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Interim Results

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Arricano Real Estate Plc (ARO)
22-Sep-2021 / 12:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

 

22 September 2021 


Arricano Real Estate plc

 ("Arricano" or the "Company" or, together with its subsidiaries, the "Group")

Unaudited Interim Results for the 6 months ended 30 June 2021

Arricano is one of the leading real estate developers and operators of shopping centres in Ukraine with over 148,100 sqm of gross leasable area under operation and land for a further three sites under development. 

 

Highlights

 

Ganna Chubotina, Chief Executive Officer of Arricano, commented:

"Despite the challenges created by the global pandemic, our portfolio of shopping centres continued to operate close to capacity with occupancy at 99.5%. This demonstrates, in our view, that we have been successful in supporting some of our tenants through the last 18 months and equally importantly the appeal amongst our tenant base of retaining their retail presence in our centres over a period when the retail market has been very challenging. While the impact of COVID-19 remains, normal trading is returning which enables us to switch from protecting the business to once again growing it."

For further information please contact:

 

CEO:

Arricano Real Estate plc

Ganna Chubotina

 

 

Tel: +357 25 582 535

Nominated Adviser and Broker:

WH Ireland Limited

Chris Fielding/Ben Good  

 

Tel: +44 (0)20 7220 1666

 

Financial PR:

Novella Communications Limited

Tim Robertson/Fergus Young

 

 

Tel: +44 (0)20 3151 7008

 

Chief Executive Officer's Report

Introduction

I am pleased to be reporting on a positive trading performance for the first six months of 2021. While the effects of the global pandemic are still visible, visitor numbers to our shopping centres accelerated fast when restrictions were lifted, much faster than when they were lifted in 2020 and continue to rise; indicating that our customers are no longer avoiding social space for fear of COVID-19 and are instead keen to return to normal retail patterns.

 

Our ability to retain occupancy at 99.5% during a very challenging period for all retailers reflects well on our business. This led to revenue generation of USD 16.9 million, which is just 2% below pre-COVID-19 revenue levels in 2019, a good result especially as the portfolio was partially closed for nearly two of the six months under review. That being the case, the Company is performing well and is positioned, assuming trading remains restriction free, to continue to grow and develop.

 

Overall, we believe the retail market is recovering, in response to increased consumer spending and a general improvement in consumer confidence.

Results

Recurring revenues for the period increased by 19% to USD 16.9 million (2020: USD 14.2 million). Underlying operating profit before revaluation of investment property increased to USD 11.9 million (2020: USD 9.6 million).

 

The revaluation of the investment property portfolio, resulted in a loss of USD 9.0 million (6 months 2020: gain of USD 30.1 million), caused by the rise in value of the Hryvna against the USD dollar. However, the revaluation effect was offset by foreign exchange gains in the amount of USD 10.2 million included in Other Comprehensive Income. The total value of investment property portfolio comprised USD 281.6 million (31 December 2020: USD 275.5 million).

The Company has continued to make excellent progress in bringing the cost of borrowings down with the average cost of bank loans decreasing from an average of 10.1% as at 31 December 2020 to 8.3% as at 30 June 2021.

Cash flow from operating activities was USD 10.0 million with Group cash balances as at 30 June 2021 of USD 15.0 million (31 December 2020: USD 12.0 million).

 

Net asset value increased to USD 125.2 million (31 December 2020: USD 119.4 million).

Operating Review

Each year our shopping centres welcome tens of millions of visitors. To maintain and grow this level of interest and loyalty, which Arricano has achieved over the last years, requires hard work and a continual focus on evolving the customer experience. In 2021, despite the distractions of managing the impact of the pandemic, 41 new tenants were introduced into the portfolio.

New additions improve retail mix within each mall by expanding the most successful product categories. In the Rayon shopping mall, the fast fashion and electronics categories were expanded and in the Prospect shopping mall, the well-known French sports retailer Decathlon opened in May 2021 with a 2,000 sqm retail space, quickly adding to both visitor numbers and operating income.

As the challenges associated with the pandemic have reduced, key categories such as fast fashion, sporting goods, home appliances and electronics, and goods for home and interior have shown positive turnover growth in comparison to 2020 when shopping centres were under greater restrictions.

Alongside introducing new tenants into the retail mix, the Group continued to focus on direct dialogue with individual tenants with a focus on promoting closer working partnerships. Sharing of data is also key to evolving tenant partnerships. In the period under review, the Group has been testing and implementing new analytical products for tracking customer behavior, tenant turnover and providing a greater analysis of footfall across multiple different categories, as well as conversion into sales and other trading indicators, all in real time.

It is worth noting there has been a gradual recovery in the F&B segment as well as a moderate recovery in cinemas and entertainment centres, though they continue to operate with some restrictions relating to social distancing.

Operational experience gained in 2020 and the reduced impact of the pandemic enabled the introduction of a smart-leasing strategy. Each tenant was judged individually when providing assistance in rent relief based on their sales performance which, together with a general improvement in trading by all tenants, led to very low vacancy rates in the portfolio.

