IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Financial Statements as of December 31, 2021 and for the six and three-month periods ended as of that date, presented comparatively
Legal information
Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.
Fiscal year N°: 79, beginning on July 1st, 2021.
Legal address: 261 Carlos Della Paolera St., 9th 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: General Ordinary and Extraordinary Shareholders’ Meeting held on December 12, 2019 and registered in the Superintendence on October 13,2020 with the number 9896, Book 1200 Volume – of Joint Stock Companies.
Expiration of the Company’s by-laws: April 5, 2043.
Registration number with the Superintendence: 213,036.
Capital: 810,870,597 shares. (*)
Common Stock subscribed, issued and paid-up nominal value (in millions of ARS): 811.
Parent Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
(Cresud S.A.C.I.F. y A.).
Legal Address: 261 Carlos Della Paolera St., 9th 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: 434,263,359 common shares.
Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 53.68% (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 ARS 1 per share and entitled to 1 vote each | 810,870,597 | 811 |
(1) For computation purposes, treasury shares have been subtracted.
(2) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.
(*) By Extraordinary Shareholders’ Meeting dated December 22, 2021, an increase of the capital stock of the company was approved, as a result of the merger by absorption with IRSA Propiedades Comerciales S.A. in the amount of ARS 152,158,215 through the issuance of 152,158,215 ordinary shares of ARS 1 par value each and one vote per share. The procedure is in progress. In the same way, the capital increase and the issuance of shares related to the 5,181 warrants exercised in November are in process of being registered in the “Inspección General de Justicia” (General Inspection of Justice).
Index
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 | 8 |
Note 4 – Acquisitions and disposals | 9 |
Note 5 – Financial risk management and fair value estimates | 11 |
Note 6 – Segment information | 11 |
Note 7 – Investments in associates and joint ventures | 13 |
Note 8 – Investment properties | 14 |
Note 9 – Property, plant and equipment | 15 |
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 | 19 |
Note 15 – Cash flow information | 20 |
Note 16 – Trade and other payables | 20 |
Note 17 – Borrowings | 21 |
Note 18 – Provisions | 22 |
Note 19 – Taxes | 22 |
Note 20 – Revenues | 24 |
Note 21 – Expenses by nature | 24 |
Note 22 – Cost of goods sold and services provided | 24 |
Note 23 – Other operating results, net | 25 |
Note 24 – Financial results, net | 25 |
Note 25 – Related party transactions | 25 |
Note 26 – CNV General Resolution N° 622 | 28 |
Note 27 – Foreign currency assets and liabilities | 28 |
Note 28 – Results from discontinued operations | 29 |
Note 29 – Other significant events of the period | 29 |
Note 30 – Subsequent Events | 31 |
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. | |
BHSA | Banco Hipotecario S.A. | |
Clal | Clal Holdings Insurance Enterprises Ltd. | |
CNV | Securities Exchange Commission | |
CPF | Collective Promotion Funds | |
Condor | Condor Hospitality Trust Inc. | |
Cresud | Cresud S.A.C.I.F. y A. | |
DIC | Discount Investment Corporation Ltd. | |
Efanur | Efanur S.A. | |
Financial Statements | Unaudited Condensed Interim Consolidated Financial Statements | |
Annual Financial Statements | Consolidated Financial Statements as of June 30, 2019 | |
HASAU | Hoteles Argentinos S.A.U. | |
IAS | International Accounting Standards | |
IASB | International Accounting Standards Board | |
IDBD | IDB Development Corporation Ltd. | |
IFRS | International Financial Reporting Standards | |
IRSA, The Company”, “Us”, “We” | IRSA Inversiones y Representaciones Sociedad Anónima | |
IRSA CP | IRSA Propiedades Comerciales S.A. | |
MPIT | Minimum presumed income tax | |
NCN | Non-convertible notes | |
New Lipstick | New Lipstick LLC | |
NIS | New Israeli Shekel | |
Quality | Quality Invest S.A. | |
Shufersal | Shufersal Ltd. | |
TGLT | TGLT S.A. | |
Tyrus | Tyrus S.A. |
1
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of December 31, 2021 and June 30, 2021
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 12.31.2021 | 06.30.2021 | |
ASSETS | |||
Non-current assets | |||
Investment properties | 8 | 238,739 | 220,590 |
Property, plant and equipment | 9 | 6,009 | 4,993 |
Trading properties | 10, 22 | 1,959 | 1,980 |
Intangible assets | 11 | 2,669 | 2,891 |
Right-of-use assets | 12 | 949 | 977 |
Investments in associates and joint ventures | 7 | 12,266 | 14,652 |
Deferred income tax assets | 19 | 551 | 537 |
Income tax and MPIT credit | 28 | 36 | |
Trade and other receivables | 14 | 2,788 | 3,429 |
Investments in financial assets | 13 | 834 | 1,467 |
Total non-current assets | 266,792 | 251,552 | |
Current assets | |||
Trading properties | 10, 22 | 137 | 137 |
Inventories | 22 | 92 | 87 |
Income tax and MPIT credit | 54 | 199 | |
Trade and other receivables | 14 | 10,265 | 10,207 |
Investments in financial assets | 13 | 3,701 | 3,813 |
Derivative financial instruments | 13 | 10 | - |
Cash and cash equivalents | 13 | 7,264 | 2,326 |
Total current assets | 21,523 | 16,769 | |
TOTAL ASSETS | 288,315 | 268,321 | |
SHAREHOLDERS’ EQUITY | |||
Shareholders' equity attributable to equity holders of the parent (according to corresponding statement) | 116,762 | 74,471 | |
Non-controlling interest | 7,947 | 25,162 | |
TOTAL SHAREHOLDERS’ EQUITY | 124,709 | 99,633 | |
LIABILITIES | |||
Non-current liabilities | |||
Borrowings | 17 | 52,812 | 56,275 |
Lease liabilities | 879 | 1,026 | |
Deferred income tax liabilities | 19 | 87,293 | 82,801 |
Trade and other payables | 16 | 1,839 | 1,671 |
Provisions | 18 | 1,576 | 137 |
Derivative financial instruments | 13 | 1 | 11 |
Salaries and social security liabilities | 89 | 104 | |
Total non-current liabilities | 144,489 | 142,025 | |
Current liabilities | |||
Trade and other payables | 16 | 6,310 | 6,146 |
Borrowings | 17 | 11,684 | 18,559 |
Lease liabilities | 110 | 65 | |
Provisions | 18 | 216 | 177 |
Salaries and social security liabilities | 560 | 525 | |
Income tax and MPIT liabilities | 205 | 1,133 | |
Derivative financial instruments | 13 | 32 | 58 |
Total current liabilities | 19,117 | 26,663 | |
TOTAL LIABILITIES | 163,606 | 168,688 | |
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES | 288,315 | 268,321 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
. Eduardo S. Elsztain President |
2
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
for the six and three-month periods ended December 31, 2021 and 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Six months | Three months | ||||
Note | 12.31.2021 | 12.31.2020 | 12.31.2021 | 12.31.2020 | |
Revenues | 20 | 11,051 | 7,473 | 6,222 | 4,770 |
Costs | 21, 22 | (4,216) | (3,968) | (2,283) | (2,124) |
Gross profit | 6,835 | 3,505 | 3,939 | 2,646 | |
Net gain / (loss) from fair value adjustment of investment properties | 8 | 22,450 | 13,986 | 29,607 | (26,492) |
General and administrative expenses | 21 | (1,894) | (2,287) | (1,082) | (1,205) |
Selling expenses | 21 | (840) | (1,188) | (467) | (432) |
Other operating results, net | 23 | (40) | (71) | (106) | (89) |
Profit/ (loss) from operations | 26,511 | 13,945 | 31,891 | (25,572) | |
Share of (loss) / profit of associates and joint ventures | 7 | (120) | (683) | 51 | (931) |
Profit / (loss) before financial results and income tax | 26,391 | 13,262 | 31,942 | (26,503) | |
Finance income | 24 | 157 | 103 | 89 | 8 |
Finance costs | 24 | (3,857) | (4,781) | (1,860) | (2,104) |
Other financial results | 24 | 7,656 | 4,776 | 4,387 | 3,727 |
Inflation adjustment | 24 | 430 | 1,674 | 55 | 1,772 |
Financial results, net | 4,386 | 1,772 | 2,671 | 3,403 | |
Profit / (loss) before income tax | 30,777 | 15,034 | 34,613 | (23,100) | |
Income tax | 19 | (5,257) | (6,044) | (7,975) | 7,328 |
Profit/ (loss) for the period from continuing operations | 25,520 | 8,990 | 26,638 | (15,772) | |
Loss for the period from discontinued operations | 28 | - | (10,748) | - | - |
Profit / (loss) for the period | 25,520 | (1,758) | 26,638 | (15,772) | |
Other comprehensive income: | |||||
Items that may be reclassified subsequently to profit or loss: | |||||
Currency translation adjustment | (434) | 1,058 | (253) | 1,852 | |
Revaluation surplus | - | 430 | - | 430 | |
Other comprehensive (loss) / income for the period from continuing operations | (434) | 1,488 | (253) | 2,282 | |
Other comprehensive loss for the period from discontinued operations | - | (13,781) | - | - | |
Total other comprehensive loss for the period | (434) | (12,293) | (253) | 2,282 | |
Total comprehensive income / (loss) for the period | 25,086 | (14,051) | 26,385 | (13,490) | |
Total comprehensive income / (loss) from continuing operations | 25,086 | 10,478 | 26,385 | (13,490) | |
Total comprehensive loss from discontinued operations | - | (24,529) | - | - | |
Total comprehensive income / (loss) for the period | 25,086 | (14,051) | 26,385 | (13,490) | |
Profit/ (loss) for the period attributable to: | |||||
Equity holders of the parent | 25,722 | (882) | 26,383 | (11,998) | |
Non-controlling interest | (202) | (876) | 255 | (3,774) | |
Profit / (loss) from continuing operations attributable to: | |||||
Equity holders of the parent | 25,722 | 7,606 | 26,383 | (11,998) | |
Non-controlling interest | (202) | 1,384 | 255 | (3,774) | |
Total comprehensive income/ (loss) attributable to: | |||||
Equity holders of the parent | 25,301 | (5,066) | 26,142 | (9,961) | |
Non-controlling interest | (215) | (8,985) | 243 | (3,529) | |
Total comprehensive Income/(loss) from continuing operations attributable to: | |||||
Equity holders of the parent | 25,301 | 10,159 | 26,141 | (9,962) | |
Non-controlling interest | (215) | 319 | 244 | (3,528) | |
Profit / (loss) per share attributable to equity holders of the parent: (i) | |||||
Basic | 31.80 | (1.53) | 32.62 | (20.87) | |
Diluted | 28.87 | (1.53) | 29.62 | (20.87) | |
Profit/ (loss) per share from continuing operations attributable to equity holders of the parent: | |||||
Basic | 31.80 | 13.23 | 32.62 | (20.87) | |
Diluted | 28.87 | 13.18 | 29.62 | (20.87) |
(i) The basic profit/loss per share have been calculated using 808,898,749 shares at 12.31.21 and 575,377,891 at 12.31.20. If 808,898,749 shares had been used for the calculation, the result per share would be (ARS 1.09) for 12.31.20. The diluted profit/loss per share have been calculated using 890,815,893 shares at 12.31.21 and 576,529,312 at 12.31.20. If 890,815,893 shares had been used for the calculation, the result per share would be (ARS 0.99) for 12.31.20. See note 17 to the Annual Financial Statements.
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
. Eduardo S. Elsztain President |
3
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 2021
(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 (i) | Warrants (iii) | Share premium | Additional paid-in capital from treasury shares | Legal reserve | Special reserve Resolution CNV 609/12 (ii) | Other reserves (iv) | Retained earnings | Subtotal | Non-controlling interest | Total Shareholders’ equity | |
Balance as of July 1, 2021 | 657 | 2 | 24,970 | 2,143 | 29,038 | 178 | 1,930 | 17,013 | 32,867 | (34,327) | 74,471 | 25,162 | 99,633 |
Profit / (loss) for the period | - | - | - | - | - | - | - | - | - | 25,722 | 25,722 | (202) | 25,520 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | - | (421) | - | (421) | (13) | (434) |
Total profit / (loss) and other comprehensive (loss) for the period | - | - | - | - | - | - | - | - | (421) | 25,722 | 25,301 | (215) | 25,086 |
Assignment of results according to A.G.O. | - | - | - | - | - | - | - | - | (36,967) | 36,967 | - | - | - |
Warrants exercise (iii) | - | - | - | (1) | 4 | - | - | - | - | - | 3 | - | 3 |
Capitalisation of irrevocable contributions | - | - | - | - | - | - | - | - | - | - | - | 17 | 17 |
Dividend distribution | - | - | - | - | - | - | - | - | - | - | - | (30) | (30) |
Incorporated by merger | 152 | - | - | - | 19,509 | - | 359 | - | (474) | (2,559) | 16,987 | (16,987) | - |
Balance as of December 31, 2021 | 809 | 2 | 24,970 | 2,142 | 48,551 | 178 | 2,289 | 17,013 | (4,995) | 25,803 | 116,762 | 7,947 | 124,709 |
(i) Includes ARS 1 of Inflation adjustment of treasury shares. See Note 17 to the Annual Financial Statements.
(ii) Related to CNV General Resolution N° 609/12.
(iii) As of December 31, 2021, the remaining warrants to exercise amount to 79,964,078, equivalent to the same number of shares. See Note 29 to this Financial Statements.
(iv) Group´s other reserves for the period ended December 31, 2021 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 | Revaluation surplus | Total Other reserves | |
Balance as of July 1, 2021 | (308) | (10,148) | 347 | 3,061 | 780 | (777) | 37,951 | 153 | - | 1,808 | 32,867 |
Other comprehensive loss for the period | - | - | - | - | (421) | - | - | - | - | - | (421) |
Total comprehensive loss for the period | - | - | - | - | (421) | - | - | - | - | - | (421) |
Assignment of results according to A.G.O. | - | - | - | - | - | - | (36,967) | - | - | - | (36,967) |
Incorporated by merger | - | (622) | - | - | (14) | - | - | - | 25 | 137 | (474) |
Balance as of December 31, 2021 | (308) | (10,770) | 347 | 3,061 | 345 | (777) | 984 | 153 | 25 | 1,945 | (4,995) |
There are no cumulative unpaid dividends on preferred shares.
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
. Eduardo S. Elsztain President |
4
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 2021
(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 (i) | Share premium | Additional paid-in capital from treasury shares | Legal reserve | Special reserve Resolution CNV 609/12 (ii) | Other reserves (iii) | Accumulated deficit | Subtotal | Non-controlling interest | Total Shareholders’ equity | |
Balance as of July 1, 2020 | 575 | 2 | 24,950 | 26,303 | 172 | 877 | 17,013 | 10,663 | 22,789 | 103,344 | 118,542 | 221,886 |
Loss for the period | - | - | - | - | - | - | - | - | (882) | (882) | (876) | (1,758) |
Other comprehensive loss for the period | - | - | - | - | - | - | - | (4,184) | - | (4,184) | (8,109) | (12,293) |
Total profit and other comprehensive loss for the period | - | - | - | - | - | - | - | (4,184) | (882) | (5,066) | (8,985) | (14,051) |
Assignment of results according to A.G.O. | - | - | - | - | - | 1,135 | - | 20,611 | (21,746) | - | - | - |
Distribution of dividends in shares | - | - | - | - | - | - | - | - | (875) | (875) | - | (875) |
Capitalisation of irrevocable contributions | - | - | - | - | - | - | - | - | - | - | 20 | 20 |
Dividend distribution | - | - | - | - | - | - | - | - | - | - | (3,232) | (3,232) |
Decrease due to loss of control | - | - | - | - | - | - | - | - | - | - | (75,299) | (75,299) |
Other changes in equity | - | - | - | - | - | - | - | 8,813 | - | 8,813 | 1,468 | 10,281 |
Reserve for share-based payments | - | - | - | - | 3 | - | - | (3) | - | - | - | - |
Changes in non-controlling interest | - | - | - | - | - | - | - | (395) | - | (395) | 957 | 562 |
Balance as of December 31, 2020 | 575 | 2 | 24,950 | 26,303 | 175 | 2,012 | 17,013 | 35,505 | (714) | 105,821 | 33,471 | 139,292 |
(i) Includes ARS 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(ii) Related to CNV General Resolution N° 609/12.
(iii) Group’s other reserves for the period ended December 31, 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 | Reserve for defined contribution plans | Special reserve | Other reserves from subsidiaries | Revaluation surplus | Total Other reserves | |
Balance as of July 1, 2020 | (311) | (9,533) | 356 | 3,061 | (1,318) | (614) | (657) | 18,804 | 193 | 682 | 10,663 |
Other comprehensive loss for the period | - | - | - | - | (4,696) | (130) | 247 | - | - | 395 | (4,184) |
Total comprehensive loss for the period | - | - | - | - | (4,696) | (130) | 247 | - | - | 395 | (4,184) |
Reserve for share-based payments | 2 | - | (5) | - | - | - | - | - | - | - | (3) |
Assignment of results according to A.G.O. | - | - | - | - | - | - | - | 20,611 | - | - | 20,611 |
Changes in non-controlling interest | - | (395) | - | - | - | - | - | - | - | - | (395) |
Other changes in equity | - | (92) | - | - | 7,811 | (8) | 1,293 | - | (193) | 2 | 8,813 |
Balance as of December 31, 2020 | (309) | (10,020) | 351 | 3,061 | 1,797 | (752) | 883 | 39,415 | - | 1,079 | 35,505 |
There are no cumulative unpaid dividends on preferred shares.
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
. Eduardo S. Elsztain President |
5
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Consolidated Statements of Cash Flows
for the six-month period ended December 31, 2021 and 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 12.31.2021 | 12.31.2020 | |
Operating activities: | |||
Net cash generated from continuing operating activities before income tax paid | 15 | 4,799 | 2,964 |
Income tax and MPIT paid | (107) | (51) | |
Net cash generated from continuing operating activities | 4,692 | 2,913 | |
Net cash generated from discontinued operating activities | - | 3,732 | |
Net cash generated from operating activities | 4,692 | 6,645 | |
Investing activities: | |||
Contributions and issuance of capital in associates and joint ventures | (30) | (41) | |
Acquisition and improvements of investment properties | (1,449) | (3,067) | |
Proceeds from sales of investment properties | 4,611 | 21,370 | |
Acquisitions and improvements of property, plant and equipment | (133) | (113) | |
Acquisitions of intangible assets | (4) | (14) | |
Dividends collected from associates and joint ventures | 2,634 | - | |
Proceeds from loans granted | 334 | - | |
Payment of derivative financial instruments | (41) | (507) | |
Acquisitions of investments in financial assets | (1,379) | (17,708) | |
Proceeds from disposal of investments in financial assets | 1,460 | 23,172 | |
Interest received | 118 | 472 | |
Proceeds from sales of intangible assets | 248 | - | |
Net cash generated from continuing investing activities | 6,369 | 23,564 | |
Net cash generated from discontinued investing activities | - | 53,485 | |
Net cash generated from investing activities | 6,369 | 77,049 | |
Financing activities: | |||
Borrowings and issuance of non-convertible notes | 6,804 | 4,986 | |
Payment of borrowings and non-convertible notes | (5,671) | (41,106) | |
(Payment) / collection of short-term loans, net | (516) | 3,588 | |
Interests paid | (3,609) | (5,666) | |
Repurchase of non-convertible notes | (2,761) | (201) | |
Acquisition of non-controlling interest in subsidiaries | - | (217) | |
Proceeds from warrants exercise | 3 | - | |
Payment of borrowings to related parties | (299) | - | |
Dividends paid to non-controlling interest in subsidiaries | - | (3,115) | |
Sale of own non-convertible notes | - | 4,737 | |
Dividends paid | (32) | - | |
Payment of lease liabilities | (13) | (29) | |
Net cash used in continuing financing activities | (6,094) | (37,023) | |
Net cash used in discontinued financing activities | - | (21,874) | |
Net cash used in financing activities | (6,094) | (58,897) | |
Net increase / (decrease) in cash and cash equivalents from continuing activities | 4,967 | (10,546) | |
Net increase in cash and cash equivalents from discontinued activities | - | 35,343 | |
Net increase in cash and cash equivalents | 4,967 | 24,797 | |
Cash and cash equivalents at beginning of period | 2,326 | 163,461 | |
Inflation adjustment | (47) | (3) | |
Deconsolidation of subsidiaries | - | (175,036) | |
Foreign exchange gain/ (loss) on cash and fair value result for cash equivalents | 18 | (10,794) | |
Cash and cash equivalents at end of period | 13 | 7,264 | 2,425 |
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
. Eduardo S. Elsztain President |
6
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 February 9, 2022.
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, whose main shareholder and final beneficiary is Eduardo Sergio Elsztain.
As of the end of these Unaudited Condensed Interim Consolidated Financial Statements (hereinafter, Financial Statements), the Group operates 335,279 square meters (sqm) in 14 shopping malls, 109,859 sqm in 7 premium offices and an extensive land reserve for future commercial developments; operates and holds a majority interest (with the exception of La Ribera Shopping Center, of which it has a 50% ownership interest) in a portfolio of 14 shopping malls in Argentina, six of which are located in the Autonomous City of Buenos Aires (Abasto Shopping, Alcorta Shopping, Alto Palermo, Patio Bullrich, Dot Baires Shopping and Distrito Arcos), two in Buenos Aires province (Alto Avellaneda and Soleil Premium Outlet) and the rest are situated in different provinces (Alto Noa in the City of Salta, Alto Rosario in the City of Rosario, Mendoza Plaza in the City of Mendoza, Córdoba Shopping Villa Cabrera in the City of Córdoba, Alto Comahue in the City of Neuquén and La Ribera Shopping in the City of Santa Fe). The Group also owns the historic building where the Patio Olmos Shopping Mall is located, operated by a third party.
As stated in Note 1 to the consolidated financial statements as of June 30, 2021, after the declaration of insolvency and liquidation of IDBD in which the Group lost control of it, the results of such company as of December 30,2020 were included in 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, 2021 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 six months ended December 31, 2021 and 2020 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.
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.
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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 December 31, 2021, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18.
As of December 31, 2021 (accumulated six months) | |
Price variation | 20% |
As a consequence of the aforementioned, these financial statements as of December 31, 2021 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, 2021 and December 31, 2020 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.
See Note 29 for information on the context in which the Group operates.
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.
3.
Seasonal effects on operations
The operations of the Group’s shopping malls are subject to seasonal effects, which affect the level of sales recorded by lessees. During summertime 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 from July through December, compared to the period from January through June.
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4.
Acquisitions and disposals
Significant acquisitions and disposals for the six-month period ended December 31, 2021 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2021, are detailed in Note 4 to the Annual Financial Statements.
A.
Sale of real estate parcels in Hudson
On August 2, 2021, the bill for the sale of several parcels of the property called Casonas located in Hudson, Berazategui district, was signed. The price of the transaction was USD 0.6 million.
B.
Sale of Mariano Acosta Plot
On August 9, 2021, a sale bill for Mariano Acosta Plot was signed for a total amount of USD 0.7 million. With the signing of the bill, the amount of USD 0.5 million was received and the remaining balance of USD 0.2 million at the signing of the deed.
C.
Sale of Merlo Plot
On August 9, 2021, a sale bill for Merlo Plot was signed for a total amount of USD 0.7 million. With the signing of the bill, the amount of USD 0.5 million was received and the remaining balance of USD 0.2 million at the signing of the deed.
D.
Sale of Catalinas Tower building
On November 2, 2021, three medium-height floors of the tower “261 Della Paolera” located in the Catalinas district of the Autonomous City of Buenos Aires for a total area of approximately 3,582 square meters and 36 parking spaces located in the building were sold.
The transaction price was approximately ARS 3,197 million, which as of the date of issuance of these financial statements were paid in full.
On December 15, 2021, possession of the 12th floor and 12 parking spaces of the “261 Della Paolera” tower were handed over to the European Union. The total of the operation was USD 9 million.
E.
Transfer of rights Libertador Trust
On November 18, 2021, the deed for transfer of rights of an apartment and complementary units of the Libertador Trust was signed for USD 1 million.
