Black Sea Property - Annual Financial Report
RNS Number : 0201S
Black Sea Property PLC
01 November 2019
 

 

BLACK SEA PROPERTY PLC

("Black Sea Property" or the "Company")

 

Audited Results for the year ended 31 December 2018

 

The Board of Black Sea Property PLC is pleased to announce its audited results for year ended 31 December 2018.

 

 

Electronic copies of the annual report will be available at the Company's website http://www.blackseapropertyplc.com

 

 

- END -

 

BLACK SEA PROPERTY PLC

Alex Borrelli -  Chairman

 

+44(0) 774 702 0600

PETERHOUSE CAPITAL LIMITED

NEX Exchange Corporate Adviser

Fungai Ndoro and Guy Miller

+44 (0) 207 469 0930

Chairman's Statement

 

I am pleased to present the financial statements of Black Sea Property PLC ('the Company') and its subsidiaries (collectively referred to as 'the Group'), for the year ended 31 December 2018.

 

The net asset value as at 31 December 2018 was €12,002,389 or 0.95 cents per share (2017: €9,661,697 or 0.76 cents per share).

 

The Company generated revenues from camping reservations at Camping South Beach EOOD ("CSB") of €433,410. This resulted in earnings per share, taking into account the gain on its purchase of €3,552,794 of 0.18 cents (2017: loss of 0.02 cents) after operating expenses.

 

Investments and Financings

 

On 2 January 2018, the Company through its wholly owned subsidiary, BSPF Project 1 EAD, acquired CSB (formerly Camping Gradina EOOD) including all its assets and liabilities. CSB owns six plots of land situated next to each other with a total area of 62,136 sqm, with permission to develop a camping complex. The six plots are located at the beachfront on the Black Sea Coast, close to the City of Sozopol.

 

The consideration for this acquisition was €2.76m of which €2.40m was through the assumption of a balance payable to CSB documented in a novation agreement dated 29 December 2017.

 

On 2 January 2018, the acquisition was completed and then recorded in the Trade Register in Bulgaria. This is the date that the Group obtained control of CSB.

 

The acquisition of CSB resulted in a bargain purchase gain, mainly due to the purchase price reflecting the on-going difficulties of CSB in its ability to accumulate sufficient funds for execution of its investment plans of CSB. Through the Company, CSB, as part of a larger organization, gained the ability to recapitalize and refinance certain obligations with more favourable terms, realizing immediate synergy savings and operationally therefore, having the ability to expand its business potential.

 

Following completion of the acquisition of CSB, we successfully completed the pilot project and commenced operations with the first three re-constructed bungalows.  We selected the architectural studio, to finalise the design for the re-construction of the project.  We carried out detailed analysis of the tourist market in Bulgaria which showed greater demand for luxury camping vacations, such as those offered at CSB, and a limited supply of such properties, and so there has been an increase in the prices charged for such breaks.

 

The Company has commenced domestic and international promotional campaigns and participated in several trade fairs in western and central Europe.  Towards the end of 2018, the Company completed the new design for the overall site and put the re-construction and interior design works contracts out to tender.  Re-construction commenced in early 2019 and was completed in September 2019.

 

The valuation of CSB as at 1 September 2019 carried out by Forton AD, an alliance partner of Cushman & Wakefield, amounted to €16.26million.

 

The Company's other main asset is the UniCredit Building, an office building in Sofia, which was acquired in October 2017.  During the year, the Company has focused on the reconstruction of the roof. We are currently preparing further development proposals for the building which will be submitted for further approvals in due course.  There is currently no letting of the building, but we expect to be able to advance its refurbishment significantly during 2019.

 

 

We are grateful for the continued support of our major shareholders which has enabled the Company to further progress the development of CSB and the UniCredit Building during the period.

 

Share trading and Audit opinion

 

During the course of the audit, concerns were raised by the auditors about the relatively high levels of unbanked cash at CSB at the time of its acquisition and unsatisfactory accounting procedures for recording bookings and reservations which were not appropriate for the Company as a listed entity.  As a result, there has been a delay in the completion of the audit while further checks have been carried out and trading in the Company's shares has been suspended.

 

The auditors have issued a disclaimer audit opinion, details of which are set out in their report below. All recommendations of the auditors have been addressed and implemented promptly:

 

1.  The Company has since adopted an internationally recognised reservations system.

2.  The accounting function has been outsourced to Crowe Bulgaria, the Bulgarian member of Crowe Global which is one of the leading international accounting networks, the eighth largest accounting network in the world in order to improve the accounting and internal control function.

3.  Available cash resources have been utilised in the Company's normal business operations for settlement of liabilities to contractors and suppliers.

 

Following publication of the audited accounts and the forthcoming unaudited interim results to 30 June 2019, we expect trading in the Company's shares to re-commence in the near future.

 

The major part of the cash on acquisition had arisen from loans made by the vendor's related companies and amounted to around EUR 700,000, confirmed by Phoenix Capital, the Company's property investment adviser, and was to be applied in the development of the business which approach is not unusual practice in Bulgaria.  The cash was held in euros, deemed to be a safer currency than the local Bulgarian lev.

 

During the first half of 2018, cash balances of EUR 378,356 (BGN 740,000) were transferred to the Company's bank account and used for working capital purposes.  As of 31 December 2018, the cash in the Company amounted to about 2% of the total assets.  On 28 May 2019, the outstanding cash amounting to EUR 310,000 and BGN 19,500 was transferred to the Company's bank account and applied in settling outstanding liabilities to subcontractors and suppliers for the completion of the investment project.

