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Agroton Public Limited
Annual / Quarterly Financial Statement • Jun 7, 2024
5489_10-k_2024-06-07_6be0c1cc-f6a4-405b-8514-ef9dcf17ed5a.pdf
Annual / Quarterly Financial Statement
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REPORT AND SEPARATE FINANCIAL STATEMENTS 31 December 2019
REPORT AND SEPARATE FINANCIAL STATEMENTS 31 December 2019
| CONTENTS | PAGE |
|---|---|
| Board of Directors and other officers | 1 |
| Declaration of the members of the Board of Directors and the Company official responsible for the preparation of the financial statements |
2 |
| Management Report | 3 - 4 |
| Independent auditor's report | 5 - 8 |
| Statement of profit or loss and other comprehensive income | 9 |
| Statement of financial position | 10 |
| Statement of changes in equity | 11 |
| Cash flow statement | 12 |
| Notes to the separate financial statements | 13 - 38 |
BOARD OF DIRECTORS AND OTHER OFFICERS
| Board of Directors: | Iurii Zhuravlov (Chief Executive Officer) Tamara Lapta (Deputy Chief Executive Officer) Larysa Orlova (Chief Financial Officer) Borys Supikhanov (Non-Executive Director) Volodymyr Kudryavtsev (Non-Executive Director) |
|---|---|
| Company Secretary: | Inter Jura Cy (Services) Limited |
| Independent Auditors: | Exsus Ltd Chartered Accountants 12, Mykinon Street Office 11, 1st Floor, LAVINIA COURT, 1065, Nicosia, Cyprus |
| Legal Advisers: | K. Chrysostomides & Co LLC |
| Registered office: | 1 Lampousas Street 1095 Nicosia Cyprus |
| Registration number: | ΗΕ255059 |
DECLARATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIAL RESPONSIBLE FOR THE PREPARATION OF THE FINANCIAL STATEMENTS
In accordance with article 9(3)(c) and (7) of the Transparency Requirements (Securities Listed for Trading on a Regulated Market) Law of 2007 (the "Law"), as amended from time to time, we, the Members of the Board of Directors and the Company official responsible for the preparation of the financial statements of Agroton Public Limited (the "Company") for the year ended 31 December 2019, confirm that to the best of our knowledge:
a) the annual financial statements presented on pages 9 to 40:
i) have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union and the provisions of article (9), section (4) of the Law, and
ii) give a true and fair view of the assets and liabilities, the financial position and the profits or losses of Agroton Public Limited and of the entities included in the financial statements, as a whole and
b) the Management Report provides a fair review of the developments and performance of the business as well as the position of Agroton Public Limited, as a whole, together with a description of the major risks and uncertainties that they face.
Members of the Board of Directors:
| Iurii Zhuravlov | |
|---|---|
| Tamara Lepta | |
| Larysa Orlova | |
| Borys Supikhanov | |
| Volodymyr Kudryavtsev | |
Company official responsible for the preparation of the financial statements of the Company for the year ended 31 December 2019:
................................. Larysa Orlova
Nicosia, 22 May 2024
MANAGEMENT REPORT
The Board of Directors of Agroton Public Limited (the "Company") presents to the members its Annual Report together with the audited financial statements of the Company for the year ended 31 December 2019.
Incorporation
The Company Agroton Public Limited was incorporated in Cyprus on 21 September 2009 as a private limited liability company under the provisions of the Cyprus Companies Law, Cap. 113. The Company was listed at the main market of Warsaw Stock Exchange on 8 November 2010.
Principal activities
The principal activities of the Company, which are unchanged from last year, are those of an investment holding company and the provision of financing to related parties. The Company is the holding company of a group of companies of agriculture producers in Ukraine. The principal activities of the Group which remained the same as in the previous year, are grain and oil crops growing, agricultural products storage and sale, cattle breeding (milk cattle-breeding, poultry farming) and milk processing. The poultry farming business has been temporarily abandoned due to the military clashes and armed conflict in Eastern Ukraine.
Examination of the development, position and performance of the activities of the Company
The current financial position as presented in the financial statements is not considered satisfactory and the Board of Directors is making an effort to reduce the Company losses.
Main risks and uncertainties
The principal risks and uncertainties faced by the Company are disclosed in notes 7, 8 and 22 of the separate financial statements.
Branches
During the year ended 31 December 2019 the Company did not operate any branches.
Use of financial instruments by the Company
The Company is exposed to market price risk, interest rate risk, credit risk and liquidity risk from the financial instruments it holds.
Market price risk
Market price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices. The Company's financial assets at fair value through profit or loss are susceptible to market price risk arising from uncertainties about future prices of the investments.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company's Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. Credit risk related to financial instruments and cash deposits.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets.
Financial Results
The Company's results for the year are set out on page 9. The net loss for the period amounted to US\$5,081,930 (2018: net loss US\$117,664). On 31 December 2019 the total assets of the Company were US\$79,308,907 (2018: US\$88,935,026) and the net assets of the Company were US\$3,578,086 (2018: US\$8,660,016).
Dividends
The Board of Directors does not recommend the payment of a dividend.
MANAGEMENT REPORT
Share capital
There were no changes in the share capital of the Company during the year under review.
Board of Directors
The members of the Company's Board of Directors as at 31 December 2019 and at the date of this report are presented on page 1. All of them were members of the Board of Directors throughout the year ended 31 December 2019.
In accordance with the Company's Articles of Association all Directors presently members of the Board continue in office.
There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors.
Events after the reporting period
Any significant events that occurred after the end of the reporting period are described in note 27 of the separate financial statements.
Related party transactions
Disclosed in note 23 of the separate financial statements.
Independent Auditors
During the year the Independent Auditors of the Company, KPMG Limited, resigned and Exsus Ltd was appointed in their place.
The Independent Auditors, Exsus Ltd, were appointed in replacement of the previous auditors KPMG Limited and have expressed their willingness to continue in office and a resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By order of the Board of Directors,
Larysa Orlova Director
Nicosia, 22 May 2024
Independent Auditor's Report
To the Members of Agroton Public Limited
Report on the Audit of the Separate Financial Statements
Opinion
We have audited the separate financial statements of parent company Agroton Public Limited (the ''Company''), which are presented in pages 9 to 38 and comprise the statement of financial position as at 31 December 2019, and the separate statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes of the separate financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying separate financial statements give a true and fair view of the financial position of the Company as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113 relating to separate financial statements.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the ''Auditor's Responsibilities for the Audit of the Separate Financial Statements'' section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the separate financial statements in Cyprus, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined that there are no key audit matters to communicate in our report.
Other information
The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report, but does not include the separate financial statements and our auditor's report thereon.
Our opinion on the separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. 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.
With regards to the management report, our report is presented in the "Report on other legal and regulatory requirements" section.
Independent Auditor's Report (continued)
To the Members of Agroton Public Limited
Responsibilities of the Board of Directors for the Separate Financial Statements
The Board of Directors is responsible for the preparation of separate financial statements that give a true and fair view in accordance with IFRSs as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, the Board of Directors is responsible for assessing the Company'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 Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate 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 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 separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.
- Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves a true and fair view.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Independent Auditor's Report (continued)
To the Members of Agroton Public Limited
Report on Other Legal Requirements
Requirements of Article 10(2) of the EU Regulation 537/2014
1. Appointment of the Auditor and Period of Engagement
We were appointed as auditors of the Company by the General Meeting of the Company's members on 21 May 2024. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 1 year.
2. Consistency of the Additional Report to the Audit Committee
We confirm that our audit opinion on the separate financial statements expressed in this report is consistent with the additional report to the Audit Committee of the Company, which we issued on 22 May 2024 in accordance with Article 11 of the EU Regulation 537/2014.
3. Provision of Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Company and which have not been disclosed in the separate financial statements or the Management Report.
Other Legal Requirements
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
- In our opinion, based on the work undertaken in the course of our audit, the Management Report has been prepared in accordance with the requirements of the Cyprus Companies Law, Cap 113, and the information given is consistent with the separate financial statements.
