M&L PROPERTY & ASSETS PLC
Pactolus Hungarian Property Plc
Final results to 31 December 2014
Pactolus Hungarian Property Plc presents its results for the year ended 31
December 2014.
The original sphere of the Company's activity was that of acquiring,
developing, selling and letting investment properties in Budapest, Hungary.
However, at the Annual General Meeting held on 26 June 2014, this was expanded
to include investing directly or indirectly (via equities, debt and
derivatives) in a portfolio of assets or asset backed investment vehicles
including real estate, infrastructure, closed and open ended funds.
Key Highlights
* The portfolio of properties was valued at €7.3m as at 31 December 2014
(2013:€7.3m);
* Net asset value per share of 38p as at 31 December 2014 (2013: 41p), a
decrease of 7 per cent, mainly due to exchange rate movements;
* Annualised rent roll of €400,590 at 31 December 2014 (2013: €393,810) with
a current annualised rent roll of €454,180;
* Rental yield on cost as at 31 December 2014 was 7.4 per cent (2013: 7.5 per
cent);
* The quality of our leases has deteriorated with 83 per cent now expiring in
under a year (2013: 73 per cent); and
* The Group has continued to review costs throughout the year, reducing
annual administration costs by 24 per cent to €177,140 for the year ended
31 December 2014 (2013: €232,641).
Chairman's Statement
In what has been a fairly static year for the Group in terms of property
sales, the Group's reported net asset value at the period end was €5.1m,
which equates to 38 pence per share (conversion rate of €1.2870 to
Sterling). We continue to operate at a profit before financing activities,
generating €80,243 this year compared to €20,862 last year.
The Group continued reducing its costs and for this year reported €177,140
in administrative expenses, a reduction of 24 per cent compared to the €
232,641 incurred last year.
The bank loan provided by Investec was recalled and replaced by funds made
available from M&M Investment Company Plc (the parent company of the Asset
Manager and majority shareholder of Pactolus Hungarian Property Plc) on 21
December 2014. Subsequently the Group now has repaid €869,214 of this new
loan from M&M Investment Company Plc.
The share price has moved up to 26p per share as at 31 December 2014
compared to 24p per share as at 31 December 2013.
Our strategy for the forthcoming year remains to continue to cut costs and
sell properties, using the proceeds to reduce unsecured debt. Once the
debt has been cleared, the Company expects to re-invest the proceeds from
the sales of its current property estate primarily into the shares of asset
backed companies such as property companies or closed-end investment funds,
approval of which was given at last year's Annual General Meeting.
This year the Board will present for Shareholders approval, a proposal to
change the Company's name from Pactolus Hungarian Property plc to M&L
Property & Assets plc as it is not the long term intention of the Company
to continue being so focused on Hungarian property assets.
Our Annual General Meeting will be held at 10.00am on Thursday 25 June 2015
at the offices of Equiom (Isle of Man) Limited, Jubilee Buildings, Victoria
Street, Douglas, Isle of Man, IM1 2SH. Shareholders who are unable to
attend the Meeting are requested to complete and return the form of proxy
which is enclosed with the Annual Report and Financial Statements so as to
ensure that their votes are represented.
B Miller
Non-Executive Chairman
28 May 2015
Notes:
Forex Rates:
Euro to the Pound Sterling as at 31 December 2014 was €1.2870 (2013: €
1.2044);
Forint to the Euro
as at 31 December 2013 was 316.50Ft (2013: 296.6Ft).
(Source: FactSet Research Inc.)
Asset Manager's Report
The Property Portfolio
The Group's portfolio valuation has not significantly changed and remains
at €7.3m as at 31 December 2014 (2013: €7.3m). The only valuation changes
this year are with regard to the properties sold post year end and reported
as current investment properties in the statement of financial position.
These properties have been sold at an average net proceeds of 1.7 per cent
above their 31 December 2013 book value.
During the year to 31 December 2014, the Group made no further additions to
the portfolio and the floor space remained at 4,783 square metres. As at
31 December 2014, there were no property sales completed.
Lettings
As at 31 December 2014, the Group had 18 out of 27 properties let for an
average yield against cost of approximately 7.4 per cent (2013: 7.5 per
cent). As at 28 May 2015, the Group had a fully let rental book of
properties.
Disposals
The Group did not complete any property sales in 2014 (2013: One).
However, since the year end the Group has completed the sale of 5
properties. These properties are being sold at an average price per square
metre (after cost) of €1,438.
Debt and Share Repurchase Programme
On 21 December 2014 the Group repaid the entire secured bank debt due to
Investec Bank Plc (Irish Branch). This repayment was funded by an
unsecured loan advanced to the Company from M&M Investment Company Plc, the
parent company of the Group's Asset Manager. As at 31 December 2014, the
total amount due to M&M Investment Company Plc was €2.3m.
Net debt to equity ratio has increased to 46 per cent from 44 per cent
reported last year.
The Company currently has authority to acquire up to 28.6 per cent
(2,950,774 shares) of its current issued share capital (10,316,624 shares)
and will be seeking shareholders' approval at the next annual general
meeting to renew this authority.
Dividend
The Company has continued with its policy of not paying dividends. No
dividend has been paid since 30 October 2009 and there are no plans to pay
a dividend.
Hungarian Economy
The residential property market in Budapest has stabilised. The Hungarian
economy is not expected to record any material growth in 2015.
The Group's strategy for 2015 remains the same in that we intend to work to
retain our tenants, sell units when we can achieve reasonable valuations,
minimise costs and reduce debt.
Midas Investment Management Limited
2nd Floor, Arthur House, Chorlton Street, Manchester, M1 3FH.
