Annual Report and Accounts

Cubus Lux plc 21 March 2005 CUBUS LUX PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 The following information has been extracted from the Report and Accounts of Cubus Lux plc for the year ended 31 December 2004 which will be posted to shareholders shortly. CHAIRMAN'S STATEMENT I am pleased to submit results for the year ended 31 December 2004 and my first report as temporary Chairman, of the company. I assumed this position early in 2005 as Mr. David Gray tendered his resignation for personal reasons. Operations 2004 has been an important year for the company. We completed our equity financing and achieved our AIM listing during the year and we opened our second casino at the Belvedere Hotel in Medulin. We are now well positioned as the leading casino operator in the Istria Peninsula. The Istria region is highly seasonal and the summer months from June to September show solid activity. We are working to build our off-season business by bringing in gaming enthusiasts and semi-professional players (junkets) into our casinos. We still have a lot of work to do to develop a marketing infrastructure which will deliver a steady stream of customers and we failed to achieve this in time to impact our 2004 results. We are now focussing on developing marketing arrangements with Italian, Russian and Israeli junket operators to bring players into our casinos. We hope to begin to see the impact of this by mid-2005. Financial For the year ending 31 December 2004, the company is reporting revenues of £484,000 and net loss of £453,000. Our results are below expectations, due to an increase in our administrative expenses as a result of operating a public company, which was not matched by an increase in revenues due to the late opening of the Medulin casino and to a below budget junket business. We have implemented corrective action and we expect an improvement in results in 2005. Personnel We are pleased to announce the appointment of Mr Brendan Gardner, who has assumed responsibility for operations, initially in a consulting capacity to Cubus Lux d.o.o.. Mr. Gardner has twenty years experience in the casino industry and will be responsible for casino operations and for our marketing activities. Our plans for 2005 Our priorities for 2005 are to intensify our marketing to build our revenue base and try to develop less seasonality in our business and we are looking at a further possible expansion. We have been approached by several hotel operators who have invited us to open casinos on their sites. We are evaluating these opportunities and we hope to be able to announce soon the opening of a new well-sited casino in Croatia during 2005. We will seek to effect fund raising in 2005 to strengthen our working capital and to finance our next site opening. We will be looking to strengthen our board in 2005 with the appointment of a new Chairman with relevant gaming industry experience. I would like to thank all our staff for their hard work during this transition year from a private to a public company. If you have any questions please feel free to contact me. HAGGAI RAVID Interim Chairman Non Executive Director 17 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 Note £'000 £'000 TURNOVER 1,2 484 528 Cost of sales (58) (64) ------------- ------------- GROSS PROFIT 426 464 Administrative expenses (886) (729) ------------- ------------- OPERATING LOSS 3 (460) (265) Interest payable and similar charges 6 (7) - Interest receivable and other income 7 14 - ------------- ------------- LOSS ON ORDINARY (453) (265) ACTIVITIES BEFORE TAXATION Tax on loss on ordinary activities 8 - - ------------- ------------- RETAINED LOSS (453) (265) ====== ====== LOSS PER SHARE Basic and diluted 20 (2.41p) (1.66p) ====== ====== All activities arose from continuing activities. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2004 2003 £'000 £'000 Loss for the financial year (453) (265) Exchange rate movements (8) - ------------- ------------- Total recognised losses relating to the year (461) (265) ====== ====== CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2004 Notes 2004 2003 £'000 £'000 FIXED ASSETS Tangible assets 10 594 226 ------------ ------------ CURRENT ASSETS Stock 12 6 3 Debtors 13 54 3 Cash at bank 14 385 88 ------------ ------------ 445 94 CREDITORS: amounts falling due within one year 15 (361) (635) ------------ ------------ NET CURRENT ASSETS/(LIABILITIES) 84 (541) ------------ ------------ TOTAL ASSETS LESS CURRENT LIABILITIES 678 (315) CREDITORS: amounts falling due in more than one year 16 (140) - ------------ ------------ 538 (315) ====== ===== CAPITAL AND RESERVES Called up share capital 19 223 161 Share premium account 20 1,101 159 Merger reserve 20 347 37 Profit and loss account 20 (1,133) (672) ------------- ---------- EQUITY SHAREHOLDERS' FUNDS 538 (315) ====== ====== These financial statements were approved by the Board of Directors on 17 March 2005 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £'000 £'000 Operating loss (460) (265) Loss on disposal of fixed assets 21 - Depreciation 61 48 (Increase)/decrease in debtors (51) 32 Increase in stock (3) (3) Increase in creditors 92 158 -------------- --------------- CASH OUTFLOW FROM OPERATING ACTIVITIES (340) (30) Return on investment and servicing of finance Interest payable (7) - Interest receivable 14 Capital expenditure and financial investment Purchase of fixed assets (426) (43) -------------- --------------- CASH OUTFLOW BEFORE FINANCING (759) (73) FINANCING Issue of shares in Cubus Lux Plc (net of issue costs) 1,004 - New loans undertaken 60 124 --------------- --------------- INCREASE IN CASH IN THE YEAR 305 51 ======= ====== RECONCILIATION OF NET CASH FLOW TO NET FUNDS/(DEBT) 2004 2003 £'000 £'000 Increase in cash in the period 305 51 Exchange differences (8) - Cash inflow from movement in debt (60) (124) New finance leases undertaken in year (24) - Loans converted to shares in Cubus Lux d.o.o. 310 - ------------- ------------- Movement in net funds/(debt) in the period 523 (73) Net debt at beginning of period (291) (218) ------------- ------------- Net funds/(debt) at end of period 232 (291) ====== ====== NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 ANALYSIS OF CHANGES IN NET DEBT At 1 January Cash Other Exchange At 31 December 2004 movements 2004 flows differences £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 88 305 - (8) 385 ------------ ------------ ------------ ------------ ------------ 88 305 - (8) 385 Debt due in less than one year Finance leases - - (5) - (5) Loans (379) (60) 431 - (8) ------------ ------------ ------------ ------------ ------------ (291) 245 426 (8) 372 Debt due in more than one year Finance leases - - (19) - (19) Loans - - (121) - (121) ------------ ------------ ------------ ------------ ------------ (291) 245 286 (8) 232 ====== ====== ====== ====== ====== RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 £'000 £'000 Loss for the year (453) (265) --------------- --------------- (453) (265) Exchange rate differences (8) - New shares issued in Cubus Lux Plc (net of issue costs) 1,004 - New shares issued in Cubus Lux d.o.o. (net of issue costs) 310 - --------------- --------------- Net movement in shareholders' funds/ 853 (265) (deficit) Opening shareholders' deficit (315) (50) --------------- --------------- Closing shareholders' funds/(deficit) 538 (315) ======= ======= NOTES TO THE REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 1. ACCOUNTING POLICIES (a) Basis of Preparation The financial information is prepared on the historical cost basis in accordance with the applicable accounting standards. It comprises the consolidated financial information of Cubus Lux Plc and its subsidiary. (b) Basis of Consolidation On 20 May 2004, the company purchased 100% of the issued share capital of Cubus Lux d.o.o., a company registered in the Commercial Court in Rijeka, Croatia, by way of a share for share exchange. Under Financial Reporting Standard 6, merger accounting has been adopted as the basis of consolidation. (c) Depreciation Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset by equal monthly instalments over its expected useful life as follows:- Motor Vehicles 25% per annum Office furniture, computers and casino equipment 10-25% per annum (d) Stocks Stocks are valued at the lower of cost and net realisable value. (e) Foreign Currencies Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. The results and balance sheets of overseas operations are translated at the rate of exchange rating at the balance sheet date. The rate of exchange used at 31 December 2004 was 10.839 HRK to £1 (2003: 10.454 HRK to £1). (f) Turnover Turnover represents the invoiced amount of goods sold and services provided in the year, net of value added tax. 2. BUSINESS SEGMENT ANALYSIS The turnover, loss on ordinary activities before taxation and net assets/(liabilities) of the Group in the Republic of Croatia, are attributable to one activity, that of the operation of casinos. 