- In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the Management Report. We have nothing to report in this respect.
Independent Auditor's Report (continued)
To the Members of Agroton Public Limited
Other Matters
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
We have reported separately on the consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2019. The opinion in that report is qualified.
Comparative figures
The separate financial statements of the Company for the year ended 31 December 2018 were audited by another auditor who expressed an unmodified opinion on those separate financial statements on 25 April 2019.
Avraam Kapiri Certified Public Accountant and Registered Auditor for and on behalf of Exsus Ltd Chartered Accountants
Nicosia, 22 May 2024
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 31 December 2019
| Note | 2019 US\$ |
2018 US\$ |
|
|---|---|---|---|
| Loan interest income Net fair value gains on financial assets at fair value through profit or loss Other operating income Interest expense |
16 | 3.308.020 270.460 118.475 (3.113.095) |
3.791.656 - - (3.539.785) |
| Gross profit | 583.860 | 251.871 | |
| Administration expenses Net impairment loss on financial assets Other expenses |
9 7.3 10 |
(111.540) (5.409.723) - |
(95.120) - (94.291) |
| Operating (loss)/profit | (4.937.403) | 62.460 | |
| Finance income Finance costs Net finance costs |
11 | 154 (20.947) (20.793) |
798 (10.730) (9.932) |
| (Loss)/profit before tax | (4.958.196) | 52.528 | |
| Tax Net loss for the year |
12 | (123.734) (5.081.930) |
(170.192) (117.664) |
| Other comprehensive income | - | - | |
| Total comprehensive income for the year | (5.081.930) | (117.664) |
The notes on pages 13 to 38 form an integral part of these separate financial statements.
STATEMENT OF FINANCIAL POSITION 31 December 2019
| 2019 | 2018 | ||
|---|---|---|---|
| ASSETS | Note | US\$ | US\$ |
| Non-current assets | |||
| Investments in subsidiaries Loans receivable |
13 14 |
4.818 58.090.297 |
4.818 - |
| 58.095.115 | 4.818 | ||
| Current assets | |||
| Receivables | 15 | 204.379 | 147.958 |
| Loans receivable | 14 | 1.065.404 | 64.154.688 |
| Financial assets at fair value through profit or loss Cash and cash equivalents |
16 17 |
9.174.263 10.769.746 |
141.373 24.486.189 |
| 21.213.792 | 88.930.208 | ||
| Total assets | 79.308.907 | 88.935.026 | |
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Share capital | 18 | 661.128 | 661.128 |
| Share premium | 18 | 88.531.664 | 88.531.664 |
| Accumulated losses | (85.614.706) | (80.532.776) | |
| Total equity | 3.578.086 | 8.660.016 | |
| Non-current liabilities | |||
| Borrowings | 19 | 75.241.008 | - |
| 75.241.008 | - | ||
| Current liabilities | |||
| Trade and other payables | 20 | 42.472 | 46.991 |
| Borrowings Current tax liabilities |
19 21 |
- 447.341 |
79.904.412 323.607 |
| 489.813 | 80.275.010 | ||
| Total liabilities | 75.730.821 | 80.275.010 | |
| Total equity and liabilities | 79.308.907 | 88.935.026 |
On 22 May 2024 the Board of Directors of Agroton Public Limited authorised these separate financial statements for issue.
Larysa Orlova Tamara Lapta Director Director
.................................... ....................................
| The notes on pages 13 to 38 form an integral part of these separate financial statements. | ||||||||
|---|---|---|---|---|---|---|---|---|
| ------------------------------------------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- | -- |
STATEMENT OF CHANGES IN EQUITY
31 December 2019
| Share capital US\$ |
Share premium US\$ |
Accumula ted losses US\$ |
Total US\$ |
|
|---|---|---|---|---|
| Balance at 1 January 2018 | 661.128 | 88.531.664 (80.415.112) | 8.777.680 | |
| Comprehensive income Net loss for the year |
- | - | (117.664) | (117.664) |
| Balance at 31 December 2018/ 1 January 2019 | 661.128 | 88.531.664 (80.532.776) | 8.660.016 | |
| Comprehensive income Net loss for the year |
- | - | (5.081.930) | (5.081.930) |
| Balance at 31 December 2019 | 661.128 | 88.531.664 (85.614.706) | 3.578.086 |
In accordance with the Cyprus Companies Law, Cap. 113, Section 55 (2) the share premium reserve can only be used by the Company in (a) paying up unissued shares of the Company to be issued to members of the Company as fully paid bonus shares; (b) writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the Company; and (c) providing for the premium payable on redemption of any redeemable preference shares or of any debentures of the Company.
Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 17% will be payable on such deemed dividend to the extent that the ultimate owners at the end of the period of two years from the end of the year of assessment to which the profits refer are both Cyprus tax resident and Cyprus domiciled. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is paid by the company for the account of the owners.
The notes on pages 13 to 38 form an integral part of these separate financial statements.
CASH FLOW STATEMENT 31 December 2019
| 2019 | 2018 | ||
|---|---|---|---|
| Note | US\$ | US\$ | |
| CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before tax Adjustments for: |
(4.958.196) | 52.528 | |
| Unrealised exchange (profit)/loss Fair value (gains)/losses on financial assets at fair value through profit or |
(154) | 790 | |
| loss | (270.460) | 94.291 | |
| Impairment charge on loans to related parties | 23 | 5.409.723 | - |
| Interest income | (3.308.020) | (3.791.656) | |
| Interest expense Coupon interest |
11 | 3.113.095 (118.475) |
3.539.785 - |
| (132.487) | (104.262) | ||
| Changes in working capital: | |||
| Increase in receivables Decrease in trade and other payables |
(4.824) (4.396) |
(3.024) (3.492) |
|
| Cash used in operations | (141.707) | (110.778) | |
| Interest received | 465.914 | 3.791.656 | |
| Net cash generated from operating activities | 324.207 | 3.680.878 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Loans repayments received | 2.431.370 | 7.312.060 | |
| Payment for purchase of financial assets at fair value through profit or loss Coupon Interest received |
(8.827.808) 132.256 |
- - |
|
| Net cash (used in)/generated from investing activities | (6.264.182) | 7.312.060 | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Repayments of borrowings | (7.759.509) | (2.038.500) | |
| Unrealised exchange (loss) | - | (790) | |
| Interest paid | (16.990) | (453.000) | |
| Net cash used in financing activities | (7.776.499) | (2.492.290) | |
| Net (decrease)/increase in cash and cash equivalents | (13.716.474) | 8.500.648 | |
| Cash and cash equivalents at beginning of the year Effect of exchange rate fluctuations on cash held |
24.486.189 31 |
15.985.541 - |
|
| Cash and cash equivalents at end of the year | 17 | 10.769.746 | 24.486.189 |
The notes on pages 13 to 38 form an integral part of these separate financial statements.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
1. Incorporation and principal activities
Country of incorporation
The Company Agroton Public Limited (the ''Company'') was incorporated in Cyprus on 21 September 2009 as a private limited liability company under the provisions of the Cyprus Companies Law, Cap. 113. The Company was listed at the main market of Warsaw Stock Exchange on 8 November 2010. Its registered office is at 1 Lampousas Street, 1095 Nicosia, Cyprus.
Principal activities
The principal activities of the Company, which are unchanged from last year, are those of an investment holding company and the provision of financing to related parties. The Company is the holding company of a group of companies of agriculture producers in Ukraine. The principal activities of the Group which remained the same as in the previous year, are grain and oil crops growing, agricultural products storage and sale, cattle breeding (milk cattle-breeding, poultry farming) and milk processing. The poultry farming business has been temporarily abandoned due to the military clashes and armed conflict in Eastern Ukraine.
2. Basis of preparation
The Company has prepared these parent's separate financial statements for compliance with the requirements of the Cyprus Income Tax Law.
The separate financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113. The separate financial statements have been prepared under the historical cost convention as modified by the revaluation of, and financial assets and financial liabilities at fair value through profit or loss.
The Company has also prepared consolidated financial statements in accordance with IFRSs for the Company and its subsidiaries (the ''Group'').
