Interim Results
Dolphin Capital Investors Limited
18 September 2007
18 September 2007
Dolphin Capital Investors Limited (DCI.L)
Interim results for the period ended 30 June 2007
DOLPHIN RECORDS 52% RISE IN NAV DURING H1 2007
Dolphin Capital Investors ('Dolphin' or the 'Company'), the leading investor in
the residential resort sector in south-east Europe, announces its results for
the period ended 30 June 2007.
Highlights
• Total Net Asset Value ('NAV') of the Company of €1,295 million
before deferred income tax liabilities (€1,161 million after DITL)
• NAV per share of 167p and 150p before and after DITL, up 52% and 48%
respectively over NAV per share figures of 110p and 101p as of 31 December 2006
• Profit before tax of €211.3 million (30 June 2006: €60.9 million),
resulting in a fully diluted earnings per share of €0.61
• NAV uplift driven primarily by the inclusion of all assets of
Cyprus' largest holiday home developer, Aristo Developers Plc ('Aristo'),
following the successful acquisition via a public offer in April 2007
• Healthy growth in Aristo's financial performance during H1 2007,
with a reported 15% and 19% increase in revenues (€69 million) and net profit
after tax (€13 million) respectively compared to H1 2006
• Aristo integration advancing strongly and existing projects
progressing in line with their development plans
• Successful completion of third fundraising of €450 million in June
2007
• In final stage of negotiations relating to a number of pipeline
investments in core markets of Greece and Cyprus as well as other regional
emerging markets.
Commenting, Andreas N Papageorghiou, Chairman of Dolphin Capital Investors,
said:
'It gives me great pleasure to report yet another successful half-yearly period
for Dolphin Capital Investors. During this period, the Company maintained its
strong investment performance, raised €450 million of additional equity capital
and became the largest real estate investment fund listed on AIM. In addition,
the acquisition of Aristo, Cyprus' largest landowner and holiday home developer,
underpinned Dolphin's market-leading position by combining Dolphin's real estate
expertise with one of the most successful residential developers in the region.'
Miltos Kambourides, founder and Managing Partner of Dolphin Capital Partners,
commented:
'Dolphin has had a very productive first half of the year, marked by a
significant capital raise amidst challenging market conditions. With a number
of exciting pipeline opportunities already at an advanced negotiation stage, we
remain confident in our ability to deploy the new capital over the coming months
and further grow the Company.'
For further information, please contact:
Dolphin Capital Partners
Miltos E. Kambourides miltos@dolphincp.com
Pierre A. Charalambides pierre@dolphincp.com
Financial Dynamics Tel: +44 (0)20 7831 3113
Stephanie Highett/Lauren Mills/Nicole Marino
Notes to editors
Dolphin Capital Investors Limited ('Dolphin' or the 'Company') is the leading
investor in the residential resort sector in south-east Europe and currently the
largest real estate investment company listed on AIM.
Dolphin seeks to generate strong capital growth for its shareholders by
acquiring large seafront sites of striking natural beauty in the eastern
Mediterranean and establishing sophisticated leisure-integrated residential
resorts.
Since inception in 2005, Dolphin has raised €859 million, has become one of the
largest private seafront landowners in Greece and Cyprus and has partnered with
some of the world's most recognised architects, golf course designers and hotel
operators.
In April 2007, Dolphin acquired Aristo, one of the largest holiday home
developers in south-east Europe. This enabled the enlarged Company to combine
real estate private equity investment expertise with leading development
experience and local market knowledge.
Dolphin is managed by Dolphin Capital Partners ('DCP' or the 'Investment Manager
'), an independent private equity management firm that specialises in real
estate investments in south-east Europe.
Dolphin's evolution
H2 2005
• Dolphin is formed and funded with €5 million of seed capital.
• Dolphin is admitted to trading on AIM, raising €104 million via a
placing with institutional investors. The issue price at admission is 68p.
Panmure Gordon acted as sole bookrunner.
H1 2006
• Dolphin executes its first investment by committing €23 million to
Kilada Hills Golf Resort.
• €49 million committed to Apollo Heights Polo Resort, Scorpio Bay
Resort and the expansion of Kilada Hills Golf Resort.
H2 2006
• €21 million committed to Amanmila Resort and Lavender Bay Golf
Resort.
• Secondary AIM fundraising of an additional €300 million (£202.7
million) completed via a placing of 217,959,896 new common shares at 93p per
share. Panmure Gordon acted as sole bookrunner.
• €54 million committed to Sitia Bay Golf Resort and Seascape Hills
Resort and €54 million committed to the expansion and/or increase of
shareholding in Kilada Hills Golf Resort, Lavender Bay Golf Resort and Apollo
Heights Polo Resort.
H1 2007
• €65 million allocated/committed to Livka Bay Resort and Rebranded
Hotels and an additional €6.5 million invested for the minority buy-out of
Scorpio Bay Resort.
• €245 million committed to the acquisition of an 85% shareholding in
Aristo, the largest holiday home developer in Cyprus and listed on the Cyprus
Stock Exchange.
• Third fundraising of an additional €450 million (£303 million) via a
placing of 178,041,096 new common shares at 170p per share. Goldman Sachs and
Morgan Stanley acted as joint bookrunners and Panmure Gordon acted as co-lead
manager.
Chairman's Statement
It gives me great pleasure to report yet another successful half-yearly period
for Dolphin Capital Investors.
During this period, the Company maintained its strong investment performance,
raised €450 million of additional equity capital and became the largest real
estate investment fund listed on AIM. In addition, the acquisition of Aristo,
Cyprus' largest landowner and holiday home developer, underpinned Dolphin's
market-leading position by combining Dolphin's real estate investment expertise
with one of the most successful residential developers in the region.
Dolphin's track record of significant value creation for shareholders continued
in the first six months of 2007. As of 30 June 2007, the total NAV of the
Company was €1,295 million before DITL and €1,161 million after DITL, equivalent
to a NAV per share of 167p (€2.48) and 150p (€2.22) respectively, which
represents a 52% and 48% uplift over the respective NAV per share figures of
110p and 101p as of 31 December 2006.
With increasing regional governmental support, legislative improvements, a
continuing compelling supply/demand imbalance and a healthy flow of new
attractive investment opportunities, Dolphin is strongly positioned to create
further growth both in its existing and new target markets.
With an exciting portfolio of projects and a promising pipeline in unrivalled
locations, we look forward with confidence to creating further value for
shareholders.
Andreas N Papageorghiou
Chairman
Dolphin Capital Investors
Investment Manager's Report
Dolphin Capital Investors is managed by Dolphin Capital Partners ('DCP') and
focused exclusively on the residential resort sector predominantly in the
eastern Mediterranean. The Company's investment model is predicated on the
acquisition of large-scale sites in prime locations that can be developed into
sophisticated leisure-integrated residential resorts to be marketed to affluent
international and domestic buyers. Since admission to trading on AIM, Dolphin
has established a strong track record of rapid capital deployment and NAV uplift
creation. Capitalising on its first mover advantage in the target region, its
access to exclusive deal flow and its network of world acclaimed project
partners, Dolphin intends to continue to deliver significant capital
appreciation to its shareholders.
The first half of 2007 has been particularly successful for Dolphin. During this
period, we made a highly strategic move which has taken the Company to its next
phase of evolution: the acquisition in April 2007 of Aristo, Cyprus' largest
private landowner and holiday home developer. The transaction, Dolphin's largest
equity commitment to date and Cyprus' largest public-to-private takeover with an
enterprise value of €442 million, served both to double the Company's landbank
and significantly enhance its competitive position in the holiday home
development market. Dolphin now combines real estate private equity investment
expertise with extensive development experience.
Following the Aristo acquisition, Dolphin returned to the public markets in June
2007 to raise an additional €450 million, thus becoming the largest real estate
investment company listed on AIM.
Dolphin has continued to generate NAV uplift in the first half of 2007. The
total NAV of the Company as of 30 June 2007 was €1,295 million before Deferred
Income Tax Liabilities ('DITL') and €1,161 million after DITL, equivalent to a
NAV per share of 167p (€2.48) and 150p (€2.22) respectively. This represents a
52% and 48% uplift over the respective NAV per share figures of 110p and 101p as
of 31 December 2006.
As of 31 August 2007, Dolphin has committed a total of €538 million out of €839
million of net equity funds raised. This figure does not include €57 million
that has been committed since May through Aristo for new land acquisitions in
Cyprus and which will be funded through the €85 million bank facility that was
secured in August.
As the recently raised funds are invested and as the ongoing design, planning
and permitting application processes of existing projects are progressed, the
Company expects to be able to sustain robust NAV growth and continue to generate
strong returns for shareholders.
We are confident that the remaining capital will be deployed in a timely manner
over the coming months as negotiations relating to a number of advanced
investment pipeline projects are concluded.
