REG - DCI Advisors Ltd - Annual Financial Report
30/06/2023 13:30
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RNS Number : 5941E DCI Advisors Limited 30 June 2023
DCI Advisors Ltd
("DCI") or the ("Company") and together with its subsidiaries the ("Group")
Final Results and Publication of Annual Report for the year ended 31 December
2022
The Company is pleased to announce its final results for the year ended 31
December 2022.
Copies of the Annual Report and Accounts will be posted to shareholders today
and made available on the Company's website at: www.dciadvisorsltd.com
(http://www.dciadvisorsltd.com)
Enquiries
DCI Advisors Ltd
Nicolai Huls / Nick Paris, Managing Directors nickparis@btinternet.com (mailto:nickparis@btinternet.com)
+44 (0) 7738 470550
finnCap (Nominated Adviser & Broker)
William Marle / Jonny Franklin-Adams / Edward Whiley / Milesh Hindocha
(Corporate Finance)
+44 (0) 20 7220 0500
Mark Whitfeld / Pauline Tribe (Sales)
FIM Capital Limited (Administrator) llennon@fim.co.im (mailto:llennon@fim.co.im) / gdevlin@fim.co.im
(mailto:gdevlin@fim.co.im)
Lesley Lennon / Grainne Devlin (Corporate Governance)
CHAIRMAN'S STATEMENT
For the year ended 31 December 2022
Dear Shareholders,
I joined the board of DCI Advisors (the "Company" or "DCI") as Chairman in
February 2023.
The previous Chairman, Martin Adams, resigned at the same time to focus on
other projects. The Board would like to thank Martin for his guidance and
support of DCI since June 2021 during what continued to be a challenging
period for the Company. The focus remains on improving the Company's corporate
governance and implementing its new investment policy and realisation strategy
aimed at selling the remaining investments, repaying debt and distributing the
net proceeds to shareholders.
In 2022, since the Interim Report was released, there have been two
significant events:
● The Company completed the disposal of its entire interest in the
One & Only at Kea Island project ("OOKI") Prior to the sale, Dolphin was
the owner of 66.67% of Single Purpose Vehicle Ten Ltd ("SPV10") which, in
turn, indirectly owned 50% of OOKI, thereby providing the Company with an
effective equity interest of 33.33% in OOKI. Pursuant to the sale, the Company
received a net consideration, in aggregate, of €17.92 million, of which
€0.90 million was paid as an advance to DCI on 5 December and the remaining
€17.02 million balance was received on completion. Following the completion
of the disposal of our interest in SPV10, the guarantees provided by Dolphin
under the OOKI construction loan, including the existing share pledge and
mortgage over Dolphin's Scorpio Bay asset to secure the guarantees, are
expected to be released by the end of Q2 2023.
● From these disposal proceeds, an amount of €13.01 million was
applied towards the repayment in full by 31 December 2022 of the existing loan
facility that Dolphin drew down on 7 June and 16 July 2021. Following this
repayment, all debt at the Company level was fully repaid. All remaining
proceeds from the sale of our interest in OOKI were retained by Dolphin to
meet its accrued and current liabilities and working capital requirements.
In 2023, in addition to the change of Chairman, there have been a number of
further significant events which would be prudent to highlight in this FY2022
statement:
● On 20 March 2023 the Board announced that the Investment
Management Agreement ("IMA") between the Company and Dolphin Capital Partners
Ltd ("DCP") had been terminated with immediate effect on the basis of a
repudiatory breach of that contract by DCP
● It had come to the Company's attention that DCP entered into an
undisclosed share option agreement with the purchaser of the Amanzoe resort in
Porto Heli, Greece at the same time that the Company sold its interest in the
resort, as originally announced on 2 August 2018 (the "Undisclosed Option
Agreement"). The Undisclosed Option Agreement entitled DCP to acquire up to
30% of the share capital of DolphinCI Fourteen Ltd (the special purpose
vehicle holding the Amanzoe resort). A separate agreement for DCP to acquire
15% of the share capital of DolphinCI Fourteen Limited had been disclosed and
authorised by the Company at the time.
● The Undisclosed Option Agreement had not been disclosed to the
Company by DCP at the time of the sale of DolphinCI Fourteen Limited. The
failure by DCP, as agent of the Company under the terms of the IMA, to
disclose the existence of the Undisclosed Option Agreement, and to fulfil its
other duties as agent, constitutes a repudiatory breach of the IMA that has
resulted in the termination of the IMA by the Company. DCP has filed a legal
claim against the Company in the commercial Courts in England seeking to
recover various sums including termination notice of six months but the
Directors believe that this claim has no merit and have filed a counter claim.
● The Company is seeking to pursue all legal options to recover
the value arising from the Undisclosed Option Agreement that is the Company's
property. The Directors believe that this value could be material in the
context of the size of the Company, but at this time do not have enough
information to put a precise quantum on this and therefore no account of it
has yet been taken in our NAV.
● The independent Directors of the Company also removed Miltos
Kambourides, who is the Co-Founder and Managing Partner of DCP, as a Director
of the Company with immediate effect.
● The Directors have put in place additional resources since the
termination of DCP, including loan funding (from certain shareholders in the
Company), in order to enable the Company to self-manage its assets and to
enable the continued construction of the Kilada Hills Golf & Country
Resort and to facilitate the various asset sales processes currently underway.
● Nicolai Huls and Nick Paris were appointed as Executive
Directors of the Company and also appointed as co-Managing Directors. The
Company will now be self-managed and has no current intention of appointing a
new investment manager. The Directors remain committed to the objectives for
the Company that were approved by Shareholders at the Company's Extraordinary
General Meeting held on 22 December 2021 which were to make no further
investments, pay off Group level debts, aim to realise all investments by 31
December 2024 and return all surplus capital to shareholders after retaining
sufficient funds for liabilities and working capital requirements.
On 7 June 2023, Dolphin Capital Investors Ltd changed its name to DCI Advisors
Ltd as part of the termination terms contained in the IMA. The stock price
ticker on the London Stock Exchange remained unchanged as DCI LN.
Summary of Financial Performance
At the 31 December 2022 financial year end, the NAV of the Company was
€120.5 million (2021: €128.0 million) representing a decrease of 5.86%
compared to 31 December 2021.. The NAV reflects a reduction of 8.7% in the
value of investment property by €4.5 million (2021: €24.2 million) to
€47.8 million (2021: €52.2 million) and 2022 operating expenses of €3.8
million (2021: €7.3 million). The net loss after tax attributable to the
owners of the company was €5.5 million (2021: €21.3 million).
As at 31 December 2022, the DCI group had two principle liabilities:
· €10.4 million owed under the redeemable preference share
agreement signed at the Kilada investment level; and
· €4.6 million owed to PBZ, the Croatian lender to the Livka Bay
investment.
In sterling terms, DCI's NAV per share remained at 11p on 31 December 2022 (31
December 2021: 11p)
Additional Director
It is our intention to appoint a new independent Director in the coming months
in order to enhance the corporate governance within the Company. We will
update shareholders as soon as the process has been completed.
I would like to thank shareholders and our numerous service providers for the
support and confidence that they have given the Board in proceeding with the
changes outlined above. I look forward to meeting with shareholders in person
over the coming months.
Sean Hurst
Chairman
DCI Advisors Ltd 30 June 2023
MANAGING DIRECTORS' REPORT
Termination of DCI's Investment Manager
The Company was founded by Miltos Kambourides/Dolphin Capital Partners Ltd
("DCP") in 2004. Since that time the Company raised close to €950 million in
equity of which currently just €121 million in NAV is left. Over this period
shareholders received no dividends. No value creation was achieved while DCP
as Investment Manager received close to €190 million in Investment
Management fees.
Given this background we were very disappointed when it came to the Company's
attention that DCP had entered into an undisclosed option agreement with the
purchaser of the Amanzoe resort in Porto Heli, Greece at the time that the
Company sold its interest in the resort, as originally announced on 2 August
2018 (the "Undisclosed Option Agreement"). The Undisclosed Option Agreement
entitled DCP to acquire up to 30% of the share capital of DolphinCI Fourteen
Limited (the special purpose vehicle holding the Amanzoe resort). A separate
agreement for DCP to acquire 15% of the share capital of DolphinCI Fourteen
Limited had been disclosed and authorised by the Company.
The failure by DCP, as agent of the Company under the terms of the Investment
Management Agreement dated 1 December 2021 (the "IMA"), to disclose the
existence of the Undisclosed Option Agreement, and to fulfil its other duties
as agent, constituted a repudiatory breach of the IMA that resulted in the
immediate termination of the IMA by the Company which was announced 20 March
2023. The independent Directors of the Company also removed Miltos
Kambourides, who is the Co-Founder and Managing Partner of DCP, as a Director
of the Company on 18 March 2023 with immediate effect.
Since then, the Company has received notification that DCP filed a claim
against the Company in the English High Court alleging a repudiatory breach of
contract by the Company in relation to the termination by the Company of the
IMA (the "Claim").
The Company considers the Claim to be opportunistic, speculative and without
merit and will be defending the Claim vigorously. The Company has filed its
own counterclaim. The Company will pursue all legal options to recover the
value arising from the Undisclosed Option Agreement as the Directors believe
that value is the Company's property. The Directors believe that this value
could be material in the context of the size of the Company, but at this time
do not have enough information to put a precise quantum on this. The Company
has since found more potential issues relating to DCP and its management of
the company which are currently under review.
Business Overview
Due to DCP's termination as Investment Manager and the removal of Miltos
Kambourides as a Director, the remaining Directors have put in place
additional resources, including funding, to enable the Company to self-manage
its assets and to enable the continued construction of the Kilada Hills Golf
& Country Resort ("Kilada") and the various asset sales processes
currently underway.
The Company has no current intention of appointing a new investment manager.
Nicolai Huls and Nick Paris became Executive Directors of the Company with
immediate effect after DCP's termination and were also appointed as Managing
Directors. The Company is managing this transition phase together with its
service providers who are all still in place.
During 2022, the Directors focused on implementing the Investing Policy &
Realisation Strategy which had been approved by shareholders in December 2021.
Also, after the removal of Miltos Kambourides as Director and the termination
of the IMA, this Investing Policy & Realisation Strategy continues to be
in place with the aim of paying surplus capital back to Shareholders.
DCP was paid €2.4 million of advances against future incentive fees in 2022,
and it was due to be paid €2.31 million in 2023 and €1.3 million in 2024,
but these payments ended on 20 March 2023. Additional costs have been incurred
to replace DCP, but the Directors believe they will be significantly lower
than those levels leading to a net gain to Shareholders.
In December 2022, the Company sold its stake in One & Only Kea ("OOKI")
for a net consideration, in aggregate, of €17.92 million which represented a
premium of 17% to the valuation of the Dolphin's investment in OOKI as
disclosed in the Company's financial statements as at 31 December 2021. From
these disposal proceeds, an amount of €13.01 million was applied towards the
repayment in full by 31 December 2022 of the existing loan facility owed by
DCI after which all debt at the Company level was fully repaid. While the
original plan was to maximise its realisation value by holding and developing
OOKI until fully operational, the offer received during the summer of 2022 in
combination with the obligation to repay the existing loan facility by the
year end led the Board of Directors to decide to exit OOKI earlier than
planned.
During the year, we also focused on enhancing the value of Kilada, an asset
which we have indicated that we will hold and develop until the first phase of
construction, involving constructing the golf course and the Country Club, is
finalised. During 2022 and 2023, DCI made some follow-on investments to Kilada
in order to enhance its value and to continue construction.
As part of our Investing Policy & Realisation Strategy, in 2022 we also
made steps to implement the sales of some of our other assets, although most
progress was achieved after DCP's termination as Investment Manager.
Bridge Financing
During 2022, the Company was able to repay its loan facility in full after
which all debt at the Company level was fully repaid. It is the Director's
view that it is not in shareholders' interests to have another very expensive
credit facility in place going forwards.
Despite this view, due to regular operating expenses, commitments to Kilada
and Investment Management fees paid to DCP (both advances as well as
outstanding investment management fees) it was decided by the Board of
Directors to borrow some money from shareholders in the form of modest
shareholder loans. These loans pay 12% pa interest which is much more
attractive to the Company than the other credit facilities which were offered
to the Company during 2022/2023. By the end of June 2023, the number of
committed shareholder loans was 4 with a total capital amount of €1.4m. We
expect more shareholder loans going forwards until we raise funds from asset
sales later this year.
Major Asset Review
Kilada Country Club, Golf & Residences (www.mykilada.com)
The Kilada Country Club, Golf & Residences is our main asset. Finalising
the 18-hole golf course plus the Country Club is our highest priority and we
believe we should be able to reach that target during 2024. This will be
supported by the new financing agreement put in place during May 2023 with our
joint venture ("JV") partner which will help to fund these development costs.
By finalising the golf course plus the Country Club we believe we will de-risk
the project which then should support a higher valuation of this asset.
During 2022, our 15% JV partner completed their financial commitment to the
project and contributed €3 million of capital to the project bringing their
total commitment to €12 million. In May 2023, the Company announced a new
agreement between DCI and its JV Partner to secure funding for the
finalisation of the Golf Course and the Country Club on an 85%:15% split which
reflects our respective equity shareholdings. As part of this agreement our JV
partner has committed to lend a further €2.5 million with immediate effect.
Thanks to this agreement, the Company will be in the position to apply for the
payment of the first €1.5 million of €6 million of approved Greek
government grants very shortly. These grants are drawn down in stages
dependent on spending on the project concerned.
On the development side, construction of the centrepiece Jack Nicklaus
Signature Golf Course at Kilada continues to progress. After the
archaeologists finalised their work on the site on which the Country Club is
to be built we started excavations and construction of the retaining wall and
started work on the Country Club's access road. Archaeologists continue to
work on the site, but we do not expect that these activities will create any
major delays for the project at this stage. We also focused on the
construction of the pipe network connecting the water desalination system with
the lake and completion of the pump station and the corresponding
infrastructure.
Lavender Bay
The situation at Lavender Bay has been complicated by a challenge in Q1 2022
by the Greek state in relation to DCI's ownership title, which needs to be
addressed in tandem with the original vendor of the land, the Archdiocese of
Dimitriada. As a conservative measure, the now disputed ownership of Lavender
Bay has led the Company to write down the value of the asset. However, the
liability to pay further instalments of €20.8 million to the Church for the
land purchase has been retained in the 2022 financial statements although the
Company has no intention to make any further payments until the ownership
dispute has been resolved.
In view of these developments, we have been in negotiations with the original
vendor with a view to ensuring that no additional funds will be paid to them
under our sale and purchase contracts until the resolution of this legal
dispute with the Greek State and, to potentially reduce the overall quantum of
our deferred liabilities to them, by capitalizing such deferred payments
against a minority equity position in the project. In parallel, we have been
working with their legal counsel to prepare our legal recourse against the
Greek State to the competent courts so that the matter can be finally
judicially resolved.
Since the current liabilities at the project level are higher than the asset
value, Lavender Bay's valuation within the Company's NAV is negative €22.9m.
Due to accounting rules the Company has been obliged to use this negative
valuation in its books. Given the fact that the liabilities are at project
level and non-recourse it is the Board of Director's view that it is highly
unlikely that this negative valuation will ever be realised. So, while the
published Company's NAV is €120.5m, the Board of Directors believes that the
Company's real NAV is closer to €143.4m. The Board of Directors believe a
zero valuation for this asset is the worst-case scenario. However, we would
like to emphasise that our focus will be to achieve a positive exit value for
this asset going forward.
Plaka Bay and Scorpio Bay
There have been no new developments at these two projects.
Livka Bay, Croatia
In October 2022, it was decided to appoint a local real estate adviser to lead
the process to find potential investors for this asset. In 2023 the agent
approached potential investors, and several have expressed interest in the
project and due diligence is currently underway. While a 100% exit is our
preferred option, we are open to staying involved in the project together with
a new JV-partner if there is a clear path for the Company to exit from this
asset over the next couple of years.
Apollo Heights, Cyprus
In 2022, the Company had been approached by several potential buyers for this
asset, but none of these resulted in any serious discussions. The Company is
therefore currently reworking all sales and due diligence materials relating
to the site with a view to re-marketing it.
Aristo Developers, Cyprus (a 47.9% affiliate)
In 2022, Aristo Developers benefited from a more favourable real estate market
in Cyprus. Total sales increased by close to 26% compared to the year before.
Due to this strong performance, Aristo Developers has been able to continue to
deleverage by paying down bank debt. Sales started well in 2023and this year
further revenue growth, profits and positive cash flows are expected.
In late 2022, the Company together with the majority shareholder signed a
mandate with AXIA Ventures, a Greek and Cypriot investment bank to sell Aristo
Developers to international investors. A marketing exercise took place in
early 2023 and it is still ongoing as we work to develop interest with those
investors.
One&Only at Kea Island
The Company sold its stake in OOKI in December 2022. The project is still
under development and a precise opening date has yet to be announced.
Market Dynamics
The Greek economy is performing strongly and has been outperforming the
EU-average growth rate. This is expected to also be the case for the next
couple of years. The recent Greek government elections indicate another four
years of a business friendly environment in the country. The strong
performance of the Greek economy has been supported by stable politics,
increasing Foreign Direct Investment, pent-up domestic demand after many years
of underperformance and a very strong hospitality sector. Given these positive
developments it is expected that Greece will soon again achieve investment
grade status for its government bonds. This all bodes well for DCI's Greek
assets. We also expect the availability of credit for Greek companies and real
estate developments to improve strongly over the next couple of years and we
hope to also benefit from that.
Croatia entered the Schengen passport zone and joined the EURO currency zone
on 1 January 2023. This will support the Croatian economy as it will be easier
for tourists and second homeowners to visit the country and for foreign
investors to invest in the country while at the same time minimising their
currency risk. The tourism sector continues to perform well, and more tourists
are again expected this year.
The Cypriot economy is also performing well. While real estate prices are
still 15% below their peak they have stabilised and are slowly picking up. The
banking sector is still very conservative, and the banks are still cautious in
providing credit to companies, but this is slowly improving. Tourism has
already picked up strongly and is supporting the economy.
