Audited Final Results
Parkmead Group (The) PLC
30 November 2007
Friday 30 November 2007
THE PARKMEAD GROUP PLC ('Parkmead' or the 'Group')
Audited results for the 12 months ended 30 June 2007
The Parkmead Group plc (PMG) today announces its audited results for the year
ended 30 June 2007.
The Group's preliminary results were announced on 27 September 2007, however,
the sale of Quayside Corporate Services Limited, announced 8 November 2007, gave
rise to a subsequent adjusting event. As a result of this the Group has amended
its results as follows:
• the Group's investment in Quayside has been revalued by £0.5 million from
£2.7 million to £2.2 million; and,
• further provisions of £0.2 million for bad debts have been made given the
continued uncertainty in the distressed company debt markets.
The Group's Annual Report for the year ended 30 June 2007 was posted to
shareholders today.
Financial highlights
• Further progress in returning toward profitability with £0.4 million loss
after tax and minority interest (2006: loss £6.4 million restated)
• Cash balances increased by 106% from £6.2 million to £12.8 million
• Debt free balance sheet
• Successful sale of the Group's technology based former trading
subsidiaries and certain other technology investments
• Loss per share 0.11 pence (2006: Loss per share 3.71 pence, restated)
Commenting on the results, Colin Goodall, Chairman of The Parkmead Group plc,
said:
'We have successfully restructured the Group and have made further progress in
returning towards profitability. Our balance sheet has been strengthened though
the successful exit from our former technology portfolio; as at the year end the
Group had £12.8 million in cash and no debt. The Group will now focus on the
energy sector; providing corporate finance services and making principal
investments. I look forward to the continued development of the Group over the
coming year. '
For further information:
The Parkmead Group plc 020 7494 5770
Niall Doran CEO
Gordon Ashworth, CFO
Madano Partnership 0207 593 4000
Matthew Moth
Charles Stanley Securities (Nominated Adviser) 0207 149 6482
Rick Thompson / Henry Fitzgerald-O'Connor
CHAIRMAN'S STATEMENT
Development of the Group, Results and Dividends
I am pleased to announce that the Group has made further progress in returning
towards profitability in the year ended 30 June 2007 recording a loss before tax
and minority interests of £0.5 million (2006: loss £6.2 million, restated).
This is a significant improvement over 2006 and is indicative of the progress
that the Group has made.
At the operating level the Group recorded a loss of £5.3 million (2006: loss
£3.9 million restated). There were, however a number of exceptional items, one
off costs, amortisation of goodwill and impairment charges which gave rise to
this. In particular, the Group wrote down the carrying value of Quayside
Corporate Services Limited ('Quayside' the Group's turnaround business) by £3.1
million from £5.3 million to £2.2 million and also expensed £0.6 million of
amortisation relating to Quayside. During the year, the Group invested in a
number of business development activities. The costs associated with this
investment of £0.6 million were expensed in the year. Prior to the Group
relocating in August this year a provision was made for dilapidations, onerous
lease commitments and accelerated depreciation (relating to the Group's former
offices) of £0.3 million. Finally, subsequent to the year end, the Group has
reached agreement to dispose of its entire holding in Quayside for a
consideration of £0.6 million in cash and deferred consideration of up to £2.0
million. Accordingly, the operating loss before these exceptional and
impairment costs was £0.7 million; a significant improvement on 2006 (loss £3.9
million restated). The Group was particularly successful in divesting of a
number of its trading subsidiaries and certain portfolio investments. Overall a
profit on sale of subsidiaries of £4.6 million was recorded (2006: £nil). In
accordance with its accounting policy, the Group revalued its remaining
portfolio investments which gave rise to a charge of £0.2 million in the year
(2006 charge: £2.7 million). Net interest income was significantly higher at
£0.4 million (2006: £nil) due mainly to higher than anticipated proceeds from
asset sales.
Overall the Group recorded a loss for the year, after tax and minority interests
of £0.4 million (2006: £6.4 million restated). The Board is not recommending
the payment of a dividend (2006: £nil).
