Preliminary Results for Year Ended 31 October 2017

Notes to the Financial Statements 

 

1         General information

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 October 2017 or 31 October 2016. The report of the auditor on the statutory financial statements for the year ended 31 October 2017 and 31 October 2016 was not qualified.

The report of the auditor on the statutory financial statements for each of the years ended 31 October 2017 and 31 October 2016 did not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 October 2016 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 October 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The Company is a public limited company incorporated in England and Wales and quoted on AIM. The Company's principal activity in the year under review was that of a holding and management company of a Group involved in the design, creation, development and management of environmentally friendly luxury hotels and resorts and in the operation of independent travel businesses, through which the Group provides a broad range of services including, inter alia, transportation, hotel and other accommodation and leisure services.

2          Accounting policies

 

Basis of preparation

While the financial information included in this preliminary announcement has been prepared in accordance with the EU adopted International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements for the year ended 31 October 2017 on 6 April 2018.

Adoption of new and revised Standards

The International Accounting Standards Board and IFRIC have issued the following new and revised standards and interpretations with an effective date after the date of these financial statements, which have been endorsed and issued by the EU at 31 October 2017: 

 

Standard/Interpretation	Title	Effective date
IFRS 9	Financial instruments	1 January 2018
IFRS 15	Revenue from contracts with customers	1 January 2018
IFRS 16	Leases	1 January 2019

 

The directors anticipate that the adoption of IFRS 9 in future periods will have no material impact on the profit of the financial statements of the Group. The directors have not deemed it necessary to measure the impact of IFRS 15 and 16 in future periods given that Revenue and Leases are only within Stewart Travel Limited, which has been re-classified as Non-current assets held for sale.

Going concern  

The directors have considered the financial and commercial position of the Group in relation to its project in Crete (the "Project") and also in respect of its travel and leisure business. In particular, the directors have reviewed the matters referred to below.

 

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

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

In addition to specific Project related matters as noted above, and as has been the case in the past, the Group continues to need to raise capital in order to meet its existing finance and working capital requirements. While the directors consider that any necessary funds will be raised as required, the ability of the Company to raise these funds is, by its nature, uncertain.

Since the year end the Company has announced the extension of the repayment date of the Hillside International Holdings Limited loan facility from 31 December 2017 to 30 June 2018. Should it be required, the Company is of the view that, following negotiation, the repayment date of the loan facility would be further extended as in the past.  

 

Having taken these matters into account, the directors consider that the going concern basis of preparation of the financial statements is appropriate.

 

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries as at 31 October 2017 using uniform accounting policies.  The Group's policy is to consolidate the result of subsidiaries acquired in the year from the date of acquisition to the Group's next accounting reference date. Intra-group balances are eliminated on consolidation.

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values of the assets given, liabilities incurred and equity instruments issued by the Group in exchange for control of the acquired business. Acquisition related costs are recognised in the consolidated statement of comprehensive income as incurred. 

 

Critical accounting estimates and judgements

The preparation of the financial statements in accordance with generally accepted financial accounting principles requires the directors to make critical accounting estimates and judgements that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying value of assets and liabilities within the next financial year are discussed below:

·     in capitalising the costs directly attributable to the Project (see inventories below), and continuing to recognise goodwill relating to the Project, the directors are of the opinion that the Project will be brought to fruition and that the carrying value of inventories and goodwill is recoverable; and

 

·     as set out above, the directors have exercised judgement in concluding that the company and group is a going concern.

 

Goodwill

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

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

 

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and any recognised impairment loss.

 

Depreciation is provided in order to write off the cost of each asset, less its estimated residual value, over its estimated useful life on a straight line basis as follows:

 

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

 

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

 

 

Intangible assets/Research and development

Research expenditure is recognised as an expense when it is incurred. Development expenditure is recognised as an expense except where the expenditure meets the following criteria:

 

a)    the technical feasibility of completing the intangible asset so that it will be available for use or sale.

 

b)    its intention to complete the intangible asset and use or sell it.

 

c)    its ability to use or sell the intangible asset.

 

d)    how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

 

e)    the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

 

f)     its ability to measure reliably the expenditure attributable to the intangible asset during its development.

 

The expenditure is amortised over its useful economic life of five years.

 

Investments

Investments in subsidiaries are stated at cost less any impairment deemed necessary.

Inventories

Inventories represent the actual costs of goods and services directly attributable to the acquisition and development of the Project and are stated at the lower of cost and net realisable value. 

 

Foreign exchange

Transactions denominated in foreign currencies are translated into sterling at the rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated at the rates ruling at that date. Any translation differences arising are dealt with in the consolidated statement of comprehensive income.

