TIDMEVER
RNS Number : 7152U
Evergreen Securities PLC
29 June 2009
Evergreen Securities plc
June 29 2009
Evergreen Securities plc ("Evergreen" or the "Company")
Final Results
For the year ended 31 December 2008
The Company announces its final results for the year ended 31 December 2008.
Highlights:
Loss before tax of GBP8.2 million:
* Realised losses on investments of GBP5.4 million
* Impairment provisions on balance of portfolio of GBP2.2 million
* Administrative expenses of GBP0.5 million
A further GBP1.5 million of fair value provisions taken directly to equity.
Investment portfolio at 31 December 2008 at a net value of GBP1.3 million
Loss per share 92.6p
Net assets per share at 31 December 2008 of 3.0p
Sam Wauchope (Chairman) commented:
Nigel Wright and I were appointed to the Board in December 2008 after a very
poor period of trading following the acquisitions made and the re-admission of
the shares to trading on AIM in May 2008. General market conditions combined
with specific problems in several of the Company's portfolio investments to
generate significant losses. We have concentrated on securing the Company's
position in those of its remaining investments with any prospects, and on
arranging the necessary short-term finance to allow the Company to continue to
trade pending the realisation of at least part of our portfolio assets for
working capital. We are in discussion with the Company's major shareholders
regarding the future strategy of the Company and a further announcement will be
made when these discussions conclude.
The Company's Annual Report and Accounts and Notice of the Annual General
Meeting will be posted to shareholders on Tuesday June 30th and will also be
available from the Company's website: www.esplc.co.uk.
The Company's AGM will be held at 10:30 a.m. on Friday 31 July 2009 at the
offices of Seymour Pierce Limited, 20 Old Bailey, London EC4M 7EN.
Enquiries:
Evergreen:
Sam Wauchope (Chairman) 01992 572341
Nigel Wright(Chief Executive Officer) 020 7299 4116
Seymour Pierce:
Jonathan Wright 020 7107 8000
CHAIRMAN'S STATEMENT
I was appointed Chairman of Evergreen Securities plc ("Evergreen", or "the
Company") in December 2008, and now present the financial results for the year
ended 31 December 2008 and the 2008 Annual Report.
Overview
Evergreen was established in its present trading form in May 2008 when the
former Ethanol Investments plc made three acquisitions which created an
investment company with 12 minority holdings in various companies, quoted and
unquoted, largely in the renewable energy sector, with an ascribed value of some
GBP10.4million.
The decline of the world's capital and credit markets, coupled with specific
difficulties in a number of the portfolio investments, has had significant
negative effects on the portfolio, and by 31 December 2008 the portfolio had
reduced in value to GBP1.3million.
The net loss for the year was GBP8.2million, and a further GBP1.5million of fair
value provisions were made against the remaining investments in the portfolio;
this was recognised directly in equity. The net assets of the Company at 31
December 2008 stood at GBP0.4million.
The Directors are in discussion with the three major shareholder groups in the
Company, who together hold 71% of the ordinary share capital of the Company,
regarding possible future strategies. A further announcement will be made when
these discussions are concluded.
Financial results
The net loss for the year after taxation was GBP8.2million (2007: loss of
GBP0.2million). Realised losses of GBP5.4million were compounded by write-downs
of GBP2.2million for impairment of investments. Administration costs totalled
GBP0.5million (2007: GBP0.2million) and interest expense GBP0.05million (2007:
Nil).
A further GBP1.5million of provisions has been taken directly to reserves to
recognise reductions in fair value of the portfolio. At 31 December 2008 the
value of the Group's investment portfolio stood at GBP1.3million (2007:
GBP0.5million) and net assets per ordinary share were 3.0p (2007:41.3p).
The cash balance at 31 December 2008 was GBP51,000 (2007: GBP5,000).
