TIDMATE
RNS Number : 5188J
Agua Terra Limited
30 June 2011
Agua Terra Limited
Results for the year ended 31 December 2010
30 June 2011
Chairman's statement
Agua Terra Limited (LSE: ATE), the first development company
dedicated exclusively to high quality mixed-use leisure real estate
projects in Southeast Europe to be quoted on AIM, is pleased to
announce its results for the period 1 January 2010 to 31 December
2010 and provide an update on operational progress.
Operational highlights
The Company has received planning permission on all its sites
and is evaluating its options with the land it owns
Land holdings' valuation remains at EUR10m.
The assets of the Company have remained debt-free, shielding the
Company from the deterioration in credit conditions worldwide
Financial highlights
With no new sales, the income statement shows only operating and
administrative expenses, which have been tightly controlled and
amount to 32% of the costs incurred in 2009.
The balance sheet reflects the land holdings referred to above
and relatively modest liabilities.
In the absence of any income from sales of properties, the
Company received financial support from two of its directors,
Markos Kashiouris and Petros Economides. These advances, which were
made after the balance sheet date, have enabled the Company to
settle all of its other liabilities.
Lord Balfour, Chairman, said:
"While still owning important assets in Greece, the dire
economic situation which has been unfolding in the country
following on from the global crisis in 2008/9 has meant that
development and transactions have been brought to a halt with
obvious consequences for the Company. In the circumstances, in
order to save costs, it has been decided to approach the
Shareholders regarding de-listing the Company from the London AIM
market. This recommendation and approval of the financial
statements (audited by PwC) to 31st December 2010 took place at a
meeting of the Board on 30th June 2011. A corollary of this is that
I and all the other non-executive directors resigned effective this
date. I wish to thank them for their support and wisdom during a
very unusual period and wish the shareholders well in the coming
years. "
Enquiries:
Agua Terra Limited
Markos Kashiouris, Director Tel: 020 7581 1423
Consolidated statement of comprehensive income
for the year ended 31 December 2010
Period from
3 July
2008 to
31 December
2010 2009
Note EUR EUR
Fair value gains on investment property 12 - 1,758,465
Employee benefit expense 5 (408,028) (659,072)
Non-executive Directors' fees 20 (iii) (24,000) (195,000)
Professional fees for AIM listing - (494,244)
Other professional fees (76,492) (145,044)
Auditors' remuneration (5,040) (26,040)
Net foreign exchange transaction
loss (1,743) (2,316)
Transportation expenses (20,162) (80,225)
Other expenses (2,340) (55,683)
__________ __________
Operating (loss)/profit (537,805) 100,841
Finance costs 6 (11,594) (6,678)
__________ __________
(Loss)/profit before tax (549,399) 94,163
Income tax expense 7 35,169 (386,862)
__________ __________
Loss for the year/period and total
comprehensive income (514,230) (292,699)
=========== ===========
Loss attributable to:
Owners of the parent (514,230) (292,699)
========== ===========
Cents per
Share
Basic loss per share 8 (7.94) (5.36)
========= ==========
Diluted loss per share 8 (7.94) (5.36)
========= ==========
The notes are an integral part of these consolidated financial
statements.
Consolidated balance sheet
as at 31 December 2010
2010 2009
Note EUR EUR
Assets
Non-current assets
Investment property 12 10,023,000 10,023,000
__________ __________
10,023,000 10,023,000
__________ __________
Current assets
Trade and other receivables 13 39,516 37,730
Cash and cash equivalents 14 40,615 49,870
__________ __________
80,131 87,600
__________ __________
Total assets 10,103,131 10,110,600
========== ==========
Equity and liabilities
Capital and reserves
Share capital and share premium 15 9,072,500 9,072,500
Other reserves 16 317,100 209,072
Accumulated losses (806,929) (292,699)
__________ __________
Total equity 8,582,671 8,988,873
__________ __________
Non-current liabilities
Borrowings 17 - 206,678
Deferred income tax liabilities 18 351,693 386,862
__________ __________
351,693 593,540
__________ __________
Current liabilities
Borrowings 17 255,603 -
Trade and other payables 19 913,164 528,187
__________ __________
1,168,767 -
__________ __________
Total liabilities 1,520,460 1,121,727
__________ __________
Total equity and liabilities 10,103,131 10,110,600
========== ==========
On 30 June 2011 the Board of Directors of Agua Terra Limited
authorised these financial statements for issue.
The notes on are an integral part of these consolidated
financial statements.
Consolidated statement of changes in equity
for the year ended 31 December 2010
Share Share Other Accumulated
Note capital premium reserves losses Total
EUR EUR EUR EUR EUR
Transactions with owners
Issue of shares on
incorporation 15 - 900 - - 900
Additional issue of
shares on 26 September
2008 15 - 9,061,600 - - 9,061,600
Additional issue of
shares on 23 December
2009 15 - 10,000 - - 10,000
Share based payments -
value of employee
services 16 - - 209,072 - 209,072
_________ __________ _________ __________ _________
Total transactions with
owners - 9,072,500 209,072 - 9,281,572
_________ __________ _________ __________ _________
Comprehensive income
Loss for the period - - - (292,699) (292,699)
_________ __________ _________ __________ _________
Balance at 31 December
2009/ 1 January 2010 - 9,072,500 209,072 (292,699) 8,988,873
_________ __________ _________ __________ _________
Comprehensive income
Loss for the year - - - (514,230) (514,230)
Transactions with owners
Share based payments -
value of employee
services 16 - - 108,028 - 108,028
_________ __________ _________ __________ _________
Balance at 31 December
2010 - 9,072,500 317,100 (806,929) 8,582,671
========= ========== ========= ========== =========
The notes on are an integral part of these consolidated financial
statements.
