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TUM Finance plc
Report & Consolidated Financial Statements
31 December 2023
        
Company registration number: C 91228
TUM Finance plcReport and consolidated financial statements Year ended 31 December 20231
Contents
Statement of compliance with the principles of Good Corporate Governance4
Statements of profit or loss and other comprehensive income14
Statements of financial position15
Statements of cash flows17
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
2
Directors’ report
The directors present their report together with the audited financial statements of TUM Finance plc (the ‘company’) and the consolidated financial statements of the group for the year ended 31 December 2023.
Principal activities
The company and its subsidiaries (the ‘group’) are involved in real estate development, investment and leasing in Malta. The company holds investments in subsidiaries for capital growth and income generation. It also provides financing to companies forming part of the group and to other related companies.
Performance review
The statements of profit or loss and other comprehensive income are set out on page 14. During the year, the group generated a profit before tax of € 2,097,251 (2022: € 1,939,165). The company generated a profit before tax of € 127,991 (2022: € 160,536).
Dividends
During the years ended 31 December 2023 and 2022, the company did not declare any dividends.
Future developments
On 17 January 2024, the group transferred its 50% shareholding in Develeco Malta Limited to BBT plc in exchange for additional shares in the latter.
On 29 January 2024, the group further transferred its shareholding in MOSM Ltd, Missag Ltd and Regeneration Projects Ltd to BBT Logistics Limited.
Directors
The following have served as directors of the company during the year under review:
Anthony Fenech
Matthew Fenech
Silvan Fenech
Stanley Portelli
Mario Vella
William Wait
 
In accordance with the company’s Articles of Association, the present directors remain in office.
Disclosure of information to the auditor
At the date of making this report the directors confirm the following:
-As far as each director is aware, there is no relevant information needed by the independent auditor in connection with preparing the audit report of which the independent auditor is unaware, and
-Each director has taken all steps that he ought to have taken as a director in order to make himself aware of any relevant information needed by the independent auditor in connection with preparing the audit report and to establish that the independent auditor is aware of that information.
Statement of directors’ responsibilities
The Companies Act, Cap 386 requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the group and the company as at the end of the financial year and of the profit or loss of the group and the company for that year. In preparing these financial statements, the directors are required to:
-adopt the going concern basis unless it is inappropriate to presume that the group and the company will continue in business;
-select suitable accounting policies and then apply them consistently;
-make judgements and estimates that are reasonable and prudent;
-account for income and charges relating to the accounting period on the accruals basis;
-value separately the components of asset and liability items; and
-report comparative figures corresponding to those of the preceding accounting period.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the group and the company and to enable them to ensure that the financial statements have been properly prepared in accordance with the Companies Act, Cap 386. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. They are also responsible for safeguarding the assets of the group and the company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Auditor
The auditor Grant Thornton has intimated its willingness to continue in office and a resolution proposing its reappointment will be put to the Annual General Meeting.
Signed on behalf of the Board of Directors on 15 April 2024 by Anthony Fenech (Director) and Silvan Fenech (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Statement of compliance with the principles of Good Corporate Governance
1.Introduction
The Capital Markets Rules issued by the Malta Financial Services Authority (MFSA) require companies listed on the Official List of the Malta Stock Exchange to endeavour to adopt and observe The Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules (the “Code”).
Although the Code sets out (non-mandatory) recommended principles of good practice, the Board of Directors of the Company (the “Board” or the “Directors”) consider that such practices are generally in the best interests of the Company, its shareholders, its bondholders, and other stakeholders, and that compliance with the Code evidences the Company’s and the Directors’ commitment to high standards of good corporate governance.
This Corporate Governance Statement (the “Statement”) sets out the organisational structures, controls practices and processes in place within the Company and explains how these effectively achieve the goals set out in the Code. For this purpose, the Statement will make reference to the pertinent provisions and principles of the Code and set out the manner in which the Directors believe these have been adhered to. Where the Company has not complied with any of the principles of the Code, this Statement provides an explanation for such non-compliance. Reference in this Statement to compliance with the principles of the Code means compliance with the Code’s main principles and provisions.
The Board has carried out a review of the Company’s compliance with the Code during the period under review and is hereby reporting on the extent of its adoption of the provisions and principles of the Code for the financial year being reported, as required in terms of Capital Markets Rule 5.97.
2.Compliance
The Company has adopted a corporate decision-making and supervisory structure that is tailored to suit its requirements and designed to ensure the existence of adequate controls and procedures within the Company, whilst retaining an element of flexibility essential to allow the Company to react promptly and efficiently to circumstances arising in respect of its business, taking into account its size and the economic conditions in which it operates.
The Directors are of the view that the Company has employed structures which are most suitable and complementary for the size, nature, operations and level of complexity of the Company. Accordingly, in general the Directors believe that the Company has adopted appropriate structures to achieve an adequate level of good corporate governance, together with an adequate system of control in line with the Company’s requirements.
In particular, it is pertinent to note that the Company’s principal purpose is to act as a financing and holding vehicle for the Tum Finance Group (as defined hereunder), consisting of the Company and its direct subsidiary Tum Operations Limited (C91301) and indirect subsidiaries San Gwakkin Limited (C102186) and Easysell Limited (C9778) (hereinafter the “Guarantor”) (collectively referred to as the “Tum Finance Group”), in view of which, the Directors deem some of the principles and provisions of the Code to be disproportionate or inapplicable to the Company, as explained further below.
