Minoan Regulatory News (MIN)

2 May 2007 08:30

Minoan Group PLC02 May 2007 Minoan Group Plc ("Minoan" or "the Company") Admission to AIM Minoan, the leisure resort development company, announces that trading in itsordinary shares has commenced on AIM today, following publication of itsadmission document. Highlights • Move to AIM from PLUS. • AXIES S.A., a member of the Lambert Smith Hampton (Hellas) Group, an international group of chartered surveyors, has appraised the Group's interest in the site at Cavo Sidero in Eastern Crete, based on certain assumptions, at £115 million. Further details of the valuation are given in the admission document which has been sent to shareholders. • Minoan has signed its first Hotel Management Agreement for its luxury resort with Kempinski Hotels in respect of the hotel to be built at Grandes Bay. • Copies of the admission document are available free of charge from the offices of JM Finn & Co at Salisbury House, London Wall, EC2M 5TA. Christopher Egleton, Chairman of Minoan, commented: "We are delighted with the move to AIM and we look forward to making furtherprogress with the exciting development at Cavo Sidero in Eastern Crete. Whilstbeing quoted on PLUS Markets has allowed us to develop the business to thisstage, we anticipate that the move to AIM will lead to an improved profile andstatus for Minoan among prospective investors and customers. Tony Marshall joined the Group as a director of Loyalward Limited in October1993 shortly after that company had submitted its original tender for the CavoSidero contract. He has served as a non-executive director of Minoan sinceJanuary 2000 and his considerable expertise and ongoing support of the Companywill be missed. He leaves with the Board's very best wishes for the future". For further information visit www.minoangroup.com or contact: Christopher Egleton Minoan Group Plc 07808 722022 Bill Cole Minoan Group Plc 01689 897397 Geoff Nash J M Finn & Co Ltd 020 7628 9688 Alan Frame Westport Communications Ltd 020 7404 7878 Introduction The Group's business is to assemble, design and supervise the construction ofthe development and, ultimately, to manage the proposed resort at Cavo Sidero, a25 square kilometre site in Eastern Crete. It is proposed that the developmentand operation of the resort will be based on the principles of sustainabledevelopment. The site is owned by a charitable foundation ("the Foundation")established by the Holy Monastery of Toplou and the Holy Metropolis of Sitia andIerapetra and has been provided to the Group under the terms of a contract withthe Foundation dated 14 July 1998 ("the Contract"). On 7 November 2006, the Company announced that it had received approval from theGreek Ministry of Environment, Planning and Public Works, of the Group'sEnvironmental Impact Study ("EIS"). After being signed by all competentministers, the formal approval of the Environmental Terms was published on 18February 2007. The Directors currently envisage that, when complete, the resort will comprisefive hotel complexes in the form of "villages" which will provide accommodationfor up to 7,000 residents and visitors. The comprehensive amenities of theresort are expected to include, inter alia, a 45 hole golf complex,incorporating a championship standard course ("the Golf Complex"), a tenniscentre, a theatre and arts centre, an athletics complex, a spa, water sportsfacilities, shops and restaurants. The Directors believe that the resort will bethe first luxury integrated holiday resort of its type in Crete. AXIES S.A., a member of the Lambert Smith Hampton (Hellas) Group, aninternational group of chartered surveyors, has appraised the value of theGroup's interest in the site, based on certain assumptions, at approximately£115 million. This is after deducting the cost of putting in place the necessaryinfrastructure and on the basis that all local and national consents requiredfor the development have been obtained. A copy of a letter from AXIES S.A.,containing the bases and assumptions of the valuation is set out in theadmission document. The Group's strategy coincides with the stated policy of the Greek Governmentregarding high quality tourism and foreign direct investment. Over the past fewyears the Group and the project have received considerable support from variousGreek Government Ministers and Ministries, local communities in Crete and theBritish Government through HM Ambassador in Athens. The development appears onthe website of the Greek Ministry of Economy and Finance as one of threeexamples of large-scale investments confirming a "significant increase inforeign investment demonstrating confidence in the Greek economy". The Market Opportunity Over the last decade, the demand from Northern Europe for overseas holiday homeshas increased substantially. To date, British demand for second homes in theeastern Mediterranean has been mainly focused on Cyprus, where the Directorsconsider that the nearest comparable development