Future Objectives
The Company's main objectives for 2023 are to:
1. Execute further portfolio asset disposals;
2. Progress construction at Kilada and generate plot and villa sales
momentum at the project;
3. Secure adequate working capital liquidity for DCI
4. Defend our claim against DCP and pursue all legal options to
recover the value arising from the Undisclosed Option Agreement.
Nicolai Huls, Managing Director
Nick Paris, Managing Director
DCI Advisors Ltd 30 June 2023
DIRECTORS' REPORT
The Directors present their report together with the audited financial
statements of the Company and its subsidiary undertakings (together the
"Group") for the twelve months ended 31 December 2022.
Principal Activities
The principal activity of the Group is the development of beachfront
properties in the Eastern Mediterranean - Greece, Cyprus and Croatia.
Change of Company Name
On 1 June 2023, the Company changed its name from Dolphin Capital Investors
Ltd to DCI Advisors Ltd.
Business Review for the period and Future Developments
The consolidated statement of comprehensive income for the twelve month period
and the statement of net assets as at 31 December 2022 are set out on pages 20
and 21 of the printed report. The assets of the Group are principally
development properties and these are valued once a year by the Directors based
on recommendations from the Managing Directors. In addition, external valuers
are contracted in each relevant country at the financial year end to assess
the current value of those properties.
A review of the development and performance of the Group and of expected
future developments has been set out in the Chairman's Statement.
No dividends were declared or paid during 2022.
Principal Risks and Uncertainties
The Group's business is property development in the Eastern Mediterranean. Its
principal risks are therefore related to the property market in these
countries in general, and also the particular circumstances of the property
development projects that it is undertaking.
The Directors seek to mitigate and manage these risks through continual
review, policy setting and enforcement of contractual rights and obligations.
They also regularly monitor the economic and investment environment in
countries that the Group operates in and the management of the Group's
property development portfolio.
Directors
The Directors of the Company who held office throughout the financial period
and up to the date of this report were as follows:
· Martin Adams - Resigned 10 February 2023
· Sean Hurst - Appointed 13 February 2023
· Nicolai Huls
· Nick Paris
· Miltos Kambourides - Removed 18 March 2023
On 10 February 2023, Martin Adams resigned as Chairman of the Board of
Directors and Sean Hurst was subsequently elected appointed to that role on 13
February 2023.
As of 31 December 2022 all Directors were independent non-executive Directors,
except Miltos Kambourides, who was considered to be non-independent because of
his role as the founder and majority owner of Dolphin Capital Partners Ltd,
the Company's Investment Manager. In addition, Nicolai Huls and Nick Paris
became executive directors when they became Managing Directors on 20 March
2023.
Directors' remuneration during the twelve months ended 31 December 2022
The Directors remuneration details during the period of this report were as
follows:
Director Director's fees Total
(€) (€)
Martin Adams 75,000 75,000
Nicolai Huls 65,000 65,000
Nick Paris 65,000 65,000
Miltos Kambourides * -- --
*Miltos Kambourides continued to waive his right to collect a Director's fee
from the Company in light of his involvement as the founder and majority owner
of the Company's Investment Manager.
The Directors intend to propose changes at the Company's AGM in 2023 to the
Company's incentive fee scheme which was payable to Dolphin Capital Partners
Ltd until their Investment Management Agreement was terminated on 20 March
2023. No incentive fees have been paid or are due to the former Investment
Manager from that date. The proposed changes will create an incentive fee pool
for key members of the Company's employees including the Directors. Further
details will be contained in the Notice of the AGM.
Directors' interests
The interests of the Directors in the Company's shares as at 31 December 2022
were as follows:
Director Numbers of Common Shares of
Euros 0.01 each held
Nicolai Huls
- direct shareholding 775,000
- director of Discover Investment Company which owns 30,026,849 shares
Miltos Kambourides 66,019,006
- indirect shareholding*
Nick Paris
- direct shareholding 1,634,487
* Miltos Kambourides is 75% shareholder of Dolphin Capital Partners that held
88,025,342 shares. Following the year end Dolphin Capital Partners disposed of
all their shares in the Company.
Substantial Shareholders
The Directors are aware of the following direct and indirect interests
comprising more than 3% of the issued share capital of the Company as at 1
June 2023, which is the latest practicable date before the publication of this
report:
Number of Percentage of
Common Shares held issued Share Capital
(%)
Almitas Capital LLC 100,297,481 11.10
J O Hambro Capital Management Ltd1 93,386,413 10.32
Fortress Investment Group 89,922,801 9.94
Mr. Lars Ernest Bader 82,925,600 9.17
Peter Gyllenhammar AB The Union Discount Company of London Ltd 70,000,000 7.74
Forager Funds Management Pty Ltd 64,100,000 7.09
Progressive Capital Partners Ltd 53,787,814 5.95
Terra Partners Asset Mgt Ltd 53,736,687 5.94
Discover Investment Company* 30,026,849 3.32
Alina Holdings Plc 28,983,930 3.20
Weiss Asset Management 27,400,000 3.03
*Nicolai Huls is a Director of Discover Investment Company
CORPORATE GOVERNANCE STATEMENT
Statement of compliance with the Quoted Companies Alliance Corporate
Governance Code (the "QCA statement")
Introduction from the Chairman
The Board of DCI (the Board or the Directors) fully endorses the importance of
good corporate governance and applies the QCA Corporate Governance Code,
published in April 2018 by the Quoted Companies Alliance (the "QCA Code"),
which the Board believes to be the most appropriate recognised governance code
for a company of the Company's size with shares admitted to trading on the AIM
market of the London Stock Exchange. This is a practical, outcome-oriented
approach to corporate governance that is tailored for small and mid-size
quoted companies in the UK and which provides the Company with the framework
to help ensure that a strong level of governance is maintained.
As Chairman, I am responsible for leading an effective board, fostering a good
corporate governance culture, maintaining open communications with the major
shareholders and ensuring appropriate strategic focus and direction for the
Company. The Board is also supported by a Nomination and Corporate Governance
Committee which comprised the Board's independent Directors throughout to help
us to do that.
Notwithstanding the Board's commitment to applying the QCA Code, we will not
seek to comply with the QCA Code where strict compliance in the future would
be contrary to the primary objective of delivering long-term value for our
shareholders. However, we do consider that following the QCA Code, and a
framework of sound corporate governance and an ethical culture, is conducive
to long-term value creation for shareholders.
All members of the Board believe strongly in the importance of good corporate
governance to assist in achieving objectives and in accountability to our
shareholders. In the statements that follow, the Company explains its approach
to governance in more detail.
The QCA Code identifies 10 principles that are considered appropriate
arrangements and asks companies to disclose how the companies apply each
principle. Our compliance with these 10 principles is set out below.
Principle 1: Establish a strategy and business model which promote long-term
value for shareholders
The Company's investment policy is to realize all its portfolio assets in a
controlled, orderly and timely manner. The strategy of the Group, which was
approved by the Company's shareholders in an Extraordinary General Meeting
held on 22 December 2021 (the "EGM"), is set out in detail in the EGM circular
dated 2 December 2021 (the "Circular"), specifically the investing policy and
realisation strategy is defined in paragraph 4 of Part 1 and the investment
management agreement is defined in paragraph 5 in the Circular.
The Circular is available to view at: www.dciadvisorsltd.com
The Company strategy is shaped and formulated by the Board in regular
discussions with the Managing Director. The Company's assets were managed by
Dolphin Capital Partners Limited ("DCP"), an investment management company
incorporated in February 2005, until their IMA was terminated on 20 March
2023. Full details of the Investment Manager's remuneration arrangements and
the terms and conditions of service are set out in the Circular.
The Board is the Company's decision-making body, approving or disapproving
each investment and divestment proposed by the Investment Manager. The Board
is responsible for acquisitions and divestments, major capital expenditures
and focuses upon the Company's long-term objectives, strategic direction, and
distributions policy. The Managing Directors are responsible for implementing
this strategy and for generally managing and developing the business. Changes
in strategy require approval from the Board.
The key challenges and risks that the Group strategy presents relate to the
fact that most of the Company's investments are illiquid, and there can be no
assurance that the Company will be able to realise financial returns on such
investments in a timely manner. Other risks include those associated with
general economic climate, local real estate conditions, changes in supply of,
or demand for, competing properties in an area, energy and supply shortages,
various uninsured or uninsurable risks. As a result, a downturn in the real
estate sector or the materialisation of any one or a combination of the
aforementioned risks could materially adversely affect the Company and the
implementation of the investment policy.
In order to mitigate the above risks, the Board and the Managing Directors,
working with the Company's advisers, will continue to explore the best manner
in which the divestment of the Company's portfolio can be achieved on an asset
by asset basis, in the light of prevailing market conditions and
circumstances, in order to maximise returns to shareholders. Moreover, in
order to preserve the financial resources of the Company, the allocation of
any additional capital investment into any of the Company's projects will be
substantially sourced from joint venture agreements with third party capital
providers and project level debt and with the sole objective of enhancing the
respective asset's realisation potential and value.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Company is committed to engaging and communicating openly with its
shareholders to ensure that its strategy, business model and performance are
clearly understood. All Board members have responsibility for shareholder
liaison but queries are primarily delegated to the Company's advisors or
Managing Directors in the first instance or to the Company's Chairman.
Contact details for the Company's advisors are contained on the Company's
website www.dciadvisorsltd.com
Additionally, shareholders can get in touch by sending an e-mail to the
Company's administrator, FIM Capital Limited ("FIM") at
corporate.governance@fim.co.im
The Board, together with the Managing Directors, are responsible for
implementing the strategy that was approved by the shareholders at the EGM.
Throughout the year, the Board has regular dialogue with institutional
investors, providing them with such information on the Company's progress as
is permitted within the guidelines of the AIM Rules, MAR and requirements of
the relevant legislation. Twice a year, at the time of announcing the Group's
half and full-year results, the Company schedules a round of investor calls
with its shareholders to update them on developments and to receive feedback
and suggestions from them.
Commencing in 2022, the Company has held an Annual General Meeting each year
("AGM"). This provides investors the opportunity to enter into dialogue with
the Board and for the Board to receive feedback and take action if and when
necessary. The results of the AGM are subsequently announced via RNS and
published on the Company's website. Feedback from, and engagement with,
substantial shareholders has historically been successful in ensuring, for
example, material transactions are suitably structured with shareholder
considerations in mind.
Principle 3: Take into account wider stakeholder and social responsibilities
and their implications for long-term success
Corporate social responsibility ("CSR") is a cornerstone of the Company's
culture. The Board is responsible for the social and ethical frameworks at DCI
and the Company is committed to transparency with its approach and business
and welcomes interaction with all stakeholders and the local communities.
The Board is aware that engaging with its stakeholders strengthens
relationships, assists the Board in making better business decisions and
ultimately promotes the long-term success of the Company. The Group's
stakeholders include shareholders, members of staff of underlying companies
and of Advisors and other service providers, suppliers, auditors, lenders,
regulators, industry bodies and the communities surrounding the locations of
its investments. DCI is an internally managed company.
The Board as a whole is responsible for reviewing and monitoring the parties
contracted to the Company, including their service terms and conditions. The
Audit Committee supports Board decisions by considering and monitoring the
risks of the Company.
The Board is regularly updated on wider stakeholder views and issues
concerning its projects, both formally at Board meetings and informally
through ad hoc updates. Advisers involved with the investment portfolio are
invited to join Board meetings and provide a report to the Board. Engagement
in this manner enables the Board to receive feedback and better equips them to
make decisions affecting the business.
The goal is to deliver value for our stakeholders while in parallel to
contribute in meaningful ways to the local economies, societies, and
environments where DCI invests.
The Company's Corporate Social Responsibility statement can be viewed on it's
website at: www.dciadvisorsltd.com
Principle 4: Embed effective risk management, considering both opportunities
and threats, throughout the organisation
Ultimate responsibility for the process by which risk in the business is
managed rests with the Board. The Managing Directors are required to enforce
the risk management framework adopted by the Company and report its
effectiveness to the Board. The respective risks and processes to implement
risk management are reviewed bi-annually.
The principal risks and uncertainties facing the Group, as well as mitigating
actions, are set out in this Report. These risks are reviewed by the Audit
Committee, whose role is to provide oversight of the financial reporting
process, the audit process, the system of internal controls, overall
compliance with laws and regulations and review the budgetary process. The
Audit Committee is currently chaired by Nick Paris and its other member is
Nicolai Huls.
The Company's Directors and its former Investment Manager comply with Rule 21
of the AIM Rules relating to directors' and applicable employees' dealings in
the DCI's securities. Accordingly, DCI has adopted an appropriate Share
Dealing Code for Directors and applicable employees of the Investment Manager
and the Investment Manager had also adopted a conflicts of interest policy.
The Company does not have an Investment Committee as, in accordance with its
investment strategy, it is not proceeding into any investments into new
projects or the acquisition of additional assets.
Principle 5: Maintain the Board as a well-functioning, balanced team led by
the Chair
The Board had four members throughout 2022, comprising an independent
non-executive Chairman and three non- executive directors of which 2 were
independent. The Company has restrictions on the maximum length of service for
Directors. At every annual general meeting any director:
- who has been appointed by the board since the previous annual general
meeting;
- who held office at the time of the two preceding annual general meetings
and who did not retire at either of them; or
- who has held office with the Company, other than employment or executive
office, for a continuous period of nine years or more at the date of the
meeting,
shall retire from office and may offer himself for re-appointment by the
members
The Directors biographies are published on the Company's website at
www.dciadvisorsltd.com
The Board will continue to review its structure in order to provide what it
considers to be an appropriate balance of experience and skills. Board
meetings are held on a frequent basis, in person where possible, with
additional meetings held as required.
All Directors receive regular and timely information regarding the operational
and financial performance of the Company. Relevant information is circulated
to the Directors in advance of the Board meetings. All Directors have direct
access to the advice and services of the Company's advisors and are able to
receive independent professional advice in the furtherance of their duties, if
necessary, at DCI's expense.
14 formal Board meetings (including Board calls) were held in the period
during 2022. A summary of Board and Committee meetings attended in the 12
months to 10 February 2023 is set out below:
Board Meetings Audit Committee Nomination & Corporate Governance Committee
Director Attended Eligible Attended Eligible Attended Eligible
Mr M Adams 14 14 1 1 - 1
Mr N Huls 14 14 1 1 1 1
Mr N Paris 14 14 1 1 1 1
Mr M Kambourides 14 14 - - - -
Principle 6: Ensure that between them the Directors have the necessary
up-to-date experience, skills and capabilities
The biographical details of all the Directors can be viewed on the Company
website: www.dciadvisorsltd.com
The Directors skills are kept up to date by attending seminars, conferences
and specialized courses from advisers as well as personal reading into the
subjects of real estate management and development and corporate finance. The
Directors also receive ad hoc guidance on certain matters, for example, the
AIM Rules for Companies from the Company's Nominated Adviser as well as
receiving updates on the regulatory environment from FIM, who provide
specialist fund administration services to a variety of closed ended funds and
collective investment schemes. The role and responsibilities of the Directors
are set out in a Statement of Directors' Responsibilities and the Terms of
Reference of the Audit Committee are summarised at the end of this document.
All Directors are able to take independent professional advice in the
furtherance of their duties, if necessary, at the Company's expense.
Principle 7: Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement
Board meetings are held on a frequent basis at key geographical locations.
To date, no independent Board evaluation process has been conducted by the
Company as the Chairman believes that the Board performs effectively. Key
strategic issues and risks are discussed in an open and forthright manner,
with decisions being made based on the factual data available.
In future, Board evaluations will take place periodically, whereby Board
members will be asked to complete and return an effectiveness questionnaire
across a variety of criteria, then return these to FIM, who, where necessary,
will seek clarification on any responses given. Responses will then be
recorded anonymously to enable the Board to hold open follow-up discussions on
the aggregated evaluation data.
The Board's periodic self-evaluations of performance will be based on
externally determined guidelines appropriate to the composition of the Board
and the Company's operation, including Board committees. The scope of the
self-evaluation exercise will be re-assessed in each instance to ensure
appropriate depth and coverage of the Board's activities consistent with
corporate best practice.
The effectiveness questionnaire underlying the Board evaluation process
assesses the composition, processes, behaviours and activities of the Board
through a range of criteria, including the size and independence, mix of
skills (for example corporate governance, financial, real estate industry and
regulatory) and experience, and general corporate governance considerations in
line with the QCA code.
All Board appointments have been made after consultation with advisers and,
when appropriate, with major shareholders. Detailed due diligence is carried
out on all new potential Board candidates. The Board will consider using
external advisers to review and evaluate the effectiveness of the Board and
Directors in future to supplement internal evaluation processes. Additionally,
the Board will undertake formal and periodic succession planning.
The independent Directors have remained independent throughout their term of
office except for Nicolai Huls and Nick Paris who became executive directors
and therefore non-independent on 20 March 2023.
When the Board undertakes a periodic evaluation process, the relevant
materials and guidance in respect of this process, following current best
practice at the time of the evaluation, is available from FIM.
Principle 8: Promote a corporate culture that is based on ethical values and
behaviours
Throughout DCI, culture has significant impact on behaviours, risk management
and ultimately performance. The Board is responsible for defining the desired
culture, delegating the embedding of culture in operations in the Company and
then overseeing and monitoring the result. The Board seeks to maintain the
highest standards of integrity and probity in the conduct of the Company's
operations. An open culture is encouraged within the Company, with regular
communications among shareholders.
The Board believes that if an organization wants to create a culture of
ethical conduct, they must be sure that members have the tools that they need
to do so. These include adequate and appropriate training, consultation,
modeling and supervision. These tools also include being able to bring
internal and external experts to the organization in to engage staff at all
levels of training and problem solving as well.
The Company has made investments in projects that seek to make a contribution
to the development of communities in which they are located. In planning its
activities, the Board will give consideration to evaluating the social impact
of proposed developments with a view to promoting where possible local
employment and the delivery of other local benefits; and mitigating negative
impacts to the extent possible.
The Company promotes and supports the rights and opportunities of all people
to seek, obtain and hold employment without discrimination.
The Company is also committed to being honest and fair in all its dealings
with partners, contractors and suppliers. Procedures are in place to ensure
that any form of bribery or improper behaviour is prevented from being
conducted on the Company's behalf by investee companies, contractors and
suppliers. Robust systems are in place to safeguard the Company's information
entrusted to it by investee companies, contractors and suppliers, and seeks to
ensure that it is never used improperly.