Consolidated Statement of Comprehensive Income
For the year ended 31 December
Restated
Notes 2014 2013
€ €
Continuing operations
Rental income and related fees 4 493,473 564,195
Direct operating expenses (236,090) (310,692)
Gross profit 257,383 253,503
Administrative expenses 5 (177,140) (232,641)
Operating profit 5 80,243 20,862
Finance income 10 412 2,265
Finance costs 11 (115,896) (111,804)
Profit on disposal of investment properties 17 - 9,978
Profit on sale of listed investments 16 967 -
Net gain on revaluation of investment properties 17 26,458 -
Unrealised loss on listed investments 16 (99) -
Loss for the year from continuing operations (7,915) (78,699)
Exceptional items 6 - (32,517)
Loss before taxation (7,915) (111,216)
Tax expense 12 (802) (741)
Net loss attributable to equity shareholders (8,717) (111,957)
Other comprehensive loss:
Exchange differences on translating foreign operations (62,316) (190,044)
Total comprehensive loss for the year (71,033) (302,001)
Loss attributable to equity shareholders (8,717) (111,957)
Total comprehensive loss attributable to equity (71,033) (302,001)
shareholders
Loss per Ordinary Share: Basic (0.1) Cent (1.1) Cents
13
13 (0.1) Cent (1.1) Cents
Diluted
Statements of Financial Position
As at 31 December
Group Parent Group Parent
2014 2014 2013 2013
Notes € € € €
Non-Current Assets
Property, plant & 15 24,360 - 32,480 -
equipment
Listed investments 16 904 904 - -
Investment properties 17 5,355,611 - 6,944,319 -
Property under 17 317,804 - 317,804 -
development
Investment in 18 - 81,955 - 81,955
subsidiaries
5,698,679 82,859 7,294,603 81,955
Current Assets
Investment properties 17 1,615,166 - - -
Loans to subsidiaries 19 - 14,926,622 - 12,997,751
Trade and other 20 61,775 44,771 98,588 51,963
receivables
Cash and cash 233,906 2,803 175,479 5,626
equivalents
1,910,847 14,974,196 274,067 13,055,340
Total Assets 7,609,526 15,057,055 7,568,670 13,137,295
Current Liabilities
Trade and other payables 21 257,187 54,997 835,312 642,378
Secured loan 22 - - 1,150,000 -
Other loans 23 2,284,901 2,284,901 444,887 444,887
2,542,088 2,339,898 2,430,199 1,087,265
Net Assets 5,067,438 12,717,157 5,138,471 12,050,030
Equity Attributable to
Owners of the Parent
Share capital 24 150,226 150,226 150,226 150,226
Capital redemption 222,715 222,715 222,715 222,715
reserve
Share premium 1,046,894 1,046,894 1,046,894 1,046,894
Merger reserve (109,193) (3,689,271) (109,193) (3,689,271)
Translation reserve (1,578,518) - (1,516,202) -
Retained earnings 5,335,314 14,986,593 5,344,031 14,319,466
Total Equity 5,067,438 12,717,157 5,138,471 12,050,030
The financial statements were approved and authorised for issue at a meeting of
the Board of Directors held on 28 May 2015 and signed on its behalf by:
Stephen Gray
Barry Smith
Director
Director
Group Statements of Changes in Equity
Share Capital Share Merger Translation Retained
capital redemption premium reserve reserve earnings Total
€ reserve € € € € €
€
Balance as at 150,226 222,715 1,046,894 (109,193) (1,516,202) 5,344,031 5,138,471
1 January 2014
Changes in equity for 2014
Loss for the year - - - - - (8,717) (8,717)
Exchange
differences on - - - - (62,316) - (62,316)
translating
foreign operations
Balance as at 150,226 222,715 1,046,894 (109,193) (1,578,518) 5,335,314 5,067,438
31 December 2014
Share Capital Share Merger Translation Retained
capital redemption premium reserve reserve earnings Total
€ reserve € € € € €
€
Balance as at 235,133 137,808 1,046,894 (109,195) (1,326,158) 7,143,758 7,128,240
1 January 2013
Changes in equity for 2013
Loss for the - - - - - (111,957) (111,957)
year
Purchase of own (84,907) 84,907 - - - (1,687,770) (1,687,770)
share
Subsidiary write - - - 2 - - 2
down
Exchange
differences on
translating - - - - (190,044) - (190,044)
foreign
operations
Balance as at 150,226 222,715 1,046,894 (109,193) (1,516,202) 5,344,031 5,138,471
31 December 2013
Company Statements of Changes in Equity
Share Capital Share Merger Retained
capital redemption premium reserve earnings Total
€ reserve € € € €
€
Balance as at 150,226 222,715 1,046,894 (3,689,271) 14,319,466 12,050,030
1 January 2014
Changes in equity for 2014
Profit for the year - - - - 667,127 667,127
Balance as at 150,226 222,715 1,046,894 (3,689,271) 14,986,593 12,717,157
31 December 2014
Share Capital Share Merger Retained
capital redemption premium reserve earnings Total
€ reserve € € € €
€
Balance as at 235,133 137,808 1,046,894 (3,689,271) 15,465,269 13,195,833
1 January 2013
Changes in equity for 2013
Profit for the - - - - 541,966 541,966
year
Purchase of own (84,907) 84,907 - - (1,687,769) (1,687,769)
shares
Balance as at 150,226 222,715 1,046,894 (3,689,271) 14,319,466 12,050,030
31 December 2013
Statements of Cash Flows
For the year ended 31 December
Group Parent Group Parent
2014 2014 2013 2013
Notes € € € €
Cash flows from operating
activities
Net (loss)/profit (8,717) 667,127 (111,957) 541,966
Adjusted for:
Profit on sale of investment 17 - - (9,978) -
properties
Unrealised gain on investment 17 (26,458) - - -
Profit on sale of listed investment (868) (868) - -
Depreciation 15 8,120 - 8,120 -
Interest income 10 (412) (812,991) (2,265) (753,680)
Bank loan interest expense 11 56,180 - 74,129 -
Other loans interest expense 11 59,716 59,716 37,675 37,675
Foreign exchange (gains)/losses (28,825) (6,005) (4,345) 1,206
Income tax expense 12 802 - 741 -
Decrease/(increase) in receivables 36,813 7,192 148,873 (48,633)
Increase/(decrease) in payables 58,116 45,750 (130,574) 76,387
Cash generated from/(used in) operation 154,467 (40,079) 10,419 (145,079)
Interest paid (57,950) - (74,282) (37)
Income taxes paid (2,142) - (352) -
Net cash generated from/(used in) 94,375 (40,079) (64,215) (145,116)
operating activities
Cash flows from investing
activities
Net receipts from sales of - - 152,509 -
investment properties
Purchase of listed investments 16 (9,513) (9,513) - -
Proceeds of sale of listed 16 9,477 9,477 - -
investments
Purchases of furniture and fittings 15 - - (40,600) -
Bank interest received 10 412 17 2,265 292
Net cash generated from/(used in) 376 (19) 114,174 292
investing activities
Cash flows from financing
activities
Bank loan repayment (1,150,000) - (350,000) -
Purchase of own shares - - (1,687,769) (1,687,769)
Net loans to subsidiary - (1,115,897) - (115,727)
undertakings
Other loans received 1,147,167 1,147,167 444,887 444,887
Net cash (used in)/from financing (2,833) 31,270 (1,592,882) (1,358,609)
activities
Net (decrease)/increase in cash and cash 91,918 (8,828) (1,542,923) (1,503,433)
equivalents
