EHG.L Regulatory News (EHG)

16 December 2015

Elegant Hotels Group plc

Full Year Results Statement

A transformational year of strong growth

Elegant Hotels Group plc (the "Company" or the "Group"), the owner and operator of five upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announces its results for the year ended 30 September 2015.

Highlights

· Revenue up 4.3% to $60.1million (2014: $57.6million)

· RevPAR (revenue per available room) up 4.9% to $255 (2014: $243)

· ADR (average daily rates) up 5.7% to $373 from $353

· Adjusted operating profit up 15.7% to $19.2 million (2014: $16.6 million)

· Adjusted EBITDA up 12.7% to $22.2million (2014: $19.7 million)

· Adjusted EPS up 15.7% to 14.7 cents per share (2014: 12.7 cents)

· Net debt down 61.2% to $40.8 million (2014: $105.1 million)

· Successful IPO to the London Stock Exchange's AIM on 26 May 2015

· Proposed final dividend of 1.75 pence per share, resulting in a full year dividend of 3.5 pence per share covering the approximately five month period on AIM

Commenting on the results, Sunil Chatrani, CEO of Elegant Hotels, said:

"This has been a landmark year for Elegant Hotels. We achieved strong revenue and underlying profit growth, and demand for Barbados as a tourist destination remains buoyant, with arrivals and flight capacity both continuing to improve. The Group's admission to AIM in May has provided us with a great foundation from which to grow and expand, both organically and through acquisitions in Barbados and the wider Caribbean. 2016 promises to be a year of further significant development, and we are excited about the future prospects for the business."

Analyst Conference call

A conference call for analysts with the Company's management team will take place at 9.30am (GMT) today, the details of which are as follows:

International access +44 (0) 20 3003 2666

UK Toll Free 0808 109 0700

USA Toll Free 1 866 966 5335

Password Elegant Hotels

Slide viewer www.meetingzone.com/presenter

Slide access PIN 3368431#

For further information:

NOTES TO EDITORS:

Elegant Hotels owns and operates five luxury hotels and a beachfront restaurant, Daphne's, on the island of Barbados. The Group's portfolio comprises 483 rooms, which represents almost 25% of Barbados' quality leisure tourist room stock. Four of the five Group hotels are situated along the prestigious west coast of Barbados commonly known as the "Platinum Coast". The properties are all freehold, with a total aggregate plot size of approximately 20 acres and an aggregate beachfront of 2,300 feet. The value attributed to Elegant's portfolio as at 15 April 2015 was $235.5 million.

The Group has a strong market presence and is a profitable, cash generative and financially stable business that has enjoyed continuous growth in both revenue and EBITDA over the last three financial years. In the year to 30 September 2015, it achieved revenues of $60.1million and EBITDA before non-recurring items of $22.2 million.

The Group's shares were admitted to trading on the London Stock Exchange's AIM in May 2015. Its objective now is to leverage its position as a leading hotel operator in Barbados and to expand both on Barbados and further into the Caribbean.

Together, the Group's five hotels - Colony Club, Tamarind, The House, Crystal Cove, and Turtle Beach - offer styles encompassing classic and contemporary, family-friendly and adults-only offerings.

Investor website: http://www.eleganthotelsgroup.com/

Commercial website: http://www.eleganthotels.com/  

BUSINESS REVIEW

Revenue and Demand

We are pleased to report a strong set of results for the financial year ended 30 September 2015.

Revenue for the year of $60.1 million represents an increase of 4.3% over the previous year (2014: $57.6 million). This reflects our strategic focus on driving rates while holding occupancy levels relatively stable. Average daily rates (ADR) have grown by 5.7% from $353 in 2014 to $373 in 2015, while occupancy has remained at circa 68% across both periods. Increases in ADR attract little incremental cost so conversion to profit tends to be stronger than that of revenue growth from higher occupancy.

Although the occupancy at our hotels has remained relatively stable, we have seen a strong period of growth in tourist arrivals to the island of Barbados. After a number of years of relatively stable visitor numbers, the total number of tourist arrivals for 2015 up to the end of October has grown by almost 14.7%. Arrivals from the UK and the United States, which are the key markets for customers in our hotels, have risen by 12.7% and 28.2% respectively. We believe this reflects the recovery in both of these economies, with a delay of around six months due to the lead time in booking long haul holidays to the Caribbean. There may also be demand shifting over from some competing winter-sun destinations in North Africa and the Middle East, due to the ongoing instability and uncertainty of some of those destinations.

This customer demand has been supported by increased airlift. The expected extra capacity that we outlined to prospective investors at the time of the IPO has all come on-stream: British Airways is up from 10 to 12 flights per week from the UK in the winter; extra capacity from the United States added over 33,000 additional seats this year, with Delta's new routes from New York and Atlanta; JetBlue have recently introduced a new route from Boston as well as an enhanced "Mint" service (the equivalent of business class) from New York; and Thomas Cook also announced a new route from Glasgow operating from November to January, providing direct flights from the north of the UK.

Increased demand can drive Group profits even if there is little change in occupancy. Higher demand allows us to achieve better yield by increasing headline prices or by reducing discounts. Indeed, it is often in our busiest periods over Christmas and New Year that we feel the most pronounced lift in results from extra demand, even though most of the other hotels on the island are busy as well.

Elegant's ability to manage yield is assisted by stronger negotiating positions with tour operators than most of its competitors. This is partly because we are the largest hotel operator on Barbados, with almost 25% of the quality leisure tourist room stock on the island, but also because we benefit from the expertise of our specialised revenue team based in Florida.

Profitability

As these results demonstrate, the Elegant management team stayed focused on running and indeed growing the underlying business despite the potential distraction and workload of preparing the Group for an IPO. Group operating profit before exceptional items increased by 15.7% to $19.2 million (2014: $16.6 million). Adjusted EBITDA (before exceptionals and share based payments charges) increased by 12.7% to $22.2 million (2014: $19.7 million). Adjusted EBITDA margin was 36.9%, reflecting our continuing focus on cost discipline (2014: 34.1%).

