CHARILAOS APOSTOLIDES PUBLIC LIMITED REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 31 December 2005
CHARILAOS APOSTOLIDES PUBLIC LIMITED
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 31 December 2005
CONTENTS PAGE
Board of Directors and other officers 1
Report of the Board of Directors 2 - 3
Declaration of the members of the board of directors and the company officials responsible for the drafting of the financial statements 4
Auditors' report 5
Consolidated income statement 6
Consolidated balance sheet 7
Consolidated statement of changes in equity 8
Consolidated cash flow statement 9
Notes to the consolidated financial statements 10 - 33
CHARILAOS APOSTOLIDES PUBLIC LIMITED
BOARD OF DIRECTORS AND OTHER OFFICERS
Board of Directors: George Photiou (Chairman and Managing Director) Nicolaos Philippou (Executive Director) Christodoulos Matthew (Executive Director) Mikis Ioannou (Executive Director) Christos Papastavrou (Executive Director) Charis Photiou (Executive Director) Lambros Pelekanos (Non Executive Director)
Company Secretary: Christodoulos Matthew
Assistant Secretary: Chartac Management Services Limited
Auditors: MOORE STEPHENS STYLIANOU & CO CERTIFIED PUBLIC ACCOUNTANTS - CY 58 Arch. Makarios III Avenue Iris Tower 6th Floor, Office 602 1075 Nicosia, Cyprus
Legal Advisers: Panayiotou & Pelekanos
Registered Office: Chapo Tower - 1st Floor 75, Athalassas Avenue 2012 Strovolos Nicosia - Cyprus
Bankers: The Cyprus Popular Bank Public Company Ltd Hellenic Bank Public Company Ltd Alpha Bank Ltd Bank of Cyprus Public Company Ltd
Registration number: 2518
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
REPORT OF THE BOARD OF DIRECTORS
The Board of Directors presents its report together with the audited consolidated financial statements of the Group for the year ended 31 December 2005.
Principal activities The principal activities of the Group, which are unchanged from last year, are the following: • Building and civil engineering contracting (in Cyprus and internationally) • Property development • Operating a plant for the production and placement of asphalt products • Mechanical and electrical engineering contracting • Operating a plant for the production and distribution of ready-mixed concrete
The Group during the year operated through a branch in Greece.
Review of current position, future developments and significant risks The current financial position as presented in the financial statements is considered satisfactory as the Group has become profitable. The Board of Directors does not expect major changes in the principal activities of the Group in the foreseeable future.
The Company Charilaos Apostolides Public Limited participates in Hermes Airports Ltd that is going to build and operate the Larnaca and Paphos airports for the next 25 years. During the next two years the Company, in addition to the construction contracts on hand and any new contracts to be obtained, will perform significant construction work at the Larnaca Airport.
The group companies operating abroad are expected to continue the steady strong performance achieved during the last two years and a consecutive rise in their turnover is expected. The Board of Directors’ aim is to improve the profit margins of its overseas operations and to further extend its operations in the Gulf Area.
The most significant risks to be faced by the Group during 2006 are the possibility of continuous increases in the oil price and the financial risks described in note 3 of the financial statements.
Results and Dividends The Group's results for the year are set out on page 6. The Board of Directors does not recommend the payment of a dividend and the net profit for the year is retained.
Share capital There were no changes in the share capital of the Company during the year.
Classification of Company titles On 26 August 2004 the Company shares were enrolled in the Alternative Market of the Stock Exchange.
Corporate governance code The Board of Directors, as at the date of this report has not decided to adopt the Corporate Governance Code.
Board of Directors The members of the Board of Directors of the Company as at 31 December 2005 and at the date of this report are shown on page 1. All of them were members of the board throughout the year ended 31 December 2005.
In accordance with the Company's Articles of Association, all directors presently members of the board, retire and, being eligible, offer themselves for re-election.
There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors.
Post balance sheet events
There were no material post balance sheet events, which have a bearing on the understanding of the financial statements.
2
CHARILAOS APOSTOLIDES PUBLIC LIMITED
REPORT OF THE BOARD OF DIRECTORS
Directors' shareholdings The directors' shareholdings as at 31 December 2005 and at the date of this report were as follows:
31/12/2005 26/04/2006 % % George Photiou 59,65 59,65 Nicolaos Philippou 3,46 3,46 Christodoulos Matthew 1,56 1,56 Mikis Ioannou 1,06 1,06 Christos Papastavrou 0,06 0,06
The above percentages take into account indirect participation as defined by the Cyprus Stock Exchange Law, article 60(4).
The indirect participation of George Photiou is derived from the shareholding held by Chapo Holdings Limited (47,47%) in which George Photiou is the majority shareholder.
Shareholdings over 5% Shareholdings over 5% as at 31 December 2005 and at the date of this report were as follows:
31/12/2005 26/04/2006 % % Chapo Holdings Limited 47,47 47,47 George Photiou 12,17 12,17 Demetra Investment Company Limited 8,73 8,73
Significant contracts with directors and related persons On 31 December 2005, there were no significant contracts between Group companies in which the directors or other related parties had a material interest.
Auditors The auditors, MOORE STEPHENS STYLIANOU & CO, have expressed their willingness to continue in office and a resolution giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.
By order of the Board of Directors,
Christodoulos Matthew Secretary
Nicosia, Cyprus, 26 April 2006
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
DECLARATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS
In accordance with section 140(1) of the Cyprus Securities and Stock Exchange Law, we the members of the Board of Directors and the company officials responsible for the drafting of the financial statements of Charilaos Apostolides Public Limited for the year ended 31 December 2005, based on our knowledge, which is the product of careful and conscientious work, declare that the particulars which are specified in the consolidated financial statements are true and complete.
Members of the Board of Directors:
George Photiou Nicolaos Philippou Christodoulos Matthew Mikis Ioannou Christos Papastavrou Charis Photiou Lambros Pelekanos
Responsible for drafting the financial statements
Christos Papakyriakou (Finance Director)
Nicosia, Cyprus, 26 April 2006
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AUDITORS' REPORT TO THE MEMBERS OF CHARILAOS APOSTOLIDES PUBLIC LIMITED
Report on the financial statements
1. We have audited the consolidated financial statements of Charilaos Apostolides Public Limited (the Company) and its subsidiaries (the Group) on pages 6 to 33, which comprise the consolidated balance sheet as at 31 December 2005 the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and the related notes. These financial statements are the responsibility of the company's Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to the Company's members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. 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.
2. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
3. In our opinion the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2005 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and International Financial Reporting Standards as issued by the IASB and the requirements of the Cyprus Companies Law, Cap. 113.