Exchange movement on foreign subsidiaries (33,491) 6,005 (185,698) (1,206)
Cash and cash equivalents as at 1 175,479 5,626 1,904,100 1,510,265
January
Cash and cash equivalents as at 31 233,906 2,803 175,479 5,626
December
Notes to the Financial Statements
For the year ended 31 December 2014
Accounting policies
1. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated and parent company financial statements are set out below.
Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and the
Isle of Man Companies Acts 1931 to 2004.
A separate income statement for the parent company has not been presented as
permitted by the Isle of Man Companies Acts 1931 to 2004. The parent company
generated profits of €667,127 (2013: €541,966).
Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and all of its Subsidiaries.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group.
Presentational currency
The Directors have adopted to use the Euro in presenting the financial
statements due to the international exposure and stakeholders of the Company.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks and other short term highly liquid investments with original maturities
of three months or less.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs to its tax base, except for
differences arising on:
* the initial recognition of goodwill;
* the initial recognition of an asset or liability in a transaction which is
not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
* investment in subsidiaries where the Group is able to control the timing of
the reversal of the difference and it is probable that the difference will
not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where
it is probable that taxable profit will be available against which the
difference can be utilised.
The amount of the asset or liability is determined using tax rates that
have been enacted or substantially enacted by end of the reporting period
and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
* the same taxable group company; or
* different group entities which intend either to settle current tax assets
and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single
segment of business, being primarily investment in properties and related
services. The Group invests in properties situated in Budapest, Hungary.
Adoption of standards effective in 2014
(a) New and amended standards adopted by the group.
There are no IFRSs or IFRIC interpretations that are effective for
the first time for the financial year beginning on 1 January
2014 that would be expected to have a material impact on the group.
(b) New standards and interpretations not yet adopted.
Effective Dates:
Standards Accounting
periods
commencing after
* IFRS 19 Financial Instruments 1 January 2015
* IFRS 15 Revenue from Contract with Customers 1 January 2015
The financial statements are prepared in accordance with International
Financial Reporting Standards and Interpretations in force at the reporting
date. The Group has not adopted any standards or interpretations in advance of
the required implementation dates. It is not expected that adoption of
standards or interpretations which have been issued by the International
Accounting Standards Board but have not been adopted will have a material
impact on the financial statements.
Income
Interest, fees and rental income are included in the financial statements on an
accruals basis. Rental income is recognised on a straight line basis.
Property sales are included in the financial statements on an unconditional
exchange basis. The profit on disposal of investment properties is the
difference between the sales proceeds and the carrying value of the assets at
the date of disposal, less selling costs.
Expenses
All expenses are accounted for on an accruals basis.
Issue and redemption costs
All costs incurred in the placing and repurchase of the Company's shares are
written off in full against the profit and loss reserve.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the end of the
reporting period. All differences are taken to the statement of comprehensive
income.
Group entities that have a functional currency different from the presentation
currency are translated at the closing rate at the end of the reporting period
for assets and liabilities. Income and expenses are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the closing rate at the end of the
reporting period) and all resulting exchange differences are recognised as a
separate component of equity.
Investment properties
Investment properties include completed properties which are held for their
investment potential.
Investment properties are carried at fair value. Fair value is based on active
market prices. Gains and losses arising from changes in the fair value of
investment property are included in the statement of comprehensive income for
the period in which they arise. As permitted by IAS 40, investment properties
have been valued by the Directors using judgements based on the current local
property market.
Properties under development are classified under non-current assets and are
stated at the fair value less any impairment.
Investment properties held for sale are actively marketed for sale and
classified under current assets and are stated at the fair value less any
impairment and selling costs.
Impairment of assets
At the end of each reporting period, the Group reviews the carrying amounts of
its assets to determine whether there is any indication that those assets have
suffered an impairment loss. If the recoverable amount of an asset is estimated
to be less than its carrying amount, the carrying amount of the asset is
reduced to its estimated recoverable amount. Any impairment loss is recognised
as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset
in prior years. A reversal of an impairment loss is recognised as income
immediately.
Property, plant and equipment
All furniture and equipment are stated at cost less impairment. Cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as a
separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to
profit or loss during the financial period in which they are incurred.
Depreciation, based on a component approach, is calculated using the straight
line method to allocate the cost over
the assets estimated useful lives, as follows:
Furniture and equipment - 5 - 10 years
Asset residual values and useful lives are reviewed, and adjusted if
appropriate at each financial year-end.
Gains and losses on disposals are determined by comparing proceeds with the
carrying amount. These are included in the Statement of Comprehensive Income.