Principal Investment and Advisory
Our revenues grew 17% to £3.7 million (2006: £3.2 million). The Group provided
corporate finance and advisory services to clients predominantly in the energy
sector including advising on disposals, acquisitions and corporate
restructurings. Following the successful realisation of proceeds from the
disposal of the Group's former subsidiaries, the Group will look to make
investments either as principal or along side financing partners in energy
related assets during the course of the coming year.
Our turnaround business activities are carried out through Quayside. Before
provisions for doubtful debts Quayside recorded a profit of £0.2 million,
however, at present, given the unpredictable nature of the distressed company
debt markets, we have set aside £0.6 million for doubtful debts associated with
trade receivables. The impact of this provision caused Quayside to record a
loss for the year of £0.4 million.
Portfolio and Subsidiary Investments
The Group was successful in disposing of the majority of its technology assets.
The Group sold its holding in AVM in September 2006 for a cash consideration of
£1.3 million before expenses. AVM was carried in the Company's balance sheet at
£0.5 million giving a profit before expenses of £0.8 million, however, on
deconsolidation this profit reduced to £0.2 million. The Group's holding in
Yospace was sold for a cash consideration of £4.9 million before expenses in
February 2007. On deconsolidation and repayment of debt the sale realised a
profit of £4.0 million. In February of this year the Group disposed of its
holding in Respond Group Limited for a cash consideration of £2.1 million before
expenses, which after repayment of debt, gave rise to a profit of £0.4 million.
The successful conclusion of these deals demonstrates the Group's capacity to
execute transactions. Furthermore, as a result, the Group's balance sheet has
been strengthened significantly which provides funds for the Group's principal
investment activities.
The Group's remaining technology portfolio is comprised of small holdings in
Future Route Limited, Metapraxis Limited, Red M Group Limited, Retento Limited
and Speed Trap Limited. The Group revalued these holdings with an overall
charge of £0.2 million being recognised during the year. The Group's investment
in Thruvision Limited has been revalued by £0.2 million from £1.1 million to
£1.3 million following a further funding round subsequent to the Group's
investment.
Key Performance Indicators
The Board monitors the performance of its businesses through the reporting of
monthly management accounts that show progress against budget, highlighting
significant variances, positive and negative. The Board also receives cash flow
reports on a monthly basis. The Board considers the Group's pipeline of
business at each Board meeting and tests Executive Management's expectation of
conversion. Additionally, key performance indicators are set, against which the
Board can assess performance and prospects for the businesses. With regard to
Quayside, the Board monitors each assignment undertaken against budgeted profit
and gross profit margin and for the year ended 30 June 2007 gross margins
averaged 54%. With regard to the corporate finance business, revenue is
analysed between recurring revenue streams and success fees. The baseline
target is to cover fixed costs with recurring revenues and for the year under
review fixed costs were covered 127% by recurring revenues. Executive Directors
report progress on the Group's investments at each Board meeting.
Principal Risks and Uncertainties
The principal trading risks of the Group's business are the sourcing of suitable
transactions (deal flow) and the ability to recruit and retain experienced
executives. With regard to deal flow, the Group has via its Board and other
intermediary relationships, access to a number of sources of deal flow which the
Board believes is satisfactory to grow the business. With regard to recruitment
the Group has been actively recruiting at senior levels over the past year,
however, the market remains tight for high quality individuals. As a mitigating
strategy the Group has entered into a number of retainer relationships whereby
it has access to high quality corporate finance and investment experts such that
it can resource deals in a cost effective manner.
Outlook
Overall it has been a satisfactory year, we have taken steps to focus our
business and our core division is performing well. Our balance sheet is
significantly strengthened, with cash balances more than doubled to £12.8
million (2006: £6.2 million) following the asset realisation programme. We have
now successfully restructured the Group.
Our strategy will be to focus on the energy sector; providing corporate finance
services and making principal investments to create shareholder value, at an
acceptable level of risk. I look forward to the continued development of the
Group over the coming year.