Users of these parent's separate financial statements should read them together with the Group's consolidated financial statements as at and for the year ended 31 December 2019 in order to obtain a proper understanding of the financial position, the financial performance and the cash flows of the Company and the Group.
3. Functional and presentation currency
The separate financial statements are presented in United States Dollars (US\$) which is the functional currency of the Company.
4. Adoption of new or revised standards and interpretations
As from 1 January 2019, the Company adopted all the following IFRSs and International Accounting Standards (IAS), which are relevant to its operations. The adoption of these Standards did not have a material effect on the financial statements.
5. Significant accounting policies
The principal accounting policies adopted in the preparation of these separate financial statements are set out below. These policies have been consistently applied to all years presented in these separate financial statements unless otherwise stated.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Going concern basis
These parent financial statements have been prepared under the going concern basis, which assumes the realisation of assets and settlement of liabilities in the course of ordinary economic activity. Renewals of the Company's assets,and the future activities of the Company, and its activities are significantly influenced by the current and future economic environment in Ukraine. The Board of Directors and Management are closely monitoring the challenging conditions in the domestic markets as described in note 19 in the financial statements and has assessed the currentsituation and there is no indication of adverse effects while at the same time are taking all steps to secure the Company's short and long term viability. To this effect, they consider that the Company is able to continue its operations as a going concern.
Subsidiary companies
Subsidiaries are entities controlled by the Company. Control exists where the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment is identified.
Revenue
Recognition and measurement
Revenue represents the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to the customer, excluding amounts collected on behalf of third parties (for example, value-added taxes); the transaction price. The Company includes in the transaction price an amount of variable consideration as a result of rebates/discounts only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimations for rebates and discounts are based on the Company's experience with similar contracts and forecasted sales to the customer.
The Company recognises revenue when the parties have approved the contract (in writing, orally or in accordance with other customary business practices ) and are committed to perform their respective obligations, the Company can identify each party's rights and the payment terms for the goods or services to be transferred, the contract has commercial substance (i.e. the risk, timing or amount of the Company's future cash flows is expected to change as a result of the contract), it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer and when specific criteria have been met for each of the Company's contracts with customers.
The Company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. In evaluating whether collectability of an amount of consideration is probable, the Company considers only the customer's ability and intention to pay that amount of consideration when it is due.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimates are reflected in the statement of profit or loss and other comprehensive income in the period in which the circumstances that give rise to the revision become known by Management.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Revenue (continued)
Identification of performance obligations
The Company assesses whether contracts that involve the provision of a range of goods and/or services contain one or more performance obligations (that is, distinct promises to provide a service) and allocates the transaction price to each performance obligation identified on the basis of its stand-alone selling price. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service, either on its own or together with other resources that are readily available to the customer (that is the good or service is capable of being distinct) and the Company's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the good or service is distinct within the context of the contract).
Revenue is measured based on the consideration to which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. The Company recognises revenue when it transfers control of a product or service to a customer.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
Finance income
Interest income is recognised on a time-proportion basis using the effective method.
Finance costs
Interest expense and other borrowing costs are charged to profit or loss as incurred.
Foreign currency translation
(1) Functional and presentation currency
Items included in the Company's financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in United States Dollars (US\$), which is the Company's functional and presentation currency.
(2) 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. Translation differences on non-monetary items such as equities held at fair value through profit or loss are reported as part of the fair value gain or loss.
Tax
Current tax liabilities and assets are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or substantively enacted, by the reporting date.
Dividends
Dividend distribution to the Company's shareholders is recognised in the Company's financial statements in the year in which they are approved by the Company's shareholders.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Financial assets - Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through OCI or through profit or loss), and
- those to be measured at amortised cost.
The classification and subsequent measurement of debt financial assets depends on: (i) the Company's business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. On initial recognition, the Company may irrevocably designate a debt financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI or at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
For investments in equity instruments that are not held for trading, the classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). This election is made on an investment-by-investment basis.
All other financial assets are classified as measured at FVTPL.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
Financial assets - Recognition and derecognition
All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention (''regular way'' purchases and sales) are recorded at trade date, which is the date when the Company commits to deliver a financial instrument. All other purchases and sales are recognised when the entity becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Financial assets - Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Financial assets - Measurement (continued)
Debt instruments
Subsequent measurement of debt instruments depends on the Company's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in 'other income'. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss and other comprehensive income. Financial assets measured at amortised cost (AC) comprise: cash and cash equivalents, bank deposits with original maturity over 3 months, trade receivables and financial assets at amortised cost.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in ''other income''. Foreign exchange gains and losses are presented in ''other gains/(losses)'' and impairment expenses are presented as separate line item in the statement of profit or loss and other comprehensive income.
FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL is recognised in profit or loss and presented net within ''other gains/(losses)'' in the period in which it arises.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company's Management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment, any related balance within the FVOCI reserve is reclassified to retained earnings. The Company's policy is to designate equity investments as FVOCI when those investments are held for strategic purposes other than solely to generate investment returns. Dividends from such investments continue to be recognised in profit or loss as other income when the Company's right to receive payments is established.
Changes in the fair value of financial assets at FVTPL are recognised in ''other gains/(losses)'' in the statement of profit or loss and other comprehensive income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTPL are not reported separately from other changes in fair value.
Financial assets - impairment - credit loss allowance for ECL
The Company assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at amortised cost and FVOCI and exposure arising from loan commitments and financial guarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Financial assets - impairment - credit loss allowance for ECL (continued)
The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of profit or loss and other comprehensive income within ''net impairment losses on financial and contract assets. Subsequent recoveries of amounts for which loss allowance was previously recognised are credited against the same line item.
Debt instruments carried at amortised cost are presented in the statement of financial position net of the allowance for ECL. For loan commitments and financial guarantee contracts, a separate provision for ECL is recognised as a liability in the statement of financial position.
For debt instruments at FVOCI, an allowance for ECL is recognised in profit or loss and it affects fair value gains or losses recognised in OCI rather than the carrying amount of those instruments.
The impairment methodology applied by the Company for calculating expected credit losses depends on the type of financial asset assessed for impairment. Specifically:
For trade receivables and contract assets, including trade receivables and contract assets with a significant financing component, and lease receivables the Company applies the simplified approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised from initial recognition of the financial assets.
For all other financial instruments that are subject to impairment under IFRS 9, the Company applies general approach - three stage model for impairment. The Company applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1.
Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (''12 Months ECL''). If the Company identifies a significant increase in credit risk (''SICR'') since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (''Lifetime ECL''). Refer to note 7, Credit risk section, for a description of how the Company determines when a SICR has occurred. If the Company determines that a financial asset is creditimpaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. The Company's definition of credit impaired assets and definition of default is explained in note 7, Credit risk section.
Additionally the Company has decided to use the low credit risk assessment exemption for investment grade financial assets. Refer to note 7, Credit risk section for a description of how the Company determines low credit risk financial assets.
Financial assets -Reclassification
Financial instruments are reclassified only when the business model for managing those assets changes. The reclassification has a prospective effect and takes place from the start of the first reporting period following the change.
Financial assets - write-off
Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Financial assets - modification
The Company sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Company assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset (e.g. profit share or equity-based return), significant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.
If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred. The Company also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.
In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Company compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss.
Cash and cash equivalents
For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank. Cash and cash equivalents are carried at amortised cost because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.
