RNS Number:2831W
Penmc PLC
08 March 2004
Chairman's Statement
This has been a very difficult year for the Company and the results reflect the
problems that have arisen. The loss before tax for the year was #7,797,358,
which comprises atrading loss of #2,874,753, write-off of goodwill of
#1,700,000 and losses on the disposal of discontinued operations of #3,222,605,
(2002, trading profit #1,517,118, goodwill written off #27,207,940, loss before
tax #25,690,822). Turnover was down from the 2002 figure of #11,987,459 to
#5,346,797.
I reported to you in my interim statement that the sale of IFP had been
completed and the potential costs and problems, as well as the trading losses
had therefore been stemmed. I also reported the imminent sale of Kingsbridge
Nottingham Ltd to its management and I can confirm that that was completed on
30th June 2003. One of the conditions of the sale was that the Company changed
its name so that it did not use the word Kingsbridge. This was carried out at an
EGM on December 29th 2003.
Trading for the remaining businesses during the second half continued to be
difficult. Kingsbridge Advisors Ltd had lost several senior sales staff and
continued to suffer losses. Benson Mcgarvey was trading profitably, but at a
much lower level than in previous years. Peter Mcgarvey and his team expressed
interest in purchasing the business in Nottingham. In view of the #3million
convertible loan stock held by the former vendors of the business,which would
have diluted all existing shareholders to a considerable extent, the only
sensible course of action was to proceed with this sale, which was completed on
31st August 2003.
The business of Kingsbridge Advisors Ltd was not viable without support from
other group companies and so negotiations for its sale to City Gate Argyle
Limited were completed on 23rd October 2003, with deferred consideration based
on business retention payable over the next two years.
These sales mean that the Company has become a small cash shell. Since then, the
new Chief Executive has been focused on dealing with creditors and obtaining
settlement of all outstanding issues with the former subsidiaries and we
anticipate that the majority of those issues will be finalised in the not too
distant future. This will enable him and the Board to focus their attentions on
achieving a reverse takeover, which will, we hope, give shareholders an
opportunity to benefit in the future.
This has been a very trying time for shareholders and also for your board. In a
people business, keeping the leading people focused and interested is essential
to their retention. The problems encountered at IFP, the market difficulties and
the collapse in the share price meant that our key people were disillusioned
with the public status of the Company. The loan stock conversion would have
reduced most holdings to a small percentage of the former amount and they saw
the only way forward was to buy back their companies. The board had to balance
carefully the need to obtain a fair price, the future of the business if key
people resigned and the opportunity to sell the business elsewhere. I feel that,
in the circumstances, we have pursued the most sensible course of action open to
us. We must now take the Company forward.
I am grateful to our new Chief Executive, Laurie Turnbull and to the Company
Secretary/Financial Controller Paul Manning for taking on the task of rebuilding
the Company. They have achieved a lot in resolving the outstanding issues and I
have confidence that they will successfully take the Company forward.
Eric J Cater
Chairman
8 March 2004
Chief Executive's Report
I was appointed to the board on 14th August 2003, just days before the end of
the financial year. Eric Cater in his statement provides a review of the year in
question and appropriately reports on matters with which he is both familiar and
knowledgeable.
Shareholders have heard little from the Company and have suffered a considerable
fall in value of their shares and I would therefore like to take this
opportunity to briefly outline the action I have taken.
At the instigation of a number of substantial shareholdersI wrote to the board
of the Company requesting a meeting with the directors. At a meeting held on
12th of March 2003 I informed the board that major shareholders were extremely
concerned that the Company's value had plummeted from more than #60m to less
than #2m in little over a year. It was explained to me that the Board would not
support my appointment to the board and that they wished to continue with their
plans for the Company stressing that they would review the situation in three
monthsand should the Company not be better placed then they would welcome
further discussions.
I was subsequently contacted and accepted the appointment of Chief executive in
August 2003. I immediately reviewed the situation with the Company and brought
to the Board the experience of Brian Wilmott as a Non Executive Director and
Paul Manning as Company Secretary both of whom have worked with me on several
projects. Within days I became aware of the grave difficulties facing the
Company. Two of the cornerstones that made up the company had been sold, in
effect to the management, and the company had no financial facilities to see it
through the disposal of the remaining two businesses. To compound matters, one
of the businesses, Benson Mcgarvey had virtually been sold, in a separate
management buyout. This then left a small operation in Scotland, Kingsbridge
Advisors Limited, to be dealt with and a heads of terms for its disposal were in
existence.
My review resulted in an immediate meeting with the Company's bankers and I was
advised that they would be supportive of the new Board although they sought
comfort from myself to cover the overdraft that was steadily increasing.
Substantial payments were due to major creditors including the Inland Revenue.
