RNS Number:4231S
PGI Group PLC
15 April 2008
PGI Group Plc
15 April 2008
Preliminary Statement of the Group's Results for the year ended 31 December 2007
Chairman's Statement
The Group profit for the year before tax, biological assets and hyperinflation
adjustments amounted to �2,417,000 compared with �1,723,000 for 2006. Including
the adjustments for biological assets and Zimbabwe hyperinflation, the group
profit before tax was �3,618,000 (2006: �3,199,000).
For the reasons I gave in my Chairman's statement last year, I would again
encourage shareholders to treat these adjustments with caution. They are shown
in a separate column in the profit and loss account, and the hyperinflation
adjustments are shown separately on the Group Balance Sheet.
Towards the end of 2006, Group borrowings were significantly reduced when all
the issued loan stock of �7.5 million was converted into ordinary shares.
Consequently, the net interest cost was only �574,000 in 2007, compared with
�1,252,000 in 2006.
The food group was affected by a fall in tea prices last year, despite tea
production holding up well. The decline in prices was mitigated by a better
quality of tea in Malawi, the result of improvements we have made over the past
few years. The Malawi tea operations were also affected by local cost inflation
of around 8%, not matched by any decline in the exchange rate.
Our tea operations at Eastern Highlands in Zimbabwe continue to be the most
challenging. General economic malaise and soaring hyperinflation have made it
impossible to recruit enough labour. With such severe inflation (officially
recorded at 66,000% p.a. at the end of 2007) and large but unpredictable
movements in the market exchange rate, it is impossible to track the true
financial performance of this business. In the circumstances, it is a great
credit to the local management that tea production declined by only 5% last
year.
The Zimbabwe government has recently passed an "Indigenisation and Economic
Empowerment Act", which might lead to the compulsory transfer of controlling
interests in all Zimbabwe companies to indigenous Zimbabweans. At this stage it
is too early to assess what impact this might have on Eastern Highlands.
The Group's perishables businesses in Zambia improved considerably in 2007. Rose
production at Khal Amazi increased by 26% as it successfully integrated the
Sunrose business acquired during 2006. Our vegetable business, Chalimbana, had
its first profitable year since it started trading in 2005.
Jensen, the Group's Russian property management business, was successful during
2007 in fully committing the US$101 million fund it raised during 2006 to
investments. The entire fund is invested in residential, commercial retail and
industrial projects in the Saint Petersburg region. In addition to the mixed-use
Petrovsky Arsenal project, the Fund compiled a portfolio of high street retail
assets throughout central Saint Petersburg and made several land acquisitions
outside of Saint Petersburg. In its retail portfolio, Jensen has signed new
leases or renegotiated terms with several of the existing tenants, increasing
the revenue of the portfolio.
Jensen's original smaller fund valuations continue to show strong growth,
reflecting the buoyancy of the property market in Saint Petersburg. The results
for Jensen include the uplift in the value of the first fund, originally
established in 1994.
We are recommending an ordinary dividend of 0.25p per share (2006:0.25p, paid
January 2007) payable on 5 August 2008 to Shareholders on the register on 2 May
2008.
We have started the current year with a mixed performance. Our tea businesses
have benefited from higher tea prices and good growing conditions, but in Zambia
our estates have suffered from exceptionally high rainfall that has held back
rose production.
We were saddened to report in December 2007 the death of David Fish in a tragic
accident. He had been a Director only for a short time, but we will miss his
contribution.
Last but not least, I would like to thank all the Group's employees for their
work and commitment during the year.
Rupert Pennant-Rea
Chairman
15 April 2008
Review of activities
Food Group
This division operates the food and flower business units in Malawi, Zambia and
Zimbabwe. The products: tea, roses, fresh vegetables and macadamia nuts are
mostly marketed to European supermarkets and food processors.
Financial Results
The division made an operating profit of �3,388K on a turnover of �17,486K. This
is a drop in profitability by 10 % over last year, driven mostly by lower tea
prices.
The division's turnover is split between:
Tea 48 %
Cut Flowers 39 %
Vegetables 9 %
Macadamia nuts 4 %
Net operating assets increased by 3 % to � 17,973K. Capital expenditure was
�1,888K which included the purchase of the freehold land of one of our rose
greenhouse sites in Zambia. Of the remainder the majority was spent on new field
and factory investments in our Malawi tea business.
