23rd Sep 2014 07:00
23 September 2014
DOLPHIN CAPITAL INVESTORS LIMITED
("DCI" or "Dolphin" or the "Company"
and together with its subsidiaries the "Group")
Trading Update and Preliminary Half Year Results for the period ended 30 June 2014
Dolphin, a leading global investor in the residential resort sector in emerging markets, is pleased to release its unaudited half year results for the six months ended 30 June 2014 and provide an update on operational progress since its last trading update.
A. Operating Highlights since last Trading Update of 11 June 2014:
ADVANCED PROJECTS
· The Porto Heli Collection (www.portohelicollection.com), Greece
Amanzoe (www.amanzoe.com)
- The operational performance of Amanzoe hotel in the year to date has been in line with our budget, with occupancy reaching 100% on many days during the peak season and average daily room rates in excess of €1,400.
- Four new hotel beach pavilions adjacent to the Amanzoe Beach Club, and with direct beach access, were added to Amanzoe's offering, further enhancing its luxury credentials.
- During the period one more Villa sale reservation has been signed, bringing the total number of Aman villas already sold or reserved to date to 13. Moreover, there are ongoing advanced discussions for the sale of additional villas at Amanzoe, which are expected to complete soon.
- A further two Amanzoe villas were added to Amanzoe's rental programme in July 2014, bringing the total to four. Construction is progressing well on three further Villas, which are due to complete within 2015. Construction for one additional villa is expected to begin in Q4 2014.
The Jack Nicklaus Golf Course and Villas at Kilada Hills
- The Company is in negotiations with a major regional bank for a €16 million long term senior construction loan facility and a c. €6.5 million VAT bridge facility for the construction cost input VAT, and for the development of the Jack Nicklaus Signature Golf Course and Club House and the project's Beach Club. Through the development of these leisure components, the Company expects to be able to sell over 110,000 m2 of golf residences and c. 20,000 m2 of hilltop villas in this first phase.
- As reported in the Company's annual report released on 26 March 2014, the improved Strategic Investment permit for the entire project including the hotel component is advancing. The approval of the Strategic Environmental Impact Study from the regional council received on 10 June 2014 and the approval by the Ministry of Culture received on 30 July 2014 pave the way for the dispatch of the draft Presidential Decree, for review by the Greek Council of State, the completion of which will effectively seal the Strategic Incentive permitting process.
- In parallel, the existing building permits for the golf course remain in force and construction can start imminently, subject to finalising the funding package which, in addition to the bank finance, would require an equity contribution or third party investment of approximately €14 million.
The Nikki Beach Resort & Spa at Porto Heli ("Nikki Beach" - www.nikkibeachhotels.com)
- Nikki Beach welcomed its first guests on 28 July 2014 with notable coverage across the international and regional press.
- In August, the hotel enjoyed consistently high occupancy which reached 100% on a number of days. The feedback received so far confirms that Nikki Beach complements the Amanzoe offering, further enhancing The Porto Heli Collection experience.
- PR and marketing activities are underway and a PR agency has been appointed to promote the hotel operations and launch the project's residential offering internationally, with 49 units being put forward for sale.
· Venus Rock Golf Resort ("Venus Rock" - www.venusrock.com), Cyprus
- Following the termination of the Venus Rock Sale Agreement with China Glory Investment Group ("CGIG") as reported in the Company's latest trading update, DCI Holdings Two Ltd (the parent company of Aristo) has decided to run a competitive process for the divestment of the Venus Rock project.
- Alongside this activity, Aristo has been developing new sales collateral for the re-launch of the Venus Rock plots and home sales, a major component of Aristo's sales inventory, which had been on hold for the past year due to the transaction with CGIG.
· Playa Grande Club & Reserve ("Playa Grande" - www.playagrande.com), Dominican Republic
- Construction of the Aman Hotel is on schedule, with all 30 pavilions and the main lodge currently being built. The mock up pavilion of the Aman Hotel was completed, reviewed and approved by Aman Resorts in June 2014. Completion and opening is expected in the third quarter of 2015.
- The renovation of the front nine holes of the Robert Trent Jones Sr. golf course is scheduled to commence shortly, following the recent completion of the full renovation of the back nine holes by Rees Jones. We anticipate that the completion of the entire golf course will coincide with the commencement of operations at the Aman Hotel.
- On 21 August 2014, Dolphin signed a non-binding term sheet with a US institutional investor for a proposed investment in Playa Grande through the issue of a six year $30 million mezzanine debt facility to DCA Holdings 7 Ltd, the holding company of the Playa Grande project. Since the signing of this term sheet, the investor has been undertaking legal, financial and technical due diligence, and the parties are working towards the closing of the transaction, which is expected in October 2014, at which time further details will be announced.
- This funding will enable Dolphin to accelerate the completion of all complementary leisure facilities to the Aman Hotel (including the Aman beach club, golf clubhouse, spa, gym, tennis, kids' club, hiking and equestrian trails), to cover all general project overhead costs and debt service until the project becomes cashflow positive without relying on further pre-sales, and to complete the design of the project's Playa Navio phase (second phase).
· Pearl Island (www.pearlisland.com), Panama
- The team is value-engineering the designs for the planned Ritz Carlton Reserve hotel and construction is expected to begin in the first quarter of 2015, subject to the successful conclusion of ongoing discussions with regional banks to increase the approved debt facility of $21 million to $33 million, and sourcing the $30 million of additional equity required.
- The regional investor group that acquired the Founders' Phase is advancing construction works and the first group of turn-key villas and condos is scheduled to be delivered by the end of 2014/early 2015. Infrastructure works are progressing on schedule and various components of the Founders' Phase peninsula such as the airport, beach club, service pier, marina and breakwater have been completed.
- The sale of lots and turn-key properties in the Founders' Phase is progressing, with values reflecting the strong demand and limited supply of luxury residential opportunities in Panama.
- Dolphin remains in discussions with various strategic groups that have indicated an interest in investing and participating in one of the many development phases of the island, including the Ritz Carlton Reserve, the Marina and another luxury branded resort phase.
MAJOR PROJECTS
· Amankea Greece
- On 28 July 2014, Amankea officially qualified to receive state subsidies, amounting to c. €4.9 million, for the construction of the project's leisure components.
- Amankea is also in the final stage of negotiations with a major regional bank for a €22 million long term senior construction loan facility, a c. €7 million VAT bridge facility for the construction cost input VAT and a €5.4 million Letter of Guarantee for the pre-financing of the above mentioned state subsidies. The completion of this loan facility is expected within Q4 2014 and depends on the finalization of the bank's due diligence on the project, the conclusion of definitive documentation and final bank approval.
- The Amankea construction can begin as soon as the construction drawings are completed and the final construction permit is received, but remains subject to finalizing the funding package which, in addition to the bank financing, would require an equity contribution or third party investment of approximately €16 million.
· LaVanta, Turkey
- Two villas were sold during the period, for a total consideration of €0.5 million.
· Syros, Greece
- On 19 September 2014, Zoniro entered into a binding pre-agreement with a foreign investor group for the sale of 10 land plots on the island of Syros. The land was part of the Aristo Greek portfolio which was 100% retained by DCI following the divestment of 50.2% of Aristo in 2012.
- The transaction net consideration payable to Zoniro amounts to €1.94 million, of which the Company has already received a non-refundable advance of €0.22 million. The transaction consideration will be received in staged payments over the next 10 months and €1.15 million from the proceeds will be used for the repayment of debt which was secured against the plots.
- The transaction represents a 26% premium to the asset's book value.
· Dolphin Capital Americas ("DCA")
- Following the Letter of Intent signed by DCA to acquire one of the largest privately owned islands in the Bahamas through a corporate merger transaction on 24 March 2014, the Company conducted extensive due diligence and decided not to proceed at this point, as it was not comfortable with the project's expected rate of return versus Dolphin's existing projects.
ARISTO
• 52 homes and plots were sold by Aristo in the eight month period ending 31 August 2014, representing sales of €16 million. Both figures are in line with the performance over the corresponding period in 2013. 51% of the clientele originated from Russia and 40% from China.
