RNS Number:2763W
Newfound N.V.
09 May 2007
Newfound N.V.
Preliminary results for the year ended 31 December 2006
Dispute with auditors leads to their resignation
On 1 May 2007, the Company announced that it would release preliminary results
for the year ended 31 December 2006 by 9 May 2007. Following a dispute with the
Company's auditors, Baker Tilly, on certain matters detailed below, which
dispute it has not been possible to resolve, Baker Tilly yesterday tendered
their resignation as the Company's auditors. The Company has accepted that
resignation, and pending appointment of replacement auditors, today announces
preliminary unaudited results for the period ended 31 December 2006. The
Company will appoint new auditors as soon as possible and, subsequently, will
release audited results for this period.
On 23 February 2007, Newfound announced that it expected operating profit before
exceptional items for the financial year to 31 December 2006 would be not less
than US$6 million. This statement was made on the basis of advice received
during 2006 from Baker Tilly that, under International Financial Reporting
Standards ("IFRS"), sales of US$ 22.3 million to be made in 2006 of land in the
Pinney's Estate Resort ("the Nevis Sales") would be regarded as revenue for the
Group for the financial year 2006.
Subsequently, Baker Tilly informed Newfound that, in its revised opinion, the
revenue relating to the Nevis Sales did not qualify to be recognised under IFRS
as revenue for the period 2006. As a result reported revenue for the year 2006
is expected to be US$ 27.9 million; operating loss before exceptional items US$
10.0 million; adjusted loss per share US cents 12.0 and total equity US$ 17.6
million. Had Baker Tilly applied the advice originally given to Newfound in
2006 in relation to the Nevis Sales, Newfound's revenue would have been US$ 50.2
million, operating profit before exceptional items US$ 9.8 million, adjusted
earnings per share US cents 4.9 and total equity US$ 37.5 million, ahead of the
Company's expectations.
The figures announced today are therefore reported without the benefit of the
Nevis Sales, which have been deferred. There is no change in the cash flow
expected from the re-classification of the Nevis Sales and the Board believes
that there is no impact on the underlying value of the Group's land assets.
Key highlights
Since admission to AIM in September 2006, key highlights include:
* Letter of intent signed for Starwood hotel concession and luxury
residences at Pinney's Estate Resort
* Excellent start to Newfound sales at Pinney's Estate Resort
* Approximately 40% of inventory sold or reserved at the 168-unit
Ocean's Edge Resort, St Kitts
* Humber Valley consolidating its position as one of Canada's premier
all seasons resort with over 25% growth of guest-nights in 2006
* Identification of and significant advances in upcoming Newfound resort
projects
Brian Dobbin, Chief Executive Officer, commented:
"We are very disappointed at the revision that Baker Tilly made in its views and
the impact this has had upon what would otherwise have been a very positive
announcement. The revenue deferral which has been reported today has no impact
on the cash flow of the Group or, the Board believes, on the underlying value of
the business proposition.
"At the business level, this has been an important year for the Group in which
it has made significant steps in advancing the development model. We are now
well placed to maximise the value of our current developments while making
progress in pursuing a range of new opportunities.
"Important commercial developments continue. We have recently signed a letter
of intent for the granting of a hotel concession at Pinney's Estate Resort with
the W(R) Retreat and Spa brand, part of Starwood's collection of luxury hotels,
as well as for the development of W(R) branded luxury residences, and we look
forward to concluding this arrangement over the coming months. This represents
a major step forward in the establishment of the Pinney's Estate Resort as a
leading international destination. We will continue villa plot sales in late
2007 in this project.
"At Humber Valley we have adopted a new marketing strategy that complements our
move to develop substantially larger lots aimed at the luxury end of the market.
Initial sales have started and I am excited and confident in the product for
our growing number of luxury buyers.
"We are also in discussions on a number of new projects that would have a
significant impact on the future value of the Group.
"I believe that Newfound is exceptionally well positioned to exploit the
worldwide growth in the international luxury resort sector driven by increasing
affluence and demographic changes. We have worked hard over the last 18 months,
and I look forward to the fruits of this labour in the immediate future".
Ends
For further information, please contact:
Newfound N.V.
Edwin Richards +44 (0)20 7470 2490
Cubitt Consulting
Michael Henman/John Beresford-Peirse +44 (0)20 7367 5100
Collins Stewart
Adrian Hadden +44 (0)20 7523 8353
About Newfound:
Newfound is a creator and operator of international luxury resorts and
destinations. Newfound established a proven business model through the success
of Humber Valley Resort in Canada and is developing two further resorts in St.
Kitts and Nevis in the Caribbean.
Humber Valley Resort, with 2,200 acres, currently has over 170 privately owned
properties the majority of which are available for rent. It is an all-season,
luxury resort offering golf, world-class salmon fishing, sailing, skiing and a
luxury spa. This year, a limited number of land lots and accompanying high-end
bespoke homes will be released.