In order to comply with legislation or regulations aimed at the prevention of
money laundering, the Company has adopted anti-money laundering and
anti-bribery procedures.
Principle 9: Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
A description of each board member and their experience is available on the
website at www.dciadvisorsltd.com, and the role of the Company's committees
are also available on the Company website at: www.dciadvisorsltd.com
Responsibilities of the Board
The Board is responsible for the implementation of the investment policy of
the Company and for its overall supervision. The Board is also responsible for
the Company's day-to-day operations. In order to fulfil these obligations, the
Board has delegated certain operational responsibilities to the Managing
Directors, to FIM and to other service providers.
The Company has not established a remuneration committee as it is satisfied
that any pertinent issues can be considered by the Board as a whole.
The Chairman is responsible for leading an effective Board, focusing the
Directors' discussions on the key levers for value creation and risk
management as well as the effective running of the Company, fostering a good
corporate governance culture, maintaining open communications with the major
shareholders and ensuring appropriate strategic focus and direction.
In addition to this, the Chairman is responsible for ensuring that all
Directors are fully informed and qualified to take the required decisions.
For this purpose, non-executive directors spend time with the Managing
Directors between Board meetings, covering certain aspects of the business
where they have special expertise.
The Board receives formal investment reports from the Managing Directors at
frequent Board meetings, and receives management accounts, and compliance
reports from FIM. The Board maintains regular contact with all its service
providers and is kept fully informed of investment and financial controls and
any other matters that should be brought to the attention of the Directors.
The Directors also have access where necessary to independent professional
advice at the expense of the Company.
In addition to these, the Directors review and approve the following matters:
• Strategy and management
• Policies and procedures
• Financial reporting and controls
• Capital structure
• Contracts
• Shareholder documents / Press announcements
• Adherence to Corporate Governance and best
practice procedures
The Board has established the following Committees:
Audit Committee: The Audit Committee is chaired by Nick Paris and its other
member is Nicolai Huls and it aims to meet at least three times a year.
The Audit Committee provides oversight and review of the financial reporting
process, the audit process, the system of internal controls, the accounting
policies, principles and practices underlying them, liaising with the external
auditors and reviewing the effectiveness of internal controls, and overall
compliance with laws and regulations and review the budgetary process.
Nomination & Corporate Governance Committee: The Corporate Governance
Committee is chaired by Nicolai Huls and its other members are Martin Adams
and Nick Paris. The Committee aims to meet at least twice annually.
The role of the Nomination & Corporate Governance Committee is to evaluate
the Company's corporate governance policies and principles and recommend
changes to the Board as necessary, and identify, evaluate and recommend to the
Board qualified nominees for Board election.
The Directors have access to the advice and services of FIM, the Nominated
Adviser, legal counsel, regulatory consultants and other experts where it is
deemed appropriate. They can also seek independent external professional
advice and any relevant training, as necessary.
Principle 10: Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders
The Board is committed to maintaining an open dialogue with shareholders.
Direct communication with shareholders is coordinated by the Chairman in
consultation with the Company's advisers, as appropriate.
Throughout the year, the Board maintains a regular dialogue with institutional
investors, providing them with such information on the Company's progress as
is permitted within the guidelines of the AIM Rules, MAR and requirements of
the relevant legislation.
The Company communicates with shareholders through the yearly Annual Report
and Financial Statements, Interim Report, the Annual General Meeting, and
other AIM announcements. Investors are also able to contact the Directors and
Company's advisors directly at any time.
The Board believes that the Annual Report and the Interim Report play an
important part in presenting all shareholders with an assessment of the
Group's position and prospects. All reports and press releases are published
on the Company's website www.dciadvisorsltd.com
If a significant proportion of independent votes were to be cast against a
resolution at any general meeting, the Board's policy would be to engage with
the shareholders concerned to understand the reasons behind the voting
results. Following this process, the Board would make an appropriate public
statement regarding any different action it has taken, or will take, as a
result of the vote.
Details of the Directors' remuneration can be found on page 8 of the printed
report.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DCI ADVISORS LTD
Report on the audit of the consolidated financial statements
Qualified Opinion
We have audited the accompanying consolidated financial statements of DCI
Advisors Ltd (formerly Dolphin Capital Investors Ltd) (the 'Company'), and its
subsidiaries (together with the Company, the 'Group'), which are presented on
pages 20 to 62 of the printed report and comprise the consolidated statement
of financial position as at 31 December 2022, and the consolidated statements
of profit or loss and other comprehensive income, changes in equity and cash
flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matter described in the
Basis for Qualified Opinion section of our report, the accompanying
consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2022, and of
its consolidated financial performance and its consolidated cash flows for the
year then ended in accordance with International Financial Reporting Standards
as adopted by the European Union ('IFRS-EU').
Basis for Qualified Opinion
As described in Note 16, an amount of €3.6 million (2021: €5.1 million) is
included in Investment Property as of 31 December 2022 relating to land
acquired or leased by the Group's subsidiary company Golfing Development S.A.
in prior years, at Nies (Sourpi, Thessaly), for which a fair value adjustment
of €1.5 million was recorded as loss in 2022 in profit or loss (2021:
€13.2 million). The respective land is disputed by the Greek State as to its
private character and actions were taken to register it in its name at the
local Land Registries. Various actions are in progress by the Group's
component, Golfing Development S.A. to claim its ownership and legal rights.
We were not provided with an independent legal expert opinion regarding the
outcome of these actions, hence the outcome cannot be reliably determined at
this stage. This matter existed in the preceding financial year and caused us
to qualify our audit opinion on the consolidated financial statements relating
to that year.
Based on the above, we were unable to obtain sufficient and appropriate audit
evidence in relation to the ownership and fair value of the Investment
Property of total amount of €3.6 million representing approximately 2% of
the total assets of the Group. Consequently, we were unable to determine
whether and to what extent any adjustments to the fair value of this property
were necessary.
We conducted our audit in accordance with International Standards on Auditing
('ISAs'). Our responsibilities under those standards are further described in
the 'Auditors' responsibilities for the audit of the consolidated financial
statements' section of our report. We are independent of the Group in
accordance with the International Code of Ethics (Including International
Independence Standards) for Professional Accountants of the International
Ethics Standards Board for Accountants (''IESBA Code'') together with the
ethical requirements in Cyprus that are relevant to our audit of the
consolidated financial statements, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our qualified opinion
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the consolidated financial statements of
the current period. This matter was addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
Valuation of immovable property
(Refer to notes 15 to 16, and 19 to the consolidated financial statements)
The risk Our response
The Group has a significant portfolio of immovable properties which is Our audit procedures in relation to the valuation of immovable properties
classified, depending on the case, as investment property, property, plant and included among others:
equipment and trading properties. The total carrying amount of the
aforementioned immovable properties as at 31 December 2022 was €107 million,
not including the amount of €3.6 million for which reference is made in the
Basis for Qualified Opinion paragraph above. - evaluating the competence, capabilities and objectivity of the
external valuation specialists engaged by the Company.
- challenging the appropriateness of the valuation methodology
Investment properties are measured at fair value, property, plant and and assumptions used. Assumptions, such as those relating to the discount
equipment at revalued amounts, which are based on fair value and trading rates used and the amounts and timing of forecasted cash inflows and outflows,
properties at the lower of cost and net realisable value. In determining fair as well as the comparables used and adjustments made in valuations were
values the Group utilises in most cases independent professional valuers. challenged based on industry norms and external data. Internal valuation
specialists were used within this process. Explanations were sought for
significant movements in value.
There are significant judgements and estimates inherent in estimating fair - reperforming specialists' calculations.
value and net realisable value (which is based on the intended development and
future selling price of these properties). - assessing the sensitivity of the forecasts used in valuations.
- assessing the adequacy of the disclosures around the valuation
of property assets.
The existence of significant estimation uncertainty coupled with the fact that
only a small percentage change in the assumptions can have a significant
impact on the valuation is why we have given specific audit focus and
attention to this area.
Other information
The Board of Directors is responsible for the other information. The other
information comprises the information included in the Chairman's Statement,
Managing Directors' report, Director's report and Corporate Governance
statement, but does not include the consolidated financial statements and our
auditors' report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information identified above and, in doing
so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in
this regard.
Responsibilities of the Board of Directors and those charged with governance
for the consolidated financial statements
The Board of Directors is responsible for the preparation of consolidated
financial statements that give a true and fair view in accordance with
IFRS-EU, and for such internal control as the Board of Directors determines is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting, unless there is an intention to either
liquidate the Company or to cease Group's operations, or there is no realistic
alternative but to do so.
The Board of Directors is responsible for overseeing the Group's financial
reporting process.
Auditors' responsibilities for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors' report
that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional skepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Group's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Board of Directors.
· Conclude on the appropriateness of the Board of Directors' use of
the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group's ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors' report to the related disclosures
in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors' report. However, future
events or conditions may cause the Group to cease to continue as a going
concern.
· Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves a true and fair view.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within the Group
to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with Governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with Governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with Governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors' report.
Other matter
( )
This report, including the opinion, has been prepared for and only for the
Company's members as a body and for no other purpose. We do not, in giving
this opinion, accept or assume responsibility for any other purpose or to any
other person to whose knowledge this report may come to. These financial
statements have not been prepared for the purpose of complying with the legal
requirements of the British Virgin Islands Law.
The engagement partner on the audit resulting in this independent auditors'
report is Demetris S. Vakis.
Demetris S. Vakis, FCA
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia
Cyprus
30 June 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2022
31 December 2022 31 December 2021
Note €'000 €'000
Revenue 6 318 4,703
Cost of sales 7 - (2,786)
Gross profit 318 1,917
Gain on disposal of equity-accounted investees 18 5,421 -
Gain on disposal of subsidiary 30 - 5,898
Change in valuations 8 (2,984) (24,648)
Investment Manager remuneration 28.2 - (3,600)
Directors' remuneration 28.1 (205) (323)
Professional fees 10 (1,987) (2,149)
Administrative and other expenses 11 (1,614) (1,269)
Depreciation charge 15 (48) (48)
Total operating and other expenses (1,417) (26,139)
Results from operating activities (1,099) (24,222)
Finance income 73 16
Finance costs (2,997) (3,010)
Net finance costs 12 (2,924) (2,994)
Share of (losses)/profits on equity-accounted investees, net of tax 18 (1,785) 5,973
Loss before taxation (5,808) (21,243)
Taxation 13 12 1,270
Loss (5,796) (19,973)
Other comprehensive Loss
Foreign currency translation differences 12 (56) (2,245)
Reclassification of foreign currency translation differences on loss of 30 - (5,784)
control
Share of revaluation on equity-accounted investees 18 - (278)
Other comprehensive loss, net of tax (56) (8,307)
Total comprehensive loss (5,852) (28,280)
Loss attributable to:
Owners of the Company (6,924) (21,343)
Non-controlling interests 1,128 1,370
(5,796) (19,973)
Total comprehensive loss attributable to:
Owners of the Company (6,980) (29,561)
Non-controlling interests 1,128 1,281
(5,852) (28,280)
Loss per share
Basic and diluted loss per share (€) 14 (0.01) (0.02)
The notes on pages 23 to 62 of the printed report are an integral part of
these consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
31 December 2022 31 December 2021
Note €'000 €'000
Assets
Property, plant and equipment 15 15,226 9,069
Investment property 16 45,943 52,188
Equity-accounted investees 18 42,694 65,555
Non-current assets 103,863 126,812
Other investments 17 - 99
Trading properties 19 56,516 56,516
Receivables and other assets 20 10,083 1,092
Cash and cash equivalents 21 2,226 4,575
Current assets 68,825 62,282
Total assets 172,688 189,094
Equity
Share capital 22 9,046 9,046
Share premium 22 569,847 569,847
Retained deficit (467,314) (460,390)
Other reserves 528 584
Equity attributable to owners of the Company 112,107 119,087
Non-controlling interests 8,440 8,942
Total equity 120,547 128,029
Liabilities
Loans and borrowings 23 10,434 20,125
Lease liabilities 25 3,347 3,331
Deferred tax liabilities 24 6,577 6,609
Trade and other payables 26 19,795 20,089
Non-current liabilities 40,153 50,154
Loans and borrowings 23 4,611 4,743
Lease liabilities 25 88 89
Trade and other payables 26 7,289 6,079
Current liabilities 11,988 10,911
Total liabilities 52,141 61,065
Total equity and liabilities 172,688 189,094
Net asset value ('NAV') per share (€) 27 0.12 0.13
The consolidated financial statements were authorised for issue by the Board
of Directors on 30 June 2023.
Nick Paris
Nicolai Huls
Managing
Director
Managing Director
The notes on pages 23 to 62 of the printed report are an integral part of
these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Attributable to owners of the Company
Share Share Translation Revaluation Retained Non-controlling Total
capital premium reserve reserve deficit Total interests equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2021 9,046 569,847 8,337 465 (439,047) 148,648 6,523 155,171
Comprehensive income
(Loss)/profit - - - - (21,343) (21,343) 1,370 (19,973)
Other comprehensive income
Share of revaluation on equity-accounted investees - - - (186) - (186) (92) (278)
Foreign currency translation differences - - (2,248) - - (2,248) 3 (2,245)
Translation differences to profit or loss due to disposal of subsidiary - - (5,784) - - (5,784) - (5,784)
Total other comprehensive income - - (8,032) (186) - (8,218) (89) (8,307)
Total comprehensive income - - (8,032) (186) (21,343) (29,561) 1,281 (28,280)
TRANSACTIONS WITH OWNERS OF THE COMPANY
Changes in ownership interests in subsidiaries
Disposal of interests without a change in control - - - - - - 1,138 1,138
Total transactions with owners of the Company - - - - - - 1,138 1,138
Balance at 31 December 2021 9,046 569,847 305 279 (460,390) 119,087 8,942 128,029
9,046 569,847 305 279 (460,390) 119,087 8,942 128,029
Balance at 1 January 2022
Comprehensive income
(Loss)/profit - - - - (6,924) (6,924) 1,128 (5,796)
Other comprehensive income
Share of revaluation on equity-accounted investees - - - - - - - -
Foreign currency translation differences - - (56) - - (56) - (56)
Total other comprehensive income - - (56) - - (56) - (56)
Total comprehensive income - - (56) - (6,924) (6,980) 1,128 (5,852)
TRANSACTIONS WITH OWNERS OF THE COMPANY
Changes in ownership interests in subsidiaries
Dividends paid to Non Controlling Interest - - - - - - (2,250) (2,250)
Disposal of interests without a change in control - - - - - - 620 620
Total transactions with owners of the Company - - - - - - (1,630) (1,630)
Balance at 31 December 2022 9,046 569,847 249 279 (467,314) 112,107 8,440 120,547
The notes on pages 23 to 62 of the printed report are an integral part of
these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
31 December 2022 31 December 2021
Note €'000 €'000
Cash flows from operating activities
Loss (5,796) (19,973)
Adjustments for:
Loss in fair value of investment property 8 6,316 24,240
Impairment loss on other investments 8 - 209
Gain on disposal of investment in associates/subsidiaries 18,30 (5,411) (5,898)
Reversal of impairment loss on property, plant and equipment 15 (2,944) (615)
(Reversal of)/impairment loss on equity-accounted investees 8 (388) 814
Depreciation charge 15 48 48
Interest expense 12 2,891 1,812
Interest income 12 (4) (16)
Exchange difference (76) (2,175)
Share of losses/(profits) on equity-accounted investees, net of tax 18 1,785 (5,973)
Taxation 13 (12) (1,270)
(3,591) (8,797)
Changes in:
Receivables (8,974) (618)
Payables 568 (2,212)
Trading properties - 3,253
Deferred revenue - (109)
Cash used in operating activities (11,997) (8,483)
Tax paid - (193)
Net cash used in operating activities (11,997) (8,676)
Cash flows from investing activities
Proceeds from disposal of subsidiaries, net of cash disposed of 30 - (208)
Proceeds from disposal of associate 18 26,875 -
Acquisitions of investment property 16 (75) (21)
Acquisitions of property, plant and equipment 15 (3,264) (3,651)
Proceeds from other investments 17 99 326
Interest received 4 16
Net cash from/(used in) investing activities 23,639 (3,538)
Cash flows from financing activities
Repayment of loans and borrowings (12,370) (3,611)
New loans - 14,063
Proceeds from issue of redeemable preference shares 3,000 5,500
Transaction costs related to loans and borrowings - (90)
Payment of lease liabilities (8) (8)
Interest paid (2,363) (726)
Dividend paid to non-controlling interests (2,250) -
Net cash (used in)/from financing activities 23 (13,991) 15,128
Net (decrease)/increase in cash and cash equivalents (2,349) 2,914
Cash and cash equivalents at 1 January 4,575 1,661
Cash and cash equivalents at 31 December 2,226 4,575
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of the following:
Cash in hand and at bank (see note 21) 2,226 4,575
Cash and cash equivalents at the end of the year 2,226 4,575
The notes on pages 23 to 62 of the printed report are an integral part of
these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2022
1. REPORTING ENTITY
DCI Advisors Ltd (Formerly: Dolphin Capital Investors Ltd) (the 'Company') was
incorporated and registered in the British Virgin Islands ('BVI') on 7 June
2005. The Company is a real estate investment company focused on the
early-stage, large-scale leisure-integrated residential resorts in the Eastern
Mediterranean, and managed, until 20 March 2023, by Dolphin Capital Partners
Ltd (the 'Investment Manager'), an independent private equity management firm
that specialises in real estate investments, primarily in south-east Europe,
and thereafter self-managed. The shares of the Company were admitted to
trading on the AIM market of the London Stock Exchange ('AIM') on 8 December
2005.
With effect from 01 June 2023, the name of the Company was changed from
Dolphin Capital Investors Ltd to DCI Advisors Ltd.
The consolidated financial statements of the Company as at 31 December 2022
comprise the financial statements of the Company and its subsidiaries
(together referred to as the 'Group') and the Group's interests in
equity-accounted investees.
The consolidated financial statements of the Group as at and for the year
ended 31 December 2022 are available at www.dciadvisorsltd.com.