Report on other legal requirements
4. Pursuant to the requirements of the Companies Law, Cap. 113, we report the following: • We have obtained all the information and explanations we considered necessary for the purposes of our audit. • In our opinion, proper books of account have been kept by the Company. • The Group's financial statements are in agreement with the books of account. • In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give the information required by the Companies Law, Cap. 113, in the manner so required. • In our opinion, the information given in the report of the Board of Directors on pages 2 to 3 is consistent with the financial statements.
MOORE STEPHENS STYLIANOU & CO Nicosia, Cyprus, 28 April 2006 CERTIFIED PUBLIC ACCOUNTANTS - CY
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
CONSOLIDATED INCOME STATEMENT Year ended 31 December 2005
2005 2004 Note CY£ CY£
Revenue 38.711.094 32.292.609 Cost of sales (34.553.994) (30.210.658) Gross profit 4.157.100 2.081.951 Other income 6 171.472 464.503 Administration expenses (2.338.606) (1.890.494) Selling and distribution expenses (776.814) (300.638) Other expenses 7 (24.542) (110.544) Operating profit 8 1.188.610 244.778 Finance costs 10 (575.249) (561.020) Profit/ (loss) before tax 613.361 (316.242) Tax 11 (214.383) (67.517) Net profit / (loss) for the year 398.978 (383.759)
Profit/ (loss) per share attributable to equity holders of the parent (cent) 13 0,80 (0,77)
The notes on pages 10 to 33 form an integral part of these financial statements.
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
CONSOLIDATED BALANCE SHEET 31 December 2005
2005 2004 Note CY£ CY£ ASSETS Non-current assets Property, plant and equipment 14 3.867.197 3.142.914 Intangible assets 15 39.962 38.462 Available-for-sale financial assets 16 15.000 15.000 Trade and other receivables 19 287.912 993.547 4.210.071 4.189.923 Current assets Inventories 17 8.714.303 6.030.079 Amount due from customers for contract work 18 7.451.506 6.897.815 Trade and other receivables 19 13.544.546 10.423.762 Financial assets at fair value through profit or loss 20 121.390 125.180 Refundable taxes 28 - 6.715 Cash at bank and in hand 21 2.505.513 1.544.976 32.337.258 25.028.527 Total assets 36.547.329 29.218.450
EQUITY AND LIABILITIES Capital and reserves Share capital 22 10.000.000 10.000.000 Other reserves 23 329.825 175.751 Retained earnings / accumulated (losses) 118.896 (265.509) 10.448.721 9.910.242 Non-current liabilities Borrowings 24 3.447.752 786.998 Deferred tax 25 157.272 155.804 Provisions for other liabilities and charges 26 189.185 124.450 3.794.209 1.067.252 Current liabilities Amount due to customers for contract work 1.001.615 241.812 Trade and other payables 27 12.021.796 7.775.860 Borrowings 24 9.240.606 10.223.284 Current tax liabilities 28 40.382 - 22.304.399 18.240.956 Total liabilities 26.098.608 19.308.208 Total equity and liabilities 36.547.329 29.218.450
On 26 April 2006, the Board of Directors of Charilaos Apostolides Public Limited authorised these financial statements for issue.
George Photiou Nicolaos Philippou Chairman and Managing Director Director
The notes on pages 10 to 33 form an integral part of these financial statements.
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2005
Retained earnings/ Other accumulated Share capital reserves (losses) Total Note CY£ CY£ CY£ CY£
Balance - 1 January 2004 10.000.000 187.141 133.304 10.320.445
Fair value reserve on land and buildings Fair value gains - net of tax 23 - 33.432 - 33.432 Exchange difference arising on the translation and consolidation of foreign companies' financial statements - (59.876) - (59.876) Net gains and losses recognised directly in equity - (26.444) - (26.444) Net loss for the year - - (383.759) (383.759) Total recognised loss for 2004 - (26.444) (383.759) (410.203) Transfer - 15.054 (15.054) - - (11.390) (398.813) (410.203) At 31 December 2004/ 1 January 2005 10.000.000 175.751 (265.509) 9.910.242
Exchange difference arising on the translation and consolidation of foreign companies' financial statements - 139.501 - 139.501 Net gains and losses recognised directly in equity - 139.501 - 139.501 Net profit for the year - - 398.978 398.978 Total recognised income for 2005 - 139.501 398.978 538.479 Transfer - 14.573 (14.573) - - 154.074 384.405 538.479 At 31 December 2005 10.000.000 329.825 118.896 10.448.721
Companies, which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 15% will be payable on such deemed dividends to the extent that the shareholders (companies and individuals) are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year during the following two years. This special contribution for defence is payable for the account of the shareholders.
The notes on pages 10 to 33 form an integral part of these financial statements.
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2005
2005 2004 Note CY£ CY£ CASH FLOWS FROM OPERATING ACTIVITIES Profit/ (loss) before tax 613.361 (316.242) Adjustments for: Depreciation of property, plant and equipment 14 920.192 809.338 Exchange difference arising on the translation of non current assets in foreign currencies 1.096 17.985 Exchange difference arising on the translation and consolidation of foreign companies' financial statements 139.501 (59.876) Amortisation of goodwill 15 - 9.615 Amortisation of computer software 15 750 - (Profit) from the sale of property, plant and equipment 14 (27.192) (129.102) (Profit) from the sale of financial assets at fair value through profit or loss (20.718) - Fair value losses on financial assets at fair value through profit or loss 24.542 110.544 Provisions 64.735 5.087 Dividend income (5.706) (2.688) Interest income (28.272) (18.971) Interest expense 10 529.631 459.373 Operating profit before working capital changes 2.211.920 885.063 Changes in working capital: Inventories (2.684.224) (2.808.374) Amount due from customers for contract work 206.112 (139.571) Trade and other receivables (2.415.149) 1.983.707 Financial assets at fair value through profit or loss (34) 5.925 Trade and other payables 4.245.936 (1.072.029)
Cash flows from / (used in) operations 1.564.561 (1.145.279) Tax paid (165.818) (32.455) Net cash from / (used in) operating activities 1.398.743 (1.177.734)
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangible assets 15 (2.250) - Purchase of property, plant and equipment 14 (1.775.311) (1.116.429) Proceeds from disposal of property, plant and equipment 14 156.932 223.536 Interest received 28.272 18.971 Dividends received 5.706 2.688 Net cash (used in) investing activities (1.586.651) (871.234)
CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (2.643.049) (1.782.582) Proceeds from borrowings 5.336.336 3.018.158 Interest paid (529.631) (459.373) Net cash from financing activities 2.163.656 776.203
Net increase / (decrease) in cash and cash equivalents 1.975.748 (1.272.765) Cash and cash equivalents: At beginning of the year 21 (4.835.557) (3.562.792) At end of the year 21 (2.859.809) (4.835.557)
The notes on pages 10 to 33 form an integral part of these financial statements.