Colony Club led the way, perhaps because it was refurbished most recently, with Turtle Beach trailing the pack due to suffering from noisy and disruptive works at a neighbouring hotel (concluded at the end of January 2015). The other properties - Tamarind, The House, Crystal Cove and Daphne's restaurant - have all showed year on year improvement.

The fact that we have greater scale than most of our competitors helps us control costs, with centralised functions serving all of our properties. These functions include procurement (giving scale in purchasing), accounting (giving better cost control) and HR (giving improved training and personnel development).

Basic and diluted earnings per share were 7.2 cents (2014: 16.6 cents). On an adjusted basis, excluding IPO and listing expenses, share based payments and other one-off costs together with the associated tax impact, and reflecting the total shares in issue post-IPO, basic earnings per share were 14.7 cents (2014: 12.7 cents) and diluted earnings per share were 14.6 cents (2014: 12.7 cents).

Key Performance Drivers

Guest experience: We never lose sight of the fact that it is ultimately our guests who pay the hotels' costs, all of our salaries and, of course, the Group's dividend. Elegant's philosophy remains one of continuous investment and improvement. In addition to day-to-day maintenance and regular refurbishment (what hoteliers tend to call "furniture, fixtures and equipment reserve" or "FF&E reserve"), there is a central fund that is allocated to larger projects each year. We believe that this, as well as the Group's outstanding training and service programs, generate tangible improvements in the guests' experience at our properties.

Rate and Occupancy: We believe the increase in demand (see arrivals data above) provides clear potential for us to continue to grow revenue in the short to medium term. Our strategy for the existing portfolio is to leverage this demand where possible to yield higher rates. While both high rate and high occupancy are obviously important for improving the Group's revenue, we see the greatest potential in rate growth for 2016 and accordingly will be focusing our efforts in that area.

Cost control: In addition to the general cost benefits from our centralised administrative operations, we are continuing to develop our central procurement capability (in order to fully benefit from our scale and from recent changes in import duties) and we are focusing on reducing the Group's energy costs (enhancing our hotel energy-saving policies and ensuring that all related equipment, such as modern air-conditioning, is more efficient).

Expansion: Long-term growth will also be driven by expanding the Group through acquisitions both on Barbados and further into the Caribbean. The admission to AIM allowed us to reduce debt, thereby freeing up capacity to carry out acquisitions. The team is working hard to develop a pipeline of potential targets and is actively considering a number of opportunities. While there can never be any certainty around such transactions, we would be disappointed not to acquire at least one hotel in 2016.

Dividend

The Directors are pleased to announce that they are proposing a final dividend for the financial year ended 30 September 2015 of 1.75 pence per share. The final dividend is subject to the approval of the Company's Shareholders at its Annual General Meeting. The final dividend will be paid on 8 February 2016 to shareholders on the register on 29 December and the Company's ordinary shares will become ex-dividend on 24 December 2015. The total dividend for the five month period from listing on 26 May 2015 to 30 September 2015 amounts to 3.5 pence per share.

It is the Board's intention to continue to implement a progressive dividend policy in line with the growth in future earnings. As always, this will be subject to the discretion of the Board and to the Company having sufficient distributable reserves.

People and Board

The success of Elegant Hotels is down to its people. The Group's strong performance reflects the quality, hard work and loyalty of the team. Each member of staff in every property has played their part. Our on-island central services and accounting team has had an unusually challenging year given the extra work required to prepare for the IPO and the subsequent rigours of public company life. We also owe much to the efforts of the revenue management team in Florida and our sales teams in the UK and elsewhere, who help generate the demand on which everything is built.

In order to further strengthen the Group's senior management team, we recently started the process of recruiting a Group Chief Financial Officer.

On behalf of the Board, we would like to thank all of our employees, customers, suppliers and business partners for their efforts in 2015. We would also like to welcome and thank our new shareholders for their trust in our Company and faith in our future.

Summary and Outlook

As we approach the busiest period of the year over the key winter months of December to February, we have good visibility, as always, into the strength of bookings. These are in line with management's expectations at this stage of the year. We continue to pursue a strategy focussed on rate growth and on enhancing the Elegant Hotels' experience for our customers.

The Board is also committed to an acquisition strategy that will increase the scale of the business both in Barbados and the wider Caribbean islands. We believe that this approach will underpin and drive profitable growth for the future and, with that in mind, look forward to the future with confidence.

FINANCIAL REVIEW

A year of strong financial performance

The financial year ended 30 September 2015 has been a year of strong growth and strengthening of the Group's balance sheet. Total revenue, gross profit and adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) are all up on last year with an increased market demand (the total number of tourist arrivals for 2015 up to the end of October 2015 has grown by almost 14.7%).

Revenue

Total revenue increased by 4.3% in the year to $60.1 million (2014: $57.6 million). All but one of the hotels recorded revenue growth. The exception was Turtle Beach which experienced significant disruption from the refurbishment of the neighbouring property (now completed).

Colony Club recorded the highest increase in revenue in the year which is mainly attributable to the completion of the final phase of the recent renovation program, completing the refurbishment of all of the guest suites and rooms.

Gross profit

Total gross profit increased by 5.8% to $37.6 million (2014: $35.5 million). With the exception of Turtle Beach, the focus has been on rate growth at all of the properties. This, together with improvements in operating efficiencies, reductions in fuel costs and some access to duty-free concessions on food and beverages, have all contributed to the improvement in gross profit.

Exceptional costs

The Group incurred costs in relation to the IPO that were specific to the listing and also to other related activities such as the amendment to the Group's borrowing arrangements. All of these costs are regarded as one-off in nature and will not recur. As a result, the financial performance of the business is being presented after adjustment for such items. The table below sets out the impact on each of the lines in the Income Statement and the remainder of this review is based on the adjusted results excluding the impact of exceptional costs.