 

Board members

 

We were pleased to welcome to the Board both Ventsislava Blagoeva Altanova and Miroslav Rosenov Georgiev as non-executive Directors of the Company in November 2018.  Elena Fournadjieva resigned as an executive Director in September 2018.

 

Ventsislava and Miroslav were nominated by, and act as representatives of, Phoenix Capital Management AD, the Company's investment adviser and 28.18% shareholder, through Mamferay Holdings Limited, its wholly owned subsidiary ("Mamferay"). Ventsislava and Miroslav bring significant real estate expertise to the Company including project development, marketing and the structuring of acquisition financing. 

 

I currently act in an executive capacity for the Company while the Board has determined that the Company will be represented by the Chairman acting jointly with any of the other directors. 

 

 

Annual General Meeting and Resolutions

 

The resolutions for the forthcoming Annual General Meeting are contained in a separate Notice and are also available to shareholders on the website http://www.blackseapropertyplc.com/.  The Directors recommend shareholders to vote in favour of all the resolutions and a form of proxy is being despatched to all shareholders for this purpose.

 

The AGM will be held at the Company's registered office at 12 noon on Thursday 5 December  2019.

 

Outlook

 

We expect to complete the entire re-construction of CSB in the near future which we believe 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 also look forward to progressing our plans for the refurbishment of the UniCredit Building during the current year with a view to this prestigious asset generating returns for the Company in due course.

 

We believe that we now have a strong base for delivering value to our shareholders.  Overall, we are experiencing growth in the real estate market in Bulgaria.  We continue to investigate further investment opportunities for the Company with the potential for value accretion.

 

Signed on behalf of the Board by:

 

 

Alex Borrelli

Chairman

Date: 31 October 2019

 

 

Directors' Report for the year ended 31 December 2018

 

Shareholders' Interests

 

As at 31 December 2018, the significant shareholders of the Company were as follows:

 

Beneficial shareholder

Holding

Percentage

Mamferay Holdings Limited

377,814,581

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

 

BDO LLP are the Auditor of the Company. A resolution to re-appoint BDO LLP as the Company's Auditor will be put to the forthcoming Annual General Meeting.  A notice of the AGM, together with explanation of the resolution to be proposed at the meeting will be sent in a separate circular to shareholders.

 

So far as the Directors are aware at the time the report is approved:

 

·    there is no relevant audit information of which the Company's Auditor are unaware;

·    and each Director has taken the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company's Auditor are aware of the information.

 

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 30.03 of the Company's Articles of Association is £100,000 (€112,595 at year-end exchange rate) per annum, plus expenses.

 

 

2018

 

2017

 

 

Alex Borrelli

30,955*

 

34,152*

Antony Gardner-Hillman (resigned 5 May 2017)

-

 

24,798

Boris Lagadinov

13,441

 

8,230

Elena Fournadjieva (resigned 26 September 2018)

16,775

 

22,750

Miroslav Georgiev (appointed 20 November 2018)

1,350

 

-

Ventsislava Altanova (appointed 20 November 2018)

1,350

 

-

Yordan Naydenov

20,376

 

22,149

 

84,247

 

112,079

*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 €2.48 million net current assets at 31 December 2018, the majority of which was held as cash and cash equivalents at underlying subsidiaries. The Group currently has limited cash resources and will therefore need to secure additional financing to complete the upgrade of the UniCredit building and provide for general working capital.

 

The Group intends to raise the necessary additional funding to finance future acquisitions, upgrade the UniCredit building and provide for general working capital needs by way of additional capital through the issue of further ordinary shares. The Directors believe that the Group will be successful in raising the necessary finance.

 

In addition, the major shareholder, Mamferay Holdings Limited, has provided a loan of €600,000 to assist the group with any future financial commitments (see 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.  

 

Whilst the Directors are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding.

 

 

 

Statement of Directors' Responsibilities

 

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations. In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the European Union ("EU").

The financial statements for any period are required to give a true and fair view of the state of affairs of the Group at the end of that period, and of the profit or loss of the Group for the period.

 

In preparing these financial statements, the Directors are required to:

 

·    select suitable accounting policies and then apply them consistently;

·    make judgements and estimates that are reasonable and prudent;

·    state whether the financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU; and

·    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

 

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time its financial position and to enable them to ensure that its financial statements comply with the Isle of Man Companies Act 2006. They 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 Company's website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

On behalf of the Board

 

 

 

Alex Borrelli

Chairman
 

31 October 2019

 

 

 

Independent Auditor's report to the shareholders of Black Sea Properties Plc

 

Disclaimer of opinion

We were engaged to audit the financial statements of Black Sea Property PLC (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

We do not express an opinion on the accompanying financial statements of the Group. Because of the significance of the matters described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements. 

 

Basis for disclaimer of opinion

The Company acquired the entire share capital of Camping Gradina EOOD on 2 January 2018. At this date, and at year end, this subsidiary held cash in hand of €780,231 and €312,783 respectively. We were not made aware of the existence of this cash and therefore did not attend a cash count at either of these dates. The Group recorded a bargain on purchase of €3,759,352 as a result of the acquisition of Camping Gradina EOOD. We were therefore not able to satisfy ourselves regarding the valuation of the bargain on acquisition amount given that were not able to obtain assurance over the existence and valuation of cash in hand held at acquisition date. We were unable to satisfy ourselves by alternative means of the existence, completeness and valuation of cash held at both these dates. Consequently, we were unable to determine whether any adjustment to these amounts were necessary.

