6 Feb 2012 07:00
Announcement 6 February 2012 CUBUS LUX plc ("Cubus Lux" or the "Company") Final Results for the Year Ended 31 March 2011
Cubus Lux plc, the operator and developer of tourism and leisure facilities in Croatia, announces its results for the year ended 31 March 2011.
HIGHLIGHTS
* Group continues progress with its strategy of creating value in
leisure-related and general real estate projects in Croatia, Montenegro and
neighbouring regions
* Discussions are ongoing on financing options, including partnerships, for
specific projects
* Completion of Molatska residential/commercial real estate development in
Zadar * The Group's Casino activities have ceased * Revenues of £1.02 million (2010 - £1.48 million) * Exceptional charges £33.4 million (2010 - £0.8 million) * Payment conditions breached in Olive Island land purchase resulting in cancellation of contract and disposal of the intangible asset i.e.
development rights. Project expected to be retrievable subject to financing
* Total Post-tax loss, after exceptional charges, of £30.3 million (2010 -
post-tax loss £3.6 million)
* Net loss per share for continuing operations of 133.95p (2010 - loss per
share of 18.08p)
* Net loss per share for discontinued operations of 0.51p (2010 - loss per
share of 0.91p)
* £956,000 additional equity raised during the year
Commenting on the results, executive chairman, Dr. Gerhard Huber said:
"The recent political environment created conditions which again continued tochallenge us in securing necessary finance. As a consequence, we were unable tomeet obligations to pay the instalments required for the Company to acquire theOlive Island land. We have therefore recognised a loss on disposal of the OliveIsland intangible assets, `rights of development', through an exceptionalcharge. However, the Board remains committed to the development and we intendto re-acquire the rights of development to the Olive Island deal subject tofinancing.We have several financing options in respect of our major projects undernegotiation. We expect to finalise at least one of these in the coming months.In the intervening period and in the event that financing is further delayed wewill undertake contingency plans to streamline the Company to guarantee ourcontinued operation.In addition, we are reviewing participations in other businesses and revenuestreams, some of which are outside the tourism industry, and we look forward toproviding appropriate updates in due course."
A copy of the report and accounts, together with the notice convening the Annual General Meeting, which is to be held on 12 March 2012, has today been posted to shareholders and is available on the Company's website, www.cubuslux.com.
For further information about the Company please see www.cubuslux.com orcontact:Cubus Lux PLC Steve McCann, CFO +44 (0) 7787 183 184 Northland Capital Luke Cairns/Rod Venables +44 (0) 20 7796 8800 Partners Limited (Nominated Adviser) Keith, Bayley, Simon Frost/David Coffman +44 (0) 203 100 8300 Rogers & Co Limited (Broker) CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 MARCH 2011
I am pleased to present the results for the year ended 31 March 2011
Overview
The Group has continued to explore new leisure related project opportunities inCroatia and Montenegro to further our vision of becoming the number one leisureand tourism company in this region. However, the main focus this last year hasbeen on securing finance for the large projects already won at tender.There were signs of some easing in the credit markets during 2011 although mostbanks are still showing some reluctance to lend. Despite this, the Board hasadvanced in the financing options being negotiated and is now more confident tobe able to secure, in the short term, the necessary finance for the majorprojects being considered. We are in discussion with a number of lenders andpotential partners and are currently negotiating alternatives and reviewingrespective borrowing conditions. If received, these loans would benefit alloperations, allow us to fund our main projects and to pursue further expansionplans. The current situation is that project development funds althoughexpected, have not been received. As a result, we have not been able to fulfilpayment conditions in the Olive Island land purchase contract causing a breachby the Group. We are still able to, and very much intend to, close the landpurchase deal as soon as these funds are available and take maximum benefitfrom the project.
Because of breaches in contracts we have recognised the disposal of the intangible assets in respect of the Olive Island Resort and Hotel and Hotel Sutomiscica as discussed further below. This has resulted in a loss on disposal of £33,721,000.
Cubus Lux d.o.o. - the gaming company
As previously advised, the existing casino company has suffered economicallylargely due to the activities in relation to the modernisation of the hotel.Consequently, we closed the casino in Pula in June 2011.
Plava Vala d.o.o. - the marina company
Our main operating company in this year has been our marina. We continue toconsider the marina business to be an integral element in our future strategyand in this respect we have been considering taking a partner with like-mindedgoals.
In addition, in the short term, until our financial goals are achieved, we would still consider disposal opportunities.
