Annual Report • May 7, 2021
Annual Report
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REPORT AND FINANCIAL STATEMENTS 31 December 2020
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| CONTENTS | PAGE |
|---|---|
| Board of Directors and other officers | 1 |
| Management Report | $2 - 3$ |
| Declaration of the members of the Board of Directors and the company officials responsible for the preparation of the financial statements |
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| Independent auditor's report | $5 - 8$ |
| Statement of profit or loss and other comprehensive income | $\overline{9}$ |
| Statement of financial position | 10 |
| Statement of changes in equity | 11 |
| Cash flow statement | 12 |
| Notes to the financial statements | $13 - 28$ |
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| Board of Directors: | Peter G. Economides Androulla Zavou Economides |
|---|---|
| Company Secretary: | Totalserve Management Ltd |
| Independent Auditors: | Ekkeshis Ierodiakonou Ltd Certified Public Accountants and Registered Auditors 39 Themistocles Dervis Str. Off. 102 1066, Nicosia |
| Registered office: | 17 Gr. Xenopoulou Str. 3106, Limassol Cyprus |
| Registration number: | HE27549 |
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The Board of Directors presents its report and audited financial statements of the Company for the year ended 31 December 2020.
The principal activity of the Company, which are unchanged from last year, is the development of land. On 10 November 2020 the Company obtained a licence for its shares to be listed to the Emerging Companies Market.
On 15 July 2020, the Company changed its name from P.G. Economides Properties Ltd to P.G. Economides Properties Plc.
The Company's development to date, financial results and position as presented in the financial statements are not considered satisfactory and the Board of Directors is making an effort to reduce the Company's losses.
The principal risks and uncertainties faced by the Company are disclosed in notes 6, 7 and 19 of the financial statements.
The Company is exposed to interest rate risk and credit risk from the financial instruments it holds.
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company's income and operating cash flows are substantially independent of changes in market interest rates as the Company has no significant interest-bearing assets. The Company is exposed to interest rate risk in relation to its non-current borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company's Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. Credit risk arises from cash and cash equivalents as well as credit exposures to customers including outstanding receivables.
Credit risk is managed on a group basis. For banks and financial institutions, the Company has established policies whereby the majority of bank balances are held with independently rated parties with a minimum rating of ['C'].
If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.Individual credit limits and credit terms are set based on the credit quality of the customer in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored.
The Company's investments in debt instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration.
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.
There were no changes in the share capital of the Company during the year under review.
The Company recognises the importance of implementing sound corporate governance policies, practices and procedures. As a company listed on the Cyprus Stock Exchange (CSE), P.G. Economides Properties Plc has adopted CSE's Corporate Governance Code and applies its principles.
In March 2006 the CSE issued a revised Code of Corporate Governance. The Company complies with all the provisions of the revised Code
The members of the Company's Board of Directors as at 31 December 2020 and at the date of this report are presented on page 1. All of them were members of the Board of Directors throughout the year ended 31 December 2020.
In accordance with the Company's Articles of Association all Directors presently members of the Board continue in office.
There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors.
The Independent Auditors, Ekkeshis Ierodiakonou Ltd, have expressed their willingness to continue in office and a resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By order of the Board of Directors,
Totalserve Management Ltd Secretary
Nicosia, 29 April 2021
In accordance with Article 9 sections (3c) and (7) of the Transparency Requirements (Traded Securities in Regulated Markets) Law 2007 (N 190 (I)/2007) ("the Law") we, the members of the Board of Directors and the Company official responsible for the financial statements of P.G. Economides Properties Plc (the "Company") for the year ended 31 December 2020, on the basis of our knowledge, declare that:
(a) The annual financial statements of the Company which are presented on pages 9 to 28:
(i) have been prepared in accordance with the applicable International Financial Reporting Standards as adopted by the European Union and the provisions of Article 9, section (4) of the law, and
(ii) provide a true and fair view of the particulars of assets and liabilities, the financial position and profit or loss of the Company and the entities included in the financial statements as a whole and
b) The management report provides a fair view of the developments and the performance as well as the financial position of the Company as a whole, together with a description of the main risks and uncertainties which they face.
