Dolphin Capital Investors Limited – Final Results

Dolphin, an investor in high-end residential resort developments in the eastern Mediterranean, announces results for the year ended 31 December 2018 and a trading update.

Financial Highlights:

• Gross Assets of €244 million (31 December 2017: €395 million).
• Total Group Net Asset Value (“NAV”) of €178 million and €165 million before and after Deferred Tax Liabilities (“DTL”) respectively. This represents a decrease of €45 million and €30 million (20.2% and 15.2%) respectively, against the 2017 year-end figures.
• NAV reduction principally due to:
  – year-end valuation write-downs and impairment charges of €19 million on the DCI asset portfolio; and,
  – depreciation charges and other operational, corporate, finance and management expenses as detailed in section F below.
• Sterling NAV per share as at 31 December 2018 stood at 18p before DTL and 16p after DTL, versus 22p and 19p, a 19.1% and 14.0% decrease before and after DTL respectively, compared to 31 December 2017. The decrease, mainly reflecting the factors mentioned above, was partially offset by a 1.4% appreciation of the Euro versus Sterling during the period.
• Total Debt of €25 million with a Group total debt to gross asset ratio of 10% (2017: 25%). DCI itself does not have any borrowings. The Group debt is at project level on a non-recourse basis.
• Total Group cash as of 22 March 2019 was €9.9 million (31 December 2018: €8.6 million).

Divestments:

• On 18 January 2018, Dolphin entered into an agreement for the disposal of its 77.8% interest in the Sitia Bay Resort project for a total cash consideration of €14 million. The full consideration was received by the Company and the disposal was completed on 3 April 2018.
• On 5 February 2018, Dolphin sold its 100% interest in Triopetra for a total consideration of €4.1 million.
• On 1 August 2018 the Company entered into an agreement with Grivalia Hospitality S.A for the disposal of its 100% interest in Amanzoe and the conditional sale of 20 Kilada Hills Golf plots for a €10 million cash consideration. The disposal of Amanzoe completed on 27 September 2018 and the full €5.8 million cash consideration for Amanzoe was paid to Dolphin, whilst the acquirers also assumed all existing liabilities of Amanzoe which amounted to €117 million as at 30 June 2018. The €10 million cash consideration for the purchase of the 20 Kilada Hills plots will be paid in instalments, commencing when the funding for the development of the first phase of the project is secured.
• On 26 October 2018, DCI disposed of its 25% interest in the Nikki Beach Resort & Spa project for a total cash consideration of €1.65 million which was received on the date of the transaction.
• On 27 December 2018, Dolphin agreed the sale of the remaining five Seafront Villas in Kilada through a wholesale transaction for a total cash consideration of €4.05 million, of which an amount of €3.4 million has been received while the balance will remain in an escrow account as security for potential project related contingent liabilities.

Operations:

• The revised construction permits for the One&Only Kea Island project were issued on 7 July 2018 and the redesign of the resort to meet the One&Only standards has been completed. The bidding process for the appointment of a construction company is underway. Following these developments, and the finalization of the definitive documentation for the project’s senior bank loan which is underway, we expect that all the pending conditions precedent for the finalization of the joint venture with One&Only for the development of the project will be met within Q2 2019.  The commencement of the project development is expected within 2019, so that the resort opens in time for the 2021 season.
• The planning and zoning process of Kilada Hills Golf Resort was completed on 22 August 2018, when the Joint Ministerial Decision granting approval for the Environmental Conditions and Urban Study for the project was published in the Greek Government Gazette, making Kilada the first ever private project in Greece to receive an approval under the Strategic Project Legislation. Discussions with a major local bank for a senior development facility are underway together with the project tendering process so that construction works can commence during the year.
• Aristo sold 115 homes during the twelve months to December 2018, representing total sales revenue of €67.2 million, an increase of 2% compared to the same period in 2017.
• Sales agreements were signed for two residences at La Vanta, Turkey in 2018 and one more followed in early 2019.

Strategy:

The Board’s strategy is to optimise the disposal of the Company’s asset portfolio in order to return capital to shareholders.

The Board has been encouraged by the success of the asset and project disposals achieved since the adoption of the New Asset Strategy in December 2016, which have enabled the Company to significantly reduce its overall leverage levels and meet all its operational expenses. However, the Board considers that the timeline for the full disposal, in an orderly manner, of the remaining assets of the Company by the end of 2019 to be unachievable and will not allow the Board to optimise realized returns and cash distributions to shareholders.

Accordingly, the Board plans to present proposals to shareholders in the near future for an extension to the current timetable of two years, combined with an amendment to the management fee structure which will align such fees to the level of distributions to shareholders.

Commenting, Andrew Coppel, Chairman of Dolphin’s Board of Directors said:

“We made significant progress in disposing a number of portfolio assets during the year. Our attention is now focussed on the commencement of construction at the One&Only at Kea Resort and the first phase of the Kilada Hills Golf Resort within 2019 which, together with the Company’s strategic shareholding in Aristo Developers, we consider critical in our efforts to realize tangible value for our shareholders.”

Miltos Kambourides, Founder of Dolphin and Managing Partner of Dolphin Capital Partners said:

“Whilst market conditions for disposals in our geographic area of operation remain challenging, we are encouraged by the disposals realized in 2018 and the continued improvement in the economic landscape in both Greece and Cyprus. We are working closely with the board to formulate a realistic exit strategy for each remaining asset.”