Ronson Development SE






Consolidated Financial Statements

for the year ended 31 December 2020




Management Board


Boaz Haim, President of the Management Board

Yaron Shama, Vice-President of the Management Board, Chief Financial Officer

Andrzej Gutowski, Vice-President of the Management Board, Sales and Marketing Director

Alon Haver, Member of the Management Board


Supervisory Board


Amos Luzon, Chairman

Ofer Kadouri

Alon Kadouri

Przemysław Kowalczyk

Piotr Palenik

Shmuel Rofe



Registered office


Al. Komisji Edukacji Narodowej 57

02-797 Warsaw

Poland


Auditors


PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k.

ul. Polna 11

00-633 Warsaw

Poland

Contents


                                                                                                                                                                     Page




 

Consolidated Financial Statements for the year ended 31 December 2020


Consolidated Statement of Comprehensive Income for the year ended 31 December 2020                                                              1


Consolidated Statement of Financial Position as at 31 December 2020                                                                                             2


Consolidated Statement of Changes in Equity for the year ended 31 December 2020                                                                       3


Consolidated Statement of Cash Flows for the year ended 31 December 2020                                                                                  4


Notes to the Consolidated Financial Statements                                                                                                                                  5

 
















Consolidated Statement of Comprehensive Income

For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)

Note





Revenue from residential projects

6

400,257

223,464

Revenue from the sale of land


-

6,500

Revenue from sale of services

6

976

2,654

Revenue


401,233

232,618





Cost of sales residential projects

7

(315,023)

(181,984)

Cost of sales of land


-

(6,312)

Cost of sales


(315,023)

(188,296)





Gross profit


86,210

44,322





Changes in the value of investment property

16

(307)

802

Selling and marketing expenses

8

(5,928)

(5,803)

Administrative expenses

9

(22,542)

(20,181)

Share of profit/(loss) from joint ventures

17

(803)

9,082

Other expenses

11

(3,401)

(3,763)

Other income

12

1,923

1,734

Result from operating activities


55,152

26,193





Finance income

13

558

750

Finance expense

13

(5,168)

(4,862)

Net finance income


(4,610)

(4,112)





Profit/(loss) before taxation


50,542

22,081

Income tax benefit

14

(10,399)

(4,667)

Profit/(loss) for the year


40,143

17,414





Other comprehensive income


-

-

Total comprehensive income for the year, net of tax


40,143

17,414





Total profit/(loss) for the year attributable to:




equity holders of the parent

24

40,143

17,414

non-controlling interests


-

-

Total profit/(loss) for the year


40,143

17,414





Total comprehensive income attributable to:




equity holders of the parent


40,143

17,414

Non-controlling interests


-

-

Total comprehensive income for the year, net of tax


40,143

17,414





Weighted average number of ordinary shares (basic and dilluted)

24

163,103,163

163,689,616





In Polish Zlotys (PLN)




Net earnings per share attributable to the equity holders of the parent (basic)

24

0.246

0.106

Net earnings per share attributable to the equity holders of the parent (dilluted)

24

0.246

0.106


The notes on pages 5 to 69 are an integral part of these consolidated financial statements.


Consolidated Statement of Financial Position

As at 31 December


2020

2019

In thousands of Polish Zlotys (PLN)

Note





Assets




Non-current assets




Property and equipment

15

8,797

8,552

Investment property

16

8,956

10,098

Intangible fixed assets


39

-

Investment in joint ventures

17

8,902

10,617

Deferred tax assets

18

9,037

6,935

Land designated for development

19

45,486

44,321

Total non-current assets


81,217

80,523





Current assets




Inventory

19

664,761

718,060

Trade and other receivables and prepayments

20

37,374

24,745

Advances for Land


3,700

-

Income tax receivable


338

130

Loans granted to joint ventures

17

1,039

1,977

Other current financial assets

21

14,239

22,157

Cash and cash equivalents

22

135,099

95,591

Total current assets


856,550

862,660

Total assets


937,767

943,183





Equity and liabilities




Equity




Shareholders’ equity

23



Share capital


12,503

12,503

Share premium


157,905

150,278

Treasury shares


(1,613)

(580)

Retained earnings


211,022

188,293

Total equity


379,817

350,494





Liabilities




Non-current liabilities




Floating rate bond loans

25, 26

175,382

151,078

Deferred tax liability

18

9,562

9,618

Lease liabilities related to perpetual usufruct of investment property

28

590

552

Total non-current liabilities


185,534

161,248





Current liabilities




Trade and other payables and accrued expenses

29

58,347

97,715

Floating rate bond loans

25,26

52,625

34,924

Other payables - accrued interests on bonds

25,26

2,065

1,967

Secured bank loans

25,26

-

12,875

Interest bearing deferred trade payables


8,482

2,338

Advances received

30

224,267

254,970

Income tax payable


11,734

1,087

Provisions

31

994

2,016

Lease liabilities related to perpetual usufruct of land

28

13,902

23,549

Total current liabilities


372,416

431,441

Total liabilities


557,950

592,689

Total equity and liabilities


937,767

943,183

The notes on pages 5 to 69 are an integral part of these consolidated financial statements.


Consolidated Statement of Changes in Equity


For the years ended 31 December 2020 and 31 December 2019:


In thousands of Polish Zlotys (PLN)

Share
capital

Share premium

Treasury shares

Retained earnings

Total equity







Balance at 1 January 2020

12,503

150,278

(580)

188,293

350,494







Comprehensive income:






Profit for the year ended 31 December 2020

-

-

-

40,143

40,143

Other comprehensive income

-

-

-

-

-

Total comprehensive income/(expense)

-

-

-

40,143

40,143







Own shares acquired

-

-

(1,033)

-

(1,033)







Dividend

-

-

-

(9,787)

(9,787)







Allocation of 2019 result - share premium increase

-

7,627

-

(7,627)

-







Balance at 31 December 2020

12,503

157,905

(1,613)

211,022

379,817





In thousands of Polish Zlotys (PLN)

Share
capital

Share premium


Treasury shares

Retained earnings(1)

Total equity







Balance at 1 January 2019

12,503

150,278

-

180,699

343,480







Comprehensive income:






Profit for the year ended 31 December 2019

-

-

-

17,414

17,414

Other comprehensive income

-

-

-

-

-

Total comprehensive income

-

-

-

17,414

17,414







Dividend paid

-

-

-

(9,820)

(9,820)







Repurchase of own shares

-

-

(580)

-

(580)







Balance at 31 December 2019

12,503

150,278

(580)

188,293

350,494


(1)In order to fund the purchase of own shares under the buyback program, a capital reserve (within retained earnings) is established for an amount of PLN 2,000 thousand. The capital reserve is subsequently reduced by the amount of the consideration paid for the shares bought back. The capital reserve as at 31 December 2019 amounted to PLN 1,420 thousand and is presented as a part of the retained earnings. As at 25 January 2020 the capital reserve was liquidated.
















The notes on pages 5 to 69 are an integral part of these consolidated financial statements.


Consolidated Statement of Cash Flows



2020

2019

For the year ended 31 December


In thousands of Polish Zlotys (PLN)

Note







Cash flows from/(used in) operating activities




Profit/(loss) for the period


40,143

17,414

Adjustments to reconcile profit for the period to net cash used in operating activities




Depreciation


1,029

983

Decrease/(increase) in the value of investment property


(163)

(802)

Write-down/(reversal) of inventory


1,326

(594)

Finance expense


5,168

4,862

Finance income


(558)

(750)

Loss/(profit) on sale of property and equipment


60

(115)

Share of loss /(profit) from joint ventures


803

(9,082)

Income tax expense/(benefit)

14 

10,399

4,667





Decrease/(increase) in inventory and land designated for
development

38

46,262

(7,496)

Acqustion of Nova Królikarnia project

5

(46,914)

(46,069)

Decrease/(increase) in advances for land


(3,700)

-

Decrease/(increase) in trade and other receivables and prepayments

38

(11,669)

(8,147)

Decrease/(increase) in other current financial assets


7,918

(7,838)

Increase/(decrease) in trade and other payables and accrued expenses

38

17,580

19,566

Increase/(decrease) in provisions


(1,022)

(549)

Increase/(decrease) in advances received


(30,703)

102,518

Interest paid


(8,331)

(12,269)

Interest received


473

582

Income tax received/(paid)

14

(2,118)

(4,176)

Net cash from/(used in) operating activities


25,983

52,705





Cash flows from/(used in) investing activities




Acqustion of new entity


(1,000)

-

Acquisition of property and equipment


(70)

(1,549)

Proceeds from loans garnet to JV


3,127

3,450

Loans granted to joint ventures


(1,126)

(16,190)

Dividend received from joint ventures


-

12,836

Proceeds from sale of property and equipment


146

115

Net cash from/(used in) investing activities


1,077

(1,338)





Cash flows (used in)/from financing activities




Proceeds from bank loans, net of bank charges

27

26,029

71,200

Repayment of bank loans

27

(39,217)

(96,754)

Proceeds from bond loans, net of issue costs and of bonds replacement

26

96,223

31,560

Repayment of bond loans

26

(55,000)

(50,000)

Repayment of loans from other


(3,500)

-

Payment of dividend

23

(9,787)

(9,820)

Payment of perpetual usufruct rights

28

(1,268)

(2,210)

Buy-back of shares

23

(1,033)

(580)

Net cash from/(used in) financing activities


12,447

(56,604)





Net change in cash and cash equivalents


39,508

(5,237)

Cash and cash equivalents at beginning of period


95,591

100,828

Cash and cash equivalents at end of period*


135,099

95,591

* Including restricted cash that amounted to PLN 17,606 thousand and PLN 3,829 thousand as 31 December 2020 and as 31 December 2019, respectively.