Tea
Our tea is grown in Malawi and Zimbabwe. Total tea production increased by 99t
to 16,373t over 2006. Lujeri Tea Estates, our Malawi business, produced 12,641t
of this total, an increase of 3% over last year.
Lujeri continues to replant its older seedling tea with improved tea varieties
that are selected for both their yield and quality characteristics. Volumes will
continue to rise over the next 5 years as these plantings come to maturity.
Our Zimbabwe tea business, Eastern Highlands Plantations Ltd continues to
operate though under the most challenging of conditions. Tea production declined
by 5% from a failure to attract sufficient workers onto the estate, and this
business now accounts for only 6% of the turnover of the division.
It is most unlikely that this business will be able to improve its productivity
until there is a resolution to the hyper inflationary conditions under which it
is operating.
In the year the average Malawi auction tea price declined by 17% or 23 US cents
per kg. Against this, Lujeri's tea price declined by 6%. This lower decline is a
result of the significant investments we have made over the last few years into
improving our manufacturing capacity which in turn has allowed us to make a more
consistent quality of tea.
In Malawi we process tea for 5,500 smallholders. As part of our strategy for
maximising their returns we provide them with extension services that have
resulted in significant yield and quality improvements. We have now embarked on
the process of having them accrediting to "Fairtrade" standards which should
result in improved returns to them.
Cut Flowers
Our Zambian business, Khal Amazi Ltd produced 131 million stems, a 26% increase.
This volume growth came from both the new greenhouses we have erected at the
Kapwelyomba site and the benefits of the Sunrose acquisition we made in 2006.
All our production is the smaller headed roses which are sold across a wide
range of northern European supermarkets.
Our airfreight forwarding company increased its market share for perishables
from Zambia and we expect this to grow further this year
Vegetables
Chalimbana Fresh Produce operates a farm and packhouse in Zambia. The fresh
vegetables produced are all exported to European supermarkets. We have refined
the business model further and now concentrate on both conventional and organic
peas. This strategy has increased shipments and improved profitability.
During the year we changed our UK marketing partner and the new arrangements
have increased the availability of our products to UK supermarkets.
Macadamia Nuts
The new nut cracking factory that we built in 2006 started operations in
February 2007 and has processed 277 t of kernel in its first year of operation.
The nuts are sourced from our own orchards in Malawi. We have 762ha in the
ground and as they mature over the next 6 years crops will double.
The market response has been encouraging and we will now look at how we can add
value to our nuts at origin.
Review of activities
(continued)
Jensen Group
Jensen Group successfully committed Jensen Group I Limited Partnership, a
USD100,835,000 fund raised in 2006, to investment projects in Saint Petersburg
and the Saint Petersburg region. In addition to its Sestra River Developments
mixed use project (renamed Petrovsky Arsenal), the fund has invested in several
land sites and has assembled a portfolio of high street retail properties.
Petrovsky Arsenal is a property spun out of Sestroretsk Instrument Works,
founded by Peter the Great in 1721. On the 13.9 hectare site, the Fund has
obtained preliminary permission to build approximately 150,000 square meters of
mixed-use space. The property sits in the town of Sestroretsk, inside the Saint
Petersburg administrative region and among the most prestigious suburbs in the
area. It is anticipated construction on the first phase of the property will
begin during the second half of 2008.
The land plots acquired by the Fund are located outside of central Saint
Petersburg and will take advantage on the growth of the City and the market
trend of suburbanization. Most of the land acquired will be developed for
residential or industrial uses. The retail portfolio acquired by the Fund
includes assets located throughout central Saint Petersburg with a concentration
of assets located near the Okhta Center development where Gazprom Neft (the oil
division of Gazprom) is planning to build a 300 meter tower to relocate its
headquarters from Moscow.
In addition to Jensen Group I Limited Partnership, Jensen manages Sestroretsk
Instrument Works, a 13.1 hectare territory and eight smaller investment funds
which were set up and have been invested since 1994. The earlier funds increased
in value during 2007 in addition to earning rent from the largely foreign
tenants leasing them. These funds are comprised of residential, commercial and
retail properties in the heart of Saint Petersburg along the City's main
thoroughfares and canals as well as in the prestigious suburb of Sestroretsk.
For management of these investments, Jensen Group receives a management fee and/
or a carried interest on all distributions made after the investors receive
their investment capital back plus a preferred return.