Classification as financial assets at amortised cost
These amounts generally arise from transactions outside the usual operating activities of the Company. They are held with the objective to collect their contractual cash flows and their cash flows represent solely payments of principal and interest. Accordingly, these are measured at amortised cost using the effective interest method, less provision for impairment. Financial assets at amortised cost are classified as current assets if they are due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
Credit related commitments
The Company issues commitments to provide loans. Such commitments are initially recognised at their fair value, which is normally evidenced by the amount of fees received. This amount is amortised on a straight-line basis over the life of the commitment, except for commitments to originate loans if it is probable that the Company will enter into a specific lending arrangement and does not expect to sell the resulting loan shortly after origination; such loan commitment fees are deferred and included in the carrying value of the loan on initial recognition. At the end of each reporting period, the commitments are measured at (i) the remaining unamortised balance of the amount at initial recognition, plus (ii) the amount of the loss allowance determined based on the expected credit loss model, unless the commitment is to provide a loan at a below market interest rate, in which case the measurement is at the higher of these two amounts. The carrying amount of the loan commitments represents a liability. For contracts that include both a loan and an undrawn commitment and where the Company cannot separately distinguish the ECL on the undrawn loan component from the loan component, the ECL on the undrawn commitment is recognised together with the loss allowance for the loan. To the extent that the combined ECLs exceed the gross carrying amount of the loan, they are recognised as a liability.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Financial liabilities - measurement categories
Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Borrowings
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Financial liabilities - Modifications
An exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. (In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered.)
If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners and is recognised directly to equity.
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds, including interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset, when it is probable that they will result in future economic benefits to the Company and the costs can be measured reliably.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of financial position.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
5. Significant accounting policies (continued)
Share capital
Ordinary shares are classified as equity. The difference between the fair value of the consideration received by the Company and the nominal value of the share capital being issued is taken to the share premium account.
Non-current liabilities
Non-current liabilities represent amounts that are due more than twelve months from the reporting date.
Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
6. New accounting pronouncements
At the date of approval of these separate financial statements, standards and interpretations were issued by the International Accounting Standards Board which were not yet effective. Some of them were adopted by the European Union and others not yet. The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the separate financial statements of the Company.
7. Financial risk management
Financial risk factors
The Company is exposed to market price risk, interest rate risk, credit risk, liquidity risk, currency risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Company to manage these risks are discussed below:
7.1 Market price risk
The Company is exposed to equity securities price risk because of equity investments held by the Company and classified on the statement of financial position either as fair value through other comprehensive income or at fair value through profit or loss. The Company is not exposed to commodity price risk.
Post-tax profit for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would increase/decrease as a result of gains/losses on equity securities classified as fair value through other comprehensive income.
To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company's Board of Directors.
7.2 Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company's income and operating cash flows are substantially independent of changes in market interest rates as the Company has no significant interest-bearing assets. The Company is exposed to interest rate risk in relation to its non-current borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company's Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
7. Financial risk management (continued)
7.2 Interest rate risk (continued)
At the reporting date the interest rate profile of interest- bearing financial instruments was:
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Fixed rate instruments | ||
| Financial assets | 64.565.424 | 64.154.688 |
| Financial liabilities | (75.241.008) | (79.904.412) |
| (10.675.584) | (15.749.724) |
7.3 Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. Credit risk arises from [cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVTPL), favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and contract assets as well as lease receivables. Further, credit risk arises from financial guarantees and credit related commitments.]
(i) Risk management
Credit risk is managed on a group basis. For banks and financial institutions, the Company has established policies whereby the majority of bank balances are held with independently rated parties with a minimum rating of ['C'].
If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. [Individual credit limits and credit terms are set based on the credit quality of the customer in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards.]
There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions.
The Company's investments in debt instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration.
These policies enable the Company to reduce its credit risk significantly.
(ii) Impairment of financial assets
The Company has the following types of financial assets that are subject to the expected credit loss model:
- financial assets at amortised cost
- cash and cash equivalents
The impairment methodology applied by the Company for calculating expected credit losses depends on the type of financial asset assessed for impairment. Specifically:
For trade receivables the Company applies the simplified approach permitted by IFRS 9, which requires lifetime expected losses to be recognised from initial recognition of the financial assets.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
7. Financial risk management (continued)
7.3 Credit risk (continued)
(ii) Impairment of financial assets (continued)
For all other financial assets that are subject to impairment under IFRS 9, the Company applies general approach - three stage model for impairment. The Company applies a three-stage model for impairment, based on changes in credit quality since initial recognition. A financial asset that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter (''12 Months ECL''). If the Company identifies a significant increase in credit risk (''SICR'') since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (''Lifetime ECL''). If the Company determines that a financial asset is credit-impaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL.
Impairment losses are presented as net impairment losses on financial and contract assets within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.
Significant increase in credit risk
The Company considers the probability of default upon initial recognition of the asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the financial asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:
- internal credit rating
- external credit rating (as far as available)
- actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrower's/counterparty's ability to meet its obligations
- actual or expected significant changes in the operating results of the borrower/counterparty
- significant increases in credit risk on other financial instruments of the same borrower/counterparty
- significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements
- significant changes in the expected performance and behaviour of the borrower/counterparty, including changes in the payment status of counterparty in the Company and changes in the operating results of the borrower/counterparty.
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Company has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. No significant changes to estimation techniques or assumptions were made during the reporting period.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
Low credit risk
The Company has decided to use the low credit risk assessment exemption for investment grade financial assets. Management consider 'low credit risk' for listed bonds to be an investment grade credit rating with at least one major rating agency. Other instruments are considered to be low credit risk when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
7. Financial risk management (continued)
7.3 Credit risk (continued)
(ii) Impairment of financial assets (continued)
Default
A default on a financial asset is when the counterparty fails to make contractual payments within 90 days of when they fall due.
Write-off
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorises a debt financial asset for write off when a debtor fails to make contractual payments greater than 180 days past due. Where debt financial assets have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
The Company's exposure to credit risk for each class of (asset/instrument) subject to the expected credit loss model is set out below:
Loans to related parties
The gross carrying amounts below represent the Company's maximum exposure to credit risk on these assets as at 31 December 2019 and 31 December 2018:
| Company internal credit rating | 2019 | 2018 |
|---|---|---|
| US\$ | US\$ | |
| Performing | 59.155.701 | 64.154.688 |
| Total | 59.155.701 | 64.154.688 |
The Company does not hold any collateral as security for any loans to related parties.
There were no significant loans to related parties written off during the year that are subject to enforcement activity.
Cash and cash equivalents
The Company assesses, on a group basis, its exposure to credit risk arising from cash at bank. This assessment takes into account, ratings from external credit rating institutions and internal ratings, if external are not available.
Bank deposits held with banks with investment grade rating are considered as low credit risk.
The gross carrying amounts below represent the Company's maximum exposure to credit risk on these assets as at 31 December 2019 and 31 December 2018:
| Company internal credit rating | External credit rating | 2019 | 2018 |
|---|---|---|---|
| US\$ | US\$ | ||
| Performing | AAA - A | 10.767.737 | 24.477.519 |
| Performing | BBB - B | 2.009 | 8.670 |
| Total | 10.769.746 | 24.486.189 |
The ECL on current accounts is considered to be approximate to 0, unless the bank is subject to capital controls. The ECL on deposits accounts is calculated by considering published PDs for the rating as per Moody's and an LGD of 40- 60% as published by ECB.
The Company does not hold any collateral as security for any cash at bank balances.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
7. Financial risk management (continued)
7.3 Credit risk (continued)
(ii) Impairment of financial assets (continued)
Cash and cash equivalents (continued)
There were no significant cash at bank balances written off during the year that are subject to enforcement activity.
(iii) Net impairment losses on financial assets recognised in profit or loss
During the year, the following gains/(losses) were recognised in profit or loss in relation to impaired financial assets:
| Impairment losses | 2019 | 2018 |
|---|---|---|
| Impairment charge - loans to related parties | US\$ (5.409.723) |
US\$ - |
| Net impairment loss on financial assets | (5.409.723) | - |
7.4 Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.