2. basis of preparation
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by the
European Union ('EU').
The consolidated financial statements were authorised for issue by the Board
of Directors on 30 June 2023.
b. Basis of preparation
The consolidated financial statements have been prepared on a going concern
basis, which assumes that the Group will be able to discharge its liabilities
in the normal course of business.
On 22 December 2021, an Extraordinary General Meeting was held and the
Shareholders approved a continuation of the Company without setting a
termination date or a date for a further continuation vote in order to provide
time to optimise for Shareholders the value that can be realised from the
Company's investments by removing potentially commercially prejudicial
deadlines from negotiations with potential buyers. Notwithstanding the absence
of a formal date for Shareholders to consider a continuation of the Company,
the Board may, at any time, propose a further continuation vote to
Shareholders.
The Group's cash flow forecasts for the foreseeable future involve
uncertainties related primarily to the exact disposal proceeds and timing of
disposals of the assets expected to be disposed of. Management believes that
the proceeds from forecast asset sales will be sufficient to maintain the
Group's cash flow at a positive level. Should the need arise, management will
take actions to reduce costs and is confident that it can secure additional
loan facilities and/or obtain repayment extension on existing ones, until
planned asset sales are realised and proceeds received.
If for any reason the Group is unable to continue as a going concern, then
this could have an impact on the Group's ability to realise assets at their
recognised values and to extinguish liabilities in the normal course of
business at the amounts stated in the consolidated financial statements.
Based on these factors, management has a reasonable expectation that the Group
has and will have adequate resources to continue in operational existence for
the foreseeable future.
c. Basis of measurement
The consolidated financial statements have been prepared under the historical
cost convention, with the exception of property (investment property and
property, plant and equipment), which are stated at their fair values.
d. Adoption of new and revised standards and interpretations
As from 1 January 2022, the Group adopted all changes to IFRS which are
relevant to its operations. This adoption did not have a material effect on
the consolidated financial statements of the Group.
The following standards, amendments to standards and interpretations have been
issued but are not yet effective for annual periods beginning on 1 January
2022. Those which may be relevant to the Group are set out below. The Group
does not plan to adopt these standards early. The Group continues to assess
the potential impact on its consolidated financial statements resulting from
the application of the following standards.
(i) Standards and interpretations adopted by the EU
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2: Disclosure of Accounting Policies (applicable for annual periods
beginning on or after 1 January 2023)
The amendments to IAS 1 and the update to IFRS Practice Statement 2 aim to
help companies on the application of materiality to the disclosure of
accounting policies. The key amendments to IAS 1 include: (1) requiring
companies to disclose their material accounting policies rather than their
significant accounting policies, (2) clarifying that accounting policies
related to immaterial transactions, other events or conditions are themselves
immaterial and as such need not be disclosed, and (3) clarifying that not all
accounting policies that relate to material transactions, other events or
conditions are themselves material to a company's financial statements. The
amendments to IFRS Practice Statement 2 are to include guidance and two
additional examples on the application of materiality to accounting policy
disclosures. The amendments are consistent with the refined definition of
material i.e. "Accounting policy information is material if, when considered
together with other information included in an entity's financial statements,
it can reasonably be expected to influence decisions that the primary users of
general-purpose financial statements make on the basis of those financial
statements". The Group is currently evaluating the expected impact of adopting
the amendments on its financial statements. As such, the expected impact of
the amendments is not yet known or reasonably estimable.
Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates (applicable for annual periods
beginning on or after 1 January 2023)
The amendments to IAS 8 are issued to clarify how companies should distinguish
changes in accounting policies from changes in accounting estimates, with a
primary focus on the definition of and clarifications on accounting estimates.
The amendments introduce a new definition for accounting estimates: clarifying
that they are monetary amounts in the financial statements that are subject to
measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company
develops an accounting estimate to achieve the objective set out by an
accounting policy. Developing an accounting estimate includes both: (1)
selecting a measurement technique (estimation or valuation technique), and (2)
choosing the inputs to be used when applying the chosen measurement technique.
The effects of changes in such inputs or measurement techniques are changes in
accounting estimates. The definition of accounting policies remains unchanged.
The Group is currently evaluating the expected impact of adopting the
amendments on its financial statements. As such, the expected impact of the
amendments is not yet known or reasonably estimable.
Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction (applicable for annual periods
beginning on or after 1 January 2023)
Targeted amendments to IAS 12 clarify how companies should account for
deferred tax on certain transactions (e.g. leases and decommissioning
provisions). The amendments narrow the scope of the initial recognition
exemption (IRE) so that it does not apply to transactions that give rise to
equal and offsetting temporary differences. As a result, companies will need
to recognise a deferred tax asset and a deferred tax liability for temporary
differences arising on initial recognition of a lease and a decommissioning
provision. The Group is currently evaluating the expected impact of adopting
the amendments on its financial statements. As such, the expected impact of
the amendments is not yet known or reasonably estimable.
(ii) Standards and interpretations not adopted by the EU
Amendments to IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current and Non-current Liabilities with
Covenants (applicable for annual periods beginning on or after 1 January 2024)
In 2020, the IASB has amended IAS 1 to promote consistency in application and
clarify the requirements on determining if a liability is current or
non-current. Under existing IAS 1 requirements, companies classify a liability
as current when they do not have an unconditional right to defer settlement of
the liability for at least twelve months after the end of the reporting
period. As part of its amendments, the IASB has removed the requirement for a
right to be unconditional and instead, now requires that a right to defer
settlement must have substance and exist at the end of the reporting period.
Similar to existing requirements in IAS 1, the classification of liabilities
is unaffected by management's intentions or expectations about whether the
company will exercise its right to defer settlement or will choose to settle
early.
(ii) Standards and interpretations not adopted by the EU continued
On 31 October 2022 the IASB issued further amendments to IAS 1 i.e.
Non-current liabilities with covenants. The new amendments aim to improve the
information an entity provides when its right to defer settlement of a
liability is subject to compliance with covenants within twelve months after
the reporting period. The amendments clarify that only covenants with which a
company must comply on or before the reporting date affect the classification
of a liability as current or non-current. Covenants with which the company
must comply after the reporting date (i.e. future covenants) do not affect a
liability's classification at that date. However, when non-current liabilities
are subject to future covenants, companies will now need to disclose
information to help users understand the risk that those liabilities could
become repayable within 12 months after the reporting date.
The amendments also clarify how a company classifies a liability that can be
settled in its own shares (e.g. convertible debt). When a liability includes a
counterparty conversion option that involves a transfer of the company's own
equity instruments, the conversion option is recognised as either equity or a
liability separately from the host liability under IAS 32 Financial
Instruments: Presentation. The IASB has now clarified that when a company
classifies the host liability as current or non-current, it can ignore only
those conversion options that are recognised as equity. Companies may have
interpreted the existing IAS 1 requirements differently when classifying
convertible debt. Therefore, convertible debt may become current.
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback
(applicable for annual periods beginning on or after 1 January 2024)
The IASB has issued amendments to IFRS 16 Leases, which add to requirements
explaining how a company accounts for a sale and leaseback after the date of
the transaction. A sale and leaseback is a transaction for which a company
sells an asset and leases that same asset back for a period of time from the
new owner. IFRS 16 includes requirements on how to account for a sale and
leaseback at the date the transaction takes place. However, IFRS 16 had not
specified how to measure the transaction when reporting after that date. The
amendments issued in September 2022 impact how a seller-lessee accounts for
variable lease payments that arise in a sale and leaseback transaction. The
amendments introduce a new accounting model for variable payments and will
require seller-lessees to reassess and potentially restate sale and leaseback
transactions entered into since 2019.
The amendments confirm the following: (1) On initial recognition, the
seller-lessee includes variable lease payments when it measures a lease
liability arising from a sale and leaseback transaction. (2) After initial
recognition, the seller-lessee applies the general requirements for subsequent
accounting of the lease liability such that it recognises no gain or loss
relating to the right of use it retains.
e. Use of estimates and judgements
In preparing these consolidated financial statements, management has made
judgements, estimates and assumptions that affect the application of
accounting principles and the related amounts of assets and liabilities,
income and expenses. The estimates and underlying assumptions are based on
historical experience and various other factors that are deemed to be
reasonable based on knowledge available at that time. Actual results may
deviate from such estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
Impairment of investment in equity-accounted investees
The Company follows the requirements of IAS 36 to determine whether the
investments in equity-accounted investees are impaired and calculates the
amount of the impairment. An impairment loss is recognised for the difference
between the carrying amount and the recoverable amount of the asset. The
recoverable amount is the greater of the fair value less costs to sell and
value in use. As at 31 December 2022, the Group assessed whether the carrying
amount of equity-accounted investees is impaired, by comparing it with its
fair value less cost to sell.
Measurement of fair values
A number of the Group's accounting policies and disclosures require the
measurement of fair values, for both financial and non-financial assets and
liabilities.
The Group has an established control framework with respect to the measurement
of fair values. This includes the Managing Directors who have overall
responsibility for overseeing all significant fair value measurements,
including Level 3 fair values.
When measuring the fair value of an asset or a liability, the Group uses
observable market data as far as possible. Significant unobservable inputs
and valuation adjustments are regularly reviewed and changes in fair value
measurements from period to period are analysed.
Fair values are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability might
be categorised in different levels of the fair value hierarchy, then the fair
value measurement is categorised in its entirety in the same level of the fair
value hierarchy as the lowest level input that is significant to the entire
measurement.
The Group recognises transfers between levels of the fair value hierarchy at
the end of the reporting period during which the change has occurred.
When applicable, further information about the assumptions made in measuring
fair values is included in the notes specific to that asset or liability.
Further information about the assumptions made in measuring fair values is
included in the following notes:
- Note 3 and 15: property, plant and equipment;
- Note 3 and 16: investment property.
f. Functional and presentation currency
These consolidated financial statements are presented in Euro (€), which is
the Company's functional currency. All amounts have been rounded to the
nearest thousand, unless otherwise indicated.
3. MEASUREMENT of fair values
Properties
The fair value of investment property and land and buildings classified as
property, plant and equipment is determined at the end of each reporting
period. External, independent valuation companies, having appropriate
recognised professional qualifications and recent experience in the location
and category of the properties being valued, value the Group's properties at
the end of each year and where necessary, semi-annually.
The Directors have appointed American Appraisal and Colliers International,
two internationally recognised valuation firms, to conduct valuations of the
Group's acquired properties to determine their fair value. These valuations
are prepared in accordance with generally accepted appraisal standards, as set
out by the Royal Institute of Chartered Surveyors ('RICS'). Furthermore, the
valuations are conducted on an 'as is condition' and on an open market
comparative basis.
The valuation analysis of properties is based on all the pertinent market
factors that relate both to the real estate market and, more specifically, to
the subject properties. The valuation analysis of a property typically uses
four approaches: the cost approach, the direct sales comparison approach, the
income approach and the residual value approach. The cost approach measures
value by estimating the Replacement Cost New or the Reproduction Cost New of
property and then determining the deductions for accrued depreciation that
should be made to reflect the age, condition and situation of the asset during
its past and proposed future economic working life. The direct sales
comparison approach is based on the premise that persons in the marketplace
buy by comparison. It involves acquiring market sales/offerings data on
properties similar to the subject property. The prices of the comparables are
then adjusted for any dissimilar characteristics as compared to the subject's
characteristics. Once the sales prices are adjusted, they can be reconciled to
estimate the fair value for the subject property. Based on the income
approach, an estimate is made of prospective economic benefits of
ownership. These amounts are discounted and/or capitalised at appropriate
rates of return in order to provide an indication of value. The residual
value approach is used for the valuation of the land and depends on two basic
factors: the location and the total value of the buildings developed on a
site. Under this approach, the residual value of the land is calculated by
subtracting the development cost from the estimated sales value of the
completed development.
Each of the above-mentioned valuation techniques results in a separate
valuation indication for the subject property. A reconciliation process is
then performed to weigh the merits and limiting conditions of each approach.
Once this is accomplished, a value conclusion is reached by placing primary
weight on the technique, or techniques, that are considered to be the most
reliable, given all factors.
4. PRINCIPAL subsidiaries
The Group's most significant subsidiaries were the following:
Country of Shareholding interest
Name Project incorporation 2022 2021
Scorpio Bay Holdings Limited Scorpio Bay Resort Cyprus 100% 100%
Scorpio Bay Resorts S.A. Scorpio Bay Resort Greece 100% 100%
Xscape Limited Lavender Bay Resort Cyprus 100% 100%
Golfing Developments S.A. Lavender Bay Resort Greece 100% 100%
MindCompass Overseas One Limited Kilada Hills Golf Resort Cyprus 85% 88%
MindCompass Overseas S.A. Kilada Hills Golf Resort Greece 85% 88%
MindCompass Overseas Two S.A. Kilada Hills Golf Resort Greece 100% 100%
MindCompass Parks S.A. Kilada Hills Golf Resort Greece 100% 100%
Dolphin Capital Greek Collection Limited Kilada Hills Golf Resort Cyprus 100% 100%
DCI Holdings One Limited * Aristo Developers BVIs 100% 100%
D.C. Apollo Heights Polo and Country Resort Limited Apollo Heights Resort Cyprus 100% 100%
Symboula Estates Limited Apollo Heights Resort Cyprus 100% 100%
Azurna Uvala D.o.o. Livka Bay Resort Croatia 100% 100%
Eastern Crete Development Company S.A. Plaka Bay Resort Greece 100% 100%
Single Purpose Vehicle Ten Limited ** One&Only Kea Resort Cyprus 67% 67%
The above shareholding interest percentages are rounded to the nearest
integer.
*This entity holds a 48% shareholding interest in DCI Holdings Two Ltd ("DCI
H2") which is the owner of Aristo Developers Ltd.
** During the year the entity disposed of the 50% shareholding interest in
Single Purpose Vehicle Fourteen Limited (owner of One&Only Kea Resort)
5. Significant accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all periods presented in these consolidated financial
statements unless otherwise stated.
5.1 Subsidiaries
Subsidiaries are the entities controlled by the Group. The Group 'controls' an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date on which
control commences until the date on which control ceases.
5.2 Non-controlling interests ('NCI')
NCI are measured initially at their proportionate share of the acquiree's
identifiable net assets at the date of acquisition. Changes in the Group's
interest in a subsidiary that do not result in a loss of control are accounted
for as equity transactions.
5.3 Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and
liabilities of the subsidiary, and any related Non-controlling Interest
("NCI") and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former subsidiary
is measured at fair value when control is lost.
5.4 Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses arising from
intra-group transactions are eliminated in preparing the consolidated
financial statements. Unrealised gains arising from transactions with
equity-accounted investees are eliminated to the extent of the Group's
interest in the entity. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of
impairment.
5.5 Business combinations
The Group accounts for business combinations using the acquisition method when
the acquired set of activities and assets meets the definition of a business
and control is transferred to the Group (see Note 5.1). In determining whether
a particular set of activities and assets is a business, the Group assesses
whether the set of assets and activities acquired includes, at a minimum, an
input and substantive process and whether the acquired set has the ability to
produce outputs.
The consideration transferred in the acquisition is generally measured at fair
value, as are the identifiable net assets acquired. Any goodwill that arises
is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as
incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of
acquisition. If an obligation to pay contingent consideration that meets the
definition of a financial instrument is classified as equity, then it is not
re-measured and settlement is accounted for within equity. Otherwise, other
contingent consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent consideration are
recognised in profit or loss.
5.6 Interest in equity-accounted investees
The Group's interests in equity-accounted investees comprise interests in
associates and a joint venture. Associates are those entities in which the
Group has significant influence, but not control, over the financial and
operating policies. A joint venture is an arrangement in which the Group has
joint control, whereby the Group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its
liabilities. Interests in associates and the joint venture are accounted for
using the equity method and are initially recognised at cost, which includes
transaction costs. The Group's investment includes goodwill identified on
acquisition, net of any accumulated impairment losses. Subsequent to initial
recognition, the consolidated financial statements include the Group's share
of the income and expenses and equity movements of equity-accounted investees,
after adjustments to align the accounting policies with those of the Group,
until the date that significant influence or joint control ceases. When the
Group's share of losses exceeds its interest in an equity-accounted investee,
the carrying amount of that interest (including any long-term investments) is
reduced to nil and the recognition of further losses is discontinued except to
the extent that the Group has an obligation or has made payments on behalf of
the investee.
After application of the equity method, the Group assess the recoverable
amount for each associate or joint venture, unless the associate or joint
venture does not generate cash inflows from continuing use that are largely
independent of those from other assets of the entity. An impairment loss is
recognised for the difference between the carrying amount and the recoverable
amount of the equity-accounted investees. The recoverable amount is the
greater of the fair value less costs to sell and value in use.
5.7 Investment property
Investment property is property held either to earn rental income or for
capital appreciation or for both, but not for sale in the ordinary course of
the business, use in the production or supply of goods or services or for
administration purposes. Investment property is initially measured at cost
and subsequently at fair value with any change therein recognised in profit or
loss.
Cost includes expenditure that is directly attributable to the acquisition of
the investment property. The cost of self-constructed investment property
includes the cost of materials and direct labour, any other costs directly
attributable to bringing the investment property to a working condition for
their intended use.
Any gain or loss on disposal of an investment property (calculated as the
difference between the net proceeds from disposal and the carrying amount of
the item) is recognised in profit or loss. When an investment property that
was previously classified as property, plant and equipment is sold, any
related amount included in the revaluation reserve is transferred to retained
earnings.
When the use of property changes such that it is reclassified as property,
plant and equipment, its fair value at the date of reclassification becomes
its cost for subsequent accounting.
5.8 Property, plant and equipment
Land and buildings are carried at fair value, based on valuations by external
independent valuers, less subsequent accumulated depreciation for buildings
and the subsequent accumulated impairment losses. Revaluations are carried out
at the end of each year and where necessary, semi-annually. Properties under
construction are stated at cost less any accumulated impairment losses. All
other property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses. Any gain or loss on
disposal of an item of property, plant and equipment is recognised in profit
or loss.
Increases in the carrying amount arising on revaluation of property, plant and
equipment are credited to fair value reserve in shareholders' equity.
