Cubus Lux Plc
(the `Company')
Posting of Admission Document
The Company today announces that, on 14 January 2008, it entered into
conditional agreements to acquire the Olive Island Companies, and that an
Admission Document has today been posted to shareholders convening a General
Meeting at which resolutions will be proposed to, inter alia, approve the
Acquisitions. Further to the posting of the Admission Document to shareholders,
the suspension of trading in the shares of the Company on AIM has been lifted.
On 13 March 2007, the Company announced that it had entered into an option
agreement which gave it the right to acquire certain development land known as
the Olive Island Resort on the coast of Dalmatia in Croatia, which is intended
to be developed into a village resort and a four star hotel. The Company
announced extensions to this option on 13 July 2007 and 1 October 2007, and on
24 December 2007, it announced that it had exercised the option and that as the
Acquisitions constitute a reverse takeover under the AIM Rules, the Company had
requested that trading in its shares on AIM be suspended pending the
publication of an admission document.
The companies to be acquired (both of which are registered in Croatia) are:
* `DPUP' (Duboko Plavetnilo - Ugljan Projektant d.o.o.) - owns the Olive Island
Village project; and
* `DPH' (Duboko Plavetnilo - Hoteli d.o.o.) - owns the Olive Island Hotel
project.
The Acquisitions are effected by two separate agreements, the consideration for
which is, in aggregate approximately Euro27.45 million, as follows:
* For the acquisition of DPUP: Euro12 million to be satisfied by the issue of Loan
Notes and Euro9.45 million to be satisfied by the issue of 36,904,996 Ordinary
Shares in the capital of the Company, credited as fully paid.
* For the acquisition of DPH Euro1 million to be satisfied by the issue of Loan
Notes and Euro5 million to be satisfied by the issue of 7,028,993 Ordinary Shares
in the capital of the Company, credited as fully paid.
The size of the Olive Island Companies, in aggregate and relative to the
Company, means the Acquisitions taken together are considered a reverse
takeover for the purposes of the AIM Rules. Accordingly, the Proposals are
conditional on the approval of the Shareholders at the General Meeting.
Furthermore, since three directors of the Company (Gerhard Huber, Christian
Kaiser and Michael Janssen) are beneficial shareholders in the Olive Island
Companies (being interested, in aggregate, in approximately 36.8 per cent. of
the Consideration Shares and approximately 30.8 per cent. of the Loan Notes),
the Acquisition is also a related party transaction (as defined) under the AIM
Rules and, as Gerhard Huber, Christian Kaiser and Michael Janssen are all
directors of the Company, a substantial property transaction involving
directors under section 190 of the Companies Act 2006.
Gerhard Huber, Chairman of Cubus Lux, commented:
"We are delighted to have entered into agreements in respect of the acquisition
of the Olive Island companies which will allow us to further our ambitions of
establishing a major resort operation on the Dalmatian coast of Croatia.
Croatia is experiencing one of the steepest rises in tourism in the world and
we expect to be well placed to serve this demand.
"Cubus Lux has set its target of becoming the pre-eminent tourist and leisure
business in Croatia and this major acquisition will certainly help us achieve
this aim. In addition, the Company continues to pursue additional developments
which will enhance this offering."