The following tables detail the Company's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.
| 31 December 2019 |
Carrying amounts US\$ |
Contractual cash flows US\$ |
3 months or less US\$ |
3-12 months US\$ |
1-2 years US\$ |
2-5 years US\$ |
More than 5 years US\$ |
|---|---|---|---|---|---|---|---|
| Trade and other payables Loans from own |
1.805 | 1.805 | - | 1.805 | - | - | - |
| subsidiaries | 75.241.008 | 78.345.595 | - | 78.345.595 | - | - | - |
| 75.242.813 78.347.400 | - | 78.347.400 | - | - | - | ||
| 31 December | Carrying | Contractual | 3 months or | More than | |||
| 2018 | amounts | cash flows | less | 3-12 months | 1-2 years | 2-5 years | 5 years |
| US\$ | US\$ | US\$ | US\$ | US\$ | US\$ | US\$ | |
| Notes | 7.759.510 | 7.759.510 | 7.759.510 | - | - | - | - |
| Trade and other | |||||||
| payables | 4.397 | 4.397 | - | 4.397 | - | - | - |
| Loans from own | |||||||
| subsidiaries | 72.144.902 | 75.241.007 | - | 75.241.007 | - | - | - |
| 79.908.809 83.004.914 | 7.759.510 75.245.404 | - | - | - |
7.5 Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company's measurement currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro. The Company's Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
7. Financial risk management (continued)
7.6 Capital risk management
Capital includes equity shares and share premium.
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Company's overall strategy remains unchanged from last year.
8. Critical accounting estimates, judgments and assumptions
Estimates and judgments 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 accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Calculation of loss allowance
When measuring expected credit losses the Company uses reasonable and supportable forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other.
Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Critical judgements in applying the Company's accounting policies
Fair value of financial assets
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each reporting date. The fair value of the financial assets at fair value through other comprehensive income has been estimated based on the fair value of these individual assets.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
8. Critical accounting estimates, judgments and assumptions (continued)
Impairment of investments in subsidiaries
The Company periodically evaluates the recoverability of investments in subsidiaries whenever indicators of impairment are present. Indicators of impairment include such items as declines in revenues, earnings or cash flows or material adverse changes in the economic or political stability of a particular country, which may indicate that the carrying amount of an asset is not recoverable. If facts and circumstances indicate that investment in subsidiaries may be impaired, the estimated future discounted cash flows associated with these subsidiaries would be compared to their carrying amounts to determine if a write-down to fair value is necessary.
Impairment of loans receivable
The Company periodically evaluates the recoverability of loans receivable whenever indicators of impairment are present. Indicators of impairment include such items as declines in revenues, earnings or cash flows or material adverse changes in the economic or political stability of a particular country in which the borrower operates, which may indicate that the carrying amount of the loan is not recoverable. If facts and circumstances indicate that loans receivable may be impaired, the estimated future discounted cash flows associated with these loans would be compared to their carrying amounts to determine if a write-down to fair value is necessary.
Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in note 7, Credit risk section.
9. Administration expenses
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Annual levy | 394 | 408 |
| Sundry expenses | - | 1.500 |
| Subscriptions and contributions | 3.333 | - |
| Auditors' remuneration for the statutory audit of annual accounts | 40.571 | 36.869 |
| Auditors' remuneration - prior years | - | 8.346 |
| Accounting fees | 12.143 | 12.507 |
| Legal fees | 1.013 | 2.548 |
| Legal and professional | 337 | 320 |
| Secretarial fees | 1.012 | 1.048 |
| Registered office fees | 1.012 | 1.048 |
| Fines | 2.187 | 2.334 |
| Irrecoverable VAT | 6.044 | 8.466 |
| Professional fees | 16.243 | 11.127 |
| Custodian fees | 27.251 | 8.599 |
| 111.540 | 95.120 |
10. Other expenses
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Fair value losses on financial assets at fair value through profit or loss | - | 94.291 |
| - | 94.291 |
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
11. Finance income/(costs)
| Exchange profit | 2019 US\$ 154 |
2018 US\$ 798 |
|---|---|---|
| Finance income | 154 | 798 |
| Net foreign exchange losses Sundry finance expenses |
(1.481) (19.466) |
(790) (9.940) |
| Finance costs | (20.947) | (10.730) |
| Net finance costs | (20.793) | (9.932) |
| 12. Tax |
| Corporation tax | 2019 US\$ 123.734 |
2018 US\$ 170.192 |
|---|---|---|
| Charge for the year | 123.734 | 170.192 |
The tax on the Company's results before tax differs from theoretical amount that would arise using the applicable tax rates as follows:
| (Loss)/profit before tax | 2019 US\$ (4.958.196) |
2018 US\$ 52.528 |
|---|---|---|
| Tax calculated at the applicable tax rates Tax effect of expenses not deductible for tax purposes Tax effect of allowances and income not subject to tax 10% additional charge |
(619.775) 766.088 (33.827) 11.248 |
6.566 148.254 (100) 15.472 |
| Tax charge | 123.734 | 170.192 |
The corporation tax rate is 12,5%.
Under certain conditions interest income may be subject to defence contribution at the rate of 30% (reduced to 17% as of 1 January 2024). In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17%.
Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc) are exempt from Cyprus income tax.
Under certain conditions interest income may be subject to defence contribution at the rate of 30%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17%.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
13. Investments in subsidiaries
| 2019 US\$ |
2018 US\$ |
|||||
|---|---|---|---|---|---|---|
| Balance at 1 January | 4.818 | 4.818 | ||||
| Balance at 31 December | 4.818 | 4.818 | ||||
| The details of the subsidiaries are as follows: | ||||||
| Name | Country of incorporation |
Principal activities | 2019 Holding % |
2018 Holding % |
2019 US\$ |
2018 US\$ |
| "Living" LLC | Ukraine | Agricultural activities | 99.99 | 99.99 | 4.718 | 4.718 |
| Agroton (BVI) Limited |
British VirginIslands |
Trading in Agriculture products |
100 | 100 | 100 | 100 |
| LLC "Gefest" | Ukraine | Owner of landlease rights |
100 | 100 | - | - |
| LLC "Lugastan" | Ukraine | Owner of landlease | 99.99 | 99.99 | - | - |
The Company periodically evaluates the recoverability of investments in subsidiaries whenever indicators of impairment are present. Indicators of impairment include such items as declines in revenues, earnings or cash flows or material adverse changes in the economic or political stability of a particular country, which may indicate that the carrying amount of an asset is not recoverable. If facts and circumstances indicate that investment in subsidiaries may be impaired, the estimated future discounted cash flows associated with these subsidiaries would be compared to their carrying amounts to determine if a write-down to fair value is necessary.
4.818 4.818
The ownership of land lease rights previously held by subsidiary companies LLC Gefest and LLC Lugastan have been transferred to Agroton PJSC and PE Agricultural Production Firm Agro. Subsidiary company LLC Gefest was liquidated on July 25, 2019. LLC Lugastan is under liquidation procedures.
*Note: The Company directly owns 30.92% of LLC "Lugastan" and indirectly controls an additional 69.07% through its subsidiaries, "Living" LLC and Agroton PJSC.
On 20 May 2022, the subsidiary company Agroton (BVI) Limited was liquidated.
rights
14. Loans receivable
*Note
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Balance at 1 January | 64.154.688 | 71.466.748 |
| Repayments | (2.897.285) | (11.103.716) |
| Interest charged | 3.308.021 | 3.791.656 |
| Expected Credit Loss | (5.409.723) | - |
| Balance at 31 December | 59.155.701 | 64.154.688 |
| 2019 | 2018 | |
| US\$ | US\$ | |
| Loans to related parties (Note 23.1) | 64.565.424 | 64.154.688 |
| Loss allowance on loans receivable | (5.409.723) | - |
| 59.155.701 | 64.154.688 | |
| Less current portion | (1.065.404) | (64.154.688) |
| Non-current portion | 58.090.297 | - |
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
14. Loans receivable (continued)
The loans are repayable as follows:
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Within one year | 1.065.404 | 64.154.688 |
| Between one and five years | 58.090.297 | - |
| 59.155.701 | 64.154.688 |
The exposure of the Company to credit risk in relation to loans receivable is reported in note 7 of the separate financial statements.
15. Receivables
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Accrued income | 51.597 | - |
| Other receivables | 160 | - |
| Refundable VAT | 152.622 | 147.958 |
| 204.379 | 147.958 |
The fair values of receivables due within one year approximate to their carrying amounts as presented above.
The exposure of the Company to credit risk and impairment losses in relation to receivables is reported in note 7 of the separate financial statements.