Sector Dynamics
Despite the recent debt market turmoil that has negatively affected the yield
performance of traditional real estate companies, the structural growth story of
Dolphin's investments in strategic seafront land sites and the prospects for the
leisure-integrated residential real estate sector remain strong. Foreign
property ownership continues to be well supported by positive fundamentals such
as demographic trends (including, amongst others, the quest for a place in the
sun by the growing Northern European ageing population as well as increased
mobility) and continuing favourable developments in the hospitality/leisure and
tourism industries.
The global market for holiday homes and timeshare apartments represents one of
the fastest-growing segments in the hospitality industry, with a 15-year
compound annual growth rate of nearly 10% (source: 'American Resort Development
Association', Collins Stewart, June 2007). Cap Cana's recent aggressive sales
record of $300 million in the Dominican Republic, with more than 95% of
inventory being sold out in only the first few hours of the Trump Farallon
Estates sales launch, represents another formidable example of the sector's
increasing popularity and success.
2006 also saw 36 million more tourists than 2005 worldwide (source: UNWTO World
Tourist Barometer, January 2007), with golf tourism growing at impressive rates.
The sport's popularity continues to attain an impressive scale and is fast
spreading into new geographic markets, with Stephen Proctor of Sports Marketing
Surveys projecting the need for a new golf course to open every working day for
the next 10-15 years across Europe and particularly along the Mediterranean
coast to satisfy the increasing demand (source: 'The Business of Golf',
Financial Times, July 2007).
Dolphin's target region continues to present an enticing investment story.
Macroeconomic data has been particularly encouraging for the Company's target
markets, with strong GDP growth over the first half of 2007. Cyprus in
particular is enjoying strong economic stability as it prepares for its entry
into the eurozone during this transitional period of set rate conversions.
Tourist statistics have also been positive for Greece, Cyprus and Croatia, all
of which rank high in the Travel and Tourism Competitiveness Index: Human,
Cultural and Natural Resources (source: the latest World Investment Report of
UNCTAD). Greek tourist bookings were at a 10-year high for H1 2007, with foreign
arrivals forecast to rise 6% in 2007, bringing the total increase since 2004 to
more than 24% (source: 'Tourism Results 2000-2006', Kathimerini Newspaper, July
2007). The story is very similar for Croatia and Cyprus, the former having
completed another successful tourist season over the past six months with two
million arrivals (source: Croatian Tourism Board satisfied with course of
tourist season', Croatian Ministry of the Sea, Tourism, Transport, and
Development, July 2007) whilst the latter aims for 3.5 million tourists by 2010
(source: 'Strategic Plan for Tourism Development 2003-2010', Cyprus Tourism
Ministry).
Local governments continue to share the Company's desire to revitalise the
tourist industry and modernise their countries' infrastructure. The draft '
Special National Tourism Zoning Plan', unveiled by the Greek Government in the
spring, and the recently published 'Golf Investment Guide' by Croatia's state
investment proposition agency APIU, both aim to delineate a national zoning plan
that will allow for the orderly development of golf residential resorts. The
scale of the proposed reforms are set to be far-reaching, recognising the
undisputed success of the golf industry in boosting tourism revenue. Cyprus is
also pressing ahead with its 'Strategic Plan for Tourism Development', which
places particular emphasis on sports tourism, as can be demonstrated by the 12
preliminary licences for golf-integrated residential resorts that are being
granted by the Cypriot authorities, three of which have been awarded to
Dolphin's recently acquired Aristo.
In Turkey, the recent electoral success of the AKP party has strengthened our
resolve to tap the country's real estate potential. The Government appears
poised to maintain the positive foreign investment climate nurtured since 2002,
remaining openly supportive of Foreign Direct Investment ('FDI'), with an
estimated $25 billion of FDI this year compared with less than $1 billion a year
six years ago (source: 'FT Report - Investing in Turkey: Polls unlikely to deter
investors', Financial Times, July 2007) and continuing to focus on structural
reforms and privatisations. GDP growth over the past three years has
consistently exceeded 5% (source: Turkish Statistical Institute), whilst average
international arrivals and income receipts growth has been recorded at 11.1% and
13.9% respectively during 1995-2005 (source: 'The Travel & Tourism Report 2007 -
Part II', UNWTO). The Government is also keen to reinvigorate the country's bid
to join the EU. Dolphin is expected to be able to announce the closing of its
first investment in Turkey in the near future.
Sicily, as one of Italy's few remaining virgin and underdeveloped regions, also
presents a number of attractive opportunities on which the Company is currently
completing extensive due diligence. Dolphin expects to be able to capitalise on
the market potential as the island's business environment becomes more and more
transparent.
A final note on the recent fire outbursts in Greece: these were indeed
particularly unfortunate for the country, with the tragic loss of many innocent
lives and the natural beauty of large parts of the Peloponnese and the island of
Evia severely damaged. The Dolphin sites have not been affected by this tragedy
but the events do reinforce the need for extra protective measures going
forward. We are committed to working with the municipalities in which all of our
projects are located and ensuring that adequate fire prevention mitigates any
possible future damage.
Current Investments
Dolphin's investment activity over the first half of 2007 has been focused on
continued land aggregation, the integration of Aristo and the progression of the
planning applications across the Company's current projects.
The existing project portfolio includes investments in 12 major
leisure-integrated residential resorts in Greece, Cyprus and Croatia and several
small ones from the Aristo portfolio amounting to c.35 million m2 of acquired/
contracted land and c.17km of direct coastline. From the 12 major developments,
four were recently added from the Aristo acquisition, namely Venus Rock Golf
Resort, Eagle Pine Golf Resort, Douneika and Tsilivi.
Acquisitions of sizeable land parcels have also been negotiated over the past
two months and are expected to be completed soon, with the purpose of adding new
major projects to the portfolio, accumulating more land in the greater areas
surrounding existing projects and creating critical mass in locations deemed as
strategic to Dolphin's investment plans. Notable examples of completed
acquisitions post 30 June 2007 include the purchase of a 13-hectare beachfront
site near Seascape Hills that will accommodate an Aman beachclub and villas and
an 84-hectare site contiguous to Eagle Pine Golf Resort that will enable the
project to be significantly expanded. Aristo has also actively been expanding
its land portfolio, with the cumulative acquisition of approximately 71 hectares
of land in Cyprus since May 2007.
