Interim Results

Mercury Group PLC 29 June 2005 MERCURY GROUP PLC ('Mercury' or 'the Group') INTERIM RESULTS For the six months ended 31 March 2005 CHAIRMAN'S STATEMENT I am pleased to announce the interim results for the six months ended 31 March 2005. The period has seen considerable progress in achieving our objective of building a group of companies capable of providing a wide range of professional services to the real estate industry. Over the period, we completed the acquisitions of three businesses which now form the building blocks of the Group. All the businesses are bedding down very well but given the timing of the acquisitions, our results for the period do not properly reflect their on-going contribution to turnover and profit. Results for the six months ended 31 March 2005 reflect only three months' contribution from Telco Solutions our project management company, three months' contribution from Navitas Hemway, our facilities management company and only one month's contribution from Smith Melzack Pepper Angliss, our commercial property consultancy and estate agency business. Turnover for the period was £782,000 and the operating loss was £297,000. The loss before tax was £316,000. The Group retains a legacy investment in Dialog Inc. This has been fully provided for and, for the time being, we have chosen not to dispose of it given the unsatisfactory market conditions. However, we are keeping this situation under review. In December 2004, we acquired the remaining 60 per cent. of shares in Navitas Hemway ('Navitas'), the facilities management company based in Crewe. To date, the Group has paid £0.6 million for the entire issued share capital of Navitas, with further deferred consideration to be payable following the 12 month period ending 30 September 2005. Since its acquisition, Navitas has performed well and Navitas is currently engaged on contracts at five shopping centres. The business is currently tendering for a number of major shopping centres as well as other large sites. At the same time as acquiring full ownership of Navitas, the Group acquired Telco Solutions ('Telco'), the project management company for the data centre sector. We have paid a total of £0.5 million for the entire issued share capital of Telco to date, with further deferred consideration payable dependent on certain performance targets being met, during the years ending 30 September 2005 and 2006. In March 2005, we completed the acquisition of Smith Melzack Pepper Angliss ('SMPA'), the commercial property consultancy and estate agency business, for a consideration of up to £1.3 million. In March, we also acquired an option over Lee Baron Group Limited, another commercial property agency. While we allowed the option on Lee Baron Group Limited to lapse, we are working closely together on a number of projects and our discussions remain ongoing. We do not propose a dividend at this stage. The Directors are expecting to propose a capital reduction, which will require shareholder and Court approval. Subject to such approvals, we will reconsider the dividend policy during the year to 30 September 2006. With our three acquisitions, the Group's transformation into an integrated property services group is well underway. The outlook for all the business units, especially for our facilities management operation, Navitas, is encouraging. In addition, we are particularly pleased to note that the cross-selling opportunities we envisaged across our operations are now beginning to bear fruit. While we intend to concentrate on organic growth, we will also continue to examine other acquisition opportunities which offer us complementary skills and services. The board remains confident of prospects for future growth and I look forward to updating shareholders in due course. David Williams Chairman Enquiries Mercury Group Plc David Williams, Chairman T: 020 7422 6566 Biddicks Katie Tzouliadis T: 020 7448 1000 Mercury Group Plc Consolidated Profit and Loss Account For the six months ended 31 March 2005 6 Months ended Year ended 31 March 30 September 2005 2004 Unaudited Audited £ £ Turnover - Continuing 782,082 - - Discontinued - 246,970 Cost of sales (292,386) (189,616) ------------ ------------ Gross profit 489,696 57,354 Administrative expenses (786,949) (631,277) ------------ ------------ Operating loss (297,253) (573,923) - Continuing operations (297,253) (529,762) - Discontinued operations - (44,161) Share of loss of associate (35,152) (149,024) Amortisation of goodwill arising on acquisition of associate (8,441) (28,138) Loss on fixed asset investments - (214,839) Profit on disposal of subsidiary - 12,555 Interest payable and similar charges (1,362) (3) Interest receivable and similar charges 26,091 36,545 ------------ ------------ Loss on ordinary activities before taxation (316,117) (916,827) Tax on loss on ordinary activities - - ------------ ------------ Loss on ordinary activities after taxation (316,117) (916,827) ============ ============ Earnings/(loss) per ordinary share (0.02)p (0.08)p ============ ============ Mercury Group Plc Consolidated Balance Sheet At 31 March 2005 31 March 2005 30 September 2004 Unaudited Audited Notes £ £ £ £ Fixed assets Intangible assets 5,873,445 - Tangible assets 100,443 - Investments in associates - 233,096 Investments 1 1 ----------- ----------- 5,973,889 233,097 Current assets Debtors 1,607,044 492,920 Cash at bank and in hand 292,129 951,894 ------------ ----------- 1,899,173 1,444,814 Creditors: amounts falling due within one year (2,057,583) (253,293) ------------ ----------- Net current (liabilities)/ assets (158,410) 1,191,521 ----------- ------------ Total assets less current liabilities 5,815,479 1,424,618 Creditors: amounts falling due after one year (260,980) - ----------- ------------ Net assets 5,554,499 1,424,618 =========== ============ Capital and reserves Called up share capital 8,900,003 8,446,493 Share premium account 3,167,827 1,406,688 Shares to be issued 2,231,349 - Other reserves 156,953 156,953 Profit and loss account (8,901,633) (8,585,516) ------------ ------------ Shareholders' funds 5,554,499 1,424,618 ============ ============ Mercury Group Plc Consolidated Cash Flow Statement For the six months ended 31 March 2005 6 Months ended Year ended 31 March 2005 30 September 2004 Unaudited Audited Note £ £ £ £ Net cash (outflow) from operating activities (a) (1,120,575) (309,194) Returns on investments and servicing of finance Interest received 26,091 36,545 Interest paid (1,362) (3) --------- --------- Net cash inflow for returns on