F.
Sale of parking spaces – Libertador Building
On December 21, 2021, 33 parking spaces of Libertador Building 498 were sold for a value of USD 0.8 million.
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G.
Investment in Condor Hospitality Inc
On September 22, 2021, Condor Hospitality Trust S.A. (“Condor”) has signed a sale agreement for its portfolio of 15 hotels in the United States with B9 Cowboy Mezz A LLC, an affiliate of Blackstone Real Estate Partners. Said sale was approved by the Condor Shareholders' Meeting held on November 12, 2021 and was completed on the 19th of the same month for an amount of USD 305 million. Within this framework, Condor announced a Liquidation and Dissolution Plan, with the intention of distributing certain net income from the sale of the hotel portfolio to the shareholders in one or more installments, which was approved by the Condor Shareholders' Meeting held on December 1, 2021.
On December 10, 2021, in accordance with the aforementioned Plan, Condor's Board of Directors approved the distribution of a special dividend of USD 7.94 per share, which payment was made on December 30, 2021, corresponding to IRSA an approximate amount of USD 25.3 million for its direct and indirect holding of 3,191,213 common shares that, as of the date of issuance of the financial statements, have already been fully collected. As of December 31, 2021, Condor shares were delisted from the NYSE, pending the final liquidation of the company.
H.
Merger by absorption of IRSA and IRSA CP
On September 30, 2021, IRSA & IRSA CP Boards of Directors approved the prior merger agreement between both companies and the corresponding special financial statements as of June 30, 2021, initiating the corporate reorganization process under the terms of art. 82 et seq. of the General Law of Companies. The merger process has particular characteristics given that they are two companies included in the public offering regime, reason why, not only apply the current provisions of the General Law of Companies but also the procedures established regarding reorganization of companies of the Regulations of the “Comisión Nacional de Valores” (National Securities Commission) and the markets, both national and foreign, where their shares are listed.
The Merger is carried out in order to streamline the technical, administrative, operational and economic resources of both Companies, standing out among others: (a) the operation and maintenance of a single transactional information system and centralization of the entire accounting registration process; (b) presentation of a single financial statement to the different control agencies with the consequent cost savings in accounting and advisory fees, tariffs and other related expenses; (c) simplification of the accounting information reporting and consolidation process, as a consequence of the reduction that the merger would imply for the corporate structure as a whole; (d) removal of the IRSA CP public offering listing on BYMA and NASDAQ with the associated costs that this represents; (e) cost reduction for legal fees and tax filings; (f) increase in the percentage of the capital stock that is listed in the different markets, increasing the liquidity of the listed shares; (g) tax efficiencies and (h) preventively avoid the potential overlap of activities between the Companies.
In accordance with the commitments assumed in the Prior Merger Commitment, having obtained the administrative consent of the United States Securities and Exchange Commission, an entity to which they are subject because both companies list their shares in markets that operate in said jurisdiction, The shareholders' meetings of both companies were called.
On December 22, 2021, the Shareholders' Meetings of IRSA and IRSA CP were held, approving the merger by absorption, whose effective date was established on July 1, 2021. As of that date, the transfer to the absorbent of the totality of the equity of the absorbed company, thereby incorporating all its rights and obligations, assets and liabilities into the equity of the absorbing company.
Likewise, and within the framework of the reorganization process, the Board of Directors has approved the exchange ratio, which has been established at 1.40 IRSA shares for each IRSA CP share, which is equivalent to 0.56 IRSA GDS for each ADS of IRSA CP. Within this framework, it was decided to increase the share capital by issuing 152,158,215 new shares in IRSA.
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The exchange of IRSA CP shares for IRSA shares will be carried out once the entire administrative process has been completed and once the registration has been made in the “Inspección General de Justicia” (General Inspection of Justice), a process that may take several months.
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.
From June 30, 2021 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 29 in relation to COVID-19.
6.
Segment information
Segment information was prepared and classified according to the business in which the Group operates, they were descripted in Note 6 to the Annual Financial Statements.
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 December 31, 2021 and 2020:
Six Months ended December 31, 2021 | |||||
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 | 8,816 | (63) | 2,313 | (15) | 11,051 |
Costs | (1,862) | 33 | (2,387) | - | (4,216) |
Gross profit / (loss) | 6,954 | (30) | (74) | (15) | 6,835 |
Net gain from fair value adjustment of investment properties | 22,385 | 65 | - | - | 22,450 |
General and administrative expenses | (1,924) | 6 | - | 24 | (1,894) |
Selling expenses | (835) | (5) | - | - | (840) |
Other operating results, net | (60) | - | 29 | (9) | (40) |
Profit / (loss) from operations | 26,520 | 36 | (45) | - | 26,511 |
Share of profit of associates and joint ventures | (77) | (43) | - | - | (120) |
Segment profit / (loss) | 26,443 | (7) | (45) | - | 26,391 |
Reportable assets | 263,435 | (1,770) | - | 26,650 | 288,315 |
Reportable liabilities | - | - | - | (163,606) | (163,606) |
Net reportable assets | 263,435 | (1,770) | - | (136,956) | 124,709 |
Six Months ended December 31, 2020 | |||||
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 | 5,818 | (26) | 1,701 | (20) | 7,473 |
Costs | (2,148) | 47 | (1,867) | - | (3,968) |
Gross profit / (loss) | 3,670 | 21 | (166) | (20) | 3,505 |
Net gain from fair value adjustment of investment properties | 14,753 | (767) | - | - | 13,986 |
General and administrative expenses | (2,322) | 5 | - | 30 | (2,287) |
Selling expenses | (1,198) | 10 | - | - | (1,188) |
Other operating results, net | (141) | 2 | 78 | (10) | (71) |
Profit / (loss) from operations | 14,762 | (729) | (88) | - | 13,945 |
Share of profit of associates and joint ventures | (1,218) | 535 | - | - | (683) |
Segment profit / (loss) | 13,544 | (194) | (88) | - | 13,262 |
Reportable assets | 279,041 | (1,446) | - | 24,483 | 302,078 |
Reportable liabilities | - | - | - | (162,788) | (162,788) |
Net reportable assets | 279,041 | (1,446) | - | (138,305) | 139,290 |
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(1) Represents the equity value of joint ventures that were proportionately consolidated for segment information.
(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 ARS 10 and ARS 12 as of December 31, 2021 and 2020 respectively.
Below is a summarized analysis of the segments from the Group for the periods ended December 31, 2021 and 2020:
Six Months ended December 31, 2021 | ||||||||
Shopping Malls | Offices | Sales and developments | Hotels | International | Corporate | Others | Total | |
Revenues | 5,991 | 1,250 | 131 | 1,383 | 5 | - | 56 | 8,816 |
Costs | (582) | (152) | (135) | (782) | (10) | - | (201) | (1,862) |
Gross profit / (loss) | 5,409 | 1,098 | (4) | 601 | (5) | - | (145) | 6,954 |
Net (loss) / gain from fair value adjustment of investment properties (i) | (5,549) | 1,041 | 26,380 | - | 4 | - | 509 | 22,385 |
General and administrative expenses | (863) | (246) | (172) | (257) | (38) | (280) | (68) | (1,924) |
Selling expenses | (272) | (75) | (267) | (122) | - | (84) | (15) | (835) |
Other operating results, net | (70) | (2) | (74) | (4) | 3 | - | 87 | (60) |
(Loss) / profit from operations | (1,345) | 1,816 | 25,863 | 218 | (36) | (364) | 368 | 26,520 |
Share of profit of associates and joint ventures | - | - | - | - | 304 | - | (381) | (77) |
Segment (loss) / profit | (1,345) | 1,816 | 25,863 | 218 | 268 | (364) | (13) | 26,443 |
Investment properties and trading properties | 60,687 | 89,165 | 93,881 | - | 114 | - | 2,579 | 246,426 |
Investment in associates and joint ventures | - | - | - | - | 319 | - | 8,037 | 8,356 |
Other operating assets | 390 | 2,739 | 2,310 | 3,042 | - | 9 | 163 | 8,653 |
Operating assets | 61,077 | 91,904 | 96,191 | 3,042 | 433 | 9 | 10,779 | 263,435 |
(i) For the six-month period ended December 31, 2021, the net gain from fair value adjustment of investment properties was ARS 22,450. The net impact of the values in pesos of our properties was mainly a consequence of the change in macroeconomic conditions:
(a) gain of ARS 2,440 as a consequence of the variation in the projected income growth rate increase and the conversion to dollars of the projected cash flow in pesos according to the exchange rate estimates used in the cash flow from shopping malls.
(b) positive impact of ARS 3,533 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.
(c) an increase of 40 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 ARS 2,857.
(d) Additionally, due to the impact of the inflation adjustment, ARS 10,387 were reclassified for shopping malls from “Net gain from fair value adjustment” to “Inflation Adjustment” in the Statement of Income and Other Comprehensive Income.
(e) The value of our office buildings and other rental properties measured in real terms decreased by 0.67% during the six-month period ended as of December 31, 2021, due to the variation of the implicit exchange rate. Likewise, there is an impact for the sales of the period and the increase in the valuation of Costa Urbana whose development project was approved by the Legislature of the Autonomous City of Buenos Aires. See Note 8.
Six Months ended December 31, 2020 | ||||||||
Shopping Malls | Offices | Sales and developments | Hotels | International | Corporate | Others | Total | |
Revenues | 2,933 | 1,688 | 540 | 180 | 448 | - | 29 | 5,818 |
Costs | (441) | (137) | (560) | (506) | (379) | - | (125) | (2,148) |
Gross profit / (loss) | 2,492 | 1,551 | (20) | (326) | 69 | - | (96) | 3,670 |
Net (loss) / gain from fair value adjustment of investment properties | (7,188) | 11,767 | 9,309 | - | 5 | - | 860 | 14,753 |
General and administrative expenses | (1,017) | (269) | (220) | (237) | (47) | (491) | (41) | (2,322) |
Selling expenses | (175) | (119) | (798) | (71) | (30) | - | (5) | (1,198) |
Other operating results, net | (88) | (5) | (56) | 15 | (2) | - | (5) | (141) |
(Loss) / profit from operations | (5,976) | 12,925 | 8,215 | (619) | (5) | (491) | 713 | 14,762 |
Share of loss of associates and joint ventures | - | - | (23) | - | (818) | - | (377) | (1,218) |
Segment (loss) / profit | (5,976) | 12,925 | 8,192 | (619) | (823) | (491) | 336 | 13,544 |
Investment properties and trading properties | 81,954 | 104,415 | 66,947 | - | 168 | - | 3,057 | 256,541 |
Investment in associates and joint ventures | - | - | 940 | - | 2,804 | - | 11,833 | 15,577 |
Other operating assets | 450 | 1,579 | 1,502 | 3,219 | - | 11 | 162 | 6,923 |
Operating assets | 82,404 | 105,994 | 69,389 | 3,219 | 2,972 | 11 | 15,052 | 279,041 |
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7.
Investments in associates and joint ventures
Changes in the Group’s investments in associates and joint ventures for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
December 31, 2021 | June 30, 2021 | |
Beginning of the period / year | 14,644 | 134,549 |
Increase of equity interest and capital contributions | 665 | 51 |
Decrease of interest in associate (iv) | - | (52,812) |
Deconsolidation (i) | - | (58,345) |
Share of profit | 30 | (3,655) |
Impairment (iii) | (150) | (754) |
Currency translation adjustment | (299) | (4,311) |
Dividends (v) | (2,634) | - |
Other comprehensive income | - | (65) |
Others | - | (14) |
End of the period / year (ii) | 12,256 | 14,644 |
(i)
Corresponds to the deconsolidation of IDBD. See Note 4.G to the consolidated Financial Statements as of June 30, 2021.
(ii)
As of December 31, 2021 and June 30, 2021 includes ARS (10) and ARS (8), reflecting interests in companies with negative equity, which were disclosed in “Provisions” (Note 18).
(iii)
Corresponds to the investment in TGLT S.A.
(iv)
Corresponds to the sale of the remaining equity interest in Shufersal in July 2020.
(v)
Corresponds to dividends distributed by Condor. See Note 4.G.
% ownership interest | Value of Group's interest in equity | Group's interest in comprehensive income / (loss) | ||||
Name of the entity | December 31, 2021 | June 30, 2021 | December 31, 2021 | June 30, 2021 | December 31, 2021 | December 31, 2020 |
Associates | ||||||
New Lipstick | 49.96% | 49.96% | 229 | 263 | (5) | (569) |
BHSA | 29.91% | 29.91% | 6,271 | 6,457 | (187) | 243 |
Condor | 21.70% | 18.89% | - | 1,951 | 302 | (251) |
Quality | 50.00% | 50.00% | 3,512 | 3,525 | (43) | 578 |
La Rural S.A. | 50.00% | 50.00% | 618 | 204 | (5) | 49 |
TGLT | 27.82% | 27.82% | 957 | 1,129 | (82) | (635) |
Other joint ventures | N/A | N/A | 669 | 1,115 | (249) | (3,201) |
Total associates and joint ventures | 12,256 | 14,644 | (269) | (3,786) |
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 | - | (*) (1) | (*) (41) |
BHSA | Argentina | Financial | 448,689,072 | (**) 1,500 | (**) (620) | (**) 20,188 |
Quality | Argentina | Real estate | 225,146,912 | 406 | (86) | 6,912 |
La Rural S.A. | Argentina | Organization of events | 714,998 | 1 | 11 | 302 |
TGLT | Argentina | Real estate | 257,320,997 | 925 | (82) | 5,117 |
(*)
Amounts in millions of US Dollars under USGAAP.
(**)
Information as of December 31, 2021 according to IFRS.
Puerto Retiro (joint venture):
There have been no changes to what was informed in Note 8 to the Annual Financial Statements.
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8.
Investment properties
Changes in the Group’s investment properties for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
Six Months ended December 31, 2021 | Year ended June 30, 2021 | ||||
Rental properties | Undeveloped parcels of land | Properties under development | Total | Total | |
Fair value at the beginning of the period / year | 151,158 | 65,258 | 4,174 | 220,590 | 411,637 |
Additions | 545 | 448 | 456 | 1,449 | 1,248 |
Capitalized leasing costs | 13 | - | - | 13 | 27 |
Amortization of capitalized leasing costs (i) | (10) | - | - | (10) | (15) |
Transfers | (1,127) | - | - | (1,127) | (638) |
Deconsolidation | - | - | - | - | (141,575) |
Disposals | (4,354) | (257) | - | (4,611) | (25,806) |
Currency translation adjustment | (13) | - | (2) | (15) | (14,896) |
Net (loss) / gain from fair value adjustment | (3,961) | 26,334 | 77 | 22,450 | (9,392) |
Fair value at the end of the period / year | 142,251 | 91,783 | 4,705 | 238,739 | 220,590 |
(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:
12.31.2021 | 12.31.2020 | |
Rental and services income | 9,543 | 6,319 |
Direct operating expenses | (3,291) | (2,465) |
Development expenses | (84) | (133) |
Net realized gain from fair value adjustment of investment properties (i) (ii) | 2,062 | 11,948 |
Net unrealized gain from fair value adjustment of investment properties | 20,388 | 2,038 |
(i)
As of December 31, 2021 includes ARS 13 for the sale of Casona Hudson, ARS 61 for the sale of the Merlo Land, ARS 55 for the sale of the Mariano Acosta Land, ARS 66 for the sale of parking spaces of Libertador 498 and ARS 1,867 for the sale of floors of Catalinas Building. As of December 31, 2020 includes ARS 5,962 for the sale of Torre Boston and ARS 5,986 for the sale of Bouchard 710.
(ii)
As of December 31, 2021 corresponds (ARS 63) to the realized result from fair value adjustment for the period ((ARS 75) for the sale of Casona Hudson, (ARS 16) for the sale of the Merlo Land, (ARS 18) for the sale of the Mariano Acosta Land, (ARS 79) for the sale of parking spaces of Libertador 498 and ARS 125 for the sale of floors of Catalinas Building) and ARS 2,125 for realized result from fair value adjustment made in previous years (ARS 88 for the sale of Casona Hudson, ARS 77 for the sale of the Merlo Land, ARS 73 for the sale of the Mariano Acosta Land, ARS 145 for the sale of parking spaces of Libertador 498 and ARS 1,742 for the sale of floors of Catalinas Building). As of December 31, 2020, (ARS 1,825) corresponds to net realized fair value adjustment on investment properties for the period ((ARS 1,260) for the sale of Torre Boston and (ARS 565) for the sale of Bouchard 710) and ARS 13,773 corresponds to the realized fair value adjustment made in previous years (ARS 7,224 for the sale of Torre Boston and ARS 6,549 for the sale of Bouchard 710).
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 December 31, 2021, considering the market conditions existing at that date due to the pandemic described in Note 29, incorporating the effect of the variation in the exchange rate in other assets denominated in US Dollars.
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Costa Urbana –former Solares de Santa María– Costanera Sur, Buenos Aires City (IRSA)
On December 21, it was published the law from Buenos Aires City congress approving the Regulations for the development of the property of approximately 70 hectares, owned by the Company since 1997, previously known as "Solares de Santa María", located in front of the Río de la Plata in the South Coast of the Autonomous City of Buenos Aires, southeast of Puerto Madero. The published law grants a New Standard, designated: "U73 - Public Park and Costa Urbana Urbanization", which enables the combination of diverse uses such as homes, offices, retail, services, public spaces, education, and entertainment.
The Company will have a construction capacity of approximately 895,000 sqm, which will drive growth for the coming years through the development of mixed-use projects.
IRSA will destinate 50.8 hectares for public use, which represents approximately 71% of the total area of the property and will contribute with three additional lots of the property, two for the Sustainable Urban Development Fund and one for the Innovation Trust, Science and Technology of the Government of the Autonomous City of Buenos Aires, to which the sum of USD 2 million in cash and the amount of 3,000,000 sovereign bonds (AL35) will also be contributed.
Likewise, the Company will be in charge of the infrastructure and road works on the property and will carry out the public space works contributing up to USD 40 million together with the maintenance of the public spaces assigned for 10 years or until the sum of USD 10 million is completed.
“Costa Urbana” will change the landscape of Buenos Aires City, giving life to an undeveloped area and will be in an exceptional property due to its size, location and connectivity, providing the City the possibility of expanding and recovering access to the Río de la Plata coast with areas for walks, recreation, green spaces, public parks and mixed uses.
The financial valuation of the property at fair value amounts to approximately USD 360 million as of December 31, 2021.
9.
Property, plant and equipment
Changes in the Group’s property, plant and equipment for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
Six Months ended December 31, 2021 | Year ended June 30, 2021 | ||||
Buildings and facilities | Machinery and equipment | Others | Total | Total | |
Costs | 8,522 | 3,027 | 696 | 12,245 | 253,050 |
Accumulated depreciation | (3,925) | (2,822) | (505) | (7,252) | (184,797) |
Net book amount at the beginning of the period / year | 4,597 | 205 | 191 | 4,993 | 68,253 |
Additions | 48 | 26 | 59 | 133 | 1,994 |
Disposals | - | - | - | - | (108) |
Deconsolidation | - | - | - | - | (57,798) |
Reclassification to assets held for sale | - | - | - | - | (34) |
Currency translation adjustment | - | - | - | - | (4,620) |
Transfers | 1,127 | - | - | 1,127 | 1,191 |
Depreciation charges (i) | (185) | (43) | (16) | (244) | (3,885) |
Balances at the end of the period / year | 5,587 | 188 | 234 | 6,009 | 4,993 |
Costs | 9,697 | 3,053 | 755 | 13,505 | 12,245 |
Accumulated depreciation | (4,110) | (2,865) | (521) | (7,496) | (7,252) |
Net book amount at the end of the period / year | 5,587 | 188 | 234 | 6,009 | 4,993 |
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(i)
As of December 31, 2021, depreciation charges of property, plant and equipment were recognized as follows: ARS 175 in "Costs", ARS 67 in "General and administrative expenses" and ARS 2 in "Selling expenses", respectively in the Statement of Income (Note 21).
10.
Trading properties
Changes in the Group’s trading properties for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
Six Months ended December 31, 2021 | Year ended June 30, 2021 | ||||
Completed properties | Properties under development | Undeveloped sites | Total | Total | |
Beginning of the period / year | 146 | 965 | 1,006 | 2,117 | 12,975 |
Additions | - | 108 | 1 | 109 | 969 |
Deconsolidation | - | - | - | - | (9,262) |
Currency translation adjustment | - | (130) | - | (130) | (836) |
Disposals | - | - | - | - | (1,729) |
End of the period / year | 146 | 943 | 1,007 | 2,096 | 2,117 |
Non-current | 1,959 | 1,980 | |||
Current | 137 | 137 | |||
Total | 2,096 | 2,117 |
11.
Intangible assets
Changes in the Group’s intangible assets for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
Six Months ended December 31, 2021 | Year ended June 30, 2021 | ||||
Goodwill | Information systems and software | Contracts and others | Total | Total | |
Costs | 163 | 950 | 2,852 | 3,965 | 127,288 |
Accumulated amortization | - | (703) | (371) | (1,074) | (77,023) |
Net book amount at the beginning of the period / year | 163 | 247 | 2,481 | 2,891 | 50,265 |
Additions | - | 4 | - | 4 | 2,620 |
Disposals | - | - | (171) | (171) | (134) |
Impairment | - | - | - | - | (48) |
Deconsolidation | - | - | - | - | (44,016) |
Currency translation adjustment | - | - | - | - | (2,983) |
Amortization charges (i) | - | (55) | - | (55) | (2,813) |
Balances at the end of the period / year | 163 | 196 | 2,310 | 2,669 | 2,891 |
Costs | 163 | 954 | 2,681 | 3,798 | 3,965 |
Accumulated amortization | - | (758) | (371) | (1,129) | (1,074) |
Net book amount at the end of the period / year | 163 | 196 | 2,310 | 2,669 | 2,891 |
(i)
As of December 31, 2021, amortization charges were recognized in the amount of ARS 11 in "Costs" and ARS 44 in "General and administrative expenses", in the Statement of Income (Note 21).
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12.
Right-of-use assets
The Group’s right-of-use assets as of December 31, 2021 and June 30, 2021 are the following:
December 31, 2021 | June 30, 2021 | |
Real Estate | 21 | 13 |
Machinery and equipment | 3 | 5 |
Others | 925 | 959 |
Total Right-of-use assets | 949 | 977 |
Non-current | 949 | 977 |
Total | 949 | 977 |
The depreciation charge of the right-of use-assets is detailed below:
December 31, 2021 | December 31, 2020 | |
Real Estate | 28 | 1,556 |
Telecommunications | - | 356 |
Others | 7 | 340 |
Total depreciation of right-of-use assets (i) | 35 | 2,252 |
(i)
As of December 31, 2021, amortization charges were recognized in the amount of ARS 30 in "Costs" and ARS 5 in "General and administrative expenses", in the Statement of Income (Note 21). Includes ARS 2,190 charged to the result of discontinued operations as of December 31, 2020
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 December 31, 2021 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 | |||||
December 31, 2021 | |||||||
Assets as per Statement of Financial Position | |||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) | 9,227 | - | - | - | 9,227 | 4,713 | 13,940 |
Investments in financial assets: | |||||||
- Public companies’ securities | - | 355 | - | - | 355 | - | 355 |
- Bonds | - | 3,130 | - | - | 3,130 | - | 3,130 |
- Warrants from related parties | - | 36 | - | - | 36 | - | 36 |
- Investments in financial assets with quotation | 11 | 1,003 | - | - | 1,014 | - | 1,014 |
Derivative financial instruments: | |||||||
- Foreign-currency future contracts | - | 10 | - | - | 10 | - | 10 |
Cash and cash equivalents: | |||||||
- Cash at bank and on hand | 4,720 | - | - | - | 4,720 | - | 4,720 |
- Short-term investments | - | 2,544 | - | - | 2,544 | - | 2,544 |
Total assets | 13,958 | 7,078 | - | - | 21,036 | 4,713 | 25,749 |
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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 | |||||
December 31, 2021 | |||||||
Liabilities as per Statement of Financial Position | |||||||
Trade and other payables | 3,315 | - | - | - | 3,315 | 4,834 | 8,149 |
Borrowings (excluding finance leases) | 64,496 | - | - | - | 64,496 | - | 64,496 |
Derivative financial instruments: | |||||||
- Swaps | - | - | 33 | - | 33 | - | 33 |
Total liabilities | 67,811�� | - | 33 | - | 67,844 | 4,834 | 72,678 |
Financial assets and financial liabilities as of June 30, 2021 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, 2021 | |||||||
Assets as per Statements of Financial Position | |||||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) | 8,709 | - | - | - | 8,709 | 5,952 | 14,661 |
Investments in financial assets: | |||||||
- Public companies’ securities | - | 1,176 | - | - | 1,176 | - | 1,176 |
- Bonds | - | 3,265 | - | - | 3,265 | - | 3,265 |
- Investments in financial assets with quotation | 11 | 770 | - | 58 | 839 | - | 839 |
Cash and cash equivalents: | |||||||
- Cash at bank and on hand | 1,359 | - | - | - | 1,359 | - | 1,359 |
- Short term investments | - | 967 | - | - | 967 | - | 967 |
Total assets | 10,079 | 6,178 | - | 58 | 16,315 | 5,952 | 22,267 |
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, 2021 | |||||||
Liabilities as per Statement of Financial Position | |||||||
Trade and other payables | 3,474 | - | - | - | 3,474 | 4,343 | 7,817 |
Borrowings (excluding finance leases) | 74,834 | - | - | - | 74,834 | - | 74,834 |
Derivative financial instruments: | |||||||
- Swaps | - | - | 69 | - | 69 | - | 69 |
Total liabilities | 78,308 | - | 69 | - | 78,377 | 4,343 | 82,720 |
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, 2021.
