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Eden Finance Plc, which had issued bonds at 6.7 per cent interest and redeemable in 2010, has published its financial statements for 2005. Like other finance companies the sole income generating activity is the interest earned from the companies utilising the funds. The proceeds were used to finance capital projects undertaken by the Eden Group.
Interest earned in 2005 was Lm710,000, whilst interest payable to bondholders was Lm670,000, leaving a net interest earned of Lm40,000, which is equivalent to last year’s figure.
The only expense item is for administrative purposes for Lm22,000. This is slightly less than that for 2004. After deducting the tax charge, profit stood at Lm11,700, bringing earnings per share of 2c3 against 2c1 for 2004.
The balance sheet shows total assets reaching Lm10,742,000, mainly consisting of Lm10,500,000 in fixed assets funded by the bonds valued at Lm10 million. Total assets exceed the total liabilities before including the capital and reserves figure.
As requested by the listing rules, the guarantors of the bond issue, the Eden Leisure Group Ltd, has also had its financial results approved and were published as part of the company announcement. The guarantor company is not listed on the Malta Stock Exchange.
Bondholders would be interested to be informed of these financial results also. The main business of the Eden Leisure Group is in the business of hotels and entertainment. The group increased its turnover and operating profit. The long-term strategy includes a restructuring exercise of the group’s operations and a number of business centres have become fully owned subsidiary companies. Two major transactions were carried out mid-way of the financial year under review. The entertainment operations were passed on to Eden Entertainment Ltd and the hotel operations to Eden Hospitality Ltd.
The hotel is now in its third year of operations and is achieving growth and registering increased operating profits. In summer the hotel started to operate a beach concession at the nearby St George’s Bay which generated increased activity.
On the entertainment side, negative growth was registered in the cinema and bowling sectors. This was attributable to the adverse economic environment and fierce competition. During the same financial year the company leased the timeshare property to a large international company through a long-term lease agreement and also contracted the management of the resort. The proceeds of the lease were used to significantly reduce the bank borrowings by circa a million Malta lira, and the balance was used to mainly settle most of the remaining capital creditors. Post-financial year, the group took a commercial decision to discontinue the Imax theatre operation that was not registering profits and used the space for another cinema screen and opened up a conference centre. The 2005 results include the impairment figure for the Imax assets.
As the entertainment group consolidates its operations to maximize its returns, it is on the lookout to increase its international partners. For 2006, the group’s forecast is positive expecting an increased market share of the hotel business and a subsequent increase in profitability. Growth is expected also in the entertainment business of the group.
A non-core operation in February 2006 was sold off and proceeds used to accelerate settlements to the largest remaining capital creditor.
A review of the Eden Leisure Group Ltd’s condensed financial results show that the company turned a loss after tax of Lm98,000 registered in 2004 into a profit of over Lm1.1 million.
The explanation of the post-balance sheet events in the review explain the background of the asset held for sale asset of Lm510,000.
The importance of analyzing the guarantor company’s financial results ensures that bondholders are well informed of how the end beneficiary of their investment has utilised the funds. Eden Group has a substantial value of its assets termed as fixed assets.
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