The total amount of exceptional costs that were incurred in the year amounted to $10.2 million (2014: $1.9 million), comprising: costs directly associated with the IPO of $5.6 million (2014: nil); share based payments charges for share options issued to Directors and senior management at IPO under the Group's long term incentive plan (LTIP) amounting to $0.5 million (2014: nil); and other one-off costs incurred during the year of $4.1 million (2014: $1.9 million), including re-financing costs, one-off legal costs and restructuring.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses at $29.3 million were significantly higher than the previous year (2014: $21.7 million) as the Group incurred costs in relation to the IPO and began to incur costs associated with being listed on AIM. SGA expenses adjusted for IPO and other costs were $0.7 million down on the prior year at $19.1 million (2014: $19.8 million), reflecting continued efficiencies and control of costs in a strong growth year.

EBITDA

Reported EBITDA and adjusted EBITDA are set out in the following table:

Adjusted EBITDA increased by 12.8% to $22.2 million (2014: $19.7 million) after IPO costs, charges for share based payments and other one-off costs. Adjusted EBITDA margin in 2015 was 36.9% (2014: 34.1%). The improvement represents the effectiveness of the Group's approach to focus on improving room rates as well as cost control and operational efficiency.

Financial expenses

Financial expenses in 2015 were $3.1 million (2014: $3.3 million), a reduction of $0.2 million. Proceeds from the issue of shares amounting to $42.0 million were used, along with cash resources in the business, to achieve a renewal of the Group's credit agreement with the Bank of Nova Scotia. Prior to the IPO, the drawdown of facilities under the credit agreement was $102.0 million. Following the IPO, the drawdown was reduced to $45.0 million. In the four months since the IPO, the interest charge has reduced significantly but this is partially offset by higher base interest rates during the course of the year. Going forward the full year interest cost should be significantly reduced.

Taxation

The total taxation charge for the year of $1.0 million was $1.0 million lower than the prior year (2014: $2.0 million) due to the level of one-off costs incurred during the year. After adjusting for exceptional costs, the taxation charge on the adjusted profit before tax amounted to $3.0 million (2014: $2.0 million). This reflects the increased profitability of the business and the reduced levels of tax losses available for offset against taxable profit due to utilization in prior years, and the amendments to the Barbados Income Tax Act - removing Group Tax Relief and reducing the number of years of allowable brought forward tax losses of prior years.

The effective tax rate on the adjusted profit before tax is 18.8% (2014: 15.3%) reflecting the changes noted above.

Adjusted profit for the year

Profit after tax and after adjustment for exceptional costs has increased by $1.8 million to $13.1 million (2014: $11.3 million). The adjusted profit for the year represents an increase of 15.7%.

Earnings per share

Basic earnings per share (EPS) for the year were 7.2 cents (2014: 16.6 cents). Adjusted basic EPS (after adjusting for IPO costs, shared based payment costs and other one-off costs) increased by 15.7% to 14.7 cents per share (2014: 12.7 cents).

Dividend

At the time of the IPO the Directors stated an intention to implement a progressive dividend policy in line with the growth in future earnings, subject to the discretion of the Board and to the Company having sufficient distributable reserves. For the year ending 30 September 2016, subject to the discretion of the Board, having taken into account the current and expected future trading performance of the Company, and to the Company having sufficient distributable reserves, the Directors intend that the total annual dividend payable will equate to a dividend yield of 7% (calculated on the basis of the Placing Price).

In order to facilitate the payment of a maiden dividend it was necessary to seek approval from the High Court for the reduction of the Company's share premium account. Following approval from our Shareholders and the Court, the reduction was implemented and a maiden dividend of 1.75 pence per share was declared on 30 September and paid on 30 October 2015.

We are pleased to announce that the Board is recommending a final dividend of 1.75 pence per share for shareholders on the register on 29 December 2015, payable on 8 February 2016. This makes a total dividend of 3.5 pence per share covering the approximately five month period from 26 May 2015 to 30 September 2015.

Balance Sheet

The most significant change in the balance sheet during the period was a result of the successful IPO and listing on AIM on 26 May 2015. A total of 88.8 million shares were issued at an initial price of £1.00 per share. Proceeds from 56.6 million shares allowed the Company to acquire the businesses of the Elegant Hotels Group in a share-for-share exchange with the existing owners, principally Vision Capital and also members of the senior management team. The proceeds from the remaining 32.2 million shares were translated into US dollars (approximately $48.9 million) which, together with existing cash resources in the businesses, were used to repay bank loans and for the costs of the IPO transaction and other one-off costs.

Third party debt of $102.0 million with the Bank of Nova Scotia was renegotiated and reduced to a term loan facility of $50.0, of which $45.0 million has been drawn down, together with an overdraft facility of $5.0 million and a revolving credit facility of $5.0 million.

The strength of the Group's balance sheet lies in its assets as well as the renewed financing arrangements. The properties of the Group were valued by an independent third party during the IPO process at $235.5 million, representing 17% loan to value as at 30 September 2015.

Cash Flow

Strong EBITDA conversion provides a sound basis for the Group's cash flow. Capital expenditure for the year of $3.5 million is in line with expectations and will typically run in the range of $3.5 to $4.0 million to support the Renovation phases of the Group's strategy. Year end net debt of $40.8 million comprises a term loan of $45.0 million; an outstanding balance of $1.4 million from a loan used to purchase the land at Daphne's restaurant which will be settled in 2016; and cash and cash equivalents of $5.6 million at 30 September 2015, from which the interim dividend was paid in October prior to the start of the Group's principal trading period. 

Consolidated Statement of Profit and Loss and Other Comprehensive Income

All amounts relate to continuing activities.

There were no other recognised gains and losses in the year.

The notes below form part of these financial statements.

Approved on behalf of the Board of Directors on 15 December 2015 and signed on its behalf by:

Director Director

Simon Sherwood Sunil Chatrani

The notes below form part of these financial statements.

The notes below form part of these financial statements.

The notes below form part of these financial statements.

The notes below form part of these financial statements.

Approved on behalf of the Board of Directors on 15 December 2015 and signed on its behalf by:

Director Director

Simon Sherwood Sunil Chatrani

The notes below form part of these financial statements.

The notes below form part of these financial statements.

The notes below form part of these financial statements.

