CONSOLIDATED ANNUAL REPORT OF
ECHO INVESTMENT
GROUP
22
CONTENT
About the Company 4
Information on the financial statement 5
CONSOLIDATED FINANCIAL STATEMENT OF ECHO INVESTMENT GROUP FOR 2020 6
CHAPTER 1
Consolidated statement of financial position 8
Consolidated profit and loss account 10
Consolidated statement of comprehensive income 11
Statement of changes in equity 12
Consolidated cash flow statement 13
CHAPTER 2
EXPLANATORY NOTES 15
Explanatory notes to the consolidated financial statement 16
CHAPTER 3
INFORMATION ON THE FINANCIAL STATEMENTS 62
Echo Investment Group 63
Application of new and amended standards and interpretations issued
by the IFRS Interpretations Committee 68
Published standards and interpretations which are not eective yet
and have not been adopted by the Group 69
Main accounting principles 70
Methods of determining the financial result 79
Error correction – changing the presenting principles – restatement
of statements for previous period 83
Material estimates and judgments of the Management Board of the Company 85
Financial risk management 91
Capital risk management 98
01.
02.
03.
04.
05.
06.
07.
08.
09.
| Financial statement
4
Consolidated nancial statements of Echo Investment Group for 2020
The Echo Investment Group’s core activity consists
of the construction, lease and sale of oce and re-
tail buildings, construction and sale of residential
buildings as well as trade in real estate. The parent
company – Echo Investment Spółka Akcyjna (later
referred to as the Company) has a registered oce
in Kielce, al. Solidarności 36, Poland. The Company
was registered in Poland, Kielce at al. Solidarności
36 on 23 July 1992. Echo is a Joint Stock Company
entered into the National Court Register under no.
0000007025 by the District Court in Kielce, 10th
Economic Department of the National Court Reg-
ister. Since 5 March 1996, the Company’s shares are
quoted at the Warsaw Stock Exchange on the regu-
About the Company
1996
First listing of Echo Investment
on the WSE.
Kielce
lated market. They are included into Warsaw Stock
Exchange Index WIG, mWIG40 subindex, WIG ESG
social responsible companies index as well as sec-
tor index WIG-Real Estate. The main place where
the Company runs its business is Poland. The parent
entity is Lisala Sp. z o.o., and the ultimate parent of
the group is WING IHC Zrt. The Company was estab-
lished for an indefinite period of time.
Information on the Management Board and Super-
visory Board has been prepared in the Management
Board report on operations of Echo Investment S.A.
and its Group for 2020 in Part 1 Basic information
about the Company and the Group.
| Financial statement
5
Consolidated nancial statements of Echo Investment Group for 2020
The consolidated statements of the Echo Investment
S.A. present financial data for the 12-month period
ending on 31 December 2020 and comparative data
for the 12-month period ending on 31 December
2019. The Group’s financial statement in this financial
statements is presented in thousands of Polish zloty
(PLN), if not indicated dierently.
DECLARATION OF CONFORMITY
The statements have been prepared in compliance
with the International Financial Reporting Standards
(IFRS), as adopted by the European Commission.
ASSUMPTION OF CONTINUITY
IN OPERATIONS
The statements have been drawn up according to the
going concern principle as there are no circumstanc-
es indicating a threat to continued activity.
APPROVAL OF FINANCIAL STATEMENTS
The Company drew up the Consolidated Financial
Statement for the year ended 31 December 2020,
which was approved for publication on 30 March
2021. As at 31 December 2020 the Capital Group
consisted of 141 entities consolidated according to
the full method, and 23 entities consolidated accord-
ing to the equity method. As at 31 December 2019 it
consisted of 144 subsidiaries, presented according
to the full method, and 20 associates consolidated
according to the equity method. The composition
of the Capital Group as at 31 December 2020 is pre-
sented in paragraph 3.
Information on the financial statement
CONSOLIDATED
FINANCIAL
STATEMENT OF
ECHO INVESTMENT
GROUP FOR 2020
CHAPTER 1
| Financial statement
8
Consolidated nancial statements of Echo Investment Group for 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000
Note
As at
31.12.2020
As at
31.12.2019 –
restated
As at
1.01.2019 –
restated
ASSETS
Non-current assets
Intangible assets 2 3 459 3 741 2 468
Property, plant and equipment 3 27 872 25 762 8 938
Investment property 4 1 388 972 941 983 988 903
Investment property under construction 5 780 621 1 517 866 872 509
Investment in associates and joint ventures 27 306 449 254 142 258 531
Long-term financial assets 8 201 194 115 862 84 590
Deferred tax asset 29 56 476 53 903 52 493
2 765 043 2 913 259 2 268 432
Current assets
Inventory 9 925 173 1 052 327 771 836
Current tax assets 5 708 1 484 3 381
Other taxes receivable 10 93 050 59 006 87 177
Trade and other receivables 10 112 111 144 844 211 142
Short-term financial assets 8 50 761 64 465 42 190
Derivative financial instruments 13 - 2 669 -
Other financial assets * 14 82 524 57 157 54 719
Cash and cash equivalents 14 327 097 492 295 439 532
1 596 424 1 874 247 1 609 977
Assets held for sale 6 1 269 329 22 923 13 500
Total assets 5 630 796 4 810 429 3 891 909
* Mainly cash on escrow accounts from residential clients
Consolidated statement
of financial position
| Financial statement
9
Consolidated nancial statements of Echo Investment Group for 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION PLN ‘000
Note
As at
31.12.2020
As at
31.12.2019 –
restated
As at
1.01.2019 –
restated
EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of the parent 1 684 685 1 562 365 1 495 573
Share capital 15 20 635 20 635 20 635
Supplementary capital 15 1 280 664 1 259 252 1 420 922
Revaluation capital - - -
Retained earnings 382 420 281 739 45 543
Foreign currency translation reserve 966 739 8 473
Non-controlling interest (126) (122) (114)
1 684 559 1 562 243 1 495 459
Long-term liabilities
Credits, loans, bonds 17 1 465 767 1 602 126 1 149 693
Derivative financial instruments - - -
Long-term provisions 16 50 029 35 931 58 973
Deferred tax liabilities 29 203 518 152 733 111 303
Leasing 28,18 88 132 117 889 -
Other liabilities 18 117 722 16 018 28 089
Liabilities due to customers 19 14 208 45 754 57 851
1 939 376 1 970 451 1 405 909
Short-term liabilities
Credits, loans, bonds 17 846 501 367 545 280 729
Credits, loans, bonds - non-current assets classified as held for sale 17 496 036
- -
Derivative financial instruments - - -
Income tax payable 1 618 5 035 8 859
Other taxes liabilities 18 13 626 16 126 8 400
Trade payables 18 130 249 238 011 234 623
Dividend payable 18 - - -
Leasing 28,18 46 752 67 076 -
Short-term provisions 16 32 059 89 428 115 843
Other liabilities 18 178 726 87 362 78 590
Liabilities due to customers 19 217 405 407 152 263 497
1 962 972 1 277 735 990 541
Liabilities directly associated with non-current assets classified as held for sale 6 43 889 - -
Total equity and liabilities 5 630 796 4 810 429 3 891 909
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
CONSOLIDATED PROFIT AND LOSS ACCOUNT PLN ‘000
Note
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Revenues 19 1 212 854 880 133
Cost of sales 20 (969 023) (677 130)
Gross profit 243 831 203 003
Profit on investment property 21 228 985 398 412
Administrative costs associated with project implementation (33 162) (27 511)
Selling expenses (29 855) (28 883)
General and administrative expenses (69 291) (97 357)
Other operating income 22, 28 10 383 22 516
Other operating expenses 23 (12 724) (20 027)
Operating profit 338 167 450 153
Financial income 24 15 028 15 244
Financial cost 25 (61 936) (61 371)
Profit (loss) on FX derivatives 13 (21 176) 4 100
Foreign exchange gains (losses) 26 (83 904) 2 691
Share of profit (loss) of associates and joint ventures 27 (9 567) (12 629)
Profit before tax 176 612 398 188
Income tax 30 (54 523) (98 664)
current tax (5 749) (53 438)
deferred tax 29 (48 774) (45 226)
Net profit (loss), including: 122 089 299 524
Equity holders of the parent 122 093 299 532
Non-controlling interest (4) (8)
Equity holders of the parent 122 093 299 532
Weighted average number of ordinary shares (in ‘000) without shares held 412 691 412 691
Profit (loss) per one ordinary share (in PLN) 0,30 0,73
Diluted profit (loss) per one ordinary share (PLN) 0,30 0,73
Consolidated profit and loss account
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
Consolidated statement of
comprehensive income
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Profit for the year 122 089 299 524
Components of other comprehensive income that may be reclassified to profit or loss in later
periods
exchange dierences on translation of foreign operations 227 (7 734)
revaluation gains - -
Other comprehensive income for the year, net of tax 227 (7 734)
Total comprehensive income for the year, including: 122 316 291 790
Comprehensive income attributable to shareholders of the parent company 122 320 291 798
Comprehensive income attributable to non-controlling interest (4) (8)
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
Statement of changes in equity
STATEMENT OF CHANGES IN EQUITY PLN ‘000
Share
capita
Supplemen-
tary
capital
Accumula-
ted retained
earnings
Currency
translation
dierences
Equity
attributable
to equity
holders of the
parent
Capital of
non-control-
ling interests Total equity
For the period 1.01.2020 - 31.12.2020
Opening balance 20 635 1 259 252 281 739 739 1 562 365 (122) 1 562 243
Distribution of previous years' profit/
loss
– 21 412 (21 412) – – – –
Other comprehensive income – – – 227 227 – 227
Net profit (loss) for the period - - 122 093 - 122 093 (4) 122 089
Closing balance 20 635 1 280 664 382 420 966 1 684 685 (126) 1 684 559
For the period 1.01.2019 - 31.12.2019
Opening balance 20 635 1 420 922 45 543 8 473 1 495 573 (114) 1 495 459
Impact of implementation MSSF 16 on
1st January 2019
- - (18 661) - (18 661) - (18 661)
Opening balance, with restated
figures
20 635 1 420 922 26 882 8 473 1 476 912 (114) 1 476 798
Distribution of previous years' profit/
loss
- 44 675 (44 675) – – - –
Dividend paid - (206 345) - – (206 345) - (206 345)
Other comprehensive income – – - (7 734) (7 734) – (7 734)
Net profit (loss) for the period – – 299 532 – 299 532 (8) 299 524
Closing balance 20 635 1 259 252 281 739 739 1 562 365 (122) 1 562 243
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
Consolidated cash flow statement
CONSOLIDATED CASH FLOW STATEMENT PLN ‘000
Note
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Operating cash flow – indirect method
Profit (loss) before tax 176 612 398 188
Total adjustments
Share in net (profit) loss of associates and joint ventures 9 567 12 629
Depreciation of PP&E 11 738 9 472
FX gains (losses) 99 798 (15 541)
- result on liquidation of Echo Prime Assets BV - (7 210)
Interest and profit sharing (dividends) 64 503 41 041
(Profit) loss on revaluation of investment properties (282 693) (456 806)
(Profit) loss on investment activity (6 916) (23 045)
Change of provisions (43 271) 15 368
(Profit) loss on revaluation of assets and liabil-ities 5 954 (1 430)
(141 320) (418 312)
Changes in working capital
Change in inventories 69 967 (161 720)
Change in receivables (8 981) 86 046
Change in short–term liabilities, except for loans and borrowings (128 256) 71 205
Change in restricted cash (25 367) (2 438)
(92 637) (6 907)
Net cash generated from operating activities (I+II+III) (57 345) (27 031)
Income tax paid (13 391) (55 365)
Net cash generated from operating activities (70 736) (82 396)
Cash flows from investing activities
Inflows
Disposal of intangible assets and tangible fixed assets 23 891
Sale of investments in property 29 577 580 445
From borrowings 17 763 14 309
Sale of investments 15 631 -
62 994 595 645
Outflows
Purchase of intangible assets and PP&E (9 695) (10 810)
Investment in property (656 200) (656 236)
For borrowings (77 331) (60 957)
Investments purchase (72 663) -
(815 889) (728 003)
Net cash flow from investing activities (I+II) (752 895) (132 358)
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
CONSOLIDATED CASH FLOW STATEMENT CONT. PLN ‘000
Note
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Cash flow from financing activities
Inflows
Loans and borrowings 663 302 672 145
Issue of debt securities 17 492 183 133 832
Other financial inflows - 1 430
1 155 485 807 407
Outflows
Dividends and other payments to equity holders - (206 345)
Repayment of loans and borrowings (134 881) (85 993)
Redemption of debt securities 17 (250 272) (170 500)
Due to FX derivatives (5 954) -
Payments of leasing liabilities (17 209) (23 236)
Interest paid (88 736) (53 816)
(497 052) (539 890)
Net cash flow from financing activities (I+II) 658 433 267 517
Total net cash flows (A.V+B.III+C.III) (165 198) 52 763
Change in the balance of cash in consoli-dated statement of financial position, including (165 198) 52 763
Change of cash due to FX dierences - -
Cash and cash equivalents at the begin-ning of the period 492 295 439 532
Cash and cash equivalents at the end of the period (F+D) 327 097 492 295
CHAPTER 2
EXPLANATORY NOTES
| Financial statement
16
Consolidated nancial statements of Echo Investment Group for 2020
Explanatory notes to the
consolidated financial statement
NOTE 1
Conditional liabilities are presented at nominal val-
ue. In the Company’s opinion, the fair value of the
sureties and guarantees is near zero because the
probability that they will be used is low. A detailed
description of o-balance sheet items is presented
which is a further part of the note. Information on
expected loan loss are presented in the section 8 –
financial risk management.
OFFBALANCE SHEET ITEMS PLN ‘000
31.12.2020 31.12.2019
Contingent liabilities for other parties:
due to guarantees and sureties granted 1 369 944 1 378 770
due to court proceedings 17 523 11 042
Total contingent liabilities 1 387 467 1 389 812
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
NOTE 1A
FINANCIAL SURETY AGREEMENTS BY ECHO INVESTMENT GROUP
AS AT 31.12.2020 PLN ‘000
Issuer Entity receiving surety Beneciary Value Validity Description
Echo Investment S.A. Echo – Browary
Warszawskie Sp.
zo.o. Sp.K. and Dellia
Investments – Projekt
Echo – 115 Sp. zo.o.
Sp.K.
HPO AEP Sp. zo.o.
Sp.J.
11 537 Until the date of ob-
taining the occupancy
permit for the invest-
ments in progress,
however not later
than 07.12.2031.
Surety for liabilities of Echo – Browary
Warszawskie Sp. z o.o. Sp.K. and Dellia
Investments – Projekt Echo – 115 Sp.
z o.o. Sp.K. as a collateral of liabilities
resulting from the lease agreement of
7.12.2016. Mutual surety issued in EUR.
Echo Investment S.A. Projekt Echo 130 Sp.
zo.o.
PKO BP S.A. 23 074 until 31.01.2024 Surety for the repayment of the loan
in connection with the disbursement
of the construction loan up to the limit
of EUR 5 million without completion of
transferring a part of the property to
the Company.
Total 34 611
NONFINANCIAL SURETY AGREEMENTS BY ECHO INVESTMENT GROUP
AS AT 31.12.2020 PLN ‘000
Issuer Entity receiving surety Beneciary Value Validity Description
Echo – SPV 7 Sp.
zo.o. / Echo – Aurus
Sp. zo.o.
Sagittarius-Projek
Echo – 113 Sp.zo.o.
Sp.k.
Warburg – HiH Invest
Real Estate GmbH
32 539 until 21.01.2022 Surety for liabilities of Sagittarius - Pro-
jekt Echo - 113 Sp. z o.o. Sp.K. resulting
from sale agreement.
Echo – SPV 7 Sp.
zo.o. / Echo – Aurus
Sp. zo.o.
Sagittarius – Projek
Echo – 113 Sp. zo.o.
Sp.K.
Warburg – HiH Invest
Real Estate GmbH
152 000 until 31.10.2028 Surety for liabilities of Sagittarius - Pro-
jekt Echo - 113 Sp. z o.o. Sp.K. resulting
from quality guarantee agreement and
agreement on fit-out works.
Total 184 539
Total surety 219 150
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
FINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP AS AT 31.12.2020
Issuer
Entity receiving the
guarantee Beneciary Value Validity Description
Echo Investment S.A. Grupa Echo Sp. zo.o. IB 14 FIZAN 82 495 until 24.05.2024 Security for the proper performance of
the obligations arising from the contract
for the sale of the West Link oce
building in Wrocław. Issued in EUR.
After 24.05.2021 the maximum amount
of the liability will be reduced by 80
percent.
Echo Investment S.A. Midpoint 71-Cornwall
Investments Sp. z o.o.
SKA (former: Projekt
22 – Grupa Echo Sp.
zo.o. S.K.A.)
A19 Sp. zo.o. 27 689 until 4.07.2038 Guarantee for the obligations of Mid-
point 71-Cornwall Investments Sp. z o.o.
SKA (Midpoint 71 project) arising from
the good neighborly agreement con-
cluded on 4.07.2018. Issued in EUR.
Echo Investment S.A. Rosehill Investments
Sp. zo.o.
IB 6 FIZAN / GPF 3
FIZAN
105 783 until 31.03.2022 Security for the proper performance of
the obligations of Rosehill Investments
Sp. z o.o. resulting from the program
contract concluded on 31.08.2017. Issued
in EUR.
Echo Investment S.A. Dellia Investments –
Projekt Echo – 115 Sp.
zo.o. Sp.K.
LUX Europa III S.a.r.l. 50 763 until 3.03.2026 Security for the proper performance
of the liabilities of Dellia Investments -
Projekt Echo - 115 Sp. z o.o. Sp.K. arising
from the sale contract of the Gatehouse
Oces building being part of the War-
saw Brewery complex. Issued in EUR.
Echo Investment S.A. Projekt 17 – Grupa
Echo Sp. zo.o. SKA
Bank Millennium S.A. 4 938 until the conversion of
the construction loan
into an investment
loan
Guarantee securing rent proceeds
during the performance of the West 4
Business Hub oce project in Wrocław.
Issued in EUR.
Echo Investment S.A. Face2Face - Stran-
raer Sp. z o.o. SKA
(former: Projekt 20
- Grupa Echo Sp. o.o.
SKA)
Bank Pekao S.A. 70 000 until 29.12.2023 Guarantee securing cost overrun, cov-
ering interests on minimal level and se-
curing own contribution on Face2Face
oce project in Katowice. Issued in PLN.
PKO BP S.A.
(on behalf of Echo
Investment S.A.)
Galeria Libero - Pro-
jekt Echo - 120 Sp. z
o.o. Sp.K.
Director of the Tax
Administration
Chamber in Kielce
873 until 10.02.2021 Lottery guarantee for Galeria Libero -
Projekt Echo - 120 Sp. z o.o. Sp.K.
Echo Investment S.A Midpoint71 – Cornwall
Investments Sp. zo.o.
SKA
PKO BP S.A. 20 051 until 31.12.2029 Guarantee securing debt service cover
ratio and covering rent-free periods in
lease agreements on Midpoint 71 oce
project in Wroclaw. Issued in EUR.
Towarzystwo
Ubezpieczeń Euler
Hermes S.A.
(on behalf of Echo
Investment S.A.)
Gosford Investment
Sp. zo.o.
Womak Delta Sp.
zo.o.
29 14.07.2021 Rent guarantee - apartment sales oce
in Wrocław
Total 362 621
| Financial statement
19
Consolidated nancial statements of Echo Investment Group for 2020
NONFINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP
AS AT 31.12.2020 PLN '000
Issuer
Entity receiving the
guarantee Beneciary Value Validity Description
Echo Investment S.A. Projekt 104 Sp. zo.o. Skua Sp. zo.o. 27 689 until 31.07.2022 Security of the proper performance of
the final sale contract and the master
lease contract for the Aquarius Business
House II oce building in Wrocław.
Issued in EUR.
Echo Investment S.A. Echo – Opolska Busi-
ness Park Sp. zo.o.
Sp.K.
issued for Ventry
Investments Sp. z o.o.
Sp.K (currently an au-
thorized entity of EPP
Oce O3 Business
Campus Sp.z o.o.)
42 108 until 21.12.2026 Construction guarantee related to the
sale of the O3 Business Campus I oce
building in Kraków. The construction
guarantee is secured by a corporate
guarantee issued by Echo Investment
S.A. The guarantee issued in EUR.
Echo Investment S.A. ZAM – Projekt Echo –
127 Sp. zo.o. Sp.K.
issued for Emfold
Investments Sp. z
o.o. (currently an
authorized entity of
Tryton Business Park
Sp.z o.o.)
43 925 until 21.12.2026 Construction guarantee related to the
sale of the Tryton oce building in
Gdańsk. The construction guarantee
is secured by a corporate guarantee
issued by Echo Investment S.A. Guaran-
tee issued in EUR.
Echo Investment S.A. Symetris – Projekt
Echo – 131 Sp. zo.o.
Sp.K.
issued for Flaxton
Investments Sp. z
o.o. (currently an
authorized entity of
EPP Oce - Symetris
Business Park Sp.z
o.o.)
18 789 until 21.12.2026 Construction guarantee related to the
sale of the Symetris I oce building in
Łódź. The construction guarantee is se-
cured by a corporate guarantee issued
by Echo Investment S.A. Guarantee
issued in EUR.
Echo Investment S.A. Projekt Echo 135 Sp.
zo.o. Sp.K.
A4 Business Park Sp.
zo.o.
25 382 until 26.04.2027 Construction guarantee related to the
sale of the A4 Business Park III oce
building in Katowice. The guarantee
is secured by a corporate guarantee
issued by Echo Investment S.A. Guaran-
tee issued in EUR.
Echo Investment S.A. Echo – Opolska Busi-
ness Park Sp. zo.o.
Sp.K.
EPP Oce O3
Business Campus Sp.
zo.o
40 148 until 21.12.2027 Construction guarantee related to the
sale of the O3 Business Campus II oce
building in Kraków. The guarantee is se-
cured by a corporate guarantee issued
by Echo Investment S.A. Guarantee
issued in EUR.
Echo Investment S.A. gwarancja bez-
pośrednia Echo
Investment S.A.
Nobilis – Projekt Echo
– 117 Sp. zo.o. Sp.K.
40 000 until 31.10.2026 Quality guarantee for construction work
related to the Nobilis oce building in
Wrocław.
Echo Investment S.A. Symetris – Projekt
Echo – 131 Sp. zo.o.
Sp.K.
issued for Flaxton
Investments Sp. z
o.o. (currently an
authorized entity of
EPP Oce - Symetris
Business Park Sp.z
o.o.)
17 618 until 31.08.2023 Construction guarantee related to the
sale of the oce building Symetris II
in Łódź. Issued in EUR. The maximum
amount of the liability will be succes-
sively reduced as the amount of the
liability that is secured by the guarantee
decreases.
Echo Investment S.A. R4R Łódź Wodna Sp.
zo.o. R4R Wrocław
Kępa Sp. zo.o. R4R
Wrocławskie Rychtal-
ska Sp. zo.o. R4R
Warszawa Browary
Sp. zo.o.
Bank Pekao S.A. 14 147 until 30.09.2021 Guarantee securing exceeding the costs
of performing Resi4REnt projects: Łódź
Wodna, Wrocław Rychtalska, Warsaw
Brewery, Wrocław Kępa.
Echo Investment S.A. Projekt Beethovena –
Projekt Echo – 122 Sp.
zo.o. SKA
PKO BP S.A. 36 000 until 30.06.2023 Security for exceeding the costs of per-
forming the Moje Miejsce oce project
in Warsaw.
PKO BP S.A. Echo Investment S.A. LUX Europa III S.a.r.l. 6 450 until 7.05.2021 Security for the liabilities of Dellia In-
vestments - Projekt Echo - 115 Sp. z o.o.
Sp.K. arising from the contract of quality
guarantee concluded on 27.03.2019.
| Financial statement
20
Consolidated nancial statements of Echo Investment Group for 2020
NONFINANCIAL GUARANTEES ISSUED BY ECHO INVESTMENT GROUP
AS AT 31.12.2020 PLN '000
Issuer
Entity receiving the
guarantee Beneciary Value Validity Description
Echo Investment S.A. Dellia Investments –
Projekt Echo – 115 Sp.
zo.o. Sp.K.
LUX Europa III S.a.r.l. 101 249 until 31.12.2024 Security for the proper performance of
Dellia Investments - Projekt Echo - 115
Sp. z o.o. Sp.K. arising from the sale
contract of the Gatehouse Oces build-
ing being part of the Warsaw Brewery
complex. Issued in EUR.
Echo Investment S.A. Dellia Investments –
Projekt Echo – 115 Sp.
zo.o. Sp.K.
LUX Europa III S.a.r.l. 163 550 until 30.06.2030 Security for the proper performance of
Dellia Investments - Projekt Echo - 115
Sp. z o.o. Sp.K. liabilities, arising from
the sale agreement of the Gatehouse
Oce building in the Warsaw Brewery
complex. Issued in PLN.
Echo Investment S.A. Dellia Investments –
Projekt Echo – 115 Sp.
zo.o. Sp.K.
Bank Pekao S.A. 73 738 until the conversion of
the construction loan
into an investment
loan
Guarantee securing the costs exceed of
the oce project in the Warsaw Brew-
ery complex in Warsaw. Issued in EUR.
Echo Investment S.A. Projekt 17 – Grupa
Echo Sp. zo.o. SKA
Bank Millennium S.A. 8 045 until the conversion of
the construction loan
into an investment
loan
Guarantee of exceeding the costs of
performing the West 4 Business Hub
oce project in Wrocław.
Echo Investment S.A. Echo – Opolska Busi-
ness Park Sp. zo.o.
Sp.K.
EPP Development 6
Sp. zo.o.
37 226 until 9.08.2028 Construction guarantee related to the
sale of the O3 Business Campus III oce
building in Kraków. The guarantee is se-
cured by a corporate guarantee issued
by Echo Investment S.A. Guarantee
issued in EUR.
Echo – SPV 7 Sp.
zo.o.
R4R Poznań Szcze-
panowskiego Sp.
zo.o. R4R Warszawa
Taśmowa Sp. zo.o.
R4R Warszawa
Woronicza Sp. zo.o.
R4R Gdańsk Koło-
brzeska Sp. zo.o.
Santander Bank Pols-
ka S.A.,
24 500 until the conversion of
the construction loan
into an investment
loan
Security of the borrowers liabilities
arising from the cost overrun not in-
cluded in the budget specified in credit
agreement.
Echo Investment S.A Midpoint71 – Cornwall
Investments Sp. zo.o.
SKA
PKO BP S.A. 39 000 until 31.12.2026 Guarantee securing cost overrun and
maintanance of unleased area on
Midpoint 71 oce project in Wroclaw.
Issued in PLN.
Echo Investment S.A Projekt Echo – 130 sp.
zo.o.
Bank Pekao S.A. 28 609 until 31.04.2024 A guarantee securing the costs of the
oce project being exceeded as part of
the Fuzja CDJ complex. Issued in PLN.