Principle 1: The Board
The Directors believe that for the period under review, the Company has generally complied with the requirements of this principle and the relative Code provisions.
The Board is composed of members who are fit and proper to direct and manage the business of the Company with honesty, competence and integrity. All the members of the Board are aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company and its status as a listed company and the Board is cognisant of its accountability for its own performance and that of its delegates. The Board of Directors is primarily responsible for:
devising the corporate and business strategy of the Company;
setting and reviewing internal policies, procedures and controls of the Company;
the overall management and supervision of the Company;
reviewing and evaluating internal control procedures, financial performance and business risks and opportunities facing the Company.
Throughout the period under review, the Board has maintained systems designed to ensure that the Directors obtain timely information at regular intervals or when the need arises.
The Board has delegated specific responsibilities to the Audit Committee, under formal terms of reference approved by the Board. Further detail in relation to the Audit Committee may be found in the sections headed ‘Principles 4 and 5’ of this Statement hereunder.
Principle 2: Chairman and Chief Executive Officer
Given that the Company acts as the holding and financing arm of the Tum Finance Group and does not carry out other operations of its own, the Company has not appointed a Chief Executive Officer. Nevertheless, it has appointed a Chairperson, whose role is to lead the Board. During the period under review, Mr Anthony Fenech (an executive director of the Company) occupied the post of Chairperson. The Board considers that notwithstanding that the Chairman is not an independent director as recommended by the Code, the means for addressing potential conflicts of interest are suitably addressed in the statute of the company and terms of reference of the Audit Committee of the company. Furthermore, the Board considers the present Chairman to be fit and proper to occupy the role.
Principle 3: Composition of the Board
In terms of the Articles of Association of the Company, the Board of Directors of the Company shall consist of a minimum of three (3) directors and a maximum of six (6) directors.
In terms of the Articles of Association of the Company, the Directors of the Company (save for the managing director, if any) shall retire from office every three (3) years. Retiring Directors shall, however, be eligible for re-appointment. The Company shall give its shareholders, having voting rights, at least fourteen (14) days written notice to submit candidates for the election to Directors, and the appointment (and removal) of Directors shall be made by an ordinary resolution.
The Board of Directors of the Company is comprised of six (6) directors, three (3) of whom are executive directors, and three (3) of whom are independent non-executive directors. All of the present Directors of the Company were originally appointed with effect from the date of registration of the Company, and their tenure was extended for a further period of three years by virtue of a shareholders’ resolution passed on 24 March 2022.
DirectorCapacityDate of Appointment
Mr. Anthony FenechExecutive Director (Chairperson)26th March 2019
Mr. Matthew Fenech Executive Director26th March 2019
Mr. Silvan Fenech Executive Director26th March 2019
Dr. Stanley Portelli Independent and Non-Executive Director26th March 2019
Mr. Mario Vella Independent and Non-Executive Director26th March 2019
Mr. William Wait Independent and Non-Executive Director26th March 2019
For the purpose of Code Provision 3.2, three (3) of the Directors are considered by the Board to be independent within the meaning of the Capital Markets Rules, such independent Directors being Dr. Stanley Portelli, Mr. Mario Vella, and Mr. William Wait.
The non-executive Directors contribute to the strategic development of the Company and the creation of long-term growth of the Company and are responsible for:
constructively challenging and developing strategy;
monitoring reporting of performance;
scrutinising performance of management; and
ensuring the integrity of financial information, financial controls and risk management systems.
Save as disclosed above, none of the non-executive Directors of the Company:
a)are or have been employed in any capacity by the Company;
b)receive significant additional remuneration from the Company;
c)have close family ties with any of the executive members of the Board;
d)have been within the last three (3) years an engagement partner or a member of the audit team of the present or past external auditor of the Company;
e)have served on the Board for more than twelve (12) consecutive years and
f)have a significant business relationship with the Company.
In terms of Code Provision 3.4, each non-executive Director has declared in writing to the Board that he undertakes:
to maintain in all circumstances his/her independence of analysis, decision and action;
not to seek or accept any unreasonable advantages that could be considered as compromising his independence; and
to clearly express his opposition in the event that he finds that a decision of the Board may harm the Company.
Each non-executive Director has complied with the aforementioned undertaking for the period under review.
Principle 4 and 5: The Responsibilities of the Board and Board Meetings
The Board of Directors is entrusted with the overall direction, administration and management of the Company and meets on a regular basis to discuss and take decisions on matters concerning the strategy, operational performance and financial performance of the Company. At its meetings, the Board is provided with updates on ongoing performance of the Company and its subsidiaries, supplemented as necessary with management accounts on, as a minimum, a quarterly basis.
In fulfilling its mandate, the Board assumes responsibility to:
a)establish appropriate corporate governance standards;
b)review, evaluate and approve, on a regular basis, long-term plans for the Company;
c)review, evaluate and approve the Company’s budgets, forecasts and financial statements;
d)review, evaluate and approve major resource allocations and capital investments;
e)review the financial and operating results of the Company;
f)ensure appropriate policies and procedures are in place to manage risks and internal control;
g)review, evaluate and approve the overall corporate organisation structure;
h)review, evaluate and approve compensation to Directors;
i)ensure effective communication with shareholders, bondholders, other stakeholders and the market.
