TIDMCBA
RNS Number : 1255N
Ceiba Investments Limited
28 September 2021
28 September 2021
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
RESULTS FOR THE SIX MONTH PERIODED 30 JUNE 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 Bonds are listed on The International Stock Exchange, Guernsey
under the symbol CEIB1026 (ISIN: GG00BMV37C27). The Company is
governed by a Board of Directors, the majority of whom are
independent. Like many other investment companies, it outsources
its investment management, administration and other services 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 own the underlying
properties. The Company also arranges and invests in financial
instruments granted in favour of Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 30 JUNE 2021 IN GBP AND US$ (FOREX:
GBP/US$ = 1.3819)
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 30 June 2021 of GBP1:US$1.3819.
GBP US$
30 Jun 2021 31 Dec 2020 30 Jun 2021 31 Dec 2020
------------ ------------ ------------ ------------
Total Net Assets GBP 130.4m GBP142.9m US$ 180.2m US$194.4m
------------ ------------ ------------ ------------
NAV per share
(1) 94.7p 103.8p US$1.31 US$1.41
------------ ------------ ------------ ------------
Market Capitalisation GBP 97.1m GBP116.3m US$134.1m US$158.3m
------------ ------------ ------------ ------------
Share Price 70.5p 84.5p US$0.97 US$1.15
------------ ------------ ------------ ------------
Discount to
NAV (1) (25.6%) (18.6%) (25.6%) (18.6%)
------------ ------------ ------------ ------------
NAV Total Return
(1) (8.7%) (9.4%) (7.3%) (6.0%)
------------ ------------ ------------ ------------
Share Price
Return (1) (16.6%) 19.0% (15.3%) 22.8%
------------ ------------ ------------ ------------
30 Jun 2021 30 Jun 2020 30 Jun 2021 30 Jun 2020
------------ ------------ ------------ ------------
Net Loss to (GBP8.7m) (GBP23.8m) (US$12.1m) (US$29.5m)
shareholders
------------ ------------ ------------ ------------
Loss per share (6.3p) (17.3p) (US$0.09) (US$0.21)
------------ ------------ ------------ ------------
1 These are considered Alternative Performance Measures.
2 Source: Refinitiv
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 (the "Investment
Manager"). Both ASFML and the Investment Manager are wholly-owned
subsidiaries of abrdn plc, a publicly-quoted company on the London
Stock Exchange.
CHAIRMAN'S STATEMENT
Overview
Cuba presently finds itself in a very challenging environment -
the COVID-19 pandemic continues to have a severe adverse impact on
tourism, with the majority of hotels remaining closed; there has
been no discernible move by the United States to ease its embargo;
and the recent implementation of monetary reform at a point when
Cuba's liquidity position is very weak. The impact of these
challenges has, unsurprisingly, caused some very difficult living
conditions for many Cuban residents, which in turn has led to a
high level of public frustration. The Cuban government has
continued to take steps to ease the present predicament and, among
other things, it has eliminated customs duties on the import of
food products and medicine and has approved legislation that allows
for and encourages private small and medium size enterprises.
Throughout the COVID-19 pandemic, a prime concern of the Board
has been to ensure the safety of the people who work to advance the
interests of the Company. Cuba has handled the virus very well and
its record of COVID-19 cases and mortality rates have been
relatively low, although there has been a steep increase in new
cases over the summer. Clearly there still remains considerable
uncertainty about the duration of this pandemic, the expected
return to normality, and the long-term impact.
The assets that clearly have suffered most are the hotel
interests. After being closed between April and October 2020 in the
face of the pandemic, the tourism sector in Cuba has been operating
at a low level since November 2020. Although running with a
skeletal number of flights and hotels that are operational, the
country has received some 164,000 tourists in the first eight
months of 2021, representing less than 6% of pre-pandemic numbers.
At present, it remains impossible to predict how quickly the Cuban
tourism sector will recover from the worldwide disruption caused by
the COVID-19 virus. It is hoped that with increasingly successful
vaccination programmes, both in outbound markets and within Cuba,
the tourism sector will restart in the autumn and gain strength
across the coming high season from December 2021 to April 2022. The
Cuban Ministry of Tourism has announced that, with 90% of the Cuban
population expected to be fully vaccinated by November, the country
will begin gradually reopening for tourism at scale from 15
November 2021. It is expected that no tests on arrival or isolation
periods will be required for travellers entering with a vaccination
certificate or a negative pre-flight PCR test.
Results for the six months to 30 June 2021
The NAV per Share at 30 June 2021 was US$1.31 (94.7p) compared
to US$1.41 (103.8p) at 31 December 2020 and the loss in the first
six months of the financial year was US$0.09 (6.3p) compared to a
loss of US$0.21 (17.3p) for the same period last year. Total income
was US$ 1,592,235 (GBP1,146,297), compared to US$ 7,589,454
(GBP6,013,830) at 30 June 2020, representing a 79% decline, largely
attributable to a fall in dividend income as more fully described
in the Manager's Review. The valuation of assets of the Company,
the timing of the receipt of dividends from the joint venture
companies, as well as earnings in respect of the six months ended
30 June 2021 continue to be negatively impacted by the COVID -19
pandemic and other factors.
I am pleased to report that the Company's largest asset - the
Miramar Trade Centre, in which it holds a 49% interest - has
continued, throughout the pandemic, to be almost fully occupied.
While the income received was lower than last year due to ongoing
rent concessions being provided to some tenants, net profits were
12.6% higher due to significant cost savings being achieved
primarily as a result of the recent monetary reforms. Some of these
cost savings are expected to be recurring. The valuation of the
Company's participation in Inmobiliaria Monte Barreto S.A. which
owns the Miramar Trade Centre is US$72.7 million (GBP52.6 million),
which compares to $81.4 million (GBP59.8 million) as at 31 December
2020. The outlook remains positive and no significant decline in
occupancy levels is anticipated for the rest of the financial year.
However, in light of Cuba's precarious liquidity position and
related difficulties relating to the repatriation of dividends, the
discount rate applied to the valuation was increased, which has
triggered the lower valuation.
As regards the hotel interests of the Company, the Meliã Habana
has remained open throughout the pandemic and has been used as one
of the few quarantine hotels in Havana, which has allowed for
modest occupancy rates and income and profit levels. The Sol
Palmeras Hotel in Varadero is also operational, generating modest
profits notwithstanding the extremely low occupancy levels. The two
other Varadero hotels in which the Company has an interest have
been closed throughout the first half of this year. It is envisaged
they will remain so for the remainder of the year. Given the
unprecedented challenges in the hospitality sector, it is a credit
to those involved in the hotel operations that the Company's hotel
interests overall continue to trade profitably - albeit at a low
level.
The Trinidad hotel construction project has been delayed,
primarily as a result of difficulties on the part of the
constructor, who has been removed from the project. The development
is being undertaken by Toscuba on its own in which the Company has
a 40% interest (with further technical assistance being provided by
a Spanish construction adviser in the hotel sector) and it should
prove to be a very attractive destination in an area where there is
limited competition. The development is due to be completed by the
autumn of 2022.
Convertible bond issue
On 31 March 2021, the Company successfully closed the issue of
EUR25 million (US$29,312,500 / GBP21,211,737) 10.00% senior
unsecured convertible bonds. The proceeds from this issue will
ensure the availability of funding for the completion of
construction of the TosCuba project, as well as the advance of the
new industrial logistics and warehouse project in the Special
Development Zone of Mariel.
Dividends
With the ongoing inherent uncertainty surrounding the operation
of many of the Company's assets, the payment of dividends continues
to be suspended. The Board views the recommencement of the payment
of dividends as a priority and the policy will be kept under
constant review.
Board Composition
During the period, as part of its succession planning, the Board
has sought an additional director. A potential candidate has been
identified and is going through the process of being approved by
the Guernsey regulator. The Board expects to be able to make an
announcement shortly in this respect. It is the Board's policy to
undertake a regular review of its performance, skills, composition
and diversity to ensure that it has the appropriate mix of relevant
experience and skills to ensure the effective overall operation of
the Company.
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 ongoing
challenging and uncertain times.
John Herring
Chairman
27 September 2021
INVESTMENT MANAGER'S REVIEW
2021 PERFORMANCE
As at 30 June 2021, the Net Asset Value ("NAV") of the Company
was US$180,194,167 / GBP130,395,953 (31 December 2020:
US$194,425,614 / GBP142,875,966 ) and the NAV total return for the
period was 7.3%. The loss on the change in the fair value of the
equity investments during the period was (US$10,996,492) /
(GBP7,916,841). The net loss of the Company for the six months
ended 30 June 2021 attributable to the shareholders was
(US$12,056,422) / (GBP9,553,425).
