REG - Dolphin Capital Inv - Final Results <Origin Href="QuoteRef">DOLC.L</Origin> - Part 2
16/07/2015 09:09
- Part 2: For the preceding part double click ID:nRSC0224Pa
Director
Dolphin Capital Partners
3 June 2015
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2014
31 December 2014 31 December 2013
Note E'000 E'000
Continuing operations
Valuation gain on investment property 12 18,576 22,605
Impairment loss on trading properties 14 (6,216) (970)
Reversal of impairment loss on trading properties 14 - 778
Net operating profits 7 18,516 12,746
Total operating profits 30,876 35,159
Investment Manager fees 25.2 (13,671) (13,780)
Personnel expenses 8 (8,305) (6,974)
Depreciation charge 13 (3,239) (2,447)
Professional fees (10,547) (8,746)
Administrative and other expenses (10,205) (10,114)
Total operating and other expenses (45,967) (42,061)
Results from operating activities (15,091) (6,902)
Finance income 9 325 417
Finance costs 9 (15,959) (17,669)
Net finance costs (15,634) (17,252)
Gain on disposal of investment in subsidiaries 26 2,497 -
Profit on dilution in equity accounted investees 16 149 -
Share of profits/(losses) on equity accounted investees, net of tax 16 50,146 (77,239)
Impairment loss on property, plant and equipment 13 (13) (342)
Reversal of impairment loss on property, plant and equipment 13 670 117
Total non-operating profits/(losses) 53,449 (77,464)
Profit/(loss) before taxation 22,724 (101,618)
Taxation 10 1,588 (11,256)
Profit/(loss) for the year 24,312 (112,874)
Other comprehensive income
Items that will never be reclassified to profit or loss
Revaluation of property, plant and equipment 13 6,322 (4,283)
Related tax 10 (555) 1,118
5,767 (3,165)
Items that are or may be reclassified to profit or loss
Foreign currency translation differences 9 15,330 (939)
Translation differences to profit or loss due to disposal of subsidiary (2,709) -
Share of revaluation on equity accounted investees 16 (22) 205
Fair value adjustment on available-for-sale financial assets 15 (64) 321
12,535 (413)
Other comprehensive income for the year, net of tax 18,302 (3,578)
Total comprehensive income for the year 42,614 (116,452)
Profit/(loss) attributable to:
Owners of the Company 21,639 (111,910)
Non-controlling interests 2,673 (964)
Profit/(loss) for the year 24,312 (112,874)
Total comprehensive income attributable to:
Owners of the Company 36,731 (113,700)
Non-controlling interests 5,883 (2,752)
Total comprehensive income for the year 42,614 (116,452)
EARNINGS/(Loss) per share
Basic and diluted earnings/(loss) per share (E) 11 0.03 (0.17)
Consolidated statement of financial position
As at 31 December 2014
31 December 2014 31 December 2013
Note E'000 E'000
Assets
Investment property 12 451,880 423,791
Property, plant and equipment 13 176,765 143,604
Equity accounted investees 16 234,223 180,862
Available-for-sale financial assets 15 2,201 2,265
Deferred tax assets 21 2,557 4,230
Other non-current assets 2,584 3,458
Non-current assets 870,210 758,210
Trading properties 14 52,323 64,524
Receivables and other assets 17 21,138 28,956
Cash and cash equivalents 18 30,978 7,100
Current assets 104,439 100,580
Total assets 974,649 858,790
Equity
Share capital 19 6,424 6,424
Share premium 19 498,933 498,933
Retained earnings 28,821 10,056
Other reserves 23,270 8,259
Equity attributable to owners of the Company 557,448 523,672
Non-controlling interests 30,364 24,504
Total equity 587,812 548,176
Liabilities
Loans and borrowings 20 213,923 153,044
Finance lease obligations 22 7,628 8,018
Deferred tax liabilities 21 55,180 56,610
Other non-current liabilities 21,393 23,536
Non-current liabilities 298,124 241,208
Loans and borrowings 20 26,166 15,760
Finance lease obligations 22 467 423
Trade and other payables 23 62,059 53,115
Current tax liabilities 21 108
Current liabilities 88,713 69,406
Total liabilities 386,837 310,614
Total equity and liabilities 974,649 858,790
Net asset value ('NAV') per share (E) 24 0.87 0.82
Consolidated statement of changes in equity
For the year ended 31 December 2014
Attributable to owners of the Company
Share Share Translation Revaluation Retained Non-controlling Total
capital premium reserve reserve earnings Total interests equity
E'000 E'000 E'000 E'000 E'000 E'000 E'000 E'000
Balance at 1 January 2013 6,424 498,933 1,483 8,533 120,108 635,481 32,293 667,774
Total comprehensive income for the year
Loss for the year - - - - (111,910) (111,910) (964) (112,874)
Other comprehensive income for the year
Revaluation of property, plant and equipment, net of tax - - - (2,324) - (2,324) (841) (3,165)
Foreign currency translation differences - - 8 - - 8 (947) (939)
Share of revaluation on equity accounted investees - - - 205 - 205 - 205
Fair value adjustment on available-for-sale financial asset - - - 321 - 321 - 321
