Final Results

28 April, 2010 GRESHAM HOUSE PLC (the "Company" or the "Group") PRELIMINARY FINANCIAL STATEMENT YEAR ENDED 31 DECEMBER 2009 Gresham House plc (GHE.L), the property and early-stage investment trust, is pleased to announce its preliminary results for the year ended 31 December, 2009. CHAIRMAN'S STATEMENT I am pleased to report that the Company has delivered much improved results for the year ended 31 December, 2009. The Results The revenue loss before tax has decreased from £3,140,000 in 2008 to £901,000 in 2009 whilst the diluted net asset value per share has increased by 16.9% from 405.3p to 473.7p per share. This increase in the asset value per share largely arises through an increase in the value of our investment in Hallin Marine of £5,291,000 following a takeover bid from Superior Energy. On completion of the takeover in February 2010 the Company received £8.6m of which £5.5m has been invested in bonds with a minimum rating of B+. This assists the Company in its aim to build a strong platform to move forward into the next stage of its proposed expansion in the property sector. The principal reason for the reduction in revenue losses is that development property impairments fell from £2,220,000 in 2008 to only £102,000 in 2009. Comparing the results for the two years, excluding impairments and the movement in the fair value of the interest rate swaps, the loss for 2009 would have been £532,000 against £920,000 for 2008. The reduction of rental income has been a significant factor in the Company's performance this year with a decrease of approximately £339,000 against last year. This primarily arose as a result of the loss of two major tenants at Force 6 Trading Estate, Newton le Willows who were not replaced due to the anticipated grant of planning for a residential development in the next few months. These tenancies represented an annualised income of £677,000 but we anticipate that this will be more than compensated for by an increase in the valuation of this site once the planning consent has been granted. In addition as a result of increased voids with their resultant liability to empty rates, property outgoings increased by £204,000 to £1,275,000 prior to impairments. Administration overheads fell from £1,462,000 to £836,000 caused by lower staff and redundancy costs together with reduced professional fees in 2009. Finance costs have increased to £1,052,000 (2008: £927,000) as a result of providing a sum of £267,000 to reflect the fair value of our banking swap arrangements offset by the effect of the reduction in global interest rates. Net Asset Value Per Share As highlighted above the diluted net asset value per share increased by approximately 16.9% from 405.3p to 473.7p principally due to the increase in the value of the investment portfolio of £5,872,000 offset by a decrease in valuation of our property portfolio of £1,524,000. More details regarding these movements are described below. Property Portfolio There has been a marked improvement in sentiment in the commercial property market since last year. However, investment demand has been focused on the prime end of the market, essentially properties let to good covenants, on long leases and in good locations. Secondary and tertiary commercial property investments, such as our portfolio, are still suffering from the weakness in occupational demand throughout all sectors. The annual decline in capital values of the Investment Property Databank ("IPD") index in the 12 months to 31 December, 2009 was 5.6% however the index has now risen for the last 8 consecutive months. Our independent valuation of the investment property portfolio showed a 5.9% decline in values. Despite this continuing fragility of the market, we believe that we are making sound progress in realising maximum value from the existing property portfolio. We continue to look at property opportunities but our ability to make acquisitions is materially restricted by our need to operate within our Investment Trust status. Investment Portfolio The Investment Portfolio has increased from £6,688,000 to £12,723,000 at 31 December, 2009 primarily as a result of the successful takeover of Hallin Marine, the proceeds of which were received in February 2010. The remainder of the portfolio has a valuation of £4,324,000 and we are currently reviewing all the remaining investments with the objective of either selling in the short term or of realising additional value on those retained. Dividend In order to maintain our investment trust status we are again recommending a dividend of 1p per share payable on 25 June, 2010 to shareholders on the register on 28 May, 2010. Future Strategy As shareholders will be aware a resolution was passed at the 2008 Annual General Meeting whereby the investment objective and policy of the Company was changed to realise the Group's assets over a period of approximately five years with