REG - Dolphin Capital Inv - Final Results <Origin Href="QuoteRef">DOLC.L</Origin> - Part 6
04/05/2017 07:06
- Part 6: For the preceding part double click ID:nRSD1068Ee
Directors' interest
Miltos Kambourides is the founder and managing partner of the Investment Manager.
The interests of the Directors as at 31 December 2016, 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
Mark Townsend 282
Andrew Coppel 150
Save as disclosed, 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.
From 1 January 2016 to 31 December 2016 From 1 January 2015 to 31 December 2015
E'000 E'000
Remuneration 1,415 844
Equity-settled share-based payment arrangements - Directors Awards (see note 32) 94 60
Total remuneration 1,509 904
The Directors' remuneration details for the years ended 31 December 2016 and 31 December 2015 were as follows:
From 1 January 2016to 31 December 2016 From 1 January 2015to 31 December 2015
E'000 E'000
Laurence Geller *678 233
Robert Heller 205 175
Graham Warner 180 174
Mark Townsend 61 58
Justin Rimel 3 13
Andrew Coppel 232 34
David B. Heller 3 21
Sue Farr 53 -
Roger Lane-Smith - 122
Andreas Papageorghiou - 2
Cem Duna - 2
Antonios Achilleoudis - 2
Christopher Pissarides - 8
Total 1,415 844
*Comprises E636 thousand compensation for loss of office and E42 thousand compensation for expenses.
Mr. Miltos Kambourides has waived his fees.
On 25 February 2015, the Company announced the following Directorate changes. Andreas Papageorghiou, Cem Duna, Antonios
Achilleoudis and Christopher Pissarides stepped down from the Board. Five new members joined the Board - Laurence Geller,
who also served as Chairman, Robert Heller, Graham Warner, Mark Townsend and Justin Rimel. Miltos Kambourides and David B.
Heller remained on the new Board, as did Roger Lane Smith until his retirement on 31 December 2015. On 6 October 2015,
Andrew Coppel also joined the Board.
On 1 March 2016, Laurence Geller, David B. Heller and Justin Rimel resigned from the Company's Board with Andrew Coppel
being appointed as the Independent Chairman.
Laurence Geller no longer retains an interest in the stock options issued pursuant to the Company's Stock Option Programme,
whilst Andrew Coppel does not participate in the Stock Option Programme.
On 19 July 2016, Sue Farr joined the Board as a non-executive Director.
31.2 Investment Manager remuneration
From 1 January 2016 to 31 December 2016 From 1 January 2015 to 31 December 2015
E'000 E'000
Fixed management fee/Annual fee 7,500 12,813
Variable management fees/Performance fee 4,221 -
Equity-settled share-based payment arrangements - Investment Management Awards (see note 32) (315) 315
Total remuneration 11,406 13,128
In 2016, the Investment Manager, fully waived any rights under the Investment Manager Awards it was entitled to under the
terms of the previous Investment Management Agreement ('IMA') and the Company's share incentive plan (see note 32).
In line with the Amended and Restated IMA, signed in December 2016, with retroactive effect from 1 July 2016, the following
arrangements came into effect:
i. Fixed management fee
The annual management fees for the second half of 2016 were retrospectively reduced from E8.5 million to E6.5 million per
annum and have been set to a fixed declining annual amount equal to E6 million for 2017, E5 million for 2018 and E4 million
for 2019.
Additionally, the term of the IMA has been reduced and will expire at the earlier of the end of the Divestment Period or 31
December 2019 rather than August 2020 as under the terms of the previous IMA. There will be no fixed management fee due for
2020.
ii. Variable management fee
Variable management fee has been introduced which will become payable solely upon the execution of each asset divestment by
the Company. The variable management fee will be equal to a percentage of the enterprise value (i.e. the equity value of
the asset plus any loans or other liabilities assumed by its purchaser) of any asset disposed by the Company during the
Divestment Period at a valuation at or in excess of 50% of its latest reported NAV.
The variable management fee percentage will be equal to 3% for divestments executed within the second half 2016 and will be
reduced to 2.5%, 2.0% and 1.3% for those concluded in 2017, 2018 and 2019 respectively for disposals completed at 50% or
more of latest reported NAV. The variable management fee will increase in respect of transactions executed at sales prices
exceeding 50% of their NAV.
