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2023 ReportMinoan Group Plc Report and Financial Statements Year ended 31 October 2016 Company registration no: 3770602 Minoan Group Plc Report and Financial Statements Year ended 31 October 2016 Contents Directors and Advisers Chairman’s Statement Strategic Report Directors’ Report Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Balance Sheet Company Balance Sheet Consolidated Cash Flow Statement Note to the Consolidated Cash Flow Statement Company Cash Flow Statement Note to the Company Cash Flow Statement Notes to the Financial Statements 1 2-4 5-6 7-8 9-10 11 12 13 14 15 16 17 18 19 20-47 Minoan Group Plc Directors and Advisers Directors C W Egleton FCA (Chairman) D C Wilson (Managing Director) B D Bartman BSc (Econ), FCA G D Cook MA, ACA T R C Hill B.Arch Company secretary W C Cole FCA Registered office 30 Crown Place London EC2A 4ES Bankers HSBC Bank plc, London Barclays Bank Plc, Glasgow Legal advisers Pinsent Masons LLP, London Nominated adviser and broker WH Ireland Limited, London Head office 3rd Floor Sterling House 20 Renfield Street Glasgow G2 5AP Administration office 3rd Floor AMP House Dingwall Road Croydon Surrey CR0 2LX Registrars Neville Registrars Limited, Halesowen, West Midlands Independent auditor Moore Stephens LLP Chartered Accountants and Statutory Auditor 150 Aldersgate Street London EC1A 4AB 1 Minoan Group Plc Chairman’s Statement Introduction The status of the Itanos Gaia project in Crete (the “Project”) and of the Appeals against the issue of the Presidential Decree (“PD”) and the positive outlook for the future will be the focus of my Statement. The dismissal of the Appeals against the PD would be transformational for the Group and the status of our Travel and Leisure business (“T&L”) is equally encouraging albeit on a less significant scale. Once again T&L reports strong year on year growth of 11% in total transaction value. This was achieved despite the Brexit referendum which caused an immediate and significant short term drop in business, exacerbated by a 50% drop in Turkish travel following terrorist activity. Greece In the Group’s Interim Results Announcement in July last year, I reported that Appeals against the issue of the PD had been lodged and that we awaited a Court Hearing at which we anticipated a decision to dismiss the appeals and confirm the granting of the equivalent of outline planning permission for the Project. On 24 March 2017 we announced on AIM that we noted Greek media reports stating that the Appeals had indeed been rejected by the Greek Supreme Court (the “Court”). The timing of this Chairman’s Statement is such that an official announcement has not yet been made by the Court and, therefore, it is difficult to expand more on the Greek media reports other than, once again, to note them. Your Board has remained confident in the Greek justice system throughout the long process of seeking the appropriate planning consent for the Project and, of course, the turn of events noted above gives every reason for this confidence to be sustained. The Greek Supreme Court, like most others, does not work to a published timetable and whilst it is possible that a decision is published in a few weeks, shareholders should not be concerned if it takes longer. The confirmation of the Appeals being dismissed will, of itself, be a transformational event on many levels for the Group. It will necessitate considerable effort in a relatively short timeframe in order to pursue more vigorously various ongoing discussions and negotiations with potential partners and others in readiness for, and to continue after, the official notification from the Court. It should be noted however, that joint ventures and other complex real estate transactions are not, by their nature, quick or easy to bring to a conclusion. In our case, the fact that the Project is in a country where there is economic uncertainty will also have an impact. Nevertheless, your Board is confident in its ability to achieve a satisfactory solution for all shareholders. I will report in due course when notification is received from the Court. 2 Minoan Group Plc Chairman’s Statement (continued) Travel and Leisure T&L has again reported a solid set of financial results that reflect a continued growth in revenue and gross profit despite the Brexit impact. This growth has funded a continued investment in operating costs in order to take the business into the next phase of organic growth. Total transaction value has increased in the period under review by 11% from £61m to £68m and gross profit shows a year on year increase of £551,000 (8%) to £7,044,000 (2015: £6,493,000). The investment in operating costs referred to above has increased the overhead cost to £6,772,000 (2015: £6,106,000). EBITDA increased to £715,000 (2015: £698,000) whilst the effect of an increase in depreciation charge sees operating profit decrease to £272,000 (2015: £387,000). Having made the investment to secure continued growth the bounce back from the Brexit dip has continued and I regard it as encouraging that gross profit in the current year is running at a year on year growth rate of 16% and I expect a significantly better result in the current year. Financial Review The growth in revenue and gross profit is attributable to T&L as set out above. In respect of Operating Expenses, a year on year increase in costs associated with the Project and in Corporate Development, together with the investment in the T&L cost base noted above, has resulted in an increase of £247,000 in the current year’s operating loss to £788,000 (2015: £541,000). The cost increase and consequent decrease in operating profit is in line with the Group’s plan and is, in the main, a function of investing for growth in T&L. An increase in finance costs of £462,000 (which includes an increase in the warrants charge of £282,000) sees the reported net loss move to £2,272,000 (2015: £1,620,000). In respect of the balance sheet, and as noted above subject to receipt of formal notifications from the Greek Supreme Court, we will be working hard on crystallisation of the value of the Project (which I have previously reported to shareholders has been valued at “around €100m”). The value of the Project in the Consolidated Balance Sheet is £43m. We reported to shareholders in October 2016 the extension of the Loan Facility with Hillside International Holdings Limited to 30 June 2017. Settlement of this loan will form part of our considerations in securing shareholder value for the Project. Outlook In respect of the Project, we await confirmation and the publication of the decision from the Greek Supreme Court. Once confirmation is received, the Group will be in a good position to negotiate maximum value from partners and developers and, jointly, plan the next steps. 