As of December 31, 2021, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group, except as mentioned in Note 29.
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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 | |
Derivative financial instruments – Swaps | Theoretical price | Underlying asset price and volatility | Level 2 and 3 | - |
The following table presents the changes in Level 3 instruments as of December 31, 2021 and June 30, 2021:
Investments in financial assets - Others | Total as of December 31, 2021 | Total as of June 30, 2021 | |
Balances at beginning of the period / year | 58 | 58 | 5,902 |
Currency translation adjustment | (6) | (6) | (5) |
Deconsolidation | - | - | (5,850) |
Write off | (70) | (70) | - |
Gain for the period / year (i) | 18 | 18 | 11 |
Balances at the end of the period / year | - | - | 58 |
(i)
Included within “Financial results, net” in the Statements of Income.
14.
Trade and other receivables
Group’s trade and other receivables as of December 31, 2021 and June 30, 2021 are as follows:
December 31, 2021 | June 30, 2021 | |
Sale, leases and services receivables | 6,070 | 5,532 |
Less: Allowance for doubtful accounts | (887) | (1,025) |
Total trade receivables | 5,183 | 4,507 |
Prepaid expenses | 633 | 970 |
Borrowings, deposits and others | 3,769 | 4,419 |
Advances to suppliers | 858 | 1,144 |
Tax receivables | 1,417 | 1,404 |
Others | 1,193 | 1,192 |
Total other receivables | 7,870 | 9,129 |
Total trade and other receivables | 13,053 | 13,636 |
Non-current | 2,788 | 3,429 |
Current | 10,265 | 10,207 |
Total | 13,053 | 13,636 |
Movements on the Group’s allowance for doubtful accounts were as follows:
December 31, 2021 | June 30, 2021 | |
Beginning of the period / year | 1,025 | 6,757 |
Additions (i) | 186 | 909 |
Recovery (i) | (150) | (276) |
Currency translation adjustment | 14 | (332) |
Deconsolidation | - | (5,592) |
Receivables written off during the period/year as uncollectable | - | (34) |
Inflation adjustment | (188) | (407) |
End of the period / year | 887 | 1,025 |
(i)
Additions and recovery of the allowance for doubtful accounts have been included in “Selling expenses” in the Statement of Income (Note 21).
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15.
Cash flow and cash equivalent information
Following is a detailed description of cash flows generated by the Group’s operations for the six-month period ended December 31, 2021 and 2020:
Note | Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Profit / (loss) for the period | 25,520 | (1,758) | |
Profit for the period from discontinued operations | - | 10,748 | |
Adjustments for: | |||
Income tax | 19 | 5,257 | 6,044 |
Amortization and depreciation | 21 | 344 | 346 |
Net loss from fair value adjustment of investment properties | (22,450) | (13,986) | |
Net gain from disposal of intangible assets | (77) | - | |
Financial results, net | (3,975) | (3,203) | |
Provisions and allowances | 545 | 864 | |
Share of (profit) / loss of associates and joint ventures | 7 | 120 | 683 |
Changes in operating assets and liabilities: | |||
(Increase) / decrease in inventories | (5) | 15 | |
(Increase) / decrease in trading properties | (48) | 1,131 | |
Increase in trade and other receivables | (446) | (1,035) | |
Increase in trade and other payables | 44 | 3,169 | |
Increase in salaries and social security liabilities | 24 | 11 | |
Decrease in provisions | (54) | (65) | |
Net cash generated by continuing operating activities before income tax paid | 4,799 | 2,964 | |
Net cash generated by discontinued operating activities before income tax paid | - | 4,033 | |
Net cash generated by operating activities before income tax paid | 4,799 | 6,997 | |
The following table presents a detail of significant non-cash transactions occurred in the six-month period ended December 31, 2021 and 2020:
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Increase in rights of use through increased lease liabilities | - | 36 |
Decrease in investment properties through an increase in property, plant and equipment | 1,127 | - |
Decrease in lease liabilities through a decrease in trade and other receivables | 3 | - |
Decrease of property, plant and equipment through an increase of receivables and tax debts | - | 50 |
Increase of trading properties through an increase of trade and other payables | - | 386 |
Distribution of dividends in shares | - | 875 |
Currency translation adjustment | 434 | 12,293 |
Increase in investment properties through an increase in trade and other payables | 135 | - |
Increase in investments in associates and joint ventures through a decrease in investments in financial assets | 635 | - |
16.
Trade and other payables
Group’s trade and other payables as of December 31, 2021 and June 30, 2021 were as follows:
December 31, 2021 | June 30, 2021 | |
Trade payables | 1,020 | 1,239 |
Advances from sales, leases and services | 4,031 | 3,629 |
Accrued invoices | 864 | 1,035 |
Total trade payables | 5,915 | 5,903 |
Taxes payable | 890 | 823 |
Other payables | 1,344 | 1,091 |
Total other payables | 2,234 | 1,914 |
Total trade and other payables | 8,149 | 7,817 |
Non-current | 1,839 | 1,671 |
Current | 6,310 | 6,146 |
Total | 8,149 | 7,817 |
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17.
Borrowings
The breakdown of the Group’s borrowings as of December 31, 2021 and June 30, 2021 was as follows:
Total as of December 31, 2021 | Total as of June 30, 2021 | Fair value as of December 31, 2021 | Fair value as of June 30, 2021 | |
NCN | 55,233 | 62,489 | 53,533 | 58,749 |
Bank loans | 2,217 | 3,753 | 2,217 | 3,769 |
Bank overdrafts | 5,306 | 6,364 | 5,306 | 6,359 |
Other borrowings | 1,379 | 1,666 | 1,377 | 1,666 |
AABE Debt | 306 | 311 | 306 | 311 |
Loans with non-controlling interests | 55 | 251 | 55 | 251 |
Total borrowings | 64,496 | 74,834 | 62,794 | 71,105 |
Non-current | 52,812 | 56,275 | ||
Current | 11,684 | 18,559 | ||
Total | 64,496 | 74,834 |
Issuance of IRSA Non-convertible Notes
On August 26, 2021, the Company issued USD 58.1 million Non-convertible Notes in the local market through the following instruments:
●
Series XIII: denominated in dollars and payable in pesos at the applicable exchange rate for USD 58.1 million at a fixed rate of 3.9%, with semi-annual payments. The principal payment will be in three installments, counted from the date of issuance: the first for 25% of the nominal value on August 26, 2023; the second for 25% on February 26, 2024, and the third for 50% of the nominal value on August 26, 2024. The price of issuance was 100.0% of the nominal value.
The funds have been used to refinance short-term liabilities.
IRSA´s Series VII Non-convertible Notes Redemption
The Company resolved to early redeem the Series VII Notes maturing last January 21, 2022.
The redemption took place on November 25, 2021, in accordance with the terms and conditions detailed in the Prospectus Supplement for Series VII Notes.
The redemption price was 100% of the face value of the Series VII Notes, plus accrued and unpaid interest, as of the date set for redemption.
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18.
Provisions
The table below shows the movements in the Group's provisions categorized by type:
Six Months ended December 31, 2021 | Year ended June 30, 2021 | ||||
Income tax (iii) | Legal claims | Investments in associates and joint ventures (ii) | Total | Total | |
Beginning of period / year | - | 306 | 8 | 314 | 9,955 |
Additions (i) | 71 | 153 | - | 224 | 11 |
Share of loss of associates | - | - | 2 | 2 | - |
Deconsolidation | - | - | - | - | (8,545) |
Recovery (i) | - | (18) | - | (18) | (63) |
Used during the period / year | - | (54) | - | (54) | (156) |
Inflation adjustment | - | (53) | - | (53) | (137) |
Transfers (Note 19) | 1,377 | - | - | 1,377 | - |
Currency translation adjustment | - | - | - | - | (751) |
End of period / year | 1,448 | 334 | 10 | 1,792 | 314 |
Non-current | 1,576 | 137 | |||
Current | 216 | 177 | |||
Total | 1,792 | 314 |
(i) Additions and recovery of legal claims are included in "Other operating results, net". Tax contingency increases are included in “Financial results, net”
(ii) Corresponds to investments in Puerto Retiro, company that has negative equity.
(iii) See Note 19 – Submission of income tax presentation.
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:
December 31, 2021 | December 31, 2020 | |
Current income tax | (779) | 15 |
Deferred income tax | (4,478) | (6,059) |
Income tax from continuing operations | (5,257) | (6,044) |
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 six-month period ended December 31, 2021 and 2020:
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Profit from continuing operations at tax rate applicable in the respective countries | (10,772) | (4,510) |
Permanent differences: | ||
Share of profit of associates and joint ventures | 42 | 205 |
Unrecognized tax loss carryforwards | 3,809 | (1,787) |
Inflation adjustment permanent difference | 4,948 | 1,819 |
Tax rate differential | 69 | 2,638 |
Non-taxable profit, non-deductible expenses and others | (213) | 91 |
Tax inflation adjustment | (3,140) | (4,500) |
Income tax from continuing operations | (5,257) | (6,044) |
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IRSA Inversiones y Representaciones Sociedad Anónima
The gross movement in the deferred income tax account is as follows:
December 31, 2021 | June 30, 2021 | |
Beginning of period / year | (82,264) | (78,519) |
Currency translation adjustment | - | 2,024 |
Deconsolidation | - | 18,901 |
Assets held for sale | - | 46 |
Revaluation surplus reserve | - | (100) |
Deferred income tax charge | (4,478) | (24,616) |
End of period / year | (86,742) | (82,264) |
Deferred income tax assets | 551 | 537 |
Deferred income tax liabilities | (87,293) | (82,801) |
Deferred income tax liabilities, net | (86,742) | (82,264) |
As of December 31, 2021, unrecognized ARS 4,250 million of tax loss carry forward. Based on the evolution of the business, Management is evaluating their recoverability.
Submission of income tax presentation
Dated November 15, 2021 IRSA CP hereinafter "the taxpayer", which according to what is detailed in the Note. 4.1 has been absorbed by the Company, filed to the Argentine Tax Authority the income tax for the fiscal year ended June 30, 2021 applying the systemic and comprehensive inflation adjustment mechanism as detailed: restating tax amortizations according to articles 87 and 88; updating the computable cost of real estate acquired or built prior to July 1, 2018 and sold in this fiscal year under the terms of article 63; updating the loss of the fiscal period 2018, until the concurrence of the tax result of the exercise, following the methodology provided in article 25 and updating the costs of inventories as established in article 59, all articles mentioned belong to the income tax law (ordered text in 2019).
The non-application of the aforementioned mechanisms would have implied that the tax to be paid amounted to ARS 1,377, in this way the effective rate to be paid would have consumed a substantial portion of the income obtained by the taxpayer exceeding the reasonable limit of taxation, being configured in the opinion of the taxpayer and his tax and legal advisors an assumption of confiscation, an assumption that at the date of issuance of these financial statements has not been validated or challenged by the Argentine Tax Authority or by higher courts. Together with the aforementioned income tax presentation, a multinote form was presented in which the application of the mechanisms was reported, arguing that the effective tax rate would represent a percentage that would exceed the reasonable limits of imposition, setting up a situation of confiscation, in violation of art. 17 of the National Constitution (according to doctrine of the judgment "Candy S.A. c/AFIP and another a/ protection action", judgment of 07/03/2009, Judgments 332:1571, and subsequent precedents).
The aforementioned legal doctrine of the national supreme court is fully applicable to the particular case of IRSA, since the application of the regulations that do not allow the application of the integral and systematic inflation adjustment would prevent, as happened in the "Candy case", recognizing the totality of the inflationary effect in its tax balance causing the company to pay taxes on fictitious income.
Notwithstanding what is detailed in the previous paragraph, and given the existing background, the taxpayer timely determined and accounted for the income tax for the fiscal year ended June 30, 2021 without considering the aforementioned adjustment mechanisms, considering that , in the opinion of their tax advisors, the Argentine Tax Authority could challenge the presentation and said challenge could be validated by higher courts because there is no uniform jurisprudence to date that irrefutably validates the taxpayer's position. In this sense, after the merger process detailed in Note 4.1, the Company's Board of Directors has reassessed, together with its tax advisors, the characteristics of the presentation, the existing background and the analysis that the taxpayer made in a timely manner, having concluded in the same sense and therefore it has decided to keep the liability accounted for, which at the closing date of these financial statements with the computation of accrued interest amounts to ARS 1,448, and is disclosed in the item Non-current provisions. As of the date of issuance of these financial statements, the Company has not received any challenge or formal rejection by the Tax Authority.
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IRSA Inversiones y Representaciones Sociedad Anónima
20.
Revenues
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Rental and services income | 9,543 | 6,319 |
Sales of trading properties and developments | 126 | 973 |
Revenue from hotels operation and tourism services | 1,382 | 181 |
Total Group’s revenues | 11,051 | 7,473 |
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 December 31, 2021 | Total as of December 31, 2020 | |
Cost of sale of goods and services | 154 | - | - | 154 | 869 |
Salaries, social security costs and other personnel expenses | 1,485 | 821 | 49 | 2,355 | 2,100 |
Depreciation and amortization | 226 | 116 | 2 | 344 | 346 |
Fees and payments for services | 131 | 249 | 32 | 412 | 773 |
Maintenance, security, cleaning, repairs and others | 1,224 | 151 | 1 | 1,376 | 1,038 |
Advertising and other selling expenses | 467 | - | 141 | 608 | 263 |
Taxes, rates and contributions | 370 | 64 | 571 | 1,005 | 1,019 |
Director´s fees | - | 385 | - | 385 | 761 |
Leases and service charges | 98 | 27 | 3 | 128 | 117 |
Allowance for doubtful accounts, net | - | - | 36 | 36 | 33 |
Other expenses | 61 | 81 | 5 | 147 | 124 |
Total as of December 31, 2021 | 4,216 | 1,894 | 840 | 6,950 | - |
Total as of December 31, 2020 | 3,968 | 2,287 | 1,188 | - | 7,443 |
22.
Cost of goods sold and services provided
Total as of December 31, 2021 | Total as of December 31, 2020 | |
Inventories at the beginning of the period | 2,204 | 21,447 |
Purchases and expenses | 4,329 | 35,452 |
Currency translation adjustment | (129) | (6,446) |
Disposals | - | (1,416) |
Deconsolidation | - | (5,675) |
Inventories at the end of the period | (2,188) | (2,411) |
Total costs | 4,216 | 40,951 |
The following table presents the composition of the Group’s inventories as of December 31, 2021 and June 30, 2021:
Total as of December 31, 2021 | Total as of June 30, 2021 | |
Real estate | 2,096 | 2,117 |
Others | 92 | 87 |
Total inventories at the end of the period (*) | 2,188 | 2,204 |
(*) Inventories include trading properties and inventories.
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IRSA Inversiones y Representaciones Sociedad Anónima
23.
Other operating results, net
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Donations | (34) | (93) |
Lawsuits and other contingencies | (135) | (76) |
Management fees | 11 | 6 |
Operating interest expense | 79 | 70 |
Others | 39 | 22 |
Total other operating results, net | (40) | (71) |
24.
Financial results, net
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Finance income: | ||
- Interest income | 157 | 73 |
- Dividend income | - | 30 |
Total finance income | 157 | 103 |
Finance costs: | ||
- Interest expenses | (3,507) | (4,567) |
- Other finance costs | (350) | (599) |
Subtotal finance costs | (3,857) | (5,166) |
Capitalized finance costs | - | 385 |
Total finance costs | (3,857) | (4,781) |
Other financial results: | ||
- Fair value gain of financial assets and liabilities at fair value through profit or loss, net | 857 | 5,686 |
- Exchange differences, net | 5,986 | (42) |
- Gain / (loss) from repurchase of negotiable obligations | 790 | (331) |
- Gain / (loss) from derivative financial instruments, net | 11 | (476) |
- Other financial results | 12 | (61) |
Total other financial results | 7,656 | 4,776 |
- Inflation adjustment | 430 | 1,674 |
Total financial results, net | 4,386 | 1,772 |
25.
Related party transactions
The following is a summary of the balances with related parties as of December 31, 2021 and June 30, 2021:
Item | December 31, 2021 | June 30, 2021 |
Trade and other receivables | 2,772 | 3,590 |
Investments in financial assets | 2,174 | 1,897 |
Borrowings | (797) | (1,086) |
Trade and other payables | (582) | (550) |
Total | 3,567 | 3,851 |
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IRSA Inversiones y Representaciones Sociedad Anónima
Related party | December 31, 2021 | June 30, 2021 | Description of transaction | Item |
New Lipstick LLC | 25 | 28 | Reimbursement of expenses receivable | Trade and other receivable |
Condor | - | 662 | Public company’s securities | Trade and other receivable |
- | 344 | Loans granted | Trade and other receivable | |
- | 6 | Others | Trade and other receivable | |
- | 58 | Others | Investment in financial assets | |
Lipstick Management LLC | (176) | (193) | Loans obtained | Borrowings |
Metropolitan 885 Third Av. LLC | (219) | (568) | Loans obtained | Borrowings |
La Rural S.A. | 125 | 88 | Loans granted | Trade and other receivable |
204 | 246 | Dividends | Trade and other receivable | |
(5) | (15) | Leases and/or rights of use payable | Trade and other payables | |
Other associates and joint ventures | - | 2 | Reimbursement of expenses receivable | Trade and other receivable |
(39) | (44) | Loans obtained | Borrowings | |
6 | 7 | Leases and/or rights of use receivable | Trade and other receivable | |
10 | (2) | Unpaid contributions | Trade and other payables | |
14 | 7 | Management Fee | Trade and other receivable | |
(101) | (126) | NCN | Borrowings | |
(29) | (88) | Others | Trade and other payables | |
24 | 29 | Others | Trade and other receivable | |
1 | 1 | Share based payments | Trade and other payables | |
- | (7) | Lease liabilities | Trade and other payables | |
- | 8 | Loans granted | Trade and other receivable | |
36 | - | Warrants from related parties | Investment in financial assets | |
Total associates and joint ventures | (124) | 443 | ||
Cresud | 6 | 16 | Reimbursement of expenses receivable | Trade and other receivable |
(193) | (107) | Corporate services payable | Trade and other payables | |
2,138 | 1,839 | NCN | Investment in financial assets | |
(117) | (174) | Others | Trade and other payables | |
(3) | (4) | Share based payments | Trade and other payables | |
Total parent company | 1,831 | 1,570 | ||
Futuros y Opciones S.A. | - | (114) | Loans obtained | Borrowings |
2 | 4 | Others | Trade and other receivable | |
Helmir S.A. | (35) | (39) | NCN | Borrowings |
Total subsidiaries of parent company | (33) | (149) | ||
Directors | (218) | (152) | Fees for services received | Trade and other payables |
5 | 6 | Advances | Trade and other receivable | |
Finkelstein | (172) | - | Loans obtained | Borrowings |
Yad Leviim LTD | 1,770 | 1,938 | Loans granted | Trade and other receivable |
Others (1) | (2) | (1) | Legal Services | Trade and other payables |
(55) | (2) | Loans obtained | Borrowings | |
570 | 176 | Others | Trade and other receivable | |
(19) | - | Others | Trade and other payables | |
(7) | (1) | Management Fee | Trade and other payables | |
21 | 23 | Reimbursement of expenses receivable | Trade and other receivable | |
Total directors and others | 1,893 | 1,987 | ||
Total at the end of the period / year | 3,567 | 3,851 |
(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.
26
IRSA Inversiones y Representaciones Sociedad Anónima
The following is a summary of the results with related parties for the six-month periods ended December 31, 2021 and 2020:
Related party | Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | Description of transaction |
BACS | 22 | 48 | Leases and/or rights of use |
BHN Vida S.A | 12 | - | Leases and/or rights of use |
BHN Seguros Generales S.A. | 11 | - | Financial operations |
Helmir | 1 | - | Financial operations |
Other associates and joint ventures | - | (5) | Leases and/or rights of use |
- | (26) | Corporate services | |
Total associates and joint ventures | 46 | 17 | |
Cresud | 30 | 26 | Leases and/or rights of use |
(324) | (445) | Corporate services | |
(126) | 245 | Financial operations | |
Total parent company | (420) | (174) | |
Directors | (370) | (761) | Fees and remunerations |
Yad Leviim LTD | 44 | 4 | Financial operations |
(17) | - | Donations | |
(17) | - | Legal services | |
- | 18 | Fees and remuneration | |
Total others | (360) | (739) | |
Total at the end of the period | (734) | (896) |
(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 six-month periods ended December 31, 2021 and 2020:
Related party | Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | Description of the operation |
Cresud | - | (528) | Dividends granted |
Total dividends distribution | - | (528) | |
Quality | 30 | 29 | Capital contributions |
Condor | 635 | - | Exchange of shares |
Puerto Retiro | - | 12 | Capitalized loan |
Total capital contributions | 665 | 41 | |
Condor | 2,634 | - | Purchase and exchange of shares |
Total other transactions | 2,634 | - |
27
IRSA Inversiones y Representaciones Sociedad Anónima
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 12.31.2021 | Total as of 06.30.2021 |
Assets | ||||
Trade and other receivables | ||||
US Dollar | 29 | 102.52 | 2,990 | 3,914 |
Euros | 0 | 115.89 | 11 | 29 |
Receivables with related parties: | ||||
US Dollar | 18 | 102.72 | 1,831 | 2,315 |
Total trade and other receivables | 4,832 | 6,258 | ||
Investments in financial assets | ||||
US Dollar | 9 | 102.52 | 892 | 813 |
Pounds | 1 | 138.25 | 85 | 120 |
Nuevo Israel Shekel | 24 | 33.06 | 786 | 735 |
Investments with related parties: | ||||
US Dollar | 23 | 102.72 | 2,394 | 2,700 |
Total investments in financial assets | 4,157 | 4,368 | ||
Cash and cash equivalents | ||||
US Dollar | 17 | 102.52 | 1,771 | 1,269 |
Euros | 0 | 115.89 | 1 | 1 |
Total cash and cash equivalents | 1,772 | 1,270 | ||
Total Assets | 10,761 | 11,896 | ||
Liabilities | ||||
Trade and other payables | ||||
US Dollar | 10 | 102.72 | 986 | 1,456 |
Euros | - | 116.37 | - | 39 |
Payables to related parties: | ||||
US Dollar | 0 | 102.72 | 9 | 64 |
Total Trade and other payables | 995 | 1,559 | ||
Borrowings | ||||
US Dollar | 511 | 102.72 | 52,449 | 60,334 |
Borrowings with related parties | ||||
US Dollar | 7 | 102.72 | 764 | 1,752 |
Total Borrowings | 53,213 | 62,086 | ||
Derivative financial instruments | ||||
US Dollar | 0 | 102.72 | 33 | 70 |
Total derivative financial instruments | 33 | 70 | ||
Lease liabilities | ||||
US Dollar | 9 | 102.72 | 876 | 942 |
Lease liabilities with related parties | ||||
US Dollar | - | 102.72 | - | 7 |
Total lease liabilities | 876 | 949 | ||
Total Liabilities | 55,117 | 64,664 |
(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 December 31, 2021 according to Banco de la Nación Argentina.