The directors consider UK pounds sterling to be the functional currency of the Group, as this is the currency of the majority of revenue and expenditure.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and short-term deposits, with a maturity of less than three months, held with banks. 

 

Trade and other receivables

Trade and other receivables are recognised initially at fair value and shown less any provision for amounts considered irrecoverable. They are subsequently measured at an amortised cost using the effective interest rate method, less irrecoverable provision for receivables.

 

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

Loans

Loan borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost and any difference between the proceeds (net of transaction costs) and the redemption value is recognised as a borrowing cost over the period of the borrowings using the effective interest method

 

Leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Revenue (Discontinued operations)

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

 

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

 

Non-current assets held for sale and discontinued operations

Where an asset, or disposal group (an asset together with related liabilities), is to be recovered principally through a sale transaction and not through continuing use, and an active plan has been entered into to dispose of the asset or disposal group, it is reclassified as held for sale. On reclassification, the asset is measured at the lower of its carrying amount or fair value less costs to sell. Any losses on re-measurement are recognised in profit or loss.

 

Share-based payments

The Group has a Long Term Incentive Plan ("LTIP") in which any director or employee selected by the remuneration committee may participate. Awards under the LTIP have been granted on the basis that certain performance conditions will be met.

The Company has also granted options and warrants to purchase Ordinary Shares. The fair values of the LTIP awards, options and warrants are calculated using the Black-Scholes and Binomial option pricing models as appropriate at the grant date. The fair value of LTIP awards and options are charged to profit or loss over their vesting periods, with a corresponding entry recognised in equity. This charge does not involve any cash payment by the Group.

 

Where warrants are issued in conjunction with a loan instrument, the fair value of the warrants forms part of the total finance cost associated with that instrument and is released to profit or loss through finance costs over the term of that instrument using the effective interest method.

Pensions

Loyalward Limited operates a stakeholder pension scheme for its employees and Stewart Travel Limited operates a defined contribution pension scheme. Contributions payable to the pension scheme are charged to profit or loss in the period to which they relate.

Taxation

Current taxes, where applicable, are based on the results shown in the financial statements and are calculated according to local tax rules using tax rates enacted, or substantially enacted, by the balance sheet date and taking into account deferred taxation. Deferred tax is computed using the liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted rates and laws that will be in effect when the differences are expected to reverse.  Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction that at the time of the transaction affects neither accounting, nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will arise against which the temporary differences will be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities arising in the same tax jurisdiction are offset.

The Group is entitled to a tax deduction for amounts treated as compensation on exercise of certain employee share options. As explained under "Share-based payments" above, a compensation expense is recorded in the Group's statement of comprehensive income over the period from the grant date to the vesting date of the relevant options.  As there is a temporary difference between the accounting and tax bases a deferred tax asset is recorded.  The deferred tax asset arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company's share price at the balance sheet date) with the cumulative amount of the compensation expense recorded in the statement of comprehensive income. If the amount of estimated future tax deduction exceeds the cumulative amount of the remuneration expense at the statutory rate, the excess is recorded directly in equity against retained earnings.

 

 

 

3      Information regarding directors and employees

 

Directors' and key management remuneration

 

	Costs taken to inventories	Costs taken to profit or loss	Total
	£'000	£'000	£'000
Year ended 31 October 2017
Fees	244	388	632
Sums charged by third parties for directors' and key management services	333	70	403
Share-based payments	-	79	79
	577	537	1,114
Year ended 31 October 2016
Fees	236	431	667
Sums charged by third parties for directors' services	342	70	412
Share-based payments	-	(24)	(24)
	578	477	1,055

 

The total directors' and key management remuneration shown above includes the following amounts in respect of the directors of the Company.

 

	2017		2016
	Fees/Sums charged by third parties	Share-based payments	Fees/Sums  charged by third parties	Share-based payments
	£'000	£'000	£'000	£'000
C W Egleton (Chairman)	320	42	296	(12)
D C Wilson	250	20	250	(9)
B D Bartman	35	6	35	(1)
G D Cook	35	4	35	-
T R C Hill	46	7	37	(1)
	686	79	653	(23)

 

 

Notes to the Financial Statements (continued)

Year ended 31 October 2017

 

3      Information regarding directors and employees (continued)

 

Staff costs during the period (including directors and key management)

 

	Costs taken to         inventories	Costs taken to profit or loss	Total
	£'000	£'000	£'000
Year ended 31 October 2017
Salaries and fees	315	4,655	4,970
Social security cost	51	432	483
Share-based payments	-	96	96
	366	5,183	5,549
Year ended 31 October 2016
Salaries and fees	363	4,063	4,426
Social security cost	34	352	386
Share-based payments	-	(24)	(24)
	397	4,391	4,788

 

Note: Staff costs exclude sums charged by third parties for directors' services.