Investment in subsidiary companies
The investments in subsidiary companies are included in the Statement of
Financial Position at cost less any provisions for diminution in value.
Loans to subsidiary companies
The unsecured subordinated loan made to Midasz Property Kft. is repayable on
demand and has been accounted for under Current Assets and is measured at cost.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established
when there is objective evidence that the Company will not be able to collect
all amounts due according to the original terms of receivables. The amount of
provisions is the difference between the asset's carrying amount and the
present value of estimated future cash flows, discounted at the effective
interest rate. The provision is recognised in associated profit or loss.
Trade payables
Trade payables are stated at their original invoice value.
Interest-bearing borrowings
Interest-bearing borrowings are stated at amortised cost using the effective
interest method. The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments throughout the expected life of the
financial liability.
Borrowing costs
All borrowing costs are recognised in the profit or loss amortised over the
period of the loan.
Critical judgment in applying the Group's accounting policies
The Group prepares its consolidated financial statements in accordance with
IFRS as adopted by the European Union, the application of which often requires
judgements to be made by the board when formulating the Group's financial
position and results. The key sources of estimation uncertainty of the Group
are the fair value estimates of investment properties.
Investment properties and properties under development represent a significant
proportion of the Group's assets, being 96% (2013: 96%) of the Group's total
assets. Therefore, the estimates and assumptions made to determine their fair
value are critical to the measurement of the Group's financial position and
performance.
In determining the fair value of investment properties, the Group uses
historical and current market data, and existing lease agreements to determine
the fair value of each property.
Financial instruments
Financial instruments are classified and accounted for according to the
substance of the contracted arrangement, as either financial assets, financial
liabilities or equity instruments. An equity instrument is any contract that
evidences a residual interest in the assets of the company after deducting all
of its liabilities.
Prior year restatement
The Group amended its disclosure of certain items of expenses to more
accurately record these within their appropriate class. Agency fees and
insurance costs directly relating to property are now classed under direct
operating costs. The net impact of the restatement to the shareholder funds
for both Group and Company is €Nil.
2. Material agreements
(i) Midas Investment Management Limited ("MIM") was appointed the Group's Asset
Manager on 17 March 2006.
On 24 April 2013, the Asset Management Agreement was amended by a side
letter to incorporate changes to the management fees. From that date
MIM will charge:
1. A flat annual fee of €55,000 per annum plus VAT;
2. A quarterly fee on all property rented out of 12 per cent of the net rental
income plus VAT; and
3. A commission on sales of up to 4 per cent plus VAT of sales proceeds. For
the avoidance of doubt, MIM will only charge a fee on sales if it is
involved in procuring the buyer and only if the commission charged by
others when aggregated with MIM's commission does not exceed 5 per cent
plus VAT.
The Investment Management Agreement cannot be terminated, other than
for cause by the Company on 12 month's prior notice.
(ii) Equiom (Isle of Man) Limited (previously known as Equiom Trust Company
Limited) was appointed as Administrator to the Company, pursuant to the Terms
of a Letter of Engagement dated 21 December 2005. As part of its engagement,
Equiom (Isle of Man) Limited ("Equiom") agrees, as required, for a number of
its senior staff members to accept appointment as director of the Company.
Equiom also agrees to arrange for a suitable person to be appointed as Company
Secretary.
3. Operating segments
The Group primarily operates in a single reporting segment under the
classification of its properties held for investment. The entire Group's
revenue and property assets are derived from and located in a single
geographical location, Budapest, in Hungary.
The loss for the year €8,717 (2013: €111,957) primarily derived from operations
of managing the Group's investment properties. The Group's principal activity
is to let or sell properties located in Central Budapest.
The Group defines its major customers for disclosure purposes as any one
customer that represents five per cent or more of the Group's annualised rent
roll. Throughout the year, the Group invoiced four (2013: four) major
customers for rental income totalling €200,700 (2013: €193,890), being 44 per
cent (2013: 49 per cent) of the Group's current annualised rent roll.
4. Rental income and related fees
Analysis of the Group's revenue is as follows:
2014 2013
€ €
Rental income from investment properties 493,473 564,195
493,473 564,195
5. Group operating profit is stated after charging/(crediting)
Restated
2014 2013
Administrative expenses € €
Directors' emoluments 14,100 17,025
Asset Manager's fees 66,000 113,717
Legal and professional fees 60,694 31,349
Administrator's costs 16,247 19,608
Auditor's remuneration 20,300 24,682
Administrative costs 13,992 14,481
Currency exchange gains (28,825) (4,345)
Bank charges 6,512 8,004
Depreciation 8,120 8,120
177,140 232,641
The Group amended its disclosure of certain items of expenses to more
accurately record these within their appropriate class. Agency fees and
insurance costs directly relating to property are now classed under direct
operating costs. The amounts relating to these expenses for the year amounted
to €15,335 (2013: €16,580). The net impact of the restatement to the
shareholder funds for both Group and Company is €Nil.
The Asset Manager's fees calculated and payable for the year ended 31 December
2014 and the preceding period all relate to Midas Investment Management
Limited. As at 31 December 2014 management fees and related interest due to
Midas Investment Management Limited were €Nil (2013: €588,745).
6. Exceptional items
2014 2013
€ €
Tender and reorganisation costs - 32,517
7. Staff numbers and costs
Excluding Directors, the Group employs no staff.
8. Auditor's remuneration
2014 2013
€ €
Fees payable to the Group's auditors 11,700 13,760
The audit of the Group's trading subsidiaries 8,600 10,922
Taxation services 500 1,000
9. Directors' emoluments
2014 2013
€ €
(i) Directors' fees:
Total fees 2,000 2,400
The Directors' fees for all other directors, for both reporting periods, were
paid to Equiom (Isle of Man) Limited in accordance with the Letter of
Engagement referred to in Note 2.
