RNS Number:6981B
PGI Group PLC
20 April 2006
PGI Group Plc
20 April 2006
Preliminary statement of the Group's results for the year ended 31 December 2005
Chairman's statement
There were some significant developments in the PGI Group during 2005, and the
final result for the year was a loss of #359,000 after all charges, and
including a profit on the discontinued Indonesian business. This compares with a
restated loss of #1,379,000 in 2004. Both the 2005 and the comparative figures
incorporate the changes to accounting policies arising from the adoption of
International Accounting Standards.
In summary, during 2005 the Group:
* acquired an 80% interest in Jensen Group;.
* completed the acquisition of assets in Zambia from Agriflora Ltd;
* raised #8.6 million by way of a rights issue;
* disposed of all its operations in Indonesia; and
* paid a dividend for the first time since 1996.
In April 2005 we circulated details of the acquisition of an 80% interest in
Jensen Group, which is involved in property investment management and
development in Russia. Steven Wayne, who leads the Jensen Group and owns the
other 20%, was appointed to the PGI Board. When Richard Clothier retired in July
2005, Mr Wayne succeeded him as Group Chief Executive.
Jensen Group manages eight small funds that have been established since 1994 and
are invested in properties in St Petersburg, Russia. It also manages a 31
hectare property in Sestroretsk, a suburb of St Petersburg. Jensen is now
raising a new fund for property investment in the St Petersburg area. This fund,
which will be established in the Cayman Islands, will be managed by Jensen
Group. One of the first acquisitions the fund makes will be a large part of the
Sestroretsk property.
At the same time as buying into Jensen, we announced a rights issue of ordinary
shares. This was concluded in June 2005, raising approximately #8.6 million (net
of expenses) and considerably strengthening the Group's finances. By 31 December
2005, net borrowings were down to just over #7 million. The main borrowing is
now the #7.9 million loan stock, convertible at 25p into ordinary shares, and
due to be converted or repaid during 2006.
At the end of 2004 we announced the acquisition in Zambia of the assets of the
vegetable and roses business previously owned by Agriflora Ltd. The acquisition
was completed early in 2005, and has substantially expanded the Group's Zambian
operations.
A new subsidiary, Chalimbana Fresh Produce, has been formed to develop the
vegetable business. The start-up costs of the business resulted in a loss in
2005, but it is now on budget to make a worthwhile contribution in 2006, and is
selling its produce to several large UK retailers.
The roses business acquired from Agriflora has been added to the existing Group
operation, Khal Amazi. By 2007 Khal Amazi's production area will have doubled,
to 44 hectares.
In the last quarter of the year, the Group disposed of all its operations in
Indonesia. These consisted of three tea estates and a small rubber estate in
Java, owned by the Group's 65% held subsidiary, P T Tatar Anyar; and a 2,000
hectare rubber estate in Sumatra, wholly owned by P T Air Muring. In total,
these sales realised approximately #3.7 million and resulted in a net profit on
disposal of nearly #1.3 million.
The withdrawal from all the Indonesian businesses means that our tropical
agriculture is now concentrated in southern Africa. It has been reorganised into
a new operating division, called PGI Food Group.
In previous statements I have referred to the land reform process in Zimbabwe.
During 2005, Zimbabwe adopted a new constitution which contained clauses
abolishing freehold title to agricultural land. The Government has indicated
that this may be replaced with a long leasehold title. This change has not
affected our ability to operate the estate.
A detailed review of the Group's operations and trading performance in 2005
follows. In summary, drought in southern Africa held back the tea crops; and the
Group's UK wheelbarrow manufacturer, Chillington, had another poor year as a
result of weak demand in the DIY sector. We have made an impairment adjustment
to the manufacturing assets to reflect our estimate of their current fair value.
However, 2006 has started on a better note. There has been plenty of rain in
southern Africa, and tea prices have risen as a result of drought in Kenya. We
also expect an increase in contribution from Jensen once the new fund is
established.
None of these achievements would have been possible without the hard work of all
the Group's employees. Thank you to each of them.
Following the changes to the Group that have taken place over the last few
years, the Board have carried out a review of the audit arrangements. It has
concluded that the Group would be better served by a firm represented in all the
areas in which the Group now operates. Accordingly, it is proposed that Ernst &
Young LLP be appointed auditors at the forthcoming AGM in place of UHY Hacker
Young.