Kilada Hills Golf Resort, Greece
• Golf-integrated development spread over a 180-hectare site designed by
Jean-Michel Gathy of Denniston International
• 70 hectares of adjacent landbank
• Situated in the upmarket residential area of Porto Heli, 175km from
Athens
• To comprise more than 80,000 residential buildable m2, a 117-room and
suite luxury GHM-operated hotel and an 18-hole championship Jack Nicklaus
Signature Golf Course
• The golf, hotel and residential building permits received in Q3 2006
for the original 80-hectare masterplan made Kilada Hills probably the most
mature project in terms of permits in Greece
• Based on the original permits, a €13 million subsidy package was
received in March 2007 for the hotel and golf construction
• Permits for the new design and expanded masterplan are progressing
Seascape Hills Resort, Greece
• Aman resort and villa community masterplanned by Ed Tuttle
• Nestled within the greenest area of the wider Porto Heli peninsula,
only a 10-minute drive from Kilada Hills Golf Resort
• Hill-top site of 40 hectares to accommodate a luxury 40-room Aman
hotel, 40 Aman villas and a spa
• Recent acquisition of a 13-hectare beachfront site that will
accommodate an Aman beach-club and additional villas
• Additional 33 hectares of adjacent landbank already acquired
• Expected to benefit from the extended range of facilities to be
offered by the neighbouring Kilada Hills Golf Resort
• Pending Environmental Impact Study ('EIS') approval
Lavender Bay Golf Resort, Greece
• Seafront leisure-integrated residential resort spread over a
294-hectare site and masterplanned by EDSA
• 10-minute drive from Nea Achialos International Airport
• To comprise more than 100,000m2 of residential accommodation, a
250-room luxury hotel, an 18-hole Gary Player Signature Golf Course and a
100-berth marina
• Hotel operator selection process in final stages
• Preliminary EIS and suitability by the Greek National Tourism
Organisation ('GNTO') for hotel component already obtained; final EIS for the
hotel submitted and under review
• Progressing in parallel the site eligibility for special out of town
zoning on the eastern zone
Scorpio Bay Resort, Greece
• 172-hectare site, situated only an hour's drive from Athens
International Airport in the region of Skorponeri, featuring 2km of coastline
and dramatic views of the bay and the island of Evia
• To comprise a luxury hotel, with at least 80,000 m2 of buildable
residential area
• Hotel operator and architect selection process in final stage
• Preliminary EIS pending approval
• Expected to be the closest high-end seaside residential resort to
Athens
Amanmila Resort, Greece
• The first villa-integrated Aman Resort to be signed up in Europe
• Situated on an unspoilt secluded peninsula on the island of Milos
• To comprise a 40-room Aman hotel with 40 villas over 65 hectares
• Design by John Heah already completed
• 135 hectares of adjacent landbank
• Preliminary EIS pending submission
• Land transfer procedure has progressed and is expected to be completed
in the near future
Sitia Bay Golf Resort, Greece
• Golf-integrated residential resort, to be developed on a 250-hectare
seafront site
• Situated in Sitia region in eastern Crete, only a 10-minute drive from
Sitia International Airport
• To comprise an 85-berth marina, an 18-hole Nicklaus Design
Championship Golf Course, a 250-room luxury hotel and residential units
totalling more than 110,000m2
• One of the most advanced projects in Crete in terms of permits (EIS
and tourist suitability for leisure component obtained, special out of town
zoning eligibility of the wider Sitia area for residential development)
• WATG commissioned to prepare masterplan and architectural design for
the hotel, spa, and conference facilities
• Luxury hotel operator to be appointed shortly
Tsilivi Resort, Greece
• Holiday home community to be developed on a 11-hectare beachfront site
on the island of Zakynthos, Greece
• Located in the small village of Tsilivi, only 4km from the town of
Zakynthos and a 20-minute drive from the island's airport
• To comprise more than 56,000 buildable m2 of residential real estate
• One of the largest sites remaining that falls within urban building
zoning and can benefit from high building coefficients
• Permits in place for the first phase, remaining permits expected
shortly
Douneika Resort, Greece
• 26.5-hectare beachfront site located in the region of Ilia, on the
north-west coast of the Peloponnese
• Only a 30-minute drive from Andravida Airport and approximately two
hours from Athens International Airport upon completion of upgrades on the
existing highway, currently under construction
• Less than 1km away from an existing marina
• In early stages of design and permit process
Apollo Heights Polo Resort, Cyprus
• Polo and golf-integrated residential resort to be developed on a
460-hectare site, masterplanned by EDSA
• Located between Paphos and Limassol and accessible in less than an
hour from both Cyprus International Airports and in close proximity to Eagle
Pine and Venus Rock Golf Resorts
• Multi-phased development with capacity to accommodate more than
200,000m2 of residential real estate, a five-star luxury hotel and an 18-hole
Tony Jacklin Signature Golf Course
• Resort expected to benefit from the proximity to the existing 18-hole
golf course and polo fields of the neighbouring British Military Bases
• Staged permit process expected to span over next few years
Eagle Pine Golf Resort, Cyprus
• Premier masterplanned leisure-integrated residential community spread
over a c.300 hectare site
• Located only a few kilometres from Apollo Heights Polo Resort and a
15-minute drive from Venus Rock Golf Resort
• Holds preliminary approval for the development of a golf-integrated
resort, with a residential development component of up to 100,000m2 on 140
hectares
• 160-hectare landbank can accommodate more development
• Masterplanned by EDSA
• Golf design by Graham Marsh in association with Hans-Georg Erhardt
• Final permits expected in 2008
Venus Rock Golf Resort, Cyprus
• One of the largest seafront residential resort development sites in
Europe, spread over 1,000 hectares
• Adjacent to Aphrodite Hills
• Operating golf course (Secret Valley Golf Club)
• A small portion of the site has already been developed, with 187 more
plots permitted for residential development
• Holds preliminary approval for the development of two golf-integrated
resorts, with a residential development component of up to 100,000m2 each
• Masterplan and landscape design have been revised by EDSA
• Expected to comprise three golf courses, c. 3,000 residential units, a
five-star hotel with spa, marina, beachfront and commercial facilities
• British golf legend Tony Jacklin recently appointed to lead golf
course designs
• Final permits expected in 2008
Livka Bay Resort, Croatia
• Dolphin's first investment in Croatia and one of the first
leisure-integrated residential resorts in the country, masterplanned by
Jean-Michael Gathy
• Situated on the island of Solta, spread over 56 hectares of natural
cove, some 15km from Split International Airport
• To comprise a GHM-operated 80-room luxury hotel, a 160-berth marina,
over 250 residential units, beach and club house as well as a retail village
• Zoning consent for Phase I received; EIS pending approval; final
permits for both phases expected within 2008
Aristo
Over the past few months, we have taken significant steps to retain and further
improve the efficiency of Aristo's existing key management and operations. We
have focused on restructuring the company into functional business segments and
creating a new brand designed to elevate the Aristo profile and allow the
company to tap more effectively the more upscale market segments. More
specifically, and in line with Dolphin's press release on 5 April 2007, Aristo's
largest and more reputable assets have been integrated within Dolphin's core
luxury development division. Discussions with renowned master-planners,
architects, golf designers, operators and marketers have already been initiated
with a view to progressing what are eventually to become world-class holiday
home destinations integrated with championship golf courses and other leisure/
retail components. Venus Rock Golf Resort, Aristo's flagship asset spread over a
1,000 hectare site, has already secured Tony Jacklin's participation in the
project, through the design of two new 18-hole golf courses, one of which is to
replace the single existing 18-hole course, and is to apply for a third golf
licence over the coming months.
We have also sought to extract synergies at the operational level through the
integration of Aristo's in-house development and sales teams with those of
Dolphin's other projects in Greece, in effect laying the foundation for a
stronger Aristo development platform dedicated to overseeing the planning and
permit progression of Dolphin's projects both in Greece and Cyprus. A new CEO
has been appointed for Aristo in Greece and further recruitment is under way. By
consolidating the Greece and Cyprus development functions in Aristo, Dolphin
benefits significantly from savings on development fees previously budgeted for
external developers and from the synergies and economies of scale that are
clearly created.
The performance of Aristo for the first half of the year exhibited healthy
growth compared to the same period for 2006. The company achieved a 15% increase
in revenue and reported a strong net profit after tax position of €13 million,
representing a 19% uplift which, together with the recently secured loan
facility, are expected to be efficiently allocated to further grow the company.
It should be noted that these reported profits are generated from the operations
only and do not include any property revaluations.
Aristo also boasts a consistently strengthening marketing force, having sold 401
units during the first half of 2007 compared to 300 in the first half of 2006,
recording a 34% volume uplift. Aristo has also made substantial inroads into the
Russian purchasers' market, with the percentage of sales to Russian second home
buyers of Aristo's total sales increasing from 15% to 29% over H1 2007.
Dolphin Capital Atlantis ('DCA'), a Dolphin subsidiary and holding company of
Aristo, currently holds 98.74% of the share capital of Aristo. DCA recently
activated its right to squeeze out the remaining shareholders, further to the
completion of the public offer process during the summer.
Investment Pipeline
We are in the process of closing on a number of attractive investment
opportunities which come from the pipeline identified before the last
fundraising and which are expected to be announced in the near term. In
addition, we continue to expand the Company's pipeline through the addition of
new attractive investment opportunities.
With close to 75% of the investment pipeline dedicated to projects in Greece and
Cyprus, our focus remains on our primary target markets to date. We have
nonetheless actively sought to replicate our success in other regional emerging
markets. We aim to expand our position in Croatia and execute our first
investments in Turkey. For Turkey in particular, Dolphin has partnered with
Kemer Group, a pioneer in creating leisure integrated residential communities in
the country, having sold over 2,000 homes to date. The Kemer Group's flagship
development, the Kemer Golf & Country Club outside of Istanbul, is Turkey's
premier, social, sports and golf club, offering a vast range of facilities
including an 18-hole internationally accredited golf course, restaurants, sports
facilities, equestrian competition courses, spas, social and cultural event
facilities, and personal development programmes in a unique natural setting.
Further to amendments in Dolphin's investment policy following the latest
fundraising, enabling the Company to invest up to 5% of its last reported NAV to
new geographies outside its primary investment region of the eastern
Mediterranean, we are evaluating some very compelling investment opportunities
introduced by our operating partners. We believe that such opportunities will
offer significant capital returns, generate positive synergies with Dolphin's
existing portfolio, enhance existing relationships and create the potential for
new strategic partnerships with international service providers and operators
that should benefit the Company's investments in the primary investment region.
With approximately €301 million of uncommitted funds as of 31 August 2007, we
are confident in our ability to commit the remaining capital efficiently and
profitably before the end of H1 2008.
Looking Ahead
Our goals over the coming months are to:
• commit or invest all remaining capital by the end of the first half of
2008;
• progress the design and permit process of all existing and new
projects;
• continue the integration of Aristo;
• upgrade Aristo's large land sites into upscale residential resorts;
• expand Aristo's development leadership into Greece and continue to
export the team's development management expertise and experience to other
Dolphin projects;
• continue to expand Dolphin's network of world class strategic
partnerships and brands;
• expand in other regional markets such as Turkey and Sicily and, to a
limited extent, outside the eastern Mediterranean; and
• prepare for a transition to the main market of the LSE during the
course of 2008 to establish Dolphin as one of the largest and most profitable
real estate investment companies in south-east Europe and beyond.
