Half-yearly Report
Cubus Lux plc
(the "Company")
Half-yearly Report for the six months to 30 September 2010
Cubus Lux plc, the operator and developer of premier tourism and leisure
facilities in Croatia and Montenegro, announces its results for the half year
ended 30 September 2010.
KEY HIGHLIGHTS
* Negotiations on financing options for projects at an advanced stage and new
financing opportunities becoming offered.
* Montenegrin Parliament has approved the detailed plan for the Valdanos
resort subject to contract.
* Casino business to be disposed of to focus on managed resorts and other
leisure related tourism facilities.
* Preparation of contingency plans to ensure, in the absence of funding, that
the Company remains in a secure financial position.
* Revenues of £679,000 (2009 - £965,000)
* Pre-tax loss of £1.4 million (2009 - pre-tax loss £0.6 million)
* Net loss per share of 7.11p (2009 - loss per share of 3.2p)
* £646,000 additional equity raised during the year.
Commenting on the results, executive chairman Dr. Gerhard Huber said;
"With the combination of Croatian's progress towards EU membership and the
focussed emphasis by the Government to push forward with projects involving
high quality leisure facilities that will extend the tourism season, Cubus Lux,
after ten years of development and operation in Croatia, appears to have first
mover opportunities for new projects.
The financial and credit markets show some improvement but overall still remain
at a slower pace to 2008 which is giving us challenges in securing necessary
finance. However, the Board remains committed to its vision of becoming the
number one leisure and tourism company in this region.
We are negotiating on several financing options and would hope for at least one
of these to be finalised early in the New Year. In the event that financing is
delayed we have contingency plans to streamline the Company and to maintain a
healthy liquidity which will guarantee our continued operation in the meantime.
We look forward to providing appropriate updates in due course."
For further information about the Company and the complete interim report
please see www.cubuslux.com or contact:
Cubus Lux plc Steve McCann +44 (0) 7787 183 184
Northland Capital Luke Cairns and Rod Venables +44 (0) 20 7492 4750
Partners Ltd
Hybridan LLP (Broker) Claire Louise Noyce +44 (0) 20 7947 4350
CHAIRMAN'S STATEMENT
REPORT AND FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
I am pleased to present the results for the six months ended 30 September 2010
Overview
The Company continues to explore new leisure related project opportunities in
Croatia and Montenegro to further our vision of becoming the number one leisure
and tourism company in this region. We are engaged in the development of
numerous projects but, as we have commented previously, all are subject to
financing.
The Company has advanced in its discussions with a number of parties to provide
the funding that will allow the Company to progress its various projects.
Whilst the directors remain optimistic of finalising one or more of these, to
date, none have yet come to fruition.
The Company currently has term sheets for financing from, the equivalent of, €
100,000,000 to €200,000,000 although there can be no guarantee that these will
be formalised. In the absence of the necessary funding in the near term the
directors are considering a number of alternative options to ensure that the
Company remains liquid as funding continues to be sought.
Although our main focus is Olive Island Resort and the funding, we have made
considerable progress on Valdanos and the marina expansion programme. The
Montenegrin Parliament, at the end of November 2010, finally approved the
Detailed Plan for Valdanos and we have now been invited to sign the Purchase
Agreement which we expect to do shortly after the New Year. In addition, we are
very close to agreeing terms on two of our marina targets.
Cubus Lux d.o.o. - the gaming company
The casino is largely dependent on the local trade and Italian tourists. As
previously reported, the numbers of Italian tourists visiting Croatia this year
have been much lower than in previous years and, in addition, the trade at the
Hotel housing the casino has not yet recovered to the levels achieved prior to
the start of the Hotel's refurbishment. As a result, trading during the summer
proved quite disappointing and resulted in a loss. The Company has therefore
decided to refurbish the casino with a view to the disposal of the gaming
business, which would enable the Company's management to concentrate on resort
management and real estate projects.
Plava Vala d.o.o. - the marina company
As previously outlined, our goal is to have a string of marinas, with some
level of real estate development, connecting our principle resorts. We have
made good progress in identifying further marinas that would both enhance our
business but also meet the Croatian Government's objective of extending the
tourism season through top quality leisure facilities. However, all are subject
to having sufficient funds to acquire and develop them and as such the Company
is currently restricted as to how far it can advance these plans. We would look
to finance the expansion through our own sources but would also consider
involving a partner as appropriate.
