Final results & notice of AGM

RNS Number : 3999U

CareCapital Group plc

21 December 2011

 



21 December 2011

CARECAPITAL GROUP PLC

("CareCapital", "the Group" or "the Company")

Financial statements for the year to 31 December 2010 & Notice of AGM

CareCapital plc (AIM: CARE) announces its audited financial statements for the year to 31 December 2010 and Notice of Annual General Meeting.

Highlights

·      The Group progressed its development programme of medical office buildings in both the UK and Germany in spite of the challenging economic conditions prevailing in 2009 continuing through 2010

·      Interim working capital and development funding was provided through the sale, in February 2010, of 14 smaller, older medical centres in the UK and the securing of additional short term loan finance

·      Outline planning consent was obtained for projects in Buckley and Glynneath, North Wales

·      Construction commenced on developments in Allesley, Coventry, which includes a library for the City Council, and West Wirral; both with scheduled completion in early to mid 2012

·      At 31 December 2010 the value of our completed investment properties was £31.0 million (2009: £49.8 million) and developments in progress £4.9 million (2009: £10.2 million)

·      Rental income from the completed investment properties decreased to £2.2 million (2009: £3.4 million) following the disposal of the bulk of the UK portfolio in February 2010

·      Six operating companies which owned the substantial proportion of the UK portfolio were sold for net consideration of £4.4 million after repayment of associated senior debt

·      The net cash proceeds from the disposal were used to pay down other short term debts and fund working capital

·      The loss for the year after tax was £4.18 million (2009: loss £1.77 million after writing off goodwill of £1.75 million). The loss included revaluation losses of £1.6 million, losses on disposal of six operating companies of £1.1 million and the write off of £0.6 million development costs

·      November 2011 the Group disposed of the German portfolio of medical office buildings for €27.35 million

·      A new initiative led to the Group playing a leading role in the International development and operation of Proton Beam Therapy Centres. The construction of the first project, a 50,000 sq. ft. new building in Central London, is planned to start in the third quarter of 2012. Planning consent for this project was granted in September 2011. Combined with a California based project the gross development value including equipment is some £150 million.  There are similar sized projects in Los Angeles and three other major US cities.

·      AGM to be held on 31 January 2012

For further information please visit www.carecapital.co.ukor contact:

Mike Sinclair, Chairman Paul Stacey, Managing Director	Sandy Jamieson	Simon Hudson,
CareCapital Group Plc	Libertas Partners LLP	Tavistock Communications
Tel: [phone]	Tel: [phone]	Tel: [phone]
[e-mail]		[e-mail]

Chairman's and Chief Executive's statement

We are pleased to present our report on the 2010 financial results of CareCapital Group Plc and the Group's activities since our last year end statement published on 30 June 2010.

As presented in more detail below, the Group progressed its development programme of medical office buildings in both the UK and Germany in spite of, as reported in our last statement, the challenging economic conditions prevailing throughout 2009 continuing through 2010.  Interim working capital and development funding requirements have been provided through the sale, in February 2010, of 14 smaller, older medical centres in the UK and the securing of additional short term loan finance.

Following the above sale and raising of further short term finance the Board has carefully considered the options for the Group's future business strategy in order to ensure the ability to progress its healthcare property development pipeline and other opportunities as well as being able to repay short term borrowings and provide working capital.  The Board has taken into account the long term cash requirement of both developing and investing in property assets as opposed to the forward sale and financing of developments.  As a consequence it has been decided to dispose of the Group's German property assets, realising cash and thereby significantly reducing both debt and the funding requirement for the future.  During 2011 a number of potential offers for the German property portfolio have been considered and it was decided to accept an offer from a Canadian fund specialising in the investment in medical office real estate.  This offer values the German property holding companies at €27.35 million.

This transaction was approved by shareholders on 19 September 2011 and notarised in November 2011.

The development programme for both the UK and Germany has been progressed during the year.  As mentioned above, in February we disposed of 14 older, smaller UK medical centres together with associated pharmacies and other buildings for a total sum of £23.5 million; this transaction produced £4.4 million in net cash which was used to pay down a substantial proportion of the then outstanding short term debt together with providing working capital to enable the completion of the 3,500 sq m medical office building development in Adlershof, south east of Berlin, in which the tenants started to occupy their space in early May and, in the UK, to reach financial close and commence construction in May on the 2,500 sq m community/ neighbourhood centre in Allesley, Coventry and the 2,000 sq m medical centre in Thingwell, West Wirral with construction starting on site in December.  The Coventry project comprises a library which is being fully funded by the Local Authority to be completed as part of the first phase of the development in June 2011; a medical centre and pharmacy which have been forward sold to a specialist investor and ancillary medical/ community areas that we are retaining; the target completion date for the second phase being June 2012.  The West Wirral project has also been forward sold and is therefore fully funded by the purchasing investment fund; completion is scheduled for January 2012.  The other projects in the development pipeline also progressed during 2010 are medical centre projects in Buckley and Swansea valued at £13 million on completion that are part of the joint venture in Wales with Gaufron Healthcare Limited and where construction will commences in 2012; together with a 2,000 sq m scheme in Bishops Stortford which is also scheduled to commence in 2012.  To deliver these opportunities the Company will need to raise new equity in 2012.  The Directors are currently in discussion with current and new investors.