Real estate
Our Molatska development is now completed. The parcelisation of the apartmentsis currently being finalised in the Croatian courts. Following this completion,the apartments can be sold as freehold units. We have sold our remaining shareof the project company and will be paid from apartment sales. We have furtherreduced the carrying value of our receivable with respect to this debt fromGortan Zadar d.o.o. by £110,000 to cover potential selling expenses andtransfer tax.We have a second development at the resort of Borik in Zadar, Croatia. This isof a similar design to our Molatska development but is close to the coast,within the tourist area rather than a city location. We have to date paid adeposit for the land of £675,000. With the required funding, this Borik projectis expected to be profitable, however, in the absence of the required fundingwe have prudently written down our initial investment to £nil.
The completion of the two main projects won at tender, Olive Island Resort and our Valdanos project, still remain a primary focus for us but credit market conditions remain difficult for large-scale projects such as ours.
Our initial contract to acquire the land for the Olive Island Resort has nowlapsed by virtue of a breach in the purchase agreement, following our inabilityto pay the final instalments. The current situation is that the Municipality,Opcina Preko, is under obligation to repay deposits so far expended of €1.25million. As a result of the breach, the Group no longer has rights over theoriginal intangible asset acquired on the acquisition of Duboko PlavetniloUgljan Projektant d.o.o. and Duboko Plavetnilo Hoteli d.o.o.. The Group is,however, continuing negotiations with Opcina Preko and we expect to completethe deal outside of the original contract. The Group has reflected the loss ofthe `Rights of Development' as a disposal of Intangible Assets. If the Groupdoes finally acquire the land and complete the Olive Island Resort as isplanned, the Group would retain the full profits of the project. If theIntangibles had continued to be carried at full value, the Group would have, inany case, amortised the Intangibles as the developed real estate is sold,therefore the Group does not consider there to be any long term detriment tothis treatment.Financial
For the year ended 31 March 2011, the Group reports revenue of £1,016,000 (2010: £1,480,000) and an operating loss for continuing operations, of £35,572,000 (2010: £1,991,000) after exceptional charges of £33,448,000 (2010: £837,000)
The Group has been negotiating various loan agreements but has still notcompleted any. Because of breaches in contracts the Group has recognised thedisposal of the intangible assets relating to its principal two developments,resulting in a loss on disposal of £33,721,000. Offsetting this, because ofunfulfilled terms by the seller, the Group has derecognised the deferredconsideration liabilities of £1,011,000 in respect of the acquisition of TihaUvala d.o.o. In addition to a reduction in goodwill for Adriatic DevelopmentLLC and Cubus Lux Projektiranje d.o.o., this gives a total exceptional cost of£33,448,000.An external net interest charge of £432,000 (2010: £479,000), loan noteinterest charge of £939,000 (2010: £923,000) and tax credit of £6,744,000(2010: £2,000) give an overall loss on continuing operations for the year of £30,199,000 (2010: £3,395,000). In addition, our discontinued operationsresulted in a loss of £115,000 (2010: £170,000) giving an overall company lossfrom ordinary activities of £30,314,000 (2010: £ 3,565,000). Loss per share oncontinuing operations, including the exceptional loss, amounted to 133.95p(2010: 18.08p loss per share). In addition, loss per share on discontinuedoperations was 0.51p (2010: 0.91p loss per share)The Company issued a further 5,623,311 ordinary shares at 14p per share and56,158 ordinary shares at 17.5p per share during the year. In addition,warrants of 1,122,813 ordinary shares, exercisable at the nominal value of 10p,in respect of the acquisition of Duboko Plavetnilo Hoteli d.o.o. in 2008, havenow been exercised.Plans for the futureDespite setbacks, we are committed to re-acquiring the Rights of Development toOlive Island and advancing the development of Valdanos at the earliestopportunity. If we do secure the required funding, we will implement a plan forthe completion of the development of these resort projects. Furthermore, we arereviewing other opportunities, some of which are outside the tourism industry.GERHARD HUBERChairmanExecutive Director
