Final Results

RNS Number : 9779N

Minoan Group PLC

27 February 2009

 



MINOAN GROUP PLC

Preliminary Results Announcement 

Minoan Group Plc ('Minoan or 'the Company'), the AIM-quoted leisure resort developer, announces its preliminary results for the 18 months ended 30 September 2008

HIGHLIGHTS

• While awaiting the decision of the Conseil d'Etat in respect of the appeal lodged against the Greek Government's approval of the EIA in respect of its Cavo Sidero Project, the Company continues to receive an unusually high level of support from local communities.

• The Group has implemented a substantial cost cutting programme in order to reduce expenditure and funding requirements. When completed, this programme and other measures will have reduced average cash operating costs by approximately 65%. 

• The Board is considering expanding the Company's business activities with the aim of providing an income stream. 

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

Christopher Egleton	Minoan Group Plc	07808 722022
Bill Cole	Minoan Group Plc	01689 897397
Jeremy Garrett-Cox/ Nicola Marrin	Seymour Pierce Limited	020 7107 8000
Nick Rome/Gemma O’Hara	Bishopsgate Communications Ltd	020 7562 3350
Alan Frame	Westport Communications Ltd	020 7404 7878

Chairman's Statement

Introduction

Following Minoan's change of accounting reference date from 31 March to 30 September, and with the exception of the brief statements appearing in the Company's interim results announcements, this is my first full Chairman's Statement since July 2007. With some notable exceptions, the intervening period has been disappointing with regard to the progress made in bringing the Cavo Sidero Project to fruition. The reasons for this have been outside the Company's control and are dealt with below.

AIM 

On 2 May 2007 Minoan moved its listing from PLUS Markets to the Alternative Investment Market ('AIM') of London Stock Exchange plc. As part of this process AXIES S.A., at that time part of the Lambert Smith Hampton Group, provided an updated valuation of the Project in the amount of €170 million. Whilst recognising that the economic climate may well have affected this valuation, the Board believes that the current market capitalisation in no way reflects the Company's underlying value.

The Cavo Sidero Project

National Land Plan

The National Land Plan, which was approved by the Greek Government in June 2008, and its subsidiary plans, for example the proposed Special Land Plan for Tourism, will provide for the first time a comprehensive and structured approach to development in Greece. 

At the time of announcing the approval of the National Land Plan the Greek Minister of Environment, Land Planning and Public Works, Mr George Souflias, said 'The completion of the National Land Plan is one of the most important structural changes to happen in the country in recent decades.'

Planning approval/Appeal process

Following publication, in February 2007, of the Greek Government's formal approval of the Company's Environmental Impact Assessment ('EIA') and the issuance of environmental terms, an appeal was lodged on environmental and planning grounds. This appeal was originally due to be heard by Greece's Supreme Administrative Court, the Conseil d'Etat (the 'Court'), on 5 November 2007. Following a number of postponements, the hearing of the appeal finally took place on 7 November 2008. 

At the hearing, the Judge Rapporteur, who had been appointed by the Court to study the case, produced a non-binding report and recommendation. The view expressed in this report suggested the acceptance of the appeal and the annulment of the environmental terms of the Project. The principal basis for this recommendation was that the planning route taken by the Company should have been under a special planning approval process (POTA), rather than the usual tourism planning regulations under which our application had been made. I can only repeat my comments at the time and confirm that the Company had worked for over eight years with all of the past and present governments and a large number of the relevant national, regional and local authorities. At no time did any of the parties involved advise that they considered POTA to be the correct, let alone obligatory, route to be followed. 

At the hearing the legal teams representing the Company, the Foundation, local communities and stakeholders, as well as the legal representative of the Greek Government, strongly rebutted the report together with the entirety of the grounds of the appeal including the suggested grounds in the report for annulment relating to the status of the area within the Natura 2000 network and water management. The legal representative of the Government went further by saying that new forms of tourism were necessary for Greece and the Cavo Sidero Project was a prime example.

The Company continues to receive an unusually high level of support from local communities, many of which filed positive interventions with the Court.

The Court's procedure is that the judges attending the hearing meet to discuss the case and then arrive at a decision which may, or may not, accept the recommendation of the Judge Rapporteur. The detailed decision is expected to be published later this year.

Media 

During the protracted appeal process a number of well orchestrated attacks have been made, largely in the Greek media, on the Company, its officers and the Foundation Panagia Akrotiriani (the 'Foundation') by various individuals and organisations. Among other things, doubts have been cast about the Church's ownership of the Cavo Sidero site, the validity of the Foundation's constitution, the tender process by which the Contract to develop Cavo Sidero was awarded and the legality of the Contract itself. 

