Final Results

RNS Number : 0810G

Parkmead Group (The) PLC

17 October 2008

 

October 17 2008

THE PARKMEAD GROUP PLC ('Parkmead' or the 'Group')

The Parkmead Group plc (PMG) today announces its unaudited preliminary results for the year ended 30 June 2008.

Financial highlights

• Loss before tax from continuing operations reduced to £0.4 million (2007: £4.6 million)

• Net assets increased to £16.2 million (2007: £16.0 million)

• £8.3 million invested in energy based assets (2007: £nil)

• Loss per share from continuing operations reduced from 1.23 pence to 0.10 pence per share

• Disposal of non-core trading subsidiary

Commenting on the results, Colin Goodall, Chairman of The Parkmead Group plc, said:

'The Group is now fully positioned as a specialist investor in energy assets.  Our balance sheet remains strong with no debt, significant cash balances and a growing portfolio of investments.  During the year we have cemented our industry expertise with the creation of our Advisory Board.  We have built up an investment team with significant industry expertise and associated networks and we are actively appraising investment opportunities at the asset and corporate level.  I look forward to the continued development of the Group over the coming year'

-Ends-

For further information:

The Parkmead Group plc	020 7494 5770
Niall Doran CEO
Gordon Ashworth, CFO
Madano Partnership	0207 593 4000
Matthew Moth
Charles Stanley Securities	0207 149 6000
Nominated Adviser & Broker
Rick Thompson / Carl Holmes

THE PARKMEAD GROUP PLC

CHAIRMAN'S STATEMENT

Development of the Group, Results and Dividends

2008 was an important year in Parkmead's development with the Group becoming fully focused on the energy sector. 

The Group invested £8.3 million in various energy assets including Transeuro Energy Corporation, PA Resources, RXT and Faroe Petroleum, further details of which are contained later in this statement. During the year the Group disposed of its non core trading subsidiary, Quayside Corporate Services Limited, and also disposed of its holding in Metapraxis. The Group is now actively pursuing further strategic energy investments at the corporate and asset level.

The Group has reinforced its access to expertise in the energy sector through the creation of an Advisory Board which was announced to the market earlier this year and in this regard Mr. David Bamford (a non-executive Director of Tullow Oil plc) and Professor Peter Davies (formerly Chief Economist at BP plc) have been appointed. Subsequent to the year end the Group announced the appointment of Mr. Faysal Hamza as a non-executive Director who will provide the Group with access to expertise and networks in the Middle East.  

At the operating level the Group recorded a loss of £1.3 million being a significant improvement on 2007: (loss £5.3 million). After finance income and amounts written off investments, this reduced to £0.4 million (loss) (2007: £4.6 million (loss)). During the year certain investments previously written down to zero through the income statement were revalued following successful refinancings. The reversal of these losses is not accounted for in the Group's income statement but directly through equity in accordance with IFRS. After loss on disposal of discontinued operations the loss for the year amounted to £0.7 million (2007: £0.6 million (loss)).  

The Financial Information for the year ended 30 June 2008 has been produced in accordance with International Financial Accounting Standards ('IFRS') for the first time. The impact of this was significant and the loss before tax on continuing operations was £0.4 million lower than if it had been prepared under United Kingdom Generally Accepted Accounting Principles ('UK GAAP') and this is explained as follows:

• movement on value on unquoted investments            £0.2 million (negative)

• movement on value on quoted investments            £0.2 million (negative)

Accordingly, without the impact of IFRS, the Group's result in the consolidated income statement improved by £0.3 million on a like for like accounting basis.

IFRS also requires that the Group's assets be carried at fair value. In relation to a loan made during the year to Transeuro Energy Corp of CA$1,250,000, whilst the book value is recorded at £0.6 million, the fair value has been recorded at £0.03 million with an effective interest rate of 857% rather than the contracted rate of 12%.

The Board is not recommending the payment of a dividend (2007: £nil).

