Annual / Quarterly Financial Statement • Mar 16, 2023
Annual / Quarterly Financial Statement
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Boaz Haim, President of the Management Board Yaron Shama, Finance Vice-President of the Management Board Andrzej Gutowski, Sales Vice-President of the Management Board Karolina Bronszewska, Member of the Management Board for Marketing and Innovation
Amos Luzon, Chairman Alon Kadouri Ofer Kadouri
Al. Komisji Edukacji Narodowej 57 02-797 Warsaw Poland
PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. ul. Polna 11 00-633 Warsaw Poland
| Consolidated Financial Statements for the year ended 31 December 2022 | |
|---|---|
| Consolidated Statement of Comprehensive Income for the year ended 31 December 2022 | 1 |
| Consolidated Statement of Financial Position as at 31 December 2022 | 2 |
| Consolidated Statement of Changes in Equity for the year ended 31 December 2022 | 3 |
| Consolidated Statement of Cash Flows for the year ended 31 December 2022 | 4 |
| Notes to the Consolidated Financial Statements | 5 |
| For the year ended 31 December | 2022 | 2021 | |
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Note | ||
| Revenue from sales of residential projects | 5 | 300,259 | 457,677 |
| Revenue from the sale of land | 5 | - | 22,500 |
| Revenue from sale of services | 5 | - | 722 |
| Revenue | 300,259 | 480,899 | |
| Cost of sales of residential projects | 5 | (220,832) | (371,223) |
| Cost of sales of land | - | (24,976) | |
| Cost of sales | (220,832) | (396,199) | |
| Gross profit | 79,427 | 84,700 | |
| Changes in the fair value of investment property | 13 | 303 | (297) |
| Selling and marketing expenses | 6 | (4,565) | (4,760) |
| Administrative expenses | 7 | (25,505) | (23,676) |
| Share of the profit from joint ventures accounted for using the | |||
| equity method | 14 | 1,278 | 5,763 |
| Other expenses | 8 | (5,200) | (4,857) |
| Other income | 9 | 2,714 | 2,363 |
| Result from operating activities | 48,452 | 59,236 | |
| Finance income | 10 | 3,520 | 600 |
| Finance costs | 10 | (8,414) | (4,412) |
| Gain/loss in fair value of financial instrument at fair value through profit and loss |
25 | 4,121 | - |
| Net finance income/(cost) | (773) | (3,812) | |
| Profit before taxation | 47,679 | 55,424 | |
| Income tax expense | 11 | (16,328) | (15,077) |
| Profit for the year | 31,351 | 40,347 | |
| Other comprehensive income | - | - | |
| Total comprehensive income for the year, net of tax | 31,351 | 40,347 | |
| Total profit for the year attributable to: | |||
| Equity holders of the parent | 22 | 31,351 | 40,347 |
| Non-controlling interests | - | - | |
| Total profit for the year | 31,351 | 40,347 | |
| Total comprehensive income attributable to: | |||
| Equity holders of the parent | 22 | 31,351 | 40,347 |
| Non-controlling interests | - | - | |
| Total comprehensive income for the year, net of tax | 31,351 | 40,347 | |
| Weighted average number of ordinary shares (basic and diluted) | 22 | 162,442,859 | 162,445,075 |
| In Polish Zlotys (PLN) | |||
| Net earnings per share attributable to the equity holders of | |||
| the parent (basic) | 22 | 0.193 | 0.248 |
| Net earnings per share attributable to the equity holders of | |||
| the parent (diluted) | 22 | 0.193 | 0.248 |
| As at 31 December | 2022 | 2021 | |
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Note | ||
| Assets | |||
| Non-current assets | |||
| Property and equipment | 12 | 7,556 | 7,558 |
| Investment property | 13 | 63,139 | 28,595 |
| Intangible fixed assets | 686 | 1,016 | |
| Investment in joint ventures | 14 | 2,331 | 3,846 |
| Deferred tax assets | 15 | 8,830 | 8,195 |
| Land designated for development | 16 | 21,094 | 10,041 |
| Total non-current assets | 103,636 | 59,251 | |
| Current assets | |||
| Inventory | 16 | 747,254 | 655,542 |
| Trade and other receivables and prepayments | 17 | 65,620 | 58,180 |
| Advances for Land | 18 | 20,650 | 48,453 |
| Income tax receivable | 691 | 1,002 | |
| Loans granted | 1,717 | 1,621 | |
| Loans granted to joint ventures | 14 | 133 | 319 |
| Other current financial assets | 19 | 11,217 | 8,794 |
| Cash and cash equivalents | 20 | 51,185 | 133,434 |
| Total current assets | 898,467 | 907,345 | |
| Total assets | 1,002,103 | 966,597 | |
| Equity and liabilities | |||
| Equity | |||
| Shareholders' equity | 21 | ||
| Share capital | 12,503 | 12,503 | |
| Share premium | 150,278 | 150,278 | |
| Treasury shares | (1,732) | (1,732) | |
| Retained earnings | 290,347 | 258,996 | |
| Total equity/Equity attributable to equity | |||
| holders of the parent | 451,396 | 420,045 | |
| Liabilities | |||
| Non-current liabilities | |||
| Floating rate bond loans | 23 | 158,110 | 196,991 |
| Deferred tax liability | 15 | 23,809 | 13,513 |
| Lease liabilities related to perpetual usufruct of investment | 663 | 553 | |
| property | 24 | ||
| Total non-current liabilities | 182,583 | 211,057 | |
| Current liabilities | |||
| Trade and other payables and accrued expenses | 26 | 75,055 | 61,086 |
| Floating rate bond loans | 23 | 40,000 | 49,770 |
| Other payables - accrued interests on bonds | 23 | 5,260 | 2,477 |
| Secured bank loans | 23 | 16,297 | 1,568 |
| Advances received | 27 | 139,911 | 198,227 |
| Income tax payable | 70 | 2,716 | |
| Provisions | 3,704 | 2,128 | |
| Lease liabilities related to perpetual usufruct of land | 24 | 17,322 | 17,523 |
| Financial liability measured at FVPL | 25 | 70,506 | - |
| Total current liabilities | 368,124 | 335,495 | |
| Total liabilities | 550,707 | 546,552 | |
| Total equity and liabilities | 1,002,103 | 966,597 |
| Attributable to the Equity holders of the parent | |||||
|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Share capital |
Share premium |
Treasury shares |
Retained earnings |
Total Equity attributable to the Equity holders of the parent |
| Balance at 1 January 2022 | 12,503 | 150,278 | (1,732) | 258,996 | 420,045 |
| Comprehensive income: | |||||
| Profit for the year ended 31 December 2022 | - | - | - | 31,351 | 31,351 |
| Other comprehensive income | - | - | - | - | - |
| Total comprehensive income | - | - | - | 31,351 | 31,351 |
| Balance at 31 December 2022 | 12,503 | 150,278 | (1,732) | 290,347 | 451,396 |
| Attributable to the Equity holders of the parent | |||||
|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Share capital |
Share premium |
Treasury shares |
Retained earnings |
Total Equity attributable to the Equity holders of the parent |
| Balance at 1 January 2021 | 12,503 | 157,905 | (1,613) | 211,022 | 379,817 |
| Comprehensive income: | |||||
| Profit for the year ended 31 December 2021 | - | - | - | 40,347 | 40,347 |
| Other comprehensive income | - | - | - | - | - |
| Total comprehensive income | - | - | - | 40,347 | 40,347 |
| Own shares acquired | - | - | (119) | - | (119) |
| Reclassification of 2019 net result from Share premium to retained earnings (1) |
- | (7,627) | - | 7,627 | - |
| Balance at 31 December 2021 | 12,503 | 150,278 | (1,732) | 258,996 | 420,045 |
(1) change of presentation of allocation of net result for the year 2019 from Share premium to Retained earnings
| In thousands of Polish Zlotys (PLN) | Note | 2022 | 2021 |
|---|---|---|---|
| Cash flows used in operating activities | |||
| Profit for the period | 31,351 | 40,347 | |
| Adjustments to reconcile profit for the period to net cash used in operating activities | |||
| Depreciation and amortization | 871 | 731 | |
| (Increase)/decrease in fair value of investment property | (359) | 297 | |
| Write-down of inventory | 482 | 4,351 | |
| Finance expense | 8,330 | 4,412 | |
| Finance income | (1,929) | (843) | |
| Foreign exchange gain | (1,507) | - | |
| Gain in fair value of financial instrument at fair value through profit or | (4,121) | - | |
| loss Share of profit from joint ventures |
(1,327) | (5,763) | |
| Income tax expense | 11 | 16,327 | 15,077 |
| Subtotal | 48,118 | 58,608 | |
| Decrease/(increase) in inventory and land designated for | 34 | ||
| development | (996) | 167,376 | |
| Purchases of land | (55,246) | (113,784) | |
| Decrease/(increase) in advances for land | - | (36,553) | |
| Decrease/(increase) in trade and other receivables and prepayments | 34 | (11,347) | (28,937) |
| Decrease/(increase) in other current financial assets | (2,423) | 5,445 | |
| Increase/(decrease) in trade and other payables and accrued expenses | 34 | (9,777) | 1,502 |
| Increase/(decrease) in provisions | 1,576 | 1,133 | |
| Increase/(decrease) in advances received | (58,316) | (26,040) | |
| Subtotal | (88,412) | 28,750 | |
| Interest paid | (16,072) | (10,729) | |
| Interest received | 1,708 | 2 | |
| Income tax paid | 11 | (8,998) | (19,971) |
| Net cash used in operating activities | (111,774) | (1,948) | |
| Cash flows from/(used in) investing activities | |||
| Acquisition of property and equipment | (360) | (173) | |
| Proceeds from investment property | (10,468) | (19,936) | |
| Repayments of loans granted to joint ventures | 197 | 11,808 | |
| Loans granted | - | (1,621) | |
| Dividend received from joint ventures | 2,831 | - | |
| Net cash from/(used in) investing activities | (7,800) | (9,922) | |
| Cash flows from financing activities | |||
| Proceeds from bank loans, net of bank charges | 23 | 95,788 | 19,223 |
| Repayment of bank loans | 23 | (83,209) | (18,497) |
| Proceeds from bond loans, net of charges | 23 | - | 95,105 |
| Repayment of bond loans | 23 | (50,000) | (77,929) |
| Repayment of loans from other Payment of perpetual usufruct rights |
24 | - (1,206) |
(6,674) (904) |
| SAFE Agreement | 25 | 74,626 | - |
| Buy-back of shares | 21 | - | (119) |
| Net cash from financing activities | 35,999 | 10,205 | |
| Net change in cash and cash equivalents | (83,575) | (1,665) | |
| Cash and cash equivalents at beginning of period | 133,434 | 135,099 | |
| Effects of exchange rate changes on cash and cash equivalents | 1,326 | - | |
| Cash and cash equivalents at end of period | 51,185 | 133,434 |
* Including restricted cash that amounted to PLN 9,353 thousand and PLN 58,526 thousand as 31 December 2022 and as 31 December 2021, respectively.
Ronson Development SE ('the Company'), formerly named Ronson Europe N.V., is an European Company with its statutory seat in Warsaw, Poland. The registered office is located at al. Komisji Edukacji Narodowej 57 in Warsaw. The Company was incorporated in the Netherlands on 18 June 2007 as Ronson Europe N.V. with statutory seat in Rotterdam. During 2018, the Company changed its name and was transformed into an European Company (SE) and, effectively as of 31 October 2018, transferred its registered office of the Company from the Netherlands to Poland.
The Company (together with its subsidiaries, 'the Group') is active in the development and sale of residential units, primarily apartments, in multi-family residential real-estate projects to individual customers in Poland. In 2021 the Management Board of the Company decided to start developing new activity, so-called Private Rent Sector (PRS). PRS is sector of Poland's residential market in which buildings are designed and built specifically for renting. The Company prepared Consolidated Financial Statements for the year ended 31 December 2022, which was authorized for issue on 15 March 2023.
The shares of the Company were traded on the Warsaw Stock Exchange until 28 April 2022. As at 31 December 2022 and until the date of publication, 100% of the shares are controlled by Amos Luzon Development and Energy Group Ltd. ('A. Luzon Group'), (the ultimate parent company), whereas 66.06% of the shares are controlled indirectly (via I.T.R. Dori B.V., a fully owned subsidiary of A. Luzon Group), and 32.98% of the shares are controlled directly owned.by A. Luzon Group, 66.06% of the shares are controlled via I.T.R. Dori B.V., a fully owned subsidiary of A. Luzon Group. In addition 0.96% of the shares are held by the Company. The real beneficiary of the Company is Mr. Amos Luzon, Chairman of the Supervisory Board.
The details of the entities whose financial statements have been included in these Consolidated Financial Statements, the year of incorporation and the percentage of ownership and voting rights directly or indirectly held by the Company as at 31 December 2022 and as at 31 December 2021, are presented below and on the following page. The projects managed by the entities are in various stages of development ranging from being in the process of acquiring land for development to projects which are completed or near completion.
| Entity name | Year of incorporation |
Share of ownership & voting rights at the end of |
||||
|---|---|---|---|---|---|---|
| 31 December 2022 | 31 December 2021 | |||||
| a. | held directly by the Company: | |||||
| 1 | Ronson Development Management Sp. z o.o. | 1999 | 100% | 100% | ||
| 2 | Ronson Development Warsaw Sp. z o.o. (3) | 2000 | - | 100% | ||
| 3 | Ronson Development Investment Sp. z o.o. (3) | 2011 | - | 100% | ||
| 4 | Ronson Development Metropol Sp. z o.o. (3) | 2011 | - | 100% | ||
| 5 | Ronson Development Creations Sp. z o.o. (3) | 2005 | - | 100% | ||
| 6 | Ronson Development Sp. z o.o. | 2006 | 100% | 100% | ||
| 7 | Ronson Development Construction Sp. z o.o. | 2006 | 100% | 100% | ||
| 8 | City 2015 Sp. z o.o. | 2006 | 100% | 100% | ||
| 9 | Ronson Development Village Sp. z o.o. (1) | 2007 | 100% | 100% | ||
| 10 | Ronson Development Skyline Sp. z o.o. | 2007 | 100% | 100% | ||
| 11 | Ronson Development Universal Sp. z o.o. (1) | 2007 | 100% | 100% | ||
| 12 | Ronson Development South Sp. z o.o. | 2007 | 100% | 100% | ||
| 13 | Ronson Development Partner 5 Sp. z o.o. | 2007 | 100% | 100% | ||
| 14 | Ronson Development Partner 4 Sp. z o.o. | 2007 | 100% | 100% | ||
| 15 | Ronson Development North Sp. z o.o. (3) | 2007 | - | 100% | ||
| 16 | Ronson Development Providence Sp. z o.o. | 2007 | 100% | 100% | ||
| 17 | Ronson Development Finco Sp. z o.o. | 2009 | 100% | 100% | ||
| 18 | Ronson Development Partner 2 Sp. z o.o. | 2009 | 100% | 100% | ||
| 19 | Ronson Development Partner 3 Sp. z o.o. | 2012 | 100% | 100% | ||
| 20 | Ronson Development Studzienna Sp. z o.o. | 2019 | 100% | 100% | ||
| 21 | Ronson Development SPV1 Sp. z o.o. | 2021 | 100% | 100% | ||
| 22 | Ronson Development SPV2 Sp. z o.o. | 2021 | 100% | 100% | ||
| 23 | Ronson Development SPV3 Sp. z o.o. | 2021 | 100% | 100% | ||
| 24 | Ronson Development SPV4 Sp. z o.o. | 2021 | 100% | 100% | ||
| 25 | Ronson Development SPV5 Sp. z o.o. | 2021 | 100% | 100% | ||
| 26 | Ronson Development SPV6 Sp. z o.o. | 2021 | 100% | 100% | ||
| 27 | Ronson Development SPV7 Sp. z o.o. | 2021 | 100% | 100% | ||
| 28 | Ronson Development SPV8 Sp. z o.o. | 2021 | 100% | 100% | ||
| 29 | Ronson Development SPV9 Sp. z o.o. | 2021 | 100% | 100% | ||
| 30 | Ronson Development SPV10 Sp. z o.o. | 2021 | 100% | 100% | ||
| 31 | Ronson Development SPV11 Sp. z o.o. | 2021 | 100% | 100% | ||
| 32 | Ronson Development SPV12 Sp. z o.o. (2) | 2022 | 100% | - | ||
| 33 | Ronson Development SPV13 Sp. z o.o. (2) | 2022 | 100% | - |
| Entity name | Year of incorporation |
Share of ownership & voting rights at the end of |
||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | |||||
| b. | held indirectly by the Company : | 2022 | 2021 | |||
| 34 | AGRT Sp. z o.o. (5) | 2007 | - | 100% | ||
| 35 | Ronson Development Partner 4 Sp. z o.o. – Panoramika Sp.k. | 2007 | 100% | 100% | ||
| 36 | Ronson Development Sp. z o.o. - Estate Sp.k. | 2007 | 100% | 100% | ||
| 37 | Ronson Development Sp. z o.o. - Home Sp.k. | 2007 | 100% | 100% | ||
| 38 | Ronson Development Sp. z o.o. - Horizon Sp.k. | 2007 | 100% | 100% | ||
| 39 | Ronson Development Partner 3 Sp. z o.o. - Sakura Sp.k. | 2007 | 100% | 100% | ||
| 40 | Ronson Development Partner 3 sp. z o.o. – Viva Jagodno sp. k. | 2009 | 100% | 100% | ||
| 41 | Ronson Development Sp. z o.o. - Apartments 2011 Sp.k. | 2009 | 100% | 100% | ||
| 42 | Ronson Development Sp. z o.o. - Idea Sp.k. | 2009 | 100% | 100% | ||
| 43 | Ronson Development Partner 2 Sp. z o.o. – Destiny 2011 Sp.k. | 2009 | 100% | 100% | ||
| 44 | Ronson Development Partner 2 Sp. z o.o. - Enterprise 2011 Sp.k. | 2009 | 100% | 100% | ||
| 45 | Ronson Development Partner 2 Sp. z o.o. - Retreat 2011 Sp.k. | 2009 | 100% | 100% | ||
| 46 | Ronson Development Partner 5 Sp. z o.o. - Vitalia Sp.k. | 2009 | 100% | 100% | ||
| 47 | Ronson Development Sp. z o.o. - 2011 Sp.k. | 2009 | 100% | 100% | ||
| 48 | Ronson Development Sp. z o.o. - Gemini 2 Sp.k. | 2009 | 100% | 100% | ||
| 49 | Ronson Development Sp. z o.o. - Verdis Sp.k. | 2009 | 100% | 100% | ||
| 50 | Ronson Espresso Sp. z o.o.(5) | 2006 | - | 100% | ||
| 51 | Ronson Development Sp. z o.o. - Naturalis Sp.k. | 2011 | 100% | 100% | ||
| 52 | Ronson Development Sp. z o.o. - Impressio Sp.k. | 2011 | 100% | 100% | ||
| 53 | Ronson Development Partner 3 Sp. z o.o.- Nowe Warzymice Sp. k | 2011 | 100% | 100% | ||
| 54 | Ronson Development Sp. z o.o. - Providence 2011 Sp.k. | 2011 | 100% | 100% | ||
| 55 | Ronson Development Partner 2 Sp. z o.o. - Capital 2011 Sp. k. | 2011 | 100% | 100% | ||
| 56 | Ronson Development Partner 5 Sp. z o.o. - Miasto Marina Sp.k. | 2011 | 100% | 100% | ||
| 57 | Ronson Development Partner 5 Sp. z o.o. - City 1 Sp.k. | 2012 | 100% | 100% | ||
| 58 | Ronson Development Partner 2 Sp. z o.o. - Miasto Moje Sp. k. | 2012 | 100% | 100% | ||
| 59 | Ronson Development sp. z o.o. – Ursus Centralny Sp. k. | 2012 | 100% | 100% | ||
| 60 | Ronson Development Sp. z o.o. - City 4 Sp.k. | 2016 | 100% | 100% | ||
| 61 | Ronson Development Partner 2 Sp. z o.o. – Grunwald Sp.k. | 2016 | 100% | 100% | ||
| 62 | Ronson Development Sp. z o.o. Grunwaldzka" Sp.k. | 2016 | 100% | 100% | ||
| 63 | Ronson Development Sp. z o.o. - Projekt 3 Sp.k. | 2016 | 100% | 100% | ||
| 64 | Ronson Development Sp. z o.o. - Projekt 4 Sp.k. | 2017 | 100% | 100% | ||
| 65 | Ronson Development Sp. z o.o. - Projekt 5 Sp.k. | 2017 | 100% | 100% | ||
| 66 | Ronson Development Sp. z o.o. - Projekt 6 Sp.k. | 2017 | 100% | 100% | ||
| 67 | Ronson Development Sp. z o.o. - Projekt 7 Sp.k. | 2017 | 100% | 100% | ||
| 68 | Ronson Development Sp. z o.o. - Projekt 8 Sp.k. | 2017 | 100% | 100% | ||
| 69 | Bolzanus Limited (Company with the registered office in Cyprus) | 2013 | 100% | 100% | ||
| 70 | Park Development Properties Sp. z o.o. - Town Sp.k. | 2007 | 100% | 100% | ||
| 71 | Tras 2016 Sp. z o.o. | 2011 | 100% | 100% | ||
| 72 | Park Development Properties Sp. z o.o. | 2011 | 100% | 100% | ||
| 73 | Jasminova 2016 Sp. z o.o.(6) | 2016 | - | 100% | ||
| 74 | Town 2016 Sp. z o.o. (6) | 2016 | - | 100% | ||
| 75 | Enterprise 2016 Sp. z o.o. (6) | 2016 | - | 100% | ||
| 76 | Wrocław 2016 Sp. z o.o. | 2016 | 100% | 100% | ||
| 77 | Darwen Sp. z o.o. | 2016 | 100% | 100% | ||
| 78 | Truro Sp. z o.o. | 2017 | 100% | 100% | ||
| 79 | Tregaron Sp. z o.o. | 2017 | 100% | 100% | ||
| 80 | Totton Sp. z o.o. | 2017 | 100% | 100% | ||
| 81 | Tring Sp. z o.o. | 2017 | 100% | 100% | ||
| 82 | Thame Sp. z o.o. | 2017 | 100% | 100% | ||
| 83 | Troon Sp. z o.o. | 2017 | 100% | 100% | ||
| 84 | Tywyn Sp. z o.o. | 2018 | 100% | 100% | ||
| 85 | Semela Sp. z o.o.(4) | 2021 | - | 100% | ||
| c. | other entities (accounted for using the equity method): | |||||
| 86 | Coralchief sp. z o.o. | 2018 | 50% | 50% | ||
| 87 | Coralchief sp. z o.o. - Projekt 1 sp. k. | 2016 | 50% | 50% | ||
| 88 | Ronson IS sp. z o.o. | 2009 | 50% | 50% | ||
| 89 | Ronson IS sp. z o.o. sp. k. | 2012 | 50% | 50% |
1) The Company has the power to govern the financial and operating policies of this entity and to obtain benefits from its activities, whereas Kancelaria Radcy Prawnego Jarosław Zubrzycki holds the legal title to the shares of this entity.
