IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Financial Statements as of September 30, 2020 and for the three-month period ended as of that date, presented comparatively
1
Legal information
Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.
Fiscal year N°: 78, beginning on July 1st, 2019.
Legal address: 108 Bolívar St., 1st floor, Autonomous City of Buenos Aires, Argentina.
Company activity: Real estate investment and development.
Date of registration of the by-laws in the Public Registry of Commerce: June 23, 1943.
Date of registration of last amendment of the by-laws in the Public Registry of Commerce: October 29, 2018.
Expiration of the Company’s by-laws: April 5, 2043.
Registration number with the Superintendence: 213,036.
Capital: 578,676,460 shares.
Common Stock subscribed, issued and paid up nominal value (in millions of Ps.): 579.
Parent Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
(Cresud S.A.C.I.F. y A.).
Legal Address: 877 Moreno St., 23rd. floor, Autonomous City of Buenos Aires, Argentina.
Main activity: Real estate, agricultural, commercial and financial activities.
Direct and indirect interest of the Parent Company on the capital stock: 359,102,219 common shares.
Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 62.34% (1).
CAPITAL STATUS | ||
Type of stock | Shares authorized for Public Offering (2) | Subscribed, issued and paid up nominal value (in millions of Pesos) |
Common stock with a face value of Ps. 1 per share and entitled to 1 vote each | 578,676,460 | 579 |
(1) For computation purposes, treasury shares have been subtracted.
(2) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.
2
Index
Glossary .... | 1 |
Unaudited Condensed Interim Consolidated Statements of Financial Position | 2 |
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income | 3 |
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity | 4 |
Unaudited Condensed Interim Consolidated Statements of Cash Flows | 6 |
Notes to the Unaudited Condensed Interim Consolidated Financial Statements: | |
Note 1 – The Group’s business and general information | 7 |
Note 2 – Summary of significant accounting policies | 7 |
Note 3 – Seasonal effects on operations | 9 |
Note 4 – Acquisitions and disposals | 9 |
Note 5 – Financial risk management and fair value estimates | 10 |
Note 6 – Segment information | 10 |
Note 7 – Investments in associates and joint ventures | 13 |
Note 8 – Investment properties | 15 |
Note 9 – Property, plant and equipment | 16 |
Note 10 – Trading properties | 16 |
Note 11 – Intangible assets | 16 |
Note 12 – Right-of-use assets | 17 |
Note 13 – Financial instruments by category | 17 |
Note 14 – Trade and other receivables | 18 |
Note 15 – Cash flow information | 20 |
Note 16 – Trade and other payables | 21 |
Note 17 – Borrowings | 22 |
Note 18 – Provisions | 22 |
Note 19 – Taxes | 23 |
Note 20 – Revenues | 23 |
Note 21 – Expenses by nature | 25 |
Note 22 – Cost of goods sold and services provided | 25 |
Note 23 – Other operating results, net | 26 |
Note 24 – Financial results, net | 26 |
Note 25 – Related party transactions | 27 |
Note 26 – CNV General Resolution N° 622 | 29 |
Note 27 – Foreign currency assets and liabilities | 29 |
Note 28 – Groups of assets and liabilities held for sale | 30 |
Note 29 – Results from discontinued operations | 30 |
Note 30 – Other significant events of the period | 31 |
Note 31 – Subsequent Events | 31 |
3
Glossary
The following are not technical definitions, but help the reader to understand certain terms used in the wording of the notes to the Group´s Financial Statements.
Terms | Definitions | |
BACS | Banco de Crédito y Securitización S.A. | |
BCRA | Central Bank of the Argentine Republic | |
BHSA | Banco Hipotecario S.A. | |
Cellcom | Cellcom Israel Ltd. | |
Clal | Clal Holdings Insurance Enterprises Ltd. | |
CNV | Securities Exchange Commission | |
CODM | Chief operating decision maker | |
CPF | Collective Promotion Funds | |
Condor | Condor Hospitality Trust Inc. | |
Cresud | Cresud S.A.C.I.F. y A. | |
DIC | Discount Investment Corporation Ltd. | |
Eclsa | E-Comerce Latina S.A. | |
Efanur | Efanur S.A. | |
Financial Statements | Unaudited Condensed Interim Consolidated Financial Statements | |
Gav-Yam | Gav-Yam, Bayside Land Corporation Ltd | |
Annual Financial Statements | Consolidated Financial Statements as of June 30, 2019 | |
HASAU | Hoteles Argentinos S.A.U. | |
IAS | International Accounting Standards | |
IASB IBC | International Accounting Standards Board Israel Broadband Company | |
IDBT | IDB Tourism (2009) Ltd | |
IDBD | IDB Development Corporation Ltd. | |
IFISA | Inversiones Financieras del Sur S.A. | |
ISPRO | Ispro the Israel Properties Rental Corp. Ltd. | |
IFRS | International Financial Reporting Standards | |
IRSA, The Company”, “Us”, “We” | IRSA Inversiones y Representaciones Sociedad Anónima | |
IRSA CP | IRSA Propiedades Comerciales S.A. | |
Israir | Israir Airlines & Tourism Ltd. | |
LRSA Mehadrin | La Rural S.A. Mehadrin Ltd. | |
Metropolitan | Metropolitan 885 Third Avenue Leasehold LLC | |
MPIT | Minimum presumed income tax | |
NCN | Non-convertible notes | |
New Lipstick | New Lipstick LLC | |
NFSA | Nuevas Fronteras S.A. | |
NIS | New Israeli Shekel | |
PBC | Property & Building Corporation Ltd. | |
PBEL | PBEL Real Estate LTD | |
Quality | Quality Invest S.A. | |
Shufersal | Shufersal Ltd. | |
Tarshop | Tarshop S.A. | |
TGLT | TGLT S.A | |
Tyrus | Tyrus S.A. |
4
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of September 30, 2020 and June 30, 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 09.30.2020 | 06.30.2020 | |
ASSETS | |||
Non-current assets | |||
Investment properties | 8 | 166,478 | 244,966 |
Property, plant and equipment | 9 | 2,338 | 40,618 |
Trading properties | 10, 22 | 1,328 | 5,228 |
Intangible assets | 11 | 1,186 | 29,911 |
Right-of-use assets | 12 | 621 | 21,379 |
Investments in associates and joint ventures | 7 | 12,718 | 80,089 |
Deferred income tax assets | 19 | 148 | 681 |
Income tax and MPIT credit | 26 | 27 | |
Restricted assets | 13 | - | 2,014 |
Trade and other receivables | 14 | 1,881 | 24,898 |
Investments in financial assets | 13 | 506 | 3,782 |
Derivative financial instruments | 13 | - | 153 |
Total non-current assets | 187,230 | 453,746 | |
Current assets | |||
Trading properties | 10, 22 | 218 | 2,493 |
Inventories | 22 | 65 | 5,041 |
Restricted assets | 13 | 8 | 6,684 |
Income tax and MPIT credit | 105 | 331 | |
Group of assets held for sale | 28 | - | 44,868 |
Trade and other receivables | 14 | 4,998 | 39,986 |
Investments in financial assets | 13 | 3,378 | 20,922 |
Financial assets held for sale | 13 | - | 3,636 |
Derivative financial instruments | 13 | 16 | 227 |
Cash and cash equivalents | 13 | 4,397 | 97,276 |
Total current assets | 13,185 | 221,464 | |
TOTAL ASSETS | 200,415 | 675,210 | |
SHAREHOLDERS’ EQUITY | |||
Shareholders' equity attributable to equity holders of the parent (according to corresponding statement) | 70,375 | 61,500 | |
Non-controlling interest | 23,364 | 70,544 | |
TOTAL SHAREHOLDERS’ EQUITY | 93,739 | 132,044 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 17 | 31,967 | 320,616 |
Lease liabilities | 586 | 14,400 | |
Deferred income tax liabilities | 19 | 42,121 | 47,408 |
Trade and other payables | 16 | 1,745 | 2,335 |
Provisions | 18 | 145 | 3,297 |
Employee benefits | - | 481 | |
Derivative financial instruments | 13 | 29 | 59 |
Salaries and social security liabilities | 33 | 210 | |
Total non-current liabilities | 76,626 | 388,806 | |
Current liabilities | |||
Trade and other payables | 16 | 5,007 | 31,943 |
Borrowings | 17 | 24,471 | 84,338 |
Lease liabilities | 139 | 5,242 | |
Provisions | 18 | 108 | 2,627 |
Group of liabilities held for sale | 28 | - | 23,912 |
Salaries and social security liabilities | 235 | 4,419 | |
Income tax and MPIT liabilities | 30 | 673 | |
Derivative financial instruments | 13 | 60 | 1,206 |
Total current liabilities | 30,050 | 154,360 | |
TOTAL LIABILITIES | 106,676 | 543,166 | |
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES | 200,415 | 675,210 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
.. |
5
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
for the three-month periods ended September 30, 2020 and 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Three month | |||
Note | 09.30.2020 | 09.30.2019 | |
Revenues | 20 | 1,609 | 4,487 |
Costs | 21, 22 | (1,097) | (1,682) |
Gross profit | 512 | 2,805 | |
Net gain from fair value adjustment of investment properties | 8 | 24,089 | 12,349 |
General and administrative expenses | 21 | (644) | (661) |
Selling expenses | 21 | (450) | (295) |
Other operating results, net | 23 | (18) | (56) |
Profit from operations | 23,489 | 14,142 | |
Share of profit of associates and joint ventures | 7 | 147 | 737 |
Profit before financial results and income tax | 23,636 | 14,879 | |
Finance income | 24 | 56 | 83 |
Finance costs | 24 | (1,593) | (1,782) |
Other financial results | 24 | 624 | (9,152) |
Inflation adjustment | (29) | (393) | |
Financial results, net | (942) | (11,244) | |
Profit before income tax | 22,694 | 3,635 | |
Income tax expense | 19 | (7,958) | (2,505) |
Profit for the period from continuing operations | 14,736 | 1,130 | |
(Loss) / profit for the period from discontinued operations | 29 | (6,396) | 13,887 |
Profit for the period | 8,340 | 15,017 | |
Other comprehensive income: | |||
Items that may be reclassified subsequently to profit or loss: | |||
Currency translation adjustment | (5,833) | 71 | |
Other reserves | 1,954 | 1,730 | |
Items that may not be reclassified subsequently to profit or loss, net of income tax: | - | - | |
Actuarial profit from defined contribution plans | - | (11) | |
Other comprehensive (loss) / income for the period from continuing operations | (3,879) | 1,790 | |
Other comprehensive (loss) / income for the period from discontinued operations | (4,794) | 14,057 | |
Total other comprehensive (loss) / income for the period | (8,673) | 15,847 | |
Total comprehensive (loss) / income for the period | (333) | 30,864 | |
Total comprehensive income from continuing operations | 10,857 | 2,920 | |
Total comprehensive (loss) / income from discontinued operations | (11,190) | 27,944 | |
Total comprehensive (loss) / income for the period | (333) | 30,864 | |
Profit for the period attributable to: | |||
Equity holders of the parent | 6,615 | 4,509 | |
Non-controlling interest | 1,725 | 10,508 | |
Profit from continuing operations attributable to: | |||
Equity holders of the parent | 11,679 | 247 | |
Non-controlling interest | 3,057 | 883 | |
Total comprehensive income / (loss) attributable to: | |||
Equity holders of the parent | 2,914 | 3,568 | |
Non-controlling interest | (3,247) | 27,296 | |
Total comprehensive income / (loss) from continuing operations attributable to: | |||
Equity holders of the parent | 15,034 | 2,062 | |
Non-controlling interest | (4,177) | 858 | |
Profit per share attributable to equity holders of the parent: | |||
Basic | 11.50 | 7.84 | |
Diluted | 11.42 | 7.84 | |
Profit per share from continuing operations attributable to equity holders of the parent: | |||
Basic | 20.31 | 0.43 | |
Diluted | 20.17 | 0.43 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
.. |
6
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Attributable to equity holders of the parent | ||||||||||||
Share capital | Treasury shares | Inflation adjustment of share capital and treasury shares (1) | Share premium | Additional paid-in capital from treasury shares | Legal reserve | Special reserve Resolution CNV 609/12 (2) | Other reserves (3) | Retained earnings | Subtotal | Non-controlling interest | Total Shareholders’ equity | |
Balance as of July 1, 2020 | 575 | 4 | 14,613 | 15,653 | 102 | 522 | 10,124 | 6,345 | 13,562 | 61,500 | 70,544 | 132,044 |
Profit for the period | - | - | - | - | - | - | - | - | 6,615 | 6,615 | 1,725 | 8,340 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | (3,701) | - | (3,701) | (4,972) | (8,673) |
Total profit and other comprehensive (loss) / income for the period | - | - | - | - | - | - | - | (3,701) | 6,615 | 2,914 | (3,247) | (333) |
Capitalisation of irrevocable contributions | - | - | - | - | - | - | - | - | - | - | 4 | 4 |
Dividend distribution | - | - | - | - | - | - | - | - | - | - | (20) | (20) |
Other changes in equity | - | - | - | - | - | - | - | 5,926 | - | 5,926 | (43,846) | (37,920) |
Reserve for share-based payments | - | - | - | - | 2 | - | - | (2) | - | - | - | - |
Changes in non-controlling interest | - | - | - | - | - | - | - | 35 | - | 35 | (71) | (36) |
Balance as of September 30, 2020 | 575 | 4 | 14,613 | 15,653 | 104 | 522 | 10,124 | 8,603 | 20,177 | 70,375 | 23,364 | 93,739 |
(1) Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2) Related to CNV General Resolution N° 609/12.
(3) Group´s other reserves for the period ended September 30, 2020 are comprised as follows:
Cost of treasury stock | Changes in non-controlling interest | Reserve for share-based payments | Reserve for future dividends | Currency translation adjustment reserve | Hedging instruments | Special reserve | Reserve for defined contribution plans | Other reserves from subsidiaries | Revaluation surplus | Total Other reserves | |
Balance as of July 1, 2020 | (185) | (5,673) | 212 | 1,822 | (784) | (394) | 11,190 | (422) | 115 | 464 | 6,345 |
Other comprehensive loss for the period | - | - | - | - | (3,476) | (78) | - | (147) | - | - | (3,701) |
Total comprehensive loss for the period | - | - | - | - | (3,476) | (78) | - | (147) | - | - | (3,701) |
Reserve for share-based payments | 1 | - | (3) | - | - | - | - | - | - | - | (2) |
Changes in non-controlling interest | - | 35 | - | - | - | - | - | - | - | - | 35 |
Other changes in equity | - | (52) | - | - | 5,034 | 215 | - | 784 | (115) | 60 | 5,926 |
Balance as of September 30, 2020 | (184) | (5,690) | 209 | 1,822 | 774 | (257) | 11,190 | 215 | - | 524 | 8,603 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
. |
7
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Attributable to equity holders of the parent | ||||||||||||
Share capital | Treasury shares | Inflation adjustment of share capital and treasury shares (1) | Share premium | Additional paid-in capital from treasury shares | Legal reserve | Special reserve Resolution CNV 609/12 (2) | Other reserves (3) | Retained earnings | Subtotal | Non-controlling interest | Total Shareholders’ equity | |
Balance as of July 1, 2019 | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,121 | 73,258 | (65,479) | 49,352 | 82,692 | 132,044 |
Adjustments previous periods (IFRS 9 and 15) | - | - | - | - | - | - | - | - | (1,248) | (1,248) | (926) | (2,174) |
Balance as of July 1, 2018 (recast) | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,121 | 73,258 | (66,727) | 48,104 | 81,766 | 129,870 |
Profit for the period | - | - | - | - | - | - | - | - | 4,509 | 4,509 | 10,508 | 15,017 |
Other comprehensive (loss) / income for the period | - | - | - | - | - | - | - | (941) | - | (941) | 16,788 | 15,847 |
Total profit / (loss) and other comprehensive income for the period | - | - | - | - | - | - | - | (941) | 4,509 | 3,568 | 27,296 | 30,864 |
Capitalisation of irrevocable contributions | - | - | - | - | - | - | - | - | - | - | 11 | 11 |
Dividend distribution | - | - | - | - | - | - | - | - | - | - | (18) | (18) |
Decrease due to loss of control | - | - | - | - | - | - | - | - | 25 | 25 | (46,419) | (46,394) |
Changes in non-controlling interest | - | - | - | - | - | - | - | (185) | - | (185) | (74) | (259) |
Balance as of September 30, 2019 | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,121 | 72,132 | (62,193) | 51,512 | 62,562 | 114,074 |
(1) Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2) Related to CNV General Resolution N° 609/12.
(3) Group’s other reserves for the period ended September 30, 2019 are comprised as follows:
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements
Cost of treasury stock | Changes in non-controlling interest | Reserve for share-based payments | Reserve for future dividends | Currency translation adjustment reserve | Hedging instruments | Reserve for defined contribution plans | Special reserve | Other reserves from subsidiaries | Revaluation surplus | Total Other reserves | |
Balance as of July 1, 2019 | (176) | (5,678) | 223 | 1,821 | 282 | (10) | 76,906 | (334) | 112 | 112 | 73,258 |
Other comprehensive loss for the period | - | - | - | - | (866) | - | - | - | (75) | - | (941) |
Total comprehensive loss for the period | - | - | - | - | (866) | - | - | - | (75) | - | (941) |
Share-based compensation | 3 | - | (3) | - | - | - | - | - | - | - | - |
Changes in non-controlling interest | - | (185) | - | - | - | - | - | - | - | - | (185) |
Balance as of September 30, 2019 | (173) | (5,863) | 220 | 1,821 | (584) | (10) | 76,906 | (334) | 37 | 112 | 72,132 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
.. |
8
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Cash Flows
for the three-month periods ended September 30, 2020 and 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 09.30.2020 | 09.30.2019 | |
Operating activities: | |||
Net cash generated from continuing operating activities before income tax paid | 15 | 1,138 | 2,926 |
Income tax and MPIT paid | (3) | (197) | |
Net cash generated from continuing operating activities | 1,135 | 2,729 | |
Net cash generated from discontinued operating activities | 2,227 | 7,738 | |
Net cash generated from operating activities | 3,362 | 10,467 | |
Investing activities: | |||
Acquisition of interest in associates and joint ventures | - | (5) | |
Contributions and issuance of capital in associates and joint ventures | (8) | (112) | |
Acquisition and improvements of investment properties | (719) | (824) | |
Proceeds from sales of investment properties | 9,604 | - | |
Acquisitions and improvements of property, plant and equipment | (45) | (40) | |
Acquisitions of intangible assets | (6) | (7) | |
Net increase of restricted deposits | - | (226) | |
Dividends collected from associates and joint ventures | - | 26 | |
Proceeds from loans granted | - | 45 | |
Acquisitions of investments in financial assets | (6,181) | (11,245) | |
Proceeds from disposal of investments in financial assets | 6,809 | 14,811 | |
Interest received from financial assets | 157 | 202 | |
Dividends received from financial assets | - | 4 | |
Loans granted | - | (639) | |
Net cash generated from continuing investing activities | 9,611 | 1,990 | |
Net cash generated from discontinued investing activities | 31,830 | 1,500 | |
Net cash generated from investing activities | 41,441 | 3,490 | |
Financing activities: | |||
Borrowings and issuance of non-convertible notes | 3,466 | 16,293 | |
Payment of borrowings and non-convertible notes | (20,009) | (17,730) | |
Collections of short term loans, net | 4,861 | 1,686 | |
Interests paid | (2,624) | (2,203) | |
Repurchase of non-convertible notes | (66) | (1,972) | |
Acquisition of non-controlling interest in subsidiaries | (53) | (246) | |
Sale of own non-convertible notes | 525 | - | |
Net proceeds from derivate financial instrument | (225) | 258 | |
Net cash (used in) / generated from continuing financing activities | (14,125) | (3,914) | |
Net cash generated from /(used in) discontinued financing activities | (13,019) | (31,325) | |
Net cash generated from financing activities | (27,144) | (35,239) | |
Net (decrease) / increase in cash and cash equivalents from continuing activities | (3,379) | 805 | |
Net (decrease) / increase in cash and cash equivalents from discontinued activities | 21,038 | (22,087) | |
Net (decrease) / increase in cash and cash equivalents | 17,659 | (21,282) | |
Cash and cash equivalents at beginning of period | 97,276 | 93,059 | |
Cash and cash equivalents reclassified as held-for-sale | - | 36 | |
Deconsolidation of subsidiaries | (104,164) | - | |
Foreign exchange gain and inflation adjustment on cash and changes in fair value of cash equivalents | (6,374) | 13,875 | |
Cash and cash equivalents at end of period | 13 | 4,397 | 85,688 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
9
IRSA Inversiones y Representaciones Sociedad Anónima
Notes to the Unaudited Condensed Interim Consolidated Financial Statements
(Amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
1.
The Group’s business and general information
These Financial Statements have been approved for issuance by the Board of Directors, on November 17, 2020.
IRSA was founded in 1943, and it is engaged in a diversified range of real estate activities in Argentina since 1991. IRSA and its subsidiaries are collectively referred to hereinafter as “the Group”. Cresud is our direct parent company and IFIS Limited is our ultimate parent company.
The Group has established two Operations Centers, Argentina and Israel, to manage its global business, mainly through the following companies, as explained below, the Group has lost control of the Israel Operations Center and it has been deconsolidated as of September 30, 2020:
(*) See note 4. to the Annual Financial Statements for more information about the changes within the Operations Center in Israel.
Operations Center in Israel
As stated in Note 1. to the consolidated financial statements as of June 30, 2020, on September 25, 2020 the Court decreed the insolvency and liquidation of IDBD and appointed a trustee for its shares along with a custodian over DIC and Clal shares. After this decision, the Board of Directors of IDBD was removed from its functions, therefore, the Group lost control as of that date. For comparability purposes, the results of the Israel Operations Center for the three-month periods ended September 30 have been reclassified to discontinued operations.
2.
Summary of significant accounting policies
2.1.
Basis of preparation
These financial statements have been prepared in accordance with IAS 34 “Interim financial reporting” and should therefore be read in conjunction with the Group's annual Consolidated Financial Statements as of June 30, 2020 prepared in accordance with IFRS. Also, these financial statements include additional information required by Law No. 19,550 and / or regulations of the CNV. Such information is included in the notes to these financial statements, as accepted by IFRS.
These financial statements for the interim periods of three month ended September 30, 2020 and 2019 have not been audited. Management considers that they include all the necessary adjustments to fairly present the results of each period. Intermediate period results do not necessarily reflect the proportion of the Group's results for the entire fiscal years.
10
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated by non-monetary items. This requirement also includes the comparative information of the financial statements.
In order to conclude on whether an economy is categorized as highly inflationary in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates or exceed 100%. Accumulated inflation in Argentina in three years is over 100%. For that reason, in accordance with IAS 29, Argentina must be considered a country with a highly inflationary economy starting July 1, 2018.
In relation to the inflation index to be used and in accordance with FACPCE Resolution No. 539/18, it is determined based on the Wholesale Price Index (IPIM) until 2016, considering the average variation of the Consumer Price Index (CPI) of the Autonomous City of Buenos Aires for the months of November and December 2015, because during those two months there were no national IPIM measurements. Then, from January 2017, the National Consumer Price Index (National CPI) is considered. The table below presents the index for the period ended September 30, 2020, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18.
As of September 30, 2020 (accumulated three months) | |
Price variation | 8% |
As a consequence of the aforementioned, these financial statements as of September 30, 2020 were restated in accordance with IAS 29.
2.2.
Significant accounting policies
The accounting policies applied in the presentation of these Financial Statements are consistent with those applied in the preparation of the Annual Financial Statements, as described in Note 2 to those Financial Statements.
2.3.
Comparability of information
Balance items as of June 30, 2020 and September 30, 2019 presented in these Unaudited Condensed Interim Consolidated Financial Statements for comparative purposes arise from the financial statements as of and for such periods restated according to IAS 29 (See note 2.1). Certain items from prior periods have been reclassified for consistency purposes regarding the loss of control in IDBD See note 1. to these Financial Statements.
2.4.
Use of estimates
The preparation of Financial Statements at a certain date requires Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these financial statements. In the preparation of these financial statements, the significant judgments made by Management in applying the Group’s accounting policies and the main sources of uncertainty were the same as the ones applied by the Group in the preparation of the Annual Financial Statements described in Note 3 to those Financial Statements, except for those mentioned in Note 30.
11
3.
Seasonal effects on operations
Operations Center in Argentina
The operations of the Group’s shopping malls are subject to seasonal effects, which affect the level of sales recorded by lessees. During summer time in Argentina (January and February), the lessees of shopping malls experience the lowest sales levels in comparison with the winter holidays (July) and Christmas and year-end holidays celebrated in December, when they tend to record peaks of sales. Apparel stores generally change their collections during the spring and the fall, which impacts positively on shopping malls sales. Sale discounts at the end of each season also affect the business. As a consequence, for shopping mall operations, a higher level of business activity is expected in the period ranging between July and December, compared to the period between January and June.
4.
Acquisitions and disposals
Significant acquisitions and disposals for the three-month period ended September 30, 2020 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2020, are detailed in Note 4 to the Annual Financial Statements.
A.
Sale of floors from Boston Tower
On July 15, 2020, IRSA CP entered into a preliminary sale agreement (with delivery of possession) with respect to a medium-height floor from Boston tower located at Della Paolera 265, Catalinas district, City of Buenos Aires, covering a total area of approximately 1,063 sq. meters and 5 parking lots located in the building. The price of the transaction was Ps. 477.7 (US$ 6.7), which has been paid in full.
On August 26, 2020, IRSA CP executed a preliminary sale agreement (with delivery of possession) with respect to 5 floors from Boston tower located at Della Paolera 265, Catalinas district, City of Buenos Aires, covering a total area of approximately 6,235 sq. meters and 25 parking lots located in the building. The price of the transaction was Ps. 2,562 million (US$ 34.7 million), which has been paid in full.
B.
Bouchard sale
On July 30, 2020, IRSA CP sold the entire “Bouchard 710” building, located in the Plaza Roma district of the City of Buenos Aires. The tower has a gross leasable area of 15,014 sq. meters divided into 12 floors for office use and 116 parking lots. The price of the transaction was approximately Ps. 6,300 million (US$ 87 million), which has been paid in full.
C.
Lipstick Building, New York, United States
On August 7, 2020, Metropolitan signed an agreement with the owner of the Ground Lease in which it terminated the relationship, leaving the administration of the building. Accordingly, at June 30, 2020, the Group derecognized Metropolitan's liabilities associated with the ground lease, as well as all the assets and liabilities associated with the building and the administration of the building; and made an agreement with the owner of the Ground Lease that states that Metropolitan is completely released from responsibilities, except for (i) claims for liabilities prior to June 1, 2020 from people who have performed work or provided services in the Building or to Metropolitan and (ii) claims from people who have had an accident on the property dated after August 7, 2020.
D.
Condor Merger Agreement
On July 19, 2019, Condor entered into a merger agreement with Nextponint Hospitality Trust. In accordance with the contractual terms, each Condor common share, with a par value of USD 0.01 per share, was canceled prior to the merger and became the right to receive a cash amount equivalent to USD 11.10 per share. ordinary action. Additionally, in accordance with the terms and conditions of the merger agreement, each Class E convertible share was automatically canceled and became the right to receive a cash amount equivalent to USD 10.00 per share.
12
The closing of the transaction, which had been scheduled for March 23, 2020, did not occur.