Consolidated statement of cash flows
for the year ended 31 December 2010
Period from
3 July
2008 to
31 December
2010 2009
Note EUR EUR
Cash flows from operating activities
Profit before tax (514,230) 94,163
Adjustments for:
Interest expense 6 11,594 6,678
Fair value gains on investment property 12 - (1,758,465)
Share-based payments (Chief executive
Officer) 20 (iii) 108,028 209,072
Share-based payments (Non-executive
Directors) 20 (iii) - 60,000
__________ ___________
(429,777 (1,388,552)
Changes in working capital:
Trade and other receivables (1,786) (37,730)
Trade and other payables 384,977 488,187
__________ ___________
Net cash used in operations (46,586) (938,095)
__________ ___________
Cash flows from investing activities
Purchase of investment property 12 - (8,264,535)
__________ ____________
Net cash used in investing activities
activities - (8,264,535)
__________ ____________
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 15 - 9,012,500
Proceeds from borrowings from related
parties 20 (v) 36,800 200,000
Interest paid (44) -
__________ ___________
Net cash from financing activities 36,756 9,212,500
__________ ___________
Net (decrease)/increase in cash, cash
equivalents and
bank overdrafts (9,830) 9,870
Cash, cash equivalents and bank overdrafts
at the beginning of the year 9,870 -
__________ ___________
Cash, cash equivalents and bank overdrafts
at end of
year 14 40 9,870
========== ===========
The notes on are an integral part of these consolidated
financial statements.
Notes to the consolidated financial statements
1 General information
Country of incorporation
he Company is a limited liability company incorporated in
British Virgin Islands on 3 July 2008. Its registered office is at
197 Main Street, Road Town, Tortola, British Virgin Islands.
As of 3 October 2008, the Company's shares were admitted to
trading on AIM, a market operated by the London Stock Exchange.
Principal activities
The principal activity of the Group is that of property
acquisition with view of its capital appreciation and/or
development.
The consolidated financial statements were authorised for issue
by the Board of Directors on 30 June 2011.
Operating environment of the Group
The Group is operating in Greece, where its investment property
is located. The challenging economic conditions in Greece with low
purchasing power and competitive pressure are the main
characteristics of the operating environment of the Group.
Fears of default of the Greek government resulted in a series of
measures taken by a number of entities, including provision of
rescue packages from the EU and austerity measures from the Greek
Government.
Such circumstances could affect the fair value of its properties
and ability of the Group to obtain new borrowings. Deteriorating
operating conditions for debtors or borrowers may also have an
impact on Management's cash flow forecasts.
Management believes it is taking all the necessary measures to
support the sustainability and growth of the Group's business in
the current circumstances.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all periods presented in
these consolidated financial statements unless otherwise
stated.
Basis of preparation
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS), as adopted by the European Union (EU).
As of the date of the authorisation of the financial statements,
all International Financial Reporting Standards issued by the
International Accounting Standards Board (IASB) that are effective
as of 1 January 2010 have been adopted by the EU through the
endorsement procedure established by the European Commission, with
the exception of certain provisions of IAS39 "Financial
Instruments: Recognition and Measurement" relating to portfolio
hedge accounting.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
investment property.
The preparation of consolidated financial statements in
conformity with IFRSs requires the use of certain critical
accounting estimates and requires management to exercise its
judgment in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements are disclosed
in Note 4.
Going concern
The financial statements have been prepared on a going concern
basis. However, during the year ended 31 December 2010, the Company
incurred a net loss of EUR514.230 (2009: EUR292,699) and as of the
date the Company's current liabilities exceeded its current assets
by EUR1,088,636 (2009: EUR430,587). The Board of Directors believes
that the going concern basis of preparation is appropriate for the
following reasons:
-- The Chief Executive Officer, to whom the Group owes
EUR525,000 at the end of 2010 (2009: EUR225,000) (Note 20(iv)), has
agreed not to call for repayment of these balances until such time
as the Group has adequate funds to repay them as well as to provide
adequate financial support to enable the Group to meet its third
party obligations for the foreseeable future; and
The parties that can exercise significant influence, to whom the
Group at the end of 2010 has payable balances of EUR174,611
(2009:EUR116.003) (Note 20(iv)) and loan balances of EUR255.028
(2009: EUR255.028) (Note 20(v)), have agreed not to call for
repayment of these balances until such time as the Group has
adequate funds to repay them as well as to provide adequate
financial support to enable the Group to meet its third party
obligations for the foreseeable future.
Basis of consolidation
Subsidiaries
Subsidiaries are all entities (including special purpose
entities) over which the Group has the power to govern the
financial and operating policies generally accompanying a
shareholding of more than one half of the voting rights. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether
the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are de--consolidated from the date that control
ceases.
The group uses the acquisition method of accounting to account
for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred and the equity interests
issued by the group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed
as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. On
an acquisition-by-acquisition basis, the group recognises any
non-controlling interest in the acquiree either at fair value or at
the non-controlling interest's proportionate share of the
acquiree's net assets.