Total 788 173
Total guarantees 1 150 794
| Financial statement
21
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 2
CHANGES IN PP&E BY TYPES PLN ‘000
For the period 1.01.2020 - 31.12.2020
Purchased
permits,
patents, licences
and similar
assets
Other
intangible
assets
Total
intangible
assets
a) gross value of intangible assets at the beginning of the period 9 733 708 10 441
b) Changes, due to:
- purchase 1 811 132 1 943
- sale - - -
c) Gross value of intangible assets at the end of the period 11 544 840 12 384
d) Accumulated depreciation at the beginning of the period (6 669) (31) (6 700)
e) Deprecation for the period:
- depreciation (2 210) (15) (2 225)
- correction due to sale - - -
f) Accumulated depreciation at the end of the period (8 879) (46) (8 925)
g) Net value of intangible assets at the end of the period 2 665 794 3 459
CHANGES IN PP&E BY TYPES PLN ‘000
For the period 1.01.2019 – 31.12.2019
Purchased
permits,
patents, licences
and similar
assets
Other
intangible
assets
Total
intangible
assets
a) gross value of intangible assets at the beginning of the period 7290 820 8110
b) Changes, due to:
- purchase 2446 (112) 2334
- sale (3) - (3)
c) Gross value of intangible assets at the end of the period 9733 708 10441
d) Accumulated depreciation at the beginning of the period (5617) (25) (5642)
e) Deprecation for the period:
- depreciation (1055) (6) (1061)
- correction due to sale 3 - 3
f) Accumulated depreciation at the end of the period (6669) (31) (6700)
g) Net value of intangible assets at the end of the period 3064 677 3741
| Financial statement
22
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 3
CHANGES IN PP&E BY TYPES PLN ‘000
For the period 1.01.2020 - 31.12.2020
Own
land
Buildings
and struc-
tures
Technical
equipment
and machi-
nes
Means of
transport
Other
PP&E Total PP&E
a) gross value of PP&E at the beginning of the period after corrections 293 21 278 5 575 9 767 8 387 45 300
b) increases, due to:
– purchase - 97 134 - 1 986 2 217
– leasing MSSF 16 - 5 397 - 1 487 - 6 884
c) decreases due to:
– sale - - (50) - (129) (179)
– liquidation - - - - (64) (64)
d) gross PP&E at the end of the period 293 26 772 5 659 11 254 10 180 54 158
e) accumulated depreciation at the beginning of the period (11) (4 616) (5 025) (4 717) (5 169) (19 538)
f) deprecation for the period:
– depreciation (3) (352) (168) (339) (623) (1 485)
– liquidation - - - - 64 64
– leasing MSSF 16 - (4 040) - (1 311) (153) (5 504)
– correction due to sale - - 50 - 127 177
g) accumulated depreciation at the end of the period (14) (9 008) (5 143) (6 367) (5 754) (26 286)
h) net value of PP&E at the end of the period 279 17 764 516 4 887 4 426 27 872
CHANGES IN PP&E BY TYPES PLN ‘000
For the period 1.01.2019 – 31.12.2019
Own
land
Buildings
and struc-
tures
Technical
equipment
and machi-
nes
Means of
transport
Other
PP&E Total PP&E
a) gross value of PP&E at the beginning of the period 357 5159 6764 2696 7766 22742
– impact of implementation MSSF 16 as of 1st January 2019 - 8081 - 6571 - 14652
a) gross value of PP&E at the beginning of the period after correc-
tions
357 13240 6764 9267 7766 37394
b) icreases, due to:
– purchase - 1018 308 305 2468 4099
– leasing MSSF 16 - 8003 - 752 - 8755
c) decreases due to:
– sale (64) (231) (715) (557) (1269) (2836)
– liquidation - (752) (782) - (578) (2112)
d) gross PP&E at the end of the period 293 21278 5575 9767 8387 45300
e) accumulated depreciation at the beginning of the period (8) (965) (5786) (2184) (4862) (13805)
f) deprecation for the period:
– depreciation (3) (343) (488) (416) (1170) (2420)
– liquidation - 183 764 - 517 1464
– leasing MSSF 16 - (3504) - (2486) - (5990)
– correction due to sale - 13 485 369 346 1213
g) accumulated depreciation at the end of the period (11) (4616) (5025) (4717) (5169) (19538)
h) net value of PP&E at the end of the period 282 16662 550 5050 3218 25762
The balance at the end of the period includes land
use rights (perpetual usufruct) in the amount of PLN
18,330 thousand PLN (in 2019 it amounted to PLN
17,422 thous.) De-tailed information on the impact
of the adop-tion of IFRS 16 is presented in Note 28.
| Financial statement
23
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 4
CHANGES IN INVESTMENT PROPERTY PLN ‘000
Oces
Shopping
centers Plots
Land use
right Total
Value at 1.01.2019 395 285 587 501 6 117 - 988 903
impact of implementation MSSF 16 as of 1st
January 2019
- - - 51 398 51 398
Value at 1.01.2019 after corrections 395 285 587 501 6 117 51 398 1 040 301
purchase - 117 494 - 9 528 127 022
investment properties under construction taking 173 657 - - - 173 657
expenditure on investments 60 103 33 075 - - 93 178
sale (303 637) - - (3 510) (307 147)
revaluation of property 25 548 (29 212) - (3 824) (7 488)
taking to assets held for sale (164 797) - (3 905) (8 838) (177 540)
Value at 31.12.2019 186 159 708 858 2 212 44 754 941 983
purchase - - - 8 389 8 389
investment properties under construction taking 862 265 - - 11 702 873 967
expenditure on investments 55 881 3 111 - - 58 992
revaluation of property 19 940 34 157 - (5 592) 48 505
taking to assets held for sale (532 784) - - (10 080) (542 864)
Value at 31.12.2020 591 461 746 126 2 212 49 173 1 388 972
The Group measures investment properties at fair
value at the end of each reporting period. The valu-
ation methodology is described in section 04 “Ba-
sic accounting principles”. The appraisals of the in-
vestment properties were performed by the Internal
Analyzes Department.
Due to the commissioning of the Face2Face Business
Campus I and II in Katowice, Villa Oces in War-
saw and the West 4 Business Hub oce building in
Wrocław, the Group transferred the value of these
properties in the amount of PLN 862,265 thous. (in-
cluding the right to use the land (perpetual use) in
the amount of PLN 11,702 thous.) from the item “in-
vestment property under construction” to the item
“investment property”.
Due to the intention to sell within 12 months, the
Group reduced the status of investment properties,
transferring to the item “assets held for sale”, the
Moje Miejsce oce building phase I in Warsaw, worth
PLN 196,369 thous. and the Villa Oces in Warsaw,
worth PLN 336,415 thous. (including the right to
use land (perpetual usufruct) in the amount of PLN
10,080 thous.).
As at December 31, 2020 he value of the proper-
ty consists mainly of real estate: Libero shopping
center, the Face2Face Business Campus oce pro-
ject, phase I and II in Katowice and West 4 Busi-
ness Hub in Wrocław. At the same time, the value
of investment real estate includes the value of the
right to use the land (perpetual usufruct), which as
at December 31, 2020 is PLN 49,173 thous.
The fair value of investment properties was classified
as level 3 of the fair value hierarchy. Detailed infor-
mation in part 7 - Significant estimates and judg-
ments of the Management Board of the Company.
| Financial statement
24
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 5
CHANGES IN INVESTMENT PROPERTY UNDER CONSTRUCTION PLN ‘000
Oces
Shopping
centers Plots
Land use
right Total
Value at 1.01.2019 806 079 - 66 430 - 872 509
impact of implementation MSSF 16 as of 1st
January 2019
- - - 36 355 36 355
Value at 1.01.2019 after corrections 806 079 - 66 430 36 355 908 864
purchase 45 850 - - 4 156 50 006
expenditure on investments 388 672 10 703 340 - 399 715
revaluation of property 399 433 - 39 - 399 472
movement to investment properties (173 657) - - - (173 657)
sale (2 829) - - - (2 829)
movement to inventory (62 072) - - (1 633) (63 705)
Value at 31.12.2019 1 401 476 10 703 66 809 38 878 1 517 866
expenditure on investments 544 510 12 736 213 - 557 459
revaluation of property 216 767 - - 1 157 217 924
transfer from inventory 31 791 - - - 31 791
movement to investment properties (862 265) - - (11 702) (873 967)
taking to assets held for sale (658 437) - - (12 015) (670 452)
Value at 31.12.2020 673 842 23 439 67 022 16 318 780 621
The Group measures investment properties under
construction at fair value at the end of each report-
ing period. The valuation methodology is described
in section 04 Main Accounting Principles. The ap-
praisals of the investment properties under con-
struction were performed by the Internal Analysis
Department and an external appraiser.
The expenses incurred for the implementation of the
investment concerned the implementation of invest-
ments located in Kraków, Katowice, Łódź, Gdańsk,
Wrocław and Warsaw.
Due to the fulfilment of the conditions allowing for
the valuation to fair value of the investment prop-
erty under construction, the Group recognized the
result of the first revaluation of the Moje Miejsce II
oce building in Warsaw (PLN 17,773 thous.) and
Fuzja CD in Łódź (PLN 18,973 thous.). In addition,
the Group updated the fair value of oce buildings,
Face2Face Business Campus stages I and II in Katow-
ice (PLN 57,738 thous.), West 4 Business Hub (PLN
20,064 thous.), Midpoint71 in Wrocław (PLN 40,976
thous.), React I in Łódź (PLN 5,136 thous.) and the
Malthouse Oces in Warsaw (PLN 53,212 thous.).
The total amount of revenue recognized from the
valuation of investment properties under construc-
tion was PLN 213,872 thous. net, i.e. after taking into
account the provision for the obligation to secure
revenues for the rent-free periods (master lease) and
profit sharing.
In connection with the commissioning of the Face-
2Face I and II oce property in Katowice, Villa Of-
fices in Warsaw and the West 4 Business Hub oce
building in Wrocław, the Group transferred the value
of these properties in the amount of PLN 862,265
thous. (including the right to use the land (perpetual
usufruct) in the amount of PLN 11,702 thous.) from
the item “investment property under construction”
to the item “investment property”.
Due to the intention to sell within 12 months, the
Group reduced the status of investment properties
under construction, transferring to the item “assets
held for sale” the Moje Miejsce II oce building in
Warsaw worth PLN 121,383 thous. and the oce
building at the Malthouse Oce in Warsaw (Warsaw
Brewery GH) in the value of PLN 527,335 thous. and
a property in Wrocław worth PLN 9 719 thous. (in-
cluding the right to use the land (perpetual usufruct)
in the amount of PLN 12,015 thous.).
As at December 31, 2020, in the report the Group
presented investment properties under construction
with a total value of PLN 780,621 thous. The closing
balance of the reporting period consists mainly of:
the Midpoint 71 oce building in Wrocław, the React
I oce building in Łódź, the oce building Brain
Park in Krakow. The value of investment property
includes the right to use land (perpetual usufruct)
in the amount of PLN 16,318thous.
The value of liabilities for the purchase of investment
properties under construction as at 31 December
2020 was PLN 57,696 thous. (as at December 31,
2019 it was PLN 90,078 thous.).
The Group assigned level 3 in the fair value hierarchy
for investment properties under construction. Details
are presented in part 7 - Significant estimates and
judgments of the Management Board of the Com-
pany.
| Financial statement
25
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 6
CHANGE IN ASSETS HELD FOR SALE
PLN ‘000
Oces
Shopping
centers Plots
Land use
right Total
Value at 1.01.2019 - - 13 500 - 13 500
impact of implementation MSSF 16 as of 1st
January 2019
- - - 5 518 5 518
Value at 1.01.2019 after corrections - - 13 500 5 518 19 018
investment properties taking 164 797 - 3 905 8 838 177 540
sale (164 797) - - (8 838) (173 635)
Value at 31.12.2019 - - 17 405 5 518 22 923
investment properties under construction taking 658 437 - - 12 015 670 452
investment properties taking 532 784 - - 10 080 542 864
revaluation of property 16 262 - - - 16 262
expenditure on investments 39 751 - - - 39 751
sale - - (17 405) (5 518) (22 923)
Value at 31.12.2020 1 247 234 - - 22 095 1 269 329
The Group measures assets held for sale at fair val-
ue at the end of each reporting period. The valua-
tion methodology is described in section 04 Main
Accounting Principles. The valuations of the assets
held for sale were performed by the Internal Analysis
Works.
Due to the intention to sell it within 12 months, the
Group increased its assets held for sale by transfer-
ring the Moje Miejsce II oce building in Warsaw
worth PLN 121 383 thous. from the item “investment
property under construction” and Malthouse Oces
in Warsaw (Warsaw Brewery GH stage) in the value
of PLN 527 335 thous. (including the right to use
the land (perpetual usufruct) in the amount of PLN
12,015 thous.) and transferring the Moje Miejsce I of-
fice building in Warsaw with a value of PLN 196,369
thous. from the item “investment real estate” and the
Villa Oces in Warsaw, worth PLN 336,415 thous. (in-
cluding the right to use the land (perpetual usufruct)
in the amount of PLN 10,080 thous.).
The decrease in assets held for sale is related to the
sale of a land property in Pamiątkowo near Poznań,
worth PLN 3,905 thous. and a plot of land in Koszalin
with a value of PLN 13,500 thous. including the right
to use the land (perpetual usufruct) in the amount
of PLN 5,518 thous. Details on the sale of real estate
in 2020 are described in Note 32.
As at December 31, 2020, under “assets held for
sale”, the Group recognized oce properties in War-
saw (Moje Miejsce I and II, Malthouse Oces and
Villa Oces in Warsaw) and a property in Wrocław
with a total value PLN 1,269,329 thous. including the
right to use land (perpetual usufruct) in the amount
of PLN 22,095 thous.
The Group assigned level 3 in the fair value hierar-
chy for investment properties classified as held for
sale. Details are presented in part 7 - Significant es-
timates and judgments of the Management Board
of the Company.
In the consolidated statement of financial position,
liabilities related to projects are presented under “li-
abilities related to assets held for sale”:
OBLIGATIONS REGARDING ASSETS HELD FOR SALE
31.12.2020 31.12.2019
Liabilities due to Leasing 23 467 -
Deposits received 20 421 -
Total 43 889 -
−
Mathouse Oces and Villa Oces in Warsaw
(Warsaw Brewery, stage K and GH)
− Moje Miejsce stage I and stage II in Warsaw.
Assets and liabilities related to assets held for sale
| Financial statement
26
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 7
NOTE 8
AMOUNTS REGARDING PROPERTIES INCLUDED IN PROFIT
AND LOSS ACCOUNT PLN ‘000
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
Rental income from investment property 111 756 76 415
Direct operating costs (including repair and maintenance costs) related to investment
property which generated rental income in a given period
(51 525) (46 211)
FINANCIAL ASSETS PLN ‘000
31.12.2020 31.12.2019
long-term loans granted (with interests) 198 901 112 508
short-term loans granted (with interests) 50 762 65 527
long-term sureties 2 292 2 292
Assets at the end of the period 251 955 180 327
long-term 201 194 115 862
short-term 50 761 64 465
Loans were granted to legal entities and natural
persons in PLN, with the WIBOR interest rate + mar-
gin, as well as in EUR – with a fixed interest rate. As
at the balance sheet date, loans with a total value
of PLN 204,787 thous. (after conversion into PLN)
were granted to entities accounted for using the
equity method: Galeria Młociny, Towarowa 22 and
Resi4Rent. The carrying amount of loans granted
to other entities is PLN 44,876 thous.
The maximum credit risk associated with loans
equals their carrying amount. The Company’s Man-
agement Board actively monitors debtors and as-
sesses that their loan obligations are possible to
Detailed information on amounts related to proper-
ties included in the profit and loss account can be
found additionally in Note 21.
meet. In particular, it is possible in the case of the
loans granted to related entities, which enables the
Group to assess and identify the loans for which the
credit risk has increased significantly. The Compa-
ny’s Management Board did not state such loans.
The Management Board also assessed the loans in
terms of making a write-down for expected credit
losses and assessed such write-down as immaterial.
The estimated fair value of the loans granted is ap-
proximately equal to their carrying amount.
| Financial statement
27
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 9
The “finished products” item includes mainly residential
and commercial premises sold under final contracts.
The “semi-finished products and work in progress”
item includes mainly real estate owned by the Group
and expenditure on housing projects in preparation
and implementation (eg. design services, construc-
tion works, etc. provided by external companies).
Additionally, this item shows the right to use land
(perpetual usufruct). The remaining value of the item
relates to the expenditure incurred on the services of
finishing the premises (fit-out). Due to the specific
nature of the business, the purchased land, prepared
for development, is presented as work in progress,
and the newly purchased land as land.
The ‘goods’ item includes land earmarked for sale.
Inventories are valued according to the cost of pro-
duction or purchase, but not higher than the obtain-
able net sales value. This value is obtained according
to the current market prices obtained from the devel-
opment market. The reversal of an inventory write-
down occurs either in connection with the sale of an
inventory or in connection with an increase in the net
selling price. The amounts of write-os of the value
of inventories recognized as an expense in the period
and the amounts of the reversal of write-downs of
values decreasing the value of inventories recognized
as income in the period are presented in the profit and
loss account under “cost of sale”.
INVENTORY PLN ‘000
31.12.2020 31.12.2019
Semi-finished products and work-in-progress 540 294 939 245
– asset on perpetual usufruct 26 979 42 164
Finished products 181 682 64 925
Goods 17 834 48 157
Land intended for investment 185 363 -
Inventory in total 925 173 1 052 327
The significant increase in inventories in 2019 is the
result of, among others disclosure of lease assets
(IFRS 16), transfers from investment property under
construction, as well as expenditure incurred and
property purchases.
In accordance with IAS 23, the Group activates the
portion of financial costs directly related to the acqui
-
sition and production of assets presented as invento-
ries. The activation concerns the amount of financial
expenses determined using the eective interest rate
reduced by the income from the temporary placement
of cash (i.e. the interest on bank deposits, except for
deposits resulting from blockades of accounts or let-
ters of credit) in the case of targeted financing con-
tracted for a given construction project. In the case of
leasing, interest costs on the leasing obligation related
to a specific project are capitalized in the project cost
(targeted financing). In the case of general financing,
the overall financing costs subject to capitalization are
determined by applying the capitalization rate to the
expenditure incurred for a given asset.
The activated amount of borrowing costs for inven-
tories in 2020 amounted to PLN 7,267 thous. (capi-
talization rate 1.04%) whereas in 2019 it amounted to
PLN 7,630 thous. (capitalization rate 1,17%).
The value of inventories as at December 31, 2020 is
PLN 925,173 thous., including for sale within 12 months
502,065 thous. PLN.
INVENTORIES IMPACT ON PROFIT/LOSS PLN ‘000
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
Amount of inventories recognised as an expense in the period (952 114) (657 730)
Impairment losses on inventories recognised in the period as cost 588 (7 142)
Reversal of impairment losses which decreases the value of inventories recog-
nised in the period as income
14 409 24 872
The change in inventory write-down until December
31, 2020 amounted to PLN 14,997 thous. As at De-
cember 31, 2019, this value amouted to PLN 17,730
thous.
The reversal of write-downs in 2019 concerned
mainly residential projects located in Wrocław (Gro
-
ta-Roweckiego 111), Poznań (Naramowice, Sołacz),
Łódź (Wodna) and Warsaw (Reset), in relation to
sale transactions concluded.
Inventory write-downs and reversals refer to resi-
dential projects included in the ‘finished goods’ and
‘goods’ items presented in Note 10 and they are
intended to write down the value to the level of a
feasible price.
The inventory value recognized as income / cost in
a given period is included in the profit and loss ac-
count under “cost of sales”.
| Financial statement
28
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 10
SHORTTERM RECEIVABLES PLN ‘000
31.12.2020 31.12.2019
Trade receivables
– up to 12 months 46 840 57 453
Total trade receivables 46 840 57 453
Advances for the purchase of land 20 402 17 584
Asset on perpetual usufruct 3 704 14 535
Receivables from selling Browary J - 8 814
advances for invoiced deliveries 18 046 13 998
cost of transferred infrastructure 2 963 4 662
advances - other 5 419 6 094
Other receivables 14 737 21 704
Total non-financial assets 65 271 87 391
Receivables due to VAT tax 80 978 56 562
Receivables due to other taxes 12 072 2 444
Total receivables due to taxes 93 050 59 006
Total net short-term receivables 205 161 203 850
– impairment losses on receivables - trade receivables 10 882 10 899
Total gross-short-term receivables 216 043 214 749
Receivables on account of deliveries and services re-
sult from provided development services, fit-out ser-
vices, rental of commercial and residential space, and
other. A detailed description of the services provided
by the Group’s companies can be found in note 19.
The company controls the condition and payment
capacity of its counterparties on an ongoing basis.
There is no significant risk concentration in relation to
any of the clients of the Echo Investment Group. As
at 31 December 2020, the Group estimated the val-
ue of impairment losses based on a provision matrix
based on historical data regarding the repayment of
receivables by counterparties.
The maximum value of credit risk related to trade
receivables does not significantly dier from the car-
rying amount. The estimated fair value of trade re-
ceivables is the current value of future expected dis-
counted cash flows and does not deviate significantly
from the balance sheet value of these receivables.
| Financial statement
29
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 11
CHANGE IN IMPAIRMENT LOSSES ON SHORTTERM RECEIVABLES
PLN ‘000
31.12.2020 31.12.2019
Opening balance 10 899 4 141
Increase due to:
– establishment of an impairment loss 5 030 7 551
5 030 7 551
Decrease due to:
– reversal of a provision (5 047) (763)
– discontinuance of enforcement proceedings - (30)
– sale of entities (5 047) (793)
Impairment losses on short-term receivables at the end of the period 10 882 10 899
The Group estimated the value of impairment for
trade receivables based on a provision matrix based
on historical data regarding the repayment of receiv-
ables by counterparties. The matrix has been pre-
sented in the chapter on financial risk management
in the part concerning credit risk.
NOTE 12
OVERDUE GROSS TRADE RECEIVABLES, WITH REMAINING
MATURITY FROM THE BALANCE SHEET DATE PLN ‘000
31.12.2020 31.12.2019
up to 1 month 9 279 3 035
between 1 month and 3 months 3 324 4 441
between 3 months and 6 months 613 2 910
between 6 months and 1 year 2 807 3 004
over 12 months 7 499 4 730
Total (gross) overdue trade receivables 23 522 18 120
write-downs on trade receivables (10 882) (10 899)
Total (net) overdue trade receivables 12 640 7 221
| Financial statement
30
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 13
NOTE 14
FINANCIAL INSTRUMENTS ASSETS PLN ‘000
31.12.2020 31.12.2019
- Interest Rate Swap - -
- FX fowards - 2 669
Total financial investments in derivatives - 2 669
With maturities:
- up to 1 year - 2 669
- from 1 to 3 years - -
FINANCIAL INSTRUMENTS LIABILITIES PLN ‘000
31.12.2020 31.12.2019
- Forward 10 929 -
Total financial investments in derivatives - -
With maturities:
- up to 1 year 10 929 -
PROFIT LOSS ON FX DERIVATIVES PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
- profit/loss on settlement of forwards/IRS (5 954) 1 431
- income/costs due to revaluation of forwards/IRS (15 222) 2 669
Total profit (loss) on FX derivatives (21 176) 4 100
CASH AND ITS EQUIVALENTS PLN ‘000
31.12.2020 31.12.2019
Cash in hand and at bank 327 097 492 295
Total cash 327 097 492 295
OTHER FINANCIAL ASSETS PLN ‘000
31.12.2020 31.12.2019
Restricted cash:
– proceeds from residential customers on escrow accounts released by the bank in
the course of the progress of investment
60 095 32 617
– securing the refund of security deposit 12 708 6 880
– securing the repayment of interest and principal instalments 9 721 12 114
– other - 5 546
Total other monetary assets 82 524 57 157
The Group invests surplus cash in the following
banks: PKO BP S.A., PEKAO S.A., DNB Bank Polska
S.A., Santander Bank Polska S.A., Alior Bank Polska,
Bank Millenium S.A., mBank S.A. and BNP Paribas
Bank Polska S.A.
The maximum credit risk of cash is equal to its car-
rying amount.
Cash at bank earns interest at floating interest rates
based on daily bank deposit rates.
Short-term deposits are made for various periods,
from one day to one month, depending on the
Group’s current demand for cash. They are subject
to determined interest rates.
| Financial statement
31
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 15A
Description of shares
The share capital of Echo Investment S.A.
is divided into 412,690,582 ordinary bear-
er shares of A, B, C, D, E and F series.
None of the shares has limited rights. The
Company’s share capital, i.e. the nominal
value of all the shares, amounts to PLN
20,635, and it was paid in cash. The nom-
inal value of one share is PLN 0.05. The
number of shares equals the number of
Shareholding structure
The major shareholder of Echo Invest-
ment S.A. is Lisala Sp. z o.o., controlled
by Hungarian Wing IHC Zrt. The share-
holding structure information as it was on
December 31, 2020 and as on the balance
sheet day is based on notifications from
shareholders and information on the OFE
(Opened Pension Funds) portfolios com-
position as at December 31, 2020.
votes at the General Meeting of Share-
holders. The securities issued by Echo
Investment S.A. do not provide their own-
ers with any special controlling powers.
Echo Investment S.A. does not have any
information on limitations in exercising
the voting right or transferring ownership
rights by owners of its securities.
SHAREHOLDERS OF ECHO INVESTMENT S.A. HOLDING MORE THAN 5% OF
THE SHARE CAPITAL AS AT 31 DECEMBER 2020
Shareholder No of shares and votes % of share capital % Votes on GMS
Lisala Sp. z o.o. (Wing IHC Zrt and Grin Real
Estate partners)
272 375 784 66,0 66,0
Nationale-Nederlanden OFE 55 833 698 13,53 13,53
Aviva Otwarty Fundusz Emerytalny Aviva
Santander
27 350 695 6,63 6,63
Nicklas Lindberg 538 676 0,13 0,13
Maciej Drozd 221 765 0,05 0,05
Péter Kocsis 44 000 0,01 0,01
Others 56 325 964 13,65 13,65
Total 412 690 582 100,00% 100,00%
– Lisala Sp. z o.o. (Wing IHC Zrt and Grin Real
Estate partners)
– Nationale-Nederlanden OFE
– Aviva Otwarty Fundusz Emerytalny Aviva Santander
– Nicklas Lindberg – CEO
– Maciej Drozd – Vice-President, CFO
– Péter Kocsis – Member of the Supervisory Board
– Other
Number of shares:
272 375 784 –
55 833 698 –
27 350 695 –
538 676 –
221 765 –
44 000 –
56 325 964 –
66%
6.63%
13.53%
13.53%
0.13%
0.05%
0.01%
| Financial statement
32
Consolidated nancial statements of Echo Investment Group for 2020
SUPPLEMENTARY CAPITAL PLN ‘000
31.12.2020 31.12.2019
From share premium 100 748 100 748
Created out of profits 993 865 993 865
Reserve fund for dividend 186 051 164 639
Total 1 280 664 1 259 252
The Ordinary General Meeting of Shareholders
(OGMS) of Echo Investment S.A. took place on 13
August 2020 in Warsaw.
The net profit achieved in the completed financial
year 2019 in the amount of PLN 21 412 312.65 was
allocated to distribute among all shareholders on the
following principles:
1. The profit allocated for distribution increased by
PLN 184 932 978.35 from the Dividend Fund (PLN
206,345,291 in total) was allocated for distribu-
tion among all shareholders of the Company as
the dividend.
2.
The amount of PLN 206,345,291 paid by the Com-
pany on 21 October 2019 as an advance for div-
idend for the financial year was included on the
dividend basis. As the dividend corresponded to
the amount of the dividend advance payment, the
shareholders decided that the Company would
not pay any additional funds from the profit for
the financial year 2019.
In 2019, the Company paid an advance on dividends
in the amount of PLN 206,345 thous. The value of
the dividend per share was PLN 0.50.
BOOK VALUE PER SHARE
31.12.2020 31.12.2019
Equity attributable to equity holders of the parent entity [PLN ‘000] 1 684 685 1 562 365
Number of shares (in thous. pieces) 412 691 412 691
Book value per share (in PLN) 4,08 3,79
Diluted number of shares 412 691 412 691
Diluted book value per share 4,08 3,79
EARNINGS PER SHARE
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
Profit (loss) attributable to the parent entity's shareholders [PLN ‘000] 122 093 299 532
Weighted average number of ordinary shares (in thousands) 412 691 412 691
Basic profit (loss) per ordinary share (in PLN) 0,30 0,73
Profit (loss) attributable to the parent entity's shareholders [PLN ‘000] 122 093 299 532
Weighted average diluted number of ordinary shares (in thousands) 412 691 412 691
Diluted profit (loss) per ordinary share (in PLN) 0,30 0,73
In 2020 and 2019 the Company did not use diluting
instruments.
NOTE 15B
NOTE 15C
| Financial statement
33
Consolidated nancial statements of Echo Investment Group for 2020
CHANGE IN PROVISIONS PLN ‘000
31.12.2020
31.12.2019
Opening balance
Provisions on expected costs of general administrative (audit, bonuses, leave of absence, etc.) 531 4 441
Provision for estimated penalties and losses 12 631 15 967
Provision for court cases 5 773 6 126
Provision for liabilities related to investment projects 2 585 8 753
Provision for master lease obligations 19 679 33 182
Provision for profit share obligations 78 306 97 443
Provision for fit-out works 5 855 7 610
Provision for the final settlement of the investment property sale price - 1 294
125 359 174 816
Increases due to:
Provisions on estimated costs of general administrative (audit, bonuses, leave of absence, etc.) 605 631
Provision for estimated penalties and losses 1 243 5 247
Provision for estimated costs of warranty repairs, etc. 1 540 -
Provision for court cases 1 342 369
Provision for liabilities related to investment projects 6 757 7 363
Provision for master lease obligations 4 728 17 888
Provision for profit share obligations 12 006 29 489
Provision for fit-out works 1 976 6 498
30 197 67 485
Utilization due to:
Incurred costs of general administrative (435) (4 541)
Incurred penalties and losses (860) (8 583)
(266) -
Provision for court cases (3 681) (722)
Provision for liabilities related to investment projects (7 241) (13 531)
Provision for master lease obligations (12 037) (31 391)
Provision for profit share obligations (44 029) (48 626)
Provision for fit-out works (4 919) (8 253)
Provision for the final settlement of the investment property sale price - (1 294)
(73 468) (116 941)
Closing balance
Provisions on estimated costs of general administrative (audit, bonuses, leave of absence, etc.) 700 531
Provision for estimated penalties and losses 13 014 12 631
Provision for estimated costs of warranty repairs, etc. 1 274 -
Provision for court cases 3 434 5 773
Provision for liabilities related to investment projects 2 101 2 585
Provision for master lease obligations 12 370 19 679
Provision for profit share obligations 46 283 78 306
Provision for fit-out works 2 912 5 855
Provision for the final settlement of the investment property sale price - -
82 088 125 359
Including:
Long-term provisions 50 029 35 931
Short-term provisions 32 059 89 428
NOTE 16
* Detailed information on provisions for lease guarantees are included in point 07 „Material estimates of the group’s management board”
** Detailed information on provisions for profit shares obligations are included in point 07 „Material estimates of the group’s management
board”
| Financial statement
34
Consolidated nancial statements of Echo Investment Group for 2020
In the reporting period, the following provisions for
investment liabilities were used:
−
related to the Symetris Business Park I oce build-
ings in Łódź, O3 Business Campus I in Kraków,
sold in 2016, in the amount of PLN 863 thous.
− related to the O3 Business Campus II oce build-
ings in Kraków and Nobilis Business House in
Wrocław sold in 2017, in the amount of PLN 3,154
thous.
− related to Sagittarius Business House in Wrocław
sold in 2018 in the amount of PLN 1,019 thous.
− related to the O3 Business Campus III in Kraków,
Gatehouse Oces in Warsaw and Moje Miejsce
I in Warsaw, in the amount of PLN 5,480 thous.
Provisions for rental guarantees and the obligation
to distribute the profit were divided according to
the maturity date from the balance sheet date. Pro-
visions for rental guarantees have been divided into
long-term guarantees in the amount of: PLN 2,997
thous. and short-term, in the amount of: PLN 9,373
thous. However, the liabilities to distribute the profit
to: long-term, in the amount of: PLN 46,083 thous.
and short-term, in the amount of: PLN 200 thous.
The dates of realization of provisions for penalties
and losses, warranty costs and court cases are dif-
ficult to estimate, and there is a high probability of
their realization within 12 months from the balance
sheet date.
Provision for penalties includes the value of penalties
it can be encumbered by the Group for concluded
agreements with the probability of being encum-
bered by more than 50%.