In short, in 2010 the Group completed developments valued at €6.7 million (£5.88 million); commenced on site projects with a gross completion value of £10.3 million and had capital commitments at the year-end of £6.2 million (fully funded).  The remaining development programme has a gross completion value of £34.6 million of which it is anticipated projects to the value of £15.4 million will start on site during early/mid 2012.  In addition we are actively involved in the progression of an advanced cancer centre in Central London for which planning was granted in September 2011 which has a total development value of £50 million.

The financial results for 2010, prepared under IFRS, show that Group turnover was £3.4 million made up of rents receivable of £2.2 million (2009: £3.3 million); asset sales under forward funding arrangements of £1.2 million (2009: £nil).  Cost of sales was £1.7 million (2009: £0.5 million).  Administrative and other operating costs in 2010 were £1.7 million compared with £1.8 million in 2009; of this direct salary and associated employment costs were £1.1 million in 2010 down from £1.5 million in 2009.  The loss before tax for the year was £4.5 million; (2009: £3.5 million), £2.2 million of this loss related to loss on revaluation and loss on disposal of the UK portfolio.  Total fixed assets at 31 December 2010 were £34.2 million: (2009: £60.2 million reflecting the disposal of UK assets in February 2010.

Net Asset Value at the year-end was £7.2 million (9.0p per share) compared with £11.5 million (15.0p per share at 31 December 2009).  This reduction in NAV per share was as a result of the operating loss for the year including the revaluation of investment properties under IFRS.

As previously announced our Company is playing a leading role in the International development and operation of Proton Beam Therapy Centres.  This activity is being carried out through our associate company Advanced Proton Solutions Holdings Limited ("APS") in which CareCapital has a 28.75% shareholding.  Our first project, at a 50,000 sq. ft. new building in Central London, is planned to open for treating patients in the fourth quarter of 2013.  APS also has similar projects in Los Angeles and three other major US cities.

The rationalisation of Healthcare Real Estate is a phenomenon throughout the world.  The separation of the development and ownership of Healthcare properties from the operational activities that take place within them is part of that process.  We believe this will provide real opportunities for new developments both in the UK and elsewhere.

Dr. Michael Sinclair

Chairman

Paul Stacey

Chief Executive

15 December 2010

Consolidated statement of comprehensive income

For the year ended 31 December 2010

	Group 2010	Group 2009
	£	£
Revenue	3,395,568	3,414,698
Cost of sales	(1,698,278)	(455,296)
Gross profit	1,697,290	2,959,402
Administrative expenses	(1,765,751)	(1,808,043)
Impairment of goodwill	-	(1,751,960)
Net (loss)/gain on revaluation of investment properties	(1,064,863)	596,807
Loss on disposal of UK portfolio	(504,172)	-
Net portfolio (losses)/gains	(2,115,068)	596,807
Development costs written off	(504,172)	(502,032)
Operating loss	(2,687,701)	(505,826)
Finance income	648	4,303
Finance costs	(1,607,323)	(2,963,463)
Loss on ordinary activities before taxation	(4,294,376)	(3,464,986)
Taxation	118,888	1,696,466
Loss after taxation	(4,175,488)	(1,768,520)
Loss for the period
Attributable to equity shareholders	(4,094,292)	(1,903,049)
Non-controlling interests	(81,196)	134,529
	(4,175,488)	(1,768,520)
Other comprehensive income
Exchange differences on translation of foreign operations	(322,071)	(648,614)
Total comprehensive loss for the year net of tax	(4,507,559)	(2,417,134)
Total comprehensive loss attributable to:
Equity shareholders	(4,393,156)	(2,486,802)
Non-controlling interests	(114,403)	69,668
	(4,507,559)	(2,417,134)
Loss per ordinary share
Basic and diluted	(5.33)p	(2.48)p
Weighted average number of shares (000s)	76,754	76,754