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
1. Incorporation and principal activities
Country of incorporation
The company was incorporated in Cyprus on 27 May 1969 as a private company with limited liability under the Companies Law, Cap. 113. The company was converted into a public company in accordance with the provisions of the Companies Law, Cap. 113 on 21 February 2000 through a change of its Memorandum of Association. The shares of the Company were listed on the Cyprus Stock Exchange on 13 November 2000. Its registered office is at Chapo Tower - 1st Floor, 75, Athalassas Avenue, 2012 Strovolos, Nicosia - Cyprus.
Principal activities
The principal activities of the Group, which are unchanged from last year, are the following: • Building and civil engineering contracting (in Cyprus and internationally) • Property development • Operating a plant for the production and placement of asphalt products • Mechanical and electrical engineering contracting • Operating a plant for the production and distribution of ready-mixed concrete
2. Accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented in these financial statements unless otherwise stated.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and International Financial Reporting Standards (IFRSs) as issued by the IASB. The consolidated financial statements comply with both these reporting frameworks because at the time of their preparation all applicable IFRSs issued by the IASB have been adopted by the EU through the endorsement procedure established by the European Commission. In addition, the consolidated financial statements have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113. The financial statements have been prepared under the historical cost convention as modified by the revaluation of land and buildings, investment property, available-for-sale financial assets, and financial assets and financial liabilities held for trading.
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the use of certain critical accounting estimates and requires management to exercise its judgment in the process of applying the Group's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates.
Adoption of new and revised IFRSs
As from 1 January, 2005, the Group adopted all the IFRSs and International Accounting Standards (IAS), which are relevant to its operations.
The adoption of these Standards did not have a material effect on the consolidated financial statements.
At the date of authorisation of these financials statements some Standards were in issue but not yet effective. The Board of Directors expects that the adoption of these Standards in future periods will not have a material effect on the consolidated financial statements of the Group.
10
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Consolidation
The Group consolidated financial statements comprise the financial statements of the parent company Charilaos Apostolides Public Limited and the financial statements of its subsidiaries, joint ventures and companies under joint control, for the year ended 31 December 2005. A list of these entities is presented in Note 29.
The financial statements of all the Group companies are prepared using uniform accounting policies. All inter-company transactions and balances between Group companies have been eliminated during consolidation.
Revenue recognition
Revenue comprises the invoiced amount for the sale of goods and services net of Value Added Tax, rebates and discounts. Revenues earned by the Group are recognised on the following bases:
• Sale of products
Sales of products are recognised when significant risks and rewards of ownership of the products have been transferred to the customer, which is usually when the Group has sold or delivered the products to the customer, the customer has accepted the products and collectibility of the related receivable is reasonably assured.
• Rendering of services
Sales of services are recognised in the accounting period in which the services are rendered by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.
• Profit from the development of and trading in real estate
Profit from the development of and trading in real estate is recognised on the basis of the percentage of completion method. In the case of projects under construction, profit commences to be recognised when the construction reaches an advanced stage towards completion. The profit recognised in the year is determined by reference to the cost of work executed to the year-end in comparison to total expected cost for each project. Losses from the sale of real estate are recognised immediately they are foreseen.
• Construction contracts
Contract costs are recognised when incurred.
When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.
When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised by reference to the stage of completion of the contract activity at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the total expected loss is recognised as an expense immediately.
The Group uses the ''percentage of completion method'' to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion. They are presented as inventories, prepayments or other assets, depending on their nature.
The Group presents, as an asset, the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds progress billings. Progress billings not yet paid by customers and retention are included within trade and other receivables.
11
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Revenue recognition (continued)
The Group presents, as a liability, the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).
• Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
• Dividend income
Dividend income is recognised when the right to receive payment is established.
Employee benefits
The Group and the employees contribute to the Government Social Insurance Fund based on employees' salaries. In addition the Group operates a defined contribution scheme the assets of which are held in a separate trustee- administered fund. The scheme is funded by payments from employees and by the Group. The Group's contributions are expensed as incurred and are included in staff costs. The Group has no legal or constructive obligations to pay further contributions if the scheme does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.
For employees of the company under joint control, Charilaos Apostolides (Bahrain) W.L.L., provision is made for end-of- service benefits determined in accordance with the Bahrain labour law based on non-Bahraini employees' salaries at the time of leaving and number of years of service. Although the expected costs of these benefits are accrued over the period of employment, they are only paid to employees on completion of their term of employment with the company. Charges or write backs of provision arising from the difference between the carrying amount of provision and any actuarial computation of end-of-services benefits are recognised either as income or expenses where material. These gains or losses are recognised over the expected average remaining employment period of the employees. Bahraini employees are covered under the General Organisation of Social Insurance scheme and the Group's obligations are limited to the amounts contributed to the scheme.
Finance costs
Interest expense and other borrowing costs are charged to the income statement as incurred with the exception on finance costs relating to development projects which are transferred to development cost until the date of completion.
Foreign currency translation
(1) Measurement currency The financial statements are prepared in Cyprus Pounds (the measurement currency), which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Group. (2) Foreign currency translation Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary items such as equities held for trading are reported as part of the fair value gain or loss. Translation differences on available-for-sale equities are included in the fair value reserve in equity.
12
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Tax
Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Property, plant and equipment
Land and buildings are carried at fair value, based on valuations by external independent valuers, less subsequent depreciation for buildings. Revaluations are carried out with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the balance sheet date. All other property, plant and equipment are stated at historical cost less depreciation.
Increases in the carrying amount arising on revaluation of property plant and equipment are credited to fair value reserves in shareholders' equity. Decreases that offset previous increases of the same asset are charged against that reserve; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset (the depreciation charged to the income statement) and depreciation based on the asset's original cost is transferred from fair value reserves to retained earnings.
Depreciation is calculated on the straight-line method to write off the cost or revalued amount of each asset to their residual values, over their estimated useful life. The annual depreciation rates used are as follows:
% Buildings 3-4 Plant and machinery 10-25 Motor vehicles 10-33 1/3 Furniture, fixtures and office equipment 10-20
No depreciation is provided on land.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Expenditure for repairs and maintenance of property, plant and equipment is charged to the income statement of the year in which they were incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.
Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in profit from operations. When revalued assets are sold, the amounts included in the fair value reserves are transferred to retained earnings.