28
IRSA Inversiones y Representaciones Sociedad Anónima
28.
Results from discontinued operations
The results of the discontinued operations include the IDBD / DIC operations which were deconsolidated in the comparative period (see Note 4.G to the Annual Financial Statements).
Six Months ended December 31, 2021 | Six Months ended December 31, 2020 | |
Revenues | - | 45,579 |
Costs | - | (36,983) |
Gross profit | - | 8,596 |
Net gain from fair value adjustment of investment properties | - | (33) |
General and administrative expenses | - | (5,247) |
Selling expenses | - | (4,998) |
Other operating results, net | - | 1,706 |
Profit from operations | - | 24 |
Share of profit of associates and joint ventures | - | 866 |
Profit before financial results and income tax | - | 890 |
Finance income | - | 633 |
Finance cost | - | (8,311) |
Other financial results | - | 549 |
Financial results, net | - | (7,129) |
Profit before income tax | - | (6,239) |
Income tax | - | 333 |
Loss from operations that are discontinued | - | (5,906) |
Loss for loss of control | - | (4,842) |
Loss from discontinued operations | - | (10,748) |
Loss for the period from discontinued operations attributable to: | ||
Equity holders of the parent | - | (8,488) |
Non-controlling interest | - | (2,260) |
Loss per share from discontinued operations attributable to equity holders of the parent: | ||
Basic | - | (14.76) |
Diluted | - | (14.76) |
29.
Other relevant events of the period
IRSA Shareholders’ Meeting
On October 21, 2021, the Ordinary Shareholders’ Meeting approved among others:
Partially write off the special reserve in the amount of ARS 30,693 which, restated for inflation, amounts to the sum of ARS 36,967, and use it for the total absorption of the negative result for the fiscal year ended June 30, 2021.
Warrants exercise
During the six-month period ended December 31, 2021, certain warrant holders exercised their right to acquire additional shares. As of December 31, 2021, USD 15,518.30 was collected, for a converted common shares equivalent of 35,922. Amounts in USD are expressed in integers
29
IRSA Inversiones y Representaciones Sociedad Anónima
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 and the exchange rate of the Argentine peso against other currencies, mainly the dollar, changes in interest rates which have an impact on the cost of capital, changes in government policies, capital controls and other political or economic events both locally and internationally.
The main indicators of the Argentine economy are described below:
●
In November 2021, the Monthly Economic Activity Estimator (“EMAE” in Spanish) reported by the National Institute of Statistics and Censuses (“INDEC” in Spanish), registered a variation of 9.3% compared to the same month of 2020, and 1.7% compared to the previous month.
●
The annual retail inflation reached 50.94% in the last 12 months. The survey on market expectations prepared by the Argentine Central Bank in December 2021, called the Market Expectations Survey (“REM” in Spanish), estimates a retail inflation of 54.8% i.a. for December 2022 and 43.4% for December 2023. Analysts participating in the REM forecast a rebound in economic activity in 2022, reaching an economic growth of 2.9%.
●
In the period from December 2020 to December 2021, the Argentine peso depreciated 22.1% against the US dollar according to the wholesale average exchange rate of Banco de la Nación Argentina. Given the exchange restrictions in force since August 2019, as of December 31, 2021, there is an exchange gap of approximately 92.3% 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 Argentine Central Bank. 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 necessary currencies to meet its financial obligations.
COVID-19 Pandemic
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 lockdowns, among other measures. The ongoing pandemic and these extraordinary government measures 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 as of today, more than 8,500,000 cases of infections had been confirmed in Argentina, by virtue of which the Argentinian Government implemented a series of health measures of social, preventive and mandatory lockdown at the national level with the closure of non-essential activities, including shopping malls, as well as the suspension of flights and border closures, for much of the years 2020 and 2021.
Since the beginning of fiscal year 2022, and until the date of presentation of the financial statements, the Company's shopping malls are fully operational, as well as the office buildings, despite the remote work modality that some tenants continue to apply. Regarding hotels, although they have been operating since December 2020, the sector continues working with certain restrictions on air flows and the influx of international tourism.
The final extent of the Coronavirus outbreak and its impact on the country's economy is still uncertain. However, although it has produced significant short-term effects, they are not expected to affect business continuity and the Group’s ability to meet its financial commitments for the next twelve months.
30
IRSA Inversiones y Representaciones Sociedad Anónima
The Group is closely monitoring the situation and taking all necessary measures to preserve human life and the Group's businesses.
30.
Subsequent events
Transfer of rights Libertador Trust
On February 2, 2022, the deed for transfer of rights of an apartment and complementary units of the Libertador Trust was signed for USD 0.9 million.
31
Free translation from the original prepared in Spanish for publication in Argentina
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: Carlos Della Paolera 261 - 9th 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 December 31, 2021, the unaudited condensed interim consolidated statements of income and other comprehensive income for the six month period and threemonth period ended December 31, 2021, the unaudited condense interim consolidated statements of changes in shareholders’ equity and of cash flows for the six month period then ended, and selected explanatory notes.
The balances and other information for the fiscal year ended on June 30, 2021 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 statement of financial position and the consolidated 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 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.
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 have not been 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 except for i) the lack of transcription to the Inventories and Balance Sheet Book, and ii) the lack of transcription to the General Journal Book of the accounting entries corresponding to the month of December 2021;
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 December 31, 2021 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 40,512,941, which was not due at that date.
Autonomous City of Buenos Aires, February 9, 2022
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 Marcelo Héctor Fuxman Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 134 F. 85 | |
Carlos Brondo Public Accountant (UNCUYO) C.P.C.E.C.A.B.A. V. 391 F. 078 | José Daniel Abelovich Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 102 F. 191 |
32
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Financial Statements as of December 31, 2021 and for the six and three-month periods ended as of that date, presented comparatively
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Financial Position
as of December 31, 2021 and June 30, 2021
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 12.31.21 | 06.30.21 | |
ASSETS | |||
Non-current assets | |||
Investment properties | 7 | 189,250 | 46,531 |
Property, plant and equipment | 8 | 1,612 | 37 |
Trading properties | 9 | 872 | 716 |
Intangible assets | 10 | 2,441 | 1,106 |
Rights of use assets | 11 | 666 | 11 |
Investments in subsidiaries, associates and joint ventures | 6 | 59,049 | 84,686 |
Income tax credit | 9 | 1 | |
Trade and other receivables | 13 | 1,983 | 1,408 |
Total non-current assets | 255,882 | 134,496 | |
Current assets | |||
Trading properties | 9 | 137 | 132 |
Inventories | 43 | 1 | |
Income tax credit | 33 | 7 | |
Trade and other receivables | 13 | 5,546 | 1,128 |
Derivative financial instruments | 12 | 10 | - |
Investments in financial assets | 12 | 3,160 | 295 |
Cash and cash equivalents | 12 | 2,665 | 648 |
Total current assets | 11,594 | 2,211 | |
TOTAL ASSETS | 267,476 | 136,707 | |
SHAREHOLDERS’ EQUITY | |||
Shareholders' equity (according to corresponding statements) | 117,150 | 74,787 | |
TOTAL SHAREHOLDERS’ EQUITY | 117,150 | 74,787 | |
LIABILITIES | |||
Non-current liabilities | |||
Trade and other payables | 14 | 1,301 | 6 |
Borrowings | 15 | 58,391 | 19,388 |
Deferred income tax liabilities | 16 | 73,975 | 23,282 |
Other liabilities | 62 | - | |
Provisions | 17 | 1,539 | 32 |
Lease liabilities | - | 7 | |
Total non-current liabilities | 135,268 | 42,715 | |
Current liabilities | |||
Trade and other payables | 14 | 4,405 | 863 |
Salaries and social security liabilities | 301 | 1 | |
Borrowings | 15 | 10,185 | 18,294 |
Provisions | 17 | 165 | 42 |
Lease liabilities | 2 | 5 | |
Total current liabilities | 15,058 | 19,205 | |
TOTAL LIABILITIES | 150,326 | 61,920 | |
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES | 267,476 | 136,707 |
The accompanying notes are an integral part of these Financial Statements.
. Eduardo S. Elsztain President |
1
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Income and Other Comprehensive Income
for the six and three-month periods ended December 31, 2021 and 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Six month | Three month | ||||
Note | 12.31.21 | 12.31.20 | 12.31.21 | 12.31.20 | |
Revenues | 18 | 7,658 | 3,143 | 4,230 | 1,924 |
Costs | 19 | (2,852) | (1,894) | (1,526) | (932) |
Gross profit | 4,806 | 1,249 | 2,704 | 992 | |
Net gain/ (loss) from fair value adjustment of investment properties | 7 | 23,767 | 7,008 | 29,349 | (5,221) |
General and administrative expenses | 19 | (1,441) | (383) | (838) | (202) |
Selling expenses | 19 | (660) | (78) | (368) | (58) |
Other operating results, net | 20 | (44) | (1,069) | (351) | (1,062) |
Profit/ (loss) from operations | 26,428 | 6,727 | 30,496 | (5,551) | |
Share of loss of subsidiaries, associates and joint ventures | 6 | (1,191) | (1,434) | (643) | (11,878) |
Profit/ (loss) before financial results and income tax | 25,237 | 5,293 | 29,853 | (17,429) | |
Finance income | 21 | 95 | 32 | 88 | 14 |
Finance costs | 21 | (3,762) | (2,539) | (1,597) | (1,067) |
Other financial results | 21 | 8,219 | 1,946 | 4,508 | 2,238 |
Inflation adjustment | 21 | 562 | (157) | 159 | 412 |
Financial results, net | 5,114 | (718) | 3,158 | 1,597 | |
Profit/ (loss) before income tax | 30,351 | 4,575 | 33,011 | (15,832) | |
Income tax | 16 | (4,976) | (3,636) | (7,347) | 2,676 |
Profit/ (loss) for the period | 25,375 | 939 | 25,664 | (13,156) | |
Other comprehensive (loss)/ income: | |||||
Items that may be reclassified subsequently to profit or loss: | |||||
Share of other comprehensive income of subsidiaries, associates and joint ventures | - | 512 | - | 66 | |
Currency translation adjustment of subsidiaries, associates and joint ventures | (421) | (4,696) | (244) | 1,238 | |
Total other comprehensive (loss)/ profit for the period (i) | 6 | (421) | (4,184) | (244) | 1,304 |
Total comprehensive profit/ (loss) for the period | 24,954 | (3,245) | 25,420 | (11,852) | |
Profit/ (loss) per share for the period (ii) | |||||
Basic | 31.37 | 1.63 | 31.72 | (22.88) | |
Diluted | 28.48 | 1.63 | 28.80 | (22.88) |
(i)
Components of other comprehensive income have no impact on income tax.
(ii)
The loss/profit per share basic have been calculated using 808,898,749 shares at 12.31.21 and 575,377,891 at 12.31.20. If 808,898,749 shares had been used for the calculation, the result per share would be ARS 1.16 for 12.31.20. The loss/profit per share diluted have been calculated using 890,815,983 shares at 12.31.21 and 576,529,312 at 12.31.20. If 890,815,983 shares had been used for the calculation, the result per share would be ARS 1.05 for 12.31.20 See Note 17 to the Annual Financial Statements as of June 30, 2021.
The accompanying notes are an integral part of these Financial Statements.
. Eduardo S. Elsztain President |
2
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 2021
(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 | Warrants (2) | Legal reserve | CNV 609/12 Resolution reserve | Other reserves (3) | Retained earnings | Total Shareholders’ equity | |
Balance as of June 30, 2021 | 657 | 2 | 24,970 | 29,038 | 178 | 2,143 | 1,930 | 17,013 | 35,825 | (36,969) | 74,787 |
Profit for the period | - | - | - | - | - | - | - | - | - | 25,375 | 25,375 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | - | (421) | - | (421) |
Warrants exercise | - | - | - | 4 | - | (1) | - | - | - | - | 3 |
Incorporated by merger | 152 | - | - | 19,509 | - | - | 359 | - | (52) | (2,562) | 17,406 |
Shareholders’ meeting held as of 10.21.21 | - | - | - | - | - | - | - | - | (36,967) | 36,967 | - |
Balance as of December 31, 2021 | 809 | 2 | 24,970 | 48,551 | 178 | 2,142 | 2,289 | 17,013 | (1,615) | 22,811 | 117,150 |
(1) Includes ARS 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2021.
(2) As of December 31, 2021, the remaining warrants to exercise amount to 79,964,078, equivalent to the same number of shares. See Note 29 to the interim condensed consolidated financial statements.
(3) The composition of Other reserves of the Company as of December 31, 2021 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, 2021 | (308) | (7,191) | 347 | 3,061 | 780 | 37,951 | 1,185 | 35,825 |
Other comprehensive loss for the period | - | - | - | - | (421) | - | - | (421) |
Incorporated by merger | - | (175) | - | - | (14) | - | 137 | (52) |
Shareholders’ meeting held as of 10.21.21 | - | - | - | - | - | (36,967) | - | (36,967) |
Balance as of December 31, 2021 | (308) | (7,366) | 347 | 3,061 | 345 | 984 | 1,322 | (1,615) |
There are no cumulative unpaid dividends on preferred shares
The accompanying notes are an integral part of these Financial Statements.
. Eduardo S. Elsztain President |
3
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Changes in Shareholders’ Equity
for the six-month period ended December 31, 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) | Accumulated losses | Total Shareholders’ equity | |
Balance as of June 30, 2020 | 575 | 2 | 24,951 | 26,303 | 172 | 877 | 17,013 | 12,658 | 18,751 | 101,302 |
Profit for the period | - | - | - | - | - | - | - | - | 939 | 939 |
Other comprehensive loss for the period | - | - | - | - | - | - | - | (4,184) | - | (4,184) |
Shareholders’ meeting held as of 10.26.20 | - | - | - | - | - | 1,135 | - | 20,611 | (21,746) | - |
Dividend distribution in shares | - | - | - | - | - | - | - | - | (875) | (875) |
Share-based payments | - | - | - | - | 3 | - | - | (3) | - | - |
Changes in non-controlling interest | - | - | - | - | - | - | - | 619 | - | 619 |
Other changes in subsidiaries` equity | - | - | - | - | - | - | - | 8,816 | - | 8,816 |
Balance as of December 31, 2020 | 575 | 2 | 24,951 | 26,303 | 175 | 2,012 | 17,013 | 38,517 | (2,931) | 106,617 |
(1) Includes ARS 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 December 31, 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 | (311) | (7,541) | 356 | 3,061 | (1,316) | 18,804 | (395) | 12,658 |
Other comprehensive loss for the period | - | - | - | - | (4,696) | - | 512 | (4,184) |
Shareholders’ meeting held as of 10.26.20 | - | - | - | - | - | - | 20,611 | 20,611 |
Reserve for share-based payments | 2 | - | (5) | - | - | - | - | (3) |
Changes in non-controlling interest | - | 619 | - | - | - | - | - | 619 |
Other changes in subsidiaries` equity | - | (91) | - | - | 7,813 | - | 1,094 | 8,816 |
Balance as of December 31, 2020 | (309) | (7,013) | 351 | 3,061 | 1,801 | 18,804 | 21,822 | 38,517 |
There are no cumulative unpaid dividends on preferred shares.
The accompanying notes are an integral part of these Financial Statements.
. Eduardo S. Elsztain President |
4
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Cash Flows
for the six-month periods ended December 31, 2021 and 2020
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
Note | 12.31.21 | 12.31.20 | |
Operating activities (1) | |||
Profit for the period | 25,375 | 939 | |
Adjustments: | |||
Income tax | 16 | 4,976 | 3,636 |
Amortization and depreciation | 19 | 350 | 9 |
Gain from disposal of trading properties | - | (1,257) | |
Financial results, net | (4,938) | (1,161) | |
(Increase)/ decrease in trading properties | 9 | (1) | 515 |
Net gain from fair value adjustment of investment properties | 7 | (23,767) | (7,008) |
Share of profit of subsidiaries, associates and joint ventures | 6 | 1,191 | 1,434 |
Loss from disposal of subsidiaries | - | 1,014 | |
Gain from disposal of intangible assets | (77) | - | |
Provisions and allowances | 511 | (23) | |
Management fees | (90) | - | |
Increase in inventories | (1) | - | |
Increase/ (decrease) in salaries and social security liabilities | 11 | (11) | |
Decrease / (increase) in trade and other receivables | 84 | (51) | |
Use of provisions | (45) | - | |
(Decrease)/ increase in trade and other payables | (525) | 1,917 | |
Net cash flow generated from / (used in) operating activities | 3,054 | (47) | |
Investing activities (1) | |||
Capital contributions to subsidiaries, associates and joint ventures | 6 | (346) | (601) |
Acquisition of investment properties | (1,269) | - | |
Acquisition of property, plant and equipment | 8 | (29) | (26) |
Acquisition of intangible assets | 10 | (3) | (3) |
Increase of investments in financial assets | (1,099) | (1,363) | |
Proceeds from sale of investment properties | 4,598 | - | |
Proceeds from sale of intangible assets | 113 | - | |
Decrease in derivative financial instruments | (10) | (41) | |
Proceeds from sale of investments in financial assets | 1,243 | 3,081 | |
Loans payment received from related parties | 5 | - | |
Interest received | 103 | - | |
Dividends received | 281 | - | |
Net cash flow generated from investing activities | 3,587 | 1,047 | |
Financing activities (1) | |||
Short-term loans obtained, net | (475) | 2,152 | |
Borrowings obtained | 412 | - | |
Payment of loans | (536) | (503) | |
Interests paid | (3,594) | (2,900) | |
Loans obtained from subsidiaries, associates and joint ventures | 230 | 14,919 | |
Payment of loans from subsidiaries, associates and joint ventures | (5) | (50) | |
Payment of finance leases | (4) | - | |
Exercise of warrants | 3 | - | |
Payment of NCN | (4,557) | (23,005) | |
Issuance of NCN | 6,392 | 4,484 | |
Repurchase of non-convertible notes | (2,672) | - | |
Net cash flow used in financing activities | (4,806) | (4,903) | |
Increase/ (decrease) in cash and cash equivalents, net | 1,835 | (3,903) | |
Cash and cash equivalents at the beginning of the period | 12 | 648 | 3,988 |
Cash and cash equivalents incorporated by merger | 65 | - | |
Foreign exchange gain on cash and fair value result for cash equivalents | 143 | (3) | |
Inflation adjustment | (26) | (2) | |
Cash and cash equivalents at the end of the period | 12 | 2,665 | 80 |
(1)
See operations that do not affect cash flows in Note 24 to these financial statements.
. Eduardo S. Elsztain President |
5
IRSA Inversiones y Representaciones Sociedad Anónima
Notes to the Unaudited Condensed Interim Consolidated 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 Carlos Della Paolera 261, 9th. Floor, Buenos Aires, Argentina.
The Company owns, manages and develops a portfolio of office and other rental properties in Buenos Aires. Directly and indirectly, it also participates in the operation of shopping malls. In addition, IRSA through its subsidiaries, associates and joint ventures manages and develops branded hotels across Argentina.
These Unaudited Condensed Interim Separate Financial Statements have been approved for issue by the Board of Directors on February 9, 2022.
2.
Basis of preparation of the Unaudited Condensed Interim Separate Financial Statements
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 and Financial Statements of Fusion as of June 30, 2021 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 December 31, 2021 and 2020 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.
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.
6
IRSA Inversiones y Representaciones Sociedad Anónima
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 December 31, 2021, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18:
Price variation | December 31, 2021 (six-month accumulated) |
20% |
As a consequence of the aforementioned, these Unaudited Consolidated Financial Statements as of December 31, 2021 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, 2021. 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, 2021 and December 31, 2020, which are disclosed for comparative purposes, arise from the financial statements at said dates restated in accordance with IAS 29 (note 2.1).
See Note 29 to the Unaudited Condensed Interim Consolidated Financial Statements for information on the context in which the Group operates.
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, 2021, described in Note 3 to those financial statements.
3.
Seasonal effects on operations
See Note 3 to the Unaudited Condensed Interim Consolidated Financial Statements.
4.
Acquisitions and disposals
4.1
Merger by absorption of IRSA and IRSA Propiedades Comerciales
On September 30, 2021, IRSA & IRSA Propiedades Comerciales Boards of Directors approved the prior merger agreement between both companies and the corresponding special financial statements as of June 30, 2021, initiating the corporate reorganization process under the terms of art. 82 et seq. of the General Law of Companies. The merger process has particular characteristics given that they are two companies included in the public offering regime, reason why, not only the current provisions of the General Law of Companies apply but also the procedures established regarding reorganization of companies of the Regulations of the “Comisión Nacional de Valores” (National Securities Commission) and the markets, both national and foreign, where their shares are listed.
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IRSA Inversiones y Representaciones Sociedad Anónima
The Merger is carried out in order to streamline the technical, administrative, operational and economic resources of both Companies, standing out among others: (a) the operation and maintenance of a single transactional information system and centralization of the entire accounting registration process; (b) presentation of a single financial statement to the different control agencies with the consequent cost savings in accounting and advisory fees, tariffs and other related expenses; (c) simplification of the accounting information reporting and consolidation process, as a consequence of the reduction that the merger would imply for the corporate structure as a whole; (d) removal of the IRSA PC public offering listing on BYMA and NASDAQ with the associated costs that this represents; (e) cost reduction for legal fees and tax filings; (f) increase in the percentage of the capital stock that is listed in the different markets, increasing the liquidity of the listed shares; (g) tax efficiencies and (h) preventively avoid the potential overlap of activities between the Companies.
In accordance with the commitments assumed in the Prior Merger Commitment, having obtained the administrative consent of the United States Securities and Exchange Commission, an entity to which they are subject because both companies list their shares in markets that operate in said jurisdiction, The shareholders' meetings of both companies were called.
On December 22, 2021, the Shareholders' Meetings of IRSA and IRSA PC were held, approving the merger by absorption, whose effective date was established on July 1, 2021. As of that date, the transfer to the absorbent of the totality of the equity of the absorbed company, thereby incorporating all its rights and obligations, assets and liabilities into the equity of the absorbing company.
Likewise, and within the framework of the reorganization process, the Board of Directors has approved the exchange ratio, which has been established at 1.40 IRSA shares for each IRSA PC share, which is equivalent to 0.56 IRSA GDS for each ADS of IRSA PC. Within this framework, it was decided to increase the share capital by issuing 152,158,215 new shares in IRSA.
The exchange of IRSA PC shares for IRSA shares will be carried out once the entire administrative process has been completed and once the registration has been made in the “Inspección General de Justicia” (General Inspection of Justice), a process that may take several months.
The following are the net assets incorporated:
12.31.21(*) | |
Investment properties | 122,288 |
Property, plant and equipment | 1,621 |
Trading properties | 160 |
Intangible assets | 1,409 |
Rights of use assets | 874 |
Investments in subsidiaries, associates and joint ventures (**) | (24,198) |
Income tax credit | 37 |
Trade and other receivables | 5,313 |
Inventories | 41 |
Investments in financial assets | 3,091 |
Cash and cash equivalents | 65 |
Total Assets | 110,701 |
Trade and other payables | 5,082 |
Borrowings | 40,459 |
Deferred income tax liabilities | 46,170 |
Provisions | 166 |
Lease liabilities | (2) |
Income tax liabilities | 1,131 |
Salaries and social security liabilities | 289 |
Total Liabilities | 93,295 |
Total net Assets | 17,406 |
(*) The absorption was carried out at the accounting values of the absorbed company on the effective date of the merger.
(**) Includes the effect of the reduction of the investment that IRSA held in IRSA CP.
Significant acquisitions and disposals of the Company and/or its subsidiaries for the six-month period ended December 31, 2021 are detailed in Note 4 to the Unaudited Condensed Interim Consolidated Financial Statements.