The Group's vision is to create long-term environmental, social, physical,
cultural and economic value in untapped destinations benefiting local
populations, home owners, international visitors and shareholders alike.
Newfound has an integrated business model based on destination master-planning,
which generates revenues from multiple sources, including hotel development and
sales, freehold sales, construction and development, services to owners, the
provision of leisure activities and the operation of concessions.
Newfound is building an industry leading, world-class luxury lifestyle brand
offering exceptional holiday experiences in luxurious homes, situated in
locations of outstanding natural beauty.
www.newfoundgroup.com
Newfound N.V.
Preliminary results for the year ended 31 December 2006
Chairman's statement
On 1 May 2007, the Company announced that it would release preliminary results
for the year ended 31 December 2006 by 9 May 2007. Following a dispute with the
Company's auditors, Baker Tilly, on certain matters detailed below, which
dispute it has not been possible to resolve, Baker Tilly yesterday tendered
their resignation as the Company's auditors. The Company has accepted that
resignation, and pending appointment of replacement auditors, today announces
preliminary unaudited results for the period ending 31 December 2006. The
Company will appoint new auditors as soon as possible and, subsequently, will
release audited results for this period.
On 23 February 2007, Newfound announced that it expected operating profit before
exceptional items for the financial year to 31 December 2006 would be not less
than US$6 million. This statement was made on the basis of advice received
during 2006 from Baker Tilly, that, under International Financial Reporting
Standards ("IFRS"), sales of US$ 22.3 million to be made in 2006 of land in the
Pinney's Estate Resort ("the Nevis Sales") would be regarded as revenue for the
Group for the financial year 2006.
Subsequently, Baker Tilly informed Newfound that, in its revised opinion, the
revenue relating to the Nevis Sales did not qualify to be recognised under IFRS
as revenue for the period 2006. As a result reported revenue for the year 2006
is expected to be US$ 27.9 million; operating loss before exceptional items US$
10.0 million; adjusted loss per share US cents 12.0 and total equity US$ 17.6
million. Had Baker Tilly applied the advice originally given to Newfound in
2006 in relation to the Nevis Sales, Newfound's revenue would have been US$ 50.2
million, operating profit before exceptional items US$ 9.8 million, adjusted
earnings per share US cents 4.9 and total equity US$ 37.5 million, ahead of the
Company's expectations.
The figures announced today are therefore reported without the benefit of the
Nevis Sales, which have been deferred. There is no change in the cash flow
expected from the re-classification of the Nevis Sales and the Board believes
that there is no impact on the underlying value of the Group's land assets.
While 2006 was predominantly about creating a platform to expand the exciting
opportunities presented by the international resort development market, we are
pleased to report that our most substantial new development, Pinney's Estate
Resort in Nevis, has got off to an excellent start and has exceeded our
expectations; the 40 initial plots offered in the Pre-Launch Offer sold out in
only four weeks albeit that the reporting of the revenue has been deferred. We
believe that the 430 acres on Nevis will generate sales of about US$ 1 billion
over the coming years and are particularly excited about the potential
partnership opportunities with Starwood, one of the world's leading hotel and
resort operators. The response to our smaller Caribbean development in St
Kitts, Ocean's Edge Resort, has also been positive with reservations on US$ 25
million worth of property although the timing and accounting treatment meant
that the revenues at Ocean's Edge did not fall into 2006.
Our focus in Humber Valley has been to address the construction issues that led
to a significant backlog in building. Contracts with third-party contractors
were successfully concluded and the proceeds from the fund raising as part of
the reverse acquisition in September 2006 will enable us to accelerate
construction in 2007. Whilst we deliberately scaled down the new sales effort,
the number of transactions was below our expectations. This was in part due to
the construction backlog, but also the availability of direct flights to
Newfoundland. Both of these issues have been addressed.
During the year the Company has sought to strengthen the board, and we are
fortunate to have John Morgan and Robert Weisz as non-executive directors as
both bring substantial international property and construction experience and
strong track records of commercial achievement.
Our CEO, Brian Dobbin, has a clear and innovative vision for our growth in the
international luxury resort business and is providing strong leadership to his
highly motivated team.
Our primary objective is to secure sustainable growth for the long term value of
our shareholders and I have no doubt Newfound will be successful in achieving
this objective. There is enormous potential in our sector and Newfound is well
placed to capitalise on the opportunity.
On your behalf, the Board would like to thank all the Newfound staff for their
exceptional efforts this year.
Jeremy White
Chairman
9 May 2007
Newfound N.V.