I want to end with particular thanks to Richard Clothier, who retired from the
Board at the end of the year. The Group changed enormously during his seven
years as Chief Executive, selling more than ten non-core businesses, buying two
new operations in Zambia, and investing in Jensen. He oversaw big improvements
in all our African activities, which will benefit the Group for years to come.
Rupert Pennant-Rea
Chairman
20 April 2006
Review of activities
FOOD GROUP
This division encompasses our food and floriculture operating units. The
products: tea, cut flowers, vegetables and macadamia nuts are grown in southern
Africa and marketed to direct end users across Europe.
At the start of the year we acquired a Zambian farm and packhouse for the
production of export vegetables. This is a new product line to the food group.
During the year the Indonesian rubber and tea plantations were sold. Both these
businesses were mature with low growth prospects and the strong rubber price
allowed us to exit at a price above book value.
Financial results
The division made an operating profit of #2,048,000 on a turnover of
#13,950,000. This 19% drop in the operating profit over 2004 has been
substantially caused by a severe drought across southern Africa that
particularly affected the tea businesses.
This turnover was split between the different products:
Tea 49%
Cut flowers 23%
Vegetables 6%
Macadamias 6%
Indonesia disposed businesses 16%
Tea
Our tea is grown in Malawi and Zimbabwe. The total tea crop was 13,234 tonnes,
down from 17,752 tonnes in 2004. This dramatic reduction was caused by drought
which started in February and broke in November. Some of our estates received
only one quarter of their long term average annual rainfall. Fortunately there
has been very little long term damage to the tea plants, and we expect crops to
recover to pre-drought levels in 2006.
Tea prices declined by 7% in the year, on the back of record production in East
Africa.
In both Malawi and Zimbabwe we have continued to develop the smallholder sector
around our estates. This has been done through the provision of tea plants,
inputs and transport to move the green leaf to our processing factories. This
programme continues to result in year-on-year volume growth and together with
the new estate plantings in Malawi that are coming to maturity, we expect good
organic growth over the next few years.
Cut Flowers
We grow and export sweetheart roses at our farm in Zambia. Production increased
to 72 million stems (2004: 54 million stems). At the beginning of the year an
additional 22 ha of greenhouses were purchased. These structures are being moved
to a new site adjacent to our existing farm. By the end of 2005, 7ha had been
moved and fully planted. A further 7ha will be moved in 2006.
During the year the farm achieved accreditation from the Ethical Trading
Initiative ("ETI") which will allow it to sell to a wider selection of
supermarkets. ETI is a tripartite body made up of companies, trades unions and
non-governmental organisations that promotes good practice in the implementation
of codes of labour practice.
Airfreight represents about half the total cost of production of our roses. The
rapid increase in the airline fuel surcharges in second half of the year put
margins under pressure. To offset this, more value adding of the roses has been
done on the farm by bunching and sleeving the bouquets.
Vegetable business
This new business has been in a development stage in 2005. By the end of 2005 we
had established a reputation as a supplier of good quality sliced and whole
runner beans, mange tout, sugar snap peas and baby corn. Our products are being
sold into two major UK supermarkets. Also completed during the year was the full
accreditation of both the farms and packhouse to UK food industry standards and
this will allow us to further increase our opportunities to supply to UK
supermarkets.
Macadamia nuts
We operate 700ha of young macadamia nut orchards in Malawi which are planted on
land inappropriate for tea. Nut in shell production was 595 tonnes, up from 428
tonnes in 2004. With crops continuing to rise, we have started to build a
cracking factory in Malawi that will be commissioned in 2006. Once complete we
will be able to supply kernel direct to European end users.
JENSEN GROUP
Jensen Group manages and develops real estate in St. Petersburg, Russia. The PGI
Group acquired 80 percent of Jensen in April of 2005 for 9,200,000 shares in
PGI. Jensen was previously wholly owned by Mr S.W. Wayne, an American who has
twelve years' experience of managing property investments in Russia. Mr Wayne is
a graduate of Harvard University and, before developing his own business, was
employed by Morgan Stanley in New York and London. After the retirement of
Richard Clothier in July, Mr. Wayne was named as the PGI Group's Chief Executive
Officer.
