TIDMBSP
RNS Number : 6044U
Black Sea Property PLC
30 July 2020
BLACK SEA PROPERTY PLC
("Black Sea Property" or the "Company")
Audited Results for the year ended 31 December 2019
The Board of Black Sea Property PLC is pleased to announce its
audited results for year ended 31 December 2019.
Electronic copies of the annual report will be available at the
Company's website http://www.blackseapropertyplc.com
BLACK SEA PROPERTY PLC
Alex Borrelli - Chairman +44(0) 774 702 0600
PETERHOUSE CAPITAL LIMITED
AQSE Corporate Adviser
Heena Karani and Duncan Vasey +44 (0) 207 469 0930
Chairman's Statement
I am pleased to present the financial statements of Black Sea
Property PLC ("Black Sea Property" or the "Company") for the year
ended 31 December 2019. This follows an extension granted by Aquis
Stock Exchange (AQSE) as a result of logistical issues arising from
Covid-19 restrictions and in accordance with the Stakeholder Update
released by AQSE on 31 March 2020.
The net asset value as at 31 December 2019 was EUR16,066,843 or
1.27 cents per share (2018: EUR12,002,389 or 0.95 cents per
share).
The Company generated revenues from camping reservations of
EUR671,030 (2018: EUR433,410). This resulted in earnings per share
of 0.32 cents (2018: 0.18 cents, after taking into account the
purchase gain of EUR3,759,352) after operating expenses.
Investments and Financings
Camping South Beach EOOD ("CSB")
During the period, the Company continued its reconstruction of
CSB while also marketing the development as a destination for
luxury camping holidays which resulted in further revenue
generation in the period.
However, the impact of the closure of all non-essential
businesses in Bulgaria from 13 March 2020 to combat the spread of
the Covid-19 has had a material effect on occupancy. The Bulgarian
government lifted this state of emergency on 13 May 2020 and
immediately replaced it with an "extraordinary epidemic situation".
Although internal travel is now permitted, strict regulations in
the hospitality segment have to be followed.
The seaside beaches have been opened since 1 June 2020 and the
holiday summer season started at the beginning of July. However, it
is not expected that occupancy levels which were achieved in 2019,
will be repeated this year as Bulgarians are still advised to
refrain from non-essential travel. The Company is in the process of
renegotiating the payment plans of its credit facilities.
The Directors expect CSB to benefit from the increased move
within the Bulgarian hospitality market towards camping holidays in
local markets which allow for social distancing while holidaying
within the country.
The fair value of the investment property in CSB at the yearend
was EUR16,260,000 which represents a marginal increase of EUR15,234
above the balance at the end of the previous year, but this
includes the additions during the year of EUR2,788,744 and is
stated after adjusting for the reduction in fair value of
EUR2,773,510 (note 8).
The Company was able to recognise other income of EUR1,046,962
in respect of a receivable in CSB which had previously been
impaired (note 6).
Ivan Vazov 1 Building
We are currently preparing further development proposals for the
Ivan Vazov 1 Building which will be submitted for further approvals
in due course. There is currently no letting of the building and we
expect to be in a position shortly to advance its
refurbishment.
The Company is in the process of renegotiation with Ivan Vazov 1
Bulbank for an extension of the credit repayment period by 12
months. Final draft of the Annex for the extension was agreed and
will be signed by the end of July.
The Ivan Vazov 1 Building was valued at EUR11,329,000 at 31
December 2019 (note 8).
Byala Plots of Land ("Byala")
On 27 December 2019, the Company signed a settlement agreement
for the cancellation of the sale of 23 plots of land in Byala,
located near Varna on the Black Sea Coast. The former management of
the Company had previously agreed to the sale of Byala in 2014 at a
consideration of EUR1,020,000 (including VAT) being a price level
significantly under the then market valuation. Under the terms of
the settlement agreement, the transfer of Byala was rescinded and
was restored to the Company. The Company paid a net cost of
EUR1,065,723 which included legal costs and to cover expenses and
improvements related to Byala. Byala was valued at EUR8,397,000 at
31 December 2019 (note 8).
The Directors expect to develop Byala as a further camping site
with luxury facilities, complementary to CSB, and will
significantly extend the Company's operations.
ECDC Group
In February 2020, the Company completed the acquisition of 100%
of European Convergence Development (Cayman) Limited ("ECD Cayman")
and ECD Management (Cayman) Limited from European Convergence
Development Company PLC ("ECDC") for EUR3,582,639 (note 23).
The Company also completed the acquisition of 29.85% of ECDC at
a price per share equal to its estimated net asset value of
EUR0.00168 which equates to a consideration of EUR44,855.
ECD Cayman's main assets include a 70% holding via a subsidiary
in two plots in Kraymorie, Burgas and a 100% holding in two plots
in Plovdiv, which are currently valued at a minimum of
EUR3,300,000.
The main rationale for the acquisition of interests in ECDC
Group includes: the opportunity to add two development plots
suitable for logistics/industrial development (the site in Plovdiv)
and residential, commercial or hospitality development (the site in
Kraimorie), thus diversifying BSP portfolio. Both ECD Cayman and
ECDC have established structures in place that will save time and
costs for future investments.
Financings
To enable Black Sea Property to fund the acquisition of Byala,
Mamferay Holdings Limited ("Mamferay") provided an unsecured loan
of EUR1,214,318 in addition to its current loan of EUR180,000 with
an interest rate of 2.75% per annum and for repayment by 16
December 2022. Mamferay is a wholly owned subsidiary of Phoenix
Capital Holding JSC which owns 79.99% of the shares of Phoenix
Capital Management JSC, the Company's investment adviser, and also
owns 26.94% of the shares of Black Sea Property.
Subsequent to the year end, in January 2020, the Company raised
EUR4,585,682 through a placement of 416,880,162 new ordinary shares
at EUR0.011 per share for further development of the Company's real
estate portfolio and for making investments. At the same time,
Mamferay converted its existing loans of EUR1,397,391 into
127,035,545 new ordinary shares at EUR0.011 per share. Mamferay
currently holds 488,457,561 ordinary shares representing 26.94% of
the Company's issued share capital (note 23).
BSP's suspension in trading in June 2019
Trading in the Company's shares on the NEX Growth Market (now
AQSE) was suspended on 3 June 2019 as the audited accounts were not
able to be published by 31 May 2019.
Subsequently, the Company addressed all the recommendations of
the auditors and implemented the necessary procedures:
-- Adoption of an internationally recognised reservations system;
-- Outsourcing of the accounting function to Crowe Bulgaria
Advisory Limited in order to improve the accounting and internal
control function; and
-- Utilisation of available cash resources in the Company's
normal business operations for settlement of liabilities to
contractors and suppliers.
Following publication of both the audited accounts for the year
ended 31 December 2018 and the unaudited interim results to 30 June
2019, trading in the Company's shares re-commenced on the NEX
Growth Market (now AQSE).
Annual General Meeting and Resolutions
The resolutions for the forthcoming Annual General Meeting will
be contained in a separate Notice to be issued shortly.
Outlook
The Company is not able to fully assess the impact of the
current restrictions on the results for the year ending 31 December
2020, as it is still uncertain for how long this disruption will
continue and the ongoing effect these issues will have on consumer
demand in the short and medium term particularly for its
operations. The Board is taking prudent steps to mitigate and
manage its cash flow and cost base and is confident that the
business is well equipped to withstand this near-term
uncertainty.
We believe that CSB will attract strong rental demand from both
domestic and other European customers for the current season
following our marketing campaigns. We are pleased with the overall
project design and expect the project to generate a solid revenue
stream for the Company.