The provision for the expected costs of warranty re-
pairs includes the value of repairs or compensation
related to sold premises and projects, with the prob-
ability of being charged more than 50%.
The provision for project liabilities relates to the
provision for brokerage and other project-related
provisions.
The amounts of provisions were estimated based on
the Company’s best knowledge and its experience.
NOTE 17
In the consolidated statement of financial position,
the item “Loans, borrowings and bonds financing
real estate held for sale” presents liabilities (bank
loans, bonds, loans) relating to projects intended for
sale and presented in the line “Assets held for sale”.
As at the balance sheet date, this item includes lia-
bilities financing projects:
−
Oces at the Malthouse and Oces at the Villa in
Warsaw (Warsaw Brewery K and GH)
− Moje Miejsce I and II in Warsaw
The „loans and borrowings” item presents special
purpose loans and lines of credit in current accounts.
The purpose credit agreements are secured by real
estate mortgages, assignment of receivables re-
sulting from lease agreements, construction agree-
ments, policies and registered pledges on shares,
accounts, belongings and rights of subsidiaries. In-
terest rates on loans denominated in EUR are based
on the EURIBOR plus a margin.
Credit lines denominated in PLN are secured by
blank promissory notes, declarations of submission
to enforcement and powers of attorney to bank ac-
counts. The loan interest rate is based on the WIBOR
rate plus a bank’s margin. According to the best in-
formation and data of the Management Boards of
the Group’s companies, there were no breaches of
the terms of loan agreements or the agreed levels of
collateral during the financial year and until the date
of signing the financial statements.
In the ‘debt securities’ item the Group presents
bonds issued. The interest on bonds is based on the
CREDIT, LOANS AND BONDS PLN ‘000
31.12.2020 31.12.2019
Loans and borrowings 916 937 820 161
Credits, loans, - non-current assets classified as held for sale 467 055 -
Debt securities 1 395 332 1 149 510
Debt securities - non-current assets classified as held for sale 28 980 -
Total liabilities due to loans and borrowings 2 808 304 1 969 671
- of which long-term portion 1 465 767 1 602 126
- of which short-term portion 1 342 537 367 545
| Financial statement
35
Consolidated nancial statements of Echo Investment Group for 2020
WIBOR rate plus a margin. The fair value of loans
and borrowings does not dier significantly from
their balance value. The fair value was determined
by the income method based on the cash flows dis-
counted by the current market interest rate. The fair
value measurement was classified as level 3 of the
fair value hierarchy.
Issuance of bonds denominated in EUR
The Management Board of Echo Investment on Sep-
tember 3, 2020 concluded an issue agreement with
Bank Pekao S.A., establishing a program for the issu-
ance of unsecured ordinary bearer bonds up to the
total amount of the issued and outstanding bonds of
EUR 100 million. Bonds issued pursuant to the Issu-
ance Program will be oered for purchase without
the need to draw up a prospectus or information
memorandum. On the issuance date the Bonds will
be registered in the depository maintained by Kra-
jowy Depozyt Papierów Wartościowych S.A. and it
Private bond issue
On October 28, 2020, Echo Investment has also is-
sued short-term bonds for a private investor in a
will be introduced to trading in an alternative trading
system operated by Warsaw Stock Exchange (Gieł-
da Papierów Wartościowych w Warszawie S.A.).
Bonds will be issued as unsecured ordinary bearer
bonds denominated in EUR and bearing interest at
a fixed or variable interest rate, with a maturity not
exceeding 5 years. The final parameters of the bonds
will be determined through talks with investors and
will be subject to approval of the Company’s Man-
agement Board.
total value of EUR 12,8 million (the euro-bonds issu-
ance program described above).
BONDS ISSUED BY THE COMPANY IN 2020 IN PLN
Series Date
Nominal
value
[‘000 PLN]
Bonds for institutional investors – series 1/2020 2.06.2020 150 000
Bonds for institutional investors – series 1P/2020 5.08.2020 100 000
Total 250 000
Even more detailed information on loans and bonds
can be found in the Report of the Management
Board on the activities of Echo Investment S.A. and
its Capital Group for 2020 in part 20 “Financial lia-
bilities of the Company and its Capital Group”
Information on the bond issued in Q1 2021 you can
find in the item 11.3.
BONDS ISSUED BY THE COMPANY IN 2020 IN EUR
Series Date
Nominal
value
[‘000 PLN]
Bonds for institutional investors – series 1E/2020 23.10.2020 40 000
Bonds for institutional investors – series 2P/2020 * 28.10.2020 12 800
Total 52 800
*Issue out of the issuance program with Bank Pekao S.A.
| Financial statement
36
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 18
Fair value of trade and other liabilities does not dif-
fer significantly from the valuation at its carrying
amount.
TRADE AND OTHER LIABILITIES PLN ‘000
31.12.2020 31.12.2019
Trade payables maturing:
Up to 12 months 130 249 238 011
130 249 238 011
Leasing liabilities 134 884 184 964
Liabilities due to purchases of land 125 234 -
Security deposits from contractors and deposits received 55 493 57 266
Payments on escrow account from clients purchasing apartments 60 095 32 617
Financial instruments 10 929 -
Accruals - future expenses to be incurred 22 553 -
Accruals - bonuses for the Management Board and employees 6 893 5 940
Accruals - other 2 339 3 974
Other liabilities 12 912 3 584
431 332 288 345
Liabilities due to VAT 892 5 069
Liabilities due to other taxes 12 734 11 057
13 626 16 126
Total trade and others liabilities 575 207 542 482
NOTE 19
REVENUE FROM SALES PLN ‘000
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
Revenue from Contracts with Customers
Sale and lease of residential space 728 560 554 169
Sale to the Resi4Rent 286 998 97 894
Services in oce space 54 103 46 514
Services in retail space 1 383 28 125
Other sale 24 519 76 670
Revenue from Contracts with Customers 1 095 563 803 372
Lease (MSSF16) 117 291 76 761
Revenue total 1 212 854 880 133
The following are disclosures regarding the main groups of in-
come that will enable users of the financial statements to be-
come acquainted with the nature, amounts, acquisition dates
and uncertainties related to income and cash flows resulting
from concluded agreements.
| Financial statement
37
Consolidated nancial statements of Echo Investment Group for 2020
REVENUES PLN ‘000
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
Sale (A) 728 560 554 169
Lease (C) 134 1 352
Apartments 728 694 555 521
Lease (C) 62 470 30 044
Fit-out services (D) 54 103 46 514
Oce 116 573 76 558
Sale (A) 0 6 850
Lease (C) 54 270 44 386
Development services (E) 1 383 21 275
Retail 55 653 72 511
Sale (G) 286 998 97 894
Resi4Rent 286 998 97 894
Sale (F) 22 614 71 274
Lease (C) 417 979
Services (F) 1 905 5 396
Other 24 936 77 649
FUTURE MINIMUM CASH FLOWS RESULTING FROM
LEASES IN WHICH THE GROUP IS THE LESSOR
PLN ‘000
31.12.2020 31.12.2019
up to 1 year 100 357 39 498
over 1 to 2 years 130 120 75 925
over 2 to 3 years 140 805 89 636
from 3 to 4 years old 126 040 100 315
over 4 to 5 years 114 397 90 652
over 5 years 375 617 303 817
Total 987 335 699 843
The leased investment properties are also mostly
objects of leasing, with the Echo Group being the
lessee. Lease contracts signed by the Echo Group as
a lessor assume monthly payments. The lease price
depends only on the market price indexes. Where it
is necessary to reduce credit risk, the Echo Group
receives deposits or bank guarantees from tenants.
The Echo Group is exposed to a decline in market
lease rates, however, due to the fact that lease agree-
ments are signed for periods of several years, the
impact of such market changes is spread over time.
| Financial statement
38
Consolidated nancial statements of Echo Investment Group for 2020
(A) Revenues related to property development
– sale of residential and commercial space in
residential projects
The Group recognizes revenues when a obligation to perform
a service is fulfilled. The obligation to perform the service is
deemed fulfilled when the property is handed over to the buy-
er, which is based on the acceptance protocol signed by the
parties only after completion of the construction property and
obtaining the occupancy permit, as well as provided by 100 %
payments towards the purchase price of real estate made by
the buyer. Agreements included within this income group do not
include variable remuneration. Moreover, in the Group’s opinion,
the concluded agreements do not contain a significant element
of financing. Therefore, the Group, as a rule, does not show re-
ceivables or other asset balances under contracts related to this
group of revenues. Contractual obligations reflect the advance
payments made by the customers. The table below presents
changes in the balance of contractual liabilities in relation to
this group of revenues.
The total value of revenues to be recognized in the future, re-
sulting from contracts for the sale of residential space, signed
as at the balance sheet date 31 December 2020, amounts PLN
1,182,051 thous., of which the Group received advance payments
in the amount of PLN 231,613 thous. until the balance sheet
date. These revenues will be recognised when the property is
delivered to the buyers, after completion of the construction
and obtaining the necessary administrative decisions, which
follows on average after a period of about 1 to 3 months after
construc-tion is completed.
DEFERRED INCOME ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Deferred income - opening balance 452 906 321 348
Increase - inflows 507 267 684 886
Presented as revenue in the period (728 560) (553 328)
– including revenue presented in the period, considered in balance of received ad-
vanced payments at the beginning of the period
(420 394) (123 279)
Deferred income - closing balance 231 613 452 906
| Financial statement
39
Consolidated nancial statements of Echo Investment Group for 2020
DEFERRED INCOME RESULTING FROM RESIDENTIAL SALES AGREEMENTS PLN ‘000
Project Targeted completion
Targeted
total value
Total value of defer-
red revenue related
to concluded
agreements
Received
advances /
Liabilities
under contracts
with customers
(long-term) *
Received
advance
paymants /
deferred
income (long
and short-
term)
*
Deposit on
apartments
(long and
short-term other
liabilities (note
18)**
Osiedle Krk I, Kraków IV Q 2022 97 056 97 056 0 12 412 42
Osiedle Krk II, Kraków II Q 2023 97 070 97 070 6 498 0 353
Osiedle Bonarka Living I, Kraków IV Q 2022 68 400 68 400 0 6 363 0
Osiedle Jarzębinowe V, Łódź project completed 43 911 6 0 0 0
Osiedle Jarzębinowe VII, Łódź project completed 36 661 4 857 0 2 690 39
Osiedle Jarzębinowe VIII, Łódź IV Q 2021 39 302 39 302 0 12 111 893
Nowa Dzielnica, Łódź project completed 30 200 1 535 0 1 0
Fuzja I, Łódź project completed 105 589 50 083 0 8 109 424
Fuzja II, Łódź II Q 2022 92 307 92 307 1 152 0 277
Osiedle Jaśminowe IV, Poznań project completed 31 380 38 0 0 0
Osiedle Perspektywa I, Poznań project completed 43 683 230 0 182 0
Osiedle Perspektywa II, Poznań project completed 24 795 16 0 16 0
Osiedle Perspektywa III, Poznań project completed 30 836 62 0 0 35
Osiedle Enter IA, Poznań IV Q 2021 41 649 41 649 0 13 092 849
Osiedle Enter IB, Poznań IV Q 2021 37 838 37 838 0 1 376 275
Nasze Jeżyce I, Poznań II Q 2021 57 829 57 829 0 21 361 16 874
Nasze Jeżyce II, Poznań II Q 2021 64 200 64 200 0 18 059 11 403
Apartamenty Esencja, Poznań project completed 116 366 38 110 0 15 204 12 235
Widoki Mokotów, Warszawa project completed 69 273 7 491 0 25 17
Warsaw Brewery phase A, Warsaw project completed 55 343 160 0 53 0
Warsaw Brewery phase B, Warsaw project completed 125 289 188 0 0 49
Warsaw Brewery phase C, Warsaw project completed 91 536 1 118 0 375 0
Warsaw Brewery phase D, Warsaw project completed 113 411 43 396 0 704 2 058
Osiedle Reset I, Warszawa project completed 67 163 576 0 162 0
Osiedle Reset II, Warszawa project completed 119 369 6 683 0 3 056 40
Moje Miejsce, Warsaw project completed 132 313 6 129 0 744 259
Stacja Wola I, Warsaw III Q 2021 204 300 204 300 0 82 135 5 346
Stacja Wola II, Warsaw II Q 2022 138 430 138 430 6 558 0 4 226
Grota – Roweckiego 111 etap III project completed 16 232 60 0 0 41
Ogrody Graua, Wrocław project completed 47 209 19 094 0 1 333 3
Stacja 3.0, Wrocław project completed 89 306 50 707 0 6 826 3 508
Zebra, Wrocław project completed 75 795 1 514 0 99 150
Puszkarska R4R, Kraków IQ 2021 - sale of plot 5 969 5 969 0 5 969 0
Other 5 647 5 647 0 4 948 699
Total 2 415 657 1 182 051 14 208 217 405 60 095
* Advances exempt from duciary accounts
** Remaining advances (gross amount) to be released from escrow accounts
In the item “Liabilities under contracts with customers”, the
Group presents payments from customers for apartments in
pending residential projects kept and released from escrow
accounts.
As at December 31, 2020, the amount of unblocked depos-
its was PLN 231,613 thous., of which long-term amounted to
PLN 14,208 thous. As at December 31, 2019, the amount of un-
blocked deposits was PLN 452,906 thous., of which long-term:
PLN 45,754 thous.
| Financial statement
40
Consolidated nancial statements of Echo Investment Group for 2020
(B) Revenues related to property development –
sale of commercial real estate – oce buildings
and shipping centres
The Group recognizes types and numbers of services to which
it has committed for the benefit of the buyer under the contract
for the sale of real estate, including rent guarantees.
As part of the sale of investment properties, the Group recogniz
-
es revenue when the obligation to perform the service is fulfilled,
i.e. when the notarial deed is signed, which is the moment when
the control over the property is transferred to the buyer. The
Group recognises the amount of revenue in the amount of the
price resulting from the transaction specified in the contract
between the entity and the buyer. Its level is determined at the
fair value, taking into account the amount of future liabilities
resulting from the economic content of the concluded contract.
The variable element occurring in this type of contracts (due
to its dependence on future events) is the amount concerning
rental guarantee. Despite the uncertainty, the Group is able to
reliably estimate the cost that it will have to incur on account
of the vacant space in the building in the period specified in
the contract at the moment of conclusion of the contract. The
Group creates provisions in this respect in accordance with IAS
37 “Provisions, Contingent Liabilities and Contingent Assets”.
This provision reduces the remuneration from the contract, and
thus recognised revenues from its execution. The result on the
sale of commercial real estate classified as investment property
in accordance with IAS 40 “Investment Property” is presented
in the statement of comprehensive income as Profit (loss) on
investment property. Details regarding provisions recognised
by the Group as at 30 June 2020 are presented in note 16.
The Group recognises additional costs of concluding a sales
agreement as an element of the profit and loss account, at the
moment of recognising the revenue from the sale of an asset.
Moreover, in the Group’s opinion, the concluded agreements
do not contain a significant element of financing. The purchase
price of the property obtained from the buyer is paid in full in
such agreements at the time of the sale. Due to such character-
istics of the contracts concluded, the Group, as a rule, does not
show receivables or other balances of assets due to contracts
related to this group of revenues.
(C) Revenues related to lease
Commercial buildings - shopping centres and oces, commis-
sioned for use, and individual premises in residential projects for
rent are a source of rental income for the Group. In accordance
with IFRS 16 Leases, revenues from the lease of residential and
commercial space are recognised on a straight-line basis over
the term of the agreements concluded.
| Financial statement
41
Consolidated nancial statements of Echo Investment Group for 2020
(D) Revenues related to fit-out works
As part of services conedted with construction of oce pro-
jects, the market standard is to perform fit-out works of space
before their occupancy by tenants. The Group provides fit-out
works, which includes preparation and agreement of the scope
of works, organisation and carrying out tenders for construction
works, as well as supervision and coordination of construction
works. The Group recognises revenues when the obligation to
perform the service is fulfilled, i.e. during the service provision
period. The remuneration resulting from the concluded agree-
ments is permanent and due to the Group after handing over
the oce space to the tenant. The duration of contracts is rel-
atively short and ranges from 1 to 2 months. Moreover, in the
Group’s opinion, the concluded agreements do not contain any
significant element of financing. Due to such characteristics of
the contracts signed, there are no significant balances of assets
or liabilities under contracts, except for trade receivables (see
note 10).
The total value of revenues to be recognised in the future related
to obligations to perform contracts for the implementation of
fit-out works signed as at the balance sheet date on 31 Decem-
ber 2020 is PLN 972 thous. These revenues will be recognised
at the time of completion of works, which depending on the
oce building is expected in the following periods:
DEFERRED INCOME RESULTING FROM FITOUT WORKS
AGREEMENT PLN ‘000
Building Tenant
Date of execu-
tion Value
Sagittarius Business House, Wrocław Oras Olesno sp. zo.o. 2021/07 972
Total 972
(E) Revenues related to project implementation
services
As part of the investment implementation services, the Group
provides services for the preparation and organisation of the in-
vestment process with respect to development projects owned
by other entities, entities associated with the Echo Investment
Group and unrelated entities. As part of its responsibilities, the
Group undertakes the performance of advisory, management,
legal and other activities necessary to manage the implemen-
tation of the investment. This process includes the preparation
of investments, organisation and carrying out tenders for con-
struction works, supervision and coordination of construction
works as well as customer service. The Group recognises reve-
nues when the obligation to perform the service is fulfilled, i.e.
during the service provision period. The remuneration resulting
from the concluded contracts is permanent and due to the Com-
pany monthly. Moreover, in the Group’s opinion, the concluded
agreements do not contain a significant element of financing.
Due to such characteristics of the contracts signed, there are
no significant balances of assets or liabilities under contracts,
except for trade receivables (see note 10).
| Financial statement
42
Consolidated nancial statements of Echo Investment Group for 2020
(F) Other revenues of the Group
The Management Board analyzed the remaining contracts for
the provision of real estate brokerage, accounting, legal, con-
sulting, IT, financial, marketing and other services. The Group
recognises revenues when the obligation to perform the per-
formance is fulfilled, i.e. for certain contracts - at the end of the
given type of service (e.g. signing a real estate sale agreement
as a result of the intermediation service in the sale of real estate)
or during the period of providing a given type of services (e.g.
in the period of provision of accounting, marketing, consulting,
legal or real estate management services). In most cases, servic-
es are provided on a monthly basis and are accounted for in the
same period, and the remuneration for the Group becomes due.
For some contracts (e.g. real estate intermediation), the remu-
neration resulting from concluded contracts contains a variable
element, however, the nature of these contracts shows that the
Group is entitled to the remuneration only when the contractual
obligation is fulfilled. This means that the variable remuneration
is known at the moment of recognising the revenue, and its
value is not changed later. Moreover, in the Group’s opinion, the
concluded agreements do not contain a significant element of
financing. Due to such characteristics of the contracts signed,
there are no significant balances of assets or liabilities under
contracts, except for trade receivables (see note 10).
(G) Income from the sale of rental apartments
As part of the sale of real estate included in the Resi4Rent cate-
gory, relating to the flat platform for rent, the Group recognizes
revenue upon fulfilment of the performance obligation, i.e. when
control of the property is transferred to the buyer. The Group
recognizes the amount of revenue in the amount of the price
resulting from the transaction defined in the sale and purchase
agreement between the entity and the buyer. Its level is deter-
mined according to the fair value of the payment, taking into
account the amount of future liabilities resulting from the eco-
nomic substance of the concluded contract.
| Financial statement
43
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 20
NET OPERATING COSTS PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Sale and lease of residential space (564 165) (401 728)
Construction and lease of oce space (82 565) (57 459)
Lease of retail space (21 923) (54 245)
Sale to the Resi4Rent (273 049) (91 168)
Other (27 321) (72 530)
Total net operating costs (969 023) (677 130)
COSTS BY TYPE PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Amortisation (11 738) (9 472)
Consumption of materials and power (105 985) (119 880)
Outsourced services (701 686) (751 413)
Taxes and charges (18 573) (13 027)
Payroll (47 409) (65 802)
Social security contributions and other benefits (8 725) (10 441)
Other costs by type (35 758) (61 858)
Value of goods and materials sold - -
Total costs by type (929 875) (1 031 892)
Change in inventories, finished products and work in progress 171 456 (201 011)
- -
Administrative expenses related to execution of projects (33 163) (27 511)
Selling and distribution expenses (29 855) (28 883)
General and administrative expenses (69 291) (97 357)
Cost of products sold (969 023) (677 130)
| Financial statement
44
Consolidated nancial statements of Echo Investment Group for 2020
NET PROFIT ON INVESTMENT PROPERTY PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Profit on investment property (11 977) 16 597
Revaluation of property, including: 251 008 376 674
- asset on leasing IFRS 16 2 695 (3 839)
Costs of profit share (10 045) 5 141
Net profit (loss) on investment property 228 985 398 412
NOTE 21
In 2020, the Group sold a plot of land in Pamiątkowo
near Poznań and a plot of land in Koszalin. The trans-
actions are described in note 32.
In the item “profit (loss) on the sale of investment
properties”, among others costs of securing rent-
al revenues (master lease) are presented, which
mainly relate to sold Sagittarius Business House in
Wrocław and O3 Business Campus in Kraków. The
item “revaluation of real estate” presents real estate
appraisals, which mainly relate to oce projects:
Face2Face Business Campus (I and II), Villa Oces
and Malthouse Oces (Warsaw Brewery K and GH),
Moje Miejsce ( I and II) in Warsaw, Midpoint71 and
West 4 Business Hub in Wrocław and Fuzja CD in
Łódź. On the other hand, the item “Profit sharing
costs” presents liabilities to profit distribution, which
mainly concern Moje Miejsce (I and II) in Warsaw and
Libero Shopping Center in Katowice.
NOTE 22
*In 2020, the release of provisions mainly con-cerned court cases in the amount of PLN 3,400 thous.
OTHER OPERATING INCOME PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Reversal of writte-os and reseves * 4 713 8 021
Termination of reserves and provisions 387 3 018
Revaluation of receivable 1 108 1 151
Contractual penalties 855 1 520
Compensations 520 5 675
Profit from sale of non-financial non-current assets 22 890
Other 2 778 2 241
Total other operating income 10 383 22 516
NOTE 23
OTHER OPERATING EXPENSES PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Established provisions* (4 670) (5 318)
Revaluation of receivable (2 111) (2 708)
Contractual penalties (1 048) (3 847)
Donations (555) (276)
Cost of sale of non-financial non-current assets (152) (971)
Other (4 188) (6 907)
Total other operating expenses (12 724) (20 027)
* W pozycji „Utworzone rezerwy” prezentowane są głównie rezerwy na naprawy gwarancyjne, sprawy sądowe, pośrednictwo w najmie.
| Financial statement
45
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 24
NOTE 25
FINANCIAL INCOME PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Profit on disposal of investments 7 926 7 210
income from borrowings interest with amortized cost 6 817 7 265
Income from interest 285 761
Other financial income - 8
Total financial income 15 028 15 244
In the item “profit on the sale of investments” in 2020,
the Group showed the result on the sale of Projekt
Pamiątkowo Sp. z o.o. , Projekt Echo 132 Sp. z o.o. in
the amount of PLN 2,664 thous. and the company
Projekt 18 - Grupa Echo Sp. z o.o. S.K.A in the amount
of PLN 5,262 thous. Revenue from the sale of shares
in Projekt 18 - Grupa Echo Sp. z o.o. S.K.A amounted
to 3,192 thous., the value of assets sold amounted to
PLN 27,675 thous, including inventories PLN 26,894
thous. and the value of liabilities sold amounted to
PLN 28,298 thous., including loans of PLN 26,578
thous. Revenue from the sale of shares in Projekt Pa-
miątkowo Sp. z o.o. and Projekt Echo 132 Sp. z o.o.
amounted to PLN 3 541 thous.
NOTE 25
FINANCIAL COSTS PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
interest expense from credit and bonds with amortized cost (53 768) (53 509)
costs of expected credit loss (445) (650)
Costs due to interest of leasing (3 354) (6 913)
loss on disposal of investments (4 369) (300)
Total (61 936) (61 371)
In accordance with IAS 23, the Group activates the
part of financial costs that are directly related to the
acquisition and production of assets. In the case of
general financing, the financing costs subject to cap-
italisation are determined using the weighted aver-
age of all borrowing costs in relation to the incurred
outlays for a given asset.
The activated amount of borrowing costs in 2020
amounted to: PLN 8,599 thous. at a capitalization
rate of 1.04% (of which: for inventories: PLN 7,267
thous., for investment properties under construction:
PLN 1,332 thous.). In 2019, it was 10,785 thous. At a
capitalization rate of 1.17%, (including: for inventories
PLN 7,630 thous., for investment properties under
construction: PLN 3 155 thous.).
NOTE 26
GAIN LOSS DUE TO EXCHANGE RATE DIFFERENCES PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
- Realised exchange rate dierences’ losses over gains surplus 1 679 55
- Unrealised exchange rate dierences’ losses over gains surplus (85 583) 2 636
Total gain (loss) due to exchange rate dierences (83 904) 2 691
| Financial statement
46
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 27
Rosehill Investments Sp. zo.o., Berea Sp. zo.o.
(Galeria Młociny)
On 31 May 2017 the Echo Investment Group together
with the EPP Group concluded a purchase agree-
ment concerning a property located in Warsaw at
ul. Zgrupowania AK „Kampinos”. Under the conclud-
ed transaction the companies purchased shares in
Rosehill Investments Sp. z o.o., which is the owner
of Galeria Młociny project by way of holding 100%
shares in Berea Sp. z o.o. The property value was
established as EUR 104.5 mln. As at the day of the
acquisition and the balance date i.e. on 31 December
2020 the Echo Investment Group held 30% shares in
the project company being the owner of the prop-
erty and the remaining 70% was held by the EPP
Group. Echo Investment S.A. and EPP N.V. are only
responsible for their respective parts of the purchase
price. The share of the Group in Berea Sp. z o.o. pre-
sented in the financial report is estimated accord-
ing to the equity method. Pursuant to the articles
of association, all strategic financial and operational
decisions (including in particular: purchase of a sig-
nificant asset, conclusion of a lease agreement, etc.)
require the unanimous consent of both shareholders.
A summary of financial information in the joint ven-
ture is presented below. The carrying value of the
investment as at 31 December 2020 amounted to
PLN 104,919 thous.
In 2019, the company analyzed the impairment of net
investment value based on the equity method in a
jointly controlled company Rosehill Investments Sp.
z o.o (projekt Młociny). In the first half of 2019, due
to Galeria Młociny opening, the company updated
the fair value of the project in the net assets of the
jointly controlled entity. The company estimated that
the recoverable amount of the net investment as at
the balance sheet date is lower than the value of
the shares in net assets as at that day. As a result,
the company recognized an impairment loss of PLN
12,756 thous.
The value of investments in associates and joint
ventures accounted for using the equity method is
presented in the table below:
31.12.2020 31.12.2019
Rosehill Investments Sp. zo.o., Berea Sp. zo.o. (Galeria Młociny) 104 919 88 178
Projekt Echo – 138 Sp. zo.o. Sp.K. (Towarowa 22) 147 741 147 986
R4R Poland Sp. zo.o. (Resi4Rent) 53 789 17 978
Total 306 449 254 142
Joint-ventures
| Financial statement
47
Consolidated nancial statements of Echo Investment Group for 2020
SELECTED DATA FROM THE FINANCIAL SITUATION
PLN ‘000
31.12.2020
Fixed assets – investment property 1 816 847
Current assets 14 916
Cash 46 477
Total assets 1 878 240
Long-term liabilities 1 321 682
Short-term liabilities 280 271
Total liabilities 1 601 953
Equity 276 287
% share of Echo Investment S.A. 30,00%
Share of the Echo Investment Group in net assets * 82 886
Joint venture’s financial data – Galeria
Młociny
SELECTED DATA FROM THE STATEMENT
OF COMPREHENSIVE INCOME PLN ‘000
1.01.2020 –
31.12.2020
Operating income 66 929
Operating costs (30 109)
Revenue/cost - revaluation of property * (121 073)
General and administrative expenses (1 696)
Costs of sales –
Other income / operating costs (3 000)
Financial income 717
Financial costs (52 793)
Gross profit (loss) (141 025)
Income tax 1 559
Net profit (loss) (139 465)
Total comprehensive income (139 465)
Share of the Echo Investment Group (%) 30,00%
Share of the Group in comprehensive income resulting from joint-venture (41 840)
* as a result of the new valuation made in 2020, a decrease in the value of the property was recognized (Galeria
Młociny), taking into account the situation related to COVID 19.
* The dierence between the net investment value (PLN 104,919 thous.) and the value of Echo Investment
Group’s share in the net assets of Rosehill Investments Sp. z o.o. - the Młociny project (PLN 82,886 thous.)
constitutes goodwill.
| Financial statement
48
Consolidated nancial statements of Echo Investment Group for 2020
Projekt Echo – 138 Sp. zo.o. Sp.K.
(Towarowa 22)
On 15 September 2016 the Echo Investment Group
and the EPP Group concluded a conditional pur-
chase agreement under which they were planning
to purchase a property located at ul. Towarowa 22 in
Warsaw, where a joint investment enterprise is to be
developed. The final purchase agreement was con-
cluded on 23 December 2016. The property sales
price was EUR 77.4 mln, however, it will be increased
to EUR 119.4 mln upon the fulfilment of conditions
stipulated in the agreement. Echo Investment paid
EUR 35.82 mln and EPP’s contribution amounted
to EUR 41.58 mln. Thus, as at the balance date i.e.
on 31 December 2020 the Echo Investment Group
had 46.20% share in the project company being the
owner of the property at ul. Towarowa 22. EPP held
the remaining 53.80%. Upon the fulfilment of all
conditions increasing the price, the share of Echo
Investment in the transaction and the planned en-
terprise will ultimately amount to 30% and 70% will
be held by the EPP Group. Pursuant to the articles
of association, all strategic financial and operational
decisions (including in particular: purchase of a sig-
nificant asset, conclusion of a lease agreement, etc.)
require the unanimous consent of both shareholders.