3. OPERATING LOSS Operating loss is stated after charging:- 2004 2003 £'000 £'000 Depreciation of fixed assets - owned by the group 61 48 Auditors remuneration 14 4 Operating lease rentals 30 25 Loss on disposal of fixed assets 21 - ======= ======= 4. STAFF COSTS The staff costs for the year ending 31 December 2004, totalled £194,927 (2003: £195,212). There were no pension expenses for the company for the year ending 31 December 2004. (2003: £nil). The average number of persons (including directors) employed by the Group during the year was 31 (2003: 21). 5. DIRECTORS' REMUNERATION 2004 2003 £'000 £'000 Directors' emoluments 53 - ======== ======== 6. INTEREST PAYABLE Other interest payable 7 - ======== ======== 7. INTEREST RECEIVABLE Bank interest receivable 14 - ======== ======== 8. TAXATION (a) Analysis of charge in the year Corporation tax - - ======== ======== (b) Factors affecting tax charge for the year The tax assessed for the year is different than the standard rate of corporation tax. The differences are explained below: Loss on ordinary activities before taxation (453) (265) ======== ======== Multiplied by the standard rate of corporation tax of (136) (80) 30% Effects of: Disallowable expenditure 28 24 Losses carried forward 108 56 ------------------ ------------------ Current year tax charge - - ======== ======== (c) Factors affecting future tax charges The directors believe that the future tax charges will be reduced by the use of tax losses carried forward in Croatia. 9. LOSS FOR THE FINANCIAL YEAR The parent company has taken advantage of section 230 of the Companies Act 1985 and has not included its own profit and loss account in these financial statements. The group loss for the period includes a loss after taxation of £333,000 which is dealt with in the financial statements of the company. 10. TANGIBLE FIXED ASSETS Other tangible Leasehold GROUP Premises fixed assets Total £'000 £'000 £'000 Cost or valuation At 1 January 2004 2 324 326 Additions 43 407 450 Disposals - (25) (25) --------------- ------------ ---------------- At 31 December 2004 45 706 751 --------------- ------------ --------------- Depreciation At 1 January 2004 - 100 100 Charge for the year 3 58 61 Eliminated on disposal - (4) (4) -------------- ------------ -------------- At 31 December 2004 3 154 157 -------------- ------------ -------------- Net Book Value At 31 December 2004 42 552 594 ======= ======= ======= At 31 December 2003 2 224 226 ======= ======= ======= At 31 December 2004, included within other fixed assets are assets held under finance leases with a net book value of £23,539 (2003: £nil). No depreciation (2003: £nil) has been charged on this asset in the year as it was leased from 30 December 2004. 11. INVESTMENTS Company 2004 £'000 Shares 319 ======= At 31 December 2004, the company held the following investment: Country of Proportion held by Nature of business Name of undertaking registration parent company Cubus Lux d.o.o. Croatia 100% Operation of casinos On 20 May 2004, the company purchased the entire issued share capital of Cubus Lux d.o.o, a company registered in the Commercial Court in Rijeka, Croatia with company number 3883817 and registration number 080298857 by way of a share for share exchange resulting in 15,950,001 ordinary shares of 1p each being issued in consideration. 11. INVESTMENTS (continued) The split of the profit and loss account is as follows: - Cubus Lux d.o.o Cubus Lux d.o.o Cubus Lux Plc Pre merger Post merger Post merger Total Turnover 146 338 - 484 Cost of sales (19) (39) - (58) -------------- -------------- -------------- -------------- Gross Profit 127 299 - 426 Administrative expenses (191) (361) (334) (886) Net interest receivable - 6 1 7 --------------- --------------- --------------- --------------- Retained loss (64) (56) (333) (453) ======= ======= ======= ======= Cubus Lux Plc was dormant until the merger. At the date of the merger, the net liabilities of Cubus Lux d.o.o were £57,909 and the fair value of the consideration was £319,000. 