In addition to creating wealth for Dolphin's shareholders, we remain committed
to creating a long-lasting economic and social benefit for the regions,
environments and societies where we invest. To facilitate that, we have recently
established a wholly-owned subsidiary, Dolphin Capital Foundation ('DCF'), a
non-profit charitable entity dedicated to assisting the surrounding regional
communities and environments where Dolphin invests and to contributing to their
well-being. Dolphin's Board of Directors has approved for the progressive
donation of up to €2 million to be contributed towards DCF charitable projects.
The first donations planned are for the purchase of fire-fighting vehicles for
municipalities in Greece where some of Dolphin's major projects are located.
Miltos Kambourides Pierre Charalambides
Managing Partner Partner
Dolphin Capital Partners Dolphin Capital Partners
Finance Director's Report
During the first half of its second year of trading, Dolphin has maintained a
solid financial performance. As at 30 June 2007, the Company had invested €378
million and committed €518 million out of the €839 million net equity funds
raised.
Consistent with the Company's valuation policy, Colliers International ('
Colliers') proceeded with the appraisal of:
(i) eight major pre-Aristo investments, namely Kilada Hills Golf Resort,
Scorpio Bay Resort, Seascape Hills Resort, Lavender Bay Golf Resort, Sitia Bay
Golf Resort, Apollo Heights Polo Resort, Livka Bay Resort and the hotel property
acquisition in Porto Heli (part of the Rebranded Hotels initiative).
(ii) all the assets of Dolphin's largest subsidiary, Aristo which include,
amongst others, the flagship projects of Venus Rock Golf Resort and Eagle Pine
Golf Resort.
Based on this valuation, the Company's NAV per share before and after DITL as of
30 June 2007 is 167p (€2.48) and 150p (€2.22) respectively, representing an
uplift of 52% and 48% over the reported NAV figures of 110p and 101p as of 31
December 2006. The major driver of the NAV uplift has been the inclusion of the
Aristo assets in the Company's portfolio, following the successful acquisition
via a public offer which contributed into the Dolphin portfolio over 13 million
m2 of prime development land.
€ £ Uplift since
31 Dec 06
Total NAV before DITL (millions) 1,295 871 na
Total NAV after DITL (millions) 1,161 781 na
NAV per share before DITL 2.48 167p 52%
NAV per share after DITL 2.22 150p 48%
Note: -NAV is fully diluted for warrants granted to the Investment Manager
(pro-forma number of shares: 4.5 million).
-GBP/Euro rate of 0.6726 as of 30 June 2007.
The NAV figures shown in the table above are reported on a diluted basis, taking
into account (on a pro-forma basis) the exercise of the over-performance
warrants by the Investment Manager structured into the over-performance
incentive scheme in conjunction with the October 2006 placing and amended in the
third fundraising in June 2007. As of the latest NAV calculation, the accrued
over-performance warrants amount to 4.5 million shares, a number that could grow
substantially if the Company's NAV continues to grow at a high pace for the
remainder of 2007. The actual number of over-performance warrants granted to DCP
will be calculated based on the NAV as at 31 December 2007. The NAV figures do
not take into account, however, the potential payment of the performance fee
which is payable only when cash profits above the 8% return hurdle are realised.
It should also be noted that the reported DITL of €134 million, were calculated
based on the current fair market value of the land acquired as reported by
Colliers, and are applicable only in the event of direct sale of land or assets.
The sale of land is anticipated to take effect through the sale of shares of the
holding SPVs and, as such, most of the DITL are not expected to become payable.
The NAV before DITL is therefore considered by the Investment Manager as the
more representative figure.
Dolphin expects a significant NAV uplift over the coming months, driven
primarily by:
• completion of minority buy-outs as in the case of Venus Rock Golf
Resort where the 14% not currently owned by Aristo is expected to come under
DCA's control by the end of 2007;
• completion of the Aristo squeeze-out process;
• conversion of signed land pre-contracts into final contracts, as in
the case of Amanmila Resort which is currently not reflected in the Company's
NAV;
• profits generated by the Aristo operations;
• progress with the planning and permitting process of existing
projects; and most importantly,
• closing of additional investments from the pipeline.
Financial Overview
Dolphin's Total Assets as at 30 June 2007 are reported at €1,782 million and
Total Liabilities at €472 million, based on the interim consolidated financial
statements of the Company.
The fair market value of Dolphin's investments (both freehold and leasehold
interests) as at 30 June 2007 was reported by Colliers at €1,270 million,
assuming 100% ownership. After deducting minority interests of €149 million and
other net liabilities of €308 million, the fair market value of Dolphin's assets
amounts to €813 million versus €378 million of invested funds, which represents
an uplift of €435 million or a 2.2x multiple.
Current assets are €507 million (after deducting Trading Properties of €351
million which are included in Investment Property), made up of a cash balance of
€482 million and €25 million of other receivables.
Liabilities total €472 million, including €134 million DITL (as already
explained, DITL are unlikely to materialise), €179 million of Interest-bearing
loans and Finance lease obligations and €158 million of other payables.
The net profit for the first half of 2007 was reported at €212 million resulting
in a fully diluted earnings per share of €0.61.
KPMG performed the review of the interim consolidated financial statements.
Finance and Capital Structure
The Investment Manager continues to optimise the Company's capital structure by
reviewing all options for cautiously gearing up the balance sheet.
During August, Dolphin secured an €85 million debt facility from Bank of Cyprus
to refinance Aristo. The interest-only loan has a cost of 95bps over one-month
Euribor with bullet repayment in five years and is secured against DCA's shares
in Aristo.
As the Company's projects start to enter into the construction phase, the
Company anticipates further increasing their individual gearing levels.
Cash Management
Cash is held in overnight deposits and short-term fixed accounts at our
custodian bank, Anglo Irish Bank Corporation. Approximately 10% of the recently
raised €450 million has been re-invested in a AAA-rated money market fund,
managed by Goldman Sachs Asset Management, pending investment in Dolphin
projects.
Tracking of Performance
Following the acquisition of Aristo, the Company has undertaken a cost
allocation exercise, in effect assigning its cost of acquiring Aristo across the
main assets of the company according to their pro-rata net equity value, in
order to accurately track the performance of each project or business unit. By
drawing down the €85 million facility, which is secured against the shares of
the holding company of Aristo, the cost basis of the individual assets of Aristo
(shown in the table below) will be reduced pro-rata.
Investments/Commitments
The following table summarises Dolphin's investment activity to date:
Development Country Land site (hectares) Dolphin Investment Commitment
shareholding % 30/06/2007 30/06/2007
€m €m
Kilada Hills Greece 250 89 59.4 65.0
Scorpio Bay Greece 172 100 9.7 16.0
Apollo Heights Cyprus 460 100 16.4 21.4
Amanmila Greece 200 25-50 0.5 5.0
Lavender Bay Greece 294 96 9.6 46.0
Sitia Bay Greece 250 77 11.4 24.0
Seascape Hills Greece 86 99 15.4 30.0
Livka Bay Croatia 59 90 8.7 35.0
Rebranded Hotels Greece 1 100 1.3 30.
Aristo
Venus Rock Golf Resort Cyprus 1,000 85 84.1 84.1
Eagle Pine Golf Resort Cyprus 301 85 15.8 15.8
Magioko Cyprus 11 85 6.7 6.7
Aristo Other Cyprus 397 85 134.6 134.6
Tsilivi Greece 11 85 2.7 2.7
Douneika Greece 26.5 85 0.9 0.9
Aristo Other Greece 2.7 85 0.6 0.6
Subtotal Aristo 1,748 245.4 245.4
Total 3,520 377.6 517.8
Panos Katsavos
Finance Director
Dolphin Capital Partners
Independent Report on Review of Interim Financial Information
To the Shareholders of Dolphin Capital Investors Limited
Introduction
We have reviewed the accompanying consolidated balance sheet of Dolphin Capital
Investors Limited (the 'Company') as at 30 June 2007 and the related
consolidated statements of income, changes in equity and cash flows for the
six-month period then ended and a summary of significant accounting policies and
other explanatory notes (the interim financial information). This interim
financial information is the responsibility of the Company's Board of Directors.
Our responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity'. 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 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 accompanying interim financial information does not give a true and
fair view of the financial position of the Company as at 30 June 2007, and of
its financial performance and its cash flows for the six-month period then ended
in accordance with IAS 34, 'Interim Financial Reporting'.