3 Minoan Group Plc Chairman’s Statement (continued) Outlook (continued) In respect of T&L, I have noted above that the levels of organic growth remain healthy. However, in order to achieve major stepped growth in this division through acquisition, the Board will continue to work with advisors in considering the possibility of a separation of T&L from the rest of the Group as well as other solutions. Conclusion It is difficult to fully express my own and the Board’s gratitude for the patience of our shareholders, and the whole team’s efforts in bringing the Project to this stage. The delays suffered in Greece have also adversely affected the growth of T&L where, for the past few years we have not been able to acquire a number of businesses, for fear of creating unnecessary dilution in the value per share expected from the Project. On the presumption that the dismissal of the Appeals is confirmed in the not too distant future I believe that 2017 will bring much better news for shareholders. The next year is destined to be the most value enhancing in the Group’s history and I look forward to making further announcements in the future. Christopher W Egleton Chairman 31 March 2017 4 Minoan Group Plc Strategic Report The directors present their Strategic Report and the audited consolidated financial statements for the year ended 31 October 2016. Review of business A review of the Group’s business is given in the Chairman’s Statement on page 2. The key performance indicators used in the travel businesses are total transaction value and gross profit. Total transaction value has increased to £67,820,000 from £60,964,000 and gross profit has increased to £7,044,000 from £6,493,000. This reflects volume growth and the Group’s strategy of changing its business mix to concentrate on more profitable products. The directors are of the opinion that analysis using key performance indicators for the Project is not necessary for an understanding of the development, performance or position of that operation. Principal risks and uncertainties The Group’s key risks currently remain centred round the Project. The Group has an ongoing requirement to raise capital to finance its working capital. As has been the case for the past several years, the Group is in continual discussions with a variety of individuals and commercial parties regarding the provision of funding to enable the Group’s current and future obligations and requirements to be met. These discussions are at varying stages of development and the Board is confident that all necessary funding will be forthcoming within a timescale which will enable the Group to move forward to provide a return to shareholders in due course (see also note 1). As the Project now moves towards its implementation stage, the normal risks associated with a development of its size and nature will apply. These include, inter alia, detailed planning consents, availability of project finance, construction costs and market demand. The risks relating to the travel businesses are primarily its reliance on supply from tour operators and airlines, and changes in general economic and other business conditions which may adversely affect demand for tourism products. There are no material risks related to currency. Going concern The Board is confident that the value of the Group’s asset in Crete, combined with its capital raising ability and the future prospects for development in other areas of activity, justifies the conclusion that it is appropriate to prepare the financial statements on the going concern basis (as described in more detail in note 1). The directors envisage that any joint venture or partnership arrangements will preserve the nature of the Group’s long term commitment to the Project. 5 Minoan Group Plc Strategic Report (continued) Corporate social responsibility The Group has demonstrated its social responsibilities through its iterative approach to the evolution of the Project, which has involved a transparent process and extensive consultation with stakeholders. The Project design embraces the principles of the five capitals of sustainable development (i.e. natural, human, social, manufactured and financial) to ensure that all related matters have been taken into account. Thus the more usual concerns related to the protection of the environment, flora, fauna, hydrogeology and the ecology generally have drawn in considerations of wider issues including social, cultural, human and economic matters as well as those related to the extensive use of renewable energy and many other items contributing to a healthy carbon footprint. The Project is strictly focused on the long term restoration and preservation of the environment as a whole and puts in place a sustainable management plan, involving local representatives and experts, to ensure a robust, pro-active management system is implemented aimed at protecting the area for future generations. In conducting its travel business the Group ensures that it is compliant with all appropriate regulations, including those applicable to the protection of clients’ funds. In addition, the Group ensures, as far as possible, that only reputable providers of holiday products are dealt with. Approved by the Board of Directors and signed by order of the Board. C W Egleton Director 31 March 2017 6 Minoan Group Plc Directors’ Report The directors present their annual report for the year ended 31 October 2016. Principal activities 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 acts as agent in providing a broad range of services including, inter alia, transportation, hotel and other accommodation and leisure services. Results and dividends The financial statements are prepared in accordance with EU adopted International Financial Reporting Standards (“IFRS”) and the Companies Act 2006. The Group made a loss for the year, after taxation, of £2,272,000 (31 October 2015: £1,620,000). The loss also includes a credit in respect of share-based payments of £24,000 (2015: charge of £57,000) and non-cash finance cost in respect of warrants issued in association with the Hillside loan in the amount of £930,000 (31 October 2015: £628,000) (see note 17). These charges do not involve any cash payment. No dividend is proposed for the year (31 October 2015: Nil). The Group’s financial instruments and risk management are discussed in note 15. Statement of directors’ responsibilities The directors are responsible for preparing and reporting the financial statements in accordance with applicable laws and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Parent Company financial statements in accordance with IFRS as adopted by the EU. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial period and of the profit or loss of the Group for that period. In preparing the financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state the financial statements comply with IFRS as adopted by the EU; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors confirm that they have complied with the above requirements in preparing the financial statements. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 7 Minoan Group Plc Directors’ Report (continued) Statement of directors’ responsibilities (continued) The directors are responsible for the maintenance and integrity of the Group website, www.minoangroup.com. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each director as at the date of this report has confirmed that, to the best of his knowledge, the Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and include in the Chairman’s Statement, the Strategic Report and Directors’ Report a fair review of the development, performance and position or the Group, together with a description of the principal risks and uncertainties it faces. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that year. The directors in office throughout the period and at the end thereof, as referred to on page 1, remain in office as at the date of signing of the Directors’ Report. Insurance The Company had in place during the year, and remaining in place at the date of this report, Directors and Officers Liability Insurance covering the directors of all group companies. Events after the balance sheet date The directors draw attention to the events disclosed in note 20. Auditor and disclosure of information to the auditor Each director, as at the date of this report, has confirmed that insofar as they are aware there is no relevant audit information (that is, information needed by the Group’s auditor in connection with preparing their report) of which the Group’s auditor is unaware, and that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. A resolution to appoint Moore Stephens LLP as the auditor for the ensuing year will be proposed at the Annual General Meeting. Approved by the Board of Directors and signed by order of the Board. C W Egleton Director 31 March 2017 8 Minoan Group Plc Independent Auditor’s Report to the members of Minoan Group Plc We have audited the financial statements of Minoan Group Plc for the year ended 31 October 2016 which comprise the consolidated statement of comprehensive income, the consolidated and company statements of changes in equity, the consolidated and company balance sheets, the consolidated and company cash flow statements and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and the auditor As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Report and Financial Statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 October 2016 and of the Group’s loss for the year then ended. 9 Minoan Group Plc Independent Auditor’s Report to the members of Minoan Group Plc (continued) Opinion on financial statements (continued) the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Emphasis of matter - going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in the Chairman’s Statement, the Strategic Report and in note 1 to the financial statements concerning the uncertainty regarding the Group’s ability to secure project finance in order to bring its project in Crete to fruition and to continue as a going concern. This is, in turn, dependent on the Group’s ability to continue to raise capital in order to meet its finance and working capital requirements to move forward, whether with the Project or with the travel and leisure business. The financial statements do not include any adjustments that would result if the Group was unsuccessful in this regard. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following where under the Companies Act 2006 we are required to report to you if, in our opinion: adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Neil Tustian (Senior Statutory Auditor) for and on behalf of MOORE STEPHENS LLP Chartered Accountants and Statutory Auditor LONDON 31 March 2017 10 Minoan Group Plc Consolidated Statement of Comprehensive Income Year ended 31 October 2016 Total transaction value Revenue Cost of sales Gross profit Notes to the Financial Statements 2016 2015 £’000 £’000 67,820 60,964 7,317 (273) 7,044 6,816 (323) 6,493 Operating expenses (7,261) (6,523) Other operating expenses: Corporate development costs Credit/(charge) in respect of share-based payments 17 Operating loss Finance costs Loss before taxation Taxation Loss after taxation 17 3 5 (595) 24 (788) (1,484) (2,272) - (2,272) (511) (57) (598) (1,022) (1,620) - (1,620) Loss for year attributable to equity holders of the Company (2,272) (1,620) Loss per share attributable to equity holders of the Company: Basic and diluted 6 (1.19)p (0.89)p The notes on pages 20 to 47 form part of these financial statements. 11 Minoan Group Plc Consolidated Statement of Changes in Equity Year ended 31 October 2016 Year ended 31 October 2016 Share capital £’000 Share premium £’000 Merger reserve Warrant Reserve £’000 £’000 Retained earnings Total equity £’000 £’000 Balance at 1 November 2015 14,975 31,435 9,349 1,904 (13,831) 43,832 Loss for the year - - Issue of ordinary shares at a premium Share based payments Extension of warrant expiry date (see note 17) 144 - 1,150 - - - - - - - - (2,272) (2,272) - - (24) - 1,294 (24) 215 - 215 Balance at 31 October 2016 15,119 32,585 9,349 2,119 (16,127) 43,045 Year ended 31 October 2015 Share capital £’000 Share premium £’000 Merger reserve Warrant Reserve £’000 £’000 Retained earnings Total equity £’000 £’000 Balance at 1 November 2014 14,843 30,261 9,349 313 (12,268) 42,498 Loss for the year - - Issue of ordinary shares at a premium 132 1,174 Share based payments - - - - - - (1,620) (1,620) - - 1,306 1,591 57 1,648 Balance at 31 October 2015 14,975 31,435 9,349 1,904 (13,831) 43,832 12 Minoan Group Plc Company Statement of Changes in Equity Year ended 31 October 2016 Share premium £’000 Warrant Reserve £’000 Retained earnings Total equity £’000 £’000 31,435 - 1,904 3,746 52,060 (1,519) (1,519) 144 1,150 - (24) 1,294 (24) - - - - 215 - 215 Balance at 31 October 2016 15,119 32,585 2,119 2,203 52,026 Year ended 31 October 2016 Balance at 1 November 2015 Loss for the year Issue of ordinary shares at a premium Share-based payments Extension of warrant expiry date (see note 17) Year ended 31 October 2015 Balance at 1 November 2014 Profit for the year Issue of ordinary shares at a premium Share-based payments Share capital £’000 14,975 - Share capital £’000 14,843 - 132 Share premium £’000 Warrant Reserve £’000 Retained earnings Total equity £’000 £’000 30,261 - 313 2,364 - 1,325 - 1,174 - - - 1,591 57 47,781 1,325 1,306 1,648 Balance at 31 October 2015 14,975 31,435 1,904 3,746 52,060 13 Minoan Group Plc Consolidated Balance Sheet as at 31 October 2016 Notes to the Financial Statements 2016 £’000 2015 £’000 Assets Non-current assets Intangible assets Property, plant and equipment Total non-current assets Current assets Inventories Receivables Cash and cash equivalents Total current assets Total assets Equity Share capital Share premium account Merger reserve account Warrant reserve Retained earnings Total equity Liabilities Current liabilities Total liabilities 7 8 10 11 14 12 9,771 728 10,499 42,562 2,610 104 45,276 9,835 711 10,546 41,266 2,171 145 43,582 55,775 54,128 15,119 32,585 9,349 2,119 (16,127) 43,045 14,975 31,435 9,349 1,904 (13,831) 43,832 12,730 12,730 10,296 10,296 Total equity and liabilities 55,775 54,128 The financial statements on pages 11 to 47 were approved and authorised for issue by the Board of Directors on 31 March 2017. Signed on behalf of the Board of Directors C W Egleton Director 14 Minoan Group Plc Company Balance Sheet as at 31 October 2016 Assets Non-current assets Investments Total non-current assets Current assets Receivables Cash and cash equivalents Total current assets Total assets Equity Share capital Share premium account Warrant reserve Retained earnings Total equity Liabilities Current liabilities Total liabilities Note to the Financial Statements 2016 £’000 2015 £’000 9 11 14 12 28,286 28,286 29,836 60 29,896 28,286 28,286 28,756 1 28,757 58,182 57,043 15,119 32,585 2,119 2,203 52,026 6,156 6,156 14,975 31,435 1,904 3,746 52,060 4,983 4,983 Total equity and liabilities 58,182 57,043 Company registration number: 3770602 The financial statements on pages 11 to 47 were approved and authorised for issue by the Board of Directors on 31 March 2017. Signed on behalf of the Board of Directors C W Egleton Director 15 Minoan Group Plc Consolidated Cash Flow Statement Year ended 31 October 2016 Note to the Consolidated Cash Flow Statement 2016 £’000 2015 £’000 Cash flows from operating activities Net cash inflow/(outflow) from continuing operations 1 Finance costs Net cash generated from/(used) in operating activities Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets: Goodwill - deferred consideration IT project Net