Consolidated income statement for the year ended 31 December 2007
2007 2006
Result before Result before
biological Biological biological Biological
assets and assets and assets and assets and
hyperinflation hyperinflation hyperinflation hyperinflation Total
adjustments Adjustments Total adjustments adjustments
Notes �000 �000 �000 �000 �000 �000
Continuing operations
Revenue 18,713 (261) 18,452 17,430 (438) 16,992
Cost of sales (8,768) (117) (8,885) (7,897) 171 (7,726)
Gross profit 9,945 (378) 9,567 9,533 (267) 9,266
Distribution costs (2,248) (8) (2,256) (2,417) 6 (2,411)
Administrative expenses (5,902) (29) (5,931) (5,349) (2) (5,351)
Other operating income 154 15 169 636 (8) 628
Fair value adjustment to:
- investment properties 916 - 916 497 - 497
- biological assets - 1,438 1,438 - 1,537 1,537
Operating Profit 2,865 1,038 3,903 2,900 1,266 4,166
Finance revenue 88 - 88 156 - 156
Finance costs (668) 6 (662) (1,446) 38 (1,408)
Share of associate's
results 132 - 132 113 - 113
Monetary working capital
hyperinflation adjustments - 157 157 - 172 172
Profit before taxation 3 2,417 1,201 3,618 1,723 1,476 3,199
Taxation 4 (655) (251) (906) (667) (326) (993)
Profit for year from
continuing operations 1,762 950 2,712 1,056 1,150 2,206
Discontinued operations
(Loss) after taxation from
discontinued operations - - - (126) - (126)
Net (loss) on disposal of
operations - - - (88) - (88)
Total (loss) for year from
discontinued operations - - - (214) - (214)
Profit for the year 1,762 950 2,712 842 1,150 1,992
Restated
Profit attributable to:
Equity holders of the
parent 780 682 1,462 171 1,167 1,338
Minority interests 982 268 1,250 671 (17) 654
1,762 950 2,712 842 1,150 1,992
Restated
Pence Pence Pence Pence
Earnings per ordinary share 5
Basic 0.60 1.13 0.17 1.29
Dividend per ordinary share 6 0.25 -
Consolidated balance sheet at 31 December 2007
2007 2006
(Restated)
Excluding Including Excluding Including
hyperinflation hyperinflation hyperinflation hyperinflation
adjustments adjustments* adjustments adjustments*
�000 �000 �000 �000
ASSETS
Non-current assets
Goodwill 2,047 2,047 2,055 2,055
Biological assets 12,984 12,984 12,665 12,665
Property, plant and equipment 10,189 10,189 9,372 9,372
Hyperinflation adjustment - 246 - 642
10,189 10,435 9,372 10,014
Investment properties 2,208 2,208 1,313 1,313
Investments
- associate 320 320 200 200
- other 45 45 43 43
27,793 28,039 25,648 26,290
Current assets
Inventories 2,128 2,128 2,061 2,061
Hyperinflation adjustment - 134 - 42
2,128 2,262 2,061 2,103
Trade and other receivables 1,983 1,983 1,759 1,759
Other financial assets 17 17 - -
Cash and cash equivalents 2,006 2,006 2,840 2,840
6,134 6,268 6,660 6,702
Total assets 33,927 34,307 32,308 32,992
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent company
Share capital 32,365 32,365 32,326 32,326
Share premium account 425 425 420 420
Capital redemption reserve 250 250 250 250
Revaluation reserve 457 457 700 700
Retained earnings (17,066) (16,746) (17,124) (16,611)
16,431 16,751 16,572 17,085
Minority interests 3,920 3,920 2,927 2,927
Total equity 20,351 20,671 19,499 20,012
Non-current liabilities
Interest bearing loans and
borrowings 1,552 1,552 1,383 1,383
Other payables 177 177 275 275
Provision for deferred tax
liabilities 2,540 2,540 2,016 2,016
Hyperinflation adjustment - 60 - 171
2,540 2,600 2,016 2,187
Defined pension plan deficit 3,497 3,497 3,764 3,764
7,766 7,826 7,438 7,609
Current liabilities
Interest bearing loans and
borrowings 3,291 3,291 2,755 2,755
Trade and other payables 2,229 2,229 2,102 2,102
Other financial liabilities 9 9 - -
Current tax liabilities 281 281 514 514
5,810 5,810 5,371 5,371
Total liabilities 13,576 13,636 12,809 12,980
Total equity and liabilities 33,927 34,307 32,308 32,992
*These are the Group's Balance Sheets for the years ended 31 December 2007 and
2006.