On October 14, 2020, Condor entered into an agreement with Nextponint Hospitality Trust and some of its affiliates ("NHT Parties") to resolve any and all claims between them related to the aforementioned merger agreement.
Under the agreement with NHT, the Parties will make three payments to Condor in three installments, with the last payment maturing on December 30, 2020 and for a total of USD 7.0 million.
As of the date of presentation of these financial statements, the Company has 2,245,100 ordinary shares and 325,752 Series E shares of Condor.
E.
Loss of control of IDBD
As described in Note 1. to these financial statements, at the end of September 2020, the Group has lost control of IDBD, deconsolidating the related assets and liabilities and reclassifying the operations from this operations center to discontinued operations.
The following table details the net assets disposed:
09.30.2020 | |
ASSETS | |
Investment properties | 84,251 |
Property, plant and equipment | 34,396 |
Trading properties | 5,512 |
Intangible assets | 26,194 |
Right-of-use assets | 18,530 |
Investments in associates and joint ventures | 34,721 |
Deferred income tax assets | 407 |
Income tax credit | 305 |
Restricted assets | 6,021 |
Trade and other receivables | 50,669 |
Investments in financial assets | 22,680 |
Derivative financial instruments | 264 |
Inventories | 3,377 |
Group of assets held for sale | 39,441 |
Cash and cash equivalents | 104,164 |
TOTAL ASSETS | 430,932 |
Borrowings | 305,070 |
Lease liabilities | 16,984 |
Deferred income tax liabilities | 11,655 |
Trade and other payables | 22,782 |
Income tax liabilities | 427 |
Provisions | 5,085 |
Employee benefits | 447 |
Derivative financial instruments | 447 |
Salaries and social security liabilities | 3,173 |
Group of liabilities held for sale | 20,646 |
TOTAL LIABILITIES | 386,716 |
TOTAL NET ASSETS | 44,216 |
Non-controlling interest | (43,846) |
Result for loss of control | 370 |
Recycling of currency translation adjustment and other reserves | (3,252) |
Total result for loss of control (*) | (2,882) |
(*) Included within discontinued operations
5.
Financial risk management and fair value estimates
These Financial Statements do not include all the information and disclosures on financial risk management; therefore, they should be read along with Note 5 to the Annual Financial Statements. There have been no changes in risk management or risk management policies applied by the Group since year-end.
13
From June 30, 2020 and up to the date of issuance of these Financial Statements, there have been no significant changes in business or economic circumstances affecting the fair value of the Group's assets or liabilities (either measured at fair value or amortized cost) except for what is mentioned in Note 30 in relation to COVID-19. Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Group’s financial instruments, except as mentioned in Note 30.
6.
Segment information
As explained in Note 6 to the Annual Financial Statements, the Group reports its financial performance separately in two Operations Centers. As described in Note 1, the Group lost control of IDBD and has reclassified its results to discontinued operations. Segment information for the period ended September 30, 2019 has been recast for the purposes of comparability with the present period.
Below is a summary of the Group’s operating segments and a reconciliation between the operating income according to segment information and the operating income of the Statements of Income and Other Comprehensive Income of the Group for the periods ended September 30, 2020 and 2019:
Three Month ended September 30, 2020 | |||||||
Operations Center in Argentina | Operations Center in Israel | Total | Joint ventures (1) | Expensesand collectivepromotion funds | Elimination of inter-segment transactions and non-reportable assets / liabilities (2) | Total as per statement of income / statement of financial position | |
Revenues | 1,218 | - | 1,218 | (8) | 405 | (6) | 1,609 |
Costs | (651) | - | (651) | 14 | (460) | - | (1,097) |
Gross profit / (loss) | 567 | - | 567 | 6 | (55) | (6) | 512 |
Net gain from fair value adjustment of investment properties | 24,926 | - | 24,926 | (837) | - | - | 24,089 |
General and administrative expenses | (649) | (5) | (654) | 1 | - | 9 | (644) |
Selling expenses | (451) | - | (451) | 1 | - | - | (450) |
Impairment of associates and joint ventures | - | - | - | - | - | - | - |
Other operating results, net | (25) | - | (25) | 1 | 9 | (3) | (18) |
Profit / (loss) from operations | 24,368 | (5) | 24,363 | (828) | (46) | - | 23,489 |
Share of (loss) / profit of associates and joint ventures | (472) | - | (472) | 619 | - | - | 147 |
Segment profit / (loss) | 23,896 | (5) | 23,891 | (209) | (46) | - | 23,636 |
Reportable assets | 185,020 | 1,399 | 186,419 | (954) | - | 14,950 | 200,415 |
Reportable liabilities | - | (2,355) | (2,355) | - | - | (104,321) | (106,676) |
Net reportable assets | 185,020 | (956) | 184,064 | (954) | - | (89,371) | 93,739 |
Three Monts ended September 30, 2019 | |||||||
Operations Center in Argentina | Operations Center in Israel | Total | Joint ventures (1) | Expensesand collectivepromotion funds | Elimination of inter-segment transactions and non-reportable assets / liabilities (2) | Total as per statement of income / statement of financial position | |
Revenues | 3,609 | - | 3,609 | (25) | 910 | (7) | 4,487 |
Costs | (740) | - | (740) | 11 | (953) | - | (1,682) |
Gross profit / (loss) | 2,869 | - | 2,869 | (14) | (43) | (7) | 2,805 |
Net gain from fair value adjustment of investment properties | 12,897 | - | 12,897 | (548) | - | - | 12,349 |
General and administrative expenses | (651) | (28) | (679) | 8 | - | 10 | (661) |
Selling expenses | (300) | - | (300) | 5 | - | - | (295) |
Other operating results, net | (65) | - | (65) | - | 12 | (3) | (56) |
Profit / (loss) from operations | 14,750 | (28) | 14,722 | (549) | (31) | - | 14,142 |
Share of profit of associates and joint ventures | 324 | - | 324 | 413 | - | - | 737 |
Segment profit / (loss) | 15,074 | (28) | 15,046 | (136) | (31) | - | 14,879 |
Reportable assets | 132,844 | 542,703 | 675,547 | (771) | - | 33,893 | 708,669 |
Reportable liabilities | - | (480,535) | (480,535) | - | - | (114,060) | (594,595) |
Net reportable assets | 132,844 | 62,168 | 195,012 | (771) | - | (80,167) | 114,074 |
(1) Represents the equity value of joint ventures that were proportionately consolidated for segment information.
14
(2) Includes deferred income tax assets, income tax and MPIT credits, trade and other receivables, investment in financial assets, cash and cash equivalents and intangible assets except for rights to receive future units under barter agreements, net of investments in associates with negative equity which are included in provisions in the amount of Ps. 8,482 and Ps. 6,051 as of September 30, 2020 and 2019 respectively.
Below is a summarized analysis of the segments from the Group’s Operations Center in Argentina for the periods ended September 30, 2020 and 2019:
Three Month ended September 30, 2020 | ||||||||
Operations Center in Argentina | ||||||||
Shopping Malls | Offices | Sales and developments | Hotels | International | Corporate | Others | Total | |
Revenues | 367 | 541 | 39 | 6 | 263 | - | 2 | 1,218 |
Costs | (134) | (45) | (97) | (129) | (221) | - | (25) | (651) |
Gross profit / (loss) | 233 | 496 | (58) | (123) | 42 | - | (23) | 567 |
Net gain from fair value adjustment of investment properties | 1,178 | 13,112 | 10,096 | - | 2 | - | 538 | 24,926 |
General and administrative expenses | (328) | (87) | (66) | (57) | (17) | (74) | (20) | (649) |
Selling expenses | (73) | (37) | (305) | (19) | (16) | - | (1) | (451) |
Other operating results, net | (24) | (1) | (6) | 8 | - | - | (2) | (25) |
Profit / (loss) from operations | 986 | 13,483 | 9,661 | (191) | 11 | (74) | 492 | 24,368 |
Share of loss of associates and joint ventures | - | - | (8) | - | (386) | - | (78) | (472) |
Segment profit / (loss) | 986 | 13,483 | 9,653 | (191) | (375) | (74) | 414 | 23,896 |
Investment properties and trading properties | 54,124 | 72,026 | 43,899 | - | 103 | - | 1,986 | 172,138 |
Investment in associates and joint ventures | - | - | 565 | - | 1,781 | - | 7,152 | 9,498 |
Other operating assets | 282 | 236 | 809 | 1,954 | - | - | 103 | 3,384 |
Operating assets | 54,406 | 72,262 | 45,273 | 1,954 | 1,884 | - | 9,241 | 185,020 |
(i) For the three-month period ended September 30, 2020, the net gain from fair value adjustment of investment properties was Ps. 2,565. The net impact of the values in pesos of our properties was mainly a consequence of the change in macroeconomic conditions:
(a) gain of Ps.19,713.7 as a consequence of an increase in the projected inflation rate plus GDP, with the resulting increase in the cash flows from shopping malls revenues;
(b) loss of Ps.22,963.3 due to the conversion to dollars of the projected cash flow in pesos according to the exchange rate estimates used in the cash flow;
(c) an increase of 72 basis points in the discount rate, mainly due to an increase in the country-risk rate component of the WACC discount rate used to discount the cash flow, which led to a decrease in the value of the shopping malls of Ps.2,244.
(d) positive impact of Ps.14,539.7 resulting from the conversion into pesos of the value of the shopping malls in dollars based on the exchange rate at the end of the period;
(e) Additionally, due to the impact of the inflation adjustment, Ps. 12,160.3 were reclassified for shopping malls from “Net gain from fair value adjustment” to “Inflation Adjustment” in the Statement of Income and Other Comprehensive Income.
The value of our office buildings and other rental properties measured in real terms increased by 11.9% during the three-month period ended as of September 30, 2020, due to a devaluation of the peso which exceeded the period's inflation rate.
Three Monts ended September 30, 2019 | ||||||||
Operations Center in Argentina | ||||||||
Shopping Malls | Offices | Sales and developments | Hotels | International | Corporate | Others | Total | |
Revenues | 2,085 | 697 | 83 | 701 | 3 | - | 40 | 3,609 |
Costs | (180) | (37) | (56) | (429) | (4) | - | (34) | (740) |
Gross profit / (loss) | 1,905 | 660 | 27 | 272 | (1) | - | 6 | 2,869 |
Net gain from fair value adjustment of investment properties | 601 | 6,845 | 5,153 | - | - | - | 298 | 12,897 |
General and administrative expenses | (257) | (56) | (66) | (107) | (41) | (88) | (36) | (651) |
Selling expenses | (140) | (29) | (53) | (77) | - | - | (1) | (300) |
Other operating results, net | (27) | (7) | (16) | (4) | (1) | - | (10) | (65) |
Profit / (loss) from operations | 2,082 | 7,413 | 5,045 | 84 | (43) | (88) | 257 | 14,750 |
Share of profit / (loss) of associates and joint ventures | - | - | 1 | - | (228) | - | 551 | 324 |
Segment profit / (loss) | 2,082 | 7,413 | 5,046 | 84 | (271) | (88) | 808 | 15,074 |
Investment properties and trading properties | 54,965 | 40,896 | 35,580 | - | 116 | - | 1,443 | 133,000 |
Investment in associates and joint ventures | - | - | 574 | - | (9,619) | - | 5,817 | (3,228) |
Other operating assetsInvestment | 314 | 74 | 198 | 2,155 | 234 | - | 97 | 3,072 |
Operating assets | 55,279 | 40,970 | 36,352 | 2,155 | (9,269) | - | 7,357 | 132,844 |
Below is a summarized analysis of the segments from the Group’s Operations Center in Israel for the periods ended September 30, 2020 and 2019:
15
Three Month ended September 30, 2020 | |||||||
Operations Center in Israel | |||||||
Real Estate | Supermarkets | Telecommunications | Insurance | Corporate | Others | Total | |
Revenues | - | - | - | - | - | - | - |
Costs | - | - | - | - | - | - | - |
Gross profit | - | - | - | - | - | - | - |
Net gain from fair value adjustment of investment properties | - | - | - | - | - | - | - |
General and administrative expenses | - | - | - | - | (5) | - | (5) |
Selling expenses | - | - | - | - | - | - | - |
Impairment of associates and joint ventures | - | - | - | - | - | - | - |
Other operating results, net | - | - | - | - | - | - | - |
Profit from operations | - | - | - | - | (5) | - | (5) |
Share of profit of associates and joint ventures | - | - | - | - | - | - | - |
Segment profit | - | - | - | - | (5) | - | (5) |
Operating assets | - | - | - | - | 1,399 | - | 1,399 |
Operating liabilities | - | - | - | - | (2,355) | - | (2,355) |
Operating assets (liabilities), net | - | - | - | - | (956) | - | (956) |
Three Monts ended September 30, 2019 | |||||||
Operations Center in Israel | |||||||
Real Estate | Supermarkets | Telecommunications | Insurance | Corporate | Others | Total | |
Revenues | - | - | - | - | - | - | - |
Costs | - | - | - | - | - | - | - |
Gross profit | - | - | - | - | - | - | - |
Net gain from fair value adjustment of investment properties | - | - | - | - | - | - | - |
General and administrative expenses | - | - | - | - | (28) | - | (28) |
Selling expenses | - | - | - | - | - | - | - |
Other operating results, net | - | - | - | - | - | - | - |
Profit from operations | - | - | - | - | (28) | - | (28) |
Share of profit of associates and joint ventures | - | - | - | - | - | - | - |
Segment profit | - | - | - | - | (28) | - | (28) |
Operating assets | 204,587 | 34,536 | 159,317 | 20,065 | 74,195 | 50,003 | 542,703 |
Operating liabilities | (165,817) | - | (127,182) | - | (27,718) | (159,818) | (480,535) |
Operating assets (liabilities), net | 38,770 | 34,536 | 32,135 | 20,065 | 46,477 | (109,815) | 62,168 |
7.
Investments in associates and joint ventures
Changes in the Group’s investments in associates and joint ventures for the three-month period ended September 30, 2020 and for the year ended June 30, 2020 were as follows:
September 30, 2020 | June 30, 2020 | |
Beginning of the period / year | 80,073 | 38,519 |
Adjustment previous periods (IFRS 9 and IAS 28) | - | (2,130) |
Increase of equity interest in associates and joint ventures | - | 3,598 |
Capital contributions | 8 | 2,909 |
Capital reduction | - | (114) |
Decrease of interest in associate (iv) | (30,980) | - |
Deconsolidation (iii) | (34,721) | 31,409 |
Share of profit | 662 | 9,330 |
Currency translation adjustment | (2,417) | 57 |
Dividends (i) | - | (1,959) |
Other comprehensive loss | (333) | (1,340) |
Reclassification to held-for-sale | - | (2,228) |
Others | 409 | (1) |
Incorporation by business combination | - | 2,023 |
End of the period / year (ii) | 12,701 | 80,073 |
16
(i) Note 25.
(ii) As of September 30, 2020 and June 30, 2020 includes Ps. (17) and Ps. (16), reflecting interests in companies with negative equity, which were disclosed in “Provisions” (Note 18).
(iii) The amount as of September 30, 2020 corresponds to the effect of the deconsolidation of IDBD and DIC (See note 4.E).
Regarding the amount as of June 30, 2020, it corresponds to the effect of the deconsolidation of Gav-Yam (See Note 4 to the consolidated Financial Statements as of June 30, 2020)
(iv) Corresponds to the sale of the remaining equity interest in Shufersal in July 2020.
% ownership interest | Value of Group's interest in equity | Group's interest in comprehensive income / (loss) | ||||
Name of the entity | September 30, 2020 | June 30, 2020 | September 30, 2020 | June 30, 2020 | September 30, 2020 | September 30, 2019 |
Associates | ||||||
New Lipstick | 49.96% | 49.96% | 173 | 503 | (330) | (2,141) |
BHSA | 29.91% | 29.91% | 4,327 | 4,385 | (60) | 477 |
Condor | 18.89% | 18.89% | 1,548 | 1,594 | (55) | (17) |
PBEL | N/A | 45.40% | - | - | - | - |
Shufersal | N/A | 26.02% | - | 30,263 | 17 | - |
Mehadrin | N/A | 45.41% | - | - | - | - |
Gav-Yam | N/A | N/A | - | 29,365 | 28 | - |
Quality | 50.00% | 50.00% | 2,892 | 2,262 | 622 | 400 |
La Rural SA | 50.00% | 50.00% | 235 | 219 | 16 | 81 |
TGLT | 30.50% | N/A | 2,166 | 2,217 | (39) | - |
Other joint ventures | N/A | N/A | 1,360 | 9,265 | (1,954) | 19 |
Total associates and joint ventures | 12,701 | 80,073 | (1,755) | (1,181) |
Below is additional information about the Group’s investments in associates and joint ventures:
Latest financial statements issued | ||||||
Name of the entity | Place of business / Country of incorporation | Main activity | Common shares 1 vote | Share capital (nominal value) | Profit / (loss) for the period | Shareholders’ equity |
Associates | ||||||
New Lipstick | U.S. | Real estate | N/A | - | (*) (9) | (*) (31) |
BHSA | Argentina | Financial | 448,689,072 | (***) 1,500 | (***) (194) | (***) 14,001 |
Condor | EE.UU. | Hotel | 2,245,100 | (*) 232 | (*) (10) | (*) 76 |
PBEL | India | Real estate | N/A | (**) (2) | (**) - | (**) (2) |
Shufersal | Israel | Retail | N/A | (**) 1,399 | (**) 80 | (**) 1,930 |
Mehadrin | Israel | Agropecuaria | N/A | N/A | N/A | N/A |
Gav-Yam | Israel | Inmobiliaria | N/A | (**) 1,356 | (**) 68 | (**) 3,526 |
Quality | Argentina | Real estate | 163,039,244 | 406 | 1,243 | 5,717 |
La Rural SA | Argentina | Organization of events | 714,498 | 1 | 224 | 327 |
TGLT (1) | Argentina | Real estate | 279,502,813 | 925 | (477) | 6,295 |
Other joint ventures | N/A | N/A | N/A | N/A |
(*)
Amounts in millions of US Dollars under USGAAP. Condor’s year-end falls on December 31, so the Group estimates their interest with a three-month lag, including material adjustments, if any.
(**)
Amounts in millions of NIS.
(***)
Information as of September 30, 2020 according to BCRA's standards.
(1)
Additionally, 21,600,000 preferred class A shares and 24,948,798 preferred class B shares were subscribed, subject to conversion. As of the date of issuance of these financial statements, these preferred shares have not yet been converted.
Puerto Retiro (joint venture):
There have been no changes to what was informed in Note 8 to the Annual Financial Statements.
17
8.
Investment properties
Changes in the Group’s investment properties for the three-month period ended September 30, 2020 and for the year ended June 30, 2020 were as follows:
Three Month ended September 30, 2020 | Year ended June 30, 2020 | ||||
Rental properties | Undeveloped parcels of land | Properties under development | Total | Total | |
Fair value at the beginning of the period / year | 207,434 | 33,966 | 3,566 | 244,966 | 359,057 |
Adjustments previous periods | - | - | - | - | 459 |
Additions | 146 | - | - | 146 | 5,790 |
Incorporation by business combination | - | - | - | - | 263 |
Capitalized finance costs | - | - | - | - | 87 |
Capitalized leasing costs | 16 | 1 | - | 17 | 21 |
Amortization of capitalized leasing costs (i) | (3) | - | - | (3) | (16) |
Reclassification to assets held for sale | - | - | - | - | (26,085) |
Deconsolidation | (82,116) | (854) | (1,281) | (84,251) | (169,600) |
Disposals | (9,607) | - | - | (9,607) | (16,312) |
Currency translation adjustment | (8,628) | (89) | (142) | (8,859) | 57,570 |
Net (loss)/ gain from fair value adjustment | 13,909 | 9,326 | 834 | 24,069 | 33,732 |
Fair value at the end of the period / year | 121,151 | 42,350 | 2,977 | 166,478 | 244,966 |
(i)
Amortization charges of capitalized leasing costs were included in “Costs” in the Statements of Income (Note 21).
The following amounts have been recognized in the Statements of Income:
09.30.2020 | 09.30.2020 | |
Rental and services income | 1,304 | 3,704 |
Direct operating expenses | (653) | 1,195 |
Development reimbursements / (expenses) | (17) | (23) |
Net realized gain from fair value adjustment of investment properties | 187 | - |
Net unrealized gain from fair value adjustment of investment properties | 23,902 | 12,349 |
Valuation techniques are described in Note 9 to the Annual Financial Statements. There were no changes to such techniques. The Group has reassessed the assumptions September 30, 2020, considering the market conditions existing at that date due to the pandemic described in Note 30, incorporating the effect of the variation in the exchange rate in other assets denominated in US Dollars.
18
9.
Property, plant and equipment
Changes in the Group’s property, plant and equipment for the three-month period ended September 30, 2020 and for the year ended June 30, 2019 were as follows:
Three Month ended September 30, 2020 | Year ended June 30, 2020 | ||||||
Agricultural establishments | Buildings and facilities | Machinery and equipment | Communication networks | Others | Total | Total | |
Costs | 10,226 | 13,003 | 4,826 | 108,657 | 13,880 | 150,592 | 125,505 |
Accumulated depreciation | (5,540) | (7,455) | (4,068) | (85,927) | (6,984) | (109,974) | (91,158) |
Net book amount at the beginning of the period / year | 4,686 | 5,548 | 758 | 22,730 | 6,896 | 40,618 | 34,347 |
Additions | 40 | 64 | 3 | 416 | 533 | 1,056 | 6,107 |
Disposals | - | (19) | (1) | (40) | - | (60) | (3,558) |
Incorporation by business combination | - | - | - | - | - | - | 6,576 |
Impairment / recovery | (4,373) | (3,071) | (570) | (20,300) | (6,082) | (34,396) | (1,141) |
Reclassification to assets assets held for sale | - | (20) | - | - | - | (20) | (295) |
Currency translation adjustment | (333) | (249) | (44) | (1,636) | (487) | (2,749) | 6,266 |
Transfers | - | - | - | - | - | - | (280) |
Depreciation charges (i) | (20) | (169) | (14) | (1,170) | (738) | (2,111) | (7,404) |
Balances at the end of the period / year | - | 2,084 | 132 | - | 122 | 2,338 | 40,618 |
Costs | 5,167 | 9,264 | 4,088 | 80,895 | 8,118 | 107,532 | 150,592 |
Accumulated depreciation | (5,167) | (7,180) | (3,956) | (80,895) | (7,996) | (105,194) | (109,974) |
Net book amount at the end of the period / year | - | 2,084 | 132 | - | 122 | 2,338 | 40,618 |
(i) As of September 30, 2020, depreciation charges of property, plant and equipment were recognized as follows: Ps. 65 in "Costs" and Ps. 4 in "General and administrative expenses", respectively in the Statement of Income (Note 21). On the other hand, Ps 2.042 has been charged to the result of discontinued operations.
10.
Trading properties
Changes in the Group’s trading properties for the three-month period ended September 30, 2020 and for the year ended June 30, 2020 were as follows:
Three Month ended September 30, 2020 | Year ended June 30, 2020 | ||||
Completed properties | Properties under development | Undeveloped sites | Total | Total | |
Beginning of the period / year | 2,180 | 892 | 4,649 | 7,721 | 8,999 |
Adjustment previous periods | - | - | - | - | - |
Additions | - | 112 | 278 | 390 | 2,486 |
Desconsolidation | (1,526) | (102) | (3,884) | (5,512) | (167) |
Capitalized financial costs | - | - | - | - | 13 |
Currency translation adjustment | (140) | (14) | (268) | (422) | 943 |
Transfers | 139 | (139) | - | - | 231 |
Capitalized finance costs | - | - | - | - | - |
Disposals | (557) | (74) | - | (631) | (4,784) |
End of the period / year | 96 | 675 | 775 | 1,546 | 7,721 |
Non-current | 1,328 | 5,228 | |||
Current | 218 | 2,493 | |||
Total | 1,546 | 7,721 |
19
11.
Intangible assets
Changes in the Group’s intangible assets for the three-month period ended September 30, 2020 and for the year ended June 30, 2020 were as follows:
Three Month ended September 30, 2020 | Year ended June 30, 2020 | |||||||
Goodwill | Trademarks | Licenses | Customer relations | Information systems and software | Contracts and others | Total | Total | |
Costs | 6,075 | 9,066 | 12,153 | 25,548 | 8,520 | 14,386 | 75,748 | 62,905 |
Accumulated amortization | - | (854) | (9,548) | (22,883) | (3,974) | (8,578) | (45,837) | (35,342) |
Net book amount at the beginning of the period / year | 6,075 | 8,212 | 2,605 | 2,665 | 4,546 | 5,808 | 29,911 | 27,563 |
Additions | - | - | - | 20 | 284 | 634 | 938 | 4,853 |
Disposals | - | - | - | - | (79) | - | (79) | (235) |
Impairment | (5,859) | (7,607) | (2,360) | (2,251) | (3,514) | (4,603) | (26,194) | (3,532) |
Transfers to trading properties | - | - | - | - | - | - | - | - |
Assets incorporated by business combination | - | - | - | - | - | - | - | 61 |
Currency translation adjustment | (91) | (585) | (186) | (196) | (329) | (388) | (1,775) | 6,217 |
Amortization charges (i) | - | (20) | (59) | (238) | (742) | (556) | (1,615) | (5,016) |
Balances at the end of the period / year | 125 | - | - | - | 166 | 895 | 1,186 | 29,911 |
Costs | 125 | 814 | 8,929 | 22,395 | 4,338 | 9,478 | 46,079 | 75,748 |
Accumulated amortization | - | (814) | (8,929) | (22,395) | (4,172) | (8,583) | (44,893) | (45,837) |
Net book amount at the end of the period / year | 125 | - | - | - | 166 | 895 | 1,186 | 29,911 |
(ii) As of September 30, 2020, amortization charges were recognized in the amount of Ps. 2 in "Costs" and Ps. 27 in "General and administrative expenses", in the Statement of Income (Note 21). On the other hand, Ps 1.586 has been charged to the result of discontinued operations.
12.
Right-of-use assets
The Group’s right-of-use assets as of September 30, 2020 and June 30, 2020 are the following:
September 30, 2020 | June 30, 2020 | |
Real Estate | 8 | 4,431 |
Telecommunications | - | 11,846 |
Machinery and equipment | 11 | 14 |
Others | 602 | 5,088 |
Total Right-of-use assets | 621 | 21,379 |
Non-current | 621 | 21,379 |
Total | 621 | 21,379 |
The depreciation charge of the right-of use-assets is detailed below:
September 30, 2020 | September 30, 2019 | |
Real Estate | 397 | 579 |
Telecommunications | 2,293 | 3,397 |
Others | 646 | 1,096 |
Total depreciation of right-of-use assets | 3,336 | 5,072 |
20
13.