Decreases that offset previous increases of the same asset are charged against
that reserve; all other decreases are recognised in profit or loss. Increase
is recognised to the profit or loss to the extent that it reverses a
revaluation decrease of the same asset previously recognised in profit or
loss.
The cost of self-constructed assets includes the cost of materials and direct
labour, any other costs directly attributable to bringing the asset to a
working condition for their intended use.
Depreciation charge is recognised in profit or loss on a straight-line basis
over the estimated useful lives of items of property, plant and equipment.
Freehold land is not depreciated.
The annual rates of depreciation are as follows:
Buildings
3%
Machinery and equipment 10% - 33.33%
Motor vehicles and other 10% - 20%
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
The Group recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when that cost is
incurred if it is probable that the future economic benefits embodied with the
item will flow to the Group and the cost of the item can be measured
reliably. All other costs are recognised in profit or loss as incurred.
5.9 Trading properties
Trading properties (inventory) are shown at the lower of cost and net
realisable value. Net realisable value is the estimated selling price in the
ordinary course of the business less the estimated costs of completion and the
estimated costs necessary to make the sale. Cost of trading properties is
determined on the basis of specific identification of their individual costs
and represents the fair value paid at the date that the land was acquired by
the Group.
5.10 Leases
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand-alone prices. However, for the
leases of property the Group has elected not to separate non-lease components
and account for the lease and non-lease components as a single lease
component.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources and makes certain adjustments to
reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the
following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement date;
- amounts expected to be payable under a residual value guarantee;
and
- the exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional renewal period
if the Group is reasonably certain to exercise an extension option, and
penalties for early termination of a lease unless the Group is reasonably
certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is re-measured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is re-measured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of
investment property in 'property, plant and equipment' and lease liabilities
in 'loans and borrowings' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for leases of low-value assets and short-term leases, including IT
equipment. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
5.11 Financial instruments
Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when
they are originated. All other financial assets and financial liabilities are
initially recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant
financing component) or financial liability is initially measured at fair
value plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue. A trade receivable without a
significant financing component is initially measured at the transaction
price.
Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at:
amortised cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition
unless the Group changes its business model for managing financial assets, in
which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
A debt investment is measured at FVOCI if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose objective is achieved
by both collecting contractual cash flows and selling financial assets; and
- its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
On initial recognition of an equity investment that is not held for trading,
the Group may irrevocably elect to present subsequent changes in the
investment's fair value in OCI. This election is made on an
investment‑by‑investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as
described above are measured at FVTPL. This includes all derivative financial
assets. On initial recognition, the Group may irrevocably designate a
financial asset that otherwise meets the requirements to be measured at
amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
Cash and cash equivalents
Cash and cash equivalents comprise cash deposited with banks and bank
overdrafts repayable on demand. Cash equivalents are short-term, highly-liquid
investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. Bank overdrafts
that are repayable on demand and form an integral part of the Group's cash
management are included as a component of cash and cash equivalents for the
purpose of the consolidated statement of cash flows.
Financial assets - Business model assessment
The Group makes an assessment of the objective of the business model in which
a financial asset is held at a portfolio level because this best reflects the
way the business is managed and information is provided to management. The
information considered includes:
- the stated policies and objectives for the portfolio and the
operation of those policies in practice. These include whether management's
strategy focuses on earning contractual interest income, maintaining a
particular interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected cash outflows or
realising cash flows through the sale of the assets;
- how the performance of the portfolio is evaluated and reported
to the Group's management;
- the risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed;
- how managers of the business are compensated - e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cash flows collected; and
- the frequency, volume and timing of sales of financial assets in
prior periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Group's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL.
Financial assets - Assessment whether contractual cash flows are solely
payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making this assessment,
the Group considers:
- contingent events that would change the amount or
timing of cash flows;
- terms that may adjust the contractual coupon rate,
including variable‑rate features;
- prepayment and extension features; and
- terms that limit the Group's claim to cash flows
from specified assets (e.g. non‑recourse features).
A prepayment feature is consistent with the solely payments of principal and
interest criterion if the prepayment amount substantially represents unpaid
amounts of principal and interest on the principal amount outstanding, which
may include reasonable additional compensation for early termination of the
contract. Additionally, for a financial asset acquired at a discount or
premium to its contractual par amount, a feature that permits or requires
prepayment at an amount that substantially represents the contractual par
amount plus accrued (but unpaid) contractual interest (which may also include
reasonable additional compensation for early termination) is treated as
consistent with this criterion if the fair value of the prepayment feature is
insignificant at initial recognition.
· Financial assets at FVTPL: These assets are subsequently measured at
fair value. Net gains and losses, including any interest or dividend income,
are recognised in profit or loss.
· Financial assets at amortised cost: These assets are subsequently
measured at amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses. Interest income, foreign exchange gains
and losses and impairment are recognised in profit or loss. Any gain or loss
on derecognition is recognised in profit or loss.
· Debt investments at FVOCI: These assets are subsequently measured at
fair value. Interest income calculated using the effective interest method,
foreign exchange gains and losses and impairment are recognised in profit or
loss. Other net gains and losses are recognised in OCI. On derecognition,
gains and losses accumulated in Other Comprehensive Income ("OCI") are
reclassified to profit or loss.
· Equity investments at FVOCI: These assets are subsequently measured
at fair value. Dividends are recognised as income in profit or loss unless the
dividend clearly represents a recovery of part of the cost of the investment.
Other net gains and losses are recognised in OCI and are never reclassified to
profit or loss.
Financial liabilities - Classification, subsequent measurement and gains and
losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A
financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit or
loss. Other financial liabilities are subsequently measured at amortised cost
using the effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
The financial liabilities of the Group are measured as follows:
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value, less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in profit or loss over the
period of the borrowings on an effective interest basis.
Trade payables
Trade payables are initially recognised at fair value and are subsequently
measured at amortised cost, using the effective interest rate method.
Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Group neither transfers nor retains substantially all of the
risks and rewards of ownership and it does not retain control of the financial
asset.
The Group enters into transactions whereby it transfers assets recognised in
its statement of financial position, but retains either all or substantially
all of the risks and rewards of the transferred assets. In these cases, the
transferred assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations
are discharged or cancelled, or expire. The Group also derecognises a
financial liability when its terms are modified and the cash flows of the
modified liability are substantially different, in which case a new financial
liability based on the modified terms is recognised at fair value.
On derecognition of a financial liability, the difference between the carrying
amount extinguished and the consideration paid (including any non-cash assets
transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the
Group currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realise the asset and
settle the liability simultaneously.
5.12 Share capital and premium
Share capital represents the issued amount of shares outstanding at their par
value. Any excess amount of capital raised is included in share premium.
External costs directly attributable to the issue of new shares, other than on
a business combination, are shown as a deduction, net of tax, in share premium
from the proceeds. Share issue costs incurred directly in connection with a
business combination are included in the cost of acquisition.
5.13 Dividends
Dividends are recognised as a liability in the period in which they are
declared and approved and are subtracted directly from retained earnings.
5.14 Contract liabilities
Payments received in advance on development contracts for which no revenue has
been recognised yet are recorded as contract liabilities as at the statement
of financial position date.
5.15 Provisions
A provision is recognised in the consolidated statement of financial position
when the Group has a legal or constructive obligation as a result of a past
event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
5.16 Expenses
Investment Manager remuneration, Directors' remuneration, operational
expenses, professional fees, administrative and other expenses are accounted
for on an accrual basis. Expenses are charged to profit or loss, except for
expenses incurred on the acquisition of an investment property, which are
included within the cost of that investment. Expenses arising on the
disposal of an investment property are deducted from the disposal proceeds.
5.17 Impairment
Financial instruments and contract assets
The Group recognises loss allowances for expected credit losses ('ECLs') on:
- financial assets measured at amortised cost;
- debt investments measured at FVOCI; and
- contract assets.
The Group measures loss allowances at an amount equal to lifetime ECLs, except
for the following, which are measured at 12‑month ECLs:
- debt securities that are determined to have low credit risk at
the reporting date; and
- other debt securities and bank balances for which credit risk
(i.e. the risk of default occurring over the expected life of the financial
instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured
at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Group
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group's historical
experience and informed credit assessment and including forward‑looking
information.
The Group assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.
The Group considers a financial asset to be in default when:
- the borrower is unlikely to pay its credit obligations to the
Group in full, without recourse by the Group to actions such as realising
security (if any is held); or
- the financial asset is more than 90 days past due.
Non-financial assets
At each reporting date, the Group reviews the carrying amounts of its
non-financial assets (other than investment property and trading properties)
to determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. Goodwill
is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs. Goodwill arising from
a business combination is allocated to CGUs or groups of CGUs that are
expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs of disposal. Value in use is based on the
estimated future cash flows, discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU
exceeds its recoverable amount. Impairment losses are recognised in profit or
loss. They are allocated first to reduce the carrying amount of any goodwill
allocated to the CGU, and then to reduce the carrying amounts of the other
assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets,
an impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
The Group considers a debt security to have low credit risk when its credit
risk rating is equivalent to the globally understood definition of 'investment
grade'.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12‑month ECLs are the portion
of ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the
instrument is less than 12 months). The maximum period considered when
estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk.
Measurement of ECLs
ECLs are a probability‑weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at
amortised cost and debt securities at FVOCI are credit‑impaired. A financial
asset is 'credit‑impaired' when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have
occurred.
Evidence that a financial asset is credit‑impaired includes the following
observable data:
· significant financial difficulty of the borrower or issuer;
· a breach of contract such as a default or being more than 90
days past due;
· the restructuring of a loan or advance by the Group on terms
that the Group would not consider otherwise;
· it is probable that the borrower will enter bankruptcy or other
financial reorganisation; or
· the disappearance of an active market for a security because of
financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets. For debt securities at FVOCI,
the loss allowance is charged to profit or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof. For individual customers, the Group has a policy of
writing off the gross carrying amount when the financial asset is 180 days
past due based on historical experience of recoveries of similar assets. For
corporate customers, the Group individually makes an assessment with respect
to the timing and amount of write‑off based on whether there is a reasonable
expectation of recovery. The Group expects no significant recovery from the
amount written off. However, financial assets that are written off could still
be subject to enforcement activities in order to comply with the Group's
procedures for recovery of amounts due.
5.18 Revenue recognition
Revenue is measured based on the consideration specified in a contract with a
customer. The Group recognises revenue at a point in time, which is when it
transfers control over the property to the buyer. The buyer obtains control
when the sale consideration is fully settled, and the ownership of the
property is then transferred to the buyer.
5.19 Finance income and costs
The Group's finance income and finance costs include:
- interest income;
- interest expense;
- dividend income.
Interest income or expense is recognised using the effective interest method.
Dividend income is recognised in profit or loss on the date on which the
Group's right to receive payment is established.
The 'effective interest rate' is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is
applied to the gross carrying amount of the asset (when the asset is not
credit-impaired) or to the amortised cost of the liability. However, for
financial assets that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest
rate to the amortised cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross
basis.
5.20 Foreign currency translation
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the exchange rate at
the reporting date. Non-monetary assets and liabilities that are measured at
fair value in a foreign currency are translated into the functional currency
at the exchange rate when the fair value was determined. Non-monetary items
that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction. Foreign
currency differences are generally recognised in profit or loss and presented
within finance costs.
5.21 Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on acquisition, are translated to Euro at exchange
rates at the reporting date. The income and expenses of foreign operations are
translated to Euro at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in OCI and accumulated in the
translation reserve, except to the extent that the translation difference is
allocated to NCI.
When a foreign operation is disposed of in its entirety or partially such that
control, significant influence or joint control is lost, the cumulative amount
in the translation reserve related to that foreign operation is reclassified
to profit or loss as part of the gain or loss on disposal. If the Group
disposes of part of its interest in a subsidiary but retains control, then the
relevant proportion of the cumulative amount is reattributed to NCI. When the
Group disposes of only part of an associate or joint venture while retaining
significant influence or joint control, the relevant proportion of the
cumulative amount is reclassified to profit or loss.
5.22 Segment reporting
A segment is a distinguishable component of the Group that is engaged either
in providing products or services (operating segment), or in providing
products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those
of other segments. Segment results that are reported to the Group's chief
operating decision maker include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
5.23 Earnings per share
The Group presents basic and diluted (if applicable) earnings per share
('EPS') data for its shares. Basic EPS is calculated by dividing the profit or
loss attributable to shareholders of the Company by the weighted average
number of shares outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to shareholders and the weighted
average number of shares outstanding for the effects of all dilutive potential
shares.
5.24 NAV per share
The Group presents NAV per share by dividing the total equity attributable to
owners of the Company by the number of shares outstanding as at the statement
of financial position date.
5.25 Taxation
Income tax
Taxation comprises current and deferred tax. Taxation is recognised in profit
or loss, except to the extent that it relates to a business combination, or
items recognised directly in equity or in other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantially enacted at the
statement of financial position date, and any adjustment to tax payable or
receivable in respect of previous years. Current tax also includes any tax
arising from dividends.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is not recognised for:
- temporary differences on the initial recognition of assets or liabilities
in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss;
- temporary differences related to investments in subsidiaries, associates and
joint arrangements to the extent that the Group is able to control the timing
of the reversal of the temporary differences and it is probable that they will
not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of
goodwill.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences to the extent that it is probable that future
taxable profits will be available against which the temporary difference can
be utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax
benefit will be realised.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities. For this
purpose, the carrying amount of investment property measured at fair value is
presumed to be recovered through sale, and the Group has not rebutted this
presumption.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
5.26 Fair value measurement
'Fair value' is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal or, in its absence, the most
advantageous market to which the Group has access at that date. The fair value
of a liability reflects its non-performance risk.
A number of the Group's accounting policies and disclosures require the
measurement of fair values, for both financial and non-financial assets and
liabilities (Note 2e).
When one is available, the Group measures the fair value of an instrument
using the quoted price in an active market for that instrument. A market is
regarded as 'active' if transactions for the asset or liability take place
with sufficient frequency and volume to provide pricing information on an
ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation
techniques that maximise the use of relevant observable inputs and minimise
the use of unobservable inputs. The chosen valuation technique incorporates
all of the factors that market participants would take into account in pricing
a transaction.
If an asset or a liability measured at fair value has a bid price and an ask
price, then the Group measures assets and long positions at a bid price and
liabilities and short positions at an ask price.
The best evidence of the fair value of a financial instrument on initial
recognition is normally the transaction price - i.e. the fair value of the
consideration given or received. If the Group determines that the fair value
on initial recognition differs from the transaction price and the fair value
is evidenced neither by a quoted price in an active market for an identical
asset or liability nor based on a valuation technique for which any
unobservable inputs are judged to be insignificant in relation to the
measurement, then the financial instrument is initially measured at fair
value, adjusted to defer the difference between the fair value on initial
recognition and the transaction price. Subsequently, that difference is
recognised in profit or loss on an appropriate basis over the life of the
instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.
5.27 Comparatives
Where necessary, comparative figures have been adjusted to conform to changes
in presentation in the current year.
6. revenue
2022 2021
€'000 €'000
Revenue from contracts with customers:
Sale of trading properties - 3,845
Other revenue
Other income 318 858
Total 318 4,703
7. COST OF SALES
2022 2021
€'000 €'000
Sales of trading properties - 2,786
Total - 2,786
8. Change in valuation
Note 2022 2021
€'000 €'000
Loss in fair value of investment property 16 (6,316) (24,240)
(Reversal of)/impairment loss on equity-accounted investees 18 388 (814)
Reversal of impairment loss of property, plant and equipment 15 2,944 615
Impairment of other investments - (209)
Total (2,984) (24,648)
9. SEGMENT REPORTING
As at 31 December 2022 and 31 December 2021, the Group is not considered to
have reportable operating segments that require disclosure. The Group has one
business segment focusing on achieving capital growth through investing in
residential resort developments primarily in south-east Europe.
The geographic information analyses the Group's non-current assets by the
Company's country of domicile. In presenting the geographic information,
segment assets were based on the geographic location of the assets.
Non-current assets
2022 2021
€'000 €'000
Greece 36,469 55,935
Croatia 19,180 18,482
Cyprus 48,214 52,395
At end of year 103,863 126,812
Country risk developments
Greece
According to the OECD, the GDP of Greece was projected to increase by 5.6% in
2022, 1.8% in 2023 and 2.3% in 2024. As COVID containment measures eased in
April 2021, economic activity rebounded, supported by a stronger-than-expected
summer tourist season.
According to the Bank of Greece, in 2022, the balance of travel services
showed a surplus of €15.7bn vs surplus of €9.4bn in 2021 and €15.4bn in
2019.
The government's recovery and resilience plan has boosted activity and
productivity through investments in green transition, upgrading digital
infrastructure and skills, and supporting private firms' investments. However,
further to the unfolding developments with the Ukraine-Russia current
situation, inflation in Greece is now estimated to have peaked at 9.3% in 2022
and to be 4.0% in 2023 according to the IMF. Besides the inflationary
pressure, a very strong tourism season is expected. According to the President
of the Greek Tourism Confederation (SETE), the revenues from Greek tourism
this season may exceed 2019 levels.
Cyprus
Even though Cyprus' economy was negatively affected by rising Covid infection
rates at the end of 2020, a strong recovery of the economy was recorded by the
end of 2021 and this has continued. According to IMF forecasts, a 6.6%
increase in GDP was expected during 2022, reaching almost pre-crisis levels
and it is forecast to be 2.5% for 2023.
Despite the disruption caused by the pandemic and the termination of the
Cyprus Investment Program (CIP), the Real Estate & Construction sector
maintained its position as one of the fastest growing sectors of the economy,
highlighting its resilience and importance to the overall economy according to
the PWC Real Estate Market Report.
However, the current situation in Ukraine has had an impact on Russian
demand, which has been drastically reduced. This also results in a reduction
of tourism, which is a lead-in for interest in real estate. In addition, the
rising inflation and petrol prices, which resulted to the increase of the cost
in travel and materials by c.10%, as well as a VAT charge, affected the
Cyprus market.