(ii) Remuneration of Directors:
2014 2013
€ €
Mr. C Bennett - 2,925
Mr. B Miller 12,100 11,700
10. Finance income
2014 2013
€ €
Bank and cash equivalents interest 412 2,265
11. Finance costs
2014 2013
€ €
Interest on bank loan 56,180 74,129
Interest on other borrowings 59,716 36,675
115,896 111,804
12. Tax expense
2014 2013
€ €
Current tax
Income tax on foreign subsidiaries 802 741
The Company is subject to Isle of Man income tax at zero per cent (2013: zero
per cent).
The reasons for the difference between the actual tax charge for the year and
the theoretical amount that would arise using the average tax rate applicable
to profits of the consolidated group are as follows:
2014 2013
€ €
Loss before tax (7,915) (111,216)
Foreign subsidiaries expected tax charge based (792) (11,121)
on the applicable rate of 10% (2013: 10%)
Local business tax in Hungary 802 741
Different tax rates applied on overseas (16,431) (54,197)
jurisdictions
Expenses that are not deductable for tax 14,587 76,151
Gains/(losses) not relievable 2,636 (10,833)
Current income tax charge for the year 802 741
The movements in deferred tax assets and liabilities (prior to the offsetting
of balances within the same jurisdiction as permitted by IAS 12 Income Taxes)
during the year are shown below.
Amounts credited to the consolidated income statement are as follows:
2014 2013
€ €
Available losses in the UK 27,059 27,059
Deferred tax asset not recognised (27,059) (27,059)
- -
13. Earnings per share
The calculation of the earnings per share is based on the following:
As at 31 December 2014
Loss for the year Ordinary Shares Per Share
€ Number €
Basic and diluted loss per (8,717) 10,316,624 (0.001)
share
Adjusted earnings per share for the year ended 31 December 2014
Loss for the year Ordinary Shares Per Share
€ Number €
Basic loss per share (8,717) 10,316,624 (0.001)
Gain on listed investment (868) - (0.000)
Net valuation gain (26,458) - (0.003)
Adjusted loss per share (36,043) 10,316,624 (0.004)
As at 31 December 2013
Loss for the year Ordinary Shares Per Share
€ Number? €
Basic and diluted loss per (111,957) 11,207,261 (0.010)
share
Adjusted earnings per share for the year ended 31 December 2013
Loss for the year Ordinary Shares Per Share
€ Number? €
Basic loss per share (111,957) 11,207,261 (0.010)
Adjusted loss per share (111,957) 11,207,261 (0.010)
Earnings per share: Retrospective adjustment (See note 23)
2012
Loss for the year Per Share
€ Ordinary Shares €
Basic and diluted loss per (111,957) 16,147,582 (0.007)
share
Shares acquired post year (5,830,958)
end
(111,957) 10,316,624 (0.011)
? Weighted average number of Ordinary Shares in issue during the period.
14. Dividends
2014 2013
No. of Shares € No. of €
Shares
Dividend of €Nil (2013: €Nil) 10,316,624 - 10,316,624 -
per share paid
The Company has not paid a dividend to shareholders since 30 October 2009 and
will not be paying any future dividends to shareholders until further
reductions have been made to the debt outstanding.
15. Property, plant and equipment
Furniture and equipment
Group 2014 2013
€ €
Cost
As at 1 January 40,600 545,874
Additions - 40,600
Impairment write off - (545,874)
As at 31 December 40,600 40,600
Accumulated depreciation/impairment
As at 1 January 8,120 545,874
Depreciation 8,120 8,120
Impairment write off - (545,874)
As at 31 December 16,240 8,120
Opening net book value as at 1 January 32,480 -
Closing net book value as at 31 December 24,360 32,480
As at 31 December 2013, the Directors recognised an impairment loss in
furniture and equipment after their annual review and impairment tests.
16. Listed investments at fair value through profit and loss
Group and Company 2014 2013
€ €
Purchase at cost 9,513 -
Sales proceeds (9,477) -
Realised profit on sale 967 -
Unrealised loss on valuation (99)
Closing fair value at 31 December 904 -
17. Investment properties
Group
Investment properties at 31 December 2014 were subjected to a management
valuation review based on the active market indicative prices.
Amounts recognised in the income statement:
2014 2013
€ €
Rental income 493,473 564,195
Direct operating expenses on properties that 236,090 310,692
generated rental income
Reconciliation of carrying amounts:
2014 2013
€ €
Carrying value at the beginning of the year 7,262,123 7,404,654
Fair value changes 26,458 -
Disposals - (142,531)
Carrying value at the end of the year 7,288,581 7,262,123
Investment properties 5,355,611 6,944,319
Properties under development 317,804 317,804
Properties held for resale 1,615,166 -
7,288,581 7,262,123
Properties sold during the
year
2014 2013
€ €
Gross proceeds from the sale of investment - 168,000
properties
Less: carrying value and related sales costs - (158,022)
Realised profit on disposal of property - 9,978
Of properties held for resale as current assets, 5 have been sold post year
end. The remaining are actively marketed and expected to sell in 2015.
18. Investments in subsidiary companies
The subsidiaries of the Company are stated below:
Proportion
of voting
Country of rights &
Subsidiary Principal registration shares
activity held
Midasz Property Kft. Property Hungary 100%
investment
Midasz Property Two Kft. Property Hungary 100%
investment
Pactolus Eastern European
Property Limited Property UK 100%
investment
Pactolus (UK) Limited Property UK 100%
investment
Pactolus (IOM) Limited IOM 100%
Dormant
2014 2013
Subsidiaries € €
Pactolus Eastern European Property Limited 18,561 18,561
Pactolus (UK) Limited 1 1
Midasz Property Kft. 51,393 51,393
Midasz Property Two Kft. 12,000 12,000
81,955 81,955
All the above subsidiaries, with the exception of Midasz Property Two Kft.,
were acquired and accounted for under IFRS 3: Business Combinations.