Jensen manages eight funds established since 1994 and invested in properties in
St. Petersburg, Russia. Jensen identifies suitable projects and manages the
property and its development. A management fee is received annually from some of
the funds. However, it is expected that the major part of the income generated
by Jensen will arise from carried interests accruing on the sale of property at
the end of the funds' lives.
In addition to the funds, Jensen Group manages OAO Sestroretsk Tool Works, the
oldest factory in Saint Petersburg. Founded by Peter the Great in 1721, the
factory's largest component of value is real estate. Therefore, Jensen is
engaged in restructuring the operating businesses (heating plant and tool works
factory) in order to unlock the value of the real estate. Jensen Group will
manage the development of the 31 hectare site which is located in one of St
Petersburg's most prestigious suburbs.
In addition to the projects it currently manages, Jensen Group is planning to
raise $100 million for Jensen Group I Limited Partnership in 2006 which will
invest in further projects in St Petersburg's real estate market.
MANUFACTURING
Chillington, the Group's UK wheelbarrow manufacturer, again reduced its trading
losses in 2005. Sales volumes were maintained despite weak demand that has
affected the major DIY retailers. Further cost reductions should enable progress
to continue in 2006. An impairment provision has been made to the net assets of
this division at 31 December 2005.
Consolidated income statement for the year ended 31 December 2005
2005 2004
(Restated)
Notes #'000 #'000
--------------------------- ------ -------- ----------
Continuing operations
Revenue 19,265 18,004
Cost of sales (13,134) (12,040)
--------------------------- ------ -------- ----------
Gross profit 6,131 5,964
Operating expenses (5,706) (4,910)
--------------------------- ------ --------- ----------
Profit from operations 425 1,054
--------------------------- ------ --------- ----------
Impairment provision to tangible assets of a (670) -
subsidiary undertaking
--------------------------- ------ --------- ----------
(Loss)/profit before finance costs (245) 1,054
Finance costs (1,595) (1,821)
--------------------------- ------ --------- ----------
Loss after finance costs (1,840) (767)
Monetary working capital hyper-inflation 150 46
adjustment ------ --------- ----------
---------------------------
Loss before taxation 3 (1,690) (721)
Taxation 4 (338) (1,083)
--------------------------- ------ --------- ----------
Loss for period from continuing operations (2,028) (1,804)
--------------------------- ------ --------- ----------
Discontinued operations
Profit after taxation from discontinued 386 425
operations.
--------------------------- ------ --------- ----------
Net profit on disposal of Indonesian 1,283 -
operations
--------------------------- ------ --------- ----------
Total profit for period from discontinued 1,669 425
operations
--------------------------- ------ --------- ----------
Loss for the period (359) (1,379)
--------------------------- ------ --------- ----------
Attributable to:
Equity holders of the parent (618) (1,633)
Minority interests 259 254
--------------------------- ------ --------- ----------
(359) (1,379)
--------------------------- ------ --------- ----------
(Restated)
Pence Pence
--------------------------- ------ --------- ----------
Loss per ordinary share 5
Basic (0.74) (2.65)
--------------------------- ------ --------- ----------
Dividend per ordinary share 6 0.25 -
--------------------------- ------ --------- ----------
Consolidated balance sheet at 31 December 2005
2005 2004
(Restated)
#'000 #'000
---------------------- ------- --------
Non-current assets
Intangible assets 2,102 270
Biological assets 13,224 15,033
Tangible assets 10,306 7,280
Investments 160 329
---------------------- ------- --------
25,792 22,912
---------------------- ------- --------
Current assets
Inventories 2,767 2,823
Trade and other receivables 1,902 1,993
Cash and cash equivalents 4,373 803
---------------------- ------- --------
9,042 5,619
---------------------- ------- --------
Current liabilities
Debt finance (9,808) (5,507)
Trade and other payables (2,964) (3,616)
Current tax liabilities (194) (810)
---------------------- ------- --------
(12,966) (9,933)
---------------------- ------- --------
Net current liabilities (3,924) (4,314)
---------------------- ------- --------
Total assets less current liabilities 21,868 18,598