13
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Deferred income from government grants
Government grants on non-current assets acquisitions are recorded as deferred income and recognised as income on a systematic and rational basis over the useful life of the asset.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired undertaking at the date of acquisition. Goodwill on acquisition of subsidiaries is included in ''intangible assets''. Goodwill on acquisitions of associates is included in ''investments in associates''. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated and impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Computer software
Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure, which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programmes are recognised as an expense when incurred. Computer software costs are amortised using the straight-line method over their useful lives, not exceeding a period of three years. Amortisation commences when the computer software is available for use and is included within administrative expenses.
Leased assets
Where assets are financed by leasing arrangements that give rights approximating to ownership (finance leases), the assets are treated as if they were purchased outright. The amount capitalised is the present value of the minimum lease payments payable during the lease term. The corresponding leasing commitments are shown as obligations under finance leases. Depreciation on the relevant assets is charged to the income statement.
Lease payments are analysed between capital and interest components so that the interest element of the payment is charged to the income statement over the period of the lease and represents a constant proportion of the balance of capital repayments outstanding. The capital part reduces the amount payable to the lessor.
Operating leases
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
Joint ventures
The Group's share in a joint venture is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group's share of net assets of the joint venture (equity method).
Investments
The Group classifies its investments in equity and debt securities in the following categories: financial assets at fair value through profit or loss, originated loans, held-to-maturity investments and available for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of investments at initial recognition and re-evaluates this designation at every balance sheet date.
14
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Investments (continued)
• Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified in the held for trading category if acquired principally for the purpose of generating a profit from short-term fluctuations in price. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the consolidated balance sheet date.
• Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after the consolidated balance sheet date. These are classified as non-current assets.
• Held-to-maturity investments
Investments with fixed or determinable payments and fixed maturity that the management has the positive intent and ability to hold to maturity, other than loan and receivables originated by the Group, are classified as held-to- maturity investments. Such investments are included in non-current assets, except for maturities within twelve months from the balance sheet date, which are classified as current assets.
• Available-for-sale financial assets
Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets.
Purchase and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. The cost of the purchase includes transactions costs. Trading and available-for-sale financial assets are subsequently carried at fair value. Held-to-maturity investments are subsequently carried at amortised cost using the effective yield method.
Realised and unrealised gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss are included in the income statement in the year in which they arise. Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in fair value reserves in equity.
When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from available-for-sale financial assets.
The fair value of investments is based on quoted bid prices or amounts derived from cash flow models. Fair values for unlisted equity investments are estimated using applicable price/earnings or price/cash flow ratios refined to reflect the specific circumstances of the issuer. Equity investments for which fair values cannot be measured reliably are recognised at cost less impairment. When available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from available-for-sale financial assets.
The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. The amount of the impairment loss for assets carried at amortised cost is calculated as the difference between the assets carrying amount and the present value of expected future cash flows discounted at the financial instrument's original effective interest rate. By comparison, the recoverable amount of an instrument measured at fair value is the present value of expected future cash flows discounted at the current market rate of interest for a similar financial asset.
15
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Impairment of long-lived assets
Property, plant and equipment and other non-current assets, including goodwill and other intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
Inventories
Inventories are stated at the lower of cost and net realisable value. The cost is determined using the weighted average method. Stock of real estate for sale are stated at cost which comprises cost of land, amounts paid to subcontractors and other direct costs and expenses, less provision for permanent diminution in value, which is recognised as an expense in the period in which the diminution is identified. Net realisable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses.
Work in progress
Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus attributable overheads based on a normal level of activity.
Trade receivables
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount. The amount of the provision is recognised in the income statement.
Share capital
Ordinary shares are classified as equity.
Borrowings
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
Long-term liabilities
Long-term liabilities represent amounts that are due more than twelve months from the balance sheet date.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current liabilities.
16
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
2. Accounting policies (continued)
Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.
Segmental information
Primary segment The group operates under five main segments: • Building and civil engineering contracting (in Cyprus and internationally) • Property development • Operating a plant for the production and placement of asphalt products • Mechanical and electrical engineering contracting • Operating a plant for the production and distribution of ready-mixed concrete
Secondary segment During the year under review activities were carried out both in Cyprus and abroad. Overseas activities were carried out in Bahrain, the UK, Greece and Gibraltar.
Costs are allocated between the above segments on an actual basis.
3. Financial risk management
(1) Financial risk factors The Group is exposed to market price risk, interest rate risk, credit risk, liquidity risk and currency risk arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below:
(1.1) Market price risk Market price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices. The Group's available-for-sale financial assets and financial assets at fair value through profit or loss are susceptible to market price risk arising from uncertainties about future prices of the investments. The Group's market price risk is managed through diversification of the investment portfolio.
(1.2) Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. The Group is exposed to interest rate risk in relation to its non-current borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly.
(1.3) Credit risk Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and the Group has policies to limit the amount of credit exposure to any financial institution.
(1.4) Liquidity risk Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.
17
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
3. Financial risk management (continued)
(1.5) Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Bahrain dinar, Sterling pounds and the Euro. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
(2) Fair value estimation The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the balance sheet date.
The fair value of financial instruments traded in active markets, such as publicly traded trading and available-for-sale financial assets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below
• Work in progress
Work in progress is stated at cost plus any attributable profit less any foreseeable losses and less amounts received or receivable as progress payments. The cost of work in progress includes materials, labour and direct expenses plus attributable overheads based on a normal level of activity. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date.
• Income taxes
Significant judgment is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
• Fair value of financial assets
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The fair value of the financial assets available for sale has been estimated based on the fair value of their individual assets.
• Impairment of available-for-sale financial assets
The Group follows the guidance of IAS 39 on determining when an investment is other-than-temporarily impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.
