PANAMA, REPUBLIC OF PANAMA--(Marketwired - Aug. 31, 2016)
- Thunderbird Resorts Inc.
("Thunderbird") (FRANKFURT:4TR)(EURONEXT
AMSTERDAM:TBIRD) is pleased to announce that its 2016
Half-year report has been filed with the Euronext ("Euronext
Amsterdam") and the Netherlands Authority for Financial Markets
("AFM"). As a Designated Foreign Issuer with respect to Canadian
securities regulations, the Half-year report is intended to comply
with the rules and regulations set forth by the AFM and the
Euronext Amsterdam.
Copies of the Half-year report in the English
language will be available at no cost at the Group's website
at www.thunderbirdresorts.com.Copies in the English language
are available at no cost at the Group's operational office in
Panama and at the offices of our local paying agent ING Commercial
Banking, Paying Agency Services, Location Code TRC 01.013,
Foppingadreef 7, 1102 BD Amsterdam, the Netherlands (tel:+31 20 563
6619, fax: +31 20 563 6959, email: iss.pas@ing.nl).
Copies are also available on SEDAR at www.SEDAR.com.
Below are certain material excerpts from the full
2016 Half-year Report the entirety of which can be found on our
website at www.thunderbirdresorts.com.
LETTER FROM THE
CEO
Dear Shareholders and Investors:
While we always give considerable thought to the
Letter from the CEO, the letter in this 2016 Half-year Report is of
particular importance, with a four-part agenda as follows. Sections
2 and 3 below are of particular relevance for shareholders who wish
more insight into the Special Resolution that has been sent for
consideration at our September 21, 2016 Annual General and Special
Shareholders' Meeting.
-
Summarize progress through the 2016 Half-year
period against our previously-stated goals.
-
Describe the rationale for the special
resolution that has been sent to shareholders for consideration at
our September 21, 2016 Annual General and Special Shareholders'
Meeting. The resolution referred to is a Special Resolution that
the Company may post-sale of its assets: Pay a liquidating
distribution to shareholders and formally liquidate and dissolve
the company.
-
Describe those factors that could impact the net
value of the Group's assets as compared to its current market
capitalization. Those items discussed herein are: i) Valuation
metrics commonly used in our markets for the acquisition of gaming
cash flows and for commercial real estate; and ii) Valuation
adjustments that are most typical in these types of transactions
such as asset transfer tax, capital gains tax, contingencies,
escrows, potential litigation liabilities or assets and such
working capital items as cash and cash equivalents, pre-paid
expenses and deposits and borrowings.
-
Summarize our conclusions and offer key notes
for consideration.
Please refer to the section
entitled "Forward Looking Statement" on page 2 which contains all
of the admonitions concerning reliance on the information we
provide to you. In summary, none of the information
described in points 2 and 3 in this letter should be relied on in
your analysis of the net liquidation value of the Group. Rather, we
would expect you as a shareholder to perform and rely on your own
research and on the publicly available financial information
provided by the Group in 2016 and in previous years. Any and all
"metric" information provided in points 2 and 3 of this letter
should not be relied upon by potential acquirers of our assets as
the Group will seek to sell assets at values that protect the
interests of our shareholders. Any final pricing of any Group asset
will be based on numerous factors, including the number of bidders,
the terms of the particular transaction, the time-value and other
considerations that the Group deems relevant to setting the final
terms of a specific transaction.
1. PERFORMANCE UNDER OUR
PREVIOUSLY-STATED GOALS
In the CEO Letter to Shareholders published in the
2015 Annual Report, the Group stated certain goals that support
achieving profitability and building a healthy company. A detailed
update can be found in the remaining chapters of this report. Below
is a summary update on our progress through June 30, 2016.
A. Increase our EBITDA(1):
Adjusted EBITDA (after deducting Corporate-level expenses) reduced
by $333 thousand or 18.1% on a USD basis as compared to Half-year
2015. However, under a currency neutral analysis (in which the same
exchange rate would be applied to both periods), the Group's
Adjusted EBITDA decreased by only $31 thousand or 2.0% as compared
to 2015. The $333 thousand reduction of Adjusted EBITDA was driven
by $1.5 million in decreased revenues for the Group, meaning that
the Group has also made corresponding cuts in expense to offset the
revenue loss as reported in US dollars. Moreover, under a currency
neutral analysis (in which the same exchange rate would be applied
to both periods), Group revenue would actually have reduced by only
$37 thousand, meaning that a reduction in revenue was in fact
primarily an issue of foreign exchange.
B. Improve our Profit /
(Loss): Our Loss from Continuing Operations improved by $906
thousand or 38.8%. The improvement is the result of reduced
interest and financing costs and higher Other gains as compared to
Half-year 2015. Other gains are mainly related to the sale of the
office building in Panama.
C. Reduce our borrowings:
Gross debt2 has been
reduced to $30.3 million on June 30, 2016 as compared to $32.1
million on December 31, 2015. Net debt (gross debt less cash and
cash equivalents) has been reduced to $28.2 million on June 30,
2016 as compared to $29.3 million on December 31, 2015.