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IRSA Inversiones y Representaciones Sociedad Anónima
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, 2021. 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 Tyrus, Efanur, Panamerican Mall S.A. and Torodur S.A.. The main associates include BHSA.
The Company indirectly participated, until September 25, 2020, through Tyrus, in IDB Development Ltd. (“IDBD”) and Discount Investment Company Ltd (“DIC”), since on that date the insolvency and liquidation of IDBD was decreed generating the loss of control of both companies.
Detailed below is the evolution of investments in subsidiaries, associates and joint ventures of the Company, for the six-month period ended December 31, 2021 and for the year ended June 30, 2021:
12.31.21 | 06.30.21 | |
Beginning of period / year | 84,686 | 119,869 |
Share of profit | (1,041) | (28,589) |
Other comprehensive loss | (421) | (5,879) |
Impairment of associates and joint ventures | (150) | (48) |
Capital contributions (Note 22) | 501 | 4,290 |
Incorporated by merger (Note 4.1) | (24,198) | - |
Changes in non-controlling interest | - | 446 |
Dividends (Note 22) | (390) | (12,265) |
Sale of interest | - | (2,599) |
Other changes in subsidiaries’ equity | - | 9,461 |
End of the period / year | 58,987 | 84,686 |
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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/ (loss) | ||||||||
12.31.21 | 06.30.21 | 12.31.21 | 06.30.21 | 12.31.21 | 12.31.20 | ||||||
Subsidiaries | |||||||||||
IRSA CP (11) | - | 78.07% | - | 68,027 | - | 4,842 | |||||
Tyrus | 100.00% | 100.00% | 4,080 | 4,430 | (245) | (8,095) | |||||
Efanur | 99.08% | 100.00% | 3,216 | 3,262 | (46) | (290) | |||||
Ritelco S.A. | 100.00% | 100.00% | 1,049 | 1,091 | (42) | (2,000) | |||||
Inversora Bolívar S.A. | 96.87% | 96.57% | 1,086 | 1,108 | (32) | 32 | |||||
ECLSA | 98.93% | 99.08% | 1,596 | 2,119 | (66) | 145 | |||||
Palermo Invest S.A. | 97.35% | 97.34% | 1,120 | 1,137 | (32) | 36 | |||||
NFSA | 76.34% | 76.34% | 499 | 552 | (52) | (88) | |||||
Llao Llao Resort S.A. | 50.00% | 50.00% | 562 | 605 | (43) | (17) | |||||
HASAU | 100.00% | 100.00% | 334 | 333 | (32) | (91) | |||||
Liveck S.A. | 9.30% | 9.30% | 77 | 87 | (9) | (2) | |||||
Panamerican Mall S.A. (12) | 80.00% | - | 25,806 | - | (99) | - | |||||
Torodur S.A. (12) | 100.00% | - | 8,322 | - | (864) | - | |||||
Arcos del Gourmet S.A. (12) | 90.00% | - | 2,189 | - | 43 | - | |||||
Shopping Neuquén S.A. (12) | 99.95% | - | 1,101 | - | 75 | - | |||||
Centro de Entretenimientos La Plata S.A. (8)(7)(6)(12) | 95.40% | - | 708 | - | (7) | - | |||||
We Are Appa S.A. (12) | 93.61% | - | 349 | - | (192) | - | |||||
Entertainment Holdings S.A. (12) | 70.00% | - | 41 | - | 82 | - | |||||
Emprendimiento Recoleta S.A. (4)(12) | 53.68% | - | 59 | - | (21) | - | |||||
Entretenimiento Universal S.A. (5)(12) | 3.75% | - | (1) | - | 1 | - | |||||
Fibesa S.A. (5)(12) | 97.00% | - | (61) | - | 57 | - | |||||
Associates | |||||||||||
BHSA (1)(2) | 4.93% | 4.93% | 995 | 1,026 | (31) | 41 | |||||
Manibil S.A. (3) | - | - | - | - | - | (23) | |||||
BACS (2) | 37.72% | 37.72% | 565 | 579 | (15) | (2) | |||||
TGLT S.A. (9)(10)(12) | 27.82% | - | 957 | - | (171) | - | |||||
Joint ventures | |||||||||||
IRSA - Galerías Pacífico S.A. - U.T. | 50.00% | 50.00% | 428 | 258 | 169 | (112) | |||||
Cyrsa S.A. | 50.00% | 50.00% | 64 | 72 | (8) | 6 | |||||
Quality Invest S.A. (12) | 50.00% | - | 3,512 | - | (43) | - | |||||
Nuevo Puerto Santa Fe S.A. (8)(12) | 50.00% | - | 334 | - | 11 | - | |||||
Total subsidiaries, associates and joint ventures | 58,987 | 84,686 | (1,612) | (5,618) |
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IRSA Inversiones y Representaciones Sociedad Anónima
Latest financial information 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 | ||||||
Tyrus | Uruguay | Investment | 21,365,969,547 | 7,480 | (6) | 3,914 |
Efanur | Uruguay | Investment | 461,751,428 | 131 | 294 | 3,216 |
Ritelco S.A. | Uruguay | Investment | 453,321,177 | 453 | (43) | 1,049 |
Inversora Bolívar S.A. | Argentina | Investment | 1,473,847,188 | 93 | (33) | 1,125 |
ECLSA | Argentina | Investment | 1,710,302,484 | 80 | (28) | 1,607 |
Palermo Invest S.A. | Argentina | Investment | 1,126,647,085 | 161 | (32) | 1,130 |
NFSA | Argentina | Hotel | 38,068,999 | 50 | (80) | 890 |
Llao Llao Resort S.A. | Argentina | Hotel | 73,580,206 | 147 | (86) | 1,123 |
HASAU | Argentina | Hotel | 603,978,099 | 26 | (32) | 351 |
Liveck S.A. | Uruguay | Investment | 41,855,579 | 415 | (28) | 415 |
Panamerican Mall S.A. (12) | Argentina | Real estate | 397,661,435 | 497 | (120) | 32,263 |
Torodur S.A.(12) | Uruguay | Investment | 2,514,547,001 | 1,884 | (847) | 8,357 |
Arcos del Gourmet S.A. (12) | Argentina | Real estate | 72,973,903 | 81 | 110 | 2,432 |
Shopping Neuquén S.A. (12) | Argentina | Real estate | 53,511,353 | 54 | 75 | 1,102 |
Centro de Entretenimiento La Plata S.A. (8)(7)(6)(12) | Argentina | Real estate | 36,824 | 95 | 4 | 159 |
We Are Appa S.A. (12) | Argentina | Developer | 484,727,737 | 518 | (204) | 240 |
Entertainment Holdings S.A. (12) | Argentina | Investment | 32,503,379 | 46 | 102 | 282 |
Emprendimiento Recoleta S.A. (4)(12) | Argentina | Real estate | 13,449,990 | 25 | (38) | 111 |
Entretenimiento Universal S.A.(12) | Argentina | Event organization and others | 825 | - | 29 | (32) |
Fibesa S.A.(12) | Argentina | Real estate | (i) | 2 | 120 | 190 |
Associates | ||||||
BHSA (1)(2) | Argentina | Financial | 73,939,835 | 1,500 | (620) | 20,188 |
BACS (2) | Argentina | Financial | 33,125,751 | 88 | (40) | 1,498 |
TGLT S.A. (9)(12) | Argentina | Real estate | 257,320,997 | 925 | (82) | 5,117 |
Joint ventures | ||||||
IRSA - Galerías Pacífico S.A. - U.T. | Argentina | Hotel | 500,000 | 1 | 338 | 855 |
Cyrsa S.A. | Argentina | Real estate | 8,748,270 | 3 | (16) | 127 |
Quality Invest S.A. (12) | Argentina | Financial | 225,146,912 | 406 | (86) | 6,912 |
Nuevo Puerto Santa Fe S.A. (8)(12) | Argentina | Financial | 138,750 | 28 | 21 | 631 |
(1)
Considered significant. See Notes 7 to 8 to the Annual Consolidated Financial Statements.
(2)
Information as of December 31, 2021 according to BCRA's standards. For the purpose of the valuation of the investments in the Company, figures as of December 31, 2021 have been considered, with the necessary IFRS adjustments. Share market price of Banco Hipotecario S.A as of December 31, 2021 amounts to ARS 8.76. See Note 8 to the Consolidated Financial Statements as of June 30, 2021.
(3)
As mentioned in note 4G. to the Consolidated Financial Statements, the Company, on December 22, 2020, sold 217,332,873 shares, that represents the 49% of the capital stock of Manibil S.A.. The operation was completed in February 2021, so the Company leaves the character of shareholder of that Company from that moment.
(4)
Concession ended on November 18, 2018. As of September 30, 2021, is in liquidation.
(5)
Included in other payables.
(6)
Corresponds to profit for the six-month periods ended December 31, 2021 and 2020, respectively.
(7)
Include the necessary adjustments to get to the balances in accordance with the International Financial Reporting Standards.
(8)
Nominal value per share ARS 100.
(9)
See note 4 to the Annual Consolidated Financial Statements as of June 30, 2021.
(10)
Includes ARS 2 of other comprehensive income. For the purposes of the valuation of the investment in the Company, the financial information prepared by TGLT S.A. has been considered.
(11)
See Note 4.1.
(12)
Incorporation by merger with IRSA CP (Note 4.1.).
(i)
Corresponds to 2,323,126 shares. Nominal value per share ARS 1 with 5 votes rights.
7.
Investment properties
Changes in the Company’s investment properties for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |||||
Shopping Malls | Office and Other rental properties | Undeveloped parcels of land | Properties under development | Total | Total | |
Fair value at the beginning of the period / year | - | 6,764 | 39,767 | - | 46,531 | 43,303 |
Additions | 167 | 186 | 448 | 456 | 1,257 | 6 |
Disposals | - | (4,341) | (257) | - | (4,598) | (32) |
Incorporated by merger (Note 4.1) | 49,872 | 51,795 | 16,650 | 3,971 | 122,288 | - |
Net gain from fair value adjustment | (4,357) | 1,741 | 26,393 | (10) | 23,767 | 3,254 |
Initial additions lease costs | 9 | 3 | - | - | 12 | - |
Amortization of capitalized lease costs | (4) | (3) | - | - | (7) | - |
Fair value at the end of the period / year | 45,687 | 56,145 | 83,001 | 4,417 | 189,250 | 46,531 |
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IRSA Inversiones y Representaciones Sociedad Anónima
The following amounts have been recognized in the Statements of Comprehensive Income:
12.31.21 | 12.31.20 | |
Sale, rental and services´ income (Note 18) | 7,532 | 57 |
Rental and services´ costs (Note19) | (2,718) | (17) |
Cost of sales and developments (Note19) | (57) | (36) |
Net unrealized gain from fair value adjustment on investment properties | 23,830 | 7,008 |
Net realized loss from fair value adjustment on investment properties | (63) | - |
Valuation techniques are described in Note 9 to the Consolidated Financial Statements as of June 30, 2021. There were no changes to the valuation techniques.
For information on the development of Costa Urbana, see Note 8 to the consolidated financial statements as of December 31, 2021.
8.
Property, plant and equipment
Changes in the Company’s property, plant and equipment for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
12.21.21 | 06.30.21 | ||||||
Buildings and facilities | Furniture and fixtures | Machinery and equipment | Vehicles | Others | Total | Total | |
Costs | 337 | 120 | 325 | 8 | - | 790 | 763 |
Accumulated depreciation | (330) | (94) | (321) | (8) | - | (753) | (731) |
Net book amount at the beginning of the period / year | 7 | 26 | 4 | - | - | 37 | 32 |
Additions | 9 | 1 | 19 | - | - | 29 | 27 |
Depreciation (Note 19) | (30) | (8) | (37) | - | - | (75) | (22) |
Incorporated by merger (Note 4.1) | 1,378 | 76 | 165 | - | 2 | 1,621 | - |
Balances at the end of the period / year | 1,364 | 95 | 151 | - | 2 | 1,612 | 37 |
Costs | 2,306 | 499 | 2,728 | 42 | 2 | 5,577 | 790 |
Accumulated depreciation | (942) | (404) | (2,577) | (42) | - | (3,965) | (753) |
Net book amount at the end of the period / year | 1,364 | 95 | 151 | - | 2 | 1,612 | 37 |
9.
Trading properties
Changes in the Company’s trading properties for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |||
Completed properties | Undevelopedproperties | Total | Total | |
Beginning of the period / year | 132 | 716 | 848 | 2,576 |
Additions | - | 1 | 1 | 1,044 |
Capitalized finance costs | - | - | - | 564 |
Disposals (Note 19) | - | - | - | (3,336) |
Incorporated by merger (Note 4.1) | 14 | 146 | 160 | - |
End of the period / year | 146 | 863 | 1,009 | 848 |
Non-current | 872 | 716 | ||
Current | 137 | 132 | ||
Total | 1,009 | 848 |
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IRSA Inversiones y Representaciones Sociedad Anónima
10.
Intangible assets
Changes in Company’s intangible assets for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |||
Computer software | Future units to be received from barters | Total | Total | |
Costs | 66 | 1,085 | 1,151 | 163 |
Accumulated amortization | (45) | - | (45) | (34) |
Net book amount at the beginning of the period / year | 21 | 1,085 | 1,106 | 129 |
Additions | 3 | - | 3 | 989 |
Disposals | - | (36) | (36) | - |
Amortization (Note 19) | (41) | - | (41) | (12) |
Incorporated by merger (Note 4.1) | 148 | 1,261 | 1,409 | - |
Balances at the end of the period / year | 131 | 2,310 | 2,441 | 1,106 |
Costs | 806 | 2,310 | 3,116 | 1,152 |
Accumulated amortization | (675) | - | (675) | (46) |
Net book amount at the end of the period / year | 131 | 2,310 | 2,441 | 1,106 |
11.
Rights of use assets
Changes in Company’s rights of use assets for the six-month period ended December 31, 2021 and for the year ended June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |
Shopping malls | 663 | - |
Machinery and equipment | 3 | - |
Offices | - | 11 |
Total rights of use assets | 666 | 11 |
Non-current | 666 | 11 |
Total | 666 | 11 |
The charges to income related to rights of use assets were the following:
12.31.21 | 06.30.21 | |
Shopping malls | 218 | - |
Machinery and equipment | 2 | - |
Others | 7 | - |
Total amortizations and depreciation (Note 19) | 227 | - |
12.
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, 2021.
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IRSA Inversiones y Representaciones Sociedad Anónima
Financial assets and financial liabilities as of December 31, 2021 and June 30, 2021 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 | |||||
December 31, 2021 | |||||
Assets as per Statement of Financial Position | |||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 13) | 5,364 | - | 5,364 | 2,934 | 8,298 |
Investments in financial assets: | |||||
- Public companies’ securities | - | 178 | 178 | - | 178 |
- Mutual funds (ii) | - | 31 | 31 | - | 31 |
- Bonds | - | 2,951 | 2,951 | - | 2,951 |
- Futures on foreign currency | - | 10 | 10 | - | 10 |
Cash and cash equivalents: | |||||
- Cash at bank and on hand | 869 | - | 869 | - | 869 |
- Short- term investments | - | 1,796 | 1,796 | - | 1,796 |
Total | 6,233 | 4,966 | 11,199 | 2,934 | 14,133 |
Financial liabilities at amortized cost (i) | Subtotal financial liabilities | Non-financial liabilities | Total | |
December 31, 2021 | ||||
Liabilities as per Statement of Financial Position | ||||
Trade and other payables (Note 14) | 2,301 | 2,301 | 3,405 | 5,706 |
Borrowings (Note 15) | 68,576 | 68,576 | - | 68,576 |
Total | 70,877 | 70,877 | 3,405 | 74,282 |
Financial assets at amortized cost (i) | Financial assets at fair value through profit or loss | Subtotal financial assets | Non-financial assets | Total | |
Level 1 | |||||
June 30, 2021 | |||||
Assets as per Statement of Financial Position | |||||
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 13) | 1,201 | - | 1,201 | 1,346 | 2,547 |
Investments in financial assets: | |||||
- Mutual funds (ii) | - | 12 | 12 | - | 12 |
- Bonds | - | 283 | 283 | - | 283 |
Cash and cash equivalents: | |||||
- Cash at bank and on hand | 106 | - | 106 | - | 106 |
- Short-term investments | - | 542 | 542 | - | 542 |
Total | 1,307 | 837 | 2,144 | 1,346 | 3,490 |
Financial liabilities at amortized cost (i) | Subtotal financial liabilities | Non-financial liabilities | Total | |
June 30, 2021 | ||||
Liabilities as per Statement of Financial Position | ||||
Trade and other payables (Note 14) | 820 | 820 | 49 | 869 |
Borrowings (Note 15) | 37,682 | 37,682 | - | 37,682 |
Total | 38,502 | 38,502 | 49 | 38,551 |
(i)
The fair value of financial assets and liabilities at amortized cost does not differ significantly from their book value, except for borrowings (Note 15). 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.
(ii)
See description of reprofiling of public debt instruments in Note 33 to the consolidated annual financial statements.
As of December 31, 2021, 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
13. Trade and other receivables
Company’s trade and other receivables, as of December 31, 2021 and June 30, 2021 are comprised as follows:
12.31.21 | 06.30.21 | |
Sales, leases and services receivables | 4,389 | 435 |
Less: Allowance for doubtful accounts | (769) | (11) |
Total trade receivables | 3,620 | 424 |
Borrowings granted, deposits and others | 1,257 | 587 |
Advance payments | 737 | 260 |
Tax credits | 1,177 | 861 |
Prepaid expenses | 489 | 219 |
Long-term incentive plan | 15 | 18 |
Dividends | 90 | 156 |
Others | 144 | 11 |
Total other receivables | 3,909 | 2,112 |
Total trade and other receivables | 7,529 | 2,536 |
Non-current | 1,983 | 1,408 |
Current | 5,546 | 1,128 |
Total | 7,529 | 2,536 |
Movements on the Company’s allowance for doubtful accounts are as follows:
12.31.21 | 06.30.21 | |
Beginning of period /year | 11 | 18 |
Additions | 168 | 4 |
Disposals / Recoveries | (130) | (1) |
Currency translation adjustment | 869 | - |
Inflation adjustment | 13 | (10) |
Incorporated by merger (Note 4.1) | (162) | - |
End of the period / year | 769 | 11 |
The additions, disposals and recoveries of the allowance for doubtful accounts have been included in “Selling expenses” in the Statements of Income (Note 19). Amounts charged to the allowance for doubtful accounts are generally written off when there is no expectation of recovery.
14.
Trade and other payables
Company’s trade and other payables as of December 31, 2021 and June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |
Customers´ advances | 1,378 | 33 |
Trade payables | 887 | 413 |
Accrued invoices | 653 | 359 |
Admission rights | 1,226 | - |
Other income to be accrued | 59 | - |
Tenant deposits | 63 | 1 |
Total trade payables | 4,266 | 806 |
Director´s fees | 212 | 23 |
Long-term incentive plan | 3 | 16 |
Tax amnesty plans | 23 | 2 |
Other payables | 483 | 9 |
Other tax payables | 719 | 13 |
Total other payables | 1,440 | 63 |
Total trade and other payables | 5,706 | 869 |
Non-current | 1,301 | 6 |
Current | 4,405 | 863 |
Total | 5,706 | 869 |
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IRSA Inversiones y Representaciones Sociedad Anónima
15. Borrowings
Company’s borrowings as of December 31, 2021 and June 30, 2021 are comprised as follows:
Book value as of 12.31.21 | Book value as of 06.30.21 | Fair value as of 12.31.21 | Fair value as of 06.30.21 | |
NCN | 54,842 | 19,687 | 53,143 | 19,111 |
Bank loans | 835 | 1,055 | 835 | 1,055 |
Related parties (Note 22) | 7,807 | 16,935 | 7,799 | 16,732 |
Bank overdrafts | 5,092 | 5 | 5,092 | 5 |
Total borrowings | 68,576 | 37,682 | 66,869 | 36,903 |
Non-current | 58,391 | 19,388 | ||
Current | 10,185 | 18,294 | ||
Total | 68,576 | 37,682 |
See Note 17 to the Unaudited Condensed Interim Consolidated Financial Statements.
16.
Currents and deferred income tax
The charge for the Company’s income tax is comprised as follows:
12.31.21 | 12.31.20 | |
Deferred income tax | (4,523) | (3,636) |
Current income tax | (453) | - |
Income tax | (4,976) | (3,636) |
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 six-month periods ended December 31, 2021 and 2020:
12.31.21 | 12.31.20 | |
Net income at tax rate (i) | (10,623) | (1,373) |
Permanent differences: | ||
Share of profit of subsidiaries, associates and joint ventures | (417) | (735) |
Income tax rate differential | - | 423 |
Difference between provision and tax return | 207 | 98 |
Recovery/ (provision) of loss carry forwards | 3,901 | (1,691) |
Inflation adjustment for tax purposes | (3,781) | (2,685) |
Inflation adjustment | 5,735 | 2,273 |
Non-deductible expenses and others | 2 | 54 |
Income tax | (4,976) | (3,636) |
(1) Income tax rate relevant in Argentina as of December 31, 2021 and 2020 was 35 % and 30 %, respectively.
Changes in the deferred tax account are as follows:
12.31.21 | 06.30.20 | |
Beginning of the period / year | (23,282) | (13,439) |
Income tax charge | (4,523) | (9,843) |
Incorporated by merger (Note 4.1) | (46,170) | - |
End of the period / year | (73,975) | (23,282) |
As of December 31, 2021, unrecognized ARS 3,170 million of tax loss carryforward. Based on the evolution of the business, Management is evaluating their recoverability.
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IRSA Inversiones y Representaciones Sociedad Anónima
See Note 19 to the interim condensed consolidated financial statements.
17. Provisions
The table below presents the changes in the Company's provisions as of December 31, 2021 and June 30, 2021 were as follows:
12.31.21 | 06.30.21 | |||
Income tax (ii) | Labor, legal and other claims (i) | Total | Total | |
Beginning of period / year | - | 74 | 74 | 506 |
Additions (i) | 71 | 118 | 189 | 32 |
Decreases (i) | - | (15) | (15) | (25) |
Utilizations | - | (45) | (45) | (32) |
Transfers (Note 16) | 1,377 | - | 1,377 | - |
Incorporated by merger (Note 4.1) | - | 166 | 166 | - |
Inflation adjustment | - | (42) | (42) | (43) |
Share of loss | - | - | - | (364) |
End of period / year | 1,448 | 256 | 1,704 | 74 |
Non-current | 1,539 | 32 | ||
Current | 165 | 42 | ||
Total | 1,704 | 74 |
(i)
Additions and decreases in labor, legal and other claims are included in "Other operating results, net”. Additions and decreases in tax contingencies are included in "Financial results, net”.
(ii)
See Note 19 to the interim condensed consolidated financial statements – “Submission of income tax presentation”.
