6-K 1 irsaconsolidadoingles3112.htm FINANCIAL STATEMENT IIQ20 Blueprint
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Unaudited Condensed Interim Consolidated Financial Statements as of December 31, 2019 and for the six-month period ended as of that date, presented comparatively
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal information
 
 
Denomination: IRSA Inversiones y Representaciones Sociedad Anónima.
 
Fiscal year N°: 77, beginning on July 1st, 2018.
 
Legal address: 108 Bolívar St., 1st floor, Autonomous City of Buenos Aires, Argentina.
 
Company activity: Real estate investment and development.
 
Date of registration of the by-laws in the Public Registry of Commerce: June 23, 1943.
 
Date of registration of last amendment of the by-laws in the Public Registry of Commerce: October 29, 2018.
 
Expiration of the Company’s by-laws: April 5, 2043.
 
Registration number with the Superintendence: 213,036.
 
Capital: 578,676,460 shares.
 
Common Stock subscribed, issued and paid up nominal value (in millions of Ps.): 579.
 
Parent Company: Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria
(Cresud S.A.C.I.F. y A.).
 
Legal Address: 877 Moreno St., 23rd. floor, Autonomous City of Buenos Aires, Argentina.
 
Main activity: Real estate, agricultural, commercial and financial activities.
 
Direct and indirect interest of the Parent Company on the capital stock: 359,102,219 common shares.
 
Percentage of votes of the Parent Company (direct and indirect interest) on the shareholders’ equity: 62.34% (1).
 
 
Type of stock
CAPITAL STATUS
Shares authorized for Public Offering (2)
Subscribed, issued and paid up nominal value
(in millions of Pesos)
Common stock with a face value of Ps. 1 per share and entitled to 1 vote each
578,676,460
579
 
(1) For computation purposes, treasury shares have been subtracted.
(2) Company not included in the Optional Statutory System of Public Offer of Compulsory Acquisition.
 
 
 
 
 
 
 
 
 
Index
 
Glossary  ...
1
Unaudited Condensed Interim Consolidated Statements of Financial Position                  
2
Unaudited Condensed Interim Consolidated Statements of Income and Other Comprehensive Income
3
Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
4
Unaudited Condensed Interim Consolidated Statements of Cash Flows       
6
Notes to the Unaudited Condensed Interim Consolidated Financial Statements:
 
Note 1 – The Group’s business and general information 
7
Note 2 – Summary of significant accounting policies 
8
Note 3 – Seasonal effects on operations 
11
Note 4 – Acquisitions and disposals 
11
Note 5 – Financial risk management and fair value estimates 
15
Note 6 – Segment information 
15
Note 7 – Investments in associates and joint ventures 
18
Note 8 – Investment properties 
20
Note 9 – Property, plant and equipment 
20
Note 10 – Trading properties 
21
Note 11 – Intangible assets 
21
Note 12 – Right-of-use assets 
23
Note 13 – Financial instruments by category 
23
Note 14 – Trade and other receivables 
25
Note 15 – Cash flow information 
26
Note 16 – Trade and other payables 
26
Note 17 – Borrowings 
27
Note 18 – Provisions 
27
Note 19 – Taxes 
28
Note 20 – Revenues 
29
Note 21 – Expenses by nature 
29
Note 22 – Cost of goods sold and services provided 
29
Note 23 – Other operating results, net 
30
Note 24 – Financial results, net 
30
Note 25 – Related party transactions 
30
Note 26 – CNV General Resolution N° 622 
33
Note 27 – Foreign currency assets and liabilities 
33
Note 28 – Groups of assets and liabilities held for sale 
34
Note 29 – Results from discontinued operations 
34
Note 30 – Other significant events of the period 
35
Note 31 – Subsequent Events 
37
 
 
 
 
 
 
 
 
 
 
 
Glossary
 
The following are not technical definitions, but help the reader to understand certain terms used in the wording of the notes to the Group´s Financial Statements.
 
Terms
 
Definitions
BACS
 
Banco de Crédito y Securitización S.A.
BCRA
 
Central Bank of the Argentine Republic
BHSA
 
Banco Hipotecario S.A.
Cellcom
 
Cellcom Israel Ltd.
Clal
 
Clal Holdings Insurance Enterprises Ltd.
CNV
 
Securities Exchange Commission
CODM
 
Chief operating decision maker
CPF
 
Collective Promotion Funds
Condor
 
Condor Hospitality Trust Inc.
Cresud
 
Cresud S.A.C.I.F. y A.
DIC
 
Discount Investment Corporation Ltd.
Eclsa
 
E-Comerce Latina S.A.
Efanur
 
Efanur S.A.
Financial Statements
 
Unaudited Condensed Interim Consolidated Financial Statements
Gav-Yam
 
Gav-Yam, Bayside Land Corporation Ltd
Annual Financial Statements
 
Consolidated Financial Statements as of June 30, 2019
HASA
 
Hoteles Argentinos S.A.
IAS
 
International Accounting Standards
IASB
 
International Accounting Standards Board
IDBT
 
IDB Tourism (2009) Ltd
IDBD
 
IDB Development Corporation Ltd.
IFISA
 
Inversiones Financieras del Sur S.A.
ISPRO
 
ISPRO the Israel properties rental Corp. Ltd.
IFRS
 
International Financial Reporting Standards
IRSA, The Company”, “Us”, “We”
 
IRSA Inversiones y Representaciones Sociedad Anónima
IRSA CP
 
IRSA Propiedades Comerciales S.A.
Israir
 
Israir Airlines & Tourism Ltd.
LRSA
 
La Rural S.A.
Metropolitan
 
Metropolitan 885 Third Avenue Leasehold LLC
MPIT
 
Minimum presumed income tax
NCN
 
Non-convertible notes
New Lipstick
 
New Lipstick LLC
NFSA
 
Nuevas Fronteras S.A.
NIS
 
New Israeli Shekel
PBC
 
Property & Building Corporation Ltd.
PBEL
 
PBEL Real Estate LTD
Quality
 
Quality Invest S.A.
Shufersal
 
Shufersal Ltd.
Tarshop
 
Tarshop S.A.
TGLT
 
TGLT S.A
Tyrus
 
Tyrus S.A.
 
 
 
 
 
 
 
 
 
1
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Consolidated Statements of Financial Position
as of December 31, 2019 and June 30, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Note
12.31.2019
 
06.30.2019
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
8
169,956
 
293,613
Property, plant and equipment
9
26,674
 
28,087
Trading properties
10, 22
4,336
 
6,899
Intangible assets
11
23,462
 
22,539
Rights of use
12
13,181
 
 -
Other assets
 
33
 
30
Investments in associates and joint ventures
7
63,588
 
39,121
Deferred income tax assets
19
397
 
502
Income tax and MPIT credit
 
14
 
190
Restricted assets
13
679
 
3,874
Trade and other receivables
14
16,954
 
15,564
Investments in financial assets
13
3,965
 
3,634
Financial assets held for sale
13
 -
 
5,257
Derivative financial instruments
13
83
 
120
Total non-current assets
 
323,322
 
419,430
Current assets
 
 
 
 
Trading properties
10, 22
1,923
 
461
Inventories
22
1,303
 
1,443
Restricted assets
13
5,615
 
5,512
Income tax and MPIT credit
 
450
 
491
Group of assets held for sale
28
36,488
 
10,122
Trade and other receivables
14
28,220
 
28,365
Investments in financial assets
13
32,060
 
40,538
Financial assets held for sale
13
7,337
 
14,672
Derivative financial instruments
13
58
 
52
Cash and cash equivalents
13
64,753
 
76,098
Total current assets
 
178,207
 
177,754
TOTAL ASSETS
 
501,529
 
597,184
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders' equity attributable to equity holders of the parent (according to corresponding statement)
 
34,340
 
40,357
Non-controlling interest
 
47,055
 
67,621
TOTAL SHAREHOLDERS’ EQUITY
 
81,395
 
107,978
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Borrowings
17
253,502
 
335,969
Lease liabilities
 
9,972
 
 -
Deferred income tax liabilities
19
33,737
 
46,297
Trade and other payables
16
1,780
 
2,206
Provisions
18
11,451
 
10,082
Employee benefits
 
182
 
167
Derivative financial instruments
13
89
 
1,293
Salaries and social security liabilities
 
151
 
138
Total non-current liabilities
 
310,864
 
396,152
Current liabilities
 
 
 
 
Trade and other payables
16
19,938
 
23,353
Borrowings
17
58,970
 
57,253
Lease liabilities
 
3,928
 
 -
Provisions
18
2,075
 
2,168
Group of liabilities held for sale
28
19,726
 
7,163
Salaries and social security liabilities
 
3,468
 
2,651
Income tax and MPIT liabilities
 
426
 
435
Derivative financial instruments
13
739
 
31
Total current liabilities
 
109,270
 
93,054
TOTAL LIABILITIES
 
420,134
 
489,206
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
501,529
 
597,184
 
 
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, 2019 and 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Six month
 
Three month
 
Note
12.31.2019
 
12.31.2018
 
12.31.2019
 
12.31.2018
Revenues
20
42,786
 
39,719
 
21,978
 
21,409
Costs
21, 22
(26,444)
 
(24,781)
 
(13,266)
 
(13,031)
Gross profit
 
16,342
 
14,938
 
8,712
 
8,378
Net gain / (loss) from fair value adjustment of investment properties
8
3,724
 
(9,081)
 
(6,375)
 
(20,471)
General and administrative expenses
21
(4,640)
 
(4,716)
 
(2,286)
 
(2,535)
Selling expenses
21
(5,786)
 
(5,296)
 
(3,113)
 
(2,660)
Other operating results, net
23
(2,557)
 
891
 
(2,520)
 
169
Profit / (loss) from operations
 
7,083
 
(3,264)
 
(5,582)
 
(17,119)
Share of loss of associates and joint ventures
7
(1,671)
 
(1,212)
 
(1,757)
 
(1,405)
Loss before financial results and income tax
 
5,412
 
(4,476)
 
(7,339)
 
(18,524)
Finance income
24
536
 
728
 
255
 
417
Finance costs
24
(10,487)
 
(10,152)
 
(4,155)
 
(5,350)
Other financial results
24
(5,084)
 
(238)
 
3,828
 
83
Inflation adjustment
 
206
 
(579)
 
542
 
(497)
Financial results, net
 
(14,829)
 
(10,241)
 
470
 
(5,347)
Loss before income tax
 
(9,417)
 
(14,717)
 
(6,869)
 
(23,871)
Income tax expense
19
(2,365)
 
3,312
 
(315)
 
2,802
Loss for the period from continuing operations
 
(11,782)
 
(11,405)
 
(7,184)
 
(21,069)
Profit for the period from discontinued operations
29
16,639
 
3,042
 
(239)
 
2,577
Profit / (loss) for the period
 
4,857
 
(8,363)
 
(7,423)
 
(18,492)
Other comprehensive income:
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Currency translation adjustment
 
3,355
 
2,412
 
(5,414)
 
(10,975)
Change in the fair value of hedging instruments net of income taxes
 
(74)
 
45
 
(59)
 
52
Items that may not be reclassified subsequently to profit or loss, net of income tax:
 
 -
 
 -
 
 -
 
 -
Actuarial profit from defined contribution plans
 
(102)
 
 -
 
(46)
 
 -
Other comprehensive income for the period from continuing operations
 
3,179
 
2,457
 
(5,519)
 
(10,923)
Other comprehensive income / (loss) for the period from discontinued operations
 
4,210
 
(2,082)
 
(51)
 
(10,216)
Total other comprehensive income for the period
 
7,389
 
375
 
(5,570)
 
(21,139)
Total comprehensive income / (loss) for the period
 
12,246
 
(7,988)
 
(12,993)
 
(39,631)
 
 
 
 
 
 
 
 
 
Total comprehensive loss from continuing operations
 
(8,603)
 
(8,948)
 
(12,703)
 
(31,991)
Total comprehensive income from discontinued operations
 
20,849
 
960
 
(290)
 
(7,640)
Total comprehensive income / (loss) for the period
 
12,246
 
(7,988)
 
(12,993)
 
(39,631)
 
 
 
 
 
 
 
 
 
Profit for the period attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(1,421)
 
(8,093)
 
(5,108)
 
(17,018)
Non-controlling interest
 
6,278
 
(270)
 
(2,315)
 
(1,474)
 
 
 
 
 
 
 
 
 
Loss from continuing operations attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(10,308)
 
(9,719)
 
(6,492)
 
(18,577)
Non-controlling interest
 
(1,474)
 
(1,686)
 
(692)
 
(2,492)
 
 
 
 
 
 
 
 
 
Total comprehensive (Loss) / income attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(3,902)
 
(8,381)
 
(6,820)
 
(22,171)
Non-controlling interest
 
16,148
 
393
 
(6,173)
 
(17,460)
 
 
 
 
 
 
 
 
 
Total comprehensive (Loss) / income from continuing operations attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
(6,953)
 
(9,487)
 
(6,184)
 
(15,186)
Non-controlling interest
 
(1,650)
 
539
 
(6,519)
 
(16,805)
 
 
 
 
 
 
 
 
 
Loss per share attributable to equity holders of the parent:
 
 
 
 
 
 
 
 
Basic
 
(2.47)
 
(14.06)
 
(8.87)
 
(29.57)
Diluted
 
(2.47)
 
(14.06)
 
(8.87)
 
(29.57)
 
 
 
 
 
 
 
 
 
Loss per share from continuing operations attributable to equity holders of the parent:
 
 
 
 
 
 
 
 
Basic
 
(17.89)
 
(16.89)
 
(11.27)
 
(32.28)
Diluted
 
(17.89)
 
(16.89)
 
(11.27)
 
(32.28)
 
 
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, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Attributable to equity holders of the parent
 
 
 
Share capital
Treasury shares
Inflation adjustment of share capital and treasury shares (1)
Share premium
Additional paid-in capital from treasury shares
Legal reserve
Special reserve Resolution CNV 609/12 (2)
Other reserves (3)
Retained earnings
Subtotal
Non-controlling interest
Total Shareholders’ equity
Balance as of July 1, 2019
575
4
11,844
12,800
69
427
8,277
59,906
(53,545)
40,357
67,621
107,978
Adjustments previous periods (IFRS 16 and IAS 28) (Note 2.2)
 -
 -
 -
 -
 -
 -
 -
 -
(1,022)
(1,022)
(757)
(1,779)
Restated balance as of July 1, 2019
575
4
11,844
12,800
69
427
8,277
59,906
(54,567)
39,335
66,864
106,199
(Loss) / profit for the period
 -
 -
 -
 -
 -
 -
 -
 -
(1,421)
(1,421)
6,278
4,857
Other comprehensive (loss) / income for the period
 -
 -
 -
 -
 -
 -
 -
(2,481)
 -
(2,481)
9,870
7,389
Total profit and other comprehensive (loss) / income for the period
 -
 -
 -
 -
 -
 -
 -
(2,481)
(1,421)
(3,902)
16,148
12,246
Assignment of results according to A.G.O.
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(129)
(129)
Loss absorption
 -
 -
 -
 -
 -
 -
 -
(53,219)
53,219
 -
 -
 -
Issuance of shares
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
75
75
Distribution of dividends in shares
 -
 -
 -
 -
 -
 -
 -
(519)
 -
(519)
 -
(519)
Capitalization of irrevocable contributions
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
23
23
Dividend distribution
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(1,215)
(1,215)
Decrease due to loss of control
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(38,099)
(38,099)
Other changes in equity
 -
 -
 -
 -
 -
 -
 -
 -
21
21
154
175
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(595)
 -
(595)
3,234
2,639
Balance as of December 31, 2019
575
4
11,844
12,800
69
427
8,277
3,092
(2,748)
34,340
47,055
81,395
 
(1)
Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2)
Related to CNV General Resolution N° 609/12.
(3)
Group´s other reserves for the period ended December 31, 2019 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
Revaluation surplus
Special reserve
Reserve for defined contribution plans
Other reserves from subsidiaries
Total Other reserves
Balance as of July 1, 2019
(145)
(4,647)
182
1,490
233
(7)
62,889
(273)
92
92
59,906
Other comprehensive profit for the period
 -
 -
 -
 -
(2,338)
 -
 -
 -
(143)
 -
(2,481)
Total comprehensive loss for the period
 -
 -
 -
 -
(2,338)
 -
 -
 -
(143)
 -
(2,481)
Reserve for share-based payments
5
 -
(5)
 -
 -
 -
 -
 -
 -
 -
 -
Distribution of dividends in shares
 -
 -
 -
 -
 -
 -
(519)
 -
 -
 -
(519)
Share-based compensation
 -
(595)
 -
 -
 -
 -
 -
 -
 -
 -
(595)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
(53,219)
 -
 -
 -
(53,219)
Balance as of December 31, 2019
(140)
(5,242)
177
1,490
(2,105)
(7)
9,151
(273)
(51)
92
3,092
 
 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, 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Attributable to equity holders of the parent
 
 
 
Share capital
Treasury shares
Inflation adjustment of share capital and treasury shares (1)
Share premium
Additional paid-in capital from treasury shares
Legal reserve
Special reserve Resolution CNV 609/12 (2)
Other reserves (3)
Retained earnings
Subtotal
Non-controlling interest
Total Shareholders’ equity
Balance as of July 1, 2018
575
6
11,844
12,800
69
427
8,277
4,318
38,860
77,176
73,202
150,378
Adjustments previous periods (IFRS 9 and 15)
 -
 -
 -
 -
 -
 -
 -
 -
(289)
(289)
(5)
(294)
Balance as of July 1, 2018 (recast)
575
6
11,844
12,800
69
427
8,277
4,318
38,571
76,887
73,197
150,084
Loss for the period
 -
 -
 -
 -
 -
 -
 -
 -
(8,093)
(8,093)
(270)
(8,363)
Other comprehensive (loss) / income for the period
 -
 -
 -
 -
 -
 -
 -
(288)
 -
(288)
663
375
Total profit / (loss) and other comprehensive income for the period
 -
 -
 -
 -
 -
 -
 -
(288)
(8,093)
(8,381)
393
(7,988)
Incorporation by business combination
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(14)
(14)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(1,219)
 -
(1,219)
2,010
791
Dividend distribution
 -
 -
 -
 -
 -
 -
 -
 -
(2,297)
(2,297)
 -
(2,297)
Reserve for share-based payments
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
29
29
Capitalization of contributions
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(9)
(9)
Assignment of results according to A.G.O. at 10.31.18
 -
 -
 -
 -
 -
 -
 -
57,616
(57,616)
 -
 -
 -
Dividends distribution to non-controlling interest in subsidiaries
 -
 -
 -
 -
 -
 -
 -
 -
 -
 -
(560)
(560)
Balance as of December 30, 2018
575
6
11,844
12,800
69
427
8,277
60,427
(29,435)
64,990
75,046
140,036
  
(1)    Includes Ps. 1 of Inflation adjustment of treasury shares. See Note 16 to the Annual Financial Statements.
(2)    Related to CNV General Resolution N° 609/12.
(3)    Group’s other reserves for the period ended December 31, 2018 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
Revaluation surplus
Other reserves from subsidiaries
Total Other reserves
Balance as of July 1, 2018
(161)
(3,440)
198
1,490
954
92
5,273
(273)
92
93
4,318
Other comprehensive loss for the period
 -
 -
 -
 -
(242)
(46)
 -
 -
 -
 -
(288)
Total comprehensive loss for the period
 -
 -
 -
 -
(242)
(46)
 -
 -
 -
 -
(288)
Share-based compensation
2
 -
(2)
 -
 -
 -
 -
 -
 -
 -
 -
Assignment of results according to A.G.O. at 10.31.18
 -
 -
 -
 -
 -
 -
57,616
 -
 -
 -
57,616
Changes in non-controlling interest
 -
(1,219)
 -
 -
 -
 -
 -
 -
 -
 -
(1,220)
Balance as of December 30, 2018
(159)
(4,659)
196
1,490
712
46
62,889
(273)
92
93
60,426
 
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 periods ended December 31, 2019 and 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
Note
12.31.2019
 
12.31.2018
Operating activities:
 
 
 
 
Net cash generated from continuing operating activities before income tax paid
15
15,021
 
7,973
Income tax and MPIT paid
 
(346)
 
(326)
Net cash generated from continuing operating activities
 
14,675
 
7,647
Net cash generated from discontinued operating activities
 
2,105
 
2,931
Net cash generated from operating activities
 
16,780
 
10,578
Investing activities:
 
 
 
 
Acquisition of participation in associates and joint ventures
 
(591)
 
(18)
Decreased in cash due to deconsolidation of subsidiaries
 
 -
 
(9)
Contributions and issuance of capital in associates and joint ventures
 
(119)
 
 -
Acquisition and improvements of investment properties
 
(1,404)
 
(2,009)
Acquisition of subsidiaries, net of cash acquired
 
 -
 
(349)
Proceeds from sales of investment properties
 
8,978
 
14
Acquisitions and improvements of property, plant and equipment
 
(2,275)
 
(2,311)
Proceeds from sales of property, plant and equipment
 
2,904
 
14
Acquisitions of intangible assets
 
(1,701)
 
(1,634)
Acquisitions of subsidiaries, net of cash acquired
 
(71)
 
(60)
Net increase of restricted deposits
 
4,477
 
(636)
Dividends collected from associates and joint ventures
 
74
 
246
Proceeds from sales of interest held in associates and joint ventures
 
43
 
7,288
Proceeds from loans granted
 
27
 
104
Acquisitions of investments in financial assets
 
(10,652)
 
(23,846)
Proceeds from disposal of investments in financial assets
 
14,327
 
29,096
Interest received from financial assets
 
610
 
622
Dividends received from financial assets
 
79
 
31
Proceeds from sales of intangible assets
 
25
 
 -
Loans granted to related parties
 
(202)
 
(12)
Loans granted
 
(3,195)
 
 -
Net cash generated from / (used in) continuing investing activities
 
11,334
 
6,531
Net cash used in discontinued investing activities
 
2,485
 
(6,276)
Net cash generated from / (used in) investing activities
 
13,819
 
255
Financing activities:
 
 
 
 
Borrowings and issuance of non-convertible notes
 
11,280
 
25,002
Payment of borrowings and non-convertible notes
 
(34,753)
 
(19,343)
(Payment) / collections of short term loans, net
 
1,278
 
(1,084)
Interests paid
 
(7,863)
 
(7,498)
Repurchase of non-convertible notes
 
(11,456)
 
(2,213)
Capital contributions from non-controlling interest in subsidiaries
 
 -
 
144
Acquisition of non-controlling interest in subsidiaries
 
(252)
 
(1,720)
Proceeds from sales of non-controlling interest in subsidiaries
 
 -
 
8
Loans received from associates and joint ventures, net
 
80
 
77
Payment of borrowings to related parties
 
 -
 
(2)
Dividends paid to non-controlling interest in subsidiaries
 
(203)
 
756
Charge for issuance of shares and other equity instruments
 
2,417
 
 -
Net proceeds from derivate financial instrument
 
(1,549)
 
294
Net cash (used in) / generated from continuing financing activities
 
(41,021)
 
(5,579)
Net cash generated from /(used in) discontinued financing activities
 
(4,766)
 
6,844
Net cash generated from financing activities
 
(45,787)
 
1,265
Net (decrease) / increase in cash and cash equivalents from continuing activities
 
(15,012)
 
8,599
Net (decrease) / increase in cash and cash equivalents from discontinued activities
 
(176)
 
3,499
Net (decrease) / increase in cash and cash equivalents
 
(15,188)
 
12,098
Cash and cash equivalents at beginning of period
 
76,098
 
73,045
Cash and cash equivalents reclassified as held-for-sale
 
(522)
 
(974)
Foreign exchange gain and inflation adjustment on cash and changes in fair value of cash equivalents
 
4,365
 
(2,452)
Cash and cash equivalents at end of period
13
64,753
 
81,717
 
 
 
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 10, 2020.
 
IRSA was founded in 1943, and it is engaged in a diversified range of real estate activities in Argentina since 1991. IRSA and its subsidiaries are collectively referred to hereinafter as “the Group”. Cresud is our direct parent company and IFIS Limited is our ultimate parent company.
 
The Group has established two Operations Centers, Argentina and Israel, to manage its global business, mainly through the following companies:
  (*) See note 4. to the Annual Financial Statements for more information about the changes within the Operations Center in Israel.
 
Operations Center in Israel
 
IDBD and DIC have certain restrictions and financial agreements in relation to their financial debt, including their debentures and loans with banks and financial institutions. Regarding IDBD's financial position, its cash flow and its ability to meet its financial debt commitments, it should be considered that certain bondholders have hired representative and legal advisors, over the last months to evaluate potential courses of actions including procedures for declaring IDBD’s insolvency.
 
Besides IDBD’s financial situation, its negative equity, negative operating cash flows and low credit rating of its debentures which resulted in its bondholders hiring representative and legal advisors to evaluate a potential procedure for declaring the insolvency of IDBD, the cash flow forecast for the next 24 months presented to the Board of Directors includes the current price of Clal’s shares and its implications in the swap transactions deposits (see note 31) and considers the assumption that IDBD will receive, inter alia, proceeds from the sale of private investments which are directly owned by IDBD, while the implementation of these plans does not depend entirely on factors under its control.
 
Additionally, IRSA’s Board of Directors has approved a commitment with Dolphin to make capital contributions in Dolphin for up to NIS 210 (approximately Ps. 3,360 as of the date of these financial statements), described in Note 1 to the Annual Financial Statements.
 
 
 
 
 
 
 
 
  7
IRSA Inversiones y Representaciones Sociedad Anónima
 
In preparation for its 2019 annual financial statements, IDBD is currently evaluating its financial position, including, among others, its updated cash flow projection and its net assets value. At this stage, IDBD did not finalize its assessment.
 
The commitments and other restrictions that result from IDBD and DIC’s indebtedness do not have effect over IRSA since such indebtedness has no recourse against IRSA, nor has IRSA guaranteed it with its assets, except for the commitment to make contributions to Dolphin as mentioned above.
 
Considering the above, as of December 31, 2019, the financial risk of IRSA with respect to the Operations Center in Israel is limited to the abovementioned commitments and the equity risk, as a result of the pledges granted over DIC shares to certain bondholders of IDBD, is limited to the value of IRSA’s net assets in the Operation Center in Israel, which amounted to NIS 588 (Ps. 9,737) as of December 31, 2019.
 
 
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, 2019 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, 2019 and 2018 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 is approximates or exceed 100%. Accumulated inflation in Argentina in three years is over 100%. For that reason, in accordance with IAS 29, Argentina must be considered a country with a highly inflationary economy starting July 1, 2018.
 
In relation to the inflation index to be used and in accordance with FACPCE Resolution No. 539/18, it will be determined based on the Wholesale Price Index (IPIM) until 2016, considering for the months of November and December 2015 the average variation of the Consumer Price Index (CPI) of the Autonomous City of Buenos Aires, because during those two months there were no national IPIM measurements. Then, from January 2017, the National Consumer Price Index (National CPI) will be considered. The table below presents the index for the period ended December 31, 2019, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18.
 
 
Quarter ended September 30, 2019
Quarter ended December 31, 2019
As of December 31, 2019 (accumulated six months)
Price variation
13%
12%
25%
 
 
As a consequence of the aforementioned, these financial statements as of December 31, 2019 were restated in accordance with IAS 29.
 
 
 
 
 
 
 
 
 
8 
IRSA Inversiones y Representaciones Sociedad Anónima
 
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.
 
As described in Note 2.2 to the annual financial statements, the Group has adapted IFRS 16: “Leases” and Amendment to IAS 28 “Investment in associates and joint ventures” in the current year applying the cumulative effect approach, therefore, accumulated impact was recognized in retained earnings as of July 1, 2018. Comparative figures were not restated
 
 
The main changes were the following:
 
IFRS 16: Leases
 
The standard establishes the criteria for recognition and valuation of leases for lessees and lessors. The changes incorporated mainly impact the tenant's accounting. IFRS 16 provides that the lessee recognizes an asset for the right of use and a liability at present value with respect to those contracts that meet the definition of lease agreements according to IFRS 16. In accordance with the standard, a lease agreement is one that provides the right to control the use of an identified asset for a specific period. In order for a company to have control over the use of an identified asset: a) it must have the right to substantially obtain all the economic benefits of the identified asset and b) it must have the right to direct the use of the identified asset.
The standard allows to exclude short-term contracts (under 12 months) and those in which the underlying asset has low value.
 
