Half-yearly Report

Cubus Lux plc ("Cubus Lux" or the "Company") Half- yearly Report Cubus Lux plc, the Croatia-based leisure and tourism company, announces its half year results for the six months ended 30 September 2008. Highlights: - Turnover up 9% to £963,000 (six months to 30 September 2007: £886,000) - Operating profit of £967,000 (six months to 30 September 2007: £341,000) which includes negative goodwill of £1,686,000 arising from the Tiha Uvala acquisition. Excluding this negative goodwill, operating loss of £719,000 - Earnings per share 1.6p, including the negative goodwill on the Tiha Uvala acquisition. Loss per share of 10.0p excluding negative goodwill - Acquisition of Hotel Sutomiscica project - Annual contracts for more than 90% of marina berths In September 2008 we purchased a hotel project on land adjoining our marina at Sutomiscica. Our total purchase price will be HRK 9 million (approximately £1 million) which includes the project plus the leasehold on approximately 11,000 square metres of coastal land for a period of 40 years. This project includes a 100 bed Hotel, a small apartment house, and conferencing and leisure facilities. In addition we will receive a sea concession for moorings. This facility will complement both the existing marina operation and the Olive Island Resort, and we believe it will support a stand-alone business including conferencing and training. Commenting on the results, executive chairman Gerhard Huber said: "The `Olive Island' project continues to be our main focus. This is the first of our large real estate developments and the realisation of the planned resort will provide a strong foundation for the Company's future development. In addition, we are pursuing opportunities in all our divisions. We continue to focus on creating sustainable shareholder value, through a firm strategy of introducing profitable new projects with strong potential to fulfil that aim. We are well known and well positioned in both Croatia and its neighbouring countries and are able to compete effectively for a wide variety of projects. As a result, we look forward to the Company's future with excitement." For further information please see www.cubuslux.com or contact:- Steve McCann Cubus Lux plc +385 (0)99 214 9636 Simon Sacerdoti/Liam Murray, Nominated Adviser Dowgate Capital Advisers Limited +44 (0)20 7492 4777 Kealan Doyle/Nicholas Nicolaides, Broker Lewis Charles Securities Limited +44 (0)20 7456 9100 Pam Spooner City Road Communications +44 (0) 20 7248 8010 +44 (0)7858 477 747 CHAIRMAN'S STATEMENT I am pleased to present the results for the six months ended 30 September 2008. Operations The Group's three principle operating divisions are the casinos, the marina and the newly established resort management division. In addition, we have a general real estate business where we take up opportunities to initiate commercial and residential developments. Our established divisions, the casinos and the Olive Island Marina have now matured and are both poised to move into periods of expansion. Our new division, including the Olive Island Resort, is progressing on plan in terms of valuation and financial projections. There has been some slippage in timing as a direct result of the slowdown in the pipeline of bank funding for construction - a factor beyond your Company's control however, we believe the difficulties within the banking sector are easing, so that the impact will be only to push the start of our construction into the first quarter of 2009 from the planned last quarter of 2008. Cubus Lux d.o.o. - the gaming company As reported in the 2008 Report and Accounts we have added to our Pula casino operation in Istria with a seasonal casino in Selce, south of Rijeka. Both of the casinos are located in hotels. For the first time we did not achieve budget at Pula as the hotel experienced a reduced number of visitors, partly as the result of a refurbishment programme and partly because of economic factors. As a consequence we have shifted our emphasis and investment from holiday makers towards promoting the casino locally and from early September have started to see improvements which we will pursue over the coming months. Selce started well but, due to only three months operation and start up costs, the division as a whole returned a small loss of €30,000. We will continue to explore opportunities during the continued redevelopment of Hotel Histria and in addition, we are close to finalising negotiations to open a further casino in Split. Plava Vala d.o.o. - the marina company The marina in Sutomiscica, Ugljan, near Zadar, has now completed its