TIDMCBA
RNS Number : 7858J
Ceiba Investments Limited
29 April 2022
29 April 2022
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
RESULTS FOR THE YEARED 31 DECEMBER 2021
COMPANY OVERVIEW
GENERAL
CEIBA Investments Limited ("CEIBA" or the "Company") is a
Guernsey-incorporated, closed-ended investment company, with
registered number 30083. The Ordinary Shares of the Company are
listed on the Specialist Fund Segment ("SFS") of the London Stock
Exchange's Main Market under the symbol CBA (ISIN: GG00BFMDJH11).
The Company's Bonds are listed on the International Stock Exchange,
Guernsey under the symbol CEIB1026 (ISIN: GG00BMV37C27). The
governance framework of the Company reflects that as an investment
company there are no employees, and the Directors, the majority of
whom are independent, are all non-executive. Like many other
investment companies, the investment management and administration
functions are outsourced to third party providers. Through its
consolidated subsidiaries (together with the Company, the "Group"),
the Company invests in Cuban real estate and other assets by
acquiring shares in Cuban joint venture companies or other entities
that have direct interests in the underlying properties. The
Company also arranges and invests in financial instruments granted
in favour of Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2021 IN GBP AND US$
(FOREX: GBP/US$ = 1.3477)
The Company's Net Asset Value ("NAV") and share price are quoted
in Sterling (GBP) but the functional currency of the Company is the
U.S. Dollar (US$). As such, the financial highlights of the Company
set out below are being provided in both currencies, applying the
applicable exchange rate as at 31 December 2021 of GBP1:US$ 1.3477
(2020: GBP1=US$1.3608).
USD 31-Dec-21 31-Dec-20 % change
( 17.
Total Net Assets (m) $160.3 $194.4 5)%
( 17.5
NAV per Share (1) $1.16 $1.41 )%
Net Loss to shareholders ($ 19.80 ( 45.5
(m) ($ 28.8 ) ) )%
($ 0.21 ( 50.0
Loss per share ) ($ 0.14 ) )%
GBP 31-Dec-21 31-Dec-20 % change
( 16.7
Total Net Assets (m) GBP118.96 GBP142.90 )%
( 16.7
NAV per Share (1) GBP0.864 GBP1.038 )%
( 24.7
Market Capitalisation (m) GBP88.1 GBP116.30 )%
( 24.7
Share price GBP0.64 GBP0.85 )%
Discount (1) ( 25.9 )% ( 18.6 )%
Shares in issue 137,671,576 137,671,576
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Ongoing charges (1) 2.80% 2.91%
1 These are considered Alternative Performance Measures. See
glossary for more information.
MANAGEMENT
The Company has appointed Aberdeen Standard Fund Managers
Limited ("ASFML" or the "AIFM") as the Company's alternative
investment fund manager to provide portfolio and risk management
services to the Company. The AIFM has delegated portfolio
management to Aberdeen Asset Investments Limited ("AAIL" or the
"Investment Manager"). Both ASFML and AAIL are wholly-owned
subsidiaries of abrdn plc ("abrdn"), a publicly-quoted company on
the London Stock Exchange. References throughout this document to
abrdn refer to both the AIFM and the Investment Manager.
CHAIRMAN'S STATEMENT
At the time of publication of the 2020 Annual Report of CEIBA
Investments Limited ("CEIBA" or the " Company ") in April 2021,
both the Company and Cuba were in the midst of the battle against
the Covid-19 pandemic and at that time the long-term impact of the
virus and the timing of the expected return to normality were
difficult to predict with any degree of certainty. Overall, Cuba
has handled the virus well and to date, around 10.6 million people
or 94% of the population have received at least one vaccine dose
and 87% are fully vaccinated. Consequently, like many other
countries, Cuba has now rolled back many of the various
restrictions, especially concerning travel, which had been imposed
to combat the virus. However, as global travel begins a slow
recovery there is no question that CEIBA has been severely impacted
throughout 2020 and 2021 and will continue to suffer somewhat until
a full return to normal is achieved. Compounding the pandemic
issues are the challenges presented by the ongoing U.S. embargo
against Cuba, the conflict between Russia and Ukraine and the
transitionary effects of recent monetary reforms adopted by the
Cuban government. Overall, CEIBA finds itself at present trading in
a very challenging environment.
CUBA MONETARY REFORMS
In the second half of 2020, the Cuban government undertook to
adopt significant monetary reforms, which your Board considers to
be positive overall. These reforms, which are generally referred to
as the Tarea Ordenamiento (TO), took effect on 1 January 2021 and
included:
- the elimination of the Cuban Convertible Peso (CUC), which
previously traded at par with the U.S. Dollar (US$), thereby
unifying the dual currency system under a single currency: the
Cuban Peso or CUP;
- a fixed official exchange rate between the CUP and the US$ of 24 to 1, and;
- the adoption of a system for allocating hard currency
throughout the economy intended to largely decentralise business
decisions and provide foreign investment vehicles and Cuban
entities with real financial autonomy. This is accomplished through
the creation of "liquidity" rights (denominated in US$) that can be
used to exchange Cuban Pesos to hard currency for international
transfers on a decentralised basis.
While the Board considers these reforms to be a positive move
the timing, in hindsight, has been unfortunate. The lack of any
easing of the U.S. Cuban embargo under the Biden administration and
the very slow resumption of international travel in the face of the
pandemic have severely impaired the foreign exchange reserves and
general liquidity position of the Cuban economy, through reduced
overseas remittances and greatly reduced tourism income.
What we are presently witnessing in Cuba as a result of the poor
liquidity position is a shortage of vital imported products,
increased inflation and a serious devaluation of the street value
of the CUP. The Investment Manager's report describes the reforms
and their effects in further detail, but at present the main
uncertainty caused by them for CEIBA is in relation to the income
generated by Inmobiliaria Monte Barreto S.A. (" Monte Barreto ")
and the Company's ability to realise such income in the form of
hard currency dividend payments.
RELATIONS WITH THE UNITED STATES
U.S.-Cuba relations had been expected to improve following the
inauguration of President Biden in January 2021, but
disappointingly to date nothing has changed from the Trump
presidency and all U.S. sanctions have remained stubbornly in place
during 2021. In respect of U.S. personnel and entities, the U.S.
Cuban embargo legislation prohibits investments in Cuba, greatly
constrains family and other hard currency remittances, commercial
transactions and trade, and severely restricts travel. It is
possible that following the mid-term election in November 2022 we
may see some relaxation of the rules in accordance with the
promises given prior to his election. Any initiatives to improve
the relationship between the two countries should have a very
positive impact on the Cuban economy and also on the Company's
assets.
2021 REVIEW
Similar to its performance throughout the whole of 2020 and
despite the backdrop of the Covid-19 pandemic, Monte Barreto, the
Cuban joint venture company that owns and operates the Miramar
Trade Center, which is Cuba's leading mixed-use office and retail
real estate complex, continued to trade strongly throughout 2021
and occupancy levels remained well over 95% throughout the year.
Although revenues were down slightly as compared with the prior
year, net income in 2021 reached US$15.6 million for the year,
representing an 8.5% increase over the prior year and making 2021
the most profitable year since incorporation of the joint venture.
This increase in profitability has largely been a result of the
lower operating costs as a result of the unification of the
currency. The 2022 outlook for Monte Barreto continues to be
positive, with occupancy percentage levels expected to remain in
the high nineties throughout the year.
While Monte Barreto continues to trade well, there presently
remains considerable uncertainty over the impact of Cuba's monetary
reforms on the ability of the joint venture company to generate
"liquid" hard currency income from its operations (and consequently
its ability to pay dividends to its shareholders without depending
on allocations of hard currency from the Cuban authorities). This
matter remains unresolved at present and discussions are continuing
between the joint venture partner and the relevant Cuban government
authorities to confirm the position. While this uncertainty
remains, the discount rates applied to future cash flows for the
purpose of arriving at a valuation for Monte Barreto have
increased, resulting in a lower valuation for CEIBA's present
interest. In addition, due to the uncertainty on the timing of
payment of the dividends owed to the Company by Monte Barreto, the
Company has made a provision in its financial statements in the
amount of US$12,281,408 representing the outstanding dividends
receivable from Monte Barreto.
Throughout 2021, the global travel and hotel industries
continued to be severely impacted by the Covid-19 pandemic. During
November 2021 Cuba re-opened its borders to international tourism,
but then the Omicron variant of the virus spread globally and
further delayed any material recovery in the travel trade. As a
result, in 2021 Cuba received fewer than 360,000 tourists - 67%
less than during 2020, and less than 10% of the 4 million tourists
that Cuba hosted during 2019, the last year before the
pandemic.
CEIBA's main hotel interests are held through its 32.5% holding
in the Cuban joint venture company Miramar S.A. (" Miramar ").
Miramar owns three hotels in Varadero and one hotel in Havana. In
Varadero, the Meliã Las Américas and the Meliã Varadero re-opened
in November 2021, having been closed since arrival of the pandemic
in March 2020. The Sol Palmeras remained open for most of the year
but traded on a heavily scaled-back basis and mainly to Cuban
nationals. The Meliã Habana Hotel in Havana remained open
throughout 2021 and was one of the main quarantine hotels on the
island, managing to maintain positive operations throughout the
year. Miramar had a negative EBITDA of US$4.5 million, including a
one-time foreign exchange expense of US$5.4 million relating to the
conversion of monetary assets under the monetary reforms. While the
recovery in the tourist trade remains slow, a gradual build up
throughout 2022 is expected.
CEIBA's other hotel interest is its 40% holding in the Cuban
joint venture company TosCuba S.A. (" TosCuba "), which is
constructing the 400-room Meliã Trinidad Península Hotel. This
hotel is situated on the south coast of Cuba close to the historic
city of Trinidad and will be the first modern
international-standard beach resort hotel in the area. It should
prove to be an excellent addition to the hotel interests of the
Company. Construction has continued throughout the year, although
at a reduced pace, and the original contractor was replaced in the
first half of 2021 following repeated defaults in performance.
Completion of the construction process is expected to take place
during 2022, with a soft opening scheduled for the first quarter of
2023 and the official launch of the hotel during Cuba's
international Tourism Fair in May 2023.
DIVIDS
The Covid pandemic has clearly had a very negative impact on the
revenues generated by the Company's hotel interests and it was
decided, following its onset, that it was vital that CEIBA should
maintain sufficient cash to meet all of its existing and future
undertakings. Accordingly, the dividend policy was suspended in
2020 and no dividend has been paid since then. The Board would very
much like to reinstate the payment of dividends but, in view of
there still being considerable uncertainty as to how long it will
take to see a return of normal tourism numbers and with the added
uncertainty of the impact of the monetary reforms on the dividends
payable by Monte Barreto, it has been decided to maintain the
present position for another year. Accordingly, it is not intended
that any dividend be paid to shareholders in 2022. This stance will
be kept under constant review and it remains the Board's intention
to reinstate the dividend as soon as appropriate.
BOARD
I am grateful to the Board for their commitment and input during
another challenging year. It is the Board's policy to undertake a
regular review of its own performance to ensure that it has the
appropriate mix of relevant experience and skills to ensure the
effective overall operation of the Company. In this latter regard,
I am delighted to welcome Jemma Freeman to the board. She was
appointed in October 2021 and is the Executive Chairman of Hunters
& Frankau Limited, the exclusive distributor for Habanos S.A.'s
cigar portfolio in the United Kingdom. The Freeman family have been
involved with cigars since the 1800's and with Cuba since the
1920's when they owned cigar factories in Havana. She brings a
wealth of experience, skills and diversity to the Board, in
addition to her deep knowledge and understanding of the Cuban
business environment, complementing those of our existing
directors.
THE INVESTMENT MANAGER
Aberdeen Standard Fund Managers Limited, a wholly owned
subsidiary of abrdn plc, has acted as manager of the Group's
portfolio of assets throughout the year. There has been no change
in the underlying key operational management of the Company and
this team continues to be headed by Sebastiaan Berger, who is
exclusively focused on the Company's assets and business and has
acted in this role for some 20 years. The Board reviewed the work
of the Investment Manager during the year and concluded that it was
very satisfied with the performance of the Investment Manager and
that it was in the best interests of shareholders that ASFML remain
as manager of the portfolio.
The Board extends its sincere thanks to the Investment Manager
and to the entire management team based in Cuba for their
commitment and efforts on behalf of the Company in these very
difficult times.
John Herring
Chairman
28 April 2022
STRATEGIC REPORT
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide a regular
level of income and substantial capital growth.
INVESTMENT POLICY
The Company is a country fund with a primary focus on Cuban real
estate assets. The Company seeks to deliver the investment
objective primarily through investment in, and management of, a
portfolio of Cuban real estate assets, with a focus on the tourism
and commercial property sectors. Cuban real estate assets may also
include infrastructure, industrial, retail, logistics, residential
and mixed-use assets (including development projects).
The Company may also invest in any type of financial instrument
or credit facility secured by Cuba-related cash flows.
In addition, subject to the investment restrictions set out
below, the Company may invest in other Cuba-related businesses,
where such are considered by the Investment Manager to be
complementary to the Company's core portfolio ("Other Cuban
Assets"). Other Cuban Assets may include, but are not limited to,
Cuba-related businesses in the construction or construction supply,
logistics, energy, technology and light or heavy industrial
sectors.
Investments may be made through equity investments, debt
instruments or a combination of both.
The Company will invest either directly or through holdings in
special purpose vehicles ("SPVs"), joint venture vehicles,
partnerships, trusts or other structures. The Cuban Foreign
Investment Act (Law 118 / 2014) guarantees that the holders of
interests in Cuban joint venture companies may transfer their
interests, subject always to agreement between the parties and the
approval of the Cuban government.
INVESTMENT RESTRICTIONS
The following investment limits and restrictions apply to the
Company and its business which, where appropriate, will be measured
at the time of investment:
-- the Company will not knowingly or intentionally use or
benefit from confiscated property to which a claim is held by a
person subject to U.S. jurisdiction;
-- the Company may invest in Cuban and non-Cuban companies,
joint ventures and other entities that earn all or a substantial
part of their revenues from activities outside Cuba, although such
investments will, in aggregate, be limited to less than 10% of the
Gross Asset Value;
-- save for Monte Barreto (see the Investment Manager's Review
for more information on this asset), the Company's maximum exposure
to any one asset will not exceed 30 per cent. of the Gross Asset
Value;
-- no more than 20 per cent. of the Gross Asset Value will be
invested in Other Cuban Assets; and
-- no more than 20 per cent. of the Gross Asset Value will be
exposed to "greenfield" real estate development projects, being
new-build construction projects carried out on undeveloped
land.
The restrictions above apply at the time of investment and the
Company will not be required to dispose of any asset or to
re-balance the portfolio as a result of a change in the respective
valuations of its assets. The investment limits detailed above will
apply to the Group as a whole on a look-through basis, i.e. where
assets are held through subsidiaries, SPVs, or equivalent holding
vehicles, the Company will look through the holding vehicle to the
underlying assets when applying the investment limits.
KEY PERFORMANCE INDICATORS ("KPIs")
The KPIs by which the Company measures its economic performance
include:
-- Total income
-- Net income
-- Total net assets
-- Net asset value per share (NAV)*
-- Net asset value total return*
-- Market capitalisation
-- Premium / Discount to NAV *
-- Dividend per share
-- Gain / Loss per share
* These are considered Alternative Performance Measures.
In addition to the above measures, the Board also regularly
monitors the following KPIs of the joint venture companies in which
the Company is invested and their underlying real estate assets,
all of which are Alternative Performance Measures.
In the case of commercial properties, other KPIs include:
-- Occupancy levels
-- Average monthly rate per square meter (AMR)
-- Earnings before interest, tax, depreciation and amortisation (EBITDA)
-- Net income after tax
In the case of hotel properties, other KPIs include:
-- Occupancy levels
-- Average Daily Rate per room (ADR)
-- Revenue per available room (RevPAR)
-- EBITDA
-- Net income after tax
The Board also monitors the financial performance of the Cuban
joint venture companies that own the commercial and hotel
properties using these KPIs. The Board and the Investment Manager
seek to influence the management decisions of the Cuban joint
venture companies through representation on their corporate bodies
with the objective of generating reliable and growing cash flow for
the Cuban joint venture companies, which in turn will be reflected
in reliable and growing dividend streams in favour of the
Company.
PRINCIPAL RISKS
PRINCIPAL RISKS
Introduction
The Company is exposed to a variety of risks and uncertainties.
The Board, through the Audit Committee, is responsible for the
management of risk and has put in place a regular and robust
process to identify, assess and monitor the principal risks and
uncertainties facing the business. A core element of this process
is the Company's risk register which identifies the risks facing
the Company and identifies how these may impact on operations,
performance and solvency and what mitigating actions, if any, can
be taken. There are a number of risks which, if they occurred,
could have a material adverse effect on the Company and its
financial condition, performance and prospects. As part of its risk
process, the Board also seeks to identify emerging risks to ensure
that they are effectively managed as they develop. In the event
that an emerging risk has gained significant weight or importance,
that risk is categorised and added to the Company's risk register
and is monitored accordingly.
Principal Risks
The Company invests in Cuba, a frontier or pre-emerging market,
which may increase the risk as compared to investing in similar
assets in other jurisdictions.
In addition to general country-risk, the most significant risks
faced by the Company during the financial year appear in the table
below, together with a description of the possible impact thereof,
mitigating actions taken by the Company and an assessment of how
such risks are trending at the present time.
The Board relies upon its external service providers to ensure
the Company's compliance with applicable regulations and, from time
to time, employs external advisers to advise on specific concerns.
The operation of key controls in the Investment Manager's and other
third party service providers risk management processes and how
these apply to the Company's business are reviewed regularly by the
Audit Committee along with internal control reports from these
entities.
Type of Risk Description and Possible Mitigating Action Trend
Impact
Emerging Risks relating to the Cuban Financial System
Cuban Financial During the second half The Investment Manager á
Reforms - Financial of 2020 and continuing has closely followed all
Autonomy Rules throughout 2021, in the developments relating to
midst of the economic the adoption and implementation
disruption caused by the of these new measures,
Covid-19 pandemic and and has communicated its
strengthened sanctions views and interacted regularly
maintained in place by at all appropriate levels
the U.S. government, the in order to extend their
Cuban government adopted application to the operations
new financial reforms of the joint venture companies
aimed at creating a new in which the Company has
objective system for the a participation.
allocation of limited Although the interpretation
liquidity reserves within of the new financial autonomy
the economy and intending rules, as well as the practical
to provide "real financial ability of the Cuban financial
autonomy" to Cuban entities, system to successfully
including foreign investment implement them in the short
vehicles such as the joint term, remain subject to
venture companies in which significant uncertainty,
the Company invests. These the Investment Manager
reforms set fixed levels believes that the new financial
of "liquidity" for various autonomy rules will in
types of income and largely most cases create an objective
remove the requirement (non-discretionary) and
to obtain centralised largely decentralised mechanism
foreign exchange approvals for the allocation of liquid
for international payments resources, thereby significantly
(such as the distribution increasing the financial
of dividends to foreign autonomy of joint venture
shareholders) sourced companies and representing
from the "liquid" financial a real reduction in liquidity
resources over which the risk.
entities have autonomous/decentralised Where insufficient liquidity
control. This new "liquidity" may be generated from operations,
generated automatically then the relevant joint
in the course of operations venture companies will
is in addition to the remain subject, as before,
regular centralised/government to the more general system
allocations of liquidity, of centralised allocation
which must still be provided of liquidity, with the
(as was the case prior inherent risks that this
to adoption of the reforms) implies.
in the event that the
financial autonomy rules
do not generate sufficient
liquid resources from
operations to cover international
obligations. However,
these measures are being
implemented gradually
and do not at present
apply to all economic
sectors or to all joint
venture companies. In
particular, the new rules
are not presently being
applied to joint venture
companies in the commercial
real estate sector (such
as Inmobiliaria Monte
Barreto S.A. in which
the Company has a 49%
interest) with the result
that these companies remain
fully dependent on centrally
assigned liquidity for
their international payments.
The new measures may take
time to show the intended
effect or may not have
the stated positive impact
on the liquidity position
of the country, or their
application may not be
fully extended to all
of the joint venture companies
in which the Company has
a participation, which
may have a negative effect
of the affairs of the
Company.
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Currency Reform As part of the 2020-2021 The currency devaluation á
Risk economic reform package risk associated with the
adopted by the Cuban government imposition of the CUP as
in order to continue modernising sole currency for operations
the Cuban economy, new is new and significant.
currency reforms aimed The cash and currency positions
at harmonising exchange of each of the joint venture
rates and eliminating companies in which the
Cuba's dual currency system Company has a participation
required all foreign investment are continuously monitored
vehicles to convert and for the purpose of reducing
denominate their assets currency risk to the greatest
and legal obligations, extent possible. There
and to carry out all transactions, are presently no hedging
in Cuban Pesos (" CUP mechanisms available to
" previously denominated mitigate this new risk.
and carried out in US$).
The Cuban Peso has a fixed
(non-market) exchange
rate of US$1.00 : CUP24,
which may be subject to
further devaluation at
the discretion of the
Cuban Central Bank.