Review of the year
The May Transaction
As Ethanol Investments plc, the Company entered the year with one investment,
supplemented in February by one further investment. The Company was renamed
Evergreen Securities plc and established in its current form in May 2008 when,
as described to shareholders in the admission document dated 24 April 2008, the
Company acquired minority equity and/or loan note interests in eleven companies
from three separate investment groups ("the May Transaction"). The total value
ascribed to the investments was GBP10.1million, and consideration comprised
GBP50,000 in cash, 8,443,407 ordinary shares in the Company and GBP1.2million in
nominal value of loan notes in the Company. Immediately post the transaction,
the new shareholders held 72.5% of the ordinary shares in the Company.
The investments made formed the basis of a new investment strategy which was
stated in summary in the admission document as being "to acquire holdings in
clean and renewable energy and/or technology companies and/or assets and
projects", although reference was also made to the potential for investments in
other sectors "where potential exists for short-term value enhancement".
Early Activity
A number of transactions took place in the two months following the May
Transaction:
* two investments were sold (TMO Renewables and Coal International ), together
generating a realised profit of GBP0.3million.
* the Company made an additional cash investment of GBP0.4million into FibreGen
plc, increasing its holding from 1.5% to 7.2% of the ordinary share capital.
* a small investment was made into BioMass Investment Group.
* as announced on 14 July 2008, the Company acquired FibreGen plc's interest in a
non-binding Memorandum of Understanding regarding a potential joint venture with
a Canadian partner to provide renewable pelletised fuel to Chinese power
stations; consideration was GBP3.83million; GBP0.5million in cash plus the
Company's equity interests in Waipuna Limited and HaloSource Limited, which
together were valued at GBP3.33million in the sale and purchase agreement
governing the transaction.
Subsequent slowdown
The dramatic decline in worldwide capital and credit markets hit early stage
unquoted companies particularly hard. This resulted in the then Directors, in
preparing the interim accounts released on 30 September 2008, making substantial
provisions against the value of the portfolio and announcing a change of
emphasis in strategy, whereby the focus would move from pre-IPO to "special
situations" in "short-term, cash-generative opportunities and projects",
complemented by an "increased emphasis on broking, introductory and consultant
(one-off) fees".
This change of emphasis did not result in any further transactions or income in
the balance of the year. The Company's cash balances had been substantially
consumed in the transactions described above, there was no effective market for
any realisations of portfolio assets and attempts to attract new investors and
capital met with no success.
Further, the portfolio companies were generally finding trading conditions very
challenging. This was compounded by specific difficulties in certain portfolio
companies, most notably Prometheus Energy Company (now in liquidation) and HIP
Facilities Group Limited, where a strategy to realise the remaining assets
proved unsuccessful and investors have been informed that there is no prospect
of any return of capital. Most significantly in terms of the Company's net
assets, the intended joint venture for China was never established and the
Memorandum of Understanding expired.
In December 2008 the then Board resigned and were replaced by Nigel Wright as
Chief Executive and myself as non executive chairman.
Review at 31 December 2008
As the new Board, we have conducted a detailed review of the portfolio, and held
discussions with the management of all companies other than Prometheus. In
general, trading conditions have continued to be difficult in 2009 to date.
We have concluded that there is no value to the Company in its investments in
Prometheus, HIP Facilities Group and the proposed Chinese joint venture, and
these have been written-off in full.
We recognise that all of the other portfolio companies have their challenges.
Some appear reasonably positioned to address those challenges, but for others
the challenges are fundamental and daunting. Trading levels are lower than hoped
for and new cash has not been available to allow the companies to pursue their
plans. While we consider that any company which continues to trade or holds
assets should not be written-off, in certain cases we consider it unlikely that
the Company's interests in the companies will return to the valuations at which
the acquisitions were made. Accordingly we have adopted a prudent approach on an
investment-by-investment basis to the valuation of the portfolio at 31 December
2008. The total value ascribed is GBP1.3million.
The year-end cash balance was GBP51,000.
The way forward
The Company is currently operating with no employees other than the two
Directors and on as low an administrative cost base as is feasible in its
present form. Having conducted a detailed review of the portfolio, and taking
into account the need for the Company to generate sufficient cash to sustain its
operations, the Directors are consulting with the Company's three major
shareholder groups regarding possible routes forward. A further announcement
will be made after these discussions are concluded.
