Premliminary Results Amendmnt

Pathfinder Properties PLC 04 January 2005 FOR IMMEDIATE RELEASE 4 January 2005 The folowing replaces the preliminary results announcement released on 30 July 2004 under RNS number 4255B. Under the heading 'Lomond Galleries, Loch Lomond' in the Chairman's Statement, it should have read that it was 'the directors of Pathfinder (Loch Lomond) Limited' not 'the Bank' who appointed 'an administrator over the property'. The full amended version appears below. FOR IMMEDIATE RELEASE Pathfinder Properties PLC Results for the year ended 31 December 2003 The Board of Pathfinder announces the results of the Company for the year ended 31 December 2003, which are set out below. The audited financial statements for the year ended 31 December 2003 are being sent to all shareholders. Copies may be obtained from the Company by writing to Pathfinder Properties PLC, 1001 Finchley Road, London NW11 7HB. CHAIRMAN'S STATEMENT The year under review This is my first report to you since being elected as chairman of the company at the Extraordinary General Meeting in January this year. Unfortunately, the year to December 2003 was not a good one for Pathfinder and, as you will see from the accounts, the company made a loss of £4,426,000. I must stress that none of the present members of your Board of Directors were involved with the management of the company during that period and it was precisely because of our concerns over the way that the company was being run that Sunnyview Limited requisitioned the Extraordinary General Meeting at which shareholders voted to remove all the then directors and to appoint Jeffrey Azouz, Dr John Guy Davies and myself in their place. As you can see from the accounts, our concerns proved to be well founded. The accounts reveal that the previous Board managed to spend £1,818,000 in administrative expenses whilst not receiving any net operating income. This is in spite of a statement made by the previous chairman at the company's last AGM that he intended to reduce administrative expenses from the previous year's level of £1,450,000. Notwithstanding these losses and complaints from shareholders about salaries and fees paid to certain directors for the year ended 31 December 2002, the administrative expenses for the year also include £167,405 paid to Claire O'Connor or a company with which she was connected. £85,418 was paid to Marc Green or a company with which he was connected. Mr Green has since resigned. In light of the earlier concerns voiced by shareholders over the levels of remuneration of previous Board members, your current Board is surprised and disappointed at the sums paid. You may recall that in the weeks leading up to the Extraordinary General Meeting, the previous board had effectively put the company up for sale and announced that they had received expressions of interest from various parties and that the company was in an offer period. Following my appointment to the Board, I immediately sought clarification from the company's professional advisors in order to establish the seriousness of the expressions of interest. My enquiries revealed that none of the parties had really shown any genuine interest and, in light of this, and the considerable costs involved with the exercise, I brought the offer period to an end. The new Board's immediate priorities were to reduce the outrageously high levels of administrative expenditure and to deal with the company's outstanding debts. We have cut administrative expenses drastically by reducing staff levels from seven to two and by the directors having taken over many of the functions that were previously carried out by the staff. We have made substantial savings by relocating the offices to lower cost premises and by substantially reducing the directors' remuneration. Taking account of these and other cost saving measures, we believe that we will cut administrative expenses substantially. The largest of the company's debt, apart from bank loans, was an outstanding debt of approximately £409,000 plus interest that was due under the settlement agreement with Amicrest Holdings PLC (formerly Pathfinder Recovery 2 PLC). This sum was due to be paid in May 2004 and, as far as I could ascertain, the previous Board had not made any arrangements for the sum to be paid. I negotiated an option with Amicrest Holdings PLC allowing the debt to be paid by way of a transfer of shares in the company valued at 16 pence per share. As a condition of this option, I agreed that Amicrest Holdings PLC would be entitled to nominate a director to the Board of the company. I am pleased to say that pursuant to the agreement of the option, Gerard Lee was elected to the Board and subsequently appointed Chief Executive of the company. His considerable skill and experience in the property arena has proved invaluable. To enable shareholders to get a full insight into the company, I set out below details of the main properties held by the Pathfinder Group. Back Turner Street, Manchester This is a site on which there are a number of derelict