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General Liquidity The continued high levels The Investment Manager á
of the Cuban Financial of tension between the actively monitors and manages
System and Repatriation United States and Cuba the liquidity position
Risk and the maintenance by of the Company, its subsidiaries
the Biden administration and the joint ventures,
of harsh U.S. sanctions in which it invests to
imposed during the Trump the greatest extent possible
administration, which so that cashflows of the
have resulted in steep Company are transferred
reductions in U.S. family to bank accounts outside
remittances and travellers Cuba. The Investment Manager
to Cuba, as well as the has no control or influence
global fall in international over the execution or timing
tourism and other economic of payments to be transferred
shocks associated with by Cuban banks to the Company's
the Covid-19 pandemic, international bank accounts.
together with numerous
transitional difficulties
associated with the implementation
of the currency reform
measures described above,
have had strong negative
impacts on the fragile
economic and liquidity
positions in Cuba. In
the final months of 2021
and through the first
quarter of 2022, there
was a marked deterioration
in the timing of international
transfers from Cuba. The
duration of these negative
effects is unknown, and
they may in turn have
a continuing negative
impact on the ability
of the joint venture companies
in which the Company has
an interest to make distributions
abroad, which in turn
may have a negative impact
on the ability of the
Company to carry out its
investment programme.
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Risks relating Cuba maintains strong Although the conflict resulted á
to the War in historical, political in an abrupt halt of the
Ukraine and economic ties to Russia tourists travelling from
and to Ukraine. The Russian-Ukrainian Russia and Ukraine to Cuba,
conflict that erupted the operator of the Company's
in February 2022 resulted tourism assets has refocused
in an abrupt halt in Russia its marketing efforts to
and Ukraine tourism to attract tourists from its
the island. Since the historical principal tourist
reopening of the tourism supplier (Canada) and other
sector in November 2021, countries.
Cuba welcomed a significant
number of Russian and
Ukranian tourists to the
island. Further aspects
of the Russia-Cuba relationship
may eventually be affected
by the conflict, including
Russian investments in
Cuba, banking relationships
and other areas.
---------------------------------------- ------------------------------------- -------
Public Health Risk
Global Pandemic Although Cuba and many The Board discusses current â
Risk other parts of the world issues with the Investment
appear to have now passed Manager to limit the impact
the worst stage of the of the pandemic on the
Covid-19 pandemic and business of the Company.
to have reached, or be The Board recognises that
on the point of reaching, tourism is particularly
a stage of declining numbers affected by the various
of new cases, hospitalisations travel restrictions that
and deaths, the continued have been imposed and considers
effects of the public that this is a risk that
health risks associated is likely to continue to
with the Covid-19 pandemic, impact upon the operating
including the arrival environment of the Company
of new variants, may have in the short term .
a lasting and as yet unquantifiable The Board's actions are
negative impact on the targeted at (i) protecting
global tourism industry, the welfare of the various
the economy of Cuba, and teams involved in the affairs
the operations and performance of the Company, (ii) ensuring
of the assets of the Company. operations are maintained
The pandemic may directly to the extent possible
or indirectly affect all and to protect and support
other risk categories the assets of the Company
mentioned in this matrix. for the duration of the
present crisis, and (iii)
to mitigate insofar as
possible the longer-term
negative impact of economic
and operational disruption
caused by this and future
pandemics.
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Risks Relating to the Company and its Investment Strategy
Investment Strategy The setting of an unattractive The Company's investment ->
and Objective strategic proposition strategy and objective
to the market and the is subject to regular review
failure to adapt to changes to ensure that it remains
in investor demand may attractive to investors.
lead to the Company becoming The Board considers strategy
unattractive to investors, regularly and receives
a decreased demand for strategic updates from
shares and a widening the Investment Manager,
discount. investor relations reports
and updates on the market
from the Company's Broker.
At each Board meeting,
the Board reviews the shareholder
register and any significant
movements. The Board considers
shareholder sentiment towards
the Company with the Investment
Manager and Broker, and
the level of discount at
which the Company's shares
trade.
---------------------------------------- ------------------------------------- -------
Investment Restrictions Investing outside of the The Board sets, and monitors, ->
investment restrictions its investment restrictions
and guidelines set by and guidelines, and receives
the Board could result regular reports which include
in poor performance and performance reporting on
inability to meet the the implementation of the
Company's objectives, investment policy, the
as well as a discount. investment process and
application of the guidelines.
The Investment Manager
attends all Board meetings.
The Board monitors the
share price relative to
the NAV.
---------------------------------------- ------------------------------------- -------
Portfolio and Operational Risks
Joint Venture The investments of the Prior to entering into ->
Risk Group in Cuban real estate any agreement to acquire
assets are made through an investment, the Investment
Cuban joint venture companies Manager will perform or
in which Cuban government procure the performance
entities hold an equity of due diligence on the
interest, giving rise proposed acquisition target.
to risks relating to the The Group tries to structure
liquidity of investments, its equity investments
government approval, corporate in Cuban joint venture
governance and deadlock. companies so as to include
a viable exit strategy.
The Investment Manager,
or the members of the on-the-ground
team, regularly attend
the Board meetings of the
joint venture companies
through which Group interests
are held, and actively
manage relations with the
management teams of each
joint venture company,
the relevant Cuban shareholders
and relevant third parties
to ensure that Group interests
are enhanced.
---------------------------------------- ------------------------------------- -------
Real Estate Risk As an indirect investor The Investment Manager á
in real estate assets, regularly monitors the
the Company is subject level of real estate risk
to risks relating to property in the Cuban market and
investments, including reports to the Board at
access to capital and each meeting regarding
finance, global capital recent developments. The
and financial market conditions, Investment Manager works
acquisition and development closely with the on-the-ground
risk, competition, tenant team, the external hotel
risk, environmental risk managers and the joint
and others, and the materialisation venture managers to identify,
of these risks could have monitor and actively manage
a negative effect on specific local real estate risk.
properties, development In the case of Monte Barreto,
projects or the Group tenant risk has been augmented
generally. by the new financial autonomy
rules, which result amongst
others in certain categories
of tenants paying their
rents with varying degrees
of liquidity. The Investment
Manager, together with
the management team of
Monte Barreto, now assesses
the impact of the new financial
autonomy rules in all new
leasing decisions.
---------------------------------------- ------------------------------------- -------
Construction Risk As a developer and investor The Investment Manager á
in new construction as regularly monitors all
well as refurbishment construction and refurbishment
projects, the Company activities carried out
is subject to risks relating within Group companies
to the planning, execution and works closely with
and cost of construction the on-the-ground management
works, including the availability team and the joint venture
and transportation of managers to identify, monitor
materials and the cost and actively manage all
thereof, inclement weather, construction risks. The
contractor risk, execution Investment Manager reports
risk and the risk of delay. to the Board at each meeting
The materialisation of regarding recent developments
these risks could have in this respect. In the
a negative effect on the construction context, the
implementation of development availability and transportation
projects of the Group. of construction materials
have been significantly
affected by the Covid-19
pandemic worldwide, thereby
increasing construction
costs.
---------------------------------------- ------------------------------------- -------
Tourism Risk As an indirect investor The Investment Manager â
in hotel assets, the Company regularly monitors the
is subject to numerous local and regional tourism
risks relating to the markets and meets regularly
tourism sector, both in with the external hotel
outbound and inbound markets, management to identify,
including the cost and monitor and manage global
availability of air travel, and local tourism risk
the imposition of travel and to develop appropriate
restrictions by overseas strategies for dealing
governments, seasonal with changing conditions.
variations in cash flow, The Company aims to maintain
demand variations, changes a diversified portfolio
in or significant disruptions of tourism assets spanning
to travel patterns, risk various hotel categories
related to the manager (city hotel / beach resort,
of the hotel properties, business / leisure travel,
and the materialisation luxury / family) in numerous
of these risks could have locations across the island.
a negative impact on specific As the world reemerges
properties or the Company from the Covid-19 pandemic
generally. the Investment Manager
is working closely with
the external hotel management
to optimise the resumption
of full scale operations
at the hotels in which
the Company has an interest.
---------------------------------------- ------------------------------------- -------
Valuation Risk Asset valuations may fluctuate As part of the valuation á
materially between periods process, the Investment
due to changes in market Manager engages an independent
conditions. The combined third party valuer to provide
effects of higher levels an independent valuation
of risk associated with report on each of the indirectly
financial and monetary owned real estate assets
reforms, the continuation of the Group. The valuations
under the Biden administration are also subject to review
of an aggressive U.S. by the Investment Manager's
sanction regime and the Alternatives Pricing Committee.
slower than expected recovery
of the worldwide tourism
market in the face of
the pandemic have resulted
in increased discount
rates and lower income
projections, leading to
a rise in the volatility
of valuations.
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Dependence on The Company is dependent The Board receives reports ->
Third Party Service on the Investment Manager from its service providers
Providers and other third parties on internal controls and
for the provision of all risk management at each
systems and services relating Board meeting. It receives
to its operations and assurance from all its
investments, and any inadequacies significant service providers
in design or execution as well as back-to-back
thereof, control failures assurances where activities
or other gaps in these are themselves sub-delegated
systems and services could to other third party providers
result in a loss or damage with which the Company
to the Company. In addition, has no direct contractual
the continued high level relationship. In the course
of aggression of U.S. of its activities, the
sanctions may limit the Management Engagement Committee
pool of service providers of the Board reviews the
willing or able to work engagements of all third
with the Company. party service providers
on an annual basis. Further
details of the internal
controls which are in place
are set out in the Directors'
Report.
---------------------------------------- ------------------------------------- -------
Loss of Key Fund The loss of key managers Under the Management Agreement, ->
Personnel contracted by the Investment the Investment Manager
Manager to manage the has the obligation to provide
portfolio of investments at all times personnel
of the Group could impact with adequate knowledge,
performance of the Company. experience and contacts
in the Cuban market. In
order to mitigate key manager
risk. The Investment Manager
makes every effort to spread
knowledge and experience
of the Cuban market within
the organisation so as
to reduce reliance on a
small team of individuals.
---------------------------------------- ------------------------------------- -------
Risks Relating to Investment in Cuba and the U.S. Embargo
General Economic, The Group's underlying The Company benefits from
Political, Legal investments are situated the services of its highly
and Financial and operate within a unique experienced on-the-ground
Environment within economic and legal market, management team consisting
Cuba with a comparatively high of eight members. With
level of uncertainty, a well-balanced mix of
and a sensitive political Cuban and foreign professionals
environment. who all have long-standing
expertise in the country,
the team is one of the
most practised investment
groups focused exclusively
on investment in the Cuban
market, which constantly
monitors the economic,
political and financial
environment within Cuba.
The subsidiaries of the
Company have been structured
to benefit from existing
investment protection and
tax treaties to which Cuba
is a party.
---------------------------------------- ------------------------------------- -------
U.S. government Tensions remain high between The Investment Manager ->
restrictions relating the governments of the closely follows developments
to Cuba United States and Cuba relating to the relationship
and the U.S. government between the United States
maintains numerous legal and Cuba and monitors all
restrictions aimed at new restrictions adopted
Cuba, including the inclusion by the United States to
of Cuba on the U.S. list measure their possible
of state sponsors of terrorism. impact on the assets of
Contrary to pre-election the Group. The Group has
campaign statements and adapted its investment
widely held initial expectations, model to the existing sanctions,
the Biden administration but the risk remains of
has not taken any steps further sanctions being
to soften or suspend any adopted in the future.
restrictions against Cuba,
although it is possible
that it might do so in
the future. The rise of
further tensions with
the United States or the
adoption by the U.S. government
of further restrictions
against Cuba could negatively
impact the operations
of the Company and its
access to third-party
service providers, the
value of its investments,
the liquidity or tradability
of its shares, or its
access to international
capital and financial
markets.
---------------------------------------- ------------------------------------- -------
Helms-Burton Risk On 2 May 2019, Title III At the time of acquiring ->
of the Helms-Burton Act each of its interests in
was brought fully into Cuban joint venture companies,
force by the Trump administration the Company carried out
following 23 years of extensive due diligence
successive uninterrupted investigations in order
suspensions. Numerous to ensure that no claims
legal claims were subsequently existed under applicable
launched before U.S. courts U.S. legislation, and in
against U.S. and foreign particular that there were
investors in Cuba, which no claims certified by
has had and could have the U.S. Foreign Claims
a further negative impact Settlement Commission under
on the foreign investment its Cuba claims program
climate in Cuba and may with respect to any of
hinder the ability of the properties in which
the Company to access the Company acquired an
international capital interest. However, given
and financial markets the broad definitions and
in the future. In light terms of the Helms-Burton
of the political nature Act and its purpose of
of the Helms-Burton Act, creating legal uncertainty
and the fact that under on the part of investors
Title III of the Act, in Cuba, as well as the
Cuban persons who were absence of any register
not U.S. Persons at the of uncertified claims or
time their property was case law, there is no certain
expropriated but subsequently way for the Company to
became U.S. Persons have verify beyond doubt whether
the right to make claims, or not a Helms-Burton action
there is also a risk that under Title III could be
legal claims might be brought in respect to a
initiated against the particular property, or
Company or its subsidiaries whether the Company may
before U.S. courts. The be deemed to indirectly
Biden administration has profit or benefit from
not taken any steps to certain activities carried
suspend or repeal Title out by other parties. The
III of the Helms-Burton Company does not have any
Act, although it is possible property or assets in the
that it might do so in United States that could
the future . be subject to seizure.
---------------------------------------- ------------------------------------- -------
Transfer Risk Numerous U.S. legal restrictions The Investment Manager ->
- U.S. Sanctions contained in the Cuban is conscious of and closely
Assets Control Regulations follows developments concerning
and other legal provisions the U.S. legal restrictions
target financial transactions, that target financial transactions
instruments, and other and assets. The Company
assets in which there does not carry out any
is a Cuban connection. international transfers
As a result U.S. and international in U.S. Dollars or through
banks, clearing houses, U.S. banks or intermediaries.
brokers and other financial The Investment Manager
intermediaries may refuse manages the banking relationships
to deal with the Company of the Company and generally
or may freeze, block, acts at all times so as
refuse to honor, reverse to minimise the impact
or otherwise impede legitimate of these legal provisions
transactions or assets on the legitimate transactions
of the Company, even where and assets of the Company.
no U.S. link is established.
---------------------------------------- ------------------------------------- -------
Currency Risk As a result of U.S. sanctions The Company does not hedge á
prohibiting the use of its foreign currency risks.
the U.S. dollar, the Group
deals in numerous currencies
and fluctuations in exchange
rates can have a negative
impact on the performance
of the Group, as well
as the expression of the
Company's NAV in Sterling
and/or USD.
The risk relating to monetary
reforms recently adopted
by the Cuban government
imposing the use of the
CUP are described elsewhere
in this table.
---------------------------------------- ------------------------------------- -------
Risks relating to Regulatory and Tax framework
Tax Risk Changes in the Group's The Investment Manager
tax status or tax treatment regularly reviews the tax
in any of the jurisdictions rules that may affect the
where it has a presence operations or investments
may adversely affect the of the Company and seeks
Company or its shareholders. to structure the activities
of the Company in the most
tax efficient manner possible.
However, the Company holds
investment structures in
numerous jurisdictions
arising from past acquisitions,
and the general direction
of change in many jurisdictions
is not favourable.
---------------------------------------- ------------------------------------- -------
The financial risks associated with the Company include market
risk, liquidity risk and credit risk, all of which are described in
greater detail in note 19 to the Consolidated Financial
Statements.
The Board will continue to assess these risks on an ongoing
basis and is confident that the procedures that the Company has put
in place are sufficient to ensure that the necessary monitoring of
risks and controls has been carried out throughout the reporting
period.
INVESTMENT MANAGER'S REVIEW
2021 PERFORMANCE
The performance of CEIBA Investments Limited ("CEIBA" or the "
Company ") is largely dependent on the fair values of the
properties in which it has an interest as calculated using
discounted cash flow models by the independent RICS valuer
Arlington Consulting - Consultadoria Imobiliaria Limitada, trading
under the name Abacus ("Abacus"). As at 31 December 2021, the fair
values of all of the assets in which CEIBA Investments has an
interest decreased, mainly as a result of (i) a fall in projected
income levels as a result of the continued effects of the Covid-19
pandemic and its negative impact on the Cuban tourism sector and
the Cuban economy, (ii) the continuation under the Biden
administration of President Trump's intensified Cuba embargo
policies, and (iii) increased discount rates as a result of higher
levels of perceived risk in the present circumstances, in
particular as regards the liquidity issues faced by the
country.
As at 31 December 2021, the Net Asset Value of the Company was
US$160,322,589 (31 December 2020: US$194,425,614) and the NAV total
return for the year was -17.5 % (2020: -6.0 %). The loss on the
change in the fair value of the equity investments during the year
was US$13,843,717 (2020: loss US$41,914,276). The total dividend
income from the Cuban joint venture companies during 2021 was
US$3,050,124 (2020: US$13,258,912). The net loss of the Company for
2021 attributable to the shareholders was US$28,811,901 (2020:
US$19,808,620).
INTRODUCTION
If there are two things that I have in my DNA, they are
positivism and looking at a brighter future instead of looking
back.
After another difficult year, during which the country faced
extremely challenging conditions, by November 2021 Cuba had
demonstrated to the world that its home-grown Abdala and Soberana 2
vaccines were indeed effective in the fight against Covid-19 and
that its country-wide vaccination program had been diligently
implemented and resulted in rapidly falling numbers of new cases
and fatalities, and once again these qualities took the upper hand
and I thought that the Cuban economy had hit bottom and would begin
rising to a brighter future.
But at the start of Cuba's high tourism season, just as Cuba was
reopening its international borders and welcoming international
travellers back to the island, the Omicron variant of the Covid-19
virus emerged in South Africa and rapidly spread throughout the
world, causing a new wave of restrictive travel measures aimed at
slowing the swift pace of infections produced by the new variant.
These measures resulted in many travel cancellations from Canada
(historically Cuba's most important source of tourists during the
very important period from December to April each year). Despite
this obvious setback, tourist numbers began to improve, with Russia
joining Canada as one of the principal source markets. All of our
hotels re-opened, occupancy levels and profitability started to
increase, and I hoped that Cuba's precarious liquidity position
would soon start to show signs of improvement!
However, once again positive momentum was short-lived.
When on 24 February 2022 Russia invaded Ukraine, all Russian
(and Ukrainian) travel came to an abrupt halt and Cuba once again
found itself facing the prospect of a difficult high season.
The general lack of liquidity within Cuba's economy during 2021,
the continuation under the Biden administration of the strengthened
Trump sanctions against Cuba and the present uncertainty regarding
the timing of a tourism recovery have all taken their toll and have
forced CEIBA to make downward adjustments to our asset
valuations.
This has triggered that the 2021 year-end result of the Company
is a net loss attributable to the shareholders of US$28,811,901.
The outlook for 2022 will largely depend on how long the
Russia-Ukraine conflict will last, how it will impact world
politics and Cuba's important relationships, and its effect on
international travel patterns and the recovery of Cuba's tourism
industry. To a lesser extent, the coming year could also be further
affected by the rise of any new variant of the Covid-19 virus.
In addition, starting in the final months of 2021 and continuing
through to today, the Cuban banking system has experienced
significant delays in the execution of payments instructed, even
where such payments are made with the required "liquidity" in
accordance with the new financial autonomy rules. This shows that
the Cuban liquidity position is precarious, and this may make it
more challenging to continue implementing its program of monetary
reforms.
Monetary Reforms
Cuba's recent monetary reforms, announced in 2020 and
implemented in 2021, eliminated Cuba's double currency and were
undoubtedly planned on the basis of a projected improvement in the
country's precarious liquidity position that was expected to result
from a growing (not shrinking) economy. It introduced a fixed
official exchange rate of 24 Cuban Pesos to 1 United States Dollar
and was aimed primarily at improving financial discipline,
transparency and accountability within Cuba's state-owned
enterprises.
However, the events described above and the continuation of U.S.
sanctions under the Biden administration (particularly those
affecting family remittances and U.S. travel) that were widely
expected to be relaxed, jointly had a negative impact on the
liquidity position of the country and complicated the
implementation of the reforms, provoking numerous distortions in
both the private and foreign investment sectors.
In addition, the scarcity of hard currency income to pay for
imported products, resulting in shortages of basic products for
sale in local currency (CUP) shops, triggered significant inflation
and a fall in the informal exchange rate so that by the end of 2021
the street rate of exchange had reached CUP75 to USD1, falling
further to CUP 110 to USD 1 by 15 April 2022. By contrast, joint
ventures, international airlines and all state-owned businesses
were obliged to use the official rate of CUP24 to USD1, in turn
provoking undesired monetary arbitrage.
The government has not signalled any future devaluation of the
CUP and instead has argued that it hopes to close the discrepancy
between the official and informal rates through increased national
production and an improved supply of basic products in the CUP
retail outlets.
By the end of 2021, the lack of liquidity in the economy also
began to be noticeable in delays in the execution of international
payments made under the financial autonomy rules, which in turn
puts significant pressure on one of the principal objectives of the
monetary reforms for foreign trade and investment, which is to
guarantee financial autonomy and the repatriation of profits.
The Colony
In March 2022 I visited Finca El Rosillo, a small privately
owned farm next to the main highway to Pinar del Rio Province where
the owners produce a delicious honey made by bees that do not
sting. The bees create their colonies in rotten tree trunks and
protect them by sealing them off and leaving only a single entry
and exit that is constantly guarded to protect the colony from its
biggest enemy: hornets (that do sting). This seems to be a good
metaphor for the short-term strategy of Cuba: seal all points of
entry, grow the internal economy and avoid getting stung by
hornets.