to Cavo Sidero is at AphroditeHills, Paphos. The Directors believe that visitors are now seeking new opportunities in SouthEastern Europe, particularly destinations which enjoy the Mediterranean climateand excellent recreation facilities, such as those available on the IberianPeninsula, but which are less crowded and offer better value. The Directorsconsider that Crete, and the resort in particular, meets these criteria. Crete is the largest of the Greek islands with a length of approximately 260kilometres, its width ranging from 10 kilometres to 56 kilometres. The majorityof the population lives in the central part of the island where the largestcity, Heraklion, is located. The island has a well-developed infrastructure withgood air and sea communications to mainland Greece and beyond. The climate ismild, with the winter temperature averaging 12 degrees Celsius rising to anaverage of 30 degrees Celsius in the summer with more than 300 days of sunshineeach year. Crete is renowned for its rugged coastline, unspoilt sandy beaches,gorges and varied countryside. This natural beauty is complemented by many sitesof significant cultural interest and areas of great historical andarchaeological importance including the Minoan palaces at Knossos and Zakros. The Cavo Sidero Project The Site The land for the resort at Cavo Sidero, to which the Group has rights under theContract, further details of which are contained in the admission document, islocated in Eastern Crete on a peninsular site of approximately 25 squarekilometres (or 10 square miles). The site is an area of undeveloped land withgood transport and communications. The peninsula is already a recognised touristdestination because it contains the Holy Monastery of Toplou, the archaeologicalsite at Itanos and, at Vai, the site of the only natural palm forest in Europe. Sitia Airport, which is approximately 25 minutes from the site by car, wasrecently extended and upgraded to handle the current generation of short haulaircraft used in Europe. The airport is certified as an international airport bythe Greek Civil Aviation Authority and is currently operational on a limitedbasis. A new terminal building is scheduled to be open by 2009, approximatelythe same time as Cavo Sidero is planned to become operational. Resort Features The resort will offer a range of facilities designed to meet the requirements ofdifferent market segments. Key attributes will include: • a model of sustainable development to meet the growing market demand for such a destination; • a very low density, luxury resort set in a large environmentally regenerated and managed area, and built to high quality standards; • a combination of hotels, apartments and villas; • a wide range of leisure and sports facilities; • good international accessibility via a modern airport; and • cultural facilities designed to involve and engage visitors in the life of the region. When complete, it is planned that the resort will provide an extensive range ofamenities for guests including the Golf Complex, a tennis centre, a theatre andarts centre, an athletics complex, a spa, water sports facilities, shops andrestaurants. Commercial In accordance with the Group's stated policy of appointing those consultants,partners and other professionals who are at the forefront of their respectivefields, the following commercial agreements have been entered into: On 19 April 2007, the Company announced the signing of a Hotel ManagementAgreement with Kempinski Hotels ("Kempinski") in respect of the Grandes BayHotel, one of the five proposed hotels in the resort. Kempinski is one of theworld's leading luxury hotel management groups and, in 2007, is celebrating 110years as a hotelier. The Directors believe that this agreement underlines CavoSidero's credentials as a luxury resort. Negotiations with other operators areongoing. The management of the Golf Complex has been entrusted to PGA GolfManagement Limited who will provide advice throughout the construction phasebefore assuming the management of the golfing facilities. Resort Group International Limited ("Resort Group") has been appointed to act asagent for the international marketing of luxury homes across the entire Project.Resort Group has been established by Graeme Grant, the former Chairman ofPremier Resorts Limited, inter alia, the company involved in the marketing ofAphrodite Hills in Cyprus. The Approvals Process Throughout the approvals process, the Group has worked closely with itsprofessional advisers in Greece and the UK to ensure that all the necessaryprocedures have been correctly followed. The Group's plans are intended toensure that the development will meet or exceed the highest current standards ofcompliance under both Greek national and EU building and environmentalregulations. This has been a time consuming and exacting process but one whichthe Directors consider to have been essential in order to ensure that theGroup's objective of creating a luxury, integrated