Non-current liabilities
Debt finance (1,574) (9,311)
Other payables (81) (73)
Non-current tax liabilities - (262)
Provisions for deferred tax liabilities (1,276) (885)
Retirement benefit liabilities (4,317) (4,627)
---------------------- ------- --------
Net assets 14,620 3,440
---------------------- ------- --------
Equity
Share capital 24,429 12,950
Share premium account 10,705 11,198
Capital redemption reserve 250 250
Revaluation reserves 639 695
Retained earnings (22,550) (22,526)
---------------------- ------- --------
Attributable to equity holders of parent company 13,473 2,567
---------------------- ------- --------
Minority interests 1,147 873
---------------------- ------- --------
Total equity 14,620 3,440
---------------------- ------- --------
Consolidated cash flow statement for the year ended 31 December 2005
2005 2004
(Restated)
#'000 #'000
--------------------------- -------- --------
Cash flow from operating activities
Profit from operations - Continuing operations 425 1,054
Discontinued operations 570 583
--------------------------- -------- --------
Adjustment for: 995 1,637
Depreciation 1,051 923
Disposal of tangible assets (48) (72)
Disposal of minority interest - 30
Amortisation of goodwill - 55
Additional retirement benefit costs (195) (142)
Share options 36 -
Oversea tax paid (654) (361)
--------------------------- -------- --------
Operating profit before changes in working capital 1,185 2,070
Increase in inventories (151) (573)
Increase in trade and other receivables (113) (187)
(Decrease)/increase in liabilities (475) 280
Exchange difference on working capital (474) (159)
--------------------------- -------- --------
Cash generated from operations (28) 1,431
Finance costs (1,362) (1,576)
Dividend paid (244) -
--------------------------- -------- --------
Net cash from operating activities (1,634) (145)
--------------------------- -------- --------
Cash flows from investing activities
Capital expenditure (4,353) (1,833)
Disposal of tangible assets 833 131
Acquisition of subsidiary (2,440) -
Disposal of Indonesian subsidiaries 3,741 -
Additions to investments - (287)
Dividends and other payments to minority interests (net) - (23)
--------------------------- -------- --------
Net cash from investing activities (2,219) (2,012)
--------------------------- -------- --------
Cash flows from financing activities
Issue of shares (net of expenses) 10,863 1
(Payment)/receipt of loans and finance lease liabilities (3,038) 2,989
--------------------------- -------- --------
Net cash from financing activities 7,825 2,990
--------------------------- -------- --------
Net increase in cash and cash equivalents 3,972 833
Cash and cash equivalents at beginning of period (622) (1,478)
--------------------------- -------- --------
Effects of exchange rate changes on cash and cash (22) 23
equivalents
--------------------------- -------- --------
Cash and cash equivalents at end of period 3,328 (622)
--------------------------- -------- --------
Analysis of net debt
Cash 4,373 803
Overdrafts (1,045) (1,425)
--------------------------- -------- --------
Cash and cash equivalents 3,328 (622)
Debt due within one year (8,744) (4,016)
Debt due after one year (1,534) (9,242)
Finance leases (59) (135)
--------------------------- -------- --------
Total (7,009) (14,015)
--------------------------- -------- --------
Consolidated statement of changes in equity
Attributable to equity holders of the Company
-----------------------------------------------
Share Share Revaluation Retained Total Minority Total
Capital Earnings Interests Equity
Premium Reserve
& Capital
Redemption
Reserves
#'000 #'000 #'000 #'000 #'000 #'000 #'000
----------------------- ------ ------- ------- ------ ------ ------ ------
Balance at 1
January 2005
(restated) 12,950 11,448 695 (22,526) 2,567 873 3,440
Changes in equity for
2005
Monetary working
capital
hyper-inflation
adjustment - - - (150) (150) - (150)
Exchange differences
on translation of
net oversea assets - - (1,713) 1,328 (385) 129 (256)
Unrealised surplus
on revaluation of
properties - - 1,703 - 1,703 65 1,768
Reversal of capital
reserve on disposals
(net) - - - (254) (254) - (254)
Actuarial loss (net)
of defined benefits
pension plan - - - (272) (272) - (272)
Changes in potential
tax on property
revaluations - - (46) 101 55 - 55
Recognition of
share options - - - 36 36 - 36
Transfer - (49) - 49 - - -
----------------------- ------ ------- ------- ------ ------ ------ ------
Net (expense)/income