Sam Wauchope
Chairman
26 June 2009
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2008
+------------------------------------------------+-------+---------+----------+---+---------+
| | | 2008 | | 2007 |
+------------------------------------------------+-------+--------------------+---+---------+
| |Notes | GBP'000 | GBP'000 | | GBP'000 |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Investment income | 5 | | 9 | | 5 |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Total revenue | | | 9 | | 5 |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Investment expenses: | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Loss on disposal of available-for-sale | | (5,411) | | | - |
| financial assets | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Impairment losses on available-for-sale | 9 | (2,237) | | | - |
| financial assets | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Total investment expenses | | | (7,648) | | - |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | (7,639) | | 5 |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Administrative expenses | | | (504) | | (227) |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Operating loss | 2 | | (8,143) | | (222) |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Interest expense on convertible loan notes | 13 | | (53) | | - |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Loss before taxation | | | (8,196) | | (222) |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Taxation | 6 | | - | | - |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
| Loss attributable to equity shareholders | | | (8,196) | | (222) |
+------------------------------------------------+-------+---------+----------+---+---------+
| | | | | | |
+------------------------------------------------+-------+---------+----------+---+---------+
+------------------------------------------------+-------+------------------+----+--------+
| | | | | |
+------------------------------------------------+-------+------------------+----+--------+
| Loss per share | | | | |
+------------------------------------------------+-------+------------------+----+--------+
| | | | | |
+------------------------------------------------+-------+------------------+----+--------+
| Basic and fully diluted loss per share | 3 | (92.6p) | |(7.9p) |
+------------------------------------------------+-------+------------------+----+--------+
The operating loss in both years arises from the Group's continuing operations.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2008
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | Share capital | Share | Loan | Share | Investment | Accumulated | Total |
+----------------+---------------------+---------+---------+---------+------------+-------------+---------+
| | Ordinary | Deferred | premium | note | option | reserve | losses | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | account | reserve | reserve | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Balance at 1 | 35 | 503 | 1,952 | - | 106 | - | (1,962) | 634 |
| January 2007 | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Loss for the | - | - | - | - | - | - | (222) | (222) |
| year and total | | | | | | | | |
| recognised | | | | | | | | |
| income and | | | | | | | | |
| expense for | | | | | | | | |
| the year | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Balance at 31 | 35 | 503 | 1,952 | - | 106 | - | (2,184) | 412 |
| December 2007 | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Loss for the | - | - | - | - | - | - | (8,196) | (8,196) |
| year | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Fair value | - | - | - | - | - | (1,529) | - | (1,529) |
| losses on | | | | | | | | |
| available for | | | | | | | | |
| sale financial | | | | | | | | |
| assets | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Total | - | - | - | - | - | (1,529) | (8,196) | (9,725) |
| recognised | | | | | | | | |
| income and | | | | | | | | |
| expense for | | | | | | | | |
| the year | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Proceeds of | 117 | - | 9,233 | - | - | - | - | 9,350 |
| share issues | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Expenses of | - | - | (21) | - | - | - | - | (21) |
| share issues | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Equity | - | - | - | 349 | - | - | - | 349 |
| recognised on | | | | | | | | |
| issue of | | | | | | | | |
| convertible | | | | | | | | |
| loan notes | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
| Balance at 31 | 152 | 503 | 11,164 | 349 | 106 | (1,529) | (10,380) | 365 |
| December 2008 | | | | | | | | |
+----------------+----------+----------+---------+---------+---------+------------+-------------+---------+
CONSOLIDATED BALANCE SHEET
As at 31 December 2008
+-----------------------------------------+------------+-------------+--+------------+
| | | 2008 | | 2007 |
+-----------------------------------------+------------+-------------+--+------------+
| | Notes | GBP'000 | | GBP'000 |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Current assets | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Available for sale financial assets | 4 | 1,298 | | 542 |
+-----------------------------------------+------------+-------------+--+------------+
| Trade and other receivables | | 30 | | 16 |
+-----------------------------------------+------------+-------------+--+------------+