Chief Executive Officer's report
Where we came from and what we believe
Although Newfound N.V. is a newborn public company, we have been working for a
decade to get us where we are today. Ten years ago we saw that tourism and
second home ownership were evolving into something new. The most affluent North
American and European urban dwellers were seeking authentic experiences in a
luxury environment for holidays that gave them a temporary escape from their
lives in large cities. Staying in a cramped hotel rooms, surrounded by teeming
masses in an overdeveloped destination was the very opposite of what a real
escape meant.
Our first project, Humber Valley Resort in Newfoundland, Canada, was designed to
give visitors and vacation home buyers the space and amenities to enjoy the
spectacular natural surroundings and outdoor activities available in western
Newfoundland. From the start, we worked in a way that chimed with the
marketplace. We did not fall into the developer's trap of maximizing revenue
from each square foot which, in the long run, will make the experience less
valuable. We give people everything they need to make their own vacation plans.
If that means they want to spend a day inside the chalet reading or relaxing,
we ensure that the indoors is as great as the outdoors. We master-plan the
experience for generations to come, and in doing so preserve the natural
ingredients that made that experience in the first place. And finally, we don't
follow the herd to locations which are already established; we take the less
beaten path and with the right ingredients and formula, create a destination
which can maximize values over time.
Over the ten years we learned some important lessons. We created our own
property sales company specialising in international second home sales. We
found out more about completing large scale developments in another country,
operating in what are, in essence, small towns and handling the stresses
associated with rapid growth. As we begin our new life as a public company, our
experience positions Newfound uniquely to capitalise on the wave of demographic
changes that, internationally, are spurring year on year second home sales
growth.
Newfound is a creator and seller of authentic and high-value retreat
experiences. Selling vacations in our vacation homes is the most embryonic part
of our business, but it is the future of our Company. We believe strongly that
development for the sake of development is unsustainable. It is the experiences
that can be enjoyed from the second home that makes its purchase a valuable
investment as well as the centre of some of the best memories of a lifetime.
Like the swell of money for second home purchases, we believe the growing mass
affluence in today's economies is, every day, creating more and more clients for
future Newfound vacations.
We will learn more lessons as we build our vision for the Company's future - a
series of international Newfound resort destinations that allow our homeowners
and vacationers to experience authenticity, privacy, luxury, and amenity. With
our workdays becoming faster and more hectic all the time, we do not need our
vacation retreats to be that way. In order to deliver this type of escape and
relaxation, you need to plan for it, and that is what Newfound does. This long
term, large scale planning, allows us to protect and preserve our destinations,
and make sure that our grandchildren can enjoy the culture, activities, and
environment that we enjoy in our locations today.
Our last year's financial results
For the year 2006, Newfound is expected to report sales of US$ 27.9 million
(2005: US$ 52.2 million) and an operating loss before exceptional items of US$
10.0 million (2005: profit of US$ 7.5 million) with the result that adjusted
loss per share were US cents 12.0 per share (2005: earnings of US cents 5.2 per
share). The operating loss and loss per share for the year, after exceptional
items, were US$ 40.2 million and US cents 40.2 per share respectively. The
exceptional items are explained in the CFO's report below. The board does not
propose to declare a final dividend.
The Chairman has commented on the change in advice from the Company's auditors,
Baker Tilly, and I do not propose to say anything further on this matter. We
are pleased with the underlying performance for 2006 as it was a year of
significant restructuring for us. Over two years ago we decided that we could
not realise our vision of a family of international Newfound destinations as a
small private company. That began a long period of examining our restructuring
options. Upon our decision in late 2005 to reverse into the public market in
London, we also undertook the necessary work to forge new industry relationships
required to build the foundation of that vision.
We are proud that, in a busy year that saw great pressures on management through
the reverse and admission to AIM, the development of the Company's new projects
and partnerships and heavy demands from Humber Valley Resort, the fundamental
business of the Group continued to develop well.
The future of Newfound
For the coming year, the restructuring, new project development, and
relationship building we have been undergoing will begin to bear its first
fruit. Our latest resort, Pinney's Estate on the Caribbean island of Nevis,
will continue with its property sales this year after two years of planning and
a great start to those sales in 2006. The Pinney's Estate land is an iconic
site and the island of Nevis has long been established as a superlative
Caribbean destination. We have recently signed a non-binding letter of intent
for the granting of a hotel concession at Pinney's Estate Resort with the W(R)
Retreat and Spa brand, part of the Starwood's luxury hotel brand offering, and
we look forward to concluding this arrangement over the coming months. This
represents a major step forward and enables us to firm up the short to
medium-term strategy at the resort. After spending the last eighteen months
examining the world's leading leisure brands, we are very excited about this new
partnership in Nevis for luxury hotels, spas, and residences that will
compliment the Newfound model of single home ownership.
