REG - Dolphin Capital Inv - Final Results <Origin Href="QuoteRef">DOLC.L</Origin> - Part 2
04/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSD1068Ea
(17,228) (2,635)
(260,990) (147,995)
Total comprehensive income attributable to:
Owners of the Company (247,481) (144,228)
Non-controlling interests (17,092) 91
(264,573) (144,137)
Loss per share
Basic and diluted lossper share (E) 15 (0.27) (0.18)
Basic and diluted lossper share - Continuing operations (E) 15 (0.22) (0.16)
Basic and diluted lossper share - Discontinued operation (E) 15 (0.05) (0.02)
Consolidated statement of financial position
As at 31 December 2016
31 December 2016 31 December 2015
Note E'000 E'000
Assets
Property, plant and equipment 16 87,647 187,015
Investment property 17 176,548 340,853
Equity-accounted investees 21 - 188,637
Available-for-sale financial assets 20 - 2,201
Deferred tax assets 26 996 997
Trade and other receivables 22 - 1,178
Non-current assets 265,191 720,881
Trading properties 19 29,763 37,387
Trade and other receivables 22 4,001 15,002
Cash and cash equivalents 23 4,698 41,990
Assets held for sale 18 162,435 70,240
Current assets 200,897 164,619
Total assets 466,088 885,500
Equity
Share capital 24 9,046 9,046
Share premium 24 569,847 569,847
Retained deficit (365,689) (121,706)
Other reserves 20,683 24,402
Equity attributable to owners of the Company 233,887 481,589
Non-controlling interests 17,993 34,939
Total equity 251,880 516,528
Liabilities
Loans and borrowings 25 79,521 191,152
Finance lease liabilities 27 2,934 2,956
Deferred tax liabilities 26 24,255 30,129
Trade and other payables 29 6,479 6,698
Deferred revenue 28 7,230 17,846
Non-current liabilities 120,419 248,781
Loans and borrowings 25 12,749 32,528
Finance lease liabilities 27 48 77
Trade and other payables 29 43,112 58,241
Deferred revenue 28 10,683 11,220
Liabilities held for sale 18 27,197 18,125
Current liabilities 93,789 120,191
Total liabilities 214,208 368,972
Total equity and liabilities 466,088 885,500
Net asset value ('NAV') per share (E) 30 0.26 0.53
Consolidated statement of changes in equity
For the year ended 31 December 2016
Attributable to owners of the Company
Share Share Translation Revaluation Retained Non-controlling Total
capital premium reserve reserve deficit Total interests equity
E'000 E'000 E'000 E'000 E'000 E'000 E'000 E'000
Balance at 1 January 2015 6,424 498,933 10,695 12,575 28,821 557,448 30,364 587,812
Total comprehensive income
Loss - - - - (145,360) (145,360) (2,635) (147,995)
Other comprehensive income
Revaluation of property, plant and equipment, net of tax - - - (12,993) - (12,993) (397) (13,390)
Foreign currency translation differences - - 13,244 854 - 14,098 3,123 17,221
Share of revaluation on equity-accounted investees - - - 27 - 27 - 27
Total other comprehensive income - - 13,244 (12,112) - 1,132 2,726 3,858
Total comprehensive income - - 13,244 (12,112) (145,360) (144,228) 91 (144,137)
Transactions with owners of the Company
Contributions and distributions
Issue of ordinary shares 2,193 60,527 - - - 62,720 - 62,720
Placement costs - (1,464) - - - (1,464) - (1,464)
Bond conversions 429 11,851 - - - 12,280 - 12,280
Equity-settled share-based payment arrangements - - - - 375 375 - 375
Non-controlling interests on capital increases of subsidiaries - - - - (545) (545) 545 -
Total contribution and distributions 2,622 70,914 - - (170) 73,366 545 73,911
Changes in ownership interests
Acquisition of non-controlling interests without a change in control - - - - (4,997) (4,997) 3,236 (1,761)
Other movement in non-controlling interests - - - - - - 703 703
Total changes in ownership interests - - - - (4,997) (4,997) 3,939 (1,058)
Total transactions with owners of the Company 2,622 70,914 - - (5,167) 68,369 4,484 72,853
Balance at 31 December 2015 9,046 569,847 23,939 463 (121,706) 481,589 34,939 516,528
Balance at 1 January 2016 9,046 569,847 23,939 463 (121,706) 481,589 34,939 516,528
Total comprehensive income
Loss - - - - (243,762) (243,762) (17,228) (260,990)
Other comprehensive income
