Final Results

GRESHAM HOUSE PLC PRELIMINARY FINANCIAL STATEMENT YEAR ENDED 31 DECEMBER 2007 Gresham House plc (GHE.L), the property and early-stage investment trust, Today announces its preliminary results for the year ended 31 December 2007. CHAIRMAN'S STATEMENT The results for the year to 31 December 2007 show a loss in the revenue account amounting to £993,000 against a comparative profit for 2006 of £669,000. The capital account shows a loss after taxation of £1,879,000 which is largely attributable to a decline in the valuation of properties as at the year end in line with widespread market falls offset by gains of £1,000,000 generated from the investment portfolio during the same period. As a consequence of these results the basic net asset value as at 31 December 2007, was 837.9p compared with 902.4p at the end of 2006. The revenue losses for the year primarily arose as a result of the costs arising from the lengthy discussions throughout the year with Parkwood Property Investments LLP ("Parkwood") on various abortive proposals culminating in the General Meeting ("GM") held on the 21 January 2008; the provision made against the Group's investment in its associate, New Capital (Speke) Limited, and increased costs at the property known as Southern Gateway in Speke, Liverpool. In addition provisions have had to be made against a six acre site at Knowsley relating to issues arising with a former executive director of the property subsidiaries who is currently seeking to frustrate our attempts to dispose of that property. The relevant companies in the Group have commenced proceedings against him and against the company which it is alleged he used as a vehicle to purchase an adjacent property in breach of his duties to those companies. From the revenue prospective, the reduction in rental income in 2007 was largely due to the property at Deacon Park, Knowsley, which was destroyed by fire and remains empty, making no contribution to income for the year. Whilst Southern Gateway in Speke, Liverpool has generated a further increase in rent over the past year, there still remains some 200,000 sq. ft. to be let and your Board is pursuing negotiations on the sale of this site subject to planning. In September 2007 your Company announced that it had entered into non-binding heads of terms for the sale of this site together with our investment in an associated company, which owns another site adjoining Southern Gateway, for an aggregate £61 million subject to various planning permissions being obtained. However, following the publicity regarding this site generated around the time of the requisition of the GM by Parkwood the prospective buyer withdrew from the transaction. Negotiations continue with other parties with a view to securing a sale at a satisfactory value. During 2007 Wolden Estates Limited entered into a conditional sale agreement with Linden Limited under which, subject to achieving certain planning permissions, they will acquire the Group's property interests at Vincent Lane, Dorking for a consideration of £8.2 million against the valuation at 31 December 2007 of £3.29 million. Linden Limited has made the necessary planning application which is progressing and we are hopeful that the sale will complete within the next twelve months. Gresham's investment portfolio increased 4.8% over the year, a satisfactory performance when compared with the FTSE All Share index which increased by 1.75% over the same period. As at 31 March 2008 the value of the investment portfolio had decreased by 2% since year end but this is against a fall in the FTSE All Share index of nearly 11%. Our best performers were SpaceandPeople up 105%, Hallin Marine up 104%, BATS up 37% and Egdon Resources up 20%. The worst performers of the top ten investments held at the year end were Image Scan down 64% and Avesco down 31%. We continue to hold these latter investments in anticipation of seeing a recovery during this year. In view of the exceptional losses incurred in the revenue account the Board has reviewed its past policy of progressive dividends and this year recommends a final dividend of 5p per share as against 6p last year. Shareholders will recall that it had been your Board's intention to divest the Group of its property assets into a REIT. This intention was thwarted by