Preliminary Results Announcement

RNS Number : 6175T

Minoan Group PLC

31 March 2016

 



31 March 2016

Preliminary Results Announcement 

Minoan Group Plc (or "the Group") announces its preliminary results for the year ended 31 October 2015

Highlights

·      Presidential Decree granting approval for the project in Crete has been secured, which is a transformational event for the Group

·      Discussions are currently underway with various potential partners including, inter alia, Hotel Operators, Joint Venturers, Financiers and Investors to consider the best route for the project to deliver maximum value for shareholders

·      Total Group transaction value up 20% from £50,757,000 to £60,964,000

·      Group gross profits increased by over 14% to £6,493,000 from £5,680,000

·      The Travel and Leisure division remained profitable, with profit before taxation of £233,000 though this was lower than last year due to a dispute with a back office services provider, which has been successfully resolved

·      Strong start to the current year in Travel and Leisure with total transaction value up 16% despite the current challenging environment for tourism and travel globally

·      Group is well positioned to capitalise on the transformational event of securing of the Presidential Decree in Greece and further expand its fast-growing and profitable T&L business

Minoan Chairman, Christopher Egleton commented:

"This is definitely a landmark year for the Group, with the issuance of the Presidential Decree approving our project in Crete. It will be the catalyst for one of the most significant foreign investments in the Greek tourist sector and stands to deliver substantial value for shareholders while supporting the local economy and creating some 1,200 long term jobs.

We are already having a number of conversations to examine the best way forward to develop what will be one of the premier resorts in the Mediterranean and to ensure that we maximise returns for our investors.

With the exception of a few localities, Greece's tourism industry continues to expand rapidly and the relative isolation of Crete from regional migrant issues combined with improvements in local transport infrastructure, such as the opening of the new Sitia International airport, are strongly supportive of our plans for a world-class tourist resort.

The T&L division has performed robustly, expanding total transaction value and increasing gross profits. Our "buy and build" strategy of integrating specialist travel brands remains central to the business and we see opportunities for further expansion to create value.

Overall 2016 promises to be a transformational year for the Group, with the prospects for both arms of the business looking very strong . The Board's top priority remains to ensure that our investors and shareholders reap the full rewards."

Minoan Group Plc's Preliminary Results Announcement for the year ended 31 October 2015 can be viewed on the Company's website, www.minoangroup.com, with effect from 31 March 2016.

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

Minoan Group Plc
Christopher Egleton	[e-mail]
Duncan Wilson	0141 226 2930
Bill Cole	020 8253 4305
WH Ireland Limited	020 7220 1666
Adrian Hadden/Mark Leonard
Throgmorton Street Capital	020 7071 0808
Forbes Cutler
Morgan Rossiter	020 3195 3240
Richard Morgan Evans/James Rossiter

Chairman's Statement     

Introduction

The issue of the Presidential Decree in respect of the Group's Itanos Gaia project in Crete (the "Project") in March will, naturally, be the dominant feature of my Statement because of its pivotal nature for the Group's business. Its positive impacts cannot be over emphasised and some of these will be dealt with later in my review. 

The year ended 31 October 2015 was extremely busy with the teams in Greece and the UK making very good progress.

In the Travel and Leisure ("T&L") business, total transaction value increased by 20% over the comparable figure in the previous financial year although, as referred to in the announcement of the Group's Interim Results in July last year, the business suffered a number of "one-off" impacts resulting from a dispute with the provider of back office services. This was successfully resolved but its overall impact resulted in a decline in profit before tax. Were it not for this the T&L profit before tax would have shown a significant increase and the growth in total transaction value would have been even stronger.

Greece

The Presidential Decree granting land use approval for the Project has been issued and published in the Greek Government Gazette. As a result, the planning rules for the Project are now enshrined in law.

The Presidential Decree was unanimously approved by the Plenum of the Greek Council of State and then endorsed by the current Government before being signed by the President of the Hellenic Republic, Mr Prokopios Pavlopoulos. As I said at the time, this is a transformational event and is the result of many years of hard work by the Group, its advisors and our Greek team who have had to cope with five changes of Government in the last five years alone.

In this context, it is also important to note that this approval is the first for a major foreign leisure development in the past 30 years.