We believe that the development of the plots of land at Byala
will add significantly to the Group's operations as a luxury
camping operator taking into account the increased demand for
high-class camping locations and the relatively low supply at the
Black Sea coast.
We also look forward to progressing our plans for the
refurbishment of the Ivan Vazov 1 Building during the current year
with a view to this prestigious asset, generating returns for the
Company in due course.
Signed on behalf of the Board by:
Alex Borrelli
Chairman
29 July 2020
Directors' Report for the year ended 31 December 2019
Shareholders' Interests
As at 31 December 2019, the significant shareholders of Black
Sea Property Plc ("the Company") were as follows:
Beneficial shareholder Holding Percentage
Mamferay Holdings Limited 357,814,581 28.18%
-------------
Compass Capital JSC 217,936,000 17.17%
-------------
Neo London Capital AD 372,126,806 24.82%
-------------
Capman AM 105,000,000 8.27%
There are no changes to the significant shareholders of the
Company from prior year.
Auditor
During the financial year, BDO LLP resigned and Grant Thornton
Limited was appointed as auditor in accordance with Section 80C of
the Isle of Man Companies Act 2006. Grant Thornton Limited, being
eligible, has expressed its willingness to continue in office.
Directors' interests
No current Director has an interest in the share capital of the
Company.
Directors' remuneration
Directors' remuneration comprises solely the fee payments
received by the Directors. No Directors received any benefits under
long term or short term incentive schemes.
The maximum amount of the aggregate Directors' ordinary
remuneration permitted under Article 83.1 of the Company's Articles
of Association is GBP100,000 (EUR112,130 at year-end exchange rate)
per annum, plus expenses.
Fees invoiced Fees payable Fees invoiced Fees payable
Year ended As at Year ended As at
31 Dec 2019 31 Dec 31 Dec 2018 31 Dec 2018
2018
EUR EUR EUR EUR
25,447 13,525 30,955 5,580
Alex Borrelli* 13,901
Ventsislava Altanova
(appointed 20 November
2018) 13,873 7,095 1,350 1,350
Elena Fournadjieva - - 16,775 -
(resigned 26 September
2018)
Miroslav Georgiev
(appointed 20 November
2018) 13,873 7,095 1,350 1,350
Boris Lagadinov 13,901 7,109 13,441 -
Yordan Naydenov 13,945 7,095 20,376 -
--------------
81,039 41,919 84,247 8,280
--------------- -------------- --------------- --------------
*includes 20% VAT charge.
Corporate Governance
The Company is committed to applying the highest principles of
corporate governance commensurate with its size.
While the Company is not required to comply in full with the
provisions set out in the UK Corporate Governance Code Issued by
the Financial Reporting Council, or to comment on its compliance
with the provisions of that Code, the Board is nevertheless
accountable to shareholders for the good corporate governance of
the Company.
The Board consists of five Directors and holds at least four
board meetings annually. Matters which would normally be referred
to appointed committees, such as the Audit, Remuneration and
Nomination Committees, are dealt with by the Board as a whole.
Going concern
The Group had EUR1,069,312 current assets at 31 December 2019,
the majority of which was held as cash and cash equivalents at
underlying subsidiaries.
Subsequent to the year-end the Group has raised additional
funding through a share capital raise in order to further the
development of the Company's real estate portfolio. Further details
are given below.
Accordingly, the Directors have a reasonable expectation that
the Company and the Group will continue in operational existence
for the foreseeable future, and for a period of at least 12 months
from the date of signing of these financial statements. Therefore,
the financial statements have been prepared as a going concern.
Post balance sheet events
Cash placing and debt to equity conversion
On 20 January 2020 the Company performed a share placing and
simultaneous debt to equity conversion. The overall amount raised
before expenses was EUR4,585,682, through a placement of
416,880,162 new ordinary shares of nil par value (the "Placing
Shares") at a price of EUR0.011 per Ordinary Share (the
"Placing").
In addition to the Placing, Mamferay Holdings Limited
("Mamferay") agreed to convert all its outstanding loans being
EUR1,397,391 including interest, into 127,035,545 ordinary shares
at EUR0.011 per share (the "Loan Shares").
ECDC Group acquisition
On 25 February 2020 the Company successfully completed the
acquisition of 100% of European Convergence Development (Cayman)
Limited ("ECD Cayman") and ECD Management (Cayman) Limited ("ECD
Management"), both being subsidiaries of European Convergence
Development Company PLC, Isle of Man ("ECDC"), including
outstanding receivables of EUR122,221,701 (a loan granted by ECDC
to ECD Cayman). The consideration paid for ECD Cayman and ECD
Management and the outstanding receivables was EUR3,582,639. The
Company also signed agreements for the acquisition of 29.85% of
ECDC at a price per share equal to the net asset value of the
shares of EUR0.00168.
Change in registered office address
With effect from 9th March 2020 the Company changed its
registered office to 55 Athol Street, Douglas, Isle of Man, IM1
1LA.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Group financial statements in accordance with applicable
law and regulations.
The Directors are required to prepare Group financial statements
for each financial year. The Directors have elected to prepare the
Group financial statements in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union and applicable law.
The Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and of its profit or loss for that period.
In preparing each of the Group financial statements, the Directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs;
-- assess the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that its
financial statements comply with the Isle of Man Companies Act
2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group's
website. Legislation in the Isle of Man governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Alex Borrelli
Chairman
29 July 2020
Independent Auditor's report to the shareholders of Black Sea
Property Plc
Opinion
We have audited the financial statements of Black Sea Property
Plc (the 'Company') and its subsidiary companies (the 'Group') for
the year ended 31 December 2019 which comprise the Consolidated
Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity,
Consolidated Statement of Cash Flow and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2019 and of its profit for the year then
ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the
Isle of Man Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements, including the FRC's Ethical
Standard, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Who we are reporting to
This report is made solely to the Company's members, as a body,
in accordance with the terms of our engagement. Our audit work has
been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the Company and the Company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
The Directors have prepared the financial statements on the
going concern basis as they have concluded that the Group's
financial position and net cash resources means that it is
realistic to do so. The Directors have also concluded that there
are no material uncertainties that could have cast significant
doubt over its ability to continue as a going concern for at least
twelve months from the date of the financial statements.
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you
where:
-- the Directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- the Directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group's ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for
issue.
However, as we cannot predict with certainty all future events
or conditions and as any subsequent events may result in outcomes
that are inconsistent with judgements that were reasonable at the
time they were made, the absence of reference to a material
uncertainty in this auditor's report cannot be viewed as a
guarantee as the Group's ability to continue as a going
concern.
Other matter
The prior year was audited by BDO LLP and their audit report was
signed on 1 November 2019.
--
A disclaimer of opinion was issued in the prior year due to the
following audit findings:
-- It was not possible to verify the existence and valuation of
cash held at Camping Gradina EOOD. Due to this it was not possible
to conclude on the valuation of the bargain acquisition recognised
in the prior year financial statements
-- South Beach EOOD did not have a systematic set of processes
and controls over the recording of revenue therefore completeness
and accuracy of revenue could not be determined.
During the year the Group has addressed these points by
implementing the following:
-- Adopted an internationally recognised reservation system at South Beach EOOD
-- Outsourced the accounting function of the Bulgarian
subsidiaries to Crowe Bulgaria Advisory Limited to improve
accounting and internal control function.
No disclaimer of opinion is required in the current year
financial statements as a result of these matters.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
This is not a complete list of all risks identified by our
audit.