Revaluation of property, plant and equipment, net of tax - - - 4,114 - 4,114 - 4,114
Foreign currency translation differences - - (7,594) - - (7,594) 136 (7,458)
Share of revaluation on equity accounted investees - - - 17 - 17 - 17
Fair value adjustment on available-for-sale financial asset - - - (256) - (256) - (256)
Total other comprehensive income - - (7,594) 3,875 - (3,719) 136 (3,583)
Total comprehensive income - - (7,594) 3,875 (243,762) (247,481) (17,092) (264,573)
Transactions with owners of the Company
Contributions and distributions
Equity-settled share-based payment arrangements - - - - (221) (221) - (221)
Total contribution and distributions - - - - (221) (221) - (221)
Changes in ownership interests
Other movement in non-controlling interests - - - - - - 146 146
Total transactions with owners of the Company - - - - - - 146 146
Balance at 31 December 2016 9,046 569,847 16,345 4,338 (365,689) 233,887 17,993 251,880
Consolidated statement of cash flows
For the year ended 31 December 2016
31 December 2016 31 December 2015
E'000 E'000
Cash flows from operating activities
Loss (260,990) (147,995)
Adjustments for:
Net change in fair value of investment property 64,584 45,047
Impairment loss on trading properties 724 3,431
Loss/(gain) on disposal of investment in subsidiaries 23,932 (823)
Gain on disposal of investment in equity-accounted investees (151) -
Share of losses on equity-accounted investees, net of tax 34,389 44,553
Equity-settled share-based payment arrangements (221) 375
Impairment loss on equity-accounted investees 109,265 -
Impairment loss on re-measurement of disposal groups 4,197 763
Impairment loss on available-for-sale financial assets 995 -
(Reversal of) impairment loss and write offs of property, plant and equipment (92) 15,247
Concession/write off of land 292 2,607
Depreciation charge 2,780 2,919
Interest income (30) (106)
Interest expense 15,314 19,700
Exchange difference (13,922) 2,590
Taxation (4,857) (15,296)
(23,791) (26,988)
Changes in:
Receivables 9,380 810
Payables 3,286 16,495
Cash used in operating activities (11,125) (9,683)
Tax paid (74) (160)
Net cash used in operating activities (11,199) (9,843)
Cash flows from investing activities
Proceeds/(outflow) from disposal of subsidiaries, net of cash disposed of 61,239 (299)
Proceeds from disposal of investment in equity-accounted investees 1,101 -
Net acquisitions of investment property (11) (308)
Net acquisitions of property, plant and equipment (2,515) (42,260)
Net change in trading properties 3,200 16,189
Net change in equity-accounted investees - (286)
Net change in net assets held for sale 291 -
Interest received 30 106
Net cash from/(used in) investing activities 63,335 (26,858)
Cash flows from financing activities
Proceeds from issue of share capital - 61,256
Acquisition of non-controlling interests without a change in control - (1,761)
Change in loans and borrowings (78,643) 3,892
Change in finance lease obligations (51) 1,100
Interest paid (10,652) (13,183)
Net cash (used in)/from financing activities (89,346) 51,304
Net (decrease)/increase in cash and cash equivalents (37,210) 14,603
Cash and cash equivalents at 1 January 41,990 28,739
Effect of movement in exchange rates on cash held 101 (587)
Cash and cash equivalents reclassified to assets held for sale (183) (765)
Cash and cash equivalents at 31 December 4,698 41,990
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 23) 4,698 41,990
Cash and cash equivalents at the end of the year 4,698 41,990
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 2016 comprise the financial statements of the
Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates.
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 3 May 2017.
b. Basis of preparation
The consolidated financial statements of the Company for the year ended 31 December 2016 have been prepared taking into
account the Company's intention to dispose of all of its assets by 31 December 2019, as further explained below. The basis
of preparation used continues to be in accordance with International Financial Reporting Standards as adopted by the
European Union.