US Cuban Embargo - 60 Years Old
On 3 February 2022 the Cuban economy had endured 60 years under
the U.S. embargo, it having been first adopted by President Kennedy
in 1962 as Proclamation 3447 entitled Embargo on All Trade with
Cuba, and having the main purposes of stopping the spread of
communism and causing "hunger, desperation and overthrow of
government." During the subsequent six decades, the legal measures
creating the embargo have ebbed and flowed, gaining or losing
strength in accordance with the prevailing political winds in
Florida, but the negative impact on the island has been
constant.
In its present form, subsequent to the adoption of the
Helms-Burton Act of 1996, the U.S. embargo against Cuba is
enshrined in law and can only be overturned by Congress, which
would be no small feat in today's politically divided reality in
the United States. The embargo prohibits trade between U.S. persons
and Cuba, but its insidious negative effects also extend
extra-territorially to a large number of valid and legitimate
transactions between Cuba and its international partners, whether
they be other sovereign governments or, most importantly for the
Company, foreign investors who invest or trade on the island.
Following a significant relaxation of the embargo rules during
the Obama administration, the Trump administration resumed a much
harder line and returned the United States to a policy of strong
aggression towards its smaller neighbour. So far, the Biden
administration has not relaxed any of the harsher sanctions of the
Trump era, notwithstanding his stated intent to do so expressed
during the presidential campaign in 2020.
In early March 2022, it was announced that the U.S. Embassy in
Havana would be re-staffed and would resume a certain number of
direct consular services in Havana. The expectation remains that
some easing of the present sanctions will be forthcoming, most
likely in the areas of family remittances and the facilitation of
travel between the U.S. and Cuba.
Conflict in Ukraine
In February 2022, Russia invaded Ukraine. Both countries are
traditional allies of Cuba and both were important sources of
tourists for the island during parts of the pandemic and especially
from the full reopening of the Cuban tourism sector in November
2021 until the outbreak of the war. In January and February 2022,
Russian travellers were amongst the largest groups of tourists to
the island, roughly equal to Canada, which usually is the leading
source of travellers. The war has resulted in the cancellation of
most direct flights between Russia and Cuba, representing a further
blow to the Cuban tourism industry, already hard hit by two years
of pandemic-related hotel closures and travel restrictions. It
remains unclear at present whether Russian tourism to the island
will rebound or whether other markets will be able to make up the
shortfall. The war in Ukraine is also expected to have other
indirect impacts on the Cuba economy in areas such as the price of
oil, shipping costs and the availability of ships to Cuba
(especially from Europe). Russian investments on the island may be
affected, as well as banking relationships.
PORTFOLIO ACTIVITY
The Miramar Trade Centre / Monte Barreto
The largest real estate holding of the Company is its 49%
interest in Inmobiliaria Monte Barreto S.A. ("Monte Barreto"), the
Cuban joint venture company that owns and operates the Miramar
Trade Centre, a six-building mixed-use commercial real estate
complex comprising approximately 56,000 square metres
(approximately 600,000 square feet) of net rentable area that
constitutes the core of the new Miramar business district in
Havana.
Occupancy rates remained largely stable throughout the year,
declining a modest 1.6% from 98.2% at the beginning of the year to
96.6% at year-end. The property suffered a small number of
departures relating to the pandemic, and the market has tightened
somewhat. Revenues declined by 3.6% compared to the prior year as a
result of the lower occupancy rate and modest rent incentives
granted. However, Monte Barreto registered net income of US$15.6
million during the year (2020: US$14.4 million), representing an
8.5% increase over the prior year and a new record for annual
profit. The increase was primarily the result of savings resulting
from the monetary reforms implemented during the year, including
reduced operational expense (mainly salary and electricity
costs).
Demand for international-standard office accommodation in Havana
remains strong, predominantly from multi-national companies, NGOs
and foreign diplomatic missions. Monte Barreto remains the market
leader. As a consequence, the operational outlook for Monte Barreto
in 2022 remains positive, as we expect occupancy levels to remain
in the high nineties throughout the coming year. However, in light
of the present market conditions, which remain uncertain -
particularly as regards liquidity - the joint venture is applying
its general strategy of rental increases as leases are renewed on a
case by case basis.
In accordance with the new provisions of Resolution 115 dealing
with financial autonomy and the allocation of hard currency
resources, commercial real estate activities have been excluded
from some of the general rules relating to "liquid" payments (the
ability to transfer funds abroad on an autonomous basis, without
foreign exchange controls), and consequently the local payments of
many tenants of the joint venture are presently not received with
liquidity and conversely most local payments to be made by the
joint venture are similarly not made with liquidity. As a result,
the joint venture is presently operating under a mixed regime
having reduced liquidity requirements, in which certain liquid
resources of the joint venture are generated internally through
operations, and certain resources are allocated centrally.
Given the present limited financial autonomy of Monte Barreto,
in combination with the current economic situation and liquidity
difficulties faced by the country, Monte Barreto did not have
sufficient liquid resources (whether generated internally or
allocated centrally) to pay significant dividends payable to the
Company during the past year. Management is currently discussing
potential solutions for the liquidity issues of Monte Barreto with
the relevant Cuban authorities and pending agreement and
implementation of such a solution accumulated profits remain in the
joint venture company. In addition to the above, hard currency
transfers made by Cuban banks are presently experiencing delays.
Dividend income recorded by the Company from Monte Barreto during
the year was US$2.6 million, compared to US$6.9 million in 2020.
Due to the uncertainty on the timing of payment of the dividends
owed to the Company by Monte Barreto, the Company has made a
provision in its financial statements in the amount of
US$12,281,408 representing the outstanding dividends receivable
from Monte Barreto.
The valuation of Monte Barreto has been adjusted downward at 31
December 2021 by US$13.7 million to US$67.7 million, representing a
16.9% decline as compared with the December 2020 valuation. This
was driven mainly by an increase in the discount rate to 12.8%
(2020: 9.8%) applied in the discounted cash flow model of Monte
Barreto in order to take into account the disruption to the Cuban
economy caused by the Covid-19 pandemic, continued U.S. aggressive
measures and the increased liquidity, transfer and currency risks
faced by Monte Barreto and its shareholders.
We expect these headwinds to remain present throughout 2022 and,
as a result, we believe that only part of the presently outstanding
dividends will be paid during the current year. Nevertheless, we
believe that the pace of distribution of dividends will pick up
once again when the country re-emerges from the present
difficulties, which is not likely to occur until 2023.
The Hotels of Miramar
Through its indirect ownership of a 32.5% interest in Miramar,
the Group has interests in the following hotels:
- the Meliã Habana Hotel, a 397-room international-category
5-star business hotel located on prime ocean-front property in
Havana (directly opposite the Miramar Trade Center);
- the Meliã Las Americas Hotel, a 340-room
international-category 5-star beach resort hotel located in
Varadero;
- the Meliã Varadero Hotel, a 490-room international-category
5-star beach resort hotel located in Varadero; and
- the Sol Palmeras Hotel, a 607-room international-category
4-star beach resort hotel located in Varadero.
The Hotels are operated by Meliã Hotels International S.A.
("Meliã Hotels International"), which also has a 17.5% equity
interest in Miramar (and a 10% equity interest in TosCuba).
Performance of the Hotels
As a result of the Covid-19 pandemic and the resulting collapse
of the worldwide travel industry, the Hotels once again faced an
extremely challenging business environment in 2021. While the Sol
Palmeras and the Meliã Habana hotels were able to maintain services
throughout the year, occupancy and room rates were reduced. The
Meliã Las Americas and Meliã Varadero hotels resumed operations
towards the end of the year (in November and December 2021,
respectively) following the formal reopening of the Cuban tourism
industry in November 2021.
With two of its hotels closed throughout most of the year and
the other two operating at very low levels, together with the
one-time foreign exchange expense of US$5.4 million relating to the
conversion of monetary assets under the monetary reforms, the net
loss after tax of Miramar was US$9.6 million (2020: net loss of
US$3.5 million). This also resulted in lower dividend income earned
by the Company from Miramar during the year of US$500 thousand,
compared to US$6.3 million in the prior year.
All four of the Hotels of Miramar are presently operating under
volatile and unpredictable market conditions. We believe that the
Hotels are presently in a very strong competitive position within
the Cuban market, given that two of the four operated throughout
the year and consequently Miramar has a stronger working capital
position and other operational advantages over competitors.
However, since the formal re-opening of the Cuban tourism sector in
November 2021 (following the success of the Cuban vaccination and
other public health efforts to control the pandemic), the
subsequent arrival of the Omicron variant in December 2021, closely
followed by the Russian invasion of Ukraine, have once again
affected the most important outbound tourism markets for Cuba:
Canada, Western Europe and Russia. The outlook for 2022 remains
uncertain and will depend on numerous factors external to Cuba,
including in particular the recovery of international travel
patterns and the availability of airlift.
Once hotel operations return to normal as the world emerges from
the Covid-19 pandemic and international travel and tourism markets
recover from the disruption suffered over the last two years, we
expect the liquid resources directly generated by the operations of
Miramar under the new liquidity rules to be more than sufficient to
allow Miramar to distribute dividends.
The valuation of Miramar has been adjusted downwards at 31
December 2021 to US$94.5 million (2020: US$103.2 million),
representing a 9.2% decline. This was driven mainly by an increase
in the discount rates applied in the discounted cash flow models of
the Hotels in order to take into account the disruption to the
Cuban tourism industry caused by the Covid-19 pandemic and the
uncertain timing of recovery, continued U.S. aggressive measures,
as well as a slightly more conservative approach to the recovery of
occupancy rates as the world emerges from the pandemic.
The TosCuba Project
The Company has an 80% interest in Mosaico Hoteles S.A.
("Mosaico Hoteles"), representing a 40% indirect interest in
TosCuba, the Cuban joint venture company that is constructing the
401 room Meliã Trinidad Península Hotel.
As at 31 December 2021, all structural works (including windows
and roofing) had been substantially completed and electric,
plumbing and air-conditioning works had started. The building
process has been progressing slowly since the beginning of the
Covid-19 pandemic in March 2020 but is now expected to be completed
within the next twelve months.
During the first months of 2021 the joint venture, under the
leadership of Mosaico Hoteles, undertook a full review and
reorganisation of the hotel construction process, which resulted in
the termination of the turnkey construction contract with the
Cuban-Italian construction partnership (with effect from 30 June
2021) and the renegotiation and increase of existing finance
arrangements. TosCuba has now taken full control over the site as
well as all stored materials and equipment, and will now complete
the construction of the hotel on its own, with technical assistance
on pricing, tender procedures and product selection from
International Hospitality Projects S.L., a Spanish construction
adviser in the hotel sector. Under the new structure, significant
progress was made in the second half of 2021 in the tendering and
execution of major supply arrangements, and the pace of
construction is now ramping up once again to pre-pandemic levels.
It is now estimated that construction of the hotel will be
completed by the first quarter of 2023.
In April 2018, the Company arranged and executed a US$45 million
construction finance facility to be disbursed under two tranches of
US$22.5 million each. The terms of the facility were amended in
August 2021 to take into account the new construction process and
other circumstances. At 31 December 2021, the Company's full
participation in the first tranche (Tranche A) in the amount of
US$18 million (2020: US$16.1 million) was fully disbursed, and the
amount of US$709 thousand was disbursed under the second tranche
(Tranche B), the maximum principal amount of which was increased to
US$29 million under the August 2021 amendment to the facility. The
increased principal of Tranche B includes an amount of US$4 million
that may be used for the purchase of equipment needed by the
relevant Cuban utility companies to ensure the provision of the
required water and electrical services to the hotel.
Repayment of the amended facility is secured by the future
income of the hotel, and repayment of Tranche B has also been
guaranteed by Cubanacán (the Cuban shareholder in the joint venture
company) and is further secured by Cubanacán's dividend
entitlements in Miramar.
The total cost of the project - including incorporation of the
joint venture company, acquisition of surface rights, construction
of the hotel, financing for the acquisition of equipment necessary
to guarantee the proper functioning of public utilities and
start-up costs - is presently estimated at US$78.8 million. Of this
amount, US$16 million represents the share capital invested in
TosCuba by the shareholders, of which the Company contributed
US$6.4 million (40%), more than US$11.2 million represents grants
received under the Spanish Cuban Debt Conversion Programme, and
US$4 million represents finance to be granted to third parties
(which will be repaid). The remaining funds necessary to complete
the project will be disbursed under the construction finance
facility.
GBM Interinvest Technologies Mariel S.L.
In December 2020, the Company formalised its participation in a
new multi-phase industrial park real estate project to be developed
in the Special Development Zone of Mariel, Cuba by acquiring a 50%
interest in GBM Interinvest Technologies Mariel S.L., the Spanish
company that is developing the project.
Groundworks on the 11.3-hectare site for the construction of the
first four warehouses of the project began in the first quarter of
2021 and were completed in June 2021. Discussions with potential
tenants are currently being pursued with a view to coordinating the
start of construction works with the existence of real demand.
The Company paid an initial amount of US$303,175 for its 50%
interest entered into a Convertible Loan Agreement in the principal
amount of EUR500,000 (US$566,316) during the course of 2021. The
full investment of the Company in this project is expected to be
approximately US$1.5 million.
FINTUR Facility
Since 2002, the Company has arranged and participated in
numerous secured finance facilities extended to Casa Financiera
FINTUR S.A. ("FINTUR"), the Cuban government financial institution
for the tourism sector. Under the most recent FINTUR Facility,
originally executed in 2016 in the principal amount of EUR24
million and subsequently amended in 2019 through the addition of a
second tranche in the principal amount of EUR12 million, the
Company initially held a EUR4 million participation under Tranche A
and a EUR2 million participation under Tranche B.
This facility generates an 8.00% interest rate and operated
successfully without delay or default until the closure of all
Cuban hotels in March 2020 as a result of the Covid-19 pandemic. At
that time, the income from the hotels that serve as the basis for
payments under the FINTUR facility ceased and such income is not
expected to resume until Cuba's international tourism operations
recover in earnest.
With effect from 1 April 2020, the Company and FINTUR agreed to
revise the remaining outstanding payments under the FINTUR facility
(combining the two tranches into a new single tranche C) and to
provide a one-year period of grace on the payment of principal,
with a two-year principal payment period thereafter. The principal
payments of the new Tranche C falling due on 30 June 2021, 30
September 2021 and 31 December 2021 were subsequently waived by the
lenders as a result of the continued closure of the hotels serving
as security for payment of the facility, with the waived principal
payments being added to subsequent payments without extending the
term.
As at 31 December 2021, the principal amount of US$ 1,943,760
was outstanding under the Company's participation in Tranche C of
the Facility.
Only one of the hotels granted as security for the repayment of
the FINTUR facility is open at the present time, although FINTUR
has transferred funds from other sources to pay all outstanding
interest on a current basis throughout the pandemic and for the
principal payment made on 31 March 2022. The Investment Manager
meets regularly with FINTUR in order to gauge the speed with which
the cash flows are likely to return to acceptable levels and to
determine whether any additional hotel security should be
received.
OUTLOOK
We expect that, as a result of the Covid-19 pandemic, the high
level of U.S. sanctions against Cuba and the ongoing transitional
effects of monetary and economic reforms adopted by the Cuban
government, the very difficult economic circumstances faced by the
country throughout 2021 will continue in 2022, and that the local
market conditions in which the Company and the joint venture
companies in which it holds interests operate will remain very
challenging. The very tight hard currency position of the Cuban
economy resulting from the above factors is also likely to continue
having a negative impact on the timing of dividend and other
payments to the Company in the short term.
We expect that the timing of a recovery in Cuba will depend on a
number of external factors, including the duration of the war in
Ukraine, the actions of the U.S. government and the evolution of
world travel markets in the face of the pandemic. Internal factors
such as the government's ability to adhere to the planned reform
program will also play an important role.
As the world continues to recover from the pandemic, we expect
that international leisure travel will increase once again and that
the four Miramar Hotels, which are all presently operating, will
gradually return to normal levels of occupancy and performance. In
addition, it is expected that the Meliã Trinidad Península Hotel
will be completed and will begin operations in the first quarter of
2023.
We expect the operational performance of Monte Barreto to remain
strong in 2022, although the timing of payment of the resulting
dividends will remain uncertain in the short term and we believe
that only part of the dividends to be generated in favour of the
Company will be paid during the current year. Nevertheless, we
believe that the pace of distribution of dividends will pick up
once again when the economic headwinds presently affecting the
country subside, which is not likely to occur until 2023.
We believe that Cuba's liquidity position, which we monitor
closely, will continue to be weak in the short term, but we do
anticipate that over the medium term the country's foreign currency
reserves will improve. In addition, the new monetary reforms and
liquidity rules adopted by the Cuban government will eventually
have a positive effect on the Cuban economy as well as on the
operations of the joint venture companies of the Company. As a
result of these new measures, and in particular the
de-centralisation of decision-making that they mandate, management
of the joint ventures is expected to have improved control over
their hard currency payments and the ability to make timely
distributions to shareholders.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
28 April 2022
DIRECTORS' REPORT (EXTRACTS)
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting ("AGM") is included
within this Annual Report and Consolidated Financial Statements.
The AGM will take place at the registered office of the Company,
Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT
Channel Islands on 16 June 2022 at 2.00 p.m. An explanation of each
resolution to be proposed at the AGM is included in the Letter from
the Chairman. All shareholders will have the opportunity to put
questions to the Board or the Investment Manager at the Company's
AGM. Shareholders are encouraged to vote on the resolutions
proposed in advance of the AGM and to submit questions to the Board
and the Investment Manager by emailing CEIBA.Investments@abrdn.com
.
The Company Secretary is also available to answer general
shareholder queries at any time throughout the year.
In the event that the situation surrounding Covid-19 should
affect the plans to hold the AGM on 16 June 2022 the Company will
update shareholders through an announcement to the London Stock
Exchange and will provide further details on the Company's website.
As noted above, the Board encourages all shareholders to exercise
their votes, and submit any questions, in respect of the meeting in
advance. This should ensure that your votes are registered in the
event that attendance at the AGM might not be possible.
By order of the Board
28 April 2022
JTC Fund Solutions (Guernsey) Limited
Secretary
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and Consolidated Financial Statements, in accordance with
applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the "Law")
requires the Directors to prepare financial statements for each
financial year. Under the Law, the Directors have elected to
prepare the Consolidated Financial Statements in accordance with
IFRS. Under the Law, the Directors must not approve the
Consolidated Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing these Consolidated Financial Statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- prepare the Consolidated Financial Statements on a going
concern basis unless it is inappropriate to presume that the
Company will continue in business; and
-- state whether all applicable IFRS standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that it's Consolidated Financial Statements comply with the
Law. They are also responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors listed, being the persons responsible, hereby
confirm to the best of their knowledge that:
-- the Consolidated Financial Statements, prepared in accordance
with the applicable accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company, and all the undertakings included in the
consolidation taken as a whole;
-- in the opinion of the Directors, the Annual Report and
Consolidated Financial Statements taken as a whole, is fair,
balanced and understandable and it provides the information
necessary to assess the Company's position and performance,
business model and strategy; and
-- the General Information section and Directors' Report include
a fair review of the development and performance of the business
and the position of the Company and all the undertakings included
in the consolidation taken as a whole, and the Principal Risks
section provides a description of the principal risks and
uncertainties that they face.
-- there is no additional information of which the Company's Auditor is not aware.
For CEIBA Investments Limited
Keith Corbin
28 April 2022
CConsolidated Statement of Financial
Position
As at 31 December 2021
31 Dec 2021 31 Dec
2020
Note US$ US$
----- ------------ ----------------------
Assets
Current assets
Cash and cash equivalents 4 26,228,072 4,270,860
Accounts receivable and accrued income 5 3,821,068 14,581,229
Loans and lending facilities 6 3,372,086 2,827,292
------------ ----------------------
Total current assets 33,421,226 21,679,381
------------ ----------------------
Non-current assets
Accounts receivable and accrued income 5 3,146,333 1,768,447
Loans and lending facilities 6 19,185,524 17,395,343
Equity investments 7 175,828,034 197,618,050
Investment in associate 8 303,175 303,175
Property, plant and equipment 9 515,608 533,598
------------ ----------------------
Total non-current assets 198,978,674 217,618,613
------------ ----------------------
Total assets 232,399,900 239,297,994
------------ ----------------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 10 4,347,187 1,085,590
Short-term borrowings 11 1,004,673 -
Deferred liabilities 17 1,000,000 1,000,000
Total current liabilities 6,351,860 2,085,590
------------ ----------------------
Non-current liabilities
Accounts payable and accrued expenses 10 - 1,129,709
Convertible bonds 12 28,299,353 -
Deferred liabilities 17 833,333 1,833,333
Total non-current liabilities 29,132,686 2,963,042
------------ ----------------------
Total liabilities 35,484,546 5,048,632
------------ ----------------------
Equity
Stated capital 13 106,638,023 106,638,023
Revaluation surplus 319,699 319,699
Retained earnings 46,801,482 75,613,383
Accumulated other comprehensive income 6,563,385 11,854,509
------------ ----------------------
Equity attributable to the shareholders
of the parent 160,322,589 194,425,614
------------ ----------------------
Non-controlling interest 13 36,592,765 39,823,748
Total equity 196,915,354 234,249,362
Total liabilities and equity 232,399,900 239,297,994
------------ ----------------------
NAV 13 160,322,589 194,425,614
NAV per share 13 1.16 1.41
See accompanying notes 1 to 23, which are an integral part of
these consolidated financial statements.