T he total dividend income from the Cuban joint venture
companies in which the Company has an interest during the six
months ended 30 June 2021 was US$513,673 / GBP369,815 (30 June
2020: US$6,884,559 / GBP5,455,277). The 92% decrease in dividend
income as compared to the prior period is attributable to the
continued impact of the COVID-19 pandemic on the Cuban tourism
industry and the resulting closure or reduced operations and
profitability of the hotels in which the Company has an interest,
as well as the tense liquidity position of the Cuban financial
system at the present time caused by the pandemic, increased U.S.
sanctions and the transitional effects of monetary reform. In the
case of Monte Barreto, and notwithstanding the fact that the
profitability of this joint venture has not been affected, the
above factors affect the timing of the payment of dividends to the
Company and introduce a foreign exchange risk in the event of a
future devaluation of the CUP against the USD during the period
between the generation of profits (in CUP) and the declaration and
distribution of dividends (in USD). In turn, the uncertain timing
of cash flow to the Company may affect the timing of resumption of
the Company's policy of distributing annual dividends to its
shareholders.
The principal reason for the decrease in NAV during the period
was a decrease in the fair values of all of the main assets in
which the Company is invested. In turn, the fall in fair values was
mainly attributable to (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, the Cuban economy and
the continuation under the Biden administration of President
Trump's intensified Cuba embargo policy, and (ii) increased
discount rates as a result of higher levels of perceived risk in
the present circumstances.
ÁNIMO !!!
Ánimo (noun: resolve, mettle, steadfastness, spirit, energy,
encouragement, courage ) is a Spanish word that is not easily
translated to English, but for me it best expresses in a single
word my message to encourage, reassure and inspire my friends,
colleagues and employees in Cuba, and also the stakeholders of
CEIBA with respect to the future that lies ahead of us and the
mindset we require to get there. By using this word, on the one
hand I recognize the multiple challenges that Cuba and - by
extension - the Company are presently facing, but on the other hand
I also convey my firm belief and fervent wish that these challenges
can, will, and are presently in the process of being overcome
through resolve and sure handedness of action.
In the Manager's Review of 27 April 2021, it was noted, amongst
other things, that 2021 is likely to be an extremely important year
for Cuba and that economic recovery will in no small measure depend
on the world's ability to control the COVID-19 pandemic, the
restarting of international travel and the reopening of Cuba for
tourism. In addition, President Biden living up to his campaign
promise that he would "promptly reverse the failed Trump policies"
and the effectiveness of recently adopted measures aimed at the
overhaul of Cuba's monetary system, the stimulation of national
production and import substitution and the invigoration of the
nascent private sector will also be contributing factors.
Cuba and the COVID-19 Pandemic
To date, Cuba has played a remarkable role in the COVID-19
pandemic. It deployed some 3,700 medics from Cuba's Henri Reeves
Medical Brigade to 39 countries and developed three promising
protein-based vaccines (Abdala, Soberana 02 and Soberana Plus),
which have been authorised for emergency use in Cuba and some other
countries (two of the vaccines have recently been submitted to the
World Health Orgnaisation for wider international certification) .
Nevertheless, after more than a year of leading a largely
successful battle against the COVID-19 pandemic, since the
beginning of June 2021 Cuba has been suffering a significant
increase in the number of reported daily cases and deaths, largely
attributable to the Delta variant of the virus, which arrived in
the country over the course of the spring. And although Cuba's
vaccination programme is rushing forward, the medical system has
been put under severe pressure.
In mid-September, some 60% of the Cuban population had received
one dose and more than 40% of the population was fully vaccinated.
By mid-November, when the country plans to reopen for travel and
tourism, Cuba expects that 90% of the population will be fully
vaccinated. The first results of Cuba's vaccination programme are
beginning to appear, and the spread of the virus is showing signs
of slowing, particularly in Havana and Matanzas, where the
vaccination efforts were concentrated in the first stage of the
programme begun in May 2021. The overall death rate remains
comparatively low and it would seem that the locally-developed
vaccines are indeed protecting the population against serious
illness and death.
Re-Opening of Cuba's Tourism Sector
The ongoing COVID-19 pandemic severely impacted Cuba's tourism
sector during the first six months of 2021 in which period it
received less than 200,000 visitors and it is presently impossible
to predict how quickly the Cuban tourism sector will recover from
the worldwide disruption caused by the pandemic. A few Cuban
tourism areas are presently open, with a modest number of hotels
under operation in each area. Visitors have been arriving and
departing in accordance with available airlift and travel
restrictions in outbound markets, with no significant virus-related
issues since reopening of the market in mid-November 2020.
The Cuban Ministry of Tourism announced in early September 2021
that Cuba will reopen the country gradually for travel and tourism
activities, with far fewer entry restrictions and testing
requirements, as from 15 November 2021. This plan is based on the
assumption that 90% of the Cuban population will be fully
vaccinated by that time. Hotel operators have tentative plans for a
gradual reopening of hotels in the final months of 2021 and into
the new year, although the ability to implement such plans will
depend on external circumstances as the world emerges from the
present pandemic.
Democratic Party's National Agenda Frustrates President Biden's
International Policy to Make Good on his Campaign Promises re:
Cuba
Initial hopes for a renewed thawing of relations between the
United States and Cuba following the inauguration of the new U.S.
administration of President Joe Biden were first put on hold, and
then later dashed. To the surprise of many, and contrary to
promises made by Biden on the campaign trail, the Biden
administration did not reinstate the Obama-era policies of
engagement with Cuba, but instead has left in place all of the 241
amplified Trump sanctions against Cuba, including Trump's
last-minute reinstatement of Cuba to the list of State sponsors of
terrorism on 12 January 2021.
The principal driver behind this change of heart appears to be
the aspirations of the U.S. Democratic Party to win additional
Senate and House seats during the upcoming 2022 midterm
congressional elections and the general view that the party should
avoid at all costs that its candidates are depicted as "socialists"
or "communists", which was the strategy that may have helped
President Trump and the Republicans win the popular vote in the
State of Florida during the U.S. elections in 2020. Following
numerous public demonstrations in Miami, Tampa and other cities in
Florida in support of rare expressions of discontent in Cuba that
took place on 11 July 2021, new sanctions targeting certain Cuban
regime officials and entities were announced and it now seems
unrealistic to believe that a serious review of U.S. Cuba policy
will take place before the 2022 midterms.
Cuba's Economy, Reforms and Liquidity
During the first six months of 2021, the ongoing economic and
liquidity crises caused by the noxious combination of U.S.
sanctions (particularly those aimed at the limitation of family
remittances), reduced deliveries of subsidised oil and other
economic aid from Venezuela and other Cuban allies, the
inflationary effects of monetary reforms adopted over the last year
and the near complete collapse of the international tourism sector
in the face of the pandemic, not to mention the increased costs of
the health care system and vaccine development, have deepened
further. Hope for a short-term economic recovery will largely
depend on an increase in U.S. family remittances and the return of
international tourism, which in turn will depend on the success of
the Cuban vaccination campaign and other health measures, as well
as the reopening of outbound markets for travel.
In the face of these difficulties, Cuba has increasing
difficulty in providing many basic goods to the population, who
must spend several hours every day queuing for the limited goods on
offer, causing deep frustration in the local population and social
and political tensions as well.
The monetary and other reform efforts initiated during the
summer of 2020 and carried out throughout the year have proved to
be extensive, including new liquidity rules, currency unification,
labour reforms and the adoption and publication of new rules
allowing for the formation of corporate entities for private
businesses (micro, small and medium size enterprises). But the
implementation of reform has been difficult and a devaluation of
the official exchange rate between the Cuban Peso and the U.S.
Dollar remains a real risk going forwards.
Renewed Hope on the Horizon
There is, however, reason for optimism amidst the long list of
challenges. The Cuban government has continued to push forward its
vaccination campaign and appears to be accelerating the pace of new
reforms and other measures to alleviate the economic crisis and
present shortages. Amongst the most far-reaching of such reforms
are the new rules allowing the incorporation of small and medium
size businesses in the private sector, which are expected to have a
strong impact on the Cuban economy as it re-emerges from the
present situation.
In addition, notwithstanding the severe liquidity and economic
struggles facing the island, the government appears to be
maintaining its commitment to the new liquidity rules that provide
financial autonomy to various actors in the economy, including
joint venture companies. It is to be hoped that these efforts can
be sustained for a while longer so that the pandemic can be brought
back under control, tourism activities can be restarted in earnest
and Cuba can begin to emerge, on its own, from the deep economic
disruption and other difficulties that have characterised the last
two years. Now that Cuba has declared that the tourism industry
will resume with few restrictions as from 15 November 2021, we
trust that a new chapter aimed at recovery can begin.
EUR25 Million 10% Convertible Bond 2026
On 31 March 2021, the Company was successful in raising EUR25
million (US$29.3 million / GBP21.2 million) in new funds through an
oversubscribed issue of 10.00% senior unsecured convertible bonds
due 2026 (the "Bonds"). The Bonds were admitted to The
International Stock Exchange, Guernsey, on 13 April 2021. The
proceeds from this fund raising have significantly enhanced the
Company's financial position and enable TosCuba to complete the
construction of the Meliá Trinidad Peninsula hotel in a timely
manner, assuming no cost overruns and business interruptions on the
ground.
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.