Peter G. Economides
Androulla Zavou Economides
Responsible for drafting the financial statements
(Financial Manager)
Nicosia, 29 April 2021
Ekkeshis lerodiakonou Ltd
39 Themistocles Dervis Street T: +357 22 466 470 1st Floor F: +357 22 766 470 CY-1066 Nicosia, Cyprus www.eicyprus.com P.O.Box 26643 CY-1646 Nicosla, Cyprus
We have audited the financial statements of P.G. Economides Properties Plc (the "Company"), which are presented in pages 9 to 28 and comprise the statement of financial position as at 31 December 2020, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our report. We remained independent of the Company throughout the period of our appointment in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Cyprus, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The Board of Directors is responsible for the other information. The other information comprises the information included in the Management Report, the Corporate Governance Statement, the X report, and the Y report [tailor accordingly], but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
We communicate with the those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters.
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in our Independent Auditor's Report, which is required in addition to the requirements of International Standards on Auditing.
We were first appointed as auditors of the Company on 20 April 2021 by the Board of Directors. Our appointment has been renewed annually by shareholder resolution representing a total period of uninterrupted engagement appointment of 2 years.
We confirm that our audit opinion on the financial statements expressed in this report is consistent with the additional report to the Audit Committee of the Company, which we issued on [insert date] in accordance with Article 11 of the EU Regulation 537/2014.
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Company and which have not been disclosed in the financial statements or the Management Report.
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified material misstatements in the corporate governance statement in relation to the information disclosed for items (iv) and (v) of subparagraph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113. We have nothing to report in this respect.
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
The engagement partner on the audit resulting in this independent auditor's report is Constantinos Ekkeshis.
The financial statements of the Company for the year ended 31 December 2019 were audited by another auditor who expressed an unmodified opinion on those financial statements on 31 December 2019.
Nicosia, 29 April 2021
COR
| Note | 2020 € |
2019 € |
|
|---|---|---|---|
| Selling and distribution expenses Administration expenses |
(14, 895) | (6, 245) (22, 919) |
|
| Operating loss | (14, 895) | (29, 164) | |
| Finance costs Net finance costs |
10 | (1,020) (1,020) |
(1,580) (1,580) |
| Net loss for the year | (15, 915) | (30, 744) | |
| Other comprehensive income | |||
| Total comprehensive income for the year | (15, 915) | (30, 744) |
The notes on pages 13 to 28 form an integral part of these financial statements.
| Note | 2020 € |
2019 € |
|
|---|---|---|---|
| ASSETS | |||
| Current assets Inventories Trade and other receivables Cash at bank and in hand |
12 13 14 |
17,915,096 86,543 52 |
17,756,526 98,660 12 |
| 18,001,691 | 17,855,198 | ||
| Total assets | 18,001,691 | 17,855,198 | |
| EQUITY AND LIABILITIES | |||
| Equity Share capital Accumulated (losses) |
15 | 11,934,065 (46, 659) |
11,934,065 (30, 744) |
| Total equity | 11,887,406 | 11,903,321 | |
| Non-current liabilities Borrowings |
16 | 5,469,513 | 5,415,348 |
| 5,469,513 | 5,415,348 | ||
| Current liabilities Trade and other payables Borrowings |
17 16 |
191,453 453,268 |
13,032 523,446 |
| Current tax liabilities | 18 | 51 | 51 |
| 644,772 | 536,529 | ||
| Total liabilities | 6,114,285 | 5,951,877 | |
| Total equity and liabilities | 18,001,691 | 17,855,198 |
On 29 April 2021 the Board of Directors of P.G. Economides Properties Plc authorised these financial statements for issue.
Peter G. Economides Director
. . . . . . . . . . . . . . . . . . . Androulla Zavou Economides Director
31 December 2020
| Note | Share capital € |
Share premium € |
Fair value reserve - land and buildings € |
Accumulated losses € |
Total € |
|
|---|---|---|---|---|---|---|
| Balance at 1 January 2019 | 5,130 | 4,856,377 | 453,735 | 5,731,822 | 11,047,064 | |
| Comprehensive income Net loss for the year Total comprehensive income for the year |
(30, 744) (30, 744) |
(30, 744) (30, 744) |
||||
| Transactions with owners Issue of share capital Capitalisation of reserves Total transactions with owners |
15 | 11,928,935 11,928,935 |
(4,856,377) (4,856,377) |
(453, 735) (453, 735) |
(5,731,822) (5,731,822) |
11,928,935 (11, 041, 934) 887,001 |
| Balance at 31 December 2019/ 1 January 2020 |
11,934,065 | (30, 744) | 11,903,321 | |||
| Comprehensive income Net loss for the year Total comprehensive income for the year |
(15, 915) | (15, 915) | ||||
| Balance at 31 December 2020 | 11,934,065 | (15, 915) (46.659) |
(15, 915) 11.887.406 |
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at the rate of 17% will be payable on such deemed dividend to the extent that the shareholders for deemed dividend distribution purposes at the end of the period of two years from the end of the year of assessment to which the profits refer, are Cyprus tax residents and domiciled. From 1 March 2019, the deemed dividend distribution is subject to a 1,70% contribution to the General Healthcare System, increased to 2,65% from 1 March 2020, with the exception of April 2020 until June 2020 when the 1,70% rate was applicable. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders.