12. STOCK Group 2004 2003 £'000 £'000 Goods held for resale 6 3 ======= ======= 13. DEBTORS Group Company Group 2004 2004 2003 £'000 £'000 £'000 Amounts owed by group undertakings - 740 - Other debtors 25 - - Prepayments and accrued income 29 3 3 --------------- --------------- --------------- 54 743 3 ======= ======= ======= 14. CASH AT BANK AND IN HAND Included within the cash at bank and in hand at 31 December 2004, is HRK 1,200,000 (2003: £87,812) which is held by the Croatian Ministry of Finance as a bond to cover any large casinos wins. Cubus Lux d.o.o. is required to keep this bond in place in order to maintain its gaming licence. Cubus Lux d.o.o. is also required by law to maintain cash on site of €50,000 and HRK 150,000 at each casino. 15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group Company Group 2004 2004 2003 £'000 £'000 £'000 Loans 8 - 379 Trade creditors 189 - 65 Other taxes and social security 77 - 186 Amounts held under finance lease 5 - - Accruals and deferred income 82 76 5 --------------- --------------- --------------- 361 76 635 ======= ======= ======= 16. CREDITORS: AMOUNTS FALLING DUE IN MORE THAN ONE YEAR Loans 121 - - Amounts held under finance lease 19 - - --------------- --------------- --------------- 140 - - ======= ======= ======= The loan due in more than one year is due to Moshe Har Adir, an executive director of the company and is repayable on or before 16 December 2007 and is interest free. 17. BORROWINGS Group 2004 2003 £'000 £'000 Amounts due in less than one year 8 379 Amounts due within two to five years 121 - -------------- -------------- 129 379 ======= ======= 18. FINANCE LEASES Group Payable within one year 5 - Payable in one to five years 19 - --------------- --------------- 24 - ======= ======= 19. CALLED UP SHARE CAPITAL Authorised: The authorised share capital consists of 30,000,000 ordinary shares of 1p each and 2,000,000 deferred ordinary shares of 0.1p each. Allotted, called up and fully paid: 22,102,001 ordinary shares of £0.01 221 159 each 1,555,554 deferred ordinary shares of £0.001 each 2 2 --------------- -------------- 223 161 ======= ======= On incorporation, the company issued 2 subscriber shares of £1.00 each. Subsequently, these were converted into 200 shareS of £0.01 each. On 20 May 2004, the company purchased the entire issued share capital of Cubus Lux d.o.o. by way of a share for share exchange resulting in 15,949,801 ordinary shares of £0.01 each being issued in consideration. On 5 June 2004, 1,555,554 deferred ordinary shares were issued and paid at par value of £0.001 each. On 11 August 2004, 6,152,000 ordinary shares were issued and paid at £0.225 each. The company has issued a three year option over 210,000 £0.01 ordinary shares exercisable at par value to Eli Abramovich, a non-executive director of the company, vesting at a rate of 70,000 on 7 June 2005, 7 June 2006 and 7 June 2007 based on continuing service with the company. 20. SHARE PREMIUM AND RESERVES Share Merger Profit and premium reserve loss account £'000 £'000 £'000 Group At 1 January 2004 159 37 (672) Issue of shares in subsidiary in period - 310 - Issue of shares via public offer (net 942 - - of costs) Exchange rate differences - - (8) Retained loss for the period - - (453) ----------------- ----------------- ------------------ At 31 December 2004 1,101 347 (1,133) ======== ======== ========= Share Profit and premium loss account £'000 £'000 Company Issue of shares (net of costs) 1,101 - Retained loss for the period - (333) ----------------- ------------------ At 31 December 2004 1,101 (333) ======== ========= 21. LOSS PER SHARE The loss per share of 2.41p (2003: 1.42p) has been calculated on the weighted average number of shares in issue during the year namely 18,772,476 (2003: 15,949,801) and losses of £453,452 (2003: £265,234). FRS 14 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company 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 is made to diluted EPS for out-of-the-money share options. 22. OPERATING LEASE COMMITMENTS At 31 December 2004, the company had annual commitments under non-cancellable operating leases expiring as follows:- Group 2004 2003 Land and Other Land and Other buildings buildings £'000 £'000 £'000 £'000 Between two and five years - 15 - - ======== ======== ========= ======== This information is provided by RNS The company news service from the London Stock Exchange

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