resort, which also respectsthe principles of sustainable development, is achieved. The Group's plans have evolved to reflect the substantial market changes thathave taken place in recent years as well as to take account of the terms andconditions specified in the various approvals received. The EIS approval represents the successful conclusion of many years of intensiveeffort by the Group and its advisers. However, on 17 April 2007, an appeal against the EIS approval was lodged withthe Greek Council of State. As in many other juristictions, appeals are notuncommon and the lodging of this appeal was anticipated by the Company. Theappeal has been lodged on the grounds, primarily, that the EIS approval violatedthe environmental laws of Greece. However, following legal advice, the Board isconfident that the EIS fully respected all such environmental laws and theCompany will do all in its power to assist the Greek Government in defendingthis appeal. It is not possible at this stage to estimate how long the appeal process willtake but the Directors hope that the appeal hearings will commence during thecourse of this summer. Appeals in respect of projects of major importance suchas Cavo Sidero are usually dealt with expeditiously by the Greek courts,although they may involve a number of court hearings. Care has been taken to ensure that the Project has as low an impact as possibleon the environment and also is consistent with a sustainable development. Giventhis fact, plus the desire of both the Greek Government and many of the localcommunities in Crete for Cavo Sidero to succeed, the Board is confident that theappeals process will be successfully concluded. Minoan will then proceed tosecure the remaining regulatory licences (for example, building licenses) inorder to be able to start construction. Environmental Protection The Cavo Sidero Project was conceived and designed to be environmentallysensitive. Since then, however, the continuing increase in environmentalstandards required both by legislation and by the market has resulted in theoriginal concept being substantially revised and enhanced. Minoan has alwaysregarded the protection of the environment as paramount. The Group's plan forsustainable development includes a build footprint of less than 1 per cent. ofthe area of the project and is intended to reinforce and underpin the keyelements of environmental and cultural heritage which are regarded by theCompany as being essential for the long term commercial prospects of thedevelopment. As part of its environmental and sustainable development policies, the Group hasrecently signed a partnership agreement with Forum for the Future for theintegrated tourism and land management of the resort. Forum for the Futurebrings a major sustainability resource of the highest calibre to the project.This will enable the Group to increase the levels of sustainability of everyelement of the project, thereby satisfying a perceived growing market demand forresponsible, sustainable resorts in the Mediterranean area. Strategy and Future Prospects Business Plan The Board anticipates that the Group's income will derive from the followingsources: • the marketing of residential units within thedevelopment, whether "off plan" or completed, either individually, in blocks ofunits or in clusters to joint venture developers and others; • the operation/leasing of the Group's interests inthe individual hotels, golf courses, commercial properties, leisure facilitiesor joint ventures which may be formed to facilitate the development of suchassets; • the provision of resort management services andcommon (public) utility services where these are not supplied by the localauthority; and • the operation of franchises and concessions in theResort. Financial Strategy For the purposes of projecting the working capital requirements of the business,the Board has made the prudent assumption that the appeal lodged against the EISapproval takes more than a year to resolve. On this assumption constructionwould not commence until late 2008 and no significant project development costsor considerations due under the Contract are incurred in the twelve months fromAdmission. The pre-construction and development programmes will commence following theraising of the relevant project finance. These programmes envisage that theinitial costs of the project will include: • preliminary costs relating primarily to staff recruitment and office establishment; • design and survey work required in connection with obtaining building licences; • site enabling costs including fencing, offices and signage; and • 3.9 million to be paid to the Foundation under the Contract. The Group is continually reviewing the funding requirements necessary to allowit to achieve its immediate and future goals and the optimum way of satisfyingthese requirements. It is currently expected that nearly all of the finance forthe project will be raised in the form of project finance and/or from