As previously announced, we have also been assessing the viability of
increasing the number of berths at our current marina at Sutomiscica but this
expansion is restricted to our cash resources. As highlighted above, in the
absence of third party funding, the Company is reviewing its own asset base and
its ability to realise some value and, in respect of our overall strategy, we
are reviewing possible disposal opportunities for the marina at Sutomiscica.
Real estate
Our Molatska development is progressing well and on course for completion by
May 2011. As previously reported we have reduced the book value to a pre-agreed
disposal price should we leave this project before completion, which we would
have to do in the absence of funding. As a result of the initial delayed start
of construction, the Hypo Alpe Adria Bank loan which was originally due for
repayment 1 October 2010 has been extended to 31 December 2011. This will allow
the final draw-downs and enable the project to be fully completed.
Although credit market conditions do still remain difficult for large-scale
projects such as ours we are more confident that we will be able very soon to
close the purchase contract in respect of Olive Island Resort, our primary
focus. In the event that appropriate funding is not secured then the directors
would release the Company's interest in the Project and pursue the Municipality
for deposits currently paid which amount to €1.7m. The Company needs
approximately €70m to complete the land purchase and phase one development for
the Olive Island Resort and Hotel.
Our Valdanos project is now approved, subject to signing the purchase agreement
and we can focus further on its development and financing (full development
costs would be in the region of €135m) and a further announcement will be made
when the agreement is signed.
Financial
For the six months ended 30 September 2010 the Company reports revenue of £
679,000 and a pre tax loss of £1,411,000.
Loss per share amounted to 7.11p
The Company issued a further 4,620,319 new ordinary shares at 14p during the
half year.
Plans for the future
As the first of our `resort' projects, we continue to focus on the `Olive
Island' project as our main objective. This will set the standard for Cubus Lux
and assist in fulfilling our vision and continuing strategy in the leisure and
tourism industry of Croatia and Montenegro. This resort together with the
accompanying real estate programme will provide a very strong foundation for
the Group's future development.
Overall, the board believes it is getting ever closer to obtaining the
necessary and significant funding to finance our various existing and
prospective projects whilst running alternative contingency plans which would
ensure, in the absence of funding, that the Company remains in a secure
financial position.
GERHARD HUBER
Chairman
Executive Director
GROUP INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Six months to Six months to Year ended
30 September 30 September 31 March
2010 2009 2010
Unaudited Unaudited Audited
Note £'000 £'000 £'000
REVENUE 2 679 965 1,480
Cost of sales (68) (106) (160)
------------- ------------- -------------
GROSS PROFIT 611 859 1,320
Administrative expenses (1,377) (827) (2,844)
Other (expenses)/income 4 (27) 190 (637)
------------- ------------- -------------
OPERATING (LOSS)/PROFIT (793) 222 (2,161)
Net finance expense (618) (821) (1,402)
-------------- -------------- -------------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (1,411) (599) (3,563)
Tax on ordinary activities 3 - (3) (2)
------------- ------------- -------------
LOSS FOR THE PERIOD (1,411) (602) (3,565)
Exchange difference on
translation of overseas
operations 147 (101) (25)
------------- ------------- -------------
TOTAL COMPREHENSIVE LOSS
FOR PERIOD/YEAR (1,264) (703) (3,590)
====== ====== ======
ATTRIBUTABLE TO:
Equity holders of the Company (1,379) (585) (3,569)
Minority interest (32) (17) 4
------------- ------------- -------------
(1,411) (602) (3,565)
====== ====== ======
EARNINGS PER SHARE
Basic and diluted 5 (7.11)p (3.2)p (18.99)p
====== ====== ======
GROUP BALANCE SHEET
AT 30 SEPTEMBER 2010
As at 30 As at 30 As at 31
September 2010 September March
2009 2010
Unaudited Unaudited Audited
£'000 £'000 £'000
Non-current assets
Intangible assets 39,093 39,093 39,093
Goodwill 738 1,576 738
Property, plant and equipment 4,454 5,077 4,780
-------------- -------------- --------------