Financial instruments by category
This note presents the financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line in the Consolidated Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information related to fair value hierarchy refer to Note 13 to the Annual Financial Statements. Financial assets and financial liabilities as of September 30, 2020 are the following:
Financial assets at amortized cost | Financial assets at fair value through profit or loss | Subtotal financial assets | Non-financial assets | Total | |||
Level 1 | Level 2 | Level 3 | |||||
September 30, 2020 | |||||||
Assets as per Statement of Financial Position | |||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) | 4,152 | - | - | - | 4,152 | 3,396 | 7,548 |
Investments in financial assets: | |||||||
- Public companies’ securities | - | 302 | - | 177 | 479 | - | 479 |
- Bonds | - | 2,109 | - | - | 2,109 | - | 2,109 |
- Investments in financial assets with quotation | 10 | 329 | 931 | 26 | 1,296 | - | 1,296 |
Derivative financial instruments: | |||||||
- Warrants | - | - | - | - | - | - | - |
- Foreign-currency future contracts | - | - | 16 | - | 16 | - | 16 |
Restricted assets (i) | 8 | - | - | - | 8 | - | 8 |
Cash and cash equivalents: | |||||||
- Cash at bank and on hand | 4,330 | - | - | - | 4,330 | - | 4,330 |
- Short-term investments | - | 67 | - | - | 67 | - | 67 |
Total assets | 8,500 | 2,807 | 947 | 203 | 12,457 | 3,396 | 15,853 |
Financial liabilities at amortized cost | Financial liabilities at fair value through profit or loss | Subtotal financial liabilities | Non-financial liabilities | Total | |||
Level 1 | Level 2 | Level 3 | |||||
September 30, 2020 | |||||||
Liabilities as per Statement of Financial Position | |||||||
Trade and other payables | 3,983 | - | - | - | 3,983 | 2,769 | 6,752 |
Borrowings (excluding finance leases) | 56,438 | - | - | - | 56,438 | - | 56,438 |
Derivative financial instruments: | |||||||
- Forwards | - | - | 89 | - | 89 | - | 89 |
Total liabilities | 60,421 | - | 89 | - | 60,510 | 2,769 | 63,279 |
21
Financial assets and financial liabilities as of June 30, 2020 were as follows:
Financial assets at amortized cost | Financial assets at fair value through profit or loss | Subtotal financial assets | Non-financial assets | Total | |||
Level 1 | Level 2 | Level 3 | |||||
June 30, 2020 | |||||||
Assets as per Statements of Financial Position | |||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) | 53,134 | - | - | - | 53,134 | 15,771 | 68,905 |
Investments in financial assets: | - | - | - | - | - | - | - |
- Public companies’ securities | - | 618 | 248 | - | 866 | - | 866 |
- Private companies’ securities | - | - | - | 3,132 | 3,132 | - | 3,132 |
- Deposits | 1,028 | 66 | - | - | 1,094 | - | 1,094 |
- Bonds | - | 9,940 | 1,555 | - | 11,495 | - | 11,495 |
- Investments in financial assets with quotation | - | 6,995 | 872 | 250 | 8,117 | - | 8,117 |
Derivative financial instruments | - | - | - | - | - | - | - |
- Foreign-currency future contracts | - | - | 139 | - | 139 | - | 139 |
- Others | 66 | - | 22 | 153 | 241 | - | 241 |
Restricted assets (i) | 8,698 | - | - | - | 8,698 | - | 8,698 |
Financial assets available for sale: | - | - | - | - | - | - | - |
- Clal | - | 3,636 | - | - | 3,636 | - | 3,636 |
Cash and cash equivalents: | - | - | - | - | - | - | - |
- Cash at bank and on hand | 26,562 | - | - | - | 26,562 | - | 26,562 |
- Short term investments | 67,420 | 3,294 | - | - | 70,714 | - | 70,714 |
Total assets | 156,908 | 24,549 | 2,836 | 3,535 | 187,828 | 15,771 | 203,599 |
Financial liabilities at amortized cost | Financial liabilities at fair value through profit or loss | Subtotal financial liabilities | Non-financial liabilities | Total | |||
Level 1 | Level 2 | Level 3 | |||||
June 30, 2020 | |||||||
Liabilities as per Statement of Financial Position | |||||||
Trade and other payables | 26,898 | - | - | - | 26,898 | 7,380 | 34,278 |
Borrowings (excluding finance leases) | 404,954 | - | - | - | 404,954 | - | 404,954 |
Derivative financial instruments: | - | ||||||
- Foreign-currency future contracts | - | - | 149 | - | 149 | - | 149 |
- Swaps | - | - | 1,028 | 22 | 1,050 | - | 1,050 |
- Others | - | - | 66 | - | 66 | - | 66 |
Total liabilities | 431,852 | - | 1,243 | 22 | 433,117 | 7,380 | 440,497 |
(i) Corresponds to security deposits and escrows.
22
The fair value of financial assets and liabilities at their amortized cost does not differ significantly from their book value, except for borrowings (Note 17). The fair value of payables approximates their respective carrying amounts because, due to their short-term nature, the effect of discounting is not considered significant. Fair values are based on discounted cash flows (Level 3).
The valuation models used by the Group for the measurement of Level 2 and Level 3 instruments are no different from those used as of June 30, 2020.
As of September 30, 2020, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group.
The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments. Details of such models are presented in the following table. When no quoted prices are available in an active market, fair values (particularly with derivatives) are based on recognized valuation methods.
Description | Pricing model / method | Parameters | Fair value hierarchy | Range |
Promissory note | Theoretical price | Acquisition agreement. | Level 2 | - |
Investments in financial assets - Other private companies’ securities | Cash flow / NAV - Theoretical price | Projected revenue discounted at the discount rate / The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investments assessments. | Level 3 | 1 - 3.5 |
Investments in financial assets - Others | Discounted cash flow - Theoretical price | Projected revenue discounted at the discount rate / The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investment assessments. | Level 3 | 1 - 3.5 |
Derivative financial instruments – Forwards | Theoretical price | Underlying asset price and volatility | Level 2 and 3 | - |
The following table presents the changes in Level 3 instruments as of September 30, 2020 and June 30, 2020:
Derivative financial instruments - Forwards | Investments in financial assets - Private companies' securities | nvestments in financial assets - Others | Investments in financial assets - Public companies | Derivative financial instruments | Total as of September 30, 2020 | Total as of June 30, 2020 | |
Balances at beginning of the period / year | (22) | 3,132 | 250 | - | 153 | 3,513 | 4,460 |
Additions and acquisitions | - | - | - | - | - | - | 38 |
Transfer to level 1 | - | - | - | 247 | - | 247 | 378 |
Currency translation adjustment | - | - | - | - | - | - | 883 |
Desconsolidation | 22 | (3,132) | (219) | - | (153) | (3,482) | - |
Write off | - | - | - | - | - | - | (1,709) |
Gain / (loss) for the period / year (i) | - | - | (5) | (70) | - | (75) | (537) |
Balances at the end of the period / year | - | - | 26 | 177 | - | 203 | 3,513 |
(i)
Included within “Financial results, net” in the Statements of Income.
14.
Trade and other receivables
Group’s trade and other receivables as of September 30, 2020 and June 30, 2020 are as follows:
23
September 30, 2020 | June 30, 2020 | |
Sale, leases and services receivables | 3,095 | 41,397 |
Less: Allowance for doubtful accounts | (669) | (4,021) |
Total trade receivables | 2,426 | 37,376 |
Prepaid expenses | 530 | 14,529 |
Borrowings, deposits and others | 1,470 | 10,797 |
Advances to suppliers | 886 | 1,086 |
Tax receivables | 763 | 866 |
Others | 804 | 230 |
Total other receivables | 4,453 | 27,508 |
Total trade and other receivables | 6,879 | 64,884 |
Non-current | 1,881 | 24,898 |
Current | 4,998 | 39,986 |
Total | 6,879 | 64,884 |
Movements on the Group’s allowance for doubtful accounts were as follows:
September 30, 2020 | June 30, 2020 | |
Beginning of the period / year | 4,021 | 2,856 |
Adjustments previous periods (IFRS 9) | - | - |
Additions | 355 | 1,107 |
Recovery | (72) | (117) |
Currency translation adjustment | (238) | 1,145 |
Deconsolidation | (3,328) | (22) |
Receivables written off during the period/year as uncollectable | (20) | (772) |
Transfer to assets held for sale | - | (22) |
Incorporation by business combination | - | 19 |
Inflation adjustment | (49) | (173) |
End of the period / year | 669 | 4,021 |
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statement of Income (Note 21).
15.
Cash flow information
Following is a detailed description of cash flows generated by the Group’s operations for the three month periods ended September 30, 2020 and 2019:
Note | Three Month ended September 30, 2020 | Three Month ended September 30, 2019 | |
Profit for the period | 8,340 | 15,017 | |
Profit / (Loss) for the period from discontinued operations | 6,396 | (13,887) | |
Adjustments for: | |||
Income tax | 19 | 7,958 | 2,505 |
Amortization and depreciation | 21 | 122 | 119 |
Loss from disposal of property, plant and equipment | - | - | |
Net gain from fair value adjustment of investment properties | (24,089) | (12,349) | |
Financial results, net | (87) | 12,670 | |
Provisions and allowances | 70 | 69 | |
Share of profit of associates and joint ventures | 7 | (147) | (737) |
Changes in operating assets and liabilities: | |||
Decrease in inventories | 5 | 1 | |
Decrease / (increase) in trading properties | 256 | (52) | |
Decrease in restricted assets | 1,157 | - | |
(Increase) / decrease in trade and other receivables | (643) | 392 | |
Increase / (decrease) in trade and other payables | 1,885 | (476) | |
Decrease in salaries and social security liabilities | (73) | (160) | |
Decrease in provisions | (12) | (186) | |
Net cash generated by continuing operating activities before income tax paid | 1,138 | 2,926 | |
Net cash generated by discontinued operating activities before income tax paid | 2,405 | 7,897 | |
Net cash generated by operating activities before income tax paid | 3,543 | 10,823 |
24
The following table presents a detail of significant non-cash transactions occurred in the three-month periods ended September 30, 2020 and 2019:
Three Month ended September 30, 2020 | Three Month ended September 30, 2019 | |
Decrease of associates and joint ventures through an increase of trade and other receivables | - | 26 |
Increase in rights of use through increased lease liabilities | 24 | - |
Increase of investment properties through a decrease of financial assets | - | 299 |
Increase of trade and other receivables through a decrease of associates and joint ventures | 11 | - |
Increase of property, plant and equipment through an increase of trade and other payables | - | 618 |
Increase of intangible assets through an increase of trade and other payables | - | 36 |
Increase of investment properties through an increase of borrowings | 81 | - |
Increase of trading properties through an increase of borrowings | 12 | 5 |
Distribution of dividends to non-controlling interest pending payment | - | 18 |
Decrease of interest in associates and joint ventures | 30.980 | - |
Increase in investment properties through an increase in trade and other payables | - | 499 |
Increase of right-of-use assets through a decrease in property, plant and equipment | - | 23 |
Decrease of investments in associates and joint ventures through a reclassification to assets held for sale | - | 4.434 |
16.
Trade and other payables
Group’s trade and other payables as of September 30, 2020 and June 30, 2020 were as follows:
September 30, 2020 | June 30, 2020 | |
Trade payables | 800 | 20,151 |
Advances from sales, leases and services | 2,640 | 2,850 |
Construction obligations | - | 438 |
Accrued invoices | 396 | 473 |
Deferred income | - | 153 |
Total trade payables | 3,836 | 24,065 |
Dividends payable to non-controlling interest | - | 241 |
Taxes payable | 215 | 171 |
Construction provisions | - | - |
Other payables | 2,701 | 9,801 |
Total other payables | 2,916 | 10,213 |
Total trade and other payables | 6,752 | 34,278 |
Non-current | 1,745 | 2,335 |
Current | 5,007 | 31,943 |
Total | 6,752 | 34,278 |
17.
Borrowings
The breakdown of the Group’s borrowings as of September 30, 2020 and June 30, 2020 was as follows:
Total as of September 30, 2020 (ii) | Total as of June 30, 2020 (ii) | Fair value as of September 30, 2020 | Fair value as of June 30, 2020 | |
NCN | 44,538 | 340,026 | 185,441 | 252,018 |
Bank loans | 3,629 | 60,580 | 39,103 | 45,329 |
Bank overdrafts | 7,110 | 2,614 | 7,110 | 2,428 |
Other borrowings (i) | 1,161 | 1,734 | 1,161 | 1,611 |
Total borrowings | 56,438 | 404,954 | 232,815 | 301,386 |
Non-current | 31,967 | 320,616 | ||
Current | 24,471 | 84,338 | ||
56,438 | 404,954 | |||
25
Issuance of IRSA Non-convertible Notes
On July 21, 2020, subsequently to the closing of the fiscal year, the Company issued USD 38.4 million Non-convertible Notes in the local market through the following instruments:
●
Ps. 335.2 (equivalent to USD 4.7 million) Series VI NCNs denominated and payable in Argentine pesos at a variable rate (Private Badlar) + 4.0%, with interest accruing on a quarterly basis. The principal amount is repayable in two installments: the first one -equal to 30% of the par value of the notes- payable on the date that is 9 (nine) months after the Issue and Settlement Date and the second installment -equal to 70% of the par value of the notes- payable on the relevant due date, i.e. July 21, 2021. Notes were issued at 100% of their par value.
●
US$ 33.7 million Series VII NCNs denominated in US$ and payable in Argentine pesos at the applicable exchange rate, at a fixed 4.0% rate, with interest accruing on a quarterly basis. Repayment of capital is due on January 21, 2021. Notes were issued at 100% of their par value. The proceeds will be used to refinance short-term indebtedness.
Payment of non-convertible notes
On July 20, 2020, the Company paid the twentieth interest installment and the principal installment of the US$ 75 Series II Non-convertible Notes issued on July 20, 2010.
On August 6, 2020, the Company paid the second interest installment and the principal installment of the US$ 47 Series II Non-convertible Notes issued on August 6, 2019.
Payment of IRSA CP’s Series IV Non-convertible Notes
On September 14, 2020, the aggregate principal amount of the Series IV Non-convertible Notes in the amount of Ps. 10,381 (US$ 140 million) and interest accrued as of such date in the amount of Ps. 134 (US$ 1.8 million) were paid.
18.
Provisions
The table below shows the movements in the Group's provisions categorized by type:
Legal claims (i) | Investments in associates and joint ventures (ii) | Site dismantling and remediation | Other provisions | Total | Total | |
Beginning of period / year | 2,686 | 16 | 482 | 2,740 | 5,924 | 14,980 |
Additions | 7 | - | 20 | (79) | (52) | 513 |
Share of loss of associates | - | 1 | (1) | (1) | (1) | (8,032) |
Incorporated by business combination | - | - | - | - | - | 60 |
Recovery | (1) | - | - | - | (1) | (1,132) |
Used during the period / year | (44) | - | - | (20) | (64) | (896) |
Inflation adjustment | (17) | - | - | - | (17) | (73) |
Desconsolidation | (2,217) | - | (468) | (2,400) | (5,085) | - |
Currency translation adjustment | (178) | - | (33) | (240) | (451) | 504 |
End of period / year | 236 | 17 | - | - | 253 | 5,924 |
Non-current | 145 | 3,297 | ||||
Current | 108 | 2,627 | ||||
Total | 253 | 5,924 |
26
(i) Additions and recovery are included in "Other operating results, net".
(ii) Corresponds to investments in New Lipstick and Puerto Retiro, companies that have negative equity. The increase and recovery is included in "Share of profit of associates and joint ventures ".
.
There were no significant changes to the processes mentioned in Note 18 to the Annual Financial Statements.
19.
Taxes
The details of the Group’s income tax, is as follows:
September 30, 2020 | September 30, 2019 | |
Current income tax | (5) | (194) |
Deferred income tax | (7,953) | (2,311) |
Income tax from continuing operations | (7,958) | (2,505) |
Below is a reconciliation between income tax recognized and the amount which would result from applying the prevailing tax rate on profit before income tax for the three-month periods ended September 30, 2020 and 2019:
Three Month ended September 30, 2020 | Three months ended September 30, 2019 | |
Profit from continuing operations at tax rate applicable in the respective countries (*) | (6,808) | (1,458) |
Permanent differences: | ||
Share of profit of associates and joint ventures | (44) | 190 |
Unrecognized tax loss carryforwards (i) | (2,415) | (808) |
Inflation adjustment permanent difference | 446 | (1,013) |
Tax rate differential | 1,636 | 662 |
Non-taxable profit, non-deductible expenses and others | 222 | 1,113 |
Fiscal transparency | - | 149 |
Tax inflation adjustment | (995) | (1,340) |
Income tax from continuing operations | (7,958) | (2,505) |
(i)
Corresponds principally to Operations Center in Argentina.
The gross movement in the deferred income tax account is as follows:
September 30, 2020 | June 30, 2020 | |
Beginning of period / year | (46,727) | (56,001) |
Use of tax los carryforwards | - | - |
Currency translation adjustment | 1,240 | 1,694 |
Incorporated by business combination | - | (933) |
Deconsolidation | 11,248 | 15,370 |
Charged to the revaluation surplus reserve | - | 386 |
Revaluation surplus reserve | - | (98) |
Deferred income tax charge | (7,734) | (7,145) |
End of period / year | (41,973) | (46,727) |
Deferred income tax assets | 148 | 681 |
Deferred income tax liabilities | (42,121) | (47,408) |
Deferred income tax liabilities, net | (41,973) | (46,727) |
27
20.
Revenues
Three months ended September 30, 2020 | Three months ended September 30, 2019 | |
Rental and services income | 1,304 | 3,704 |
Sales of trading properties and developments | 299 | 80 |
Revenue from hotels operation and tourism services | 6 | 703 |
Total Group’s revenues | 1,609 | 4,487 |
21.
Expenses by nature
The Group discloses expenses in the statements of income by function as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”. The following table provides additional disclosures regarding expenses by nature and their relationship to the function within the Group.
Costs | General and administrative expenses | Selling expenses | Total as of September 30, 2020 | Total as of September 30, 2019 | |
Cost of sale of goods and services | 294 | - | - | 294 | 72 |
Salaries, social security costs and other personnel expenses | 368 | 165 | 23 | 556 | 932 |
Depreciation and amortization | 72 | 50 | - | 122 | 119 |
Fees and payments for services | 11 | 59 | 134 | 204 | 150 |
Maintenance, security, cleaning, repairs and others | 242 | 46 | - | 288 | 583 |
Advertising and other selling expenses | 22 | - | 2 | 24 | 170 |
Taxes, rates and contributions | 59 | 16 | 238 | 313 | 323 |
Interconnection and roaming expenses | - | - | - | - | - |
Fees to other operators | - | - | - | - | - |
Director´s fees | - | 285 | - | 285 | 128 |
Leases and service charges | 25 | 9 | 6 | 40 | 53 |
Allowance for doubtful accounts, net | - | - | 45 | 45 | 39 |
Other expenses | 4 | 14 | 2 | 20 | 69 |
Total as of September 30, 2020 | 1,097 | 644 | 450 | 2,191 | |
Total as of September 30, 2019 | 1,682 | 661 | 295 | 2,638 | |
22.
Cost of goods sold and services provided
Total as of September 30, 2020 | Total as of September 30, 2019 | |
Inventories at the beginning of the period (*) | 12,762 | 22,274 |
Adjustments previous periods | - | (8,126) |
Purchases and expenses (**) | 7,700 | 41,852 |
Capitalized finance costs | - | 99 |
Currency translation adjustment | 8,262 | (369) |
Transfers | - | (810) |
Disposals | (631) | (1,231) |
Deconsolidation | (3,377) | - |
Inventories at the end of the period (*) | (1,611) | (11,065) |
Total costs | 23,105 | 42,624 |
The following table presents the composition of the Group’s inventories as of September 30, 2020 and June 30, 2020:
Total as of September 30, 2020 | Total as of September 30, 2019 | |
Real estate | 1,546 | 7,721 |
Others | 65 | - |
Telecommunications | - | 5,041 |
Total inventories at the end of the period (*) | 1,611 | 12,762 |
(*) Inventories include trading properties and inventories.
23.
Other operating results, net
28
Three months ended September 30, 2020 | Three months ended September 30, 2019 | |
Gain from disposal of subsidiary and associates (1) | - | (8) |
Donations | (19) | (38) |
Lawsuits and other contingencies | (25) | (30) |
Operating interest expense | 13 | 26 |
Others (2) | 13 | (6) |
Total other operating results, net | (18) | (56) |
24.
Financial results, net
Three months ended September 30, 2020 | Three months ended September 30, 2019 | |
Finance income: | ||
- Interest income | 17 | 83 |
- Dividend income | 12 | - |
- Other finance income | 27 | - |
Total finance income | 56 | 83 |
Finance costs: | ||
- Interest expenses | (1,485) | (1,661) |
- Loss on debt swap | (5) | (3) |
- Other finance costs | (196) | (164) |
Subtotal finance costs | (1,686) | (1,828) |
Capitalized finance costs | 93 | 46 |
Total finance costs | (1,593) | (1,782) |
Other financial results: | ||
- Fair value gain of financial assets and liabilities at fair value through profit or loss, net | 800 | (456) |
- Exchange differences, net | (8) | (8,929) |
- Gain from repurchase of negotiable obligations | 20 | 8 |
- Gain from derivative financial instruments, net | (188) | 225 |
Total other financial results | 624 | (9,152) |
- Inflation adjustment | (29) | (393) |
Total financial results, net | (942) | (11,244) |
29
25.
Related party transactions
The following is a summary of the balances with related parties as of September 30, 2020 and June 30, 2019:
Item | September 30, 2020 | June 30, 2020 | ||
Trade and other receivables | 387 | 1,416 | ||
Investments in financial assets | 2 | 1,702 | ||
Borrowings | (29) | (169) | ||
Trade and other payables | (70) | (410) | ||
Total | 290 | 2,539 | ||
Related party | September 30, 2020 | June 30, 2020 | Description of transaction | Item |
Manibil S.A. | - | - | Contributions in advance | Trade and other receivable |
New Lipstick LLC | - | - | Loans granted | Trade and other receivable |
- | (83) | Loans obtained | Borrowings | |
18 | 17 | Reimbursement of expenses receivable | Trade and other receivable | |
Condor | 222 | 290 | Public companies securities | Trade and other receivable |
IRSA Real Estate Strategies LP | 127 | 125 | Reimbursement of expenses receivable | Trade and other receivable |
Other associates and joint ventures | - | 131 | Reimbursement of expenses receivable | Trade and other receivable |
- | - | Leases and/or rights of use payable | Trade and other payables | |
(29) | (29) | Loans obtained | Borrowings | |
- | 9 | Management fees | Trade and other receivable | |
- | 90 | Leases and/or rights of use receivable | Trade and other receivable | |
- | 219 | Dividends | Trade and other receivable | |
(1) | (1) | Reimbursement of expenses receivable | Trade and other payables | |
- | - | Reimbursement of expenses payable | Trade and other receivable | |
Total associates and joint ventures | 337 | 1,276 | ||
Cresud | (4) | (3) | Reimbursement of expenses receivable | Trade and other payables |
(48) | (264) | Corporate services receivable | Trade and other payables | |
2 | 1,702 | NCN | Investment in financial assets | |
4 | 4 | Leases and/or rights of use receivable | Trade and other payables | |
(1) | (1) | Management fee | Trade and other payables | |
- | (3) | Share based payments | Trade and other payables | |
Total parent company | (47) | 1,435 | ||
Directors | (16) | (137) | Fees for services received | Trade and other payables |
- | 4 | Advances | Trade and other receivable | |
Others (1) | - | - | Leases and/or rights of use receivable | Trade and other receivable |
- | (57) | Loans granted | Trade and other receivable | |
- | (1) | Reimbursement of expenses payable | Trade and other payables | |
16 | 19 | Reimbursement of expenses receivable | Trade and other receivable | |
Total directors and others | - | (172) | ||
290 | 2,539 | |||
(1)
Includes CAMSA, Estudio Zang, Bergel & Viñes, Austral Gold, Fundación IRSA, Hamonet S.A., CAM Communication LP, Gary Gladstein and Fundación Museo de los Niños.
30
The following is a summary of the results with related parties for the three-month periods ended September 30, 2020 and 2019:
Related party | Three Month ended September 30, 2020 | Three months ended September 30, 2019 | Description of transaction |
BACS | 28 | - | Leases and/or rights of use |
Manibil | - | - | Corporate services |
Tarshop | - | - | Leases and/or rights of use |
- | - | Commissions | |
La Rural S.A. | - | - | Leases and/or rights of use |
Condor | - | - | Financial operations |
Other associates anf joint ventures | - | - | Financial operations |
Otras asociadas y negocios conjuntos | 9 | 41 | Leases and/or rights of use |
Otras asociadas y negocios conjuntos | - | (3) | Corporate services |
Otras asociadas y negocios conjuntos | (9) | - | Honorarios y remuneraciones |
Total associates and joint ventures | 28 | 38 | |
Cresud | 4 | 4 | Leases and/or rights of use |
Cresud | (204) | (155) | Corporate services |
Cresud | 299 | 96 | Financial operations |
Total parent company | 99 | (55) | |
Directors | (515) | (145) | Fees and remunerations |
Otras (1) | - | 41 | Leases and/or rights of use |
Otras (1) | - | - | Financial operations |
Otras (1) | - | (14) | Donationd |
- | (11) | Corporate services | |
(20) | - | Fees and remuneration | |
Total others | (535) | (129) | |
Total at the end of the period | (408) | (146) | |
(1)
Includes Isaac Elsztain e Hijos, CAMSA. Hamonet S.A., Ramat Hanassi, Estudio Zang, Bergel y Viñes, Austral Gold, La Rural, New Lipstick, Condor, TGLT and Fundación IRSA.
The following is a summary of the transactions with related parties for the three-month periods ended September 30, 2020 and 2019:
Related party | Three Month ended September 30, 2020 | Three months ended September 30, 2019 | Description of the operation |
Condor | - | 36 | Dividends received |
Total dividends received | - | 36 | |
Quality | 8 | 16 | Capital contributions |
Manibil | - | 94 | Capital contributions |
Total capital contributions | 8 | 110 | |
Pareto | 53 | - | Purchase and exchange of shares |
Total other transactions | 53 | - | |
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26.
CNV General Resolution N° 622
As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622, below there is a detail of the notes to the Unaudited Condensed Interim Consolidated Financial Statements that disclose the information required by the Resolution in Exhibits.
Exhibit A - Property, plant and equipment | Note 8 Investment properties and Note 9 Property, plant and equipment |
Exhibit B - Intangible assets | Note 11 Intangible assets |
Exhibit C - Investment in associates | Note 7 Investments in associates and joint ventures |
Exhibit D - Other investments | Note 13 Financial instruments by category |
Exhibit E – Provisions | Note 18 Provisions |
Exhibit F - Cost of sales and services provided | Note 22 Cost of goods sold and services provided |
Exhibit G - Foreign currency assets and liabilities | Note 27 Foreign currency assets and liabilities |
27.