a view to returning capital to shareholders. Having now reviewed this objective in light of the opportunities being offered, the liquid resources now available to the Company and the skill sets of the management team, the Board now believes that it would be in the best interests of shareholders to expand our base and invest in commercial property which it believes is likely to offer significant opportunities for above average returns to shareholders. We therefore intend to propose a resolution at this years Annual General Meeting to change the stated investment policy to reflect this. Assuming that this resolution is passed by shareholders the next step will be to review the Memorandum and Articles so as to ensure they enable us to maximise our opportunities. Any change requires a special resolution and this will need 75% of those voting to carry it. At present we are not certain of being able to secure the required level of approval and we will pursue alternative solutions to achieve our goal. However it will be our intention to bring forward such a resolution in due course. We look forward to another rewarding year and I would like to thank all our employees who have contributed to the improved results of 2009. 27 April, 2010 Tony Ebel Chairman CHIEF EXECUTIVE'S REPORT In last year's statement we disclosed the business plan for each of the major assets of the Group. The assets all had specified objectives in order to optimise their value thereby enabling shareholders to benefit from the maximisation of net asset value per share. I would like to comment on the status of each of the principal assets and the overall performance of the Group during the year and the prospects of realising upsides on these assets. Property Portfolio The year end independent valuation has shown a further decrease of £1,524,000 (2008: £13,568,000) on our investment property portfolio and an impairment provision against developments in hand of £102,000 (2008: £2,220,000). The reason for the further write downs are due to the fall in the market for the first seven months of the year which resulted in a decline in the IPD index of 5.6% for the calendar year of 2009 compared to the Group's investment property valuation falling by 5.9%. The overall rental income of the property portfolio has dropped from £2,125,000 per annum to £1,347,000 per annum at year end but this is largely due to the strategy of obtaining vacant possession of our industrial estate in Newton-le- Willows for re-development. A planning application on the 28 acre site was submitted in November 2009 for 441 houses and 35,000 sq ft of commercial space. St Helen's Borough Council is fully supportive of the application and there is an expectation of consent within the next few months. A number of national house builders have submitted offers conditional on planning consent being approved, to acquire the site at levels in excess of book value and at this stage we are anticipating the sale of the site on a phased payment basis by the end of the year. At Southern Gateway, in Speke, income decreased since year end by £168,000 due to the loss of Eli Lilly, one of our main tenants. However we are in advanced negotiations with an existing tenant who require further space which would result in an increase in income of £50,000 per annum. In addition we are reviewing our options on the Inhalations Building at with a view to creating a specialist pharmaceutical serviced laboratory operation. At Vincent Lane, Dorking, we have agreed terms with a national discount food retailer for the sale of 40% of the 3 acre site, subject to planning. Offers have been received for the balance of the site from a number of house builders and planners have indicated their support for a mixed use scheme. We anticipate that the total sale price will be in excess of book value. At Curtis Road, Dorking, the onerous planning condition has now been lifted and we are now in advanced discussions to sell this site at close to book value. At Northern Gateway, Knowsley, despite serious interest from potential occupiers and purchasers we have not been successful to date in securing a letting or sale of the premises. Take up of new industrial space in the North West during 2009 was significant and now, with limited supply and improving demand, we are confident of achieving a positive result in 2010. The Group is in the final stages of acquiring a 2.4 acre site on an established business park near Aberdeen. We have pre-let the site to Hallin Marine and are due to commence construction of their new facility in May, with completion due a year later. We anticipate that a sale of the completed investment in 2011 will generate a substantial profit. Investments As reported in the Chairman's Statement the value of our investment portfolio increased by £6,035,000 to £12,723,000 as at 31 December, 2009 mainly as a result of the increase in value of our