Following advice, the Board had decided not to respond to these spurious attacks. However, I would like to take this opportunity to deal with the main issues:

(i)                   The ownership of the land was confirmed in 1999 by an unappealable decision of the Court of Appeal of Chania, Crete;

(ii)                 The Company’s legal advisers have confirmed that the Foundation was properly constituted and was legally entitled to enter into the Contract;

(iii)                The international tenders were evaluated and the awarding of the Contract was approved by the relevant Greek Ministry on the basis of Heads of Agreement examined by the Ministry; and

(iv)               The Contract is a legally binding and correctly constituted document.

Although the land ownership decision by the Court of Appeal in Chania in 1999 is unappealable there has been an effort to reopen the case focussing around a preliminary investigation into the documentation relating to the land ownership. The Company is not aware of any irregularities in the relevant documentation and your Board is confident that the ownership issues are clear and in favour of the Foundation.  

Although the Project's environmental and sustainability credentials are first class there have been a number of articles published in Greece and elsewhere attacking it on environmental grounds. The great majority of the comments on environmental issues have been both inaccurate and uninformed, often by persons who have not even visited Cavo Sidero. The EIA has been acknowledged as the most comprehensive document of its kind ever seen in Greece. The Company is fully aware of its responsibilities to the environment and, with the help of leading international experts, has designed a project which embraces wholeheartedly the principles of sustainability, is strictly focused on the long term restoration and preservation of the environment as a whole and delivers a wide range of benefits to the local area and communities. A sustainable management plan will be implemented involving local representatives and experts to ensure that these objectives are achieved and sustained.

Architectural Competition

In December 2007 I announced the result of the architectural competition held to decide the architects for 'Grandes Bay', Cavo Sidero's first tourism village. Following submissions of the highest calibre, two practices have been chosen as joint winners by a panel of independent members, company executives and a representative of the Foundation.

The first is that of Alexandros Tombazis, one of the most prominent members of the Greek architectural community, whose practice is famous for the quality and pioneering character of its designs in Greece and many other countries. The Alexandros Tombazis practice has a reputation for its sustainable design solutions and is a leading expert in Greece on bioclimatic design.

The second firm selected, Baldrich Tobal, is a well established Spanish practice with a particular expertise in tourist resorts, hotels, golf destinations and leisure homes. Baldrich Tobal is expert in resort planning and has a deep understanding of operator requirements and the commercial factors required to achieve a successful resort, allied to a comprehensive understanding of how to deliver sustainable solutions and good bioclimatic design.  

Commercial

In January this year I was delighted to announce the signing of a Memorandum of Understanding ('MOU') with Six Senses Resorts & Spas ('Six Senses') in respect of the management agreement covering the operation of the resort at the White Sands location of the Project. You will be aware that this is the second agreement to be signed with a major international hotel operator following the agreement with Kempinski Hotels announced previously. 

The Six Senses brand is one of the most environmentally friendly hotel brands in the world with an ambitious agenda for the sustainability of its hotels and other operations. Evalution is the new brand of the group and aims to be the most sustainable of all the Six Senses brands.

Six Senses co-operates fully with Forum for the Future, who, in February 2007, signed a Partnership Agreement with Minoan for the integrated tourism and land management of Cavo Sidero. As I have commented previously, Forum for the Future brings to the Project a major sustainability resource of the highest calibre.

Shareholder Loyalty Scheme

Significant enhancements to the Shareholder Loyalty Scheme were announced in November 2007. 

Financial Results

At 30 September 2008 the book value of the Cavo Sidero Project was £31,974,563 (31 March 2007: £27,807,246). The nature of the Company's business means that certain expenses, although attributable to the Project in overall terms, have to be written off as incurred. These costs give rise to a loss for the period ended 30 September 2008 of £2,493,581 (year ended 31 March 2007: £803,312 as restated, prior year - £1,068,312), which is in line with the Board's expectations. The costs include a charge in respect of share based payments in the amount of £1,175,730 (year ended 31 March 2007: £45,837 credit). The loss per share, including the share based payments charge, was 5.00p (year ended 31 March 2007: 2.11p as restated, prior year - 2.80p). The share based payments charge is simply an accounting entry required by International Financial Reporting Standards and involves no movement of cash. The loss per share excluding this charge is 2.64p (year ended 31 March 2007: 2.23p as restated, prior year - 2.92p). 

