CPI BYTY Group Annual Report 2011
CPI BYTY Group Annual report 2011
CONTENTS
CPI BYTY GROUP ...................................................................................................................................... 4 Persons Responsible for the CPI BYTY Annual Report............................................................................. 4 Independent Auditor’s Report ................................................................................................................ 5 Introduction by the Director of CPI BYTY ................................................................................................ 9 Overview of Selected Financial Indicators of the CPI BYTY Group ........................................................ 10 Governing Bodies of the Company ........................................................................................................ 11 General Meeting of CPI BYTY ............................................................................................................ 11 Supervisory Board of CPI BYTY .......................................................................................................... 12 Board of Directors of CPI BYTY .......................................................................................................... 12 Management of CPI BYTY .................................................................................................................. 13 Principles of Remuneration for Members of the Supervisory Board, Board of Directors and Management of CPI BYTY .................................................................................................................. 14 Approach to Risks in Relation to Financial Reporting ....................................................................... 14 Internal Control ................................................................................................................................. 16 Code of Corporate Governance......................................................................................................... 16 Report on the CPI BYTY Group .............................................................................................................. 17 Information about CPI BYTY .............................................................................................................. 17 Securities ........................................................................................................................................... 18 Shares ............................................................................................................................................ 18 Bonds ............................................................................................................................................. 19 Information about the CPI BYTY Group ............................................................................................. 19 CPI Residence – rental housing ..................................................................................................... 19 CPI Residence – residential development ..................................................................................... 20 Expected development...................................................................................................................... 20 Miscellaneous .................................................................................................................................... 20 Social Responsibility ...................................................................................................................... 20 Research and Development .......................................................................................................... 20 Environment and Human Resources ............................................................................................. 20 Foreign Branches ........................................................................................................................... 21 Fees Charged by Auditors .............................................................................................................. 21 Other ............................................................................................................................................. 21 Report of the Board of Directors on Business Activities ....................................................................... 22 Financial Performance ....................................................................................................................... 23 2
CPI BYTY Group Annual report 2011
Financial Performance of CPI BYTY................................................................................................ 23 Financial Performance of CPI BYTY Group .................................................................................... 23 Report of the Board of Directors on Relations between Related Parties for 2011 ............................... 24 Consolidated financial statements as at 31 December 2011 ................................................................ 28 Consolidated statement of financial position ................................................................................... 29 Consolidated statement of comprehensive income ......................................................................... 30 Consolidated statement of cash flow ................................................................................................ 31 Consolidated statement of changes in equity ................................................................................... 32 Notes to the consolidated financial statements ............................................................................... 33 Financial statements as at 31 December 2011 ..................................................................................... 85 Statement of financial position ......................................................................................................... 86 Statement of comprehensive income ............................................................................................... 87 Statement of cash flow...................................................................................................................... 88 Statement of changes in equity......................................................................................................... 89 Notes to the Financial Statements .................................................................................................... 90
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CPI BYTY Group Annual report 2011
CPI BYTY GROUP CPI BYTY, a.s. (hereinafter also referred to as "CPI BYTY" or “the Company”) is the second largest provider of rental housing in the Czech Republic. The housing stock of CPI BYTY currently totals nearly 13 000 apartments in Prague and other cities of the Moravian-Silesian, Usti, Liberec and Central Bohemian regions. Most of the apartments are rented at regulated rents. The real estate portfolio is complemented by non-residential premises which are rented at market rents. The core business of CPI BYTY is the lease and operation of its own properties. Employees of CPI BYTY provide tenants with comprehensive rental and management services. CPI BYTY is the only shareholder of BPT Development, a.s. and Březiněves, a.s. (hereinafter together referenced as the "CPI BYTY Group").
Persons Responsible for the CPI BYTY Annual Report Statutory Declaration With the use of all reasonable care and to the best of our knowledge, the consolidated Annual Report provides a true and fair view of the financial situation, business activities, and results of operations of the issuer and its consolidated group for 2011, and of the outlook for the future development of the financial situation, business activities, and results of operations of the issuer and its consolidated group. No facts have been omitted that could change the meaning of this report. Prague, 27 April 2012
Marek Stubley Chairman of the Board of Directors CPI BYTY, a.s.
Zdeněk Havelka Member of the Board of Directors CPI BYTY, a.s.
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Independent Auditor’s Report
CPI BYTY Group Annual report 2011
Introduction by the Director of CPI BYTY 2011 was clearly a turning point for CPI BYTY. After many decades of stagnation, the housing market was liberalised, which, as is now apparent, benefitted primarily the needs of tenants and applicants for rental housing. Increased government attention and a policy change towards supporting rental housing help further improve conditions in the housing market. A significant change is the amendment to the Civil Code, which governs the rights and responsibilities of landlords and tenants. Despite the negative reception that accompanied these changes, just shortly after the amendment entered into effect, it has become apparent that, again, it is the tenants who benefit the most from these changes because the amendment is reflected in the quality of life in tenement houses, the safety of tenants, and the responsibilities between tenants and landlords. In addition, we regard the results of the transition from regulated to contractual rent as very successful. In the vast majority of cases, we reached agreement with tenants of once-regulated apartments, which had an effect on the lives of all, including those of tenants with market rent. Based on these results, we were able to launch massive investment in housing, which exceeded 230 million crowns last year alone, and build an investment plan for the following years that envisages total investment in the region of one billion. The funds, however, were invested not only in the technical condition of buildings, but also in the development of services that CPI BYTY provides to its tenants. Client centres increased the number of visiting days and working hours; in Třinec and Ústí nad Labem we moved our offices to new locations in order to provide better comfort and support to tenants. Social officers – who are based at individual client centres and who, thanks to their proactive work, have been able to advise several hundreds of tenants – are perceived as providing a very important service that is appreciated by tenants. The company’s website received an overhaul and is now balanced in terms of content for both the existing tenants and for those interested in new housing or relocation. In addition to a visual redesign, the website features a number of technical improvements, such as distribution of news and notifications to registered emails. Tenants can receive similar information via text messages as well. We are also constantly improving our intranet, which is used for both communication and monitoring.
Daniel Bacík Director of CPI BYTY, a.s.
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CPI BYTY Group Annual report 2011
Overview of Selected Financial Indicators of the CPI BYTY Group Overview of key indicators (consolidated financial statements) Indicator Net rental and service related income EBITDA EBIT EBIT margin Net profit EPS - basic Total Assets Investment Property Equity ROE ROA
Unit TCZK TCZK TCZK % TCZK CZK / share TCZK TCZK TCZK % %
10
2010 229 498 523 172 522 084 227,5 447 607 22 380 350,0 9 980 952 6 857 998 4 731 734 9,5 5,2
2011 44 922 310 112 309 984 690,0 184 478 9 223 900,0 10 316 357 7 078 303 4 915 901 3,8 3,0
index 2011/2010 % 19,6 59,3 59,4 303,3 41,2 41,2 103,4 103,2 103,9 39,7 57,4
CPI BYTY Group Annual report 2011
Governing Bodies of the Company (A Separate Part of the Annual Report in Accordance with Section 118(4)(j) of Act No. 256/2004 Coll.) In accordance with the Articles of Association, the statutory bodies of CPI BYTY are the General Meeting, the Board of Directors and the Supervisory Board, while the General Meeting as the supreme body elects and dismisses members of the Board of Directors and the Supervisory Board. The executive body is the Management of CPI BYTY. The Company has not established any other executive, control bodies or committees. In accordance with section 44(3) of Act No. 93/2009 Coll., the function of the audit committee is performed by the Supervisory Board of CPI BYTY.
General Meeting of CPI BYTY The General Meeting is the supreme body of CPI BYTY. The scope of powers of the General Meeting includes: a) decision on changes to the Articles of Association, provided the change is not a result of an increase in share capital by the Board of Directors, or of another legal matter; b) decision on an increase in share capital or on authorization of the Board of Directors in accordance with article 41 of the Articles of Association, or on the possibility of offsetting a monetary receivable towards the company against a receivable of the company arising from share capital repayment; c) decision on a decrease in share capital or on the issue of bonds in accordance with section 160 Act No. 513/1991 Coll., as amended (the "Commercial Code"); d) election and removal of members of the Board of Directors; e) election and removal of members of the Supervisory Board, excluding those members of the Supervisory Board that are elected and removed by Employees; f) approval of the ordinary or extraordinary financial statements and consolidated financial statements and statutory cases, interim financial statements, the allocation of profits or payment of losses and determination of bonuses paid to board members; g) deciding on the remuneration of members of the Board of Directors and the Supervisory Board; h) decision to quote participating securities of CPI BYTY under a special law, and to repeal such quotes; i) decision to cancel the Company's insolvency, appointment and removal of a liquidator, including the determination of his/her remuneration, approval of the proposed distribution of the liquidation value; j) decision on the merger, transfer of assets to a single shareholder or a division, or a change of the legal status; k) approval of contracts listed in section 67a of the Commercial Code; l) approval of negotiations undertaken on behalf of the Company in its formation under section 64 of the Commercial Code; m) approval of the contract on control and the contract on profit transfer and a silent partnership and their changes; n) adoption of other decisions on issues in which the Commercial Code confers powers on the General Meeting. The General Meeting is quorate if present shareholders have shares with a nominal value of at least 30% of the company’s share capital. One share with a nominal value of CZK 100 thousand represents one vote. In accordance with section 186(1) of the Commercial Code, the General Meeting decides by majority vote of shareholders present, unless the law or Articles of Association of CPI BYTY require a different type of majority. In matters referred to in section 186(2) of the Commercial Code, the law requires a two-third majority of votes of shareholders present. In matters referred to in Section 186(3) of the Commercial Code, the law requires approval by at least three-fourths of votes of shareholders having such shares. Likewise, a three-fourth 11
CPI BYTY Group Annual report 2011
majority of shareholders is required by law to decide matters listed in section 186(4) of the Commercial Code. Pursuant to section 186(5) of the Commercial Code, the consent of all shareholders whose shares are to be combined is required in addition to a valid decision of the General Meeting on combining the shares. Further modifications to the action and decision-making of the General Meeting, as well as the participation of shareholders in the General Meeting and the rights of shareholder at the General Meeting, the manner of convening the General Meeting, and the replacement General Meeting are governed by the Articles of Association of CPI BYTY.
Supervisory Board of CPI BYTY The Supervisory Board is a supervisory body of CPI BYTY and is entitled to all rights in the range of generally applicable laws, Articles of Association and resolutions of the General Meeting of CPI BYTY. The Supervisory Board oversees the performance of the Board of Directors and the Company's business. The Supervisory Board is entitled, in particular, to: a) review the ordinary, extraordinary, consolidated and interim financial statements and the proposed distribution of profits or payment of losses and to submit its observations to the General Meeting, b) convene a General Meeting, if required by the interests of CPI BYTY, c) suggest its observations, and recommendations and suggestions it deems appropriate to the Board of Directors or the General Meeting, d) inspect all documents and records relating to the activities of CPI BYTY and to check whether the accounting records are properly kept in accordance with the facts and whether the business activities of CPI BYTY are conducted in accordance with the laws, Articles of Association and instructions of the General Meeting. The Supervisory Board is quorate if an absolute majority of its members are present at the meeting. The adoption of a resolution in all matters discussed by the Supervisory Board requires an absolute majority vote of all (not just present) members of the Supervisory Board. The structure, constitution and term of the Supervisory Board, convening meetings of the Supervisory Board, the session of the Supervisory Board, the duties of Supervisory Board members, and bonuses and fees paid to the Supervisory Board are governed by the Articles of Association of CPI BYTY.
As at 31 December 2011, the members of the Supervisory Board were: Pavel Semrád, chairman of the Supervisory Board since 15 March 2010 Josef Štolba, member of the Supervisory Board since 8 June 2011 Radovan Vítek, member of the Supervisory Board since 8 June 2011
Board of Directors of CPI BYTY The Board of Directors is a statutory body that manages the activities of CPI BYTY and acts on its behalf. Board of Directors decides on all matters of CPI BYTY that are not defined by law or the Articles of Association of CPI BYTY as reserved for the General Meeting or the Supervisory Board. In particular, the Board of Directors: a) implements the resolutions of the General Meeting; b) convenes the Annual General Meeting at least once a year or the extraordinary General Meeting in accordance with the provisions of section 181 and 193 of the Commercial Code and the Articles of Association of CPI BYTY; c) ensures business management, including proper book-keeping; 12
CPI BYTY Group Annual report 2011
d) submits to the General Meeting: (i) proposals for amendments to the Articles of Association of CPI BYTY; (ii) a proposal for a change in the share capital amount and the issue of bonds; (iii) a proposal for the merger or demerger of CPI BYTY; (iv) an application for the dissolution of CPI BYTY with liquidation and a share in the liquidation balance; (v) a report on the company's business and its assets, and business and financial policies; (vi) the annual financial statements and the distribution of profits or losses, including the settlement method for determining the amount of dividends and bonuses; e) submits to the Supervisory Board (i) reports on the activities of CPI BYTY which the Supervisory Board may request; (ii) for approval, all decisions for which the Supervisory Board has reserved the right of prior approval pursuant to article 19(3)(e) of the Articles of Association of CPI BYTY. The Board is quorate when its meeting is attended by all members of the Board. For decisions on all matters discussed at the meeting of the Board, the consent of all members of the Board is required. With the consent of all members of the Board, the Board of Directors may also vote outside its meeting – in writing or by means of communication technology. Voters are then considered present. A statement of the voting result shall be written at the next meeting of the Board. The structure, constitution and term of the Board of Directors, convening meetings of the Board of Directors, the session of the Board of Directors, the duties of Board of Directors members, and bonuses and fees paid to the Board of Directors are governed by the Articles of Association of CPI BYTY.
As at 31 December 2011, the members of the Board of Directors were: Marek Stubley, chairman of the Board of Directors since 15 March 2010 Zdeněk Havelka, member of the Board of Directors since 19 December 2003, chairman of the Board of Directors since 23 August 2005, member of the Board of Directors since 15 March 2010 Milan Trněný, member of the Board of Directors since 14 November 2000
Management of CPI BYTY The Management of CPI BYTY is responsible for managing the organizational units of CPI BYTY. The organizational structure is based on specialization by business function.
The members of Management (executives) are: Daniel Bacík, director of CPI BYTY Director of CPI BYTY directly manages CPI BYTY and carries out the decisions of the Board of Directors. Direct subordinates are Financial director and Technical director. Šárka Raková, financial director of CPI BYTY Financial director is responsible for financial management of CPI BYTY. Luděk Zelinka, technical director of CPI BYTY Technical director is responsible for facility management of all properties held by CPI BYTY. The workplace of the Management of CPI BYTY is located at Špitálské náměstí 3517-A617/1, 400 01 Ústí nad Labem. 13
CPI BYTY Group Annual report 2011
Principles of Remuneration for Members of the Supervisory Board, Board of Directors and Management of CPI BYTY There are no special principles of remuneration for members of the Supervisory Board, Board of Directors and Management of CPI BYTY. The remuneration of the Supervisory Board and the Board of Directors is decided by the General Meeting of the Company on the basis of section 187 (1)( g) of Act no. 513/1991 Sb., Commercial Code, as amended. The salaries of members of Management are decided by the Board of Directors of CPI BYTY. Salary expenses for 2011 (TCZK)
Body Board of Directors Supervisory Board Management
0 0 506 820
Members of the Supervisory Board, members of the Board of Directors and members of Management received neither monetary nor non-monetary income from the company in 2011 except for salaries they were paid as employees of the Company. The salaries have no variable component. As employees of CPI BYTY, a.s., members of the Supervisory Board, Board of Directors and Management had no advantages or benefits in comparison with other employees of CPI BYTY in 2011. Members of the Supervisory Board, Board of Directors and Management and their affiliated persons do not possess any shares issued by CPI BYTY, and they do not act as contracting parties to any options or similar contracts whose underlying asset would be equity securities issued by CPI BYTY, nor are there any contracts concluded for their benefit. Declaration There are no conflicts of interests linked to any member of the Supervisory Board, Board of Directors or Management.
Approach to Risks in Relation to Financial Reporting As of 31 December 2011, CPI BYTY was exposed to the following risks arising from financial assets and financial liabilities: Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk mainly from its rental activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Liquidity risk Liquidity risk refers to the possibility of the Group being unable to meet its cash obligations mainly in relation to the settlement of amounts due to suppliers and bank loans and facilities. The Group monitors its risk of shortage of funds using different liquidity planning tools. These tools comprise e.g. the following activities: maintaining a sufficient balance of liquid funds; flexible utilization of bank loan, overdrafts and facilities; projection of future cash flows from operating activities.
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CPI BYTY Group Annual report 2011
Market risk Market risk includes the possibility of negative changes in value of assets of CPI BYTY due to unexpected changes in the underlying market parameters, such as exchange rates or interest rates. The Group is exposed to various risks associated with the impact of fluctuations in the prevailing levels of market interest rates on its net position and cash flows. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk of losing key people The risk of losing key people is the risk that CPI BYTY will not be able to retain and motivate people who are crucial for the ability of CPI BYTY to create and implement key strategies of CPI BYTY. The key persons of CPI BYTY are members of CPI BYTY’s Management. The dependence of CPI BYTY on rental property Due to the fact that CPI BYTY engages in the lease of real estate, its financial results depend on the existence of tenants willing and able to lease and operate the real estate owned by CPI BYTY. If there was a significant loss of tenants, this fact could adversely affect the economic and financial situation of CPI BYTY. The risk of early termination of the lease by the current or future tenants The risk of early termination of the lease by the current or future tenants is the risk that, in the event of early termination of the lease, CPI BYTY (as the lessor) will not be immediately able to find another tenant willing to enter into a lease agreement under comparable conditions. The risk associated with market rent development The core business of CPI BYTY is rental housing. Currently, most of the apartments owned by CPI BYTY are rented at “regulated rent”. Its gradual liberalisation under the act on unilateral rent increases currently has a positive impact on the financial performance of CPI BYTY. Deregulation of rent in the Czech Republic should finish as at 31 December 2012, and thereafter rent for all apartments should be determined solely based on market conditions. Market rent, as opposed to regulated rent, reflects the relationship of supply and effective demand on the local housing market. CPI BYTY is exposed to the risk that the market rent may experience a downward trend in the future where the supply of rental apartments substantially exceeds the demand for rental housing (for example, as a result of economic recovery, the income of individuals increases and mortgage loans again become more readily available, which will in turn boost interest in becoming a homeowner). Any reduction in market rents could have a negative impact on CPI BYTY. The dependence of CPI BYTY on the degree of indebtedness of its target tenant group To a certain extent, CPI BYTY is dependent on the solvency of its target tenant group, yet it is unable to influence tenants’ payment behavior. The total increase in the indebtedness of households may lead to failure to pay the agreed rent, which could negatively affect the cash flow of CPI BYTY while increasing the cost of litigation and debt recovery. Changes in lifestyle and living standards may adversely affect interest in rental housing Future changes in tenants’ preferences, housing trends and higher living standards of the population in a certain area may lead to a significant reduction in interest in rental housing. The increased preference to own rather than rent may ultimately mean a significant loss of tenants. The risk associated with low liquidity of real estate The risk of investing in real estate is linked to their low liquidity. Unlike financial assets, the sale of real estate is a complex and long-term transaction which may adversely affect the profitability of investments in real estate. 15
CPI BYTY Group Annual report 2011
The risk of insolvency proceedings The commencement of insolvency proceedings against a debtor generally entails certain legal effects (in particular, restrictions on the debtor’s ability to dispose of their property), which occur regardless of whether or not the insolvency petition is substantiated. Generally, we cannot rule out that, in the event of an unsubstantiated petition for the commencement of insolvency proceedings against the Company, CPI BYTY would be limited, for an indefinite time, in the disposal of its property, which could adversely affect the financial situation of CPI BYTY.