Amendment to IAS 28 “Investment in associates and joint ventures”
 
In accordance with the amendment to IAS 28, an entity shall implement the provisions of IFRS 9 to Long-term Investments that are essentially part of the entity's net investment in the associate or in the joint venture according to the definitions of said standard. The provisions of IFRS 9 shall apply to such investments with respect to the interest in the losses of an associate or a joint venture, as well as with respect to the recognition of the impairment of an investment in an associate or joint venture. In addition, when applying IFRS 9 to such long-term investments, the entity will make it prior to the adjustments made to the carrying amount of the investment in accordance with IAS 28.
 
Additionally, the Company opted for an accounting policy where the currency translation adjustments arising from these loans are recorded as part of other comprehensive income.
 
 
 
 
 
 
 
 
 
 
 
 
9 
IRSA Inversiones y Representaciones Sociedad Anónima
 
The effect on retained earnings as of July 1, 2019 for the first implementation of IFRS 16 and IAS 28 is the following:
 
 
 
07.01.2019
 
 
Implementation NIIF 16
 
Implementation NIC 28
 
Total
ASSETS
 
 
 
 
 
 
Non- Current Assets
 
 
 
 
 
 
Investment properties
 
375
 
 -
 
375
Rights of use
 
12,400
 
 -
 
12,400
Investments in associates and joint ventures
 
 -
 
(1,787)
 
(1,787)
Trade and other receivables
 
106
 
 -
 
106
Total Non-Current Assets
 
12,881
 
(1,787)
 
11,094
Current assets
 
 -
 
 -
 
 -
Income tax and MPIT credit
 
15
 
 -
 
15
Trade and other receivables
 
(150)
 
 -
 
(150)
Group of assets held for sale
 
2,748
 
 -
 
2,748
Total current assets
 
2,613
 
 -
 
2,613
TOTAL ASSETS
 
15,494
 
(1,787)
 
13,707
SHAREHOLDERS’ EQUITY
 
 -
 
 -
 
 -
Capital and reserves attributable to equity holders of the parent
 
 -
 
 -
 
 -
Retained earnings
 
8
 
(1,030)
 
(1,022)
Total capital and reserves attributable to equity holders of the parent
 
8
 
(1,030)
 
(1,022)
Non-controlling interest
 
 -
 
(757)
 
(757)
TOTAL SHAREHOLDERS’ EQUITY
 
8
 
(1,787)
 
(1,779)
LIABILITIES
 
 -
 
 -
 
 -
Non-Current Liabilities
 
 -
 
 -
 
 -
Trade and other payables
 
9,351
 
 -
 
9,351
Total Non-Current Liabilities
 
9,351
 
 -
 
9,351
Current Liabilities
 
 -
 
 -
 
 -
Lease liabilities
 
3,456
 
 -
 
3,456
Trade and other payables
 
(81)
 
 -
 
(81)
Group of liabilities held for sale
 
2,760
 
 -
 
2,760
Total Current Liabilities
 
6,135
 
 -
 
6,135
TOTAL LIABILITIES
 
15,486
 
 -
 
15,486
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
15,494
 
(1,787)
 
13,707
 
 
 
2.3.
Comparability of information
 
Balance items as of June 30, 2019 and December 31, 2018 presented in these Unaudited Condensed Interim Consolidated Financial Statements for comparative purposes arise from the financial statements as of and for such periods restated according to IAS 29 (See note 2.1). Certain items from prior periods have been reclassified for consistency purposes regarding the loss of control in Gav-Yam. See note 4.A. to these Financial Statements.
 
2.4.
Use of estimates
 
The preparation of Financial Statements at a certain date requires Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the period. Actual results might differ from the estimates and evaluations made at the date of preparation of these financial statements. In the preparation of these financial statements, the significant judgments made by Management in applying the Group’s accounting policies and the main sources of uncertainty were the same as the ones applied by the Group in the preparation of the Annual Financial Statements described in Note 3 to those Financial Statements.
 
 
 
 
 
 
 
 
 
10 
IRSA Inversiones y Representaciones Sociedad Anónima
 
3.
Seasonal effects on operations
 
Operations Center in Argentina
 
The operations of the Group’s shopping malls are subject to seasonal effects, which affect the level of sales recorded by lessees. During summer time in Argentina (January and February), the lessees of shopping malls experience the lowest sales levels in comparison with the winter holidays (July) and Christmas and year-end holidays celebrated in December, when they tend to record peaks of sales. Apparel stores generally change their collections during the spring and the fall, which impacts positively on shopping malls sales. Sale discounts at the end of each season also affect the business. As a consequence, for shopping mall operations, a higher level of business activity is expected in the period ranging between July and December, compared to the period between January and June.
 
Operations Center in Israel
 
The results of operations of telecommunications and tourism are usually affected by seasonality in summer months in Israel and by the Jewish New Year, given a higher consumption due to internal and external tourism.
 
4.
Acquisitions and disposals
 
Significant acquisitions and disposals for the six month period ended December 31, 2019 are detailed below. Significant acquisitions and disposals for the fiscal year ended June 30, 2019, are detailed in Note 4 to the Annual Financial Statements.
 
Operations Center in Argentina
 
A.
Condor merger agreement
 
On July 19, 2019, Condor signed an agreement and merger plan with a company not related to the Group. The agreement set that each ordinary share, whose nominal value is US$ 0.01 per share will be canceled before the merger and will be replaced by the right to receive a cash amount equivalent to US$ 11.10 per ordinary share. Additionally, in accordance with the terms and conditions of the merger agreement, each Series E convertible share will be automatically canceled and shareholders will become entitled to receive a cash amount equal to US$ 10.00 per share.
 
It is estimated that the operation will be completed before February 29, 2020. At the date of issuance of these financial statements, the Group held 2,197,023 ordinary shares and 325,752 Series E shares.
 
 
B.
Distribution of dividends in kind
 
On October 30, 2019, the Ordinary Shareholders’ Meeting of IRSA, approved, a dividend distribution in kind for the equivalent amount of Ps. 480 (representative of Ps. 0.83 per share) payable in shares of IRSA CP. IRSA CP’s quoted price per share as of October 29, 2019, was considered and, it amounted to 205 pesos per share. As a result 2,341,463 shares were distributed. This transaction was accounted for as a change in equity generating a reduction of the equity attributable to the controlling shareholders for Ps. 443 restated for inflation as of the date of this financial statements. As of the end of the period the groups interest in IRSA CP amounts to 80.65%.
 
 
 
 
 
 
 
 
 
 
 
11 
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
C.
TGLT – Recapitalization agreement
 
On August 8, 2019, we entered into certain arrangements with TGLT S.A. (“TGLT”) providing for collaboration in TGLT’s financial restructuring and recapitalization. Through the recapitalization agreement TGLT committed to: (i) make a public offering to subscribe Class A preferred shares at a subscription price of US$1.00 per TGLT share; (ii) make a public offering of new Class B preferred shares which may be subscribed by (a) the exchange for ordinary shares of TGLT, at an exchange ratio of one Class B preferred share for every 6.94 ordinary shares of the Company and / or (b) the exchange for convertible notes, at an exchange ratio of a Class B preferred share for each US$1.00 of convertible notes (including accumulated and unpaid interests under the existing convertible notes); and (iii) grant an option to subscribe new Class C preferred shares in a public offer for cash to be carried out if: (a) the public offer of Class A and Class B preferred shares is completed and (b) a minimum number of option holders have exercised that option at a subscription price of US$1.00 per Class C preferred share (or its equivalent in pesos).
 
Finally, supporting the recapitalization plan, IRSA CP signed a subscription commitment with TGLT for Class A preferred shares under the Class A Public Offering to make a contribution in kind of shares of the company La Maltería S.A., 100% of its ownership, for an amount of up to US$ 24 million and promised to exchange its convertible notes into Class B preferred shares.
 
In turn, on November 22, 2019, TGLT held a meeting with bondholders of convertible notes in order to consider the amendment to different clauses of the indenture in force at that date, and in line with what was agreed in the recapitalization agreement, IRSA CP approved the amendments.
 
Under the agreements described above, the successful consummation of the offer by TGLT, and having reached the thresholds of consent from the bondholders of convertible notes of TGLT, on December 11, 2019, the Company concluded the process scheduled in the recapitalization agreement and related documents through the subscription of Class A preferred shares, integrating them in kind through the contribution of the shares of the company La Maltería S.A., 100% of their ownership and, moreover, proceeded to the exchange of the convertible note - including deferred interest and accrued interest from August 15, 2019 to December 11, 2019 - in preferred class B shares.
 
 
Operations Center in Israel
 
A.
Sale of Gav-Yam
 
On July 1, 2019, PBC sold approximately 11.7% of its equity interest in Gav-Yam's through private agreements. After this transaction, the holding of PBC in Gav-Yam changed from 51.7% to 40.0%. The consideration received for said sale was NIS 456 (approximately $ 6,118 restated as of the date of these financial statements).
 
 
Additionally, on September 1, 2019, PBC sold approximately an additional 5.14% of Gav-Yam, therefore the stake of PBC in Gav-Yam went from 40.0% to 34.9%. as a consequence of the aforementioned sales, PBC has lost the right to nominate the majority of the members of the Board of Directors, and to appoint or remove the key members of management. Consequently, PBC has lost control of Gav-Yam and has deconsolidated such investment since that date.
 
 
 
 
 
 
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
Below is a detail of the sale:
 
 
09.30.2019
Cash received
12,555
Remediation of the fair value of the remaining investment
28,315
Total
40,870
Net assets written off including business key
(24,596)
Earnings from sales of a net tax subsidiary (*)
16,274
 
 
              (*) These results are presented within discontinued operations, in the line “Other operating results, net”.
 
 
Below is a detail of the net assets deconsolidated:
 
 
09.30.2019
Investment properties
138,688
Property, plant and equipment
934
Intangible assets
2,992
Rights of use
37
Investments in associates and joint ventures
3,870
Restricted assets
333
Trade and other receivables
1,019
Investments in financial assets
11,759
Trading properties
136
Income tax credit
167
Cash and cash equivalents
9,352
TOTAL ASSETS
169,287
Borrowings
88,224
Lease liabilities
37
Deferred income tax liabilities
16,124
Trade and other payables
2,111
Employee benefits
19
Salaries and social security liabilities
56
Income tax and MPIT liabilities
111
TOTAL LIABILITIES
106,682
Non-controlling interest
38,009
Net assets written off including business key
24,596
 
 
B.
Agreement for sale of a plot of land in the US
 
As mentioned in Note 4. D of the Operations Center in Israel, the agreement for the sale of the land attached to the Tivoli project has been breached and terminated. In July 2019, the Group signed a new agreement for the sale of the aforementioned land, for a total amount of US$ 18 million. At this stage, there is no certainty that the sale transaction will be completed.
 
C.
IDBD financing agreement
 
On August 31, 2019, IDBD’s Board of Directors gave its approval to accept a commitment by Dolphin to make a capital contribution ("the Commitment"), whose main points are the following:
 
Dolphin irrevocably undertook the commitment to make capital contributions to IDBD for a total amount of NIS 210 in three equal annual payments (NIS 70 each) on September 2, in each of the years 2019-2021 ("Payments" and "payment dates", respectively). The aforementioned payments will be made in exchange for the company’s shares or as a subordinated loan in similar terms to the subordinated loan that Dolphin advanced in the past to IDBD. On September 2, 2019, the first payment for NIS 70 million was made.
 
IRSA committed unilaterally and irrevocably to transfer to Dolphin the amounts it needs to comply with the Commitment ("IRSA Commitment"). If Dolphin does not make the capital contributions in accordance with the Commitment, then Dolphin's rights in accordance with the IRSA Commitment will be automatically assigned to IDBD, and IDBD will have the right to act to carry out the IRSA Commitment.
 
 
 
 
 
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
The Commitment will automatically expire in each of the following cases: (a) if motions are filed to decree insolvency against IDBD (whether voluntarily or involuntarily filed) in the courts of Israel and they are valid in any of the Payment Dates, in which case the corresponding Payment Date will be postponed for a period of 90 days and the corresponding payment will be transferred to IDBD only if the procedures are canceled during the mentioned period of 90 days. If the procedures for declaring insolvency are not canceled within 90 days as mentioned above, the entire commitment will expire; (b) if an insolvency decree is given as set forth in section 3 of the Israel Insolvency and Economic Recovery Act, 5778-2018; and (c) a trustee, fiduciary, special manager or any officer of this type (temporary or permanent) is appointed in IDBD, or the court will issue a similar order (with respect to the insolvency of IDBD).
 
D.
Advance payment of Ispro debentures
 
In August 2019, the Audit Committee and Ispro Board approved the full advance payment of the debentures (Series B), which were quoted in the TASE, the total amount was NIS 131. The early repayment of these debentures will make Ispro an unlisted company for the TASE.
 
E.
Sale of Clal shares
 
On August 28, 2019, the second buyer of the transaction described in Note 4.A. notified the decision to exercise the option for the remaining 3% at a price of NIS 50 per share for a total of NIS 83 million. These shares were delivered through a swap contract.
 
On September 3, 2019, IDB concluded an agreement for the sale of an additional 6% of Clal shares, of which 1% would be collected in cash (approximately NIS 29) and the remaining 5% through the receipt of IDBD’s own debentures for a nominal value of approximately NIS 190 million. The agreed price of Clal share was NIS 52.5 and the discount value applied to the IDBD debentures was between 25% - 21% discount with respect to the nominal value.
As mentioned in Note 4.A. to the annual financial statements, IDBD was looking for different ways of financing the purchase of Clal's to the third buyer. On October 27, 2019, IDBD signed an agreement with a financial entity which offered to buy all rights and obligations related to the financing of said purchase.
 
On November 7, the sale transaction has been completed and the loan has been granted by a financial entity. It should be clarified that the amount of 2,771,309 of Clal Insurance Enterprises shares sold was subject to a swap transaction between IDBD and a financial entity, that ended with the Company's notice to that entity.
 
On December 16, Clal made a public capital increase of 12,066,000 shares at a price of NIS/share 53.87 in which IDBD did not take part.
 
Additionally, on the same date, IDBD sold 200,000 shares of Clal at a price of NIS/share 53.95, representative of 0.3% of the new share capital.
 
On December 18, IDBD sold 617,017 shares of Clal at a price of NIS/share 53.77, representative of 0.9% of the share capital.
 
Additionally, during December 2019, a swap transaction, which IDBD had agreed for 2.771.309 shares, expired. The price per share was of NIS 52.25.
 
As a result of said transaction, as of December 31, 2019, IDBD’s equity interest in Clal Insurance Enterprises was 8.5% and it owned an additional 8.2% through swap transactions.
 
 
 
 
 
 
 
 
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
F.
Capital Increase in Cellcom
 
On December 5, 2019, Cellcom made a tender offer for the issuance of shares, of which DIC participated and acquired 50% of the issuance. The amount received for the shares was of NIS 307 (approximately Ps. 5,320 as of that date) and Cellcom issued a total amount of 30,600,000 ordinary shares, 7,038,000 share options (Series 3) and 6,426,000 share options (Series 4) for an amount of NIS 1.021 per unit (each unit will consist of 100 ordinary shares, 23 share options Series 3 and 21 share options Series 4).
 
After this transaction, DIC holds 46.2% of the issued capital and approximately 48.5% of the voting rights of Cellcom (directly and over agreements with other shareholders of Cellcom).
 
 
 
G.
PBC distribution of dividends in kind
 
 
On December 10, 2019 PBC distributed all its interest in Mehadrin as a dividend in kind. As a result, DIC holds a direct interest in Mehadrin of 31.4%. As of December 2019, Mehadrin is classified as an associate.
 
 
 
 
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, 2019 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). Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Group’s financial instruments, except as mentioned in note 30.
 
6.
Segment information
 
As explained in Note 6 to the Annual Financial Statements, the Group reports its financial performance separately in two Operations Centers. As described in Note 4.A from the Israel operations center to these Financial Statements, the Group lost control of Gav-am as of September 30, 2019 and has reclassified its results to discontinued operations. Segment information for the period ended December 31, 2018 has been recast for the purposes of comparability with the present period.
 
 
 
 
 
 
 
 
 
 
 
 
15
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Below is a summary of the Group’s operative segments and a reconciliation between the operating income according to segment information and the operating income of the statement of income and other comprehensive income of the Group for the periods ended December 31, 2019 and 2018:
 
 
 
 
Six months ended December 31, 2019
 
Operations Center in Argentina
Operations Center in Israel
Total
Joint ventures (1)
Expensesand collectivepromotion funds
Elimination of inter-segment transactions and non-reportable assets / liabilities (2)
Total as per statement of income / statement of financial position
Revenues
6,531
34,767
41,298
(40)
1,540
(12)
42,786
Costs
(1,359)
(23,498)
(24,857)
21
(1,611)
3
(26,444)
Gross profit / (loss)
5,172
11,269
16,441
(19)
(71)
(9)
16,342
Net gain / (loss) from fair value adjustment of investment properties
4,141
(164)
3,977
(253)
 -
 -
3,724
General and administrative expenses
(1,134)
(3,528)
(4,662)
7
 -
15
(4,640)
Selling expenses
(536)
(5,229)
(5,765)
4
(25)
 -
(5,786)
Other operating results, net
(42)
(2,594)
(2,636)
14
71
(6)
(2,557)
Profit / (loss) from operations
7,601
(246)
7,355
(247)
(25)
 -
7,083
Share of (loss) of associates and joint ventures
(1,289)
(563)
(1,852)
181
 -
 -
(1,671)
Segment profit / (loss)
6,312
(809)
5,503
(66)
(25)
 -
5,412
Reportable assets
102,321
374,349
476,670
(597)
 -
25,456
501,529
Reportable liabilities
 -
(331,885)
(331,885)
 -
 -
(88,249)
(420,134)
Net reportable assets
102,321
42,464
144,785
(597)
 -
(62,793)
81,395
 
 
 
Six months ended December 31, 2018
 
Operations Center in Argentina
Operations Center in Israel
Total
Joint ventures (1)
Expensesand collectivepromotion funds
Elimination of inter-segment transactions and non-reportable assets / liabilities (2)
Total as per statement of income / statement of financial position
Revenues
7,100
30,920
38,020
(45)
1,753
(9)
39,719
Costs
(1,233)
(21,744)
(22,977)
28
(1,832)
 -
(24,781)
Gross profit / (loss)
5,867
9,176
15,043
(17)
(79)
(9)
14,938
Net (loss) / gain from fair value adjustment of investment properties
(9,569)
487
(9,082)
1
 -
 -
(9,081)
General and administrative expenses
(1,312)
(3,430)
(4,742)
11
 -
15
(4,716)
Selling expenses
(501)
(4,797)
(5,298)
2
 -
 -
(5,296)
Other operating results, net
(310)
966
656
161
79
(5)
891
(Loss) / profit from operations
(5,825)
2,402
(3,423)
158
 -
1
(3,264)
Share of (loss) of associates and joint ventures
(397)
(622)
(1,019)
(193)
 -
 -
(1,212)
Segment (loss) / profit
(6,222)
1,780
(4,442)
(35)
 -
1
(4,476)
Reportable assets
127,162
503,648
630,810
(786)
 -
26,617
656,641
Reportable liabilities
 -
(432,060)
(432,060)
 -
 -
(84,542)
(516,602)
Net reportable assets
127,162
71,588
198,750
(786)
 -
(57,925)
140,039
 
 
(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 Ps. 8,912 and Ps. 5,288 as of December 31, 2019 and 2018 respectively.
 
 
 
 
 
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
Below is a summarized analysis of the business unit of the Group’s Operations Center in Argentina for the periods ended December 31, 2019 and 2018:
 
Six months ended December 31, 2019
 
Operations Center in Argentina
 
Shopping Malls
Offices
Sales and developments
Hotels
International
Corporate
Others
Total
Revenues
3,644
1,095
460
1,268
5
 -
59
6,531
Costs
(287)
(61)
(257)
(706)
(5)
 -
(43)
(1,359)
Gross profit
3,357
1,034
203
562
 -
 -
16
5,172
Net (loss) / gain from fair value adjustment of investment properties
(1,876)
3,326
2,544
 -
 -
 -
147
4,141
General and administrative expenses
(440)
(115)
(108)
(177)
(60)
(177)
(57)
(1,134)
Selling expenses
(254)
(43)
(98)
(135)
 -
 -
(6)
(536)
Other operating results, net
(85)
(24)
(3)
(9)
(1)
 -
80
(42)
Profit / (loss) from operations
702
4,178
2,538
241
(61)
(177)
180
7,601
Share of profit of associates and joint ventures
 -
 -
 -
 -
(381)
 -
(908)
(1,289)
Segment profit / (loss)
702
4,178
2,538
241
(442)
(177)
(728)
6,312
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
43,075
31,242
24,362
1,628
268
 -
1,082
101,657
Investment in associates and joint ventures
 -
 -
456
 -
(7,530)
 -
5,315
(1,759)
Other operating assets
44
50
2,225
25
 -
 -
79
2,423
Operating assets
43,119
31,292
27,043
1,653
(7,262)
 -
6,476
102,321
 
 
For the six month period ended December 31, 2019, the net gain from fair value adjustments of shopping malls was Ps. 4,141 million. The net impact of the values in pesos of our properties was mainly a consequence of the change in macroeconomic conditions:
 
(a) positive result of Ps.19,638.8 million as a consequence of an increase in the projected inflation rate plus GDP, with the resulting increase in the cash flow of shopping malls revenues;
(b) negative result of Ps.21,592.6 million due to the conversion to dollars of the projected cash flow in pesos according to the exchange rate estimates used in the cash flow;
(c) an increase of 72 basis points in the discount rate, mainly due to an increase in the country-risk rate component of the WACC discount rate used to discount the cash flow, which led to a decrease in the value of the shopping malls of Ps.2,244.0 million.
(d) positive impact of Ps.11,560.7 million resulting from the conversion into pesos of the value of the shopping malls in dollars based on the exchange rate at the end of the period;
(e) additional effect due to the suspension of the income tax rate applicable to companies for one year, which resulted in a reduction in the value of shopping centers of Ps. 209.0 million.
 
 
The value of our office buildings and other rental properties measured in real terms increased by 12.0% during the six-month period ended as of December 31, 2019, due to a devaluation of the peso which exceeded the period's inflation rate.
 
Additionally, due to the impact of the inflation adjustment, part of the gain from fair value adjustments was reclassified due to exposure to changes in the purchasing power of the currency.
 
 
 
Six months ended December 31, 2018
 
Operations Center in Argentina
 
Shopping Malls
Offices
Sales and developments
Hotels
International
Corporate
Others
Total
Revenues
4,207
840
515
1,454
7
 -
77
7,100
Costs
(319)
(44)
(67)
(717)
(3)
 -
(83)
(1,233)
Gross profit / (loss)
3,888
796
448
737
4
 -
(6)
5,867
Net (loss) / gain from fair value adjustment of investment properties
(13,663)
3,863
197
 -
3
 -
31
(9,569)
General and administrative expenses
(454)
(105)
(94)
(227)
(54)
(326)
(52)
(1,312)
Selling expenses
(268)
(53)
(20)
(152)
 -
 -
(8)
(501)
Other operating results, net
33
(15)
(187)
40
3
 -
(184)
(310)
(Loss) / profit from operations
(10,464)
4,486
344
398
(44)
(326)
(219)
(5,825)
Share of profit of associates and joint ventures
 -
 -
(21)
 -
(299)
 -
(77)
(397)
Segment (loss) / profit
(10,464)
4,486
323
398
(343)
(326)
(296)
(6,222)
 
 
 
 
 
 
 
 
 
Investment properties and trading properties
66,040
30,625
23,311
 -
92
 -
1,161
121,229
Investment in associates and joint ventures
2
 -
375
 -
(3,840)
 -
6,683
3,220
Other operating assets
229
152
163
1,754
174
 -
241
2,713
Operating assets
66,271
30,777
23,849
1,754
(3,574)
 -
8,085
127,162
 
 
 
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
Below is a summarized analysis of the business unit of the Group’s Operations Center in Israel for the periods ended December 31, 2019 and 2018:
 
Six months ended December 31, 2019
 
Operations Center in Israel
 
Real Estate
Supermarkets
Telecommunications
Insurance
Corporate
Others
Total
Revenues
6,277
 -
27,595
 -
 -
895
34,767
Costs
(3,364)
 -
(19,885)
 -
 -
(249)
(23,498)
Gross profit
2,913
 -
7,710
 -
 -
646
11,269
Net loss from fair value adjustment of investment properties
(164)
 -
 -
 -
 -
 -
(164)
General and administrative expenses
(378)
 -
(2,297)
 -
(440)
(413)
(3,528)
Selling expenses
(117)
 -
(4,924)
 -
 -
(188)
(5,229)
Other operating results, net
(1,644)
 -
(657)
 -
(58)
(235)
(2,594)
Profit / (loss) from operations
610
 -
(168)
 -
(498)
(190)
(246)
Share of loss of associates and joint ventures
(404)
 -
(89)
 -
 -
(70)
(563)
Segment profit / (loss)
206
 -
(257)
 -
(498)
(260)
(809)
 
 
 
 
 
 
 
 
Operating assets
133,810
22,442
115,160
7,337
29,114
66,486
374,349
Operating liabilities
(123,193)
 -
(89,968)
 -
(98,434)
(20,290)
(331,885)
Operating assets (liabilities), net
10,617
22,442
25,192
7,337
(69,320)
46,196
42,464
 
 
 
Six months ended December 31, 2018
 
Operations Center in Israel
 
Real Estate
Supermarkets
Telecommunications
Insurance
Corporate
Others
Total
Revenues
6,153
 -
24,018
 -
 -
749
30,920
Costs
(3,857)
 -
(17,488)
 -
 -
(399)
(21,744)
Gross profit
2,296
 -
6,530
 -
 -
350
9,176
Net gain from fair value adjustment of investment properties
487
 -
 -
 -
 -
 -
487
General and administrative expenses
(281)
 -
(2,114)
 -
(422)
(613)
(3,430)
Selling expenses
(103)
 -
(4,554)
 -
 -
(140)
(4,797)
Other operating results, net
 -
 -
181
 -
413
372
966
Profit / (loss) from operations
2,399
 -
43
 -
(9)
(31)
2,402
Share of (loss) / profit of associates and joint ventures
(470)
252
 -
 -
 -
(404)
(622)
Segment profit / (loss)
1,929
252
43
 -
(9)
(435)
1,780
 
 
 
 
 
 
 
 
Operating assets
271,236
21,126
103,239
24,773
54,408
28,866
503,648
Operating liabilities
(210,798)
 -
(80,053)
 -
(126,264)
(14,945)
(432,060)
Operating assets (liabilities), net
60,438
21,126
23,186
24,773
(71,856)
13,921
71,588
 
 
 
 
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, 2019 and for the year ended June 30, 2019 were as follows:
 
 
December 31, 2019
 
June 30, 2019
Beginning of the period / year
31,499
 
45,933
Adjustment previous periods (IFRS 9 and IAS 28)
(1,787)
 
(135)
Increase in equity interest in associates and joint ventures
2,506
 
614
Issuance of capital and contributions
180
 
116
Capital reduction
(29)
 
(591)
Decrease of interest in associate
 -
 
(6,319)
Associates incorporated by business combination
24,445
 
 -
Share of profit / (loss)
(1,616)
 
(6,151)
Currency translation adjustment
(428)
 
(356)
Dividends (i)
(66)
 
(1,512)
Distribution for associate liquidation
148
 
 -
Reclassification to held-for-sale
(159)
 
 -
Others
(17)
 
(100)
End of the period / year (ii)
54,676
 
31,499
 
 
(i)
Note 25.
(ii)
As of December 31, 2019 and June 30, 2019 includes Ps. (8,912) and Ps. (7,622), reflecting interests in companies with negative equity, which were disclosed in “Provisions” (Note 18).
 