buildings, some of which are listed. Approximately 18 months ago, a planning application was submitted for 20 residential units. The application was stayed due to a threat that English Heritage was going to list the entire site. The previous Board failed to resolve this issue. However, I am pleased to confirm that we have managed to obtain confirmation from English Heritage that they do not intend to list the remaining buildings on the site. We have revived the planning application and hope to sell the property in due course. The Old Cattle Market, Wetherby, Leeds Planning application was submitted for 24 new build apartments together with 10,000 sq ft of retail. Planning permission was granted subject to a Section 106 agreement being entered into with the local authority. For some reason, the previous board entered into a joint venture agreement with a third party when the property was acquired by the Group. Under this arrangement, the joint venture partner does not put any money into the venture yet receives 50% of the profit. The current Board considers this arrangement to be disadvantageous. If the Group were to develop the site, it would result in the joint venture partner receiving 50% of the profit having put in no money and no effort. As a result, the Board has decided to sell the property. North Gate, Newark This is an excellent site on the edge of Newark town centre, fronting the river. The site consists of an old listed brewery and a cleared area. We have applied for planning permission to convert the listed building into 52 residential units, to develop 98 residential units fronting the river and to develop 55 houses on the remainder of the site. The previous board also entered into a joint venture agreement in respect of this site, although in this case, the joint venture partner put £850,000 into the deal. The Board decided that it would be in the best interests of the company to take full control of this site and I am pleased to say we have bought out the joint venture partner for £860,000 and the Group now owns 100% of this development. The company has exchanged contracts to sell the part of the site on which the 55 houses are to be built for £2,450,000 subject to planning permission being granted. It is hoped that planning permission will be obtained within the next six months and it is the Board's intention to develop the rest of the site. Lomond Galleries, Loch Lomond, Scotland This is the most problematical property. When we first started to investigate this situation, we found that the management expenses and the bank interest being paid exceeded the income by approximately £400,000 per annum. The property consists of a listed building (the old Argyll Motors head office) which has been sub-divided into retail units. The building does not lend itself to retail use and the company had found it extremely difficult to find tenants. Furthermore, it is situated very close to a brand new shopping centre known as Loch Lomond Shores. Therefore, we considered that there was no realistic prospect of reducing the income shortfall and, in order to minimise losses to Pathfinder Properties PLC, your Board decided to allow the directors of Pathfinder (Loch Lomond) Limited to appoint an administrator over the property. This has a dramatic effect on the accounts as provision of £1,839,000 has been made against the value of the property. As the company was put into administration in May 2004, dependent on the disposal values of the property achieved by the administrator, the Group's investment of £2,000,000 in this property will become irrecoverable. River Quay, Manchester I now turn to River Quay, which is a large cleared site on the border of Manchester City Centre. From a planning viewpoint, the site has been divided into 4 phases. Phase 1 has planning permission for 199 residential apartments, 9,500 sq ft of commercial space and 144 car parking spaces. Phase 2 has planning permission for 191 residential apartments, 9,500 sq ft of commercial space and 191 car parking spaces. Planning permission has not been granted in respect of Phases 3 and 4. The previous Board had the intention of developing Phase 1, even though they had very little experience in this size of development. In order to finance the project, they had arranged mezzanine finance with Lehman Brothers at a ridiculously high interest rate of 18% per annum. Had they commenced the development reliant on such finance, I have little doubt that it could well have led to disaster. Fortunately, the Lehman Brothers funds had not been drawn down, although the company had already paid a commitment fee of £50,000 in readiness. The current Board cancelled this facility. In order to fund the Group's administrative costs, the previous board had borrowed heavily against the assets of the company. The current Board consider that the development of the entire site is too big to be undertaken by a company of Pathfinder's resources and therefore, our initial thoughts were to sell all four Phases. However this would deprive the company of potential development