• As indicated by the level of sales over the period, Aristo's sales performance remains poor, putting a strain on the company's cashflows. As a result, Aristo has prioritized its payments so as to ensure that its development programme continues on course, while it is making good progress in restructuring its bank obligations in a long term and sustainable way which will benefit both the company's shareholders and its lenders - since such obligations are fully secured against land mortgages exceeding the respective loan values. To that regard, Aristo has already agreed the restructuring of its loan obligations with all of its lenders, except one - its major lender - with whom the company is in advanced discussions to agree a significant deleveraging of the Aristo group through a project level debt-to-preferred-equity conversion together with the re-profiling of the Aristo Group's loan maturities and reductions in the interest rates incurred.
• In parallel, the company is taking actions both at the wholesale level (for example, by selling Venus Rock Golf Resort) as well as at the retail level by launching new projects to enhance the diversification of product offering and support its sales potential.
• In addition to the ongoing challenging market conditions, recent sales performance has been adversely affected by negative publicity relating to an investigation carried out by the authorities with regard to the subdivision of 177 land plots in a 160,000 m2 site owned by Aristo in the Paphos area. Mr. Aristodemou and his wife were detained for questioning in the context of this investigation. The size of the disputed green area is 2,730 m2 which, although not material, has drawn disproportional attention by the local investigators and media, due to the previous appointment of Mr. Aristodemou as the Chairman of Board of the Bank of Cyprus.
• The Aristo management is fully cooperating with the local authorities on all aspects of the investigation, and remains confident that its result will demonstrate that there has been no inappropriate action or intended omission by Aristo.
B. €40.4 million investment by Colony Capital into Amanzoe
· As announced on 8 August 2014, Colony Capital Acquisitions LLC ("Colony") entered into final agreements with DolphinCI14 Ltd (the Company's Cyprus subsidiary which holds the Group's shareholding in Amanzoe) for a €40.4 million second priority loan facility (the "Facility") into Amanzoe.
· The full loan facility proceeds have been drawn down as follows:
a. an amount of €10 million was used to refund a deposit that Archimedia Holdings Corp. ("Archimedia") had advanced to the Company in the context of the corresponding Profit Sharing Agreement as reported by the Company on 26 March 2014, thus terminating the agreement in question;
b. an amount of €21 million was returned to DCI; while
c. an amount of €9 million was retained by Amanzoe for future expansion and development costs.
· The transaction establishes a strategic relationship with Colony, one of the world's leading and most respected real estate investors with significant experience in large scale luxury integrated resorts and accelerates the return on capital to DCI in the Amanzoe investment.
C. Financial highlights:
· Total Group NAV as at 30 June 2014 was €638 million and €552 million before and after Deferred Income Tax Liabilities ("DITL") respectively. This represents a decrease of €9.73 million (1.5%) and €8.19 million (1.5%), respectively, from 31 March 2014. The decrease is mainly due to a small valuation loss in the Aristo portfolio, as well as to regular operating expenses, offset by revaluation gains in Amankea.
· Sterling NAV per share as at 30 June 2014 was 80p before DITL and 69p after DITL. This represents a decrease of 4.6% and 4.5% compared to the 31 March 2014 figures, due to the reasons stated above and to the 3.1% appreciation of Sterling versus Euro over the period.
· The Company continues to have a strong asset base coupled with low leverage:
- Gross Assets of €905 million.
- Total Debt of €169 million with a Group total debt to total assets value ratio of only 19%.
- €50 million and US$9.17 million of convertible bonds are held at the Company level. The Company has provided corporate guarantees for the US$31 million outstanding Playa Grande Convertible Bonds, and the US$19 million Playa Grande construction loan.
D. Strategic Focus
The strategic priorities of the Company are to:
1. Complete agreed sales of residential units and enhance the operational performance of the resorts.
2. Complete the development of the Aman Golf Resort and sell all the remaining Founder Aman Villas at Playa Grande.
3. Proceed with securing senior bank loans, equity financing and final permits for the commencement of Amankea, Pearl Island's second phase and Jack Nicklaus Signature Golf Resort projects during 2015, which will result in Dolphin having five completed, operational and cashflow producing projects.
4. Assist Aristo's management in increasing retail sales during the current challenging period and conclude the Venus Rock Golf Resort sale through the competitive process now underway, using the sales proceeds to reduce Aristo's leverage and distribute dividends to Dolphin.
5. Advance the zoning and permitting of Dolphin's other Major Projects, enabling the Company to sell these assets - either partially or wholly - at a profit, or develop them and realise their full cash return potential.
Commenting, David B. Heller, Chairman of Dolphin's Board of Directors, said:
"Although our markets remain challenging, we have seen improvements at all levels, which we intend to exploit further by completing the funding of additional projects and crystallising value where appropriate. In 2014 to date, we have made notable advancements with our key developments, and a number of major projects are set to come on line for construction during next year, which will ensure that we continue to deliver value for shareholders."
Miltos Kambourides, Founder of Dolphin and Managing Partner of Dolphin Capital Partners, added:
"We are pleased that Nikki Beach has become our active second operating resort complementing Amanzoe which continues to perform above expectations.
"We are firmly focused on completing Playa Grande and launching Kilada Golf Resort, Amankea and the second phase of Pearl Island. We also remain optimistic that Aristo will overcome its current challenges and will reinforce its status as the leading developer in Cyprus."
E. Conference call for analysts and investors
There will be a conference call at 09:00 a.m. UK time on 23 September 2014, which can be accessed using the following dial-in numbers:
UK dial in number: | +44(0)20 3427 1914 |
Greece dial in number: | 00800 128 800 |
Pass code: | 7698563 |
For further information, please contact:
Dolphin Capital Partners Miltos E. Kambourides Pierre A. Charalambides Katerina G. Katopis Eleni Florou |
|
Panmure Gordon (Joint Broker) Richard Gray / Dominic Morley / Andrew Potts
|
+44 (0) 20 7886 2500
|
LCF Edmond de Rothschild Securities (Joint Broker) William Marle Haris Papanikolaou |
|
Grant Thornton UK LLP (Nominated Adviser) Philip Secrett
|
+44 (0) 20 7383 5100 |
FTI Consulting, London Stephanie Highett Claire Turvey Nick Taylor |
+44 (0)20 3727 1000
|
Notes to Editors
Dolphin (www.dolphinci.com) is a leading global investor in the residential resort sector in emerging markets. Dolphin seeks to generate strong capital growth for its shareholders by acquiring large seafront sites of striking natural beauty in the eastern Mediterranean, Caribbean and Latin America and developing sophisticated leisure-integrated residential resorts.
Since its inception in 2005, Dolphin has become one of the largest private seafront landowners in Greece and Cyprus and has partnered with some of the world's most recognised architects, golf course designers and hotel operators.
Dolphin's portfolio is currently spread over approximately 63 million m2 of prime coastal developable land and comprises 14 large-scale, leisure-integrated residential resorts under development 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.
F. Chairman's Statement
I am pleased to report Dolphin's results for the first half of 2014.
During the period, we made continued progress towards achieving our strategic priorities within a challenging, but constantly improving market.
The opening of The Nikki Beach Resort & Spa at Porto Heli on 28 July 2014 demonstrated once again the Company's ability to create high end luxury resorts on time and on budget, even within demanding economic conditions. The resort further enhanced The Porto Heli Collection offering, and we have received extremely positive feedback from our guests.
The operations of Amanzoe, the first villa-integrated Aman resort in Europe and one of the most exclusive destinations in the Mediterranean, continue their excellent performance, with occupancy again reaching almost 100% on many days during the peak holiday season. Amanzoe is increasingly regarded as one of the top leisure-integrated residential resorts in the world, with consistently outstanding reviews in the top tier international press. It is also encouraging to note that one more Aman Villa has been reserved since the Company's last Trading Update, while there are several Aman villa sales at advanced discussions with completion expected soon.
The completion of Colony's €40.4 million investment into Amanzoe established Dolphin's strategic relationship with one of the world's leading real estate investors, and we are looking into other areas of cooperation.
I am particularly pleased that we have made significant progress with regard to both the bank financing and the receipt of final permits at Kilada Hills Golf Resort and Amankea. Kilada Hills Golf Resort is the third phase of The Porto Heli Collection and it will enhance the existing offering with a prestigious Jack Nicklaus Signature 18-hole golf course. Amankea will be the second Aman branded resort in Greece and the first one developed on a European island.