Colin Goodall
23 November 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
(AUDITED)
NOTES CONTINUING DISCONTINUED
OPERATIONS OPERATIONS TOTAL TOTAL
2007 2007 2007 2006
As restated
£ £ £ £
Turnover 3 3,687,006 3,960,081 7,647,087 13,006,387
Cost of sales 3 (563,840) (1,741,234) (2,305,074) (4,989,539)
Gross Profit 3,123,166 2,218,847 5,342,013 8,016,848
Administrative expenses 3 (8,676,625) (2,117,975) (10,794,600) (12,037,581)
Other operating income 3 150,987 150,987 106,054
Operating (loss)/profit 3 (5,402,472) 100,872 (5,301,600) (3,914,679)
Profit on disposal of
subsidiaries/ investments 5 4,613,262 -
Exceptional profit on deemed
disposal - 363,715
Amounts written off 4
investments (154,286) (2,670,624)
Net interest receivable/
(payable) 389,295 (1,553)
Loss on ordinary activities
before taxation 3 (453,329) (6,223,141)
Taxation (5,342) (41,873)
Loss on ordinary activities
after taxation (458,671) (6,265,014)
Minority interest 49,851 (86,587)
Loss for the financial year (408,820) (6,351,601)
Loss per 5 pence ordinary
share (pence)
- basic 6 (0.11p) (3.71p)
- diluted 6 (0.11p) (3.71p)
GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
(AUDITED)
2007 2006
As restated
£ £
Loss on ordinary activities before taxation (453,329) (6,223,141)
Write-down of previous temporary diminution in value of fixed asset investments
charged against revaluation reserve - (306,464)
Historical cost loss on ordinary activities before taxation (453,329) (6,529,605)
Historical cost loss for the year retained after taxation and minority interest (408,820) (6,658,065)
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
(AUDITED)
2007 2006
As restated
£ £
Profit/(Loss) for the financial year attributable to members of the parent Company (408,820) (6,351,601)
Unrealised surplus on revaluation of fixed asset investments 235,943 -
Write-down of previous revaluation of fixed asset investments - (1,095,754)
Currency translation adjustment - 9,772
Total recognised gains/(losses) relating to the year (172,877) (7,437,583)
Prior year adjustment - FRS 20 (1,750,798)
Total recognised loss since the last annual report (1,923,675)
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2007
(AUDITED)
NOTES 2007 2007 2006 2006
As restated As restated
£ £ £ £
Fixed assets
Intangible assets 2,177,829 8,176,776
Tangible assets 127,660 598,355
Investments 1,547,308 3,059,365
Investments in joint ventures
Share of gross assets 50,000 -
3,902,797 11,834,496
Current assets
Stock - 252,971
Debtors 905,168 4,127,827
Cash at bank and in hand 12,758,804 6,207,315
13,663,972 10,588,113
Creditors
Amounts falling due within one year (1,192,949) (5,187,657)
Net current assets 12,471,023 5,400,456
Total assets less current liabilities 16,373,820 17,234,952
Creditors
Amounts falling due after more than one
year - (694,982)
Provision for liabilities and charges (343,798) (108,816)
Net assets 16,030,022 16,431,154
Capital and reserves
Called up share capital 18,417,089 18,417,089
Merger reserve (952,109) (952,109)
Revaluation reserve 235,943 -
Other reserve (1,128,008) (1,128,008)
Profit and loss account (542,893) (243,049)
Equity shareholders' funds 7 16,030,022 16,093,923
Minority interests - 337,231
Capital employed 16,030,022 16,431,154
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2007
(AUDITED)
NOTES 2007 2006
£ £
Net cash inflow/(outflow) from operating activities 8(a) 384,107 (1,018,444)
Returns on investments and servicing of finance 8 (b) 314,084 (1,553)
Taxation (791,859) 83,483
Capital expenditure and financial investment 8 (b) 1,925,921 (1,221,727)
Acquisitions and disposals 8 (b) 5,574,315 (406,776)
Cash inflow/(outflow) before financing 7,406,568 (2,565,017)
Financing 8 (b) (647,768) 10,584,419
Increase in cash 6,758,800 8,019,402
