Minoan Regulatory News (MIN)

2 April 2014

Preliminary Results Announcement 

Minoan Group Plc (or "the Group") announces its preliminary results for the year ended 31 October 2013

HIGHLIGHTS

· Excellent progress made throughout the year in developing the Group into a successful international travel and leisure business

· Strong performance from the Travel and Leisure ("T&L") division - total transaction value up 37% to £51.2 million and operating profit for the continuing travel business up 47% to over £600,000

· The Group has bought in the 20% stake in the T&L division and arranged a £5m loan facility to accelerate the division's acquisitions and growth

· T&L performance since the year end continues to improve with an increasing gross margin and gross profit up by 15% in the period to March 2014

· Crete Project granted Fast Track status, Strategic Environmental Assessment submitted and, in advance of the final decision, the Sitia Municipality has voted in favour of the Project

· The realisation of the value of the Project, through joint ventures and partnerships is now a key objective of the directors

· With the Project's main value crystallisation event expected shortly, and the T&L division's accelerating growth, the Group is well positioned to deliver significant further enhancement of shareholder value

Minoan Chairman, Christopher Egleton commented:

"Currently we have never been closer to realising management's ambition of developing the Group into a successful international travel and leisure business after 12 months of outstanding progress.

Growth at the T&L division is accelerating, with strong double-digit increases in both revenues and operating profit. The new loan facility will ensure the pace of acquisitions continues to pick up while the buyback of the minority stake in the business ensures that Minoan shareholders will benefit from the full impact of this excellent performance.

With the Crete Project in Fast Track, the SEA submitted and reaffirmations of support from both the Greek Government and the Local Municipality, a final decision is expected shortly that would be the main value crystallisation event for the Project.

Given this backdrop we look forward to the coming year with every expectation of delivering further significant improvements both operationally and in terms of enhancing shareholder value."

Minoan Group Plc's Preliminary Results Announcement for the year ended 31 October 2013 can be viewed on the Company's website, www.minoangroup.com, with effect from 2 April 2014.

For further information visit www.minoangroup.com or contact:

Chairman's Statement

Introduction

The year under review saw the successful completion of the consolidation of the Group's travel business under the Stewart Travel brand and very strong trading results. The Group's project in Greece (the "Project") was granted Fast Track status and a major new financing facility was completed.

The Group has made significant progress in its twin objectives of the creation of a widely based travel and leisure business, and the realisation of value from the Project, having put in place the management, financial and technical resources to support both significant further growth of the travel and leisure division, and the progress of the Project towards Presidential Decree and beyond.

Since the year end we have continued to move forward with the buy in of the 20% stake in the travel business sold earlier in the financial year, the completion and submission of the Strategic Environmental Assessment ("SEA") for the Project and the start of the Public Consultation process on the SEA. In addition, we have agreed to acquire the trade and assets of Martin Singer Travel Limited, a successful, long established, independent business in the Aberdeen area.

Greece

The Project has already received the support of the local municipality in Sitia and the next step, assuming a successful Public Consultation, is the preparation and gazetting of the Presidential Decree setting out the development zones for the Project as approved under the Fast Track legislation.

Whilst the Group's team in Greece continues to work on matters concerning the granting of the Presidential Decree, the focus of their efforts is beginning to change and move towards the practical implementation of the Project.

The Group has completed major steps forward for the Project - Fast Track Approval, the preparation and submission of the SEA and its release for Public Consultation. With their completion, looking ahead, the primary objective for the directors is the crystallisation of shareholder value. It is intended to explore all possible avenues open to the Company including the progression of a number of ongoing discussions with potential joint venture partners and operators as well the instigation of discussions with other parties who have registered their interest in participating in the Project.

On a more general note, it has been announced that funds are being made available by the Greek National and Regional Governments to improve the road network in the region and also to allow the completion of the new passenger terminal at Sitia airport, both of which are expected to increase the tourism value of the local area.

Travel and Leisure

The Group's travel and leisure division has had another successful year with total transaction value growing by 37% for the year ended 31 October 2013 to reach £51.2 million (2012: £37.4 million) and a profit before tax from the continuing business of £604,000 (2012: £413,000).