| Cash and cash equivalents | | 51 | | 5 |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Total assets | | 1,379 | | 563 |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Current liabilities | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Trade and other payables | | (88) | | (151) |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Net current assets | | 1,291 | | 412 |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Non-current liabilities | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Convertible loan notes | 5 | (926) | | - |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Net assets | | 365 | | 412 |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Equity | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Share capital | | 655 | | 538 |
+-----------------------------------------+------------+-------------+--+------------+
| Share premium account | | 11,164 | | 1,952 |
+-----------------------------------------+------------+-------------+--+------------+
| Loan note reserve | | 349 | | - |
+-----------------------------------------+------------+-------------+--+------------+
| Share option reserve | | 106 | | 106 |
+-----------------------------------------+------------+-------------+--+------------+
| Investment reserve | | (1,529) | | - |
+-----------------------------------------+------------+-------------+--+------------+
| Accumulated losses | | (10,380) | | (2,184) |
+-----------------------------------------+------------+-------------+--+------------+
| | | | | |
+-----------------------------------------+------------+-------------+--+------------+
| Total equity | | 365 | | 412 |
+-----------------------------------------+------------+-------------+--+------------+
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2008
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | 2008 | | 2007 |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | Notes | GBP'000 | | GBP'000 |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Net cash used in operating activities | 6 | (564) | | (148) |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Cash flow from investing activities: | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Purchase of | | (1,061) | | (542) |
| available-for-sale | | | | |
| financial assets | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Disposal of | | 1,276 | | - |
| available-for-sale | | | | |
| financial assets | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Net cash generated by(used in) investing | | 215 | | (542) |
| activities | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Cash flow from financing activities: | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Net proceeds from share issues | | 395 | | - |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Net cash generated by financing activities | | 395 | | - |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Net increase/(decrease) in cash and cash | | 46 | | (690) |
| equivalents | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Cash and cash equivalents at 1 January | | 5 | | 695 |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| Cash and cash equivalents at 31 December | | 51 | | 5 |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
| | | | | |
+--------------------------------------------+---------+---------------------------+--+-------------------------+
NOTES TO THE FINANCIAL STATEMENTS
1. Financial information
The financial information set out in this announcement does not comprise the
Group's statutory accounts for the year ended 31 December 2008 or 31 December
2007
The financial information for the year ended 31 December 2007 is derived from
the statutory accounts for the year which have been delivered to the Registrar
of Companies. The auditors reported on those accounts; their report was
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their reports and, did not
contain a statement under either Section 237 (2) or Section 237 (3) of the
Companies Act 1985.
The financial information for the year ended 31 December 2008 is derived from
the statutory accounts for the year which will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The auditors reported
on the accounts on 26 June 2009; their report was unqualified and did not
contain a statement under either Section 237 (2) or Section 237 (3) of the
Companies Act 1985. The audit report included reference to matters to which the
auditors drew attention by way of emphasis without qualifying their report in
respect of the uncertainty surrounding the ability of the Group and Company to
continue as a going concern.
The accounting policies are consistent with those applied in the preparation of
the statutory accounts for the year ended 31 December 2008, which have been
prepared in accordance with International Financial Reporting Standards
("IFRS").
Copies of the Annual Report and Accounts will be mailed to shareholders on 30
June 2009, and will be posted to the Company's website at www.esplc.co.uk.
2. Accounting policies
The principal accounting policies are summarised below. They have all been
applied consistently throughout the period covered by these financial
statements.
Basis of preparation
The financial information has been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union applied
in accordance with the provisions of the Companies Act 1985. The financial
statements have been prepared under the historical cost convention, unless
otherwise stated in these financial statements.
Going concern
After making enquiries, the Directors have formed a judgement at the time of
approving the financial statements that there is a reasonable expectation that
the Group can realise investment assets to enable it to continue in operational
existence for the foreseeable future. The Group has in place a line of credit of
GBP50,000 at 12% interest per annum to assist with funding requirements,
repayable at the earlier of the date at which the Group has made realisations in
excess of GBP250,000 or 30 September 2010.