	2017	2016
	No.	No.
Monthly average number of persons employed
Directors	5	5
Sales and administration	226	203

 

4      Loss before taxation

 

The loss before taxation is stated after charging:

 

	2017 £'000	2016                    £'000
Depreciation	132	122
Amortisation	345	334
Operating leases	54	83
Auditor's remuneration:
Audit fees	72	54
Tax services	5	4

 

 

 

4      Loss before taxation (continued)

 

Audit fees in respect of the Company were £20,000 (31 October 2016: £17,000). Tax services fees in respect of the Company were £4,000 (31 October 2016: £500).

 

5     Segmental information

 

The Group strategy and growth objectives necessitate the building of an associated infrastructure. The Group considers it appropriate to identify separately the corporate development division together with costs related to acquisitions. Accordingly, the Group is organised into three divisions both by business segment and geographical location:

·     the luxury resorts division, currently being the development of a luxury resort in Crete, which includes the central administration costs of the Group and which is a continuing operation;

·     the Travel and Leisure division (UK), being the operation and management of the travel businesses, which is a discontinued  operation (see note below); and

·     the corporate development division (UK) as described above, which is a continuing operation.

The information presented below is consistent with how information is presented to the Board, with the Group's accounting policies and with the geographical location of the relevant divisions.

 

 

 

 

 

 

	2017
	Luxury Resorts	Travel and Leisure	Corporate Development	Total
	£'000	£'000	£'000	£'000
Total transaction value	-	80,320	-	80,320
Revenue	-	8,700	-	8,700
Cost of sales	-	(354)	-	(354)
Gross profit	-	8,346	-	8,346
Operating expenses	(480)	(7,783)	(504)	(8,767)
	(480)	563	(504)	(421)
Charge  in respect of share-based payments	(186)	-	-	(186)
Charge related to assets held for sale	(650)	-	-	(650)
Operating (loss)/profit	(1,316)	563	(504)	(1,257)
Finance costs	(1,184)	(75)	-	(1,259)
(Loss)/profit before taxation	(2,500)	488	(504)	(2,516)
Taxation	-	-	-	-
(Loss)/profit after taxation	(2,500)	488	(504)	(2,516)
Operating expenses include:
Depreciation and amortisation	2	468	-	470
Operating leases - plant and equipment	-	54	-	54
Assets/liabilities
Goodwill	3,583	5,610	-	9,193
Other non-current assets	161	1,237	-	1,398
Current assets	44,510	1,889	-	46,399
Charge related to asset held for sale	-	(250)		(250)
Total assets	48,254	8,486	-	56,740
Total and current liabilities	12,847	1,604	-	14,451

 

 

 

	2016
	Luxury Resorts	Travel and Leisure	Corporate Development	Total
	£'000	£'000	£'000	£'000
Total transaction value	-	67,820	-	67,820
Revenue	-	7,317	-	7,317
Cost of sales	-	(273)	-	(273)
Gross profit	-	7,044	-	7,044
Operating expenses	(489)	(6,772)	(595)	(7,856)
	(489)	272	(595)	(812)
Credit in respect of share-based payments	24	-	-	24
Operating (loss)/profit	(465)	272	(595)	(788)
Contribution to central costs	100	(100)	-	-
Finance costs	(1,341)	(143)	-	(1,484)
(Loss)/profit before taxation	(1,706)	29	(595)	(2,272)
Taxation	-	-	-	-
(Loss)/profit after taxation	(1,706)	29	(595)	(2,272)
Operating expenses include:
Depreciation and amortisation	13	443	-	456
Operating leases - plant and equipment	-	83	-	83
Assets/liabilities
Goodwill	3,583	5,185	-	8,768
Other non-current assets	157	1,574	-	1,731
Current assets	43,491	1,785	-	45,276
Total assets	47,231	8,544	-	55,775
Total and current liabilities	10,561	2,169	-	12,730

 

As stated in the Strategic Report, the Group has announced its intention to sell the travel business and the results for the year ended 31 October 2017 have been presented in accordance with IFRS 5. As a consequence, the profit after taxation of the Travel and Leisure business in the amount of £488,000 appears in the Consolidated Statement of Comprehensive Income as Profit from discontinued operations. Similarly, the net assets of the Travel and Leisure business are shown as non-current assets held for sale in the Consolidated Balance Sheet and the lower of its fair value and carrying value.