RNS Number:9262M
Probus Estates PLC
30 June 2003
Probus Estates PLC ("the Company")
Preliminary Results for the Year Ended 31 December 2002
Chairman's statement
Results
Turnover for the year was Euro28.1 million, an increase of Euro6.3 million over 2001
(Euro 21.8 million) largely due to sales of units at Santa Ponsa. The Group
achieved an operating loss of Euro1.2 million compared to an operating profit of
Euro0.2 million in the previous year. The results show a loss for the year after
tax of Euro10.1 million (2001: Euro2.0 million loss). This was partly due to the
closure of the Palladium business, which included redundancy costs, and partly
due to interest incurred by the Company in relation to the Can Vinyes project
being expensed.
Review of major events
The results for 2002 were promising in some areas of the group but disappointing
in other areas, which resulted in various decisions being made regarding the
future of the group. The most significant decision in 2002 was the closure of
the Palladium business, the main activity in Calaxada S.L., due to continuing
losses in the last few years.
The profitability of the Casino declined in 2002 due to the general downturn in
tourism to Mallorca, which as a result, has had an effect on the visitor numbers
to the Casino. In addition, there has not been much progress on the Can Vinyes
project in Barcelona as there have been, and still are, problems in obtaining
the necessary building approvals from the local authorities. A moratorium has
been issued by the local government with respect to building applications, which
we are in the process of contesting. Although we are contesting the moratorium
we have decided to maintain the valuation as shown in the previous year, which
was based on an approved development plan.
Board changes
Since the year-end, Mr Lars-Erik Magnusson has resigned from the Board as the
Chief Executive and Mr Richard Prickett and Mr Peter Byrne have resigned as
directors. On 11th February 2003, Mr Hans Junge was appointed as Chairman and
Chief Executive Officer.
Outlook
In January 2003 a standstill agreement was signed with the largest creditor, and
guarantor, regarding the La Caixa loan of Euro29.15 million for a period of one
year. The standstill agreement has subsequently been extended to 30th June
2004.
During this time efforts will be made to improve the profitability and liquidity
of the group. In February 2003 the head office at Vigo Street, London, was
officially closed.
In the Casino costs have been reduced by 20%, improved marketing strategies have
been implemented and the food and beverage operations have been reduced to a
minimum. After a disappointing start in 2003, by May the Casino was showing
positive results which were above both target and the previous year.
With respect to the Dutch properties, the property management has been changed
which has resulted in a significant cost saving.
The Company is still suffering from liquidity problems, however with the
standstill agreement in place and the support of the largest creditor I remain
positive about the future outcome.
Hans R Junge Chairman and Chief Executive Officer
30 June 2003
Operating and financial review
Leisure operations
During the year the Group ceased operations of the Palladium show in Calaxada
SL, the wholly owned subsidiary of Casino de Mallorca SL, at a total cost of
Euro807,000, which has been disclosed as an exceptional item and includes
redundancy costs of Euro480,000 and the write-off of show equipment of Euro327,000.
The reason for the closure was due to the large losses incurred by the show
(2002: loss Euro2.1 million). Despite the opening of a new, and high quality, show
in April 2002 ticket sales were adversely affected by the downturn in tourism
and remained disappointing throughout the year. The average number of tickets
sold per show night was 561 (2001: 541) giving an average occupancy rate of 42%
(2001: 40%). After the year-end an agreement has been signed with Son Amar who
will rent the theatre providing additional revenue of Euro300,000 per annum.
At Casino de Mallorca the number of clients, excluding attendances to the
Palladium, reduced by 12.5% from the previous year, although the total gaming
income only decreased by 4.9%. The declining gaming income is mainly attributed
to a reduction in visitors to the island by 7.8% and, more specifically, a
reduction in German visitors by 15.7%.
Property operations
The retail and residential development in Santa Ponsa was completed during the
year with the focus now being on selling the units and apartments.
Approximately 50% of the development had been sold by 31 December 2002 providing
a turnover of Euro6.8 million.
Administrative expenses
Administrative expenses increased to Euro4,808,000 from Euro3,529,000 the previous
year, mainly due to the provision for a bad debt of Euro1,370,000 which related to
a non-payment on 31 December 2002 of a loan note from Lemco Invest Ltd., a trust
company that has Mr Magnusson's family as the beneficiaries. Included in the
administrative expenses is an amount of Euro551,000 for amortisation of goodwill
(2001:Euro550,000).