As at the balance sheet day, on 31 December 2020
those conditions were not yet fulfilled. Echo Invest-
ment S.A. and EPP N.V. are only responsible for their
proportional parts of the price. The share of the Echo
Investment Group in the joint venture is shown in the
consolidated financial statement and it is estimated
using the equity method. The carrying value of the
investment as at 31 December 2020, amounted to
PLN 147,741 thous. A summary of financial informa-
tion in the joint venture is presented below.
SELECTED DATA FROM THE FINANCIAL SITUATION PLN ‘000
31.12.2020
Fixed assets – investment property 425 153
Other fixed assets 476
Cash 4 744
Current assets 754
Total assets 431 127
Long-term liabilities 84 958
Short-term liabilities 21 122
Total liabilities 106 080
Equity 325 047
Share of Echo Investment S.A. 46,20%
Elimination of mutual transactions between unit and the Group (2 412)
Share of Echo Investment S.A. 147 741
Joint venture’s financial data – Towarowa 22
| Financial statement
49
Consolidated nancial statements of Echo Investment Group for 2020
SELECTED DATA FROM THE STATEMENT
OF COMPREHENSIVE INCOME PLN ‘000
1.01.2020 –
31.12.2020
Operating income 9 570
Operating costs. (10 111)
Costs of projects’ sell –
General and administrative expenses (248)
Other income / operating costs 672
Financial income and costs (1 352)
Gross profit (loss) (1 469)
Income tax 33
Net profit (loss) (1 436)
Total comprehensive income (1 436)
Share of the Echo Investment Group (%) 46,20%
Share of the Group in comprehensive income resulting from joint-venture (663)
R4R Poland Sp. zo.o. (RESI4RENT)
On 20 July 2018 Echo Investment S.A. acquired 30%
of shares and votes in a joint investment venture. The
remaining 70% of shares and votes was acquired by
R4R S.a.r.l. Pursuant to the articles of association,
all strategic financial and operational decisions (in-
cluding in particular: purchase of a significant asset,
conclusion of a lease agreement, etc.) require the
unanimous consent of both share-holders. Pursuant
to the agreement, the project will operate as a plat-
form of apartments for rent in Poland. As part of
the project, buildings with apartments for rent were
built - primarily in four locations in Warsaw, Łódź
and Wrocław. Under the agreement, Echo Invest-
ment S.A. provides planning, design and investment
implemen-tation services while R4R Poland Sp. z
o.o. is responsible for the operational management
of the platform. On 14 September 2018, subsidiar-
ies of R4R Poland Sp. z o.o. concluded preliminary
purchase agreements for four development pro-
jects developed by subsidiaries of Echo Investment
S.A. for a total price of PLN 338,670 thousand. The
projects created approximately 1,200 apartments,
which, according to the assumptions of the project,
are dedicated to rent.
The projects that are the subject of the agreements
are:
− Warsaw Brewery, developed on a property locat-
ed in Warsaw at 58 Grzybowska street,
− Rychtalska, carried out on a property located in
Wrocław at Rychtalska street,
−
Kępa Mieszczańska, constructed on a prop-
erty located in Wrocław on the island of Kępa
Mieszczańska,
− Wodna, developed on a property located in Łódź
at 23 Wodna street.
Pursuant to the provisions of the preliminary con-
tract, an agreement for the final sale of the real
estate was signed for the above-described real es-
tate. The R4R Rychtalska contract projects were
sold to the R4R platform in 2019, while the R4R
Kępa Mieszczańska, R4R Wodna and R4R Browary
Warszawskie projects were sold in 2020.
By fulfilling its commitment to co-finance the pro-
ject, in 2018 Echo Investment S.A. provided capital to
R4R Poland Sp. z o.o. acquiring new shares in the in-
creased share capital with a value of PLN 41,354,269,
in 2019 with a value of PLN 9,434,700, in 2020 with
a value of PLN 3,474,000. At the same time, Echo
Investment granted a loan to R4R Poland Sp. z o.o. in
2019 for the amount of PLN 77 250 728 and in 2020
for the amount of PLN 35 546 700.
In 2019 and 2020, new subsidiaries of R4R Poland
Sp. z o.o. were created in order to develop pro-
jects located among others in Warsaw (Taśmowa,
Woronicza, Wilanowska streets), Gdańsk (Kołobrzes-
ka street), Kraków (3 Maja street, Jana Pawła II and
Puszkarska street) and Poznań (Szczepanowskiego
street). The share of the Echo Investment Group in
the consolidated financial statements is recognised
by using the equity method. A summary of financial
information in the joint venture is provided below.
The carrying value of the investment as at 31 Decem-
ber 2020 amounted PLN 53 789 thous.
| Financial statement
50
Consolidated nancial statements of Echo Investment Group for 2020
SELECTED DATA FROM
THE FINANCIAL SITUATION PLN ‘000
31.12.2020
Fixed assets – investment property 553 625
Fixed assets – investment properties under construction 408 414
Other fixed assets 2 301
Cash 24 692
Current assets 38 224
Total assets 1 027 256
Long-term liabilities 801 342
Short-term liabilities 43 612
Total liabilities 844 954
Equity 182 302
Share of the Echo Investment S.A. 30,00%
Elimination of mutual transactions between unit and the Group (902)
Share of the Echo Investment S.A. 53 789
Joint venture’s financial data
– Platforma R4R
SELECTED DATA FROM THE STATEMENT
OF COMPREHENSIVE INCOME PLN ‘000
1.01.2020 –
31.12.2020
Operating income 14 855
Administrative costs related to project (4 162)
Revenue - revaluation of property 151 155
General and administrative expenses (13 206)
Other income / operating costs (2 119)
Financial costs (12 956)
Gross profit (loss) 133 567
Income tax (26 759)
Net profit (loss) 106 808
Total comprehensive income 106 808
Share of the Echo Investment Group (%) 30,00%
Share of the Group in comprehensive income resulting from joint-venture 32 042
| Financial statement
51
Consolidated nancial statements of Echo Investment Group for 2020
Perpetual usufruct right Other agreements
Fixed
assets
Inventory Investment
properties
Investment
properties
under con-
struction
Assets held
for sale
Fixed assets Inventory Investment
properties
Investment
properties
under con-
struction
Right-of-use asset
As of 1.01.2020 - 42 164 2 945 38 879 5 517 17 422 - 41 809 -
Depreciation - (2 328) - - - (5 504) - - -
Fair value measurement - 188 198 - - (67) - (5 990) -
Increases - 11 442 1 822 2 051 22 095 6 478 - 8 389 -
Reductions - (24 488) - (24 611) (5 517) - - - -
As of 31.12.2020 26 979 4 965 16 319 22 095 18 330 - 44 207 -
Perpetual usufruct right Other agreements
Fixed
assets
Inven-
tory
Invest-
ment
properties
Investment
properties
under con-
struction
Assets held for
sale
Fixed assets Inventory Investment
properties
Investment
properties
under con-
struction
Lease liabilities
As of 1.01.2020 - 53 547 2 945 38 825 5 514 18 357 - 65 777 -
Interest expense - 2 414 198 (4 225) - (27) - 4 682 -
Debt repayment - (6 593) - - - (485) - (10 130) -
Increases - 20 821 1 624 1 466 22 465 4 099 - 7 700 -
Reductions - (37 615) - (18 716) (5 514) (5 491) - (53) -
Reclassification - (1 694) (200) (1 340) - - - - -
As of 31.12.2020 - 30 880 4 568 16 010 22 465 16 453 - 67 975 -
Perpetual usufruct right Other agreements
Fixed
assets
Inven-
tory
Investment
properties
Investment
properties
under con-
struction
Assets held for
sale
Fixed assets Inventory Investment
properties
Investment
properties
under con-
struction
Lease liabilities
short-term - 30 880 4 5 088 22 465 399 - 11 383 -
long-term - - 4 564 10 922 - 16 054 - 56 592 -
NOTE 28 Leases
| Financial statement
52
Consolidated nancial statements of Echo Investment Group for 2020
The total outflow of cash due to the repayment of lease liabilities
in 2020 amounted to PLN 17,209 thous.
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Costs related to leasing low-value assets
281 878
Costs related to short-term leasing
18 616 16 610
Revenue from subleasing right-of-use assets
20 434 17 642
| Financial statement
53
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 29
CHANGE IN DEFERRED INCOME TAX ASSETS + AND DEFERRED
TAX PROVISIONS PLN ‘000
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
1. Deferred tax at the beginning of the period
measurement of financial instruments (507) -
valuation of investment property (153 629) (111 114)
interests in subsidiaries, jointly controlled entities and associates * (11 565) (13 991)
tax loss 27 847 14 428
liabilities due to loans and bonds (measurement, FX dierences, etc.) (1 691) (1 581)
liabilities due to borrowings (measurement, FX dierences, etc.) (3 004) (4 103)
loans receivable (interest, valuation, exchange rate dierences, etc.) (7 748) (3 843)
liabilities related to investment projects (master lease) 29 663 21 680
activated costs on projects during construction 20 877 31 204
costs due to created reserves 2 918 2 113
other (6 294) 6 396
the impact of implementing IFRS 16 on January 1, 2019 4 304 (5 208)
(98 829) (64 019)
2. Change in the period
measurement of financial instruments 786 (507)
valuation of investment property (30 132) (42 516)
interests in subsidiaries, jointly controlled entities and associates * 1 853 2 426
tax loss 11 909 13 419
liabilities due to loans and bonds (measurement, FX dierences, etc.) 10 653 (110)
liabilities due to borrowings (measurement, FX dierences, etc.) 2 609 1 099
loans receivable (interest, valuation, exchange rate dierences, etc.) (6 323) (3 905)
liabilities related to investment projects (master lease) (28 720) 7 984
activated costs on projects during construction (5 764) (10 327)
costs due to created reserves 11 805
other (5 691) (12 690)
IFRS 16 598 9 512
(48 211) (34 810)
3. Total deferred income tax at the end of the period
measurement of financial instruments 279 (507)
valuation of investment property (183 762) (153 629)
interests in subsidiaries, jointly controlled entities and associates * (9 712) (11 565)
tax loss 39 756 27 847
liabilities due to loans and bonds (measurement, FX dierences, etc.) 8 964 (1 691)
liabilities due to borrowings (measurement, FX dierences, etc.) (395) (3 004)
loans receivable (interest, valuation, exchange rate dierences, etc.) (14 071) (7 748)
liabilities related to investment projects (master lease) 944 29 663
activated costs on projects during construction 15 112 20 877
costs due to created reserves 2 929 2 918
other (11 986) (6 294)
IFRS 16 4 903 4 304
(147 039) (98 829)
including:
Deferred tax assets 56 476 53 903
change during the year 2 573 1 410
Deferred tax provision 203 518 152 733
change during the year 50 785 41 430
* Estimated value of the tax burden related to the expected changes in the Group’s structure resulting from the dierence
between the tax and balance sheet value of the subsidiaries’ shares.
As of 31 December 2020, the Group did
not recognise deferred income tax assets
for the amount of PLN 24,195 thous. on
account of tax losses.
The expiry dates of the right to income
tax reduction due to tax loss fall in the
years: 2021 (PLN 1,463 thous.), 2022
(PLN 26,884 thous.), 2023 (PLN 21,464
thous.), 2024 (PLN 84,234 thous.), and
2025 (75,195 thous.).
| Financial statement
54
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 30
INCOME TAX EFFECTIVE TAX RATE ‘000 PLN
1.01.2020-
31.12.2020
1.01.2019-
31.12.2019
1. Profit before tax (gross profit) 176 612 398 188
2. Income tax calculated according to the parent company tax rate (19%) 33 556 75 655
3. Dierences:
Tax eect of non-taxable income (20 946) (4 664)
Tax eect of non-deductible costs 45 106 29 235
Utilization of previously unrecognized tax losses (2 073) (877)
Tax losses for which deferred income tax has not been recognized 8 082 4 903
Income tax for the preceding years (3 791) -
Tax losses from previous years for which deferred income tax was recognized (4 994) (5 588)
Interim result of partnerships (191) -
Eect of tax rate change (226) -
Dierences total 20 967 23 009
Charge on the financial result due to income tax, including 54 523 98 664
current tax (5 749) (53 438)
deferred tax (48 774) (45 226)
| Financial statement
55
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 31
NOTE 31A
NOTE 31B
NOTE 31C
NOTE 31D
ALLOCATION OF GAINS FROM SALE TO SEGMENTS
PLN ‘000
1.01.2020
– 31.12.2020
1.01.2019
– 31.12.2019
Residential 728 694 555 521
Oces 116 573 76 558
Shopping centres 55 653 72 511
Resi4Rent 286 998 97 894
Unallocated assets 24 936 77 649
Total 1 212 854 880 133
SEGMENT REPORTING
ALLOCATION OF COST OF SALE TO SEGMENTS PLN ‘000
1.01.2020
– 31.12.2020
1.01.2019
– 31.12.2019
Residential (564 165) (401 728)
Oces (82 565) (57 459)
Shopping centres (21 923) (54 245)
Resi4Rent (273 049) (91 168)
Unallocated assets (27 321) (72 530)
Total (969 023) (677 130)
ALLOCATION OF ASSETS TO SEGMENTS PLN ‘000
31.12.2020 31.12.2019
Residential 1 179 869 1 065 493
Oces 2 943 537 2 027 505
Shopping centres 975 625 954 277
Resi4Rent 202 765 326 788
Unallocated assets 329 000 436 366
Total 5 630 796 4 810 429
ALLOCATION OF LIABILITIES TO SEGMENTS PLN ‘000
31.12.2020 31.12.2019
Residential 534 817 435 064
Oces 1 195 128 724 347
Shopping centres 409 463 373 026
Resi4Rent 8 674 210 265
Unallocated assets 1 798 155 1 505 484
Total 3 946 237 3 248 186
| Financial statement
56
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 31E
NOTE 31F
ALLOCATION OF GROSS GAIN LOSS
OF SALE TO SEGMENTS PLN ‘000
1.01.2020
– 31.12.2020
1.01.2019
– 31.12.2019
Residential 164 529 153 793
Oces 34 007 19 099
Shopping centres 33 730 18 266
Resi4Rent 13 950 6 726
Unallocated assets (2 385) 5 119
Total (gross) 243 831 203 003
ALLOCATION OF VALUE OF INVESTMENTS IN ASSOCIATES
AND JOINT VENTURES TO SEGMENTS PLN ‘000
31.12.2020 31.12.2019
Residential 25 435 25 477
Oces 94 615 94 772
Shopping centres 113 981 97 255
Resi4Rent 72 418 36 638
Total 306 449 254 142
In 2019 and 2020, the Group generated sales reve-
nues only in Poland.
NOTE 32 Sale of investment properties
Property in Koszalin
The subsidiary of Echo Investment S.A., i.e. Galeria
Nowa - “Grupa Echo” Sp. z o.o. Sp.K. based in Kielce
on January 30, 2020, acting as the seller, and the
company Sent To Sp. z o.o. Sp. K. with its oce in
Koszalin, as buyers, concluded a contract for the sale
of property located in Koszalin at Krakusa and Wan-
da street and Zwycięstwa street. The selling price of
the property was PLN 13,500 thous. After consid-
ering all costs related to the transaction, the Group
recognized a loss on sale of the investment property
in the amount of PLN 155 thous.
| Financial statement
57
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 33
CHANGE OF LIABILITIES RESULTING FROM FINANCIAL ACTIVITY
PLN ‘000
liabilities due to credits,
loans and bonds
dividend
liabilities
opening balance as at 1.01.2020 1 969 671 -
Cash flows
- inflows 1 155 485 -
- Outflows (473 889) -
Non-cash changes 157 037 -
- accrued interest 71 830 -
- valuation of FX dierences 84 348 -
- valuation by eective interest rate 859 -
closing balance as at 31.12.2020 2 808 304 -
CHANGE OF LIABILITIES RESULTING FROM FINANCIAL ACTIVITY
PLN ‘000
liabilities due to credits,
loans and bonds
dividend
liabilities
opening balance as at 1.01.2019 1430422 -
Cash flows
- inflows 805977 -
- Outflows (310309) -
Non-cash changes 43581 -
- accrued interest 50176 -
- valuation of FX dierences (5137) -
- valuation by eective interest rate (1459) -
closing balance as at 31.12.2019 1969671 -
CHANGE OF SHORTTERM LIABILITIES, EXCLUDING BORROWINGS
AND LOANS ‘000 PLN
1.01.2020 –
31.12.2020
1.01.2019 –
31.12.2019
Change of short-term liabilities, excluding borrowings and loans, including (128 256) 71 205
- due to deferred income (150 069) 131 558
- due to trade liabilities and others (43 685) (62 478)
- due to other tax liabilities (2 501) 7 726
- due to liabilities on residential deposits on escrow accounts 21 871 (3 812)
- due to liabilities on deposits received from sybcontractors
and advance payment received
27 478 (17 921)
- due to liabilities on deposits received from sybcontractors
and advance payment received"
18 649 16 132
ADDITIONAL EXPLANATION TO
CONSOLIDATED CASH-FLOW STATEMENT
Lessee includes in the cash-flow statement following
items as part of financial activity:
− monetary payments of main instalments with in-
terests,
On the other hand, as part of operating activities,
it classifies::
− short-term lease instalments,
− lease instalments covering low value assets and,
−
variable lease instalments not included in lease
liabilities.
| Financial statement
58
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 34 INFORMATION ON FINANCIAL INSTRUMENTS [PLN ‘000]
The Group classifies its financial assets into the fol-
lowing categories:
− financial assets measured at amortized cost,
−
financial assets are measured at fair value through
other comprehensive income,
−
financial assets at fair value through profit or loss.
The classification of ingredients is made at the time
of initial recognition. It depends on the financial in-
struments management model adopted by the entity
and the analysis of the contractual cash flow charac-
teristics of these instruments.
The application of IFRS 9 did not significantly change
the classification of the Group’s finan-cial assets. As
a rule, IFRS 9 does not intro-duce significant chang-
es to the classification and measurement of financial
liabilities, except for modifications that do not cur-
rently result in derecognition of an existing financial
liability. As a result of the application of IFRS 9, the
classification of the Group’s financial liabilities has
not been changed.
Type of instrument Note
Classication
according to IAS 39
Classication
according to IFRS 9
Carrying value
as at 31.12.2020
Carrying value
as at 31.12.2019
FINANCIAL ASSETS
Long-term loans granted 8 Loans and receivables Amortized cost 198 901 112 508
Short-term loans granted 8 Loans and receivables Amortized cost 50 762 65 527
Trade receivables 10 Loans and receivables Amortized cost 85 683 120 090
Cash and cash equivalents 14 Loans and receivables Amortized cost 409 621 549 452
FINANCIAL LIABILITIES
Liabilities from the issue of debt securities 17 Amortized cost Amortized cost 1 395 332 1 149 510
Trade liabilities 18 Amortized cost Amortized cost 404 405 331 476
Credits and loans 17 Amortized cost Amortized cost 1 412 972 820 161
Loans granted, trade receivables and other receiva-
bles are measured by the Group at amortized cost,
as two conditions are met for them:
1. assets are kept as part of a business model which
intention is to maintain assets in order to obtain
flows resulting from the contract;
2.
contractual terms of these financial assets give
rise to specified cash flows that are solely repay-
ment of the principal and the interest on the un-
paid part of the capital.
In accordance with IFRS 9, as at each reporting date,
the entity estimates the amount of the impair-ment
loss in the amount equal to the expected credit loss-
es:
−
in the next 12 months, if the credit risk associ-
ated with a given instrument has not increased
significantly since the initial recognition of the
instrument; or
−
until the end of the expected maturity (the so-
called period of life) of a given financial asset, if
the credit risk associated with a given instrument
has significantly increased since the initial recog-
nition of this instrument and if there has been a
default event, which is identified after 90 days
from the maturity date.
While determining the future expected credit loss,
the Group considers all reasonable and confirmed
information, including this that relates to the future.
The Group will apply the permitted simplification
of measurement of impairment on the basis of ex-
pected losses over the whole life for all receivables.
In case of trade receivables, the Group applies the
simplified approach and therefore does not monitor
changes in credit risk over their life, and estimates
the impairment loss in the amount equal to the ex-
pected credit losses over the life of receivables. The
Group uses the matrix of provisions, made on the
basis of historical data concerning repayment of re-
ceivables by contractors, to calculate the value of the
impairment loss on trade receivables. Additionally,
the Group analyzes trade receivables and other re-
ceivables on an individual basis with a high degree of
probability of irrecoverability, in cases justified by the
type of business or the structure of recipients - and
recognizes a write-o at a reliably estimated value.
Classification of an asset to this category is made on
the basis of information about the current financial
situation of the counterparty and information about
other events that may have a significant impact on
the recoverability of the asset. The impairment loss
is updated on each reporting date.
| Financial statement
59
Consolidated nancial statements of Echo Investment Group for 2020
NOTE 35
Activities of Echo Investment S.A. capital group since
March 2020 has been exposed to a number of mac-
roeconomic and environmental risks associated with
the spread of SARS-CoV-2 coronavirus and COV-
ID-19. The restrictions introduced by the government
directly aected the course of business processes
and the organization of the Group’s work. On March
17, 2020, Echo Investment S.A. published a current
report on the potential impact of the pandemic on
the Company’s operations, listing potential areas of
impact and associated risks. The impact of a pan-
demic is analyzed on an ongoing basis to adapt the
strategy and method of operation to the changing
restrictions.
Securing the functioning of the company
The introduction of restrictions on the functioning of
the economy and society in mid-March 2020 result-
ed in the vast majority of companies and organiza-
tions — as far as possible — deciding to reduce their
operations or switch to remote working (home of-
fice) procedures. In the case of Echo Investment, the
situation was monitored on an ongoing basis by the
management sta and a crisis management center
appointed in accordance with internal procedures.
The company focused on the following activities:
1.
Securing the possibility for employees to work
remotely.
2.
Securing the continuity of the company’s basic
functions.
3. Securing the oces and construction sites with
additional personal protective equipment.
4.
Elaboration and implementation of emergency
procedures.
5.
Permanent, daily management teleconferences
for ongoing risk analysis and decisions.
6.
Elaboration and implementation of precaution-
ary procedures after the personnel returns to the
oces.
7. Accelerating the plan of digitization of business
processes — primarily accounting and contracts.
8.
The group also conducted a number of analyz-
es and studies to learn about the preferences of
customers, colleagues, university students (future
employees) regarding remote work and the im-
pact of the pandemic on the change in consumer
preferences and behavior, which allows for adjust-
ing the oer and marketing activities.
Continuity of work on construction sites
The most important task for the Management Board
was to ensure the continuity of work on all construc
-
tion sites. The company has introduced additional
emergency procedures at the construction sites in
the event of an illness, and has equipped all the sites
with personal protective equipment, antibacterial
gels, masks and information materials. The Manage-
ment Board also conducted daily monitoring of the
number of employees on individual construction
sites, and in the event of a threat to continuity, it
was prepared to introduce additional employees to
the construction sites. The state of supplies of mate-
rials and the associated risks were monitored, a plan
was implemented to secure supplies by anticipatory
deliveries directly to the construction site, especial-
ly as regards equipment and materials from abroad
whose transport to Poland could be threatened or
delayed due to the virus. As a result, all the construc-
tions have maintained undisturbed activity.
The company has established a business continuity
plan for all construction sites. Teams on construction
sites have been split so that two groups work in the
same location, and if one team becomes ill, construc-
tion continuity can be provided by a second team.
Emergency cover on smaller sites, where it is not
possible to split the team, is provided by teams from
other projects or, as a last resort, by hired external
teams. A strict sanitation regime is maintained on
construction sites - limiting meetings, briefings held
outside, social distancing, temperature testing, lim-
iting visits by outsiders (mail carriers, couriers) to a
separate area in the construction oce, disinfection
and using medical devices to filter the air in the most
exposed areas (e.g. meeting rooms).
The company has established a business continuity
plan for all construction sites. Teams on construction
sites have been split so that two groups work in the
same location, and if one team becomes ill, construc-
tion continuity can be provided by a second team.
Emergency cover on smaller sites, where it is not
possible to split the team, is provided by teams from
other projects or, as a last resort, by hired external
teams. A strict sanitation regime is maintained on
construction sites - limiting meetings, briefings held
outside, social distancing, temperature testing, lim-
iting visits by outsiders (mail carriers, couriers) to a
separate area in the construction oce, disinfection
and using medical devices to filter the air in the most
exposed areas (e.g. meeting rooms).
Due to the expected reduction in demand for con-
struction services in the future, the Management
The impact of the COVID-19 pandemic on the operations of Echo Investment Group
| Financial statement
60
Consolidated nancial statements of Echo Investment Group for 2020
Board has taken steps to reduce the costs of con-
struction services and materials. Negotiations and a
number of savings initiatives have been undertaken,
as a result of which costs on individual projects are
reduced by 5-10% compared to the initial budgets.
The eects of these procedures are already visible
when contracting subsequent construction works.
There is a noticeable increase in the number of con-
struction companies submitting tenders, which gives
the contracting authorities a better negotiating po-
sition.
Group’s financial liquidity security
The priority for securing the Group at the time of the
lockdown and in the face of a potential economic
slowdown was to secure financial liquidity. The Man-
agement Board has undertaken a number of activi-
ties to this end, such as, among others:
−
involvement of operating teams in planning the
cash flow on a larger scale than before;
− reviewing the budgets of all departments and re-
ducing costs;
− reducing new hires;
− limiting employee benefits;
−
minimizing the number of days of outstanding
leave to employees;
− withholding of bonuses for employees in 2020;
−
exemption and deferment of payment of social
insurance (ZUS) contributions;
−
deferral of payment of fees for perpetual usufruct
of land, based on the so-called anti-crisis shields;
− ongoing and constant analysis of proceeds from
the sale of apartments;
− ongoing and constant analysis of the balance of
rent receivables in finished oce buildings and
other receivables;
−
analyzing the land bank and commencing the pro-
cess of selling real estate outside the main area of
the company’s strategy;
− halting or slowing down the construction of pro-
jects at an early stage of construction that do not
have secured tenants;
− introducing the requirement of pre-selling apart-
ments before the construction of a housing pro-
ject begins;
− reducing external costs, in particular for consul-
tancy and marketing services;
−
discussions with banks to suspend or reduce pro-
ject debt handling.
Retail sector
The most dicult time for the retail sector was the
periods of the so-called “hard lockdown” - (March-
April 2020, November 2020, January 2021, March
2021) when the operations of stores and restaurants
in shopping centers was limited (except for grocery
stores, drugstores, pharmacies, pet food stores and
services). In case of the Echo Investment Group, this
concerned the Libero shopping center in Katowice
and Galeria Młociny in Warsaw (in which the Group
holds a 30% stake). During the lockdown periods,
the operations of most tenants in both facilities were
very limited (only several percent of tenants were
operating in Libero). Maintaining the activities of the
remaining tenants required taking extra precautions,
providing security materials, and maintaining the fa-
cility’s service (security, cleaning, day-to-day opera-
tions). “Defrosting” the tenants’ operations from the
beginning of May involved the need to renegotiate
leases and reach an agreement with the tenants on
incurring losses incurred during the closing.
Following the spring lockdown, shopping center
owners, tenants and banks agreed on a compromise
that would optimally distribute costs between ten-
ants and lessors, with the long-term goal of restoring
shopping center turnover and footfall to pre-pan-
demic levels. Echo Investment immediately started
to implement this agreement and signed appropriate
annexes with tenants. Rapid actions brought very
good results, fast growth in turnover and gradual
return of customers.
In line with its strategy, Echo Investment aims to
reach an agreement with the tenants as soon as
possible after each lockdown and to return Libero
and Galeria Młociny to normal operations as soon
as possible. Despite dicult negotiating conditions,
both facilities were among the first to be fully oper-
ational on the market after the spring lockdown. As
a result of the pandemic, the list of tenants changed
slightly by single service outlets, whose owners de-
clared bankruptcy. Despite a number of restrictions
and safety measures, the pace of customer return to
both projects and turnover growth from June to Oc-
tober were faster than expected. The historically high
conversion rate (the ratio of visitors to transactions)
demonstrated the responsibility of customers who
come to the shopping centres for specific purchases.
With the second and third waves of the pandemic,
the government reimposed significant restrictions
on tenants of shopping centres. About 25% of all
tenants were operating in Libero. Echo Investment
is in constant contact with all tenants. Agreements
with tenants worked out after the first shopping
centres’s closing assumed the possibility of further
closings, but they only applied to 2020. Currently,
Echo Investment is focusing on signing short-term
1-2 month agreements, based on the current situa-
tion of tenants and their individual standings. Both
managers of both shopping centres and their ten-
ants are aware of the unpredictability of the situation
in the long term. Both parties assume to return to
negotiating long-term annexes in the middle of the
year, when the situation regarding the end of the
epidemic should be more predictable. Then it will be
easier to assess the situation of individual tenants,
their restructuring and development plans.
| Financial statement
61
Consolidated nancial statements of Echo Investment Group for 2020
Both facilities are focused on marketing activities
to strengthen brand awareness. Marketing actions
in the first stage (until about the middle of the year)
will focus only on increasing the turnover value, while
only in the later stage they will be focused on activ-
ities to support footfall. It is important that the vast
majority of tenants focus on maintaining existing
stores and innovative sales approaches.
In order to minimize operating costs of shopping
centres, steps have been taken to defer or cancel
some payments (e.g. perpetual usufruct or real es-
tate tax, principal and interest instalments on loans)
and to optimize operating costs.