Consolidated cash flow statement for the year ended 31 December 2007
2007 2006
(Restated)
Including Including
hyperinflation hyperinflation
adjustments adjustments
�000 �000
Operating activities
Profit before tax from continuing operations 3,618 3,199
Profit/(loss) before tax from discontinued - (126)
operations
Profit before tax 3,618 3,073
Adjustment to reconcile profit before tax to net
cash flows
Non-cash:
Depreciation of property, plant and equipment 823 952
Disposal of property, plant and equipment 53 (38)
Additional retirement benefit costs (200) (179)
Share based payments 60 -
Disposal of shares to minority interests 4 -
Net finance costs - continuing operations 574 1,252
Net finance costs - discontinued operations - 44
Fair value adjustments (2,354) (2,034)
Share of net profit of associate (132) (113)
Hyperinflation indexation adjustment 508 113
Monetary working capital hyperinflation (157) (172)
adjustment
Working capital adjustments:
(Increase)/decrease in inventories (159) 3
(Increase)/decrease in trade and other (241) (329)
receivables
Increase/(Decrease) in trade and other payables 38 (277)
Exchange difference on working capital (881) (1,397)
Oversea tax paid (445) (135)
Net cash generated from operating activities 1,109 763
Cash flows from investing activities
Capital expenditure (1,837) (2,146)
Disposal of property, plant and equipment - 58
Acquisition of subsidiaries - (521)
Disposal of subsidiaries - 528
Additions to investments (net) 9 16
Net cash from investing activities (1,828) (2,065)
Cash flows from financing activities
Issue of shares (net of expenses) 44 88
Payment of loans and finance lease liabilities 163 (259)
Finance costs, net of bank interest received (454) (1,129)
Dividends paid to equity holders of the parent (323) -
Dividends and other payments to minority (228) (20)
interests (net)
Distributions from property fund (net) (1) (2)
Net cash from financing activities (799) (1,322)
Net (decrease) in cash and cash equivalents (1,518) (2,624)
Cash and cash equivalents at beginning of period 959 3,328
Effects of exchange rate changes on cash and 100 255
cash equivalents
Cash and cash equivalents at end of period (459) 959
Cash and cash equivalents comprise:
Cash 2,006 2,840
Overdrafts (2,465) (1,881)
Cash and cash equivalents (459) 959
Interest bearing loans and borrowings due within (3,291) (2,755)
one year
Less: short term debt 826 874
Overdrafts (2,465) (1,881)
Consolidated statement of changes in equity
Attributable to equity holders of the Company
Share
premium &
capital
Share redemption Revaluation Retained Minority Total
capital reserves reserve earnings Total interests equity
�000 �000 �000 �000 �000 �000 �000
Balance at 1 January 2007 32,326 670 700 (16,611) 17,085 2,927 20,012
Changes in equity for 2007
Hyperinflation indexation
movement - - - 553 553 - 553
Exchange differences on
translation of net oversea
assets:
- before hyperinflation
indexation - - (445) (1,549) (1,994) (60) (2,054)
- hyperinflation indexation
movement - - - (513) (513) - (513)
Revaluation of property - - 228 - 228 57 285
Actuarial gain (net) of
defined benefits pension
plan - - - 187 187 - 187
Deferred tax on property
revaluations:
- before hyperinflation
indexation - - (26) (15) (41) (30) (71)
- hyperinflation indexation
movement - - - 4 4 - 4
Net (expense)/income
recognised directly in
equity - - (243) (1,333) (1,576) (33) (1,609)
Profit for the year - - - 1,462 1,462 1,250 2,712
Total recognised income and - - (243) 129 (114) 1,217 1,103
(expense)
Issue of new ordinary shares
(net of expenses):
Exercise of share options 39 5 - - 44 - 44
Share-based payment - - - 60 60 - 60
Dividend paid - - - (323) (323) - (323)
Dividend paid to minority
interests - - - - - (124) (124)
Distributions from property
fund (net) - - - (1) (1) - (1)
Disposal of shares to minority
interests - - - - - 4 4
Repayment of advances from
non-equity minority interests
(net) - - - - - (104) (104)
Balance at 31 December 2007 32,365 675 457 (16,746) 16,751 3,920 20,671
Notes to the Preliminary Statement
1. Basis of preparation
These financial statements, from which the information in this preliminary
statement has been derived, have been prepared in accordance with International
Financial Reporting Standards ("IFRS") adopted by the European Union and they
therefore comply with Article 4 of the EU IAS Regulation. They have been
prepared on the historical cost basis, except for biological assets, freehold
land and buildings and investment properties which have been measured at fair
value.