2) Companies created and registered in KRS in first quarter of 2022
3) Companies merged with Ronson Development South Sp. z o.o. on 9 March 2022
4) Companies merged with Ronson Development SPV7 Sp. z o.o. on 18 August 2022
5) Companies merged with Ronson Development South Sp. z o.o. on 22 August 2022
6) Companies merged with Tras 2016 Sp. z o.o. on 13 October 2022
2. Basis of preparation of Financial Statements and measurement
These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS'). In light of the nature of the Group's activities, the IFRSs applied by the Group are not different from the IFRSs endorsed by the European Union, which are effective for the financial year ended 31 December 2022. Information about standards and interpretations were presented below.
The Consolidated Financial Statements were authorized by the Management Board of Ronson Development SE on 15 March 2023. These Consolidated Financial statements have been prepared on the assumption that the Group is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of its operations. The Company prepared Consolidated Financial Statements for the year ended 31 December 2022 in both English and Polish languages, while the Polish version is binding.
The following standards and amendments became effective as of 1 January 2022:
• Amendments to IAS 16 - Property, Plant and Equipment - prohibition of adjusting the cost of production of property, plant and equipment by the amounts obtained from the sale of components produced during the period of preparation of property, plant and equipment to start operating in accordance with the management's intentions.
• Amendments to IFRS 3 – "Business combinations" - update of the Conceptual Framework in IFRS;
• Amendments to IAS 37 – "Provisions, contingent liabilities and contingent assets" - explanations on whether the contract is an Onerous Contracts;
• Annual Improvements to IFRS Standards 2018-2020 (IFRS 1 "First-time Adoption of International Financial Reporting Standards", IFRS 9 "Financial Instruments", IAS 41 "Agriculture" and to the illustrative examples of IFRS 16 "Leasing").
The impact of the above amendments and improvements to IFRSs has been analyzed by the Management Board. Based on the assessment the amendments do not impact the Consolidated Financial Statements of the Company.
Certain new accounting standards and interpretations have been published that are not mandatory for 2022 reporting periods and have not been early adopted earlier by the Group. The Management Board do not expect that these standards have a material impact on the entity or the Group in the current or future reporting periods and on foreseeable future transactions.
The Consolidated Financial Statements have been prepared on the historical cost basis, except for investment property and SAFE Agreement (financial liability) which was measured at fair value. The methods used to measure fair values for the purpose of preparing the Consolidated Financial Statements are discussed further in Note 3(r), Note 13, Note 25 and Note 28.
Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency') being Polish Zloty ('PLN'). Polish Zloty is the presentation currency of the Consolidated Financial Statements of the Group, and is also the functional currency of the parent company.
The Consolidated Financial Statements are presented in thousands of Polish Zloty, except when otherwise indicated.
2. Basis of preparation of Financial Statements and measurement
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reported period. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing-basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements, are described in the following notes:
The Group conducts residential units projects and developing activities in dedicated operating subsidiaries. Such transactions are accounted for in accordance with IAS 2 and IFRS 15, whereby inventory is sold and revenue should be recognized after the criteria are met.
The revenue from the sale of real estate (residential units, commercial units, etc.) is recognized at the moment when control over the real estate is transferred to the customer of mentioned real estate together with the transfer of significant risks and rewards typical to the ownership rights. According to the Company's judgement this occurs at the moment of handover of the real estate to the customer, which is based on a handover document signed by both parties and subject to the condition that the customer has paid 100% of the sale price for the real estate. More information is presented in the Note 5 to the Consolidated Financial Statements.
Inventory and residential land bank is stated at the lower of cost and net realizable value (NRV). NRV for completed inventory (Finished goods) is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group having taken suitable external advice and in the light of recent market transactions. NRV in respect of work in progress and residential land bank is assessed with reference to market prices at the reporting date for similar completed properties, less estimated costs to complete construction and less an estimate of the time value of money to the date of completion. More information is presented in the Note 16 to the Consolidated Financial Statements.
The fair value of the investment property is determined by independent real estate valuation experts based on the discounted cash flow approach or comparison approach (pairwise comparison method). The determination of the fair value of the investment property using discounted cash flow approach requires the use of estimates such as future cash flows from assets (such as lettings, tenants' profiles, future revenue streams, capital values of fixtures and fittings, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. Comparison approach involves an analysis of similar properties which are being sold on the market and for which the characteristics that determine the cost and the terms of the transactions are known. More information is presented in the Note 13 to the Consolidated Financial Statements.
2. Basis of preparation of Financial Statements and measurement
According to the IFRS 16 standard the Company the lease payments shall be discounted using the rate implicit in the lease contract, or if this rate cannot be readily determined, the Company's incremental borrowing rate. The Company decided to use incremental borrowing rate ('IBR') that was determined based on reference rate adjusted by margin. The IBR rate was built based on reference rate (30 years state bonds quotation) increased by margin which represents higher credit risk of the Company due to worse ratios, risk related to unusual length of potential financing and no possibility to establish security for such long-term financing. More information is presented is the Note 24 to the Consolidated Financial Statements.
Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses and deductible temporary differences can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax strategies. More information is presented in the Note 15 to the Consolidated Financial Statements.
The fair value of the financial liability at fair value through profit or loss is determined by independent valuator based on the Monte Carlo simulation model and the Black & Scholes model. The determination of the fair value of the liability requires the use of estimates such as share price, exercise price, loan maturity, risk free interest, credit risk, expected volatility and expected dividend yield. More information is presented in the Note 25 to the Consolidated Financial Statements.
The Group enters into sale agreements with clients, which require advance payments in accordance with the agreed schedule. Based on the analysis of the agreements, it was found that they do not contain a significant element of financing due to the fact that advance payments from clients are intended to secure the performance of the agreement (i.e. they guarantee that the customer will not withdraw from the purchase and from the customer's point of view constitute security that the given premises will be sold to him at the agreed price), so they are made for reasons other than providing financing to the developer (IFRS 15 par. 62c). In addition, if the flat finds a buyer quite late, i.e. shortly before signing the acceptance report, the difference between the cash price paid once by such a customer and the price paid by the customer in the event of signing the contract significantly earlier does not result from interest in this period, but from changes in market prices housing.
Financial assets are written-off, in whole or in part, when the Group exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Group may write-off financial assets that are still subject to enforcement activity when the Group seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.
For purposes of measuring probability of default, the Group defines default as a situation when the debtor meets the unlikeliness-to-pay criteria listed below:
These Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2022. Control is achieved when the Group 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. Specifically, the Group controls an investee if, and only if, the Group has:
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
The financial statements of subsidiaries are prepared for the same period as the financial statement of Parent. The Group entities keep books of accounts in accordance with accounting policies specified in the Accounting Act dated 29 September 1994 ('the Accounting Act') with subsequent amendments and the regulations issued based on that Act (all together: 'Polish Accounting Standards'). These consolidated financial statements include a number of adjustments not included in the books of account of the Group entities, which were made in order to bring the financial statements of those entities in conformity with IFRSs as adopted by EU.
Where property is acquired, via corporate acquisitions or otherwise, the management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business or assets. Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred taxation arises. Otherwise, acquisitions are accounted for as business combinations.
The accounting policies set out below have been applied consistently in all periods presented in these Consolidated Financial Statements.
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates prevailing at the dates of the transactions using:
Revenues from the sale of residential units are recognized when (or as) the Group has satisfied a performance obligation by transferring a promised good (unit) to a customer, i.e. the revenues are recognized at point in time. A residential unit is transferred when (or as) the customer obtains control of the residential unit (i.e. upon signing protocol of technical acceptance and transfer of key to the unit and payment of the entire amount, resulting from the sale agreement), after receiving valid occupancy permit for the building based on hand-over protocol signed between the Group representatives and the customer and provided that the entire amount resulting from the sale agreement has been paid by the customer.
Advances received related to pre-sales of residential units, are presented as deferred income, in the Statement of financial position when they do not meet the criteria to be recognized as revenue. When they subsequently meet these criteria, they are recognized as revenue.
The Group recognizes the provision for the warranties separately. Warranty is treated as a separate performance obligation.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument to another entity.
The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus transaction costs. In the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or the financial liability. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.
In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The classification and subsequent measurement of debt financial assets also depends on the Group's business model for managing the related assets portfolio.
3. Significant accounting policies
The business model reflects how the Group manages the assets in order to generate cash flows – whether the Group's objective is: (i) solely to collect the contractual cash flows from the assets ("hold to collect contractual cash flows",) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets ("hold to collect contractual cash flows and sell") or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of "other" business model and measured at FVTPL.
For purposes of subsequent measurement, financial assets are classified in four categories:
For the Group the first category is most relevant. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. Assets to which above policy applies:
The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognized in two steps. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at Amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss.
Financial liability at fair value through profit or loss are subsequently measured at fair value. A gain or loss on a financial liability that is designated as at fair value through profit or loss is presented as follows:
unless the treatment of the effects of changes in the liability's credit risk described in (a) would create or enlarge an accounting mismatch in profit or loss, then all changes in fair value (including the effects of changes in the credit risk of the liability) are presented in profit and loss.
| Category | Statement of financial position item | Measurement | |
|---|---|---|---|
| Loans granted | Amortized cost method | ||
| Cash and cash equivalent | Amortized cost method | ||
| Assets measured at amortized costs | Trade and other receivables | Amortized cost method | |
| Other current financial assets | Amortized cost method | ||
| Bond loans | Amortized cost method | ||
| Liabilities measured at amortized costs | Secured bank loans | Amortized cost method | |
| Trade and other payables and accrued expenses | Amortized cost method | ||
| Liabilities measured at fair value | |||
| through profit and loss | Financial liability measured at FVPL | Fair value |
The financial instruments of the Group are classified into one of the following categories:
Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of comprehensive income as incurred.
3. Significant accounting policies
Depreciation is calculated on the straight-line basis over the estimated useful life of each component of an item of property and equipment.
The estimated useful life of property and equipment, depending on the class of asset, ranges as below:
Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.
Depreciation methods, useful lives and residual values are reassessed at the reporting date, and adjusted prospectively since the beginning of the following year, if appropriate.
The Group recognizes assets and liabilities resulting from leases with a period exceeding 12 months, unless the underlying asset is of low value. The only material lease agreements with a period exceeding 12 months into which the Group has entered, are the rights of perpetual usufruct of real estate properties.
The Group recognizes a lease liability, measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at the date of signing the lease contract. The Group recognizes the respective right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments recognized immediately before the commencement date. The Group has decided to present right-of-use assets under the same item in the Consolidated Statement of Financial Position, under which the relevant underlying assets would be presented if they were owned by the Group. The lease liabilities are presented separately from other liabilities in long term liabilities with respect to lease of investment properties and short term liabilities with respect to lease of inventory.
Assets - was recognized in the Consolidated Statement of Financial Position under "Inventory".
Liabilities - was presented in the Consolidated Statement of Financial Position as a short term under "Lease liabilities related to perpetual usufruct of land".
Costs - the Group depreciates the right of use asset on straight line basis over the lease period. On the other hand the Group recognizes finance expense to reflect interest expense on lease liability. Those costs are capitalized to Inventory as long as development project qualifies for capitalization.
Derecognition – at the moment occupancy permit is issued the Group becomes the owner of the land (based on The Act of July 20, 2018 on transformation of the right of perpetual usufruct of land built for housing purposes into the ownership right of these lands). Since then the Group is no longer liable for perpetual usufruct fees but pays conversion fees. At the moment occupancy permit is issued and revenue from the sale of residential units is recognized (when the performance obligations are satisfied and when the customer obtains control of the good, i.e. upon signing of the protocol of technical acceptance and the transfer of the key to the buyer of the residential unit and total payment obtained) the liability for conversion fee and related asset are reclassified to other payables and other receivables and are presented under "Trade and other payables and accrued expenses" and "Trade and other receivables and prepayments" respectively. The Group is legally released from the obligation to pay conversion fees only upon signing the final notary deed for transferring the ownership of unit together with share in the land to the client. Carrying amounts of receivables and payables are derecognized from Consolidated Statement of Financial Position once final notary deeds are signed with clients.
Despite the fact that based on the Group's core business the operating cycle of inventory is on average 5 years i.e. plots of land are purchased for the purpose of the development of residential projects and transferring the ownership of the units together with share in the land to the client. Under IFRS 16 the Group is not allowed to consider the period for which the Group expects to be the usufructuary despite the fact that the period is quite precisely known. Therefore once lease liabilities are recognized, the Group is required to discount all future payments resulting from the right of perpetual usufruct for the period for which the right is granted to individual properties (it can be up to 99 years). Following the requirements of IFRS 16 the Group recognize lease liabilities of which majority will not be paid by the Group.
Assets - was recognized in the statement of financial position under "Investment properties".
Liabilities - was presented in the statement of financial position as a long term under "Lease liabilities related to perpetual usufruct of investment property".
Costs - the Group fair values the right of use asset at each balance sheet date and recognizes finance expense to reflect interest expense on lease liability.
Assets – the right of use assets (cars) was recognized in the statement of financial position under "Property and equipment" less accrued depreciation.
Liabilities - was presented in the statement of financial position as a long term under "Lease liabilities related to perpetual usufruct of investment property" less repayment of capital part of the lease.
Costs - the Group depreciates the right of use asset on straight-line basis for the full duration of the lease at each balance sheet date and recognizes finance expense to reflect interest expense on lease liability.
Investment properties and investment properties under construction are measured initially at cost, including transaction costs. After initial recognition, as at each reporting date, investment property under construction that meets the premises for their valuation, and investment property are measured at fair value. The fair value measurement is updated at least quarterly. Profits or losses resulting from changes in the fair value of investment properties are recognized in the statement of comprehensive income in the period in which they arise. The result on the valuation of investment properties is presented in the profit / loss on changes in the fair value of investment property line.
For investment properties under construction, the premises for valuation are met in the case of projects where a significant part of the risks related to the construction process has been eliminated and it is possible to measure reliably at fair value. In other cases, when it is not possible to reliably determine the fair value, the value of real estate under construction is valued according to the cost method.
The Group has specified the conditions under which it begins the process of analyzing whether significant risks relating to investment properties under construction have been eliminated. There are specific conditions analyzed by the Group if the risks are minimalized which are basis for the fair value valuation, like for example, but not limited to, obtaining building permit, contracting construction work.
The presented conditions constitute the boundary criteria of the analysis. Each investment property under construction is analyzed individually in terms of the possibility of obtaining a reliable valuation to fair value, taking into account, in addition to the conditions described above, also the general economic and market situation, the availability of data for similar properties and expectations regarding the volatility of factors underlying the valuation and the method of financing investment project.
Land and buildings measured at fair value are updated in such a way as to reflect the market conditions prevailing at the end of each reporting period. The fair value of investment property is the price that would have been received for the sale of an asset or paid for the transfer of a liability in a transaction between market participants carried out on normal conditions at the valuation date. Fair values are subject to verification by external valuations prepared by experts in cooperation with the Management Board. To determine the fair value of the property, independent appraisers use valuation methods most appropriate for the valuation of the property depending on the individual asset.
The Group estimates that an operating cycle for projects/stage of a big project lasts for about 5 years. The operating cycle is divided into two phases: (i) the pre-construction preparation phase lasting about 3 years (obtaining necessary site permits, environmental decisions or construction permits, designing, etc.), and (ii) construction phase lasting also about 2 years.
When a project is within the operating cycle the project is presented as short-term assets under inventory, in other cases the project is presented as long-term under Residential land bank.
Inventories are valued at the purchase price plus capitalized costs (incurred during preparation for project implementation), however, not higher than the net realizable value from the sale. The purchase price includes costs incurred in connection with construction of the project.
Inventories consists of real estate projects related to realization of multi-family block of flats or detached houses for individual clients.
Inventory is measured at cost increased by capitalized costs incurred relating to the preparation of the projects for construction, in the value not higher than the net realizable value. The cost of inventory includes expenditure incurred relating to the construction of a project. Inventory comprises residential real estate projects to individual customers.
Project construction costs include:
Inventory is recognized as a cost of sales in the statement of comprehensive income when the sale of residential units is recognized.
Long-term part of the land bank (if a commencement of construction phase is not planned within the period of 3 years from the reporting date) is presented in non-current assets of the consolidated statement of financial position, as "Residential land bank", whereas short-term part of the land bank is presented in current assets of the consolidated statement of financial position, in inventory balance. Residential land bank is measured at cost increased by capitalized costs incurred relating to the preparation of the projects for construction, in the total value not higher than the net realizable value.
Share capital includes the proceeds received from the issue of ordinary shares on the nominal value in exchange for cash.
Share premium includes the excess of proceeds received from the issue of shares over the nominal value of shares. Shares issuance costs are deducted from the share premium.
Own shares that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments.
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. The computations of the basic earnings per share are determined on the basis of the weighted average number of shares outstanding during the year. The diluted earnings per share are determined by adjusting the statement of comprehensive income and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted and rights to obtain shares by employees.
The carrying amounts of the Group's non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's or a cash generating unit's recoverable amount is estimated.
An impairment loss is recognized if the carrying amount of an asset or a cash generating unit exceeds its recoverable amount.
The recoverable amount of an asset or a cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Borrowing costs directly attributable to the inventory of properties which necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of the cost of the respective assets. The interest capitalized is calculated using the Group's weighted average cost of borrowings after adjusting for borrowings associated with specific developments. Where borrowings are associated with specific developments, the amount capitalized equals the gross interest incurred on those borrowings. Interest is capitalized as from the commencement of the development work until the date of completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted.
Income tax expense comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax expense is calculated according to tax regulations in effect in the jurisdiction in which the individual companies are domiciled.
Deferred income tax is provided, using the balance sheet method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, and for tax losses carried forward, except for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. At each reporting date deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Other current financial assets in the statement of financial positions comprise only funds deposited on escrow accounts. The separate line was created due to new legal regulations "Act on the Protection of Rights of a Dwelling Unit or House Buyer" which resulted in the need to open individual escrow accounts for advances paid by the customers of the Group for the purchases of apartments. Amounts collected on individual escrow accounts are measured at amortised cost less expected credit losses.
Cash and cash equivalents in the statement of financial positions comprise cash at banks and on hand and shortterm deposits with an original maturity of three months or less, except for collateralized deposits.
For the purpose of the consolidated statement cash flows, cash and cash equivalents consist of cash and shortterm deposits as defined above, net of outstanding bank overdrafts. Cash and cash equivalents are measured at amortized costs less expected credit losses.
Obligations for contributions to defined contribution pension plans are recognized as an expense in the statement of comprehensive income as incurred.
The Company's subsidiaries are required, under applicable regulations, to pay, on a monthly basis, social security contributions for the employees' future pension benefits. These benefits, according to IAS 19 'Employee Benefits', are state plans and are characterized as defined contribution plans. Therefore, the Company's subsidiaries have no legal or constructive obligation to pay future pension benefits and their obligation is limited to payment of contributions as they fall due.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Under the equity method, the investment in a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group's share of net assets of the joint venture since the acquisition date. Upon making an investment in an associate or joint venture, the amount by which the costs of such investment exceed the value of the Group's share in the net fair value of identifiable assets and liabilities of this entity is recognized as goodwill and included in the carrying amount of the underlying investment.