recognised directly
in equity - (49) (56) 838 733 194 927
Loss for the year - - - (618) (618) 259 (359)
----------------------- ------ ------- ------- ------ ------ ------ ------
Total recognised
income and expense
for 2005 - (49) (56) 220 115 453 568
----------------------- ------ ------- ------- ------ ------ ------ ------
Issue of new ordinary
shares (net of expenses)
Acquisition of
Jensen Group 2,300 (4) - - 2,296 - 2,296
Rights issue 9,007 (436) - - 8,571 - 8,571
Conversion of
loan stock 172 (4) - - 168 - 168
Dividend paid - - - (244) (244) - (244)
Minority interest in
net assets acquired - - - - - 576 576
Disposal of minority
interests - - - - - (776) (776)
Advances from
non-equity minority
interests - - - - - 21 21
----------------------- ------ ------- ------- ------ ------ ------ ------
Balance at 31
December 2005 24,429 10,955 639 (22,550) 13,473 1,147 14,620
----------------------- ------ ------- ------- ------ ------ ------ ------
Notes to the Preliminary Statement
1. Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards including International Accounting Standards and
Interpretations (collectively 'IFRS') issued by the International Accounting
Standards Board. ('IASB').
Full details of IFRS policies applied and reconciliations of comparative figures
between UK GAAP and IFRS are available in our Interim Statement, a copy of which
is available from our website. www.pgi-uk.com
2. Status of financial information
The financial information contained in this preliminary announcement does not
constitute the company's consolidated statutory financial statements for the
years ended 31 December 2005 or 2004, but is derived from those financial
statements.
The comparative figures for the year ended 31 December 2004 are an extract from
the full accounts for the year and have also been modified by the adoption of
International Financial Reporting and Accounting Standards. These modifications
have not been audited. The unmodified accounts on which the auditors have made a
report under Section 235 of the Company Act 1985 have been filed with the
Registrar of Companies. The audit report was qualified on a technical issue
concerning directors;' valuations of oversea plantations, factories and
ancillary property and did not contain a statement under Section 237(2) or (3)
of the Companies Act.
The report of the auditors on the 2005 accounts will be qualified on a technical
issue because the company has adopted a method of accounting for the results of
its operations in Zimbabwe which is not fully in accordance with the provision
of IAS 29. "Financial Reporting in Hyperinflationary Economies".
3. Segmental analysis - Loss before taxation
2005 2004
(Restated)
#'000 #'000
By activity:
Continuing operations:
Food group 2,048 2,520
Manufacturing (including impairment provision in 2005 (1,031) (484)
of #670,000)
Investment property management (acquired in 2005) 42 -
Central costs net of sundry income (1,304) (982)
------- --------
Finance costs (including monetary working capital (1,445) (1,775)
hyper-inflation adjustment)
------- --------
(1,690) (721)
------- --------
Notes to the Preliminary Statement
4. Taxation
2005 2004
(Restated)
#'000 #'000
Current taxation:
UK Corporation tax 241 58
Double taxation relief (241) (58)
------- -------
- -
------- -------
Foreign tax:
Current tax on income for the period 131 590
Adjustment in respect of prior periods (57) 306
------- -------
74 896
------- -------
Deferred taxation:
Origination and reversal of timing differences 301 103
Adjustment in respect of prior periods (37) 84
------- -------
264 187
------- -------
Tax on continuing operations 338 1,083
------- -------
5. Loss per ordinary share
Basic
Basic loss per share is calculated by dividing the loss attributable to equity
holders of the Company by the weighted average number of ordinary shares in
issue during the year, including the effects of the rights issue in June 2005.
2005 2004
(Restated)
#'000 #'000
Loss attributable to equity holders of the company (618) (1,633)
------- -------
Weighted average number of ordinary shares in issue
(thousands), restated for rights issue 83,644 61,632
-------- --------
Basic loss per share (pence per share) (0.74) (2.65)
-------- --------
6. Dividend per ordinary share
An interim dividend of 0.25p per share was paid on 28 October 2005 (2004: #Nil).
No final dividend is recommended (2004: #Nil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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