investments and servicing of finance 24,729 36,542 Taxation (82,981) (40,194) Capital expenditure and financial investment Payments to acquire tangible fixed assets (7,379) - Receipts from sales of investments - 47,135 --------- --------- Net cash (outflow)/ inflow from investing activities (7,379) 47,135 Acquisitions and disposals Purchase of associate - (147,592) Proceeds of part disposal of subsidiary - 172,028 Cash disposed of with subsidiary undertaking - (116,654) Purchase of subsidiary undertakings (411,198) - Cash deficit acquired with subsidiaries (130,035) - --------- --------- --------- ----------- --------- Net cash outflow from acquisitions and disposals (541,233) (92,218) ----------- Net cash (outflow) before financing (1,727,439) (357,929) Financing Issue of ordinary share capital 1,105,500 1,254,759 Debt finance repaid (600,000) (42,656) Capital element of finance lease repaid (792) - --------- --------- --------- ----------- --------- ----------- Net cash inflow from financing 504,708 1,212,099 ----------- ----------- (Decrease)/Increase in cash in the year (b) & (c) (1,222,731) 854,170 =========== =========== Mercury Group Plc Notes to the Consolidated Cash Flow Statement For the six months ended 31 March 2005 (a) Reconciliation of operating loss to net cash flow from operating activities 6 Months ended Year ended 31 March 2005 30 September 2004 Unaudited Audited £ £ Operating loss (297,253) (573,923) Depreciation charge Amortisation charge 11,026 362 52,485 - Increase in debtors (939,825) (87,194) Increase in creditors 52,992 351,501 ------------ ---------- Net cash outflow from operating activities (1,120,575) (309,194) ============ ========== (b) Reconciliation of net cash flow to movement in net funds (Decrease)/Increase in cash (1,222,731) 854,170 Decrease in debt - 42,656 ------------ ---------- Movement in net funds (1,222,731) 896,826 Opening net funds 951,894 55,068 ------------ ---------- Closing net (debt)/funds (270,837) 951,894 ============ ========== (c) Analysis of changes in net debt At Cash Flow At 31 March 30 September 2005 2004 £ £ £ Cash at bank and in hand 951,894 (659,765) 292,129 Bank overdraft - (562,966) (562,966) ---------- ---------- ---------- 951,894 (1,222,731) (270,837) Debt due after one year - - - ---------- ---------- ---------- Total 951,894 (1,222,731) (270,837) ========== ========== ========== (d) Major non cash transactions During the period, the company issued 225,709,800 ordinary shares with a fair value of £1,089,149 as part of the consideration for subsidiary undertakings. Mercury Group Plc Notes to the Interim Report For the six months ended 31 March 2005 1. Status of the Interim Report The financial information contained in the Interim Report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The comparative financial information for the year ended 30 September 2004 is an abridged version of the group's published financial statements for that year, which contained an unqualified audit report and which have been filed with the Registrar of Companies. 2. Accounting Policies The financial statements are prepared in accordance with applicable accounting standards. The principal accounting policies adopted in the preparation of the financial statements are described below and have remained unchanged. Accounting convention The financial statements have been prepared under the historical cost convention modified to include the revaluation of certain investments and in accordance with applicable accounting standards. Basis of consolidation The group profit and loss account and balance sheet consist of the financial statements of the parent company and its subsidiary undertakings. The group's share of associated undertakings' profits or losses is included in the group profit and loss account, and added to the cost of investments in the balance sheet. The results of businesses acquired or disposed of during the year have been included from the effective date of acquisition or up until the date of disposal. Profits or losses on intra-group transactions are eliminated in full. Turnover Turnover represents fees invoiced, excluding discounts, other sales taxes and VAT. Tangible Fixed Assets Depreciation is provided on the cost of tangible fixed assets in equal annual instalments over the estimated useful lives of the assets. The rates of depreciation are as follows: Office equipment 25% on cost Motor vehicles 25% reducing balance Computer equipment 33% reducing balance Taxation The charge for taxation is based on the results for the year and takes into account deferred taxation. Provision is made for material deferred taxation, in respect of all timing differences that have originated but not reversed at the balance sheet date. Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Leases Operating lease rentals are charged to the profit and loss account in equal annual amounts over the lease term. Investments Investments are included at valuation on the following basis: (a) Listed investments are valued at Directors' estimate of market values given the size of the holding. (b) Unquoted investments are valued by the Directors at the cost of the investment, subject to any impairment in value. Goodwill Goodwill arising from the purchase of subsidiary and associated undertakings, represents the excess of the fair value of the purchase consideration over the fair value of the net assets, or share of net assets acquired. The goodwill arising on acquisitions is capitalised as an intangible asset and amortised over a period of 20 years. 3. Earnings per share The basic earnings per share calculation is based on a weighted average number of ordinary shares of 0.1 pence each in issue during the period of 1,537,327,773 (Year ended 30 September 2004: 1,146,033,75). 4. Reconciliation of movements in shareholders' funds The reconciliation of movements in shareholders' funds is as follows: £ Shareholders' funds at 1 October 2004 1,424,618 Loss for the period (316,117) Shares issued in period 2,214,649 Shares to be issued (Note 5) 2,231,349 ----------- Shareholders' funds at 31 March 2005 5,554,499 =========== 5. Shares to be issued The balance included within shareholders funds as shares to be issued represents the directors best estimate of the fair value of ordinary shares to be issued as deferred consideration on the acquisitions made in the year representing 367,975,800 ordinary shares. This information is provided by RNS The company news service from the London Stock Exchange

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