Foreign currency assets and liabilities
Book amounts of foreign currency assets and liabilities are as follows:
Item / Currency (1) | Amount (2) | Peso exchange rate (3) | Total as of 09.30.20 | Total as of 06.30.20 |
Assets | ||||
Trade and other receivables | ||||
US Dollar | 11 | 75.980 | 870 | 3,246 |
Euros | 0 | 88.965 | 11 | 948 |
Receivables with related parties: | ||||
US Dollar | 0 | 76.180 | 18 | 335 |
Total trade and other receivables | 899 | 4,529 | ||
Investments in financial assets | ||||
US Dollar | 0 | 75.980 | 10 | 3,879 |
Pounds | 3 | 22.223 | 69 | 84 |
Investments with related parties: | ||||
US Dollar | 16 | 76.180 | 1,212 | 1,305 |
Total investments in financial assets | 1,291 | 5,268 | ||
Derivative financial instruments | ||||
US Dollar | - | 75.980 | - | - |
Total Derivative financial instruments | - | - | ||
Cash and cash equivalents | ||||
US Dollar | 22 | 75.980 | 1,689 | 14,015 |
Euros | 1 | 88.965 | 1 | 1,665 |
Total cash and cash equivalents | 1,690 | 15,680 | ||
Total Assets | 3,880 | 25,477 | ||
Liabilities | ||||
Trade and other payables | ||||
US Dollar | 181 | 76.180 | 13,822 | 14,201 |
Euros | 0 | 98.490 | - | 328 |
Payables to related parties: | ||||
US Dollar | - | 76.180 | - | - |
Total Trade and other payables | 13,822 | 14,529 | ||
Borrowings | ||||
US Dollar | 241 | 76.180 | 18,385 | 65,590 |
Borrowings with related parties | ||||
US Dollar | 1 | 76.180 | 67 | 379 |
Total Borrowings | 18,452 | 65,969 | ||
Derivative financial instruments | ||||
US Dollar | 0 | 76.180 | 1 | 102 |
Total derivative financial instruments | 1 | 102 | ||
Lease liabilities | ||||
US Dollar | 0 | 76.180 | 2 | - |
Total lease liabilities | 2 | - | ||
Total Liabilities | 32,277 | 80,600 |
(1) Considering foreign currencies those that differ from each Group’s subsidiaries functional currency at each period/year-end.
(2) Stated in millions of each foreign currency.
(3) Exchange rates as of September 30, 2020 according to Banco de la Nación Argentina.
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28.
Groups of assets and liabilities held for sale
As mentioned in Note 4.C. to the Annual Financial Statements, the Group had as of June 30, 2020
has certain assets and liabilities classified as held for sale. The following table presents the main ones:
September 30, 2020 | June 30, 2020 | |
Property, plant and equipment | - | 38,453 |
Intangible assets | - | 1,467 |
Investments in associates | - | 241 |
Deferred income tax assets | - | 876 |
Investment properties | - | - |
Income tax credits | - | - |
Trade and other receivables | - | 1,991 |
Cash and cash equivalents | - | 1,840 |
Total assets held-for-sale | - | 44,868 |
Trade and other payables | - | 10,686 |
Salaries and social security liabilities | - | 417 |
Employee benefits | - | 416 |
Deferred income tax liabilities | - | 2,103 |
Borrowings | - | 10,290 |
Total liabilities held-for-sale | - | 23,912 |
Total net assets held-for-sale | - | 20,956 |
29.
Results from discontinued operations
The results of the discontinued operations include the IDBD / DIC operations which were deconsolidated in the current period (see Note 4.E) and the results of the comparative periods have been reclassified.
Three months ended September 30, 2020 | Three months ended September 30, 2019 | |
Revenues | 27,124 | 27,100 |
Costs | (22,008) | (18,143) |
Gross profit | 5,116 | 8,957 |
Net loss from fair value adjustment of investment properties | (20) | - |
General and administrative expenses | (3,122) | (2,569) |
Selling expenses | (2,974) | (3,185) |
Other operating results, net | (1,867) | 19,881 |
(Loss) / profit from operations | (2,867) | 23,084 |
Share of profit / (loss) of associates and joint ventures | 515 | (528) |
(Loss) / profit before financial results and income tax | (2,352) | 22,556 |
Finance income | 377 | 317 |
Finance cost | (4,946) | (7,321) |
Other financial results | 327 | (1,624) |
Financial results, net | (4,242) | (8,628) |
(Loss) / profit before income tax | (6,594) | 13,928 |
Income tax | 198 | (41) |
(Loss) / profit from discontinued operations | (6,396) | 13,887 |
(Loss) / profit for the period from discontinued operations attributable to: | ||
Equity holders of the parent | (5,064) | 4,271 |
Non-controlling interest | (1,332) | 9,616 |
(Loss) / profit per share from discontinued operations attributable to equity holders of the parent: | ||
Basic | (8.81) | 7.42 |
Diluted | (8.81) | 7.36 |
(1)
As of September 30, 2020 corresponds mainly to the loss of control of IDBD; As of September 30, 2019, it mainly corresponds to the result from the loss of control of Gav-Yam and the fair value measurement of the remaining investment.
33
IRSA Inversiones y Representaciones Sociedad Anónima
30.
Other relevant events of the period
Economic context in which the company operates
The Company does business in a complex framework due to the macroeconomic conditions, whose main variables have recently shown high volatility, and also due to regulatory, social and political conditions, both at a national and international level.
Its operating income may be affected by fluctuations in the inflation index and the argentine peso exchange rate against other currencies, mainly the dollar, variations in interest rates which have an impact on the cost of capital, changes in government policies, capital control and other political or economic developments both locally and internationally.
In December 2019, a new coronavirus strain (SARS-COV-2), causing a severe acute respiratory syndrome (COVID-19), appeared in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In response, countries have taken extraordinary actions intended to prevent the spread of the virus, including, travel bans, border shutdowns, closing of non-essential businesses, instructions to residents to practice social distancing and implementation of lockdowns, among others. The ongoing pandemic and these extraordinary governmental actions are affecting the worldwide economy and have rendered global financial markets highly volatile.
The first case of COVID-19 in Argentina was reported on March 3, 2020 and until November 8, 2020, more than 1,200,000 cases of infections had been confirmed in Argentina. As a result, the Argentine the National Government implemented a series of health measures of social, preventive and mandatory isolation at the national level that began on March 19, 2020 and extended several times, most recently until November 8, 2020 inclusive in the Metropolitan Area of Buenos Aires although it has been extended in some cities in the interior of the country. Among this measures, that affected the local economy, the following stand out: the extension of the public emergency in health matters, the total closure of borders, the suspension of international and domestic flights, the suspension of medium and long-distance land transport, the suspension of artistic and sports shows, closure of businesses not considered essential, including shopping malls and hotels.
These measures have significantly affected Argentine companies, which have faced drops in income and the deterioration of their flow of payments. In this context, the Argentine Government announced several actions intended to tackle the financial crisis of the companies adversely affected by the COVID-19 pandemic. In addition to the stagnation of the Argentine economy, there is an international crisis caused by the COVID-19 pandemic. In view of this scenario, a severe downturn in the Argentine economy is expected.
After several negotiations between the Argentine Government and the bondholders, the Argentine Government announced the execution of an agreement in principle with the main groups of bondholders in order to avoid the default. On August 28, 2020, the Government informed that the holders of 93.55% of the aggregate outstanding principal amount of all bonds have accepted a debt exchange and, on August 31, 2020, the Argentine Government obtained the consents required to exchange and/or amend 99.01% of the aggregate outstanding principal amount of all series of eligible bonds. As of the date of these financial statements, the new bonds are already being traded on the market.
However, the Government still faces the challenge of arriving at a successful renegotiation of the debt with the IMF. A favorable outcome for Argentina and the restructuring of its debt with the IMF would have a positive impact on the Argentine economy in the mid- and long-term. On the contrary, failure to reach an agreement with foreign private creditors might lead Argentina to default on its sovereign debt and, as a result, this situation may trigger restrictions on the companies’ ability to obtain new financing.
At the local environment, the following circumstances may be noted:
●
In August 2020, an indicador called “Monthly Estimator of Economic Activity” (“EMAE”) reported by the National Institute of Statistics and Censuses (“INDEC”), registered a variation of (11.6%) compared to the same month of 2019, and from 1,1% compared to the previous month.
●
The market expectations survey prepared by Central Bank in October 2020, called the Market Expectations Survey (“REM” in Spanish), estimates a retail inflation of 35.8% for 2020. The analysts who confirm the REM forecast a variation in real GDP for 2020 of (11.6)%. In turn, they foresee that in 2021 economic activity will rebound in activity, reaching an economic growth of 4.5%.
34
●
The interannual inflation as of September 30, 2020 reached 36.6%.
●
In the period from September 2019 to September 2020, the argentine peso depreciated 32.3% compared to the US dollar at the average wholesale exchange rate quoted byBanco de la Nación Argentina. Given the exchange restrictions in force since August 2019, as of September 30, 2020 the exchange gap between the official peso/US dollar exchange rate and the peso/US dollar exchange rate offered in the black market is almost 82%. This has an impact on the level of economic activity and detrimentally affects the reserves of the of the Argentine Central Bank. In addition, the current foreign exchange restrictions or those that may be imposed in the future may impair the Company’s ability to access the Sole Free FX Market (Mercado Único Libre de Cambio or MULC) to purchase the currency required to meet its financial obligations.
On September 15, 2020, the Argentine Central Bank issued Communication “A” 7106 which establishes, among other things, that entities with principal maturities falling due between October 15, 2020 and March 31, 2021 related to the issuance of foreign-currency denominated publicly-registered debt securities in Argentina by private sector clients or by the entities themselves, must submit to the Argentine Central Bank a refinancing plan based on the following criteria: (a) the net amount for which access to the foreign exchange is granted within the original terms must not exceed 40% of the principal amount due, and (b) the remaining principal amount must have been refinanced through new foreign debt with an average life of at least 2 years. It is worth mentioning that for the maturities to be registered from the effective date of the communication (September 16, 2020) and until 12.31.2020, the refinancing plan must be submitted prior to 09.30.2020; and the submission deadline for the remaining maturities -between January 1, 2021 and March 31, 2021, must be submitted with a term of at least 30 calendar days before the maturity of the capital to be refinanced.
COVID-19 PANDEMIC
As described above, the COVID-19 is having an adverse impact on both the global and the Argentine economy and the Company’s business.
Below follows a description of the expected effects of the COVID-19 pandemic on the Company as of the date of these financial statements:
●
Because of the social, preventive and obligatory lockdown, shopping malls throughout the country were closed since March 20, 2020, exclusively remaining operational those stores dedicated to activities considered essential such as pharmacies, supermarkets and banks. The reopening of shopping malls in the interior of the country began during the months of May, June, and July. In August 2020, the Arcos District, an open-air premium outlet in the city of Buenos Aires, was opened and in October 2020, the Group’s shopping malls in City and Greater Buenos Aires were reopened. As of October 31, 2020, all the Group’s shopping malls were open and operating under strict protocols. However the uncertainty posed by this situation may cause the closing of stores that have already opened, as happened in some shopping malls in the interior of the country in previous months due to the increase in cases in those regions.
●
As a result of the shopping mall closings, the Company has decided to differ the invoicing and collection of the Monthly Guaranteed Amount (Valor Mensual Asegurado or V.M.A.) until September 30, 2020, with some exceptions, and not to collect the collective promotion fund during such period in an attempt to prioritize its long-term relationship with the lessees. Additionally, an increase in the delinquency rate of some lessees has been noticedAs a result of the above, the impact on shopping malls is a 82.4% decrease in income from rentals and services during the first quarter of fiscal year 2021 compared to the same period of last fiscal year, and a 12.6% increase compared to the immediately preceding quarter. Additionally, the charge for bad debts in the first quarter of fiscal year 2021 is ARS 40 million and ARS 37 million in the same period of previous fiscal year.
●
In relation rental of offices, although most of the tenants are working in the home office mode, they are operational with strict safety and hygiene protocols. To date, we have not evidenced a deterioration in collections.
35
●
La Rural, the Buenos Aires and Punta del Este Convention Centers and the DIRECTV Arena stadium, establishments that the Group owns directly or indirectly, have also been closed since March 20. All planned congresses were suspended, most of the fairs and conventions have been postponed, while the shows scheduled at the DIRECTV Arena stadium were mostly cancelled. The reopening date of these establishments is uncertain, as well as the future agenda of fairs, conventions and shows.
●
The Libertador hotel in the City of Buenos Aires and Llao Llao in the province of Río Negro have temporarily closed since the mandatory lockdown decreed in March 2020, while the Intercontinental Hotel in the City of Buenos Aires has worked only under a contingency and emergency plan. As a result of the above, the impact on these financial statements is a 99% decrease in revenues compared to same period of previous fiscal year After the end of first quarter of fiscal year 2021, on November 16, the Llao Llao Hotel opened its doors operating under strict protocols. It is expected that the hotels in the city of Buenos Aires will gradually begin to restart their activity in the coming months.
In financial matters, in May and July 2020, IRSA has issued Notes in the local market for an approximate amount of USD 105.4 million. With those proceeds, the Company canceled its Series II Notes for a nominal value of USD 71.4 million maturing on July 20, 2020 and Series II Notes for a nominal value of CLP 31,502.6 million (equivalent to approximately USD 41 million) maturing on August 6, 2020. On the other hand, IRSA CP canceled its Series IV Notes on September 14 for a nominal value of USD 140 million.
The maturity of IRSA Series I notes for a nominal value of USD 181.5 million falls within the period contemplated by communication “A” 7106 of the BCRA mentioned above. In this sense, IRSA presented a proposal to the BCRA in the corresponding terms and carried out an exchange operation through the payment in cash of USD 72.6 million and the issuance of two new series of Notes: Series VIII and Series IX for a nominal value of USD 31.7 million and USD 80.7 million (including USD 6.5 million of new subscriptions). The exchange offer was accepted by 98.3%
In the next 12 months, IRSA faces the maturity of its Series III Notes for a nominal value of ARS 354 million (equivalent to USD 4.6 million) maturing on February 21, 2021, Series IV Notes for a nominal value of USD 51.4 million maturing on May 21, 2021, Series VI Notes for a nominal value of ARS 335 million (equivalent to USD 4.4 million) maturing on July 21, 2021, bank overdrafts for an amount equivalent to USD 22.0 million and other banking debt for USD 11.8 million. For its part, IRSA CP has maturities of banking debt for the approximate sum of USD 72.7 million.
It is important to mention that IRSA has approved with IRSA CP a credit line for up to USD 180 million over 3 years, of which as of September 30, 2020 IRSA used approximately USD 104.5 million, leaving the balance available. Additionally, at the Annual Shareholders Meeting, held on October 26, 2020, IRSA CP approved the distribution of a cash dividend of ARS 9,700 million that will be paid on November 25. As of September 30, IRSA owned an 80.65% stake in IRSA CP.
The final extent of the Coronavirus outbreak and its impact on the country's economy is unknown and difficult to fully predict. However, although it has produced significant short-term effects, they are not expected to affect business continuity and the Company’s ability to meet financial commitments for the next twelve months.
The Company is closely monitoring the situation and taking all necessary measures to preserve human life and the Group's businesses.
36
31.
Subsequent events
Investors Assembly
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 26, 2020, a distribution of a dividend in kind for ARS 484 million in shares of IRSA Propiedades Comerciales, subsidiary of IRSA.
Exchange of debentures
On November 12, 2020, the company carried out an exchange operation of its Series I Notes, for a nominal value of USD 181.5 million
Nominal Value of Existing Notes presented and accepted for the Exchange (for both Series): approximately USD 178.5 which represents 98.31% acceptance, through the participation of 6,571 orders.
●
Series VIII: Face Value of Existing Notes presented and accepted for the Exchange: approximately USD 104.3 million.
Nominal Value to be Issued: approximately USD 31.7 million.
Issuance Price: 100% nominal value.
Maturity Date: It will be November 12, 2023.
Consideration of the Exchange Offer: eligible holders whose existing notes have been accepted for the Exchange by the Company, will receive for every USD 1 submitted to the Exchange, the accrued interest of the existing notes until the settlement and issue date and the following:
■
A sum of money of approximately USD 72,6 million for repayment of capital of such existing notes presented to the Exchange, in cash, in United States Dollars, which will be equivalent to USD 0.69622593 for each USD 1 of existing notes presented to the Exchange; and
■
The remaining amount until completing 1 USD for each 1 USD of existing notes presented to the Exchange, in notes Series VIII.
Annual Nominal Fixed Interest Rate: 10.00%.
Amortization: The capital of the Series VIII Notes will be amortized in 3 annual installments (33% of the capital on November 12, 2021, 33% of the capital on November 12, 2022, 34% of the capital on the maturity date of Series VIII).
Interest Payment Dates: Interest will be paid quarterly for the expired period as of the issue and settlement date.
Payment Address: Payment will be made to an account at Argentine Securities Commission in the Autonomous City of Buenos Aires
●
Series IX: Face Value of Existing Notes presented and accepted for the Exchange: approximately USD 74.2 million.
Nominal Value to be Issued (together with the Face Value to be issued as a result of the cash subscription): approximately USD 80.7 million.
Issuance Price: 100% nominal value.
Maturity Date: It will be March 1, 2023.
Consideration of the Exchange Offer: the eligible holders whose existing notes have been accepted for the Exchange by the Company, will receive Series IX Notes for 100% of the capital amount presented for exchange and accepted by the Company and the accrued interest of the existing notes until the settlement and issue date.
Early Bird: will consist of the payment of USD 0.02 for each USD 1 of existing notes delivered and accepted in the Exchange on or before the deadline date to Access the Early Bird. Said consideration will be paid in Pesos on the issue and settlement date according to the exchange rate published by Communication “A” 3500 of the Central Bank of Argentina on the business day prior to the expiration date of the Exchange, which is ARS 79.3433 for each USD 1 of Existing Notes delivered and accepted in the Exchange.
Annual Nominal Fixed Interest Rate: 10.00%.
Amortization: The capital of the Series IX Notes will be amortized in one installment on the maturity date.
Interest Payment Dates: Interest will be paid quarterly for the expired period from the issuance and settlement date.
Payment Address: Payment will be made to an account at Argentine Securities Commission in New York, United States, for which purpose the Company will make US dollars available to an account reported by the Argentine Securities Commission in said jurisdiction.
●
Modifications to the Terms of the Existing Notes: Considering that consent has been obtained for an amount greater than 90% of the existing notes capital, the Company has modified and replaced the following essential and non-essential terms and conditions of the existing notes.
By virtue of the implementation of the Proposed Non-Essential Modifications, the entire section of "Certain Commitments" and "Events of Default" is eliminated from the terms and conditions set forth in the prospectus supplements dated May 2, 2019 and dated July 25, 2019 corresponding to the existing notes.
37
Additionally, pursuant to the implementation of the Proposed Essential Modifications, the following terms and conditions of the Existing Notes are modified and replaced:
■
Expiration Date: It will be March 1, 2023.
■
Interest Payment Dates: will be the same dates reported for Class IX in the Notice of Results.
It is clarified that the terms and conditions of the Series I Notes not modified by the Proposed Essential Modifications and the Proposed Non-Essential Modifications will maintain their full validity.
Boston Tower Office Floors Sale
On November 5, 2020, IRSA Commercial Properties sold and transferred 4 additional floors for a gross rental area of approximately 3,892 sqm and 15 garage units located in the building. The transaction price was approximately Ps. 1,812 (USD 22.9 million).
Finally, on November 12, 2020, the Company sold and transferred the last 3 floors with a rental area of 3,266 m2, a retail store of 228 m2 and 15 parking spaces for a total price of approximately Ps. 1,521 (USD 19.1 million)
Loan to related party
On October 23, 2020, Dolphin Netherlands has granted a loan to Yad Leviim Ltd. for a term of 60 days, in a principal amount of USD 16,250,000 at a rate interest of 5% per year. Yad Leviim Ltd. is a company controlling by Eduardo Elsztain.
38
REVIEW REPORT ON THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
To the Shareholders, President and Directors of
IRSA Inversiones y Representaciones Sociedad Anónima
Legal address: Bolívar 108 – 1st floor
Autonomous City of Buenos Aires
Tax Registration Number: 30-52532274-9
Introduction
We have reviewed the accompanying unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima and its subsidiaries (“the Company”), which comprise the unaudited condensed interim consolidated statement of financial position at September 30, 2020, the unaudited condensed interim consolidated statements of income and other comprehensive income, of changes in shareholders’ equity and of cash flows for the three-month period then ended, and selected explanatory notes.
The balances and other information for the fiscal year ended on June 30, 2020 and its interim periods are an integral part of the financial statements mentioned above; therefore, they must be considered in connection with these financial statements.
Management’s responsibility
The Board of Directors of the Company is responsible for the preparation and presentation of these unaudited condensed interim consolidated financial statements in accordance with International Financial Reporting Standards, adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and included by the National Securities Commission (CNV) in its regulations, as approved by the International Accounting Standards Board (IASB), and is therefore responsible for the preparation and presentation of the unaudited condensed interim consolidated financial statements mentioned in the first paragraph, in accordance with International Accounting Standard 34 Interim Financial Information (IAS 34).
Scope of our review
Our review was limited to the application of the procedures established under International Standards on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, adopted as a review standard in Argentina by Technical Pronouncement No. 33 of the FACPCE and approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of inquiries of Company staff responsible for preparing the information included in the unaudited condensed interim consolidated financial statements and of analytical and other review procedures. This review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated statements of financial position and the consolidated statements of income and other comprehensive income and of cash flows of the Company.
39
Conclusion
On the basis of our review, nothing has come to our attention that causes us to believe that the unaudited condensed interim consolidated financial statements mentioned in the first paragraph of this report have not been prepared, in all material respects, in accordance with International Accounting Standard 34 Interim financial reporting.
Emphasis of matter paragraph – Loss of control of subsidiaries in Israel
Without modifying our conclusion, we draw attention to the information included in Note 1 to the accompanying unaudited condensed interim consolidated financial statements regarding the loss of control of IDBD and DIC, subsidiaries of the Operations Center in Israel.
Report on compliance with current regulations
In accordance with current regulations, we report, in connection with IRSA Inversiones y Representaciones Sociedad Anónima, that:
a) the unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are in the process of being transcribed into the Inventory and Balance Sheet book and, except for the above mentioned situation, as regards those matters that are within our competence, they are in compliance with the provisions of the General Companies Law and pertinent resolutions of the National Securities Commission;
b) the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima arise from accounting records carried in all formal aspects in accordance with legal requirements;
c) we have read the Business Summary (“Reseña Informativa”), on which we have no observations to make regarding matters that are within our competence;
d) at September 30, 2020 the debt of IRSA Inversiones y Representaciones Sociedad Anónima accrued in favor of the Argentine Integrated Social Security System, as shown by the Company’s accounting records, amounted to ARS 1,058,161.42, which is not due at that date.
Autonomous City of Buenos Aires, November 17, 2020
PRICE WATERHOUSE & CO. S.R.L. (Partner) | ABELOVICH, POLANO & ASOCIADOS S.R.L. (Partner) | |
C.P.C.E.C.A.B.A. V° 1 F° 17 | C.P.C.E.C.A.B.A. V° 1 F° 30 | |
Walter Zablocky Public Accountant (UNLP) C.P.C.E.C.A.B.A. V. 340 F. 156 | José Daniel Abelovich Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 102 F. 191 |
40
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Financial Statements as of September 30, 2020 and for the three-month periods ended as of that date, presented comparatively
41
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Financial Position
as of September 30, 2020 and June 30, 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 09.30.20 | 06.30.20 | |
ASSETS | |||
Non-current assets | |||
Investment properties | 7 | 33,047 | 25,770 |
Property, plant and equipment | 8 | 34 | 19 |
Trading properties | 9 | 503 | 503 |
Intangible assets | 10 | 77 | 77 |
Investments in subsidiaries, associates and joint ventures | 6 | 80,756 | 71,549 |
Trade and other receivables | 12 | 957 | 607 |
Total non-current assets | 115,374 | 98,525 | |
Current assets | |||
Trading properties | 9 | 583 | 1,030 |
Inventories | 1 | 1 | |
Trade and other receivables | 12 | 1,206 | 1,804 |
Income tax and MPIT credit | 3 | 4 | |
Derivative financial instruments | 11 | 11 | 1 |
Investments in financial assets | 11 | 8 | 290 |
Cash and cash equivalents | 11 | 14 | 2,372 |
Total current assets | 1,826 | 5,502 | |
TOTAL ASSETS | 117,200 | 104,027 | |
SHAREHOLDERS’ EQUITY | |||
Shareholders' equity (according to corresponding statements) | 70,934 | 60,286 | |
TOTAL SHAREHOLDERS’ EQUITY | 70,934 | 60,286 | |
LIABILITIES | |||
Non-current liabilities | |||
Trade and other payables | 13 | 19 | 82 |
Borrowings | 14 | 10,607 | 4,219 |
Deferred income tax liabilities | 15 | 11,755 | 7,998 |
Provisions | 16 | 981 | 264 |
Total non-current liabilities | 23,362 | 12,563 | |
Current liabilities | |||
Trade and other payables | 13 | 1,203 | 1,285 |
Salaries and social security liabilities | 6 | 10 | |
Borrowings | 14 | 21,659 | 29,844 |
Derivative financial instruments | 11 | - | 2 |
Provisions | 16 | 35 | 36 |
Lease liabilities | 1 | 1 | |
Total current liabilities | 22,904 | 31,178 | |
TOTAL LIABILITIES | 46,266 | 43,741 | |
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES | 117,200 | 104,027 |
The accompanying notes are an integral part of these Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
. |
42
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Income and Other Comprehensive Income
for the three-month periods ended September 30, 2020 and 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 09.30.20 | 09.30.19 | |
Revenues | 17 | 726 | 483 |
Costs | 18 | (572) | (253) |
Gross profit | 154 | 230 | |
Net gain from fair value adjustment of investment properties | 7 | 7,277 | 3,286 |
General and administrative expenses | 18 | (107) | (127) |
Selling expenses | 18 | (12) | (56) |
Other operating results, net | 19 | (4) | (19) |
Profit from operations | 7,308 | 3,314 | |
Share of profit of subsidiaries, associates and joint ventures | 6 | 6,215 | 7,329 |
Profit before financial results and income tax | 13,523 | 10,643 | |
Finance income | 20 | 10 | 21 |
Finance costs | 20 | (876) | (930) |
Other financial results | 20 | (174) | (3,519) |
Inflation adjustment | 20 | (338) | (510) |
Financial results, net | (1,378) | (4,938) | |
Profit before income tax | 12,145 | 5,705 | |
Income tax | 15 | (3,757) | (1,590) |
Profit for the period | 8,388 | 4,115 | |
Other comprehensive income: | |||
Items that may be reclassified subsequently to profit or loss: | |||
Share of other comprehensive loss of subsidiaries, associates and joint ventures | (225) | (80) | |
Currency translation adjustment of subsidiaries, associates and joint ventures | (3,476) | (865) | |
Total other comprehensive loss for the period (i) | 6' | (3,701) | (945) |
Total comprehensive profit for the period | 4,687 | 3,170 | |
Profit per share for the period: | |||
Basic | 14.59 | 7.16 | |
Diluted | 14.51 | 7.11 |
The accompanying notes are an integral part of these Financial Statements.
(i) Components of other comprehensive income have no impact on income tax.
By: | /s/ Eduardo S. Elsztain | ||
President |
.. |
2
43
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Share capital | Treasury shares | Inflation adjustment of Share Capital and Treasury Shares (1) | Share premium | Additional Paid-in capital from Treasury Shares | Legal reserve | CNV 609/12 Resolution reserve | Other reserves (2) | Retained earnings | Total Shareholders’ equity | |
Balance as of June 30, 2020 | 575 | 4 | 14,613 | 15,653 | 102 | 522 | 10,124 | 7,533 | 11,160 | 60,286 |
Profit for the period | - | - | - | - | - | - | - | - | 8,388 | 8,388 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | (3,701) | - | (3,701) |
Reserve for share-based payments | - | - | - | - | 2 | - | - | (2) | - | - |
Changes in non-controlling interest | - | - | - | - | - | - | - | 35 | - | 35 |
Other changes in subsidiaries` equity | - | - | - | - | - | - | - | 5,926 | - | 5,926 |
Balance as of September 30, 2020 | 575 | 4 | 14,613 | 15,653 | 104 | 522 | 10,124 | 9,791 | 19,548 | 70,934 |
(1) Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2020.