Internal Control The internal accounting guidelines of CPI BYTY, which define procedures, responsible persons and dates for individual tasks, form an integral part of the internal control system. The internal policies applied by CPI BYTY include mainly signing and accountability rules, the circulation of accounting records, a chart of accounts, an internal guideline on tangible and intangible fixed assets, inventory policies, rules for recognising expenses and revenues, stocktaking guidelines, rules for recognising adjustments and the establishment and release of provisions, rules for the preparation of financial statements, and other internal guidelines. Continuous controls are carried out within the entity, focusing on links between accounts relating to fixed assets, inventories, short-term investments and settlements. The control process is regularly reviewed and if deficiencies are identified, steps are taken to quickly correct them and prevent them in the future. Quarterly financial statements are presented to the Management of CPI BYTY. The internal control system of CPI BYTY consists of both internal regulations containing control mechanisms and active work of the Supervisory Board, as well as an external audit, which is conducted twice a year (an interim audit and an audit for the current reporting period). Results of external audits are presented to the Board of Directors and the Supervisory Board of CPI BYTY, which charges the Management of CPI BYTY with drawing conclusions and taking follow-up steps. Members of Management are fully responsible for reviewing the internal processes of each respective department. As part of the internal control framework, members of Top Management are responsible for: the reliability and sharing of information, compliance with laws and internal regulations, the safeguarding of assets and proper use of resources, and achieving set goals.
Code of Corporate Governance CPI BYTY has not adopted any binding code of corporate governance. CPI BYTY observes all provisions of the Commercial Code concerning the rights of shareholders – particularly their right to influence CPI BYTY in certain basic matters such as the election of members of the Board of Directors and changes to the Articles of Association. CPI BYTY duly convenes general meetings and ensures equal treatment of all shareholders. When carrying out its statutory duties, CPI BYTY regularly informs about the financial situation, performance, ownership and management. Beyond its legal obligations, CPI BYTY provides regular information about all relevant issues affecting its operations and the CPI BYTY Group. The reason why CPI BYTY has not created or adopted any code is mainly the fact that the shares issued by CPI BYTY are not publicly traded, as well as the existing straightforward shareholding structure consisting of a sole shareholder.
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CPI BYTY Group Annual report 2011
Report on the CPI BYTY Group Information about CPI BYTY CPI BYTY, a.s., with its registered office in Prague 1, Václavské náměstí 1601/47, postcode 110 00, Identification Number 26228700, was established on 14 November 2000 for an indefinite period of time. Its activities are carried out in accordance with the Czech law, pursuant to Act no. 513/1991 Coll., Commercial Code, as amended. According to article 3 of CPI BYTY’s Articles of Association effective as at 31 December 2011, the principal activities are as follows: lease of real estate, apartments and non-residential premises, production, trade and services not listed in Annexes 1 to 3 to the Trades Licensing Act. CPI BYTY was recorded in the Commercial Register held by the Municipal Court in Prague, section B, insert 7990. The documents are kept in the Registry of Documents and at CPI BYTY. Contact details: CPI BYTY, a.s. Václavské náměstí 1601/47 110 00 Prague 1 Czech Republic tel.: +420 281 082 110, fax: +420 281 082 150, e-mail:
[email protected], www.cpibyty.cz As of 31 December 2011, the consolidation unit of the CPI BYTY Group includes the following companies in which CPI BYTY has directly controlling influence. CPI BYTY is not dependent on any other entities within the CPI BYTY Group. CPI BYTY, a.s. 100,00% BPT Development, a.s. 100,00% Březiněves, a.s.
In addition, CPI BYTY is as at 31 December 2011 a part of another consolidation unit of the company Czech Property Investments, a.s., with its registered office in Prague 1, Václavské náměstí 1601/47, postcode 110 00, Identification Number 42716161.
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CPI BYTY Group Annual report 2011
Securities Shares Ordinary bearer shares are issued in certificated form with a nominal value of TCZK 100 per share and are not listed securities. The total nominal value of the issued shares is TCZK 2 000. Dividends are taxed in accordance with Act No. 586/1992 Coll., on Income tax, as amended. The tax is withheld on the dividend pay-out date. The shares of CPI BYTY are transferable without any restrictions. The change of owner of shares in certificated form is performed by handover in accordance with the Securities Act. The shareholder does not have any option or pre-emptive rights. When the shareholder votes at the General Meeting, one share represents one vote. The dividend pay-out is ensured by the Board of Directors in accordance with the decision of the General Meeting, which defines the place and date of the dividend payout. The latest date for the dividend pay-out is the date defined as decisive for the dividend pay-out. If the General Meeting does not decide otherwise, the dividend is due within one year of the date on which the resolution on profit distribution was made at the General Meeting. After the liquidation of CPI BYTY, the shareholder is entitled to a share in the liquidation balance. The shares of CPI BYTY are not traded on any public or regulated domestic or foreign market. Registered Capital The registered capital of CPI BYTY has been fully paid up, and is not subject to any options or other exchange rights. CPI BYTY is not a direct holder of own shares. The conditions for changing the registered capital amount and the rights arising from shares listed in the Articles of Association of CPI BYTY are in accordance with the law. The shareholder structure of CPI BYTY as of 31 December 2011 was as follows:
Share in registered capital
Shareholder Czech Property Investments, a.s.
100,00%
Total
100,00%
CPI BYTY is not aware of any information about contracts between shareholders that could result in aggravating the transferability of shares or voting rights. Equity As of 31 December 2011, equity presented in individual financial statements of CPI BYTY totalled TCZK 4 933 873 and comprised: registered capital (TCZK 2 000), capital funds (TCZK 2 119 182), reserve funds (TCZK 400), retained profits/accumulated losses (TCZK 2 812 291). Compared with 2010, there was an increase in the equity of CPI BYTY by TCZK 194 270.
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CPI BYTY Group Annual report 2011
Bonds SPOBYT 5,25/13 bonds The SPOBYT 5,25/13 bonds, with a total nominal value of TCZK 250 000 due in 2013, were issued on 30 October 2003. The bonds were issued in two tranches during the issue period of one year after the date of issue. The bonds were issued in book-entry bearer form (registered in the Central Securities Depository, the abbreviation is SPOBYT 5,25/13, ISIN CZ0003501363). The nominal value of each bond is TCZK 10. The prospectus and the issuing terms were approved by the decision of the Securities Committee in the Czech Republic on 10 October 2003, reference number 45/N/900/2003/2, which came into force on 16 October 2003. The bonds were accepted for trading at the market organized by RM-Systém a.s. On 27 February 2007 the above-mentioned bonds were bought by the original issuer – SPOBYT, a.s. In addition, the bonds were pledged in favour of Raiffeisenbank, a.s. and the rights to dispose of the bonds by the issuer were limited. As a result of a merger with the original issuer of the bonds (SPOBYT, a.s.), CPI BYTY became the issuer effective from 1 January 2009.
Information about the CPI BYTY Group CPI Residence – rental housing CPI BYTY focuses on the operation and management of its rental housing portfolio. The existing housing stock of CPI BYTY includes 12 771 rental apartments in 13 cities of the Czech Republic. The housing portfolio of CPI BYTY includes also non-residential premises rented by CPI BYTY and used as an additional source of income. Company
City Třinec Litvínov Ústí nad Labem Česká Lípa Praha Český Těšín Nové Město pod Smrkem Děčín Slaný Most Jablonec nad Nisou Liberec Chlumec Teplice
CPI BYTY, a.s.
Total
Number 3 978 2 686 2 507 1 693 828 367 196 196 77 72 66 51 32 22 12 771
Rental income of CPI BYTY was influenced by state rent regulation that was partially released by the adoption of Act No. 107/2006 Coll. on unilateral apartment rent increases. State authorities accepted requirements of property owners and established rules and rates, which had gradually increased a regulated rent in period of four years. The process of deregulation finally ended on 31 December 2011 in all cities and municipalities with the exception of cities with over 100,000 inhabitants and Central Bohemian region, where the regulation will end on 31 December 2012. In 2010 CPI BYTY opted for a three-step rent increase model spreading the effort to reach the target amount over three years. CPI BYTY tried to take into account the tenants’ economic power and social aspects by increasing the rents gradually. Proposed rents for individual apartments are based on the apartment size and locality attractiveness. CPI BYTY proceeds to more mass investments in revitalizing the rental housing in 2011 along with the regulated rent increase. 19
CPI BYTY Group Annual report 2011
CPI Residence – residential development CPI BYTY itself does not directly focus on the implementation of development projects. Its subsidiary Březiněves, a.s. recently finished a development project entitled Jižní Stráň, and owns additional land for future residential development.
Expected development In the short term, CPI BYTY will increase funds that will be invested in improving the technical condition of residential buildings. For 2012, more than CZK 320 million is planned to be invested primarily in the overhaul of roofs and elevators, and in the already started entrance revitalization project. In addition to general investment projects, the needs of specific towns and locations will be addressed, e.g. the repair of balconies and the replacement of balcony railings in Litvínov and Třinec. In the medium term, CPI BYTY will focus on reducing the energy requirements of buildings, and changing the energy supply. Selected investment projects for 2012 (in TCZK) are shown in the following table: Project Replacing windows Revitalization of entrance portals Reducing energy consumption Other investments (elevators, balconies, roofs, electrical, sewer, fire protection, surface modification, etc.) Total
all regions total 127 500
75 000
Ústí nad Labem 50 000
1 500
1 000
Nové Město pod Smrkem 0
42 800
14 000
16 000
7 000
5 000
800
9 200
4 000
3 000
1 250
750
200
148 000
58 000
38 000
29 000
18 000
5 000
327 500
151 000
107 000
38 750
24 750
6 000
Třinec
Litvínov
Česká Lípa
BPT Development, a.s. and Březiněves, a.s. of the CPI BYTY Group might carry out residential development projects, taking into account the current situation in the real estate market in the Czech Republic.
Miscellaneous Social Responsibility CPI Byty regularly supports and contributes to the work of many NGOs and associations that focus on helping the sick or disabled children.
Research and Development Considering the core business of the company, CPI BYTY does not engage in the research and development of new products or processes.
Environment and Human Resources The activities of CPI BYTY and the CPI BYTY Group do not endanger the environment. As part of HR management, the company strives to improve the organization of work and increase the qualifications of its employees through various training programmes (e.g. intensive language training and courses). As at 31 December 2011 CPI BYTY had 84 employees. With respect to employment relationships, CPI BYTY adheres to applicable legislation.
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CPI BYTY Group Annual report 2011
Foreign Branches CPI BYTY has no branch abroad.
Fees Charged by Auditors In 2011, the following audit fees were charged (in CZK, excluding VAT):
Audit of financial statements and annual reports
Entity
CPI BYTY, a.s. Consolidation unit CPI BYTY
600 000 400 000
Total
1 000 000
Other In 2011 no public offer was made to take over the shares of CPI BYTY. CPI BYTY did not make any public offer to take over the shares of other companies, nor were its business activities interrupted. CPI BYTY did not take part in any court, administration or arbitration proceedings that could have a significant effect on its financial situation. CPI BYTY is not a party to any contracts that will come into force, change or cease to exist in the event of a change in the control of the company as a result of a takeover offer. The company did not conclude any contracts with members of the Board of Directors or employees on the basis of which the company would be obligated to provide compensation should their function or employment be terminated with respect to a takeover offer. CPI BYTY did not create any programs on the basis of which employees and members of the Board of Directors could acquire the company’s equity securities, options for such securities or other rights related to them under privileged conditions.
21
CPI BYTY Group Annual report 2011
Report of the Board of Directors on Business Activities Investment in the housing portfolio In 2011 CPI BYTY implemented a number of measures and investment projects that significantly contributed to an increase in the technical standard of residential buildings. Total investments for 2011 exceeded MCZK 230. The correlation between the amount of rent and repairs is confirmed by the cities of Česká Lípa and Litvínov, where, thanks to the large number of agreements on the amount of once-regulated rent, the original plan for the replacement of plastic windows was actually exceeded and the replacement of windows will be finalised this year. A three-year plan will thus be implemented in two years. In North Bohemia and North Moravia, the total number of households with new plastic windows reached 5 800, which is much more than envisaged by the original plan. Another 4 500 flats will receive new windows this year. The replacement of windows, however, was not the only area of interest for CPI BYTY. Funds were also invested in major roof repairs. An example is the complete renovation of the roof on residential buildings in Hrnčířská Street in Ústí nad Labem or in Dukelská Street in Třinec, where the renovation will continue even in 2012. Considerable amounts were also invested in less visible projects, such as the connection of 21 apartment buildings (134 apartments) to the sewerage system in the Třinec area – Kanada, or the connection of selected buildings in Usti nad Labem to the public sewerage system. As one of its priorities, CPI BYTY chose to increase security and orderliness in residential buildings. One of the solutions is putting critical buildings under the surveillance of a security agency. The revitalization of entry portals and hallways, launched in Český Těšín and Třinec in November last year and affecting a total of 1 500 tenants, also contributed to increased security and crime prevention. More than 100 refurbished entrances will be followed by others not only in Northern Moravia but also in Northern Bohemia. Česká Lípa CPI BYTY invested over CZK 60 million in replacing timber windows with plastic windows and reduced the original three-year schedule to less than two years. Additional funds were invested in smaller repairs of apartments and buildings, and the security of selected entrances. A significant portion of money was also spent on commencing a project whose aim is to change the heating system in the block of flats Sever, thus reducing or maintaining prices of heating at an acceptable level. The total investment exceeded CZK 67 million. Litvínov CPI BYTY invested over CZK 60 million in replacing timber windows with plastic windows, which included the majority of flats and again shortened the schedule from three to two years. A full replacement of the water distribution system was carried out in two buildings. Together with other repairs, the total amount climbed to CZK 65 million. Třinec and Český Těšín In 2011, CPI BYTY invested over CZK 20 million in replacing timber windows with plastic windows. Additional funds were spent on connecting houses in the Kanada district to the sewerage system; work began on the repair of roofs in Dukelská Street and on the preparation of a project to repair balconies. Together with other minor repairs, these activities required a further CZK 15 million. In November, CPI BYTY launched a pilot project – the revitalization of the entrances and common areas of houses, which involves the replacement of doors, mailboxes and doorbell consoles, as well as the painting or renewal of shared amenities. Total investment in the region exceeded CZK 41 million. Ústí nad Labem CPI BYTY invested nearly CZK 40 million in replacing timber windows with plastic windows. Additional funds were spent on connecting flats with unsatisfactory septic tanks to the public sewerage system. A significant 22
CPI BYTY Group Annual report 2011
amount of money was required for the repair of roofs, with the houses on Hrnčířská Street representing the largest surface area. A large part of the funds was also invested in boosting the security of houses in Masarykova Street, where surveillance was set up. These repairs required nearly a further CZK 10 million.
Financial Performance Financial Performance of CPI BYTY Revenues In comparison to 2010, rental income for 2011 increased by 26% (in absolute value by TCZK 90 855). Rental income development was influenced by the rent deregulation in 2011 and by revenue from Litvinov and Janov premises that were acquired in the half of 2010.
Total Asset Total asset increased by TCZK 138 578 in 2011. Largest share of total asset represent investment property (TCZK 6 868 550). Largest share of total liabilities represent interest-bearing loans and borrowings (total value of TCZK 3 310 308).
Financial Performance of CPI BYTY Group Revenues Gross rental income revenues for 2011 amounted to TCZK 446 182. Compared to 2010, these revenues grew up by 26%. Rental income development was influenced by the rental income of CPI BYTY (as described above).
EBIT EBIT ratio for CPI BYTY Group reached value of TCZK 397 689 in 2011. Decrease in its value compared to 2010 (TCZK 592 995) was caused by increase of expenses for repairs and maintenance.
Total Asset Total asset for CPI BYTY Group amounted to TCZK 10 316 357 in 2011. The largest share of total asset represents investment property in the amount of TCZK 7 078 303. Interest-bearing loans and borrowings (total value of TCZK 3 538 063) represent the largest share of total liabilities.
Marek Stubley Chairman of the Board of Directors CPI BYTY, a.s.
Zdeněk Havelka Member of the Board of Directors CPI BYTY, a.s.
23
CPI BYTY Group Annual report 2011
Report of the Board of Directors on Relations between Related Parties for 2011 The Report on Relations between Czech Property Investments, a.s., Identification Number 42716161, with its registered office in Prague 1, Václavské náměstí 1601/47, postcode 110 00 (hereinafter referred to as “CPI”), Mr Radovan Vítek, Minská 41, postcode 616 00, and CPI BYTY, a.s., Identification Number 26228700, with its registered office in Prague 1, Václavské náměstí 1601/47, postcode 110 00 (hereinafter referred to as the "controlled entity" or "CPI Byty"), and between CPI BYTY and other companies controlled by CPI or by Mr Radovan Vitek for the financial period from 1 January 2011 to 31 December 2011 (hereinafter referred to as the “Financial Period”) was prepared in accordance with section 66a (9) of Act No. 513/1991 Coll., the Commercial Code, as amended. CPI was the sole shareholder of CPI BYTY as at 31 December 2011. Mr Radovan Vitek was the sole shareholder of CPI as at 31 December 2011. CPI and Mr Radovan Vítek were the controlling entities of CPI BYTY as at 31 December 2011. The Board of Directors of CPI BYTY, acting with due care, is not aware of any person controlled by CPI or by Mr Radovan Vítek other than those mentioned in this report. Ownership Structure Radovan Vítek 100,00% Cerrini, s.r.o. 100,00% Materali, a.s. 100,00% Mondello, a.s. 100,00% Papetti, s.r.o. 100,00% Pietroni, s.r.o. 100,00% Rivaroli, a.s. 100,00% Robberg, a.s. 100,00% Vila Šárka, a.s. 100,00% Zacari, a.s. 100,00% Czech Property Investments, a.s.
24
CPI BYTY Group Annual report 2011
The companies controlled by CPI as at 31 December 2011
Name of the Company
4B Property, s.r.o.
Ownership interest 50,00%
Name of the Company
Ownership interest
Český Těšín Property Development, a.s.
100,00% 100,00%
A/L SK Office 2 s.r.o.
100,00%
Čadca Property Development, s.r.o.
AB BHV, spol. s.r.o.
100,00%
DOREK Vysoké Mýto, a.s.
ABIGAIL, a.s.
100,00%
Družstvo Land
Auto - priemyselný park, s.r.o. Lozorno
100,00%
Dunajská Streda Investments, s.r.o.
100,00%
Bageleot, a.s.
100,00%
ELAMOR, a.s.
100,00%
Balvinder, a.s.
100,00%
Farhan, a.s.
100,00%
Baudry Beta, a.s.
100,00%
FL Property Development, a.s.
100,00%
Baudry, a.s.
100,00%
HERTONE, a.s.
100,00%
Baumarkt České Budějovice s.r.o.
100,00%
Horova Immo s.r.o.
BAYTON SR, a.s.
100,00%
Hraničář, a.s.
100,00%
Beroun Property Alfa, a.s.
100,00%
Chrudim Investments, a.s.
100,00%
Beroun Property Development, a.s.
100,00%
IGY2 CB, a.s.
100,00%
Betonstav spol. s r.o.
100,00%
Kerina, a.s.
100,00%
BPT Development, a.s.
100,00%
Komárno Investments, s.r.o.
100,00%
BRILLIANT VARIETY s.r.o.
100,00%
Komárno Property Development, a.s.
100,00%
Březiněves, a.s.
100,00%
Komura, a.s.
100,00%
Camuzzi, a.s.
100,00%
Liptovský Mikuláš Property Development, a.s.
100,00%
Carpenter Invest, a.s.
100,00%
Lockhart, a.s.
100,00%
CB Property Development, a.s.
100,00%
LUDLOW a.s.
100,00%
Conradian, a.s.
100,00%
Malerba, a.s.
100,00%
50,00%
MAPON, a.s.
100,00%
COPA Centrum Národní, s.r.o.
99,96% 99,96%
50,00%
CPI - Bor, a.s.
100,00%
Marissa Alfa, a.s.
100,00%
CPI - City Park Jihlava, a.s.
100,00%
Marissa Beta, a.s.
100,00%
CPI - Facility, a.s.
100,00%
Marissa Delta, a.s.
100,00%
99,96%
Marissa East, a.s.
100,00%
CPI - Krásné Březno, a.s. CPI - Land Development, a.s.
100,00%
Marissa Epsilon, a.s.
100,00%
CPI - Orlová, a.s.
100,00%
Marissa Gama, a.s.
100,00%
CPI - Real Estate, a.s.
100,00%
Marissa Ióta, a.s.
100,00%
CPI - Štupartská, a.s.
100,00%
Marissa Kappa, a.s.
100,00%
CPI - Zbraslav, a.s.