Energy Investments

The Group's investment portfolio is now essentially focused on the energy sector. During the year the following investments were made:

• the acquisition of 230,000 shares in PA Resources in November 2007 for a cost of £1.0 million. The Group has subsequently exited from this holding realising a profit on sale of £0.3 million

• the acquisition of 2,918,724 shares in Faroe Petroleum plc ('Faroe') for a cost of £5.3 million. We believe that Faroe's asset base (exploration and near-term production) has the potential to create significant value

• the acquisition of 260,000 shares in RXT for a cost of £1.3 million. RXT has developed proprietary marine geo seismic technology and its markets are growing strongly

• the acquisition of CA$1.3 million convertible debt in Transeuro Energy Corporation ('Transeuro'). This debt instrument has warrants attached to it which provide an opportunity to benefit from upside in Transeuro's share price

Advisory

Whilst our advisory business revenues declined to £1.3 million (2007: £2.3 million) the flexible nature of our cost base meant that associated direct costs were kept under control and were thus significantly less than revenues. The Group provides corporate finance and advisory services to clients predominantly in the energy sector. Our advisory team is increasingly focused on internal projects relating to the Group's energy investment portfolio, which in the short to mid term may lead to a reduction in fee levels earned.

Residual Investments and Subsidiary Investments

As announced on 8th November 2007 the Group disposed of its subsidiary, Quayside Corporate Services Limited for an initial consideration of £0.6 million plus a deferred consideration of up to £2.0 million. This disposal marked one of the final steps in re-focusing the Group in to a specialist energy investor.  

Key Performance Indicators 

With the change in the Group's investment focus it is more appropriate to monitor the performance of the Group with Balance Sheet Key Performance Indicators ('KPI') rather than those relating to revenue. Accordingly the Board's oversight of performance is primarily focused on net asset per share and the internal rate of return made on investments. The Board monitors these KPI's at each Board Meeting. The Board also receives monthly management accounts which show progress against budget, cash flows and asset valuations.  

	2008	2007
Net asset per share (based on shares in issue)	4.40p	4.34p
Internal Rate of Return on exiting investments	75.5%*	NA*

* Excludes legacy investments

Given market conditions and economic uncertainty the Board is satisfied with the improvement in net asset per share recorded in the period under review.

With regard to the corporate finance business, revenue is analysed between recurring revenue streams and success fees. The baseline target is to cover the fixed element of salary costs of those employees in our advisory team by recurring revenues. 

Of equal importance is the Group's pipeline of deals that it is working on and in this regard the Board is fully appraised at each Board meeting on progress made.  

Principal Risks and Uncertainties

The principal trading risk of the Group is that of sourcing, appraising and managing suitable investments.  The Group is now fully focused on investing in the energy sector; accordingly in order to support this activity the Group reinforced its investment appraisal capacity by way of the formation of an Advisory Board as previously mentioned. 

The Group's primary investment focus being energy means that it is increasingly exposed to the exchange rate movements of the US dollar.  The Group is also exposed to movements in the exchange rate of the Norwegian Krone and Canadian Dollar against Sterling in relation to its investment portfolio.  The Group monitors these exposures and considers hedging where appropriate. As at 30 June 2008 the Group had no hedging instruments in place.  

Outlook 

The Group is now fully focused on the energy sector. Our balance sheet remains strong with no debt, strong cash balances and a growing portfolio of investments. We have built up an investment team with significant industry expertise and associated networks. Our strategy will be to continue to source investment opportunities in the energy sector that will create shareholder return at an acceptable level of risk.

I look forward to the continued development of the Group over the coming year.

