REG - Dolphin Capital Inv - Half Yearly Report <Origin Href="QuoteRef">DOLC.L</Origin> - Part 1
RNS Number : 0308ADolphin Capital Investors Limited24 September 201524 September 2015
DOLPHIN CAPITAL INVESTORS LIMITED
("DCI" or "Dolphin" or the "Company"
and together with its subsidiaries the "Group")
Half Year Results for the period ended 30 June 2015 and Trading Update
A. Financialand operational highlights:
Financial
Total Group Net Asset Value ("NAV") as at 30 June 2015 was 690 million and 604 million before and after Deferred Income Tax Liabilities ("DITL") respectively. This represents an increase of 46 million and 47 million, or 7.2% and 8.4%, respectively, against the year end 2014 figures.
NAV uplift is mainly due to the impact of the 75 million equity fundraising which the Company completed on 11 June 2015 and the appreciation of the Americas properties in Euro terms due to the devaluation of the Euro against the US Dollar by c. 8.5%. This was partly offset by Dolphin's regular operational, corporate, finance and management expenses as well as the costs of the equity fundraising.
No portfolio revaluation was undertaken during this period; the next full portfolio valuation will be conducted at 31 December 2015.
Sterling NAV per share as at 30 June 2015 stood at 54p before DITL and 47p after DITL, a 31.3% and 30.6% decrease before and after DITL respectively compared to the 31 December 2014 figures. The decrease was mainly driven by the issuance of 262,186,689 new common shares, in the context of the 75 million equity fundraising, at 0.21 on 11 June 2015 (the "New Shares"), and the 9.8% appreciation of Sterling versus the Euro over the period.
Adjusting the 31 December 2014 NAV to reflect the June 2015 equity fundraising, the pro forma NAV at 30 June 2015 was down 3.8% and 4.2% before DITL and after DITL respectively, and on the same basis the Sterling NAV per share at 30 June 2015 was down 13.2% and 13.6% respectively.
The Company continues to have a strong asset base:
- Gross Assets of 1,074 million (including Dolphin's share of Aristo DITL).
- Total Debt of 240 million (240 million as at 31 December 2014) with a Group total debt to total assets value ratio of 23%. On 10 June 2015, certain holders of the Convertible Bonds that mature on 31 March 2016, agreed to convert Bonds with a value of US$14.4 million into 42,930,080 New Shares.
Cash at 30 June 2015 was 74.8 million (31 December 2014: 30.9 million), of which 19.3 million was cash restricted at project level for certain developments (31 December 2014: 23.9 million).
Operational
Review and adoption of a new refocused strategy.
Significant changes to the Company's Board of Directors.
Agreement of revised fee arrangements with Dolphin Capital Partners ("DCP" or the "Investment Manager")
Executed sales contracts or pre-contracts at Amanzoe, Amanera, Kilada Hills and LaVanta.
Managed the business through the extraordinary economic and political conditions in Greece, including the imposition of capital controls, maintaining seamless operations for both Amanzoe and Nikki Beach resorts.
Progressed the development of Playa Grande Club and Reserve and a ramp up of operations, including the co-ordination of a pre-marketing campaign, ahead of the anticipated opening of the new Amanera Resort on 23 November 2015.
Agreed the disposal of Zoniro (Hellas) to its local management team, separate to DCP, which is expected to result in cash savings to Dolphin of c.7.2 million for the period until the end of 2016 and a NAV uplift of 0.8 million
Commenting, Laurence Geller, Non-Executive Chairman of Dolphin's Board of Directors said:
"This has been a busy period for the Company as efforts have been heavily focused on the first steps of the implementation of the refocused strategy, which aims to enable Dolphin Capital Investors to deliver its potential. While we are early on in the process, I am confident that, with the people, portfolio and processes we have in place, we are on the right path to generate improved value to shareholders."
Miltos Kambourides, Founder of Dolphin and Managing Partner of Dolphin Capital Partners said:
"Implementing the business plan presented at the equity raise in June 2015 and unlocking value for shareholders are the key areas of focus of our team. The fundamentals of our sector remain strong. The opening of Amanera in November will be a major milestone event for Dolphin and we expect that it will further demonstrate the quality of the Dolphin projects and their profit generation potential."
B. Conference call for analysts and investors
There will be a conference call at 9:00 a.m. (UK time) on Thursday, 24 September 2015, which can be accessed using the following dial-in numbers:
London Dial in number: +44(0)20 3427 1912
National Free Phone - Greece: 00800 128 801
Confirmation Code: 6272634
For further information, please contact:
Dolphin Capital Partners
Miltos E. Kambourides
Pierre A. Charalambides
Eleni Florou
miltos@dolphincp.com
pierre@dolphincp.com
ef@dolphincp.com
Panmure Gordon
(Broker)
Richard Gray / Dominic Morley / Andrew Potts
+44 (0) 20 7886 2500
Grant Thornton UK LLP
(Nominated Adviser)
Philip Secrett
+44 (0) 20 7383 5100
FTI Consulting, London
Richard Sunderland / Claire Turvey
+44 (0)20 3727 1000
dolphincapital@fticonsulting.com
Notes to Editors
Dolphin (www.dolphinci.com) is a leading global investor and developer of residential resorts in emerging markets.
Dolphin seeks to generate strong capital growth and cash returns for its shareholders through the development of sophisticated leisure-integrated residential resorts in partnership with some of the world's most recognised architects, golf course designers and hotel operators, and through the orderly disposal of its Non-Core Assets.
Dolphin's portfolio is currently spread over approximately 57 million m2 of prime coastal developable land in Greece, Cyprus, Croatia, Turkey, the Dominican Republic and Panama and a 49.8% strategic shareholding in Aristo Developers Ltd, the largest developer and private land owner in Cyprus.
Dolphin is managed by Dolphin Capital Partners, an independent real estate private equity firm.
In June 2015, the Company adopted a refocused strategy and the Company's investments are now categorised as five Core Projects to be developed over time and 10 Non-Core Assets to be realised as part of an orderly monetisation process. The Core Projects are the Company's existing developments known as Amanzoe, Kilada Hills and the Kea Resort (all in Greece), Playa Grande Club & Reserve (Dominican Republic) and Pearl Island (Panama), and represent the most mature and advanced developments of the Company.
In terms of the returns generated from the Core Projects and from the disposal of Non-Core Assets, in accordance with the Company's distribution policy and subject to the Company's working capital requirements relating to the equity funding needs of the Core Projects and to providing for other financial commitments of the Company, these will be utilised to pay dividends or other distributions to Shareholders (including by way of share buy backs) at the discretion of the Board.
C. Chairman's Statement
2015 has been a busy period for DCI with the review and adoption of a new refocused strategy, significant changes to the Company's board of directors, agreement of revised fee arrangements with Dolphin Capital Partners and an equity fundraising to support the new strategy.
The past months also marked the beginning of the execution of the refocused strategy for DCI and I would like to share some of the notable steps taken towards delivering on that strategy and to generate improved shareholder returns.
Changes to the Board and to the Investment Management Agreement
As reported by the Company on 25 February 2015, following consultation with the majority of the Company's shareholders, the Investment Manager and its Nominated Adviser, the Company's Board of Directors was strengthened with the appointment of five new Board members, bringing the total number of members to eight, and included my appointment as Non-executive Chairman.
The new Board includes a number of seasoned luxury resort, real estate, lodging and investment professionals who bring valuable experience and insights to the Company.
Following the 25 February 2015 appointments, the newly constituted Board conducted a review of the Company's existing strategy in conjunction with the Investment Manager, taking into account representations made by certain shareholders. The conclusion of the review was that the Company's investments should be categorised as Core Projects to be developed over time and Non-Core Assets to be realised as part of an orderly monetization process. Monies raised from the sale of Non-Core Assets will be invested in those Core Projects that require funding, namely Pearl Island (Ritz Carlton phase), Kilada Hills Golf Resort and Kea Resort, subject to the Company's working capital needs, at the Board's discretion.
Concurrent with the development of this refocused strategy, the Board negotiated revisions to the investment management agreement with the Investment Manager. Amongst other agreed changes this resulted in reduced annual management fees, so that with effect from 1 January 2017, the annual management fee payable to the Investment Manager will change to the lower of (i) 8.5 million, or (ii) 1.25 per cent. of the gross asset value of the Company. To transition to the new management fee, with effect from 1 July 2015, the management fee will be 6 million for the second half of 2015 and 8.5 million for the 2016 calendar year. We estimate annual savings, commencing January 1st 2016, of 5.1 million.
The Board also agreed a package of incentive agreements, incorporating separate performance fees for each of the Core Projects and Non-Core Assets, and a share incentive plan with the Investment Manager. The Board believes these revisions to the terms of the Investment Management Agreement (IMA) further align the interests of shareholders and the Investment Manager in the execution of the refocused strategy.
Revised and strengthened budgetary, process and other controls with DCP were also agreed and are being implemented.
Additional capital raising
As part of the refocused strategy, it was determined that DCI needed to raise additional funds in order to procure adequate time to implement its business plan and sufficient working capital to meet 2015 and 2016 running costs (and to repay the remaining 2016 convertible bonds).
On11June 2015,the Company concluded an equity offering which raised 75 million before expenses, comprising cash of c.62.7 million and conversion of 2016 convertible bonds of c.12.3 million, with strong support from existing shareholders. The Board and the Investment Manager would like to thank both existing and new investors for their support in the equity offering.
Governance
In line with a consistent strong focus on corporate governance,the newly constituted Board established the following key committees - (i) Audit; (ii) Finance; (iii) Nomination & Corporate Governance; and (iv) Strategy & Oversight. The Strategy & Oversight committee is chaired by myself and the other membersare Graham Warner and Robert Heller, respectively the Chairmen of the Board, the Audit Committee and the Finance Committees. The Strategy & Oversight Committeewas established to work with and monitor DCP in the execution of the Investing Policy. It meets monthly with DCP.
At the time of the announcement of the equity fundraising, and with these Board and committee changes in process or completed, the Company's Senior Independent Director and Chairman of the Nomination & Governance Committee, Roger Lane-Smith, expressed his intention to retire from the Board by the end of 2015. The Company has engaged Webster Partners, working alongside a Board established Search Committee, comprised of members of the Strategy & Oversight Committee and Roger Lane-Smith, to identify a suitable new Senior Independent Director with UK public company board experience. We have met a number of potential candidates and anticipate this recruitment will be successfully completed during the fourth quarter of 2015.
Additional monitoring and finance review
The Board is monitoring the expenditure of the funds from the equity offering, to ensure that not only are they in line with the budget presented at the time of the equity offering but also taking into account market trends, changes and circumstances such as the challenging operating environment in Greece and, most importantly, monthly operating trends, metrics and performance. We are pleased that Amanzoe is generally performing as planned, despite challenges presented by volatility in Greece.
In addition, we are undertaking a comprehensive review of all corporate overhead costs and budgets and financing for our Core Projects to identify opportunities for improvement. As a result we are currently re-tendering for many of the outsourced services that DCI utilises and we anticipate savings from this exercise.
Non-Core Assets
In accordance with the refocused strategy, Savills (UK) Ltd and Savills Greece have been retained to provide professional advisory, marketing and sales services in undertaking a full review of all of the Company's Non-Core projects in Greece, Croatia and Turkey.
The Investment Manager is exploring additional channels to promote the monetisation of all the Non-Core Assets, including those in Cyprus.