Depreciation transfer due to revaluation - - - 33 (33) - - -
Total other comprehensive income for the year - - 8 (1,765) (33) (1,790) (1,788) (3,578)
Total comprehensive income for the year - - 8 (1,765) (111,943) (113,700) (2,752) (116,452)
Transactions with owners of the Company
Contributions and distributions
Non-controlling interests on capital increases of subsidiaries - - - - - - 254 254
Total contributions and distributions - - - - - - 254 254
Changes in ownership interests
Acquisition of non-controlling interests without a change in control - - - - 1,891 1,891 (5,291) (3,400)
Total changes in ownership interests - - - - 1,891 1,891 (5,291) (3,400)
Total transactions with owners of the Company - - - - 1,891 1,891 (5,037) (3,146)
Balance at 31 December 2013 6,424 498,933 1,491 6,768 10,056 523,672 24,504 548,176
Balance at 1 January 2014 6,424 498,933 1,491 6,768 10,056 523,672 24,504 548,176
Total comprehensive income for the year
Profit for the year - - - - 21,639 21,639 2,673 24,312
Other comprehensive income for the year
Revaluation of property, plant and equipment, net of tax - - - 5,661 - 5,661 106 5,767
Foreign currency translation differences - - 11,913 385 (72) 12,226 3,104 15,330
Translation differences to profit or loss due to disposal of subsidiary - - (2,709) - - (2,709) - (2,709)
Share of revaluation on equity accounted investees - - - (22) - (22) - (22)
Fair value adjustment on available-for-sale financial asset - - - (64) - (64) - (64)
Depreciation transfer due to revaluation - - - (153) 153 - - -
Total other comprehensive income for the year - - 9,204 5,807 81 15,092 3,210 18,302
Total comprehensive income for the year - - 9,204 5,807 21,720 36,731 5,883 42,614
Transactions with owners of the Company
Changes in ownership interests
Acquisition of non-controlling interests without a change in control - - - - (2,955) (2,955) (23) (2,978)
Total changes in ownership interests - - - - (2,955) (2,955) (23) (2,978)
Total transactions with owners of the Company - - - - (2,955) (2,955) (23) (2,978)
Balance at 31 December 2014 6,424 498,933 10,695 12,575 28,821 557,448 30,364 587,812
Consolidated statement of cash flows
For the year ended 31 December 2014
31 December 2014 31 December 2013
E'000 E'000
Cash flows from operating activities
Profit/(loss) for the year 24,312 (112,874)
Adjustments for:
Valuation gain on investment property (18,576) (22,605)
Impairment loss on trading properties 6,216 970
Reversal of impairment loss on trading properties - (778)
Impairment loss on property, plant and equipment 13 342
Reversal of impairment loss on property, plant and equipment (670) (117)
Depreciation charge 3,239 2,447
Interest income (325) (417)
Interest expense 15,228 12,308
Exchange difference (4,303) 5,278
Gain on disposal of investment in subsidiaries (2,497) -
Profit on dilution in equity accounted investees (149) -
Share of (profits)/losses on equity accounted investees, net of tax (50,146) 77,239
Taxation (1,588) 11,256
(29,246) (26,951)
Changes in:
Receivables 3,400 14,247
Payables 6,853 20,595
Cash (used in)/from operating activities (18,993) 7,891
Tax paid (207) (276)
Net cash (used in)/from operating activities (19,200) 7,615
Cash flows from investing activities
Proceeds from disposal of subsidiaries, net of cash disposed of 10,047 -
Net acquisitions of investment property (1,406) (343)
Net acquisitions of property, plant and equipment (23,412) (25,598)
Acquisitions of available-for-sale financial assets - (1,944)
Net change in trading properties 4,510 (16,869)
Net change in equity accounted investees (1,116) -
Interest received 325 417
Net cash used in investing activities (11,052) (44,337)
Cash flows from financing activities
Funds received from non-controlling interests - 254
Acquisition of non-controlling interests without a change in control (2,978) (3,400)
Change in loans and borrowings 72,708 36,955
Change in finance lease obligations (346) (113)
Interest paid (15,228) (12,308)
Net cash from financing activities 54,156 21,388
Net increase/(decrease) in cash and cash equivalents 23,904 (15,334)
Cash and cash equivalents at the beginning of the year 4,861 19,993
Effect of exchange rate fluctuations on cash held (26) 202
Cash and cash equivalents at the end of the year 28,739 4,861
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 18) 30,978 7,100
Bank overdrafts (see note 20) (2,239) (2,239)
Cash and cash equivalents at the end of the year 28,739 4,861
1. REPORTING ENTITY
Dolphin Capital Investors Limited (the 'Company') was incorporated and registered in the British Virgin Islands ('BVIs') on
7 June 2005. The Company is a real estate investment company focused on the early-stage, large-scale leisure-integrated