Finance costs
The increase in finance costs charged to the profit and loss account (Euro7,753,000
compared to Euro2,350,000 in 2001) was mainly due to interest, previously
capitalised, being expensed in 2002. The interest previously capitalised
relates to a loan held in Probus Estates PLC for the financing of the Can Vinyes
project in its subsidiary Rilantecson S.L. In view of the delay in obtaining
planning consent it was felt to be prudent not to capitalise the interest. In
addition, there was also a reduction in finance costs due to the amortisation of
the mortgage financing the Dutch properties and the reduction of the interest
rate from 5.56% to 4.37%.
Loss per share
The loss for the year after taxation was Euro10,069,000 (2001:Euro1,993,000) and the
loss per share, both basic and diluted, was 2.1 cents (2001: 0.43 cents loss).
Commentary on the balance sheet
Fixed assets
The goodwill shown under fixed assets relates to the acquisition of Casino de
Mallorca. As required by FRS 11 the Board has reviewed the goodwill for
possible impairment and has concluded that it is reasonable to carry the
goodwill at its stated value and to continue to amortise it over 20 years. The
other land and buildings shown in the balance sheet relate to the casino
property.
The investment properties are the five investment properties in The Netherlands.
These properties are substantially fully let. Some of the leases which fell
due for renewal in 2003 have now been renewed. All leases are subject to
indexation.
Current assets
The most significant change in current assets is the completion of the retail
and residential development in Santa Ponsa, and the reclassification of the cost
as "Development properties". The cost of the development is being transferred
to cost of sales on a proportionate basis as units are sold.
The increase in the carrying value of development land at Can Vinyes is due to
the cost of applications for planning consent. Additional costs incurred on the
development at Can Vinyes will be added assuming we continue to be satisfied
that the cost is ultimately recoverable.
Creditors
The increase in short term creditors from Euro53 million to Euro64 million is
primarily due to the reclassification of the liability for arrears of gaming
tax, from long term to short term. In addition, there has been a delay in
paying the gaming tax due for the third and fourth quarter for 2002. This
latter liability has now been paid in full.
A final judgement has been given in the lawsuit between Casino de Mallorca and
the Spanish authorities over the gaming tax claim from 1992/1993 and Casino de
Mallorca is required to pay Euro5,427,000, which is the liability including
interest. This amount has been fully provided for.
Share capital
During the year 16,648,230 and 39,030,041 ordinary shares of 1p were issued in
accordance with the guarantee agreement at 2.375p and 1.77p per share
respectively. A further 11,455,480 shares were issued in lieu of interest
payable at 1.77p per share. The issue of shares at a premium to the nominal
value explains the increase in the share premium account during the year.
Net asset value per share
The net asset value per share at 31st December 2002 was 5.87 cents (2001:8.39
cents), equivalent to 3.83p (2001:5.12p).
Financial instruments
The Group's financial instruments comprise bank loans, loan notes, overdrafts,
cash, trade debtors and trade creditors. It is and has been the Group's policy
that no trading in financial instruments shall be undertaken.
Currency risk
The Group has continued to be euro based, having the majority of both its assets
and its liabilities denominated in euro. In previous years the movement of the
euro (and its predecessor currencies) against sterling has meant that in the
sterling accounts there have sometimes been substantial currency translation
differences. With publication of the Group's accounts in euro these differences
are now minor. Shareholders, who may previously have noted the discount
existing between the net asset value per share and the market price, should now
be alert to the fact that the net asset value per share will be quoted in cents
and the market price on the London Stock Exchange in pence.
Interest rate risk
As at 31st December 2002 the Group had long-term borrowings to finance its
investment properties in The Netherlands and to finance Santa Ponsa in Mallorca.
These borrowings were all at a spread over the euribor six month floating
rate. The convertible loan notes, totalling Euro11,850,000 and issued as part of
the consideration for the Can Vinyes acquisition, have a coupon of 8%.
The guaranteed one year bank loan for Euro29,150,000 has an effective interest rate
fixed at 12% (including a guarantee fee) and the Euro16,000,000 loan note due
December 2002 has a coupon of 8%. The Euro16,000,000 loan note is still
outstanding by agreement with the loan note holder.
Tenant and market risk
The investment properties in The Netherlands are substantially fully let and on
market rents.
With the exception of Rotterdam, which is leasehold, all the properties are
freehold. The ground rent for the property in Rotterdam has been paid in
advance until the year 2087.