Colin Goodall

17 October 2008

THE PARKMEAD GROUP PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

		2008	2007
		UNAUDITED	UNAUDITED
	NOTES	£	£
Revenue	3	1,283,153	2,277,871
Other operating income		12,352	150,987
Operating expenses		(2,566,880)	(7,694,607)
Operating loss		(1,271,375)	(5,265,749)
Finance income		504,971	520,369
Finance costs		(803)	(666)
Profit on sale of investments		303,706	435,549
Amounts written off investments		-	(262,725)
Other gains - net		89,229	-
Loss before tax		(374,272)	(4,573,222)
Taxation		-	-
Loss after tax- continuing operations		(374,272)	(4,573,222)
(Loss)/Profit after tax- discontinued operations		(328,555)	3,993,696
Loss for the financial year		(702,827)	(579,526)
Attributable to:
Equity shareholders		(702,827)	(529,675)
Minority interest		-	(49,851)
Loss for the financial year		(702,827)	(579,526)
Loss per 5 pence ordinary share (pence)
Continuing operations- basic and diluted	4	(0.10)	(1.23)
Total- basic and diluted	4	(0.19)	(0.13)

CONSOLIDATED AND COMPANY BALANCE SHEET

AS AT 30 JUNE 2008

	GROUP		COMPANY
	UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	2008	2007	2008	2007
	£	£	£	£
Assets
Non current assets
Property, plant and equipment	230,076	108,776	230,076	108,776
Investment in subsidiary and joint ventures	-	-	201,000	200,000
Available-for-sale financial assets	9,221,833	1,506,754	9,221,833	1,506,754
Trade and other receivables	949,351	90,554	949,351	40,554
Total non-current assets	10,401,260	1,706,084	10,602,260	1,856,084
Current assets
Trade and other receivables	1,943,994	623,338	1,964,855	860,478
Other financial assets at fair value through profit or loss	678,577	-	678,577	-
Cash and cash equivalents	4,243,690	12,746,208	4,037,610	12,572,224
Total current assets	6,866,261	13,369,546	6,681,042	13,432,702
Non-current assets classified as held for sale	-	2,491,139	-	2,189,229
Total assets	17,267,521	17,566,769	17,283,302	17,478,015
Liabilities
Current liabilities
Current portion of capital lease obligations	(12,521)	-	(12,521)	-
Trade and other payables	(1,008,607)	(874,968)	(987,205)	(871,758)
Provisions	(18,836)	(370,276)	(18,836)	(370,276)
Total current liabilities	(1,039,964)	(1,245,244)	(1,018,562)	(1,242,034)
Non-current liabilities
Capital lease obligations	(13,565)	-	(13,565)	-
Total non-current liabilities	(13,565)	-	(13,565)	-
Liabilities associated with non-current assets held for sale	-	(324,581)	-	-
Total liabilities	(1,053,529)	(1,569,825)	(1,032,127)	(1,242,034)
Net assets	16,213,992	15,996,944	16,251,175	16,235,981
Capital and reserves
Called up share capital	18,417,089	18,417,089	18,417,089	18,417,089
Merger reserve	(952,109)	(952,109)	1,454,546	1,454,546
Other reserve	(1,128,008)	(1,128,008)	(1,128,008)	(1,128,008)
Foreign exchange reserve	159,149	-	159,149	-
Revaluation reserve	966,159	344,382	966,159	344,382
Retained deficit	(1,248,288)	(684,410)	(3,617,760)	(2,852,028)
Equity shareholders' funds	16,213,992	15,996,944	16,251,175	16,235,981

CONSOLIDATED AND COMPANY STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 30 JUNE 2008

	GROUP		COMPANY
	2008	2007	2008	2007
	UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£	£	£	£
Movement on value of investment in quoted companies	280,007	-	280,007	-
Movement on value of investment in unquoted companies	500,919	344,382	500,919	344,382
Net income recognised directly in equity	780,926	344,382	780,926	344,382
Loss for the financial year	(702,827)	(579,526)	(904,681)	(52,264)
Total recognised income/(expense) for the year	78,099	(235,144)	(123,755)	292,118
Attributable to:
Equity shareholders	78,099	(185,293)	(123,755)	292,118
Minority interest	-	(49,851)	-	-
	78,099	(235,144)	(123,755)	292,118

CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2008

		GROUP		COMPANY
		2008	2007	2008	2007
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	NOTES	£	£	£	£
Cash flows from operating activities
Continuing activities	5	(2,020,265)	(1,009,468)	(2,040,986)	(1,128,813)
Discontinued operations	5	(4,250)	1,393,575	-	-
Interest received		588,066	452,676	576,352	501,271
Interest paid		-	(138,592)	-	(666)
Taxation paid		-	(791,859)	-	-
Net cash used in operating activities		(1,436,449)	(93,668)	(1,464,634)	(628,208)
Cash flow from investing activities
Proceeds from sale of subsidiaries		589,247	5,506,445	589,247	5,332,986
Proceeds from sale of investments		1,198,466	2,038,602	1,198,466	2,038,602
Debt disposed of with subsidiaries		-	(463,092)	-	-
Cash disposed of with subsidiaries		(15,685)	67,870	-	-
Acquisition of investments		(8,727,996)	-	(8,727,996)	-
Acquisition of property, plant and equipment		(193,273)	(113,104)	(193,273)	(107,450)
Proceeds from sale of property, plant and equipment		13,529	423	6,529	423
Net cash (used in)/generated by investing activities		(7,135,712)	7,037,144	(7,127,027)	7,264,561
Cash flow from financing activities
Income from debt and lease financing		37,564	-	37,564	-
Finance lease principal payments		(11,478)	(184,676)	(11,478)	-
Net cash generated by/(used in) financing activities		26,086	(184,676)	26,086	-
Net (decrease)/increase in cash and cash equivalents		(8,546,075)	6,758,800	(8,565,575)	6,636,353
Cash and cash equivalents at beginning of year		12,758,804	6,000,004	12,572,224	5,935,871
Effect of exchange rate fluctuations		30,961	-	30,961	-
Cash and cash equivalents at end of year		4,243,690	12,758,804	4,037,610	12,572,224

The above table includes information relating to discontinued operations, see Note 5 c).

NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2008

The financial information contained in these preliminary results does not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. The financial information disclosed for the year ended 30 June 2008 is an abridged version of the Group's financial statements which will be finalised and signed on the basis of the financial information presented by the Directors in this announcement and which will be delivered to the Registrar of Companies following the Group's Annual General Meeting. The Annual Report and Accounts will be sent to shareholders shortly.

The statutory accounts for the year ended 30 June 2008 are currently unaudited. The accounts for the financial year ended 30 June 2007 which were prepared under UK GAAP, have been reported on by the Company's auditors and delivered to the registrar of companies. The auditors issued an unqualified opinion on those accounts.

This is the first year that The Parkmead Group plc has prepared Financial Information in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS) for both the consolidated and Parent Company financial information. Prior to the adoption of IFRS the Financial Information had been prepared in accordance with UK GAAP. UK GAAP differs in certain respects from IFRS and certain accounting and valuation methods have been adjusted, when preparing this financial information, to comply with IFRS. The comparative amounts in respect of 2007 have been restated to reflect these adjustments as the transition date is 1 July 2006.

IFRS 1 'First-time Adoption of International Financial Reporting Standards' sets out the requirements for companies preparing Financial Information under IFRS for the first time and, in general, requires the accounting policies to be applied retrospectively with certain mandatory exceptions and exemptions, as detailed in note 6.

A description of the effect of the transition from UK GAAP to IFRS together with reconciliations between the financial information previously prepared under UK GAAP and the IFRS equivalents for the Group is set out in note 6.

 

1.               BASIS OF PREPARATION OF THE FINANCIAL INFORMATION

The consolidated financial information presented in this statement has been prepared in accordance with IFRSs as adopted by the EU, IFRIC interpretations and the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated Financial Information have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and available-for-sale financial assets.

