TIDMCBA
RNS Number : 0466L
Ceiba Investments Limited
28 April 2020
27 April 2020
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
ANNUAL FINANCIAL REPORT
COMPANY OVERVIEW
GENERAL
CEIBA Investments Limited ("CEIBA" or the "Company") is a
Guernsey-incorporated, closed-ended investment company, with
registered number 30083. Its shares were listed (the "Listing") on
the Specialist Fund Segment ("SFS") of the London Stock Exchange's
Main Market on 22 October 2018, where it currently trades under the
symbol CBA. 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. The Company does not
have a fixed life. 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 that own the underlying properties. The Company also
arranges and invests in financial instruments granted in favour of
Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2019 IN GBP AND US$
(FOREX: GBP/US$ = 1.3113)
Given the fact that the Net Asset Value ("NAV") and share price
of the Company are quoted in Sterling (GBP) and that the functional
currency of the Company is the U.S. Dollar (US$), the financial
highlights of the Company set out below are being provided in both
currencies, applying the applicable exchange rate as at 31 December
2019.
In GBP
Total Net Assets NAV per share (1) Number of shares in
GBP157.7m (2018: GBP162.0m) 114.5p (2018: 117.7p) issue
GBP160.6m (2) (2018: 116.6p (2) (2018: 137,671,576 Ordinary
GBP165.8m) (2) 120.5p) (2) Shares
(2018: 137,671,576
Ordinary Shares)
Market Capitalisation Share price Net Gain to shareholders
GBP97.7m (2018: GBP139.7m) 71.0p (2018: 101.5p) GBP5.8m (2018: GBP1.4m)
GBP5.0m (2) (2018:
GBP5.2m) (2)
----------------------- -------------------------
Earnings per share NAV Total Return(1,3) Premium (Discount)
4.2p (2018: 1.2p) 0.8% (2018: 1.0%) to NAV(1)
3.6p (2) (2018: 4.6p) 0.3% (2) (2018: 3.9%) (38.0%) (4) (2018:
(2) (2) (13.8%)) (4)
(39.1%) (2) (2018:
15.7%) (2)
----------------------- -------------------------
In US$
Total Net Assets NAV per share (1) Number of shares in
US$206.7m (2018: $205.6m) US$1.50 (2018: $1.49) issue
US$210.6m (2) (2018: US$1.53 (2) (2018: 137,671,576 Ordinary
$210.5m) (2) $1.53) (2) Shares
(2018: 137,671,576
Ordinary Shares)
Market Capitalisation Share price Net Gain to shareholders
US$128.2m (2018: $177.3m) US$0.93 (2018: $1.29) US$7.6m (2018: $1.8m)
US$6.6m (2) (2018:
$6.6m) (2)
------------------------- -------------------------
Earnings per share NAV Total Return(1,3) Premium (Discount)
US$0.06 (2018: $0.02) 4.9% (2018: (4.2%)) to NAV(1)
US$0.05 (2) (2018: 4.3% (2) (2018: (2.1%)) (38.0%) (4) (2018:
$0.06) (2) (2) (13.8%)) (4)
(39.1 %) (2) (2018:
(15.7%)) (2)
------------------------- -------------------------
1 These are considered Alternative Performance Measures. See
glossary below for more information.
2 These figures differ from the figures derived from the audited
Consolidated Financial Statements. The figures are calculated in
full accordance with International Financial Reporting Standards
("IFRS"), except that they include an adjustment recognising the
full amount of US$5.0m / GBP3.9m received from Aberdeen Standard
Fund Managers Limited on 23 November 2018 in connection with the
execution of the Management Agreement in the Statement of
Comprehensive Income for the year ended 31 December 2018, rather
than deferring this amount over the five-year term of the
Management Agreement as required by IFRS. This adjustment resulted
in the increase of the net income attributable to the shareholders
of the Company for the year ended 31 December 2018 by US$4.8m /
GBP3.8m, to be followed by a US$1.0m / GBP0.8m decrease in the net
income attributable to the shareholders of the Company in each
subsequent year for the remainder of the five year term of the
Management Agreement. Consequently, for the year ended 31 December
2019 the adjustment resulted in a decrease in the net income
attributable to the shareholders of the Company in the amount of
US$1.0m / GBP0.8m.
3 The comparative 2018 NAV Total Return figures have been
restated from the prior year due to a change in the methodology of
their calculation. In 2018, the calculations accounted for the
reinvestment of the dividend at the year end, not when the
dividends went ex-dividend. To be in line with industry practice,
the figures above have been calculated on the basis that dividends
declared during the period are reinvested on the day that the
shares traded ex-dividend.
4 The rationale for the movement is discussed within the
Chairman's Statement.
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 Standard Life Aberdeen plc, a publicly-quoted
company on the London Stock Exchange. Aberdeen Standard Investments
("ASI") is a brand of Standard Life Aberdeen plc. References
throughout this document to ASI refer to both the AIFM and the
Investment Manager.
CHAIRMAN'S STATEMENT
OVERVIEW
As I write these words, the entire world is battling the
COVID-19 pandemic. Nearly all countries are presently facing an
unprecedented public health crisis as well as an as-yet undefined,
but surely profound, disruption to their national economies and
international trade relations. On the investment front, this crisis
will affect corporate revenues and investment valuations in a
myriad of ways, and I do not expect the full implications of the
present disruption to become apparent for some time.
Consequently, both I and the Investment Manager have attempted
to describe in our respective reports the operations, developments
and results of the Company and its investments during the year
recently ended, as well as the initial effects of the crisis on the
operations and assets of the Group and our first responses.
However, we believe it is impossible at this point in time to make
accurate judgements about the duration of the crisis and the
expected return to normal operations, nor to make coherent
statements about the outlook for the future, other than the
obvious.
As this crisis has unfolded in recent weeks, our first concern
was to protect our people and our assets. The Investment Manager,
the Havana team, the Administrator and other service providers have
adopted all reasonable measures, to the best of their abilities, to
protect the safety of all of the people working to advance the
affairs of the Company. Regarding the assets and operations of the
Group, in a trading note dated 3 April 2020 the Board withdrew all
prior guidance on the expected performance of the Company for the
current year 2020, and described the initial measures taken by the
Board to mitigate the impact of the pandemic on the operations and
assets of the Company. As its first response, the Board has taken
the following decisions:
-- to support the decision of Miramar to close its hotels in
Havana and Varadero and substantially reduce its workforce;
-- to support the decision of TosCuba to substantially lower
capital expenditure on the construction of the new hotel, and to
agree on a revised time-line and disbursement schedule until such
time as there is greater certainty around the economic and
financial viability of the hotel development;
-- to discuss and agree with Casa Financiera FINTUR S.A a new
payment schedule for the EUR24 million and EUR12 million tranches
of the credit facility granted to FINTUR, under which the aggregate
present exposure of the Company is EUR1,716,667;
-- to suspend the existing dividend policy of the Company and to
cancel the dividend scheduled to be paid by the Company in June
2020;
-- to restrict discretionary spending and uncommitted capital
expenditure in Miramar and Monte Barreto for the present time;
-- to carry out a detailed review of the costs and expenditures
of the Company and its subsidiaries with a view to limiting
unnecessary spending.
The Board will re-evaluate and refine these measures as the
situation evolves further.
In addition to the above, in order to alleviate the working
capital requirements of the Company during the present difficult
circumstances, the Investment Manager has agreed to defer the
management fee payable in respect of the second and third quarters
of 2020 until 31 December 2022 (or sooner if the operational
results of the Company permits). The Board is very grateful for the
support of the Investment Manager in these unprecedented times.
2019 REV IEW
General
While 2019 was a difficult year for Cuba and the Company alike,
and the overall performance of the Company's hotel interests was
disappointing, the results of the Miramar Trade Center and the
progress in construction of the TosCuba Project near Trinidad were
very encouraging.
The political backdrop with regard to U.S. - Cuba relations, and
in particular the introduction of a number of increasingly tough
new measures by the Trump administration over the past year, has
naturally provided Cuba and the Company with some significant
challenges. Inevitably, the Company's hotel assets were adversely
affected by a significant drop in U.S. travel to Cuba, with the
Havana based Meliã Habana Hotel suffering more than the Varadero
Hotels. Occupancy levels were generally maintained at all of the
hotels, although average room rates were materially reduced as a
result of market conditions.
Set against this, the Company's investment in the Miramar Trade
Center, the Havana office complex, recorded its best year ever. In
addition, the construction of the new 400 room Meliã Trinidad Playa
Hotel development project located near the historic town of
Trinidad, in the south of Cuba, was on budget at the end of the
year and has exciting potential once tourism operations return to
normal.
Cuban economic backdrop
As described in the Investment Manager's Review below, the past
year has witnessed numerous further measures taken by the U.S.
Government which have had an adverse impact upon the Cuban economy.
These include the coming into force of Title III of the
Helms-Burton Act; new restrictions on the amount of family
remittances that can be sent from the U.S. to family members in
Cuba; further restrictions aimed at limiting the amount of U.S.
travel to Cuba; the prohibition of U.S. flights to Cuba (other than
to Havana); the elimination of all U.S. cruise ship visits to Cuba;
and certain banking restrictions that make it increasingly
difficult for banks to process Cuba-related funds transfers. These
measures have had an overall adverse impact on the country and have
led to shortages of fuel and basic food supplies as well as a
deterioration in the country's liquidity position. Although the
Company has not been affected by Helms-Burton litigation, the
decline in U.S. travel to Cuba that has resulted from these new
measures, as well as numerous banking and other restrictions, have
had and are expected to continue to have a negative impact on the
operations of the Company.
With the upcoming U.S. presidential election in November 2020,
it is difficult to envisage any immediate easing of the adverse
headwinds which Cuba and the Company will face in the coming
period. However, once the election is out of the way it is possible
that we may well see a hoped-for new situation emerge.
At the outset of 2019, the number of tourists travelling to Cuba
was predicted at 5.1m - an expected increase of 7% over 2018. In
the event, only 4.3m tourists visited Cuba in 2019, a 16% decrease
against the forecast. While this fall in tourist arrivals did not
result in significant declines in occupancy rates at the Company's
hotels,
room rates were affected, most keenly at the Meliã Habana Hotel.
Results and Dividend
The trading results of the Company for the year ended 31st
December 2019 benefited from the Monte Baretto office complex
recording its best year but this excellent performance was offset
by a drop in the income generated by the Company's hotel interests.
In particular the Havana based, Meliã Habana hotel was adversely
impacted by the significant drop in US tourism. The dividends
received from the joint venture companies which manage the office
complex and hotel interests amounted to US$20.7m/ GBP 15.8m (2018:
US$16.2m/ GBP12.7m ) and provided a healthy cash flow to the
Company. The valuations of the Company's interests in the joint
venture companies recorded an aggregate drop in value of US$14.2m.
This fall was largely driven by a reduction in the value of the
underlying hotel assets, with the write down of the Meliã Habana
being the largest, offset to some degree by an increase in the
value of the Monte Barreto office complex.
After careful consideration, the Board has taken the decision to
cancel the dividend which was scheduled to be paid in June 2020.
This decision has been taken against the backdrop of the
significant impact that the COVID-19 pandemic is expected to have
on the Cuban tourism sector in the present year, as well as the
planned investment programme of the Group. The Board is conscious
that this changes the dividend policy set out in the Company's
prospectus in 2018, which stated that the Company intended to pay
an annual dividend targeting a yield of 4%, and the Board intends
to reinstate the dividend at the indicated rate as soon as
possible.
Board
I am grateful to the Board for their commitment and input during
the year. In last year's Annual Report I indicated that I intended
to step down as Chairman, however the independent directors have
requested that I remain as Chairman for the present time, given the
very challenging environment in which the Company is currently
operating. It is the Board's policy to undertake a regular review
of its performance and skills to ensure that is has the appropriate
mix of relevant experience and skills to ensure the effective
overall operation of the Company.
The Manager
Aberdeen Standard Fund Managers Limited ("ASFML"), a wholly
owned subsidiary of Standard Life Aberdeen plc, has acted as
manager of the Group's portfolio of assets throughout the year.
There has been no change in the underlying key operational
management of the Company and this team continues to be headed up
by Sebastiaan Berger, who is exclusively focused on the Company's
assets and business and has acted in this role for a number of
years. The Board reviewed the work of the Manager during the year
and concluded that it was satisfied with the performance of the
Manager and that it was in the best interests of shareholders that
ASFML remain as Manager of the portfolio.
Auditor
During the year, in an effort to improve the efficiency and
cost-effectiveness of the Company's operations, the Board sought
offers from numerous audit firms. As a result of this process, the
Board has appointed Grant Thornton Limited as the auditor of the
Company on 3 December 2019. The appointment of Grant Thornton
Limited will be subject to approval by shareholders at the
Company's Annual General Meeting.
Discount
As at 31 December 2019, the audited NAV of the Company stood at
US$1.50 or 114.5p. At 31 December 2019, the shares traded at 71p
per share and therefore at a 38% discount to their underlying NAV.
The Board is acutely aware of the present lack of connection
between the share price and the underlying net asset value and will
look at all ways to narrow the discount to the NAV. With the
continuous negative news concerning the U.S. - Cuba relationship
and the ongoing worldwide public health crisis that is having a
major impact on the travel and tourism industries on a global
scale, it is understandably difficult to generate investor interest
and the liquidity in the shares is also limited. In conjunction
with Aberdeen Standard Investments and the Company's brokers N+1
Singer, there will be an ongoing drive to increase investor
awareness of the Company and its long-term potential.
Outlook
In light of the high degree of uncertainty regarding the depth
and duration of the COVID-19 pandemic and the resulting economic
disruption, it is not possible at the present time to comment on
the outlook of the Company in the coming years. The Board has taken
sensible mitigation steps to safeguard the assets and cash position
of the Company in the present circumstances and the Board believes
that the Company has adequate resources to sustain the immediate
period of uncertainty. The Board, in consultation with the
Investment Manager, will adjust its views and its actions as new
developments occur.
In addition, the Board remains convinced of the long-term
investment case for its investment strategy regarding Cuba. The
country is resilient and has long experience in dealing with
difficult circumstances. We are hopeful that Cuba and its people
will weather the present storm as effectively as they have
traversed past challenges, and are confident that as this crisis
subsides foreign investment will play an even more central role in
Cuba's development strategy and that the Company will be able to
continue contributing in a positive and profitable manner to this
strategy.
John Herring ,
Chairman
27 April 2020
GENERAL INFORMATION ON THE COMPANY AND ITS INVESTMENT
STRATEGY
BACKGROUND / HISTORY
The Company was incorporated in 1995 in Guernsey as a
closed-ended investment company for the purpose of investing in
Cuba. The Company made its first Cuban investment in 1996 and its
portfolio subsequently included interests in a variety of Cuban
assets and businesses, including biotechnology ventures, mining,
residential real estate, consumer/industrial ventures and trade
finance.
In 2002 a new external investment manager was appointed to
manage the Company. The founders of this external manager included
Sebastiaan A.C. Berger and Cameron Young. Paul Austin subsequently
joined the Company's management team in 2005.
Under this new external investment manager, the Company began to
focus its investment activities on the Cuban real estate and
tourism sectors, and disposed of its interests in non-complementary
assets and businesses. In repositioning the business of the Company
during this period, the Company developed a new investment strategy
with the following main features:
-- to acquire ownership interests in Cuban joint venture
companies that own high-quality Cuban commercial real estate and
hotel assets;
-- to pursue investments in development projects through the
entering into of new joint ventures with the Cuban government or
the acquisition of interests in existing joint ventures;
-- to arrange secured financing for Cuban borrowers, primarily in the tourism sector;
-- to establish a professional "on-the-ground" management team
with experience in negotiating, managing and exiting investments in
Cuba; and
-- to pay a regular annual dividend to Shareholders.
The Company's total equity has grown from approximately US$19
million in 2001 to US$256 million as at 31 December 2019. During
the 2019 accounting period the Company paid approximately US$8.6
million in cash dividends.
The Company was listed on the Irish Stock Exchange from 1996 to
2002 and subsequently on the Channel Islands Stock Exchange (now
known as The International Stock Exchange) from 2004 until the end
of 2010. During the period from 2011 to 2018 the Company was
unlisted and internally-managed.
The Company is regulated by the Guernsey Financial Services
Commission as a Registered Closed-Ended Collective Investment
Scheme with effect from 11 September 2018 under The Protection of
Investors (Bailiwick of Guernsey) Law, 1987 as amended.
MANAGEMENT CONTRACT AND SPECIALIST FUND SEGMENT LISTING
In October 2018, the Company completed an IPO and listed its
Ordinary Shares on the Specialist Fund Segment of the Main Market
of the London Stock Exchange, where it trades under the symbol CBA.
As part of the process for listing on the SFS, the Company
reconverted itself to a registered collective investment scheme
regulated by the Guernsey Financial Services Commission and
re-externalised management.
In addition, the Company entered into a Management Agreement
under which the Company has appointed ASFML as the Company's
Alternative Investment Fund Manager to provide portfolio and risk
management services to the Company. ASFML has delegated portfolio
management to the Investment Manager. Both ASFML and the Investment
Manager are wholly-owned subsidiaries of Standard Life Aberdeen
plc.
As at 31 December 2019, the issued share capital of the Company
consisted of 137,671,576 fully paid Ordinary Shares (2018:
-137,671,576).
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide a regular
level of income and substantial capital growth.
INVESTMENT POLICY
The Company is a country fund with a primary focus on Cuban real
estate assets. The Company seeks to deliver the investment
objective primarily through investment in, and management of, a
portfolio of Cuban real estate assets, with a focus on the tourism
and commercial property sectors. Cuban real estate assets may also
include infrastructure, industrial, retail, logistics, residential
and mixed-use assets (including development projects).
The Company may also invest in any type of financial instrument
or credit facility secured by Cuba-related cash flows.
In addition, subject to the investment restrictions set out
below, the Company may invest in other Cuba-related businesses,
where such are considered by the Investment Manager to be
complementary to the Company's core portfolio ("Other Cuban
Assets"). Other Cuban Assets may include, but are not limited to,
Cuba-related businesses in the construction or construction supply,
logistics, energy, technology and light or heavy industrial
sectors.
Investments may be made through equity, debt or a combination of
both.
The Company will invest either directly or through holdings in
special purpose vehicles ("SPVs"), joint venture vehicles,
partnerships, trusts or other structures. The Cuban Foreign
Investment Act guarantees that the holders of interests in Cuban
joint venture companies may transfer their interests, subject
always to agreement between the parties and the approval of the
Cuban government.
INVESTMENT RESTRICTIONS
The following investment limits and restrictions apply to the
Company and its business which, where appropriate, will be measured
at the time of investment:
-- the Company will not knowingly or intentionally use or
benefit from confiscated property to which a claim is held by a
person subject to U.S. jurisdiction;
-- the Company may invest in Cuban and non-Cuban companies,
joint ventures and other entities that earn all or a substantial
part of their revenues from activities outside Cuba, although such
investments will, in aggregate, be limited to less than 10 per
cent. of the Gross Asset Value;
-- save for Monte Barreto (please see the Investment Manager's
Review for more information on this asset), the Company's maximum
exposure to any one asset will not exceed 30 per cent. of the Gross
Asset Value;
-- no more than 20 per cent. of the Gross Asset Value will be
invested in Other Cuban Assets; and
-- no more than 20 per cent. of the Gross Asset Value will be
exposed to "greenfield" real estate development projects, being
new-build construction projects carried out on undeveloped
land.
The Company will not be required to dispose of any asset or to
re-balance the Portfolio as a result of a change in the respective
valuations of its assets. The investment limits detailed above will
apply to the Group as a whole on a look through basis, i.e. where
assets are held through subsidiaries, SPVs, or equivalent holding
vehicles, the Company will look through the holding vehicle to the
underlying assets when applying the investment limits.
KEY PERFORMANCE INDICATORS ("KPIs")
The KPIs by which the Company measures its economic performance
include:
-- Total income
-- Net income
-- Total net assets (NAV)
-- Net asset value per share*
-- Non IFRS net asset value per share*
-- Net asset value total return*
-- Market capitalisation
-- Premium / Discount to NAV *
-- Dividend yield *
-- Dividend per share
-- Gain/Loss per share
* These are considered Alternative Performance Measures.
In addition to the above measures, the Board also regularly
monitors the following KPIs of the joint venture companies in which
the Company is invested and their underlying real estate assets,
all of which are Alternative Performance Measures.
In the case of commercial properties, other KPIs include:
-- Occupancy levels
-- Average monthly rate per square meter (AMR)
-- Earnings before interest, tax, depreciation and amortisation (EBITDA)
-- Net income after tax
In the case of hotel properties, other KPIs include:
-- Occupancy levels
-- Average Daily Rate per room (ADR)
-- Revenue per available room (RevPAR)
-- EBITDA
-- Net income after tax
The Board monitors the financial performance of the Cuban joint
venture companies owning the commercial and hotel properties using
these KPIs with the objective, using its best efforts to influence
the management decisions of the Cuban joint venture companies
through representation on their corporate bodies, of generating
reliable and growing cash flow for the Cuban joint venture
companies, which in turn will be reflected in reliable and growing
dividend streams in favour of the Company.
PRINCIPAL RISKS
PRINCIPAL RISKS & UNCERTAINTIES
There are a number of risks which, if they occurred, could have
a material adverse effect on the Company and its financial
condition, performance and prospects.
The Company invests in Cuba, which may increase the risk as
compared to investing in similar assets in other jurisdictions.
A full description of the risks faced by the Company is
contained in the Company`s Prospectus and should be referred to
prior to any investment decision.
Risk Management and Internal Controls
The Board is responsible for the management of risk and
regularly carries out a robust assessment of the principal risks
and uncertainties affecting the business, discusses how these may
impact on operations, performance and solvency and what mitigating
actions, if any, can be taken. As part of its risk process, the
Board seeks to identify emerging risks to ensure that they are
effectively managed as they develop. The Audit Committee is
responsible for ensuring that the internal control procedures are
robust and that risk management processes are appropriate.