Overall, the performance of the Miramar Trade Centre during the
first six months of 2021 was once again very strong. Occupancy
rates remained in the high nineties throughout the period, with
only slight declines and subsequent recoveries relating to COVID-19
tenant departures. Although revenues declined somewhat compared to
the previous period as a result of slightly lower occupancy rates
and rent reductions, Monte Barreto registered net income of
US$8,130,564 / GBP5,853,538 during the six months ended 30 June
2021 (30 June 2020: US$7,217,617 / GBP5,719,189), representing a
12.6% increase in US dollar terms over the comparable period in US$
terms . The increase was primarily the result of savings resulting
from the monetary reforms adopted in December 2020, including (i)
reduced operational expense, mainly salary and electricity costs,
and (ii) reduced depreciation expense as a result of the conversion
of the value of fixed assets from USD to CUP at a rate of 1:1.
Demand for international-standard office accommodation in Havana
continues to exceed supply, predominantly from multi-national
companies, NGOs and foreign diplomatic missions. Monte Barreto
remains the dominant option in this market segment. As a
consequence, and notwithstanding the COVID-19 pandemic, the outlook
for Monte Barreto in the second half of 2021 remains very
encouraging, as we expect occupancy levels to remain in the high
nineties and loss of rental income as a result of the pandemic to
be modest. However, in light of the present market conditions, the
joint venture may review its general strategy of rental increases
as leases are renewed.
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 will not be deemed to be "liquid"
and conversely most local payments to be made by the joint venture
will similarly not require 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 will be generated internally, and certain resources
will be allocated centrally by the government.
Given the present limited financial autonomy of Monte Barreto,
in combination with the current economic situation and liquidity
difficulties faced by the country, we believe that the Company will
for the remainder of this year receive limited dividends from Monte
Barreto, whether to be declared in respect of the current year or
receivable from past periods. Nevertheless, we expect that the pace
of distribution of dividends will pick up again once the country
re-emerges from the present difficulties, which we expect to be
during 2022. Dividend income recorded by the Company from Monte
Barreto during the first half of the year was US$513,673 /
GBP369,815 compared to US$573,963 / GBP464,409 in the first half of
2020.
The valuation of Monte Barreto has been adjusted downward at 30
June 2021 by US$5,509,027 / GBP3,986,560, representing a 5.3%
decline as compared with the December 2020 valuation in US dollar
terms. This was driven mainly by an increase of 2.5% in the
discount rate that is 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 transfer and currency risk
faced by Monte Barreto and its shareholders.
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 Centre);
- 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 ensuing collapse of
the worldwide travel industry, the Hotels faced an extremely
challenging business environment during the first half of the year,
and the results reflect this. While the Sol Palmeras and the Meliã
Habana hotels were able to maintain services throughout the first
six months of the year, occupancy and room rates were reduced. The
Meliã Las Americas and Meliã Varadero hotels were closed during the
entire period.
With two of its hotels closed throughout the period and the
other two operating at minimal occupancy rates, the net income
after tax of Miramar was US$673,339 / GBP484,765 (30 June 2020:
US$2,210,246 / GBP1,751,384). This resulted in the Company not
receiving any dividend income from Miramar during the first six
months of 2021 compared to US$6,310,596 / GBP5,000,472 of dividends
of Miramar recorded in the first six months of 2020.
Fortunately, the Meliã Habana hotel is one of the few hotels in
Havana where arriving travellers are authorised to spend their
obligatory isolation period and the hotel is popular with flight
crews and other essential travellers, so we expect that operations
will continue at these levels until international travel markets
recover later this year. The Sol Palmeras is also expected to
remain open in the coming months, with a modest number of guests
from countries that have resumed flights to Cuba (such as Russia,
Germany and Canada), but our expectation is that occupancy will
remain at very low levels until the Canadian and European markets
resume in earnest when their populations are more fully vaccinated
and regular flights from these important outbound markets
resume.
The ability of the Hotels to reopen and return to a normal
operating environment will depend upon numerous factors such as the
success of vaccination campaigns in outbound markets and in Cuba,
the availability of air lift and others. There is obviously a great
deal of uncertainty connected with the performance of the hotel
sector for the remainder of the year.
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 year, we expect
the liquid resources directly generated by the operations of
Miramar under the new liquidity rules, under which international
tourism income is treated as direct export income (of which 80% of
the liquidity can be retained by the joint venture) to be more than
sufficient to allow Miramar to distribute all profits to be
generated during the year. In addition, we anticipate that the
adopted monetary reforms may have a positive impact on the cost
structures and profitability of the Hotels when normal operations
are resumed.
The valuation of Miramar and its four hotels has been adjusted
downward at 30 June 2021 by US$8,741,664 / GBP6,325,830,
representing a 10.7% decline as compared with the December 2020
valuation in US dollar terms. This was driven mainly by an increase
of 2.0% in the discount rate that is applied in the discounted cash
flow model of Miramar in order to take into account the disruption
to Cuba's economy and tourism sector caused by the COVID-19
pandemic, the continued U.S. aggressive measures and the increased
transfer and currency risk faced by Miramar and its
shareholders.
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 30 June 2021 , all structural works have been completed
and the project has reached an overall completion level of
approximately 64%. The project has been progressing slowly since
the beginning of the COVID-19 pandemic in March 2020, with delays
initially originating at the Italian partner in the construction
joint venture that was constructing the hotel and then later
spreading to the on-the-ground construction works.
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 and the renegotiation and
increase of existing finance arrangements. TosCuba 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.A., a Spanish construction
adviser in the hotel sector. It is now estimated that construction
of the hotel will be completed by the fourth quarter of 2022,
before the start of the 2022-2023 high season.
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 / GBP16.3 million each. The terms of the facility
were amended in August2021 to take into account the new
construction process and other circumstances. The amount disbursed
under the Company's US$18 million / GBP13 million participation in
the first tranche (Tranche A) as at 30 June 2021 was US$17.1
million / GBP12.4 million. The second tranche (Tranche B), the
maximum principal amount of which was increased to US$29 million /
GBP21 million, under the August 2021 amendment to the facility, has
not yet begun disbursement. The increased principal of Tranche B
includes an amount of US$4 million / GBP2.9 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 Cubanac án (the Cuban shareholder in the joint
venture company), which in turn is further secured by a guarantee
by Miramar .
The total cost of the project - including incorporation of the
joint venture company, acquisition of surface rights, construction
of the hotel, and start-up costs - is presently estimated at US$76
million. Of this amount, US$16 million represents the share capital
invested in TosCuba by its shareholders (CEIBA, US$6.4 million,
Meliã Hotels International US$1.6 million and Cubanacán US$8
million) and approximately US$12 million represents grants received
or to be received under the Spanish Cuban Debt Conversion
Programme. In accordance with the terms of the Spanish Cuban Debt
Conversion Programme the funds granted should be used by the joint
venture company to fund local purchases of goods and services
delivered under the construction contract by Cuban suppliers,
thereby reducing the external funding that would otherwise need to
be provided.
The remaining funds necessary to complete the project will be
disbursed under the construction finance facility described
above.
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. ("GBM IT
Mariel"), 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. Discussions with potential tenants
are currently being pursued with a view to coordinating the start
of construction works with the existence of real demand, especially
given recent increases (expected to be temporary) in the cost of
construction materials and container transport.
The Company has made an initial contribution of US$303,175 /
GBP219,390 for its 50% share interest and has extended a EUR500,000
(US$594,200 / GBP429,988) convertible loan to GBM IT Mariel. The
Company is expected to invest a further EUR500,000 (US$594,200 /
GBP429,988) during the course of 2021.
FINTUR Finance 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 (US$28.5 million / GBP20.6 million) and subsequently
amended in 2019 through the addition of a second tranche in the
principal amount of EUR12 million (US$14.2 million / GBP10.3
million) , the Company initially held a EUR4 million (US$4.7
million / GBP3.4 million) participation under Tranche A and a EUR2
million (US$2.4 million / GBP1.7 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 first
principal payment of the new Tranche C fell due on 30 June 2021 but
was waived 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 is current to 30 June 2021.
As at 30 June 2021, the principal amount of US$2,043,025 /
GBP1,478,417 was outstanding under the Company's participation in
Tranche C of the Facility.
All of the hotels granted as security for the repayment of the
Facility remain closed at the present time. 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, U.S.
sanctions against Cuba and the transitional effects of monetary and
economic reforms, the very difficult economic circumstances faced
by Cuba during the first half of 2021 will continue at least until
the end of the year, and that the local market conditions in which
the Company and its subsidiaries operate will remain very
challenging. The very tight liquidity position of the Cuban economy
resulting from the above factors may also negatively impact the
timing of dividend and other payments to the Company in the short
term.
However, as the world recovers from the pandemic, we expect that
international leisure travel will increase and that three of the
four Miramar hotels will be reopened for business by the end of
2021, and that all four Miramar hotels, as well as the TosCuba
hotel in Trinidad, will be operational and generating income by the
start of the 2022 high season in November 2022.