100,00%
Marissa Ksí, a.s.
100,00%
CPI BYTY, a.s.
100,00%
Marissa Lambda, a.s.
100,00%
CPI City Center ÚL, a.s.
100,00%
Marissa North, a.s.
100,00%
CPI Facility Slovakia, a.s.
100,00%
Marissa Omega, a.s.
100,00%
CPI Finance Ireland Limited
100,00%
Marissa Omikrón, a.s.
100,00%
CPI Finance Netherlands B.V.
100,00%
Marissa Sigma, a.s.
100,00%
CPI Finance, a.s.
100,00%
Marissa South, a.s.
100,00%
CPI Hotels Properties, a.s.
100,00%
Marissa Tau, a.s.
100,00%
CPI Management, s.r.o.
100,00%
Marissa Théta, a.s.
100,00%
CPI Park Mlýnec, a.s.
100,00%
Marissa West, a.s.
100,00%
CPI Park Žďárek, a.s.
99,96%
Marissa Yellow, a.s.
100,00%
CPI Property, s.r.o.
100,00%
Marissa Ypsilon, a.s.
100,00%
CPI Reality, a.s.
100,00%
Marissa, a.s.
100,00%
CPI Retails ONE, a.s.
100,00%
MB Property Development, a.s.
100,00%
CPI Retails TWO, a.s.
100,00%
Mělník Investments, s.r.o.
100,00%
CPI Services, a.s.
100,00%
Michalovce Property Development, a.s.
100,00%
25
CPI BYTY Group Annual report 2011
Name of the Company
Ownership interest
Name of the Company
Ownership interest
Modřanská Property, a.s.
100,00%
Ružomberok Property Development, a.s.
100,00%
MUXUM, a.s.
100,00%
Řepy Investments, s.r.o.
100,00%
Náchod Investments, s.r.o.
100,00%
SHEMAR INVESTMENTS LIMITED
100,00%
NERONTA, a.s.
100,00%
Strakonice Property Development, a.s.
100,00%
Nymburk Property Development, a.s.
100,00%
Svitavy Property Alfa, a.s.
100,00%
OC Nová Zdaboř a.s.
100,00%
Svitavy Property Development, a.s.
100,00%
Office Star Four, spol. s r.o.
100,00%
Telč Property Development, a.s.
100,00%
Office Star Fourteen, spol. s r.o.
100,00%
Trebišov Property Development, s.r.o.
100,00%
Office Star One, spol. s r.o.
100,00%
Trenčín Property Development, a.s.
100,00%
Office Star Seven, spol. s r.o.
100,00%
TRIFIT Vysoké Mýto s.r.o.
100,00%
Office Star Ten, spol. s r.o.
100,00%
Trutnov Property Development, a.s.
100,00%
Office Star Thirteen, spol. s r.o.
100,00%
Třinec Property Development, a.s.
100,00%
Office Star Three, spol. S r.o.
100,00%
U svatého Michala, a.s.
100,00%
Olomouc City Center, a.s.
100,00%
Vigano, a.s.
100,00%
OLYMPIA Mladá Boleslav s.r.o.
100,00%
VM Property Development, a.s.
100,00%
OLYMPIA Teplice s.r.o.
100,00%
VT Alfa, a.s.
50,00%
Pardubice Investments, s.r.o.
100,00%
VT Holding, a.s.
50,00%
Považská Bystrica Investments, s.r.o.
100,00%
Vyškov Property Development, a.s.
100,00%
Považská Bystrica Property Development, a.s.
100,00%
Zvolen Property Development, a.s.
100,00%
Prague Property Development, s.r.o.
100,00%
Žďár Property Development, a.s.
100,00%
Prievidza Property Development, a.s.
100,00%
Ždírec Property Development, a.s.
100,00%
RK Building s.r.o.
100,00%
Concluded contracts In the Financial Period, the following contracts and agreements were signed between CPI BYTY and CPI or Mr Radovan Vítek, and between CPI BYTY and other entities controlled by CPI or by Mr Radovan Vítek:
Contracting Party CPI - Facility, a.s. CPI - Facility, a.s. CPI - Facility, a.s. (no. 1) CPI - Facility, a.s. (no. 2) CPI - Facility, a.s. (no. 3) CPI - Orlová, a.s. CPI Finance, a.s. (no. 1) CPI Finance, a.s. (no. 2) CPI Finance, a.s. (no. 3) CPI Finance, a.s. (no. 4) CPI Finance, a.s. (no. 5) CPI Finance, a.s. (no. 6) CPI Finance, a.s. (no. 7) CPI Finance, a.s. (no. 8) Czech Property Investments, a.s. JUDr. Radovan Vítek
Contract Purchase agreement Vehicle sublease contract Purchase agreement Purchase agreement Purchase agreement Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Agreement of assignment of receivables Management agreement Share purchase agreement
26
Date 1.6.2011 5.5.2011 1.12.2011 1.12.2011 1.12.2011 19.8.2011 1.7.2011 1.7.2011 1.7.2011 1.7.2011 1.7.2011 1.7.2011 1.7.2011 1.7.2011 1.1.2011 1.3.2011
CPI BYTY Group Annual report 2011
Other Legal Acts In the Financial Period, no other legal acts were executed between CPI BYTY and CPI or Mr Radovan Vítek, and between CPI BYTY and entities controlled by CPI or by Mr Radovan Vítek. Other measures, their advantages and disadvantages, supplies provided, considerations received, and loss suffered During the Financial Period, no measures were adopted or implemented in the interest or at the instigation of CPI or Mr Radovan Vítek or entities controlled by CPI or Mr Radovan Vítek. During the Financial Period, no supplies were provided and no considerations were received in the interest or at the instigation of CPI or Mr Radovan Vítek or entities controlled by CPI or Mr Radovan Vítek . The value of transactions between related parties is set out in the notes to the financial statements of CPI BYTY for 2011. The Board of Directors of the controlled entity confirms that CPI BYTY suffered no damage or loss as a result of the conclusion of the above-mentioned agreements, the implementation of the above-mentioned other legal acts and other measures, and supplies provided or considerations received.
Prague, 31 March 2012
Marek Stubley Chairman of the Board of Directors CPI BYTY, a.s.
Zdeněk Havelka Member of the Board of Directors CPI BYTY, a.s.
27
Consolidated financial statements as at 31 December 2011
CPI BYTY, a.s.
CPI BYTY Group Consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Consolidated statement of financial position Note ASSETS Non-current assets Investment property Property, plant and equipment Other investments Loans provided Trade and other receivables Total non-current assets
31 December 2011
31 December 2010
3.1 3.2 3.3 3.4 3.5
7 078 303 590 1 525 860 7 323 -8 612 076
6 857 998 30 267 1 525 980 377 614 19 821 8 811 680
3.6 3.5
6 405 1 406 254 16 924 121 775 152 923 1 704 281
11 084 872 923 -120 401 164 864 1 169 272
10 316 357
9 980 952
2 000 2 094 843 2 819 058 4 915 901
2 000 2 094 843 2 634 898 4 731 741
-4 915 901
-7 4 731 734
3.9 3.13
3 158 071 1 012 966 4 171 037
3 367 443 956 515 4 323 958
3.9
379 992 -847 831 1 596 1 229 419
163 214 8 017 737 985 16 044 925 260
5 400 456
5 249 218
10 316 357
9 980 952
Current assets Trading property - inventories Trade and other receivables Current income tax assets Loans provided Cash and cash equivalents Total current assets
3.4 3.7
TOTAL ASSETS EQUITY Share capital Other reserves Retained earnings Total equity attributable to owner of the Company
3.8 3.8 3.8
Non-controlling interests Total equity LIABILITIES Non-current liabilities Interest-bearing loans and borrowings Deferred tax liabilities Total non-current liabilities Current liabilities Interest-bearing loans and borrowings Current income tax liabilities Trade and other payables Provisions Total current liabilities
3.11 3.12
Total liabilities TOTAL EQUITY AND LIABILITIES
Notes to consolidated financial statements on pages 33 to 84 are integral part of these financial statements.
29
CPI BYTY Group Consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Consolidated statement of comprehensive income Note
2011
2010
Continuing operations Gross rental income
4.1
446 182
355 390
Net service charge expenses
4.2
-2 663
-8 897
Property operating expenses
4.3
-398 597
-116 995
44 922
229 498
Net rental and service related income
Net valuation gain on investment property
4.4
289 678
365 222
Loss on the disposal of investment property
3.1
-435
-11 419
--
904
Gain on the disposal of trading property Loss on the disposal of property plant and equipment
--
-682
Administrative expenses
4.5
-14 479
-31 845
Other income
4.6
17 420
6 494
Other expenses
4.7
-25 850
-34 366
311 256
523 806
Results from operating activities
Finance income
4.8
88 450
71 190
Finance expenses
4.9
-158 426
-108 033
Net finance expenses
-69 976
-36 843
Profit before income tax
241 280
486 963
Income tax expense
-56 813
-39 498
Profit from continuing operations
4.10
184 467
447 465
Profit for the period
184 467
447 465
Total comprehensive income for the period
184 467
447 465
184 478
447 607
Profit attributable to: Owners of the Company Non-controlling interest Profit for the period
-11
-142
184 467
447 465
184 478
447 607
Total comprehensive income/ (expense) attributable to: Owners of the Company Non-controlling interest Total comprehensive income for the period
-11
-142
184 467
447 465
Earnings per share Basic earnings per share (TCZK)
3.8
9 224
22 380
Diluted earnings per share (TCZK)
3.8
9 224
22 380
Notes to consolidated financial statements on pages 33 to 84 are integral part of these financial statements.
30
CPI BYTY Group Consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Consolidated statement of cash flow 2011
2010
241 280
486 963
-289 678
-365 222
67 951
34 749
Impairment of assets
8 845
11 688
Gain / (Loss) on the disposal of investment property
-4 868
5 097
128
1 088
--
682
Operating activities Profit before income tax Adjusted by: Net valuation gain on investment property Net interest expenses
Depreciation Loss on the disposal of plant and equipment Gains on the dispoal of trading property - inventory Profit before income tax, changes in working capital and provisions Changes in trade and other receivables Changes in trade and other payables Changes in trading property - inventory
--
-904
23 658
174 141
-136 529
-183 762
236 788
136 835
-1 100
-3 214
Change in provisions
-14 448
-2 538
Income tax paid
-25 658
-31 392
82 711
90 088
126 225
121 415
--
244
-16 167
-298
-707
-174
51 896
9 276
718
3 024
Net cash flows from operating activities
Investing activities Proceeds from sale on investment property Proceeds from sale of property, plant and equipment Acquisition of investment property Acquisition of property, plant and equipment Other loan - repaid Interest received Acquisition of other investment
--
-983 412
161 965
-849 925
-119 536
1 473 113
291
-50
-137 372
-90 830
Dividends paid
--
-580 000
Proceeds from merger
--
36 322
-256 617
838 555
Net increase / (decrease) in cash and cash equivalents
-11 941
78 718
Cash and cash equivalents at beginning of the year
164 864
86 146
Cash and cash equivalents at the end of the year
152 923
164 864
Net cash flows from investing activities Financing activities: Drawings / (repayments) of loans and borrowings Drawings / (repayments) of finance lease liabilities Interest paid
Net cash flows from financing activities
Notes to consolidated financial statements on pages 33 to 84 are integral part of these financial statements.
31
CPI BYTY Group Consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Consolidated statement of changes in equity
Balance at 1 January 2010 Profit for the period Total comprehensive income for the period Dividends Total contributions by and distributions to owners of the Company
Share capital
Other reserves
Retained earnings
Total attributable to owners of the Company
Non-controlling interests
Total equity
2 000
1 214
2 767 291
2 770 505
--
2 770 505
--
--
447 607
447 607
-142
447 465
--
--
447 607
447 607
-142
447 465
--
--
-580 000
-580 000
--
-580 000
--
--
-580 000
-580 000
--
-580 000
--
--
-580 000
-580 000
--
-580 000
--
2 093 629
--
2 093 629
135
2 093 764
Total transactions with owners of the Company Other movements Impact of merger Total other movements
--
2 093 629
--
2 093 629
135
2 093 764
Balance at 31 December 2010
2 000
2 094 843
2 634 898
4 731 741
-7
4 731 734
Balance at 1 January 2011
2 000
2 094 843
2 634 898
4 731 741
-7
4 731 734
184 478
184 478
-11
184 467
Profit for the period Total comprehensive income for the period Disposal of non-controlling interests without a change in control
--
--
184 478
184 478
-11
184 467
--
--
-318
-318
18
-300
Total changes in ownership interests in subsidiaries
--
--
-318
-318
18
-300
Total transactions with owners of the Company
--
--
-318
-318
18
-300
2 000
2 094 843
2 819 058
4 915 901
--
4 915 901
Balance at 31 December 2011
Notes to consolidated financial statements on pages 33 to 84 are integral part of these financial statements.
32
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Notes to the consolidated financial statements 1 General information CPI BYTY, a.s. (herafter “the Company” or “CPI BYTY”) is a joint-stock company incorporated under the laws of the Czech Republic and was established on 14 November 2000. The merger of the Company with SPOBYT, a.s., BYTY TŘINEC, a.s. and Byty Česká Lípa, a.s. with effective date of 1 January 2009 was registered on 1 January 2010 in the commercial register. The merger of the Company with RLRE Tellmer Property s.r.o. with effective date of 1 July 2010 was registered on 19 November 2010 in the commercial register. The Company and its subsidiaries form the Consolidation group (herafter together refered as “the Group” or “CPI BYTY Group”). The main activity of the Group is rent of of residential and commercial premises and developer’s activity.
Registered office Václavské náměstí 1601/47 Praha 1 Czech Republic
Registration Number 262 28 700
Shareholder as at 31 December 2011 The sole shareholder of the Company is Czech Property Investments, a.s. (herafter “CPI a.s.“) with registered office - Václavské náměstí 1601/47, Praha 1, Czech Republic. The registration number of the sole shareholder is 42716161. CPI BYTY Group is part of consolidation group of CPI (herafter “CPI Group”), which is controlled by Mr. Radovan Vítek.
as at 31 December 2010 The shareholders of the Company were CPI a.s. (80%) and Prague Development Holding, a.s. (20%) with registered office – Václavské náměstí 1601/47, Praha 1, Czech Republic. With effective date of 1 January 2011 Prague Development Holding a.s. merged to CPI a.s. This merger was registered on 28 June 2011.
33
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Management as at 31 December 2011 Board of Directors
Supervisory Board
Chairman
Chairman
Marek Stubley, since 15 March 2010
Pavel Semrád, since 15 March 2010
Members
Members
Milan Trněný, since 15 March 2010
Josef Štolba, since 8 June 2011
Zdeněk Havelka, since 15 March 2010
Radovan Vítek, since 8 June 2011
as at 31 December 2010 Board of Directors
Supervisory Board
Chairman
Chairman
Marek Stubley, since15 March 2010
Pavel Semrád, since 15 March 2010
Members
Members
Milan Trněný, since 15 March 2010
David Michal, since 15 March 2010
Zdeněk Havelka, since 15 March 2010
Karolína Babáková, since 15 March 2010
34
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2 Summary of significant accounting policies 2.1 Basis of preparation of consolidated financial statements (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The consolidated financial statements were authorised for issue by the Board of Directors on 27 April 2012. In 2011 the Group adopted the following new or amended standards and interpretations, which were relevant to the Group: -
IFRS 3 – Business Combinations (effective date 1 July 2010) The amendments clarify that contingent consideration arising in a business combination previously accounted for in accordance with IFRS 3 (2004) that remains outstanding at the adoption date of IFRS 3 (2008) continues to be accounted for in accordance with IFRS 3 (2004); furthermore the amendments limit the accounting policy choice to measure noncontrolling interests upon initial recognition at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets to instruments that give rise to a present ownership interest and that currently entitle the holder to a share of net assets in the event of liquidation; and expand the current guidance on the attribution of the market-based measure of an acquirer’s share-based payment awards issued in exchange for acquiree awards between consideration transferred and post-combination compensation cost when an acquirer is obliged to replace the acquiree’s existing awards to encompass voluntarily replaced unexpired acquiree awards.
-
IFRS 7 Financial Instruments: Disclosures (effective date 1 January 2011) The amendments add an explicit statement that qualitative disclosure should be made in the contact of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments. In addition, the IASB amended and removed existing disclosure requirements.
-
IAS 1 Presentation of financial statements (effective date 1 January 2011) The amendments clarify that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income also is required to be presented, but may be presented either in the statement of changes in equity or in the notes.
-
IAS 24 Related Party Disclosures (effective date 1 January 2011) The revised IAS 24 Related Party Disclosures amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities.
The adoption of the above-mentioned revised standards and amendments do not have a material impact on the consolidated financial statements of the Group. A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2011, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except for IFRS 9 Financial Instruments, which becomes mandatory for the Group’s 2013 consolidated financial statements and could change the classification and measurement of financial assets. The Group does not plan to adopt this standard early and the extent of the impact has not been determined.
35
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(b) Basis of measurement The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:
investment property is measured at fair value;
derivative financial instruments are measured at fair value;
non-derivative financial instruments at fair value through profit or loss are measured at fair value.
(c) Functional and presentation currency These consolidated financial statements are presented in Czech Crowns, which is the Group’s functional currency. All financial information presented in Czech Crowns has been rounded to the nearest thousand (TCZK), except when otherwise indicated. (d) Use of estimates and judgements The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, internal calculation and various other factors that the management believes to be reasonable under the circumstances, the results of which form the basis of judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about assumptions and estimated uncertainties that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the note 7 Financial risk management. (e) Changes in classification and presentation The Group has amended classification and presentation of certain items in the consolidated financial statements as at 31 December 2011 in order to provide more reliable and accurate information about the Group’s financial position, financial performance and its cash-flow. To ensure consistency with the classification selected in the current period, reclassifications were made in the comparative financials as at 31 December 2010. The reclassifications have no impact to net profit or to the equity that was reported as at 31 December 2010.
36
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2.2 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. (i)
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquire; plus
if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss. Transaction cost, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within the equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. The interest of non-controlling shareholders is stated at the non-controlling interest’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the noncontrolling interest in excess of the non-controlling interest are allocated against the interests of the parent company.
37
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(ii)
Business combinations involving entities under common control
A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. In the absence of more specific guidance, the Group consistently applied acquisition accounting to account for to all common control transactions. (iii)
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. (iv)
Loss of control
On the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence retained. (v)
Transactions eliminated on consolidation
Intra-group balances and transactions, and any gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. (b) Foreign currency (i)
Functional currencies
Functional currency of the companies within the Group is Czech Crown, as the entities are incorporated and carry out their operations in Czech republic. (ii)
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.
38
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for the differences arising on the retranslation of qualifying cash flow hedges to the extent the hedge is effective, which are recognised in the other comprehensive income. (c) Investment property Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of material and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. An external independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, valued the portfolio of investment property at the year end of 2011 and 2010 respectively. The results of independent valuations were further analysed by the Group’s valuation committee and included in the final management estimates of the fair value. Those estimates considered the results of current and prior external valuations, information about current market conditions and internal calculations of the Group. Following methods of investment property valuation were used with respect of its segment classification. (i) Residential Residential properties have been valued using Discounted cash flow (DCF) method of valuation. The discounted cash flow calculation is a valuation of rental income considering non‑recoverable costs and applying a discount rate for the current income risk over a ten-year period. After ten years a determining residual value (exit scenario) is calculated. (ii) Land and vacant buildings Land and vacant buildings have been valued using the direct comparison method to arrive at the value of the property in its existing state. Comparison of other similarly located and zoned plots of land/buildings that are currently on the market in the similar location was performed. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
39
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(d) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Group’s statement of financial position. Property held under operating leases that meets the definition of investment property is classified as investment property on a property-byproperty basis. Investment property held under an operating lease is recognised in the Group’s statement of financial position at its fair value. (e) Property, plant and equipment (i)
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation (see below) and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the initial estimate, where relevant, of the costs of dismantling and removing building items and restoring the building site at which they are located, capitalised borrowing costs and an appropriate proportion of production overheads. Where components of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. (ii)
Reclassification to investment property
When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on re-measurement is recognised in profit or loss to the extent that it reverses the previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss. (iii)
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.