Principal Risks and Uncertainties
The most significant risks identified by the Board appear in the
table below, together with a description of the possible impact
thereof, mitigating actions taken by the Company and an assessment
of how such risks have changed during the year.
The Board relies upon its external service providers to ensure
the Company's compliance with applicable regulations and, from time
to time, employs external advisers to advise on specific
concerns.
Description Possible Impact Mitigating Action Change
of Risk during
Year
Emerging Risk
Global Pandemic The emergence of the global The Board, the Investment
Risk COVID-19 pandemic post-year Manager, the local team
end may, as is the case in Havana, the joint venture
in many places around the companies in which the
world and in many economic Company has participations,
sectors, have a profound the Administrator and other
and as yet unquantifiable service providers have
negative impact on the all acted to the best of
operations and performance their abilities and in
of the assets of the Company, a coordinated fashion in
and may directly or indirectly the best interests of stakeholders
affect all other risk categories (i) to protect the welfare
mentioned in this matrix. of the various teams involved
More information on COVID-19 in the affairs of the Company,
is set out in the Chairman's (ii) to ensure operations
Statement and Manager's are maintained to the extent
Review. possible and to protect
and support the assets
of the Company for the
duration of the present
crisis, and (iii) to mitigate
insofar as possible the
longer-term negative impact
of economic and operational
disruption caused by the
pandemic. Given the unknown
duration of the crisis,
all of the above actors
will communicate regularly
in order to properly adapt
and coordinate the response
of the Company to changing
circumstances.
------------------------------------- ------------------------------------- --------
Risks Relating to the Company and its Investment Strategy
Investment The setting of an unattractive The Company's investment ->
Strategy and strategic proposition to strategy and objective
Objective the market and the failure is subject to regular review
to adapt to changes in to ensure that it remains
investor demand may lead attractive to investors.
to the Company becoming The Board considers strategy
unattractive to investors, regularly and receives
a decreased demand for strategic updates from
shares and a widening discount. the Investment Manager,
investor relations reports
and updates on the market
from the Company's Broker.
At each Board meeting,
the Board reviews the shareholder
register and any significant
movements. The Board considers
shareholder sentiment towards
the Company with the Investment
Manager and Broker, and
the level of discount at
which the Company's shares
trade.
------------------------------------- ------------------------------------- --------
Investment Investing outside of the The Board sets, and monitors, ->
Restrictions investment restrictions its investment restrictions
and guidelines set by the and guidelines, and receives
Board could result in poor regular reports which include
performance and inability performance reporting on
to meet the Company's objectives, the implementation of the
as well as a discount. investment policy, the
investment process and
application of the guidelines.
The Investment Manager
attends all Board meetings.
The Board monitors the
share price relative to
the NAV.
------------------------------------- ------------------------------------- --------
Portfolio and Operational Risks
Joint Venture The investments of the Prior to entering into ->
Risk Group in Cuban real estate any agreement to acquire
assets are made through an investment, the Investment
Cuban joint venture companies Manager will perform or
in which Cuban government procure the performance
entities hold an equity of due diligence on the
interest, giving rise to proposed acquisition target.
risks relating to the liquidity The Group tries to structure
of investments, government its equity investments
approval and deadlock. in Cuban joint venture
companies so as to include
a viable exit strategy.
The Investment Manager,
or the members of the on-the-ground
team, regularly attend
the Board meetings of the
joint venture companies
through which its interests
are held.
------------------------------------- ------------------------------------- --------
Real Estate As an indirect investor The Investment Manager
Risk in real estate assets, regularly monitors the
the Company is subject level of real estate risk
to risks relating to property in the Cuban market and
investments, including reports to the Board at
access to capital and global each meeting regarding
capital market conditions, recent developments. The
acquisition and development Investment Manager works
risk, competition, tenant closely with the on-the-ground
risk, environmental risk team, the external hotel
and others, and the materialisation managers and the joint
of these risks could have venture managers to identify,
a negative effect on specific monitor and actively manage
properties or the Group local real estate risk.
generally.
------------------------------------- ------------------------------------- --------
Tourism Risk As an indirect investor The Investment Manager
in hotel assets, the Company regularly monitors the
is subject to numerous local and regional tourism
risks relating to the tourism markets and meets regularly
sector, both in outbound with the external hotel
and inbound markets, including management to identify,
the cost and availability monitor and manage global
of air travel, seasonal and local tourism risk
variations in cash flow, and to develop appropriate
demand variations, changes strategies for dealing
in or significant disruptions with changing conditions.
to travel patterns, risk The Company aims to maintain
related to the manager a diversified portfolio
of the hotel properties, of tourism assets spanning
and the materialisation various hotel categories
of these risks could have (city hotel / beach resort,
a negative impact on specific business / leisure travel,
properties or the Company luxury / family) in numerous
generally. locations across the island.
------------------------------------- ------------------------------------- --------
Valuation Risk Asset valuations may fluctuate As part of the valuation ->
materially between periods process, the Investment
due to changes in market Manager engages an independent
conditions. third party valuator to
provide an independent
valuation report on each
of the indirectly owned
real estate assets of the
Group. The valuations are
also subject to review
by the Investment Manager's
Alternatives Pricing Committee.
------------------------------------- ------------------------------------- --------
Dependence The Company is dependent The Board receives reports ->
on Third Party on the Investment Manager from its service providers
Service Providers and other third parties on internal controls and
for the provision of all risk management at each
systems and services relating Board meeting. It receives
to its operations and investments, assurance from all its
and any inadequacies in significant service providers
design or execution thereof, as well as back to back
control failures or other assurances where activities
gaps in these systems and are themselves sub-delegated
services could result in to other third party providers
a loss or damage to the with which the Company
Company. has no direct contractual
relationship. Further details
of the internal controls
which are in place are
set out in the Directors'
Report.
------------------------------------- ------------------------------------- --------
Loss of Key The loss of key managers Sebastiaan Berger, a key ->
Fund Personnel contracted by the Investment member of the CEIBA management
Manager to manage the portfolio team, became an employee
of investments of the Group of the Investment Manager
could impact performance on 1 January 2019. Sebastiaan
of the Company. continues to be supported
by the long-standing foreign
and local management team
that has successfully managed
the Company and its portfolio
for the last 18 years.
Under the Management Agreement,
the Investment Manager
has the obligation to at
all times provide personnel
with adequate knowledge,
experience and contacts
in the Cuban market.
------------------------------------- ------------------------------------- --------
Risks Relating to Investment in Cuba and the U.S. Embargo
General Economic, The Group's underlying Mr Berger has lived and
Political, investments are situated worked in Cuba for 24 years
Legal and Financial and operate within a unique and has been lead investment
Environment economic and legal market, manager of the Company
within Cuba with a comparatively high since 2001, utilising his
level of uncertainty, and extensive experience in
a sensitive political environment. the market in selecting
top-performing investments.
The Company benefits from
the services of its highly
experienced on-the-ground
team consisting of nine
members and being one of
the most practised investment
teams focused exclusively
on investment in the Cuban
market, which constantly
monitors the economic,
political and financial
environment within Cuba.
Mr Berger regularly visits
Cuba and the Board undertakes
an overseas trip to Cuba
at least annually. The
subsidiaries of the Company
have been structured to
benefit from existing investment
protection and tax treaties
to which Cuba is a party.
------------------------------------- ------------------------------------- --------
U.S. government Tensions remain high between The Investment Manager
restrictions the governments of the closely follows developments
relating to United States and Cuba relating to the relationship
Cuba and the U.S. government between the United States
maintains numerous legal and Cuba and monitors all
restrictions aimed at Cuba. new restrictions adopted
The Trump administration by the United States to
continues to adopt new measure their possible
restrictions. The rise impact on the assets of
of further tensions with the Group. The Group has
the United States or the adapted its investment
adoption by the U.S. government model to the existing sanctions,
of further restrictions but the risk remains of
against Cuba could negatively further sanctions being
impact the operations of adopted in the future.
the Company, the value
of its investments, the
liquidity or tradability
of its shares, or its access
to international capital
and financial markets.
------------------------------------- ------------------------------------- --------
Helms-Burton On 2 May 2019, Title III At the time of acquiring
Risk of the Helms-Burton Act each of its interests in
was brought fully into Cuban joint venture companies,
force following 23 years the Company carried out
of successive uninterrupted extensive due diligence
suspensions. Canada, the investigations in order
European Union and other to ensure that no claims
governments have strongly existed under applicable
objected to the move and U.S. legislation, and in
have stated that they are particular that there were
prepared to defend their no claims certified by
companies' interests in the U.S. Foreign Claims
Cuba before the World Trade Settlement Commission under
Organization. A number its Cuba claims program
of legal claims were subsequently with respect to any of
launched before US courts the properties in which
against U.S and foreign the Company acquired an
investors in Cuba, which interest. However, given
has had and could have the broad definitions and
a further negative impact terms of the Helms-Burton
on the foreign investment Act and its purpose of
climate in Cuba and may creating uncertainty on
hinder the ability of the the part of investors,
Company to access international as well as the absence
capital and financial markets of any register of uncertified
in the future. In light claims or case law, there
of the political nature is no certain way for the
of the Helms-Burton Act Company to have diligently
and the fact that under verified whether or not
Title III Cuban persons a Helms-Burton action under
who were not U.S. Persons Title III could be brought
at the time their property in respect to a particular
was expropriated but subsequently property, or whether the
became U.S. Persons have Company may be deemed to
the right to make claims, indirectly profit or benefit
there is also a risk that from certain activities
legal claims might be initiated carried out by other parties.
against the Company or The Company does not have
its subsidiaries before any property or assets
U.S. courts. in the United States that
could be subject to seizure.
------------------------------------- ------------------------------------- --------
Liquidity Risk The continued rise in regional The Investment Manager
tensions between the United actively manages the liquidity
States and Venezuela may position of the Company,
impact the economic and its subsidiaries and the
liquidity position in Cuba, joint ventures in which
which may in turn have it invests so that cash
a negative impact on the flows are transferred to
position of the Company. bank accounts outside of
Cuba. In addition, financial
facilities in which the
Company participates are
structured so that secured
cash flows and debt service
payments originate and
remain outside Cuba.
------------------------------------- ------------------------------------- --------
Risks relating to Regulatory and Tax framework
Tax Risk Changes in the Group's The Investment Manager
tax status or tax treatment regularly reviews the tax
in any of the jurisdictions rules that may affect the
where is has a presence operations or investments
may adversely affect the of the Company and seeks
Company or its shareholders. to structure the activities
of the Company in the most
tax efficient manner possible.
However the Company holds
investment structures in
numerous jurisdictions
arising from past acquisitions,
and the general direction
of change in many jurisdictions
is not favourable.
------------------------------------- ------------------------------------- --------
The financial risks associated with the Company include market
risk, liquidity risk and credit risk, all of which are described in
greater detail in note 17 to the Consolidated Financial
Statements.
Following the ongoing assessment of the principal and emerging
risks facing the Company, and its current position, the Board is
confident that the Company will be able to continue in operation
and meet its liabilities as they fall due.
VIABILITY STATEMENT
VIABILITY STATEMENT
The Board considers the Company, with no fixed life, to be a
long-term investment vehicle.
The Board continually considers the prospects for the Company
over the longer term. Based on the Company's current financial
position, its operating model and track record, as well as the
experience of the Investment Manager from both a Cuban investment
and closed-end investment company perspective, the Board believes
that the Company has a sound basis upon which to continue to
deliver capital growth and returns over the long term.
For the purposes of this viability statement, the Board has
decided that a period of three years is an appropriate period over
which to report. In assessing the viability of the Company over the
review period, the Directors have conducted a robust review of the
principal risks focusing upon the following factors:
-- The principal risks as detailed in the Principal Risks above;
-- The ongoing relevance of the Company's investment objective in the current environment;
-- The level of income generated by the Company and forecast income;
-- The valuation of the Company's property portfolio, the
Investment Manager's portfolio strategy for the future and the
market outlook; and
-- The liquidity and cash position of the Company over the next 36 months
The COVID-19 pandemic has created a high level of uncertainty
regarding the future income and commitments of the Group. Factors
that the Board have considered in relation to the current crisis
when assessing the viability of the Company include:
-- The impact on the general liquidity position of Cuba and the
ability of Miramar and Monte Barreto to distribute dividends to
their shareholders, including the Group.
-- The impact on the Cuban tourism industry and the financial results of Miramar.
-- The impact on the timing of construction of the TosCuba
Project due in part to delays in the receipt of construction
imports from Europe.
Although the Board believes that the Company and the Group
currently have sufficient cash resources to meet their commitments
during the next twelve months, the Board recognises that short-term
financing or the syndication to other lenders of existing finance
facilities extended to the joint venture companies may be required
during the latter part of the review period. The amount and timing
of any required financing would be dependent on several factors,
including the length and depth of the current crisis and its effect
on the economy and liquidity position of Cuba, the amount of time
required for Cuba and its tourism industry to recover from the
current crisis, the impact of the current crisis on the timing and
rate of construction of the TosCuba project, and the results of the
upcoming U.S. presidential election and its impact on Cuba, if any.
The Board is confident that any required short-term financing can
be obtained.
Accordingly, the Directors have a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due for the period of assessment, which is
three years from the date of this Annual Report. In making this
assessment, the Board has also considered the fact that potential
developments such as the current COVID -19 crisis continuing for a
prolonged period of time, a substantial adverse change in the
outlook for Cuba and the U.S embargo, or changes in investor
sentiment could have an impact on the accuracy of its assessment of
the Company's prospects and viability in the future.
GOING CONCERN
In accordance with the guidance of the Financial Reporting
Council, the Directors have undertaken to review the Company's
ability to continue as a going concern.
The Directors are mindful of the principal risks and
uncertainties disclosed above and the Viability Statement. The
Company does not have any external debt obligations and does not
anticipate the need for external finance over the next 12
months.
The Directors have reviewed cash flow projections that detail
revenue and liabilities and will continue to receive cashflow
projections as part of the full year reporting and monitoring
processes. After reviewing the cashflow projections and the
significant capital commitments, 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 Annual Report.
Accordingly, the Directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
Financial Statements.
SECTION 172 STATEMENT
Stakeholder Engagement
The Board wishes to describe to the Company's shareholders how
the Directors have discharged their duties and responsibilities
over the course of the financial year. This section, which serves
as the Company's section 172 statement as required by the AIC Code
on Corporate Governance 2019, explains how the Directors have
promoted the success of the Company for the benefit of its
stakeholders as a whole during the financial year to 31 December
2019, taking into account the likely long term consequences of
decisions, the need to foster relationships with all stakeholders
and the impact of the Company's operations on the environment.
The Role of the Directors
The Company is a closed-ended investment company, has no
executive directors or direct employees and is governed by the
Board of Directors. Its main stakeholders are Shareholders, the
Investment Manager, investee companies, service providers, and the
environment and community.
As set out in the Corporate Governance Report, the Board has
delegated day-to-day management of the assets to the Investment
Manager and either directly or through the Investment Manager, the
Company employs key suppliers to provide services in relation to
valuation, legal and tax requirements, auditing, company
secretarial, depositary obligations and share registration, amongst
others. All decisions relating to the Company's investment policy,
investment objective, dividend policy, gearing, corporate
governance and strategy in general are reserved for the Board. The
Board meets quarterly and receives full information on the
Company's performance, financial position and any other relevant
information. At least once a year, the Board also holds a meeting
specifically to review the Group's strategy.
The Board regularly reviews the performance of the Investment
Manager, and its other service providers, to ensure they manage the
Company, and its relations with its stakeholders, effectively and
that their continued appointment is in the best long term interests
of the stakeholders as a whole.
Shareholders
The Board's primary focus is to promote the long-term success of
the Company for the benefit of its stakeholders as a whole. The
Board oversees the delivery of the investment objective, policy and
strategy, as agreed by the Company's shareholders.
Shareholders are key stakeholders and the Board places great
importance on communication with them. The Board welcomes all
shareholder views and aims to act fairly on them. Through
investment into the Company, the Board believes that the Company's
shareholders seek exposure to Cuban real estate assets, a regular
level of income and substantial capital growth, a well-executed
sustainable investment policy, responsible capital allocation and
value for money.
The Investment Manager and the Company's broker regularly meet
with shareholders, and prospective shareholders, to discuss Company
initiatives and seek feedback. The views of shareholders are
discussed by the Board at every Board meeting, and action is taken
to address any shareholder concerns. The Board and Investment
Manager provides regular updates to shareholders and the market
through the Annual Report, Half-Yearly Report, quarterly Net Asset
Value announcements, and its website.
In the event of any changes to strategy, the Board will
proactively engage with major shareholders to determine their
appetite for any such change. The Chairman offers to meet with key
shareholders at least annually, and other Directors are available
to meet shareholders as required. This allows the Board to hear
feedback directly from shareholders. During the financial year to
31 December 2019, the Board members, and the Investment Manager,
participated in several meetings with large shareholders to provide
reports on the progress of the Company and receive feedback, which
was then provided to the full Board.
The Company's AGM provides a forum, both formal and informal,
for shareholders to meet and discuss issues with the Directors and
Investment Manager of the Company. The Board encourages as many
shareholders as possible to attend the Company's AGM and to provide
feedback on the Company.
Investee Companies
Another key stakeholder group is that of the special purpose
vehicles, joint venture vehicles, partnerships, trusts and other
structures through which the Company invests. Representatives of
the Company are appointed to the boards of the underlying
investment vehicles and, acting in the best interests of the
Company's stakeholders, influence management decisions to ensure
that the investee companies are run in accordance with the
Company's expectations.
The Board believes that the companies in which the Company
invests would like a positive and trusting working relationship
with the Investment Manager and the Board, sustainable and
long-term investment, positive governance practices, and value
creation for all stakeholders.
In addition to engagement with the investee companies, the
Investment Manager works closely with the external hotel managers
and managers of office complexes who are responsible for running
the Company's properties. This allows the Investment Manager to
fully understand the operational risks associated with the
management of the Company's underlying assets. The Board oversees
the Investment Manager's interactions with the investee companies
and receives reports on engagement, interaction and revenue streams
at every Board meeting.
Investment Manager
The Investment Manager's Report details the key investment
decisions taken during the year and subsequently. The Investment
Manager has continued to manage the Company's assets in accordance
with the mandate provided by shareholders, with the oversight of
the Board. The Board receives presentations from the Investment
Manager at every Board meeting to help it to exercise effective
oversight of the Investment Manager and the Company's strategy. The
Board formally reviews the performance of the Investment Manager,
and the fees it receives, at least annually. More details on the
conclusions from the Board's review is set out below.
Other Service Providers
The Board seeks to maintain constructive relationships with the
Company's suppliers either directly or through the Investment
Manager with regular communications and meetings. The Board via the
Management Engagement Committee also ensures that the views of its
service providers are considered and at least annually reviews
these relationships in detail. The aim is to ensure that
contractual arrangements remain in line with best practice,
services being offered meet the requirements and needs of the
Company and performance is in line with the expectations of the
Board, Investment Manager and other relevant stakeholders. Reviews
will include those of the company secretary, broker, share
registrar and auditor.
The Community and the Environment
The Board and the Investment Manager are committed to investing
in a responsible manner. There are a number of geopolitical,
technological, social and demographic trends underway that can, and
do, influence real estate investments - many of these changes fall
under the umbrella of the Environment and Community, or
Environmental, Social and Governance ("ESG"), considerations. As a
result, the Investment Manager fully integrates ESG factors into
its investment decision making and governance process.
The Board has adopted the Investment Manager's ESG Policy and
associated operational procedures and is committed to environmental
management in all phases of the investment process. The Company
aims to invest responsibly, to achieve environmental and social
benefits alongside returns.
Strategic Activity during the Year
The Chairman's Statement and Investment Manager's Report details
the key decisions taken during the year and subsequently. Notable
actions where the interests of stakeholders were actively
considered include:
-- the Board's decision to change auditor; and
-- the Board's decision to cancel the dividend for the year
ended 31 December 2019 in light of the difficult and unpredictable
economic conditions created by the COVID-19 public health crisis
worldwide as well as the investment programme of the Company.
As set out above, the Board considers the long-term consequences
of its decisions on its stakeholders to ensure the long-term
sustainability of the Company.
INVESTMENT MANAGER'S REVIEW
INTRODUCTION
While uncertainty is inevitable in the business of the Company,
at present the social, economic and political landscapes in which
we operate all seem to be in major turmoil. With the entire world
struggling to cope with the COVID-19 pandemic and governments
everywhere making valiant efforts to deal with this new reality to
the best of their ability, it seems inevitable that we will all be
affected by this crisis, although its medium and long-term impact
on economic and social patterns, and the operations and assets of
the Company are as yet uncertain. In addition to this new global
phenomenon, Cuba's economy continues to be particularly affected by
the ongoing U.S. Cuban embargo regulations which may be subject to
change following the outcome of the US Presidential election in
November 2020.
COVID-19
The outbreak of the Novel Coronavirus (COVID-19) pandemic in
2020 has resulted in numerous deaths, adversely impacted global
commercial activity and contributed to significant volatility in
certain equity and debt markets. The global impact of the outbreak
is rapidly evolving and on 11th March 2020, the World Health
Organization declared the crisis a pandemic. Many countries have
reacted by instituting quarantines, prohibitions on travel and the
closure of offices, businesses, schools, retail stores and other
public venues. Businesses are also implementing similar
precautionary measures. Such measures, as well as the general
uncertainty surrounding the dangers and impact of COVID-19, are
creating significant disruption in supply chains and economic
activity and are having a particularly adverse impact on
transportation, hospitality, tourism, entertainment and other
industries.
The impact of COVID-19 has led to significant volatility and
declines in the global public equity markets and it is uncertain
how long this volatility will continue. As COVID-19 continues to
spread, the potential impacts, including the possibility of a
global, regional or other economic recession, are increasingly
uncertain and difficult to assess. The Investment Manager considers
the emergence of the COVID-19 pandemic to be a non-adjusting post
balance sheet event. Further details can be found in Note 24 to the
financial statements.