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2011
2011 2010 £'000 £'000 Continuing operations Revenue 1,016 1,480 Cost of sales (100) (160) Gross Profit 916 1,320 Administrative expenses (3,040) (2,474) - Exceptional charges (33,448) (837) Operating loss (35,572) (1,991) Net finance expenditure (1,371) (1,402) Loss on ordinary activities (36,943) (3,393)before tax Tax on ordinary activities 6,744 (2) Loss on ordinary activities (30,199) (3,395)after tax Discontinued operations Loss for the year from discontinued (115) (170)operations Loss on ordinary activities (30,314) (3,565)for the year
Exchange differences on translation of 117
(25)overseas operations Total comprehensive loss for (30,197) (3,590)the year Loss for the year attributable to: Equity holders of the Company (30,314) (3,569) Minority interest - 4 (30,314) (3,565)
LOSS PER SHARE - Continuing operations
Basic (133.95)p (18.08)p Diluted (133.95)p (18.08)p
LOSS PER SHARE - Discontinued operations
Basic (0.51)p (0.91)p Diluted (0.51)p (0.91)p CONSOLIDATED BALANCE SHEETAT 31 MARCH 2011ASSETS 2011 2010 £'000 £'000 Non-current assets Intangible assets 5,372 39,093 Goodwill - 738 Property, plant and equipment 4,309 4,780 9,681 44,611 Current assets Inventories 3,983 8,252 Trade and other receivables 1,190 660 Cash at bank 2,165 2,675 7,338 11,587 TOTAL ASSETS 17,019 56,198 EQUITY
Equity attributable to the owners of the
parent Called up share capital 2,608 1,928 Share premium account 17,411 17,135 Merger reserve 347 347 Retained earnings (32,456) (2,345) TOTAL EQUITY (12,090) 17,065 MINORITY INTEREST IN EQUITY - 237 LIABILITIES Non-current liabilities Deferred consideration - 416 Deferred tax liabilities 1,074 7,818 Loans 3,350 2,615 4,424 10,849 Current liabilities Trade and other payables 5,956 6,216 Loans 18,729 21,831 24,685 28,047 TOTAL LIABILITIES 29,109 38,896 TOTAL EQUITY AND LIABILITIES 17,019 56,198
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2011
2011 2010 £'000 £'000
Cash flows from operating activities
Loss after taxation (30,314) (3,565) Adjustments for: Net finance income 1,371 1,402 Tax (credit)/charge (6,744) 2 Write down in inventories 675 -
Profit on disposal of fixed assets -
60 Exchange rate differences 88 (242) Share based payments 86 276 Depreciation 322 359
Loss on disposal of intangible assets 33,721
- Impairment of goodwill 738 837
Movement in trade and other receivables (530)
50 Movement in inventories 3,594 (1,887) Movement in trade and other payables (1,094) 1,101 Disposal of subsidiary (2,890) - Cash outflow from operating activities (977) (1,607) Interest paid - net (155) (434) Net cash outflow from operating activities (1,132)
(2,041)
Cash flows from investing activities Purchase of property, plant and equipment (17) (122)and intangibles
Proceeds from sale of property 34
-
Cash inflow/(outflow) from financing 17 (122)activities
Cash flows from financing activities
Issue of shares 872 268
Capital element of finance lease repaid -
(22)
Net loans undertaken less repayments (307)
1,328
Cash inflow from financing activities 565
1,574
Net cash (outflow)/inflow from all (550) (589)activities Cash and cash equivalents at beginning of 2,675 3,365period Non-cash movement arising on foreign 40 (101)currency translation Cash and cash equivalents at end of period 2,165
2,675
Cash and cash equivalents comprise
Cash and cash equivalents 2,165 2,675
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2011
Total attributable to equity Share Share Merger Retained Translation holders of Minority capital Premium reserve earnings Reserve the company
Interests Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2009 1,790 17,005 347 1,691 (718) 20,115 233 20,348 Share based - - - 276 - 276 - 276payments Total comprehensive loss for the - - - (3,569) (25) (3,594) 4 (3,590)year Issue of shares (net of costs) 138 130 - - - 268 - 268 At 31 March 1,928 17,135 347 (1,602) (743) 17,065 237 17,3022010 Share based - - - 86 - 86 - 86payments Total comprehensive loss for the - - - (30,314) 117 (30,197) (237) (30,434)year Issue of shares (net of costs) 680 276 - - - 956 - 956 At 31 March 2,608 17,411 347 (31,830) (626) (12,090) - (12,090)2011
The financial information in this announcement does not comprise statutory accounts for the purpose of Section 435 of the Companies Act 2006 for the years ended 31 March 2010 and 2011. It has been extracted from the Company's consolidated accounts for the period to 31 March 2011.
