22 Dec 2010 07:00
Cubus Lux plc (the "Company") Half-yearly Report for the six months to 30 September 2010
Cubus Lux plc, the operator and developer of premier tourism and leisure facilities in Croatia and Montenegro, announces its results for the half year ended 30 September 2010.
KEY HIGHLIGHTS
* Negotiations on financing options for projects at an advanced stage and new
financing opportunities becoming offered. * Montenegrin Parliament has approved the detailed plan for the Valdanos resort subject to contract. * Casino business to be disposed of to focus on managed resorts and other leisure related tourism facilities.
* Preparation of contingency plans to ensure, in the absence of funding, that
the Company remains in a secure financial position. * Revenues of £679,000 (2009 - £965,000) * Pre-tax loss of £1.4 million (2009 - pre-tax loss £0.6 million) * Net loss per share of 7.11p (2009 - loss per share of 3.2p) * £646,000 additional equity raised during the year.
Commenting on the results, executive chairman Dr. Gerhard Huber said;
"With the combination of Croatian's progress towards EU membership and thefocussed emphasis by the Government to push forward with projects involvinghigh quality leisure facilities that will extend the tourism season, Cubus Lux,after ten years of development and operation in Croatia, appears to have firstmover opportunities for new projects.The financial and credit markets show some improvement but overall still remainat a slower pace to 2008 which is giving us challenges in securing necessaryfinance. However, the Board remains committed to its vision of becoming thenumber one leisure and tourism company in this region.We are negotiating on several financing options and would hope for at least oneof these to be finalised early in the New Year. In the event that financing isdelayed we have contingency plans to streamline the Company and to maintain ahealthy liquidity which will guarantee our continued operation in the meantime.We look forward to providing appropriate updates in due course."
For further information about the Company and the complete interim report please see www.cubuslux.com or contact:
Cubus Lux plc Steve McCann +44 (0) 7787 183 184 Northland Capital Luke Cairns and Rod Venables +44 (0) 20 7492 4750Partners Ltd Hybridan LLP (Broker) Claire Louise Noyce +44 (0) 20 7947 4350CHAIRMAN'S STATEMENT
REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
I am pleased to present the results for the six months ended 30 September 2010
Overview
The Company continues 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. We are engaged in the development ofnumerous projects but, as we have commented previously, all are subject tofinancing.The Company has advanced in its discussions with a number of parties to providethe funding that will allow the Company to progress its various projects.Whilst the directors remain optimistic of finalising one or more of these, todate, none have yet come to fruition.The Company currently has term sheets for financing from, the equivalent of, €100,000,000 to €200,000,000 although there can be no guarantee that these willbe formalised. In the absence of the necessary funding in the near term thedirectors are considering a number of alternative options to ensure that theCompany remains liquid as funding continues to be sought.Although our main focus is Olive Island Resort and the funding, we have madeconsiderable progress on Valdanos and the marina expansion programme. TheMontenegrin Parliament, at the end of November 2010, finally approved theDetailed Plan for Valdanos and we have now been invited to sign the PurchaseAgreement which we expect to do shortly after the New Year. In addition, we arevery close to agreeing terms on two of our marina targets.
Cubus Lux d.o.o. - the gaming company
The casino is largely dependent on the local trade and Italian tourists. Aspreviously reported, the numbers of Italian tourists visiting Croatia this yearhave been much lower than in previous years and, in addition, the trade at theHotel housing the casino has not yet recovered to the levels achieved prior tothe start of the Hotel's refurbishment. As a result, trading during the summerproved quite disappointing and resulted in a loss. The Company has thereforedecided to refurbish the casino with a view to the disposal of the gamingbusiness, which would enable the Company's management to concentrate on resortmanagement and real estate projects.
Plava Vala d.o.o. - the marina company
As previously outlined, our goal is to have a string of marinas, with somelevel of real estate development, connecting our principle resorts. We havemade good progress in identifying further marinas that would both enhance ourbusiness but also meet the Croatian Government's objective of extending thetourism season through top quality leisure facilities. However, all are subjectto having sufficient funds to acquire and develop them and as such the Companyis currently restricted as to how far it can advance these plans. We would lookto finance the expansion through our own sources but would also considerinvolving a partner as appropriate.As previously announced, we have also been assessing the viability ofincreasing the number of berths at our current marina at Sutomiscica but thisexpansion is restricted to our cash resources. As highlighted above, in theabsence of third party funding, the Company is reviewing its own asset base andits ability to realise some value and, in respect of our overall strategy, weare reviewing possible disposal opportunities for the marina at Sutomiscica.