Investments in subsidiaries are accounted for at cost less
impairment. Cost is adjusted to reflect changes in consideration
arising from contingent consideration amendments. Cost also
includes direct attributable costs of investment.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the
fair value of the group's share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair
value of the net assets of the subsidiary acquired in the case of a
bargain purchase, the difference is recognized directly in the
statement of comprehensive income.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the
policies adopted by the group.
Adoption of new and revised IFRSs
During the current year the Group adopted all the new and
revised International Financial Reporting Standards (IFRS) that are
relevant to its operations and are effective for accounting periods
beginning on 1 January 2010. This adoption did not have a material
effect on the accounting policies of the Group.
At the date of approval of these consolidated financial
statements the following accounting standards were issued by the
International Accounting Standards Board but were not yet
effective:
(i) Adopted by the European Union
New standards
-- IAS 24 (Revised) "Related Party Disclosures" (effective for
annual periods beginning on or after 1 January 2011).
Amendments
-- Amendments to IAS 32 "Financial Instruments: Presentation:
Classifications of Rights Issues" (effective for annual periods
beginning on or after 1 February 2010).
-- Amendment to IFRS 1 "Limited Exemption from Comparative IFRS
7 Disclosures for First Time Adopters" (effective for annual
periods beginning on or after 1 July 2010).
-- Amendment to IFRIC 14 Prepayments of a Minimum Funding
Requirement (effective for annual periods beginning on or after 1
January 2011).
Annual Improvements 2010 (effective for annual periods beginning
on or after 1 July 2010 and 1 January 2011).
New IFRICs
-- IFRIC 19 "Extinguishing Financial Liabilities with Equity
Instruments" (effective for annual periods beginning on or after 1
July 2010).
(ii) Not adopted by the European Union
New standards
-- IFRS 9 "Financial Instruments" (effective for annual periods
beginning on or after 1 January 2013).
-- IFRS 10, "Consolidated Financial Statements" (effective for
annual periods beginning on or after 1 January 2013).
-- IFRS 11, "Joint Arrangements" (effective for annual periods
beginning on or after 1 January 2013).
-- IFRS 12, "Disclosure of Interests in Other entities"
(effective for annual periods beginning on or after 1 January
2013).
-- IFRS 13, "Fair Value Measurement" (effective for annual
periods beginning on or after 1 January 2013).
-- IAS 27, "Separate Financial Statements" (effective for annual
periods beginning on or after 1 January 2013).
IAS 28, "Investments in Associates and Joint Ventures"
(effective for annual periods beginning on or after 1 January
2013).
Amendments
-- Amendments to IFRS 7 Financial Instruments: Disclosures
(effective for annual periods beginning on or after 1 July
2011).
-- Amendment to IAS 12 "Income Taxes" (effective for annual
periods beginning on or after 1 January 2012).
Amendment to IFRS 1 "First-time adoption of International
Financial Reporting Standards" (effective for annual periods
beginning on or after 1 July 2011).
The Board of Directors expects that the adoption of these
financial reporting standards in future periods will not have a
material effect on the financial statements of the Company.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of operating
segments, has been identified as the Board of Directors who makes
the strategic decisions.
At 31 December 2010 and 2009, the Group has no operating
activity except for holding of land in Mykonos. As a result, the
Group has no operating segments to report.
Employee benefits
(a) Share-based compensation
The Group operates an equity-settled, share-based compensation
plan for its Chief Executive Officer, under which the Group
receives services from its Chief Executive as consideration for
equity instruments (shares) of the Group. The fair value of the
employee services received in exchange for the grant of shares is
recognised as an expense. The total amount to be expensed is
determined by reference to the fair value of the shares granted,
excluding the impact of any non-market service and performance
vesting conditions (for example, EBITDA targets). Non-market
vesting conditions are included in assumptions about the number of
shares that are expected to vest. The total amount expensed is
recognised over the vesting period, which is the estimated period
over which all of the specified vesting conditions are to be
satisfied. At each balance sheet date, the Group revises its
estimates of the number of shares that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the statement of
comprehensive income, with a corresponding adjustment to
equity.
When the vesting period is linked to a market performance
condition, and the vesting period is longer than originally
estimated, the expense is recognised over the originally estimated
vesting period.
(b) Cash bonus plans
The Group recognises a liability and an expense for cash bonuses
attributable to the Chief Executive Officer, based on the agreed
percentage of EBITDA. The Group recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
Foreign currency translation
(i) Functional and presentation currency
Items included in the Group's financial statements are measured
using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated
financial statements are presented in Euro (EUR), which is the
Group's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year--end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in the consolidated statement of
comprehensive income.
Current and deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity,
respectively.
The current income tax is calculated in the basis of the tax
laws enacted or substantively enacted at the balance sheet date in
the country in which the Group operates and generates taxable
income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax
regulation is subject to interpretation. If applicable tax
regulation is subject to interpretation, it establishes provision
where appropriate on the basis of amounts expected to be paid to
the tax authorities.
Deferred income tax is recognised using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
However, the deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of transaction
affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates and laws that have been
enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profits will be available against
which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on the Company where there is an intention to settle the
balances on a net basis.
Investment property
Investment property comprises of land held for capital
appreciation purposes. Investment property is measured initially at
its cost, including related transaction costs.