1. General information

Elegant Hotels Group plc ("Elegant Hotels" or the "Company") is a public limited company incorporated in the United Kingdom. The address of the registered office is 10 Norwich Street, London, EC4A 1BD. The principal activity of the Company and its subsidiaries (collectively the "Group") is the ownership and operation of hotels and restaurants on the island of Barbados.

Elegant Hotels Group plc was incorporated on 10 April 2015.

On 11 May 2015 the subsidiaries were acquired by the Company shortly before the listing of the Company's shares on the London Stock Exchange's AIM.

On 26 May 2015 the Company listed its shares on the London Stock Exchange. 

By applying the principles of reverse acquisition accounting under IFRS 3 "Business Combinations", the Group is presented as if the Company had always owned the subsidiaries. The comparative Statement of Profit and Loss and Other Comprehensive Income and Statement of Financial Position are presented in line with the previously presented position before the insertion of the Company. The comparative and current year consolidated reserves of the Group are adjusted to reflect the statutory share capital, share premium and merger reserve of the Company as if it had always existed, adjusted for movements in the underlying share capital and reserves from the share for share exchange.

The steps taken to restructure the Group and the impact on the primary consolidated financial statements are as follows:

- On 10 April 2015 a new company, Elegant Hotels Group plc was incorporated with one ordinary share of 1p and £50,000 redeemable shares

- On 11 May 2015 Elegant Hotels Group plc directly and indirectly acquired the entire share capital of the Elegant Hotels Group in exchange for the issue of 56,615,788 ordinary shares of 1p creating a merger reserve of £56,049,630

- On 26 May 2015 the £50,000 redeemable shares were redeemed

- On 26 May 2015 Elegant Hotels Group plc was floated on the London Stock Exchange and a further 32,200,000 ordinary shares of 1p were sold for £1 per share. The Company received proceeds of £32,200,000 creating share premium of £31,878,000

- The Group used the proceeds to reduce the amount of its external debt and for the payment of costs associated with the IPO

- Fees and other costs associated with the IPO were wholly allocated to the Consolidated Income Statement and shown as Exceptional Costs

Subsequent to the IPO on 24 July 2015 the Company made a resolution for the reduction of the share premium account. On 13 August 2015 the High Court of Justice confirmed the reduction of share premium of £31,878,000 which was registered at Companies House on 18 August 2015.

2. Basis of preparation

The consolidated financial statements in this results announcement for Elegant Hotels Group plc ("Elegant Hotels" or the "Company") as at and for the year ended 30 September 2015 comprise the Company and its subsidaiares (together referred to as "the Group").

These primary statements and selected notes comprise the audited consolidated financial results of the Group for the years ended 30 September 2015 and 2014. The information set out in this results announcment does not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006 but represents extracts from them. These extracts do not provide as full an understanding of the financial performance and position, or financial and investing activities, of the Group as the complete Annual Report.

The consolidated financial statements presented in this document have been prepared in accordance with International Financial Reporting Standards as adopted by the EU. The Company's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU and as applied in accordance with the Companies Act 2006. The Company has taken advantage of the exemption provided under section 408 of the Companies Act not to publish its individual income statement and related notes. The profit for the year included a loss on ordinary activities after tax of $3,468,000 in respect of the Company. The Company had no other items of comprehensive income in the year.

This is the first set of consolidated financial statements of Elegant Hotels Group plc, which is now the ultimate holding company of the Elegant Hotels Group following reorganisation of the Group to facilitate the Initial Public Offering.

The financial statements have been presented as a continuation of the Elegant Hotels Group. In doing so, the principles of reverse acquisition accounting in IFRS 3 "Business Combinations" have been applied. The result of the application is to present the financial statements as if Elegant Hotels Group plc had always owned the Group and comparatives have been prepared on this basis accordingly.

The functional currency of the Company is sterling. The Group presents its financial information in US dollars, which is the dominant currency of the trading entities. 

The financial information is presented in United States dollars unless otherwise indicated. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

3. First time adoption of IFRS

The Elegant Hotels Group has not previously prepared consolidated financial statements in accordance with International Financial Reporting Standards as adopted in the EU. As such, these financial statements represent its first EU IFRS financial statements and IFRS 1 "First time adoption of International Financial Reporting Standards" has been adopted. As Elegant Hotels Group has not previously prepared consolidated financial statements, no reconciliations from previous GAAP have been presented. The historic rate of exchange at the time of the transaction has been applied to any opening balances in a foreign currency. The specific impact of the first time adoption to IFRS has been discussed within the relevant accounting policies.

4. Measurement convention

The consolidated financial statements are prepared on the historical cost basis except that the certain assets and liabilities are stated at their fair value. These include loans and receivables.

5. Accounting policies

Both the parent company financial statements and the group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

Going concern

The Group meets its day-to-day working capital requirements with the assistance of its bank facilities which were renewed on 26 May 2015. The Group's forecasts and projections take account of reasonably possible changes in trading performance and show that the Group should be able to operate within the level of its current facilities, meet future debt repayments and will continue to comply with its banking covenants for at least the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.

The principal accounting policies applied by the Group and Company in the preparation of these consolidated financial statements for the years ended 30 September 2014 and 30 September 2015 are set out below. These policies have been consistently applied to all periods presented.

Changes to accounting policies since the last period

The following standards, interpretations and amendments, issued by the IASB or the International Financial Reporting Interpretations Committee (IFRIC), are both relevant and effective for the first time in the current financial year and have been adopted by the Group with no significant impact on its consolidated results or financial position for the current reporting period:

• Annual Improvements to IFRSs (2010-2012 Cycle) - Minor amendments to various accounting standards, effective for periods beginning on or after 1 January 2014 onwards.

• Annual Improvements to IFRSs (2011-2013 Cycle) - Minor amendments to various accounting standards, effective for periods beginning on or after 1 January 2014 onwards.

• IFRS 10 'Consolidated Financial Statements'.

• IFRS 12 'Disclosure of Interests in Other Entities'.

• Amendments to IFRS 10, IFRS 11 and IFRS 12 'Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance'.

Management are assessing the following standards, which are not a full list of those coming into effect, for the impact on the Group:

• IFRS 9 'Financial Instruments' (effective date for accounting periods from 1 January 2018). This standard has not yet been endorsed for use in the EU.