US-Cuban Embargo
For Cuba, the arrival of the COVID-19 pandemic immediately
follows a year during which the Trump administration implemented an
almost constant stream of harsh new measures against the country.
These new embargo restrictions have strongly impacted its tourism
sector, the export of medical and other services, family
remittances and other parts of the Cuban economy. With respect to
the deteriorating relationship between the United States and Cuba,
perhaps the most difficult questions to answer are: Where this will
all end? And what can Cuba do to reverse the gradual deterioration
of its relationship with the U.S.?
In early January 2020, Cuba's President Miguel Díaz-Canel stated
that he did not believe that the Trump administration would drop
sanctions against the island in exchange for concessions from his
government. And he may be right. Ongoing Cuban government efforts
to open the national economy, extend internet access to the
population, adopt a new Constitution, appoint a new president and
rejuvenate government, as most recently demonstrated by the
appointment of Tourism minister Manuel Marrero Cruz (56) as Prime
Minister (officially "President of the Council of Ministers") and
adding Cuba's minister of Economy and Planning, Alejandro Gil
Fernández (55), as Deputy Prime Minister (officially Vice-President
of the Council of Ministers) are not even mentioned by the U.S.
administration. An often expressed explanation is that, although
the recent strengthening of U.S. sanctions against Cuba has as its
primary purpose to punish Cuba for its ongoing support for
Venezuela's President Maduro, it also serves President Trump's 2020
re-election strategy which is based on the assumption that in order
to win the State of Florida he needs the support of hard-line Cuban
American and Venezuelan voters. The election of former
Vice-President Joe Biden as President of the United States would
likely trigger a renewed rapprochement between the countries and
easing of the U.S.-Cuban embargo regulations, but even a re-elected
President Trump could change his tune, especially since in April
2021 Raul Castro (who will then be 89 years old) will step down as
First Secretary of Cuba's Communist Party.
PERFORMANCE
The Net Asset Value of the Company as at 31 December 2019
amounted to US$206,734,334 / GBP157,656,016 (2018: US$205,641,346 /
GBP162,037,149), of which approximately 87% was indirectly invested
in income-generating Cuban commercial and tourism related real
estate assets and 10% represented finance facilities and cash. The
total dividend income from the Cuban joint venture companies during
the year ended 31 December 2019 was US$20,670,560 / GBP15,763,410
(2018: US$16,158,458 / GBP12,732,218).
During the 2019 financial year, the operational results of the
joint ventures in which CEIBA has an interest were mixed.
Inmobiliaria Monte Barreto S.A. ("Monte Barreto") had its best
performance ever with a net income of US$13.5 million / GBP10.3
million (2018: US$12.7 million / GBP10.0 million). However the
performance of the Meliã Habana and the Varadero Hotels were below
expectation. Taking into account, the receipt by Miramar S.A.
("Miramar") of a tax credit described below, the net income after
tax of Miramar was US$17.9 million / GBP13.6 million (2018: US$21.7
million / GBP17.1 million - includes net income of Cubacan S.A.
that was merged with Miramar in September 2018).
The net income of the Company for the year ended 31 December
2019 attributable to the shareholders was US$7,579,514 /
GBP5,780,152 (2018: US$1,775,926 / GBP1,399,359), and NAV per share
at 31 December 2019 was US$1.50 / GBP1.14 (2018: US$1.49 /
GBP1.18). The principal factor that contributed negatively to the
results was the decrease in the fair value of Miramar, the joint
venture company that owns the Hotel investments. This was partially
offset by an increase in the fair value of Monte Barreto, the joint
venture company that owns the Miramar Trade Center, and an increase
in dividend income compared to the prior year.
As noted above, the loss on the change in the fair value of the
equity investments of US$14,658,562 / GBP11,178,649 (2018: loss of
US$4,483,525 / GBP3,532,838) was primarily due to the decrease in
the fair value of Miramar, which was a result of lower room rates
and income levels compared to the prior year. The decrease of the
Group's share in the fair value of Miramar, was US$26,742,193 /
GBP20,393,650.
CUBA - ECONOMIC BACKDROP
In January 2020, before the COVID-19 pandemic, Deputy Prime
Minister and Minister of Economy and Planning Alejandro Gil
Fernández highlighted that over the last 12 months, Cuba's economy
saw growth of around 0.5%, and that despite the economic blockade
and increased political pressure from the U.S., Cuba's economy was
on course to show 1% growth in 2020. Gil stated that it was a
testament to Cuba's resilience that Cuba managed to pass through an
"extremely tense year" without entering into economic decline. In
addition, he asserted that Cuba was prepared for an anticipated
tightening of the U.S. blockade in the coming year and that the
National Assembly had identified 12 priorities for the Cuban
economy in 2020, including diversification and "serious action
around exports." The Economic Commission for Latin America and the
Caribbean (CEPAL) has estimated average 2019 economic growth for
the region of 0.1% and projected growth for 2020 of around 0.3%.
However in a special COVID-19 report published by CEPAL on 3 April
2020, it stated that as a result of the COVID-19 pandemic its
original projections should be adjusted downwards by some three,
four or even more percentage points. So far, no estimates are
available on the effect COVID-19 will have on Gil's original growth
projections for the Cuban economy.
THE US CUBAN EMBARGO
In any case, 2019 proved to be a very challenging one for the
Cuban economy. The re-strengthening of the U.S. economic blockade
against Cuba and the constant onslaught of negative U.S. rhetoric
have hurt Cuba's tourism sector, family remittances to the island,
the availability of subsidized Venezuelan oil and the export of
medical and other services. The Manager believes that the negative
impact of the further tightening of U.S. travel restrictions will
continue to be felt in 2020. Against the backdrop of the upcoming
U.S. Presidential election and the ongoing efforts made by the U.S.
administration to force Cuba to withdraw its support for Venezuela,
there is little hope that relations between the U.S. and Cuba will
improve this year.
The new economic measures adopted by the Trump administration
during 2019 include:
Ø The restriction of family remittances (through the imposition
of a cap of US$1,000 per quarter and the elimination of the
donation category of "remittance"), although the US Treasury
subsequently confirmed an exemption from the new limits on
remittances that "support the operation of economic activity in the
non-state sector" (in other words: private sector enterprise);
Ø The adoption of new restrictions aimed at limiting U.S. travel
to Cuba (the removal of the "people-to-people" category of approved
travel and the cancellation of U.S. cruise ship travel to the
island);
Ø The coming into force of Title III of the Helms-Burton Act
(see below);
Ø The prohibition of U.S. flights to Cuba, except Havana;
and
Ø The announcement of further rollbacks of Obama-era
normalisation measures in the banking and other areas, including
the elimination of the "U-turn transactions", which allowed banking
institutions to process certain Cuba-related funds transfers
originating and terminating outside the United States, provided
neither the originator nor the recipient was a U.S. person.
The coming into force of Title III of the Helms-Burton Act in
May 2019 (a contentious law previously suspended by all U.S.
presidents since it was adopted in 1996) has resulted in the launch
by Cuban American plaintiffs of a number of lawsuits in U.S. courts
against certain Cuban as well as U.S. and foreign companies doing
business in Cuba, who are accused of "trafficking in confiscated
property".
These lawsuits will take some time to work their way through the
court process, although a number of them have already been
withdrawn or dismissed. T he law remains highly controversial and
its coming into force has been strongly condemned by the European
Union, Canada, Mexico and other allies of the United States who
trade with and invest in Cuba. In a departure from past policy
towards U.S. legal actions against it, the Cuban government has
hired U.S. lawyers to defend the interests of Cuban state companies
in at least one of the Title III lawsuits. The Cuban government
also appears to be cooperating with foreign defendants in their
efforts to defeat the Title III lawsuits. While this is frustrating
for all those concerned, it is important to stress that none of the
properties in which the Company has an investment are subject to a
Title III action.
This renewed hostility towards Cuba on the part of the United
States would seem to form part of the more general U.S. policy of
pressuring the Maduro government in Venezuela with a view to
encouraging regime-change there. The actions specifically target
some of the leading sources of Cuban hard currency income: tourism
revenues relating to U.S. travel to Cuba; subsidised oil imports
from Venezuela; service income relating to medical services abroad
and new foreign investment transactions. The new travel measures
have already had a negative impact on U.S. travel to the island,
with a corresponding fall in tourism arrivals and receipts, down
from an original projection of 5.1 million arrivals at the
beginning of the year to an actual number of 4.28 million at the
end of 2019, and the initiation of lawsuits against foreign
companies under Title III of the Helms-Burton Act has begun to have
the clearly-intended chilling effect on the foreign investment
climate more generally, as well as on the willingness of
international banks and other financial institutions to deal with
Cuba.
The recent political developments are monitored closely but we
do not believe that they undermine the long-term investment case or
value of the Company's assets, although it is expected that the
short-term operational context will remain very challenging for at
least the remainder of the year and it is unclear when the general
situation will start to improve.
PORTFOLIO ACTIVITY
Overall the performance of the Miramar Trade Centre, the office
complex of Monte Barreto, in which the Company has a 49% stake, had
its most profitable year ever - occupancy rates remained at 100%
throughout the year and revenues and gross profit were up 2.0 % and
6.5% respectively. The Hotel Assets faced the challenging political
and economic backdrop referred to above and the results reflect
this. While the resort hotels in Varadero generally saw occupancy
remain strong, room rates declined. The Meliã Habana Hotel was
particularly affected by the tightened embargo on U.S. visitors and
consequently saw a more pronounced decline in room rates.
From a development perspective, construction of the Meliã
Trinidad Playa Hotel development project located near Trinidad,
Cuba was progressing steadily until the COVID-19 crisis in Italy
began affecting the Italian partner in the construction joint
venture that is constructing the hotel in March 2020. Structural
works are now approximately 90% complete and the hotel has a sealed
roof on most structures. Progress is now being made on internal
works, including doors, windows, flooring and other installations,
although at a slower pace as a result of the pandemic.
During 2020, construction works relating to planned improvements
were also scheduled at the Company's hotels in Havana and Varadero.
At the December board meeting of Miramar, it was agreed to approve
a 2020 CAPEX and investment programme of US$21 million that will be
funded by Miramar out of existing cash resources held by the joint
venture company at its Cuban bank accounts, without jeopardizing
dividend distributions. The timing of these investments will now be
re-evaluated.
In mid-January 2019, we learned that the Cuban Ministry of
Finance and Prices granted a request made by Miramar and awarded a
US$2.5 million tax credit, which partially alleviates the
disappointing result of the Hotel Assets in 2019. The tax credit
results from the re-investment of profits by Miramar in 2018 at the
time of the Cubacan S.A. - Miramar merger and subsequent
capitalization. As well, HOMASI S.A., the foreign shareholder of
Miramar has been successful in obtaining a credit-line (initially
in the principal amount of EUR3.5 million) in order to fund its
confirming and discounting activities with the hotel suppliers.
PORTFOLIO UPDATE
The Miramar Trade Centre / Monte Barreto
During 2018 and 2019, the Miramar Trade Center has effectively
maintained a 100% occupancy rate. The average monthly rent per
square meter rose from US$25.22 in 2018 to US$26.28 in 2019. As a
result, Monte Barreto continued its strong performance, with an
EBITDA of US$18.1 million / GBP13.8 million for (2018: US$17.3
million/ GBP13.2 million) and net income after tax of US$13.5
million / GBP10.3 million (2018: US$12.7 million/ GBP10.0 million)
for the year. The increase is due to Monte Barreto continuing to
raise rental rates as tenant leases are renewed.
The valuation of Monte Barreto has been adjusted upward by some
US$25.5 million. The principal factor for the increased value is
the inclusion of a residual value for the property in order to
align with the valuation methodology used for establishing the
values of the Hotel Assets.
Demand, predominantly from multi-national companies, NGOs and
foreign diplomatic missions for international-standard office
accommodation in Havana currently exceeds supply. 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 2020 remains encouraging, as we expect
occupancy levels to remain in the high nineties and loss of rental
income as a result of concessions to travel and tourism companies
to be modest. However, the tense general liquidity situation in
Cuba in the coming year may have a negative effect on the ability
of Monte Barreto to distribute dividends to its shareholders,
including CEIBA.
The Hotels of Miramar S.A.
Through its indirect ownership of a 32.5% interest in Miramar,
the Group has interests in the following hotels (the "Hotels"):
- the Meliã Habana Hotel, a 397-room international-category
5-star business hotel located on prime ocean-front property in
Havana (directly opposite the Miramar Trade Center);
- the Meliã las Americas Hotel, a 340-room
international-category 5-star beach resort hotel located in
Varadero;
- the Meliã Varadero Hotel, a 490-room international-category
5-star beach resort hotel located in Varadero; and
- the Sol Palmeras Hotel, a 607-room international-category
4-star beach resort hotel located in Varadero.
All of 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
During 2019, the Hotels continued to suffer from various
negative external factors, including the strengthening of the U.S.
embargo (as described elsewhere in this report), the bankruptcy of
travel company Thomas Cook, a decrease in the number of
international flights to Varadero and Havana, financial turmoil in
Argentina, and fierce competition between numerous Caribbean
countries and the Yucatan peninsula in Mexico to capture Canadian
tourists as well as longer distance tourists from Europe and Asia.
Taking into account the receipt by Miramar of a tax credit
described below, the net income after tax of Miramar S.A. was
US$17.9 million / GBP13.6 million (2018: US$21.7 million / GBP17.1
million - includes net income of Cubacan S.A. that was merged with
Miramar in September 2018).
Financial information of the Hotels is as follows:
2019 2018
Meliã Habana
Hotel
EBITDA US$6,120,591 / GBP4,667,575 US$7,686,699 / GBP6,056,811
Occupancy Rate 66% 65%
ADR US$142 / GBP108 US$146 / GBP111
RevPAR US$94 / GBP72 US$112 / GBP88
Meliã Las
Americas Hotel
EBITDA US$5,378,939 / GBP4,101,990 US$7,639,134 / GBP6,019,332
Occupancy Rate 76% 81%
ADR US$129 / GBP98 US$141 / GBP108
RevPAR US$98 / GBP75 US$114 / GBP91
Meliã Varadero
Hotel
EBITDA US$7,013,618 / GBP5,348,599 US$8,262,384 / GBP6,510,428
Occupancy Rate 80% 79%
ADR US$103 / GBP79 US$112 / GBP85
RevPAR US$82 / GBP63 US$88 / GBP71
Sol Palmeras Hotel
EBITDA US$6,965,194 / GBP5,311,671 US$8,862,908 / GBP6,983,617
Occupancy Rate 82% 82%
ADR US$90 / GBP69 US$100 / GBP76
RevPAR US$74 / GBP56 US$82 / GBP65
---------------------------- ----------------------------
During the year, the Hotels were able to maintain their average
occupancy rates as compared to the prior year, with the exception
of the Meliã Las Americas Hotel, which saw a 5% decline. All of the
Hotels suffered a significant decrease in average room rates,
resulting in lower income and EBITDA compared to the prior
year.
The decrease in the 2019 operational results of Miramar were
partially compensated by a tax credit it received in the amount of
US$2.5 million. In late December 2019, the Cuban Ministry of
Finance and Prices granted Miramar a tax credit relating to the
re-investment of profits by Miramar at the time of completion of
the 2018 merger between Miramar and Cubacan S.A. (at the time the
joint venture company that owned the Varadero Hotels), and will be
applied against the tax payable of the joint venture company for
the 2019 and 2020 tax years.
Confirming and Discounting Facility
In early December 2019, 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 will be financed
in part by a EUR3.5 million credit line received by HOMASI from a
Spanish bank for this purpose, thus alleviating the present cash
flow position of the Company. The facility has attractive economic
terms (finance cost below 5%), and the facility will be secured by
the offshore cash flows generated by two of the Hotels. Management
expects that the execution of this facility will assist in
stabilising the operations relating to supply of the Hotels and
minimizing the impact of the current liquidity difficulties that
Cuba is experiencing.
Planned Investments
In December 2019, the joint venture agreed that a four year
refurbishment and development plan will be carried out, which
includes all of the Miramar hotels and which will see a total of
187 new rooms and new facilities added and 512 rooms and 57
bungalows refurbished across the whole estate.
The planning and permission process for the expansion of the
Meliã Habana Hotel is well underway. These involve improvements to
existing rooms, public areas and restaurants, the construction of
an additional 163 new rooms and the construction of a large modern
ballroom and conference centre. This investment is scheduled to be
carried out in phases over the coming four years when same is
economically justified.
In the case of the Varadero Hotels, planned investments include
the modernisation and upgrade of existing rooms and bungalows and,
in the case of the Meliã las Americas Hotel, the renovation of
common areas.
At the December board meeting of Miramar, an investment
programme in the amount of US$21 million was approved for 2020, to
be funded by Miramar out of existing cash resources held by the
joint venture in its Cuban bank accounts. This investment programme
is deemed essential to enable the Hotels to remain competitive in
the face of new hotel inventory that has recently become or will
soon be operational in Havana and Varadero.
T he 2020 investment programme includes:
- Meliã Habana Hotel: modernisation and upgrade of common areas
and 68 existing rooms, as well as the construction of 24 new rooms
within the existing structure of the Hotel.
- Sol Palmeras Hotel: modernisation and upgrade of 50 bungalows and 63 rooms.
- Meliã las Americas Hotel: modernisation and upgrade of common
areas, 144 rooms and 7 bungalows.
- Meliã Varadero Hotel: modernisation and upgrade of 238 rooms.
Whether the 2020 investment programme will be carried out
partially or in full will, amongst others, depend on the impact of
the COVID-19 pandemic and the timing of the re-opening of the
Hotels.
2020 Outlook
In mid March 2020, Cuba adopted a range of measures to confront
the COVID-19 pandemic, which included the closing of almost all
hotels in Cuba, including the four hotels owned and operated by
Miramar. Although, Miramar has no third party finance and a healthy
cash balance which will allow it to operate without receiving any
income for a period in excess of 12 months, it is inevitable that
the real income levels for 2020 and possibly beyond will fall below
the projections that were used by ABACUS, the independent valuer of
the Company, at the time of calculating the fair values of the
Company's operating Hotel Assets as at 31 December 2019. It is
therefore likely that the fair values of the Hotels will be
adjusted downwards as at 30 June 2020 to reflect the temporary loss
of income and the present uncertainty surrounding the effects of
the COVID-19 pandemic.
The TosCuba Project
Construction of the Meliã Trinidad Playa Hotel near Trinidad,
Cuba was started in December 2018 was advancing on budget. Although
the project has been progressing steadily, the operations of the
Italian-Cuban construction partnership and the flow of imported
materials and equipment have been severely impacted by the COVID-19
pandemic.
At present major structural works are approximately 90% complete
and significant internal works are already underway, including
electrical, plumbing, doors and windows, flooring, internal
structures and drywall installation.
The total capital of TosCuba is US$16 million. The capital has
been spent on the surface rights over the property,
pre-construction planning and development costs and the payment of
part of the required deposit under the turnkey construction
contract executed with a Cuban-Italian construction joint venture
in 2018, which provides for a total construction cost of
approximately US$60 million. During 2019, additional investments to
include elevators, roadworks (entrance, parking, etc.), beach
improvement, and other costs were identified that will be added to
the investment budget once the costs thereof have been
approved.
In April 2018, the Company arranged and presently participates
in a US$45 million construction finance facility to be disbursed
under two tranches of US$22.5 million / GBP17.2 million each. The
amount disbursed under the Company's participation in the first
tranche (A) as at 31 December 2019 amounted to US$9.9 million /
GBP7.5million. The second tranche (B) will begin disbursement once
the first tranche is fully disbursed. Repayment of the facility is
secured by the future income of the hotel, and Tranche B has
received further security over additional tourism cash flows
granted by the Cuban shareholder in the joint venture company.
TosCuba received a grant in the amount of US$10 million / GBP7.6
million under the Spanish Cuban Debt Conversion Programme. In
accordance with the terms of the grant, these funds were 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 the Company
would otherwise have needed to provide.
In March 2020, the Italian-Cuban partnership that is
constructing the hotel informed TosCuba that the construction would
likely be affected by the COVID-19 pandemic and would suffer
delays. In parallel, CEIBA is presently in discussions with TosCuba
to substantially lower the rate of capital expenditure on the
TosCuba Project until there is greater certainty around the
repatriation of dividends from the Cuban joint venture companies
Miramar and Monte Barreto. This will inevitably extend the
time-line for construction of the TosCuba Project as well as the
disbursement schedule under the facility. Further information will
be provided when there is greater clarity on the development.
FINTUR and TosCuba Finance Facilities
FINTUR Facility
Since 2002, the Company has arranged and participated in
numerous secured finance facilities extended to Casa Financiera
FINTUR S.A. ("FINTUR"), the Cuban government financial institution
for the tourism sector. These facilities act as a medium-term
investment and treasury management tool for the Group. The
facilities are fully secured by offshore tourism proceeds from
numerous internationally managed hotels. The Group has a successful
18year track record in arranging and participating in over EUR150
million of facilities extended to FINTUR, with no defaults
occurring during this period.
Under the most recent facility, originally executed in 2016 in
the principal amount of EUR24 million and subsequently amended in
2019through the addition of a second tranche in the principal
amount of EUR12 million, the Company has a EUR4 million
participation under Tranche A and a EUR2 million participation
under Tranche B. This facility generates an 8.00% interest rate and
is operating successfully without delay or default. As at 31
December 2019, the principal amount of US$1,213,648 / GBP925,530
was outstanding under the Company's participation in Tranche A, and
the principal amount of US$2,016,523 / GBP1,537,804 was outstanding
under the Company's participation in Tranche B.
As a result of the COVID-19 pandemic, the income from the hotels
that serve as the basis for payments under the FINTUR facility are
expected to abruptly stop as of April 2020 and to resume only after
Cuba's tourism sector restarts (and the hotels) re-open during the
second half of the year. Negotiations with FINTUR to re-schedule
payments are presently underway.