residential resorts in south-east Europe and the Americas, and managed by Dolphin Capital Partners Limited (the 'Investment
Manager'), an independent private equity management firm that specialises in real estate investments, primarily in
south-east Europe. The shares of the Company were admitted to trading on the AIM market of the London Stock Exchange
('AIM') on 8 December 2005.
The consolidated financial statements of the Company as at 31 December 2014 comprise the financial statements of the
Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly
controlled entities.
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 2 June 2015.
b. Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, with the exception of
property (investment property, property, plant and equipment) and available-for-sale financial assets, which are stated at
their fair values and investments in associates and jointly controlled entities, which are accounted for in accordance with
the equity method of accounting.
c. Adoption of new and revised standards and interpretations
As from 1 January 2014, 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 Company other than the disclosure effect explained
below:
(a) IFRS 12 Disclosure of interest in other entities
As a result of IFRS 12, the Group has expanded its disclosures about its interests in subsidiaries (see note 27) and equity
accounted investees (see note 16).
The following standards, amendments to standards and interpretations have been issued but are not yet effective for annual
periods beginning on 1 January 2014. Those which may be relevant to the Group are set out below. The Group does not plan to
adopt these standards early. Although the Group continues to assess the potential impact on its consolidated financial
statements resulting from the application of the following standards, it currently expects that their adoption in future
periods will not have a significant effect on the consolidated financial statements of the Company.
(i) Standards and interpretations adopted by the EU
· IAS 19 (Amendments) 'Defined Benefit Plans: Employee Contributions' (effective for annual periods beginning on or
after 1 July 2014).
· Improvements to IFRSs 2010-2012 (effective for annual periods beginning on or after 1 July 2014).
· Improvements to IFRSs 2011-2013 (effective for annual periods beginning on or after 1 July 2014).
(ii) Standards and interpretations not adopted by the EU
· IFRS 14 'Regulatory Deferral Accounts' (effective for annual periods beginning on or after 1 January 2016).
· IFRS 10, IFRS 12 and IAS 28 (Amendments): Investment Entities: Applying the Consolidation Exception (effective for
annual periods beginning on or after 1 January 2016).
· IFRS 11 'Accounting for acquisitions of interests in Joint Operations' (Amendments) (effective for annual periods
beginning on or after 1 January 2016
· IAS 1 (Amendments): Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016).
· IFRS 10 and IAS 28 (Amendments): Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (effective for annual periods beginning on or after 1 January 2016).
· IAS 27 (Amendments) 'Equity method in separate financial statements' (effective for annual periods beginning on or
after 1 January 2016).
· IAS 16 and IAS 41 (Amendments): 'Bearer plants' (effective for annual periods beginning on or after 1 January
2016).
· IAS 16 and IAS 38 (Amendments) 'Clarification of acceptable methods of depreciation and amortisation' (effective
for annual periods beginning on or after 1 January 2016).
· Annual Improvements to IFRSs 2012-2014 Cycle (effective the latest as from the commencement date of its first
annual period beginning on or after 1 January 2016).
· IFRS 15 'Revenue from contracts with customers' (effective for annual periods beginning on or after 1 January
2017).
· IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 1 January 2018).
d. Use of estimates and judgements
The preparation of consolidated financial statements in accordance with IFRS requires from Management the exercise of
judgement, to make estimates and assumptions that influence 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.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised and in any future periods affected. In particular, information about
significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the consolidated financial statements are described below:
Work in progress
Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or
receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus
attributable overheads based on a normal level of activity. The Group uses its judgement to select a variety of methods and
make assumptions that are mainly based on market conditions existing at each statement of financial position date.