2. SPECIAL RESOLUTION PROVIDED TO
SHAREHOLDERS FOR CONSIDERATION
On August 25, 2016, the Group sent to shareholders
the supporting materials for our September 21, 2016 Annual General
and Special Shareholders' Meeting. Included within those materials
was a Special Resolution requesting that the Company's shareholders
approve the following:
BE IT RESOLVED THAT:
i. The Board of Directors of the
Corporation is hereby authorized, at a time to be determined by the
Board of Directors of the Corporation, to voluntarily dissolve the
Corporation pursuant to the BVI Business Corporate Act of 2004,
which winding up process and dissolution application shall be
commenced and implemented at such time as determined by the Board
in their sole discretion;
ii. The Board of Directors of the
Corporation is hereby authorized to make provision for and to
discharge all liabilities of the Corporation in conjunction with
the winding up and dissolution of the Corporation and in connection
with such winding up and dissolution, is authorized to make a pro
rata distribution to shareholders of the net proceeds available to
the Corporation (after adjusting for carrying costs and other
winding up and dissolution related expenses) from the sale of any
or all remaining assets of the Corporation in such amounts and at
such times as determined by the Board of Directors;
iii. Any one director or officer
of the Corporation be and is hereby authorized and directed to do
all such things and to execute and deliver all documents and
instruments as may be necessary or desirable to carry out the terms
of this resolution, including but not limited to the filing of
articles of dissolution under the BVI Business Corporations Act;
and
iv. The directors of the
Corporation may, in their discretion, without further approval of
the shareholders, revoke this special resolution at any time before
the filing of articles of dissolution under the Business
Corporation Act (BVI) in respect of the foregoing.
Granting the Board of Directors the right to
voluntarily dissolve the Corporation does not mean that the same will occur. Approval of
shareholders in advance allows the Board the flexibility to
undertake the same should the Board deem it to be in the best
interest of shareholders based on the circumstances at the time,
without the risk of delay of approval of specific transactions or
the expense of calling another shareholder meeting to specifically
approve such matter. In the event that the Company proceeds with
its plan to liquidate and dissolve, the company in due course
intends to delist from the Euronext Amsterdam in accordance with
the rules and procedures of the Euronext Amsterdam.
Also included within the materials for the Annual
General and Special Shareholders' Meeting was a rationale for this
Special Resolution, which we summarize immediately below.
As published in the Corporation's 2014 Half-year
Report, 2014 Annual Report, 2015 Half-year Report, the Q3 2015
Interim Management Statement, and the 2015 Annual Report, the Board
of Directors and Management both believe that the market
capitalization of Thunderbird Resorts Inc. is less than its
intrinsic value, which we define as:
The net proceeds which the Group
could achieve through liquidating all operating and real estate
assets; plus the net proceeds achievable from completing all tax
and non-tax litigations and fulfilling all escrow periods for
escrows; and less carrying costs to manage process and operations
while the Group remains a publicly-traded company.
Moreover, the Board of Directors and Management
believe that it is increasingly difficult to finance growth and to
achieve accretive value for the following reasons:
A. The lack of liquidity in our stock means that
we cannot use our stock as currency to acquire cash flow.
B. Banks are increasingly reticent and many now
even prohibit working with gaming companies, which means that
access to competitively priced debt and amortization schedules is
now virtually impossible to achieve, and therefore bank financing
is not a mechanism for investment in growth.
C. The Group has historically relied on high-yield
bonds, but this market has dried up for two reasons: i) The stage
of development of gaming in our markets has matured in recent
years, meaning that the gaming sector in these markets is
experiencing relatively moderate growth and can no longer afford
the double-digit interest rates and single-digit loan periods that
are standard requirements of high-yield bonds; and ii) Even if the
Group could afford to service high-yield bonds, since the financial
crisis bond investors are exceedingly more cautious about investing
and there are far fewer of them.
D. Our geographic markets have large
concentrations of wealth in few hands, which means that the number
of acquirers for our real estate assets are small and the time to
sell at a competitive price can be exceedingly long, which means we
are not able to generate proceeds from real estate asset sales on a
timely basis to invest in growing our operating assets.
Because the Group believes that shareholders
should achieve higher returns through a liquidating distribution as
compared to the market cap at the date of publication of this 2016
Half-year Report and as compared to some future market
cap given the lack of resources to invest in growth, we recommend
that the shareholders carefully consider the Special Resolution as
described. We also suggest that shareholders consider the low level
of liquidity for the stock of Thunderbird Resorts Inc., and the
difficulty that low demand creates for shareholders to achieve an
exit via the market.
To view all of the materials for the Annual
General and Special Shareholders' Meeting, including a copy of the
resolution itself, please click on the following
link: http://thunderbirdresorts.com/wp-content/uploads/2016/08/2016-AGM-press-release-aug-25-2016.pdf.
3. MARKET-BASED VALUATION
METRICS
The Group operates in different markets, we have
varied ownership levels in our assets, and we operate in sectors
ranging from gaming to hospitality to real estate. Because there
are many factors that could influence the realizable value of
liquidated assets, shareholders may find it challenging to get
comfortable with their own analyses of the net value of the Group's
assets. By reviewing this section along with the full 2016
Half-year Report, the Information Circular (see link above) and
relevant past disclosures, we hope you will have sufficient
information to prepare your own analysis. Should you have follow-up
questions, please kindly direct them to Albert Atallah, General
Counsel via email to aatallah@thunderbirdresorts.com. We will
publish any price sensitive information stemming from these
questions and answers.
While it is not appropriate for the Board of
Directors or Management to forecast net asset values or to forecast
the possible ranges of liquidating distributions to shareholders,
below we do provide metrics that are commonly used in markets in
which we own assets.
A. Valuation of Gaming Cash Flows: Earnings before
Interest, Tax, Depreciation and Amortization ("EBITDA") is widely
used in the gaming industry in our markets as a substitute for
operating cash flow. To determine the gross value of EBITDA in our
markets, acquirers and sellers commonly reach a valuation based on
a range of 4.5X to 6.0X historic EBITDA rather than a formula based
on the net present value of forecasted future cash flows.