Newfound's Pinney's Estate Resort, which is being master-planned over 430 acres
and 1,000 feet in elevation change will, we estimate, generate $1 billion in
development value over the next eight to ten years. Nestled in the idyllic
setting of Nevis and its friendly population of 12,000 people, this latest
Newfound Resort will continue the values set in Humber Valley, and will weave
its homes and structures into amazing vegetation of palm groves and tropical
forest, overlooking 2,000 feet of golden Caribbean beach.
2007 will also see a new direction for the Humber Valley Resort, as the
development plan has been updated to mirror the growth and direction of Newfound
internationally. Humber Valley has always been blessed with spectacular natural
beauty, wildlife, and world class outdoor activities like powder skiing and
trophy fly fishing. The resort has benefited from over $100 million of
investment by Newfound - including a private two lane bridge, three restaurants
and bars, and a golf course voted the gold medal winner in the world by the
judges of the Homes Overseas Awards. After selling over 350 large vacation
homes on lots of around an acre in size, Humber Valley Resort will now be
offering a limited supply of legacy luxury homes for the next number of years on
plots restricted in size only by the imaginations of the client.
When we say legacy luxury we mean 5,000+ square foot homes set in over five
acres of pristine forest, at elevations overlooking the entire resort; or an
architectural masterpiece hidden in two acres of private paradise on the banks
of one of the world's greatest Atlantic salmon rivers. This is the type of
luxury second home that will be passed from generation to generation. The fact
that we can do this for a fraction of the price to be paid in European or
American destinations that offer less than Humber Valley, and we can provide
direct and frequent access out of London and, under future proposals, New York
into Humber Valley, makes us very confident about this new product.
New project opportunities in the last year have also been abundant and the next
Newfound resorts are now being planned. When we announce the sites and
partnerships involved in these next resorts you will see why the Newfound
management team is so excited as we continue to lay the foundation of our
vision. We love what we do, and our Company's culture is very much about
creating the best places and the right spaces to truly enjoy life's moments of
retreat and freedom that took so much work to achieve.
While Newfound N.V. is a young company we are not just planning for the next
year or so. We are planning for the next generations to create growing value
for our shareholders and owners for many years to come.
Brian Dobbin
Chief Executive Officer
9 May 2007
Newfound N.V.
Chief Financial Officer's report
This is the first annual report and accounts of Newfound as a public company.
The report has been compiled under the requirements of IFRS.
Summarised income statement
2006 2005 2004
US$'000 US$'000 US$'000
Revenue 27,879 52,213 44,842
Operating (loss) / profit before exceptional items (10,007) 7,523 3,172
Adjusted (loss) / earnings per share (US cents) (12.0) 5.2 2.0
The financial performance of the Group's operations is discussed in the Chief
Executive Officer's report.
Operating profit before exceptional items is considered to provide a more
accurate reflection of the underlying performance of the Group. Had the sales
made in the very successful pre-launch offer of land at the Pinney's Estate
Resort been included in revenue and profits for 2006, as was originally advised
by Baker Tilly, the results for the Group would have shown operating profit
before exceptional items 30% better than in 2005 at US$ 9.8 million. This
revenue is not, of course, lost to the Group, but its recognition in the income
statement has been deferred.
Sales and marketing expenses increased by 59% to US$ 5.9 million principally
reflecting an increase in advertising expenditure and administrative expenses
before exceptional items rose 20% to US$ 14.1 million mainly because of the
increased central overhead required to run a public company.
Exceptional items
The following exceptional items are included in the results for 2006:
* A charge of US$2.5 million (2005: US$3.3 million) within cost of sales
relating to non-recurring sub-contract construction losses together with the
related tax credit of US$0.9 million (2005: US$1.2 million)
* A charge of US$17.2 million within administrative expenses relating to the
issue of shares to employees and key management prior to the acquisition of
the Newfound group by the Company
* A charge of US$10.6 million within administrative expenses relating to the
write off of goodwill arising on the acquisition of Nettec plc
* A charge of US$1.1 million within finance costs relating to a conversion
premium and interest payable on loans repaid out of the proceeds of
the new shares issued by the Company
The first of these exceptional items covers losses on construction contracts in
Humber Valley Resort. Construction costs have risen as a result of increasing
demand for construction services on the West coast of Newfoundland
(substantially because of the success of the Humber Valley Resort itself) as
well as rising raw material price. This cost increase has been exacerbated by
the time it has taken to build out the backlog of chalet construction having
sold at a fixed price to customers during 2003 and 2004.
The remaining exceptional items have arisen because of the nature of reverse
acquisition accounting under IFRS 3 and the actual cost of these items was taken
into account in the acquisition price negotiated at the time of the reverse
takeover.
Dividends
No final dividend has been proposed. However, prior to the acquisition, an
interim dividend of US$ 10.0 million was paid to Dolphin, the former owner of
the Newfound group, to eliminate amounts owing to Dolphin and this was adjusted
for in the acquisition purchase price.