 
 
 
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Name of the entity
 
% ownership interest
 
Value of Group's interest in equity
 
Group's interest in comprehensive income / (loss)
 
December 31, 2019
June 30, 2019
 
December 31, 2019
June 30, 2019
 
December 31, 2019
December 31, 2018
Associates
 
 
 
 
 
 
 
 
 
New Lipstick (1)
 
49.96%
49.96%
 
(8,912)
(7,622)
 
(368)
(455)
BHSA
 
29.91%
29.91%
 
2,927
3,918
 
(993)
(121)
Condor
 
18.89%
18.89%
 
1,331
1,225
 
(13)
79
PBEL
 
45.00%
45.40%
 
 -
1,743
 
 -
(2)
Shufersal
 
26.02%
26.02%
 
22,442
20,260
 
1,952
439
Mehadrin
 
31.40%
45.41%
 
4,174
4,265
 
(58)
(606)
Gav-Yam
 
34.90%
N/A
 
25,457
N/A
 
163
N/A
Quality
 
50.00%
50.00%
 
1,857
1,646
 
185
32
La Rural SA
 
50.00%
50.00%
 
184
89
 
94
26
TGLT
 
30.50%
N/A
 
1,915
N/A
 
 -
N/A
Other joint ventures
 
N/A
N/A
 
3,301
5,975
 
(3,006)
(478)
Total associates and joint ventures
 
 
 
 
54,676
31,499
 
(2,044)
(1,086)
 
 
(1)
On March 4th 2019, Metropolitan a subsidiary of New Lipstick, has renegotiated its non-recourse debt with IRSA, for an amount of USD 11 plus a contingent amount over the option price on part of the parcel of the land where the Lipstick building is built. The debt is due on April 30, 2021.
 
Below is additional information about the Group’s investments in associates and joint ventures:
 
Name of the entity
 
Place of business / Country of incorporation
 
Main activity
 
Common shares 1 vote
 
Latest financial statements issued
 
 
 
 
Share capital (nominal value)
 
Profit / (loss) for the period
 
Shareholders’ equity
Associates
 
 
 
 
 
 
 
 
 
 
 
 
New Lipstick
 
U.S.
 
Real estate
 
N/A
 
N/A
 
 (*) (8)
 
 (*) (217)
BHSA
 
Argentina
 
Financial
 
448,689,072
 
(***) 1,500
 
 (***) 3,321
 
 (***) 9,407
Condor
 
EE.UU.
 
Hotel
 
2,245,100
 
N/A
 
 (*) (2)
 
 (*) 92
PBEL
 
India
 
Real estate
 
450
 
(**) 1
 
(**) 144
 
(**) 3,254
Shufersal
 
Israel
 
Retail
 
79,282,087
 
(**) 242
 
(**)242
 
(**) 1,795
Mehadrin
 
Israel
 
Agropecuaria
 
N/A
 
N/A
 
 -
 
12,276
Gav-Yam
 
Israel
 
Inmobiliaria
 
N/A
 
N/A
 
(**) 149
 
(**) 3,254
Quality
 
Argentina
 
Real estate
 
120,827,022
 
326
 
369
 
3,659
La Rural SA
 
Argentina
 
Organization of events
 
714,498
 
1
 
199
 
289
TGLT (2)
 
Argentina
 
Real estate
 
1,509,889
 
80
 
 -
 
(3,237)
Other joint ventures
 
 
 
 
 
 -
 
N/A
 
N/A
 
N/A
 
 
 
(*)    
Amounts in millions of US Dollars under USGAAP. Condor’s year-end falls on December 31, so the Group estimates their interest with a three-month lag, including material adjustments, if any.
(**) 
 Amounts in millions of NIS.
(***) 
Information as of December 31, 2019 according to BCRA's standards.
(2)    
Additionally, 21,600,000 preferred class A shares and 24,948,798 preferred class B shares were subscribed, subject to conversion. As of the date of issuance of these financial statements, these preferred shares have not yet been converted.
 
 
Puerto Retiro (joint venture):
 
There have been no changes to what was informed in Note 8 to the Annual Financial Statements.
 
 
 
 
 
 
 
19
IRSA Inversiones y Representaciones Sociedad Anónima
 
8.
Investment properties
 
Changes in the Group’s investment properties for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
Six months ended December 31, 2019
 
Year ended June 30, 2019
 
Rental properties
 
Undeveloped parcels of land
 
Properties under development
 
Total
 
Total
Fair value at the beginning of the period / year
258,376
 
25,096
 
10,141
 
293,613
 
318,625
Adjustments previous periods
375
 
-
 
-
 
375
 
-
Additions
578
 
1
 
1,556
 
2,135
 
10,222
Capitalized finance costs
 -
 
 -
 
 -
 
 -
 
205
Capitalized leasing costs
13
 
 -
 
 -
 
13
 
14
Amortization of capitalized leasing costs (i)
(9)
 
 -
 
 -
 
(9)
 
(19)
Transfers
29
 
(44)
 
15
 
 -
 
381
Assets incorporated by business combination
(19,748)
 
(636)
 
(568)
 
(20,952)
 
 -
Deconsolidation
(127,270)
 
(7,213)
 
(4,205)
 
(138,688)
 
 -
Disposals
(9,494)
 
(343)
 
 -
 
(9,837)
 
(3,299)
Currency translation adjustment
37,015
 
1,476
 
1,091
 
39,582
 
(2,684)
Net gain from fair value adjustment
1,373
 
2,070
 
281
 
3,724
 
(29,832)
Fair value at the end of the period / year
141,238
 
20,407
 
8,311
 
169,956
 
293,613
 
(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:
 
 
12.31.2019
 
12.31.2018
Rental and services income
9,838
 
13,316
Direct operating expenses
(3,200)
 
(3,538)
Development expenditures
46
 
(2,835)
Net realized gain from fair value adjustment of investment properties
3
 
 -
Net unrealized gain from fair value adjustment of investment properties
3,721
 
(9,081)
 
                Valuation techniques are described in Note 9 to the Annual Financial Statements. There were no changes to such techniques. The Company has reassessed the assumptions at the end of the period, incorporating the effect of the variation in the exchange rate in other assets denominated in US Dollars.
 
 
9.
Property, plant and equipment
 
               Changes in the Group’s property, plant and equipment for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
Six month ended December 31, 2019
 
Year ended June 30, 2019
 
Buildings and facilities
 
Machinery and equipment
 
Communication networks
 
Others
 
Total
 
Total
Costs
9,360
 
2,127
 
83,343
 
7,800
 
102,630
 
97,017
Accumulated depreciation
(5,837)
 
(1,454)
 
(61,367)
 
(5,885)
 
(74,543)
 
(69,206)
Net book amount at the beginning of the period / year
3,523
 
673
 
21,976
 
1,915
 
28,087
 
27,811
Additions
152
 
46
 
2,012
 
512
 
2,722
 
6,290
Disposals
(18)
 
(1)
 
(2,798)
 
 -
 
(2,817)
 
(53)
Deconsolidation
(372)
 
(523)
 
 -
 
(39)
 
(934)
 
 -
Assets incorporated by business combinations
(241)
 
 -
 
 -
 
 -
 
(241)
 
 -
Currency translation adjustment
241
 
131
 
2,960
 
(501)
 
2,831
 
(634)
Transfers
 -
 
(19)
 
 -
 
 -
 
(19)
 
10
Depreciation charges (i)
(183)
 
(42)
 
(2,188)
 
(542)
 
(2,955)
 
(5,337)
Balances at the end of the period / year
3,102
 
265
 
21,962
 
1,345
 
26,674
 
28,087
Costs
6,782
 
1,706
 
89,422
 
3,723
 
101,633
 
102,630
Accumulated depreciation
(3,680)
 
(1,441)
 
(67,460)
 
(2,378)
 
(74,959)
 
(74,543)
Net book amount at the end of the period / year
3,102
 
265
 
21,962
 
1,345
 
26,674
 
28,087
 
(i)
As of December 31, 2019, depreciation charges of property, plant and equipment were recognized as follows: Ps. 2,520 in "Costs", Ps. 363 in "General and administrative expenses" and Ps. 73 in "Selling expenses", respectively in the Statement of Income (Note 21).
 
20
IRSA Inversiones y Representaciones Sociedad Anónima
 
10.
Trading properties
 
Changes in the Group’s trading properties for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
 
 
Six-month ended December 31, 2019
 
Year ended June 30, 2019
 
Completed properties
 
Properties under development
 
Undeveloped sites
 
Total
 
Total
Beginning of the period / year
2,364
 
2,106
 
2,890
 
7,360
 
19,428
Adjustment previous periods (IFRS 15)
 -
 
 -
 
 -
 
 -
 
(7,329)
Additions
24
 
915
 
28
 
967
 
3,226
Deconsolidation
 -
 
(136)
 
 -
 
(136)
 
 -
Currency translation adjustment
140
 
96
 
229
 
465
 
(1,190)
Transfers
554
 
(526)
 
(30)
 
(2)
 
47
Impairment
 -
 
 -
 
 -
 
 -
 
(40)
Capitalized finance costs
 -
 
64
 
 -
 
64
 
15
Disposals
(301)
 
(2,127)
 
(31)
 
(2,459)
 
(6,797)
End of the period / year
2,781
 
392
 
3,086
 
6,259
 
7,360
Non-current
 
 
 
 
 
 
4,336
 
6,899
Current
 
 
 
 
 
 
1,923
 
461
Total
 
 
 
 
 
 
6,259
 
7,360
 
 
 
11.
Intangible assets
 
Changes in the Group’s intangible assets for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
 
Six-month ended December 31, 2019
Year ended June 30, 2019
 
Goodwill
Trademarks
Licenses
Customer relations
Information systems and software
Contracts and others
Total
Total
Costs
5,775
6,218
8,334
17,852
5,680
7,581
51,440
46,369
Accumulated amortization
 -
(481)
(6,307)
(15,078)
(2,323)
(4,712)
(28,901)
(22,099)
Net book amount at the beginning of the period / year
5,775
5,737
2,027
2,774
3,357
2,869
22,539
24,270
Additions
 -
 -
 -
 -
674
1,538
2,212
3,276
Disposals
 -
 -
 -
 -
(84)
 -
(84)
(54)
Deconsolidation
(2,973)
 -
 -
 -
(19)
 -
(2,992)
 -
Impairment
 -
 -
 -
 -
 -
 -
 -
(162)
Currency translation adjustment
2,007
584
194
228
337
284
3,634
(707)
Amortization charges (i)
 -
(44)
(117)
(528)
(614)
(544)
(1,847)
(4,084)
Balances at the end of the period / year
4,809
6,277
2,104
2,474
3,651
4,147
23,462
22,539
Costs
4,809
6,857
9,193
19,699
6,403
9,897
56,858
51,440
Accumulated amortization
 -
(580)
(7,089)
(17,225)
(2,752)
(5,750)
(33,396)
(28,901)
Net book amount at the end of the period / year
4,809
6,277
2,104
2,474
3,651
4,147
23,462
22,539
 
 
(i)
As of December 31, 2019, amortization charges were recognized in the amount of Ps. 118 in "Costs", Ps. 558 in "General and administrative expenses" and
  Ps. 1,244 in "Selling expenses", in the Statement of Income (Note 21).
 
 
 
 
 
21
IRSA Inversiones y Representaciones Sociedad Anónima
 
12.
Right-of-use assets
 
The Group’s right-of-use assets as of December 31, 2019 and June 30, 2019 are the following:
 
 
 
December 31, 2019
 
June 30, 2019
Real Estate
2,939
 
 -
Telecommunications
9,027
 
 -
Machinery and equipment
15
 
 -
Others
1,200
 
 -
Total Rights of use
13,181
 
 -
Not Current
13,181
 
 -
Total
13,181
 
 -
 
 
 
The depreciation charge of the right-of use-assets is detailed below:
 
 
 
December 31, 2019
 
December 31, 2018
Real Estate
472
 
 -
Telecommunications
1.450
 
 -
Others
121
 
 -
Total depreciation of Rights of use
2.043
 
 -
 
 
 
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 see Note 13 to the Annual Financial Statements. Financial assets and financial liabilities as of December 31, 2019 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, 2019
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
37,640
 
 -
 -
 -
 
37,640
 
10,291
 
47,931
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
  - Public companies’ securities
 -
 
891
195
 -
 
1,086
 
 -
 
1,086
  - Private companies’ securities
 -
 
 -
 -
2,468
 
2,468
 
 -
 
2,468
  - Deposits
513
 
50
 -
 -
 
563
 
 -
 
563
  - Bonds
 -
 
18,517
1,888
 -
 
20,405
 
 -
 
20,405
  - Others
 -
 
10,366
644
493
 
11,503
 
 -
 
11,503
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
 -
42
 -
 
42
 
 -
 
42
  - Others
 -
 
 -
17
82
 
99
 
 -
 
99
Restricted assets (i)
6,294
 
 -
 -
 -
 
6,294
 
 -
 
6,294
Financial assets held for sale:
 
 
 
 
 
 
 
 
 
 
 
  - Clal
 -
 
7,337
 -
 -
 
7,337
 
 -
 
7,337
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
  - Cash at bank and on hand
15,977
 
 -
 -
 -
 
15,977
 
 -
 
15,977
  - Short-term investments
46,955
 
1,821
 -
 -
 
48,776
 
 -
 
48,776
Total assets
107,379
 
38,982
2,786
3,043
 
152,190
 
10,291
 
162,481
 
 
 
 
 
 
 
22
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
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, 2019
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
15,671
 
 -
 -
 -
 
15,671
 
6,047
 
21,718
Borrowings (excluding finance leases)
312,472
 
 -
 -
 -
 
312,472
 
 -
 
312,472
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
  - Foreign-currency future contracts
 -
 
78
650
 -
 
728
 
 -
 
728
  - Others
 -
 
 -
 -
67
 
67
 
 -
 
67
  - Forwards
 -
 
 -
33
 -
 
33
 
 -
 
33
Total liabilities
328,143
 
78
683
67
 
328,971
 
6,047
 
335,018
 
 
Financial assets and financial liabilities as of June 30, 2019 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, 2019
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statements of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables)
36,473
 
 -
 -
 -
 
36,473
 
9,791
 
46,264
Investments in financial assets:
 -
 
 -
 -
 -
 
 -
 
 -
 
 -
  - Public companies’ securities
 -
 
1,204
174
35
 
1,413
 
 -
 
1,413
  - Private companies’ securities
 -
 
 -
 -
2,297
 
2,297
 
 -
 
2,297
  - Deposits
4,610
 
45
 -
 -
 
4,655
 
 -
 
4,655
  - Bonds
 -
 
21,047
1,336
1,256
 
23,639
 
 -
 
23,639
  - Investments in financial assets with quotation
 -
 
11,619
549
 -
 
12,168
 
 -
 
12,168
Derivative financial instruments
 -
 
 -
 -
 -
 
 -
 
 -
 
 -
  - Foreign-currency future contracts
 -
 
 -
36
 -
 
36
 
 -
 
36
  - Others
 -
 
 -
16
120
 
136
 
 -
 
136
Restricted assets (i)
9,386
 
 -
 -
 -
 
9,386
 
 -
 
9,386
Financial assets held for sale:
 -
 
 -
 -
 -
 
 -
 
 -
 
 -
  - Clal
 -
 
19,929
 -
 -
 
19,929
 
 -
 
19,929
Cash and cash equivalents:
 -
 
 -
 -
 -
 
 -
 
 -
 
 -
  - Cash at bank and on hand
8,462
 
 -
 -
 -
 
8,462
 
 -
 
8,462
  - Short term investments
65,913
 
1,723
 -
 -
 
67,636
 
 -
 
67,636
Total assets
124,844
 
55,567
2,111
3,708
 
186,230
 
9,791
 
196,021
 
 
 
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, 2019
 
 
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other payables
18,581
 
 -
 -
 -
 
18,581
 
6,978
 
25,559
Borrowings (excluding finance leases)
393,203
 
 -
 -
 -
 
393,203
 
 -
 
393,203
Derivative financial instruments:
 -
 
 
 
 
 
 
 
 
 
 
  - Swaps
 -
 
 -
169
 -
 
169
 
 -
 
169
  - Others
 -
 
 -
1,095
60
 
1,155
 
 -
 
1,155
Total liabilities
411,784
 
 -
1,264
60
 
413,108
 
6,978
 
420,086
 
 
(i) Corresponds to security deposits and escrows.
 
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).
 
 
 
 
23
IRSA Inversiones y Representaciones Sociedad Anónima
 
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, 2019.
 
As of December 31, 2019, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Group.
 
The Group uses a range of valuation models for the measurement of Level 2 and Level 3 instruments. Details of such models are presented in the following table. When no quoted prices are available in an active market, fair values (particularly with derivatives) are based on recognized valuation methods.
 
 
 
 
 
 
 
 
 
 
 
Description
 
Pricing model / method
 
Parameters
 
Fair value hierarchy
 
Range
 
Foreign currency put
 
 
Theoretical price
 
Underlying price (Market price) and currency volatility (historical)
 
 
Level 2
 
 
-
Promissory note
 
Discounted cash flows - Theoretical price
 
Underlying asset price (Market price); share price volatility (historical) and market interest rate (Libor rate curve).
 
Level 3
 
Underlying asset price 10.5 to 11.5
Share price volatility 58% to 78%
Market interest-rate
1.5% to 3%
Investments in financial assets - Other private companies’ securities
 
Cash flow / NAV - Theoretical price
 
Projected revenue discounted at the discount rate /
The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investments assessments.
 
Level 3
 
1 - 3.5
Investments in financial assets - Others
 
Discounted cash flow - Theoretical price
 
Projected revenue discounted at the discount rate /
The value is calculated in accordance with shares in the equity funds on the basis of their Financial Statements, based on fair value or investment assessments.
 
Level 3
 
1 - 3.5
Derivative financial instruments – Forwards
 
Theoretical price
 
Underlying asset price and volatility
 
Level 2 and 3
 
-
 
The following table presents the changes in Level 3 instruments as of December 31, 2019 and June 30, 2019:
 
 
 
Derivative financial instruments - Forwards
 
Investments in financial assets - Private companies' securities
 
investments in financial assets - Others
 
Derivative financial instruments
 
Total as of December 31, 2019
 
Total as of June 30, 2019
Balances at beginning of the period / year
(60)
 
2,297
 
1,291
 
120
 
3,648
 
4,058
Additions and acquisitions
 -
 
15
 
 -
 
 -
 
15
 
151
Transfer to level 1
 -
 
 -
 
 -
 
(3)
 
(3)
 
52
Currency translation adjustment
(7)
 
200
 
61
 
(20)
 
234
 
(67)
Write off
 -
 
 -
 
(851)
 
 -
 
(851)
 
 -
Gain / (loss) for the period / year (i)
 -
 
(44)
 
(8)
 
(15)
 
(67)
 
(546)
Balances at the end of the period / year
(67)
 
2,468
 
493
 
82
 
2,976
 
3,648
 
 
(i)
Included within “Financial results, net” in the Statements of Income.
 
 
 
 
 
 
 
 
 
24
IRSA Inversiones y Representaciones Sociedad Anónima
 
       
14.
Trade and other receivables
 
Group’s trade and other receivables as of December 31, 2019 and June 30, 2019 are as follows:
 
 
December 31, 2019
 
June 30, 2019
Sale, leases and services receivables
31,292
 
31,215
Less: Allowance for doubtful accounts
(2,757)
 
(2,335)
Total trade receivables
28,535
 
28,880
Prepaid expenses
7,236
 
7,027
Borrowings, deposits and other debit balances
4,919
 
3,626
Advances to suppliers
1,350
 
1,140
Tax receivables
433
 
561
Others
2,701
 
2,695
Total other receivables
16,639
 
15,049
Total trade and other receivables
45,174
 
43,929
Non-current
16,954
 
15,564
Current
28,220
 
28,365
Total
45,174
 
43,929
 
 
Movements on the Group’s allowance for doubtful accounts were as follows:
 
 
December 31, 2019
 
June 30, 2019
Beginning of the period / year
2,335
 
1,577
Adjustments previous periods (IFRS 9)
 -
 
171
Additions
372
 
687
Recoveries
(80)
 
(54)
Currency translation adjustment
549
 
559
Deconsolidation
(17)
 
 -
Receivables written off during the period/year as uncollectable
(295)
 
(409)
Transfer of assets available for sale
(17)
 
 
Inflation adjustment
(90)
 
(196)
End of the period / year
2,757
 
2,335
 
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statement of Income (Note 21).
 
15.
Cash flow information
 
Following is a detailed description of cash flows generated by the Group’s operations for the six month periods ended December 31, 2019 and 2018:
 
 
Note
Six months ended 12.31.2019
 
Six months ended 12.31.2018
Profit / (loss) for the period
 
4,857
 
(8,363)
Profit for the period from discontinued operations
 
(16,639)
 
(3,042)
Adjustments for:
 
 
 
 
Income tax
18
2,365
 
(3,312)
Amortization and depreciation
20
6,912
 
4,627
Net gain / (loss) from fair value adjustment of investment properties
 
(3,724)
 
9,081
Share-based compensation
 
58
 
29
Impairment of other assets
 
1,513
 
236
Depreciation of associates and joint ventures
 
-
 
200
Net gain from disposal of intangible assets
 
 -
 
(12)
Gain from disposal of subsidiary and associates
 
 -
 
(1,069)
Financial results, net
 
15,742
 
9,333
Provisions and allowances
 
263
 
676
Share of profit of associates and joint ventures
7
1,671
 
1,212
Changes in operating assets and liabilities:
 
 
 
 
(Increase) / decrease in inventories
 
(348)
 
58
Decrease / (increase) in trading properties
 
1,345
 
(352)
Increase in restricted assets
 
 -
 
(180)
Decrease in trade and other receivables
 
3,368
 
944
Decrease in trade and other payables
 
(2,781)
 
(1,721)
Increase / (decrease) in salaries and social security liabilities
 
873
 
(260)
Decrease in provisions
 
(454)
 
(112)
Net cash generated by continuing operating activities before income tax paid
 
15,021
 
7,973
Net cash generated by discontinued operating activities before income tax paid
 
2,105
 
2,931
Net cash generated by operating activities before income tax paid
 
17,126
 
10,904
 
 
 
 
25
IRSA Inversiones y Representaciones Sociedad Anónima
 
The following table presents a detail of significant non-cash transactions occurred in the six-month periods ended December 31, 2019 and 2018:
 
 
 
Six months ended 12.31.2019
 
Six months ended 12.31.2018
Increase in investment properties through an increase in trade and other payables
 
40
 
 -
Increase in investment properties through a decrease in trade and other receivable
 
 -
 
267
Increase in investment properties through a decrease in financial assets
 
245
 
 -
Increase of properties for sale through an increase in borrowings
 
64
 
43
Increase of properties for sale through a decrease of investment properties
 
 -
 
852
Increase in property, plant and equipment through an increase in trade and other payables
 
447
 
465
Increase in intangible assets through an increase in trade and other payables
 
511
 
 -
Increase in intangible assets through an increase in trade and other payables
 
 -
 
270
Distribution of dividends at non-controlling interest pending payment
 
1,012
 
 -
Increase in investments in financial assets through a decrease in investments in associates and joint ventures
19
 
 -
Increase in investments in associates and joint ventures through a decrease in investments in financial assets
723
 
 -
Increase in investments in associates and joint ventures through a decrease in borrowings
 
 -
 
8
Reduction of investment properties through the acquisition of investments in associates
 
1,192
 
 -
Decrease in borrowings through a decrease in financial assets
 
2,161
 
 -
Increase of rights of use through a decrease of property, plant and equipment
 
19
 
 -
Distribution of dividends in shares
 
519
 
 -
Increase in investment properties through an increase in trade and other payables
 
446
 
 -
Increase in investment properties through an increase in borrowings
 
 -
 
41
Decrease in trade and other receivable through an increase in investments in associates and joint ventures
 
 -
 
9
Increase in investments in associates and joint ventures from an increase in trade and other payables
 
61
 
 -
 
16.
Trade and other payables
 
Group’s trade and other payables as of December 31, 2019 and June 30, 2019 were as follows:
 
 
 
December 31, 2019
 
June 30, 2019
Trade payables
12,031
 
15,288
Sales, rental and services payments received in advance
2,749
 
3,972
Construction obligations
629
 
1,171
Accrued invoices
511
 
593
Deferred income
83
 
120
Total trade payables
16,003
 
21,144
Dividends payable to non-controlling shareholders
199
 
180
Tax payables
442
 
369
Construction obligations
1,015
 
1,277
Other payables
4,059
 
2,589
Total other payables
5,715
 
4,415
Total trade and other payables
21,718
 
25,559
Non-current
1,780
 
2,206
Current
19,938
 
23,353
Total
21,718
 
25,559
 
 
 
 
 
 
 
26
IRSA Inversiones y Representaciones Sociedad Anónima
 
17.
Borrowings
 
The breakdown of the Group’s borrowings as of December 31, 2019 and June 30, 2019 was as follows:
 
 
Total as of December 31, 2019 (ii)
 
Total as of June 30, 2019 (ii)
 
Fair value as of December 31, 2019
 
Fair value as of June 30, 2019
NCN
265,301
 
335,978
 
225,958
 
331,499
Bank loans
44,411
 
51,343
 
40,369
 
49,077
Bank overdrafts
1,554
 
354
 
1,554
 
354
Other borrowings (i)
1,206
 
5,547
 
1,206
 
7,803
Total borrowings
312,472
 
393,222
 
269,087
 
388,733
Non-current
253,502
 
335,969
 
 
 
 
Current
58,970
 
57,253
 
 
 
 
 
312,472
 
393,222
 
 
 
 
 
 
(i) Includes finance leases in the amount of Ps. 19 as of June 30, 2019.
(ii) Includes Ps. 286,104 and Ps. 389,956 as of December 31, 2019 and June 30, 2019, respectively, corresponding to the Operations Center in Israel.
 
The following table describes the Group’s issuance of debt during the present period:
 
Entity
Class
Issuance / expansion date
Amount in original currency
Maturity date
Nominal rate of
Principal payment
Interest payment
 
interest
IRSA
Class I tranche 2
Aug-19
USD 85
11/15/2020
10.00% e.a.
At expiration
quarterly
(1)
IRSA
Class II
Aug-19
CLP 31 (2)
08/06/2020
10.50% e.a.
At expiration
quarterly
 
IDBD
Serie 15
Nov-19
NIS 237
06/30/2022
4.70% e.a.
2 payments
quarterly
 
 
(1)
Corresponds to an expansion of the series.
(2)
Equivalent to USD 45 as of the issuance date.
 
18.
Provisions
 
The table below shows the movements in the Group's provisions categorized by type:
 
 
 
Six-month ended December 31, 2019
 
Year ended June 30, 2019
 
Legal claims (i)
 
Investments in associates and joint ventures (ii)
 
Site dismantling and remediation
 
Other provisions
 
Total
 
Total
Beginning of period / year
2,102
 
7,622
 
302
 
2,224
 
12,250
 
9,007
Additions
88
 
372
 
29
 
 -
 
489
 
4,099
Recovery
(20)
 
 -
 
 -
 
 -
 
(20)
 
(96)
Used during the period / year
(183)
 
 -
 
 -
 
(144)
 
(327)
 
(312)
Inflation adjustment
(36)
 
 -
 
 -
 
 -
 
(36)
 
(67)
Currency translation adjustment
177
 
918
 
34
 
41
 
1,170
 
(381)
End of period / year
2,128
 
8,912
 
365
 
2,121
 
13,526
 
12,250
Non-current
 
 
 
 
 
 
 
 
11,451
 
10,082
Current
 
 
 
 
 
 
 
 
2,075
 
2,168
Total
 
 
 
 
 
 
 
 
13,526
 
12,250
 
 
(i)
Additions and recoveries are included in "Other operating results, net".
(ii)
Corresponds to investments in New Lipstick and Puerto Retiro, companies that have negative net worth. The increases and recoveries are included in "Share of profit of associates and joint ventures ".

There were no significant changes to the processes mentioned in Note 18 to the Annual Financial Statements.
 