The notes on pages 13 to 28 form an integral part of these financial statements.
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| Note | 2020 € |
2019 € |
|
|---|---|---|---|
| CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: |
(15, 915) | (30, 744) | |
| Interest expense | 10 | 679 | 828 |
| (15, 236) | (29, 916) | ||
| Changes in working capital: Increase in inventories |
(158, 570) | (17,756,526) | |
| Decrease/(increase) in trade and other receivables Decrease in Directors' current accounts Increase in trade and other payables |
12,117 178,421 |
(17,681) (28, 860) 362,349 |
|
| Cash generated from/(used in) operations | 16,732 | (17, 470, 634) | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Repayments of borrowings | (354, 659) | ||
| Proceeds from borrowings | 54,165 | ||
| Interest paid | (679) | (828) | |
| Net cash generated from/(used in) financing activities | 53,486 | (355, 487) | |
| Net increase/(decrease) in cash and cash equivalents | 70,218 | (17,826,121) | |
| Cash and cash equivalents at beginning of the year | (70, 166) | 17,755,955 | |
| Cash and cash equivalents at end of the year | 14 | 52 | (70, 166) |
The notes on pages 13 to 28 form an integral part of these financial statements.
The Company P.G. Economides Properties Plc (the "Company") was incorporated in Cyprus on 09 August 1986 as a private limited liability company under the provisions of the Cyprus Companies Law, Cap. 113. Its registered office is at 17 Gr. Xenopoulou Str., 3106, Limassol, Cyprus.
The principal activity of the Company, which are unchanged from last year, is the development of land. On 10 November 2020 the Company obtained a licence for its shares to be listed to the Emerging Companies Market.
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113. The financial statements have been prepared under the historical cost convention.
During the current year the Company adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2020. This adoption did not have a material effect on the accounting policies of the Company.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented in these financial statements unless otherwise stated.
The Company is organised by business segments and this is the primary format for segmental reporting. Each business segment provides products or services which are subject to risks and returns that are different from those of other business segments. The Company operates only in Cyprus and for this reason operations are not analysed by geographical segment.
Interest expense and other borrowing costs are charged to profit or loss as incurred.
The Company classifies its financial assets in the following measurement categories:
The classification and subsequent measurement of debt financial assets depends on: (i) the Company's business model for managing the related assets portfolio and (ii) the cash flow characteristics of the asset. On initial recognition, the Company may irrevocably designate a debt financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI or at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
For investments in equity instruments that are not held for trading, the classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). This election is made on an investment-by-investment basis.
All other financial assets are classified as measured at FVTPL.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).
All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention ("reqular way" purchases and sales) are recorded at trade date, which is the date when the Company commits to deliver a financial instrument. All other purchases and sales are recognised when the entity becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
The Company assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at amortised cost and FVOCI and exposure arising from loan commitments and financial quarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.
The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of profit or loss and other comprehensive income within "net impairment losses on financial and contract assets. Subsequent recoveries of amounts for which loss allowance was previously recognised are credited against the same line item.
Debt instruments carried at amortised cost are presented in the statement of financial position net of the allowance for ECL. For loan commitments and financial guarantee contracts, a separate provision for ECL is recognised as a liability in the statement of financial position.
For debt instruments at FVOCI, an allowance for ECL is recognised in profit or loss and it affects fair value gains or losses recognised in OCI rather than the carrying amount of those instruments.
The impairment methodology applied by the Company for calculating expected credit losses depends on the type of financial asset assessed for impairment. Specifically:
For trade receivables and contract assets, including trade receivables and contract assets with a significant financing component, and lease receivables the Company applies the simplified approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised from initial recognition of the financial assets.