After initial recognition investment property is carried at fair
value. Fair value is based on active market prices, adjusted, if
necessary, for any difference in the nature, location or condition
of the specific asset. If this information is not available, the
Group uses alternative valuation methods, such as recent prices on
less active markets or discounted cash flow projections. Valuations
are performed by professional valuers who hold recognised and
relevant professional qualifications and have recent experience in
the location and category of the investment property being valued.
These valuations form the basis for the carrying amounts in the
financial statements.
Changes in fair values are recorded in the consolidated
statement of comprehensive income. A transfer from investment
property to inventories is made only when there is a change in use
evidenced by commencement of development with a view to sale.
Investment properties are derecognised either when they have been
disposed of or when the investment property is permanently
withdrawn from use and no future economic benefit is expected from
its disposal.
Share capital
Ordinary shares are classified as equity.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
consolidated statement of comprehensive income over the period of
the borrowings, using the effective interest method.
Borrowings are classified as current liabilities, unless the
Group has an unconditional right to defer settlement of the
liability for at least twelve months after the balance sheet
date.
Trade payables
Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents on the balance sheet include deposits
held at call with banks, cash balances held with lawyers in
fiduciary capacity on behalf of the Group and bank overdrafts. For
the purposes of the statement of cash flows, cash and cash
equivalents exclude cash balances held with lawyers in fiduciary
capacity as they are not available for use by the Group.
3 Financial risk management
(i) Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange risk and fair value
interest rate risk), credit risk and liquidity risk.
The Group's risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
Risk management is carried out by the Board of Directors.
-- Market risk
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions
or recognised assets or liabilities are denominated in a currency
that is not the Group's functional currency. As at 31 December 2010
and 2009 the Group did not have material exposure in foreign
exchange risk.
Management monitors the exchange rate fluctuations on a
continuous basis and acts accordingly.
Fair value interest rate risk
As the Group has no significant interest--bearing assets, the
Group's income and operating cash flows are substantially
independent of changes in market interest rates.
The Group's interest rate risk arises from its borrowings.
Borrowings issued at fixed rates expose the Group to fair value
interest rate risk.
The Group's management monitors the interest rate fluctuations
on a continuous basis and acts accordingly.
Credit risk
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions and committed transactions.
For banks and financial institutions, only independently rated
parties with a satisfactory rating are accepted.
Liquidity risk
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
balance sheet to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Balances due within 12 months equal their carrying balances as the
impact of discounting is not significant.
Between
Less than 1 and 2
1 year years
EUR EUR
At 31 December 2009:
Borrowings - 226,954
Trade and other payables (excluding deferred
income) 488,187 -
488,187 226,954
At 31 December 2010:
Borrowings 266,868 -
Trade and other payables (excluding deferred
income) 913,164 -
1,180,032 -
Prudent liquidity risk management implies maintaining sufficient
cash and having available an adequate amount of committed credit
facilities. The management maintains flexibility in funding by
maintaining availability under committed credit lines with related
parties (Note 17).
These undrawn borrowing facilities totalled EUR744,972 at the
end of 2010 (2009: EUR793,322) and the Group reached an agreement
with these parties to defer repayment of these borrowings to 31
December 2011 (Note 20(v)).
In addition, the Chief Executive Officer, to whom the Group owes
EUR525,000 at the end of 2010 (2009: EUR225,000) (Note 20(iv)), has
agreed not to call for repayment of these balances until such time
as the Group has adequate funds to repay them.
(ii) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
Consistent with others in the industry, the Group monitors
capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Net debt is calculated as
total borrowings (including 'current and non--current borrowings'
as shown in the balance sheet) less cash and cash equivalents.
Total capital is calculated as 'equity' as shown in the balance
sheet plus net debt.
The gearing ratios at 31 December 2010 and 2009 were as
follows:
2010 2009
EUR EUR
Total borrowings (Note 17) 255,603 206,678
Less: cash and cash equivalents (Note 14) (40,615) (49,870)
_________ __________
Net debt 214,988 156,808
Total equity 8,582,671 8,988,873
_________ __________
Total capital as defined by management 8,797,659 9,145,681
========= ==========
Gearing ratio 2.44% 1.71%
(iii) Fair value estimation
The table below analyse financial instruments carried at fair
value by valuation method. The different levels have been
identified as follows:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
As at 31 December 2009 and 2010, the Group did not have any
financial assets and liabilities that are measured at fair
value.
4 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
(i) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
-- Income taxes
Significant judgment is required in determining the provision
for income taxes. There are transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary
course of business. The Group recognises liabilities for
anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Disposal of the Group's land located in Greece will attract Greek
corporation tax. The Greek corporation tax rate is 24% for the year
2010 reducing by 1% yearly to 20% for year 2014 onwards. The Group
provided for deferred tax on its land revaluation gain at 20%
(2009: 22%), which is its best estimate as at 31 December 2010. The
change was a result of the change in the management plans to hold
the property for longer term than originally estimated.
-- Estimated fair value of investment properties
The best evidence of fair value is current prices in an active
market for the properties with similar characteristics. In the
absence of such information, the Group determines the amount within
a range of reasonable fair value estimates. In making its
judgement, the Group considers information from a variety of
sources including:
(i) current prices in an active market for properties of
different nature, condition or location (or subject to different
lease or other contracts), adjusted to reflect those
differences;
(ii) recent prices of similar properties in less active markets,
with adjustments to reflect any changes in economic conditions
since the date of the transactions that occurred at those prices;
and
(iii) discounted cash flow projections based on reliable
estimates of future cash flows, derived from the terms of any
existing lease and other contracts and (where possible) from
external evidence such as current market rents for similar
properties in the same location and condition, and using discount
rates that reflect current market assessments of the uncertainty in
the amount and timing of the cash flows.