holding in Hallin Marine of £5,291,000. The subsequent sale of this investment realised £8.6 million in February 2010 and £5.5 million of the proceeds have now been invested in B+ rated bonds to ensure that we maintain our status as an authorised investment trust. The remaining investments total £4.324 million and include three principal investments with a book value of £2.341 million. These are: Welsh Industrial Investment Trust plc (book value of £801,000 including preference shares). On 1 April, 2010 shareholders voted to liquidate the company and we have subsequently received £720,000 in cash from the liquidator. In addition we expect to receive additional value by way of a distribution in specie of shares in SpaceandPeople plc and Wheelsure Holdings plc which, at today's share prices, could amount to £280,000; SpaceandPeople plc (book value of £873,000) - This AIM listed company which specialises in marketing and sale of promotional space on behalf of shopping centres is expected to release further value over the next year. We will increase our shareholding to approximately 16.6% on the distribution in specie of the Welsh Industrial Investment Trust holding; and Memorial Holdings Ltd - Gresham House invested £680,000 in a 5% stake in Memorial Holdings whose only asset is a 55 acre site that is being developed as a cemetery in Chislehurst, within the London Borough of Bromley. Cemetery space for internments is becoming scarce within the London Boroughs and the Government estimates that space for burials will run out by 2019. The first phase (10 acres) of the site is being developed and the cemetery should be operational by the spring of 2011. Revenue streams are expected to be very rewarding once fully operational. Gresham has an option to acquire a further 5% stake at £850,000 which is materially less than the final placing price of the remainder of the shares. Loans and Cash The total loans at 31 December, 2009 were £25,744,000. Since the year end, £8,570,000 has been repaid leaving loans of £17,174,000 which are secured against the property portfolio. Although the accounts have classified the Co-Op loan of approximately £10.5 million under current liabilities, this being technically repayable on demand, it should be noted that this facility is in fact not due for repayment until May 2012 and we have received confirmation from Co-Op that it is not their current intention to call this loan. The other loans amounting to £6.947 million are with the Royal Bank of Scotland of which £3.463 million matures in July 2011 and £3.484 million matures in July 2012. The cash at bank at 31 December, 2009 was £9,043,000 and represented 38.4% of the net assets of the Group. As mentioned previously since the year end £5.5 million has been invested in B+ rated bonds all maturing between 2013 and 2018. The Group is in a strong position going forward with sufficient cash to expand and acquire opportunistic property assets where the management believe they will be able to add value. Future Strategy We are currently disposing of both property and investments with a view to investing in assets with greater returns such as the proposed development of the Hallin Marine head office in Aberdeen and the cemetery in Chislehurst. We are also looking at investing in other property investments both on a corporate and stand alone basis but we are restricted as to the manner in which we invest in some property transactions to ensure that we do not breach our Investment Trust status. We therefore either have to pass on these opportunities or find a joint venture partner thereby giving away part of our profit to another investor. This is not a sound basis to enhance shareholder value and we are therefore considering the implications of a change of strategy in this regard. We believe that our experienced team can add value for shareholders. It is intended any relevant resolutions will be put to shareholders at a future General Meeting. In the meantime we have replaced our brokers and corporate advisers with Arbuthnot Securities Limited as we believe they are well suited to assist with our strategic planning. We look forward to another year of growth and positive returns for shareholders. 