Having created substantial value, the Board is now focusing its attention on achieving the best outcome for all stakeholders in the Project, including the local community where we have full support. After so much time and effort the maximisation of value and returns to our investors is the first priority. Shareholders will be aware that,the last "opinion of value" as per estimate dated 27 June 2011, which was reaffirmed in March 2012, estimated that the Group's interest in the land was "around €100m" and that there have been numerous discussions with various potential partners including, inter alia, Hotel Operators, Joint Venturers, Financiers and Investors. These and other discussions with the advisors working on the details for the fruition of the development, which will bring a new type of tourism to Crete, are now being accelerated. Crystallising discussions and negotiations such as these is a complex process and it can take some time to arrive at the best conclusion, especially where more than one party is involved. Nevertheless, the Board is confident of achieving a successful outcome in due course.

Due to its location, Crete has not suffered any material adverse effect from the current migration problems  being experienced in other parts of Greece and remains the destination of choice for millions of visitors.

The general situation in Greece, however, continues to be difficult with the migrant issue being the latest to exacerbate the Country's overall difficulties. Notwithstanding, the Greek Government continues to re-affirm its support of the tourism industry as a major part of the Greek economy.

I am pleased to confirm that Sitia International airport, which is approximately 30 minutes from Itanos Gaia, is now fully operational and will have a beneficial and growing impact on the local tourism industry.

Travel and Leisure

The T&L Division has continued to show significant volume growth with total transaction value increasing by 20% from £50,757,000 to £60,964,000 and gross profit increasing by 14% from £5,680,000 to £6,493,000. This growth was offset by an increase in operating expenses in order to prepare for further expansion in the current year. The net profit of the division, however, decreased from £454,000 to £233,000 for a number of reasons including the dispute reported in July last year.

This dispute affected numerous parts of the business including total transaction value, the restriction of our expected expansion into foreign exchange and an increase in costs. The total impact of what was a completely unexpected and one off event is estimated to have amounted to approximately £410,000. All these matters have now been successfully resolved.

The current year has started well with gross revenues up 16% despite the current widely reported problems causing a number of popular tourist destinations to suffer major reductions in bookings.

Financial Review

The financial results for the year ended 31 October 2015 reflect what has been, as I noted earlier, a highly encouraging year in advancing our dual strategies to maximise value from the Greek side of our business and to continue the trend of underlying growth in T&L.

Notwithstanding the successes of the year, the Consolidated Statement of Comprehensive Income has been affected by various items that are worthy of explanation.  In particular, the accounting treatment afforded to the Charge in respect of share-based payments, by definition a non cash item, has been changed in the results for 2015 and restated in the comparatives (moving the majority of this charge, to finance costs).  Further, the T&L dispute referred to above adversely impacted the Loss after taxation.

The Consolidated Balance Sheet continues to be dominated by the value attributed to the Project which, as I have noted above, with the granting of the Presidential Decree is now more than ever advancing towards value maximisation for our investors and shareholders. Also worthy of note is that as a result of the delay in receiving the Presidential Decree, and in keeping with normal accounting rules, the loan owed to one of our major investors has moved from non-current liabilities to current liabilities.

To summarise, the change in accounting treatment of the Charge in respect of share-based payments has increased Finance costs reported in the Consolidated Statement of Comprehensive Income for the year ended 31 October 2015 by £628,000 (with an associated reduction in the Charge in respect of share-based payments). The impact of this change in accounting treatment is neutral on the net result. However, as stated above, the impact of the T&L dispute served to increase the expected loss in the year by approximately £410,000, which, together with higher interest charge, gave rise to our reported loss of £1,620,000 (2014: £1,036,000).  Whilst the quantum of this impact is greater than had been expected it is entirely of a one-off nature

Outlook

In Greece, the Group is now extremely well-positioned to reap the benefits of the hard work of recent years whilst in the UK the travel business will continue to identify new businesses it wishes to acquire to enhance its performance and create value for shareholders. In this latter context your Board is examining various ways of unlocking value for shareholders both from the Project, as I have described, and from the T&L division where its expansion has, in part, been hampered by not being independent.

It is essential that the "buy and build" process of our T&L division is accelerated and to this end the Board is considering the benefits of separating it in whole, or in part, from the Greek project in whichever is the best way to achieve additional value. Amongst other methods a separate quotation may be sought as soon as the division is of sufficient scale.  