40
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(iv)
Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. The estimated useful lives for the current and comparative periods are as follows: Assets Equipment Motor vehicles Fittings Computers
2011 10 years 5 years 5 years 3 years
2010 10 years 5 years 5 years 3 years
Depreciation methods, useful lives and residual values (if not insignificant) are reviewed at each reporting date and adjusted if appropriate. (f) Intangible assets (i)
Goodwill
Business combinations are accounted for by applying the acquisition method. Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets. Subsequently, goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units (assets) and is not amortised but is tested annually for impairment. (ii)
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives, are measured at cost less accumulated amortisation (see below) and accumulated impairment losses. (iii)
Subsequent expenditure
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.
41
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(iv)
Amortisation
Except for goodwill, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: Assets
2011
2010
Software Other intangible assets
3-8 years 3-5 years
3-8 years 3-5 years
Amortisation methods, useful lives and residual values (if not insignificant) are reviewed at each reporting date and adjusted if appropriate. (g) Trading property - inventory Trading property - inventory is measured at the lower of cost and net realisable value. Cost includes expenditure that is directly attributable to the acquisition of the trading property inventory. The cost of self-constructed trading property - inventory includes the cost of material and direct labour, any other costs directly attributable to bringing the trading property - inventory to a condition for their intended use and capitalised borrowing costs. Costs of trading property – inventory reclassified from existing investment property is based on the fair value of such property. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses (h) Financial instruments (i) Non-derivative financial assets Non-derivative financial assets comprise investments in equity and debt securities, provided loans, trade and other receivables, and cash and cash equivalents. The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including financial assets designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
42
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Provided loans Loans are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, provided loans are measured at amortised cost using the effective interest method, less any impairment losses. Finance charges, including premiums receivable on settlement or redemption and direct issue costs, are recognised in profit or loss on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The recoverable amount of the Group’s provided loans is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate calculated at initial recognition of these financial assets). Loan receivables with a short duration are not discounted. The Group classifies as a current portion any part of long-term loans that is due within one year from the date of the statement of financial position. Trade and other receivables Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method, less any impairment losses. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. Bank accounts and call deposits that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash-flow statement. Held-to-maturity financial assets If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Held-to-maturity financial assets comprise debentures.
43
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and presented in fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Available-for-sale financial assets which are investments in an equity instrument that does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value are clearly inappropriate are carried at cost. Available-for-sale financial assets comprise equity securities and debt securities. (ii) Non-derivative financial liabilities Non-derivative financial liabilities comprise loans and borrowings, bonds issued, bank overdrafts, and trade and other payables. The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including financial liabilities designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Interest-bearing loans, borrowings and bonds issued and bank overdraft Interest-bearing loans, borrowings and bonds are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, the interest-bearing loans, borrowings and bonds are measured at amortised cost using the effective interest method. Bank overdrafts form an integral part of the Group’s cash management.
44
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in profit or loss on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Group classifies as a current portion any part of long-term loans that is due within one year from the date of the statement of financial position. Trade and other payables Trade and other payables are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these payables are measured at amortised cost using the effective interest method. (iii) Share capital and share premium Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares and shares options, other than upon a business combination, are recognised as a deduction from equity, net of any tax effects. Repurchase and reissue of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable cost, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasure shares and are presented in the reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.
(i) Impairment (i)
Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant of prolonged decline in its fair value below its cost is objective evidence of impairment.
45
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Financial assets measured at amortised cost The Group considers evidence of impairment for financial assets measured at amortised cost (provided loans, trade and other receivables, held-to-maturity financial assets) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against provided loans, trade and other receivables or held-tomaturity financial assets. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. (ii)
Non - financial assets
The carrying amounts of the Group’s non-financial assets, other than investment property and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite-lived intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.
46
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset of CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (k) Guaranties provided In the normal course of business, the Group entities may enter into credit related commitments which are accounted for in accounts out of the statement of financial position. These commitments primarily include financial guarantees. Provisions are made for estimated losses on these commitments. In estimating the losses, the Group refers to the historical data regarding risk parameters (credit conversion factors, probability of default and loss-given default). (l) Revenue (i)
Rental income
Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. The term of the lease is the non-cancellable period of the lease. Any further term for which the tenant has the option to continue the lease is not considered.
47
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(ii)
Service charges and expenses recoverable from tenants
Service charges and expenses recoverable from tenants are dislosed net in the consolidated statement of comprehensive income. And they are recorded based on received invoices and estimates. (iii)
Services rendered
Revenue from services rendered is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. This usually involves other services not directly connected with rental activities. (iv)
Sale of investment property, trading property, investments in subsidiaries and equity-accounted investees
Revenue from the sale of investment property, trading property, investments in subsidiaries and equity-accounted investees is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. (m) Expenses (i)
Service costs and property operating expenses
Service costs for service contracts entered into and property operating expenses are expensed as incurred. (ii)
Operating lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Where the property interest held under an operating lease is classified as an investment property, the property interest is accounted for as if it was a finance lease and the fair value model is used for the asset recognised. (iii)
Finance lease payments
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (n) Finance income and finance costs
48
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Finance income comprises interest income on funds invested (bank interest, interest on provided loans, interest on bonds purchased), dividend income, gains on disposal of available-for-sale financial assets, , gains on derivative instruments that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established. Finance costs comprise interest expense on loans and borrowings, on bonds issued, interest charges related to finance leases, bank charges, losses on disposal of available-for-sale financial assets, losses on derivative instruments that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income. The interest expense component of finance lease payments is recognised in profit or loss using the effective interest rate method. Borrowing costs that are not directly attributable to the acquisition or construction of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance costs depending on whether foreign currency movements are in a net gain or net loss position. (o) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Current and deferred income tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will no reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantially enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 49
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(p) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (q) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Each segment within the group is periodically evaluated during the regular meetings of established task forces and results of such evaluations are reported during the Board of Directors meetings. Segment results that are reported to the Board of Directors, which is the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Group’s headquarters), head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, investment property, intangible assets other than goodwill and trading property. Segment information is presented in respect of the Group’s operating and geographical segments. The Group’s primary format for segment reporting is based on operating segments. The operating segments are determined based on the Group’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis.
50
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2.3 Definition of the consolidation group As at 31 December 2011 the consolidation group is formed by CPI BYTY and 2 subsidiaries under direct control of CPI BYTY. The Group as at 31 December 2011: Voting rights share
Consolidation method
Václavské nám. 1601/47, Praha 1
100%
full method
Václavské nám. 1601/47, Praha 1
100%
full method
Voting rights share
Consolidation method
Controlled entities
Registered office
BPT Development, a.s. Březiněves, a.s.
The Group as at 31 December 2010: Controlled entities
Registered office
BPT Development, a.s.
Václavské nám. 1601/47, Praha 1
100%
full method
Březiněves, a.s.
Václavské nám. 1601/47, Praha 1
99,45%
full method
2.4 Business combinations In 2011 no business combinations were realized. The effects of the mergers in 2010 are described in Note 3.8.
51
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3 Consolidated statement of financial position 3.1 Investment property Investment property 2011
Balance at 1 January 2011 Additions Transfer from trading property – inventories Transfer from property, plant and equipment
Residential
Land bank
Total
6 621 229
236 769
6 857 998
16 167
--
16 167
--
5 779
5 779
15 001
15 037
30 038
-121 357
--
-121 357
303 796
-14 118
289 678
6 834 836
243 467
7 078 303
Residential
Land bank
Total
Balance at 1 January 2010
3 177 529
36 054
3 213 583
Acquired through merger
3 182 364
223 006
3 405 370
298
--
298
Disposals Valuation gain / (loss) Balance at 31 December 2011
Investment property 2010
Additions Transfer from property, plant and equipment Disposals Valuation gain / (loss) Balance at 31 December 2010
--
37
37
-126 442
-70
-126 512
387 480
-22 258
365 222
6 621 229
236 769
6 857 998
Investment property represent land bank in Praha – Březiněves and housing portfolio in following locations: Praha – Letňany, Ústí nad Labem, Česká Lípa, Třinec, Slaný, Teplice, Most, Děčín, Liberec, Jablonec nad Nisou, Nové Město pod Smrkem and Litvínov. The owned properties of the Company are subject to a registered debenture to secure bank loans (refer to Note 3.9). In accordance with accounting policies applied, the Group re-assessed the use of certain items of property, plant and equipment and changed their classification from owner-occupied to investment property. No gain or loss arose on the re-measurement of the respective property.
52
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Disposals of investment property 2011
2010
Proceeds from sale of investment property
126 225
121 415
Carrying value of investment property sold
-121 357
-126 512
-5 303
-6 322
-435
-11 419
Related cost (e.g. transfer tax) Loss
Disposals of investment property represent mainly sale of appartments in Praha – Letňany. Acquisitions through merger in 2010
Březiněves, a.s. (subsidiary of SPOBYT, a.s.) Byty Česká Lípa, a.s. SPOBYT, a.s. RLRE Tellmer Property s.r.o. Total
For detail of merger process refer to Note 3.8.
53
Residential
Land bank
Total
--
210 257
210 257
703 396
--
703 396
1 604 968
12 749
1 617 717
874 000
--
874 000
3 182 364
223 006
3 405 370
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.2 Property, plant and equipment Property, plant and equipment 2011 Land and buldings
Plant and equipment
Finance leases
Property under construction
Total
Cost Balance at 1 January 2011
33 076
1 456
1 281
91
35 904
Additions
--
--
707
--
707
Disposals
--
--
-319
--
-319
-33 076
-1 456
--
-91
-34 623
--
--
1 669
--
1 669
3 220
1 365
1 052
--
5 637
Depreciation for the period
--
--
128
--
128
Accumulated depreciation to disposals
--
--
-101
--
-101
-3 220
-1 365
--
--
-4 585
--
--
1 079
--
1 079
29 856
91
229
91
30 267
--
--
590
--
590
Land and buldings
Plant and equipment
Finance leases
Property under construction
Total
7 167
1 456
319
37
8 979
26 861
--
962
--
27 823
Additions
83
--
--
91
174
Disposals
-1 035
--
--
--
-1 035
--
--
--
-37
-37
33 076
1 456
1 281
91
35 904
Transfers to investment property Balance at 31 December 2011
Accumulated depreciation Balance at 1 January 2011
Transfers to investment property Balance at 31 December 2011
Carrying amounts At 1 January 2011 At 31 December 2011
Property, plant and equipment 2010
Cost Balance at 1 January 2010 Acquired through merger
Transfers to investment property Balance at 31 December 2010
Accumulated depreciation Balance at 1 January 2010 Accumulated depreciation acquired through merger
89
1 365
27
--
1 481
2 216
--
961
--
3 177
Depreciation for the period
1 024
--
64
--
1 088
-109
--
--
--
-109
3 220
1 365
1 052
--
5 637
7 078
91
292
37
7 498
29 856
91
229
91
30 267
Accumulated depreciation to disposals Balance at 31 December 2010
Carrying amounts At 1 January 2010 At 31 December 2010
54
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.3 Other investments
2011 Bonds (incl. accrued aliquot interest)
1 525 860
2010 1 525 980
Other investments comprises CPI 2021 bonds (ISIN CZ0003501496) which were issued by CPI a.s. as bearer bonds in listed form. Nominal value of each bond is TCZK 2 000. The interest (6M PRIBOR + margin 3,5 % p.a.) is due semi-annually in arrears on 8 February and 8 August. The bonds are due on 8 August 2021. As at 31 December 2011, the Group owns 748 bonds in total nominal value of TCZK 1 496 000 (2010: 748 bonds in total nominal value of TCZK 1 496 000). The accrued aliquot interest amounts to TCZK 29 860 (2010: TCZK 29 980). All bonds are subject to a registered debenture to secure bank loans (refer to Note 3.9).
55
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.4 Loans provided Loans provided (non-current)
Loans provided to related parties (Note 8.1) Loans provided to third parties Total
2011
2011
2010
2010
Balance
Average interest rate
Balance
Average interest rate
7 323
6,21%
352 835
4,42%
--
--
24 779
6,32%
7 323
377 614
Loans provided (current)
Loans provided to related parties (Note 8.1) Loans provided to third parties Total
2011
2011
2010
2010
Balance
Average interest rate
Balance
Average interest rate
121 739
--
109 547
--
36
--
10 854
2,31%
121 775
120 401
Balances of non-current loans include loan principal and unpaid non-current interest. Balances of current loans include loan principal, unpaid interest related to current loans and current portion of unpaid interest related to non-current loans which is expected to be paid within 12 months.
56
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.5 Trade and other receivables Trade and other receivables (non-current) 2011
2010
Receivables due from third parties
--
19 821
Total
--
19 821
2011
2010
313 910
289 768
292
718
Advances paid (4)
152 927
121 861
Prepaid expenses
39 918
34 463
Trade and other receivables (current)
Trade receivables due from third parties (1) Trade receivables due from related parties
Receivables due from cession from third parties Receivables due from cession from related parties (3) Receivables due from employees Other receivables due from third parties Total
Impairment to trade receivables due from third parties (2) Impairment to other receivables due from third parties Total Total trade and other receivables net of impairment
9 059
113 475
966 934
374 590
1 925
1 910
346
6 350
1 485 311
943 135
-79 057
-65 379
--
-4 833
-79 057
-70 212
1 406 254
872 923
(1) Trade receivables due from third parties represent primarily trade receivables from tenants of TCZK 138 249 (2010: TCZK 94 068) and receivables from invoicing of utilities of TCZK 164 890 (2010: TCZK 180 806). Receivables from invoicing of utilities will be settled against Advances received from tenants when final amount of utilities consumption and respective invoicing is known. (2) The impairment to trade receivables due from third parties is created for trade receivables from tenants overdue more than 181 days. Creation of adjusting items to receivables is recognized in statement of comprehensive income as impairment loss within Other expenses. (3) Receivables due from cession from related parties are described in Note 8.1. (4) Advances paid represent advances for utilities paid by the Company for which final invoice has not been received from utility providers.
57
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.6 Trading property – inventories Balance as at 31 December 2011 relates to projects of Jižní stráň (Březiněves, a.s.) and Letňany (BPT Development, a.s.)
Balance at 1 January Construction cost incurred and other additions Disposal - sale Transfer to investment property Balance at 31 December
2011
2010
11 084
7 870
1 100
4 940
--
-1 726
-5 779
--
6 405
11 084
2011
2010
150 575
163 147
2 348
1 717
152 923
164 864
3.7 Cash and cash equivalents
Bank balances Cash on hand Total
58
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.8 Equity Share capital
Weighted average number of ordinary shares (basis) Dilution Weighted average number of ordinary shares (diluted) Nominal value of ordinary share (in CZK) Share capital
2011
2010
20
20
--
--
20
20
100 000
100 000
2 000
2 000
The ordinary shares were issued in form of certified bearer ordinary shares. The issued share capital was fully paid up. No new shares were issued in 2011 and 2010.
Earning per share
2011
2010
184 478
447 607
Earning per share (in CZK) - basic
9 223 900
22 380 350
Earning per share (in CZK) - diluted
9 223 900
22 380 350
Dividend per share (in CZK) - basic
--
29 000 000
Dividend per share (in CZK) - diluted
--
29 000 000
2011
2010
47
47
2 093 629
2 093 629
1 167
1 167
2 094 843
2 094 843
Net profit attributable to ordinary shareholders for the year (in TCZK)
Other reserves
Capital contributions Merger reserve Legal reserve Total capital and reserve funds
Legal reserve comprises legal reserve of the Group of TCZK 1 167 (2010: TCZK 1 167). In 2010, the Company recorded equity reserve of TCZK 1 606 684 related to the merger of SPOBYT, a.s. and Byty Česká Lípa, a.s. (the Companies ceased to exist) with CPI BYTY (the successor company) and equity reserve of TCZK 486 945 related to the merger of RLRE Tellmer Property s.r.o. (the company ceased to exist) with the Company (the successor company).
59
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Due to merger of CPI BYTY with Byty Česká Lípa, a.s. and SPOBYT, a.s., the correspondent fund was created according to this process: + Assets in real value Byty Ceská Lípa, a.s. + Assets in real value of SPOBYT, a.s + Assets in real value of Březiněves, a.s
928 928 2 322 785 255 570
- Value of investment into Byty Česká Lípa, a.s.
-187 806
- Value of capital participation in Březiněves, a.s.
-50 141
Total
+ Liabilites of Byty Česká Lípa, a.s.
507 748
+ Liabilities SPOBYT, a.s.
923 922
+ Liabilities Březiněves, a.s.
230 847
+ Non-controlling share in equity + Funds created by merger
3 269 336
135 1 606 684 3 269 336
The company Březiněves, a.s was on the date of the merger a subsidiary of SPOBYT, a.s. Due to merger of CPI BYTY with company RLRE Tellmer Property s.r.o., the correspondent fund was created according to this process: + Assets in real value of RLRE Tellmer Property s.r.o.
875 581
- Value of investment into RLRE Tellmer Property s.r.o. Total
-875 581
+Liabilites of RLRE Tellmer Property s.r.o.
388 636
+Funds created by merger
486 945 875 581
The Group had no investment in the company RLRE Tellmer Property s.r.o. On the date of merger, the company RLRE Tellmer Property s.r.o. was owned by CPI a.s. as fellow subsidiary of CPI BYTY. Non-controlling interest In 2011 the Group acquired an additional 0,55% interest in Březiněves, a.s., increasing its ownership from 99,45% to 100%. A cash consideration of TCZK 300 was paid to the non-controlling interest shareholder. The carrying value of the additional interest acquired at the acquisition date was TCZK 18. The difference of TCZK 318 between the consideration paid and the carrying value of the interest acquired has been recognised in retained earnings within equity.
60
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.9 Interest-bearing loans and borrowings Non-current liabilities
Loans from related parties
2011
2010
210 144
115 597
Loans from third parties Bank loans Finance lease liaibilities Total
--
178 993
2 947 571
3 072 723
356
130
3 158 071
3 367 443
2011
2010
239 937
16 466
14 784
27 158
125 152
119 536
119
54
379 992
163 214
Current liabilities
Loans from related parties Loans from third parties Bank loans Finance lease liaibilities Total
The detailed split as at 31 December 2011 can be summarised as follows:
Currency
Nominal interest rate
Due within 1 year
Due within 1- 5 years
Due in following years
Total
Loans from related parties CPI a.s.
CZK
5% p.a.
3
8 597
--
8 600
CPI Finance, a.s.
CZK
5% p.a.
239 708
3 450
198 097
441 255
CPI Services, a.s.
CZK
5% p.a.
226
--
--
226
239 937
12 047
198 097
450 081
Subtotal Loans from third parties Loans from third parties
CZK
6% p.a.
14 784
--
--
14 784
CZK
1M PRIBOR + (2,5%-4,2%)
125 152
777 236
2 170 335
3 072 723
CZK
6,12% p.a.
119
356
--
475
379 992
789 639
2 368 432
3 538 063
Bank loans Raiffeisenbank, a.s. Finance lease Finance lease (car) Total
61
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The detailed split as at 31 December 2010 can be summarised as follows:
Currency
Nominal interest rate
Due within 1 year
Due within 1- 5 years
Due in following years
Total
Loans from related parties CPI a.s.
CZK
5% p.a.
8
2 283
--
2 291
CPI Reality, a.s.
CZK
5% p.a.
16 448
113 109
--
129 557
CPI Services, a.s.
CZK
5% p.a.
10
205
--
215
16 466
115 597
Subtotal
132 063
Loans from third parties Loans from third parties
CZK
6% p.a.
27 158
--
178 993
206 151
CZK
1M PRIBOR + (2,5%-4,2%)
119 536
537 006
2 535 717
3 192 259
CZK
8,64% p.a.
54
130
--
184
163 214
652 733
2 714 710
3 530 657
Bank loans Raiffeisenbank, a.s. Finance lease Finance lease (car) Total
In order to secure the obligations under the bank loan agreement the Company created: -
Morgage agreement over the investment property; Pledges to all existing and future receivables; Pledges of bank accounts receivables; Pledges of shares in the Company; Guarantee issued by CPI a.s. Pledge of Debentures in the ownership of the Company.
The bank loan agreement granted by the bank is subject to a number of covenants. During 2011 there were no events of default nor were there any breaches of covenants with respect to bank loan agreement.