Prior year adjustment
The 2005 accounts have been restated by taking into account losses relating to
sub-contract construction contracts in Humber Valley Resort that were not
accounted for correctly at the time of the reverse acquisition last September
resulting in an increase in provisions after tax of US$2.1 million.
Seasonality
It should be noted that the Newfound business is very seasonal with most sales
of property occurring in the summer and autumn. As such the half yearly figures
to June 2007 will not reflect a time based proportion of the expected result for
the full year.
Balance sheet
The balance sheet is presented having written off the goodwill that arose on the
reverse takeover of Nettec plc and does not include any revaluation of
Newfound's land and other assets. The balance sheet reflects, therefore the
historical costs of the land and infrastructure owned by the Newfound group.
The increase in "Property, plant and equipment" of US$16.9 million reflects the
continued investment in infrastructure in Humber Valley Resort and the
capitalisation of development costs relating to the Pinney's Estate Resort and
Ocean's Edge resort in the Caribbean.
There has also been a significant increase in "Trade and other receivables",
both short and long term, reflecting the deferred payment terms negotiated with,
in particular, the buyers of villa plots in the Pinney's Estate Resort.
The increase in "Trade and other payables" results principally from the increase
in construction activity in Humber Valley Resort.
Net debt stands at US$15.5 million as at the balance sheet date (2005: US$19.5
million); the bulk of this debt relates to leased construction equipment in the
Humber Valley and loans from the Nevis and Newfoundland governments for the
purchase of land. Newfound had cash of US$ 3.8 million at the balance sheet
date. The Company continues to focus on firm cash management.
Employees
At the balance sheet date Newfound employed 218 people (2005: 199).
Edwin Richards
Chief Financial Officer
9 May 2007
Newfound N.V.
Consolidated income statement
For the year ended 31 December 2006
2006 2006 2006 2005 2005 Restated
2005
Before Before
exceptional Exceptional exceptional Exceptional
items items items items
(note 4) Total (note 4) Total
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue 3 27,879 - 27,879 52,213 - 52,213
Cost of sales (17,872) (2,457) (20,329) (29,251) (3,263) (32,514)
Gross profit/
(loss) 10,007 (2,457) 7,550 22,962 (3,263) 19,699
Administrative
expenses (14,070) (27,776) (41,846) (11,713) - (11,713)
Sales and
marketing expenses (5,945) - (5,945) (3,739) - (3,739)
Other income 1 - 1 13 - 13
Operating (loss)/
profit 3 (10,007) (30,233) (40,240) 7,523 (3,263) 4,260
Finance income 154 - 154 132 - 132
Finance costs (770) (1,143) (1,913) (1,024) - (1,024)
(Loss)/profit
before tax (10,623) (31,376) (41,999) 6,631 (3,263) 3,368
Tax credit/
(charge) (554) 887 333 (2,423) 1,178 (1,245)
(Loss)/profit
for the year (11,177) (30,489) (41,666) 4,208 (2,085) 2,123
Attributable to:
Equity holders
of the Company (11,091) (26,186) (37,277) 4,208 (2,085) 2,123
Minority interests (86) (4,303) (4,389) - - -
(11,177) (30,489) (41,666) 4,208 (2,085) 2,123
(Loss)/earnings
per share from
(loss) / profit
attributable to
equity holders of
the Company US cents US cents
- basic and
diluted 6 (40.2) 2.6
Newfound N.V.
Consolidated balance sheet
As at 31 December 2006
Restated
2006 2005
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 41,226 24,295
Investments - 634
Trade and other receivables 10,518 769
Deferred charges - 168
Deferred tax assets 1,118 1,896
52,862 27,762
Current assets
Inventories 14,622 5,840
Trade and other receivables 24,070 20,391
Current tax assets 1,207 -
Restricted cash 633 -
Cash and cash equivalents 3,789 723
44,321 26,954
LIABILITIES
Current liabilities
Trade and other payables (32,648) (24,975)
Current tax liabilities - (1,558)
Deferred revenue (16,240) (4,880)
Long-term debt (9,364) (4,446)
Provisions (859) (857)
(59,111) (36,716)
Net current liabilities (14,790) (9,762)
Non-current liabilities
Deferred tax liabilities (1,335) (1,159)
Deferred revenue (9,174) -
Long-term debt (9,953) (15,696)
(20,462) (16,855)
Net assets 17,610 1,145
EQUITY
Share capital 1,585 6
Share premium 22,371 -
Additional paid in capital 7,151 -
Other reserves 60 317
Translation reserve (611) (182)
(Loss) / retained earnings (22,851) 1,004
Reverse acquisition reserve 9,891 -
Equity attributable to equity holders of the Company 17,596 1,145
Minority interests in equity 14 -
Total equity 17,610 1,145
Newfound N.V.