We do not expect that Cuba's liquidity position will improve in
the short term, but we do anticipate that over the medium term the
recovery of Cuba's liquidity position in combination with the new
monetary reforms and liquidity rules adopted by the Cuban
government during the year will 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 a
much greater degree of control over the financial resources
generated by their operations, which we expect to be largely
beneficial for new investments, ongoing operations, performance and
the ability to make timely distributions to shareholders.
Moreover, having successfully raised significant new funds at a
very difficult time, demonstrating strong confidence on the part of
our investors, for which we are grateful, we enter into an exciting
new period of development for the Company. With immediate
deployment capacity, the Company is very strongly positioned to
enhance its position in the Cuban market by driving ahead, at a
very difficult time, with completion of the new hotel in Trinidad
and construction of the first phase of the new industrial
warehousing project in Mariel.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
27 September 2021
INTERIM BOARD REPORT
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing this Half-Yearly
Report in accordance with applicable law and regulations.
The Directors confirm to the best of their knowledge that:
- the unaudited Interim Condensed Consolidated Financial
Statements are 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 as a
whole;
- this Interim Board Report includes a fair review of the
information required by DTR 4.2.7R of the FCA's Disclosure Guidance
and Transparency Rules, being an indication of important events
that have occurred during the first six months of the financial
year and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the
remaining six months of the year; and
- the financial statements include a fair review of the
information required by DTR 4.2.8R of the FCA's Disclosure Guidance
and Transparency Rules, being related party transactions that have
taken place in the first six months of the financial year and that
have materially affected the financial position or performance of
the Company during that period, and any changes in the related
party transactions described in the last Annual Report that could
do so.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board regularly reviews the principal risks and
uncertainties affecting the Company together with the mitigating
actions it has established to manage these risks. These can be
summarised under the following headings:
-- Public Health Risk
- Global Pandemic Risk
-- Risks Relating to the Company and its Investment Strategy
- Investment Strategy and Objective
- Investment Restrictions
-- Portfolio and Operational Risks
- Joint Venture Risk
- Real Estate Risk
- Construction Risk
- Tourism Risk
- Valuation Risk
- Dependence on Third Party Service Providers
- Loss of Key Fund Personnel
-- Risks Relating to Investment in Cuba and the U.S. Embargo
- General Economic, Political, Legal and Financial Environment within Cuba
- U.S. Government Restrictions relating to Cuba
- Helms-Burton Risk
- Liquidity and Transfer Risk
- Currency Risk
-- Risks Relating to Regulatory and Tax framework
- Tax Risk
The Board notes that there are a number of contingent risks
stemming from the COVID-19 pandemic that currently impact, and may
continue to impact, the operations of the Company as set out in the
Chairman's Statement and the Manager's Review. With support from
the Board, the Manager will continue to review carefully the
composition of the Company's portfolio and will be pro-active in
taking investment decisions where necessary.
In all other respects, the Company's principal risks and
uncertainties have not materially changed since the date of the
2020 Annual Report.
GOING CONCERN
In accordance with the guidance of the Financial Reporting
Council, the Directors have reviewed the Company's ability to
continue as a 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 Company's reporting and monitoring
processes. After reviewing the cashflow projections and the
significant capital commitments, as well as taking into account the
principal risks and uncertainties, including the impact of
COVID-19, the Directors believe that the Company has adequate
financial resources to continue its operational existence for the
foreseeable future and at least 12 months from the date of this
Half-Yearly Report.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
unaudited Interim Condensed Consolidated Financial Statements.
For and on behalf of the Board
Peter Cornell Keith Corbin
27 September 2021 27 September 2021
INDEPENT REVIEW REPORT TO THE MEMBERS OF CEIBA INVESTMENTS
LIMITED
Introduction
We have reviewed the condensed set of consolidated financial
statements of CEIBA Investment Limited and its Subsidiaries
(together, the 'Group') included in the half yearly report for the
six months ended 30 June 2021, which comprises the Interim
Condensed Consolidated Statement of Financial Position as at 30
June 2021 and the related Interim Condensed Consolidated Statement
of Comprehensive Income, the Interim Condensed Consolidated
Statement of Changes in Equity and the Interim Condensed
Consolidated Statement of Cash Flows for the six-month period then
ended and a summary of significant accounting policies and other
explanatory notes.
The half yearly report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the half yearly report in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority. The Directors are responsible for the
preparation and fair presentation of the interim condensed
financial statements contained in the half yearly report, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting' issued by the International Accounting
Standards Board. Our responsibility is to express a conclusion on
the interim condensed financial statements based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 , 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity.' A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Emphasis of matter - valuation uncertainty
We draw your attention to the disclosures made in Note 2.3 to
the interim condensed consolidated financial statements concerning
the material uncertainty in the valuation of the underlying real
estate assets comprising the valuation of the equity investments.
As explained in Notes 2.3, the investments are carried at fair
value, determined using a valuation methodology which involves
judgments and estimates made by management. The independent
valuation experts 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 and 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. Our review conclusion is not
qualified in this respect.
Unqualified conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half yearly report for the six months
ended 30 June 2021 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Grant Thornton Limited
Statutory Auditor, Chartered Accountants
Guernsey, Channel Islands
27 September 2021
Consolidated Statement of Financial Position
For the period ended 30 June 2021
Unaudited Audited
as at 6 as at 12
months months
30 Jun 2021 31 Dec
2020
Note US$ US$
----- ------------- ----------------------
Assets
Current assets
Cash and cash equivalents 4 32,022,438 4,270,860
Accounts receivable and accrued income 5 14,443,984 14,581,229
Loans and lending facilities 6 5,194,589 2,827,292
------------- ----------------------
Total current assets 51,661,011 21,679,381
------------- ----------------------
Non-current assets
Accounts receivable and accrued income 5 2,426,425 1,768,447
Loans and lending facilities 6 17,992,817 17,395,343
Equity investments 7 183,670,534 197,921,225
Property, plant and equipment 517,642 533,598
------------- ----------------------
Total non-current assets 204,607,418 217,618,613
------------- ----------------------
Total assets 256,268,429 239,297,994
------------- ----------------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 8 3,188,256 1,085,590
Short-term borrowings 9 1,838,771 -
Deferred liabilities 1,000,000 1,000,000
Total current liabilities 6,027,027 2,085,590
------------- ----------------------
Non-current liabilities
Accounts payable and accrued expenses 8 1,129,709 1,129,709
Convertible bonds 10 29,752,768 -
Deferred liabilities 1,333,333 1,833,333
------------- ----------------------
Total non-current liabilities 32,215,810 2,963,042
------------- ----------------------
Total liabilities 38,242,837 5,048,632
------------- ----------------------
Equity
Stated capital 10 106,638,023 106,638,023
Revaluation surplus 319,699 319,699
Retained earnings 63,556,961 75,613,383
Accumulated other comprehensive income 9,679,484 11,854,509
------------- ----------------------
Equity attributable to the shareholders
of the parent 180,194,167 194,425,614
------------- ----------------------
Non-controlling interest 11 37,831,425 39,823,748
Total equity 218,025,592 234,249,362
Total liabilities and equity 256,268,429 239,297,994
------------- ----------------------
NAV 11 180,194,167 194,425,614
NAV per share 11 1.31 1.41
See accompanying notes 1 to 19, which are an integral part of
these consolidated financial statements.
These unaudited condensed consolidated financial statements were
approved by the Board of Directors and authorised for issue on 27
September 2021.