As part of the streamlining of DCI's activity, the Board has agreed to the disposal of DCI's wholly-owned subsidiary DolphinCI Twenty Seven Limited, comprising the assets and operations of Zoniro (Hellas), to its management team which is separate from DCP, for a nominal one Euro consideration while retaining some upside should Zoniro (Hellas) make profits from future real estate sales. The Zoniro (Hellas) disposal will result in a cash saving of at least 7.2 million by the end of 2016, due to the elimination of the existing debt service costs, annual overheads and other liabilities while improving the net equity position by 0.8 million.
Interim Results
Group Net Asset Value ("NAV") as at 30 June 2015 was 690 million before Deferred Income Tax Liabilities ("DITL") and 604 million after DITL. NAV per share before and after DITL in Euro terms as at 30 June 2015 was 0.76 and 0.67 respectively after taking into account of the dilutive effect of the equity fundraising and 2016 convertible bond conversion. Adjusting the 31 December 2014 NAV for the effect of the June 2015 equity fundraising, the NAV at 30 June 2015 was down 3.8% and 4.2% before DITL and after DITL respectively, and on the same basis the Sterling NAV per share at 30 June 2015 was down 13.2% and 13.6% respectively.
Outlook
Global macro tourism trends are favourable and all demographic and business indicators point towards these trends continuing for the foreseeable future. As far as DCI is concerned, the higher end of the global tourism market is growing, becoming increasingly discerning, experience-oriented and desires authentic and customised experiences and services. Our business plan is evolving to satisfy those trends and the resultant demand.
We have a robust and clearly understood strategy. We have excellent Core Projects with strong, long term potential. Systems, controls and metrics measurement processes are being implemented to enable the Board to better manage and understand all aspects of DCI. We are working closely with DCP to understand the various aspects of the Core Projects and Non-Core Assets in order to address the challenges, risks and opportunities.
We are particularly looking forward to the anticipated opening of the Amanera resort at Playa Grande Club & Reserve, Dominican Republic, in November 2015.
The Board, in conjunction with DCP, are very focused on the Company's priorities and advancing our Core Projects and Non-Core Assets in line with the refocused strategy. We look forward to reporting continued progress.
Laurence Geller CBE
Chairman
Dolphin Capital Investors
24 September 2015
D. Investment Manager's Report
D.1 Business Overview
2015 has seen a continuation of the development progress of our Core Projects (ranging from Villa sales and construction to advancing zoning and permitting) and the commencement of processes to monetise our Non-Core Assets.
The successful completion of the 75 million equity raise at an issue price of 0.21 per New Share, and the formal adoption of the refocused strategy, with specific deliverables and timeframes, announced on 3 June 2015, was a milestone event for the Company.
Since then, we have been fully focused on delivering this refocused strategy, with good progress to date:
1. Executed sales contracts or pre-contracts for the following residential sales:
a. One Villa and one Beach Cabana at Amanzoe (Greece)
b. One Villa in Amanera (Dominican Republic)
c. One Sea Front Villa lot in Kilada Hills (Greece)
d. One house in La Vanta (Turkey)
2. Managing the business through extraordinary economic and political conditions in Greece, which include the imposition of capital controls, while maintaining seamless operations for both the Amanzoe and Nikki Beach resorts.
3. Despite the Greek economic crisis, the Amanzoe hotel Net Operating Income (NOI) is expected to double in 2015 compared to 2014.
4. Progressed the development of Playa Grande Club & Reserve and a ramp up of operations, including the co-ordination of a pre-marketing campaign, ahead of the anticipated opening of the new Amanera Resort on 23 November 2015.
5. Agreed the disposal of Zoniro (Hellas) to its local management team, separate to DCP, which is expected to result in cash savings to Dolphin of c.7.2 million for the period until the end of 2016 and a NAV uplift of 0.8 million.
6. Collected 3.9 million in subsidies in relation to Amanzoe from the Greek Ministry of Development.
D.2. Portfolio Review
D.2.1. CORE PROJECTS
Amanzoe, Greece (www.amanzoe.com)
- Amanzoe operations improved during 2015 compared to 2014. The expected occupancy for the 2015 operational period is 57% (214 days) compared to 38% for 2014 (306 days).
- Following a pause in sales activity in June and July, due to political and economic events in Greece, interest in the villas resumed in August resulting in one new villa reservation, the sale of use of one beach cabana, and a number of other pending discussions.
- Additional works at the Amanzoe Beach Club have been completed. These include a new children's pool, additional lounging areas and a new reception building which, importantly has created the opportunity for four beach cabanas to be used as additional income producing overnight room accommodation.
- Three more villas have been completed and were delivered to their owners in August 2015. To date, seven villas have been completed, all of which are participating in the Amanzoe Villa rental programme and therefore are contributing to the resort's revenue generation.
- Of the three new villas completed, villa 20 represents the largest Aman villa in the entire global Aman portfolio. Comprising 4,992 of covered m2, villa 20 includes 10 bedrooms and, amongst other facilities, a 30 metre and a 20 metre swimming pool, five smaller pools, a full spa and gym inclusive of an indoor pool, a library, and multiple sitting areas all with stunning sea views. Due to its uniqueness it is expected to generate significant rental and other revenues for Amanzoe.
- Amanzoe continues to receive outstanding reviews. At the 2015 Cond Nast Traveller Readers' Travel Awards, published on 2 September 2015, Amanzoe was voted second in the "Best Hotel in Europe, Turkey & Russia" category, ranking first in terms of resorts, and eleventh in the general "The World's Top 100" list. The resort was also named one of the best spas of the year by Tatler magazine and Best European Resort by The Gallivanter's Guide.
Playa Grande Club & Reserve ("Playa Grande" - www.playagrande.com), Dominican Republic
- The construction of Amanera at Playa Grande Club & Reserve continues on schedule, with the formal opening scheduled for 23 November 2015.
- On 30 June 2015, the Amanera website (www.amanera.com) went live and the opening of Amanera was announced to the press and dedicated Aman clients. A detailed pre-opening marketing and public relations plan is in place and is being executed in the lead up to the opening. The hotel has started to receive room reservation requests with strong occupancy levels expected at the opening.
- Progress on the renovation of the Robert Trent Jones Snr. golf course is continuing apace. Following the completion of the back nine holes, the renovation of the front nine holes is almost complete (along with the construction of the new golf course maintenance building) and scheduled for delivery within 15 October 2015 ahead of the commencement of operations at the Aman Hotel.
- Villa sales are gaining momentum, driven by strong North American market conditions and a marketing campaign to promote the opening of the hotel with an increase in site visits and enquiries from prospective villa buyers. Pipeline discussions are ongoing with potential purchasers to buy the three remaining Aman Founder Villas and five remaining two-bedroom villas (in addition to the four Founder Villas and one two bedroom property sold to date). The pace of sales is anticipated to accelerate upon opening of the hotel, as guests see the completed product and fully experience the property.
- Construction of the previously sold Founder Villas commenced in September. The two bedroom villa that has also been sold is in advanced construction stages and scheduled for delivery in December, concurrent with the opening of the Amanera hotel.
Pearl Island ("Pearl Island" - www.pearlisland.com), Panama
- The Zoniro Panama development team is completing the Ritz Carlton Reserve detailed design phase and performing value engineering to ensure that the development budget is achieved. Plans are being finalised for construction, which is subject to the Company obtaining the requisite equity financing.
- As previously noted, the project obtained approval from a regional bank to increase the approved debt facility from US$21 million to US$33 million. We are reviewing options to raise the c. US$33 million of additional equity required, c.US$20 million for DCI's shareholding, either through a JV, or from recycling the potential proceeds of Non-Core Asset sales or other means.
- The first group of turn-key villas and condos in the Founder's Phase (which is owned by a regional investor group and our local partner in the island) are to be delivered in the coming months, together with the already completed beach club, airport, service pier, main island infrastructure, first phase of the marina, and other common amenities in the Founder's Phase. The Founder's Phase has already delivered 40 lots connected to all utilities and will be delivering a further 36 completed villas and condos, together with 48 marina berths / slips between September and December 2015.
- Sales momentum at the Founder's Phase remains strong, with several new pre-sales having been recorded this period. Residential sales from the Founder's Phase to date amount to c.US$73 million for 83 units sold, representing over 50% of the inventory available for sale.
- The success of the Founders Phase sale bodes well for the success of DCI's residential sales as and when our product reaches the market.
Kilada Hills Golf Resort, Greece
- Subsequent to the Central Administrative Council's approval of the Strategic Investment Proposal on 5 November 2014, the decision as a draft Presidential Decree was also approved by the sitting ministerial council, and the Council of State issued a positive consultation on 29 April 2015. The "Strategic Development" final permits are pending, and despite being reviewed and approved by the previous ministers, the final approval is expected to be reviewed and ratified by the new government, following the election on 20 September 2015. The issuance of the Presidential Decree is expected thereafter.
- Dolphin continues to review additional funding options and remains in discussions with third parties to secure the funds required for the project development. These include, but are not limited to, joint venture transactions with/without debt financing or the use of proceeds from the monetization of Non-Core Assets, in order to develop the planned 18-hole Jack Nicklaus Signature Golf Course, a golf club house, beach club and respective infrastructure allowing the Company the opportunity to sell approximately 200 golf residences.
- A reservation agreement for the sale of one of the Sea Front Villa shell structures, subject to final contract, was signed on 16 September.
Kea Resort, Greece
- The Company remains in discussions with a major Greek bank for a long term senior construction loan facility and a VAT bridge facility, as well as a Letter of Guarantee for the pre-financing of state subsidies, which are expected to resume post the recapitalisation of the Greek banking sector.
- The Company is reviewing options to secure the 20 million equity investment in the project which is required for its development.
D.2.2. NON-CORE ASSETS
In relation to the divestment of the Non-Core Assets, Savills is advising the Company on the evaluation and marketing of these projects. Savills has recently completed due diligence on the Non-Core Asset portfolio and together with the Board and the Investment Manager, it has been agreed that the following three assets will be prioritised for monetisation over the coming year: Sitia Bay (Greece), La Vanta (Turkey) and Livka Bay (Croatia).
Disposal of Zoniro (Hellas)
- The Company has agreed to sell the issued share capital of DolphinCI Twenty Seven Limited, which holds the assets and operations of Zoniro (Hellas), to certain of the management of Zoniro (Hellas), separate to DCP, for a nominal consideration of one Euro. Zoniro (Hellas) is involved in the permitting, development, advisory and project management services to DCI's Greek subsidiaries. Following the transaction, Zoniro (Hellas) will trade as an independent company delivering the same level of services to the Group, with DCI initially as its main client.
- As at 30 June 2015, DolphinCI Twenty Seven Limited had total assets of 19.4 million primarily representing certain non-core property assets and total liabilities of 20.2 million primarily representing indebtedness on its assets. The NAV as at 30 June 2015 was a negative 0.8 million, and therefore its outright sale for nominal consideration will result in a corresponding gain for Dolphin of 0.8 million. Its losses for the year ended 31 December 2014 were c. 1 million.
- The Zoniro (Hellas) disposal will also result in an estimate cash saving of at least 7.2 million for the period until the end of 2016, due to the elimination of the existing debt service costs, incremental annual overheads and other liabilities that would have been financed by Dolphin.
- The annual overheads for Zoniro (Hellas) were approximately 2 million. Zoniro will now enter into direct contracts for the provision of development and project management services with the Greek Group companies with an aggregate gross consideration of 1.5 million per annum, with the Company retaining the option to terminate after two years with a 6-month notice period. During the term of these service contracts, Zoniro will continue to provide the same permitting, development, advisory and project management services that it provided to the Greek subsidiaries of the Group prior to the disposal.
