Preliminary Results 31 Oct 2019 - amendment

Notes to the Financial Statements

Year ended 31 October 2019

 

1         General information

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 October 2019 or 31 October 2018. The report of the auditors on the statutory financial statements for the year ended 31 October 2019 and 31 October 2018 was not qualified.

The report of the auditor on the statutory financial statements for each of the years ended 31 October 2019 and 31 October 2018 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 2018 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 October 2019 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. 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 plus the provision of general management services.

 

2              Accounting policies

 

Basis of preparation

The financial statements are prepared under the historical cost convention except for where financial instruments are stated at fair value.

 

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: 

 

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
IFRIC 23	Uncertainty over income tax position	1 January 2019

 

The directors anticipate that the adoption of IFRS 9 and IFRIC 23 in future periods will have no material impact on the profit of the financial statements of the Group.

 

Going concern 

The directors have considered the financial and commercial position of the Group in relation to its project in Crete (the "Project"). 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 been rejected by the Greek Supreme Court.

 

Accordingly, the directors consider that 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.

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 2019 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:

 

Plant and equipment:	3 to 5 years
Fixtures and fittings:	3 years

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

 

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 currency

A foreign currency transaction is recorded, on initial recognition in Euros, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period:

- foreign currency monetary items are translated using the closing rate;

- non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and

- non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in profit or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Cash flows arising from transactions in a foreign currency are recorded in Euros by applying to the foreign currency amount the exchange rate between the Euros and the foreign currency at the date of the cash flow.

 

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

                                                                    

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. 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 statement of financial position 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 statement of financial position 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 2019
Fees	(85)	274	189
Sums charged by third parties for directors' and key management services	111	70	181
Share-based payments (note 17)	-	-
	26	344	370
Year ended 31 October 2018
Fees	93	280	373
Sums charged by third parties for directors' and key management services	331	70	401
Share-based payments (note 17)	-	63	63
	424	413	837

 

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

 

	2019		2018
	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)	162	-	297	32
D C Wilson	-	-	-	23
B D Bartman	35	-	35	3
G D Cook	35	-	35	2
T R C Hill	48	-	53	3
	280	-	420	63

 

 

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 2019
Salaries and fees	-	250	250
Social security cost	-	30	30
Share-based payments (note 17)	-	-	-
	-	280	280
Year ended 31 October 2018
Salaries and fees	347	124	471
Social security cost	53	33	86
Share-based payments (note 17)	-	63	63
	400	220	620

 

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

 

	2019	2018
	No.	No.
Group monthly average number of persons employed
Directors	7	8
Management, administration and sales	2	4

 

 

4      Loss before taxation

 

The loss before taxation is stated after charging:

 

	2019 £'000	2018                    £'000
Depreciation	-	1
Operating leases	-	-
Auditor's remuneration:
Group audit fees	21	20

 

 

 

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 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.

 

 

 

	Luxury Resorts	Corporate Development	Total
	£'000	£'000	£'000
Operating expenses	(799)	-	(799)
	(799)	-	(799)
Charge in respect of share-based payments	-	-	-
Charge related to assets held for sale	-	-	-
Operating (loss)/profit	(799)	-	(799)
Finance costs	(1,278)	-	(1,278)
(Loss)/profit before taxation	(2,077)	-	(2,077)
Taxation	-	-	-
(Loss)/profit after taxation	(2,077)	-	(2,077)
Operating expenses include:
Depreciation and amortisation	-	-	-
Assets/liabilities
Goodwill	3,583	-	3,583
Other non-current assets	157	-	157
Current assets	46,083	-	46,083
Total assets	49,823	-	49,823
Total and current liabilities	7,566	-	7,566

 

 

 

	2018
	Luxury Resorts	Travel and Leisure	Corporate Development	Total
	£'000	£'000	£'000	£'000
Total transaction value	-	-	-
Revenue	-	-	-	-
Cost of sales	-	-	-	-
Gross profit	-	-	-	-
Operating expenses	(602)	-	(92)	(694)
	(602)	-	(92)	(694)
Charge in respect of share-based payments	(63)	-	-	(63)
Charge related to assets held for sale	(2,560)	-	-	(2,560)
Operating (loss)/profit	(3,225)	-	(92)	(3,317)
Finance costs	(648)	-	-	(648)
(Loss)/Profit from Discontinued Operation	-	943	-	943
(Loss)/profit before taxation	(3,873)	943	(92)	(3,022)
Taxation	-	-	-	-
(Loss)/profit after taxation	(3,873)	943	(92)	(3,022)
Operating expenses include:
Depreciation and amortisation	1	-	-	1
Assets/liabilities
Goodwill	3,583	-	-	3,583
Other non-current assets	161	-	-	161
Current assets	45,616	-	-	45,616
Total assets	49,360	-	-	49,360
Total and current liabilities	8,764	-	-	8,764

 

The Group completed the sale of its travel business on 9 October 2018 and the results for the year ended 31 October 2018 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 £943,000 appears in the Consolidated Statement of Comprehensive Income for the year ended 31 October 2018 as Profit from discontinued operation.