Revenue recognition
The Group applies the provisions of IAS18 for accounting for revenue from sale of developed property, under which income
and cost of sales are recognised upon delivery and when substantially all risks have been transferred to the buyer.
Provision for bad and doubtful debts
The Group reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the
customer's payment record and the customer's overall financial position. If indications of irrecoverability exist, the
recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision
is charged through the consolidated statement of comprehensive income. The review of credit risk is continuous and the
methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly.
Income taxes
Significant judgement is required in determining the provision for income taxes. There are transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such determination is made.
Fair value measurement
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 a valuation
team that has 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 market observable 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.
e. Functional and presentation currency
The consolidated financial statements are presented in euro (E), which is the functional currency of the Company, rounded
to the nearest thousand.
3. Determination 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 and quarterly.
The Directors have appointed Colliers International and American Appraisal (Hellas), two internationally recognised firms
of surveyors, 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 American Society of Appraisers (the
'ASA'), and in conformity with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation and the
Principles of Appraisal Practice and Code of Ethics of the ASA and 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 from the estimated sales value of the completed development, the development cost.
Each of the above-mentioned valuation techniques results in a separate valuation indication for the subject property. Then
a reconciliation process is 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.
Financial assets
The fair value of financial assets that are listed on a stock exchange is determined by reference to their quoted bid price
at the reporting date. If the market for a financial asset is not active (and for unlisted securities), the Group
establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference
to other instruments that are substantially the same and discounted cash flow analysis, making maximum use of market inputs
and relying as little as possible on entity specific inputs. Equity investments for which fair values cannot be measured
reliably are recognised at cost less impairment.
Trade and other receivables
The fair value of trade and other receivables, excluding construction work in process, is estimated as the present value of
future cash flows, discounted at the market rate of interest at the reporting date.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate
of interest is determined by reference to similar lease agreements.
4. Significant subsidiaries
As at 31 December 2014, the Group's most significant subsidiaries were the following:
Country of Shareholding
Name incorporation interest
Scorpio Bay Holdings Limited Cyprus 100%
Scorpio Bay Resorts S.A. Greece 100%
Latirus Enterprises Limited Cyprus 80%
Iktinos Techniki Touristiki S.A. ('Iktinos') Greece 78%
Xscape Limited Cyprus 100%
Golfing Developments S.A. Greece 100%
MindCompass Overseas Limited Cyprus 100%
MindCompass Overseas S.A. Greece 100%
MindCompass Overseas Two S.A. Greece 100%
MindCompass Parks S.A. Greece 100%
Dolphin Capital Greek Collection Limited Cyprus 100%
DCI Holdings One Limited BVIs 100%
Aristo Developers S.A. Greece 100%
D.C. Apollo Heights Polo and Country Resort Limited Cyprus 100%
Symboula Estates Limited Cyprus 100%
DolphinCI Fourteen Limited ('DCI 14') Cyprus 92%
Eidikou Skopou Dekatessera S.A. ('ES 14') Greece 92%
Eidikou Skopou Dekaokto S.A. ('ES 18') Greece 92%
Eidikou Skopou Eikosi Ena S.A. Greece 80%
Azurna Uvala D.o.o. ('Azurna') Croatia 100%
Eastern Crete Development Company S.A. Greece 100%
DolphinLux 2 S.a.r.l. Luxembourg 100%
Kalkan Yapi ve Turizm A.S. Turkey 100%
Dolphin Capital Americas Limited BVIs 100%
DCA Pearl Holdings Limited BVIs 100%
DCA Holdings Six Limited BVIs 100%
DCA Holdings Seven Limited BVIs 100%
DCI Holdings Seven Limited ('DCI H7') BVIs 100%
Playa Grande Holdings Inc. ('PGH') Dominican Republic 100%
Single Purpose Vehicle Eight Limited Cyprus 100%
Eidikou Skopou Dekapente S.A. Greece 100%
Single Purpose Vehicle Ten Limited ('SPV 10') Cyprus 67%
Eidikou Skopou Eikosi Tessera S.A. Greece 67%
Pearl Island Limited S.A. Panama Republic 60%
Zoniro (Panama) S.A. Panama Republic 60%
The above shareholding interest percentages are rounded to the nearest integer.