(2) The composition of Other reserves of the Company as of September 30, 2020 is as follows:
Cost of Treasury shares | Changes in non-controlling interest | Reserve for share-based payments | Reserve for future dividends | Currency translation adjustment reserve | Special reserve | Other reserves of subsidiaries | Total Other reserves | |
Balance as of June 30, 2020 | (185) | (4,487) | 212 | 1,822 | (784) | 11,190 | (235) | 7,533 |
Other comprehensive loss for the period | - | - | - | - | (3,476) | - | (225) | (3,701) |
Reserve for share-based payments | 1 | - | (3) | - | - | - | - | (2) |
Changes in non-controlling interest | - | 35 | - | - | - | - | - | 35 |
Other changes in the equity | - | (52) | - | - | 5,034 | - | 944 | 5,926 |
Balance as of September 30, 2020 | (184) | (4,504) | 209 | 1,822 | 774 | 11,190 | 484 | 9,791 |
The accompanying notes are an integral part of these Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
. |
44
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the three-month period ended September 30, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Share capital | Treasury shares | Inflation adjustment of Share Capital and Treasury Shares (1) | Share premium | Additional Paid-in capital from Treasury Shares | Legal reserve | CNV 609/12 Resolution reserve | Other reserves (2) | Retained earnings | Total Shareholders’ equity | |
Balance as of June 30, 2019 (recast) | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,124 | 73,943 | (65,081) | 50,438 |
Adjustments of previous periods (IFRS 16 and 28) | - | - | - | - | - | - | - | - | (1,248) | (1,248) |
Balance as of June 30, 2019 (recast) | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,124 | 73,943 | (66,329) | 49,190 |
Profit for the period | - | - | - | - | - | - | - | - | 4,115 | 4,115 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | (945) | - | (945) |
Changes in non-controlling interest | - | - | - | - | - | - | - | (185) | - | (185) |
Other changes in subsidiaries` equity | - | - | - | - | - | - | - | - | 23 | 23 |
Balance as of September 30, 2019 | 575 | 4 | 14,613 | 15,653 | 85 | 522 | 10,124 | 72,813 | (62,191) | 52,198 |
(1) Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2019.
(2) The composition of Other reserves of the Company as of September 30, 2019 is as follows:
The accompanying notes are an integral part of these Financial Statements.
Cost of Treasury shares | Changes in non-controlling interest | Reserve for share-based payments | Reserve for future dividends | Currency translation adjustment reserve | Special reserve | Other reserves of subsidiaries | Total Other reserves | |
Balance as of June 30, 2019 | (177) | (4,998) | 223 | 1,821 | 283 | 76,906 | (115) | 73,943 |
Other comprehensive loss for the period | - | - | - | - | (865) | - | (80) | (945) |
Reserve for share-based payments | 3 | - | (3) | - | - | - | - | - |
Changes in non-controlling interest | - | (185) | - | - | - | - | - | (185) |
Balance as of September 30, 2019 | (174) | (5,183) | 220 | 1,821 | (582) | 76,906 | (195) | 72,813 |
By: | /s/ Eduardo S. Elsztain | ||
President |
.. |
45
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Cash Flows
for the three-month period ended September 30, 2020 and 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Nota | 09.30.20 | 09.30.19 | |
Operating activities | |||
Profit for the period | 8,388 | 4,115 | |
Adjustments: | |||
Income tax | 15 | 3,757 | 1,590 |
Amortization and depreciation | 18 | 2 | 3 |
Gain from disposal of trading properties | (159) | (235) | |
Financial results, net | 4,579 | 6,538 | |
Increase in trading properties | 9 | (15) | (365) |
Net gain from fair value adjustment of investment properties | 7 | (7,277) | (3,286) |
Share of profit of subsidiaries, associates and joint ventures | 6 | (6,215) | (7,329) |
Gain from disposal of subsidiaries | (4) | (137) | |
Provisions and allowances | 4 | 1 | |
Decrease/ (Increase) in trade and other receivables | 205 | (5) | |
Increase in trade and other payables | 612 | 428 | |
(Decrease) in payroll and social security liabilities | (3) | - | |
Net cash flow generated from operating activities | 3,874 | 1,318 | |
Investing activities | |||
Capital contributions to subsidiaries, associates and joint ventures | 6 | (10) | (1,780) |
Issuance of capital | - | (94) | |
Acquisition of property, plant and equipment | 8 | (16) | (3) |
Acquisition of intangible assets | 10 | (1) | - |
Increase of investments in financial assets | (619) | (6,802) | |
Proceeds from sale of investments in financial assets | 892 | 7,266 | |
Increase in loans granted to subsidiaries, associates and joint ventures | - | (15) | |
Proceeds from borrowings granted to subsidiaries, associates and joint ventures | 3 | - | |
Interest collection of fixed term | - | 8 | |
Net cash flow generated from/ (used in) investing activities | 249 | (1,420) | |
Financing activities | |||
Short-term loans obtained, net | 687 | 708 | |
Payment of loans | (223) | (239) | |
Interests paid | (1,026) | (831) | |
Loans obtained from subsidiaries, associates and joint ventures | (1) | 2,178 | |
Payment of loans from subsidiaries, associates and joint ventures | (20) | (194) | |
Payment of NCN | (8,302) | (10,031) | |
Issuance of NCN | 2,424 | 8,495 | |
Payments from derivative financial instruments | (20) | - | |
Net cash flow used in financing activities | (6,481) | 86 | |
Decrease in cash and cash equivalents, net | (2,358) | (16) | |
Cash and cash equivalents at the beginning of the period | 11 | 2,372 | 55 |
Foreign exchange gain of cash and changes in fair value of cash equivalents | - | (1) | |
Cash and cash equivalents at the end of the period | 11 | 14 | 38 |
Additional information | |||
Currency translation adjustment | (3,476) | (865) | |
Other comprehensive loss of subsidiaries | (225) | (80) | |
Changes in non-controlling interest | 35 | (185) | |
Other changes in subsidiaries` equity | 5,926 | 23 | |
Increase in borrowings of subsidiaries, associates and joint ventures through a decrease in trade and other receivables | - | 7 | |
Increase in borrowings through an increase in trading properties | 93 | 45 | |
Issuance of NCN | 365 | 23 |
The accompanying notes are an integral part of these Financial Statements.
By: | /s/ Eduardo S. Elsztain | ||
President |
46
IRSA Inversiones y Representaciones Sociedad Anónima
Notes to the Unaudited Condensed Interim Separate Financial Statements
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
1.
General information and company’s business
IRSA Inversiones y Representaciones Sociedad Anónima (“IRSA” or “The Company”) was founded in 1943, it is primarily engaged in managing real estate holdings in Argentina since 1991.
IRSA is a corporation incorporated and domiciled in Argentina. The registered office is Bolívar 108, 1st. Floor, Buenos Aires, Argentina.
The Company owns, manages and develops, directly and indirectly through its subsidiaries, a portfolio of office and other rental properties in Buenos Aires. In addition, IRSA through its subsidiaries, associates and joint ventures manages and develops shopping malls and branded hotels across Argentina, and also office properties in the United States and in numerous markets and industry sectors in Israel, such as real estate, supermarkets, insurance, telecommunications, etc.
These Unaudited Condensed Interim Separate Financial Statements have been approved for issue by the Board of Directors on November 17, 2020.
2.
Basis of preparation of the Unaudited Condensed Interim Separate Financial Statements
2.1.
Basis of preparation
The National Securities Commission (CNV), in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of the Technical Resolution No. 26 (RT 26) of the FACPCE and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its share capital or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime.
For the preparation of these Unaudited Condensed Interim Separate Financial Statements, the Company has made use of the option provided by IAS 34, and has prepared them in a condensed form. Therefore, these financial statements do not include all the information required in a complete set of annual financial statements and, consequently, it is recommended that they be read together with the annual financial statements as of June 30, 2020.
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated for non-monetary items. This requirement also includes the comparative information of the financial statements.
In order to conclude on whether an economy is categorized as a high inflation one, in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates to or exceeds 100%. Accumulated inflation in Argentina in three years has been over 100%. For this reason, in accordance with IAS 29, the Argentine economy must be considered as a high inflation economy starting July 1, 2018.
Regarding the inflation index to be used and in accordance with FACPCE Resolution No. 539/18, it will be determined based on the Wholesale Price Index (IPIM) until 2016, considering the average variation of Consumer Price indices (CPI) of the Autonomous City of Buenos Aires for the months of November and December 2015, because during those two months there were no national IPIM measurements. Then, from January 2017, the National Consumer Price Index (National CPI) will be considered. The table below shows the evolution of this index during the period ended September 30, 2020, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18.
Quarterly price variation | 09.30.2020 |
8% |
47
IRSA Inversiones y Representaciones Sociedad Anónima
As a consequence of the aforementioned, these Unaudited Financial Statements as of September 30, 2020 were restated in accordance with IAS 29.
2.2. Significant accounting policies
The accounting policies adopted in the preparation of these Unaudited Condensed Interim Separate Financial Statements are consistent with those applied in the Annual Financial Statements as of June 30, 2020. The main accounting policies are described in Note 2 of those Annual Financial Statements.
2.3.
Comparability of information
The amounts as of June 30, 2020 and September 30, 2019, which are disclosed for comparative purposes, arise from the financial statements at said dates restated in accordance with IAS 29.
2.4.
Use of estimates
The preparation of Financial Statements at a certain date requires Management to make estimates and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these Unaudited Condensed Interim Separate Financial Statements. In the preparation of these Unaudited Condensed Interim Separate Financial Statements, the main significant judgments made by Management in applying the Company’s accounting policies and the major sources of uncertainty were the same that the Company used in the preparation of the Separate Financial Statements for the fiscal year ended June 30, 2020, described in Note 3 to those financial statements, except as indicated in Note 25.
3.
Seasonal effects on operations
See Note 3 to the Unaudited Condensed Interim Consolidated Financial Statements.
4.
Acquisitions and disposals
Significant acquisitions and disposals of the Company and/or its subsidiaries for the three-month period ended September 30, 2020 are detailed in Note 4 to the Unaudited Condensed Interim Consolidated Financial Statements.
5.
Financial risk management and fair value estimates
These Unaudited Condensed Interim Financial Statements do not include all the information and disclosures of the risk management, so they should be read together with the Annual Separate Financial Statements as of June 30, 2020. There has been no changes in the risk management or risk management policies applied by the Company since the end of the annual fiscal year. See notes to the Unaudited Condensed Interim Consolidated Financial Statements. Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Company’s financial instruments.
6.
Information about the main subsidiaries, associates and joint ventures
The Company conducts its business through several operating and holding subsidiaries, associates and joint ventures. Its main subsidiaries include IRSA CP and Tyrus. The main associates include BHSA and New Lipstick. Its main joint ventures include Cyrsa S.A. and Puerto Retiro S.A.
The Company indirectly participates through Tyrus in IDB Development Ltd. (“IDBD”) and Discount Investment Company Ltd (“DIC”). These companies have certain financial restrictions and agreements in relation to their financial debt, including their debentures and loans with banks and financial institutions. These commitments and other restrictions resulting from the indebtedness of IDBD and DIC (such as the pledges granted by IDBD over part of its shareholding in DIC) do not have recursive effects against IRSA, nor has IRSA guaranteed them with its assets, so the economic risk of IRSA is limited to the value of said investments.
IDBD's financial condition as of June 30, 2020 had a deficit in shareholders’ equity, ongoing negative cash flows from continuing operating activities activities and a low credit rating. IDBD´s cash flow required to meet its liabilities, including short-term liabilities is based on the financial support of its controlling shareholder (Dolphin Netherlands BV) and on the realization of assets which the realization date is not under IDBD´s control. As a result of the above, IDBD has been into negotiations with its creditors in order to restructure its financial debt on more favorable terms. As a result, the Company recognized an impairment loss of Ps. 2,160 in its separate financial statements as of June 30, 2020, equivalent to the net value of its investment in IDBD and DIC as of that date.
48
As of June 30, 2020, the aggregate principal amount of the (i) IDBD Series 9 Bonds was NIS 901 million (“Series 9”), (ii) IDBD Series 14 Bonds was NIS 889 million collateralized by DIC shares owned directly or indirectly by IDBD representing 70% of the share capital of DIC (“Series 14”), (iii) IDBD Series 15 Bonds was NIS 238 million collateralized by shares of Clal representing 5% of the share capital of Clal (“Series 15”).
As no agreement has been reached, on September 17, 2020, the Series 9 trustee submitted to the District Court in Tel-Aviv-Jaffa (the "Court") a petition to grant an order for the opening of proceedings for IDBD pursuant to the Insolvency and Economic Rehabilitation Law, 5778 – 2018 and to instruct the appointment of a trustee for IDBD pursuant to Section 43 and to grant the trustee any and all authority over the decision making of IDBD.
On September 21, 2020, the Series 14 bond holders approved the immediate fully payment of the remaining balances of such serie.
On September 22, 2020, IDBD and Dolphin Netherlands B.V. submitted an initial response to the Petition, arguing that it is in the best interest of IDBD and its creditors to exhaust the negotiations among the controlling shareholder and its creditors during a short period with the aim to maximize the value of its assets, avoid costs and additional negative effects.
In addition, responses by the Series 14 trustee and the Series 15 trustee were filed requesting the enforcement of liens and the appointment of a receiver as well as an urgent hearing, which was scheduled for September 24, 2020.
On September 25, 2020, the Court resolved that IDBD is insolvent and therefore it resolved to grant all three orders requested and accordingly, issued an order for the initiation of proceedings and liquidation of IDBD, and has appointed a liquidator to IDBD and interim receivers over the Pledged DIC and Clal Shares.
Under IFRS 10 “Consolidated Financial Statements” (“IFRS 10”), an investor controls an investee if and only if the investor has all the following: a) power over the investee; b) exposure, or rights, to variable returns from its involvement with the investee; and c) the ability to use its power over the investee to affect the amount of the investor’s returns. Based on the facts and circumstances outlined above, our management believe that, as from September 25, 2020, IRSA lost control over IDBD and DIC and consequently it derecognized the reserves disclosed in other comprehensive income associated with said investments, recognizing a loss of Ps. 2,904 in the three-month period ended September 30, 2020.
To date, we are analyzing together with our local and international advisors the judicial decision, of September 25, 2020 and its alternatives.
Detailed below is the evolution of investments in subsidiaries, associates and joint ventures of the Company, for the three-month period ended September 30, 2020 and for the year ended June 30, 2020:
09.30.20 | 06.30.20 | |
Beginning of period / year | 71,333 | 61,172 |
Adjustments of previous periods (IFRS 16 and IAS 28) | - | (1,406) |
Share of profit | 6,215 | 11,614 |
Other comprehensive loss | (3,701) | (1,060) |
Capital contributions (Note 21) | 10 | 2,363 |
Changes in non-controlling interest | 35 | 508 |
Dividends | - | (634) |
Sale of interest | - | (1,123) |
Other changes in subsidiaries’ equity | 5,926 | (101) |
End of the period / year | 79,818 | 71,333 |
(i)
Includes Ps. (938) and Ps. (216) reflecting interests in companies with negative equity as of September 30, 2020 and June 30, 2020, respectively, which are disclosed in “Provisions” (see Note 16).
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IRSA Inversiones y Representaciones Sociedad Anónima
Name of the entity | % ownership interest | Company´s interest in equity | Company’s interest in comprehensive income | |||
09.30.20 | 06.30.20 | 09.30.20 | 06.30.20 | 30.09.2020 | 30.09.2019 | |
Subsidiaries | ||||||
IRSA CP | 79.27% | 79.27% | 70,780 | 61,486 | 9,327 | 2,640 |
Tyrus | 100.00% | 100.00% | (938) | (216) | (6,761) | 2,818 |
Efanur | 100.00% | 100.00% | 2,139 | 2,249 | (110) | 410 |
Ritelco S.A. | 100.00% | 100.00% | 1,992 | 1,989 | 39 | 313 |
Inversora Bolívar S.A. | 95.13% | 95.13% | 951 | 962 | (12) | 17 |
ECLSA | 96.74% | 96.74% | 1,520 | 1,360 | 162 | 58 |
Palermo Invest S.A. | 97.00% | 97.00% | 472 | 486 | (14) | 38 |
NFSA | 76.34% | 76.34% | 388 | 438 | (50) | (3) |
Llao Llao Resort S.A. | 50.00% | 50.00% | 364 | 370 | (6) | (3) |
HASAU | 100.00% | 100.00% | 263 | 282 | (18) | (9) |
Liveck S.A. | 9.30% | 9.30% | 59 | 57 | (1) | 3 |
Associates | ||||||
BHSA (1) (2) | 4.93% | 4.93% | 690 | 700 | (10) | 79 |
Manibil S.A. | 49.00% | 49.00% | 565 | 573 | (8) | 2 |
BACS (2) | 33.36% | 33.36% | 349 | 349 | 1 | (10) |
Joint ventures | ||||||
IRSA - Galerías Pacífico S.A. - U.T. | 50.00% | 50.00% | 173 | 202 | (29) | 26 |
Cyrsa S.A. | 50.00% | 50.00% | 51 | 46 | 4 | 5 |
Total subsidiaries, associates and joint ventures | 79,818 | 71,333 | 2,514 | 6,384 |
Latest financial statements issued | ||||||
Name of the entity | Location of business / Country of incorporation | Main activity | Common shares 1 vote | Share capital (nominal value) | Profit / (loss) for the period | Shareholders’ equity |
Subsidiaries | ||||||
IRSA CP | Argentina | Real estate | 99,894,541 | 126 | 12,349 | 89,253 |
Tyrus | Uruguay | Investment | 16,025,861,475 | 7,480 | (3,063) | (938) |
Efanur | Uruguay | Investment | 132,181,770 | 131 | (117) | 2,139 |
Ritelco S.A. | Uruguay | Investment | 94,369,151 | 94 | 40 | 1,993 |
Inversora Bolívar S.A. | Argentina | Investment | 88,422,547 | 93 | (16) | 999 |
ECLSA | Argentina | Investment | 77,316,130 | 80 | 166 | 1,568 |
Palermo Invest S.A. | Argentina | Investment | 155,953,673 | 161 | (14) | 768 |
NFSA | Argentina | Hotel | 38,068,999 | 50 | (70) | 668 |
Llao Llao Resort S.A. | Argentina | Hotel | 73,580,206 | 147 | (12) | 727 |
HASAU | Argentina | Hotel | 25,625,473 | 26 | (18) | 261 |
Liveck S.A. | Uruguay | Investment | 41,855,579 | 450 | (8) | 381 |
Associates | ||||||
BHSA (1) (2) | Argentina | Financial | 73,939,835 | 1,500 | (194) | 14,001 |
Manibil S.A. | Argentina | Real estate | 151,872,872 | 444 | (16) | 1,153 |
BACS (2) | Argentina | Financial | 29,297,626 | 88 | 3 | 1,048 |
Joint ventures | ||||||
IRSA - Galerías Pacífico S.A. - U.T. | Argentina | Hotel | 500,000 | 1 | (58) | 346 |
Cyrsa S.A. | Argentina | Real estate | 8,748,270 | 17 | 9 | 102 |
(1)
Considered significant. See Notes 7 to 8 to the Annual Consolidated Financial Statements.
(2)
Information as of September 30, 2020 according to BCRA's standards. For the purpose of the valuation of the investments in the Company, figures as of September 30, 2020 have been considered, with the necessary IFRS adjustments. Share market price of Banco Hipotecario S.A as of September 30, 2020 amounts to Ps. 9,35. See Note 8 to the Consolidated Financial Statements as of June 30, 2020.
7.
Investment properties
Period ended September 30, 2020 | Year ended June 30, 2020 | |||
Rental properties | Undeveloped parcels of land | Total | Total | |
Fair value at the beginning of the period / year | 3,801 | 21,969 | 25,770 | 16,020 |
Net gain from fair value adjustment | 1,073 | 6,204 | 7,277 | 9,750 |
Fair value at the end of the period / year | 4,874 | 28,173 | 33,047 | 25,770 |
50
The following amounts have been recognized in the Statements of Comprehensive Income:
09.30.20 | 09.30.19 | |
Sale, rental and services´ income (Note 17) | 12 | 14 |
Rental and services´ costs (Note18) | 3 | 11 |
Cost of sales and developments (Note18) | 11 | 10 |
Net unrealized gain from fair value adjustment of investment properties | 7,277 | 3,286 |
Valuation techniques are described in Note 9 to the Consolidated Financial Statements as of June 30, 2020. There were no changes to the valuation techniques.
8.
Property, plant and equipment
Period ended September 30, 2020 | Year ended June 30, 2020 | |||||
Buildings and facilities | Furniture and fixtures | Machinery and equipment | Vehicles | Total | Total | |
Costs | 201 | 56 | 193 | 4 | 454 | 453 |
Accumulated depreciation | (187) | (55) | (189) | (4) | (435) | (429) |
Net book amount at the beginning of the period / year | 14 | 1 | 4 | - | 19 | 24 |
Additions | - | 15 | 1 | - | 16 | 1 |
Depreciation (Note 18) | - | - | (1) | - | (1) | (6) |
Balances at the end of the period / year | 14 | 16 | 4 | - | 34 | 19 |
Costs | 201 | 71 | 194 | 4 | 470 | 454 |
Accumulated depreciation | (187) | (55) | (190) | (4) | (436) | (435) |
Net book amount at the end of the period / year | 14 | 16 | 4 | - | 34 | 19 |
9.
Trading properties
Period ended September 30, 2020 | Year ended June 30, 2020 | ||||
Completed properties | Undevelopedproperties | Properties under development | Total | Total | |
Beginning of the period / year | 79 | 578 | 876 | 1,533 | 3,340 |
Additions | - | - | 15 | 15 | 1,751 |
Capitalized finance costs | - | - | 93 | 93 | 100 |
Disposals (Not 18) | - | - | (555) | (555) | (3,658) |
End of the period / year | 79 | 578 | 429 | 1,086 | 1,533 |
Non-current | 503 | 503 | |||
Current | 583 | 1,030 | |||
Total | 1,086 | 1,533 |
10.
Intangible assets
Period ended September 30, 2020 | Year ended June 30, 2020 | |||
Computer software | Future units to be received from barters | Total | Total | |
Costs | 37 | 60 | 97 | 95 |
Accumulated amortization | (20) | - | (20) | (16) |
Net book amount at the beginning of the period / year | 17 | 60 | 77 | 79 |
Additions | 1 | - | 1 | 2 |
Amortization | (1) | - | (1) | (4) |
Balances at the end of the period / year | 17 | 60 | 77 | 77 |
Costs | 38 | 60 | 98 | 97 |
Accumulated amortization | (21) | - | (21) | (20) |
Net book amount at the end of the period / year | 17 | 60 | 77 | 77 |
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IRSA Inversiones y Representaciones Sociedad Anónima
11. Financial instruments by category
This note presents financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information, related to fair value hierarchy see Note 13 to the Consolidated Financial Statements as of June 30, 2020.
Financial assets and financial liabilities as of September 30, 2020 and June 30, 2020 are as follows:
Financial assets at amortized cost (i) | Financial assets at fair value through profit or loss | Subtotal financial assets | Non-financial assets | Total | ||
Level 1 | Level 2 | |||||
September 30, 2020 | ||||||
Assets as per Statement of Financial Position | ||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12) | 1,601 | - | - | 1,601 | 576 | 2,177 |
Investments in financial assets: | ||||||
- Mutual funds (ii) | - | 8 | - | 8 | - | 8 |
Derivative financial instruments: | ||||||
- Options | - | - | 11 | 11 | - | 11 |
Cash and cash equivalents: | ||||||
- Cash at bank and on hand | 14 | - | - | 14 | - | 14 |
Total | 1,615 | 8 | 11 | 1,634 | 576 | 2,210 |
Financial liabilities at amortized cost (i) | Financial liabilities at fair value through profit or loss | Subtotal financial liabilities | Non-financial liabilities | Total | |
Level 1 | |||||
September 30, 2020 | |||||
Liabilities as per Statement of Financial Position | |||||
Trade and other payables (Note 13) | 628 | - | 628 | 594 | 1,222 |
Borrowings (Note 14) | 32,266 | - | 32,266 | - | 32,266 |
Total | 32,894 | - | 32,894 | 594 | 33,488 |
Financial assets at amortized cost (i) | Financial assets at fair value through profit or loss | Subtotal financial assets | Non-financial assets | Total | ||
Level 1 | Level 2 | |||||
June 30, 2020 | ||||||
Assets as per Statement of Financial Position | ||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12) | 1,858 | - | - | 1,858 | 564 | 2,422 |
Investments in financial assets: | ||||||
- Mutual funds (ii) | - | 290 | - | 290 | - | 290 |
Derivative financial instruments: | ||||||
- Swaps | - | - | 1 | 1 | - | 1 |
Cash and cash equivalents: | ||||||
- Cash at bank and on hand | 11 | - | - | 11 | - | 11 |
- Short-term investments | 1,001 | 1,360 | - | 2,361 | - | 2,361 |
Total | 2,870 | 1,650 | 1 | 4,521 | 564 | 5,085 |
Financial liabilities at amortized cost (i) | Financial liabilities at fair value through profit or loss | Subtotal financial liabilities | Non-financial liabilities | Total | |
Level 1 | |||||
June 30, 2019 | |||||
Liabilities as per Statement of Financial Position | |||||
Trade and other payables (Note 13) | 663 | - | 663 | 704 | 1,367 |
Derivative financial instruments: | |||||
- Foreign-currency future contracts | - | 2 | 2 | - | 2 |
Borrowings (excluding finance leases) (Note 14) | 34,063 | - | 34,063 | - | 34,063 |
Total | 34,726 | 2 | 34,728 | 704 | 35,432 |
(i)
The fair value of financial assets and liabilities at amortized cost does not differ significantly from their book value, except for borrowings (Note 14). The fair value of payables approximates their respective carrying amounts because, due to their short-term nature, the effect of discounting is not considered significant.
As of September 30, 2020, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Company.
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IRSA Inversiones y Representaciones Sociedad Anónima
12.
Trade and other receivables
Company’s trade and other receivables, as of September 30, 2020 and June 30, 2020 are comprised as follows:
September 30, 2020 | June 30, 2020 | |
Sales, leases and services’ receivables | 107 | 108 |
Leases and services receivables | 582 | 834 |
Less: Allowance for doubtful accounts | (14) | (11) |
Total trade receivables | 675 | 931 |
Borrowings granted, deposits and others | 901 | 900 |
Advance payments | 211 | 226 |
Tax credits | 348 | 317 |
Prepaid expenses | 8 | 15 |
Long-term incentive plan | 15 | 16 |
Others | 5 | 6 |
Total other receivables | 1,488 | 1,480 |
Total trade and other receivables | 2,163 | 2,411 |
Non-current | 957 | 607 |
Current | 1,206 | 1,804 |
Total | 2,163 | 2,411 |
Movements on the Company’s allowance for doubtful accounts are as follows:
September 30, 2020 | June 30, 2020 | |
Beginning of period /year | 11 | 39 |
Additions | 4 | 4 |
Disposals / Recoveries | - | (20) |
Inflation adjustment | (1) | (12) |
End of the period / year | 14 | 11 |
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statements of Income (Note 18). Amounts charged to the allowance for doubtful accounts are generally written off, when there is no expectation of recovery.
13.
