Final Results
Parkmead Group (The) PLC
27 September 2007
Thursday 27 September 2007
THE PARKMEAD GROUP PLC ('Parkmead' or the 'Group')
Preliminary results for the 12 months ended 30 June 2007
The Parkmead Group plc (PMG) today announces its unaudited preliminary results
for the year ended 30 June 2007.
Financial highlights
- Return to profitability with £0.3 million profit 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
- Profit per share 0.08 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 returned it to
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. '
-Ends-
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/Carl Holmes
CHAIRMAN'S STATEMENT
Development of the Group, Results and Dividends
I am pleased to announce that the Group returned to profitability for the year
ended 30 June 2007 recording a profit before tax and minority interests of £0.3
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 £4.6 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 £2.6
million from £5.3 million to £2.7 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. Accordingly, the operating loss before these
exceptional and impairment costs was £0.5 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 profit for the year, after tax and minority
interests and share based payments of £0.3 million (2006 loss: £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 decided to set aside £0.5 million for doubtful debts
associated with trade receivables. The impact of this provision caused Quayside
to record a loss for the year of £0.3 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 £5.0 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
successfully restructured the Group and have returned it to profitability.
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
27 September 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
NOTES CONTINUING DISCONTINUED TOTAL TOTAL
OPERATIONS OPERATIONS
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 (7,968,244) (2,117,975) (10,086,219) (12,037,581)
Other operating income 3 150,987 150,987 106,054
-
Operating (loss)/profit 3 (4,694,091) 100,872 (4,593,219) (3,914,679)
Profit on disposal of 5 4,613,262
subsidiaries/ investments -
Exceptional profit on deemed - 363,715
disposal
Amounts written off 4 (154,286) (2,670,624)
investments
Net interest receivable/ 389,295
(payable) (1,553)
Profit/(Loss) on ordinary 3 255,052 (6,223,141)
activities before taxation
Taxation (5,342) (41,873)
Profit/(Loss) on ordinary 249,710 (6,265,014)
activities after taxation
Minority interest 49,851 (86,587)
Profit/(Loss) for the 299,561 (6,351,601)
financial year
Profit/(Loss) per 5 pence
ordinary share (pence)
- basic 6 0.08p (3.71p)
- diluted 6 0.08p (3.71p)
GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
2007 2006
As restated
£ £
Profit/(Loss) on ordinary activities before taxation 255,052 (6,223,141)
Write-down of previous temporary diminution in value of fixed asset - (306,464)
investments charged against revaluation reserve
Historical cost profit/(loss) on ordinary activities before taxation 255,052 (6,529,605)
Historical cost profit/(loss) for the year retained after taxation and 299,561 (6,658,065)
minority interest
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
2007 2006
As restated
£ £
Profit/(Loss) for the financial year attributable to members of the parent 299,561 (6,351,601)
Company
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 535,504 (7,437,583)
Prior year adjustment - FRS 20 (1,750,798)
Total recognised loss since the last annual report (1,215,294)
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2007
(UNAUDITED)
NOTES 2007 2007 2006 2006
As restated As restated
£ £ £ £
Fixed assets
Intangible assets 2,672,793 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 -
4,397,761 11,834,496
Current assets
Stock 252,971
-
Debtors 1,118,585 4,127,827
Cash at bank and in hand 12,758,804 6,207,315
13,877,389 10,588,113
Creditors
Amounts falling due within one year (1,192,949) (5,187,657)
Net current assets 12,684,440 5,400,456
Total assets less current liabilities 17,082,201 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 16,738,403 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 165,488 (243,049)
Equity shareholders' funds 7 16,738,403 16,093,923
Minority interests - 337,231
Capital employed 16,738,403 16,431,154
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
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
The preliminary results for the year ended 30 June 2007 are unaudited. The
financial information contained in this announcement does not constitute the
Group's audited statutory financial statements for the year ended 30 June 2007
within the meaning of Section 240 of the Companies Act 1985.
The financial information for the period from incorporation to 30 June 2006 has
been extracted from the Group's statutory financial statements for that period
which have been delivered to the Registrar of Companies. The report of the
auditors on those financial statements was unqualified and did not contain any
statements under either Section 237(2) (accounting records or returns
inadequate or accounts not agreeing with records and returns) or 237(3)
(failure to obtain necessary information and explanations) of the Companies' Act
1985. The financial information contained in this announcement has been prepared
under accounting policies set out in Group financial statements for the period
ended 30 June 2006, except where noted below in the basis of preparation.