• IFRS 15 'Revenue from contracts with Customers' (effective date for accounting periods from 1 January 2017). This standard has not yet been endorsed for use in the EU.

• Amendments to IAS 1: Disclosure Initiative (effective date for accounting periods from 1 January 2016). This amendment has not yet been endorsed for use in the EU.

• Annual improvements to IFRSs 2012-2014 Cycle (effective date for accounting periods from 1 January 2016). This amendment has not yet been endorsed for use in the EU.

• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation (effective date for accounting periods from 1 January 2016). This amendment has not yet been endorsed for use in the EU.

• Annual Improvements to IFRSs (2010-2012 Cycle) Minor amendments to various accounting standards, effective for periods beginning on or after 1 July 2014 onwards. These amendments have not yet been endorsed for use in the EU.

• Annual Improvements to IFRSs (2011-2013 Cycle) Minor amendments to various accounting standards, effective for periods beginning on or after 1 July 2014 onwards. These amendments have not yet been endorsed for use in the EU.

The other standards not yet in effect are not expected to have a material impact on the Group or Company.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Separate parent company financial statements

In the parent company financial statements, all investments in subsidiaries are carried at cost less impairment.

Merger reserve

On 11 May 2015 the Company became the new holding company for the Group. This was put into effect through a share-for-share exchange of 56,615,788 ordinary shares of £0.01 in the Company for the whole of the issued capital of eight St Lucia domiciled companies. These companies own all of the share capital in ten trading subsidiaries. The accounting treatment for this type of transaction, where the new and the acquired companies remain under common control is scoped out of IFRS3.

Accordingly, as required under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors the Group has applied the principles within IFRS 3 Business Combinations to assist its judgement in identifying a suitable accounting policy. The introduction of the new holding company has been accounted for as a capital reorganisation using the merger accounting principles prescribed within IFRS 3 Business Combinations. Therefore the consolidated financial statements of the group are presented as the acquired entities have always been part of the group.

The use of merger accounting principles has resulted in a balance on group and Company capital and reserves which has been classified as a merger reserve and included in the Group's shareholders' funds.

The Company has recognised the value of its investment in the acquired St Lucian companies at a value based upon the initial share placing price on admission to AIM of £1 per share. As permitted by section 612 of the Companies Act 2006 the amount attributable to share premium has been transferred to the merger reserve.

Revenue Recognition

Revenue for the Group is measured at the fair value of the consideration received or receivable. The Group recognises revenue for services provided when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity.

Revenue arising from the provision of hotel accommodation, restaurant and bar services and activities is recognised when the service is provided and the products are delivered to the customer.

All deposits for accommodation and similar income which are received in advance of the related performance are classified as deferred revenue and shown as a liability until completion of the performance.

Finance income and expense

Finance income is recognised in profit and loss on an accruals basis. Finance cost is recognised as it accrues in profit or loss, using the effective interest method.

Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Elegant Hotels Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 

Retirement Benefits: Defined contribution schemes

Contributions to defined contribution schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.

Share-based payment transactions

Employees (and Directors) receive remuneration in the form of equity-settled share-based payments, whereby employees render services in exchange for shares or for rights over shares. The fair value of the employee services received in exchange for the grant of options or shares is recognised as an expense. The total amount to be expensed on a straight line basis over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market based vesting conditions (for example, continuation of employment and performance targets).

The share options are valued using the Black Scholes option pricing model. Non-market based vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each Balance Sheet date to allow for forecast leaving employees and the difference is charged or credited to the Statement of Profit and Loss and Other Comprehensive Income, with a corresponding adjustment to reserves.

Foreign currency transactions and balances

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in US Dollars, which is the functional currency of the subsidiary companies, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation), or a disposal involving loss of control over a subsidiary that includes a foreign operation, all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss.

The Group contracted foreign exchange forward contracts to secure the required funding, in US dollars, from the proceeds of the placing which were denominated in sterling. The Group also enters into forward US dollar/sterling forward exchange contracts to secure the amount of approved and declared dividends. No other forward contracts or similar contracts are conducted.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs. Under the transition provisions of IFRS 1, land and buildings which were previously revalued were measured on the basis of their deemed cost, being their Barbados GAAP carrying value, including revaluations, as at October 1, 2005 being the effective date of the Elegant Hotels subsidiary companies' conversion of IFRS.

Depreciation on assets under construction does not commence until they are complete and available for use. These assets represent 'fit-outs'. Land is not depreciated.

Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over the expected useful economic lives. It is provided at the following annual rates:

Inventories

Inventories are valued at the lower of cost and net realisable value on a first in, first out basis. The cost is determined using a weighted average basis. Net realisable value is the estimated selling price in the normal course of business less the estimated costs necessary to make the sale.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.

They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Accounts receivable are presented in current assets in the statement of financial position, except for those with maturities greater than one year after the reporting date.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

The Company advances loans to its subsidiary undertakings which are accounted for as part of its net investment in those operations. These loans are repayable on demand and are stated at amortised cost less provision for impairment.

Financial assets

The Group classifies non-derivative financial assets into the following categories: cash and cash equivalents, short-term investment deposits to secure local electricity supplies, accounts receivable, financial assets at fair value through profit or loss, and held-to-maturity investments. The classification depends on the purpose for which the assets are held.

Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date for financial assets other than those held at fair value through profit or loss.

Cash and cash equivalents

Cash and cash equivalents comprise of cash balances and fixed deposits with original maturity dates of 90 days or less. The carrying value of cash and cash equivalents in the statement of financial position is considered to be fair value.

Impairment of non-financial assets

Assets that have indefinite useful lives are not subject to amortisation and are tested annually for impairment. All other non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

The Elegant Hotels Group determine any impairment by comparing the carrying values of each of the Elegant Hotels Group assets (or the cash-generating unit to which it belongs) to their recoverable amounts, which is the higher of the asset's fair value less costs to sell and its value in use. Fair value represents market value in an active market. Value in use is determined by discounting future cash flows arising from the asset. Future cash flows are determined with reference to the Elegant Hotels Group's own projections using pre-tax discount rates.