 
 
 
 
 
27
IRSA Inversiones y Representaciones Sociedad Anónima
 
19.
Taxes
 
The details of the Group’s income tax, is as follows:
 
 
December 31, 2019
 
Decemberr 31, 2018
Current income tax
21
 
(555)
Deferred income tax
(2,253)
 
3,867
Minimum presumed income tax
(133)
 
-
Income tax from continuing operations
(2,365)
 
3,312
 
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 periods ended December 31, 2019 and 2018:
 
 
Six months ended December 31, 2019
 
Six months ended December 31, 2018
Profit from continuing operations at tax rate applicable in the respective countries (*)
2,492
 
4,430
Permanent differences:
 
 
 
Share of profit of associates and joint ventures
(529)
 
(218)
Unrecognized tax loss carryforwards (i)
(1,680)
 
(1,285)
Changes in fair value of financial instruments
(626)
 
 -
Result of exposure to permanent inflation
1,110
 
(103)
Tax rate differential
871
 
699
Non-taxable profit / (loss), non-deductible expenses and others
(1,604)
 
(190)
Fiscal transparency
88
 
(21)
Adjustment for tax inflation
(2,487)
 
 -
Income tax from continuing operations
(2,365)
 
3,312
 
 
(i)
 Corresponds principally to Operations Center in Argentina.
 
 
The gross movement in the deferred income tax account is as follows:
 
 
December 31, 2019
 
June 30, 2019
Beginning of period / year
(45,795)
 
(51,256)
Use of tax losses
(47)
 
 -
Currency translation adjustment
(1,692)
 
1,646
Desconsolidation
16,447
 
 -
Deferred income tax charge
(2,253)
 
3,815
End of period / year
(33,340)
 
(45,795)
Deferred income tax assets
397
 
502
Deferred income tax liabilities
(33,737)
 
(46,297)
Deferred income tax liabilities, net
(33,340)
 
(45,795)
 
 
Tax law modifications in the operation center Argentina
 
 Law No. 27,541 of social solidarity and productive recovery, published on December 23, 2019 introduced certain amendments to different taxes and the creation of the Tax for an Inclusive and Selfless Argentina (PAIS).
 
The main modifications affecting the Group in relation to income tax are the following:
 
1)
 In the first and second fiscal year beginning after January 1, 2018 (namely, for the Group’s fiscal years beginning on July 1, 2019 and 2020), the gain or loss resulting from tax inflation adjustment will be charged by one sixth in the determination exercise and the remaining five sixths in the following fiscal years;
 
2)
The tax rate applicable to companies for the third fiscal year beginning after January 1, 2018 was increased from 25% to 30% (namely, for the Group’s fiscal years beginning on July 1, 2019)
 
 
 
 
 
 
28
IRSA Inversiones y Representaciones Sociedad Anónima
    
20.
Revenues
 
 
Six months ended December 31, 2019
 
Six months ended December 31, 2018
Income from communication services
20,831
 
18,330
Rental and services income
9,838
 
10,277
Sale of communication equipment
6,763
 
5,688
Sale of trading properties and developments
3,190
 
3,541
Revenue from hotels operation and tourism services
1,370
 
1,557
Other revenues
794
 
326
Total Group’s revenues
42,786
 
39,719
 
 
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, 2019
 
Total as of December 31, 2018
Cost of sale of goods and services
7,479
 
 -
 
 -
 
7,479
 
7,021
Salaries, social security costs and other personnel expenses
2,719
 
1,756
 
2,294
 
6,769
 
6,638
Depreciation and amortization
4,403
 
1,136
 
1,373
 
6,912
 
4,627
Fees and payments for services
1,103
 
816
 
25
 
1,944
 
3,547
Maintenance, security, cleaning, repairs and others
1,964
 
243
 
180
 
2,387
 
2,395
Advertising and other selling expenses
294
 
6
 
1,060
 
1,360
 
1,327
Taxes, rates and contributions
301
 
42
 
324
 
667
 
623
Interconnection and roaming expenses
2,900
 
 -
 
 -
 
2,900
 
2,572
Fees to other operators
4,274
 
 -
 
 -
 
4,274
 
3,578
Director´s fees
 -
 
316
 
 -
 
316
 
416
Leases and service charges
52
 
9
 
9
 
70
 
226
Allowance for doubtful accounts, net
 -
 
 -
 
354
 
354
 
379
Other expenses
955
 
316
 
167
 
1,438
 
1,444
Total as of December 31, 2019
26,444
 
4,640
 
5,786
 
36,870
 
 
Total as of December 31, 2018
24,781
 
4,716
 
5,296
 
 
 
34,793
 
 
22.
Cost of goods sold and services provided
 
 
Total as of December 31, 2019
 
Total as of December 31, 2018
Inventories at the beginning of the period (*)
8,803
 
20,661
Adjustments previous periods
 -
 
(7,377)
Purchases and expenses (**)
23,627
 
34,158
Capitalized finance costs
64
 
43
Currency translation adjustment
3,890
 
(1,283)
Transfers
 -
 
852
Disposals
(2,459)
 
(212)
Deconsolidation
(136)
 
 -
Inventories at the end of the period (*)
(7,562)
 
(12,455)
Total costs
26,227
 
34,387
 
 
The following table presents the composition of the Group’s inventories as of December 31, 2019 and June 30, 2019:
 
Total as of December 31, 2019
 
Total as of December 31, 2018
Real estate
6,259
 
7,421
Telecommunications
1,303
 
1,382
Total inventories at the end of the period (*)
7,562
 
8,803
 
 
(*) Inventories include trading properties and inventories.
(**) As of December 31, 2018 includes the cost of goods sold from Gav-Yam which was reclassified to discontinued operations.
 
 
 
29
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
23.
Other operating results, net
 
 
Six months ended December 31, 2019
 
Six months ended December 31, 2018
Gain from disposal of subsidiary and associates (1)
(6)
 
1,069
Donations
(95)
 
(64)
Lawsuits and other contingencies
(57)
 
(35)
Depreciation of associates and joint ventures
(1,621)
 
(198)
Impairment of associates and joint ventures (2)
386
 
358
Others
(1,164)
 
(239)
Total other operating results, net
(2,557)
 
891
 
(1)
As of December 31, includes the result from the sale of the Group´s equity interest in Cyber Secdo.
(2)
As of December 31, 2019, includes Ps. 970 of the Cellcom voluntary retirement plan
 
 
24.
Financial results, net
 
 
 
Six months ended December 31, 2019
 
Six months ended December 31, 2018
Finance income:
 
 
 
 - Interest income
443
 
436
 - Dividend income
75
 
66
 - Other finance income
18
 
226
Total finance income
536
 
728
Finance costs:
 
 
 
 - Interest expenses
(9,997)
 
(9,907)
 - Loss on debt swap
(4)
 
 -
 - Other finance costs
(551)
 
(329)
Subtotal finance costs
(10,552)
 
(10,236)
Capitalized finance costs
65
 
84
Total finance costs
(10,487)
 
(10,152)
Other financial results:
 
 
 
 - Fair value gain of financial assets and liabilities at fair value through profit or loss, net
(2,978)
 
1,333
 - Exchange differences, net
(4,427)
 
(2,096)
 - Result for repurchase of negotiable obligations
2,506
 
 -
 - Gain from derivative financial instruments, net
(185)
 
525
Total other financial results
(5,084)
 
(238)
 - Inflation adjustment
206
 
(579)
Total financial results, net
(14,829)
 
(10,241)
 
25.
Related party transactions
 
The following is a summary of the balances with related parties as of December 31, 2019 and June 30, 2019:
 
 
Item
 
 December 31, 2019
 
 June 30, 2019
Trade and other receivables
 
2,019
 
1,433
Investments in financial assets
 
1,212
 
1,428
Borrowings
 
(73)
 
 -
Trade and other payables
 
(273)
 
(406)
Total
 
2,885
 
2,455
 
 
 
 
 
 
30
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
 Related party
 
 December 31, 2019
 
 June 30, 2019
 
 Description of transaction
 
 Item
Manibil S.A.
 
 -
 
 -
 
 Contributions in advance
 
 Trade and other receivable
New Lipstick LLC
 
1,253
 
1,107
 
 Loans granted
 
 Trade and other receivable
 
 
(64)
 
 -
 
 Loans obtained
 
 Borrowings
 
 
14
 
13
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
Condor
 
241
 
209
 
 Public companies securities
 
 Trade and other receivable
Other associates and joint ventures
 
 -
 
1
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
 
 
 -
 
(15)
 
 Leases and/or rights of use payable
 
 Trade and other payables
 
 
(9)
 
 -
 
 Loans obtained
 
 Borrowings
 
 
5
 
 -
 
 Management fees
 
 Trade and other receivable
 
 
11
 
15
 
  Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
204
 
 -
 
 Dividends
 
 Trade and other receivable
 
 
(2)
 
14
 
 Reimbursement of expenses payable
 
 Trade and other payable
Total associates and joint ventures
 
1,653
 
1,344
 
 
 
 
Cresud
 
(18)
 
(47)
 
 Reimbursement of expenses receivable
 
 Trade and other payables
 
 
(106)
 
(143)
 
 Corporate services receivable
 
 Trade and other payables
 
 
1,212
 
1,428
 
 NCN
 
 Investment in financial assets
 
 
4
 
6
 
 Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
(1)
 
(1)
 
 Management fee
 
 Trade and other payables
 
 
(3)
 
(4)
 
 Share based payments
 
 Trade and other payables
Total parent company
 
1,088
 
1,239
 
 
 
 
Directors
 
(135)
 
(210)
 
 Fees for services received
 
 Trade and other payables
Others (1)
 
96
 
34
 
  Leases and/or rights of use receivable
 
 Trade and other receivable
 
 
82
 
 -
 
 Loans granted
 
 Trade and other receivable
 
 
(8)
 
 -
 
 Reimbursement of expenses payable
 
 Trade and other payables
 
 
109
 
48
 
 Reimbursement of expenses receivable
 
 Trade and other receivable
Total directors and others
 
144
 
(128)
 
 
 
 
Total at the end of the period/year
 
2,885
 
2,455
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
31
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, 2019 and 2018:
 
Related party
 
 Six months ended December 31, 2019
 
 Six months ended December 31, 2018
Description of transaction
 BACS
 
26
 
25
 Leases and/or rights of use
 Manibil
 
 -
 
40
 Corporate services
 Tarshop
 
 -
 
20
 Leases and/or rights of use
 
 
 -
 
2
 Commissions
 La Rural S.A.
 
 -
 
32
 Leases and/or rights of use
 Condor
 
 -
 
(20)
 Financial operations
 Other associates anf joint ventures
 
(4)
 
11
 Financial operations
 Otras asociadas y negocios conjuntos
13
 
14
 Leases and/or rights of use
Otras asociadas y negocios conjuntos
 
13
 
(2)
 Corporate services
Total associates and joint ventures
 
48
 
122
 
Cresud
 
8
 
15
 Leases and/or rights of use
Cresud
 
(248)
 
(243)
 Corporate services
Cresud
 
46
 
40
 Financial operations
Total parent company
 
(194)
 
(188)
 
 Directors
 
(258)
 
(393)
 Fees and remunerations
 Otras (1)
 
 -
 
2
 Leases and/or rights of use
 Otras (1)
 
(117)
 
17
 Financial operations
 Otras (1)
 
(13)
 
(14)
 Donation
 
 
 -
 
5
 Corporate services
 
 
(17)
 
(11)
 Fees and remuneration
Total others
 
(405)
 
(394)
 
Total at the end of the period
 
(551)
 
(460)
 
 
 
(1)
Includes Isaac Elsztain e Hijos, CAMSA. Hamonet S.A., Ramat Hanassi, Estudio Zang, Bergel y Viñes, Austral Gold, La Rural, New Lipstick, Condor and Fundación IRSA.
 
The following is a summary of the transactions with related parties for the six-month periods ended December 31, 2019 and 2018:
 
Related party
 
 Six months ended December 31, 2019
 
 Six months ended December 31, 2018
 
Description of the operation
Condor
 
26
 
58
 
Dividends received
Mehadrin
 
 -
 
83
 
Dividends received
Manaman
 
 -
 
35
 
Dividends received
Nuevo Puerto Santa Fe S.A.
 
25
 
14
 
Dividends received
Nave by the sea
 
 -
 
43
 
Dividends received
Emco
 
15
 
12
 
Dividends received
Total dividends received
 
66
 
245
 
 
Cresud
 
331
 
1,448
 
Dividends granted
Helmir
 
8
 
9
 
Dividends granted
Total dividends distribution
 
339 
 
1,457
 
 
Quality
 
26
 
29
 
Capital contributions
Manibil
 
77
 
 -
 
Capital contributions
Others
 
77
 
 -
 
Capital contributions
Total capital contributions
 
180
 
29
 
 
TGLT S.A.
 
3,107
 
 -
 
Purchase and exchange of shares
Total other transactions
 
3,107
 
 -
 
 
 
 
 
 
 
 
 
32
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 - Equity investments
Note 7 Equity interest 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 12.31.19
Total as of 06.30.19
Assets
 
 
 
 
Trade and other receivables
 
 
 
 
US Dollar
35
59.690
2,107
2,155
Euros
1
66.853
37
174
Receivables with related parties:
 
 
 
 
US Dollar
4
59.890
227
210
Total trade and other receivables
 
 
2,371
2,539
Investments in financial assets
 
 
 
 
US Dollar
13
59.690
780
4,235
Pounds
 -
78.266
 -
60
Investments with related parties:
 
 
 
 
US Dollar
20
59.890
1,212
1,428
Total investments in financial assets
 
 
1,992
5,723
Derivative financial instruments
 
 
 
 
US Dollar
 -
59.690
 -
15
Total Derivative financial instruments
 
 
 -
15
Cash and cash equivalents
 
 
 
 
US Dollar
71
59.690
4,219
14,591
Euros
0
66.853
1
91
Total cash and cash equivalents
 
 
4,220
14,682
Total Assets
 
 
8,583
22,959
 
 
 
 
 
Liabilities
 
 
 
 
Trade and other payables
 
 
 
 
US Dollar
9
59.890
528
9,240
Euros
0
67.227
3
45
Payables to related parties:
 
 
 
 
US Dollar
 -
59.890
 -
18
Total Trade and other payables
 
 
531
9,303
Borrowings
 
 
 
 
US Dollar
539
59.890
32,270
45,495
Borrowings with related parties
 
 
 
 
US Dollar
1
59.890
64
761
Total Borrowings
 
 
32,334
46,256
Derivative financial instruments
 
 
 
 
US Dollar
1
59.890
53
34
Total derivative financial instruments
 
 
53
34
Lease liabilities
 
 
 
 
US Dollar
0
59.890
14
 -
Total lease liabilities
 
 
14
 -
Total Liabilities
 
 
32,932
55,593
 
(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, 2019 according to Banco de la Nación Argentina.
 
33
IRSA Inversiones y Representaciones Sociedad Anónima
 
28.
Groups of assets and liabilities held for sale
 
As mentioned in Note 4.C. to the Annual Financial Statements, the Group has certain assets and liabilities classified as held for sale. The following table shows the main ones:
 
 
 
December 31, 2019
 
June 30, 2019
Property, plant and equipment
10,370
 
5,571
Intangible assets
629
 
120
Investments in associates
149
 
526
Deferred income tax assets
348
 
255
Investment properties
20,056
 
106
Income tax credits
66
 
 -
Trade and other receivables
3,362
 
2,643
Cash and cash equivalents
1,508
 
901
Total assets held-for-sale
36,488
 
10,122
Trade and other payables
10,020
 
4,265
Employee benefits
331
 
254
Deferred income tax liability
1,640
 
45
Borrowings
7,735
 
2,599
Total liabilities held-for-sale
19,726
 
7,163
Total net assets held-for-sale
16,762
 
2,959
 
 
29.
Results from discontinued operations
 
The results from operations of Gav-Yam for the period ended December 31, 2019 and the results from Israir and IDB Tourism for both periods; have been reclassified in the Statements of Income under discontinued operations.
 
 
Six months ended December 31, 2019
 
Six months ended December 31, 2018
Revenues
11,817
 
13,848
Costs
(8,714)
 
(9,606)
Gross profit
3,103
 
4,242
Net gain from fair value adjustment of investment properties
 -
 
711
General and administrative expenses
(526)
 
(545)
Selling expenses
(396)
 
(456)
Other operating results, net (1)
15,414
 
451
Profit from operations
17,595
 
4,403
Share of profit of associates and joint ventures
116
 
170
Profit before financial results and income tax
17,711
 
4,573
Finance income
73
 
154
Finance cost
(1,212)
 
(1,301)
Other financial results
100
 
40
Financial results, net
(1,039)
 
(1,107)
Profit before income tax
16,672
 
3,466
Income tax
(33)
 
(424)
Profit from discontinued operations
16,639
 
3,042
 
 
 
 
(Loss) / profit for the period from discontinued operations attributable to:
 
 
 
Equity holders of the parent
8,887
 
1,626
Non-controlling interest
7,752
 
1,416
Profit per share from discontinued operations attributable to equity holders of the parent:
 
 
 
Basic
15.43
 
2.83
Diluted
15.34
 
2.81
 
(1)  includes the fair value remediation of residual ownership in Gav-Yam
 
As of December 31, 2019 and 2018, Ps. 3,019 and Ps. 1,971 of the total revenues from discontinued operations and Ps. 16,678 and Ps.1,939 of the total profit from discontinued operations correspond to Gav-Yam.
 
 
 
34
IRSA Inversiones y Representaciones Sociedad Anónima
 
30.
Other relevant events of the period
 
Economic context in which the company operates
 
The Company operates in a complex economic context, whose main economic variables have recently had strong volatility, both nationally and internationally.
 
At a local level, the following was observed:
 
●
Year-on-year inflation as of December 31, 2019, was 53.8%, and projected inflation for the next 12 months has been estimated at 42.2% according to the survey on market expectations made by the Argentine Central Bank for 2020.
 
●
After the outcome of the 2019 primary elections, concerns have been raised in the international markets regarding the sustainability of the Argentine debt. For such reason, country-risk indicators reached 2,200 points, resulting in a depreciation of sovereign bonds. This trend has continued even after the general elections of October 2019. It should be noted that from January to December 2019, the Peso depreciated 59% vis-à-vis the U.S. Dollar, according to the average wholesale exchange rate quoted by Banco de la Nación Argentina.
 
●
Pursuant to the report filed by the Argentine Central Bank at the end of 2019, entitled “Objectives and plans for the development of the currency, foreign exchange, financial, and credit policies for 2020”, Argentina ended 2019 with a drop in activity levels in the whereabouts of 3%, and an annual inflation rate in excess of 50%, the highest one in the past 28 years. In terms of foreign exchange flows, in 2019 the capital and financial account deficit exceeded U.S. Dollars 35,000 million. Capital inflows, which had been driven by high domestic interest rates and were not backed by productive investments, were withdrawn when not even the soaring domestic interest rates were able to offset the growing devaluation expectation. Once again, Argentina experienced a high level of external debt, which accounted for 40.1% of the GDP in the second quarter of 2019, as compared to 13.9% of the GDP at the end of 2015.
 
●
In this scenario, the Government decided to implement various measures, including emergency executive decree No. 609/2019, which imposed several foreign exchange restrictions, and Law No. 27,541 on Social Solidarity and Productive Recovery in the Public Emergency Framework (the “Solidarity Law”), promulgated on December 23, 2019, which among other issues, seeks to create the conditions required for the fiscal accounts and debt to be sustainable, with a solidary approach that includes the imposition of progressive tax schemes. In addition, it aims to promote the reactivation of the economy by strengthening the income of the more vulnerable sectors, increasing their consumption levels and alleviating the tax debts of small and medium sized companies in an attempt to facilitate business continuity.
 
●
Below is a description of the principal measures adopted:
 
  -
Foreign exchange market restrictions: The scope of Emergency Executive Decree No. 609/2019, published in the Official Gazette on September 1, 2019, which had reinstated restrictions on the foreign exchange market, was ratified and broadened. Some of these restrictions include:
 
o
specific terms and conditions for settling export proceeds were established by the Argentine Central Bank;
 
o
new financial indebtedness with foreign creditors disbursed from September 1, 2019 onwards must be settled in the local foreign exchange market, and deposited in a local bank account;
 
o
the Argentine Central Bank’s prior consent is required for the repayment of debts for imports of goods and services;
 
o
the Argentine Central Bank’s consent is required for Argentine companies to remit profits or pay dividends;
 
 
 
 
 
 
 
 
 
35
IRSA Inversiones y Representaciones Sociedad Anónima
 
o
repayment of loans abroad may be settled through the local foreign exchange market on their maturity dates, subject to (i) the previous settlement of the funds; and (ii) the previous satisfaction of certain reporting obligations imposed by the Argentine Central Bank;
 
-
the Argentine Central Bank’s previous consent is required for the payment of debts to offshore related companies. To access the foreign exchange market, residents are required to submit documents evidencing the validity of the transactions in respect of which foreign currency is being purchased to remit funds abroad;
 
-
swap and arbitrage transactions may be made by customers without the Argentine Central Bank’s previous consent, always provided that they are implemented as individual transactions in Argentine Pesos;
 
-
cash withdrawals may be made abroad by debiting local bank accounts, always provided that the relevant foreign currency has been already deposited in the referred account;
 
-
payment of certain public debt instruments was deferred;
 
-
fuel price controls were established.
 
-
Severance payment duplication: On December 13, 2019, under Executive Decree 34/2019, an occupational public emergency was declared for a term of six months, and the obligation to pay twice the applicable severance payment in case of no-cause dismissal was established for a term of 180 days.
 
-
Corporations: The application of paragraph 5), Article 94 of the Argentine Companies Law, which established that the loss of capital qualified as a mandatory corporate dissolution event, was suspended until December 31, 2020, as was also Article 206, which required corporations to reduce their stock capital when losses had depleted the amount of reserves and 50% of their stock capital.
 
-
Declaration of public emergency: The Solidarity Law declared the public emergency in economic, financial, tax, administrative, social security, public utility, energy, health, and social matters, and the Argentine Executive Branch was delegated several powers under the scope of the Solidarity Law.
 
-
Sovereign debt sustainability: The Argentine Executive Branch has been empowered to take all such actions as necessary to recover and ensure the sustainability of the Argentine sovereign debt.
 
-
Energy system: The Argentine Executive Branch has been empowered to freeze electricity and natural gas utility rates under federal jurisdiction and to start a renegotiation process under the current comprehensive tariff review scheme, or to implement a new extraordinary review, from the effective date of this law for a term of up to one hundred and eighty (180) days, aimed at achieving a reduction in the actual tariff burden on households, stores, and industries for 2020.
 
-
Employer contributions: The differential contribution scheme for SMEs (18%) vs. large corporations (20.40%) has been reinstated, as well as the possibility to consider the applicable percentages according to the employer’s jurisdiction as VAT fiscal credit, and Executive Decree 814/2001 was repealed. The current employer contribution deduction continues in effect.
 
-
Tax inflation adjustment: The positive or negative inflation adjustment for the first and second fiscal years starting on January 1, 2019, calculated pursuant to current regulations, shall be allocated as follows: one-sixth in such fiscal period, and the remaining five-sixths, in equal parts, over the immediately following 5 fiscal periods.
 
-
Personal Assets: Tax rates were increased, and the tax thresholds were not modified. A higher rate was imposed on assets located abroad, and a tax benefit was established for repatriated assets.
 
-
Tax on Financial Income: Interest accrued on fixed term deposits in domestic currency, and third-party deposits or other methods for raising capitals from the public, as determined by the Central Bank, were exempted from this tax for fiscal period 2019. The tax on financial income for fiscal period 2020 was repealed.
 
 
 
 
 
 
 
 
 
 
36
IRSA Inversiones y Representaciones Sociedad Anónima
 
-
Income Tax. Tax rate on corporations and dividends: The changes in tax rates were suspended until the fiscal year starting on January 1, 2021; therefore, the following tax rates have been maintained in effect: Legal entities’ income: 30%; and dividends: 7%.
 
-
Tax for an Inclusive and Selfless Argentina: For a term of 5 years, foreign currency purchase transactions made for no specific purpose, including purchases of banknotes and purchases made through wire transfers, are subject to a 30% tax rate, and this tax may not be credited against other tax liabilities.
 
-
Tax on debits and credits on bank accounts: Cash withdraws from bank accounts are subject to twice the tax rate previously in effect. This increase shall not apply to accounts held by individuals or legal entities evidencing their condition as small or medium-sized companies.
 
-
Employment benefits: The Argentine Executive Branch is empowered to: a) require private employers to pay minimum salary rises to their workers; b) temporarily release them from the obligation to pay dues and contributions to the Argentine Social Security System (SIPA) on the salary rises resulting from the enforcement these powers or collective bargaining; and c) reduce dues and/or contributions to the SIPA for certain specific jurisdictions and industries or in critical situations.
 
-
Minimum general salary rise: On January 2020, under Executive Decree 14/2020, the Argentine Executive Branch approved a salary rise for private employees of Ps. 3,000, effective as of January 2020. From February 2020 onwards, an additional sum of Ps.1,000 will apply.
 
The volatility and uncertainty scenario described above subsists as of the date of these financial statements.
 
The Company’s Management continuously monitors the development of the variables that affect its business, to define its course of action and identify potential impacts on its equity and financial condition. The Company’s financial statements should be read in light of these circumstances.
 
31.
Subsequent events
 
Loss of control of Gav-Yam
 
On January 12, 2019, PBC received a letter from the Ministry of Justice of Israel, in which it questioned that PBC no longer holds control of Gav Yam. Therefore, the Ministry of Justice believes that PBC may be considered as breaching the provisions of the Concentration Law.
 
The management of PBC sustains its position that as of September 30, 2019 it no longer holds control of Gav Yam, considering the facts and circumstances described in Note 4 to theses financial statements. Currently PBC is preparing a response to the Ministry of Justice of Israel
 
Agreement for the sale of ISPRO
 
 
 On January 27, 2020, PBC signed an agreement to sell all its equity interest in Ispro for an amount of NIS 885. Such agreement is expected to finalize in March 2020. This transaction is subject to the approval of the Competence Regulatory Agency in accordance to the Economic Competence Act, which will have to rule within 150 days of the agreement date. Therefore, the assets and liabilities of Ispro were classified as available for sale.
 
Dolphin Netherland guarantee to IDBD
 
On February 4, 2020 after approval received from IDBD’s Audit Committee and Board of Directors, Dolphin Netherlands, committed towards the Company to provide to the financing entities through whom swap transactions were performed by the Company in connection with shares of Clal in August 2018 and in November 2018, autonomous and unconditional guarantees in a cumulative total of approximately NIS 11, which will constitute a part of the pledged deposits which IDBD undertook as part of the terms of the aforementioned swap transactions. 
 
It is noted that the banks will be entitled to forfeit the guarantees only in case any of the swap transactions have concluded (in accordance with its terms, including in case of early termination), and on the aforementioned termination date, there is a deficit in the amount of the pledged deposits which were provided by the Company to the banks.
 
 
 
 
 
 
 
 
37
IRSA Inversiones y Representaciones Sociedad Anónima
 
Regarding the commitment of Dolphin Netherlands to inject capital into IDBD in equal annual payments of NIS 70 million each on September 2, of the years 2019, 2020 and 2021, which was reported in Note 4 of the annual consolidated financial statements, in case any of the swap transactions has concluded before the deadline for execution of the second payment, on September 2, 2020, the unrealized parts of the guarantees will be returned to Dolphin Netherlands, while each part of the guarantees exercised until September 2, 2020, will be considered as part of the second payment, whereby the balance of the second payment will be transferred by Dolphin Netherlands to IDBD. As long as the swap transactions are still in effect on September 2, 2020, Dolphin Netherlands will make the second payment to IDBD, in accordance with and subject to the terms of the aforementioned commitment, and the guarantees will be returned to Dolphin Netherlands.
 
 
 
 
 
 
 
 
 
 
 
 
 
38
 
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: Bolivar 108 – 1° floor
Autonomous City Buenos Aires
Tax Code No. 30-52532274-9
 
 
 
Introduction
 
We have reviewed the unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima and its subsidiaries (hereinafter “the Company”) which included the unaudited condensed interim consolidated statements of financial position as of December 31, 2019 and the unaudited condensed interim consolidated statements of income and other comprehensive income for the six-month period and three-month period ended December 31, 2019, the unaudited condensed interim consolidated statements of changes in shareholders’ equity and the unaudited condensed interim consolidated statements of cash flows for the six-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2019 and the interim periods within that fiscal year are an integral part of these financial statements and, therefore, they should be considered in relation to those financial statements.
 
