REG - Dolphin Capital Inv - Half Yearly Report <Origin Href="QuoteRef">DOLC.L</Origin> - Part 3
29/10/2014 13:40
- Part 3: For the preceding part double click ID:nRSW3187Sb
1,853 - (193) 415 13,057
Bank overdrafts in euro 2,239 - - (101) 101 2,239
Bank overdrafts in United States dollars - 61 - - - 61
Convertible bonds payable in euro 50,000 - - (1,375) 1,375 50,000
Convertible bonds payable in United States dollars 29,193 - - (1,026) 1,310 29,477
Total 168,804 1,914 (2,974) (4,782) 5,791 168,753
Convertible bonds payable
On 5 April 2013, the Company issued 5,000 bonds (the 'Euro Bonds') at E10
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 E0.01 each. The initial conversion price is E0.5737 (representing
GBP 0.50 per share converted into euro at the fixed exchange rate of
GBP1.00:E1.1474) and US$0.6717 (representing GBP 0.45 per share converted into
United States dollars at the fixed exchange rate of GBP 1.00:US$1.4928) per
share for the Euro Bonds and the US$ Bonds, respectively.
The Euro Bonds and the US$ Bonds are not publicly traded.
Part of the bonds, amounting to E41,004 thousand, was subscribed by Third
Point LLC, a significant shareholder of the Company (see note 22.5).
On 29 March 2011, DCI H7 issued 4,000 bonds at US$10 thousand each, bearing an
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.
Bonds may be converted prior to maturity (unless earlier redeemed or
repurchased) at the option of the holder into Company's common shares of E0.01
each for a conversion price of US$0.7239, equivalent of GBP 0.453, 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
maybe 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 2014 31 December 2013
Future minimum lease payments Interest Present value of minimum lease payments Future minimum lease payments Interest Present value of minimum lease payments
E'000 E'000 E'000 E'000 E'000 E'000
Less than one year 505 79 426 502 79 423
Between two and five years 1,773 293 1,480 1,773 293 1,480
More than five years 11,414 5,088 6,326 11,665 5,127 6,538
Total 13,692 5,460 8,232 13,940 5,499 8,441
The major finance lease obligations comprise leases in Greece with 99-year
lease terms.
19. Deferred tax assets and liabilities
30 June 2014 31 December 2013
Deferred Deferred Deferred Deferred
tax assets tax liabilities tax assets tax liabilities
E'000 E'000 E'000 E'000
Balance at beginning of period/year 4,230 (56,610) 3,384 (45,454)
From disposal of subsidiary (see note 23) (1,162) - - -
Recognised in profit or loss (644) 648 1,427 (12,393)
Recognised in other comprehensive income - - - 1,118
Exchange difference and other (38) (46) (581) 119
Balance at end of period/year 2,386 (56,008) 4,230 (56,610)
Deferred tax assets and liabilities are attributable to the following:
30 June 2014 31 December 2013
Deferred Deferred Deferred Deferred
tax assets tax liabilities tax assets tax liabilities
E'000 E'000 E'000 E'000
Revaluation of investment property - (46,308) - (45,452)
Revaluation of trading properties - (3,093) - (4,723)
Revaluation of property, plant and equipment - (7,611) - (6,180)
Other temporary differences - 1,004 - (255)
Tax losses 2,386 - 4,230 -
Total 2,386 (56,008) 4,230 (56,610)
20. Trade and other payables
30 June 2014 31 December 2013
E'000 E'000
Trade payables 445 514
Land creditors 24,603 24,251
Investment Manager fees payable (see note 22.2) 467 467
Payable to the former controlling shareholder of PGH project (see note 22.4) 503 498
Other payables and accrued expenses 34,931 27,385
Total 60,949 53,115
21. NAV per share
30 June 2014 31 December 2013
'000 '000
Total equity attributable to owners of the Company (E) 552,317 523,672
Number of common shares outstanding at end of period/year 642,440 642,440
NAV per share (E) 0.86 0.82
22. Related party transactions
22.1 Directors of the Company
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 2014 were as follows:
Shares
'000
Miltos Kambourides (indirect holding) 65,081
Roger Lane-Smith 60
Andreas Papageorghiou 5
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 E2,050
thousand par value that may be converted prior to maturity into 3,573,296
common Company shares of E0.01 each.
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:
• E890 million; plus
• The gross proceeds of further equity issues, other than the funds raised
in respect of the proceeds of the equity issues as at 25 October 2012 and 30
December 2011; plus
• Realised net profits less any amounts distributed to shareholders.
The equity funds as at 30 June 2014 comprised of E681 million.
In addition, the Company shall reimburse the Investment Manager for any
professional fees or other costs incurred on behalf of the Company at its
request for services or advice.
Management fees for the six-month periods ended 30 June 2014 and 30 June 2013,
amounted to E6,858 thousand and E6,890 thousand, respectively.