first full year in its phase 1 status. During this last 12 months management was able to return an operating profit, and towards the end of the half year period achieved a better than expected annual contracted occupancy level of more than 90%. The benefits of this will continue to be seen over the current financial period. The next phase of expansion will include a 50% increase in berths, leisure facilities and a repair area with travel lift. These additions will consolidate the profitability of the division. We have had a successful year with regattas and are establishing our marina as a renowned location for charter boats. The marina management continues to look for expansion opportunities and is exploring possible acquisitions of existing marinas as well as tendering for new projects. Olive Island Resort companies After the acquisition of the resort project on Ugljan we are progressing well with the development. We have agreed the land purchase, are in the final stages of securing the necessary bank finance and expect to break ground by the end of the first quarter of 2009. This project includes a four star hotel with 500 beds to be operated by Sol Melia, a marina, 126 villas and 305 apartments. We believe that this project will be one of the first green field coastal resorts to open in Croatia. Tiha Uvala d.o.o. - Hotel Sutomiscica On 30 September 2008, the Company acquired Tiha Uvala d.o.o. (translated as "Acquired Bay Ltd") for a consideration of HRK 9 million payable in two instalments in cash (approximately £1,000,000). The vendor is Heres d.o.o. who will also be retained as constructor for the project. The consideration is payable in two tranches. The first tranche of the consideration comprises 50 per cent of the purchase price and is payable on receipt of building permits, which is expected to take place in the first quarter of 2009. The second tranche is payable on completion of construction. Tiha Uvala d.o.o. holds (1) a long term lease on 4,416 square metres of coastal land at Sutomiscica, Ugljan, Croatia, (2) a concession over approximately 6,000 square metres of adjoining coastal land and (3) a 15 metre sea concession along 250 metres of sea shore for moorings. Approvals have been granted from the local council to build a 3 storey, 40 room, 4+ stars hotel with restaurant, shops, conferencing facility and underground parking. In addition, approval has been granted for the building of an adjoining luxury apartment block of 9 apartments. Heres d.o.o. will undertake the construction. The concession land will be used for a cafe-bar with outside seating, tennis courts and a park. The whole site adjoins the Groups current Olive Island Marina in the bay of Sutomiscica. Construction is anticipated to commence in January 2009 and is envisaged to be completed in approximately 18-24 months. Heres doo will be the constructor and remain a partner for up to three years. Financial: For the six months ended 30 September 2008 the Company reports revenues of £963,000 and a pre-tax profit of £229,000. Earnings per share amounted to 1.6p. Plans for the future: The `Olive Island' project continues to be our main focus. This is the first of our large real estate developments and the realisation of the planned resort will provide a strong foundation for the Company's future development. In addition, we are pursuing opportunities in all our divisions. We continue to focus on creating sustainable shareholder value, through a firm strategy of introducing profitable new projects with strong potential to fulfil that aim. We are well known and well positioned in both Croatia and its neighbouring countries and are able to compete effectively for a wide variety of projects. As a result, we look forward to the Company's future with excitement. GERHARD HUBER Chairman Executive Director GROUP INCOME STATEMENT Six months to Six months to Year ended 30 September 30 September 31 March 2008 2007 2008 Unaudited Unaudited Audited Note £'000 £'000 £'000 REVENUE 2 963 886 3,078 Cost of sales (106) (113) (202) ------------- ------------- ------------- GROSS PROFIT 857 773 2,876 Administrative expenses (1,576) (1,206) (2,399) Other income 4 1,686 774 4,693 ------------- ------------- ------------- OPERATING PROFIT 967 341 5,170 Net finance expense (738) (97) (290) -------------- -------------- ------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 229 244 4,880 Tax on ordinary activities 3 (3) (4) (9) ------------- ------------- ------------- PROFIT FOR THE PERIOD 226 240 4,871 ====== ====== ====== EARNINGS PER SHARE Basic 7 1.6p 2.5p 47.8p ====== ====== ====== Diluted 7 1.5p 2.3p 