The Group's operating cash outflow for the period ended 30 September 2008 is £4,460,148. A significant proportion of this amount is in respect of non-recurring items such as the costs of admission to AIM, the final costs of submitting the Company's EIA and the costs related to the defence of the appeal against the Greek Government's approval of the EIA. Following full implementation of a cost cutting programme (see below) the Group's recurring cash operating costs are expected to be approximately 35% of the annualised operating cash outflow of the period under review. 

The Future

Although we are currently experiencing a widely reported global economic downturn, the directors continue to focus on future market demands, which we believe will put greater emphasis on the cultural, social and ecological aspects of tourism. In these circumstances, the directors believe that the enforced delay in commencing construction of the Project will result in the Company being well positioned to take advantage of any upturn.

As in the past, the Company continues to raise equity funding when required in order to meet its ongoing obligations and to move the Cavo Sidero Project forward. Over the last 9 months the directors have implemented a substantial cost cutting programme in order to reduce expenditure and, therefore, funding requirements. When completed, this programme and other measures will have reduced average cash operating costs by approximately 65%. It is intended that future capital will be raised on a staged basis as required. 

Discussions are ongoing with a number of potential investors who have expressed an interest either in investing in Minoan or in participating directly in the Project itself. I will inform shareholders of any developments as they happen.

Until now Minoan has been a single project company. In view of the delays in the legal and planning process for the Project, your Board is considering expanding the Company's business activities and is actively examining a number of potential opportunities, with negotiations in respect one such opportunity having already commenced. It is the intention of the Board that any future business must be compatible with the Group's philosophy of being involved only in activities that can be sustainable and environmentally friendly. The Board's intention is that the businesses being considered will provide an income stream for the Company and, therefore, provide greater certainty for the Company's future funding.

Share Capital Reorganisation

In order to ensure that the Company is in a position to take advantage of the potential opportunities to expand its business activities referred to above and to provide flexibility in terms of any future need to issue equity, the Board has decided to propose that the Company's share capital be reorganised.

You will be well aware of Minoan's current share price and the fact that it is now lower than the 25 pence nominal value of the Company's ordinary shares. Unlike in many jurisdictions where shares have no nominal value and, as a result, the price at which shares can be issued is unrestricted (e.g. in the USA), under UK company law shares may not be issued at a price below nominal value. Accordingly, to provide maximum flexibility, the Board believes the nominal value of each ordinary share should be reduced to the lowest feasible amount. The Share Capital Reorganisation, which will be proposed at the forthcoming Annual General Meeting ('AGM'), will sub-divide each existing ordinary share of 25 pence into 1 new ordinary share of 1 pence and 1 deferred share of 24 pence. The reorganisation will not affect in any way the value of your quoted shareholdings. Full details will be included in the Notice of AGM to be sent to shareholders in the near future.

Conclusion

Whilst acknowledging disappointment at the length of the appeals process and the Company's current low market capitalisation, my fellow directors and I remain fully committed and confident that, in due course, Cavo Sidero will take its place as a major, internationally acclaimed resort with leading sustainability credentials.

I and my fellow directors wish to thank you all for your ongoing patience and support.

Christopher W Egleton

Chairman

25 February 2009

Consolidated Income Statement

18 months ended 30 September 2008

		18 months ended      30.09.08    £	Year ended      31.03.07    £
Revenue		-	-
Cost of sales		-	-
Gross profit		-	-
Operating expenses		(1,422,176)	(867,826)
(Charge)/credit in respect of share based payments		(1,175,730)	45,837
Operating loss		(2,597,906)	(821,989)
Finance income		104,325	19,018
Finance costs		-	(341)
Loss before taxation		(2,493,581)	(803,312)
Taxation expense		-	-
Loss for period attributable to equity holders of the Company		(2,493,581)	(803,312)
Loss per share attributable to equity holders of
the Company		(5.00)p	(2.11)p
Loss per share attributable to equity holders of
the Company (excluding the (charge)/credit in
respect of share based payments)		(2.64)p	(2.23)p

All of the above arises from continuing activities.