jointventure partners. In the light of discussions to date, the Board is confident that the requiredproject finance can be obtained on acceptable terms. The strategy is toimplement the project by phasing the construction programme such that theGroup's financial risk profile is kept within prudent limits whilst at the sametime allowing the completion of the Project. The Group's plans envisage thatconstruction will take place in two main phases. Subject to market demand, phaseone will include the village at Grandes Bay, the Golf Complex and the Golf andConference village, whilst phase two will be the remaining proposed threevillages (being White Sands, Porto Sidero and Crystal Cove). It is the intention of the Board to implement the project alongside thirdparties, where appropriate, in order to minimise exposure and risk. This islikely to involve the utilisation of joint venture vehicles. Such third partieswill be chosen for their competence, financial strength, general experience andlocal acceptability. The Company will need to pay the balance of the initial consideration due underthe Contract on "activation" of the Contract. This consideration is not anoperational cost of the business. Activation occurs when Loyalward obtains abuilding licence for phase one of the project and this will not take placeunless and until the appeal lodged on 17 April 2007 and any subsequent appealsare resolved. Taking a prudent view, the Directors have assumed that this willnot be until late 2008. The Group has arranged a guarantee with Singer & Friedlander Limited in respectof the balance of the initial consideration, details of which are set out in theadmission document. This guarantee is due to expire on 31 December 2007. Theguarantee has been renewed twice before, most recently on 11 April 2006. It isthe Board's expectation that this guarantee will be renewed again on 31 December2007, if required. AXIES S.A. Valuation The residual land value of the site has been assessed by AXIES S.A. atapproximately £115 million, on the bases set out in their letter which iscontained in the admission document. The key assumptions referred to in AXIES S.A.'s assessment include: • improvements in local transport infrastructure; • all development constructed to a high quality; • security of tenure for purchasers of villas and apartments is assured through the Contract, so as to provide a surety of tenure aligned to the freehold title of the Foundation; • all local and national consents required for the development have been obtained; • hotel profitability is as forecast by the Group'shospitality consultants; • marketing of the residential development achieves the prices forecast by Resort Group, the Group's marketing agents; and • costs of infrastructure and construction are as forecast by the Group's cost consultants. The residual land value of approximately £115 million is based on assessing thecompleted value of the development and from this, deducting all likely costs ofconstruction, fees, interest and the developer's profit. The remainder is thatpart of the completed value which can be attributed to the land. Shareholder Loyalty Scheme The shareholder loyalty scheme, was established in December 2003, with theintention of recognising the support of shareholders holding at least 7,500Ordinary Shares in Minoan for a period of twelve months or more. Qualifyingshareholders will receive substantial discounts on the price of certain of theresort's properties. These discounts will rise in stages from a holder of 7,500Ordinary Shares being entitled to a discount of £2,000 on the combined price ofone low season week and one peak season week for a two bedroom townhouse/apartment, to the holder of 500,000 Ordinary Shares or more receiving a discountof £125,000 on the price of a three or four bedroom villa on the site. In addition, as part of its normal financing arrangements, discounts have beenagreed with others. The Group has also adopted a scheme for senior management(including the Directors) under which, subject to a minimum period of servicewith the Group, an eligible person is entitled to acquire a property on a costplus basis which will be at a discount to the market rate. Whilst it is difficult to quantify the aggregate amount of such discounts, thetotal of discounts available outside the shareholder loyalty scheme is notexpected to exceed 2.25 per cent. of the projected total sales of the resort'sproperties. Directors and Management The Group's policy is to retain a small central management team which will beaugmented as necessary as the project is implemented. The current team is asfollows. Board of Directors Christopher Egleton, Chairman, aged 61 After qualifying as a chartered accountant and a subsequent career in the Cityof London in merchant banking, Mr Egleton spent a period of 6 years with BritishLand. He then became chief executive and founder shareholder of Beckenham Group Plc, a small industrialgroup which was floated on the Third Market