Financial liabilities

All financial liabilities are recognised initially at fair value and subsequently at amortised cost.

Leased Assets

Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operating lease'), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term. 

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in profit or loss.

Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

Share Capital

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's ordinary shares are classified as equity instruments.

Segment reporting

An operating segment is a component of the Elegant Hotels Group that engages in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available.

All revenue and operating profit is derived from the main activity of the Group. Each hotel is considered to be a separate operating segment of the Group based on the information provided to the CODM (considered to be the Board of Directors). These segments are aggregated for the purposes of disclosure as the aggregation criteria of International Financial Reporting Standard 8 are considered to be met.

Dividend distribution

Dividend distribution to the shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are appropriately authorised and approved for payment and are no longer at the discretion of the company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the financial statements.

Taxation

Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognized in the statement of profit or loss except to the extent that it relates to items recognized directly into equity, in which case it is recognized into equity.

The Group follows the liability method of accounting for corporation tax, whereby the future tax asset (when it is probable that taxable profits will be available against which the deferred tax asset can be utilized) or liability resulting from temporary difference is accounted for at the expected corporation tax rate.

 Current tax for the year is the expected tax payable on the taxable income for the year, using the best estimate of the weighted average annual income tax rate expected for the full financial year.

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets or liabilities, using the tax rates enacted or substantially enacted at the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred tax assets and liabilities are offset only if certain criteria are met.

Related parties

A party is related to the Elegant Hotels Group, if:

(i) directly, or indirectly through one or more intermediaries, the party:

• is controlled by, or is under common control with, the Elegant Hotels Group (this includes parents, subsidiaries and fellow subsidiaries);

• has a direct or indirect interest in the Elegant Hotels Group that gives it significant influence; or

• has joint control over the Elegant Hotels Group

 (ii) the party is an associate of the Elegant Hotels Group;

(iii) the party is a joint venture or a partnership in which the Elegant Hotels Group is a venturer or a partner;

 (iv) the party is a member of the key management personnel of the Elegant Hotels Group or their parent entities;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

 (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or

(vii) the party is a post-employment benefit plan for the benefit of employees of the Elegant Hotels Group, or any entity that is a related party of the entity.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

The Elegant Hotels Group has a related party relationship with its directors, related companies, other group companies and affiliated parties controlled by its directors, senior officers, executives and significant shareholders of the parent company. "Key management personnel" represents certain senior officers of the Elegant Hotels Group.

6. Accounting estimates and judgements

The preparation of consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates. Judgements made by the directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are:

Property, plant and equipment - The assessment of the useful economic lives requires judgement in order that depreciation can be charged over the life selected. This also includes the assessment of residual values that will be attributed to the hotel properties. Judgement is also required in determining whether the carrying values of the assets have any indication of impairment.

Taxation - Management judgement is required to determine the amount of deferred tax assets that can be recognised based on the likely timing and level of future taxable profits. Where entities are loss making and are expected to continue to be loss making into the future it is judged that deferred tax assets should not be recognised in respect of these losses as it is not known when the losses will be able to be utilised in these entities.

The Group provides for anticipated risks, based on reasonable estimates, for tax risks in the respective countries in which it operates. The amount of such provisions are based on various factors, such as experience with previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible authority. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws and the amount and timing of future taxable income. Difference could arise between the actual results and the assumptions made or future changes to these assumptions which could necessitate future adjustment to tax income or expense already recorded.

Provisions for bad debts and inventory obsolescence - Provisions are made with reference to the ageing of receivable and inventory balances and the view of management as to whether amounts are recoverable.

Share based payments - Estimating the fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. The estimate also requires determination of the expected life of the share option, volatility and dividend yield and making assumptions about them. These estimates are reassessed at the end of each reporting period. The assumptions and model used for estimated fair value for share-based payment transactions is disclosed in note 27.

7. Financial instruments - risk management

 The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group has not issued or used any other financial instruments of a speculative nature. The Group contracts forward currency contracts to secure the value of approved dividends payable to its shareholders. No other new forward currency contracts are undertaken.

The Group is exposed to the following financial risks:

· Credit risk

· Liquidity risk

· Market interest rate risk

To the extent financial instruments are not carried at fair value in the consolidated statement of financial position, book value approximates to fair value at 30 September 2015 and 30 September 2014.

Trade and other receivables are measured at amortised cost. Book values and expected cash flows are reviewed by the Board and any impairment charged to the consolidated statement of comprehensive income in the relevant period.

Cash and cash equivalents are held in various currencies including US dollars, Barbados dollars, Sterling and the Euro.

Trade and other payables are measured at book value and amortised cost.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. At 30 September 2015 the Group has trade receivables of $2,217,000 (2014: $2,594,000).

The Group is exposed to credit risk in respect of these balances such that, if one or more of the customers' encounter financial difficulties, this could adversely affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers prior to entering into contracts and by entering into contracts with customers with agreed credit terms. Provision is made against any receivable considered to be impaired.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet its expected cash requirements as determined by regular cash flow forecasts prepared by management.

Market interest rate risk

Market interest rate risk arises from the Group's borrowings which are denominated in US dollars.

None of the Group's financial assets and liabilities are subject to fixed rates of interest. The most significant element of the financial liabilities relates to the Group's long term loan which is subject to interest at LIBOR plus 2.75% and is therefore entirely variable.

The Group is also exposed to market interest rate risk in respect of its cash balances held pending investment in the growth of the Group's operations. The effect of interest rate changes in the Group's interest-bearing assets and liabilities and the re-pricing of its interest-bearing liabilities are set out in note 34.

Capital Management

The Group's capital is made up of share capital, share premium, merger reserve, translation reserve and retained earnings totalling $105,841,000 (30 September 2014: $43,200,000).

The Group's objectives when maintaining capital are:

· To safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

· To provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The capital structure of the Group consists of shareholders equity as set out in the consolidated statement of changes in equity. All funding required to expand the Group's business, including the acquisition and development of new hotels and for working capital purposes are financed from existing cash resources where possible. Management will also consider future fund-raising or bank finance where appropriate.