As at the date of this announcement, the auditors have not reported on the
Group's financial statements for the year ended 30 June 2007, nor have such
financial statements been delivered to the Registrar of Companies. The financial
statements for the year ended 30 June 2007 will be distributed to shareholders
prior to the Annual General Meeting, and then filed with the Registrar of
Companies.
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 (2006: £169,343 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 option charge
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 3,286,875 358,831 (5,956,616) 16,738,403 16,128,397
Less: inter segmental sales (32,000) (132,000) - -
- -
3,687,006 3,154,875 358,831 (5,956,616) 16,738,403 16,128,397
Discontinued Operations:
Software development, support 1,153,658 1,884,640 (266,455) (245,846) (963,426)
and marketing -
Investment and advisory - 22,497 3,834 (376,550) - (2,975)
Design, supply and install of 2,806,423 7,944,375 158,842 355,871 - 1,269,158
audio visual systems
3,960,081 9,851,512 (103,779) (266,525) - 302,757
7,647,087 13,006,387 255,052 (6,223,141) 16,738,403 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. Profit/(Loss) on ordinary activities before taxation £ £
UK 251,218 (5,846,591)
USA and Canada 3,834 (376,550)
255,052 (6,223,141)
2007 2006
As restated
iii. Net assets/(liabilities) £ £
UK 16,738,403 16,434,129
USA and Canada - (2,975)
16,738,403 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 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 (7,968,244) (2,117,975) (10,086,219) (6,820,469) (5,217,112) (12,037,581)
expenses
Other operating - 150,987 106,054 106,054
income 150,987
-
Operating (loss)/ (4,694,091) 100,872 (4,593,219) (3,876,165) (38,514) (3,914,679)
profit
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 PROFIT/(LOSS) PER SHARE
The basic profit/(loss) per share has been calculated by dividing the profit/
(loss) attributable to equity shareholders funds by the weighted average number
of shares in issue during the year.
The profit/(loss) and weighted average number of shares used in the calculation
of the profit/(loss) per share are set out below:
2007 2006
As restated
Basic profit / (loss) per share
Profit / (Loss) attributable to ordinary shareholders (£) 299,561 (6,351,601)
Weighted average number of shares - number 368,341,780 171,332,649
Profit / (Loss) per 5 pence ordinary share (pence) 0.08p (3.71p)
- basic
Diluted Loss per share
The diluted profit/(loss) per share has been calculated by dividing the profit/
(loss) attributable to equity shareholders funds by the weighted average number
of diluted shares in issue during the year.
The profit/(loss) and weighted average number of shares used in the calculation
of the profit/(loss) per share are set out below:
2007 2006
As restated
Basic profit/(loss) per share
Profit/(Loss) attributable to ordinary shareholders (£) 299,561 (6,351,601)
Weighted average number of shares - number 368,341,780 171,332,649
Weighted average number of options - number 4,511,549 -
Weighted average number of diluted shares - number 372,853,329 171,332,649
Profit/(Loss) per 5 pence ordinary share (pence) 0.08p (3.71p)
- diluted
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 (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
Profit / (Loss) for the year 299,561 (6,351,601)
At 30 June 16,738,403 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 (4,694,091) 100,872 (4,593,219) (3,914,679)
Depreciation 90,852 178,770
72,688 18,164
Amortisation and impairment of 3,198,292 74,377 3,272,669 426,894
intangible assets
Gain on disposal of fixed assets (1,144) (1,078)
66 -
Provision for share based payments 108,976 - 108,976 1,609,899
(Increase)/ Decrease in stocks 25,299 25,299 (22,566)
-
(Increase)/Decrease in debtors 642,678 (163,559) (294,315)
(806,237)
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 inflow/(outflow) from (639,434) 1,023,541 384,107 (1,018,444)
operating activities
(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 314,084
finance (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 1,925,921 (1,221,727)
investment
Acquisitions and disposals
Purchase of subsidiary (916,596)
-
Sale of subsidiaries 5,506,445
-
Overdraft/(Cash) disposed of with subsidiaries 67,870
-
Cash/(Overdraft) acquired 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 inflow/(outflow) 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
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