In fulfilling its responsibilities, the Board continuously assesses and monitors the Company’s present and future operations, opportunities, threats, and risks in the external environment, and its current and future strengths and weaknesses in its internal environment.
In the course of holding Board meetings, as and when necessary, the Board considers, inter alia, their statutory and fiduciary duties, the Company’s operations and prospects, the skills and competence of senior management, the general business environment, and its own expectations.
Audit Committee
The Board delegates certain specific responsibilities to the Audit Committee. The Board of Directors of the Company has established an Audit Committee and has formally set out Terms of Reference governing the scope of its composition, role, functions, powers, duties and responsibilities, as well as the procedures and processes to be complied with in its activities.
The Audit Committee is a sub-committee of the Board and fulfils an oversight role in connection with the quality and integrity of the Company’s financial statements. Towards this end, the over-arching objective of the Audit Committee is that of assisting the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal controls, the audit process and the process for monitoring compliance with applicable laws and regulations.
The Audit Committee is expected to deal with and advise the Board on issues of financial risk, control and compliance, and associated assurance of the Company, including:
i.ensuring that the Company adopts, maintains and, at all times, applies appropriate accounting and financial reporting processes and procedures;
ii.monitoring of the audit of the Company’s management and annual accounts;
iii.facilitating the independence of the external audit process and addressing issues arising from the audit process and ensuring good communication between internal and external audit activities, as applicable;
iv.reviewing the systems and procedures of internal control implemented by management and of the financial statements, disclosures and adequacy of financial reporting;
v.making recommendations to the Board in relation to the appointment of the external auditors and the approval of the remuneration and terms of engagement of the external auditors, following the relative appointment by the shareholders in the annual general meeting;
vi.monitoring and reviewing of the external auditors’ independence and, in particular, the provision of additional services to the Company;
vii.ensuring that the Company, at all times, maintains effective financial risk management and internal financial and auditing control systems, including compliance functions; and
viii.assessing any potential conflicts of interests between the duties of Directors and their respective private interests, or their duties and interests unrelated to the Company.
In addition, the Audit Committee has the role and function of evaluating any proposed transaction to be entered into by the Company and a related party (which term shall have the same meaning as in the International Accounting Standards adopted in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council) to ensure that the execution of any such transaction is at arm’s length, on a commercial basis and ultimately in the best interests of the company.
Any proposed transaction which the Company wishes to enter into and which satisfies either of the following conditions shall be referred to the Audit Committee for its consideration and approval:
(i)transactions which clearly fall within the ambit of the Capital Markets Rules as related party transactions and which are not the subject of an exemption therefrom;
(ii)transactions in respect of which management is not certain as to whether they fall within the ambits of the Capital Markets Rules as related party transactions or in respect of which there is uncertainty as to whether any one or more exemptions should apply to the proposed transactions.
At the meeting convened for this purpose, the Audit Committee shall consider the proposed transaction and first determine whether it is a transaction that falls within the ambit of the applicable Capital Markets Rules and, if it so determines, shall then consider the merits of the proposed transaction.
The Audit Committee is made up entirely of non-executive Directors, all of whom are deemed to be independent of the Company. Audit Committee members are appointed for as long as they remain independent non-executive Directors, unless terminated earlier by the Board. During the period under review, the Audit Committee was composed of:
Mr. Mario VellaChairperson of the Audit Committee
Dr. Stanley Portelli Member of the Audit Committee
Mr. William Wait Member of the Audit Committee
Notes2023202220232022
Revenue53,692,7503,746,181588,125613,125
Administrative and other operating expenses6(640,638)(916,881)(131,275)(120,177)
Gross profit 3,052,1122,829,300456,850492,948
Finance income714,05539,473465,984459,883
Finance costs8(855,303)(840,578)(794,843)(792,295)
Share of loss of associates14(113,613)(89,030)--
Profit before tax2,097,2511,939,165127,991160,536
Tax (expense) income10(395,440)(533,075)-27,516
Profit for the year1,701,8111,406,090127,991188,052
Profit from discontinued operations93,648,000---
Total comprehensive income5,349,8111,406,090127,991188,052
Attributable to:
Equity holders of the Company5,267,7521,187,801--
Non-controlling interests 82,059218,289--
Notes2023202220232022
Assets
Non-current
Investment property1130,500,45165,406,424--
Property, plant and equipment128,567,039117,844--
Investment in subsidiary13--20,074,62320,074,623
Investment in associates1429,618,5753,774,086--
Loans due from related parties15325,000-17,115,91016,994,889
69,011,06569,298,35437,190,53337,069,512
Current
Loans due from related parties15--2,228,2221,611,111
Amounts due from related parties164,815,5491,653,1741,417,9381,957,221
Trade and other receivables17261,670282,5006,2513,540
Cash and cash equivalents18845,721105,2264,602285
Tax recoverable154,717184,17196,708181,446
6,077,6572,225,0713,753,7213,753,603
Total assets75,088,72271,523,42540,944,25440,823,115
Equity
Share capital19.117,693,00017,693,00017,693,00017,693,000
Retained earnings19.219,251,43813,983,686598,244470,253
Capital contributions19.33,915,8113,915,8112,456,0162,456,016
Other reserves19.4542,683542,683--
Equity attributable to Owners of the parent41,402,93236,135,18020,747,26020,619,269
Non-controlling interests(9,539)4,624,058--
Total equity41,393,39340,759,23820,747,26020,619,269
Liabilities
Non-current
Deferred tax liability213,031,3035,751,403--
Bank loan 235,215,927---
Loans due to related parties241,756,007---
Lease liabilities22191,737191,764--
Debt securities in issue2019,702,89419,658,40519,702,89419,658,405
29,897,86825,601,57219,702,89419,658,405
Current
Loans due to related parties24-1,200,000--
Trade and other payables25753,0541,349,95742,48170,302
Debt securities in issue20391,081439,732391,081439,732
Amounts due to related parties262,277,0011,268,24760,53835,407
Tax payable376,325904,679--
3,797,4615,162,615494,100545,441
Total liabilities33,695,32930,764,18720,196,99420,203,846
Total liabilities and equity75,088,72271,523,42540,944,25440,823,115
The financial statements on pages 14 to 50 were approved and authorised for issue by the board of directors on 15 April 2024. The financial statements were signed on behalf of the company’s board of directors by Anthony Fenech (Director) and Silvan Fenech (Director) as per the Directors’ Declaration of ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report 2023.