8. Revenue

Virgin Holidays represented 12.5% of the Group's total revenue (2014: 13.2%). No other customer represented more than 10% of the Group's total revenue.

9. Profit before taxation

10. Staff numbers and costs

The average number calculated on a full time equivalent basis, of persons employed by the group (including directors) during the year, analysed by category, was as follows:

The aggregate payroll costs of these persons were as follows:

11. Directors' remuneration

The aggregate of remuneration and amounts receivable under long term incentive schemes of the highest paid director was $409,000 (2014: $382,000).

None of the Directors received a payment in lieu of pension contribution.

12. IPO and listing expenses and other one-off costs

Expenses incurred in respect of the Company's placing and AIM listing transaction and other one-off costs including re-financing costs and one-off professional fees. 

13. Finance income

14. Finance expense

15. Taxation

16. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year and total comprehensive income attributable to equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year. The weighted average number of shares for 2014 and the profit for the year ended 30 September 2014 include the shares issued by the Company in 2015 forming part of a share exchange with common shareholders.

The Company has 2,657,895 potentially issuable shares (2014: nil) all of which relate to share options issued to directors and key management personnel of the company. The dilutive number of issuable shares 185,441 for the purposes of calculating the dilutive earnings per share.

Diluted earnings per share amounts are calculated by dividing profit for the year and total comprehensive income attributable to equity holders of the parent company by the weighted average number of ordinary shares outstanding during the year together with the dilutive number of 185,441 ordinary shares.

Adjusted basic earnings per share have been calculated in order to compare earnings per share year on year and to aid future comparisons. The weighted average number of shares in issue has been restated on a pro-forma basis to reflect the post-IPO share capital structure. The adjustment assumes that the total shares issued [post-IPO] were in issue throughout all of 2014 and 2015. In addition, earnings have been adjusted to exclude IPO and listing expenses, share based payments and other one-off costs (and any associated impact on the taxation charge).

Adjusted diluted earnings per share is calculated by applying the same adjustments to earnings as described in relation to adjusted earnings per share divided by the weighted average number of ordinary shares outstanding during the year adjusted by the effect of the outstanding share options.

17. Property, plant and equipment - Group

No interest has been capitalised into property, plant and equipment. No items of property, plant and equipment are held under finance leases. The Group's principal properties are used as security for bank loans (see note 24).

The subsidiary companies transitioned to IFRS in 2005. On transition the properties were revalued by independent valuers. The overall increase in value was taken to the revaluation surplus. Subsequent additions have been shown at cost. The fair value of the Group's property, plant and equipment is considered to be greater than the book value recorded in these financial statements on the basis of the property valuation carries out by CBRE at the time of the IPO. The valuation was performed as at 15 April 2015 and indicated a value of $235.5 million.

All of the Group's non-current assets are located in Barbados.

18. Investments in subsidiaries

The Group and Company have the following investments in subsidiaries:

*Wholly owned held indirectly through subsidiary undertakings.

All investments in subsidiaries have been consolidated in these financial statements. Included within investments are intercompany loans to the subsidiaries which are considered by management to be as permanent as equity and have been treated as such.

19. Deferred tax assets and liabilities - Group

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

The recoverability of the deferred tax asset is dependent on future taxable profits in excess of those arising from the reversal of deferred tax liabilities. The deferred tax asset has been recognised to the extent that it is considered to be recoverable based on forecasts for future periods. At 30 September 2015, the value of the unrecognised deferred tax asset is $694,000 nil (2014: $ nil). Deferred tax assets and deferred tax liabilities are presented net in the statement of financial position as the Group has the legal right to settle current tax amounts on a net basis and the deferred tax amounts are levied by the same taxing authority on the same Group of entities that intend to realise the asset and settle the liability at the same time.

20. Inventories

21. Trade and other receivables

There were no receivables that were past due or considered to be impaired. There is no significant difference between the fair value of the other receivables and the values stated above.

The remainder of the other debtors balance is categorised as loans and receivables. All amounts shown under trade and other receivables, with the exception of the deposits for new leases, are due for payment within one year.

22. Short-term investments

Deposits are lodged with the providers of utility services in Barbados to secure supplies. There is no significant difference between the fair value of the short-term investments and the values stated above.

23. Cash and cash equivalents/ bank overdrafts

Cash and cash equivalents comprise cash, cash at bank and bank deposits with a maturity of up to 90 days.

24. Bank Loans, other interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group and Company's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group and Company's exposure to interest rate and foreign currency risk, see note 34.

Terms and debt repayment schedule

The Bank of Nova Scotia

On 26 May 2015, certain subsidiaries of the Group entered into a Credit Agreement with the Bank of Nova Scotia to provide a Term Loan Commitment of up to $50 million at LIBOR plus 2.75%, of which $45.0 million is currently drawn; a Revolving Loan Commitment of $5 million at LIBOR plus 2.75%; and an Uncommitted Operating Overdraft of $10 million at Base Rate less 2%. Neither the Revolving Loan or the Operating Overdraft has been drawn.

The Company is party as a guarantor to cross-guarantees in respect of the indebtedness of the subsidiary undertakings to the Bank of Nova Scotia. At 30 September 2015 the total indebtedness of subsidiary undertakings under these cross-guarantees amounted to US$45.0 million (2014: $nil).

Henry Stanley Rawle Moe

On 3 March 2014, Daphne's Restaurant Limited (the "Mortgagor") signed an agreement with Henry Stanley Rawle Moe (the "Lender") to finance the purchase of a parcel of land of approximately 12,000 square feet situated at Paynes Bay, St, James, Barbados.

The Mortgagor agreed to pay the balance of Bds$5,600,000 (US$2,828,000) by two equal annual payments together with interest of 5% per annum. Final payment of principal and interest is due on 3 March 2016.