For further information, the full Admission Document is available on the
Company's website at www.cubuslux.com, or please contact:
Cubus Lux plc +44 (0)7900 683 683
Gerhard Huber, Chairman
City Financial Associates Limited, Nominated Adviser +44 (0)20 7492 4777
Liam Murray/Simon Sacerdoti
Ellis Stockbrokers Limited, Joint Broker +44 (0)1293 51 77 44
Neil Badger
Lewis Charles Securities Limited, Joint Broker +44 (0)20 7456 9100
Kealan Doyle
Threadneedle Communications, Financial PR +44 (0)20 7936 9605
Graham Herring/Alex White
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2008
Publication of this document 15 January
Latest time and date for receipt of proxy forms 10.30 a.m. on 5 February
General Meeting 10.30 a.m. on 7 February
Admission and dealings commence in the Existing 8 February
Ordinary Shares and the Subscription Shares on AIM
Issue of Consideration Shares and completion of the 31 May
Acquisitions expected by
ADMISSION AND PLACING STATISTICS
Number of Existing Ordinary Shares 97,662,518
Number of Ordinary Shares to be issued pursuant to 4,381,571
the Subscription
Number of Ordinary Shares in issue on Admission 102,044,089
Number of Consideration Shares 43,933,989
Number of warrants and options in issue on Admission 8,675,000
Maximum number of Ordinary Shares to be issued as a 37,604,860
result of the conversion of the Loan Notes
BACKGROUND TO AND REASONS FOR THE ACQUISITIONS
Cubus Lux is in the process of transition from a casino operator into a leisure
and development company in Croatia. The acquisition and construction of the
Olive Island Marina has been completed and the marina is fully operational. As
a further step the Company has entered into two option agreements to acquire
certain development land known collectively as the "Olive Island Resort" on the
Dalmatian coast of Croatia.
The Olive Island Resort development land is set in 384,000 sqm of land along
approximately 1.5km of beach, and is intended to be developed into:
(a) a village resort comprising 431 units, namely 126 villas and 305 apartments
as well as the accompanying facilities such as restaurants, shops, offices and
a marina (the "Villas Development"); and
(b) a 4 star hotel containing 500 beds (the "Hotel Development").
THE CROATIAN TOURISM MARKET
During the 1980s, Croatia developed as a popular holiday destination, which the
Directors believe was due to its Mediterranean climate, coastal scenery and low
cost of living. The Dalmatian coast, with its many islands, became especially
popular, particularly for sailing holidays. Political unrest in the Balkan
region, culminating in Croatia's declaration of independence from the Yugoslav
Federation in June 1991, erupted into violence which affected the country for
most of the next five years. Events such as the shelling of Dubrovnik, centre
of the country's developing tourism industry, had an inevitable impact and
tourism to Croatia plummeted. Following the intervention of the UN and
diplomatic efforts by the US, the Dayton Agreement of December 1995 signalled
the start of the restoration of stability and economic rehabilitation.
The Directors believe that Croatia's travel and tourism industry has been
recovering strongly since the early 1990s. The country was given official EU
membership candidate status in June 2004, which could pave the way for it to
become a fully-fledged EU member state in the foreseeable future.
Travel and tourism in Croatia had a projected growth of 7.8 per cent. in 2007,
and it is estimated to grow, in real terms, by 7.9 per cent. per annum between
2008 and 2017. (Source: World Travel & Tourism Council/Oxford Economic
Forecasting).
It has been estimated that there were 8.7 million foreign visitors to Croatia
in 2006, each staying on average for 5.4 nights. The total number of overseas
visitors increased by nearly 10 per cent. between 2004 and 2006.
In recent years an increase in tourists from wealthier western European
countries (notably France, the United Kingdom and the Netherlands) and North
America which, unlike Germany and Italy, has not traditionally been a major
source of tourism, can be observed. The average length of stay declined
slightly over the last year, possibly as a result of increased accessibility
and transportation links (for example, the growth in budget airlines) which
have made shorter breaks more practical. This may also explain the more rapid
growth in the number of visitors from further afield in Europe than the
traditional sources of visitors. (Source: "Statistical Information 2007",
Republic of Croatia - Central Bureau of Statistics)
INFORMATION ON THE GROUP
The Group currently comprises two main trading subsidiaries, as well as other
companies which hold or will be used to acquire development projects in the
future.
Casino operations
Cubus Lux doo, a wholly-owned subsidiary of the Company, was granted a 10 year
concession agreement for organising games of chance in casinos on 20 January
2000. The gaming licence held by Cubus Lux doo authorises it to open:
(a) as many full casinos (defined as an operation with a minimum of 7 tables
and an unlimited number of slot machines) as it desires;
(b) two seasonal automated casinos, containing only electronic gambling
machines, operating four to six months a year; and
(c) two seasonal casinos operating four to six months a year.