Valuations below 5X EBITDA are generally reserved for poorly
managed businesses that require material upgrades to sustain
revenue. Valuations of 6X are generally reserved for premium
locations with demonstrable growth potential. Our gaming EBITDAs
for Peru and Nicaragua totaled $5.6 million in 2015 and our
unaudited, preliminary gaming EBITDAs through half-year 2016 are
approximately $2.5 million. Please remember that the Group is a
100% shareholder of all of its Peru real estate and operating
assets and a 55.9% shareholder of all of its Nicaragua real estate
and operating assets, so EBITDA multiples should be calculated on a
pro rata basis.
B. Adjustments to the Valuation of Gaming Cash
Flows: Common adjustments to the valuation of gaming EBITDA
include: i) Add back adjustments for corporate shared services that
could be redundant for a buyer, meaning that there could
be a discussion of a price increase based on synergistic
efficiencies to be passed to a buyer that operates in the market;
ii) In the case of an operation sold that is not currently paying a
lease because it operates within real estate we own, a lease amount
might be negotiated based on cap rates similar to those provided in
paragraph 3C below and deducted from the EBITDA calculation used to
determine valuation of gaming cash flows as per paragraph 3A above;
and iii) Typical working capital adjustments based on balance sheet
items.
C. Valuation of Income-producing Real Estate: The
value of income producing real estate in our operating countries
and sectors is generally determined by capitalization rates ranging
from 9% to 11% depending on the quality of the real estate and
whether it supports hospitality, office or gaming
operations. Special Note on the Real Estate
of Fiesta Hotel & Casino: The Fiesta Hotel & Casino is
a mixed-use hotel, office complex and retail real estate property
in the heart of Miraflores, Lima in Peru. We are currently in
discussions with several qualified investors, all of which are
either financial investors or strategic investors who do not
operate in the gaming sector. The April 2015 real estate valuation
for this property was provided by a well-respected real estate
appraisal firm that is commonly used by banks in Peru when
evaluating real estate loan transactions. Regardless of the
appraised value, final pricing for this asset will most likely be
determined by the cash flow sold with the real estate, which most
likely will be the hotel cash flows, office leases, parking garage
cash flows and a lease to be negotiated for the retail gaming
space. Based on the current levels of cash flow and on the
practical reality that only a portion of the casino cash flow (via
a lease back) would likely be made to a buyer of this real estate,
the Group expects that the maximum realizable gross value of this
real estate will be no more than $35 million based on the
information available today.
Other Valuation Inputs: As referenced in the third bullet at the
very top of this letter, it is important to take into account
valuation adjustments that are most typical in these transactions
such as asset transfer tax, capital gains tax, contingencies,
escrows, potential litigation liabilities or assets and such
working capital items as cash and cash equivalents, pre-paid
expenses and deposits and borrowings. The point of this paragraph
is to help the reader to better understand the impact of each of
these items when evaluating the net liquidation value of the Group.
Real estate and share transfer taxes, as well as capital gains
taxes, should be available online through multiple sources. For
information regarding Group escrows that could possibly be
partially or wholly recovered, please refer to our 2015 Annual
Report and specifically to Note 11 and to Chapter 2, "Other Group
Updates." For information regarding tax contingencies, pre-paid
taxes in cases that continue under dispute and litigation
"liabilities / assets," please refer to the Notes 17 and 22 in the
2015 Annual Report. For information on Group debt, please kindly
review this 2016 Half-year Report. Finally, we believe it is
important to measure and understand the carrying costs of the
Group, which we have referenced in Chapter 2, "Other Group Updates"
of this 2016 Half-year Report. At this time, we cannot estimate: i)
The number of months or possibly even years it could take for the
Group to complete implementation of the Special Resolution should
in fact it be approved and fully implemented; and ii) Which assets
might be sold first and, if the Special Resolution is fully
implemented, when it would be likely to make a liquidating
distribution. Finally, the number of issued and outstanding shares
of Thunderbird Resorts Inc. as of the publication of the 2016
Half-year Report is 25,054,371. In regards to the number of issued
and outstanding shares, it is important to note that Officers are
materially discounting their salaries so as to preserve Group cash,
and it is possible that this discount could be re-paid in shares of
the Group as described in Chapter 2 "Other Group Updates" of this
2016 Half-year Report.
4. CONCLUSIONS AND KEY NOTES FOR
CONSIDERATION
We recognize that this is an unusual Letter from
the CEO, but we strongly believe that shareholders should have the
opportunity to learn about valuation metrics that are commonly used
in our operating markets. Regardless, it is the responsibility of
the shareholder to perform their own analysis of the market and of
our reporting and to reach their own conclusions on the net
liquidation value of the Group as compared to its current market
capitalization. We offer the following conclusions and key notes
for your consideration.
A. The Board of Directors and Management believe,
but cannot be certain, that the intrinsic value as defined herein
should be greater than the average market capitalization of the
Group in the months leading up to this publication. For this
reason, we are presenting to shareholders the Special Resolution to
distribute from the sale of the Group's assets followed by the
formal liquidation of company assets and dissolution of the
company. Regardless, there can be no assurances whatsoever that any
liquidating distribution, if paid (see next paragraph), will exceed
the current market capitalization.
B. Should a Special Resolution be approved, it is
possible that the Board of Directors and Management
might not actually implement the
Special Resolution if there were a change in circumstance that made
it in the best interests of shareholders to postpone or cancel its
implementation. For example, if the Group were able to sell a
material portion of its real estate by early 2017, it is possible
that the Group could become virtually debt free and could start to
generate regular, material cash flows; in which case, it might at
that point be in the interest of shareholders for the Group to
spend time building accretive value and cancel or postpone the
implementation of the Special Resolution. On the other hand, if the
Group is not able to sell a material portion of its real estate by
early 2017, then it would likely be in the interest of shareholders
that the Group also pursue sales of its operating assets and fully
implement the Special Resolution.