Residential for sale and apartments for
rent sectors
Although regulations related to the pandemic did
not limit the operation of sales oces, notaries and
authorities, in practice, the sale of apartments was
almost completely stopped during the second half of
March. Clients returned to the analysis of the housing
market and submitting their inquiries in the second
week of April. Due to the already advanced work
related to the digitalization of sales processes, Echo
Investment’s salesmen were prepared for remote
customer service: they could present their oers at
online meetings and with the help of virtual reality
tools, negotiate contract provisions in the CRM sys-
tem or present the progress of construction work
through cameras. The introduction of the pandemic
state accelerated the implementation of further ele-
ments of on-line service: a system for signing binding
booking agreements or initial customer service using
artificial intelligence.
Taking into account new trends and customers’
needs, Echo Investment’s designers and vendors
have introduced new solutions and facilities to their
projects, which support sales. Depending on the
project, these include applications allowing for con-
tact-free entry into apartments (from the housing
estate gate, in front of the main door and the ele-
vator), the services of architects (who help arrange
an apartment in such a way that oce space can be
made easily accessible), special marking and training
materials, washbasins or disinfectants in common
areas (e.g. at playgrounds). Balconies, terraces, log-
gias and gardens have also become more important
for customers.
Since June, the number of inquiries and meetings
with potential customers has remained at a level
similar to before the pandemic. However, custom-
ers are still more cautious when making purchasing
decisions. There is a noticeable increase in the num-
ber of transactions for investment purposes, with no
or little credit, which involves the desire to protect
the capital after a series of interest rate cuts. Ready
apartments and apartments with near commission-
ing dates are bought more willingly. Clients pay more
attention to security of transactions, which works in
favour of large and capital-stable entities such as
Echo Investment. The most sensitive group are cli-
ents buying their first apartment, who depend on
obtaining a credit, with relatively low income and low
own contribution. Because of the uncertainty about
macroeconomic developments and, therefore, about
their personal financial situation, these clients prefer
suspending transactions. The housing sector is also
strongly aected by the tightening of banks’ lending
policies. The initially tightened credit policy of banks
was also of great importance for the housing sector,
but this turned out to be temporary. Despite the in-
troduction of restrictions in the economy, the sale
of apartments in Echo Investment and the number
of inquiries since summer 2020 has remained at a
satisfactory level. Despite the increase in the num-
ber of cases and the introduction of restrictions, the
activity of customers is constant.
As a consequence of the economic downturn, great-
er caution and Echo Investment’s conservative poli-
cy, new projects were being started on the condition
of achieving certain level of pre-sale. On spring 2020
the company reduced its annual sales target to 1,400
apartments. Finally the company has sold (by pre-
liminary agreement) 1,570 apartments and handed
over to clients 1,505 units.
Restrictions related to the pandemic did not have
a significant impact on the operation of the Resi-
4Rent residential platform, in which Echo Investment
has a 30% stake. Although in the first weeks of the
restrictions introduced, the process of renting pro-
jects was almost completely stopped, very quickly
the interest of potential clients returned to normal.
In line with the Management Board expectation, Re-
si4Rent benefits from the pandemic situation, with
slight decrease of rent rates expectations. Due to
the increased uncertainty in the economy and higher
requirements for taking out mortgage loans, a large
number of potential apartment buyers postpone the
purchase decision and take advantage of institution-
al apartment rental.
Oce sector
The most important task in the oce sector was
maintaining negotiations on leasing space in pro-
jects built by the company and continuing the sales
processes of the finished buildings. The rental de-
partment is observing an elongation of decisions
on the part of tenants, which is connected to the
uncertainty about the future work system and the
impact of remote working on companies. However,
the potential tenants do not withdraw from negoti-
ations. In the sales processes, the Group lowered its
expectations concerning yields on future sales trans-
actions and suspended the sale of some buildings.
In Q1 2021 the Group has sold Villa Oces building
in the Warsaw Brewery complex, what stabilised the
long-term cash-flow. Promising sale negotiations are
| Financial statement
62
Consolidated nancial statements of Echo Investment Group for 2020
also underway regarding the Malthouse Oces and
Moje Miejsce oce buildings in Warsaw (signed let-
ters of intent). The group also returned to sale pro-
cess of the Face2Face oce buildings in Katowice
(signed letters of intent).
In order to meet the expectations of customers,
new standards have been introduced to prevent the
spread of the virus in oce buildings. From the be-
ginning of the epidemiological threat, the team of
Echo Investment experts has set the task of better
securing employees of organizations that have locat-
ed their oces in the buildings of Echo Investment.
A number of solutions responding to post-covid
needs have been compiled into the “healthy oce”
program. Special air purification systems, dedicated
application, tilt windows, the use of easy-to-clean
finishing materials are just some of the points of the
program. In addition to the solutions introduced at
the stage of implementation and planning of the in-
vestment, Echo Investment focused on securing the
already operating oce buildings. The “five for safe-
ty” program is a guarantee that these oce buildings
are ready to receive employees returning to the of-
fices. Echo Investment focused on key installations
of building security: ventilation and air conditioning.
Clean and healthy air for the new oce buildings of
Echo Investment will be provided to tenants using
the RCI ActivePure technology.
The impact of the coronavirus pandemic
on the operations and results of the Echo
Investment Group in the future
The occurrence of the third wave of the COVID-19
pandemic after the balance sheet date and possible
escalation of its course in the future may result in
the need to revise certain assumptions adopted in
the preparation of the financial statements, which
may lead to changes in accounting estimates in sub-
sequent reporting periods. The Management Board
of the Company and the Group analyzed the areas
related to the estimated values and areas in the fi-
nancial statements that are aected by the situation.
The results of this analysis indicate the following po-
tential impact areas.
It is possible that the continuation of the pandem-
ic will limit the expansion of companies in Poland,
which will result in a decrease in demand for oce
space. This may result in a lower pace of new build-
ings leasing and a decline in rental rates. This situ-
ation may lead to a slowdown of the construction
of buildings at an early stage of construction and
a fair value decrease of completed buildings. In the
case of buildings that are ready, due to their fair val-
ue decrease, in an extreme situation, the covenants
provided for in loan agreements may be broken and
the need to repay part of the loan faster. When it
comes to completed buildings, the pandemic may
also lead to lower investors’ interest in purchasing
such buildings and, as a consequence, to postponed
sale of them.
The Management Board of Echo Investment also
indicates that in the case of shopping centers: Libe-
ro in Katowice and Galeria Młociny in Warsaw (in
which the Group holds a 30% stake), the develop-
ment of the pandemic and subsequent lockdowns
may result in bankruptcy of some tenants, which in
practice may mean termination of some lease agree-
ments . The consequence could be a reduction in the
rental ratios, future revenues and the fair value of
both projects. The consequence of such a situation
may be the breach of covenants provided for in the
loan agreements and the need to repay part of the
loan faster. Moreover, if further restrictions on the
activities of shopping centers are introduced, rental
income may be lost, which may also lead to a reduc-
tion in value and violation of covenants.
At this stage, the Company is not able to reliably
estimate the impact of the above events on the value
of investment properties, as the situation is changing
day by day. In the Management Board opinion, in the
moderate scale of the pandemic, the LTV covenants,
which are the ratio of bank financing to the market
value of real estate, are not endangered. Neverthe-
less, the Management Board would like to point out
that the pace of renting oces recorded before the
epidemic was faster.
The prolonged pandemic and possible new restric-
tions may slow down the sale of apartments or
discourage some potential clients from concluding
transactions. It could lead to a lower than planned
sale of apartments, which will translate into lower
revenues and shifting the realization of revenues and
profits from the sale of apartments to the following
years.
Due to the short observation horizon, the Manage-
ment Board is not able to accurately estimate the
impact of the COVID epidemic on the operations
of the Company and the Group in subsequent peri-
ods. Currently, the oce buildings built by the Group
are provided with financing. Residential projects are
mainly financed by prepayments from clients. At the
end of 2020, the Group had over PLN 320 million in
cash in its accounts. In Q1 2021, the Group sold the
Villa Oces building in Warsaw, the sales process-
es of further assets held for sale within the next 12
months from the balance sheet date are processing
as planned. In Q1 2021, the Company also placed
bonds with a total value of PLN 195 million. Taking
all above into consideration, the Management Board
does not currently identify a significant threat relat-
ed to the impact of the development of the coro-
navirus epidemic on the Company’s liquidity or its
ability to continue operation, despite the expected
need to pay for a controlling stake in Archicom in
the coming weeks. The Management Board monitors
the potential impact on an ongoing basis and takes
all possible steps to mitigate any negative eects
for the Group.
| Financial statement
64
Consolidated nancial statements of Echo Investment Group for 2020
Echo Investment Group
Echo Investment S.A. plays the most important role
in the structure of the Group, which it supervises,
co-executes and provides financial resources for
the implementation of development projects. The
vast majority of companies being part of the Group
were established or purchased in order to execute
specific investment tasks, including those rsulting
from the construction process of a specific devel-
opment project.
.. Composition of the Group
As at 31 December 2020 the Capital Group included
141 subsidiaries consolidated according to the full
method and 23 jointly controlled companies con-
solidated according to the equity method.
SUBSIDIARIES
No Subsidiary
Registered
oce
% of capital
held Parent entity
1 53 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
2 Avatar – Projekt Echo – 119 Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
3 Babka Tower – Projekt Echo – 93 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o.
4 Bełchatów – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
5 City Space – GP Sp. zo.o. Warsaw 100% Echo Investment S.A.
6 Supersam City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
7 Rondo 1 City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
8 Plac Unii City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
9 City Space Management Sp. zo.o. Warsaw 100% Echo Investment S.A.
10 Cornwall Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
11 React – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
12 Dagnall Sp. zo.o. Warsaw 100% Echo Investment S.A.
13 Dellia Investments – Projekt Echo – 115 sp. zo.o. Sp.K. Kielce 100% Pudsey Sp zo.o.
14 Doxent Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
15 Duże Naramowice – Projekt Echo – 111 Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
16 Echo – Advisory Services Sp. zo.o. Kielce 100% Echo Investment S.A.
17 Echo – Arena Sp. zo.o. Kielce 100% Echo Investment S.A.
18 Echo – Aurus Sp. zo.o. Kielce 100% Echo Investment S.A.
19 Echo – Babka Tower Sp. zo.o. Kielce 100% Echo Investment S.A.
20 Echo – Babka Tower Sp. zo.o. Sp.K. Kielce 100% Gleann Sp. zo.o.
21 Echo – Browary Warszawskie Sp. zo.o. Kielce 100% Echo Investment S.A.
22 Echo – Browary Warszawskie Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
23 Echo – Galaxy Sp. zo.o. Kielce 100% Echo Investment S.A.
24 Echo – Galaxy Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
25 Echo – Nowy Mokotów Sp. zo.o. Kielce 100% Echo Investment S.A.
26 Echo – Nowy Mokotów Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
| Financial statement
65
Consolidated nancial statements of Echo Investment Group for 2020
SUBSIDIARIES
No Subsidiary
Registered
oce
% of capital
held Parent entity
27 Echo – Opolska Business Park Sp. zo.o. Kielce 100% Echo Investment S.A.
28 Echo – Opolska Business Park Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o.
29 Echo – Property Poznań 1 Sp. zo.o. Kielce 100% Echo Investment S.A.
30 Echo – SPV 7 Sp. zo.o. Kielce 100% Echo Investment S.A.
31 Tryton – City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
32 Echo Investment ACC – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
33 Echo Investment Project 1 S.R.L. Brasov 100% Echo – Aurus Sp. zo.o.
34 Echo Investment Project Management S.R.L. Brasov 100% Echo Investment S.A.
35 Elektrownia RE Sp. zo.o. Kielce 100% Echo Investment S.A.
36 Fianar Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
37 Galeria Libero – Projekt Echo 120 Sp. zo.o. Sp.K. Kielce 100% Fianar Investments Sp. zo.o.
38 Galeria Nova – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
39 Galeria Tarnów – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
40 Gleann Sp. zo.o. Warsaw 100% Echo Investment S.A.
41 Gosford Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
42 GRO Nieruchomości Sp. zo.o. Kraków 100% Echo Investment S.A.
43 Grupa Echo Sp. zo.o. Kielce 100% Echo Investment S.A.
44 Kasztanowa Aleja – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
45 Kielce – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
46 Klimt House – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
47 Malta Oce Park – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
48 Metropolis – Projekt Echo 121 Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
49 Oxygen – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
50 Park Postępu – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
51 Park Rozwoju III – Projekt Echo – 112 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o.
52 Perth Sp. zo.o. Warsaw 100% Echo Investment S.A.
53 PHS – Projekt CS Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o.
54 Pod Klonami – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
55 Potton Sp. zo.o. Warsaw 100% Echo Investment S.A.
56 PPR – Grupa EchoSp. zo.o. SKA Kielce 100% Echo Investment S.A.
57 Princess Investment Sp. zo.o. Kielce 100% Echo Investment S.A.
58 Projekt 1 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
59 Projekt 12 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
60 Projekt 13 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
61 Projekt 132 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
62 Projekt 133 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
63 Nobilis – City Space GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
64 Projekt 14 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
65 React – Dagnall Sp. zo.o. SKA Kielce 100% Potton Sp zo.o.
66 Projekt 16 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
67 Projekt 17 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
68 Cinema Asset Manager – Grupa Echo sp. zo.o. SKA Kielce 100% Echo Investment S.A.
69 Face2Face – Stranraer Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
70 Projekt 21 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
71 Midpoint71 – Cornwall Investments Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
72 Projekt 5 – Grupa Echo Sp. zo.o. SKA Szczecin 100% Echo Investment S.A.
73 Projekt Beethovena – Projekt Echo – 122 Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
74 Projekt CS Sp. zo.o. Kielce 100% Echo Investment S.A.
75 Projekt Echo – 104 Sp. zo.o. Kielce 100% Echo Investment S.A.
76 Projekt Echo – 108 Sp. zo.o. Kielce 100% Echo Investment S.A.
77 Projekt Echo – 111 Sp. zo.o. Kielce 100% Echo Investment S.A.
78 Projekt Echo – 112 Sp. zo.o. Kielce 100% Echo Investment S.A.
79 Projekt Echo – 113 Sp. zo.o. Kielce 100% Echo Investment S.A.
80 Projekt Echo – 115 Sp. zo.o. Kielce 100% Echo Investment S.A.
81 Projekt Echo – 116 Sp. zo.o. Kielce 100% Echo Investment S.A.
| Financial statement
66
Consolidated nancial statements of Echo Investment Group for 2020
SUBSIDIARIES
No Subsidiary
Registered
oce
% of capital
held Parent entity
82 Projekt Echo – 119 Sp. zo.o. Kielce 100% Echo Investment S.A.
83 Projekt Echo – 120 Sp. zo.o. Kielce 100% Echo Investment S.A.
84 Projekt Echo – 121 Sp. zo.o. Kielce 100% Echo Investment S.A.
85 Projekt Echo – 122 Sp. zo.o. Kielce 100% Echo Investment S.A.
86 Projekt Echo – 123 Sp. zo.o. Kielce 100% Galeria Nova – Grupa Echo Sp. zo.o. SKA
87 Projekt Echo – 127 Sp. zo.o. Kielce 100% Echo Investment S.A.
88 Projekt Echo – 128 Sp. zo.o. Kielce 100% Echo Investment S.A.
89 Projekt Echo – 129 Sp. zo.o. Kielce 100% Selmer Investments Sp. zo.o. Sp.K.
90 Projekt Echo – 130 Sp. zo.o. Kielce 100% Echo Investment S.A.
91 Projekt Echo – 131 Sp. zo.o. Kielce 100% Echo Investment S.A.
92 Projekt Echo – 135 Sp. zo.o. Kielce 100% Echo Investment S.A.
93 Projekt Echo – 135 Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o.
94 Projekt Echo – 136 Sp. zo.o. Kielce 100% Echo Investment S.A.
95 Projekt Echo – 136 Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
96 Projekt Echo – 137 Sp. zo.o. Kielce 100% Echo Investment S.A.
97 Projekt 139 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Perth Sp. zo.o.
98 Projekt 140 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
99 Aquarius – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
100 142 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
101 Beethovena – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
102 Projekt 144 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo – Arena Sp. zo.o.
103 Projekt 145 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
104 Projekt 146 – City Space – GP Sp. zo.o. Sp.K. Warsaw 100% City Space Management Sp. zo.o.
105 Projekt 147 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
106 Projekt 148 – Grupa Echo Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
107 Projekt Echo – 93 Sp. zo.o. Kielce 100% Echo Investment S.A.
108 Projekt Echo – 99 Sp. zo.o. Kielce 100% Echo Investment S.A.
109 Projekt K-6 – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
110 Projekt Naramowice – Grupa Echo Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
111 Projekt Saska Sp. zo.o. Kielce 95% Echo Investment S.A.
112 Pudsey Sp. zo.o. Warsaw 100% Echo Investment S.A.
113 Pure Systems Sp. zo.o. Kraków 100% Echo Investment S.A.
114 Q22 – Projekt Echo – 128 Sp. zo.o. Sp.K. Kielce 100% Potton Sp zo.o.
115 Sagittarius – Projekt Echo – 113 Sp. zo.o. Sp.K. Kielce 100% Doxent Investments Sp. zo.o.
116 Seaford Sp. zo.o. Warsaw 100% Echo Investment S.A.
117 Selmer Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
118 Selmer Investments Sp. zo.o. Sp.K. Warsaw 100% Echo Investment S.A.
119 Senja 2 Sp. zo.o. Warsaw 100% Echo – Browary Warszawskie Sp. zo.o. Sp.K.
120 Shanklin Sp. zo.o. Warsaw 100% Echo Investment S.A.
121 Stranraer Sp. zo.o. Warsaw 100% Echo Investment S.A.
122 Strood Sp. zo.o. Warsaw 100% Echo Investment S.A.
123 Swanage Sp. zo.o. Warsaw 100% Echo Investment S.A.
124 Symetris – Projekt Echo – 131 Sp. zo.o. Sp.K. Warsaw 100% Gosford Investments Sp. zo.o.
125 Taśmowa – Projekt Echo – 116 Sp. zo.o. SKA Kielce 100% Echo Investment S.A.
126 ZAM – Projekt Echo – 127 Sp. zo.o. Sp.K. Warsaw 100% Perth Sp. zo.o.
127 Villea Investments Sp. zo.o. Warsaw 100% Echo Investment S.A.
128 Bowen Sp. zo.o. Warsaw 100% Echo – Browary Warszawskie Sp. zo.o. Sp.K.
129 RPGZ IX Sp. zo.o. Kraków 100% Echo Investment S.A.
130 Projekt 150 – Shanklin Sp. zo.o. Sp.K. Kielce 100% Echo Investment S.A.
131 Projekt 151 – Projekt 13 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A.
132 Projekt 152 – Projekt 14 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A.
133 Projekt 153 – Projekt 21 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A.
134 Projekt 154 – Projekt K-6 – Grupa Echo Sp. zo.oSKA Sp.K. Kielce 100% Echo Investment S.A.
135 Projekt Echo – 139 Sp. zo.o. Kielce 100% Echo Investment S.A.
136 Projekt Echo – 140 Sp. zo.o. Kielce 100% Echo Investment S.A.
| Financial statement
67
Consolidated nancial statements of Echo Investment Group for 2020
SUBSIDIARIES
No Subsidiary
Registered
oce
% of capital
held Parent entity
137 Projekt Echo – 141 Sp. zo.o. Kielce 100% Echo Investment S.A.
138 Projekt Echo – 142 Sp. zo.o. Kielce 100% Echo Investment S.A.
139 Projekt Echo – 143 Sp. zo.o. Kielce 100% Echo Investment S.A.
140 Projekt Echo – 144 Sp. zo.o. Kielce 100% Echo Investment S.A.
141 Projekt Echo – 145 Sp. zo.o. Kielce 100% Echo Investment S.A.
JOINT VENTURES
No Subsidiary
Registered
oce
% of capital
held Parent entity
GALERIA MŁOCINY
1 Rosehill Investments Sp. zo.o. Warsaw 30% Echo Investment S.A.
2 Berea Sp. zo.o. Warsaw 30% Rosehill Investments Sp. zo.o.
TOWAROWA 22
3 Projekt Echo – 138 Sp. zo.o. Sp.K. Warsaw 46,20% Strood Sp. zo.o.
4 Projekt Echo – 138 Sp. zo.o. Warsaw 30% Echo Investment S.A.
RESI4RENT
5 R4R Poland Sp. zo.o. Warsaw 30% Echo Investment S.A.
6 R4R Łódź Wodna Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
7 R4R Wrocław Kępa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
8 R4R Wrocław Rychtalska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
9 R4R Warszawa Browary Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
10 R4R Leasing Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
11 R4R Poznań Szczepanowskiego Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
12 R4R Warszawa Taśmowa Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
13 R4R Warszawa Woronicza Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
14 R4R Gdańsk Kołobrzeska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
15 R4R RE Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
16 R4R Kraków 3 Maja Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
17 R4R Warszawa Wilanowska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
18 R4R RE Wave 3 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
19 R4R Kraków Puszkarska Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
20 Pimech Invest Sp.zo.o. Warsaw 30% R4R Poland Sp. zo.o.
21 M2 Hotel Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
22 R4R RE Wave 4 Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
23 R4R Kraków JPII Sp. zo.o. Warsaw 30% R4R Poland Sp. zo.o.
| Financial statement
68
Consolidated nancial statements of Echo Investment Group for 2020
. Changes in the structure of the group in 2020.
INCREASE OF THE CAPITAL GROUP
Entity Action Date Share capital
Projekt Echo – 141 Sp. zo.o. Registration by the District Court in Kielce 27.01.2020 5 000 PLN
Projekt Echo – 142 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 PLN
Projekt Echo – 143 Sp. zo.o. Registration by the District Court in Kielce 24.01.2020 5 000 PLN
Projekt Echo – 144 Sp. zo.o. Registration by the District Court in Kielce 28.01.2020 5 000 PLN
Projekt Echo – 145 Sp. zo.o. Registration by the District Court in Kielce 23.01.2020 5 000 PLN
DECREASE OF THE CAPITAL GROUP
Entity Action Date Share capital
Projekt – Pamiątkowo Sp. zo.o. Agreement for the sale of shares by Echo - SPV 7 Sp. z o.o.
for Common Investment S.A.
05.05.2020 50 000 PLN
Projekt Echo 132 Sp. zo.o. Agreement for the sale of shares by Echo Investment S.A.
for Common Investment S.A.
05.05.2020 3 910 000 PLN
Forum 60 Fundusz Inwestycyjny
Zamknięty
Liquidation 01.06.2020 20 000 PLN
Projekt 18 – Grupa Echo Sp. zo.o. S.K.A. Agreement for the sale of shares by Echo Investment S.A.
and Grupa Echo Sp. z o.o. for Palena Sp. z o.o. and Student
Depot Group B.V.
03.11.2020 50 000 PLN
OTHER CHANGES
Entity Action Date
Projekt Echo – 120 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.01.2020
Projekt Echo – 115 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.01.2020
Projekt Echo – 113 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 25.02.2020
Projekt Echo – 131 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 28.02.2020
Echo – Opolska Business Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 09.03.2020
Projekt Echo – 122 Sp. zo.o. Capital increase in the company was registered by Echo Investment S.A. 13.03.2020
Echo – Browary Warszawskie
Sp. zo.o. Sp.K.
Reduction in the contribution made by the limited partner of Echo Invest-
ment S.A. was registered.
20.11.2020
| Financial statement
69
Consolidated nancial statements of Echo Investment Group for 2020
The following amendments to existing standards
issued by the International Accounting Standards
Board (IASB) and endorsed for use in the EU enter
into force for the first time in the Group’s 2020 fi-
nancial statements:
Amendments to IAS 1 “Presentation of Financial
Statements” and IAS 8 “Accounting Policies,
Changes in Accounting Estimates and Errors” –
Denition of Materiality
(approved in the EU on November 29, 2019)
The standard is eective for annual periods begin-
ning on or after January 1, 2020.
Amendments to IFRS 3 “Business Combinations”
– Denition of a Business
(approved in the EU on April 21, 2020)
The standard is eective for business combinations
where the acquisition date is on or after the begin-
ning of the first annual period beginning on or after
January 1, 2020, and for asset acquisitions that oc-
curred on or after the beginning of the aforemen-
tioned annual period.
Amendments to IFRS 9 “Financial Instruments”,
IAS 39 “Financial Instruments: Recognition
and Measurement” and IFRS 7 “Financial
Instruments: Disclosures” – Reform of the
Reference Interest Rate
(approved in the EU on January 15, 2020)
The standard is eective for annual periods begin-
ning on or after January 1, 2020.
Amendments to IFRS 16 “Leasing” - Rent Reliefs
in Connection with Covid-19
(approved in the EU on October 9, 2020)
The standard is eective from 1 June 2020 at the
latest for the financial year beginning on 1 January
2020 or later.
Changes to references to the conceptual
framework in IFRS
(approved in the EU on November 29, 2019)
The standard is eective for annual periods begin-
ning on or after January 1, 2020.
The above-mentioned changes to the existing stand-
ards did not have a significant impact on the Group’s
financial statements for 2020.
Application of new and amended
standards and interpretations issued by
the IFRS Interpretations Committee
| Financial statement
70
Consolidated nancial statements of Echo Investment Group for 2020
Published standards and
interpretations which are not
eective yet and have not
been adopted by the Group
New standards and amendments to
existing standards that have already been
issued by the IASB and endorsed by the
EU, but not yet eective
In approving these financial statements, the follow-
ing amendments to existing standards have been
issued by the IASB and endorsed for use in the EU,
which are eective at a later date:
Amendments to IFRS 4 “Insurance Contracts”
entitled “Extension of the temporary exemption
from the application of IFRS 9”
(approved in the EU on December 16, 2020)
The expiry date of the temporary exemption from
IFRS 9 has been extended from January 1, 2021 to
annual periods beginning on or after January 1, 2023.
Amendments to IFRS 9 “Financial Instruments”,
IAS 39 “Financial Instruments: Recognition and
Measurement”, IFRS 7 “Financial Instruments:
Disclosures”, IFRS 4 “Insurance Contracts” and
IFRS 16 “Leasing” - Reform of the Reference
Interest Rate - Stage 2
(approved in the EU on January 13, 2021)
The standard is eective for annual periods begin-
ning on or after 1 January 2021.
New standards and amendments to
existing standards issued by the IASB but
not yet endorsed for use in the EU
The IFRS as endorsed by the EU do not currently
dier significantly from the regulations issued by the
International Accounting Standards Board (IASB),
except for the following new standards and amend-
ments to standards, which as at March 30, 2021 have
not yet been approved for use in the EU (the fol-
lowing eective dates refer to the full version of the
standards):
IFRS 14 “Deferred balances from regulated
activities”
The standard is eective for annual periods begin-
ning on or after 1 January 2016. The European Com-
mission has decided not to initiate the approval pro-
cess of this interim standard for use in the EU until
the final version of IFRS 14 is issued.
IFRS 17 “Insurance Contracts” as amended to
IFRS 17
The standard is eective for annual periods begin-
ning on or after January 1, 2023.
Amendments to IAS 1 “Presentation of financial
statements” – Classification of liabilities as short-
term or long-term
The standard is eective for annual periods begin-
ning on or after January 1, 2023.
Amendments to IAS 1 “Presentation of Financial
Statements” - Disclosures on the accounting
policy applied
The standard is eective for annual periods begin-
ning on or after January 1, 2023.
Amendments to IAS 8 “Accounting Policies,
Changes in Accounting Estimates and Errors” -
Disclosures on the Accounting Policy Applied
The standard is eective for annual periods begin-
ning on or after January 1, 2023.
Amendments to IAS 16 “Property, Plant and
Equipment” – Revenue Earned Before Accepting
the Fixed Assets Component for Use
The standard is eective for annual periods begin-
ning on or after 1 January 2022.
Amendments to IAS 37 “Provisions, Contingent
Liabilities and Contingent Assets” - Onerous
Contracts – Cost of Fullling the Contract
The standard is eective for annual periods begin-
ning on or after 1 January 2022.
Amendments to IFRS 3 “Business Combinations”
– Amendments to references to conceptual
assumptions including amendments to IFRS 3
The standard is eective for annual periods begin-
ning on or after 1 January 2022.
| Financial statement
71
Consolidated nancial statements of Echo Investment Group for 2020
Amendments to IFRS 10 “Consolidated Financial
Statements” and IAS 28 “Investments in Associates
and Joint Ventures” – Sale or contribution of
assets between an investor and its associate or joint
venture and subsequent amendments
The eective date of the amendments has been
postponed until the completion of research work on
the equity method.
Amendments to various standards “Improvements
to IFRS (2018-2020 cycle)” – changes made
as part of the procedure of introducing annual
improvements to IFRS (IFRS 1, IFRS 9, IFRS
16 and IAS 41) aimed mainly at resolving
inconsistencies and clarifying the vocabulary
(changes to IFRS 1, IFRS 9 and IAS 41
The standards are eective for annual periods be-
ginning on or after January 1, 2022. Amendments
to IFRS 16 concern only the illustrative example, and
therefore the eective date is not provided.
According to the Group’s estimates, the above-men-
tioned new standards and changes to the existing
standards would not have a significant impact on the
financial statements, if they had been applied by the
Group as at the balance sheet date.
Hedge accounting of the portfolio of financial assets
and financial liabilities, the principles of which have
not been approved for use in the EU, still remain
outside the regulations approved by the EU.
According to the Group’s estimates, the application
of hedge accounting for the portfolio of financial
assets or liabilities in accordance with IAS 39 “Fi-
nancial Instruments: Recognition and Measurement”
would not have a significant impact on the financial
statements, if applied as at the balance sheet date.
| Financial statement
72
Consolidated nancial statements of Echo Investment Group for 2020
Main accounting principles
The most important accounting principles applied
in the preparation of these financial statements are
presented below. These rules were applied in all pre-
sented periods in a continuous manner unless stated
otherwise.
FUNCTIONAL CURRENCY
AND CURRENCY OF PRESENTATION
Items in the financial statements of each Group’s
entities are presented in the main currency of the
economic environment in which given subsidiary op-
erates (functional currency). The Group’s financial
statement is presented in the Polish zloty (PLN) – the
presentation currency and the functional currency of
the parent company.