TosCuba - Construction Facility
As stipulated above in April 2018 CEIBA arranged and executed a
secured construction finance facility in favour of TosCuba in order
to provide funding for the construction of the Meliã Trinidad Playa
Hotel. The facility is in the maximum principal amount of up to
US$45 million, to be disbursed in two tranches, with an 8.00%
interest rate. The first disbursement under the facility was made
in November 2018 in the lead-up period to the formal construction
start of the project in December 2018, and as at 31 December 2019
the principal amount of US$9,915,552 / GBP7,561,619 had been
disbursed under the Company's participation. The remainder of the
facility will be disbursed over the remaining construction period,
followed by a nine-year repayment period.
This facility may be syndicated and is secured by future income
of the hotel under construction and 50% of the principal amount is
further secured by a guarantee given by Cubanacán S.A., Corporación
de Turismo y Comercio Internacional ("Cubanacán"), the Cuban
shareholder of TosCuba, backed by income from another hotel in
Cuba.
As stipulated above, the COVID-19 pandemic has had a material
adverse effect on the development of this investment. As a result
of the expected temporary loss of dividend income from Miramar and
the uncertainty with respect to the receipt of dividend income from
Monte Barreto the timing of construction and of the disbursements
to be made under the facility are presently being discussed between
the constructor, TosCuba and its shareholders. In addition, it is
likely that at some point in time in the future the Company may be
forced to attract funding from its shareholders or third parties in
order to continue providing the amounts committed under the
facility. The Investment Manager is currently envisaging debt
rather than equity funding for this purpose.
OUTLOOK
Management expects that, as a result of the COVID-19 pandemic,
the very difficult economic and political circumstances faced by
Cuba during 2019 will continue into 2020, and that the local market
conditions in which the Group operates will remain very challenging
throughout the year. The further accentuation of the liquidity
challenges faced by the Cuban economy as a result of the pandemic
and the U.S. Cuban embargo are expected to negatively impact the
timing of dividend and other payments to the Company, as well as
the timing of the ongoing development of the TosCuba Project.
However, we do expect that all of the hotels of Miramar will
re-open in 2020 and that all of our underlying Cuban real estate
assets, the Cuban joint ventures in which we are invested and the
loan facilities in which we participate will continue to generate
positive operational results. In addition, with numerous
construction projects under development and in execution, we are
investing today to ensure and safeguard growth in the future. We
also anticipate that we will be able to leverage our long-standing
experience in the marketplace to continue investing in the country
despite the challenging environment, as well as to negotiate and
execute attractive new long-term investment opportunities.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
27 April 2020
DIRECTORS' REPORT (EXTRACTS)
The Directors present their Report and the audited Consolidated
Financial Statements for the year ended 31 December 2019.
The principal activity, and purpose, of the Company is to
provide a regular level of income and substantial capital growth.
The Company is a country fund with a primary focus on Cuban real
estate assets. The Company seeks to deliver the investment
objective primarily through investment in, and management of, a
portfolio of Cuban real estate assets, with a focus on the
tourism-related and commercial property sectors. A description of
the activities for the Company for the year under review is
provided in the Chairman's Statement above.
STATUS
The Company is a Guernsey company which was incorporated on 10
October 1995. With effect from 11 September 2018, the Company
became a Registered Closed-ended Collective Investment Scheme
pursuant to The Protection of Investors (Bailiwick of Guernsey)
Law, 1987, as amended and the Registered Collective Investment
Schemes Rules 2015 issued by the Guernsey Financial Services
Commission.
The Company invests either directly or through holdings in
special purpose vehicles, joint venture vehicles, partnerships,
trusts or other structures. As at 31 December 2019, the Group held
the following interests in joint venture companies in Cuba:
-- an indirect 49 per cent. interest in Inmobiliaria Monte
Barreto S.A., which is the Cuban joint venture company that owns
and operates the Miramar Trade Centre, a 56,000m(2) mixed-use
office and retail complex in Havana;
-- an indirect 32.5 per cent. interest in Miramar S.A., which is
the Cuban joint venture company that owns the Meliã Habana Hotel
and the Varadero Hotels; and
-- an indirect 40 per cent. interest in TosCuba S.A., which is
the Cuban joint venture company that owns and is constructing the
Meliã Trinidad Playa Hotel.
The Directors are of the opinion that the Company has conducted
its affairs from 1 January 2019 to 31 December 2019 as a registered
collective investment scheme, so as to comply with the Registered
Collective Investment Scheme Rules 2015.
The Directors, having considered the Group's objectives and
available resources along with its projected income and
expenditure, are satisfied that the Group has adequate resources to
continue in operational existence for the foreseeable future. The
Directors are closely monitoring the latest market developments
relating to COVID-19, and possible future impact on the Company in
particular on the Group's investment portfolio and financing
arrangements and following enquiries with the Group's property
advisors, the Directors remain confident that the going concern
basis remains appropriate in preparing the consolidated financial
statements.
RESULTS AND DIVIDS
Details of the Company's results are shown below.
CAPITAL STRUCTURE AND ISSUANCE
The Company's capital structure is summarised in note 11 to the
financial statements.
At 31 December 2019, there were 137,671,576 fully paid Ordinary
Shares (2018 - 137,671,576) in issue.
VOTING RIGHTS
Ordinary Shareholders are entitled to vote on all resolutions
which are proposed at general meetings of the Company. The Ordinary
Shares carry a right to receive dividends. On a winding up, after
meeting the liabilities of the Company, the surplus assets will be
paid to Shareholders in proportion to their shareholdings.
MANAGEMENT AGREEMENT
On 31 May 2018, the Company entered into the Management
Agreement under which ASFML was appointed as the Company's
alternative investment fund manager to provide portfolio and risk
management services to the Company. The Management Agreement took
effect on 1 November 2018. ASFML has delegated portfolio management
to the Investment Manager. Both AFSML and the Investment Manager
are wholly-owned subsidiaries of Standard Life Aberdeen plc.
Pursuant to the terms of the Management Agreement, ASFML is
responsible for portfolio and risk management on behalf of the
Company and will carry out the on-going oversight functions and
supervision and ensure compliance with the applicable requirements
of the AIFMD.
There are no performance, acquisition, exit or property
management fees payable to the AIFM and/or the Investment
Manager.
MANAGEMENT FEE
Under the terms of the Management Agreement, ASFML is entitled
to receive an annual management rate of 1.5 per cent. of Total
Assets. For this purpose, the term Total Assets means the aggregate
of the assets of the Company less liabilities on the last business
day of the period to which the fee relates (excluding from
liabilities any proportion of principal borrowed for investment and
treated in the accounts of the Company as current liabilities).
The annual management fee payable by the Company to the AIFM
will be reduced by deduction of the (annual) running costs of the
Havana operations of CEIBA Property Corporation Limited, a
subsidiary of the Company.
In addition, the AIFM is entitled to reimbursement for all costs
and expenses properly incurred by the AIFM and/or the Investment
Manager in the performance of its duties under the Management
Agreement.
In connection with execution of the Management Agreement, ASFML
paid the Company US$5,000,000 to compensate the Company for the
costs relating to the IPO and Listing as well as for releasing and
making available the Company's internal management team to ASFML.
In the event that the Management Agreement is terminated prior to
the fifth anniversary of its coming into effect, the Company must
pay ASFML a pro-rated amount of the US$5,000,000 payment based on
the amount of time remaining in the five year period. As such, this
payment has been recorded as a deferred liability and is being
amortised over the five year period. The amount amortised each
period is accounted for as a reduction of the management fee.
The Directors reviewed the terms of the Management Agreement and
management fees during the year and have confirmed that, due to the
investment skills, experience and commitment of the Investment
Manager, the appointment of ASFML, on the terms agreed, is in the
interests of Shareholders as a whole. The Management Engagement
Committee is responsible for undertaking a review of the Management
Agreement on a regular basis and providing a recommendation on the
continued appointment of the AIFM to the Board.
POLITICAL AND CHARITABLE DONATIONS
The Company does not make political donations and has not made
any charitable donations during 2019 (2018 - Nil).
RISK MANAGEMENT
Details of the financial risk management policies and objectives
relative to the use of financial instruments by the Company are set
out in note 17 to the financial statements.
THE BOARD
The names and short biographies of the directors of the Company,
all of whom are non-executive, at the date of this report are shown
above. John Herring is the Chairman and Peter Cornell is the Senior
Independent Director. Trevor Bowen, Keith Corbin and Peter Cornell
are considered independent non-executive Directors.
The Board considers that John Herring and Colin Kingsnorth
continue to be independent in character and judgement and bring a
wealth of experience. However, due to John's historical connection
with Northview Investment Fund Limited (the Company's largest
shareholder), and his length of service on the Board, John is not
considered independent for the purposes of The AIC Code of
Corporate Governance (published in February 2019) (the "AIC
Code").
In addition, Colin Kingsnorth, having served on the Board for an
extended period of time and as a representative of Laxey Partners,
and the investment manager of Value Catalyst Fund, both major
shareholders in the Company, is also not considered independent for
the purposes of the AIC Code.
The Board, which comprises five male directors, regularly
reviews composition of the Board and succession planning. Given the
length of service of the independent non-executive directors and
the interests being represented by the other non-executive
directors, as well as the current position of the Company, the
Board believes that the Board composition continues to be
appropriate.
ROLE OF THE CHAIRMAN
The Chairman is responsible for providing effective leadership
to the Board, demonstrating objective judgement and promoting a
culture of openness and debate. The Chairman facilitates the
effective contribution, and encourages active engagement, by each
Director. In conjunction with the Company Secretary, the Chairman
ensures that Directors receive accurate, timely and clear
information to assist them with effective decision-making. The
Chairman leads the evaluation of the Board and individual
Directors, and acts upon the results of the evaluation process by
recognising strengths and addressing any weaknesses. The Chairman
also engages with major shareholders and ensures that all Directors
understand shareholder reviews.
ELECTION OF THE BOARD
In accordance with corporate governance best practice, the Board
has agreed that all Directors will retire annually and, if
appropriate, will seek re-election at the annual general meeting of
the Company. All Directors will stand for re-election at the
forthcoming Annual General Meeting. The Board has reviewed the
skills and experience of each Director and believes that each
contributes to the long-term sustainable success of the Company.
The Board has no hesitation in recommending their election or
re-election to shareholders.
In common with most Registered Closed Ended Collective
Investment Schemes, the Company has no direct employees. Directors'
& Officers' liability insurance cover has been maintained
throughout the year at the expense of the Company.
CORPORATE GOVERNANCE
The Company is committed to high standards of corporate
governance. As the Company is listed on the SFS, the Company has
undertaken to voluntarily comply with provision 9.8 of Chapter 9 of
the Listing Rules regarding corporate governance and the principles
and provisions of the AIC Code for the year ended 31 December
2019.
The AIC Code addresses all the principles and provisions set out
in the UK Corporate Governance Code, as well as setting out
additional principles and provisions on issues that are of specific
relevance to investment companies. The Board considers that
reporting in accordance with the principles and provisions of the
AIC Code provides more relevant and comprehensive information to
shareholders. The AIC Code is available on the AIC website at;
https://www.theaic.co.uk .
The Company has compiled throughout the accounting period with
the relevant provisions contained within the AIC Code except
provisions relating to:
-- the independence and tenure of the chairman (provisions 11 and 13);
-- the role and responsibility of the chief executive (provisions 9 and 14); and
-- executive directors' remuneration ( provisions 33 and 36 to 40).
The Board considers that provisions 9, 14, 33 and 36 to 40 are
not relevant to the position of the Company, being an
externally-managed investment company. In particular, all of the
Company's day to day management and administrative functions are
outsourced to third parties. And, as set out above, the Board has
not complied with provisions 11 and 13 and has resolved that, given
the projects currently underway at the Company, and the present
economic disruption caused by the COVID-19 pandemic, John's
continued appointment as Chairman is in the best interests of the
Company and shareholders as a whole. The Board evaluates
appointments, including the Chairman, on an annual basis.
Directors have attended the following scheduled Board meetings
during the year ended 31 December 2019.
Director No of Meetings Attended Meetings during
period on the
Board
John Herring 4 4
Keith Corbin 4 4
Trevor Bowen 3 4
Peter Cornell 4 4
Colin Kingsnorth 3 4
------------------------ ----------------
Policy on Tenure
The Board's policy on tenure is that Directors need not serve on
the Board for a limited period of time only. The Board does not
consider that the length of service of a Director is as important
as the contribution he or she has to make, and therefore the length
of service will be determined on a case-by-case basis. The Board
believes that changes to its composition, including succession
planning for Directors, can be managed without undue disruption to
the Company's operations. Directors are able and encouraged to
provide statements to the Board of their concerns and ensure that
any items of concern are recorded in the Board minutes and the
Chairman encourages all Directors to present their views on matters
in an open forum.
The Board notes that some Shareholders may see longevity on the
Board as a negative. The Board is compliant with the provisions of
the AIC Code relating to corporate governance and time served on
boards and will continue to ensure that it meets these rules in the
future. The Board has a mix of longer serving and more recently
appointed Directors and the Board believes that the experience of
the longer serving Directors has served the Company well through
numerous investment cycles and is valued by the Board as a
whole.
The Board has a schedule of matters reserved to it for decision
and the requirement for Board approval on these matters is
communicated directly to the senior staff at the Investment
Manager. Such matters include strategy, gearing, treasury and
dividend policy. Full and timely information is provided to the
Board to enable the Directors to function effectively and to
discharge their responsibilities. The Board also reviews the
financial statements, performance and revenue budgets.
The Board intends to conduct, on an annual basis, an appraisal
of the Chairman of the Board, Directors' individual self-evaluation
and a performance evaluation of the Board and its committees as a
whole. The Board has not undertaken a formal performance evaluation
during the year to 31 December 2019. In February 2020, the Board
considered an externally facilitated Board evaluation but concluded
that, as the composition of the Board was still relatively new,
this should be deferred until 2021, at which time it will be
considered again. Instead the Board decided that the process for
2020 would consist of a Chairman lead questionnaire-based
evaluation.
However, the Board has no hesitation in recommending to
Shareholders the re-election of all Directors.
There is an agreed procedure for Directors to take independent
professional advice if necessary and at the Company's expense. This
is in addition to the access which every Director has to the advice
and services of the Company Secretary, which is responsible to the
Board for ensuring that Board procedures are followed and that
applicable rules and regulations are complied with.
Board Committees
The Board has established an Audit Committee, a Management
Engagement Committee and a Nomination Committee. These committees
undertake specific activities through delegated authority from the
Board. Terms of reference for each committee may be found on the
Company's website ( www.ceibalimited.co.uk ) and copies are
available from the Company's Secretary upon request. The terms of
reference are reviewed and re-assessed by the Board for their
adequacy on an annual basis .
The Board has not appointed a separate remuneration committee
but, as set out below, delegates the consideration of the
remuneration of the Directors to the Nomination Committee.
Details of the activities of each of the committees are set out
below.
Audit Committee
Information regarding the composition, responsibilities and
activities of the Audit Committee is detailed in the Report of the
Audit Committee below.
Nomination Committee
All appointments to the Board are considered by the Nomination
Committee which is chaired by Keith Corbin and is made up of all of
the independent non-executive Directors. The Board's overriding
priority in appointing new directors to the Board is to identify
the candidate with the best range of skills and experience to
complement existing Directors. The function of the Nomination
Committee is to ensure that the Company goes through a formal
process of reviewing the structure, size and composition (including
the skills, knowledge, experience and diversity) of the Board,
identifying the experience and skills which may be needed and those
individuals who might best provide them and to ensure that the
individual has sufficient available time to undertake the tasks
required. When considering the composition of the Board, members
will be mindful of diversity, inclusiveness and meritocracy. The
outside directorships and broader commitments of Directors are also
monitored by the Nomination Committee.
The Company's aim as regards the composition of the Board is
that it should have a balance of experience, skills and knowledge
to enable each Director and the Board as a whole to discharge their
duties effectively. Whilst the Board agrees that it is entirely
appropriate that it should seek diversity, it does not consider
that this can be best achieved by establishing specific quotas and
targets and appointments will continue to be made based wholly on
merit. Accordingly, when changes to the Board are required, the
Nomination Committee will have regard to diversity and to a
comparative analysis of candidates' qualifications and experience.
A pre-established, clear, neutrally formulated and unambiguous set
of criteria will be utilised to determine the most suitable
candidate for the specific position sought. Once appointed, the
successful candidate will receive a formal and tailored
induction.
The remuneration of the Directors is reviewed on an annual basis
by the Nomination Committee and compared with the level of
remuneration for directorships of other similar companies. All
Directors receive an annual fee and there are no share options or
other performance related benefits available to them. The
remuneration of the Directors has been set in order to attract
individuals of a calibre appropriate to the future development of
the Company. The Company's policy on Directors' remuneration,
together with details of the remuneration of each Director, is
detailed in the Directors' Remuneration Report below.
The Nomination Committee meets at least once per year and
otherwise as required.
During the year the Nomination Committee met once to consider
succession planning for the current Chairman. The Nomination
Committee agreed that, given the projects currently underway at the
Company, and the present climate, Mr Herring's continued
appointment was in the best interests of the Company and
shareholders as a whole but the position of Chairman would be kept
under regular review.
Management Engagement Committee
The Management Engagement Committee comprises the entire Board
of Directors and is chaired by John Herring. The principal duties
of the Management Engagement Committee are to review the
performance of the Investment Manager and its compliance with the
terms of the Management Agreement. The terms and conditions of the
Investment Manager's appointment, including an evaluation of fees,
are reviewed by the Management Engagement Committee on an annual
basis.
The Management Engagement Committee shall also review the terms
of appointment of other key service providers to the Company.
The Management Engagement Committee meets at least once per year
and otherwise as required.
During the year the Management Engagement Committee met once to
consider the performance of, and the contractual arrangements with
the key service providers of the Company, including the Investment
Manager, the AIFM and the Administrator.
INTERNAL CONTROL & RISK MANAGEMENT
The Board is ultimately responsible for the Company's system of
internal control and for reviewing its effectiveness and confirms
that there is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Company. This process
has been in place during the year under review and up to the date
of approval of this Annual Report. It is regularly reviewed by the
Board and accords with the Financial Reporting Council
Guidance.
The Board has reviewed the effectiveness of the system of
internal control focussing in particular on the process for
identifying and evaluating the principal risks affecting the
Company and policies by which these risks are managed.
The Directors have delegated the investment management of the
Company's assets to ASFML within overall guidelines, and this
embraces implementation of the system of internal control,
including financial, operational and compliance controls and risk
management. Internal control systems are monitored and supported by
the Investment Manager's internal audit function which undertakes
periodic examination of business processes, including compliance
with the terms of the management agreement, and ensures that
recommendations to improve controls are implemented.
Risks are identified and documented through a risk management
framework by each function within the Investment Manager's group
activities. Risk includes financial, regulatory, market,
operational and reputational risk. This helps the internal audit
risk assessment model identify those functions for review. Any
weaknesses identified are reported to the Board, and timetables are
agreed for implementing improvements to systems. The implementation
of any remedial action required is monitored and feedback provided
to the Board.
The principal risks and uncertainties faced by the Company are
detailed above.
The key components of the process designed by the Directors to
provide effective internal control are outlined below:
-- the Investment Manager prepares forecasts and management
accounts which allow the Board to assess the Company's activities
and review its performance;
-- the Board and Investment Manager have agreed clearly defined
investment criteria, specified levels of authority and exposure
limits. Reports on these issues, including performance statistics
and investment valuations, are regularly submitted to the Board and
there are meetings with the Investment Manager as appropriate;
-- as a matter of course the Investment Manager's compliance
department continually reviews the Investment Manager's operations
and reports to the Audit Committee on a six monthly basis;
-- written agreements are in place which specifically define the
roles and responsibilities of the Investment Manager and other
third-party service providers and, where relevant, ISAE3402
Reports, a global assurance standard for reporting on internal
controls for service organisations, or their equivalents are
reviewed;
-- the Board has considered the need for an internal audit
function but, because of the compliance and internal control
systems in place within the Investment Manager, has decided to
place reliance on the Investment Manager's systems and internal
audit procedures; and
-- the Audit Committee carried out an annual assessment of
internal controls for the year ended 31 December 2019 by
considering documentation from the Investment Manager, and the
Depositary, including their internal audit and compliance functions
and taking account of events since 31 December 2019. The results of
the assessment, that internal controls are satisfactory, will be
reported to the Board at the next Board meeting.
Internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against misstatement and loss.
MANAGEMENT OF CONFLICTS OF INTEREST
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors prepare a list of other positions held and
all other conflict situations that may need to be authorised either
in relation to the Director concerned or his connected persons. The
Board considers each Director's situation and decides whether to
approve any conflict, taking into consideration what is in the best
interests of the Company and whether the Director's ability to act
in accordance with his or her wider duties is affected. Each
Director is required to notify the Company's Secretary of any
potential, or actual, conflict situations that will need
authorising by the Board. Authorisations given by the Board are
reviewed at each Board meeting. No Director has a service contract
with the Company although Directors are issued with letters of
appointment upon appointment. The Directors' interests in
contractual arrangements with the Company are as shown in note 13
to the financial statements. No other Directors had any interest in
contracts with the Company during the period or subsequently. The
conflicts of the non-independent directors are well known to the
Board and reviewed regularly.
The Board has adopted appropriate procedures designed to prevent
bribery. The Company receives periodic reports from its service
providers on the anti-bribery policies of these third parties. It
also receives regular compliance reports from the Investment
Manager and the Administrator.
The Criminal Finances Act 2017 has introduced a new corporate
criminal offence of "failing to take reasonable steps to prevent
the facilitation of tax evasion". The Board has confirmed that it
is the Company's policy to conduct all of its business in an honest
and ethical manner. The Board takes a zero-tolerance approach to
facilitation of tax evasion, whether under Guernsey law or under
the law of any foreign country.