19. Loans to subsidiaries
Company Company
2014 2013
€ €
Midasz Property Kft. 14,786,291 12,857,420
Midasz Two Property Kft. 75,760 75,760
Pactolus Eastern European Property Limited 65,270 65,270
Pactolus (UK) Limited (699) (699)
14,926,622 12,997,751
These comprise of unsecured subordinated loans issued in support of property
acquisitions. The loans provided by the parent company to Midasz Property Kft.
are currently charged at interest of 6.25 per cent (2013: 6.25 per cent), and
are repayable on demand, however it is not anticipated that the full balance
will be recovered within 12 months of the balance sheet date.
20. Trade and other receivables Group Company Group Company
2014 2014 2013 2013
€ € € €
Rent and fees receivable 12,594 - 21,548 -
Other receivables 39,969 39,969 65,046 39,969
Prepayments and accrued income 9,212 4,802 11,994 11,994
61,775 44,771 98,588 51,963
21. Trade and other payables Group Company Group Company
2014 2014 2013 2013
€ € € €
Trade payables and accruals 87,923 31,824 723,738 618,630
Rent received in advance 6,536 - 2,151 -
Deposits held 138,259 - 81,269 -
Taxation 1,296 - 2,636 -
Interest payable and similar 23,173 23,173 25,518 23,748
charges
257,187 54,997 835,312 642,378
22. Secured loan Group Company Group Company
2014 2014 2013 2013
€ € € €
Variable interest rate loan - - 1,150,000 -
Loan to value of portfolio - - 16% -
During the current and preceding period, the Group operated a loan facility
with Investec Bank Plc (Irish Branch). During the year this loan was repaid in
full and the facility cancelled.
23. Other loans Group Company Group Company
2014 2014 2013 2013
€ € € €
Unsecured loans 2,284,901 2,284,901 444,887 444,887
2,284,901 2,284,901 444,887 444,887
During the year the Company was advanced funds repayable on demand from the
parent and associated companies of Asset Manager, Midas Investment Management
Limited. These advances are repayable on demand and attract interest at the
rate of 4.8 per cent (2013: 6.25 per cent) above Euribor.
24. Share capital
Authorised share capital
Number 2014 Number 2013
of shares € of shares €
Ordinary shares of 1p each 70,000,000 900,900 70,000,000 843,080
Ordinary shares of 1p each issued
and fully paid
Number 2014 Number 2013
of shares € of shares €
Balance as at 1 January 10,316,624 150,226 16,147,582 235,133
Buy back and cancellation of - - (5,830,958) (84,907)
shares
As at 31 December 10,316,624 150,226 10,316,624 150,226
Each ordinary share carries the right to one vote in any circumstances and the
right to dividends paid.
At the last Annual General Meeting on 26 June 2014, shareholders approved the
Board's proposal to authorise the Company to acquire up to 28.6 per cent of its
issued share capital as at 26 June 2014. After the resolution was passed, the
Company was authorised to acquire up to 2,950,774 of its issued ordinary
shares. The Company did not utilise this facility during 2014.
During the year to 31 December 2013, the Company acquired 5,830,958 of its
issued Ordinary shares for a total cost of €1,687,769 as part of the ongoing
share repurchase programme. The average price paid per ordinary share was 24
pence, exclusive of direct acquisition costs.
Ordinary shareholders are entitled to vote at all general meetings.
The currency rate used to convert the authorised share capital is €1.2870
(2013: €1.2044).
25. Net Asset Value per Ordinary Share 2014 2013
Net asset value as at 31 December €5,067,438 €5,138,471
Number of shares in issue as at 31 December 10,316,624 10,316,624
Net asset value per ordinary share €0.49 €0.50
Net asset value per share [Euro to Sterling
exchange rate at the year-end €1.2870 (2013: € £0.38 £0.41
1.2044)]
26. Financial risk factors
The Group and Company's activities throughout the current and previous year
exposes it to a variety of financial risks: market risk (including currency
risk and price risk), credit risk, liquidity risk, cash flow risk and interest
rate risk.
Risk management is carried out by the Board of Directors. The Board identifies
and evaluates financial risks in close co-operation with the Group's operating
units. The Board provides principles for overall risk management, as well as
policies covering specific areas, such as foreign exchange risk, interest-rate
risk, credit risk, use of financial instruments and investing excess liquidity.
Fair value of financial instruments:
2014 2014 2013 2013
Carrying Fair Carrying Fair
Value Value Value Value
Group € € € €
Financial assets
Trade and other receivables 52,563 52,563 86,651 86,651
Cash and cash equivalents 233,906 233,906 175,479 175,479
Financial liabilities
Other payables 257,187 257,187 835,312 835,312
Secured loan - - 1,150,000 1,150,000
Other loans 2,284,901 2,284,901 444,887 444,887
Company
Financial assets
Trade and other receivables 39,969 39,969 39,969 39,969
Loans to subsidiaries 14,926,622 14,926,622 12,997,751 12,997,751
Cash and cash equivalents 2,803 2,803 5,626 5,626
Financial liabilities
Other payables 54,997 54,997 618,629 618,629
Other loans 2,284,901 2,284,901 444,887 444,887
It is the Directors' opinion that the Group and Company's carrying and fair
value of its financial instruments are the same.
Credit risk
The Group places surplus cash with third parties and is therefore potentially
at risk from the failure of any such third party of which it is a creditor. It
is the Group's policy to place excess cash funds on a short-term basis only and
spread the risk over a number of different providers.
The Group's principal credit risk is that of cash and short-term deposits. The
Board, in conjunction with the Asset Manager, has credit policies in place and
this exposure is monitored on an ongoing basis.
Within the Group's credit risk policies are measures to ensure that rental
contracts are made with customers of an appropriate credit history in order to
minimise the exposure to any outstanding debts from lessees.