Croatia
2022 was defined by a return to normality in Croatia, after the dual crises
of the Covid pandemic and an earthquake in the previous year. According to the
European Commission the economic developments in 2022 point to a full V-shaped
recovery of the Croatian economy. After a drop of 8.1% in 2020, real GDP grew
by 10.4% in 2021 and by 6.2% in 2022. Economic activity and tourism arrival
numbers are expected to benefit strongly from the adoption of the Euro
currency and the admission of Croatia into the Schengen passport zone on
1.1.23.
10. PROFESSIONAL FEES
2022 2021
€'000 €'000
Legal fees 383 398
Auditors' remuneration (see below) 261 328
Accounting expenses 241 200
Appraisers' fees 9 24
Project design and development fees 133 607
Consultancy fees 338 218
Administrator fees 270 136
Other professional fees 352 238
Total 1,987 2,149
2022 2021
€'000 €'000
Auditors' remuneration comprises the following fees:
Audit and other audit related services 261 328
Total 261 328
11. ADMINISTRATIVE AND OTHER EXPENSES
2022 2021
€'000 €'000
Travelling and accommodation 132 102
Insurance 75 58
Marketing and advertising expenses 66 50
Personnel expenses (see below) 568 633
Immovable property and other taxes 243 205
Rents 120 91
Other 410 130
Total 1,614 1,269
Personnel expenses
2022 2021
€'000 €'000
Wages and salaries 423 476
Compulsory social security contributions 50 51
Other personnel costs 95 106
Total 568 633
The average number of employees employed by the Group 27* 27*
*The vast majority consists of workers/archaeologists at Kilada
12. Finance costS
2022 2021
Recognised in profit or loss €'000 €'000
Interest income 4 16
Exchange difference 69 -
Finance income 73 16
Interest expense (2,891) (1,812)
Transaction costs and other financing expenses (43) (1,139)
Bank charges (63) (43)
Exchange difference - (16)
Finance costs (2,997) (3,010)
Net finance costs recognised in profit or loss (2,924) (2,994)
2022 2021
€'000 €'000
Recognised in other comprehensive income
Foreign currency translation differences (56) (2,245)
Finance costs recognised in other comprehensive income (56) (2,245)
13. Taxation
2022 2021
€'000 €'000
RECOGNISED IN PROFIT OR LOSS
Income tax expense
Current year 1 10
Other 6 119
7 129
Deferred tax expense
On valuation loss of investment properties (see note 24) (19) (1,399)
(19) (1,399)
Taxation recognised in profit or loss (12) (1,270)
Reconciliation of taxation based on taxable loss and taxation based on
accounting loss:
2022 2021
€'000 €'000
Loss before taxation (5,808) (21,243)
Taxation using domestic tax rates (808) (3,442)
Effect of valuation loss on properties (19) (1,379)
Non-deductible expenses 654 3,186
Tax-exempt income (562) -
Current year losses for which no deferred tax is recognised 716 240
Other 7 125
Total (12) (1,270)
As a company incorporated under the BVI International Business Companies Act
(Cap. 291), the Company is exempt from taxes on profits, income or dividends.
Each company incorporated in BVI is required to pay an annual government fee,
which is determined by reference to the amount of the company's authorised
share capital.
In Greece, the corporation tax rate applicable to profits is 22% (22% in
2021). Tax losses of Greek companies are carried forward to reduce future
profits for a period of five years.
The profits of the Cypriot companies of the Group are subject to a corporation
tax rate of 12.50% on their total taxable profits. Tax losses of Cypriot
companies are carried forward to reduce future profits for a period of five
years. In addition, the Cypriot companies of the Group are subject to a 3%
special contribution tax on rental income. Under certain conditions, interest
income may be subject to a special contribution tax at the rate of 30%. In
such cases, this interest is exempt from corporation tax.
In Croatia, the corporation tax rate is 18%. Tax losses of Croatian
companies are carried forward to reduce future profits for a period of five
years.
14. LOSS per share
Basic loss per share
Basic loss per share is calculated by dividing the loss attributable to owners
of the Company by the weighted average number of common shares outstanding
during the year.
2022 2021
'000 '000
Loss attributable to owners of the Company (€) (6,924) (21,343)
Number of weighted average common shares outstanding 904,627 904,627
Basic loss per share (€) (0.01) (0.02)
Loss attributable to owners of the Company
2022 2021
€'000 €'000
Loss attributable to owners of the Company (6,924) (21,343)
Profit attributable to non-controlling interests 1,128 1,370
Total (5,796) (19,973)
Weighted average number of common shares outstanding 2022 2021
'000 '000
Outstanding common shares at the beginning and end of the year 904,627 904,627
Diluted loss per share
As at 31 December 2022 and 2021, the diluted loss per share is the same as the
basic loss per share, as there were no outstanding dilutive potential ordinary
shares (a financial instrument or other contract that, when converted to
ordinary shares, would decrease earnings per share or increase loss per share)
during these years.
15. Property, plant and equipment
Property under construction Land & Machinery & equipment
€'000 buildings €'000 Other Total
€'000 €'000 €'000
2022
Cost or revalued amount
At beginning of year 5,683 20,445 366 45 26,539
Direct acquisitions 3,241 12 11 - 3,264
At end of year 8,924 20,457 377 45 29,803
Depreciation and impairment
At beginning of year - 17,080 357 33 17,470
Depreciation charge for the year - 38 9 1 48
Reversal of impairment loss (note 8) - (2,944) - - (2,944)
Exchange difference - - (1) 4 3
At end of year - 14,174 365 38 14,577
Carrying amounts 8,924 6,283 12 7 15,226
2021
Cost or revalued amount
At beginning of year 2,054 20,445 361 39 22,899
Direct acquisitions 3,629 6 10 6 3,651
Disposals through subsidiary disposal - (6) (5) - (11)
At end of year 5,683 20,445 366 45 26,539
Depreciation and impairment
At beginning of year - 17,665 349 30 18,044
Depreciation charge for the year - 36 11 1 48
Disposals through subsidiary disposal - (6) (3) - (9)
Reversal of impairment loss (note 8) - (615) - - (615)
Exchange difference - - - 2 2
At end of year - 17,080 357 33 17,470
Carrying amounts 5,683 3,365 9 12 9,069
The carrying amount at year end of land and buildings, if the cost model was
used, would have been €6.3 million (2021: €3.3 million). Land and
buildings include right-of-use assets of €442 thousand (2021: €442
thousand) related to leased properties that do not meet the definition of
investment property.
Fair value hierarchy
The fair value of land and buildings, amounting to €6,283 thousand (2021:
€3,365 thousand), has been categorised as a Level 3 fair value based on the
inputs to the valuation techniques used.
The following table shows a reconciliation from opening to closing balances of
Level 3 fair value.
2022 2021
€'000 €'000
At beginning of year 3,365 2,780
Acquisitions 12 6
Gains/(losses) recognised in profit or loss
Reversal of impairment loss and write offs in 'Change in valuations' 2,944 615
Depreciation in 'Depreciation charge' (38) (36)
At end of year 6,283 3,365
Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in measuring land and
buildings, as well as the significant unobservable inputs used.
Property location Valuation technique (note 3) Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement
Property in Greece - Hotel complexes Income approach Room occupancy rate (annual): 2022: 32% to 44% The estimated fair value would increase/(decrease) if:
(weighted average: 42%)
2021: 45% to 52% Room occupancy rate was higher/(lower);
(weighted average: 51%) Average daily rate per occupied room was higher/(lower);
Average daily rate per occupied room: 2022: €950 to €1,186 Gross operating margin was higher/(lower);
(weighted average: €1,064) Terminal capitalisation rate was lower/(higher);
2021: €546 to €738 Risk-adjusted discount rate was lower/(higher).
(weighted average: €673)
Gross operating margin rate: 2022: 20% to 35%
(weighted average: 33%)
2021: 24% to 38%
(weighted average: 36%)
Terminal capitalisation rate: 2022: 8% (2021: 8%)
Risk-adjusted discount rate: 2022: 12% (2021: 11%)
Combined approach (Income and Cost) Income approach (for land components) The estimated fair value would increase/(decrease) if:
Net operating income per m(2): 2022: €53 to €328
2021: €53 to €328 Net operating income per m2 was higher/(lower);
Cash flow velocity (years): 2022: 10 (2021: 11) Cash flow velocity was shorter/(longer);
Terminal capitalisation rate: 2022: 11% (2021: 9%) Terminal capitalisation rate was lower/(higher);
Risk-adjusted discount rate: 2022: 12% (2021: 11%) Risk-adjusted discount rate was lower/(higher);
Cost approach (for building components) Replacement cost (new) per m2 was higher/(lower);
Replacement cost (new) per m(2): 2022: €600 - €1,500 Entrepreneurial profit rate was higher/(lower);
2021: €500 - €1,100 Depreciation rate was lower/(higher).
Entrepreneurial profit rate: 2022: 20% (2021: 20%)
Depreciation rate: 2022: 40% (2021: 38%)
Useful life (years): 2022: 60 (2021: 60)
Sensitivity of fair value measurement to change in unobservable inputs
Given the uncertainties in the market, any changes in unobservable inputs may
lead to measurement with significantly higher or lower fair value. A variation
of the discount rate would affect the fair value of property in Greece - Hotel
Complexes as follows:
Change in Impact on fair value
Assumption 2022
Increase (Decrease)
Discount Rate % €'000 €'000
- Hotel Complexes in Greece 1.00% 2,672 (2,232)
16. Investment property
2022 2021
Note €'000 €'000
At beginning of year 52,188 76,303
Capital subsequent expenditure 75 21
Fair value adjustment 8 (6,316) (24,240)
Exchange differences (4) 104
At end of year 45,943 52,188
As at 31 December 2022 and 31 December 2021, part of the Group's immovable
property is held as security for bank loans (see note 23).
Changes in fair value are recognised as gain/(losses) in profit or loss and
included in "Change in Valuation" (see note 8). All such gains/(losses) are
unrealised.
Part of investment property includes land acquired by Golfing Developments
S.A. ("Golfing"), a subsidiary company and owner of the Lavender Bay Resort,
from third parties and also right-of-use assets on land leased by third
parties. It should be noted that in 2010, the Greek State Real Estate Service
disputed part of this land owned by Golfing as belonging to the Greek State.
In 2011, the vendor of the land lodged an objection (administrative appeal) to
the Directorate of Public Property of the Ministry of Finance, requesting the
review of the conclusion of the Real Estate Service report, as well as the
Final report of the inspector of the Ministry of Finance. Golfing proceeded to
various legal actions in order to indicate its ownership of the land at that
time. As part of these legal proceedings, the Courts had issued a decision in
2019 as part of a criminal law procedure, indicating that there were no
grounds indicating the public nature of Golfing's land.
In September 2021, the Greek Council for Public Properties issued an Opinion
claiming that a part of the overall land comprising 843,114m(2), amounting to
€2.4 million as at 31 December 2022 (2021: €3.2 million) and included in
Investment Property as of 31 December 2022 and 2021 respectively, that was
sold from the Archdiocese of Dimitriada ('Vendor') to Golfing in 2006 and
2007, belonged to the Greek State disputing the private character of the land.
This Opinion was adopted by the Ministry of Finance in January 2022, who took
steps to register the property in the name of the Greek State at the local
land registries in April and May 2022. This adoption constitutes a unilateral
administrative act and if it is found to be incorrect or illegal, it can be
revoked. The Company intends to proceed to an appeal to the Greek courts
claiming its ownership of the disputed land, based on Golfing's and the
Company's relevant Board of Directors decision that was taken at its meetings
on 15 June 2022 and 22 June 2022, respectively.
In addition, the Greek Council for Public Properties disputed the ownership
rights of the Vendor on the land leased to Golfing in 2006 and 2007 of
2,097,443 m(2), from which 1,746,334 m(2) are activated leased contracts, of
an amount of €1.2 million included in Investment Property as of 31 December
2022 (2021: €1.9 million), for which, though, no final opinion was issued by
this Council. Golfing and the Vendor proceeded to legal actions relating to
this dispute as well in January 2022.
The Group believes, based on legal assessments, that the unilateral
registration of the property in the name of the Greek State, does not
establish and does nor constitute a title deed or a court decision and,
therefore does not lead to the loss of property rights of Golfing but the
Greek State disputes the private character of the above land of 843,114m(2) of
Golfing, indicating its public character.
Although the dispute is considered as a significant obstacle to the
continuation of the investment in the project, Golfing continues to recognize
the respective land under its assets as investment property of Golfing, on the
basis of legal evidence of ownership of the land as described above.
Golfing, based on third party valuation experts, proceeded to the assessment
of fair value of the respective land included in investment property and
recorded a negative adjustment of €1.5 million as at 31 December 2022 (2021:
€13.2 million) in 'Loss in fair value of investment property' in profit or
loss in 2022 and 2021 including a significant downward adjustment to account
for the estimated uncertainty relating to the above case.
Fair value hierarchy
The fair value of investment property, amounting to €45.9 million and (2021:
€52.2 million), has been categorised as a Level 3 fair value based on the
inputs to the valuation techniques used.
Valuation techniques and significant unobservable inputs
The following table shows the valuation techniques used in measuring the fair
value of investment property, as well as the significant unobservable inputs
used.
Property location Valuation technique (see note 3) Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement
Property in Greece Combined approach (Market and Income) Market approach - 60% weight The estimated fair value would increase/(decrease) if:
Asking prices per m(2): 2022: €13 to €29 A
s
k
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g
p
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i
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(
2
)
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e
r
/
(
l
o
w
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r
)
;
2021: €8 to €26 P
r
e
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u
m
s
w
e
r
e
h
i
g
h
e
r
/
(
l
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)
;
Premiums/(discounts) on the following: D
i
s
c
o
u
n
t
s
w
e
r
e
l
o
w
e
r
/
(
h
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)
;
Location: 2022: 0% W
e
i
g
h
t
s
o
n
c
o
m
p
a
r
a
b
l
e
s
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r
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h
i
g
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/
(
l
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)
;
2021: -10% to 0% W
e
i
g
h
t
s
o
n
c
o
m
p
a
r
a
b
l
e
s
w
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d
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t
s
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e
r
e
l
o
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/
(
h
i
g
h
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)
;
Site size: 2022: 0% Q
u
a
n
t
i
t
y
o
f
v
i
l
l
a
s
w
a
s
h
i
g
h
e
r
/
(
l
o
w
e
r
)
;
2021: 0% S
e
l
l
i
n
g
p
r
i
c
e
p
e
r
m
(
2
)
w
a
s
h
i
g
h
e
r
/
(
l
o
w
e
r
)
;
Asking vs transaction: 2022: -30% to -20% E
x
p
e
c
t
e
d
a
n
n
u
a
l
g
r
o
w
t
h
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e
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l
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e
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a
s
h
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/
(
l
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)
;
2021: -30% to -20% C
a
s
h
f
l
o
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v
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t
y
w
a
s
s
h
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t
e
r
/
(
l
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g
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r
)
;
Frontage sea view: 2022: 0% R
i
s
k
-
a
d
j
u
s
t
e
d
d
i
s
c
o
u
n
t
r
a
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w
a
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l
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/
(
h
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)
.
2021: 0%
Maturity/development potential: 2022: 0% to +30%
2021: +10% to +30%
Weight allocation: 2022: +15% to +20%
2021: +5% to +25%
Discount on market approach value:
Legal status: 2022: -85% (2021: -80%)
Income approach - 40% weight
Quantity of villas: 2022: 447 (2021: 447)
Selling price per m(2): 2022: €2,900
2021: €2,800
Expected annual growth in selling price: 2022: from year 3: 3%
2021: from year 3: 3%
Cash flow velocity (years): 2022:14 (2021: 13)
Risk-adjusted discount rate: 2022: 18% (2021: 14%)
Discount on combined approach value:
Legal status: 2022: -85% (2021: -80%)
Property in Greece Market approach Asking prices per m(2): 2022: €1 to €88 The estimated fair value would increase/(decrease) if:
2021: €1 to €94 Asking prices per m(2) were higher/(lower);
Premiums/(discounts) on the following: Premiums were higher/(lower);
Location: 2022: -40% to +30% Discounts were lower/(higher);
2021: -40% to +10% Weights on comparables with premiums were higher/(lower);
Site size: 2022: -50% to +20% Weights on comparables with discounts were lower/(higher).
2021: -50% to +10%
Asking vs transaction: 2022: -30% to 0%
2021: -30% to 0%
Frontage sea view: 2022: -30% to +30%
2021: 0% to +30%
Maturity/development potential: 2022: -50% to +30%
2021: -20% to +50%
Zoning: 2022: -30%
2021: -30%
Other: 2022: -30% to +50%
2021: -20% to +30%
Strategic investment approval: 2022: 20%
2021: 20%
Weight allocation: 2022: +10% to +40%
2021: +5% to +60%
Discount on market approach value:
Legal status: 2022: -85% (2021: -80%)
Property in Cyprus Market approach Asking prices per m(2): 2022: €1 to €349 The estimated fair value would increase/(decrease) if:
2021: €1 to €349 Asking prices per m(2) were higher/(lower);
Premiums/(discounts) on the following: Premiums were higher/(lower);
Location: 2022: -10% to +20% Discounts were lower/(higher);
2021: -10% to +20% Weights on comparables with premiums were higher/(lower);
Site size: 2022: -40% to 0% Weights on comparables with discounts were lower/(higher).
2021: -40% to 0%
Asking vs transaction: 2022: -20% to +20%
2021: -15% to +20%
Frontage sea view: 2022: -10% to +30%
2021: -10% to +30%
Maturity/development potential: 2022: -20% to 0%
2021: -20% to +50%
Weight allocation: 2022: +5% to +30%
2021: +5% to +30%
Property Market Asking prices per m(2): 2022: €3 to €96 The estimated fair value would increase/(decrease) if:
in Croatia approach 2021: €3 to €96 Asking prices per m(2) were higher/(lower);
Premiums/(discounts) on the following: Premiums were higher/(lower);
Location: 2022: -5% to 0% Discounts were lower/(higher);
2021: -5% to 0% Weights on comparables with premiums were higher/(lower);
Site size: 2022: -20% to -15% Weights on comparables with discounts were lower/(higher).