The statutory accounts for the year ended 31 March 2010 have been delivered tothe Registrar of Companies and included an audit report which was unqualified,did not contain statements under Sections 498(2) or (3) of the Companies Act2006 but did contain an emphasis of matter in relation to Going Concern. Thestatutory accounts for the year ended 31 March 2011 will be delivered to theRegistrar of Companies in due course.
The auditors' report on the 2011 financial statements, whilst unqualified, contains the following emphasis of matter in relation to Going Concern:
"In forming our opinion on the financial statements, which is not modified, wehave considered the adequacy of the disclosure made in note 1 to the financialstatements concerning the Company's ability to continue as a going concern. TheGroup incurred a net loss of £30,314,000 during the year ended 31 March 2011and at the year end the Group's current liabilities exceed its current assetsby £17,347,000. This along with the other matters explained within theaccounting policies, indicates the existence of a material uncertainty whichmay cast significant doubt about the Group's ability to continue as a goingconcern. The financial statements do not include the adjustments that wouldresult if the Group was unable to continue as a going concern."
EXTRACT FROM THE NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of Preparation
These financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (January 2012). The policies set out below have been consistently applied to all the years presented.
The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of revenues and expenses during the period. Although theseestimates are based on management's best knowledge of the amount, event oractions, actual results ultimately may differ from those estimates.
These consolidated financial statements have been prepared under the historical cost convention. No separate income statement is presented for the parent company as provided by Section 408, Companies Act 2006.
Going concern
The Group has a tight control on expenditure, is running lean operations but isstill committed to exploring and developing essential profitable growth sectorsand has been striving to improve the cash position. The summer season wasprofitable although the continuing recession did have an impact on numbers oftourists in the city and potential day trippers to our facilities. In addition,the Company has issued equity in the late summer months to raise funds to keepexisting and new projects running. A total of 4,628,448 ordinary shares wereissued at prices ranging between 10.5p and 12p per share. Despite this, thereare still concerns over meeting future liabilities.The Executive Directors are working continually to obtain the necessary loanfinance for the larger projects, in particular for Olive Island Resort andValdanos. The Ugljan Island Municipality, as existing land owner for ourresort, remains very encouraged by the progress being made by the Company andthe State of Croatia are aware of our efforts and are very encouraging also.The Directors are in continued dialogue with these parties and are maintaininggood and positive relations. The Directors are satisfied that sufficientfunding to fully finance all current projects will be available.The Directors have agreed a loan that would satisfy the construction costs ofnot only Olive Island Resort and Hotel but Hotel Sutomiscica also. Despite theDirectors confidence that the agreed loans will be received in good time tocontinue with the projects there is uncertainty over the specific timing. As aconsequence, as the terms of the loan are specific to the intangible assetvaluations, any uncertainty in the loans used in this valuation would createuncertainty in the balance sheet. The Directors are negotiating alternativeloans and project partnerships.In addition to the receipt of the aforementioned corporate loans, the Companymaintains contingency plans which include negotiations to sell the Olive Islandmarina if necessary. The Company has interest from prospective investors onboth a 100% purchase and 50% partnership alternative. In addition, the Companyhas sold its share of the Molatska residential development project for €900,000. This money will be realised from the early sales of completedapartments. Furthermore, loan note holders of the €13,000,000 loan notes haveconfirmed that they will not seek repayment from the Company unless the Grouphas sufficient funds to do so and continue trading and the Directors havenegotiated an extension to 31 December 2012 with the remaining loan noteholders.
In addition to the focus on leisure and tourism, the Company is also negotiating opportunities to diversify into other fields and is currently pursuing a deal that would financially support the Company further going forward.
Given the uncertainty over the future funding the Directors recognise thatthere is a material uncertainty that casts significant doubt over the Group'sability to operate as a going concern. The financial statements do not containthe adjustments that would be necessary if the Group was unable to continue asa going concern. Such adjustments would include presenting assets at theirrecoverable amounts which would be likely to result in further provisions tothe current carrying amounts in the financial statements and to providing forfurther liabilities that might arise on a break up basis of preparation.
Basis of Consolidation
On 20 May 2004, the Company purchased 100% of the issued share capital of CubusLux d.o.o., a company registered in the Commercial Court in Rijeka, Croatia, byway of a share for share exchange. Merger accounting was adopted as the basisof consolidation.
On 6 March 2006, the Company purchased 100% of the issued share capital of Plava Vala d.o.o., a company registered in Croatia, by way of a share for share exchange. The results of the companies have been consolidated using the purchase method.