 

All revenue for the Group is generated entirely from the Camping Gradina business. We observed that the company does not have a systematic set of processes and controls over the recording of revenue. We were unable to satisfy ourselves by alternative means concerning the completeness and accuracy of revenue recorded during the year ended 31 December 2018, which is included in the statement of comprehensive income at €433,410. Consequently we were unable to determine whether any adjustments to revenue, trade receivables, corporation tax or value added tax were necessary.

 

As a result of these matters, we were unable to obtain sufficient, appropriate audit evidence in respect of these matters and we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded cash and cash equivalents, revenues, trade receivables, income taxes, trade creditors and the other elements making up the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity and consolidated statement of cash flows, including the bargain gain on acquisition disclosed in note 8 to the financial statements.

 

The possible effects of any undetected misstatements in respect of the matters stated above, if any, could be both material and pervasive to the financial statements.

 

Although we do not express an opinion on the financial statements and accordingly cannot form a conclusion in respect of going concern, we draw attention to note 1 to the financial statements, which details that the Group has prepared forecasts that demonstrate that the Group requires additional funding to continue. Whilst the Directors have received a letter of support from a major shareholder, there is no binding commitment on that shareholder and therefore no certainty that such funding will be received.  As stated in note 1, these events or conditions, along with other matters as set out in note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern.

 

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities, 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 Group or to cease operations, or have no realistic alternative but to do so.

 

Auditor's responsibilities for the audit of the financial statements

 

Our responsibility is to conduct an audit of the Group's financial statements in accordance with International Standards on Auditing (UK) and to issue an auditor's report.

 

However, because of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

 

We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements.

 

Use of our report

This report is made solely to the Parent Company's members, as a body, in accordance with Section 80C of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the Parent 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 Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

 

BDO LLP

Chartered Accountants

London

United Kingdom

 

 

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

 

Consolidated Statement of Comprehensive Income

 

 

 

Year to

 

Year to

 

Notes

31 Dec 18

 

31 Dec 17

 

 

 

Total revenue

 

 

 

 

 

 

 

 

 

Revenue

3

433,410

 

-

Property operating expenses

3

 

-

 

 

 

-

 

 

 

 

 

(Loss)/gain on revaluation of investment properties

2

(497,881)

 

428,792

Bargain purchase on acquisition

7

 3,759,352

 

-

Net gain on investment properties

 

 3,261,471

 

428,792

 

 

 

 

 

Administration and other expenses

4

(628,599)

 

(446,086)

Operating profit / (loss)

 

2,684,136

 

(17,294)

Interest income - cash at banks

5

420,847

 

-

Interest payable and similar charges

5

(740,646)

 

(41,405)

Profit/(loss) before tax

 

2,364,337

 

(58,699)

 

 

 

 

 

Taxation

6

(23,645)

 

(64,256)

Profit/(loss) and total comprehensive income attributable to shareholders

 

2,340,692

 

(122,955)

 

 

 

 

 

Earnings/(loss) per share

 

 

 

 

Basic and Diluted earnings/(loss) per share (cents)

16

0.18

 

(0.02)

 

 

The results are derived from continuing operations during the year.

 

 

The notes below are an integral part of these consolidated financial statements.

 

 

Consolidated Statement of Financial Position

 

 

 

2018

 

2017

 

Notes

 

Non-current assets

 

 

 

 

Investment properties

8

27,566,766

 

11,229,740

 

 

27,566,766

 

11,229,740

Current assets

 

 

 

 

 

 

 

 

 

Trade and other receivables

9

566,263

 

6,138,436

Cash and cash equivalents

10

3,698,239

 

2,238,811

 

 

4,264,502

 

8,377,247

 

 

 

 

 

Total assets

 

31,831,268

 

19,606,987

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

Issued share capital

14

64,774,886

 

64,774,886

Retained earnings

15

(51,239,411)

 

(53,580,103)

Foreign currency translation reserve

15

(1,533,086)

 

(1,533,086)

Total equity

 

12,002,389

 

9,661,697

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

Bank loans

12

16,535,339

 

6,933,596

Deferred tax liability

6

1,509,773

 

42,879

 

 

18,045,112

 

6,976,475

Current liabilities

 

 

 

 

Trade payables

11

234,261

 

207,839

Bank loans

12

1,549,506

 

-

Other payables

11

-

 

2,760,976

 

 

1,783,767

 

2,968,815

 

 

 

 

 

Total liabilities

 

19,828,879

 

9,945,290

 

 

 

 

 

Total equity and liabilities

 

31,831,268

 

19,606,987

 

 

 

 

 

Number of ordinary shares in issue

14

1,269,407,896

 

1,269,407,896

NAV per ordinary share (cents)

16

0.95

 

0.76

 

 

The notes below are an integral part of these consolidated financial statements.