- Dolphin will be entitled to a proportion of any profits realized by Zoniro (Hellas) through the potential sale of its real estate assets to third parties at a price exceeding their valuation as at 30 June 2015, until the 3rd anniversary from the disposal transaction completion date. Dolphin's profit sharing entitlement will be set at 50% for the first year, 35% for the second year and 20% for the third year from the completion of the Zoniro (Hellas) disposal. Dolphin will undertake to Zoniro (Hellas) to settle the corresponding percentages of the annual real estate taxes assessed on the relevant Zoniro (Hellas) assets during the period where this profit sharing entitlement is in force.
- For the purposes of the AIM Rules, the sale of DolphinCI Twenty Seven Limited to certain of its management (who are directors of DCI subsidiaries) constitutes a related party transaction. As required by the AIM Rules, the Directors consider, having consulted with the Nominated Adviser, Grant Thornton, that the terms of the sale of DolphinCI Twenty Seven Limited are fair and reasonable insofar as Shareholders are concerned.
The Nikki Beach Resort & Spa at Porto Heli ("Nikki Beach" - www.nikkibeachhotels.com) (a 25% associate of DCI)
- The Greek crisis had an impact on the performance of the hotel in June and July due to the fact that, on average, more than 40% of its clientele are Greeks, who tend to make late bookings during the summer season and these were significantly reduced during this period.
- By comparison, August was significantly better with close to 90% occupancy as a consequence of key managerial and strategic changes being made as well as improvement in the overall market alongside positive reviews and an increase in the popularity of the hotel.
- This positive trend has continued in September, with occupancy currently being more than double that originally budgeted.
- Momentum remains highly positive going into 2016 and the Nikki Beach operator remains confident that 2016 will be the project's first positive NOI year.
Aristo Developers Ltd (a 49.8% associate of DCI)
- Aristo's sales performance has continued on a positive trend. The re-organisation of its sales and marketing team has been delivering improved results, based to a large extent on its success in the strengthening of the Company's network of international agents including the key Chinese market, where Aristo has recently opened offices. Furthermore, a reorganisation of Aristo's Moscow office has recently been concluded and a UK representative has been appointed.
- Aristo sold 62 homes and plots during the period from January to August 2015, representing total sales of 28 million, up 78% on the respective period in 2014. The average sales price per unit has been higher on a year-on-year basis, as a result of Aristo's pursuit of sales in connection with the "visa/residence" and "passport" incentive legislation enacted in Cyprus. The company's management is confident that further improvement on the pace of sales is to be expected.
Eight months to
Eight months to
31/08/2015
31/08/2014
RETAIL SALES RESULTS
New sales booked
28,543,120
16,018,000
% change
78%
Units sold
62
51
% change
22%
CLIENT ORIGIN
China
79.98%
40.89%
Other overseas
8.47%
6.67%
Russia
6.92%
52.43%
Cyprus
4.28%
--
UK
0.35%
--
- On 28 July 2015, the Criminal Court in Cyprus acquitted Mr. Aristodemou (Aristo's CEO) and all defendants of all charges pertaining to the site owned by Aristo in the Paphos area. This outcome has significantly restored Aristo's corporate image and has aided sales and marketing efforts in achieving improved results.
- With the court case resolved and the Bank of Cyprus concluding its own internal reorganisation, discussions between Aristo management and the Bank of Cyprus in relation to the restructuring of Aristo's c. 260 million of outstanding debt have resumed and are currently in progress. Aristo remains also in discussion with other local banks for restructuring certain loan facilities.
- The process carried out by Citigroup Global Markets Limited in relation to the sale of the Venus Rock project in Cyprus is ongoing.
D.3. Market Dynamics
International tourism demand continued to be robust between January and April 2015, with 332 million international tourist arrivals, representing an increase of 4% compared to the prior year, according to the latest UNWTO World Tourism Barometer. Almost all regions enjoyed strong growth. Prospects for the May to August period remained upbeat, with close to 500 million tourists expected to have travelled abroad during these four months.
By region, the Americas (+6%) led the growth, followed by Europe, Asia and the Pacific and the Middle East, all recording 4% to 5% more arrivals. By sub-region, Oceania and South America boasted the strongest increase (both +8%), followed by the Caribbean and Central and Eastern Europe (both +7%).
The key points for Dolphin's markets are as follows:
- In Greece, international tourist arrivals, according to the Bank of Greece for the first six months of 2015, have increased by 20.8% compared to the same period in 2014, and it is expected that, by the end of the year, a new historical record of approximately 25 million arrivals will be set, proving the resilience of the Greek tourism sector, despite the recent financial turmoil over the course of the summer that now seems to be settling following the new bail-out signed and the government's enhanced position post September's elections.
- In Cyprus, tourist arrivals during the period from January to July 2015 amounted to 1.45 million, as reported by the Statistical Authority of Cyprus, marking an increase of 6.5% compared to the same period in 2014. The KPMG Tourism Market Report notes that the tourist arrivals during this period were the highest since 2002. According to the same report, the total contribution of travel and tourism to GDP is expected to grow by 5.5% to 3.6 billion (22.4% of GDP) in 2015.
- The outlook for travel and tourism in the Dominican Republic in 2015 is very positive. Foreign tourist arrivals in the Dominican Republic for the period of January to June 2015 totalled over 2.8 million, an increase of approximately 20.3% relative to the same period in 2014.
- The number of tourists visiting Panama for the period January to June 2015 totalled 3.5 million and was up by c.7.9% relative to the same period in 2014. Tourist expenditure was US$1.9 billion, representing an increase of 14.7%, compared to the same period last year.
- A total of 2.7 million tourists visited Croatia in the first five months of 2015, which was an increase of 12% on the same period in 2014, as reported by the National Tourist Board. The number of visitors arriving in Turkey from January to June 2015 decreased by 2.4% to c. 17 million, compared to the same period in the previous year according to the Ministry of Tourism. The decrease is attributed to the slowdown in the Russian economy.
D.4. Strategic focus for the remainder of 2015 and beyond
The Company's strategic priorities are to:
1. Complete contracted and reserved sales of residential units and execute new ones;
2. Complete the development of the Amanera Resort and sell all the remaining Founder Aman Villas at Playa Grande;
3. Proceed with finalizing the Strategic Investment zoning for Kilada Hills;
4. Secure the appropriate funding needed to develop Pearl Island and, potentially, Kilada Hills and Kea Resort, ultimately resulting in five completed cashflow producing Core Projects for the Company;
5. Continue to assist Aristo's management as possible in dealing with the loan restructurings and the improvement of its business performance and sales;
6. Accelerate the monetisation of all Non-Core Assets; and
7. Achieve cost savings on corporate overhead costs by re-tendering the auditing, administration, custodian and legal services contracts.
D.5. List of assets
A summary of Dolphin's current investments is presented below. As at 30 June 2015, the net invested amount is 589* million.
PROJECT
Land site
(hectares)DCI's
stakeInvestment cost*
(m)Debt
(m)Real estate value
(m)Loan to real estate
asset value (%)
CORE PROJECTS
1
Amanzoe
93
100%**
42
76
2
Playa Grande Club & Reserve
839
100%
86
52
3
Pearl Island
1323
60%
28
-
4
Kilada Hills Golf Resort
235
100%
93
-
5
Kea Resort
65
67%
9
-
TOTAL
2,555
258
128
488
26%
NON-CORE PROJECTS
6
The Nikki Beach Resort & Spa
1
25%
5
-
7
Sitia Bay Golf Resort
270
78%
17
-
8
Scorpio Bay Resort
172
100%
14
-
9
Lavender Bay Resort
310
100%
25
-
10
Plaka Bay Resort
442
100%
12
-
11
Triopetra
11
100%
4
-
12
Apollo Heights Polo Resort
461
100%
17
20
13
Livka Bay Resort
63
100%
27
8
14
La Vanta - Mediterra Resorts
8
100%
16
1
TOTAL
1,738
138
29
212
14%
ARISTO CYPRUS*
1,448
50%
191
-
226
Itacar Investment
n/a
10%
2
-
5
DCI Corporate Bonds
n/a
n/a
n/a
73
-
GRAND TOTAL
5,741
589
230
931
25%
*Residual investment cost, including amounts paid in shares.
**Pro-forma shareholding, current DCI interest 92%
A breakdown of Dolphin's portfolio for certain key metrics is provided below.
COUNTRY
Land size (hectares)
Investment Cost *
( million)Debt
( million)Real Estate Value
( million)% Loan to real estate asset value
Net Asset Value
1
Greece
1,599
220
76
387
20%
35%
2
Cyprus**
1,909
209
20
266
7%
39%
3
Croatia & Turkey
71
43
9
44
21%
5%
4
Americas
2,163
116
52
233
23%
21%
Grand Total
5,741
588
157
931
17%
100%
*Residual investment cost, including amounts paid in shares.
**DCI's portfolio in Cyprus includes its equity investment in Aristo Developers Ltd, which owns assets in Cyprus that are subject to Aristo's debt and other obligations.
Land size (hectares)
Investment Cost *
( million)Debt
( million)Real Estate Value
( million)% Loan to real estate asset value
Net Asset Value
1
Core Projects
2,555
258
128
487
26%
43%
2
Non-Core Assets
3,186
331
29
444
7%
57%
Grand Total
5,741
589
157
931
18%
100%
*Residual investment cost, including amounts paid in shares.
E. Future Objectives
With the Amanzoe Hotel now successfully operating, and the opening of Amanera on schedule at the end of November, Dolphin is demonstrating its ability to successfully deliver product per expectations and to sell luxury residential real estate at or above anticipated pricing. As stated in our refocused strategy, our objectives are to:
1. Complete the first phases of the Core Projects, to establish them as luxury resort destinations, thereby providing a catalyst for both retail sales of homes, and potential second phase project joint ventures or exits;
2. Where appropriate, advance the zoning, permitting, design and branding of the Non-Core Assets to improve their exit potential and actively pursue their divestment;
3. Make Dolphin a cashflow positive company with organic growth potential; and,
4. Reduce Dolphin's current trading discount to NAV and improve the liquidity of its shares.
Miltos Kambourides
Managing Partner
Dolphin Capital Partners
24 September 2015
Pierre Charalambides
Founding Partner
Dolphin Capital Partners
24 September 2015
F. Finance Director's Report
Net Asset Value ('NAV')
The reported NAV as at 30 June 2015 is presented below:
As at
30 June 2015
Variation since
31 December 2014
Variation since
31 December 2014 (Proforma*)
Total NAV before DITL (million)
690
487
7.2%
(3.3%)
(3.8%)
(13.2%)
Total NAV after DITL (million)
604
426
8.4%
(2.2%)
(4.2%)
(13.6%)
NAV per share before DITL
0.76
0.54
(23.9%)
(31.3%)
(3.8%)
(13.2%)
NAV per share after DITL
0.67
0.47
(23.0%)
(30.6%)
(4.2%)
(13.6%)
___________
Notes:
1. Euro/GBP rate 0.70574 as at 30 June 2015 and 0.78247 as at 31 December 2014.
2. Euro/USD rate 1.1189 as at 30 June 2015 and 1.2141 as at 31 December 2014.
3. NAV per share has been calculated on the basis of 904,626,856 issued shares as at 30 June 2015 and 642,440,167 issued shares as at 31 December 2014.
4. NAV before DITL include the 49.8% DITL of Aristo.
* Total NAV variation percentages have been calculated using the proforma consolidated balance sheet as at 31 December 2014 (adjusted for the effect of June 2015 equity fund raising)
Total Group NAV as at 30 June 2015 was 690 million and 604 million before and after DITL respectively. This represents a decrease of 27.3 million (3.8%) and 26.8 million (4.2%), respectively, from the respective pro forma 31 December 2014 figures.