As at 31 December 2014, all or part of the shares held by the Company in some of its subsidiaries are pledged as a security
for loans (see note 20).
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 those entities, including special purpose entities, controlled by the Group. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases.
5.2 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 associates 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.
5.3 Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights
that currently are exercisable.
The Group measures goodwill at the acquisition date as the fair value of the consideration transferred, plus the recognised
amount of any non-controlling interests in the acquiree, plus if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration
transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or
equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Any
contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is
classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to
the fair value of the contingent consideration are recognised in profit or loss. The interest of non-controlling
shareholders in the acquiree is initially measured at the non-controlling shareholders' proportion of the net fair value of
the assets, liabilities and contingent liabilities recognised.
5.4 Associates and jointly controlled entities
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting
power of another entity. Joint ventures are those entities over whose activities the Group has joint control, established
by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Associates and
jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially
recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment
losses. 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, from the date that
significant influence or joint control commences 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.
5.5 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 and capitalised borrowing
costs.
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.
A property interest under an operating lease is classified and accounted for as an investment property on a
property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property
interest under an operating lease classified as an investment property is carried at fair value. Lease payments are
accounted for as described in accounting policy 5.9.
5.6 Property, plant and equipment
Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent
depreciation for buildings. Revaluations are carried out with sufficient regularity such that the carrying amount does not
differ materially from that which would be determined using fair value at the statement of financial position date. All
other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
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.
The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of
the costs of dismantling and removing the items and restoring the site on which they are located, and appropriate
proportion of production overheads.
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, unless it constitutes part of the cost of another asset in which case is included in this
asset's carrying amount. 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%
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.
5.7 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.
5.8 Work in progress
Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or
receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus
attributable overheads based on a normal level of activity.
5.9 Leased assets
Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as
finance leases. Property held under operating leases that would otherwise meet the definition of investment property may be
classified as investment property on a property-by-property basis. Such property is accounted for as if it were a finance
lease and the fair value model is used for the asset recognised. Minimum lease payments on finance leases are apportioned
between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
5.10 Trade and other receivables
Trade and other receivables are stated at their cost less impairment losses (see accounting policy 5.21).
5.11 Financial assets
The classification of the Group's investments in equity securities depends on the purpose for which the investments were
acquired. Management determines the classification of investments at initial recognition and re-evaluates this designation
at every statement of financial position date.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through profit
or loss at inception. A financial asset is classified in the held for trading category if acquired principally for the
purpose of generating a profit from short-term fluctuations in price. Assets in this category are classified as current
assets if they are either held for trading or are expected to be realised within 12 months of the statement of financial
position date. Realised and unrealised gains and losses arising from changes in the fair value of financial assets at fair
value through profit or loss are included in the profit or loss in the period in which they arise.
(ii) Available-for-sale financial assets
Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or
changes in interest rates, are classified as available for sale. These are included in non-current assets unless management
has the express intention of holding the investment for less than 12 months from the reporting date or unless they will
need to be sold to raise operating capital, in which case they are included in current assets. Unrealised gains and losses
arising from changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income
and then in equity. When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments
are included in profit or loss. In respect of available-for-sale equity securities, impairment losses previously recognised
in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is
recognised in other comprehensive income and accumulated under the heading of fair value reserve.
5.12 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.
5.13 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.
5.14 Own shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly
attributable costs, in net of any tax effects, is recognised as a reduction from equity. Repurchased shares are classified
as own shares and are presented as a reduction from total equity. When own shares are sold or reissued subsequently, the
amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is
transferred to share premium.
5.15 Dividends
Dividends are recognised as a liability in the period in which they are declared and approved and are subtracted directly
from retained earnings.
5.16 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.
5.17 Trade and other payables
Trade and other payables are stated at their cost.
5.18 Prepayments from clients
Payments received in advance on development contracts for which no revenue has been recognised yet, are recorded as
prepayments from clients as at the statement of financial position date and carried under creditors. Payments received in
advance on development contracts for which revenue has been recognised, are recorded as prepayments from clients to the
extent that they exceed revenue that was recognised in profit or loss as at the statement of financial position date.
5.19 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.
5.20 Expenses
Investment manager fees, management incentive fees, professional fees, selling, administration 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.
5.21 Impairment
The carrying amounts of the Group's assets, other than investment property (see accounting policy 5.5) and deferred tax
assets (see accounting policy 5.29), are reviewed at each statement of financial position date to
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