45.4p ====== ====== ====== GROUP BALANCE SHEET As at 30 As at 30 As at 31 March September 2008 September 2008 2007 Unaudited Unaudited Audited Note £'000 £'000 £'000 FIXED ASSETS Non-current assets Intangible assets 5 39,093 5,372 35,902 Goodwill 689 - 940 Property, plant and equipment 6 4,748 4,236 4,702 ------------- ------------- -------------- 44,530 9,608 41,544 ------------- ------------- -------------- CURRENT ASSETS Inventories 3,310 2,187 3,172 Trade and other receivables 2,098 1,929 2,384 Cash at bank 2,251 1,068 2,372 ------------- ------------- ------------ 7,659 5,184 7,928 ------------- ------------- -------------- TOTAL ASSETS 52,189 14,792 49,472 ====== ====== ======= EQUITY Capital and reserves attributable to the Company's equity shareholders Called up share capital 1,463 977 1,463 Share premium account 16,028 8,711 16,028 Merger reserve 347 347 347 Retained earnings and translation 3,377 (1,296) 3,120 reserves ------------- ------------- -------------- TOTAL EQUITY 21,215 8,739 20,958 -------------- -------------- -------------- LIABILITIES Non-current liabilities Deferred tax liabilities 7,819 290 7,180 Loans 16,161 2,999 5,053 Amounts due under finance leases 24 3 38 ------------- ------------- ------------- 24,004 3,292 12,271 -------------- -------------- ------------- Current liabilities Trade and other payables and 6,228 2,600 5,433 deferred income Loans 737 156 10,805 Amounts due under finance leases 5 5 5 ------------- ------------- -------------- 6,970 2,761 16,243 -------------- -------------- -------------- TOTAL LIABILITIES 30,974 6,053 28,514 -------------- -------------- -------------- TOTAL EQUITY AND LIABILITIES 52,189 14,792 49,472 ======= ====== ======= GROUP CASH FLOW STATEMENT Six months to Six months to Year ended 31 30 September 30 September March 2008 2007 2008 Unaudited Unaudited Audited £'000 £'000 £'000 Cash flows from operating activities Profit before taxation 229 240 4,880 Adjustments for: Net finance expense (738) 97 (290) Net interest paid 738 (97) 290 Profit on disposal of fixed assets - - 26 Exchange rate difference 8 - 578 Share based payments 110 102 222 Depreciation and amortisation 167 74 256 Negative goodwill written back to income (1,686) - (3,739) statement Movement in trade and other receivables 289 (979) 373 Movement in inventories (138) (2,146) (2,571) Movement in trade and other payables 163 2,011 957 -------------- -------------- --------------- Cash flow from operating activities (858) (698) 982 Taxation paid (3) - (9) -------------- -------------- --------------- Net cash outflow from operating activities (861) (698) 973 -------------- -------------- --------------- Cash flow from investing activities Purchase of property, plant and equipment (111) (836) (982) and intangibles Proceeds from sale of property 16 - 66 Purchase of subsidiaries - - (795) Cash acquired with subsidiary - - 18 -------------- -------------- --------------- Net cash outflow from investing activities (95) (836) (1,693) -------------- -------------- --------------- Cash flows from financing activities Issue of shares - 1,568 2,341 Capital element of finance lease repaid - (5) - Net loans undertaken less repayments 1,018 (105) 499 -------------- -------------- --------------- Cash inflow from financing activities 1,018 1,458 2,840 -------------- -------------- --------------- Cash and cash equivalents at beginning of 2,372 1,375 1,375 period Net cash inflow/(outflow) from all 62 (76) 2,120 activities Non-cash movement arising on foreign (183) (231) (1,123) currency translation --------------- -------------- --------------- Cash and cash equivalents at end of period 2,251 1,068 2,372 ======= ====== ====== Cash and cash equivalents comprise Cash (excluding overdrafts) and cash 2,251 1,068 2,372 equivalents ======= ====== ====== NOTES TO THE GROUP CASH FLOW STATEMENT 1. ACQUISITION OF SUBSIDIARIES a) On 30 May 2008 the company purchased 100% of the issued share capital of Deep Blue Development Liegenschaftserschliessungs GmbH. The shares in Deep Blue Development Liegenschaftserschliessungs GmbH. were acquired for £Nil consideration. £'000 Net assets acquired: At book value: Tangible fixed assets 14 Creditors (3) Loans (14) --------- (3) Goodwill 3 --------- Consideration - ===== b) On 30 September 2008, the company purchased 100% of the issued share capital of Tiha Uvala d.o.o. a company registered in Croatia. The purchase price includes an initial payment of HRK 4.5 million payable on receipt of all building permits and a further HRK 4.5 million payable on completion of the construction of a Hotel. The respective timings of the