For these reasons, the Directors continue to adopt the going concern basis in
preparing the financial statements. However, the Directors have not yet realised
any investments but believe that this will be achieved. Whilst there are
inherent uncertainties in relation to future events, and therefore no certainty
over the outcome of the matters described, the Directors consider that, based
upon financial projections and dependent on the success of their efforts to
carry out their plans, the Company and the Group will be going concerns for
twelve months from the date of approval of these financial statements.
If it is not possible for the Directors to realise their plans, the carrying
value of the assets of the Group are likely to be further impaired. In addition,
other costs may arise in the course of realising these assets.
Critical accounting judgements and key sources of estimation and uncertainty
The preparation of financial statements in conformity with generally accepted
accounting practice requires management to make estimates and judgements that
affect the reported amounts of assets and liabilities as well as the disclosure
of contingent assets and liabilities at the balance sheet date and the reported
amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The main areas where
estimates and judgements have been used are:
Available for sale financial assets
The Directors have made a value judgement, in accordance with IFRS 7, in
determining the fair value of the investments. Assumptions have been made
regarding the factors affecting the marketability of the investments, which if
different could materially affect the value of the Group's equity.
Share based payments
In determining the fair value of equity settled share based payments and the
related charge to the income statement, the Group makes assumptions about future
events and market conditions. In particular, judgement must be made as to the
likely number of shares that will vest, and the fair value of each award
granted. The fair value is determined using a valuation model which is dependent
on further estimates, including the Group's future dividend policy, employee
turnover, the timing with which options will be exercised and the future
volatility in the price of the Group's shares. Such assumptions are based on
publicly available information and reflect market expectations and advice taken
from qualified personnel. Different assumptions about these factors from those
made by the Group could materially affect the reported value of share based
payments.
New standards and interpretations
At the date of authorisation of these financial statements, the following
Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet mandatorily effective:
+-----------------+-------------------------------------------+----------------------------+
| | | Effective for accounting |
| | | periods beginning on or |
| | | after: |
+-----------------+-------------------------------------------+----------------------------+
| IFRS 3 | Business | 1 July 2009 |
| (revision) | Combinations | |
+-----------------+-------------------------------------------+----------------------------+
| IFRS 8 | Operating | 1 January 2009 |
| | Segments | |
+-----------------+-------------------------------------------+----------------------------+
| IFRIC | Distributions | 1 July 2009 |
| 17 | of Non-cash | |
| | Assets to | |
| | Owners | |
+-----------------+-------------------------------------------+----------------------------+
| IFRIC | Transfer | 1 July 2009 |
| 18 | of | |
| | Assets | |
| | from | |
| | Customers | |
+-----------------+-------------------------------------------+----------------------------+
| IAS 1 | Presentation | 1 January 2009 |
| (revision) | of Financial | |
| | Statements | |
+-----------------+-------------------------------------------+----------------------------+
| IAS 23 | Borrowing | 1 January 2009 |
| (revision) | Costs | |
+-----------------+-------------------------------------------+----------------------------+
| IAS 27 | Consolidated | 1 July 2009 |
| (revision) | and Separate | |
| | Financial | |
| | Statements | |
+-----------------+-------------------------------------------+----------------------------+
In addition IFRIC have issued the following standards and interpretations that
are not applicable to the Company:
+--------------+------------------------------------------+----------------------------+
| | | Effective for accounting |
| | | periods beginning on or |
| | | after: |
+--------------+------------------------------------------+----------------------------+
| IFRIC | Customer | 1 July 2008 |
| 13 | Loyalty | |
| | Programmes | |
+--------------+------------------------------------------+----------------------------+
| IFRIC | Agreements | 1 January 2009 |
| 15 | for the | |
| | Construction | |
| | of Real | |
| | Estate | |
+--------------+------------------------------------------+----------------------------+
| IFRIC | Hedges | 1 October 2008 |
| 16 | of a | |
| | Net | |
| | Investment | |
| | in a | |
| | Foreign | |
| | Operation | |
+--------------+------------------------------------------+----------------------------+
The Directors do not anticipate that the adoption of the other standards and
interpretations listed above will have a material impact on the Group's
financial statements in the period of initial application.