cash used in investing activities Cash flows from financing activities Net proceeds from the issue of ordinary shares Loans received 458 (255) 203 (103) (130) (140) (373) - 129 (348) (394) (742) (116) - (629) (745) 70 1,435 Net cash generated from financing activities 129 1,505 Net (decrease)/increase in cash Cash at beginning of year Cash at end of year (41) 145 104 18 127 145 16 Minoan Group Plc Note to the Consolidated Cash Flow Statement Year ended 31 October 2016 1 Cash flows from operating activities Loss before taxation Finance costs Depreciation Amortisation Exchange (gain)/loss relevant to property, plant and equipment Increase in inventories Share-based payments Increase in receivables Increase/(decrease) in current liabilities Non cash movement in equity Net cash inflow/(outflow) from continuing operations 2016 £’000 2015 £’000 (2,272) 1,484 122 334 (36) (1,296) (24) (439) 1,291 1,294 458 (1,620) 1,022 103 208 19 (1,224) 57 (579) 430 1,236 (348) 17 Note to the Company Cash Flow Statement 1 Minoan Group Plc Company Cash Flow Statement Year ended 31 October 2016 Cash flows from operating activities Net cash inflow/(outflow) from continuing operations Finance costs Net cash used in operating activities Cash flows from investing activities Acquisition of shares in subsidiary company Net cash used in investing activities Cash flows from financing activities Net proceeds from the issue of ordinary shares Loans received Net cash generated from financing activities Net increase in cash Cash at beginning of year Cash at end of year 2016 £’000 2015 £’000 40 (110) (70) - - - 129 129 59 1 60 (1,166) (339) (1,505) - - 70 1,435 1,505 - 1 1 18 Minoan Group Plc Note to the Company Cash Flow Statement Year ended 31 October 2016 1 Cash flows from operating activities (Loss)/profit before taxation Finance costs Share-based payments charge Increase in receivables Increase/(decrease) in current liabilities Non cash movement in investments Non cash movement in equity Net cash inflow/(outflow) from continuing operations 2016 £’000 2015 £’000 (1,519) 1,339 (24) (1,080) 30 - 1,294 40 1,325 339 685 (1,993) (1,838) (920) 1,236 (1,166) 19 Minoan Group Plc Notes to the Financial Statements Year ended 31 October 2016 1 Accounting policies These consolidated financial statements are prepared in accordance with EU adopted International Financial Reporting Standards (“IFRS”) and the Companies Act 2006 applicable to companies reporting under IFRS. The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Basis of accounting The financial statements are prepared under the historical cost convention except for where financial instruments are stated at fair value. No statement of comprehensive income is presented by the Company as permitted by Section 408 of the Companies Act 2006. The Company’s loss before taxation for the year ended 31 October 2016 was £1,519,000 (31 October 2015: Profit £1,325,000). The profit before taxation in the year ended 31 October 2015 includes a gain on the write off of intercompany balances of £2,543,000. 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 had not been endorsed by the EU at 31 October 2016: Standard/Interpretation IFRS 9 IFRS 16 Title Financial instruments Leases Effective date 1 January 2018 1 January 2019 The following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective. Standard/Interpretation IFRS 15 Title Effective date Revenue from contracts with customers 1 January 2018 The directors anticipate that the adoption of these standards in future periods will have no material impact on the profit of the financial statements of the Group. IFRS 16: Leases will have the impact of increasing both creditors and fixed assets on the balance sheet by similar amounts that will depend on the operating leases that the Group is party to during the year ended 31 October 2019. It is not practicable to estimate the number or nature of leases that the Group may be party to in 2019/20 at this stage. 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. 20 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 1 Accounting policies (continued) Going concern (continued) 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. Reports in the Greek media have stated that the appeals lodged against the Presidential Decree have been rejected by the Greek Supreme Court. Accordingly, the directors consider it relevant that having completed financial joint venture agreements (see note 12) prior to the above, and any other consents, 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. With a number of acquisitions in the planned expansion of its Travel and Leisure business having been completed over a period of time, the Group continues to generate profits and cash flow within this sector of its activities. 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 2016 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 21 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 1 Accounting policies (continued) Critical accounting estimates and judgements (continued) 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 (see note 7). 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: Leasehold improvements: Plant and equipment: Fixtures and fittings: Motor vehicles: capital cost not depreciated over the term of the lease 3 to 5 years 3 years 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. 22 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 1 Accounting policies (continued) 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) f) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. 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. The financial statements of Loyalward Hellas S.A., the Company’s Greek subsidiary, are retranslated using the closing rate method and foreign exchange gains and losses on translation are taken directly to equity through other comprehensive income. The exchange differences are held in a separate reserve and will be recycled to the statement of comprehensive income should the Group dispose of the subsidiary. 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. 23 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 1 Accounting policies (continued) Trade and other receivables Trade and other receivables are recognised initially at fair value and shown less any provision for amounts considered irrecoverable. Trade and other payables Trade and other payables are recognised initially at fair value. 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 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. 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 of 1p each. The fair values of the LTIP awards, options and warrants are calculated using the Black-Scholes and Monte Carlo fair value 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. 24 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 1 Accounting policies (continued) 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. 