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
16
Balance at 1 January 202217,693,00012,795,885542,6832,456,0163,909,37837,396,962
Profit for the year-1,187,801--218,2891,406,090
Contribution of associate---1,459,795-1,459,795
Additional contribution----496,091496,091
Incorporation of subsidiary----300300
Balance at 31 December 202217,693,00013,983,686542,6833,915,8114,624,05840,759,238
GroupCompany
Notes2023202220232022
Operating activities
Profit before tax2,097,2511,939,165127,991160,536
Adjustments27(768,157)892,807(259,266)(105,713)
Net changes in working capital274,731,402(399,672)1,538,986561,403
Operating activities of discontinued operation553,316---
Income taxes (paid) received (526,505)(484,038)84,73876,241
Net cash generated from operating activities6,087,3071,948,2621,492,449692,467
Investing activities
Payments to acquire property, plant and equipment12(8,522,346)(93,077)--
Payments to acquire investment property11(137,323)(452,531)--
Advances to related parties(1,130,253)--
Investment in associates-(1,200,000)--
Net cash used in investing activities(9,789,922)(1,745,608)--
Financing activities
Issuance of loans to related parties--(738,132)-
Proceeds from incorporation of subsidiary -300--
Proceeds from bank loan5,215,927---
Repayment of lease liabilities(10,538)(10,520)--
Bond interest paid(750,000)(699,213)(750,000)(699,213)
Interest paid(4,162)(3,606)-(171)
Net cash generated from (used in) financing activities4,451,227(713,039)(1,488,132)(699,384)
Net change used in cash and cash equivalents748,612(510,385)4,317(6,917)
Cash and cash equivalents, beginning of year                105,226615,6112857,202
Cash and cash equivalents, end of year853,838105,2264,602285
Cash and cash equivalents included in disposal group(8,117)---
Cash and cash equivalents for continuing operations18845,721105,2264,602285
2General information and statement of compliance with International Financial Reporting Standards (IFRS)
TUM Finance plc is a public limited company registered in Malta under the Companies Act, (Cap. 386) with registration number C91228. The registered office of the company is TUM Invest Head Office, Zentrum Business Centre, Mdina Road, Qormi.
The financial statements of the group and the company have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union, and in accordance with the Companies Act, Cap 386.
The financial statements are presented in euro (€), which is also the functional currency of the holding company and its subsidiaries.
2.1 Going concern
As at 31 December 2023, the group’s current assets exceeded current liabilities by € 2,280,196 (2022: restated current liabilities exceeded current assets by € 2,937,544).
The directors have assessed the appropriateness of the going concern on the basis of cash forecasts prepared by management. These projections indicate that the group will have sufficient resources to meet its obligations as they fall due. The shareholders have furthermore confirmed their commitment to support the group financially should this be required.
At the time of approving these financial statements, the directors have determined that there is reasonable expectation that the group has adequate resources to continue operating for the foreseeable future and continue adopting the going concern basis in preparing the financial statements.
3 New or revised Standards or Interpretations
3.1 New standards adopted as at 1 January 2023
Some accounting pronouncements which have become effective from 1 January 2023 and have therefore been adopted do not have a significant impact on the group and company’s financial results or position.
Other Standards and amendments that are effective for the first time in 2023 and could be applicable to the group and company are:
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
• Definition of Accounting Estimates (Amendments to IAS 8)
• International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12)
These amendments do not have a significant impact on these financial statements and therefore no disclosures have been made.
3.2
Standards, amendments and Interpretations to existing Standards that are not yet effective and have not been adopted early by the company
At the date of authorisation of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB or IFRIC. None of these Standards or amendments to existing Standards have been adopted early by the company and no Interpretations have been issued that are applicable and need to be taken into consideration by the group and the company.
Other Standards and amendments that are not yet effective and have not been adopted early by the group and the company include:
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
• Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
• Non-current Liabilities with Covenants (Amendments to IAS 1)
• Lack of Exchangeability (Amendments to IAS 21)
These amendments are not expected to have a significant impact on the financial statements in the period of initial application and therefore no disclosures have been made.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New standards, amendments and interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the group and company’s financial statements.
The material accounting policies applied by the group and company are consistent with those used in previous years.
4.2Presentation of financial statements
The financial statements are presented in accordance with IAS 1 ‘Presentation of Financial Statements’ (Revised 2007). The group and company have elected to present the 'statement of profit or loss and other comprehensive income' in one statement.