SUBSTANTIAL INTERESTS
The Company has been advised that the following shareholders
owned 5% or more of the issued Ordinary share capital of the
Company at 31 December 2019:
Shareholder Number of shares held % held
Northview Investment
Fund Ltd 37,854,018 27.5
---------------------- -------
Laxey Partners Limited 23,736,481 17.2
---------------------- -------
Aberdeen Standard Investments 9,747,852 7.1
---------------------- -------
Citco Global Custody
NV Ref Ifoghas Investments
Ltd 7,477,144 5.4
---------------------- -------
The Value Catalyst
Fund Ltd 7,242,835 5.3
---------------------- -------
There have been no significant changes notified in respect of
shareholdings between 31 December 2019 and 27 April 2020.
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting ("AGM") is included
within this Annual Report and Consolidated Financial Statements.
The AGM will take place at the registered office of the Company,
Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT
Channel Islands on 19 June 2020 at 2.00pm. All shareholders will
have the opportunity to put questions to the Board or the
Investment Manager at the Company's AGM. Please note that the
Company's Secretary is available to answer general Shareholder
queries at any time throughout the year. In the event that the
situation surrounding COVID-19 should affect the plans to hold the
AGM on 19 June 2020 the Company will update shareholders through an
announcement to the London Stock Exchange and will provide further
details on the Company's website. The Board would encourage all
shareholders to exercise their votes, and submit any questions, in
respect of the meeting in advance. This should ensure that your
votes are registered in the event that attendance at the AGM might
not be possible.
RELATIONS WITH STAKEHOLDERS
The Directors place a great deal of importance on communication
with Shareholders. The Board welcomes feedback from all
Shareholders. The Chairman meets periodically with the largest
Shareholders to discuss the Company. The Annual Report and
Consolidated Financial Statements are widely distributed to other
parties who have an interest in the Company's performance.
Shareholders may obtain up to date information on the Company
through the Company's website www.ceibalimited.co.uk .
The Board's policy is to communicate directly with Shareholders
and their representative bodies without the involvement of the
Investment Manager in situations where direct communication is
required and usually a representative from the Board is available
to meet with major Shareholders on an annual basis in order to
gauge their views.
By order of the Board
27 April 2020
JTC Fund Solutions (Guernsey) Limited
Secretary
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and Consolidated Financial Statements, in accordance with
applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the "Law")
requires the Directors to prepare financial statements for each
financial year. Under the Law, the Directors have elected to
prepare the Consolidated Financial Statements in accordance with
IFRS. Under the Law the Directors must not approve the Consolidated
Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period.
In preparing these Consolidated Financial Statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- prepare the Consolidated Financial Statements on a going
concern basis unless it is inappropriate to presume that the
Company will continue in business; and
-- state whether all applicable IFRS standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Company's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that it's Consolidated Financial Statements comply with the
Law. They are also responsible for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors listed, being the persons responsible, hereby
confirm to the best of their knowledge that:
-- the Consolidated Financial Statements, prepared in accordance
with the applicable accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company, and all the undertakings included in the
consolidation taken as a whole;
-- that in the opinion of the Directors, the Annual Report and
Consolidated Financial Statements taken as a whole, is fair,
balanced and understandable and it provides the information
necessary to assess the Company's position and performance,
business model and strategy; and
-- the General Information section and Directors' Report include
a fair review of the development and performance of the business
and the position of the Company and all the undertakings included
in the consolidation taken as a whole, and the Principal Risks
section provides a description of the principal risks and
uncertainties that they face.
-- there is no additional information of which the Company's auditor is not aware.
For Ceiba Investments Limited
John Herring
Chairman
27 April 2020
Consolidated Statement of Financial 31 Dec 2019 31 Dec
Position 2018
As at 31 December 2019
Note US$ US$
----- ------------ ------------
Assets
Current assets
Cash and cash equivalents 4 13,102,578 19,814,790
Accounts receivable and accrued income 5 2,211,832 1,558,288
Loans and lending facilities 6 2,558,018 1,811,257
------------ ------------
Total current assets 17,872,428 23,184,335
------------ ------------
Non-current assets
Accounts receivable and accrued income 5 5,646,484 131,664
Loans and lending facilities 6 10,587,702 5,703,057
Equity investments 7 227,340,559 238,795,681
Property, plant and equipment 8 568,346 537,265
------------ ------------
Total non-current assets 244,143,091 245,167,667
------------ ------------
Total assets 262,015,519 268,352,002
------------ ------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 9 2,066,213 2,202,953
Deferred liabilities 15 1,000,000 1,000,000
Total current liabilities 3,066,213 3,202,953
------------ ------------
Non-current liabilities
Deferred liabilities 15 2,833,333 3,833,333
------------ ------------
Total non-current liabilities 2,833,333 3,833,333
------------ ------------
Total liabilities 5,899,546 7,036,286
------------ ------------
Equity
Stated capital 11 106,638,023 106,638,023
Revaluation surplus 319,699 298,449
Retained earnings 95,422,003 96,403,178
Accumulated other comprehensive income 4,354,609 2,301,696
------------ ------------
Equity attributable to the shareholders
of the parent 206,734,334 205,641,346
------------ ------------
Non-controlling interest 11 49,381,639 55,674,370
Total equity 256,115,973 261,315,716
Total liabilities and equity 262,015,519 268,352,002
------------ ------------
NAV 11 206,734,334 205,641,346
NAV per share 11 1.50 1.49
See accompanying notes 1 to 24, which are an integral part of
these consolidated financial statements.
These audited Financial Statements were approved by the board of
Directors and authorised for issue on 27 April 2020.
They were signed on the Company's behalf;
Keith Corbin, Director Peter Cornell, Director
31 Dec 2019 31 Dec 2018
Note US$ US$
----- ------------- -------------
Income
Dividend income 7 20,670,560 16,158,458
Interest income 820,588 321,323
Travel agency commissions 15,426 89,264
Gain on settlement of financial liabilities
at fair value 10 - 1,625,406
Foreign exchange gain - 787,662
21,506,574 18,982,113
------------- -------------
Expenses
Foreign exchange loss (383,162) -
Loss on change in fair value of equity
investments 7 (14,658,562) (4,483,525)
Management salaries 20 - (2,672,549)
Management fees 15 (1,985,429) (358,557)
Other staff costs (73,080) (214,638)
Travel (82,055) (212,415)
Operational costs (144,783) (214,578)
Legal and professional fees 21 (1,028,242) (2,353,365)
Administration fees and expenses (266,250) (278,348)
Finance cost 10 - (3,560,772)
Audit fees 23 (465,514) (392,508)
Miscellaneous expenses (196,509) (139,840)
Director fees and expenses 13 (239,085) (146,246)
Depreciation 8 (38,062) (37,693)
(19,560,733) (15,065,034)
------------- -------------
Net income before taxation 1,945,841 3,917,079
------------- -------------
Income taxes 3.8 - -
------------- -------------
Net income for the year 1,945,841 3,917,079
------------- -------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
Gain/(loss) on exchange differences
of translation of foreign operations 3,158,328 (7,285,831)
Other comprehensive income that will
not be reclassified to profit or
loss in subsequent periods
Revaluation reserve movements 21,250 50,250
Total comprehensive income/(loss) 5,125,419 (3,318,502)
------------- -------------
Net income/(loss) for the year attributable
to:
Shareholders of the parent 7,579,514 1,775,926
Non-controlling interest (5,633,673) 2,141,153
Total comprehensive income /(loss)
attributable to:
Shareholders of the parent 9,653,677 (2,909,615)
Non-controlling interest (4,528,258) (408,887)
Basic and diluted earnings per share 14 0.06 0.02
See accompanying notes 1 to 24, which are an integral part of
these consolidated financial statements.
31 Dec 2019 31 Dec 2018
Note US$ US$
------- --------------------------- --------------------
Operating activities
Net income for the year 1,945,841 3,917,079
Items not affecting cash:
Depreciation 8 38,062 37,693
Change in fair value of equity investments 7 14,658,562 4,483,525
Change in fair value of financial
liabilities 10 - (1,625,406)
Non-cash dividend income 7 - (6,725,092)
Loss on property, plant & equipment
disposal - 1,650
Dividend income received (20,670,560) (16,158,458)
( 321,323
Interest income (820,588) )
Interest expense - 3,560,772
Foreign exchange loss/(gain) 383,162 (787,662)
(4,465,521) (13,617,222)
Increase/(decrease) in accounts receivable
and accrued income 98,064 (89,191))
Decrease in accounts payable and accrued
expenses (136,740) (2,546,093)
Amortisation of deferred liability 15 (1,000,000) (166,667)
Dividend income 14,997,092 14,908,958
Interest income received 227,628 281,213
Interest paid - (3,560,772)
Net cash flows from operating activities 9,720,523 (4,789,774)
--------------------------- --------------------
Investing activities
Purchase of equity investments 7 - (12,169,002)
Purchase of property, plant & equipment 8 (47,893) (30,688)
Loans and lending facilities disbursed (7,408,813) (4,749,764)
Loans and lending facilities recovered 1,777,407 1,713,062
Net cash flows from investing activities (5,679,299) (15,236,392)
--------------------------- --------------------
Financing activities
Short-term borrowings paid (i) 10 - (34,195,489)
Net proceeds from share issuance 11 - 37,966,014
Proceeds of sale of non-controlling
interest - 20,500,000
Cash payment received from investment
manager 15 - 5,000,000
Cash distribution to non-controlling
interest 11 (1,786,874) -
Receipt of past dividends not settled
with shareholder 9 - 1,305,982
Payment of cash dividends (8,560,689) (6,974,578)
Contributions received from non-controlling
interest 22,401 4,531,109
Net cash flows from financing activities (10,379,991) 28,133,038
--------------------------- --------------------
Change in cash and cash equivalents (6,283,938) 8,106,872
Cash and cash equivalents at beginning
of the period 19,814,790 11,630,102
Foreign exchange on cash (428,274) 77,816
Cash and cash equivalents at end of
the period 13,102,578 19,814,790
--------------------------- --------------------
(i) The Northview loans of US$35,820,895 were settled in 2018 at
US$34,195,489 cash, or at a gain of US$1,625,406, and there are no
further external loans raised in 2019.
(ii) Dividends received, income received and interest paid for
2018 has been presented in accordance with the 2019 presentation,
shown separately within the cashflow.
See accompanying notes 1 to 24, which are an integral part of
these consolidated financial statements
For the year ended 31 December 2018
Total Equity
Other attributable
Stated Revaluation Retained comprehensive to the Non-controlling Total
Capital Surplus Earnings income parent interest Equity
Notes US$ US$ US$ US$ US$ US$ US$
Opening
Balance 68,672,009 248,199 99,262,456 7,037,487 175,220,151 53,981,522 229,111,673
Share issuance 37,966,014 - - - 37,966,014 - 37,966,014
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 11 - 50,250 - (4,735,791) (4,685,541) (2,550,040) (7,235,581)
Net income
for
the year 11 - - 1,775,926 - 1,775,926 2,141,153 3,917,079
Capital
increase/
contributions
during the
period 11 - - 2,339,374 - 2,339,374 2,191,735 4,531,109
Dividend
declared
during the
year 22 - - (6,974,578) - (6,974,578) - (6,974,578)
Balance at 31
December 2018 106,638,023 298,449 96,403,178 2,301,696 205,641,346 55,674,370 261,315,716
----------- ----------- ----------- ------------- ------------ --------------- -----------
See accompanying notes 1 to 24, which are an integral part of
these consolidated financial statements
For the year ended 31 December 2019
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$
Opening Balance 106,638,023 298,449 96,403,178 2,301,696 205,641,346 55,674,370 261,315,716
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 11 - 21,250 - 2,052,913 2,074,163 1,105,415 3,179,578
Net
income/(loss)
for the year 11 - - 7,579,514 - 7,579,514 (5,633,673) 1,945,841
Capital
increase/
contributions
during the
period 11 - - - - - 22,401 22,401
Cash
distribution
to
non-controlling
interest 11 - - - - - (1,841,703) (1,841,703)
Payable
transferred
to
non-controlling
interest 11 - - - - - 54,829 54,829
Dividend
declared
during the year 22 - - (8,560,689) - ( 8,560,689) - (8,560,689)
----------- ----------- ---------------- ------------- ----------------- --------------- -----------------
Balance at 31
December 2019 106,638,023 319,699 95,422,003 4,354,609 206,734,334 49,381,639 256,115,973
----------- ----------- ---------------- ------------- ----------------- --------------- -----------------
See accompanying notes 1 to 24, which are an integral part of
these consolidated financial statements.
1. Corporate information
These consolidated financial statements for the year ended 31
December 2019 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 Center, 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 other 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 ("LSE-SFS"), where it trades under the
symbol "CBA" (see note 11) 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 Standard
Life Aberdeen plc (see note 15).
2. Basis of preparation
2.1 Statement of compliance and basis of measurement
These consolidated financial statements have been prepared under
the historical cost convention, except for certain financial
instruments as disclosed in note 3.9 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 consolidated financial statements are presented in United
States Dollars ("US$"), which is also the Company's functional
currency. The majority of the Group's income, equity investments
and transactions are denominated in US$, subsidiaries are
re-translated to US$ to be aligned with the reporting currency of
the Group.
2.3 Use of estimates and judgments
The preparation of the Group's consolidated financial
statements, in conformity with IFRS, requires management to make
judgments, estimates, and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Management judgements
The key management judgements made by management in relation to
the financial statements are:
a) That the Group is not an Investment Entity (see note 3.15);
b) That the Group is a Venture Capital Organisation (see note 3.16);
c) That the functional currency of the parent company (Ceiba
Investments Limited) is US$ dollar (see note 3.18)
Management estimates - valuation of equity investments
Significant areas requiring the use of estimates also include
the valuation of equity investments. Actual results could differ
from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future period
affected.
In determining estimates of recoverable amounts and fair values
for its equity investments, the Group relies on independent
valuations, historical experience, assumptions regarding applicable
industry performance and prospects, as well as general business and
economic conditions that prevail and are expected to prevail.
Assumptions underlying asset valuations are limited by the
availability of reliable comparable data and the uncertainty of
predictions concerning future events (see note 7).
By their nature, asset valuations are subjective and do not
necessarily result in precise determinations. Should the underlying
assumptions change, the carrying amounts could change and,
potentially, by a material amount.
Change in Management estimates - valuation of equity
investments
The determination of the fair values of the equity investments
may include independent valuations of the underlying properties
owned by the joint venture companies. These valuations assume a
level of working capital required for day to day operations of the
properties. Management estimates the amount of cash required for
these working capital needs to determine if the joint venture
companies hold any excess cash that should be added as a component
of the fair value of the equity investments.
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 2019 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 except for the
adoption of new standards effective as of 1 January 2019.
During the fiscal year the Group applied the following standard
applicable for reporting periods beginning on or after 1 January
2019:
-- IFRS 16 Leases: (Full or partial) application with
retrospective effect for reporting periods beginning on or after 1
January 2019 is required.
IFRS 16 specifies how an IFRS reporter will recognise, measure,
present and disclose leases. The standard provides a single lessee
accounting model, requiring lessees to recognise assets and
liabilities for all leases unless the lease term is 12 months or
less or the underlying asset has a low value. Lessors continue to
classify leases as operating or finance, with IFRS 16's approach to
lessor accounting substantially unchanged from its predecessor, IAS
17. The Group assesses new lease contracts to determine the right
of use asset. 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.
3. Summary of significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
3.1 Consolidation
The consolidated financial statements comprise the financial
statements of CEIBA and its subsidiaries as at 31 December 2019.
Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if and only
if the Group has:
-- Power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee)
-- Exposure, or rights, to variable returns from its involvement with the investee, and
-- The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement with the other vote holders of the investee
-- Rights arising from other contractual arrangements
-- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and cease to be consolidated from the date
on which control is transferred out of the Group. Where there is a
loss of control of a subsidiary, the consolidated financial
statements include the results for the part of the reporting period
during which the Group has control.
The Group had direct and indirect equity interests in the
following entities as at 31 December 2019 and 31 December 2018:
Equity interest
held indirectly
Country of by the Group
Entity Name Incorporation or holding entity
31 Dec 2019 31 Dec
2018
1. CEIBA Property Corporation Limited
(a) (i) Guernsey 100% 100%
1.1. GrandSlam Limited (a) (ii) Guernsey 100% 100%
1.2. CEIBA MTC Properties Inc.(a)
(iii) Panama 100% 100%
1.2.1 Inmobiliaria Monte Barreto
S.A. (b) (iv) Cuba 49% 49%
1.3. CEIBA Tourism B.V. (a) (viii) Netherlands 100% 100%
1.3.1. HOMASI S.A. (a) (iii) Spain 65% 65%
1.3.1.1. Miramar S.A. (b) (vi) Cuba 50% 50%
1.3.2. Mosaico Hoteles S.A. (a)
(iii) Switzerland 80% -
1.3.2.1 TosCuba S.A. (b) (vii) Cuba 50% -
1.3.3. Mosaico B.V. (a) (v) Netherlands 80% 80%
1.3.3.1 Mosaico Hoteles S.A. (a)
(iii) Switzerland - 100%
1.3.3.1.1 TosCuba S.A. (b) (vii) Cuba - 50%
a) Company consolidated at 31 December 2019 and 31 December 2018.
b) Company accounted at fair value at 31 December 2019 and 31 December 2018.
(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 Center as its principal asset.
(v) On 11 March 2019, all of the shares in Mosaico Hoteles S.A.
held by Mosaico B.V., together with (i) the full outstanding value
of the shareholder loan extended by Mosaico B.V. to Mosaico Hoteles
S.A., and (ii) all payables owed by Mosaico B.V., were transferred
by Mosaico B.V. to CEIBA Tourism B.V. (80%) and to Meliã Hotels
International (20%) in accordance with their shareholdings in
Mosaico B.V., with the result that Mosaico Hoteles S.A. is now
owned directly by CEIBA Tourism B.V. (80%) and Meliã Hotels
International S.A. (20%) and Mosaico B.V. no longer has any assets
or liabilities. It is intended that Mosaico B.V. will be liquidated
in the near future.
(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. In December 2017 it was
converted from a cooperative to a limited liability company
(B.V.).
All inter-company transactions, balances, income, expenses and
unrealised surpluses and deficits on transactions between CEIBA
Investments Limited and its subsidiaries have been eliminated on
consolidation. Non-controlling interest represent the interests in
the operating results and net assets of subsidiaries attributable
to minority shareholders.
3.2 Foreign currency translation
Transactions denominated in foreign currencies during the period
are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated at
the reporting date into functional currency at the exchange rate at
that date. Foreign currency differences arising on translation are
recognised in the consolidated statement of comprehensive income as
foreign exchange income (loss).
The financial statements of foreign subsidiaries included in the
consolidation are translated into the reporting currency in
accordance with the method established by IAS 21, The Effects of
Changes in Foreign Exchange Rates. Assets and liabilities are
translated at the closing rates at the statement of financial
position date, and income and expense items at the average rates
for the period. Translation differences are taken to other
comprehensive income and shown separately as foreign exchange
reserves on consolidation without affecting income. Translation
differences during the year ended 31 December 2019 were gains of
US$ 3,158,328 (2018: loss of US$7,285,831).
The exchange rate used in these consolidated financial
statements at 31 December 2019 is 1 Euro = US$1.2030 (2018: 1 Euro
= US$1.1440).
3.3 Change in fair value from equity investments and short term
borrowings at fair value through profit or loss
Changes in fair value from equity investments and short term
borrowings at fair value through profit or loss includes all
realised and unrealised fair value changes, but excludes interest
and dividend income.
3.4 Dividend income
Dividend income arising from the Group's equity investments is
recognised in the consolidated statement of comprehensive income
when the Group's right to receive payment is established or cash
amounts have been received.
3.5 Interest income
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable. Interest income is recognised in the consolidated
statement of comprehensive income.
3.6 Travel agency commissions
GrandSlam, a wholly-owned subsidiary of the Group, is a travel
agency that acts as an intermediary between the customer and
airlines, tour operators and hotels. GrandSlam facilitates
transactions and earns a commission in return for its service. This
commission may take the form of a fixed fee per transaction or a
stated percentage of the customer billing, depending on the
transaction and the related vendor. Commission is recognised when
the respective bookings have been made.
3.7 Fees and expenses
Fees and expenses are recognised in the statement of
comprehensive income on the accrual basis as the related services
are performed. Transaction costs incurred during the acquisition of
an investment are recognised within the expenses in the
consolidated statement of comprehensive income and transactions
costs incurred on share issues or placements are included within
consolidated statement of changes in equity in respect of stated
capital.
Transaction costs incurred on the disposal of investments are
deducted from the proceeds of sale and transactions costs incurred
on shares are deducted from the share issue proceeds.
3.8 Taxation
Deferred taxes are provided for the expected future tax
consequences of temporary differences between the carrying amounts
and tax bases of assets and liabilities using current corporation
tax rate.
Deferred tax liabilities are recognized for temporary
differences that will result in taxable amounts in future years.
Deferred tax assets are recognised for temporary differences that
will result in deductible amounts in future years. Where it is not
certain that the temporary difference will be reversed no deferred
taxation asset is established. At 31 December 2019 and 31 December
2018 the Group has not established any deferred tax assets or
liabilities.
The average tax rates applicable to the income earned by the
Group and its subsidiaries in their respective jurisdictions are as
follows:
Guernsey Exempt
The Netherlands Exempt
Panama Exempt
Spain Exempt
Cuba (i) 15%
(i) The Cuban tax rate does not apply to the Group itself, but
is rather the tax rate of the underlying Cuban joint venture
companies of the equity investments and is taken into account when
determining their fair value (see note 7).
3.9 Financial assets and financial liabilities
(a) Recognition and initial measurement
Financial assets and financial liabilities at fair value through
profit or loss are measured initially at fair value.