Based on the Company's new asset strategy approved by its shareholders in December 2016, the Company's objective is to
dispose of all of the Company's assets by 31 December 2019. The allocation of any additional capital investment into any
of the Company's projects will be substantially sourced from third party capital providers and with the sole objective of
enhancing the respective asset's realisation potential until 31 December 2019. The Board expects to return the proceeds
from asset disposals to shareholders, as the orderly realisation of the Company's assets progresses and taking into account
the Company's liquidity position and working capital requirements. In the event that any assets are still held by the
Company shortly before 31 December 2019, the Board will convene a shareholders' meeting at which appropriate resolutions
for the future of the Company will be proposed.
c. 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), available-for-sale financial assets, which are stated at
their fair values, assets and liabilities held for sale, which are stated at their fair value less costs to sell and
investments in associates, which are accounted for in accordance with the equity method of accounting.
d. Adoption of new and revised standards and interpretations
As from 1 January 2016, 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.
The following standards, amendments to standards and interpretations have been issued but are not yet effective for annual
periods beginning on 1 January 2016. 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
IFRS 15 'Revenue from contracts with customers' (effective for annual periods beginning on or after 1 January 2018).
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer
Loyalty Programs.
(ii) Standards and interpretations not adopted by the EU
IAS 7 (Amendments) 'Disclosure Initiative' (effective for annual accounting periods beginning on or after 1 January 2017).
The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from cash flow and non-cash changes.
IAS 12 (Amendments) 'Recognition of Deferred Tax Assets for Unrealised Losses' (effective for annual accounting periods
beginning on or after 1 January 2017).
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair
value.
Annual Improvements to IFRSs 2014-2016 Cycle (effective for annual periods beginning on or after 1 January 2017 (IFRS 12)
and 1 January 2018 (IFRS 1 and IAS 28)).
The annual improvements impact three standards. The amendments to IFRS 1 remove the outdated exemptions for first-time
adopters of IFRS. The amendments to IFRS 12 clarify that the disclosure requirements for interest in other entities also
apply to interests that are classified as held for sale or distribution. The amendments to IAS 28 clarify that the election
to measure at fair value through profit or loss an investment in associate or a joint venture that is held by an entity
that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or
joint venture on an investment-by-investment basis, upon initial recognition.
IFRS 15 (Clarifications) 'Revenue from Contracts with Customers' (effective for annual periods beginning on or after 1
January 2018).
The amendments in Clarifications to IFRS 15 address three of the five topics identified i.e. identifying performance
obligations, principal versus agent considerations, and licensing. The clarifications provide some transition relief for
modified contracts and completed contracts. Additionally, the IASB concluded that it was not necessary to amend IFRS 15
with respect to the collectability or measuring non-cash consideration.
IFRS 16 'Leases' (effective for annual periods beginning on or after 1 January 2019).
IFRS 16 introduces a single, on-balance lease sheet accounting model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease
payments. There are optional exemptions for short-term leases and leases of low value items. Lessor accounting remains
similar to the current standard - i.e. lessors continue to classify leases as finance or operating leases.
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a
Lease.
e. 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 profit or loss. The review of credit risk is continuous and the methodology and assumptions used for
estimating the provision are reviewed regularly and adjusted accordingly.
Taxation
Significant judgement is required in determining the provision for taxation. 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.
Going concern assumptions
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
forecasted asset sales will be sufficient to maintain the Group's cash flow forecasts at a positive level. Should the need
arise, management is confident that it can secure additional banking facilities and/or obtain waivers 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.
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 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.
f. Functional and presentation currency
These consolidated financial statements are presented in Euro (E), which is the Company's functional currency. All amounts
have been rounded to the nearest thousand, unless otherwise indicated.
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.
The Directors have appointed Colliers International, American Appraisal (Hellas) and PKF Consulting USA (the latter for
2015), three 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 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. 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.
Equity-settled share-based payment arrangements
The fair value of equity-settled share-based payment arrangements are measured at grant date using the Trinomial Tree
Option Pricing Model and Monte Carlo simulations. Service and non-market performance conditions attached to the
arrangements are not taken into account in measuring fair value.
