Final Results
10 March 2008
PROPERTY RECYCLING GROUP PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Property Recycling Group plc (AIM: PROP), which acquires and improves
brownfield sites before selling them to developers or end users,
announces its results for the year ended 31 December 2007.
Highlights
* Revenue comprises property sales, rental and other income from
properties amounting in total to £0.97 million (2006: £1.16
million). There were property sales amounting to £0.09 million
in the year (2006: £0.40 million).
* Profit before tax for the year of £0.23 million (2006: £0.24
million).
* Final dividend of 0.7p per share making total dividend for the
year of 1.2p, the same as 2006, underlining the Board's
confidence in the Group's prospects.
* Continued enhancement of value through planning improvements and
remediation, the benefits of which will be reflected in future
results.
Paul Rackham, Executive Chairman of Property Recycling Group plc,
said: "We expect economic conditions to be difficult in 2008, but less
liquidity in the market should create excellent opportunities to
build the portfolio at attractive prices." For further information please contact:
Paul Rackham, Chairman, 01953 717176
Property Recycling Group plc
Geoff Nash/Leslie Kent 020 7600 1658
JM Finn Capital Markets (Nominated adviser and joint
broker)
John Webb/Robert Luetchford 020 7490 3788
Marshall Securities Limited (Joint broker)
The report and financial statements for the year ended 31 December
2007 are expected to be posted to shareholders by 10 March 2008. Copies of the accounts will be available on the Company's website:
www.propertyrecycling.co.uk.
The Annual General Meeting of the Company will be held at 10.30 a.m. on 6 May 2008 at the offices of Mayer Brown International LLP, 11
Pilgrim Street, London EC4V 6RW. Visit our website: www.propertyrecycling.co.uk
EXECUTIVE CHAIRMAN'S REPORTIntroduction I am pleased to present the Group's results for the year ended 31
December 2007. During the period we began to see a cooling of the
demand which had pushed prices to unattractive levels. The Group
acquired an eight hectare property at Colsterworth in Lincolnshire
which has significant potential and we continued to enhance the
planning profile of the portfolio and to build rental revenues. With
a net ungeared balance sheet the Group is well positioned to take
advantage of opportunities to acquire properties at attractive prices
as valuations reduce and sellers appear.
Background The Company's objective is to create shareholder value through
recycling of brownfield sites. Despite the widely reported slowdown
in housebuilding and commercial property sectors there remains strong
long term pressure for the use of brownfield sites as an alternative
to greenfield development. The government's latest plans call for
three million new homes by 2020.
Financial results In the year ended 31 December 2007 the Group achieved turnover of
£0.97 million, inclusive of £0.09 million property sales, compared to
turnover of £1.16 million in the previous year which included
property sales of £0.40 million. Profit before tax was £0.23 million
(2006: £0.24 million). Earnings per share was 0.80p (2006: 0.63p). At 31 December 2007 the Group had net funds of £0.54 million (2006:
£5.49 million).
The financial information has been prepared under International
Financial Reporting Standards (IFRSs) and the comparatives have been
restated on this basis. The principal impact of IFRS on the results
has been in relation to the recognition of deferred tax on a gain
that would arise if the revalued property on the balance sheet were
sold at the revalued amount without any rollover relief being
obtained. The effects of the adjustments on the results, income
statement, balance sheet and equity of the Group are set out in the
Annual Report and Financial Statements.
Dividend The Board is recommending a final dividend of 0.7p per share payable
on 22 May 2008 to shareholders on the register at the close of
business on 25 March 2008. Combined with the interim dividend paid
to shareholders in October 2007 of 0.5p this takes the total dividend
in respect of 2007 to 1.2p (2006: 1.2p). Payment of dividends in
future years will be considered in the light of achieved profits
which will be significantly affected by the timing of realisations,
and with reference to the overall objective of the Company to make
substantial gains by investing cash in new properties. In future, the
Board intends to pay interim dividends only in the event of a
substantial realisation of property and to pay a final dividend each
year based on the results for the year.
Property portfolio At the date of this report the portfolio comprises six properties
totalling 208 hectares generating rental income of approximately
£830,000 per annum. The properties are: Colsterworth
In February 2007 we agreed to acquire a site of 8.09 hectares. The
acquisition was completed in July 2007. The site is located adjacent
to the A1, midway between Stamford and Grantham, and has planning
consent for general industrial, storage and distribution use. It has
18 buildings covering a total area of 20,300 sq m (218,500 sq ft). Approximately 14,660 sq m (157,800 sq ft) is tenanted on short term
leases, generating approximately £444,000 per annum, with 5,640 sq m
(60,700 sq ft) available to let, which would produce another £167,000
per annum. There is also a potential for a further 12,000 sq m
(129,200 sq ft) of new development on the property. Our agents are
marketing the vacant space, a unit has been let and we are
progressing interest on the remaining 5 units.