The variable management fee will become payable to the Investment Manager three months from the completion of the
respective disposal. Specifically in relation to the Playa Grande disposal, E1 million of the variable management fee has
been paid upon the completion of the disposal and the balance will become payable at the earlier of the date when the
Company makes a distribution of proceeds from asset sales to Shareholders or nine months from the completion of the Playa
Grande disposal.
With regard to the disposal of Aristo Developers Ltd and Pearl Island, the Manager will be entitled to a Variable annual
management fee equal to 3%, 2.5%, 2% and 1.3% on the portion of their corresponding Total Disposal Prices received by the
Company within 2016, 2017, 2018 and 2019 respectively.
Investment Manager was entitled to a performance fee payable under the terms of the previous IMA. There is no change to
this entitlement. However, any performance fees earned under this arrangement will be fully deducted from any future annual
management fees and variable management fees payable over the term of the IMA.
Previous arrangements, in force until 30 June 2016
Annual fee
The Investment Manager is entitled to an annual management fee defined as follows:
• for the period from 1 July 2015 to and including 31 December 2016, the annual management fee shall be E1 million
per calendar month payable quarterly in advance; and
• with effect from and including 1 January 2016, the annual management fee shall be E8.5 million payable quarterly in
advance.
• commencing on and with effect from 1 January 2017, the annual management fee payable for the following annual
periods will be permanently reduced on 1 January in each year to an amount equal to the lower of:
(i) 1.25% of the gross asset value of the Company calculated as at the last preceding 31 December calculation date; and
(ii) E8.5 million.
In addition, the Company shall reimburse the Investment Manager for any professional fees or other costs incurred on behalf
of the Company for the provision of services or advice.
Performance fee
i. Core asset incentive fee
The Investment Manager will be entitled to the core asset incentive fee based on the net profits received by the Company
from the core assets or the disposal thereof.
Core assets comprise of the following projects: Amanzoe, Kilada Hills, Kea, Pearl Island and Playa Grande. All other
assets of the company are characterized as non-core for the purpose of incentive fee calculations.
The net proceeds will be divided between the Investment Manager and the Company on the following basis:
• first, 100% to the Company until the Company has received an amount equal to E169.6 million (the 'Aggregate Core
Asset Base Value');
• second, 100% to the Company until the Company has received an amount equal to the core asset capital and costs;
• third, 100% to the Company until the Company has received an amount equal to the base cost compounded quarterly at
the average one-month Euribor rate plus 500 basis points (but capped at a maximum interest rate of 6% per annum);
• fourth, 60% to the Investment Manager and 40% to the Company until the Investment Manager has received an amount
equal to 20% of the Net Profits then distributed; and
• thereafter, 20% to the Investment Manager and 80% to the Company such that the Investment Manager shall receive a
total core asset incentive fee equivalent to 20% of the Net Profits.
On the disposal of a core asset, the Investment Manager shall be entitled to receive an advance of the core asset incentive
fee on the following basis:
• where the disposal takes place prior to the date on which the Company shall have first received an amount of net
profits from the disposal of core assets equal to, or in excess of, E113,055,360 (the 'Trigger Date'), an amount equal to
6.666% of the net profits received by the Company on the disposal of such core asset; or
• where the disposal takes place after the Trigger Date, an amount equal to 10% of the net profits received by the
Company on the disposal of such core asset, (in each case a 'Core Asset Incentive Fee Advance Payment').
The aggregate value of any Core Asset Incentive Fee Advance Payments will at any time be set off against, and thereby
reduce to not less than zero, any liability of the Company to pay core asset incentive fees.
ii. Non-core asset incentive fee
The Investment Manager will be entitled to the non-core asset incentive fee based on the net profits received by the
Company from the disposal of any non-core assets. No non-core asset incentive fee will be payable in respect of a non-core
asset unless the aggregate disposal proceeds actually received by the Company in respect of such non-core asset exceeds the
base value (the 'Payment Condition'). The base value is defined as 65% of the non-core asset value as at 31 December 2014.
