Final Results
Medsea Estates Group PLC
22 March 2007
For immediate release 22 March 2007
MEDSEA ESTATES GROUP PLC
('Medsea or 'the Company')
RECORD RESULTS FOR THE YEAR TO
31ST DECEMBER 2006
Medsea Estates Group PLC, the AIM-listed Spanish-based estate agency group,
announces audited results for the year to 31 December 2006.
HIGHLIGHTS
•Record pre-tax profits of £2.9 million (2005: loss of £52,000)
•Turnover rose by 55% to £13.3 million (2005: £8.59 million)
•Progressive improvement throughout the year
•Earnings per share of 2.66p (2005: loss of 0.11p)
Tony Gatehouse, Chairman, commented: 'I am delighted with the progress Medsea
has made in 2006. The investments we made during 2005 to reinforce our
operations in Spain and expand into other territories have helped drive the
Group forward across a broad front and resulted in a substantial increase in
revenues and record profits.
'The Group performed well right across the board but without doubt Italy was the
jewel in the crown last year where we quickly exceeded our initial contract and
continue to perform strongly.
'The current year has started well and our forward bookings are up on last year.
The Board anticipates further organic growth and we believe that there are
opportunities to build on the foundations of our geographic spread. We have set
ourselves demanding targets and look forward to the coming year with optimism.'
For further information contact:
Medsea Estates Group PLC
Tony Gatehouse, Chairman
Juan Carlos Rodriguez Martinez, Chief Executive 0034 96 570 40 02
Weber Shandwick Financial
Terry Garrett/ Alex White/ John Moriarty 0207 067 0700
CHAIRMAN'S STATEMENT
I am delighted to report that the Group has achieved a record performance with
pre-tax profits of £2.9 million in the 12 months to 31 December 2006. The
investment we made during 2005 to reinforce Medsea Estates' operations in Spain
and expand beyond this traditional base, have helped drive the Group forward
across a broad front and resulted in a substantial increase in revenues and
operating profits.
Turnover rose to £13,300,000, a 55% increase over the £8,592,000 achieved in
2005. Group operating profits for the 12 months amounted to £2,222,000 (2005: a
loss of £270,000). Pre-tax profits for the year climbed to a record £2,894,000,
including associate income, compared to a £52,000 loss in 2005.
Pre-tax profits for 2006 were 30% higher than the Group's previous best in 2004
and it is particularly pleasing to demonstrate the progressive improvement of
the Group from the depressed result of 2005. Turnover in the second half reached
£8,033,000 compared to £5,267,000 in the first six months. Pre-tax profits in
the closing six months were £1,843,000 compared to £1,051,000 for the first six
months.
The results for the year include a significant contribution from our associated
companies. These are companies in which Medsea, in addition to exclusive
international marketing rights, has acquired minority interests in the
development companies and thereby a share in the net profits arising from these
developments.
Earnings per share for year amounted to 2.66p (2005: loss of 0.11p).
The Group performed well across the board but without doubt Italy was the jewel
in Medsea's crown last year. Our initial contract for 110 units per annum in
Calabria was quickly exceeded. Subsequently, our Italian partners increased the
minimum number of units to be sold by us to 250 per annum, also renewing our
exclusive international selling rights for a minimum of five years.
In 2006, Group sales totaled 1,086 units, and we continue to perform strongly.
In January and February of 2007 we sold 161 units compared to 83 in the previous
year.
The marketing agreement with Headlands International, the award-winning
international property group, has been expanded. This gives Medsea and its
agents direct access to a range of properties in emerging countries such as
Portugal, Turkey, Cyprus, Brazil, Bulgaria, Dubai and Cape Verde.
The Group is now able to focus more on Euromed Investments, a division which, I
believe, has immense potential. Euromed, through which we invest in our
associate companies and thereby earn a share in their profits, has already
procured exclusive selling rights to the national and international market for
Residencial Argos Sol, a large development in Murcia. Our share of the
development profit is likely to be in the region of €6 Million. In addition,
existing developments at Frondoso Valley and Torre del Obispo have now been sold
to the extent of 30% and 75% respectively.