The safety of all visitors and employees remains the Group's first priority. Alongside adhering to strict PPE protocols, Arricano introduced vaccination points across all shopping centres with the assistance of local authorities and support of the Ministry of Health. As part of this initiative, all Arricano shopping centre employees were given an opportunity to be vaccinated.

Arricano continues to focus on promoting offline shopping through multiple communication venues, including cultural and art exhibitions. Recently, a new unique project in the Prospect shopping mall drew out the influences fashion and professional life have had on each other. This was a very popular project and, along with other similar projects, has helped to increase footfall and visit times.

While development projects have naturally slowed over the past 18 months, the Group is progressing the Lukianivka project, Kyiv. Although there have been a number of delays, commitment to the project remains unchanged and it is still expected to open in 2023.

As part of the Group's ESG policy, we continue to support our shopping centres' communities with charitable and educational activities, which also help to strengthen local loyalty, stimulate footfall and increase both visit times and number of stores visited. We also continue to engage with consumers around social responsibility topics focusing on brands with strong social responsibility credentials and/or extensive charitable works.

People

The first half-year of 2021 was still challenging for the Company, but the successful performance of the Group reflects high levels of commitment and hard work from all employees of Arricano and on behalf of the Board I would like to thank them.

Changes to the Board

In July 2021, Urmas Somelar decided to retire as a Director and as Chairman of the Board for personal reasons.

The Board has agreed that Mr Georgios Komodromos, an independent non-executive director of the Company, will succeed Mr Somelar as Chairman pending the appointment of a permanent independent successor.

Management and the Directors would like to thank Mr Somelar for his contribution and valuable advice over the last few years.

Outlook

Though the market situation and shopping centres performance within the remaining months of 2021 directly depends on the pandemic dynamics and any potential restrictions, with our focus on long-term partnerships with our tenants, I feel confident we will continue to perform and are well placed to make a good start in 2022.

 

 

 

 

 

Note

30 June 2021

(unaudited)

31 December

           2020

 

 

 

 

(in thousands of USD)

 

 

 

 

 

 

 

Assets

 

 

 

Non-current assets

 

 

 

Investment property

4

           281,581

275,452

Long-term VAT receivable

 

               4,297

4,130

Property and equipment

 

                  113

94

Intangible assets

 

                  118

126

 

 

 

 

Total non-current assets

 

           286,109

279,802

 

 

 

 

Current assets

 

 

 

Trade and other receivables

 

               1,270

1,673

Prepayments made and other assets

 

                  594

479

VAT receivable

 

                  308

576

Assets classified as held for sale

 

               1,591

1,529

Income tax receivable

 

                  391

380

Cash and cash equivalents

 

             14,988

12,062

 

 

 

 

Total current assets

             

             19,142

  16,699

 

 

 

 

Total assets

           

           305,251

       296,501

 

 

 

 

 

 

 

Note

30 June 2021

(unaudited)

    31 December

2020

 

 

 

 

 

 

(in thousands of USD)

 

 

 

 

 

 

 

Equity and Liabilities

 

 

 

Equity

 

 

 

Share capital

 

67

                          67

Share premium

 

183,727

183,727

Non-reciprocal shareholders contribution

 

59,713

59,713

Retained earnings

 

66,756

67,142

Other reserves

 

(61,983)

(61,983)

Foreign currency translation differences

 

(123,046)

(129,272)

 

 

 

 

Total equity

           

125,234

119,394

 

 

 

 

Non-current liabilities

 

 

 

Long-term borrowings

5

70,266

73,458

Long-term trade and other payables

6

15,935

15,330

Long-term advances received

 

281

-

Other long-term liabilities

7

31,469

31,462

Deferred tax liability

 

6,243

5,796

 

 

 

 

Total non-current liabilities

 

124,194

126,046

 

 

 

 

Current liabilities

 

 

 

Short-term loans and borrowings

5

35,317

32,360

Short-term trade and other payables

6

4,001

3,712

Taxes payable other than income tax

 

4,246

5,015

Short-term advances received

 

6,158

5,503

Other short-term liabilities

7

6,101

4,471

 

 

 

 

Total current liabilities

           

55,823

51,061

 

 

 

 

Total liabilities

           

180,017

177,107

 

 

 

 

Total equity and liabilities

 

305,251

296,501

 

 

 

 

 

 

 

 

 

These consolidated interim condensed financial statements were approved by the Board of Directors on 22 September 2021 and were signed on its behalf by:

 

 

 

 

 

George Komodromos

Director

 

Juri Pold

Director

 

 

 

Note

Six months ended 30 June 2021

Six months ended

30 June 2020

 

 

(unaudited)

(unaudited)

(in thousands of USD, except for earnings per share)

 

 

 

 

 

 

 

Revenue

8

16,906

14,237

(Loss) / Gain on revaluation of investment property

 

(9,027)

30,096

Goods, raw materials and services used

 

(483)

(378)

Operating expenses

 

(3,463)

(3,122)

Employee costs

 

(1,019)