4.3Basis of consolidation
The financial statements consolidate those of the parent company and all of its subsidiaries controlled by the company drawn up to 31 December 2023. Control exists when the company has power over the investee, is exposed or has rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of its returns. In assessing control, potential voting rights that give the Company the current ability to direct the investee’s relevant activities are taken into account. All subsidiaries have a reporting date of 31 December.
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 in 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 derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
Intra-group balances, transactions and unrealised gains and losses on transactions between the group companies are eliminated on consolidation. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from the group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
The separate and consolidated financial statements reflect the financial position and operation of the company and its subsidiaries as listed below (together the ‘group’).
Entities
Principal activities
Country of incorporation
Ownership interest
Subsidiaries
TUM Operations Limited
Investment and holding company
Malta
100%
Easysell Limited (indirectly through TUM Operations Limited)
Holding and management of immovable property
Malta
100%
San Gwakkin Limited (indirectly through TUM Operations Limited)
Property development
Malta
75%
Center Parc Holdings Ltd. (indirectly through TUM Operations Limited)
Development and operations of shopping mall
Malta
75%
Center Parc Development Limited (indirectly through TUM Operations Limited)
Dormant
Malta
75%
The group’s shares in Center Parc Holdings Ltd. were sold to BBT plc on 6 June 2023 through a multi-transfer joint venture agreement.
Center Parc Development Limited was put into liquidation on 31 December 2023.
4.4Revenue
Revenue is measured at the fair value of the consideration received or receivable for services provided in the normal course of business, net of value added tax and discounts, where applicable. Revenue is recognised to the extent that it is probable that future economic benefits will flow to the group and company, and these can be measured reliably.
To determine whether to recognise revenue, the group and company follow a 5-step process:
1.Identifying the contract with a customer
2.Identifying the performance obligations
3.Determining the transaction price
4.Allocating the transaction price to the performance obligations
5.Recognising revenue when/as performance obligation(s) are satisfied
The following specific recognition criteria must also be met before revenue is recognised:
i.Rental income from investment property is recognised in profit or loss on a straight-line basis over the lease term.
ii.Interest income is recognised using the effective interest method.
iii.Expenses and costs incurred to properties are recharged to tenants in the period in which they are incurred
iv.Dividend income is recognised on the date when the company’s right to receive the payment is established.
Revenue is recognised either at a point in time or over time, when (or as) the group or company satisfy performance obligations by providing the promised services to the customers.
The group and company recognise contract liabilities for consideration received in respect of unsatisfied performance obligations and report these amounts as other liabilities in the statement of financial position. Similarly, if the group and company satisfy a performance obligation before they receive the consideration, the group and company recognise either a contract asset or a receivable in the statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
22
Revenue from the provision of services is recognised when or as the group and company transfer control of the assets to the customer. Control is transferred at a point in time and occurs when the customer takes undisputed delivery of the goods.
Dividend income, other than those from investments in associates, is recognised at the time the right to receive payment is established.
4.5Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised from the time that expenditure for these assets and borrowing costs are being incurred and activities that are necessary to prepare these assets for their intended use or sale are in progress. Borrowing costs are capitalised until such time as the assets are substantially ready for their intended use or sale. Borrowing costs are suspended during extended periods in which active development is interrupted. All other borrowing costs are recognised as an expense in profit or loss in the period in which they are incurred.
Items of property, plant and equipment are initially recognised at acquisition cost. Subsequently, they are carried at acquisition cost less accumulated depreciation and impairment losses.
Depreciation is calculated, using the straight-line method, to write off the cost of assets over their estimated useful lives on the following bases:
4.7 Leases
The group as a lessee
The group considers whether a contract is or contains a lease at inception of a contract. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (underlying asset) for a period of time in exchange for a consideration’. To apply this definition, the group assesses whether the contract meets three key evaluations which are whether:
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the group,
the group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract;
the group has the right to direct the use of the identified asset throughout the period of use. The group assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
-Plant and machinery
6.67-25%
-Office furniture, fittings and equipment
10%
Material residual value estimates and estimates of useful lives are updated as required, but at least annually, whether or not the asset is revalued. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within ‘other income’ or ‘administrative and other operating expenses’.
Subsequent costs are included in the carrying amount of the asset or recognised as separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss.
For leases of land and buildings, the minimum lease payments are first allocated to each component based on the relative fair values of the respective lease interests. Each component is then evaluated separately for possible treatment as a finance lease, taking into consideration the fact that land normally has an indefinite economic life.
Measurement and recognition of lease
At lease commencement date, the group recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the commencement date (net of any incentives received).
The group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The group also assesses the right-of-use asset for impairment when such indicators exist.
At lease commencement date, the group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.
The group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use asset has been disclosed with investment property (see note 11) and lease liabilities have been disclosed separately (see note 22).
The group as a lessor
Leases for which the group is a lessor continue to be classified as finance or operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. Lease classification is made at the inception of the lease, which is the earlier of the date of the lease agreement and the date of commitment by the parties to the principal provisions of the lease.
When the group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Leased assets are presented in the statement of financial position according to their nature and are tested for impairment in accordance with the group’s accounting policy on impairment. Depreciable leased assets are depreciated in accordance with the group’s accounting policy on depreciation. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the leased asset.