Trade and other payables
September 30, 2020 | June 30, 2020 | |
Customers´ advances | 582 | 694 |
Trade payables | 524 | 544 |
Accrued invoices | 74 | 104 |
Tenant deposits | 1 | 1 |
Total trade payables | 1,181 | 1,343 |
Director´s fees | 14 | - |
Long-term incentive plan | 13 | 14 |
Tax amnesty plans | 1 | 2 |
Other tax payables | 10 | 8 |
Other | 3 | - |
Total other payables | 41 | 24 |
Total trade and other payables | 1,222 | 1,367 |
Non-current | 19 | 82 |
Current | 1,203 | 1,285 |
Total | 1,222 | 1,367 |
14.
Borrowings
Company’s borrowings as of September 30, 2020 and June 30, 2020 are comprised as follows:
Book value as of 09.30.20 | Book value as of 06.30.20 | Fair value as of 09.30.20 | Fair value as of 06.30.20 | |
NCN | 17,121 | 23,771 | - | 23,965 |
Bank loans | 1,418 | 1,550 | 1,418 | 1,550 |
Related parties (Note 21) | 12,117 | 7,635 | - | 7,705 |
Bank overdrafts | 1,610 | 1,107 | 1,610 | 1,107 |
Total borrowings | 32,266 | 34,063 | 3,028 | 34,327 |
Non-current | 10,607 | 4,219 | ||
Current | 21,659 | 29,844 | ||
Total | 32,266 | 34,063 |
53
15.
Currents and deferred income tax
The charge for the Company’s income tax is comprised as follows:
09.30.20 | 09.30.19 | |
Deferred income tax | (3,757) | (1,590) |
Income tax | (3,757) | (1,590) |
Below is a reconciliation between income tax recognized and the amount which would arise from applying the prevailing tax rate on profit before income tax for the three-month periods ended September 30, 2020 and 2019:
09.30.20 | 09.30.19 | |
Net income at tax rate (i) | (3,644) | (1,712) |
Permanent differences: | ||
Share of profit of subsidiaries, associates and joint ventures | 1,864 | 2,160 |
Income tax rate differential | 430 | 232 |
Difference between provision and tax return | 57 | - |
Tax loss carryfowards´ allowance | (2,373) | (808) |
Inflation adjustment for tax purposes | (634) | (703) |
Inflation adjustment | 634 | (732) |
Non deductible expenses and others | (91) | (27) |
Income tax | (3,757) | (1,590) |
09.30.20 | 06.30.20 | |
Beginning of the period / year | (7,998) | (7,212) |
Income tax charge | (3,757) | (786) |
End of the period / year | (11,755) | (7,998) |
Law No. 27,541 of solidarity and productive revival in the framework of Argentine public emergency, published on December 23, 2019 introduced some modifications to different taxes and the creation of the tax for an Inclusive Selfless Argentina (PAIS).
The main modifications affecting the Group in relation to income tax are the following:
1)
In the first and second fiscal year beginning after January 1, 2018 (namely, for the Group’s fiscal years beginning on July 1, 2019 and 2020), the gain or loss resulting from tax inflation adjustment will be charged by one sixth in the determination exercise and the remaining five sixths in the following fiscal years;
2)
The tax rate applicable to companies for the third fiscal year beginning after January 1, 2018 was increased from 25% to 30% (namely, for the Group’s fiscal years beginning on July 1, 2019)
16. Provisions
The table below presents the changes in the Company's provisions:
Period ended September 30, 2020 | Year ended June 30, 2020 | |||
Investments in subsidiaries, associates and joint ventures | Labor, legal and other claims (i) | Total | Total | |
Beginning of period / year | 216 | 84 | 300 | 66 |
Additions | 722 | 1 | 723 | 264 |
Decrease | - | (1) | (1) | (6) |
Utilization | - | - | - | (1) |
Inflation adjustment | - | (6) | (6) | (23) |
End of period / year | 938 | 78 | 1.016 | 300 |
Non current | 981 | 264 | ||
Current | 35 | 36 | ||
Total | 1.016 | 300 |
(i)
Additions and recoveries are included in "Other operating results, net”.
54
17. Revenues
09.30.20 | 09.30.19 | |
Sale of trading properties | 714 | 467 |
Rental income, averaging of scheduled rental escalation and expense reimbursements | 12 | 14 |
Property management fees | - | 2 |
Sales, rental and services´ income | 726 | 483 |
18. Expenses by nature
Costs (i) | General and administrative expenses | Selling expenses | 09.30.20 | 09.30.19 | |
Cost of sales of trading properties (Note 9) | 555 | - | - | 555 | 231 |
Salaries, social security costs and other personnel expenses | 1 | 43 | - | 44 | 64 |
Taxes, rates and contributions | 6 | - | 8 | 14 | 53 |
Fees and payments for services | - | 16 | - | 16 | 19 |
Director´s fees (Note 21) | - | 25 | - | 25 | 25 |
Maintenance, security, cleaning, repairs and others | 9 | 7 | - | 16 | 15 |
Traveling, transportation and stationery expenses | - | 4 | - | 4 | 11 |
Leases and services’ charges | 1 | 6 | - | 7 | 10 |
Advertising and other selling expenses | - | - | - | - | 1 |
Bank charges | - | 4 | - | 4 | 3 |
Amortization and depreciation (Note 8 and 10) | - | 2 | - | 2 | 3 |
Allowance for doubtful accounts (charge and recovery, net) (Note 12) | - | - | 4 | 4 | 1 |
Total expenses by nature as of 09.30.20 | 572 | 107 | 12 | 691 | - |
Total expenses by nature as of 09.30.19 | 253 | 127 | 56 | - | 436 |
(1)
For the three-month period ended September 30, 2020, includes Ps. 3 of rental and services costs and Ps. 569 of costs of sales and developments, of which Ps. 11 corresponds to investment properties and Ps. 558 to trading properties. For the three-month period ended September 30, 2019, includes Ps. 11 which correspond to rental and services costs; Ps. 242 to costs of sales and developments, of which Ps. 11 corresponds to investment properties and Ps. 231 to trading properties
19. Other operating results, net
09.30.20 | 09.30.19 | |
Lawsuits and other contingencies (i) | - | (4) |
Donations | (6) | (14) |
Operating interest expense | 3 | 2 |
Others | (1) | (3) |
Total other operating results, net | (4) | (19) |
(i)
Includes legal costs and expenses.
20. Financial results, net
09.30.20 | 09.30.19 | |
Interest income | 10 | 21 |
Total finance income | 10 | 21 |
Interest expense | (914) | (893) |
Other finance costs | (55) | (82) |
Subtotal finance costs | (969) | (975) |
Capitalized finance costs | 93 | 45 |
Total finance costs | (876) | (930) |
Net exchange difference | (126) | (3,698) |
Net (loss) / gain from changes in fair value of financial assets | (40) | 177 |
(Loss) from derivative financial instruments, net | (8) | - |
Gain from repurchase of non-convertible notes | - | 2 |
Total other financial results | (174) | (3,519) |
Inflation adjustment | (338) | (510) |
Total financial results, net | (1,378) | (4,938) |
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IRSA Inversiones y Representaciones Sociedad Anónima
21. Related party transactions
The following is a summary of the balances with related parties as of September 30, 2020 and June 30, 2020:
Item | September 30, 2020 | June 30, 2020 |
Trade and other receivables | 1,337 | 1,638 |
Trade and other payables | (1,108) | (1,133) |
Borrowings | (12,117) | (7,635) |
Total | (11,888) | (7,130) |
September 30, 2020 | June 30, 2020 | Operation description | Item | |
Cresud | (1) | (1) | Long-term incentive plan payable | Trade and other payables |
(47) | (69) | Corporate services payable | Trade and other payables | |
(4) | (2) | Reimbursement of expenses payable | Trade and other payables | |
4 | 5 | Leases receivable | Trade and other receivables | |
(1) | (1) | Management fee | Trade and other payables | |
Total parent company | (49) | (68) | ||
IRSA CP | (569) | (674) | Reimbursement of expenses receivable | Trade and other payables |
369 | 662 | Reimbursement of expenses receivable | Trade and other receivables | |
(11) | (11) | Leases and rights of use payable | Trade and other payables | |
(4,364) | (3,986) | Non-Convertible Notes | Borrowings | |
(6,887) | (2,813) | Loans received | Borrowings | |
(70) | (61) | Corporate services payable | Trade and other payables | |
(12) | (13) | Long-term incentive plan payable | Trade and other payables | |
(5) | (10) | Reimbursement of expenses payable | Trade and other payables | |
(1) | (1) | Commissions | Trade and other payables | |
(2) | - | Leases payable | Trade and other payables | |
(152) | (152) | Other liabilities | Trade and other payables | |
Tyrus | 417 | 415 | Borrowings granted | Trade and other receivables |
1 | 1 | Reimbursement of expenses receivable | Trade and other receivables | |
ECLSA | 295 | 290 | Borrowings granted | Trade and other receivables |
107 | 116 | Dividends receivable | Trade and other receivables | |
Panamerican Mall S.A. | 1 | 1 | Long-term incentive plan receivable | Trade and other receivables |
Efanur | (106) | (104) | Loans received | Borrowings |
Torodur S.A. | (444) | (443) | Non-Convertible Notes | Borrowings |
Ritelco S.A. | (30) | (30) | Loans received | Borrowings |
NFSA | (33) | (34) | Loans received | Borrowings |
NFSA | 9 | 5 | Management fees receivables | Trade and other receivables |
Fibesa S.A. | 13 | 14 | Long-term incentive plan receivable | Trade and other receivables |
(46) | - | Loans received | Borrowings | |
Real Estate Investment Group VII LP | (26) | (25) | Loans received | Borrowings |
Palermo Invest S.A. | 12 | 13 | Dividends receivable | Trade and other receivables |
Palermo Invest S.A. | 18 | 18 | Borrowings granted | Trade and other receivables |
HASAU | 2 | 2 | Hotel services receivable | Trade and other receivables |
(16) | - | Other liabilities | Trade and other payables | |
(10) | (31) | Loans received | Borrowings | |
Llao Llao Resorts S.A. | 3 | 3 | Hotel services receivable | Trade and other receivables |
- | 1 | Reimbursement of expenses receivable | Trade and other receivables | |
New Lipstick | 18 | 18 | Reimbursement of expenses receivable | Trade and other receivables |
Lipstick Management LLC | (84) | (83) | Loans received | Borrowings |
Cyrsa S.A. | (29) | (29) | Loans received | Borrowings |
Inversora Bolívar S.A. | 10 | 10 | Dividends receivable | Trade and other receivables |
34 | 34 | Borrowings granted | Trade and other receivables | |
Banco Hipotecario S.A | (1) | (1) | Leases and rights of use payable | Trade and other payables |
IRSA – Galerías Pacífico S.A. - U.T. | (126) | (135) | Other liabilities | Trade and other payables |
Emprendimiento Recoleta S.A | 1 | 1 | Long-term incentive plan receivable | Trade and other receivables |
TGLT S.A. | (76) | - | Other liabilities | Trade and other payables |
Others subsidiaries, associates and joint ventures (1) | - | 2 | Reimbursement of expenses receivable | Trade and other receivables |
Others subsidiaries, associates and joint ventures (1) | 1 | 1 | Contributions in advance | Trade and other receivables |
1 | 1 | Long-term incentive plan receivable | Trade and other receivables | |
Total subsidiaries, associates and joint ventures | (11,788) | (7,028) | ||
Directors | (14) | - | Fees | Trade and other payables |
- | 5 | Advances granted | Trade and other receivables | |
5 | 5 | Borrowings granted | Trade and other receivables | |
Total directors | (9) | 10 | ||
Consultores Asset Management S.A. | 16 | 14 | Reimbursement of expenses receivable | Trade and other receivables |
BHN Vida S.A. | (58) | (57) | Non-Convertible Notes | Borrowings |
Estudio Zang, Bergel y Viñes Abogados | - | (2) | Legal Services | Trade and other payables |
Others subsidiaries, associates and joint ventures (2) | - | 1 | Reimbursement of expenses receivable | Trade and other receivables |
Total others | (42) | (44) | ||
Total | (11,888) | (7,130) |
(1)
It includes ALL GOLF Center S.A., Panamerican Mall S.A, Emprendimiento Recoleta S.A., Quality Invest S.A., Puerto Retiro, Arcos del Gourmet S.A., Inversora Bolívar S.A., y Palermo Invest S.A.
(2)
It includes Austral Gold Argentina S.A., Chacabuco 175 S.R.L. y Dolphin Fund Ltd.
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IRSA Inversiones y Representaciones Sociedad Anónima
The following is a summary of the results with related parties for the three-month period ended September 30, 2020 and 2019:
September 30, 2020 | September 30, 2019 | Operation description | |
Cresud | 2 | 3 | Leases and/or rights of use |
- | - | Financial operations | |
(31) | (40) | Corporate services | |
Total parent company | (29) | (37) | |
IRSA CP | (464) | (799) | Financial operations |
(4) | (19) | Corporate services | |
(2) | 1 | Leases and/or rights of use | |
ECLSA | 5 | 37 | Financial operations |
Ritelco | - | (5) | Financial operations |
Efanur | (1) | (19) | Financial operations |
Tyrus | 3 | 66 | Financial operations |
Lipstick | (1) | (15) | Financial operations |
REIG VII | - | (5) | Financial operations |
Torodur | (23) | (81) | Financial operations |
Palermo Invest | - | (4) | Financial operations |
Others subsidiaries, associates and joint ventures (1) | 3 | 3 | Fees |
1 | - | Financial operations | |
Total subsidiaries, associates and joint ventures | (483) | (840) | |
Directors | (25) | (25) | Fees |
Senior Management | (2) | (4) | Fees |
Total Directors and Senior Managment | (27) | (29) | |
Fundación IRSA | - | (11) | Donations |
Estudio Zang, Bergel & Viñes | (3) | (1) | Fees |
BHN Vida S.A. | 1 | - | Financial operations |
Others subsidiaries, associates and joint ventures (2) | - | 3 | Leases and/or rights of use |
- | (3) | Donations | |
Total others | (2) | (12) | |
Total at the end of the period | (541) | (918) |
(1)
It includes Inversora Bolívar S.A., Cyrsa S.A., BACS, Palermo Invest S.A., Efanur and Liveck S.A.
(2)
It includes Puerta 18, Austral Gold Argentina S.A., Hamonet S.A., y Consultores Asset Management S.A.
The following is a summary of the transactions with related parties without impact in results for the three-month period ended September 30, 2020 and 2019:
September 30, 2020 | September 30, 2019 | Operation description | |
Tyrus | (7) | (1,781) | Contributions granted |
Liveck S.A. | (3) | (7) | Contributions granted |
Manibil S.A. | - | (95) | Contributions granted |
Total contributions to subsidiaries | (10) | (1,883) |
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IRSA Inversiones y Representaciones Sociedad Anónima
22. Foreign currency assets and liabilities
Book amounts of foreign currency assets and liabilities are as follows:
Item (1) | Amount (2) | Foreign exchange rate (3) | Total as of 09.30.20 | Total as of 06.30.20 |
Assets | ||||
Trade and other receivables | ||||
US Dollar | 4.01 | 75.980 | 305 | 305 |
Euros | 0.11 | 88.965 | 10 | 9 |
Receivables with related parties | ||||
US Dollar | 10.40 | 76.180 | 792 | 780 |
Total Trade and other receivables | 1,107 | 1,094 | ||
Investments in financial assets | ||||
US Dollar | 0.11 | 75.980 | 8 | 8 |
Total Investments in financial assets | 8 | 8 | ||
Derivative financial instruments | ||||
US Dollar | - | 75.980 | - | 1 |
Total Derivative financial instruments | - | 1 | ||
Cash and cash equivalents | ||||
US Dollar | 0.08 | 75.980 | 6 | 10 |
Total Cash and cash equivalents | 6 | 10 | ||
Total Assets | 1,121 | 1,113 | ||
Liabilities | ||||
Trade and other payables | ||||
US Dollar | 0.42 | 76.180 | 32 | 115 |
Payables with related parties | ||||
US Dollar | 3.29 | 76.180 | 251 | 155 |
Total Trade and other payables | 283 | 270 | ||
Lease liabilities | ||||
US Dollar | 0.01 | 76.180 | 1 | - |
Total Lease liabilities | 1 | - | ||
Borrowings | ||||
US Dollar | 233.58 | 76.180 | 17,794 | 24,982 |
Borrowings with related parties | ||||
US Dollar | 106.56 | 76.180 | 8,118 | 7,534 |
Total Borrowings | 25,912 | 32,516 | ||
Total Liabilities | 26,196 | 32,786 |
(1)
Considering foreign currencies those that differ from Group’s functional currency at each period / year.
(2)
Expressed in millions of foreign currency.
(3)
Exchange rate as of September 30, 2020 according to Banco de la Nación Argentina records.
23.
CNV General Resolution N° 622/13
As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622/13, below is a detail of the notes to the Unaudited Condensed Interim Separate Financial Statements that disclose the information required by the Resolution in Exhibits.
Exhibit A - Property, plant and equipment | Note 7 Investment properties and Note 8 Property, plant and equipment |
Exhibit B - Intangible assets | Note 10 Intangible assets |
Exhibit C - Equity investments | Note 6 Information about the main subsidiaries, associates and joint ventures |
Exhibit D - Other investments | Note 11 Financial instruments by category |
Exhibit E - Provisions | Note 12 Trade and other receivables and Note 16 Provisions |
Exhibit F - Cost of sales and services provided | Note 9 Trading properties and Note 18 Expenses by nature |
Exhibit G - Foreign currency assets and liabilities | Note 22 Foreign currency assets and liabilities |
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IRSA Inversiones y Representaciones Sociedad Anónima
24.
CNV General Resolution N° 629/14 – Storage of documentation
On August 14, 2014, the CNV issued General Resolution N° 629 whereby it introduced amendments to rules related to storage and conservation of corporate books, accounting books and commercial documentation. In this sense, it should be noted that the Company has entrusted the storage of certain non-sensitive and old information to the following providers:
Storage of documentation responsible | Location | |
Iron Mountain Argentina S.A. | Av. Amancio Alcorta 2482, Autonomous City of Buenos Aires | |
Pedro de Mendoza 2143, Autonomous City of Buenos Aires | ||
Saraza 6135, Autonomous City of Buenos Aires | ||
Azara 1245, Autonomous City of Buenos Aires | ||
Polígono industrial Spegazzini, Autopista Ezeiza Km 45, Cañuelas, Province of Buenos Aires | ||
Cañada de Gómez 3825, Autonomous City of Buenos Aires |
It is further noted that a detailed list of all documentation held in custody by providers, as well as documentation required in section 5 a.3) of Section I, Chapter V, Title II of the CNV RULES (2013 as amended) are available at the registered office.
On February 5, 2014 there was a widely known accident in Iron Mountain’s warehouse. Such company is a supplier of the Company and Company’s documentation was being kept in the mentioned warehouse. Based on the internal review carried out by the Company, duly reported to the CNV on February 12, 2014, the information kept at the Iron Mountain premises that were on fire do not appear to be sensitive or capable of affecting normal operations.
25.
Economic context in which the Company operates
See Note 30 to the Unaudited Condensed Interim Consolidated Financial Statements.
26.
Subsequent events
See Note 30 to the Unaudited Condensed Interim Consolidated Financial Statements, in addition are as follows:
Dividend distribution from IRSA CP
On October 26, 2020, IRSA CP Shareholders' Meeting has decided to distribute a cash dividend of Ps. 9,700. The amount per share will be (V $ N1) Ps. 76.9755 and an amount per ADR of Ps. 307.9022 (Argentine pesos per ADR).
The Company maintains a holding percentage of 79.27% over said Company.
59
IRSA Inversiones y Representaciones Sociedad Anónima
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of September 30, 2020
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
1.
Specific and significant systems that imply contingent lapsing or rebirth of benefits envisaged by such provisions.
None.
2.
Significant changes in the Company´s activities or other similar circumstances that occurred during the fiscal years included in the financial statements, which affect their comparison with financial statements filed in previous fiscal years, or that could affect those to be filed in future fiscal years.
See Note 2.3.
3.
Receivables and liabilities by maturity date.
Past due | Without term | Without term | To be due | ||||||||
09.30.20 | Current | Non-current | Up to 3 months | From 3 to 6 months | From 6 to 9 months | From 9 to 12 months | From 1 to 2 years | From 2 to 3 years | Total | ||
Accounts receivables | Trade and other receivables | 207 | 353 | 6 | 631 | 1 | 8 | 6 | 951 | - | 2,163 |
Total | 207 | 353 | 6 | 631 | 1 | 8 | 6 | 951 | - | 2,163 | |
Liabilities | Trade and other payables | 377 | - | - | 237 | 3 | 3 | 583 | 19 | - | 1,222 |
Borrowings | - | - | - | 16,144 | 362 | 825 | 4,328 | 10,607 | - | 32,266 | |
Salaries and social security liabilities | - | 1 | - | 5 | - | - | - | - | - | 6 | |
Provisions | - | 35 | 981 | - | - | - | - | - | - | 1,016 | |
Lease liabilities | - | - | - | - | - | 1 | - | - | - | 1 | |
Total | 377 | 36 | 981 | 16,386 | 365 | 829 | 4,911 | 10,626 | - | 34,511 |
4.a.
Breakdown of accounts receivable and liabilities by maturity and currency.
Items | Current | Non-current | Totals | |||||||
Local currency | Foreign currency | Total | Local currency | Foreign currency | Total | Local currency | Foreign currency | Total | ||
Accounts receivables | Trade and other receivables | 812 | 394 | 1,206 | 244 | 713 | 957 | 1,056 | 1,107 | 2,163 |
Total | 812 | 394 | 1,206 | 244 | 713 | 957 | 1,056 | 1,107 | 2,163 | |
Liabilities | Trade and other payables | 920 | 283 | 1,203 | 19 | - | 19 | 939 | 283 | 1,222 |
Borrowings | 2,468 | 19,191 | 21,659 | 3,886 | 6,721 | 10,607 | 6,354 | 25,912 | 32,266 | |
Salaries and social security liabilities | 6 | - | 6 | - | - | - | 6 | - | 6 | |
Provisions | 35 | - | 35 | 981 | - | 981 | 1,016 | - | 1,016 | |
Lease liabilities | - | 1 | 1 | - | - | - | - | 1 | 1 | |
Total | 3,429 | 19,475 | 22,904 | 4,886 | 6,721 | 11,607 | 8,315 | 26,196 | 34,511 |
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RSA Inversiones y Representaciones Sociedad Anónima
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of September 30, 2020
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
4.b.
Breakdown of accounts receivable and liabilities by adjustment clause.
On September 30, 2020 there are no receivables and liabilities subject to adjustment clause.
4.c.
Breakdown of accounts receivable and liabilities by interest clause
Items | Current | Non-current | Accruing interest | Non- | |||||||||
Accruing interest | Non-accruing interest | Total | Accruing interest | Non-accruing interest | Total | accruing | Total | ||||||
Fixed rate | Floating rate | (*) | Fixed rate | Floating rate | (*) | Fixed rate | Floating rate | interest | |||||
Accounts receivables | Trade and other receivables | 550 | 89 | 567 | 1,206 | 712 | - | 245 | 957 | 1,262 | 89 | 812 | 2,163 |
Total | 550 | 89 | 567 | 1,206 | 712 | - | 245 | 957 | 1,262 | 89 | 812 | 2,163 | |
Liabilities | Trade and other payables | - | - | 1,203 | 1,203 | 1 | - | 18 | 19 | 1 | - | 1,221 | 1,222 |
Borrowings | 18,993 | 2,309 | 357 | 21,659 | 10,143 | 466 | (2) | 10,607 | 29,136 | 2,775 | 355 | 32,266 | |
Salaries and social security liabilities | - | - | 6 | 6 | - | - | - | - | - | - | 6 | 6 | |
Provisions | - | - | 35 | 35 | - | - | 981 | 981 | - | - | 1,016 | 1,016 | |
Lease liabilities | 1 | - | - | 1 | - | - | - | - | 1 | - | - | 1 | |
Total | 18,994 | 2,309 | 1,601 | 22,904 | 10,144 | 466 | 997 | 11,607 | 29,138 | 2,775 | 2,598 | 34,511 |
(*) Includes the balance as of 09.30.2020 of the interest payable corresponding to the loans.
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RSA Inversiones y Representaciones Sociedad Anónima
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of September 30, 2020
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
5.
Related parties.
a.
Interest in related parties:
Name of the entity | % ownership interest of the Group |
Entity's with direct ownership interest of IRSA: | |
IRSA CP | 79.27% |
E-commerce Latina S.A. | 96.74% |
Efanur S.A. | 100.00% |
Hoteles Argentinos S.A. | 100.00% |
Inversora Bolívar S.A. | 95.13% |
Llao Llao Resort S.A. | 50.00% |
Nuevas Fronteras S.A. | 76.34% |
Palermo Invest S.A. | 97.00% |
Ritelco S.A. | 100.00% |
Tyrus S.A. | 100.00% |
Liveck S.A. | 9.30% |
b.
Related parties debit/credit balances. See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
6.
Loans to Directors.
See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
7.
Physical inventory.
In view of the nature of the inventories, no physical inventories are performed and there are no slow turnover assets.
8.
Current values.
See Notes 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
9.
Appraisal revaluation of property, plant and equipment.
None.
10.
Obsolete unused property, plant and equipment.
None.
11.
Equity interest in other companies in excess of that permitted by section 31 of law N° 19,550.
None.
12.
Recovery values.
See Notes 6, 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
62
RSA Inversiones y Representaciones Sociedad Anónima
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of September 30, 2020
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
13.
Insurances.
Insured Assets.
Real Estate | Insured amounts (1) | Accounting values | Risk covered |
Bouchard 551 | 1 | 310 | All operational risk with additional coverage and minor risks |
Libertador 498 | 3 | 228 | All operational risk with additional coverage and minor risks |
Santa María del Plata | 0.044 | 21,588 | All operational risk with additional coverage and minor risks |
Abril Manor House | 3 | 51 | All operational risk with additional coverage and minor risks |
Catalinas Norte Plot | 2 | 814 | All operational risk with additional coverage and minor risks |
Subtotal | 9 | 22,991 |
(1)
The insured amounts are in US Dollars.
In our opinion, the above-described insurance policies cover current risks adequately.
14.
Allowances and provisions that, taken individually or as a whole, exceed 2% of the shareholder´s equity.
None.
15.
Contingent situations at the date of the financial statements which probabilities are not remote and the effects on the Company´s financial position have not been recognized.
Not applicable.
16.
Status of the proceedings leading to the capitalization of irrevocable contributions towards future subscriptions.
Not applicable.
17.
Unpaid accumulated dividends on preferred shares.
None.
18.
Restrictions on distributions of profits.
According to Argentine law, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution.
In addition, according to CNV General Resolution N° 609/12, a special reserve was constituted which cannot be released to make distributions in cash or in kind. See Note 16 to the Consolidated Financial Statements at June 30, 2020.
IRSA NCN due 2019 and 2020 both contain certain customary covenants and restrictions, including, among others, limitations for the incurrence of additional indebtedness, restricted payments, disposal of assets, and entering into certain transactions with related companies. Restricted payments include restrictions on the payment of dividends.
Autonomous City of Buenos Aires, Nov 17, 2020.
63
REVIEW REPORT ON THE UNAUDITED CONDENSED INTERIM SEPARATE FINANCIAL STATEMENTS
To the Shareholders, President and Directors of
IRSA Inversiones y Representaciones Sociedad Anónima
Legal address: Bolívar 108 – 1st floor
Autonomous City of Buenos Aires
Tax Registration Number: 30-52532274-9
Introduction
We have reviewed the accompanying unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima (“the Company”), which comprise the unaudited condensed interim separate statement of financial position at September 30, 2020, the unaudited condensed interim separate statements of income and other comprehensive income, of changes in shareholders’ equity and of cash flows for the three-month period then ended, and selected explanatory notes.