 

The preparation of Financial Information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The resulting accounting estimates may not equate with the actual results which will only be known in time. Those areas believed to be key areas of estimation are noted below:

 

·     Estimates of fair values of share based payments, warrants and unquoted investments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Directors consider shares traded in an active market to be traded daily on a recognised stock exchange. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the time the transaction is recognised and at each balance sheet date.

 

2.               ACCOUNTING POLICIES

b.         Basis of Consolidation

a)   Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

b)   Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

c.         Interest in Joint Ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, in that strategic financial and operating decisions require the unanimous consent of the parties.

The Group’s interest in joint ventures is accounted for using the proportionate consolidation method, whereby the Group’s share of the results and assets and liabilities of a jointly-controlled entity is combined line by line with similar items in the Group’s consolidated financial information.

d.         Intangible assets

a)   Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

e.         Impairment of non-financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

f.          Depreciation

Tangible fixed assets are stated at historic purchase cost less depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets on a straight line basis to write each asset down to its estimated residual value over its expected useful life, as follows:

Short leasehold improvements                            5 years 

Fixtures, fittings and computer equipment            3 – 5 years

 

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

g.         Financial assets

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ (note 9) and cash and cash equivalents in the balance sheet.

c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category and dividend income from financial assets at fair value through profit or loss are presented in the income statement within ‘other (losses)/gains – net’ in the period in which they arise.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss, while translation differences on non-monetary securities are recognised in equity. Changes in the fair value of monetary and non monetary securities classified as available-for-sale are recognised in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of finance income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of ‘other (losses)/gains – net’ when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a Group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement but through equity. Impairment testing of trade receivables is described in note 9.

h.         Derivative financial instruments

Derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement except where derivatives qualify for cash flow hedge accounting.

Embedded derivatives: A derivative may be embedded in another financial instrument known as the host contract. Where the economic characteristics and risks of an embedded derivative are not closely related to those of the host contract the embedded derivative is separated from the host and held on the balance sheet at fair value. Movements in fair value are posted to the income statement whilst the host contract is accounted for according to the policy for that class of financial instrument.

i.          Assets held for sale

Groups of assets are reclassified as held for sale when a sale within one year is highly probable and the assets are available for immediate sale in their present condition. Property, plant and equipment and intangible assets held for sale are remeasured at the lower of fair value less cost to sell or the carrying amounts at the date they meet the held for sale criteria. Any resulting impairment loss is recognised in the income statement.

j.          Cash and cash equivalents

Cash and cash equivalents for the purposes of the cash flow statement includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

k.         Foreign currency

a)   Functional and presentation currency

Items included in the financial information of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial information is presented in pounds sterling, which is the Company’s functional and presentation currency.

b)   Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available-for-sale are included in the available-for-sale reserve in equity.

l.          Leasing and Hire purchase agreements

Assets held under finance leases and hire purchase contracts, which are those where substantially all the risks and rewards of ownership of the asset have passed to the Group, are capitalised in the balance sheet and are depreciated over their useful lives. A liability is also created in the balance sheet.

The interest element of the rental obligations is charged to the income statement over the period of the lease and represents a constant rate of charge on the remaining capital repayments.

Rentals payable and receivable under operating leases are charged or credited to the income statement on a straight line basis over the lease term.

m.        Deferred taxation

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

n.         Pensions

The Company contributes 3% of employees’ gross salary into personal pension funds of their choice. The cost of providing pension contributions for employees is charged to the income statement as accrued.

o.         Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

p.         Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax and after eliminating sales within the Group.

The Group and the Company recognises revenue when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the entity. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. 

q.         Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

r.          Trade receivables

Trade receivables are initially stated at fair value and subsequently accreted for interest and adjusted for any provisions for impairment. Trade receivables are assessed individually for impairment. Movements in the provision for doubtful trade receivables are recorded in the income statement in operating expenses.