The investment properties were valued at 30 June 2009 at fair
value comprising open-market value, based on valuations by
independent, professionally qualified valuers who hold recognised
relevant professional qualifications and have recent experience in
the locations and categories of the investment properties valued.
At 31 December 2009 and 2010, the Board of Directors has determined
this valuation still to be appropriate on the basis of available
information as explained above.
(ii) Critical judgements in applying the Group's accounting
policies
-- Share-based payments - Performance warrants
The Group did not recognise share-based payment expense in
respect of additional performance warrants (Note 15) issuable
to the Chief Executive Officer in the event of future capital
raising, on the basis that such an exit event was assessed
as not probable as at 31 December 2010 and 2009. This assessment
requires significant judgement. If this assessment is estimated
as probable in subsequent accounting periods, then the Group
will need to recognise additional share-based payment expenses
at a value of EUR0.7219 per additional warrant to be issued
based on the formula explained in Note 15.
5 Employee benefit expense
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Salaries 300,000 450,000
Share-based payments (Note 16) 108,028 209,072
_________ _________
408,028 659,072
========= =========
6 Finance costs
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Interest expense:
Loans from related parties (Note 20 (v)) 11,550 6,678
Bank overdrafts 44 -
________ ________
11,594 6,678
======== ========
7 Income tax expense
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Deferred tax (credit)/charge (Note
18) (35,169) 386,862
========= ==========
The tax on the Group's (loss)/profit before tax differs from the
theoretical amount that would arise using the applicable tax rate
as follows:
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
(Loss)/profit before tax (35,169) 94,163
========= ==========
Tax calculated at the applicable
corporation tax rates in BVI - -
Tax effect of the existence of permanent
establishment in
Greece - 386,862
Tax effect due to the change in tax
rates (35,169) -
_________ __________
Income tax charge (35,169) 386,862
========= ==========
The Company is incorporated in the British Virgin Islands and
hence is exempt from any tax on its profits.
The Company's subsidiaries (Note 11), which are registered in
Cyprus, are subject to corporation tax on their taxable profits at
the rate of 10%. Up to 31 December 2008, under certain conditions
interest may be subject to defence contribution at the rate of 10%.
In such cases 50% of the same interest will be exempt from
corporation tax thus having an effective tax rate burden of
approximately 15%. From 1 January 2009 onwards, under certain
conditions, interest may be exempt from income tax and only subject
to defence contribution at the rate of 10%. Disposal of the Group's
land located in Greece will attract Greek corporation tax estimated
at the rate of 20% (2009: 22%) (see Note 4 (i)). As at 31 December
2010, the Company's Cyprus registered subsidiaries had tax losses
carried forward amounting to EUR39,226 (2009: EUR28,820) for which
no deferred tax asset has been recognised as profits for future
periods against which these losses can be utilised cannot be
estimated with sufficient reliability.
8 Basic and diluted loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss
attributable to equity holders by the weighted average number of
shares in issue during the period.
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Loss attributable to equity
holders (EUR) (514,230) (292,699)
========== =========
Weighted average number of
shares in issue 6,478,860 5,464,422
========= =========
Basic loss per share (cents
per share) (7.94) (5.36)
========= =========
(b) Diluted
Diluted loss per share is calculated by adjusting the weighted
average number of shares outstanding to assume conversion of all
dilutive potential shares.
The Company's dilutive potential shares arose from founder and
performance warrants explained in more detail in Note 15, as well
as from the Chief Executive Officer's share bonus plan explored in
more detail in Note 20 (iii).
The computation of diluted earnings per share excludes the
effect of assuming the conversion of founder and performance
warrants because their effect would have been anti-dilutive. In
addition, the effect of the Chief Executive Officer's share bonus
plan is nil, as no shares would have been issued under the plan
since none of the conditions were met at 31 December 2010 and
2009.
9 Financial instruments by category
Loans and
receivables Total
EUR EUR
31 December 2009
Assets as per balance
sheet
Trade and other receivables (excluding
prepayments) 36,800 36,800
Cash and cash equivalents 49,870 49,870
Total 86,670 86,670
Other
financial
liabilities Total
EUR EUR
Liabilities as per balance sheet
Borrowings 206,678 206,678
Trade and other payables
(excluding deferred income) 488,187 488,187
Total 694,865 694,865
Loans and
receivables Total
EUR EUR
31 December 2010
Assets as per balance
sheet
Trade and other receivables (excluding
prepayments) 36,800 36,800
Cash and cash equivalents 40,615 40,615
__________ _________
Total 77,415 77,415
========= =========
Other
financial
liabilities Total
EUR EUR
Liabilities as per balance sheet
Borrowings 255,603 255,603
Trade and other payables
(excluding deferred income) 873,164 873,164
__________ __________
Total 1,128,767 1,128,767
========== ==========
10 Credit quality of financial assets
The credit quality of financials assets that are neither past
due nor impaired can be assessed by reference to external credit
ratings (if applicable) or to historical information about
counterparty default rates:
2010 2009
EUR EUR
Fully performing other receivables
Group 1 36,800 36,800
========= ========
Cash at bank and short--term bank deposits
Bank - Baa2 (Moody's) 615 9,870
Third parties with no external credit rating 40,000 40,000
________ _________
615 49,870
======== ==========
Group 1 - related parties
11 Investments in subsidiaries
The Group's interests in its subsidiaries, all of which are
unlisted, were as follows:
Principal Country of 2010 % 2009
Name activity incorporation holding % holding
Agua Terra Alpha Property
(Cyprus) Limited investment Cyprus 100 100
Agua Terra Beta
(Cyprus) Limited Dormant Cyprus 100 100
The Company subscribed for 100% of the issued share capital
of these subsidiaries upon their incorporation, at a price
of EUR2,000 each, which is equal to the nominal value of their
issued share capital.