Basis of consolidation
The Group financial statements incorporate the financial statements of the
Company and entities controlled by the Company (its subsidiaries) prepared to 31
December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
Revenue
Interest income earned from loan note instruments is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset's net
carrying amount.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred
tax.
The tax currently payable is based on the taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for income tax is calculated using tax rates that have been
enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all chargeable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and
liabilities in a transaction which affects neither the tax profit nor the
accounting profit.
Share based payments
The cost of share based employee compensation arrangements, whereby employees
receive remuneration in the form of shares or share options, is recognised as an
employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is
determined by reference to the fair value (excluding the effect of non
market-based vesting conditions) at the date of grant. The assumptions
underlying the number of awards expected to vest are subsequently adjusted for
the effects of non market-based vesting to reflect the conditions prevailing at
the balance sheet date. Fair value is measured by the use of the Black-Scholes
model. The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of the non-transferability, exercise
restrictions and behavioural considerations.
Investment in subsidiaries
Investment in subsidiaries are stated at cost less any provision for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the Group becomes a party to the contractual provisions of the instrument.
Available for sale financial assets
Available for sale financial assets are non-derivatives and are included in
current assets on the basis that management intends to dispose of the investment
within 12 months of the balance sheet date. Available-for-sale financial assets
are initially measured at fair value, which ordinarily equates to cost,
including transaction costs. At subsequent reporting dates available for sale
financial assets are measured at fair value, or at cost where fair value is not
readily ascertainable.
Gains and losses arising from changes in fair value are recognised directly in
equity until the financial asset is disposed of or is determined to be impaired,
at which time the cumulative gain or loss recognised previously in equity is
included in the net profit or loss for the period. Where the fair value of
available-for-sale financial assets is adjusted downwards on a temporary basis
due to such factors as market conditions the resulting loss is taken direct to
equity.
The Group follows the guidance of IFRS 7 when an available for sale financial
asset is impaired. This determination requires significant judgement. In making
this judgement, the Group evaluates, among other factors, the duration and
extent to which the fair value of an investment is less than its cost; and the
financial health of and short-term business outlook for the investee, including
factors such as industry and sector performance and operating and financing cash
flow. Impairments of available for sale financial assets are recognised in the
income statement.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value
and are subsequently measured at amortised cost using the effective interest
method. A provision is established when there is objective evidence that the
Group will not be able to collect all amounts due. The amount of any provision
is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each balance sheet
date. Financial assets are impaired where there is objective evidence that as a
result of one or more events that occurred after the original recognition of the
financial asset the estimated future cash flows of the investment have been
impacted. In the case of equity securities classified as available for sale, a
significant or prolonged decline in the fair value of the security below its
cost is considered as an indicator that the securities are impaired. If any such
evidence exists for available for sale financial assets, the cumulative loss -
measured as the difference between the acquisition cost and the current fair
value, less any impairment loss previously recognised in profit or loss - is
removed from equity and recognised in the income statement. Impairment losses
recognised in the income statement on equity instruments are not reversed
through the income statement.
Impairment of financial assets (continued)
For loans and receivables the amount of the impairment is the difference between
the asset's carrying amount and the present value of estimated future cash flows
discounted at the original effective interest rate. The carrying amount of the
financial asset is reduced by the impairment loss directly.
Trade and other payables
Trade and other payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate
method.
Financial liabilities and equity instruments
Financial liabilities and equity instruments issued by the Group are classified
in accordance with the substance of the contractual arrangements entered into
and the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of
the company after deducting all of its liabilities. Equity instruments issued by
the Group are recorded at the proceeds received net of direct issue costs.