62
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.10 Other bonds issued Non-current liabilities
2011 No. of bonds issued Proceeds from issued bonds - SPOBYT 5,25/13 Less: bonds owned by Group Total
2010 Value
No. of bonds issued
Value
25 000
250 000
25 000
250 000
25 000
250 000
25 000
250 000
--
--
--
--
Bonds SPOBYT 5,25/13 with the total nominal value of TCZK 250 000 due in 2013 were issued on 30 October 2003. The nominal value of each bond is TCZK 10. Bonds were issued as bearer notes in listed form (registered Bonds were issued in listed form (registered in the Central Securities Depository, the abbreviation is SPOBYT 5,25/13, ISIN CZ0003501363) in form of bearer shares. The nominal value of each bond is TCZK 10. The prospectus and the issuing terms were approved by the decision of the Securities Committee in the Czech Republic on 10 October 2003, reference number 45/N/900/2003/2 that came into force on 16 October 2003. Bonds were accepted for trading at the market organized by RM-Systém a.s.All above mentioned bonds were bought back from the holders by the original issuer – company SPOBYT, a.s. on 27 February 2007. In addition, the bonds were pledged in favour of the company Raiffeisenbank, a.s. and the rights to dispose of the bonds by issuer were limited. As a result of merger with the original issuer of the bonds (the company SPOBYT, a.s.) the Company became the issuer with effective date 1 January 2009.
63
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.11 Trade and other payables
Trade payables due to related parties (refer to Note 8.1)
2011
2010
15 164
18 081
Trade payables due to third parties (1)
176 046
77 032
Advances received from tenants (2)
279 825
272 945
30 734
28 015
2 390
69
Payables from cession
--
17 554
Commissions
--
55 000
Payables to HAINES s.r.o. (4)
--
250 407
338 389
14 162
5 283
4 720
847 831
737 985
Rental deposits from tenants (3) Payables due to employees, social security and health insurance, employees income tax
Other payables due to related parties (refer to Note 8.1) Other payables due to third parties
(1) The balance of Trade payables due to third parties increased compared to prior year mainly due to additional payables resulting from repairs and maintenance of apartments realized in 2011. (2) Advances received from tenants represent payments received from tenants for utilities that will be settled against trade receivables when final amount of utilities consumption and respective invoicing is known. (3) Deposits from tenants represent payables of the Company from received rental related deposits. As respective rental contracts can be terminated by tenants on short notice, the deposits are classified as current payables. (4) RLRE Tellmer Property s.r.o. (merged to the Company with effective date of 1 July 2010) owned portfolio of rental flats in Litvinov. The apartment portfolio of RLRE Tellmer Property s.r.o. was rented out to related party HAINES s.r.o. (herafter “HAINES”) that operated the portfolio as service company. After the merger of the Company and RLRE Tellmer Property s.r.o. the rental contract between the Company and HAINES was cancelled which resulted in recognition of liability of the Company to HAINES as at 31 December 2010.
3.12 Provisions
Balance at 1 January
2011
2010
16 044
728
Provisions created in the period
--
847
Provisions used in the period
--
-2 039
Provisions released in the period Merger additions Balance at 31 December
64
-14 448
--
--
16 508
1 596
16 044
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.13 Deferred tax Assets
Investment property Provisions
Liabilities
Net
2011
2010
2011
2010
2011
2010
--
--
-1 006 618
-952 988
-1 006 618
-952 988
--
--
-6 348
-3 048
-6 348
-3 048
Other items
112
153
-112
-632
--
-479
Tax assets/(liabilities)
112
153
-1 013 078
-956 668
-1 012 966
-956 515
--
--
--
--
--
--
112
153
-1 013 078
-956 668
-1 012 966
-956 515
Set-off of tax Net tax assets/(liabilities)
Movement in deferred tax balances in 2011 Balance at 1 January 2011
Recognised in profit or loss
Balance at 31 December 2011
-952 988
-53 630
-1 006 618
-3 048
-3 300
-6 348
-479
479
--
-956 515
-56 451
-1 012 966
Balance at 1 January 2010
Recognised in profit or loss
-524 743
-54 133
-374 112
-952 988
--
35
--
35
Investment property Provisions Other items Total
Movement in deferred tax balances in 2010
Investment property Finance lease Trade and other receivables Provisions
--
110
--
110
-6 835
3 787
--
-3 048
-1 370
746
--
-624
-532 948
-49 455
-374 112
-956 515
Other items Total
Movement Balance at recognised 31 December 2010 in equity
The movement in 2010 deferred tax of TCZK 374 112 relates to temporary differences on assets and liabilities recognized directly as a result of merger described in Note 3.8 and was recorded to equity of the CPI BYTY Group.
65
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4 Consolidated statement of comprehensive income 4.1 Gross rental income
Total gross rental income
2011
2010
446 182
355 390
Gross rental income includes income from rental of flats of TCZK 414 863 (2010: TCZK 323 654) and income from rental of non-residential premises of TCZK 31 319 (2010: TCZK 31 736). In 2010, the balance comprises revenue from Litvinov and Janov premises only for 6 months. Further the rental income development was influenced by the rent deregulation in 2011. Gross rental income is derived from a large number of tenants and no single tenant or group of tenants contribute more than 10% to the Group’s gross rental income.
4.2 Net service charge income / (expense) 2011 Service charge income Service charge expenses Total
66
2010
11 050
5 243
-13 713
-14 140
-2 663
-8 897
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.3 Property operating expenses 2011
2010
-306 866
-63 384
Utility services for vacant premises
-47 166
-25 577
Personnel expenses
-29 603
-9 740
Real estate tax
-4 512
-4 823
Property insurance expenses
-2 958
-3 642
Letting fee, other fees paid to real estate agents
-2 011
-80
-64
-1 024
-5 417
-8 725
-398 597
-116 995
2011
2010
Energy consumption
-32 165
-16 864
Material consumption
-3 102
-1 869
Waste management
-4 184
-2 043
Security services
-3 310
-2 485
Cleaning services
-4 405
-2 316
-47 166
-25 577
2011
2010
-21 476
-6 979
-7 976
-2 350
-151
-411
-29 603
-9 740
83
27
Repairs and maintenance
Depreciation and amortisation expense Other expenses Total property operating expenses
Utility services for vacant premises
Total property operating expenses
Personnel expenses
Wages and salaries Social and health security contributions Other social expenses Total Average number of employees
67
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.4 Net valuation gain on investment property 2011
2010
Residential
303 796
387 480
Total valuation gains
303 796
387 480
Land bank
-14 118
-22 258
Total valuation losses
-14 118
-22 258
Net valuation gain
289 678
365 222
Valuation gains
Valuation losses
4.5 Administrative expenses 2011
2010
Audit, tax and advisory services
-4 252
-7 908
Lease expenses
-2 168
-1 839
Accounting and other services based on mandate contracts
-1 566
-3 166
Legal services
-1 343
-8 179
Telecommunication fees
-973
-623
Advertising expenses
-549
-327
-64
-64
-3 564
-9 739
-14 479
-31 845
Depreciation and amortisation expense Other administrative expenses Total administrative expenses
4.6 Other income
Release of unused provisions Income from penalties
2011
2010
14 448
2 538
2 934
2 711
Insurance claims
28
927
Gain on assignment of receivables
10
318
17 420
6 494
Total other income
68
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.7 Other expenses 2011
2010
Impairment of current assets
-8 845
-11 688
Write-off receivables
-7 785
--
Taxes and fees
-3 288
-44
Tax non-deductible VAT expenses
-3 036
-5 020
Penalties
-1 043
-1 854
Compensations paid to tenants
--
-14 197
Other
-1 853
-1 563
Total other expenses
25 850
34 366
2011
2010
Interest income on bonds
74 918
52 561
Interest income on loans and receivables
12 776
18 208
Bank interest income
753
372
Other finance income
3
49
88 450
71 190
2011
2010
-156 398
-105 890
-2 028
-2 143
-158 426
-108 033
4.8 Finance income
Total finance income
4.9 Finance cost
Interest expense related to bank and non-bank loans Other finance cost (bank charges) Total finance cost
69
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.10 Income tax recognised in profit or loss 2011
2010
Current year related income tax
-362
9 957
Total
-362
9 957
Origination and reversal of temporary differences
-56 451
-49 455
Total
-56 451
-49 455
Income tax expense recognised in profit or loss
-56 813
-39 498
Current income tax income/(expense)
Deferred income tax expense
The tax rate of 19% was used for the calculation of deferred tax in 2010 and 2011. Reconciliation of effective tax rate 2011
2010
Profit for the period
184 467
447 465
Total income tax expense recognised in profit or loss
-56 813
-39 498
Profit before income tax
241 280
486 963
19%
19%
Income tax using the nominal corporate income tax rate
-45 843
-92 523
Non-deductible expense
-19 434
-7 845
Nominal corporate income tax rate
Tax exempt income
16 231
1 358
--
26 594
Change in the permanent tax differences
-6 054
34 063
Other effects
-1 713
-1 145
Tax expense
-56 813
-39 498
Other tax allowable credits
70
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
5
Segment reporting
5.1 Business segments Residential
Net rental and service related income
Land bank
Eliminations
Total consolidated
2011
2010
2011
2010
2011
2010
2011
2010
46 129
230 802
-1 207
-1 304
--
--
44 922
229 498
Net valuation gain/(loss) on inv. property
303 796
387 480
-14 118
-22 258
--
--
289 678
365 222
Results from operating activities
313 281
553 074
-2 025
-29 268
--
--
311 256
523 806
93 278
80 804
500
1 129
-5 328
-10 743
88 450
71 190
5 328
10 743
-158 426
-108 033
Finance income Finance expenses
-152 685
-107 996
-11 069
-10 780
Net finance income/ (costs)
-59 407
-27 192
-10 569
-9 651
--
--
-69 976
-36 843
Income tax income/ (expense)
-59 304
-47 976
2 491
8 478
--
--
-56 813
-39 498
Profit/(loss) for the period
194 570
477 906
-10 103
-30 441
--
--
184 467
447 465
Other information Segment assets
10 037 416
9 907 070
278 995
282 152
-54
-208 270
10 316 357
9 980 952
Segment liabilities
5 152 076
5 207 768
248 434
249 720
-54
-208 270
5 400 456
5 249 218
Segment net assets
4 885 340
4 699 302
30 561
32 432
--
--
4 915 901
4 731 734
5.2 Geographical segments The Group operates only in the Czech Republic.
71
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
6 Financial risk management 6.1 Liquidity risk Liquidity risk refers to the possibility of the Group being unable to meet its cash obligations mainly in relation to the settlement of amounts due to suppliers and bank loans and facilities. The Group monitors its risk to a shortage of funds using different liquidity planning tools. These tools comprise following activities: maintain a sufficient balance of liquid funds; flexible utilization of bank loan, overdrafts and facilities; projection of future cash flows from operating activities. Liquidity risk analysis The following table summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments including accrued interest. The table reflects the earliest settlement of Group’s liabilities based on contractual maturity. Liquidity risk 2011
Loans from third parties Loans from related parties Bank loans Finance lease liabilities
Current value
< 3 month
3-12 months
1-2 years
2-5 years
> 5 year
Total
14 784
15 006
--
--
--
--
15 006
450 081
73 782
182 562
--
15 093
228 477
499 914
3 072 723
31 084
98 479
142 353
785 784
3 436 074 4 493 774
475
30
96
141
300
--
567
847 831
77 401
760 347
216
9 625
242
847 831
4 385 894
197 303
1 041 484
142 710
810 802
Current value
< 3 month
3-12 months
1-2 years
2-5 years
> 5 year
Total
Loans from third parties
206 151
27 565
--
--
679
232 012
260 256
Loans from related parties
132 063
16 672
--
124 645
2 854
--
144 171
3 192 259
--
124 700
--
652 999
4 014 457
4 792 156
184
13
44
79
78
--
214
Trade and other payables Total
3 664 793 5 857 092
Liquidity risk 2010
Bank loans Finance lease liabilities Current income tax liabilities Trade and other payables Total
8 017
8 017
--
--
--
--
8 017
737 985
70
737 916
--
--
--
737 985
4 276 659
52 337
862 660
124 724
656 610
4 257 179
5 942 799
72
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
6.2 Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk mainly from its rental activities (primarily for trade receivables) and from its financing activities, including provided loans, purchased bonds, deposits with banks and financial institutions and other financial instruments. Customer credit risk is managed reflecting the Group’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard at the time of entering into a rental agreement. Outstanding customer receivables are regularly monitored. The Group’s maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The following tables present financial assets as of 31 December 2011 reflecting their classification based on its ageing structure and impairment if applicable: Credit risk 2011 Total neither past due nor impaired Cash and cash equivalents Trade and other receivables Loans provided
Total past due but not impaired
Impaired
Total
152 923
--
--
152 923
1 092 694
313 560
79 057
1 406 254
128 487
611
--
129 098
Purchased bonds
1 525 860
--
--
1 525 860
Total
2 899 964
314 171
79 057
3 214 135
Breakdown of overdue financial assets which are not impaired 2011
Trade and other receivables Loans provided Total
Past due 1-30 days
Past due 31-90 days
Past due 91-180 days
51
624
179
Past due Past due more than 360 181-360 days days 59 716
252 990
Total 313 560
--
--
--
--
611
611
51
624
179
59 716
253 601
314 171
73
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Credit risk 2010 Total neither past due nor impaired
Total past due but not impaired
Impaired
Total
Cash and cash equivalents
164 864
--
--
164 864
Trade and other receivables
352 074
540 670
70 212
892 744
Loans provided
444 277
53 738
--
498 015
Purchased bonds
1 525 980
--
--
1 525 980
Total
2 487 195
594 408
70 212
3 081 603
Breakdown of overdue financial assets which are not impaired 2010 Past due 130 days Trade and other receivables Loans provided Total
Past due 31- Past due 9190 days 180 days
Past due Past due 181more than 360 360 days days
Total
657
99
--
66 964
472 950
540 670
--
--
--
24 951
28 787
53 738
657
99
--
91 915
501 737
594 408
Not impaired Trade and other receivables past due more than 181 days represent receivables to related parties. The Group does not expect any potential losses from these receivables.
6.3 Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders; and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. The Group as property investor is mainly influenced by the fact that it leverages its project financing by using bank debts. There is no real seasonality impact on its financial position but rather a volatility of financial markets might positively or negatively influence Group’s financial position. No changes were made in the objectives, policies or processes during the year ended 31 December 2011. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total equity. Debt is defined as long-term and short-term liabilities as detailed described in consolidated statement of financial position. Equity includes all capital and reserves as shown in the consolidated statement of financial position. The gearing ratios at 31 December 2011 and at 31 December 2010 were as follows:
2011
2010
Debt
5 400 456
5 249 218
Equity
4 915 901
4 731 734
110%
111%
Gearing ratio
74
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
6.4 Interest rate risk The Group is exposed to various risks associated with the impact of fluctuations in the prevailing levels of market interest rates on its net position and cash flows. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial liabilities (bank loans) with variable interest rate calculated based on 1M PRIBOR + (2,5%4,2%) p.a. reprice in 1 month and financial assets (purchased bonds) with variable interest rate calculated based on 6M PRIBOR + margin 3,5 % p.a. reprice in 6 months. All other financial assets and liabilities bear interest calculated based on fixed interest rate set by the initial recognition. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term assets and liabilities with floating interest rates. These are represented by bank loans and acquired bonds, the base for interest rates changes are the values at 31 December 2011. Interest rate risk 2011
Effective interest rate
Nominal/ carrying amount
Interest calculated
Purchased bonds
4,95%
1 496 000
74 052
Interest bearing loans and borrowings (bank loans)
4,38%
-3 072 723
-134 585
-1 576 723
-60 533
Total
The following table shows results of sensitivity analysis in financial instruments to changes in interest rates. Interest rate risk 2011 - sensitivity analysis rate + 10%
Interest calculated
P/L effect
rate 10%
Interest calculated
P/L effect
Purchased bonds
5,4%
81 457
7 405
4,5%
66 647
-7 405
Interest bearing loans and borrowings
4,8%
-148 044
-13 459
3,9%
-121 127
13 459
-66 587
-6 054
-54 480
6 054
Total
The previous table can be interpreted as follows: 31 December 2011, if respective interest rate was of 10 percent higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 6 054 lower / TCZK 6 054 higher due to changed interest income and expense. Interest rate risk 2010
Effective interest rate
Nominal/ carrying amount
Interest calculated
Purchased bonds
5,06%
1 496 000
75 698
Interest bearing loans and borrowings (bank loans)
3,99%
-3 192 259
-127 371
-1 696 259
-51 673
Total
75
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The following table shows results of sensitivity analysis in financial instruments to changes in interest rates. Interest rate risk 2010 - sensitivity analysis rate + 10%
Interest calculated
P/L effect before taxation
rate 10%
Interest calculated
P/L effect before taxation
Purchased bonds
5,6%
83 267
7 570
4,6%
68 128
-7 570
Interest bearing loans and borrowings
4,4%
-140 108
-12 737
3,6%
-114 634
12 737
-56 841
-5 167
-46 506
5 167
Total
6.5 Foreign currency risk CPI BYTY Group is not exposed to any foreign currency risk. All transactions are denominated in Czech Crowns.
6.6 Fair values Carrying amount
Fair value
2011
2010
2011
2010
152 923
164 864
152 923
164 864
1 406 254
892 744
1 406 254
892 744
129 098
498 015
129 098
498 015
Purchased bonds
1 525 860
1 525 980
1 525 860
1 525 980
Total
3 214 135
3 081 603
3 214 135
3 081 603
3 538 063
3 530 657
3 538 063
3 530 657
847 831
737 985
847 831
737 985
4 385 894
4 268 642
4 385 894
4 268 642
Financial assets Cash and cash equivalents Trade and other receivables Loans provided
Financial liabilities Interest bearing loans and borrowings Trade and other payables Total
76
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The sensitivity analysis on change in assumptions of investment property valuation (except from land bank) is included below: Current yield
Current market value
Increased yield by 25 bp
2011
6,53%
6 834 836
6,78%
6 580 855
-253 981
2010
5,86%
6 621 229
6,11%
6 350 164
-271 065
Recalculated P/L effect before Market value taxation
The previous table can be interpreted as follows: 31 December 2011, if respective yield was of 25 bp higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 253 981 lower / TCZK 253 981 higher due to changed yield.
Current yield
Decrease Annualised rental rental income by income 10%
Recalculated P/L effect before Market value taxation
2011
6,53%
446 182
401 564
6 149 525
-685 311
2010
5,86%
387 859
349 073
5 959 106
-662 123
The previous table can be interpreted as follows: 31 December 2011, if respective rental income was of 10 percent higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 685 311 higher / TCZK 685 311 lower due to changed rental income.
77
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
7 Contingencies 7.1 Contingent assets The Group is not aware of existence of any contingent assets as at 31 December 2011.
7.2 Contingent liabilities The Group does not have in evidence any contingent liabilities. No legal proceeding is active the result of which would influence consolidated financial statements and the Group is not aware about any potential enter upon the law-suit.
78
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
8 Related parties, management remuneration The group has a related party relationships with its board members, executive management, shareholders and companies in which these parties held controlling or significant influence or are joint ventures.
8.1 Related party transactions Non-current loans provided to related parties - 2011
Interest rate
31 December 2011
CPI a.s.
2,10 % p.a.
1 172
CPI a.s.
7,00 % p.a.
6 151
Total
7 323
Non-current loans provided to related parties - 2010
Interest rate
31 December 2010
5 % p.a.
266 447
1,4 % – 2,1 % p.a.
71 742
2,1 % p.a.
5 000
Družstvo Land
6 % p.a.
4 097
CPI - Bor, a.s.
2,1 % p.a.
3 500
CPI Reality, a.s.
2,1 % p.a.
2 049
Prague Development Holding, a.s. CPI a.s. CPI – Land Development, a.s.
Total
352 835
79
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Current loans provided to related parties Current portion of the loans provided includes primarily unpaid interest from non-current loans and debentures which is expected to be paid within 12 months. 31 December 2011
31 December 2010
121 739
55 509
Prague Development Holding, a.s.
--
51 744
Družstvo Land,a.s.
--
1 193
CPI - Land Development,a.s.
--
723
CPI - Bor, a.s
--
356
CPI Reality,a.s.