Statement of Changes in Equity

18 months ended 30 September 2008

	Share Capital £	Share Premium £	Merger reserve  £	Retained earnings  £	Total equity   £
Balance at 1 April 2007	11,937,653	17,794,904	9,348,724	(6,497,059)	32,584,222
Loss for the period	-	-	-	(2,493,581)	(2,493,581)
Total recognised income for the period ended 30 September 2008	11,937,653	17,794,904	9,348,724	(8,990,640)	30,090,641
Net proceeds from shares issued	1,641,021	1,386,128	-	-	3,027,149
Share based payments	-	-	-	1,175,730	1,175,730
Balance at 30 September 2008	13,578,674	19,181,032	9,348,724	(7,814,910)	34,293,520

Year ended 31 March 2007

	Share Capital £	Share Premium £	Merger reserve  £	Retained earnings  £	Total equity   £
Balance at 1 April 2006	9,215,980	12,176,872	9,348,724	(5,315,556)	25,426,020
Loss for the period	-	-	-	(803,312)	(803,312)
Total recognised income for the year ended 31 March 2007	9,215,980	12,176,872	9,348,724	(6,118,868)	24,622,708
Net proceeds from shares issued	2,721,673	5,618,032	-	-	8,339,705
Share based payments	-	-	-	(378,191)	(378,191)
Balance at 31 March 2007	11,937,653	17,794,904	9,348,724	(6,497,059)	32,584,222

Consolidated Balance Sheet as at 30 September 2008

		30.09.08 £	31.03.07 £
Assets
Non-current assets
Intangible assets		3,572,776	3,572,776
Property, plant and equipment		175,795	151,291
Total non-current assets		3,748,571	3,724,067
Current assets
Inventories		31,974,563	27,807,246
Receivables		63,911	319,876
Cash and cash equivalents		575,199	3,811,117
Total current assets		32,613,673	31,938,239
Total assets		36,362,244	35,662,306
Equity
Capital and reserves attributable to equity holders of the Company
Share capital		13,578,674	11,937,653
Share premium account		19,181,032	17,794,904
Merger reserve account		9,348,724	9,348,724
Retained earnings		(7,814,910)	(6,497,059)
Total equity		34,293,520	32,584,222
Liabilities
Current liabilities
Trade and other payables		644,242	191,392
Social security and other taxes		31,899	54,563
Provisions for other liabilities and charges		1,392,583	2,832,129
Total liabilities		2,068,724	3,078,084
Total equity and liabilities		36,362,244	35,662,306

These financial statements were approved by the Board of Directors on 25 February 2009.  

Signed on behalf of the Board of Directors

C W Egleton 

Director

Consolidated Cash Flow Statement

18 months ended 30 September 2008

		18 months ended 30.09.08 £	Year ended 31.03.07 £
Cash flows from operating activities
Net cash used in continuing operations		(4,460,148)	(3,890,938)
Net cash used in operating activities		(4,460,148)	(3,890,938)
Cash flows from investing activities
Purchase of property, plant and equipment		(26,005)	(18,141)
Net cash used in investing activities		(26,005)	(18,141)
Cash flows from financing activities
Interest received		104,325	19,018
Interest paid		-	(341)
Net proceeds from the issue of ordinary shares		1,145,910	7,532,020
Net cash generated from financing activities		1,250,235	7,550,697
Net (decrease)/increase in cash		(3,235,918)	3,641,618
Cash at beginning of period		3,811,117	169,499
Cash at end of period		575,199	3,811,117

Notes to the preliminary results 

18 months ended 30 September 2008

1. General information

The Company is a public limited company incorporated in the UK and quoted on the Alternative Investment Market of the London Stock Exchange. The Company's principal activity is the design, creation, development and management of its luxury resort development at Cavo Sidero in North East Crete.  

2. Basis of preparation

These consolidated financial statements are prepared in accordance with EU Endorsed International Financial Reporting Standards ('IFRS') and IFRIC interpretations and the Companies Act 1985/2006 applicable to companies reporting under IFRS. The adoption of IFRSs and IFRIC interpretations represents a change in accounting policy.  

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods represented, unless otherwise stated.

In June 2008 the Company extended its accounting reference date from 31 March 2008 to 30 September 2008. This is the first period in which IFRSs have been applied and comparatives have been restated from UK GAAP to comply with IFRS. The only adjustment to previously reported numbers relates to the requirement under IFRS not to amortise goodwill and instead test it annually for impairment. All other changes arising from the transition to IFRS are presentational only.

	IFRS	UK GAAP
	£	£
18 months ended 30 September 2008
Loss for period	(2,493,581)	(2,891,081)
Total assets	36,362,244	35,699,744
Year ended 31 March 2007
Loss for year	(803,312)	(1,068,312)
Total assets	35,662,306	35,397,306

Going concern

The financial statements have been prepared on the going concern basis. 