CONSOLIDATED RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
NOTES 2007 2006
£ £
Increase in cash in the year 6,758,800 8,019,402
Decrease in debt and lease financing 647,768 1,632,262
Finance leases acquired with subsidiaries - (9,132)
Other non-cash changes - new finance leases - (12,690)
Other non-cash changes - share based award - (2,678,849)
Movement in net funds 7,406,568 6,950,993
Net funds/(debt) at 1 July 5,352,236 (1,598,757)
Net funds at 30 June 8 (c) 12,758,804 5,352,236
NOTES TO THE PRELIMINARY RESULTS
YEAR ENDED 30 JUNE 2007
1 PRELIMINARY ANNOUNCEMENT
This restated consolidated financial information has been extracted from the 2007 Annual Report and has been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP) and accounting policies consistent with
those described in the Annual Report and Financial Statements for the year ended 30 June 2006, except where noted in the
basis of preparation below. The financial information set out in this document does not constitute statutory accounts
for the years ended 30 June 2006 or 30 June 2007 within the meaning of Section 240 of the Companies Act 1985. The
Annual Report and Financial Statements for 2006 have been delivered to the Registrar of Companies and the Annual Report
and Financial Statements for 2007 will be delivered to the Registrar of Companies in due course. The auditors have
reported on those accounts and have given an unqualified report which does not contain a statement under section 237(2)
or (3) of the Companies Act 1985.
2 ACCOUNTING POLICIES
Basis of preparation
The financial statements are prepared on a going concern basis, under the
historical cost convention modified to include the revaluation of fixed asset
investments and in accordance with the Companies Act 1985 and applicable
accounting standards in the United Kingdom.
Changes in accounting policy
The Group has adopted FRS 20 'Share based payments' during the year. The
adoption of this standard represents a change in accounting policy and the
comparative figures have been restated accordingly. The effect was to increase
administrative expense by £108,976 for share options (2006: £168,343 for share
options and £1,441,556 for other share based awards). The effect on net assets
as at 1 July 2006 for the share options was £nil as the credit entry for the
cumulative option charge of £309,242 to 1 July 2006 has been taken directly to
equity in accordance with FRS 20. With regard to other share based awards, the
effect was to reduce net assets by £2,569,564 which comprised recognition of the
charge of £1,441,556 included in administrative expenses plus a debit to other
reserves of £1,128,008 representing the remainder of the transaction through the
employee benefit trust.
3 SEGMENTAL ANALYSIS
a. Business Segment
The Group is organised into three business segments: Investment and advisory,
Software development, support and marketing and Design, supply and install of
audio visual systems.
Turnover Profit/(Loss) on Ordinary Net Assets
Activities Before
Taxation and Minority
Interest
2007 2006 2007 2006 2007 2006
As restated As restated
£ £ £ £ £ £
Continuing Operations:
Investment and advisory 3,719,006 3,286,875 (349,550) (5,956,616) 16,030,022 16,128,397
Less: inter segmental sales (32,000) (132,000) - - - -
3,687,006 3,154,875 (349,550) (5,956,616) 16,030,022 16,128,397
Discontinued Operations:
Software development, support
and marketing 1,153,658 1,884,640 (266,455) (245,846) - (963,426)
Investment and advisory - 22,497 3,834 (376,550) - (2,975)
Design, supply and install of
audio visual systems 2,806,423 7,944,375 158,842 355,871 - 1,269,158
3,960,081 9,851,512 (103,779) (266,525) - 302,757
7,647,087 13,006,387 (453,329) (6,223,141) 16,030,022 16,431,154
b. Geographical Analysis
All turnover originated in the UK.