44,285 45,746 44,611
-------------- -------------- --------------
Current Assets
Inventories 10,592 5,725 8,252
Trade and other receivables 966 974 660
Cash at bank 2,592 2,782 2,675
--------------- ------------- ---------------
14,150 9,481 11,587
--------------- --------------- ---------------
TOTAL ASSETS 58,435 55,227 56,198
======= ======= =======
EQUITY
Capital and reserves attributable to
the Company's
equity shareholders
Called up share capital 2,390 1,892 1,928
Share premium account 17,320 17,114 17,135
Merger reserve 347 347 347
Retained earnings and translation (3,532) 265 (2,345)
reserves
--------------- ------------- --------------
TOTAL EQUITY 16,525 19,618 17,065
-------------- -------------- --------------
MINORITY INTEREST IN EQUITY 205 216 237
-------------- -------------- --------------
LIABILITIES
Non-current liabilities
Deferred consideration 416 416 416
Deferred tax liabilities 7,818 7,818 7,818
Loans 4,356 7,047 2,615
-------------- -------------- -------------
12,590 15,281 10,849
--------------- -------------- -------------
Current liabilities
Trade and other payables and deferred 7,772 3,712 6,216
income
Loans 21,343 16,396 21,831
Amounts due under finance leases - 4 -
-------------- ------------- --------------
29,115 20,112 28,047
--------------- -------------- --------------
TOTAL LIABILITIES 41,705 35,393 38,896
-------------- -------------- ----------------
TOTAL EQUITY AND LIABILITIES 58,435 55,227 56,198
======= ======= ========
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Six months to Six months to Year ended
30 September 30 September 31 March
2010 2009 2010
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit before taxation (793) 222 (2,161)
Adjustments for:
Exchange rate difference (176) (202) (242)
Share based payments 45 28 276
Depreciation and amortisation 163 178 359
Adjustment to deferred consideration 27 (190) -
Profit on disposal of fixed assets - - 60
Impairment of goodwill - - 837
Movement in trade and other (304) (265) 50
receivables
Movement in inventories (2,505) (1,165) (1,887)
Movement in trade and other payables 1,525 46 1,101
-------------- -------------- ---------------
Cash flow from operating activities (2,018) (1,348) (1,607)
Interest (paid)/received - net - (456) (434)
Taxation paid - (3) -
-------------- -------------- ---------------
Net cash outflow from operating (2,018) (1,807) (2,041)
activities
-------------- -------------- ---------------
Cash flow from investing activities
Purchase of property, plant and (8) (67) (122)
equipment and intangibles
Proceeds from sale of property - 20 -
-------------- -------------- ---------------
Net cash outflow from investing (8) (47) (122)
activities
-------------- -------------- ---------------
Cash flows from financing activities
Issue of shares 646 211 268
Capital element of finance lease - (18) (22)
repaid
Net loans undertaken less repayments 1,326 1,090 1,328
-------------- -------------- ---------------
Cash inflow from financing 1,972 1,283 1,574
activities
-------------- -------------- ---------------
Cash and cash equivalents at 2,675 3,365 3,365
beginning of period
Net cash outflow from all activities (54) (571) (589)
Non-cash movement arising on foreign (29) (12) (101)
currency translation
--------------- --------------- ---------------
Cash and cash equivalents at end of 2,592 2,782 2,675
period
======= ======= ======
Cash and cash equivalents comprise
Cash and cash equivalents 2,592 2,782 2,675
======= ====== ======
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
1. BASIS OF PREPARATION
These interim consolidated financial statements are for the six months ended 30
September 2010. They have been prepared in accordance with IAS 34, Interim
Financial Reporting. These interim financial statements have been prepared in
accordance with those IFRS standards and IFRIC interpretations issued and
effective or issued and early adopted as at the time of preparing these
statements (December 2010). The IFRS standards and IFRIC interpretations that
will be applicable at 31 March 2010, including those that will be applicable on
an optional basis, are not known with certainty at the time of preparing these
interim financial statements. The policies set out below have been consistently
applied to all the years presented.
These consolidated interim financial statements have been prepared under the
historical cost convention.