The Company has initiated a competitive sale process for Venus Rock Golf Resort, with a view to achieving the (whole or partial) sale of the asset, and which should help offset the sales performance of Aristo, which continues lagging management's expectations. In parallel, the Dolphin team is looking at opportunities for small or large scale exits of non-core assets such as Porto Kundu sold earlier this year.
The Greek and other governments remain committed to attracting and facilitating inward investment, and we welcome the recent legislative reforms, which are expected to benefit tourism development and large scale projects.
The Company's NAV, before and after DITL, as at 30 June 2014 is reported at €638 million and €552 million, respectively, and the NAV per share before and after DITL in Euro terms was €0.99 and €0.86 respectively, representing a 5.7% and 5.5% increase from 31 December 2013.
David B. Heller
Chairman
Dolphin Capital Investors Limited
23 September 2014
G. Investment Manager's Report
The main focus of our team for 2014 continues to be securing solid progress and funding in all stages of development of our portfolio (ranging from securing permitting to construction and sales) and realising exits that further validate the value of the portfolio and crystallise value for shareholders.
The opening of The Nikki Beach Resort & Spa this summer was, as expected, a very gratifying and important milestone in the Company's development, representing the second of our luxury resorts to come to market and the completion of the second phase of The Porto Heli Collection.
Amanzoe's second year of operations is further improved, while the resort continues to serve as a showcase of Dolphin's development capabilities, profit potential and vision.
Sales activity has continued to gain momentum in recent months, with a number of potential transactions under negotiation. Positive signs are seen in the senior debt local financing environment as well as in the availability for mezzanine facilities. We feel that the timing is right for completing the construction of infrastructure and leisure facilities of some additional key projects, such as Kilada Hills, Pearl Island and Amankea, in order to produce more luxury residential supply to satisfy the increasing demand and realize value for the Company.
Market Dynamics
International tourist arrivals grew by 4.6% in the first half of 2014 according to the latest UNWTO World Tourism Barometer. Destinations worldwide received some 517 million international tourists between January and June 2014, 22 million more than in the same period of 2013.
Growth was strong across the board, with the Americas recording a 6% increase, followed by Asia and the Pacific and Europe (both at +5%). By sub-region, South Asia and Northern Europe (both +8%) were the best performers, together with North-East Asia and Southern Mediterranean Europe (both +7%).
In general, the most important observations, for the countries we are invested in, are as follows:
· Tourist arrivals in Greece from January to August 2014 increased by almost 16% compared to the same period of 2013, based on preliminary results issued by the country's main airports. This remarkable performance has led to the upward revision of the estimated international arrivals for 2014 from an initial 19 million to an all-time record of 19.5 million (despite the loss of additional tourist arrivals from Russia and Ukraine due to the political instability).
· Tourist arrivals in Cyprus for the period January-August 2014 totalled approximately 1.7 million, representing a 6% increase from the corresponding period in 2013.
· For the same eight month period, Croatia experienced a 5% rise in tourist arrivals compared to 2013, as around 10.6 million arrivals were registered according to statistics collected by local tourism boards
· The number of visitors arriving in Turkey from January to June 2014 increased by 2.8% compared to the same period in the previous year according to the provisional data acquired from the General Directorate of Security and the Turkish Statistical Institute, reaching approximately 17.5 million.
· Tourist arrivals in Panama for the period January to June 2014 totalled over 1.8 million, an increase of approximately 5.5% relative to the same period of 2013.
· The number of tourists visiting the Dominican Republic for the period January to June 2014 totalled 3.16 million and was up by c.8.3% relative to the same period of 2013.
In addition, and relevant to DCI's focus on HNWIs, the Wealth-X and UBS Billionaire Census 2014 demonstrated that the wealthy population continues to grow significantly.
H. Updated Portfolio characteristics and cash generation potential
The Portfolio
A summary of Dolphin's current investments is presented below. As at 31 August 2014, the net invested amount is €580* million.
Project | Land site | DCI's stake | Investment Cost * | Debt | Real Estate Value | Loan to real estate asset value (%) | |
(hectares) | (€ million) | (€ million) | (€ million) | ||||
ADVANCED PROJECTS | |||||||
1 | The Porto Heli Collection | 343 | 138 | 74 | |||
Amanzoe | 96 | 86% | 41 | 74 | |||
The Nikki Beach Resort & Spa | 1 | 25% | 5 | - | |||
The Chedi and Jack Nicklaus Signature Golf Course | 246 | 100% | 92 | - | |||
2 | Venus Rock | 1,000 | 50% | 83 | - | - | |
3 | Playa Grande Club & Reserve | 950 | 100% | 85 | 13 | ||
4 | Pearl Island | 1,440 | 60% | 27 | - | ||
TOTAL | 3,733 | 333 | 87 | 478 | 18% | ||
MAJOR PROJECTS | |||||||
5 | Sitia Bay Golf Resort | 280 | 78% | 17 | - | ||
6 | Amankea | 65 | 67% | 9 | - | ||
7 | Scorpio Bay Resort | 172 | 100% | 14 | - | ||
8 | Lavender Bay Resort | 310 | 100% | 24 | - | ||
9 | Plaka Bay Resort | 440 | 100% | 12 | - | ||
10 | Triopetra | 11 | 100% | 4 | - | ||
13 | Eagle Pine Golf Resort-Aristo | 319 | 50% | 18 | - | ||
12 | Apollo Heights Polo Resort | 461 | 100% | 17 | 21 | ||
11 | Livka Bay Resort | 63 | 100% | 26 | 10 | ||
14 | LaVanta - Mediterra Resorts | 8 | 100% | 15 | 1 | ||
15 | Zoniro Greece | 27 | 100% | 3 | 11 | ||
TOTAL | 2,156 | 159 | 43 | 271 | 16% | ||
ARISTO CYPRUS | 392 | 50% | 86 | - | 110 | ||
Itacare Investment | n/a | 10% | 2 | - | 7 | ||
DCI Corporate Bonds | n/a | n/a | n/a | 79 | - | ||
GRAND TOTAL | 6,281 | 580 | 209 | 866 | 24% |
*Residual investment cost, including amounts paid in shares.
Geographic breakdown
Project | Land size (hectares) | Investment Cost * | Debt** | Real Estate Value | % Loan to real estate asset value | Net Asset Value | |
(€ million) | (€ million) | (€ million) | |||||
1 | Greece | 1,648 | 222 | 85 | 397 | 21% | 40% |
2 | Cyprus | 2,172 | 203 | 21 | 265 | 8% | 38% |
3 | Croatia & Turkey | 71 | 41 | 11 | 47 | 24% | 5% |
4 | Americas | 2,390 | 114 | 13 | 157 | 8% | 17% |
Grand Total | 6,281 | 580 | 130 | 866 | 15% | 100% |
* Residual investment cost, including amounts paid in shares.
**Excluding DCI corporate bonds.
Exits
Land site (hectares) | Dolphin stake sold | Dolphin original investment (€m) | Dolphin exit proceeds (€m) | Dolphin return on investment (times) | |
Tsilivi - Aristo | 11 | 100% | 2 | 7 | 3.50x |
Amanmila | 210 | 100% | 2.8 | 5.4 | 1.90x |
Kea | 65 | 33% | 4 | 4.1 | 1.00x |
Seafront Villas | 3.6 | 100% | 9 | 14 | 1.52x |
Kings' Avenue Mall | 4 | 100% | 11 | 15 | 1.36x |
Aristo Developers Ltd | 1,351 | 50% | 208 | 375.5 | 1.80x |
The Nikki Beach Resort & Spa at Porto Heli | 1 | 75% | 4 | 6.9 | 1.83x |
Pearl Island Founders phase | 106 | 100% | 6 | 10.6 | 1.73x |
Pt. Kundu | 4 | 100% | 16 | 10 | 0.63x |
TOTAL | 1,756 | 262 | 488 | 1.71x |
Cash Generation Potential of the Dolphin portfolio:
The Advanced Projects are spread over 3,733 hectares of land, of which 1,508 hectares represent the current phases of these developments. The total unsold residential capacity of these projects is approximately 470,000 buildable m2, of which circa 240,000 m2 are planned for their current phases.