profit and the Board considered a sale of part of the site. The Board does not however believe that it would be in the best interests of the company to sell part of the site to an unconnected party as we consider that this could impede the development of the retained part. Problems can arise with having more than one contractor on site and, furthermore, the company would find itself selling properties on site in direct competition with a third party. The Board has considered an alternative solution whereby a company controlled by Gerard Lee and myself acquire phases 2, 3 and 4 at open market value (in accordance with a professional valuation) on condition that it will not place its units for sale until 75% of the Phase 1 units have been sold. This will provide the company with the necessary cash to develop Phase 1 without resorting to mezzanine funding at exorbitant interest rates. If and when the Group decides to undertake such a disposal, it will be a 'related party' transaction under the AIM Rules and will require at that stage John Davies, being the independent director, to consult with the Company's Nominated Advisor with a view to stating that the terms of the transaction are fair and reasonable insofar as its shareholders are concernec. When I was first appointed to the Board of the company, I was very disappointed with the company's financial state, but I am now cautiously optimistic, as I believe that substantial profits can be generated by the development of Newark and Phase 1, River Quay. Finally, I would like to thank my fellow directors and staff for all the hard work they have put in to place our company on a better financial footing. Edward Azouz Chairman 23 July 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2003 Notes Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 TURNOVER Group and share of joint 6 17,490 ventures less share of joint (6) (2,100) ventures -------- ------- Group turnover 4 - 15,390 Cost of sales (2,115) (13,980) -------- ------- Gross (loss)/profit (2,115) 1,410 Administrative expenses (1,818) (1,451) -------- ------- (3,933) (41) Other operating income (120) 158 -------- ------- OPERATING (LOSS)/PROFIT BEFORE SHARE OF JOINT VENTURES (4,053) 117 Share of operating profits in joint ventures - 352 -------- ------- OPERATING (LOSS)/PROFIT 4 (4,053) 469 (Loss)/profit on sale of investment properties (8) 66 -------- ------- (4,061) 535 Interest receivable 177 263 Interest payable (736) (910) -------- ------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 4 (4,620) (112) Taxation 72 (84) -------- ------- LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (4,548) (196) Equity minority interests 122 93 -------- ------- LOSS ON ORDINARY ACTIVITIES ATTRIBUTABLE TO MEMBERS (4,426) (103) Ordinary dividends 5 - (173) -------- ------- Loss for the year transferred to reserves 8 (4,426) (276) -------- ------- Loss per share 12 (5.54p) (0.13p) The operating (loss)/profit arises from the Group's continuing operations. A statement of total recognised gains and losses for the year is given in note 10. CONSOLIDATED BALANCE SHEET 31 December 2003 Notes 31 Dec 31 Dec 2003 2002 as restated £'000 £'000 FIXED ASSETS Intangible fixed assets - - 142 Goodwill Tangible assets 11 32 Investment in joint ventures -------- ------- Share of gross assets 3,517 3,274 Share of gross (2,259) (1,839) liabilities Goodwill 51 51 -------- ------- 1,309 1,486 Other investments 152 152 -------- ------- 1,472 1,812 -------- ------- CURRENT ASSETS Work-in-progress 15,886 15,365 Debtors 814 913 Cash at bank 6 2,012 6,474 -------- ------- 18,712 22,752 CREDITORS: amounts falling due within one year 7 (11,269) (3,926) -------- ------- -------- ------- NET CURRENT ASSETS 7,443 18,826 -------- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 8,915 20,638 CREDITORS: amounts falling due after more than one year Bank and other - (7,330) loans PROVISIONS FOR LIABILITIES AND CHARGES - - -------- ------- 8,915 13,308 EQUITY MINORITY INTERESTS (283) (1,079) -------- ------- NET ASSETS 8,632 12,229 -------- ------- CAPITAL AND RESERVES Called up share capital 7,997 7,975 Share premium account 1,970 1,946 Merger reserve 2,494 2,494 Capital reserve 153 - Share Capital reacquired (1,668) (2,298) Profit and loss account 8 (2,314) 2,112 -------- -------- ------- EQUITY SHAREHOLDERS' FUNDS 8,632 14,958 -------- ------- Net assets per share attributable to ordinary shareholders 10.79p 15.34p CASH FLOW STATEMENT for the year ended 31 December 2003 Notes Year Year ended ended 31 Dec 31 Dec 2003 2002 £'000 £'000 NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES 11 (3,853) 10,804 -------- ------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 173 238 Interest paid (291) (545) -------- ------- Net cash outflow from returns on investments and servicing of finance (118) (307) TAXATION -------- ------- Corporation tax paid (388) (57) -------- ------- CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Receipts from sales of investment properties 18 81 Receipts from joint ventures 37 730 Payments