The information set out in this interim report for the six months ended 30
September 2010 does not constitute statutory accounts as defined by section 434
of the Companies Act 2006. The statutory accounts for the year ended 31 March
2010, incorporating an unqualified auditors' report, have been filed with the
Registrar of Companies.
Going concern
The Executive Directors are working continually to obtain the necessary loan
finance for the larger projects, in particular for Olive Island Resort. The
Municipality of Preko, as existing land owner are very encouraged by the
progress being made by the Company and the State of Croatia are aware of our
efforts and are very encouraging also. The Municipality, with State support has
agreed to extend the payment terms until January 2011. The Directors believe
that the conclusion of a financing package is very close and is fully expecting
to receive the Olive Island project loans within the aforementioned payment
terms. The loans being negotiated would finance fully the Olive Island project
and allow all other liabilities to be paid.
Despite the progress being made contingency plans are however prepared and
include negotiations to sell the Olive Island marina if necessary. In addition,
we are reviewing a possible sale of our casino at Pula and our partner in Cubus
Lux Projektiranje d.o.o. has offered to buy our 50% share. Furthermore the
majority of loan note holders of the €13,000,000 million loan notes have
indicated that they will not seek repayment from the Company in December 2010
unless the Group has sufficient funds to do so and continue trading and the
Directors are in the process of negotiating an extension to 31 December 2011
with the remaining loan note holders.
The Directors are in the process of re-negotiating the term of the Euro loan
notes issued for the acquisition of the Olive Island Project to be repayable by
31 December 2011.
The Directors have re-negotiated the Hypo Alpe Adria loan in Cubus Lux
Projektiranje so that the loan will be repayable on 31 December 2011.
At the year end Plava Vala d.o.o was in breach of the loan covenants on the
Erste bank loan, due to a delay in the payment of principal and interest. As
such the loan has been disclosed as a current liability. There has been no
indication to date from the bank that the loan will be called in due to the
breach of covenants. However the Directors are in the process of finalising
further funding that will enable them to pay off the loan and any arrears due.
This will present the opportunity to use the Company income towards the
expansion of the numbers of berths. This in turn would make the marina
profitable throughout the year rather than just in the summer season creating
the returns to meet bank liabilities.
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
.
2. BUSINESS SEGMENT ANALYSIS
Period ended 30 September Casino Marina Property Resort Central Total
2010:
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External sales 268 363 - - 48 679
====== ====== ===== ======= ==== ======
Loss
Segment operating loss (232) (240) (76) (34) (211) (793)
Net finance costs (618)
-------------
Loss before taxation (1,411)
======
Assets and liabilities
Segment assets 1,056 9,735 11,868 35,342 434 58,435
Segment liabilities (718) (5,995) (7,907) (23,709) (3,376) (41,705)
------------ ------------- -------------- --------------- ------------- ---------------
Net assets/(liabilities) 338 3,740 3,961 11,633 (2,942) 16,730
====== ====== ====== ======== ====== =======
Year ended 31 March 2010:
Revenue
External sales 667 773 - - 40 1,480
====== ====== ====== ====== ====== =======
Profit/(loss)
Segment operating profit/ (487) (199) (782) 167 (860) (2,161)
(loss)
Net finance costs (1,402)
-------------
Loss before taxation (3,563)
=======
Assets and liabilities
Segment assets 1,129 9,986 8,481 36,344 258 56,198
Segment liabilities (674) (6,108) (4,284) (24,550) (3,280) (38,896)
-------------- -------------- -------------- -------------- ------------ ---------------
Net assets/(liabilities) 455 3,878 4,197 11,794 (3,022) 17,302
====== ====== ====== ======== ====== =======
Period ended 30 September
2009:
Revenue
External sales 500 447 - - 18 965
====== ====== ===== ======= ==== ======
Profit/(loss)
Segment operating profit/ 9 46 73 301 (207) 222
(loss)
Net finance costs (821)
-------------
Profit before taxation (599)
======
Assets and liabilities
Segment assets 1,320 10,236 8,471 34,814 386 55,227
Segment liabilities (371) (6,037) (4,364) (22,852) (1,769) (35,393)
------------ ------------- -------------- --------------- ------------- ---------------
Net assets/(liabilities) 949 4,199 4,107 11,962 (1,383) 19,834
====== ====== ====== ======== ====== =======
The Group currently operates in one geographical market, Croatia and therefore
no secondary segmentation is provided.