The Croatian Gaming Board retains the power to close down any casino for
failure to comply with the terms of its gaming licence or with regulatory
requirements. On expiry of the current casino concession agreement, Cubus Lux
doo may request an extension of the concession for a further eight years. The
Directors believe that as long as it complies with the terms of the gaming
licence, Cubus Lux doo will be successful in its request to have the gaming
licence extended.
The group currently operates two annual casinos in hotels in Croatia, covering
almost 20,000 square feet.
Hotel Histria, Pula
The Group's first operation was the year-round casino in the Hotel Histria in
Pula, located at the southern part of the Istrian Peninsula. Hotel Histria is
situated above the sea coast, only four kilometres away from the historic
centre of Pula. It is open all year round, with 240 rooms on five floors. The
casino has recently been expanded from its former 8,000 square feet premises to
include a further 6,800 square feet, and reopened on 13 July 2007. The
Directors believed that this expansion would benefit the Group after certain
low-fare airlines started to fly to the International airport of Pula from
Dublin and London. The new facility now offers 97 slot machines, 6 horse racing
machines, 2 electronic roulette machines, 5 American roulette tables, 3 Black
Jack tables, 3 Poker tables and 1 Texas Holdem table. There is also an outside
terrace with tables providing light refreshments and drinks.
This expansion of the casino at the Hotel Histria was effected by transferring
equipment from a third casino that the Group previously operated in a nearby
hotel (Hotel Belvedere in Medulin), which was no longer considered by the
Directors to be a suitable location for the operation of a casino. The move has
increased both the floor space and offering of the Hotel Histria casino, and
the Directors believe that this may result in an increased number of visitors
to the Hotal Histria casino and an increase in the average length of stay.
Narcis Hotel, Rabac
On 11 July 2005, the Group announced the opening of a casino located in the
Narcis hotel in Rabac, which lies approximately 30 miles northeast of Pula. The
Group entered into a three-year agreement to operate the casino complex at the
Rabac hotel, with an option for an additional three-year extension. The hotel
complex has more than 670 rooms and there is is a caravan park with 3,000
camping places adjacent to the hotel. The hotel complex stretches over 200,000
square metres. The casino occupies 5,900 square feet and has 31 slot machines,
1 electronic roulette machine and 7 tables, offering Blackjack, Poker and
Chemin de Fer.
Marina operations - Olive Island Marina
Plava Vala was acquired by the Group in February 2006 and, pursuant to a
concession granted to Plava Vala by the Government of the Republic of Croatia,
is the owner and operator of the Olive Island Marina, situated in Sutomi*s�cica
on the island of Ugljan, which is approximately 4 miles from the city of Zadar.
The 3,000-year-old city of Zadar is the capital of Northern Dalmatia and, along
with its international airport, offers numerous restaurants and cafes, cinemas,
theatres, galleries, libraries, museums and sports centres.
Ugljan is considered to be a suburb of Zadar, owing to its frequent travel
connections. It is approximately 30 minutes from Zadar by regular ferry lines.
Ugljan has a mild and healthy Mediterranean climate, with an average air
temperature from May to October of 22�C, and an average of 2,500 annual hours
of sunshine.
The Olive Island Marina currently has around 200 berths and the Directors
believe it to be one of the most attractive marinas along the Croatian coast.
All berths have international standard electricity and water supply. The land
facilities include a restaurant operated by Plava Vala together with bar
facilities, wireless internet access throughout the marina, as well as high
standard shower and toilet facilities. In addition, service facilities for
boats are offered in the marina, together with a ship supply shop and a small
supermarket.
The Marina is marketed as a destination marina with easy access to the city of
Zadar by a regular shuttle service for guests to and from the marina. As a
result, the Directors believe that guests have a choice of the more relaxed and
peaceful atmosphere of the marina, or the more energetic city life in Zadar.
The more secluded location of the marina has attracted owners of super yachts,
providing them with the required privacy.
Zadar apartment developments
The Group currently owns a plot of land in Zadar, the former capital of
Dalmatia, on which it intends to build residential and commercial properties
for resale. The project is located in the select resort of Borik and is a mixed
commercial/residential building. It is located within walking distance of the
Borik hotel and resort area and the Borik marina. The total land space is
approximately 70,000 square feet. Total land acquisition costs are Euro2.9
million. Saleable space is expected to be 98,000 square feet. Construction is
planned to start in May 2008 and to be completed by October 2009. The Group
also acquired another development site in Zadar which it has since sold at a
profit of Euro1.1 million.