C. In the meantime, shareholders may choose to
exit at prices set by the market at any time or retain their
shareholding positions in order to benefit from a potential
distribution should in fact shareholders approve the Special
Resolution and should in fact the Group fully implement the Special
Resolution.
We will keep you informed as there are material
events and progress.
Salomon Guggenheim, Chief Executive Officer and
President
August 31, 2016
1. "EBITDA" is not an accounting term under IFRS, and
refers to earnings before net interest expense, income taxes,
depreciation and amortization, equity in earnings of affiliates,
minority interests, development costs, other gains and losses, and
discontinued operations. "Property EBITDA" is equal to EBITDA at
the country level(s). "Adjusted EBITDA" is equal to property EBITDA
less "Corporate expenses," which are the expenses of operating the
parent company and its non-operating subsidiaries and
affiliates.
2. Gross debt equals total borrowings and finance lease
obligations.
GROUP
OVERVIEW
Below is our consolidated profit / (loss) summary
for our continuing operations for the six months ended June 30,
2016 as compared with the same period of 2015. In summary, Group
revenue and adjusted EBITDA have reduced on a USD basis (see
"Forex" note below), despite lower country-level operating expenses
and reduced corporate expenses. See notes on certain key items
below.
(In thousands, proportional
consolidation) |
|
|
|
|
|
|
|
|
|
Six months
ended |
|
|
|
|
|
|
June 30 |
|
|
|
|
|
|
2016 |
|
2015 |
|
Variance |
|
% change |
|
Net
gaming wins |
$ |
16,124 |
|
$ |
17,209 |
|
$ |
(1,085 |
) |
-6.3 |
% |
Food and
beverage sales |
|
1,429 |
|
|
1,501 |
|
|
(72 |
) |
-4.8 |
% |
Hospitality and other sales |
|
1,923 |
|
|
2,313 |
|
|
(390 |
) |
-16.9 |
% |
Total revenues |
|
19,476 |
|
|
21,023 |
|
|
(1,547 |
) |
-7.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Promotional allowances |
|
2,474 |
|
|
2,282 |
|
|
192 |
|
8.4 |
% |
Property,
marketing and administration |
|
13,777 |
|
|
14,724 |
|
|
(947 |
) |
-6.4 |
% |
Property EBITDA |
|
3,225 |
|
|
4,017 |
|
|
(792 |
) |
-19.7 |
% |
Corporate
Expenses |
|
1,723 |
|
|
2,182 |
|
|
(459 |
) |
-21.0 |
% |
Adjusted EBITDA |
|
1,502 |
|
|
1,835 |
|
|
(333 |
) |
-18.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Property
EBITDA as a percentage of revenues |
|
7.7 |
% |
|
8.7 |
% |
|
|
|
|
|
Depreciation and amortization |
|
1,514 |
|
|
1,836 |
|
|
(322 |
) |
-17.5 |
% |
Interest
and financing costs, net |
|
1,697 |
|
|
2,124 |
|
|
(427 |
) |
-20.1 |
% |
Management fee attributable to non-controlling interest |
|
2 |
|
|
- |
|
|
2 |
|
0.0 |
% |
Project
development |
|
- |
|
|
48 |
|
|
(48 |
) |
-100.0 |
% |
Foreign
exchange (gain) / loss |
|
294 |
|
|
466 |
|
|
(172 |
) |
-36.9 |
% |
Other
(gains) / losses |
|
(716 |
) |
|
(470 |
) |
|
(246 |
) |
52.3 |
% |
Income
taxes |
|
143 |
|
|
169 |
|
|
(26 |
) |
-15.4 |
% |
Loss for the period from continuing operations |
|
(1,432 |
) |
|
(2,338 |
) |
|
906 |
|
-38.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Forex: The strengthening of the US dollar versus
our operating currencies continues to have a material impact on our
business as compared to the same period in 2015. Under a currency
neutral analysis (in which the same exchange rate would be applied
to both periods), Group revenue would have decreased by only $37
thousand or 0.2% (virtually no change), while adjusted EBITDA would
have reduced by just $31 thousand or 2.0%.
Group Debt: Below is the
Group's Gross debt and Net debt on June 30, 2016.
(In thousands) |
|
|
|
|
Jun-16 |
Mar-16 |
Dec-15 |
Borrowings |
$ |
29,247 |
$ |
29,417 |
$ |
30,701 |
Obligations under leases and hire purchase contracts |
|
1,038 |
|
1,150 |
|
1,432 |
Gross Debt |
$ |
30,285 |
$ |
30,568 |
$ |
32,133 |
Less: cash and cash equivalents (excludes restricted
cash) |
|
2,092 |
|
2,138 |
|
2,869 |
Net Debt |
$ |
28,193 |
$ |
28,429 |
$ |
29,264 |
|
|
|
|
|
|
|
Note: Gross debt above is presented net of debt
issuance costs (costs of debt at time of issuance, which are
currently non-cash and amortize over time) which is why there is an
approximate $186 thousand variance with the total principal balance
below.