KPMG
Chartered Accountants
17 September 2007
Nicosia, Cyprus
Interim Consolidated Income Statement
For the six-month period ended 30 June 2007
From 1 January 2007 From 7 June 2005
Note to 30 June 2007 to 30 June 2006
€'000 €'000
Gain on disposal of investment in subsidiary - 7,955
Valuation (loss)/gain on property (2,472) 4,175
Other operating profits 60 -
Total operating (losses)/profits (2,412) 12,130
Investment manager fees 16.2 (4,312) (1,263)
Management incentive fees 16.4 (28,753) -
Professional fees (4,231) (22)
Other expenses (3,461) (425)
Total operating and other expenses (40,757) (1,710)
Net operating (loss)/profit before net financial income (43,169) 10,420
Financial income 2,429 2,083
Financial expense (1,239) (9)
Net financial income 1,190 2,074
Excess of fair value over cost arising on acquisitions 17 253,245 48,386
Profit before taxation 211,266 60,880
Taxation 5 740 (1,070)
Profit for the period 212,006 59,810
Attributable to:
Equity holders of the Company 212,176 58,296
Minority interest (170) 1,514
Profit for the period 212,006 59,810
Basic earnings per share (€) 6 0.62 0.53
Fully diluted earnings per share (€) 6 0.61 0.48
The notes below are an integral part of these interim consolidated financial
statements.
Interim Consolidated Balance Sheet
As at 30 June 2007
30 June 2007 31 December 2006
Note €'000 €'000
Assets
Investment property 7 855,350 278,017
Property, plant & equipment 8 59,842 165
Investment in associate 9,147 -
Intangible assets 250 -
Total non-current assets 924,589 278,182
Trading properties 9 350,519 19,900
Loans receivable 10 253 6,500
Receivables and other assets 23,279 7,570
Deferred tax asset 14 1,033 520
Cash and cash equivalents 11 482,237 292,929
Total current assets 857,321 327,419
Total assets 1,781,910 605,601
Equity
Share capital 12 5,175 3,395
Share premium 12 833,061 395,335
Reserves 540 -
Retained earnings 322,500 110,324
Total equity attributable to equity holders of the 1,161,276 509,054
Company
Minority interest 148,950 31,898
Total equity 1,310,226 540,952
Liabilities
Interest-bearing loans 13 110,058 2,500
Finance lease obligation 525 4,532
Deferred tax liability 14 134,198 43,372
Total non-current liabilities 244,781 50,404
Interest - bearing loans 13 68,592 1,029
Finance lease obligation 29 122
Amount due to customers for contract work 53,228 -
Trade and other payables 101,122 12,951
Tax payable 3,932 143
Total current liabilities 226,903 14,245
Total liabilities 471,684 64,649
Total equity & liabilities 1,781,910 605,601
Net asset value per share (€ per share) 15 2.24 1.50
Diluted net asset value per share (€ per share) 15 2.22 1.50
The notes below are an integral part of these interim consolidated financial
statements.
Interim Consolidated Statement of Changes in Equity
For the six-month period ended 30 June 2007
Share Share Translation Revaluation Retained Minority Total
capital premium reserve reserve earnings Total interest equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Balance at 7 50 4,950 - - - 5,000 - 5,000
June 2005
Shares 1,040 102,960 - - - 104,000 - 104,000
issued
Placing - (4,304) - - - (4,304) - (4,304)
costs
Profit for - - - - 58,296 58,296 1,514 59,810
the period
Minority - - - - - - 44,169 44,169
interest on
acquisitions
Balance at 1,090 103,606 - - 58,296 162,992 45,683 208,675
30 June 2006
Balance at 1 3,395 395,335 - - 110,324 509,054 31,898 540,952
January 2007
Shares 1,780 448,220 - - - 450,000 - 450,000
issued
Placing - (10,494) - - - (10,494) - (10,494)
costs
Profit for - - - - 212,176 212,176 (170) 212,006
the period
Minority - - - - - - 117,197 117,197
interest on
acquisitions
Foreign - - 234 - - 234 25 259
currency
translation
difference
Revaluation - - - 306 - 306 - 306
of property,
plant and
equipment,
net of tax
Balance at 5,175 833,061 234 306 322,500 1.161,276 148,950 1,310,226
30 June 2007
The notes below are an integral part of these interim consolidated financial
statements.
Interim Consolidated Cash Flow Statement
For the six-month period ended 30 June 2007
From 1 January 2007 From 7 June 2005
to 30 June 2007 to 30 June 2006
€'000 €'000
Operating activities
Profit before taxation 211,266 60,880
Adjustments for:
Excess of fair value over cost arising on acquisitions (253,245) (48,386)
Depreciation charge 15 -
Foreign currency exchange difference 259 892
Gain on disposal of investment in subsidiary - (7,955)
Valuation loss/(gain) on property 2,472 (4,175)
Net financial income (1,279) (2,074)
Operating loss before changes in working capital (40,512) (818)
Increase in receivables and prepayments (15,709) (3,151)
Increase in trade and other payables 87,935 2,215
Increase in loans receivable (253) (6,500)
Cash used in operations 31,461 (8,254)
Interest paid (1,150) (9)
Taxes paid (135) -
Cash flows generated from/(used) in operating activities 30,176 (8,263)
Investing activities
Acquisition of subsidiaries, net of cash acquired (247,769) (48,883)
Acquisition of property, plant and equipment (4,939) -
Acquisition of trading properties (325) -
Acquisition of investment property (21,458) (20,825)
Proceeds from disposal of investment in subsidiary - 18,000
Interest received 2,429 1,191
Cash flows used in investing activities (272,062) (50,517)
Financing activities
Proceeds from the issue of share capital 450,000 109,000
Payment of placing costs (10,494) (4,304)
Finance lease obligation (4,100) -
Net repayment of interest-bearing loans (4,212) -
Cash flows from financing activities 431,194 104,696
Net increase in cash and cash equivalents 189,308 45,916
Cash and cash equivalents at the beginning of the period 292,929 -
Cash and cash equivalents at the end of the period 482,237 45,916
The notes below are an integral part of these interim consolidated financial
statements.
Notes to the Interim Consolidated Financial Statements
1. General information
Dolphin Capital Investors Limited (the 'Company') was incorporated and
registered in the British Virgin Islands on 7 June 2005. The Company is a real
estate investment company focused on the early-stage, large scale
leisure-integrated residential resorts in Southeast Europe, and managed by
Dolphin Capital Partners Limited (the 'Investment Manager'), an independent
private equity management firm that specialises in real estate investments in
Southeast Europe.
The shares of the Company were admitted to trading on the AIM market of the
London Stock Exchange ('AIM') on 8 December 2005.
The interim consolidated financial statements were authorised for issue by the
directors on 17 September 2007.
2. Accounting policies
The interim consolidated financial statements comprise the Company and its
subsidiaries, together referred to as the 'Group'.
The interim consolidated financial statements of the Group have been prepared in
accordance with all International Financial Reporting Standards (IFRSs) that
have been adopted for application in the European Union, including International
Accounting Standard No. 34 'Interim Financial Reporting' and must be read in
conjunction with the audited consolidated financial statements of the period
from 7 June 2005 to 31 December 2006. The accounting policies applied are the
same as those used in the audited consolidated financial statements referred to
above.
The interim consolidated financial statements are presented in Euro (€), rounded
to the nearest thousand.
3. Significant company holdings
The Company's most significant company holdings are the following:
Country of Shareholding
Name incorporation Interest
Scorpio Bay Holdings Limited Cyprus 100.00%
Scorpio Bay Resorts S.A. Greece 100.00%
Latirus Enterprises Limited Cyprus 80.00%
Iktinos Techniki Touristiki S.A. Greece 76.50%
Xscape Limited Cyprus 96.30%
Golfing Developments S.A. Greece 96.30%
MindCompass Overseas Limited Cyprus 88.70%
MindCompass Overseas S.A. Greece 88.70%
Mindcompass Overseas Two S.A. Greece 88.70%
Ergotex Services Limited Cyprus 88.70%
D.C. Apollo Heights Polo and Country Cyprus 100.00%
Resort Ltd (ex. Alasia Polo and Country Resort Limited)
Symboula Estates Ltd Cyprus 100.00%
DolphinCI Fourteen Limited Cyprus 100.00%
Eidikou Skopou Dekatessera S.A. Greece 99.00%
Portoheli Hotel and Marina S.A. Greece 80.00%
Aristo Developers plc Cyprus 84.04%
Azurna Uvala D.o.o. Croatia 90.00%
Alexandra Beach Tourist Enterprises S.A. Greece 42,02%
4. Segment reporting
The Company has one business and geographical segment focusing on achieving
capital growth through investing in residential resort developments in Southeast
Europe.
5. Taxation
From 1 January 2007 From 7 June 2005
to 30 June 2007 to 30 June 2006
€'000 €'000
Corporate income tax (23) -
Defence tax 20 -
Deferred tax (737) 1,070
Total (740) 1,070
6. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of common shares in
issue during the period.