27 April, 2010 Derek Lucie-Smith Chief Executive Further information: Derek Lucie-Smith (Chief Executive, Gresham House plc) 020 7590 7500 Brian Hallett (Finance Director, Gresham House plc) 01489 570861 Alasdair Younie (Arbuthnot Securities Limited) 020 7012 2000 GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2009 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income: Dividend and interest income 200 - 200 266 - 266 Rental income 2,112 - 2,112 2,451 - 2,451 Other operating income 62 - 62 (6) - (6) ----- ----- ----- ----- ----- ----- Total Income 2,374 - 2,374 2,711 - 2,711 Gains/(losses) on investments held at fair value - 5,872 5,872 - (6,330) (6,330) Movement in fair value of property investments - (1,524) (1,524) - (13,512)(13,512) Profit on disposal of property, plant and equipment - - - - 507 507 ----- ----- ----- ----- ------ ------ Total income and gains/(losses) on investments 2,374 4,348 6,722 2,711 (19,335)(16,624) ----- ----- ----- ----- ------ ------ Operating costs: Property outgoings and impairments (1,377) - (1,377) (3,291) - (3,291) Administrative overheads (836) - (836) (1,462) - (1,462) ----- ----- ----- ----- ------ ------ (2,213) - (2,213) (4,753) - (4,753) ----- ----- ----- ----- ------ ------ Group operating profit/(loss) 161 4,348 4,509 (2,042)(19,335)(21,377) Finance costs (1,052) - (1,052) (927) - (927) Share of joint venture operating loss (10) - (10) (171) - (171) ----- ----- ----- ----- ------ ------ Group and share of joint venture operating profit/(loss) before taxation (901) 4,348 3,447 (3,140)(19,335)(22,475) Taxation - - - - 848 848 ----- ----- ----- ----- ------ ------ Profit/(loss) and total comprehensive income (901) 4,348 3,447 (3,140)(18,487)(21,627) ===== ===== ===== ===== ====== ====== Attributable to:- Equity holders of the parent (1,012) 4,366 3,354 (2,874)(17,943)(20,817) Non-controlling interest 111 (18) 93 (266) (544) (810) ----- ----- ----- ----- ------ ------ (901) 4,348 3,447 (3,140)(18,487)(21,627) ===== ===== ===== ===== ====== ====== Basic and diluted earnings per Ordinary Share (20.7p) 89.4p 68.7p (58.9p)(367.7p)(426.6p) ==== ==== ==== ==== ===== ===== Notes (i) The total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRSs. (ii) The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. (iii) All revenue and capital items in the above statement derive from continuing operations. (iv) Dividends - Ordinary shares: proposed final dividend of 1p per share (2008: 1p) payable on 25 June, 2010 to shareholders on the register at 28 May, 2010 49 49 ===== ===== (v) The summary of results for the year ended 31 December, 2009 does not constitute statutory accounts within the meaning of s435(1) of the Companies Act 2006. The financial information has been extracted from the Group's full statutory accounts for the year ended 31 December, 2009 in which the auditors' report was neither qualified, nor contained any reference to emphasis of matter, nor any statement under section 498(2) or section 498(3) of the Companies Act 2006. The full statutory accounts are available on the Company's website www.greshamhouse.com and will be posted to shareholders. (vi)Basic and diluted earnings per ordinary share are based on the net profit attributable to equity shareholders of £3,354,000 (2008: loss £20,817,000), and on 4,881,880 (2008: 4,879,694) ordinary shares being the weighted average number of those in issue during the year. There are no shares deemed to have been issued as at 31 December, 2009. The calculation for diluted earnings per share for 2008 would have included 8,908 shares deemed to have been issued at nil consideration as a result of options granted but these have not been recognised as they would reduce the loss per share. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER, 2009 Equity Attributable Non- Ordinary Share to equity control- share Share option Capital Retained share- ing Total capital premium reserve reserve earnings holders interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2008 1,220 847 42 30,363 (12,650) 19,822 331 20,153 Profit/(loss) for the period * - - - 4,366 (1,012) 3,354 93 3,447 Ordinary dividends paid - - - - (49) (49) - (49) Share based payments - - (28) - 28 - - - ------ ------ ------ ------ ------ ------ ----- ------ Balance at 31 Dec 2009 1,220 847 14 34,729 (13,683) 23,127 424 23,551 ====== ====== ====== ====== ====== ====== ===== ====== YEAR ENDED 31 DECEMBER, 2008 Equity Attributable Non- Ordinary Share to equity control- share Share option Capital Retained share- ing Total capital premium reserve reserve earnings holders interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2007 1,219 831 44 48,306 (9,538) 40,862 1,141 42,003 Loss for the period * - - - (17,943) (2,874) (20,817) (810)(21,627) Ordinary dividends paid - - - - (244) (244) - (244) Issue of shares 1 16 - - - 17 - 17 Share based payments - - (2) - 6 4 - 4 ------ ------ ------ ------ ------ ------ ----- ------ Balance at 31 Dec 2008 1,220 847 42 30,363 (12,650) 19,822 331 20,153 ====== ====== ====== ====== ====== ====== ===== ====== * The profit/(loss) for the period is the total comprehensive income for the period. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2009 2009 2008 Assets £'000 £'000 Non-current assets Investments - securities 12,723 6,688 Property investments 24,600 25,750 Investment in joint venture - - Property, plant and equipment 2 3 ------ ------ Total non-current assets 37,325 32,441 ------ ------ Current assets Trade and other receivables 504 361 Accrued income and prepaid expenses 714 1,721 Other current assets 3,408 3,432 Cash and cash equivalents 9,043 1,839 ------ ------ Total current assets 13,669 7,353 ------ ------ Total assets 50,994 39,794 ------ ------ Current liabilities Trade and other payables 1,432 1,702 Short term borrowings 19,037 17,939 ------ ------ Total current liabilities 20,469 19,641 ------ ------ Total assets less current liabilities 30,525 20,153 Non-current liabilities Long term borrowings 6,707 - Other financial liabilities 267 - Deferred taxation - - ------ ------ 6,974 - ------ ------ Net assets 23,551 20,153 ====== ====== Capital and reserves Ordinary share capital 1,220 1,220 Share premium 847 847 Share option reserve 14 42 Capital reserve 34,729 30,363 Retained earnings (13,683) (12,650) ------ ------ Equity attributable to equity shareholders 23,127 19,822 Non-controlling interest 424 331 ------ ------ Total equity 23,551 20,153 ====== ====== Basic net asset value per ordinary share 473.7p 406.0p ====== ====== Diluted net asset value per ordinary share 473.7p 405.3p ====== ====== Notes Basic net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 4,881,880 (2008: 4,881,880) ordinary shares being the number of ordinary shares in issue at the year end. Diluted net asset value per ordinary share is based on Equity attributable to equity shareholders at the year end and on 4,881,880 (2008: 4,890,788) ordinary shares. The number of shares is based upon the number of shares in issue at the year end together with nil(2008:8,908) shares deemed to have been issued at nil consideration as a result of options granted. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2009 2009 2009 2008 2008 £'000 £'000 £'000 £'000 Cashflow from operating activities Investment income received 142 166 Interest received 58 100 Rental income received 1,819 2,431 Other cash payments (2,053) (1,601) ------ ------ Net cash generated from operations (34) 1,096 Interest paid on property loans (717) (967) ------ ------ (717) (967) ------ ------ Net cash flows from operating activities (751) 129 Cash flows from investing activities Purchase of investments (1,252) (264) Investment in joint venture (10) (171) Sale of investments 1,089 1,511 Sale of tangible fixed assets 980 - Expenditure on investment properties (374) (513) Disposal of investment properties - 56 Purchase of developments in hand (234) (260) ------ ------ 199 359 Cash flows from financing activities Repayment of loans (18,090) (443) Receipt of loans 25,895 684 Share capital issued - 17 Equity dividends paid (49) (244) ------ ------ 7,756 14 ------ ------ Increase in cash and cash equivalents 7,204 502 Cash and cash equivalents at start of period 1,839 1,337 Cash and cash equivalents at end of ------ ------ period 9,043 1,839 ====== ====== NOTES TO THE GROUP STATEMENT OF CASH FLOWS RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS 2009 2008 £'000 £'000 Revenue return before taxation (901) (3,140) Interest payable 1,052 927 Share based payments - 4 Depreciation of property, plant and equipment 1 11 Share of joint venture losses 10 171 ------ ------ 162 (2,027) Decrease in current assets 142 2,869 (Decrease)/increase in current liabilities (338) 254 ------ ------ (34) 1,096 ====== ====== GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT SEGMENTAL REPORTING Property Investment Investment Elimination Consolidated 2009 2008 2009 2008 2009 2008 2009 2008 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue External income 183 65 2,133 2,546 - - 2,316 2,611 Inter-segment income 981 1,156 - 666 (981) (1,822) - - ----- ----- ----- ----- --- ----- ----- ----- Total revenue 1,164 1,221 2,133 3,212 (981) (1,822) 2,316 2,611 ===== ===== ===== ===== === ===== ===== ===== Gain/(loss) on investments at fair value 5,872 (6,330) - - - - 5,872 (6,330) Losses on property investments at fair value - - (1,524)(13,512) - - (1,524) (13,512) Profit on disposal of property, plant and equipment - 507 - - - - - 507 ----- ----- ----- ------ --- ----- ----- ----- Total income and gains 7,036 (4,602) 609 (10,300) (981) (1,822) 6,664 (16,724) Segment expenses - - (1,377) (3,291) - - (1,377) (3,291) Interest expense - - (1,052) (927) - - (1,052) (927) ----- ----- ----- ------ --- ----- ----- ------ Segment profit/(loss) 7,036 (4,602)(1,820)(14,518) (981) (1,822) 4,235 (20,942) ===== ===== ===== ====== === ===== Unallocated corporate expenses (836) (1,462) ----- ----- Operating profit/(loss) 3,399 (22,404) Share of joint venture loss (10) (171) Interest income 58 100 ----- ------ Profit/(loss) before taxation 3,447 (22,475) ===== ====== All revenue is derived from operations within the United Kingdom. The principal accounting policies adopted by the Group are fundamentally the same as the previous year other than the Basis of preparation note which is reproduced in full below. Full disclosure of the principal accounting policies and related party transactions are included in the financial statements which can be found on the Company's