For all other financial instruments that are subject to impairment under IFRS 9, the Company applies general approach - three stage model for impairment. The Company applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1.
Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter ("12 Months ECL"). If the Company identifies a significant increase in credit risk ("SICR") since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any ("Lifetime ECL"). Refer to note 6, Credit risk section, for a description of how the Company determines when a SICR has occurred. If the Company determines that a financial asset is creditimpaired, the asset is transferred to Stage 3 and its ECL is measured as a Lifetime ECL. The Company's definition of credit impaired assets and definition of default is explained in note 6, Credit risk section.
Additionally the Company has decided to use the low credit risk assessment exemption for investment grade financial assets. Refer to note 6, Credit risk section for a description of how the Company determines low credit risk financial assets.
Financial instruments are reclassified only when the business model for managing those assets changes. The reclassification has a prospective effect and takes place from the start of the first reporting period following the change.
Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.
The Company sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Company assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset (e.g. profit share or equity-based return), significant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.
If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes. including determining whether a SICR has occurred. The Company also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.
In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Company compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss.
For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and bank overdrafts. In the statement of financial position, bank overdrafts are included in borrowings in current liabilities. Cash and cash equivalents are carried at amortised cost because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.
These amounts generally arise from transactions outside the usual operating activities of the Company. They are held with the objective to collect their contractual cash flows and their cash flows represent solely payments of principal and interest. Accordingly, these are measured at amortised cost using the effective interest method, less provision for impairment. Financial assets at amortised cost are classified as current assets if they are due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, in which case they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
Trade receivables are also subject to the impairment requirements of IFRS 9. The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. See note 6, Credit risk section.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company, and a failure to make contractual payments for a period of greater than 180 days past due.
Financial guarantee contracts are contracts that require the Company to make specified payments to reimburse the holder of the guarantee for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantees are recognised as a financial liability at the time the guarantee is issued.
Financial guarantees are initially recognised at their fair value, which is normally evidenced by the amount of fees received. In the absence of fees received, the fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.
Financial guarantees are subsequently measured at the higher of (i) the amount determined in accordance with the expected credit loss model under IFRS 9 "Financial Instruments", and (ii) the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15 "Revenue from Contracts with customers".
Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
An exchange between the Company and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms and conditions of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. (In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in loan covenants are also considered.)
If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
Modifications of liabilities that do not result in extinguishment are accounted for as a change in estimate using a cumulative catch up method, with any gain or loss recognised in profit or loss, unless the economic substance of the difference in carrying values is attributed to a capital transaction with owners and is recognised directly to equity.
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds, including interest on borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset, when it is probable that they will result in future economic benefits to the Company and the costs can be measured reliably.
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the statement of financial position.
Inventories are stated at the lower of cost and net realisable value. The cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses.
Ordinary shares are classified as equity.
Non-current liabilities represent amounts that are due more than twelve months from the reporting date.
At the date of approval of these financial statements, standards and interpretations were issued by the International Accounting Standards Board which were not yet effective. Some of them were adopted by the European Union and others not yet. The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the financial statements of the Company.
The Company is exposed to interest rate risk, credit risk, liquidity risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Company to manage these risks are discussed below:
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company's income and operating cash flows are substantially independent of changes in market interest rates as the Company has no significant interest-bearing assets. The Company is exposed to interest rate risk in relation to its non-current borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company's Management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet an obligation. Credit risk arises from [cash and cash equivalents, contractual cash flows of debt investments carried at amortised cost, at fair value through other comprehensive income (FVOCI) and at fair value through profit or loss (FVTPL), favourable derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and contract assets as well as lease receivables. Further, credit risk arises from financial guarantees and credit related commitments.]
Credit risk is managed on a group basis. For banks and financial institutions, the Company has established policies whereby the majority of bank balances are held with independently rated parties with a minimum rating of ['C'].
If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, Management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. [Individual credit limits and credit terms are set based on the credit quality of the customer in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards.1
There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions.
The Company's investments in debt instruments are considered to be low risk investments. The credit ratings of the investments are monitored for credit deterioration.
These policies enable the Company to reduce its credit risk significantly.