The fair value of the liability portion of a convertible loan note is determined
using a market interest rate for the equivalent non-convertible bond. This
amount is recorded as a liability on an amortised cost basis until extinguished
on conversion or maturity of the bonds. The remainder of the proceeds is
allocated to the conversion option. This is recognised and included in
shareholders' equity, net of tax effects.
3. Loss per share
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| | 2008 | | 2007 |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| | GBP'000 | | GBP'000 |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| Loss for the purpose of basic | (8,196) | | (222) |
| and diluted loss per ordinary | | | |
| share | | | |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| | | | |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| Number of shares: | | | |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| Weighted average number of ordinary shares in | 8,854,369 | | 2,804,982 |
| issue | | | |
| during the year | | | |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
| Basic and fully diluted loss | (92.6p) | | (7.9p) |
| per ordinary share | | | |
+---------------------------------------------------+-----------------------------+--+-----------------------------+
As the group had negative earnings in 2008 and 2007 the effect of the exercise
of options or the additional equity created through conversion of the
convertible loan would be anti-dilutive, so the diluted loss per share is the
same as the basic loss per share.
Deferred shares are not included in the earnings per share calculation as they
carry no rights to dividends and are only entitled to receive capital on the
winding up or other return of capital after payment to ordinary shareholders of
paid up capital, dividends and GBP10,000,000 in respect of each ordinary share.
4. Available for sale financial assets
+---------------------------------------------------+-----------+--+-------------+
| | |
+---------------------------------------------------+----------------------------+
| | 2008 | | 2007 |
| | GBP'000 | | GBP'000 |
+---------------------------------------------------+-----------+--+-------------+
| At 1 January | 542 | | - |
+---------------------------------------------------+-----------+--+-------------+
| Additions | 14,644 | | 542 |
+---------------------------------------------------+-----------+--+-------------+
| Disposals | (10,122) | | - |
+---------------------------------------------------+-----------+--+-------------+
| Impairment losses taken to the income statement | (2,237) | | - |
+---------------------------------------------------+-----------+--+-------------+
| Fair value losses taken to equity | (1,529) | | - |
+---------------------------------------------------+-----------+--+-------------+
| | 1,298 | | 542 |
+---------------------------------------------------+-----------+--+-------------+
| | |
+---------------------------------------------------+----------------------------+
| | 2008 | | 2007 |
| | GBP'000 | | GBP'000 |
+---------------------------------------------------+-----------+--+-------------+
| Listed Securities: | | | |
+---------------------------------------------------+-----------+--+-------------+
| Equity securities | 5 | | - |
+---------------------------------------------------+-----------+--+-------------+
| Unlisted securities: | | | |
+---------------------------------------------------+-----------+--+-------------+
| Equity securities | 1,043 | | 542 |
+---------------------------------------------------+-----------+--+-------------+
| Debt securities with fixed interest of 8% and | 250 | | - |
| maturity date of May 2011 | | | |
+---------------------------------------------------+-----------+--+-------------+
| | 1,298 | | 542 |
+---------------------------------------------------+-----------+--+-------------+
+---------------------------------------------------+---------------------------+--+---------------------------+
| 5. Financial liabilities | | | |
+---------------------------------------------------+---------------------------+--+---------------------------+
| | 2008 | | 2007 |
+---------------------------------------------------+---------------------------+--+---------------------------+
| | GBP'000 | | GBP'000 |
+---------------------------------------------------+---------------------------+--+---------------------------+
| Non-current | | | |
+---------------------------------------------------+---------------------------+--+---------------------------+
| Convertible loan notes: | | | |
+---------------------------------------------------+---------------------------+--+---------------------------+
| Liability component at date of issue | 873 | | - |
+---------------------------------------------------+---------------------------+--+---------------------------+
| Accrued interest | 53 | | - |
+---------------------------------------------------+---------------------------+--+---------------------------+
| | 926 | | - |
+---------------------------------------------------+---------------------------+--+---------------------------+
+---------------------------+---------+---------+--------------+--+---------+---+---------------------------+
| The table below analyses the group's financial liabilities into relevant maturity |
| groupings based on the remaining period from the balance sheet date to the |