The statement of profit or loss reflects the Group's share of the results of operations of the joint venture. Any change in Other comprehensive income of joint ventures is presented as part of the Group's Other comprehensive income. In addition, when there has been a change recognized directly in the equity of the joint venture, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Dividends declared by the joint venture decrease the carrying amount of the investment in the joint venture. Unrealized gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognizes the loss as 'Share of profit/(loss) of a joint venture' in the statement of profit or loss.
Upon loss of joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss.
The Group measures investment properties and financial liability ("SAFE" Agreement) at fair value at each balance sheet date. The financial liability is measured at Fair value through profit and loss in its entirety. The movements in fair value are recorded in profit and loss, except for the fair value changes arising from changes in the Company's own credit risk, which should be accounted for through other comprehensive income with no subsequent recycling. In addition, fair values of financial instruments measured at amortized cost are disclosed in Note 28 and Note 29.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
The principal or the most advantageous market must be accessible to by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Group's operating segments are defined as separate entities developing particular residential projects, which for reporting purposes were aggregated. The aggregation for reporting purpose is based on geographical locations (Warsaw, Poznań, Wrocław and Szczecin) and type of activity (development of apartments, development of houses). Moreover, for particular assets the reporting was based on type of income: rental income from investment property or from so-called Private Rent Sector. The segment reporting method requires also the Company to present separately joint venture within Warsaw segment. There has been no changes in the basis of segmentation or in the basis of measurement of segment profit or loss from the last annual financial statements. There is no concentration of the services to one client, the revenue is allocated to many clients, mostly individual clients.
According to the Management Board's assessment, the operating segments identified have similar economic characteristics. Aggregation based on the type of development within the geographical location has been applied since primarily the location and the type of development determine the average margin that can be realized on each project and the project's risk factors. Considering the fact that the construction process for apartments is different from that for houses and considering the fact that the characteristics of customers buying apartments slightly differ from those of customers interested in buying houses, aggregation by type of development within the geographical location has been used for segment reporting and disclosure purposes.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated indirectly based on reasonable criteria. Unallocated assets comprise mainly unallocated cash and cash equivalents and income tax assets. Unallocated liabilities comprise mainly income tax liabilities and bond loans. The unallocated result (loss) comprises mainly head office expenses. IFRS adjustments represents the elimination of the Joint venture segment for reconciliation of the profit (loss), assets and liabilities to the consolidated numbers. Joint ventures are accounted using the equity method.
The results of activities in the individual segments are assessed mainly on the basis of sale revenues, cost of sales of residential projects, assigned marketing costs and others operating costs/income assigned to each segment. Additionally the Group analyses the profit and gross margin on sales as well as result before tax (including financial costs and income assigned to the segment) generated by the individual markets.
Data presented in the table below are aggregated by type of development within the geographical location:
| In thousands of Polish Zlotys (PLN) | As at 31 December 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Warsaw | Poznań Wrocław |
Szczecin | Unallocated | IFRS adjustme nts |
Total | ||||||||
| Apartments | Houses | Joint venture |
Rental | Apartments | Houses | Apartments | Houses | Apartments | Houses | ||||
| Segment assets Unallocated assets |
530,898 - |
100,278 - |
5,570 - |
70,605 - |
122,968 - |
8,953 - |
58,431 - |
- - |
86,801 - |
- - |
- 20,721 |
(3,123) - |
981,382 20,721 |
| Total assets | 530,898 | 100,278 | 5,570 | 70,605 | 122,968 | 8,953 | 58,431 | - | 86,801 | - | 20,721 | (3,123) | 1,002,103 |
| Segment liabilities Unallocated liabilities |
160,174 - |
5,216 - |
955 - |
24,376 - |
24,320 - |
- - |
17,278 - |
- - |
17,050 - |
- - |
- 302,293 |
(955) - |
248,414 302,293 |
| Total liabilities |
160,174 | 5,216 | 955 | 24,376 | 24,320 | - | 17,278 | - | 17,050 | - | 302,293 | (955) | 550,707 |
| In thousands of Polish Zlotys (PLN) | As at 31 December 2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Warsaw | Poznań Wrocław |
Szczecin | Unallocated | IFRS adjustme nts |
Total | ||||||||
| Apartments | Houses | Joint venture |
Rental | Apartments | Houses | Apartments | Houses | Apartments | Houses | ||||
| Segment assets Unallocated |
546,714 | 85,181 | 19,914 | 30,449 | 116,951 | - | 45,403 | - | 97,797 | - | - | (15,749) | 926,660 |
| assets Total assets |
- 546,714 |
- 85,181 |
- 19,914 |
- 30,449 |
- 116,951 |
- - |
- 45,403 |
- - |
- 97,797 |
- - |
39,937 39,937 |
- (15,749) |
39,937 966,597 |
| Segment liabilities Unallocated liabilities |
218,314 - |
952 - |
547 - |
1,329 - |
6,064 - |
- - |
11,413 - |
- - |
28,594 - |
- - |
- 279,886 |
(547) - |
266,666 279,886 |
| Total liabilities |
218,314 | 952 | 547 | 1,329 | 6,064 | - | 11,413 | - | 28,594 | - | 279,886 | (547) | 546,552 |
In thousands of Polish Zlotys (PLN) For the year ended 31 December 2022
| Warsaw | Poznań Wrocław |
Szczecin | Unallocated | IFRS adjustments |
Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Apartments | Houses | Joint venture |
Rental | Apartments | Houses | Apartments | Houses | Apartments | Hous es |
||||
| Revenue/Reve nue from Clients(1) |
217,797 | - | 16,896 | 841 | 2,325 | - | 23,139 | - | 56,157 | - | - | (16,896) | 300,259 |
| Segment result Unallocated result |
56,782 - |
720 - |
3,285 - |
881 - |
(4,892) - |
1,376 - |
4,522 - |
- - |
14,372 - |
- - |
- (25,308) |
(3,285) - |
73,756 (25,308) |
| Result from operating activities |
56,782 | 720 | 3,285 | 881 | (4,892) | 1,376 | 4,522 | - | 14,372 | - | (25,308) | (3,285) | 48,452 |
| Net finance income/ (expenses) |
244 | (88) | 75 | 177 | (52) | (2) | 84 | - | 115 | - | (1,252) | (75) | (773) |
| Profit/(loss) before tax |
57,024 | 632 | 3,360 | 1,059 | (4,944) | 1,374 | 4,607 | - | 14,486 | - | (26,557) | (3,361) | 47,679 |
| Income tax expenses Profit for the |
(16,328) | ||||||||||||
| year | 31,351 |
(1) Revenues are recognized at the moment when control over the real estate is transferred to the buyer, which is based on a signed technical acceptance protocol, handover the keys to the buyer and reception of full payment.
| In thousands of Polish Zlotys (PLN) | For the year ended 31 December 2021 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Warsaw | Poznań Wrocław |
Szczecin | Unallocated | IFRS adjustments |
Total | ||||||||
| Apartments | Houses | Joint venture |
Rental | Apartments | Houses | Apartments | Houses | Apartments | Houses | ||||
| Revenue/Reve nue from Clients(1)/(2) |
275,389 | 29,166 | 67,639 | 697 | 19,322 | - | 92,739 | - | 63,586 | - | - | (67,639) | 480,899 |
| Segment result Unallocated result |
50,088 - |
5,540 - |
14,600 - |
(82) - |
(244) - |
- - |
18,751 - |
- - |
2,547 - |
- - |
- (17,365) |
(14,600) - |
76,600 (17,365) |
| Result from operating activities |
50,088 | 5,540 | 14,600 | (82) | (244) | - | 18,751 | - | 2,547 | - | (17,365) | (14,600) | 59,235 |
| Net finance income/ (expenses) |
(145) | (85) | (151) | 25 | (33) | - | (52) | - | (118) | - | (3,403) | 151 | (3,812) |
| Profit/(loss) before tax |
49,943 | 5,455 | 14,449 | (57) | (277) | - | 18,699 | - | 2,429 | - | (20,768) | (14,449) | 55,424 |
| Income tax expenses Profit for the year |
(15,077) 40,347 |
(1) Revenues are recognized at the moment when control over the real estate is transferred to the buyer, which is based on a signed technical acceptance protocol, handover the keys to the buyer and reception of full payment.
(2) Revenues from the sale of land and from the sale of services are appropriately allocated to a given segment, i.e. the sale of the Naturalis project was allocated to the Warsaw segment apartments in accordance with the land development conditions, revenues from services were allocated to the Warsaw - Apartments segment as they relate to the re-invoicing of services provided for JV Wilanów Tulip, which investment concerns apartments in Warsaw
The majority of Group's revenues are generated through development and sale of units, primarily apartments, in residential real-estate projects to individual customers in Poland ("residential units"). The Group recognizes revenues at the moment performance obligations are satisfied. According to Group's policy the performance obligation is satisfied at the moment, the residential unit is handed over to the customer. It occurs only after construction process is finalized meaning occupancy permit received and the full amount is paid by client. The agreements with the customers do not contain variable considerations. The agreements, in the opinion of the Group, do not contain a significant financing component. Based on such characteristics of revenues, the Group, as a rule, does not present any receivables or other contract assets, except for costs to obtain the contract, capitalized to prepayments. Contract liabilities, are reflected by advances received, which are disclosed in the Note 27.
| For the year ended 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Sales revenue | ||
| Revenue from residential projects | 300,259 | 457,677 |
| Revenue from the sale of land | - | 22,500 |
| Revenue from sale of services | - | 722 |
| Total sales revenue | 300,259 | 480,899 |
| Cost of sales | ||
| Cost of sales residential projects | (220,347) | (369,299) |
| Cost of sales of land | - | (24,976) |
| Inventory reversals/(write down) to the net realisable value | (485) | (1,924) |
| Total cost of sales | (220,832) | (396,199) |
| Gross profit on sales | 79,427 | 84,700 |
| Gross profit on sales, in % to revenue | 26% | 18% |
The table below presents the breakdown of revenues from the sale of residential investments by project:
| For the year ended 31 December | Location | 2022 | 2021 |
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | |||
| Ursus Centralny Ia | Warsaw | 686 | 56,951 |
| Ursus Centralny Ib | Warsaw | 47,356 | - |
| Ursus Centralny IIa | Warsaw | 81,620 | 24,114 |
| Miasto Moje I-III | Warsaw | 1,438 | 36,597 |
| Miasto Moje IV | Warsaw | 20,046 | 46,863 |
| Miasto Moje V | Warsaw | 59,705 | - |
| Nowe Warzymice I | Szczecin | 2,372 | 16,537 |
| Nowe Warzymice II | Szczecin | 21,530 | - |
| Nowe Warzymice III | Szczecin | 23,632 | - |
| Viva Jagodno I | Wrocław | 95 | 43,887 |
| Viva Jagodno IIa | Wrocław | 22,958 | - |
| Panoramika V | Szczecin | 1,159 | 8,064 |
| Panaromika VI | Szczecin | 7,464 | 15,675 |
| Vitalia III | Wrocław | 34 | 45,816 |
| City Link III | Warsaw | - | 15,467 |
| Grunwald2 | Poznań | 624 | 15,923 |
| Nova Królikarnia 2c | Warsaw | - | 27,095 |
| Nova Królikarnia 2b | Warsaw | - | 2,071 |
| Nova Królikarnia 3a | Warsaw | 3,325 | 35,691 |
| Nova Królikarnia 3b | Warsaw | - | 26,435 |
| Nova Królikarnia 3c | Warsaw | 1,401 | 26,712 |
| Other | 4,814 | 13,778 | |
| Total revenue | 300,259 | 457,677 |
The table below presents breakdown of costs of sales allocated to projects:
| In thousands of Polish Zlotys (PLN) | For the year ended 31 December Location |
2021 | |
|---|---|---|---|
| Ursus Centralny Ia | Warsaw | 565 | 47,106 |
| Ursus Centralny Ib | Warsaw | 34,611 | |
| Ursus Centralny IIa | Warsaw | 61,861 | 18,245 |
| Miasto Moje I-III | Warsaw | 1,051 | 30,295 |
| Miasto Moje IV | Warsaw | 14,997 | 32,301 |
| Miasto Moje V | Warsaw | 40,385 | |
| Nowe Warzymice I | Szczecin | 1,847 | 13,507 |
| Nowe Warzymice II | Szczecin | 15,685 | |
| Nowe Warzymice III | Szczecin | 15,485 | |
| Viva Jagodno I | Wrocław | 73 | 32,857 |
| Viva Jagodno IIa | Wrocław | 17,697 | |
| Panoramika V | Szczecin | 1,022 | 7,386 |
| Panaromika VI | Szczecin | 6,943 | 14,573 |
| Vitalia III | Wrocław | 33 | 37,533 |
| City Link III | Warsaw | - | 9,204 |
| Grunwald2 | Poznań | 464 | 12,088 |
| Nova Królikarnia 2c | Warsaw | - | 23,945 |
| Nova Królikarnia 2b | Warsaw | - | 1,862 |
| Nova Królikarnia 3a | Warsaw | 2,854 | 30,255 |
| Nova Królikarnia 3b | Warsaw | - | 23,432 |
| Nova Królikarnia 3c | Warsaw | 1,166 | 22,661 |
| Other Total cost of sales |
3,609 220,347 |
12,048 369,299 |
|
| For the year ended 31 December | 2022 | ||
| In thousands of Polish Zlotys (PLN) | |||
| Advertising | 4,388 | ||
| Depreciation | 88 | ||
| Other | 89 | ||
| Total selling and marketing expenses | 4,565 | ||
| Administrative expenses For the year ended 31 December |
2022 | ||
| In thousands of Polish Zlotys (PLN) | |||
| Personnel expenses | 17,287 | ||
| - Wages | 15,089 | ||
| - Social security and other employee benefits | 2,198 | ||
| External services | |||
| 3,615 | |||
| Consulting fees to main shareholder | 867 | ||
| Materials and energy | 514 | ||
| Depreciation | 786 | ||
| Taxes and charges | 1,462 | ||
| Other | |||
| 974 | 2021 3,403 464 892 4,760 2021 17,035 14,974 2,061 3,085 862 735 436 1,036 487 |
||
| Total administrative expenses | 25,505 | 23,676 |
464 -
Sharing of costs of road construction, network
accounts
Write-off of liabilities/Reversal of allowance for doubtful
| Other expenses | ||
|---|---|---|
| 2021 | 2022 | For the year ended 31 December |
| In thousands of Polish Zlotys (PLN) | ||
| 1,430 | 893 | Maintenance expense of unsold units |
| 1,704 | 57 | Cost of repairs and defects |
| 435 | 2,316 | Expense for contractual penalties and compensation |
| 344 | - | Write-down of trade receivables |
| - | 172 | Charity activities |
| 624 | 378 | Cost of research and due diligence of new projects |
| - | 802 | Costs related to obtaining financing (broker fee) |
| 321 | 582 | Other expenses |
| 4,857 | 5,200 | Total other expenses |
| Other income | ||
| 2021 | 2022 | For the year ended 31 December |
| In thousands of Polish Zlotys (PLN) | ||
| 184 | ||
| 374 | Revenues from contractual penalties and compensation |
Rental income from inventory 240 518 Net profit on sale of property and equipment - 39 Reversal of accruals 611 606
reconstruction according to agreements 842 722
Other income 183 294 Total other income 2,714 2,363
| In thousands of Polish Zlotys (PLN) | Total amount | Amount capitalized |
Amount capitalized (under IFRS 16) |
Recognized in the statement of comprehensive income |
|---|---|---|---|---|
| Interest income on bank deposits | 1,710 | - | - | 1,710 |
| Foreign exchange gain | 1,591 | - | - | 1,591 |
| Other finance income | 219 | - | - | 219 |
| Finance income | 3,520 | - | - | 3,520 |
| Interest expense on financial liabilities Commissions and fees |
(18,854) (4,766) |
12,118 3,213 |
- - |
(6,736) (1,553) |
| Other finance costs | (125) | - | - | (125) |
| Finance costs | (23,745) | 15,331 | - | (8,414) |
| Finance costs - on lease | ||||
| liabilities | (1,049) | - | 1,049 | - |
| Net finance income | (21,274) | 15,331 | 1,049 | (4,894) |
| In thousands of Polish Zlotys (PLN) | Total amount | Amount capitalized |
Amount capitalized (under IFRS 16) |
Recognized in the statement of comprehensive income |
|---|---|---|---|---|
| Interest income on bank deposits | 1 | - | - | 1 |
| Other finance income | 599 | - | - | 599 |
| Finance income | 600 | - | - | 600 |
| Interest expense on financial liabilities Commissions and fees Other finance costs Finance costs |
(10,908) (3,496) (316) (14,720) |
8,227 2,026 55 10,308 |
- - - - |
(2,681) (1,470) (261) (4,412) |
| Finance costs - on lease liabilities |
(746) | 746 | - | - |
| Net finance income | (14,866) | 11,054 | - | (3,812) |
| Income tax charges |
||
|---|---|---|
| For the year ended 31 December | 2022 | 2021 |
| In thousands of Polish Zlotys (PLN) | ||
| Current tax expense | ||
| Current period | 7,203 | 10,475 |
| Taxes in respect of previous periods | (535) | (192) |
| Total current tax expense | 6,669 | 10,283 |
| Deferred tax expense | ||
| Origination and reversal of temporary differences | 11,078 | 5,589 |
| Tax losses utilized/(recognized) | (1,419) | (795) |
| Total deferred tax expense | 9,659 | 4,794 |
| Total income tax expense | 16,328 | 15,077 |
| Reconciliation of effective tax rate | ||
| For the year ended 31 December In thousands of Polish Zlotys (PLN) |
2022 | 2021 |
| Profit for the year | 31,351 | 40,347 |
| Total income tax benefit | 16,328 | 15,077 |
| Profit before income tax | 47,679 | 55,424 |
| Expected income tax using the Polish tax rate (19%) | 9,059 | 10,531 |
| Tax effect on: | ||
| Taxes in respect of previous periods | 659 | (192) |
| Non-deductible expenses, net | 3,336 | 1,818 |
| Movement in unrecognized deferred tax assets on loss carry forward in Poland |
- | 119 |
| Movement in unrecognized deferred tax in previous years | - | 127 |
| Tax charge in connection with the organizational | ||
| restructuring of the Group (write off) | 1,322 | 2,603 |
| Impact of JV result | (243) | (1,095) |
| Deferred tax asset write-off on tax losses | 2,500 | 947 |
| Other differences | (305) | 219 |
| Tax expense for the period | 16,328 | 15,077 |
| Effective tax rate | 34.25% | 27.20% |
The effective income tax rate for the year ended 31 December 2022 amounted to 34.25% (27.20% in comparative period). Higher effective tax rate was due to higher non-deductable costs for tax purposes. Which is the result of the polish tax regulation limiting certain type of costs recognition and amounts per year as well as higher tax losses written off which is mainly due to restructuring process in the Group (mergers) done in 2022 and planned for 2023.
| For the year ended 31 December 2022 | Vehicles | Equipment | Building | Total |
|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||||
| Cost or deemed cost | ||||
| Balance at 1 January | 1,277 | 3,444 | 9,161 | 13,882 |
| Additions | 154 | 422 | - | 577 |
| Sales and disposals | - | (679) | - | (679) |
| Closing balance | 1,431 | 3,188 | 9,161 | 13,780 |
| Depreciation and impairment losses | ||||
| Balance at 1 January | 631 | 3,390 | 2,303 | 6,324 |
| Depreciation for the period | 249 | 65 | 267 | 580 |
| Sales and disposals | - | (679) | - | (679) |
| Closing balance | 880 | 2,776 | 2,570 | 6,225 |
| Carrying amounts | ||||
| At 1 January | 646 | 54 | 6,858 | 7,558 |
| Closing balance | 552 | 412 | 6,591 | 7,556 |
| In thousands of Polish Zlotys (PLN) | Vehicles | Equipment | Building | Total |
|---|---|---|---|---|
| Cost or deemed cost | ||||
| Balance at 1 January | 1,030 | 3,444 | 10,105 | 14,579 |
| Rights of use of assets (cars) | 353 | - | - | 353 |
| Transfer to Inventory | - | - | (944) | (944) |
| Sales and disposals | (106) | - | - | (106) |
| Closing balance | 1,277 | 3,444 | 9,161 | 13,882 |
| Depreciation and impairment losses | ||||
| Balance at 1 January | 608 | 2,960 | 2,214 | 5,782 |
| Depreciation for the period | 129 | 430 | 285 | 844 |
| Transfer to Inventory | - | - | (196) | (196) |
| Sales and disposals | (106) | - | - | (106) |
| Closing balance | 631 | 3,390 | 2,303 | 6,324 |
| Carrying amounts | ||||
| At 1 January | 422 | 484 | 7,891 | 8,797 |
| Closing balance | 646 | 54 | 6,858 | 7,558 |
As at 31 December 2022 and 31 December 2021 none of the Property and equipment was secured for bonds issued nor secured bank loans.