Transactions denominated in foreign currencies are
translated into the functional currency at the ex-
change rate eective on the transaction or measure-
ment day when items are revalued. Gains and losses
arising from the settlement of such transactions and
measurement of assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
The Group comprises entities with a functional cur-
rency other than PLN. The reporting data of those
companies included in these statements have been
converted to PLN in accordance with IAS 21, ex-
cluding capital items, that should be recalculated
according to historical currency exchange. Balance
sheet items are translated at the exchange rate on
the balance sheet, the profit and loss account items
are translated at the average exchange rate for the
period (unless this average is not a reasonable ap-
proximation of cumulative eect of the rates eec-
tive on the transaction days – in which case income
and expenses are translated at the dates of the trans-
action days). The resulting exchange dierences are
recognised in other comprehensive income and the
cumulative amounts are recognised in a separate
component of equity. In the moment of the foreign
entity disposal, its accumulated currency dierences
recognised in equity are recognised in profit and loss
account as profit on disposal.
LEASING
e Group as a lessee
In order for a contract to be classified as a leasing
agreement, the following conditions must be met:
− the contract must relate to an identified asset for
which the supplier does not have a significant
converting right
− the contract should give the beneficiary the right
to control the use of the identified asset for a
specified period of time. This means that the user
has the right to take advantage of the economic
benefits of using a given component and the right
to decide on its use
− the contract must be payable.
The Group applies the following simplifications,
based on not including the lease liability:
− short-term lease - a short-term lease agreement
is a contract with no option to purchase an asset,
concluded for a period shorter than 12 months
from the beginning of the contract
− low-value lease - the basis for the assessment of
the „low” value should be the value of the new
asset. The Management Board of the Group has
decided that this applies to lease agreements re-
garding assets whose value did not exceed PLN
15,000 (when new), which can be treated as the
upper limit of recognition as a low value item.
The Group recognizes the right of perpetual usu-
fruct of land granted by administrative decisions as
a leasing contract. This applies to all land, including
those related to development projects presented as
inventory.
If lease and non-lease components are identified in
a contract, the Group chooses a practical solution
according to which it recognises each lease compo-
nent and any accompanying non-lease components
as a single lease component. In addition, in the case
of a portfolio of leases with similar characteristics,
the Group applies the standard to the entire portfolio
when it reasonably expects that the impact that the
application of this standard to the portfolio will have
on the financial statements will not be significantly
dierent from the impact of applying it to individual
leases under this portfolio.
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Consolidated nancial statements of Echo Investment Group for 2020
The duration of the lease contract is defined as the
irrevocable duration of the lease contract including
also possible periods of renewal of the lease contract
if the lessee is reasonably certain that the lessee will
use this option and possible periods of notice for the
lease contract if the lessee is reasonably sure that
this option will not be used.
At the time of the first recognition, the Group recog-
nises the lease liability measured at the current value
of lease payments due to the lessor over the lease
period dis-counted at the lease rate, and if it is not
available, at the marginal lending rate typical for a
given asset. Lease payments include:
− fixed payments less any incentives due;
− variable lease payments, that depend on the in-
dex or the rate, initially priced using the index or
the rate eective as at the starting date of the
contract;
− amounts whose payment by the lessee is expect-
ed within the guaranteed residual value;
− the exercise price of the purchase option, if it can
be assumed with sucient certainty that the les-
see will use this option;
− penalty payments for termination of the lease, if
the lease terms reflect the exercise by the lessee
of the option to terminate the lease.
At the same time, the Group recognises an asset
for the right to use in the same amount as a liability,
adjusted for all lease payments paid on or before
the start date, less any lease incentives received and
increased by any initial direct costs incurred by the
lessee.
After the initial recognition, the Group recognizes a
lease liability by:
− increasing the carrying amount to reflect interest
on a lease liability,
−
reducing the carrying amount to reflect lease pay
-
ments paid, and
−
updating the carrying amount valuation to take
account of any reassessment or change in the
lease, listed below (changes in the lease contract),
or to account for substantially constant − lease
payments.
Changes to the lease agreement that make it nec-
essary to update the value of the liability include:
− a change in the leasing period,
− a change in the assessment of the call option of
the underlying asset.
For the above changes, the Group uses an updated
discount rate:
−
a change in the amount expected to be paid under
the guaranteed final value,
− a change in future lease payments resulting from
a change in the index or rate used to set those
payments, including, for example, a change to
take into account changes in rental rates in the
free market following a review of those rentals.
The Group applies an unchanged discount rate,
unless the change in lease payments results from
changes in variable interest rates. In that case, the
Group shall use a revised discount rate that reflects
changes in the interest rate.
The Group shall recognise the amount of the remeas-
urement of the lease liability as an adjustment to the
right-of-use asset. However, if the carrying amount
of the right-of-use asset is reduced to zero and there
is a further reduction in the measurement of the
lease liability, the Group recognizes the remaining
amount of the revaluation in the result.
After the date of commencement of the lease, the
asset under the right of use is measured at cost less
total depreciation and amortization (impairment)
and total impairment loss and the revised lease li-
ability adjusted for any revaluation. Depreciation is
calculated using the straight-line method over the
estimated useful life. If the lease agreement transfers
to the Group the title of the asset before the end of
the lease period or when the cost of the asset due to
the right of use reflects the fact that the Group will
exercise the option to buy the residual value of the
leased asset, the Group depreciates the asset from
the right of use from the moment of commencement
of the leasing contract until the end of the estimat-
ed economic useful life of the asset. In other cases,
the Group depreciates assets due to the right of use
from the date of commencement of the contract to
the earlier of two dates: the date of the end of the
economic life of the asset or the end date of the
lease. For lease contracts, the subject of which is an
asset which, in accordance with the Group’s account-
ing policies, is measured at fair value, the Group does
not depreciate such assets due to the right of use
but measures them at fair value.
The Group has decided to include assets due to the
right of use in the same line of the statement of fi-
nancial position, in which the corresponding leased
assets are presented when they are the property of
the Group. Liabilities are presented appropriately in
long-term - when the asset due to the right of use is
classified as a fixed asset, investment property or in-
vestment property under construction, or short-term
- when perpetual usufruct concerns assets classi-
fied as inventory. The Group classifies assets due to
the right of use resulting from contracts / decisions
issued to the following balance sheet items and ap-
plies the appropriate accounting policy for certain
items:
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74
Consolidated nancial statements of Echo Investment Group for 2020
Contract type and presentation in the balance sheet Valuation method as at the balance sheet date
Impact on the
income statement
Oce space lease agreements:
– investment property, or Valuation at fair value Ye s
– fixed assets Depreciation Yes
Rental agreement on means of transport:
- fixed assets Depreciation Yes
Perpetual usufruct of land:
– investment property, or Valuation at fair value Ye s
– investment property under construction, not valued at fair value,
or
Depreciation with simultaneous capitalization
of depreciation costs in the value of investment
property under construction
No
– fixed assets Depreciation Yes
inventory Depreciation with simultaneous capitalization
of depreciation costs in inventory
Yes
Lease liabilities are covered by IFRS 9 with respect
to determining when these liabilities meet the cri-
teria for removing them from the balance sheet. A
liability in accordance with IFRS 9 par. B.3.31-B.3.34
is removed from the balance sheet once it has been
settled, expired or the debtor has been legally re-
leased from debt, e.g. by transferring the debt to an
-
other party. The right of perpetual usufruct of land, in
relation to which the Group is legally released from
the debt arising from the obligation to pay fees for
perpetual usufruct or transformation fees only at the
time of legal (notarial) transfer of a share in the land
belonging to the premises sold to the buyer, is a spe-
cial case. Therefore, until the transfer of the above
ownership, the liabilities of the lease of land, as well
as the corresponding assets due to the right to use
the land in perpetual usufruct, remain on the balance
sheet, although in accordance with the policies de-
scribed in section 20. Methods for determining the
financial result, revenues from the sale of residential
and service premises are recognized when the prop-
erty is delivered to the buyer. For this reason, when
the premises are transferred to the buyer (which is
also the moment when the proceeds from the sale
of the premises are recognized), a portion of the
related leasing asset is transferred from inventory
to receivables from the buyer, in the amount corre-
sponding to the recognized liability for the leasing
of the given land. Until the (notarial) transfer of the
property to the purchaser, both the receivable and
the liability are disclosed as short-term, because
they will be settled by transfer to the buyer dur
-
ing the “operating cycle”. On the date of transfer of
ownership to the buyer, the liability for land lease
and receivables from the purchaser of premises are
de-recognised through the cost of sales.
e Group as a lessor
In the case of contracts where the Group acts as a
lessor, each lease contract is classified as operat-
ing or finance lease. Lease agreements under which
the lessor retains a significant portion of the risks
and rewards of ownership of the leased asset are
classified as operating leases. A leasing contract is
classified as a financial leasing if, as a result of this
contract, substantially all of the risk and rewards of
ownership of the leased asset are transferred to the
lessee. In the case of operating lease agreements,
the Group recognizes lease revenues on an on-going
basis in the statement of comprehensive income. In
the case of finance leases, the Group de-recognises
the asset that is the subject of the agreement while
recognizing the lease receivable.
Sub-leasing - a transaction for which an underlying
asset is re-leased by a lessee (‘intermediate lessor’)
to a third party, and the lease (‘head lease’) between
the head lessor and lessee remains in eect. The
Group classifies sub-leasing as follows:
− if it was decided to choose a short-term lease ex-
emption for main lease, subleasing is classified as
operating lease
− otherwise, sub-leasing is classified in relation to
the asset due to the right to use the principal lease
and not the underlying asset.
− If the sub-lease agreement is classified as operat-
ing lease, the indirect lessor (the Group) continues
to recognize the lease liability and asset due to
the right to use of the main lease. At the same
time, it recognizes sublease leasing revenues on
an ongoing basis.
−
If the sub-lease agreement is classified as financial
lease, the indirect lessor (the Group): − ceases to
recognize the asset due to the right to use the
main lease as at the date of the initial sub-lease
agreement;
−
recognizes the net investment from sub-leasing
instead and assesses it for impairment (lease re-
ceivable);
− continues to recognize the original lease liability.
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75
Consolidated nancial statements of Echo Investment Group for 2020
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment include fixed assets
owned by the Group. The composition of the Group’s
fixed assets include:
−
real estate (not leased and not intended for trade)
used by the Group;
− plant and machinery;
− vehicles;
− other complete and serviceable items with an ex-
pected service life of more than one year.
Fixed assets are valued and presented in the state-
ment according to purchase prices or production
costs, less depreciation and impairment write-os.
Fixed assets are posted on collective accounts ac-
cording to the groups of the Classification of Fixed
Assets and a detailed register of fixed assets is kept.
Fixed assets are depreciated using the straight-line
method of tax rates. Subsequent expenditure is in-
cluded in the asset’s carrying amount or recognized
as a separate asset (where appropriate) only when
it is probable that economic benefits will flow to the
Company from the item and the cost of the item can
be reliably measured . All other repair and mainte-
nance expenses are charged to the profit and loss
account in the financial period in which they were
incurred.
Property, plant and equipment are verified for im-
pairment if events or changes in circumstances indi-
cate that the carrying amount may not be realizable.
An impairment loss is recognized for the amount by
which the carrying amount of an asset or cash-gen-
erating unit exceeds the recoverable amount and is
recognized in the profit and loss account. The re-
coverable amount is the higher of the fair value less
costs to sell or value in use.
Gains and losses on disposal of fixed assets, repre-
senting the dierence between the sales proceeds
and the carrying amount of the fixed asset sold are
recognised in the profit and loss account under other
operating income / expenses.
INVESTMENT PROPERTIES, INVESTMENT
PROPERTIES UNDER CONSTRACTION
Investment properties include properties owned by
the Group which are leased out together with land
directly related to these properties, as well as land
purchased and maintained in order to increase their
value. Investment properties under construction are
investments carried out by the Group intended for
lease and under construction. The Group classifies
investment properties under construction as invest-
ment proper-ties when they are available for use.
Investment properties are initially recognized at
purchase price / manufacturing cost. Subsequent
expenditure is included in the carrying amount of
the investment property or recognized as a sepa-
rate investment property (where applicable) only
when it is probable that an economic benefit will
flow to the Group from the item and the cost of the
item can be reliably measured. . All other repair and
maintenance expenses are charged to the statement
of comprehensive income in the financial period in
which they are incurred. The value of investment
properties under construction includes costs directly
related to the project not yet completed. They con-
sist of expenses incurred for the purchase of land
real estate, outlays for the design and implementa-
tion of buildings (mainly external services), activated
financial costs and other costs incurred during the
implementation directly related to the investment.
After the initial recognition, as at each balance sheet
date, investment property under construction that
meets the premises for their valuation, and invest-
ment property are disclosed at fair value. The fair
value measurement is updated at least quarterly.
Profits or losses resulting from changes in the fair
value of investment properties are recognized in the
profit and loss account in the period in which they
arise. The result on the valuation of investment prop
-
erties is presented in the profit / loss on investment
property item.
The result on the valuation of investment proper-
ties is presented in the profit / loss on investment
property item.
For real estate under construction, the premises for
valuation are deemed to be met in the case of pro-
jects where a significant part of the risks related to
the construction process has been eliminated and it
is possible to measure reliably at fair value. In other
cases, when it is not possible to reliably determine
the fair value, the value of real estate under con-
struction is valued according to the purchase price
or production cost less impairment losses. The Group
has specified the conditions under which it begins
the process of analyzing whether significant risks
relating to investment properties under construction
have been eliminated. These conditions include:
− obtaining a building permit,
− contracting construction works with a value of at
least 30% of the investment budget,
− renting at least 20% of the area in the project un-
der implementation.
The presented conditions constitute the boundary
criteria of the analysis. Each in-vestment property
under construction is analyzed individually in terms
of the possibility of obtaining a reliable valuation
to fair value, taking into account, in addition to the
conditions described above, also the general eco
-
nomic and market situation, the availability of data
for similar properties and expectations regarding the
volatility of factors underlying the valuation and the
method of financing. investment project.
The fair values of land and buildings measured at
fair value are updated in such a way as to reflect the
market conditions prevailing at the end of the re-
porting period. The fair value is the price that would
have been received for the sale of an asset or paid
| Financial statement
76
Consolidated nancial statements of Echo Investment Group for 2020
for the transfer of a liability in a transaction between
market participants carried out on normal conditions
at the valuation date. Property fair values are sub-
ject to verification by internal Analyse Department
in cooperation with the Management Board, based
on transaction concluded on active market, oers,
preliminary agreements, knowledge and experience,
or based on external valuations prepared by experts.
As a rule, valuations of oce real estate, for which
the Group carries out an active sales preparation
process, are prepared internally, based on available
market data, in particular a level of discount rate
(yield) discussed with po-tential buyers, and based
on levels of rent and other rental conditions. The
discounted net cash flow (DCF) method is used to
determine the fair value. In the case of in-vestment
property under construction, the valuation is re-
duced by the discounted expenditure necessary to
complete the investment, taking into account the
development margin. At the time the property is
measured at fair value, the Group recognizes at the
same time the provisions related to real estate for
securing rent-free periods, which granted and/or due
to profit share in the event of contractual arrange-
ments providing for the profit share of the sale of
the property of other parties. Provisions for securing
rent-free periods include all expected future pay-
ments related to acquiring tenants that the Group
expects to pay economically, i.e. primarily costs of
rent-free periods (periods with reduced rents), costs
of fit-out work to be carried out, costs other leasing
incentives for tenants and costs of agents. Recog-
nized provisions for projects sold adjust the result
recognized on the valuation of investment property
presented under “revaluation of immovable proper-
ty “, and for projects sold - under “profit / loss on
the sale of the property”. The values expressed in
EUR and USD are converted every quarter accord-
ing to the current exchange rates published by the
National Bank of Poland. In the event of a change
in the use of the property, it shall be appropriately
reclassified in the financial statements. The property
is transferred and recognized in the item of property,
plant and equipment or inventory at the previously
disclosed carrying amount. The result on the sale
of investment property is recognized under ‘profit
/ loss on investment property’. The Group transfers
investment properties to a category of assets held
for sale only when the property is sold outside the
ordinary operating cycle. This is due to the adopt-
ed strategy of the Echo Investment Group, accord-
ing to which real estate is maintained by the Group
and sold at the best moment - in the opinion of the
Management Board - that takes into account expec-
tations regarding return on invested capital, avail-
ability of capital for other investments, as well as
basing the decision on the market situation and ex-
pectations for its further development. The Group’s
goal is to build properties and increase their value
through active management of investment projects.
Therefore, the Group classifies investment projects
as investment properties (or investment properties
under construction) and reclassifies them to assets
held for sale only in rare situations.
ASSETS HELD FOR SALE
Assets (or a disposal group) are classified as held for
sale if their carrying amount is recovered principally
through a sale transaction and not through its fur-
ther use. This condition is considered to be fulfilled
only when the occurrence of the sale transaction is
very likely and the asset (or the disposal group) is
available for immediate disposal in its current state
(in accordance with generally accepted commercial
terms). Classi-fication of an asset as held for sale as-
sumes the intention of the company’s manage-ment
to make a sale transaction within one year from the
change of classification. They are valued at the lower
of the following two amounts: their carrying amount
and fair value minus costs of disposal.
INVENTORY
The item of inventories comprises: semi-finished
products and work in process, finished products, and
goods. Due to the specific nature of the activity, pur-
chased land prepared for development is presented
as work in progress, and land freshly purchased as
land. The work in progress includes also the expens-
es incurred over the process of construction of facil-
ities and sites for sale (design services, construction
works, etc. provided by external contractors). Fin-
ished products mainly include residential and busi-
ness premises completed and sold under final sale
contracts. The goods include land intended for sales.
The inventories of tangible items of current assets
are measured at the value corresponding to the
purchase price of land and the cost of production
of developers’ business products increased by ac-
tivated financial costs, being not higher than the
net realizable value. This value is collected based
on market transaction prices in the residential real
estate market. Reversal of impairment loss of inven-
tories appears either on the sale of inventories exor
due to increased net sales price. Both the amount of
write-downs of inventories recognised as an expense
in the period and the amount of any reversal of any
write-downs decreasing the value of inventories rec-
ognised in the period as reduction in cost are stated
in the profit and loss accounts under sales cost.
FINANCIAL ASSETS
In accordance with IFRS 9, the Group classifies its
financial assets into the following categories:
− financial assets measured at amortised cost,
−
financial assets measured at fair value through
other comprehensive income,
−
financial assets at fair value through profit or loss.
The classification of assets takes place at the mo-
ment of initial recognition. It depends on the finan-
cial instruments management model adopted by the
entity and analysis of the characteristics of contrac-
tual cash flows from these instruments.
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Consolidated nancial statements of Echo Investment Group for 2020
Loans granted and restricted cash that are not in line
with a definition of cash equiva-lents in accordance
with IAS 7 “Cash flow” (i.e. collateral for bank guar-
antees and funds accumulated on open residential
fiduciary accounts) and trade receivables and other
receivables are measured by the Group at amortized
cost, as two conditions are met for them: assets are
held under a business model whose intention is to
hold assets in order to obtain contractual flows and
the contractual terms of these financial assets create
cash flows at repetitive times that are only repay-
ment of principal and interest on outstanding capital.
Assets are recognised on the transaction date, and
derecognised upon the expiry of the contractual
rights to cash flows from the financial asset or where
a financial asset is transferred along with all risks and
benefits of ownership thereof or when the asset is
significantly modified. The Group applies the weight-
ed average purchase price as the valid method of
expenditure in the area of financial instruments.
If the renegotiation or other type of modification of
the contractual cash flows generat-ed by the finan-
cial asset results in its derecognition in accordance
with IFRS 9, the modified instrument is treated as
new. In the event of a renegotiation or other mod-
ifi-cation of the contractual cash flows generated
by a given asset that does not result in derecogni-
tion, the Group revalues the gross carrying amount
of that financial asset (i.e. the amount of its amor-
tized cost before allowance for credit losses). The
revalua-tion is the discounting of the new expected
contractual cash flows (after modification) using the
original eective interest rate. The resulting dier-
ence is recognized as profit / loss in profit or loss.
From that moment on, the Group assesses whether
the credit risk of a given financial instrument has
increased significantly after its initial recognition, by
comparing the credit risk as at the date of the finan-
cial statements (under the modified terms) with the
risk at initial recognition (under the terms before the
modification).
RECEIVABLES
Trade and other receivables are recognized in the
balance sheet at transaction price and then at amor-
tized cost using the eective interest method, reduc-
ing them by im-pairment losses. When the dierence
between the value at amortized cost and the value of
the amount of the payment required does not have a
significant eect on the Company’s financial results,
such receivables are recognized in the balance sheet
as the amount of the payment required.
The value of receivables is updated taking into ac-
count the degree of probability of their payment by
making a write-down. The rules for creating revalu-
ation write-os are described below in the section
Impairment of financial assets.
Advances for deliveries are valued according to cash
disbursed and in accordance with received VAT in-
voices documenting the granting of advance pay-
ments.
LOANS GRANTED
Loans granted are Debt Instruments held for the pur-
pose of obtaining contractual cash flows that consist
solely of principal and interest repayments (“SPPI”).
These assets are booked under at the date of the
transaction, and derecognized when the contractual
rights to cash flows from a financial asset expire or
when the financial asset is transferred along with
all the risks and benefits of ownership of the asset.
Loans granted are recognized as at the date of en-
tering the books at fair value plus transaction costs,
then as at the balance sheet date at amortized cost
determined using the eective interest method.
The rules for recognition of impairment write-downs
are described below in the sec-tion Impairment of
financial assets.
LOSS OF VALUE OF FINANCIAL ASSETS
(‘ECL’)
Pursuant to IFRS 9, as at each reporting day, the
Group estimates the amount of the impairment loss
equal to the expected credit loss (‘ECL’). The Group
calculates the write-o as follows for individual asset
categories:
Trade receivables
The Group uses a simplified approach and therefore
does not monitor changes in credit risk during its
lifetime and measures the impairment loss in the
amount equal to the expected credit losses (‘ECL’)
over the life of the debt. To calculate the value of
the impairment loss for trade receivables, the Com-
pany uses a provision matrix made once a year as at
December 31 based on historical data regarding the
payment of receivables by contractors. Impairment
losses are updated as at each reporting day. The
provision matrix is based on the analysis of the pay-
ment of receivables in indi-vidual past due groups
and determining the probability of non-payment of
receivables from a given age range based on his-
torical data. For the purposes of the analysis, trade
receivables are divided into two groups: receivables
from the sale of apartments, the lease and other re-
ceivables. The calculated probability of non-payment
of receivables in each of the past due groups for
specific categories of receivables is applied to the
current balance of receivables in each of the past
due groups and the write-o for the expected credit
losses of receivables is calculated.
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78
Consolidated nancial statements of Echo Investment Group for 2020
Additionally, the Group analyzes trade receivables
and other receivables on an individual basis with a
high degree of probability of irrecoverability, in cases
justified by the type of business or the structure of
recipients - and recognizes a write-o at a reliably
estimated value. Classification of an asset to this
category is made on the basis of information about
the current financial situation of the counterparty
and information about other events that may have
a significant impact on the recoverability of the as-
set. Such receivables are excluded from the matrix
analysis, and a possible write-o is recognized on
the basis of an individual analysis.
Loans granted and covered bonds
The Group calculates the expected credit losses
(‘ECL’) for loans and bonds as the dierence be
-
tween the cash flows arising from the contracts
signed and the cash flows that the entity expects
to receive.
The Group calculates the cash flows that it expects
to obtain based on the default ratio determined on
the basis of the margin on the bonds issued by the
Group and adjusted by the recovery ratio as a relia-
ble estimate of the level of credit risk.
In addition, the Group provides the individual analy-
sis of loans granted and bonds covered with a signif-
icant level of probability of default, in cases justified
by the type of business or the client structure - and
recognizes the write-o in a reliably estimated value.
Such loans and bonds are excluded from the cal-
culation of the write-o for expected credit losses.
DERIVATIVES
Derivatives are recognised in the books at the time
where the Companies becomes a party to a binding
agreement. The Group takes recourse to derivative
instruments to mitigate the risks associated with
changes in ex-change rates or interest rates. The
Group does not apply hedge accounting.
At the balance sheet date, derivatives are measured
at fair value. Whereas derivatives with fair value
greater than zero are financial assets, those with
negative fair value are financial liabilities.
Profit or loss on derivative instruments is recognized
in financial income or expenses respectively, and in
the consolidated cash flow statement as cash flows
from investing activities if the acquisition results in
the recognition of an asset in the consolidated state-
ment of financial position.
FINANCIAL ASSETS HELD
FOR SALE
On the day of recognition, these assets are measured
at fair value increased by transaction costs, while
at the balance sheet date they are measured at fair
value. Gains or losses arising from changes in the
fair value of an asset is recognised directly in other
comprehensive income. In the event of impairment,
(in case of material or long-term drop of fair value
of given bond under its cost) the amounts previ-
ously recognised in other comprehensive income is
reclassified to profit or loss. Assets available for sale
include stocks and shares in companies other than
subsidiaries and associates which are not quoted in
an active market, which are current or non-current
assets. In cases where no fair value can be deter-
mined, their valuations are carried at cost less ac
-
cumulated impairment losses, whereas valuation
eects are recognised in profit or loss.
CASH
Cash at bank and in hand, as well as short-term
investments, as well as other financial assets that
meet the definition of cash equivalents are meas-
ured at nominal value. As at the balance sheet date,
the Group assesses premises for impairment of cash
value, including the need to create a provision for
expected credit losses.
Cash in foreign currencies is valued at the report-
ing date. The same definition of cash shall apply to
cashflow report.
FINANCIAL LIABILITIES
Financial liabilities include loans, borrowings, debt
securities, not payable interest on bank loans ac-
counted for according to the accrual principle as
well as the discount of debt securities to be settled
in subsequent accounting periods. Foreign currency
loans are measured at the average exchange rate of
the National Bank of Poland.
Financial liabilities are initially recognized at fair val-
ue less transaction costs, and then measured using
the “amortized cost” method. The valuation of liabil-
ities includes all costs of obtaining financing, includ-
ing directly related to financing costs of bank fees,
costs of brokers and agents, legal costs, experts, a
bank monitor, and costs related to marketing at ob-
taining the capital, occurring in the issue of bonds.
Trade liabilities are initially measured at fair value,
and subsequently, long-term liabilities are measured
at amortized cost using the eective interest meth-
od. In cases where the dierence between the value
at amortized cost and the value in the amount of the
payment required does not have a significant eect
| Financial statement
79
Consolidated nancial statements of Echo Investment Group for 2020
on the financial results of the Group, such liabilities
are recognized in the balance sheet in the amount
of the payment required.
CONTRACTS OF ISSUED
FINANCIAL GUARANTEES
Financial guarantee contracts are recognized in
o-balance sheet liabilities and receivables. At each
balance sheet date, the Group assesses whether
there is a likelihood of a need to make a withdrawal
and create a provision. The amount of the pro-vision
is determined based on estimates of the amount of
probable expenditure necessary to settle the liabili-
ty arising from the guarantee contract. At the same
time, in accordance with the requirements of IFRS 9,
the Group creates the provision for expected credit
losses (‘ECL’) due to financial guarantees granted.
The Group calculates the expected credit loss (‘ECL’)
regarding the guarantees given as expected pay-
ments to compensate the guarantee holder for the
incurred credit loss. The Group first determines the
value of the Group’s exposure due to guarantees
granted (the actual total value of the contingent li-
ability as at the balance sheet date). The net expo-
sure resulting from the guarantee thus determined
is multiplied by the default ratio (determined on the
basis of the margin on bonds issued by the Group
and adjusted for the recovery ratio).
INCOME TAX
Income tax on the profit or loss for the year includes
the tax currently payable and deferred tax. Income
tax is recognised in the profit and loss account, ex-
cept for amounts related to items recognised in oth-
er comprehensive income, in which case the income
tax is accordingly recognised in other comprehen-
sive income.
The current portion of the income tax is the expect-
ed tax on the taxable income for the year, calculat-
ed by using tax rates enacted at the balance sheet
date, together with any tax adjustments for previous
years. Deferred tax is calculated with the balance
sheet method as tax to be paid or reimbursed in
the future on the dierences between the carrying
values of assets and liabilities and the correspond-
ing tax values used to calculate the tax base, except
for temporary dierences which arise at the time
of initial recognition of an asset or liability, and do
not aect the accounting or tax result. At the com-
mencement of the lease, the right-of-use asset and
the lease liability are equal, so there is no temporary
dierence and no deferred tax is created. During the
lease term, a dierence arises between the value of
the asset and the lease liability. The Group calculates
deferred income tax on the dierence between these
values. This approach aims to reflect the relationship
between the right-of-use asset and the lease liability,
and account for deferred tax based on cumulative
temporary dierences. This method provides an ef-
fective tax rate that better reflects the economics
of the entire lease transaction. For the calculation
of deferred income tax, a tax rate is used which will
apply in the reporting periods in which assets will be
settled or liabilities will be released.
Deferred tax is not created for temporary dierences
on investments in subsidiaries, jointly controlled enti-
ties and associates, if the Group controls the reversal
of these dierences and they will not be reversed in
foreseeable future.
Deferred income tax assets due to tax loss are cre-
ated, if the settlement of the loss in the following
years is probable.
Deferred income tax assets are created in the amount
to be deducted from income tax in the future due to
negative temporary dierences, which will reduce
the tax base and deductible tax loss in the future.
EQUITY CAPITAL
The share capital is measured at nominal value
shown at the National Court Register. The dierenc-
es between the fair value of the payment received
and the nominal value of shares are recognised in the
reserve fund as capital from sales of shares above
their nominal value.
The share issue costs reduce the Group’s supple-
mentary capital.