12 Investment property
2010 2009
EUR EUR
At the beginning of the year/period 10,023,000 -
Purchases during the period (Note 20 (ii)) - 8,264,535
Fair value gains (Note 4(i)) - 1,758,465
__________ __________
At the end of the year/period 10,023,000 10,023,000
========== ==========
The above investment property comprises of three sites located
in Mykonos, Greece, which collectively comprise the Mykonos Azure
project.
The Group has obtained planning permissions for the development
of ultra-luxury serviced residences over all three sites.
13 Trade and other receivables
2010 2009
EUR EUR
Receivables from related parties (Note 20
(iv)) 36,800 36,800
Prepayments 2,716 930
________ ________
39,516 37,730
======== =========
The fair values of trade and other receivables approximate
their carrying amounts. Trade and other receivables do not
contain impaired assets.
The maximum exposure to credit risk at the balance sheet date
is the carrying value of each class of receivable mentioned
above. The Group does not hold any collateral as security.
14 Cash and cash equivalents
2010 2009
EUR EUR
Cash at bank 615 9,870
Cash balances held with lawyers (Note 19) 40,000 40,000
________ ________
40,615 49,870
======== ========
Cash and cash equivalents include the following for the purposes
of the statement of cash flows:
2010 2009
EUR EUR
Cash and cash equivalents 615 9,870
Bank overdrafts (Note 17) (575) -
_________ ________
40 9,870
========= =========
15 Share capital and share premium
Number of Share
shares capital Share premium Total
EUR EUR EUR
Issue of shares on
incorporation 450 - 900 900
26 September 2008:
Issue of shares at EUR2 per
share 4,505,800 - 9,011,600 9,011,600
Issue of shares to
non-executive Directors for
free 25,000 - 50,000 50,000
4,530,800 - 9,061,600 9,061,600
23 December 2009:
Issue of shares in exchange
of founder warrants 1,940,469 - - -
Issue of shares to a
non-executive Director for
free 7,141 - 10,000 10,000
1,947,610 - 10,000 10,000
At 31 December 2009 and 2010 6.478.860 - 9.072.500 9.072.500
The Company has unlimited authorised share capital, comprising
of shares of nil par value.
On incorporation, the Company issued 450 common shares of nil
par value at a price of EUR2 per share.
On 26 September 2008, the Company issued an additional 4,505,800
common shares of nil par value at a price of EUR2 per share. In
addition, on the same date the Company issued 25,000 common shares
of nil par value for free to its non-executive Directors (see Note
20 (iii)).
On 23 December 2009, the Company issued an additional 1,940,469
common shares of nil par value for free to its founder warrants
holders in consideration of the cancellation of 4,531,250 founder
warrants. In addition, on the same date the Company issued 7,141
common shares of nil par value for free to a non-executive Director
(see Note 20 (iii)).
As from 3 October 2008 the Company's issued shares are trading
on the AIM of the London Stock Exchange.
Founder Warrants
On 26 September 2008, the Company issued 4,531,250 founder
warrants to subscribe for shares of the Company at an exercise
price of EUR2 per founder warrant. The founder warrants were
exercisable at any time from issue until 26 September 2018 and were
non--transferable, except with the prior consent of the Board. On
23 December 2009, the Company cancelled all of the outstanding
founder warrants, and issued instead 1,940,469 new common shares in
exchange for such warrants.
Performance Warrants
On 26 September 2008, the Company executed the Performance
Warrant Instrument pursuant to which the Company may issue up to
453,125 warrants to subscribe for shares of the Company at an
exercise price of EUR2.59 per share. After 3 October 2011, if the
Company's share price is trading at more than a 20% discount to the
Company's then net asset value, then the holder of performance
warrants may elect to exercise his performance warrant at a price
of 1.295 times the closing share price on the date falling three
years before the date of exercise. Each performance warrant
entitles the holder to acquire one share.
Shares issued on the exercise of performance warrants are
subject to a three year lock--in, other than those shares issued
following the election to exercise at a price of 1.295 times the
closing share price, in which case the shares issued will be
subject to a five year lock--in. The performance warrants are
exercisable at any time from issue until 26 September 2018 and are
non--transferable except with the prior consent of the Board.