As no valuation of the Company's portfolio took place as at 30 June 2015, this NAV reduction is mainly due to Dolphin's regular fixed operational, corporate, finance and management expenses and the costs of the equity fundraising. This was slightly offset by the appreciation of the Americas properties in Euro terms due to the devaluation of the Euro against the dollar by c. 8.5%.
Sterling NAV per share as at 30 June 2015 was 54p before DITL and 47p after DITL and decreased by 31.3% and 30.6%, before and after DITL respectively compared to the 31 December 2014 figures. The decrease was mainly driven by the reason explained above, the issuance of 262,186,689 new common shares at 21p in June 2015 and the 9.8% appreciation of Sterling versus Euro over the period.
The next full portfolio valuation will be as at 31 December 2015.
Financial position
Condensed consolidated Interim statement of financial position
30 June 2015
31 December 2014
' 000
(reviewed)
' 000
(audited)
Assets
Real estate assets (investment and trading properties)
714,217
680,968
Equity accounted investees(1)
257,849
265,203
Other assets
26,757
28,480
Cash and cash equivalents (2)
74,820
30,978
Total assets
1,073,643
1,005,629
EQUITY
Equity attributable to Shareholders before DITL(1)
689,929
643,608
Non-controlling interests
31,840
30,364
Total equity
721,769
673,972
LIABILITIES
Interest-bearing loans and finance lease obligations
247,355
248,185
Other liabilities
104,519
83,472
Total liabilities
351,874
331,657
Total equity and liabilities
1,073,643
1,005,629
___
1 Amounts include the 49.8% DITL of Aristo
2 Includes restricted cash of 19.3 million and 23.9 million as at 30 June 2015 and 31 December 2014
The Company's NAV before DITL, after deducting from total consolidated assets, non-controlling interests of 32 million, other liabilities of 105 million and total debt of 247 million, is 690 million as at 30 June 2015.
The Company's consolidated assets (including 1,044 million total assets plus 30 million of 49.8% DITL of Aristo) total 1,074 million and include 714 million of real estate assets, 258 million of investments in equity accounted investees, 102 million of other assets and cash. The 714 million figure represents the fair market valuation of Dolphin's real estate portfolio (both freehold and leasehold interests) as at 30 June 2015, assuming 100% ownership. The 258 million figure represents the 49.8% investment in Aristo and the 25% stake in Nikki Beach. The 27 million of other assets comprise mainly 8 million of VAT receivable, 3 million of deferred tax assets and 4 million of government grants.
The Company's consolidated liabilities total 352 million and comprise 105 million of other liabilities as well as 247 million of interest-bearing loans and finance lease obligations, out of which 50 million and US$9.17 million convertible bonds are held at Company level. The remaining loans are held by Group subsidiaries and are non-recourse to Dolphin (except for the Playa Grande convertible Bond and the US$19 million Playa Grande construction loan which are guaranteed by the Company).
The 105 million of other liabilities comprise mainly 25 million of option contracts to acquire land in the Company's Lavender project, 7.3 million deferred income from government grants and 33 million of client advances from villa sales.
Condensed consolidated Interim statement of profit or loss
From 1 January 2015
to 30 June 2015
From 1 January 2014
to 30 June 2014
'000
'000
Total operating profits
4,909
13,086
Investment Manager fees
(6,814)
(6,858)
Professional fees
(3,446)
(3,484)
Administrative and other expenses
(15,512)
(10,757)
Results from operating activities
(20,863)
(8,013)
Net finance costs
(9,484)
(5,626)
Share of (losses)/profits on equity accounted investees, net of tax
(7,077)
42,887
Gain on disposal of investment in subsidiaries
-
2,709
(Loss)/profit before taxation
(37,424)
31,957
Taxation
(17)
(40)
(Loss)/profit for the period
(37,441)
31,917
(Loss)/profit attributable to:
Owners of the Company
(36,057)
30,359
Non-controlling interests
(1,384)
1,558
(Loss)/profit for the period
(37,441)
31,917
Results
Loss for the six month period ended 30 June 2015 amounted to 37 million compared to 32 million profit for the respective period last year. The variation was mainly due to the fact that there were no independent asset valuations as at 30 June 2015, while in 2014 DCI recorded its share of the increase in the Venus Rock independent valuation, following the termination of the sale contract with the China Glory investment Group, as well as to revaluation gains recorded in Amankea.
Furthermore administrative and other expenses were increased by approximately 4.8 million compared to prior year, mainly due to a 1.9 million litigation liability crystalized at the Zoniro (Hellas) level and a provision for Aman branding fees of approximately 2.1 million.
Finally, net finance costs increased by 3.9 million mainly due to full period costs for the loans advanced by Melody Business Finance LLC and and Colony Luxembourg S.a.r.l. to the Company's Amanera and Amanzoe projects respectively.
Total Operating Profits
These were 4.9 million (2014: 13 million, including 8.8 million revaluation gains in Amankea).
Operating profits were derived from the following sources:
million
Income from hotel operation
3.2
Income from construction contracts
2.3
Rental income
0.2
Other income
2.3
Cost of sales
(3.0)
Fair value adjustment
(0.1)
TOTAL
4.9
Investment Manager Fees
These amounted to 6.8 million (2014:6.9 million). Further details on these and the revised arrangements in place post 1 July 2015 can be found in Note 22.2 of the Interim Condensed Financial Statements.
Professional Fees
The majority of Professional Fees related to the design, appraisal, project management and development costs incurred by the Company on its property interests which are expensed to profit or loss as incurred. The charge for the period was 3.4 million (2014: 3.5 million) and can be broken down as follows:
million
Legal fees
0.4
Audit and Accounting fees
0.5
Property development, design and management
2.1
Other
0.4
TOTAL
3.4
Administrative and other expenses
These amounted to 15.5 million (2014: 10.8 million). The majority of the increase in costs over those incurred in 2014 is attributable to a provision of 1.9 million in respect of a litigation liability at Zoniro (Hellas) level, relating to a fees dispute with a former service provider, a 1.9 million land concession cost relating to the permitting of the Kea resort, where the local project company transferred the ownership of a part of the asset to the Greek state to achieve final permitting (in lieu of a cash payment) and, finally, a provision for branding fees of approximately 2.1 million payable to Aman in relation to villa sales in Amanzoe.
The respective expenses are analysed in the following table:
million
Personnel costs
3.7
Selling and promotion costs
1.0
Aman Branding & Mgt fees
2.3
Litigation liability provision
1.9
Land concession costs
1.9
Depreciation
1.5
Directors fees
0.3
Other expenses
2.9
TOTAL
15.5
The reduction in the NAV after DITL resulted in an accounting loss of 36 million for the six-month period ended 30 June 2015 implying 0.05 loss per share.
The consolidated interim financial statements have been reviewed by KPMG.
Panos Katsavos
Finance Director
Dolphin Capital Partners
24 September 2015
Condensed consolidated interim statement of profit or loss and other comprehensive income
For the six-month period ended 30 June 2015
From 1 January 2015
to 30 June 2015
From 1 January 2014
to 30 June 2014
Note
'000
'000
Continuing operations
Valuation (loss)/gain on investment property
9
(96)
8,766
Impairment loss on trading properties
-
(4,249)
Other operating profits
5,005
8,569
Total operating profits
4,909
13,086
Investment Manager fees
22.2
(6,814)
(6,858)
Professional fees
(3,446)
(3,484)
Administrative and other expenses
(15,512)
(10,757)
Total operating and other expenses
(25,772)
(21,099)
Results from operating activities
(20,863)
(8,013)
Finance income
240
499
Finance costs
(9,724)
(6,125)
Net finance costs
(9,484)
(5,626)
Share of (losses)/profits on equity accounted investees, net of tax
13
(7,077)
42,887
Gain on disposal of investment in subsidiaries
23
-
2,709
Total non-operating (losses)/profits
(7,077)
45,596
(Loss)/profit before taxation
(37,424)
31,957
Taxation
7
(17)
(40)
(Loss)/profit for the period
(37,441)
31,917
OTHER COMPREHENSIVE INCOME
Items that are or may be reclassified to profit or loss
Foreign currency translation differences
12,137
686
Translation differences to profit or loss due to disposal of subsidiary
23
-
(2,709)
Share of revaluation on equity accounted investees
13
17
17
Fair value adjustment on available-for-sale financial assets
-
(64)
12,154
(2,070)
Other comprehensive income for the period, net of tax
12,154
(2,070)
Total comprehensive income for the period
(25,287)
29,847
(Loss)/profit attributable to:
Owners of the Company
(36,057)
30,359
Non-controlling interests
(1,384)
1,558
(Loss)/profit for the period
(37,441)
31,917
Total comprehensive income attributable to:
Owners of the Company
(26,218)
28,110
Non-controlling interests
931
1,737
Total comprehensive income for the period
(25,287)
29,847
(Loss)/EARNINGS per share
Basic and diluted (loss)/earnings per share ()
8
(0.05)
0.05
Condensed consolidated interim statement of financial position
As at 30 June 2015
30 June 2015
31 December 2014
Note
'000
'000
Assets
Investment property
9
459,408
451,880
Property, plant and equipment
10
195,625
176,765
Equity accounted investees
13
227,539
234,223
Available-for-sale financial assets
12
2,201
2,201
Deferred tax assets
19
2,405
2,557
Other non-current assets
2,953
2,584
Non-current assets
890,131
Trading properties
11
59,183
52,323
Receivables and other assets
14
19,198
21,138
Cash and cash equivalents
15
74,820
30,978
Current assets
153,201
104,439
Total assets
1,043,332
974,649
Equity
Share capital
16
9,046
6,424
Share premium
16
569,921
498,933
Retained earnings
(7,781)
28,821
Other reserves
33,109
23,270
Equity attributable to owners of the Company
604,295
Non-controlling interests
31,840
30,364
Total equity
636,135
Liabilities
Loans and borrowings
17
205,415
213,923
Finance lease obligations
18
7,408
7,628
Deferred tax liabilities
19
55,324
55,180
Other non-current liabilities
19,829
21,393
Non-current liabilities
287,976
Loans and borrowings
17
34,101
26,166
Finance lease obligations
18
431
467
Trade and other payables
20
84,565
62,059
Current tax liabilities
124
21
Current liabilities
119,221
88,713
Total liabilities
407,197
Total equity and liabilities
1,043,332
974,649
Net asset value ('NAV') per share ()
21
0.67
0.87
Condensed consolidated interim statement of changes in equity
For the six-month period ended 30 June 2015
Attributable to owners of the Company
Share
Share
Translation
Revaluation
Retained
Non-controlling
Total
capital
premium
reserve
reserve
earnings
Total
interests
equity
'000
'000
'000
'000
'000
'000
'000
'000
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 PERIOD
Profit for the period
-
-
-
-
30,359
30,359
1,558
31,917
Other comprehensive income for the period
Foreign currency translation differences
-
-
507
-
-
507
179
686
Translation differences to profit or loss due to disposal of subsidiary
-
-
(2,709)
-
-
(2,709)
-
(2,709)
Share of revaluation on equity accounted investees