payments are 6 months and 2 years. Net assets acquired: £'000 At fair value: Intangible fixed assets (note 5) 3,191 Deferred tax provision (638) ------------- 2,553 ------------- Debtors 2 ------------- 2 ------------- Total 2,555 Negative goodwill-written back to the income statement (1,686) in `other income' ------------- 869 ------------- The negative goodwill has arisen as the Group received a bargain purchase. Satisfied by: Deferred consideration 869 ====== GROUP STATEMENT OF CHANGES IN EQUITY Merger Retained Translation Share Capital Share Premium Reserve Earnings Reserve Total £'000 £'000 £'000 £'000 £'000 £'000 At 31 March 2007 881 7,239 347 (1,574) 9 6,902 Share based payments - - - 222 - 222 Total recognised income and expenses - - - 4,871 (408) 4,463 Issue of shares (net of - - costs) 141 2,199 - 2,340 Acquisition of subsidiaries (net of costs) 441 6,590 - - - 7,031 ------------- -------------- ------------- -------------- ---------- -------------- At 31 March 2008 1,463 16,028 347 3,519 (399) 20,958 Share based payments - - - 110 - 110 Total recognised income and expenses - - - 226 (79) 147 ------------- -------------- ------------- -------------- ---------- -------------- At 30 September 2008 1,463 16,028 347 3,855 (478) 21,215 ====== ======= ====== ====== ====== ======= NOTES 1. ACCOUNTING POLICIES The accounting policies, applied on a consistent basis in the preparation of the financial information, are as follows: (a) Basis of Preparation These half year 2008 interim consolidated financial statements of Cubus Lux Plc are for the six months ended 30 September 2008. The information included within this document has been prepared on the basis of the recognition and measurement requirements of IFRS standards, IAS standards and IFRIC interpretations in issue that are endorsed by the European Commission and effective at 19 November 2008. The Group accounting policies are as set out in the March 2008 report and financial statements. 2. Business segment analysis Period ended 30 September Property Resort 2007: Casino Marina Central Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue External sales 689 197 - - - 886 ====== ====== ===== ======= ==== ====== Profit/(loss) Segment operating 18 - profit/(loss) 147 (177) 353 341 Net finance costs (97) ------------- Profit before taxation 244 ====== Assets and liabilities Segment assets 1,468 3,553 2,257 - 7,514 14,792 Segment liabilities (271) (3,675) (1,700) - (407) (6,053) ------------ ------------- -------------- --------------- ------------- ------------- Net assets/(liabilities) 1,197 (122) 557 - 7,107 8,739 ====== ====== ====== ======== ====== ====== Year ended 31 March 2008: Revenue External sales 962 361 - 1,755 - 3,078 ======= ====== ====== ====== ====== ======= Profit/(loss) Segment operating profit/(loss) 65 (229) 31 1,725 3,578 5,170 Net finance costs (290) ------------ Profit before taxation 4,880 ====== Assets and liabilities Segment assets 1,461 3,904 2,616 2,449 39,042 49,472 Segment liabilities (344) (4,147) (1,996) (1,993) (20,034) (28,514) -------------- ------------- -------------- ------------- --------------- ------------- Net assets/(liabilities) 1,117 (243) 620 456 19,008 20,958 ======= ====== ====== ====== ======= ====== Casino Marina Property Resort Central Total £'000 £'000 £'000 £'000 £'000 £'000 Period ended 30 September 2008: Revenue External sales 533 387 - 43 - 963 ====== ====== ===== ======= ==== ====== Profit/(loss) Segment operating (loss)/profit (30) 2 12 (67) 1,050 967 Net finance costs (738) ------------- Profit before taxation 229 ====== Assets and liabilities Segment assets 1,421 4,012 2,666 2,566 41,524 52,189 Segment liabilities (304) (4,421) (2,039) (2,093) (22,117) (30,974) ------------ ------------- -------------- --------------- ------------- ------------- Net assets/(liabilities) 1,117 (409) 627 473 19,407 21,215 ====== ====== ====== ======== ====== ====== 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 income Other income of £1,686,000 in the period ended 30 September 2008, relates to negative goodwill arising from the acquisition of Tiha Uvala d.o.o. and subsequent valuation of the intangible fixed assets acquired. In compliance with the IFRS, the company obtained an external valuation by Brand Finance plc and the intangible assets which were valued at £3,191,000 (see note 1b to the group cash flow). 