Alina : Annual Report 31 December 2023

Alina

Holdings PLC

The Anxiety of "Modern Times, 1936" … still with us

Annual Report

For the Year Ended 31 December 2023

DIRECTORS, SECRETARY AND ADVISERS

Directors	C Duncan Soukup, Chairman
	T Donell
	M Porter
Registered Office	Eastleigh Court
	Bishopstrow
	Warminster
	BA12 9HW
Company Secretary	Alasdair Johnston
Solicitors to the Company	Locke Lord (UK) LLP
	201 Bishopsgate
	London
	EC2M 3AB
	Eversheds Sutherland
	One Wood Street
	London
	EC2V 7WS
Auditors	RPG Crouch Chapman LLP
	40 Gracechurch Street
	London, EC3V 0BT
Registrars	Equiniti Limited
	Aspect House
	Spencer Street
	Lancing
	BN99 6QQ
Company website	www.alina-holdings.com

2 Alina Holdings PLC | Annual Report and Accounts 2023

CONTENTS

	Page
Directors, Secretary and Advisers	2
Highlights for the Year ended 31 December 2023	4
Report for the Year to 31 December 2023	5
Chairman's Statement	5
Financial Review	7
Corporate Responsibility Statement	12
Governance	13
Directors' Report	18
Statement of Directors' Responsibilities	21
Independent Auditors' Report to the members of Alina Holdings PLC	23
Consolidated Statement of Income	28
Consolidated Statement of Comprehensive Income	29
Consolidated Statement of Financial Position	30
Consolidated Statement of Cash Flows	31
Consolidated Statement of Changes in Equity	32
Notes to the Consolidated Financial Statements	33
Company Balance Sheet as at 31 December 2023 with comparatives	50
Notes to the Financial Statements	51
Glossary	55

Annual Report and Accounts 2023 | Alina Holdings PLC 3

HIGHLIGHTS FOR THE YEAR

ENDED 31 DECEMBER 2023

GROUP RESULTS 2023 VERSUS 2022

•	Group Net Profit / (Loss) for the period - £000	(£1,123) vs (£136)
•	Group Earnings / (Loss) Per Share (both basic and diluted)*1	(4.95p) vs (0.60p)
•	Reported Book value per share*2	21.9p vs 26.9p
•	Cash - £000	£1,117 vs £1,721
•	Financial Holdings - £000	£2,013 vs £1,749
•	Property Holdings - £000*3	£2,501 vs £3,304

*1 based on weighted average number of shares in issue of 22,697,000 (2022: 22,697,000)

*2 based on actual number of shares in issue as at 31 December 2023 of 22,697,000 (2022: 22,697,000)

*3 Property Holdings, as shown above, reflect ownership of Stafford (as at December 2023) & Oldham (as at 31 December 2022). The current valuation of the Company's remaining Property Assets is £2.4m (2023) & £2.5m (2022).

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REPORT FOR THE YEAR TO 31 DECEMBER 2023

Alina Holdings PLC ("Alina" or the "Company") is a company registered on the Main Market of the London Stock Exchange. The group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group").

CHAIRMAN'S STATEMENT

Writing one's own report card is always a time for self-reflection, particularly when the conclusion is "could have done better".

In 2023 we…read I…definitely could have done better. Following the Q3 correction, the NASDAQ 100 (NDX) staged a remarkable recovery and, from 27 October to 29 December, surged 27.6%. Driven by the Magnificent 7, which contributed nearly half of the broader market's 2023 performance, and its poster child Nvidia (NVDA), which rose 239%, the NDX registered a 54.9% for the year when many, including ourselves, had anticipated a recession due to higher interest rates and sticky inflation. The irony is not lost on us as we have since been proven right and the anticipated Fed Pivot has not yet happened, as inflation has proven stickier that most had predicted.

Alina's portfolio of assets is a mixture of Operating, financial (including cash) assets, and a limited number of hedge positions. Clearly hedging doesn't always work, and on occasion it backfires and increases risk. In 2023, our hedging activities were a small drag on our results but, as with any insurance policy, there is always a price for protection. I am pleased to report that since the end of the year, our largest short position in Tesla (TSLA) generated a realised gain of $731k (£587K at £/$ 1.2437) or a return on average capital employed (ROACE) of 258%. The TSLA short position was closed out on 23 April 2024, the morning before TSLA reported Q1 earnings.