These audited Financial Statements were approved by the board of
Directors and authorised for issue on 28 April 2022.
They were signed on the Company's behalf;
Keith Corbin, Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
----- ------------- -------------
Income
Dividend income 7 3,050,124 13,258,912
Interest income 1,924,110 1,899,468
Travel agency commissions 7,529 6,113
Foreign exchange gain - 1,157,566
4,981,763 16,322,059
------------- -------------
Expenses
Foreign exchange loss (130,198) -
Interest expense on bonds (2,176,931) -
Loss on change in fair value of equity
investments 7 (13,843,717) (41,914,276)
Expected credit losses 5 (12,281,408) -
Management fees 17 (2,276,574) (1,864,518)
Other staff costs (72,958) (67,035)
Travel (54,204) (51,856)
Operational costs (317,361) (108,302)
Legal and professional fees (1,487,338) (1,368,707)
Administration fees and expenses (344,620) (292,534)
Audit fees 22 (321,625) (270,909)
Miscellaneous expenses (305,075) (136,976)
Directors' fees and expenses 15 (276,111) (232,677)
Depreciation 9 (29,792) (39,645)
(33,917,912) (46,347,435)
------------- -------------
Net loss before taxation (28,936,149) (30,025,376)
------------- -------------
Income taxes 3.7 - -
------------- -------------
Net loss for the year (28,936,149) (30,025,376)
------------- -------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
(Loss)/gain on exchange differences
of translation of foreign operations (8,140,191) 11,538,310
Total comprehensive loss (37,076,340) (18,487,066)
------------- -------------
Net loss for the year attributable
to:
Shareholders of the parent (28,811,901) (19,808,620)
Non-controlling interest (124,248) (10,216,756)
Total comprehensive loss attributable
to:
Shareholders of the parent (34,103,025) (12,308,720)
Non-controlling interest (2,973,315) (6,178,346)
Basic and diluted loss per share 16 (0.21) (0.14)
See accompanying notes 1 to 23, which are an integral part of
these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
------- ------------- -------------
Operating activities
Net loss for the year (28,936,149) (30,025,376)
Items not affecting cash:
Depreciation 9 29,792 39,645
Expected credit losses 5 12,281,408 -
Change in fair value of equity
investments 7 13,843,717 41,914,276
Dividend income (3,050,124) (13,258,912)
Interest income (1,924,110) (1,899,468)
Interest expense 2,176,931 -
Foreign exchange loss/(gain) 130,198 (1,157,566)
(5,448,337) (4,387,401)
Decrease/(increase) in accounts
receivable and accrued income 810,460 (4,018,460)
Increase in accounts payable and
accrued expenses 2,131,888 149,086
Non- cash movement in amortisation
of deferred liability 17 (1,000,000) (1,000,000)
Dividend income received 641,756 9,998,244
Interest income received 622,884 160,317
Net cash flows from operating activities (2,241,349) 901,786
------------- -------------
Investing activities
Purchase of investment in associate 8 - (303,175)
Purchase of property, plant & equipment 9 (11,802) (4,897)
Loans and lending facilities disbursed (3,168,711) (6,190,914)
Loans and lending facilities recovered 833,736 (886,001)
Net cash flows from investing activities (2,346,777) (7,384,987)
------------- -------------
Financing activities
Short term borrowings received 1,004,673 -
Issue of convertible bonds 29,312,500 -
Interest paid on convertible bonds (2,176,931) -
Cash distribution to non-controlling
interest 13 (257,668) (3,463,951)
Contributions received from non-controlling
interest - 84,406
Net cash flows from financing activities 27,882,574 (3,379,545)
------------- -------------
Change in cash and cash equivalents 23,294,448 (9,862,746)
Cash and cash equivalents at beginning
of the period 4,270,860 13,102,578
Foreign exchange on cash (1,337,236) 1,031,028
Cash and cash equivalents at end
of the period 26,228,072 4,270,860
------------- -------------
See accompanying notes 1 to 23, which are an integral part of
these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
For the year ended 31 December 2021
Total Equity
Other attributable
Stated Revaluation Retained comprehensive to the Non-controlling
Capital Surplus Earnings income parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Opening Balance 106,638,023 319,699 75,613,383 11,854,509 194,425,614 39,823,748 234,249,362
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 13 - - - (5,291,124) (5,291,124) (2,849,067) (8,140,191)
Net loss for
the
year 13 - - (28,811,901) - (28,811,901) (124,248) (28,936,149)
Capital
increase/
contributions
during the
period 13 - - - - - - -
Cash
distribution
to
non-controlling
interest 13 - - - - - (257,668) (257,668)
Balance at 31
December 2021 106,638,023 319,699 46,801,482 6,563,385 160,322,589 36,592,765 196,915,354
----------- ----------- -------------- ------------- ------------ --------------- ------------
See accompanying notes 1 to 23, which are an integral part of
these consolidated financial statements.
For the year ended 31 December 2020
Total Equity
Other attributable
Stated Revaluation Retained comprehensive to the Non-controlling
Capital Surplus Earnings income parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Opening Balance 106,638,023 319,699 95,422,003 4,354,609 206,734,334 49,381,639 256,115,973
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 13 - - - 7,499,900 7,499,900 4,038,410 11,538,310
Net loss for
the
year 13 - - (19,808,620) - (19,808,620) (10,216,756) (30,025,376)
Capital
increase/
contributions
during the
period 13 - - - - - 84,406 84,406
Cash
distribution
to
non-controlling
interest 13 - - - - - (3,463,951) (3,463,951)
Balance at 31
December 2020 106,638,023 319,699 75,613,383 11,854,509 194,425,614 39,823,748 234,249,362
----------- ----------- -------------- ------------- ------------ --------------- ------------
1. Corporate information
These consolidated financial statements for the year ended 31
December 2021 include the accounts of CEIBA Investments Limited and
its subsidiaries, which are collectively referred to as the "Group"
or "CEIBA".
CEIBA was incorporated in 1995 in Guernsey, Channel Islands as a
registered closed-ended collective investment scheme with
registered number 30083. In May 2013, the status of CEIBA changed
to an unregulated investment company rather than a regulated
investment fund. The status of CEIBA was changed back to a
registered closed-ended collective investment scheme on 11
September 2018 under The Protection of Investors (Bailiwick of
Guernsey) Law, 2020 as amended. The registered office of CEIBA is
located at Dorey Court, Admiral Park, St. Peter Port, Guernsey,
Channel Islands GY1 2HT.
The principal holding and operating subsidiary of the Group is
CEIBA Property Corporation Limited ("CPC") which holds a license
issued by the Cuban Chamber of Commerce and has offices in Cuba
located at the Miramar Trade Centre, Edificio Barcelona, Suite 401,
5(ta) Avenida, esq. a 76, Miramar, Playa, La Habana, Cuba.
The principal investment objective of CEIBA is to achieve
capital growth and dividend income from direct and indirect
investment in or with Cuban businesses, primarily in the tourism
and commercial real estate sectors, and other revenue-generating
investments primarily related to Cuba.
The Group currently invests in Cuban joint venture companies
that are active in two major segments of Cuba's real estate
industry: (i) the development, ownership and management of
revenue-producing commercial properties, and (ii) the development,
ownership and management of hotel properties. In addition, the
Group occasionally arranges and participates in secured finance
facilities and other interest-bearing financial instruments granted
in favour of Cuban borrowers, primarily in the tourism sector. The
Group's asset base is primarily made up of equity investments in
Cuban joint venture companies that operate in the real estate
segments mentioned above.
The officers are contracted through third party entities or
consultancy agreements. CEIBA and its subsidiaries do not have any
obligations in relation to future employee benefits.
On 22 October 2018, CEIBA completed an initial public offering
and listed its ordinary shares on the Specialist Fund Segment of
the London Stock Exchange, where it trades under the symbol "CBA".
The Group also entered into a management agreement, with effect
from 1 November 2018, under which the Group has appointed Aberdeen
Standard Fund Managers Limited ("ASFML" or the "AIFM") as the
Group's alternative investment fund manager to provide portfolio
and risk management services to the Group. The AIFM has delegated
portfolio management to Aberdeen Asset Investments Limited (the "
Investment Manager "). Both the AIFM and the Investment Manager are
wholly-owned subsidiaries of abrdn (see note 17).
2. Basis of preparation
2.1 Statement of compliance and basis of measurement
These consolidated financial statements have been prepared under
the historical cost convention, except for certain financial
instruments as disclosed in note 3.8 and certain property, plant
and equipment as disclosed in note 3.11 which are measured at fair
value, in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB").
2.2 Functional and presentation currency
These consolidated financial statements are presented in United
States Dollars ("US$"), which is also the Company's functional
currency. The majority of the Group's income, equity investments
and transactions are denominated in US$, subsidiaries are
re-translated to US$ to be aligned with the reporting currency of
the Group.
2.3 Use of estimates and judgments
The preparation of the Group's consolidated financial
statements, in conformity with IFRS, requires management to make
judgments, estimates, and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Management judgements
The key management judgements made by management in relation to
the financial statements are:
a) That the Group is not an Investment Entity (see note 3.15);
b) That the Group is a Venture Capital Organisation (see note 3.16).
c) That the functional currency of the parent company (CEIBA
Investments Limited) is US$ (see note 3.18)
Management estimates - valuation of equity investments
Significant areas requiring the use of estimates also include
the valuation of equity investments. Actual results could differ
from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future period
affected.
In determining estimates of recoverable amounts and fair values
for its equity investments, the Group relies on independent
valuations, historical experience, and assumptions regarding
applicable industry performance and prospects, as well as general
business and economic conditions that prevail and are expected to
prevail. Assumptions underlying asset valuations are limited by the
availability of reliable comparable data and the uncertainty of
predictions concerning future events (see note 7).
By their nature, asset valuations are subjective and do not
necessarily result in precise determinations. Should the underlying
assumptions change, the carrying amounts could change and,
potentially, by a material amount.
Change in Management estimates - valuation of equity
investments
The determination of the fair values of the equity investments
may include independent valuations of the underlying properties
owned by the joint venture companies. These valuations assume a
level of working capital required for day-to-day operations of the
properties. Management estimates the amount of cash required for
these working capital needs to determine if the joint venture
companies hold any excess cash that should be added as a component
of the fair value of the equity investments.
In regards to the 31 December 2021 valuations of the properties
held by Monte Barreto and Miramar performed by the independent
valuers, the valuers have noted in their reports that their
valuations have been prepared in a period of significant market
instability as a result of the Covid-19 pandemic. The impact on the
Cuban tourism sector and the economy in general has been dramatic,
with significantly lower numbers of international tourists arriving
since April 2020, which has had a negative impact on the Cuban
economy. As it is not possible to ascertain with any certainty when
the tourism sector and the economy will recover, there is a
material uncertainty as to the valuation of the subject
properties.
Change in Management estimates - expected credit losses in
respect of dividends receivable
As explained in note 5, due to the current liquidity constraints
placed upon Monte Barreto as a result of the recent Cuban monetary
reforms, the timing of receipt of the historical dividends
receivable is uncertain. Therefore the dividends receivable from
Monte Barreto at year end have been impaired in full in the
Statement of Comprehensive Income. However, in the case of Miramar,
the same liquidity constraints are not applicable under the
monetary reforms, due to a large portion of its income being earned
in foreign currency and therefore Miramar has been assigned a
higher credit rating. Management expects to receive the full amount
of dividends receivable from Miramar in due course.
The total amount of credit impaired receivables at year end is
$12,281,408 (2020: nil) and is the balance of the dividend
receivable due from Monte Barrreto.
2.4 Reportable operating segments
An operating segment is a distinguishable component of the Group
that is engaged in the provision of products or services (business
segment). The primary segment reporting format of the Group is
determined to be business segments as the Group's business segments
are distinguishable by distinct financial information provided to
and reviewed by the chief operating decision maker in allocating
resources arising from the products or services engaged by the
Group.
2.5 Equity investments
Equity investments include the direct and indirect interests of
the Group in Cuban joint venture companies, which in turn hold
commercial properties, hotel properties and hotel properties under
development. Cuban joint venture companies are incorporated under
Cuban law and have both Cuban and foreign shareholders.
Equity investments of the Group are measured at fair value
through profit or loss in accordance with IFRS 9, Financial
Instruments: Recognition and Measurement ("IFRS 9"), on the basis
of the option to do so as per IAS 28. Changes in fair value are
recognised in the statement of comprehensive income in the period
of the change.
2.6 New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2021 and not
early adopted that are relevant to the Group
IAS 1 'Presentation of financial statements' Classification of
Liabilities as Current or Non-current. The IASB issued amendments
to paragraphs 69 to 76 of IAS 1 to specify the requirements for
classifying liabilities as current or non-current. If the entity
has the right at the end of the reporting period to defer
settlement of a liability for at least twelve months after the
reporting period, then the liability is classified as non-current.
The classification is not affected by the likelihood that the
entity will exercise its right to defer settlement. Therefore, if
the right exists, the liability is classified as non-current even
if management intends or expects to settle the liability within
twelve months of the reporting period. The effective date is for
annual periods beginning on or after 1 January 2023deferred until
accounting periods starting not earlier than 1 January 2024. The
amendments to the standard are not expected to have a material
impact on the financial statements or performance of the Group.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2. In February 2021, the IASB issued amendments
to IAS 1 and IFRS Practice Statement 2 Making Materiality
Judgements, in which it provides guidance and examples to help
entities apply materiality judgements to accounting policy
disclosures. The amendments aim to help entities provide accounting
policy disclosures that are more useful by: replacing the
requirement for entities to disclose their 'significant' accounting
policies with a requirement to disclose their 'material' accounting
policies; and adding guidance on how entities apply the concept of
materiality in making decisions about accounting policy
disclosures. The effective date is for annual periods beginning on
or after 1 January 2023. The Group is in the process of assessing
the amendments to the standard but it is not expected to have a
material impact on the financial statements or performance of the
Group.
Definition of Accounting Estimates - Amendments to IAS 8. In
February 2021, the IASB issued amendments to IAS 8, in which it
introduces a new definition of 'accounting estimates'. The
amendments clarify the distinction between changes in accounting
estimates and changes in accounting policies and the correction of
errors. Also, they clarify how entities use measurement techniques
and inputs to develop accounting estimates. The amended standard
clarifies that the effects on an accounting estimate of a change in
an input or a change in a measurement technique are changes in
accounting estimates if they do not result from the correction of
prior period errors. The previous definition of a change in
accounting estimate specified that changes in accounting estimates
may result from new information or new developments. Therefore,
such changes are not corrections of errors. This aspect of the
definition was retained by the IASB. The effective date is for
annual periods beginning on or after 1 January 2023. The standard
is not expected to have a material impact on the financial
statements or performance of the Group as the amendment is in line
with the current treatment by the Group.
There are no other standards, interpretations or amendments to
existing standards that are not yet effective that would be
expected to have a significant impact on the Group.
2 .7 Changes in accounting policies
Standards and interpretations applicable this period
There are no standards, amendments to standards or
interpretations that are effective for years beginning on 1 January
2021 that have a material effect on the financial statements of the
Group.
There are no new standards, amendments to standards or
interpretations that are effective for years beginning on 1 January
2021 that have a material effect on the financial statements of the
Group.
2.8 Convertible Bonds
The 10% unsecured convertible bonds 2026 (the " Bonds ") issued
by the Company have been classified as a liability as per IAS 32.
The Bonds were initially recognised at fair value and are
subsequently measured at amortised cost using the effective
interest rate methodology.
3. Summary of significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
3.1 Consolidation
The consolidated financial statements comprise the financial
statements of CEIBA and its subsidiaries as at 31 December 2021.
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:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee)
-- Exposure, or rights, to variable returns from its involvement with the investee, and
-- The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee
-- Rights arising from other contractual arrangements
-- The Group's voting rights and potential voting rights
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.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date
on which control is transferred out of the Group. Where there is a
loss of control of a subsidiary, the consolidated financial
statements include the results for the part of the reporting period
during which the Group has control.
The Group had direct and indirect equity interests in the
following entities as at 31 December 2021 and 31 December 2020:
Equity interest
held indirectly
Country by the Group
Entity Name of Incorporation or holding entity
31 Dec 2021 31 Dec
2020
1. CEIBA Property Corporation Limited
(a) (i) Guernsey 100% 100%
1.1. GrandSlam Limited (a) (ii) Guernsey 100% 100%
1.2. CEIBA MTC Properties Inc.(a)
(iii) Panama 100% 100%
1.2.1 Inmobiliaria Monte Barreto
S.A. (b) (iv) Cuba 49% 49%
1.3. CEIBA Tourism B.V. (a) (viii) Netherlands 100% 100%
1.3.1. HOMASI S.A. (a) (iii) Spain 65% 65%
1.3.1.1. Miramar S.A. (b) (vi) Cuba 50% 50%
1.3.2. Mosaico Hoteles S.A. (a)
(iii) Switzerland 80% 80%
1.3.2.1 TosCuba S.A. (b) (vii) Cuba 50% 50%
1.3.3. Mosaico B.V. (a) (v) Netherlands - 80%
1.3.4 Grupo BM Interinvest Technologies
Mariel S.L (c) (ix) Spain 50% 50%
a) Company consolidated at 31 December 2021 and 31 December 2020.
b) Company accounted at fair value at 31 December 2021 and 31 December 2020.
c) Company accounted for as an investment in associate at 31
December 2021 and 31 Decemeber 2020.
(i) Holding company for the Group's interests in real estate
investments in Cuba that are facilitated by a representative office
in Havana.
(ii) Operates a travel agency that provides services to
international clients for travel to Cuba.
(iii) Holding company for underlying investments with no other significant assets.
(iv) Joint venture company that holds the Miramar Trade Centre as its principal asset.
(v) Mosaico B.V. was liquidated in May 2021
(vi) Joint venture that holds the Meliã Habana Hotel, Meliã Las
Americas Hotel, Meliã Varadero Hotel and Sol Palmeras Hotel as its
principal assets.
(vii) Joint venture company incorporated to build a beach hotel in Trinidad, Cuba.
(viii) Dutch company responsible for the holding and management
of the Group's investments in tourism.
(ix) Spanish company that is developing an industrial logistics
warehouse project in the Special Development Zone of Mariel,
Cuba.
All inter-company transactions, balances, income, expenses and
realised surpluses and deficits on transactions between CEIBA
Investments Limited and its subsidiaries have been eliminated on
consolidation. Non-controlling interest represent the interests in
the operating results and net assets of subsidiaries attributable
to minority shareholders.
3.2 Foreign currency translation
Transactions denominated in foreign currencies during the period
are translated into the functional currency using the exchange
rates prevailing at the date of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated at
the reporting date into functional currency at the exchange rate at
that date. Foreign currency differences arising on translation are
recognised in the consolidated statement of comprehensive income as
foreign exchange income (loss).
The financial statements of foreign subsidiaries included in the
consolidation are translated into the reporting currency in
accordance with the method established by IAS 21, The Effects of
Changes in Foreign Exchange Rates. Assets and liabilities are
translated at the closing rates at the statement of financial
position date, and income and expense items at the average rates
for the period. Translation differences are taken to other
comprehensive income and shown separately as foreign exchange
reserves on consolidation without affecting income. Translation
differences during the year ended 31 December 2021 were losses of
US$ 8,140,191 (2020: gains of US$ 11,538,310 ).
The exchange rate used in these consolidated financial
statements at 31 December 2021 is 1 Euro = US$1.1326 (2020: 1 Euro
US$1.2271).
3.3 Dividend income
Dividend income arising from the Group's equity investments is
recognised in the consolidated statement of comprehensive income
when the Group's right to receive payment is established or cash
amounts have been received. 3.4 Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable. Interest income is recognised in the consolidated
statement of comprehensive income.
3.5 Travel agency commissions
GrandSlam, a wholly-owned subsidiary of the Group, is a travel
agency that acts as an intermediary between the customer and
airlines, tour operators and hotels. GrandSlam facilitates
transactions and earns a commission in return for its service. This
commission may take the form of a fixed fee per transaction or a
stated percentage of the customer billing, depending on the
transaction and the related vendor. Commission is recognised when
the respective bookings have been made.
3.6 Fees and expenses
Fees and expenses are recognised in the statement of
comprehensive income on the accrual basis as the related services
are performed. Transaction costs incurred during the acquisition of
an investment are recognised within the expenses in the
consolidated statement of comprehensive income and transactions
costs incurred on share issues or placements are included within
consolidated statement of changes in equity in respect of stated
capital.
Transaction costs incurred on the disposal of investments are
deducted from the proceeds of sale and transactions costs incurred
on shares are deducted from the share issue proceeds.
3.7 Taxation
Deferred taxes are provided for the expected future tax
consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities using current corporation
tax rate.
Deferred tax liabilities are recognized for temporary
differences that will result in taxable amounts in future years.