In the years ended 31 December 2022 and 31 December 2021, the Group did not recognize any impairment loss with respect to property and equipment.
| For the year ended 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Balance at 1 January | 28,595 | 8,956 |
| Perpetual usufruct (IFRS16) movements | 128 | (8) |
| Purchase of investment property land | 34,113 | 19,944 |
| Change in fair value during the year | 303 | (297) |
| Balance as at 31 December, including: | 63,139 | 28,595 |
| Cost | 57,695 | 23,590 |
| Perpetual usufruct (IFRS16) | 673 | 537 |
| Fair value adjustments | 4,771 | 4,468 |
As at 31 December 2022, the investment property included:
During the period ended 31 December 2022 the Company purchased a land dedicated for PRS business located in Warsaw, Marynin and Wola for the total amount of PLN 33 million.
The investment property consists of a plot of land located in Warsaw (71, Gwiaździsta Street) and an office building with an aggregate usable floor space of 1,318 m2 located on this plot that is leased to third parties under lease agreements with a definite as well as an indefinite term subject to a three-month notice period for termination ("Bielany IP").
The investment property - land comprise of several plots of land located in Warsaw:
At the end of each reporting period, the Management Board conducts an assessment of the fair value of each property, taking into account the most up-to-date appraisals. The Management Board determines the value of the property within the range of reasonable estimates of the fair value. The best evidence to determine the fair value is the current prices of similar properties in an active market.
In the absence of such information, management analyzes information from various sources, including:
All fair value estimates of real estate determined in this way, except for investment land, are included in level 3. In this method, the key input data are prices per square meter of comparable (in terms of location and size) plots in the same region obtained in sales transactions in the current year (Level 2 of the fair value hierarchy). The unobservable input data on the Level 3 was average period of comparable transactions. For the comparison approach the external appraiser used the transactions from the period 2021-2022 to perform the valuation.
The below table presents the impact of the valuation on the profit and loss for the year ended 31 December 2022.
| Investment | Cost as at 31 December 2022 |
Fair value as at 31 December 2022 |
Gain/(loss) on investment property valuation |
|---|---|---|---|
| Galopu | 8,842 | 12,121 | 3,281 |
| Poleczki | 12,077 | 8,903 | (3,174) |
| Auchan/Marynin | 9,257 | 9,325 | 68 |
| Wolska | 23,836 | 23,836 | - |
| Horizon/Gwiaździsta | 8,114 | 8,242 | 128 |
| Total | 62,126 | 62,427 | 303 |
Investment property at Gwiaździsta street (Office building) is valued at fair value determined as at 31 December 2022 by an independent appraiser, having an appropriate recognized professional qualification using the method of discounted cash flows. As at 31 December 2021, the fair value of Investment property was determined by an independent appraiser as well. Below table presents assumptions used for the valuation.
| Location | Name of project |
Segment | Valuation technique |
Total area m2 |
Annual rental revenue (PLN thousands)* |
Discount rate |
Capitalization rate |
Fair value (PLN thousands) |
|---|---|---|---|---|---|---|---|---|
| Warsaw | Horizon | Office building |
income approach |
1,423 | 864.32 | 7.50% | 13.33% | 8,242 |
| Total | 8,242 |
*rental value consists of monthly rate of PLN 50,63 per m2 (based on the valuation report) multiplied by total area.
During the year ended 31 December 2022 and 2021 the rental income from investment property amounted to PLN 618 thousand and PLN 559 thousand, respectively. The investment property is currently occupied. In 2022, direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period amounted to PLN 255 thousands and direct operating expenses (including repairs and maintenance) arising from investment property that did not generate rental income during the period amounted to PLN 131 thousand.
If the yields used for the appraisals of investment property on 31 December 2022, had been 100 basis points higher, the fair value of the investments would have been 11.8% lower. In this situation, the Group's equity would have been PLN 973 thousand lower.
Receivables for minimum lease payments for the rental of investment property are as follows:
| 2022 | 2021 | |
|---|---|---|
| (PLN thousands) | (PLN thousands) | |
| Less than 1 year | 592 | 405 |
| Between 1 and 2 years | 471 | 239 |
| Between 2 and 3 years | 452 | 160 |
| Between 3 and 5 years | 370 | 83 |
| Over 5 years | 287 | 4 |
| Total | 2,170 | 890 |
There are inter-relationships between unobservable inputs. Expected rental fees may impact the net operating income and fair value as well as different time period as well as wages applied to the comparative prices may result in different average price.
The table below summarizes the quantitative information on significant unobservable inputs used in Level 3 of the fair value hierarchy:
| Fair value at | Range of inputs (probability-weighted average) |
|||||
|---|---|---|---|---|---|---|
| Description | 31 December 2022 [PLN thousands] |
31 December 2021 [PLN thousands] |
Unobservable Inputs* |
2022 | 2021 | Relationship of unobservable inputs to fair value |
| Rented | Discount rate | 7.5% | 7% | The higher the discount rate, the lower the fair value |
||
| building | 8,242 | 8,114 | Capitalization rate | 13.33% | 14.29% | The higher the |
| offices | Expected vacancy rate |
10% | 10% | capitalization rate and the expected vacancy rate, the lower the fair value |
* There were no significant inter-relationships between unobservable inputs that materially affect fair values
This approach is used to value investment property for which data on comparable property sale transactions on a given market is available as well as land and residential property.Valuation of these types of property involves an analysis of similar properties which are being sold on the market and for which the characteristics that determine the purchase price and the terms of the transactions are known. Since very few comparable transactions are executed on the market and the prices of such transactions differ widely, the valuation was performed using the pairwise comparison method. The Group uses this approach mainly to value undeveloped properties or developed properties with unspecified use or zoning on which no capital expenditure has been made.
The table below represents the fair value of the investment property land value based on the comparison approach as at 31 December 2022:
| Location | Name of project | Segment | Valuation technique |
Total area m2 |
Avarage price (PLN thousands)* |
Fair value (PLN thousands) |
|---|---|---|---|---|---|---|
| Warsaw | Poleczki | Land | Comparison | |||
| approach | 1,820 | 4.89 | 8,903 | |||
| Warsaw | Galopu | Land | Comparison | |||
| approach | 3,718 | 3.26 | 12,122 | |||
| Warsaw | Marynin | Comparison | ||||
| Land | approach | 5,447 | 1.71 | 9,325 | ||
| Total | 30,351 |
* avarage price for 1m2 of usable area of land
The Wolska land was purchased at close to year end, under market conditions. The Group made an independent assessment and concluded that the transaction price reflects the market value as at 31 December 2022.
| In thousands of Polish Zlotys (PLN) | 2022 | 2021 |
|---|---|---|
| Loans granted | 133 | 319 |
| Share in net equity value of joint ventures | 2,331 | 3,846 |
| The Company's carrying amount of the investment | 2,464 | 4,165 |
| Presented as Loans granted to joint ventures (current assets) | (133) | (319) |
| Investment in joint ventures | 2,331 | 3,846 |
Share of profit/(loss) from joint ventures comprise the Group's shares in four entities where the Group is holding 50% shares and voting rights in each of those entities: Ronson IS Sp. z o.o. and Ronson IS Sp. z o.o. Sp.k. which are running the first two stages of the City Link project, as well as Coralchief Sp. z o.o. and Coralchief Sp. z o.o. – Projekt 1 Sp.k. which are running the Wilanów Tulip project. Both projects are residential sector which is the same as the Group.
The table below present the movements in the share in net equity value of joint ventures:
| In thousands of Polish Zlotys (PLN) | 2022 | 2021 |
|---|---|---|
| Opening balance | 3,846 | (1,693) |
| Net result of joint venture during the period | 1,278 | 5,579 |
| Offsetting net results of the joint venture with intercompany | ||
| interest during the period | 33 | 184 |
| Share of profit of joint ventures | 1,311 | 5,763 |
| Dividend paid | (2,792) | - |
| Closing balance before offsets | 2,364 | 4,070 |
| Cancelling the offset of intercompany interest accrued during | ||
| the period | (33) | (224) |
| Total closing balance of the share in joint ventures' net | ||
| assets | 2,331 | 3,846 |
| Total closing balance of carrying amount of investment | ||
| in joint venture | 2,331 | 3,846 |
Summarised financial information of the joint ventures is presented below:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Current Assets | ||
| Inventory | 1,171 | 14,239 |
| Cash and cash equivalents | 4,372 | 4,441 |
| Other current financial assets | 27 | 1,262 |
| Current Liabilities | ||
| Loans from shareholders | (133) | (631) |
| Advances received | (96) | (5,116) |
| Other liabilities | (679) | (6,504) |
| Equity | 4,663 | 7,691 |
| Company share 50% | 2,331 | 3,846 |
The summarised statement of comprehensive income of the joint ventures in aggregate is as follows:
| For the year ended 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Revenue | 16,896 | 67,639 |
| Cost of sales | (13,081) | (52,315) |
| Gross profit | 3,815 | 15,324 |
| Administrative expenses(1) | (310) | (775) |
| Selling and marketing expenses | (184) | (434) |
| Other income/(cost) | (185) | 114 |
| Finance income | 152 | 5 |
| Finance costs | (75) | (454) |
| Profit before taxation | 3,213 | 13,780 |
| Income tax expense | (657) | (2,622) |
| Profit for the year (continuing operations) | 2,556 | 11,158 |
| Total comprehensive income for the year (continuing operations) | 2,556 | 11,158 |
| The Company's share of profit for the year | 1,278 | 5,579 |
(1) Including management fee to the Group amounting to PLN 720 thousand during the year ended 31 December 2021.
The table below present the movements of the loans granted to the joint ventures.
| In thousands of Polish Zlotys (PLN) | 2022 | 2021 |
|---|---|---|
| Opening balance | 319 | 11,634 |
| Loans granted | - | 117 |
| Loans repaid | (195) | (10,564) |
| Accrued interest | 12 | 377 |
| Interest paid | (4) | (1,244) |
| Total closing balance | 133 | 319 |
As at 31 December 2022 loans granted to joint ventures were presented as short-term assets. The loans granted to joint venture bore fixed interests at the level of 5%.
Deferred tax assets and liabilities as at the beginning and end of the financial periods are attributable to the following:
| Opening | Recognized in the | Closing balance | |
|---|---|---|---|
| balance | statement of | 31 December | |
| In thousands of Polish Zlotys (PLN) | 1 January 2022 | comprehensive income | 2022 |
| Deferred tax assets | |||
| Tax loss carry forward | 4,285 | 1,419 | 5,704 |
| Difference between tax and accounting basis of | |||
| inventory | 20,420 | 13,543 | 33,963 |
| Accrued interest | 1,885 | (785) | 1,100 |
| Accrued expense | 760 | 307 | 1,067 |
| Write-down on work in progress | 2,610 | 25 | 2,635 |
| Fair value loss on investment property | - | 871 | 871 |
| Other | 1,953 | (1,203) | 750 |
| Total deferred tax assets | 31,913 | 14,177 | 46,090 |
| Deferred tax liabilities | |||
| Difference between tax and accounting revenue | |||
| recognition | 27,553 | 21,088 | 48,641 |
| Difference between tax base and carrying value | |||
| of capitalized finance costs on inventory | 7,608 | 1,521 | 9,129 |
| Accrued interest | 635 | (68) | 567 |
| Fair value gain on investment property | 975 | 636 | 1,611 |
| Fair value gain on valuation of "SAFE" | |||
| Agreement | - | 783 | 783 |
| Other | 461 | (123) | 338 |
| Total deferred tax liabilities | 37,232 | 23,836 | 61,068 |
| Total deferred tax benefit (see Note 11) | 9,659 | ||
| Deferred tax assets | 31,913 | 46,090 | |
| Deferred tax liabilities | 37,230 | 61,068 | |
| Offset of deferred tax assets and liabilities for | (23,718) | (37,260) | |
| individual companies | |||
| Deferred tax assets reported in the | |||
| Consolidated Statement of Financial Position | 8,195 | 8,830 | |
| Deferred tax liabilities reported in the | |||
| Consolidated Statement of Financial Position | 13,512 | 23,809 |
| Opening | Recognized in the | ||
|---|---|---|---|
| balance | statement of | Closing balance | |
| 1 January | comprehensive | 31 December | |
| In thousands of Polish Zlotys (PLN) | 2021 | income | 2021 |
| Deferred tax assets | |||
| Tax loss carry forward | 3,491 | 795 | 4,285 |
| Difference between tax and accounting basis of inventory | 16,454 | 3,965 | 20,420 |
| Accrued interest | 3,126 | (1,240) | 1,885 |
| Accrued expense | 719 | 41 | 760 |
| Write-down of inventory and residential land bank | 2,041 | 569 | 2,610 |
| Other | 4,663 | (2,710) | 1,953 |
| Total deferred tax assets | 30,494 | 1,419 | 31,913 |
| Deferred tax liabilities | |||
| Difference between tax and accounting revenue | |||
| recognition | 20,666 | 6,887 | 27,553 |
| Difference between tax base and carrying value of | |||
| capitalized finance costs on inventory | 8,573 | (965) | 7,608 |
| Accrued interest | 166 | 469 | 635 |
| Fair value gain on investment property | 1,031 | (56) | 975 |
| Other | 582 | (121) | 461 |
| Total deferred tax liabilities | 31,018 | 6,213 | 37,231 |
| Total deferred tax benefit (see Note 11) | 4,794 | ||
| Deferred tax assets | 30,494 | 31,913 | |
| Deferred tax liabilities | 31,018 | 37,231 | |
| Offset of deferred tax assets and liabilities for individual | |||
| companies | (21,457) | (23,718) | |
| Deferred tax assets reported in the Consolidated Statement of Financial Position |
9,037 | 8,195 | |
| Deferred tax liabilities reported | |||
| in the Consolidated Statement of Financial Position | 9,562 | 13,513 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax strategies in making this assessment. In order to fully realize the deferred tax asset (before offsetting against deferred tax liability), the Group will need to generate future taxable income of approximately PLN 242,579 thousand. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible. The management believes there is a higher probability that the Group will realize the benefits of these deductible differences. The amount of the deferred tax asset which is considered realizable, could however be reduced in the near term if estimates of future taxable income during the tax loss carry-forward period are reduced.
Tax losses in Poland are required to be utilized within 5 years following the period in which they originated, subject to the limitation that a maximum of 50% of the loss carry-forward can be used in one year. Since 2019 there is allowance of one time up to PLN 5.0 million tax loss utilization in a year and the surplus from this amount is utilized according to the 50% of the tax loss in one year as described above.
| As at 31 December | 2022 | 2021 | ||||
|---|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Recognized tax losses |
Unrecognized tax losses |
Total tax losses |
Recognized tax losses |
Unrecognized tax losses |
Total tax losses |
| Tax loss 2017 carried forward | - | - | - | 1,596 | 4,817 | 6,413 |
| Tax loss 2018 carried forward | 39 | 2,881 | 2,920 | 2,865 | 414 | 3,278 |
| Tax loss 2019 carried forward | 190 | 643 | 833 | 1,642 | 1,375 | 3,017 |
| Tax loss 2020 carried forward | 4,203 | 198 | 4,401 | 3,634 | 2,386 | 6,020 |
| Tax loss 2021 carried forward | 9,474 | 172 | 9,645 | 12,813 | 477 | 13,290 |
| Tax loss 2022 carried forward | 16,115 | 27 | 16,142 | - | - | - |
| Total tax losses carried | ||||||
| forward | 30,021 | 3,921 | 33,942 | 22,550 | 9,469 | 32,019 |
The deferred tax assets on tax losses carried forward expire in the following years as at 31 December 2022:
| 2022 | 2021 | ||||
|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) |
Recognized tax losses |
Unrecognized tax losses |
Recognized tax losses | Unrecognized tax losses |
|
| 2022 | - | - | 303 | 915 | |
| 2023 | 7 | 547 | 544 | 79 | |
| 2024 | 36 | 122 | 312 | 261 | |
| 2025 | 799 | 38 | 691 | 453 | |
| 2026 | 1,800 | 33 | 2,434 | 91 | |
| 2027 | 3,062 | 5 | - | - | |
| Total tax losses carried forward |
5,704 | 745 | 4,284 | 1799 |
Unrecognized deferred tax assets on tax losses carried forward in Poland are presented in the table below:
| In thousands of Polish Zlotys (PLN) |
Balance 1 January 2021 |
Tax losses expired |
Additions/ (Realizations) |
Balance 31 December 2021 |
Tax losses expired |
Additions/ (Realizations) |
Balance 31 December 2022 |
|---|---|---|---|---|---|---|---|
| Tax losses | 746 | (24) | 1,077 | 1,799 | (915) | (138) | 745 |
| Total | 746 | (24) | 1,077 | 1,799 | (915) | (138) | 745 |
A deferred tax asset is recognized only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilized. Unrecognized deferred tax assets relate primarily to tax loss carry-forwards, which are not considered probable of realization prior to their expiration.
The Company did not recognize the entire deferred tax asset at consolidation level resulting from contributions as the recoverability of such assets is uncertain. Total unrecognized deferred tax assets as at 31 December 2022 are estimated to be PLN 50 thousand (31 December 2021: PLN 50 thousand).
| In thousands of Polish Zlotys (PLN) |
As at 1 January 2022 |
Transferred to finished goods |
Additions | As at 31 December 2022 |
|
|---|---|---|---|---|---|
| Land and related | (17,261) | 79,610 | 421,324 | ||
| expense | 358,975 | ||||
| Construction costs | 115,557 | (111,696) | 201,734 | 205,595 | |
| Planning and permits | 17,131 | (3,412) | 8,604 | 22,322 | |
| Borrowing costs (2) | 38,432 | (5,310) | 15,331 | 48,453 | |
| Borrowing costs on | |||||
| lease and depreciation | 3,039 | (350) | 1,234 | 3,923 | |
| perpetual usufruct | |||||
| right (1) | |||||
| Other | 3,647 | (2,263) | 2,371 | 3,755 | |
| Work in progress | 536,780 | (140,293) | 308,884 | 705,372 | |
| In thousands of Polish Zlotys (PLN) |
As at 1 January 2022 |
Transferred from work in progress |
Recognized in the statement of comprehensive income |
As at 31 December 2022 |
|
| Finished goods | 105,681 | 140,293 | (217,915) | 28,059 | |
| As at | Revaluation write-down recognized in statement of comprehensive income |
As at 31 December |
|||
| In thousands of Polish | 1 January 2022 | Increase | Utilization/Reve | 2022 | |
| Zlotys (PLN) | rsal | ||||
| Write-down | (4,118) | - | 1,148 | (2,970) | |
| In thousands of Polish Zlotys (PLN) |
As at 1 January 2022 |
Recalculation adjustment (3) |
Depreciation | Transfer to Other receivables |
As at 31 December 2022 |
| Perpetual usufruct right (2) |
17,199 | 1,447 | (215) | (1,638) | 16,793 |
| Inventory, valued at |
realisable value 655,542 747,254
(1) For additional information see Note 24.
(2) Borrowing costs are capitalized to the value of inventory with 9.912% average effective capitalization interest rate.
(3) Relates to change in the perpetual usufruct payments from 2022
| In thousands of Polish Zlotys (PLN) | As at 1 January 2021 |
Transferred from/to land designated for development |
Transferred to finished goods |
Additions | As at 31 December 2021 |
|---|---|---|---|---|---|
| Land and related expense | 294,430 | 7,240 | (64,281) | 121,585 | 358,975 |
| Construction costs | 194,539 | - | (277,942) | 198,959 | 115,557 |
| Planning and permits | 16,760 | - | (7,403) | 7,774 | 17,131 |
| Borrowing costs (2) Borrowing costs on lease and |
34,844 | 496 | (7,215) | 10,307 | 38,432 |
| deprecation perpetual usefruct right (1) |
2,758 | - | (632) | 913 | 3,039 |
| Other | 3,839 | 30 | (3,618) | 3,396 | 3,647 |
| Work in progress | 547,170 | 7,766 | (361,090) | 342,933 | 536,780 |
| In thousands of Polish Zlotys (PLN) | As at 1 January 2021 |
Transferred from fixed assets |
Transferred from work in progress |
Recognized in the statement of comprehensive income |
As at 31 December 2021 |
|---|---|---|---|---|---|
| Finished goods | 109,419 | 747 | 361,090 | (365,575) | 105,681 |
| Revaluation write-down recognized in statement of comprehensive income |
|||||
|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | As at 1 January 2021 |
Increase | Utilization/Reve rsal |
As at 31 December 2021 |
|
| Write-down | (5,503) | - | - | 1,385 | (4,118) |
| Transfer to | As at | ||||
|---|---|---|---|---|---|
| As at | Recalculation | Other | 31 December | ||
| In thousands of Polish Zlotys (PLN) | 1 January 2021 | adjustment(3) | Depreciation | receivables | 2021 |
| Perpetual usefruct right | 13,675 | 6,379 | (167) | (2,688) | 17,199 |
| Inventory, valued at lower of cost | ||
|---|---|---|
| and net realisable value | 664,761 | 655,542 |
| (1) For additional information see Note 24. |
(2) Borrowing costs are capitalized to the value of inventory with 4.4241% average effective capitalization interest rate.