Conclusion

In the meantime, I wish to record my own and the Board's thanks to our shareholders and staff for their patience and support in reaching the milestone constituted by the Presidential Decree.

The next year is destined to be the most exciting and fruitful for the Group, its shareholders, Directors and staff and I look forward to making further announcements in the future.

Christopher W Egleton

Chairman

30 March 2016

Consolidated Statement of Comprehensive Income

Year ended 31 October 2015

		2015                    £'000	2014                    £'000
Total transaction value		60,964	50,757
Revenue		6,816	5,932
Cost of sales		(323)	(252)
Gross profit		6,493	5,680
Operating expenses		(6,523)	(5,306)
Other operating expenses:
Corporate development costs		(511)	(501)
Charge in respect of share-based payments		(57)	(326)
Operating loss		(598)	(453)
Finance costs		(1,022)	(583)
Loss before taxation		(1,620)	(1,036)
Taxation		-	-
Loss after taxation		(1,620)	(1,036)
Loss for year  attributable to equity holders of the Company		(1,620)	(1,036)
Loss per share attributable to equity holders of
the Company: Basic and diluted		(0.89)p	(0.61)p

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

 

Consolidated Statement of Changes in Equity

Year ended 31 October 2015

Year ended 31 October 2015

	Share capital £'000	Share premium £'000	Merger reserve                         £'000	Warrant Reserve  £'000	Retained earnings                                  £'000	Non-controlling interest                                  £'000	Total equity                                                                                                                                      £'000
Balance at 1 November 2014	14,843	30,261	9,349	313	(12,268)	-	42,498
Loss for the year	-	-	-	-	(1,620)	-	(1,620)
Issue of ordinary shares at a premium	132	1,174	-	-	-	-	1,306
Share based payment charge	-	-	-	1,591	57	-	1,648
	14,975	31,435	9,349	1,904	(13,831)	-	43,832

Year ended 31 October 2014

	Share capital £'000	Share premium £'000	Merger reserve                         £'000	Warrant Reserve  £'000	Retained earnings                                  £'000	Non-controlling interest                                  £'000	Total equity                              £'000
Balance at 1 November 2013	14,693	28,781	9,349	-	(11,997)	919	41,745
Loss for the year	-	-	-	-	(1,036)		(1,036)
Issue of ordinary shares at a premium	150	1,480	-	-	-	-	1,630
Acquisition of non controlling               interest	-	-	-	-	-	(919)	(919)
Share-based payments:
Current year charge	-	-	-	313	326	-	639
Settlement of liabilities	-	-	-	-	439	-	439
Balance at 31 October 2014	14,843	30,261	9,349	313	(12,268)	-	42,498

 

Consolidated Balance Sheet as at 31 October 2015

		2015 £'000	2014 £'000
Assets
Non-current assets
Intangible assets		9,835	9,414
Property, plant and equipment		711	717
Total non-current assets		10,546	10,131
Current assets
Inventories		41,266	40,042
Receivables		2,171	1,592
Cash and cash equivalents		145	127
Total current assets		43,582	41,761
Total assets		54,128	51,892
Equity
Share capital		14,975	14,843
Share premium account		31,435	30,261
Merger reserve account		9,349	9,349
Warrant reserve		1,904	313
Retained earnings		(13,831)	(12,268)
Total equity		43,832	42,498
Liabilities
Non-current liabilities		-	3,500
Current liabilities		10,296	5,894
Total liabilities		10,296	9,394
Total equity and liabilities		54,128	51,892

 

Consolidated Cash Flow Statement

Year ended 31 October 2015

		2015 £'000	2014 £'000
Cash flows from operating activities
Net cash outflow from continuing operations		(348)	(2,138)
Finance costs		(394)	(270)
Net cash used in operating activities		(742)	(2,408)
Cash flows from investing activities
Purchase of property, plant and equipment		(116)	(122)
Purchase of intangible assets		(629)	(713)
Non cash movement in intangible assets		-	(153)
Acquisition of shares in subsidiary company		-	(430)
Net cash used in investing activities		(745)	(1,418)
Cash flows from financing activities
Net proceeds from the issue of ordinary shares		70	667
Loans received		1,435	3,081
Payments of hire purchase liabilities		-	(66)
Net cash generated from financing activities		1,505	3,682
Net increase/(decrease) in cash		18	(144)
Cash at beginning of year		127	271
Cash at end of year		145	127

 