Stanton
In August 2007 we were advised that IKEA did not intend to exercise
the option it held over the Group's site. The Board has reviewed a
number of alternatives for the site, which has an existing planning
approval for an 111,480 sq m distribution centre granted in August
2006. Our agents are marketing the property and we are currently in
the early stages of negotiations with interested purchasers.
Brigg
During the year we have continued to make progress at this site. The
Group granted ECO2 North Lincs Limited ("ECO2") a three year option
to purchase five hectares for the development of a biomass power
station at a price of £2 million. ECO2 is currently applying for
planning permission. The Group has made a major submission under the
Local Development Framework for a mixed residential and commercial
development on part of the site.
Fornham Park
A further building plot has been sold for a consideration of
£87,500. We are working with advisers on a very interesting
eco-friendly housing development on part of the site. We are
expecting a successful result from a planning application which has
been made for the remediation of the remaining brownfield land. We
regard the balance of this site to have considerable future potential
which we are actively working on.
Hensby
Our investment property produces an annual rental income of
approximately £250,000. We continue to work with our tenant, ADAS,
to maximise the future earning potential of the undeveloped land. ADAS are making good progress with establishing the site as a centre
of excellence for composting technology.
Stoke Holy Cross
This is a longer term site which will require the acquisition of
additional land to maximise potential and in due course the
preparation of a master plan.
New Articles of Association We are asking shareholders to approve a number of amendments to our
articles of association primarily to reflect the provisions of the
Companies Act 2006. An explanation of the main changes between the
proposed and the existing articles of association is set out in the
appendix to the Report and Financial Statements.
The directors consider that all the resolutions to be put to the
Annual General Meeting are in the best interests of the Company and
its shareholders as a whole. Your Board will be voting in favour of
them and unanimously recommends that you do so as well.
Prospects In the last six months we saw a significant reduction in the demand
for commercial and residential property as the speculative investors
who had driven prices so high in 2005 and 2006 withdrew. The credit
crunch has increased pressure on purchasers who are financed through
borrowings. Prices have fallen to some extent already and we expect
that there will be opportunities to acquire properties on attractive
terms in the coming months. The Group has agreement in principle from
its bankers to provide facilities of up to £30 million to fund
suitable future acquisitions, but we intend to use gearing prudently
with a view to balancing the Group's income and interest.
Our actions to secure improved rentals provide a sound basis for the
Group which remains ungeared on a net basis. Our continued work to
improve the planning status of the sites will enhance their long term
value. We expect that economic conditions will be difficult during
2008. We consider we are well placed to address such market
conditions and to take advantage of acquisition opportunities they
generate.
Paul Rackham
Executive Chairman
10 March 2008 CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2007
Year ended Year ended
31 December 31 December
2007 2006
Note £ £Revenue 3 970,101 1,158,132 Cost of sales - (188,119) Gross profit 970,101 970,013 Administrative expenses (938,663) (1,034,842) Operating profit/(loss) 31,438 (64,829) Investment revenues 284,542 439,233
Finance costs (131,016)
(86,385)Profit before tax 229,595 243,388 Tax credit/(charge) 4 61,375 (16,936) Profit for the year 290,970 226,452
attributable to equity holders
of the parent
Earnings per share 6
Basic (pence) 0.80 0.63 Diluted (pence) 0.80 0.63 In 2007 and 2006 all results derived from continuing operations.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2007
Year Year
ended ended
31 December 31 December
Note 2007 2006
£ £
Balance at 1 January 11,273,647 11,505,346
Net profit for the year 290,970 226,452
Dividends paid 5 (434,400) (543,000)
Increase in equity reserve 40,338 65,146
Increase in revaluation reserve 46,825 19,703
Balance at 31 December 11,217,380 11,273,647
Equity comprises share capital, share premium account, merger
reserve, revaluation reserve, equity reserve and retained earnings.