Key audit matter How the scope of our audit addressed
the key audit matter
------------------------------------------- --------------------------------------------------------------
Carrying value of investment property Our audit work included, but was
As detailed in note 8, the Group not restricted to, the following:
owns investment properties with * We assessed the competency, independence,
a fair value of EUR35,986,000 qualifications and objectivity of the independent
at 31 December 2019. valuer to confirm that they are appropriately
The determination of the fair qualified to value the properties.
value of the investment properties
is considered to be a significant
judgement as detailed in note
3 and we therefore considered * We reviewed the valuation reports to ensure that all
this to be a significant audit valuations have been carried out in line with
risk and key audit area. relevant professional standards and in accordance
The Group engages an independent with the group's accounting policy.
valuer (Forton) to determine the
fair value of the property at
the year end. This valuation considers
the nature of the property, its * We assessed the significant judgements used in the
location and any comparable property valuations to ensure they are reasonable.
transactions. The valuations require
the independent valuer to make
significant professional judgements
in relation to expected future * We reviewed the appropriateness of the disclosures
cash flows, market capitalisation within the group's financial statements in relation
yields and appropriate input information to the valuation methodology, key valuation inputs
provided by the management in and valuation uncertainty.
relation to occupancy and rental
values. Any inaccuracies in this
input information or unreasonable
judgements made in the valuation * We recalculated the movement in fair value, ensured
could result in a material misstatement that this was reasonable and agreed this to the
of the Statement of Comprehensive financial statements.
Income and the Statement of Financial
Position.
Key observations
--------------------------------------------------------------------------------------------------------
As a result of our work we concluded that the valuation of the
Group's investment properties is appropriate and in line with
the Group's accounting policies
--------------------------------------------------------------------------------------------------------
Valuation and recoverability of Our audit work included, but was
the intergroup loans not restricted to, the following:
The Company holds receivables * We obtained and reviewed all loan agreements in place
with its subsidiary companies and recalculated the interest receivable from the
totalling EUR3,828,952 at 31 December subsidiary companies.
2019. These loans have been issued
to support the operations of the
Bulgarian subsidiaries. Due to
the nature of these loans they * We reviewed the consolidation to ensure that all
are considered key to the audit loans and interest were fully eliminated on
of the Company. consolidation and preparation of the group financial
statements.
---------------------------------------- --------------------------------------------------------------
Key observations
--------------------------------------------------------------------------------------------------------
As a result of our work we concluded that the valuation of the
intergroup loans is appropriate and in line with the Group's accounting
policies
--------------------------------------------------------------------------------------------------------
Our application of materiality
We define materiality as the magnitude of a misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality in determining the nature, timing
and extent of our audit work and in evaluating the results of that
work.
The materiality for the Group was set at EUR477,000, which
equates to 1.5% of group total assets at the planning stage of our
audit, before the final property valuations had been accounted for.
This benchmark was considered to be the most appropriate given the
nature of the asset based group. We chose not to revise our
materiality threshold throughout the course of the audit once the
final property valuation figures were known as this would result in
a higher materiality to that set at planning which we did not feel
was appropriate.
We use a different level of materiality, performance
materiality, to drive the extent of our testing. This was set at
60% of the financial statement materiality which reflects our
assessment of risk inherent in the audit.
We determined the threshold at which we will report individual
audit differences to the Board to be EUR23,900. In addition, we
communicate misstatements below that threshold that, in our view,
warrant reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the
Group's business and is risk-based. Our audit was scoped by
obtaining an understanding of the Group and its environment,
including the Group's system of internal control, and assessing the
risk of material misstatement at the Group level.
A full scope audit was carried out on each component of the
Group. Detailed audit instructions were issued to the auditors of
the components which detailed the significant risks that were to be
addressed through the audit and indicated the information that
needed to be reported back to the Group audit team. The Group audit
team communicated with all component auditors throughout the
planning, fieldwork and concluding stages of the local audits.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the
Chairman's Statement and the Directors' Report set, other than the
financial statements and our auditor's report thereon. Our opinion
on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Grant Thornton Limited
Douglas
Isle of Man
29 July 2020
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Year to Year to
Notes 31 Dec 19 31 Dec 18
EUR EUR
Total revenue
Revenue 2 671,030 433,410
Property operating expenses 2 (468,514) (382,146)
----------- ------------
202,516 51,264
----------- ------------
Gain/(loss) on revaluation of investment
properties 8 4,564,767 (497,881)
Bargain purchase on acquisition 6 - 3,759,352
Net gain on investment properties 4,564,767 3,261,471
----------- ------------
Administration and other expenses 5 (977,728) (628,599)
Operating profit 3,789,555 2,684,136
----------- ------------
Other income 6 1,318,513 420,847
Interest payable and similar charges 6 (652,436) (740,646)
Profit before tax 4,455,632 2,364,337
Taxation 7 (391,178) (23,645)
Profit and total comprehensive income
attributable to shareholders 4,064,454 2,340,692
=========== ============
Gain per share
Basic and Diluted gain per share
(cents) 16 0.32 0.18
The results are derived from continuing operations during the
year.
The notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
as at 31 December 2019
2019 2018
Notes EUR EUR
Non-current assets
Investment properties 8 35,986,000 27,566,766
35,986,000 27,566,766
--------------- ---------------
Current assets
Trade and other receivables 9 351,367 566,263
Cash and cash equivalents 10 717,945 3,698,239
1,069,312 4,264,502
--------------- ---------------
Total assets 37,055,312 31,831,268
=============== ===============
Equity and liabilities
Issued share capital 14 64,774,886 64,774,886
Retained earnings 15 (47,174,957) (51,239,411)
Foreign currency translation reserve 15 (1,533,086) (1,533,086)
Total equity 16,066,843 12,002,389
Liabilities
Non-current liabilities
Bank loans 12 8,326,534 16,535,339
Deferred tax liability 7 1,903,784 1,509,773
--------------- ---------------
10,230,318 18,045,112
--------------- ---------------
Current liabilities
Trade payables 11 496,684 234,261
Shareholder loans 22 1,394,958 -
Bank loans 12 8,866,509 1,549,506
10,758,151 1,783,767
--------------- ---------------
Total liabilities 20,988,469 19,828,879
--------------- ---------------
Total equity and liabilities 37,055,312 31,831,268
=============== ===============
Number of ordinary shares in issue 14 1,269,407,896 1,269,407,896
NAV per ordinary share (cents) 16 1.27 0.95
The notes are an integral part of these consolidated financial
statements.