The notes on pages 5 to 69 are an integral part of these consolidated financial statements.


Notes to the Consolidated Financial Statements


1.Background and business of the Company

(a)Ronson Development SE (‘the Company’), formerly named Ronson Europe N.V., is an European Company with its statutory seat in Warsaw, Poland. The registered office is located at al. Komisji Edukacji Narodowej 57. The Company was incorporated in the Netherlands on 18 June 2007 as Ronson Europe N.V. with statutory seat in Rotterdam. During 2018, the Company changed its name and was transformed into an European Company (SE) and, effectively as of 31 October 2018, transferred its registered office of the Company from the Netherlands to Poland. Address of the Company’s registered office is the same as domicile of the Company.

The Company (together with its subsidiaries, ‘the Group’) is active in the development and sale of residential units, primarily apartments, in multi-family residential real-estate projects to individual customers in Poland. The Company prepared Consolidated Financial Statements for the year ended 31 December 2020, which was authorized for issue on 10 March 2021.


The shares of the Company are traded on the Warsaw Stock Exchange since 5 November 2007. According to publicly available information, as at 31 December 2020, 66.06% of the outstanding shares are controlled indirectly by Amos Luzon Development and Energy Group Ltd. (‘A. Luzon Group’) and 0.91% of the shares are held by the Company. The remaining 33.03% of the outstanding shares are held by other investors including Nationale Nederlanden Powszechne Towarzystwo Emerytalne S.A. and Metlife Powszechne Towarzystwo Emerytalne S.A.. The number of shares held by the investors is equal to the number of votes, as there are no privileged shares issued by the Company. It shall be noted that as at 31 December 2020, the Company held 1,489,235 own shares (0.91%) and, in accordance with art. 364 § 2 of the Code of Commercial Companies, it does not exercise voting rights from own shares.

As at 31 December 2020, the Groups' market capitalization was below the value of net assets. Although, the Company strongly believes that this is a temporary situation due to many different factors, including low liquidity of the Company’s shares listed on WSE, Management took appropriate steps to review the Company’s assets to determine if there is any additional write-down required and found no basis for it. Management verified that the forecast margin potential in respect of the inventory is positive. Therefore, no indicators for potential additional impairment have been identified.


(b)The details of the entities whose financial statements have been included in these Consolidated Financial Statements, the year of incorporation and the percentage of ownership and voting rights directly or indirectly held by the Company as at 31 December 2020 and as at 31 December 2019, are presented below and on the following page.

The projects managed by the entities are in various stages of development ranging from being in the process of acquiring land for development to projects which are completed or near completion.









Notes to the Consolidated Financial Statements

1.Background and business of the Company


Entity name

Year of

incorporation

Share of ownership & voting rights at the end of


Share of ownership & voting rights at the end of


31 December
2020

31 December 2019

a.

held directly by the Company:




1

Ronson Development Management Sp. z o.o.

1999

100%

100%

2

Ronson Development 2000 Sp. z o.o. (2)

2000

-

100%

3

Ronson Development Warsaw Sp. z o.o.

2000

100%

100%

4

Ronson Development Investment Sp. z o.o.

2011

100%

100%

5

Ronson Development Metropol Sp. z o.o.

2011

100%

100%

6

Ronson Development Properties Sp. z o.o. (2)

2002

-

100%

7

Apartments Projekt Sp. z o.o. (2)

2003

-

100%

8

Ronson Development Enterprise Sp. z o.o. (2)

2004

-

100%

9

Ronson Development Company Sp. z o.o. (2)

2005

-

100%

10

Ronson Development Creations Sp. z o.o.

2005

100%

100%

11

Ronson Development Buildings Sp. z o.o. (2)

2005

-

100%

12

Ronson Development Structure Sp. z o.o. (2)

2005

-

100%

13

Ronson Development Poznań Sp. z o.o. (2)

2005

-

100%

14

E.E.E. Development Sp. z o.o. (2)

2005

-

100%

15

Ronson Development Innovation Sp. z o.o. (2)

2006

-

100%

16

Ronson Development Wrocław Sp. z o.o. (2)

2006

-

100%

17

Ronson Development Capital Sp. z o.o. (2)

2006

-

100%

18

Ronson Development Sp. z o.o.

2006

100%

100%

19

Ronson Development Construction Sp. z o.o.

2006

100%

100%

20

City 2015 Sp. z o.o.

2006

100%

100%

21

Ronson Development Village Sp. z o.o. (1)

2007

100%

100%

22

Ronson Development Conception Sp. z o.o. (2)

2007

-

100%

23

Ronson Development Architecture Sp. z o.o. (2)

2007

-

100%

24

Ronson Development Skyline Sp. z o.o.

2007

100%

100%

25

Continental Development Sp. z o.o. (2)

2007

-

100%

26

Ronson Development Universal Sp. z o.o. (1)

2007

100%

100%

27

Ronson Development Retreat Sp. z o.o. (2)

2007

-

100%

28

Ronson Development South Sp. z o.o.

2007

100%

100%

29

Ronson Development Partner 5 Sp. z o.o.

2007

100%

100%

30

Ronson Development Partner 4 Sp. z o.o.

2007

100%

100%

31

Ronson Development North Sp. z o.o.

2007

100%

100%

32

Ronson Development Providence Sp. z o.o.

2007

100%

100%

33

Ronson Development Finco Sp. z o.o.

2009

100%

100%

34

Ronson Development Partner 2 Sp. z o.o.

2009

100%

100%

35

Ronson Development Skyline 2010 Sp. z o.o. w likwidacji (2)

2010

-

100%

36

Ronson Development Partner 3 Sp. z o.o.

2012

100%

100%

37

ACG 23 Sp. z o.o. / Ronson Development Studzienna Sp. z o.o. (9)

2019

100%

-
















Notes to the Consolidated Financial Statements

1.Background and business of the Company


Share of ownership & voting rights at the end of


31 December 2020

31 December 2019

b.

held indirectly by the Company :




38

Nova Królikarnia B.V. (Company with the registered office in the Netherlands)

2016

100%

100%

39

AGRT Sp. z o.o.

2007

100%

100%

40

Ronson Development Partner 4 Sp. z o.o. – Panoramika Sp.k.

2007

100%

100%

41

Ronson Development Sp z o.o. - Estate Sp.k.

2007

100%

100%

42

Ronson Development Sp. z o.o. - Home Sp.k.

2007

100%

100%

43

Ronson Development Sp z o.o. - Horizon Sp.k.

2007

100%

100%

44

Ronson Development Partner 3 Sp. z o.o. - Sakura Sp.k.

2007

100%

100%

45

Destiny Sp. z o.o. (6)

2007

-

100%

46

Ronson Development Millenium Sp. z o.o. (6)

2007

-

100%

47

Ronson Development Partner 3 sp. z o.o. – Viva Jagodno sp. k.

2009

100%

100%

48

Ronson Development Sp. z o.o. - Apartments 2011 Sp.k.

2009

100%

100%

49

Ronson Development Sp. z o.o. - Idea Sp.k.

2009

100%

100%

50

Ronson Development Partner 2 Sp. z o.o. – Destiny 2011 Sp.k.

2009

100%

100%

51

Ronson Development Partner 2 Sp. z o.o. - Enterprise 2011 Sp.k.

2009

100%

100%

52

Ronson Development Partner 2 Sp. z o.o. - Retreat 2011 Sp.k.

2009

100%

100%

53

Ronson Development Partner 5 Sp. z o.o - Vitalia Sp.k.

2009

100%

100%

54

Ronson Development Sp. z o.o. - 2011 Sp.k.

2009

100%

100%

55

Ronson Development Sp. z o.o. - Gemini 2 Sp.k.

2009

100%

100%

56

Ronson Development Sp. z o.o. - Verdis Sp.k.

2009

100%

100%

57

Ronson Espresso Sp. z o.o.

2006

100%

100%

58

Ronson Development Apartments 2010 Sp. z o.o. (6)

2010

-

100%

59

RD 2010 Sp. z o.o. (6)

2010

-

100%

60

Retreat Sp. z o.o.