in 1987 and subsequently moved tothe Unlisted Securities Market in 1989. He relinquished his major executive rolein relation to that group in 1991 and retired from the group in 1993. Throughoutthe late 1970s and the 1980s he participated in a series of propertytransactions including existing residential units as well as development sitesfor both residential and industrial development. For a number of years he wasthe major shareholder in Pentex Group plc, a UK oil exploration and productioncompany. He realised the bulk of his investment in Pentex Group plc between 1994and 1995, immediately prior to its flotation, and since that date hasconcentrated on a number of business interests but principally that of theGroup, which he joined in 1995. He was the founder of Sutherland Associates aventure capital partnership. Barry Bartman, Finance Director, aged 65 Mr Bartman is a specialist in corporate finance and business strategy. Afterqualifying as a chartered accountant in 1965, he worked primarily in corporatefinance at Coopers & Lybrand, N M Rothschild & Sons and British Land. He hasworked as a consultant for many years with a number of major banks andinstitutions as well as many private and listed industrial companies. He hasheld various executive and non-executive directorships/chairmanships, includingfinance director and non-executive director of Signature Restaurants PLC, wherehe was involved in the refinancing and growth of the business via acquisition.As senior non-executive director, he negotiated the management buy-out ofSignature Restaurants led by its chairman, Luke Johnson. He has acted as aconsultant to Minoan since May 2005, and joined the Board in 2006. Geoffrey Brown, Project Director, aged 56 Mr Brown has over 35 years experience in construction and property developmentin the UK and overseas. Ashgate Development Services Limited, of which he ischairman, has managed several high profile developments, including the awardwinning regeneration of central Coventry which was shortlisted for the StirlingPrize, the UK's premier architectural award. He was managing director of thedevelopment management division of Speyhawk and previously he worked for AlfredMcAlpine and HBG in the Middle East and Nigeria. He joined the Board in 2005. He has extensive experience in managing large schemes and of particularrelevance to the Project are his previous involvements with the Riffa Golf andLeisure Complex in Bahrain, the Courland Bay Resort in Tobago and Campo de Marin Majorca. He has also been involved in various luxury hotel/ residentialprojects in the UK, including Lucknam Park, a member of Relais & Chateaux. Timothy Hill, Operations Director, aged 58 Mr Hill is a director of the Project Management Division of WT Partnership(which provides services to Minoan), one of the world's largest quantitysurveying and project management companies. He is a registered architect withmore than 30 years international experience in Europe, Africa and Asia, and hasworked either as an architect and/or project manager on a variety of commercial,industrial and governmental projects, specialising in hotel and leisuredevelopments. Relevant projects include the Pine Cliffs golf resort in Portugal,the Pemberton resort in St Thomas in the British Virgin Islands, St James Beachhotels in Barbados and the Sandyport Marina Development in Nassau, Bahamas. Hejoined the Group in 1993. Duncan Wilson, Non-Executive Director, aged 48 Mr Wilson is a travel professional with over 25 years experience and an in-depthknowledge of the leisure industry. He was previously a main board director of MyTravel plc, formerly known as Airtours, a £3 billion turnover company, prior towhich he was CEO of Direct Holidays PLC. During his five year tenure at DirectHolidays the profits tripled and it was then sold to Airtours for over £80million. In 1991 he was part of a group which acquired leading independentresort estate agents, Beach Villas, which was sold to Thomas Cook in 1997. Hejoined the Board in 2006. Grahame Cook, Non-Executive Director, aged 49 Mr Cook, a chartered accountant, has held a number of senior executivepositions. These include most recently his role as Chief Executive at WestLBPanmure, until 2003, where he was responsible for all global functions and theexpansion and development of WestLB Panmure's business. Prior to this he spentthree years at UBS as a managing director where he was on the Global InvestmentBanking Management Committee. He was also a director of Barclays de Zoete Wedd.He was a founding member of the London Stock Exchange techMARK Advisory Counciland currently holds various other non-executive positions including Antisoma PLC(Official List), Sinclair Pharma Plc (Official List and Euronext) andNon-Executive Vice Chairman of US/European investment bank Moore Clayton & Co.He joined the Board in 2006. Charles Young, Non-Executive Director, aged 53 Mr Young spent 18 years with the British Linen Bank, which was the merchantbanking