Excluding the effect of acquisition and significant discontinued business streams, the gross profit of the division increased by 9%. This impressive growth reflects a mix of volume growth and the fruits of a conscious strategy to move away from traditional retail business towards higher margin business, thereby generating an overall increase in gross margin. In particular, the businesses of Cruise and Golf grew substantially ahead of the market.

Chairman's Statement (continued)

Travel and Leisure (continued)

Although the additional overhead base of acquired businesses has contributed to an increase in divisional overheads, underlying overheads remain broadly stable on a like for like basis. More generally, and in line with the underlying strategy, the infrastructure and overhead base of the business, together with the management team remain at a level appropriate to support a far greater volume of business and acquisition targets continue to be actively pursued.

Assuming the successful completion of its most recent acquisition, which remains subject to due diligence, the Group's travel division will have acquired and successfully integrated eight travel agencies and businesses to date.

Financial review

During the year, cash used in operating activities amounted to £2.2 million, funded by borrowings under the £5 million loan facility secured with Hillside International Holdings Limited ("Hillside"), other loans, plus the sale of a 20% interest in the T&L division, generating proceeds in the year of £2.5 million.

Since the year end, we have re-acquired the minority interest in the T&L division for a total consideration of £930,000, drawn further upon the Hillside facility, and directors and senior management have demonstrated their confidence in the Group by settling fees totalling £699,000 in equity and options.

Board change

On 19 February 2014, the Company announced that Barry Bartman was retiring from the role of Group Finance Director with effect from the end of that month whilst remaining on the Board as a non-executive director. The Company has commenced the process of recruiting a new Group Finance Director.

Barry has made an enormous contribution since joining the Board and my colleagues and I are very pleased that he has agreed to remain as a non-executive director so that the Group may continue to benefit from his wide experience and, in particular, his knowledge of the Greek business climate and the Project.

On a personal note, I am delighted that Barry is to remain with the Group.

Outlook

Greece

The progress made in the last few months has been gratifying and there is no doubt that there is now support for the Project at all levels within the Greek Government and communities local to the Project. I believe that the Board's long held belief both in the Project and in our team's ability to bring it to fruition is now closer than ever to being realised.

Chairman's Statement (continued)

Outlook (continued)

Travel and Leisure

The trading performance of the division since the year end has continued to strengthen.

In respect of the continuing business streams, total transaction value for the first five months of the current financial year increased by 10% and gross profit by 15%. The division's best performing areas are Corporate Travel and Cruise, both of which are registering annual sales growth rates of over 20%.

The Board is delighted by Travel and Leisure's performance so far this financial year. It is clear that sales are rising and discounts falling, which is the virtuous circle we aimed to achieve.

Our confidence in the outlook for the current year is reinforced by that the fact that the results for February are better than the industry trend with March reflecting even stronger growth.

The Travel and Leisure business continues to offer good opportunities for expansion and the Board will continue its buy-and-build strategy in seeking to acquire businesses that add value to our Stewart Travel brand.

We are continuing discussions with a number of prospective acquisitions in the North of England and expect to be able to update the market in the coming weeks.

Conclusion

This has been our most successful year to date and my colleagues and I look forward to reporting to shareholders on further significant progress in all areas of the Group's business over the next twelve months.

Christopher W Egleton

Chairman

1 April 2014

Consolidated Statement of Comprehensive Income

Year ended 31 October 2013

All of the activities of the Group are classed as continuing.

The Group had no recognised gains and losses other than the results for the year set out above.

Statements of Changes in Equity

Year ended 31 October 2013

Year ended 31 October 2013

Year ended 31 October 2012

Consolidated Balance Sheet as at 31 October 2013

Consolidated Cash Flow Statement

Year ended 31 October 2013

Notes to the Consolidated Cash Flow Statement

Year ended 31 October 2013

1 Cash flows from operating activities

Notes to the preliminary results

Year ended 31 October 2013

1. General information

The financial information set out in this Preliminary Results Announcement, which has been extracted from the Report and Financial Statements, does not constitute the Company's statutory accounts for the year ended 31 October 2013.