Amounts due from lessees under a finance lease are presented in the statement of financial position as receivables at the amount of the group’s net investment in the lease and include initial direct costs [unless the finance lease involves manufacturer or dealer lessors]. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group and the company’s net investment in the finance lease.
When a contract includes lease and non-lease components, the group applies IFRS 15 to allocate the consideration under the contract to each component.
4.8Investment property
Investment property is property held to earn rentals and/or for capital appreciation. Investment property is recognised as an asset when it is probable that the future economic benefits that are associated with the investment property will flow to the entity and the cost can be measured reliably.
Investment property is initially measured at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value at the end of the reporting period. Gains or losses arising from changes in the fair value of investment property are recognised in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined by a professionally qualified architect/surveyor on the basis of market values
Investment property is derecognised on disposal or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses on derecognition represent the difference between the net disposal proceeds, if any, and the carrying amount and are recognised in profit or loss in the period of derecognition. The amount of consideration to be included in the gain or loss arising from the de-recognition of investment property is determined in accordance with the requirements for determining the transaction price in IFRS 15.
Rental income and operating expenses from investment property are reported within ‘revenue’ and ‘administrative and other operating expenses’.
4.10Investment in associates
In the consolidated financial statements of the group, subsequent to initial recognition, investment in associates is accounted for using the equity method. Under the equity method, the carrying amount of the investment in associate is adjusted for the share in net income or loss of the associate, dividends received, and other equity movements of the associate. Where the group’s share of losses in an associate exceeds its interest in the associate, including any unsecured receivable, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
The use of the equity method ceases from the date that significant influence ceases.
An associate is an entity over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.
Investment in associates is initially recognised at cost, being the fair value of the consideration given, including acquisition charges associated with the investment.
4.11Business combinations under common control
A business combination under common control is a transaction when the Group acquires a company, or brings into the Group for consolidation, for which the latter is already under common control by the same ultimate controlling party of the Group.
In 2022, Tum Invest Limited, the ultimate parent company, entered into various linked transactions (‘restructuring’). The restructuring continued in 2023, which consisted of TUM Invest Limited contributing the shareholding in a number of associates and assigning related party balance to TUM Operations Limited via another related entity, TUM Capital Limited. The restructuring is considered a reorganisation of entities under common control because the ultimate parent company retained the same control over the combined resources both before and after the restructuring.
The acquisition of associates under common control can be accounted for using either the acquisition method or the predecessor accounting method. Management is of the view that the acquisition accounting method is the most appropriate method and accordingly the cost of the investment is compared against the fair value of the share of assets and liabilities taken over. Since the purchase consideration transferred, being the nominal value of shares, is not reflective of the fair value taken over, management has elected to impute a capital contribution for the difference in determining the cost of the investment. In determining the value of the capital contribution, management has assessed the associates contributed, MOSM Ltd, Missag Ltd, Regeneration Projects Ltd and BBT Logistics Limited as being a single entity in line with the planned subsequent steps in the restructuring which will see these entities being merged.
4.12 Financial instruments
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
The group and company do not have any financial assets categorised as FVTPL and FVOCI in the periods presented.
The classification is determined by both:
• the entity’s business model for managing the financial asset; and
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in the statement of profit or loss and other comprehensive income are presented within ‘finance costs’ and ‘finance income’.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The group and company’s cash and cash equivalents, loans due from related parties, and trade and other receivables fall into this category of financial instruments.
Impairment of financial assets
IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. Instruments within the scope of the requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
The group and company consider a broad range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
financial instruments that have not deteriorated significantly in credit quality since initial
recognition or that have low credit risk (‘Stage 1’) and
• financial instruments that have deteriorated significantly in credit quality since initial recognition
and whose credit risk is not low (‘Stage 2’).
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
27
‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.
Classification and measurement of financial liabilities
The group’s financial liabilities include debt securities in issue, lease liabilities, loans and amounts due to related parties, and trade and other payables.
The company’s financial liabilities include debt securities in issue, amounts due to related parties, and trade and other payables.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the group and company designate a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in the income statement are included within ‘finance costs’ or ‘finance income’.
4.13 Fair value of financial assets and liabilities
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.
For financial reporting purposes, fair value measurements are categorised into level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the company determines when transfers are deemed to have occurred between levels in the hierarchy at the end of each reporting period.
4.14 Impairment of non financial assets
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the greater of its fair value less costs to sell and its value in use. To determine the value in use, the company’s management estimates expected future cashflows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cashflows. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by the company’s management.
Impairment losses are recognised immediately in the statement of profit or loss and other comprehensive income. Impairment losses for cash-generating units are charged pro-rata to the assets in the cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.
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 amortisation, if no impairment loss had been recognised.
4.15Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised directly in other comprehensive income or equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period and any adjustment to tax payable in respect of previous years.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and company and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in the separate and consolidated statement of profit or loss and other comprehensive income or equity (such as the revaluation of land) in which case the related deferred tax is also recognised in other comprehensive income or equity respectively.
4.16Significant management judgement in applying accounting policies and estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Use of available information and application of judgement are inherent in making estimates. Actual results in future could differ from such estimates and the differences may be material to the financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.
Except as disclosed below, in the opinion of the directors, the accounting estimates and judgements made in the course of preparing these financial statements are not difficult, subjective or complex to a degree which would warrant their description as critical in terms of the requirements of IAS 1 (revised).
Significant management judgement
The following is the significant management judgement in applying the accounting policies of the group that has the most significant effect on the financial statements.