Note to the Consolidated Cash Flow Statement

Year ended 31 October 2015

Cash flows from operating activities

	2015 £'000	2014 £'000
Loss before taxation	(1,620)	(1,036)
Finance costs	394	270
Depreciation	103	102
Amortisation	208	130
Exchange loss relevant to property, plant and equipment	19	22
Increase in inventories	(1,224)	(1,675)
Share-based payments	685	1,078
Increase in receivables	(579)	(696)
Increase/(decrease) in current liabilities	430	(126)
Non cash movement in equity	1,236	(207)
Net cash outflow from continuing operations	(348)	(2,138)

   

Notes to the preliminary results

Year ended 31 October 2015

1. General information

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 October 2015 or 31 October 2014. The report of the auditor on the statutory financial statements for the year ended 31 October 2015 and 31 October 2014 was not qualified.

The report of the auditor on the statutory financial statements for each of the years ended 31 October 2015 and 31 October 2014 did not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 October 2014 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 October 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

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

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed for the use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements for the year ended 31 October 2015 that comply with IFRS in April 2016.

Comparative figures

The results for 2014 have been restated to show share based payment charges of £313,000 that relate to the issue of warrants linked to the Group's £5million loan facility as finance costs rather than within administrative expenses. Similarly the fair value of the warrants have been shown as a separate Warrant Reserve within equity and an equal amount netted from the principal of the loan within liabilities to reflect the amortised cost.

Going concern

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 business. In particular, the directors have reviewed the matters referred to below.

Following the unanimous approval of a Plenum of the Greek Council of State, the highest court in Greece, the Presidential Decree granting land use approval for the Project was issued on 11 March 2016 and has been published in the Government Gazette. The planning rules for the Project are now enshrined in law.

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

Notes to the preliminary results (continued)

Year ended 31 October 2015

2. Accounting policies (continued)

Going concern (continued)

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 a number of acquisitions in the planned expansion of its Travel and Leisure business having been completed over period of time, 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.

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 2015

3. Segmented information (continued)

	2015
	Luxury Resorts	Travel and Leisure	Corporate Development	Total
	£'000	£'000	£'000	£'000
Total transaction value	-	60,964	-
Revenue	-	6,816	-	6,816
Cost of sales	-	(323)	-	(323)
Gross profit	-	6,493	-	6,493
Operating expenses	(417)	(6,106)	(511)	(7,034)
	(417)	387	(511)	(541)
Charge in respect of share-based payments	(57)	-	-	(57)
Operating (loss)/profit	(474)	387	(511)	(598)
Contribution to central costs	100	(100)	-	-
Finance costs	(968)	(54)	-	(1,022)
(Loss)/profit before taxation	(1,342)	233	(511)	(1,620)
Taxation	-	-	-	-
(Loss)/profit after taxation	(1,342)	233	(511)	(1,620)
Operating expenses include:
Depreciation and amortisation	-	311	-	311
Operating leases - plant and equipment	-	59	-	59
Assets/liabilities
Goodwill	6,127	2,511	-	8,638
Other non-current assets	134	1,774	-	1,908
Current assets	42,082	1,500	-	43,582
Total assets	48,343	5,785	-	54,128
Total and current liabilities	7,181	3,115	-	10,296

Notes to the preliminary results (continued)

Year ended 31 October 2015

3. Segmented information (continued)

	2014
	Luxury Resorts	Travel and Leisure	Corporate Development	Total
	£'000	£'000	£'000	£'000
Total transaction value	-	50,757	-	50,757
Revenue		5,932		5,932
Cost of sales	-	(252)	-	(252)
Gross profit	-	5,680	-	5,680
Operating expenses	(428)	(4,878)	(501)	(5,807)
	(428)	802	(501)	(127)
Charge in respect of share-based payments	(326)	-	-	(326)
Operating (loss)/profit	(754)	802	(501)	(453)
Contribution to central costs	300	(300)	-	-
Finance costs	(535)	(48)	-	(583)
(Loss)/profit before taxation	(989)	454	(501)	(1,036)
Taxation	-	-	-	-
(Loss)/profit after taxation	(989)	454	(501)	(1,036)
Operating expenses include:
Depreciation and amortisation	1	231	-	232
Operating leases - plant and equipment	-	49	-	49
Assets/liabilities
Goodwill	6,127	2,451	-	8,578
Other non-current assets	146	1,407	-	1,553
Current assets	40,457	1,304	-	41,761
Total assets	46,730	5,162	-	51,892
Non-current liabilities	3,500	-	-	3,500
Current liabilities	4,862	1,032	-	5,894
Total liabilities	8,362	1,032	-	9,394

4. Goodwill

Goodwill arising on acquisitions represents the difference between the fair value of the net assets acquired and the consideration paid and is recognised as an asset.