From 1 January 2007 From 7 June 2005
to 30 June 2007 to 30 June 2006
€'000 €'000
Profit attributable to equity holders of the Company (€) 212,176 58,296
Number of weighted average common shares in issue 343,395 109,000
Basic earnings per share (€ per share) 0.62 0.53
Weighted average number of common shares
30 June 2007 30 June 2006
'000 '000
Issued common shares at the beginning of the period 339,460 5,000
Effect of shares issued during the period 3,935 104,000
Weighted average number of common shares at the 343,395 109,000
end of the period
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the number of common
shares outstanding to assume conversion of all dilutive potential shares. The
Company has one category of dilutive potential common shares: warrants. The
number of shares calculated above is compared with the number of shares that
would have been issued assuming the exercise of the warrants.
From 1 January 2007 From 7 June 2005
to 30 June 2007 to 30 June 2006
€'000 €'000
Profit attributable to equity holders of the Company (€'000) 212,176 58,296
Weighted average number of common shares in issue ('000) 343,395 109,000
Effect of potential conversion of warrants ('000) 4,468 12,500
Weighted average number of common shares 347,863 121,500
for diluted earnings per share ('000)
Fully diluted earnings per shares (€ per share) 0.61 0.48
7.Investment property
30 June 2007 31 December 2006
€'000 €'000
At beginning of period 278,017 -
Additions through:
direct acquisitions 21,458 57,565
acquisition of subsidiary companies (see note 17) 556,696 175,936
856,171 233,501
Fair value adjustment (821) 44,516
At end of period 855,350 278,017
8.Property, plant and equipment
30 June 2007 31 December 2006
€'000 €'000
Cost or revaluation
At beginning of period 268 -
Additions through:
Direct acquisition of property, plant and equipment 4,939 53
Acquisition of subsidiary companies (see note 17) 65,779 215
Revaluation (1,244) -
At end of period 69,742 268
Accumulated depreciation
At beginning of period 103 -
Additions through:
Acquisition of subsidiary companies (see note 17) 9,782 100
Charge for the period 15 3
At end of period 9,900 103
Carrying amount 59,842 165
9.Trading properties
30 June 2007 31 December 2006
€'000 €'000
At beginning of period 19,900 -
Additions 325 -
Additions through acquisition of subsidiaries (see note 17) 330,294 19,900
At end of period 350,519 19,900
10. Loans receivable
On 30 June 2006, the Company entered into a loan agreement with Egnatia Anonimi
Asfalistiki Etaireia (Egnatia) and Le Monde Asfalistiki S.A. (Le Monde)
regarding Scorpio Bay Resort, to provide Egnatia and Le Monde with a €6.5
million loan at an 8% interest cost for a maximum period of one year. The loan
was secured against Egnatia's and Le Monde's 49% shareholding of Scorpio Bay
Holdings Ltd and, in the event that it would have not been repaid within 12
months, the Company would have the right to obtain 100% of Scorpio Bay Holdings
Ltd.
On 22 February 2007, the Company activated the above-mentioned security
provisions of the loan agreement and acquired the remaining 49% shareholding
interest in Scorpio Bay Holdings Ltd (see also note 17), because Egnatia and Le
Monde had entered into liquidation proceedings and were unable to repay the
loan.
In February 2007, the Company entered into a loan agreement with Virtus
Investments B.V. (Virtus), the minority shareholder of Azurna Uvala D.o.o.
(Azurna) of Livka Bay project, to provide Virtus with a €250 thousand loan at an
annual interest rate of 8%. The purpose of the loan was the acquisition by
Virtus of the 10% of the new share capital of Azurna. The loan is repayable in
full not later than 5 February 2010 and was secured against Virtus's 10%
shareholding interest in Azurna. In the event that it would have not been
repaid by the due date, the Company would have the right to withhold the amount
of the loan against the purchase price of the consideration of Azurna's share
capital.
11. Cash and cash equivalents
30 June 2007 31 December 2006
€'000 €'000
Bank balances 82,233 53,193
One-week deposit 400,000 -
One-month fixed deposits - 14,927
Two-month fixed deposits - 61,149
Three-month fixed deposits 4 163,660
Cash and cash equivalents in the statement of cash flows 482,237 292,929
The average interest rate on the above bank balances for the six-month period
ended 30 June 2007 was 3.68% (as at 31 December 2006: 3.21%).
12. Share capital and premium
Authorised share capital
'000 30 June 2007 '000 31 December 2006
of shares €'000 of shares €'000
Common shares of €0.01 each 2,000,000 20,000 500,000 5,000
Movement in share capital and premium
'000 Share capital Share premium
of shares €'000 €'000
Capital at 7 June 2005 5,000 50 4,950
Shares issued from AIM primary placement on 104,000 1,040 102,960
8 December 2005
Placement costs on AIM primary placement - - (3,411)
Shares issued from exercise of warrants on 12,500 125 -
9 October 2006
Shares issued from AIM secondary placement on 217,960 2,180 297,831
9 October 2006
Placement costs on AIM secondary placement - - (6,995)
Capital at 31 December 2006 339,460 3,395 395,335
Capital at 1 January 2007 339,460 3,395 395,335
Shares issued from AIM third placement on 178,041 1,780 448,220
27 June 2007
Placement costs on AIM third placement - - (10,494)
Capital at 30 June 2007 517,501 5,175 833,061
Warrants
In conjunction with the secondary placing on 7 October 2006, the Investment
Manager was granted an additional over performance incentive designed to reward
the Investment Manager if the Company achieves exceptional growth in its net
asset value during the period from the date of the Placing to 31 December 2007.
The achievement of this additional incentive is predicated upon the Company's
net asset value growth over this period out-performing a hurdle rate of 30% (the
'Super Hurdle'). In the event of this over performance, the Investment Manager
will be granted the right to subscribe (at par value of €0,01) for such number
of further common shares as equals 10% of the value of the net asset value
growth over the Super Hurdle divided by €1.34. The Investment Manager has
agreed that any common shares subscribed for pursuant to the Warrant Proposal
will be subject to a lock-up requirement for a period of two years from the date
of subscription.
The Company and the Investment Manager have agreed to vary the Over-performance
Warrant Deed by increasing the Super Hurdle to include the gross proceeds of the
third fund raising multiplied by 1.11, which results in the equivalent of the
30% original Super Hurdle for the remaining period.
In addition, the Company and the Investment Manager have agreed a further
variation to the Over Performance Warrant Deed under which, for the period from
1 January 2008 to 31 December 2008, the Investment Manager is to be granted a
further one-off over-performance warrant entitlement to reward exceptional
growth. The hurdle for the 2008 Warrant Deed is the net asset value per common
share on 31 December 2007 multiplied by 1.3 (the 'Second Super Hurdle'). In the
event that this Second Super Hurdle is met, the Investment Manager would be
granted the right to subscribe (at par value of €0.01) for such number of
further common shares as equals 10% of the excess net asset value achieved by
the Company by the end of 2008 divided by net asset value per common share on 31
December 2007 multiplied by 1.3. These new common shares subscribed for would
be subject to the same lock-up requirement as for the common shares subscribed
for under the initial Warrant Grant.
13. Interest-bearing loans
30 June 2007 31 December 2006
€'000 €'000
Current portion 68,592 1,029
Non current portion 110,058 2,500
Total 178,650 3,529
14. Deferred tax assets and liabilities
30 June 2007 31 December 2006
Deferred Deferred Deferred Deferred
tax asset tax liability tax asset tax liability
€'000 €'000 €'000 €'000
Balance at the beginning of the period 520 (43,372) - -
From acquisition of subsidiaries (see note 17) 3 (90,952) 491 (32,828)
From revaluation of property, plant - (101) - -
and equipment
Charge/(credit) in the interim consolidated 510 227 29 (10,544)
income statement
Balance at the end of the period 1,033 (134,198) 520 (43,372)
Deferred tax assets and liabilities are attributable to the following:
30 June 2007 31 December 2006
Deferred Deferred Deferred Deferred
tax asset tax liability tax asset tax liability
€'000 €'000 €'000 €'000
Revaluation of investment property - (108,452) - (42,219)
Revaluation of trading property - (23,350) - (1,153)
Revaluation of property, plant - (2,396) - -
and equipment
Tax losses 1,033 - 520 -
Total 1,033 (134,198) 520 (43,372)
The deferred tax provision for the Cyprus subsidiaries is based on the capital
gains tax rate and the corporate tax rate, which are 20% and 10%, respectively.
The deferred tax provision for the Greek subsidiaries is based on a 25% tax
rate, which is the rate applicable for the year 2007 and thereafter. The
deferred tax provision for the Croatian subsidiary is based on a 20% tax rate.