 

The financial statements were approved and authorised for issue by the Board of Directors on 31 October 2019 and were signed on their behalf by:

 

 

 

 

Chairman                                                        Executive Director                                         

 

 

Consolidated Statement of Changes in Equity

 

 

 Share capital

 Retained earnings

Foreign currency translation reserve

Total

 

 

 

 

 

 

At 1 January 2017

55,920,286

 (53,457,148)

 (1,533,086)

930,052

 

 

 

 

 

Loss for the year

-

(122,955)

 

(122,955)

Other comprehensive income

 -

 -

 -

 -

Total comprehensive income

-

(122,955)

-

(122,955)

 

 

 

 

 

Transactions with owners

 

 

 

 

Issue of share capital

9,036,000

-

-

9,036,000

Share issue costs

(181,400)

-

-

(181,400)

 

 

 

 

 

At 31 December 2017

64,774,886

(53,580,103)

(1,533,086)

9,661,697

 

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

 

 

 

The notes below are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

 

 

 

2018

 

2017

 

Notes

 

Operating activities

 

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

 

2,364,337

 

(58,699)

Loss/(gain) on revaluation of investment property

8

497,881

 

(428,792)

Bargain Purchase on Acquisition

7

(3,759,352)

 

-

Finance expense

5

740,646

 

41,405

 

 

(156,488)

 

(446,086)

Changes in working capital

 

 

 

 

(Increase)/decrease in trade and other receivables

 

(628,870)

 

1,204

(Decrease)/increase in trade and other payables

 

(323,539)

 

102,907

Tax paid

 

(85,309)

 

(21,377)

 

 

 

 

 

Net cash outflow from operating activities

 

(1,194,206)

 

(363,352)

 

 

 

 

 

Investing activities

 

 

 

 

Investment property additions

8

(540,035)

 

(10,800,948)

Cash held by the acquired subsidiary

7

4,154,758

 

-

Cash advance pre-acquisition

7

-

 

(3,374,527)

Net cash inflow/(outflow) from investing activities

 

3,614,723

 

(14,175,475)

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Interest paid and other charges

12

(720,719)

 

(37,809)

Loans received

 

-

 

100,000

Loans repaid

 

-

 

(222,000)

Bank loan received

12

(240,370)

 

7,000,000

Bank loan arrangement fees

 

-

 

(70,000)

Issue of share capital

14

-

 

8,854,600

 

 

 

 

 

Net cash (outflow)/inflow from financing activities

 

(961,089)

 

15,624,791

 

 

 

 

 

Net increase in cash and cash equivalents

 

1,459,428

 

1,085,964

 

 

 

 

 

Cash and cash equivalents at the beginning of the year

10

2,238,811

 

1,152,847

 

 

 

 

 

Cash and cash equivalents at the end of the year

10

3,698,239

 

2,238,811

             

 

 

The notes below are an integral part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statements

 

1)   Accounting policies

 

a)      Basis of preparation

 

The consolidated financial statements of the Company for the year ended 31 December 2018 comprise the financial statements of the Company and its subsidiaries (together, the "Group") and have been prepared in accordance with International Financial Reporting Standards ("IFRS") endorsed for use in the EU.

 

Originally domiciled in Jersey, the Company was re-domiciled to the Isle of Man with effect from 20 July 2016 and continues under the Isle of Man Companies Act 2006 with the name Black Sea Property PLC and with registered number 013712V. The Company operates as a close 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.

 

b)      Basis of consolidation

 

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. All companies within the Group have a 31 December year end and apply consistent accounting policies. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Assets and liabilities of subsidiaries denominated in foreign currencies are translated at the closing rate at the reporting date. Profit or loss amounts are translated at an average rate. Differences are taken directly to foreign currency translation differences in equity.

 

c)      Going concern

The Group had €2.48 million net current assets at 31 December 2018, the majority of which was held as cash and cash equivalents at underlying subsidiaries. The Group currently has limited cash resources and will therefore need to secure additional financing to complete the upgrade of the UniCredit building and provide for general working capital.

The Group intends to raise the necessary additional funding to finance future acquisitions and upgrade of the UniCredit building and provide for general working capital needs by way of additional capital through the issue of further ordinary shares. The Directors believe that the Group will be successful in raising the necessary finance.  

In addition, the major shareholder, Mamferay Holdings Limited, has provided an additional loan of €600,000 to assist the group with any future financial commitments.

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 (see note 23).

Whilst the Directors are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding.  The financial statements do not include the adjustments that would result if the Company and the Group were unable to continue as a going concern.

d)      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:

 

(i) assets and liabilities are translated to Euro at exchange rates at the reporting date;

(ii) 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

(iii) 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.

 

e)      Interest income

 

Income on investments is recognised on an accruals basis.

 

f)       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.

 

g)      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.

 

h)      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.

 

i)       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.

 

j)       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.

 

k)      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 using an income capitalisation technique. The valuation is obtained from third party valuers, based upon assumptions including future rental value, anticipated property costs, future development costs and the appropriate discount rate. Reference is also made to market evidence of transaction prices for similar properties. More information is provided in the 'Investment Properties' note.

 

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.

l)       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.

 

m)     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.

 

n)      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.

o)      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.

 

During the year, the Company acquired Camping South Beach EOOD ("CSB"), formerly Camping Gradina EOOD. CSB is a standalone business with integrated set of activities and assets that are capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities. Therefore, the acquisition was treated as a business combination (see note 8).