website www.greshamhouse.com. Basis of preparation The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. During 2009 the following accounting standards and guidance were adopted by the Group: (i) IAS 1 (Revised) Presentation of Financial Statements. The revised standard has changed the way the Group's primary financial statements have been presented. The revision required information to be aggregated on the basis of shared characteristics and introduced a "statement of comprehensive income" to enable readers to analyse changes in an entity's equity resulting from transactions with owners separately from "non-owner" changes. Comparative information has been re-presented so that it also is in conformity with the revised standard. (ii) IFRS 7 (Amendment) Financial Instruments: Disclosures The amendment introduced a three-level hierarchy for fair value measurement disclosures and required entities to provide additional disclosures about the relative reliability of those fair valued instruments. In addition the amendment clarified and enhanced liquidity risk disclosure requirements to enable users to better evaluate the nature and extent of liquidity risk arising from financial instruments and how the entity managed risk. The Group has provided these additional disclosures in the notes to the financial statements. (iii) IFRS 8 Operating Segments IFRS 8 replaced IAS 14 and requires operating segments to be identified on the basis of internal reports about components that are regularly reviewed by the Board. The new standard has not significantly impacted the way management reports segmental information as this is the basis on which the Group is organised and managed. During 2009 the following standards and interpretations were adopted by the Group and were mandatory for the accounting period, but either had no material impact on the Group's financial statements or were not relevant to the operations of the Group: (i) IFRS 1 (Amendment) First time adoption of IFRS (ii) IFRS 2 (Amendment) Share-based payment (iii) IAS 23 (Amendment) Borrowing Costs. (iv) IAS 27 (Amendment) Consolidated and Separate Financial Statements (v) IAS 32 (Amendment) Financial Instruments Presentation (vi) IAS 39 and IFRS 7 (Amendment) Financial Instruments Recognition and Measurement (vii) IAS 40 (Amendment) Investment Property (viii) IFRIC 9 (amendment) Financial instruments: Recognition and measurement, and Reassessment of embedded derivatives (ix) IFRIC 13 Customer loyalty programmes (x) IFRC 15 Agreements for the construction of real estate (xi) IFRIC 16 Hedges of a net investment in a foreign operation The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies ("the AIC") is consistent with the requirements of IFRS and appropriate in the context of the Company's activities, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. Other standards and interpretations have been issued which will be effective for future reporting periods but have not been adopted in these financial statements as set out in note (v). The financial statements highlight that the Group has loans of £19.0 million due within one year. On the basis that (i) the Other loan of £8.3 million has been repaid in full since year end and (ii) The Co-operative Bank plc facility of £10.5 million is technically repayable on demand but has an expiry date of 31 May, 2012 and confirmation has been received that it is not the bank's current intention to call the loan facility, these financial statement have been prepared on a going concern basis. After making enquiries, and having due regard to the above, the directors believe that the Group has access to sufficient working capital for the foreseeable future and therefore remains a going concern. Statement of the Directors' Responsibilities The directors are responsible for preparing the directors' report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the annual report includes information required by the Listing Rules of the Financial Services Authority. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and have elected to prepare the parent company financial statements in accordance with those standards. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgments and estimates that are reasonable and prudent; - state whether the financial statements have been prepared in accordance with IFRSs as adopted by the European Union; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation and the parent company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions. The directors confirm, to the best of their knowledge: - that the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and - that the management report included within the Report of the Directors, the Chairman's Statement, the Chief Executive's Report and the Investment Policy includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

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