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 E160.1 million*; plus
ii A hurdle amount equal to an annualised percentage return equal to the
average one-month Euribor rate applicable in the period commencing from the
month when the relevant cost 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 reduction in the total cost of investment was adjusted in April 2014 by
E7.6 million, as compared to the base reduction of E167 million, to reflect
the loss incurred by the Company through 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 E109 million returned 50% of overall performance fee held in escrow
Up to E109 million plus the cumulative hurdle returned 25% of any performance fee held in escrow
After the return of E409 million post-hurdle, plus the return of E225 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 2014 and 30 June 2013. As at 30 June 2014 and 31 December 2013,
funds held in escrow, including accrued interest, amounted to E467 thousand.
22.3 Directors' remuneration
The Directors' remuneration for the six-month periods ended 30 June 2014 and
30 June 2013 were as follows:
From 1 January 2014 From 1 January 2013
to 30 June 2014 to 30 June 2013
E'000 E'000
Andreas Papageorghiou 7.5 7.5
Cem Duna 7.5 7.5
Roger Lane-Smith 22.5 22.5
Antonios Achilleoudis 7.5 7.5
Christopher Pissarides 25.0 25.0
David B. Heller* 9.1 5.2
Total 79.1 75.2
* On 14 March 2013, Mr. David B. Heller was appointed as non-executive
Director, having been nominated for appointment by Third Point LLC. On 10 June
2014, he was elected to be Chairman of the Board of the Company. The previous
Chairman, Mr. Andreas Papageorgiou, will continue to act as a non-executive
director.
Mr. Miltos Kambourides has waived his fees.
22.4 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 E4.4 million payable in three installments:
E2.4 million by 10th of September 2013, E1 million by 30th of September 2013
and E1 million by 31st of October 2013. The last installment of E1 million
was transferred within February of 2014. Consideration might be increased by
the transfer of plots of land in the project, to the seller, of total market
value equal to E4 million, subject to the project receiving permits for
building 40,000 m2, of freehold residential properties. The conditional
deferred consideration will be adjusted pro rata in case the buildable
properties are less than 40,000 m2 but is also subject to a 5% annual increase
commencing from the second anniversary from the signing of the agreement and
until implementation from the Company.
DolphinCI Thirteen Limited, a subsidiary of the Group, has signed a
shareholder agreement with the non-controlling shareholder of Iktinos. Under
its current terms, DolphinCI Thirteen Limited has acquired approximately 80%
of the shares of Latirus Enterprises Limited (Sitia Bay project) by paying the
non-controlling shareholder an initial sum upon closing and a conditional
amount in the event the non-controlling shareholder will be successful in,
among others, acquiring additional specific plots and obtaining construction
permits.
On 20 September 2010, the Group signed an agreement with Archimedia controlled
by John Hunt, for the sale of a 14.29% stake in Amanzoe for a consideration of
E11 million. The agreement also granted Archimedia the right to partially or
wholly convert this shareholding stake into up to three predefined Aman Villas
(the 'Conversion Villas') for a predetermined value and percentage per Villa.
The first E1 million of the consideration was received at signing, while the
completion of the transaction and the payment of the E10 million balance was
subject to customary due diligence on the project and the issuance of the
construction permits for the Conversion Villas prior to a longstop date set at
1 April 2011. On 28 March 2011, the Company reached an agreement with
Archimedia to vary the original terms of the sale agreement, which was
followed by the Company and Archimedia entering into an amended sale agreement
on 13 March 2012. The Company has already received US$12,422 thousand and
E1,300 thousand, while US$978 thousand and E800 thousand, plus any additional
consideration that may be due depending on the exact size and features of the
Conversion Villas, will be received upon completion of the Conversion Villas.
The total receivable amount of E1,516 thousand (31 December 2013: E1,509
thousand) is 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 2 July 2014, Archimedia remitted E904
thousand (E263 thousand and US$878 thousand) to the Company and on 17
September 2014 the conversion of 6.43% of Archimedia's 14.29% stake into one
of the designated Conversion Villas was completed. The finalization 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
E10 million with the Company also entitled to 50% profit participation in the
sale of five Villas. It was also agreed that the Company would undertake the
construction contract for the completion of the Villas and a E1 million
deposit was paid upon signing. During 2013, the Company received an additional
amount of E990 thousand. The construction of the two Villas is currently
underway.
On 5 September 2012, the Company signed a sales agreement with a regional
investor group led by Mr. Alberto Vallarino for the sale of its 60%
shareholding in Peninsula Resort Holdings Limited, the entity that indirectly
holds the land for Pearl Island's Founders' phase of the Pearl Island Project.