Plans for the current phases of the Advanced Projects include the development of four luxury hotels comprising the first Aman residential resort in Europe (Amanzoe - operating), the first Aman golf-integrated resort worldwide (Playa Grande - planned to open in Q3 2015), the first Nikki Beach resort in the Mediterranean (operating), and the first Ritz Carlton Reserve resort in Central America (Pearl Island - expected to start construction in Q1 2015 subject to the conclusion of debt financing and the availability of equity funds); as well as the recently renovated golf course in Playa Grande designed by Robert Trent Jones, Senior and renovated by his son Rees Jones, the two 18-hole golf courses in Venus Rock Golf Resort (the first of which is currently operating) and the Jack Nicklaus Signature Golf Course at Kilada.
Dolphin's remaining portfolio includes:
• Two additional fully permitted leisure-integrated residential resort projects, Amankea and Sitia Bay Resort, which are ready to assume Advanced Project status and are spread over 345 hectares of land with a potential capacity of c. 140,000 residential buildable m2.
• Eight major leisure-integrated residential resort projects spread over 1,811 hectares of land on seven of which we conservatively expect to build and sell c. 430,000 residential buildable m2, representing a very low c. 3% building coefficient, while one is expected to be exited on a wholesale basis. These projects are expected to further increase in value as they complete their permitting and design phase and reach Advanced Project status.
• Residual developable land or coefficient since, under the current plans, not all the land or building capacity of the Major Projects will be utilised.
• Aristo Developers, the largest developer and private land owner in Cyprus, which currently has c. 60,000 buildable m2 of residential product in stock or under construction and c. 314,000 land m2 in the form of readily available land plots with a total listed sales potential of over €124 million. In addition, Aristo holds an additional vast portfolio of land assets with the potential to sell over 900,000 residential buildable m2 once fully developed. Dolphin retains a strategic 49.8% shareholding in Aristo.
Based on the above, the Investment Manager estimates Dolphin's total project portfolio cash return potential to be approximately €3.9 billion, or c. 477p per share. This includes only c. €30 million of dividends expected from the sale of Venus Rock and excludes any dividends or other divestment revenues from Aristo - a development company with on-going operations and a diverse portfolio of real estate projects.
The gross cash returns potential of each project is summarised in the following table:
(€ million) | DCI Stake | Residential Buildable m2 | Leisure buildable m2 | Land plots (m2) | Total cash generation potential | |||
Advanced Projects | ||||||||
The Porto Heli Collection | 100% | 208,752 | 51,601 | - | 768 | |||
Playa Grande | 100% | 66,805 | 27,647 | 1,210,013 | 540 | |||
Pearl Island | 60% | 190,680 | 48,119 | 1,838,466 | 613 | |||
TOTAL | 466,237 | 127,367 | 3,048,479 | 1,921 | ||||
Permitted Projects | ||||||||
AmanKea | 67% | 19,328 | 10,177 | - | 113 | |||
Sitia Bay | 78% | 120,435 | 21,516 | 1,346,431 | 231 | |||
TOTAL | 139,763 | 31,693 | 1,346,431 | 344 | ||||
Major Projects & Aristo | ||||||||
Greece | 241,587 | 93,006 | - | 560 | ||||
Scorpio Bay Resort | 100% | 50,800 | 14,600 | - | 160 | |||
Lavender Bay Resort | 100% | 96,280 | 24,526 | - | 196 | |||
Plaka Bay Resort | 100% | 70,087 | 32,000 | - | 157 | |||
Triopetra | 100% | 8,870 | 10,430 | - | 21 | |||
Douneika | 100% | 15,550 | 11,450 | - | 27 | |||
Cyprus | 141,996 | 7,924 | 4,610,000 | 248 | ||||
Apollo Heights Polo Resort | 100% | - | - | 4,610,000 | 200 | |||
Eagle Pine Golf Resort | 50% | 141,996 | 7,924 | - | 48 | |||
Turkey | 10,734 | - | - | 11 | ||||
Mediterra | 100% | 10,734 | - | - | 11 | |||
Croatia | 32,944 | 29,287 | - | 48 | ||||
Livka | 100% | 32,944 | 29,287 | - | 48 | |||
TOTAL | 431,261 | 130,217 | 4,610,000 | 867 | ||||
Venus Rock | 50% | 30 | ||||||
Residual Land / Coefficient | - | - | 13,100,000 | 734 | ||||
GRAND TOTAL | 1,033,261 | 289,277 | 22,104,910 | 3,896 |
• The cash generation potential assumes the full development of each project and its exit through retail sales of the residential portfolio and land plots, as well as the sale of its leisure components at a multiple to their expected terminal NOI and does not include inflation assumptions or interim project exits, with the exception of the Company's Apollo project which is assumed to be exited on a wholesale basis at the time when it receives final zoning and permitting. Cost assumptions cover future development, marketing, sales, branding and agency expenses and do not include already incurred expenses for land acquisition and development as well as respective financing costs, management and performance fees, or corporate income taxes.
• Venus Rock is expected to be sold, following completion of the competitive process initiated by the Company, and generate dividends amounting to c. €30 million to the Company. Although the deleveraging of Aristo is expected to allow more dividends for Dolphin going forward, these were not included in the projections.
• All statements are based on future expectations rather than on historical facts and are forward looking statements that involve a number of assumptions, risks and uncertainties. The Company and the Investment Manager cannot give any assurance that such statements will prove to be correct. Any forward looking statements made by or on behalf of the Company are made only on a best estimate basis as at the date they are made and they do not constitute future earnings, revenues or profits forecasts or guidance. Neither the Company nor the Investment Manager undertake to update forward looking statements to reflect any changes in expectations, events, conditions or circumstances upon which such statements are made.
Miltos Kambourides Managing Partner Dolphin Capital Partners 23 September 2014 | Pierre Charalambides Founding Partner Dolphin Capital Partners 23 September 2014 |
I. Finance Director's Report
Net Asset Value ('NAV')
The reported NAV as at 30 June 2014 is presented below:
Variation since 31 December 2013 | ||||
€ | £ | € | £ | |
Total NAV before DITL (millions) | 638 | 511 | 5.7% | 1.3% |
Total NAV after DITL (millions) | 552 | 442 | 5.5% | 1.1% |
NAV per share before DITL | 0.99 | 0.80 | 5.7% | 1.3% |
NAV per share after DITL | 0.86 | 0.69 | 5.5% | 1.1% |
___________
Notes:
1. Euro/GBP rate 0.80050 as at 30 June 2014 and 0.83478 as at 31 December 2013.
2. Euro/USD rate 1.36452 as at 30 June 2014 and 1.37660 as at 31 December 2013.
3. NAV per share has been calculated on the basis of 642,440,167 issued shares as at 30 June 2014 and as at 31 December 2013. .
4. NAV before DITL include the 49.8% DITL of Aristo.
Total Group NAV as at 30 June 2014 was €638 million and €552 million before and after DITL respectively. This represents an increase of €34 million (5.7%) and €29 million (5.5%), respectively, from 31 December 2013. The increase is mainly due to DCI's share of the increase in the Venus Rock valuation, in accordance with the latest independent valuation, following the termination of the sale contract with the China Glory Investment Group, and revaluation gains in Amankea counterbalanced by the effect of regular Dolphin operational and corporate expenses.
The 30 June 2014 reported NAV is primarily based on new valuations conducted by American Appraisal for the Aristo portfolio and Amankea.
Sterling NAV per share before DITL increased in the six month period ended 30 June 2014 by 1.3%, as the effect of the reasons mentioned above was partially counterbalanced by c.4.1% appreciation of Sterling versus the Euro during the period.
The reduction in the NAV after DITL resulted in an accounting gain of €30 million for the six-month period ended 30 June 2014 implying €0.05 earnings per share.
The next full portfolio valuation will be as at 31 December 2014.