PROVISIONS
The provisions are recognised when the Group is un-
der a present obligation resulting from past events,
it is probable that fulfilment of this obligation will
cause an outflow of resources representing econom-
ic costs and a reliable estimate of the amount of the
obligation can be made. Provisions are measured at
the present value of the costs estimated in accord-
ance with the best knowledge of the management
of the Group, the incursion of which is required to
settle the present liability at the balance sheet date.
In accordance with the adopted principle, no provi-
sions are made for retirement benefits. Due to the
age of employees and their rotation, potential re-
serves would not have a significant impact on the
presented financial statements. Upon their occur-
rence, the payment of retirement severance pays will
be booked on a cash basis.
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80
Consolidated nancial statements of Echo Investment Group for 2020
Methods of determining
the financial result
REVENUE
The amount of revenue is equal to the remunera-
tion determined in agreements with clients exclud-
ing amounts receiving on behalf of the third party.
In accordance with IFRS 15, the Group recognises
revenues when the obligation is fulfilled (or in the
course of fulfilling) by transferring a promised goods
or services (i.e. an asset) to a customer. The asset is
transferred when the customer obtains control of
that asset. After fulfilling (or in the course of fulfill-
ing) obligations, the entity recognises an amount
equal to a transaction price as income, which has
been assigned to that performance obligation. To
determine the transaction price, the entity shall con-
sider the terms of the contract and its usual commer-
cial practices. The transaction price is the amount of
remuneration that the entity expects to be entitled
to in exchange for the transfer of promised goods
or services to the customer, excluding amounts col-
lected on behalf of third parties (for example, cer-
tain sales taxes). The remuneration specified in the
contract with the client may include fixed amounts,
variable amounts or both.
Revenue from the sale of residential and service
premises are recognised on the date of handover of
real estate to the buyer. This occurs on the basis of
the acceptance protocol signed by the parties pro-
viding only after completion of the construction of
real estate and receiving the occupancy permit on
condition that the buy-er will pay 100% towards the
purchase price of real estate. Paid apartments are
also considered to be cases of minor underpayments
(up to PLN 500), larger underpayments, which the
Group decides not to collect from customers, or in
the event of receivables from tenant changes, which,
according to arrangements, are payable later than
the moment of handover of the premises.
Revenues from the rental of residential and com-
mercial space are recognised on a straight-line basis
over the term of the contracts concluded. Revenue
from other con-tracts for the provision of services
(legal, consulting, IT, financial, marketing, security
and other services) is recognised by the Group when
the performance obligation is met.
COST OF SALES
Costs of goods, products and services sold consist
of costs incurred in respect of revenues of a given
financial year and overheads not yet incurred.
The cost of goods and products sold is measured at
the production cost, using the method of detailed
identification of the actual cost of assets sold or the
percentage share e.g. of the land or shares sold, etc.
In particular, the cost of sales of premises and land
sold is determined proportionally to their share in
the total cost of construction of the facility and the
entire land constituting a given project.
ADMINISTRATIVE COSTS
RELATED TO PROJECTS
Administrative costs related to projects include ad-
ministrative costs indirectly related to the implemen-
tation of development projects which include: real
estate tax, maintenance fees, property protection,
administrative sta remuneration costs and mainte-
nance costs of employees responsible for construc-
tion of projects in the part where cannot be assigned
to a specific project or they relate to projects com-
pleted and other costs related to the maintenance of
development projects. Costs of employees respon-
sible for construction of projects in the part where
cannot be assigned to a specific project, during the
construction period are capitalised in the value of
project. Costs are allocated on the basis of working
hours reported by employees. These costs, despite
an indirect connection with the construction 07
Methods of determining the financial result 85 Con-
solidated financial statements of Echo Investment
Group for 2019 Information on the financial state-
ment of development projects, are not capitalised
in the value of inventories/investment properties,
because:
−
in light of IAS 2, these costs are excluded from
the purchase price or the cost of inventories due
to the fact that they are not incurred in order to
bring inventories to their current status and place;
− IAS 40, which refers in this respect to the provi-
sions of IAS 16, does not permit capitalisation of
administrative and general management costs in
the value of investment property.
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81
Consolidated nancial statements of Echo Investment Group for 2020
FINANCING COSTS
Financial costs related to the current period are rec-
ognized in the profit and loss account according to
the amortized cost method described in the Liabil-
ities section, except for costs subject to activation
in accordance with the solution included in IAS 23.
The Group activates the part of financial expens-
es which is directly related to the acquisition and
production of financial assets recognized as stock
and projects commenced. In the case of targeted
financing for a given construction project, activation
covers the amount of financial costs minus income
received from temporary depositing of cash (i.e. in-
terest on bank deposits with the exception of depos-
its resulting from the blocking of accounts, accredi-
tation agreements). In the case of general financing,
the general financing costs subject to capitalization
are determined using the capitalization rate in rela-
tion to the expenditures incurred for a given asset
component. In the case of leasing, interest costs on
the leasing obligation related to a specific project are
capitalized in the project cost (targeted financing).
In accordance with the requirements of IAS 23, the
Group begins to activate financial costs when the
Group undertakes actions necessary to prepare an
asset for its in-tended use or sale. These activities
involve more than just activities related to its phys-
ical construction. They also include technical and
administrative work prior to commencing physical
construction, such as activities related to obtaining
necessary permits, design and preparatory works.
However, such activities do not include the holding
of an asset when no production or development that
changes the asset’s condition is taking place.
CONSOLIDATION OF SUBSIDIARIES
Subsidiaries are all entities over which the Group
exercises control, which occurs when the Company:
− exercises authority over the entity,
− is exposed to changing financial results or holds
rights to variable financial results,
− is capable of using the authority exercised over
the entity in which the investment was made to
influence the amount of their financial results.
Subsidiaries are consolidated in the full method from
the date of extending authority over them to the
time of losing it. Financial statements of subsidiar-
ies present data for the same accounting period as
the parent company, using consistent accountancy
methods. The process of consolidation eliminates all
intra-group transactions and accounting balances.
Elimination also extends to the value of shares held
by the Company and other consolidated entities in
subsidiaries which represents the share of the Com-
pany and other Group entities subject to consolida-
tion in the equity of subsidiaries.
The most important role in the structure of the Group
is played by Echo Investment S.A., which is the owner
of units of the Group, supervises, co-participates and
provides funds for the implementation of ongoing
developer’s projects. The companies included in its
composition have been established or acquired in or-
der to carry out specific investment tasks and mostly
do not engage in business operations other than that
which would result from the process of execution
of specific project, and next from the provision of
services of lease assets already completed or other
services.
COMBINATIONS OF ECONOMIC ENTITIES
The Group has subsidiaries which hold real estate.
At the time of the acquisition, the Group considers
whether the acquisition is the acquisition of an enter-
prise or the acquisition of an asset. The Group ana-
lyzes whether the acquisition meets the definition
of a venture in accordance with IFRS 3. In particular,
the Group performs a concentration test that ena-
bles a simplified assessment of whether the acquired
set of activities and assets constitutes a venture. A
positive concentration test result means that the
acquisition does not constitute a business and no
additional assessment is required. The concentration
test is positive when substantially all of the fair value
of the acquired gross assets is concentrated in a sin-
gle identifiable asset or group of similar identifiable
assets. A negative result requires a detailed analysis
of whether the acquisition meets the definition of
a project.
The acquisition of subsidiaries by the Group, except
for the acquisition of entities under common con-
trol, is accounted for according to the acquisition
method. The payment transferred in the business
combination transaction is measured at fair value,
calculated as the collective fair value of the Group’s
assets transferred, liabilities contracted to the previ-
ous owners of the acquired entity and capital instru-
ments issued by the Group in exchange for acquisi-
tion of control over the acquired entity. The costs
related to the acquisition are recognized in the result
at the time they are incurred.
Goodwill is valued as the excess of the amount of
payment transferred, the amount of non-controlling
interest in the acquired entity and the fair value of
shares in the acquiree previously held the acquirer
over the fair value of identifiable net assets acquired
and liabilities measured at the acquisition date. If, af-
ter re-verification, the net value of identifiable assets
and liabilities valued at the date of acquisition, ex-
ceeds the sum of the payment transferred, the value
of non-controlling interests in the acquiree and the
fair value of shares in that entity previously held by
the acquirer, this surplus is recognized directly in the
result as a gain on bargain purchase.
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Consolidated nancial statements of Echo Investment Group for 2020
Non-controlling shares that form part of owner-
ship interests and entitle owners to a proportionate
share in the net assets of the entity in the event of
its liquidation can be initially measured at fair value
or proportionally to non-controlling interests in the
recognized value of identifiable net assets of the
acquiree. The selection of the valuation method is
made individually for each takeover transaction. In
the event that the acquisition of subsidiaries does
not constitute a takeover of the business, it is rec-
ognized as the acquisition of a group of assets and
liabilities. The acquisition cost is allocated to assets
and liabilities acquired based on their relative fair
values and no goodwill or deferred income tax is
recognized.
INVESTMENTS IN ASSOCIATED
COMPANIES AND JOINT VENTURES
Associates are the companies which the parent com-
pany has a direct or indirect (through subsidiaries)
influence on yet are not its subsidiaries or joint ven-
tures. Joint ventures are contractual arrangements
whereby two or more parties undertake a business
which is subject to co-control.
Joint ventures are joint contractual agreement ac-
cording to which co-controlling parts have rights to
net assets resulting from the contractual agreement.
The financial year of associates, joint ventures and
the parent company is the same.
The Group’s investments in associates and joint
ventures are accounted for in the consolidated fi-
nancial statements using the equity method. Under
the equity method, the investment in an associate or
joint venture is initially recognized at cost and sub-
sequently adjusted to take account of the Group’s
interest in the financial result and other comprehen-
sive income of the associate or joint venture. If the
Group’s share of losses in an associate or joint ven-
ture exceeds its share in the entity, the Group ceases
to recognize its share of further losses. Additional
losses are recognized only to the extent consistent
with legal or customary liabilities assumed by the
Group or to payments made on behalf of an associ-
ate or joint venture.
An investment in an associate or joint venture is ac-
counted for using the equity method from the date
on which the entity acquired the status of a joint
venture or associ-ate. On the date of investing in an
associate or joint venture, the amount by which the
investment costs exceed the Group’s share of the net
fair value of the identifiable assets and liabilities of
that entity is recognized as goodwill and included in
the bal-ance value of the investment. The amount by
which the Group’s share of net fair value in identifi-
able assets and liabilities exceeds investment costs
is recognized directly in profit or loss in the period
in which the investment was made.
When assessing the need to recognize the impair-
ment of an investment of the Group in an associate
or joint venture, the requirements of IAS 28 apply. If
necessary, the entire carrying amount of the invest-
ment is tested for impairment in accordance with
IAS 36 Impairment of Assets as a single asset by
comparing its recoverable amount. with the carrying
amount. The recognized impairment is part of the
carrying amount of the investment. The reversal of
this impairment is recognized in accordance with IAS
36 to the extent corresponding to the subsequent in-
crease in the recoverable amount of the investment.
The Group ceases to apply the equity method on the
date a given investment ceases to be its associate or
joint venture and when it is classified as earmarked
for sale. The dierence between the balance value of
an associate or joint venture at the date of discon-
tinuance of the equity method and the fair value of
retained interests and proceeds from the disposal of
a portion of the interest in that entity is taken into ac-
count when calculating the gain or loss on disposal
of an associate or joint venture.
If the Group reduces its share in an associate or in
a joint venture but it continues to settle it using the
equity method, it transfers to the financial result
any portion of profit or loss previously recognized
in other total income, corresponding to the share
reduction, provided that the profit or loss is subject
to reclassification to the financial result at the time
of the disposal of related assets or liabilities.
Unrealized profits and losses resulting from transac-
tions between the Group and the entity recognized
under the equity method are subject to consolida-
tion eliminations in accordance with the Group’s
share in the equity of the entity recognized using
the equity method.
VALUATION TO FAIR VALUE
The Group measures financial instruments such as in-
struments measured at fair value available for sale as
well as derivative instruments and non-financial as-
sets such as investment properties at fair value as at
each balance sheet date. Fair value is defined as the
price that would have been received from the sale
of an asset or paid to transfer a liability in a trans-
action carried out on the usual terms of asset dis-
posal between market participants on the valuation
date under current market conditions. The fair value
measurement is based on the assumption that the
sale transaction of an asset or liability transfer takes
place on the market available for the main market
for a given asset or liability, available to the Group,
or in the absence of the main market, on the most
advantageous market for a given asset or liability.
The fair value of an asset or liability is measured as-
suming that when determining the price of an asset
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83
Consolidated nancial statements of Echo Investment Group for 2020
or liability, market participants act in their best eco-
nomic interest.
The fair value measurement of a non-financial asset
takes into account the market participant’s ability
to generate economic benefits through the largest
possible and best use of the asset or its disposal to
another market participant that would ensure the
greatest possible and best use of the asset.
The Group applies valuation techniques that are ap-
propriate to the circumstances and for which su-
cient data is available to measure fair value, with the
maximum use of appropriate observable input data
and the minimum use of unobservable input data.
All assets and liabilities that are measured at fair
value or their fair value is disclosed in the financial
statements are classified in the fair value hierarchy
as described below based on the lowest input data
level that is significant for the fair value measure-
ment taken as a whole:
−
Level 1 – Quoted (unadjusted) market prices in
an active market for identical as-sets or liabilities,
− Level 2 – Valuation techniques for which the low-
est level of input data, which is significant for the
fair value measurement as a whole, is directly or
indirectly observable,
− Level 3 – Valuation techniques for which the low-
est level of input data, which is significant for the
fair value measurement as a whole, is unobserv-
able.
At each balance sheet date, in the case of assets
and liabilities occurring at particular balance sheet
dates, the Group assesses in the financial statements
whether transfers took place between levels of the
hierarchy by reassessing the classification to indi-
vidual levels, guided by the relevance of the input
data from the lowest level that is significant for the
valuation to fair value treated as a whole.
REPORTING BY SEGMENTS
The Group’s business segments are presented in ac-
cordance with data from internal management re-
porting and analyzed by the key operational decision
maker. The key operating decision maker, which is
responsible for the allocation of resources and the
assessment of operating segments’ results, is the
Management Board of Echo Investment S.A.
In the Group, the following reporting segments were
identified, which are identical to operating segments
defined on the basis of the type of projects imple-
mented:
−
residential areas (rental and sale of residential and
service areas),
− shopping centres (rental),
− oce buildings (rental),
− others (services for external clients
− accountancy, leasing, development).
Principles for determining revenues, costs, segment’s
result measurement, asset valuation and segment’s
liabilities are the accounting policies adopted for the
preparation and presentation of the Group’s consol-
idated financial statements, as well as accounting
policies that specifically relate to segment reporting.
The operating segment profit margin is measured as
‘gross profit / loss on sales’.
Segment financial data are included in note 31 to the
financial statements.
NET PROFIT PER SHARE
The net profit per share for each period is calculated
by dividing the net profit for a given period attrib-
utable to ordinary shareholders of the parent entity
by the weighted average number of shares issued
during the period.
CASH FLOW
The cash flow statement is prepared using the in-
direct method. Liabilities on account of overdraft
facilities are denominated as loan debt rather than
cash equivalent.
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84
Consolidated nancial statements of Echo Investment Group for 2020
Error correction – changing the
presenting principles – restatement
of statements for previous period
The Management Board of the Group voluntarily de-
cided to change the incorrect presentation of finan-
cial costs and financial revenues related to amortised
costs of interests on granted borrowing, received
loans and issued bonds. After the analysis, the Man-
agement Board concluded that the financial revenue
related to the adjusted purchase price on the con-
tracted loans and issued bonds in the amount of PLN
6,605 thous. should be presented as financial costs,
The Group’s Management Board decided to change
the incorrect presentation of provisions in the con-
solidated statement of financial position. After the
analysis, the Management Board concluded that
long-term provisions will be presented under long-
term liabilities, while short-term provisions will be
while financial costs related to the adjusted purchase
price on loans granted in the amount of PLN 1,959
thous. should be presented as financial revenue. As a
result, the Group made an appropriate presentation
change in the consolidated profit and loss account
in the comparative period, i.e. from January 1, 2019
to December 31, 2019.
The changes are presented below:
presented under short-term liabilities. As a result, the
Group made an appropriate presentation change in
the consolidated statement of financial position as
at December 31, 2019 and January 1, 2019.
The changes are presented in the table below.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
PLN ‘000 PLN
31.12.2019
published data
31.12.2019
transformed data Change
Provisions
Long-term provisions 35 931 - (35 931)
Short-term provisions 89 428 - (89 428)
Deferred tax liabilities 152 733 - (152 733)
Long-term liabilities
Long-term provisions - 35 931 35 931
Deferred tax liabilities - 152 733 152 733
Short-term liabilities
Short-term provisions - 89 428 89 428
CONSOLIDATED PROFIT AND LOSS ACCOUNT
PLN ‘000 PLN
1.01.2019 –
31.12.2019
published data
1.01.2019 –
31.12.2019
transformed data Change
Financial income 23 808 15 244 (8 564)
Financial cost (69 935) (61 371) 8 564
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Consolidated nancial statements of Echo Investment Group for 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
PLN ‘000 PLN
31.12.2019
published data
31.12.2019
transformed data Change
Provisions
Long-term provisions 58 973 - (58 973)
Short-term provisions 115 843 - (115 843)
Deferred tax liabilities 111 303 - (111 303)
Long-term liabilities
Long-term provisions - 58 973 58 973
Deferred tax liabilities - 111 303 111 303
Short-term liabilities
Short-term provisions - 115 843 115 843
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86
Consolidated nancial statements of Echo Investment Group for 2020
Material estimates and
judgments of the Management
Board of the Company
The preparation of the financial statements requires
the Management Board of the Company to adopt
certain assumptions and make estimates and judg-
ments that aect the figures disclosed in the financial
statements. Assumptions and estimates are based
on the best knowledge of current and future events
and activities, however, actual results may dier from
those anticipated. Estimates and related assump-
tions are subject to ongoing verification. Change in
accounting estimates is recognized in the period in
which they were changed – if it concerns only this
period, or in the current and future period – if the
changes concern both the current and future period.
The main fields in which the Management Board’s
estimates have a material impact on the financial
statements and key sources of uncertainty as at the
balance sheet date are:
INVESTMENT PROPERTIES /
INVESTMENT PROPERTIES UNDER
CONSTRUCTION /
ASSETS HELD FOR SALE
Investment real estate includes facilities leased to cli-
ents by companies which are part of the Group. The
fair value of investment real estate is classified at level
3 in the fair value hierarchy. There were no transfers
between the levels.
After a change in the strategy of the Echo Investment
Group, the Group most often measures properties at
fair value during construction and / or commerciali-
sation. The property valuation is based on the income
method using the discounted cash flow technique,
which takes into account future proceeds from rent
(including rent guarantees), the sale of real estate and
other expenditure to be incurred. The yield used to
determine residual values recognized in cash flows
result from the Management Board’s estimates based
on preliminary agreements for the sale of real estate,
letters of intent, external valuations of appraisers or
their familiarity with the market. The rates used also
take into account the risk, and the level of risk is as-
sessed individually for each property subject to its
status. The fair value of real estate properties which
are almost 100% commercialised and generate a fixed
income is determined by the unit according to the
income method, using simple capitalization technique
as the quotient of the project’s net operating income
(NOI) and the yield, or using the value resulting from
external valuation, a preliminary contract for the sale
of real estate, a letter of intent or a purchase oer,
provided they exist.
According to the valuations prepared by the Group,
the value of investment properties as at 31 December
2020 amounted to PLN 1,388,972 thous. It consisted of
real estate measured at fair value (PLN 1,266,595 thou-
sand) and other properties (PLN 122,377 thousand)
The table below presents an analysis of investment
properties carried at fair value in the consolidated
statement of financial position according to the levels
of the fair value hierarchy:
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Consolidated nancial statements of Echo Investment Group for 2020
INVESTMENT PROPERTY FAIR VALUE HIERARCHY LEVELS
Level 1* Level 2** Level 3*** Fair value - total
2020
Shopping Centers - - 629 304 629 304
Oces - - 593 084 593 084
Oces - CitySpace - - 44 207 44 207
Total - - 1 266 595
* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly
observable
*** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable
As at December 31, 2019, the value of investment
properties was PLN 941,983 thous. It consisted of
real estate measured at fair value (PLN 820,154
thous.) and other properties (PLN 121,829 thous.).
The key input data and assumptions adopted for
investment properties measured using the income
method are as follows:
INVESTMENT PROPERTY VALUATION TECHNIQUES
Valuation
Valuation
technique Discount rate % Capitalization %
2020
Shopping Centers 629 304 Income method 7,00% 6,50%
Oces 593 084 Income method 7,62%-7,85% 7,12%-7,35%
Oces - CitySpace 44 207 Income method 5,05% -
Total 1 266 595
The table below presents an analysis of investment
properties carried at fair value in the consolidated
statement of financial position according to the levels
of the fair value hierarchy:
INVESTMENT PROPERTY FAIR VALUE HIERARCHY LEVELS
Level 1* Level 2** Level 3*** Fair value - total
2019
Shopping Centers - - 592 185 592 185
Oces - - 186 159 186 159
Oces - CitySpace - - 41 809 41 810
Total - - 820 154
* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly
observable
*** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable
The key input data and assumptions adopted for
investment properties measured using the income
method are as follows:
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Consolidated nancial statements of Echo Investment Group for 2020
The value of investment properties under construc-
tion as at December 31, 2020 amounted to PLN
780,621 thous. It consisted of real estate valued at
fair value (PLN 384,008 thousand) and real estate
valued at the value of expenditure (PLN 396,613
thousand).
The table below presents an analysis of investment
properties carried at fair value in the consolidated
statement of financial position according to the lev-
els of the fair value hierarchy:
INVESTMENT PROPERTY UNDER CONSTRUCTION
VALUATION TECHNIQUES
Valuation
Valuation
technique Discount rate % Capitalization %
2020
Shopping Centers 67 022 Other method
Oces 316 986 Income method 7,00% – 8,00% 6,50% – 7,50%
Total 384 008 -
INVESTMENT PROPERTY UNDER CONSTRUCTION
FAIR VALUE HIERARCHY LEVELS
Level 1* Level 2** Level 3*** Fair value - total
2020
Shopping Centers - - 67 022 67 022
Oces - - 316 986 316 986
Total - - 384 008
* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly
observable
*** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable
The key input data and assumptions adopted for
investment properties measured using the income
method are as follows:
When calculating the valuation of the fair value
of investment properties under construction, the
Group companies take into account the valuation
of the debt related to the debt incurred for the
purpose of the implementation of a specific invest-
ment project.
As at December 31, 2019, the value of investment
properties under construction amounted to PLN
1,517,866 thousand. It consisted of real estate valued
at fair value (PLN 1,113,543 thousand) and real es-
tate valued at the value of expenditure (PLN 404,323
thousand).
INVESTMENT PROPERTY VALUATION TECHNIQUES
Valuation
Valuation
technique Discount rate % Capitalization %
2019
Shopping Centers 592 185 Income method 7,00% 6,50%
Oces 186 159 Income method 7,25% 6,75%
Oces - CitySpace 41 810 Income method 11,27% -
Total 820 154
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
INVESTMENT PROPERTY UNDER CONSTRUCTION
VALUATION TECHNIQUES
Valuation
Valuation
technique Discount rate % Capitalization %
2019
Shopping Centers 66 809 Other method
Oces 1 046 734 Income method 5,10%-8,00% 4,60% – 7,50%
Total 1 113 543
INVESTMENT PROPERTY UNDER CONSTRUCTION
FAIR VALUE HIERARCHY LEVELS
Level 1* Level 2** Level 3*** Fair value - total
2019
Shopping Centers - - 66 809 66 809
Oces - - 1 046 734 1 046 734
Total - - 1 113 543
* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly
observable
*** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable
ASSETS HELD FOR SALE FAIR VALUE HIERARCHY LEVELS
Level 1* Level 2** Level 3*** Fair value - total
2020
Oces - - 1 259 610 1 259 610
Total - - 1 259 610
* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
** Level 2 - valuation techniques where the lowest level inputs that are relevant to the determination of fair value are directly or indirectly
observable
*** Level 3 - valuation techniques where the lowest level inputs that are relevant to the measurement of fair value are unobservable
The key input data and assumptions adopted for
investment properties measured using the income
method are as follows:
Under the ‘assets held for sale’ item the Group pre-
sents the properties with reference to which a de-
cision was made to sell them within 12 months. This
item includes completed projects as well as ongoing
projects and investment plots. As at 31 December
2020, the value of assets held for sale amounted
to PLN 1,269,329 and consisted of oce buildings
measured at fair value (PLN 1,259,610 thous.) and
real estate valued at the value of expenditure (PLN
9,719 thous.).
The table below presents an analysis of assets held
for sale carried at fair value in the consolidated state-
ment of financial position according to the levels of
the fair value hierarchy:
The table below presents an analysis of investment
properties carried at fair value in the consolidated
statement of financial position according to the lev-
els of the fair value hierarchy:
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
As at 31 December 2019, the value of assets held for
sale was PLN 22,923 thous. and consisted of invest-
ment land.
SECURING REVENUE FOR RENT-FREE
PERIODS (MASTER LEASE) )
When an investment property is selling, it occurs
that buildings are not fully commercialized at the
time of sale. The price is calculated based on the
project’s projected revenue (NOI) while the Group
signs a contract securing the rent-free periods (mas-
ter lease). Securing rental proceeds (master lease)
is estimated on the basis of information obtained
from the oce project leasing team, accepted by
the Member of the Management Board responsible
for this segment of activity, concerning:
− terms of signed lease agreements,
− assumptions for vacant areas, such as expected
transfer dates
The following is calculated on this basis:
− for vacancies: the rent that would be paid by the
potential future tenant,
− for signed contracts: rental holidays (if any). The
estimate is made from the balance sheet date for
the period of securing rental proceeds. In each
calculated month:
−
if a vacancy is expected on an area in a given
month, the cost of securing rental revenue is a full
rent which is provided for on this area;
−
if it is expected that a given area will be trans-
ferred and the tenant has a rental holiday, the cost
of securing the rental proceeds related to this area
in a given month is equal to the value of rental
holidays;
− if it is expected that the tenants’ rental holidays
are over in a given month, the cost of securing the
rental proceeds is equal to zero.
The basic rent and the maintenance fees are calcu-
lated in this way, the exception being that there are
no rental holidays on maintenance fees. The total of
these values discounted as at the balance sheet date
is the value of the reserve for securing rent-free peri-
ods (master lease). The reserve for securing rent-free
periods (master lease) is calculated for projects sold.
The key input data and assumptions adopted for as
-
sets held for sale measured using the income meth-
od are as follows:
ASSETS HELD FOR SALE VALUATION TECHNIQUES
Valuation
Valuation
technique Discount rate % Capitalization %
2020
Oces 1 259 610 Income method 5,20% – 7,65% 4,70% – 7,15%
Total 1 259 610
As at 31 December 2020, the value of reserves
established to secure rent free periods amounted
to PLN 12,370 thousand.
As at 31 December 2019, the value of reserves es-
tablished to secure rent free periods amounted to
PLN 19,679 thousand.
PROFIT SHARE FROM SALE
OF REAL ESTATE
A profit share is a share in the minority investor’s
profit. It results from concluded agreements ac-
cording to which the investor is obliged to pay
the capital constituting a share in the investment.
The capital is contributed to the entities which
perform the project in the form of a loan or an is-
sue participating bonds. At the time of the sale of
the project, the capital is returned to the investor
along with due profit share (calculated as the sale
price - costs). The provision for the profit share is
estimated for projects valued using the income
method in proportion to the released profit on real
estate. Therefore, the first provision for the profit
share is created along with the first valuation of
the project at fair value.
As at 31 December 2020, the value of provision
for costs on account of the profit share from the
sale of real estate amounted to PLN 46,283 thous.
As at 31 December 2019, the value of provision for
costs on account of the profit share from the sale
of real estate amounted to PLN 78,306 thousand.
INVENTORY
When estimating the amount of the write-down
on inventories held by the Group as at the balance
sheet date, information is analyzed according to
the current market prices obtained from the de-
velopment market, regarding the expected sale
| Financial statement
91
Consolidated nancial statements of Echo Investment Group for 2020
prices and current market trends, as well as informa-
tion resulting from the preliminary sales agreements
concluded by the Group.
Assumptions used in the calculation of the write-
down are mainly based on valid market prices of
real estate in a given market segment. In the case of
land included in the item of inventories, the value of
write-downs results from the suitability of the given
land for the needs of the current and future oper-
ations of the Group estimated by the Management.
Data regarding write-downs updating the value of
inventories to the net value possible to obtain and
reversing write-downs on this account are presented
in note 9.
FINANCIAL INSTRUMENTS VALUED
ACCORDING TO FAIR VALUE
The Group uses its judgment when selecting valua-
tion methods and makes assumptions based on mar-
ket conditions existing at each balance sheet date.
In particular, concluded forward contracts and con-
cluded option agreements are valued on the basis of
valuations provided by banks, which use such data
as current exchange rates, their historical volatility
and interest rates on deposits (WIBOR, EURIBOR)
when calculating them. As at 31 December 2020, the
Group did not change the valuation principles for
financial instruments, there were no changes in the
classification or movements between levels of the
fair value hierarchy. There is no dierence between
the carrying value and the fair value of financial in-
struments.
ASSET FROM DEFERRED INCOME TAX
The Group recognizes deferred tax asset based on
the assumption that tax profit will be achieved in the
future and it will be possible to use it. This assump-
tion would be unjustified if the tax results deterio-
rated in the future.
The Management Board verifies the adopted esti-
mates regarding the probability of recovering de-
ferred tax assets based on changes in factors taken
into account when making them, new information
and past experience.