Property Assets

Brislington, Bristol: Currently underperforming our expectations due to tenant problems, partially caused by scaffolding erected for work on the Landlord's adjacent building that are currently moribund.

Castle Court,Hastings: Former Argos unit has now been refurbished and asbestos removed.Claim for expenditure plus costs will now be submitted to Sainsbury's, the new owner's of Argos per the 'full repairing lease' that they have ignored.

Former Italian Way (restaurant) unit has now been recovered from illegal tenant that had taken occupation without even bothering to apply for a lease. Refurbishment will be undertaken and application to expand the unit will be sought from Hastings Council, the Freehold owner.

Shaw, Suffolk: Small unit, in the process of being sold.

Outlook

Sadly, I do not believe that Geo-political risk is properly reflected in current US share prices. Therefore, the likelihood of the correction we anticipated last year, but which turned into an enormous AI infused rally, still exists. Whilst we will always be substantially skewed to the long side, we will continue to try and protect downside risk.

Duncan Soukup

Chairman

Alina Holdings plc 29 April 2024

Annual Report and Accounts 2023 | Alina Holdings PLC 5

REPORT FOR THE YEAR TO 31 DECEMBER 2023 CONTINUED

With reference to the photo on the front-cover…

Taken from Charlie Chaplin's film, Modern Times (1936) to highlight TSLA. Apart from being a brilliant piece of cinematography, it goes someway to illustrating my view of TESLA (TSLA).Too much, too quickly, without an obvious Plan B.

Mr Musk has single-handedly forced the automotive industry to adopt alternative energy solutions, whilst at the same time promising "the development of some of the most revolutionary technologies in auto, energy and artificial intelligence". Unfortunately for TSLA shareholders, they are paying an extreme price for as yet unproven technologies, whilst the company's core business is under attack on all sides.

When valuing TSLA, one can only assign a market multiple to the company's automotive business…if that. So, assigning a multiple of 8x EV/EBITDA to TSLA TTM EBITDA of $13,588 would result in an Enterprise Value of about $100bn. I should point out that 8x is more than generous for a company that's EBITDA is declining. I would also point out that Mercedes-Benz and BMW are currently selling at 2x TTM EBITDA.

In any event, whether an * multiple is correct or not, faithful TSLA shareholders are paying $400bn for hope and glory...with zero visibility and multiple broken promises. Can Mr Musk and TSLA pull a rabbit out the proverbial hat…of course they could, but in the meantime TSLA's car business has some very serious credibility problems, not least of which is Mr Musk, or is he, Howard Hughes reincarnated?

With reference to the photo on the back-cover…

Taken from another of Charlie Chaplin's films, the Great Dictator (1940) to highlight the Geo-political risks that I currently see in the World, which I do not believe are factored into current market multiples. Clearly, I have an opinion on what is transpiring, but this is not the right forum for a political debate, but rather absolutely the right forum for me to express my 'risk' concerns. Using the dictionary, and Mr Buffett's preferred definition of risk as the possibility for loss or injury, the current situation with quasi-dictators in China, Russia, Iran and, yes, even in the US, does not bode well. Whether, as investors, we like it or not the risks that an external event could deflate the current AI induced market bubble, is very real...the US market valuation, based on the Case-Schiller Index is currently on a 34X multiple, in the top 1% of all valuations whilst earnings are probably at or close to a peak… difficult to see how the market continues to rise in these circumstances.

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FINANCIAL REVIEW

The financial statements contained in this report have been prepared in accordance with UK Adopted International Accounting Standards.

Result

The Group recorded an IFRS loss for the year to 31 December 2023 of £1,123,000, or 4.95p/shr (2022: loss £136,000, or 0.60p/shr). The majority of the losses were associated with the decline in value of the Company's HEIQ investment, and losses on hedges, partially offset by the increase in value (on a mark to market basis) of Dolphin Capital Advisors (DCI).

Operating income is still substantially below Group target due to continued vacancy of the former Argos unit in the Company's Hastings property. Further clouding the picture was the ongoing problem that we encountered in Hastings with an illegal occupant who had taken occupancy illegally. The offending party had the temerity to blame us for not extending them a lease, notwithstanding the fact that they had moved in without ever applying for a lease. We are pleased to report that they have since departed.