They were signed on the Company's behalf;
Keith Corbin, Director Peter Cornell, Director
Consolidated Statement of Comprehensive Income
For the period ended 30 June 2021
Unaudited Unaudited
6 months 6 months
30 Jun 2021 30 Jun 2020
Note US$ US$
----- ------------- -------------
Income
Dividend income 7 513,673 6,884,559
Interest income 1,077,508 703,456
Travel agency commissions 1,054 1,439
1,592,235 7,589,454
------------- -------------
Expenses
Foreign exchange loss (188,017) (394,798)
Interest expense on bonds 10 (743,820) -
Loss on change in fair value of equity
investments 7 (10,996,492) (46,879,952)
Management fees (1,221,711) (1,010,822)
Other staff costs (39,558) (31,991)
Travel (29,572) (36,840)
Operational costs (41,788) (39,217)
Legal and professional fees (605,241) (603,368)
Administration fees and expenses (155,499) (136,742)
Audit fees (97,723) (162,367)
Miscellaneous expenses (209,823) (46,005)
Directors' fees and expenses (124,085) (112,846)
Depreciation (16,481) (19,990)
(14,469,810) (49,516,106)
------------- -------------
Net loss before taxation (12,877,575) (41,926,652)
------------- -------------
Income taxes - -
------------- -------------
Net loss for the period (12,877,575) (41,926,652)
------------- -------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
(Loss)/gain on exchange differences
of translation of foreign operations (3,346,195) 334,802
Total comprehensive loss (16,223,770) (41,591,850)
------------- -------------
Net loss for the year attributable
to:
Shareholders of the parent (12,056,422) (29,453,418)
Non-controlling interest (821,153) (12,473,234)
Total comprehensive loss attributable
to:
Shareholders of the parent (14,231,447) (29,235,798)
Non-controlling interest (1,992,323) (12,356,052)
Basic loss per share 14 (0.09) (0.21)
Diluted loss per share 14 (0.07) (0.21)
See accompanying notes 1 to 19, which are an integral part of
these consolidated financial statements
Consolidated Statement of Cash Flows
For the period ended 30 June 2021
Unaudited Unaudited
Note 6 months 6 months
30 Jun 2021 30 Jun 2020
------- ------------- -------------
Operating activities
Net (loss)/ income for the year (12,877,575) (41,926,652)
Items not affecting cash:
Depreciation 8 16,481 19,990
Change in fair value of equity investments 7 10,743,468 46,879,952
Dividend income receivable (513,673) -
Interest income (1,077,508) -
Foreign exchange loss 188,017 394,798
(3,520,790) 5,368,088
Decrease/(increase) in accounts receivable
and accrued income 708,831 (2,807,308)
Increase in accounts payable and
accrued expenses 2,102,664 144,337
Non- cash movement in amortisation
of deferred liability (500,000) (500,000)
Interest income received 361,617 -
Net cash flows from operating activities (847,678) 2,205,117
------------- -------------
Investing activities
Purchase of property, plant & equipment (525) (2,264)
Miramar Confirming facility (1,410,826) (1,658,357)
Loans and lending facilities disbursed (1,621,715) (3,699,173)
Loans and lending facilities recovered - 1,299,412
Net cash flows from investing activities (3,033,066) (4,060,382)
------------- -------------
Financing activities
Short term borrowings received 1,838,771 1,551,727
Issue of convertible bonds 29,312,500 -
Cash distribution to non-controlling
interest - (3,161,056)
Contributions received from non-controlling
interest - 84,405
Net cash flows from financing activities 31,151,271 (1,524,924)
------------- -------------
Change in cash and cash equivalents 27,270,527 (3,380,189)
Cash and cash equivalents at beginning
of the period 4,270,860 13,102,578
Foreign exchange on cash 481,051 (117,074)
Cash and cash equivalents at end
of the period 32,022,438 9,605,315
------------- -------------
Dividends received 6,000,000
Interest received 361,617 267,650
Interest paid 41,168
See accompanying notes 1 to 19, which are an integral part of
these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the period ended 30 June 2021
Unaudited
For the period ended 30 June 2020
Other Total Equity
Stated Revaluation Retained comprehensive attributable Non-controlling
Capital Surplus Earnings income to the parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Balance at 1 January
2020 106,638,023 319,699 95,422,003 4,354,609 206,734,334 49,381,639 256,115,973
Net loss for the
period - - (29,453,418) - (29,453,418) (12,473,234) (41,926,652)
Capital contributions
from non-controlling
interest - - - - - 84,405 84,405
Cash distribution
to non-controlling
interest - - - - - (3,161,056) (3,161,056)
Net other comprehensive
income to be
reclassified
to profit or loss
in subsequent
periods - - - 217,620 217,620 117,182 334,802
Balance at 30
June 2020 106,638,023 319,699 65,968,585 4,572,229 177,498,536 33,948,936 211,447,472
See accompanying notes 1 to 19, which are an integral part of
these consolidated financial statements.
Unaudited
For the period ended 30 June 2021
Other Total Equity
Stated Revaluation Retained comprehensive attributable Non-controlling
Capital Surplus Earnings income to the parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Balance at 1
January
2021 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, 10 - - - (2,175,025) (2,175,025) (1,171,170) (3,346,195)
Net loss for
the
year 10 - - (12,056,422) - (12,056,422) (821,153) (12,877,575)
Balance at 31
December 2021 106,638,023 319,699 63,556,961 9,679,484 180,194,167 37,831,425 218,025,592
------------- ----------- -------------- ------------- ------------- --------------- -------------
See accompanying notes 1 to 19, which are an integral part of
these unaudited interim condensed consolidated financial statements
.
Notes to the Interim Consolidated Financial Statements
For the six months ended 30 June 2021 (unaudited)
1. Corporate information
T hese unaudited interim condensed consolidated financial
statements for the Interim Financial Report 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, 1987 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 plc.
2. Basis of preparation
2.1 Statement of compliance and basis of measurement
These unaudited interim condensed consolidated financial
statements have been prepared under the historical cost convention,
except for certain financial instruments as disclosed in note 3.9
and certain property, plant and equipment as disclosed in note 3.12
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 unaudited interim condensed 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 unaudited interim condensed consolidated financial statements
are:
a) That the Group is not an Investment Entity (see note 3.14 of
the Company's 31 December 2020 financial statements );
b) That the Group is a Venture Capital Organisation (see note
3.15 of the Company's 31 December 2020 financial statements ).
c) That the functional currency of the parent company (CEIBA Investments Limited) is US$
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.
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 30 June 2021 valuations of the properties held
by Inmobiliaria 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 almost no 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.
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 exception provided for 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 2020 and not
early adopted that are relevant to 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
The accounting policies applied during this year are fully
consistent with those applied in the previous period.
2.8 Going concern
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.
2.9 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 unaudited interim
condensed consolidated financial statements .
3.1 Consolidation
The consolidated financial statements comprise the financial
statements of CEIBA and its subsidiaries as at 31 December 2020.
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 30 June 2021 and 31 December 2020:
Equity interest
held indirectly
Country by the Group
Entity Name of Incorporation or holding entity
30 Jun 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) Spain 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 (a) (ix) Spain 50% 50%
a) Company consolidated at 30 June 2021 and 31 December 2020.
b) Company accounted at fair value at 30 June 2021 and 31 December 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) A 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.
4. Cash and cash equivalents
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Cash on hand 13,040 5,480
Bank current accounts 32,009,398 4,465,380
32,022,438 4,270,860
------------ ------------
5. Accounts receivable and accrued income
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Dividends receivable from Miramar S.A. 310,595 312,352
Dividends receivable from Inmobiliaria
Monte Barreto S.A. 10,384,957 9,871,284
Loan interest receivable 2,432,198 4,000,000
TosCuba deposit (i) 3,430,786 449,733
Other accounts receivable and deposits 311,873 9,871,284
16,870,409 16,349,676
------------ ------------
Current portion 14,443,984 14,581,229
------------ ------------
Non-current portion 2,426,425 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.
Presented below is the ageing of receivables and accrued income
based on their contractual terms of repayment
30 June 31 Dec 2020
2021
US$ US$
----------- ------------
Up to 30 days 10,882,952 553,216
Between 31 and 90 days 275,336 249,214
Between 91 and 180 days 303,453 5,336,284
Between 181 and 365 days 2,982,243 8,442,515
Over 365 days 2,426,425 1,768,447
----------- ------------
16,870,409 16,349,676
----------- ------------
The majority 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 terms of 3 stage
model per IFRS 9 by assessing the credit risk of the counterparties
who declared the dividend (Monte Barreto and Miramar). The delay in
payment of the dividends receivable is due to the current liquidity
position of the Cuban financial system caused by the pandemic,
increased U.S. sanctions and the transitional effects of monetary
reform. However, in the case of Monte Barreto, the profitability of
the joint venture has not been affected and therefore it has been
assigned a higher credit rating. Although there is uncertaintly as
to the timing of when the dividends will be received due to the
issues noted above, Management expects to receive the full amount
of dividends receivable in due course.
The overall credit risk of TosCuba has significantly increased
since its initial recognition due to COVID-19 and the resulting
prevailing economic conditions. The loan is assessed at Stage 2 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.
Other accounts receivables 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 overall potential impairment loss on the total accounts
receivable and accrued income balance of has been estimated to be
immaterial.
6. Loans and lending facilities
30 June 2021 31 Dec 2020
US$ US$
------------- ------------
TosCuba S.A. (i) 17,133,981 16,106,466
Casa Financiera FINTUR S.A. (ii) 2,043,025 2,110,795
Miramar Facility (iii) 3,416,200 2,005,374
Grupo B.M. Intervest Technologies 594,200 -
Mariel S.L. (iv)
23,187,406 20,222,635
------------- ------------
Current portion 5,194,589 2,827,292
------------- ------------
Non-current portion 17,992,817 17,395,343
------------- ------------
(i) 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 is in the maximum
principal amount of up to US$45,000,000, divided into two separate
tranches of US$22,500,000 each. 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 (the Cuban
shareholder of TosCuba) as well as by a security assignment in
favour of the Group (in its capacity as Tranche B lender) of all
international tourism proceeds generated by the Meliã Santiago de
Cuba Hotel. The Construction Facility was amended in August 2021
(see note 19).
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. The TosCuba loan has had a
significant increase in credit risk since its initial recognition.
The loan is assessed at Stage 2 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.