The Group estimates its debt as follows starting
in July 2016:
|
|
|
|
|
|
|
|
Principal Payment |
2016 |
2017 |
2018 |
2019 |
2020 |
Thereafter |
Total |
|
Corporate |
$ |
5,798,892 |
$ |
5,177,458 |
$ |
2,207,631 |
$ |
1,375,026 |
$ |
1,534,143 |
$ |
1,862,962 |
$ |
17,956,112 |
|
Peru |
|
1,213,286 |
|
1,749,279 |
|
1,420,385 |
|
6,497,237 |
|
- |
|
- |
|
10,880,187 |
|
Nicaragua |
|
125,742 |
|
269,561 |
|
294,885 |
|
673,863 |
|
175,462 |
|
95,073 |
|
1,634,586 |
Total |
$ |
7,137,920 |
$ |
7,196,298 |
$ |
3,922,901 |
$ |
8,546,126 |
$ |
1,709,605 |
$ |
1,958,035 |
$ |
30,470,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Payment |
2016 |
2017 |
2018 |
2019 |
2020 |
Thereafter |
Total |
|
Corporate |
$ |
843,977 |
$ |
931,841 |
$ |
623,971 |
$ |
456,979 |
$ |
297,863 |
$ |
121,721 |
$ |
3,276,352 |
|
Peru |
|
491,414 |
|
803,430 |
|
595,615 |
|
213,110 |
|
- |
|
- |
|
2,103,569 |
|
Nicaragua |
|
83,121 |
|
145,765 |
|
120,441 |
|
92,985 |
|
24,205 |
|
6,675 |
|
473,192 |
Total |
$ |
1,418,512 |
$ |
1,881,036 |
$ |
1,340,027 |
$ |
763,074 |
$ |
322,068 |
$ |
128,396 |
$ |
5,853,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RISK MANAGEMENT
For more detail on Risk Factors, see Chapter 5 of
the 2016 Half-year Report.
MANAGEMENT STATEMENT ON "GOING
CONCERN"
Management routinely plans future activities
including forecasting future cash flows. Management has reviewed
their plan with the Directors and has collectively formed a
judgment that the Group has adequate resources to continue as a
going concern for the foreseeable future, which Management and the
Directors have defined as being at least the next 12 months from
the filing of our 2015 Annual Report. In arriving at this judgment,
Management has prepared the cash flow projections of the Group,
which incorporates a 5-year rolling forecast and detailed cash flow
modeling through the current financial year. Directors have
reviewed this information provided by Management and have
considered the information in relation to the financing
uncertainties in the current economic climate, the Group's existing
commitments and the financial resources available to the Group. The
expected cash flows have been modeled based on anticipated revenue
and profit streams with debt funding programmed into the model and
reducing over time. The model assumes no new construction projects
during the forecast period. The model assumes a stable regulatory
environment in all countries with existing operations.
Sensitivities have been applied to this model in relation to
revenues not achieving anticipated levels.
The Directors have considered the: (i) base of
investors and debt lenders historically available to Thunderbird
Resorts, Inc.; (ii) global capital markets; (iii) limited trading
exposures to our local suppliers and retail customers; (iv) other
risks to which the Group is exposed, the most significant of which
is considered to be regulatory risk; (v) sources of Group income,
including management fees charged to and income distributed from
its various operations; (vi) cash generation, debt amortization
levels and key debt service coverage ratios; (vii) fundamental
trends of the Group's businesses; (viii) extraordinary cash inflows
and outflows from one-time events forecasted to occur in the
12-month period following the reporting period of this 2016
Half-year Report; (ix) ability to re-amortize and unsecured
lenders; (x) level of probability of refinancing of secured debt;
(xi) liquidation of undeveloped and therefore non-performing real
estate assets that have been held for sale; and (xii) level of
interest by third parties in the acquisition of certain operating
assets.
The Directors have also considered certain
critical factors that might affect its continuing operations, as
follows:
-
Debt Repayment and Cash Flow: Debt service
payments for secured bank loans in Peru and secured and unsecured
loans at the Corporate-level continue to be a significant part of
the Group's outflow. The Group has invested significant time and
effort to refinance debt under longer-term amortizations, but the
banking industry in Latin America is not easily amenable to
financing our gaming operations or real estate that depend on
gaming income. The Group may need to sell the majority of its real
estate assets in order to pay down virtually all Group debt and
revert the Group to positive cash flow.
-
Corporate Expense and Cash Flow: Corporate
expense has decreased materially in recent years, and is expected
to continue to decrease. Combined with debt reduction, achieving
the Group's announced Corporate expense targets is critical to
achieving positive cash flow. Progress in this regard includes
preliminary, unaudited Corporate expense in half-year 2016 of $1.7
million, and the Group is now targeting a Corporate Expense run
rate of less than $2.0 million starting approximately in October
2016.
-
Liquidity and Working Capital: The Group is
currently operating with low levels of reserves and working
capital. Selling all or virtually all Group real estate and
reverting cash flow will be critical to creating a healthy level of
working capital reserves.
Considering the above, Management and Directors
are satisfied that the consolidated Group has adequate resources to
continue as a going concern for at least the 12 months following
the reporting period of this 2016 Half-year Report. For these
reasons, Management and Directors continue to adopt the going
concern basis in preparing the consolidated financial
statements.