Subject to satisfaction of the Payment Condition in respect of any non-core asset, the net proceeds actually received by
the Company from the disposal of such non-core asset will be divided between the Investment Manager and the Company on the
following basis:
• first, 100% to the Company until the Company has received an amount equal to the base value;
• second, 12.5% to the Investment Manager and 87.5% to the Company until the net proceeds equal 80% of the base
value;
• third, 17.5% to the Investment Manager and 82.5% to the Company until the net proceeds equal 100% of the base
value; and
• thereafter, 25% to the Investment Manager and 75% to the Company.
50% of each non-core asset incentive fee will be placed in an interest bearing escrow account to be operated by the
Company's administrator. Any funds held in this escrow account will be dealt with as follows; commencing on 31 December
2016, in the event that, as at 31 December in each year, the aggregate net proceeds received by the Company in relation to
all non-core assets disposed of during the previous 12 month period (the 'Look-back Period'):
• do not equal or exceed the aggregate of the base values of any non-core assets disposed of during an applicable
Look-back Period (the 'Aggregate Base Value') then the Company's administrator will be authorised to repay any escrowed
funds to the Company until such time as the Company has received an amount equal to the Aggregate Base Value and thereafter
any remaining escrowed funds (if any) will be paid to the Investment Manager; or
• equal or exceed the Aggregate Base Value then the Company's administrator will be authorised to pay to the
Investment Manager the escrowed funds.
A clawback provision is in place with regard to incentive (performance) fee payments in the event the aggregate proceeds
from the disposal of assets do not exceed a certain threshold.
Previous arrangements, in force until 30 June 2015
Annual fees
The Investment Manager was entitled to an annual management fee of 2% of the equity funds defined as follows:
• E890 million; plus
• The gross proceeds of further equity issues, other than the funds raised in respect of the proceeds of the equity
issues as at 25 October 2012 and 30 December 2011; plus
• Realised net profits less any amounts distributed to shareholders.
The equity funds as at 30 June 2015 comprised E681 million.
In addition, the Company reimbursed the Investment Manager for any professional fees or other costs incurred on behalf of
the Company for the provision of services or advice.
Performance fees
The Investment Manager was entitled to a performance fee based on the net profits made by the Company, subject to the
Company receiving the 'Relevant Investment Amount' which is defined as an amount equal to:
I. The total cost of the investment reduced on a pro rated basis by an amount of E160.1 million*; plus
II. A hurdle amount equal to an annualised percentage return equal to the average one-month Euribor rate applicable in
the period commencing from the month when the relevant cost was incurred compounded for each year or fraction of a year
during which such investment was held (the 'Hurdle'); plus
III. A sum equal to the amount of any realised losses and/or write-downs in respect of any other investment which has
not already been taken into account in determining the Investment Manager's entitlement to a performance fee.
In the event that the Company had received distributions from an investment equal to the Relevant Investment Amount, any
subsequent net profits arising should have been distributed in the following order or priority:
I. 60% to the Investment Manager and 40% to the Company until the Investment Manager should had received an amount
equal to 20% of such profits; and
II. 80% to the Company and 20% to the Investment Manager, such that the Investment Manager should had received a total
performance fee equivalent to 20% of the net profits.
* The total cost of investment was reduced in April 2014 by E7.6 million, as compared to the base reduction of E167.7
million, to reflect the loss incurred by the Company through the Pasakoy Yapi ve Turizm A.S. ('Pasakoy') sale transaction,
as calculated in accordance with the Investment Management Agreement provisions and definitions.
The performance fee payment was subject to certain escrow and clawback provisions. As at 31 December 2016, the funds held
in escrow, including accrued interest, were released (2015: funds in escrow - E467 thousand).
31.3 Shareholder and development agreements
Shareholder agreements
DolphinCI Twenty Two Limited, a subsidiary of the Group, had signed a shareholder agreement with the non-controlling
shareholder of Eastern Crete Development Company S.A., under which it had acquired 60% of the shares of the Plaka Bay
project by paying the former majority shareholder a sum upon closing and a conditional amount in the event the
non-controlling shareholder was successful in, among others, acquiring additional specific plots and obtaining construction
permits. On 23 August 2013, the parties signed a new agreement for the purchase of the remaining 40% stake of the entity.