 
Management 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 the International Financial Reporting Standards (IFRS), adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and added by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB) and , for this reason, is responsible for the preparation and presentation of the unaudited condensed interim consolidated financial statements above mentioned in the first paragraph according to the International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34).
 
 
 
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
 INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
Scope of our review
 
Our review was limited to the application of the procedures established in the International Standard on Review Engagements ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity", which was adopted as a review standard in Argentina in Technical Resolution No. 33 of the FACPCE, without modification as approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of making inquiries of persons responsible for the preparation of the information included in the unaudited condensed interim consolidated financial statements, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the consolidated statements of financial position, the consolidated statements of income and other comprehensive income and the consolidated statements of cash flows of the Company.
 
Conclusion
 
Based on our review, nothing has come to our attention that causes us to believe that the accompanying unaudited condensed interim consolidated financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim financial reporting'.
  
Emphasis paragraph
 
Without qualifying our conclusion, we draw attention to Note 6 to these unaudited condensed interim consolidated financial statements.

 Report on compliance with current regulations
 
In accordance with current regulations, we report about IRSA Inversiones y Representaciones Sociedad Anónima that:
 
a) the unaudited condensed interim consolidated financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are being processed for recording in the "Inventory and Balance Sheet Book", and comply, as regards those matters that are within our competence, with the provisions set forth in the Commercial Companies Law and in the corresponding 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 respects in accordance with applicable legal provisions;
  
c) we have read the Business Summary (“Reseña Informativa”) on which, as regards those matters that are within our competence, we have no observations to make;
 
 
 
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
 INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
d) at December 31, 2019, the debt of IRSA Inversiones y Representaciones Sociedad Anónima owed in favor of the Argentina Integrated Pension System which arises from accounting records amounted to Ps. 155,590.39, which was not claimable at that date.
  
 
 
 
Autonomous City of Buenos Aires, February 10, 2020. 
 
 
 
 
 
PRICE WATERHOUSE & CO. S.R.L.      
 
                                      
 
                                           (Partner)
 
C.P.C.E.C.A.B.A. Tº 1 Fº 17
Dr. Mariano C. Tomatis
 Public Accountant (UBA)
 C.P.C.E.C.A.B.A. Tº 241 Fº 118
 
 
ABELOVICH, POLANO & ASOCIADOS S.R.L.
  
 
 
                                                              (Partner)
 
C.P.C.E. C.A.B.A. T° 1 F° 30
    José Daniel Abelovich
   Contador Público (UBA)
C.P.C.E. C.A.B.A. T° 102 F° 191
 
 
 
 
 
 
 
 
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Unaudited Condensed Interim Separate Financial Statements as of December 31, 2019 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, 2019 and June 30, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
12.31.19
 
06.30.19
ASSETS
 
 
 
 
Non-current assets
 
 
 
 
Investment properties
7
14,685
 
13,099
Property, plant and equipment
8
17
 
20
Trading properties
9
411
 
464
Intangible assets
10
63
 
64
Investments in subsidiaries, associates and joint ventures
6
46,741
 
50,023
Income tax and MPIT credit
 
 -
 
167
Trade and other receivables
12
158
 
102
Total non-current assets
 
62,075
 
63,939
Current assets
 
 
 
 
Trading properties
9
2,207
 
2,266
Inventories
 
1
 
1
Trade and other receivables
12
1,249
 
1,266
Income tax and MPIT credit
 
3
 
6
Derivative financial instruments
11
40
 
 -
Investments in financial assets
11
6
 
445
Cash and cash equivalents
11
64
 
44
Total current assets
 
3,570
 
4,028
TOTAL ASSETS
 
65,645
 
67,967
SHAREHOLDERS’ EQUITY
 
 
 
 
Shareholders' equity (according to corresponding statements)
 
35,048
 
41,246
TOTAL SHAREHOLDERS’ EQUITY
 
35,048
 
41,246
LIABILITIES
 
 
 
 
Non-current liabilities
 
 
 
 
Trade and other payables
13
5
 
60
Borrowings
14
2,317
 
10,020
Deferred income tax liabilities
15
6,384
 
5,898
Provisions
16
40
 
46
Total non-current liabilities
 
8,746
 
16,024
Current liabilities
 
 
 
 
Trade and other payables
13
1,296
 
1,892
Salaries and social security liabilities
 
2
 
2
Borrowings
14
20,468
 
8,795
Derivative financial instruments
11
78
 
 -
Provisions
16
6
 
8
Lease liabilities
 
1
 
 -
Total current liabilities
 
21,851
 
10,697
TOTAL LIABILITIES
 
30,597
 
26,721
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
 
65,645
 
67,967
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
 
                                           .
Saúl Zang          
Vice President I     
acting as 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, 2019 and 2018
 (All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
 
 
Six month
 
Three month
 
Note
12.31.19
 
12.31.18
 
12.31.19
 
12.31.18
Revenues
17
1,302
 
282
 
907
 
259
Costs
18
(1,009)
 
(35)
 
(803)
 
(19)
Gross profit
 
293
 
247
 
104
 
240
Net gain from fair value adjustment of investment properties
7
1,586
 
596
 
(1,101)
 
(3,242)
General and administrative expenses
18
(240)
 
(394)
 
(135)
 
(288)
Selling expenses
18
(79)
 
(35)
 
(33)
 
4
Other operating results, net
19
(452)
 
(1,123)
 
(436)
 
(1,116)
Profit / (Loss) from operations
 
1,108
 
(709)
 
(1,601)
 
(4,402)
Share of profit / (loss) of subsidiaries, associates and joint ventures
6
150
 
(7,815)
 
(5,843)
 
(17,134)
Profit / (loss) before financial results and income tax
 
1,258
 
(8,524)
 
(7,444)
 
(21,536)
Finance income
20
26
 
6
 
8
 
(6)
Finance costs
20
(1,538)
 
(967)
 
(778)
 
(513)
Other financial results
20
(1,356)
 
(254)
 
1,522
 
3,976
Inflation adjustment
20
187
 
(247)
 
604
 
(295)
Financial results, net
 
(2,681)
 
(1,462)
 
1,356
 
3,162
Loss before income tax
 
(1,423)
 
(9,986)
 
(6,088)
 
(18,374)
Income tax
15
(619)
 
1,078
 
681
 
443
Loss for the period
 
(2,042)
 
(8,908)
 
(5,407)
 
(17,931)
 
 
 
 
 
 
 
 
 
Other comprehensive income:
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Share of other comprehensive loss of subsidiaries, associates and joint ventures
 
(143)
 
(48)
 
(78)
 
26
Currency translation adjustment of subsidiaries, associates and joint ventures
 
(2,338)
 
(241)
 
(1,630)
 
(5,081)
Total other comprehensive loss for the period (i)
6
(2,481)
 
(289)
 
(1,708)
 
(5,055)
Total comprehensive loss for the period
 
(4,523)
 
(9,197)
 
(7,115)
 
(22,986)
 
 
 
 
 
 
 
 
 
Loss per share for the period:
 
 
 
 
 
 
 
 
Basic
 
(3.55)
 
(15.49)
 
(9.40)
 
(31.18)
Diluted
 
(3.55)
 
(15.49)
 
(9.40)
 
(31.18)
 
 (i) Components of other comprehensive income have no impact on income tax.
  The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
                                            .
Saúl Zang        
Vice President I     
acting as 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, 2019
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Share capital
Treasury shares
Inflation adjustment of Share Capital and Treasury Shares (1)
Share premium
Additional Paid-in capital from Treasury Shares
Legal reserve
CNV 609/12 Resolution reserve
Other reserves (2)
Retained earnings
Total Shareholders’ equity
Balance as of June 30, 2019
576
3
11,844
12,800
69
427
8,279
60,467
(53,219)
41,246
Adjustments of previous periods (IFRS 16 and IAS 28)
 -
 -
 -
 -
 -
 -
 -
 -
(1,022)
(1,022)
Balance as of June 30, 2019 (recast)
576
3
11,844
12,800
69
427
8,279
60,467
(54,241)
40,224
Loss for the period
 -
 -
 -
 -
 -
 -
 -
 -
(2,042)
(2,042)
Other comprehensive loss for the period
 -
 -
 -
 -
 -
 -
 -
(2,481)
 -
(2,481)
Shareholders’ meeting held as of 10.30.19
 -
 -
 -
 -
 -
 -
 -
(53,219)
53,219
 -
Dividend distribution in shares
 -
 -
 -
 -
 -
 -
 -
(519)
 -
(519)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(153)
 -
(153)
Other changes in the subsidiaries` equity
 -
 -
 -
 -
 -
 -
 -
 -
19
19
Balance as of December 31, 2019
576
3
11,844
12,800
69
427
8,279
4,095
(3,045)
35,048
 
(1)
Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2019.
(2)
The composition of Other reserves of the Company as of December 31, 2019 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, 2019
(145)
 
(4,087)
 
182
 
1,490
 
233
 
62,889
 
(95)
 
60,467
Other comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(2,338)
 
 -
 
(143)
 
(2,481)
Reserve for share-based payments
5
 
 -
 
(5)
 
 -
 
 -
 
 -
 
 -
 
 -
Shareholders’ meeting held as of 10.30.19
 -
 
 -
 
 -
 
 -
 
 -
 
(53,219)
 
 -
 
(53,219)
Dividend distribution in shares
 -
 
 -
 
 -
 
 -
 
 -
 
(519)
 
 -
 
(519)
Changes in non-controlling interest
 -
 
(153)
 
 -
 
 -
 
 -
 
 -
 
 -
 
(153)
Balance as of December 31, 2019
(140)
 
(4,240)
 
177
 
1,490
 
(2,105)
 
9,151
 
(238)
 
4,095
 
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
                                            .
Saúl Zang        
Vice President I    
acting as 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, 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
Share capital
Treasury shares
Inflation adjustment of Share Capital and Treasury Shares (1)
Share premium
Additional Paid-in capital from Treasury Shares
Legal reserve
CNV 609/12 Resolution reserve
Other reserves (2)
Retained earnings
Total Shareholders’ equity
Balance as of June 30, 2018
575
3
11,845
12,800
69
427
8,280
3,745
38,949
76,693
Adjustments of previous periods (IFRS 9 and 15)
 -
 -
 -
 -
 -
 -
 -
 -
(270)
(270)
Balance as of June 30, 2018 (recast)
575
3
11,845
12,800
69
427
8,280
3,745
38,679
76,423
Loss for the period
 -
 -
 -
 -
 -
 -
 -
 -
(8,908)
(8,908)
Other comprehensive loss for the period
 -
 -
 -
 -
 -
 -
 -
(289)
 -
(289)
Shareholders’ meeting held as of 10.29.18
 -
 -
 -
 -
 -
 -
 -
57,616
(57,616)
 -
Dividend distribution in shares
 -
 -
 -
 -
 -
 -
 -
 -
(2,297)
(2,297)
Changes in non-controlling interest
 -
 -
 -
 -
 -
 -
 -
(150)
 -
(150)
Balance as of December 31, 2018
575
3
11,845
12,800
69
427
8,280
60,922
(30,142)
64,779
 
 
(1)
Includes Ps. 1 of inflation adjustment of treasury shares. See Note 16 of Consolidated Financial Statements as of June 30, 2019.
(2)
The composition of Other reserves of the Company as of December 31, 2018 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, 2018
(161)
 
(4,014)
 
198
 
1,489
 
954
 
5,273
 
6
 
3,745
Other comprehensive loss for the period
 -
 
 -
 
 -
 
 -
 
(241)
 
 -
 
(48)
 
(289)
Reserve for share-based payments
2
 
 -
 
(2)
 
 -
 
 -
 
 -
 
 -
 
 -
Shareholders’ meeting held as of 10.29.18
 -
 
 -
 
 -
 
 -
 
 -
 
57,616
 
 -
 
57,616
Changes in non-controlling interest
 -
 
(150)
 
 -
 
 -
 
 -
 
 -
 
 -
 
(150)
Balance as of December 31, 2018
(159)
 
(4,164)
 
196
 
1,489
 
713
 
62,889
 
(42)
 
60,922
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
 
 
                          
 

 
 
                                      .
Saúl Zang        
Vice President I    
acting as President    
 
 
 
 
 
4
IRSA Inversiones y Representaciones Sociedad Anónima
Unaudited Condensed Interim Separate Statements of Cash Flows
for the six-month period ended December 31, 2019 and 2018
(All amounts in millions, except otherwise indicated)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
 
Note
12.31.19
 
12.31.18
Operating activities
 
 
 
 
Loss for the period
 
(2,042)
 
(8,908)
Adjustments:
 
 
 
 
Income tax
15
619
 
(1,078)
Amortization and depreciation
18
3
 
3
Gain from disposal of trading properties
 
(297)
 
(230)
Financial results, net
 
3,418
 
1,341
Increase in trading properties
9
(672)
 
 -
Net gain from fair value adjustment of investment properties
7
(1,586)
 
(596)
Share of profit of subsidiaries, associates and joint ventures
6
(150)
 
7,815
Gain from disposal of subsidiaries
 
443
 
1,089
Result for derivative financial instruments
 
64
 
 -
Provisions and allowances
 
(29)
 
34
Decrease in trade and other receivables
 
35
 
307
Increase in trade and other payables
 
823
 
2,798
Net cash flow generated from operating activities
 
629
 
2,575
Investing activities
 
 
 
 
Capital contributions to subsidiaries, associates and joint ventures
6
(1,573)
 
(295)
Additions to investment properties
 
 -
 
(40)
Issuance of capital
 
(77)
 
 -
Acquisition of intangible assets
10
(1)
 
(3)
Increase of investments in financial assets
 
(5,787)
 
(264)
Proceeds from sale of investments in financial assets
 
6,319
 
273
Increase in loans granted to subsidiaries, associates and joint ventures
 
(96)
 
(5)
Payments for derivative financial instruments
 
(24)
 
 -
Proceeds from borrowings granted to subsidiaries, associates and joint ventures
 
 -
 
123
Dividends received of subsidiaries
 
522
 
765
Net cash flow (used in) / generated from investing activities
 
(717)
 
554
Financing activities
 
 
 
 
Short-term loans obtained, net
 
1,168
 
(1,192)
Payment of loans
 
(384)
 
(358)
Interests paid
 
(1,294)
 
(1,199)
Loans obtained from subsidiaries, associates and joint ventures
 
2,081
 
183
Payment of loans from subsidiaries, associates and joint ventures
 
(579)
 
(2)
Repayment of principal of NCN
 
(9,105)
 
 -
Issuance of NCN
 
6,943
 
 -
Repurchase of non-convertible notes
 
 -
 
(71)
Net cash flow used in financing activities
 
(1,170)
 
(2,639)
(Decrease) / Increase in cash and cash equivalents, net
 
(1,258)
 
490
Cash and cash equivalents at the beginning of the period
11
44
 
31
Foreign exchange gain of cash and changes in fair value of cash equivalents
 
1,278
 
(2)
Cash and cash equivalents at the end of the period
11
64
 
519
 
 
 
 
 
Additional information
 
 
 
 
Currency translation adjustment
 
(2,338)
 
(241)
Share of other comprehensive loss of subsidiaries
 
(143)
 
(48)
Changes in non-controlling interest
 
(153)
 
(150)
Increase of investment properties through a decrease in trade and other receivables
 
 -
 
267
Increase in borrowings through an increase in investment properties
 
 -
 
6
Increase in borrowings through an increase in trading properties
 
64
 
43
Increase in borrowings of subsidiaries, associates and joint ventures through a decrease in trade and other receivables
 
6
 
 -
Increase in trading properties through a decrease in investment properties
 
 -
 
1,867
Dividends paid through a decrease in investments in subsidiaries, associates and joint ventures
 
519
 
2,297
Issuance of NCN
 
19
 
 -
 
The accompanying notes are an integral part of these Financial Statements.
 
 
 
                                            .
Saúl Zang          
Vice President I       
acting as 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 Bolívar 108, 1st. Floor, Buenos Aires, Argentina.
 
The Company owns, manages and develops, directly and indirectly through its subsidiaries, a portfolio of office and other rental properties in Buenos Aires. In addition, IRSA through its subsidiaries, associates and joint ventures manages and develops shopping malls and branded hotels across Argentina, and also office properties in the United States and in numerous markets and industry sectors in Israel, such as real estate, supermarkets, insurance, telecommunications, etc.
These Unaudited Condensed Interim Separate Financial Statements have been approved for issue by the Board of Directors on February 10, 2020.
 
2.
Basis of preparation of the Unaudited Condensed Interim Separate Financial Statements
 
2.1. 
Basis of preparation
 
The National Securities Commission (CNV), in Title IV "Periodic Information Regime" - Chapter III "Rules relating to the presentation and valuation of financial statements" - Article 1, of its standards, has established the application of the Technical Resolution No. 26 (RT 26) of the FACPCE and its amendments, which adopt IFRS, issued by the IASB, for certain companies included in the public offering regime of Law No. 26,831, either because of its share capital or its non-convertible notes, or that have requested authorization to be included in the aforementioned regime.
 
For the preparation of these Unaudited Condensed Interim Separate Financial Statements, the Company has made use of the option provided by IAS 34, and has prepared them in a condensed form. Therefore, these financial statements do not include all the information required in a complete set of annual financial statements and, consequently, it is recommended that they be read together with the annual financial statements as of June 30, 2019.
 
IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be expressed in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. To do so, in general terms, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be calculated for non-monetary items. This requirement also includes the comparative information of the financial statements.
 
In order to conclude on whether an economy is categorized as a high inflation one, in the terms of IAS 29, the standard details a series of factors to be considered, including the existence of an accumulated inflation rate in three years that approximates to or exceeds 100%. Accumulated inflation in Argentina in three years has been over 100%. For this reason, in accordance with IAS 29, the Argentine economy must be considered as a high inflation economy starting July 1, 2018.
 
 
 
 
 
 

 
 
 
6
IRSA Inversiones y Representaciones Sociedad Anónima
 
Regarding the inflation index to be used and in accordance with FACPCE Resolution No. 539/18, it will be determined based on the Wholesale Price Index (IPIM) until 2016, considering the average variation of Consumer Price indices (CPI) of the Autonomous City of Buenos Aires for the months of November and December 2015, because during those two months there were no national IPIM measurements. Then, from January 2017, the National Consumer Price Index (National CPI) will be considered. The table below shows the evolution of this index during the period ended December 31, 2019, according to official statistics (INDEC) and following the guidelines described in Resolution 539/18:
 
Price variation:
Quarter ended on 30.09.2019
Quarter ended on 31.12.2019
 31.12.2019 (six month accumulated
 
13%
12%
25%
 
 
As a consequence of the aforementioned, these Unaudited Consolidated Financial Statements as of December 31, 2019 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, 2019. The main accounting policies are described in Note 2 of those Annual Financial Statements.
 
As described in Note 2.2 to the Annual Financial Statements, the Company has adopted IFRS 16: “Leases” and Amendment to IAS 28 “Investment in associates and joint ventures” in the current year applying the cumulative effect approach, therefore, accumulated impact was recognized in retained earnings as of July 1, 2019 and comparative figures were not restated.
 
The following were the main changes:
 
IFRS 16: Leases
 
The standard establishes the criteria for recognition and valuation of leases for lessees and lessors. The changes incorporated mainly impact the tenant's accounting. IFRS 16 provides that the lessee recognizes an asset for the right of use and a liability at present value with respect to those contracts that meet the definition of lease agreements according to IFRS 16. In accordance with the standard, a lease agreement is one that provides the right to control the use of an identified asset for a specific period. In order for a company to have control over the use of an identified asset: a) it must have the right to obtain substantially all the economic benefits of the identified asset and b) it must have the right to direct the use of the identified asset.
 
The standard allows to exclude short-term contracts (under 12 months) and those in which the underlying asset has low value.
 
Amendment to IAS 28 “Investment in associates and joint ventures”
 
In accordance with the amendment to IAS 28, an entity shall implement the provisions of IFRS 9 to Long-term Investments that are essentially part of the entity's net investment in the associate or in the joint venture according to the definitions of said standard. The provisions of IFRS 9 shall apply to such investments with respect to the interest in the losses of an associate or a joint venture, as well as with respect to the recognition of the impairment of an investment in an associate or joint venture. In addition, when applying IFRS 9 to such long-term investments, the entity will make it prior to the adjustments made to the carrying amount of the investment in accordance with IAS 28.
 
Additionally, the Company opted for an accounting policy where the currency translation adjustments arising from these loans are recorded as part of other comprehensive income.
 
 
2.3.    
   Comparability of information
 
The amounts as of June 30, 2019 and December 31, 2018, which are disclosed for comparative purposes, arise from the financial statements at said dates restated in accordance with IAS 29 (Note 2.1). Certain figures have been reclassified for comparison purposes in these financial statements.
 
 
 
 
 
 
 
 
 
 
7
IRSA Inversiones y Representaciones Sociedad Anónima
 
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, 2019, 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
 
Significant acquisitions and disposals of the Company and/or its subsidiaries for the six-month period ended December 31, 2019 are detailed in Note 4 to the Unaudited Condensed Interim Consolidated Financial Statements.
 
5.            
Financial risk management and fair value estimates
 
These Unaudited Condensed Interim Financial Statements do not include all the information and disclosures of the risk management, so they should be read together with the Annual Separate Financial Statements as of June 30, 2019. 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.
 
There have been no changes in management or in the risk management policies applied by the Company as of December 31, 2019. See notes to the consolidated condensed interim financial statements. Furthermore, there have been no transfers between the different hierarchies used to assess the fair value of the Company’s financial instruments.
 
6.            
Information about the main subsidiaries, associates and joint ventures
 
The Company conducts its business through several operating and holding subsidiaries, associates and joint ventures. Its main subsidiaries include IRSA CP and Tyrus. The main associates include BHSA and New Lipstick. Its main joint ventures include Cyrsa S.A. and Puerto Retiro S.A.
 
As stated in Note 1 to these consolidated condensed interim financial statements, the Company indirectly participates through Tyrus in IDBD and DIC. Those companies have certain restrictions and financial agreements in relation to their financial debt, including their debentures and loans with banks and financial institutions. Although the commitments and other restrictions resulting from the indebtedness of IDBD and DIC do not have recursive effects against our subsidiary IRSA, nor has IRSA guaranteed it with its assets, except for commitments of capital contributions described in said note; IRSA's financial risk related to this investment (IDBD and DIC) is limited to the aforementioned capital contribution commitments and the equity risk as of December 31, 2019, as a result of the pledges granted on the shares of DIC, is limited to the amount of the investment in said subsidiaries which amounts to NIS 588 as of December 31, 2019 (Ps. 9,737 millions).
 
Detailed below is the evolution of investments in subsidiaries, associates and joint ventures of the Company, for the six-month period ended December 31, 2019 and for the year ended June 30, 2019:
 
 
12.31.19
 
06.30.19
Beginning of period / year
50,023
 
82,202
Adjustments of previous periods (IFRS 16 and IAS 28)
(1,022)
 
 -
Share of profit / (loss)
150
 
(27,958)
Other comprehensive loss
(2,481)
 
(825)
Capital contributions (Note 21)
1,650
 
853
Changes in non-controlling interest
(153)
 
(72)
Dividends
(522)
 
(969)
Sale of subsidiaries, associates and joint ventures
(923)
 
(3,243)
Other changes in the equity of subsidiaries
19
 
35
End of the period / year
46,741
 
50,023
 
 
 
 
 
 
 
 
8
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
Name of the entity
 
% ownership interest
 
Company´s interest in equity
 
Company’s interest in comprehensive income
12.31.19
06.30.19
 
12.31.19
 
06.30.19
 
12.31.19
 
12.31.18
Subsidiaries
 
 
 
 
 
 
 
 
 
 
 
IRSA CP
 
79.27%
81.13%
 
37,587
 
38,966
 
109
 
(5,760)
Tyrus
 
100.00%
100.00%
 
1,661
 
3,150
 
(1,899)
 
(2,222)
Efanur
 
100.00%
100.00%
 
1,860
 
1,669
 
191
 
43
Ritelco S.A.
 
100.00%
100.00%
 
1,478
 
1,519
 
(39)
 
11
Inversora Bolívar S.A.
 
95.13%
95.13%
 
779
 
986
 
(208)
 
(229)
ECLSA
 
96.74%
96.74%
 
783
 
956
 
(208)
 
(40)
Palermo Invest S.A.
 
97.00%
97.00%
 
192
 
394
 
(201)
 
(81)
NFSA
 
76.34%
76.34%
 
389
 
370
 
19
 
72
Llao Llao Resort S.A.
 
50.00%
50.00%
 
310
 
315
 
(4)
 
 -
HASA
 
100.00%
100.00%
 
275
 
265
 
11
 
45
Liveck S.A.
 
9.76%
10.01%
 
51
 
35
 
(1)
 
 -
Associates
 
 
 
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
4.93%
4.93%
 
464
 
627
 
(164)
 
29
Manibil S.A.
 
49.00%
49.00%
 
469
 
391
 
1
 
(23)
BACS (2)
 
33.36%
33.36%
 
247
 
254
 
(7)
 
(22)
Joint ventures
 
 
 
 
 
 
 
 
 
 
 
UTE IRSA - Galerías Pacífico S.A.
 
50.00%
50.00%
 
160
 
92
 
68
 
75
Cyrsa S.A.
 
50.00%
50.00%
 
36
 
34
 
1
 
(2)
Total subsidiaries, associates and joint ventures
 
 
 
 
46,741
 
50,023
 
(2,331)
 
(8,104)
 
 
Name of the entity
 
Location of business / Country of incorporation
Main activity
Common shares 1 vote
 
Latest financial statements issued
 
 
Share capital (nominal value)
Profit / (loss) for the period
Shareholders’ equity
Subsidiaries
 
 
 
 
 
 
 
 
IRSA CP
 
Argentina
Real estate
99,894,541
 
126
(382)
47,282
Tyrus
 
Uruguay
Investment
16,025,861,475
 
7,480
767
1,663
Efanur
 
Uruguay
Investment
132,181,770
 
130
9
1,860
Ritelco S.A.
 
Uruguay
Investment
94,369,151
 
94
(39)
1,478
Inversora Bolívar S.A.
 
Argentina
Investment
88,421,639
 
94
(218)
819
ECLSA
 
Argentina
Investment
77,316,127
 
80
(213)
808
Palermo Invest S.A.
 
Argentina
Investment
155,953,673
 
161
(207)
527
NFSA
 
Argentina
Hotel
38,068,999
 
50
18
648
Llao Llao Resort S.A.
 
Argentina
Hotel
73,580,206
 
147
(7)
620
HASA
 
Argentina
Hotel
25,625,473
 
26
11
271
Liveck S.A.
 
Uruguay
Investment
40,243,406
 
413
(23)
337
Associates
 
 
 
 
 
 
 
 
BHSA (1) (2)
 
Argentina
Financial
73,939,835
 
1,500
(3,321)
9,407
Manibil S.A.
 
Argentina
Real estate
151,872,872
 
444
1
957
BACS (2)
 
Argentina
Financial
29,297,626
 
88
(21)
741
Joint ventures
 
 
 
 
 
 
 
 
UTE IRSA - Galerías Pacífico S.A.
 
Argentina
Hotel
500,000
 
1
135
318
Cyrsa S.A.
 
Argentina
Real estate
8,748,270
 
17
2
72
 
(1)
Considered significant. See Notes 7 to 8 to the Annual Consolidated Financial Statements.
(2)
Information as of December 31, 2019 according to BCRA's standards. For the purpose of the valuation of the investments in the Company preliminary, figures as of December 31, 2019 have been considered, with the necessary IFRS adjustments. Share market price of Banco Hipotecario S.A as of December 31, 2019 amounts to Ps. 14.10. See Note 8 to the Consolidated Financial Statements as of June 30, 2019.
 