Refurbishment of the former Argos unit is now complete, and we will now seek to relet both the Argos unit, and once extended, the end restaurant unit at prevailing rates, whilst also commencing the refurbishment and conversion of the first floor from office to residential. Unfortunately, building costs are currently in Lala-land ,such that finding a builder to work at a reasonable price is somewhat akin to finding a needle in a haystack.

Key Performance Indicators ("KPI's")

Throughout the reporting period the Group had no borrowings and held cash reserves at 31 December 2023 of £1.117 million (31 December 2022: £1.721 million). The KPI's relating to Interest Cover, Loan to Value and Gearing, shown in previous reports, are therefore no longer applicable. The Net Asset Value per Share at 31 December 2023 was 21.9p (31 December 2022: 26.9p).

Property Operating Expenses

Property operating expenses for the year to 31 December 2023 were £298,000 (2022: £300,000). This was predominantly caused by the property rates increases and the vacancy of a larger floorspace in Hastings. There was a release of bad debt provision in the comparable period which increases the variance.

Administrative Expenses

Administrative expenses were £743,000 during the year to 31 December 2023 (2022: £604,000).

Net Asset Value ("NAV")

The NAV at 31 December 2023 was £4.97 million or 21.9p per share,based on 22.7 million shares in issue,excluding those held in treasury (31 December 2022: £6.10 million, 26.9p per share, based on 22.7 million shares in issues).

At 31 December 2023 the Group held £1.117 million of cash (31 December 2022: £1.721 million). At 31 December

2023 the Group had no banking debt (31 December 2022: £nil).

At 31 December 2023, investment properties were held at an assessed fair value of £2,371,000 (2022: £2,504,000). The fair value has been assessed with reference to a third party valuation performed in 2020. The Board's assessment of the carrying value remains unchanged, pending finding new tenants for vacant units.

One residential property in Stafford is considered to be held for sale at 31 December 2023, valued in the Company's accounts at that date at its anticipated sale price.

The 2020 external valuation was undertaken in accordance with the Royal Institute of Chartered Surveyors Appraisal and Valuation Standards on the basis of market value.. Market value is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

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FINANCIAL REVIEW CONTINUED

Financing

The Group had no borrowings during the year and the Group's operations were financed from its property income.

During the reporting period the Group held some of its cash in foreign currencies. These holdings generated a small unrealised loss at the end of the period, principally from the reduction in USD value against GBP across the period. The risk associated with foreign currency holdings is described in Note 16 to the financial statements.

Dividend

In line with the Group's current dividend distribution policy no dividend will be paid in respect of the reporting period. The directors will continue to review the dividend policy in line with progress with the Group's investment strategy.

Risk Management & Operational Controls

The directors recognize that commercial activities invariably involve an element of risk. A number of the risks to which the business is exposed, such as the condition of the UK domestic economy and sentiment in the UK property market, are beyond the Company's influence. However, such risk areas are monitored and appropriate mitigating action, such as reviewing the substance and timing of the Company's operational plans, is taken wherever practicable in response to significant changes. The directors consider the risk areas the Company is exposed to in the light of prevailing economic conditions and the risk areas set out in this section are subject to review.

In relation to asset management, the Company's approach to risk reflects the Company's granular business model and position in the market and involves the expertise of its directors, management and third-party advisers. Operational progress and key investment and disposal decisions are considered in regular management team meetings as well as being subject to informal peer review.

Higher level risks and financial exposures are subject to constant monitoring. Major investment and disposal decisions are subject to review by the directors in accordance with a protocol set by the Board.

The Board's approach in this area is further explained in the Governance section, under Risk & Internal Control.

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Principal Risks and Uncertainties