The financial statements were approved and authorised for issue
by the Board of Directors on 29 July 2020 and were signed on their
behalf by:
Alex Borrelli Ventsislava Altanova
Chairman Director
Consolidated Statement of Changes in Equity
for the year ended 31 December 2019
Share capital Retained earnings Foreign currency translation Total
reserve
EUR EUR EUR EUR
At 1 January 2018 64,774,886 (53,580,103) (1,533,086) 9,661,697
Profit for the year - 2,340,692 - 2,340,692
Other comprehensive income - - - -
---------------- -------------------- ---------------------------------- ------------
Total comprehensive income - 2,340,692 - 2,340,692
At 31 December 2018 64,774,886 (51,239,411) (1,533,086) 12,002,389
================ ==================== ================================== ============
At 1 January 2019 64,774,886 (51,239,411) (1,533,086) 12,002,389
Profit for the year - 4,064,454 - 4,064,454
Other comprehensive income - - - -
------------ -------------- ------------- ------------
Total comprehensive income - 4,064,454 - 4,064,454
At 31 December 2019 64,774,886 (47,174,957) (1,533,086) 16,066,843
============ ============== ============= ============
The notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2019
2019 2018
Notes EUR EUR
Operating activities
Profit before taxation 4,455,632 2,364,337
(Gain)/loss on revaluation of investment property 8 (4,564,767) 497,881
Bargain Purchase on Acquisition 6 - (3,759,352)
Other income 6 (1,318,513) -
Finance expense 6 652,436 740,646
------------- -------------
(775,212) (156,488)
Changes in working capital
Increase in trade and other receivables (659,493) (628,870)
Increase/(decrease) in trade and other payables 265,256 (323,539)
Tax paid - (85,309)
Net cash outflow from operating activities (1,169,449) (1,194,206)
Investing activities
Investment property additions and acquisitions 8 (3,854,467) (540,035)
Interest received 6 1,318,513 -
Cash held by the acquired subsidiary - 4,154,758
Net cash (outflow)/inflow from investing activities (2,535,954) 3,614,723
Financing activities
Interest paid and other charges 12 (669,849) (720,719)
Loans received 22 1,394,958 -
Bank loan received 12 - (240,370)
Net cash inflow/(outflow) from financing activities 725,109 (961,089)
Net (decrease)/increase in cash and cash equivalents (2,980,294) 1,459,428
Cash and cash equivalents at the beginning of the year 10 3,698,239 2,238,811
Cash and cash equivalents at the end of the year 10 717,945 3,698,239
============= =============
The notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2019
1) General information
Black Sea Property PLC (the "Company") was originally
incorporated in Jersey and re-domiciled to the Isle of Man with
effect from 20 July 2016 and continues under the Isle of Man
Companies Act 2006 with registered number 013712V.
The Company operates as a closed ended investment company for
the purposes of the Isle of Man Collective Investment Schemes Act
2008 and the Isle of Man Collective Investment Schemes (Definition)
Order 2008. The Company became a Regulated Fund in the Isle of Man
on 26 February 2015 and it is subject to the Isle of Man Collective
Investment Schemes Regulations.
The Company seeks to generate capital gains through the
development, financing and sale of property in Bulgaria, including
the prime areas of Bulgaria's Black Sea coast, the ski resorts and
the capital, Sofia.
The Company has five wholly owned Jersey subsidiaries and four
wholly owned Bulgarian subsidiaries (collectively the "Group").
2) Summary of significant accounting policies
a) Basis of preparation
The principal accounting policies applied in the preparation of
the financial statements are set out below. These policies have
been consistently applied throughout the year, unless otherwise
stated.
The financial statements have been prepared on a going concern
basis under the historical-cost convention as modified by the
revaluation of financial assets held at fair value through profit
or loss and investment properties that have been measured at fair
value.
Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") issued by the
International Accounting Standards Board ("IASB") and International
Financial Reporting Interpretations Committee ("IFRIC")
interpretations as applicable to an Isle of Man company under the
Companies Act 2006.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRS
requires the Directors to make judgements, estimates and
assumptions that affect the reported amounts of assets,
liabilities, income and expenses. These estimates and associated
assumptions are based on historical experience and various other
factors, which are believed to be reasonable under the
circumstances, and are reviewed on an on-going basis. The Directors
believe that the estimates utilised in preparing its financial
statements are reasonable and prudent. Actual results could differ
from these estimates. The most significant accounting estimate
affecting the financial statements is the valuation of investment
property (see note 3).
b) Standards and amendments which are first effective for the
period beginning 1 January 2019
The Company has initially adopted IFRS 16 Leases from 1 January
2019. A number of other new standards are effective from 1 January
2019 but they do not have a material effect on the Company's
financial statements.
IFRS 16 introduced a single, on-balance sheet accounting model
for lessees. The Company is not a lessee or a lessor. The adoption
of IFRS 16 had no impact on the net assets attributable to holders
of shares or the Company and no restatement of comparative
information was required from the adoption of this new accounting
standard.
The Company's subsidiary Camping South Beach EOOD ("CSB") owns a
camping site on which it leases premises to third parties which are
classified as operating leases. The Group has applied IFRS 16 for
lessors, but lessor accounting remains similar to previous
accounting policies.
The adoption of IFRS 16 had no impact on the net assets
attributable to holders of shares in the Group and no restatement
of comparative information was required from the adoption of this
new accounting standard.
The accounting policies applicable to the Group as a lessor are
not different from those under IAS 17. The Group is not required to
make any adjustments on the transition to IFRS 16 for leases in
which it acts as a lessor. However, the Group has applied IFRS 15
Revenue from Contracts with Customers to allocate consideration in
the contract to each lease and non-lease component. This has had no
impact on the Group.
c) New standards, amendments and interpretations issued but not
yet effective and not early
adopted
A number of new standards are effective for annual periods
beginning after 1 January 2019 and earlier application is
permitted; however, the Group has not early adopted the new or
amended standards in preparing these consolidated financial
statements.
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements:
-- Amendments to References to Conceptual Framework in IFRS Standards;
-- Definition of a Business (Amendments to IFRS 3);
-- Definition of Material (Amendments to IAS 1 and IAS 8); and
-- IFRS 17 Insurance Contracts.
d) Basis of consolidation
The financial statements comprise the results of the Company and
its subsidiaries as set out in note 13. Subsidiaries in which the
Company has the ability to exercise control are fully consolidated.
Control is defined as having exposure, or rights, to variable
returns due to involvement in an investee and the ability to affect
those returns.
Inter-company transactions, balances and unrealised gains and
losses on transactions between Group companies are eliminated. The
accounting policies of the subsidiaries are consistent with those
of the Company.
e) Going concern
The Group had EUR1,069,312 current assets at 31 December 2019,
the majority of which was held as cash and cash equivalents at
underlying subsidiaries.
Subsequent to the year-end the Group has raised additional
funding through a share capital raise in order to further the
development of the Company's real estate portfolio. As part of
their going concern assessment, the Board of Directors have
reviewed cash flow forecasts reviewed for the 12 months from the
date these financial statements were signed. Further details are
given in note 23.
Accordingly, the Directors have a reasonable expectation that
the Company and the Group will continue in operational existence
for the foreseeable future, and for a period of at least 12 months
from the date of signing of these financial statements. Therefore,
the financial statements have been prepared as a going concern.
f) Functional and presentation currency
(i) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (the 'functional
currency'). The consolidated financial statements are presented in
Euros, which is the Company's presentational currency. The
functional currency of each entity within the Group is a key
judgement of management and the Directors. This judgement
prioritises primary factors, such as the source of competitive
forces and the denomination of sales prices and input costs, over
secondary considerations such as the source of financing, in
accordance with IAS21. These considerations indicate that the
functional currency of the Bulgarian entities is Bulgarian Lev and
the functional currency of the holding companies is the Euro.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Non-monetary items carried at fair value, which are denominated in
foreign currencies, are translated at the rates prevailing at the
date when the fair value was determined, and the gain or loss is
recognised in the profit or loss.
(iii) Foreign operations
The results and financial position of all the foreign entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
-- assets and liabilities are translated to Euro at exchange rates at the reporting date;
-- income and expenses are translated at average exchange rates
(unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of
the transactions); and
-- all resulting exchange differences are recognised as a
separate component of Other Comprehensive Income.
When a foreign operation is sold, such exchange differences are
recognised in the Consolidated Statement of Comprehensive Income as
part of the gain or loss on sale.
g) Fair value measurement principles
The Group measures its investments in properties at fair value.
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either in the
principal market for the asset or liability or, in the absence of a
principal market, in the most advantageous market for the asset or
liability. The principal or the most advantageous market must be
accessible to the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest. The fair value for financial instruments
traded in active markets at the reporting date is based on their
mid quoted price or binding dealer price quotations, without any
deduction for transaction costs. Securities defined in these
accounts as 'listed' are traded in an active market.