25 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 2 Information regarding directors and employees Directors’ and key management remuneration Year ended 31 October 2016 Fees Sums charged by third parties for directors’ services Share-based payments (note 17) Year ended 31 October 2015 Fees Sums charged by third parties for directors’ services Share-based payments (note 17) Costs taken to inventories Costs taken to profit or loss £’000 £’000 236 342 - 578 229 294 - 523 431 70 (24) 477 423 45 57 525 Total £’000 667 412 (24) 1,055 652 339 57 1,048 The total directors’ and key management remuneration shown above includes the following amounts in respect of the directors of the Company, adjusted for remuneration waived in exchange for the granting of options as referred to above: 2016 2015 C W Egleton (Chairman) D C Wilson B D Bartman G D Cook T R C Hill Fees/Sums charged by third parties Share-based payments £’000 296 250 35 35 37 653 £’000 (12) (9) (1) - (1) (23) Directors’ interests in the Company’s LTIP and share options are shown in note 17. Fees/Sums charged by third parties Share-based payments £’000 £’000 264 250 25 25 31 595 29 20 3 - 3 55 26 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 2 Information regarding directors and employees (continued) Staff costs during the period (including directors and key management) Year ended 31 October 2016 Salaries and fees Social security cost Share-based payments (note 17) Year ended 31 October 2015 Salaries and fees Social security cost Share-based payments (note 17) Costs taken to inventories £’000 Costs taken to profit or loss £’000 363 34 - 397 349 37 - 386 4,063 352 (24) 4,391 3,784 324 57 4,165 Total £’000 4,426 386 (24) 4,788 4,133 361 57 4,551 Note: Staff costs exclude sums charged by third parties for directors’ services. Monthly average number of persons employed Directors Sales and administration 3 Loss before taxation The loss before taxation is stated after charging: Depreciation Amortisation Operating leases Auditor’s remuneration: Audit fees Tax services 2016 No. 5 203 2015 No. 5 191 2016 £’000 2015 £’000 110 334 83 54 4 103 208 59 73 5 Audit fees in respect of the Company were £17,000 (31 October 2015: £21,250). Tax services fees in respect of the Company were £500 (31 October 2015: £750). 27 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 4 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; the Travel and Leisure division (UK), being the operation and management of the travel businesses; and the corporate development division (UK) as described above. 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. Total transaction value Revenue Cost of sales Gross profit Operating expenses Credit in respect of share-based payments Operating (loss)/profit Contribution to central costs Finance costs (Loss)/profit before taxation Taxation (Loss)/profit after taxation Operating expenses include: Depreciation and amortisation Operating leases - plant and equipment Assets/liabilities Goodwill Other non-current assets Current assets Total assets 2016 Luxury Resorts £’000 - Travel and Leisure £’000 67,820 Corporate Development £’000 - Total £’000 67,820 - - - 7,317 (273) 7,044 - - - 7,317 (273) 7,044 (489) (489) 24 (465) 100 (1,341) (1,706) - (1,706) (595) (595) - (595) (6,772) 272 - 272 (100) (143) 29 - - 29 (595) - - (595) (7,856) (812) 24 (788) - (1,484) (2,272) - (2,272) 13 - 443 83 - - 456 83 6,127 157 43,491 49,775 2,641 1,574 1,785 6,000 - - - - 8,768 1,731 45,276 55,775 Total and current liabilities 10,561 2,169 - 12,730 28 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2015 4 Segmental information (continued) Total transaction value Revenue Cost of sales Gross profit Operating expenses Charge in respect of share-based payments Operating (loss)/profit Contribution to central costs Finance costs (Loss)/profit before taxation Taxation (Loss)/profit after taxation Operating expenses include: Depreciation and amortisation Operating leases - plant and equipment Assets/liabilities Goodwill Other non-current assets Current assets Total assets 2015 Luxury Resorts £’000 - Travel and Leisure £’000 60,964 Corporate Development £’000 - Total £’000 60,964 - - - 6,816 (323) 6,493 - - - 6,816 (323) 6,493 (417) (417) (57) (474) 100 (968) (1,342) - (1,342) (511) (511) - (6,106) 387 - 387 (100) (54) 233 - - 233 - - (511) (511) (511) (7,034) (541) (57) (598) - (1,022) (1,620) - (1,620) - - 311 59 - - 311 59 6,127 134 42,082 48,343 2,511 1,774 1,500 5,785 - - - - 8,638 1,908 43,582 54,128 Total and current liabilities 7,181 3,115 - 10,296 29 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 5 Taxation Consolidated (a) Analysis of taxation for the year UK corporation tax (b) Factors affecting taxation for the year Loss before taxation 2016 £’000 - 2016 £’000 (2,272) 2015 £’000 - 2015 £’000 (1,620) Tax on ordinary activities multiplied by the UK corporation tax rate of 20% (2015: 20.41%) (454) (331) Effects of: Expenses not deductible for tax purposes Other timing differences Increase in tax losses Taxation (credit)/charge for the year Taxation losses carried forward appear in note 13. 6 Loss per share 216 15 223 - 159 (7) 179 - Earnings per share are calculated by dividing the earnings attributable to the equity holders of a company by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share are calculated by adjusting basic earnings per share to assume the conversion of all potential dilutive ordinary shares. As the Group is loss making, there are no dilutive instruments in issue, and therefore the basic loss per share and diluted loss per share are the same. The weighted average number of shares used in calculating basic and diluted loss per share for the year ended 31 October 2016 was 190,972,389 (31 October 2015: 182,214,717). See note 20 for potentially dilutive share options issued after the balance sheet date. 30 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 7 Intangible assets Consolidated 2016 2015 Goodwill IT Projects Total Goodwill IT Projects £’000 £’000 £’000 £’000 £’000 Cost At beginning of year Additions At end of year 8,638 130 8,768 1,580 10,218 140 270 1,720 10,488 8,578 60 8,638 1,011 569 1,580 Total £’000 9,589 629 10,218 Accumulated amortisation At beginning of year - 383 - - 334 717 383 334 717 - 175 - 208 - 383 175 208 383 8,638 8,768 1,197 9,835 1,003 9,771 8,578 8,638 836 1,197 9,414 9,835 The Group conducts an annual impairment test on the carrying value of goodwill based on the recoverable amount of two cash generating units: the Project and the Travel and Leisure business. The Project is assessed using fair value less costs to sell. The directors have assessed the recoverable amount of the Project as being greater than the combined carrying value of the goodwill and inventories of £48,689,000 at 31 October 2016 on the basis of valuations previously carried out and the positive progress made in the period since (see also note 10). The goodwill allocated to the Travel and Leisure business is £2,641,000. The recoverable amount of the Travel and Leisure business has been assessed using a value in use model. The net present value of projected cash flows is compared with the carrying value of the CGU’s assets and goodwill. Cash flow forecasts are based upon management approved budgets for a period of one year and a revenue growth rate of 5% for a further four years, this being consistent with recent historical performance. Thereafter growth rates are reduced to zero. Cash flows are discounted using a pre-tax discount rate of 11%. The addition to goodwill in the amount of £130,000 arose from a deferred consideration that is not material but that should have been recognised in the previous year. 31 Provided in year At end of year Net book value At beginning of year At end of year Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 8 Property, plant and equipment Year ended 31 October 2016 Consolidated Freehold land Furniture, fittings, plant and equipment Leasehold improvements £’000 £’000 £’000 Cost At 1 November 2015 Exchange adjustments Additions At 31 October 2016 Accumulated depreciation At 1 November 2015 