18
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
5. Segmental analysis by activity and geographical area
Primary segment
2005 Contracting Property Mechanical and Operation of a Operation of Elimination Total operations development electrical ready mixed an asphalt of engineering concrete plant plant intergroup transactions CY£ CY£ CY£ CY£ CY£ CY£ CY£ Sales 24.927.232 3.186.634 4.862.936 4.464.050 1.882.817 (612.575) 38.711.094 Cost of sales 22.816.863 2.767.421 4.632.794 3.933.464 1.807.853 (1.404.400) 34.553.995 Gross profit / (loss) 2.110.369 419.213 230.142 530.586 74.964 791.825 4.157.099 (Loss) / profit from trading operations 774.649 248.524 39.430 289.377 (163.370) - 1.188.610 Total assets for operations 22.373.108 9.335.370 1.353.769 3.392.212 92.870 - 36.547.329 Total liabilities for operations (22.167.798) (682.546) (1.145.094) (2.103.170) - - (26.098.608) Capital expenditure for operations 1.326.983 - 3.942 422.692 21.694 - 1.775.311 Depreciation for operations 536.012 - 10.652 332.319 41.209 - 920.192
2004 Contracting Property Mechanical and Operation of a Operation of Elimination Total operations development electrical ready mixed an asphalt of engineering concrete plant plant intergroup transactions CY£ CY£ CY£ CY£ CY£ CY£ CY£ Sales 22.636.522 2.250.504 2.748.487 4.032.280 1.141.635 (516.820) 32.292.608 Cost of sales 21.898.456 1.747.466 2.646.796 3.428.351 1.024.409 (534.820) 30.210.658 Gross profit / (loss) 738.066 503.038 101.691 603.929 117.226 18.000 2.081.950 (Loss) / profit from trading operations (344.777) 383.872 11.823 428.841 (234.981) - 244.778 Total assets for operations 18.124.244 7.035.715 1.072.434 2.827.624 158.433 - 29.218.450 Total liabilities for operations (14.950.844) (1.811.743) (882.220) (1.663.401) - - (19.308.208) Capital expenditure for operations 541.019 - 10.295 535.998 29.117 - 1.116.429 Depreciation for operations 451.068 - 16.290 281.057 60.923 - 809.338
19
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
5. Segmental analysis by activity and geographical area (continued)
Secondary segment
2005 Cyprus Bahrain Greece UK Gibraltar Total CY£ CY£ CY£ CY£ CY£ CY£ Sales 21.093.830 9.831.671 285.417 2.351.595 5.148.581 38.711.094 Cost of sales 19.608.080 8.819.621 169.472 2.163.272 3.793.550 34.553.995 Gross profit / (loss) 1.485.750 1.012.050 115.945 188.323 1.355.031 4.157.099 (Loss) / profit from trading operations (25.579) 481.947 81.578 160.299 490.365 1.188.610 Total assets for operations 21.460.975 8.299.507 639.766 3.113.734 3.033.347 36.547.329 Total liabilities for operations (11.774.660) (7.929.189) (703.103) (2.985.544) (2.706.112) (26.098.608) Capital expenditure for operations 615.237 1.061.718 - - 98.356 1.775.311 Depreciation for operations 696.061 184.964 5.194 2.866 31.107 920.192
2004 In Cyprus Bahrain Greece UK Gibraltar Total CY£ CY£ CY£ CY£ CY£ CY£ Sales 22.706.255 5.443.170 533.133 903.678 2.706.372 32.292.608 Cost of sales 22.075.698 5.011.937 172.743 851.212 2.099.068 30.210.658 Gross profit / (loss) 630.557 431.233 360.390 52.466 607.304 2.081.950 (Loss) / profit from trading operations (195.258) 155.643 141.859 31.242 111.292 244.778 Total assets for operations 22.206.427 3.526.377 676.350 2.219.984 589.312 29.218.450 Total liabilities for operations (12.175.398) (3.896.435) (538.124) (2.207.312) (490.939) (19.308.208) Capital expenditure for operations 855.914 124.220 503 - 135.792 1.116.429 Depreciation for operations 679.498 75.459 1.143 155 53.083 809.338
6. Other income
2005 2004 CY£ CY£ Interest income 28.272 18.971 Dividend income 5.706 2.688 Commissions received 9.125 7.920 Rendering of services 80.459 303.814 Gain from sale of property, plant and equipment 27.192 129.102 Profit from sale of financial assets at fair value through profit and loss 20.718 - Government grants - 2.008 171.472 464.503
7. Other expenses
2005 2004 CY£ CY£ Fair value losses on financial assets at fair value through profit and loss 24.542 110.544 24.542 110.544
20
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
8. Operating profit
2005 2004 CY£ CY£ Operating profit is stated after (crediting) / charging the following items: Amortisation of goodwill (included in ''administrative expenses'') (Note 15) - 9.615 Amortisation of computer software (included in ''administrative expenses'') (Note 15) 750 - Depreciation of property, plant and equipment (Note 14) 920.192 809.338 Staff costs including directors in their executive capacity (Note 9) 4.263.297 4.995.888 Auditors' remuneration 22.065 23.243 Operating lease rentals 5.415 5.293 Trade receivables - impairment charge for bad and doubtful debts 215.240 -
9. Staff costs
2005 2004 CY£ CY£ Staff salaries 3.711.337 4.307.889 Social insurance costs etc 287.778 359.600 Social cohesion fund 68.363 86.727 Provident fund contributions 195.819 241.672 4.263.297 4.995.888
Average number of employees (including directors in their executive capacity) 583 666
Contributions are made to provident funds operating in accordance with the current Provident Fund Law for all eligible Group employees working in Cyprus.
For employees of the company under joint control, Charilaos Apostolides (Bahrain) W.L.L., provision is made for end-of- service benefits determined in accordance with the Bahrain labour law based on non-Bahraini employees' salaries at the time of leaving and number of years of service. Although the expected costs of these benefits are accrued over the period of employment they are only paid to employees on completion of their term of employment with the company. Charges or write backs of provision arising from the difference between the carrying amount of provision and any actuarial computation of end-of-services benefits are recognised either as income or expenses where material. These gains or losses are recognised over the expected average remaining employment period of the employees. Bahraini employees are covered under the General Organisation of Social Insurance scheme and the Group obligations are limited to the amounts contributed to the scheme.
10. Finance costs
2005 2004 CY£ CY£ Net foreign exchange transaction (gains) / losses (9.738) 59.762 Interest expense 529.631 459.373 Other finance expenses 55.356 41.885 575.249 561.020
11. Tax
2005 2004 CY£ CY£ Corporation tax - current year 177.142 35.130 Corporation tax - prior years 34.396 2.675 Defence contribution - current year 1.295 407 Defence contribution - prior years 82 1.106 Deferred tax (Note 25) 1.468 28.199 Total charge for the year 214.383 67.517
21
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
11. Tax (continued)
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows: 2005 2004 CY£ CY£ Profit/ (loss) before tax 613.361 (316.242)
Tax calculated at the applicable tax rates 61.336 (31.624) Effect of different tax rates in other countries (6.377) (5.730) Tax effect of expenses not deductible for tax purposes 210.987 112.311 Tax effect of allowances and income not subject to tax (145.589) (134.862) Tax effect of group tax relief 2.327 - Tax effect of tax loss for the year 57.415 95.035 Defence contribution current year 1.295 407 Deferred tax 1.468 28.199 Prior year tax 34.478 3.781 Tax charge 214.383 67.517
The corporation tax rate is 10%.
Under certain conditions interest may be subject to defence contribution at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax, thus having an effective tax rate burden of approximately 15%. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 15%.
Overseas Group subsidiaries and companies under joint control are subject to tax in accordance with the tax rates in force in the countries of registration and operation. These tax rates range between NIL and 35%.