The Company has the following types of financial assets that are subject to the expected credit loss model:
The impairment methodology applied by the Company for calculating expected credit losses depends on the type of financial asset assessed for impairment. Specifically:
Impairment losses are presented as net impairment losses on financial and contract assets within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item.
The Company considers the probability of default upon initial recognition of the asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of a default occurring on the financial asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information. Especially the following indicators are incorporated:
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Company has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors. No significant changes to estimation techniques or assumptions were made during the reporting period.
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
The Company has decided to use the low credit risk assessment exemption for investment grade financial assets. Management consider 'low credit risk' for listed bonds to be an investment grade credit rating with at least one major rating agency. Other instruments are considered to be low credit risk when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.
A default on a financial asset is when the counterparty fails to make contractual payments within 90 days of when they fall due.
Financial assets are written off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a repayment plan with the Company. The Company categorises a debt financial asset for write off when a debtor fails to make contractual payments greater than 180 days past due. Where debt financial assets have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
The Company's exposure to credit risk for each class of (asset/instrument) subject to the expected credit loss model is set out below:
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables (including those with a significant financing component, and contract assets.
To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Company has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2020 or 1 January 2020 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Company has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
The average credit period on sales of goods is 60 days. No interest is charged on outstanding trade receivables.
The Company always measures the loss allowance for trade receivables at an amount equal to lifetime ECL.
There were no significant trade receivable and contract asset balances written off during the year that are subject to enforcement activity.
(ii) Impairment of financial assets (continued)
The Company assesses, on a group basis, its exposure to credit risk arising from cash at bank. This assessment takes into account, ratings from external credit rating institutions and internal ratings, if external are not available.
Bank deposits held with banks with investment grade rating are considered as low credit risk.
The gross carrying amounts below represent the Company's maximum exposure to credit risk on these assets as at 31 December 2020 and 31 December 2019:
The ECL on current accounts is considered to be approximate to 0, unless the bank is subject to capital controls. The ECL on deposits accounts is calculated by considering published PDs for the rating as per Moody's and an LGD of 40-60% as published by ECB.
The Company does not hold any collateral as security for any cash at bank balances.
There were no significant cash at bank balances written off during the year that are subject to enforcement activity.
The primary purpose of these instruments is to ensure that funds are available to a borrower as required. Guarantees which represent irrevocable assurances that the Company will make payments in the event that a counterparty cannot meet its obligations to third parties, carry the same credit risk as loans receivable. Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans or guarantees. With respect to credit risk on commitments to extend credit, the Company is potentially exposed to loss in an amount equal to the total unused commitments, if the unused amounts were to be drawn down. The Company monitors the term to maturity of credit related commitments, because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.
Capital includes equity shares and share premium, convertible preference shares and loan from parent company.
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Company's overall strategy remains unchanged from last year.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
When measuring expected credit losses the Company uses reasonable and supportable forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other.
Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements.
Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions.
The Company reviews its inventory records for evidence regarding the saleability of inventory and its net realizable value on disposal. The provision for obsolete and slow-moving inventory is based on Management's past experience, taking into consideration the value of inventory as well as the movement and the level of stock of each category of inventory.
The amount of provision is recognised in profit or loss. The review of the net realisable value of the inventory is continuous and the methodology and assumptions used for estimating the provision for obsolete and slow-moving inventory are reviewed regularly and adjusted accordingly.
Critical judgements in applying the Company's accounting policies
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Company's past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Details of the key assumptions and inputs used are disclosed in note 6, Credit risk section.
| 2020 | Total | |
|---|---|---|
| Profit before tax Assets Liabilities |
€ (15, 915) 18,001,691 6,114,285 |
€ (15, 915) 18,001,691 6,114,285 |
| 2019 | Total | |
| € | € | |
| Profit before tax | (30, 744) | (30, 744) |
| Assets | 17,855,198 | 17,855,198 |
| Liabilities | 5,951,877 | 5,951,877 |
| 2020 | 2019 | |
|---|---|---|
| € | € | |
| Auditors' remuneration | 1,200 | 2,750 |
| Other expenses | 13,695 | 26,414 |
| Total expenses | 14,895 | 29,164 |
| 10. Finance costs | ||
| 2020 | 2019 | |
| € | € | |
| Interest expense | 679 | 828 |
| Sundry finance expenses | 341 | 752 |
| Finance costs | 1,020 | 1,580 |
The corporation tax rate is 12,5%.