18. Revenues
12.31.21 | 12.31.20 | |
Base rent | 2,678 | 48 |
Contingent rent | 2,565 | - |
Admission rights | 401 | - |
Parking fees | 130 | - |
Property management fees | 69 | 9 |
Others | 42 | - |
Averaging of scheduled rent escalation | (280) | - |
Rentals and services income | 5,605 | 57 |
Sale of trading properties | 126 | 3,086 |
Total revenues from sales, rentals and services | 5,731 | 3,143 |
Expenses and collective promotion fund | 1,927 | - |
Total revenues from expenses and collective promotion funds | 1,927 | - |
Total revenues | 7,658 | 3,143 |
19. Expenses by nature
The Company discloses expenses in the Statements of Income and Other Comprehensive Income by function as part of the line items “Costs”, “General and administrative expenses” and “Selling expenses”. The following table provides additional disclosure regarding expenses by nature and their relationship to the function within the Company.
| Costs (i) | General and administrative expenses | Selling expenses | 12.31.21 | 12.31.20 |
Salaries, social security costs and other personnel expenses | 830 | 691 | 23 | 1,544 | 184 |
Maintenance, security, cleaning, repairs and others | 858 | 86 | 1 | 945 | 62 |
Taxes, rates and contributions | 299 | 2 | 453 | 754 | 88 |
Advertising and other selling expenses | 385 | - | 124 | 509 | 3 |
Director´s fees (Note 22) | - | 370 | - | 370 | 75 |
Amortization and depreciation | 282 | 66 | 2 | 350 | 9 |
Fees and payments for services | 45 | 152 | 12 | 209 | 57 |
Leases and services’ charges | 86 | 22 | 3 | 111 | 23 |
Traveling, transportation and stationery expenses | 17 | 40 | 4 | 61 | 12 |
Cost of sales of trading properties | 40 | - | - | 40 | 1,828 |
Allowance for doubtful accounts (charge and recovery, net) (Note 13) | - | - | 38 | 38 | 3 |
Bank expenses | 2 | 12 | - | 14 | 11 |
Others | 8 | - | - | 8 | - |
Total expenses by nature as of 12.31.21 | 2,852 | 1,441 | 660 | 4,953 | - |
Total expenses by nature as of 12.31.20 | 1,894 | 383 | 78 | - | 2,355 |
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IRSA Inversiones y Representaciones Sociedad Anónima
(i)
For the six-month period ended December 31, 2021, includes ARS 2,718 of rental and services costs and ARS 134 of costs of sales and developments, of which ARS 57 corresponds to investment properties and ARS 77 to trading properties. For the six-month period ended December 31, 2020, includes ARS 17 which correspond to rental and services costs and ARS 1,877 to costs of sales and developments, of which ARS 36 corresponds to investment properties and ARS 1,841 to trading properties.
20. Other operating results, net
12.31.21 | 12.31.20 | |
Lawsuits and other contingencies (i) | (103) | (18) |
Donations | (34) | (47) |
Loss from purchase or disposal of subsidiaries, associates and/or joint ventures | - | (1,014) |
Management fee | 90 | - |
Interest generated by operating credits | 66 | 6 |
Others | (63) | 4 |
Total other operating results, net | (44) | (1,069) |
(i)
Includes legal costs and expenses.
21. Financial results, net
12.31.21 | 12.31.20 | |
Interest income | 95 | 32 |
Total finance income | 95 | 32 |
Interest expense | (3,455) | (2,720) |
Other finance costs | (307) | (205) |
Subtotal finance costs | (3,762) | (2,925) |
Capitalized finance costs | - | 386 |
Total finance costs | (3,762) | (2,539) |
Net exchange difference | 6,935 | (817) |
Net gain from changes in fair value of financial assets | 661 | 2,891 |
Gain/ (loss) from derivative financial instruments, net | 1 | (65) |
Gain from repurchase of non-convertible notes | 608 | - |
Other financial results | 14 | (63) |
Total other financial results | 8,219 | 1,946 |
Inflation adjustment | 562 | (157) |
Total financial results, net | 5,114 | (718) |
22. Related party transactions
The following is a summary of the balances with related parties as of December 31, 2021 and June 30, 2021:
Item | 12.31.21 | 06.30.21 |
Rights of use assets | 655 | 11 |
Trade and other payables | 1,498 | 1,004 |
Investments in financial assets | 2,339 | 283 |
Trade and other receivables | (743) | (409) |
Lease liabilities | - | (13) |
Borrowings | (7,807) | (16,935) |
(4,058) | (16,059) |
Related parties | 12.31.21 | 06.30.21 | Operation description | Item |
Cresud | (3) | (1) | Long-term incentive plan payable | Trade and other receivables |
(256) | (861) | Non-Convertible Notes | Borrowings | |
(275) | (61) | Corporate services payable | Trade and other receivables | |
(31) | (13) | Reimbursement of expenses payable | Trade and other receivables | |
6 | 8 | Leases receivable | Trade and other payables | |
2,339 | - | Non-Convertible Notes | Investments in financial assets | |
(2) | (2) | Management fee | Trade and other receivables | |
Total parent company | 1,778 | (930) |
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IRSA Inversiones y Representaciones Sociedad Anónima
Related parties | 12.31.21 | 06.30.21 | Operation description | Item |
IRSA CP (*) | - | 171 | Reimbursement of expenses receivable | Trade and other payables |
- | (12) | Leases receivable | Trade and other receivables | |
- | (5,120) | Non-Convertible Notes | Borrowings | |
- | (9,453) | Loans received | Borrowings | |
- | 11 | Rights of use assets | Rights of use assets | |
- | (60) | Corporate services payable | Trade and other receivables | |
- | 283 | Non-Convertible Notes | Investments in financial assets | |
- | (14) | Non-Convertible Notes | Trade and other receivables | |
- | (7) | Reimbursement of expenses payable | Trade and other receivables | |
- | (2) | Leases payable | Trade and other receivables | |
- | (13) | Lease liabilities | Lease liabilities | |
Tyrus | 324 | 581 | Borrowings granted | Trade and other payables |
4 | - | Reimbursement of expenses receivable | Trade and other payables | |
ECLSA | - | 5 | Reimbursement of expenses receivable | Trade and other payables |
(559) | - | Loans received | Borrowings | |
- | 129 | Dividends receivable | Trade and other payables | |
Panamerican Mall S.A. | 1 | - | Long-term incentive plan receivable | Trade and other payables |
50 | - | Reimbursement of expenses receivable | Trade and other payables | |
8 | - | Management fees receivables | Trade and other payables | |
221 | - | Borrowings granted | Trade and other payables | |
(22) | - | Leases payable | Trade and other receivables | |
Arcos del Gourmet S.A. | (3) | - | Leases and rights of use payable | Trade and other receivables |
(9) | - | Leases payable | Trade and other receivables | |
4 | - | Management fees receivables | Trade and other payables | |
18 | - | Reimbursement of expenses receivable | Trade and other payables | |
Fibesa S.A. | 2 | - | Reimbursement of expenses receivable | Trade and other payables |
(91) | (67) | Loans received | Borrowings | |
13 | 16 | Long-term incentive plan receivable | Trade and other payables | |
90 | - | Dividends receivable | Trade and other payables | |
Shopping Neuquen S.A. | 655 | - | Rights of use assets | Rights of use assets |
30 | - | Reimbursement of expenses receivable | Trade and other payables | |
177 | - | Borrowings granted | Trade and other payables | |
Efanur | (147) | (164) | Loans received | Borrowings |
Torodur S.A. | (801) | (811) | Non-Convertible Notes | Borrowings |
(5,335) | - | Loans received | Borrowings | |
Ogden Argentina S.A | 367 | - | Borrowings granted | Trade and other payables |
1 | - | Reimbursement of expenses receivable | Trade and other payables | |
Ritelco S.A. | (36) | (47) | Loans received | Borrowings |
3 | 4 | Reimbursement of expenses receivable | Trade and other payables | |
Entretenimiento Universal S.A. | 49 | - | Borrowings granted | Trade and other payables |
We are Appa S.A | (1) | - | Other liabilities | Trade and other receivables |
1 | - | Other credits | Trade and other payables | |
La Arena S.A. | 1 | - | Reimbursement of expenses receivable | Trade and other payables |
IRSA International LLC | (32) | - | Other liabilities | Trade and other receivables |
Emprendimiento Recoleta S.A | 1 | 1 | Long-term incentive plan receivable | Trade and other payables |
Boulevard Norte S.A | (5) | - | Reimbursement of expenses payable | Trade and other receivables |
Palermo Invest S.A. | - | 14 | Dividends receivable | Trade and other payables |
2 | 1 | Contributions to integrate | Trade and other payables | |
Inversora Bolívar S.A. | - | 12 | Dividends receivable | Trade and other payables |
Real Estate Investment Group VII LP | (35) | (41) | Loans received | Borrowings |
TGLT S.A. | - | (58) | Other liabilities | Trade and other receivables |
Nuevo Puerto Santa Fe S.A | 11 | - | Management fees receivables | Trade and other payables |
(1) | - | Leases and rights of use payable | Trade and other receivables | |
1 | - | Long-term incentive plan receivable | Trade and other payables | |
2 | - | Reimbursement of expenses receivable | Trade and other payables | |
Quality S.A | 10 | - | Contributions to integrate | Trade and other payables |
Total subsidiaries, associates and joint ventures | (5,031) | (14,641) |
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IRSA Inversiones y Representaciones Sociedad Anónima
Related parties | 12.31.21 | 06.30.21 | Operation description | Item |
Directors | - | (23) | Reimbursement of expenses payable | Trade and other receivables |
(212) | - | Fees | Trade and other receivables | |
5 | 6 | Borrowings granted | Trade and other payables | |
Total directors | (207) | (17) | ||
Futuros y Opciones.Com S.A. | 1 | - | Reimbursement of expenses receivable | Trade and other payables |
2 | - | Prepayments | Trade and other payables | |
- | (36) | Surety | Borrowings | |
CYRSA S.A | (39) | (43) | Loans received | Borrowings |
Banco Hipotecario S.A. | 6 | (1) | Leases receivable | Trade and other payables |
(1) | - | Leases and rights of use payable | Trade and other receivables | |
BHN Vida S.A. | (3) | - | Guaranty deposits | Trade and other receivables |
(58) | (65) | Non-Convertible Notes | Borrowings | |
BHN Sociedad de Inversion S.A. | 1 | - | Leases receivable | Trade and other payables |
BACS ADMINISTRADORA DE ACTIVOS S.A | 7 | - | Leases receivable | Trade and other payables |
BHN Seguros Generales S.A. | (43) | (63) | Non-Convertible Notes | Borrowings |
Banco de Crédito y Securitización | (4) | - | Leases and rights of use payable | Trade and other receivables |
Consultores Asset Management S.A. (CAMSA) | - | 7 | Reimbursement of expenses receivable | Trade and other payables |
11 | - | Reimbursement of expenses receivable | Trade and other payables | |
Estudio Zang, Bergel & Viñes | (1) | 1 | Legal Services | Trade and other receivables |
1 | - | Reimbursement of expenses receivable | Trade and other payables | |
Austral Gold | 2 | 1 | Reimbursement of expenses receivable | Trade and other payables |
Fundación Museo de los Niños | 9 | - | Leases receivable | Trade and other payables |
IRSA - Galerías Pacífico S.A. U.T. | (223) | - | Loans received | Borrowings |
(134) | (157) | Other liabilities | Trade and other receivables | |
La Rural S.A. | (4) | - | Leases and rights of use payable | Trade and other receivables |
New Lipstick | 25 | 28 | Reimbursement of expenses receivable | Trade and other payables |
Lipstick Management LLC | (120) | (133) | Loans received | Borrowings |
Liveck S.A. | 1 | 2 | Borrowings granted | Trade and other payables |
Inversiones Financieras del Sur S.A. | 1 | - | Reimbursement of expenses receivable | Trade and other payables |
Agrofy S.A. | 1 | - | Reimbursement of expenses receivable | Trade and other payables |
Hoteles Argentinos S.A | 3 | - | Other credits | Trade and other payables |
5 | 5 | Hotel services receivable | Trade and other payables | |
Nuevas Fronteras S.A | (29) | (31) | Loans received | Borrowings |
18 | 10 | Hotel services receivable | Trade and other payables | |
Llao Llao Resorts S.A. | 1 | 4 | Hotel services receivable | Trade and other payables |
1 | - | Reimbursement of expenses receivable | Trade and other payables | |
Helmir S.A | (35) | - | Non-Convertible Notes | Borrowings |
Total others | (598) | (471) | ||
Total | (4,058) | (16,059) |
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IRSA Inversiones y Representaciones Sociedad Anónima
The following is a summary of the results with related parties for the six-month period ended December 31, 2021 and 2020:
Related party | 12.31.21 | 12.31.20 | Operation description |
Cresud | 30 | 18 | Leases and/or rights of use |
(126) | (57) | Financial operations | |
(324) | (109) | Corporate services | |
Total parent company | (420) | (148) | |
IRSA CP (*) | - | 728 | Financial operations |
- | (32) | Corporate services | |
- | (5) | Leases and/or rights of use | |
Arcos del Gourmet S.A. | (5) | - | Leases and/or rights of use |
22 | - | Fees | |
Fibesa S.A. | 2 | - | Leases and/or rights of use |
1 | - | Fees | |
3 | - | Financial operations | |
Ritelco | 4 | - | Financial operations |
Torodur S.A. | 807 | - | Financial operations |
Efanur | 16 | (2) | Financial operations |
Helmir S.A | 1 | - | Financial operations |
Tyrus S.A. | (37) | 9 | Financial operations |
Lipstick Management | 12 | - | Financial operations |
Shopping Neuquén S.A. | (17) | - | Financial operations |
(218) | - | Leases and/or rights of use | |
Ogden Argentina S.A | (36) | - | Financial operations |
Entretenimiento Universal S.A. | (5) | - | Financial operations |
ECLSA | (6) | - | Financial operations |
Panamerican Mall S.A. | 42 | - | Fees |
(4) | - | Leases and/or rights of use | |
(24) | - | Financial operations | |
Emprendimiento Recoleta S.A. | 1 | - | Fees |
CYRSA S.A | 4 | - | Financial operations |
CELP S.A. | (2) | - | Leases and/or rights of use |
We are Appa S.A | 3 | - | Fees |
1 | - | Leases and/or rights of use | |
Nuevo Puerto Santa Fe S.A. | (1) | - | Leases and/or rights of use |
7 | - | Fees | |
Quality Invest S.A. | 2 | - | Fees |
(1) | - | Leases and/or rights of use | |
Other subsidiaries, associates and joint ventures (1) | - | 11 | Financial operations |
Total subsidiaries, associates and joint ventures | 572 | 709 | |
Directors | (370) | (75) | Fees |
Senior Management | (8) | (6) | Fees |
Total Directors and Senior Management | (378) | (81) | |
BHN Seguros Generales S.A. | 11 | - | Leases and/or rights of use |
BHN Sociedad de Inversión S.A. | 4 | - | Leases and/or rights of use |
BHN Vida S.A. | 12 | 5 | Leases and/or rights of use |
BACS Administradora de Activos S.A. | 9 | - | Leases and/or rights of use |
Austral Gold S.A | 2 | - | Leases and/or rights of use |
2 | - | Fees | |
Consultores Asset Management S.A. | 4 | - | Leases and/or rights of use |
1 | - | Fees | |
Hamonet S.A. | (2) | - | Leases and/or rights of use |
Isaac Elsztain e Hijos S.C.A. | (5) | (5) | Leases and/or rights of use |
Estudio Zang, Bergel & Viñes | (17) | (12) | Fees |
Banco de Crédito y Securitización S.A. | 22 | - | Leases and/or rights of use |
Consultores Assets Management | - | 8 | Leases and/or rights of use |
Fundación IRSA | (17) | - | Donations |
1 | - | Leases and/or rights of use | |
Museo de los niños | - | (20) | Donations |
(6) | - | Discounts received in leases and/or rights of use | |
Fundación Puerta 18 | (5) | (14) | Donations |
IRSA - Galerías Pacífico S.A. U.T. | 7 | - | Financial operations |
HASA | 1 | - | Fees |
Nuevas Fronteras S.A. | 8 | - | Fees |
2 | - | Financial operations | |
Total others | 34 | (38) | |
Total at the end of the period | (192) | 442 |
(1)
It includes Inversora Bolívar S.A., Cyrsa S.A., BACS, Palermo Invest S.A., y Liveck S.A...
(*) As of December 31, 2021, the balances of IRSA CP are zero due to the merger between both companies. See Note 4.1.
21
IRSA Inversiones y Representaciones Sociedad Anónima
The following is a summary of the transactions with related parties without impact in results for the six-month period ended December 31, 2021 and 2020:
Related party | 12.31.21 | 12.31.20 | |
IRSA CP | - | (12,265) | Dividends distribution |
Total distribution of dividends | - | (12,265) | |
Fibesa S.A. | 108 | - | Dividends received |
Arcos del Gourmet S.A | 282 | - | Dividends received |
Total distribution of dividends | 390 | - | |
PISA | (14) | - | Irrevocable contributions |
Inversora Bolívar S.A. | (11) | - | Irrevocable contributions |
ECLASA | (125) | - | Irrevocable contributions |
Total distribution of dividends | (150) | - | |
Tyrus | (117) | (3,482) | Irrevocable contributions granted |
HASA | (32) | (25) | Irrevocable contributions granted |
Liveck S.A. | - | (5) | Irrevocable contributions granted |
Quality Invest S.A. | (30) | - | Irrevocable contributions granted |
Torodur S.A | (172) | - | Irrevocable contributions granted |
Total contributions to subsidiaries | (351) | (3,512) |
23.
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 12.31.21 | Total as of 06.30.21 |
Assets | ||||
Trade and other receivables | ||||
US Dollar | 7.71 | 102.52 | 790 | 340 |
Euros | 0.09 | 115.89 | 11 | 17 |
Receivables with related parties | ||||
US Dollar | 10.06 | 102.72 | 1,033 | 620 |
Total Trade and other receivables | 1,834 | 977 | ||
Investments in financial assets | ||||
US Dollar | 6.08 | 102.52 | 623 | 12 |
Investment in financial assets with related parties | ||||
US Dollar | 22.77 | 102.72 | 2,339 | 283 |
Total Investments in financial assets | 2,962 | 295 | ||
Cash and cash equivalents | ||||
US Dollar | 6.93 | 102.52 | 710 | 104 |
Total Cash and cash equivalents | 710 | 104 | ||
Total Assets | 5,506 | 1,376 | ||
Liabilities | ||||
Trade and other payables | ||||
US Dollar | 3.10 | 102.72 | 318 | 153 |
Euros | - | - | - | 16 |
Payables with related parties | ||||
US Dollar | 0.43 | 102.72 | 44 | 63 |
Total Trade and other payables | 362 | 232 | ||
Lease liabilities | ||||
US Dollar | 0.02 | 102.72 | 2 | 12 |
Total Lease liabilities | 2 | 12 | ||
Borrowings | ||||
US Dollar | 489.59 | 102.72 | 50,291 | 15,462 |
Borrowings with related parties | ||||
US Dollar | 76.31 | 102.72 | 7,839 | 6,346 |
Total Borrowings | 58,130 | 21,808 | ||
Total Liabilities | 58,494 | 22,052 |
(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 December 31, 2021 according to Banco de la Nación Argentina records.
22
IRSA Inversiones y Representaciones Sociedad Anónima
24.
Additional information
Operations not affecting funds | 12.31.21 | 12.31.20 |
Currency translation adjustment | (421) | (4,696) |
Other comprehensive gain of subsidiaries | - | 512 |
Changes in non-controlling interest | - | 619 |
Other changes in subsidiaries` equity | - | 8,816 |
Increase in borrowings through an increase in trading properties | - | 386 |
Increase in investments in associates and joint ventures through dividends received | - | 2,912 |
Dividends received through a decrease in borrowings of subsidiaries | - | 9,352 |
Increase in investments in associates and joint ventures through a decrease in trade and other receivables | - | 1,076 |
Decrease in borrowings through a decrease in trade and other receivables | - | 593 |
Distribution of dividends in shares through a decrease in investments in associates and joint ventures | - | 875 |
Issuance of NCN through of payment of loans | - | 613 |
Decrease in lease liabilities through a decrease in trade and other receivables | 3 | - |
Increase in dividends receivable through a decrease in investments in associates and joint ventures | 109 | - |
Decrease in dividends receivable through an increase in investments in associates and joint ventures | 155 | - |
Decrease in investments in associates and joint ventures through a decrease in other liabilities. | 8 | - |
Incorporation by merger | |
12.31.21 | |
Book value of identifiable assets and assumed liabilities:: | |
Investment properties | 122,288 |
Property, plant and equipment | 1,621 |
Trading properties | 160 |
Intangible assets | 1,409 |
Investments in subsidiaries, associates and joint ventures | 24,144 |
Investments in financial assets | 3,091 |
Income tax credit | 37 |
Trade and other receivables | 5,313 |
Rights of use assets | 874 |
Inventories | 41 |
Borrowings | 40,459 |
Deferred income tax liabilities | 46,170 |
Trade and other payables | 5,082 |
Lease liabilities | 2 |
Provisions | 166 |
Other liabilities | 54 |
Salaries and social security liabilities | 289 |
Income tax liabilities | 1,131 |
Cash and cash equivalents | 65 |
25.
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 12 Financial instruments by category |
Exhibit E - Provisions | Note 13 Trade and other receivables and Note 17 Provisions |
Exhibit F - Cost of sales and services provided | Note 9 Trading properties and Note 19 Expenses by nature |
Exhibit G - Foreign currency assets and liabilities | Note 23 Foreign currency assets and liabilities |
23
IRSA Inversiones y Representaciones Sociedad Anónima
26.
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 provider:
Storage of documentation responsible | Location | |
Iron Mountain Argentina S.A. | Av. Amancio Alcorta 2482, Autonomous City of Buenos Aires | |
San Miguel de Tucumán 601, Carlos Spegazzini. | ||
Torcuato Di Tella 1800, Carlos Spegazzini. | ||
Puente del Inca 2540, Carlos Spegazzini |
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.
27.
Economic context in which the Company operates
See Note 29 to the Unaudited Condensed Interim Consolidated Financial Statements.
28.
Subsequent events
See Note 30 to the Unaudited Condensed Interim Consolidated Financial Statements.
24
Free translation from the original prepared in Spanish for publication in Argentina
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: Carlos Della Paolera 261 - 9th 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”), including the unaudited condensed interim separate statement of financial position at December 31, 2021, the unaudited condensed interim separate statements of income and other comprehensive income for the six month period and threemonth period ended December 31, 2021 and the unaudited condense interim separate statements of changes in shareholders’ equity and of cash flows for the sixmonth period then ended, and selected explanatory notes.
The balances and other information for the fiscal year ended on June 30, 2021 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).
25
Free translation from the original prepared in Spanish for publication in Argentina
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.
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 have not been 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 except for i) the lack of transcription to the Inventories and Balance Sheet Book, and ii) the lack of transcription to the General Journal Book of the accounting entries corresponding to the month of December 2021;
26
Free translation from the original prepared in Spanish for publication in Argentina
c) at December 31, 2021 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 40,512,941, which was not due at that date.
Autonomous City of Buenos Aires, February 9, 2022
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 Marcelo Héctor Fuxman Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 134 F. 85 | |
Carlos Brondo Public Accountant (UNCUYO) C.P.C.E.C.A.B.A. V. 391 F. 078 | José Daniel Abelovich Public Accountant (UBA) C.P.C.E. C.A.B.A. V. 102 F. 191 |
27
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 and the exchange rate of the Argentine peso against other currencies, mainly the dollar, changes in interest rates which have an impact on the cost of capital, changes in government policies, capital controls and other political or economic events both locally and internationally.
The main indicators of the Argentine economy are described below:
●
In November 2021, the Monthly Economic Activity Estimator (“EMAE” in Spanish) reported by the National Institute of Statistics and Censuses (“INDEC” in Spanish), registered a variation of 9.3% compared to the same month of 2020, and 1.7% compared to the previous month.
●
The annual retail inflation reached 50.94% in the last 12 months. The survey on market expectations prepared by the Argentine Central Bank in December 2021, called the Market Expectations Survey (“REM” in Spanish), estimates a retail inflation of 54.8% i.a. for December 2022 and 43.4% for December 2023. Analysts participating in the REM forecast a rebound in economic activity in 2022, reaching an economic growth of 2.9%.
●
In the period from December 2020 to December 2021, the Argentine peso depreciated 22.1% against the US dollar according to the wholesale average exchange rate of Banco de la Nación Argentina. Given the exchange restrictions in force since August 2019, as of December 31, 2021, there is an exchange gap of approximately 92.3% 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 Argentine Central Bank. 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 necessary currencies to meet its financial obligations.
COVID-19 pandemic
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 lockdowns, among other measures. The ongoing pandemic and these extraordinary government measures 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 as of today, more than 8,500,000 cases of infections had been confirmed in Argentina, by virtue of which the Argentinian Government implemented a series of health measures of social, preventive and mandatory lockdown at the national level with the closure of non-essential activities, including shopping malls, as well as the suspension of flights and border closures, for much of the years 2020 and 2021.