2010

100%

100%

61

Enterprise 2010 Sp. z o.o.(6)

2010

-

100%

62

Wrocław 2010 Sp. z o.o. (6)

2010

-

100%

63

E.E.E. Development 2010 Sp. z o.o. (6)

2010

-

100%

64

Ronson Development Nautica 2010 Sp. z o.o.

2010

100%

100%

65

Gemini 2010 Sp. z o.o. (6)

2010

-

100%

66

Ronson Development Sp. z o.o. - Naturalis Sp.k.

2011

100%

100%

67

Ronson Development Sp. z o.o. - Impressio Sp.k.

2011

100%

100%

68

Ronson Development Partner 3 Sp. z o.o.- Nowe Warzymice Sp. k

2011

100%

100%

69

Ronson Development Sp. z o.o. - Providence 2011 Sp.k.

2011

100%

100%

70

Ronson Development Partner 2 Sp. z o.o. - Capital 2011 Sp. k.

2011

100%

100%

71

Ronson Development Partner 5 Sp. z o.o. - Miasto Marina Sp.k.

2011

100%

100%

72

Ronson Development Partner 5 Sp. z o.o. - City 1 Sp.k.

2012

100%

100%

73

Ronson Development Partner 2 Sp. z o.o. - Miasto Moje Sp. k.

2012

100%

100%

74

Ronson Development sp. z o.o. – Ursus Centralny Sp. k.

2012

100%

100%

75

Ronson Development Sp. z o.o. - City 4 Sp.k.

2016

100%

100%

76

Ronson Development Partner 2 Sp. z o.o. – Grunwald Sp.k.

2016

100%

100%

77

Ronson Development Sp. z o.o. Grunwaldzka” Sp.k. (before named as Ronson Development Sp. z o.o. - Projekt 2 Sp.k.)

2016

100%

100%

78

Ronson Development Sp. z o.o. - Projekt 3 Sp.k.

2016

100%

100%

79

Ronson Development Sp. z o.o. - Projekt 4 Sp.k.

2017

100%

100%

80

Ronson Development Sp. z o.o. - Projekt 5 Sp.k.

2017

100%

100%

81

Ronson Development Sp. z o.o. - Projekt 6 Sp.k.

2017

100%

100%

82

Ronson Development Sp. z o.o. - Projekt 7 Sp.k.

2017

100%

100%

83

Ronson Development Sp. z o.o. - Projekt 8 Sp.k.

2017

100%

100%

84

Ursus 2017 Sp. z o.o. (4)

2017

-

100%

85

Projekt City Sp. z o.o. (5)

2017

-

100%

86

Bolzanus Limited (Company with the registered office in Cyprus)

2013

100%

100%

87

Park Development Properties Sp. z o.o. - Town Sp.k.

2007

100%

100%

88

Tras Sp. z o.o. (7)

2015

-

100%

89

Pod Skocznią Project Sp. z o.o. (7)

2015

-

100%

90

District 20 Sp. z o.o. (7)

2015

-

100%

91

Arkadia Development Sp. z o.o. (7)

2015

-

100%

92

Królikarnia 2015 Sp. z o.o. (7)

2015

-

100%

93

Tras 2016 Sp. z o.o.

2011

100%

100%

94

Pod Skocznia Projekt 2016 Sp. z o.o. (3)

2011

-

100%




Notes to the Consolidated Financial Statements

1.Background and business of the Company


Share of ownership & voting rights at the end of


31 December 2020

31 December 2019

b.

held indirectly by the Company :




95

District 20 – 2016 Sp. z o.o. (3)

2011

-

100%

96

Arkadia Development 2016 Sp. z o.o. (3)

2011

-

100%

97

Królikarnia 2016 Sp. z o.o. (3)

2011

-

100%

98

Kroli Development Sp. z o.o. (3)

2012

-

100%

99

Park Development Properties Sp. z o.o.

2011

100%

100%

100

Jasminova 2016 Sp. z o.o.

2016

100%

100%

101

Town 2016 Sp. z o.o.

2016

100%

100%

102

E.E.E. Development 2016 Sp. z o.o. (7)

2016

-

100%

103

Enterprise 2016 Sp. z o.o.

2016

100%

100%

104

Wrocław 2016 Sp. z o.o.

2016

100%

100%

105

Darwen Sp. z o.o.

2017

100%

100%

106

Truro Sp. z o.o.

2017

100%

100%

107

Tregaron Sp. z o.o.

2017

100%

100%

108

Totton Sp. z o.o.

2017

100%

100%

109

Tring Sp. z o.o.

2017

100%

100%

110

Thame Sp. z o.o.

2017

100%

100%

111

Troon Sp. z o.o.

2017

100%

100%

112

Tywyn Sp. z o.o. (8)

2018

100%

-

c.

other entities not subject to consolidation:




113

Coralchief sp. z o.o.

2018

50%

50%

114

Coralchief sp. z o.o. - Projekt 1 sp. k.

2016

n/a

n/a

115

Ronson IS sp. z o.o.

2009

50%

50%

116

Ronson IS sp. z o.o. sp. k.

2012

n/a

n/a


(1)The Company has the power to govern the financial and operating policies of this entity and to obtain benefits from its activities, whereas Kancelaria Radcy Prawnego Jarosław Zubrzycki holds the legal title to the shares of this entity

(2)In connection with the merger, registered in the National Court Register on 4 May 2020, the company was taken over by the Ronson Development South sp. z o.o. and by law from 4 May 2020 Ronson Development South sp. z o.o. took over all the rights and obligations of the company

(3)In connection with the merger, registered in the National Court Register on 7 May 2020, the company was taken over by the Tras 2016 sp. z o.o. and by law from 7 May 2020 Tras 2016 sp. z o.o. took over all the rights and obligations of the company

(4)In connection with the merger, registered in the National Court Register on 1 April 2020, the company was taken over by the Destiny sp. z o.o. and by law from 1 April 2020 Destiny sp. z o.o. took over all the rights and obligations of the company

(5)In connection with the merger, registered in the National Court Register on 1 April 2020, the company was taken over by the RD 2010 sp. z o.o. and by law from 1 April 2020 RD 2010 sp. z o.o. took over all the rights and obligations of the company

(6)In connection with the merger, registered in the National Court Register on 1 July 2020, the company was taken over by the Ronson Development South sp. z o.o. and by law from 1 July 2020 Ronson Development South sp. z o.o. took over all the rights and obligations of the company

(7)In connection with the merger, registered in the National Court Register on 1 July 2020, the company was taken over by the Tras 2016 sp. z o.o. and by law from 1 July 2020 Tras 2016 sp. z o.o. took over all the rights and obligations of the company.

(8)Acquired during execution of third call option agreement on 9 April 2020.

(9)Entity acquired on 18 December 2020. Change of the name into Ronson Development Studzienna Sp. z o.o. was registered in KRS on 8 March 2021.













Notes to the Consolidated Financial Statements

2.Basis of preparation and measurement


(a)Basis of preparation and statement of compliance

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (‘IFRS’). In light of the nature of the Group’s activities, the IFRSs applied by the Group are not different from the IFRSs endorsed by the European Union, which are effective for the financial year ended 31 December 2020. The Group is aware about new standards and interpretations that have been issued but have not yet become effective. Information about standards and interpretations were presented below.


The Consolidated Financial Statements were authorized by the Boards of Directors of Ronson Development SE on 10 March 2021. These Consolidated Financial statements have been prepared on the assumption that the Group is a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of its operations. The Company prepared Consolidated Financial Statements for the year ended 31 December 2020 in both English and Polish languages, while the Polish version is binding.

New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting
period commencing 1 January 2020:

• Definition of Material – amendments to IAS 1 and IAS 8

• Definition of a Business – amendments to IFRS 3

• Interest Rate Benchmark Reform – amendments to IFRS 9, IAS 39 and IFRS 7

• Revised Conceptual Framework for Financial Reporting


The Group also elected to adopt the following amendments early:

• Annual Improvements to IFRS Standards 2018-2020 Cycle.

The above standards, amendments and improvements do not have any material impact on the Consolidated Financial Statements of the Group and should not have any material impact on current and future periods.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for
31 December 2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

(b)Basis of measurement

The Consolidated Financial Statements have been prepared on the historical cost basis, except for investment property which was measured at fair value. The methods used to measure fair values for the purpose of preparing the Consolidated Financial Statements are discussed further in Note 3(q), Note 16 and Note 32.


(c)Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’) being Polish Zloty (‘PLN’). Polish Zloty is the presentation currency of the Consolidated Financial Statements of the Group, and is also the functional currency of the parent company.

The Consolidated Financial Statements are presented in thousands of Polish Zloty, except when otherwise indicated.