12. Parent company losses
The net consolidated profits attributable to the shareholders include the following losses of the parent company:
2005 2004 CY£ CY£ Net loss for the year (524.551) (1.084.879)
13. Profit/ (loss) per share attributable to equity holders of the parent
2005 2004
Profit/ (loss) attributable to shareholders (CY£) 398.978 (383.759)
Weighted average number of ordinary shares in issue during the year 50.000.000 50.000.000
Profit/ (loss) per share attributable to equity holders of the parent (cent) 0,80 (0,77)
22
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
14. Property, plant and equipment
Land and Plant and Motor Furniture, Total buildings machinery vehicles fixtures 2005 and office equipment CY£ CY£ CY£ CY£ CY£ Cost or valuation Balance - 1 January 2004 865.225 3.655.653 2.730.494 511.369 7.762.741 Additions 32.968 647.837 418.882 16.742 1.116.429 Disposals - (235.748) (220.572) (28.220) (484.540) Exchange differences (4.542) (59.383) (868) (6.900) (71.693) On 1 January 2005 893.651 4.008.359 2.927.936 492.991 8.322.937 Additions 81.513 1.174.030 434.049 85.719 1.775.311 Disposals - (353.544) (155.586) (45.144) (554.274) Exchange differences 22.349 13.939 9.220 28.303 73.811 At 31 December 2005 997.513 4.842.784 3.215.619 561.869 9.617.785 Depreciation Balance - 1 January 2004 87.395 2.629.496 1.736.992 360.616 4.814.499 Charge for the year 27.213 364.257 374.120 43.748 809.338 On disposals - (206.259) (162.391) (21.456) (390.106) Exchange differences (1.792) (46.830) (171) (4.915) (53.708) On 1 January 2005 112.816 2.740.664 1.948.550 377.993 5.180.023 Charge for the year 32.725 408.686 430.199 48.582 920.192 On disposals - (269.424) (111.251) (43.859) (424.534) Exchange differences 11.836 49.369 693 13.009 74.907 At 31 December 2005 157.377 2.929.295 2.268.191 395.725 5.750.588 Net book amount At 31 December 2005 840.136 1.913.489 947.428 166.144 3.867.197
Land and buildings comprise freehold property except for the cases mentioned below.
The following properties are not freehold:
(a) Getian General Services Limited premises are constructed on long-term leasehold land owned by the Republic of Cyprus, covering an area of 14,800 square metres situated in K. Lakatamia locality. The lease, which covers a period of 5 years, commenced on 31.5.2003 and will expire on 30.5.2008, with an option for the company to renew it for a further 5 years. The annual rental, which is currently CY£1.575, will remain the same until 30.5.2008 and is subject to revision every 5 years. This property was valued on 31.12.1999 at CY£58.500.
(b) The joint control company Charilaos Apostolides (Bahrain) W.L.L. premises are constructed on long-term leasehold land, owned by the Government of the Kingdom of Bahrain. The lease expires on 31 December 2008. The terms of lease provide for extension of the lease period at the discretion of Ministry of Development and Industry. The directors are of the opinion that the lease will be renewed thereafter. The annual lease rental payable for 2005, which is fixed until 31 December 2008, was CY£3.840. The historic cost of these buildings in accordance with the consolidated balance sheet as at 31.12.1999 was CY£44.317 and the net book value was CY£NIL. The directors are of the opinion that these buildings have insignificant value.
Group land and buildings have been valued by the directors as at 31 December 1999, based on valuation by independent valuers. The valuation was based on market values and existing use of the property. The value used in the financial statements is the average value from the two valuations. The surplus on revaluation amounting to CY£458.888, was credited to the revaluation reserve.
23
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
14. Property, plant and equipment (continued)
In the cash flow statement, proceeds from sale of property, plant and equipment comprise:
2005 2004 CY£ CY£ Net book amount 129.740 94.434 Profit from the sale of property, plant and equipment (Note 6) 27.192 129.102 Proceeds from disposal of property, plant and equipment 156.932 223.536
If the land and buildings were stated on the historical cost basis, the amounts would be as follows:
2005 2004 CY£ CY£ Cost 664.364 550.873 Accumulated depreciation (249.945) (220.777) Net book amount 414.419 330.096
The historical cost and the market value of land that is not depreciated is as follows: 2005 2004 CY£ CY£ Cost 37.178 37.178 Market value 170.420 170.420
Bank borrowings are secured on land and buildings to the value of CY£ 655.000 (2004: CY£ 655.000) (Note 24).
15. Intangible assets
Computer Total Total Goodwill software 2005 2004 CY£ CY£ CY£ CY£ Cost On 1 January 96.152 - 96.152 96.152 Additions - 2.250 2.250 - At 31 December 96.152 2.250 98.402 96.152 Depreciation On 1 January 57.690 - 57.690 48.075 Amortisation for the year (Note 8) - 750 750 9.615 At 31 December 57.690 750 58.440 57.690 Closing net book amount 38.462 1.500 39.962 38.462
Goodwill arose from the acquisition of a subsidiary and represents the difference between the purchase consideration and the groups' share in the fair value of net assets acquired at the date of acquisition. The Board of Directors tests annually goodwill for impairment.
16. Available-for-sale financial assets
2005 2004 CY£ CY£ Opening net book amount 15.000 15.000 Closing net book amount 15.000 15.000
Available-for-sale financial assets, comprising equity securities in non listed public companies are classified as non-current assets, unless they are expected to be realised within twelve months of the balance sheet date or unless they will need to be sold to raise operating capital.
24
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
17. Inventories and work in progress
2005 2004 CY£ CY£ Raw materials 158.183 211.533 Property for development 7.514.655 5.398.694 Land for resale - 56.455 Work in progress 1.041.465 349.797 Goods for resale - 13.600 8.714.303 6.030.079
The cost of inventories recognised as expense and included in ''cost of goods sold'' amounted to CY£ 20.704.066 (2004: CY£ 14.349.050)
Inventories of property for development and land for sale of CY£ 6.175.000 (2004: CY£ 5.054.600) have been pledged as security for borrowings (Note 24)
Stocks are stated at cost. As at the year-end no provision for slow moving or obsolete stocks was considered necessary.