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
3. TAXATION
The Company is controlled and managed by its Board in Croatia. Accordingly,
the interaction of UK domestic tax rules and the taxation agreement entered
into between the U.K. and Croatia operate so as to treat the Company as
solely resident for tax purposes in Croatia. The Company undertakes no
business activity in the UK such as might result in a Permanent
Establishment for tax purposes and accordingly has no liability to UK
corporation tax.
4. OTHER EXPENSES/INCOME
Other expenses of £27,000 in the period ended 30 September 2010 (£
200,000 income in year ended 31 March 2010; £190,000 income in period
ended 30 September 2009), arises in respect of the cost of deferred
consideration payable for Duboko Plavetnilo Hotels d.o.o. and as such
this adjustment of goodwill has been recognised in the consolidated
income statement.
£837,000 of other expenses in the year ended 31 March 2010 relates to
the impairment of goodwill in Cubus Lux Projektiranje d.o.o..
5. EARNINGS PER SHARE
The loss per share of 7.11p (year ended 31 March 2010: loss 18.99p; six
months ended 30 September 2009: loss 3.2p) has been calculated on the
weighted average number of shares in issue during the period namely
19,397,754 (year ended 31 March 2010: 18,773,207; six months ended 30
September 2009: 18,449,564) and losses of £1,379,000 (year ended 31 March
2010: loss £3,569,000; six months ended 30 September 2009: loss £585,000
).
The calculation of diluted loss per share of 7.11p (year ended 31 March
2010: loss 18.99p; six months ended 30 September 2009: loss 3.2p) has
been calculated on the weighted average number of shares in issue during
the period namely 19,397,754 (year ended 31 March 2010; 18,773,207; six
months ended 30 September 2009: 18,449,564) and losses of £1,379,000
(year ended 31 March 2010: loss £3,569,000; six months ended 30 September
2009: loss £585,000). For a loss making group with outstanding share
options, net loss per share would only be increased by the exercise of
out-of-the money options. Since it is inappropriate to assume that option
holders would act irrationally no adjustment has been made to diluted EPS
for out-of-the-money share options.
INDEPENDENT REVIEW REPORT TO CUBUS LUX PLC
We have been engaged by the Company to review the condensed set of financial
statements in the interim report for the six months ended 30 September 2010
which comprises the consolidated income statement, consolidated interim balance
sheet, consolidated interim statement of changes in shareholders' equity,
consolidated interim cash flow statement, and related notes. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' Responsibilities
The interim report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim report in
accordance with the AIM rules. As disclosed in note 1, the annual financial
statements of Cubus Lux plc are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements included in this
interim report has been prepared in accordance with International Accounting
Standard 34, ``Interim Financial Reporting,'' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the interim report based on our review.
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London Stock
Exchange for companies whose securities are traded on AIM and for no other
purpose. No person is entitled to rely on this report unless such a person is a
person entitled to rely on this report by virtue of and for the purpose of our
terms of engagement or has been expressly authorised to do so by our prior
consent. Save as above, we do not accept responsibility for this report to any
other person or for any other purpose and we hereby expressly disclaim any and
all such liability.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ``Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim report
for the six months ended 30 September 2010 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union.
Going Concern
In forming our opinion, which is not qualified, we have considered the adequacy
of the disclosures made within the accounting policies concerning the Group's
ability to continue as a going concern. The Group incurred a net loss of £
1,264,000 during the period ended 30 September 2010 at the period end the
Group's current liabilities exceed its current assets by £14,965,000. This
along with the other matters explained in note 1 to the condensed consolidated
interim financial statements, indicates the existence of a material uncertainty
which may cast significant doubt about the Group's ability to continue as a
going concern. The consolidated interim financial statements do not include the
adjustments that would result if the Group was unable to continue as a going
concern.
haysmacintyre
Chartered Accountants Fairfax House
Registered Auditors 15 Fulwood Place
London
WC1V6A
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