The consideration for the sale was a cash payment of US$6 million (50% paid at
closing on 14 September 2012 and 50% one year from closing, collected on 17
September 2013) and a commitment to invest an additional circa US$35 million
of development capital within a maximum period of two years in order to
complete the aforementioned phase of the project. Out of those funds,
approximately US$13 million shall be incurred on development of components
owned by Pearl Island Limited S.A., with US$11,530 thousand already invested
by 30 June 2014 (31 December 2013: US$7,171thousand).
On 24 September 2012, the Company signed an agreement with an affiliate of the
Swiss Development Group for the sale of a 75% stake in the Nikki Beach Resort
& Spa at Porto Heli together with a contract for the management and
construction of the project for a minimum consideration of E3.15 million, that
will increase depending on the size of the loan facility obtained, the returns
realised and the final construction cost. An amount of E1.23 million had been
received by the Company as of 31 December 2012, and the remaining balance of
the minimum consideration was received in early 2013.
Development agreements
Eastern Crete Development Company S.A., a subsidiary of the Group, has signed
a development management agreement with a company related to the
non-controlling shareholder of Plaka Bay Resort under the terms of which this
company undertakes to assist Eastern Crete Development Company S.A. to obtain
all permits required to enable the development of the project as well as to
select advisers, consultants, etc., during the pre-construction phases. The
development manager receives an annual fee.
Pursuant to the original Sale and Purchase Agreement of 10 December 2007, DCI
H7 was obliged to make payments for the construction of infrastructure on the
land retained by DR Beachfront Real Estate LLC ('DRB'), the former majority
shareholder of PGH. Pursuant to a restructuring agreement dated 5 November
2012, those obligations have been restructured with the material provisions of
that agreement already fulfilled. As at 31 December 2013, following cash
payments of US$7.6 million and transfers of land parcels valued at
approximately US$11 million, the total provision outstanding is US$0.7 million
(E503 thousand) (31 December 2013: US$0.7 million or E498 thousand) which is
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.
22.5 Other related parties
During the periods ended 30 June 2014 and 30 June 2013, the Group incurred the
following related party transactions with the following parties:
30 June 2014 Related party name E'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
Archimedia JH Holding Corp. 79 Loss on finance lease of immovable property
Third Point LLC, shareholder of the Company 41,004 Bond holder (see note 17)
Third Point LLC, shareholder of the Company 1,158 Bond interest for the period
30 June 2013Related party name E'000 Nature of transaction
Progressive Business Advisors S.A. 145 Accounting fees
John Heah, non-controlling shareholder of SPV 10 30 Design fees in relation to Playa Grande project
Iktinos Hellas S.A. 25 Project management services in relation to Sitia project and rent payment
J&P Development S.A. 30 Project management services in relation to Cape Plaka project
Third Point LLC, shareholder of the Company 41,004 Subscription to bonds (see note 17)
Third Point LLC, shareholder of the Company 532 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.
E'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
E'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 2013.
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 2014, the Group had a total of E13,076 thousand contractual
capital commitments on property, plant and equipment (31 December 2013:
E16,499 thousand).
Non-cancellable operating lease rentals are payable as follows:
30 June 2014 31 December 2013
E'000 E'000
Less than one year 19 19
Between two and five years 40 50
Total 59 69
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 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 of approximately E60 million (31
December 2013: E48 million), subject always to the escrow and clawback
provisions mentioned in note 22.2.
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.
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
On 6 August 2014, DCI 14 (the Company's Cyprus subsidiary holding the Group's
shareholding in Amanzoe), entered into a E40,400,000 loan facility agreement
with Colony Capital Acquisitions LLC acting on behalf of managed funds
('Colony'). The facility has a six year term and a fixed 11% annual interest
paid semi-annually. The facility is structured on a mezzanine basis, having no
recourse to or guarantee from the Company. The security package comprises of
pledges over the shares of DCI 14 and the shares of certain of its Cyprus
subsidiaries and their assets. In addition, Colony will receive a share of
the net distributable cash flows of Amanzoe as follows: 100% of all net cash
flows until the annual interest is paid, then 64% until the facility is
repaid, and finally 25% until the aggregate of all repayment amounts received
by Colony under the facility equate to an internal rate of return of 16%.
Dolphin will be entitled to repay the facility at any time by repaying to
Colony an amount that would represent the greater of a) a 1.35x multiple or b)
a 16% internal rate of return, on the facility.
On 28 January 2014, the Company signed an agreement which granted Archimedia
an option to acquire a 50% profit share from future sales of Amanzoe Villas.
Under the terms of the agreement, by making a refundable deposit of E10
million (amount included in Other non-current liabilities) Archimedia was
given the option to acquire a 50% entitlement in the net profits to be
realised from the sales of the unsold and unreserved Amanzoe Villas, which
will be constructed in the current and future development phases of the
project, for a total upfront consideration of E26 million in cash. The Company
retained a call option to redeem Archimedia's investment during the first two
years from closing which was exercised on August 8, 2014, by remitting E10.486
million (including interest) to Archimedia.
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