Real estate
Our Molatska development is progressing well and on course for completion byMay 2011. As previously reported we have reduced the book value to a pre-agreeddisposal price should we leave this project before completion, which we wouldhave to do in the absence of funding. As a result of the initial delayed startof construction, the Hypo Alpe Adria Bank loan which was originally due forrepayment 1 October 2010 has been extended to 31 December 2011. This will allowthe final draw-downs and enable the project to be fully completed.Although credit market conditions do still remain difficult for large-scaleprojects such as ours we are more confident that we will be able very soon toclose the purchase contract in respect of Olive Island Resort, our primaryfocus. In the event that appropriate funding is not secured then the directorswould release the Company's interest in the Project and pursue the Municipalityfor deposits currently paid which amount to €1.7m. The Company needsapproximately €70m to complete the land purchase and phase one development forthe Olive Island Resort and Hotel.Our Valdanos project is now approved, subject to signing the purchase agreementand we can focus further on its development and financing (full developmentcosts would be in the region of €135m) and a further announcement will be
madewhen the agreement is signed.Financial
For the six months ended 30 September 2010 the Company reports revenue of £ 679,000 and a pre tax loss of £1,411,000.
Loss per share amounted to 7.11p
The Company issued a further 4,620,319 new ordinary shares at 14p during the half year.
Plans for the futureAs the first of our `resort' projects, we continue to focus on the `OliveIsland' project as our main objective. This will set the standard for Cubus Luxand assist in fulfilling our vision and continuing strategy in the leisure andtourism industry of Croatia and Montenegro. This resort together with theaccompanying real estate programme will provide a very strong foundation forthe Group's future development.
Overall, the board believes it is getting ever closer to obtaining the necessary and significant funding to finance our various existing and prospective projects whilst running alternative contingency plans which would ensure, in the absence of funding, that the Company remains in a secure financial position.
GERHARD HUBERChairmanExecutive DirectorGROUP INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Six months to Six months to Year ended 30 September 30 September 31 March 2010 2009 2010 Unaudited Unaudited Audited Note £'000 £'000 £'000 REVENUE 2 679 965 1,480 Cost of sales (68) (106) (160) ------------- ------------- ------------- GROSS PROFIT 611 859 1,320 Administrative expenses (1,377) (827) (2,844) Other (expenses)/income 4 (27) 190 (637) ------------- ------------- ------------- OPERATING (LOSS)/PROFIT (793) 222 (2,161) Net finance expense (618) (821) (1,402) -------------- -------------- ------------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,411) (599) (3,563) Tax on ordinary activities 3 - (3) (2) ------------- ------------- ------------- LOSS FOR THE PERIOD (1,411) (602) (3,565) Exchange difference on translation of overseas operations 147 (101) (25) ------------- ------------- ------------- TOTAL COMPREHENSIVE LOSS FOR PERIOD/YEAR (1,264) (703) (3,590) ====== ====== ====== ATTRIBUTABLE TO: Equity holders of the Company (1,379) (585) (3,569) Minority interest (32) (17) 4 ------------- ------------- ------------- (1,411) (602) (3,565) ====== ====== ====== EARNINGS PER SHARE Basic and diluted 5 (7.11)p (3.2)p (18.99)p ====== ====== ======GROUP BALANCE SHEETAT 30 SEPTEMBER 2010 As at 30 As at 30 As at 31 September 2010 September March 2009 2010 Unaudited Unaudited Audited £'000 £'000 £'000 Non-current assets Intangible assets 39,093 39,093 39,093 Goodwill 738 1,576 738 Property, plant and equipment 4,454 5,077 4,780 -------------- -------------- -------------- 44,285 45,746 44,611 -------------- -------------- -------------- Current Assets Inventories 10,592 5,725 8,252 Trade and other receivables 966 974 660 Cash at bank 2,592 2,782 2,675 --------------- ------------- --------------- 14,150 9,481 11,587 --------------- --------------- --------------- TOTAL ASSETS 58,435 55,227 56,198 ======= ======= ======= EQUITY