Consolidated statement of changes in shareholders' equity
For the year ended 31 December 2006
Share Share Additional Other
capital premium paid in reserves Translation
capital reserve
Note US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2005 5 - - 220 (301)
Issue of capital 1 - - - -
Redemption of Class B shares for
amounts less than - - - 292 -
stated value
Provision for redemption of Class B
shares for amounts - - - (195) -
greater than stated value
Foreign exchange translation difference - - - - 119
Net profit for the year - - - - -
Balance at 31 December 2005 6 - - 317 (182)
Prior period error 2 - - - - -
Adjusted balance at 31 December 2005 6 - - 317 (182)
Reverse combined share capital on
acquisition (6) - - - -
Acquisition - - - - -
Issue of capital 1,585 22,371 - - -
Provision for redemption of Class B
shares for amounts - - - (258) -
greater than stated value
Transfer from long-term debt - - 7,151 - -
Foreign exchange translation difference - - - 1 (429)
Share based payments 4 - - - - -
Goodwill transfer 4 - - - - -
Loss for the year - - - - -
Dividends 5 - - - - -
Balance at 31 December 2006 1,585 22,371 7,151 60 (611)
(Loss) / Reverse Total Minority Total
retained acquisition interests Equity
earnings reserve
Note US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2005 (1,119) - (1,195) - (1,195)
Issue of capital - - 1 - 1
Redemption of Class B shares for amounts less than - - 292 - 292
stated value
Provision for redemption of Class B shares for amounts - - (195) - (195)
greater than stated value
Foreign exchange translation difference - - 119 - 119
Net profit for the year 4,208 - 4,208 - 4,208
Balance at 31 December 2005 3,089 - 3,230 - 3,230
Prior period error 2 (2,085) - (2,085) - (2,085)
Adjusted balance at 31 December 2005 1,004 - 1,145 - 1,145
Reverse combined share capital on acquisition - - (6) - (6)
Acquisition (100) 20,457 20,357 100 20,457
Issue of capital - - 23,956 - 23,956
Provision for redemption of Class B shares for amounts - - (258) - (258)
greater than stated value
Transfer from long-term debt - - 7,151 - 7,151
Foreign exchange translation difference - - (428) - (428)
Share based payments 4 12,907 - 12,907 4,303 17,210
Goodwill transfer 4 10,566 (10,566) - - -
Loss for the year (37,277) - (37,277) (4,389) (41,666)
Dividends 5 (9,951) - (9,951) - (9,951)
Balance at 31 December 2006 (22,851) 9,891 17,596 14 17,610
Newfound N.V.
Consolidated cash flow statement
For the year ended 31 December 2006
2006 Restated
2005
US$'000 US$'000
Cash flows from operating activities
Cash (used in) / generated from operations (6,936) 6,413
Interest received 154 132
Interest paid (1,945) (934)
Tax (paid) / received (1,487) 92
Net cash (used in) / generated from operating activities (10,214) 5,703
Cash flows from investing activities
Advances to parent company and company under common control - (5,425)
Acquisition of subsidiary (net of cash acquired) 1,568 -
Acquisition of joint venture (500) -
Proceeds from other loans repayments 128 167
Purchase of property, plant and equipment (18,238) (3,997)
Disposal of property, plant and equipment 1,189 148
Purchases of trading investments - (634)
Net cash used in investing activities (15,853) (9,741)
Cash flows from financing activities
Cash flows relating to reverse acquisition:
Net proceeds from issue of ordinary share capital 26,463 -
Repayments of short-term debt (11,977) -
Proceeds from issuances of short-term debt 16,178 -
Repayment of long-term debt (1,763) -
28,901 -
Other cash flows from financing activities:
Net proceeds from issue of ordinary share capital - 1
Proceeds from issuances of Class B and Class C preference shares 485 863
Proceeds from overdraft borrowings 920 -
Proceeds from issuances of short-term debt 2,000 1,624
Proceeds of long-term debt - 4,390
Repayments of short-term debt - (332)
Finance lease principal payments (2,099) (881)
Repayments of long-term debt (83) (342)
Redemptions of Class B liability (915) (1,597)
Payment of subsidiary preference share dividends (127) -
Advances from companies under common control - 389
Cash flow generated from financing activities 29,082 4,115
Net increase in cash and cash equivalents 3,015 77
Exchange gains on cash 51 119
Cash and cash equivalents at beginning of the year 723 527
Cash and cash equivalents at end of the year 3,789 723
Newfound N.V.
Notes to the preliminary announcement
For the year ended 31 December 2006
1. General information
Newfound N.V. ("the Company") and its subsidiaries (together "the Group") is a
developer and operator of international luxury resorts and destinations. The
Group continues to operate and develop Humber Valley Resort in Canada and is
currently developing a further resort in each of St Kitts and Nevis in the
Caribbean.