18. Amount due from customers for contract work
2005 2004 CY£ CY£ Uncompleted contract work 105.746.860 105.743.719 Less: Payments received on account (98.295.354) (98.845.904) 7.451.506 6.897.815
19. Trade and other receivables
2005 2004 CY£ CY£ Trade receivables 9.446.861 7.696.050 Contract retentions 1.095.137 1.149.203 Receivables from related companies (Note 31) 872.026 486.768 Directors' current accounts - debit balances (Note 31) 13.644 60.137 Deposits and prepayments 801.716 1.096.270 Advances to subcontractors 141.599 178.197 Other receivables 1.461.475 750.684 13.832.458 11.417.309 Less non-current receivables (287.912) (993.547) Current portion 13.544.546 10.423.762
Concentrations of credit risk with respect to trade receivables are limited due to the Group's large number of customers who have a variety of end markets in which they sell. The Group's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collections losses is inherent in the Group's trade receivables.
The Group has recognized a loss of CY£ 215.240 (2004: CY£ - ) for the impairment of its trade receivables during the year ended 31 December 2005. The loss has been included in selling and distribution costs in the income statement.
The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above.
25
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
20. Financial assets at fair value through profit or loss
2005 2004 CY£ CY£ Opening net book amount 125.180 241.649 Additions 67.797 - Disposals (47.045) (5.925) Change in fair value (24.542) (110.544) Closing net book amount 121.390 125.180
The financial assets at fair value through profit or loss are marketable securities and are valued at market value at the close of business on 31 December by reference to Stock Exchange quoted bid prices. Financial assets at fair value through profit or loss are classified as current assets because they are expected to be realised within twelve months of the balance sheet date.
In the cash flow statement, financial assets at fair value through profit or loss are presented within the section on operating activities as part of changes in working capital. In the income statement, changes in fair values of financial assets at fair value through profit or loss are recorded in operating income.
21. Cash and cash equivalents
2005 2004 CY£ CY£ Cash in hand 113.931 213.074 Cash at bank 2.391.582 1.331.902 2.505.513 1.544.976
For the purposes of the cash flow statement, the cash and cash equivalents include the following:
2005 2004 CY£ CY£ Cash at bank and in hand 2.505.513 1.544.976 Bank overdrafts (Note 24) (5.365.322) (6.380.533) (2.859.809) (4.835.557)
22. Share capital
2005 2005 2004 2004 Number of Number of shares CY£ shares CY£ Authorised Ordinary shares of CY£0,20 each 125.000.000 25.000.000 125.000.000 25.000.000 Issued and fully paid On 1 January 50.000.000 10.000.000 50.000.000 10.000.000 At 31 December 50.000.000 10.000.000 50.000.000 10.000.000
26
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
23. Other reserves
Fair value reserve on General Capital Consolidation land and revenue reserve reserve buildings reserve Exchange reserve Total CY£ CY£ CY£ CY£ CY£ CY£ Balance - 1 January 2004 15.825 (50.000) 199.295 79.438 (57.417) 187.141 Deferred tax on revaluation of land and buildings (Note 25) - - 33.432 - - 33.432 Exchange difference arising on the translation and consolidation of foreign companies' financial statements - - - - (59.876) (59.876) Transfer - - - 12.706 2.348 15.054 At 31 December 2004/ 1 January 2005 15.825 (50.000) 232.727 92.144 (114.945) 175.751 Exchange difference arising on the translation and consolidation of foreign companies' financial statements - - - 5.299 134.202 139.501 Transfer - - - 14.573 - 14.573 At 31 December 2005 15.825 (50.000) 232.727 112.016 19.257 329.825
24. Borrowings
2005 2004 CY£ CY£
Current borrowings Bank overdrafts (Note 21) 5.365.322 6.380.533 Bank loans 3.698.378 3.842.751 Finance lease and hire purchase contracts 176.906 - 9.240.606 10.223.284
Non current borrowings Bank loans 3.138.082 786.998 Finance lease and hire purchase contracts 309.670 - 3.447.752 786.998
Maturity of non-current borrowings between one to two years 2.205.913 103.107 between two and five years 1.241.839 683.891 3.447.752 786.998
The bank loans and overdrafts are secured as follows: • By floating charge on the Group's assets for CY£ 5.600.000 (2004: CY£ 5.709.600) • By mortgage against immovable property of the Group for CY£ 7.290.000 (2004: CY£ 4.220.000) • First legal charge over Group property in the UK • By floating charge on the Group's inventories for CY£ 40.000 (2004: CY£ 40.000) • Personal guarantees from the directors / shareholders of the Group.
27
CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
24. Borrowings (continued)
The weighted average effective interest rates at the balance sheet date were as follows: 2005 2004 Bank overdrafts 6,00% 7,15% Bank loans 6,42% 6,55%
25. Deferred tax
Deferred tax is calculated in full on all temporary differences under the liability method using the applicable tax rates (Note 11). The applicable corporation tax rate in the case of tax losses is 10%.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.
The movement on the deferred taxation account is as follows:
Revaluation of Accelerated tax land and depreciation buildings Total CY£ CY£ CY£ Balance - 1 January 2004 32.532 128.505 161.037 Charged / (credited) to: Income statement (Note 11) 28.199 - 28.199 Fair value reserve (Note 23) - (33.432) (33.432) At 31 December 2004/ 1 January 2005 60.731 95.073 155.804 Charged / (credited) to: Income statement (Note 11) 1.468 - 1.468 At 31 December 2005 62.199 95.073 157.272
The amounts included in the balance sheet include the following: 2005 2004 CY£ CY£ Deferred tax assets to be recovered after more than twelve months 95.073 95.073 Deferred tax liabilities to be settled within twelve months 62.199 60.731
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
26. Provisions for other liabilities and charges
A provision for end-of-service benefits exists and is determined in accordance with the Bahrain labour law in respect of non-Bahraini employees working in Bahrain. The retirement of Bahraini employees is provided under the General Organisation for Social Insurance Scheme and the Group liability is covered by making contributions to the scheme.
Pension and other post retirement obligations Total CY£ CY£ Balance - 1 January 2004 119.363 119.363 Charged / (credited) to income statement 22.344 22.344 Utilised amount (7.706) (7.706) Exchange difference (9.551) (9.551) At 31 December 2004/ 1 January 2005 124.450 124.450 Charged / (credited) to income statement 55.278 55.278 Utilised during the year (5.850) (5.850) Exchange difference 15.307 15.307 At 31 December 2005 189.185 189.185
27. Trade and other payables
2005 2004 CY£ CY£ Trade payables 7.316.785 5.433.793 Payments received on account 2.323.067 1.189.755 VAT 135.352 177.529 Directors' current accounts - credit balances (Note 31) 1.210 1.245 Accruals 1.797.094 802.828 Other creditors 448.288 156.142 Payables to related companies (Note 31) - 14.568 12.021.796 7.775.860
The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above.