The base consideration for the purchase was E4.4 million payable in three installments: E2.4 million by 10 September 2013,
E1 million by 30 September 2013 and E1 million by 31 October 2013. The last installment of E1 million was transferred in
February 2014. Consideration might be increased by the transfer of plots of land in the project, to the seller, of total
market value equal to E4 million, subject to the project receiving permits for building 40,000 m2, of freehold residential
properties. The conditional deferred consideration will be adjusted pro rata in case the buildable properties are less than
40,000 m2 but is also subject to a 5% annual increase commencing from the second anniversary from the signing of the
agreement and until implementation by the Company.
On 20 September 2010, the Group signed an agreement with Archimedia, controlled by John Hunt, for the sale of a 14.29%
stake in Amanzoe for a consideration of E11 million. The agreement also granted Archimedia the right to partially or wholly
convert this shareholding stake into up to three predefined Aman Villas (the 'Conversion Villas') for a predetermined value
and percentage per Villa. The first E1 million of the consideration was received at signing, while the completion of the
transaction and the payment of the E10 million balance was subject to customary due diligence on the project and the
issuance of the construction permits for the Conversion Villas prior to a longstop date set at 1 April 2011. On 28 March
2011, the Company reached an agreement with Archimedia to vary the original terms of the sale agreement, which was followed
by the Company and Archimedia entering into an amended sale agreement on 13 March 2012. The Company received US$12,422
thousand and E1,300 thousand, while US$978 thousand and E800 thousand due as at 31 December 2013, plus any additional
consideration that could be due depending on the exact size and features of the Conversion Villas, would be received upon
completion of the Conversion Villas. On 2 July 2014, Archimedia remitted E904 thousand (E263 thousand and US$878 thousand)
to the Company towards this end. As of 31 December 2015 no receivable amount was outstanding. On 3 August 2012, the Company
received a Conversion Notice from Archimedia to convert 6.43% of its shares in Amanzoe in exchange for an Aman Villa and on
27 December 2012 a further Notice for the conversion of the remaining 7.86% of its shares for two other Aman Villas. As of
31 December 2015, all Villas Conversions had been completed and Archimedia did not hold any shareholding interest in
Amanzoe.
Shareholder agreements
On 6 August 2012, the Company signed an agreement for the sale of eight out of the nine remaining Seafront Villas, part of
the Mindcompass Overseas Limited group of entities. The total base net consideration agreed for this sale was E10 million,
with the Company also entitled to 50% profit participation in the sale of five Villas. It was also agreed that the Company
would undertake the construction contract for the completion of the Villas and a E1 million deposit was paid upon signing.
During 2013, the Company received an additional amount of E990 thousand. The construction of the two Villas is currently
underway.
On 5 September 2012, the Company signed a sales agreement with a regional investor group led by Mr. Alberto Vallarino for
the sale of its 60% shareholding in Peninsula Resort Holdings Limited, the entity that indirectly holds the land for Pearl
Island's Founders' phase of the Pearl Island Project. The consideration for the sale was a cash payment of US$6 million
(50% paid at closing on 14 September 2012 and 50% one year from closing, collected on 17 September 2013) and a commitment
to invest an additional circa US$35 million of development capital within a maximum period of two years in order to
complete the aforementioned phase of the project. Out of those funds, approximately US$13 million would be incurred on
development of components owned by Pearl Island Limited S.A., with the entire amount already invested by 31 December 2015.
Development agreements
Pursuant to the original Sale and Purchase Agreement of 10 December 2007, DCI H7 was obliged to make payments for the
construction of infrastructure on the land retained by DR Beachfront Real Estate LLC ('DRB'), the former majority
shareholder of PGH. Pursuant to a restructuring agreement dated 5 November 2012, those obligations have been restructured
with the material provisions of that agreement already fulfilled. As at 31 December 2015, following cash payments of
US$7.6 million and transfers of land parcels valued at approximately US$11.7 million, no amount is outstanding. As stated
in note 33, the Company entered into a share purchase agreement for the sale of the project on 14 November 2016 and
completion took place on 8 December 2016.