During the year we further strengthened our management team with the appointment
of Graham Jeffs as Finance Director and we continued to recruit key personnel
for our rapidly growing Italian operation.
Outlook
Our robust performance last year, when many commentators were pessimistic about
buying activity by those in northern Europe seeking homes in sunnier climates,
emphasizes the underlying strength of the Medsea business.
We have a broad portfolio of attractive properties that is diverse in terms of
both location and product. This appeals to a wide range of potential buyers. We
enjoy excellent relationships with our network of providers, which includes
agents in the UK, Ireland and Benelux, and corporate partners such as Saga and
Headland International.
As already indicated, the current year has started well and our forward bookings
for client visits are higher than at this point last year. The Board anticipates
further organic growth from our existing operations and we also believe that
there are opportunities to build on the firm foundations of Medsea's geographic
spread. It is too early to make forecasts for 2007: but we have set ourselves
demanding targets - we look forward to the coming year with optimism.
................................................
Tony Gatehouse
22 March 2007
MEDSEA GROUP ESTATES PLC AND SUBSIDIARY UNDERTAKINGS
GROUP PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31 DECEMBER
2006
Total Total
Notes 2006 2005
£'000 £'000
Turnover 2 13,300 8,592
Cost of sales (8,849) (6,658)
-------- --------
Gross profit 4,451 1,934
Administrative expenses (2,229) (2,204)
-------- --------
Group Operating
profit/(loss) 3 2,222 (270)
Share of operating profit
in associate 702 224
Interest receivable and
similar income 1 2
Interest payable and
similar charges 5 (31) (8)
-------- --------
Profit/(loss) on ordinary
activities before taxation 2,894 (52)
Tax on profit/(loss) on
ordinary activities 6 (1,019) (18)
-------- --------
Profit/(loss) on ordinary
activities after taxation 1,875 (70)
Minority interests 7 5 (7)
-------- --------
Retained profit/(loss) for
the year 1,880 (77)
======== ========
Earnings/(loss) per share
Basic 2.66 pence (0.11pence)
Note: None of the group's activities was acquired or discontinued during the
above 2 years.
MEDSEA GROUP ESTATES PLC AND SUBSIDIARY UNDERTAKINGS
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE PERIOD ENDED 31 DECEMBER 2006
Notes 2006 2005
£'000 £'000
Statement of total recognised gains and
losses
Profit/(loss) for the
financial year 1,880 (77)
Currency translation
differences (20) (2)
Unrealised surplus on
revaluation of investment
properties 49 -
-------- --------
Total recognised
gains/(losses) relating to
the year 1,909 (79)
======== ========
MEDSEA GROUP ESTATES PLC AND SUBSIDIARY UNDERTAKINGS
GROUP BALANCE SHEET
AS AT 31 DECEMBER 2006
Notes 2006 2006 2005 2005
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 6 5
Tangible assets 872 1,135
Investments - 4
Investments in
associates 687 236
---------
-------
1,565 1,380
Current assets
Stock 301 182
Debtors 12,245 6,718
Cash at bank and in
hand 944 156
-------- -------
13,490 7,056
Creditors: amounts falling due within
one year (7,580) (3,654)
-------- -------
Net current assets 5,910 3,402
--------- -------
Total assets less
current liabilities 7,475 4,782
Creditors: amounts falling due after more
than one year (300) (108)
Provisions for
liabilities (1,535) (794)
And charges
--------- -------
5,640 3,880
========= =======
Capital and reserves
Share capital 7,063 7,063
Share premium 22 22
Other reserve 117 118
Revaluation reserve 46 95
Merger reserve (7,058) (7,058)
Profit and loss
account 5,446 3,631
Minority interests 7 4 9
--------- -------
Shareholders' funds -
equity 5,640 3,880
========= =======
MEDSEA GROUP ESTATES PLC AND SUBSIDIARY UNDERTAKINGS
GROUP CASHFLOW STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2006
Notes 2006 2005
Reconciliation of operating profit/(loss) to net cash flow from
operating activities
Operating profit/(loss) 2,222 (270)
Share of operating profit in
associate 702 224
Depreciation 121 121
Foreign exchange/loss (90) (74)
Amortisation of intangible
fixed assets 3 2
(Profit)/loss on sale of
fixed assets (52) 7
(Increase)/decrease in
debtors (5,978) 635
(Increase) in stock (119) (53)
Increase/(decrease) in
creditors 4,056 (991)
------- -------
Net cash inflow/(outflow)
from operating activities 865 (399)
======= =======
CASH FLOW STATEMENT
Net cash inflow/(outflow)
from operating activities 865 (399)
Returns on investments and