-
-
-
17
-
17
-
17
Fair value adjustment on available-for-sale financial asset
-
-
-
(64)
-
(64)
-
(64)
Total other comprehensive income for the period
-
-
(2,202)
(47)
-
(2,249)
179
(2,070)
Total comprehensive income for the period
-
-
(2,202)
(47)
30,359
28,110
1,737
29,847
TRANSACTIONS WITH OWNERS OF THE COMPANY
Changes in ownership interests
Acquisition of non-controlling interests without a change in control
-
-
-
-
535
535
(1,535)
(1,000)
Total changes in ownership interests
-
-
-
-
535
535
(1,535)
(1,000)
Total transactions with owners of the Company
-
-
-
-
535
535
(1,535)
(1,000)
Balance at 30 June 2014
6,424
498,933
(711)
6,721
40,950
552,317
24,706
577,023
Balance at 1 January 2015
6,424
498,933
10,695
12,575
28,821
557,448
30,364
587,812
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
Loss for the period
-
-
-
-
(36,057)
(36,057)
(1,384)
(37,441)
Other comprehensive income for the period
Foreign currency translation differences
-
-
9,822
-
-
9,822
2,315
12,137
Share of revaluation on equity accounted investees
-
-
-
17
-
17
-
17
Total other comprehensive income for the period
-
-
9,822
17
-
9,839
2,315
12,154
Total comprehensive income for the period
-
-
9,822
17
(36,057)
(26,218)
931
(25,287)
TRANSACTIONS WITH OWNERS OF THE COMPANY
Contributions by and distributions to owners of the Company
Issue of ordinary shares
2,193
60,527
-
-
-
62,720
-
62,720
Placement costs
-
(1,390)
-
-
-
(1,390)
-
(1,390)
Bond conversions
429
11,851
-
-
-
12,280
-
12,280
Non-controlling interests on capital increases of subsidiaries
-
-
-
-
(545)
(545)
545
-
Total contributions by and distributions to owners of the Company
2,622
70,988
-
-
(545)
73,065
545
73,610
Total transactions with owners of the Company
2,622
70,988
-
-
(545)
73,065
545
73,610
Balance at 30 June 2015
9,046
569,921
20,517
12,592
(7,781)
604,295
31,840
636,135
For the six-month period ended 30 June 2015
From 1 January 2015
to 30 June 2015
From 1 January 2014
to 30 June 2014
'000
'000
Cash flows from operating activities
(Loss)/profit for the period
(37,441)
31,917
Share of losses/(profits) on equity accounted investees, net of tax
7,077
(42,887)
Unrealised loss/(gain) on property
96
(4,517)
Other adjustments
12,634
3,788
(17,634)
(11,699)
Changes in:
Receivables
1,571
(1,250)
Payables
20,942
18,147
Cash from operating activities
4,879
5,198
Tax received/(paid)
77
(17)
Net cash from operating activities
4,956
5,181
Cash flows from investing activities
Proceeds from disposal of subsidiaries, net of cash disposed of
-
8,288
Net disposals of investment property
2,621
151
Net acquisitions of property, plant and equipment
(13,900)
(10,751)
Net change in equity accounted investees
(376)
(1,116)
Net change in trading properties
(6,704)
4,773
Interest received
242
265
Net cash (used in)/from investing activities
(18,117)
1,610
Cash flows from financing activities
Proceeds from issue of share capital, net of placement costs
61,330
-
Acquisition of non-controlling interests without a change in control
-
(1,000)
Change in loans and borrowings
2,460
186
Change in finance lease obligations
(256)
(209)
Interest paid
(5,960)
(4,782)
Net cash from/(used in) financing activities
57,574
(5,805)
Net increase in cash and cash equivalents
44,413
986
Cash and cash equivalents at the beginning of the period
28,739
4,861
Effect of exchange rate fluctuations on cash held
(619)
(2)
Cash and cash equivalents at the end of the period
72,533
5,845
For the purpose of the condensed consolidated interim statement of cash flows, cash and cash equivalents consist of the following:
Cash in hand and at bank (see note 15)
74,820
8,145
Bank overdrafts (see note 17)
(2,287)
(2,300)
Cash and cash equivalents at the end of the period
72,533
Notes to the condensed consolidated interim financial statements
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 condensed consolidated interim financial statements of the Company as at and for the six-month period ended 30 June 2015 comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates.
The consolidated financial statements of the Group as at and for the year ended 31 December 2014 are available at www.dolphinci.com.
2. STATEMENT OF COMPLIANCE
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2014. They are presented in euro (), rounded to the nearest thousand.
These condensed consolidated interim financial statements were authorised for issue by the Board of Directors on 23 September 2015.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2014.
4. ESTIMATES
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2014.
5. Significant SUBSIDIARIES
As at 30 June 2015, 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%
IktinosTechnikiTouristikiS.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%
EidikouSkopouEikosiEnaS.A.
Greece
80%
AzurnaUvalaD.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 30 June 2015 and 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.
6. Segment reporting
The Group has one operation, investing in real estate, and three reportable segments as shown below, which represent the geographical regions in which the Group operates.
Americas1
South-East Europe2
Other3
Reportable
segment
totals
Adjustments4
Consolidated totals
'000
'000
'000
'000
'000
'000
30 June 2015
Investment property
129,898
329,510
-
459,408
-
459,408
Property, plant and equipment
95,884
99,741
-
195,625
-
195,625
Trading properties
1,993
57,190
-
59,183
-
59,183
Equity accounted investees
-
225,919
1,620
227,539
-
227,539
Available-for-sale financial assets
2,201
-
-
2,201
-
2,201
Cash and cash equivalents
13,210
8,464
53,146
74,820
-
74,820
Intra-group debit balances
14,399
291,257
522,406
828,062
(828,062)
-
Other assets
2,979
21,016
561
24,556
-
24,556
Total assets
260,564
1,033,097
577,733
1,871,394
(828,062)
1,043,332
Loans and borrowings
52,480
113,941
73,095
239,516
-
239,516
Finance lease obligations
59
7,780
-
7,839
-
7,839
Deferred tax liabilities
2,321
53,003
-
55,324
-
55,324
Intra-group credit balances
148,215
394,377
285,470
828,062
(828,062)
-
Other liabilities
14,259
89,074
1,185
104,518
-
104,518
Total liabilities
217,334
658,175
359,750
1,235,259
(828,062)
407,197
Valuation loss on investment property
(80)
(16)
-
(96)
-
(96)
Share of losses on equity accounted investees, net of tax
-
(6,070)
(1,007)
(7,077)
-
(7,077)
Other operating profits
1,622
3,299
84
5,005
-
5,005
Investment Manager fees
-
-
(6,814)
(6,814)
-
(6,814)
Net finance costs
(1,494)
(5,109)
(2,881)
(9,484)
-
(9,484)
Other expenses
(4,562)
(13,659)
(737)
(18,958)
-
(18,958)
Loss before taxation
(4,514)
(21,555)
(11,355)
(37,424)
-
(37,424)
Taxation
14
(31)
-
(17)
-
(17)
Loss for the period
(4,500)
(21,586)
(11,355)
(37,441)
-
(37,441)
Americas1
South-East Europe2
Other3
Reportable
segment
totals
Adjustments4
Consolidated totals
'000
'000
'000
'000
'000
'000
31 December 2014
Investment property
120,285
331,595
-
451,880
-
451,880
Property, plant and equipment
75,996
100,769
-
176,765
-
176,765
Trading properties
1,837
50,486
-
52,323
-
52,323
Equity accounted investees
-
231,996
2,227
234,223
-
234,223
Available-for-sale financial assets
2,201
-
-
2,201
-
2,201
Cash and cash equivalents
20,514
7,662
2,802
30,978
-
30,978
Intra-group debit balances
13,274
285,185
507,763
806,222
(806,222)
-
Other assets
2,673
19,729
3,877
26,279
-
26,279
Total assets
236,780
1,027,422
516,669
1,780,871
(806,222)
974,649
Loans and borrowings
43,128
113,801
83,160
240,089
-
240,089
Finance lease obligations
134
7,961
-
8,095
-
8,095
Deferred tax liabilities
2,139
53,041
-
55,180
-
55,180
Intra-group credit balances
125,522
393,200
287,500
806,222
(806,222)
-
Other liabilities
9,045
73,495
933
83,473
-
83,473
Total liabilities
179,968
641,498
371,593
1,193,059
(806,222)
386,837
30 June 2014
Valuation gain on investment property
-
8,766
-
8,766
-
8,766
Impairment losses
-
(4,249)
-
(4,249)
-
(4,249)
Share of profits on equity accounted investees, net of tax
-
42,887
-
42,887
-
42,887
Gain on disposal of investment in subsidiaries
-
2,709
-
2,709
-
2,709
Other operating profits
2,660
5,909
-
8,569
-
8,569
Investment Manager fees
-
-
(6,858)
(6,858)
-
(6,858)
Net finance costs
(16)
(4,031)
(1,579)
(5,626)
-
(5,626)
Other expenses
(4,129)
(9,146)
(966)
(14,241)
-
(14,241)
(Loss)/profit before taxation
(1,485)
42,845
(9,403)
31,957
-
31,957
Taxation
(25)
(15)
-
(40)
-
(40)
(Loss)/profit for the period
(1,510)
42,830
(9,403)
31,917
-
31,917
1 Americas comprises the Group's activities in the Dominican Republic and the Republic of Panama. Also includes the investment in ItacareCapital Investments Ltd ('Itacare') (see note 12).
2 South-East Europe comprises the Group's activities in Cyprus, Greece, Croatia and Turkey.
3 Other comprises the parent company, Dolphin Capital Investors Limited.
4 Adjustments consist of intra-group eliminations.
Country risk developments
The general economic environment prevailing in the south-east Europe area and internationally may affect the Group's operations. Concepts such as inflation, unemployment, and development of the gross domestic product are directly linked to the economic course of every country and variation in these and the economic environment in general might affect the Group to a certain extent.
The global fundamentals of the sector remained strong during 2014 and the first half of 2015, with both international tourism and wealth continuing to grow, even though economic activity in two of the Group's primary markets, Greece and Cyprus, continued to face significant challenges. The business climate is slowly, but steadily improving in Cyprus assisted by the legislative reforms implemented during the last eighteen months by the Cypriot government.
After the escalation of the sovereign debt crisis in Greece in mid-2012 and the international media speculation involving scenarios of default and/or Greece's exit from the Eurozone, the country's economic conditions significantly stabilized until the end of 2014, when a general election was called in Greece for January 2015. In 2014 international tourist arrivals, according to Tourism Research Institute, set a new historical record by reaching 21.5 million, a 20% increase compared to 2013. In the first six months of 2015, the number of international tourist arrivals to Greece increased by 6.7% compared to the same period last year, according to the Greek Tourism Confederation (SETE). In late June 2015 capital controls were imposed and the banking system was closed for more than two weeks. On 12 July 2015, the Greek Prime Minister agreed with the European Union leaders a list of reforms that the Greek Government needs to implement in order to unlock a fresh 82bn to 86bn bail-out. On 15 July 2015, the Greek parliament passed this law and in the context of this agreement the government has put forward a plan of reforms, spending cuts and tax rises. The conclusion of this agreement is expected, if the respective measures are implemented, to restore the sustainability of the Greek economy on a long term basis. Since the announcement of the referendum on 5 July 2015, tourism was negatively affected by the cancelation of reservations and the slowdown of new ones. Since the announcement of the provisional agreement for the 3rd bail out, reservations are picking up again and the expectation is that the end result for 2015 will be the same as 2014, which was a record year for Greece.