Since the beginning of fiscal year 2022, and until the date of presentation of the financial statements, the Company's shopping malls are fully operational, as well as the office buildings, despite the remote work modality that some tenants continue to apply. Regarding hotels, although they have been operating since December 2020, the sector continues working with certain restrictions on air flows and the influx of international tourism.
The final extent of the Coronavirus outbreak and its impact on the country's economy is still uncertain. However, although it has produced significant short-term effects, they are not expected to affect business continuity and the Group’s ability to meet its financial commitments for the next twelve months.
The Group is closely monitoring the situation and taking all necessary measures to preserve human life and the Group's businesses.
Merger by absorption of IRSA and IRSA Propiedades Comerciales
On September 30, 2021, IRSA & IRSA Propiedades Comerciales Boards of Directors approved the prior merger agreement between both companies and the corresponding special financial statements as of June 30, 2021, initiating the corporate reorganization process under the terms of art. 82 et seq. of the General Law of Companies. The merger process has particular characteristics given that they are two companies included in the public offering regime, reason why, not only apply the current provisions of the General Law of Companies but also the procedures established regarding reorganization of companies of the Regulations of the “Comisión Nacional de Valores” (National Securities Commission) and the markets, both national and foreign, where their shares are listed.
The Merger is carried out in order to streamline the technical, administrative, operational and economic resources of both Companies, standing out among others: (a) the operation and maintenance of a single transactional information system and centralization of the entire accounting registration process; (b) presentation of a single financial statement to the different control agencies with the consequent cost savings in accounting and advisory fees, tariffs and other related expenses; (c) simplification of the accounting information reporting and consolidation process, as a consequence of the reduction that the merger would imply for the corporate structure as a whole; (d) removal of the IRSA PC public offering listing on BYMA and NASDAQ with the associated costs that this represents; (e) cost reduction for legal fees and tax filings; (f) increase in the percentage of the capital stock that is listed in the different markets, increasing the liquidity of the listed shares; (g) tax efficiencies and (h) preventively avoid the potential overlap of activities between the Companies.
In accordance with the commitments assumed in the Prior Merger Commitment, having obtained the administrative consent of the United States Securities and Exchange Commission, an entity to which they are subject because both companies list their shares in markets that operate in said jurisdiction, The shareholders' meetings of both companies were called.
On December 22, 2021, the Shareholders' Meetings of IRSA and IRSA PC were held, approving the merger by absorption, whose effective date was established on July 1, 2021. As of that date, the transfer to the absorbent of the total equity of the absorbed company, thereby incorporating all its rights and obligations, assets and liabilities into the equity of the absorbing company.
Likewise, and within the framework of the reorganization process, the Board of Directors has approved the exchange ratio, which has been established at 1.40 IRSA shares for each IRSA PC share, which is equivalent to 0.56 IRSA GDS for each ADS of IRSA PC. Within this framework, it was decided to increase the share capital by issuing 152,158,215 new shares in IRSA.
The exchange of IRSA PC shares for IRSA shares will be carried out once the entire administrative process has been completed and once the registration has been made in the “Inspección General de Justicia” (General Inspection of Justice), a process that may take several months.
1
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
Consolidated Results
(in millions of ARS) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues | 6,222 | 4,770 | 30.4% | 8,937 | (30.4)% |
Result from fair value adjustment of investment properties | 29,607 | (26,492) | - | (12,762) | - |
Result from operations | 31,891 | (25,572) | - | (8,891) | - |
Depreciation and amortization | 180 | 141 | 27.7% | 281 | (35.9)% |
EBITDA (1) | 32,071 | (25,431) | - | (8,610) | - |
Adjusted EBITDA (1) | 4,392 | 4,012 | 9.5% | 3,662 | 19.9% |
Result for the period | 26,638 | (15,772) | - | (15,253) | - |
Attributable to equity holders of the parent | 26,383 | (11,998) | - | (10,498) | - |
Attributable to non-controlling interest | 255 | (3,774) | - | (4,755) | - |
(1)
See Point XIX: EBITDA Reconciliation
(in millions of ARS) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues | 11,051 | 7,473 | 47.9% | 16,477 | (32.9)% |
Result from fair value adjustment of investment properties | 22,450 | 13,986 | 60.5% | 7,989 | 181.0% |
Result from operations | 26,511 | 13,945 | 90.1% | 14,873 | 78.2% |
Depreciation and amortization | 344 | 346 | (0.6)% | 480 | (28.3)% |
EBITDA (1) | 26,855 | 14,291 | 87.9% | 15,353 | 74.9% |
Adjusted EBITDA (1) | 6,467 | 12,253 | (47.2)% | 6,874 | (5.9)% |
Result for the period | 25,520 | (1,758) | - | 9,979 | 155.7% |
Attributable to equity holders of the parent | 25,722 | (882) | - | (2,922) | - |
Attributable to non-controlling interest | (202) | (876) | (76.9)% | 12,901 | (101.6)% |
(1)
See Point XIX: EBITDA Reconciliation
Group’s income increased by 47.9% during the first semester of fiscal year 2022 compared to the same quarter of fiscal year 2021 mainly due to the impact of COVID-19 pandemic in the Shopping Malls and Hotels segments that straightly affected operations during previous fiscal year.
Adjusted EBITDA decreased by 47.2% mainly explained by Sales and Developments segment which recorded lower sales of investment properties compared to last fiscal year. Rental segments Adjusted EBITDA reached ARS 5,489 million, ARS 4,298 million from the Shopping Malls segment, ARS 834 million from the Offices segment and ARS 357 million from Hotels Segment, increasing 68.7% compared to the previous fiscal year but still 31.5% below pre-pandemic levels.
Net result for the first half of fiscal year 2022 registered a gain of ARS 25,520 million compared to a loss of ARS 1,758 million during the same period of previous fiscal. This is mainly explained by the gain recorded for changes in the fair value of investment properties due to the increase in the valuation of the "Costa Urbana" property, whose development project was approved by the Legislature of the Autonomous City of Buenos Aires in December 2021.
II. Shopping Malls
Our portfolio’s leasable area totaled 335,279 sqm of GLA. Real tenants’ sales of our shopping centers reached ARS 92,168 million in the first half of fiscal year 2022, 122% higher than in 6M21 and 0.7% lower than in 6M20. Sales for the second quarter of fiscal year 2022 were ARS 54,479, exceeding sales for the same period of 2021 and 2020 by 66.0% and 7.6%, respectively.
Portfolio’s occupancy reached 89.1%, mainly due to the exit of Garbarino in Alto Avellaneda Shopping. Excluding the effect of the remaining vacancy from large stores, occupancy would have been 95.5%.
2
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
Shopping Malls’ Operating Indicators
IIQ 22 | IQ 22 | IVQ 21 | IIIQ 21 | IIQ 21 | |
Gross leasable area (sqm) | 335,279 | 335,641 | 334,826 | 335,893 | 333,460 |
Tenants’ sales (3 months cumulative in current currency) | 54,479 | 37,689 | 18,640 | 31,148 | 32,809 |
Occupancy | 89.1% | 89.6% | 89.9% | 89.5% | 88.3% |
Shopping Malls’ Financial Indicators
(in millions of ARS) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues from sales, leases, and services | 3,539 | 2,316 | 52.8% | 3,984 | (11.2)% |
Net result from fair value adjustment on investment properties | (1,473) | (9,167) | (83.9)% | (4,865) | (69.7)% |
Result from operations | 1,125 | (7,641) | - | (1,964) | - |
Depreciation and amortization | 40 | 32 | 25.0% | 86 | (53.5)% |
EBITDA (1) | 1,165 | (7,609) | - | (1,878) | - |
Adjusted EBITDA (1) | 2,638 | 1,558 | 69.3% | 2,987 | (11.7)% |
(1)
See Point XIX: EBITDA Reconciliation
(in millions of ARS) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues from sales, leases, and services | 5,991 | 2,933 | 104.3% | 7,488 | (20.0)% |
Net result from fair value adjustment on investment properties | (5,549) | (7,188) | (22.8)% | (3,855) | 43.9% |
Result from operations | (1,345) | (5,976) | (77.5)% | 1,536 | (187.6)% |
Depreciation and amortization | 94 | 103 | (8.7)% | 148 | (36.5)% |
EBITDA (1) | (1,251) | (5,873) | (78.7)% | 1,684 | (174.3)% |
Adjusted EBITDA (1) | 4,298 | 1,315 | 226.8% | 5,539 | (22.4)% |
(1)
See Point XIX: EBITDA Reconciliation
Income from this segment during the first semester of fiscal year 2022 reached ARS 5,991 million, an increase of 104.3% when compared with the same period of previous fiscal year, but still 20.0% below pre-pandemic levels. Adjusted EBITDA for the first half of fiscal year 2022 reached ARS 4,298 million, a 22.4% lower than in the first half of fiscal year 2020, not affected by the pandemic.
Operating data of our shopping malls
Date of acquisition | Location | Gross Leasable Area (sqm)(1) | Stores | Occupancy (2) | IRSA CP Interest (3) | |
Alto Palermo | Dec-97 | City of Buenos Aires | 19,925 | 144 | 100.0% | 100% |
Abasto Shopping(4) | Nov-99 | City of Buenos Aires | 36,798 | 159 | 96.1% | 100% |
Alto Avellaneda | Dec-97 | Province of Buenos Aires | 40,288 | 123 | 64.8% | 100% |
Alcorta Shopping | Jun-97 | City of Buenos Aires | 15,812 | 114 | 99.3% | 100% |
Patio Bullrich | Oct-98 | City of Buenos Aires | 11,396 | 90 | 91.2% | 100% |
Dot Baires Shopping | May-09 | City of Buenos Aires | 46,993 | 163 | 79.5% | 80% |
Soleil | Jul-10 | Province of Buenos Aires | 16,077 | 75 | 98.4% | 100% |
Distrito Arcos | Dec-14 | City of Buenos Aires | 14,335 | 64 | 100.0% | 90.0% |
Alto Noa Shopping | Mar-95 | Salta | 19,388 | 84 | 98.6% | 100% |
Alto Rosario Shopping | Nov-04 | Santa Fe | 33,732 | 136 | 94.2% | 100% |
Mendoza Plaza Shopping | Dec-94 | Mendoza | 42,947 | 129 | 84.1% | 100% |
Córdoba Shopping | Dec-06 | Córdoba | 15,360 | 106 | 99.0% | 100% |
La Ribera Shopping | Aug-11 | Santa Fe | 10,531 | 69 | 96.8% | 50% |
Alto Comahue | Mar-15 | Neuquén | 11,697 | 92 | 95.9% | 99.95% |
Patio Olmos(5) | Sep-07 | Córdoba | - | - | - | |
Total | 335,279 | 1,548 | 89.1% |
(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).
(5) IRSA CP owns the historic building of the Patio Olmos shopping mall in the Province of Córdoba, operated by a third party.
Cumulative tenants’ sales in real terms as of December 31, 2021, compared to the same periods of fiscal years 2021 and 2020
(ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Alto Palermo | 7,006 | 3,581 | 95.6% | 6,556 | 6.9% |
Abasto Shopping | 6,699 | 3,108 | 115.5% | 6,331 | 5.8% |
Alto Avellaneda | 4,921 | 2,307 | 113.3% | 5,755 | (14.5)% |
Alcorta Shopping | 5,053 | 2,947 | 71.5% | 4,000 | 26.3% |
Patio Bullrich | 2,593 | 1,908 | 35.9% | 2,589 | 0.2% |
Dot Baires Shopping | 4,440 | 2,595 | 71.1% | 5,156 | (13.9)% |
Soleil | 3,058 | 1,945 | 57.2% | 2,587 | 18.2% |
Distrito Arcos | 4,022 | 2,620 | 53.5% | 3,001 | 34.0% |
Alto Noa Shopping | 2,285 | 1,786 | 27.9% | 1,996 | 14.5% |
Alto Rosario Shopping | 6,457 | 4,283 | 50.8% | 5,093 | 26.8% |
Mendoza Plaza Shopping | 3,399 | 3,255 | 4.4% | 3,454 | (1.6)% |
Córdoba Shopping | 2,167 | 1,372 | 57.9% | 1,629 | 33.0% |
La Ribera Shopping(1) | 970 | 487 | 99.2% | 976 | (0.6)% |
Alto Comahue | 1,409 | 615 | 129.1% | 1,525 | (7.6)% |
Total sales | 54,479 | 32,809 | 66.0% | 50,648 | 7.6% |
(1) Through our joint venture Nuevo Puerto Santa Fe S.A.
(ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Alto Palermo | 11,451 | 3,795 | 201.7% | 11,793 | (2.9)% |
Abasto Shopping | 11,101 | 3,265 | 240.0% | 11,760 | (5.6)% |
Alto Avellaneda | 8,209 | 2,461 | 233.6% | 10,509 | (21.9)% |
Alcorta Shopping | 8,359 | 2,975 | 181.0% | 6,967 | 20.0% |
Patio Bullrich | 4,186 | 2,189 | 91.2% | 4,593 | (8.9)% |
Dot Baires Shopping | 7,319 | 2,735 | 167.6% | 9,173 | (20.2)% |
Soleil | 5,507 | 2,254 | 144.3% | 4,901 | 12.4% |
Distrito Arcos | 6,881 | 3,461 | 98.8% | 5,507 | 25.0% |
Alto Noa Shopping | 4,134 | 2,884 | 43.3% | 3,842 | 7.6% |
Alto Rosario Shopping | 11,104 | 6,350 | 74.9% | 9,309 | 19.3% |
Mendoza Plaza Shopping | 6,058 | 5,315 | 14.0% | 6,766 | (10.5)% |
Córdoba Shopping | 3,695 | 2,222 | 66.3% | 2,925 | 26.3% |
La Ribera Shopping(1) | 1,636 | 725 | 125.7% | 1,937 | (15.5)% |
Alto Comahue | 2,528 | 871 | 190.2% | 2,867 | (11.8)% |
Total sales | 92,168 | 41,502 | 122.1% | 92,849 | -0.7% |
(1) Through our joint venture Nuevo Puerto Santa Fe S.A.
Cumulative tenants’ sales per type of business in real terms as of December 31, 2021, compared to the same periods of fiscal years 2021 and 2020(1)
(ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Department Store | - | 837 | (100.0)% | 2,738 | (100.0)% |
Clothes and footwear | 34,074 | 20,408 | 67.0% | 29,554 | 15.3% |
Entertainment | 1,101 | 67 | 1543.3% | 1,000 | 10.1% |
Home and decoration | 1,336 | 865 | 54.5% | 1,057 | 26.4% |
Home Appliances | 4,436 | 1,793 | 147.4% | 4,807 | (7.7)% |
Restaurants | 8,401 | 5,097 | 64.8% | 7,148 | 17.5% |
Miscellaneous | 819 | 335 | 144.5% | 516 | 58.7% |
Services | 4,312 | 3,407 | 26.6% | 3,828 | 12.6% |
Total | 54,479 | 32,809 | 66.0% | 50,648 | 7.6% |
(1)
Includes sales from stands and excludes spaces used for special exhibitions.
3
(ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Department Store | - | 1,476 | (100.0)% | 4,969 | (100.0)% |
Clothes and footwear | 56,486 | 24,568 | 129.9% | 52,364 | 7.9% |
Entertainment | 1,944 | 76 | 2457.9% | 2,760 | (29.6)% |
Home and decoration | 2,399 | 1,088 | 120.5% | 1,886 | 27.2% |
Restaurants | 8,030 | 2,523 | 218.3% | 9,958 | (19.4)% |
Miscellaneous | 14,069 | 6,713 | 109.6% | 12,425 | 13.2% |
Services | 1,425 | 375 | 280.0% | 1,013 | 40.7% |
Home Appliances | 7,815 | 4,683 | 66.9% | 7,474 | 4.6% |
Total | 92,168 | 41,502 | 122.1% | 92,849 | (0.7)% |
(1)
Includes sales from stands and excludes spaces used for special exhibitions.
Revenues from cumulative leases as of December 31, 2021, compared to the same periods of fiscal years 2021 and 2020
(ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Base rent | 1,065 | 1,230 | (13.4)% | 1,705 | (37.5)% |
Percentage rent | 1,910 | 593 | 222.1% | 1,338 | 42.8% |
Total rent | 2,975 | 1,823 | 63.2% | 3,043 | (2.2)% |
Non-traditional advertising | 78 | 8 | 875.0% | 101 | (22.8)% |
Revenues from admission rights | 249 | 248 | 0.4% | 495 | (49.7)% |
Fees | 39 | 41 | (4.9)% | 47 | (17.0)% |
Parking | 128 | 8 | 1500.0% | 187 | (31.6)% |
Commissions | 64 | 57 | 12.3% | 95 | (32.6)% |
Other | 6 | 131 | (95.4)% | 16 | (62.5)% |
Subtotal | 3,539 | 2,316 | 52.8% | 3,984 | (11.2)% |
Expenses and Collective Promotion Fund | 1,253 | 946 | 32.5% | 1,504 | (16.7)% |
Total | 4,792 | 3,262 | 46.9% | 5,488 | (12.7)% |
(ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Base rent (1) | 1,853 | 1,339 | 38.4% | 3,463 | (46.5)% |
Percentage rent (1) | 3,130 | 699 | 347.8% | 2,178 | 43.7% |
Total rent | 4,983 | 2,038 | 144.5% | 5,641 | (11.7)% |
Non-traditional advertising | 125 | 63 | 98.4% | 195 | (35.9)% |
Revenues from admission rights | 467 | 494 | (5.5)% | 935 | (50.1)% |
Fees | 79 | 83 | (4.8)% | 97 | (18.6)% |
Parking | 196 | 12 | 1533.3% | 390 | (49.7)% |
Commissions | 124 | 106 | 17.0% | 189 | (34.4)% |
Other | 17 | 137 | (87.6)% | 41 | (58.5)% |
Subtotal(2) | 5,991 | 2,933 | 104.3% | 7,488 | (20.0)% |
Expenses and Collective Promotion Fund | 2,314 | 1,541 | 50.2% | 2,924 | (20.9)% |
Total | 8,305 | 4,474 | 85.6% | 10,412 | (20.2)% |
(1)
Includes Revenues from stands for ARS 362.7 million cumulative as of December 2021
(2)
Includes ARS 5.7 million from Patio Olmos.
III. Offices
According to Cushman & Wakefield, the quarter closed with a stable vacancy of 15.3%, in the Buenos Aires City premium market, due to the gradual occupation of workspaces thanks to advances in vaccination and end of the winter period, while prices show a decline averaging USD 24.7 per sqm.
4
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
Offices’ Operating Indicators
IIQ 22 | IQ 22 | IVQ 21 | IIIQ 21 | IIQ 21 | |
Gross Leasable area | 109,859 | 113,451 | 113,291 | 114,475 | 114,475 |
Total Occupancy | 68.6% | 72.4% | 74.7% | 76.3% | 75.6% |
Class A+ & A Occupancy | 76.7% | 78.9% | 80.1% | 81.2% | 79.5% |
Class B Occupancy | 30.9% | 41.1% | 48.5% | 52.4% | 56.7% |
Rent USD/sqm | 24.9 | 25.1 | 25.7 | 25.4 | 25.7 |
The gross leasable area during the second quarter of fiscal year 2022 was 109,859 sqm, decreasing slightly when compared to the previous quarter due to the four floors sale in the “261 Della Paolera” building. Portfolio average A+ & A reached 76.7%, and average rental price reached USD 24.9 per sqm.
Offices’ Financial Indicators
(in ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues from sales, leases and services | 461 | 779 | (40.8)% | 1,078 | (57.2)% |
Net result from fair value adjustment on investment properties, PP&E e inventories | 3,061 | (10,266) | - | (4,667) | - |
Profit from operations | 3,246 | (9,735) | - | (3,875) | - |
Depreciation and amortization | 44 | 7 | 528.6% | 32 | 37.5% |
EBITDA(1) | 3,290 | (9,728) | - | (3,843) | - |
Adjusted EBITDA (1) | 229 | 538 | (57.4)% | 824 | (72.2)% |
(1)
See Point XIX: EBITDA Reconciliation
(in ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues from sales, leases and services | 1,250 | 1,688 | (25.9)% | 2,250 | (44.4)% |
Net result from fair value adjustment on investment properties, PP&E e inventories | 1,041 | 11,767 | (91.2)% | 6,835 | (84.8)% |
Profit from operations | 1,816 | 12,925 | (85.9)% | 8,584 | (78.8)% |
Depreciation and amortization | 59 | 32 | 84.4% | 43 | 37.2% |
EBITDA(1) | 1,875 | 12,957 | (85.5)% | 8,627 | (78.3)% |
Adjusted EBITDA (1) | 834 | 1,190 | (29.9)% | 1,792 | (53.5)% |
(1)
See Point XIX: EBITDA Reconciliation
During the first quarter of fiscal year 2022, revenues from the offices segment decreased by 25.9% and Adjusted EBITDA decreased 29.9% compared to the previous fiscal year, mainly explained by the lower occupancy and the exchange rate lag, keeping the rental prices stable. Adjusted EBITDA margin was 66.7%, 3.7 bps lower than the previous year.
5
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
Below is information on our office segment and other rental properties:
Offices & Others | Date of Acquisition | Gross Leasable Area (sqm)(1) | Occupancy (2) | Actual Interest | 6M 22 - Rental revenues (ARS thousand) (5) |
AAA & A Offices | |||||
Republica Building | Dec-14 | 19,885 | 60.9% | 100% | 217,445 |
Boston Tower | Dec-14 | 693 | |||
Intercontinental Plaza (3) | Dec-14 | 2,979 | 100.0% | 100% | 53,574 |
Dot Building | Nov-06 | 11,242 | 84.9% | 80% | 113,820 |
Zetta | May-19 | 32,173 | 89.8% | 80% | 437,094 |
261 Della Paolera – Catalinas | Dec-20 | 24,098 | 65.5% | 100% | 298,501 |
Total AAA & A Offices | 90,377 | 76.7% | 1,121,127 | ||
B Offices | |||||
Suipacha 652/64 | Dec-14 | 11,465 | - | 100% | 8,320 |
Philips | Jun-17 | 8,017 | 75.1% | 100% | 75,081 |
Total B Buildings | 19,482 | 30.9% | 100% | 83,401 | |
Subtotal Offices | 109,859 | 68.6% | 1,204,528 | ||
Other rental properties (4) | 43,442 | ||||
Total Offices and Others | 1,247,970 |
(1) Corresponds to the total gross leasable area of each property as of December 31, 2021. Excludes common areas and parking lots.
(2) Calculated by dividing occupied square meters by gross leasable area as of December 31, 2021.
(3) We own 13.2% of the building that has 22,535 square meters of gross leasable area.
(4) Includes 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).
(5) Corresponds to the accumulated income of the period.
IV. Hotels
After the restrictions imposed in 2020 due to the pandemic, which kept the sector without operations for approximately 9 months, the activity begins to show signs of recovery thanks to domestic tourism and the government's incentives to promote it in a context where certain restrictions still apply in air flows and the arrival of international tourism.
(in ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues | 862 | 170 | 407.1% | 1,427 | (39.6)% |
Profit from operations | 199 | (297) | - | 353 | (43.6)% |
Depreciation and amortization | 71 | 78 | (9.0)% | 111 | (36.0)% |
EBITDA | 270 | (219) | - | 464 | (41.8)% |
(in ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues | 1,383 | 180 | 668.3% | 2,606 | (46.9)% |
Profit from operations | 218 | (619) | - | 496 | (56.0)% |
Depreciation and amortization | 139 | 157 | (11.5)% | 185 | (24.9)% |
EBITDA | 357 | (462) | - | 681 | (47.6)% |
During the first half of fiscal year 2022, Hotels segment recorded a decrease in revenues of 46.9% compared with the same period of fiscal year 2020 while the segment’s EBITDA reached ARS 357 million, a 47.6% decrease when compared to the same period of fiscal year 2020, not affected by the pandemic.
6
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
The following chart shows certain information regarding our luxury hotels:
Hotels | Date of Acquisition | IRSA’s Interest | Number of rooms | Occupancy |
Intercontinental (1) | 11/01/1997 | 76,34% | 313 | 36.9% |
Sheraton Libertador (2) | 03/01/1998 | 100,00% | 200 | 35.5% |
Llao Llao (3) | 06/01/1997 | 50,00% | 205 | 57.9% |
Total | - | - | 718 | 42.5% |
(1)
Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(2)
Through Hoteles Argentinos S.A.U.