2007 2006
i. Turnover by destination £ £
UK 7,074,432 10,342,438
Europe 572,655 952,594
USA and Canada - 1,697,303
Other - 14,052
7,647,087 13,006,387
2007 2006
As restated
ii. (Loss)/Profit on ordinary activities before taxation £ £
UK (457,163) (5,846,591)
USA and Canada 3,834 (376,550)
(453,329) (6,223,141)
2007 2006
As restated
iii. Net assets/(liabilities) £ £
UK 16,030,022 16,434,129
USA and Canada - (2,975)
16,030,022 16,431,154
The segmental analysis of turnover, profit before tax and net assets for the
United Kingdom includes £2,806,423 (2006: £7,944,375), £158,842 (2006: £355,871)
and £nil (2006: £1,269,158) at 30 June 2007 in respect of Audio Visual Machines
Limited and its subsidiaries which were sold during the year.
The segmental analysis of turnover, loss before tax and net assets for the
United Kingdom includes £588,366 (2006: £962,046), loss £(266,455) (2006: loss £
(245,846)) and £nil (2006: (£963,426)) at 30 June 2007 in respect of Yospace
Technologies Limited which was sold during the year.
The segmental analysis of turnover for Europe also includes £565,292 (2006:
£922,594) in respect of Yospace Technologies Limited which was sold during the
year.
The segmental analysis of turnover, profit/(loss) before tax and net assets for
the USA and Canada includes £nil (2006: £22,497), £3,834 (2006: loss £(376,550))
and £nil (2006: £(2,975)) in respect of US operations which were discontinued
during the prior year.
The analysis of operating (loss)/profit between continuing and discontinued
operations is set out below:
2007 2006
Continuing Discontinued Total Continuing Discontinued Total
Operations Operations
As restated As restated As restated
£ £ £ £ £ £
Turnover 3,687,006 3,960,081 7,647,087 3,154,875 9,851,512 13,006,387
Cost of sales (563,840) (1,741,234) (2,305,074) (316,625) (4,672,914) (4,989,539)
Gross profit 3,123,166 2,218,847 5,342,013 2,838,250 5,178,598 8,016,848
Administrative
expenses (8,676,625) (2,117,975) (10,794,600) (6,820,469) (5,217,112) (12,037,581)
Other operating
income 150,987 - 150,987 106,054 - 106,054
Operating (loss)/
profit (5,402,472) 100,872 (5,301,600) (3,876,165) (38,514) (3,914,679)
4 AMOUNTS WRITTEN OFF INVESTMENTS
In accordance with the Group's accounting policy, the Group has assessed the
fair value of its fixed asset investments at the balance sheet date. The
assessment has resulted in a write-down of £154,286 (2006: £2,670,624) to the
profit and loss account.
5 PROFIT ON DISPOSAL OF SUBSIDIARIES/INVESTMENTS
On 29 September 2006 the Group sold its entire holding in Audio Visual Machines
Limited for a cash consideration of £1,275,000. After expenses the Group
recognised a profit on disposal of £162,940 in the profit and loss account.
On 2 February 2007 the Group sold its entire holding in Yospace Technologies
Limited for a total cash consideration of £4,896,164, including repayment of
debt and interest. After expenses the Group recognised a profit on disposal of
£4,004,167 in the profit and loss account.
On 20 February 2007 the Group sold its entire holding in Respond Group Limited
for a consideration of £2,067,969, including repayment of debt and interest.
After expenses the Group recognised a profit on disposal of £446,155.
6 LOSS PER SHARE
The basic loss per share has been calculated by dividing the loss attributable
to equity shareholders funds by the weighted average number of shares in issue
during the year.
The loss and weighted average number of shares used in the calculation of the
loss per share are set out below:
2007 2006
As restated
Basic loss per share
Loss attributable to ordinary shareholders (£) (408,820) (6,351,601)
Weighted average number of shares - number 368,341,780 171,332,649
Loss per 5 pence ordinary share (pence)
- basic (0.11p) (3.71p)
Diluted Loss per share
Due to the loss in the current and prior year there is no further dilution of
the loss per share as a result of the share options in issue.
