DCI Dci Advisors Ltd

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DCI Advisors Ltd

(the "Company" or "DCI")

Shareholder Update

15 April 2024

The Directors of the Company wish to provide the following update for Shareholders.

General market conditions

Market conditions improved significantly in 2023 in Greece, Cyprus and Croatia where the Company's assets are located with increased tourist numbers, improved GDP growth and improved political stability in all three countries. Notable events were the re-election of the Greek government in June and the upgrading of Greek government debt ratings by the international rating agencies in September and October, the re-election of the Cyprus government in February and the entry of Croatia into the Euro Currency zone and the Schengen visa free travel zone on 1 January 2023. These improvements boosted demand in their residential property markets with improved pricing and transaction volumes. The Directors expect these trends to continue throughout 2024 and beyond and to increase investor interest in buying our assets.

Asset disposal progress

General

The Directors have now identified robust sale plans for each asset in the portfolio and stabilised and improved those assets where required since the former Manager was terminated. None of these assets are easy to sell which is why they have not already been sold since the Company first went into wind down in 2016 and therefore a patient but determined approach is being pursued.  

Croatia

The sale of the Company's interest in land with planning permission to build a hotel, villas and a marina at Livka Bay near to Split in Croatia is in process but the timing of its completion is not yet certain.  The sale proceeds will be used first to repay the bank loan of €4 million plus interest that is outstanding and is secured on the land and the use of the remaining proceeds will be assessed when the sale completes. An announcement will be made when more information is available.

Cyprus

Multiple discussions are underway to sell the Company's interest in land at Apollo Heights, Cyprus with several of these focussing on the opportunity to create a large Photovoltaic solar power generation park on part of the site which it is believed will be more likely to gain planning permission from the Sovereign Base Administration than the Company's original plans to create an integrated hotel, golf course and residential development.  

The Company continues to discuss and pursue exit opportunities from its minority 48% stake in Aristo Developers. We were very pleased to see robust sales, cash flow generation and debt reduction throughout 2023, which has continued this year.

Greece

We have used the last 12 months to maintain and attract new people for our Greek developments, putting together a support team of 16 people. On top of that we have 12 archaeological workers on the site at our Kilada development. All these people have done their utmost to manage our Greek assets. We have also continued to work together with a well-known golf contractor, one of the main Greek infrastructure contractors as well as local contractors. The more the Company's Kilada development matures, the more contractors will be added as necessary.

Over the last 12 months, we have made good progress in developing the Kilada project and 95% of the golf course's land has now been released by the archaeological team. This means we do not expect any issues regarding archaeological findings for the development of the golf course. In addition, to the two grassed holes at the end of 2022, in 2023 we have been able to finish the shaping, construction and grassing of an additional five other holes, bringing the total to seven. In 2023, we also finalised the shaping of four further holes which are now ready to be grassed. Regarding the golf clubhouse and country club, the excavations have now finished, and the reinforcements for the foundations and the first level of columns have been put in place. We aim to have nine holes ready to play this summer, which will enable us to have a soft opening of the golf course so that people can start to play and live the Kilada experience, a precursor to hopefully joining the golf course. We believe this will speed up the sales process of land lots around the course. The progress achieved in 2023 was officially signed off by the Greek government via the release of €1.5m in government grants in December. Getting the government grant released was an intense process which we have been able to close successfully. Another €4.5 million in grants is expected to be paid to the project over the next 12 months.

At the same time, we have started the process of finding a 5-star hotel operator, who is interested in operating the hotel, which we believe should assist in securing the hotel development financing.

To bridge the current capital needs for the development, we have identified a family office investor that is expected to invest up to €2.5 million in the Kilada project for an equity stake in the project of up to 3%. This capital will support the development and help us bridge the period between now and when other funding is available. It will also reduce DCI's funding obligation for the project and eventually increase the cash available for distributions to DCI Shareholders when we realise an exit from one of our other assets.

The progress achieved so far is resulting in increased investor interest for the development. As a result, enquiries for buying land lots have increased, and we expect to start recommencing plot sales again shortly. In order to facilitate the expected increased appetite in the development, we have restructured the sales team to support this improved momentum in demand.

In addition, we have also received several enquiries to purchase the Company's interest in the whole project. The timing of the increased interest at this stage is encouraging, as we had planned to actively start the sales process for the Kilada project after the golf course soft opening in the summer. We are still in the process of preparing for this stage but have indicated a willingness to the potential buyers that we would consider offers for the whole project before the formal process has started. These discussions are now underway.

Additionally, during the last 12 months we have identified several potential interested parties for our other three developments in Greece, being Lavander Bay, Plaka Bay and Scorpio Bay. This interest is still in early stages, but we hope to be able to intensify the discussions soon. In the meantime, we have applied for a special urban planning permit for Plaka Bay (similar to our Kilada asset) in order to mature it and make it more marketable, and have started the same process for Scorpio Bay. We are also in the process of restructuring Lavander Bay by amending the original purchase agreement with the Greek church, such that the project can begin the development of the non-disputed land whilst having the option to develop the disputed land when it is released back to us. We believe this restructuring will add a lot of value to the project and will make the asset more saleable. The legal opinion that we and the Greek Church have received is that the land sold to us was owned by the Church and that the Greek state is not the owner. Unfortunately, this needs to be confirmed by a Greek court before the matter can be irrevocably resolved. The Church has already started its legal proceedings against the Greek State. DCI will do the same for the disputed land banks already held in the name of DCI's subsidiary, Golfing Developments S.A..

Modest Shareholder borrowings and the desire to avoid taking out large loans

The Company has been financed in the past by large secured or convertible medium-term loans from private credit providers, but the most recent loan from CastleLake was repaid in December 2022 from part of the proceeds of selling our interest in the One & Only Kea Island resort. Since then, the current Directors have preferred to switch to financing operations via shorter term more modest sized borrowings currently amounting to €3.3 million from some of its Shareholders at lower interest rates than was available on the private credit market. At the same time costs have been cut significantly and several of our service providers have been changed in order to bring down the operational costs on a structural basis and reduce the cash burn. In this way, the total funds borrowed via shareholder loans to date is not as large as it might have otherwise been, and the Directors anticipate can be repaid relatively easily from the proceeds of asset sales, which will then enable earlier distributions of capital to Shareholders.   

Search for a new independent Non-Executive Director

The Company has stated the need for some time to appoint a new independent Non-Executive Director to join the Board and serve alongside Sean Hurst, the independent Non-Executive Chairman following the switch of Nicolai Huls and Nick Paris to Executive Director roles in March 2023. As a result, a formal process has been started to appoint someone using an experienced independent recruitment firm. The search is being publicised widely and all applicants will be considered carefully.   

Legal cases

The Company has three legal cases underway. It is important to realise that in the cases that are taking place in the UK and the British Virgin Islands, the Company is defending commercial actions brought against it by its former Investment Manager and a service provider who we believe is closely connected with them. The Directors priority is to protect the assets of the Company in contesting these cases. In connection with the criminal and civil actions that the Company has filed in Greece against certain individuals, the Directors wish to highlight that they are Directors of a London quoted company and that having found instances of apparent wrongdoing they have had no choice but to investigate them and pursue redress for the harm caused to the Company. Inaction by the Directors is not possible given their own fiduciary obligations to the Company and their obligations under criminal law.

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