(3)
Through Llao Llao Resorts S.A.
Hotels’ operating and financial indicators.
IIQ 22 | IQ 22 | IVQ 21 | IIIQ 21 | IIQ 21 | |
Average Occupancy | 42.5% | 21.0% | 12,1% | 28.2% | 8.0% |
Average Rate per Room (USD/night) | 205 | 243 | 151 | 230 | 175 |
V. Sales and Developments
(in ARS million) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues | 131 | 474 | (72.4)% | 805 | (83.7)% |
Net result from fair value adjustment on investment properties | 27,751 | (7,656) | - | (3,432) | - |
Result from operations | 27,375 | (8,019) | - | (3,273) | - |
Depreciation and amortization | 3 | 4 | (25.0)% | 5 | (40.0)% |
Net result from fair value adjustment on investment properties | 1,928 | 2,951 | (34.7)% | - | - |
Barter Agreement results | - | - | - | 490 | (100.0)% |
EBITDA (1) | 27,378 | (8,015) | - | (3,268) | - |
Adjusted EBITDA (1) | 1,555 | 2,592 | (40.0)% | (326) | - |
(1)
See Point XIX: EBITDA Reconciliation
(in ARS million) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues | 131 | 540 | (75.7)% | 945 | (86.1)% |
Net result from fair value adjustment on investment properties | 26,380 | 9,309 | 183.4% | 5,228 | 404.6% |
Result from operations | 25,863 | 8,215 | 214.8% | 5,204 | 397.0% |
Depreciation and amortization | 5 | 11 | (54.5)% | 10 | (50.0)% |
Net result from fair value adjustment on investment properties | 2,062 | 11,948 | (82.7)% | - | - |
Barter Agreement results | - | - | - | 490 | (100.0)% |
EBITDA (1) | 25,868 | 8,226 | 214.5% | 5,214 | 396.1% |
Adjusted EBITDA (1) | 1,550 | 10,865 | (85.7)% | (504) | - |
(1)
See Point XIX: EBITDA Reconciliation
Adjusted EBITDA of “Sales and Developments” segment decreased by 85.7% during the first half of fiscal year 2022 compared to the previous fiscal year, due to lower sales of investment properties. While the Bouchard 710 and the Boston Tower buildings were sold last year, only four floors of the “200 Della Paolera” building were sold this semester.
7
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
VI. International
Investment in Condor Hospitality Inc.
On September 22, 2021, Condor Hospitality Trust S.A. (“Condor”) has signed a sale agreement for its portfolio of 15 hotels in the United States with B9 Cowboy Mezz A LLC, an affiliate of Blackstone Real Estate Partners. Said sale was approved by the Condor Shareholders' Meeting held on November 12, 2021 and was completed on the 19th of the same month for an amount of USD 305 million. Within this framework, Condor announced a Liquidation and Dissolution Plan, with the intention of distributing certain net income from the sale of the hotel portfolio to the shareholders in one or more installments, which was approved by the Condor Shareholders' Meeting held on December 1, 2021.
On December 10, 2021, in accordance with the aforementioned Plan, Condor's Board of Directors approved the distribution of a special dividend of USD 7.94 per share, which payment was made on December 30, 2021, corresponding to IRSA an approximate amount of USD 25.3 million for its direct and indirect holding of 3,191,213 common shares that, as of the date of issuance of the financial statements, have already been fully collected. As of December 31, 2021, Condor shares were delisted from the NYSE, pending the final liquidation of the residual company.
VII. Corporate
(in millions of ARS) | IIQ 22 | IIQ 21 | YoY Var | IIQ 20 | YoY Var |
Revenues | - | - | - | - | - |
Result from operations | (237) | (358) | (33.8)% | (332) | (28.6)% |
Depreciation and amortization | 2 | 1 | 100.0% | 2 | 0.0% |
EBITDA | (235) | (357) | (34.2)% | (330) | (28.8)% |
(in millions of ARS) | 6M 22 | 6M 21 | YoY Var | 6M 20 | YoY Var |
Revenues | - | - | - | - | - |
Result from operations | (364) | (491) | (25.9)% | (479) | (24.0)% |
Depreciation and amortization | 5 | 3 | 66.7% | 4 | 25.0% |
EBITDA | (359) | (488) | (26.4)% | (475) | (24.4)% |
VIII. 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 December 31, 2021. During the first half of fiscal year 2022, the investment in Banco Hipotecario generated an ARS 187 million loss compared to a ARS 243 million gain during the same period of 2021. For further information, visit http://www.cnv.gob.ar or http://www.hipotecario.com.ar.
IX. EBITDA by Segment (ARS million)
6M 22 | Shopping Malls | Offices | Sales and Developments | Hotels | International | Corporate | Others | Total |
Result from operations | (1,345) | 1,816 | 25,863 | 218 | (36) | (364) | 368 | 26,520 |
Depreciation and amortization | 94 | 59 | 5 | 139 | - | 5 | 43 | 345 |
EBITDA | (1,251) | 1,875 | 25,868 | 357 | (36) | (359) | 411 | 26,865 |
6M 21 | Shopping Malls | Offices | Sales and Developments | Hotels | International | Corporate | Others | Total |
Result from operations | (5,976) | 12,925 | 8,215 | (619) | (5) | (491) | 713 | 14,762 |
Depreciation and amortization | 103 | 32 | 11 | 157 | - | 3 | 43 | 349 |
EBITDA | (5,873) | 12,957 | 8,226 | (462) | (5) | (488) | 756 | 15,111 |
EBITDA Var | (78.7)% | (85.5)% | 214.5% | - | 620.0% | (26.4)% | (45.6)% | 77.8% |
6M 20 | Shopping Malls | Offices | Sales and Developments | Hotels | International | Corporate | Others | Total |
Result from operations | 1,536 | 8,584 | 5,204 | 496 | (113) | (479) | 370 | 15,598 |
Depreciation and amortization | 148 | 43 | 10 | 185 | 2 | 4 | 42 | 434 |
EBITDA | 1,684 | 8,627 | 5,214 | 681 | (111) | (475) | 412 | 16,032 |
EBITDA Var | (174.3)% | -78.3% | 396.1% | (47.6)% | (67.6)% | (24.4)% | (0.2)% | 67.6% |
X. 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 | 8,816 | (63) | 2,313 | (15) | 11,051 |
Costs | (1,862) | 33 | (2,387) | - | (4,216) |
Gross result | 6,954 | (30) | (74) | (15) | 6,835 |
Result from sales of investment properties | 22,385 | 65 | - | - | 22,450 |
General and administrative expenses | (1,924) | 6 | - | 24 | (1,894) |
Selling expenses | (835 | (5) | - | - | (840 |
Other operating results, net | (60) | - | 29 | (9) | (40) |
Result from operations | 26,520 | 36 | (45) | - | 26,511 |
Share of loss of associates and joint ventures | (77) | (43) | - | - | (120) |
Result before financial results and income tax | 26,443 | (7) | (45) | - | 26,391 |
*Includes Puerto Retiro, CYRSA, Nuevo Puerto Santa Fe and Quality (San Martín plot).
XI. Financial Debt and Other Indebtedness
The following table describes our total indebtedness as of December 31, 2021:
Description | Currency | Amount (USD MM) (1) | Interest Rate | Maturity |
Bank overdrafts | ARS | 54.4 | Floating | < 360 days |
PAMSA loan | USD | 13.5 | Fixed | Feb-23 |
Series X NCN | ARS | 6.8 | Floating | Mar-22 |
Series V NCN | USD | 9.2 | 9.0% | May-22 |
Series II NCN | USD | 356.0 | 8.75% | Mar-23 |
Series IX NCN | USD | 51.5 | 10.0% | Mar-23 |
Series I NCN | USD | 3.1 | 10.0% | Mar-23 |
Series VIII NCN | USD | 18.0 | 10.0% | Nov-23 |
Series XI NCN | USD | 12.8 | 5.0% | Mar-24 |
Series XII NCN | ARS | 41.6 | Floating | Mar-24 |
Series XIII NCN | USD | 31.2 | 3.9% | Aug-24 |
Other debt | USD | 3.9 | - | Feb-22 |
IRSA’s Total Debt | USD | 602.0 | ||
Cash & Cash Equivalents + Investments | USD | 101.2 | ||
IRSA’s Net Debt | USD | 500.8 |
(1)
Principal amount in USD (million) at an exchange rate of ARS 102.72/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.
8
IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
XII. Material and Subsequent Events
October 2021: General Ordinary Shareholders’ Meeting
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October21, 2021, the following matters, inter alia, were resolved:
●
To partially write off the special reserve in the amount of ARS 30,693,399,903 which, adjusted for inflation, amounts to the sum of ARS 33,542,594,551, and use it for the total absorption of the negative result for the fiscal year 2021
●
Designation of board members.
●
Compensations to the Board of Directors for the fiscal year ended June 30, 2021.
November 2021: Series VII Notes Redemption
The Company resolved to early redeem the Series VII Notes maturing last January 21, 2022.
The redemption took place on November 25, 2021, in accordance with the terms and conditions detailed in the Prospectus Supplement for Series VII Notes.
The redemption price was 100% of the face value of the Series VII Notes, plus accrued and unpaid interest, as of the date set for redemption.
November 2021: Warrants exercise
Between November 17 and 25, 2021, certain warrants holders have exercised their right to acquire additional shares and 5,181 ordinary shares of the Company were registered, with a nominal value of VN ARS 1. As a result of the exercise, USD 2,238.19 has collected the Company.
After the exercise of these warrants, the number of shares and the capital stock of the Company goes from 658,707,201 to 658,712,382, and the new number of outstanding warrants goes from 79,969,259 to 79,964,078.
November and December 2021: “Della Paolera 261” floors sale
During the quarter, the Company sold and transferred three and one medium-height floors of the “261 Della Paolera” tower for a total area of approximately 4,797 sqm and 48 parking spaces located in the building.
The transaction price corresponding to the three floors sold in November was approximately ARS 3,197 million, equivalent to USD 32.0 million (USD/sqm 8,950), while the price of the floor sold in December was approximately USD 9.2 million (USD/sqm 7,560), including the interior design work. Both transactions were paid in full.
After this transaction, IRSA retains its rights for 20 floors of the building with an approximate leasable area of 24,000 sqm, in addition to parking spaces and other complementary spaces.
December 2021: Costa Urbana project approval
On December 21, it was published the law from Buenos Aires City congress approving the Regulations for the development of the property of approximately 70 hectares, owned by the Company since 1997, previously known as "Solares de Santa María", located in front of the Río de la Plata in the South Coast of the Autonomous City of Buenos Aires, southeast of Puerto Madero. The published law grants a New Standard, designated: "U73 - Public Park and Costa Urbana Urbanization", which enables the combination of diverse uses such as homes, offices, retail, services, public spaces, education, and entertainment.
The Company will have a construction capacity of approximately 895,000 sqm, which will drive growth for the coming years through the development of mixed-use projects.
IRSA will destinate 50.8 hectares for public use, which represents approximately 71% of the total area of the property and will contribute with three additional lots of the property, two for the Sustainable Urban Development Fund and one for the Innovation Trust, Science and Technology of the Government of the Autonomous City of Buenos Aires, to which the sum of USD 2 million in cash and the amount of 3,000,000 sovereign bonds (AL35) will also be contributed.
Likewise, the Company will be in charge of the infrastructure and road works on the property and will carry out the public space works contributing up to USD 40 million together with the maintenance of the public spaces assigned for 10 years or until the sum of USD 10 million is completed.
“Costa Urbana” will change the landscape of the City of Buenos Aires, giving life to an undeveloped area and will be in an exceptional property due to its size, location and connectivity, providing the City the possibility of expanding and recovering access to the Río de la Plata coast with areas for walks, recreation, green spaces, public parks and mixed uses.
The financial valuation of the property at fair value amounts to approximately USD 360 million as of December 31, 2021.
February 2022: Appointment of new Regular Director
As a subsequent event, on January 31, 2022, the Board of Directors resolved to appoint Mr. David Williams, Alternate Director of the Company since December 12, 2019, as a Regular Director to replace Mr. Marcos Oscar Moisés Fischman until the expiration of the mandate on June 30, 2022.
February 2022: Senior Management
As a subsequent event, the Company informed the Senior Management designated by the Board of Directors’ Meeting held on February 9, 2022:
Name | Position |
Eduardo S. Elsztain | Chief Executive Officer |
Arnaldo Jawerbaum | Chief Operating Officer |
Jorge Cruces | Chief Investment Officer |
Matias Gaivironsky | Chief Administrative and Financial Officer |
XIII. Summarized Comparative Consolidated Balance Sheet
(in ARS million) | 12.31.2021 | 12.31.2020 | 12.31.2019 |
Non-current assets | 266,792 | 283,634 | 664,404 |
Current assets | 21,523 | 18,444 | 366,203 |
Total assets | 288,315 | 302,078 | 1,030,607 |
Capital and reserves attributable to the equity holders of the parent | 116,762 | 105,821 | 70,566 |
Non-controlling interest | 7,947 | 33,470 | 96,696 |
Total shareholders’ equity | 124,709 | 139,291 | 167,262 |
Non-current liabilities | 144,489 | 128,990 | 638,803 |
Current liabilities | 19,117 | 33,797 | 224,542 |
Total liabilities | 163,606 | 162,787 | 863,345 |
Total liabilities and shareholders’ equity | 288,315 | 302,078 | 1,030,607 |
XIV. Summarized Comparative Consolidated Income Statement
(in ARS million) | 12.31.2021 | 12.31.2020 | 12.31.2019 |
Profit from operations | 26,511 | 13,945 | 14,873 |
Share of profit of associates and joint ventures | (120) | (683) | (2,284) |
Profit from operations before financing and taxation | 26,391 | 13,262 | 12,589 |
Financial income | 157 | 103 | 223 |
Financial cost | (3,857) | (4,781) | (5,905) |
Other financial results | 7,656 | 4,776 | (8,706) |
Inflation adjustment | 430 | 1,674 | 500 |
Financial results, net | 4,386 | 1,772 | (13,888) |
Results before income tax | 30,777 | 15,034 | (1,299) |
Income tax | (5,257) | (6,044) | (4,106) |
Results of the period from continued operations | 25,520 | 8,990 | (5,405) |
Results from discontinued operations after taxes | - | (10,748) | 15,384 |
Result of the period | 25,520 | (1,758) | 9,979 |
Other comprehensive results for the period | (434) | (12,293) | 15,185 |
Total comprehensive result for the period | 25,086 | (14,051) | 25,164 |
Attributable to: | |||
Equity holders of the parent | 25,301 | (5,066) | (8,021) |
Non-controlling interest | (215) | (8,985) | 33,185 |
XV. Summary Comparative Consolidated Cash Flow
(in ARS million) | 12.31.2021 | 12.31.2020 | 12.31.2019 |
Net cash generated from operating activities | 4,692 | 6,645 | 34,481 |
Net cash generated from investing activities | 6,369 | 77,049 | 28,400 |
Net cash used in financing activities | (6,094) | (58,897) | (94,091) |
Net increase / (decrease) in cash and cash equivalents | 4,967 | 24,797 | (31,210) |
Cash and cash equivalents at beginning of year | 2,326 | 163,461 | 156,376 |
Cash and cash equivalents reclassified to available for sale | - | - | (1,073) |
Results from changes in the purchasing power of the cash currency | (47) | (3) | (255) |
Subsidiaries deconsolidation | - | (175,036) | - |
Foreign exchange gain on cash and changes in fair value of cash equivalents | 18 | (10,794) | 9,225 |
Cash and cash equivalents at period-end | 7,264 | 2,425 | 133,063 |
XVI. Comparative Ratios
(in ARS million) | 12.31.2021 | 12.31.2020 | 12.31.2019 | |||
Liquidity | ||||||
CURRENT ASSETS | 21,523 | 1.13 | 18,444 | 0.55 | 366,203 | 1.63 |
CURRENT LIABILITIES | 19,117 | 33,797 | 224,542 | |||
Indebtedness | ||||||
TOTAL LIABILITIES | 163,606 | 1.40 | 162,787 | 1.54 | 863,345 | 12.23 |
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 116,762 | 105,821 | 70,566 | |||
Solvency | ||||||
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | 116,762 | 0.71 | 105,821 | 0.65 | 70,566 | 0.08 |
TOTAL LIABILITIES | 163,606 | 162,787 | 863,345 | |||
Capital Assets | ||||||
NON-CURRENT ASSETS | 266,792 | 0.93 | 283,634 | 0.94 | 664,404 | 0.64 |
TOTAL ASSETS | 288,315 | 302,078 | 1,030,607 |
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
XVII. 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 six-month period ended December 31 (in ARS million) | |||
2021 | 2020 | 2019 | |
Profit for the period | 25,520 | (1,758) | 9,979 |
Result from discontinued operations | - | 10,748 | (15,384) |
Interest income | (157) | (73) | (217) |
Interest expense | 3,507 | 4,567 | 5,618 |
Income tax | 5,257 | 6,044 | 4,106 |
Depreciation and amortization | 344 | 346 | 480 |
EBITDA (unaudited) | 34,471 | 19,874 | 4,582 |
Net gain from fair value adjustment of investment properties | (22,450) | (13,986) | (7,989) |
Realized net gain from fair value adjustment of investment properties | 2,062 | 11,948 | - |
Barter agreement results | - | - | (490) |
Share of profit of associates and joint ventures | 120 | 683 | 2,284 |
Dividends earned | - | (30) | (6) |
Foreign exchange differences net | (5,986) | 42 | 8,433 |
Result from derivative financial instruments | (11) | 476 | 163 |
Fair value gains of financial assets and liabilities at fair value through profit or loss | (857) | (5,686) | 240 |
Inflation adjustment | (430) | (1,674) | (500) |
Other financial costs/income | (452) | 606 | 157 |
Adjusted EBITDA (unaudited) | 6,467 | 12,253 | 6,874 |
Adjusted EBITDA Margin (unaudited)(1) | 58.52% | 163.96% | 41.72% |
(1) Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by revenue from sales, rents and services.
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
XVIII. NOI Reconciliation
In addition, we present in this summary report Net Operating Income or “NOI”. We define NOI as gross profit from operations, less Selling expenses, plus realized result from fair value adjustments of investment properties, less barter agreement results, plus Depreciation and amortization.
NOI is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS. We present NOI because we believe it provides investors a supplemental measure of our financial performance that may facilitate period-to-period comparisons on a consistent basis. Our management also uses NOI from time to time, among other measures, for internal planning and performance measurement purposes. NOI 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. NOI, 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 NOI for the periods indicated:
For the six-month period ended December 31 (in ARS million) | |||
2021 | 2020 | 2019 | |
Gross profit | 6,835 | 3,505 | 10,430 |
Selling expenses | (840) | (1,188) | (1,144) |
Depreciation and amortization | 344 | 346 | 480 |
Realized result from fair value of investment properties | 2,062 | 11,948 | - |
Barter agreement results | - | - | (490) |
NOI (unaudited) | 8,401 | 14,611 | 9,276 |
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
XIX.
FFO Reconciliation
We also present in this summary report Adjusted Funds From Operations attributable to the controlling interest (or “Adjusted FFO”), which we define as Total profit for the year or period plus depreciation and amortization of property, plant and equipment, intangible assets and amortization of initial costs of leases minus total net financial results excluding net financial interests, minus unrealized result from fair value adjustments of investment properties minus inflation adjustment plus deferred tax, and less non-controlling interest net of the result for fair value, less the result of participation in associates and joint ventures.
Adjusted FFO is a non-IFRS financial measure that does not have a standardized meaning prescribed by IFRS. Adjusted FFO is not equivalent to our profit for the period as determined under IFRS. Our definition of Adjusted FFO is not consistent and does not comply with the standards established by the White Paper on funds from operations (FFO) approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), as revised in February 2004, or the “White Paper.”
We present Adjusted FFO because we believe it provides investors a supplemental measure of our financial performance that may facilitate period-to-period comparisons on a consistent basis. Our management also uses Adjusted FFO from time to time, among other measures, for internal planning and performance measurement purposes. Adjusted FFO 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. Adjusted FFO, 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 Adjusted FFO for the periods indicated:
For the six-month period ended December 31 (in ARS million) | |||
2021 | 2020 | 2019 | |
Result for the period | 25,520 | (1,758) | 9,979 |
Result from fair value adjustments of investment properties | (22,450) | (13,986) | (7,989) |
Result from fair value adjustments of investment properties, realized | 2,062 | 11,948 | - |
Depreciation and amortization | 344 | 346 | 480 |
Foreign exchange, net | (5,986) | 42 | 8,433 |
Other financial results | (12) | 61 | - |
Results from derivative financial instruments | (11) | 476 | 163 |
Results of financial assets and liabilities at fair value through profit or loss | (857) | (5,686) | 240 |
Dividends earned | - | (30) | (6) |
Other financial costs | 350 | 599 | 420 |
Deferred income tax | 4,478 | 6,059 | 3,400 |
Non-controlling interest | 202 | 876 | (12,901) |
Non-controlling interest related to PAMSA’s fair value | (207) | 998 | 401 |
Results of associates and joint ventures | 120 | 683 | 2,284 |
Inflation adjustment | (430) | (1,674) | (500) |
Repurchase of non-convertible notes | (790) | 331 | (130) |
Adjusted FFO | 2,333 | (715) | 4,274 |
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IRSA Inversiones y Representaciones Sociedad Anónima
Summary as of December 31, 2021
XX. Brief comment on prospects for the Fiscal Year
We are optimistic about the recovery of the shopping center business during fiscal year 2022. Activity indicators, such as tenants’ sales and visiting public, evolve favorably and we continue working on occupying the area that was made available because of the pandemic. Likewise, we will continue to position the company's Marketplace to complement physical in-store sales with online sales, offering our customers different purchase and delivery alternatives.
The office segment represents a challenge this year. In the first half of the year, we have observed a slight reduction in rental prices together with an increase in vacancies, mainly in B category. We are confident in the quality of our portfolio, after the “flight to quality” process that we have carried out in recent years, to be able to offer the best services and attract the most premium and demanding corporations in a context of transition towards a hybrid work modality. We will work during the year on the full occupation of the "261 Della Paolera" building, inaugurated in December 2020, as well as the rest of the vacant area of the portfolio.
Regarding hotels segment, after the restrictions imposed in 2020 due to the pandemic, which kept the sector without operations for approximately 9 months, the activity is beginning to show signs of recovery from domestic tourism and government incentives to promote it. The sector awaits the resumption of air flows and the arrival of international tourism to recover its income levels prior to the pandemic.
After more than 20 years since we acquired the property known as Solares de Santa María in Puerto Madero Sur, the legislature of the city of Buenos Aires approved in December the Regulations for the development of the "Costa Urbana" project. The published law grants a New Standard, designated: "U73 - Public Park and Urban Coastal Development", which enables the combination of diverse uses such as housing, offices, shops, services, public spaces, education and entertainment. The Company will have a construction capacity of approximately 895,000 m², which will drive growth for the coming years through the development of mixed-use projects.
Within the framework of the corporate reorganization process that began at the beginning of the year, the shareholders' meetings of IRSA and IRSA PC held on December 22, 2021 approved the merger by absorption between the companies, in which IRSA absorbs IRSA PC, which dissolves without liquidating. The effective date of the merger is July 1, 2021. Both companies have initiated the administrative processes before the National Securities Commission for the administrative compliance of said body and its subsequent registration before the General Inspection of Justice, in charge of the Registry Public in the Autonomous City of Buenos Aires, of (i) the merger by absorption; (ii) the capital increase by merger and authorization of the public offering of said shares by IRSA; (iii) the dissolution without liquidation of IRSA PC; (iv) the transfer of the public offer and the cancellation of the public offer of IRSA PC. The approvals by the controlling agencies could take several months.
In 2022 we will continue working on the reduction and efficiency of the cost structure and on the consolidation of the best real estate portfolio in Argentina, maintaining our commitment to preserve the health and well-being of clients, employees, tenants, and the entire population.
Eduardo S. Elsztain
Chairman
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