Under certain conditions interest income may be subject to defence contribution at the rate of 30%. In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 17%.
Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc) are exempt from Cyprus income tax.
| 2020 | 2019 € |
|
|---|---|---|
| Assets for resale | 17,915,096 17,756,526 | |
| 17,915,096 17,756,526 |
During the previous year, the value of €17.592.772 (plus capitalised interest for 2019 of €163.754), previously recognised as assets held for sale, has been reclassified to inventory, since there is change in the intention of the Board, which intends to develop and sell a planned project of its own land in the future. The Company actively started activities for development of its land including obtaining relevant permits for the planned project and undertaking feasibility studies of its business plan etc.
On the basis of assessment by external parties, the Company is also considering to invite investors to participate in the Company in order to develop the project as a whole and sell it as a project.
During the year the interest amount of €158.570 was capitalised.
Assets are stated at the lower of cost and net realisable value.
| 2020 | 2019 |
|---|---|
| € | |
| 2,395 | 2,395 |
| $\blacksquare$ | 12,932 |
| 84,148 | 83,333 |
| 86,543 | 98,660 |
The Company does not hold any collateral over the trading balances.
The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above.
The exposure of the Company to credit risk and impairment losses in relation to trade and other receivables is reported in note 6 of the financial statements.
| Cash at bank and in hand | 2020 | 2019 |
|---|---|---|
| € | ||
| $\sim$ | ||
For the purposes of the cash flow statement, the cash and cash equivalents include the following:
| 2020 | 2019 |
|---|---|
| € | |
| 52 | 12 |
| (70,178) | |
| (70, 166) | |
The exposure of the Company to credit risk and impairment losses in relation to cash and cash equivalents is reported in note 6 of the financial statements.
| 2020 Number of |
2020 | 2019 Number of |
2019 | |
|---|---|---|---|---|
| Authorised | shares | € | shares | € |
| Ordinary shares of €1 each | 12,000,000 | 12,000,000 | 12,000,000 | 12,000,000 |
| Issued and fully paid Balance at 1 January Change in denomination of share capital (from |
11,934,065 | 11,934,065 | 3,000 | 5,130 |
| €1,00 to $€1,71)$ Issue of shares |
$\overline{\phantom{0}}$ (11, 934, 065) |
2,130 11,928,935 |
11,928,935 | |
| Balance at 31 December | 11,934,065 | 11,934,065 | 11,934,065 |
| 2020 € |
2019 € |
|
|---|---|---|
| Current borrowings | ||
| Bank overdrafts (Note 14) | 70,178 | |
| Bank loans | 453,268 | 453,268 |
| 453,268 | 523,446 | |
| Non-current borrowings | ||
| Bank loans | 5,469,513 | 5,415,348 |
| Total | 5,922,781 | 5,938,794 |
| Maturity of non-current borrowings: | ||
| 2020 | 2019 | |
| € | € | |
| Between one to two years | 453,268 | 453,268 |
| Between two and five years | 1,220,339 | 1,220,339 |
| After five years | 3,795,906 | 3,741,741 |
| 5.469.513 | 5415348 |
Bank loan 1: The bank loan in the original amount of €8.713.868 is repayable by monthly installments of €22.097 each until 2037 and a final balloon payment of €26.690. The loan is subject to a fixed interest rate of 2,83% per annum.
Bank loan 2: The bank loan in the original amount of €2.500.000 is repayable by monthly installments of €12,770 each until 2038 and a final balloon payment of €12.989. The loan is subject to a 3-month floating rate equal to Euribor plus a margin of 2,83% per annum.
The bank loans and overdrafts are secured as follows:
| 2020 | 2019 | |
|---|---|---|
| € | ||
| Shareholders' current accounts - credit balances (Note 20.2) | 190,002 | |
| Accruals | 1,451 | 3,000 |
| Other creditors | 10,032 | |
| 191,453 | 13,032 |
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
| 2020 | 2019 | |
|---|---|---|
| Special contribution for defence | ||
On 11 March 2020, the World Health Organisation declared the Coronavirus COVID-19 outbreak to be a pandemic in recognition of its rapid spread across the globe. Many governments are taking increasingly stringent steps to help contain, and in many jurisdictions, now delay, the spread of the virus, including: requiring self-isolation/ quarantine by those potentially affected, implementing social distancing measures, and controlling or closing borders and "locking-down" cities/regions or even entire countries. These measures have slowed down the economies both in Cyprus but globally as well with the potential of having wider impacts on the respective economies as the measures persist for a greater period of time.