--
22
121 739
109 547
CPI a.s.
Total
Bonds
The Company holds bonds issued by CPI a.s. in the total nominal value of TCZK 1 496 000 as at 31 December 2011 (2010: TCZK 1 496 000). The aliquot interest amounts to TCZK 29 860 (2010: TCZK 29 980), refer to Note 3.3. Trade receivables
Mr. Radovan Vítek
31 December 2011
31 December 2010
129
129
CPI Orlová, a.s.
97
--
CPI - Facility, a.s.
66
5
CPI Services, a.s.
--
499
MUXUM, a.s.
--
60
CPI a.s.
--
5
U svatého Michala, a.s.
--
20
292
718
Total
80
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Receivables due from cession 31 December 2011
31 December 2010
CPI a.s.
249 291
374 216
CPI Finance,a.s.
717 643
--
--
374
966 934
374 590
Mr. Radovan Vítek Total
Other receivables represent the receivables from cession of receivables of the Company, primarily receivables from related parties in the original amount of TCZK 966 125, realized based on concluded agreements. Loans received from related parties 2011
Interest rate
Balance as at 31 December 2011
Due within 1 year
Due in subsequent years
CPI Finance, a.s.
5% p.a.
441 255
239 708
201 547
CPI a.s.
5% p.a.
8 600
3
8 597
CPI Services, a.s.
5% p.a.
226
226
--
450 081
239 937
210 144
Interest rate
Balance as at 31 December 2011
Due within 1 year
Due in subsequent years
CPI Reality, a.s.
5% p.a.
129 557
16 448
113 109
CPI a.s.
5% p.a.
2 291
8
2 283
CPI Services, a.s.
5% p.a.
215
10
205
132 063
16 466
115 597
Total
Loans received from related parties 2010
Total
Trade payables 31 December 2011
31 December 2010
CPI Finance,a.s.
6 723
--
CPI Services, a.s.
3 627
4 736
CPI a.s.
2 108
1 306
CPI Reality, a.s.
1 919
8 652
Hraničář, a.s.
118
--
CPI - Facility, a.s.
669
3 387
15 164
18 081
Total
81
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Other payables
CPI a.s. CPI Finance,a.s. Vyškov Property Development, a.s. Mr. Radovan Vítek CPI Reality, a.s. Total
2011
2010
250 407
681
86 138
--
1 544
1 544
300
--
--
11 937
338 389
14 162
Other payables represent payables from cession of payables of CPI BYTY, primarily payables to related parties in the original amount of TCZK 563 973, realized based on concluded agreements. Income for services rendered 2011
2010
CPI Services, a.s.
--
394
CPI - Facility, a.s.
--
308
Total
--
702
2011
2010
76 292
53 808
Prague Development Holding, a.s.
--
13 507
Družstvo Land
--
249
CPI - Land Development, a.s.
--
106
CPI - Bor, a.s.
--
75
CPI Reality, a.s.
--
44
76 292
67 789
2011
2010
-1 585
-7 426
Hraničář, a.s.
-99
--
CPI a.s.
-13
-1 745
--
-4 513
-1 697
-13 684
Interest Income
CPI a.s.
Total
Expenses for services purchased
CPI - Facility, a.s.
CPI Services, a.s. Total
82
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Interest expenses
CPI Finance, a.s. CPI a.s. CPI Services, a.s. Total
2011
2010
-4 621
-5 734
-305
-248
-10
-10
-4 936
-5 992
8.2 Guarantees CPI a.s. acting as a collateral for bank loan received by the Company (refer to Note 3.9).
8.3 Remuneration to Board of Directors, Supervisory Board and Management Members of the Supervisory Board, members of the Board of Directors and members of Management received neither monetary nor non-monetary income from the company in 2011 and 2010 except for salaries they were paid as employees of the Company. The salaries have no variable component. As employees of the Company, members of the Supervisory Board, Board of Directors and Management had no advantages or benefits in comparison with other employees of CPI BYTY in 2011 and 2010.
83
CPI BYTY Group Notes to the consolidated financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
9 Subsequent events No significant events occurred between the balance sheet date and the date of preparation of the Group’s consolidated financial statements.
Prague, 27 April 2012
Zdeněk Havelka Member of Board of Directors CPI BYTY, a.s.
Marek Stubley Chaiman of Board of Directors CPI BYTY, a.s.
84
Financial statements as at 31 December 2011
CPI BYTY, a.s.
85
CPI BYTY, a.s. Financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Statement of financial position
Note
31 December 2011
31 December 2010
6 868 550
6 669 762
590
411
1 525 860
1 525 980
1 172
515 693
--
19 821
8 396 172
8 731 667
1 400 593
871 328
16 924 120 664
-180 919
151 596
163 457
1 689 777
1 215 704
10 085 949
9 947 371
2 000
2 000
2 119 582
2 119 582
2 812 291
2 618 021
4 933 873
4 739 603
3 003 163
3 365 457
ASSETS Non-current assets Investment property
3.1
Property, plant and equipment
3.2
Other investments
3.3
Loans provided
3.4
Trade and other receivables
3.5
Total non-current assets Current assets Trade and other receivables
3.5
Current income tax assets Loans provided
3.4
Cash and cash equivalents
3.6
Total current assets TOTAL ASSETS
EQUITY Share capital
3.7
Other reserves
3.7
Retained earnings
3.7
Total equity LIABILITIES Non-current liabilities Interest-bearing loans and borrowings
3.8
Deferred tax liabilities
1 011 463
952 521
4 014 626
4 317 978
307 145
163 199
-828 709
8 017 716 999
1 596
1 575
Total current liabilities
1 137 450
889 790
Total liabilities
5 152 076
5 207 768
10 085 949
9 947 371
3.12
Total non-current liabilities Current liabilities Interest-bearing loans and borrowings
3.8
Current income tax liabilities Trade and other payables
3.10
Provisions
3.11
TOTAL EQUITY AND LIABILITIES
Notes to financial statements on pages 90 to 138 are integral part of these financial statements.
86
CPI BYTY, a.s. Financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Statement of comprehensive income Note
2011
2010
446 170
355 315
Continuing operations Gross rental income
4.1
Net service charge expenses
4.2
-2 663
-8 897
Property operating expenses
4.3
-397 378
-109 781
46 129
236 637
Net rental and service related income
Net valuation gain on investment property
4.4
303 796
387 280
Loss on the disposal of investment property
3.1
-435
-11 419
--
5
Gain on the disposal of property, plant and equipment Administrative expenses
4.5
-14 273
-23 741
Other income
4.6
2 972
4 133
Other expenses
4.7
Results from operating activities
-25 208
-91 962
312 981
500 933
1 243 615
Finance income
4.8
93 278
Finance expenses
4.9
-152 685
-107 996
Net finance expenses
-59 407
1 135 619
Profit before income tax
253 574
1 636 552
Income tax expense
-59 304
-47 976
Profit from continuing operations
4.10
194 270
1 588 576
Profit for the period
194 270
1 588 576
Total comprehensive income for the period
194 270
1 588 576
Profit attributable to owners
194 270
1 588 576
Total comprehensive income attributable to owners
194 270
1 588 576
9 713
79 428
9 713
79 428
Earnings per share Basic earnings per share
3.7
Diluted earnings per share
3.7
Notes to financial statements on page 90 to 138 are integral part of these financial statements.
87
CPI BYTY, a.s. Financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Statement of cash flow 2011
2010
253 574
1 636 552
Operating activities Profit before income tax Adjusted by: Net valuation gain on investment property
-303 796
-387 280
Net interest expenses
57 402
25 071
Impairment of assets
8 845
70 974
-4 868
5 097
Gain / (Loss) on the disposal of investment property Depreciation
128
65
--
-1 148 314
11 285
202 165
Changes in trade and other receivables
86 326
-195 661
Changes in trade and other payables
12 898
142 899
21
-499
-25 658
-31 005
84 872
117 899
Proceeds from sale of investment property
126 225
121 415
Acquisition of investment property
-16 167
-298
-707
-174
49 815
--
718
2 449
Other financial income Profit before income tax, changes in working capital and provisions
Change in provisions Income tax paid Net cash flows from operating activities
Investing activities
Acquisition of property, plant and equipment Other loan - repaid Interest received Acquisition of other investment Net cash flows from investing activities
--
-983 412
159 884
-860 020
-119 536
1 471 405
Financing activities Drawing / (repayments) of loans and borrowings Drawings / (repayments) of finance lease liabilities
291
-50
-137 372
-90 824
Dividends paid
--
-580 000
Proceeds from merger
--
33 405
-256 617
833 936
Net decrease in cash and cash equivalents
-11 861
91 815
Cash and cash equivalents at the beginning of the year
163 457
71 642
Cash and cash equivalents at the end of the year
151 596
163 457
Interest paid
Net cash flows from financing activities
Notes to financial statements on page 90 to 138 are integral part of these financial statements.
88
CPI BYTY, a.s. Financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Statement of changes in equity Share capital
Other reserves
Retained earnings
Total equity
2 000
400
1 609 445
1 611 845
Profit for the period
--
--
1 588 576
1 588 576
Total comprehensive income for the period
--
--
1 588 576
1 588 576
Dividends
--
--
-580 000
-580 000
Total contributions by and distributions to owners of the Company
--
--
-580 000
-580 000
Total transactions with owners of the Company
--
--
-580 000
-580 000
Impact of merger
--
2 119 182
--
2 119 182
Total other movements
--
2 119 182
--
2 119 182
Balance at 31 December 2010
2 000
2 119 582
2 618 021
4 739 603
Balance at 1 January 2011
2 000
2 119 582
2 618 021
4 739 603
Profit for the period
--
--
194 270
194 270
Total comprehensive income for the period
--
--
194 270
194 270
2 000
2 119 582
2 812 291
4 933 873
Balance at 1 January 2010
Other movements
Balance at 31 December 2011
Notes to financial statements on page 90 to 138 are integral part of these financial statements.
89
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Notes to the Financial Statements 1 General information CPI BYTY, a.s. (herafter “the Company” or “CPI BYTY”) is a joint-stock company incorporated under the laws of the Czech Republic and was established on 14 November 2000. The merger of the Company with SPOBYT, a.s., BYTY TŘINEC, a.s. and Byty Česká Lípa, a.s. with effective date of 1 January 2009 was registered on 1 January 2010 in the commercial register. The merger of the Company with RLRE Tellmer Property s.r.o. with effective date of 1 July 2010 was registered on 19 November 2010 in the commercial register. The main activity of the Company is rent of residential and commercial premises.
Registered office Václavské náměstí 1601/47 Praha 1 Czech Republic
Registration Number 262 28 700
Shareholder as at 31 December 2011 The sole shareholder of the Company is Czech Property Investments, a.s. (hereafter “CPI a.s.”) with registered office - Václavské náměstí 1601/47, Praha 1, Czech Republic. The registration number of the sole shareholder is 42716161. The Company is part of consolidation group of CPI a.s. which is controlled by Mr. Radovan Vítek. as at 31 December 2010 The shareholders of the Company were CPI a.s. (80%) and Prague Development Holding, a.s. (20%) with registered office – Václavské náměstí 1601/47, Praha 1, Czech Republic. With effective date of 1 January 2011 Prague Development Holding a.s. merged to CPI a.s. This merger was registered on 28 June 2011.
90
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Management: as at 31 December 2011 Board of Directors
Supervisory Board
Chairman Marek Stubley, since 15 March 2010
Chairman Pavel Semrád, od 15 March 2010
Members
Members
Milan Trněný, since 15 March 2010 Zdeněk Havelka, since 15 March 2010
Josef Štolba, since 8 June 2011 Radovan Vítek, since 8 June 2011
as at 31 December 2010 Board of Directors
Supervisory Board
Chairman Marek Stubley, since 15 March 2010
Chairman Pavel Semrád, since 15 March 2010
Members
Members
Milan Trněný, since 15 March 2010 Zdeněk Havelka, since 15 March 2010
David Michal, since 15 March 2010 Karolína Babáková, since 15 March 2010
91
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2 Summary of significant accounting policies 2.1 Basis of preparation of financial statements (a)
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial statements were authorised for issue by the Board of Directors on 27 April 2012. In 2011 the Company adopted the following new or amended standards and interpretations, which were relevant to the Company: -
IFRS 3 – Business Combinations (effective date 1 July 2010) The amendments clarify that contingent consideration arising in a business combination previously accounted for in accordance with IFRS 3 (2004) that remains outstanding at the adoption date of IFRS 3 (2008) continues to be accounted for in accordance with IFRS 3 (2004); furthermore the amendments limit the accounting policy choice to measure noncontrolling interests upon initial recognition at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets to instruments that give rise to a present ownership interest and that currently entitle the holder to a share of net assets in the event of liquidation; and expand the current guidance on the attribution of the market-based measure of an acquirer’s share-based payment awards issued in exchange for acquiree awards between consideration transferred and post-combination compensation cost when an acquirer is obliged to replace the acquiree’s existing awards to encompass voluntarily replaced unexpired acquiree awards.
-
IFRS 7 Financial Instruments: Disclosures (effective date 1 January 2011) The amendments add an explicit statement that qualitative disclosure should be made in the contact of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments. In addition, the IASB amended and removed existing disclosure requirements.
-
IAS 1 Presentation of financial statements (effective date 1 January 2011) The amendments clarify that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income also is required to be presented, but may be presented either in the statement of changes in equity or in the notes.
-
IAS 24 Related Party Disclosures (effective date 1 January 2011) The revised IAS 24 Related Party Disclosures amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities.
The adoption of the above-mentioned revised standards and amendments does not have a material impact on the financial statements of the Company. A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2011, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company, except for IFRS 9 Financial Instruments, which becomes mandatory for the Company’s 2013 financial statements and could change the classification and measurement of financial assets. The Company does not plan to adopt this standard early and the extent of the impact has not been determined.
92
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(b)
Basis of measurement
The financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:
(c)
investment property is measured at fair value;
derivative financial instruments are measured at fair value;
non-derivative financial instruments at fair value through profit or loss are measured at fair value.
Functional and presentation currency
These financial statements are presented in Czech Crowns, which is the Company’s functional currency. All financial information presented in Czech Crowns has been rounded to the nearest thousand (TCZK), except when otherwise indicated. (d)
Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience, internal calculations and various other factors that the management believes to be reasonable under the circumstances, the results of which form the basis of judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about assumptions and estimated uncertainties that have the most significant effect on the amounts recognised in the financial statements is included in the note 6.6 Fair values. (e)
Changes in classification and presentation
The Company has amended classification and presentation of certain items in the financial statements as at 31 December 2011 in order to provide more reliable and accurate information about the Company’s financial position, financial performance and its cash-flow. To ensure consistency with the classification selected in the current period, reclassifications were made in the comparative financials as at 31 December 2010. The reclassifications have no impact to net profit or to the equity that was reported as at 31 December 2010.
93
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2.2 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Company takes into consideration potential voting rights that currently are exercisable. The Company measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquire; plus
if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in profit or loss. Transaction cost, other than those associated with the issue of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred. Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within the equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. The interest of non-controlling shareholders is stated at the non-controlling interest’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the noncontrolling interest in excess of the non-controlling interest are allocated against the interests of the parent company.
94
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(i) Business combinations involving entities under common control A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. In the absence of more specific guidance, the Company consistently applied acquisition accounting to account for to all common control transactions. (b) Foreign currency (i) Functional currencies Functional currency of the Company is Czech Crown, as the entity is incorporated and carries out its operations in the Czech Republic. (ii) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for the differences arising on the retranslation of qualifying cash flow hedges to the extent the hedge is effective, which are recognised in the other comprehensive income. (c) Investment property Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of material and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. An external independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, valued the portfolio of investment property at the year end of 2011 and 2010 respectively. The results of independent valuations were further analysed by the Company’s valuation committee and included in the final management estimates of the fair value. Those estimates considered the results of current and prior 95
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
external valuations, information about current market conditions and internal calculations of the Company. Following methods of investment property valuation were used with respect of its segment classification. (i) Residential Residential properties have been valued using Discounted cash flow (DCF) method of valuation. The discounted cash flow calculation is a valuation of rental income considering non‑recoverable costs and applying a discount rate for the current income risk over a ten-year period. After ten years a determining residual value (exit scenario) is calculated. (ii) Land and vacant buildings Land and vacant buildings have been valued using the direct comparison method to arrive at the value of the property in its existing state. Comparison of other similarly located and zoned plots of land/buildings that are currently on the market in the similar location was performed. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. (d) Leased assets Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised in the Company’s statement of financial position. Property held under operating leases that meets the definition of investment property is classified as investment property on a property-byproperty basis. Investment property held under an operating lease is recognised in the Company’s statement of financial position at its fair value. (e) Property, plant and equipment (i)
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation (see below) and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the initial estimate, where relevant, of the costs of dismantling and removing building items and restoring the building site at which they are located, capitalised borrowing costs and an appropriate proportion of production overheads.
96
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Where components of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. (ii)
Reclassification to investment property
When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on re-measurement is recognised in profit or loss to the extent that it reverses the previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve in equity. Any loss is recognised immediately in profit or loss. (iii)
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance is expensed as incurred. (iv)
Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss over the estimated useful lives of each component. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. The estimated useful lives for the current and comparative periods are as follows: Assets Equipment Motor vehicles Fittings Computers
2011 10 years 5 years 5 years 3 years
2010 10 years 5 years 5 years 3 years
Depreciation methods, useful lives and residual values (if not insignificant) are reviewed at each reporting date and adjusted if appropriate.
97
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(f) Intangible assets (i)
Goodwill
Business combinations are accounted for by applying the acquisition method. Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets. Subsequently, goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units (assets) and is not amortised but is tested annually for impairment. (ii)
Other intangible assets
Other intangible assets that are acquired by the Company and have finite useful lives, are measured at cost less accumulated amortisation (see below) and accumulated impairment losses. (iii)
Subsequent expenditure
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. (iv)
Amortisation
Except for goodwill, intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: Assets
2011
2010
Software Other intangible assets
3-8 years 3-5 years
3-8 years 3-5 years
Amortisation methods, useful lives and residual values (if not insignificant) are reviewed at each reporting date and adjusted if appropriate. (g) Trading property - inventory Trading property - inventory is measured at the lower of cost and net realisable value. Cost includes expenditure that is directly attributable to the acquisition of the trading property inventory. The cost of self-constructed trading property - inventory includes the cost of material and direct labour, any other costs directly attributable to bringing the trading property - inventory to a condition for their intended use and capitalised borrowing costs. Costs of trading property – inventory reclassified from existing investment property is based on the fair value of such property. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses
98
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(h) Investments in Subsidiaries Subsidiary is an enterprise controlled by the Company, whose financial and operating process can be controlled by the Company in order to achieve benefits from its operations. Investments in subsidiaries are measured at costs less any impairment losses. (i) Financial instruments (i)
Non-derivative financial assets
Non-derivative financial assets comprise investments in equity and debt securities, provided loans, trade and other receivables, and cash and cash equivalents. The Company initially recognises loans and receivables on the date that they are originated. All other financial assets (including financial assets designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Provided loans Loans are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, provided loans are measured at amortised cost using the effective interest method, less any impairment losses. Finance charges, including premiums receivable on settlement or redemption and direct issue costs, are recognised in profit or loss on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The recoverable amount of the Company’s provided loans is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate calculated at initial recognition of these financial assets). Loan receivables with a short duration are not discounted. The Company classifies as a current portion any part of long-term loans that is due within one year from the date of the statement of financial position.