7 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
As restated
2007 2006
£ £
At 1 July as previously reported 18,663,487 6,274,489
Prior year adjustments- FRS 20 (Note 2) (2,569,564) -
At 1 July as restated 16,093,923 6,274,489
- Shares Issued
- placing - 10,000,000
- EBT and share options - 2,679,181
- on acquisition of Quayside - 6,000,001
Transaction Costs - (462,500)
Revaluation of investment upwards 235,943 -
Write down of previously revalued investments - (1,095,754)
Currency translation adjustment - 9,772
Other reserve - Shared based award - (1,128,008)
Cost of share options 108,976 168,343
Loss for the year (408,820) (6,351,601)
At 30 June 16,030,022 16,093,923
8 NOTES TO THE CASH FLOW STATEMENT
(a) Reconciliation of operating (loss)/profit to net cash inflow/
(outflow) from operating activities
2007 2006
CONTINUING DISCONTINUED TOTAL TOTAL
OPERATIONS OPERATIONS
£ £ £ £
Operating (loss)/profit (5,402,472) 100,872 (5,301,600) (3,914,679)
Depreciation 72,688 18,164 90,852 178,770
Amortisation and impairment of
intangible assets 3,693,256 74,377 3,767,633 426,894
Gain on disposal of fixed assets (1,144) 66 (1,078) -
Provision for share based payments 108,976 - 108,976 1,609,899
Decrease /(Increase) in stocks - 25,299 25,299 (22,566)
Decrease /(Increase) in debtors 856,095 (806,237) 49,858 (294,315)
Increase/(Decrease) in creditors (210,631) 1,611,000 1,400,369 897,553
Increase in other provisions 243,798 - 243,798 100,000
Net cash (outflow)/inflow from
operating activities (639,434) 1,023,541 384,107 (1,018,444)
(b) Analysis of cash flows for headings netted in the cash flow
statement
2007 2006
£ £
Returns on investments and servicing of finance
Interest received 452,676 300,353
Interest paid (137,474) (301,392)
Interest element of finance lease rental payments (1,118) (514)
Net cash inflow/(outflow) from returns on investments and servicing of
finance 314,084 (1,553)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (113,104) (95,222)
Payments to acquire fixed asset investments - (1,270,505)
Receipts from sale of tangible fixed assets 423 -
Receipts from sale of fixed asset investments 2,038,602 144,000
Net cash inflow/(outflow) from capital expenditure and financial
investment 1,925,921 (1,221,727)
Acquisitions and disposals
Purchase of subsidiary - (916,596)
Sale of subsidiaries 5,506,445 -
Overdraftdisposed of with subsidiaries 67,870 -
Cashacquired with subsidiary - 509,820
Net cash inflow/(outflow) from acquisitions and disposals 5,574,315 (406,776)
Financing
Issue of ordinary share capital - 12,679,181
Transaction costs - (462,500)
Capital element of finance lease rental payments (19,278) (2,544)
Decrease in short term borrowings (51,795) (31,139)
Decrease in long term borrowing (576,695) (1,598,579)
Net cash (outflow)/inflow from financing (647,768) 10,584,419
(c) Analysis of Change in Net Funds
At 1 July 2006 Cash flow Disposals At 30 June 2007
£ £ £ £
Cash 6,207,315 6,622,786 (71,297) 12,758,804
Overdraft (207,311) 68,144 139,167 -
Short term loans (51,795) 25,000 26,795 -
Finance lease obligations (19,278) 12,176 7,102 -
Long term loans (426,695) (2,500) 429,195 -
Loan stock (150,000) 150,000 - -
5,352,236 6,875,606 530,962 12,758,804
9 POST BALANCE SHEET EVENTS
On 8 November 2007 the Company entered into an agreement to sell its entire
shareholding in Quayside Corporate Services Limited to David Mills, a Director
of the Group during the year. Proceeds from this sale amounted to an initial
consideration of £0.6 million before expenses and a further deferred payment of
up to £2.0 million.
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