In July 2016, the Group arranged and participated in a
EUR24,000,000 (US$28,521,600) 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$14,260,800). The Group had an
initial participation of EUR4,000,000 (US$4,753,600) under the
first tranche and a EUR2,000,000 (US$2,376,800) 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 has
been granted and the term has been extended to March 2023. In
addition, the amounts outstanding under the two existing tranches
of the facility were consolidated into a single tranche. The
facility has a fixed interest rate of 8%, and under the
renegotiated terms interest was accumulated until 31 December 2020
and is then to be 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
was waived 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 is current to 30 June 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. Based on
historical analysis FINTUR has made all payments on time with no
defaults since the inception of this facility as well with previous
loan facilities. The loan is not repayable on demand. The FINTUR
facility has had a significant increase in credit risk since its
initial recognition. The loan is assessed at Stage 2 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) The Company's subsidiary HOMASI (the foreign shareholder of
Miramar) executed a US$7 million confirming and discounting
facility with Miramar for the purpose of confirming and discounting
supplier invoices relating to the operations of the four Hotels
owned by the joint venture company. The facility is financed in
part by a EUR3.5 million credit line received by HOMASI from a
Spanish bank for this purpose. The facility is secured by the
offshore cash flows generated by the Hotels of Miramar. At 30 June
2021, a total of EUR1,753,904 (US$ 2,084,340 ) was disbursed under
the facility. The loan is not repayable on demand. The Miramar
facility has had a significant increase in credit risk since its
initial recognition. The loan is assessed at Stage 2 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 following table details the expected maturities of the loans
and lending facilities portfolio based on contractual terms:
30 June 31 Dec 2020
2021
US$ US$
----------- ------------
Up to 30 days 1,154,536 802,523
Between 31 and 90 days 684,121 223,960
Between 91 and 180 days 2,245,484 223,960
Between 181 and 365 days 1,110,448 2,338,673
Over 365 days 17,992,817 13,614,722
----------- ------------
23,187,406 17,203,838
----------- ------------
7. Equity investments
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Miramar S.A. 97,675,136 103,184,163
Inmobiliaria Monte Barreto
S.A. 72,692,223 81,433,887
TosCuba S.A. 13,000,000 13,000,000
Grupo B.M. Interinvest Technologies
Mariel S.L. 303,175 303,175
------------ ------------
183,670,534 197,921,225
------------ ------------
Monte
Miramar Barreto TosCuba GBM Mariel Total
(i) US$ (ii) US$ US$
US$ US$
------------- ------------ ----------- ------------- -------------
Balance at 31 December
2019 127,887,983 86,702,576 12,750,000 - 227,340,559
Foreign currency translation
reserve 57,078 - - - 57,078
Change in fair value
of equity investments (41,686,282) (5,443,670) 250,000 - (46,879,952)
Balance at 30 June 2020 86,258,779 81,258,906 13,000,000 - 180,517,685
Foreign currency translation
reserve 12,134,689 - - - 12,134,689
Change in fair value
of equity investments 4,790,695 174,981 - - 4,965,676
Share equity acquired - - - 303,175 303,175
Balance at 31 December
2020 103,184,163 81,433,887 13,000,000 303,175 197,921,225
Foreign currency translation
reserve (3,254,199) - - - (3,254,199)
Change in fair value
of equity investments (2,254,828) (8,741,664) - - (10,966,492)
------------- ------------ ----------- ------------- -------------
Balance at 30 June 2021 97,675,136 72,692,223 13,000,000 303,175 186,670,534
------------- ------------ ----------- ------------- -------------
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 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 30 June
2021, the amount of Excess Cash that is included in the fair value
of Monte Barreto stated in these financial statements is
US$6,297,223 (31 Dec 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:
30 Jun 2021 31 Dec 2020
Discount rate (after tax) (i) 11.7% 9.8%
Occupancy year 1 97.6% 97.3%
Average occupancy year 2 to 8 96.8% 97.3%
Occupancy year 8 and subsequent periods 97.0% 97.5%
Average rental rates per square meter per US$26.46 US$27.23
month - year 1 to 6
Annual increase in rental rates subsequent
to year 7 (ii) 2.5% 2.5%
Capital investments as percentage of rental
revenue 3% 3%
(i) The effective tax rate is estimated to be 19% (31 Dec 2020: 19%).
(ii) 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 2020 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 30 June 2021, the
amount of Excess Cash that is included in the fair value of Miramar
stated in these financial statements is US$10,475,136 (31 Dec 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:
30 Jun 2021 31 Dec 2020
Meliã Habana
Discount rate (after tax) (i) 14.8% 13.1%
Average occupancy year 1 to 3 58.5% 60.3%
Occupancy year 4 and subsequent periods 70% 72.2%
Average daily rate per guest - year 1 US$120.00 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% 2.5%
Capital investments as percentage of total
revenue 7% 7%
30 Jun 2021 31 Dec 2020
Meliã Las Americas
Discount rate (after tax) (iii) 14.7% 12.9%
Average occupancy year 1 to 3 60.4% 63%
Occupancy year 4 and subsequent periods 80% 79.5%
Average daily rate per guest - year 1 US$110.00 US$110.93
Average increase in average daily rate
per guest - year 2 to 6 12% 11%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
30 Jun 2021 31 Dec 2020
Meliã Varadero
Discount rate (after tax) (iii) 14.7% 12.9%
Average occupancy year 1 to 3 59% 64.6%
Occupancy year 4 and subsequent periods 80% 80.3%
Average daily rate per guest - year 1 US$95.00 US$97.88
Average increase in average daily rate
per guest - year 2 to 6 6% 6%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
Sol Palmeras
Discount rate (after tax) (iii) 14.7% 12.9%
Average occupancy year 1 to 3 57.5% 65.1%
Occupancy year 4 and subsequent periods 80% 81.8%
Average daily rate per guest - year 1 US$80.00 US$86.75
Increase in average daily rate per guest
- year 2 10% 12%
Average increase in average daily rate
per guest - year 3 to 6 5% 5%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (31 Dec 2020: 19%).
(ii) The increase in the average daily rate per guest in
subsequent periods is in-line with the estimated rate of long-term
inflation.
(iii) The effective tax rate is estimated to be 21% (31 Dec 2020: 21%).
Sensitivity to changes in the estimated rental rates / average
daily rates
The discounted cash flow models include estimates of the future
rental rates / average daily rates of the joint venture companies.
Actual rental rates / average daily rates may differ from these
estimates due to several factors including the general business
climate and economic conditions, the strength of the overall
tourism market and the influence of competitors. Therefore, the
following tables detail the change in fair values of the equity
investments, when applying what Management considers to be the
reasonable possible spread in rental rates / average daily rates of
between 15% lower and 15% higher compared to the rates used in
these consolidated financial statements .
The following table details the fair values of the equity
investments at 30 June 2021 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 72,692,223 69,477,787 66,263,351 63,048,915
Miramar 97,675,136 94,873,410 92,071,683 89,269,958
The following table details the fair values of the equity
investments at 30 June 2021 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 72,692,223 75,906,659 79,121,094 82,335,530
Miramar 97,675,136 100,476,863 103,278,590 106,080,318
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 30 June 2021 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 72,692,223 69,448,359 66,203,468 62,957,362
Miramar 97,675,136 95,166,813 92,658,490 90,112,935
The following table details the fair values of the equity
investments at 30 June 2021 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 72,692,223 73,257,393 n/a n/a
Miramar 97,675,136 100,183,460 102,691,784 105,200,109
(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 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 30 June 2021 when applying lower discount and
capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 72,692,223 79,699,714 88,630,615 100,422,985
Miramar 97,675,136 106,217,170 116,462,980 128,975,571
The following table details the fair values of the equity
investments at 30 June 2021 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 72,692,223 67,040,031 62,378,994 58,464,952
Miramar 97,675,136 90,445,701 84,248,795 78,878,721
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 30 June 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 72,692,223 72,478,926 72,265,629 72,052,332
Miramar 97,675,136 96,014,524 94,353,912 92,693,300
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 30 June 2021 and 31 December 2020, however
this is considered unlikely and therefore the related sensitivities
have not been shown .
TosCuba
At 30 June 2021 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 (31 Dec 2020: US$8,000,000) to
TosCuba.
In 2019, TosCuba was awarded a US$10 million grant under the
Spanish Cuban Debt Conversion Programme, a Spanish-Cuba initiative
aimed at promoting Spanish private sector investments in Cuba under
which outstanding bilateral debts owed to Spain by Cuba may be
settled through awards granted to investment projects in Cuba from
a special countervalue fund created for this purpose. Under these
awards, local currency invoices relating to services and materials
received in Cuba in the course of constructing the projects are
paid from the countervalue fund on behalf of the joint ventures.
The 50% interest of the Group in amounts received under the
programme by TosCuba have been recorded as a change in the fair
value in the investment in TosCuba.
The capital contributions made by the Company plus its share of
the cash grants received by TosCuba under the Spanish Cuban Debt
Conversion Programme have been determined to be the best observable
measure of the Company's interest in the fair value of TosCuba. The
Director's have determined that the fair value of TosCuba is
reasonable taking into consideration the current percentage of
completion of the hotel construction and the estimated cost to
completion, the projected value of the hotel upon completion and
current debt level of TosCuba.