 

p)      Changes in accounting policies and disclosures

 

Interpretations and amendments to published standards effective in 2018

 

The following standards, interpretations and amendments were adopted by the Group during the year:

 

·    IFRS 9 (2014) - Financial instruments (effective 1 January 2018)

·    Amendments to IFRS 2: Classification and measurement of Share-based Payment Transactions (effective 1 January 2018)

·    Annual improvements to IFRS Standards 2014-2016 Cycle (effective 1 January 2018)

·    IFRIC Interpretation 22 - Foreign Currency Transactions and Advance Consideration (effective 1 January 2018)

·    IFRS 15 - Revenue from Contracts with Customers (effective 1 January 2018)

 

IFRS 9 Financial Instruments replaced IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

 

The Group has applied IFRS 9 retrospectively, with the initial application date of 1 January 2017, and determined that there was no material impact on the comparative balances other than a change in classification and terminology. There was no impact on hedging as the Group does not apply hedge accounting.

 

The implications of IFRS 15 are that contract revenues are spread over the full term of the customer contract rather than being recognised at one particular point. Revenue includes mainly fees from camping reservations which are short term and generally recognised immediately and not affected by IFRS 15. Therefore, the Group has assessed the impact of IFRS 15 and concluded that it does not affect the financial performance or financial position of the Group or the disclosures made in its financial statements.

 

Standards, amendments and interpretations to published standards not yet effective

 

At the date of authorisation of these financial statements, the following standards and interpretations, were in issue but not yet effective, and have not been early adopted by the Group:

 

·    IFRS 16 - Leases (effective 1 January 2019)

·    Annual Improvements to IFRS Standards 2015 - 2017 Cycle (1 January 2019)

·    Amendments to References to the Conceptual Framework in IFRS Standards (effective 1 January 2020)

 

The directors have reviewed the IFRS standards in issue which are effective for annual accounting years ending on or after the stated effective date. In their view, none of these standards would have a material impact on the financial statements of the Group.

 

q)      Financial instruments

A financial instrument is any contract that gives rise to a financial asset of on 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 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 Cashflows. In the case of the Company or Group, all financial assets meet this critera and so there are held to at amortised cost.

 

Impairment of financial assets

IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - 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. 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 the statement of profit or loss and other comprehensive income 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.

 

2)      Significant accounting judgements, estimates and assumptions

 

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities.

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Critical judgements

Business combinations

As disclosed in note 1(O), the Company acquired CSB which is standalone business with integrated set of activities and assets that are capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities and therefore, the acquisition was treated as a business combination (also see note 8).

 

Critical estimates

The Group used estimates in determining the fair values for Investment properties as shown below:

 

Valuation of investment properties

The Company's accounting policy on fair value measurements is discussed in accounting policy note 1(i). The Company measures fair value using the following hierarchy that reflects the significant of inputs used in making the measurements:

 

·     Level 1: Quoted market price (unadjusted) in an active market for and identical instrument.

·     Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category included instruments valued using: quoted market prices in active markets for similar instruments: quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

·     Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

 

All the Company's investment properties are measured at fair value have been valued on the basis of Level 3 described above. See further details on note 9.

 

A reconciliation from the beginning balances to the ending balances for Level 3 investments is as follows:

 

2018

 

2017

Beginning of year

11,229,740

 

-

Acquisition

16,294,872

 

10,800,948

Additions

540,035

 

-

Fair value adjustment

(497,881)

 

428,792

Value at end of year

27,566,766

 

11,229,740

 

Unicredit building

11,322,000

 

11,229,740

CSB

16,244,766

 

-

Value at end of year

27,566,766

 

11,229,740

 

Financial instruments not measured at fair value

The carrying value of short-term financial assets and financial liabilities (cash, debtors and creditors) approximate their fair value.

 

3)      Net operating income

 

 

Year to

 

Year to

 

 

31 Dec 18

 

31 Dec 17

 

 

 

 

 

 

 

 

Camping reservations

 

433,410

 

-

Property operating expenses

 

 

-

 

 

 

-

 

All income during the year is primarily due to camping reservations from Camp South Beach EOOD ("CSB") (formerly Camping Gradina EOOD) - see note 8.

 

4)   Administration and other expenses

 

2018

 

2017

 

 

 

 

 

 

Directors' remuneration

84,247

 

112,079

Administration fees - Isle of Man

47,334

 

28,189

Administration fees - Jersey

39,358

 

-

Administration fees - Bulgaria

126,464

 

74,361

Legal and professional fees

19,361

 

53,574

Auditor's remuneration

32,404

 

39,395

Foreign currency expenses

4,295

 

2,349

Registrar fees

2,212

 

2,653

Broker fees

33,933

 

34,507

Other administration and professional fees

238,991

 

101,328

 

628,599

 

446,086

         

 

In 2018, key management personnel comprise the Board (2017: The Board). The Board's compensation comprised Directors' fees only during the year, the amount of which is summarised within the Directors' Report.

 

 

5)   Finance income/(expense)

 

The following amounts have been included in the Consolidated Statement of Comprehensive Income line for the reporting periods presented:

 

Interest income

2018

 

2017

 

 

Interest income - cash and deposit instruments

420,847

 

-

 

420,847

 

-

Interest payable and similar charges

 

 

 

Interest expense on borrowings (*)

717,206

 

37,809

Amortisation of bank loan arrangement fee

23,440

 

3,596

 

740,646

 

41,405

 

*The interest on borrowings relates mainly to the secured debt funding on note 12.

6)      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 zero percent. Additionally, neither the Isle of Man nor Jersey levies tax on capital gains.

 

Consequently, shareholder's resident outside 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% (2017: 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 Nil% (2017: Nil%) is shown below.