Financial position
Condensed Interim consolidated statement of financial position | |||||||
30 June 2014 | 31 December 2013 | ||||||
€' 000 | €' 000 | ||||||
Assets | |||||||
Real estate assets (investment and trading properties) | 634,968 | 631,920 | |||||
Equity accounted investees | 254,610* | 204,346* | |||||
Other assets | 36,903 | 38,908 | |||||
Cash and cash equivalents | 8,145 | 7,100 | |||||
Total Assets | 934,626 | 882,274 | |||||
Equity | |||||||
Equity attributable to Dolphin shareholders before DITL | 638,052* | 603,765* | |||||
Non-controlling interest | 24,708 | 24,504 | |||||
Total equity | 662,760 | 628,269 | |||||
Liabilities | |||||||
Interest-bearing loans and finance lease obligations | 176,983 | 177,245 | |||||
Other liabilities | 94,883 | 76,760 | |||||
Total liabilities | 271,866 | 254,005 | |||||
Total equity and liabilities | 934,626 | 882,274 | |||||
_______________
*Amounts include the 49.8% DITL of Aristo
The Company's NAV before DITL, after deducting from total consolidated assets, non-controlling interests of €25 million, other liabilities of €95 million and total debt of €177 million, is set at €638 million as at 30 June 2014.
The Company's consolidated assets total €935 million and include €635 million of real estate assets, €255 million of investments in equity accounted investees, €45 million of other assets and cash. The €635 million figure represents the fair market valuation of Dolphin's real estate portfolio (both freehold and leasehold interests) as at 30 June 2014, assuming 100% ownership. The €255 million figure represents the 49.8% investment in Aristo and the 25% stake in Nikki Beach. The €37 million of other assets comprise mainly €8 million of VAT receivable, €2 million of deferred tax assets and €10 million other receivables from customers and JV partners.
The Company's consolidated liabilities total €272 million and comprise €95 million of other liabilities as well as €177 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 €95 million of other liabilities comprise mainly €25 million of option contracts to acquire land, €10 million loan from Archimedia, €7.6 million deferred income from government grants and €12 million advances from villa sales.
The consolidated interim financial statements have been reviewed by KPMG.
Panos Katsavos
Finance Director
Dolphin Capital Partners
23 September 2014
Condensed consolidated interim statement of profit or loss and other comprehensive income
For the six-month period ended 30 June 2014
From 1 January 2014 to 30 June 2014 | From 1 January 2013 to 30 June 2013 | ||
Note | €'000 | €'000 | |
Continuing operations | |||
Valuation gain on investment property | 9 | 8,766 | 7,722 |
Impairment loss on trading properties | 11 | (4,249) | (790) |
Other operating profits | 8,569 | 4,365 | |
Total operating profits | 13,086 | 11,297 | |
Investment Manager fees | 22.2 | (6,858) | (6,890) |
Professional fees | (3,484) | (6,475) | |
Administrative and other expenses | (10,757) | (7,172) | |
Total operating and other expenses | (21,099) | (20,537) | |
Results from operating activities | (8,013) | (9,240) | |
Finance income | 499 | 521 | |
Finance costs | (6,125) | (7,419) | |
Net finance costs | (5,626) | (6,898) | |
Share of profits/(losses) on equity accounted investees | 13 | 42,887 | (79,290) |
Gain on disposal of investment in subsidiaries | 23 | 2,709 | - |
Total non-operating profits/(losses) | 45,596 | (79,290) | |
Profit/(loss) before taxation | 31,957 | (95,428) | |
Taxation | 7 | (40) | (7,909) |
Profit/(loss) for the period | 31,917 | (103,337) | |
Other comprehensive income | |||
Items that will never be reclassified to profit or loss | |||
Revaluation of property, plant and equipment | - | 1,965 | |
Related tax | - | (207) | |
- | 1,758 | ||
Items that are or may be reclassified to profit or loss | |||
Foreign currency translation differences | 686 | 1,741 | |
Translation differences to profit or loss due to disposal of subsidiary |
(2,709) |
- | |
Share of revaluation on equity accounted investees | 13 | 17 | (112) |
Fair value adjustment on available-for-sale financial assets | 12 | (64) | - |
(2,070) | 1,629 | ||
Other comprehensive income for the period, net of tax | (2,070) | 3,387 | |
Total comprehensive income for the period | 29,847 | (99,950) | |
Profit/(loss) attributable to: | |||
Owners of the Company | 30,359 | (103,450) | |
Non-controlling interests | 1,558 | 113 | |
Profit/(loss) for the period | 31,917 | (103,337) | |
Total comprehensive income attributable to: | |||
Owners of the Company | 28,110 | (100,078) | |
Non-controlling interests | 1,737 | 128 | |
Total comprehensive income for the period | 29,847 | (99,950) | |
EARNINGS/(Loss) per share | |||
Basic and diluted earnings/(loss) per share (€) | 8 | 0.05 | (0.16) |
Condensed consolidated interim statement of financial position
As at 30 June 2014
30 June 2014 | 31 December 2013 | ||
Note | €'000 | €'000 | |
Assets | |||
Investment property | 9 | 430,897 | 423,791 |
Property, plant and equipment | 10 | 155,811 | 143,604 |
Equity accounted investees | 13 | 224,882 | 180,862 |
Available-for-sale financial assets | 12 | 2,201 | 2,265 |
Deferred tax assets | 19 | 2,386 | 4,230 |
Other non-current assets | 2,733 | 3,458 | |
Non-current assets | 818,910 | 758,210 | |
Trading properties | 11 | 48,260 | 64,524 |
Receivables and other assets | 14 | 29,582 | 28,956 |
Cash and cash equivalents | 15 | 8,145 | 7,100 |
Current assets | 85,987 | 100,580 | |
Total assets | 904,897 | 858,790 | |
Equity | |||
Share capital | 16 | 6,424 | 6,424 |
Share premium | 16 | 498,933 | 498,933 |
Reserves | 6,010 | 8,259 | |
Retained earnings | 40,950 | 10,056 | |
Equity attributable to owners of the Company | 552,317 | 523,672 | |
Non-controlling interests | 24,706 | 24,504 | |
Total equity | 577,023 | 548,176 | |
Liabilities | |||
Loans and borrowings | 17 | 151,243 | 153,044 |
Finance lease obligations | 18 | 7,806 | 8,018 |
Deferred tax liabilities | 19 | 56,008 | 56,610 |
Other non-current liabilities | 33,797 | 23,536 | |
Non-current liabilities | 248,854 | 241,208 | |
Loans and borrowings | 17 | 17,510 | 15,760 |
Finance lease obligations | 18 | 426 | 423 |
Trade and other payables | 20 | 60,949 | 53,115 |
Current tax liabilities | 135 | 108 | |
Current liabilities | 79,020 | 69,406 | |
Total liabilities | 327,874 | 310,614 | |
Total equity and liabilities | 904,897 | 858,790 | |
Net asset value ('NAV') per share (€) | 21 | 0.86 | 0.82 |
Condensed consolidated interim statement of changes in equity
For the six-month period ended 30 June 2014
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 2013 | 6,424 | 498,933 | 1,483 | 8,533 | 120,108 | 635,481 | 32,293 | 667,774 |
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | ||||||||
Loss for the period | - | - | - | - | (103,450) | (103,450) | 113 | (103,337) |
Other comprehensive income for the period | ||||||||
Foreign currency translation differences | - | - | 1,550 | - | - | 1,550 | 191 | 1,741 |
Revaluation of property, plant and equipment, net of tax | - | - | - | 1,934 | - | 1,934 | (176) | 1,758 |
Share of revaluation on equity accounted investees | - | - | - | (112) | - | (112) | - | (112) |
Total other comprehensive income for the period | - | - | 1,550 | 1,822 | - | 3,372 | 15 | 3,387 |
Total comprehensive income for the period | - | - | 1,550 | 1,822 | (103,450) | (100,078) | 128 | (99,950) |
Balance at 30 June 2013 | 6,424 | 498,933 | 3,033 | 10,355 | 16,658 | 535,403 | 32,421 | 567,824 |
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 |
Condensed consolidated interim statement of cash flows
For the six-month period ended 30 June 2014
From 1 January 2014 to 30 June 2014 | From 1 January 2013 to 30 June 2013 | ||
€'000 | €'000 | ||
Cash flows from operating activities | |||
Profit/(loss) for the period | 31,917 | (103,337) | |
Unrealised (gain)/loss on property | (47,404) | 72,358 | |
Other adjustments | 3,788 | 15,950 | |
(11,699) | (15,029) | ||
Changes in: | |||
Receivables | (1,250) | 2,982 | |
Payables | 18,147 | 3,883 | |
Cash from /(used in) operating activities | 5,198 | (8,164) | |
Tax paid | (17) | (76) | |
Net cash from/(used in) operating activities | 5,181 | (8,240) | |
Cash flows from investing activities | |||
Proceeds from disposal of subsidiaries, net of cash disposed of | 8,288 | - | |
Net acquisitions of investment property | 151 | (691) | |
Net acquisitions of property, plant and equipment | (10,751) | (8,590) | |
Net change in equity accounted investees | (1,116) | - | |
Net change in trading properties | 4,773 | (2,746) | |
Interest received | 265 | 521 | |
Net cash from/(used in) investing activities | 1,610 | (11,506) | |
Cash flows from financing activities | |||
Acquisition of non-controlling interests without a change in control | (1,000) | - | |
Change in loans and borrowings | 186 | 46,299 | |
Change in finance lease obligations | (209) | (226) | |
Interest paid | (4,782) | (5,717) | |
Net cash (used in)/from financing activities | (5,805) | 40,356 | |
Net increase in cash and cash equivalents | 986 | 20,610 | |
Cash and cash equivalents at the beginning of the period | 4,861 | 19,993 | |
Effect of exchange rate fluctuations on cash held | (2) | (138) | |
Cash and cash equivalents at the end of the period | 5,845 | 40,465 | |
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) | 8,145 | 42,709 | |
Bank overdrafts (see note 17) | (2,300) | (2,244) | |
Cash and cash equivalents at the end of the period | 5,845 | 40,465 |
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 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 2014 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 2013 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 2013. They are presented in euro (€), rounded to the nearest thousand.