7.            
Investment properties
 
Changes in the Company’s investment properties for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
 
Period ended December 31, 2019
 
Year ended June 30, 2019
 
Rental properties
 
Undeveloped parcels of land
 
Total
 
Total
Fair value at the beginning of the period / year
1,949
 
11,150
 
13,099
 
15,653
Additions
 -
 
 -
 
 -
 
198
Capitalized finance costs
 -
 
 -
 
 -
 
5
Disposals
 -
 
 -
 
 -
 
(8)
Transfers to trading properties
 -
 
 -
 
 -
 
(1,663)
Net gain from fair value adjustment
236
 
1,350
 
1,586
 
(1,086)
Fair value at the end of the period / year
2,185
 
12,500
 
14,685
 
13,099
 
 
 
 
9
IRSA Inversiones y Representaciones Sociedad Anónima
 
The following amounts have been recognized in the Statements of Comprehensive Income:
 
 
12.31.19
 
12.31.18
Sale, rental and services´ income (Note 17)
28
 
52
Rental and services´ costs (Note18)
8
 
9
Cost of sales and developments (Note18)
16
 
18
Net unrealized gain from fair value adjustment of investment properties
1,586
 
596
 
Valuation techniques are described in Note 9 to the Consolidated Financial Statements as of June 30, 2019. There were no changes to the valuation techniques.
 
8.            
Property, plant and equipmentoy
 
Changes in the Company’s property, plant and equipment for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
 
Period ended December 31, 2019
 
Year ended June 30, 2019
 
Buildings and facilities
 
Furniture and fixtures
 
Machinery and equipment
 
Vehicles
 
Total
 
Total
 
Costs
164
 
46
 
157
 
4
 
371
 
367
 
Accumulated depreciation
(150)
 
(45)
 
(152)
 
(4)
 
(351)
 
(342)
 
Net book amount at the beginning of the period / year
14
 
1
 
5
 
-
 
20
 
25
 
Additions
-
 
-
 
-
 
-
 
-
 
4
 
Depreciation (Note 18)
(3)
 
-
 
-
 
-
 
(3)
 
(9)
 
Balances at the end of the period / year
11
 
1
 
5
 
-
 
17
 
20
 
Costs
164
 
46
 
157
 
4
 
371
 
371
 
Accumulated depreciation
(153)
 
(45)
 
(152)
 
(4)
 
(354)
 
(351)
 
Net book amount at the end of the period / year
11
 
1
 
5
 
-
 
17
 
20
 
 
 

9.            
Trading properties
 
Changes in the Company’s trading properties for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
Period ended December 31, 2019
 
Year ended June 30, 2019
 
Completed properties
 
Undevelopedproperties
 
Properties under development
 
Total
 
Total
Beginning of the period / year
64
 
473
 
2,193
 
2,730
 
2,031
Additions
24
 
-
 
777
 
801
 
1,711
Capitalized finance costs
-
 
-
 
64
 
64
 
117
Transfers to / from investment properties
-
 
-
 
-
 
-
 
1,663
Disposals (Nota 18)
(24)
 
-
 
(953)
 
(977)
 
(2,792)
End of the period / year
64
 
473
 
2,081
 
2,618
 
2,730
Non-current
 
 
 
 
 
 
411
 
464
Current
 
 
 
 
 
 
2,207
 
2,266
Total
 
 
 
 
 
 
2,618
 
2,730
 
10.            
Intangible assets
 
  Changes in Company’s intangible assets for the six-month period ended December 31, 2019 and for the year ended June 30, 2019 were as follows:
 
Period ended December 31, 2019
 
Year ended June 30, 2019
 
Computer software
 
Future units to be received from barters
 
Total
 
Total
Costs
28
 
49
 
77
 
72
Accumulated amortization
(13)
 
-
 
(13)
 
(13)
Net book amount at the beginning of the period / year
15
 
49
 
64
 
59
Additions
1
 
-
 
1
 
4
Balances at the end of the period / year
16
 
49
 
65
 
63
Costs
30
 
49
 
79
 
77
Accumulated amortization
(16)
 
-
 
(16)
 
(13)
Net book amount at the end of the period / year
14
 
49
 
63
 
64
 
 
 
 
10
IRSA Inversiones y Representaciones Sociedad Anónima
 
11.            
Financial instruments by category
 
This note presents financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the Statements of Financial Position, as appropriate. Financial assets and liabilities measured at fair value are assigned based on their different levels in the fair value hierarchy. For further information, related to fair value hierarchy see Note 13 to the Consolidated Financial Statements as of June 30, 2019.
 
 
Financial assets and financial liabilities as of December 31, 2019 and June 30, 2019 are as follows:
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
Level 1
 
Level 2
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
929
 
-
 
-
 
929
 
488
 
1,417
Investments in financial assets:
 
 
 
 
 
 
 
 
 
 
 
 - Mutual funds (ii)
-
 
6
 
-
 
6
 
-
 
6
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 
 
 - Options
-
 
-
 
40
 
40
 
-
 
40
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 - Cash at bank and on hand
63
 
-
 
-
 
63
 
-
 
63
 - Short-term investments
-
 
1
 
-
 
1
 
-
 
1
Total
992
 
7
 
40
 
1,039
 
488
 
1,527
 
 
Financial liabilities at amortized cost (i)
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 1
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other payables (Note 13)
543
 
-
 
543
 
758
 
1,301
Derivative financial instruments:
 
 
 
 
 
 
 
 
 
 - Options
-
 
78
 
78
 
-
 
78
Borrowings (Note 14)
22,785
 
-
 
22,785
 
-
 
22,785
Total
23,328
 
78
 
23,406
 
758
 
24,164
 
 
Financial assets at amortized cost (i)
 
Financial assets at fair value through profit or loss
 
Subtotal financial assets
 
Non-financial assets
 
Total
 
 
 
Level 1
 
Level 2
 
 
 
 
 
 
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Assets as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
 
 
Trade and other receivables (excluding the allowance for doubtful accounts and other receivables) (Note 12)
813
 
-
 
-
 
813
 
586
 
1,399
 - Mutual funds (ii)
-
 
445
 
-
 
445
 
-
 
445
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 - Cash at bank and on hand
44
 
-
 
-
 
44
 
-
 
44
Total
857
 
445
 
-
 
1,302
 
586
 
1,888
 
 
Financial liabilities at amortized cost (i)
 
Financial liabilities at fair value through profit or loss
 
Subtotal financial liabilities
 
Non-financial liabilities
 
Total
 
 
 
Level 1
 
 
 
 
 
 
June 30, 2019
 
 
 
 
 
 
 
 
 
Liabilities as per Statement of Financial Position
 
 
 
 
 
 
 
 
 
Trade and other payables (Note 13)
612
 
-
 
612
 
1,340
 
1,952
Borrowings (excluding finance leases) (Note 14)
18,815
 
-
 
18,815
 
-
 
18,815
Total
19,427
 
-
 
19,427
 
1,340
 
20,767
 
(i)
The fair value of financial assets and liabilities at amortized cost does not differ significantly from their book value, except for borrowings (Note 14). The fair value of payables approximates their respective carrying amounts because, due to their short-term nature, the effect of discounting is not considered significant.
(ii)
See description of the reperfilation of public debt instruments in Note 33 to the consolidated financial statements.
 
As of December 31, 2019, there have been no changes to the economic or business circumstances affecting the fair value of the financial assets and liabilities of the Company.
 
 
 
11
IRSA Inversiones y Representaciones Sociedad Anónima
 
12.  Trade and other receivables
 
Company’s trade and other receivables, as of December 31, 2019 and June 30, 2019 are comprised as follows:
 
 
12.31.19
 
06.30.19
Receivables from the sale of properties
117
 
88
Leases and services receivables
84
 
92
Less: Allowance for doubtful accounts
(10)
 
(31)
Total trade receivables
191
 
149
Borrowings granted, deposits and others
713
 
614
Advance payments
265
 
384
Tax credits
199
 
123
Prepaid expenses
19
 
74
Long-term incentive plan
15
 
19
Others
5
 
5
Total other receivables
1,216
 
1,219
Total trade and other receivables
1,407
 
1,368
Non-current
158
 
102
Current
1,249
 
1,266
Total
1,407
 
1,368
 
Movements on the Company’s allowance for doubtful accounts are as follows:
 
 
12.31.19
 
06.30.19
Beginning of period /year
(31)
 
(14)
Additions
(3)
 
(40)
Disposals / Recoveries
18
 
8
Inflation adjustment
6
 
15
End of the period / year
(10)
 
(31)
 
The creation and release of the allowance for doubtful accounts have been included in “Selling expenses” in the Statements of Income (Note 18). Amounts charged to the allowance for doubtful accounts are generally written off, when there is no expectation of recovery.
 
13.  Trade and other payables
 
Company’s trade and other payables as of December 31, 2019 and June 30, 2019 were as follows:
 
 
12.31.19
 
06.30.19
Customers´ advances
709
 
1,316
Trade payables
439
 
437
Accrued invoices
57
 
116
Tenant deposits
1
 
1
Total trade payables
1,206
 
1,870
Director´s fees
34
 
43
Long-term incentive plan
13
 
16
Tax amnesty plans
2
 
3
Other tax payables
46
 
20
Total other payables
95
 
82
Total trade and other payables
1,301
 
1,952
Non-current
5
 
60
Current
1,296
 
1,892
Total
1,301
 
1,952
 
14.  Borrowings
 
Company’s borrowings as of December 31, 2019 and June 30, 2019 are comprised as follows:
 
 
Book value as of 12.31.19
 
Book value as of 06.30.19
 
Fair value as of 12.31.19
 
Fair value as of 06.30.19
Non-convertible notes
14,875
 
14,722
 
13,286
 
14,896
Bank loans
1,669
 
1,712
 
1,595
 
1,712
Related parties (Note 21)
5,061
 
2,301
 
4,554
 
2,315
Bank overdrafts
1,180
 
79
 
1,180
 
79
Finance leases
-
 
1
 
-
 
1
Total borrowings
22,785
 
18,815
 
20,615
 
19,003
Non-current
2,317
 
10,020
 
 
 
 
Current
20,468
 
8,795
 
 
 
 
Total
22,785
 
18,815
 
 
 
 
 
 
 
 
 
12
IRSA Inversiones y Representaciones Sociedad Anónima
 
15.  Current and deferred income tax
 
The charge for the Company’s income tax is comprised as follows:
 
 
12.31.19
 
12.31.18
Deferred income tax
(486)
 
1,078
Income MPIT
(133)
 
 -
Income tax
(619)
 
1,078
 
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, 2019 and 2018:
 
 
12.31.19
 
12.31.18
Net income at tax rate (i)
427
 
2,994
Permanent differences:
 
 
 
Share of profit / (loss) of subsidiaries, associates and joint ventures
27
 
(2,629)
Income tax rate differential
(86)
 
(38)
Difference between provision and tax return
27
 
(249)
Tax loss carryfowards´ allowance
(1,103)
 
-
Inflation adjustment for tax purposes
(1,290)
 
-
Inflation adjustment
1,520
 
1,000
Non deductible expenses and others
(8)
 
-
Income tax - (Loss) / Gain
(486)
 
1,078
Forecast Income MPIT
(133)
 
-
Income tax - (Loss) / Gain
(619)
 
1,078
 
(i) Income tax rate in effect in Argentina as of December 31, 2019 and 2018 is 30%.
 
The gross movement on the deferred income tax account is the following:
 
 
12.31.19
 
06.30.19
Beginning of the period / year
(5,898)
 
(4,167)
Income tax charge
(486)
 
(1,731)
End of the period / year
(6,384)
 
(5,898)
 
Law No. 27,541 of social solidarity and productive revival in the framework of Argentine public emergency, published on December 23, 2019 introduced some modifications to different taxes and the creation of the tax for an Inclusive and Solidarity Argentina (PAIS).
 
The main modifications affecting the Group in relation to income tax are the following:
 
●
In the first and second fiscal year beginning after January 1, 2019, the gain or loss from tax inflation adjustment will be charged one-sixth in the determination exercise and the remaining five-sixths in the following fiscal periods;
●
Power bulled points the applicable rate to companies for the third year beginning after January 1, 2018 is increased from 25% to 30%.
 
16.      Provisions
 
Company’s provisions as of December 31, 2019 and June 30, 2019 are comprised as follows:
 
 
Period ended December 31, 2019
 
Year endedJune 30, 2019
 
Labor, legal and other claims (i)
 
Total
 
Total
Beginning of period / year
54
 
54
 
78
Additions
9
 
9
 
18
Decrease
(4)
 
(4)
 
(21)
Utilization
(1)
 
(1)
 
(1)
Inflation adjustment
(12)
 
(12)
 
(20)
End of period / year
46
 
46
 
54
Non current
 
 
40
 
46
Current
 
 
6
 
8
Total
 
 
46
 
54
 
(i)
Additions and recoveries are included in "Other operating results, net”.
 
 
 
13
IRSA Inversiones y Representaciones Sociedad Anónima
 
17.        Revenues
 
 
12.31.19
 
12.31.18
Sale of trading properties
1,274
 
230
Rental income, averaging of scheduled rental escalation and expense reimbursements
25
 
46
Property management fees
3
 
6
Sales, rental and services´ income
1,302
 
282
 
18.          
 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
 
12.31.19
 
12.31.18
Cost of sales of trading properties (Note 9)
977
 
-
 
-
 
977
 
3
Salaries, social security costs and other personnel expenses
3
 
91
 
11
 
105
 
120
Taxes, rates and contributions
9
 
-
 
61
 
70
 
16
Director´s fees (Note 21)
-
 
63
 
-
 
63
 
212
Fees and payments for services
1
 
38
 
1
 
40
 
25
Maintenance, security, cleaning, repairs and others
15
 
14
 
-
 
29
 
14
Traveling, transportation and stationery
-
 
16
 
-
 
16
 
21
Leases and service charges
4
 
10
 
1
 
15
 
14
Bank charges
-
 
5
 
-
 
5
 
6
Advertising and other selling expenses
-
 
-
 
4
 
4
 
6
Amortization and depreciation (Note 8)
-
 
3
 
-
 
3
 
4
Allowance for doubtful accounts (charge and recovery, net)
-
 
-
 
-
 
-
 
12
Public services and others
-
 
-
 
1
 
1
 
11
Total expenses by nature as of 12.31.19
1,009
 
240
 
79
 
1,328
 
-
Total expenses by nature as of 12.31.18
35
 
394
 
35
 
-
 
464
 
(1)
For the six-month period ended December 31, 2019, includes Ps. 8 of rental and services costs and Ps. 1,001 of costs of sales and developments, of which Ps. 8 corresponds to investment properties and Ps. 977 to properties for sale. For the six-month period ended December 31, 2018, includes Ps. 9 which correspond to rental and services costs; Ps. 18 to costs of sales and developments.
 
19.          
Other operating results, net
 
 
12.31.19
 
12.31.18
Operating interest income
4
 
-
Donations
(17)
 
(20)
Lawsuits and other contingencies (i)
(6)
 
(9)
Others
10
 
(5)
Loss of sale of subsidiaries, associates and joint ventures
(443)
 
(1,089)
Total other operating results, net
(452)
 
(1,123)
 
(i)
Includes legal costs and expenses.
 
20.          
Financial results, net
 
12.31.19
 
12.31.18
Interest income
26
 
6
Total finance income
26
 
6
Interest expense
(1,526)
 
(975)
Other finance costs
(76)
 
(41)
Subtotal finance costs
(1,602)
 
(1,016)
Capitalized finance costs
64
 
49
Total finance costs
(1,538)
 
(967)
Net exchange difference
(1,434)
 
(252)
Net gain / (loss) from changes in fair value of financial assets
143
 
(2)
Loss from derivative financial instruments, net
(64)
 
-
Loss from repurchase of non-convertible notes
(1)
 
-
Total other financial results
(1,356)
 
(254)
Inflation adjustment
187
 
(247)
Total financial results, net
(2,681)
 
(1,462)
 
 
14
IRSA Inversiones y Representaciones Sociedad Anónima
 
21.            
Related party transactions
 
The following is a summary of the balances with related parties as of December 31, 2019 and June 30, 2019:
 
Item
 
12.31.19
 
06.30.19
Trade and other payables
 
(1,096)
 
(1,329)
Borrowings
 
(5,061)
 
(2,301)
Trade and other receivables
 
761
 
648
Total
 
(5,396)
 
(2,982)
 
 
Related parties
 
12.31.19
 
06.30.19
 
Operation description
 
Item
Cresud
 
(1)
 
(1)
 
Long-term incentive plan payable
 
Trade and other payables
 
 
(48)
 
(35)
 
Corporate services payable
 
Trade and other payables
 
 
(5)
 
(13)
 
Reimbursement of expenses payable
 
Trade and other payables
 
 
4
 
5
 
Leases receivable
 
Trade and other receivables
 
 
(1)
 
(1)
 
Management fee
 
Trade and other payables
Total parent company
 
(51)
 
(45)
 
 
 
 
IRSA CP
 
-
 
(6)
 
Reimbursement of expenses payable
 
Trade and other payables
 
 
1
 
-
 
Reimbursement of expenses receivable
 
Trade and other receivables
 
 
(709)
 
(963)
 
Advances from sale of property
 
Trade and other payables
 
 
(3,031)
 
(1,348)
 
Non-Convertible Notes
 
Borrowings
 
 
(1,456)
 
-
 
Loans received
 
Borrowings
 
 
(120)
 
(107)
 
Other liabilities
 
Trade and other payables
 
 
(87)
 
(72)
 
Corporate services payable
 
Trade and other payables
 
 
(11)
 
-
 
Lease Collections
 
Trade and other payables
 
 
(12)
 
(15)
 
Long-term incentive plan payable
 
Trade and other payables
 
 
(1)
 
(1)
 
Commissions
 
Trade and other payables
 
 
(9)
 
-
 
Leases payable
 
Trade and other payables
Tyrus
 
321
 
279
 
Borrowings granted
 
Trade and other receivables
ECLSA
226
 
145
 
Borrowings granted
 
Trade and other receivables
 
107
 
135
 
Dividends receivable
 
Trade and other receivables
Panamerican Mall S.A.
1
 
1
 
Long-term incentive plan receivable
 
Trade and other receivables
Efanur
 
(80)
 
(70)
 
Loans received
 
Borrowings
Torodur S.A.
 
(349)
 
(706)
 
Non-Convertible Notes
 
Borrowings
Ritelco S.A.
 
(23)
 
(20)
 
Loans received
 
Borrowings
NFSA
 
(27)
 
(29)
 
Loans received
 
Borrowings
Fibesa S.A.
 
13
 
16
 
Long-term incentive plan receivable
 
Trade and other receivables
Real Estate Investment Group VII LP
 
(22)
 
(19)
 
Loans received
 
Borrowings
Palermo Invest S.A.
 
12
 
15
 
Dividends receivable
 
Trade and other receivables
 
 
13
 
-
 
Borrowings granted
 
Trade and other receivables
 
 
-
 
(14)
 
Loans received
 
Borrowings
Llao Llao Resorts S.A.
 
3
 
4
 
Hotel services receivable
 
Trade and other receivables
 
 
1
 
1
 
Reimbursement of expenses receivable
 
Trade and other receivables
New Lipstick
 
14
 
13
 
Reimbursement of expenses receivable
 
Trade and other receivables
Lipstick Management LLC
 
(64)
 
(55)
 
Loans received
 
Borrowings
Cyrsa S.A.
 
(9)
 
(10)
 
Loans received
 
Borrowings
Inversora Bolívar S.A.
 
10
 
13
 
Dividends receivable
 
Trade and other receivables
 
 
22
 
-
 
Borrowings granted
 
Trade and other receivables
 
 
-
 
(30)
 
Loans received
 
Borrowings
Liveck S.A.
 
-
 
6
 
Borrowings granted
 
Trade and other receivables
UTE IRSA – Galerías Pacífico S.A.
 
(57)
 
(72)
 
Other liabilities
 
Trade and other payables
Others subsidiaries, associates and
 
-
 
1
 
Reimbursement of expenses receivable
 
Trade and other receivables
joint ventures (1)
 
1
 
1
 
Long-term incentive plan receivable
 
Trade and other receivables
 
 
(1)
 
-
 
Reimbursement of expenses payable
 
Trade and other payables
Total subsidiaries, associates and joint ventures
 
(5,323)
 
(2,907)
 
 
 
 
Directors
 
(34)
 
(43)
 
Fees
 
Trade and other payables
Total Directors
 
(34)
 
(43)
 
 
 
 
Consultores Asset Management S.A.
 
11
 
8
 
Reimbursement of expenses receivable
 
Trade and other receivables
Austral Gold Argentina S.A.
 
1
 
3
 
Reimbursement of expenses receivable
 
Trade and other receivables
Others subsidiaries, associates and
 
-
 
1
 
Management fee
 
Trade and other receivables
joint ventures (2)
 
-
 
1
 
Reimbursement of expenses receivable
 
Trade and other receivables
Total others
 
12
 
13
 
 
 
 
Total at the end of the period/year
 
(5,396)
 
(2,982)
 
 
 
 
 
(1)
It includes BHSA, Puerto Retiro S.A., Nuevo Puerto Santa Fe S.A. and Emprendimientos Recoleta S.A.
(2)
It includes Hamonet S.A. e Isaac Elsztain e Hijos S.C.A.
 
 
 
15
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, 2019 and 2018:
 
Related parties
 
12.31.19
 
12.31.18
 
Operation description
Cresud
 
3
 
15
 
Leases and/or rights of use
 
 
(59)
 
(69)
 
Corporate services
Total parent company
 
(56)
 
(54)
 
 
IRSA CP
 
 -
 
(5)
 
Leases and/or rights of use
 
 
(493)
 
(270)
 
Financial operations
 
 
(34)
 
(45)
 
Corporate services
ECLSA
 
20
 
(82)
 
Financial operations
Ritelco
 
(3)
 
(9)
 
Financial operations
Efanur
 
(10)
 
(15)
 
Financial operations
Tyrus
 
41
 
111
 
Financial operations
Panamerican Mall S.A
 
 -
 
(31)
 
Financial operations
Real Estate Strategies LLC
 
 -
 
7
 
Financial operations
Lipstick
 
(8)
 
 -
 
Financial operations
REIG VII
 
(1)
 
 -
 
Financial operations
Torodur
 
(54)
 
 -
 
Financial operations
Palermo Invest
 
(3)
 
 -
 
Financial operations
Manibil S.A.
 
 -
 
56
 
Financial operations
Others subsidiaries, associates and joint ventures (1)
 
 -
 
(14)
 
Financial operations
 
 
4
 
4
 
Fees
Total subsidiaries, associates and joint ventures
 
(541)
 
(293)
 
 
Directors
 
(63)
 
(220)
 
Fees
Senior Managment
 
(4)
 
(14)
 
Fees
Total Directors and Senior Managment
 
(67)
 
(234)
 
 
Fundación IRSA
 
(13)
 
(13)
 
Donations
 
 
1
 
 -
 
Leases and/or rights of use
Estudio Zang, Bergel & Viñes
 
(3)
 
(3)
 
Fees
Others subsidiaries, associates and joint ventures (2)
 
3
 
3
 
Leases and/or rights of use
 
 
(5)
 
-
 
Donations
Total others
 
(17)
 
(13)
 
 
Total at the end of the period
 
(681)
 
(594)
 
 
 
(1)
It includes Inversora Bolívar S.A., Cyrsa S.A., BACS, Palermo Invest S.A., y Liveck S.A
(2)
Austral Gold Argentina S.A., Hamonet S.A., UTE IRSA – Galerías Pacífico S.A. e Isaac Elsztain e Hijos S.C.A.
 
The following is a summary of the transactions with related parties without impact in results for the six-month period ended December 31, 2019 and 2018:
 
Related parties
 
12.31.19
 
12.31.18
 
Operation description
IRSA CP
 
522
 
765
 
Dividends received
IRSA CP
 
(178)
 
-
 
Dividends distribution
Cresud
 
(322)
 
(1,448)
 
Dividends distribution
Helmir S.A.
 
(20)
 
(9)
 
Dividends distribution
Total distribution
 
2
 
(692)
 
 
Tyrus
 
(1,557)
 
(284)
 
Irrevocable contributions granted
Inversora Bolivar S.A.
 
-
 
(8)
 
Irrevocable contributions granted
Efanur
 
-
 
(3)
 
Irrevocable contributions granted
Manibil S.A.
 
(77)
 
-
 
Irrevocable contributions granted
Liveck
 
(16)
 
-
 
Irrevocable contributions granted
Total contributions to subsidiaries
 
(1,650)
 
(295)
 
 
 
 
 
 
 
16
IRSA Inversiones y Representaciones Sociedad Anónima
 
22.     Foreign currency assets and liabilities
 
Book amounts of foreign currency assets and liabilities are as follows:
 
Item (1)
 Amount (2)
 Foreign exchange rate (3)
Total as of 12.31.19
 Amount (2)
Total as of 06.30.19

Assets
 
 
 
 
 
Trade and other receivables
 
 
 
 
 
US Dollar
5.15
59.690
309
6.28
334
Euros
0.24
66.853
16
0.29
17
Receivables with related parties
 
 
 
 
 
US Dollar
9.91
59.890
594
8.32
445
Total Trade and other receivables
 
 
                  919
 
                 796
Investments in financial assets
 
 
 
 
 
US Dollar
0.11
59.690
6
8.39
446
Total Investments in financial assets
 
 
                     6
 
                 446
Derivative financial instruments
 
 
 
 
 
US Dollar
0.67
59.690
40
 -
 -
Total Derivative financial instruments
 
 
                   40
 
                    -
Cash and cash equivalents
 
 
 
 
 
US Dollar
1.08
59.690
64
0.84
44
Total Cash and cash equivalents
 
 
                   64
 
                   44
Total Assets
 
 
               1,029
 
               1,286
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Trade and other payables
 
 
 
 
 
US Dollar
0.08
59.890
5
1.01
54
Euros
0.06
67.227
4
 -
 -
Payables with related parties
 
 
 
 
 
US Dollar
2.15
59.890
126
1.96
105
Euros
 -
59.890
 -
 -
17
Total Trade and other payables
 
 
                  135
 
                  176
Derivative financial instruments
 
 
 
 
 
US Dollar
1.30
59.890
78
 -
 -
Total Derivative financial instruments
 
 
                   78
 
                    -
Lease liabilities
 
 
 
 
 
US Dollar
0.02
59.890
1
 -
 -
Total Lease liabilities
 
 
                      1
 
                    -
Borrowings
 
 
 
 
 
US Dollar
275.85
59.890
16,521
299.58
16,006
Borrowings with related parties
 
 
 
 
 
US Dollar
83.92
59.890
5,026
41.79
2,232
Total Borrowings
 
 
             21,547
 
             18,238
Total Liabilities
 
 
              21,761
 
              18,414
 
(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, 2019 according to Banco de la Nación Argentina records.
 
23.
CNV General Resolution N° 622/13
 
As required by Section 1°, Chapter III, Title IV of CNV General Resolution N° 622/13, below is a detail of the notes to the Unaudited Condensed Interim Separate Financial Statements that disclose the information required by the Resolution in Exhibits.
 
Exhibit A - Property, plant and equipment
Note 7 Investment properties and Note 8 Property, plant and equipment
Exhibit B - Intangible assets
Note 10 Intangible assets
Exhibit C - Equity investments
Note 6 Information about the main subsidiaries, associates and joint ventures
Exhibit D - Other investments
Note 11 Financial instruments by category
Exhibit E - Provisions
Note 12 Trade and other receivables and Note 16 Provisions
Exhibit F - Cost of sales and services provided
Note 9 Trading properties and Note 18 Expenses by nature
Exhibit G - Foreign currency assets and liabilities
Note 22 Foreign currency assets and liabilities
 
 
 
 
17
IRSA Inversiones y Representaciones Sociedad Anónima
 
 
24.
     CNV General Resolution N° 629/14 – Storage of documentation
 
On August 14, 2014, the CNV issued General Resolution N° 629 whereby it introduced amendments to rules related to storage and conservation of corporate books, accounting books and commercial documentation. In this sense, it should be noted that the Company has entrusted the storage of certain non-sensitive and old information to the following providers:
 
Storage of documentation responsible
 
Location
Iron Mountain Argentina S.A.
 