The Group and Company's maximum exposure to credit risk:
Group Company Group Company
2014 2014 2013 2013
€ € € €
Financial assets
Trade and other receivables 52,563 39,969 86,651 39,969
Cash and cash equivalents 233,906 2,803 175,479 5,626
Loans to subsidiaries - 14,926,622 - 12,997,751
286,469 14,969,394 262,130 13,043,346
The Group and Company hold no collateral as security against any of the above
assets.
An analysis of rent and fees receivable for the Group:
2014
Neither Past due not
Carrying impaired nor 61-90 91-120 impaired
amount past due Days Days over 120
Days
€ € € € €
Rent and fees receivable 12,594 12,594 - - -
2013
Neither Past due not
Carrying impaired nor 61-90 91-120 impaired
amount past due Days Days over 120
Days
€ € € € €
Rent and fees receivable 21,548 21,548 - - -
There are no rent receivables in the accounts of the parent company.
The Group allows an average receivables period of 30 days after invoice date.
The receivables age analysis is also evaluated on a regular basis for potential
doubtful debts. It is management's opinion that no provision for doubtful
debts is required.
The Company's principal credit risk is that of its loans advanced to
subsidiaries.
As at the year end the amounts due to/(from) the Company were as follows:
2014 2013
€ €
Midasz Property Kft. 14,786,291 12,857,420
Midasz Two Property Kft. 75,760 75,760
Pactolus Eastern European Property Limited 65,270 65,270
Pactolus (UK) Limited (699) (699)
14,926,622 12,997,751
These loans do not carry any security on the assets of the related subsidiary
and are also evaluated on a regular basis for potential impairments. It is the
Board's opinion that no impairment provision is required for the year ended 31
December 2014 (2013: €Nil).
Market risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the UK
Pound, the Hungarian Forint and the Euro. Foreign xchange risk arises from
future commercial transactions, recognised monetary assets and
liabilities and net investments in foreign operations. Interest rate risk
arises from the Group's borrowing exposure.
Net interest income from cash and cash equivalents for the year totalled €412
(2013: €2,265). Net interest payments on borrowings for the year totalled €
115,896 (2013: €111,804).
The Company's net interest income from cash and cash equivalents
for the year totalled €17 (2013: €292). The Company does not have
any long-term borrowing. Interest earned on loans to
subsidiaries for the year was €812,974 (2013: €753,388).
Based on current volatility for both interest and currency exchange rates, the
Board determined that relevant risk factors should be taken into account when
assessing the Group's exposure to the market risk. The sensitivity test below
is based on the following:
(a) Interest rate change of +0.5 per cent from the average rate of 1.2
per cent earned in 2014. The average rate is calculated as the weighted
average effective interest rate.Rate on cash at bank balances represents
average rate earned on cash balances;
(b) Foreign exchange rate change of -7 per cent and +7 per cent from €
1.2870 to the Pound Sterling and 316.50 Forint to the Euro, being the
rates as at 31 December 2014.
The Company's loans to subsidiaries are transacted in Euros. The operating
currency of the leading trading subsidiary is Forint and so this exposes the
Company to foreign currency exchange risks. The Board is satisfied that no
impairment is necessary as the major assets within the relevant
subsidiary are valued in Euros.
The tables below show the effect on profit and equity after tax if changes in
interest rates as stated in (a) above with all other variables held constant,
are used as a sensitivity test on the Group's market risk exposures.
Group
2014 Financial Assets Financial
Liabilities
Total increase/ Cash & cash Rent & fees Trade Long term
(decrease) equivalents receivable payables loans
€ € € € €
Carrying amount - 233,906 12,594 257,187 2,284,901
Interest rate risk
Profit (change of (11,326) 171 - - (11,497)
+0.5%)
Foreign exchange rate risk
Equity (change of -7%) (21,926) (21,926) - - -
Equity (change of +7%) 12,523 12,523 - - -
Company
2014 Financial Assets Financial
Liabilities
Total increase/ Cash & cash Loans to Trade Long term
(decrease) equivalents subsidiaries payables loan
€ € € € €
Carrying amount - 2,803 14,926,622 54,997 2,284,901
Interest rate risk
Profit (change of (11,497) - - - (11,497)
+0.5%)
Foreign exchange rate risk
Equity (change of -7%) (492) (492) - - -
Equity (change of +7%) 1,570 1,570 - - -
Group
2013 Financial Assets Financial
Liabilities
Total increase/ Cash & cash Rent & fees Trade Long term
(decrease) equivalents receivable payables loan
€ € € € €
Carrying amount - 175,479 21,548 835,312 1,594,887
Interest rate risk
Profit (change of (10,148) 944 - - (11,092)
+0.5%)
Foreign exchange rate risk
Equity (change of -4%) 1,372 508 - 864 -
Equity (change of +4%) 392 405 - (797) -
Company
2013 Financial Assets Financial
Liabilities
Total increase/ Cash & cash Loans to Trade Long term
(decrease) equivalents subsidiaries payables loan
€ € € € €
Carrying amount - 5,626 12,997,751 642,378 444,887
Interest rate risk
Profit (change of (3,738) - - - (3,738)
+0.5%)
Foreign exchange rate risk
Equity (change of -4%) (263) (263) - - -
Equity (change of +4%) 1,118 1,118 - - -
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities to finance the Group's operations. The average creditor
payment period for the Group and Company is 60 days (2013: 60 days).