The balances and other information for the fiscal year ended on June 30, 2020 and its interim periods are an integral part of the financial statements mentioned above; therefore, they must be considered in connection with these financial statements.
Management’s responsibility
The Board of Directors of the Company is responsible for the preparation and presentation of these unaudited condensed interim separate financial statements in accordance with International Financial Reporting Standards, adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and included by the National Securities Commission (CNV) in its regulations, as approved by the International Accounting Standards Board (IASB), and is therefore responsible for the preparation and presentation of the unaudited condensed interim separate financial statements mentioned in the first paragraph, in accordance with International Accounting Standard 34 Interim Financial Information (IAS 34).
64
Scope of our review
Our review was limited to the application of the procedures established under International Standards on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, adopted as a review standard in Argentina by Technical Pronouncement No. 33 of the FACPCE and approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of inquiries of Company staff responsible for preparing the information included in the unaudited condensed interim separate financial statements and of analytical and other review procedures. This review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the separate statements of financial position, and the separate statements of income and other comprehensive income and of cash flows of the Company.
Conclusion
On the basis of our review, nothing has come to our attention that causes us to believe that the unaudited condensed interim separate financial statements mentioned in the first paragraph of this report have not been prepared, in all material respects, in accordance with International Accounting Standard 34 Interim Financial Reporting.
Emphasis of matter paragraph – Investment in Israel
Without modifying our conclusion, we draw attention to the information included in Note 6 to the accompanying unaudited condensed interim separate financial statements regarding the recoverability of the investment in the Operations Center in Israel.
Report on compliance with current regulations
In accordance with current regulations, we report, in connection with IRSA Inversiones y Representaciones Sociedad Anónima, that:
a) the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are in the process of being transcribed into the Inventory and Balance Sheet book and, except for the above mentioned situation, as regards those matters that are within our competence, they are in compliance with the provisions of the General Companies Law and pertinent resolutions of the National Securities Commission;
b) the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima arise from accounting records carried in all formal aspects in accordance with legal requirements;
c) we have read the additional information to the notes to the unaudited condensed interim separate financial statements required by section 12, Chapter III, Title IV of the rules of the National Securities Commission, on which we have no observations to make regarding matters that are within our competence;
65
d) at September 30, 2020 the debt of IRSA Inversiones y Representaciones Sociedad Anónima accrued in favor of the Argentine Integrated Social Security System, as shown by the Company’s accounting records, amounted to ARS 1,058,161.42, which is not due at that date.
Autonomous City of Buenos Aires, November 17, 2020
PRICE WATERHOUSE & CO. S.R.L. (Partner) | ABELOVICH, POLANO & ASOCIADOS S.R.L. (Partner) | |
C.P.C.E.C.A.B.A. V° 1 F° 17 | C.P.C.E.C.A.B.A. V° 1 F° 30 | |
Walter Zablocky Public Accountant (UNLP) C.P.C.E.C.A.B.A. V. 340 F. 156 | José Daniel Abelovich Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 102 F. 191 |
66
I. Brief comment on the Company’s activities during the period, including references to significant events occurred after the end of the period.
Economic context in which the Group operates
The Group operates in a complex context both due to macroeconomic conditions, whose main variables have recently experienced strong volatility, as well as regulatory, social, and political conditions, both nationally and internationally.
The results from operations may be affected by fluctuations in the inflation index and the argentine peso exchange rate against other currencies, mainly the dollar, variations in interest rates which have an impact on the cost of capital, changes in government policies, capital control and other political or economic developments both locally and internationally.
In December 2019, a new strain of coronavirus (SARS-COV-2), which caused severe acute respiratory syndrome (COVID-19) appeared in Wuhan, China. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In response, countries have taken extraordinary measures to contain the spread of the virus, including imposing travel restrictions and closing borders, closing businesses deemed non-essential, instructing residents to practice social distancing, implementing quarantines, among other measures. The ongoing pandemic and these extraordinary government actions are affecting global economic activity, resulting in significant volatility in global financial markets.
On March 3, 2020, the first case of COVID-19 was registered in the country and until November 8, 2020, more than 1,200,000 cases of infections had been confirmed in Argentina, by virtue of which the National Government implemented a series of health measures of social, preventive and mandatory isolation at the national level that began on March 19, 2020 and extended several times, most recently until November 8, 2020 inclusive in the Metropolitan Area of Buenos Aires although it has been extended in some cities in the interior of the country. Among this measures, that affected the local economy, the following stand out: the extension of the public emergency in health matters, the total closure of borders, the suspension of international and cabotage flights, the suspension of medium and long-distance land transport, the suspension of artistic and sports shows, closure of businesses not considered essential, including shopping malls and hotels.
This series of measures affected a large part of Argentine companies, which experienced a drop in their income and inconveniences in the payment chain. In this context, the Argentine government announced different measures aimed at alleviating the financial crisis of the companies affected by the COVID-19 pandemic. Likewise, it should be noted that, to the stagnation of the Argentine economy, a context of international crisis is added because of the COVID-19 pandemic. In this scenario, a strong contraction of the Argentine economy is expected.
After various negotiations between the Argentine government and the bondholders, the Argentine government announced the conclusion of a principle of agreement with the main groups of creditors, to avoid default. On August 28, 2020, the government reported that 93.55% of the holders of the total outstanding principal amount of all the bonds accepted the debt swap, and on August 31, 2020, the national government obtained the required consents to redeem and / or modify 99.01% of the total outstanding principal amount of all series of eligible bonds. As of the date of issuance of these financial statements, the new bonds are already trading on the market.
67
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
In turn, the government is challenged to achieve a successful debt renegotiation with the IMF. If Argentina achieves a favourable result and agrees to restructure its debt with the IMF, this could have a positive impact on the Argentine economy, in the medium and long term. On the contrary, the lack of an agreement with external private creditors could lead to a default of the Argentine sovereign debt and, consequently, this situation could generate limitations to the companies' ability to access new financing.
At the local environment, the following circumstances are displayed:
●
In August 2020, the Monthly Economic Activity Estimator (“EMAE” in Spanish) reported by the National Institute of Statistics and Censuses (“INDEC” in Spanish), registered a variation of (11.6)% compared to the same month of 2019, and 1.1% compared to the previous month.
●
The survey on market expectations prepared by the Central Bank in October 2020, called the Market Expectations Survey (“REM” in Spanish), estimates a retail inflation of 35.8% for 2020. The analysts who confirm the REM forecast a variation in real GDP for 2020 of (11.6)%. In turn, they foresee that in 2021 economic activity will rebound in activity, reaching an economic growth of 4.5%.
●
The interannual inflation as of September 30, 2020 reached 36.6%.
●
In the period from September 2019 to September 2020, the argentine peso depreciated 32.3% against the US dollar according to the wholesale average exchange rate of Argentine Nation Bank. Given the exchange restrictions in force since August 2019, as of September 30, 2020 there is an exchange gap of approximately 82% between the official price of the dollar and its price in parallel markets, which impacts the level of activity in the economy and affects the level of reserves of the Central Bank of the Argentine Republic. Additionally, these exchange restrictions, or those that may be dictated in the future, could affect the Group's ability to access the Single Free Exchange Market (MULC in Spanish) to acquire the foreign exchange necessary to meet its financial obligations.
On September 15, 2020, the Central Bank of the Argentine Republic (“BCRA”) published Communications “A” 7105 and 7106, which establishes, among other measures, that those who register financial debts with capital maturities in foreign currency scheduled between 10.15.2020 and 03.31.2021, they had to submit a refinancing plan to the BCRA based on the following criteria: (a) that the net amount for which the exchangemarket will be accessed in the original terms will not exceed 40% of the amount of capital maturing in the period indicated above, and (b) that the rest of the capital is, as a minimum, refinanced with a new external debt with an average life of 2 years, provided that the new debt is settled in the market of changes. It is worth mentioning that for the maturities to be registered from the effective date of the communication (September 16, 2020) and until 12.31.2020, the refinancing plan must be submitted prior to 09.30.2020; and the submission deadline for the remaining maturities -between January 1, 2021 and March 31, 2021, must be submitted with a term of at least 30 calendar days before the maturity of the capital to be refinanced.
COVID-19 pandemic
As described above, the COVID-19 pandemic is adversely impacting both the global economy and the Argentine economy and the Group's business.
The current estimated impacts of the COVID-19 pandemic on the Company as of the date of these financial statements are set out below:
●
Because of the social, preventive and obligatory lockdown, shopping malls throughout the country were closed since March 20, 2020, exclusively remaining operational those stores dedicated to activities considered essential such as pharmacies, supermarkets and banks. The reopening of shopping malls in the interior of the country began during the months of May, June, and July. In August 2020, the Arcos District, an open-air premium outlet in the city of Buenos Aires, was opened and in October 2020, the Group’s shopping malls opened in the City and Greater Buenos Aires. As of October 31, 2020, all the Group’s shopping malls were open operating under strict protocols. However, the uncertainty of the situation could cause setbacks in the openings already made, as happened in some shopping malls in the interior of the country in previous months due to the increase in cases in those regions.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
●
Given the closure of the shopping malls, the Group has decided to condone the billing and collection of the Insured Monthly Value until September 30, 2020, with some exceptions and to subsidize the collective promotion fund during the same period, prioritizing the long-term relationship with its tenants. Additionally, an increase in the delinquency rates of some tenants has been detected. As a result of the above, the impact on shopping malls is a 82.4% decrease in rental and service income during the first quarter of fiscal year 2021 compared to the same period of last fiscal year, and a 12.6% increase compared to the immediately preceding quarter. Additionally, the charge for bad debts in the first quarter of fiscal year 2012 is ARS 40 million and ARS 37 million in the same period of previous fiscal year.
●
In relation to the offices business, although most of the tenants are working in the home office mode, they are operational with strict safety and hygiene protocols. To date, we have not evidenced a deterioration in collections.
●
La Rural, the Buenos Aires and Punta del Este Convention Centers and the DIRECTV Arena stadium, establishments that the Group owns directly or indirectly, have also been closed since March 20. All planned congresses were suspended, most of the fairs and conventions have been postponed, while the shows scheduled at the DIRECTV Arena stadium were mostly cancelled. The reopening date of these establishments is uncertain, as well as the future agenda of fairs, conventions and shows.
●
The Libertador hotel in the City of Buenos Aires and Llao Llao in the province of Río Negro have temporarily closed since the mandatory lockdown decreed in March 2020, while the Intercontinental Hotel in the City of Buenos Aires has worked only under a contingency and emergency plan. As a result of the above, the impact on these financial statements is a 99% decrease in revenues compared to same period of previous fiscal year After the end of first quarter of fiscal year 2021, on November 16, the Llao Llao Hotel opened its doors operating under strict protocols. It is expected that the hotels in the city of Buenos Aires will gradually begin to restart their activity in the coming months.
In financial matters, in May and July 2020, IRSA has issued Notes in the local market for an approximate amount of USD 105.4 million. With those proceeds, the Company canceled its Series II Notes for a nominal value of USD 71.4 million maturing on July 20, 2020 and Series II Notes for a nominal value of CLP 31,502.6 million (equivalent to approximately USD 41 million) maturing on August 6, 2020. On the other hand, IRSA CP canceled its Series IV Notes on September 14 for a nominal value of USD 140 million.
The maturity of IRSA Series I notes for a nominal value of USD 181.5 million falls within the period contemplated by communication “A” 7106 of the BCRA mentioned above. In this sense, IRSA presented a proposal to the BCRA in the corresponding terms and carried out an exchange operation through the payment in cash of USD 72.6 million and the issuance of two new series of Notes: Series VIII and Series IX for a nominal value of USD 31.7 million and USD 80.7 million (including USD 6.5 million of new subscriptions). The exchange offer was accepted by 98.3%
In the next 12 months, IRSA faces the maturity of its Series III Notes for a nominal value of ARS 354 million (equivalent to USD 4.6 million) maturing on February 21, 2021, Series IV Notes for a nominal value of USD 51.4 million maturing on May 21, 2021, Series VI Notes for a nominal value of ARS 335 million (equivalent to USD 4.4 million) maturing on July 21, 2021, bank overdrafts for an amount equivalent to USD 22.0 million and other banking debt for USD 11.8 million. For its part, IRSA CP has maturities of banking debt for the approximate sum of USD 72.7 million.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
It is important to mention that IRSA has approved with IRSA CP a credit line for up to USD 180 million over 3 years, of which as of September 30, 2020 IRSA used approximately USD 104.5 million, leaving the balance available. Additionally, at the Annual Shareholders Meeting, held on October 26, 2020, IRSA CP approved the distribution of a cash dividend of ARS 9,700 million that will be paid on November 25. As of September 30, IRSA owned an 80.65% stake in IRSA CP.
The final extent of the Coronavirus outbreak and its impact on the country's economy is unknown and difficult to fully predict. However, although it has produced significant short-term effects, they are not expected to affect business continuity and the Company’s ability to meet financial commitments for the next twelve months.
The Company is closely monitoring the situation and taking all necessary measures to preserve human life and the Group's businesses.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Consolidated Results
(in millions of ARS) | IQ 21 | IQ 20 | YoY Var |
Revenues | 1,609 | 4,487 | -64.1% |
Net gain from fair value adjustment of investment properties | 24,089 | 12,349 | 95.1% |
Profit from operations | 23,489 | 14,142 | 66.1% |
Depreciation and amortization | 122 | 119 | 2.5% |
EBITDA(1) | 23,611 | 14,261 | 65.6% |
Adjusted EBITDA(1) | 4,876 | 1,912 | 155.0% |
Profit of the Period from continuing operations | 14,736 | 1,130 | 1,204.1% |
Result of the Period from discontinued operations | -6,396 | 13,887 | -146.1% |
Profit of the period | 8,340 | 15,017 | -44.5% |
Attributable to equity holders of the parent | 6,615 | 4,509 | 46.7% |
Attributable to non-controlling interest | 1,725 | 10,508 | -83.6% |
(1) See Point XIX: EBITDA Reconciliation
Company’s income decreased by 64.1% during the first quarter of fiscal year 2021 compared to the same period of 2020 mainly due to the impact of COVID-19 pandemic in our subsidiary IRSA CP Shopping Malls segment that straightly affected operations, while adjusted EBITDA increased 155.0% mainly explained by Sales and Developments segment whose adjusted EBITDA reached ARS 4,923 million because of Bouchard 710 and Boston Tower’s office sales made by IRSA CP. Rental segments Adjusted EBITDA reached ARS 92 million, negative ARS 150 million from the Shopping Malls segment, ARS 386 million from the Offices segment, and negative ARS 144 million from Hotels Segment, which represents a decrease of 96% compared to the same period of previous fiscal year.
The net result for the first quarter of fiscal year 2021 recorded a gain of ARS 8,340 million compared to ARS 15,017 million in the same period of 2020, which implies a decrease of 44.5%. The profit from continuing operations shows a gain of ARS 14,736 million, compared to a gain of ARS 1,130 million in the same period of the previous fiscal year, which implies an increase of 1,204.1%. This significant increase is explained by higher results from changes in the fair value of investment properties, partially offset by the decrease in income from the Shopping Malls segment of our subsidiary IRSA CP. On the other hand, the result of discontinued operations reflects a loss of ARS 6,396 million because of the deconsolidation of the investment in Israel as of September 30, 2020, explained by the operating result for the period and the loss due to the derecognition of remaining assets and associated reserves. For more information see “Material and Subsequent Events”.
II. Shopping Malls (through our subsidiary IRSA Propiedades Comerciales S.A.)
During the first quarter of fiscal year 2020, our tenants’ sales reached ARS 5,174 million, 79.4% lower, in real terms, than the same period of 2020. Compared to the immediately previous quarter (IVQ20), there is an increase of 207% in real terms due to the reopening of some of the company's shopping centers that were operating as of September 30, 2020. These reopening began in the interior of the country during the months of May, June, and July 2020. In August, the Arcos District, an open-air premium outlet in the city of Buenos Aires, was opened and after the end of the quarter, In October 2020, the Group's shopping centers opened in the City and Greater Buenos Aires. As of October 31, 2020, all Group's shopping centers were open, operating with rigorous protocols.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Our portfolio’s leasable area totaled 333,345 sqm during the quarter, in line with the same period of previous fiscal year. Portfolio’s occupancy remained at approximately 92.8%.
Shopping Malls’ Operating Indicators
(in ARS million, except indicated) | IQ 21 | IVQ 20 | IIIQ 20 | IIQ 20 | IQ 20 |
Gross leasable area (sqm) | 333,345 | 333,062 | 332,642 | 332,812 | 332,277 |
Tenants’ sales (3 months cumulative) | 5,174 | 1,686 | 18,381 | 30,140 | 25,113 |
Occupancy | 92.8% | 93.2% | 94.8% | 95.0% | 94.3% |
Shopping Malls’ Financial Indicators
(in millions of ARS) | IQ 21 | IQ 20 | YoY Var |
Revenues from sales, leases, and services | 367 | 2,085 | -82.4% |
Net result from fair value adjustment on investment properties | 1,178 | 601 | 96.0% |
Result from operations | 986 | 2,082 | -52.6% |
Depreciation and amortization | 42 | 37 | 13.5% |
EBITDA (1) | 1,028 | 2,119 | -51.5% |
Adjusted EBITDA (1) | (150) | 1,518 | -109.9% |
(1) See Point XIX: EBITDA Reconciliation
Income from this segment decreased 82.4% during the first quarter of fiscal year 2021, compared with same period of previous fiscal year, mainly explained by the closure of operations due to COVID-19 from March 20 to October 14, 2020, date from which all the company’s shopping malls are operational.
Adjusted EBITDA was negative by ARS 150 million, a 109.9% decrease when compared to the same period of fiscal year 2020 as a direct consequence of the impact of the COVID-19 pandemic on operations.
Operating data of our Shopping Malls
Date of opening | Location | Gross Leasable Area sqm (1) | Stores | Occupancy Rate (2) | IRSA CP’s Interest (3) | |
Alto Palermo | Dec-97 | City of Buenos Aires | 18,655 | 136 | 94.5% | 100% |
Abasto Shopping(4) | Nov-99 | City of Buenos Aires | 36,761 | 163 | 94.6% | 100% |
Alto Avellaneda | Dec-97 | Province of Buenos Aires | 38,801 | 126 | 96.2% | 100% |
Alcorta Shopping | Jun-97 | City of Buenos Aires | 15,725 | 114 | 97.4% | 100% |
Patio Bullrich | Oct-98 | City of Buenos Aires | 11,396 | 89 | 89.7% | 100% |
Dot Baires Shopping | May-09 | City of Buenos Aires | 48,805 | 164 | 71.7% | 80% |
Soleil | Jul-10 | Province of Buenos Aires | 15,156 | 79 | 95.9% | 100% |
Distrito Arcos | Dec-14 | City of Buenos Aires | 14,335 | 65 | 100.0% | 90.0% |
Alto Noa Shopping | Mar-95 | Salta | 19,313 | 85 | 99.6% | 100% |
Alto Rosario Shopping(4) | Nov-04 | Santa Fe | 33,682 | 140 | 98.3% | 100% |
Mendoza Plaza Shopping | Dec-94 | Mendoza | 43,123 | 127 | 96.0% | 100% |
Córdoba Shopping | Dec-06 | Córdoba | 15,361 | 104 | 98.1% | 100% |
La Ribera Shopping | Aug-11 | Santa Fe | 10,530 | 70 | 97.4% | 50% |
Alto Comahue | Mar-15 | Neuquén | 11,702 | 95 | 93.9% | 99.95% |
Patio Olmos(6) | Sep-07 | Córdoba | ||||
Total | 333,345 | 1,557 | 92.8% |
(1) Corresponds to gross leasable area in each property. Excludes common areas and parking spaces.
(2) Calculated dividing occupied square meters by leasable area as of the last day of the fiscal period.
(3) Company’s effective interest in each of its business units.
(4) Excludes Museo de los Niños (3,732 square meters in Abasto and 1,261 square meters in Alto Rosario).
(5) IRSA CP owns the historic building of the Patio Olmos shopping mall in the Province of Córdoba, operated by a third party.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Cumulative tenants’ sales as of September 30
(per Shopping Mall, in ARS. million) | IQ 21 | IQ 20 | YoY Var |
Alto Palermo | 127 | 3,116 | -95.9% |
Abasto Shopping | 94 | 3,231 | -97.1% |
Alto Avellaneda | 92 | 2,829 | -96.7% |
Alcorta Shopping | 17 | 1,765 | -99.0% |
Patio Bullrich | 168 | 1,193 | -85.9% |
Dot Baires Shopping | 83 | 2,390 | -96.5% |
Soleil | 184 | 1,377 | -86.6% |
Distrito Arcos | 500 | 1,491 | -66.5% |
Alto Noa Shopping | 653 | 1,099 | -40.6% |
Alto Rosario Shopping | 1,230 | 2,509 | -51.0% |
Mendoza Plaza Shopping | 1,226 | 1,971 | -37.8% |
Córdoba Shopping | 506 | 771 | -34.4% |
La Ribera Shopping(1) | 142 | 572 | -75.2% |
Alto Comahue | 152 | 799 | -81.0% |
Total | 5,174 | 25,113 | -79.4% |
(1) Through our joint venture Nuevo Puerto Santa Fe S.A.
Cumulative tenants’ sales per type of business
(per Type of Business. in ARS million) | IQ 21 | IQ 20 | YoY Var |
Anchor Store | 381 | 1,327 | -71.3% |
Clothes and Footwear | 2,477 | 13,575 | -81.8% |
Entertainment | - | 1,047 | -100.0% |
Home | 143 | 493 | -71.0% |
Restaurant | 452 | 3,065 | -85.3% |
Miscellaneous | 939 | 3,140 | -70.1% |
Services | 23 | 296 | -92.2% |
Electronic appliances | 759 | 2,170 | -65.0% |
Total | 5,174 | 25,113 | -79.4% |
Detailed Revenues as of September 30
(in ARS million) | IQ 21 | IQ 20 | YoY Var |
Base Rent (1) | 65 | 1,045 | -93.8% |
Percentage Rent | 63 | 499 | -87.4% |
Total Rent | 128 | 1,544 | -91.7% |
Revenues from non-traditional advertising | 33 | 56 | -41.1% |
Admission rights | 146 | 263 | -44.5% |
Fees | 25 | 29 | -13.8% |
Parking | 3 | 122 | -97.5% |
Commissions | 29 | 56 | -48.2% |
Others | 3 | 15 | -80.0% |
Subtotal (2) | 367 | 2,085 | -82.4% |
Expenses and Collective Promotion Funds | 354 | 844 | -58.1% |
Total | 721 | 2,929 | -75.4% |
(1) Includes Revenues from stands for ARS 43.8 million cumulative as of September 2020
(2) Does not include Patio Olmos.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
III. Offices
The corporate activity carried out remotely or virtual work that characterized this stage of confinement by COVID-19 brought with it a combination of lower demand, increased vacancy that reached 11.3%, 1.1 bps higher than previous quarter, and a slight decrease in the rental prices of category A + and A office buildings in Buenos Aires, which went from USD 26.3 to USD 26.0 for this quarter.
Offices’ Operating Indicators
IQ 21 | IVQ 20 | IIIQ 20 | IIQ 20 | IQ 20 | |
Leasable area | 93,144 | 115,640 | 115,640 | 115,640 | 115,640 |
Total Occupancy | 83.7% | 86.1% | 87.0% | 88.7% | 88.1% |
Class A+ & A Occupancy | 91.6% | 93.0% | 93.9% | 97.1% | 96.6% |
Class B Occupancy | 53.6% | 52.4% | 53.2% | 47.5% | 46.2% |
Rent USD/sqm | 26.0 | 26.6 | 26.6 | 26.9 | 26.6 |
Gross leasable area was 93,144 sqm as of the three-month period of fiscal year 2021, highly decreased when compared to the same period of previous year due to the sale of Bouchard Building and six floors sales of the Boston Tower.
Portfolio average occupancy decreases compared to previous quarters reaching 83.7%, mainly due to a slightly higher vacancy in our premium portfolio (class A+&A), mainly motivated by the sale of 100% occupied Boston Tower floors. Category B offices increased 1.3 bps their occupancy. The average rental price reached USD 26.0 per sqm, slightly below previous quarters.
Offices’ Financial Indicators
(in ARS million) | IQ 21 | IQ 20 | YoY Var |
Revenues from sales, leases and services | 541 | 697 | -22.4% |
Net gain from fair value adjustment on investment properties, PP&E e inventories | 13,112 | 6,845 | 91.6% |
Profit from operations | 13,483 | 7,413 | 81.9% |
Depreciation and amortization | 15 | 7 | 114.3% |
EBITDA(1) | 13,498 | 7,420 | 81.9% |
Adjusted EBITDA (1) | 386 | 575 | -32.9% |
(1) See Point XIX: EBITDA Reconciliation
In real terms, during the first quarter of fiscal year 2021, revenues from the offices segment decreased by 22.4% compared to the same period of 2020.
Adjusted EBITDA from this segment diminished 32.9% compared to the same period of the previous year due to the decrease in revenues related to the sale of offices floors, decrease in occupancy, and increase in commercial bonuses. Adjusted EBITDA margin was 71.3%, 11.2 bps higher than the same period of previous year.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Below is information on our Office segment and other rental properties as of September 30, 2020.
Offices & Others | Date of Acquisition | Gross Leasable Area (sqm)(1) | Occupancy (2) | IRSA CP’s Actual Interest | IQ 21 - Rental revenues (ARS thousand) |
AAA & A Offices | |||||
República Building | Apr-08 | 19,885 | 86.9% | 100% | 115,706 |
BankBoston Tower | Aug-07 | 7,383 | 85.6% | 100% | 71,721 |
Intercontinental Plaza(3) | Nov-97 | 2,979 | 100.0% | 100% | 31,654 |
Bouchard 710 | Jun-05 | - | - | 100% | 31,066 |
Dot Building | Nov-06 | 11,242 | 84.9% | 80% | 55,714 |
Zetta | May-19 | 32,173 | 97.5% | 80% | 188,072 |
Total AAA & A Offices | 73,662 | 91.6% | 493,933 | ||
B Offices | |||||
Philips | Jun-17 | 8,017 | 85.8% | 100% | 8,574 |
Suipacha 652/64 | Nov-91 | 11,465 | 31.2% | 100% | 27,684 |
Total B Buildings | 19,482 | 53.6% | 36,258 | ||
Subtotal Offices | 93,144 | 83.7% | 530,191 | ||
Other rental properties(4) | 10,150 | ||||
Total Offices | 93,144 | 83.7% | 540,341 |
(1) Corresponds to the total leasable surface area of each property as of September 30, 2020. Excludes common areas and parking spaces.
(2) Calculated by dividing occupied square meters by leasable area as of September 30, 2020.
(3) We own 13.2% of the building that has 22,535 square meters of gross rental area.
(4) Includes rental income from all those properties that are not buildings intended for rent, but that are partially or fully rented (Philips Deposit, Anchorena 665, San Martin Plot and Santa María del Plata).