16. Financial assets at fair value through profit or loss
| 2019 US\$ |
2018 US\$ |
|
|---|---|---|
| Listed securities | ||
| Bank of Cyprus Holdings Plc | 107.247 | 141.373 |
| US Treasury notes | 8.567.016 | - |
| Other short term notes | 500.000 | - |
| 9.174.263 | 141.373 | |
| 2019 | 2018 | |
| US\$ | US\$ | |
| Balance at 1 January | 141.373 | 235.664 |
| Additions | 8.762.430 | - |
| Change in fair value | 270.460 | (94.291) |
| Balance at 31 December | 9.174.263 | 141.373 |
Bank of Cyprus Shares:
Bank of Cyprus shares, designated at fair value through profit or loss represented equity securities of Bank of Cyprus converted into shares after the decree issued by Central Bank of Cyprus on 29 March 2013. Based on that decree and the measurements for recapitalization of Bank of Cyprus, 47,5% of the uninsured deposits of the affected deposits have been converted into Bank of Cyprus shares.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
16. Financial assets at fair value through profit or loss (continued)
The Company held 1.591.105 shares with fair value €0,140 cents. In January 2017, the shares in Bank of Cyprus Public Company Limited were exchanged with new shares of Bank of Cyprus Holdings Plc listed in both London Stock Exchange and in Cyprus Stock Exchange with nominal value of €0,10 cents each. As at 31 December 2019 the Company held 79.556 shares in Bank of Cyprus Holdings Plc with fair value €1,20 (2018: €1,55) each.
The exposure of the Company to market risk in relation to financial assets is reported in note 7 of the separate financial statements.
17. Cash and cash equivalents
For the purposes of the statement of cash flows, the cash and cash equivalents include the following:
| 2019 | 2018 | |
|---|---|---|
| US\$ | US\$ | |
| Cash at bank | 10.769.746 | 24.486.189 |
| 10.769.746 | 24.486.189 |
The exposure of the Company to credit risk and impairment losses in relation to cash and cash equivalents is reported in note 7 of the separate financial statements.
18. Share capital and share premium
| Issued and fully paid | Number of shares |
Share capital US\$ |
Share premium US\$ |
Total US\$ |
|---|---|---|---|---|
| Balance at 1 January 2018 | 21.670.000 | 661.128 | 88.531.664 | 89.192.792 |
| Balance at 31 December 2018 | 21.670.000 | 661.128 | 88.531.664 | 89.192.792 |
| Balance at 31 December 2018/ 1 January 2019 |
21.670.000 | 661.128 | 88.531.664 | 89.192.792 |
| Balance at 31 December 2019 | 21.670.000 | 661.128 | 88.531.664 | 89.192.792 |
Authorised capital
On 31 December 2018 the authorised share capital of the Company amounted to 47.619.048 ordinary shares of nominal value €0,021 each.
Issued capital
Upon incorporation on 21 September 2009 the Company issued to the subscribers of its Memorandum of Association 12.000.000 ordinary shares of nominal value of €0,021 each, amounting to €252.000 (US\$ equivalent of US\$ 370.591).
On 4 November 2009 the Company issued 4.000.000 additional ordinary shares of nominal value €0,021 each, amounting to €84.000 (US\$ equivalent of US\$ 123.715), at a premium of €6,93 per share, amounting to a total share premium of €27.720.000 (US\$ equivalent of US\$ 38.791.285).
Global Depositary Receipts "GDRs" were issued against the 4.000.000 new shares by "The Bank of New York Mellon" for US\$ 9,72875 per each new share. The total consideration of the share capital issued was US\$ 38.915.000 out of which US\$ 123.715 is the total nominal value credited to the share capital account and US\$ 38.791.285 is the share premium reserve. Share issue expenses of US\$ 317.154 were deducted from the sahre premium reserve. GDRs are trade on the Open Market of the Frankfurt Stock Exchange since 12 November 2009.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
18. Share capital and share premium (continued)
The members of the Company held an Extraordinary General Meeting on 25 June 2010 where they authorized and approved the increase of the issued share capital of the Company from 16.000.000 ordinary shares of €0,021 each amounting to €336.000 (US\$ equivalent of US\$ 494.306) to 21.670.000 ordinary shares of nominal value of €0,021, by the creation of 5.670.000 ordinary shares of a nominal value of €0,021 each, ranking pari pasu with the existing shares of the Company.
On 29 October 2010 the Company proceeded and issued 5.670.000 ordinary shares of nominal value €0,021 each, amounting to €119.070 (Equivalent to US\$ 166.822), at a premium of €6,7595 per share amounting to a total share premium of €38.326.365 (US\$ equivalent of US\$ 54.389.456) from the public offering. Share issue expenses of US\$ 4.165.101 were deducted from the share premium reserve.
Listing of the Company to the Warsaw Stock Exchange
During the 2010, the Board of Directros of the Company resolved to proceed with the initial public offering of 5.670.000 new ordinary shares of the Company and the application for the admission of the entire issued share capital of the Company, including the Offer Shares to trading on the regulated market of the Warsaw Stock Exchange.
19. Borrowings
| 2019 | 2018 | |
|---|---|---|
| Balance at 1 January | US\$ 79.904.412 |
US\$ 78.856.127 |
| Repayments | (7.759.510) | (2.491.500) |
| Interest accrued | 3.096.106 | 3.539.785 |
| Balance at 31 December | 75.241.008 | 79.904.412 |
| 2019 | 2018 | |
| US\$ | US\$ | |
| Current borrowings Notes |
- | 7.759.510 |
| Loans from own subsidiaries (Note 23.2) | - | 72.144.902 |
| - | 79.904.412 | |
| Non-current borrowings | ||
| Loans from own subsidiaries (Note 23.2) | 75.241.008 | - |
| Total | 75.241.008 | 79.904.412 |
Notes
On 14 July 2011, the Company issued US\$50.000.000 12,50% Notes due on 14 July 2014. The Notes have been admitted to the official list of the UK Listing authority and to the London Stock Exchange Plc and trading on the London Stock Exchange's regulated market.
The Notes bear interest at a rate of 12,50% per annum payable semi-annually in arrears on 14 January and 14 July in each year, commencing on 14 January 2012.
The Notes are recognised initially at fair value (US\$50.000.000) net of issue costs equal to US\$2.777.014. The difference between the proceeds (net of issue costs) and the redemption value as at 14 July 2014 is recognised in the statement of profit or loss over the period of the issue.
On 8 August 2013 the Company has secured the consent of the Noteholders to amend the terms and conditions of the Notes as follows:
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
19. Borrowings (continued)
- Extend the maturity of the Notes by 60 months to 14 July 2019 in order to lengthen the average maturity of the Groups funding sources;
- Postpone the interest payment that was due for payment to Noteholders on 14 July 2013 to 14 January 2014;
- Decrease the interest rate with effect from 14 January 2013 from 12,5% to 8% per annum;
- Amend the definition of Leverage Ratio Exception so that the maximum Consolidated Leverage Ratio would be 4,0 rather than 3,0; and
- Amend the definition of Permitted Indebtedness so that Additional Indebtedness is not to exceed US\$20 million (rather than US\$5 million) at any time outstanding.
On 18 December 2013 the Company has secured a second consent of the Noteholders to amend the terms and conditions of the Notes as follows:
- Postpone to 14 January 2015 the interest payments that was due would be due for payment to Noteholders on 14 January 2014 (including the postponed 14 July 2013 Interest Payment) and the one that would be due for payment to Noteholders on 14 July 2014;
- Further decrease the interest rate with effect from 14 January 2013 from 8% to 6%;
- Permit the Issuer, the Sureties and any of their respective subsidiaries to re-purchase Notes, which they may at their option hold, re-sell or surrender for cancellation;
- Remove the augmented quorum requirement for any Noteholders' meeting the business of which includes any Reserved Matter(s), so that the quorum requirement for any Noteholders' meeting for passing an Extraordinary Resolution (whether or not the business of such meeting includes any Reserved Matter(s)) shall henceforth be two or more persons present in person holding Notes or being proxies or representatives and holding or representing in the aggregate more than half of the principal amount of the Notes for the time being outstanding;
- Reduce the proportion of votes required to pass an Extraordinary Resolution from not less than three-quarters in principal amount of the Notes owned by the Noteholders who are present in person or represented by proxy or representative at the relevant Noteholders' meeting to more than half of the principal amount of such Notes;
- Reduce the principal amount of Notes required to be held by Noteholders in order to pass an Extraordinary Resolution by way of electronic consent or written resolution from not less than three quarters in principal amount of the Notes outstanding to more than half of such principal amount; and
- Remove restrictions on the Issuer's ability to declare or pay dividends to shareholders.