Goodwill arising on acquisition is allocated to cash-generating units.  The recoverable amount of the cash-generating unit to which goodwill has been allocated is tested for impairment annually, or on such other occasions that events or changes in circumstances indicate that it might be impaired. Any impairment is recognised immediately as an expense and is not subsequently reversed.

The Group conducts an annual impairment test on the carrying value of goodwill based on the recoverable amount of two cash generating units: the Project and the Travel and Leisure business.

The Project is assessed using fair value less costs to sell. The directors have assessed the recoverable amount of the Project as being greater than the combined carrying value of the goodwill and inventories of £47,393,000 at 31 October 2015 on the basis of valuations previously carried out and the positive progress made in the period since.

Notes to the preliminary results (continued)

Year ended 31 October 2015

4. Goodwill (continued)

The goodwill allocated to the Travel and Leisure business is £2,511,000. The recoverable amount of the Travel and Leisure business has been assessed using a value in use model. The net present value of projected cash flows is compared with the carrying value of the CGU's assets and goodwill. Cashflow forecasts are based upon management approved budgets for a period of one year and a revenue growth rate of 5% for a further four years, this being consistent with recent historical performance. Thereafter growth rates are reduced to zero. Cashflows are discounted using a pre-tax discount rate of 11%.

5. Property, plant and equipment

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:

Freehold land:	capital cost not depreciated
Leasehold improvements:	over the term of the lease
Plant and equipment:	3 to 5 years
Fixtures and fittings:	3 years
Motor vehicles:	3 to 5 years

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

6. Revenue

Depending upon the contractual arrangements with the customer the Group acts either as agent or principal.

Where the Group acts as an agent between the service provider and the end customer, revenue is presented on a net basis as the difference between the sales to the customer and the cost of services purchased and not the total transaction value. When acting as an agent, revenue is recognised when it is notified by the principal as having been earned and due for payment.

Where the Group acts as principal, revenue is stated at the contractual value of goods and services provided and is recognised typically when the customer pays the final balance due on the holiday purchased. 

Where the Group provides management or consultancy services, the value of such services is included in revenue and is recognised in the period in which these services are provided.

7. 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 and warrants to purchase Ordinary Shares of 1p each. A charge has been made in the consolidated statement of comprehensive income in respect of the LTIP, options and warrants using the Black-Scholes and Monte Carlo fair value pricing models as appropriate at the grant date and charged over the vesting periods. This charge does not involve any cash payment. A corresponding entry is recognised in equity.

Notes to the preliminary results (continued)

Year ended 31 October 2015

7. Share-based payments (continued)

Share-based payments charge	£'000
Year ended 31 October 2015
Share-based payments - directors	57
Share-based payments - warrants finance charges(see below)	628
	685
Year ended 31 October 2014
Share-based payments - directors	108
Share-based payments - other	218
Share-based payments - warrants finance charges (see below)	313
	639

In accordance with IAS 32, the share-based payments charge in respect of warrants finance charges shown above has been included in Finance costs in the Consolidated Statement of Comprehensive Income.

8. 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 potential dilutive ordinary shares. As the Group is loss making, there are no dilutive instruments in issue, and 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 2015 was 182,214,717 (31 October 2014: 168,636,782).

9. Events after the balance sheet date 

1. On 18 November 2015 the Company announced the issue of 1,160,000 ordinary Shares of 1p each at 9

    pence per share to settle certain existing liabilities.

2. On 30 December 2015 the Company announced that the expiry date on Options granted to certain directors, 

    and a former director, to purchase up to 3,607,692 Ordinary Shares in the Company at 1p per share in

    exchange for the waiver of outstanding salaries of £469,000, had been extended from 31 December 2015 to

    31 December 2016.

3. On 11 March 2016 the Company announced that the Presidential Decree granting land use approval for the

    Project had been issued and published in the Greek Government Gazette.

 

END

 

 

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