LEASING
The adaption and application of IFRS 16 required the
Company to make various estimates and to engage
in professional judgment. The main area in which it
happened concerning the assessment of lease pe-
riods, in agreements for an indefinite period and in
agreements for which the Company was entitled to
extend the agreement. When determining a lease
period, the Company had to consider all facts and
circumstances, including the existence of economic
incentives to use or not to extend the agreement
and any termination option. The Company also es-
timated the discount rate used in the calculation of
the lease liability - as a risk-free rate increased by the
characteristic margin for the given asset to which
the lease relates.
As at 1 January 2019, the average weighted IBR rate
used to discount of liability valuation amounted to
5.73%.
| Financial statement
92
Consolidated nancial statements of Echo Investment Group for 2020
Financial risk management
THE RISK OF CHANGES IN CASH
FLOWS AND FAIR VALUE RELATED
TO INTEREST RATE
The Group’s exposure to interest rate risk stems from
financial assets and liabilities, in particular with loans
granted, bank deposits, bank loans received and
bonds issued. Borrowings, loans, and bonds bear
interest at variable rates and make the Group vul-
nerable to interest rate risk, while loans bear inter-
est at fixed interest rates and expose the Group to
fluctuations in fair value of financial instruments. In
addition, the Group is exposed to the risk of interest
rate fluctuations in the case of borrowing a new loan
or refinancing existing debt into long-term financing.
As at 31 December 2020 and 31 December 2019,
100% of liabilities on loans and debt securities yield-
ed variable-rate interest.
As at 31 December 2020, 66.93% of loans granted
yielded fixed-rate interest, the remaining part - var-
iable-rate interest. As at 31 December 2019, 55.81%
of loans granted were yielding fixed-rate interest, the
remaining part - variable-rate interest.
As at December 31, 2020, the Group used interest
rate hedging for issued bonds and contracted loans
in the form of IRS instruments.
INTEREST RATES’ RISK LIABILITIES DUE TO DEBT SECURITIES ISSUE
PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of liabilities due to the debt securities issue 1 395 332 1 149 510
Financial costs of debt securities issue’s interests 75 371 53 085
Estimated change in interest rates +/- 1 p.p. +/- 1 p.p.
Financial costs of debt securities issue’s interests rates, taking into account increase /
(decrease) of interests rates
13 953 11 495
Total impact on the gross results for the period 13 953 11 495
Income tax 2 651 2 184
Total impact on the net result for the period 11 302 9 311
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
INTEREST RATES’ RISK LIABILITIES DUE TO LOANS AND BORROWINGS
PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of liabilities due to loans and borrowings 1 412 318 819 241
Financial costs of interests 26 673 8 009
Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p.
Change of interest as a result of interest rate’s change (on a yearly basis) 14 123 8 192
Total impact on the gross results for the period 14 123 8 192
Income tax 2 683 1 557
Total impact on the net result for the period 11 440 6 635
INTEREST RATES’ RISK CASH, CASH EQUIVALENTS
AND OTHER FINANCIAL ASSETS PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of cash, cash equivalents and other financial assets 327 097 549 451
Financial income from granted loans’ interests 387 3 018
Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p.
Financial income from granted loans’ interests, taking into account interests rates’
changes
3 271 5 495
Total impact on the gross results for the period 3 271 5 495
Income tax 621 1 044
Total impact on the net result for the period 2 649 4 451
INTEREST RATES’ RISK LOANS GRANTED PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of granted loans 76 421 71 706
Financial income from granted loans’ interests 2 089 1 815
Estimated change in the interest rates +/- 1 p.p. +/- 1 p.p.
Financial income from granted loans’ interests, taking into account interests rates’
changes
764 717
Total impact on the gross results for the period 764 717
Income tax 145 136
Total impact on the net result for the period 619 581
| Financial statement
94
Consolidated nancial statements of Echo Investment Group for 2020
hedging the ex-change rate of EUR to PLN. As a re-
sult of opened position, as of 31 December 2020 the
Group remained hedged for cash flows of EUR 51.4
million. Transactions were con-ducted on the basis
of bank agreements, not speculatively and were a
part of hedging policy (but not treated by the Group
as hedge accounting as defined by IAS39) with the
intention of securing future cash flows from conver-
sion of loan tranches granted in EUR and funds from
the sale of commercial projects.
The Group pursues a uniform risk management pol-
icy of exchange rate changes and constantly mon-
itors risk areas, while using available strategies and
mechanisms to minimise the negative eects of
market volatility and cash flow hedges. The Group
maintains financial surpluses mostly in the PLN. The
amounts held in bank accounts in other currencies
are mainly to current transactions. As at 31 Decem-
ber 2020, 92.7% of cash held by the Group were
denominated in PLN, 7.3% – denominated in EUR.
As at 31 December 2019, 64.5% of cash held by the
Group were denominated in PLN, 35.5% – denomi-
nated in EUR.
Based on the simulations, it was found that the im-
pact of changes in EUR/PLN interest rates by 10%
net profit would be a maximum increase or decrease,
within individual categories of receivables and lia-
bilities:
CURRENCY RISK
The risk of foreign exchange rate fluctuations is relat-
ed to the investment loans and borrowings denomi-
nated in foreign currencies within the Group (as at 31
December 2020 they amounted EUR 276,029 thous,
however as at 31 December 2019 – EUR 144,485
thous.) the lease agreements, where rents are de-
pendent on the PLN/EUR exchange rate and other
receivables ex-pressed in foreign currencies. This risk
arises on the opportunity of the following types of
financial events:
−
currency translation of received loans (tranches
of loans) and funds from the sale of commercial
projects from EUR to PLN;
− repayment of loan instalments;
−
obtaining receivables in respect of property lease;
−
currency translation of other receivables in for-
eign currency.
The Group uses natural hedging: contracts with ten-
ants are expressed in the currency of the loan that
was taken out to finance the investment. Payments
received from the tenants obtained in this way are
intended for repayment of the aforementioned loans.
Such linking of funding with sources of in-come re-
duces the foreign exchange risk to a minimum or
eliminates it completely.
In 2020 in order to safeguard from exchange rate risk
the Group opened positions on the forward currency
market by acquiring derivative financial instruments
CURRENCY RISK RECEIVABLES DUE TO SALE OF PROJECTS AND OTHER
PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of receivables from sale of projects and other (in EUR) 2 235 7 423
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 224 742
Estimated (deferred) income tax 42 141
Impact on the net result 182 601
| Financial statement
95
Consolidated nancial statements of Echo Investment Group for 2020
CURRENCY RISK BORROWINGS LIABILITIES PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of liabilities due to borrowings (in EUR) 11 185 13 485
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 1 118 1 349
Estimated (deferred) income tax 213 256
Impact on the net result 905 1 093
CURRENCY RISK LOANS LIABILITIES PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of liabilities due to loans (in EUR) 1 262 635 601 806
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 126 264 60 181
Estimated (deferred) income tax 23 990 11 434
Impact on the net result 102 274 48 747
CURRENCY RISK BONDS LIABILITIES PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of liabilities due to bonds issued (in EUR) 273 329 79 700
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 27 333 7 970
Estimated (deferred) income tax 5 193 1 514
Impact on the net result 22 140 6 456
CURRENCY RISK BORROWINGS RECEIVABLES PLN ‘000
as at 31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of receivables due to borrowings (in EUR) 34 555 28 130
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 3 456 2 813
Estimated (deferred) income tax 657 534
Impact on the net result 2 799 2 279
| Financial statement
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Consolidated nancial statements of Echo Investment Group for 2020
CURRENCY RISK CASH, CASH EQUIVALENTS AND OTHER FINANCIAL
RESTRICTED ASSETS PLN ‘000
as at
31.12.2020
Value calculated
for the analysis
as at 31.12.2019
Balance of cash, cash equivalents and other financial restricted assets (in EUR) 29 740 195 065
Estimated change of exchange rate (EUR) +/- 10 p.p. +/- 10 p.p.
FX dierence due to exchange rate’s change 2 974 19 506
Estimated (deferred) income tax 565 3 706
Impact on the net result 2 409 15 800
CREDIT RISK
Credit risk arises in the case of cash,
granted borrowings, derivative financial
instruments and deposits in banks and
financial institutions, as well as in rela
-
tion to clients and tenants of the Group
in the form of outstanding receivables.
The specifics of the Group’s operations
in the field of sales of residential space,
lease and provision of services mean that
the Group is not exposed to significant
credit risk. As at 31 December 2020, the
Group estimated the value of impairment
losses on trade receivables based on the
provision matrix based on historical data
regarding repayment of receivables by
contractors in the division of types of
sales revenues. Credit loss ratios were
calculated on the basis of a model based
on historical repayment of receivables in
individual overdue groups. The table be-
low presents data on exposures and the
value of impairment losses on expected
credit losses.
In addition, the Group has implemented
procedures to assess the creditworthi-
ness of customers and tenants, where-
as for the latter hedging in the form of
31 December 2020
Default rate weighted
average
Gross value of trade
receivables
[PLN ‘000]
Provision for expected
credit losses
[PLN ‘000]
current 0,09% 34 200 32
1-30 days 1,34% 9 279 124
31-90 days 51,95% 3 324 1 727
91-360 days 61,99% 3 420 2 120
over 361 days 91,73% 7 499 6 879
Total 57 722 10 882
deposits and guarantees are applied as
collateral. No significant concentration of
risk occurs in relation to any of the cus-
tomers of the Group. In the case of cash
and deposits in banks, the Group uses the
services of reputable entities. With regard
to all classes of financial assets, the Group
considers that the credit risk associated
with financial instruments is too low. In
the Management Board’s opinion, in view
of the presented business characteristics,
the risk of non-performance of contractu-
al obligations is low, the Group’s debtors
have a high short-term ability to fulfil their
obligations within the scope of contracts
concluded with the Group, and possible
adverse changes in economic and busi-
ness conditions in the long term may -
but not necessarily and, in the opinion of
the Management Board, they should not
- limit their ability to fulfil their obligations
within the scope resulting from conclud-
ed agreements.
| Financial statement
97
Consolidated nancial statements of Echo Investment Group for 2020
LOSS OF LIQUIDITY
The risk of losing liquidity is the risk that
the Group will not be able to settle its
financial liabilities on their due dates. The
Group manages the liquidity risk by main-
taining the appropriate amount of the
available cash reserve, using the oer of
banking services and reserve credit lines
and by monitoring the forecast and ac-
tual cash flows. As at 31 December 2020
out of PLN 210 million available under
current and working capital loans, the
Group had PLN 37.4 million of free lim-
it and PLN 327 million of non-restricted
cash. As at 31 December 2019 out of PLN
225 million available under current and
working capital loans, the Group had PLN
1.6 million of free limit and PLN 492 mil-
lion of non-restricted cash. Due to the dy-
namic nature of its operations, the Group
retains the flexibility of financing through
the availability of cash and the diversity
of sources of financing.
The Group has sucient funds to pay
all liabilities in due time. Liquidity risk is
minimised in the longer term through the
availability of bank credit facilities. At any
time, the Group may use sucient funds
from the loan facilities granted by banks.
The analysis of the Group’s undiscounted
financial liabilities that will be settled in
appropriate aging periods based on the
time remaining to contractual maturity
date as at the balance day 31 December
2020:
ANALYSIS OF UNDISCOUNTED FINANCIAL LIABILITIES
AS AT 31.12.2020 PLN ‘000
Period Loans Borrowings Bonds Leasing
Guarantees and
sureties Derivates
Trade and other
liabilities
Up to 1 year 817 033 3 114 522 390 70 219 49 188 10 026 158 444
1 – 3 years 289 278 - 459 501 40 461 373 161 - 89 183
3 – 5 years 295 476 - 413 441 28 709 235 428 903 7 556
5 – 10 years - 8 071 - 12 001 672 942 - -
Over 10 years - - - 6 961 39 226 - 300
Total 1 401 787 11 185 1 395 332 158 351 1 369 945 10 929 255 484
ANALYSIS OF UNDISCOUNTED FINANCIAL LIABILITIES
AS AT 31.12.2019 PLN ‘000
Period Loans Borrowings Bonds Leasing
Guarantees and
sureties Derivates
Trade and other
liabilities
Up to 1 year 219629 6367 141549 69563 48593 2669 240195
1 – 3 years 136178 - 762995 42805 416167 - -
3 – 5 years 316978 - 173864 28013 276244 - -
5 – 10 years - 7312 - 30673 448665 - -
Over 10 years 133697 - 71102 13910 189101 - -
Total 806482 13679 1149510 184964 1378770 2669 240195
The analysis includes estimated future interest payments.
| Financial statement
98
Consolidated nancial statements of Echo Investment Group for 2020
LIQUIDITY RATIOS
Current ratio
(current assets / short-term liabilities)
Quick ratio indicator
(current assets - inventories / short-term
liabilities)
Instant cash ratio
(cash / short-term liabilities)
VALUES OF LIQUIDITY RATIO
31.12.2020 31.12.2019
Current ratio 0,81 1,47
Quick ratio indicator 0,34 0,64
Instant cash ratio 0,21 0,43
| Financial statement
99
Consolidated nancial statements of Echo Investment Group for 2020
Capital risk management
The Group’s objective in managing capital is to pro-
tect the Group’s ability to continue its operations,
so that it can generate return for shareholders and
to maintain an optimal capital structure to reduce
its cost.
While managing the capital, the Group makes deci-
sions regarding the level of financial leverage, divi-
dend policy, issuance of new shares or purchasing
and subsequent redemption or resale of previously
issued shares and the possible sale of assets to re-
duce debt.
The Group monitors its capital by such methods as
debt ratios. This ratio is calculated as the ratio of
net debt to total capital. Net debt is calculated as
the sum of loans and borrowings (including current
and long-term loans reported in the balance sheet)
increased by unpaid dividends and reduced by cash,
cash equivalents and other restricted financial assets.
The total capital is calculated as equity shown in the
balance sheet inclusive of net debt.
DEBT RATIO PLN ‘000
Note 31.12.2020 31.12.2019
Total loans, borrowings and bonds 17 2 808 304 1 969 671
Liability for dividend - -
Cash and equivalents 14 (327 097) (492 295)
Other restricted financial assets 14 (82 524) (57 157)
Net debt 2 398 683 1 420 219
Total equity 1 684 685 1 562 365
Total capital 4 083 368 2 982 584
Debt ratio 58,74% 47,62%
Value of presented ratios are within the financial assumptions of the Group.
| Financial statement
100
Consolidated nancial statements of Echo Investment Group for 2020
Agreements concluded
with related entities
TRANSACTIONS WITH RELATED ENTITIES PLN ‘000
31.12.2020 31.12.2019
Results of transactions with owners
Receivables from loans granted 37 446 -
Trade receivables - -
Trade liabilities 1 517 3 033
Incurred costs 14 800 14 792
Recognized revenue - -
Results of transactions with related entities
Receivables from loans granted - -
Trade liabilities 1 091 -
Trade liabilities 4 -
Incurred costs 4 37 499
Recognized revenue 5 030 49 522
Results of transactions with members of the Management Board
Recognized revenue 2 857 1 504
Advances received 766 1 005
Results of transactions with jointly controlled entities
Receivables from loans granted 205 160 169 092
Trade receivables 8 054 21 652
Liabilities - 10 646
Incurred costs 15 -
Recognized revenue 298 564 107 274
Advances received 5 969 113 005
CHANGE IN ALLOWANCES FOR EXPECTED CREDIT LOSSES
RECEIVABLES PLN ‘000
31.12.2020 31.12.2019
As at the beginning of the period 217 -
Increases due to:
– creation of a write-o 174 217
Balance of write-os at the end of the period
Stan odpisów na koniec okresu 391 217
| Financial statement
101
Consolidated nancial statements of Echo Investment Group for 2020
Material post-balance
sheet events
. Conclusion of a preliminary
agreement on the acquisition
of a majority stake of shares in
Archicom S.A.
On February 17, 2021 the Management Board of Echo
Investment entered into a preliminary agreement
with Dorota Jarodzka-Śródka, Kazimierz Śródka
and Rafał Jarodzki on the acquisition of a stake of
Archicom S.A. shares representing in total approxi-
mately 66.01% of the share capital and entitling to a
total of approximately 65.99% of votes. The price for
the shares will be PLN 425 million. Echo Investment
will pay PLN 237 million on the transaction day and
the remaining PLN 188 million in bonds issued with
a maturity date of 3.5 years, bearing interest at an
annual rate of 5%. The signing of the final agreement
and the closing of the transaction shall be subject to
the consent of the President of the Oce of Com-
petition and Consumer Protection.
The transaction will exclude the development busi-
ness carried out outside the Wrocław agglomeration
and two development projects in Kraków, as well as
the architectural design studio - these assets will
remain in the hands of the sellers. The development
projects will be sold to Dorota Jarodzka-Śródka and
Rafał Jarodzki for PLN 131 m million (paid in two
instalments), and the design studio will be sold to
Dorota Jarodzka-Śródka and Kazimierz Śródka for
PLN 2.4 million.
In addition, on the closing date of the transaction
an option agreement shall be executed under which
Echo Investment S.A. or an entity designated by the
company shall be entitled to purchase the Archicom
S.A. shares remaining in the hands of the sellers,
representing 8.31% of the share capital and carrying
13.32% of total votes at the general meeting. The
option will be exercisable until March 15, 2023.
At the end of 2020 in Wrocław and Kraków Archicom
has c.a. 2,000 apartments under construction and
4,200 in preparation. After completion of the trans-
action, the Echo-Archicom Group will be the largest
residential developer in Poland, having started the
construction of a total of 7 thousand apartments
for sale and rent in 2021. The acquisition is in line
with Echo Investment’s strategic goals of becoming
a Polish nationwide leader in the residential sector.
Archicom has been operating mainly on the Lower
Silesian market and has been listed on the Stock
Exchange since 2016. The company has grown out
of a family-owned architectual design oce and
has 160 completed projects to its credit, includ
-
ing the revitalized Wrocław Brewery complex, the
award-winning Olimpia Port estate and the first
exclusive Platinum Lofts in Wrocław. Archicom is a
strong, recognizable brand with nearly 15% share in
the Wrocław residential market.
. Sale of Villa Oces building
Echo Investment Group has concluded final sale
agreement of Villa Oces building being part of the
Warsaw Brewery complex. It was acquired by KGAL
Group, a leading independent investment and asset
manager. The building was sold for approximately
EUR 86.7 million.
The transaction value was reduced, inter alia, by the
value of the rent-free periods, the partial value of
capitalized rents on premises not handed over to
tenants, the value of arrangement works, and other
costs. As a result, the price payable at closing was
EUR 69.3 million plus VAT. After the space is hand-
ed over to all tenants, the price will be increased
to EUR 76.6 million plus VAT. In addition the seller
received a separate fee related to the completion
of arrangement works on the tenants’ premises and
the repair of defects in the total amount of EUR 4.6
million plus VAT.
As part of the transaction, the parties have also
concluded a building quality guarantee agreement
| Financial statement
102
Consolidated nancial statements of Echo Investment Group for 2020
and a rental guarantee agreement. The second one
provides a guarantee to the buyer that the seller will
cover rent payments and service charges for parts of
the building that have not been yet rented and those
that have been rented, but for which rent reductions
or rent-free periods have been applied.
The Villa Oces building received an occupancy
permit in April 2020 and is already fully leased with
such companies as WeWork, Accenture and Etno
Café that occupies its ground floor. Soon a reputable
financial institution and Echo Investment, as well as
well-known Mediterranean restaurant will also move
into the building.
The 13-floor building of Villa Oces is located in the
immediate vicinity of the restored Schiele Villa, a
historical house of the former owner of the famous
brewery, near the entrance to the heart of Warsaw
Brewery. The structure is 55-meter high and its total
rental area amounts to 16,600 sqm.
. Bond issue of a total value of PLN
195 million
On March 17, 2021 institutional investors have ac-
quired Echo Investment’s bonds with a total value of
PLN 195 million. The obtained funds will be allocated
to the company’s development, particularly in the
promising residential sector.
The bonds have a 4-year maturity. Their interest
rate is based on the WIBOR 6M variable rate plus a
margin for investors. The agent of this new issue is
mBank S.A. Echo Investment plans to allocate the
money obtained from the bond issue to finance the
development of its business and to repay the bonds
maturing at the end of Q1 of this year.
The issued bonds are not secured and will be entered
into the market in the alternative trading system of
the Warsaw Stock Exchange.
Due to issue of bonds, the Company redeemed 1,475
own bonds with a nominal value of PLN 10,000 each
(ISIN code PLECHPS00225).
| Financial statement
103
Consolidated nancial statements of Echo Investment Group for 2020
REMUNERATION OF MEMBERS OF THE MANAGEMENT BOARD
PLN
2020 2019
From Echo Investment S.A.
Basic
remuneration
From subsidiaries,
joint-ventures and
associates
Other benets
Total
From Echo Investment S.A.
Basic
remuneration
From subsidiaries,
joint-ventures and
associates
Other benets
Total
Bonus
Bonus
Nicklas Lindberg 1 003 933 2 145 339 596 006 3 745 278 1 076 227 20 861 365 2 192 026 843 250 24 972 867
Maciej Drozd 421 672 336 000 1 224 713 35 218 2 017 603 753 413 359 100 721 999 1 080 1 835 592
Artur Langner 204 000 228 000 972 000 4 504 1 408 504 233 973 167 400 850 800 4 002 1 256 175
Marcin Materny 207 000 180 000 814 032 9 552 1 210 584 240 000 125 280 702 842 8 676 1 076 798
Rafał Mazurczak 207 000 177 120 808 992 10 052 1 203 164 200 000 180 000 814 032 8 676 1 202 708
Waldemar Olbryk 627 000 537 350 - 66 466 1 230 816 702 000 386 100 - 6 704 1 094 804
Małgorzata Turek
(appointed on
7.03.2019)
204 000 114 538 739 076 4 404 1 062 018 217 857 - 467 500 3 702 689 059
Total 2 874 605 1 573 008 6 704 152 726 202 3 423 469 22 079 245 5 749 199 876 090
Total for the year 11 877 967 32 128 003
Remuneration of the Management
Board and Supervisory Board
Remuneration of members of the
Management Board
Members of the Management Board receive remu-
neration and bonuses in accordance with the remu-
neration model described in the ‘Work Rules of the
Management Board’ adopted by the Supervisory
Board in a resolution of 21 March 2013. The bonus
system is based on an agreement in accordance
with the MBO methodology (Management by Ob-
jectives) and it is related to the company’s results.
Each Member of the Management Board may receive
an annual bonus expressed in a multiple of monthly
basic salary, depending on the key business objec-
tives which he/she has an influence on in the scope
of their responsibility. At the same time, all Members
of the Management Board have common goals, the
execution of which below the expected level will
result in a reduction of the bonus. The amount of
remuneration and bonuses of Management Board
Members is confirmed by a resolution of the Super-
visory Board every time.
In connection with the outbreak of the pandemic,
in 2020, in addition to the specific objectives set
individually for each Member of the Management
Board, the common objectives of the Management
Board were to maintain the continuity and stability
of the company’s operations - in particular, to main-
tain uninterrupted work on construction sites and in
residential sales oces - and to ensure the safety of
employees and associates. At the same time, when
the pandemic broke out, the Management Board
took measures to respond to the business and fi-
nancial risks associated with the uncertain market
situation, including decisions to partially defer the
payment of bonuses for 2019 and to temporarily re-
duce the remuneration of executives.
In 2020 and as at the date of publication of the re-
port, there were no agreements concluded between
the Company and executives, providing for compen-
sation in case of their resignation or dismissal from
their position without an important reason, or if their
dismissal occurs due to a merger of Echo Investment
S.A. or due to an acquisition.
| Financial statement
104
Consolidated nancial statements of Echo Investment Group for 2020
REMUNERATION OF MEMBERS OF THE SUPERVISORY BOARD
PLN
2020 2019
From
Echo Investment
S.A.
From subsidiaries,
joint-ventures
and associates
Other
benets
From
Echo Investment
S.A.
From subsidiaries,
joint-ventures
and associates
Noah M. Steinberg
(appointed on 9.01.2020)
137 086 - - - -
Karim Khairallah
(resigned on 13.12.2019)
- - - - -
Tibor Veres
(appointed on 9.01.2020)
75 194 - - - -
Laurent Luccioni
(resigned on 13.12.2019)
- - - - -
Mark E. Abramson
(resigned on 13.08.2020)
126 290 - - 180 000 -
Margaret Dezse
(appointed on 13.08.2020)
54 194 - - - -
Maciej Dyjas 60 000 - - 60 000 -
Sławomir Jędrzejczyk
(appointed on 13.08.2020)
54 194 - - - -
Stefan Kawalec
(dismissed on 13.08.2020)
126 290 - 1 800 180 000 -
Péter Kocsis
(appointed on 9.01.2020)
53 710 - - - -
Bence Sass
(appointed on 9.01.2020)
53 710 - - - -
Nebil Senman 60 000 - 825 60 000 -
Sebastian Zilles
(resigned on 13.12.2019)
- - - - -
Total 800 668 2 625 480 000
Total for the year 803 293 480 000
Remuneration of the Supervisory Board
The remuneration of the Supervisory Board is de-
termined in the form of resolutions of the General
Meeting of the Company’s Shareholders. The reso-
lution which is currently in force is resolution no. 23
of the General Meeting of Shareholders of 25 April
2018, which determines the amount of remuneration
for Supervisory Board members as follows:
− monthly remuneration of the Chairman of the Su-
pervisory Board – PLN 10,000 gross,
−
monthly remuneration of the Deputy Chairman
of − the Supervisory Board – PLN 7,000 gross,
− monthly remuneration of a Member of the Super-
visory Board – PLN 5,000 gross,
−
additional monthly remuneration for the chair-
men of the Supervisory Board committees – PLN
10,000 gross.
Members of the Supervisory Board shall also be
entitled to reimbursement of costs incurred in con-
nection with the exercise of the function, in particu-
lar – travel costs to the place of Supervisory Board
meetings and back, costs of individual supervision as
well as costs of accommodation and meals.
| Financial statement
105
Consolidated nancial statements of Echo Investment Group for 2020
Anna Gabryszewska-Wybraniec
Chief Accountant
Agreements concluded with an entity
authorised to audit financial statements
The Supervisory Board of Echo Invest-
ment S.A., upon the recommendation
of the Audit Committee, has selected
Deloitte Audyt Sp. z o.o. Sp.K. based in
Warsaw, al. Jana Pawła II, registered as
number 73 in the list of auditor compa-
nies to audit separate financial reports
of Echo Investment and consolidated fi-
nancial reports of the Echo Investment
Capital Group for the years 2020-2021.
The agreement was concluded by the
Management Board, based on the Super-
visory Board’s authorisation.
The Management Board of Echo Invest-
ment S.A. informs that the selection of
the auditing company conducting the
audit of the annual financial statements
was made in accordance with the regu-
lations, including the selection and pro-
cedure for the selection of the auditing
company, based on the resolution of the
Supervisory Board of 14 November 2019.
The auditing company and the members
of the team conducting the audit met the
conditions for preparing an unbiased and
independent report on the audit of the
annual financial statements in accord-
ance with the applicable regulations,
professional standards and professional
ethics.
Echo Investment S.A. complies with the
existing regulations related to rotation of
the auditing company and the key stat-
utory auditor, as well as prevailing man-
date periods. Echo Investment S.A. has
a policy with respect to the selection of
the auditing company and a policy with
respect to providing services to the issuer
by the auditing company, any entity relat-
ed to the auditing company or a member
of its network of additional non-auditing
services, including services which are
conditionally excluded from the ban on
such services by the auditing company.
The auditing company selection policy
and the non-auditing services purchase
policy were approved by resolutions of
the Audit Committee dated March 23,
2018 and are available on the Company’s
website under Investor relations / Strat-
egy and corporate governance.
THE NET REMUNERATION DUE TO THE AUDITOR ENTITLED TO AUDIT
FINANCIAL REPORTS OF THE COMPANY AND THE GROUP PLN
Due Contractual amount [PLN]
Review of the standalone and consolidated financial statements for H1 2020 135 000
Audit of the standalone financial statement for Q3 2020 98 000
Audit of the standalone and consolidated financial statements for 2020 278 000
Annual audit of subsidiaries 74 250
Total 585 250
Kielce, March 30, 2021
Nicklas Lindberg
President of the Board, CEO
Maciej Drozd
Vice-President of the Board, CFO Artur Langner
Vice-President of the Board
Rafał Mazurczak
Member of the Board
Marcin Materny
Member of the Board
Waldemar Olbryk
Member of the Board
Małgorzata Turek
Member of the Board
The document is signed with qualified electronic signature
STATEMENT OF THE
MANAGEMENT BOARD
CHAPTER 4
| Statement
107
Consolidated nancial statements of Echo Investment Group for 2020
The Management Board of Echo Investment S.A. declares that, to the best of its knowl-
edge, the annual separate financial statements for 2020 and comparative data have
been presented in compliance with the applicable accounting principles, and that they
reflect in a true, reliable and transparent manner the economic and financial situation
of Echo Investment S.A. and its financial result. The management report of Echo In-
vestment S.A. presents a true view of development, accomplishments and situation
of Echo Investment S.A., including a description of fundamental risks and threats.
The Management Board of Echo Investment S.A. declares that the entity authorised
to audit financial statements, auditing the annual financial statements for 2020, was
selected in accordance with the laws. This entity and the statutory auditors conducting
the audit fulfilled the conditions required to express an unbiased and independent
opinion on the audited annual financial statements, pursuant to the applicable laws
and professional standards.
Kielce, 30 March, 2021
Nicklas Lindberg
President of the Board, CEO
Maciej Drozd
Vice-President of the Board, CFO
Artur Langner
Vice-President of the Board
Rafał Mazurczak
Member of the Board
Marcin Materny
Member of the Board
Waldemar Olbryk
Member of the Board
Małgorzata Turek
Member of the Board
The document is signed with qualified electronic signature
CONTACT
Echo Investment S.A.
Warsaw oce
Q22 building
al. Jana Pawła II 22
00-133 Warsaw
Design and execution: Damian Chomątowski | be.net/chomatowski