| contractual maturity date. The amounts disclosed in the table are the contractual |
| undiscounted cash flows, so they include the relevant interest payable, and therefore |
| do not reconcile to the amounts disclosed on the balance sheet for borrowings. |
+-----------------------------------------------------------------------------------------------------------+
| | 2008 | | 2007 |
+-----------------------------------------------+---------------------------+---+---------------------------+
| | GBP'000 | | GBP'000 |
+-----------------------------------------------+---------------------------+---+---------------------------+
| In the first year: | Trade payables | 72 | | 139 |
+---------------------------+-------------------+---------------------------+---+---------------------------+
| In the third to fifth | Convertible loan | 1,405 | | - |
| years inclusive: | notes | | | |
+---------------------------+-------------------+---------------------------+---+---------------------------+
| | 1,477 | | 139 |
+-----------------------------------------------+---------------------------+---+---------------------------+
| As the convertible loan notes are currently non-interest bearing, an increase or |
| decrease of 1% in the average interest rate on the Group's borrowings would have no |
| affect on the result for the year or on the value of the Group's equity. |
+-----------------------------------------------------------------------------------------------------------+
| Convertible loan notes | | | |
+-------------------------------------+------------------------+--+-----------------------------------------+
| The convertible loan notes were issued as part consideration for the portfolio of |
| investments acquired in May 2008. The nominal amount of the loan notes issued |
| totalled GBP1,222,000. Interest on the loan notes will accrue and be payable from 20 |
| May 2010 at an interest rate equal to the base rate of the Royal Bank of Scotland. If |
| not earlier repaid or converted the loan notes are repayable on 20 May 2013. They are |
| convertible into ordinary shares of the Company at any time prior to 20 May 2013, at |
| the conversion price of GBP1.26 per share. |
| The fair value of the liability portion of a convertible loan note is determined |
| using a market interest rate for the equivalent non-convertible loan note. This |
| amount is recorded as a liability on an amortised cost basis until extinguished on |
| conversion or maturity of the loan notes. The remainder of the proceeds is allocated |
| to the conversion option. This is recognised and included in shareholders' equity, |
| net of income tax effects. |
| The convertible loan note recognised in the balance sheet is calculated as follows: |
+-----------------------------------------------------------------------------------------------------------+
| | 2008 | | 2007 |
+-----------------------------------------------+---------------------------+---+---------------------------+
| | GBP'000 | | GBP'000 |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Nominal value of convertible loan notes | 1,222 | | - |
| issued | | | |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Equity component | (349) | | - |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Liability component at date of issue | 873 | | - |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Interest charged | 53 | | - |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Interest paid | - | | - |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Liability component at 31 December | 926 | | - |
+-----------------------------------------------+---------------------------+---+---------------------------+
| Total equity component | 349 | | - |
+---------------------------+---------+---------+--------------+--+---------+---+---------------------------+
6. Cash used in operations
+-+----------------------------------------------+---------------+--------+--------+-+
| | | 2008 | 2007 | |
+-+----------------------------------------------+---------------+-----------------+-+
| | | GBP000 | GBP000 | |
+-+----------------------------------------------+---------------+-----------------+-+
| | | | | |
+-+----------------------------------------------+---------------+-----------------+-+
| Operating loss | (8,143) | (222) |
+------------------------------------------------+------------------------+----------+
| Loss on disposal of available for sale | 5,411 | - |
| financial assets | | |
+------------------------------------------------+------------------------+----------+
| Impairment of available for sale financial | 2,237 | - |
| assets | | |
+------------------------------------------------+------------------------+----------+
| Operating cash flows before movements in | (495) | (222) |
| working capital | | |
+------------------------------------------------+------------------------+----------+
| Increase in receivables | (14) | (1) |
+------------------------------------------------+------------------------+----------+
| (Decrease)/increase in payables | (54) | 75 |
+------------------------------------------------+------------------------+----------+
| Net cash absorbed by operating activities | (564) | (148) |
+-+----------------------------------------------+---------------+--------+--------+-+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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