Consolidated statement of financial position

As at 31 December 2010

	Group 2010	Group 2009
	£	£
Non-current assets
Investment properties	31,009,083	55,982,399
Development properties	3,072,761	4,074,198
Leasehold improvements	64,087	73,908
Plant and equipment	37,951	47,199
	34,183,882	60,177,704
Current assets
Amounts recoverable on contracts	1,789,648	-
Trade and other receivables	759,658	512,571
Cash and cash equivalents	148,442	268,573
	2,697,748	781,144
Total assets	36,881,630	60,958,848
Current liabilities
Trade and other payables	(2,617,938)	(2,453,857)
Borrowings	(7,383,476)	(9,207,414)
	(10,001,414)	(11,661,271)
Non-current liabilities
Borrowings	(19,439,878)	(37,376,534)
Deferred tax	(288,066)	(406,954)
	(19,727,944)	(37,783,488)
Total liabilities	(29,729,358)	(49,444,759)
Net assets	7,152,272	11,514,089
Equity
Share capital	767,541	767,541
Share premium account	1,397,500	1,397,500
Share option reserve	557,996	412,254
Reverse acquisition reserve	11,038,204	11,038,204
Exchange movements reserve	(439,213)	(140,349)
Accumulated losses	(6,300,810)	(2,206,518)
Equity attributable to shareholders of the Parent	7,021,218	11,268,632
Non-controlling interests	131,054	245,457
Total equity	7,152,272	11,514,089

Consolidated statement of changes in equity

For the year ended 31 December 2010

	Share capital £	Share premium £	Share options reserve £	Reverse acquisition reserve £	Exchange rate movement reserve £	Accumulated losses £	Equity shareholders' interest £	Minority interest £	Total £
Balance at 1 January 2009	767,541	1,397,500	390,606	11,038,204	443,404	(303,469)	13,733,786	175,789	13,909,575
Exchange rate movement	-	-	-	-	(583,753)	-	(583,753)	(64,861)	(648,614)
Loss for the year	-	-	-	-	-	(1,903,049)	(1,903,049)	134,529	(1,768,520)
Total comprehensive income	-	-	-	-	(583,753)	(1,903,049)	(2,486,802)	69,668	(2,417,134)
Share based payment
- employee services*	-	-	21,648	-	-	-	21,648	-	21,648
Balance at 31 December 2009	767,541	1,397,500	412,254	11,038,204	(140,349)	(2,206,518)	11,268,632	245,457	11,514,089
Balance at 1 January 2010	767,541	1,397,500	412,254	11,038,204	(140,349)	(2,206,518)	11,268,632	245,457	11,514,089
Exchange rate movement	-	-	-	-	(298,864)	-	(298,864)	(33,207)	(332,071)
Loss for the year	-	-	-	-	-	(4,094,292)	(4,094,292)	(81,196)	(4,175,488)
Total comprehensive income	-	-	-	-	(298,864)	(4,094,292)	(4,393,156)	(114,403)	(4,570,559)
Share based payment
- employee services	-	-	21,648	-	-	-	21,648	-	21,648
- cost of raising finance	-	-	124,094	-	-	-	124,094	-	124,094
Balance at 31 December 2010	767,541	1,397,500	557,996	11,038,204	(439,213)	(6,300,810)	7,021,218	131,054	7,152,272

Consolidated statement of cash flows

For the year ended 31 December 2010

	Group 2010	Group 2009
	£	£
Cash flow from operating activities
Loss after taxation	(4,175,488)	(1,768,520)
Adjustments:
Taxation	(118,888)	(1,696,466)
Finance costs	1,607,323	2,963,463
Finance income	(648)	(4,303)
Net portfolio losses/(gains)	2,115,068	(596,807)
Impairment of goodwill	-	1,751,959
Depreciation	27,318	33,132
Write off of development costs incurred	504,172	502,032
Share based payments	145,742	21,648
Cash flows from operations before changes in working capital	104,599	1,206,138
Change in amounts recoverable on contracts	(1,789,648)	-
Change in trade and other receivables	(247,086)	(47,389)
Change in trade and other payables	362,276	556,477
Cash (used)/generated from operations	(1,569,859)	1,715,226
Interest paid	(1,678,472)	(2,457,309)
Costs associated with disposal of companies	(1,050,205)	-
Cash flows from operating activities	(4,298,536)	(742,083)
Cash flows from investing activities
Disposal of investment properties	23,249,001	-
Disposal of development property	296,497	-
Capital expenditure on investment  properties	(115,844)	-
Capital expenditure on development properties	(82,697)	(6,305,031)
Purchase of leasehold improvements	-	(3,815)
Purchase of plant and equipment	(8,532)	(13,199)
Interest received	648	4,303
Cash flows from investment activities	23,339,073	(6,317,742)
Cash flows from financing activities
New mortgage loans raised (net of transaction costs)	742,950	4,446,523
Development loans	1,524,120	-
Repayment of loans	(22,084,771)	(823,382)
Directors' loans (net of costs)	26,816	300,000
Other short term loans	243,000	950,000
Cash flows from financing activities	(19,547,885)	4,873,141
Decrease in cash and cash equivalents	(507,348)	(2,186,684)
Cash and cash equivalents at 1 January 2010	268,573	2,455,257
Cash and cash equivalents at 31 December 2010	(238,775)	268,573

The negative figure of £238,775 for cash and cash equivalents at 31 December 2010 is stated after offsetting overdrawn balances of £387,217 against cash and cash equivalents of £148,442.