CONSOLIDATED BALANCE SHEET
31 December 2007 31 December 2007 31 December 2006
£ £Non-current assets
Property, plant and equipment 159,261 1,761
Investment property 2,962,000 2,962,000
Finance lease receivables 88,218 104,718
Trade and other receivables - 393,458
Deferred tax asset 1,066 -
3,210,545 3,461,937
Current assets
Inventories 7,477,515 2,558,797
Finance lease receivables 16,500 16,500
Trade and other receivables 773,634 996,168
Cash and cash equivalents 1,734,929 6,811,125
10,002,578 10,382,590
Total assets 13,213,123 13,844,527Current liabilities
Trade and other payables (172,766) (163,285)
Current tax liabilities (40,451) (64,408)
Borrowings (139,275) (133,889)
Deferred revenue (178,993) (302,826)
Provisions - (153,540)
(531,485) (817,948)
Net current assets 9,471,093 9,564,642Non-current liabilities
Borrowings (1,051,920) (1,191,145)
Deferred tax liabilities (412,338) (561,787)
(1,464,258) (1,752,932)
Total liabilities (1,995,743) (2,570,880)
Net assets 11,217,380 11,273,647Equity
Share capital 1,810,000 1,810,000
Share premium account 6,428,529 6,428,529
Merger reserve 821,833 821,833
Revaluation reserve 1,692,080 1,645,255
Equity reserve 105,484 65,146
Retained earnings 359,454 502,884
Total equity 11,217,380 11,273,647
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2007
Year Year
ended ended
31 December 31 December
2007 2006
Note £ £Net cash outflow from operating 7 (1,151,824)
activities (4,529,616)
Investing activities
Interest paid (86,385) (131,016)
Interest received 284,542 439,233
Purchase of property, plant and (176,498) -
equipment Net cash from investing activities 21,659 308,217 Financing activities
Dividends paid 5 (434,400) (543,000)
Repayments of borrowings (133,839) (137,037) Net cash used in financing (568,239) (680,037)
activities Net decrease in cash and cash (5,076,196) (1,523,644)
equivalents Cash and cash equivalents at
beginning of year 6,811,125 8,334,769 Cash and cash equivalents at end of 1,734,929 6,811,125
year
NOTES TO THE FINANCIAL INFORMATION 1. Presentation of financial information
This financial information does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 for the
Group for the year ended 31 December 2007 but has been derived from
those accounts. The statutory accounts for the year ended 31 December
2007 have been reported on by the auditors without qualification and
such report did not contain a statement under sections 237(2) or (3)
of the Companies Act 1985. The accounts for the year ended 31
December 2007 will be delivered to the Registrar of Companies for
England and Wales in due course and will also be sent to
shareholders.
Statutory accounts for the year ended 31 December 2006, which were
prepared under accounting practices generally accepted in the UK,
have been filed with the Registrar of Companies. The auditors' report
on those accounts was unqualified, and did not contain any statement
under Section 237 (2) or (3) of the Companies Act 1985.
The disclosures required by IFRS 1 concerning the transition from UK
GAAP to IFRS, including a reconciled opening balance sheet as at 1
January 2006 and comparative balance sheet as at 31 December 2006,
and an IFRS reconciliation of the Group's results for the year ended
31 December 2006 are included in the statutory accounts of the
Company for the year ended 31 December 2007. The reconciling items
from UK GAAP to IFRS included adjustments relating to income taxes,
as a result of which, net assets decreased by £479,000.
2. Significant accounting policies
Basis of accounting
The financial information has been prepared in accordance with
International Financial Reporting Standard (IFRSs).
The financial information has been prepared on the historical cost
basis. The principal accounting policies adopted were set out in the
interim statement for the six months ended 30 June 2007 and are
included in the statutory accounts for the year ended 31 December
2007.
3. Revenue and segmental information
Turnover for the year comprises the invoiced value of property sales,
property rentals and other goods and services which fall within the
Group's ordinary activities after deduction of trade discounts and
value added tax. Income from operating leases is accounted for
according to the terms of the leases.
An analysis of the Group's revenue is as follows: Year Year
ended ended
31 December 31 December
2007 2006
£ £
Sale of properties 87,500 400,000
Property rental income 829,729 521,196
Other income 52,872 236,936
970,101 1,158,132
Investment income 284,542 439,233
1,254,643 1,597,365
Business segments
For management purposes, the Group is organised into one segment
being the sale or rental of property. Analysis of the Group's
revenue between sale of property and rental income is presented
above. Geographical segments
The Group operates solely from the UK and management considers there
to be only one geographical segment.
4. Tax Year Year
ended ended
31 December 31 December
2007 2006
£ £
Current tax 42,315 (12,198)
Deferred tax (103,690) 29,134
Total tax (credit)/charge on profit on (61,375) 16,936
ordinary activities
Corporation tax is calculated at 30% (2006: 30%) of the estimated
assessable profit for the year.