These condensed consolidated interim financial statements were approved by the Board of Directors on 22 September 2014.
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 2013.
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 2013.
5. Significant SUBSIDIARIES
As at 30 June 2014, the Group's most significant subsidiaries were the following:
Country of | Shareholding | |
Name | incorporation | interest |
Scorpio Bay Holdings Limited | Cyprus | 100% |
Scorpio Bay Resorts S.A. | Greece | 100% |
Latirus Enterprises Limited | Cyprus | 80% |
Iktinos Techniki Touristiki S.A. ('Iktinos') | Greece | 78% |
Xscape Limited | Cyprus | 100% |
Golfing Developments S.A. | Greece | 100% |
MindCompass Overseas Limited | Cyprus | 100% |
MindCompass Overseas S.A. | Greece | 100% |
MindCompass Overseas Two S.A. | Greece | 100% |
MindCompass Parks S.A. | Greece | 100% |
Ergotex Services Co. Limited | Cyprus | 100% |
D.C. Apollo Heights Polo and Country Resort Limited | Cyprus | 100% |
Symboula Estates Limited | Cyprus | 100% |
DolphinCI Fourteen Limited ('DCI 14') | Cyprus | 86% |
Eidikou Skopou Dekatessera S.A. | Greece | 86% |
Eidikou Skopou Dekaokto S.A. | Greece | 86% |
Eidikou Skopou Eikosi Ena S.A. | Greece | 80% |
Portoheli Hotel and Marina S.A. | Greece | 25% |
DCI Holdings Two Limited ('DCI H2') | BVIs | 50% |
Dolphin Capital Atlantis Limited | Cyprus | 50% |
Aristo Developers Limited ('Aristo') | Cyprus | 50% |
Single Purpose Vehicle Twelve Limited | Cyprus | 50% |
Azurna Uvala D.o.o. ('Azurna') | Croatia | 100% |
Eastern Crete Development Company S.A. | Greece | 100% |
DolphinLux 2 S.a.r.l. | Luxembourg | 100% |
Kalkan Yapi ve Turizm A.S. | Turkey | 100% |
Dolphin Capital Americas Limited | BVIs | 100% |
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.
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 2014 | - | - | ||||
Investment property | 91,604 | 339,293 | - | 430,897 | - | 430,897 |
Property, plant and equipment | 56,788 | 99,023 | - | 155,811 | - | 155,811 |
Trading properties | 1,629 | 46,631 | - | 48,260 | - | 48,260 |
Equity accounted investees | - | 224,882 | - | 224,882 | - | 224,882 |
Available-for-sale financial assets | 2,201 | - | - | 2,201 | - | 2,201 |
Cash and cash equivalents | 3,566 | 3,983 | 596 | 8,145 | - | 8,145 |
Intra-group debit balances | 11,790 | 291,273 | 511,069 | 814,132 | (814,132) | - |
Other assets | 3,062 | 24,472 | 7,167 | 34,701 | - | 34,701 |
Total assets | 170,640 | 1,029,557 | 518,832 | 1,719,029 | (814,132) | 904,897 |
Loans and borrowings | 13,119 | 76,157 | 79,477 | 168,753 | - | 168,753 |
Finance lease obligations | 129 | 8,103 | - | 8,232 | - | 8,232 |
Deferred tax liabilities | 1,758 | 54,250 | - | 56,008 | - |
56,008 |
Intra-group credit balances | 108,302 | 408,328 | 297,502 | 814,132 | (814,132) | - |
Other liabilities | 9,581 | 80,244 | 5,056 | 94,881 | - | 94,881 |
Total liabilities | 132,889 | 627,082 | 382,035 | 1,142,006 | (814,132) | 327,874 |
Valuation gain on investment property | - | 8,766 | - | 8,766 | - | 8,766 |
Impairment losses | - | (4,249) | - | (4,249) | - | (4,249) |
Share of losses 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 |
Americas1 | South-East Europe2 | Other3 | Reportable segment totals | Adjustments4 | Consolidated totals | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
31 December 2013 | ||||||
Investment property | 93,120 | 330,671 | - | 423,791 | - | 423,791 |
Property, plant and equipment | 44,728 | 98,876 | - | 143,604 | - | 143,604 |
Trading properties | 1,576 | 62,948 | - | 64,524 | - | 64,524 |
Equity accounted investees | - | 180,862 | - | 180,862 | - | 180,862 |
Available-for-sale financial assets | 2,265 | - | - | 2,265 | - | 2,265 |
Cash and cash equivalents | 3,953 | 1,835 | 1,312 | 7,100 | - | 7,100 |
Intra-group debit balances | 14,205 | 281,246 | 510,417 | 805,868 | (805,868) | - |
Other assets | 4,625 | 22,054 | 9,965 | 36,644 | - | 36,644 |
Total assets | 164,472 | 978,492 | 521,694 | 1,664,658 | (805,868) | 858,790 |
Loans and borrowings | 10,982 | 78,629 | 79,193 | 168,804 | - | 168,804 |
Finance lease obligations | 157 | 8,284 | - | 8,441 | - | 8,441 |
Deferred tax liabilities | 1,742 | 54,868 | - | 56,610 | - | 56,610 |
Intra-group credit balances | 103,774 | 411,823 | 290,271 | 805,868 | (805,868) | - |
Other liabilities | 8,000 | 62,911 | 5,848 | 76,759 | - | 76,759 |
Total liabilities | 124,655 | 616,515 | 375,312 | 1,116,482 | (805,868) | 310,614 |
30 June 2013 | ||||||
Valuation gain on investment property | 5,933 | 1,789 | - | 7,722 | - | 7,722 |
Impairment losses | - | (790) | - | (790) | - | (790) |
Share of losses on equity accounted investees, net of tax | - | (79,290) | - | (79,290) | - | (79,290) |
Other operating profits | 1,917 | 2,448 | - | 4,365 | - | 4,365 |
Investment Manager fees | - | - | (6,890) | (6,890) | - | (6,890) |
Net finance costs | (291) | (6,406) | (201) | (6,898) | - | (6,898) |
Other expenses | (3,055) | (8,216) | (2,376) | (13,647) | - | (13,647) |
Profit/(loss) before taxation | 4,504 | (90,465) | (9,467) | (95,428) | - | (95,428) |
Taxation | (148) | (7,761) | - | (7,909) | - | (7,909) |
Profit/(loss) for the period | 4,356 | (98,226) | (9,467) | (103,337) | - | (103,337) |
1 Americas comprises the Group's activities in the Dominican Republic and the Republic of Panama. Also includes the investment in Itacare Capital 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 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, with both international tourism and wealth continuing to grow, even though economic activity in two of Group's primary markets, Greece and Cyprus, continued to face significant challenges, with the most notable effect on the Group's businesses being the scarcity of senior bank debt to finance the construction of the development portfolio. However, the business climate is slowly, but steadily improving in both regions, assisted by the legislative reforms implemented during the past year by both the Greek and the Cypriot governments.