servicing of finance (30) (6)
Tax paid (415) (361)
Capital expenditure and
financial investment 162 (125)
Management of liquid
resources - (4)
------- -------
Net cash flow before
financing 582 (865)
Financing 289 (261)
------- -------
Increase/(decrease) in cash 871 (1,156)
======= =======
Reconciliation of net cash flow to movements
in net debt
Increase/(decrease) in cash 871 (1,156)
Cash flow from (decrease)/
increase in debt (289) 261
------- -------
582 (895)
Net (debt)/funds at 1 January
2006 (228) 667
------- -------
Net funds/(debt) at 31
December 2006 354 (228)
======= =======
MEDSEA GROUP ESTATES PLC AND SUBSIDIARY UNDERTAKINGS
NOTES TO THE FINANCIAL STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2006
1 Accounting policies
Basis of accounting
The financial statements have been prepared under the historical cost convention,
as modified by the revaluation of certain fixed assets and in accordance with
applicable United Kingdom accounting standards.
Basis of consolidation
The group accounts consolidate the accounts of Medsea Estates Group PLC and all
its subsidiary undertakings drawn up to 31 December each year. Medsea Estates
Group PLC acquired shares in Medsea UK Limited and all its subsidiaries on 16 July
2004. The accounts have been prepared using merger accounting so that all the
combining entities results are shown from 1 January 2004.
Associates
In the group financial statements investments in associates are accounted for
using the equity method. The consolidated profit and loss account includes the
group's share of the associate's profits while the group's share of the net assets
of the associates is shown as investments in the consolidated balance sheet.
Turnover
Turnover is the total amount receivable by the group for goods supplied and
services provided, excluding value added tax.
Commission income receivable in respect of property sales is recognised at the
point at which a legally binding contract for sale has been signed between the
purchaser and the vendor and the purchaser has paid any deposit required.
Commissions payable in respect of property sales are recognised at the same time
as the corresponding commission income is recognised, and are not payable until
after commissions income is received.
While most commission will be received or paid within 12 months of the balance
sheet date this is not always achieved due to factors beyond the Group's control,
such as delays in the completion of properties. In the opinion of the directors it
is not possible to identify the amounts of such commissions where the receipt or
payment will be more than 12 months after the balance sheet date and
consequentially all accrued commission receivable or payable are included as
current assets or liabilities.
Intangible fixed assets
Trademarks are included at cost and depreciated in equal annual instalments over a
period of four years. Provisions are made for any impairment.
Depreciation
Tangible fixed assets are stated at cost or valuation, net of depreciation and any
provision for impairment. Depreciation is provided on all tangible fixed assets,
other than freehold land, so as to write off their cost or valuation, less their
estimated residual value, in equal annual instalments over the expected useful
lives of the assets, as follows:
Freehold buildings 50
years
Office equipment and motor vehicles 3 to 10
years
Investment Properties
In accordance with Statement of Standard Accounting Practice No.19, certain of the
company's properties are held for long-term investment and are included in the
Balance Sheet at their open market values. The surplus or deficit on revaluation
of such properties is transferred to the revaluation reserve. Depreciation is not
provided in respect of freehold investment properties.
This policy represents a departure from statutory accounting principles, which
require depreciation to be provided on all fixed assets. The directors consider
that this policy is necessary in order that the Financial Statements may give a
true and fair view because current values and changes in current values are of
prime importance rather than the calculation of systematic annual depreciation.
Depreciation is only one of many factors reflected in the annual valuation and the
amount which might otherwise have been shown cannot be separately identified or
quantified.
Investments
Investments are included at cost less amounts written off. Profits or losses
arising from disposals of fixed asset investments are treated as part of the
result from ordinary activities.