The Company is a public limited liability company incorporated in, and
registered under the law of The Netherlands with registered number N.V. 1386624.
The principal legislation under which the Company was formed, and operates,
and under which the shares in the Company have been and will be issued is the
Dutch Civil Code and regulations made under the law of The Netherlands. The
address of its registered office is Parkweg 2, 2585JJ Den Haag, The Netherlands.
In September 2006, the Group achieved a listing on the Alternative Investment
Market ("AIM") of the London Stock Exchange through the reverse acquisition of
Nettec plc, an AIM listed company, and a Scheme of Arrangement under which the
Company became the new holding company of Nettec plc. Subsequently the Company
acquired the Newfound group of companies. Although the legal form of this
transaction is an acquisition of the former Newfound group companies by the
Company, the substance is the reverse of this. Accordingly the consolidated
financial statements have been prepared using reverse acquisition accounting.
The Company's shares commenced trading on the AIM on 26 September 2006.
2. Summary of significant accounting policies
The preliminary results for the year ended 31 December 2006 have been prepared
in accordance with International Financial Reporting Standards ("IFRS") and the
accounting policies set out in the combined financial information for the year
ended 31 December 2005 as included in the Company's Admission Document with the
following exceptions.
With effect from 26 September 2006, the Company became the legal parent of the
Group in a predominantly share-for-share transaction and because of the relative
values of Nettec plc and the former Newfound group companies, the shareholders
of the former Newfound group companies became the majority shareholders of the
Group. Certain other shareholders of the former Newfound group companies
elected to receive a total cash alternative of $12.0 million instead of shares
in the Company. The substance of the combination was, therefore, that the
former Newfound group companies acquired the Company and Nettec plc via a
reverse acquisition.
In accordance with the reverse acquisition provisions of IFRS 3 "Business
combinations", the financial statements have been prepared as if the former
Newfound group companies had continued in business throughout the year and
comparative period. The key features of reverse acquisition accounting on these
financial statements are:
* the consolidated income statement includes the results of the former
Newfound group companies for the whole of the year to 31 December 2006 and
the comparative period for 2005, and of the Company and Nettec plc from the
date of acquisition;
* the consolidated retained earnings of the Group are based on the
pre-acquisition earnings of the former Newfound group companies;
* the Company and Nettec plc have been consolidated from the date of the
reverse acquisition, 26 September 2006, based on the fair values of the
assets and liabilities at that date;
* the financial information of the Group for 2005 and for the period from 1
January 2006 to 26 September 2006 represents the aggregation of the results
of the various entities and businesses that are now part of the Group and
that were owned by the previous parent entity, Dolphin Holdings Limited
("Dolphin"). Prior to 26 September 2006, these entities were part of a
re-organisation such that businesses not transferring into the Group
could remain as part of the Dolphin group. This re-organisation was not
effected as at 31 December 2005, and during the period to 26 September 2006,
and for this reason the financial information prior to 26 September 2006 is
aggregated not consolidated; and
2. Summary of significant accounting policies (continued)
* goodwill has been calculated as being the difference between the fair
value of the consideration effectively given by the former Newfound group
companies to acquire the Company and Nettec plc, and the aggregate of the
fair values of the separable net assets of the Company and Nettec plc. The
goodwill arising has been written off to the income statement in the year
since the Directors consider the goodwill to have no recoverable value.
Restatement for prior period error
Since the acquisition date, an error has been identified in the 2005 Newfound
group combined financial information in relation to the calculation of
construction losses. As a result, an adjustment has been made in the restated
2005 income statement to increase cost of sales and payables by US$3.3 million,
reduce the tax charge and deferred tax liabilities by US$1.2 million and reduce
the earnings per share by US 2.6 cents. The 2006 opening retained earnings have
been reduced by US$2.1 million as a result of this error.
3. Segment analysis
For management purposes, the Group is currently organised into 2 segments -
Development and Operations. These segments are the basis on which the Group
reports its primary segment information. The principal activities are as
follows:
Development: land sales and construction and sale of chalets, villas and
apartments.
Operations: resort property rental, flight revenue and costs, activities
income and sales of food and beverages.
Information about these business segments is presented below.