Av. Amancio Alcorta 2482, Autonomous City of Buenos Aires
 
Pedro de Mendoza 2143, Autonomous City of Buenos Aires
 
Saraza 6135, Autonomous City of Buenos Aires
 
Azara 1245, Autonomous City of Buenos Aires
 
Polígono industrial Spegazzini, Autopista Ezeiza Km 45, Cañuelas, Province of Buenos Aires
 
 
Cañada de Gómez 3825, Autonomous City of Buenos Aires
 
It is further noted that a detailed list of all documentation held in custody by providers, as well as documentation required in section 5 a.3) of Section I, Chapter V, Title II of the CNV RULES (2013 as amended) are available at the registered office.
 
On February 5, 2014 there was a widely known accident in Iron Mountain’s warehouse. Such company is a supplier of the Company and Company’s documentation was being kept in the mentioned warehouse. Based on the internal review carried out by the Company, duly reported to the CNV on February 12, 2014, the information kept at the Iron Mountain premises that were on fire do not appear to be sensitive or capable of affecting normal operations.
 
25.
Working capital deficit
 
At the end of the period, the Company has a working capital deficit of Ps. 18,321. The Company has issued during the current fiscal year and after December 31, 2019 NCN for a total of US$ 130 million. Also, within the framework of what was approved by the Shareholders' Meeting held on October 30, 2019, the Company is analyzing different financing alternatives to reduce its negative working capital, either through the issuance of debt, equity and / or from the sale of selected assets.
 
26.
Subsequent events
 
See subsequent events in Note 30 to Unaudited Condensed Interim Consolidated Financial Statements, in addition are as follows:
 
Dividend distribution from IRSA CP
 
On October 31, 2019, the General Shareholders' Meeting of IRSACP distributed a cash dividend of Ps. 522.
 
Dividend distribution of IRSA
 
On October 30, 2019, the General Shareholders' Meeting of IRSA distributed dividends of Ps. 519 payable in shares of IRSA CP.
 
 
 
 
 
 
 
 
18
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2019
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
 
1.
Specific and significant systems that imply contingent lapsing or rebirth of benefits envisaged by such provisions.
 
None.
 
2.
Significant changes in the Company´s activities or other similar circumstances that occurred during the fiscal years included in the financial statements, which affect their comparison with financial statements filed in previous fiscal years, or that could affect those to be filed in future fiscal years.
 
See Note 2.3.
 
3.
Receivables and liabilities by maturity date.
 
Items
Past due
Without term
Without term
To be due
12.31.19
Current
Non-current
Up to 3 months
From 3 to 6 months
From 6 to 9 months
From 9 to 12 months
From 1 to 2 years
From 2 to 3 years
Total

Accounts receivables
Trade and other receivables
383
374
6
123
325
6
38
152
-
1,407
 
Total
383
374
6
123
325
6
38
152
-
1,407
Liabilities
Trade and other payables
431
-
-
860
4
1
-
5
-
1,301
 
Borrowings
96
-
-
1,373
199
7,217
11,583
704
1,613
22,785
 
Salaries and social security liabilities
-
-
-
1
-
1
-
-
-
2
 
Provisions
-
6
40
-
-
-
-
-
-
46
 
Financial instruments
-
-
-
78
-
-
-
-
-
78
 
Lease liabilities
-
-
-
1
-
-
-
-
-
1
 
Total
527
6
40
2,313
203
7,219
11,583
709
1,613
24,213
 
 
4.a.         Breakdown of accounts receivable and liabilities by maturity and currency.
 
Items
Current
Non-current
Totals
Local currency
Foreign currency
Total
Local currency
Foreign currency
Total
Local currency
Foreign currency
Total

Accounts receivables
Trade and other receivables
335
914
1,249
153
5
158
488
919
1,407
 
Total
335
914
1,249
153
5
158
488
919
1,407
Liabilities
Trade and other payables
1,161
135
1,296
5
-
5
1,166
135
1,301
 
Borrowings
1,180
19,288
20,468
(21)
2,338
2,317
1,159
21,626
22,785
 
Salaries and social security liabilities
2
-
2
-
-
-
2
-
2
 
Provisions
6
-
6
40
-
40
46
-
46
 
Financial instruments
-
78
78
-
-
-
-
78
78
 
Lease liabilities
-
1
1
-
-
-
-
1
1
 
Total
2,349
19,502
21,851
24
2,338
2,362
2,373
21,840
24,213
 
 
 
 
 
 
 
19
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2019
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
 
 
4.b.     Breakdown of accounts receivable and liabilities by adjustment clause.
 
On December 31, 2019 there are no receivables and liabilities subject to adjustment clause.
 
4.c.     Breakdown of accounts receivable and liabilities by interest clause
 
Items
Current
Non-current
Accruing interest
 
 
Accruing interest
Non-accruing interest (*)
Total
Accruing interest
Non-accruing interest (*)
Total
Non-accuinginterest
Total
Fixed rate
Floating rate
Fixed rate
Floating rate
Fixed rate
Floating rate
 
 
Accounts receivables
Trade and other receivables
117
581
551
1,249
-
-
158
158
117
581
709
1,407
 
Total
117
581
551
1,249
-
-
158
158
117
581
709
1,407
Liabilities
Trade and other payables
-
-
1,296
1,296
-
-
5
5
-
-
1,301
1,301
 
Borrowings
18,523
1,144
801
20,468
2,209
108
-
2,317
20,732
1,252
801
22,785
 
Salaries and social security liabilities
-
-
2
2
-
-
-
-
-
-
2
2
 
Provisions
-
-
6
6
-
-
40
40
-
-
46
46
 
Financial instruments
-
-
78
78
-
-
-
-
-
-
78
78
 
Lease liabilities
1
-
-
1
-
-
-
-
1
-
-
1
 
Total
18,524
1,144
2,183
21,851
2,209
108
45
2,362
20,733
1,252
2,228
24,213
 
(*) Includes the balance as of 12.31.2019 of the interest payable corresponding to the loans.
 
 
 
 
 
 
 
 
20
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2019
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
 
5.             Related parties.
 
a.
Interest in related parties:
 
 
Name of the entity
% ownership interest of the Group
Entity's with direct ownership interest of IRSA:
 
IRSA CP
79.27%
E-commerce Latina S.A.
95.13%
Efanur S.A.
100.00%
Hoteles Argentinos S.A.
100.00%
Inversora Bolívar S.A.
95.13%
Llao Llao Resort S.A.
50.00%
Nuevas Fronteras S.A.
76.34%
Palermo Invest S.A.
97.00%
Ritelco S.A.
100.00%
Tyrus S.A.
100.00%
Liveck S.A.
9.76%
 
 
b.
Related parties debit/credit balances. See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
 
6.
Loans to Directors.
 
See Note 21 to the Unaudited Condensed Interim Separate Financial Statements.
 
7.
Physical inventory.
 
In view of the nature of the inventories, no physical inventories are performed and there are no slow turnover assets.
 
8.
Current values.
 
See Notes 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
 
9.
Appraisal revaluation of property, plant and equipment.
 
None.
 
10.
Obsolete unused property, plant and equipment.
 
None.
 
11.
Equity interest in other companies in excess of that permitted by section 31 of law N° 19,550.
 
None.

12.
Recovery values.
 
See Notes 6, 7, 8 and 10 to the Unaudited Condensed Interim Separate Financial Statements.
 
 
 
 
 
 
 
 
21
IRSA Inversiones y Representaciones Sociedad Anónima
 
Information required by Section 68 of the Buenos Aires Stock Exchange Regulations and Section 12,
Chapter III, Title IV of the National Securities Commission Regulations
Statement of Financial Position as of December 31, 2019
(Stated in millions)
Free translation from the original prepared in Spanish for publication in Argentina
13.
Insurances.
 
Insured Assets.
 
Real Estate
Insured amounts (1)
Accounting values
Risk covered
Bouchard 551
2
146
All operational risk with additional coverage and minor risks
Libertador 498
4
1,651
All operational risk with additional coverage and minor risks
Santa María del Plata
0.053
9,764
All operational risk with additional coverage and minor risks
Abril Manor House
4
5
All operational risk with additional coverage and minor risks
Catalinas Norte Plot
2
958
All operational risk with additional coverage and minor risks
Subtotal
12
12,524
 
Single policy
15,000
 
Third party liability
 
(1)
The insured amounts are in US Dollars.
 
In our opinion, the above-described insurance policies cover current risks adequately.
 
14.
Allowances and provisions that, taken individually or as a whole, exceed 2% of the shareholder´s equity.
 
None.
 
15.
Contingent situations at the date of the financial statements which probabilities are not remote and the effects on the Company´s financial position have not been recognized.
 
Not applicable.
 
16.
Status of the proceedings leading to the capitalization of irrevocable contributions towards future subscriptions.
 
Not applicable.
 
17.
Unpaid accumulated dividends on preferred shares.
 
None.
 
18.
Restrictions on distributions of profits.
 
According to Argentine law, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution.
 
In addition, according to CNV General Resolution N° 609/12, a special reserve was constituted which cannot be released to make distributions in cash or in kind. See Note 16 to the Consolidated Financial Statements at June 30, 2019.
 
Autonomous City of Buenos Aires, February 10, 2020.
 
 
 
 
 
 
 
 
22
 
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: Bolivar 108 – 1° floor
Autonomous City Buenos Aires
Tax Code No. 30-52532274-9
 
 
 
 
Introduction
 
We have reviewed the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima (hereinafter “the Company”) which included the unaudited condensed interim separate statements of financial position as of December 31, 2019, and the unaudited condensed interim separate statements of income and other comprehensive income for the six-month period and three-month period ended December 31, 2019, the unaudited condensed interim separate statements of changes in shareholders’ equity and the unaudited condensed interim separate statements of cash flows for the six-month period then ended and selected explanatory notes.
 
The balances and other information corresponding to the fiscal year ended June 30, 2019 and the interim periods within that fiscal year are an integral part of these financial statements and, therefore, they should be considered in relation to those financial statements.
 
 
Management 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 the International Financial Reporting Standards (IFRS), adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as professional accounting standards and added by the National Securities Commission (CNV) to its regulations, as approved by the International Accounting Standard Board (IASB) and , for this reason, is responsible for the preparation and presentation of the unaudited condensed interim separate financial statements above mentioned in the first paragraph according to the International Accounting Standard No 34 "Interim Financial Reporting" (IAS 34).
 
 
 
 
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina 
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS (Continued)
 
 
Scope of our review
 
Our review was limited to the application of the procedures established in the International Standard on Review Engagements ISRE 2410 "Review of interim financial information performed by the independent auditor of the entity", which was adopted as a review standard in Argentina in Technical Resolution No. 33 of the FACPCE, without modification as approved by the International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists of making inquiries of persons responsible for the preparation of the information included in the unaudited condensed interim separate financial statements, and applying analytical and other review procedures. A 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, the separate statements of income and other comprehensive income and the separate statements of cash flows of the Company.
 
 
Conclusion
 
Based on our review, nothing has come to our attention that causes us to believe that the accompanying unaudited condensed interim separate financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim financial reporting'.
 
 
Emphasis paragraph
 
Without qualifying our conclusion, we draw attention to Note 6 to these unaudited condensed interim separate financial statements.
 
 
Report on compliance with current regulations
 
In accordance with current regulations, we report about IRSA Inversiones y Representaciones Sociedad Anónima that:
 
 
a)
the unaudited condensed interim separate financial statements of IRSA Inversiones y Representaciones Sociedad Anónima are being processed for recording in the "Inventory and Balance Sheet Book", and comply, as regards those matters that are within our competence, with the provisions set forth in the Commercial Companies Law and in the corresponding 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 respects in accordance with applicable legal provisions;
 
c)
we have read the additional information to the notes to the unaudited condensed interim separate statements required by section 12 of Chapter III Title IV of the text of the National Securities Commission, on which, as regards those matters that are within our competence, we have no observations to make;
 
 
 
 
 
 
 
 
 
Free translation from the original prepared in Spanish for publication in Argentina 
 
REVIEW REPORT ON THE UNAUDITED CONDENSED
INTERIM SEPARATE FINANCIAL STATEMENTS (Continued)
 
d)
at December 31, 2019, the debt of IRSA Inversiones y Representaciones Sociedad Anónima owed in favor of the Argentina Integrated Pension System which arises from accounting records amounted to Ps. 115,590.39, which was not claimable at that date.
 
 
 
 
Autonomous City of Buenos Aires, February 10, 2020.
 
 
 
 
 
PRICE WATERHOUSE & CO. S.R.L.
 
 
                                                (Partner)
C.P.C.E.C.A.B.A. Tº 1 Fº 17
Dr. Mariano C. Tomatis
Public Accountant (UBA)
C.P.C.E.C.A.B.A. Tº 241 Fº 118
 
 
ABELOVICH, POLANO & ASOCIADOS S.R.L.
 
 
                                                (Partner)
C.P.C.E. C.A.B.A. T° 1 F° 30
José Daniel Abelovich 
Public Accountant (UBA)
C.P.C.E.C.A.B.A. T° 102 F° 191
 
 
 
 
 
 
   
 
 
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
I. Brief comment on the Company’s activities during the period, including references to significant events occurred after the end of the period.
 
 
Consolidated Results
 
(in millions of ARS)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
21,978
21,409
2.7%
42,786
39,719
7.7%
Net gain / (loss) from fair value adjustment of investment properties
-6,375
-20,471
-68.9%
3,724
-9,081
-
Profit / (Loss) from operations
-5,582
-17,118
-67.4%
7,083
-3,264
-
Depreciation and amortization
3,588
2,509
43.0%
6,912
4,627
49.4%
EBITDA(1)
-1,994
-14,609
-86.4%
13,995
1,363
926.8%
Adjusted EBITDA(1)
5,766
5,459
5.6%
11,656
10,041
16.1%
(Loss) / Profit for the period
-7,423
-18,492
-59.9%
4,857
-8,363
-
Attributable to equity holders of the parent
-5,108
-17,018
-70.0%
-1,421
-8,093
-82.4%
Attributable to non-controlling interest
-2,315
-1,474
57.1%
6,278
-270
-
(1)
See Point XIX: EBITDA Reconciliation
 
 
Company’s income increased by 7.7% during the first half of fiscal year 2020 as compared to the same period of 2019, while Adjusted EBITDA increased 16.1% reaching ARS 11,656 million, ARS 3,442 million from Argentina Business Center, that decreased 5.5%, and ARS 8,214 million from Israel Business Center, that increased by 28.4% mainly due to an increase in the EBITDA of Telecommunications segment (Cellcom) as a consequence of the impact of IFRS 16 implementation: leases costs are now included in Amortizations.
 
 
Profit for the period under review reached a gain of ARS 4,857 million compared to a ARS 8,363 million loss registered in the same period of 2019, mainly explained by higher results from changes in the fair value of investment properties in the Argentine business center and the result from the deconsolidation of Gav-Yam due to the loss of control, offset by lower results of Clal's market valuation and the impairment of Mehadrin´ shares valued at market value in the Israel business center.
 
 
Argentina Business Center
 
II. Shopping Malls (through our subsidiary IRSA Propiedades Comerciales S.A.)
 
During the first half of fiscal year 2020, our tenants’ sales reached ARS 45,183 million, 0.7% lower, in real terms, than in the same period of 2019 but increasing 4.8% during the second quarter, period in which there was a higher consumption recovery in our Shopping Malls driven by “Ahora 12” and “Ahora 18” incentive measures. Considering same Shopping Malls, that is, excluding Buenos Aires Design in fiscal year 2019, tenants’ sales increased 0.4% during the first half of 2020 and 5.6% in the second quarter.
 
Our portfolio’s leasable area totaled 332,812 sqm during the quarter, in line with the same period of previous fiscal year. Portfolio’s occupancy remained stable at approximately 95.0%, lower than in the beginning of the previous fiscal year, mainly because of Walmart's anticipated exit from Dot Baires Shopping. Excluding the effect of the remaining vacant sqm on the surface previously occupied by Walmart, occupancy reached 97.9%.
 

Shopping Malls’ Operating Indicators
 
(in ARS million, except indicated)
IIQ 20
IQ 20
IVQ 19
IIIQ 19
IIQ 19
Gross leasable area (sqm)
332,812
332,277
332,150
332,774
332,119
Tenants’ sales (3 months cumulative)
24,648
20,537
20,587
17,064
23,515
Occupancy
95.0%
94.3%
94.7%
94.5%
94.9%
 
 
 
 
 
 
 
 
1
 
  IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019


Shopping Malls’ Financial Indicators
 
(in millions of ARS)
 
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues from sales, leases and services
1,939
2,210
-12.3%
3,644
4,207
-13.4%
Net (loss) / gain from fair value adjustment on investment properties
-2,368
-10,121
-76.6%
-1,876
-13,663
-86.3%
Profit / (Loss) from operations
-990
-8,327
-88.1%
702
-10,465
-
Depreciation and amortization
41
28
46.4%
72
62
16.1%
EBITDA (1)
-949
-8,299
-88.6%
774
-10,403
-107.4%
Adjusted EBITDA (1)
1,419
1,822
-22.1%
2,650
3,260
-18.7%
(1)
See Point XIX: EBITDA Reconciliation
 
 
Income from this segment decreased 13.4% during the first half of fiscal year 2020, compared with same period of previous fiscal year, mainly due to the impact of fix components that did not accompany the semester tenants sales recovery such as base rents that decreased 20.2% in real terms and admission rights that decreased 5.8%, as well as the inclusion in the previous fiscal year of an extraordinary income of ARS 135 million as compensation for Walmart’s contract termination in Dot Baires Shopping. Costs, administrative and marketing expenses (SG&A) of the segment decrease by approximately 6.0%. Adjusted EBITDA reached ARS 2,650 million, 18.7% lower than the same period of fiscal year 2019, mainly due to higher commercial discounts granted during the first half of fiscal year 2020. Adjusted EBITDA margin, excluding income from expenses and collective promotion fund, was 72.7%, 4.8 bps lower than in the same period of previous fiscal year.
 
 
Operating data of our Shopping Malls
 
 
Date of opening
Location
Gross Leasable Area sqm (1)
Stores
Occupancy Rate (2)
IRSA CP’s Interest (3)
Alto Palermo
Dec-97
City of Buenos Aires
18,655
136
99.1%
100%
Abasto Shopping(4)
Nov-99
City of Buenos Aires
36,760
164
98.1%
100%
Alto Avellaneda
Dec-97
Province of Buenos Aires
38,330
129
94.7%
100%
Alcorta Shopping
Jun-97
City of Buenos Aires
15,725
114
98.6%
100%
Patio Bullrich
Oct-98
City of Buenos Aires
11,396
89
94.4%
100%
Buenos Aires Design(5)
Nov-97
City of Buenos Aires
-
-
-
-
Dot Baires Shopping
May-09
City of Buenos Aires
48,805
167
77.8%
80%
Soleil
Jul-10
Province of Buenos Aires
15,156
79
99.0%
100%
Distrito Arcos
Dec-14
City of Buenos Aires
14,335
65
100.0%
90.0%
Alto Noa Shopping
Mar-95
Salta
19,311
86
99.5%
100%
Alto Rosario Shopping(4)
Nov-04
Santa Fe
33,681
141
98.9%
100%
Mendoza Plaza Shopping
Dec-94
Mendoza
43,065
129
98.4%
100%
Córdoba Shopping
Dec-06
Córdoba
15,361
104
99.3%
100%
La Ribera Shopping
Aug-11
Santa Fe
10,530
68
96.0%
50%
Alto Comahue
Mar-15
Neuquén
11,702
95
96.6%
99.95%
Patio Olmos(6)
Sep-07
Córdoba
 
 
 
 
Total
 
 
332,812
1,566
95.0%
 
(1) Corresponds to gross leasable area in each property. Excludes common areas and parking spaces.
(2) Calculated dividing occupied square meters by leasable area as of the last day of the fiscal period.
(3) Company’s effective interest in each of its business units.
(4) Excludes Museo de los Niños (3,732 square meters in Abasto and 1,261 square meters in Alto Rosario).
(5) End of concession December 5, 2018
(6) IRSA CP owns the historic building of the Patio Olmos shopping mall in the Province of Córdoba, operated by a third party.
 
 
 
 
 
 
 
2
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
Cumulative tenants’ sales as of December 31
 
(per Shopping Mall, in ARS. million)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Alto Palermo
3,190
2,930
8.9%
5,739
5,558
3.3%
Abasto Shopping
3,081
3,074
0.2%
5,722
6,051
-5.4%
Alto Avellaneda
2,801
2,794
0.3%
5,114
5,424
-5.7%
Alcorta Shopping
1,947
1,737
12.1%
3,390
3,184
6.5%
Patio Bullrich
1,260
1,166
8.1%
2,235
2,042
9.5%
Buenos Aires Design(1)
-
169
-100.0%
-
495
-100.0%
Dot Baires Shopping
2,509
2,376
5.6%
4,464
4,647
-3.9%
Soleil
1,259
1,205
4.5%
2,385
2,344
1.7%
Distrito Arcos
1,461
1,176
24.2%
2,680
2,202
21.7%
Alto Noa Shopping
971
974
-0.3%
1,869
1,941
-3.7%
Alto Rosario Shopping
2,478
2,213
12.0%
4,530
4,332
4.6%
Mendoza Plaza Shopping
1,681
1,686
-0.3%
3,293
3,401
-3.2%
Córdoba Shopping
793
791
0.3%
1,424
1,477
-3.6%
La Ribera Shopping(2)
475
499
-4.8%
943
1,006
-6.3%
Alto Comahue
742
725
2.3%
1,395
1,380
1.1%
Total
24,648
23,515
4.8%
45,183
45,484
-0.7%
(1) End of concession December 5.2018
(2) Through our joint venture Nuevo Puerto Santa Fe S.A.
 
Cumulative tenants’ sales per type of business
 
(per Type of Business. in ARS million)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Anchor Store
1,333
1,283
3.9%
2,418
2,449
-1.3%
Clothes and Footwear
14,382
13,910
3.4%
25,482
25,542
-0.2%
Entertainment
487
480
1.5%
1,343
1,345
-0.1%
Home
514
497
3.4%
917
1,085
-15.5%
Restaurant
2,339
2,277
2.7%
4,846
4,943
-2.0%
Miscellaneous
3,479
2,995
16.2%
6,047
5,737
5.4%
Services
251
235
6.8%
493
534
-7.7%
Electronic appliances
1,863
1,838
1.4%
3,637
3,849
-5.5%
Total
24,648
23,515
4.8%
45,183
45,484
-0.7%
 
Detailed Revenues as of December 31
 
(in ARS million) 
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Base Rent (1)
831
1,034
-19.6%
1,686
2,113
-20.2%
Percentage Rent
652
516
26.4%
1,060
912
16.3%
Total Rent
1,481
1,550
-4.4%
2,745
3,023
-9.2%
Revenues from non-traditional advertising
49
64
-23.0%
95
111
-14.2%
Admission rights
241
225
7.4%
455
483
-5.8%
Fees
23
32
-27.1%
47
57
-18.9%
Parking
91
111
-18.2%
190
240
-20.6%
Commissions
46
73
-37.1%
92
122
-24.8%
Others
8
155
-95.0%
20
171
-88.3%
Subtotal (2)
1,939
2,210
-12.3%
3,644
4,207
-13.4%
Expenses and Collective Promotion Funds
733
719
2.0%
1,423
1,487
-4.3%
Total
2,672
2,929
-8.8%
5,067
5,694
-11.0%
(1)
Includes Revenues from stands for ARS 205.9 million cumulative as of December 2019
(2)
Does not include Patio Olmos.
 
 
 
 
 
 
 
 
3
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
III. Offices
 
 
The A+ office market in the City of Buenos Aires remains robust even after the period of highest exchange volatility in recent years. The price of Premium commercial spaces slightly raised at USD 4,900 per square meter while rental prices slightly decreased at USD 27.2 when compared with same period of previous fiscal year. per square meter for the A+ segment. The vacancy of the premium segment reached 7.6%.
 
As concerns the A+ office market in the Northern Area, we have noted a significant improvement in the price of units during the last 10 years, and we believe in its potential during the next years. Nevertheless, rental prices show a downward trend around USD 26.0 per square meter.
 
 
Sale and Rental Prices of A+ Offices – City of Buenos Aires
 
Source: LJ Ramos
 
 
Sale and Rental Prices of A+ Offices – Northern Area
 
Source: LJ Ramos
 
 
Gross leasable area was 115,639 sqm as of the second three-month period of fiscal year 2020, highly increased when compared to the same period of previous year due to the inauguration of the Zetta building in May 2019.
 
Portfolio average occupancy slightly recovers compared to the last two quarters reaching 88.7%, despite it is lower than the recorded in the same period of last fiscal year mainly due to higher vacancy in our class B offices, Suipacha 661 and Philips. Considering our premium portfolio (class A+&A), the occupancy reached 97.1%. The average rental price reached USD 26.9 per sqm in line with previous quarters.
 
 
Offices’ Operating Indicators
 
 
IIQ 20
IQ 20
IVQ 19
IIIQ 19
IIQ 19
Leasable area
115,639
115,640
115,378
83,205
83,213
Total Occupancy
88.7%
88.1%
88.3%
91.4%
90.0%
Class A+ & A Occupancy
97.1%
96.6%
97.2%
95.0%
93.1%
Class B Occupancy
47.5%
46.2%
45.0%
79.6%
79.6%
Rent USD/sqm
26.9
26.6
26.4
26.3
27.0
 
 
 
 
 
4
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
Offices’ Financial Indicators
 
(in ARS million) 
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues from sales, leases and services
523
455
14.9%
1,095
840
30.4%
Net gain from fair value adjustment on investment properties, PP&E e inventories
-2,271
-7,961
-71.5%
3,326
3,863
-13.9%
Profit from operations
-1,888
-7,623
-75.2%
4,178
4,486
-6.9%
Depreciation and amortization
15
2
650.0%
21
9
133.3%
EBITDA(1)
-1,873
-7,621
-75.4%
4,199
4,495
-6.6%
Adjusted EBITDA (1)
398
340
17.1%
873
632
38.1%
(1)
See Point XIX: EBITDA Reconciliation
 
In real terms, during the first half of fiscal year 2020, revenues from the offices segment increased by 30,4% compared to the same period of 2019. Adjusted EBITDA from this segment grew 38.1% compared to the same period of the previous year due to the positive impact of the devaluation in our dollar-denominated contracts and the effect of inauguration and income flattening of the new Zetta building, EBITDA margin was 79.7%, 4.5 bps higher than the same period of previous year.
 
Below is information on our Office segment and other rental properties as of December 31, 2019. Also, amended comparative information as of June 30, 2019, is included:
 
 
Date of Acquisition
IRSA’s Effective Interest
As of December 31, 2019
As of June 30, 2019
Gross Leaseable Area (sqm) (1)
Occupancy (2)
Gross Leaseable Area (sqm) (1)
Occupancy (2)
Offices(3)
 
 
 
 
 
 
Edificio República
04/28/08
100%
19,885
92.6%
19,885
95.2%
Torre Bankboston
08/27/07
100%
14,865
96.4%
14,865
93.5%
Intercontinental Plaza
11/18/97
100%
2,979
100.0%
2,979
100.0%
Bouchard 710
06/01/05
100%
15,014
100.0%
15,014
100.0%
Suipacha 652/64
11/22/91
100%
11,465
31.2%
11,465
44.6%
Dot Building
11/28/06
80%
11,242
100.0%
11,242
100.0%
Philips Building
06/05/17
100%
8,016
70.8%
7,755
45.7%
Zetta Building
05/06/19
80%
32,173
97.5%
32,173
97.5%
Subtotal Offices
 
N/A
115,639
88.7%
115,378
88.3%
 
 
 
 
 
 
 
Other Properties
 
 
 
 
 
 
Santa María del Plata S.A
10/17/97
100%
116,100
17.3%
116,100
25.9%
Nobleza Piccardo (4)
05/31/11
50.0%
109,610
22.5%
109,610
78.4%
Other Properties (5)
N/A
N/A
12,292
35.6%
12,292
35.6%
Subtotal Other Properties
 
N/A
238,002
20.6%
238,002
50.6%
 
 
 
 
 
 
 
Total Offices and Others
 
N/A
353,641
42.9%
353,380
62.9%
(1) Corresponds to the total leasable surface area of each property. Excludes common areas and parking spaces.
(2) Calculated by dividing occupied square meters by leasable area.
(3) Through IRSA CP.
(4) Through Quality Invest S.A.
(5) Includes the following properties: Dot Adjoining Plot, Intercontinental plot of land, Anchorena 665, Puerto Retiro, Casona Abril, Constitución 1111 and Rivadavia 2774.
 