(b) Classification
The Group has classified financial assets and financial
liabilities into the following categories:
Financial assets and financial liabilities classified at fair
value through profit or loss:
Financial assets and financial liabilities classified in this
category are those that have been designated by management upon
initial recognition. Management may only classify an instrument at
fair value through profit or loss upon initial recognition when one
of the following criteria are met, and designation is determined on
an instrument-by-instrument basis:
-- The designation eliminates, or significantly reduces, the
inconsistent treatment that would otherwise arise from measuring
the assets or liabilities or recognising gains or losses on them on
a different basis or,
-- For financial liabilities that are part of a group of
financial liabilities, which are managed and their performance
evaluated on a fair value basis, in accordance with a documented
risk management or investment strategy or,
-- For financial liabilities that contain one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited in relation to financial liabilities.
Financial assets and financial liabilities at fair value through
profit or loss are carried in the consolidated statement of
financial position at fair value. Changes in fair value are
recognised in the statement of comprehensive income.
Financial assets and financial liabilities measured at fair
value through profit or loss are the following:
-- Equity Investments are classified at fair value through
profit or loss, with changes in fair value recognised in the
statement of comprehensive income for the period.
-- Short-term Borrowings that include an equity conversion
feature are designated at fair value through profit or loss. (see
note 10)
Financial assets and financial liabilities measured at amortised
cost:
Financial assets and financial liabilities measured at amortised
cost are initially recognised at fair value and are subsequently
measured at amortised cost using the effective interest rate
methodology, in respect of financial assets less allowance for
impairment. A debt instrument is measured at amortised cost if the
objective of the business model is to hold the financial asset for
the collection of the contractual cash flows and the contractual
cash flows under the instrument solely represent payments of
principal and interest (SPPI). Amortised cost is calculated by
taking into account any discount or premium on acquisition and fees
and costs that are an integral part of the effective interest rate.
Therefore, the Group recognises interest income using a rate of
return that represents the best estimate of a constant rate of
return over the expected behavioural life of the loan, hence,
recognising the effect of potentially different interest rates
charged at various stages, and other characteristics of the product
life cycle (prepayments, penalty interest and charges). If
expectations are revised the adjustment is booked a positive or
negative adjustment to the carrying amount in the statement of
financial position with an increase or reduction in interest
income. The adjustment is subsequently amortised through Interest
and similar income in the income statement.
Financial assets and financial liabilities measured at amortised
cost are the following:
-- Cash and cash equivalents,
-- Accounts receivable and accrued income,
-- Loan and advances,
-- Accounts payable and accrued expenses
(c) Fair value measurement
Fair value is the amount for which an asset can be exchanged, or
a liability settled, between knowledgeable, willing parties in an
arm's-length transaction on the measurement date.
The Group does not have any instruments quoted in an active
market. A market is regarded as active if quoted prices are readily
and regularly available and represent actual and regularly
occurring market transactions on an arm's length basis.
As the financial instruments of the Group are not quoted in an
active market, the Group establishes their fair values using
valuation techniques. Valuation techniques include using recent
arm's length transactions between knowledgeable, willing parties
(if available), reference to the current fair value of other
instruments that are substantially the same, estimated replacement
costs and discounted cash flow analyses. The chosen valuation
technique makes maximum use of market inputs, relies as little as
possible on estimates specific to the Group, incorporates all
factors that market participants would consider in setting a price,
and is consistent with accepted economic methodologies for pricing
financial instruments. Inputs to valuation techniques reasonably
represent market expectations and measures of the risk-return
factors inherent in the financial instrument. The Group calibrates
valuation techniques and tests them for validity using prices from
observable current market transactions of similar instruments or
based on other available observable market data.
The best evidence of the fair value of a financial instrument at
initial recognition is the transaction price, i.e. the fair value
of the consideration given or received, unless the fair value of
the instrument is evidenced by comparison with other observable
current market transactions in the other instruments that are
substantially the same or based on a valuation technique whose
variables include only data from observable markets.
All changes in fair value of financial assets, other than
interest and dividend income, are recognised in the consolidated
statement of comprehensive income as change in fair value of
financial instruments at fair value through profit or loss.
(d) Identification and measurement of impairment
IFRS 9 Financial Instruments requires the Group to measure and
recognise impairment on financial assets at amortised cost based on
Expected Credit Losses. The Group was required to revise its
impairment methodology under IFRS 9 for each class of financial
asset.
From 1 January 2018, the Group assesses on a forward looking
basis the expected credit losses ("ECL") associated with its debt
instruments carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in
credit risk.
While cash and cash equivalents are also subject to the
impairment requirements of IFRS 9, the identified impairment loss
was immaterial. Investments held at fair value through profit or
loss are not subject to IFRS 9 impairment requirements.
Loans receivable measured at amortised cost fall within the
scope of ECL impairment under IFRS 9. As per IFRS 9, a loan has a
low credit risk if the borrower has a strong capacity to meet its
contractual cash flow obligations in the near term, and adverse
changes in economic and business conditions in the longer term
might, but will not necessarily reduce the ability of the borrower
to fulfil its obligations. For loans that are low credit risk, IFRS
9 allows a 12-month expected credit loss to be recognised.
The Group's approach to ECLs reflects a probability- weighted
outcome, the time value of money and reasonable and supportable
information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts
of future economic conditions.
(e) Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire, or when
it transfers the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the
financial asset are transferred or in which the Group neither
transfers nor retains substantially all the risks and rewards of
ownership and does not retain control of the financial asset. Any
interest in transferred financial assets that qualify for
derecognition that is created or retained by the Group is
recognised as a separate asset or liability in the consolidated
statement of financial position.
On derecognition of a financial asset, the difference between
the carrying amount of the asset (or the carrying amount allocated
to the portion of the asset derecognised) and the consideration
received (including any new asset obtained less any new liability
assumed) is recognised in the consolidated statement of
comprehensive income.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
3.10 Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and
short-term deposits and other short-term highly liquid investments
with remaining maturities at the time of acquisition of three
months or less.
3.11 Loans and lending facilities
Loans and lending facilities comprise investments in unquoted
interest-bearing debt instruments. They are carried at amortised
cost. Interest receivable is included in accrued income.
3.12 Property, plant and equipment
Property, plant and equipment, with the exception of works of
art, held by the Group and its subsidiaries are stated at cost less
accumulated depreciation and impairment. Depreciation is calculated
at rates to write off the cost of each asset on a straight-line
basis over its expected useful life, as follows:
Office furniture and equipment 4 to 7 years
Motor vehicles 5 years
The carrying amounts are reviewed at each statement of financial
position date to assess whether they are recorded in excess of
their recoverable amounts, and where carrying values exceed this
estimated recoverable amount, assets are written down to their
recoverable amount. Works of art are carried at their revalued
amount, which is the fair value at the date of revaluation.
Increases in the net carrying amount are recognised in the related
revaluation surplus in shareholders' equity. Valuations of works of
art are conducted with sufficient regularity to ensure the value
correctly reflects the fair value at the statement of financial
position date. Valuations are mostly based on active market prices,
adjusted for any difference in the nature or condition of the
specific asset.
3.13 Stated capital
Ordinary shares are classified as equity if they are
non-redeemable, or redeemable only at CEIBA's option.
3.14 Acquisitions of subsidiary that is not a business
Where a subsidiary is acquired, via corporate acquisitions or
otherwise, management considers the substance of the assets and
activities of the acquired entity in determining whether the
acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a
business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity or assets and liabilities
is allocated between the identifiable assets and liabilities (of
the entity) based on their relative values at the acquisition date.
Accordingly, no goodwill or deferred taxation arises.
3.15 Assessment of investment entity status
Entities that meet the definition of an investment entity within
IFRS 10 "Consolidated Financial Statements" are required to measure
their subsidiaries at fair value through profit and loss rather
than consolidate them. The criteria which define an investment
entity are, as follows:
-- An entity that obtains funds from one or more investors for
the purpose of providing those investors with investment management
services;
-- An entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
-- An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Group's objective includes providing investment management
services to investors to achieve capital growth and dividend income
from direct and indirect investment in or with Cuban businesses,
primarily in the tourism and commercial real estate sectors, and
other revenue-generating investments primarily related to Cuba.
However, in addition to reviewing fair values, the Group also
reports to its Directors, via internal management reports, various
other performance indicators in relation to the operating
performance of the investments. Therefore Management is not
measuring and evaluating the performance of the investments solely
on a fair value basis.
Accordingly, Management has concluded that the Group does not
meet all the characteristics of an investment entity. These
conclusions will be reassessed on a continuous basis, if any of
these criteria or characteristics change.
3.16 Assessment of venture capital organisation
There is no specific definition of a "venture capital
organisation". However, venture capital organisations will commonly
invest in start-up ventures or investments with long term growth
potential.
Venture capital organisations will also frequently obtain board
representation for the investments that it has acquired an equity
interest. The Group has representation on all of the board of
directors of the joint venture companies in which it has an
interest and participates in strategic policy decisions of its
investments, but does not exercise management control.
Accordingly Management has concluded that the Group is a venture
capital organisation and has applied the exemption in IAS 28
"Investments in Associates and Joint Ventures" to measures it
investments in joint venture companies at fair value through profit
or loss.
3.17 Going concern
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future and has significant liquid funds to do so.
Accordingly, the Directors have adopted the going concern basis in
preparing the financial statements.
3.18 Assessment of functional currency of parent company
An entity's functional currency is the currency of the primary
economic environment in which the entity operates (i.e. the
environment in which it primarily generates and expends cash). Any
other currency is considered a foreign currency. Management has
made an assessment of the primary economic environment of the
parent company, CEIBA Investments Limited, and the currency of its
principal income and expenses. Based on this assessment, Management
has determined that the functional currency of the parent US$.
4. Cash and cash equivalents
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Cash on hand 16,183 17,480
Bank current accounts (i) 13,086,395 19,797,310
13,102,578 19,814,790
------------ ------------
(ii) Balance without restriction. Included within the balance as
at 31 December 2018 are amounts held on behalf of shareholders
amounting to $1,305,982 (see note 9). The amount was subsequently
paid to Shareholders in July 2019.
5. Accounts receivable and accrued income
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Dividends receivable from Inmobiliaria
Monte Barreto S.A. 6,922,968 1,249,500
Loan interest receivable from TosCuba
S.A. 633,070 40,109
Other accounts receivable and deposits 302,278 400,342
7,858,316 1,689,952
------------ ------------
Current portion 2,211,832 1,558,288
------------ ------------
Non-current portion 5,646,484 131,664
------------ ------------
(i) Presented below is the ageing of receivables and accrued
income based on their contractual terms of repayment.
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Up to 30 days 120,898 1,359,642
Between 31 and 90 days 66,335 116,124
Between 91 and 180 days 2,010,678 45,603
Between 181 and 365 days 13,921 36,919
Over 365 days 5,646,484 131,664
------------ ------------
7,858,316 1,689,952
------------ ------------
Trade receivables 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 and
that the majority of the balance consists of dividends receivable,
prepayments and an insignificant amount of receivables of the
travel agency activities of GrandSla m, a wholly owned subsidiary
of the Group. As a result of the composition of the trade
receivables balance, the credit risk has been assessed to be low as
the majority of the composition is comprised of prepayments and
dividends receivable. Potential impairment loss has been estimated
to be immaterial.
6. Loans and lending facilities
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
TosCuba S.A. (i) 9,915,549 4,749,764
Casa Financiera FINTUR S.A. (ii) 3,230,171 2,764,550
13,145,720 7,514,314
------------ ------------
Current portion 2,558,018 1,811,257
------------ ------------
Non-current portion 10,587,702 5,703,057
------------ ------------
(i) In April 2018, the Group entered into a construction finance
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 Meli ã Trinidad Playa
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. 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 Meli ã Trinidad Playa 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 an assignment in favour of
the Group (in its capacity as Tranche B lender) of all
international tourism proceeds generated by the Meli ã Santiago de
Cuba Hotel. 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, therefore we have assessed the
immediate expected credit loss to be immaterial to the Group.
(ii) In July 2016, the Group arranged and participated in a
EUR24,000,000 syndicated facility provided to Casa Financiera
FINTUR S.A. ("FINTUR"). The facility was subsequently amended
through the addition of a second tranche in the principal amount of
EUR12,000,000. The Group has a EUR4,000,000 participation under
Tranche A of the facility and a EUR2,000,000 participation under
Tranche B. The facility has a term that expires in June 2020 in the
case of Tranche A and in June 2021 in the case of Tranche B, a
fixed interest rate of 8%, and quarterly payments principal and
interest. 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. It has been determined that there is no
significant risk of default over the next 12 months, therefore the
expected credit loss is assessed to be immaterial to the Group.
The following table details the expected maturities of the loans
and lending facilities portfolio according based on contractual
terms:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Up to 30 days 504,135 285,988
Between 31 and 90 days 802,882 476,647
Between 91 and 180 days 802,882 476,647
Between 181 and 365 days 448,119 571,975
Over 365 days 10,587,702 5,703,057
------------ ------------
13,145,720 7,514,314
------------ ------------
7. Equity investments
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Miramar S.A. 127,887,983 154,630,176
Inmobiliaria Monte Barreto
S.A. 86,702,576 76,165,505
TosCuba S.A. 12,750,000 8,000,000
227,340,559 238,795,681
------------ ------------
Monte
Miramar Barreto TosCuba Cubacan Total
(i) US$ (ii) US$ US$
US$ US$
------------- ------------ ----------- ------------- -------------
Balance at 31 December
2017 57,014,708 77,708,907 3,612,412 78,750,010 217,086,037
Merger of Miramar and
Cubacan 78,750,010 - - (78,750,010) -
Capital contributions 28,381,566 - 4,387,588 - 32,769,154
Foreign currency translation
reserve (6,575,985) - - - (6,575,985)
Change in fair value
of equity investments (2,940,123) (1,543,402) - - (4,483,525)
Balance at 31 December
2018 154,630,176 76,165,505 8,000,000 - 238,795,681
Foreign currency translation
reserve 3,203,440 - - - 3,203,440
Change in fair value
of equity investments (29,945,633) 10,537,071 4,750,000 - (14,658,562)
Balance at 31 December
2019 127,887,983 86,702,576 12,750,000 - 227,340,559
------------- ------------ ----------- ------------- -------------
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
Center. The Miramar Trade Center 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 Investment Manager and 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 Investment Manager and the Directors may also take into
account additional relevant information that impacts the fair value
of the equity investment that has not been considered in the
valuation of the underlying property of the joint venture. One such
fair value consideration is cash held by the joint venture in
excess of its working capital needs ("Excess Cash"). As the
valuation of the underlying property only assumes a level of
working capital to allow for day to day operations, the existence
of any Excess Cash needs to be included as an additional component
of the fair value of the joint venture company.
In the case of Monte Barreto, the amount of cash required for
working capital needs is estimated as the sum of: (i) 30% of tenant
deposits, (ii) taxes payable, (iii) dividends declared and payable,
(iv) a reserve for employee bonuses, and (v) 2 months of estimated
operating expenses. The sum of these amounts are deducted from the
balance of cash and cash equivalents of the joint venture with the
remaining balance, if any, being considered Excess Cash. At 31
December 2019, the amount of Excess Cash that is included in the
fair value of Monte Barreto stated in these financial statements is
US$1,197,575 (2018: US$2,959,505).
At 31 December 2019, 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. At 31 December
2018, cash flows were estimated until 2046 when the joint venture
expires. The key assumptions used in the discounted cash flow model
are the following:
31 Dec 2019 31 Dec 2018
Discount rate (after tax) (i) 9.75% 9.5%
Occupancy year 1 100% 100%
Average occupancy year 2 to 8 98.9% 98%
Occupancy year 8 and subsequent periods 97.5% 95%
Average rental rates per square meter per US$28.28 US$26.93
month - year 1 to 6
Annual increase in rental rates subsequent
to year 7 (ii) 3.0% 2.5%
Capital investments as percentage of rental
revenue 2% 2%
(i) The effective tax rate is estimated to be 18% (2018: 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, a 5-star hotel that
has 397 rooms, including 16 suites. 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 CUBANACAN (as to 50%). All decisions at shareholder
meetings require the unanimous agreement of the Cuban and foreign
shareholders.
In November 2018, Miramar was merged with Cubacan, the Cuban
joint venture company that previously owned the Varadero Hotels. As
a result of the merger, the four hotels are now owned by Miramar as
the remaining joint venture company. Subsequent to the merger
CUBANACAN contributed to Miramar surface rights for the four hotels
which have been extended / granted to 2042.
At 31 December 2019 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 Investment Manager and 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 independent valuations of
the properties held by the joint venture.
The Investment Manager and 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 are deducted from the balance of
cash and cash equivalents of the joint venture with the remaining
balance, if any, being considered Excess Cash. At 31 December 2019,
the amount of Excess Cash that is included in the fair value of
Miramar stated in these financial statements is US$20,187,983(2018:
US$21,680,176). Cash flows have been estimated for a ten year
period. Cash flows from year 11 onward are equal to the capitalised
amount of the cash flows at year 10. The key assumptions used in
the discounted cash flow model are the following:
31 Dec 2019 31 Dec 2018
Meliã Habana
Discount rate (after tax) (i) 12.5% 12.7%
Average occupancy years 1 to 10 70.8% 72%
Average daily rate per guest - year 1 US$137.75 US$165.95
Average increase in average daily rate
per guest - year 2 to 6 7.5% 10%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2019 31 Dec 2018
Meliã Las Americas
Discount rate (after tax) (iii) 12.25% 12.2%
Average occupancy year 1 to 3 78% 82%
Occupancy year 4 and subsequent periods 79.5% 83%
Average daily rate per guest - year 1 US$145.48 US$148.37
Average increase in average daily rate
per guest - year 2 to 6 3.8 % 3%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2019 31 Dec 2018
Meliã Varadero
Discount rate (after tax) (iii) 12.25% 12.2%
Average occupancy year 1 to 5 80.2% 81%
Occupancy year 6 and subsequent periods 80.4% 81%
Average daily rate per guest - year 1 US$104.57 US$118.13
Average increase in average daily rate
per guest - year 2 to 6 4% 3%
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) 12.25% 12.2%
Average occupancy year 1 to 5 79% 84%
Occupancy year 6 and subsequent periods 80% 84%
Average daily rate per guest - year 1 US$95.12 US$103.01
Increase in average daily rate per guest
- year 2 5% 5%
Average increase in average daily rate
per guest - year 3 to 6 4% 3%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3% 2.5%
Capital investments as percentage of total
revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (2018: 19%).
(ii) The increase in the average daily rate per guest in
subsequent periods is in-line with the estimated rate of long-term
inflation.
(iii) The effective tax rate is estimated to be 21% (2018: 21%).
Sensitivity to changes in the estimated rental rates / average
daily rates
The discounted cash flow models include estimates of the future
rental rates / average daily rates of the joint venture companies.
Actual rental rates / average daily rates may differ from these
estimates due to several factors including the general business
climate and economic conditions, the strength of the overall
tourism market and the influence of competitors. Therefore, the
following tables detail the change in fair values of the equity
investments, when applying what Management considers to be the
reasonable possible spread in rental rates / average daily rates of
between 15% lower and 15% higher compared to the rates used in
these consolidated financial statements .
The following table details the fair values of the equity
investments at 31 December 2019 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 82,380,413 78,058,250 73,736,088
Miramar 127,887,983 124,636,618 121,384,942 118,096,999
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 91,328,282 95,346,901 99,669,063
Miramar 127,887,983 131,139,349 134,390,715 137,642,082
The following table details the fair values of the equity
investments at 31 December 2018 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 76,165,505 72,395,925 68,626,345 64,856,765
Miramar 154,630,176 148,425,688 142,213,285 135,998,848
The following table details the fair values of the equity
investments at 31 December 2018 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 76,165,505 79,935,085 83,704,665 87,474,245
Miramar 154,630,176 160,834,665 167,039,155 173,243,646
Sensitivity to changes in the occupancy rates
The discounted cash flow models include estimates of the future
occupancy rates of the joint venture companies. Actual occupancy
rates may differ from these estimates due to several factors
including the general business climate and economic conditions, the
strength of the overall tourism market and the influence of
competitors. Therefore, the following tables detail the change in
fair values of the equity investments, when applying what
Management considers to be the reasonable possible spread in
occupancy rates of between 15% lower and 15% higher compared to the
rates used in these consolidated financial statements.
The following table details the fair values of the equity
investments at 31 December 2019 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 82,279,267 77,852,944 73,423,072
Miramar 127,887,983 121,797,791 115,682,917 109,515,239
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 86,702,576 91,123,299 n/a n/a
Miramar 127,887,983 133,978,176 140,068,370 146,158,565
(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 2018 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 76,165,505 72,230,239 68,289,794 64,343,255
Miramar 154,630,176 146,970,365 139,298,568 131,614,024
The following table details the fair values of the equity
investments at 31 December 2018 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 76,165,505 79,432,599 n/a n/a
Miramar 154,630,176 162,286,229 169,942,284 177,592,705
(ii) 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 31 December 2019 when applying lower discount
and capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 98,365,774 114,227,257 137,096,450
Miramar 127,887,983 139,993,689 155,101,777 174,476,187
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 77,753,412 70,660,355 65,941,079
Miramar 127,887,983 117,974,292 109,709,199 102,714,755
The following table details the fair values of the equity
investments at 31 December 2018 when applying lower discount and
capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 76,165,505 82,383,213 89,565,609 97,908,076
Miramar 154,630,176 170,289,179 189,951,563 215,364,775
The following table details the fair values of the equity
investments at 31 December 2018 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 76,165,505 70,753,968 66,019,424 61,856,143
Miramar 154,630,176 141,869,178 131,272,828 122,335,494
Sensitivity to changes in the estimation of Excess Cash
The fair values of the equity investments have been estimated
using the discounted cash flow method and adjusted for the Excess
Cash held by the joint venture companies. Within the calculation of
Excess Cash, it is estimated that the joint ventures will maintain
a sufficient cash balance for working capital purposes equal to the
equivalent of two months' operating expenses.