Notes to the Consolidated Financial Statements


2.Basis of preparation and measurement


(d)Use of estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reported period. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing-basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements, are described in the following notes:

Note 16 – Investment property

Note 18 – Deferred tax asset recognition

Note 19 – Inventory and residential land bank

Note 31 – Provisions

Note 34 – Commitments and contingencies

The Company conducts residential units projects and developing activities in dedicated SPVs. The Company reflects in its Consolidated Financial Statements the activities and transactions related to such projects based on the substance rather than legal form. Such transactions are accounted for in accordance with IAS 2 and IFRS 15, whereby inventory is sold and revenue should be recognized after the criteria are met.

Recognition of revenue

The revenue from the sale of real estate (residential units, commercial units, etc.) is recognised at the moment when control over the real estate is transferred to the customer of said real estate together with the transfer of significant risks and rewards typical to the ownership rights. According to the Company’s judgement this occurs at the moment of handover of the real estate to the customer, which is based on a handover document signed by both parties and subject to the condition that the customer has paid 100% of the sale price for the real estate.


Estimation of net realizable value for inventory and residential land bank

Inventory and residential land bank is stated at the lower of cost and net realizable value (NRV). NRV for completed inventory property (Finished goods) is assessed with reference to market conditions and prices existing at the reporting date and is determined by the Group having taken suitable external advice and in the light of recent market transactions. NRV in respect of work in progress and residential land bank is assessed with reference to market prices at the reporting date for similar completed property, less estimated costs to complete construction and less an estimate of the time value of money to the date of completion.

Valuation of investment property

The fair value of the investment property is determined by independent real estate valuation experts based on the discounted cash flow approach. The determination of the fair value of the investment property requires the use of estimates such as future cash flows from assets (such as lettings, tenants’ profiles, future revenue streams, capital values of fixtures and fittings, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets.

Valuation of lease liability

According to the IFRS 16 standard that was implemented by the Company the lease payments shall be discounted using the rate implicit in the lease contract, or if this rate cannot be readily determined, the Company’s incremental borrowing rate. The Company decided to use incremental borrowing rate (‘IBR’) that was determined based on reference rate adjusted by margin. The IBR rate was built based on reference rate (30 years state bonds quotation) increased by margin which represents higher credit risk of the Company due to worse ratios, risk related to unusual length of potential financing and no possibility to establish security for such long-term financing.

Notes to the Consolidated Financial Statements

2.Basis of preparation and measurement

(d) Use of estimates and judgments

Deferred tax asset recognition

Deferred tax assets are recognized for unused tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses and deductible temporary differences can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax strategies.

Uncertain tax treatment

Regulations regarding VAT, corporate profits tax and social security contributions are subject to frequent changes. These changes result in there being little point of reference and few established precedents that may be followed. The binding regulations also contain uncertainties, resulting in differences in opinion regarding the legal interpretation of tax regulations both between government bodies, and between government bodies and companies.

Tax and other settlements may be subject to inspection by administrative bodies authorized to impose high penalties and fines, and any additional taxation liabilities calculated as a result must be paid together with high interest. The above circumstances mean that tax exposure is greater in Poland than in countries that have a more established taxation system. Accordingly, the amounts shown in the financial statements may change at a later date as a result of the amend to the final decision of the tax authorities.

On 15 July 2016, amendments were made to the Tax Ordinance to introduce the provisions of General Anti-Avoidance Rules (GAAR). GAAR are targeted to prevent origination and use of fictitious legal structures set up to avoid payment of tax in Poland. GAAR define tax evasion as an activity performed mainly with a view to realising tax gains, which is contrary, under given circumstances, to the subject and objective of the tax law. In accordance with GAAR, an activity does not bring about tax gains, if its modus operandi was false. Any instances of (i) unreasonable division of an operation (ii) involvement of agents despite lack of economic rationale for such involvement, (iii) mutually exclusive or mutually compensating elements, as well as (iv) other activities similar to those referred to earlier may be treated as a hint of artificial activities subject to GAAR. New regulations will require considerably greater judgment in assessing tax effects of individual transactions.

The GAAR clause should be applied to the transactions performed after clause effective date and to the transactions which were performed prior to GAAR clause effective date, but for which after the clause effective date tax gains were realised or continue to be realised. The implementation of the above provisions will enable Polish tax authority challenge such arrangements realised by tax remitters as restructuring or reorganization.

The Group accounts for current and deferred tax assets and liabilities based on the requirements of IAS 12 Income taxes, based on taxable profit (tax loss), taxable base, carry-forward of unused tax losses and carry-forward of unused tax credits, and tax rates, while considering the assessment of uncertainty related to tax settlements. If uncertainty exists as to whether and to what extent tax authority will accept individual tax treatments of made transactions, the Group discloses these settlements while accounting for uncertainty assessment. Further details on taxes are disclosed in Note 14 and Note 18.



Notes to the Consolidated Financial Statements

2.Basis of preparation and measurement

(e)Basis of consolidation

These Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

exposure, or rights, to variable returns from its involvement with the investee;

the ability to use its power over the investee to affect its returns.

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. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

The financial statements of subsidiaries are prepared for the same period as the financial statement of parent. The Group entities keep books of accounts in accordance with accounting policies specified in the Accounting Act dated 29 September 1994 (‘the Accounting Act’) with subsequent amendments and the regulations issued based on that Act (all together: ‘Polish Accounting Standards’). These consolidated financial statements include a number of adjustments not included in the books of account of the Group entities, which were made in order to bring the financial statements of those entities in conformity with IFRSs as adopted by EU.

Until 31 of October 2018, Ronson Development SE kept its books of accounts in accordance with accounting policies required by the Dutch law. On 31 October 2018, the Company transferred its registered office from the Netherlands to Poland. On 20 December 2018, the Extraordinary General Meeting of the Company adopted a resolution regarding the preparation of the financial statements of Ronson Development SE in accordance with IFRS, starting with the financial statements for the financial year 2018.

Where property is acquired, via corporate acquisitions or otherwise, the management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business or assets. 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 is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date. Accordingly, no goodwill or additional deferred taxation arises. Otherwise, acquisitions are accounted for as business combinations.


Notes to the Consolidated Financial Statements


3.Significant accounting policies

The accounting policies set out below have been applied consistently in all periods presented in these Consolidated Financial Statements.

(a) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at exchange rates prevailing at the dates of the transactions using:

the purchase or selling rate of the bank whose services are used by the Group – in case of foreign currency sales or purchase transactions, as well in the case as of the debt or liability payment transactions;

the average rate specified for a given currency by the National Bank of Poland as on the transaction date, unless a customs declaration or other binding document indicates another rate – in case of other transactions.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

(b) Revenue from contracts with customers

Revenues from the sale of residential units are recognized when (or as) the Group has satisfied a performance obligation by transferring a promised good to a customer. A residential unit is transferred when (or as) the customer obtains control of the residential unit (i.e. upon signing of the protocol of technical acceptance and transfer of the key to the unit and payment of the entire amount resulting from the sale agreement), after receiving valid occupancy permit for the building.

Advances received related to pre-sales of residential units, which represent deferred income, are deferred when they do not meet the criteria to be recognized as revenue. When they subsequently meet these criteria, they are recognized as revenue.

(c)Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument to another entity.

Financial assets

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus transaction costs. In the case of a financial asset not at fair value through profit or loss. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

In order for a financial asset to be classified and measured at amortized cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

For purposes of subsequent measurement, financial assets are classified in four categories:

Financial assets at amortised cost (debt instruments)

Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

Financial assets at fair value through profit or loss



Notes to the Consolidated Financial Statements

3.Significant accounting policies

(c)Financial instruments

For the Group the first category is most relevant. Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

Loans and borrowings is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.




Notes to the Consolidated Financial Statements


3.Significant accounting policies

(c)Financial instruments

The financial instruments of the Group are classified into one of the following categories:


Category


Statement of financial position item


Measurement

Assets measured at amortized costs



Other current financial assets



Amortized cost method




Loans granted to joint ventures


Fair value through P&L


Cash and cash equivalent


Amortized cost method


Trade and other receivables and prepayments


Amortized cost method

Liabilities measured at amortized costs


Bond loans


Amortized cost method


Secured bank loans


Amortized cost method


Trade and other payables and accrued expenses


Amortized cost method


(d)Property and equipment

(i)Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognizes such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of comprehensive income as incurred.

(ii)Depreciation

Depreciation is calculated on the straight-line basis over the estimated useful life of each component of an item of property and equipment.

The estimated useful life of property and equipment, depending on the class of asset, ranges from 2 to 40 years. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

Depreciation methods, useful lives and residual values are reassessed at the reporting date, and adjusted prospectively since the beginning of the following year, if appropriate.

(e)Leases

The Group recognizes assets and liabilities resulting from leases with a period exceeding 12 months, unless the underlying asset is of low value. The only material lease agreements with a period exceeding 12 months into which the Group has entered, are the rights of perpetual usufruct of real estate properties.