Capital and reserves attributable to
the Company's equity shareholders Called up share capital 2,390 1,892 1,928 Share premium account 17,320 17,114 17,135 Merger reserve 347 347 347
Retained earnings and translation (3,532) 265
(2,345)reserves --------------- ------------- -------------- TOTAL EQUITY 16,525 19,618 17,065 -------------- -------------- -------------- MINORITY INTEREST IN EQUITY 205 216 237 -------------- -------------- -------------- LIABILITIES Non-current liabilities Deferred consideration 416 416 416 Deferred tax liabilities 7,818 7,818 7,818 Loans 4,356 7,047 2,615 -------------- -------------- ------------- 12,590 15,281 10,849 --------------- -------------- ------------- Current liabilities
Trade and other payables and deferred 7,772 3,712
6,216income Loans 21,343 16,396 21,831
Amounts due under finance leases - 4
- -------------- ------------- -------------- 29,115 20,112 28,047 --------------- -------------- -------------- TOTAL LIABILITIES 41,705 35,393 38,896 -------------- -------------- ---------------- TOTAL EQUITY AND LIABILITIES 58,435 55,227 56,198 ======= ======= ======== GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Six months to Six months to Year ended 30 September 30 September 31 March 2010 2009 2010 Unaudited Unaudited Audited £'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit before taxation (793) 222 (2,161) Adjustments for: Exchange rate difference (176) (202) (242) Share based payments 45 28 276 Depreciation and amortisation 163 178 359
Adjustment to deferred consideration 27 (190)
-
Profit on disposal of fixed assets - -
60 Impairment of goodwill - - 837 Movement in trade and other (304) (265) 50receivables Movement in inventories (2,505) (1,165) (1,887)
Movement in trade and other payables 1,525 46
1,101 -------------- -------------- ---------------
Cash flow from operating activities (2,018) (1,348)
(1,607)
Interest (paid)/received - net - (456)
(434) Taxation paid - (3) - -------------- -------------- ---------------
Net cash outflow from operating (2,018) (1,807)
(2,041)activities -------------- -------------- ---------------
Cash flow from investing activities Purchase of property, plant and (8) (67)
(122)equipment and intangibles
Proceeds from sale of property - 20
- -------------- -------------- ---------------
Net cash outflow from investing (8) (47)
(122)activities -------------- -------------- ---------------
Cash flows from financing activities
Issue of shares 646 211 268
Capital element of finance lease - (18)
(22)repaid
Net loans undertaken less repayments 1,326 1,090
1,328 -------------- -------------- --------------- Cash inflow from financing 1,972 1,283 1,574activities -------------- -------------- --------------- Cash and cash equivalents at 2,675 3,365 3,365beginning of period
Net cash outflow from all activities (54) (571)
(589)
Non-cash movement arising on foreign (29) (12)
(101)currency translation --------------- --------------- ---------------
Cash and cash equivalents at end of 2,592 2,782
2,675period ======= ======= ======
Cash and cash equivalents comprise
Cash and cash equivalents 2,592 2,782 2,675 ======= ====== ======
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
1. BASIS OF PREPARATION
These interim consolidated financial statements are for the six months ended 30September 2010. They have been prepared in accordance with IAS 34, InterimFinancial Reporting. These interim financial statements have been prepared inaccordance with those IFRS standards and IFRIC interpretations issued andeffective or issued and early adopted as at the time of preparing thesestatements (December 2010). The IFRS standards and IFRIC interpretations thatwill be applicable at 31 March 2010, including those that will be applicable onan optional basis, are not known with certainty at the time of preparing theseinterim financial statements. The policies set out below have been consistentlyapplied to all the years presented.
These consolidated interim financial statements have been prepared under the historical cost convention.