Pedro Gonzalez Holdings II Limited, a subsidiary of the Group in which the Company holds a 60% stake, has signed a
Development Management agreement with DCI Holdings Twelve Limited ('DCI H12') in which the Group has a stake of 60%. Under
its terms, DCI H12 undertakes, among others, the management of permitting, construction, sale and marketing of the Pearl
Island project. As stated in note 38, the Company entered into a share purchase agreement for the sale of its shareholding
in the project on 17 January 2017 and completion took place on 13 March 2017.
31.4 Other related parties
During the years ended 31 December 2016 and 31 December 2015, the Group entered into the following related party
transactions with the following parties:
2016Related party name E'000 Nature of transaction
Iktinos Hellas S.A. 40 Project management services in relation to Sitia project and rent payment
Third Point LLC, shareholder of the Company 1,200 Bond interest for the year
Third Point LLC, shareholder of the Company 24,566 Loss on disposal of DCA H6 (see note 33)
2015Related party name E'000 Nature of transaction
Iktinos Hellas S.A. 48 Project management services in relation to Sitia project and rent payment
John Heah, non-controlling shareholder of SPV 10 191 Design fees in relation to Kea Resort project and Playa Grande project
Progressive Business Advisors S.A. 282 Accounting fees
Third Point LLC, shareholder of the Company 2,401 Bond interest for the year
32. EQUITY-SETTLED SHARE-BASED PAYMENT ARRANGEMENTS
From 1 January 2016 to 31 December 2016 From 1 January 2015 to 31 December 2015
E'000 E'000
Investment Manager Awards (see note 31.2) (315) 315
Director Awards (see note 31.1) 94 60
Total equity-settled share-based payment arrangements (221) 375
Investment Manager Awards
On 9 June 2015, under a Stock Incentive Plan, the Company granted two nil-cost share option awards to the Investment
Manager (the 'DCP Awards') as follows:
Number of Shares to which the DCP Awards relate:
· DCP Award 1: 31,661,940 common shares of E0.01 each; and
· DCP Award 2: 22,615,671 common shares of E0.01 each,
both subject to reductions in case that certain non-market performance targets are not met.
These awards were to performance vest in various equal tranches dependent upon the average closing price of the shares
trading at or above certain relevant target share prices for a continuous period of 30 trading days. The relevant target
share prices for the purposes of these awards ranged from 35p to 80p.
In 2016, as stated in note 31.2, the Investment Manager fully waived any rights under these Awards that it was entitled to
under the terms of the previous IMA and the Company's share incentive plan.
Director Awards
On 9 June 2015, Mr. Laurence Geller, Mr. Robert Heller and Mr. Graham Warner were granted nil-cost share option awards
under a Stock Incentive Plan (the 'Director Awards'). These awards will performance vest in equal tranches dependent upon
the average closing price of the shares trading at or above certain relevant target share prices for a continuous period of
30 trading days. The relevant target share prices for the purposes of these awards are 35p, 40p, 45p, and 50p. Director
Awards remain exercisable up until the day before the fifth anniversary of the grant date of the awards. On 1 March 2016,
Mr. Laurence Geller, resigned from the Company's Board and no longer retains an interest in the stock options issued
pursuant to the Company's Stock Option Programme. The number of shares to which the Director Awards relate is 5,993,153
common shares of E0.01 each with reductions in the event that certain non-market performance targets are not met.
The most significant inputs used in the measurement of the grant date fair value of the Awards are as follows:
Awards
Fair value at grant date £0.0659
Share price at grant date £0.215
Exercise price Nil
Expected volatility (long run forecast) 31%
Risk-free rate (based on UK government 5 years Bonds) 1.523%
33. Business combinations
On 14 November 2016, the Company signed a share purchase agreement with an investor group represented by Third Point LLC
for the sale of DCA H6, the entity that indirectly held the Playa Grande Golf and Resort project. Completion of the sale
was conditional on the lapse of a Right of First Refusal in relation to the project in favour of its prior owner. The
consideration for the sale comprised of a cash payment of US$5 million (of which approximately US$ 1 million will remain in
escrow to cover certain potential post completion claims and liabilities) and the retirement of all of the Company's E50
million and US$9.17 million 2018 Convertible Bonds together with any accrued interest on the Bonds. Completion of the sale
took place on 8 December 2016, with the 2018 Convertible Bonds cancelled on the same date and the Company having received
US$4 million on 8 December 2016.