Deferred tax assets are recognised for temporary differences that
will result in deductible amounts in future years. Where it is not
certain that the temporary difference will be reversed no deferred
taxation asset is established. At 31 December 2021 and 31 December
2020 the Group has not established any deferred tax assets or
liabilities.
Guernsey Exempt
The Netherlands Exempt
Panama Exempt
Spain Exempt
Cuba (i) 15%
(i) The Cuban tax rate does not apply to the Group itself, but
is rather the tax rate of the underlying Cuban joint venture
companies of the equity investments and is taken into account when
determining their fair value (see note 7).
3.8 Financial assets and financial liabilities
(a) Recognition and initial measurement
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal ("SPPI") amount
outstanding. The Group includes in this category current and
non-current cash and cash equivalents, loans receivables and
non-financing accounts receivables and accrued income.
Financial assets and financial liabilities at fair value through
profit or loss
Financi al assets and financial liabilities at fair value
through profit or loss are measured initially at fair value.
A financial liability other than a financial liability held for
trading or contingent consideration of an acquirer in a business
combination may be designated as at FVTPL upon initial recognition
if either:
-- Such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise
-- The financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair basis, in accordance with the
Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis
-- It forms part of a contract containing one or more embedded
derivatives, and IFRS 9 permits the entire combined contract to be
designated as at FVTPL
(b) Classification
The Group has classified financial assets and financial
liabilities into the following categories:
Financial assets and financial liabilities classified at fair
value through profit or loss:
Financial assets and financial liabilities classified in this
category are those that have been designated by management upon
initial recognition. Management may only classify an instrument at
fair value through profit or loss upon initial recognition when one
of the following criteria are met, and designation is determined on
an instrument-by-instrument basis:
-- The designation eliminates, or significantly reduces, the
inconsistent treatment that would otherwise arise from measuring
the assets or liabilities or recognising gains or losses on them on
a different basis or,
-- For financial liabilities that are part of a group of
financial liabilities, which are managed and their performance
evaluated on a fair value basis, in accordance with a documented
risk management or investment strategy or,
-- For financial liabilities that contain one or more embedded
derivatives, unless they do not significantly modify the cash flows
that would otherwise be required by the contract, or it is clear
with little or no analysis when a similar instrument is first
considered that separation of the embedded derivative(s) is
prohibited in relation to financial liabilities.
Financial assets and financial liabilities at fair value through
profit or loss are carried in the consolidated statement of
financial position at fair value. Changes in fair value are
recognised in the statement of comprehensive income.
Financial assets and financial liabilities measured at fair
value through profit or loss are the following:
-- Equity Investments are classified at fair value through
profit or loss, with changes in fair value recognised in the
statement of comprehensive income for the period.
Financial assets and financial liabilities measured at amortised
cost:
Financial assets and financial liabilities measured at amortised
cost are initially recognised at fair value, except for accounts
receivables which are measured at transaction price, and are
subsequently measured at amortised cost using the effective
interest rate methodology, in respect of financial assets less
allowance for impairment. A debt instrument is measured at
amortised cost if the objective of the business model is to hold
the financial asset for the collection of the contractual cash
flows and the contractual cash flows under the instrument solely
represent payments of principal and interest (SPPI). Amortised cost
is calculated by taking into account any discount or premium on
acquisition and fees and costs that are an integral part of the
effective interest rate. Therefore, the Group recognises interest
income using a rate of return that represents the best estimate of
a constant rate of return over the expected behavioural life of the
loan, hence, recognising the effect of potentially different
interest rates charged at various stages, and other characteristics
of the product life cycle (prepayments, penalty interest and
charges). If expectations are revised the adjustment is booked a
positive or negative adjustment to the carrying amount in the
statement of financial position with an increase or reduction in
interest income. The adjustment is subsequently amortised through
Interest and similar income in the income statement.
Dividend income is recognised when the Group's right to receive
the income is established, which is generally when shareholders of
the underlying investee companies approve the dividend. Financial
assets and financial liabilities measured at amortised cost are the
following:
-- Accounts payable and accrued expenses
-- Short-term borrowings
-- Convertible bonds
(c) Fair value measurement
Fair value is the amount for which an asset can be exchanged, or
a liability settled, between knowledgeable, willing parties in an
arm's-length transaction on the measurement date.
The Group does not have any instruments quoted in an active
market. A market is regarded as active if quoted prices are readily
and regularly available and represent actual and regularly
occurring market transactions on an arm's length basis.
As the financial instruments of the Group are not quoted in an
active market, the Group establishes their fair values using
valuation techniques. Valuation techniques include using recent
arm's length transactions between knowledgeable, willing parties
(if available), reference to the current fair value of other
instruments that are substantially the same, estimated replacement
costs and discounted cash flow analyses. The chosen valuation
technique makes maximum use of market inputs, relies as little as
possible on estimates specific to the Group, incorporates all
factors that market participants would consider in setting a price,
and is consistent with accepted economic methodologies for pricing
financial instruments. Inputs to valuation techniques reasonably
represent market expectations and measures of the risk-return
factors inherent in the financial instrument. The Group calibrates
valuation techniques and tests them for validity using prices from
observable current market transactions of similar instruments or
based on other available observable market data.
The best evidence of the fair value of a financial instrument at
initial recognition is the transaction price, i.e. the fair value
of the consideration given or received, unless the fair value of
the instrument is evidenced by comparison with other observable
current market transactions in the other instruments that are
substantially the same or based on a valuation technique whose
variables include only data from observable markets.
All changes in fair value of financial assets, other than
interest and dividend income, are recognised in the consolidated
statement of comprehensive income as change in fair value of
financial instruments at fair value through profit or loss.
(d) Identification and measurement of impairment
IFRS 9 Financial Instruments requires the Group to measure and
recognise impairment on financial assets at amortised cost based on
Expected Credit Losses. The Group was required to revise its
impairment methodology under IFRS 9 for each class of financial
asset.
From 1 January 2018, the Group assesses on a forward-looking
basis the expected credit losses ("ECL") associated with its debt
instruments carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in
credit risk.
While cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment loss
was immaterial. Investments held at fair value through profit or
loss are not subject to IFRS 9 impairment requirements.
Loans receivable measured at amortised cost fall within the
scope of ECL impairment under IFRS 9. As per IFRS 9, a loan has a
low credit risk if the borrower has a strong capacity to meet its
contractual cash flow obligations in the near term, and adverse
changes in economic and business conditions in the longer term
might, but will not necessarily, reduce the ability of the borrower
to fulfil its obligations. For loans that are low credit risk, IFRS
9 allows a 12-month expected credit loss to be recognised.
If the credit risk of the loan increases significantly and the
resulting credit quality is not considered to be low credit risk,
full lifetime expected losses are recognised. Lifetime expected
credit losses are only recognised if the credit risk increases
significantly from when the entity originates or purchases the
financial instruments but that do not have objective evidence of a
credit loss event.
The Group's approach to ECLs reflects a probability- weighted
outcome, the time value of money and reasonable and supportable
information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts
of future economic conditions.
(e) Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or when
it transfers the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the
financial asset are transferred or in which the Group neither
transfers nor retains substantially all the risks and rewards of
ownership and does not retain control of the financial asset. Any
interest in transferred financial assets that qualify for
derecognition that is created or retained by the Group is
recognised as a separate asset or liability in the consolidated
statement of financial position.
On derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised) and the consideration
received (including any new asset obtained less any new liability
assumed) is recognised in the consolidated statement of
comprehensive income.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
3.9 Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and
short-term deposits and other short-term highly liquid investments
with remaining maturities at the time of acquisition of three
months or less.
3.10 Loans and lending facilities
Loans and lending facilities comprise investments in unquoted
interest-bearing debt instruments. They are carried at amortised
cost. Interest receivable is included in accounts receivable and
accrued income in note 5.
3.11 Property, plant and equipment
Property, plant and equipment, with the exception of works of
art, held by the Group and its subsidiaries are stated at cost less
accumulated depreciation and impairment. Depreciation is calculated
at rates to write off the cost of each asset on a straight-line
basis over its expected useful life, as follows:
Office furniture and equipment 4 to 7 years
Motor vehicles 5 years
The carrying amounts are reviewed at each statement of financial
position date to assess whether they are recorded in excess of
their recoverable amounts, and where carrying values exceed this
estimated recoverable amount, assets are written down to their
recoverable amount. Works of art are carried at their revalued
amount, which is the fair value at the date of revaluation.
Increases in the net carrying amount are recognised in the related
revaluation surplus in shareholders' equity. Valuations of works of
art are conducted with sufficient regularity to ensure the value
correctly reflects the fair value at the statement of financial
position date. Valuations are mostly based on active market prices,
adjusted for any difference in the nature or condition of the
specific asset.
3.12 Stated capital
Ordinary shares are classified as equity if they are
non-redeemable, or redeemable only at CEIBA's option.
3.13 Acquisitions of subsidiary that is not a business
Where a subsidiary is acquired, via corporate acquisitions or
otherwise, management considers the substance of the assets and
activities of the acquired entity in determining whether the
acquisition represents the acquisition of a business.
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 or assets and liabilities
is allocated between the identifiable assets and liabilities (of
the entity) based on their relative values at the acquisition date.
Accordingly, no goodwill or deferred taxation arises.
3.14 Investments in associates
Investments in associates are accounted for using the equity
method.
The carrying amount of the investment in associates is increased
or decreased to recognise the Group's share of the profit or loss
and other comprehensive income of the associate, adjusted where
necessary to ensure consistency with the accounting policies of the
Group.
Unrealised gains and losses on transactions between the Group
and its associates are eliminated to the extent of the Group's
interest in those entities. Where unrealized losses are eliminated,
the underlying asset is also tested for impairment.
3.15 Assessment of investment entity status
Entities that meet the definition of an investment entity within
IFRS 10 "Consolidated Financial Statements" are required to measure
their subsidiaries at fair value through profit and loss rather
than consolidate them. The criteria which define an investment
entity are, as follows:
-- An entity that obtains funds from one or more investors for
the purpose of providing those investors with investment management
services;
-- An entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
-- An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Group's objective includes providing investment management
services to investors to achieve capital growth and dividend income
from direct and indirect investment in or with Cuban businesses,
primarily in the tourism and commercial real estate sectors, and
other revenue-generating investments primarily related to Cuba.
Although the principal income sources of the CEIBA is derived
from the changes in fair value and dividends received from its
equity investments, the Group is not limited to this type of
investment. This is evidenced by CEIBA's wholly-owned subsidiary,
GrandSlam Limited, that operates a travel agency providing Cuban
related tourism products and services. The income from GrandSlam is
shown on the face of the Consolidated Statement of Comprehensive
Income as Travel Agency Commissions. Therefore the Group does not
invest funds solely for returns from capital appreciation or
investment income.
In addition to reviewing fair values, the Group also reports to
its Directors, via internal management reports, various other
performance indicators in relation to the operating performance of
the investments. Therefore Management is not measuring and
evaluating the performance of the investments solely on a fair
value basis.
Accordingly, Management has concluded that the Group does not
meet all the characteristics of an investment entity. These
conclusions will be reassessed on a continuous basis, if any of
these criteria or characteristics changes.
3.16 Assessment of venture capital organisation
There is no specific definition of a "venture capital
organisation". However, venture capital organisations will commonly
invest in start-up ventures or investments with long-term growth
potential.
Venture capital organisations will also frequently obtain board
representation for the investments that it has acquired an equity
interest. The Group has representation on all of the board of
directors of the joint venture companies in which it has an
interest and participates in strategic policy decisions of its
investments, but does not exercise management control.
Accordingly Management has concluded that the Group is a venture
capital organisation and has applied the exemption in IAS 28
"Investments in Associates and Joint Ventures" to measures it
investments in joint venture companies at fair value through profit
or loss.
3.17 Going concern
The Directors have reviewed cash flow projections that detail
revenue and liabilities and will continue to receive cashflow
projections as part of the full-year reporting and monitoring
processes. As a result, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future and has significant liquid
funds to do so. Accordingly, the Directors have adopted the going
concern basis in preparing the financial statements.
3.18 Assessment of functional currency of parent company
An entity's functional currency is the currency of the primary
economic environment in which the entity operates (i.e. the
environment in which it primarily generates and expends cash). Any
other currency is considered a foreign currency. Management has
made an assessment of the primary economic environment of the
parent company, CEIBA Investments Limited, and the currency of its
principal income and expenses. Based on this assessment, Management
has determined that the functional currency of the parent is
US$.
3.19 Embedded derivatives
An embedded derivative is a component of a hybrid contract that
also includes a non-derivative host- with the effect that some of
the cash flows of the combined instrument vary in a way similar to
a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset
host within the scope of IFRS 9 are not separated.
Derivatives embedded in hybrid contracts with hosts that are not
financial assets within the scope of IFRS 9 (e.g. financial
liabilities) are treated as separate derivatives when they meet the
definition of a derivative, their risks and characteristics are not
closely related to those of the host contracts and the host
contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or
non-current liability if the remaining maturity of the hybrid
instrument to which the embedded derivative relates is more than 12
months and is not expected to be realised or settled within 12
months.
The embedded derivative relating to the option of the Bondholder
to convert their holdings to Ordinary Shares of the Company, at any
time, at a conversion price equal to the Euro equivalent of
GBP1.043 (at the time of conversion, subject to adjustments) was
determined by management to have no value at initial recognition
and at year end.
The embedded derivative relating to the option of the issuer to
repay the convertible bond from the end of year 3 is deemed to be
closely related to the host contract and has therefore not been
separated at initial recognition. The embedded derivative is
considered by management to have no value at year end as prepayment
risk is considered to be low.
4. Cash and cash equivalents
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Cash on hand 51,251 5,480
Bank current accounts 26,176,821 4,265,380
------------ ------------
5. Accounts receivable and accrued income
31 Dec 2021 31 Dec 2020
US$ US$
------------- ------------
Loan interest receivable 3,146,526 1,716,307
TosCuba deposit (i) 3,180,786 4,000,000
Other accounts receivable and deposits 329,493 449,733
Dividends receivable from Miramar S.A. 310,596 312,352
Dividends receivable from Inmobiliaria
Monte Barreto S.A. 12,281,408 9,871,284
------------- ------------
19,248,809 16,349,676
Expected credit loss (refer to note 2.3) (12,281,408) -
------------- ------------
6,967,401 16,349,676
------------- ------------
Current portion 3,821,068 14,581,229
------------- ------------
Non-current portion 3,146,333 1,768,447
------------- ------------
(i) TosCuba deposit relates to amount held in the bank account
of TosCuba on behalf of CEIBA that will be applied against the
TosCuba construction facility for the construction of the
hotel.
Accounts receivable and accrued income have the following future
maturities:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days 106,235 553,216
Between 31 and 90 days 390,797 249,214
Between 91 and 180 days 92,810 5,336,284
Between 181 and 365 days 3,231,226 8,442,515
Over 365 days 3,146,333 1,768,447
------------ ------------
6,967,401 16,349,676
------------ ------------
$ 12,592,004 of the accounts receivable and accrued income
balance is made up of dividends receivable. The impairment on the
dividends receivable has been assessed as low in the case of
Miramar and high in the case of Monte Barreto in terms of the 3
stage model per IFRS 9 by assessing the credit risk of the
counterparty who declared the dividend. The delay in payment of the
dividends receivable from Monte Barreto is due in part to the
current liquidity position of the Cuban financial system caused by
the pandemic, increased U.S. sanctions and the transitional effects
of the Cuban monetary reforms. In the current year, the overall
credit risk for Monte Barretto has significantly increased from the
preceding year. This has resulted in the receivable moving from
Stage 2 to Stage 3 of the IFRS ECL impairment model in the current
year, which therefore requires management to assess the expected
credit loss over time. Accordingly in the current year management
has made an assessment of the expected credit loss over timetaking
into account all reasonable and supportable information that is
available that includes both internal and external information.
Due to the current liquidity constraints placed upon Monte
Barreto as a result of the recent Cuban monetary reforms, the
timing of receipt of historical dividends receivable is uncertain
amounting to US$12,281,408 (2020: US$9,871,284). Therefore, the
dividends receivable from Monte Barreto at year end have been
impaired in full in the Statement of Comprehensive Income. However,
in the case of Miramar, the same liquidity constraints do not apply
under the monetary reforms due to a large portion of its income
being earned in foreign currency and therefore Miramar has been
assigned a higher credit rating. Management expects to receive the
full amount of dividends receivable from Miramar in due course.
In the prior year, the overall credit risk for Toscuba
significantly increased from the preceding year due to COVID 19 and
the resulting prevailing economic conditions. This resulted in the
receivable moving from Stage 1 to Stage 2 of the IFRS ECL
impairment model (where it remains), which therefore requires
management to assess the expected credit loss over the lifetime of
the receivable. Accordingly in the current year management has made
an assessment of the expected credit loss over the lifetime of the
receivable taking into account all reasonable and supportable
information that is available that includes both internal and
external information and this has resulted in an assessed expected
credit loss that is immaterial to the Group. Management believes
the probability of default is low (see note 6).
Other accounts receivable and deposits are assessed in terms of
the simplified approach for expected credit losses per IFRS 9 due
to the trade receivables not containing a significant financing
component. These relate to the receivables of the travel agency
activities of GrandSlam, a wholly owned subsidiary of the
Group.
The total amount of credit impaired receivables at year end is
$12,281,408 related to the balance of the dividend receivable due
from Monte Barrreto.
6. Loans and lending facilities
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
TosCuba S.A. (i) 18,708,861 16,106,466
Casa Financiera FINTUR S.A. (ii) 1,943,760 2,110,795
Miramar Facility (iii) 1,338,673 2,005,374
Grupo B.M. Interinvest Technologies 566,316 -
Mariel S.L. (iv)
22,557,610 20,222,635
------------ ------------
Current portion 3,372,086 2,827,292
------------ ------------
Non-current portion 19,185,524 17,395,343
------------ ------------
In April 2018, the Group entered into a construction finance
facility agreement (the "Construction Facility") with TosCuba S.A.
("TosCuba") for the purpose of extending to TosCuba part of the
funding necessary for the construction of the Meliã Trinidad
Península Hotel. The Construction Facility was originally executed
in the maximum principal amount of up to US$45,000,000, divided
into two separate tranches of US$22,500,000 each. The terms of the
facility were amended in August 2021 to take into account the new
construction process and other circumstances and in particular the
maximum principal amount of Tranche B thereof was increased to
US$29,000,000. The increased principal of Tranche B includes an
amount of US$4 million that may be used for the purchase of
equipment needed by the relevant Cuban utility companies to ensure
the provision of the required water and electrical services to the
hotel. The Group has an 80% participation in Tranche A of the
Construction Facility and a 100% participation in Tranche B. The
Group has the right to syndicate Tranche B of the Construction
Facility to other lenders.
The principal terms of the Construction Facility include, (i) a
grace period for principal and interest during the construction
period of the hotel, (ii) upon expiry of the grace period,
accumulated interest will be repaid, followed by a repayment period
of eight years during which blended payments of principal and
interest will be made, (iii) interest will accrue on amounts
outstanding under the Construction Facility at the rate of 8 per
cent.
The first disbursement under the Construction Facility was made
on 23 November 2018. Repayment of the Construction Facility is
secured by an assignment in favour of the lenders of all of the
future income of the Meliã Trinidad Península Hotel following
start-up of operations. In addition, Tranche B of the Construction
Facility is also secured by a guarantee provided by Cubanacán S.A.,
Corporaciön de Turismo y Comercio Internacional (" Cubanacán " -
the Cuban shareholder of TosCuba) as well as by Cubanacán's
dividend entitlements in Miramar.
The Construction Facility represents a financial asset, based on
the terms of the loan the loan is not repayable on demand and there
is no expectation to be repaid within 12 months since there is a
grace period during the construction period of the hotel and a
further 8 year payment period. In the prior year, the credit risk
significantly increased due to COVID 19 and the resulting
prevailing economic conditions. The loan is assessed at Stage 2
(same as for the year ended 31 December 2020) of the IFRS ECL
impairment model which therefore requires management to assess the
expected credit loss over the lifetime of the loan. Accordingly,
management has made an assessment of the expected credit loss over
the lifetime of the loan taking into account all reasonable and
supportable information that is available that includes both
internal and external information and this has resulted in an
assessed expected credit loss that is immaterial to the Group.
Management believes the probability of default is low due to the
fact that the repayment of the facility is secured by the future
income of the hotel which will be in the form of Euro-denominated
off-shore tourism proceeds payable to TosCuba. As well repayment of
Tranche B has also been guaranteed by Cubanacán and is further
secured by Cubanacán's dividend entitlements in Miramar. Payments
of the facility are scheduled to begin once the hotel starts
operations.
(i) In July 2016, the Group arranged and participated in a
EUR24,000,000 (US$27,182,400 equivalent at 31 December 2021)
syndicated facility provided to Casa Financiera FINTUR S.A. ("
FINTUR "). The facility was subsequently amended in May 2019
through the addition of a second tranche in the principal amount of
EUR12,000,000 (US$13,591,200 equivalent at 31 December 2021). The
Group had an initial participation of EUR4,000,000 (US$4,530,400
equivalent at 31 December 2021) under the first tranche and a
EUR2,000,000 (US$2,265,200 equivalent at 31 December 2021)
participation under the second tranche. The term of the facility
was due to expire in June 2021 but, with the closure of nearly all
Cuban hotels as a result of the Covid-19 pandemic, an additional
grace period was granted and the term was extended to March 2023.