 

2018

 

2017

 

 

 

 

 

 

Profit/(loss) before tax

2,364,337

 

(58,699)

 

 

 

 

Profit/(loss) on ordinary activities multiplied by the standard rate in the Isle of Man of Nil% (2017: Nil%) 

-

 

-

Effect of different tax rates in other countries

(85,309)

 

(21,377)

Deferred tax liability on fair value uplift of investment property

61,664

 

(42,879)

Current charge for the year

(23,645)

 

(64,256)

 

 

 

 

Bulgarian tax losses brought-forward at 10%

(773,649)

 

(765,312)

Tax losses utilised in the year

23,293

 

(-8,337)

Bulgarian tax losses carried-forward at 10%

(750,356)

 

(773,649)

 

 

 

 

Deferred tax liability

 

 

 

 

Opening deferred tax liability balance

42,879

 

-

Deferred tax liability on fair value uplift of investment property on acquisition of a subsidiary (note 7)

1,528,558

 

-

Bulgarian deferred tax liability charge

(61,664)

 

42,879

Closing deferred tax liability balance

1,509,773

 

42,879

 

7)      Acquisition of a subsidiary

 

On 2 January 2018, the Company through its owned subsidiary, BSPF Project 1 EAD, acquired Camp South Beach EOOD ("CSB") (formerly Camping Gradina EOOD) including all its assets and liabilities. CSB owns six plots of land situated next to each other with a total area of 62,136 sqm, with permission to develop a camping complex. The six plots are located at the beachfront on the Black Sea Coast, close to the City of Sozopol.

 

The consideration for this acquisition was €2,76m of which €2.40m was through the assumption of a balance payable to CSB documented in a novation agreement dated 29 December 2017.

 

On 2 January 2018, the transaction for shares was finalised and the acquisition recorded in the Trade Register in Bulgaria. This is the date that the Group obtained control of CSB.

 

The fair value of the identifiable assets and liabilities of CSB as at the date of acquisition were:

 

The fair value of the identifiable assets and liabilities

 

 

 

 

 

Pre-acquisition

carrying value

Fair value adjustments

Recognised value

on acquisition

 

 

 €

Land and buildings

 

1,009,290     

15,285,582     

16,294,872     

Receivables

 

9,955,876     

(7,217,477)    

2,738,399

Cash and cash equivalents*

 

4,154,758

-

4,154,758

Total assets

 

15,119,924     

8,068,105     

23,188,029     

 

 

 

 

 

             

 

Trade payables

 

(220,751)    

-    

(220,751)    

 

Bank loans (note 12)

 

(11,348,251)    

-    

(11,348,251)    

 

Other liabilities*

 

(3,570,141)    

-    

(3,570,141)    

 

Deferred taxation**

 

-

(1,528,558)    

(1,528,558)    

 

Total liabilities

 

(15,139,143)    

(1,528,558)    

(16,667,701)    

 

 

 

 

 

 

 

Total identifiable net assets at fair value

     (19,219)

  6,539,547     

6,520,328     

 

 

 

 

 

 

Bargain purchase on acquisition

 

 

(3,759,352)    

 

Purchase consideration transferred (BGN 5.40 million)

 

 

2,760,976     

 

                       

 

*The consideration for this acquisition was €2.76m of which €2.40m was through the assumption of a balance payable to CSB documented in a novation agreement dated 29 December 2017. On 20 December 2017, the Group invested an additional €3.37m in CSB in the form of additional share capital.

 

**Deferred tax liability on fair value uplift of land and buildings

 

Pursuant to IFRS 3, Business Combinations, circumstances leading up to the sale of a business may result in recognition of a bargain purchase gain if the fair value of assets acquired and liabilities assumed exceeds the amount of consideration transferred. The resulting gain is recognized in net earnings of the acquirer on the acquisition date.

 

The acquisition of CSB resulted in a bargain purchase gain, mainly due to the purchase price reflecting the on-going difficulties of CSB in its ability to accumulate sufficient funds for execution of its investment plans of CSB. Through the Company, CSB acquisition, as part of a larger organization, gained the ability to recapitalize and refinance certain obligations with more favourable terms, realizing immediate synergy savings and operationally therefore, having the ability to expand its business potential.

 

The favourable loan terms include loans extension to year 2028 and capital repayments for the loan are now aligned with the expected revenues from the camping business.

 

8)      Investment properties

 

 

2018

 

 

2017

Beginning of year

11,229,740

 

 

10,800,948

Acquisition (note 7)

16,294,872

 

 

-

Additions

540,035

 

 

-

Fair value adjustment

(497,881)

 

 

428,792

Total investment property

27,566,766

 

 

11,229,740

 

 

 

 

 

Unicredit building

11,322,000

 

 

11,229,740

CSB

16,244,766

 

 

-

Total investment property

27,566,766

 

 

11,229,740

 

UniCredit Valuation

The Directors adopted valuations of the UniCredit property was performed by Forton, a commercial real estate advisory company which is a subsidiary of AG Capital, the largest real estate company in Bulgaria, and Member of the Cushman & Wakefield Alliance in Bulgaria. CSB property was valued by Bright Consult, an appraisal company with major experience in Bulgaria.

 

The valuation of UniCredit is based on Discounted Cash Flow (DCF) method. Internal rate of return of 18% was used. The forecast cash flows consist of the expected rental and/or sale revenues from the property over the projection period. Provisions are made for projected vacancies or holding costs. Rental yields of 6% - 8% were used. If rental yields were to increase or decrease by 0.5% then the valuation would decrease or increase by €0.4 million - €0.5 million.