(3) Relates to change in the perpetual usufruct payments from 2022
Plots of land purchased for development purposes on which construction or planning activities are not planned within a period of three years has been reclassified as Residential landbank presented within Non-current assets. The table below presents the movement in the Residential landbank:
| For the 12 months ended 31 | For the year ended 31 December 2021 | |
|---|---|---|
| In thousands of Polish Zloty (PLN) | December 2022 | |
| Opening balance | 10,041 | 45,486 |
| Sold land | - | (24,976) |
| Moved to inventory | - | (7,766) |
| Purchases during the period | 12.335 | - |
| Write-down adjustment | (1,282) | (2,703) |
| Total closing balance | 21,094 | 10,041 |
| Closing balance includes: | ||
| Costs | 29,681 | 17,301 |
| Write-down | (8,587) | (7,260) |
| Total Closing balance | 21,094 | 10,041 |
In the period ended 31 December 2022 the Company decided to allocate purchased on 29 March 2022 project KEN to the land designated for development in the total amount of PLN 12,187 thousand. The allocation was due to the fact that based on the purchase agreement the current user of the building has the right to evacuate not earlier than the end of 2024, according to the management assessment the process of evacuation is complex and might take even more then 2 years.
In the period ended 31 December 2021 the Company decided to move to Inventory project Vivaldi in the total amount of PLN 7,766 thousand and sold the land from Naturalis project in amount of PLN 24,976 thousand.
The Management internally assessing the net realizable value of the inventory and residential land bank and decrease the value when the net realizable value is lower than the cost amount. In view of the situation in the property market in which the Group operates, during the year ended 31 December 2022 and 31 December 2021 the Group performed an inventory and residential land bank review with regard to its valuation to net realizable value based on the most reliable evidence available to the Group.
For the year ended 31 December 2022, as a result of Net Realizable Value (NRV) analysis and reviews, a writedown adjustment for some of the Group's inventory was reversed in the amount of PLN 2,525 thousand (PLN 1,148 thousand reversal of the impairment recognized in line Inventory, PLN 1,377 thousand reversal of impairment recognized in line Residential land bank), while for some other Company's residential landbank the impairment was made in the amount of PLN 2,659 thousand. The reversal of the impairment was made due to sale realization of the projects with showed in the past negative margin, positive margin on projects, which development started in Q1 2022, as well as increase in selling prices on the projects designated for development where the impairment was recognized in the past. On the other hand the creation of an impairment is a result of higher General Constructor's costs assumed on selected projects. During the year ended 31 December 2021, as a result of Net Realizable Value (NRV) analysis and reviews, the Group reversed a write-down adjustment made during previous periods of PLN 1,685 thousand (PLN 1,385 thousand reversal of the impairment recognized in line Inventory, PLN 300 thousand reversal of impairment recognized in line Residential land bank). On the other hand the Company created a write-down adjustment of PLN 3,052 thousand was made, which is included as part of cost of sales in the Consolidated Statement of Comprehensive Income.
The valuation of inventory and residential land bank is as follows:
| As at 31 December | ||
|---|---|---|
| In thousands of Polish Zlotys (PLN) | 2022 | 2021 |
| Valued at cost | 712,284 | 619,197 |
| Valued at net realizable value | 56,063 | 46,386 |
| Total Inventory and residential land bank | 768,348 | 665,583 |
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Value added tax (VAT) receivables | 39,204 | 31,800 |
| Trade receivables | 1.565 | 1,529 |
| Other receivables | 13,689 | 1,294 |
| Trade and other receivables - IFRS 16 (impact of perpetual usufruct) | 980 | 809 |
| Bid bond | - | 1,437 |
| Notary's deposit | 1,100 | 14,742 |
| Prepayments and contract costs(1) | 9,082 | 6,569 |
| Total trade and other receivables and prepayments | 65,620 | 58,180 |
(1) The capitalized costs relating to obtaining the contracts have been presented in this line and amounted to PLN 1.6 milion for the year ended 31 December 2022 year and PLN 2.4 milion for the year ended 31 December 2021.
During the year ended 31 December 2022 and the year ended 31 December 2021, the Group recognized ECL provision in the amount of PLN 518 thousand and PLN 1,043 thousand respectively as irrecoverable debts included in trade and other receivables.
Notary's deposits represents paid amount for the preliminary purchase agreements of lands. The decrease in balance compared to year-end is a result of final land purchase in Warsaw, Białołęka (PLN 14.7 million) compensated by paid notary deposits for land in Warsaw, Bielany district (PLN 1.1 million). Bid bond balance related to the tender for a potential purchase of land which was cancelled by the court and repaid in Q1 2022.
VAT receivables balance increased by PLN 7.4 million due to continued purchase of lands in the period ended 31 December 2022 (signed preliminary and final purchase agreements), partially compensated by VAT return in the total amount of PLN 19.8 million. The VAT return process takes up to 180 days.
The increase of other receivables due to the movement from advances of land to other receivables (the purchase was not finalized) in the amount of PLN 4.9 million (including VAT) in subsidiary Ronson Development sp. z o.o. - Project 4 sp. k.. Additionally, Ronson Development sp. z o.o.- Project 3 sp.k. submitted a demand for payment of PLN 6.4 million (including VAT) as a refund of part of the deposits paid towards the purchase price of the property at Epopei Street in Warsaw. More information is included in the Note 36 and 37.
As at 31 December 2022 and at the time of preparing the financial statements there are two ongoing tax controls in the companies: Ronson Development Sp. z o.o. - Projekt 3 Sp. k. ("Projekt 3") and Ronson Development Sp. z o.o. - Projekt 6 Sp. k. ("Projekt 6").
On 17 January 2022 Projekt 6 received an authorization to carry out a tax inspection in terms of the accuracy of the declared tax as well as for the correctness of calculating and paying the tax on goods and services for the month August 2021. The amount of VAT audited by the tax authorities amounts to PLN 2.6 mio.
On 3 February 2022, Projekt 3 received an authorization to carry out a tax inspection in terms of the accuracy and correctness of the declared VAT return for the months from February to April 2021. The amount of VAT audited by the tax authority amounts to PLN 2.6 m.
Since 2021, the above mentioned companies have completed purchases of land in Warsaw. The purchase agreements were concluded with group IŁ Capital. As a result the Companies have applied for a VAT refund on the above transactions. Due to the complex purchase transaction the tax control in Projekt 3 has been extended until 8 May 2023 and in Projekt 6 until 17 April 2023.
The table below presents the lists of advances for land paid as at 31 December 2022 and 31 December 2021:
| Investment location | As at 31 December | As at 31 December |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | 2022 | 2021 |
| Warsaw, Białołęka | 1,450 | 7,500 |
| Warsaw, Ursynów | - | 9,000 |
| Warsaw, Ursus | 10,000 | 10,000 |
| Warsaw, Ursynów | 2,100 | 2,100 |
| Warsaw, Ochota | 7,100 | 7,100 |
| Warsaw, Białołęka | - | 3,753 |
| Warsaw, Targówek | - | 4,000 |
| Warsaw, Bemowo | - | 5,000 |
| Total | 20,650 | 48,453 |
For more information about purchase of plots for the year ended 31 December 2022 please refer to Note 36.
Other current financial assets comprise escrow accounts only. The regulations related to the activity of the residential developers imposed on all residential developers in Poland. This is an obligation to open an escrow account for all customers purchasing residential units during the construction period. According to these regulations, all amounts paid by the customers have to be paid directly to the escrow account. The developer is entitled to receive the money only once certain conditions – related mainly to progress of the construction process – are met or upon the transfer of the ownership of the apartment to the customer.
As long as the money is kept in the escrow account, the Company cannot dispose of the cash in any way.
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits freely available for the Group. Cash at bank comprises of overnight deposits, the short-term deposits have an original maturity varying from one day to three months.
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Cash at bank and on hand | 38,199 | 72,597 |
| Short-term deposit | 3,633 | 2,312 |
| Restricted cash | 9,353 | 58,525 |
| Total cash and cash equivalents | 51,185 | 133,434 |
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits have a duration varying between one day and three months depending on the immediate cash requirements of the Group. As at 31 December 2022 and 31 December 20201 the Group held in saving accounts cash amounting to PLN 3,633 thousand and PLN 2,312 thousand, respectively. As at 31 December 2022 and 31 December 2021 the saving accounts that earn interest rates varying between 2% - 5.75% and 0.35% - 0.40% respectively.
Restricted cash are pledge to the benefit of banks for securing construction loans.
For information about the fair value of cash and cash equivalents see Note 28.
The share capital of the Company amounts to three million two hundred and eighty thousand two hundred and sixteen euros and twenty-six cents (€3,280,216.26) and is divided into one hundred and sixty-four million ten thousand eight hundred and thirteen (164,010,813) shares with a par value of two eurocents (0. €02) each. The share capital of the Company was fully covered. The number of issued ordinary shares as at December 31, 2022 and as at December 31, 2021 amounted to 164,010,813. All shares are bearer shares. The number of outstanding shares equals the number of votes, as there are no privileged shares issued by the Company. As at 31 December 2022 and 2021, the Company held 1,567,954 own shares (0.96%) in treasury (see below) and, in accordance with art. 364 § 2 of the Code of Commercial Companies, it does not exercise voting rights from own shares.
The entire net profit for 2021 in the amount of PLN 40,346 thousand was allocated to the Company's retained earnings.
Until the date of approval of the financial statements for publication, the Management Board of Ronson Development SE has not adopted a resolution on the proposed distribution of net profit for 2022.
During the Extraordinary General Meeting of Shareholders held on 24 January 2019, the shareholders of the Company decided to approve a share buyback program and the establishment of a capital reserve for the purpose of such program, whereby the Management Board of the Company is authorized to purchase ordinary bearer shares in the Company. In order to fund the purchase of own shares under the buyback program a capital reserve (within retained earnings) is established for an amount of PLN 2.0 million. The capital reserve is subsequently reduced by the amount of the consideration paid for the shares bought back.
Then, on June 30, 2020, the Ordinary General Meeting of the Company adopted a resolution on the adoption of another share buyback program, under which the Management Board of the Company, on July 1, 2020, defined the detailed conditions for the purchase of the Company's own shares, which were also approved by the Supervisory Board of the Company. The maximum amount for the purchase of all shares under the second program was set at PLN 1,369,761.99 (one million three hundred and sixty-nine thousand seven hundred and sixty-one zlotys 99/100).
Currently, due to the fact that the Company is no longer a public company, and all the Company's shares are held directly or indirectly by A. Luzon Group, continuation of the above-mentioned program became irrelevant.
The table below presents the Treasury shares owned by the Company as at 31 December 2022 and 31 December 2021:
| For the 12 months ended 31 December 2022 |
For the 12 months ended 31 December 2021 |
|
|---|---|---|
| Number of shares | 164,010,813 | 164,010,813 |
| Share Capital | 12,503,000 | 12,503,000 |
| Treasury shares | 1,567,954 | 1,567,954 |
| Value of treasury shares | (1,731,716) | (1,731,716) |
| % of total shares | 0.96% | 0.96% |
Basic earnings per share amounts are calculated by dividing net profit/(loss) attributable to equity holders of the parent company for the year by the weighted average number of ordinary shares outstanding and in circulation during the year. Diluted earnings per share amounts are calculated by dividing the net profit/(loss) attributable to equity holders of the parent company for the year by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive instruments into ordinary shares, no such instruments exists as at 31 December 2022 and 2021.
| For the year ended 31 December | 2022 | 2021 |
|---|---|---|
| (in thousands of Polish Zlotys) | ||
| Net income attributable to the equity holders of the | ||
| parent company | 31,351 | 40,347 |
| Balance at beginning of the period | 162,442,859 | 162,521,578 |
| Weighted average per share during the year | - | (76,503) |
| Weighted average number of ordinary | ||
| shares (basic and diluted) | 162,442,859 | 162,445,075 |
| Basic and diluted earnings per share | 0.193 | 0.248 |
The Group's financial liabilities as at 31 December 2022 and 31 December 2021 included bonds and secured bank loans:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Floating rate bonds | 203,370 | 249,238 |
| Secured bank loans | 16,297 | 1,568 |
| Total loans and borrowings | 219,667 | 250,806 |
Information about the contractual terms of the Group's interest-bearing loans and borrowings is presented in the table below. For more information about the Group's exposure to interest rate, see Note 32.
The table below presents the movements in bond loans during the year ended 31 December 2022 and during the year ended 31 December 2021 as well as the Current and Non-currents balances as at the end of respective periods:
| As at 31 December | 2021 | ||
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | 2022 | ||
| Opening balance | 249,238 | 230,072 | |
| Repayment of bond loans | (50,000) | (77,929) | |
| Remission of bonds | - | (2,247) | |
| Proceeds from bond loans (nominal value) | - | 100,000 | |
| Issue cost paid | - | (2,648) | |
| Issue cost amortization | 1,349 | 1,576 | |
| Accrued interest | 18,086 | 10,775 | |
| Interest repayment | (15,303) | (10,362) | |
| Total closing balance | 203,370 | 249,238 | |
| Closing balance includes: | |||
| Current liabilities | 45,260 | 52,247 | |
| Non-current liabilities | 158,110 | 196,991 | |
| Total Closing balance | 203,370 | 249,238 |
On 9 May 2022 the Company fully repaid series T bonds including accrued interest in a total amount of PLN 51.1 million. After these repayments series T bonds amounted to nil.
| In thousands of Polish Zlotys (PLN) | Currency | Nominal interest rate |
Year of maturity |
Capital | Accrued interest |
Charges and fees |
Carrying value |
|---|---|---|---|---|---|---|---|
| Bonds loans series V(1) | PLN | 6 month Wibor + 4.30% |
2024 | 100,000 | 2,865 | (817) | 102,049 |
| Bonds loans series W(2) | PLN | 6 month Wibor + 4.00% |
2025 | 100,000 | 2,394 | (1,073) | 101,321 |
| Total | 200,000 | 5,260 | (1,890) | 203,370 |
1)The series V bonds are subject to repayment in 2 tranches 40% (PLN 40 million) of the amount together with accumulated interest to be repaid by October 2023) and the remaining amount of 60% (PLN 60 million) together with accumulated interest to be paid by April 2024.
2)The series W bonds are subject to repayment in 2 tranches 40% (PLN 40 million) of the amount together with accumulated interest to be repaid by October 2024 and the remaining amount of 60% (PLN 60 million) together with accumulated interest to be paid by April 2025.
| In thousands of Polish Zlotys (PLN) | Currency | Nominal interest rate | Year of maturity |
Capital | Accrued interest |
Charges and fees |
Carrying value |
|---|---|---|---|---|---|---|---|
| Bonds loans series T | PLN | 6 month Wibor + 3.50% |
2022 | 50,000 | 332 | (230) | 50,102 |
| Bonds loans series V(1) | PLN | 6 month Wibor + 4.30% |
2024 | 100,000 | 1,136 | (1,467) | 99,669 |
| Bonds loans series W(2) | PLN | 6 month Wibor + 4.00% |
2025 | 100,000 | 1,009 | (1,542) | 99,466 |
| Total | 250,000 | 2,477 | (3,239) | 249,238 |
1) The series V bonds are subject to repayment in 2 tranches 40% (PLN 40 million) of the amount together with accumulated interest to be repaid by October 2023 and the remaining amount of 60% (PLN 60 million) together with accumulated interest to be paid by April 2024.
2) The series W bonds are subject to repayment in 2 tranches 40% (PLN 40 million) of the amount together with accumulated interest to be repaid by October 2024 and the remaining amount of 60% (PLN 60 million) together with accumulated interest to be paid by April 2025.
Based on the conditions of bonds V and W in each reporting period the Company shall test the ratio of Net debt to Equity (hereinafter "Net Indebtedness Ratio"). The Ratio shall not exceed 80% on the Check Date.
Until the publication date, as at 31 December 2022 and as at 31 December 2021 the Company did not breach any bonds loan covenants, which would expose the Company or the Group for risk of obligatory and immediate repayment of any loan.
The table presenting the Net Indebtedness Ratio as at 31 December 2022 and 31 December 2021:
| As at | As at | |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | 31 December 2022 | 31 December 2021 |
| Loans and borrowings | 203,370 | 249,238 |
| Secured bank loans | 16,297 | 1,568 |
| Financial liability measured at FVPL | 70,506 | - |
| IFRS 16 – Lease liabilities related to cars | 363 | 292 |
| Less: cash on individual escrow accounts (other current financial assets) |
(11,217) | (8,794) |
| Less: Cash and cash equivalents | (51,185) | (133,434) |
| Net Debt | 228,134 | 108,870 |
| Equity | 451,396 | 420,045 |
| Ratio | 50.50% | 25.90% |
| Max Ratio | 80.00% | 80.00% |
Based on the conditions of bonds V and W transactions with related-parties (shareholders holding more than 25% of the shares in the Group "within the meaning of IAS 24 or with related parties "including with entities controlling the Group whether jointly or individually, whether directly or indirectly or with their subsidiaries which are not members of the Group) shall not exceed the aggregate amount of PLN 1.0 million during any given calendar year.
During the year ended 31 December 2022 and year ended 31 December 2021, the consulting fees related to A. Luzon Group amounted to PLN 900 thousand and PLN 862 thousand respectively.
Terms and conditions of issuance of Bonds of the Group ("T&C's") provide that only certain, specified types of financial indebtedness should be taken into account when determining the level of financial indebtedness for the purpose of calculating financial ratios in accordance with T&C's. In particular, certain T&C's require that financial indebtedness resulting from finance lease agreements (in Polish: umowy leasingu finansowego) should be included in calculation of the financial indebtedness. Those T&C's do not provide that the indebtedness resulting from finance lease agreements shall also include other financial indebtedness which is recognized as lease liability in accordance with IFRS 16.
Given the above, and taking into the account the type of activities carried out by the Group, despite changes in the IFRS in this respect, the Group concluded that inclusion of other type of financial indebtedness, in particular liabilities from annual fees for perpetual usufruct, for the purposes of calculations of financial ratios would not be in line with T&C's and therefore the Group does not include such finance lease alike items in such calculations.
For additional information about IFRS 16 see Note 24.
The table below presents the movement in Secured bank loans:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Opening balance | 1,568 | - |
| New bank loan drawdown | 97,934 | 20,032 |
| Bank loans repayments | (83,205) | (18,497) |
| Bank charges paid | (2,150) | (809) |
| Bank charges presented as prepayments | 1,273 | 571 |
| Bank charges amortization (capitalized on Inventory) | 876 | 238 |
| Accrued interest/(interest repayment) on bank loans, net | - | 33 |
| Total closing balance | 16,297 | 1,568 |
| Closing balance includes: | ||
| Current liabilities | 16,297 | 1,568 |
| Non-current liabilities | - | - |
| Total Closing balance | 16,297 | 1,568 |
| Investment | Currency | Nominal interest rate | Year of maturity |
Credit line amount in (PLN thousand) |
Unpaid amount as at 31 December 2022 (PLN thousand) |
Balance as at 31 December 2022 (PLN thousand) |
|---|---|---|---|---|---|---|
| Grunwaldzka | PLN | Wibor 3M + 2.90% | 2025 | 20,880 | 11 | 11 |
| Miasto Moje VI | PLN | Wibor 3M + 2.50% | 2023 | 59,600 | 11,755 | 11,755 |
| Ursus IIC | PLN | Wibor 3M + 2.50% | 2023 | 61,900 | - | - |
| Nowe Warzymice IV | PLN | Wibor 3M + 2.20% | 2023 | 20,000 | 2,604 | 2,604 |
| Viva Jagodno IIB | PLN | Wibor 3M + 2.20% | 2023 | 38,850 | 1,928 | 1,928 |
| Total | 201,230 | 16,297 | 16,297 |
As at 31 December 2022 there were no accrued interest.
| Investment | Currency | Nominal interest rate |
Year of maturity |
Credit line amount in (PLN thousand) |
Unpaid amount as at 31 December 2021 (PLN thousand) |
Accrued interest (PLN thousand) |
Balance as at 31 December 2021 (PLN thousand) |
|---|---|---|---|---|---|---|---|
| Ursus IB | PLN | Wibor 3M + 3.00% | 2023 | 26,700 | 639 | 10 | 649 |
| Miasto Moje V | PLN | Wibor 3M + 3.00% | 2023 | 35,300 | 449 | 12 | 461 |
| Nowe Warzymice II | PLN | Wibor 3M + 2.70% | 2022 | 15,300 | 446 | 12 | 458 |
| Grunwaldzka | PLN | Wibor 3M + 2.90% | 2025 | 20,880 | - | - | - |
| Total | 98,180 | 1,534 | 34 | 1,568 |
On 28 January 2022 the Group signed agreement for bank loan for Miasto Moje VI in amount up to PLN 59.6 million. On 11 April 2022 the Group signed agreement for bank loan for Ursus Centralny IIc up to PLN 61.9 million. On 15 July 2022 Group signed two bank loan agreements for Nowe Warzymice IV (up to PLN 20 million) and for Viva Jagodno IIB (up to PLN 38.9 million). For additional information about unutilized credit loans see Note 30.