The consolidated and company financial statements are presented in sterling and
all values are rounded to the nearest thousand (�000) except where otherwise
indicated.
Prior year adjustment
Due to a miscalculation of the minority interest percentage on the acquisition
of a part of the Jensen Group in 2005, the minority interest and goodwill on
acquisition have been restated in 2007. This restatement has been accounted for
retrospectively and recognised in the consolidated statement of changes in
equity at 1 January 2006. The comparative balance sheet for 2006 has been
restated to reflect the changes in minority interests, goodwill and retained
earnings. There was no effect on the previously reported profit after taxation
for 2006, but the profit attributable to the equity holders of the parent and
minority interests have been restated on the income statement. The effect on the
basic earnings per share for 2006 is as follows:
Results before
biological assets
and hyperinflation
adjustments Total
Pence Pence
Effect on earnings per ordinary share
Basic (0.08) (0.09)
The amounts of the corrections on the balance sheet amounts both excluding and
including hyperinflation adjustments for 2006 are as follows:
�000
Goodwill +154
Retained Earnings -83
Minority Interests +237
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 2007 or 2006, but is derived from those financial
statements.
The comparative figures for the year ended 31 December 2006 are an extract from
the full accounts for that year which have been filed with the Registrar of
Companies and on which the auditors have made a report under Section 235 of the
Companies Act 1985.
Notes to the Preliminary Statement
(continued)
3. Segmental reporting - Profit before taxation
The Group's primary reporting segments are the following business sectors:
Food group - Tea, roses, vegetables and macadamia nuts.
Investment property management - Properties in St. Petersburg, Russia.
The manufacturing segment has been classified as a discontinued operation for
the year ended 31 December 2006
Segment results
2007 2006
By activity Result before Result before
biological Biological biological Biological
assets and assets and assets and assets and
hyperinflation hyperinflation hyperinflation hyperinflation
adjustments adjustment Total adjustment adjustment Total
Continuing Operations: �000 �000 �000 �000 �000 �000
Food group 3,388 1,038 4,426 3,774 1,266 5,040
Investment property
management 1,074 - 1,074 663 - 663
Central costs net of sundry
income (1,465) - (1,465) (1,424) - (1,424)
2,997 1,038 4,035 3,013 1,266 4,279
Net finance costs (580) 6 (574) (1,290) 38 (1,252)
Monetary working capital
hyperinflation adjustment - 157 157 - 172 172
Profit before tax 2,417 1,201 3,618 1,723 1,476 3,199
Taxation (655) (251) (906) (667) (326) (993)
Profit for the year from
continuing operations 1,762 950 2,712 1,056 1,150 2,206
The investment property management segment includes �132,000 (2006: �113,000) in
respect of the results of the associated company.
4. Taxation
2007 2006
�000 �000
Continuing operations
Current taxation:
UK corporation tax 183 71
Double taxation relief (183) (71)
- -
Foreign tax:
Current tax on income for the period 250 483
Adjustment in respect of prior periods (26) 37
224 520
Deferred taxation:
Origination and reversal of temporary differences 213 36
Potential tax due on property revaluations and fair value 471 445
adjustments
Adjustment in respect of prior periods (2) (8)
682 473
Total tax expense reported in the income statement for continuing 906 993
operations
Notes to the Preliminary Statement
(continued)
5. Earnings per ordinary share
Basic
Basic earnings per ordinary share is calculated by dividing the result
attributable to equity holders of the Company
by the weighted average number of ordinary shares in issue during the year.
2007 2006(Restated)
Result before Result before
biological biological
assets and assets and
hyperinflation hyperinflation
adjustments Total adjustments Total
�000 �000 �000 �000
Profit for the year attributable 780 1,462 171 1,338
to the equity holders of the
Company
2007 2006
Thousands Thousands
Weighted average number of ordinary shares in issue 129,406 103,470
(restated for 2005 rights issue)
pence pence pence pence
Basic earnings per ordinary 0.60 1.13 0.17 1.29
share
6. Dividend paid and proposed
2007 2006
�000 �000
Declared and paid during the year
Equity dividends on ordinary shares:
Interim dividend for 2006 of 0.25p per share, paid in January 2007 323 -
A dividend for 2007 of 0.25p per share has been declared in 2008, payable in
August 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDSLXBGGIU
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