We set about bringing financial planning and stability to the Company, and under
very difficult circumstances we renegotiated the sale of the Benson Mcgarvey
business. I would compliment Mr Mcgarvey and the management of the company for
the exemplary manner in which they responded to the new situation that they were
faced with. Kingsbridge Advisors Limited was the last company to be sold and due
to the size of the business we had little scope for realising a fractionof what
had been paid in the first place for that company.
It is not appropriate for me to comment on the previous board of directors
however I am pleased to inform you that from the date of my appointment no fees
or salaries have been paid to a Director of the Company. I am of the firm belief
that the remuneration of Directors should correspond to the performance of the
Company. The Company has not deteriorated under our stewardship, in fact quite
the reverse and in due course when shareholders see an improvement, your
directors will be modestly rewarded.
Future Prospects
There is a great deal of work still to be undertaken, many of the deals that the
Company completed are still being reviewed and I am confident that in the coming
months we will be able to look forward rather than backwards.
The future for the Company will be interesting. As a cash shell there are many
opportunities that the Company will be able to exploit and with an experienced
board who will only be remunerated by the Company being successful, the
shareholders have now got some prospects other than that of a tax loss.
Laurence Turnbull
Chief Executive
8 March 2004
Consolidated Profit and Loss account
for the year ended 31August 2003
Year ended Year ended
31-Aug 31-Aug
2003 2002
As Restated
Notes # #
Turnover
Continuing Operations 17,610 -
Discontinued Operations 5,329,186 11,987,459
Cost of sales
Continuing Operations - -
Discontinued Operations (877,319) (1,368,682)
Gross profit
Continuing Operations 17,610 -
Discontinued Operations 4,451,867 10,618,777
Administration expenses
Continuing Operations (675,011) (498,187)
Discontinued Operations (8,213,345) (35,799,676)
Operating loss
Continuing Operations (657,401) (498,187)
Discontinued Operations (3,761,478) (25,180,899)
Operating loss (4,418,879) (25,679,086)
Exceptional item- loss on disposal of discontinued operations (3,222,605) -
Net interest payable (155,874) (11,736)
Loss on ordinary activities before taxation (7,797,358) (25,690,822)
-Loss after goodwill amortisation and exceptional items (7,797,358) (25,690,822)
-goodwill amortisation - 1,915,064
Exceptional items
-goodwill impairment 1,700,000 23,696,014
-licence impairment - 1,437,500
-loss on disposal of discontinued operations 3 3,222,605 -
-other exceptional items - 159,362
(Loss) Profit on ordinary activities before goodwill and exceptional (2,874,753) 1,517,118
items
Tax on (loss) profit on ordinary activities 33,317 (429,171)
Loss retained for the year (7,764,041) (26,119,993)
(Loss) earnings per share Pence per share
Basic 2 (7.91) (26.75)
Basic loss EPS excluding goodwill amortization and exceptionals 2 (2.90) 1.11
Diluted 2 (7.91) (26.75)
There are no recognised gains or losses other than the loss for theyear.
Consolidated Balance Sheet
as at 31 August 2003
2003 2002
Notes # #
Fixed assets
Goodwill - 12,242,759
Tangible assets 138,000 1,397,669
Investments - 11,195
138,000 13,651,623
Current assets
Debtors 359,831 1,932,644
Investment - Loan note deposit 258,000 10,213,405
Cash at bank and in hand - 601,959
617,831 12,748,008
Creditors: amounts falling due within one year (934,926) (12,231,368)
Net current (liabilities) / assets (317,095) 516,640
Total assets less current liabilities (179,095) 14,168,263
Creditors: amounts falling due after more than one year - (2,200,000)
Provisions for liabilities and charges - (33,317)
Net (liabilities) / assets (179,095) 11,934,946
Capital and reserves
Called-up share capital 981,472 981,472
Share premium account 20,112,810 20,112,810
Shares to be issued - 4,350,000
Merger reserve - 12,243,631
Profit and loss account (21,273,377) (25,752,967)
Equity shareholders' (deficit) / funds 4 (179,095) 11,934,946
Consolidated Cash Flow Statement
For the year ended 31 August 2003
Cash Flow statement 2003 2002
Notes # #
Net cash (outflow) / inflow from operating activities 5 (610,738) 1,871,128
Returns on investments and servicing of finance 6 (155,874) (11,736)
Taxation paid 6 (214,171) (914,105)
Capital expenditure and financial investment 6 - (710,311)
Acquisitions and disposals 6 61,409 88,182
Cash (outflow) inflow before financing (919,374) 323,158
Financing 6 - (5,443)
(Decrease) / increase in cash in the year 7 (919,374) 317,715
Notes
1 Basis of preparation
This preliminary announcement contains information extracted from the audited
financial statements of the Company and the Group for the year ended 31 August
2003. Those financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2002 statutory accounts.
A copy of the full financial statements will be sent to shareholders.