99
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Trade and other receivables Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, receivables are measured at amortised cost using the effective interest method, less any impairment losses. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments. Bank accounts and call deposits that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the cashflow statement. Held-to-maturity financial assets If the Company has the positive intent and ability to hold debt securities to maturity, then such financial assets are classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Held-to-maturity financial assets comprise debentures. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and presented in fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. Available-for-sale financial assets which are investments in an equity instrument that does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value are clearly inappropriate are carried at cost. Available-for-sale financial assets comprise equity securities and debt securities. (ii)
Non-derivative financial liabilities
Non-derivative financial liabilities comprise loans and borrowings, bonds issued, bank overdrafts, and trade and other payables. The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including financial liabilities designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. 100
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Interest-bearing loans, borrowings and bonds issued and bank overdraft Interest-bearing loans, borrowings and bonds are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, the interest-bearing loans, borrowings and bonds are measured at amortised cost using the effective interest method. Bank overdrafts form an integral part of the Company’s cash management. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in profit or loss on an accrual basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. The Company classifies as a current portion any part of long-term loans and bonds that is due within one year from the date of the statement of financial position. Trade and other payables Trade and other payables are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these payables are measured at amortised cost using the effective interest method. (iii)
Share capital and share premium
Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares and shares options, other than upon a business combination, are recognised as a deduction from equity, net of any tax effects. Repurchase and reissue of share capital (treasury shares) When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable cost, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasure shares and are presented in the reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium. 101
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(j) Impairment (i)
Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in payment status of borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant of prolonged decline in its fair value below its cost is objective evidence of impairment. Financial assets measured at amortised cost The Company considers evidence of impairment for financial assets measured at amortised cost (provided loans, trade and other receivables, held-to-maturity financial assets) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics. In assessing collective impairment, the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against provided loans, trade and other receivables or held-tomaturity financial assets. Interest on the impaired asset continues to be recognised. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in cumulative impairment losses attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. 102
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(ii)
Non - financial assets
The carrying amounts of the Company’s non-financial assets, other than investment property and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite-lived intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset of CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro-rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(k) Provisions A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as finance cost. (l) Guaranties provided In the normal course of business, the Company may enter into credit related commitments which are accounted for in accounts out of the statement of financial position. These commitments primarily include financial guarantees. Provisions are made for estimated losses on these commitments. In estimating the losses, the Company refers to the historical data regarding risk parameters (credit conversion factors, probability of default and loss-given default).
103
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(m) Revenue (i)
Rental income
Rental income from investment property is recognised as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. The term of the lease is the non-cancellable period of the lease. Any further term for which the tenant has the option to continue the lease is not considered. (ii)
Service charges and expenses recoverable from tenants
Service charges and expenses recoverable from tenants are dislosed net in the statement of comprehensive income and they are recorded based on received invoices and estimates. (iii)
Services rendered
Revenue from services rendered is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. This usually involves other services not directly connected with rental activities. (iv)
Commissions
When the Company acts in the capacity of an agent rather than as a principal in the transaction, the revenue recognized is the net amount of commission made by the Company. (v)
Sale of investment property, trading property, investments in subsidiaries and equity-accounted investees
Revenue from the sale of investment property, trading property, investments in subsidiaries and equity-accounted investees is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer. (n) Expenses (i)
Service costs and property operating expenses
Service costs for service contracts entered into and property operating expenses are expensed as incurred. (ii)
Operating lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Where the property interest held under an operating lease is classified as an investment property, the property interest is accounted for as if it was a finance lease and the fair value model is used for the asset recognised. 104
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(iii)
Finance lease payments
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (o) Finance income and finance costs Finance income comprises interest income on funds invested (bank interest, interest on provided loans, interest on bonds purchased), dividend income, gains on disposal of available-for-sale financial assets, gains on derivative instruments that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Company’s right to receive payment is established. Finance costs comprise interest expense on loans and borrowings, on bonds issued, interest charges related to finance leases, bank charges, losses on disposal of available-for-sale financial assets, losses on derivative instruments that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income. The interest expense component of finance lease payments is recognised in profit or loss using the effective interest rate method. Borrowing costs that are not directly attributable to the acquisition or construction of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance costs depending on whether foreign currency movements are in a net gain or net loss position.
105
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(p) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Current and deferred income tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will no reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantially enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (q) Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
106
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
(r) Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. Each segment within the Company is periodically evaluated during the regular meetings of established task forces and results of such evaluations are reported during the Board of Directors meetings. Segment results that are reported to the Board of Directors, which is the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, investment property, intangible assets other than goodwill and trading property. Segment information is presented in respect of the Company’s operating and geographical segments. The Company’s primary format for segment reporting is based on operating segments. The operating segments are determined based on the Company’s management and internal reporting structure. Inter-segment pricing is determined on an arm’s length basis. The Company determinates its operations to the one segment – Residential. In respect of geographical segments, all activities are carried out in the Czech Republic.
107
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
2.3 Investment in subsidiaries As at 31 December 2011 there are 2 subsidiaries under direct control of the Company. As at 31 December 2011: Voting rights share
Consolidati on method
Václavské nám. 1601/47, Praha 1
100%
full method
Václavské nám. 1601/47, Praha 1
100%
full method
Controlled entities
Registered office
BPT Development, a.s. Březiněves, a.s.
Controlled entities
Costs
Impairment
Carrying amount
Net assets
Share
Share of net assets
BPT Development, a.s.
2 000
-2 000
--
-8 147
100,00%
-8 147
Březiněves, a.s.
50 441
-50 441
--
-9 825
100,00%
-9 825
Total
52 441
-52 441
--
-17 972
x
x
In consequence of negative value of equity in both subsidiaries, the 100% impairment adjustment to the investments in subsidiaries was recorded. In 2011 the Company acquired additional 0,55% interest in Březiněves s.r.o., increasing its ownership from 99,45% to 100%. As at 31 December 2010: Voting rights share
Consolidati on method
Václavské nám. 1601/47, Praha 1
100%
full method
Václavské nám. 1601/47, Praha 1
99,45%
full method
Controlled entities
Registered office
BPT Development, a.s. Březiněves, a.s.
Controlled entities BPT Development, a.s.
Costs
Impairment
Carrying amount
Net assets
Share
Share of net assets
2 000
-2 000
--
-6 522
100,00%
-6 522
Březiněves, a.s.
50 141
-50 141
--
-1 347
99,45%
-1 340
Total
52 141
-52 141
--
-7 869
x
x
2.4 Business combinations In 2011 no business combinations were realized. The effect of the mergers in 2010 is described in Note 3.7.
108
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3 Statement of financial position 3.1 Investment property Investment property 2011 Residential
Land bank
Total
6 621 229
48 533
6 669 762
16 167
--
16 167
182
--
182
-121 357
--
-121 357
303 796
--
303 796
6 820 017
48 533
6 868 550
Residential
Land bank
Total
Balance at 1 January 2010
1 657 429
36 054
1 693 483
Acquired through merger
Balance at 1 January 2011 Additions Transfer from property, plant and equipment Disposals Valuation gain Balance at 31 December 2011
Investment property 2010
4 702 464
12 749
4 715 213
Additions
298
--
298
Disposals
-126 442
-70
-126 512
387 480
-200
387 280
6 621 229
48 533
6 669 762
Valuation gain / (loss) Balance at 31 December 2010
Investment property represents housing portfolio in following locations: Praha – Letňany, Ústí nad Labem, Česká Lípa, Třinec, Slaný, Teplice, Most, Děčín, Liberec, Jablonec nad Nisou, Nové Město pod Smrkem and Litvínov. The owned properties of the Company are subject to a registered debenture to secure bank loans (refer to Note 3.8). In accordance with accounting policies applied, the Company re-assessed the use of certain items of property, plant and equipment and changed their classification from owner-occupied to investment property. No gain or loss arose on the re-measurement of the respective property.
109
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Disposal of investment property 2011
2010
Proceeds from sale of investment property
126 225
121 415
Carrying value of investment property sold
-121 357
-126 512
-5 303
-6 322
-435
-11 419
Related cost (e.g. transfer tax) Loss
Disposals of investment property represent mainly sale of appartments in Praha – Letňany. Acquisitions through merger in 2010
BYTY TŘINEC, a.s. Byty Česká Lípa, a.s. SPOBYT, a.s. RLRE Tellmer Property s.r.o. Total
Residential
Land bank
Total
1 520 100
--
1 520 100
703 396
--
703 396
1 604 968
12 749
1 617 717
874 000
--
874 000
4 702 464
12 749
4 715 213
For details of merger process refer to Note 3.7.
110
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.2 Property, plant and equipment Property, plant and equipment 2011 Plant and equipment
Finance leases
Property under construction
Total
1 456
1 281
91
2 828
--
707
--
707
Cost Balance at 1 January 2011 Additions Disposals
--
-319
--
-319
-1 456
--
-91
-1 547
--
1 669
--
1 669
1 365
1 052
--
2 417
Depreciation for the period
--
128
--
128
Accumulated depreciation to disposals
--
-101
--
-101
-1 365
--
--
-1 365
--
1 079
--
1 079
91
229
91
411
--
590
--
590
Plant and equipment
Finance leases
Property under construction
Total
46
319
--
365
1 327
962
--
2 289
83
--
91
174
1 456
1 281
91
2 828
46
27
--
73
1 318
961
--
2 279
1
64
--
65
1 365
1 052
--
2 417
--
292
--
292
91
229
91
411
Transfers to investment property Balance at 31 December 2011
Accumulated depreciation Balance at 1 January 2011
Transfers to investment property Balance at 31 December 2011
Carrying amounts At 1 January 2011 At 31 December 2011
Property, plant and equipment 2010
Cost Balance at 1 January 2010 Acquired through merger Additions Balance at 31 December 2010
Accumulated depreciation Balance at 1 January 2010 Accumulated depreciation acquired through merger Depreciation for the period Balance at 31 December 2010
Carrying amounts At 1 January 2010 At 31 December 2010
111
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.3 Other investments
Bonds (incl. accrued aliquot interest)
2011
2010
1 525 860
1 525 980
Other investments comprises CPI 2021 bonds (ISIN CZ0003501496) which were issued by CPI a.s. as bearer bonds in listed form. Nominal value of each bond is TCZK 2 000. The interest (6M PRIBOR + margin 3,5 % p.a.) is due semi-annually in arrears on 8 February and 8 August. The bonds are due on 8 August 2021. As at 31 December 2011, the Company owns 748 bonds in total nominal value of TCZK 1 496 000 (2010: 748 bonds in total nominal value of TCZK 1 496 000). The accrued aliquot interest amounts to TCZK 29 860 (2010: TCZK 29 980). All bonds are subject to a registered debenture to secure bank loans (refer to Note 3.8).
3.4 Loans provided Loans provided (non-current)
Loans provided to related parties (Note 7.1) Loans provided to third parties Total
2011
2011
2010
2010
Balance
Average interest rate
Balance
Average interest rate
1 172
2,10%
490 914
3,07%
--
--
24 779
6,32%
1 172
--
515 693
--
2011
2011
2010
2010
Balance
Average interest rate
Balance
Average interest rate
120 260
--
170 065
--
404
--
10 854
2,31%
120 664
--
180 919
--
Loans provided (current)
Loans provided to related parties (Note 7.1) Loans provided to third parties
Balances of non-current loans include loan principal and unpaid non-current interest. Balances of current loans include loan principal, unpaid interest related to current loans and current portion of unpaid interest related to non-current loans which is expected to be paid within 12 months.
112
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.5 Trade and other receivables
Trade and other receivables (non-current) 2011
2010
Receivables due from third parties
--
19 821
Total
--
19 821
2011
2010
307 944
287 729
346
1 095
151 966
120 915
Trade and other receivables (current)
Trade receivables due from third parties (1) Trade receivables due from related parties Other advances paid (2) Prepaid expenses Receivables due from cession from third parties Receivables due from cession from related parties (3) Receivables due from employees Other receivables due from third parties Total Impairment to trade receivables due from third parties (4) Impairment to other receivables due from third parties Total Total trade and other receivables net of impairment
39 726
34 236
9 059
113 475
966 934
374 590
1 925
--
297
8 047
1 478 197
940 087
-77 604
-63 926
--
-4 833
-77 604
-68 759
1 400 593
871 328
(1) Trade receivables due from third parties represent primarily trade receivables from tenants of TCZK 138 249 (2010: TCZK 94 068) and receivables from invoicing of utilities of TCZK 164 890 (2010: TCZK 180 806). Receivables from invoicing of utilities will be settled against Advances received from tenants when final amount of utilities consumption and respective invoicing is known. (2) Advances paid represent advances for utilities paid by the Company for which final invoice has not been received from utility providers. (3) Receivables due from cession from related parties are described in Note 7.1. (4) The impairment to trade receivables due from third parties is created for trade receivables from tenants overdue more than 181 days. Creation of adjusting items to receivables is recognised in statement of comprehensive income as impairment loss within Other expenses.
3.6 Cash and cash equivalents
Bank balances Cash on hand Total
113
2011
2010
150 452
162 745
1 144
712
151 596
163 457
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.7 Equity Share capital
Weighted average number of ordinary shares (basis) Dilution Weighted average number of ordinary shares (diluted) Nominal value of ordinary share (in CZK) Share capital
2011
2010
20
20
--
--
20
20
100 000
100 000
2 000
2 000
The ordinary shares were issued in form of certified bearer ordinary shares. The issued share capital was fully paid up. No new shares were issued in 2011 and 2010. Earning per share
2011
2010
194 270
1 588 576
Earnings per share (in CZK) - basic
9 713 500
79 428 800
Earnings per share (in CZK) - diluted
9 713 500
79 488 800
Dividend per share (in CZK) - basic
--
29 000 000
Dividend per share (in CZK) - diluted
--
29 000 000
2011
2010
2 119 182
2 119 182
400
400
2 119 582
2 119 582
Net profit attributable to ordinary shareholders for the year (in TCZK)
Other reserves
Merger reserve Legal reserve Total capital and reserve funds
Legal reserve comprises legal reserve of the Company of TCZK 400 (2010: TCZK 400).
114
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
In 2010, the Company recorded equity reserve of TCZK 1 632 237 related to the merger of SPOBYT, a.s. and Byty Česká Lípa, a.s. (the Companies ceased to exist) with the Company (the successor company) and equity reserve of TCZK 486 945 related to the merger of RLRE Tellmer Property s.r.o. (the company ceased to exist) with the Company (the successor company). Due to merger of the Company with Byty Česká Lípa, a.s. and SPOBYT, a.s., the correspondent fund was created according to this process: + Assets in fair value Byty Ceská Lípa, a.s. + Assets in real value of SPOBYT, a.s - Value of investment into Byty Česká Lípa, a.s. Total
928 928
+ Liabilites of Byty Česká Lípa, a.s.
2 322 785
+ Liabilities SPOBYT, a.s.
-187 806
+ Funds created by merger
3 063 907
507 748 923 922 1 632 237 3 063 907
Due to merger of the Company with RLRE Tellmer Property s.r.o., the correspondent fund was created according to this process: + Assets in fair value of RLRE Tellmer Property s.r.o.
875 581
- Value of investment into RLRE Tellmer Property s.r.o. Total
-875 581
+ Liabilites of RLRE Tellmer Property s.r.o.
388 636
+ Funds created by merger
486 945 875 581
The company had no investment in the company RLRE Tellmer Property s.r.o. On the date of merger, the company RLRE Tellmer Property s.r.o. was owned by CPI a.s. as fellow subsidiary of CPI BYTY, a.s. .
115
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.8 Interest-bearing loans and borrowings Non-current liabilities
Loans from related parties
2011
2010
55 236
113 611
--
178 993
2 947 571
3 072 723
356
130
3 003 163
3 365 457
2011
2010
167 090
16 451
Loans from third parties Bank loans Finance lease liaibilities Total
Current liabilities
Loans from related parties Loans from third parties Bank loans
14 784
27 158
125 152
119 536
119
54
307 145
163 199
Finance lease liaibilities Total
The detailed split as at 31 December 2011 can be summarized as follows: Due in following years
Total
--
24
55 236
222 302
55 236
222 326
--
--
14 784
Currency
Nominal interest rate
Due within 1 year
Due within 1- 5 years
CPI a.s.
CZK
5% p.a.
24
CPI Finance, a.s.
CZK
5% p.a.
167 066 167 090
----
14 784
Loans from related parties
Subtotal Loans from third parties Loans from third parties Bank loans 1M PRIBOR + Raiffeisenbank, a.s.
CZK
2,5%-4,2%
125 152
777 236
2 170 335
3 072 723
CZK
6,12% p.a.
119
356
--
475
307 145
777 592
2 225 571
3 310 308
Finance lease Finance lease (car) Total
116
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The detailed split as at 31 December 2010 can be summarized as follows:
Currency
Interest rate
Due within 1 year
Due within 1- 5 years
Due in following years
Total
CPI a.s
CZK
5% p.a.
3
502
--
505
CPI Reality, a.s.
CZK
5% p.a.
16 448
113 109
--
129 557
16 451
113 611
Loans from related parties
Subtotal
130 062
Loans from third parties 27 158
Loans from third parties
178 993
206 151
Bank loans Raiffeisenbank, a.s.
CZK
1M PRIBOR + 2,5%-4,2%
119 536
537 006
2 535 717
3 192 259
CZK
8,64% p.a.
54
130
--
184
163 199
650 747
2 714 710
3 528 656
Finance lease Finance lease (car) Total
In order to secure the obligations under the bank loan agreement the Company created: -
Morgage agreement over the investment property; Pledges to all existing and future receivables; Pledges of bank accounts receivables; Pledges of shares in CPI BYTY; Pledge of debentures in ownership of CPI BYTY; Guarantee issued by the Czech Property Investments, a.s.
The bank loan agreement granted by the bank is subject to a number of covenants. During 2011 there were no events of default nor were there any breaches of covenants with respect to bank loan agreement.
117
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.9 Other bonds issued Non-current liabilities
2011 No. of bonds Value issued Proceeds from issued bonds - SPOBYT 5,25/13
2010 No. of bonds Value issued
25 000
250 000
25 000
250 000
25 000
250 000
25 000
250 000
--
--
--
--
Less: bonds owned by Company Total
Bonds SPOBYT 5,25/13 with the total nominal value of TCZK 250,000 due in 2013 were issued on 30 October 2003. Bonds were issued in listed form (registered in the Central Securities Depository, the abbreviation is SPOBYT 5,25/13, ISIN CZ0003501363) in form of bearer shares. The nominal value of each bond is TCZK 10. The prospectus and the issuing terms were approved by the decision of the Securities Committee in the Czech Republic on 10 October 2003, reference number 45/N/900/2003/2 that came into force on 16 October 2003. Bonds were accepted for trading at the market organized by RM-Systém a.s. All above mentioned bonds were bought back from the holders by the original issuer – company SPOBYT, a.s. on 27 February 2007. In addition, the bonds were pledged in favour of the company Raiffeisenbank, a.s. and the rights to dispose of the bonds by issuer were limited. As a result of merger with the original issuer of the bonds (the company SPOBYT, a.s.) the Company became the issuer with effective date 1 January 2009.
118
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.10 Trade and other payables
Trade payables due to related parties (refer to Note 7.1)
2011
2010
9 368
12 342
Trade payables due to third parties (1)
165 540
63 380
Advances received from tenants (2)
279 825
272 945
30 734
28 015
Rental deposits from tenants (3) Payables due to employees, social security and health insurance, employees income tax
2 390
69
Payables from cession
--
17 554
Commissions
--
55 000
Payables to HAINES s.r.o. (4)
--
250 407
336 523
12 618
4 329
4 669
828 709
716 999
Other payables due to related parties (refer to Note 7.1) Other payables due to third parties
(1) The balance of Trade payables due to third parties increased compared to prior year mainly due to additional payables resulting from repairs and maintenance of apartments realized in 2011. (2) Advances received from tenants represent payments received from tenants for utilities that will be settled against trade receivables when final amount of utilities consumption and respective invoicing is known. (3) Deposits from tenants represent payables of the Company from received rental related deposits. As respective rental contracts can be terminated by tenants on short notice, the deposits are classified as current payables. (4) RLRE Tellmer Property s.r.o. (merged to the Company with effective date of 1 July 2010) owned portfolio of rental apartments in Litvinov. The apartment portfolio of RLRE Tellmer Property s.r.o. was rented out to related party HAINES s.r.o. (herafter “HAINES”) that operated the portfolio as service company. After the merger of the Company and RLRE Tellmer Property s.r.o. the rental contract between the Company and HAINES was cancelled which resulted in recognition of liability of the Company to HAINES as at 31 December 2010.