The bank loans are presented as short-term due to the fact that those are the credit lines used by the Group and repaid during normal course of business (up to 12 months).
All credit bank loans are secured.
As at 31 December 2022 and 2021, the Group has not breached any loan covenant, which would expose the Group for risk of obligatory and immediate repayment of any loan.
The movement on the right of use assets and lease liabilities during the period ended 31 December 2022 and 31 December 2021 is presented below:
| In thousands of Polish Zlotys (PLN) |
1 January 2022 |
Acquisitions | Depreciation charge |
Fair value adjustment |
Recalculation adjustment (1) |
Transfer to trade receivables |
31 December 2022 |
|---|---|---|---|---|---|---|---|
| Right of use assets related to inventory |
17,199 | 1,674 | (215) | - | (227) | (1,638) | 16,793 |
| Right of use assets related to investment property |
545 | - | (10) | - | 138 | - | 673 |
| Right of use assets related to fixed assets |
296 | 154 | (86) | - | - | - | 364 |
| In thousands of Polish Zlotys (PLN) |
1 January 2022 |
Acquisitions | Finance expense |
Payments | Recalculation adjustment (1) |
Transfer to trade payables |
31 December 2022 |
|---|---|---|---|---|---|---|---|
| Lease liabilities related to inventory |
17,231 | 1,674 | 1,049 | (1,162) | (265) | (1,639) | 16,888 |
| Lease liabilities related to fixed assets |
292 | 142 | - | - | - | - | 434 |
| Lease liabilities related to investment property |
553 | - | 34 | (45) | 121 | - | 663 |
(1) Relates to change in the perpetual usufruct payments from 2022
| In thousands of Polish Zlotys (PLN) |
1 January 2021 |
Additions | Depreciati on charge |
Fair value adjustment |
Recalculation adjustment (1) |
Transfer to trade receivables |
31 December 2021 |
|---|---|---|---|---|---|---|---|
| Right of use assets related to inventory |
13,675 | - | (167) | - | 6,379 | (2,688) | 17,199 |
| Right of use assets related to investment property |
553 | - | (8) | - | - | - | 545 |
| Right of use assets related to fixed assets |
- | 353 | (57) | - | - | - | 296 |
| In thousands of Polish Zlotys (PLN) |
1 January 2021 |
Additions | Finance expense |
Payments | Recalculation adjustment (1) |
Transfer to trade payables |
31 December 2021 |
|---|---|---|---|---|---|---|---|
| Lease liabilities related to inventory |
13,902 | - | 746 | (903) | 6,204 | (2,718) | 17,231 |
| Lease liabilities related to fixed assets |
- | 292 | - | - | - | - | 292 |
| Lease liabilities related to investment property |
590 | - | - | (37) | - | - | 553 |
On 30 January 2022 and 22 February 2022, the Group and Amos Luzon Development and Energy Group Ltd., the Group's controlling shareholder, concluded SAFE agreements ("SAFE") with Sphera Master Fund L.P, More Provident Funds Ltd., Sphera Small Cap Fund L.P, EJS Galatee Holdings and Klirmark Opportunity Fund III L.P (the "Investors") raising a total of ILS 60 million (the "SAFE Amount") which for the date of transaction amounted to PLN 74.6 million. All the needed conditions have been completed and the full agreement amount has been transferred to Ronson until 31 December 2022.
The above agreements grant the Investors certain rights applicable after the Group is delisted from the regulated market of the Warsaw Stock Exchange, including the right to subscribe for instruments convertible into shares in the Group, as well as the right to convert their respective investments into shares or bonds in A. Luzon Group.
The above agreements do not impose any restrictive covenants or onerous undertakings on the part of the Group as well as it does not bear any interest. The respective instrument should be classified as a financial liability because it includes the obligation to deliver cash to investors in the event of change of control and it includes a conversion option that does not meet the fixed-for-fixed criteria. The Group designated the financial liability as measured at FVPL entirely, on initial recognition. No amount was recognized through the other comprehensive income.
As at 31 December 2022 the fair value of the SAFE is ILS 56,418 thousand (PLN 70,506 thousand) based on the arm's-length transactions made as of the valuation date. The profit in fair value valuation in the amount of PLN 4,121 thousand has been recognized in profit and loss. The liability is due in August 2023, with the possibility for the investors to decide about the extension for the next 12 months.
The below table presents the payments made by the investors and the valuation of the liability as at the transaction date and as at 31 December 2022:
| 103,629 |
|---|
| 1,808,557 |
| 137,418 |
| 1,030,185 |
| 1,040,931 |
| 4,120,721 |
The valuations of the SAFE was performed by external advisors Prometheus Financial Advisory, which specilizes in financial accounting and complex financial instruments. The valuation of the instrument was determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practise Aid, Valuation of Privately-Held-Group Equity Securities Issued as Compensation, (the "AICPA Practice Aid") and according to the principles of valuation of equity securities of private companies issued as part of compensation. The assumptions used in the valuation model are based on the future expectations combined with the Group's management judgement. Numerous objective and subjective factors to determine the fair value of the ordinary shares as of the date of each option grant, including the factors:
a) the prices, rights, preferences and privileges of the preferred shares;
b) current business and market conditions and projections;
c) the Group's stage of development;
d) the likelihood of a liquidity event for the ordinary shares underlying these options, such as an initial public offering or sale of the Group, given prevailing market conditions.
For valuation purposes, each SAFE agreement has two components: equity (assuming a public offering of the Company's shares in Israel and a listing of the Company's shares on the Tel Aviv Stock Exchange (collectively "IPO")) and debt. As of the valuation date, i.e. December 31, 2022, the Company's Management Board estimates that the probability of an IPO has decreased to 0%, due to significant formal complications, particularly (the obligation to pay taxes for capital gains; the obligation to pay taxes on dividend distribution; the registration for tax purposes in Poland and to have taxpayer number; the obligation to report on tax incomes on a yearly basis) tax complications for potential shareholders acquiring the Company's shares on the Tel Aviv Stock Exchange.
Based on the above, Group's management does not anticipate an IPO on the Israeli Stock Exchange before finding possible solutions to these problems. Therefore, valuation was focused on the valuation of the debt component only.
In order to valuate the fair value of the SAFE, the loss of the investors was valuated resulting from the fact that they were promised bonds with a YTM of 3% (Yield to Maturity), while the YTM of Luzon bond (Series 10) in the market is 6.54%.
In order to estimate the fair value of the SAFE, the investors' loss was reduced from the original SAFE Amount.
The following table summarizes the quantitative information about the significant unobservable inputs used in level 3 fair value measurements:
| Fair Value as at | Range of input (probability weighted average) |
||||||
|---|---|---|---|---|---|---|---|
| Description | 31 December 2022 [PLN thousands] |
31 December 2021 [PLN thousands] |
Unobservable input |
2022 | 2021 | Relationship of unobservable inputs to fair value |
|
| Financial liability measured at FVPL (SAFE agreements) |
70,506 | - | YTM( Yield to Maturity) discount rate |
3%-6.54% | - | A shift of the YMT rate by +1% results in a lower value of 1,168 thousands PLN A shift of the YMT rate by -1% results in a higher in value of 1,217 thousands PLN (2021: change in default rate by +/- 1% changed FV by PLN('000) 0) |
| As at 31 December | 2022 | 2021 | |
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | |||
| Trade payables | 22,681 | 22,909 | |
| Trade payable related to purchase of land(1) | 23,450 | - | |
| Accrued expenses | 24,020 | 25,121 | |
| Guarantees for construction work | 1,472 | 8,007 | |
| Value added tax (VAT) and other tax payables | 1,778 | 2,061 | |
| Non-trade payables | 674 | 2,165 | |
| Other trade payables - IFRS 16 | 981 | 823 | |
| Total trade and other payables and accrued expenses | 75,055 | 61,086 |
(1) the balance relates to land purchase transaction held on 19 September 2022 in which the Group via it subsidiary signed final agreement for the purchase of the land on Wolska Street Warsaw, the payment is deffered to 31 March 2023.
Trade and non-trade payables are non-interest bearing and are normally settled on 30-day terms.
Payments from customers on account of the purchase of apartments and parking spaces are recorded as deferred income until the time that they are delivered to the buyer and are recognized in the income statement as "sales revenue". This balance sheet item is closely dependent over time on the relationship between the sales rate (which as it increases, increases this item) and the deliveries rate (which as it decreases, decreases this item).
| In thousands of Polish Zlotys (PLN) | As at 31 December 2022 |
As at 31 December 2021 |
|---|---|---|
| Deferred income related to the payments received from customers for the purchase of products, not yet included as income in the income statement |
||
| Opening balance | 198,047 | 219,645 |
| - increase (advances received) | 242,123 | 436,801 |
| - decrease (revenue recognized) | (300,258) | (458,399) |
| Total advances received | 139,911 | 198,047 |
| Other (deferred income)* | - | 180 |
| Total | 139,911 | 198,227 |
* deferred income due to issued invoices for delivered apartments but not fully paid as at 31 December 2021.
Additional information regarding receivables which are a result of signed agreements with the clients, please see Note 30.
27
Revenues from contracts will be recognized at the time of handover the apartment to the client, completion of construction process and obtaining all necessary administrative decisions (occupancy permit), which usually takes from 1 to 6 months from the completion of construction stage.
The fair values of financial assets and liabilities, together with the carrying amounts shown in the Consolidated Statement of Financial Position, are as follows:
| In thousands of Polish Zlotys (PLN) | Category | Note | As at 31 December 2022 | |
|---|---|---|---|---|
| Carrying amount |
Fair value | |||
| Assets: | ||||
| Trade and other receivables | Assets measured at amortized costs | 17 | 15,254 | 15,254 |
| Other current financial assets Cash and cash equivalents |
Assets measured at amortized costs Assets measured at amortized costs |
19 20 |
11,217 51,185 |
11,217 51,185 |
| Loans granted to others | Assets measured at amortized costs | 1,717 | 1,717 | |
| Loans granted to joint ventures | Assets measured at amortized costs | 14 | 133 | 133 |
| Liabilities: | ||||
| Bond loans | Liabilities measured at amortized costs | 23 | 203,370 | 184,680 |
| Secured bank loans | Liabilities measured at amortized costs | 23 | 16,297 | 15,221 |
| Trade and other payables and accrued expenses |
Liabilities measured at amortized costs | 26 | 70,150 | 70,150 |
| Unrecognized profit/(loss) | 19,765 |
| In thousands of Polish Zlotys (PLN) | Category | Note | As at 31 December 2021 | ||
|---|---|---|---|---|---|
| Carrying amount | Fair value | ||||
| Assets: | |||||
| Trade and other receivables | Assets measured at amortized costs | 17 | 2,824 | 2,824 | |
| Other current financial assets | Assets measured at amortized costs | 19 | 8,794 | 8,794 | |
| Cash and cash equivalents | Assets measured at amortized costs | 20 | 133,434 | 133,434 | |
| Loans granted to others | Assets measured at amortized costs | 1,621 | 1,621 | ||
| Loans granted to joint ventures | Assets measured at amortized costs | 14 | 319 | 319 | |
| Liabilities: | |||||
| Bond loans | Liabilities measured at amortized costs | 23 | 249,238 | 235,603 | |
| Secured bank loans | Liabilities measured at amortized costs | 23 | 1,568 | 1,554 | |
| Trade and other payables and accrued expenses |
Liabilities measured at amortized costs | 26 | 48,030 | 48,030 | |
| Unrecognized profit/(loss) | 13,648 |
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
The interest rates used to discount estimated cash flows (PLN denominated), where applicable, are based on WIBOR plus margin as at 31 December 2022 and 31 December 2021 and are as follows:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| Secured bank loans | 9.22%-10.04% | 5.4-6.8% |
| Loans granted | 5-6% | 4.23%-6% |
The table below provides the fair value measurement hierarchy of the Group's assets and liabilities:
| Fair value measurement using: | |||||
|---|---|---|---|---|---|
| Date of | Quoted prices in active markets |
Significant observable inputs |
Significant unobservable inputs |
||
| In thousands of Polish Zlotys (PLN) | valuation | (Level 1) | (Level 2) | (Level 3) | |
| Assets measured at fair value: Investment property |
31-Dec-22 | - | 54,897 | 8,242 | |
| Liabilities for which fair values are disclosed: | |||||
| Financial liability measured at FVPL | 31-Dec-22 | - | - | 70,506 |
| Fair value measurement using: | |||||
|---|---|---|---|---|---|
| Date of | Quoted prices in active markets |
Significant observable inputs |
Significant unobservable inputs |
||
| In thousands of Polish Zlotys (PLN) | valuation | (Level 1) | (Level 2) | (Level 3) | |
| Assets measured at fair value: | |||||
| Investment property | 31-Dec-21 | - | 19,944 | 8,114 |
The amounts in the table below present uncharged investment commitments of the Group in respect of construction services to be rendered by the general contractors:
| Commitments | ||||
|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Contracted amount as at 31 December 2022 |
As at 31 December 2022 |
Contracted amount as at 31 December 2021 |
As at 31 December 2021 |
| Karmar S.A. | 142,891 | 41,143 | 167,567 | 129,300 |
| Hochtief Polska S.A. | 51,380 | 1,819 | 50,242 | 34,792 |
| Danya Cebus Poland Sp. z o.o. | - | - | 58,547 | 18,759 |
| TechBau Budownictwo Sp. z o.o. | 19,150 | 9,610 | - | - |
| EBUD - Przemysłówka Sp. z o.o. | 44,161 | 28,286 | 25,155 | 11,087 |
| Leancon Sp. z o.o. | 32,500 | 24,073 | - | - |
| W.P.I.P. - Mardom Sp. z o.o. | 36,600 | 35,357 | - | - |
| Totalbud S.A. | - | - | 27,305 | 27,305 |
| Total | 326,683 | 140,288 | 328,816 | 221,243 |
The table below presents the list of the construction loan facilities, which the Group arranged for in conjunction with entering into loan agreements with the banks in order to secure financing of the construction and other costs of the ongoing projects. The amounts presented in the table below include the unutilized part of the construction loans available to the Company/Group:
| As at 31 | As at 31 | |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | December 2022 | December 2021 |
| Miasto Moje V | - | 29,791 |
| Miasto Moje VI | 16,242 | - |
| Ursus Centralny Ib | - | 19,158 |
| Ursus Centralny IIc | 61,900 | - |
| Nowe Warzymice II | - | 8,370 |
| Grunwaldzka | 10,884 | 20,880 |
| Viva Jagodno IIb | 17,846 | - |
| Nowe Warzymice IV | 12,757 | - |
| Total | 119,630 | 78,199 |
The table below presents whole consideration to be received from the customers having bought apartments from the Group and which are based on the value of the sale and purchase agreements signed with the clients until 31 December 2022 (including the payments received and unsatisfied obligation for payments at 31 December 2022 and 31 December 2021) and not yet delivered to clients:
| As at 31 December 2022 | As at 31 December 2021 | |||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) |
Date of project completion |
Total value of preliminary sales agreements signed with clients |
Advances received from Clients as of 31 December 2022 |
Contracted payments not received yet as at 31 December 2022 |
Total value of preliminary sales agreements signed with clients |
Advances received from Clients until 31 December 2021 |
Contracted payments not received yet as at 31 December 2021 |
|
| Ursus Centralny IIa | Q4 2021 | - | - | - | 80,911 | 75,349 | 5,562 | |
| Ursus Centralny IIb | Q2 2023 | 82,039 | 57,579 | 24,460 | 64,510 | 18,367 | 46,143 | |
| Ursus Centralny Ib | Q3 2022 | - | 38 | (38) | 41,720 | 23,438 | 18,282 | |
| Ursus Centralny IIc | Q2 2023 | 34,565 | 12,856 | 21,709 | 1,521 | - | 1,521 | |
| Ursus Centralny IIe | Q2 2025 | 1,550 | 126 | 1,423 | - | - | - | |
| Miasto Moje IV | Q4 2021 | 1,492 | 500 | 993 | 15,571 | 15,330 | 241 | |
| Miasto Moje V | Q3 2022 | 2,526 | 1,539 | 987 | 57,945 | 30,701 | 27,244 | |
| Miasto Moje VI | Q1 2023 | 50,367 | 28,080 | 22,286 | 16,803 | 2,280 | 14,523 | |
| Miasto Moje VII | Q4 2024 | 569 | 61 | 508 | - | - | - | |
| Viva Jagodno IIa | Q4 2022 | 2,087 | 1,706 | 381 | 18,302 | 3,257 | 15,045 | |
| Viva Jagodno IIb | Q3 2023 | 26,461 | 10,364 | 16,098 | - | - | - | |
| Viva Jagodno III | Q4 2024 | 923 | 92 | 831 | - | - | - | |
| Panoramika VI | Q4 2021 | - | - | - | 7,464 | 6,914 | 549 | |
| Panoramika V | Q3 2020 | - | - | - | 1,104 | 513 | 591 | |
| Nowe Warzymice II | Q2 2022 | - | 6 | (6) | 20,859 | 10,193 | 10,666 | |
| Nowe Warzymice III | Q3 2022 | 612 | 61 | 551 | 18,547 | 3,828 | 14,719 | |
| Nowe Warzymice IV | Q2 2023 | 12,072 | 3,906 | 8,167 | - | - | - | |
| Nowa Północ Ia | Q4 2023 | 4,022 | 694 | 3,328 | - | - | - | |
| Osiedle Vola | Q4 2023 | 10,366 | 2,511 | 7,854 | - | - | - | |
| Eko Falenty I | Q3 2023 | 3,833 | 798 | 3,034 | - | - | - | |
| Między Drzewami | Q3 2024 | 10,610 | 1,933 | 8,677 | - | - | - | |
| Totton 3c | Q2 2021 | - | - | - | 1,401 | 1,415 | (15) | |
| Truro 3a | Q2 2021 | - | - | - | 3,325 | 332 | 2,992 | |
| Grunwaldzka | Q2 2023 | 21,014 | 14,499 | 6,514 | 12,636 | 2,579 | 10,057 | |
| Other (old) projects | 3,708 | 2,561 | 1,147 | 6,529 | 3,549 | 2,980 | ||
| Total (excluding JV) | 268,814 | 139,911 | 128,903 | 369,148 | 198,047 | 171,101 | ||
| Wilanów Tulip | Q3 2021 | 759 | 101 | 658 | 8,833 | 5,023 | 3,810 | |
| TOTAL | 269,574 | 140,012 | 129,561 | 377,981 | 203,069 | 174,911 |
*from the completion date the assumed recognition of the advances as revenue is between 3-6 months
On 19 November 2021, the State Treasury (Skarb Państwa) – President of the Capital City of Warsaw notified Ronson Development Sp. z o.o. – Ursus Centralny Sp. k. (subsidiary, "the Company") on the termination of the annual fee for perpetual usufruct of land owned by the State Treasury, located in Warsaw at 6 and 6A Taylor st. The Company received a decision to pay the annual fee in the new amount from 1 January 2022, i.e .:
The Management Board of the Company submitted an application to the Local Government Boards of Appeal in Warsaw for a determination that the increase in the fee for perpetual usufruct was unjustified. The Group treats it as the contingent liability.
On 7 April 2022, the Local Government Boards of Appeal in Warsaw received a letter from the State Treasury – the President of the Capital City of Warsaw, which showed that there was no possibility of reaching a settlement in the above case.
On 1 July 2022 the Company received a judgment of 25 May 2022 from the Local Government Boards of Appeal dismissing the company's application. Therefore, on 13 July 2022, the Company submitted a letter to the District Court in Warsaw. In the opinion of the Company's Management the judgment of the Local Government Boards of Appeal is defective and cannot stand, and objection is justified and necessary.
The resolution of this case is not expected in 2022 nor in 2023 and as a result any assesment of the outcome of this case can not be reliable enough at this stage. In case of a loss in the court, the result would affect the value of the right of use assets related to inventory and the lease liabilities for perpetual usufruct right related to inventory.
On 3 February 2023, in the case against Ronson Development Sp. z o. o. – Estate Sp. k., a subsidiary of the Company which ran the Galileo development project (the "Galileo Company"), a judgment was issued obliging the Galileo Company to pay the plaintiff (the buyer of the premises in this project) the amount of PLN 80,000 with statutory interest from the date of filing the lawsuit (May 28, 2013) as a reduction in the price of the premises due to its defects. The judgment was issued by the court of second instance and is final and enforceable. Galileo is a defendant in 10 similar cases that are being considered by the court of first instance. In connection with the above judgment, the Company decided to create a provision for other similar cases in the total amount of PLN 2.1 million.
At the same time, Galileo is the plaintiff in the case against Eiffage Polska Budownictwo S.A. the general contractor of the Galileo development project ("Eiffage"), its insurer and other entities involved in the implementation of the investment and their insurers, the subject of which is recognition of the liability of Eiffage and others for damage to the Galileo Company related to the improper implementation of this project and compensation. In addition, Galileo has already obtained partial compensation from the insurers of some entities involved in the implementation of the Galileo project.
The Company enters into various transactions with its subsidiaries and with its directors and executive officers. For a list of subsidiaries reference is made to Note 1.