Notes to the Consolidated Financial Statements

3.Significant accounting policies

(e)Leases

The method of valuation and presentation of lease in the Group's financial statements

The Group recognizes a lease liability, measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of initial application. The Group recognizes the respective right-of-use asset at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments recognized immediately before the date of initial application. The Group has decided to present right-of-use assets under the same item in the Consolidated Statement of Financial Position, under which the relevant underlying assets would be presented if they were owned by the Group. The lease liabilities are presented separately from other liabilities in long term liabilities with respect to lease of investment properties and short term liabilities with respect to lease of inventory.

The right of perpetual usufruct of land related to residential projects:

Assets - was recognized in the Consolidated Statement of Financial Position under "Inventory".

Liabilities - was presented in the Consolidated Statement of Financial Position as a short term under "Lease liabilities related to perpetual usufruct of land".

Costs - the Group depreciates the right of use asset on straight line basis over the lease period. On the other hand the Group recognizes finance expense to reflect interest expense on lease liability. Those costs are capitalized to Inventory as long as development project qualifies for capitalization.

Derecognition – at the moment occupancy permit is issued the Group becomes the owner of the land (based on The Act of July 20, 2018 on transformation of the right of perpetual usufruct of land built for housing purposes into the ownership right of these lands). Since then the Group is no longer liable for perpetual usufruct fees but pays conversion fees. At the moment occupancy permit is issued and revenue from the sale of residential units is recognized (when the performance obligations are satisfied and when the customer obtains control of the good, i.e. upon signing of the protocol of technical acceptance and the transfer of the key to the buyer of the residential unit and total payment obtained) the liability for conversion fee and related asset are reclassified to other payables and other receivables and are presented under "Trade and other payables and accrued expenses" and "Trade and other receivables and prepayments" respectively. The Group is legally released from the obligation to pay conversion fees only upon signing the final notary deed for transferring the ownership of unit together with share in the land to the client. Carrying amounts of receivables and payables are derecognized from Consolidated Statement of Financial Position once final notary deeds are signed with clients.

Despite the fact that based on the Group’s core business the operating cycle of inventory is on average 5 years i.e. plots of land are purchased for the purpose of the development of residential projects and transferring the ownership of the units together with share in the land to the client. Under IFRS 16 the Group is not allowed to consider the period for which the Group expects to be the usufructuary despite the fact that the period is quite precisely known. Therefore once lease liabilities are recognized, the Group is required to discount all future payments resulting from the right of perpetual usufruct for the period for which the right is granted to individual properties (it can be up to 99 years). Following the requirements of IFRS 16 the Group recognize lease liabilities of which majority will not be paid by the Group.

The right of perpetual usufruct of investment properties:

Assets - was recognized in the balance sheet under "Investment properties".

Liabilities - was presented in the balance sheet as a long term under "Lease liabilities related to perpetual usufruct of investment property".

Notes to the Consolidated Financial Statements

3. Significant accounting policies

(e)Leases

Costs - the Group fair values the right of use asset at each balance sheet date and recognizes finance expense to reflect interest expense on lease liability.

(f)Investment property

Investment properties are measured initially at cost, including transaction costs. Subsequently to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the statement of comprehensive income in the period in which they arise. 

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the statement of comprehensive income in the period of derecognition.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequently accounting is the fair value at the date of change in use. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

(g) Residential land bank and Inventories

The Group estimates that an operating cycle for projects/stage of a big project lasts for about 5 years. The operating cycle is divided into two phases: (i) the pre-construction preparation phase lasting about 3 years (obtaining necessary site permits, environmental decisions or construction permits, designing, etc.), and (ii) construction phase lasting also about 2 years.

When a project is within the operating cycle the project presented as short-term assets under inventory, in other cases the project presented as long-term under Residential land bank.

(i)Inventory

Inventory is measured at cost increased by capitalized costs incurred relating to the preparation of the projects for construction, in the value not higher than the net realizable value. The cost of inventory includes expenditure incurred relating to the construction of a project.

Inventory comprises residential real estate projects to individual customers.


Costs relating to the construction of a project are included in inventory of residential units as follows:

costs incurred relating to projects or a stage of a project which are not available for sale (work in progress),

costs incurred relating to units unsold associated with a project.

Project construction costs include:

a)land or leasehold rights for land,

b)construction costs paid to the general contractor building the residential project,

c)planning and design costs,

d)perpetual usufruct fees and real estate taxes incurred during the period of construction,

e)borrowing costs to the extent they are directly attributable to the development of the project,

f)professional fees attributable to the development of the project,

g)construction overheads and other directly related costs.

h)lease assets, see note 3 (e).

Inventory is recognized as a cost of sales in the statement of comprehensive income when the sale of residential units is recognized.


Notes to the Consolidated Financial Statements

3.Significant accounting policies

(g)Residential land bank and Inventories

(ii) Residential land bank

Long-term part of the land bank (if a commencement of construction phase is not planned within the period of 3 years from the reporting date) is presented in non-current assets of the consolidated statement of financial position, as “Residential land bank”, whereas short-term part of the land bank is presented in current assets of the consolidated statement of financial position, in inventory balance. Residential land bank is measured at cost increased by capitalized costs incurred relating to the preparation of the projects for construction, in the value not higher than the net realizable value.

(h)Equity

(i)Share capital

Share capital includes the proceeds received from the issue of ordinary shares on the nominal value in exchange for cash.

(ii)Share premium

Share premium includes the excess of proceeds received from the issue of shares over the nominal value of shares. Shares issuance costs are deducted from the share premium.

(iii)Treasury shares

Own shares that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

(i)Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s or a cash generating unit’s recoverable amount is estimated.

An impairment loss is recognized if the carrying amount of an asset or a cash generating unit exceeds its recoverable amount.

The recoverable amount of an asset or a cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.


Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(j)Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.






Notes to the Consolidated Financial Statements

3.Significant accounting policies

(k)Borrowing costs

Borrowing costs directly attributable to the inventory of properties which necessarily take a substantial period of time to get ready for their intended use or sale, are capitalized as part of the cost of the respective assets.

The interest capitalized is calculated using the Group’s weighted average cost of borrowings after adjusting for borrowings associated with specific developments. Where borrowings are associated with specific developments, the amount capitalized equals the gross interest incurred on those borrowings. Interest is capitalized as from the commencement of the development work until the date of completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted.

(l)Income tax expense

Income tax expense comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax expense is calculated according to tax regulations in effect in the jurisdiction in which the individual companies are domiciled.

Deferred income tax is provided, using the balance sheet method, for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, and for tax losses carried forward, except for the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit.


Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. At each reporting date deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(m)Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. The computations of the basic earnings per share are determined on the basis of the weighted average number of shares outstanding during the year. The diluted earnings per share are determined by adjusting the statement of comprehensive income and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted and rights to obtain shares by employees.

(n)Cash and cash equivalents

Cash and cash equivalents in the statement of financial positions comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, except for collateralized deposits.

For the purpose of the consolidated statement cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.



Notes to the Consolidated Financial Statements

3.Significant accounting policies

(o)Investment in joint ventures

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

Under the equity method, the investment in a joint venture is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share of net assets of the joint venture since the acquisition date. Upon making an investment in an associate or joint venture, the amount by which the costs of such investment exceed the value of the Group’s share in the net fair value of identifiable assets and liabilities of this entity is recognized as goodwill and included in the carrying amount of the underlying investment.

The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. Any change in Other comprehensive income of joint ventures are presented as part of the Group’s Other comprehensive income. In addition, when there has been a change recognized directly in the equity of the joint venture, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.

The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its carrying value, and then recognizes the loss as ‘Share of profit/(loss) of a joint venture’ in the statement of profit or loss.

Upon loss of joint control over the joint venture, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss.

(p)Employee benefits

Obligations for contributions to defined contribution pension plans are recognized as an expense in the statement of comprehensive income as incurred.

The Company’s subsidiaries are required, under applicable regulations, to pay, on a monthly basis, social security contributions for the employees’ future pension benefits. These benefits, according to IAS 19 ‘Employee Benefits’, are state plans and are characterized as defined contribution plans. Therefore, the Company’s subsidiaries have no legal or constructive obligation to pay future pension benefits and their obligation is limited to payment of contributions as they fall due.  


Notes to the Consolidated Financial Statements

3.Significant accounting policies

(q)Fair Value

The Group measures investment properties at fair value at each balance sheet date. In addition, fair values of financial instruments measured at amortized cost are disclosed in Note 32 and Note 16.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

-in the principal market for the asset or liability, or

-in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.


A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

-Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

-Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);

-Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).


For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.



Notes to the Consolidated Financial Statements


4.Segment reporting

The Group’s operating segments are defined as separate entities developing particular residential projects, which for the reporting purposes were aggregated. The aggregation for reporting purpose is based on geographical locations (Warsaw, Poznań, Wrocław and Szczecin) and type of activity (development of apartments and development of houses). Moreover, for particular assets the reporting was based on type of income: rental income from investment property. The segment reporting method requires also the Company to present separately joint venture within Warsaw segment.

