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SP FINANCE P.L.C.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31st DECEMBER 2021
Company No. C- 89462
SP FINANCE P.L.C.
CONTENTS
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PAGE
Report of the directors
1 to 5
Statement of compliance with the principles of good corporate governance
6 to 9
Statement of profit or loss and other comprehensive income
10
Statement of financial position
11 to 12
Statement of changes in equity
13
Statement of cashflows
14 to 15
Notes to the financial statements
16 to 55
Independent auditors’ report
56 to 63
SP FINANCE P.L.C.
REPORT OF THE DIRECTORS
_____________________________________________________________________________________________
______________________________________________________________________________________________________
6
Key Risks
The key risks that apply to the Company and the Group are those inherent in the operation of a hospitality business and include both risks arising from competitive pressures from similar establishments located in Malta as well as risks arising from Malta’s general attractiveness as a holiday destination.
Since February 2020, the Group has faced an additional risk emanating from the travel disruptions caused by the COVID-19 pandemic. The impact of COVID-19 and the associated additional risks for the Company and the Group are discussed in detail in the next paragraph.
COVID-19 and Statement pursuant to Capital Markets Rule 5.62
The COVID-19 pandemic that impacted the world since the beginning of 2020 has had severe repercussions on global economies.  The tourism industry was particularly badly hit due to travel restrictions imposed by governments acting on health authorities’ advice.  In Malta, tourist arrivals which totalled 2.77 million in 2019, decreased to 660k in 2020, representing a decrease of 76%.  In 2021, tourism figures bounced back by 47% to reach 969k, which however still represents only 35% of the tourist arrivals in the record year of 2019.  It is significant to note that the latest figures for January and February 2022 indicate that during these two months, tourist arrivals are at approximately 42% of the tourist arrivals in the pre-pandemic period of January and February 2020.
As in previous years, the Group generates its revenue almost exclusively through the operation of two hotels.  It does not have, and is not expected to have in the foreseeable future, any alternative sources of revenue that can mitigate the negative effects brought about by a general downturn in the travel industry, such as the one caused by COVID-19.  Its financial performance is therefore inextricably linked to the general performance of the Maltese tourism sector.
In this regard, it is encouraging to note that in 2021 the Group’s revenue reached €2.025 million, representing a 71% increase over the 2020 revenue of €1.181 million.  This result indicates that the Group managed to grab a proportionately larger share of the country’s tourist numbers, which as stated above, increased by 47% between 2020 and 2021.
It is also significant that during a year in which tourism figures were still at 35% of pre-pandemic levels, the Group managed to register a gross profit of €396k compared to a gross loss of €14k in 2020.
Within the context of the dire situation the tourism sector is still in, these results are encouraging and are testimony to the significant efforts made by management and staff during the last couple of years to survive the difficult period which arose from circumstances beyond their control and be well placed on the market to take advantage of the upturn in tourism that is expected in the coming months and years.
It is pertinent to acknowledge that various measures introduced by the authorities were crucial to the Group’s survival during the several months when the hotels were closed for business. Among the most important measures were:
-The Wage Supplement Scheme, without which the Group would have had to lay off most of its workers;
-Deferment of taxes, which was crucial to maintain adequate levels of working capital;
-The COVID-19 Guarantee Scheme operated by the Malta Development Bank, through which it obtained additional funds of €2.1m to finance its working capital;
 
In view of the long-term duration of the COVID-19 pandemic, the directors have made a thorough evaluation of its short- to medium-term likely impact on the Group’s finances, especially with a view to determine the probability that the Group will continue with its operations in the foreseeable future.
As noted above, in 2021 the Group managed to increase its gross revenue by 71% over 2020 and register a gross profit of just under €400k.  This, in the directors’ view, clearly points to a situation whereby the Group’s hotel operations and consequently its financial results are set to pick up at a pace which at least equals and most probably exceeds the recovery pace of Malta’s tourism sector.  In turn, such recovery clearly depends on how the COVID-19 pandemic evolves and how the authorities respond through the relaxation of travel and assembly restrictions.