The crisis of sovereign debt affected the Cypriot economy with a time lag, causing negative effects not only on public finances but also in the banking system. Despite the fact that the Government tried to react promptly and effectively by preparing a fiscal consolidation programme, the country captured the world's attention earlier in 2013 as it fought hard to bounce back from the brink of bankruptcy through intense negotiations with international lenders. The so called 'bail in' decision of the Eurozone included imposing losses on depositors with amounts exceeding 100,000, a closed banking system for two weeks and extensive capital controls. Since then Cyprus has been remarkably resilient following the financial crisis and in implementing tough austerity measures to restructure its economy. Although a challenging time for one of the smallest EU member states, the economic adjustment programme remains on track, with progress made in all key objectives set out by the country's international lenders. The banking sector is also on a steady path to stabilization with all domestic capital controls lifted in early April 2015. Tourist arrivals during 2014 amounted to 2.4 million and stayed at the same level when compared to 2013, as reported by the Statistical Service of the Republic of Cyprus. There was a strong start to the tourist season with arrivals to Cyprus from Britain, Israel, Germany, Holland, France, and Austria rising in the first five months of 2015. Arrivals from the UK in the period of January to May 2015 were up by 16.4% compared to the same period in 2014 (according to the Cyprus Tourism Organisation).
Consequently, it is encouraging to note that, despite the banking crisis that occurred in early 2013, the tourism industry remained unharmed and expectations for the remainder of 2015 are positive. The decision by the Ministerial Council to reduce the investment amount requirements and accelerate Cypriot citizenship awards to buyers of real estate is expected to significantly increase sales momentum and margins at Aristo Developers Limited ('Aristo') and increase the value and saleability of its larger projects. Significant value is also estimated to be unlocked through the expected zoning of the Apollo Heights Resort, following the agreement reached by the Cypriot and UK governments to permit development of such projects falling within the Sovereign British Areas.
7. Taxation
From 1 January 2015
From 1 January 2014
to 30 June 2015
to 30 June 2014
'000
'000
Corporate income tax
26
44
Deferred tax
(9)
(4)
Total
17
40
8. (LOSS)/EARNINGS per share
Basic (loss)/earnings per share
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to owners of the Company by the weighted average number of common shares outstanding during the period.
From 1 January 2015
From 1 January 2014
to 30 June 2015
to 30 June 2014
'000
'000
(Loss)/profit attributable to owners of the Company ()
(36,057)
30,359
Number of weighted average common shares outstanding
671,174
642,440
Basic (loss)/earnings per share ()
(0.05)
0.05
Weighted average number of common shares outstanding
From 1 January 2015 to 30 June 2015
From 1 January 2014 to 30 June 2014
'000
'000
Outstanding common shares at beginning of period
642,440
642,440
Effect of shares issued during the period
24,227
-
Effect of Bond Conversion shares
4,507
-
Weighted average number of common shares outstanding
671,174
642,440
Diluted (loss)/earnings per share
Diluted (loss)/earnings per share is calculated by adjusting the (loss)/profit attributable to owners and the number of common shares outstanding to assume conversion of all dilutive potential shares. As of 30 June 2015, the diluted loss per share is the same as the basic loss per share, due to the fact that no dilutive potential ordinary shares were outstanding during this period. As of 30 June 2014, the Company had one category of dilutive potential common shares: warrants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of the warrants.
From 1 January 2015
From 1 January 2014
to 30 June 2015
to 30 June 2014
'000
'000
(Loss)/profit attributable to owners of the Company ()
(36,057)
30,359
Weighted average number of common shares outstanding
671,174
642,440
Effect of potential conversion of warrants
-
5,585
Weighted average number of common shares outstanding for diluted (loss)/earnings per share
671,174
648,025
Diluted (loss)/earnings per share ()
(0.05)
0.05
The average market value of the Company's shares for the purpose of calculating the dilutive effect of warrants and convertible bonds was based on quoted market prices.
9. Investment property
30 June 2015
31 December 2014
'000
'000
At beginning of period/year
451,880
423,791
Direct acquisitions
443
3,515
Transfers to trading properties (see note 11)
-
(5,568)
Direct disposals
(3,064)
(2,109)
Exchange difference
10,245
13,675
459,504
433,304
Fair value adjustment
(96)
18,576
At end of period/year
459,408
451,880
As at 30 June 2015 and 31 December 2014, part of the Group's immovable property is held as security for bank loans.
Fair value hierarchy
The fair value of investment property, has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.
Valuation techniques and significant unobservable inputs
The valuation techniques used in measuring the fair value of investment property, as well as the significant unobservable inputs used are the same as those used as at 31 December 2014.
Under construction
Land, buildings and other
Total
30 June 2015
'000
'000
'000
Cost or revalued amount
At beginning of period
31,273
163,019
194,292
Direct acquisitions of property, plant and equipment
13,095
946
14,041
Direct disposal of property, plant and equipment
-
(576)
(576)
Exchange difference
2,661
4,129
6,790
At end of period
47,029
167,518
214,547
Depreciation and impairment losses
At beginning of period
-
17,527
17,527
Depreciation charge for the period
-
1,506
1,506
Direct disposal of property, plant and equipment
-
(435)
(435)
Exchange difference
-
324
324
At end of period
-
18,922
18,922
Carrying amounts
47,029
148,596
195,625
Under construction
'000
Land, buildings
and other
'000
Total
'000
31 December 2014
Cost or revalued amount
At beginning of year
8,180
156,114
164,294
Direct acquisitions of property, plant and equipment
19,232
4,230
23,462
Capitalised depreciation
133
-
133
Direct disposal of property, plant and equipment
-
(113)
(113)
Transfer from/(to) other assets
2,303
(8,545)
(6,242)
Revaluation adjustment
-
6,322
6,322
Exchange difference
1,425
5,011
6,436
At end of year
31,273
163,019
194,292
Depreciation and impairment losses
At beginning of year
-
20,690
20,690
Direct disposal of property, plant and equipment
-
(63)
(63)
Transfer from/(to) other assets
-
(6,242)
(6,242)
Depreciation charge for the year
-
3,239
3,239
Capitalised depreciation
-
133
133
Impairment loss
-
13
13
Reversal of impairment loss
-
(670)
(670)
Exchange difference
-
427
427
At end of year
-
17,527
17,527
Carrying amounts
31,273
145,492
176,765
As at 30 June 2015 and 31 December 2014, part of the Group's immovable property is held as security for bank loans.
Fair value hierarchy
The fair value of land and buildings, has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.
Valuation techniques and significant unobservable inputs
The valuation techniques used in measuring the fair value of land and buildings, as well as the significant unobservable inputs used are the same as those used as at 31 December 2014.
11. Trading properties
30 June 2015
31 December 2014
'000
'000
At beginning of period/year
52,323
64,524
Net direct additions/(disposals)
6,704
(4,510)
Net transfers from investment property (see note 9)
-
5,568
Disposals through disposal of subsidiary companies (see note 23)
-
(7,252)
Impairment loss
-
(6,216)
Exchange difference
156
209
At end of period/year
59,183
52,323
As at 30 June 2015 and 31 December 2014, part of the Group's immovable property is held as security for bank loans.
12. AVAILABLE-FOR-SALE FINANCIAL ASSETS
On 15 July 2013, the Company acquired 9.6 million shares, equivalent to 10% of Itacare's share capital, for the amount of 1.9 million. Itacare is a real estate investment company that was listed on AIM until 16 May 2014, when the admission of its ordinary shares to trading on AIM was cancelled,following a decision of its shareholders at the Extraordinary General Meeting that took place on 6 May 2014.
30 June 2015
31 December 2014
'000
'000
At beginning of period/year
2,201
2,265
Net change in fair value
-
(64)
At end of period/year
2,201
2,201
Fair value hierarchy
The fair value of available-for-sale financial assets, on Itacare's de-listing date, was transferred from Level 1 to Level 3 at the fair value hierarchy.
13. equity accounted investees
DCI Holdings
DCI Holdings
Progressive
Single Purpose
Two Limited
Fifty Limited
Business
Vehicle Five
('DCI H2')
('DCI H50')
Advisors S.A.
Limited ('SPV 5')
Total
'000
'000
'000
'000
'000
Balance as at 1 January 2015
231,972
2,227
24
-
234,223
Additions
-
400
-
-
400
Disposals
-
-
(24)
-
(24)
Share of losses, net of tax
(6,070)
(1,007)
-
-
(7,077)
Share of revaluation surplus
17
-
-
-
17
Balance as at 30 June 2015
225,919
1,620
-
-
227,539
Balance as at 1 January 2014
179,420
-
24
1,418
180,862
Initial cost of investment
-
1,972
-
-
1,972
Additions
-
-
-
1,116
1,116
Profit on dilution
-
149
-
-
149
Share of profits/(losses), net of tax
52,574
106
-
(2,534)
50,146
Share of revaluation deficit
(22)
-
-
-
(22)
Balance as at 31 December 2014
231,972
2,227
24
-
234,223
The details of the above investments are as follows:
Principal place
of business/
Country of
Shareholding interest
Name
incorporation
Principal activities
30 June 2015
31 December 2014
DCI H2
BVIs
Acquisition and holding of investments in Cyprus
50%
50%
DCI H50
BVIs
Acquisition and holding of investments in Greece
25%
25%
SPV 5
Cyprus
Acquisition and holding of investments in Greece
-
25%
Progressive Business Advisors S.A.
Greece
Provision of professional services to Group companies
-
20%
The above shareholding interest percentages are rounded to the nearest integer.
During the period, the Company's investment in its equity accounted investee, DCI H2, decreased by 6,053 thousand representing Aristo, DCI H2's largest subsidiary, operating losses for the period, compared to the increase of 52,552 thousand during the year 2014, in which Venus Rock property revaluation gain was included, following the termination of the agreement with China Glory Investment Group ('CGIG'). In 2013, the fair value of the Venus Rock project was reduced to reflect the purchase price agreed with CGIG whereas, in 2014, following the termination of the agreement, the property of Venus Rock was revalued based on a valuation by independent professional valuers.
During the period, the Company disposed of its participation in Progressive Business Advisors S.A. Also, DCI H50 acquired a 100% participation in SPV 5, through the enforcement of the pledge over the whole issued share capital of SPV 5 that existed in relation to a loan facility provided by DCI H50 to SPV 5. As the Company has a 25% participation in DCI H50, its indirect holding in SPV 5 remains 25% at 30 June 2015.
As of 30 June 2015, Aristo, had a total of 2.4 million (31 December 2014: 2.4 million) contractual capital commitments on property, plant and equipment and a total of 43 million (31 December 2014: 44 million) bank guarantees arising in the ordinary course of its business. Aristo's management does not anticipate any material liability to arise from these contingent liabilities. In addition, 1,500 shares out of 4,975 shares that the Company holds in DCI H2 are pledged as a security against the Group's bank loans.
SPV 5 had nil (31 December 2014: 778 thousand) contractual capital commitments on property, plant and equipment.
Summary of financial information for equity accounted investees as at 30 June 2015 and 31 December 2014, not adjusted for the percentage of ownership held by the Group:
DCI H2
DCI H50
Progressive Business
Advisors S.A.