According to the Management Board’s assessment, the operating segments identified have similar economic characteristics. Aggregation based on the type of development within the geographical location has been applied since primarily the location and the type of development determine the average margin that can be realized on each project and the project’s risk factors. Considering the fact that the production process for apartments is different from that for houses and considering the fact that the characteristics of customers buying apartments slightly differ from those of customers interested in buying houses, aggregation by type of development within the geographical location has been used for segment reporting and disclosure purposes.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated indirectly based on reasonable criteria. The unallocated result for the year comprises mainly head office expenses. Unallocated assets comprise mainly unallocated cash and cash equivalents and income tax assets. Unallocated liabilities comprise mainly bond loans and income tax liabilities.

Data presented in the table below are aggregated by type of development within the geographical location:


In thousands of Polish Zlotys (PLN)

As at 31 December 2020


Warsaw


Poznań


Wrocław


Szczecin

Unallocated

IFRS

adjustments

Total


Apartments

Houses

Joint venture

Rental


Apartments

Houses


Apartments

Houses


Apartments

Houses





















Segment assets

417,474

224,241

57,143

9,797


39,602

-


86,106

-


72,486

-

-

(47,202)

859,648

Unallocated assets

-

-

-

-


-

-


-

-


-

-

78,119

-

78,119

Total assets

417,474

224,241

57,143

9,797


39,602

-


86,106

-


72,486

-

78,119

(47,202)

937,767


















Segment liabilities

187,191

64,058

48,937

1,552


5,601

-


45,123

-


11,047

-

-

(48,937)

314,572

Unallocated liabilities

-

-

-

-


-

-


-

-


-

-

243,378

-

243,378

Total liabilities

187,191

64,058

48,937

1,552


5,601

-


45,123

-


11,047

-

243,378

(48,937)

557,950



















In thousands of Polish Zlotys (PLN)

As at 31 December 2019


Warsaw


Poznań


Wrocław


Szczecin

Unallocated

IFRS

adjustments

Total


Apartments

Houses

Joint venture

Rental


Apartments

Houses


Apartments

Houses


Apartments

Houses





















Segment assets

478,448

108,162

34,104

10,098


90,333

-


88,723

-


100,179

-

-

(21,510)

888,537

Unallocated assets

-

-

-

-


-

-


-

-


-

-

54,646

-

54,646

Total assets

478,448

108,162

34,104

10,098


90,333

-


88,723

-


100,179

-

54,646

(21,510)

943,183


















Segment liabilities

214,686

38,902

22,090

-


49,344

-


50,928

-


37,333

-

-

(22,090)

391,193

Unallocated liabilities

-

-

-

-


-

-


-

-


-

-

201,496

-

201,496

Total liabilities

214,686

38,902

22,090

-


49,344

-


50,928

-


37,333

-

201,496

(22,090)

592,689




















Notes to the Consolidated Financial Statements


4.Segment reporting

In thousands of Polish Zlotys (PLN)

For the year ended 31 December 2020


Warsaw


Poznań


Wrocław


Szczecin

Unallocated

IFRS

adjustments

Total


Apartments

Houses

Joint venture

Rental


Apartments

Houses


Apartments

Houses


Apartments

Houses





















Revenue

186,290

28,027

2,065

747


82,924

-


46,600

-


56,645

-

-

(2,065)

401,233


















Segment result

62,931

4,405

(911)

(260)


17,648

-


(395)

-


994

-

-

911

85,322

Unallocated result

-

-

-

-


-

-


-

-


-

-

(30,169)

-

(30,169)

Result from operating activities

62,931

4,405

(911)

(260)


17,648

-


(395)

-


994

-

(30,169)

911

55,153


















Net finance income/ (expenses)

(275)

(450)

(533)

(49)


(44)

-


(414)

-


(110)

-

(3,269)

533

(4,611)

Profit/(loss) before tax

62,655

3,955

(1,444)

(309)


17,604

-


(809)

-


884

-

(33,438)

1,444

50,542


















Income tax expenses
















(10,399)

Profit for the year
















40,143


















Capital expenditure

-

-

-

-


-

-


-

-


-

-

-

-

-


In thousands of Polish Zlotys (PLN)

For the year ended 31 December 2019


Warsaw


Poznań


Wrocław


Szczecin

Unallocated

IFRS

adjustments

Total


Apartments

Houses

Joint venture

Rental


Apartments

Houses


Apartments

Houses


Apartments

Houses





















Revenue

161,545

15,118

87,190

767


10,392

-


41,621

-


3,175

-

-

(87,190)

232,618


















Segment result

33,558

108

20,688

431


(3,228)

-


5,696

-


1,347

-

-

(11,606)

46,994

Unallocated result

-

-

-

-


-

-


-

-


-

-

(20,801)

-

(20,801)

Result from operating activities

33,558

108

20,688

431


(3,228)

-


5,696

-


1,347

-

(20,801)

(11,606)

26,193


















Net finance income/ (expenses)

(105)

(22)

(216)

(37)


(28)

-


(30)

-


(17)

-

(3,873)

216

(4,112)

Profit/(loss) before tax

33,453

86

20,472

394


(3,256)

-


5,666

-


1,330

-

(24,674)

(11,390)

22,081


















Income tax expenses
















(4,667)

Profit/(loss) for the year
















17,414


















Capital expenditure

830

-

-

-


-

-


317

-


-

-

402

-

1,549







Notes to the Consolidated Financial Statements

5.Acquisition of the Nova Królikarnia project

On 10 April 2018, the Company completed the acquisition of certain shares and loans granted to project companies owning properties constituting the Nova Królikarnia project for a price of PLN 83.8 million under a sale and purchase agreement with Global City Holdings B.V. (‘GCH’). The Nova Królikarnia project is located around Jaśminowa street in Warsaw and consists of 197 units and an aggregate floor space of 19,500 m2 (at the day of the transaction the project included, completed projects with 53 units and an aggregate floor space of 4,950 m2, projects under construction with 126 units and an aggregate floor space of 11,150 m2 and a project in pipeline with 18 units and an aggregate floor space of 3,400 m2). All amounts were repaid as at 31 December 2019.

In addition to the above, the Company and GCH have concluded call option agreements for a total value of PLN 78.9 million, under which the Company has been granted three call options with respect to the shares in the eight other project companies holding the remaining stages of the Nova Królikarnia project. The exercise of the three call options allows the Company to develop 161 units with an aggregate floor space of approximately 21,500 m2.

A package of customary security, such as mortgages, share pledges and statement on submission to voluntary enforcement has been established for the benefit of GCH to secure the obligations of the Company under the sale and purchase agreement and the call option agreement. Also, it has been agreed with GCH that the Company will continue to manage the Nova Królikarnia project in whole, including the stages of the project that are related to the call option agreement.

On 5 April 2019, the Company exercised the first call option under the Call Option Agreements for the total price of PLN 33.9 million as a result of which the Company (via its subsidiary) acquired shares in companies holding four substages of Nova Królikarnia project comprising 84 units with an aggregate floor space of around 9,200 m2. Moreover the Company signed the annex changing the schedule of payment of the first call option in which the price was determined to be paid in three installments: PLN 7.0 million was paid in April 2019, PLN 16.9 million was paid in October 2019 and PLN 10.0 million was paid in October 2020.

On 7 October 2019, the Company exercised the second call option under the Call Option Agreements for the total price of PLN 35.1 million as a result of which the Company (via its subsidiary) acquired shares in companies holding three substages of Nova Królikarnia project comprising 44 units with an aggregate floor space of around 9,000 m2. Moreover the Company signed the annexes changing the schedule of payment of second call option in which the price is determined to be paid in three installments: PLN 8.1 million was paid in October 2019, PLN 5.0 million was paid in February 2020 and PLN 22.0 million was paid in April 2020.

On 9 April 2020, the Company (via its subsidiary) exercised that last (third) call option under the Call Option Agreement in total amount of PLN 9.9 mio, as a result of this transaction the Company acquired shares in one substage of the Nova Królikarnia project with an aggregate floor space of 3,300 m2. All price for realization of third call option in amount of PLN 9.9 mio was paid in April 2020.

All payments concerning realization of all three call options were made according to the abovementioned schedule. As at 31 December 2020 all payables related to Acquisition of Nova Królikarnia Project were reduced to nil.

Certain fees in the maximum amount of PLN 11.9 million were due by the Company if the Company would not exercise all three call options within certain deadlines. As at 31 December 2020 as a result of realization of all three call options all fees were reduced to nil.