The amount of cash on hand required for working capital purposes
may fluctuate due to a change in the aging of receivables and
payables of the joint venture companies. Management believes that
the maximum amount of cash that would be required to be kept on
hand would not exceed three months of operating expenses. Therefore
the following table details the changes in fair values of the
equity investments at 31 December 2019 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 86,702,576 86,464,354 86,226,132 85,987,911
Miramar 127,887,983 125,617,753 123,347,522 121,077,292
The following table details the changes in fair values of the
equity investments at 31 December 2018 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 76,165,505 75,925,078 75,684,651 75,444,225
Miramar 154,630,176 152,001,858 149,373,541 146,745,223
A reduction in the number of months of operating expenses used
in the calculation would increase the changes in fair values of the
equity investments at 31 December 2019 and 2018, however this is
considered unlikely and therefore the related sensitivities have
not been shown.
TosCuba
At 31 December 2019 and 2018 the Group owned an indirect 80%
interest in Mosaico Hoteles S.A, 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. Construction of the hotel began in December
2018 and is expected to be completed the first half of 2021. The
Group has made capital contributions of US$8,000,000 (2018:
US$8,000,000) to TosCuba which is the estimated fair value of the
investment.
On 9 April 2019 it was announced that 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 will be paid from the
countervalue fund on behalf of the joint ventures. As of 31
December 2019, TosCuba has received cash grants under the programme
totalling US$9,500,000. The 50% interest of the Group in amounts
received under the programme by TosCuba have been recorded as a
change in the fair value in the investment in TosCuba.
Dividend income from equity investments
Dividend income (including participation payments) from the
equity investments above during the period is as follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Monte Barreto 9,133,233 7,583,366
Miramar 11,537,327 8,575,092
20,670,560 16,158,458
------------ ------------
Financial information of joint venture companies
The principal financial information of the joint venture
companies for the years ended 31 December 2019 and 2018 is as
follows:
Monte Barreto Miramar (i) Cubacan TosCuba (iv)
(i)
2018 2019 2018(ii) 2019 2018(iii) 2019 2018
US$ US$ US$ US$ US$ US$
2019 000's US$
US$ 000's 000's 000's 000's 000's
000's 000's
------- -------- --- --------- ------- ---------- ------- --- -------
Cash and
equivalents 19,141 7,191 56,399 66,352 - 48,336 2,407 3,184
Other current
assets 2,206 5,670 21,434 19,213 - 13,025 5,483 8,586
Non-current
assets 48,507 50,006 138,054 136,973 - 74,823 32,828 10,196
Current
financial
liabilities 18,389 6,286 20,099 23,624 - 36,365 2,554 1,217
Other current
liabilities - - - - - - - -
Non-current
financial
liabilities 3,687 3,675 1,055 1,041 - - 12,164 4,750
Other
non-current
liabilities - - - - - - - -
Revenue 23,867 23,396 85,759 38,138 - 56,064 - -
Interest
income 31 31 - - - - - -
Interest
expense - - - - - - - -
Depreciation
and
amortisation 1,658 1,606 6,831 2,623 - 3,973 - -
Taxation 2,919 3,038 263 1,998 - 1,559 - -
Profit (loss)
from
continuing
operations 13,536 12,714 17,872 8,486 - 13,178 - -
Other
comprehensive
income - - - - - - -
Total
comprehensive
income (loss) 13,536 12,714 17,872 8,486 - 13,178 - -
(i) Figures obtained from financial statements prepared under IFRS.
(ii) Cubacan was merged with Miramar in November 2018. As such,
amounts recorded in the statement of comprehensive income of
Cubacan prior to 30 September 2018 have not been included in the
2018 figures of Miramar.
(iii) Figures of 2018 of Cubacan are from its final financial
statements for the nine months ended 30 September 2018 prior to its
merger with Miramar (see note 7). Figures of 2018 have been
obtained from financial statements prepared under Cuban GAAP.
(iv) Figures obtained from financial statements prepared under Cuban GAAP.
8. Property, plant and equipment
Office furniture Works of
Motor vehicles and equipment art Total
US$ US$ US$ US$
----------------- ----------------- ----------- ----------
Cost:
At 1 January 2018 335,672 158,636 384,800 879,108
Additions - 23,688 7,000 30,688
Revaluation - - 50,250 50,250
Disposals (5,500) - - (5,500)
At 31 December
2018 330,172 182,324 442,050 954,546
Additions 44,330 3,563 - 47,893
Revaluation (i) - - 21,250 21,250
At 31 December
2019 374,502 185,887 463,300 1,023,689
Accumulated Depreciation:
At 1 January 2018 281,968 101,470 - 383,438
Charge 21,665 16,028 - 37,693
Disposals (3,850) - - (3,850)
At 31 December
2018 299,783 117,498 - 417,281
Charge 20,155 17,907 - 38,062
At 31 December
2019 319,938 135,405 - 455,343
Net book value:
At 31 December
2018 30,389 64,826 442,050 537,265
At 31 December
2019 54,564 50,482 463,300 568,346
(i) A valuation was performed by an independent valuer dated 20
December 2019. The cost value of the art work is $143,601.
9. Accounts payable and accrued expenses
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Due to shareholders (i) 5,399 1,305,982
Due to Meliã Hotels International
SA (ii) 354,581 -
Accrued professional fees 586,981 374,250
Management fees payable (see note
15) 1,041,950 288,269
Due to Enrique Rottenberg - 57,809
Accrued Directors fees 1,617 57,579
Due to Intercan Inc. - 2,865
Other accrued expenses 57,116 51,764
Other accounts payable 18,569 64,435
------------ ------------
2,066,213 2,202,953
------------ ------------
(i) Due to shareholders represents past dividends declared that
the Group has been unable to settle due to reasons internal to the
relevant shareholders. The majority of these amounts were
subsequently paid to shareholders in July 2019.
(ii) Amounts due to Meliã Hotels International S.A represent
funds held for disbursement under the TosCuba Construction
Facility, scheduled to be disbursed to the constructor in January
2020.
The future maturity profile of accounts payable and accrued
expenses based on undiscounted contractual payments:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Up to 30 days 409,709 134,777
Between 31 and 90 days 1,115,552 762,194
Between 91 and 180 days 535,553 1,305,982
Between 181 and 365 days 5,399 -
2,066,213 2,202,953
------------ ------------
10. Short-term borrowings
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Northview Investment Fund - -
Ltd. (i)
- -
------------ ------------
(i) On 8 November 2017 the Group entered into a bridge loan
agreement (as amended on 3 April 2018 and 30 July 2018) with
Northview Investment Fund Ltd., a shareholder of the Group, to
borrow EUR30,000,000 (US$35,374,619) with an annual interest rate
of 12.0% which amounted to interest incurred for the year ended 31
December 2019 of US$Nil (2018: US$3,560,772). The principal was due
in full on or before 1 April 2020 with accrued interest payments
made quarterly until the final principal payment date. Short-term
borrowings were secured by a conversion right which allowed the
lender to convert outstanding amounts to shares of CEIBA and a
security interest in the shares of CEIBA Property Corporation Ltd.
The principal and outstanding interest under the bridge loan was
paid in full on 25 October 2018.
The movement of the short-term borrowings is as follows:
31 Dec 2019 31 Dec 2018
US$ US$
-------------------------- -------------
Initial balance - 35,820,895
Gain on settlement of financial
liabilities - (1,625,406)
Cash paid - (34,195,489)
Final balance - -
--------------------------- -------------
11. Stated capital and net asset value
Authorised
The Group has the power to issue an unlimited number of shares.
The issued shares of the Group are ordinary shares of no par
value.
Issued
The following table shows the movement of the issued shares
during the year:
Number of Stated capital
ordinary US$
shares
------------ ---------------
Stated capital
Stated capital at 1 January 2018 13,458,947 68,672,009
------------ ---------------
Split of shares at 12 September
2018 (i) 107,671,576 68,672,009
------------ ---------------
Issuance of shares (ii) 30,000,000 37,966,014
Stated capital at 31 December
2018 137,671,576 106,638,023
------------ ---------------
Stated capital at 31 December
2019 137,671,576 106,638,023
------------ ---------------
(i) On 12 September 2018, the 13,458,947 issued ordinary shares
of CEIBA were split on an 8-for-1 basis, and consequently each
shareholder of the CEIBA received 8 new ordinary shares of no par
value for each ordinary share held. All existing pre-split ordinary
shares were automatically cancelled upon issuance of the
107,671,576 new post-split ordinary shares.
(ii) On 22 October 2018, CEIBA listed all its existing ordinary
shares on the Specialist Fund Segment of the Main Market of the
London Stock Exchange. In connection with the Listing, CEIBA also
issued 30,000,000 new ordinary shares by way of an Initial Public
Offering with an issue price of GBP 1.00 per share. The net
proceeds of the Initial Public Offering has been calculated as
follows:
US$
------------
Gross proceeds (GBP 30,000,000) 39,114,000
Share issue costs (1,147,986)
Net proceeds of initial public offering 37,966,014
------------
Rights, preferences and restrictions attaching to shares
The holder of each share is entitled to one vote at any
Shareholders' meeting, to receive a share of any dividends declared
by the Directors and to a share of the residual net assets upon
winding up of CEIBA.
Net asset value
The net asset value attributable to the shareholders of the
Group ("NAV") is calculated as follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------- -------------
Total assets 262,015,519 268,352,002
Total liabilities (5,899,546) (7,036,286)
Less: non-controlling interests (49,381,639) (55,674,370)
------------- -------------
NAV 206,734,334 205,641,346
Number of ordinary shares
issued (i) 137,671,576 137,671,576
NAV per share 1.50 1.49
Non-controlling interest
At 31 December 2019, the non-controlling interest corresponds to
the 35% participation of Meliã Hotels International, in the equity
of HOMASI and the 20% participation of Meliã Hotels International,
in the equity of Mosaico Hoteles S.A
The non-controlling interests in the above companies are as
follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Non-controlling interest of
HOMASI 46,878,858 54,161,837
Non-controlling interest of
Mosaico Hoteles S.A. 2,502,781 -
Non-controlling interest of
Mosaico B.V. - 1,512,533
------------ ------------
Total non-controlling interests 49,381,639 55,674,370
------------ ------------
The movement of the non-controlling interests is as follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Initial balance 55,674,370 53,891,522
Interest of non-controlling interest
in net (loss)/income (5,633,673) 2,141,153
Net other comprehensive income/(loss)
to be reclassified to profit or loss
in subsequent periods 1,105,415 (2,550,040)
Cash distribution to non-controlling
interest (1,786,874) -
Capital contributions from non-controlling
interest 22,401 2,191,735
------------ ------------
Final balance 49,381,639 55,674,370
------------ ------------
The movement of the non-controlling interests HOMASI is as
follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Initial balance 54,161,837 53,201,995
Net other comprehensive (loss)/income
to be reclassified to
profit or loss in subsequent periods 1,105,415 (2,550,040)
Interest of non-controlling interest
in net income (6,546,691) 2,178,147
Cash distribution to non-controlling
interest (1,841,703) -
Capital contributions attributable to
non-controlling interest (i) - 1,331,735
------------ ------------
Final balance 46,878,858 54,161,837
------------ ------------
(i) During 2018, the non-controlling interest of HOMASI made
capital contributions in excess of its equity interest totalling
US$3,671,109 of which US$2,339,374 was attributable to the Group
and US$1,331,735 to the non-controlling interest.
The movement of the non-controlling interests of Mosaico Hoteles
S.A. is as follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Initial balance - -
Non-controlling interest transferred
from Mosaico B.V. 1,567,361 -
Interest of non-controlling interest
in net income 913,019 -
Capital contributions from non-controlling
interest 22,401 -
------------ ------------
Final balance 2,502,781 -
------------ ------------
The movement of the non-controlling interests of Mosaico B.V. is
as follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Initial balance 1,512,533 689,527
Interest of non-controlling interest
in net loss (1) (36,994)
Capital contributions from non-controlling
interest - 860,000
Non-controlling interest transferred
to Mosaico Hoteles S.A. (1,512,532)
------------ ------------
Final balance - 1,512,533
------------ ------------
The principal financial information of HOMASI, Mosaico Hoteles
S.A. and Mosaico B.V. for the years ended 31 December 2019 and 2018
is as follows:
Mosaico
Hoteles
HOMASI S.A. Mosaico BV.
--------------------------- --------- ----------------------
2019 2018 2019 2019 2018
US$ US$ US$ US$ US$
000's 000's 000's 000's 000's
---------- --- ---------- --------- ------- --- --------
Current assets 6,316 211 104 - -
Non-current assets 127,888 154,630 12,750 - 8,000
Current liabilities (264) (291) (340) - (437)
Equity (133,940) (154,550) (12,514) - (7,563)
Income 11,615 7,406 4,751 - -
Expenses (30,320) (1,183) (186) - (185)
Depreciation - - - - -
Taxation - - - - -
Net income/(loss)
for the year (18,705) 6,223 4,565 (7) (185)
Other comprehensive
(loss)/income 3,158 (7,286) - - -
Total comprehensive
loss (15,547) (1,063) 4,565 (7) (185)
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 Meli ã 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.
31 December 2019
US$
--------------------------------------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 91,969,762 149,273,530 20,772,227 262,015,519
Total liabilities (2,345,827) (3,553,719) - (5,899,546)
Total net assets 89,623,935 145,719,811 20,772,227 256,115,973
Dividend income 9,133,233 11,537,327 - 20,670,560
Other income - 15,426 820,588 836,014
Change in fair value of
equity investments 10,537,071 (25,195,633) - (14,658,562)
Allocated expenses (2,525,970) (1,913,614) (79,425) (4,519,009)
Foreign exchange loss - - (383,162) (383,162)
Net income 17,144,334 (15,556,494) 358,001 1,945,841
Other comprehensive loss - 3,158,328 21,250 3,179,578
------------ ------------- ------------ -------------
Total comprehensive income/(loss) 17,144,334 (12,398,166) 379,251 5,125,419
Other segment information:
Property, plant and equipment
additions 47,893 - - 47,893
Depreciation 32,416 5,646 - 38,062
Total assets 91,969,762 149,273,530 20,772,227 262,015,519
Total liabilities (2,345,827) (3,553,719) - (5,899,546)
31 December 2018
US$
Commercial Tourism Other Total
property / Leisure
Total assets 85,548,677 179,942,146 2,861,179 268,352,002
Total liabilities (764,593) (6,271,693) - (7,036,286)
------------ ------------- ------------ -------------
Total net assets 84,784,084 173,670,453 2,861,179 261,315,716
Dividend income 7,583,366 8,575,092 - 16,158,458
Other income - 89,264 1,946,729 2,035,993
Change in fair value of
equity investments (1,543,402) (2,940,123) - (4,483,525)
Allocated expenses (4,369,969) (5,543,096) (668,444) (10,581,509)
Foreign exchange gain - - 787,662 787,662
------------ ------------- ------------ -------------
Net income 1,669,995 181,137 2,065,947 3,917,079
Other comprehensive loss - - (7,235,581) (7,235,581)
Total comprehensive income/(loss) 1,669,995 181,137 (5,169,634) (3,318,502)
Other segment information:
Property, plant and equipment
additions 10,922 19,766 - 30,688
Depreciation 35,187 2,506 - 37,693
13. Related parties disclosures
Compensation of Directors
As of 15 June 2018, each Director receives a fee of GBP35,0 00
(US$39,111) per annum with the Chairman receiving GBP 40,000
(US$44,419). The Chairman of the Audit Committee also receives an
annual fee of GBP40,000 (US$ 44,419 ). 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 Director fees including the fees of the Chairman, for the
year ended 31 December 2019 were US$239,085 (year ended 31 December
2018: US$146,246).
Transactions with other related parties
Transactions and balances between the Group and the joint
venture companies included within the equity investments of the
Group are detailed in notes 5, 6, 7 and 8.
CPC and GrandSlam Limited, wholly-owned subsidiaries of the
Group, lease office space totalling 319 square meters from Monte
Barreto, a commercial property investment in which the Group holds
a 49% interest. The rental charges paid under these leases are
accounted for in operational costs and for the year ended 31
December 2019 amounted to US$24,500 (2018: US$143,788) with an
average rental charge per square meter at 31 December 2019 of
US$37.64 (2018: US$26.79) plus an administration fee of US$9.75 per
square meter.
Transactions with Investment Manager
Under the terms of the Management Agreement, ASFML is entitled,
with effect from 1 November 2018, to receive an annual management
fee at the rate of 1.5 per cent of Total Assets. For this purpose,
the term Total Assets means the aggregate of the assets of the
Company less liabilities on the last business day of the period to
which the fee relates (excluding from liabilities any proportion of
principal borrowed for investment and treated in the accounts of
the Company as current liabilities). The annual management fee
payable by the Group to ASFML will be lowered by the (annual)
running costs of the Havana operations of CEIBA Property
Corporation Limited, a subsidiary of the Group. The management fees
earned by ASFML for the year ended 31 December 2019 were
US$2,985,429 (2018: US$525,224) (see note 15). In connection with
the Management Agreement, ASFML paid the Group US$5,000,000 for the
purpose of compensating the Group for the costs related to the
initial public offering and the listing of its shares on the SFS as
well as for releasing and making available the Group's internal
management team to ASFML. In the event that the Management
Agreement is terminated prior to the fifth anniversary of its
coming into effect, the Group must pay to ASFML a prorated amount
of the US$5,000,000 based on the amount of time remaining in the
five year period. As such, this payment has been recorded as a
deferred liability and is being amortised over the five year
period. The amount amortised each period is accounted for as a
reduction of the management fee. At 31 December 2019, the amount of
the payment recorded as a deferred liability is US$3,833,333 (2018:
US$4,833,333): with US$1,000,000 (2018: US$1,000,000) being the
current portion and US$2,833,333 (2018: US$3,833,333) being the
non-current portion ASFML is a wholly-owned subsidiary of Standard
Life Aberdeen plc which has an interest at 31 December 2019 in
9,747,852 shares of the stated capital (2018: 9,747,852).
Interests of Directors and Executives in the stated capital
At 31 December 2019 John Herring, a Director of CEIBA, had an
indirect interest in 40,000 shares (2018: 40,000 shares).
At 31 December 2019 Peter Cornell, a Director of CEIBA, has an
indirect interest in 100,000 shares (2018: 100,000 shares).
At 31 December 2019 Trevor Bowen a Director of CEIBA, has an
indirect interest in 43,600 shares (2018: 43,600 shares).
At 31 December 2019 Colin Kingsnorth, a Director of CEIBA, is a
director and shareholder of Laxey Partners Limited ("Laxey"). Laxey
holds 17,303,252 shares (2018: 17,303,252 shares). Funds managed by
Laxey hold 13,676,064 shares (2018: 13,676,064 shares) .
At 31 December 2019 Sebastiaan A.C. Berger, Portfolio manager
and Chief Executive Officer of CEIBA, has an interest in 3,273,081
s hares (2018: 3,273,081 s hares ).
At 31 December 2019 Cameron Young, Chief Operating Officer of
CEIBA, has an indirect interest in 4,129,672 shares (2018:
4,129,672 shares).
At 31 December 2019 Paul S. Austin, Chief Financial Officer of
CEIBA, has an interest in 144,000 shares (2018: 144,000).
14. Basic and diluted earnings per share
The earnings per share have been calculated on a
weighted-average basis and are arrived at by dividing the net
income for the year/period attributable to shareholders by the
weighted-average number of shares in issue. The weighted-average
number of shares in issue has been updated to take into account the
share split for current and comparative figures below:
31 Dec 31 Dec
2019 2018
US$ US$
------------ ------------
Weighted average of ordinary shares in issue 137,671,576 113,425,001
Net income for the year attributable to the
shareholders 7,579,514 1,775,926
Basic and diluted earnings per share 0.06 0.02
15. Investment Manager
On 31 May 2018, the Group entered into a Management Agreement
under which ASFML was appointed as the Group's alternative
investment fund manager to provide portfolio and risk management
services to the Group. The Management Agreement took effect on 1
November 2018. ASFML has delegated portfolio management to the
Investment Manager. Both ASFML and the Investment Manager are
wholly-owned subsidiaries of Standard Life Aberdeen plc.
Pursuant to the terms of the Management Agreement, ASFML is
responsible for portfolio and risk management on behalf of the
Group and will carry out the on-going oversight functions and
supervision and ensure compliance with the applicable requirements
of the AIFM Rules. Under the terms of the Management Agreement,
ASFML is entitled, with effect from 1 November 2018, to receive an
annual management fee at the rate of 1.5 per cent of Total Assets.
For this purpose, the term Total Assets means the aggregate of the
assets of the Company less liabilities on the last business day of
the period to which the fee relates (excluding from liabilities any
proportion of principal borrowed for investment and treated in the
accounts of the Company as current liabilities).The annual
management fee payable by the Group to ASFML will be lowered by the
(annual) running costs of the Havana operations of CEIBA Property
Corporation Limited, a subsidiary of the Group. The management fees
earned by the Investment Manager for the year ended 31 December
2019 were US$ 2,985,429 (2018: US$525,224).
There are no performance, acquisition, exit or property
management fees payable to ASFML or the Investment Manager.
In connection with the Management Agreement, ASFML paid the
Group US$5,000,000 for the purpose of compensating the Group for
the costs related to the initial public offering and the listing of
its shares on the SFS as well as for releasing and making available
the Group's internal management team to ASFML. In the event that
the Management Agreement is terminated prior to the fifth
anniversary of its coming into effect, the Group must pay to ASFML
a prorated amount of the US$5,000,000 based on the amount of time
remaining in the five year period. As such, this payment has been
recorded as deferred liability and is being amortised over the five
year period. The amount amortised each period is accounted for as a
reduction of the management fee. At 31 December 2019, the amount of
the payment recorded as a deferred liability is US$3,833,333 (2018:
US$4,833,333) with US$1,000,000 (2018: US$1,000,000) being the
current portion and US$2,833,333 (2018: US$3,833,333) being the
non-current portion.