Parkwood who made it clear that they would use their shareholder votes, comprising almost 30% of the Company's issued share capital, to defeat the necessary Special Resolution. In these circumstances the Board has reviewed its future strategy and has decided to realise the Group's entire portfolios of both investments and property over a period of approximately five years. Your Board is seeking the appointment of an experienced property director to assist in this objective. Such a change in your Company's investment policy will require the approval of shareholders and the appropriate ordinary resolution will be proposed as Special Business at the forthcoming Annual General Meeting. This of course will not preclude the Board from making short term investments should attractive opportunities arise and, with this in mind, your Board is also seeking shareholder approval to give your directors authority to issue new shares in the future if appropriate. The Company also wishes to take this opportunity to bring the Articles of Association of the Company into line with current practice in particular following the Companies Act 2006. Further information regarding the changes being proposed will be found in the appendix attached to the Notice of the Meeting. The Board and I wish to thank those shareholders who supported us at the General Meeting held in January which called for the removal of the majority of your Board and trust that those shareholders will continue to support the existing Board to enable it to pursue a policy of progressive asset realisation in a controlled fashion over the next few years. 29 April 2008 A.P Stirling Chairman Further information: Freddie Stirling (Chairman Gresham House plc) 020 7456 9600 Toby Hall / Christian Pickel (gth media relations) 020 7153 8039/8036 GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income: Dividend and Interest income 370 - 370 346 - 346 Rental income 2,339 - 2,339 2,664 - 2,664 Other operating income 92 - 92 276 - 276 ----- ----- ----- ----- ----- ----- Total Revenue 2,801 - 2,801 3,286 - 3,286 Gains on investments held at fair value - 1,000 1,000 - 1,495 1,495 Movement in fair value of property investments - (4,085) (4,085) - 5,286 5,286 ----- ----- ----- ----- ----- ----- 2,801 (3,085) (284) 3,286 6,781 10,067 ----- ----- ----- ----- ----- ----- Expenses Other operating expenses (2,650) - (2,650) (1,640) - (1,640) Share of associates operating Loss (169) - (169) - - - Finance costs (991) - (991) (1,213) - (1,213) ----- ----- ----- ----- ----- ----- (3,810) - (3,810) (2,853) - (2,853) ----- ----- ----- ----- ----- ----- (Loss)/profit before taxation (1,009) (3,085) (4,094) 433 6,781 7,214 Taxation - 655 655 17 128 145 ----- ----- ----- ----- ----- ----- (Loss)/profit for the year (1,009) (2,430) (3,439) 450 6,909 7,359 ===== ===== ===== ===== ===== ===== Attributable to:- Equity holders of the parent (993) (1,879) (2,872) 669 5,753 6,422 Minority interest (16) (551) (567) (219) 1,156 937 ----- ----- ----- ----- ----- ----- (1,009) (2,430) (3,439) 450 6,909 7,359 ===== ===== ===== ===== ===== ===== Basic earnings per ordinary Share (58.9p) 131.7p ===== ===== Diluted earnings per ordinary Share (58.9p) 131.4p ===== ===== Notes (i)The revenue column of this statement is the consolidated profit and loss account of the group. (ii) Dividends - Ordinary shares: proposed final dividend of 5p per share (2006: 6p) payable on 27 June 2008 to shareholders on the register at 30 May 2008 244 293 ===== ===== (iii)The summary of results for the year ended 31 December 2007 does not constitute statutory accounts within the meaning of s240 of the Companies Act 1985. The financial information has been extracted from the Group's full statutory accounts for the year ended 31 December 2007 on which the auditors have given an unqualified audit report. The full statutory accounts will be available by 9 May 2008 for posting to shareholders and delivery to the Registrar of Companies. Full accounts in respect of the year ended 31 December 2006 have been delivered to the Registrar of Companies and the Auditor's Report on those accounts was unqualified. (iv)Basic earnings per ordinary share are based on the net loss attributable to equity shareholders of £2,872,000 (2006: net gain of £6,422,000), and on 4,876,880 (2006: 4,874,587) ordinary shares being the weighted average number of those in issue during the year. The diluted earnings per ordinary share is based on the net loss attributable to equity shareholders of £2,872,000 (2006: net gain of £6,422,000)and on 4,876,880 (2006: 4,887,061) shares being the weighted average number of shares in issue during the year together with nil (2006:12,474) shares deemed to have been issued at nil consideration as a result of options granted. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2007 Ordinary Share share Share based Capital Retained capital premium payments reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2006 1,219 831 28 49,908 (7,975) 44,011 Loss for the period - - - (1,879) (993) (2,872) Ordinary dividend paid - - - - (293) (293) Reserves transfer - - - 277 (277) - Share based payments - - 16 - - 16 ------ ------ ------ ------ ------ ------ Balance at 31 Dec 2007 1,219 831 44 48,306 (9,538) 40,862 ====== ====== ====== ====== ====== ====== YEAR ENDED 31 DECEMBER 2006 Ordinary Share share Share based Capital Retained capital premium payments reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 Dec 2005 1,218 822 12 44,155 (8,401) 37,806 Profit for the period - - - 5,753 669 6,422 Ordinary dividend paid - - - - (244) (244) Issue of shares 1 9 - - - 10 Share based payments - - 16 - 1 17 ------ ------ ------ ------ ------ ------ Balance at 31 Dec 2006 1,219 831 28 49,908 (7,975) 44,011 ====== ====== ====== ====== ====== ====== GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 2007 2006 Assets £'000 £'000 Non current assets Investments - securities 14,265 13,345 Property investments 38,805 40,469 Property, plant and equipment 487 500 ------ ------ Total non current assets 53,557 54,314 ------ ------ Current assets Trade and other receivables 497 568 Accrued income and prepaid expenses 674 342 Other current assets 5,972 5,607 Cash and cash equivalents 1,337 991 ------ ------ 8,480 7,508 ------ ------ Total assets 62,037 61,822 ------ ------ Current liabilities Trade and other payables 1,488 1,498 Short term borrowings 7,568 6,765 ------ ------ Total current liabilities 9,056 8,263 ------ ------ Total assets less current liabilities 52,981 53,559 Non current liabilities Long term borrowings 10,130 6,337 Deferred taxation 848 1,503 ------ ------ 10,978 7,840 ------ ------ Net assets 42,003 45,719 ====== ====== Capital and reserves Ordinary share capital 1,219 1,219 Share premium 831 831 Share based payments 44 28 Capital reserve 48,306 49,908 Retained earnings (9,538) (7,975) ------ ------ Equity attributable to equity shareholders 40,862 44,011 Minority interest 1,141 1,708 ------ ------ Total equity 42,003 45,719 ====== ====== Basic net asset value per ordinary share 837.9p 902.4p ====== ====== Diluted net asset value per ordinary share 834.8p 900.1p ====== ====== Notes Basic net asset value per ordinary share is based on equity attributable to equity shareholders at the year end and on 4,876,880 (2006: 4,876,880) ordinary shares being the number of ordinary shares in issue at the year end. Diluted net asset value per ordinary share is based on equity attributable to equity shareholders at the year end and on 4,895,003 (2006: 4,889,354)ordinary shares. The number of shares is based upon the number of shares in issue at the year end together with 18,123(2006:12,474) shares deemed to have been issued at nil consideration as a result of options granted. GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Cashflow from operating activities Investment income received 193 180 Interest received 177 166 Rental income received 2,464 2,530 Other cash payments (2,344) (1,958) ------ ------ Net cash generated from operations 490 918 Interest paid on 8% Secured Redeemable Loan Stock 2006 - (342) Interest paid on property loans (972) (929) ------ ------ (972) (1,271) ------ ------ Net cash flows from operating activities (482) (353) Cash flows from investing activities Purchase of investments (1,178) (1,693) Investment in associate (350) - Sale of investments 1,406 2,617 Purchase of investment properties (4,727) (1,130) Insurance proceeds received - 4,340 Disposal of investment properties 2,306 - Purchase of developments in hand (932) (523) ------ ------ (3,475) 3,611 Cash flows from financing activities Repayment of loans (422) (2,360) Repayment of 8% Loan Stock - (3,662) Receipt of loans 5,018 3,126 Share capital issued - 10 Equity dividends paid (293) (244) ------ ------ 4,303 (3,130) ------ ------ Increase in cash and cash equivalents 346 128 Cash and cash equivalents at start of period 991 863 Cash and cash equivalents at end of ------ ------ period 1,337 991 ====== ====== NOTES TO THE CONSOLIDATED CASHFLOW STATEMENT RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS 2007 2006 £'000 £'000 Revenue return before taxation (1,009) 433 Interest payable 991 1,213 Share based payments 16 17 Depreciation of property, plant and equipment 13 12 Share of associates losses 169 - ------ ------ 180 1,675 Decrease in current assets 339 300 (Decrease) in current liabilities (29) (1,057) ------ ------ 490 918 ====== ====== GRESHAM HOUSE PLC PRELIMINARY FINAL STATEMENT SEGMENTAL REPORTING Property Investment Investment Elimination Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue External income 211 369 2,412 2,751 - - 2,623 3,120 Inter - segment income 1,329 1,920 89 335 (1,418) (2,255) - - ----- ----- ----- ----- ----- ----- ----- ----- Total revenue 1,540 2,289 2,501 3,086 (1,418) (2,255) 2,623 3,120 ===== ===== ===== ===== ===== ===== ===== ===== Gains on investments at fair value 1,000 1,495 - - - - 1,000 1,495 (Losses)/gains on property investments at fair value - - (4,107) 5,286 - - (4,107) 5,286 Proceeds of disposal of investment properties - - 2,306 - - - 2,306 - Carrying value of disposal of investment properties - - (2,284) - - - (2,284) - ----- ----- ----- ----- ----- ----- ----- ----- Total income and gains 2,540 3,784 (1,584) 8,372 (1,418) (2,255) (462) 9,901 ===== ===== ===== ===== ===== ===== ===== ===== Segment expenses - 32 (862) (744) - - (862) (712) ----- ----- ----- ----- ----- ----- ----- ----- Segment profit/(loss) 2,540 3,816 (2,446) 7,628 (1,418) (2,255)(1,324) 9,189 ===== ===== ===== ===== ===== ===== Unallocated corporate expenses (1,787) (928) ----- ----- Operating (loss)/profit (3,111) 8,261 Share of associate's loss (169) - Interest expense (991) (1,213) Interest income 177 166 ----- ----- (Loss)/profit before taxation (4,094) 7,214 ===== ===== All revenue is derived from operations within the United Kingdom. The financial statements of the Group and the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ("the SORP") for investment trusts issued by the Association of Investment Companies ("the AIC") is consistent with the requirements of IFRS and appropriate in the context of the Company's activities, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. The Company has adopted IFRS 7 `Financial Instruments: Disclosure' and the amendment to IAS 1 `Presentation of financial statements' which are mandatory for years ending 31 December 2007. This has resulted in additional disclosures but no impact on reported profit or net assets. The financial statements highlight that the Group has loans of £7.6 million due within one year. Based on directors' forecasts of the group's cash facilities, the Group will require a loan of £6 million to be refinanced when it falls due in May 2008. These financial statements have been prepared on a going concern basis, which assumes that this loan will be renewed on similar terms. The Board has received confirmation from the bank concerned that it is their present intention to refinance the loan under similar terms and conditions for a minimum term of one year, although this will be subject to approval by the bank's credit committee at the appropriate time. In the event that this loan is not renewed, the directors believe that the assets in the subsidiary companies concerned are of such quality that alternative sources of finance could be secured, or the assets themselves sold and the loans repaid. However the precise timetable for securing alternative finance or disposing of assets is not certain. The financial statements do not include any adjustment that would result in a failure to renew this bank loan or not secure alternative financing within the timescale required. After making enquiries, and having due regard to the above, the directors believe that the Group has access to sufficient working capital for the foreseeable future and therefore remains a going concern.

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