2021: -15% to -10%
Asking vs transaction: 2022: 0%
2021: 0%
Quality factor: 2022: -5% to +15%
2021: -5% to +15%
Capacity: 2022: -5% to +10%
2021: -5% to +10%
Weight allocation: 2022: +10% to +33%
2021: +25% to +33%
Sensitivity of fair value measurement to change in unobservable inputs
Given the uncertainties in the market, any changes in unobservable inputs may
lead to measurement with significantly higher or lower fair value. A variation
of the annual estimated fair value per square meter would affect the fair
value of investment properties per square meter as follows:
Change in Impact on fair value
Assumption 2022 2021
Annual estimated fair value Increase (Decrease) Increase (Decrease)
per square meter % €'000 €'000 €'000 €'000
- Property in Greece 10% 2,023 (2,023) 2,248 (2,248)
- Property in Croatia 10% 1,770 (1,770) 1,700 (1,700)
- Property in Cyprus 10% 552 (552) 970 (970)
17. OTHER INVESTMENTS
Other investments consisted of the Company's previous holding in Itacare
Capital Investments Limited. Following the decision by Itacare's shareholders
to dispose of all its assets and after a series of asset sales/swaps, the
investment was classified as a current asset. In 2021, Itacare paid an interim
dividend of €326,000 to the Company, the investment was then subsequently
impaired to the expected value of the final distribution, €99,000. During
the year the Company received the final distribution and the investment was
fully disposed.
18. equity-accounted investees
DCI H2 SPV14 Total
Note €'000 €'000 €'000
2022
At beginning of year 42,694 22,861 65,555
Share of loss, net of tax (388) (1,397) (1,785)
Disposal of Associate - (21,464) (21,464)
Reversal of impairment loss 8 388 - 388
At end of year 42,694 - 42,694
2021
At beginning of year 42,694 17,980 60,674
Share of profits, net of tax 814 5,159 5,973
Share of revaluation surplus - (278) (278)
Impairment loss 8 (814) - (814)
At end of year 42,694 22,861 65,555
Single Purpose Vehicle Fourteen Limited ('SPV 14')
On 23 December 2022 it was announced that the Company had completed the
disposal of its entire interest in the One&Only at Kea Island ('OOKI')
Project. Prior to the sale, the Company was the owner of 66.67% of Single
Purpose Vehicle Ten Ltd ('SPV10') which, in turn, indirectly owned 50% of SPV
14, thereby providing the Company with an effective equity interest of 33.33%
in SPV 14 and the OOKI project.
Under the share purchase agreement ("SPA") singed on 13 October 2022 SPV10
received €26.9 million for the 50% ownership of SPV14. At the time of the
disposal the value of the associate was €21.5 million, following a €1.4
million share of losses recognised, as a result the gain on the disposal was
€5.4 million.
Pursuant to the sale, the Company received a net consideration, in aggregate
of €17.9 million. From these disposal proceeds, an amount of €13 million
was applied towards the repayment in full by 31 December 2022 of the existing
loan facility that Company drew down on 7 June and 16 July 2021. All remaining
proceeds from the sale of SPV10 was retained by Company for use as working
capital.
DCI Holdings Two Limited ("DCI H2")
Since 31 December 2020, the Company's holding of 47.9% in DCI H2 (owner of
Aristo Developers Ltd, 'Aristo'), has been classified as an associate. An
impairment loss was recognised in 2016, based on an agreement to dispose of
the entire 49.75% shareholding in DCI H2 then owned, for the amount of €45
million. The Group subsequently disposed of 1.82% and as a result the
Company's investment in DCI H2 reduced to 47.9% at a value of €42.7 million,
which the Group estimates to be the recoverable amount as at the end of the
reporting period. The recoverable amount is calculated based on the NAV of DCI
H2 group at the reporting date adjusted by approximately 34% discount on the
DCI H2 group's real estate properties. The fair value of the investment in DCI
H2 has been categorised as a Level 3 fair value based on the inputs to the
valuation techniques used.
The details of the above investments are as follows:
Country of Shareholding interest
Name incorporation Principal activities 2022 2021
SPV 14 Cyprus Development of OOKI Resort - 33%
DCI H2 BVIs Acquisition and holding of real estate investments in Cyprus 48% 48%
The above shareholding interest percentages are rounded to the nearest
integer.
As at 31 December 2021, SPV 14 had €23.4 million contractual capital
commitments on property, plant and equipment. Also, as at 31 December 2022,
DCI H2 had €3.5 million (2021; €3.5 million) contractual capital
commitments on investment property.
The following table summarises the financial information of DCI H2 and SPV 14
as included in their own financial statements, the table also reconciles the
summarised financial information to the carrying amount of the Group's
interest in equity-accounted investees:
DCI H2 SPV 14 Total
€'000 €'000 €'000
Percentage ownership interest 48% -% 48%
31 December 2022
Current assets 105,293 - 105,293
Non-current assets 208,873 - 208,873
Total assets 314,166 - 314,166
Current liabilities 69,943 - 69,943
Non-current liabilities 57,367 - 57,367
Total liabilities 127,310 - 127,310
Net assets 186,856 - 186,856
Group's share of net assets 89,560 - 89,560
Impairment (46,866) - (46,866)
Carrying amount of interest in investee 42,694 - 42,694
Revenues 46,986 - 46,986
Profit (810) (2,793) (3,603)
Other comprehensive income - - -
Total comprehensive income (810) (2,793) (3,603)
Group's share of total comprehensive income (388) (1,397) (1,785)
DCI H2 SPV 14 Total
€'000 €'000 €'000
Percentage ownership interest 48% 50%
31 December 2021
Current assets (1) 123,989 40,658 164,647
Non-current assets 204,403 32,305 236,708
Total assets 328,392 72,963 401,355
Current liabilities (2) 84,357 13,832 98,189
Non-current liabilities (3) 56,368 13,409 69,777
Total liabilities 140,725 27,241 167,966
Net assets 187,667 45,722 233,389
Group's share of net assets 90,080 22,861 112,941
Impairment (47,386) - (47,386)
Carrying amount of interest in investee 42,694 22,861 65,555
Revenues 37,917 - 37,917
Profit (4) 1,699 10,317 12,016
Other comprehensive income - (555) (555)
Total comprehensive income 1,699 9,762 11,461
Group's share of total comprehensive income 814 4,881 5,695
The financial information of SPV 14, includes the following:
(1) Cash and cash equivalents - 2021: €6,020 thousand
(2) Non-current financial liabilities excluding trade and other payables
and provisions - 2021: €8,578 thousand
(3) Current financial liabilities excluding trade and other payables and
provisions - 2021: €769 thousand
(4) Depreciation - 2021: €29 thousand, Finance expense - 2021: €16
thousand, and Income tax expense - 2021: €20 thousand
19. Trading properties
2022 2021
€'000 €'000
At beginning of year 56,516 59,769
Disposals - (3,253)
At end of year 56,516 56,516
Trading properties comprise land to be sold and to be developed into villas
and holiday houses.
20. RECEIVABLES AND OTHER ASSETS
2022 2021
Note €'000 €'000
Trade receivables 90 45
Other receivables 939 176
Loan Receivable 28.3.1 6,637 -
Amounts Receivable from Investment Manager 28.2 1,898 -
VAT receivables 509 859
Total Trade and other receivables (see note 31) 8,175 1,080
Amounts Receivable from Investment Manager 28.2 1,898 -
Prepayments and other assets 10 12
Total 10,083 1,092
The amount receivable from Investment Manager relates to €3.0 million of
advance payments made (2021: €Nil) net of variable management fee payable of
€1.1 million (2021: €1.3 million). See note 28.2 for further information.
21. Cash and cash equivalents
2022 2021
€'000 €'000
Bank balances (see note 31) 2,226 4,565
Cash in hand - 10
Total 2,226 4,575
22. capital and reserves
Capital
Authorised share capital
2022 2021
'000 of shares €'000 '000 of shares €'000
Common shares of €0.01 each 2,000,000 20,000 2,000,000 20,000
Movement in share capital and premium
Shares in issue Share capital Share premium
'000 €'000 €'000
Capital at 1 January 2022 and to 31 December 2022 904,627 9,046 569,847
Reserves
Translation reserve: Translation reserve comprises all foreign currency
differences arising from the translation of the financial statements of
foreign operations.
Revaluation reserve: Revaluation reserve relates to the revaluation of
property, plant and equipment from both subsidiaries and equity-accounted
investees, net of any deferred tax.
23. loans AND BORROWINGS
Total Within one year Two to five years
2022 2021 2022 2021 2022 2021
€'000 €'000 €'000 €'000 €'000 €'000
Loans in Euro 4,611 17,391 4,611 4,743 - 12,648
Redeemable preference shares 10,434 7,477 - - 10,434 7,477
Total 15,045 24,868 4,611 4,743 10,434 20,125
Loans denominated in Euros
On 3 June 2021 the Company entered into a €15 million senior secured term
loan facility agreement with two institutional private credit providers acting
on behalf of their managed and advised funds. The nominal interest rate is
12.5% p.a. and the initial maturity date fell 18 months from the loan
draw-down and was subject to a six-month extension was at the Company's option
with a 2% p.a. interest step-up. The facility agreement included mandatory
prepayment clauses with regard to revenues realised by the Company from the
disposal of its assets as well as standard event of default provisions
including, inter alia, borrower change of control, termination of investment
management agreement and cancelation of existing borrower securities listing.
Following the sale of SPV10, the completion of OOKI disposal (as mentioned in
note 18) part of the disposal proceeds were applied towards the repayment in
full of this loan. As at 31 December 2022 the outstanding balance of this loan
was €Nil (2021: €12.6 million).
In the prior year, the maturity date of the outstanding loan of Azurna (the
owner of "Livka Bay") was extended to 31 December 2022. This maturity date was
further extended to 31 December 2023. During the year an amount of €353
thousand was paid in regard to the Azurna loan including principal and
interest (2021: €1,891 thousand).
Redeemable preference shares
On 18 December 2019, the Company signed an agreement with an international
investor for a €12 million investment in the Kilada Hills Project. The
investor agreed to subscribe for both common and preferred shares. The total
€12 million investment was payable in 24 monthly instalments of €500,000
each. Under the terms of the agreement, the investor is entitled to a priority
return of the total investment amount from the net disposal proceeds realised
from the project and retains a 15% shareholding stake in Kilada. As of 31
December 2022, 15.00% (2021: 11.58%) of the ordinary shares have been
transferred to the investor.
As of 31 December 2022, 12,000 redeemable preference shares (2021: 9,000) were
issued as fully paid with value of €1,000 per share. The redeemable
preference shares were issued with a zero-coupon rate and are discounted with
a 0.66% effective monthly interest rate, do not carry the right to vote and
are redeemable when net disposal proceeds are realised from the Kilada
Project. As at 31 December 2022, the fair value of the redeemable preference
shares was €10.4 million (2021: €7.3 million).
Terms and conditions of the loans
The terms and conditions of outstanding loan were as follows:
Secured loan Currency Interest rate Maturity dates 2022 2021
€'000 €'000
Livka Bay Euro Euribor plus 4.25% p.a. 2023 4,611 4,743
Kilada Euro Fixed rate of 12.5% p.a. with a 2% p.a. additional interest if extended 2023 - 12,648
Total interest-bearing liabilities 4,611 17,391
Security given to lenders
As at 31 December 2022, the Group's loans were secured as follows:
· Regarding the senior term loan facility which was paid in
December 2022, a fixed and floating charges remains over all of the Company's
assets including all of the shares in DCI Holdings One Ltd, fixed charge over
the interest reserve account, pledges over the shares of DolphinCI Twenty-Four
Ltd and the subsidiaries in Kilada Hills and Apollo Project and assignments
and charges over intercompany loans. This charge is expected to be released in
coming months.
· Regarding the Kilada preference shares, upon transfer of the
entire amount of €12 million from the investor in accordance with the terms
of the agreement, a mortgage is set against the immovable property of the
Kilada Hills Project, in the amount of €15 million (2021: €15 million).
· Regarding the Livka Bay loan, a mortgage against the immovable
property of the Croatian subsidiary, Azurna (the owner of "Livka Bay"), with a
carrying value of €17.7 million (2021: €17.0 million), two promissory
notes, a debenture note and a letter of support from its parent company
Single Purpose Vehicle Four Limited.
· In addition, the development at OOKI was partly funded by a
construction loan which was secured over its assets and those of Scorpio Bay
asset. Steps are being taken to remove the security over Scorpio Bay now that
we have sold our interest in OOKI.
Reconciliation of movements of liabilities to cash flows arising from
financing activities
Loans and borrowings Lease Non-controlling interests Total
€'000 liabilities €'000 €'000
€'000
2022
Balance at the beginning of the year 24,868 3,420 8,942 37,230
Changes from financing cash flows:
Issue of redeemable preference shares 3,000 - - 3,000
New loans - - - -
Transaction costs related to loans and borrowings - - - -
Repayment of loans and borrowings (12,370) - - (12,370)
Payment of lease liability - (8) - (8)
Dividends Paid - - (2,250) (2,250)
Interest paid (2,363) - - (2,363)
Other movements (620) - 620 -
Total changes from financing cash flows (12,353) (8) (1,630) (13,991)
Other changes- Liability-related
Interest expense 2,535 23 - 2,558
Other movements (5) - 1,128 1,123
Total liability-related other changes 2,530 23 1,128 3,681
Balance at the end of the year 15,045 3,435 8,440 26,920
Loans and borrowings Lease Non-controlling interests Total
€'000 liabilities €'000 €'000
€'000
2021
Balance at the beginning of the year 9,046 3,405 6,523 18,974
Changes from financing cash flows:
Issue of redeemable preference shares 5,500 - - 5,500
New loans 14,063 - - 14,063
Transaction costs related to loans and borrowings (90) - - (90)
Repayment of loans and borrowings (3,611) - - (3,611)
Payment of lease liability - (8) - (8)
Interest paid (726) - - (726)
Other movements (1,138) - 1,138 -
Total changes from financing cash flows 13,998 (8) 1,138 15,128
Other changes- Liability-related
Interest expense 1,682 23 - 1,705
Other movements 142 - 1,281 1,423
Total liability-related other changes 1,824 23 1,281 3,128
Balance at the end of the year 24,868 3,420 8,942 37,230
24. Deferred tax liabilities
2022 2021
€'000 €'000
Balance at the beginning of the year 6,609 8,000
Recognised in profit or loss (see note 13) (19) (1,399)
Exchange differences (13) 8
Balance at the end of the year 6,577 6,609
Deferred tax liabilities are attributable to the following:
2022 2021
€'000 €'000
Investment properties 2,215 2,247
Trading properties 4,299 4,299
Property, plant and equipment 63 63
Total 6,577 6,609
25 Lease liabilities
The major lease obligations comprise leases in Greece with 99-year lease
terms, for which, as mentioned in note 16, the Greek State disputed the
ownership rights of the lessor.
2022 2021
€'000 €'000
Non-current 3,347 3,331
Current 88 89
Total 3,435 3,420
26. Trade and other payables
2022 2021
€'000 €'000
Land creditor 20,752 20,752
Investment Management fees (see note 28.2) - 1,301
Other payables and accrued expenses 6,332 4,115
Total 27,084 26,168
2022 2021
€'000 €'000
Non-current 19,795 20,089
Current 7,289 6,079
Total 27,084 26,168
Land creditors relate to contracts in connection with the purchase of land at
Lavender Bay from the Church. The above outstanding amount bears an annual
interest rate equal to the inflation rate, which cannot exceed 2% p.a.. Full
settlement is due on 31 December 2025. As mentioned in note 16, the Group is
in negotiations with the land creditor with a view to ensuring that no
additional funds are paid to them under the sale and purchase contracts until
the resolution of the legal dispute with the Greek State and, also to reduce
the overall quantum of the Group's deferred liabilities to them, potentially
swapping all or part of the deferred payments against equity in the project.
27. NAV per share
2022 2021
'000 '000
Total equity attributable to owners of the Company (€) 112,107 119,087
Number of common shares outstanding at end of year 904,627 904,627
NAV per share (€) 0.12 0.13
28. Related party transactions
28.1 Directors' interest and remuneration
Directors' interests
Miltos Kambourides is the founder and managing partner of the Investment
Manager whose IMA was terminated on 20 March 2023.
Martin Adams, Nick Paris and Nicolai Huls were non-executive Directors
throughout 2022, with Mr. Martin Adams serving as Chairman of the Board of
Directors. On 10 February 2023, Martin Adams resigned as a Director and Sean
Hurst was appointed as a non-executive Director and Chairman.
The interests of the Directors as at 31 December 2022, all of which are
beneficial, in the issued share capital of the Company as at this date were as
follows:
Shares
'000
Miltos Kambourides (indirect holding)* 66,019
Nicolai Huls 775
Nick Paris 1,634
* Miltos Kambourides is 75% shareholder of Dolphin Capital Partners that held
88,025,342 shares. Following the year end Dolphin Capital Partners disposed of
all their shares in the Company.
Save as disclosed in this Note, none of the Directors had any interest during
the year in any material contract for the provision of services which was
significant to the business of the Group. Although the Directors believe that
DCP with whom Miltos Kambourides is connected acquired an undisclosed option
after the call of Amanzoe by the Company in August 2018.
Directors' remuneration
2022 2021
€'000 €'000
Remuneration 200 323
Total remuneration 200 323
The Directors' remuneration details for the years ended 31 December 2022 and
31 December 2021 were as follows:
2022 2021
€'000 €'000
Martin Adams 75 37
Nick Paris 65 33
Nicolai Huls 65 30
Andrew Coppel (stepped down on 30 June 2021) - 118
Graham Warner (stepped down on 30 June 2021) - 72
Mark Townsend (stepped down on 30 June 2021) - 33
Total 205 323
Miltos Kambourides waived his fees for both 2022 and 2021.