Outstanding balances with related parties as at 31 December 2022 and as at 31 December 2021 are unsecured and settlement is made in the ordinary course of business The Group did not record any impairment of receivables relating to amounts owed by related parties in either year. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. All transactions with related parties were performed based on market conditions.
During the year ended 31 December 2017, the subsidiary of the Company entered into a consulting agreement with its major (indirect) shareholder, A. Luzon Group for total monthly amount of PLN 70 thousand and covering travels and out of pocket expenses incurred in connection with rendering services. In the year 2022 and 2021 the agreement was continued and the total amount of expenses incurred amounted PLN 900 thousand and PLN 862 thousand, respectively.
During the year ended 31 December 2022 and the year ended 31 December 2021, key management personnel of the Company included the following members of the Management Board:
| Boaz Haim | - President of the Management Board | ||
|---|---|---|---|
| Yaron Shama | - Finance Vice-President of the Management Board | ||
| Andrzej Gutowski | - Sales Vice-President of the Management Board | ||
| Karolina Bronszewska (since 1 June 2021) | - Member of the Management Board for Marketing and Innovation |
||
| Alon Haver (until 31 December 2021) | - Member of the Management Board |
Apart from the compensation listed below, there were no further benefits granted/paid to key management personnel. Key management personnel compensation can be presented as follows:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Salary and other short time benefit | 337 | 175 |
| Management bonus | 25 | 50 |
| Other | 40 | 13 |
| Subtotal - Mrs Karolina Bronszewska | 402 | 238 |
| Salary and other short time benefit | 372 | 352 |
| Management bonus | 95 | 95 |
| Other(2) | 213 | 218 |
| Subtotal - Mr Yaron Shama | 680 | 665 |
| Salary and other short time benefit | 365 | 384 |
| Incentive plan linked to financial results | 171 | 425 |
| Other(1) | 104 | 41 |
| Subtotal - Mr Andrzej Gutowski | 641 | 850 |
| Salary and other short time benefit | 1,318 | 1,531 |
| Management bonus | 760 | 754 |
| Other(1) | 1,131 | 749 |
| Subtotal - Mr Boaz Haim | 3,209 | 3,034 |
| Total | 4,931 | 4,787 |
(1) Mainly related to car expenses, flights and accommodation and an American school.
(2) Transactions with related parties.
(3) Remuneration for 7 months of the year 2021 (from 1 June 2021 – appointment as member of Management Board )
On 23 November 2021 Mr. Alon Haver submitted his resignation from the position of the Member of the Management Board of the Company, with effective date as of 31 December 2021. During 2021 Mr. Alon Haver was also a Management Board member of the indirect major shareholder of the Company (A. Luzon Group) and due to the above the fact he was not receiving any remuneration from the Company nor from any of the Company's subsidiaries. The Company was covering expenses related to his activity as a Company's Management Board member, such as travel and accommodation expenses.
As at 31 December 2022 and 31 December 2021, there were no loans granted to members of the management board.
During the year ended 31 December 2022 the Group sold one Apartment and one parking place to Mr Boaz Haim for a total net amount (excluding VAT) of PLN 579.6 thousand. In addition, the Group sold three apartments to the company owned by Andrzej Gutowski for a total net amount (excluding VAT) of PLN 855 thousand. Those transactions were executed at arm's length and was in adherence to the Group's policy in respect of related-party transactions.
During the year ended 31 December 2021 the Group sold one Apartment to Mr Boaz Haim for a total net amount (excluding VAT) of PLN 369.1 thousand and one Apartment to the Company 100% owned by Alon Haver for a total net amount (excluding VAT) of PLN 378.3 thousand. Those transactions were executed at arm's length and was in adherence to the Group's policy in respect of related-party transactions.
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Mr Ofer Kadouri (first appointment: 1 March 2017) | 56 | 64 |
| Mr Alon Kadouri (first appointment: 1 March 2017) | 53 | 51 |
| Mr Shmuel Rofe (first appointment: 20 November 2017, end of term 7 July 2022) | 17 | 64 |
| Mr Piotr Palenik (first appointment: 30 June 2017, end of term 7 July 2022) | 14 | 51 |
| Mr Przemysław Kowalczyk (first appointment: 30 June 2011, end of term 7 July 2022) | 17 | 64 |
| Total | 157 | 294 |
The Supervisory Board Members are entitled to a quarterly fee of EUR 2,225 plus an amount of EUR 1,500 per personal attendance in the Supervisory Board meeting (EUR 750 if attendance is by using means of direct remote communication). The total amount due in respect of Supervisory Board fees during 2022 and 2021 amounted to PLN 157 thousand (EUR 33.5 thousand) and PLN 294 thousand (EUR 64.7 thousand), respectively. In addition, the Company paid social security contributions at the amount of PLN 26.3 thousand in the year ended 31 December 2022.
Mr Amos Luzon did not receive any direct remuneration from the Company nor from any of the Company's subsidiaries.
All loans granted to the joint venture (Coralchief Sp. z o.o. – Projekt 1 Sp.k. and Ronson IS sp. z o.o. Sp.k.). For additional information see Note 14.
As a result of requirements pertaining to A. Luzon Group, one of the Company's larger (indirect) shareholders, whose shares are listed on the Tel Aviv stock exchange, the first quarter reports, semi-annual reports and third quarter reports are subject to a full scope review by the Company's auditors. The Company has agreed with A. Luzon Group that the costs for the first and third quarter auditors' reviews will be shared between the Company and its shareholder.
The description regarding private issuance of options for shares of Luzon Group is described in the Note 36.
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, price risk and interest rate risk and inflation risk), credit risk, liquidity risk and the overall security stability of the EU area due to the Ukraine War. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Management Board reviews and updates policies for managing each of these risks and they are summarized below. The Group also monitors the market price risk arising from all financial instruments.
The Group does not use derivative financial instruments to hedge currency or interest rate risks arising from the Group's operations and its sources of finance. It has been throughout the year ended 31 December 2021 and continued in the period ended 31 December 2022, the Group's policy that no trading in (derivative) financial instruments shall be undertaken.
The Group's principal financial instruments comprise cash balances, other current financial assets, loans granted to JVs and third parties, bank loans, bonds, financial instruments measured through FVPL, trade receivables and trade payables. The main purpose of these financial instruments is to manage the Group's liquidity and to raise finance for the Group's operations.
In terms of risks specific for the sector, in which the Group operates, there is a potential increase in construction costs, a significant increase in interest rates, the challenge of securing lands for reasonable prices which can lead to the significant negative impact on the margins of new phases and projects, a prolongation of administrative procedures as well as an increasing competition in the market are considered to be the most significant uncertainties for the financial period ending 31 December 2022.
Credit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents and receivables, loans granted to JV and third parties, as well as other current financial asset.
The Group is making significant cash payments as security for preliminary land purchase agreements. The Group minimizes its credit risk arising from such payments by registering advance repayment obligations in the mortgage register of the respective property. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis (analysis of overdue receivables from Clients, monitoring of the financial institutions credit risk, control of the liquidity situation of the JV and third parties). The Group has no information that any counter parties will fail in meeting their obligations. The carrying amounts of the financial assets represent the maximum credit risk exposure.
The maximum exposure to credit risk as at 31 December 2022 and as at 31 December 2021 was as follows:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zloty (PLN) | ||
| Trade and other receivables | 15,254 | 4,261 |
| Loans granted to third parties | 1,717 | 1,621 |
| Loans granted to joint ventures | 133 | 319 |
| Cash and cash equivalents | 51,185 | 133,434 |
| Other current financial assets | 11,217 | 8,794 |
| Total | 69,386 | 148,429 |
The Group places its cash and cash equivalents and other current financial assets in financial institutions with high credit ratings. Management has no information that any counterparty will fail to meet its obligations. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Group's customer base. The credit quality of cash at banks and short-term bank deposits can be assessed by reference to external credit ratings. The Group uses the EuroRating Agency for the below analysis of credit risks of financial institutions.
| As at | As at | |
|---|---|---|
| In thousands of Polish Zloty (PLN) | 31 December 2022 | 31 December 2021 |
| Rating | ||
| A | 21,446 | 84,263 |
| BBB | 7,343 | 6,080 |
| BB | 22,396 | 43,091 |
| Total cash at banks and short-term bank deposits | 51,185 | 133,434 |
| Other current financial assets In thousands of Polish Zloty (PLN) |
As at 31 December 2022 |
As at 31 December 2021 |
| Rating | ||
| A | 6,226 | 7,608 |
| BBB | 4,875 | 1,051 |
| BB | 116 | 135 |
| Total other current financial assets | 11,217 | 8,794 |
The Group keeps cash and cash equivalents and other financial assets in four financial institutions.
Cash and cash equivalents and escrow accounts presented in Other financial assets in SoFP are considered to have low credit risk. The company holds the accounts in financial institutions with investment grade credit rating published by at least one major rating agency. While Other financial assets and Cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holdings of financial instruments, such as bond loans, bank loans, cash and cash equivalents. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing return.
The Group is exposed to foreign currency risk on receivables and payables denominated in a currency other than PLN to a limited extent only. As at 31 December 2022 and 2021, trade receivables and payables denominated in foreign currencies were insignificant.
The Group's exposure to marketable and non-marketable securities price risk does not exists because the Group has not invested in securities as at 31 December 2022 and as at 31 December 2021.
The Group did not enter into any fixed-rate borrowings transaction. The Group's variable-rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short-term receivables and payables are not exposed to interest rate risk.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, bond loans and financing from external investors (SAFE agreement).
The Group entered into 5 separate SAFE agreements in which the Company obtained a total funding of ILS 60 million (PLN 70.5 million as at 31 December 2022) via israeli institutional investors (for further details see Note 25). Apart from that there was no material change in the contractual undiscounted cash outflows for financial liabilities, except for the assumption of new loans and redemption of existing loans during the year ended 31 December 2022 as described in Notes 23.
Investment property and financial liabilities resulting from the SAFE agreement are measured at fair value estimated by an independent appraiser (details in Note 25 and 13). During the period ended 31 December 2022 there were significant changes in the business or economic circumstances that affect the fair value of the group's financial assets and financial liabilities. The impact of this changes has been recognized in the Consolidated Statement of Comprehensive Income.
A vast majority of loans and borrowings obtained by the Group is against variable interest rates that are based on 6 months WIBOR rates plus a margin. As at 31 December 2022 the 6M WIBOR rate reached 7.14% (as at 31 December 2021 amounted to 2.84%) which reflects 12 month increase of 151.4%. The changes in the WIBOR rates will have material impact on the cash flow and the profitability of the Group. The Group did not use any hedging instruments to mitigate the interest risk as the interest rates in Poland were very low for a long time and the Group was benefiting from low floating rates. Due to the last year high inflation, the floating rates increased considerably exposing the Group for high interest rates. The Group considered hedging instruments but at this stage, there was no benefit for doing so as costs of hedging together with the caped interests were similar to the floating rates the Group will pay.
The National Benchmark Reform Working Group (NGR), established by the Polish Financial Supervision Authority, is working on the implementation of a new RFR-type reference index - WIRON (Warsaw interest Rate Overnight), which will replace WIBOR and WIBID. The Roadmap published by NGR explains that the change is taking place under the BMR Regulation as part of the IBOR reform. Completion of the reform is planned by the end of 2024, while the implementation by market participants of a new offer of financial products using the WIRON index is planned for 2023 and 2024. The method of replacing the existing rates by WIRON will be regulated in the Ordinance of the Minister of Finance planned for 2023, which will specify the dates of replacement and adjustment spread. The assumptions of the Road Map also indicate that the WIBOR and WIBID reference indices will cease to be published from the beginning of 2025.
In respect of income-earning financial assets and interest-bearing financial liabilities, the following tables indicate their average effective interest rates at the reporting date and the periods in which they mature or, if earlier, re-price.
| As at 31 December 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Note | Average effective interest rate |
Total | 6 months or less |
6-12 months | 1-2 years | 2-5 years | More than 5 years |
| Fixed rate instruments | ||||||||
| Cash and cash equivalents | 20 | 0.0% | 47,552 | 47,552 | - | - | - | - |
| Other current financial assets | 19 | 0,0% | 11,217 | 11,217 | - | - | - | - |
| Loans granted to joint ventures | 14 | 5% | 133 | - | 133 | |||
| Loans granted to others | 6.00% | 1,717 | 1,717 | - | - | - | ||
| Variable rate instruments | ||||||||
| Cash and cash equivalents | 20 | Wibor ON | 3,633 | 3,633 | - | - | - | - |
| Secured bank loans | 23 | Wibor 3M + 2.20% - 3.00% |
(16,297) | - | (16,297) | - | - | - |
| Floating rate bonds | 23 | Wibor 6M + 4.00%-4.30% |
(203,370) | (5,260) | (40,000) | (99,183) | (58,927) | - |
| As at 31 December 2021 | ||||||||
|---|---|---|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Note | Average effective interest rate |
Total | 6 months or less |
6-12 months |
1-2 years |
2-5 years |
More than 5 years |
| Fixed rate instruments | ||||||||
| Cash and cash equivalents | 20 | 0,0% | 131,121 | 131,121 | - | - | - | - |
| Other current financial assets | 19 | 0,0% | 8,794 | 8,794 | - | - | - | - |
| Loans granted to others | 6,00% | 1,621 | - | 1,621 | - | - | - | |
| Variable rate instruments | ||||||||
| Cash and cash equivalents | 20 | Wibor ON Wibor 3M+ 2,70% - |
2,312 | 2,312 | - | - | - | - |
| Secured bank loans | 23 | 3,00% | (1,568) | (1,568) | - | - | - | - |
| Floating rate bonds | 23 | Wibor 6M + 3,5%- 4,3% |
(249,238) | (52,247) | - | (40,000) | (156,991) | - |
| Loans granted to joint ventures | 14 | Wibor 6M + 3,2% | 319 | - | 319 | - | - | - |
The table below presents the sensitivity analysis and its impact on net assets and income statement assuming if the variable interets rate changes by 10% assuming that all other variables remain unchanged:
| 31 December 2022 | 31 December 2021 | ||||
|---|---|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | Increase by 10% | Decrease by 10% |
Increase by 10% |
Decrease by 10% |
|
| Income statement | |||||
| Variable interest rate assets | 377 | (377) | 263 | (263) | |
| Variable interest rate liabilities* | (21,967) | 21,967 | (25,081) | 25,081 | |
| Total | (21,590) | 21,590 | (24,818) | 24,818 | |
| Net assets | |||||
| Variable interest rate assets | 377 | (377) | 263 | (263) | |
| Variable interest rate liabilities* | (21,967) | 21,967 | (25.081) | 25.081 | |
| Total | (21,590) | 21,590 | (24,818) | 24,818 |
Short-term receivables and payables are not exposed to interest rate risk.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period from reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
| Year ended 31 December 2022 | |||||
|---|---|---|---|---|---|
| Less than | Between | Between | Over | ||
| In thousands of Polish Zlotys (PLN) | 1 year | 1 and 2 years | 3 and 5 years | 5 years | Total |
| Bond loans | 54,297 | 113,617 | 62,928 | - | 230,841 |
| Secured bank loans | 16,297 | - | - | - | 16,297 |
| Lease liabilities related to perpetual usufruct of land and investment property |
1,174 | 1,174 | 3,521 | 12,116 | 17,985 |
| Trade and other payables | 74,074 | - | - | - | 74,074 |
| Liability SAFE | 70,506 | - | - | - | 70,506 |
| Total | 216.348 | 114,790 | 66,449 | 12,117 | 409,703 |
| Year ended 31 December 2021 | |||||
|---|---|---|---|---|---|
| Less than 1 | Between 1 and | Between 3 | Over | ||
| In thousands of Polish Zlotys (PLN) | year | 2 years | and 5 years | 5 years | Total |
| Liabilities | |||||
| Bond loans | 62,847 | 54,025 | 211,019 | - | 327,891 |
| Secured bank loans | 1,568 | - | - | - | 1,568 |
| Lease liabilities related to perpetual usufruct of | |||||
| land and investment property | 1,131 | 2,398 | 3,389 | 11,158 | 18,076 |
| Trade and other payables | 60,263 | - | - | - | 60,263 |
| Total | 125,809 | 56,423 | 214,408 | 11,158 | 407,798 |
During the year 2022 several changes in the polish legislation in particularly: contemplated deletion of open escrow accounts as well as introduction of compulsory contributions to the developer guarantee fund starting from 1 July 2022, the new construction law and the new local regulations related to road and infrastructure participation costs, constitute a risk that could directly or indirectly affect the Company's and the Group's activities and results. The Management Board is in the opinion, that the introduction of such changes might have a negative impact on the Group's activities. In spite of that and taking under consideration the Company and the Group long-term experience in the market, its ability to adjust quickly to the new market conditions, its financial situation and its reputation in the market the Management Board is in the opinion that these changes are of a lesser extent than on other market operators.
The Polish legislation environment is characterised in frequent amendments, incoherence, lack of unified interpretation of legislation and tax legislations which are subject to frequent changes all which is contributing to the risks factors in which the Company and the Group operate. All the above changes and lack of unified judicial decision can have negative consequences on the Group's business, its performance, its financial standing and the development prospects.
The above changes demonstrates the dynamic environment in which the Group operates and as such requiring in some cases quick response in order to adjust its activity accordingly.
The Management Board will continue monitoring the above mentioned issues on an on-going basis, and adopt further actions, if necessary, in order to minimize as much as it is possible their impact on the Group operations.
In 2022, the global economy was weakened by trade disruptions in the areas of food and fuel prices as a result of the ongoing war in Ukraine. In the second half of 2022, activity in the euro area deteriorated due to disrupted supply chains, increased financial stress and a decline in consumer and business index confidence. The upward trend in global oil, gas and coal prices observed since the beginning of 2021 increased sharply after Russia's invasion of Ukraine due to sanctions imposed on Russia, pushing up inflation to levels not seen in Europe for decades.
According to a recent update of a World Bank publication, Poland's economic growth in 2023 is expected to slow more than initially thought, as the ongoing war in Ukraine has dimmed the prospects for a post-pandemic recovery in Europe.
In 2022, the war in Ukraine was a key factor affecting the Polish economy. It caused an increase in inflation particularly related to increases in energy and food prices. The level of Polish inflation is currently one of the highest in the European Union. The Polish government's decision to completely abandon imports of Russian energy resources by the end of 2022 has also influenced activities related to the acquisition of new sources of supply, particularly coal, and the intensification of investments aimed at energy diversification.
The Polish government has also taken measures to reduce the increase in energy prices for citizens and businesses in the form of subsidies for coal and other energy resources and a freeze on electricity prices for vulnerable consumers.
In order to curb rising inflation, the Monetary Policy Council of the National Bank of Poland (NBP) raised reference interest rates for the eleventh time in a row in September 2022, resulting in a huge increase in loan instalments for borrowers and consequently worsening the situation of many households. In order to counteract the deterioration in the financial situation of borrowers, the Polish parliament introduced a consumer support programme. It includes, among other things, four months of credit holidays in 2022 and four in 2023. The government has also increased the level of the Borrower Support Fund and made it easier to apply for assistance from it.
The creditworthiness of Poles has also decreased and, consequently, the number of new loans taken out has fallen. This caused a significant slowdown in the real estate market. At the same time, in terms of the residential market, the Company noted a significant trend of cash buyers outnumbering those using mortgages, resulting in a significant decline in the number of units sold observed from the beginning of 2022.
In addition, as a consequence of the armed conflict in Ukraine, the supply chains of materials from eastern markets were disrupted and, due to the outflow of workers from Ukraine, the demand for workers on construction sites also increased.
On the other hand, however, according to the Management Board's observation, high interest rates will also force more people to enter the rental market as they will no longer be able to afford mortgages, putting even more pressure on the available rental stock. It is important to recognize that due to increasing geopolitical and economic risks, the war conflict in Ukraine will continue to intensify factors such as high inflation, increased construction costs and more restrictive financing policies for new developments and mortgages.
The Company is monitoring the situation on an ongoing basis to assess its impact on business operations. As part of its strategy, the Company will evaluate its currently planned projects and initiate projects that will be secured with bank financing and have the best chance of success in the near future, all with the aim of mitigating the impact of this crisis on the Company's business as much as possible.
At the beginning of 2022, prices of energy and agricultural commodities were high, significantly exceeding their levels seen since last year. Inflation slightly decreased to 16.6% in December from November's 17.9%. December's result represented the highest inflation rate since March 1997.
According to the Statistical office of Poland (GUS), the main factors contributing to the high inflation rate are driven by cost of housing and utilities (22.6%), transport (13.3%) and food and non-alcoholic beverages (21.5%), as well as increase in USD/PLN and EUR/PLN exchange rates.The inflation growth and with it the interbank interest growth affects the polish economy in many aspects and the real estate residential sector in the following:
In the forth quarter of 2022, there was a increase in sales in the six largest cities by 28% comparing to previous quarter and as much as 49% decrease in sales comparing to the year 2021. The management Board will continue monitoring the situation, and adopt further actions, if necessary, in order to reduce as much as it possible the effect of the inflation and interest rates increase on the Group's operations and strategy.