FINANCIAL
STATEMENTS
THUNDERBIRD RESORTS, INC. |
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL
POSITION |
(Expressed in thousands of United States dollars) |
As of June 30, 2016 and December 31, 2015 |
|
|
|
June 30,
2016 |
|
December 31,
2015 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Property,
plant and equipment (Note 7) |
$ |
22,673 |
|
$ |
24,019 |
|
Investment accounted for using the equity method (Note 16) |
|
4,341 |
|
|
5,908 |
|
Intangible assets |
|
5,947 |
|
|
5,985 |
|
Deferred
tax asset |
|
439 |
|
|
423 |
|
Trade and
other receivables |
|
1,736 |
|
|
1,629 |
|
Due from
related parties (Note 13) |
|
42 |
|
|
42 |
|
Total
non-current assets |
|
35,178 |
|
|
38,006 |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Trade and
other receivables |
|
1,605 |
|
|
1,126 |
|
Due from
related parties (Note 13) |
|
1,778 |
|
|
2,070 |
|
Inventories |
|
460 |
|
|
480 |
|
Restricted cash |
|
1,548 |
|
|
1,534 |
|
Cash and
cash equivalents |
|
2,092 |
|
|
2,869 |
|
Total
current assets |
|
7,483 |
|
|
8,079 |
|
|
|
|
|
|
|
|
Total assets |
$ |
42,661 |
|
$ |
46,085 |
|
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
Share
capital (Note 11) |
|
110,504 |
|
|
110,456 |
|
Share
option reserve |
|
89 |
|
|
89 |
|
Retained
earnings |
|
(106,511 |
) |
|
(104,633 |
) |
Translation reserve |
|
(4,804 |
) |
|
(5,209 |
) |
Equity
attributable to equity holders of the parent |
|
(722 |
) |
|
703 |
|
Non-controlling interest |
|
2,038 |
|
|
1,911 |
|
Total
equity |
|
1,316 |
|
|
2,614 |
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Borrowings (Note 9) |
|
17,575 |
|
|
22,966 |
|
Obligations under leases and hire purchase contracts (Note 10) |
|
209 |
|
|
441 |
|
Deferred
tax liabilities |
|
21 |
|
|
22 |
|
Provisions |
|
569 |
|
|
616 |
|
Trade and
other payables |
|
495 |
|
|
1,133 |
|
Total
non-current liabilities |
|
18,869 |
|
|
25,178 |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and
other payables |
|
7,606 |
|
|
5,943 |
|
Due to
related parties (Note 13) |
|
900 |
|
|
983 |
|
Borrowings (Note 9) |
|
11,672 |
|
|
7,735 |
|
Obligations under leases and hire purchase contracts (Note 10) |
|
829 |
|
|
991 |
|
Other
financial liabilities |
|
373 |
|
|
379 |
|
Current
tax liabilities |
|
329 |
|
|
361 |
|
Provisions |
|
767 |
|
|
1,901 |
|
Total
current liabilities |
|
22,476 |
|
|
18,293 |
|
|
|
|
|
|
|
|
Total
liabilities |
|
41,345 |
|
|
43,471 |
|
|
|
|
|
|
|
|
Total equity and liabilities |
$ |
42,661 |
|
$ |
46,085 |
|
|
|
|
|
|
|
|
|
THUNDERBIRD RESORTS, INC. |
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE
INCOME |
(Expressed in thousands of United States dollars) |
For the six months ended June 30, 2016 |
|
|
|
Six months
ended |
|
|
June 30 (unaudited) |
|
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
Net gaming wins |
$ |
16,124 |
|
$ |
17,209 |
|
Food, beverage and hospitality sales |
|
3,352 |
|
|
3,814 |
|
Total revenue |
|
19,476 |
|
|
21,023 |
|
|
|
|
|
|
|
|
Cost of goods sold |
|
(7,965 |
) |
|
(7,945 |
) |
Gross profit |
|
11,511 |
|
|
13,078 |
|
|
|
|
|
|
|
|
Other operating costs |
|
|
|
|
|
|
|
Operating, general and administrative |
|
(10,011 |
) |
|
(11,243 |
) |
|
Project
development |
|
- |
|
|
(48 |
) |
|
Depreciation and amortization |
|
(1,514 |
) |
|
(1,836 |
) |
|
Other
gains and (losses) (Note 5) |
|
716 |
|
|
470 |
|
Operating profit / (loss) |
|
702 |
|
|
421 |
|
|
|
|
|
|
|
|
Share of loss from equity accounted investments (Note
16) |
|
(57 |
) |
|
(10 |
) |
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
|
Foreign
exchange loss) |
|
(294 |
) |
|
(466 |
) |
|
Financing
costs (Note 6) |
|
(1,765 |
) |
|
(2,217 |
) |
|
Financing
income (Note 6) |
|
75 |
|
|
106 |
|
|
Other
interest (Note 6) |
|
(7 |
) |
|
(13 |
) |
Finance costs, net |
|
(1,991 |
) |
|
(2,590 |
) |
|
|
|
|
|
|
|
Loss before tax |
|
(1,346 |
) |
|
(2,179 |
) |
|
|
|
|
|
|
|
Income taxes expense |
|
|
|
|
|
|
|
Current |
|
(143 |
) |
|
(169 |
) |
|
Deferred |
|
- |
|
|
- |
|
Income taxes expense |
|
(143 |
) |
|
(169 |
) |
|
|
|
|
|
|
|
Loss for the year from continuing
operations |
$ |
(1,489 |
) |
$ |
(2,348 |
) |
|
|
|
|
|
|
|
Gain / (loss) for the year from discontinued operations (Note
8) |
|
(261 |
) |
|
6,690 |
|
|
|
|
|
|
|
|
Gain / (loss) for the year |
$ |
(1,750 |
) |
$ |
4,342 |
|
|
|
|
|
|
|
|
Other comprehensive income (amounts, which
will be recycled) |
|
|
|
|
|
|
Exchange differences arising on the translation of foreign
operations |
$ |
405 |
|
$ |
(1,723 |
) |
Other comprehensive income for the
year |
|
405 |
|
|
(1,723 |
) |
|
|
|
|
|
|
|
Total comprehensive income for the
year |
$ |
(1,345 |
) |
$ |
2,619 |
|
|
|
|
|
|
|
|
Gain / (loss) for the year attributable
to: |
|
|
|
|
|
|
Owners of the parent |
|
(1,878 |
) |
|
4,372 |
|
Non-controlling interest |
|
128 |
|
|
(30 |
) |
|
$ |
(1,750 |
) |
$ |
4,342 |
|
|
|
|
|
|
|
|
Total comprehensive income attributable
to: |
|
|
|
|
|
|
Owners of the parent |
|
(1,473 |
) |
|
2,649 |
|
Non-controlling interest |
|
128 |
|
|
(30 |
) |
|
$ |
(1,345 |
) |
$ |
2,619 |
|
|
|
|
|
|
|
|