Provided in year At 31 October 2016 Net book value 166 26 - 192 44 4 48 1,140 10 62 1,212 776 91 867 265 - 41 306 40 27 67 Total £’000 1,571 36 103 1,710 860 122 982 At 31 October 2016 144 345 239 728 32 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 8 Property, plant and equipment (continued) Year ended 31 October 2015 Consolidated Freehold land Furniture, fittings, plant and equipment Leasehold improvements £’000 £’000 £’000 Total £’000 Cost At 1 November 2014 Exchange adjustments Additions At 31 October 2015 Accumulated depreciation At 1 November 2014 Provided in year At 31 October 2015 Net book value 180 (14) - 166 47 (3) 44 1,067 227 1,474 (5) 78 1,140 695 81 776 - 38 265 15 25 40 (19) 116 1,571 757 103 860 At 31 October 2015 122 364 225 711 33 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 9 Investments Company Year ended 31 October 2016 Cost At 1 November 2015 Additions At 31 October 2016 Impairment At 31 October 2016 Shares in subsidiaries £’000 28,286 - 28,286 - - Net book value at 31 October 2016 28,286 Year ended 31 October 2015 Cost At 1 November 2014 Additions At 31 October 2015 Impairment At 31 October 2015 Shares in subsidiaries £’000 27,366 920 28,286 - - Net book value at 31 October 2015 28,286 Interests in subsidiaries (Note: The percentages shown in respect of all investments relate to ordinary share capital) Loyalward Limited (100%) - A company incorporated in England involved in resort design, creation, services and management. Loyalward Leisure Plc (100%) - A non-trading company incorporated in England. Loyalward Hellas S.A. (3.78% owned by Minoan Group Plc and 96.22% owned by Loyalward Limited) - A company incorporated in Greece engaged in corporate, resort and renewable energy business management in Greece. 34 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 9 Investments (continued) Interests in subsidiaries (continued) Stewart Travel Limited - A company incorporated in Scotland operating as a multi-faceted travel distributor. During the year ended 31 October 2015, the interests of King World Travel Limited and John Semple Travel Limited in the share capital of Stewart Travel Limited were acquired by Minoan Group Plc at net book value of £920,000. King World Travel Limited and John Semple Travel Limited did not trade in the year ended 31 October 2016. As a consequence the ownership of Stewart Travel Limited is as follows: Minoan Group Plc King World Travel Limited John Semple Travel Limited 10 Inventories 2016 % 100.0 - - 100.0 2015 % 100.0 - - 100.0 Consolidated Inventories at 31 October 2016 amounted to £42,562,000 (31 October 2015: £41,266,000), comprising costs associated with acquiring and developing the site in Crete, planning and other design costs. The development site of the Project is to be leased from the Public Welfare Ecclesiastical Foundation Panagia Akrotiriani (“the Foundation”) for an initial 40 year period following contract activation which will follow the relevant authorities approving the land planning and land uses for the Project. The Group has an option over a further 40 years. An amount of £3.9 million is payable to the Foundation on contract activation, plus ongoing royalties earned on revenue generated by the development (see also note 18). In particular, the directors have considered the current value of the Group’s overall interest in the Project and its progress and are of the opinion that the Project site has longer term value in excess of the carrying value of inventories. The directors’ opinion of the current value also takes into account the estimate dated 27 June 2011 of the development value of the Project site in the order of €100 million, which was included in the Company’s AIM readmission document published on 30 September 2011 and which was reaffirmed in March 2012. 35 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 11 Receivables Consolidated Trade receivables Other receivables and prepayments Value added tax recoverable 2016 £’000 976 1,562 72 2,610 2015 £’000 805 1,296 70 2,171 Trade receivables are due in 30 days. Of the above £105,000 (31 October 2015: £91,000) was outstanding for more than 30 days. No provision is considered necessary in respect of irrecoverable amounts. Company Amounts owed by subsidiary companies (see note 16) Other receivables and prepayments Value added tax recoverable 2016 £’000 29,425 400 11 29,836 2015 £’000 28,341 400 15 28,756 Amounts owed by subsidiary companies are repayable on demand, but are not expected to be received until the realisation of the project. 12 Liabilities Current liabilities Consolidated Trade and other payables Other creditor (see below) Social security and other taxes Loans (see note 15) Accruals and deferred charges 2016 £’000 1,756 1,000 828 5,086 4,060 12,730 2015 £’000 1,804 1,000 601 4,241 2,650 10,296 The other creditor arises from amounts received under the terms of financial joint venture agreements between the Company and certain third parties by which these third parties will receive an initial 5% economic interest in the Project for a total consideration of £1 million. 36 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 12 Liabilities (continued) Current liabilities Company Trade and other payables Amounts owed to subsidiary companies (see note 16) Loans (see note 15) Accruals and deferred charges 2016 £’000 394 38 5,086 638 6,156 2015 £’000 399 38 4,241 305 4,983 Amounts owed to subsidiary companies are interest free and repayable on demand. £5,000,000 has been drawn down under the terms of the loan facility agreement with Hillside International Holdings Limited (“Hillside”) (31 October 2015: £5,000,000). During the year, the repayment date was extended to 30 June 2017. The loan is subject to interest at 8% per annum. Hillside has also received Warrants to subscribe for ordinary shares in Minoan Group Plc as the facility has been drawn down as stated in note 17. The total finance cost of the loan is comprised of the cash interest at 8% per annum and the fair value of the Warrants issued in association with loan and has been recognised as a finance cost spread over the life of the loan using the effective interest method. Under the terms of the loan facility agreement Hillside has a fixed and floating charge on the Company’s assets and a floating charge on the assets of Stewart Travel Limited, John Semple Travel Limited and King World Travel Limited. 37 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 13 Deferred taxation Consolidated No deferred taxation asset has been recognised in the financial statements. The total potential asset is as follows: Tax effect of timing differences because of: Accelerated capital allowances Other short term timing differences Losses Total potential asset Amount recognised 2016 £’000 2015 £’000 2016 £’000 2015 £’000 (75) 330 2,055 2,310 (66) 474 2,144 2,552 - - - - - - - - The above potential deferred tax asset is based on a corporation tax rate of 17% (2015: 19%). Company No deferred taxation asset has been recognised in the financial statements. The total potential asset is as follows: Tax effect of timing differences because of: Other short term timing differences Losses Total potential asset Amount recognised 2016 £’000 200 1,615 1,815 2015 £’000 2016 £’000 2015 £’000 262 410 672 - - - - - - The above potential deferred tax asset is based on a corporation tax rate of 17% (2015: 19%). Following due consideration of the availability of tax losses in relation to future anticipated taxable profits, and in accordance with IAS 12, the deferred tax asset has not been recognised. The deferred tax asset not recognised will be recoverable should there be appropriate future taxable profits. 