During 2016, the Group also disposed of its entire holding in Infatran Limited ('Infatran') and DolphinCI Eleven Limited
('DCI 11').
Note DCA H6 Infatran DCI11 Total
E'000 E'000 E'000 E'000
Investment property 17 (74,644) - - (74,644)
Property, plant and equipment 16 (78,300) - - (78,300)
Trading properties 19 (3,193) (1,413) (1,599) (6,205)
Other non-current assets (632) - - (632)
Receivables and other assets (1,540) - - (1,540)
Cash and cash equivalents (2,035) - - (2,035)
Loans and borrowings 56,024 - - 56,024
Deferred revenue 10,660 - - 10,660
Trade and other payables 6,665 5 16 6,686
Net assets disposed of (86,995) (1,408) (1,583) (89,986)
Net proceeds on disposal 62,429 845 - 63,274
Disposal consideration via settlement of liability - - 2,780 2,780
(Loss)/gain on disposal recognised in profit or loss (24,566) (563) 1,197 (23,932)
Cash effect on disposal:
Net proceeds on disposal 62,429 845 - 63,274
Cash and cash equivalents (2,035) - - (2,035)
Net cash inflow on disposal 60,394 845 - 61,239
During the year ended 31 December 2015, the Group increased its ownership interest in DCI 14 by 7.86% to 100% as follows:
DCI 14
E'000
Non-controlling interests acquired (3,236)
Consideration transferred (5,108)
Less: receivables assignment 3,347
Net consideration transferred (1,761)
Acquisition effect recognised in equity (4,997)
The consideration transferred for the acquisition of the 7.86% stake in DCI 14 relates to a Conversion Villa, per the
relevant agreement (see note 31.3).
On 2 October 2015, DCI H1 sold the shares of its wholly-owned subsidiary DolphinCI Twenty Seven Ltd ('DCI 27') to DRG
Development Greece Ltd, as follows:
Note DCI 27
E'000
Investment property 17 (10,979)
Property, plant and equipment 16 (1,422)
Trading properties 19 (1,952)
Other non-current assets (24)
Receivables and other assets (5,242)
Cash and cash equivalents (299)
Loans and borrowings 9,055
Finance lease liabilities 6,162
Deferred tax liabilities 26 314
Other non-current liabilities 206
Trade and other payables 5,004
Net liabilities disposed of 823
Proceeds on disposal -
Gain on disposal recognised in profit or loss 823
Cash effect on disposal:
Proceeds on disposal -
Cash and cash equivalents (299)
Net cash outflow on disposal (299)
The consideration was E1 along with profit sharing based on the net proceeds that may be received by DCI 27 in respect of
any disposal of its subsidiary Aristo Developers S.A. or any of the subsidiary's assets. Profit sharing is adjusted on a
yearly basis and is set to 50%, 35% and finally 20% in the period between the second and third anniversary from the sale.
The profit sharing entitlement will lapse on the third anniversary from the sale date.
34. Non-CONTROLLING INTERESTs
The following table summarises the information relating to each of the Group's subsidiaries that has material
non-controlling interests, before any intra-group eliminations.