The valuations of investment properties are performed by an
external accredited independent valuer with recognised and relevant
professional qualifications and with recent experience in the
location and category of the investment property being valued. The
valuations are prepared in accordance with the RICS Valuation -
Global Standards, which incorporate the International Valuation
Standards ("IVS") and the RICS UK Valuation standards (the "RICS
Red Book"), as set out by the International Valuation Standards
Council ("IVSC"), taking into consideration the relevant IFRS 13
requirements. In arriving at their estimates of market values, the
valuers have used their market knowledge and professional judgement
and not only relied on historical transactional comparables.
Properties are valued annually.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
-- Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
-- Level 2 - Valuation techniques for which the lowest level
input that is significant to the fair value
measurement is directly or indirectly observable.
-- Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value
measurement is unobservable.
h) Impairment of financial assets
The Group assesses at each reporting date whether a financial
asset is impaired. A financial asset is deemed to be impaired if,
and only if, there is objective evidence of impairment as a result
of one or more events that have occurred after the initial
recognition of the asset and that loss event has an impact on the
estimated future cash flows of the financial asset that can be
reliably estimated.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the assets' carrying amount and the present value of
estimated future cash flows discounted using the asset's original
effective interest rate.
i) Interest income
Income on investments is recognised on an accruals basis.
j) Revenue recognition
Revenue includes mainly fees from camping reservations. Such
fees are recognised in income when received and in the period that
the company reservation has occurred.
k) Expenses
Expenses are accounted for on an accruals basis. The Group's
property operating expenses, administration fees, finance costs and
all other expenses are charged to the profit or loss. Transaction
costs directly attributable to the purchase of investment property
are included within the cost of the property.
l) Loans payable at amortised cost
Loans payable are recognised on an amortised cost basis. Loans
payable are recognised when cash is received from lenders and are
derecognised when the cash, and related interest, has been repaid.
Loans payable are initially recorded at fair value plus any
directly attributable transaction costs and are subsequently
measured at amortised cost using the effective interest method.
m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash held at
the bank and demand deposits.
Cash equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash and that are
subject to an insignificant risk of changes in value.
n) Trade and other receivables
Trade receivables are non-derivative financial assets with fixed
or determinable payment terms that are not quoted in an active
market. The carrying value of trade receivables approximates their
fair values. A provision for impairment of trade receivables is
established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of receivables.
o) Investment properties
Property that is held for rental yields or for capital
appreciation or both is classified as investment property.
Investment property comprises freehold land, freehold buildings,
and land held under long term operating leases. Investment property
is measured initially at its cost, including related transaction
costs and subsequently revalued annually to fair value.
Investment property that is being redeveloped for continuing use
as investment property or for which the market has become less
active continues to be measured at fair value.
Investment properties are accounted for on completion of
contract when ownership is recorded in the trade registry.
p) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
Current tax is payable on taxable profits for the year. Taxable
profit differs from net profit as reported in the Consolidated
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the reporting
date.
Current taxes include irrecoverable withholding tax on the
interest receivable on loans from the Company to its Bulgarian
subsidiaries.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the reporting
date, where transactions or events that result in an obligation to
pay more tax in the future or right to pay less tax in the future
have occurred at the reporting date. This is subject to deferred
tax assets only being recognised if it is considered more likely
than not that there will be sufficient profits from which the
future reversal of the temporary differences can be deducted.
q) Trade and other payables
Trade and other payables are recognised at amortised cost and
relate to amounts accrued in the normal course of business which
are payable within one year.
r) Share capital
Ordinary share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares are deducted from
the proceeds of issue and shown as a deduction to reserves.
Founder shares
Founder shares are classified as equity.
s) Acquisition of businesses
The acquisition method of accounting is used to account for
business combinations by the Group.
The consideration transferred for the acquisition of a
subsidiary comprises the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group.
The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred.
t) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another.
(i) Financial assets
Financial assets are classified at initial recognition. The
classification of financial assets at initial recognition that are
debt instruments depends on the financial asset's contractual cash
flow characteristics and the Group's business model for managing
them. The Group initially measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at
amortised cost or fair value through other comprehensive income
("OCI"), it needs to give rise to cash flows that are solely
payments of principal and interest ("SPPI") on the principal amount
outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level.
Classification and measurement is based on both whether
contractual cash flows are solely payments of principal and
interest; and whether the debt instrument is held to collect those
cash flows. In the case of the Company or Group, all financial
assets meet this criteria and so are held at amortised cost.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking
information to recognise expected credit losses ("ECLs") - the ECL
model. This replaces IAS 39's 'incurred loss model'.
ECLs are based on the difference between the contractual cash
flows due in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at the original
effective interest rate ("EIR"). The expected cash flows will
include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12
months (a '12-month ECL'). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a 'lifetime ECL').
For trade receivables and contract assets, the Group applies a
simplified approach in calculating ECLs. Therefore, the Group does
not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
It is the Group's policy to measure ECLs on such instruments on
a 12-month basis.
(ii) Financial liabilities
Financial liabilities are classified, at initial recognition, as
financial liabilities at amortised cost. The Group's financial
liabilities include trade and other payables and loans.
Subsequent measurement
Loans and borrowings and trade and other payables
After initial recognition, interest-bearing loans and borrowings
and trade and other payables are subsequently measured at amortised
cost using the EIR method. Gains and losses are recognised in
profit or loss and OCI when the liabilities are derecognised, as
well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss and other comprehensive
income.
This category generally applies to trade and other payables.
Derecognition
A financial liability is derecognised when the associated
obligation is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in profit or loss and
other comprehensive income.
3) Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts recognised in the financial statements
and disclosure of contingent liabilities. However, uncertainty
about these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amount of the
asset or liability affected in future periods.
The Group based its assumptions and estimates on parameters
available when the financial statements were prepared. However,
existing circumstances and assumptions about future developments
may change due to market changes or circumstances arising beyond
the control of the Group. Such changes are reflected in the
assumptions when they occur.
A key judgement area for the Group is the valuation of
investment properties. External independent valuers assessed the
fair value of investment properties. The valuations are performed
by a recognised valuer with a relevant professional qualification
and recent experience in the location and category of the
investment properties as described in note 2g. Details of
investment properties held at fair value can be found in note
8.
The investment properties are valued annually. The Directors
consider any relevant movements in property markets that may impact
the carrying values of the property held between the date of the
last valuation and the date of financial statements.
Another key judgement area for the Group is the fair value of
trade and other receivables including the Camp South Beach EOOD
("CSB") acquisition reversal detailed in note 6. Impairments of
trade receivables are assessment in accordance with note 2h.
4) Net operating income
Year ended Year ended
31 Dec 31 Dec
2019 2018
EUR EUR
Camping reservations 670,723 433,410
Property operating expenses (487,134) (382,146)
------------ ------------
183,589 51,264
------------ ------------
All income during the year is primarily due to camping
reservations from CSB - see note 8.
5) Administration and other expenses
Year ended Year ended
31 Dec 2019 31 Dec 2018
EUR EUR
Directors' remuneration 81,039 84,247
Administration fees - Isle of Man 48,491 47,334
Administration fees - Jersey 17,685 39,358
Administration fees - Bulgaria 379,826 126,464
Legal and professional fees 123,232 19,361
Auditor's remuneration 43,477 32,404
Foreign currency expenses 3,920 4,295
Registrar fees 2,970 2,212
Broker fees 33,961 33,933
Other administration and professional fees 243,127 238,991
-------------
977,728 628,599
------------- -------------
In 2019, key management personnel comprise the Board (2018: The
Board). The Board's compensation comprised Directors' fees only
during the year, the amount of which is summarised within the
Directors' Report.