38 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 14 Share capital Called up, allotted and fully paid 31 October 2016 - 194,650,968 Ordinary Shares of 1p each 54,148,031 Deferred Shares of 24p each 31 October 2015 - 187,671,524 Ordinary Shares of 1p each 54,148,031 Deferred Shares of 24p each Debt to be settled by the issue of shares (see note 15) 17,703,198 Ordinary Shares of 1p each (2015: 10,271,239 Ordinary Shares of 1p each) 2016 £’000 1,946 12,996 - - 14,942 177 15,119 2015 £’000 - - 1,876 12,996 14,872 103 14,975 Holders of Ordinary Shares have the right to vote and the right to receive dividends. Holders of Deferred Shares have no right to vote and no right to receive dividends. During the year, 3,000,000 Ordinary Shares of 1p each were issued at 8 pence per share, 1,444,444 Ordinary Shares of 1p each were issued at 9 pence per share and 1,375,000 Ordinary Shares of 1p each were issued at 10 pence per share under the terms of loan agreements. In addition, 1,160,000 Ordinary Shares of 1p each were issued at 9 pence per share to settle certain existing liabilities. 15 Financial instruments and risk management The Group’s financial instruments comprise borrowings, cash and various items such as trade receivables and trade payables that arise directly from its operations. It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. 39 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 15 Financial instruments and risk management (continued) Liquidity risk The Group maintains sufficient funds in local currency for operational liquidity. The Board considers liquidity risk at Board meetings through the monitoring of cash levels and detailed cash forecasts. Funding to date has been obtained principally through the issue of equity shares as required, either for cash or in settlement of liabilities. The Group has also issued loan agreements which may be settled by the issue of shares. See note 1 for further information relating to current liquidity and funding risk. All financial liabilities are non-derivative and fall due within one year (see note 12). In order to complete the development of the Project, the Group will require substantial additional financing. It is the directors’ current intention to develop the Project in such a way as to minimise or eliminate the need for further equity financing. It is intended that this will be achieved through utilising joint venture arrangements and debt project finance. Foreign currency risk The Group has one overseas trading subsidiary, Loyalward Hellas S.A., which operates in Greece and whose revenues and expenses are denominated almost exclusively in Euros. The Group finances Loyalward Hellas S.A. via Euro transfers from Loyalward Limited as required. The amount transferred ensures that the Euro balance held by Loyalward Hellas S.A. at each period end is not material. All UK companies hold cash in UK pounds Sterling only. The Sterling and Euro cash balances attract interest at floating rates. Of the Groups assets, less than 1% is held in Euros, the remainder being held in Sterling. Of the Group’s liabilities, 11% is held in Euros, with the remainder held in Sterling. Short-term receivables and payables Short-term receivables and payables have been excluded from the following disclosures. Interest rate risk The Group finances its operations through a mixture of equity and borrowings. The Group has historically borrowed in Sterling only. The Group’s liabilities, which are all denominated in sterling, are as follows: 2016 2015 £’000 £’000 Loans to be settled by the issue of shares Loans repayable in less than one year 2,400 5,086 1,630 4,241 The loans to be settled by the issue of shares, of which £325,000 are to be settled by the issue of shares at 9 pence per share, £75,000 are to be settled by the issue of shares at 10 pence per share, £200,000 are to be settled by the issue of shares at 11.6 pence per share, £150,000 are to be settled by the issue of shares at 12 pence per share, £300,000 are to be settled by the issue of shares at 13.75 pence per share, £150,000 are to be settled by the issue of shares at 14 pence per share, £500,000 are to be settled by the issue of shares at 15.5 pence per share and £700,000 are to be settled by the issue of shares at 18 pence per share, have been classified as equity in accordance with IAS 32 (note 14). During the year a total of £180,000 of loans was settled by the issue of shares at prices between 9 pence per share and 10 pence per share (31 October 2015: £585,000 at 8.5 pence per share) (note 14). 40 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 15 Financial instruments and risk management (continued) The Group has no derivatives or financial instruments other than those disclosed above. There is no material difference between the book value and the fair value of the Group’s financial assets and liabilities at 31 October 2016 and at 31 October 2015. 16 Related party transactions The following are related parties and provided services to the Group: Simmons International Limited, a company in which C W Egleton is a minority shareholder. Bizwatch Limited, a company in which J C Watts, a director of Loyalward Limited, owns 50% of the issued share capital and M A Fitch, a director of Loyalward Hellas S.A. owns 50% of the issued share capital. I.H.M. Industry & Hotel Management Limited, a company in which C Valassakis, a director of Loyalward Limited, is a controlling shareholder. B D Bartman & Co, a firm in which B D Bartman is a partner. Keith Day & Partners Ltd, a company in which N J Day, a director of Loyalward Limited, is a director and shareholder. Transactions undertaken with these related parties in relation to directors’ services are shown below. Services of the above persons supplied in year ended Payable as at 31.10.16 £’000 31.10.15 £’000 31.10.16 £’000 31.10.15 £’000 296 16 30 35 35 264 17 14 25 20 296 87 127 125 55 186 81 101 87 20 Simmons International Limited Bizwatch Limited I.H.M. Industry & Hotel Management Limited B D Bartman & Co Keith Day & Partners Ltd During the year Morgan Rossiter Limited, a company of which G D Cook is a director, supplied public relations services to the Company in the amount of £36,000 (31 October 2015: £36,000). The amount payable to Morgan Rossiter Limited as at 31 October 2016 is £7,200 (31 October 2015: £14,400). There have been no purchases or sales with companies within the Group. The Company’s balances outstanding with other Group companies arising from financing transactions are shown below. Receivable/(Payable) as at 31.10.16 £’000 Receivable/(Payable) as at 31.10.15 £’000 Loyalward Limited Stewart Travel Limited Loyalward Leisure Plc 28,178 1,247 (38) 27,304 1,037 (38) 41 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 17 Long term incentive plan, share options and warrants Share-based payments charge Year ended 31 October 2016 Share-based payments - directors Year ended 31 October 2015 Share-based payments - directors £’000 (24) (24) 57 57 Note: Under the terms of the Long Term Incentive Plan (“LTIP”) 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 performance conditions are as follows: Performance condition A Fulfilled during year ended 31 October 2012 Performance condition B Performance condition C The Group achieves a certain level of consolidated profit at EBITDA level (ignoring any charge