4. PRINCIPAL subsidiaries
As at 31 December 2016, the Group's most significant subsidiaries were the following:
Country of Shareholding
Name Project incorporation interest
Scorpio Bay Holdings Limited Scorpio Bay Resort Cyprus 100%
Scorpio Bay Resorts S.A. Scorpio Bay Resort Greece 100%
Latirus Enterprises Limited Sitia Bay Golf Resort Cyprus 80%
Iktinos Techniki Touristiki S.A. ('Iktinos') Sitia Bay Golf Resort Greece 78%
Xscape Limited Lavender Bay Resort Cyprus 100%
Golfing Developments S.A. Lavender Bay Resort Greece 100%
MindCompass Overseas Limited Kilada Hills Golf Resort Cyprus 100%
MindCompass Overseas S.A. Kilada Hills Golf Resort Greece 100%
MindCompass Overseas Two S.A. Kilada Hills Golf Resort Greece 100%
MindCompass Parks S.A. Kilada Hills Golf Resort Greece 100%
Dolphin Capital Greek Collection Limited Kilada Hills Golf Resort Cyprus 100%
DCI Holdings One Limited ('DCI H1') Aristo Developers BVIs 100%
D.C. Apollo Heights Polo and Country Resort Limited Apollo Heights Resort Cyprus 100%
Symboula Estates Limited Apollo Heights Resort Cyprus 100%
DolphinCI Fourteen Limited ('DCI 14') Amanzoe Cyprus 100%
Eidikou Skopou Dekatessera S.A. ('ES 14') Amanzoe Greece 100%
Eidikou Skopou Dekaokto S.A. ('ES 18') Amanzoe Greece 100%
Single Purpose Vehicle Two Limited ('SPV 2') Amanzoe Cyprus 64%
Eidikou Skopou Eikosi Ena S.A. Amanzoe Greece 64%
Azurna Uvala D.o.o. ('Azurna') Livka Bay Resort Croatia 100%
Eastern Crete Development Company S.A. Plaka Bay Resort Greece 100%
DolphinLux 2 S.a.r.l. La Vanta- Mediterra Resorts Luxembourg 100%
Kalkan Yapi ve Turizm A.S. ('Kalkan') La Vanta- Mediterra Resorts Turkey 100%
Dolphin Capital Americas Limited - BVIs 100%
DCA Pearl Holdings Limited Pearl Island BVIs 100%
Single Purpose Vehicle Eight Limited Triopetra Cyprus 100%
Eidikou Skopou Dekapente S.A. Triopetra Greece 100%
Single Purpose Vehicle Ten Limited ('SPV 10') Kea Resort Cyprus 67%
Eidikou Skopou Eikosi Tessera S.A. Kea Resort Greece 67%
Pearl Island Limited S.A. Pearl Island Panama Republic 60%
Zoniro (Panama) S.A. Pearl Island Panama Republic 60%
The above shareholding interest percentages are rounded to the nearest integer.
As at 31 December 2016 and 31 December 2015, all or part of the shares held by the Company in some of its subsidiaries are
pledged as a security for loans (see note 25).
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 Interest in equity-accounted investees
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. Associates 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 commences until the date that significant influence 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 5.10.
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 Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held for sale if it is highly
probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to
sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and
liabilities on a pro rata basis. Impairment losses on initial classification as held for sale and subsequent gains and
losses on re-measurement are recognised in profit or loss.
Once classified as held for sale, property, plant and equipment is no longer depreciated, and any equity-accounted investee
is no longer equity accounted.
5.8 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.
5.9 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.
5.10Leased 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.
5.11 Trade and other receivables
Trade and other receivables are stated at their cost less impairment losses (see accounting policy 5.22).
5.12 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.
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.
5.13 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.
5.14 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.
5.15 Own shares
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly
attributable costs, 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.
5.16 Dividends
Dividends are recognised as a liability in the period in which they are declared and approved and are subtracted directly
from retained earnings.
5.17 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.
5.18 Trade and other payables
Trade and other payables are stated at their cost.
5.19 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.
5.20 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.
5.21Expenses
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.
5.22 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 5.32), are reviewed at each statement of financial position date to determine whether there
is any indication of
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