Notice of Annual General Meeting

The Annual General Meeting of CareCapital Group Plc ("the Company") will be held at 54 Baker Street, London W1U 7BU on Tuesday, 31 January 2012 at 10.00 a.m.  Details of the resolutions proposed are included in the Notice of the Annual General Meeting which was posted to shareholders on 20 December 2010 and is available on the Company's web site at www.carecapital.co.uk.

Financial Statements & Audit Opinion

The financial information included in this announcement for the years ended 31 December 2010 and 31 December 2009 does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  It represents an extract from the statutory accounts, which for the year ended 31 December 2009 have been delivered to the Registrar of Companies and which for the year ended 2010 were approved by the Board of directors and have been delivered to the Registrar of Companies.

The auditors have issued an unqualified opinion in respect of the financial statements which does not contain any statements under the Companies Act 2006, Section 498(2) or Section 498(3).  The Auditors have raised an Emphasis of Matter in relation to Going Concern as follows: "In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1(a) to the financial statements concerning the group and the Company's ability to continue as a going concern.  The Company incurred a net loss of £4.2 million during the year ended 31 December 2010 and, at that date, the Group's net current liabilities were £7.3 million.  The Group has identified a requirement to raise additional funds through the issue of new equity to existing and potential investors, the issue of which requires the Directors to successfully identify investors and complete a placing which will require the consent of shareholders in general meeting.  These conditions, along with the other matters explained in note 1(a) to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's and the Company's ability to continue as a going concern.  The financial statements do not include the adjustments that would result if the Group and the Company was unable to continue as a going concern."

Basis of preparation

These financial statements have been prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union and applied in accordance with the Companies Act 2006.  The financial statements have been prepared on the historical cost basis modified to include certain assets and liabilities at fair value.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and opinions or statements received from competent professional advisors. These advisors include qualified valuers and financial institutions which have provided senior debt and associated facilities.

The most significant assumptions in the financial statements relate to revaluation movements in respect of investment properties held.  The valuations undertaken are set out in detail in note 12 to the accounts.

The Directors have taken advantage of the exemption offered by Section 408 of the Companies Act not to present a separate statement of comprehensive income for the Parent Company.

As at 31 December 2010, the Group had current liabilities of £10.0 million including a Director's loan of £1.98 million and other short term loans of £0.5 million which, at the date of approval of these accounts were overdue.  This figure also includes the £2.5 million proportion of a loan which is due in over 1 year, but where several covenant breaches have occurred, putting the loan into default.  The position is being managed with the lender although a formal waiver of the covenant breaches has not been received.  Current liabilities also include an amount of £0.7 million in respect of a development loan.  This loan represents pre-funding of costs associated with the Allesley development by one of the parties to whom the substantial proportion of the development has been pre-sold.

On 31 August 2011, the Group announced that it had agreed to sell its German property portfolio for a consideration of €27.35 million, payable in cash on completion, subject to compliance with usual commercial obligations.  Under AIM rules, this transaction was deemed to be a disposal resulting in a fundamental change of business and was therefore subject to Shareholder approval which was granted on 19 September 2011.

The cash proceeds of the disposal will be used to repay the debt secured on the property assets within the German Portfolio amounting to €26.31 million at the date of the announcement.  This amount includes £1.9 million in respect of the outstanding amount of the loan provided by Dr Michael Sinclair and £500,000 will be applied to the repayment of a second loan due to a private investor.  The remainder of the proceeds from the disposal amounting to approximately £1.04 million will be used to discharge professional fees, to progress the development of the Company's UK healthcare property pipeline and for working capital purposes.

In addition, the Directors have prepared trading and cash flow forecasts for the Group for the period to 31 December 2012 as part of a five year plan.  The forecasts indicate that additional funding will be required within the next twelve months to deliver the business plans and the Directors are in discussions with current and potential new investors to raise new equity to provide the necessary funding.  The Directors believe that the trading forecasts are realistic and that a fund raising will be able to be completed and, accordingly, the Financial Statements have been prepared on a going concern basis.  However, due to the need to successfully identify investors and complete a placing, including obtaining shareholder consent in general meeting for the issue of new equity, there is a material uncertainty which may cast significant doubt about the ability of the Group and the Company to continue as a going concern."

Publication of the Annual Report & Accounts

A copy of the Annual Report & Accounts has been posted on the Company's web site at www.carecapital.co.uk.  Printed copies of the financial statements were posted to shareholders on 20 December 2010.

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