Basic loss per share (in $): (Note
12) |
|
|
|
|
|
|
Loss from continuing operations |
|
(0.07 |
) |
|
(0.10 |
) |
Gain / (loss) from discontinued operations |
|
(0.01 |
) |
|
0.29 |
|
Total |
|
(0.08 |
) |
|
0.19 |
|
|
|
|
|
|
|
|
Diluted loss per share (in $): (Note
12) |
|
|
|
|
|
|
Loss from continuing operations |
|
(0.07 |
) |
|
(0.10 |
) |
Gain / (loss) from discontinued operations |
|
(0.01 |
) |
|
0.29 |
|
Total |
|
(0.08 |
) |
|
0.19 |
|
|
THUNDERBIRD RESORTS, INC. |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
(Expressed in thousands of United States dollars) |
For the six months ended June 30, 2016 |
|
|
|
Attributable to equity holders of
parent |
|
|
Share
capital |
|
Share
options
reserve |
|
Currency
translation
reserve |
|
Retained
earnings |
|
Total |
|
Non-
controlling
interest |
|
Total
equity |
|
Balance at January 1, 2015 |
$ |
110,144 |
|
$ |
289 |
|
$ |
(1,725 |
) |
$ |
(106,552 |
) |
$ |
2,156 |
|
$ |
6,404 |
|
$ |
8,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of
new shares |
|
96 |
|
|
- |
|
|
- |
|
|
- |
|
|
96 |
|
|
- |
|
|
96 |
|
Options
cancellation and expiration |
|
- |
|
|
(20 |
) |
|
- |
|
|
20 |
|
|
- |
|
|
- |
|
|
- |
|
Costa
Rica disposal |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(4,690 |
) |
|
(4,690 |
) |
|
$ |
96 |
|
$ |
(20 |
) |
$ |
- |
|
$ |
20 |
|
$ |
96 |
|
$ |
(4,690 |
) |
$ |
(4,594 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit /
(loss) for the year |
|
- |
|
|
- |
|
|
- |
|
|
4,373 |
|
|
4,373 |
|
|
(30 |
) |
|
4,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
differences arising on translation of foreign operations |
|
- |
|
|
- |
|
|
(1,723 |
) |
|
- |
|
|
(1,723 |
) |
|
- |
|
|
(1,723 |
) |
Total
comprehensive income for the year |
|
|
|
|
|
|
|
(1,723 |
) |
|
4,373 |
|
|
2,650 |
|
|
(30 |
) |
|
2,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2015 |
$ |
110,240 |
|
$ |
269 |
|
$ |
(3,448 |
) |
$ |
(102,159 |
) |
$ |
4,902 |
|
$ |
1,684 |
|
$ |
6,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of
new shares |
|
536 |
|
|
- |
|
|
- |
|
|
- |
|
|
536 |
|
|
- |
|
|
536 |
|
Shares
buy-back |
|
(320 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(320 |
) |
|
- |
|
|
(320 |
) |
Options
cancellation and expiration |
|
- |
|
|
(180 |
) |
|
- |
|
|
180 |
|
|
- |
|
|
- |
|
|
- |
|
Costa
Rica disposal |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
57 |
|
|
57 |
|
|
$ |
216 |
|
$ |
(180 |
) |
$ |
- |
|
$ |
180 |
|
$ |
216 |
|
$ |
57 |
|
$ |
273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit /
(loss) for the year |
|
- |
|
|
- |
|
|
- |
|
|
(3,301 |
) |
|
(3,301 |
) |
|
170 |
|
|
(3,131 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
differences arising on translation of foreign operations |
|
- |
|
|
- |
|
|
(1,761 |
) |
|
647 |
|
|
(1,114 |
) |
|
- |
|
|
(1,114 |
) |
Total
comprehensive income for the year |
|
- |
|
|
- |
|
|
(1,761 |
) |
|
(2,654 |
) |
|
(4,415 |
) |
|
170 |
|
|
(4,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015 |
$ |
110,456 |
|
$ |
89 |
|
$ |
(5,209 |
) |
$ |
(104,633 |
) |
$ |
703 |
|
$ |
1,911 |
|
$ |
2,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital |
|
Share
options
reserve |
|
Currency
translation
reserve |
|
Retained
earnings |
|
Total |
|
Non-
controlling
interest |
|
Total
equity |
|
Balance at January 1, 2016 |
$ |
110,456 |
|
$ |
89 |
|
$ |
(5,209 |
) |
$ |
(104,633 |
) |
$ |
703 |
|
$ |
1,911 |
|
$ |
2,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with owners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of
new shares |
|
48 |
|
|
- |
|
|
- |
|
|
- |
|
|
48 |
|
|
- |
|
|
48 |
|
|
$ |
48 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
48 |
|
$ |
- |
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit /
(loss) for the year |
|
|
|
|
- |
|
|
- |
|
|
(1,878 |
) |
|
(1,878 |
) |
|
127 |
|
|
(1,751 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
differences arising on translation of foreign operations |
|
- |
|
|
- |
|
|
405 |
|
|
- |
|
|
405 |
|
|
- |
|
|
405 |
|
Total
comprehensive income for the year |
|
- |
|
|
- |
|
|
405 |
|
|
(1,878 |
) |
|
(1,473 |
) |
|
127 |
|
|
(1,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2016 |
$ |
110,504 |
|
$ |
89 |
|
$ |
(4,804 |
) |
$ |
(106,511 |
) |
$ |
(722 |
) |
$ |
2,038 |
|
$ |
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THUNDERBIRD RESORTS, INC. |
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS |
(Expressed in thousands of United States dollars) |
For the six months ended June 30, 2016 |
|
|
|
Six months
ended |
|
|
June 30
(unaudited) |
|
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
Cash flow from operating activities |
|
|
|
|
|
|
Loss for the year |
$ |
(1,489 |
) |
$ |
(2,348 |
) |
Items not involving cash: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
1,514 |
|
|
1,836 |
|
|
Unrealized foreign exchange |
|
(121 |
) |
|
466 |
|
|
Decrease
in provision |
|
(1,186 |
) |
|
(1,284 |
) |
|
Other
losses / (gains) |
|
8 |
|
|
(470 |
) |
|
Share
based payments |
|
48 |
|
|
96 |
|
|
Finance
income |
|
(75 |
) |
|
2,217 |
|
|
Finance
cost |
|