in respect of share-based payments) for a six month accounting period. The price of an ordinary share of Minoan Group Plc remains at an average price of 50 pence or above for ten consecutive trading days on AIM or a recognised stock exchange 42 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 17 Long term incentive plan, share options and warrants (continued) Share-based payments charge (continued) The following awards have been granted with an expiry date of 26 April 2017: Performance condition A Performance condition B Performance condition C Maximum number of Ordinary Shares exercisable at 9 pence Maximum number of Ordinary Shares exercisable at 9pence Maximum number of Ordinary Shares exercisable at 9pence 1,400,000 1,000,000 130,000 150,000 120,000 2,800,000 1,400,000 1,000,000 130,000 150,000 120,000 2,800,000 1,400,000 1,000,000 130,000 150,000 120,000 2,800,000 C W Egleton D C Wilson B D Bartman T R C Hill W C Cole (director Loyalward Limited) The charge made for the value of the LTIP and options has been calculated using the Black-Scholes and Monte Carlo pricing models as appropriate. As stated previously, the charge does not involve any cash payment. 43 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 17 Long term incentive plan, share options and warrants (continued) Share-based payments charge (continued) Directors’ interests in share options 31 October 2016 31 October 2015 Exercise price Ordinary Shares Expiry date Exercise price Ordinary Shares Expiry date Options B D Bartman B D Bartman (see note 2 below) B D Bartman (see note 2 below) W C Cole (director Loyalward Limited) W C Cole (director Loyalward Limited) W C Cole (director Loyalward Limited) (see note 2 below) W C Cole (director Loyalward Limited) (see note 2 below) G D Cook G D Cook (see note 2 below) G D Cook (see note 2 below) Simmons International Limited Simmons International Limited Carried forward 7p 1p 1p 7p 7p 1p 1p 7p 1p 1p 7p 7p 200,000 31/12/17 1,000,000 31/12/17 850,000 31/12/17 500,000 31/12/17 100,000 31/12/17 7p 1p 1p 7p 7p 200,000 31/12/16 1,000,000 31/12/16 850,000 31/12/16 500,000 31/12/16 100,000 31/12/16 1,000,000 31/12/17 1p 1,000,000 31/12/16 1,711,111 31/12/17 250,000 31/12/17 384,615 31/12/17 377,778 31/12/17 500,000 31/12/17 400,000 31/12/17 1p 7p 1p 1p 7p 7p 1,711,111 31/12/16 250,000 31/12/16 384,615 31/12/16 377,778 31/12/16 500,000 31/12/16 400,000 31/12/16 7,273,504 7,273,504 44 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 17 Long term incentive plan, share options and warrants (continued) Directors’ interests in share options (continued) 31 October 2016 31 October 2015 Exercise price Ordinary Shares Expiry date Exercise price Ordinary Shares Expiry date Options Brought forward T R C Hill T R C Hill (see note 2 below) D C Wilson (see note 2 below) D C Wilson (see note 2 below) D C Wilson (see note 2 below) B Cassidy (director of John Semple Travel Limited) (see note 2 below) Other share options 7p 1p 1p 1p 1p 1p 7,273,504 300,000 31/12/17 1,233,333 31/12/17 1,000,000 31/12/17 2,500,000 31/12/17 850,000 31/12/17 7p 1p 1p 1p 1p 7,273,504 300,000 31/12/16 1,233,333 31/12/16 1,000,000 31/12/16 2,500,000 31/12/16 850,000 31/12/16 122,222 31/12/17 1p 122,222 31/12/16 13,279,059 13,279,059 The following additional options to purchase ordinary shares in the Company have been granted: Exercisable at 60 pence per share Exercisable at 1 pence per share (see note 2 below) Exercisable at 7 pence per share Exercisable at 8 pence per share Exercisable at 10 pence per share Notes re share options: Ordinary Shares 31.10.16 3,318,000 223,077 325,000 2,500,000 250,000 6,616,077 31.10.15 3,318,000 223,077 325,000 2,500,000 250,000 6,616,077 Expiry date See note 1 31/12/17 31/12/17 31/12/17 31/12/17 1. The expiry date of these options is 90 days after certain valid building licences and permits have been granted. 2. Granted in exchange for the waiver of fees etc. by current directors and a former director (see also note 20) 45 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 17 Long term incentive plan, share options and warrants (continued) Warrants The following warrants to subscribe for ordinary shares in the Company have been issued in accordance with the terms of the loan facility agreement with Hillside International Holdings Limited: During the year the expiry date of the warrants was extended by one year. This modification resulted in an increase of £215,000 in the fair value of the warrants. This has been spread, along with the existing fair value, across the life of the loan on an amortised cost basis. The modification was valued using Black-Scholes method. Exercisable at 8 pence per share Exercisable at 8 pence per share Exercisable at 8 pence per share Exercisable at 13 pence per share Exercisable at 8 pence per share Exercisable at 8 pence per share Exercisable at 8 pence per share Ordinary Shares 31.10.16 10,000,000 5,000,000 10,000,000 10,000,000 5,000,000 5,000,000 5,000,000 50,000,000 31.10.15 10,000,000 5,000,000 10,000,000 10,000,000 5,000,000 5,000,000 5,000,000 50,000,000 Expiry date 17/10/18 27/11/18 05/02/19 07/08/19 30/04/20 28/05/20 23/10/20 As part of the loan facility agreement, £125,000 will be payable to the warrant holder for each 10 million warrants exercised. Finance costs Year ended 31 October 2016 Fair value of warrants issued Loan interest Other interest Year ended 31 October 2015 Fair value of warrants issued Loan interest Other interest £’000 930 411 143 1,484 628 340 54 1,022 18 Contingent liabilities and commitments Other than as stated in notes 10 and 19, the Group has no other capital or operating commitments. 46 Minoan Group Plc Notes to the Financial Statements (continued) Year ended 31 October 2016 19 Operating lease commitments The Group has the following total future minimum lease commitments in respect of non-cancellable operating leases: Year ended 31 October 2016 Leasehold property Equipment Motor vehicles Up to 1 year £’000 354 46 16 416 Leases expiring in 2 to 5 years £’000 1,239 77 25 1,341 Over 5 years £’000 738 - - 738 Year ended 31 October 2015 Leasehold property Equipment Motor vehicles Up to 1 year £’000 307 44 12 363 Leases expiring in 2 to 5 years £’000 969 111 15 1,095 Over 5 years £’000 427 - - 427 20 Events after the balance sheet date Total £’000 2,331 123 41 2,495 Total £’000 1,703 155 27 1,885 1. On 22 December 2016 the Company announced the issue of 2,700,000 Ordinary Shares of 1p each at 8p per share to settle certain existing liabilities. 2. Also on 22 December 2016 the Company announced that the expiry dates of certain Options granted to certain directors and executives be extended from 31 December 2016 to 31 December 2017 (see note 17). 3. On 10 January 2017 the Company announced that, in order to satisfy certain existing commitments, it has granted Options to subscribe for 6,000,000 Ordinary Shares of 1p each at 10p per share. The Options to expire on 9 July 2018. 4. On 11 January 2017 the Company announced that, as part of his employment arrangements, it has granted an Option to subscribe for 1,000,000 Ordinary Shares of 1p each at 8p per share to Brian Cassidy, a Person Discharging Managerial Responsibilities. The Option to expire on 9 January 2020. 5. On 24 March 2017 the Company announced that it has noted reports in the Greek Media stating that the appeals against the Presidential Decree granting land use approval for its Project in Crete have been rejected by the Greek Supreme Court. 47
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