6) Finance income/(expense)
The following amounts have been included in the Consolidated
Statement of Comprehensive Income line for the reporting periods
presented:
Other income Year ended Year ended
31 Dec 2019 31 Dec 2018
EUR EUR
Interest income - cash and deposit instruments 271,551 420,847
Reversal of fair value adjustment of CSB acquisition receivable balance 1,046,962 -
1,318,513 420,847
------------- -------------
On 2 January 2018, the Company through its owned subsidiary,
BSPF Project 1 EAD, acquired CSB including all its assets and
liabilities. A bargain purchase on acquisition was recognised for
the year ended 31 December 2018 of EUR3,759,352 after fair value
adjustments to the acquired assets and liabilities including the
carrying value of the receivable that was acquired. At 31 December
2019 the fair value of the remaining receivable balance has been
reassessed and an increase in the fair value of EUR1,046,962 has
been recognised.
Interest payable and similar charges Year ended Year ended
31 Dec 2019 31 Dec 2018
EUR EUR
Interest expense on borrowings * 628,996 717,206
Amortisation of bank loan arrangement fee 23,440 23,440
652,436 740,646
------------- -------------
*The interest on borrowings relates mainly to the secured debt
funding on note 12.
7) Taxation
Isle of Man
There is no taxation payable on the Company's or its Jersey
subsidiaries' results as they are based in the Isle of Man and in
Jersey respectively where the Corporate Income Tax rates for
resident companies are 0% (2018: 0%). Additionally, neither the
Isle of Man nor Jersey levies tax on capital gains.
Consequently, shareholder's resident outside of the Isle of Man
and Jersey will not incur any withholding tax in those
jurisdictions on any distributions made to them.
Bulgaria
Subsidiaries of the Company incorporated in Bulgaria are taxed
in accordance with the applicable tax laws of Bulgaria. The
Bulgarian corporate tax rate for the year was 10% (2018: 10%).
No deferred tax assets are recognised on trading losses in the
subsidiary companies as there is significant uncertainty as to
whether sufficient future profits will be available in order to
utilise these losses.
A reconciliation of the tax charge for the year to the standard
rate of corporation tax for the Isle of Man of 0% (2018: 0%) is
shown below.
Year ended Year ended
31 Dec 31 Dec
2019 2018
EUR EUR
Profit before tax 4,455,632 2,364,337
------------ ------------
Profit on ordinary activities multiplied by
the standard rate in the Isle of Man of 0% (2018:
0%) - -
Effect of different tax rates in other countries 6,285 (85,309)
Deferred tax liability on fair value uplift
of investment property 384,893 61,664
Current charge for the year 391,178 (23,645)
------------ ------------
Bulgarian tax losses brought-forward at 10% (750,356) (773,649)
Tax losses utilised in the year 391,178 23,293
Bulgarian tax losses carried-forward at 10% (359,178) (750,356)
------------ ------------
Deferred tax liability
Opening deferred tax liability balance 1,509,773 42,879
Deferred tax liability on fair value uplift
of investment property on acquisition of
a subsidiary - 1,528,558
Bulgarian deferred tax liability charge 391,178 (61,664)
Reclassification of prior year balance 2,833 -
----------- -----------
Closing deferred tax liability balance 1,903,784 1,509,773
----------- -----------
8) Investment properties
Year ended Year ended
31 Dec 2019 31 Dec 2018
EUR EUR
Beginning of year 27,566,766 11,229,740
Acquisition 1,065,723 16,294,872
Additions 2,788,744 540,035
Fair value adjustment 4,564,767 (497,881)
------------ -------------
Total investment property 35,986,000 27,566,766
------------ -------------
Ivan Vazov 1 Building 11,329,000 11,322,000
CSB 16,260,000 16,244,766
Byala land 8,397,000 -
------------ -------------
Total investment property 35,986,000 27,566,766
------------ -------------
On 27 December 2019, the Company signed a settlement agreement
(the "Agreement") for the cancellation of the sale of 23 plots of
land in Byala ("Plots of land"). The former management of the
Company had previously agreed to the sale of the Plots of Land in
2014 at a consideration of EUR1,020,000 VAT included, being a price
level significantly under the then market valuation. Under the
terms of the Agreement the transfer agreement for the ownership of
the Plots of Land was rescinded and is restored to the Company. The
Company paid a net cost of EUR1,065,723, which included legal
costs, for the return of the Plots of Land.
The valuations of the properties at 31 December 2019 and 31
December 2018 were based on the most recent independent valuation
received for each property. The valuations were performed by
external accredited independent valuer s with recognised
professional qualifications and with recent experience in the
location and category of the investment properties being
valued.
The fair value of completed investment property has been
determined on a market value basis in accordance with the RICS "Red
Book". In arriving at their estimates of market values, the valuers
have used their market knowledge and professional judgement,
historical transactional comparables and discounted cash flow
forecasts . The highest and best use of the investment properties
is not considered to be different from its current use.
The cost of the investment properties comprises their purchase
price and directly attributable expenditure. Directly attributable
expenditure includes professional fees for legal services and stamp
duty land tax.
9) Trade and other receivables
As at As at
31 Dec 31 Dec
2019 2018
EUR EUR
Trade receivables* 345,657 566,263
Prepayments 5,710 -
--------- ---------
351,367 566,263
--------- ---------
*All amounts are due within one year. The expected credit losses
(ECL) for this amount is nil.
10) Cash and cash equivalents
As at As at
31 Dec 2019 31 Dec 2018
EUR EUR
Cash in hand 647 322,446
Cash at bank 717,298 3,375,793
------------ ------------
717,945 3,698,239
------------ ------------
Cash and cash equivalents comprise cash on hand, cash held at
the bank and demand deposits. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of
changes in value. None of the Group's cash balances are
restricted.
11) Trade and other payables
As at As at
31 Dec 2019 31 Dec 2018
EUR EUR
Trade creditors 482,494 234,261
Other payables 14,190 -
------------ ------------
496,684 234,261
------------ ------------
12) Bank loans
As at As at
31 Dec 31 Dec
2019 2018
EUR EUR
Loan from UniCredit (a) 6,980,477 6,975,121
Central Cooperative Bank (b) 10,212,566 11,109,724
17,193,043 18,084,845
------------ ------------
Long term bank loans 8,326,534 16,535,339
Current bank loans 8,866,509 1,549,506
------------ ------------
Reconciliation of bank loans
Beginning of year (gross loan) 18,084,845 7,000,000
Acquisition - 11,348,251
Bank loan arrangement fees (amortised)/capitalised 23,440 (42,963)
Interest charged 652,436 740,646
Principal repayments (897,829) (240,370)
Interest payments (669,849) (720,719)
------------ ------------
Value at end of year 17,193,043 18,084,845
------------ ------------
(a) In October 2017, the Company entered into a secured debt
funding of EUR7 million from UniCredit Bulbank AD ("UniCredit"), a
leading Bulgarian commercial bank which was used to complete the
acquisition of the Ivan Vazov 1 Building . The debt funding from
UniCredit is secured by a commercial mortgage on the property
valued at EUR11,329,000 (see note 8). The term of the debt funding
is thirty-six months from date of execution of the loan
documentation. The repayment shall be made as a one-off payment on
the repayment deadline. At the date these financial statements were
signed the Company was in the process of renegotiating an extension
of the credit repayment period by 12 months.
The interest on the loan is the internal interest percentage by
the bank plus 3.00%. The interest rate cannot be lower than 3.00%.
At year-end date the applicable annual interest rate of the loan is
3.05%.