The information set out in this interim report for the six months ended 30September 2010 does not constitute statutory accounts as defined by section 434of the Companies Act 2006. The statutory accounts for the year ended 31 March2010, incorporating an unqualified auditors' report, have been filed with theRegistrar of Companies.Going concernThe Executive Directors are working continually to obtain the necessary loanfinance for the larger projects, in particular for Olive Island Resort. TheMunicipality of Preko, as existing land owner are very encouraged by theprogress being made by the Company and the State of Croatia are aware of ourefforts and are very encouraging also. The Municipality, with State support hasagreed to extend the payment terms until January 2011. The Directors believethat the conclusion of a financing package is very close and is fully expectingto receive the Olive Island project loans within the aforementioned paymentterms. The loans being negotiated would finance fully the Olive Island projectand allow all other liabilities to be paid.Despite the progress being made contingency plans are however prepared andinclude negotiations to sell the Olive Island marina if necessary. In addition,we are reviewing a possible sale of our casino at Pula and our partner in CubusLux Projektiranje d.o.o. has offered to buy our 50% share. Furthermore themajority of loan note holders of the €13,000,000 million loan notes haveindicated that they will not seek repayment from the Company in December 2010unless the Group has sufficient funds to do so and continue trading and theDirectors are in the process of negotiating an extension to 31 December 2011with the remaining loan note holders. The Directors are in the process of re-negotiating the term of the Euro loannotes issued for the acquisition of the Olive Island Project to be repayable by31 December 2011.
The Directors have re-negotiated the Hypo Alpe Adria loan in Cubus Lux Projektiranje so that the loan will be repayable on 31 December 2011.
At the year end Plava Vala d.o.o was in breach of the loan covenants on theErste bank loan, due to a delay in the payment of principal and interest. Assuch the loan has been disclosed as a current liability. There has been noindication to date from the bank that the loan will be called in due to thebreach of covenants. However the Directors are in the process of finalisingfurther funding that will enable them to pay off the loan and any arrears due.This will present the opportunity to use the Company income towards theexpansion of the numbers of berths. This in turn would make the marinaprofitable throughout the year rather than just in the summer season creatingthe returns to meet bank liabilities.
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
.2. BUSINESS SEGMENT ANALYSIS Period ended 30 September Casino Marina Property Resort Central Total2010: £'000 £'000 £'000 £'000 £'000 £'000 Revenue External sales 268 363 - - 48 679 ====== ====== ===== ======= ==== ====== Loss Segment operating loss (232) (240) (76) (34) (211) (793) Net finance costs (618) ------------- Loss before taxation (1,411) ====== Assets and liabilities Segment assets 1,056 9,735 11,868 35,342 434 58,435 Segment liabilities (718) (5,995) (7,907) (23,709) (3,376) (41,705) ------------ ------------- --------------
--------------- ------------- ---------------
Net assets/(liabilities) 338 3,740 3,961 11,633 (2,942) 16,730 ====== ====== ====== ======== ====== ======= Year ended 31 March 2010: Revenue External sales 667 773 - - 40 1,480 ====== ====== ====== ====== ====== ======= Profit/(loss) Segment operating profit/ (487) (199) (782) 167 (860) (2,161)(loss) Net finance costs (1,402) ------------- Loss before taxation (3,563) ======= Assets and liabilities Segment assets 1,129 9,986 8,481 36,344 258 56,198 Segment liabilities (674) (6,108) (4,284) (24,550) (3,280) (38,896) -------------- -------------- -------------- -------------- ------------ --------------- Net assets/(liabilities) 455 3,878 4,197 11,794 (3,022) 17,302 ====== ====== ====== ======== ====== ======= Period ended 30 September 2009: Revenue External sales 500 447 - - 18 965 ====== ====== ===== ======= ==== ====== Profit/(loss) Segment operating profit/ 9 46 73 301 (207) 222(loss) Net finance costs (821) ------------- Profit before taxation (599) ====== Assets and liabilities Segment assets 1,320 10,236 8,471 34,814 386 55,227 Segment liabilities (371) (6,037) (4,364) (22,852) (1,769) (35,393) ------------ ------------- --------------
--------------- ------------- ---------------
Net assets/(liabilities) 949 4,199 4,107 11,962 (1,383) 19,834 ====== ====== ====== ======== ====== =======
The Group currently operates in one geographical market, Croatia and therefore
no secondary segmentation is provided.