Determining whether an arrangement contains a lease
The group and the company use their judgment in determining whether an arrangement contains a lease, based on the substance of the arrangement and make assessment of whether it is dependent on the use of a specific asset or assets, conveys a right to use the asset and transfers substantially all the risks and rewards incidental to ownership to/from the group and the company.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expense is provided below. Actual results may be substantially different.
Impairment of non-financial assets
In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate.
Useful lives of depreciable assets
Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the group and the company. The carrying amounts are analysed in notes 11 and 12. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.
Investment property
The company uses the services of professional valuers to revalue the investment properties. The professional valuers consider 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 highest and best use of a non-financial asset takes into account the use of the asset that is physically possible, legally permissible and financially feasible, as follows:
-A use that is physically possible, takes into account the physical characteristics of the asset that market participants would take into account when pricing the asset (e.g., the location or size of a property).
-A use that is legally permissible takes into account any legal restrictions on the use of the asset that market participants would take into account when pricing the asset (e.g., the zoning regulations applicable to a property).
A use that is financially feasible takes into account whether a use of the asset that is physically possible and legally permissible generates adequate income or cash flows (taking into account the costs of converting the asset to that use) to produce an investment return that market participants would require from an investment in that asset put to that use.
5Revenue
          Group
           Company
2023
2022
2023
2022
Rent income
1,771,121
3,295,022
-
-
Ordinary shares’ dividend
-
-
350,000
200,000
Preference shares’ dividend
-
-
238,125
238,125
Other income
1,921,629
451,159
-
175,000
3,692,750
3,746,181
588,125
613,125
Management assesses the operations of the group as one reporting segment on the basis that the group has one line of activity based in one jurisdiction, being Malta. Accordingly, no segment disclosures are being presented.
In 2023, the group recognised a gain on disposal of property and a gain on bargain purchase, as described below:
(i)On 4 September 2023, TUM Operations Ltd acquired the Hotel VIU57 located at Triq Dun Belin Azzopardi, Mellieha, Malta for an amount of €1,756,007 from Tum Invest Ltd. The contract price was treated as an outstanding loan owed by the TUM Operations Ltd to TUM Invest Limited, and it is due for full repayment on 29 May 2029, without any interest.
On 28 November 2023, the group, in conjunction with V&C Investments Limited (the vendor companies) entered into an agreement with Develeco Malta Limited (the purchaser company), to sell Hotel VIU57. The agreed sale price was €5,312,066. The sale price was distributed to the vendor companies equally. The cost of the property was €1,763,960 and the resulting gain for each of the vendor companies amounted to €892,073. The consideration for this transaction was agreed to be in the form of €1,812,066 worth of additional equity shares of Develeco Malta Limited, and the remaining amount of €3,500,000 in the form of cash, both of which were still not received as at year end.
(ii)The gain on bargain purchase was a result of the additional acquisition of shares of BBT plc in 2023 as described in detail in note 14.
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
31
6Administrative and other operating expenses
             Group
       Company
2023
2022
2023
2022
Auditor's remuneration (refer to note below)
40,500
46,880
23,150
14,500
General and other expenses
59,972
168,801
3,683
630
Advertising and marketing
1,151
15,205
1,151
-
Licenses and fees
9,544
19,828
7,894
14,144
FSS and Tax
22,669
39,175
4,550
4,200
Legal and professional fees
65,031
86,124
54,237
50,583
Director's fees
36,610
36,120
36,610
36,120
Depreciation
60,671
48,719
-
-
Salaries and wages
138,561
240,027
-
-
Fines and penalties
792
42,482
-
-
Insurance
19,084
21,948
-
-
Water and Electricity
186,053
197,619
-
-
Reversal of allowance of expected credit losses
-
(46,047)
-
-
640,638
916,881
131,275
120,177
The group had an average of 5 (2022: 9) employees during the year under review.
Remuneration paid to the auditors includes fees paid by the group amounting to €13,000 for other services (Company: €13,000) and €2,850 (Company: €1,150) for tax compliance services.
7Finance income
The following amounts may be analysed as follows for the reporting periods presented:
         Group
      Company
2023
2022
2023
2022
Interest income
14,055
39,473
465,984
459,883
Finance income
14,055
39,473
465,984
459,883
8Finance costs
The following amounts are analysed as follows for the reporting periods presented:
   Group
Company
2023
2022
2023
2022
Bank charges
35,799
879
354
170
Interest on debt securities in issue
794,489
792,125
794,489
792,125
Interest on lease liabilities
10,538
10,539
-
-
Interest on related party loan
14,477
37,035
-
-
855,303
840,578
794,843
792,295
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
32
9Discontinued operations
On 7 June 2023, Tum Operations Limited, BBT, and V & C Developments Limited entered into Transfer Agreement for Tum Operations Limited to exchange its 75 % shareholding in its subsidiary Center Parc Holdings Ltd in return for the issue and allotment of 31.43% of the issued share capital of BBT. The shareholding allocated to Tum Operations Limited in BBT has been determined based on the fair market value attributed to the 75% shareholding in Center Parc Holdings Ltd compared to the fair market value attributed to the assets contributed by the other shareholders in BBT.
Revenue, expenses, gains, and losses relating to the disposal of investment in Center Parc Holdings Ltd have been eliminated from profit or loss from the Group’s continuing operations and are shown as a single line item in the consolidated statement of profit or loss and other comprehensive income.