The table below presents the analysis of cash flows on the acquisition of the Nova Królikarnia project:

For the year ended 31 December

In thousands of Polish Zlotys (PLN)


2020

2019

Purchase consideration paid (Nova Królikarnia transaction)

-

13,000

Purchase consideration paid (Call Option I)


10,000

23,916

Purchase consideration paid (Call Option II)


27,000

8,084

Purchase consideration paid (Call Option III)


9,900

-

Transaction costs


22

1,071

Less: Net cash acquired at the transaction date


-

(2)

Net cash outflow


46,922

46,069


Notes to the Consolidated Financial Statements

6.Revenue

The majority of Group’s revenues are generated through development and sale of units, primarily apartments, in residential real-estate projects to individual customers in Poland (“residential units”). The Group recognizes revenues at the moment performance obligations are satisfied. According to Group’s policy the performance obligation is satisfied at the moment, the residential unit is handed over to the customer, which happens only after construction process is finalized and issuance of occupancy permit, based on hand-over protocol signed between the Group representatives and the customer and provided that the entire amount resulting from the sale agreement has been paid by the customer. The agreements with the customers do not contain variable considerations. The agreements, in the opinion of the Group, do not contain a significant financing component. Based on such characteristics of revenues, the Group, as a rule, does not present any receivables or other contract assets, except for costs to obtain the contract, capitalized to prepayments. Contract liabilities, are reflected by advances received, which are disclosed in the Note 30.

The table below presents breakdown of Revenue from residential projects per project:



For the year ended 31 December


2020

2019


In thousands of Polish Zlotys (PLN)








City Link III


149,448

30,950


Grunwald2


80,916

-


Miasto Marina


46,485

4,356


Panoramika IV


28,888

2,241


Miasto Moje III


33,388

-


Panoramika V


27,757

-


Nova Królikarnia 2c


18,584

-


Miasto Moje I&II


1,446

51,979


Nova Królikarnia 2b


4,074

50,998


Nova Królikarnia 1d


2,237

28,162


Vitalia I & II


-

29,763


Chilli IV


-

6,103


Moko


-

8,847


Młody Grunwald


1,248

3,775


Other


5,786

6,290


Total revenue


400,257

223,464

(1)Other revenue are related to sales of 7 units, parking places and storages in old projects that were completed in previous years, as well as, rental revenues.

Revenues from sale of services are associated with fee income for management services provided to joint ventures. Revenues from sale of services amounted to PLN 976 thousand during the year ended 31 December 2020 and to PLN 2,654 thousand during the year ended 31 December 2019.



Notes to the Consolidated Financial Statements

7.Cost of sales

For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






City Link III


91,999

18,955

Grunwald2


62,265

-

Miasto Marina


46,472

4,356

Panoramika IV


28,639

2,241

Miasto Moje III


27,546

-

Panoramika V


27,034

-

Nova Królikarnia 2c


16,856

-

Miasto Moje I&II


1,127

40,632

Nova Królikarnia 2b


3,676

45,909

Nova Królikarnia 1d


1,845

24,124

Vitalia I & II


-

24,644

Chilli IV


-

5,878

Moko


-

6,545

Młody Grunwald


1,199

3,775

Other


5,041

5,519

Write-down of inventory and residential land bank (1)


1,325

(594)

Total cost of sales


315,023

181,984

(1)For additional information see Note 19.

8.Selling and marketing expenses

For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Advertising


4,684

4,560

Depreciation


385

509

Other


859

734

Total selling and marketing expenses


5,928

5,803


9.Administrative expenses

For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)

Note





Personnel expenses

10

15,762

14,450

External services


3,007

2,889

Consulting fees to main shareholder


865

840

Materials and energy


628

653

Depreciation


644

474

Taxes and charges


1,336

157

Other


300

718

Total administrative expenses


22,542

20,181






Notes to the Consolidated Financial Statements

10.Personnel expenses

For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Wages and salaries


13,746

12,489

Social security and other benefits


2,016

1,961

Total personal expense


15,762

14,450





Average number of personnel employed


74

73


11.Other expenses


For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Maintenance expense of unsold units


1,463

1,344

Cost of repairs and defects


548

1,087

Expense for contractual penalties and compensation


106

274

Settlement of VAT related of previous periods


-

399

Write-down of trade receivables


1,081

163

Cost of research and due diligence of new projects


-

63

Other expenses


202

433

Total other expenses


3,401

3,763

12.Other income


For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Revenues from contractual penalties and compensation


299

337

Rental income from inventory


455

706

Net profit on sale of property and equipment


321

115

Return of perpetual usefruct from the city hall related to previous years


-

508

Other income


847

68

Total other income


1,923

1,734







Notes to the Consolidated Financial Statements

13.Finance income and expense


For the year ended 31 December 2020


Total amount

Amount capitalized

Amount capitalized (under IFRS 16)

Recognized in the statement of comprehensive income

In thousands of Polish Zlotys (PLN)








Interest on granted loans


375

-

-

375

Interest income on bank deposits


133

-

-

133

Other Finance income


50

-

-

50

Finance income


558

-

-

558







Interest expense on financial liabilities


(8,428)

5,156

-

(3,272)

Commissions and fees


(2,943)

1,718

-

(1,225)

Other finance expense


(639)

-

-

(639)

Finance expense


(12,011)

6,875

-

(5,136)







Finance expense - on lease liabilities


(949)

917

(32)







Net finance income


(12,401)

6,875

917

(4,610)



For the year ended 31 December 2019


Total amount

Amount capitalized

Amount capitalized

(under IFRS16)

Recognized in the statement of comprehensive income

In thousands of Polish Zlotys (PLN)








Interest on granted loans


257

-

-

257

Interest income on bank deposits


396

-

-

396

Other finance income


97

-

-

97

Finance income


750

-

-

750







Interest expense on financial liabilities


(11,013)

7,187

-

(3,826)

Commissions and fees


(2,651)

1,766

-

(885)

Other finance expense


(221)

106

-

(115)

Finance expense


(13,885)

9,059

-

(4,826)







Finance expense - on lease liabilities


(2,141)

 -

2,105

(36)







Net finance expense


(15,276)

9,059

2,105

(4,112)




Notes to the Consolidated Financial Statements

14.Income tax





For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Current tax




Current period


12,558

3,438

Taxation in respect of previous periods


-

363

Total current tax expense


12,558

3,801





Deferred tax




Origination and reversal of temporary differences


(792)

932

Tax losses utilized/(recognized)


(1,367)

(66)

Total deferred tax expense/(benefit)


(2,159)

866





Total income tax expense


10,399

4,667



For the year ended 31 December


2020

2019

In thousands of Polish Zlotys (PLN)






Profit for the year


40,143

17,414

Total income tax benefit


10,399

4,667

Profit before income tax


50,542

22,081





Expected income tax using the Polish tax rate (19%)


9,603

4,195





Tax effect on:




Taxes in respect of previous periods


(334)

363

Non-deductible expenses, net


368

567

Movement in unrecognized deferred tax assets on loss carry forward in Poland


315

938

Tax benefit in connection with the organizational restructuring of the Group


(452)

(2,422)

Reversal of surplus in Nova Transaction (1)


735

1,770

Unrecognized deferred tax assets in previous periods


-

(325)

Deferred tax asset write-off


506

-

Other differences


(342)

(419)

Tax expense/(benefit) for the period


10,399

4,667





Effective tax rate


20.57%

21.14%


(1) The surplus between the purchase price (including transaction cost) and the net assets value of Nova Group as the transaction date, was allocated to the inventory, in relation to which the provision for deferred income tax was not recognized on the basis of an exception (IAS 12 par. 15 (b)).


Notes to the Consolidated Financial Statements

15.Property and equipment

For the year ended 31 December 2020


Vehicles

Equipment

Building

Total

In thousands of Polish Zlotys (PLN)








Cost or deemed cost






Balance at 1 January


1,510

3,374

8,632

13,516



-

-

-

-

Additions


-

70

1,473

1,543

Sales and disposals


(480)

-

-

(480)

Closing balance


1,030

3,444

10,105

14,579







Depreciation and impairment losses






Balance at 1 January


582

2,435

1,947

4,964

Depreciation for the period


237

525

267

1,029

Sales and disposals


(211)

-

-

(211)

Closing balance


608

2,960

2,214

5,782







Carrying amounts






At 1 January


928

939

6,685

8,552

Closing balance


422

484

7,891

8,797


For the year ended 31 December 2019


Vehicles

Equipment

Building

Total

In thousands of Polish Zlotys (PLN)








Cost or deemed cost






Balance at 1 January


1,220

2,941

8,116

12,277

Additions


600

433

516

1,549

Sales and disposals


(310)

-

-

(310)

Closing balance


1,510

3,374

8,632

13,516







Depreciation






Balance at 1 January


669

1,897

1,725

4,291

Depreciation for the period


223

538

222

983

Sales and disposals


(310)

-

-

(310)

Closing balance


582

2,435

1,947

4,964







Carrying amounts






At 1 January


551

1,044

6,391

7,986

Closing balance


928

939

6,685

8,552


As at 31 December 2020 and 31 December 2019, the Property for the amount of PLN 6,489 thousands and of PLN 5,402 thousands was used to secure bond loans series R, respectively.