On 22 February 2008, the Company purchased 100% of the issued share capital ofDuboko Plavetnilo Ugljan Projektant d.o.o. and Duboko Plavetnilo Hoteli d.o.o.,two companies registered in Croatia, by way of a share for share exchange andthe issue of Cubus Lux Plc loan notes. The results have been consolidated usingthe purchase method.
On 17 March 2008, the Company purchased 100% of the issued share capital of Adriatic Development LLC and Worldwide Leisure Holding LLC, two companies registered in the U.S. The results have been consolidated using the purchase method.
On 30 May 2008, the Company purchased 100% of the issued share capital of Deep Blue Developments Liegenschaftserschliessungs GmbH, a company registered in Austria. The results have been consolidated using the purchase method.
On 30 September 2008, the Company purchased 100% of the issued share capital of Tiha Uvala d.o.o., a company registered in Croatia. The results have been consolidated using the purchase method. In 2010 the company that sold Tiha Uvala d.o.o. was declared bankrupt preventing it from finalising tender conditions to acquire the land rights and therefore the Company has derecognised the deferred consideration that remained outstanding as these amounts are no longer considered to be due.
On 1 March 2010, the Company acquired 50% of the issued share capital of CubusLux Projektiranje d.o.o., a company registered in Croatia. The Company has thepower to exercise control over the entity's financial operating policies and assuch it has been treated as a subsidiary and consolidated using the purchasemethod.
Group accounts consolidate the accounts of the Company and its subsidiary undertakings made up to 31 March 2011. All intercompany balances and transactions have been eliminated in full. Subsidiary undertakings are accounted for from the effective date of acquisition until the effective date of disposal.
2. EARNINGS PER SHARE The loss per share of continuing operations of 133.95p (2010 loss 18.08p) hasbeen calculated on the weighted average number of ordinary shares in issueduring the year, namely 22,545,720 (year ended 31 March 2010: 18,773,207) andlosses of £30,199,000 (year ended 31 March 2010: loss £3,395,000).The loss per share of discontinued operations of 0.51p (2010: loss 0.91p) hasbeen calculated on the weighted average number of ordinary shares in issueduring the year, namely 22,545,720 (year ended 31 March 2010:18,773,207) andlosses of £115,000 (year ended 31 March 2010: loss £170,000).The calculation of diluted losses per share on continuing operations of 133.95p(year ended 31 March 2010: loss 18.08p) and calculation of diluted losses pershare on discontinued operations of 0.51p (year ended 31 March 2010: loss0.91p) are based on the loss on ordinary activities after taxation and theweighted average of 22,545,720 ordinary shares (year ended 31 March 2010:18,773,207). For a loss making group with outstanding share options, net lossper share would only be increased by the exercise of out-of-the money options.Since it is inappropriate to assume that option holders would act irrationallyno adjustment has been made to dilute EPS for out-of-the-money share options. 3. EXCEPTIONAL ITEMS 2011 2010 £'000 £'000 Impairment of goodwill 738 837
Loss on disposal of intangible assets 33,721
-
De-recognition of deferred consideration (1,011)
-liability 33,448 837 Analysis of the loss on disposal in respect of the carrying value of IntangibleAssets: 2011 2010 £'000 £'000 Hotel Sutomiscica 3,191 Olive Island Resort 26,503 - Olive Island Hotel 4,027 33,721 - NOTES FOR EDITORS
CUBUS LUX plc - AIM ticker: CBX; Frankfurt ticker: FWK
Originally a casino operator in Croatia, Cubus Lux has changed its strategicfocus to a more broad-based leisure and tourist operation. It is now activelyinvolved in the development and operation of marinas, tourist resorts andhotels.The Company aims to become the leading provider of leisure and tourismfacilities in Croatia and to participate fully in the development of the northwestern Mediterranean region. Croatia will be admitted as a member of the EU in2013.Currently, Cubus Lux operates a 200+berth marina at Sutomi¡Ä‡ica, on the islandof Ugljan (more commonly referred to as Olive Island). Subject to thecompletion of the acquisition of the land at Olive Island and the securing ofthe required development funding, the management of Cubus Lux expect tocommence development of its hotel and resort on the Island. The development ofthese projects involves a 500-bed 4-star hotel and the provision of 431 villasand apartments, with accompanying shops, restaurants and bars.
Cubus Lux is currently negotiating the provision of loan funding for its projects and reviewing other opportunities, some of which are outside the tourism industry