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 have significantly stabilised. Greek tourism has witnessed impressive growth during the first eight months of 2014. Tourist arrivals in Greece from January to August 2014 increased by almost 16% compared to the same period of 2013, based on preliminary results issued by the country's main airports. This remarkable performance has led to the upward revision of the estimated international arrivals for 2014 from an initial 19 million to an all-time record of 19.5 million (despite the loss of additional tourist arrivals from Russia and Ukraine due to the political instability).The debt crisis has also been a catalyst in adopting a faster entitlement process for development projects in Greece. In particular, the introduction of the Strategic Investment incentive legislation in Greece, which should be applicable to most of the Group's local projects due to their quality, size and potential impact on the local economy, speeds up and improves zoning entitlements and building permits for Group residential resort projects in the country.
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 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 extending €100,000, a closed banking system for two weeks and extensive capital controls. 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 and increase the value and saleability of its larger projects. Significant value will also be unlocked through the expected zoning of the Apollo Heights Resort, following the agreement reached by the Cypriot and UK governments to permit for development such projects falling within the Sovereign British Areas.Tourist arrivals in Cyprus for the period January-August 2014 totalled approximately 1.7 million, representing a 6% increase from the corresponding period in 2013.
7. Taxation
From 1 January 2014 | From 1 January 2013 | |
to 30 June 2014 | to 30 June 2013 | |
€'000 | €'000 | |
Corporate income tax | 44 | 13 |
Deferred tax | (4) | 7,896 |
Total | 40 | 7,909 |
8. EARNINGS/(LOSS) per share
Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of common shares outstanding during the period.
From 1 January 2014 | From 1 January 2013 | |
to 30 June 2014 | to 30 June 2013 | |
'000 | '000 | |
Profit/(loss) attributable to owners of the Company (€) | 30,359 | (103,450) |
Number of weighted average common shares outstanding | 642,440 | 642,440 |
Basic earnings/(loss) per share (€) | 0.05 | (0.16) |
Weighted average number of common shares outstanding
From 1 January 2014 to 30 June 2014 | From 1 January 2013 to 30 June 2013 | |
'000 | '000 | |
Outstanding common shares at beginning and end of period | 642,440 | 642,440 |
Weighted average number of common shares outstanding | 642,440 | 642,440 |
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share is calculated by adjusting the profit/(loss) attributable to owners and the number of common shares outstanding to assume conversion of all dilutive potential shares. During the period, the Company has 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 2014 | From 1 January 2013 | |
to 30 June 2014 | to 30 June 2013 | |
'000 | '000 | |
Profit/(loss) attributable to owners of the Company (€) | 30,359 | (103,450) |
Weighted average number of common shares outstanding | 642,440 | 642,440 |
Effect of potential conversion of warrants | 5,585 | 5,585 |
Weighted average number of common shares outstanding for diluted earnings/(loss) per share |
648,025 |
648,025 |
Diluted earnings/(loss) per share (€) | 0.05 | (0.16) |
The convertible bonds issued by the Company, are excluded from the calculation of diluted earnings/(loss) per share for the periods ended 30 June 2014 and 2013 because of their anti-dilutive effect.
The average market value of the Company's shares for the purpose of calculating the dilutive effect of warrants and convertible loans was based on quoted market prices.
9. Investment property
30 June 2014 | 31 December 2013 | |
€'000 | €'000 | |
At beginning of period/year | 423,791 | 422,204 |
Direct acquisitions | 736 | 351 |
Transfers to property, plant and equipment (see note 10) | (2,423) | (7,232) |
Transfers to trading properties (see note 11) | - | (9,115) |
Direct disposals | (887) | (8) |
Exchange difference | 914 | (5,014) |
422,131 | 401,186 | |
Fair value adjustment | 8,766 | 22,605 |
At end of period/year | 430,897 | 423,791 |
10. Property, plant and equipment
Under construction | Land, buildings and other | Total | |
30 June 2014 | €'000 | €'000 | €'000 |
Cost or revalued amount | |||
At beginning of period | 8,180 | 156,114 | 164,294 |
Direct acquisitions of property, plant and equipment | 8,892 | 1,901 | 10,793 |
Transfers from investment property (see note 9) | - | 2,423 | 2,423 |
Capitalised depreciation | - | 95 | 95 |
Direct disposal of property, plant and equipment | - | (67) | (67) |
Exchange difference | 123 | 342 | 465 |
At end of period | 17,195 | 160,808 | 178,003 |
Depreciation and impairment losses | |||
At beginning of period | - | 20,690 | 20,690 |
Depreciation charge for the period | - | 1,405 | 1,405 |
Capitalised depreciation | - | 95 | 95 |
Direct disposal of property, plant and equipment | - | (25) | (25) |
Exchange difference | - | 27 | 27 |
At end of period | - | 22,192 | 22,192 |
Carrying amounts | 17,195 | 138,616 | 155,811 |
Under construction €'000 | Land, buildings and other €'000 |
Total €'000 | |
31 December 2013 | |||
Cost or revalued cost | |||
At beginning of year | 389 | 138,794 | 139,183 |
Direct acquisitions of property, plant and equipment | 7,808 | 17,797 | 25,605 |
Transfers from investment property (see note 9) | - | 7,232 | 7,232 |
Capitalised depreciation | - | 258 | 258 |
Direct disposal of property, plant and equipment | - | (7) | (7) |
Revaluation adjustment | - | (6,911) | (6,911) |
Exchange difference | (17) | (1,049) | (1,066) |
At end of year | 8,180 | 156,114 | 164,294 |
Depreciation and impairment losses | |||
At beginning of year | - | 20,511 | 20,511 |
Revaluation adjustment | - | (2,628) | (2,628) |
Depreciation charge for the year | - | 2,447 | 2,447 |
Capitalised depreciation | - | 258 | 258 |
Impairment loss | - | 342 | 342 |
Reversal of impairment loss | - | (117) | (117) |
Exchange difference | - | (123) | (123) |
At end of year | - | 20,690 | 20,690 |
Carrying amounts | 8,180 | 135,424 | 143,604 |
11. Trading properties
30 June 2014 | 31 December 2013 | |
€'000 | €'000 | |
At beginning of period/year | 64,524 | 38,732 |
Net direct (disposals)/additions | (4,773) | 16,869 |
Net transfers from investment property (see note 9) | - | 9,115 |
Disposals through disposal of subsidiary companies (see note 23) | (7,252) | - |
Impairment loss | (4,249) | (970) |
Reversal of impairment loss | - | 778 |
Exchange difference | 10 | - |
At end of period/year | 48,260 | 64,524 |
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.
30 June 2014 | 31 December 2013 | |
€'000 | €'000 | |
At beginning of year | 2,265 | - |
Additions | - | 1,944 |
Net change in fair value | (64) | 321 |
At end of period/year | 2,201 | 2,265 |
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 of the fair value hierarchy.
13. equity accounted investees
Single Purpose | Progressive | |||
Vehicle Five | Business | |||
DCI H2 | Limited ('SPV 5') | Advisors S.A. | Total | |
€'000 | €'000 | €'000 | €'000 | |
Balance at 1 January 2014 | 179,420 | 1,418 | 24 | 180,862 |
Additions | - | 1,116 | - | 1,116 |
Share of profits/(losses) | 43,234 | (347) | - | 42,887 |
Share of revaluation surplus | 17 | - | - | 17 |
Balance as at 30 June 2014 | 222,671 | 2,187 | 24 | 224,882 |
Balance at 1 January 2013 | 256,150 | 1,722 | 24 | 257,896 |
Share of losses | (76,935) | (304) | - | (77,239) |
Share of revaluation surplus | 205 | - | - | 205 |
Balance as at 31 December 2013 | 179,420 | 1,418 | 24 | 180,862 |
The details of the above investments are as follows:
Country of | Shareholding interest | |||
Name | incorporation | Principal activities | 30 June 2014 | 31 December 2013 |
DCI H2 | BVIs | Acquisition and holding of investments | 50% | 50% |
SPV 5 | Cyprus | Construction and management of resort | 25% | 25% |
Progressive Business Advisors S.A. | Greece | Provision of professional services | 20% | 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, increased by €43,251 thousand, compared to the decrease of €76,730 thousand during the year 2013. DCI H2's equity fluctuations for both periods relate to revaluation gains and losses on its property land bank. The decrease recognized in 2013 was principally driven by the reduction in value of the Venus Rock project, whose fair value has been adjusted to reflect the purchase price agreed with China Glory Investment Group ('CGIG'). Considering the fact that the agreement with CGIG was eventually terminated on 10 June 2014, the property of Venus Rock was revalued during the current period based on a valuation of independent professional valuers carried out with an effective date 31 March 2014.