Rank	Potential Risk		Impact	Mitigation
	Property and Investment Portfolio Performance
1.	Effect	of	downturn	in	• Tenant defaults	• Actual and prospective voids and rental
	macroeconomic environment		• Reduced rental income	arrears continually monitored.
					• Early	identification of /	discussions	with
					• Increased void costs
					tenants in difficulties
					• Reduction in Net Asset Value and	• Regular review of all properties for lease
					realisation value of assets	terminations and tenant risk, with early
						action to take control of units as appropriate
						• Limited requirement for tenant incentives
						within sub-sector
						• Close liaison with local agents enables swift
						decisions on individual properties
						• Tendency of small traders to take early
						action in response to economic conditions
						• Diverse tenant base
						• Sustainable location and property use
						• Ensuring positions are sufficiently hedged to
						ensure long and short positions are in place
						to take advantage of the market movements
2.	Higher than anticipated property	• Income insufficient to cover costs	• All	material	expenditure	subject	to
	maintenance	or improvement	/	• Decline in property value	authorisation regime
	refurbishment costs			• Capital expenditure subject to regular review
3.	Changes	to	legal environment,	• Adverse impact on portfolio	• Monitoring of UK property environment and
	planning law or local planning	• Loss of development opportunity	regulatory proposals
	policy				• Reduction in realisation value of	• Close liaison with agents and advisers
					assets	• Membership of and dialogue with relevant
						industry bodies
4.	Failure to comply with regulatory	• Tenant and third-party claims	• Guidance on	regulatory	requirements
	requirements in connection with	resulting in financial loss	provided by managing agents and
	property	portfolio, including	• Reputational damage	professional advisers
	health, safety and environmental		• Individual properties monitored by asset
						managers and agents
						• Managing agents operate formal regulatory
						certification	process	for	residential
						accommodation
						• Ongoing programme of risk assessments for
						key multi-tenanted sites
						• Key risks covered by insurance policies
	Corporate Governance & Management
5.	Non-availability of information	• Impact on operations and reporting	• Provision of effective security regime with
	technology systems or failure of	ability	automatic off-site data and systems back-
	data security			• Financial claims arising from	up
					• leak of confidential information
6.	Financial	and property market	• Insufficient finance available at	• The Group is debt-free and debt finance	has
	conditions			acceptable rates to fulfil business	not been required.
					plans	• Finance risks reduced with provision of cash
					• Inability to execute investment	reserve
					property disposal strategy owing to fall	• Impact of interest rates on property yields
					in property market values	monitored
					• Financial impact of debt interest
					• Breach of banking covenants

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FINANCIAL REVIEW CONTINUED

Operational Controls

During the year, the directors continued to recognize that the Company's ability to operate successfully is largely dependent on the maintenance of its straightforward approach to doing business and its reputation for integrity. All those who act on the Company's behalf are required to behave and transact business in accordance with the highest professional standards. As well as compliance with all relevant regulatory requirements, this extends to customer care and external complaint guidelines. The Company has adopted a Code, Policy and Procedures under the Market Abuse Regulation. The majority of the operations were contracted to Eddisons Property Management. Eddisons have looked after the property management for previous years and include the provision of all applicable compliance procedures. The directors were satisfied that the governance procedures adopted by Eddisons in relation to its clients were appropriate and protected the Company's interests. The Company's corporate governance regime is underpinned by a whistle-blowing procedure, enabling perceived irregularities to be notified to members of the Board, principally the senior independent non-executive director.

The Board has overall responsibility for the Company's internal control systems and for monitoring its effectiveness. The Board's approach is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable assurance against material misstatements or loss. The directors have not considered it appropriate to establish a separate internal audit function, having regard to the Company's size. The Board's approach to internal controls covers all companies within the Group and there are no associate or joint venture entities which it does not cover.

The principal foundations of the Company's internal control framework during the reporting period were:

• statements of areas of responsibility reserved to the directors, with prescribed limits to executive authority to commit to expenditure and borrowing;
• effective committee structure with terms of reference and reporting arrangements to the Board;
• clear remits for the delegation of executive direction and internal operational management functions;
• framework for independent directors to provide advice and support to executive directors on an individual basis;
• top-levelrisk identification, evaluation and management framework;
• effective systems for recognized capital expenditure and significant revenue items and monitoring actual cost incurred;
• ongoing reporting to the Board of operational activity and results;
• regular review of operational forecasts and consideration by the directors;
• ongoing reporting to the directors on health, safety and environmental matters.

The Board reviews the effectiveness of the Company's risk management systems against the principal risks facing the business and their associated mitigating factors, taking account of the findings and recommendations of the auditors at the Company's half-year and year-end. Following its review of the auditors' findings during the reporting period, the Board considers that the Company's approach remains effective and appropriate for a business of the Company's size and complexity.

Key Contracts

There are currently no contracts which require third party approval for any change to the nature, constitution, management or ownership of the business.The appointment agreements of directors do not contain any provisions specifically relating to a change of control.

Charitable and Political Donations

During the reporting period the Group made £650 donations for charitable purposes and no donations for political purposes (2022: nil).

10 Alina Holdings PLC | Annual Report and Accounts 2023