The Company is a public limited company incorporated in England and Wales and quoted on AIM. The Company's principal activity in the year under review was that of a holding and management company of a Group involved in the design, creation, development and management of environmentally friendly luxury hotels and resorts and in the operation of independent travel businesses, through which the Group provides a broad range of services including, inter alia, transportation, hotel and other accommodation and leisure services.

2. Accounting policies

Basis of preparation

These consolidated financial statements are prepared in accordance with EU adopted International Financial Reporting Standards ("IFRS") and the International Financial Reporting Interpretations Committee ("IFRIC") interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

The financial statements have been prepared on the going concern basis

The directors have considered the financial and commercial position of the Group in relation to its project in Crete (the "Project") and also in respect of its travel and leisure ("T&L") business. In particular, the directors have reviewed the matters referred to below.

Having received approval for the Project to qualify as a strategic investment and to be eligible for inclusion under the provisions of the Fast Track Law, the new process approved by the Greek Government allowing for quicker permitting time for Fast Track projects, the Company is currently awaiting the approval of the Strategic Environmental Assessment ("SEA") in respect of the Project, which was submitted on 23 December 2013. The SEA became available for public consultation, which includes the relevant ministries, on 19 February 2014. All comments should be received by the end of March 2014.

Accordingly, the directors consider it relevant that having completed a financial joint venture agreement prior to Fast Track and any other consents, they will conclude further Project joint venture agreements in the near term. In addition, the directors are considering a number of other agreements which are likely to have a major beneficial impact on the Group's resources. 

In addition to specific Project related matters as noted above, and as has been the case in the past, the Group continues to raise capital in order to meet its existing working capital requirements and the directors consider that any necessary funds will be raised as required.

With the first acquisitions in the planned expansion of its T&L business having been completed, the Group is now generating profits and cash flow within this sector of its activities.

Having taken these matters into account, the directors consider that the going concern basis of preparation of the financial statements is appropriate.

Notes to the preliminary results (continued)

Year ended 31 October 2013

3. Segmented information

The Group strategy and growth objectives necessitate the building of an associated infrastructure. The Group considers it appropriate to identify separately the corporate development division together with costs related to acquisitions. Accordingly, the Group is organised into three divisions both by business segment and geographical location:

· the luxury resorts division, currently being the development of a luxury resort in Crete, which includes the central administration costs of the Group;

· the Travel and Leisure division (UK), being the operation and management of the travel businesses; and

· the corporate development division (UK) as described above.

Notes to the preliminary results (continued)

Year ended 31 October 2013

3. Segmented information (continued)

The information presented below is consistent with how information is presented to the Board, with the Group's accounting policies and with the geographical location of the relevant divisions.

Notes to the preliminary results (continued)

Year ended 31 October 2013

3. Segmented information (continued)

4. Goodwill

Goodwill arising on acquisitions represents the difference between the fair value of the net assets acquired and the consideration paid.

Goodwill is tested annually for impairment. In particular, the directors have considered the current value of the Group's overall interest in the Project and its progress and are of the opinion that the Project site has longer term value in excess of the carrying value of non-current assets and inventories. The directors' opinion of the current value also takes into account the estimate dated 27 June 2011 of the development value of the Project site in the order of €100 million, which was included in the Company's AIM readmission document published on 30 September 2011 and which was reaffirmed in March 2012.

In addition, the directors are of the opinion that the projected value of the Travel and Leisure business, which is treated as one cash generating unit, is in excess of the value of the amount of goodwill attributable to them. This opinion is arrived at on the basis of the good names of the businesses acquired and the fact that the establishment of business clusters affords the Company the opportunity to realise certain economies of scale thus improving cash flow and profitability.

Notes to the preliminary results (continued)

Year ended 31 October 2013

4. Goodwill (continued)

Goodwill arising from acquisitions has been recognised as an asset.

5. Property, plant and equipment

In a prior year, certain costs in respect of the Project were reallocated to non-current assets. Although its long term commitment to the Project remains unchanged, the Group has re-assessed the treatment of this asset in the light of changes in the project financing market and its previously stated intention to develop the Project with joint venture partners and other interested parties. In order to provide flexibility in its future plans, and having taken relevant advice, the Group has decided that the costs in respect of the Project currently shown in non-current assets should be shown as a current asset as at 31 October 2013. As a result, these costs are now included in inventories. It is envisaged that any joint venture or partnership arrangements will preserve the nature of the Group's long term commitment to the Project.