IV. Sales and Developments
 
(in millions of ARS)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
392
477
-17.8%
460
515
-10.7%
Net gain from fair value adjustment on investment properties
-1,670
-4,064
-58.9%
2,544
197
1.191.4%
Profit from operations
-1,590
-3,862
-58.8%
2,538
344
637.8%
Depreciation and amortization
3
3
-
5
5
-
Barter Agreements result
239
403
-40.7%
239
403
-40.7%
EBITDA(1)
-1,587
-3,859
-58.9%
2,543
349
628.7%
Adjusted EBITDA(1)
-156
-198
-21.2%
-240
-251
-4.4%
(1)
See Point XIX: EBITDA Reconciliation
   
 
 
 
 
5
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
   
 
Revenues from the “Sales and Development” segment decreased 10.7% during the first half of fiscal year 2020 compared to the same period of previous year, due to the recognition in the previous fiscal year of the sale of a plot made by Zetol. Adjusted EBITDA of the segment was ARS 240 million loss, compared to ARS 251 million loss in the same period of fiscal year 2019.
 
 
V. CAPEX (through our subsidiary IRSA Propiedades Comerciales S.A.)
 
 
Alto Palermo Expansion
 
 
We keep working on the expansion of Alto Palermo shopping mall. the shopping mall with the highest sales per square meter in our portfolio. that will add a gross leasable area of approximately 3,900 square meters and will consist in moving the food court to a third level by using the area of an adjacent building acquired in 2015. Work progress as of December 31 was 51.0% and construction works are expected to be finished by July 2020.
 
 
200 Della Paolera - Catalinas building
 
 
The building under construction will have 35,000 sqm of GLA consisting of 30 office floors and 316 parking spaces and is located in the “Catalinas” area in the City of Buenos Aires, one of the most sought-after spots for Premium office development in Argentina. The company owns 30,832 square meters consisting of 26 floors and 272 parking spaces in the building. The total estimated investment in the project amounts to ARS 2,600 million and as of December 31, 2019. work progress was 86.0%. As of today, we have 38% of the IRSA CP's own GLA sqm with signed lease agreements and there are good commercialization prospects for the rest of the surface.
 
 
VI. Hotels
 
 
During the first half of fiscal year 2020, Hotels segment recorded a decrease in revenues of 12.8% mainly due to the decrease in the rate and the growth of the vacancy of Libertador hotel after the company acquisition of 20% of the ownership of Sheraton and began the operation of the hotel on its own. The segment’s EBITDA reached ARS 332 million during the period under review, 29.2% lower than in the previous fiscal year, mainly because the impact during IIQ19 of the G-20 in Intercontinental as well as the event of the Emir of Qatar in Llao Llao.
 
 
IIQ 20
IQ 20
IVQ 19
IIIQ 19
IIQ 19
Average Occupancy
68.1%
61.6%
65.2%
69.3%
68.5%
Average Rate per Room (USD/night)
180
163
197
209
205
 
 
(in millions of ARS)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
694
816
-15.0%
1,268
1,454
-12.8%
Profit / (loss) from operations
172
275
-37.5%
241
398
-39.4%
Depreciation and amortization
55
35
57.1%
91
71
28.2%
EBITDA
227
310
-26.8%
332
469
-29.2%
 
The following is information on our hotels segment as of December 31, 2019:
 
Hotels
Date of Acquisition
IRSA’s Interest
Number of rooms
Occupancy(1)
Average Price per Room USD. (2)

Intercontinental (3)
11/01/1997
76.34%
313
77.2%
141
Libertador (4)
03/01/1998
100.00%
200
65.0%
112
Llao Llao (5)
06/01/1997
50.00%
205
57.1%
337
Total
-
-
718
68.1%
180
(1)
Accumulated average in the three-month period.
(2)
Accumulated average in the three-month period.
(3)
Through Nuevas Fronteras S.A. (Subsidiary of IRSA).
(4)
Through Hoteles Argentinos S.A.
(5)   Through Llao Llao Resorts S.A.
 
 
 
 
 
 
6
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
VII. International
 
 
Lipstick Building, New York, United States
 
 
The Lipstick Building is a landmark building in the City of New York, located at Third Avenue and 53th Street in Midtown Manhattan, New York. Architects John Burgee and Philip Johnson (Glass House and Seagram Building, among other renowned works) designed it and it is named after its elliptical shape and red façade. Its gross leasable area is approximately 58,000 sqm and consists of 34 floors.
 
As of December 31, 2019, the building’s occupancy rate was 95.6%, thus generating an average rent of USD 78.3 per sqm.
 
Lipstick
Dec-19
Dec-18
YoY Var
Gross Leasable Area (sqm)
58,092
58,092
-
Occupancy
95.6%
96.9%
-1.3 p,p
Rental price (USD/sqm)
79.3
77.1
1.8%
 
In June 2019, an “Escrow Agreement” was signed for the sum of US $ 5.1 million, through which an option was acquired to purchase the controlling position on one of the lands where the Lipstick was built. This option expired on August 30, and the owner of the ground lease requested the transfer of the funds deposited in guarantee in his favor. The company will continue negotiations trying to obtain funding sources that allow us to execute the purchase. After the end of the period, on February 7, 2020, the termination of the loan with RBC was executed for an amount of USD 1.6 million.
 
 
Investment in Condor Hospitality Inc.
 
 
On July 19, 2019, Condor signed an agreement and merger plan with a company not related to the group. As agreed, each Condor ordinary share, whose nominal value is USD 0.01 per share will be cancelled before the merger and will become the right to receive a cash amount equivalent to USD 11.10 per ordinary share. Additionally, in accordance with the terms and conditions of the merger agreement, each Series E convertible share will be automatically cancelled and will become entitled to receive a cash amount equal to USD 10.00 per share.
  
It is estimated that the operation will be developed during the third quarter of fiscal year 2020. As of the date of these financial statement presentation, the group owned 2,245,099 common shares and 325,752 preferred E shares.
 
 
 
 
 
 
 
 
 
7
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
VIII. Corporate
 
(in millions of ARS)
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
-
-
-
-
-
-
Loss from operations
-105
-254
-58.7%
-177
-326
-45.7%
Depreciation and amortization
1
2
-50.0%
2
2
-
EBITDA
-104
-252
-58.7%
-175
-324
-46.0%
 
IX. Financial Operations and Others
 
 
Interest in Banco Hipotecario S.A. (“BHSA”) through IRSA
 
BHSA is a leading bank in the mortgage lending industry, in which IRSA held an equity interest of 29.91% as of December 31, 2019. During the first half of 2020, the investment in Banco Hipotecario generated a ARS 993 million gain compared to a ARS 121 million loss during the same period of 2019. For further information, visit http://www.cnv.gob.ar or http://www.hipotecario.com.ar.
 
 
Israel Business Center
 
 
X. Investment in IDB Development Corporation and Discount Investment Corporation (“DIC”)
 
As of December 31, 2019, IRSA’s indirect equity interest in IDB Development Corp. was 100% of its stock capital and in Discount Corporation Ltd. (“DIC”) was 82.31% of its stock capital.
  
Within this operations center, the Group operates the following segments:
 
 
●
The “Real Estate” segment mainly includes the assets and profit from operations derived from the business related to the DIC subsidiary, Property & Building (“PBC”). Through PBC, the Group operates rental and residential properties in Israel, United States and other locations in the world, and executes commercial projects in Las Vegas, United States of America.
 
●
The “Telecommunications” segment includes the assets and profit from operations derived from the business related to the subsidiary Cellcom. Cellcom is supplier of telecommunication services and its main businesses include the provision of cellular and fixed telephone, data and Internet services, among others.
  
●
The “Insurance” segment includes the investment in Clal. This company is one of the largest insurance groups in Israel, whose businesses mainly comprise pension and social security insurance and other insurance lines. The Group does not hold a controlling interest in Clal;therefore, it is not consolidated on a line-by-line basis, but presented under a single line as a financial instrument at fair value, as required under IFRS for the current circumstances in which no control is exercised.
 
●
The “Others” segment includes the assets and profit from other miscellaneous businesses, such as technological developments, tourism, oil and gas assets, electronics, and other sundry activities.
 
 
 
 
 
 
 
8
  
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
Segment Results
 
Following is the comparative information by segments of our Israel Business Center for the period between July 1, 2019 and December 31, 2019.
 
Real Estate (Property & Building - PBC) - ARS MM
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
3,039
3,338
-9.0%
6,277
6,153
2.0%
Result from fair value adjustment of investment properties
-164
487
-133.7%
-164
487
-133.7%
Profit from operations
-429
1,562
-127.5%
610
2,399
-74.6%
Depreciation and amortization
46
13
253.8%
61
25
144.0%
Devaluation of associates and joint ventures
1,621
0
100.0%
1,621
0
100.0%
EBITDA
-383
1,575
-124.3%
671
2,424
-72.3%
Adjusted EBITDA
-219
1,088
-120.1%
2,456
1,937
26.8%
 
Revenues and operating income of the Real Estate segment through the subsidiary PBC reached in the first half of fiscal year 2020 an amount of ARS 6,277 million and ARS 610 million, respectively, and for the same period ended on December 31, 2018, reached ARS 6,153 million and ARS 2,399 million respectively. This is mainly due to an average real depreciation of 13.5% of the Argentine peso against the Israeli shekel, offset by an appreciation of the Shekel against the dollar, which makes the income in Shekels for rents lower. At the operational level, the segment suffered Mehadrin's impairment as a result of the decrease in the share price.
 
Telecommunications (Cellcom) ARS MM
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
14,096
12,782
10.3%
27,595
24,018
14.9%
(Loss) / Profit from operations
-479
196
-344.4%
-168
43
-490.7%
Depreciation and amortization
3,287
2,420
35.8%
6,467
4,424
46.2%
EBITDA
2,808
2,616
7.3%
6,299
4,467
41.0%
 
The Telecommunications segment carried out by "Cellcom" reached ARS 27,595 million of revenue and an operating loss of ARS 168 million in the six-month period of fiscal year 2020. For the same period of fiscal year 2019, revenues were ARS 24,018 million and the operating gain was ARS 43 million. This is mainly due to an increase in revenues due to an increase in equipment sold, together with a 2.8% increase in fixed line revenues. At EBITDA level, lease costs were reduced because these are charged to financial results due to the implementation of IFRS 16.
 
Others (other subsidiaries) ARS MM
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
492
405
21.5%
895
749
19.5%
Loss from operations
-143
-357
-59.9%
-190
-31
512.9%
Depreciation and amortization
118
16
637.5%
147
37
297.3%
EBITDA
-25
-341
-92.7%
-43
6
-816.7%
 
The "Others" segment reached revenues of ARS 895 million and an operating loss of ARS 190 million in the first half of fiscal year 2020. During the same period of fiscal year 2019, it reached revenues of ARS 749 million and an operating loss of ARS 31 million. This is mainly due an increase in Epsilon and Bartan's income. Additionally, during the first half of the FY 2019 there were sales of associated companies while in the current period it did not register this kind of sales.
 
 
 
 
 
 
 
9
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
Corporate (DIC, IDBD and Dolphin) ARS MM
IIQ 20
IIQ 19
YoY Var
6M 20
6M 19
YoY Var
Revenues
-
-
-
-
-
-
(Loss) / Profit from operations
-259
202
-228.2%
-498
-9
5,433.3%
Depreciation and amortization
-
-
-
-
-
-
EBITDA
-259
202
-228.2%
-498
-9
5,433.3%
 
The "Corporate" segment reached in the six-month period of fiscal year 2020 an operating loss of ARS 498 million and for the same period of fiscal year 2019, an operating loss of ARS 9 million. This is mainly due to the fact that during the first half of fiscal year 2019 we had positive results from the sale of Shufersal shares.
 
Regarding “Clal”, the Group values its holding in the company as a financial asset at market value. The valuation of Clal's shares as of 12/31/2019 amounted to ARS 7,337 million.
 
 
XI. EBITDA by Operations Center (ARS million)
 
Operations Center in Argentina
 
IIQ FY 20
Shopping Malls
Offices
Sales and Developments
Hotels
International
Corporate
Others
Total
Profit / (loss) from operations
702
4,178
2,538
241
-61
-177
180
7,601
Depreciation and amortization
72
21
5
91
1
2
22
214
EBITDA
774
4,199
2,543
332
-60
-175
202
7,815
 
IIQ FY 19
Shopping Malls
Offices
Sales and Developments
Hotels
International
Corporate
Others
Total
Profit / (loss) from operations
-10,464
4,486
344
398
-44
-326
-219
-5,825
Depreciation and amortization
61
9
5
71
2
2
-2
148
EBITDA
-10,403
4,495
349
469
-42
-324
-221
-5,677
EBITDA Var
-107.4%
-6.6%
628.7%
-29.2%
42.9%
-46.0%
-191.4%
-237.7%
 
Israel Business Center
 
IIQ FY 20
Real Estate
Tele-communications
Others
Corporate
Total
Profit / (loss) from operations
610
-168
-190
-498
-246
Depreciations and amortizations
61
6,467
147
0
6,675
EBITDA
671
6,299
-43
-498
6,429
Net unrealized gain from fair value adjustment of investment properties
-
-
-
-
-
Adjusted EBITDA
671
6,299
-43
-498
6,429
 
 
 
 
 
 
 
 
10
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
IIQ FY 19
Real Estate
Tele-communications
Other
Corporate
Total
Profit / (loss) from operations
2,399
43
-31
-9
2,402
Depreciations and amortizations
25
4,424
37
0
4,486
EBITDA
2,424
4,467
6
-9
6,888
Net unrealized gain from fair value adjustment of investment properties
-
-
-
-
-
Adjusted EBITDA
2,424
4,467
6
-9
6,888
EBITDA Var
-72.3%
41.0%
-816.7%
5,433.3%
-6.7%
Adjusted EBITDA Var
-72.3%
41.0%
-816.7%
5,433.3%
-6.7%
 
 
XII. 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
41,298
-40
1,540
-12
42,786
Costs
-24,857
21
-1,611
3
-26,444
Gross profit
16,441
-19
-71
-9
16,342
Net loss from fair value adjustment of investment properties
3,977
-253
-
-
3,724
General and administrative expenses
-4,662
7
-
15
-4,640
Selling expenses
-5,765
4
-25
-
-5,786
Other operating results, net
-2,636
14
71
-6
-2,557
Profit from operations
7,355
-247
-25
-
7,083
Share of loss of associates and joint ventures
-1,852
181
-
-
-1,671
Profit before financial results and income tax
5,503
-66
-25
-
5,412
*Includes Puerto Retiro, CYRSA, Nuevo Puerto Santa Fe and Quality (San Martín plot).
 
 
XIII. Financial Debt and Other Indebtedness
  
Operations Center in Argentina
 
The following table contains a breakdown of our indebtedness as of December 31, 2019:
 
Description
Currency
Amount (1)
Interest Rate
Maturity
Bank overdrafts
ARS
20.7
Floating
< 360 days
Series II Non-Convertible Notes (USD)
USD
71.4
11.50%
Jul-20
Series II Non-Convertible Notes (CLP)
CLP
42.1
10.50%
Aug-20
Series I Non-Convertible Notes
USD
181.5
10.00%
Nov-20
Loan with IRSA CP
USD
26.5
-
Mar-22
Other debt
USD
26.5
-
Feb-22
IRSA’s Total Debt
 
368.7
 
 
Cash & Cash Equivalents + Investments (3)
USD
1.2
 
 
IRSA’s Net Debt
USD
367.5
 
 
Bank overdrafts
ARS
7.9
 -
 < 360 d
IRCP NCN Class IV(2)
USD
133.9
5.0%
Sep-20
PAMSA loan
USD
35.0
Fixed
Feb-23
IRSA CP NCN Class II
USD
360.0
8.75%
Mar-23
IRSA CP’s Total Debt
 
536.8
 
 
Cash & Cash Equivalents + Investments (3)
 
189.9
 
 
IRSA CP’S Net Debt
 
346.9
 
 
(1) 
Principal amount in USD (million) at an exchange rate of ARS 59.89/USD, without considering accrued interest or eliminations of balances with subsidiaries.
(2) 
Net of repurchase.
(3) 
“Cash & Cash Equivalents plus Investments” includes Cash & Cash Equivalents and Investments in Current Financial Assets.
 
 
 
 
11
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
Israel Business Center
 
Financial debt as of December 31, 2019:
 
Indebtedness(1)
Net (NIS million)
IDBD’s Total Debt
1,817
DIC’s Total Debt
2,875
(1) IDBD's cash balance includes a sum of NIS 192M as collateral for the equity-swap transaction
 
XIV. Subsequent Material Events
 
Operations Center in Argentina
 
October and December 2019: General Ordinary and Extraordinary Shareholders’ Meetings
 
 
At the General Ordinary and Extraordinary Shareholders’ Meeting held on October 30, 2019, the following matters, inter alia, were resolved:
 
 
●
Distribution of a dividend in kind for ARS 480 million in shares of IRSA Propiedades Comerciales, subsidiary of IRSA.
 
●
Fees payable to the Board of Directors and Supervisory Committee for fiscal year 2019 ended as of June 30, 2019.
 
●
Renewal of regular and alternate Directors due to expiration of their terms and appointment of three new independent directors. Acceptance of the resignation of a regular director.
 
●
Increase in the amount of the Global Note Program for up to USD 250 million. Delegation on the Board of Directors of the broadest powers to implement and determine the terms and conditions of the program
 
●
Stock Capital increase for up to par value of ARS 200 million through the issuance of up to 200 million common book-entry shares and delegation on the Board of Directors of the power to determine all the terms and conditions of the issuance.
 
●
Incentive plan for employees. management and directors to be integrated without premium for up to 1% of the Capital Stock.
 
 
On December 12, 2019, a new Shareholder’s meeting took place, approving the following matters:
 
● Consideration of the amendment of section twelfth article of the Bylaws.
 
● Determination of the number and consideration of appointment of regular and alternate directors for the term of three fiscal years.
 
 
November 2019: Dividend distribution
 
On November 14, 2019, the company distributed a dividend in kind in shares of IRSA Propiedades Comerciales S.A. (IRSA PC), a subsidiary of the Company, for up to the amount of ARS 480,000,000 charged to the fiscal year ended June 30, 2019
 
The dividend in kind corresponds to a gross dividend of 0.00404623926578 IRSA Propiedades Comerciales S.A.’s shares per each IRSA Inversiones y Representaciones Sociedad Anónima’s share (0.0404623926578 IRSA Propiedades Comerciales S.A.’s shares per IRSA Inversiones y Representaciones Sociedad Anónima’s GDS).
 
 
Operations Center in Israel
 
November and December 2019: Sale of Clal shares and Capital Increase
 
On May 2, 2019, IDBD had entered into an agreement with an unrelated buyer (a company owned by Eyal Lapidot) through which it granted an option to acquire Clal shares representing approximately 4.99% of its issued capital (and not less than 3%), at a price of NIS 47.7 per share. Subject to the exercise of the option by said buyer, the price would
 
 
 
 
 
 
 
 
12
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
  
be paid 10% in cash and the rest through a loan that would be provided to the buyer by IDBD and / or by a related entity and / or by a banking corporation and / or financial institution, under the agreed conditions.
 
On November 7, 2019, IDB completed the sale transaction and the loan was granted by a financial entity. It should be clarified that the 2,771,309 Clal shares sold were subject to a swap transaction between IDB and a financial entity, which ended with the Company's notice to that entity.
  
On December 16, 2019, Clal made a public capital increase of 12,066,000 shares at a price of NIS 53.87 per share, from which IDB did not participate. Additionally, IDB sold 200,000 shares of Clal at a price of NIS 53.95 per share, representative of 0.3% of the new share capital.
 
On December 18, 2019, IDB sold 617,017 shares of Clal at a price of NIS 53.77 per share representative of 0.9% of the share capital.
 
At the date of issuance of the financial statements, IDBD holds on Clal an 8.5% directly and additionally a 7.1% through swap contracts.
 
 
February 2020: Dolphin Netherlands – Guarantee granted
 
 
After the end of the period, on February 4, 2020, Dolphin Netherlands granted financial entities, through which IDB carried out Clal's stock swap transactions in August and November 2018, guarantees for approximately NIS 11 million, which will be part of the committed deposits that IDB assumed as part of the terms of those transactions.
  
It should be noted that, in relation to Dolphin Netherlands' commitment to make capital injections in IDB in three equal annual payments of NIS 70 million each, on September 2, 2019, 2020 and 2021, it is reported that:
 
● If swap transactions conclude before the deadline of the second payment (September 2, 2020), the unrealized parts of the guarantees will be returned to Dolphin Netherlands, while the parts exercised of the guarantees until that date will be considered as part of the second payment, so Dolphin Netherlands will transfer the balance of that payment to IDB.
 
● If swap transactions remain active as of September 2, 2020, Dolphin Netherlands will inject the second payment into IDB and the guarantees will be returned.
 
 
 
 
 
 
 
 
13
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
XV. Summarized Comparative Consolidated Balance Sheet
 
(in ARS million) 
12.31.2019
06.30.2019
Non-current assets
323,322
419,430
Current assets
178,207
177,754
Total assets
501,529
597,184
Capital and reserves attributable to the equity holders of the parent
34,340
40,357
Non-controlling interest
47,055
67,621
Total shareholders’ equity
81,395
107,978
Non-current liabilities
310,864
396,152
Current liabilities
109,270
93,054
Total liabilities
420,134
489,206
Total liabilities and shareholders’ equity
501,529
597,184
 
 
XVI. Summarized Comparative Consolidated Income Statement
 
 (in ARS million) 
12.31.2019
12.31.2018
Profit from operations
7,083
-3,264
Share of profit of associates and joint ventures
-1,671
-1,212
Profit from operations before financing and taxation
5,412
-4,476
Financial income
536
728
Financial cost
-10,487
-10,152
Other financial results
-5,084
-238
Inflation adjustment
206
-579
Financial results, net
-14,829
-10,241
Profit before income tax
-9,417
-14,717
Income tax
-2,365
3,312
Profit / (loss) for the period from continued operations
-11,782
-11,405
(Loss) / Profit from discontinued operations after taxes
16,639
3,042
Profit for the period
4,857
-8,363
Other comprehensive income / (loss) for the period
7,389
375
Total comprehensive income / (loss) for the period
12,246
-7,988
 
 
 
Attributable to:
 
 
Equity holders of the parent
-3,902
-8,380
Non-controlling interest
16,148
392
 
 
XVII. Summary Comparative Consolidated Cash Flow
 
(in ARS million) 
12.31.2019
12.31.2018
Net cash generated from operating activities
16,780
10,578
Net cash generated from investing activities
13,819
255
Net cash (used in) / generated from financing activities
-45,787
1,265
Net (decrease) / increase in cash and cash equivalents
-15,188
12,098
Cash and cash equivalents at beginning of year
76,098
73,045
Cash and cash equivalents reclassified to held for sale
-522
-974
Foreign exchange gain on cash and changes in fair value of cash equivalents
4,365
-2,452
Cash and cash equivalents at period-end
64,753
81,717
 
 
 
 
 
 
14
  
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
   
 
XVIII. Comparative Ratios
 
(in ARS million) 
12.31.2019
 
12.31.2018
 
Liquidity
 
 
 
 
CURRENT ASSETS
178,207
1.63
198,375
1.94
CURRENT LIABILITIES
109,270
 
102,027
 
Indebtedness
 
 
 
 
TOTAL LIABILITIES
420,134
12.23
516,602
7.95
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
34,340
 
64,991
 
Solvency
 
 
 
 
SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
34,340
0.08
64,991
0.13
TOTAL LIABILITIES
420,134
 
516,602
 
Capital Assets
 
 
 
 
NON-CURRENT ASSETS
323,322
0.64
458,260
0.70
TOTAL ASSETS
501,529
 
656,635
 
 
 
XIX. 
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, excluding barter agreement results and devaluation of Mehadrin shares.
 
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)
 
2019
2018
Profit for the period
4,857
-8,363
(Loss) / Profit from discontinued operations
-16,639
-3,042
Interest income 
-443
-436
Interest expense 
9,997
9,907
Income tax
2,365
-3,312
Depreciation and amortization 
6,912
4,627
EBITDA (unaudited) 
7,049
-619
Unrealized net gain from fair value adjustment of investment properties
-3,721
9,081
Share of profit of associates and joint ventures 
1,671
1,212
Dividends earned
-75
-66
Foreign exchange differences net 
-4,427
-2,096
(Gain) / loss from derivative financial instruments 
185
-525
Fair value gains of financial assets and liabilities at fair value through profit or loss
2978
-1,333
Inflation adjustment
-206
579
Other financial costs/income
6,820
4,211
Devaluation of Associates and joint ventures
1,621
0
Barter Agreements result
-239
-403
Adjusted EBITDA (unaudited) 
11,656
10,041
Adjusted EBITDA Margin (unaudited)(1)
27.24%
25.28%
(1) Adjusted EBITDA margin is calculated as Adjusted EBITDA, divided by revenue from sales, rents and services
 
 
 
 
 
 
15
 
IRSA Inversiones y Representaciones Sociedad Anónima
 
Summary as of December 31, 2019
 
 
XX. Brief comment on future prospects for the Fiscal Year
 
This Fiscal Year presents challenges in both operations centers: Argentina and Israel. The appreciation of international markets with respect to Argentina has become unstable as a result of the country's economic crisis and has influenced development expectations. Globally, we find the existence of trade conflicts between different countries and a slowdown in global growth that also has a negative impact on Latin America.
  
In this context, and only two months after the assumption of the new government, the economic outlook in our Argentine operations center remains uncertain. During the second semester of FY20, our subsidiary IRSA Propiedades Comerciales S.A. will keep working in order to optimize its operational efficiency, occupying its vacant sqm in Dot Baires Shopping due to Walmart's anticipated exit and will continue innovating in the latest technological trends to get closer to customers and visitors. Regarding office segment, IRCP plans to open the 9th office building of the portfolio, “200 Della Paolera”, located in Catalinas, one of the most premium corporate areas in Argentina. This building, of approximately 35,000 m2 of ABL, 318 parking lots, services and amenities, will become an emblematic icon of the city while having LEED Certification, which will validate the best environmental practices to transform operational standards of the building. The commercialization is progressing with a good occupancy forecast for its opening, scheduled for the last quarter of the FY 2020.
 
In relation to Israel Business Center, we will continue working in 2020 to improve the operating margins of each of the subsidiaries and to reduce their debt levels and the holding companies, while continuing selling Clal Insurance and those non-strategic assets of the portfolio. We rely on the value of this investment, from which we hope to obtain good results in the future.
  
On the national and international framework above mentioned, the Board of Directors of the Company will continue in the evaluation of financial, economic and / or corporate tools that allow the Company to improve its position in the market in which it operates and have the necessary liquidity to meet its obligations. Within the framework of this analysis, the indicated tools may be linked to corporate reorganization processes (merger, spin-off or a combination of both), disposal of assets in public and / or private form that may include real estate as well as negotiable securities owned by the Company, incorporation of shareholders through capital increases through the public offering of shares to attract new capital, issuance of convertible notes or subscription options or a combination of these three instruments, all as recently approved by the shareholders meeting of 10/30/2019, repurchase of shares and instruments similar to those described that are useful to the proposed objectives.
 
Considering the quality of the real estate portfolio, the diversification of our business by segment and by country and the franchise of the company to access the capital market, we are confident to continue consolidating the best portfolio in Argentina and Israel.
 
 
 
 
 
 
 
 
Saúl Zang                        
 
First Vice-Chairman in exercise of       
the presidency                    
 
 
 
 
 
 
 
16