28. Current tax liabilities / (current tax assets)
2005 2004 CY£ CY£ Corporation tax 40.382 (7.424) Special contribution for defence - 709 40.382 (6.715)
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
29. Subsidiaries, companies under joint control and joint ventures
The details of the subsidiaries and companies under joint control are as follows:
Name Country of Principal activities Year of Holding incorporation incorpor. 2005 2004 % % Chapomed Limited Cyprus Mechanical and electrical engineering contractors 1991 100 100 Getian General Services Cyprus Operation of a ready mixed concrete plant 1976 100 100 Limited Charilaos Apostolides Bahrain Building and civil engineering contractors in (Bahrain) W.L.L. Bahrain 1982 49 49 Chapo ATE Greece Building and civil engineering contractors in Greece 2001 100 100 Chapo (UK) Limited UK Building and civil engineering contractors in the UK 2001 100 100 Mistyray Limited British Virgin Holding company of Dernhall Properties Islands Limited 2002 50 50 Dernhall Properties Limited UK Property development in the UK 2002 50 50 PCG Group (Overseas) Gibraltar Building and civil engineering contractors in Limited Gibraltar 2002 50 50 Anglo Properties Ltd Isle of Man Property development in the UK 2005 50 -
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
29. Subsidiaries, companies under joint control and joint ventures (continued)
The details of joint ventures are as follows:
Name Legal status and nature of business Holding 2005 2004 % % Charilaos Apostolides & Co Limited & A. The Joint Venture was registered as a partnership on 3 Panayides Contracting Limited April 1997 under registration number 9778 and is engaged in the construction of the new Nicosia General Hospital 60 60 Joint venture named ''Prime Contracting The Joint Venture was registered as a partnership on 10 Group'' October 2001 under registration number 10532 and is engaged in construction works at the British Bases in Cyprus. 22 1/2 22 1/2 Joint venture Pieris K. - Ch. Apostolides & The Joint Venture was registered on 8 March 2001 under Co Limited registration number 059965010 and is engaged in property development in Greece. 50 50 Joint venture named ''PCG Group'' The Joint Venture was registered in 2003 and is a building and civil engineering contractor in Gibraltar. 20 20 Joint venture Chapo - Kyprianou The Joint Venture was registered in Cyprus on 25 August 2003 under registration number 10812 and is engaged in the division and sale of plots of land in Anthoupolis 50 50 Joint venture Athinaiki Techniki - Charilaos The Joint Venture was registered during 2003 in Greece Apostolides & Co Limited and is engaged in construction works for the project named Renovation of the 9th and 10th floors of the ACHEPA building of G.N. ''Evangelismos'' 50 50 Joint venture Charilaos Apostolides & Co The Joint Venture was registered during 2003 in Greece Limited - Evropaiki Techniki A.E. - Dector and is engaged in construction works for the project A.E. named Restoration of Phaliron Station 50 50 Joint venture Chapo - Cyprotels & Co The Joint Venture was registered in Cyprus on 4 March 2004 under registration number 10885 and is engaged in the construction and sale of holiday villas and holiday homes at Neo Chorio, Latsi 50 50 Joint venture Chapo - Chrysland & Co The Joint Venture was registered in Cyprus on 4 March 2004 under registration number 10884 and is engaged in the construction and sale of holiday villas and holiday homes in Paralimni 50 50
The Joint Ventures have been set up for specific purpose as explained above and a date for their termination has not been determined. The net profits from the operation of the Joint Ventures are distributable using the same proportions as the participation percentages of the parties to the ventures.
30. Interest in joint ventures and companies under joint control
The following amounts represent the Group's share of the assets and liabilities, income and expenses of the joint ventures and companies under joint control and are included in the consolidated balance sheet and the consolidated statement of operations:
2005 2004 CY£ CY£ Income 19.639.687 16.633.873 Expenses 18.385.279 15.756.106 Non-current assets 1.325.197 446.591 Current assets 18.222.939 12.344.307 Non current liabilities (1.818.312) (597.948) Current liabilities (12.967.555) (7.537.498)
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
31. Related party transactions
The Group's ultimate controlling party is Mr George Photiou. Charilaos Apostolides Public Limited has no direct holding in any of the companies mentioned here below.
The following transactions were carried out with related parties:
31.1 Directors’ remuneration
The total remuneration of the Directors was as follows: 2005 2004 CY£ CY£ Directors' fees 44.050 45.050 Directors' remuneration 121.850 135.779 Provident fund for directors 10.439 8.659 176.339 189.488
31.2 Sales of products 2005 2004 CY£ CY£ Chapo (Investments) Limited - Machinery repairs and maintenance 3.587 57.207 - Rendering of services - 28.483 George Photiou - House construction - 22.083 3.587 107.773
Sales to related parties were made on commercial terms and conditions.
31.3 Purchases of materials and rent payable 2005 2004 CY£ CY£ Chapo Holdings Limited - Office rent 15.600 15.600 Chapo (Investments) Limited - Purchase of materials 131.829 355.307 - Land rent 6.000 6.000 153.429 376.907
Purchases from related parties were made on commercial terms and conditions.
31.4 Receivables from related parties (Note 19) 2005 2004 Name Nature of transactions CY£ CY£ Chapo Holdings Limited Financing 265.186 160.046 Xylergo Limited Trade 227 - Chapo Housing Limited Trade 48 - Chapo (Investments) Limited Purchases 606.565 326.587 Chapo Estates Limited Financing - 135 872.026 486.768
31.5 Payables to related parties (Note 27) 2005 2004 Name Nature of transactions CY£ CY£ Xylergo Limited Financing - 14.568 - 14.568
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CHARILAOS APOSTOLIDES PUBLIC LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 December 2005
31. Related party transactions (continued)
31.6 Directors' current accounts - debit balances (Note 19) 2005 2004 CY£ CY£ George Photiou 4.153 39.862 Christodoulos Matthew 4.534 3.420 Mikis Ioannou 4.957 6.560 Charis Photiou - 10.295 13.644 60.137
The directors' current accounts are interest free, and have no specified repayment date.
31.7 Directors' current accounts - credit balances (Note 27) 2005 2004 CY£ CY£ Nicolaos Philippou 1.210 1.245 1.210 1.245
The directors' current accounts are interest free, and have no specified repayment date.
32. Contingent liabilities
At 31 December 2005 the Group had contingent liabilities in respect of bank guarantees arising in the ordinary course of business from which the Board of Directors is not anticipating that material liability will arise. These guarantees amounted to CY£ 10.158.709 (2004: CY£ 11.637.910)
33. Commitments
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows: 2005 2004 CY£ CY£ between one to two years 5.415 4.995 between two and five years 5.415 9.990 10.830 14.985
34. Post balance sheet events
There were no material post balance sheet events, which have a bearing on the understanding of the financial statements.
Auditors' report page 5
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