Current trading and prospects
Although the three months that have been complete since the financial half-read
(30 September 2007) are traditionally the low season, the Group's operations
have maintained steady activity and in the nine months to 31 December 2007 have
returned results in line with management expectations. The remainder of the
financial year is expected to be relatively quiet in the run-up to Easter, as
management of the Group;s businesses continue to focus on marketing initiatives
to ensure that the new tourist season fulfils its potential.
INFORMATION ON THE OLIVE ISLAND PROJECTS
Introduction
The island of Ugljan is known as the garden of the city of Zadar. The island,
which is covered with pine trees, fig trees, vineyards and olive groves,
received its name in connection with the abundance of olive oil, which has been
extracted for over 2,000 years from the numerous olive trees.
The Directors believe that the island's close proximity to the mainland and
frequent travel connections make it a convenient destination for tourists. The
island has a number of sandy beaches. There are several restaurants on Ugljan,
in which local specialties are offered. The first recorded use of the island's
current name was in 1325, and it is believed that the island has been inhabited
since the Stone Age. During Roman times, it is understood that the island was
densely populated, particularly in the north-western part, where the remains
Development profile
The Olive Island Resort is being developed as one of the first integrated
holiday developments on Ugljan Island on the Dalmatian Riviera. Properties
built for resale by the Group are expected to include 126 villas and 305
apartments. Amenities are expected to include swimming pools, tennis courts, a
marina, shops, bars, restaurants and a spa hotel.
It is intended that the resort will be built in five zones, with some sales
being off plan so that the sales and construction complete at approximately the
same time. It is intended that construction of the five zones will be staggered
and the project is anticipated to be fully completed by March 2010.
The Directors intend that the construction of the Olive Island Resort will be
financed through three loans with external banks. The Directors believe that
the Group will be able to repay these loans through the revenues which they
anticipate will be obtained from the Olive Island Resort. The loans are
expected to include (i) a land loan of Euro4 million, projected to be repaid by 31
March 2009; (ii) a construction loan, which is expected to be for a maximum
amount of Euro10 million and which is projected to be fully repaid by March 2010,
and (iii) a hotel loan of Euro17 million.
The Directors believe that the Olive Island Resort will, if successfully
implemented, prove to be profitable for the Group. The Directors believe that
it will be possible to generate turnover in excess of Euro169 million (including
VAT) from the sale of the 431 properties which it is anticipated will be built
at the Olive Island Resort.
As at the date of this announcement, 58 apartments and 12 villas have been
pre-sold, generating total initial payments, which are held in escrow, of
approximately Euro1.7 million. The total sales value (excluding VAT) of these
pre-sales is approximately Euro13.1 million. Reservations have been taken in
respect of a further 19 properties with a total sales value (excluding VAT) of
approximately Euro7.5 million.
From December 2007, the Olive Island Resort employed a sales director, Kyle
Koenig. Mr Koenig has a background in property sales, knowledge of the Olive
Island Resort, the market and a broad knowledge of marketing and sales
techniques.
Valuation
The Company has obtained an external valuation of the target assets by King
Sturge doo, International Property consultants, which is included in the full
Admission document. King Sturge values the development site at Euro42,940,000.
FUTURE STRATEGY
The Directors intend to pursue a strategy to provide Shareholders with
long-term income and capital growth from a balanced portfolio of business and
property investments in the leisure and tourism industry in Croatia.
Specific strategies in respect of the various activities of the Group include:
* growing the casino business in and outside Croatia by leveraging the existing
license and/or by acquisition;
* growing the marina business by creating a series of small to medium sized
4-star plus marinas along the coast of Croatia;
* the development of managed holiday resorts in Croatia which create recurring
revenue and net assets for the Group as well as one-off real-estate development
profits, whereby the directors intend that:
o the hotel, commercial space and common areas are retained by the Company;
o the villas and apartments are sold to customers and then taken back into the
rental pool; and
o an international hotel operator is engaged to manage the entire resort.