The facility has a fixed interest rate of 8%, and under the
renegotiated terms interest was accumulated until 31 December 2020
and then paid in quarterly instalments. With effect from 1 April
2020, the Company and FINTUR agreed to revise the remaining
outstanding payments under the FINTUR facility (combining the two
tranches into a new single tranche C) and to provide a one-year
period of grace on the payment of principal, with a two-year
principal payment period thereafter. The first principal payment of
the new Tranche C fell due on 30 June 2021 but subsequently the
principal payments of 30 June, 30 September and 31 December 2021
were waived and have been prorated amongst the remaining scheduled
principal payment dates as a result of the continued closure of the
hotels serving as security for payment of the facility. The payment
of interest on the facility was current at 31 December 2021. This
facility is secured by Euro-denominated off-shore tourism proceeds
payable to FINTUR by certain international hotel operators managing
hotels in Cuba. The loan to FINTUR represents a financial asset.
The loan is not repayable on demand. In the prior year, the FINTUR
facility had a significant increase in credit risk since its
initial recognition. The loan is assessed at Stage 2 (same as for
the year ended 31 December 2020) of the IFRS ECL impairment model
which therefore requires management to assess the expected credit
loss over the lifetime of the loan. Accordingly, management has
made an assessment of the expected credit loss over the lifetime of
the loan taking into account all
reasonable and supportable information that is available that
includes both internal and external information and this has
resulted in an assessed expected credit loss that is immaterial to
the Group.
The Company's subsidiary HOMASI (the foreign shareholder of
Miramar) executed a US$7 million confirming and discounting
facility with Miramar for the purpose of confirming and discounting
supplier invoices relating to the operations of the four Hotels
owned by the joint venture company. The facility is financed in
part by a EUR3.5 million credit line received by HOMASI from a
Spanish bank for this purpose. The facility is secured by the cash
flows generated by the Hotels of Miramar. At 31 December 2021, a
total of EUR1,181,947 (US$1,338,673) was disbursed under the
facility. The loan is not repayable on demand. In the prior year,
the Miramar facility had a significant increase in credit risk
since its initial recognition. The loan is assessed at Stage 2
(same as for the year ended 31 December 2020) of the IFRS ECL
impairment model which therefore requires management to assess the
expected credit loss over the lifetime of the loan. Accordingly
management has made an assessment of the expected credit loss over
the lifetime of the loan taking into account all reasonable and
supportable information that is available that includes both
internal and external information and this has resulted in an
assessed expected credit loss that is immaterial to the Group.
(ii) In May 2021, the Group entered into a Convertible Loan
Agreement in the principal amount of EUR500,000 (US$566,316) with
Grupo B.M. Interinvest Technologies Mariel S.L. ("GBM Mariel"). The
loan has an annual interest rate of 5% and an original term of 6
months which was subsequently extended to 1 year in November 2021.
The loan principal and accrued interest is convertible into common
shares of GBM Mariel following the conversion of the company from
an S.L. (limited liability company) to a S.A. (company limited by
shares). No assessment of the ECL associated with the convertible
loans was done by the Group as the balance is immaterial.
The following table details the expected maturities of the loans
and lending facilities portfolio based on contractual terms:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days - 555,101
Between 31 and 90 days 817,597 1,365,797
Between 91 and 180 days 1,181,363 404,897
Between 181 and 365 days 1,373,126 501,497
Over 365 days 19,185,524 17,395,343
------------ ------------
22,557,610 20,222,635
------------ ------------
7. Equity investments
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Miramar S.A. 94,511,908 103,184,163
Inmobiliaria Monte Barreto
S.A. 67,692,462 81,433,887
TosCuba S.A. 13,623,664 13,000,000
175,828,034 197,618,050
------------ ------------
Monte
Miramar Barreto TosCuba Total
(i) US$ (ii) US$
US$ US$
------------- ------------- ----------- -------------
Balance at 31 December
2019 127,887,983 86,702,576 12,750,000 227,340,559
Foreign currency translation
reserve 12,191,767 - - 12,191,767
Change in fair value
of equity investments (36,895,587) (5,268,689) 250,000 (41,914,276)
Balance at 31 December
2020 103,184,163 81,433,887 13,000,000 197,618,050
Foreign currency translation
reserve (7,946,299) - - (7,946,299)
Change in fair value
of equity investments (725,956) (13,741,425) 623,664 (13,843,717)
Balance at 31 December
2021 94,511,908 67,692,462 13,623,664 175,828,034
------------- ------------- ----------- -------------
(i) The value of Miramar represents the 50% foreign equity
interest in Miramar S.A. including non-controlling interests.
(ii) The value of TosCuba represents the 50% foreign equity
interest in TosCuba S.A. including non-controlling interests.
Below is a description of the equity investments of the Group
and the key assumptions used to estimate their fair values.
Monte Barreto
The Group holds the full foreign equity interest of 49% in the
Cuban joint venture company Monte Barreto, incorporated in 1996 for
the construction and subsequent operation of the Miramar Trade
Centre. The Miramar Trade Centre is a six-building complex
comprising approximately 80,000 square meters of constructed area
of which approximately 56,000 square meters is net rentable
area.
The Group is the sole foreign investor in Monte Barreto and
holds its 49% interest in the joint venture company through its
wholly-owned subsidiary CEIBA MTC Properties Inc. ("CEIBA MTC"),
incorporated in Panama. The remaining 51% interest in Monte Barreto
is held by the Cuban partner in the joint venture company.
The incorporation and operations of Monte Barreto are governed
by a deed of incorporation (including an association agreement and
corporate by-laws) dated 7 March 1996 between CEIBA MTC and the
Cuban shareholder. Under the Monte Barreto deed of incorporation,
Monte Barreto was incorporated for an initial term of 50 years
expiring in 2046. All decisions at shareholder meetings require the
unanimous agreement of the Cuban and foreign shareholders.
Key assumptions used in the estimated fair value of Monte
Barreto:
The fair value of the equity investment in Monte Barreto is
determined by the Directors of CEIBA taking into consideration
various factors, including estimated future cash flows from the
investment, estimated replacement costs, transactions in the
private market and other available market evidence to arrive at an
appropriate value. The Group also engages an independent valuation
firm to perform an independent valuation of the property owned by
the joint venture.
The Directors may also take into account additional relevant
information that impacts the fair value of the equity investment
that has not been considered in the valuation of the underlying
property of the joint venture. One such fair value consideration is
cash held by the joint venture in excess of its working capital
needs ("Excess Cash"). As the valuation of the underlying property
only assumes a level of working capital to allow for day-to-day
operations, the existence of any Excess Cash needs to be included
as an additional component of the fair value of the joint venture
company.
In the case of Monte Barreto, the amount of cash required for
working capital needs is estimated as the sum of: (i) 30% of tenant
deposits, (ii) taxes payable, (iii) dividends declared and payable,
(iv) a reserve for employee bonuses, and (v) 2 months of estimated
operating expenses. The sum of these amounts are deducted from the
balance of cash and cash equivalents of the joint venture with the
remaining balance, if any, being considered Excess Cash. At 31
December 2021, the amount of Excess Cash that is included in the
fair value of Monte Barreto stated in these financial statements is
US$9,529,462 (2020: US$2,494,887 ).
Cash flows have been estimated for a ten year period. Cash flows
from year 11 onward are equal to the capitalised amount of the cash
flows at year 10. The key assumptions used in the discounted cash
flow model are the following:
31 Dec 2021 31 Dec 2020
Discount rate (after tax) (i) 12.8% 9.8%
Occupancy year 1 96.2% 97.3%
Average occupancy year 2 to 8 96.5% 97.3%
Occupancy year 8 and subsequent periods 97.0% 97.5%
Average rental rates per square meter per US$26.33 US$27.23
month - year 1 to 6
Annual increase in rental rates subsequent
to year 6 (ii) 2.5% 2.5%
Capital investments as percentage of rental
revenue 3% 3%
(iii) The effective tax rate is estimated to be 19% (2020: 19%).
(iv) The increase in rental rates in subsequent periods is
in-line with the estimated rate of long-term inflation.
Miramar
HOMASI is the foreign shareholder (incorporated in Spain) that
owns a 50% share equity interest in the Cuban joint venture company
Miramar, which owns the Meli ã Habana Hotel in Havana, a 5-star
hotel that has 397 rooms. Miramar also owns t hree beach resort
hotels in Varadero known as the Meli ã Las Americas, Meli ã
Varadero and Sol Palmeras Hotels, having an aggregate total of
1,437 rooms (the "Varadero Hotels") . The Meli ã Las Americas Hotel
and Bungalows is a 5-star luxury beach resort hotel with 340 rooms,
including 90 bungalows and 14 suites and began operations in 1994.
The 5-star Meli ã Varadero Hotel is located next to the Meli ã Las
Americas Hotel and has 490 rooms, including 7 suites and began
operations in 1992. The 4-star Sol Palmeras Hotel is located next
to the Meli ã Varadero Hotel and has 607 rooms, including 200
bungalows, of which 90 are of suite or deluxe standard and began
operations 1990. The remaining share equity interest in Miramar is
held by Cubanacán (as to 50%). All decisions at shareholder
meetings require the unanimous agreement of the Cuban and foreign
shareholders. In 2018, the surface rights for the four hotels of
Miramar were extended / granted to 2042.
At 31 December 2021 the Group holds 65% of the share equity of
HOMASI, representing a 32.5% interest in Miramar. The remaining 35%
interest in HOMASI is held by Meliã Hotels International,
representing a 17.5% interest in Miramar, and has been accounted
for as a non-controlling interest in these consolidated financial
statements.
Key assumptions used in the estimated fair value of Miramar:
The fair value of the equity investment in Miramar is determined
by the Directors taking into consideration various factors,
including estimated future cash flows from the investment in US$,
estimated replacement costs, transactions in the private market and
other available market evidence to arrive at an appropriate value.
The Group also engages an independent valuation firm to perform
independent valuations in US$ of the properties held by the joint
venture.
The Directors may also take into account additional relevant
information that impacts the fair value of the equity investment
that has not been considered in the valuations of the underlying
properties of the joint venture. One such fair value consideration
is cash held by the joint venture in excess of its working capital
needs. As the valuations of the underlying properties only assume a
level of working capital to allow for day-to-day operations, the
existence of any Excess Cash needs to be included as an additional
component of the fair value of the joint venture company.
In the case of Miramar, the amount of cash required for working
capital needs is estimated as the sum of: (i) taxes payable, (ii)
dividends declared and payable, (iii) trade payables greater than
90 days outstanding, and (iv) 2 months of estimated operating
expenses. The sum of these amounts is deducted from the balance of
cash and cash equivalents of the joint venture with the remaining
balance, if any, being considered Excess Cash. At 31 December 2021,
the amount of Excess Cash that is included in the fair value of
Miramar stated in these financial statements is US$10,411,908
(2020: US$12,984,162 ). Cash flows have been estimated for a ten
year period. Cash flows from year 11 onward are equal to the
capitalised amount of the cash flows at year 10. The key
assumptions used in the discounted cash flow model are the
following:
31 Dec 2021 31 Dec 2020
Meliã Habana
Discount rate (after tax) (i) 14.7% 12.5%
Average occupancy year 1 to 3 60.0% 60.3%
Occupancy year 4 and subsequent periods 70.0% 72.2%
Average daily rate per guest - year 1 US$127.50 US$134.19
Average increase in average daily rate
per guest - year 2 to 6 6.1% 4.9%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Las Americas
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 60% 63%
Occupancy year 4 and subsequent periods 79.3% 79.5%
Average daily rate per guest - year 1 $120.56 US$110.93
Average increase in average daily rate
per guest - year 2 to 6 10.6% 11%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Varadero
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 62.3% 64.6%
Occupancy year 4 and subsequent periods 79.3% 80.3%
Average daily rate per guest - year 1 US$108.02 US$97.88
Average increase in average daily rate
per guest - year 2 to 6 4.9% 6%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
Sol Palmeras
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 66.3% 65.1%
Occupancy year 4 and subsequent periods 80.7% 81.8%
Average daily rate per guest - year 1 US$94.91 US$86.75
Increase in average daily rate per guest
- year 2 5% 12%
Average increase in average daily rate
per guest - year 3 to 6 3.1% 5%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (2020: 19%).
(ii) The increase in the average daily rate per guest in
subsequent periods is in-line with the estimated rate of long-term
inflation.
(iii) The effective tax rate is estimated to be 21% (2020: 21%).
Sensitivity to changes in the estimated rental rates / average
daily rates
The discounted cash flow models include estimates of the future
rental rates / average daily rates of the joint venture companies.
Actual rental rates / average daily rates may differ from these
estimates due to several factors including the general business
climate and economic conditions, the strength of the overall
tourism market and the influence of competitors. Therefore, the
following tables detail the change in fair values of the equity
investments, when applying what Management considers to be the
reasonable possible spread in rental rates / average daily rates of
between 15% lower and 15% higher compared to the rates used in
these consolidated financial statements .
The following table details the fair values of the equity
investments at 31 December 2021 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 67,692,462 64,822,429 61,952,395 59,082,362
Miramar 94,511,908 90,812,298 87,106,569 83,384,347
The following table details the fair values of the equity
investments at 31 December 2021 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ----------- ------------ ------------
Monte Barreto 67,692,462 70,562,495 73,432,528 76,302,561
Miramar 94,511,908 98,211,518 101,911,129 105,610,740
The following table details the fair values of the equity
investments at 31 December 2020 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 77,430,040 73,426,194 69,422,348
Miramar 103,184,163 99,236,033 95,287,903 91,330,479
The following table details the fair values of the equity
investments at 31 December 2020 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 81,433,887 85,437,733 89,441,579 93,445,426
Miramar 103,184,163 107,132,293 111,080,424 115,028,555
Sensitivity to changes in the occupancy rates
The discounted cash flow models include estimates of the future
occupancy rates of the joint venture companies. Actual occupancy
rates may differ from these estimates due to several factors
including the general business climate and economic conditions, the
strength of the overall tourism market and the influence of
competitors. Therefore, the following tables detail the change in
fair values of the equity investments, when applying what
Management considers to be the reasonable possible spread in
occupancy rates of between 15% lower and 15% higher compared to the
rates used in these consolidated financial statements.
The following table details the fair values of the equity
investments at 31 December 2021 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------- ----------- ----------- -----------
Monte Barreto 67,692,462 64,839,935 61,988,052 59,136,932
Miramar 94,511,908 89,683,071 84,828,731 79,946,598
The following table details the fair values of the equity
investments at 31 December 2021 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------- ----------- ------------ ------------
Monte Barreto (i) 67,692,462 69,620,366 n/a n/a
Miramar 94,511,908 99,340,746 104,169,585 108,998,426
(i) In the case of Monte Barreto, only a constant occupancy rate
of 100% is shown under the increase of 5% as projected occupancy is
already above or equal to 95%.
The following table details the fair values of the equity
investments at 31 December 2020 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 77,438,281 73,442,960 69,447,975
Miramar 103,184,163 98,256,156 93,324,630 88,330,847
The following table details the fair values of the equity
investments at 31 December 2020 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 81,433,887 86,441,244 n/a n/a
Miramar 103,184,163 108,112,170 113,040,178 117,968,186
(i) In the case of Monte Barreto, only a constant occupancy rate
of 100% is shown under the increase of 5% as projected occupancy is
already above or equal to 95%.
Sensitivity to changes in the discount and capitalisation
rates
The discount and capitalisation rates used in the discounted
cash flow models have been estimated taking into account various
factors including the current risk-free interest rate, country risk
rate and other industry factors. Different methodologies or
assumptions may lead to an increase or decrease in the discount and
capitalisation rates. Therefore, the following tables detail the
change in fair values of the equity investments when applying what
Management considers to be the reasonable possible spread in the
discount and capitalisation rates of between 3% lower and 3% higher
compared to the rates used in these consolidated financial
statements. The following table details the fair values of the
equity investments at 31 December 2021 when applying lower discount
and capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------- ------------ ------------ ------------
Monte Barreto 67,692,462 73,048,490 79,662,418 88,048,776
Miramar 94,511,908 102,737,618 112,607,405 124,671,680
The following table details the fair values of the equity
investments at 31 December 2021 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 67,692,462 63,261,635 59,531,353 56,344,447
Miramar 94,511,908 87,550,431 81,582,595 76,410,376
The following table details the fair values of the equity
investments at 31 December 2020 when applying lower discount and
capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 81,433,887 92,593,656 107,725,093 129,348,178
Miramar 103,184,163 113,376,155 125,923,155 141,725,407
The following table details the fair values of the equity
investments at 31 December 2020 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 72,875,764 66,111,224 60,633,360
Miramar 103,184,163 94,749,345 87,659,357 81,620,744
Sensitivity to changes in the estimation of Excess Cash
The fair values of the equity investments have been estimated
using the discounted cash flow method and adjusted for the Excess
Cash held by the joint venture companies. Within the calculation of
Excess Cash, it is estimated that the joint ventures will maintain
a sufficient cash balance for working capital purposes equal to the
equivalent of two months' operating expenses.
The amount of cash on hand required for working capital purposes
may fluctuate due to a change in the aging of receivables and
payables of the joint venture companies. Management believes that
the maximum amount of cash that would be required to be kept on
hand would not exceed three months of operating expenses. Therefore
the following table details the changes in fair values of the
equity investments at 31 December 2021 if the number of months of
operating expenses used in the calculation is increased by an
additional 1 to 3 months in comparison to the calculation used in
these consolidated financial statements.
Financial
statements + 1 month + 2 months + 3 months
US$ US$ US$ US$
------------ ------------ ------------- -------------
Monte Barreto 67,692,462 67,479,165 67,265,868 67,052,571
Miramar 94,511,908 92,633,477 90,755,047 88,876,616
The following table details the changes in fair values of the
equity investments at 31 December 2020 if the number of months of
operating expenses used in the calculation is increased by an
additional 1 to 3 months in comparison to the calculation used in
these consolidated financial statements.
Financial
statements + 1 month + 2 months + 3 months
US$ US$ US$ US$
------------ ------------ ------------- -------------
Monte Barreto 81,433,887 81,195,665 80,957,443 80,719,222
Miramar 103,184,163 101,161,741 99,139,318 97,116,896
A reduction in the number of months of operating expenses used
in the calculation would increase the changes in fair values of the
equity investments at 31 December 2021 and 2020, however this is
considered unlikely and therefore the related sensitivities have
not been shown .
TosCuba
At 31 December 2021 and 2020 the Group owned an indirect 80%
interest in Mosaico Hoteles S.A. ("Mosaico Hoteles"), which in turn
has a 50% share equity interest in TosCuba, a Cuban joint venture
company that is developing a 400 room 4-star hotel at Playa Maria
Aguilar near the city of Trinidad, Cuba. The Group has made capital
contributions of US$8,000,000 (2020: US$8,000,000) to TosCuba.
In 2019, TosCuba was awarded a US$10 million grant under the
Spanish Cuban Debt Conversion Programme, a Spanish-Cuba initiative
aimed at promoting Spanish private sector investments in Cuba under
which outstanding bilateral debts owed to Spain by Cuba may be
settled through awards granted to investment projects in Cuba from
a special countervalue fund created for this purpose. In 2021,
TosCuba was awarded an additional US$1,247,328 under the programme.
Under these awards, local currency invoices relating to services
and materials received in Cuba in the course of constructing the
projects are paid from the countervalue fund on behalf of the joint
venture. As of 31 December 2021, TosCuba has received cash grants
under the programme totalling US$11,247,328 (2020: US$10,000,000).
The 50% interest of the Group in amounts received under the
programme by TosCuba have been recorded as a change in the fair
value in the investment in TosCuba.
The capital contributions made by the Company plus its share of
the cash grants received by Toscuba under the Spanish Cuban Debt
Conversion Programme have been determined to be the best observable
measure of the Company's interest in the fair value of Toscuba. The
construction has been progressing slowly since the beginning of the
Covid-19 pandemic in March 2020. As at 31 December 2021, all
structural works have been completed and the project has reached an
overall completion level of approximately 63% and it is estimated
that the construction will be completed by the first quarter of
2023. Taking into consideration the estimated cost to completion,
the projected value of the hotel upon completion, the projected
value of the hotel upon completion and current debt level of
Toscuba, the Directors determined that the cost to date on the
project approximates the fair value of Toscuba.
Dividend income from equity investments
Dividend income from the equity investments above during the
year is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Monte Barreto 2,550,124 6,948,316
Miramar 500,000 6,310,596
3,050,124 13,258,912
------------ ------------
Financial information of joint venture companies
The principal financial information of the joint venture
companies for the years ended 31 December 2021 and 2020 is as
follows:
Monte Barreto Miramar(i) TosCuba (ii)
(i)
2020 2021 2020 2021 2020
US$ US$ US$ US$
2021 000's US$
US$ 000's 000's 000's
000's 000's
-------- -------- --- -------- ------- --- -------
Cash and equivalents 42,366 26,725 39,340 42,908 4,026 4,049
Other current
assets 1,666 1,480 21,705 16,943 4,028 3,718
Non-current
assets 45,419 46,865 131,653 135,464 54,163 48,459
Current financial
liabilities 27,428 23,450 16,610 15,659 2,026 1,874
Other current
liabilities - - - - - -
Non-current
financial liabilities 3,820 3,696 569 1,055 32,958 28,352
Other non-current
liabilities - - - - - -
Revenue 22,557 23,390 19,546 29,379 - -
Interest income 692 62 - - - -
Interest expense - - - - - -
Depreciation
and amortisation 1,653 1,656 7,255 7,396 - -
Taxation paid
(recovered) 2,754 2,533 (2,226) - - -
Profit (loss)
from continuing
operations 15,600 14,378 (9,578) (3,511) - -
Other comprehensive
income - - - - - -
Total comprehensive
income (loss) 15,600 14,378 (9,578) (3,511) - -
(i) Figures obtained from financial statements prepared under IFRS.