For the year ended 31 December 2019, the amount of the payment
amortised and recorded as a reduction of the management fee expense
in the consolidated statement of comprehensive income was
US$1,000,000 (2018: US$166,667):
2019 2018
US$ US$
------------
Management fees earned 2,985,429 525,224
Amortisation of deferred liability (1,000,000) (166,667)
Management fee expense 1,985,429 358,557
------------ ----------
16. Commitments and contingencies
Operating lease commitments
The Group has operating leases for office building space. These
have a contractual life of one year with mutual acceptance required
through issuing a notice of extension in order for lease renewal to
be undertaken annually. There are no restrictions placed upon the
lessee by entering into these leases. The annual lease payments in
place at 31 December 2019 were US$24,500 (2018: US$146,469).
The rental charges paid under operating leases accounted for in
operational costs of the statement of comprehensive income for the
year ended 31 December 2019 amounted to US$24,500 (2018:
US$143,788).
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 Playa
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$9,915,549 (2018: US$4,749,764) of which has
been advanced as at 31 December 2019. The Group has the right to
syndicate Tranche B of the Construction Facility to other lenders
(see note 6).
FINTUR Facility
Since 2002, the Company has arranged and participated in
numerous secured finance facilities extended to FINTUR, the Cuban
government financial institution for Cuba's tourism sector. These
facilities act as a medium-term investment and treasury management
tool for the Group. The facilities are fully secured by offshore
tourism proceeds from numerous internationally managed hotels.
The Group has a successful 18-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 has a EUR4 million participation in the most recent
facility executed in March 2016 (a EUR24 million four-year facility
with an 8 per cent. interest rate), which is operating successfully
without delay or default. As at 31 December 2019 the principal
amount of EUR2,883,333 (US$3,230,171) (2018: EUR2,416,667
(US$2,764,550)) was outstanding under the Company's
participation.
The transaction documents were amended in May 2019 in order to
create a new second tranche of the 2016 FINTUR facility in the
principal amount of EUR12 million (US$13,644,294), of which the
Company agreed to assume a lender participation in the principal
amount of EUR2 million (US$2,274,049), which was disbursed in July
2019.
17. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through
a process of identification, measurement and monitoring and subject
to risk limits and other controls. The objective of the Group is,
consequently, to achieve an appropriate balance between risk and
benefits, and to minimise potential adverse effects arising from
its financial activity.
The main risks arising from the Group's financial instruments
are market risk, credit risk and liquidity risks. Management
reviews policies for managing each of these risks and they are
summarised below. These policies have remained unchanged since the
beginning of the period to which these consolidated financial
statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows
of financial instruments will fluctuate due to changes in market
variables. Market price risk comprises two types of risks: foreign
currency risk and interest rate risk. The Group is not materially
exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial
instrument denominated in a currency other than the functional
currency will fluctuate due to changes in foreign exchange
rates.
The statement of comprehensive income and the net value of
assets can be affected by currency translation movements as certain
assets and income are denominated in currencies other than US$.
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.
The sensitivity of the income (loss) to a variation of the
exchange rate (EUR/US$) in relation to Euro denominated assets is
the following:
Effect of the
variation in the
foreign exchange
rate
% Income (loss) Income (loss)
31 Dec 2019 31 Dec 2018
US$ US$
------------------ --------------- ---------------
+15 1,882,162 2,613,683
+20 2,509,549 3,484,911
-15 (1,882,162) (2,613,683)
-20 (2,509,549) (3,484,911)
(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$
----------- --------- ------------------ ------------
31 December 2019
Equity investments (US$) 227,340,559 - - 227,340,559
Loans and lending facilities
(EUR) 3,230,171 3,230,171 - -
Loans and lending facilities
(US$) 9,915,549 9,915,549 - -
Accounts receivable and accrued
income (US$) 7,736,695 - - 7,736,695
Accounts receivable and accrued
income (EUR) 121,621 - - 121,621
Cash at bank (EUR) 11,230,891 - - 11,230,891
Cash at bank (US$) 1,191,898 - - 1,191,898
Cash at bank (GBP) 663,606 - - 663,606
Cash on hand (EUR) 996 - - 996
Cash on hand (US$) 1,724 - - 1,724
Cash on hand (CUC) 13,463 - - 13,463
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- --------- -------- ------------
31 December 2018
Equity investments (US$) 238,795,681 - - 238,795,681
Loans and lending facilities
(EUR) 2,764,550 2,764,550 - -
Loans and lending facilities
(US$) 4,749,764 4,749,764 - -
Accounts receivable and accrued
income (US$) 1,431,484 - - 1,431,484
Accounts receivable and accrued
income (EUR) 258,468 - - 258,468
Cash at bank (EUR) 18,814,623 2,027,302 - 16,787,321
Cash at bank (US$) 117,073 - - 117,073
Cash at bank (GBP) 865,614 - - 865,614
Cash on hand (EUR) 583 - - 583
Cash on hand (US$) 8,545 - - 8,545
Cash on hand (CUC) 8,352 - - 8,352
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation, expected credit losses are measured using
probability of default, exposure at default and loss given default.
Management consider both historical analysis and forward looking
information in determining an expected credit loss. Refer to note 6
for the assessment expected credit loss for loans and lending
facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for
each component of the consolidated statement of financial position
as well as future loan commitments, irrespective of guarantees
received:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Loans and lending facilities 13,145,720 7,514,314
Future loan commitments (TosCuba Construction
Facility) (i) 30,584,451 40,250,236
Accounts receivable and accrued income 2,142,673 1,689,952
Cash and cash equivalents 13,102,578 19,814,790
------------ ------------
Total maximum exposure to credit risk 58,975,422 69,269,292
------------ ------------
(i) The TosCuba Construction Facility is secured by future
income of the hotel under construction and 50% of the principal
construction 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 Group holds its cash and cash equivalents at financial
institutions located in the countries listed below. Also included
in the following table are the credit ratings of the corresponding
financial institutions, as determined by Moody's:
Credit 31 Dec 2019 31 Dec 2018
Rating US$ US$
-------- ------------ ------------
Cash at bank
Cuba Caa2 1,083,763 112,661
Guernsey A2 725,110 3,760,419
Spain Ba3 2,678,694 13,877,600
Spain A2 18,913 19,328
Spain Baa2 8,579,915 2,027,302
13,086,395 19,797,310
------------ ------------
Cash on hand
Spain 100 -
Cuba 16,083 16,897
The Netherlands - 583
------------ ------------
16,183 17,480
------------ ------------
Total cash and cash equivalents 13,102,578 19,814,790
------------ ------------
At 31 December 2019 and 31 December 2018, all cash and
short-term deposits that are held with counter-parties have been
assessed for probability of default; as a result no loss allowance
has been recognised based on 12-month expected credit losses as any
such impairment would be wholly insignificant to the Group.
Guarantees received
The amount and type of guarantees required depends on an
assessment of the credit risk of the counter-party. The Group has
neither financial nor non-financial assets obtained as property on
executed guarantees. See note 6 regarding guarantees obtained for
loans and lending facilities.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in
realising its non-cash assets or otherwise raising funds to meet
financial commitments. Assets principally consist of unlisted
securities and loans, which are not readily realisable. If the
Group, for whatever reason, wished to dispose of these assets
quickly, the realisation values may be lower than those at which
the relevant assets are held in the consolidated statement of
financial position. (For maturities of financial assets and
liabilities refer to note 5, 6 and 9).
Although the Group has a number of liabilities (see note 9 -
Accounts payable and accrued expenses, note 10 - Short-term
borrowings 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.
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 Playa Hotel (see note
6). The Construction Facility is in the maximum principal amount of
US$45,000,000 of which US$9,915,549 was disbursed as at 31 December
2019 (31 December 2018: US$4,749,764) under the Company's
participation. The Group has the right to syndicate Tranche B of
the Construction Facility to other lenders.
The principal of the Construction Facility is to be disbursed on
a monthly basis on the percentage of construction completed in each
preceding month. Prior to the COVID-19 pandemic, it was anticipated
that the full amount of the Construction Facility would be
disbursed by the end of 2020. However, the timing of construction
will be affected by the pandemic and consequently the disbursement
of the principal under the Construction Facility will also be
delayed. The Group currently does not have sufficient cash and cash
equivalents to cover the full disbursement of the Construction
Facility. Therefore, the disbursement of the Construction Facility
will be financed in part by the future operating income of the
Group. If future operating income is not sufficient to allow for
the disbursement of the Construction Facility, the Group may
syndicate a portion of the facility to other lenders or seek
short-term financing to cover any shortfall.
The estimated timing of cash outflows under the TosCuba
Construction Facility entered into in April 2018 are as
follows:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Between 31 and 90 days 1,151,827 600,154
Between 91 and 180 days 1,317,800 4,647,659
Between 181 and 1 year 2,400,000 10,724,063
Over 365 days 25,714,823 24,278,360
------------ ------------
30,584,451 40,250,236
------------ ------------
Capital management
The Group maintains an actively managed capital base to cover
risks inherent in the business. The Group manages its capital
structure and makes adjustments in the light of changes in economic
conditions and the risk characteristics of its activities. In order
to maintain or adjust the capital structure, the Group may adjust
the amount of dividend payment to shareholders. No changes were
made in the objectives, policies, and processes from the previous
period.
The capital base managed by the Group is composed of stated
capital, reserves and retained profits that amount at 31 December
2019 and 2018 to a total of US$256,115,973 and US$261,315,716,
respectively. The Group is not subject to external capital
requirements.
18. 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 as described in note
3.9 (c). For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and
requires varying degrees of judgement depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions
and other risks affecting the specific instrument.
Critical accounting judgements in applying the Group's
accounting estimates
Valuation of financial instruments
The Group's accounting policy on fair value measurements is
discussed in note 3.9 (c).
The Group measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements:
-- Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices). This category includes instruments valued using: quoted
prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are considered
less than active; or other valuation techniques for which all
significant inputs are directly or indirectly observable from
market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments for which the
valuation technique includes inputs not based on observable data
and the unobservable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments for which
significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
Fair values of financial assets and financial liabilities that
are traded in active markets are based on quoted prices or dealer
price quotations. The Group does not currently have any financial
assets or financial liabilities trading in active markets.
For all other financial instruments, the Group determines fair
values using valuation techniques. Valuation techniques include net
present value and discounted cash flow models, comparison to
similar instruments for which market observable prices exist and
other valuation models. Assumptions and inputs used in valuation
techniques include risk-free and benchmark interest rates and
foreign currency exchange rates. The objective of valuation
techniques is to arrive at a fair value determination that reflects
the price of the financial instrument at the reporting date that
would have been determined by market participants acting at arm's
length.
For certain instruments, the Group uses proprietary valuation
models, which usually are developed from recognised valuation
models. Some or all of the significant inputs into these models may
not be observable in the market, 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:
31 December 2019
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 227,340,559 227,340,559
- - 227,340,559 227,340,559
---------- ---------- ------------------- ------------ ------------
31 December 2018
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 238,795,681 238,795,681
- - 238,795,681 238,795,681
---------- ---------- ------------------- ------------ ------------
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
Level 3 of the fair value hierarchy:
31 Dec 2019 31 Dec 2018
Unlisted private equity investments US$ US$
------------- ------------
Initial balance 238,795,681 217,086,037
Total gains recognised in
income or loss (14,658,562) (4,483,525)
Foreign currency translation
reserve 3,203,440 (6,575,985)
Acquisitions and capital contributions - 32,769,154
Final balance 227,340,559 238,795,681
------------- ------------
Total losses for the year/period
included in income or loss
relating to assets and liabilities
held at the end of the reporting
year/period (14,658,562) (4,483,525)
------------- ------------
(14,658,562) (4,483,525)
------------- ------------
The fair value of short-term borrowing (see note 10) was
measured using valuation techniques based on observable inputs such
as interest rates, foreign exchange rates as well as the estimated
probability of conversion. There were no significant changes in
these inputs between the date in which the loan was entered into
and when the loan was repaid on 25 October 2018.
The following table shows a reconciliation from the beginning
balances to the ending balances for fair value measurements in
Level 2 of the fair value hierarchy:
31 Dec 2019 31 Dec 2018
Short-term borrowings US$ US$
------------- -------------
Initial balance - 35,820,895
Cash paid - (34,195,489)
Gain on settlement of financial
liabilities - (1,625,406)
Final balance - -
------------- -------------
Total gains for the year/period
included in income or loss
relating to assets and liabilities
held at the end of the reporting
period - (1,625,406)
-------------- -------------
- (1,625,406)
-------------- -------------
Gains/losses related to unlisted private equity investments are
recognised as change in fair value of equity investments in the
consolidated statement of comprehensive income. The accounting
value of the remaining financial assets and liabilities (cash and
cash equivalents, accounts receivable/payable, loans
receivable/payable) approximate their fair values due to their
short-term maturities.
19. Classifications of financial assets and liabilities
The table below provides a reconciliation of the line items in
the Group's consolidated statement of financial position to the
categories of financial instruments.
31 December 2019
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 - 13,102,578 - 13,102,578
Accounts receivable
and accrued income 5 - 7,858,316 - 7,858,316
Loans and lending
facilities 6 - 13,145,720 - 13,145,720
Equity investments 7 227,340,559 - - 227,340,559
227,340,559 34,106,614 - 261,447,173
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 9 - - 2,066,213 2,066,213
- - 2,066,213 2,066,213
------------ -------------- -------------- ------------
31 December 2018
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 - 19,814,790 - 19,814,790
Accounts receivable
and accrued income 5 - 1,689,952 - 1,689,952
Loans and lending
facilities 6 - 7,514,314 - 7,514,314
Equity investments 7 238,795,681 - - 238,795,681
238,795,681 29,019,056 - 267,814,737
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 9 - - 2,202,953 2,202,953
- - 2,202,953 2,202,953
------------ -------------- -------------- ------------
There were no reclassifications of financial assets during the
year ended 31 December 2019 (year ended 31 December 2018: nil).
20. Management salaries
31 Dec
31 Dec 2019 2018
US$ US$
------------- ----------
Management salaries (i) - 2,672,549
-------------- ----------
(i) Management salaries in 2018 included management bonuses paid
due to the successful listing of the Group on the SFS in 2018. In
2019, Management salaries were paid by the Investment Manager (see
note 15).
21. Legal and professional fees
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Legal and professional fees
(i) 1,028,242 2,353,365
------------ ------------
(i) Included within the legal and professional fees of 2018 is
US$912,588 attributable to the listing of the Group's Ordinary
Shares on the SFS and also incurred additional legal fees due to
corporate restructuring.
22. Dividend per share
The dividend per share has been calculated by dividing the
dividend paid by the number of shares in issue at the date of the
dividend distribution. On 29 April 2019, the Board of Directors
declared a dividend of US$8,604,474 or US$0.0625 per share which
was distributed on 14 June 2019 to the shareholders on the share
register as at 31 May 2019. No dividend has been declared in 2020
in relation to the 2019 financial year.
23. Audit fees
Audit fees incurred for the period below:
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Audit fee expense (i) 465,514 392,508
(i) Breakdown of audit and non-audit fees for 2019 and 2018,
non-audit fees classified to legal and professionals due to the
fees relating to the listing on the SFS in 2018.
31 Dec 2019 31 Dec 2018
US$ US$
------------ ------------
Audit fee expense 465,514 392,508
Non- audit fees (2018:USD 41,230 of the
non - audit fees has been capitalised to
stated capital) - 316,706
24. Events after the reporting period
Impact of COVID-19
The outbreak of the Novel Coronavirus ("COVID-19") in 2020 has
adversely impacted global commercial activity and contributed to
significant volatility in the equity and debt markets. The global
impact of the outbreak is rapidly evolving and on 11 March 2020,
the World Health Organization declared a pandemic. Many countries
have reacted by instituting quarantines, prohibitions on travel and
the closure of offices, businesses, schools, retail stores and
other public venues. Businesses are also implementing similar
precautionary measures. Such measures, as well as the general
uncertainty surrounding the dangers and impact of COVID-19, are
creating significant disruption in supply chains and economic
activity and are having a particularly adverse impact on
transportation, hospitality, tourism, entertainment and other
industries. The impact of COVID-19 has led to significant
volatility and declines in the global public equity markets and it
is uncertain how long this volatility will continue. As COVID-19
continues to spread, the potential impacts, including a global,
regional or other economic recession, are increasingly uncertain
and difficult to assess.
The outbreak of COVID-19 and the resulting financial and
economic market uncertainty could have a significant adverse impact
on the Group, including the fair value of its investments. The most
significant conditions relating to COVID-19 arose after the
reporting period and as a result the Directors considers the
emergence of the COVID-19 Coronavirus pandemic to be a
non-adjusting post balance sheet event. Any future impact on the
Group is likely to be in connection with the assessment of the fair
value of its equity investments, the timing of the construction of
TosCuba's hotel in Trinidad and the income of the Group. At the
date of reporting it is not possible to quantify the future
financial impact of COVID-19 on the Group's investments or income
with any degree of certainty.
A description of the present situation of the principal assets
of the Group and mitigating steps taken to date is set out
below.
Equity Investments
Monte Barreto
The operations of Monte Barreto do not appear to be materially
impacted to date. Only a limited number of tenants of Monte Barreto
are airlines, travel agencies and other tourism-related companies
that have suffered an instant loss of income. In addition, Monte
Barreto has no debt financing and a cash balance in excess of US$10
million, which would allow Monte Barreto to operate without income
for an extended period of time if it were to become necessary.
However, the general liquidity situation in Cuba may have a
negative effect on the ability of Monte Barreto to distribute
dividends to its shareholders, including CEIBA.
Miramar
On 20 March 2020, the Cuban Government announced a set of
measures aimed at controlling the spread of COVID-19 within its
national territory, which included strict border restrictions and
the prohibition against entry of tourists. As a direct result of
these measures, Miramar is temporarily closing its hotels and
substantially decreasing its workforce. Miramar has no debt
financing and a healthy cash balance in excess of US$40 million,
which would allow Miramar to operate without income for an extended
period of time. However, the closing of the hotels will clearly
have a negative effect on the results of Miramar, which will impact
its estimated fair value and its ability to distribute dividends to
its shareholders, including CEIBA.
TosCuba
In March 2020, the Italian-Cuban construction partnership that
is constructing TosCuba's 400-room beachfront hotel at Trinidad,
Cuba informed TosCuba that the construction schedule will be
affected by the COVID-19 pandemic and will suffer delays. In
parallel, the Company is presently in discussions with TosCuba to
substantially lower the capital expenditure on the construction
until there is greater certainty around the repatriation of
dividends from Miramar and Monte Barreto that will allow for the
future financing and construction of the new hotel. This will
inevitably extend the timeline and disbursement schedule of the
project and result in a new completion date for the turn-key
construction contract and subsequent start-up of operations of the
hotel.
FINTUR Facility
As at 1 April 2020, the Company is owed EUR1,716,667 in a
finance facility secured by offshore income from numerous hotels in
Cuba. Payment of the outstanding amount is scheduled to take place
in quarterly installments ending on 30 June 2021, but this schedule
will now likely be re-negotiated and the final payment date
extended.
The Directors will continue to closely analyse and review the
impact of COVID-19 on the Group and will take appropriate action as
required.
Confirming and Discounting Facility
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 will be financed
in part by a EUR3.5 million credit line received by HOMASI from a
Spanish bank for this purpose. The facility will be secured by the
offshore cash flows generated by two of the Hotels. In March and
April 2020, a total of EUR1,173,750.37 was disbursed under the
facility. As a result of COVID-19, it has been agreed with Miramar
that no further disbursements will be made under the facility until
the Hotels resume operations.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures
Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined or
specified in the applicable financial framework. The Directors
assess the Company's performance against a range of criteria which
are viewed as particularly relevant for closed-end investment
companies.
NAV Per Share
A very common measure of the underlying value of a share in an
investment company.
In basic terms, the net asset value ('NAV') is the value of the
investment company's assets, less any liabilities it has. The NAV
per share is the NAV divided by the number of shares in issue. This
will very often be different to the share price. The difference is
known as the discount or premium.
The NAV per share was US$1.50 / 1.145p per share as at 31
December 2019.
NAV Total Return
NAV total return involves investing the same net dividend in the
NAV of the Company with debt at fair value on the date on which
that dividend was earned.
The table below provides information relating to the NAV of the
Company on the dividend reinvestment dates during the years ended
31 December 2019 and 31 December 2018.
US$
NAV at 31 December 2018 205,641,346
Dividends paid ( 8,560,689)
Net comprehensive income for the
year(1) 9,653,677
-------------
IFRS NAV at 31 December 2019 206,734,334
Non-IFRS adjustment 3,833,333
-------------
Non-IFRS NAV at 31 December 2019 210,567,667
-------------
(1) Net comprehensive income for the year includes a net loss on
changes in the fair value of equity investments of (US$ 14,658,562
).
Premium (Discount) to NAV
As at 31 December 2019, the share price was 71.0p / US$0.93 and
the net asset value per share was 114.5p / US$1.50, the discount
was therefore (38.0)%.
ADDITIONAL NOTES TO THE ANNUAL FINANCIAL REPORT
The Annual General Meeting will take place at the registered
office of the Company, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT Channel Islands on 19 June 2020 at 2.00pm
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise. Investors may not get back the
amount they originally invested.
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31
December 2019 are an abridged version of the Company's full
financial statements, which have been approved and audited with an
unqualified report. The Annual Report and financial statements will
be delivered to the Guernsey Financial Services Commission in due
course.
The audited Annual Report and financial statements will be
posted in May 2020. Copies may be obtained during normal business
hours from the Company's Registered Office, JTC Fund Solutions
(Guernsey) Limited, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT Channel Islands or from the Company's website,
ceibalimited.co.uk*.
* Neither the content of the Company's website nor the content
of any website accessible from hyperlinks on the Company's website
(or any other website) is (or is deemed to be) incorporated into,
or forms (or is deemed to form) part of this announcement.
By Order of the Board
JTC Fund Solutions (Guernsey) Limited
Secretary
27 April 2020
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
** END**
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFFSISVIDFII
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