Dividend income from equity investments
Dividend income (including participation payments) from the
equity investments above during the period is as follows:
6 months 6 months
30 Jun 2021 30 Jun 2020
US$ US$
------------- -------------
Monte Barreto 513,673 573,963
Miramar - 6,310,596
513,673 6,884,559
------------- -------------
8. Accounts payable and accrued expenses
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Management fees payable 2,960,441 1,565,065
Accrued interest payable 743,820 -
Due to shareholders 5,650 5,926
Due to Meliã Hotels International
SA (i) 176,941 176,941
Accrued professional fees 288,928 223,349
Accrued Directors' fees 37,511 -
Other accrued expenses 86,672 186,127
Other accounts payable 18,000 57,891
------------ ------------
4,317,965 2,215,299
------------ ------------
Current portion 3,188,256 1,085,590
------------ ------------
Non-current portion 1,129,709 1,129,709
------------ ------------
(i) Amounts due to Meliã Hotels International S.A. represent
funds held for disbursement under the TosCuba Construction
Facility.
The future maturity profile of accounts payable and accrued
expenses based on undiscounted contractual payments:
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days 901,994 179,136
Between 31 and 90 days 235,437 -
Between 91 and 180 days 1,868,233 606,842
Between 181 and 365 days 182,592 299,612
Greater than 365 days 1,129,709 1,129,709
4,317,965 2,215,299
------------ ------------
9. Short-term borrowings
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Short-term finance facility (i) 1,838,771 -
1,838,771 -
------------ ------------
(i) Bank credit line held by HOMASI (see note 6 for further
details concerning the economic terms and the nature of the
facility).
10. Convertible bonds
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Convertible bonds (ii) 29,752,768 -
29,752,768 -
------------ ------------
Current portion - -
------------ ------------
Non-current portion 29,752,768 -
------------ ------------
(ii) On 31 March 2021, the Company completed the issue of
EUR25,000,000 (US$29,752,768) 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 period was
US$743,820.
The future maturity profile of accounts payable and accrued
expenses based on undiscounted contractual payments:
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Greater than 365 days 29,752,768 -
29,752,768 -
------------ ------------
11. Net asset value
The net asset value attributable to the shareholders of the
Group ("NAV") is calculated as follows:
30 Jun 2021 31 Dec 2020
US$ US$
------------- -------------
Total assets 256,268,429 239,297,994
Total liabilities (38,215,810) (5,048,632)
Less: non-controlling interests (37,831,425) (39,823,748)
------------- -------------
NAV 180,194,167 194,425,614
Number of ordinary shares
issued 137,671,576 137,671,576
NAV per share 1.31 1.41
12. 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 maker 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 maker 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. 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 also
includes a facility provided to FINTUR (see note 6).
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.
30 June 2021
US$
---------------------------------------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 96,928,020 133,412,597 25,927,812 256,268,429
Total liabilities (15,372,714) (22,870,123) - (38,242,837)
------------- ------------- ------------ -------------
Total net assets 81,555,306 110,542,474 25,927,812 218,025,592
Dividend income 513,673 - - 513,673
Other income - - 1,078,562 1,078,562
Change in fair value of
equity investments (8,741,664) (2,254,828) - (10,996,492)
Allocated expenses (1,029,590) (1,092,649) (1,163,062) (3,285,301)
Foreign exchange loss - - (188,017) (188,017)
------------- ------------- ------------ -------------
Net loss (9,257,581) (3,347,477) (272,517) (12,877,575)
Other comprehensive loss - (3,346,195) - (3,346,195)
------------- ------------- ------------ -------------
Total comprehensive loss (9,257,581) (6,693,672) (272,517) (16,223,770)
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
6 months ended 30 June 2020
US$
Dividend income 573,963 6,310,596 - 6,884,559
Other income - 704,287 608 704,895
Change in fair value of
equity investments (5,443,670) (41,436,282) - (46,879,952)
Allocated expenses (293,790) (1,947,452) (114) (2,241,356)
Foreign exchange loss - - (394,798) (394,798)
------------ ------------- ----------- -------------
Net loss (5,163,497) (36,368,851) (394,304) (41,926,652)
Other comprehensive income - 334,802 - 334,802
------------ ------------- ----------- -------------
Total comprehensive loss (5,163,497) (36,034,049) (394,304) (41,591,850)
13. Related party disclosures
Compensation of Directors
Each Director receives a fee of GBP35,0 00 (US$48,367) per annum
with the Chairman receiving GBP 40,000 (US$55,276). The Chairman of
the Audit Committee also receives an annual fee of GBP40,000 (
US$55,276 ). 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 period
ended 30 June 2021 were US$124,085 (six months to 30 June 2020:
US$112,846).
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 period ended 30 June
2021 amounted to US$12,249 (30 June 2020: US$10,259) with an
average rental charge per square meter at 30 June 2021 of US$37.64
(2020: US$37.64) plus an administration fee of 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. The
Group has assessed that there is not a material impact to the
consolidated financial statements as a result of the adoption of
IFRS 16.
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of abrdn plc which has an
interest at 30 June 2021 in 9,747,852 shares of the stated capital
(2020: 9,747,852).
Interests of Directors and Executives in the stated capital
At 30 June 2021 John Herring, a Director of CEIBA, had an
indirect interest in 40,000 shares (2020: 40,000 shares).
At 30 June 2021 Peter Cornell, a Director of CEIBA, has an
indirect interest in 100,000 shares (2020: 100,000 shares).
At 30 June 2021 Trevor Bowen a Director of CEIBA, has an
indirect interest in 43,600 shares (2020: 43,600 shares).
At 30 June 2021 Colin Kingsnorth, a Director of CEIBA, is a
director and shareholder of Laxey Partners Limited ("Laxey"). Laxey
holds 23,736,481 shares (2020: 17,303,252 shares). Funds managed by
Laxey hold 7,242,835 shares (2020: 13,676,064 shares) .
At 30 June 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 30 June 2021 Cameron Young, Chief Operating Officer of CEIBA,
has an indirect interest in 4,129,672 shares (2020: 4,129,672
shares).
At 30 June 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 30 June 2021, Shareholders of CEIBA had an interest of
EUR10,900,000 (US$12,953,560) in the Convertible Bonds (see note
10).
14. Basic and diluted earnings per share
Basic earnings per share
The earnings (loss) per share have been calculated on a
weighted-average basis and are arrived at by dividing the net
income for the year/period attributable to shareholders by the
weighted-average number of shares in issue.
30 June 30 June
2021 2020
US$ US$
------------- -----------------
Weighted average of ordinary shares in issue 137,671,576 137,671,576
Net loss for the period attributable to the
shareholders (12,056,422) (29,453,418)
Basic loss per share (0.09) (0.21)
Diluted earnings per share
The diluted earnings (loss) per share have been calculated by
dividing the adjusted net income for the year/period attributable
to shareholders by the number of diluted ordinary shares.
30 June 30 June
2021 2020
US$ US$
------------- -----------------
Diluted ordinary shares (i) 158,246,099 137,671,576
Adjusted net loss for the period attributable
to the shareholders (ii) (11,312,602) (29,453,418)
Diluted loss per share (0.07) (0.21)
(i) The diluted ordinary shares have been calculated on the
assumption that the EUR25,000,000 (US$29,752,768) 10.00% senior
unsecured convertible bonds (see note 10) are converted at a
conversion price equal to the Euro equivalent of GBP1.043
(EUR1.2151 / US$1.4413) giving a total of 20,574,523 ordinary
shares.
(ii) The net loss for the period attributable to the
shareholders has been adjusted for items related to the 10.00%
senior unsecured convertible bonds.
15. 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 period ended 30 June 2021 amounted to US$12,250 (2020: US$10,259 ).
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$45,000,000, divided into two separate
tranches of US$22,500,000 each, US$21,530,045 (31 Dec 2020:
US$20,502,533) of which has been advanced as at 30 June 2021. The
Group has the right to syndicate Tranche B of the Construction
Facility to other lenders (see note 6). The Construction Facility
was amended in August 2021 (see note 19).
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 offshore 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 30 June
2021 the principal amount of EUR1,716,667 (US$2,043,025) (31 Dec
2020: EUR1,716,667 (US$2,110,795)) was outstanding under the
Company's participation in Tranche C of the facility.
16. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through
a process of identification, measurement and monitoring and subject
to risk limits and other controls. The objective of the Group is,
consequently, to achieve an appropriate balance between risk and
benefits, and to minimise potential adverse effects arising from
its financial activity.
The main risks arising from the Group's financial instruments
are market risk, credit risk and liquidity risks. Management
reviews policies for managing each of these risks and they are
summarised below. These policies have remained unchanged since the
beginning of the period to which these consolidated financial
statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows
of financial instruments will fluctuate due to changes in market
variables. Market price risk comprises two types of risks: foreign
currency risk and interest rate risk. The Group is not materially
exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial
instrument denominated in a currency other than the functional
currency will fluctuate due to changes in foreign exchange
rates.