(ii) Figures obtained from financial statements prepared under
Cuban GAAP. The difference in accounting standard has no impact in
the consolidated financial statements.
8. Investment in associate
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Grupo B.M. Interinvest Technologies
Mariel S.L. 303,175 303,175
------------ ------------
303,175 303,175
------------ ------------
At 31 December 2021 and 2020 the Group owned an indirect 50%
share equity interest in Grupo BM Interinvest Technologies Mariel
S.L. ("GBM Mariel") , a Spanish company that is developing a new
multi-phase industrial and logistics park real estate project in
the Special Development Zone of Mariel, Cuba. The Group has made
capital contributions of US$303,175 (2020: US$303,175) to GBM
Mariel . The Company does not control GBM Mariel and has therefore
accounted for its interest as an investment in associate. This is
evidenced by the fact that only two of the five directors of GBM
Mariel are represented by the Company and all major decisions
require approval of 51% of the shareholders of GBM Mariel.
9. Property, plant and equipment
Office furniture Works of
Motor vehicles and equipment art Total
US$ US$ US$ US$
----------------- ----------------- ----------- ----------
Cost:
At 1 January 2020 374,502 185,887 463,300 1,023,689
Additions - 4,897 - 4,897
At 31 December
2020 374,502 190,784 463,300 1,028,586
Additions - 11,802 - 11,802
At 31 December
2021 374,502 202,586 463,300 1,040,388
Accumulated Depreciation:
At 1 January 2020 319,938 135,405 - 455,343
Charge 22,372 17,273 39,645
At 31 December
2020 342,310 152,678 - 494,988
Charge 12,243 17,549 29,792
At 31 December
2021 354,553 170,227 - 524,780
Net book value:
At 1 January 2020 54,564 50,482 463,300 568,346
At 31 December
2020 32,192 38,106 463,300 533,598
At 31 December
2021 19,949 32,359 463,300 515,608
10. Accounts payable and accrued expenses
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Due to shareholders 5,457 5,926
Due to Meliã Hotels International 10,878 176,941
Due to Miramar 801,426 -
Accrued professional fees 312,921 223,349
Management fees payable (see note
17) 2,978,727 1,565,065
Other accrued expenses 221,877 186,127
Other accounts payable 15,901 57,891
------------ ------------
4,347,187 2,215,299
------------ ------------
Current portion 4,347,187 1,085,590
------------ ------------
Non-current portion - 1,129,709
------------ ------------
The future maturity profile of accounts payable and accrued
expenses is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days 1,124,902 179,136
Between 31 and 90 days 1,540,653 -
Between 91 and 180 days 521,779 606,842
Between 181 and 365 days 1,159,853 299,612
Greater than 365 days - 1,129,709
4,347,187 2,215,299
------------ ------------
11. Short-term borrowings
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Short-term finance facility (i) 1,004,673 -
1,004,673 -
------------ ------------
(i) The amount represents the balance outstanding of a EUR3.5
million credit line received by HOMASI from a Spanish bank for the
purpose of financing the Miramar confirming and discounting
facility (see note 6).
12. Convertible bonds
31 Dec 2021 31 Dec 2020
US$ US$
------------- ------------
Convertible bonds issued (i) 29,312,500 -
Foreign exchange movements (1,013,147) -
28,299,353 -
------------- ------------
Current portion - -
------------- ------------
Non-current portion 28,299,353 -
------------- ------------
(i) On 31 March 2021, the Company completed the issue of
EUR25,000,000 (US$29,312,500 equivalent at date of issue) 10.00%
senior unsecured convertible bonds ("Bonds"). The Bonds were listed
on The International Stock Exchange (Channel Islands) on 13 April
2021. The Bonds have a term of 5 years expiring on 31 March 2026,
an interest rate of 10.00%, payable quarterly, and are convertible
at the option of the Bondholder to Ordinary Shares of the Company,
at any time, at a conversion price equal to the Euro equivalent of
GBP1.043 (at the time of conversion, subject to adjustments).
After three years, the Company may redeem the Bonds in advance
of their expiry in principal amounts of EUR2,500,000 or multiples
thereof.
The interest expense related to the Bonds during the year was
US$2,176,931.
The future maturity profile of the Bonds is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Greater than 365 days 28,299,353 -
28,299,353 -
------------ ------------
13. Stated capital and net asset value
Authorised
The Group has the power to issue an unlimited number of shares.
The issued shares of the Group are ordinary shares of no par
value.
Issued
The following table shows the movement of the issued shares
during the year:
Number of Stated capital
ordinary US$
shares
------------ ---------------
Stated capital
Stated capital at 31 December
2020 137,671,576 106,638,023
------------ ---------------
Stated capital at 31 December
2021 137,671,576 106,638,023
------------ ---------------
Net asset value
The net asset value attributable to the shareholders of the
Group ("NAV") is calculated as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------- -------------
Total assets 232,399,900 239,297,994
Total liabilities (35,484,546) (5,048,632)
Less: non-controlling interests (36,592,765) (39,823,748)
------------- -------------
NAV 160,322,589 194,425,614
Number of ordinary shares
issued 137,671,576 137,671,576
NAV per share 1.16 1.41
Non-controlling interest
At 31 December 2021, the non-controlling interest corresponds to
the 35% participation of Meliã Hotels International in the equity
of HOMASI and the 20% participation of Meliã Hotels International
in the equity of Mosaico Hoteles.
The non-controlling interests in the above companies are as
follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Non-controlling interest in
HOMASI 33,923,378 37,235,538
Non-controlling interest in
Mosaico Hoteles 2,669,387 2,588,210
Total non-controlling interests 36,592,765 39,823,748
------------ ------------
The movement of the non-controlling interests is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ -------------
Initial balance 39,823,748 49,381,639
Interest of non-controlling interest
in net loss (124,248) (10,216,756)
Net other comprehensive (loss)/income
to be reclassified to profit or loss
in subsequent periods (2,849,067) 4,038,410
Cash distribution to non-controlling
interest (257,668) (3,463,951)
Capital contributions from non-controlling
interest - 84,406
------------ -------------
Final balance 36,592,765 39,823,748
------------ -------------
The movement of the non-controlling interest in HOMASI is as
follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ -------------
Initial balance 37,235,538 46,878,858
Interest of non-controlling interest
in net (loss)/income (205,425) (10,217,779)
Net other comprehensive income/(loss)
to be reclassified to
profit or loss in subsequent periods (2,849,067) 4,038,410
Cash distribution to non-controlling
interest (257,668) (3,463,951)
Final balance 33,923,378 37,235,538
------------ -------------
The movement of the non-controlling interest in Mosaico Hoteles
is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Initial balance 2,588,210 2,502,781
Interest of non-controlling interest
in net income 81,177 1,023
Capital contributions from non-controlling
interest - 84,406
------------ ------------
Final balance 2,669,387 2,588,210
------------ ------------
The principal financial information of HOMASI and Mosaico
Hoteles for the years ended 31 December 2021 and 2020 is as
follows:
HOMASI Mosaico Hoteles
-------------------------- --------------------
2021 2020 2021 2020
US$ US$ US$ US$
000's 000's 000's 000's
--------- --- ---------- --------- ---------
Current assets 4,313 3,347 256 24
Non-current assets 94,526 103,184 13,624 13,000
Current liabilities (1,915) (144) (533) (83)
Equity (96,924) (106,387) (13,347) (12,941)
Income 861 6,311 633 250
Expenses (2,184) (46,055) (227) (245)
Depreciation - - - -
Taxation - - - -
Net (loss)/income
for the year (1,323) (39,744) 406 (5)
Other comprehensive
(loss)/income (8,140) 12,192 - -
Total comprehensive
(loss)/income (9,463) (27,552) 406 (5)
14. Reportable operating segments
IFRS 8 requires the Group to report on where primary business
activities are engaged and where the Group earns revenue, incurs
expenses and where operating results are reviewed by chief
operating decision makers about resources allocated to the segment
and assess its performance and for which discrete financial
information is available. The primary segment reporting format of
the Group is determined to be business segments as the Group's
business segments are distinguishable by distinct financial
information provided to and reviewed by the chief operating
decision makers in allocating resources arising from the products
or services engaged by the Group. No geographical information is
reported since all investment activities are located in Cuba and
all revenues are generated from assets held in Cuba. The operating
businesses are organised and managed separately through different
companies. For management purposes, the Group is currently
organised into three business segments:
Ø Commercial property: Activities concerning the Group's
interests in commercial real estate investments in Cuba.
Ø Tourism / Leisure: Activities concerning the Group's interests
in hotel investments in Cuba and operations of a travel agency that
provides services to international clients for travel to Cuba.
Ø Other: Includes interest from loans and lending facilities,
the Group entered into the Construction Facility with TosCuba for
the purpose of extending to TosCuba part of the funding necessary
for the construction of the Meliã Trinidad Playa Hotel and a
facility provided to FINTUR (see note 6). Other also includes the
convertible bonds.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is
evaluated based on operating income or loss and is measured
consistently with operating income or loss in the consolidated
financial statements. The Group has applied judgment by aggregating
its operating segments according to the nature of the underlying
investments. Such judgment considers the nature of operations,
types of customers and an expectation that operating segments
within a reportable segment have similar long-term economic
characteristics.
31 December 2021
US$
---------------------------------------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 80,622,834 131,124,444 20,652,622 232,399,900
Total liabilities (2,042,488) (5,142,705) (28,299,353) (35,484,546)
------------- ------------ ------------- -------------
Total net assets 78,580,346 125,981,739 (7,646,731) 196,915,354
Dividend income 2,550,124 500,000 - 3,050,124
Interest income - 370,064 1,554,046 1,924,110
Other income - 7,529 - 7,529
Change in fair value of
equity investments (13,741,425) (102,292) - (13,843,717)
Interest expense - - (2,176,931) (2,176,931)
Allocated expenses (13,371,754) (2,307,409) (2,087,903) (17,767,066)
Foreign exchange loss - - (130,198) (130,198)
------------- ------------ ------------- -------------
Net loss (24,563,055) (1,532,108) (2,840,986) (28,936,149)
Other comprehensive loss - (8,140,191) - (8,140,191)
------------- ------------ ------------- -------------
Total comprehensive loss (24,563,055) (9,672,299) (2,840,986) (37,076,340)
Other segment information:
Property, plant and equipment
additions 2,120 9,682 - 11,802
Depreciation 24,674 13,048 - 29,792
31 December 2020
US$
---------------------------------------------------------------- --------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 85,371,003 123,678,118 30,248,873 239,297,994
Total liabilities (1,977,422) (3,071,210) - (5,048,632)
------------ ------------- ----------- -------------
Total net assets 83,393,581 120,606,908 30,248,873 234,249,362
Dividend income 6,948,316 6,310,596 - 13,258,912
Interest income - 639,982 1,259,486 1,899,468
Other income - 6,113 - 6,113
Change in fair value of equity
investments (5,268,689) (36,645,587) - (41,914,276)
Allocated expenses (1,819,091) (2,272,417) (341,651) (4,433,159)
Foreign exchange gain - - 1,157,566 1,157,566
------------ ------------- ----------- -------------
Net income (139,464) (31,961,313) 2,075,401 (30,025,376)
Other comprehensive income - 11,538,310 - 11,538,310
------------ ------------- ----------- -------------
Total comprehensive income/(loss) (139,464) (20,423,003) 2,075,401 (18,487,066)
Other segment information:
Property, plant and equipment
additions 4,897 - - 4,897
Depreciation 34,305 5,340 - 39,645
15. Related party disclosures
Compensation of Directors
Each Director receives a fee of GBP35,0 00 (US$47,170) per annum
with the Chairman receiving GBP 40,000 (US$53,908). The Chairman of
the Audit Committee also receives an annual fee of GBP40,000 (
US$53,908 ). The Chairman and Directors are also reimbursed for
other expenses properly incurred by them in attending meetings and
other business of the Group. No other compensation or
post-employment benefits are provided to Directors. Total
Directors' fees, including the fees of the Chairman, for the year
ended 31 December 2021 were US$276,111 (year ended 31 December
2020: US$232,677).
Transactions with other related parties
Transactions and balances between the Group and the joint
venture companies included within the equity investments of the
Group are detailed in notes 5, 6, 7 and 8.
CPC and GrandSlam Limited, wholly-owned subsidiaries of the
Group, lease office space totalling 319 square meters from Monte
Barreto, a commercial property investment in which the Group holds
a 49% interest. The rental charges paid under these leases are
accounted for in operational costs and for the year ended 31
December 2021 amounted to US$12,555 (2020: US$ US$24,500) with an
average rental charge per square meter at 31 December 2021 of
US$18.84 (2020: US$37.64) plus an administration fee of US$6.07
(2020: US$9.75) per square meter. The Group has elected to use the
recognition exemption for lease contracts that, at the commencement
date, have a lease term of 12 months or less and do not contain a
purchase option.
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of Standard Life Aberdeen plc
which has an interest at 31 December 2021 in 9,747,852 shares of
the stated capital (2020: 9,747,852). For further discussion
regarding transactions with the Investment Manager see note 17.
Interests of Directors and Executives in the stated capital
At 31 December 2021 John Herring, a Director of CEIBA, had an
indirect interest in 40,000 shares (2020: 40,000 shares).
At 31 December 2021 Peter Cornell, a Director of CEIBA, has an
indirect interest in 100,000 shares (2020: 100,000 shares).
At 31 December 2021 Trevor Bowen, a Director of CEIBA, has an
indirect interest in 43,600 shares (2020: 43,600 shares).
At 31 December 2021 Colin Kingsnorth, a Director of CEIBA, is a
director and shareholder of Ursus Capital Limited, which holds
12,252,338 shares (2020: Colin Kingsnorth was a director and
shareholder of Laxey Partners Limited, which owned and served as
the investment manager for an aggregate of 30,979,316 shares).
At 31 December 2021 Sebastiaan A.C. Berger, the Investment
Manager's fund manager and Chief Executive Officer of CEIBA, has an
interest in 3,273,081 s hares (2020: 3,273,081 s hares ).
At 31 December 2021 Cameron Young, Chief Operating Officer of
CEIBA, has an indirect interest in 4,129,672 shares (2020:
4,129,672 shares).
At 31 December 2021 Paul S. Austin, Chief Financial Officer of
CEIBA, has an interest in 144,000 shares (2020: 144,000).
Interests of Directors, Executives and Shareholders in the
Convertible Bonds
At 31 December 2021, Directors had an interest of EURnil
(US$nil), Executives had an interest of EURnil (US$nil), and
Shareholders of CEIBA had a interest of EUR10,900,000
(US$12,345,340) in the Bonds (see note 12).
16. Basic and diluted loss per share
Basic loss per share
The loss per share has been calculated on a weighted-average
basis and is arrived at by dividing the net income for the year
attributable to shareholders by the weighted-average number of
shares in issue.
31 Dec 31 Dec
2021 2020
US$ US$
------------- -------------
Weighted average of ordinary shares in issue 137,671,576 137,671,576
Net loss for the year attributable to the
shareholders (28,811,901) (19,808,620)
Basic loss per share (0.21) (0.14)
Diluted loss per share
The diluted loss per share is considered to be equal to the
basic loss per share, as the impact of senior unsecured convertible
bonds on loss per share is anti-dilutive for the period(s)
presented. The convertible bonds could potentially dilute basis
earning per share in the future.
17. Investment Manager
On 31 May 2018, the Group entered into a Management Agreement
under which ASFML was appointed as the Group's alternative
investment fund manager to provide portfolio and risk management
services to the Group. The Management Agreement took effect on 1
November 2018. ASFML has delegated portfolio management to the
Investment Manager. Both ASFML and the Investment Manager are
wholly-owned subsidiaries of abrdn plc.
Pursuant to the terms of the Management Agreement, ASFML is
responsible for portfolio and risk management on behalf of the
Group and will carry out the on-going oversight functions and
supervision and ensure compliance with the applicable requirements
of the AIFM Rules. Under the terms of the Management Agreement,
ASFML is entitled, with effect from 1 November 2018, to receive an
annual management fee at the rate of 1.5 per cent of Total Assets.
For this purpose, the term Total Assets means the aggregate of the
assets of the Company less liabilities on the last business day of
the period to which the fee relates (excluding from liabilities any
proportion of principal borrowed for investment and treated in the
accounts of the Company as current liabilities). The annual
management fee payable by the Group to ASFML will be lowered by the
annual running costs of the Havana operations of CEIBA Property
Corporation Limited, a subsidiary of the Group. The management fees
earned by the Investment Manager for the year ended 31 December
2021 were US$3,276,574 (2020: US$2,864,518). In the prior year, in
order to assist the Group with its cash flow requirements the
Investment Manager agreed to defer payment of a portion of its fees
earned during 2020 totaling US$1,154,396 until 2022.
There are no performance, acquisition, exit or property
management fees payable to ASFML or the Investment Manager.
In connection with the Management Agreement, ASFML paid the
Group US$5,000,000 for the purpose of compensating the Group for
the costs related to the initial public offering and the listing of
its shares on the SFS as well as for releasing and making available
the Group's internal management team to ASFML. In the event that
the Management Agreement is terminated prior to the fifth
anniversary of its coming into effect, the Group must pay to ASFML
a prorated amount of the US$5,000,000 based on the amount of time
remaining in the five year period. As such, this payment has been
recorded as a deferred liability and is being amortised over the
five year period. The amount amortised each period is accounted for
as a reduction of the management fee and the original effective
interest rate applied in calculating the instruments amortised cost
is materially equal to a market interest rate. At 31 December 2021,
the amount of the payment recorded as a deferred liability is
US$1,833,333 (2020: US$2,833,333) with US$1,000,000 (2020:
US$1,000,000) being the current portion and US$833,334 (2020:
US$1,833,333) being the non-current portion.
For the year ended 31 December 2021, the amount of the payment
amortised and recorded as a reduction of the management fee expense
in the consolidated statement of comprehensive income was
US$1,000,000 (2020: US$1,000,000):
2021 2020
US$ US$
------------
Management fees earned 3,276,574 2,864,518
Amortisation of deferred liability (1,000,000) (1,000,000)
------------ ------------
Management fee expense 2,276,574 1,864,518
------------ ------------
18. Commitments and contingencies
Operating lease commitments
The rental charges paid under operating leases accounted for in
operational costs of the statement of comprehensive income for the
year ended 31 December 2021 amounted to US$12,555 (2020:
US$24,500).
TosCuba Construction Facility
In April 2018, the Group entered into the TosCuba Construction
Facility for the purpose of extending to TosCuba part of the
funding necessary for the construction of the Meli ã Trinidad
Península Hotel. The Construction Facility is in the maximum
principal amount of US$51,500,000, divided into two separate
tranches: Tranche A of US$22,500,000 and Tranche B of
US$29,000,000. As at 31 December 2021, the full US$22,500,000 of
Tranche A has been disbursed (2020: US$20,502,533) and US$708,860
of Tranche B has been disbursed (2020: nil). The Group has the
right to syndicate Tranche B of the Construction Facility to other
lenders (see note 6).
In August 2021 the TosCuba Construction Facility was amended for
the purpose, amongst others, of (i) increasing the principal amount
of Tranche B to US$29,000,000, (ii) providing that an amount of up
to US$4,000,000 may be onlent by the borrower (TosCuba) to Cuban
utility companies for investments in the infrastructure that will
serve the hotel, and (iii) modifying the security received by the
Group. The prior security assignment relating to the Meliã Santiago
de Cuba Hotel was released and a new secondary guarantee was
received from Miramar in support of the primary guarantee received
from Cubanacán (see note 6).
FINTUR Facility
Since 2002, the Company has arranged and participated in
numerous secured finance facilities extended to FINTUR, the Cuban
government financial institution for Cuba's tourism sector. The
rights of the Company under these facilities are limited to
receiving principal and interest payments (SPPI model). The
facilities are fully secured by tourism proceeds from numerous
internationally managed hotels.
The Group has a successful 19-year track record of arranging and
participating in over EUR150 million of facilities extended to
FINTUR, with no defaults occurring during this period.
The Company had a EUR4,000,000 participation in Tranche A as
well as a EUR2,000,000 participation in Tranche B of the most
recent facility executed in March 2016 and amended in 2019. The
total four-year facility had a full principal amount of
EUR36,000,000 with an 8% interest rate. The facility was operating
successfully without delay or default until March 2020, at which
time all Cuban hotels were ordered to be closed as a result of the
Covid-19 pandemic. The Company subsequently granted a further grace
period to FINTUR and consolidated all amounts then outstanding
under the two existing tranches into a new Tranche C. As at 31
December 2021 the principal amount of EUR1,716,667 (US$1,943,760)
(2020: EUR1,716,667 (US$2,110,795)) was outstanding under the
Company's participation in Tranche C of the facility.
19. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through
a process of identification, measurement and monitoring and subject
to risk limits and other controls. The objective of the Group is,
consequently, to achieve an appropriate balance between risk and
benefits, and to minimise potential adverse effects arising from
its financial activity.
The main risks arising from the Group's financial instruments
are market risk, credit risk and liquidity risks. Management
reviews policies for managing each of these risks and they are
summarised below. These policies have remained unchanged since the
beginning of the period to which these consolidated financial
statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows
of financial instruments will fluctuate due to changes in market
variables. Market price risk comprises two types of risks: foreign
currency risk and interest rate risk. The Group is not materially
exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial
instrument denominated in a currency other than the functional
currency will fluctuate due to changes in foreign exchange
rates.
The statement of comprehensive income and the net value of
assets can be affected by currency translation movements as certain
assets and income are denominated in currencies other than US$.
Management has identified the following three main areas of
foreign currency risk:
-- Movements in rates affecting the value of loans and advances denominated in Euros;
-- Movements in rates affecting the value of cash and cash
equivalents denominated in Euros; and
-- Movements in rates affecting any interest income received
from loans and advances denominated in Euros.
-- Movements in rates affecting any interest paid on convertible bonds denominated in Euros.
The sensitivity of the income (loss) and equity to a variation
of the exchange rate (EUR/US$) in relation to Euro denominated
assets and liabilities is the following:
Effect of the
variation in
the foreign exchange
rate
% Income (loss) Equity Income (loss) Equity
31 Dec 2021 31 Dec 2021 31 Dec 2020 31 Dec 2020
US$ US$ US$ US$
---------------------- --------------- -------------- --------------- --------------
+15 (523,606) 530,915 778,646 423,698
+20 (698,142) 707,886 1,038,185 564,931
-15 523,606 (530,915) (778,646) (423,698)
-20 698,142 (707,886) (1,038,185) (564,698)
(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows may fluctuate due to changes in market interest
rates.
At any time that it is not fully invested in equities, surplus
funds may be invested in fixed-rate and floating-rate securities
both in Euro and in currencies other than Euro. Although these are
generally short-term in nature, any change to the interest rates
relevant for particular securities may result in either income
increasing or decreasing, or management being unable to secure
similar returns on the expiry of contracts or the sale of
securities. In addition, changes to prevailing rates or changes in
expectations of future rates may result in an increase or decrease
in the value of securities held. In general, if interest rates
rise, income potential also rises but the value of fixed rate
securities may decline. A decline in interest rates will in general
have the opposite effect.
As the only interest-bearing financial instruments held by the
Group are fixed rate assets measured at amortised cost, the Group
has no material interest rate risk and therefore no sensitivity
analysis has been presented.
The interest rate risk profile of the Group's consolidated
financial assets and liabilities was as follows:
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- ------------ ------------------ ------------
31 December 2021
Equity investments (US$) 176,131,209 - - 176,131,209
Loans and lending facilities
(EUR) 2,866,271 2,866,271 - -
Loans and lending facilities
(US$) 19,691,339 19,691,339 - -
Accounts receivable and accrued
income (US$) 6,680,404 - - 6,680,404
Accounts receivable and accrued
income (EUR) 286,997 - - 286,997
Cash at bank (EUR) 25,434,352 - - 25,434,352
Cash at bank (US$) 731,041 - - 731,041
Cash at bank (GBP) 11,427 - - 11,427
Cash on hand (GBP) 270 - - 270
Cash on hand (EUR) 6,319 - - 6,319
Cash on hand (US$) 10,010 - - 10,010
Cash on hand (CUP) 34,602 - - 34,602
Short-term borrowings (EUR) (1,004,673) (1,004,673) - -
Convertible bonds (EUR) (28,299,353) (28,299,353) - -
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- ---------- ------------------ ------------
31 December 2020
Equity investments (US$) 197,921,225 - - 197,921,225
Loans and lending facilities
(EUR) 4,116,169 4,116,169 - -
Loans and lending facilities
(US$) 16,106,466 16,106,466 - -
Accounts receivable and accrued
income (US$) 16,052,751 - - 16,052,751
Accounts receivable and accrued
income (EUR) 296,925 - - 296,925
Cash at bank (EUR) 3,992,756 - - 3,992,756
Cash at bank (US$) 210,970 - - 210,970
Cash at bank (GBP) 61,654 - - 61,654
Cash on hand (GBP) 272 - - 272
Cash on hand (EUR) 130 - - 130
Cash on hand (US$) 1,058 - - 1,058
Cash on hand (CUC) 4,020 - - 4,020
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation, expected credit losses are measured using
probability of default, exposure at default and loss given default.
Management considers both historical analysis and forward-looking
information in determining an expected credit loss. Refer to note 6
for the assessment of the expected credit loss for loans and
lending facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for
each component of the consolidated statement of financial position
as well as future loan commitments, irrespective of guarantees
received:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Loans and lending facilities 22,557,610 20,222,635
Future loan commitments (TosCuba Construction
Facility) (i) 28,291,140 30,997,467
Accounts receivable and accrued income
(ii)* 19,248,809 16,349,676
Cash and cash equivalents 26,228,072 4,270,860
------------ ------------
Total maximum exposure to credit risk 96,325,631 71,840,638
------------ ------------
*Accounts receivable and accrued income after ECL is
US$6,967,401 (see note 5).
(i) The TosCuba Construction Facility is secured by future
income of the hotel under construction and Tranche B of the
Construction Facility is further secured by a guarantee given by
Cubanacán, the Cuban shareholder of TosCuba, backed by a new
secondary guarantee received from Miramar in support of the primary
guarantee received from Cubanacán . The facilities are assessed at
stage 2 of the IFRS ECL impairment model, management has assessed
the expected credit loss over the lifetime of the future loan
commitments to be immaterial to the Group. Management believes the
probability of default is low due to the fact that the Group is a
50% shareholder of TosCuba and has a 50% representation on the
Board of Directors. Repayment of the facility is secured by the
future income of the hotel and repayment of Tranche B has also been
guaranteed by Cubanacán and is further secured by Cubanacán's
dividend entitlements in Miramar. Payments of the facility are
scheduled to begin once the hotel starts operations.
(ii) $ 12,592,004 of the accounts receivable and accrued income
balance is made up of dividends receivable. The impairment on the
dividends receivable has been assessed as low in the case of
Miramar and high in the case of Monte Barreto in terms of the 3
stage model per IFRS 9 by assessing the credit risk of the
counterparty who declared the dividend. The delay in payment of the
dividends receivable from Monte Barreto is due in part to the
current liquidity position of the Cuban financial system caused by
the pandemic, increased U.S. sanctions and the transitional effects
of the Cuban monetary reforms. In the current year, the overall
credit risk for Monte Barretto significantly increased as compared
to the preceding year. This resulted in the account receivable
moving from Stage 2 to Stage 3 of the IFRS ECL impairment model,
which therefore requires management to assess the expected credit
loss over time. Accordingly, in the current year management has
made an assessment of the expected credit loss over timetaking into
account all reasonable and supportable information that is
available that includes both internal and external information. As
a result, the total amount of credit impaired receivables at year
end is $12,281,408 related to the balance of the dividend
receivable due from Monte Barrreto.
Due to the current liquidity constraints placed upon Monte
Barreto as a result of the recent Cuban monetary reforms, the
timing of receipt of the historical dividends receivable is
uncertain. Therefore the dividends receivable from Monte Barreto at
year end have been impaired in full in the Statement of
Comprehensive Income. However, in the case of Miramar, the same
liquidity constraints do not apply under the monetary reforms, due
to a large portion of its income being earned in foreign currency
and therefore Miramar has been assigned a higher credit rating.
Management expects to receive the full amount of dividends
receivable from Miramar in due course.
The Group holds its cash and cash equivalents at financial
institutions located in the countries listed below. Also included
in the following table are the credit ratings of the corresponding
financial institutions, as determined by Moody's:
Credit 31 Dec 2021 31 Dec 2020
Rating US$ US$
-------- ------------ ------------
Cash at bank
Cuba Caa2 727,453 183,540
Guernsey A2 21,828,192 152,420
Spain Ba3 1,631,197 2,956,003
Spain A2 19,048 20,538
Spain Baa2 1,826,198 952,879
Spain A3 144,733 -
26,176,821 4,265,380
------------ ------------
Cash on hand
Cuba 51,251 5,480
51,251 5,480
------------ ------------
Total cash and cash equivalents 26,228,072 4,270,680
------------ ------------
At 31 December 2021 and 31 December 2020, all cash and
short-term deposits that are held with counter-parties have been
assessed for probability of default; as a result no loss allowance
has been recognised based on 12-month expected credit losses as any
such impairment would be wholly insignificant to the Group.
Guarantees received
The amount and type of guarantees required depends on an
assessment of the credit risk of the counter-party. The Group has
neither financial nor non-financial assets obtained as property on
executed guarantees. See note 6 regarding guarantees obtained for
loans and lending facilities.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in
realising its non-cash assets or otherwise raising funds to meet
financial commitments. Assets principally consist of unlisted
securities and loans, which are not readily realisable. If the
Group, for whatever reason, wished to dispose of these assets
quickly, the realisation values may be lower than those at which
the relevant assets are held in the consolidated statement of
financial position. (For maturities of financial assets and
liabilities refer to notes 5, 6 and 10).
Although the Group has a number of liabilities (see note 10 -
Accounts payable and accrued expenses, note 11 - Short-term
borrowings and note 18 - commitments and contingencies), Management
assesses the liquidity risk of the Group to be low because the
Group has a sufficient amount of cash and cash equivalents.
On 31 March 2021, the Company completed the issue of
EUR25,000,000 (US$29,312,500 equivalent at date of issue) in
convertible bonds (see note 12). The Bonds have a term of 5 years
expiring on 31 March 2026, an interest rate of 10.00%, payable
quarterly, and are convertible at the option of the Bondholders to
Ordinary Shares of the Company. The Group currently has sufficient
cash and cash equivalents to cover the quarterly interest
payments.
The estimated timing of the undiscounted contracted cash flows
associated with the Bonds issued on 31 March 2021 including
interest and principal payments are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Between 1 and 30 days - -
Between 31 and 90 days 707,875 -
Between 91 and 180 days 715,740 -
Between 181 and 1 year 1,447,211 -
Between 1-2 years 2,870,826 -
Between 2-3 years 2,878,692 -
Between 3-4 years 2,870,826 -
Between 4-5 years 29,022,875 -
40,514,045 -
------------ ------------
The Group also has entered into the Construction Facility for
the purpose of extending to TosCuba part of the funding necessary
for the construction of the Meli ã Trinidad Península Hotel (see
note 6). The Construction Facility is in the maximum principal
amount of US$51,500,000, divided into two separate tranches:
Tranche A of US$22,500,000 and Tranche B of US$29,000,000. As at 31
December 2021, the full US$22,500,000 of Tranche A has been
disbursed (2020: US$20,502,533) and US$708,860 of Tranche B has
been disbursed (2020: nil). The Group has the right to syndicate
Tranche B of the Construction Facility to other lenders.
The principal of the Construction Facility is to be disbursed
gradually in accordance with the construction schedule and the
supply of materials and equipment for the hotel. Prior to the
COVID-19 pandemic, it was anticipated that the full amount of the
Construction Facility would be disbursed by the end of 2020.
However, the timing of construction has been affected by the
pandemic and consequently the disbursement of the principal under
the Construction Facility has been delayed and it is now
anticipated that the Construction Facility will be substantially
disbursed by the end of the first quarter of 2022. The Group
currently has sufficient cash and cash equivalents to cover the
full disbursement of the Construction Facility (see note 12
concerning the Bond Issue).
The estimated timing of cash outflows under the TosCuba
Construction Facility entered into in April 2018 are as
follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Between 1 and 30 days 1,279,779 -
Between 31 and 90 days 1,813,996 485,606
Between 91 and 180 days 6,887,133 3,011,861
Between 181 and 1 year 15,185,406 19,000,000
Between 1-2 years 3,124,826 8,500,000
28,291,140 30,997,467
------------ ------------
Capital management
The Group maintains an actively managed capital base to cover
risks inherent in the business. The Group manages its capital
structure and makes adjustments in the light of changes in economic
conditions and the risk characteristics of its activities. In order
to maintain or adjust the capital structure, the Group may adjust
the amount of dividend payment to shareholders. No changes were
made in the objectives, policies, and processes from the previous
period.
The capital base managed by the Group is composed of stated
capital, reserves and retained profits that amount at 31 December
2021 and 2020 to a total of US$196,915,354 and US$234,249,362,
respectively. The Group is not subject to external capital
requirements.
20. Fair value disclosures
The fair values of cash and cash equivalents, and accounts
receivable and accrued income (excluding loan interest) balances
after adjusting for expected credit losses (see note 5) are
considered to approximate their carrying amount largely due to the
short-term maturities and credit quality of these instruments. The
fair value of loans and lending facilities (and interest)
receivables are considered to approximate their carrying amount
largely due to the fixed interest rates considered to be in line
with market, as well as due to the maturities, security provided
and credit quality of these instruments (see notes 6 and 19 for
further details).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for investment and financial
assets and liabilities for which there is no observable market
price requires the use of valuation techniques as described in note
3.8 (c). For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and
requires varying degrees of judgement depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions
and other risks affecting the specific instrument.
Critical accounting judgements in applying the Group's
accounting estimates
Valuation of financial instruments
The Group's accounting policy on fair value measurements is
discussed in note 3.8 (c).
The Group measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements:
-- Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices). This category includes instruments valued using: quoted
prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered
less than active; or other valuation techniques for which all
significant inputs are directly or indirectly observable from
market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments for which the
valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments for which
significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
Fair values of financial assets and financial liabilities that
are traded in active markets are based on quoted prices or dealer
price quotations. The Group does not currently have any financial
assets or financial liabilities trading in active markets.
For all other financial instruments, the Group determines fair
values using valuation techniques. Valuation techniques include net
present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist and
other valuation models. Assumptions and inputs used in valuation
techniques include risk-free and benchmark interest rates and
foreign currency exchange rates. The objective of valuation
techniques is to arrive at a fair value determination that reflects
the price of the financial instrument at the reporting date that
would have been determined by market participants acting at arm's
length.
For certain instruments, the Group uses proprietary valuation
models, which usually are developed from recognised valuation
models. Some or all of the significant inputs into these models may
not be observable in the market are derived from market prices or
rates or are estimated based on assumptions. Examples of
instruments involving significant unobservable inputs include the
equity investments of the Group in Cuban joint venture companies.
Valuation models that employ significant unobservable inputs
require a higher degree of management judgement and estimation in
the determination of fair value. Management judgement and
estimation are usually required for selection of the appropriate
valuation model to be used, determination of expected future cash
flows on the financial instrument being valued, selection of
appropriate discount rates and an estimate of the amount of cash
required for working capital needs of the joint ventures in order
to determine if they hold any Excess Cash.
The table below analyses financial instruments measured at fair
value at the end of the reporting period by the level in the fair
value hierarchy into which the fair value measurement is
categorised:
31 December 2021
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 175,828,034 175,828,034
- - 175,828,034 175,828,034
---------- ---------- ------------------- ------------ ------------
31 December 2020
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 197,618,050 197,618,050
- - 197,618,050 197,618,050
---------- ---------- ------------------- ------------ ------------
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
Level 3 of the fair value hierarchy:
31 Dec 2021 31 Dec 2020
Unlisted private equity investments US$ US$
------------- -------------
Initial balance 197,618,050 227,340,559
Total gains recognised in
income or loss (13,843,717) (41,914,276)
Foreign currency translation
reserve (7,946,299) 12,191,767
Final balance 175,828,034 197,618,050
------------- -------------
Total losses for the year
included in income or loss
relating to assets and liabilities
held at the end of the reporting
year (13,843,717) (41,914,276)
------------- -------------
(13,843,717) (41,914,276)
------------- -------------
21. Classifications of financial assets and liabilities
The table below provides a reconciliation of the line items in
the Group's consolidated statement of financial position to the
categories of financial instruments.
31 December 2021
US$
Cash and
Fair value Financial Financial
through assets liabilities Total
profit or at amortised at amortised carrying
Note loss cost cost amount
------------ -------------- -------------- ------------
Cash and cash equivalents 4 - 26,228,072 - 26,228,072
Accounts receivable
and accrued income 5 - 6,967,401 - 6,967,401
Loans and lending
facilities 6 - 22,557,610 - 22,557,610
Equity investments 7 175,828,034 - - 175,828,034
Investment in associate 8 - 303,175 303,175
175,828,034 56,056,258 - 231,884,292
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 10 - - 4,347,187 4,347,187
Short-term borrowings 11 1,004,673 1,004,673
Convertible bonds 12 - - 28,299,353 28,299,353
Deferred liabilities 17 - - 1,833,333 1,833,333
- - 35,484,546 35,484,546
------------ -------------- -------------- ------------
31 December 2020
US$
Cash and
Fair value Financial Financial
through assets liabilities Total
profit or at amortised at amortised carrying
Note loss cost cost amount
------------ -------------- -------------- ------------
Cash and cash equivalents 4 - 4,270,860 - 4,270,860
Accounts receivable
and accrued income 5 - 16,349,676 - 16,349,676
Loans and lending
facilities 6 - 20,222,635 - 20,222,635
Equity investments 7 197,618,050 - - 197,618,050
Investment in associate 8 - 303,175 - 303,175
197,618,050 41,146,346 - 238,764,396
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 10 - - 2,215,299 2,215,299
Deferred liabilities 17 - - 2,833,333 2,833,333
- - 5,048,632 5,048,632
------------ -------------- -------------- ------------
There were no reclassifications of financial assets during the
year ended 31 December 2021 (year ended 31 December 2020: nil).
22. Audit fees
Audit fees incurred for the year were as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Audit fee expense 321,625 270,909
------------ ------------
23. Events after the reporting period
The Russian invasion of Ukraine has had an impact on Russian
tourist arrivals to Cuba generally and is expected to continue
doing so going forward. However, Russian tourists did not represent
a substantial segment of the guest occupancy of the Hotels prior to
the conflict and the first quarter 2022 results of the Hotels are
above budget.
There may be other indirect impacts of the conflict on the Cuban
or global economies, but at this stage M anagement is not able to
reliably estimate the potential scope of such impacts for the
Company, as events are unfolding day-by- day.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures
Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined or
specified in the applicable financial framework. The Directors
assess the Company's performance against a range of criteria which
are viewed as particularly relevant for closed-end investment
companies.
Discount to NAV
The discount reflects the amount by which the share price of the
Company is below the NAV per share expressed as a percentage of the
NAV per share. As at 31 December 2021, the share price was 64.0p /
US$0.86 and the net asset value per share was 86.4p / US$1.16, and
the discount was therefore 25.9%.
NAV Per Share
The net asset value ('NAV') is the value of the investment
company's assets, less any liabilities it has. The NAV per share is
the NAV divided by the number of shares in issue.
The NAV per share was US$1.16 / 86.4p as at 31 December
2021.
NAV Return
The table below provides information relating to the NAV of the
Company for the years ending 31 December 2020 and 2021.
2021 2020
Opening NAV 194,425,614 206,734,334
------------- -------------
Dividends paid - -
------------- -------------
Net comprehensive loss for
the year (34,115,831) (12,308,720)
------------- -------------
Closing NAV 160,309,783 194,425,614
------------- -------------
Ongoing charges
The ongoing charges are based on actual costs incurred in the
year excluding any non-recurring fees in accordance with the AIC
methodology. Expense items have been excluded in the calculation of
the ongoing charges figure when they are not deemed to meet the
following AIC definition: "Ongoing charges are those expenses of a
type which are likely to recur in the foreseeable future, whether
charged to capital or revenue, and which relate to the operation of
the investment company as a collective fund, excluding the costs of
acquisition/disposal of investments, financing charges and
gains/losses arising on investments. Ongoing charges are based on
costs incurred in the year as being the best estimate of future
costs."
The table below provides information relating to the ongoing
charges of the Company for the years ending 31 December 2021 and
2020 .
2021 2020
Total Expenses per statement
of comprehensive income 33,917,912 46,347,435
------------- -------------
Adjustments (items to exclude):
------------- -------------
Foreign exchange (loss)/gain (130,198) 1,157,566
------------- -------------
Interest expense on bonds (2,176,931) -
------------- -------------
Loss on change in fair value
of equity investments (13,843,717) (41,914,276)
------------- -------------
Expected credit losses (12,281,408) -
------------- -------------
Non-recurring bond issuance (395,228) -
costs
------------- -------------
Total Annualised ongoing
charges 5,090,430 5,590,725
------------- -------------
Average undiluted net asset
value in the period 181,554,628 192,301,944
------------- -------------
Ongoing charges (%) 2.80 % 2.91%
------------- -------------
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463
Sebastiaan Berger / Evan Bruce-Gardyne 6000
Singer Capital Markets Tel: +44 (0)20 7496
James Maxwell (Corporate Finance) 3000
James Waterlow (Sales)
JTC Fund Solutions (Guernsey) Limited Tel: +44 (0) 1481 702400
This information is provided by RNS, the news service of the
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END
FR SEIESAEESESL
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April 29, 2022 04:46 ET (08:46 GMT)
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