31 December 2016 SPV 10(Kea Resort) E'000 SPV 2(Amanzoe)E'000
Non-controlling interests percentage 33.33% 35.60%
Non-current assets 21,124 217
Current assets 131 3,837
Non-current liabilities (21,921) (75)
Current liabilities (441) (349)
Net (liabilities)/assets (1,107) 3,630
Carrying amount of non-controlling interests (369) 1,293
Revenue 40 77
Loss (368) (91)
Other comprehensive income - -
Total comprehensive income (368) (91)
Loss allocated to non-controlling interests (123) (32)
Other comprehensive income allocated to non-controlling interests - -
Cash flow (used in)/from operating activities (77) 19
Cash flow from investing activities - -
Cash flow from financing activities - -
Net (decrease)/increase in cash and cash equivalents (77) 19
31 December 2015 DCI Holdings Eleven Limited(Pearl Island)E'000 Pedro Gonzalez Holdings I Limited(Pearl Island)E'000 Iktinos (Sitia Bay)E'000 DCI 14 (Amanzoe)E'000 SPV 10(Kea Resort) E'000 SPV 2(Amanzoe)E'000
Non-controlling interests percentage 40% 40% 22.18% 0%* 33.33% 31.68%
Non-current assets 1,040 91,508 21,160 82,494 21,012 248
Current assets 3,463 7,972 45 39,444 75 3,906
Non-current liabilities (67) (2,432) (1,954) (137,688) (21,531) (75)
Current liabilities (5,564) (21,391) (334) (23,063) (294) (357)
Net (liabilities)/assets (1,128) 75,657 18,917 (38,813) (738) 3,722
Carrying amount of non-controlling interests (451) 30,263 4,196 - (246) 1,179
Revenue 1,994 65 - 41,147 829 165
(Loss)/ profit (823) (463) (7,576) (8,156) 615 (7)
Other comprehensive income - - - (5,057) - -
Total comprehensive income (823) (463) (7,576) (13,212) 615 (7)
(Loss)/profit allocated to non-controlling interests (329) (185) (1,680) (641) 205 (1)
Other comprehensive income allocated to non-controlling interests - - - (397) - -
Cash flow (used in)/from operating activities (66) 3,248 (84) (43,122) (1,455) (4,247)
Cash flow from/(used in) investing activities 76 (3,393) 107 45,481 1,398 -
Cash flow from/(used in) financing activities - (121) - (2,331) - 4,253
Net increase/(decrease) in cash and cash equivalents 10 (266) 23 28 (57) 6
*As mentioned in note 31.3, the Group during 2015 increased its shareholding interest in DCI 14 to 100%.
35. 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 counter parties 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:
Carrying amount
31 December 2016 31 December 2015
E'000 E'000
Trade and other receivables (see note 22) 3,231 15,196
Cash and cash equivalents (see note 23) 4,669 41,948
Total 7,900 57,144
Trade and other receivables
Exposure to credit risk
The maximum exposure to credit risk for trade and other receivables at the end of the reporting year by geographic region
was as follows:
Carrying amount
31 December 2016 31 December 2015
E'000 E'000
South-East Europe 2,662 12,464
Americas 569 2,732
Total trade and other receivables 3,231 15,196
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:
31 December 2016 31 December 2015
No. of Banks E'000 No. of Banks E'000
Bank group based on credit ratings by Moody's
Rating Aaa to A 1 1,281 3 69
Rating Baa to B - - 1 5
Rating Caa to C 5 3,387 5 6,188
Bank group based on credit ratings by Fitch's
Rating AAA to A- - - 1 572
Rating BBB to B- 1 1 4 35,114
Total bank balances 4,669 41,948
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object 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 on the
basis of contractual undiscounted cash flows of financial liabilities, and on the basis of the earliest date on which the
Group might be forced to pay.
Carrying amounts Contractual cash flows Within one year One to two years Three to five years Over five years
E'000 E'000 E'000 E'000 E'000 E'000
31 December 2016
Loans and borrowings 92,270 (134,228) (17,587) (23,466) (78,796) (14,379)
Finance lease obligations 2,982 (4,406) (49) (49) (146) (4,162)
Land creditors 25,354 (25,354) (25,354) - - -
Trade and other payables 15,110 (15,110) (8,632) (116) - (6,362)
135,716 (179,098) (51,622) (23,631) (78,942) (24,903)
31 December 2015
Loans and borrowings 223,680 (313,641) (44,900) (24,931) (220,034) (23,776)
Finance lease obligations 3,033 (4,461) (78) (50) (148) (4,185)
Land creditors 25,609 (25,609) (25,609) - - -
Trade and other payables 30,187 (30,187) (23,489) (455) - (6,243)
282,509 (373,898) (94,076) (25,436) (220,182) (34,204)
(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.