The extended recession in Cyprus and the CGIC agreement terms not allowing the company to market its Venus Rock property, have rendered DCI H2 unable to service its bank loans. The company, however, has recently completed most bank loan restructurings, rescheduling its loan repayments over a longer period and significantly reducing its debt service obligations for 2015 and 2016. The company is also in final stage discussions aiming to reach an agreement to restructure its respective loan facilities with its major bank lender. DCI H2's bank loans are fully secured primarily with mortgages against immovable property of its subsidiaries. There are no floating charges or pledges of shares relating to these bank loans.
If the plans of divestiture of the Venus Rock project do not materialize, and DCI H2 does not secure funds from its subsidiaries and 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 an impact on the Company's investment in DCI H2.
As of 30 June 2014, Aristo, DCI H2's largest subsidiary, had a total of €2.4 million (31 December 2013: €2.4 million) contractual capital commitments on property, plant and equipment and a total of €46 million (31 December 2013: €45 million) bank guarantees arising in the ordinary course of 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 Group's bank loans.
SPV 5 had a total of €3 million (31 December 2013: €5.1 million) contractual capital commitments on property, plant and equipment.
Summary of financial information for equity accounted investees as at 30 June 2014 and 31 December 2013, not adjusted for the percentage of ownership held by the Group:
DCI H2 | SPV 5 | Progressive Business Advisors S.A. | Total | |
€'000 | €'000 | €'000 | €'000 | |
30 June 2014 | ||||
Current assets | 221,821 | 8,812 | 192 | 230,825 |
Non-current assets | 734,897 | 18,873 | 2 | 753,772 |
Total assets | 956,718 | 27,685 | 194 | 984,597 |
Current liabilities | 197,558 | 9,855 | 96 | 207,509 |
Non-current liabilities | 310,878 | 9,084 | - | 319,962 |
Total liabilities | 508,436 | 18,939 | 96 | 527,471 |
Revenues | 123,164 | - | - | 123,164 |
Expenses | (36,261) | (1,387) | - | (37,648) |
Profit/(loss) | 86,903 | (1,387) | - | 85,516 |
31 December 2013 | ||||
Current assets | 222,170 | 10,099 | 192 | 232,461 |
Non-current assets | 630,273 | 11,400 | 2 | 641,675 |
Total assets | 852,443 | 21,499 | 194 | 874,136 |
Current liabilities | 186,022 | 10,571 | 96 | 196,689 |
Non-current liabilities | 305,076 | 1,007 | - | 306,083 |
Total liabilities | 491,098 | 11,578 | 96 | 502,772 |
Revenues | 29,786 | - | 455 | 30,241 |
Expenses | (184,429) | (1,217) | (454) | (186,100) |
(Loss)/profit | (154,643) | (1,217) | 1 | (155,859) |
14. RECEIVABLES AND OTHER ASSETS
30 June 2014 | 31 December 2013 | |
€'000 | €'000 | |
Trade receivables | 237 | 339 |
Amount receivable from Archimedia Holdings Corp. ('Archimedia')(see note 22.4) | 1,516 | 1,509 |
VAT receivables | 7,105 | 7,676 |
Other receivables | 15,372 | 11,032 |
Total trade and other receivables | 24,230 | 20,556 |
Prepayments and other assets | 5,352 | 8,400 |
Total | 29,582 | 28,956 |
15. Cash and cash equivalents
30 June 2014 | 31 December 2013 | |
€'000 | €'000 | |
Bank balances | 8,119 | 7,075 |
Cash in hand | 26 | 25 |
Total | 8,145 | 7,100 |
The Group during the period had no fixed deposits. The average interest rate on the fixed deposit balances for the year ended 31 December 2013 was 0.495%.
16. CAPITAL AND RESERVES
Capital
Authorised share capital
30 June 2014 | 31 December 2013 | ||||
'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 2013 and 30 June 2014 | 642,440 | 6,424 | 498,933 |
Warrants
In December 2011, the Company raised €8,500,000 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 0.317 per share, subject to anti-dilution adjustments pursuant to the warrant's terms and conditions-initial price of GBP0.35 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 | ||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | ||||
Loans in euro | 73,919 | 76,390 | 12,816 | 11,619 | 33,257 | 32,550 | 27,846 | 32,221 | |||
Loans in United States dollars | 13,057 | 10,982 | 2,394 | 1,902 | 9,036 | 7,760 | 1,627 | 1,320 | |||
Bank overdrafts in euro | 2,239 | 2,239 | 2,239 | 2,239 | - | - | - | - | |||
Bank overdrafts in United States dollars | 61 | - | 61 | - | - | - | - | - | |||
Convertible bonds payable in euro | 50,000 | 50,000 | - | - | 50,000 | 50,000 | - | - | |||
Convertible bonds payable in United States dollars | 29,477 | 29,193 | - | - | 29,477 | 29,193 | - | - | |||
Total | 168,753 | 168,804 | 17,510 | 15,760 | 121,770 | 119,503 | 29,473 | 33,541 |
1 January 2014 | New issues | Capital repayments | Interest paid | Other movements | 30 June 2014 | |
€'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
Loans in euro | 76,390 | - | (2,974) | (2,087) | 2,590 | 73,919 |
Loans in United States dollars | 10,982 | 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 €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 initial conversion price is €0.5737 (representing GBP 0.50 per share converted into euro at the fixed exchange rate of GBP1.00:€1.1474) 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 €41,004 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 €0.01 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 | ||
€'000 | €'000 | €'000 | €'000 | €'000 | €'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 | ||
€'000 | €'000 | €'000 | €'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 | ||
€'000 | €'000 | €'000 | €'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 | |
€'000 | €'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 (€) | 552,317 | 523,672 |
Number of common shares outstanding at end of period/year | 642,440 | 642,440 |
NAV per share (€) | 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 €2,050 thousand par value that may be converted prior to maturity into 3,573,296 common Company shares of €0.01 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:
• €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 2014 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 at its request for services or advice.
Management fees for the six-month periods ended 30 June 2014 and 30 June 2013, amounted to €6,858 thousand and €6,890 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 €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 has not 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 €7.6 million, as compared to the base reduction of €167 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 €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 2014 and 30 June 2013. As at 30 June 2014 and 31 December 2013, funds held in escrow, including accrued interest, amounted to €467 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 | |
€'000 | €'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 €4.4 million payable in three installments: €2.4 million by 10th of September 2013, €1 million by 30th of September 2013 and €1 million by 31st of October 2013. The last installment of €1 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 €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.
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 €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 has already received US$12,422 thousand and €1,300 thousand, while US$978 thousand and €800 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 €1,516 thousand (31 December 2013: €1,509 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 €904 thousand (€263 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 €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 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 €3.15 million, that will increase depending on the size of the loan facility obtained, the returns realised and the final construction cost. An amount of €1.23 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 (€503 thousand) (31 December 2013: US$0.7 million or €498 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 | €'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 2013 Related party name | €'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. | |||
€'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 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 €13,076 thousand contractual capital commitments on property, plant and equipment (31 December 2013: €16,499 thousand).
Non-cancellable operating lease rentals are payable as follows:
30 June 2014 | 31 December 2013 | |
€'000 | €'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 €60 million (31 December 2013: €48 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 €40,400,000 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 €10 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 €26 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 €10.486 million (including interest) to Archimedia.
Related Shares:
Dci Advisors