On 14 April 2014 the Company has purchased Notes in an aggregate principal amount of US\$22.100.000.
- On 15 December 2014 the Company has secured a third consent of the Noteholders to amend the terms and conditions of the Notes as follows:
- Postpone to 14 January 2017 the interest payments that was due for payment to Noteholders on 14 January 2016 (including the postponed 14 July 2013, 14 January 2014 and 14 July 2014 Interest Payments) and the interest payment that will be due for payment to Noteholders on 14 July 2016; and
- Waive any Event of Default or Potential Event of Default arising as a result of the Issuer's failure to deliver and publish its audited annual financial statements and accompanying certificate for the financial year ended 31 December 2014 within the period stipulated therefore in breach of Condition 3.2(n) (Financial Information) of the terms and conditions of the Notes.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
19. Borrowings (continued)
On 28 October 2015 the Company has purchased Notes in an aggregate principal amount of US\$10.350.000.
On 12 January 2016 the Company has secured a fourth consent of the Noteholders to amend the terms and conditions of the Notes as follows:
- Postpone to 14 January 2016 the interest payments that was due for payment to Noteholders on 14 January 2015 (including the postponed 14 July 2013, 14 January 2014 and 14 July 2014 Interest Payments) and the interest payment that will be due for payment to Noteholders on 14 July 2015; and
- Waive any Event of Default or Potential Event of Default arising as a result of the Issuer's fialure to deliver and publish its audited annual financial statements and accompanying certificate for the financial year ended 31 December 2015 within the period stipulated thereof in breach of condition 3.2(n) (Financial Information) of the terms and conditions of the Notes.
On 26 October 2016 the Company has purchased Notes in an aggregate principal amount of US\$10.000.000.
The following subsidiaries are acting as surety providers:
- Living LLC
- PE Agricultural Production Firm Agro
- Agroton PJSC
- Agro Meta LLC
- ALLC Noviy Shlyah
- ALLC Shiykivske
- Agro Svynprom LLC
- Agro Chornukhinski Kurchata LLC
- Rosinka-Star LLC
On 17 January 2017 the Company has secured a fifth consent of the Noteholders to postpone to 14 January 2018 the interest payments that was due for payment to Noteholders on 14 January 2017, as a result on 14 January 2018, the Company paid a coupon interest on its notes in the amount of US\$2.265.000.
On 14 January 2018, the Company paid a coupon interest on its notes in the amount of US\$2.265.000, as agreed with Noteholders on 17 January 2017.
Additionally, on 6 April 2018 the Company announced the timely and full repayment of interest on notes deferred coupon amounting to US\$2.265.000 on 14 January 2019.
On the 14 of January 2019 the outstanding principal amount of the Notes issued, as well as the accrued interest was fully settled.
The exposure of the Company to liquidity risk in relation to loans and borrowings is reported in note 6 to the financial statements.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
19. Borrowings (continued)
Maturity of non-current borrowings:
| Between two and five years | 2019 US\$ 75.241.008 |
2018 US\$ - |
|---|---|---|
| 20. Trade and other payables | ||
| Accruals Other creditors |
2019 US\$ 40.667 1.805 |
2018 US\$ 42.594 4.397 |
| 42.472 | 46.991 | |
| 21. Current tax liabilities | ||
| Corporation tax Special contribution for defence |
2019 US\$ 335.130 112.211 |
2018 US\$ 211.396 112.211 |
| 447.341 | 323.607 |
22. Operating Environment of the Company
The geopolitical situation in Eastern Europe intensified on 24 February 2022 with the commencement of the conflict between Russia and Ukraine. As at the date of authorising these separate financial statements for issue, the conflict continues to evolve as military activity proceeds. In addition to the impact of the events on entities that have operations in Russia, Ukraine, or Belarus or that conduct business with their counterparties, the conflict is increasingly affecting economies and financial markets globally and exacerbating ongoing economic challenges.
The European Union as well as United States of America, Switzerland, United Kingdom and other countries imposed a series of restrictive measures (sanctions) against the Russian and Belarussian government, various companies, and certain individuals. The sanctions imposed include an asset freeze and a prohibition from making funds available to the sanctioned individuals and entities. In addition, travel bans applicable to the sanctioned individuals prevents them from entering or transiting through the relevant territories. The Republic of Cyprus has adopted the United Nations and European Union measures. The rapid deterioration of the conflict in Ukraine may as well lead to the possibility of further sanctions in the future.
Emerging uncertainty regarding global supply of commodities due to the conflict between Russia and Ukraine conflict may also disrupt certain global trade flows and place significant upwards pressure on commodity prices and input costs as seen through early March 2022. Challenges for companies may include availability of funding to ensure access to raw materials, ability to finance margin payments and heightened risk of contractual non-performance.
The Israel-Gaza conflict has escalated significantly after Hamas launched a major attack on 7 October 2023. Companies with material subsidiaries, operations, investments, contractual arrangements or joint ventures in the War area might be significantly exposed. Entities that do not have direct exposure to Israel and Gaza Strip are likely to be affected by the overall economic uncertainty and negative impacts on the global economy and major financial markets arising from the war. This is a volatile period and situation, however, the Company is not directly exposed. Management will continue to monitor the situation closely and take appropriate actions when and if needed.
The impact on the Company largely depends on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions, and reactions to ongoing developments by global financial markets.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
22. Operating Environment of the Company (continued)
The financial effect of the current crisis on the global economy and overall business activities cannot be estimated with reasonable certainty at this stage, due to the pace at which the conflict prevails and the high level of uncertainties arising from the inability to reliably predict the outcome.
The event did not exist in the reporting period and is therefore not reflected in the recognition and measurement of the assets and liabilities in the separate financial statements as at 31 December 2019 as it is considered as a nonadjusting event.
The Company has the following exposures in Ukraine, the Russian Federation and Belarus:
- Subsidiaries
- Loans receivables
- Clients
- Supply chain
- Financing
- Other
Operating in Russia, Belarus and Ukraine involves some risk of political instability, which may include changes in government, negative policy shifts and civil unrest. Financial and economic sanctions imposed by the global community on certain sectors of the Russian economy as well as businesses and individuals in Russia in the first quarter of 2022, and the counter-measures imposed by Russia on the United States of America, United Kingdom and European Union, may potentially pose a risk to the Company's operations. These factors may have a negative impact on the Company's supply arrangements, capital flows and ability of the Company to secure external financing.
The Company actively monitors political developments on an ongoing basis. However, the macroeconomic situation in Ukraine, Russia and Belarus is out of Management's control. The scope and impact of any new potential sanctions (and any counter-sanctions) is yet unknown, however they might further affect key Russian financial institutions as well as companies operating in the Russian Federation and Belarus. Going concern implications and a description of the impact to the Company's separate financial statements are addressed in note 5.
Management has considered the unique circumstances that could have a material impact on the business operations and the risk exposures of the Company and has concluded that the main impacts on the Company's profitability/liquidity position may arise from:
- interruptions or stoppage of production in affected areas and neighboring countries
- damage or loss of inventories and other assets e.g., buildings in conflict zones in Ukraine
- closure of roads and facilities in affected areas
- disruption in banking systems and capital markets
- supply-chain and travel disruptions in Eastern Europe
- seizure of assets by government authorities
- unavailability of personnel
- reductions in sales and earnings of business in affected areas
- increased costs and expenditures
- cyberattacks
- restriction on cash balances
- impairments of financial and non-financial assets
- delays in planned business expansion
- increased volatility in the value of financial instrument
- reduced tourism
- disruption in travel and other leisure activities
- increase in expected credit losses from trade receivables, debt investments and intercompany loans
- failure to meet contractual obligations and breach of loan covenants, triggering of subjective covenants (e.g., material adverse change clauses), amendments, or waivers in lending agreements, and/or debt default
- volatility/abnormally large changes in equity or debt securities, prices, commodity prices, foreign currency exchange rates, and/or interest rates after 31 December 2019 that will significantly impact the measurement of assets in the next 12 months
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
22. Operating Environment of the Company (continued)
announcing plans of discontinuance of major assets disposals
Management is in the process of reassessing their trading and relevant cash flows using revised assumptions and incorporating downside scenarios in assessing actual and potential financing needs, taking into consideration the main impacts identified above.