to acquire investments (1,045) - Acquisition of other tangible fixed assets (26) - -------- ------- Net cash (outflow)/inflow from capital expenditure and financial investment (1,016) 811 -------- ------- ACQUISITIONS AND DISPOSALS Purchase of subsidiary undertaking - (1,069) Net cash acquired with subsidiary undertaking - 1,702 -------- ------- Net cash (outflow)/inflow from acquisitions and disposals - 633 -------- ------- -------- ------- EQUITY DIVIDENDS PAID (353) - -------- ------- MANAGEMENT OF LIQUID RESOURCES -------- ------- Decrease/(incr ease) in treasury deposits 1,326 (1,866) -------- ------- FINANCING Debt due within one year: Loans drawn down 1,266 726 Loans repaid - (8,309) Debt due in more than one year: Loans drawn down - 2,800 Loans repaid - (3,146) -------- ------- Net cash inflow/(outflow) from financing 1,266 (7,929) -------- ------- (DECREASE)/INC REASE IN CASH (3,136) 2,089 -------- ------- NOTES 1 BASIS The figures shown for the year ended 31 December 2003 are unaudited and do not constitute statutory financial statements within the meaning of the Companies Act 1985. The financial statements for the year ended 31 December 2002 have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under s.237(2) or (3) of the Companies Act 1985. 2 ACCOUNTING POLICIES The accounting policies are consistent with those used in the previous year except with regard to the investment by a subsidiary in the shares of Pathfinder Properties PLC. This change has been made to comply with The Urgent Issues Task Force (UITF) abstract 37, the new guidance for the accounting treatment has been applied to the financial statements for the first time. The comparative figures for the year ended 31 December 2002 have been restated as the adoption of UITF 37 gives rise to a net adjustment of £431,000 to the investment in own shares for that year. 3 ACQUISITIONS DURING THE YEAR The Group acquired the remaining 20% interest in Pathfinder (River Quay) Limited on 14 March 2003. 4 RESULTS FOR THE YEAR The Group's turnover and results for the year arise principally from property development activities. 5 DIVIDENDS Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 Final dividend 0.00p (2002 - 0.25p) per share - 173 -------- ------- - 173 -------- ------- No interim dividend was paid. The final dividend for the year ended 31 December 2002 is shown net of the amounts receivable by the Group on the shares held by a subsidiary company. 6 ANALYSIS OF CASH AND CASH EQUIVALENTS 31 Dec 2003 31 Dec 2002 £'000 £'000 Short term bank deposits 540 1,866 Other cash at bank 1,472 4,608 -------- ------- 2,012 6,474 -------- ------- 7 CREDITORS DUE WITHIN ONE YEAR 31 Dec 2003 31 Dec 2002 £'000 £'000 Bank loans and overdrafts 8,565 - Other loans 576 1,328 Trade creditors 183 - Other creditors and accruals 1,945 2,598 -------- ------- 11,269 3,926 -------- ------- Other loans comprise loans from minority shareholders in certain subsidiary undertakings to fund their proportionate share of developments. These loans are repayable on or after the sale or refinancing of the relevant developments. 8 PROFIT AND LOSS ACCOUNT Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 At 1 January 2,112 2,388 Transfer from revaluation reserve - - Loss for the year (4,426) (276) --------- -------- At 31 December (2,314) 2,112 --------- -------- 9 SHAREHOLDERS' FUNDS Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 Retained loss for the year (4,426) (276) Other recognised gains relating to the year 153 - Own shares disposed/(acquired) 630 (2,298) Shares issued in year 46 - --------- -------- (3,597) (2,574) At 1 January 12,229 14,803 --------- -------- At 31 December 8,632 12,229 --------- -------- 10 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 Loss for the financial year attributable to members (4,426) (103) Prior year adjustment (2,729) - Reduction of investment in own shares 630 - Capital reserve 153 - --------- -------- Total recognised gains and losses since last financial statements (6,372) (103) --------- -------- 11 RECONCILATION OF OPERATING PROFIT TO OPERATING CASH FLOWS Year ended Year ended 31 Dec 2003 31 Dec 2002 £'000 £'000 Operating (loss)/profit (4,053) 469 Amortisation of goodwill 18 145 Depreciation on fixed assets 21 - Share of profits in joint ventures - (352) (Increase)/decrease in work-in-progress (150) 10,356 Decrease in debtors 188 217 Increase in creditors 123 63 Decrease in general provisions - (94) --------- -------- (3,853) 10,804 --------- -------- 12 EARNINGS PER SHARE The loss per ordinary share is based on the loss after taxation and minority interests and on 79,874,286 (31 December 2002: 74,745,428 ordinary shares) being the weighted average number of ordinary shares in issue during the year. There is no difference between earnings and fully diluted earnings per share. For further information, contact: Gerry Lee or Edward Azouz, Directors Tel: (020) 8731 0110 This information is provided by RNS The company news service from the London Stock Exchange

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