SPV 5
Total
'000
'000
'000
'000
'000
30 June 2015
Current assets
235,609
6,076
-
-
241,685
Non-current assets
746,452
11,808
-
-
758,260
Total assets
982,061
17,884
-
-
999,945
Current liabilities
228,387
7,347
-
-
235,734
Non-current liabilities
299,565
4,058
-
-
303,623
Total liabilities
527,952
11,405
-
-
539,357
Net assets
454,109
6,479
-
-
460,588
Carrying amount of interest in investee
225,919
1,620
-
-
227,539
Revenues
10,155
650
-
-
10,805
Loss
(12,202)
(4,026)
-
-
(16,228)
Other comprehensive income
33
-
-
-
33
Total comprehensive income
(12,169)
(4,026)
-
-
(16,195)
Group's share of loss and total comprehensive income
(6,053)
(1,007)
-
-
(7,060)
31 December 2014
Current assets
235,352
6
212
7,340
242,910
Non-current assets
747,722
8,900
2
12,090
768,714
Total assets
983,074
8,906
214
19,430
1,011,624
Current liabilities
210,121
-
96
8,467
218,684
Non-current liabilities
306,678
-
-
13,023
319,701
Total liabilities
516,799
-
96
21,490
538,385
Net assets/(liabilities)
466,275
8,906
118
(2,060)
473,239
Carrying amount of interest in investee
231,972
2,227
24
-
234,223
Revenues
175,137
500
-
810
176,447
Profit/(loss)
105,676
500
-
(12,194)
93,982
Other comprehensive income
(44)
-
-
-
(44)
Total comprehensive income
105,632
500
-
(12,194)
93,938
Group's share of profit/(loss) and total comprehensive income
52,552
106
-
(2,534)
50,124
The extended recession in Cyprus and the CGIC agreement terms not allowing the company to market its Venus Rock property have necessitated the restructuring of DCI H2 bank loans. Namely, DCI H2, has recently completed some bank loan restructurings, rescheduling its loan repayments over a longer period and reducing its debt service obligations for 2015 and 2016, whereas it is under negotiations with two more banks. DCI H2's bank loans are fully secured, primarily with mortgages against immovable property of its subsidiaries. There are no floating charges relating to these bank loans.
Following the termination of the agreement with CGIC, DCI H2 continues taking actions for the disposal of Venus Rock project. If the plans of divestiture of the Venus Rock project do not materialize, and DCI H2 does not secure funds from its subsidiaries or other sources to service its banking debt, the lending institutions would be entitled to exercise the securities they hold against the relevant properties. In such situation, the timing of these disposals and the eventual disposal proceeds cannot be forecasted and could have a significant impact on the Company's investment in DCI H2.
30 June 2015
31 December 2014
'000
'000
Trade receivables
133
283
Amount receivable from Archimedia Holdings Corp. ('Archimedia')(see note 22.3)
-
415
VAT receivables
7,589
6,206
Other receivables
10,994
10,807
Total trade and other receivables
18,716
17,711
Prepayments and other assets
482
3,427
Total
19,198
21,138
15. Cash and cash equivalents
30 June 2015
31 December 2014
'000
'000
Bank balances
74,767
30,952
Cash in hand
53
26
Total
74,820
30,978
During the period, the Group had no fixed deposits.
As at 30 June 2015 and 31 December 2014, the amount of 6.2 million and 13.08 million (US$14.6 million) and the amount of 5 million and 18.9 million (US$22.9 million), respectively, received through the Colony Luxembourg S.a.r.l and Melody Business Finance LLC loan facilities are restricted for use only towards the development of Amanzoe and Playa Grande projects, respectively. In addition, funds in bank accounts of certain Group companies are pledged as a security for loans.
16. CAPITAL AND RESERVES
Capital
Authorised share capital
30 June 2015
31 December 2014
'000 of shares
'000
'000 of shares
'000
Common shares of 0.01 each
2,000,000
20,000
2,000,000
20,000
Movement in share capital and premium
Shares in
Share capital
Share premium
'000
'000
'000
Capital at 1 January 2014 and 31 December 2014
642,440
6,424
498,933
Capital at 1 January 2015
642,440
6,424
498,933
Shares issued on 9 June 2015
219,257
2,193
60,527
Placement costs
-
-
(1,390)
Bond conversion shares on 11 June 2015
42,930
429
11,851
Capital at 30 June 2015
904,627
9,046
569,921
On 9 June 2015 and 11 June 2015, the Company issued 219,256,609 new common shares and 42,930,080 bond conversion shares, respectively, at GBP 0.21 per share, for a total value of 75 million. The new shares rank pari passu with the existing common shares of the Company.
Warrants
In December 2011, the Company raised 8.5 million through the issue of new shares at GBP 0.27 per share (with warrants attached to subscribe for additional Company shares equal to 25% of the aggregate value of the new shares at the price of GBP 0.3105 per share, subject to anti-dilution adjustments pursuant to the warrant's terms and conditions - initial price of GBP 0.35 per share). The warrant holders can exercise their subscription rights within five years from the admission date. The number of shares to be issued on exercise of their rights will be determined based on the subscription price on the exercise date.
Reserves
Translation reserve
Translation reserve comprises all foreign currency differences arising from the translation of the interim financial statements of foreign operations.
Fair value reserve
Fair value reserve comprises the cumulative net change in fair value of available-for-sale financial assets until the assets are derecognized or impaired, and the revaluation of property, plant and equipment from both subsidiaries and equity accounted investees, net of any deferred tax.
17. LOANS AND BORROWINGS
Total
Within one year
Within two to five years
More than five years
30 June
31 December
30 June
31 December
30 June
31 December
30 June
31 December
2015
2014
2015
2014
2015
2014
2015
2014
'000
'000
'000
'000
'000
'000
'000
'000
Loans in euro
111,654
111,562
14,253
20,943
32,151
23,986
65,250
66,633
Loans in United States dollars
52,480
43,128
2,662
2,984
21,219
10,009
28,599
30,135
Bank overdrafts in euro
2,287
2,239
2,287
2,239
-
-
-
-
Convertible bonds payable
73,095
83,160
14,899
-
58,196
83,160
-
-
Total
239,516
240,089
34,101
26,166
111,566
117,155
93,849
96,768
As of 30 June 2015, there were no significant changes in terms and conditions of the outstanding loans, compared to 31 December 2014.
1 January 2015
New
issues
Capital repayments
Interest
paid
Other movements
30 June 2015
'000
'000
'000
'000
'000
'000
Loans in euro
111,562
-
(2,098)
(2,333)
4,523
111,654
Loans in United States dollars
43,128
4,663
-
(994)
5,683
52,480
Bank overdrafts in euro
2,239
-
-
(51)
99
2,287
Convertible bonds in euro
50,000
-
-
(1,375)
1,375
50,000
Convertible bonds in United States dollars
33,160
-
(12,759)
(1,207)
3,901
23,095
Total
240,089
4,663
(14,857)
(5,960)
15,581
239,516
The Group, as at 30 June 2015 and 31 December 2014 had a secured bank loan with a carrying amount of 3,903 thousand which was due to be repaid in full in the year through a government grant that would have been received from Greek authorities. As of 30 June 2015, the loan matured but was not repaid and the Company is currently under negotiations with the bank for an extension to the maturity date of the loan. In September 2015, the government grant was received, however, the loan has not yet been settled due to the capital controls in place. The settlement of the loan is expected within the next few months.
Convertible bonds payable
On 5 April 2013, the Company issued 5,000 bonds (the 'Euro Bonds') at 10 thousand each, bearing interest of 5.5% per annum, payable semi-annually, and maturing on 5 April 2018.
On 23 April 2013, the Company issued 917 bonds (the 'US$ Bonds') at US$10 thousand each, bearing interest of 7% per annum, payable semi-annually, and maturing on 23 April 2018.
The Euro Bonds and the US$ Bonds may be converted prior to maturity (unless earlier redeemed or repurchased) at the option of the holder into common shares of 0.01 each. The conversion price is 0.5623, equivalent of GBP 0.49 (initial conversion price GBP 0.50) and US$0.6583, equivalent of GPB 0.4410 (initial conversion price GBP 0.45) per share for the Euro Bonds and the US$ Bonds, respectively.
The Euro Bonds and the US$ Bonds are not publicly traded.
Part of the bonds, amounting to 41,004 thousand, was subscribed by Third Point LLC, a significant shareholder of the Company.
On 29 March 2011, DCI H7 issued 4,000 bonds at US$10 thousand each, bearing interest of 7% per annum, payable semi-annually, and maturing on 29 March 2016. The bonds are trading on the Open Market of the Frankfurt Stock Exchange (the freiverkehr market) under the symbol 12DD. On 23 April 2013, the Company purchased 891 bonds at a consideration of US$10 thousand each (representing their par value) plus corresponding accrued interest of approximately US$200 thousand using the funds received from the issue of the US$ Bonds. On 10 June 2015, select bondholders, including the Investment Manager, opted to convert bonds of total value US$14,420 thousand into 42,930,080 shares that were admitted on AIM on 11 June 2015. The Investment Manager converted bonds of total value US$420 thousand into 1,250,390 shares.
Bonds may be converted prior to maturity (unless earlier redeemed or repurchased) at the option of the holder into Company's common shares of 0.01 each for a conversion price of US$0.7095, equivalent of GBP 0.4436, subject to anti-dilution adjustments pursuant to the bond's terms and conditions (initial conversion price GBP 0.50). The number of shares to be issued on exercise of a conversion right shall be determined by dividing the principal amount of the bonds to be converted by the conversion price in effect on the relevant conversion date.
At the option of bondholders:
(i) some or all of the principal amount of the bonds held by a bondholder may be repurchased by the issuer; and
(ii) the consideration for such repurchase shall be the transfer by the Company to the bondholder of land plot(s) at the issuer's Playa Grande Aman development in the Dominican Republic.
18. Finance lease obligationS
30 June 2015
31 December 2014
Future minimum lease payments
Interest
Present value of minimum lease payments
Future minimum lease payments
Interest
Present value of minimum lease payments
'000
'000
'000
'000
'000
'000
Less than one year
493
62
431
529
62
467
Between two and five years
1,734
226
1,508
1,738
227
1,511
More than five years
8,920
3,020
5,900
9,168
3,051
6,117
Total
11,147
3,308
7,839
11,435
3,340
8,095
The major finance lease obligations comprise leases in Greece with 99-year lease terms.
19. Deferred tax assets and liabilities
30 June 2015
31 December 2014
Deferred
Deferred
Deferred
Deferred
tax assets
tax liabilities
tax assets
tax liabilities
'000
'000
'000
'000
Balance at beginning of period/year
2,557
(55,180)
4,230
(56,610)
From disposal of subsidiary (see note 23)
-
-
(1,162)
-
Recognised in profit or loss
(64)
73
(510)
2,218
Recognised in other comprehensive income
-
-
-
(555)
Exchange difference and other
(88)
(217)
(1)
(233)
Balance at end of period/year
2,405
(55,324)
2,557
(55,180)
Deferred tax assets and liabilities are attributable to the following:
30 June 2015
31 December 2014
Deferred
Deferred
Deferred
Deferred
tax assets
tax liabilities
tax assets
tax liabilities
'000
'000
'000
'000
Revaluation of investment property
-
(46,563)
-
(45,160)
Revaluation of trading properties
-
(5,524)
-
(2,394)
Revaluation of property, plant and equipment
-
(3,110)
-
(8,374)
Other temporary differences
-
(127)
-
748
Tax losses
2,405
-
2,557
-
Total
2,405
(55,324)
2,557
(55,180)
20. Trade and other payables
30 June 2015
31 December 2014
'000
'000
Trade payables
498
349
Land creditors
25,346
24,989
Prepayments from clients
32,867
17,893
Investment Manager fees payable (see note 22.2)
467
467
Payable to the former controlling shareholder of PGH project (see note 22.3)
-
565
Other payables and accrued expenses
25,387
17,796
Total
84,565
62,059
21. NAV per share
30 June 2015
31 December 2014
'000
'000
Total equity attributable to owners of the Company ()
604,295
557,448
Number of common shares outstanding at end of period/year
904,627
642,440
NAV per share ()
0.67
0.87
22. Related party transactions
22.1 Directors' interest and remuneration
Miltos Kambourides is the founder and managing partner of the Investment Manager.
The interests of the Directors, all of which are beneficial, in the issued share capital of the Company as at 30 June 2015 were as follows:
Shares
'000
Miltos Kambourides (indirect holding)
66,019
Mark Townsend
132
Roger Lane-Smith
60
Save as disclosed, none of the Directors had any interest during the period in any material contract for the provision of services which was significant to the business of the Group.