Contractual maturity analysis for financial liabilities:
Group
2014
Due
Due within between Due between Due between
1 month 1 to 3 3 to 12 months 1 to 5 years
months Total
€ € € € €
Other payables 167,928 3,500 82,259 3,500 257,187
Other loans 2,284,901 - - - 2,284,901
2,452,829 3,500 82,259 3,500 2,542,088
Company
2014
Other payables 54,997 - - - 54,997
Other loans 2,284,901 - - - 2,284,901
2,339,898 - - - 2,339,898
Group
2013
Due Due between
Due within between 3 to 12 Due between
1 month 1 to 3 months 1 to 5 years
Months Total
€ € € € €
Other payables 754,043 - 61,319 19,950 835,312
Secured loan - - 1,150,000 - 1,150,000
Other loans 444,887 - - - 444,887
1,198,930 - 1,211,319 19,950 2,430,199
Company
2013
Other payables 618,630 - 23,748 - 642,378
Other loans 444,887 - - - 444,887
1,063,517 - 23,748 - 1,087,265
27. Capital risk management
The Group manages its capital to ensure that it will be able to continue as a
going concern while maximising Shareholders' return. Consistently with others
in the industry, the Group monitors capital on the basis of the
debt-to-adjusted capital ratio. This ratio is calculated as net debt divided
by adjusted capital. Net debt is calculated as total debt less cash and short
term deposits. Adjusted capital comprises all components of equity.
This gearing ratio at the year-end is as follows:
2014 2013
€ €
Debt 2,542,088 2,430,199
Cash and cash equivalents (233,906) (175,479)
Net debt 2,308,182 2,254,720
Equity 5,067,438 5,138,471
Net debt to equity ratio 46% 44%
The Group's Asset Manager reviews the debt structure on a quarterly basis in
conjunction with the Board. The cost of capital and the associated risks are
considered and appropriate measures are taken to manage the Group's exposure.
28. Leasing
Leases with tenants
The Group leases out investment properties for an average lease term of 0.9
years (2013: 1.2 years). There were no contingent rental incomes recognised in
the year (2013: €Nil). The future aggregate minimum rentals receivable under
non-cancellable operating leases are as follows:
2014 2013
€ €
Less than one year 230,212 358,076
Between two and five years 82,770 132,678
312,982 490,754
The company has contracted guarantee rental payments as follows:
2014 2013
€ €
Less than one year 45,006 57,302
Between two and five years - 1,176
45,006 58,478
29. Commitments
At the year end the Group had no capital commitments (2013: €Nil) in its
portfolio of investment properties. The Company had no other capital
commitments as at the year end.
30. Related parties
The Group was charged fees by Equiom (Isle of Man) Limited of €16,247 (2013: €
19,608) in accordance with the Letter of Engagement referred to in Note 2 (ii).
The amount outstanding as at 31 December 2014 is €4,880 (2013: €3,278).
All of the Directors, apart from Brett Miller, are current staff of Equiom
(Isle of Man) Limited.
Asset and tenant management fees amounting to €66,000 (2013: €113,717),
interest charges of €29,217 (2013: €31,829), re-organisational charges of €Nil
(2013: £5,000), direct expenses recharges of €Nil (2013: €49,841) and
commission income received on share buy back and listed investment transactions
totalling €50 (2013: €3,025) were charged by Midas Investment Management
Limited. Tenant management fees chargeable to the company amounting to €59,217
(2013: €Nil) was waived for the year by the Asset Manager but remains
chargeable in respect of future periods. Midas Investment Management Limited
is controlled by Mark Sheppard, who is also a Director of the Pactolus Group's
United Kingdom subsidiaries. As at 31 December 2014 the amount outstanding to
Midas Investment Management Limited was €Nil (2013: €588,745).
During the year the Company was advanced unsecured funds repayable on demand
from the parent and associated companies of the Asset Manager, Midas Investment
Management Limited. These advances attract interest at the rate of 4.8 per
cent above the 3 month Euribor (2013: 6.25 per cent) and are detailed below:
There have been no significant events that require reporting since the
reporting period date.
1. M&M Investment Company Plc, balance outstanding as at the reporting period
date is €2,284,901 (2013:€257,050), interest charged and included in
accruals amounts to €23,173 (2013:€616).
2. Midas Nominees Limited, balance outstanding as at the reporting period date
is €Nil (2013:€156,758), interest charged for the period totalled €6,865
(2013:€4,799).
3. Gall & Eke Limited, balance outstanding as at the reporting period date is
€Nil (2013:€36,889), interest charged and included in accruals amounts to €
461 (2013:€395).
The Company also charges interest on its loan account with its subsidiaries.
Interest charged during the year amounted to €812,974 (2013: €753,388) a rate
of 6.25 per cent (2013: 6.25 per cent) per annum.
The amount due from each subsidiary is detailed in note 19 of these financial
statements.
31. Events after the reporting period
There have been no significant events that require reporting since the
reporting period date.
32. Domiciled
Pactolus Hungarian Property Plc is registered and domiciled in the Isle of Man.
33. Ultimate control
During the current and previous year, ultimate control of the Group does not
lie with any identifiable individual. Copies of the Group Annual Report and
Financial Statements are available at the Registered Office, Jubilee Buildings,
Victoria Street, Douglas, Isle of Man, IM1 2SH and at the office of the
Company's Asset Manager, Midas Investment Management Limited, 2nd Floor, Arthur
House, Chorlton Street, Manchester, M1 3FH.
34. Financial Information
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 December 2014.
Audited statutory financial statements for 2014 will be delivered to the Isle
of Man Companies Registry following the Group's Annual General Meeting.
35. Annual General Meeting
Details of the Annual General Meeting will be issued under a separate notice.
36. Report and Accounts
Pursuant to Rule 20 copies of the Audited Financial Statements for the year
ended 31 December 2014 will be sent to shareholders in due course. Further
copies will be available from the Company's website at www.pactolus.co.uk, at
the Company's registered office at Jubilee Buildings, Victoria Street, Douglas,
Isle of Man, IM1 2SH or at the offices of Midas Investment Management Ltd, 2nd
Floor, Arthur House, Chorlton Street, Manchester, M1 3FH.
Contacts & enquiries:
Asset Manager
Midas Investment Management Ltd
Mark Sheppard
Tel: 00 44 (0) 161 242 2895
Nominated Adviser:
Cairn Financial Advisers LLP
Liam Murray
Tel: 00 44 (0) 20 7148 7900
PACTOLUS HUNGARIAN PROPERTY : Final Results
June 01, 2015 at 09:27 pm IST
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