The performance warrants are divided into four classes, which
have identical rights save in respect of anti dilution provisions
in the event of any future capital raises in which case the
warrant-holders are entitled to additional warrants on the basis of
X warrants for every 100 shares issued, where X is as set out
below:
Mkt Mkt Mkt Mkt
Capitalisation Capitalisation Capitalisation Capitalisation
OR Share OR Share OR Share OR Share
Capital at Capital at Capital at Capital at
time of issue time of issue time of issue time of issue
less than EUR100m to EUR200m to more than
Class EUR100m EUR200m EUR300m EUR300m
A 2.777 1.895 1.014 0.600
B 3.902 5.203 6.504 7.040
C 2.345 1.601 0.856 0.600
D 0.976 1.301 1.626 1.760
10.0 10.0 10.0 10.0
As at 31 December 2009 and 2010, the following Performance
Warrants were issued and outstanding:
Number of Performance
Holder Class Warrants
Related party - significant
influence A 125,831
Related party - Chief Executive
Officer B 176,829
Related party - significant
influence C 106,258
The Company allocated performance warrants to its Chief
Executive Officer over and above its capacity as a shareholder, and
hence this arrangement (the excess allowance) was treated as a
share-based payment under IFRS 2. The overallocated warrants to the
Chief Executive Officer due to his executive capacity were
estimated to be 64,978. The fair value of each warrant granted
determined using an American Option Binomial Valuation model was
EUR0.7219 per warrant. The significant inputs into the model were
share price of EUR2 at grant date, exercise price of EUR2.59,
volatility of 27.28% (measured on the basis of historical
volatility of a basket of Central and South Eastern European AIM -
listed real estate stocks), expected warrants life of 9 years, and
an annual risk-free interest rate of 4.25%. The total fair value of
EUR46,908 was expensed in the statement of comprehensive income for
the period ended 31 December 2009, since the warrants vested
immediately (Note 5).
No additional share-based expense was recognised in respect of
additional warrants issuable to the Chief Executive Officer in the
event of a future capital raising, as such an exit event was not
considered probable as at 31 December 2009 and 2010.
16 Other reserves
Share-based payments reserves
-----------------------------------
2010 2009
EUR EUR
At beginning of year/period 209,072 -
Value of employee share-based
services
Share bonus scheme (Note 20 (iii)) 108,028 162,164
Performance warrants (Note 15) - 46,908
_________ _________
At end of year/period 317,100 209,072
========= =========
17 Borrowings
2010 2009
EUR EUR
Non-Current
Borrowings from related parties (Note
20 (v)) - 206,678
__________ __________
Current
Borrowings from related parties (Note
20 (v)) 255,028 -
Bank overdrafts 575 -
__________ __________
255,603 -
__________ __________
Total borrowings 255,603 206,678
========== ==========
Maturity non-current borrowings
Between 1 and 2 years - 206,678
========== ==========
Borrowings issued at fixed rates expose the Group to fair value
interest rate risks.
The Group has the following undrawn borrowing facilities with
related parties (Note 20 (v)):
2010 2009
EUR EUR
Fixed rate:
Expiring beyond one year 744,972 793,322
=========== =========
The carrying amounts of borrowings approximate their fair
value.
The carrying amounts of the Group's borrowings are denominated
in the following currencies:
2010 2009
EUR EUR
Euro 255,603 206,678
========== ==========
18 Deferred income tax liabilities
The analysis of deferred income tax liabilities is as
follows:
2010 2009
EUR EUR
Deferred tax liabilities to be settled
after more than twelve months 351,693 386,862
======== ==========
The movement in the deferred income tax account is as
follows:
Fair value gains
on investment
property
EUR
Charged to:
Statement of comprehensive income
(Note 7) 386,862
________
At 31 December 2009/1 January 2010 386,862
Credited to:
Statement of comprehensive income
(Note 7) (35,169)
________
At 31 December 2010 351,693
========
19 Trade and other payables
2010 2009
EUR EUR
Payables to related parties (Note
20 (iv)) 786,111 403,503
Other payables 72,013 61,384
Accrued expenses 15,040 23,300
Deferred income (see below) - 40,000
_________ ___________
873,164 528,187
========= ==========
In October 2009, the Group signed contracts for the sale of the
first two villas at the Mykonos Azure project. The sales price was
EUR1,500,000 for each villa, totalling EUR3,000,000, out of which
prepayments of EUR40,000 have been received and are held by a
lawyer in fiduciary capacity on behalf of the Group (Note 14). The
remaining balance was payable by 20 April 2010 and the contracts
were terminable in case of failure by the buyers to pay by that
day. In April 2010, with the mutual agreement of all parties
involved, the expiry of the agreements was extended to 20 October
2010. By that time, no further actions had taken place and the
agreements lapsed. Therefore these balances are now considered to
be due back to the customers and hence they were reclassified
within other payables.
The fair value of trade and other payables which are due within
one year approximates their carrying amount at the balance sheet
date.
20 Related party transactions
The following transactions were carried out with related parties:
(i) Purchases of services
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Related parties that can exercise
significant influence 58,231 241,524
=========== ==========
(ii) Purchase and option for additional purchase of investment
property from related parties
In October 2008, the Group purchased three properties in Pyrgi,
Agrari and Platys Gialos all of which are in Mykonos, for a
total consideration of EUR8 million from a party that can
exercise significant influence over the Group. The Board was
satisfied that the terms of the purchase were on an arms length
basis and in accordance with an external third-party valuation
of the land at the time of purchase. On 9 November 2009, the
Group signed an option agreement, for no consideration, in
respect of a portfolio of sites, located in Mykonos, Greece,
beneficially owned by a party that can exercise significant
influence over the Group. The option was exercisable by the
Group in respect of some or all the sites of any time prior to
31 March 2010. The consideration payable depended on which
properties the Group would wish to acquire ranging from EUR1.7
million to EUR5.6 million per site, up to a total maximum
consideration of EUR18 million for all sites. The Group did not
exercise the option due to financing constraints.