On 30 May 2013, David B. Heller acquired convertible Euro Bonds of 2,050 thousand par value that may be converted prior to maturity into 3,573,296 common Company shares of 0.01 each.
The Directors' remuneration for the six-month periods ended 30 June 2015 and 30 June 2014 were as follows:
From 1 January 2015
From 1 January 2014
to 30 June 2015
to 30 June 2014
'000
'000
Laurence Geller
97.0
-
Robert Heller
72.8
-
Graham Warner
72.8
-
Mark Townsend
6.7
-
Justin Rimel
6.7
-
David B. Heller
10.4
9.1
Roger Lane-Smith
22.5
22.5
Andreas Papageorghiou
2.3
7.5
Cem Duna
2.3
7.5
Antonios Achilleoudis
2.3
7.5
Christopher Pissarides
7.7
25.0
Total
303.5
79.1
Mr. Miltos Kambourides has waived his fees.
On 25 February 2015, the Company announced the following Directorate changes: five new members joined the Board, Mr. Laurence Geller who will also serve as Chairman, Mr. Robert Heller, Mr. Graham Warner, Mr. Mark Townsend and Mr. Justin Rimel. Mr. Miltos Kambourides, Mr. David Heller and Mr. Roger Lane Smith remain on the new Board, which now comprises of eight members. Mr. Andreas Papageorghiou, Mr. Cem Duna, Mr. Antonios Achilleoudis and Mr. Christopher Pissarides stepped down from the Board. The previous Chairman, Mr. David Heller, will continue to act as non-executive director.
On 9 June 2015, Mr. Laurence Geller, Mr. Robert Heller and Mr. Graham Warner were granted a nil-cost share option award under a Stock Incentive Plan. This award will performance vest in four 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. Awards remain exercisable up until the day before the fifth anniversary of the date of grant of the award.
22.2 Investment Manager fees
Annual fees
The Investment Manager is entitled to an annual management fee of 2% of the equity funds, defined as follows:
890 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 of 681 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.
Management fees for the six-month periods ended 30 June 2015 and 30 June 2014 amounted to 6,814 thousand and 6,858 thousand, respectively.
In June 2015, the Company and the Investment Manager entered into an Amended and Restated Investment Management Agreement effective from 1 July 2015 and according to whichthe annual management fee will be calculated as follows:
for the period from 1 July 2015 to and including 31 December 2015, the annual management fee shall be 1 million per calendar month payable quarterly in advance; and
with effect from and including 1 January 2016, the annual management fee shall be 8.5 million payable quarterly in advance.
commencing on and with effect from 1 January 2017, the annual management fee payable for the following annual period 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) 8.5 million.
Performance fees
The Investment Manager is 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 160.1 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 is incurred compounded for each year or fraction of a year during which such investment is 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 hasnot already been taken into account in determining the Investment Manager's entitlement to a performance fee.
In the event that the Company has received distributions from an investment equal to the Relevant Investment Amount, any subsequent net profits arising shall be distributed in the following order or priority:
i 60% to the Investment Manager and 40% to the Company until the Investment Manager shall have 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 shall receive a total performance fee equivalent to 20% of the net profits.
* The total cost of investment was reduced in April 2014 by 7.6 million, as compared to the base reduction of167.7 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 is subject to the following escrow and clawback provisions:
Escrow
The following table displays the current escrow arrangements:
Escrow
Terms
Up to 109 million returned
50% of overall performance fee held in escrow
Up to 109 million plus the cumulative hurdle returned
25% of any performance fee held in escrow
After the return of 409 million post-hurdle, plus the return of 225 million post-hurdle
All performance fees released from escrow
Clawback
If on the earlier of (i) disposal of the Company's interest in a relevant investment or (ii) 1 August 2020, the proceeds realised from that investment are less than the Relevant Investment Amount, the Investment Manager shall pay to the Company an amount equivalent to the difference between the proceeds realised and the Relevant Investment Amount. The payment of the clawback is subject to the maximum amount payable by the Investment Manager not exceeding the aggregate performance fees (net of tax) previously received by the Investment Manager in relation to other investments.
No performance fees were charged to the Company for the six-month periods ended 30 June 2015 and 30 June 2014. As at 30 June 2015 and 31 December 2014, funds held in escrow, including accrued interest, amounted to 467 thousand.
In line with the Amended and Restated Investment Management Agreement, signed in June 2015 and effective from 1 July 2015,the revised performance fees payable to the Investment Manager after 1 July 2015 will comprise three elements:
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 169.6 million (the 'Aggregate Core Asset Base Value');
second, 100% to the Company until the Company shall have received an amount equal to the core asset capital and costs;
third, 100% to the Company until the Company shall have received an amount equal to the base cost compounded quarterly at the average 1-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 shall have 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, 113,055,360 (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.
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 asset. 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 the 65% of the non-core asset value. 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 2015, 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'):
does 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
equals or exceeds the Aggregate Base Value then the Company's administrator will be authorised to pay to the Investment Manager the escrowed funds.
Incentive shares
Under the Share Incentive Plan, the Company has granted two nil-cost share option awards to the Investment Manager (the 'DCP Awards') as follows:
Number of Shares to which the DCP Award relates:
DCP Award 1: such number of Shares as equals 3.5% of the Shares in issue following Admission; and
DCP Award 2: such number of Shares as equals 2.5% of the Shares in issue following Admission.
The full vesting of the DCP Awards are subject to the satisfaction of both performance vesting targets (ranging from share prices of 35p to 80p) and time vesting conditions.
Clawback
Following the Amended and Restated Investment Management Agreement if on the clawback assessment date, the Company has not received an amount from the disposal of the core assets equal or in excess of the Aggregate Core Asset Base Value, the Investment Manager will pay to the Company an amount to cover the difference, not to exceed the aggregate amount of any Core Asset Incentive Fee Advance Payments received by the Investment Manager. The clawback assessment date is the earlier of, (i) disposal of the Company's interest in the last core asset concerned; or (ii) 1 August 2020. In the event that a fees clawback applies the Company shall be entitled to set off at any time the amount of any fees clawback payment due against, (i) any liability of the Company to pay non-core asset incentive fees and/or (ii) any other fees due and payable by the Company to the Investment Manager, but excluding the annual management fee. In addition, the Company will have a security interest over any unvested shares awarded to the Investment Manager under the Share Incentive Plan.
22.3 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 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 4.4 million payable in three installments: 2.4 million by 10 September 2013, 1 million by 30 September 2013 and 1 million by 31 October 2013. The last installment of 1 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 4 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 from 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 11 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 1 million of the consideration was received at signing, while the completion of the transaction and the payment of the 10 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 1,300 thousand, while US$978 thousand and 800 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 904 thousand (263 thousand and US$878 thousand) to the Company towards this end. As of 30 June 2015 no receivable amount was outstanding (31 December 2014: 415 thousand, included in receivables and other assets - see note 14). 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. On 17 September 2014, the conversion of 6.43% of Archimedia's 14.29% stake into one of the designated Conversion Villas was completed while the finalisation of the relevant documentation for the conversion of the remaining 7.86% is expected shortly. Following these conversions, Archimedia will not hold any shareholding interest in Amanzoe.
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 10 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 1 million deposit was paid upon signing. During 2013, the Company received an additional amount of 990 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 30 June 2015 (31 December 2014: US$12,553 thousand).
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 30 June 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 (31 December 2014: US$0.7 million or 565 thousand, included in trade and other payables - see note 20).
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.
22.4 Other related parties
During the periods ended 30 June 2015 and 30 June 2014, the Group incurred the following related party transactions with the following parties:
30 June 2015
Related party name
'000
Nature of transaction
Progressive Business Advisors S.A.
254
Accounting fees
John Heah, non-controlling shareholder of SPV 10
408
Design fees in relation to Playa Grande project
Iktinos Hellas S.A.
20
Project management services in relation to Sitia project and rent payment
Portoheli Ksenodoxio Kai Marina S.A.
16
Construction cost and project management services in relation to Nikki Beach project
Third Point LLC, shareholder of the Company
1,162
Bond interest for the period
30 June 2014
Related party name
'000
Nature of transaction
Progressive Business Advisors S.A.
165
Accounting fees
John Heah, non-controlling shareholder of SPV 10
201
Design fees in relation to Playa Grande project
Iktinos Hellas S.A.
24
Project management services in relation to Sitia project and rent payment
Portoheli Ksenodoxio Kai Marina S.A.
6,714
Construction cost and project management services in relation to Nikki Beach project
Third Point LLC, shareholder of the Company
1,158
Bond interest for the period
23. Business combinations
During the period ended 30 June 2014, the Group increased its ownership interest without any change in control in Bourne Holdings (Cyprus) Limited (holding company of Eastern Crete Development Company S.A.) by 9.09% to 100% as follows:
Eastern Crete
Development
Company S.A.
'000
Non-controlling interests acquired
1,535
Consideration transferred
(1,000)
Acquisition effect recognised in equity
535
During the period ended 30 June 2014, the Group disposed of its entire stake in Pasakoy as follows:
Pasakoy
'000
Deferred tax assets (see note 19)
(1,162)
Non-current assets
(955)
Trading properties (see note 11)
(7,252)
Receivables and other assets
(394)
Cash and cash equivalents
(1)
Loans and borrowings
1,423
Trade and other payables
52
Net assets disposed of
(8,289)
Proceeds on disposal
8,289
Translation reserve
2,709
Gain on disposal recognised in profit or loss
2,709
Cash effect on disposal:
Proceeds on disposal
8,289
Cash and cash equivalents
(1)
Net cash inflow on disposal
8,288
24. FINANCIAL RISK MANAGEMENT
The Group's financial risks and risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2014.
Fair values
The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the statement of financial position date.
25. Commitments
As of 30 June 2015, the Group had a total of 13,450 thousand contractual capital commitments on property, plant and equipment (31 December 2014: 19,446 thousand).
Non-cancellable operating lease rentals are payable as follows:
30 June 2015
31 December 2014
'000
'000
Less than one year
19
19
Between two and five years
21
29
Total
40
26. 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 advice from the Group's legal advisers, the Investment Manager 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 this matter which are considered necessary have been recorded in these condensed consolidated interim financial statements.
If investment properties, trading properties and property, plant and equipment were sold at their fair market value, this would have given rise to a payable performance fee to the Investment Manager, based on the Amended and Restated Investment Management Agreement effective from 1 July 2015, of approximately 44 million, subject always to the escrow and clawback provisions mentioned in note 22.2 (31 December 2014: 63 million, based on the Investment Management Agreement effective until 30 June 2015).
In addition to the tax liabilities that have already been provided for in the condensed consolidated interim financial statements, based on existing evidence, there is a possibility that additional tax liabilities may arise after the examination of the tax and other matters of the companies of the Group in the relevant tax jurisdictions.
The Group, under its normal course of business, guaranteed the development of properties in line with agreed specifications and time limits in favour of other parties.
27. EVENTS AFTER THE REPORtING PERIOD
According to a new tax legislation in Greece, voted in July as a consequence of the new bail out agreement signed between the Greek Government and the funding institutions, the current income tax rate changed from 26% to 29% for the fiscal year 2015 and onwards. This change is expected to increase deferred tax liability of the Group by, approximately, the amount of 4.5 million, should all other values remain the same as of 30 June 2015.
There were no other material events after the reporting period which have a bearing on the understanding of the condensed consolidated interim financial statements as at 30 June 2015.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR GMGZLMFRGKZZ
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