Hans R Junge Chairman and Chief Executive Officer
30 June 2003
Group profit and loss account
for the year ended 31st December 2002
2002 2001
Euro 000 Euro 000
Notes
Turnover
Continuing operations 24,500 21,778
Discontinued operations 3,567 -
28,067 21,778
Cost of sales (24,453) (17,993)
Gross profit 3,614 3,785
Administrative expenses (4,808) (3,529)
Operating profit/(loss)
Continuing operations 879 256
Discontinued operations (2,073) -
(1,194) 256
Loss on disposal of fixed assets (144) -
Costs of termination of discontinued operation (807) -
(Loss)/profit on ordinary activities before interest and tax (2,145) 256
Interest receivable 29 107
Interest payable (7,753) (2,350)
Loss on ordinary activities before taxation (9,869) (1,987)
Taxation (6)
(200)
Retained loss for the year (10,069) (1,993)
Loss per share, basic and diluted 2 (2.1c) (0.43c)
Group balance sheet
as at 31st December 2002
2002 2001
Euro 000 Euro 000
Fixed assets
Intangible assets
Goodwill 9,779 10,330
Tangible assets
Investment properties 34,762 34,762
Other land and buildings 24,630 24,724
Plant and equipment 4,574 3,787
73,745 73,603
Current assets
Stock 141 144
Development properties 7,454 10,870
Development land 51,689 51,618
Debtors 2,527 2,715
Cash at bank and in hand 912 1,565
62,723 66,912
Creditors - amounts falling due within one year (63,614) (52,963)
Net current (liabilities)/assets (891) 13,949
Total assets less current liabilities 72,854 87,552
Creditors - amounts falling due after more than one year
Convertible loan notes (11,850) (11,850)
Other creditors (29,398) (36,237)
(41,248) (48,087)
Net assets 31,606 39,465
Capital and reserves
Called up share capital 64,692 63,622
Share premium account 34,085 33,022
Revaluation reserve 315 315
Profit and loss account (67,486) (57,494)
Equity shareholders' funds 31,606 39,465
Group cash flow statement
for the year ended 31st December 2002
2002 2001
Euro 000 Euro 000
Net cash inflow/(outflow) from operating activities 2,806 (20,296)
Returns on investments and servicing of finance
Interest received 29 107
Interest paid (6,003) (2,741)
Net cash outflow from returns on investments (5,974) (2,643)
and servicing of finance
Taxation
Corporation tax paid - (44)
Capital expenditure
Purchase of investment properties - (5,264)
Purchase of other land and buildings (159) -
Purchase of other tangible fixed assets (1,448) (2,247)
Net cash outflow from capital expenditure (1,607) (7,511)
Acquisitions and disposals
Acquisitions of subsidiary undertakings - (33,371)
Repayment of shareholders' loans on acquisition - (4,884)
Net cash outflow from acquisitions and disposals - (38,255)
Cash outflow before financing (4,775) (68,740)
Financing
Issue of ordinary share capital 2,133 1,651
Loans advanced 535 61,421
Net cash inflow from financing 2,668 63,072
Decrease in cash in the year (2,107) (5,668)
Notes
1. The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2002 or 31 December 2001,
but is derived from those accounts. Statutory accounts for the year ended
31 December 2001 have been delivered to the Registrar of Companies, with an
unqualified auditor's report. The 2002 statutory accounts will be delivered
to the Registrar of Companies following the Company's annual general
meeting. The auditor's report on the 2002 accounts was unqualified, but did
refer to a fundamental uncertainty as to the ability of the company to
continue in existence and as to the carrying value of the development land
at Can Vinyes in Spain. The wording extracted from the auditor's report is
as follows:
"Fundamental uncertainty
In forming our opinion, we have considered the adequacy of the disclosures made
in notes 1 and 29 of the financial statements concerning the fundamental
uncertainty over the ability of the company to continue in existence which is
dependent on meeting future cash flow forecasts or obtaining further financing
as required. In addition we have considered the adequacy of the disclosures in
note 13 of the financial statements concerning the uncertainty over the
recoverability of the cost of the development land in Spain, the carrying value
of which has been assessed by the directors on the basis of a development plan
which, assumes planning permission is received. Although planning permission
has been declined, the directors believe that planning will ultimately be
received in respect of a revised plan presented to the local town council in May
2003, as described in note 13. In view of the significance of these
uncertainties, we consider that they should be brought to your attention but our
opinion is not qualified in either of these respects."
2. Loss per share
Loss per share of Euro2.1 cents (2001: loss per share of Euro0.43 cents) has been
calculated on the basis of a weighted average number of ordinary shares in issue
during the year ended 31st December 2002 of 490,906,106 (2001: 460,711,530) and
the loss after taxation of Euro10,069,000 for the year (2001: loss Euro1,993,000).
3. Dividend
The Directors do not recommend the payment of a dividend.
4. Copies of the annual report and accounts will be available for one month
from today from the registered office of the Company at Fifth Floor, 17 Hanover
Square, London W1S 1HU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UROKROORNORR