DETAILS OF THE ACQUISITIONS
The Company has entered into two separate agreements to acquire two Croatian
companies, DPUP and DPH, both of which have an interest in the Olive Island
Projects. GP Limited is the Vendor of the entire issued share capital of DPUP.
Hans Steinbichler and Milan Kotur are the Vendors of the entire issued share
capital of DPH.
DPUP
The first Acquisition Agreement relates to DPUP which is interested in the
Olive Island Project. The acquisition agreement entered into by the Company to
acquire DPUP provides that in consideration of the Acquisition the Company will
issue, in aggregate, Euro12 million of Loan Notes and 36,904,996 Consideration
Shares to the Covenantors. Completion of the Acquisition of DPUP is conditional
upon, inter alia, the acquisition by the Vendor of 100 per cent of the issued
share capital of DPUP.
The interest of DPUP arises pursuant to a tender bid made to the Municipality
of Preko to acquire 384,370 sqm of development land located on Ugljan Island.
The tender bid was made on 7 October 2005 and DPUP was informed that its tender
was successful on 21 October 2005. The acquisition of the land by DPUP from the
Municipality of Preko has not been completed because of a dispute relating to
the ownership of the land. This dispute arose when the Croatian Forestry
Agency, a Croatian company duly empowered by the Government of Croatia to
manage Croatian forests, took measures which resulted in ownership of the land
being registered with the Croatian Forestry Agency, thereby preventing the
Municipality of Preko from transferring title to the land to DPUP.
The directors of the Company have been advised that the Municipality of Preko
is in the process of arranging for title to the Olive Island Resort Development
Land to be registered in the name of the Municipality of Preko. The
Municipality of Preko has confirmed that it intends to honour the terms of the
successful tender made by DPUP and that it will transfer title to the Olive
Island Resort Development Land to DPUP once title has been obtained by the
Municipality of Preko and subject to payment by DPUP of an amount to be
determined.
The directors of the Company understand that there are a number of approvals
and conditions to be obtained and fulfilled before the Municipality of Preko
obtains title to the Olive Island Resort Development Land. The most significant
of these are as follows:
* the submission of the final version of the detailed urban plan, for adoption,
to the executive of the Municipality;
* presentation of the detailed urban plan for approval to the Ministry of
Construction, Environmental Protection and Area Planning;
* submission of the detailed urban plan to the Council of the Municipality for
the formal enactment thereof;
* submission of the enacted detailed urban plan to the Administrative
Commission which is authorised to return ownership in the Olive Island Resort
development land to the Municipality;
* once the Administrative Commission has reinstated title, to the Olive Island
Resort Development Land, in the Municipality of Preko, the Municipality of
Preko and DPUP will execute a purchase agreement in terms of the tender and
this purchase agreement requires the State Attorney's consent for the transfer
of ownership from the Municipality of Preko to DPUP.
The Directors believe that subject to the necessary approvals and conditions
being obtained and fulfilled in a timely manner, title to the Olive Island
Resort Development Land will be obtained by DPUP in March/April 2008.
In the event that DPUP does not enter into agreements to obtain good title to
or a constituted construction right over the land within nine months of the
date of the Acquisition Agreement, a condition subsequent contained in the
Acquisition Agreement enables the Acquisition to be unwound.
DPH
The second Acquisition Agreement relates to DPH which is interested in the
Olive Island Hotel Project. The Acquisition Agreement entered into by the
Company to acquire DPH provides that in consideration of the Acquisition the
Company will issue, in aggregate, Euro1 million of Loan Notes and 7,028,993
Consideration Shares to the Vendors.
Completion of the Acquisition of DPH is conditional upon, inter alia, the
acquisition by the Vendors of 100 per cent of the issued share capital of DPH.
The interest of DPH in the Olive Island Hotel Project is dependant upon title
to the Olive Island Resort Development Land being acquired by DPUP (as
discussed above). Subject to title to the Olive Island Resort Development Land
being acquired by DPUP, DPH will acquire an interest in the Olive Island Resort
Development Land and develop and operate a hotel and related activities.
END
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