SP FINANCE P.L.C.
REPORT OF THE DIRECTORS
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In this regard, it is reassuring to note that all countries from where most of Malta’s tourists originate have been steadily relaxing travel and assembly restrictions, and in some cases such as the United Kingdom, dismantling them completely. This is undoubtedly a consequence of the high percentage of vaccinated people within their populations and the effectiveness of vaccines in ensuring that if the virus is indeed contracted, its effects almost invariably are mild and not life threatening.
The situation in Malta largely follows this trend. The latest pronouncements made by public health officials indicate that practically all restrictions, especially those for events held in the open-air, will be removed in time for the summer season. This is undoubtedly excellent news for the Group’s operations, not only because, like all the Maltese tourism sector, a good summer season is crucial but also due to the numerous outdoor music events that are lined up in the summer of 2022 in the context of the 10-year partnership with the internationally renowned brand ‘Bora-Bora Ibiza’, the start of which was delayed by one year due to the pandemic and which in 2022 should generate significant business for the Group.
Within this context, the board requested management to prepare several financial projections for the year 2022 and beyond, representing different scenarios that varied from the cautiously optimistic to the moderately pessimistic. The financial projections that were finally adopted by the board were those resulting from the scenario that it considered to be the most realistic and yet prudent one. On the basis of these financial projections, the financial results for the year 2022 are expected to improve very significantly compared to those achieved in 2021 with gross revenue expected to double over this period and with significant progress being made in liquidity ratios.
As stated, the projections adopted by the board were those it considered to be based on a realistic yet prudent scenario. None of the scenarios presented to the board included the closure of the hotels for any period of time as a result of the pandemic or for any other reason outside the Group’s control. In view of all the information available to the board regarding the course of the pandemic and the current state of the war in Ukraine, it considered this to be a realistic assumption.
The board also considered the excellent relationship that the Group continues to enjoy with its bankers, a relationship that spans several decades, which suggests that additional finance, if needed, is likely to be forthcoming.
Following this detailed assessment, the directors concluded that the Group is likely to generate sufficient financial resources through its operations as to permit it to continue in operational existence for the foreseeable future, alternatively it is very likely it will be able to access adequate external financial resources to do so.
Therefore, in terms of Capital Markets Rule 5.62, the Directors hereby state that these financial statements have been prepared on the going concern basis.
Loans between subsidiary companies
The proceeds from the bond issue of the 3 May 2019 were invested as €12,000,000 4.1% Cumulative Preference shares in its subsidiary SP Investments Limited. In turn, these proceeds were invested by SP Investments Limited in its subsidiaries, which are the companies operating the Group’s hotels, partly as Ordinary share capital and partly as loans.
As per section B5 of the Summary Note forming part of the Prospectus of the above-mentioned bond issue, the loans invested by SP Investments Limited in its subsidiaries were interest-free.
As from 1 January 2021, it was deemed beneficial to the Group that SP Investments Limited start charging interest on the loans to its subsidiaries at the rate of 8% per annum. The Group and the Company results are not negatively impacted by this change.
Results, Dividends and Reserves
The results for the year are set in the Statement of Profit and Loss and Other Comprehensive Income on page 17.
The Board does not propose the payment of a dividend.
The Group’s retained earnings as at 31 December 2021 amounted to negative €2,227,322 (2020: negative €955,957) while the Company’s retained earnings on the same date amounted to €58,159 (2020: €140,107).