1,765 |
|
|
(106 |
) |
|
Other
interests |
|
7 |
|
|
13 |
|
|
Disposal
of Equity accounted investments |
|
(1,232 |
) |
|
- |
|
|
Results
from equity accounted investments |
|
57 |
|
|
10 |
|
|
Tax
expenses |
|
143 |
|
|
169 |
|
Net change in non-cash working capital
items |
|
|
|
|
|
|
|
Decrease
in trade, prepaid and other receivables |
|
(77 |
) |
|
(1,605 |
) |
|
Increase
/ (decrease) in inventory |
|
23 |
|
|
(48 |
) |
|
Increase
in trade payables and accrued |
|
1,167 |
|
|
642 |
|
Cash (used) from operations |
|
552 |
|
|
(412 |
) |
|
Total tax
paid |
|
(168 |
) |
|
(199 |
) |
Net cash generated by continuing operations |
|
384 |
|
|
(611 |
) |
|
|
|
|
|
|
|
Net cash from discontinued operations |
|
- |
|
|
77 |
|
|
|
|
|
|
|
|
Net cash (used) from operating
activities |
$ |
384 |
|
$ |
(534 |
) |
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
Expenditure on property, plant and equipment |
|
(226 |
) |
|
(2,754 |
) |
Proceeds on sale of property, plant and equipment |
|
1,273 |
|
|
44 |
|
Proceeds on sale of Costa Rica Joint Venture |
|
1,534 |
|
|
- |
|
Proceeds on sale of Costa Rica operation |
|
- |
|
|
8,077 |
|
Cost of sale of Costa Rica operation |
|
- |
|
|
(165 |
) |
Interest received |
|
75 |
|
|
106 |
|
Net cash used from investing
activities |
$ |
2,656 |
|
$ |
5,308 |
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
Proceeds from issue of new loans |
|
100 |
|
|
870 |
|
Repayment of loans and leases payable |
|
(2,642 |
) |
|
(4,955 |
) |
Interest paid |
|
(1,267 |
) |
|
(1,791 |
) |
Net cash used from financing
activities |
$ |
(3,809 |
) |
$ |
(5,876 |
) |
|
|
|
|
|
|
|
Net change in cash and cash equivalents
during the year |
|
(769 |
) |
|
(1,102 |
) |
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the
year |
|
4,403 |
|
|
6,551 |
|
|
|
|
|
|
|
|
Effect of foreign exchange adjustments |
|
6 |
|
|
3,867 |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the
year |
$ |
3,640 |
|
$ |
9,316 |
|
ABOUT THE COMPANY
We are an international provider
of branded casino and hospitality services, focused on markets in
Latin America. Our mission is to "create extraordinary experiences
for our guests." Additional information about the Group is
available at www.thunderbirdresorts.com.
Cautionary Notice: Cautionary
Notice: The 2016 Half-year Report referred to in this release
contains certain forward-looking statements within the meaning of
the securities laws and regulations of various international,
federal, and state jurisdictions. All statements, other than
statements of historical fact, included in the 2016 Half-year
Report, including without limitation, statements regarding
potential revenue and future plans and objectives of Thunderbird
are forward-looking statements that involve risk and uncertainties.
There can be no assurances that such statements will prove to be
accurate and actual results could differ materially from those
anticipated in such statements. Important factors that could cause
actual results to differ materially from Thunderbird's
forward-looking statements include competitive pressures,
unfavorable changes in regulatory structures, and general risks
associated with business, all of which are disclosed under the
heading "Risk Factors" and elsewhere in Thunderbird's documents
filed from time-to-time with the Euronext Amsterdam and other
regulatory authorities. Included in the 2016 Half-year Report are
certain "non-IFRS financial measures," which are measures of
Thunderbird's historical or estimated future performance that are
different from measures calculated and presented in accordance with
IFRS, within the meaning of applicable Euronext Amsterdam rules,
that are useful to investors. These measures include (i) Property
EBITDA consists of income from operations before depreciation and
amortization, write-downs, reserves and recoveries, project
development costs, corporate expenses, corporate management fees,
merger and integration costs, income/(losses) on interests in
non-consolidated affiliates and amortization of intangible assets.
Property EBITDA is a supplemental financial measure we use to
evaluate our country-level operations. (ii) Adjusted EBITDA
represents net earnings before interest expense, income taxes,
depreciation and amortization, equity in earnings of affiliates,
minority interests, development costs, and gain on refinancing and
discontinued operations. Adjusted EBITDA is a supplemental
financial measure we use to evaluate our overall operations.
Property EBITDA and Adjusted EBITDA are supplemental financial
measures used by management, as well as industry analysts, to
evaluate our operations. However, Property and Adjusted EBITDA
should not be construed as an alternative to income from operations
(as an indicator of our operating performance) or to cash flows
from operating activities (as a measure of liquidity) as determined
in accordance with generally accepted accounting principles.
CONTACT INFORMATION
Thunderbird Resorts Inc.
Peter LeSar
Chief Financial Officer
(507) 223-1234
plesar@thunderbirdresorts.com
www.thunderbirdresorts.com