(1,031)

Depreciation and amortization

 

(57)

(66)

 

 

 

 

Profit from operating activities

 

2,857

39,736

 

 

 

 

Finance income

9

2,381

103

Finance costs

10

(6,362)

(12,702)

 

 

 

 

(Loss) / Profit before income tax

 

(1,124)

27,137

Income tax gain / (expense)

11

738

(5,054)

 

 

 

 

(Loss) / Profit for the period

 

(386)

22,083

 

 

 

 

Other comprehensive income

 

 

 

Items that may be reclassified to profit or loss:

 

 

 

Foreign exchange (losses)/gains on monetary items that form part of net investment in the foreign operation, net of tax effect

 

11,322

(33,427)

Foreign currency translation differences

 

(5,096)

14,397

 

 

 

 

Total items that may be reclassified to profit or loss

 

6,226

(19,030)

 

 

 

 

Other comprehensive income

 

6,226

(19,030)

 

 

 

 

Total comprehensive income for the period

 

5,840

3,053

 

 

 

 

Weighted average number of shares (in shares)

 

103,270,637

103,270,637

 

 

 

 

Basic and diluted earnings per share, USD

 

(0.0037)

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

Six months ended

30 June 2021

Six months ended

30 June 2020

 

 

(unaudited)

(unaudited)

 

 

 

 

(in thousands of USD)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

Profit before income tax

 

(1,124)

27,137

Adjustments for:

 

 

 

Interest income, excluding foreign exchange gain

9

(338)

(103)

Interest expenses, excluding foreign exchange loss

10

6,362

5,574

Loss/ (gain) on revaluation of investment property

4(a)

9,027

(30,096)

Depreciation and amortization

 

57

66

Unrealised foreign exchange (gain)/loss

 

(1,982)

7,115

Allowance for bad debts

 

133

22

 

 

 

 

Operating cash flows before changes in working capital

 

12,135

9,715

 

 

 

 

Change in trade and other receivables and prepayments made and other assets

 

342

(807)

Change in VAT receivable

 

221

(995)

Change in trade and other payables

 

285

(95)

Change in advances received

 

825

(238)

Change in other liabilities

 

               -  

1,256

Change in taxes payable

 

(835)

549

Income tax paid

 

(605)

(679)

Interest paid

 

(2,401)

(2,166)

 

 

 

 

Cash flows from operating activities

 

9,967

6,540

 

 

 

 

Cash flows from investing activities

 

 

 

Acquisition of investment property, excluding capitalized borrowing costs and settlements of  payables due to constructors

 

(4,059)

(10,423)

Acquisition of property and equipment and intangible assets

 

(68)

(22)

Interest received

 

96

103

 

 

 

 

Cash flows used in investing activities

 

(4,031)

(10,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

Six months ended

30 June 2021

Six months ended

30 June 2020

 

 

(unaudited)

(unaudited)

 

 

 

 

(in thousands of USD)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from borrowings

 

3,192

8,000

Repayment of borrowings

 

(6,398)

(5,991)

 

 

 

 

Cash flows from/ (used in) financing activities

 

(3,206)

2,009

 

 

 

 

Net increase in cash and cash equivalents

 

2,730

(1,793)

Cash and cash equivalents at 1 January

 

12,062

6,905

Effect of movements in exchange rates on cash and cash equivalents

 

196

(217)

 

 

 

 

Cash and cash equivalents at 30 June

 

14,988

4,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to equity holders of the parent

 

 

Share capital

Share premium

Non-reciprocal shareholders contribution

Retained earnings

Other reserves

Foreign currency translation differences

Total

 

(in thousands of USD)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at 1 January 2020

67

183,727

59,713

46,962

(61,983)

(100,581)

127,905

 

Total comprehensive income for the period

 

 

 

 

 

 

 

 

Profit for the period (unaudited)

 

 

 

22,083

 

 

22,083

 

Foreign exchange gains on monetary items that form part of net investment in the foreign operation, net of tax effect (unaudited)

 

 

 

 

 

(33,427)

(33,427)

 

Foreign currency translation differences (unaudited)

 

 

 

 

 

14,397

14,397

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

 

 

 

(19,030)

(19,030)

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period

 

 

 

22,083

 

(19,030)

3,053

 

 

 

 

 

 

 

 

 

 

Balances at 30 June 2020 (unaudited)

67

183,727

59,713

69,045

(61,983)

(119,611)

130,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to equity holders of the parent

 

Share capital

Share premium

Non-reciprocal shareholders contribution

Retained earnings

Other reserves

Foreign currency translation differences

Total

(in thousands of USD)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at 1 January 2021

67

183,727

59,713

67,142

(61,983)

(129,272)

119,394

Total comprehensive income for the period

 

 

 

 

 

 

 

Profit for the period (unaudited)

 

 

 

(386)

 

 

(386)

Foreign exchange gains on monetary items that form part of net investment in the foreign operation, net of tax effect (unaudited)

 

 

 

 

 

11,322

11,322

Foreign currency translation differences (unaudited)

 

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