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
3. TAXATION
The Company is controlled and managed by its Board in Croatia. Accordingly,
the interaction of UK domestic tax rules and the taxation agreement entered
into between the U.K. and Croatia operate so as to treat the Company as solely resident for tax purposes in Croatia. The Company undertakes no business activity in the UK such as might result in a Permanent Establishment for tax purposes and accordingly has no liability to UK corporation tax. 4. OTHER EXPENSES/INCOME Other expenses of £27,000 in the period ended 30 September 2010 (£
200,000 income in year ended 31 March 2010; £190,000 income in period
ended 30 September 2009), arises in respect of the cost of deferred consideration payable for Duboko Plavetnilo Hotels d.o.o. and as such this adjustment of goodwill has been recognised in the consolidated income statement. £837,000 of other expenses in the year ended 31 March 2010 relates to the impairment of goodwill in Cubus Lux Projektiranje d.o.o.. 5. EARNINGS PER SHARE The loss per share of 7.11p (year ended 31 March 2010: loss 18.99p; six months ended 30 September 2009: loss 3.2p) has been calculated on the weighted average number of shares in issue during the period namely 19,397,754 (year ended 31 March 2010: 18,773,207; six months ended 30
September 2009: 18,449,564) and losses of £1,379,000 (year ended 31 March
2010: loss £3,569,000; six months ended 30 September 2009: loss £585,000 ).
The calculation of diluted loss per share of 7.11p (year ended 31 March
2010: loss 18.99p; six months ended 30 September 2009: loss 3.2p) has
been calculated on the weighted average number of shares in issue during
the period namely 19,397,754 (year ended 31 March 2010; 18,773,207; six months ended 30 September 2009: 18,449,564) and losses of £1,379,000
(year ended 31 March 2010: loss £3,569,000; six months ended 30 September
2009: loss £585,000). For a loss making group with outstanding share options, net loss per 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 irrationally no adjustment has been made to diluted EPS for out-of-the-money share options.
INDEPENDENT REVIEW REPORT TO CUBUS LUX PLC
We have been engaged by the Company to review the condensed set of financialstatements in the interim report for the six months ended 30 September 2010which comprises the consolidated income statement, consolidated interim balancesheet, consolidated interim statement of changes in shareholders' equity,consolidated interim cash flow statement, and related notes. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements.
Directors' Responsibilities
The interim report is the responsibility of, and has been approved by, thedirectors. The directors are responsible for preparing the interim report inaccordance with the AIM rules. As disclosed in note 1, the annual financialstatements of Cubus Lux plc are prepared in accordance with IFRSs as adopted bythe European Union. The condensed set of financial statements included in thisinterim report has been prepared in accordance with International AccountingStandard 34, ``Interim Financial Reporting,'' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.
Our report has been prepared in accordance with the terms of our engagement toassist the Company in meeting the requirements of the rules of the London StockExchange for companies whose securities are traded on AIM and for no otherpurpose. No person is entitled to rely on this report unless such a person is aperson entitled to rely on this report by virtue of and for the purpose of ourterms of engagement or has been expressly authorised to do so by our priorconsent. Save as above, we do not accept responsibility for this report to anyother person or for any other purpose and we hereby expressly disclaim any
andall such liability.Scope of Review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, ``Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity'' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the interim reportfor the six months ended 30 September 2010 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted bythe European Union.Going ConcernIn forming our opinion, which is not qualified, we have considered the adequacyof the disclosures made within the accounting policies concerning the Group'sability to continue as a going concern. The Group incurred a net loss of £1,264,000 during the period ended 30 September 2010 at the period end theGroup's current liabilities exceed its current assets by £14,965,000. Thisalong with the other matters explained in note 1 to the condensed consolidatedinterim financial statements, indicates the existence of a material uncertaintywhich may cast significant doubt about the Group's ability to continue as agoing concern. The consolidated interim financial statements do not include theadjustments that would result if the Group was unable to continue as a goingconcern.haysmacintyre
Chartered Accountants Fairfax House
Registered Auditors 15 Fulwood Place
London
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