(b) Central Cooperative bank loan and overdraft
As at As at
31 Dec 31 Dec
2019 2018
EUR EUR
Central Cooperative Bank overdraft (i) 667,102 664,474
Central Cooperative bank overdraft (ii) 7,837,176 8,569,252
Central Cooperative bank investment loan (ii) 1,708,288 1,875,998
------------ ------------
10,212,566 11,109,724
------------ ------------
(c) This is an overdraft with Central Cooperative Bank. The
interest on the account is 4.00% and repayable on 24 June 2020. At
the date these financial statements were signed the Company was in
the process of renegotiating an extension of the credit repayment
period by 12 months.
(i) The interest rate on the overdraft and the investment loan
is 3.6%. The maturity date for both the overdraft and the
investment loan is 21 January 2028.
13) Details of Group undertakings
The Group holds 20% or more of the nominal value of any class of
share capital in the following investments:
Share-holding Nature of Business Country of Incorporation
Held directly:
BSPF (Property 2) Limited 100% Property investment Jersey
BSPF (Property 3) Limited 100% Property investm ent Jersey
BSPF (Property 4) Limited 100% Property investment Jersey
BSPF (Property 5 ) Limited 100% Property i nvestment Jersey
BSPF (Property 6) Lim ited 100% Property i nvestment Jersey
BSPF Project 1 EAD 100% Property investment Bulgaria
BSPF Super Borovetz EAD 100% Property investment Bulgaria
BSPF Bulgaria EAD 100% I nvestment property Bulgaria
Held indirectly :
Camping South Beach EOOD 1 00% Property investment Bulgaria
BSPF (Property 3) Limited and BSPF (Property 6) Limited are both
dormant co mpanies.
Subsequent to the year end the Company successfully completed
the acquisition of 100% of European Convergence Development
(Cayman) Limited ("ECD Cayman") and ECD Management (Cayman) Limited
("ECD Management") and 29% of European Convergence Development
Company PLC, Isle of Man ("ECDC"), see note 23 for further
details.
14) Issued share capital
As at As at
31 Dec 2019 31 Dec
2018
Authorised Number Number
Founder shares of no par value 10 10
Ordinary shares of no par value Unlimited Unlimited
EUR EUR
Issued and fully paid
2 Founder shares of no par value (2018: 2) - -
1,269,407,896 ordinary shares of no par value
(2018: 1,269,407,896) 64,774,886 64,774,886
The Founders shares do not carry any rights to dividends or
profits and on liquidation they will rank behind Shares for the
return of the amount paid up on each of them. The shares carry the
right to receive notice of and attend general meetings, but carry
no right to vote thereat unless there are no Participating Shares
in issue.
Subsequent to the year end the Company successfully completed a
share raise of 416,880,162 new ordinary shares of nil par value (at
a price of EUR0.011 per ordinary share, see note 23 for further
details.
Capital management
The Directors consider capital to be the net assets of the
Group.
The capital of the Company will be managed in accordance with
the Investment Strategy documented on the Company's website.
15) Reserves
The following describes the nature and purpose of each reserve
within equity:
Retained earnings - The retained earnings represent cumulative
net profits and losses recognised in the Group's statement of
comprehensive income.
Foreign currency translation reserve - Exchange differences
relating to the translation of the results and net assets of the
Group's foreign operations from their functional currencies to the
Group's presentation currency (i.e. Currency Units). The Bulgarian
subsidiaries' functional currency is the Bulgarian Lev which is
pegged to the Euro at 1 EUR = 1.95583 BGN, hence there is no
movement of foreign currency translation reserve during the
year.
16) Profit and Net Asset Value per share
Profit per share
The basic profit per ordinary share is calculated by dividing
the net profit attributable to the ordinary shareholders of the
Company by the weighted average number of ordinary shares in issue
during the year.
As at As at
31 Dec 2019 31 Dec 2018
EUR EUR
Profit attributable to owners of parent (EUR) 4,064,454 2,340,692
Weighted average number of ordinary shares in issue 1,269,407,896 1,269,407,896
Basic profit per share (cents) 0.32 0.18
----------------- ----------------
The Company has no dilutive potential ordinary shares; the diluted earnings per share is the
same as the basic earnings per share.
Net asset value per share
As at As at
31 Dec 2019 31 Dec 2018
Net assets attributable to owners of the parent (EUR) 16,066,843 12,002,389
Number of ordinary shares outstanding 1,269,407,896 1,269,407,896
----------------- ----------------
Net Asset Value per share (cents) 1.27 0.95
----------------- ----------------
17) Segmental analysis
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal reports about components of the
Group that are regularly reviewed by the chief operating decision
maker in order to allocate resources to the segments and to assess
their performance.
Other than the previous investments in money market funds in the
UK, the Group is organised into one main operating and reporting
segment focusing on investment in the Bulgarian property
market.
No additional disclosure is included in relation to segmental
reporting as the Group's activities are limited to one operating
and reporting segment.
18) Contingencies and commitments
There are no contingencies or commitments outstanding at 31
December 2019 (2018: nil).
19) Directors' interests
Total compensation paid to the Directors during the period was
EUR81,039 (2018: EUR84,247). Outstanding Directors' fee was
EUR41,919 (2018: EUR8,280).
20) Ultimate controlling party
The Directors consider that there is no controlling or ultimate
controlling party of the Group.
21) Financial risk management objectives and policies
The Group's financial instruments comprise cash and cash
equivalents, receivables and payables that arise directly from its
operations, for example, in respect of sales and purchases awaiting
settlement, and receivables for accrued income. All of the Group's
financial instruments are loans and receivables. The main risks the
Group faces from its financial instruments are (i) market price
risk (comprising currency risk, interest rate risk and other price
risk), (ii) liquidity risk and (iii) credit risk.
The Board regularly considers risks applicable to the
portfolio.
As a result of the short term nature of the Group's financial
instruments, the carrying values approximate to fair value.
i. Currency risk
The functional and presentational currency of the Group is
Euros. The Group does not hedge this risk.
An analysis of the Group's currency exposure is detailed
below:
EUR Bulgarian
GBP EUR LEV Total
As at 31 December 2019 EUR EUR EUR EUR
Investment property - - 35,986,000 35,986,000
Trade and other receivables 6,322 - 345,045 351,367
Cash and cash equivalents 245 493,288 224,412 717,945
Trade and other payables (112,714) (212,155) (171,815) (496,684)
Deferred tax liability - - (1,903,784) (1,903,784)
Shareholder loans - (1,394,958) - (1,394,958)
Bank loans - (7,000,000) (10,193,043) (17,193,043)
----------- ------------- -------------- --------------
Net exposure (106,147) (8,113,825) 24,286,815 16,066,843
----------- ------------- -------------- --------------
Bulgarian
GBP EUR LEV Total
As at 31 December 2018 EUR EUR EUR EUR
Investment property - - 27,566,766 27,566,766
Trade and other receivables 4,209 - 562,054 566,263
Cash and cash equivalents 156,046 795,472 2,746,721 3,698,239
Trade and other payables (132,543) - (101,718) (234,261)
Deferred tax liability - - (1,509,773) (1,509,773)
Bank loans - (7,000,000) (11,084,845) (18,084,845)
----------- ------------- -------------- --------------
Net exposure 27,712 (6,204,528) 18,179,205 12,002,389
----------- ------------- -------------- --------------
Foreign currency sensitivity
The Bulgarian lev has been pegged to the Euro since its launch
in 1999 at the rate of 1.95583 leva = 1 euro, hence effectively
there is no foreign currency risk as long as the peg is in place.
If the EUR/GBP exchange rate as at 31 December 2019 was to
strengthen or weaken by +/-10% it would result in a decrease or
increase respectively in the net liabilities of EUR10,615 (2018: a
decrease or increase in net assets of EUR2,771).
ii. Credit risk
Credit risk arises on investments, cash balances and debtor
balances. The amount of credit risk is equal to the amounts stated
in the statement of financial position for each of these assets.