Taxation
Current tax, including overseas corporation tax, is provided at amounts expected
to be paid (or recovered) using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or events
that result in an obligation to pay more tax in the future or a right to pay less
tax in the future have occurred at the balance sheet date. Timing differences are
differences between the Group's taxable profits and its results as stated in the
financial information that arises from the inclusion of gains and losses in tax
assessments in periods different from those in which they are recognised in the
financial information.
A net deferred tax asset is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as more likely
than not that there will be suitable taxable profits from which the reversal of
the underlying timing differences can be deducted.
Deferred tax is not recognised when fixed assets are revalued unless by the
balance sheet date there is a binding agreement to sell the revalued assets and
the gain or loss expected to arise on sale has been recognised in the financial
information.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantively enacted at the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Stock
Stock is valued at the lower of cost and net realisable value.
Leased Assets
Assets held under finance leases and other similar contracts are capitalised as
tangible fixed assets and are depreciated over the shorter of the lease terms and
their estimated useful lives. The capital elements of future lease obligations are
recorded as liabilities, while the interest elements are charged to the profit and
loss account over the period of the lease to produce a constant rate of charge on
the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to the profit and loss account on
a straight line basis over the lease term.
Foreign currency transactions
The Group operates primarily in the Mediterranean and most of its transactions are
carried out in Euros. Assets and liabilities have been translated using the
exchange rate at the balance sheet date. Income and expenses have been translated
using the average rate for the year. The resulting foreign exchange difference is
recognised in the statement for recognised gains and losses.
2 Turnover
Turnover derives wholly from the principal activity of the Group which is
carried out in the Mediterranean.
3 Operating Profit
The operating profit is arrived at 2006 2005
after charging:
£'000 £'000
Depreciation of owned 111 116
assets
Depreciation of leased 10 5
assets
(Profit)/Loss on disposal of (52) 7
fixed assets
Hire of equipment - operating leases - 373 472
motor vehicles
Hire of equipment - operating leases - 174 160
land and buildings
Auditors' 31 31
remuneration ======== ========
4 Directors and employees
Staff costs, including directors' remuneration, were
as follows:
2006 2005
£'000 £'000
Wages and salaries 2,288 2,329
Social security costs 569 582
-------- --------
2,857 2,911
======== ========
The average monthly number of employees, including
directors, during the year
was as follows:
2006 2005
No. No.
Selling and distribution 58 84
Administration 37 41
-------- --------
95 125
======== ========
Directors' emoluments
2006 2005
£'000 £'000
Emoluments 356 212
======== ========
The highest paid director received emoluments and
benefits as follows:
2006 2005
£'000 £'000
Emoluments 150 87
======== ========
There were no directors (2005: none) to whom retirement benefits are accruing under
a money purchase scheme.
5 Interest payable and similar charges 2006 2005
£'000 £'000
Bank loans and overdrafts repayable within five 30 7
years
Finance lease interest 1 1
-------- --------
31 8
======== ========
6 Taxation
2006 2005
Analysis of charge in the year £'000 £'000
Current tax:
Overseas corporation tax on profits of the year 311 260
UK corporation tax on profits of the year - 6
Deferred tax 757 (248)
Prior year adjustment to tax charge (49) -
-------- --------
Tax on profit on ordinary activities 1,019 18
======== ========
The tax assessed for the year is higher than the standard rate of corporation
tax in the UK (30 per cent). The differences are explained below:
2006 2005
£'000 £'000
Profit/(loss) on ordinary activities before tax
2,894 (52)
======== ========
Profit on ordinary activities multiplied by standard rate
of corporation tax in the UK of 30% (2005: 30%) 869 (16)
Effects of:
Adjustment for foreign tax at different rates 83 4
Permanent timing differences 10 30
UK tax losses not available for group relief 106 -
Prior year adjustment (49) -
-------- --------
Current tax charge for year as above 1,019 18
======== ========
7 Minority interests
5% of the share capital of Euromed Investments SL are held by
third parties.
8 Profit attributable to members of the parent company
As permitted by section 230 of the Companies Act 1985 the parent company's
profit and loss account has not been disclosed in these financial statements.
The loss before dividends for the year in the accounts of the parent company
was £106,000.
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