Related Party loan

On May 14, 2010, the Subordinated Borrowers ('Crystal SL 1 Limited, Tamcove SL 1 Limited and Turtle SL 1 Limited') signed a Cure Right Subordination Agreement with the Bank of Nova Scotia ('Bank') and Vision Capital Partners IV, LP acting by its general partner VCP IV (GP) Limited, to enter into an unsecured debt junior to the Senior Debt as stated in the credit agreement and other loan documents pursuant to the Third Amendment for the purpose of curing events of default and to provide capital expenditure funding.

On December 20, 2010, the loan was transferred from Vision Capital Partners IV, L.P. to Vision Elegant Holdings LP.

The loan was unsecured, non-interest bearing and had no fixed terms of repayment.

25. Trade and other payables

All trade and other payables are due for repayment within twelve months. There is no significant difference between the fair value of the trade and other payables and the values stated above.

Trade payable days at 30 September 2015 were 36 days (2014: 41 days).

26. Employee benefits

The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the current year was $190,000 (2014: $185,000).

27. Share-based payments

Awards are made under long-term incentive and other arrangements. Certain employees of the Group have been eligible for options over ordinary shares in the company, awarded under the Share Option Scheme. The Company has no employees.

Options granted under the Scheme have a fixed exercise price base of 1p per option. The contractual life of the options is 5 years. Options cannot normally be exercised until the full vesting conditions have been met. These options are classified as equity settled.

Options were valued using the Black-Scholes option pricing model. The assumptions used in the calculation of share based payments are as follows:

· The nature of all arrangements is the grant of share options and these have an expected option life at grant date of 5 years

· Expected dividend (dividend yield) in all cases is 7%

· All option exercises are expected to be equity settled

· The expected volatility in all cases is 40% based upon historical share price volatility of listed, comparable businesses over a period of time equal to expected option life ending on date of grant

· The risk free rate applied to the options is 5.5% and is based upon the yield on zero-coupon Barbados government bonds of a term consistent with the expected option life

· It has been assumed that the employee attrition rate will remain at 6.3% throughout the period

Options over ordinary shares outstanding as at 30 September 2015

The options vest after 30 September 2017 subject to the market condition tests. The market condition tests are based on the company's earnings per share and the total shareholder return over the performance period which is from 1 October 2014 to 30 September 2017. Once these criteria have been met the options remain exercisable subject to the vesting provisions.

The weighted average exercise price for options outstanding at the period end was 1 pence.

A reconciliation of movements in all options outstanding during the period ended 30 September 2015 and an analysis of outstanding options is set out below.

There were 2,657,895 options outstanding as at 30 September 2015 with a weighted average remaining contractual life of 4 years and 7 months. 

The options vest after 30 September 2017 subject to the market and non-market condition tests. The market condition tests are based the total shareholder return over the performance period which is from 1 October 2014 to 30 September 2017. The non-market conditions are based on the company's earnings per share return over the same performance period. Once these criteria have been met the options remain exercisable subject to the vesting provisions. If performance conditions are not met then some or potentially all of the awards will lapse.

Based on the calculations described in this note, a charge of $494,000 has been included in the Statement of Profit and Loss and Other Comprehensive Income (2014: nil).

28. Share capital

The Company had one ordinary share of £0.01 and 50,000 redeemable shares of £1 each on incorporation. All of the redeemable shares were repaid during the financial year ended 30 September 2015.

During the year the Company issued 56,615,788 ordinary shares pursuant to a share-for-share exchange to acquire the whole of the equity interests of the Elegant Hotels investment and trading companies. The Company also issued 32,200,000 ordinary shares for cash under a placing agreement for the purposes of reducing the borrowings of the Group and to pay for costs associated with the IPO and the listing of the Company on AIM.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Dividends

On 30 September 2015 the Company declared an interim dividend of 1.75 pence per ordinary share which was paid on 31 October 2015. After the balance sheet date a final dividend of 1.75 pence per qualifying ordinary share (2014: nil) was proposed by the directors. The final dividend has not been provided for. 

29. Obligations under operating leases

All lease payments relate to a rented property in the United States. No other lease obligation is considered significant. The Company has no operating lease commitments.

30. Commitments

There were no outstanding capital commitments at 30 September 2015 (30 September 2014: $nil). 

31. Contingencies

The Company is a party as a guarantor to cross-guarantees in respect of the indebtedness of subsidiary undertakings. At 30 September 2015 the total indebtedness of subsidiary undertakings under these cross-guarantees amounted to US$45.0 million.

There are no other material contingent liabilities attributable to the Group or Company.

32. Post-balance sheet events

The Group has no material post-balance sheet events.

33. Related parties

Group

Immediately prior to the listing of the Company on AIM the Group's then controlling shareholder Vision Elegant Holdings LP had an outstanding loan to the Group of $10,000,000. This loan was settled by the issue of one share in Crystal SL1 Limited, Tamcove SL1 Limited and Turtle SL1 Limited on 11 May 2015. No interest was charged on the loan.

Transactions with key management personnel

The Elegant Hotels Group has a related party relationship with its directors, related companies, other group companies and affiliated parties controlled by its directors, senior officers, executives and significant shareholders of the parent company. "Key management personnel" represents certain senior officers of the Elegant Hotels Group.

Directors of the Company and their immediate relatives control 4.2 per cent of the voting shares of the Company.

The compensation of key management personnel excluding the directors is as follows:

Transactions between the Company and its subsidiary undertakings

The Company has provided funding from the proceeds of the IPO that has enabled subsidiary undertakings to significantly reduce their external borrowing commitments. A total amount of US$ 42.0 million was transferred from the Company to Elegant Finance (St Lucia) Limited on 26 May 2015. The majority of the funds were used to repay a portion of the outstanding debt of the Barbados hotel companies and the balance was used to fulfil the Group's commitments for the payment of costs associated with the IPO. The transfer of $42.0 million has been recorded as an inter-company balance that will be converted into an investment in equity in the subsidiaries.

In consideration for the services that the Company provides in the management of the Group and in arranging the financing of the subsidiaries, the Company has entered into management service agreements.

34. Financial Instruments

34. (a) Fair values of financial instruments

Fair values

The table below analyses financial instruments, into a fair value hierarchy based on the valuation technique used to determine fair value.

· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

· Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)