15. Net asset value per share
30 June 2007 31 December 2006
'000 '000
Total equity attributable to equity holders of the Company (€) 1,161,276 509,054
Number of common shares in issue at end of period 517,501 339,460
Net asset value per share (€ per share) 2.24 1.50
Number of common shares in issue at end of period 517,501 339,460
Effect of potential conversion of warrants 4,468 -
521,969 339,460
Diluted net asset value per share (€ per share) 2.22 1. 50
16. Related party transactions
16.1 Directors of the Company
Miltos Kambourides is the founder and managing partner of the Investment
Manager.
The interests of the Directors, all of which are beneficial, in the issued share
capital of the Company are as follows:
Shares
'000
Miltos Kambourides (indirect holding) 2,339*
Nicholas Moy 50
Roger Lane-Smith 45
Andreas Papageorghiou 5
*The number of shares indirectly held by Miltos Kambourides might increase due
to the right of potential conversion of warrants (see also note 12).
Save as disclosed, none of the Directors had any interest during the period in
any material contract for the provision of services which was significant to the
business of the Group.
16.2 Investment Manager fees
Annual fees
The Investment Manager is entitled to an annual management fee of 2% of the
equity funds defined as follows:
• €109 million; plus
• The gross proceeds of further equity issues; plus
• Realised net profits less any amounts distributed to shareholders.
In addition, the Company shall reimburse the Investment Manager for any
professional fees or other costs incurred on behalf of the Company at its
request for services or advice. Annual management fees paid during the
six-month period ended 30 June 2007 amounted to €4,312 thousand.
Performance fees
The Investment Manager is entitled to a performance fee based on the net
realised cash profits made by the Company subject to the Company receiving the '
Relevant Investment Amount' which is defined as an amount equal to:
(i) the total cost of the investment; plus
(ii) a hurdle amount equal to an annualised percentage return of
8% compounded for each year or fraction of a year during which such investment
is held (the 'Hurdle'); plus
(iii) a sum equal to the amount of any realised losses and/or
write-downs in respect of any other investment which has not already been taken
into account in determining the Investment Manager's entitlement to a
performance fee.
In the event that the Company has received distributions from an investment
equal to the Relevant Investment Amount, any subsequent net realised cash
profits arising shall be distributed in the following order or priority:
(i) first, 60% to the Investment Manager and 40% to the
Company until the Investment Manager shall have received an amount equal to 20%
of such profits; and
(ii) second, 80% to the Company and 20% to the Investment
Manager,
such that the Investment Manager shall receive a total performance fee
equivalent to 20% of the net realised cash profits.
The performance fee payment is subject to the following escrow and clawback
provisions:
Escrow
The escrow arrangements for the payment of performance fees payable to the
Investment Manager have been amended to take into account the proceeds of the
AIM third placement. The following table displays the current escrow
arrangements.
Escrow Amended terms
Up to €109 million returned 50% of overall performance fee held in escrow
Up to €109 million plus the cumulative hurdle returned 25% of any performance fee held in escrow
After the return of €409 million post-hurdle, plus the All performance fees released from escrow
return of 50% of €450 million post-hurdle
Clawback
If on the earlier of (i) disposal of the Company's interest in a relevant
investment or (ii) 1 August 2015, the proceeds realised from that investment are
less than the Relevant Investment Amount, the Investment Manager shall pay to
the Company an amount equivalent to the difference between the proceeds realised
and the Relevant Investment Amount. The payment of the clawback is subject to
the maximum amount payable by the Investment Manager not exceeding the aggregate
performance fees (net of tax) previously received by the Investment Manager in
relation to other investments.
16.3 Shareholder and development agreements
Shareholder agreements
Dolphinci Three Limited, a subsidiary of the Group, has signed a shareholder
agreement with the minority shareholder of Kilada Hills. Under its current
terms, the shareholding of the parties is diluted at any capital increase in
case it fails to participate at a valuation equal to €60 million, plus any
further cash invested into the project.
Dolphinci Nine Limited, a subsidiary of the Group, has signed a shareholder
agreement with the minority shareholder of Lavender Bay. Under its current
terms, the shareholding of the parties is diluted at any capital increase in
case it fails to participate at a valuation equal to €1.3 million, plus any
further cash invested into the project.
Dolphinci Twelve Limited, a subsidiary of the Group, has signed a shareholder
agreement with the minority shareholder of Livka Bay. Under its current terms,
Dolphinci Twelve Limited has acquired 90% of the shares of the project Livka Bay
(Single Purpose Vehicle Four Limited) by paying the minority shareholder the
purchase price proportionally, given that the minority shareholder will be
successful in obtaining, among others, certain agreed zoning approvals and
location and construction permits. The shares of the company are held in an
escrow account.
Dolphinci Thirteen Limited, a subsidiary of the Group, has signed a shareholder
agreement with the minority shareholder of Iktinos. Under its current terms,
Dolphinci Thirteen Limited has acquired 80% of the shares of Latirus Enterprises
Limited by paying the minority shareholder the purchase price proportionally,
given that the minority shareholder will be successful in, among others,
acquiring additional specific plots and obtaining construction permits.
Dolphinci One Limited (DCI One), a subsidiary of the Group, has signed a
shareholders agreement with the minority shareholder of Dolphinci Two Limited
(DCI Two), Mr. Theodoros Aristodemou (TA), CEO of Aristo Developers plc
(Aristo).
Under its current terms:
a) DCI Two will not issue any new shares without first offering to each of the
other parties hereto pro rata and in the event a party fails to participate its
shareholding will be diluted accordingly based on a valuation at least equal to
the latest annually reported NAV per Aristo share as reported in the
consolidated accounts.
b) DCI One retains first refusal rights should the minority shareholder decide
to sell his shares.
c) DCI Two has drag along rights into a partial or full sale, while TA has tag
along rights in the event of a sale by DCI One.
d) After the two-year period from the execution of the agreement, the minority
shareholder has the right to sell its shares to DCI One (put option) while DCI
One retains the right to buy the shares (call option), at prices specified in
the agreement.
Development agreements
MindCompass Overseas Ltd, a subsidiary of the Group, has signed a development
management agreement with companies owned by or related to the minority
shareholder of Kilada Hills under the terms of which these companies undertake
to assist MindCompass Overseas Ltd to obtain all permits required to enable the
development of the project, as well as to select advisors, consultants, etc.,
during the construction phase. The development manager receives an annual fee
plus an incentive and success fee.
XScape Ltd, a subsidiary of the Group, has signed a development management
agreement with the companies owned by or related to the minority shareholder of
Lavender Bay under the terms of which these companies undertake to assist XScape
Ltd to obtain all permits required to enable the development of the project, as
well as to select advisors, consultants, etc., during the construction phase.
The development manager receives an annual fee plus an incentive and success
fee.
Azurna, a subsidiary of the Group, has signed a development management agreement
with the minority shareholder of Livka Bay under the terms of which the minority
shareholder undertakes to assist Azurna to obtain all permits required to enable
the development of the project, to negotiate on acquisition of plots, to conduct
technical due diligence, administer any financing put in place as well as to
select advisors, consultants and contractor(s) for the project. According to the
aforementioned agreement, the development manager is entitled to an annual fee
of €1.0 million.
16.4 Service agreement
TA is entitled to receive annually a net after taxes amount equal to 20% of the
NAV Uplift (the 'Management Incentive Fee'), which shall be created following
Completion from Aristo's four potential golf-integrated residential developments
(the 'Relevant Projects').
The Management Incentive Fee shall be calculated annually starting from the 31st
of December 2007 and shall be based on the Relevant Projects' valuation as at
the 31st day of December of each year which shall be determined, each year, by
an independent third party valuer and shall be payable to TA at the latest by
the 30th of April of the following year. The Management Incentive Fee shall be
payable for each Relevant Project as long as the project is within its
Pre-development Phase and the last relevant valuation for the NAV Uplift will be
the one following the end of the projects' Pre-development Phase. The
Management Incentive Fee shall be provided for a maximum period of four years,
unless an extension applies for a Relevant Project.
The NAV Uplift shall be the sum of the individual NAV uplifts generated from the
Relevant Projects during each project's Pre-development Phase versus their
Current Book Value or versus their NAV of the previous year. NAV is defined as
the gross asset value less any financial debt allocated or charged to the
Relevant Projects less the corresponding deferred tax liabilities, calculated
separately for each Relevant Project as at the 31st day of December of each
year. Any financial debt allocated or charged on the Relevant Projects whose
proceeds were not invested or used for the benefit of the Relevant Projects will
not be deducted from this calculation.
The Current Book Value of the Relevant Projects is agreed to be the net book
value as included in the audited consolidated financial statements of Aristo as
at 31 December 2006.
The Pre-development Phase is defined to start from 5 April 2007 and to end on
the day that the Relevant Project receives planning permission for a golf
course.
As of 30 June 2007, the Management Incentive Fee is estimated to be €28,753
thousand.