This operating environment may have a significant impact on the Company's operations and financial position. Management is taking necessary measures to ensure sustainability of the Company's operations. However, the future effects of the current economic situation are difficult to predict and Management's current expectations and estimates could differ from actual results.
The Company's Management is unable to predict all developments which could have an impact on the Cyprus economy and consequently, what effect, if any, they could have on the future financial performance, cash flows and financial position of the Company.
On the basis of the evaluation performed, the Company's management has concluded that no provisions or impairment charges are necessary. The Company's Management believes that it is taking all the necessary measures to maintain the viability of the Company and the smooth conduct of its operations in the current business and economic environment.
The following transactions were carried out with related parties:
| 2020 | 2019 | ||
|---|---|---|---|
| Name | Nature of transactions | € | € |
| P.G. Economides Holdings Ltd | 12,932 | ||
| 12,932 | |||
| 20.2 Shareholders' current accounts - credit balances (Note 17) | |||
| 2020 | 2019 | ||
| € | |||
| P.G. Ecnomides Holdings Ltd | 190,002 | ||
| 190,002 |
The directors'/shareholders' current accounts are interest free, and have no specified repayment date.
The percentage of share capital of the Company held directly or indirectly by each member of the Board of Directors (in accordance with Article (4) (b) of the Directive DI 190-2007-04), as at 31 December 2020 and 24 April 2021 (5 days before the date of approval of the financial statements by the Board of Directors) were as follows:
31 December 2020 24 April 2021 $\frac{0}{0}$ $\frac{0}{0}$
The persons holding more than 5% of the share capital as at 31 December 2020 and 24 April 2021 (5 days before the date of approval of the financial statements by the Board of Directors) were as follows:
| 31 December | ||
|---|---|---|
| 2020 24 April 2021 | ||
| $\alpha$ | $\frac{1}{\alpha}$ | |
| P.G. Economides Holdings Ltd | 99.99 | $\overline{a}$ |
The shareholding interest of P.G. Economides Holdings Ltd includes his direct participation with a percentage of €11,934,053 99.99%.
At the end of the year, no significant agreements existed between the Company and its Management.
The Company had no contingent liabilities as at 31 December 2020.
The Company had no capital or other commitments as at 31 December 2020.
There were no material events after the reporting period, which have a bearing on the understanding of the financial statements.
| CONTENTS | PAGE | |
|---|---|---|
| Detailed income statement | $\overline{2}$ | |
| Operating expenses | 3 | |
| Finance expenses | $\overline{4}$ | |
| Calculation of tax losses for the five-year period | 4 |
$\alpha$
31 December 2020
$\sim$
| Page | 2020 € |
2019 € |
|
|---|---|---|---|
| Revenue | |||
| Operating expenses | |||
| Administration expenses Selling and distribution expenses |
3 3 |
(14, 895) | (22, 919) (6, 245) |
| Operating loss | (14, 895) | (29, 164) | |
| Finance costs | 4 | (1,020) | (1,580) |
| Net loss for the year before tax | (15, 915) | (30,744) |
$\sim$
UŚ.
| 2020 | 2019 | |
|---|---|---|
| € | € | |
| Administration expenses | ||
| Annual levy | 350 | 350 |
| Immovable property tax | 8,452 | 1,483 |
| Water supply and cleaning | 600 | 300 |
| Valuation Expenses | 1,500 | 5,000 |
| Auditors' remuneration | 1,200 | 2,750 |
| Other professional fees | 250 | |
| Revenue stamps | 40 | 40 |
| Sewage Expenses | 2,753 | 2,746 |
| Consultancy Fees | 10,000 | |
| 14,895 | 22,919 | |
| 2020 | 2019 | |
| € | € | |
| Selling and distribution expenses | ||
| Advertising | 6,245 | |
| 6,245 |
31 December 2020
$\tilde{L}_{\infty}^{\infty}$
| 2020 € |
2019 € |
|
|---|---|---|
| Finance costs | ||
| Interest expense Interest on loan from related company |
679 | 828 |
| Sundry finance expenses Bank charges |
341 | 752 |
| 1,020 | 1,580 |
$\langle \sigma \rangle$
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