The statement of comprehensive income and the net value of
assets can be affected by currency translation movements as certain
assets and income are denominated in currencies other than US$.
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.
n
The sensitivity of the income (loss) to a variation of the
exchange rate (EUR/US$) in relation to Euro denominated assets is
the following:
Effect of the
variation in the
foreign exchange
rate
% Income (loss) Income (loss)
30 June 2021 30 June 2020
US$ US$
------------------ --------------- ---------------
+15 694,842 1,368,760
+20 926,457 1,825,014
-15 (694,842) (1,368,760)
-20 (926,457) (1,825,014)
(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 was as follows:
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- ---------- ------------------ ------------
30 June 2021
Equity investments (US$) 183,670,534 - - 183,670,534
Loans and lending facilities
(EUR) 5,294,008 5,294,008 - -
Loans and lending facilities
(US$) 17,893,398 17,893,398 - -
Accounts receivable and accrued
income (US$) 16,659,868 - - 16,659,868
Accounts receivable and accrued
income (EUR) 210,541 - - 210,541
Cash at bank (EUR) 31,685,615 - - 31,685,615
Cash at bank (US$) 243,425 - - 243,425
Cash at bank (GBP) 80,358 - - 80,358
Cash on hand (GBP) 276 - - 276
Cash on hand (EUR) 6,369 - - 6,369
Cash on hand (US$) 2,225 - - 2,225
Cash on hand (CUC) 4,170 - - 4,170
Fixed Floating Non-interest
Total rate rate bearing
US$ 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 (EUR) 272 - - 272
Cash on hand (US$) 130 - - 130
Cash on hand (CUC) 1,058 - - 1,058
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation, expected credit losses are measured using
probability of default, exposure at default and loss given default.
Management considers both historical analysis and forward-looking
information in determining an expected credit loss. Refer to note 6
for the assessment of the expected credit loss for loans and
lending facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for
each component of the consolidated statement of financial position
as well as future loan commitments, irrespective of guarantees
received:
30 Jun 2021 31 Dec 2020
US$ US$
------------ ------------
Loans and lending facilities 23,187,406 20,222,635
Future loan commitments (TosCuba Construction
Facility) (i) 29,969,954 30,997,467
Accounts receivable and accrued income 16,870,409 16,349,676
Cash and cash equivalents 32,022,438 4,270,860
------------ ------------
Total maximum exposure to credit risk 102,050,207 71,840,638
------------ ------------
(i) The TosCuba Construction Facility is secured by future
income of the hotel under construction and 50% of the principal
construction facility amount is further secured by a guarantee
given by Cubanacán S.A., Corporación de Turismo y Comercio
Internacional, the Cuban shareholder of TosCuba S.A., backed by
income from another hotel in Cuba.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.
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 30 Jun 2021 31 Dec 2020
Rating US$ US$
-------- ------------ ------------
Cash at bank
Cuba Caa2 195,365 183,540
Guernsey A2 28,519,371 152,420
Spain Ba3 - 2,956,003
Spain A2 1,197,803 20,538
Spain Baa2 2,096,859 952,879
32,009,398 4,265,380
------------ ------------
Cash on hand
Spain - -
Cuba 13,040 5,480
13,040 5,480
------------ ------------
Total cash and cash equivalents 32,022,438 4,270,680
------------ ------------
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 note 5, 6, 9 and 10).
Although the Group has a number of liabilities (see note 8 -
Accounts payable and accrued expenses, note 9 - Short-term
borrowings, note 10 - Convertible bonds and note 16 - 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 2020, the Company issued EUR25,000,000
(US$29,752,768) in convertible bonds (see note 10). 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. The Group currently
has sufficient cash and cash equivalents to cover the quarterly
interest payments.
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$45,000,000 of which US$21,530,045 was disbursed as at
30 June 2021 (31 December 2020: US$20,502,533) and the
participation of the Group was US$17,133,979 (31 December 2020:
US$16,106,466). The Group has the right to syndicate Tranche B of
the Construction Facility to other lenders.
The principal of the Construction Facility is to be disbursed on
a monthly basis on the percentage of construction completed in each
preceding month. Prior to the COVID-19 pandemic, it was anticipated
that the full amount of the Construction Facility would be
disbursed by the end of 2020. However, the timing of construction
has been affected by the pandemic and consequently the disbursement
of the principal under the Construction Facility has been delayed
and it is now anticipated that the final disbursement under the
Construction Facility will be in the fourth quarter of 2022. The
Group currently has sufficient cash and cash equivalents to cover
the full disbursement of the Construction Facility (see note 10
concerning the Bond Issue).
The estimated timing of cash outflows under the TosCuba
Construction Facility entered into in April 2018 are as
follows:
30 June 31 Dec 2020
2021
US$ US$
----------- ------------
Between 31 and 90 days 2,969,954 485,606
Between 91 and 180 days 8,000,000 3,011,861
Between 181 and 1 year 16,000,000 19,000,000
Over 365 days 3,000,000 8,500,000
----------- ------------
29,969,954 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 30 June 2021
and 31 December 2020 to a total of US$ 218,025,592 and US$
234,249,362 , respectively.
17. Fair value disclosures
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. 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 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, and 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:
30 June 2021
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments 183,670,534 183,670,534
183,670,534 183,670,534
----------------------------------------- ------------ ------------
31 December 2020
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 197,921,225 197,921,225
- - 197,921,225 197,921,225
---------- ---------- ------------------- ------------ ------------
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:
30 Jun 2021 31 Dec 2020
Unlisted private equity investments US$ US$
------------- -------------
Initial balance 197,921,225 227,340,559
Total loss recognised in income
or loss (10,966,492) (41,914,276)
Foreign currency translation
reserve (3,254,199) 12,191,767
Acquisitions and capital contributions - 303,175
Final balance 183,670,534 197,921,225
------------- -------------
Total losses for the period/year
included in income or loss
relating to assets and liabilities
held at the end of the reporting
period/year (10,966,492) (41,914,276)
------------- -------------
(10,966,492) (41,914,276)
------------- -------------
18. 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.
30 June 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 - 32,022,438 - 32,022,438
Accounts receivable
and accrued income 5 - 16,870,409 - 16,870,409
Loans and lending
facilities 6 - 23,187,406 - 23,187,406
Equity investments 7 183,670,534 - - 183,670,534
183,670,534 72,080,253 - 255,750,787
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 8 - - 6,156,736 6,156,736
Convertible bonds 19 - - 29,752,768 29,752,768
Deferred liabilities 13 - - 2,333,333 2,333,333
- - 38,242,837 38,242,837
------------ -------------- -------------- ------------
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 7 197,921,225 - - 197,921,225
197,921,225 40,843,171 - 238,764,396
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 8 - - 2,215,299 2,215,299
Deferred liabilities 13 - - 2,833,333 2,833,333
- - 5,048,632 5,048,632
------------ -------------- -------------- ------------
There were no reclassifications of financial assets during the
period ended 30 June 2021 (year ended 31 December 2020: nil).
19. Events after the reporting period
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$4,000,000 may be onlent by the borrower (TosCuba) to Cuban
utility companies for investments in the infrastructure that will
serve the hotel, and (iii) modifying the security received by the
Group. The prior security assignment relating to the Meliã Santiago
de Cuba Hotel was released and a new secondary guarantee was
received from Miramar in support of the primary guarantee received
from Cubanacán.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined or
specified in the applicable financial framework. The Directors
assess the Company's performance against a range of criteria which
are viewed as particularly relevant for closed-end investment
companies.
NAV & Share Price Total Return
NAV total return involves investing the same net dividend in the
NAV of the Company with debt at fair value on the date on which
that dividend was earned.
Share price total return involves investing the same net
dividend in the share price of the Company on the date on which
that dividend was earned.
The tables below provide information relating to the NAV and
share price of the Company for the period ended 30 June 2021.
NAV per share (US$) Share price per share
Capital & Total Return (US$)
Opening value at 1 January
2021 1.41 1.15
-------------------- ----------------------
Closing NAV per share at
30 June 2021 1.31 0.97
-------------------- ----------------------
Capital & Total Return (7.3%) (15.3%)
-------------------- ----------------------
NAV per share (pence) Share price per share
Capital & Total Return (pence)
Opening value at 1 January
2021 103.8 84.5
---------------------- ----------------------
Closing value at 30 June
2021 94.7 70.5
---------------------- ----------------------
Capital & Total Return (8.7%) (16.6%)
---------------------- ----------------------
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463
Sebastiaan Berger / Evan Bruce-Gardyne 6000
Nplus1 Singer Advisory LLP Tel: +44 (0)20 7496
James Maxwell / James Moat (Corporate Finance) 3000
James Waterlow (Sales)
JTC Fund Solutions (Guernsey) Limited Tel: +44 (0) 1481 702400
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END
IR BCGDCIGDDGBR
(END) Dow Jones Newswires
September 28, 2021 01:59 ET (05:59 GMT)
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