Constance Hotels Services Limited | Annual Report 2025

179 ANNUAL REPORT 2025

Notes to the Financial Statements Year ended December 31, 2025

Notes to the Financial Statements Year ended December 31, 2025

3. FINANCIAL RISK MANAGEMENT (CONT’D) 3.2 Capital Risk Management

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) 4.1 Critical accounting estimates and assumptions (cont’d)

(a) Depreciation policies (cont’d)

The Group’s objectives when managing capital are:

• to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefit for other stakeholders; and • to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Directors therefore make estimates based on an independent professional valuer’s work and historical experience and use best judgement to assess the useful lives of assets and to forecast the expected residual values of the assets at the end of their expected useful lives. Refer to Note 5 for more disclosures.

(b) Deferred tax assets arising from tax losses

The Group’s strategy has remained unchanged for the past financial years. The strategy was to maintain the debt-to-capital ratio at the lower end in order to secure access to finance at a reasonable cost.

The Group has a deferred tax asset of MUR 24.3 million (2024: MUR 6.9 million) arising on tax losses. Based on Management judgements and estimates of the future taxable income, they believe that the tax losses will be fully utilised within the relevant period during which such tax losses may be carried forward. Refer to Note 11 for more disclosures.

The debt-to-capital ratios at December 31, 2025 and December 31, 2024 were as follows:

THE GROUP

THE COMPANY

(c) Employee benefit liabilities

2025 2024 MUR ‘ M MUR ‘ M MUR ‘ M MUR ‘ M 2024 2025

The present value of the pension obligations depend on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost/(income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. Refer to Note 18 for more information.

9,975 (422) 9,553 5,547

1,050

Total debt (Note 6 and 17) Less: cash and cash equivalents

8,988 (375) 8,613 6,019

1,252

(20)

(18)

1,030 2,447 3,477

Net debt

1,234 2,194 3,428

Total equity

15,100

Total capital plus net debt

14,632

63.3%

29.6%

Debt-to-capital ratio

58.9%

36.0%

(d) Revaluation of freehold land

The Group freehold land were last revalued in November 2022 by an independent professional valuer. The valuation was based on an open market value basis based on direct sales comparison taking into account recent transactions adjusted for any differences in the nature, location or condition of a specific property. Refer to Note 5 for Property, Plant and Equipment disclosures.

Total capital plus net debt is made up of capital and reserves plus net debt of the Group and the Company. The Group’s net debt to capital ratio have increased from 58.9% in 2024 to 63.3% in 2025 following additional debt taken for the repayment of the Convertible Bonds within the Group. On the other hand, the Company’s net debt to capital ratio decreased from 36.0% in 2024 to 29.6% in 2025 following the repayment of loans which took place during the year.

(e) Impairment of financial assets

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group and the Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. Refer to Notes 10 and 13 for more details.

Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

(f) Determining the lease term of contracts with renewal and termination options - Group as lessee

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).

(a) Depreciation policies

Property, plant and equipment are depreciated to their residual values over their estimated useful lives. The residual value of an asset is the estimated net amount that the Group and the Company would currently obtain from disposal of the asset, if the asset was already of the age and in the condition expected at the end of its useful life.