2 (Loss) earnings per share
Year ended Yearended
31-Aug 2003 31-Aug 2002
The calculations of (loss) earnings per share are based on the following
(losses) / profits and numbers of shares:
# #
Loss on ordinary activities after taxation (7,764,041) (26,119,993)
- goodwill amortisation - 1,915,064
Exceptional items
- goodwill impairment 1,700,000 23,696,014
- licence impairment 1,437,500
- loss on disposal of discontinued operations 3,222,605 -
- other exceptional items - 159,362
(Loss) / profit before goodwill amortisation and exceptional items (2,841,436) 1,087,947
2003 2002
Number of Number of
shares shares
Weighted average number of shares 98,147,196 97,628,887
For diluted (loss) earnings per share 98,147,196 97,628,887
Year ended Year ended
31-Aug 31-Aug
2003 2002
Pence per Pence per share
share
Basic(7.91) (26.75)
Basic EPS excluding goodwill amortisation and impairment. (2.90) 1.11
Diluted (7.91) (26.75)
The directors have presented alternative earnings per share figures to give a
better indication of the long-term results of the business. FRS14 requires
presentation of diluted EPS when a company could be called upon to issue shares
that would decrease net profit or increase net loss per share. For a loss-making
company with outstanding share options, net loss per share would only be
increased by the exercise of out-of-the-money options and warrants. Since it
seems inappropriate to assume that option and warrant holders would act
irrationally, no adjustment has been made to diluted EPS for out-of-the-money
share options and warrants.
3 Disposal of discontinued operations
During the period the company disposed of its holdings in Benson Mcgarvey
Limited, Kingsbridge Financial Limited and Kingsbridge Nottingham Limited,
together with their respective subsidiaries, to the management. The
consideration consisted of cancellation of shares to be issued, cancellation of
loan note liabilities, deferred consideration and cash. After the write- off of
the remaining goodwill the company made a loss as follows:-
#
Fixed Assets 903,848
Net current liabilities (1,912,593)
Net Liabilities (1,008,745)
Related Goodwill 10,542,759
Loss on sale (3,222,605)
Sale proceeds 6,311,409
Satisfiedby
Cash 285,239
Non issue of shares 4,350,000
Cancellation of deferred consideration 1,900,000
6,535,239
Less cost of disposal 223,830
Net consideration 6,311,409
#
Consideration 6,535,239
Less cost of disposal (223,830)
Net liabilities sold 1,008,745
Profit before goodwill write off 7,320,154
Goodwill write off (10,542,759)
Loss on sale (3,222,605)
4 Reconciliation of movements in group equity shareholders' funds
2003 2002
# #
Loss for the year (7,764,041) (26,119,993)
Shares cancelled in the year (4,350,000) -
Net reduction in equity shareholders' funds (12,114,041) (26,119,993)
Opening equity shareholders' funds 11,934,946 38,054,939
Closing equity shareholders' funds (179,095) 11,934,946
5 Reconciliation of operating loss to operating cash flows
2003 2002
# #
Operating loss (4,418,879) (25,679,086)
Depreciation charges 227,413 247,362
Loss / (profit) on sale of tangible fixed assets 128,408 (11,556)
Goodwill amortisation and impairment 1,700,000 25,611,078
Licence amortisation and impairment - 1,437,500
Decrease in debtors 1,572,813 1,684,671
Increase (decrease) in creditors 179,507 (870,857)
Adjustments to prior year goodwill - (547,984)
Net cash (outflow) inflow from operating activities (610,738) 1,871,128
Cash outflows comprise #203,000 of inflows in respect of continuing operations,
and #813,738 outflows in respect of discontinuing activities.
6 Analysis of cash flows
2003 2002
# #
Returns on investments and servicing of finance
Interest received 42,951 479,494
Interest paid (198,825) (491,230)
Net cash outflow (155,874) (11,736)
Taxation
UK corporation tax paid (214,171) (914,105)
Capital expenditure and financial investment
Purchase of tangible fixed assets - (737,154)
Sale of tangible fixed assets - 26,843
Net cash outflow (710,311)
Acquisitions and disposals
Purchase of subsidiary undertaking - 88,182
Net cash receiept on sale of subsidiary undertakings 61,409 -
Net cash inflow 61,409 88,182
Financing
Capital element of finance lease rentals - (5,443)
Net cash outflow - (5,443)
7 Analysis and reconciliation of net debt
At 1 September Cash flow Other- non cash At 31 August
2002 changes 2003
Cash at bank and in hand 601,959 (601,959) - -
Bank overdraft - (317,415) - (317,415)
601,959 (919,374) - (317,415)
Investment- loan note deposit 10,213,405 9,955,405 - 258,000
Loan notes due within one year (10,213,405) (9,955,405) - (258,000)
Finance leases (1,300,000) - 1,300,000 -
Net debt (698,041) (919,374) 1,300,000 (317,415)
Enquiries:
Laurie Turnbull 0161 7876800
This information is provided by RNS
The company news service from the London Stock Exchange
END
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