 

Based on the above assumptions, the estimate of the value of the property is €11,322,000.

 

The valuation methodology follows in general accordance with the RICS Appraisal and Valuation Standards.

 

Valuation of CSB

In preparing the valuations of CSB, the valuer relied upon their knowledge of the occupational and investment markets and the available evidence. The principal valuation approach was a blended approach using market multiples approach and residual value approach. The value of the property is €16,244,766.

 

The valuation methodology follows in general accordance with International Valuation Standards.

 

As at 31 December 2018, there are no non-cancellable operating leases.

 

 

9)      Trade and other receivables

 

2018

 

2017

 

 

 

 

Advance pre-acquisition

-

 

6,135,503

 

 

Trade receivables*

566,263

 

-

 

 

Prepayments

4,209

 

2,933

 

 

 

570,472

 

6,138,436

 

 

 

*All amounts are due within one year. The expected credit losses (ECL) for this amount is €1,418.

 

10) Cash and cash equivalents

 

2018

 

2017

 

 

Cash in hand

322,446

 

-

Cash at bank

3,375,793

 

2,238,811

 

3,698,239

 

2,238,811

 

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

 

2018

 

2017

 

 

Trade creditors

234,261

 

207,839

Other payables (note 7)

-

 

2,760,976

 

234,261

 

2,968,815

12)    Bank loans

 

2018

 

2017

 

 

Loan from UniCredit (a)

6,975,121

 

6,933,596

Central Cooperative Bank (b)

11,109,724

 

-

 

18,084,845

 

6,933,596

Long term bank loans

16,535,339

 

6,933,596

Current bank loans

1,549,506

 

-

 

Reconciliation of bank loans

 

 

 

Beginning of year (gross loan)

7,000,000

 

-

Acquisition (see note 7)

11,348,251

 

-

Loan received during the year

-

 

7,000,000

Bank loan arrangement fees

(42,963)

 

(66,404)

Interest charged

740,646

 

-

Principal repayments

(240,370)

 

-

Interest payments

(720,719)

 

-

Value at end of year

18,084,845

 

6,933,596

 

(a)  In October 2017, the Company entered into a secured debt funding of €7 million from UniCredit Bulbank AD ("UniCredit"), a leading Bulgarian commercial bank which was used to complete the acquisition from UniCredit building. The debt funding from UniCredit is secured by a commercial mortgage on the property valued at €11,322,000 (see note 9). 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.

 

The interest on the loan is the 3-month Sofia Interbank Offered Rate (SOFIBO) plus 3. 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

 

2018

 

2017

 

 

Central Cooperative Bank overdraft (i)

664,474

 

-

Central Cooperative bank overdraft (ii)

8,569,252

 

-

Central Cooperative bank investment loan (ii)

1,875,998

 

-

 

11,109,724

 

-

 

(i)   This is an overdraft with Central Cooperative Bank. The interest on the account is 4.00% and repayable on 24 June 2019. Subsequent to year-end the repayment has been extended to 24 June 2020.

 

(ii)  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 investment

Jersey

BSPF (Property 4) Limited

100%

Property
investment

Jersey

BSPF (Property 5) Limited

100%

Property investment

Jersey

BSPF (Property 6) Limited

100%

Property investment

Jersey

BSPF Project 1 EAD

100%

Property investment

Bulgaria

BSPF Super Borovetz EAD

100%

Property investment

Bulgaria

BSPF Bulgaria EAD

100%

Investment property

Bulgaria

Held indirectly:

 

 

 

Camping South Beach EOOD

100%

Property investment

Bulgaria

 

BSPF (Property 3) Limited and BSPF (Property 6) Limited are both dormant companies.

 

14)    Issued share capital

 

 

 

2018

 

2017

Authorised

 

Number

 

Number

 

 

 

 

 

Founder shares of no par value

 

10

 

10

Ordinary shares of no par value

 

Unlimited

 

Unlimited

 

 

 

 

 

 

 

 

Issued and fully paid

 

 

 

 

2 Founder shares of no par value

 

-

 

-

1,269,407,896 (2017: 1,269,407,896) ordinary shares of no par value

 

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.

 

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 "Investment objective and policy" as disclosed in the Directors' Report.

 

15)    Reserves

 

The following describes the nature and purpose of each reserve within equity:

 

Retained earnings - The retained earnings represent cumulative net 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/(loss) and Net Asset Value per share

 

Profit/(loss) per share

 

 

 

 

 

 

 

 

 

The basic profit/(loss) per ordinary share is calculated by dividing the net profit/(loss) attributable to the ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year.

 
 

 

2018

 

2017

 

 

 

 

Profit/(loss) attributable to owners of parent (€)

2,340,692

 

(122,955)

 

Weighted average number of ordinary shares in issue

1,269,407,896

 

513,625,478

 

 

 

 

 

 

Basic profit/(loss) per share (cents)

0.18

 

(0.02)

 

 

 

 

 

 

The Company has no dilutive potential ordinary shares; the diluted earnings/(loss) per share is the same as the basic earnings/(loss) per share.

 

 

 

 

 

 

Net asset value per share

 

 

 

 

 

2018

 

2017

 

 

 

 

 

 

Net assets attributable to owners of the parent (€)

12,002,389

 

9,661,697

 

Number of ordinary shares outstanding

1,269,407,896

 

1,269,407,896

 

 

 

 

 

 

Net Asset Value per share (cents)

0.95

 

0.76

 

 

 

 

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 2018.