5. Intangible fixed assets Marina Licence Olive Olive Olive Olive Olive Olive Olive Sutomiscica: Island Island Island Island Island Island Island Right to resort: resort: resort: hotel: hotel: hotel hotel: Develop Right to Brand Total Right Brand Management Develop to Contract Total Total Develop £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Cost or valuation At 31 March 5,372 - - - - - - - - 5,372 2007 Acquired on - 26,382 121 26,503 2,187 110 1,730 4,027 - 30,530 acquisition ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- At 31 March 5,372 26,382 121 26,503 2,187 110 1,730 4,027 - 35,902 2008 Acquired on - - - - - - - - 3,191 3,191 acquisition ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- At 30 5,372 26,382 121 26,503 2,187 110 1,730 4,027 3,191 39,093 September 2008 === === === === === === === === === === 6. Tangible fixed assets Casino Marina Resort Casino Marina Central Resort Total leasehold leasehold leasehold assets assets assets premises premises assets £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Cost or valuation At 31 March 2007 59 2,516 - 1,002 146 - - 3,723 Additions 26 586 - 251 149 1 - 1,013 Acquired on - - 3 - - - 10 13 acquisition Disposals - (44) - (47) (42) - - (133) Exchange rate movements 14 549 - 218 41 - - 822 ---- ---- ---- ---- ---- ---- ---- ---- At 31 March 2008 99 3,607 3 1,424 294 1 10 5,438 ---- ---- ---- ---- ---- ---- ---- ---- Additions 8 91 - 21 5 - - 125 Acquired on - - - - - - 17 17 acquisition Disposals - - - (23) - - - (23) Exchange rate movements 2 74 - 29 6 - (3) 108 ---- ---- ---- ---- ---- ---- ---- ---- At 30 September 109 3,772 3 1,451 305 1 24 5,665 2008 ---- ---- ---- ---- ---- ---- ---- ---- Depreciation At 31 March 2007 35 2 - 349 22 - - 408 Acquired on - - 2 - - - 4 6 acquisition Charge for the year 16 86 - 98 56 - - 256 Disposals - - - (27) (14) - - (41) Exchange rate 9 12 - 76 10 - - 107 movements ---- ---- ---- ---- ---- ---- ---- ---- At 31 March 2008 60 100 2 496 74 - 4 736 ---- ---- ---- ---- ---- ---- ---- ---- Charge for the 8 59 - 70 32 - 1 170 period Disposals - - - (7) - - - (7) Exchange rate 1 4 - 11 2 - - 18 movements ---- ---- ---- ---- ---- ---- ---- ---- At 30 September 69 163 2 570 108 - 5 917 2008 ---- ---- ---- ---- ---- ---- ---- ---- Net Book Value At 31 March 2008 39 3,507 1 928 220 1 6 4,702 ==== ==== ==== ==== ==== ==== ==== ==== At 30 September 40 3,609 1 881 197 1 19 4,748 2008 ==== ==== ==== ==== ==== ==== ==== ==== 7. Earnings per share The earnings per share of 1.6p (Year ended 31 March 2008: earnings 47.8p; six months ended 30 September 2007: earnings 2.5p) has been calculated on the weighted average number of shares in issue during the year namely 14,614,365 (year ended 31 March 2008: 10,181,002; six months ended 30 September 2007: 9,549,284) and profits of £226,450 (year ended 31 March 2008: profit £4,871,401; six months ended 30 September 2007: profit £240,431). The calculation of diluted earnings per share of 1.5p (year ended 31 March 2008: earnings 45.4p; six months ended 30 June 2007: earnings 2.3p) is based on the loss on ordinary activities after taxation and the diluted weighted average of 15,481,865 (year ended 31 March 2008: 10,724,816; six months ended 30 June 2007: 10,249,284) shares. At the Annual General Meeting of 6th August 2008 the company's ordinary shares of £0.01 each were consolidated by the factor 10:1 into ordinary shares of £0.1 each. The previously reported comparative earnings per share of 30 September 2007 (Basic 0.25p, diluted 0.23p) and 31 March 2008 (Basic 4.78p, diluted 4.54p) have been restated. INDEPENDENT REVIEW REPORT TO CUBUS LUX PLC Introduction We have been engaged by the company to review the group financial statements in the interim report for the six months ended 30 September 2008 which comprises the Group Income Statement, the Group Balance Sheet, the Group Cash Flow Statement, the Group Statement of Changes in Equity and related explanatory 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 group financial statements. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the interim report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts. Our responsibility Our responsibility is to express to the Group a conclusion on the group financial statements in the interim report based on our review. Our report has been prepared in accordance with the terms of our engagement and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon 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 written 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 group financial statements in the interim report for the six months ended 30 September 2008 are not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. haysmacintyre Chartered Accountants Registered Auditors Fairfax House 15 Fulwood Place London WC1V 6AY 18 November 2008

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