subsidiary of Bank of Scotland, including six years as a corporatefinance director and a further five as managing director of the bank'sinvestment banking department. He left in 1997 to pursue private businessinterests and became a partner of Christopher Egleton in Sutherland Associatesat that time. Since September 2002 he has held the position of joint managingdirector of E G Thomson (Holdings) Limited, a private investment holding companywith a range of interests including shipping agency, logistics, propertymanagement, travel agency and private equity investment. He joined the Group in1998. Senior Management William Cole, Group Company Secretary and Director of Loyalward Limited, aged 61 A chartered accountant, Mr Cole was a member of the London Stock Exchange and adirector of a number of private companies. He has been involved with the Groupsince 1993 and was a member of the team who negotiated the Contract with theFoundation. Constantin Valassakis, Non-Executive Director of Loyalward Limited, aged 45 Mr Valassakis has a Masters Degree in Economics from the University of Bordeaux,France. He is a shareholder and managing director of several Greek companies,which represent foreign manufacturers in Greece and he assists them to implementtheir offset obligations with the Hellenic Government. He is also a member ofthe Hellenic Golf Federation, with a particular interest in promoting anddeveloping the game of golf in Greece. Jeremy Watts, Non-Executive Director of Loyalward Limited and Managing Directorof Loyalward Hellas S.A., aged 61 Mr Watts has a BSc in Mechanical Engineering and an MBA from CranfieldUniversity. He has held senior management positions in companies operating inthe UK, Europe, the Middle East, Africa and the United States, including LaportePlc and Blue Circle Industries. He moved to Greece with Blue Circle in 1999until it was acquired by Lafarge in 2002, at which time he resigned to pursueprivate interests. Mr Watts is domiciled in Greece. Aristos Vassiliades, Finance Director of Loyalward Hellas S.A., aged 53 Mr Vassiliades is a graduate of the London School of Economics and he qualifiedas an accountant with Price Waterhouse. He worked for Latsis Group for 12 years(as manager and director of Internal Audit and as Deputy Financial Controller ofPetrola Hellas). In 1997 he joined J & P Group (Greek contractors anddevelopers) as Financial Consultant and left in 1999. He was then employed byLeptos Group (resort developers) as General Manager of its Greek operationsbefore joining Loyalward Hellas S.A. in November 2002. Reasons for Admission The Directors believe that Admission will raise awareness of Minoan, which theDirectors are confident will lead to an improved profile and status amongprospective investors and customers. The move to AIM from PLUS may enhance the liquidity of the Company's shares on amarket that the Directors believe will be more responsive to the growth of theGroup's business. Dividend Policy The Directors do not envisage declaring a dividend in the near future. However,if and when sufficient distributable reserves are available, the Directorsintend to pursue a progressive dividend policy. Lock-ins and Orderly Market Arrangements At Admission the Directors and persons connected with them will own 1,947,464Ordinary Shares representing 4.07 per cent. of the existing Ordinary Shares. TheDirectors have undertaken to the Company and JM Finn that subject to certainlimited exceptions they will not sell or dispose of any of their respectiveinterests in Ordinary Shares at any time before the first anniversary ofAdmission and for the 12 months immediately following will effect a sale onlythrough the Company's brokers and will only do so following the consent (not tobe unreasonably withheld) of JM Finn (or the Company's nominated adviser if itis no longer JM Finn) in relation to any such disposal and further that any suchdisposal will be made in such a manner as such broker may reasonably requirewith a view to maintaining an orderly market in the Ordinary Shares. Long Term Incentive Plan The Company has established the Minoan Group 2007 Long Term Incentive Plan inorder to allow officers and employees of the Group to share in the success ofthe Company and promote motivation and retention. The remuneration committeewill supervise the operation of the LTIP in respect of the participants. Theterms of the LTIP are summarised in the admission document. The Company may issue up to 12.5 per cent. of its issued Ordinary Shares, fromtime to time, within a ten year period to satisfy awards to participants in theLTIP and any other share plan operated by the Company under which OrdinaryShares are issued to officers or employees. There are currently up to 4,340,000Ordinary Shares that may be issued under the LTIP. Warrants and Options The Company currently has 2,317,251 warrants and 4,666,889 options outstanding. This information is provided by RNS The company news service from the London Stock Exchange