3.11 Provisions
Balance at 1 January Provisions created in the period Provisions used in the period Balance at 31 December
119
2011
2010
1 575
2 074
21
--
--
-499
1 596
1 575
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
3.12 Deferred tax Assets
Liabilities
Net
2011
2010
2011
2010
2011
2010
Investment property
--
--
-1 005 115
-949 386
-1 005 115
-949 386
Provisions
--
--
-6 348
-3 248
-6 348
-3 248
Other items
112
153
-112
-40
--
113
Tax assets/(liabilities)
112
153
-1 011 575
-952 674
-1 011 463
-952 521
--
--
--
--
--
--
112
153
-1 011 575
-952 674
-1 011 463
-952 521
Set-off of tax Net tax assets/(liabilities)
Movement in deferred tax balances in 2011 Balance at 1 January 2011
Recognised in profit or loss
Balance at 31 December 2011
-949 385
-55 730
-1 005 115
-3 248
-3 100
-6 348
112
-112
--
-952 521
-58 942
-1 011 463
Investment property Provisions Other items Total
Movement in deferred tax balances in 2010
Investment property
Balance at 1 January 2010
Movement recognised in equity
Recognised in profit or loss
Balance at 31 December 2010
-274 496
-613 257
-61 633
-949 386
--
--
35
35
Finance lease Trade and other receivables
--
--
110
110
-6 835
--
3 587
-3 248
--
--
-32
-32
-281 331
-613 257
-57 933
-952 521
Provisions Other items Total
The movement in 2010 deferred tax of TCZK 613 257 relates to temporary differences on assets and liabilities recognised as a result of mergers described in Note 3.7 and was recorded directly to equity of the Company.
120
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4 Statement of comprehensive income 4.1 Gross rental income
Total gross rental income
2011
2010
446 170
355 315
Gross rental income includes income from rental of flats of TCZK 414 863 (2010: TCZK 323 654) and income from rental of non-residential premises of TCZK 31 307 (2010: TCZK 31 661). In 2010, the balance comprises revenue from Litvinov and Janov premises only for 6 months. Further the rental income development was influenced by the rent deregulation in 2011. Gross rental income is derived from a large number of tenants and no single tenant or group of tenants contribute more than 10% to the Company’s gross rental income.
4.2 Net service charge income / (expense) 2011 Service charge income Service charge expenses Total
121
2010
11 050
5 243
-13 713
-14 140
-2 663
-8 897
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.3 Property operating expenses
Repairs and maintenance
2011
2010
-305 757
-63 259
Utility services for vacant premises
-47 138
-25 369
Personnel expenses
-29 603
-9 740
Real estate tax
-4 503
-4 802
Property insurance expenses
-2 957
-3 642
Letting fee, other fees paid to real estate agents
-2 011
-80
Depreciation and amortisation expense Other expenses Total property operating expenses
-64
-1
-5 345
-2 888
-397 378
-109 781
2011
2010
Utility services for vacant premises
Energy consumption
-32 154
-16 784
Cleaning services
-4 405
-2 316
Waste management
-4 168
-1 942
Security services
-3 310
-2 485
Material consumption Total property operating expenses
-3 101
-1 842
-47 138
-25 369
Personnel expenses
Wages and salaries Social and health security contributions Other social expenses Total Average number of employees
2011
2010
-21 476
-6 979
-7 976
-2 350
-151
-411
-29 603
-9 740
83
27
4.4 Net valuation gain on investment property 2011
2010
Residential
303 796
387 480
Land bank
--
--
303 796
387 480
Land bank
--
-200
Total valuation losses
--
-200
Valuation gains
Total valuation gains Valuation losses
122
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Net valuation gain
303 796
387 280
4.5 Administrative expenses 2011
2010
Audit, tax and advisory services
-4 073
-5 185
Lease expenses
-2 168
-1 839
Accounting and other services based on mandate contracts
-1 553
-9 997
Legal services
-1 343
-5 721
Telecommunication fees
-973
-623
Advertising expenses
-549
-279
-64
-64
-3 550
-33
-14 273
-23 741
Depreciation and amortisation expense Other administrative expenses Total administrative expenses
123
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.6 Other income 2011
2010
2 934
2 711
Insurance claims
28
922
Other
10
500
2 972
4 133
2011
2010
Impairment of assets
-8 845
-70 974
Write-off receivables
-7 785
--
Tax non-deductible VAT expenses
-3 288
-5 020
Taxes and fees
-2 326
--
Penalties
-1 043
-1 098
--
-14 197
-1 921
-673
-25 208
-91 962
Income from penalties
Total other income
4.7 Other expenses
Compensations paid to tenants Other expenses Total other expenses
4.8 Finance income 2011
2010
Interest income on bonds
74 918
52 561
Interest income on loans and receivables
17 604
27 871
Bank interest income
753
372
Other finance income
3
1 162 811
93 278
1 243 615
Total finance income
As at 1 January 2010 the merger of the Company and its fully owned subsidiary BYTY TŘINEC, a.s. (company ceased to exist as a part of the merger) was registered. As a result of the merger, the Company recorded difference between carrying value of the investment in BYTY TŘINEC, a.s. and fair value of net assets of BYTY TŘINEC, a.s. at the merger date into other finance income.
4.9 Finance cost
Interest expense related to bank and non-bank loans Other finance cost (bank charges) Total finance cost
124
2011
2010
-150 677
-105 875
- 2 008
-2 121
-152 685
-107 996
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
4.10 Income tax recognised in profit or loss 2011
2010
Current year
-362
9 957
Total
-362
9 957
Origination and reversal of temporary differences
-58 942
-57 933
Total
-58 942
-57 933
Total income tax recognised in profit or loss
-59 304
-47 976
Current income tax expense
Deferred income tax expense
The tax rate of 19% was used for the calculation of deferred tax in 2010 and 2011.
Reconciliation of effective tax rate 2011
2010
Profit for the period
194 270
1 588 576
Total income tax expense recognised in profit or loss
-59 304
-47 976
Profit before income tax
253 574
1 636 552
19%
19%
Income tax using the nominal corporate income tax rate
-48 179
-310 945
Non-deductible expense
-17 360
-15 777
Tax exempt income
13 482
220 934
Change in permanent tax differences
Nominal corporate income tax rate
-6 278
-3 498
Tax expenditure related to prior periods
--
35 860
Other tax allowable credits
--
26 594
-969
-1 144
-59 304
-47 976
Other effects Income tax expense
Tax exempt income represents the other financial income recorded as a result of merger of the Company and BYTY TŘINEC, a.s. in 2010.
125
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
5 Financial risks management 5.1 Liquidity risk Liquidity risk refers to the possibility of the Company being unable to meet its cash obligations mainly in relation to the settlement of amounts due to suppliers and bank loans and facilities. The Company monitors its risk to a shortage of funds using different liquidity planning tools. These tools comprise e.g. following activities: maintain a sufficient balance of liquid funds flexible utilization of bank loan, overdrafts and facilities projection of future cash flows from operating activities The following table summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments including accrued interest. The table reflects the earliest settlement of Company’s liabilities based on contractual maturity. Liquidity risk 2011
Loans from third parties Loans from related parties Bank loans Finance lease liabilities Trade and other payables Total
Current value
< 3 month
3-12 months
1-2 years
2-5 years
> 5 year
Total
14 784
15 006
--
--
--
--
15 006
222 326
73 782
95 397
--
--
85 616
254 795
3 072 723
31 084
98 479
142 353
785 784
3 436 074
4 493 774
475
30
96
141
300
--
567
828 709
70 087
755 643
--
2 979
--
828 709
4 139 017
189 989
949 615
142 494
789 063
3 521 690
5 592 851
Liquidity risk 2010 Current value
< 3 month
3-12 months
1-2 years
2-5 years
> 5 year
Total
Loans from third parties
206 151
27 565
--
--
679
232 012
260 256
Loans from related parties
130 062
17 165
--
124 419
--
--
141 584
3 192 259
--
124 700
--
652 999
4 014 547
4 792 246
Bank loans Finance lease liabilities Current income tax liabilities Trade and other payables Total
184
13
44
79
78
--
214
8 017
8 017
--
--
--
--
8 017
716 999
70
723 361
--
--
--
723 431
4 253 672
52 830
848 105
124 498
653 756
4 246 559
5 925 748
126
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
5.2 Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk mainly from its rental activities (primarily for trade receivables) and from its financing activities, including provided loans, purchased bonds, deposits with banks and financial institutions and other financial instruments. Customer credit risk is managed reflecting the Company’s established policy, procedures and control relating to customer credit risk management. Credit quality of the customer is assessed based on an extensive credit rating scorecard at the time of entering into a rental agreement. Outstanding customer receivables are regularly monitored. The Company’s maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The following tables present financial assets as of 31 December 2011 reflecting their classification based on its ageing structure and impairment if applicable: Credit risk 2011 Total neither past due nor impaired
Cash and cash equivalents Trade and other receivables Loans provided
Total past due but not impaired
Impaired
Total
151 596
--
--
151 596
1 087 056
313 537
70 212
1 400 593
121 836
--
--
121 836
Purchased bonds
1 525 860
--
--
1 525 860
Total
2 886 348
313 537
70 212
3 199 885
Breakdown of overdue financial assets which are not impaired 2011 Past due 1-30 days
Past due 31-90 days
Past due 91180 days
Past due 181360 days
Past due more than 360 days
Total
Trade and other receivables
34
618
179
59 716
252 990
313 537
Total
34
618
179
59 716
252 990
313 537
127
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Credit risk 2010 Total neither past due nor impaired
Total past due but not impaired
Impaired
Total
Cash and cash equivalents
163 457
--
--
163 457
Trade and other receivables
350 036
541 113
68 759
891 149
Loans provided
586 708
109 904
Purchased bonds
1 525 980
--
--
1 525 980
696 612
Total
2 626 181
651 017
68 759
3 277 198
Breakdown of overdue financial assets which are not impaired 2010
Trade and other receivables Loans provided Total
Past due 130 days
Past due 31-90 days
Past due 91180 days
657
99
--
--
--
657
99
--
Past due 181360 days
Past due more than 360 days
Total
66 964
473 393
541 113
2 219
107 685
109 904
69 183
581 078
651 017
Not impaired Trade and other receivables past due more than 181 days represent receivables to related parties. The Company does not expect any potential losses from these receivables.
5.3 Capital management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders; and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. The Company as property investor is mainly influenced by the fact that it leverages its project financing by using bank debts. There is no real seasonality impact on its financial position but rather a volatility of financial markets might positively or negatively influence Company’s financial position. No changes were made in the objectives, policies or processes during the year ended 31 December 2011. The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total equity. Debt is defined as long-term and short-term liabilities as detailed described in statement of financial position. Equity includes all capital and reserves as shown in the consolidated statement of financial position The gearing ratios at 31 December 2011 and at 31 December 2010 were as follows: Gearing ratio 2011
2010
Debt
5 152 076
5 207 768
Equity
4 933 873
4 739 603
104%
110%
Gearing ratio
128
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
5.4 Interest rate risk The Company is exposed to various risks associated with the impact of fluctuations in the prevailing levels of market interest rates on its net position and cash flows. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial liabilities (bank loans) with variable interest rate calculated based on 1M PRIBOR + (2,5%4,2%) p.a. reprice in 1 month and financial assets (purchased bonds) with variable interest rate calculated based on 6M PRIBOR + margin 3,5 % p.a. reprice in 6 months. All other financial assets and liabilities bear interest calculated based on fixed interest rate set by the initial recognition. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term assets and liabilities with floating interest rates. These are represented by bank loans and acquired bonds, the base for interest rates changes are the values at 31 December 2011. Interest rate risk 2011 Effective interest rate
Nominal / carrying amount
Interest calculated
Purchased bonds
4,95%
1 496 000
74 052
Interest bearing loans and borrowings (bank loans)
4,38%
-3 072 723
-134 585
-1 576 723
-60 533
Total
The following table shows results of sensitivity analysis in financial instruments to changes in interest rates. Interest rate risk 2011 - sensitivity analysis
Purchased bonds Interest bearing loans and borrowings (bank loans) Total
rate + 10%
Interest calculated
P/L effect
rate - 10%
Interest calculated
P/L effect
5,4%
81 457
7 405
4,5%
66 647
-7 405
4,8%
-148 044
-13 459
3,9%
-121 127
13 459
-66 587
-6 054
-54 480
6 054
The previous table can be interpreted as follows: 31 December 2011, if respective interest rate was of 10 percent higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 6 054 lower / TCZK 6 054 higher due to changed interest income and expense.
129
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Interest rate risk 2010
Effective interest rate
Nominal / carrying amount
Interest calculated
Purchased bonds
5,06%
1 496 000
75 698
Interest bearing loans and borrowings (bank loans)
3,99%
-3 192 259
-127 371
-1 696 259
-51 673
Total
The following table shows results of sensitivity analysis in financial instruments to changes in interest rates. Interest rate risk 2010 - sensitivity analysis rate + 10%
Interest calculated
P/L effect
rate 10%
Interest calculated
P/L effect
Purchased bonds
5,6%
83 267
7 570
4,6%
68 128
-7 570
Interest bearing loans and borrowings (bank loans)
4,4%
-140 108
-12 737
3,6%
-114 634
12 737
-56 841
-5 167
-46 506
5 167
Total
5.5 Foreign currency risk The Company is not exposed to any foreign currency risk. All transactions are denominated in Czech Crowns.
5.6 Fair values Carrying amount
Fair value
2011
2010
2011
2010
Financial assets Cash and cash equivalents Trade and other receivables Loans provided Purchased bonds
151 596
163 457
151 596
163 457
1 400 593
891 149
1 400 593
891 149
121 836
696 612
121 836
696 612
1 525 860
1 525 980
1 525 860
1 525 980
3 199 885
3 277 198
3 199 885
3 277 198
3 310 308
3 528 656
3 310 308
3 528 656
828 709
716 999
828 709
716 999
4 139 017
4 245 655
4 139 017
4 245 655
Financial liabilities Interest bearing loans and borrowings Trade and other payables
130
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
The sensitivity analysis on change in assumptions of investment property valuation (except from land bank) is included below: Current yield
Current market value
Increased yield by 25 bp
2011
6,54%
6 820 017
6,79%
6 570 987
-249 030
2010
5,86%
6 621 229
6,11%
6 350 164
-271 065
Recalculated P/L effect before Market value taxation
The previous table can be interpreted as follows: 31 December 2011, if respective yield was of 25 bp higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 249 030 lower / TCZK 249 030 higher due to changed yield.
Current yield
Decrease Annualised rental rental income by income 10%
Recalculated P/L effect before Market value taxation
2011
6,54%
446 170
401 553
6 139 954
-680 063
2010
5,86%
387 784
349 006
5 959 106
-662 123
The previous table can be interpreted as follows: 31 December 2011, if respective rental income was of 10 percent higher / lower and all other variables would remain constant, then the annual profit before tax was about TCZK 680 063 higher / TCZK 680 063 higher due to changed rental income.
131
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
6 Contingent assets and liabilities 6.1 Contingent assets The Company is not aware of existence of any contingent assets as at 31 December 2011.
6.2 Contingent liabilities The Company does not have in evidence any contingent liabilities. No legal proceeding is active the result of which would influence consolidated financial statements and the Company is not aware about any potential enter upon the law-suit.
132
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
7 Related party transactions The Company has a related party relationships with its board members, executive management, shareholders and parties in which they held controllability or significant influence or are joint ventures.
7.1 Related party transactions Non-current loans provided to related parties
Interest rate
31 December 2011
31 December 2010
1,4 % – 2,1 % p.a.
1 172
63 509
5 % p.a.
--
266 447
2,1 %, 5 %, 8 % p.a
--
142 862
2,1 % p.a.
--
5 000
Družstvo Land
6 % p.a.
--
4 097
CPI - Bor, a.s.
2,1 % p.a.
--
3 500
6 % p.a
--
3 450
2,1 % p.a.
--
2 049
1 172
490 914
CPI a.s. Prague Development Holding, a.s. Březiněves, a.s. CPI – Land Development, a.s.
BPT Development, a.s. CPI Reality, a.s. Total
133
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Current loans provided to related parties Current portion of the loans provided includes primarily unpaid interest from non-current loans and debentures which is expected to be paid within 12 months.
31 December 2011
31 December 2010
120 260
54 444
Březiněves, a.s.
--
61 240
Prague Development Holding, a.s.
--
51 744
Družstvo Land
--
1 193
CPI – Land Development, a.s.
--
723
CPI - Bor, a.s.
--
356
BPT Development, a.s.
--
343
CPI Reality, a.s.
--
22
120 260
170 065
CPI a.s.
Total
Bonds The Company holds bonds issued by CPI, a.s. in the total nominal value of TCZK 1 496 000 (2010: TCZK 1 496 000). The aliquot interest amounts to TCZK 29 860 (2010: TCZK 29 980). Refer also to Note 3.3. Trade receivables 31 December 2011
31 December 2010
129
129
CPI Orlová, a.s.
97
--
CPI - Facility, a.s.
66
5
BPT Development, a.s.
54
377
CPI Services, a.s.
--
499
MUXUM, a.s.
--
60
CPI a.s.
--
5
U svatého Michala, a.s.
--
20
346
1 095
Mr. Radovan Vítek
Total
134
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Receivables due from cession 31 December 2011
31 December 2010
CPI Finance,a.s.
717 643
--
CPI a.s.
249 291
374 216
--
374
966 934
374 590
Mr. Radovan Vítek Total
Other receivables represent the receivables from cession of receivables of the Company, primarily receivables from related parties in the original amount of TCZK 966 125, realized based on concluded agreements. Loans received from related parties - 2011
Interest rate
Balance as at 31 December 2011
Due within 1 year
Due in subsequent years
CPI Finance, a.s.
5% p.a.
222 302
167 066
55 236
CPI a.s.
5% p.a.
24
24
--
222 326
167 090
55 236
Interest rate
Balance as at 31 December 2010
Due within 1 year
Due in subsequent years
CPI Reality, a.s.
5% p.a.
129 557
16 448
113 109
CPI a.s.
5% p.a.
505
3
502
130 062
16 451
113 611
Total
Loans received from related parties - 2010
Total
135
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Trade payables 31 December 2011
31 December 2010
CPI Finance, a.s.
6 723
--
CPI a.s.
1 852
1 201
CPI - Facility, a.s.
669
3 387
Hraničář, a.s.
118
--
CPI Services, a.s.
6
1 009
CPI Reality, a.s.
--
6 745
9 368
12 342
31 December 2011
31 December 2010
250 407
681
85 816
11 937
300
--
336 523
12 618
Total
Other payables
CPI a.s. CPI Finance, a.s. Mr. Radovan Vítek Total
Other payables represent payables from cession of payables of the Company, primarily payables to related parties in the original amount of TCZK 563 973, realized based on concluded agreements.
Income for services rendered 2011
2010
CPI Services, a.s.
--
394
CPI - Facility, a.s.
--
308
Total
--
702
136
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
Interest income 2011
2010
76 292
53 808
Březiněves, a.s.
5 291
10 670
CPI Reality, a.s.
--
44
Prague Development Holding, a.s.
--
13 507
37
73
Družstvo Land
--
249
CPI - Bor, a.s.
--
75
CPI - Land Development, a.s.
--
106
81 620
78 532
2011
2010
-1 585
-7 426
Hraničář, a.s.
-99
--
CPI a.s.
-13
-1 745
--
-2 253
-1 697
-11 424
2011
2010
-4 584
-5 734
-24
-243
-4 608
-5 977
CPI a.s.
BPT Development, a.s.
Total
Expenses for services purchased
CPI - Facility, a.s.
CPI Services, a.s. Total
Interest expenses
CPI Finance, a.s. CPI a.s. Total
7.2 Guarantees CPI a.s. acting as a collateral for bank loan received by the Company (refer to Note 3.8).
7.3 Remuneration to Board of Directors, Supervisory Board and Management Members of the Supervisory Board, members of the Board of Directors and members of Management received neither monetary nor non-monetary income from the company in 2011 and 2010 except for salaries they were paid as employees of the Company. The salaries have no variable component. As employees of the Company, members of the Supervisory Board, Board of Directors and Management had no advantages or benefits in comparison with other employees of the Company in 2011 and 2010.
137
CPI BYTY, a.s. Notes to the financial statements for the year ended 31 December 2011 in thousand Czech crowns ( TCZK)
8 Subsequent events No significant events occurred between the balance sheet date and the date of preparation of the Company’s financial statements.
Prague, 27 April 2012
Zdeněk Havelka Member of Board of Directors CPI BYTY, a.s.
Marek Stubley Chairman of Board of Directors CPI BYTY, a.s.
138