(iii) Key management compensation
The total remuneration of the Directors was as follows:
Period from
3 July
2008 to
31 December
2010 2009
EUR EUR
Chief Executive Officer emoluments
in his executive capacity:
Fixed cash salary for the period 300,000 450,000
Share-based payments: Performance
warrants (Note 15) - 46,908
Share-based payments: Share bonus
scheme (see below *) 108,028 162,164
_________ ___________
408,028 659,072
_________ ___________
Non-executive Directors:
Fees 24,000 135,000
Share-based payments (see below **) - 60,000
_________ ___________
24,000 195,000
_________ ___________
324,000 854,072
========= ===========
(iii) Key management compensation (continued)
* With effect from 3 July 2008, the Director who acts as Chief
Executive Officer entered into a service agreement with the Company
under which he is entitled to receive the following
remuneration:
(a) Annual fixed cash salary of EUR300,000 per annum subject to
automatic increase
up to EUR1,000,000 per annum once certain market capitalisation
or additional
incremental capital raising targets are met;
(b) Annual cash bonus, of up to 5% of the Group's EBITDA
declining on a stepped basis to 3% when certain cash raising or
market capitalisation targets are met, subject to hitting certain
performance targets set by comparison of the Group's EBITDA per
EUR1 of market capitalisation to a basket of Central and South
Eastern European AIM - listed real estate stocks; and
(c) Annual share bonus of:
(i) 0.5% of EBITDA increasing on a stepped basis to 4% of EBITDA
once certain market capitalisation or capital raising milestones
are reached, subject to hitting certain performance targets set as
explained in (b) above; and
(ii) EUR500,000 worth of shares once the market capitalisation
of the Group exceeds EUR20 million.
The Chief Executive Officer's share bonus plan has been
accounted for as an equity settled share-based payment arrangement
under IFRS2 with a total expense amounting to EUR108,028 (2009:
EUR162,164). More specifically:
(i) The estimated fair value on grant date (3 July 2008) is
EUR242,705. Key inputs used for the estimation were as follows:
estimated probabilities for achieving various market
capitalisation targets, ranging from 20% for a EUR100m target and
declining on a stepped basis to 0.6% for a EUR700m target;
estimated vesting period for achieving various market
capitalisation targets, ranging from 8 years for a EUR100m target
to 20 years for a 700m target;
market capitalisation estimated as 8 times EBITDA; and
estimated discount rate of 5%.
The expense arising for the year ended 31 December 2010 is
EUR18,919 (2009: EUR28,378) with a corresponding credit in other
reserves (Note 16).
(ii) The estimated fair value on grant date (3 July 2008) is
EUR401,357 and the estimated vesting period to achieve the vesting
condition of market capitalisation exceeding EUR20 million is 4.5
years (up to 31 December 2012). Thus, the expense arising for the
year ended 31 December 2010 is EUR89,109 (2009: EUR133,786) with a
corresponding credit in other reserves (Note 16).
** On 26 September 2008, the Company issued 25,000 shares for no
consideration to its non executive directors. The fair value of
each free share issued, determined on the basis of the price of
shares issued to other parties on the same date, was EUR2. In
addition, on 23 December 2009 the Company issued 7,141 shares for
no consideration to a non-executive Director. The fair value of
each free share issued, determined on the basis of the fair value
of the Company's shares on the date of issue, was EUR1.40. The
total fair value of EUR60,000 was expensed in the consolidated
statement of comprehensive income for the period ended 31 December
2009.
(iv) Period--end balances with related parties
2010 2009
EUR EUR
Receivable from related parties (Note
13):
Parties that can exercise significant
influence 36,800 36,800
========= =========
Payable to related parties (Note 19):
Parties that can exercise significant
influence 174,611 116,003
Chief Executive Officer 525,000 225,000
Non-executive Directors 86,500 62,500
_________ _________
786,111 403,503
========= =========
The Chief Executive Officer has agreed not to call for the
repayment of the above amounts until such time as the a Group has
adequate funds to repay them.
The above balances bear no interest, are unsecured and are
repayable on demand.
(v) Loans from related parties
2010 2009
EUR EUR
Loans from parties that can exercise
significant influence:
At the beginning of the year/period 206,678 -
Loans advanced during period 36,800 200,000
Interest charged (Note 6) 11,550 6,678
__________ _________
At end of period (Note 17) 255,028 206,678
========== =========
On 26 September 2008, the Group as borrower and three parties
that can exercise significant influence as lenders, entered into a
loan agreement pursuant to which, the lenders have agreed to make
available the aggregate sum of EUR1,000,000 to the Group. The loan
was originally repayable at the earlier of 1 January 2010 and such
time as the Group raises EUR1,000,000 of capital following its
admission to trading on the AIM of the London Stock Exchange. As a
result of an addendum reached during 2009, the repayment of the
loan was deferred to 31 December 2011. Interest is at 5% per annum
and the loan is unsecured.
21 Events after the balance sheet date
On 30(th) June 2011, the Board of Directors decided to approach
the Company's shareholders regarding de-listing the Company from
the London AIM market. On the same date all non-executive directors
resigned.
There were no other material post balance sheet events, which
have a bearing on the understanding of the financial
statements.
The Independent Auditor's Report is unqualified.
The annual report is available at www.agua-terra.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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