Impairment loss

In the years ended 31 December 2020 and 31 December 2019, the Group did not recognize any impairment loss with respect to property and equipment.



Notes to the Consolidated Financial Statements

16. Investment property


For the year ended 31 December


2020

2019


In thousands of Polish Zlotys (PLN)








Balance at 1 January


10,098

8,743


IFRS 16


(8)

553


Transfer to Property, equipment and intangible assets


(827)

-


Change in fair value during the year


(307)

802


Balance as at 31 December, including:


8,956

10,098







Cost


3,646

4,058


IFRS 16


545

553


Fair value adjustments


4,765

5,487


As at 31 December 2020, the investment property included property held for long-term rental yields and capital appreciation, and were not occupied by the Group. The investment property consists of a plot of land located in Warsaw (71, Gwiaździsta Street) and an office building with an aggregate usable floor space of 1,318 m2 located on this plot that is leased to third parties under lease agreements with an indefinite term subject to a three-month notice period for termination (“Bielany IP”).

Investment property is valued at fair value determined as at 31 December 2020 by an independent appraiser, having an appropriate recognized professional qualification using the method of discounted cash flows. As at 31 December 2019, the fair value of Investment property was determined by the Management.

As at 31 December 2020, the Bielany IP was valued based on the discounted cash flow approach, including the assumption as to an annual discount rate of 7% (during a 6 year forecast period), a capitalization exit yield of 7.5%, a monthly rate of PLN 45 per m2. If the yields used for the appraisals of investment property on 31 December 2020, had been 100 basis points higher than was the case at that time, the value of the investments would have been 10% lower. In this situation, the Company’s shareholders’ equity would have been PLN 874 thousand lower.

During the year ended 31 December 2020 and 2019 the rental income from investment property amounted to PLN 757 thousand and PLN 767 thousand, respectively.

The investment properties are currently occupied.

The investment properties are used to secure bond loans series R.




Notes to the Consolidated Financial Statements

17.Investment in joint ventures


As at 31 December





In thousands of Polish Zlotys (PLN)


2020

2019







Loans granted


11,634

12,311


Share in net equity value of joint ventures


(1,693)

283


The Company's carrying amount of the investment


9,941

12,594


Presented as Loans granted to joint ventures (current assets)


(1,039)

(1,977)


Investment in joint ventures


8,902

10,617

Share of profit/(loss) from joint ventures

The Investment in joint ventures comprise the Company’s 50% interest in four joint ventures companies:

- Ronson IS sp. z o.o. and in Ronson IS Sp. z o.o. Sp.k., both involved in the development and sale of residential units in Warsaw known as City Link I and II,

- Coralchief Sp. z o.o. and Coralchief Sp. z o.o. – Projekt 1 Sp.k. which are running the Wilanów Tulip project.

The investments in joint ventures are accounted for using the equity method.


The table below present the movements in the share in net equity value of joint ventures:



As at 31 December





In thousands of Polish Zlotys (PLN)


2020

2019







Opening balance


(572)

3,439







Share of profit/(loss) in joint ventures





Net result from joint venture during the period


(1,121)

8,825


Offsetting net results of the joint venture with inter-company interest during the period


318

257


Share of profit/(loss) of joint ventures


(803)

9,082


Dividend paid


-

(12,836)


Closing balance before offsets


(1,375)

(315)


Cancelling the offset of intercompany interest accrued during the period


(318)

(257)


Total closing balance


(1,693)

(572)


Cancelling the negative result from joint venture during the period


-

855


Total closing balance


(1,693)

283





Notes to the Consolidated Financial Statements

17.Investment in joint ventures

Share of profit/(loss) from joint ventures

Summarised financial information of the joint ventures is presented below:


As at 31 December

2020

2019


In thousands of Polish Zlotys (PLN)




Assets




Fixed assets

40

98


Inventory

52,026

26,011


Cash and cash equivalents

1,942

2,511


Other current financial assets

3,177

2,560


Loans granted to related parties

-

1,977


Other assets

-

947


Liabilities




Loans from shareholders

(28,476)

(26,143)


Advances received

(24,760)

(4,620)


Other liabilities

(7,335)

(4,485)


Equity

(3,386)

(1,144)


Company share

(1,693)

(572)


The summarised statement of comprehensive income for the joint ventures in aggregate is as follows:


For the year ended 31 December

2020

2019


In thousands of Polish Zlotys (PLN)








Revenue

2,065

87,190


Cost of sales

(1,511)

(65,300)


Gross profit

554

21,890


Administrative expenses(1)

(1,123)

(3,058)


Selling and marketing expenses

(627)

(429)


Other income/(cost)

(215)

(277)


Finance income

12

75


Finance expense

(843)

(548)


Profit/(loss) before taxation

(2,242)

17,653


Income tax benefit/(expense)

-

(1)


Profit for the year (continuing operations)

(2,242)

17,652


Total comprehensive income for the year (continuing operations)

(2,242)

17,652


The Company’s share of profit/(loss) for the year

(1,121)

8,825

(1) Including management fee to the Group amounting to 976 thousand and PLN 2,564 thousand during the year ended 31 December 2020 and 31 December 2019, respectively.



Notes to the Consolidated Financial Statements

17.Investment in joint ventures

Loans granted to the joint ventures

The table below present the movements in the loans granted to the joint ventures.



As at 31 December





In thousands of Polish Zlotys (PLN)


2020

2019







Opening balance


13,166

-


Loans granted


1,126

16,190


Loans repaid


(3,107)

(3,450)


Accrued interest


595

514


Interest paid


(146)

(88)


Total closing balance


11,634

13,166


Offset of the negative result from joint venture during the period


-

(855)


Total closing balance


11,634

12,311


As at 31 December 2020, from the total amount of loans granted to joint ventures (amounting in total to PLN 11,634 thousand – before offset) loans in the aggregate amount of PLN 1,039 thousand are maturing no later than 31 December 2021. The short term loans granted to joint ventures cannot be regarded as a part of the investment in joint ventures and are presented in the Consolidated Statement of the Financial Position under current assets as Loans granted to joint ventures.


The loans granted to joint venture bear a variable rate of WIBOR 3M plus 4% margin.




Notes to the Consolidated Financial Statements

18.Deferred tax assets and liabilities

Recognized deferred tax assets and liabilities

Deferred tax assets and liabilities as at the beginning and end of the financial periods are attributable to the following:



Opening balance

1 January 2020

Recognized in the statement of comprehensive income

Closing balance

31 December 2020




In thousands of Polish Zlotys (PLN)


Deferred tax assets





Tax loss carry forward

2,124

1,367

3,491


Accrued interest

3,704

856

4,560


Accrued expense

657

62

719


Write-down on work in progress

2,452

(850)

1,602


Other*

4,106

(438)

3,668


Total deferred tax assets

13,043

997

14,040







Deferred tax liabilities





Difference between tax base and carrying value of inventory

13,732

(947)

12,785


Accrued interest

437

(271)

166


Fair value gain on investment property

1,042

(11)

1,031


Other

515

67

582


Total deferred tax liabilities

15,726

(1,162)

14,564


 Total deferred tax benefit (see Note 14)


(2,159)









Deferred tax assets

13,043


14,040


Deferred tax liabilities

15,726


14,564


Offset of deferred tax assets and liabilities for individual companies

(6,108)


(5,003)


Deferred tax assets reported





in the Consolidated Statement of Financial Position

6,935


9,037


Deferred tax liabilities reported





in the Consolidated Statement of Financial Position

9,618


9,562

* Including deferred tax asset from contributions.




Notes to the Consolidated Financial Statements

18.Deferred tax assets and liabilities



Opening balance

1 January 2019

Recognized in the statement of comprehensive income

Closing balance

31 December 2019




In thousands of Polish Zlotys (PLN)


Deferred tax assets





Tax loss carry forward

2,058

66

2,124


Accrued interest

2,348

1,356

3,704


Accrued expense

777

(120)

657


Write-down of inventory and residential landbank

2,788

(336)

2,452


Other*

1,437

2,669

4,106


Total deferred tax assets

9,408

3,635

13,043







Deferred tax liabilities





Difference between tax base and carrying value of inventory

9,521

4,211

13,732


Accrued interest

-

437

437


Fair value gain on investment property

890

152

1,042


Other

814

(299)

515


Total deferred tax liabilities

11,225

4,501

15,726


Total deferred tax benefit


866








Deferred tax assets

9,408


13,043


Deferred tax liabilities

11,225


15,726


Offset of deferred tax assets and liabilities for individual companies

(3,877)


(6,108)


Deferred tax assets reported in the

Consolidated Statement of Financial Position

5,531


6,935


Deferred tax liabilities reported in the

Consolidated Statement of Financial Position

7,348


9,618

* Including deferred tax asset from contributions.

Realization of deferred tax assets

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of