IV. Sales and Developments
(in millions of ARS) | IQ 21 | IQ 20 | YoY Var |
Revenues | 39 | 83 | -53.0% |
Net gain from fair value adjustment on investment properties | 10,096 | 5,153 | 95.9% |
Profit from operations | 9,661 | 5,045 | 91.5% |
Depreciation and amortization | 4 | 12 | -66.7% |
Net realized gain from fair value adjustment on investment properties | 5,354 | - | - |
EBITDA(1) | 9,665 | 5,057 | 91.1% |
Adjusted EBITDA(1) | 4,923 | -96 | - |
(1) See Point XIX: EBITDA Reconciliation
Revenues from the “Sales and Development” segment decreased 53.0% during the first quarter of fiscal year 2021 compared to the same period of previous year, due to a drop in Catalinas' revenue recognition because of a lesser work progress when compared to the same period of last fiscal year. Adjusted EBITDA of the segment was a ARS 4,923 million gain, mainly explained by the impact of the realized fair value of the sales of Bouchard 710 and Boston Tower sqm, compared to a ARS 96 million loss in the same period of fiscal year 2020.
Investment Properties Sales | |||||
Office Buildings | Date | Floors | GLA | Price (USD MM) | Price sqm (USD) |
Bouchard 710 – Total | Jul-2020 | 12 | 15,014 | 87.2 | 5,800 |
Boston Tower – Partial | Jul & Aug-2020 | 6 | 7,482 | 41.4 | 5,530 |
IQ21 Sales | 22,496 | 128.6 | |||
Boston Tower - Remaining | Nov-2020 | 7 | 7,158 | 42.0(1) | 5,710 |
Subsequent Sales | 7,158 | 42.0 |
(1) Includes the value of a retail store for USD 1.1 million.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
V. CAPEX (through our subsidiary IRSA Propiedades Comerciales S.A.)
The works that the company had in progress before the emergence of COVID-19 have been suspended due to the interruption of construction activity in the city of Buenos Aires on March 20. To date, the works were resumed in their entirety, operating with all the protocols in force.
200 Della Paolera - Catalinas building
The building under construction will have 35,000 sqm of GLA consisting of 30 office floors and 316 parking spaces and is located in the “Catalinas” area in the City of Buenos Aires, one of the most sought-after spots for Premium office development in Argentina. The company owns 28,051 square meters consisting of 24 floors and 272 parking spaces in the building. The total estimated investment in the project amounts to ARS 2,600 million and as of today, work progress is 97%.
Alto Palermo Expansion
We keep working on the expansion of Alto Palermo shopping mall, the shopping mall with the highest sales per square meter in our portfolio, that will add a gross leasable area of approximately 3,900 square meters and will consist in moving the food court to a third level by using the area of an adjacent building acquired in 2015. Work progress as of today is 66% and construction works are expected to be finished by June 2021.
VI. Hotels
Hotels segment has also been affected by the social, preventive, and mandatory isolation decreed by the Argentine government as of March 20, 2020, together with the closure of borders and the arrival of tourism. The Libertador hotel in the City of Buenos Aires and Llao Llao in the province of Río Negro have temporarily closed since the mandatory lockdown decreed in March 2020, while the Intercontinental Hotel in the City of Buenos Aires has worked only under a contingency and emergency plan. After the end of first quarter of fiscal year 2021, on November 16, the Llao Llao Hotel opened its doors operating under strict protocols. It is expected that the hotels in the city of Buenos Aires will gradually begin to restart their activity in the coming months.
(in millions of ARS) | IQ 21 | IQ 20 | YoY Var |
Revenues | 6 | 701 | -99.1% |
Profit from operations | (191) | 84 | -327.4% |
Depreciation and amortization | 47 | 44 | 6.8% |
EBITDA | (144) | 128 | -212.5% |
During the first quarter of fiscal year 2021, Hotels segment recorded a decrease in revenues of 99.1% while the segment’s EBITDA reached ARS 144 million negative, a 212.5% decrease when compared to the same period of previous fiscal year.
The following chart shows certain information regarding our luxury hotels:
Hotels | Date of Acquisition | IRSA’s Interest | Number of rooms |
Intercontinental (1) | 11/01/1997 | 76.34% | 313 |
Sheraton Libertador (2) | 03/01/1998 | 100.00% | 200 |
Llao Llao (3) | 06/01/1997 | 50.00% | 205 |
Total | - | - | 718 |
(1) Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(2) Through Hoteles Argentinos S.A.U.
(3) Through Llao Llao Resorts S.A.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Hotels’ operating and financial indicators
IQ 21 | IVQ 20 | IIIQ 20 | IIQ 20 | IQ 20 | |
Average Occupancy | 0.6% | 0.6% | 52.8% | 68.1% | 61.6% |
Average Rate per Room (USD/night) | 95 | 86 | 193 | 180 | 163 |
VII. International
Lipstick Building, New York, United States
On August 7, 2020, Metropolitan signed an agreement with the owner of the Ground Lease in which it terminated the relationship, leaving the administration of the building. For this reason, Metropolitan ceases to recognize the liabilities associated with the ground lease, as well as ceases to recognize all the assets and liabilities associated with the building and the operation of the administration.
Investment in Condor Hospitality Inc.
On July 19, 2019, Condor signed an agreement and merger plan. As agreed, each Condor ordinary share, whose nominal value is USD 0.01 will be canceled before the merger and will become the right to receive a cash amount equivalent to USD 11.10 per ordinary share. Additionally, in accordance with the terms and conditions of the merger agreement, each Series E convertible share will be automatically canceled and will become entitled to receive a cash amount equal to USD 10.00 per share. The closing of the acquisition, scheduled for March 23, 2020, did not occur.
On October 14, 2020, Condor signed an agreement with NexPoint Hospitality Trust (“NHT”) and some of its affiliates to resolve and settle all claims between them related to the merger agreement. According to this agreement, NHT and its affiliates shall make three payments to Condor in three instalments ending on December 30, 2020 and totalling USD 7.0 million.
As of the date of these financial statement presentation, the group owned 2,245,100 common shares and 325,752 preferred E shares.
VIII. Corporate
(in millions of ARS) | IQ 21 | IQ 20 | YoY Var |
Revenues | - | - | - |
Loss from operations | (74) | (88) | -15.9% |
Depreciation and amortization | 1 | 1 | - |
EBITDA | (73) | (87) | -16.1% |
IX. Financial Operations and Others
Interest in Banco Hipotecario S.A. (“BHSA”)
BHSA is a leading bank in the mortgage lending industry, in which IRSA held an equity interest of 29.91% as of September 30, 2020. During the first quarter of fiscal year 2021, the investment in Banco Hipotecario generated a ARS 60 million loss compared to a ARS 477 million gain during the same period of 2020. For further information, visit http://www.cnv.gob.ar or http://www.hipotecario.com.ar.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
X. EBITDA by Segment (ARS million)
IQ 21 | Shopping Malls | Offices | Sales and Developments | Hotels | International | Corporate | Others | Total |
Profit / (loss) from operations | 986 | 13,483 | 9,661 | (191) | 11 | (74) | 492 | 24,368 |
Depreciation and amortization | 42 | 15 | 4 | 47 | - | 1 | 13 | 122 |
EBITDA | 1,028 | 13,498 | 9,665 | (144) | 11 | (73) | 505 | 24,490 |
IQ 20 | Shopping Malls | Offices | Sales and Developments | Hotels | International | Corporate | Others | Total |
Profit / (loss) from operations | 2,082 | 7,413 | 5,045 | 84 | (43) | (88) | 257 | 14,750 |
Depreciation and amortization | 37 | 7 | 12 | 44 | 1 | 1 | 10 | 112 |
EBITDA | 2,119 | 7,420 | 5,057 | 128 | (42) | (87) | 267 | 14,862 |
EBITDA Var | -51,5% | 81,9% | 91,1% | -212,5% | - | -16,1% | 89,1% | 64,8% |
XI. Reconciliation with Consolidated Statements of Income (ARS million)
Below is an explanation of the reconciliation of the company’s profit by segment with its Consolidated Statements of Income. The difference lies in the presence of joint ventures included in the segment but not in the Statements of Income.
Total as per segment | Joint ventures* | Expenses and CPF | Elimination of inter-segment transactions | Total as per Statements of Income | |
Revenues | 1,218 | (8) | 405 | (6) | 1,609 |
Costs | (651) | 14 | (460) | - | (1,097) |
Gross result | 567 | 6 | (55) | (6) | 512 |
Net loss from fair value adjustment of investment properties | 24,926 | (837) | - | - | 24,089 |
General and administrative expenses | (654) | 1 | - | 9 | (644) |
Selling expenses | (451) | 1 | - | - | (450) |
Other operating results, net | (25) | 1 | 9 | (3) | (18) |
Result from operations | 24,363 | (828) | (46) | - | 23,489 |
Share of loss of associates and joint ventures | (472) | 619 | - | - | 147 |
Result before financial results and income tax | 23,891 | (209) | (46) | - | 23,636 |
*Includes Puerto Retiro, CYRSA, Nuevo Puerto Santa Fe and Quality (San Martín plot).
XII. Financial Debt and Other Indebtedness
The following table describes our total indebtedness as of September 30, 2020:
Description | Currency | Amount (USD MM) (1) | Interest Rate | Maturity |
Bank overdrafts | ARS | 22.0 | Floating | < 360 days |
Series I NCN | USD | 181.5 | 10.0% | Nov-20 |
Series III NCN | ARS | 4.6 | Variable | Feb-21 |
Series IV NCN | USD | 51.4 | 7.0% | May-21 |
Series VI NCN | ARS | 4.4 | Floating | Jul-21 |
Series VII NCN | USD | 33.7 | 4.0% | Jan-22 |
Series V NCN | USD | 9.2 | 9.0% | May-22 |
Loan with IRSA CP(3) | USD | 104.5 | - | Mar-22 |
Other debt | USD | 17.6 | - | Feb-22 |
IRSA’s Total Debt | USD | 428.9 | ||
Cash & Cash Equivalents + Investments | USD | 0.3 | ||
IRSA’s Net Debt | USD | 428.6 | ||
Bank loans and overdrafts | ARS | 72.7 | - | < 360 days |
PAMSA loan | USD | 27.0 | Fixed | Feb-23 |
IRSA CP NCN Class II | USD | 360.0 | 8.75% | Mar-23 |
IRSA CP’s Total Debt | USD | 459.7 | ||
Cash & Cash Equivalents + Investments (2) | USD | 134.7 | ||
Intercompany Credit | USD | 104.5 | ||
IRSA CP’s Net Debt | USD | 220.5 |
(1)
Principal amount in USD (million) at an exchange rate of ARS 76.18/USD, without considering accrued interest or eliminations of balances with subsidiaries.
(2)
Includes Cash and cash equivalents, Investments in Current Financial Assets and related companies notes holding.
(3)
Includes amounts taken by IRSA and subsidiaries.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
XIII. Material and Subsequent Events
July 2020: Notes issuance
On July 21, 2020, the company issued in the local market a total amount of USD 38.4 million through the following Notes:
●
Series VI: denominated and payable in pesos for ARS 335.2 million (equivalent at the time of issuance to USD 4.7 million) at a variable rate (private BADLAR + 4.0%) with quarterly payments. The principal will be paid in two installments: the first for an amount equivalent to 30% of the nominal value payable 9 (nine) months from the Issue and Settlement Date, and the second for an amount equivalent to 70% of the nominal value payable on the due date, July 21, 2021. Price of issuance was 100.0% of the nominal value.
●
Series VII: denominated in dollars and payable in pesos at the applicable exchange rate for USD 33.7 million at a fixed rate of 4.0%, with quarterly payments and principal expiring on January 21, 2022. Price of issuance was 100.0% of the nominal value.
The funds have been used to refinance short-term liabilities.
September 2020: Investment in IDBD and DIC
IDBD financial situation as of June 30, 2020 showed a negative Shareholders Equity, negative Cash Flows and a downgrade in the credit rating. In order to comply with financial liabilities, including short term debts, IDBD cash flow depended on the financial support of its controlling shareholder (Dolphin Netherlands B.V.) and the sale of assets which was not under the control of IDBD. IDBD has been keeping negotiations with financial creditors (bondholders) to restructure its financial debt in more favorable conditions.
As of June 30, 2020, the aggregate principal amount of the (i) IDBD Series 9 Bonds was NIS 901 million (“Series 9”), (ii) IDBD Series 14 Bonds was NIS 889 million collateralized by DIC shares owned directly or indirectly by us representing 70% of the share capital of DIC (“Series 14”), (iii) IDBD Series 15 Bonds was NIS 238million collateralized by shares of Clal representing 5% of the share capital of Clal (“Series 15”).
On September 7, 2020, the Company reported that, regarding the capital contributions committed for September 2, 2020 and 2021, for NIS 70 million each, it considered that there were doubts regarding the fulfilment of the previous conditions established to make said contributions. Therefore, it has resolved not to make the corresponding payment for this year.
On September 17, 2020, the Series 9 trustee submitted to the District Court in Tel-Aviv-Jaffa (the "Court") a petition to grant an order for the opening of proceedings for IDBD pursuant to the Insolvency and Economic Rehabilitation Law, 5778 – 2018 and to instruct the appointment of a trustee for IDBD pursuant to Section 33 and to grant the trustee any and all authority over the decision making of IDBD as well as the request of an immediate hearing to open the proceedings against IDBD (the “Petition”).
On September 21, 2020, the Series 14 trustee informed that the holders of Series 14 approved to make the entire uncleared balance of Series 14 repayable immediately.
On September 22, 2020, IDBD and Dolphin Netherlands B.V. submitted an initial response to the Petition, arguing that it was in the best interest of IDBD and its creditors to exhaust the negotiations among the controlling shareholder and its creditors during a short period with the aim to maximize the value of its assets, avoid costs and additional negative effects.
In addition, responses by the Series 14 trustee and the Series 15 trustee were filed requesting the enforcement of liens and the appointment of a receiver as well as an urgent hearing, which was scheduled for September 24, 2020.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
On September 25, 2020, the Court resolved that IDBD is insolvent and has therefore resolved to grant all three orders requested and accordingly, issued an order for the initiation of proceedings and liquidation of IDBD, and has appointed a liquidator to IDBD and interim receivers over the Pledged DIC Shares and the Pledged Clal Shares. After this decision, the IDBD Board of Directors was removed from its functions, so the Group lost control on that date, proceeding to deconsolidate the financial statements.
October 2019: General Ordinary and Extraordinary Shareholders’ Meeting
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 30, 2019, the following matters, inter alia, were resolved:
●
Distribution of a dividend in kind for ARS 484 million in shares of IRSA Propiedades Comerciales, subsidiary of IRSA.
●
Designation of board members.
●
Compensations to the Board of Directors for the fiscal year ended June 30, 2020.
●
Incentive plan for employees. management and directors to be integrated without premium for up to 1% of the Capital Stock.
November 2020: Dividend distribution announcement
The company announced that a dividend in the amount of ARS 484 million was made available to the Shareholders as of November 17, 2020 payable in shares of IRSA Propiedades Comerciales SA, according to the share price of that company as of October 23, 2020 that amounts to ARS 320 per share.
The Company paid the sum of 1,512,500 shares of IRSA Propiedades Comerciales S.A. at a ratio of 0.00261372304655 shares IRSA Propiedades Comerciales S.A. per IRSA share and 0.0261372304655 per IRSA ADR. The dividend was charged to the fiscal year ended June 30, 2020, and was paid to all shareholders who had such quality as of November 16, 2020 according to the record kept by Caja de Valores S.A.
November 2020: Notes Issuance – Exchange Offer Series I Notes - BCRA “A” 7106 Communication
On November 12, 2020, the company carried out an exchange operation of its Series I Notes, for a nominal value of USD 181.5 million
Nominal Value of Existing Notes presented and accepted for the Exchange (for both Series): approximately USD 178.5 which represents 98.31% acceptance, through the participation of 6,571 orders.
●
Series VIII: Face Value of Existing Notes presented and accepted for the Exchange: approximately USD 104.3 million.
Nominal Value to be Issued: approximately USD 31.7 million.
Issuance Price: 100% nominal value.
Maturity Date: It will be November 12, 2023.
Consideration of the Exchange Offer: eligible holders whose existing notes have been accepted for the Exchange by the Company, will receive for every USD 1 submitted to the Exchange, the accrued interest of the existing notes until the settlement and issue date and the following:
■
A sum of money of approximately USD 72,6 million for repayment of capital of such existing notes presented to the Exchange, in cash, in United States Dollars, which will be equivalent to USD 0.69622593 for each USD 1 of existing notes presented to the Exchange; and
■
The remaining amount until completing 1 USD for each 1 USD of existing notes presented to the Exchange, in notes Series VIII.
Annual Nominal Fixed Interest Rate: 10.00%.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
Amortization: The capital of the Series VIII Notes will be amortized in 3 annual installments (33% of the capital on November 12, 2021, 33% of the capital on November 12, 2022, 34% of the capital on the maturity date of Series VIII).
Interest Payment Dates: Interest will be paid quarterly for the expired period as of the issue and settlement date.
Payment Address: Payment will be made to an account at Argentine Securities Commission in the Autonomous City of Buenos Aires
●
Series IX: Face Value of Existing Notes presented and accepted for the Exchange: approximately USD 74.2 million.
Nominal Value to be Issued (together with the Face Value to be issued as a result of the cash subscription): approximately USD 80.7 million.
Issuance Price: 100% nominal value.
Maturity Date: It will be March 1, 2023.
Consideration of the Exchange Offer: the eligible holders whose existing notes have been accepted for the Exchange by the Company, will receive Series IX Notes for 100% of the capital amount presented for exchange and accepted by the Company and the accrued interest of the existing notes until the settlement and issue date.
Early Bird: will consist of the payment of USD 0.02 for each USD 1 of existing notes delivered and accepted in the Exchange on or before the deadline date to Access the Early Bird. Said consideration will be paid in Pesos on the issue and settlement date according to the exchange rate published by Communication “A” 3500 of the Central Bank of Argentina on the business day prior to the expiration date of the Exchange, which is ARS 79.3433 for each USD 1 of Existing Notes delivered and accepted in the Exchange.
Annual Nominal Fixed Interest Rate: 10.00%.
Amortization: The capital of the Series IX Notes will be amortized in one installment on the maturity date.
Interest Payment Dates: Interest will be paid quarterly for the expired period from the issuance and settlement date.
Payment Address: Payment will be made to an account at Argentine Securities Commission in New York, United States, for which purpose the Company will make US dollars available to an account reported by the Argentine Securities Commission in said jurisdiction.
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Modifications to the Terms of the Existing Notes: Considering that consent has been obtained for an amount greater than 90% of the existing notes capital, the Company has modified and replaced the following essential and non-essential terms and conditions of the existing notes.
By virtue of the implementation of the Proposed Non-Essential Modifications, the entire section of "Certain Commitments" and "Events of Default" is eliminated from the terms and conditions set forth in the prospectus supplements dated May 2, 2019 and dated July 25, 2019 corresponding to the existing notes.
Additionally, pursuant to the implementation of the Proposed Essential Modifications, the following terms and conditions of the Existing Notes are modified and replaced:
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Expiration Date: It will be March 1, 2023.
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Interest Payment Dates: will be the same dates reported for Class IX in the Notice of Results.
It is clarified that the terms and conditions of the Series I Notes not modified by the Proposed Essential Modifications and the Proposed Non-Essential Modifications will maintain their full validity.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
XIV. Summarized Comparative Consolidated Balance Sheet
(in ARS million) | 09.30.2020 | 06.30.2020 |
Non-current assets | 187,230 | 453,746 |
Current assets | 13,185 | 221,464 |
Total assets | 200,415 | 675,210 |
Capital and reserves attributable to the equity holders of the parent | 70,375 | 61,500 |
Non-controlling interest | 23,364 | 70,544 |
Total shareholders’ equity | 93,739 | 132,044 |
Non-current liabilities | 76,626 | 388,806 |
Current liabilities | 30,050 | 154,360 |
Total liabilities | 106,676 | 543,166 |
Total liabilities and shareholders’ equity | 200,415 | 675,210 |
XV. Summarized Comparative Consolidated Income Statement
(in ARS million) | 09.30.2020 | 09.30.2019 |
Profit from operations | 23,489 | 14,142 |
Share of profit of associates and joint ventures | 147 | 737 |
Profit from operations before financing and taxation | 23,636 | 14,879 |
Financial income | 56 | 83 |
Financial cost | (1,593) | (1,782) |
Other financial results | 624 | (9,152) |
Inflation adjustment | (29) | (393) |
Financial results, net | (942 | (11,244) |
Profit before income tax | 22,694 | 3,635 |
Income tax | (7,958) | (2,505) |
Profit for the period from continued operations | 14,736 | 1,130 |
Profit from discontinued operations after taxes | (6,396) | 13,887 |
Profit for the period | 8,340 | 15,017 |
Other comprehensive income for the period | (8,673) | 15,847 |
Total comprehensive income for the period | (333) | 30,864 |
Attributable to: | ||
Equity holders of the parent | 2,914 | 3,568 |
Non-controlling interest | (3,247) | 27,296 |
XVI. Summary Comparative Consolidated Cash Flow
(in ARS million) | 09.30.2020 | 09.30.2019 |
Net cash generated from operating activities | 3,362 | 10,467 |
Net cash generated from investing activities | 41,441 | 3,490 |
Net cash used in financing activities | (27,144) | (35,239) |
Net increase / (decrease) in cash and cash equivalents | 17,659 | (21,282) |
Cash and cash equivalents at beginning of year | 97,276 | 93,059 |
Cash and cash equivalents reclassified to held for sale | - | 36 |
Subsidiaries deconsolidation | (104,164) | - |
Foreign exchange gain on cash and changes in fair value of cash equivalents | (6,374) | 13,875 |
Cash and cash equivalents at period-end | 4,397 | 85,688 |
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
XVII. Comparative Ratios
(in ARS million) | 09.30.2020 | 09.30.2019 | ||
Liquidity | ||||
CURRENT ASSETS | 13,185 | 0.44 | 224,335 | 1.62 |
CURRENT LIABILITIES | 30,050 | 138,883 | ||
Indebtedness | ||||
TOTAL LIABILITIES | 106,676 | 1.52 | 594,595 | 11.54 |
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 70,375 | 51,512 | ||
Solvency | ||||
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 70,375 | 0.66 | 51,512 | 0.09 |
TOTAL LIABILITIES | 106,676 | 594,595 | ||
Capital Assets | ||||
NON-CURRENT ASSETS | 187,230 | 0.93 | 484,335 | 0.68 |
TOTAL ASSETS | 200,415 | 708,670 |
XVIII. EBITDA Reconciliation
In this summary report we present EBITDA and Adjusted EBITDA. We define EBITDA as profit for the period excluding: (i) interest income, (ii) interest expense, (iii) income tax expense, and (iv) depreciation and amortization. We define Adjusted EBITDA as EBITDA minus (i) total financial results, net excluding interest expense, net (mainly foreign exchange differences, net gains/losses from derivative financial instruments; gains/losses of financial assets and liabilities at fair value through profit or loss; and other financial results, net) and minus (ii) share of profit of associates and joint ventures and minus (iii) net profit from fair value adjustment of investment properties, not realized.
EBITDA and Adjusted EBITDA are non-IFRS financial measures that do not have standardized meanings prescribed by IFRS. We present EBITDA and adjusted EBITDA because we believe they provide investors supplemental measures of our financial performance that may facilitate period-to-period comparisons on a consistent basis. Our management also uses EBITDA and Adjusted EBITDA from time to time, among other measures, for internal planning and performance measurement purposes. EBITDA and Adjusted EBITDA should not be construed as an alternative to profit from operations, as an indicator of operating performance or as an alternative to cash flow provided by operating activities, in each case, as determined in accordance with IFRS. EBITDA and Adjusted EBITDA, as calculated by us, may not be comparable to similarly titled measures reported by other companies. The table below presents a reconciliation of profit from operations to EBITDA and Adjusted EBITDA for the periods indicated:
For the three-month period ended September 30 (in ARS million) | ||
2020 | 2019 | |
Profit for the period | 8,340 | 15,017 |
(Loss) / Profit from discontinued operations | 6,396 | (13,887) |
Interest income | (17) | (83) |
Interest expense | 1,485 | 1,661 |
Income tax | 7,958 | 2,505 |
Depreciation and amortization | 122 | 119 |
EBITDA (unaudited) | 24,284 | 5,332 |
Unrealized net gain from fair value adjustment of investment properties | (18,735) | (12,349) |
Share of profit of associates and joint ventures | (147) | (737) |
Dividends earned | (12) | - |
Foreign exchange differences net | 8 | 8,929 |
(Gain) / loss from derivative financial instruments | 188 | (225) |
Fair value gains of financial assets and liabilities at fair value through profit or loss | (800) | 456 |
Inflation adjustment | 29 | 393 |
Other financial costs/income | 61 | 113 |
Adjusted EBITDA (unaudited) | 4,876 | 1,912 |
Adjusted EBITDA Margin (unaudited)(1) | 303.05% | 42.61% |
(1) Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by revenue from sales, rents and services.
83
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of September 30, 2020
XIX. Brief comment on future prospects for the Fiscal Year
The year 2021 is projected as a great challenge for the company due to the impact of COVID-19 pandemic in the economic activity in Argentina.
As is public knowledge and was mentioned at the beginning of this informative review, as a consequence of the social, preventive and compulsory lockdown, shopping malls throughout the country were closed since March 20, 2020, leaving open exclusively those stores dedicated to essential activities such as pharmacies, supermarkets and banks. This had a significant impact on the revenues of this segment in the last two quarters andwill have it in the next quarter since the company's shopping malls opened 100% in mid-October and are working under rigorous protocols that include social distancing, reduced traffic and hours, access controls, among other safety and hygiene measures. The office segment operated normally during the confinement period
The hotel segment has also been affected by social, preventive and mandatory lockdown. The Libertador hotel in the City of Buenos Aires and Llao Llao in the province of Río Negro have temporarily closed since March 20, while the Intercontinental Hotel in the City of Buenos Aires has only worked under a contingency and emergency plan. Subsequently, on November 16, the Llao Llao Hotel opened its doors operating under strict protocols. It is expected that the hotels in the city of Buenos Aires will gradually begin to relax their activity in the coming months.
Looking ahead to the next fiscal year, we will continue working on reducing and make the cost structure more efficient, hoping that the activity of shopping malls will evolve in line with the economic recovery. To date, although it is too early to evaluate a performance of the activity, we can perceive a gradual recovery in sales in our shopping malls, although progressive. Regarding the hotel business, we expect gradual openings until the regularization of air flows, which will lead to the full operations.
The Company’s Board of Directors will continue evaluating financial, economic and / or corporate tools that allow the Company to improve its position in the market in which it operates and to have the necessary liquidity to face its obligations. In the context of this analysis, the indicated tools may be linked to corporate reorganization processes (merger, spin-off or a combination of both), implementation of financial and / or corporate efficiencies in international companies directly or indirectly owned by the Company through reorganization processes, public and / or private disposal of assets that may include real estate as well as negotiable securities owned by the Company, incorporation of shareholders through capital increases through the public offering of shares to raise new capital, issuance of convertible negotiable obligations or subscription options or a combination of these three instruments, repurchase of shares and instruments similar to those described that are useful for the proposed objectives. All this as it was described in the Annual Report of the Company corresponding to the fiscal year ending June 30, 2020.
The Company keeps its commitment to preserve the health and well-being of its clients, employees, tenants and the entire population, constantly reassessing its decisions in accordance with the evolution of events, the regulations that are issued and the guidelines of the competent authorities.
Saúl Zang
First Vice-Chairman
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