Property, plant and equipment is stated at historical cost less accumulated depreciation and any recognised impairment loss.

Depreciation is provided in order to write off the cost of each asset, less its estimated residual value, over its estimated useful life on a straight line basis as follows:

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The directors consider that the book values of non-current assets do not differ materially from the market values.

6. Share-based payments

The Group has a Long Term Incentive Plan ("LTIP") in which any director or employee selected by the remuneration committee may participate. Awards under the LTIP have been granted on the basis that certain performance conditions will be met.

The Company has also granted options to purchase Ordinary Shares of 1p each.

A charge has been made in the consolidated statement of comprehensive income in respect of the LTIP and options using the Black-Scholes and Monte Carlo fair value pricing models as appropriate and charged over the vesting periods. This charge does not involve any cash payment. 

Notes to the preliminary results (continued)

Year ended 31 October 2013

7. Loss per share attributable to equity holders of the Company

Earnings per share are calculated by dividing the earnings attributable to the equity holders of a company by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share are calculated by adjusting basic earnings per share to assume the conversion of all dilutive potential ordinary shares. There are no dilutive instruments in issue, therefore, the basic loss per share and diluted loss per share are the same. The weighted average number of shares used in calculating basic and diluted loss per share for the year ended 31 October 2013 was 150,942,792 (31 October 2012: 120,434,862). 

8. Events after the balance sheet date 

1. On 27 November 2013, and in accordance with the terms of the loan facility agreement with

Hillside International Holdings Limited, the Company issued 5,000,000 warrants to subscribe for

Ordinary Shares of 1p each in the Company at 8 pence per share. The expiry date for these warrants

is 27 November 2017.

2. On 18 December 2013, the Company announced that it had issued a total of 3,809,000 new

Ordinary Shares of 1p each ("Ordinary Shares") at 10 pence per share to settle outstanding directors'

fees of £236,000 and amounts due to third party service providers and consultants. Included in the

above were 1,935,000Ordinary Shares issued to Simmons International Limited.

On the same day, the Company also announced that it had granted the following options in lieu of outstanding directors' fees in the amount of £463,000:

Finally, on the same day, the Company also announced that it had granted options in order to satisfy certain existing commitments to third party consultants as follows:

3. On 23 December 2013, the Company announced the issue of 750,000 new Ordinary Shares of 1p

each ("Ordinary Shares"). The Ordinary Shares were issued fully paid up at 7.5 pence per share in order to settle £56,250 of the loan note issued in respect of the acquisition of Stewart Travel Centre.

4. On 5 February 2014, in accordance with the terms of the loan facility agreement with Hillside

International Holdings Limited, the Company issued 10,000,000 warrants to subscribe for Ordinary

Shares of 1p each in the Company at 8 pence per share. The expiry date for these warrants is 5

February 2018.

Notes to the preliminary results (continued)

Year ended 31 October 2013

8. Events after the balance sheet date 

5. On 11 February 2014, in accordance with the terms of the financial joint venture agreement with

The Candia Investment Corporation dated 20 June 2012, the Company granted options to purchase up to 4 million Ordinary Shares of 1p each in the Company at 8 pence per share. The expiry date for these options is 30 September 2015.

6. On 12 February 2014, the Company announced that it had bought in the 20% non-controlling

interest in its travel and leisure business for a consideration of £930,000.

On the same day, the Company announced that The Candia Investment Corporation, and third

parties syndicated into its interest, now have a 5% economic interest in the project in Crete for a

consideration of £1 million.

7. On 17 March 2014, the Company announced that it had agreed to acquire the trade and assets of Martin Singer Travel Limited for an initial cash consideration of £250,000 and a deferred cash consideration based on the first year's profitability post acquisition, subject to a maximum of £500,000.

Subject to confirmatory due diligence, the acquisition, which is expected to be earnings enhancing, is to be completed by 31 May 2014.