28.2 Investment Manager remuneration
2022 2021
€'000 €'000
Fixed management fee - 3,600
Total remuneration - 3,600
Variable management fee payable (1,075) (1,300)
Project Fees (2) (1)
Incentive fee advance payments 2,975 -
Amount Receivable from /(Payable to) Investment Manager 1,898 (1,301)
On 9 April 2019, the Company signed an Amended and Restated Investment
Management Agreement ('IMA'), which was effective from 1 January 2019. The
details of it were as follows:
i. Fixed investment management fee
No fixed management fee was due after 31 December 2021.The annual investment
management fees for 2021 was previously €3.6 million per annum.
ii. Variable investment management fee
The variable investment management fee for the period from 1 January 2020 to
31 December 2021 was equal to a percentage of the actual distribution made by
the Company to its shareholders, as shown below:
Aggregate Shareholder Distributions % applied
on Distributions
Up to but excluding €30 million Nil
€30 million up to but excluding €50 million 2.0%
€50 million up to but excluding €75 million 3.0%
€75 million up to but excluding €100 million 4.0%
€100 million up to but excluding €125 million 5.0%
€125 million or more 6.0%
The Investment Manager was entitled to a performance fee payable subject to
certain conditions, under the terms of the IMA. However, any performance
fees earned under this arrangement would have been fully deducted from any
future annual investment management fees and variable management fees payable
over the term of the IMA. No performance fee was payable to the Investment
Manager for the year ended 31 December 2021.
On 22 December 2021, a new IMA was approved by the Shareholders at the
Extraordinary General Meeting, which is effective from 1 January 2022, which
was terminated on 20 March 2023. The details were as follows:
A. INCENTIVE FEES AND BONUS
I. The Investment Manager shall be entitled to be paid Incentive Fees which
shall be calculated as follows based on the aggregate Distributions made by
the Company to its Shareholders:
Aggregate Distributions(1) Incentive Fees (as a percentage of Aggregate Distributions)
Up to an including €40 million 0%
In excess of €40 million 15%
(1) For the avoidance of doubt, the different percentages set out below
shall be applied incrementally and not as against the total aggregate
Distributions.
II. In addition to the fees payable pursuant to paragraph A.I above, and
subject to paragraphs B and C once aggregate Distributions of €80 million
have been made, the Investment Manager shall be entitled to be paid a further
bonus (the "Bonus") on the following basis:
Aggregate Distributions Bonus payment
€80 million €1 million
For each amount of €5 million of Distributions paid in excess of €80 €1 million
million up to and including €100 million(1)
(1) For the avoidance of doubt, the total aggregate Bonus payments which
may be paid to the Investment Manager shall not exceed a maximum of €5
million.
III. Any Incentive Fees and/or Bonus payable by the Company to the Investment
Manager shall be set off against and shall be reduced (to not less than zero)
by the amount of any fees (including but not limited to asset management fees
and villa sales fees) collected in cash by the Investment Manager under the
terms of the Kea Asset Management Agreement accruing from 1 January 2022
onwards (to the extent that these have not already been off set against the
Incentive Fee Advance Payments pursuant to paragraph B.II. below).
B. INCENTIVE FEE ADVANCE PAYMENTS
I. As an advance against future Incentive Fees, the Investment Manager shall
be entitled to receive the following annual advances, which shall be payable
in equal quarterly instalments in advance:
Year Incentive Fee Advance Payment
2022 €2.4 million
2023 €2.3 million
2024 €1.3 million
II. The Incentive Fee Advance Payments payable by the Company to the
Investment Manager shall, (i) be set off against and shall reduce (to not less
than zero) the entitlement of the Investment Manager to any Incentive Fees
and/or Bonus payable pursuant to paragraphs A.I and A.II above, and (ii) be
set off against and shall be reduced (to not less than zero) by the amount of
any fees (including but not limited to asset management fees and villa sales
fees) collected in cash by the Investment Manager under the terms of the Kea
Asset Management Agreement accruing from 1 January 2022 onwards.
III. For the avoidance of doubt, the Company shall not be obliged to take
active steps to generate funding to pay any Incentive Fee Advance Payments
and, consequently, the payment of any Incentive Fee Advance Payments shall be
deferred, partly or wholly as required, by the Company in the case where:
(i) the Company does not have freely transferable funds available to pay such
Incentive Fee Advance Payments due, or
(ii) the Company's readily accessible consolidated cash balance (excluding (a)
cash that is not readily available to the Company, (b) cash held at Kilada and
the One&Only at Kea, and (c) any cash deposited in the interest retention
account in connection with the CastleLake Loan Agreement or any subsequent
lender to the Company) after the payment of any Incentive Fee Advance Payments
due would be less than €1 million.
C ESCROW ACCOUNT
I. An amount equal to 25 per cent of the aggregate of any Incentive Fees
and/or Bonus in excess of the aggregate Incentive Fee Advance Payments to
which the Investment Manager may become entitled shall be placed in the Escrow
Account.
II. The amount held in the Escrow Account from time to time shall become
payable to the Investment Manager on the earlier to occur of:
(i) the date of completion of the disposal of the last Relevant Investment;
(ii) the date of commencement of the formal liquidation of the Company under
BVI law; and
(iii) the date of effective termination of this Agreement by the Company.
III. If the Investment Manager serves notice to terminate this Agreement, any
amounts held in the Escrow Account shall be forfeited and shall become due and
payable to the Company.
28.3 Other related party transactions
28.3.1 Exactarea Holdings Limited
On 15th December 2022 SPV10 entered into a bridge loan facility with its 33%
shareholder Exacterea Holding Limited, making available of a principle amount
up to €6.6 million. The loan is interest-free and repayable at the latest
six months from the date of the agreement.
This loan was in connection with the sale of our interest in OOKI, agreed to
be deemed to be fully repaid when the courts in Cyprus approved an application
to reduce the share premium reserve account of SPV10.
As at the 31 December 2022 the full €6.6 million was outstanding and as the
application above was approved on 16th of January 2023, since then it is
deemed fully repaid.
28.3.2 OOKI resort
The Investment Manager owned an effective 5% equity interest in SPV14 (an
equity-accounted investee and the holding company of the OOKI project) at the
time that the Company sold its interest in SPV14. Under the relevant
shareholders agreement dated 27 May 2019, the Investment Manager, One&Only
and Exactarea have priority returns for an amount equal to 75% of their equity
investment, following the payment of which the Company becomes entitled to a
priority catch-up for the same amount. The Investment Manager also had an
asset management agreement dated 1 November 2017 with OOKI and provided
management services.
28.3.3 Amanzoe resort
The Investment Manager retained a 4.9% equity interest in AZOE Holdings Ltd,
the company that owns Amanzoe resort ('AZOE') and it also had an asset
management agreement dated 3 October 2018 for the resort. However, the
Directors believe that DCP also retained an option over a further 15% of the
equity in AZOE. Amanzoe Resort S.A. entered on 2 August 2021 into a contract
to buy 24 founder plots in the Company's Kilada project for a price of €10
million payable in instalments subject to the achievement of certain
construction milestones but this contract was unwound by both parties in
February 2023. The Directors believe that DCP sold all of its interests in
AZOE Holdings Ltd during March 2023.
28.3.3 AXIA
AXIA Ventures Group Limited ('Axia'), an investment banking operation with
offices in Cyprus and Athens was 20% owned by an affiliate of the Investment
Manager and Miltos Kambourides served on its Board of Directors. However, the
affiliate sold its interest during 2022. Axia was appointed by the Company to
undertake a process for the sale of it's equity interest in OOKI dated 29
September 2020. No transaction was concluded and therefore no fee was due or
paid. Axia was also appointed by the Company in December 2022 to undertake a
process for the sale of its equity interest in Aristo Developers Limited. This
process is ongoing and no fees have yet been paid but they are believed by the
Directors to be under normal commercial terms.
28.3.4 Discover Investment Company
Nicolai Huls is a Director of Discover Investment Company which provided a
shareholder loan of €350 thousand to the Company in May 2023. The terms of
this loan are the same as loans provided by other shareholders who are not
Related Parties and the loans are for a 12 month term bearing an interest rate
of 12% p.a. with no fees payable on disbursement or repayment. If the loans
have not been repaid within 6 months from initiation, collateral in the form
of security over certain Company assets will be put in place which exceed the
aggregate value of the loans.
29. Non-CONTROLLING INTERESTs
The following tables summarises the information relating to each of the
Group's subsidiaries that has material non-controlling interests, before any
intra-group eliminations.
2022 MCO 1 SPV 10
€'000 €'000
Non-controlling interests' percentage 15.00% 33.33%
Non-current assets 18,293 -
Current assets 57,509 19,921
Non-current liabilities (57,443) -
Current liabilities (6,343) (8)
Net assets 12,016 19,913
Carrying amount of non-controlling interests 1,803 6,637
Revenue 37 -
(Loss)/profit (588) 4,001
Other comprehensive income - -
Total comprehensive income (588) 4,001
Dividends Paid - 6,750
(Loss)/profit allocated to non-controlling interests (206) 1,334
Other comprehensive income allocated to non-controlling interests - -
Dividends paid to non-controlling interest - 2,250
Cash flow from/(used in) operating activities 2,329 (8)
Cash flow (used in)/from investing activities (6,285) 3,195
Cash flow from/(used in) financing activities 3,885 (3,183)
Net (decrease)/increase in cash and cash equivalents (71) 4
2021 MCO 1 SPV 10
€'000 €'000
Non-controlling interests' percentage 11.58% 33.33%
Non-current assets 12,008 22,861
Current assets 57,382 -
Non-current liabilities (52,930) -
Current liabilities (4,477) (199)
Net assets 11,983 22,662
Carrying amount of non-controlling interests 1,389 7,553
Revenue - -
(Loss)/profit (2,832) 5,156
Other comprehensive income - (278)
Total comprehensive income (2,832) 4,878
(Loss)/profit allocated to non-controlling interests (348) 1,718
Other comprehensive income allocated to non-controlling interests - (92)
Cash flow used in operating activities (1,298) (1)
Cash flow used in investing activities (3,629) -
Cash flow from financing activities 4,316 -
Net decrease in cash and cash equivalents (611) (1)
30. business combindation
During the year ended 31 December 2021, the Group disposed of its entire stake
in Kalkan Yapi ve Turism A.S ('Kalkan', the owner of LaVanta project), as
follows:
Kalkan
€'000
Property, plant and equipment (2)
Other receivables (856)
Cash and cash equivalents (243)
Trade and other payables 1,180
Net liabilities 79
Net assets disposed of - 100% 79
Net proceeds on disposal 35
Reclassification of translation reserve from other comprehensive income to 5,784
profit or loss
Gain on disposal recognised in profit or loss 5,898
Cash effect on disposal:
Net proceeds on disposal 35
Cash and cash equivalents (243)
Net cash outflow on disposal (208)
31. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group is exposed to credit risk, liquidity risk and market risk from its
use of financial instruments. The Board of Directors has overall
responsibility for the establishment and oversight of the Group's risk
management framework. The Group's risk management policies are established to
identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in
market conditions and the Group's activities. The Group's overall strategy
remains unchanged from last year.
(i) Credit risk
Credit risk arises when a failure by counterparties to discharge their
obligations could reduce the amount of future cash inflows from financial
assets on hand at the statement of financial position date. The Group has
policies in place to ensure that sales are made to customers with an
appropriate credit history and monitors on a continuous basis the ageing
profile of its receivables. The Group's trade receivables are secured with the
property sold. Cash balances are mainly held with high credit quality
financial institutions and the Group has policies to limit the amount of
credit exposure to any financial institution.
The carrying amount of financial assets represents the maximum credit
exposure. The maximum exposure to credit risk at the end of the reporting year
was as follows:
2022 2021
€'000 €'000
Trade and other receivables (see note 20) 8,175 1,080
Cash and cash equivalents (see note 21) 2,226 4,565
Total 10,401 5,645
Trade and other receivables
Credit quality of trade and other receivables
The Group's trade and other receivables are unimpaired.
Cash and cash equivalents
Exposure to credit risk
The table below shows an analysis of the Group's bank deposits by the credit
rating of the bank in which they are held:
2022 2021
No. of Banks €'000 No. of Banks €'000
Bank group based on credit ratings by Moody's
Rating Aaa to A - - 2 4,104
Rating Baa to B 3 1,966 4 461
Rating Caa to C - - - -
Not rated 1 259
Total bank balances 2,225 4,565
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities do not match. An unmatched position potentially enhances
profitability but can also increase the risk of losses. The Group has
procedures with the objective of minimising such losses such as maintaining
sufficient cash and other highly liquid current assets and by having available
an adequate amount of committed credit facilities.
The following tables present the contractual maturities of financial
liabilities. The tables have been prepared based on contractual undiscounted
cash flows of financial liabilities, and on the basis of the earliest date on
which the Group might be forced to pay.
2022 Carrying Contractual Within One to two years Three to five years Over
amounts cash flows one year five years
€'000 €'000 €'000 €'000 €'000 €'000
Loans and borrowings 15,045 (16,611) (7,611) (3,000) (6,000) -
Lease obligations 3,435 (4,705) (91) (91) (193) (4,330)
Land creditors 20,752 (23,661) (1,280) (1,265) (21,116) -
Trade and other payables 4,982 (4,982) (4,982) - - -
44,214 (49,959) (13,964) (4,356) (27,309) (4,330)
Carrying Contractual Within One to two years Three to five years Over
2021 amounts cash flows one year five years
€'000 €'000 €'000 €'000 €'000 €'000
Loans and borrowings 24,868 (27,895) (7,849) (15,846) (4,200) -
Lease obligations 3,420 (4,653) (91) (71) (213) (4,278)
Land creditors 20,752 (23,661) (1,280) (1,265) (21,116) -
Trade and other payables 4,413 (4,413) (4,413) - - -
53,453 (60,622) (13,633) (17,182) (25,529) (4,278)
(iii) Market risk
Market risk is the risk that changes in market prices, such as interest rates,
equity prices and foreign exchange rates, will affect the Group's income or
the value of its holdings of financial instruments.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group's income and
operating cash flows are substantially independent of changes in market
interest rates as the Group has no significant interest-bearing assets.
Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. Borrowings issued at fixed rates expose the Group to fair value
interest rate risk. The Group's management monitors the interest rate
fluctuations on a continuous basis and acts accordingly.
At the reporting date the interest rate profile of interest- bearing financial
instruments was:
2022 2021
€'000 €'000
Fixed rate instruments
Financial liabilities - 20,125
Variable rate instruments
Financial liabilities 4,611 4,743
4,611 24,868
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December would have
decreased equity and profit or loss by €46 thousand (2021: €47 thousand).
This analysis assumes that all other variables, in particular foreign currency
rates, remain constant. For a decrease of 100 basis points there would be an
equal and opposite impact on the profit or loss and other equity.
Currency risk
Currency risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates. Currency risk arises when
future commercial transactions and recognised assets and liabilities are
denominated in a currency that is not the Group's measurement currency. The
Group is exposed to foreign exchange risk arising from various currency
exposures primarily with respect to the United States dollar. The Group's
management monitors the exchange rate fluctuations on a continuous basis and
acts accordingly.
Capital management
The Group manages its capital to ensure that it will be able to continue as a
going concern while improving the return to shareholders. The Board of
Directors is committed to implementing a package of measures that is expected
to focus on the achievement of the Group's investment objectives, achieve cost
efficiencies and strengthen its liquidity. Notably, these measures include
the completion of certain Group asset divestment transactions, as well as the
conclusion of additional working capital facilities at the Group and/or
Company level.
32. Commitments
As of 31 December 2022, the Group had a total of €16.5 million contractual
capital commitments on property, plant and equipment (2021: €18.0 million).
33. Contingent liabilities
Companies of the Group are involved in pending litigation. This principally
relates to day-to-day operations as a developer of second-home residences and
largely derives from certain clients and suppliers. Based on advice from the
Group's legal advisers, the Investment Manager believes that there is
sufficient defence against any claim and does not expect that the Group will
suffer any material loss. All provisions in relation to these matters which
are considered necessary have been recorded in these consolidated financial
statements.
In addition to the tax liabilities that have already been provided for in the
consolidated financial statements based on existing evidence, there is a
possibility that additional tax liabilities may arise after the examination of
the tax and other matters of the companies of the Group in the relevant tax
jurisdictions.
The Group, under its normal course of business, guaranteed the development of
properties in line with agreed specifications and time limits in favour of
other parties.
34. SUBSEQUENT EVENTS
On 20 March 2023 it was announced that the Investment Management Agreement
dated 1 December 2021 (the "IMA") between the Company and Dolphin Capital
Partners Ltd ("DCP") was terminated with immediate effect on the basis of a
repudiatory breach of contract by DCP.
It had come to the Directors' attention that DCP entered into an undisclosed
option agreement with the purchaser of the Amanzoe resort in Porto Heli,
Greece at the same time that the Company sold its interest in the resort, as
originally announced on 2 August 2018 (the "Undisclosed Option Agreement").
The Undisclosed Option Agreement entitled DCP to acquire an additional 15% of
the share capital of DolphinCI Fourteen Limited (the special purpose vehicle
holding the Amanzoe resort). A separate agreement for DCP to acquire 15% of
the share capital of DolphinCI Fourteen Limited had been disclosed and
authorised by the Company.
The Undisclosed Option Agreement had not been disclosed to the Company by DCP
at the time of the sale of DolphinCI Fourteen Limited. The failure by DCP, as
agent of the Company under the terms of the IMA, to disclose the existence of
the Undisclosed Option Agreement, and to fulfil its other duties as agent,
constitutes a repudiatory breach of the IMA that has resulted in the
termination of the IMA by the Company.
The Company is seeking to pursue all legal options to recover the value
arising from the Undisclosed Option Agreement that is the Company's property.
The Directors believe that this value could be material in the context of the
size of the Company, but at this time do not have enough information to put a
precise quantum on this.
The independent Directors of the Company have also removed Miltos Kambourides,
who is the Co-Founder and Managing Partner of DCP, as a Director of the
Company with immediate effect.
Following the termination, and as announced on 11 April 2023, the Company
received a notification that DCP had filed a claim against the Company in the
English High Court alleging repudiatory breach of contract in relation to the
termination of the IMA. At this time an accurate estimate of the financial
effect cannot be made.
The Company considers this Claim to be opportunistic, speculative and without
merit and will be defending the Claim vigorously. The Company filed its own
counterclaim. The Company will pursue all legal options to recover the value
arising from the Undisclosed Option Agreement as the Directors believe that
value is the Company's property. The Directors believe that this value could
be material in the context of the size of the Company, but at this time do not
have enough information to put a precise quantum on this. The Company has
since found more potential issues relating to DCP which are currently under
review.
There were no other material events after the reporting period except the one
described above and in note 28.3, which have a bearing on the understanding of
the consolidated financial statements as at 31 December 2022.
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