Construction costs increased significantly over the last 2 years, and high increase especially in the 4th quarter of the 2022. There is a high risk that building costs may still be rising during 2023. The increase was mainly related to increase of raw materials and energy costs influencing directly and indirectly the costs of production adding to that the pandemic situation and shortage of construction employees. The Company and the Group do not operate in a construction business, but, instead, for each project an agreement is concluded with a third-party general contractor, who is responsible for running the construction and for finalizing the project including obtaining all permits necessary for safe use of the apartments.
In the year 2021 there were many changes in the constructions law, which impacted the cost of constructions as well as sharp increase in inflation rate, costs of raw materials and energy costs.
In terms of construction law, the biggest change refers to the increase in fire safety in case of a change in the use of the building or its part. The notification should be accompanied by an expert's opinion on fire safety, which by the end might be reflected in the construction costs offered by the general contractor.
Ordinance No. 1715/2021 of the President of the Capital City of Warsaw dated October 19, 2021 on determining the principles of concluding agreements specifying the terms of construction or reconstruction of public roads by investors of non-road investments and appointing a team for cooperation with investors of non-road investments, which came into force on January 1, 2022, regulated the procedure for the City of Warsaw to conclude agreements with investors for the construction or reconstruction of roads caused by nonroad investments (based on Article 16 of the Act on Public Roads dated March 21, 1985). Pursuant to Article 16 of the Law on Public Roads, the construction or reconstruction of public roads caused by a non-road investment is the responsibility of the investor in the project. The provision in question specifies that the detailed conditions for the construction or reconstruction of these public roads shall be determined by an ordinance concluded between the road manager and the investor of the non-road investment. The Ordinance regulates, among other things, the procedure for concluding the agreement and the rates at which the value of the road investment in which the investor in question will bear his share is calculated, according to the size of the planned investment. The new procedure will cover commercial service facilities with a floor area of more than 1,000 sqm and other investments with a floor area of more than 5,000 sqm.
In addition, a number of regulations forcing the introduction of green solutions in newly designed buildings came into force in 2022:
In order to mitigate the risk of rising construction costs, the Company and the Group are signing a lump-sum contract with a general contractor, which will allow the Group to complete the project based on the planned budget.
In each project or stage of the project, the Group has concluded and will conclude contracts for the construction and implementation of development projects with one general contractor. There is a risk that non-performance of the agreement by the general contractor may cause delays in the project or significantly impact the business, financial condition or results of the Group. The Group sees a potential risk for non-performance of obligations by the general contractor in the availability of qualified workforce, in the increase of salaries and cost of construction materials and the increase of energy costs. Non-performance may result in claims against general contractor with the risk that general contractor may also fail to fully satisfy possible claims of the Company and the Group.
The Company and the Group Implement selection criteria when hiring a general contractor, which include, experience, professionalism, financial strength of the general contractor (with the obligation to provide bank or insurance guarantee) as well as the quality of the insurance policy covering all risks associated with the construction process.
The real estate development business, in which the Company and the Group operates, requires significant initial expenditures to purchase land and to cover construction, infrastructure, and design costs. As such, the Company and the Group, in order to continue and develop its business, require significant amounts of cash through external financing banks and issuance of bonds. The Company's and Group's ability to obtain such financing depend on many factors in particular, on market conditions which are beyond the Company's and the Group's control. In the event of difficulties to obtain the required financing, there is a risk that the scale of the Company's and Group's development and pace of achieving its strategic objectives may differ from what was originally planned. In such situation as described above, there is no certainty whether the Company and the Group will be able to obtain the required financing, nor whether financial resources will be obtained under conditions that are favourable to the Company and the Group. In order to mitigate the risk of insufficient financial resources, the Group is continuously exploring other possibilities of financial resources which will provide the necessary required financing and favourable conditions.
The demand for residential real estate largely depends on the availability of credits and loans for financing the purchase of apartments and houses by individuals. Possible increase in interest rates, deterioration of the economic situation in Poland or administrative restrictions on lending activities of the banks may cause a drop in demand for apartments and houses, and therefore a decrease in interest from potential buyers in the Group's development projects, which in turn may have a significant adverse impact on activities, financial standing or performance of the Company and the Group.
In 2022, access to mortgages has decreased significantly mainly due to high interest rates and the KNF's tightening of rules for calculating creditworthiness. A sharp increase in interest rates, particularly, banks internal rates has impacted and will impact, significantly, big portion of mortgage users to be eligible for residential mortgage financing. As well as, in most cases, due to creditworthy of individuals led and will lead to the decrease of the availability of mortgages. The Group is continuously observing the situation and offering administrative help to its clients for obtaining required credits.
The nature of real estate development projects requires a number of licenses, approvals and arrangements to be obtained by the Company and the Group at every stage of the development process. Despite significant caution applied in the project execution schedules, there is always a risk of delay in their obtainment. In addition there is always the risk of protests made against permits decisions which have already been issued (also due to appeals with no consequences for the appellants) or in the worse scenario failing to obtain the relevant permits. Additional risk might rise with respect to properties under perpetual usufruct. All the above factors may affect the ability to conduct and complete its executed and planned projects.
Frequent amendments, incoherence and lack of unified interpretation of legislation entail risks related to the legal and environment in which the Company and the Group operate. In particular the regulations and interpretations of tax legislations are subject to frequent changes. The practice of tax authorities, issued tax interpretations as well as judicial decisions in this area is not unified. In cases that Tax Authorities will adopt different interpretation of tax regulations from that of the Group, negative consequences can be expected with negative impact on the Group's business, its performance, its financial standing and Company's and Group's development prospects.
Below are main changes in law regulations which can affects the Group operations:
When managing capital, it is the Group's objective to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the profit appropriation, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio and leverage. The Group's policy is to keep the gearing ratio of the Group lower than 60%, and a leverage of the Group lower than 50%.
Banking covenants vary according to each loan agreement, but typically are not related directly to the gearing ratio of the Group but to the proportion of loan to value of the mortgage collateral which usually is required not to cross the limit of 70% or 75%. Moreover the Group is obliged to monitor its indebtedness according to the conditions of the bond issuance, which require, amongst others, that in each reporting period the Group shall test the ratio between Net debt to Equity. The Ratio shall not exceed 80% (for additional information see Note 23).
The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated Statement of Financial Position) less cash and cash equivalents and less Other current financial assets. Leverage is calculated as net debt divided by total capital employed. Total capital employed is calculated as 'equity' as shown in the Consolidated Statement of Financial Position plus net debt financing assets in operation.
The gearing ratios and leverage at 31 December 2022 and 31 December 2021 were as follows:
| As at 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Loan and borrowings, including current portion | 203,370 | 249,238 |
| Secured bank loans | 16,297 | 1,568 |
| Financial liability measured at FVPL | 70,506 | - |
| IFRS 16 - Lease liabilities related to cars | 363 | 292 |
| Less: cash and cash equivalents | (51,185) | (133,434) |
| Less: cash on individual escrow accounts (other current financial assets) | (11,217) | (8,794) |
| Net debt | 228,134 | 108,869 |
| Total equity | 451,396 | 420,045 |
| Total capital employed | 679,530 | 528,914 |
| Gearing ratio | 50.5% | 25.9% |
| Leverage | 33.6% | 20.6% |
There were no changes in the Groups approach to capital management during the year.
During the period the Group did not breach any of its loan and borrowings covenants, nor did it default on any other of its obligations under its loan agreements.
| For the year ended 31 December | 2022 | 2021 |
|---|---|---|
| In thousands of Polish Zlotys (PLN) | ||
| Balance sheet change in inventory | (102,765) | 43,298 |
| Finance expense, net capitalized into inventory | 15,331 | 10,174 |
| Impact of perpetual usefruct recognition | (358) | 3,480 |
| Purchase of land | 88,538 | 113,784 |
| Transfer fixed assets to Inventory | - | 747 |
| Write-down of inventory | (482) | (3,793) |
| Other | (1,260) | (314) |
| Change in inventory in the consolidated statement of cash flows | (996) | 167,376 |
| Trade and other receivables and prepayments | ||
| For the year ended 31 December | 2022 | 2021 |
| In thousands of Polish Zlotys (PLN) | ||
| Balance sheet change in trade and other receivables and prepayments Impact of transferred perpetual usufruct to trade receivables |
(7,440) | (20,806) |
| (delivered units) | 174 | (569) |
| Transfer to Intangible assets from prepayments | - | (1,458) |
| Notary deposits transferred to inventory | (14,503) | - |
| Notary deposit transferred (to)/from advances for land | 9,253 | (5,500) |
| Bank charges | 1,168 | (604) |
| Change in Trade and other receivables and prepayments in the consolidated statement of cash flows |
(11,348) | (28,937) |
| For the year ended 31 December In thousands of Polish Zlotys (PLN) |
2022 | 2021 |
|---|---|---|
| Balance sheet change in Trade and other accounts payable Impact of transferred perpetual usufruct to trade payables (delivered |
13,969 | 2,739 |
| units) | 161 | 576 |
| Transfer of interests bearing liabilities to trade accounts payables | - | (1,698) |
| Other | (319) | (115) |
| Purchases of land (not paid) | (23,588) | - |
| Change in Trade and other payables and accrued expenses in the | ||
| consolidated statement of cash flows | (9,777) | 1,502 |
Information about audit agreements and the values from those agreements is disclosed below:
| For the year ended 31 December | 2022 | 2021 | |
|---|---|---|---|
| In thousands of Polish Zlotys (PLN) | |||
| Audit and review remuneration for standalone and consolidated financial statements | 509 | 464 | |
| Other services | - | 77 | |
| Reimbursed audit review costs (1) | (86) | (117) | |
| Total remuneration for the expense of the Group | 423 | 424 | |
| (1) Costs in respect of the audit review of the Group's first and third quarter reports have been reimbursed in 50% to Main Group's shareholder. |
The table below presents projects which have been commenced in the year ended 31 December 2022:
| Project name | Location | Number of units | Area of units (m2) |
|---|---|---|---|
| Nowe Warzymice IV | Szczecin | 75 | 3,818 |
| Eko Falenty I | Warsaw | 42 | 4,304 |
| Miasto Moje VII* | Warsaw | 243 | 11,740 |
| Ursus Centralny IIe* | Warsaw | 280 | 16,246 |
| Nowa Północ Ia | Szczecin | 110 | 5,230 |
| Osiedle Vola | Warsaw | 84 | 4,851 |
| Między Drzewami* | Poznań | 117 | 5,803 |
| Nova Królikarnia 4b1 (Thame) | Warsaw | 11 | 2,566 |
| Viva Jagodno III* | Wrocław | 58 | 3,140 |
| Total | 1,020 | 57,698 |
*Commencement of sales, the construction process did not started yet
The table below presents projects which have been completed in the year ended 31 December 2022 and for which the occupancy permit was received and the delivery process of apartments has started:
| Project name | Location | Occupancy permit date | Number of units | Area of units (m2 ) |
|---|---|---|---|---|
| Nowe Warzymice II | Szczecin | 5 April 2022 | 66 | 3,492 |
| Ursus Centralny Ib | Warsaw | 5 July 2022 | 97 | 5,740 |
| Miasto Moje V | Warsaw | 31 August 2022 | 170 | 8,559 |
| Viva Jagodno IIa | Wrocław | 10 October 2022 | 76 | 4,329 |
| Nowe Warzymice III | Szczecin | 25 October 2022 | 62 | 3,537 |
| Total | 471 | 25,657 |
The below table presents signed final agreements for purchase of plots signed in the period ended 31 December 2022:
| Location | Type of agreement |
Signed date | Agreement net value |
Paid net till 31 December 2022 |
Number of units |
Potential PUM |
|---|---|---|---|---|---|---|
| (PLN million) | (PLN million) | |||||
| Warsaw, Stojowskiego | final | 11 Aug 2021, 11 Jan 2022 |
16.9 | 16.9 | 191 | 11,000 |
| Warsaw, Białołęka(1) | final | 28 Oct 2021, 13 Jan 2022 |
51.4 | 51.4 | 1,081 | 43,754 |
| Warsaw, Bemowo | final | 22 Feb 2022 | 25.9 | 25.9 | 148 | 8,100 |
| Warsaw, KEN(3) | final | 29 Mar 2022 | 11.9 | 11.9 | 94 | 5,700 |
| Warsaw, Marynin(2) | final | 15 Jun 2022 | 9.0 | 9.0 | 101 | 4,183 |
| Warsaw, Bemowo | final | 16 Oct 2021, 31 Aug 2022 |
19.5 | 19.5 | 123 | 6,928 |
| Warsaw, Wolska(2) | final | 23 Dec 2021, 19 Sep 2022 |
23.7 | - | 292 | 13,947 |
| Warsaw, Białołęka(4) | final/preliminary | 23 Nov 2020, 23 Dec 2022 |
20.0 | 20.0 | 432 | 20,700 |
| Total | 178.3 | 154.6 | 2,462 | 114,312 |
1) The part of land designatned for PRS activity
2) The land designated for PRS activity
3) According to the final agreement the former owner of the plot (Orange Polska S.A.) has the right to use the property till 31 December 2024 until it moves out
its telecommunication technical infrastructure located in the Building, the user of the property will pay to the Company leasing fee for the time of usage 4) The company signed final agreements for all land except for 1 land with the total value of PLN 1.45 million in which preliminary agreement is signed but not all conditions regarding this land ware fulfiled.
The below table presents signed preliminary agreements for purchase of plots signed until 31 December 2022 including advances paid:
| Location | Type of agreement |
Signed date | Agreement net value |
Paid net till 31 December 2022 |
Number of units |
Potential PUM |
|---|---|---|---|---|---|---|
| (PLN million) | (PLN million) | |||||
| Warsaw, Ursus | preliminary | 17 Jan 2021 | 140.0 | 10.0 | 1,860 | 85,000 |
| Warsaw, Ochota | preliminary | 10 Aug 2021, 5 Oct 2021 |
7.1 | 7.1 | 67 | 3,700 |
| Warsaw, Włochy | preliminary | 30 Dec 2021 | 16.0 | 2.0 | 142 | 8,400 |
| Warsaw, Bielany(1) | preliminary | 21 Mar 2022 | 11.0 | 1.1 | 242 | 4,559 |
| Total | 174.1 | 20.2 | 2,311 | 101,659 |
1) The land designated for PRS activity
| Project name | Location | Number of units |
General contractor | Agreement signing date |
Agreement net value |
Additional provisions |
|---|---|---|---|---|---|---|
| Nowe Warzymice IV |
Szczecin | 75 | Ebud S.A. | 1 February 2022 |
16.8 | none |
| Eko Falenty I | Warsaw | 42 | Techbau Budownictwo Sp. z o.o. |
4 March 2022 | 19.2 | none |
| Osiedle Vola | Warsaw | 84 | Leancon Sp. z o.o. | 19 May 2022 | 32.5 | none |
| Nova Północ Ia | Szczecin | 110 | Ebud S.A. | 28 July 2022 | 26 | * |
| Między Drzewami | Poznań | 117 | W.P.I.P. – Mardom Sp. z o.o. |
18 October 2022 |
36 | ** |
| Total | 428 | 130.5 |
*contract value subject to valorization
** subject to valorization up to 600k PLN
| Project name | Location | Building permit date | Number of units | Area of units (m2 ) |
|---|---|---|---|---|
| Nowe Warzymice IV | Szczecin | 22 January 2022 | 75 | 3,800 |
| Między Drzewami | Poznań | 15 March 2022 | 117 | 5,800 |
| Osiedle Vola | Warsaw | 15 April 2022 | 84 | 4,850 |
| Nowa Północ I | Szczecin | 21 April 2022 | 200 | 9,450 |
| Nova Królikarnia 4b1 | Warsaw | 2 May 2022 | 11 | 2,566 |
| Nowe Warzymice V | Szczecin | 22 December 2022 | 60 | 4,654 |
| Total | 547 | 31,120 |
On 8 March 2022, the General Meeting of the Company was held, at which the shareholders adopted a resolution on withdrawing the Company's shares from trading on the regulated market. In connection with the adoption of the above resolution, on 9 March 2022, the Company submitted an application to the Polish Financial Supervision Authority for authorization to withdraw the Company's shares from trading on the regulated market. On 14 April 2022 the Polish Financial Supervision Authority issued a consent to the withdrawal of the Company's shares from trading on the market regulated by the Warsaw Stock Exchange S.A. ("WSE") as of 28 April 2022. The respective resolution was also adopted by the Management Board of WSE on 25 April 2022.
On November 28, 2022, Luzon Group announced a private issuance of options for shares of Luzon Group ("Options"). According to the allocation, Mr. Boaz Haim received 9,817,868 Options. Options were allotted free of charge. Each Option entitles to one ordinary share of Luzon Group of NIS 0.01 par value, for an exercise price of 2 NIS (which however will be settled on a net basis, i.e. final number of received shares will be decreased by a number of shares which market value is equal to full exercise price to be paid).
Mr Haim will be entitled to exercise the Options as follows:
The Options can be exercised until the end of 7 years from the date of their allocation. Options that were not exercised within the above mentioned period, expire. Assuming all the Options are exercised, Mr. Haim will hold c.a. 2.38% of the issued and paid-up capital of Luzon Group and about 1.89% of the issued and paid-up capital of Luzon Group on a full dilution basis. The Option program envisages adjustments in case of various corporate events in Luzon Group (such as the issuance of shares or other options, merger, dividend distribution, etc.). The impact of the programme for the reporting year is insignificant.
| Project name | Location | Building permit date | Number of units | Area of units (m2 ) |
|---|---|---|---|---|
| Miasto Moje VIII | Warsaw | 12 January 2023 | 147 | 7,687 |
| Total | 147 | 7,687 |
| Project name | Location | Occupancy permit date | Number of units | Area of units (m2 ) |
|---|---|---|---|---|
| Miasto Moje VI | Warsaw | 7 February 2023 | 227 | 11,722 |
| Total | 227 | 11,722 | ||
On 17 January 2023 the anex to the main agreement relating purchase of the land in Wolska was signed. According to the new provisions payment for the land has been extended till the 31 March 2023.
On March 2, 2023, the Company (through a subsidiary) signed a final agreement for the purchase of the right to perpetual usufruct of a plot of land located in Warsaw, Ochota district, with an area of 0.2484 ha for the amount of PLN 7,100 thousand. PLN net. The above property also includes the ownership right to two buildings: the main building with a usable area of 2,404 m2 and a transformer station with a usable area of 116 m2.
| Project name | Location | Number of units |
General contractor | Agreement signing date |
Agreement net value |
Additional provisions |
|---|---|---|---|---|---|---|
| Miasto Moje VII | Warsaw | 243 | Hochtief Polska S.A. | 1 March 2023 | 70.4 | none |
| Ursus Centralny 2E | Warsaw | 282 | Techbau Budownictwo Sp. z o.o. |
10 March 2023 | 96.9 | none |
| Nova Królikarnia 4b1 | Warsaw | 11 | Totalbud S.A | 10 March 2023 | 17.4 | none |
| Total | 536 | 184.7 |
On March 1, 2023, the Company (through a subsidiary) concluded a contract for construction works with Hochtief Polska S.A. (General Contractor) for the execution of stage VII of the Miasto Moje investment. Construction works will start in the beginning of March 2023. Stage VII is to be completed by October 31, 2024. The Miasto Moje VII investment consists of a complex of multi-family residential buildings with underground garages (243 residential units). The remuneration for the performance of the Agreement is PLN 70.4 million, to which VAT will be added.
On March 10, 2023, the Company (through a subsidiary) concluded a contract for construction works with Techbau Budownictwo Sp. z o. o. (General Contractor) for the execution of stage IIE of the Ursus Centralny investment. Construction works will start in March 2023. The completion of the IIE stage is scheduled for February 28, 2025. The Ursus Centralny IIE investment consists of a complex of multi-family residential buildings with underground garages (282 residential units). The remuneration for the performance of the Agreement is PLN 96.9 million, to which VAT will be added.
On March 10, 2023, the Company (through a subsidiary) concluded a contract for construction works with Totalbud S.A. (General Contractor) for the execution of Nova Królikarnia 4b1. Construction works will start in March 2023. The completion of the Nova Królikarnia 4b1 is scheduled for October 31, 2024. Nova Królikarnia 4b1 investment consists of a complex of 6 single-family detached one- and two-family apartments with accompanying technical infrastructure (11 units). The remuneration for the performance of the Agreement is PLN 17.4 million, to which VAT will be added.
In January 2023, the Company's subsidiaries submitted payment demands addressed to several related companies that were sellers (or were otherwise involved in the sale) to Ronson group companies of certain properties:
Demands also include calls for payment of contractual or statutory interest for delay or reservation of the right to seek payment of these amounts, together with statutory interest for delay and court and enforcement costs, in court proceedings and the use of established securities, if any.
The Management Board
___________________ ___________________ Boaz Haim Yaron Shama
President of the Management Board Finance Vice-President of the Management Board
___________________ ___________________ Andrzej Gutowski Karolina Bronszewska Sales Vice-President of the Management Board Member of the Management Board
for Marketing and Innovation
Warsaw, 15 March 2023
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