Explanation of material changes – KA Finance plc

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KA Finance plc refers to the obligation which Prospects MTF companies are subject to, in terms of Rule 4.11.03 and Rule 4.11.12 relating to explanations of material changes to published forecasts of any financial information.

To this end, the company is accordingly making this announcement to guide the market with regard to the forecasts it has issued for the year 2020, through the publication and dissemination of updated Financial Sustainability Forecasts, including applicable management assumptions.

The below copy of the FSFs, as approved by the board of directors, is based on the following assumptions:

Revenue

The Group is expected to register revenues of €756K for the year ending 31 December, a decrease of €678K from what was forecasted in the Company Admission Document. The primary reason for this decrease is that projected revenues from the Group’s Centris II and Swieqi properties in 2020 have been delayed due to the current COVID-19 pandemic.

It is being forecasted that Centris II will be available to prospective tenants in October, three months later than previously forecasted. Nevertheless, to be prudent in the current turbulent business environment, no income has been forecasted from Centris II in 2020.

Swieqi will be partially complete by the end of the year and available for short lets. Again, given the current situation within the tourism industry, no revenue has been forecasted till the end of 2020.

Revenue from the Centris I and Gzira properties are projected to be in line with the figures projected in CAD. The slight decrease in revenue from Centris I is due to agreed reductions in rent payments from some tenants impacted directly by the COVID-19 related restrictive measures and who were forced to temporarily close their operations.

The Gzira property, which was planned to be transformed into a boutique hotel, is instead being currently rented out on a long let.

Direct costs

Direct costs are projected to amount to €24K, a decrease of €120K from the figure forecasted in the CAD. This is as a direct result of the delays experienced in commencement of operations of the Centris II, Swieqi and Gzira properties.

Administrative costs

Administrative costs are projected to amount to €158K, a decrease of €74K from the figure forecasted in the CAD. This is as a direct result of the delays experienced in the commencement of operation of the Centris II, Swieqi and Gzira properties.

Total net profit

Total net profit including fair value gain is projected to amount to €3.4m, a decrease of €1.6m from the €5m forecasted in the CAD. This decrease is mainly attributable to a lower fair value gain as the Centris II property will not be operational before October.

Cashflow

It is projected that the company will generate sufficient cash flows to maintain operations and to service the interest payable on the Prospects Bond accordingly. Nonetheless, the company has secured a €150k loan under the Malta Development Bank COVID-19 guarantee scheme which was drawn down on 6 August. The drawdown of this loan does not violate any of the restrictive covenants in the CAD.

It is projected that the company will close the year with a positive cash balance of € 442K, €38K higher than that forecasted in the CAD.