Business segments Development Operations Other Total
US$'000 US$'000 US$'000 US$'000
2006
Revenue 23,159 4,720 - 27,879
Operating loss before exceptional items (1,285) (5,945) (2,777) (10,007)
Exceptional items (2,457) - (27,776) (30,233)
Operating loss (3,742) (5,945) (30,553) (40,240)
Net finance costs (1,759)
Loss before tax (41,999)
Income tax credit 333
Loss for the year (41,666)
Segment assets 72,821 21,870 - 94,691
Corporate assets 2,492
Total assets 97,183
Segment liabilities (73,021) (3,679) - (76,700)
Corporate liabilities (2,873)
Total liabilities (79,573)
Capital expenditure 18,766 1,007 8 19,781
Depreciation and goodwill amortisation 957 1,316 10,566 12,839
3. Segment analysis (continued)
Business segments Development Operations Other Total
US$'000 US$'000 US$'000 US$'000
2005 restated
Revenue 48,559 3,594 60 52,213
Operating profit / (loss) before 14,649 (5,213) (1,913) 7,523
exceptional items
Exceptional items (3,263) - - (3,263)
Operating profit / (loss) 11,386 (5,213) (1,913) 4,260
Net finance costs (892)
Profit before tax 3,368
Income tax expense (1,245)
Profit for the year 2,123
Segment assets 26,776 16,218 - 42,994
Corporate assets 11,722
Total assets 54,716
Segment liabilities (24,562) (760) - (25,322)
Corporate liabilities (28,249)
Total liabilities (53,571)
Capital expenditure 1,415 2,927 - 4,342
Depreciation 1,324 900 - 2,224
The 2005 comparatives have been restated to account for the prior period error.
The split of the 2005 operating profit / (loss) by segment has been
re-calculated on a basis that is consistent with 2006.
4. Exceptional items
Exceptional items are events or transactions that fall within the activities of
the Group and which by virtue of their size or incidence have been disclosed in
order to improve the reader's understanding of the financial statements.
The following exceptional items are included in the results for 2006:
* A charge of US$2.5 million (2005: US$3.3 million) within cost of sales
relating to non-recurring sub-contract construction losses together with
the related deferred tax credit of US$0.9 million (2005: US$1.2 million)
* A charge of US$17.2 million within administrative expenses relating to the
issue of shares to employees and key management prior to the acquisition of
the Newfound group by the Company
* A charge of US$10.6 million within administrative expenses relating to the
write off of goodwill arising on the acquisition of Nettec plc
* A charge of US$1.1 million within finance costs relating to a conversion
premium and interest payable on loans repaid out of the proceeds of the new
shares issued by the Company
5. Dividends
2006 2005
US$'000 US$'000
Interim dividends paid 9,951 -
Prior to the acquisition by the Company, Humber Valley Resort Corporation and
Humber Valley Interiors Limited paid dividends to the former parent entity of
the Newfound group of companies, Dolphin, such that all balances with Dolphin,
and other related companies of Dolphin that are no longer part of the Group,
were eliminated.
6. Earnings/(loss) per share
2006 2006 2005 Restated
2005
Adjusted Total Adjusted Total
US$'000 US$'000 US$'000 US$'000
(Loss) / earnings attributable to (11,091) (37,277) 4,208 2,123
equity shareholders
Number Number Number Number
Basic weighted average number of 92,778,204 92,778,204 81,092,453 81,092,453
shares
Effect of dilutive securities:
Share options exercisable - - - -
Diluted weighted average number of 92,778,204 92,778,204 81,092,453 81,092,453
shares
US cents US cents US cents US cents
Basic (loss) / earnings per share (12.0) (40.2) 5.2 2.6
Effect of dilutive securities:
Share options - - - -
Diluted (loss) / earnings per share (12.0) (40.2) 5.2 2.6
With the exception of new shares issued as part of the acquisition, the weighted
average number of shares has been calculated as if the shares now held by the
former shareholders of the Newfound group of companies had always been in
existence prior to the reverse acquisition.
In calculating the dilutive earnings per share, the weighted average number of
shares has been adjusted for the dilutive effect of the outstanding share
options calculated by comparing the exercise price of the options against the
average market price of the Company's Ordinary shares during the period from 26
September 2006 up to the balance sheet date of 68.1 pence. The potential
exercise of options has an antidilutive effect on the adjusted and total loss
per share for 2006 because of the loss for the year. The adjusted (loss) /
earnings per share is calculated from the (loss) / profit attributable to equity
shareholders excluding exceptional items.
In relation to the contingently issuable shares under the acquisition agreement,
no dilution has been assumed as the conditions necessary for the issue of the
shares had not been met at the balance sheet date.
7. Status of preliminary announcement
The preliminary results for the year to 31 December 2006 are unaudited. The
financial information set out in the announcement does not constitute the
Group's consolidated financial statements for the year ended 31 December 2006.
The consolidated financial statements for the year to 31 December 2006 will be
finalised on the basis of the financial information shown in this preliminary
announcement and will be presented to the shareholders at the Annual General
Meeting.
8. Annual General Meeting
The Company will announce the date for the Annual General Meeting in due course.
9. Annual report and consolidated financial statements
Copies of the full Annual Report and consolidated financial statements will be
dispatched to shareholders in due course. Copies will also be available on the
Company's website (www.newfoundgroup.com) and from the registered office of the
Company: Parkweg 2, 2585JJ Den Haag, The Netherlands.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKCKKABKKPPK
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