The (credit)/charge for the year can be reconciled to the profit per
the income statement as follows:
Year Year Year Year
ended ended ended ended
31 December 31 31 31
2007 December December December
£ 2007 2006 2006
% £ %Profit before tax: 229,595 243,388 Tax at the UK corporation
tax rate of 30% (2006: 30%) 68,878 30.0 73,016 30.0
Tax effect of expenses that
are not deductible in
determining taxable profit 10,774 4.7 20,365 8.4
Permanent differences re (33,498) (14.6) - -
IBAs
Impact of abolition of
balancing allowances/charges
on buildings (137,783) (60.0) - -
Tax effect of utilisation of
tax losses not previously
recognised (1,704) (0.7) (14,604) (6.0)
Decrease in unrecognised
deferred tax assets re tax 7,609 3.3 - -
losses
Tax effect of capital
allowances where deferred
tax not recognised - - (501) (0.2)
Change in deferred tax rate (7,532) (3.3) - -
Marginal relief (3,689) (1.5) (4,950) (2.0)
Prior year adjustment re
current tax 1,864 0.7 (76,606) (31.5)
Prior year adjustment re
deferred tax 33,706 14.7 20,216 8.3 Tax expense and effective
tax rate for the year (61,375) (26.7) 16,936
7.0In addition to the amount charged to the income statement, deferred
tax relating to the revaluation of the Group's investment property
amounting to £46,825 (2006: £19,703) has been charged directly to
equity. 5. Dividends Year Year
ended ended
31 December 31 December
2007 2006
£ £
Amounts recognised as distributions to equity
holders in the period:Final dividend for the year ended 31 December
2006 253,400 362,000
of 0.7p (2005: 1p) per share.
Interim dividend for the year ended 31
December 2007 181,000 181,000
of 0.5p (2006: 0.5p) per share. 434,400 543,000
Proposed final dividend for
the year ended 31 December 253,400 253,400
2007 of 0.7p (2006: 0.7p) per
share. The proposed final dividend is subject to approval by shareholders at
the Annual General Meeting and has not been included as a liability
in these financial statements.
6. Earnings per share
Basic
The calculation of earnings per share arising on continuing
activities for the current year is based on the profit on continuing
activities for the year of £290,970 (2006: profit of £226,452) and
the weighted average number of shares of 36,200,000 (2006:
36,200,000). The Company had 36,200,000 shares in issue as at 31
December 2007. Year Year
ended ended
31 December 31 December
2007 2006Earnings per share (pence)
- - continuing operations 0.80 0.63
Diluted
The calculation of diluted earnings per share arising on continuing
activities is calculated by adjusting the weighted average number of
shares to assume conversion of share options. The adjusted weighted
average number of shares is 36,200,000 (2006: 36,200,000). Year Year
ended ended
31 December 31 December
2007 2006Earnings per share (pence)
- - continuing operations 0.80 0.63
7. Notes to the cash flow statement Year ended Year ended
31 December 31 December
2007 2006
£ £
Profit for the year 290,970 226,452
Adjustment for:
Investment revenues (284,542) (439,233)
Finance costs 86,385 131,016
Income tax (credit)/expense (61,375) 16,936
Depreciation of property, plant and equipment 17,876 532
Losses on disposals of property, plant and 1,122 -
equipment
Share based payment expense 40,338 65,146
Operating cash flows before movements in
working capital 90,774 849Increase in inventories (4,918,718) (42,612)
Decrease/(increase) in receivables 632,492 (483,525)
Decrease in payables (267,892) (19,867) Cash generated by operations (4,463,344) (545,155) Tax paid (66,272) (606,669) Net cash from operating activities (4,529,616) (1,151,824)
Cash and cash equivalents (which are presented as a single class of
assets on the face of the balance sheet) comprise cash at bank and
other short-term highly liquid investments with an original maturity
of one month or less. 8. Analysis and reconciliation of net funds At At
1 January Cash Non-cash 31 December
2007 Flow Movement 2007
£ £ £ £
Cash and cash 6,811,125 (5,076,196) - 1,734,929
equivalentsBorrowings due
after more than (1,191,145) - 139,225 (1,051,920)
one year
Borrowings due (133,889) 133,839 (139,225) (139,275)
within one year Total net funds 5,486,091 (4,942,357) - 543,734
31 December 31 December
2007 2006
£ £
Increase/(decrease) in cash in the period 1,649,134 (242,191)
Cash outflow from decrease in debt 133,839 137,037Cash outflow from decrease in liquid (6,725,330) (1,281,453)
resources
Change in net funds resulting from cash flows (4,942,357) (1,386,607) Net funds at beginning of year 5,486,091 6,872,698 Net funds at end of year 543,734 5,486,091 9. Post balance sheet events
On 6 March 2008 the Board declared a final dividend for the year
ended 31 December 2007 of 0.7p per share, (2006:0.7p) which totalled
£253,400 (2006: £253,400). This followed an interim dividend of 0.5p
(2006: £0.5p) declared on 11 September 2007 totalling £181,000 (2006:
£181,000). In accordance with IAS 10, as this final dividend was
announced after the balance sheet date, it does not represent a
present obligation at that date, and as such, is not included in the
financial information presented herein.
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