Pursuant to a transfer agreement, 75% ownership of Center Parc Holdings Ltd was disposed in exchange for 14,919 ordinary ‘A’ shares in BBT plc with an equivalent value of € 17,268,449, resulting in a gain from the transaction amounting to € 3,094,684.
Operating profit of Center Parc Holdings Ltd until the date of disposal is summarised as follows:
2023
2022
Revenue
Rental income
791,625
894,704
Other income
120
86,680
791,745
981,384
Expenses
Administrative and other operating expenses
(78,385)
(175,018)
Finance costs
(13,556)
(223,758)
Profit before tax
699,804
582,608
Income tax expense
(146,488)
(134,206)
Profit after tax
553,316
448,402
Gain on disposal of investment (refer to note below)
3,094,684
-
Profit for the year from discontinued operations
3,648,000
448,402
At the date of disposal, the carrying amounts of Center Parc Holdings Ltd’s net assets were as follows:
Assets35,326,565
Liabilities(16,438,846)
Net assets18,887,719
Non-controlling interest(4,713,954)
Net assets attributable to parent14,173,765
Non cash consideration(17,268,449)
Gain on disposal of subsidiary (3,094,684)
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
33
10Tax expense (income)
The relationship between the expected tax expense based on the effective tax rate of the group and the company at 35% (2022: 35%) and the actual tax (expense) income recognised in the statement of profit or loss and other comprehensive income can be reconciled as follows:
                 Group
               Company
2023
2022
2023
2022
Profit before tax
2,097,251
1,939,165
127,991
160,536
Tax rate
35%
35%
35%
35%
Expected tax expense
734,038
678,708
44,797
56,188
Adjustments for:
Non-deductible expenses
511,158
526,636
161,047
44,517
Non-taxable income
(2,010,401)
-
(205,844)
-
Refund under full imputation system
(173,364)
(128,221)
-
(128,221)
Income taxed on different basis at different rates
(36,783)
(544,048)
-
-
Other permanent difference arising on consolidation
1,370,792
-
-
-
Actual tax expense (income), net
395,440
533,075
-
(27,516)
Composed of:
Current tax expense (credit)
394,098
536,716
-
(27,516)
Deferred tax expense (credit)
1,342
(3,641)
-
-
395,440
533,075
-
(27,516)
11Investment property
Details of the group’s investment property and their carrying amounts are as follows:
Right-of-use
BuildingassetTotal
Cost
At 1 January 202365,217,399195,45265,412,851
Additions resulting from subsequent expenditure137,323-137,323
Disposal as a result of discontinued operations(35,041,689)-(35,041,689)
At 31 December 202330,313,033195,45230,508,485
At 1 January 202264,764,868195,45264,960,320
Additions resulting from subsequent expenditure452,531-452,531
At 31 December 202265,217,399195,45265,412,851
Accumulated Depreciation
At 1 January 2023-6,4276,427
Depreciation for the year-1,6071,607
At 31 December 2023-8,0348,034
At 1 January 2022-4,8204,820
Depreciation for the year-1,6071,607
At 31 December 2022-6,4276,427
Carrying amount
At 31 December 202330,313,033187,41830,500,451
At 31 December 202265,217,399189,02565,406,424
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
34
Additions to investment property for the year consisted of modifications to current properties held. Included in the fair value of investment property is a right of use asset in respect of ground rents payable on the land over which the property is constructed. The remaining term of the lease is till 30 April 2138.
Investment property is revalued by professionally qualified architects or surveyors on the basis of assessments of the fair value of the property in accordance with international valuations standards and professional practice.
In the years where a valuation is not obtained, management verifies all major inputs to the independent valuation report, assesses any property valuation movements when compared to the prior year valuation report and holds discussions with the independent valuer, as necessary. The most recent valuation has been reflected in the 2020 financial statements. Management obtained an updated valuation on 31 December 2022, showing a fair value of €30,945,219.
For property held, the current use equates to the highest and best use. Rental income derived from the investment property amounted to € 1,771,121 (2022: € 3,295,022). Direct operating expenses were incurred in the generation of this rental income amounted to € 534,918 (2022: € 753,418).
The group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment properties or for repairs, maintenance, and enhancements.
The group’s investment property has been determined to fall within Level 3 of the fair valuation hierarchy. The different levels in the fair value hierarchy are defined in Note 4.13.
The group’s policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. There were no transfer between levels during the year.
Description of valuation techniques used and key inputs to valuation of investment properties
The valuation was determined based on the income approach (discounted projected cash flows). Using the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including a terminal value. This method involves the projection of cash flows to which a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. Rental values and rent growth rates have been determined based on contractual agreements currently in place used as a benchmark for the calculation of the terminal value.
Valuation techniqueSignificant unobservable inputsRangeNarrative sensitivity
Investment propertyIncome approachDiscount rate6%The higher the discount rate, the lower the fair value
Rental value per square meter€93The higher the price per square meter, the higher the fair value
Rent growth per annum2.9%The higher the rent growth, the higher the fair value
Sensitivity analysis
Change in rate
Change in value
EUR’million
Discount rate sensitivity
1%/(1%)
(5.6)/8.5
Rental value per square meter sensitivity
+5%/(5%)
1.5/1.5
TUM Finance plc
Report and consolidated financial statements
Year ended 31 December 2023
35
12Property, plant and equipment