From the analysis performed additional liquidity needs/impact on financial covenants have been identified. Management is already negotiating with the financial institutions covenant resets/waivers and has already assessed future measures and alternative sources of financing such as:
- group financial support
- additional drawdown from existing credit facilities
- later payment to suppliers
- factoring of receivables
- additional financing
- cost cutting measures
- sale of investments
Management will continue to monitor the situation closely and assess/seek additional measures/committed facilities as a fall-back plan in case the crisis becomes prolonged.
23. Related party transactions
The Company is controlled by Mr. Iurri Zhuravlov, who holds directly 85,40% of the Company's share capital. The remaining 14,60% of the shares is widely held.
The following transactions were carried out with related parties:
23.1 Loans to related parties (Note 14)
| 2019 | 2018 | ||
|---|---|---|---|
| Terms | US\$ | US\$ | |
| Private Enterprise Agricultural Production | |||
| Firm "Agro" | Finance | 1.084.760 | 1.550.674 |
| Private Enterprise Agricultural Production | |||
| Firm "Agro" | Finance | 63.480.664 | 62.604.014 |
| Expected Credit loss on loans receivables | (5.409.723) | - | |
| 59.155.701 | 64.154.688 | ||
During 2010, the Company has entered into several loan agreements with related party Private Enterprise Agricultural Production Firm "AGRO" for a total amount of US\$ 20.000.000. The loans bear interest at a rate of 10% per annum and expired in 31 July 2014. During 2014 the two parties agreed to postpone the repayment date. As at 31 December 2018, the principal amount of the loans were fully repaid and the balance receivable relates to outstanding interest receivable.
Additionally, during the same period (2010), the Company has entered into several loan agreements with related party Private Enterprise Agricultural Production Firm "Agro" for a total amount of US\$ 65.000.000. The loans bear interest at a rate of 2,5%, 5% and 8% per annum.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS 31 December 2019
23. Related party transactions (continued)
23.2 Loans from related parties (Note 19)
| 2019 | 2018 | ||
|---|---|---|---|
| Terms | US\$ | US\$ | |
| Agroton BVI Limited | Finance | 75.241.008 | 72.144.902 |
| 75.241.008 | 72.144.902 |
On 25 July 2011 the Company has entered into a loan agreement with its subsidiary company Agroton BVI Limited amounting to US\$10.000.000. During 2012 the amount of the loan was extended to US\$60.000.000. The loan was originaly provided interest free. From 1 January 2013 onwards the loan bears interest at a rate of 6% per annum andwith expiry date on 1 January 2023.
On 3 March 2022, the Company entered into an assignment agreement where the loan due to Agroton (BVI) Limited was assigned to Private Enterprise Agricultural Production Firm "Agro".
24. Contingent liabilities
The Company had no contingent liabilities as at 31 December 2019.
25. Commitments
The Company had no capital or other commitments as at 31 December 2019.
26. Accounting policies up to 31 December 2018
Accounting policies applicable to the comparative period ended 31 December 2018 that were amended by IFRS 16, are as follows.
27. Events after the reporting period
As explained in note 22 the geopolitical situation in Eastern Europe and the Middle East intensified on 24 February 2022, with the commencement of the conflict between Russia and Ukraine and the Israel-Gaza conflict. As at the date of authorising these separate financial statements for issue, the conflicts continue to evolve as military activity proceeds and additional sanctions are imposed.
Independent auditor's report on pages 5 to 8
ADDITIONAL INFORMATION TO THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| CONTENTS | PAGE |
|---|---|
| Detailed income statement | 1 |
| Administration expenses | 2 |
| Finance income/cost | 3 |
| Computation of corporation tax | 4 |
DETAILED INCOME STATEMENT 31 December 2019
| Page | 2019 US\$ |
2018 US\$ |
|
|---|---|---|---|
| Revenue | |||
| Loan interest income | 3.308.020 | 3.791.656 | |
| Net fair value gains on financial assets at fair value through profit or | |||
| loss | 270.460 | - | |
| Other operating income Interest expense |
118.475 (3.113.095) |
- (3.539.785) |
|
| Operating expenses | |||
| Administration expenses | 2 | (111.540) | (95.120) |
| 472.320 | 156.751 | ||
| Other operating expenses | |||
| Impairment charge - loans to related parties | (5.409.723) | - | |
| Fair value losses on financial assets at fair value through profit or loss | - | (94.291) | |
| Operating (loss)/profit | (4.937.403) | 62.460 | |
| Finance income | 3 | 154 | 798 |
| Finance costs | 3 | (20.947) | (10.730) |
| Net (loss)/profit for the year before tax | (4.958.196) | 52.528 |
ADMINISTRATION EXPENSES 31 December 2019
| 2019 US\$ |
2018 US\$ |
|
|---|---|---|
| Administration expenses | ||
| Annual levy | 394 | 408 |
| Sundry expenses | - | 1.500 |
| Subscriptions and contributions | 3.333 | - |
| Auditors' remuneration for the statutory audit of annual accounts | 40.571 | 36.869 |
| Auditors' remuneration - prior years | - | 8.346 |
| Accounting fees | 12.143 | 12.507 |
| Legal fees | 1.013 | 2.548 |
| Secretarial fees | 1.012 | 1.048 |
| Registered office fees | 1.012 | 1.048 |
| Legal and professional | 337 | 320 |
| Fines | 2.187 | 2.334 |
| Irrecoverable VAT | 6.044 | 8.466 |
| Professional fees | 16.243 | 11.127 |
| Custodian fees | 27.251 | 8.599 |
| 111.540 | 95.120 |
FINANCE INCOME/COSTS 31 December 2019
| 2019 US\$ |
2018 US\$ |
|
|---|---|---|
| Finance income | ||
| Realised foreign exchange profit | - | 798 |
| Unrealised foreign exchange profit | 154 | - |
| 154 | 798 | |
| Finance costs | ||
| Sundry finance expenses Bank charges |
19.466 | 9.940 |
| Net foreign exchange losses | ||
| Realised foreign exchange loss | 1.481 | - |
| Unrealised foreign exchange loss | - | 790 |
| 20.947 | 10.730 |
COMPUTATION OF CORPORATION TAX 31 December 2019
| Net loss per income statement | Page 1 |
US\$ | US\$ (4.958.196) |
|
|---|---|---|---|---|
| Add: | ||||
| Impairment charge - loans to related parties | 5.409.723 | |||
| Realised foreign exchange loss | 1.481 | |||
| Annual levy | 394 | |||
| Fines | 2.187 | |||
| Non-allowable interest | 664.891 | |||
| Other non-allowable expenses | 50.012 | 6.128.688 | ||
| 1.170.492 | ||||
| Less: | ||||
| Fair value gains on financial assets at fair value through profit or loss | 270.460 | |||
| Unrealised foreign exchange profit | 154 | |||
| (270.614) | ||||
| Chargeable income for the year | 899.878 | |||
| € | ||||
| Converted into € at US\$ 1,123400 = €1 | 801.031 | |||
| Calculation of corporation tax | Income € |
Rate % |
Total € c |
Total US\$ |
| Tax at normal rates: | ||||
| Chargeable income as above | 801.031 | 12,50 | 100.128,88 | 112.485 |
| 10% additional charge | 10.012,89 | 11.248 | ||
| TAX PAYABLE | 110.141,77 | 123.733 | ||