Cash balances are limited to high-credit-quality financial
institutions. There are no impairment provisions as at 31 December
2019 (2018: nil).
The allowance for expected credit losses (ECLs) are nil.
iii. Interest rate risk
Interest rate movements may affect: (i) the fair value of the
investments in fixed interest rate securities and (ii) the level of
income receivable on cash deposits. There are no fixed interest
rate securities as at 31 December 2019 or 31 December 2018. The
interest rate profile of the Group's financial instruments
excluding other receivables was as follows:
Variable Non-interest Total
rate bearing
EUR EUR EUR
As at 31 December 2019
Trade and other payables - (496,684) (496,684)
Trade and other receivables 1,211 350,156 351,367
Cash and cash equivalents 1,742 716,203 717,945
Shareholder loans (1,394,958) - (1,394,958)
Bank loans (17,193,043) - (17,193,043)
-------------- -------------- --------------
(18,585,048) 569,675 (18,015,373)
-------------- -------------- --------------
As at 31 December 2018
Trade and other payables - (234,261) (234,261)
Cash and cash equivalents 3,698,239 - 3,698,239
Bank Loans (17,463,334) - (17,463,334)
-------------- -------------- --------------
(13,765,095) (234,261) (13,999,356)
-------------- -------------- --------------
Interest rate sensitivity
An increase of 100 basis points in interest rates during the
year would have decreased the net assets attributable to
shareholders and changes in net assets attributable to shareholders
by EUR178,000 (2018: increase EUR145,000). A decrease of 100 basis
points would not be possible because an interest rate floor has
been set with loan providers which is currently in operation.
iv. Liquidity risk
'Liquidity risk' is the risk that the Group will encounter
difficulty in meeting obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group's policy and the Boards approach to managing liquidity
is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both
normal and stress conditions. The Group's financial assets include
investment properties, which are generally illiquid. As a result,
the Group may not be able to liquidate some of its investments in
due time to meet its liquidity requirements. The Group's liquidity
is managed on a daily basis by the administrators of the Company
and its subsidiaries in accordance with policies and procedures in
place. The Group's overall liquidity risk is managed on a monthly
basis by the Board of Directors.
The following table sets out the carrying amount, by maturity,
of the Group's financial instruments that are exposed to liquidity
risk:
< 1 year 1-5 years > 5 years Total
As at 31 December 2019 EUR EUR EUR EUR
Trade and other payables (493,105) (3,579) - (496,684)
Shareholder loans (1,394,958) - - (1,394,958)
Bank loans and interest (8,886,032) (4,516,435) (3,810,099) (17,212,566)
-------------- --------------- -------------- ---------------
(10,774,095) 4,520,014 (3,810,099) (19,104,208)
-------------- --------------- -------------- ---------------
As at 31 December 2018
Trade and other payables (234,261) - - (234,261)
Bank loans and interest (2,206,313) (12,670,302) (6,408,719) (21,285,334)
-------------- --------------- -------------- ---------------
(2,440,574) (12,670,302) (6,408,719) (21,519,595)
-------------- --------------- -------------- ---------------
22) Related party transactions
During the financial year the Group was provided with an
unsecured loan facility. The balance on the loan facility at 31
December 2019 was EUR1,394,958. Interest on borrowed amounts is
calculated on the 3 months' Euro Interbank Offered Rate plus 2.5%
per annum and the amount of interest accrued and unpaid at 31
December was EUR640.
In July 2017, the Company appointed Phoenix Capital Management
JSC as its investment adviser with responsibility for advising on
the investment of the Company's property portfolio. Phoenix Capital
Holding JSC owns 79.99% of the Phoenix Capital Management JSC
shares. Phoenix Capital Holding JSC, through its wholly owned
subsidiary Mamferay, holds 28.18% (2018: 28.18%) of the issued
share capital of the Company. Phoenix Capital Management JSC
received fees of EUR214,272 (2018: EUR214,272). The amount
outstanding as at year-end is EUR160,704 (2018: EUR53,568).
Yordan Naydenov is a Director of the Company and a partner with
Boyanov & Co, a legal adviser to the Company. During the year,
Boyanov & Co received fees of EUR86,010 (2018: EUR7,700). The
amount outstanding as at year-end is EUR51,451 (2018: EUR nil).
23) Subsequent events
Cash placing and debt to equity conversion
On 20 January 2020 the Company performed a share placing and
simultaneous debt to equity conversion. The overall amount raised
before expenses was EUR4,585,682, through a placement of
416,880,162 new ordinary shares of nil par value (the "Placing
Shares") at a price of EUR0.011 per Ordinary Share (the
"Placing").
In addition to the Placing, Mamferay Holdings Limited
("Mamferay") agreed to convert all its outstanding loans being
EUR1,397,391 including interest, into 127,035,545 ordinary shares
at EUR0.011 per share (the "Loan Shares").
ECDC Group acquisition
On 25 February 2020 the Company successfully completed the
acquisition of 100% of ECD Cayman and ECD Management. The
consideration paid for ECD Cayman and ECD Management in total was
EUR3,582,639. Both companies are subsidiaries of ECDC.
The Company also signed agreements for the acquisition of 29.85%
of ECDC at a price per share equal to the net asset value of the
shares of EUR0.00168 or a total of EUR44,855.
The main rationale for the acquisition of interests in ECDC
Group includes: the opportunity to add two development plots
suitable for logistics/industrial development (the site in Plovdiv)
and residential, commercial or hospitality development (the site in
Kraimorie), thus diversifying BSP portfolio. Both ECD Cayman and
ECDC have established structures in place that will save time and
costs for future investments.
Under IFRS 3 Business combinations the following disclosure is
required for acquisitions made subsequent to the yearend which has
not been included in these financial statements:
-- details of the goodwill;
-- the fair value of consideration and details of contingent consideration;
-- details of acquired receivables;
-- details of assets acquired and liabilities assumed;
-- details of contingent liabilities recognised; and
-- details of bargain purchases.
The above disclosure has not been made because at the date of
issuance of these financial statements initial accounting for the
business combination is incomplete.
Change in registered office address
With effect from 9th March 2020 the Company changed its
registered office to 55 Athol Street, Douglas, Isle of Man, IM1
1LA.
COVID-19
On the 11 March 2020, the World Health Organisation declared
COVID-19 a global pandemic. Given the uncertainty with respect to
the duration and severity of COVID-19 and its related economic
impacts, the Board have given careful consideration to assumptions
and judgments made in relation to property valuations and
forecasted revenues.
Cash flow forecasts have been updated for the expected impact of
the pandemic and reviewed by the Board of Directors as part of
their assessment of the Group's going concern, see note 2e. The
extent of the financial impact of COVID-19 on the Group at this
stage is still unknown, and the Group will monitor the situation
closely.
Subsequent to the yearend CSB's occupancy rates have been
significantly impacted by the closure of all non-essential
businesses in Bulgaria from 13 March 2020. The Bulgarian government
lifted this state of emergency on 13 May 2020 and immediately
replaced it with an "extraordinary epidemic situation". Internal
travel is now permitted, subject to strict regulations in the
hospitality segment.
The holiday summer season started at the beginning of July. It
is not expected that occupancy levels which were achieved in the
year ended 31 December 2020, however Directors expect CSB to
benefit from the increased move within the Bulgarian hospitality
market towards camping holidays in local markets which allow for
social distancing while holidaying within the country.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
NEXKKKBDFBKKAON
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July 30, 2020 04:21 ET (08:21 GMT)
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