The directors have considered the financial and commercial position of the Company in relation to its Project at Cavo Sidero and, in particular, have reviewed the matters referred to below. 

The decision of the Greek Conseil d'Etat on the appeal lodged against the Greek Government's approval of the Company's Environmental Impact Assessment in respect of the Cavo Sidero Project is expected later in 2009. Should the appeal be dismissed, the Project will move to the next stage. Should the appeal be upheld, the directors have been advised and remain confident that, subject to receiving the detailed judgement of the Court, the Company will continue to be in a position to move forward, whether with the Project or with the other opportunities that it is considering.

During the period ended 30 September 2008 the Group had an operating cash outflow of £4,460,148. This included significant non-recurring spend on items such as the costs of admission to AIM, the final costs of submitting the Company's Environmental Impact Assessment and the legal and other professional advice incurred in the lead up to the Appeal. During the period the Group successfully raised £1,145,910 additional equity funding from its shareholders and settled liabilities of £1,881,239 through the issue of shares. At the period end, the Group had remaining cash resources of £575,199 which have continued to be employed to meet ongoing requirements. Since 30 September 2008, the directors have reviewed the level of costs and have commenced a programme of cost reduction which will, when finalised shortly, reduce average cash operating costs by approximately 65%. As has been the case in the past, in order to meet ongoing working capital requirements, the Group is currently involved in discussions with its financial advisers and potential sources of finance. The Board has considered the cash resources required in the period up to the court decision referred to above, and for the period thereafter. While recognising that there remains some uncertainty, in the light of the advanced stage of the discussions with potential funders, the directors consider that the Group will have sufficient resources for the period up to the appeal decision expected later in 2009. Following the removal of the uncertainty regarding the outcome of the court decision, the directors also consider that the funds required for the period after the decision will be determined and successfully raised as required. 

Whilst these matters indicate the existence of material uncertainties which may cast significant doubt about going concern, having taken these matters into account, the directors consider that the going concern basis of preparation of the financial statements is appropriate.

Further comment on the above matters appears in the Chairman's Statement. 

The financial statements do not include any adjustment that would be required if the Company were unable to continue as a going concern.

3. Charge in respect of share based payments

During the period the Group implemented a Long Term Incentive Plan ('LTIP') in which any director or employee selected by the remuneration committee may participate. Awards under the LTIP have been granted on the basis that certain performance conditions are met.

As required under IFRS 2, a charge has been made for the value of the LTIP using the Black-Scholes or Monte Carlo pricing models as appropriate and charged over the vesting periods. This charge, shown as a charge in respect of share based payments in the Consolidated Income Statement, does not involve any cash payment. 

An appropriate charge has been made in the profit and loss account of earlier years reflecting the fair value of the shares under option.

4. Loss per share attributable to the equity holders of the Company

Earnings per share are calculated by dividing the earnings attributable to the equity holders of a company by the weighted average number of ordinary shares in issue during the period. Diluted earnings per share are calculated by adjusting basic earnings per share to assume the conversion of all dilutive potential ordinary shares. In the case of losses however, these shares are antidilutive and as such they are ignored in calculating diluted loss per share. Therefore the basic loss per share and diluted loss per share are the same. The weighted average number of shares used in calculating basic and diluted loss per share for the period ended 30 September 2008 was 49,825,571 (year ended 31 March 2007: 38,093,737).

5. Goodwill

As stated above, IFRS require that goodwill be tested annually for impairment and not amortised. In the Group's case, the requirement to amortise goodwill ceased with effect from 31 March 2006 (note 7). The most recent independent valuation of the land at Cavo Sidero, by AXIES S.A. on 27 April 2007, indicates a value of €170, million (approximately £150 million) with all relevant approvals in place. This valuation, plus the current progress of the Cavo Sidero Project, means that the directors are of the opinion that the project site has longer term value in excess of the value of both goodwill and inventories.

The directors consider that the business consists of one cash generating unit.

The financial information set out in this Preliminary Results Announcement, which has been extracted from the audited Report and Financial Statements, does not constitute the Company's statutory accounts for the 18 months ended 30 September 2008. 

The report of the auditors on the Report and Financial Statements for the 18 months ended 30 September 2008 includes an emphasis of matter paragraph in relation to going concern (see note 2 above) but is not qualified.

Minoan Group Plc's Report and Financial Statements for the 18 months ended 30 September 2008 can be viewed on the Company's website, www.minoangroup.com, with effect from 27 February 2009. 

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