16.5 Other related parties
During the period, the Group incurred the following related party transactions
with the following entities:
Company or related party €'000 Nature of transaction
Roots Development S.A. 200 Project management services in relation to the Kilada Hills project
Roots Development S.A. 200 Project management services in relation to the Seascape Hills project
Roots Development S.A. 250 Project management services in relation to the Lavender Bay project
Ergotex Parks Limited 310 Project management services in relation to the Kilada Hills project
Ergotex Parks Limited 50 Project management services in relation to the Seascape Hills project
Virtus Finance S.A. 250 Project management services in relation to the Livka Bay project
Elemata B.V. 1,120 Financing from the minority shareholder of Livka Bay project
Virtus Investments B.V. 253 Provision of financing to the minority shareholder of Livka Bay project
The above transactions are based on written agreements that were entered into on
an arm's length basis.
17. Business combinations
During the six-month period ended 30 June 2007, the Group acquired ownership
interest in the following entities:
Acquisitions of Minority Interests
Portoheli Azurna Aristo Total Additional Additional Additional Additional Total
Hotel and Uvala Developers acquisition acquisition acquisition acquisition acquisitions
Marina D.o.o. plc in Scorpio In in Iktinos In
S.A. Bay Mind-compass Techniki Xscape
Holdings Limited Touristiki Limited
Limited S.A.
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
(a) (b) (c) (d) (e) (f) (g)
Investment 7,500 39,200 509,996 556,696 - - - - 556,696
property
Property, plant - - 55,997 55,997 - - - - 55,997
and equipment
Trading - - 330,294 330,294 - - - - 330,294
properties
Investment in - - 9,147 9,147 - - - - 9,147
associate
Intangible assets - - 250 250 - - - - 250
Deferred tax 3 - - 3 - - - - 3
asset
Cash and cash 45 345 8,764 9,154 - - - - 9,154
equivalents
Deferred tax (1,432) (5,643) (83,877) (90,952) - - - - (90,952)
liability
Interest-bearing (510) (13,238) (165,585) (179,333) - - - - (179,333)
loans
Other net current (33) (573) (63,285) (63,891) - - - - (63,891)
liabilities
Net assets 5,573 20,091 601,701 627,365 - - - - 627,365
Minority interest (1,115) (2,009) (126,890) (130,014) 11,583 760 307 167 (117,197)
Net assets 4,458 18,082 474,811 497,351 11,583 760 307 167 510,168
acquired
Purchase (2,707) (5,160) (242,556) (250,423) (6,500) - - - (256,923)
consideration
Excess of fair 1,751 12,922 232,255 246,928 5,083 760 307 167 253,245
value over
cost arising on
acquisitions
Analysis of net
cash flow and
cash equivalents:
Purchase (2,707) (5,160) (242,556) (250,423) (6,500) - - - (256,923)
consideration
Cash and cash 45 345 8,764 9,154 - - - - 9,154
equivalents of
acquired
companies
Cash outflow on (2,662) (4,815) (233,792) (241,269) (6,500) - - - (247,769)
acquisitions
17. Business combinations (cont.)
(a) Portoheli Hotel and Marina S.A.
On 14 February 2007, the Group entered into an agreement to acquire from Mr.
George Vernikos, a Greek citizen, the 80% of the share capital of the Greek
company, Portoheli Hotel and Marina S.A., the owner of Yiouli Hotel at
Portoheli, for the amount of €2.7 million. Mr. George Vernikos is the
father-in-law of Mr. Miltos Kambourides, a non-executive and non-independent
director of the Company. Mr. Kambourides abstained from voting in the
Investment Committee meeting where the final decision to acquire the above
company was taken.
(b) Azurna Uvala D.o.o.
The Group acquired a 90% shareholding interest in Livka Bay Resort, situated in
the island of Solta, Croatia. Livka Bay Resort is intended to become one of the
first exclusive residential resorts on the Dalmatian coast with a luxury hotel,
a 160-berth marina and other supporting recreational, sports and retail
facilities. The Group is committing a total of €35 million in the project
company to fund the resort's initial development expenses. The remaining shares
are owned by Virtus Investments BV, a developer of high-end resorts.
(c) Aristo Developers plc
On 5 April 2007, the Company announced the acquisition of an 80% shareholding in
Aristo, the largest holiday home development company in Cyprus and listed on the
Cyprus Stock Exchange. The Company has secured a 60% shareholding from TA, in
exchange for €128.7 million and a 15% interest in the Dolphin vehicle acquiring
Aristo, and 20% from Aristo's second largest shareholder for €57.9 million in
cash. The purchase price equates to €2.15 per share.
Aristo owns a number of strategic assets that are complementary to the Company's
strategy of acquiring large land sites and establishing premium branded
residential resorts. Aristo is today believed to be the largest private land
owner in Cyprus and the largest holiday home developer, both in terms of annual
turnover and number of units sold. Aristo owns three out of the twelve new
preliminary licences for golf-integrated residential resorts granted by the
Cypriot government. Aristo's flagship asset is Venus Rock, a 1,000 hectare site
that is one of the largest sea-front residential resort development sites in
Europe, and which is expected to comprise up to 3 golf courses, more than 3,000
residential units, a 5-star hotel with spa, extensive beach-front entertainment,
retail and commercial facilities, marina and other sport facilities. Aristo
also owns Eagle Pine, a 220 hectare site (increased to 300+ hectares in August
2007) expected to become a golf integrated resort, situated a few kilometres
away from the Company's Apollo Heights Polo Resort.
Subsequent to the announcement, the Company launched a public tender offer to
acquire the outstanding 20% of shares in Aristo also at a price of €2.15 per
share which implies a total cash consideration of €57.9 million. As at 30 June
2007, the effective shareholding interest of the Company in Aristo was 84.04%.
(d) Scorpio Bay Holdings Limited
Le Monde and Egnatia, the two minority shareholders of Scorpio Bay Holdings Ltd,
have entered into liquidation proceedings, and, as a result, the loan that
Egnatia received from the Group of €6,5 million remained unpaid. The Group
activated the security provisions of the loan agreement and acquired their
shareholding interest of 49% on Scorpio Bay Holdings Ltd. As from 22 February
2007, the Group owns 100% of Scorpio Bay Holdings Ltd (also see note 10).
(e) MindCompass Overseas Limited
The Company has increased its shareholding interest in Mindcompass Overseas Ltd
from 87.00% to 88.70%, increasing its share on this company's net assets by €760
thousand.
(f) Iktinos Techniki Touristiki S.A.
The Company has increased its shareholding interest in Iktinos Techniki
Touristiki S.A. from 75.00% to 76.50%, increasing its share on this company's
net assets by €307 thousand.
(g) Xscape Limited
The Company has increased its shareholding interest in Xscape Ltd from 95.00% to
96.30%, increasing its share on this company's net assets by €167 thousand.
18. Commitments
On 30 June 2007, the Group had commitments on the following projects:
Remaining
Investment as at commitments as at
In million of euro Country Commitment 30 June 2007 30 June 2007
Kilada Hills Greece 65.0 59.4 5.6
Scorpio Bay Greece 16.0 9.7 6.3
Apollo Heights Cyprus 21.4 16.4 5.0
Amanmila Greece 5.0 0.5 4.5
Lavender Bay Greece 46.0 9.6 36.4
Sitia Bay Greece 24.0 11.4 12.6
Seascape Hills Greece 30.0 15.3 14.7
Livka Bay Croatia 35.0 8.7 26.3
Rebranded Hotels Greece 30.0 1.3 28.7
Atlantis Cyprus 245.4 221.5 23.9*
Total 517.8 353.8 164.0
*The greatest part of the amount has already been paid after June 30, in the
course of the public tender offer. The remaining will be paid upon the
completion of the squeeze-out process
19. Contingent liabilities
In addition to the tax liabilities that have already been provided for in the
interim consolidated financial statements based on existing evidence, there is a
possibility that additional tax liabilities may arise after the examination of
the tax and other matters of the companies of the Group.
If investment properties, inventories and property, plant and equipment were
sold at their fair market value, this would have given rise to a payable
performance fee to the Investment Manager of approximately €71 million.
20. Post balance sheet events
The Group had the following post balance sheet events:
DCI Two has secured an €85 million debt facility from Bank of Cyprus. The
interest-only loan has a cost of 95 bps over one-month Euribor with bullet
repayment in five years. The loan is secured against Dolphin Capital Atlantis
Ltd's (DCA), which owns Aristo, shares in Aristo and will be drawn down as
required. The Company will use the proceeds of the refinancing to fund Aristo's
ongoing acquisition programme.
On 17 August 2007, DCA announced that its shareholding interest in the share
capital of Aristo has increased to 98.74%. DCA will exercise its right for
squeeze out, which is provided by Article 36 of Cyprus Public Offers Law of
2007, in order to acquire 100% of the shares of Aristo and apply for the
delisting of this company from the Cyprus Stock Exchange.
This information is provided by RNS
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