19)    Directors' interests

 

Total compensation paid to the Directors during the period was €84,247 (2017: €112,079). Outstanding Directors' fee was €8,280 (2017: €11,396).

 

20)    Ultimate controlling party

The Directors consider that there is no controlling or ultimate controlling party of the Company.

 

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:

 

GBP

 

EUR

Bulgarian LEV

Total

 

As at 31 December 2018

 

 

 

 

Trade and other receivables

4,209

-

605,017

609,226

Cash and cash equivalents

156,046

795,472

2,746,721

3,698,239

Trade and other payables

(132,543)

-

(366,804)

(499,347)

Bank loans

-

(7,000,000)

(11,127,808)

(18,127,808)

Net exposure

27,712

(6,204,528)

(8,142,874)

(14,319,690)

 

 

 

 

 

 

 

 

GBP

EUR

Bulgarian LEV

Total

 

As at 31 December 2017

 

 

 

 

Other receivables

2,933

-

6,135,503

6,138,436

Cash and cash equivalents

102,969

651,147

905,071

1,659,187

Trade and other payables

(83,040)

-

(78,502)

(161,542)

Loan payable

-

(2,760,976)

-

(2,760,976)

Bank loans

-

(6,933,596)

-

(6,933,596)

Net exposure

22,862

(9,043,425)

6,962,072

(2,058,491)

 

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.

 

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 2018 (2017: 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 2018. The interest rate profile of the Group's financial instruments excluding other receivables was as follows:

 

Variable rate

Non-interest bearing

 

As at 31 December 2018

 

 

Trade and other payables

-

(234,261)

Cash and cash equivalents

3,698,239

-

Bank loans

(17,463,334)

-

 

(13,765,095)

(234,261)

As at 31 December 2017

 

 

 

Trade and other payables

-

(250,718)

 

Cash and cash equivalents

2,238,811

-

 

Loan payable

(2,760,976)

-

 

Bank Loans

(6,933,596

-

 

 

(7,455,761)

(250,718)

 

           

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 €145,000 (2017: increase €75,221). A decrease of 100 basis points would have had an equal but opposite effect.

 

 

 

iv.  Liquidity risk

 

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 2018

Trade and other payables

(234,261)

-

-

(234,261)

Bank loans and interest

(2,206,313)

(12,670,302)

(6,408,719)

(18,127,808)

 

(2,440,574)    

 (12,670,302)    

 (6,408,719)    

 (21,519,595)    

 

 

 

 

 

As at 31 December 2017

 

 

 

 

Trade and other payables

(207,839)

-

-

(207,839)

Loan payable

(2,694,572)

-

-

(2,694,572)

Bank loans and interest

-

(8,047,083)

-

(8,047,083)

 

(2,902,411)

(8,047,083)

-

(10,949,494)

 

22 Related party transactions

 

As noted in note 23, the Company was provided with an unsecured loan facility of €150,000 from a shareholder, Mamferay Holdings Limited ("Mamferay") to fund running costs. Interest on borrowed amounts is calculated on the 3 months' Euro Interbank Offered Rate plus 2.5% per annum.

 

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% (2017: 28.18%) of the issued share capital of the Company. Phoenix Capital Management JSC received fees of €214,272 (2017: €70,560). The amount outstanding as at year-end is € 53,568 (2017: €75,849).

 

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 €7,700 (2017: €42,000). The amount outstanding as at year-end is € nil (2017: € nil).

 

23 Subsequent events

 

On 22 May 2019, the Company was provided with an unsecured loan facility of €150,000 from a shareholder, Mamferay Holdings Limited ("Mamferay") to fund running costs. Interest on borrowed amounts is calculated on the 3 months' Euro Interbank Offered Rate plus 2.5% per annum.

 

On 30 October 2019, the Company was provided with an unsecured loan facility of €600,000 from a shareholder, Mamferay to fund running costs. Interest on borrowed amounts is calculated on the 3 months' Euro Interbank Offered Rate plus 2.5% per annum. The maturity of the loan is 30 October 2020.

 

Subsequent to year-end, the maturity date of the overdraft with Central Cooperative Bank of €664,474 has been extended to 24 June 2020 from 24 June 2019.

 

During the course of the audit, concerns were raised by the auditors about the relatively high levels of unbanked cash at CSB at the time of its acquisition and unsatisfactory accounting procedures for recording bookings and reservations which were not appropriate for the Company as a listed entity.  As a result, there has been a delay in the completion of the audit while further checks have been carried out and trading in the Company's shares has been suspended.  Following publication of the accounts, we expect trading in the Company's shares to re-commence in the near future.

 

 

 

Subsequent to year-end, the Board has addressed audit concerns at CSB including among other things:

 

1)  The Company has since adopted an internationally recognised reservations system.

2)  The accounting function has been outsourced to Crowe Global - one of the leading international accounting networks, the eighth largest accounting network in the world in order to improve the accounting and internal control function.

3)  Available cash resources have been utilised in the Company's normal business operations for settlement of liabilities to contractors and suppliers.

4)  On 28 May 2019, the outstanding cash amounting to EUR 310,000 and BGN 19,500 was transferred to the bank account and applied in settling outstanding liabilities to subcontractors and suppliers for the completion of the investment projects.

 

There are no other significant events after reporting date.

 

 


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