Sensitivity analysis
An increase of 100 basis points in interest rates at 31 December would have decreased equity and profit or loss by E499
thousand (2015: E1,076 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.
The Group's exposure to foreign currency risk for its use of financial instruments was as follows:
31 December 2016 31 December 2015
Euro USD GBP Euro USD GBP
'000 '000 '000 '000 '000 '000
Trade and other receivables 2,662 600 - 12,467 2,973 -
Cash and cash equivalents 4,531 144 1 36,988 2,462 2,008
Loans and borrowings (92,270) - - (142,395) (88,495) -
Finance lease obligations (2,982) - - (3,004) (28) -
Land creditors (25,354) - - (24,746) (938) -
Trade and other payables (22,197) (2,149) - (24,255) (16,423) -
Net statement of financial position exposure (135,610) (1,405) 1 (144,945) (100,449) 2,008
The following exchange rates applied at the date of financial position:
Euro 1 equals to: 31 December 2016 31 December 2015
USD 1.05 1.09
TRY 3.71 3.18
HRK 7.56 7.64
GBP 0.86 0.73
Sensitivity analysis
A 10% strengthening of the Euro against the following currencies at 31 December would affected the measurement of financial
instruments denominated in a foreign currency and increased/(decreased) equity and profit or loss by the amounts shown
below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening
of the Euro against the relevant currency, there would be an equal and opposite impact on the profit and other equity.
Equity Profit or loss
2016 2015 2016 2015
E'000 E'000 E'000 E'000
USD 121 8,388 121 8,388
TRY - - - -
HRK - - - -
GBP - (249) - (249)
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.
36. Commitments
As of 31 December 2016, the Group had a total of E1,330 thousand contractual capital commitments on property, plant and
equipment (2015: E3,229 thousand).
Non-cancellable operating lease rentals are payable as follows:
31 December 2016 31 December 2015
E'000 E'000
Less than one year 11 19
Between two and five years - 11
Total 11 30
37. Contingent liabilities
Companies of the Group are involved in pending litigations. Such litigations principally relate to day-to-day operations as
a developer of second-home residences and largely derive from certain clients and suppliers. Based on the Group's legal
advisers, the Company believes that there is sufficient defence against any claim and they do 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.
A Company of the Group received an out-of-the court notice to settle an amount of E3.97 million to a lending institution
which related to claims assigned by one of the relevant Group Company's partners. The Company responded negatively to the
lending institution and the partner is currently in discussions with the lending institution in order to resolve the issue.
The Company's position is that there are no existing obligations towards this lending institution by the relevant Group
Company as well as that, in all cases, any such contingent liabilities can be claimed and recovered from the partner.
If investment properties, trading properties and property, plant and equipment were sold at their fair market value, this
would have given rise to a variable management fee to the Investment Manager, which would be based on the relevant IMA
provisions.
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 favor of other parties.
38. SUBSEQUENT EVENTS
On 17 January 2017, the Company signed a share purchase agreement with Grivalia Hospitality S.A. for the sale of its 60%
shareholding in all entities related with the Pearl Island Project. Completion of the disposal was subject to a corporate
restructuring and to the consent of the appointed hotel operator to modifications of certain terms of the hotel management
agreement. The consideration for the sale comprised of a cash payment of E27 million, payable in the form of a E1 million
non-returnable deposit which was received on 19 October 2016, E24 million upon completion of the sale and the remaining E2
million to be retained in an escrow account for a period of 12 months post completion to cover any tax liabilities,
potential breach of the Company's warranties or undisclosed indebtedness. Completion took place on 13 March 2017 with E24
million received by the Company on the same date.
On 3 May 2017, the Company decided to terminate the agreement with TA to dispose of its Aristo shares, as a result of TA's
failure to settle deferred payments by 30 April 2017. The Company will retain the unpaid portion of its Aristo shares,
which corresponds on 3 May 2017 to 47.9%. The Board remains committed to dispose of its investment in Aristo and realize
value from the remaining shareholding.
There were no other material events after the reporting period, which have a bearing on the understanding of the
consolidated financial statements as at 31 December 2016.
This information is provided by RNS
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