 

s.         Trade payables

Trade payables are initially recognised at fair value and subsequently at amortised cost.

 

t.          Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date.

u.         Share based payments

Incentives in the form of shares are provided to employees under an unapproved share option scheme and an Inland Revenue approved EMI scheme and through other discretionary share based awards. The Group measures the fair value of any share based awards issued by the Group to employees at the date of grant. The fair value at the date of grant is expensed over the vesting period, except where market based conditions make it more appropriate to recognise the costs over the expected vesting period of the options. All share based awards are settled in equity and accordingly the share based payment is credited directly to equity.

The requirements of IFRS 2 apply to all grants of share options made after 7 November 2002 which had not vested on or before 30 June 2005.

Where the share based payment has taken the form of a loan from the Employee Benefit Trust, a charge based on the fair value of the anticipated benefit is determined on a consistent basis with the other share based awards. The charge is recognised in the income statement and any difference between the charge and the loan is debited to other reserves.

v.         Employee Benefit Trust

The Company has provided loan finance to an Employee Benefit Trust (EBT) such that it can purchase shares in the Group. Assets and liabilities of the Employee Benefit Trust are included in the Group balance sheet. The costs of running the Trust are charged to the income statement.

w.         Employers taxes on share options

Employer’s national insurance in the UK is payable on the exercise of certain share options. Provision is calculated on the fair value of the share options at the balance sheet date, pro-rated over the vesting period of the options.

3.               SEGMENTAL ANALYSIS

The Directors believe that the Group has only one reportable business segment, which is investment and advisory, and one geographical segment.

 

4.               LOSS PER SHARE

Loss per share attributable to equity holders of the Company arise from continuing and discontinued operations as follows:

		2008		2007
		UNAUDITED		UNAUDITED
	Loss per 5p ordinary share from continuing operations (pence) - basic - diluted	(0.10p) (0.10p)		(1.23p)  (1.23p)
	(Loss)/Profit per 5p ordinary share from discontinued operations (pence) - basic - diluted	(0.09p) (0.09p)		1.10p  1.10p
	Loss per 5p ordinary share from total operations (pence) - basic - diluted	(0.19p) (0.19p)		(0.13p)  (0.13p)

The calculations were based on the following information.

			2008		2007
			UNAUDITED		UNAUDITED
	Profit/(Loss) attributable to ordinary shareholders (£)
	- continuing operations		(374,272)		(4,573,222)
	- discontinued operations		(328,555)		4,043,547
	- total		(702,827)		(529,675)
	Weighted average number of shares in issue
	- basic		368,341,780		368,341,780
	- diluted		368,341,780		368,341,780

Earnings per share is calculated by dividing the profit/(loss) for the year, adjusted for minority interest, by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share

Earnings per share requires presentation of diluted loss per share 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 decreased by the exercise of out-of-the-money share options. No adjustment has been made to diluted loss per share for out-of-the-money share options and there are no other diluting future share issues.

5.         RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATIONS

(a)                Reconciliation of operating loss to net cash flow from continuing operations

		Group		Company
		2008	2007	2008	2007
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
		£	£	£	£
Operating loss		(1,271,375)	(5,265,749)	(1,197,895)	(5,375,635)
Depreciation		70,113	12,776	70,113	12,790
Impairment of property, plant and equipment		-	52,738	-	52,738
Amortisation and impairment of intangible assets		-	3,693,256	-	3,884,736
Gain on disposal of fixed assets		(3,234)	(423)	(3,234)	(423)
Charge for share based payments		138,949	108,976	138,949	108,976
Decrease/(Increase) in debtors		(1,016,181)	345,518	(1,041,190)	560,914
(Decrease)/Increase in creditors		412,903	(206,174)	343,711	(622,523)
(Decrease)/Increase in other provisions		(351,440)	249,614	(351,440)	249,614
Net cash flow from operations		(2,020,265)	(1,009,468)	(2,040,986)	(1,128,813)

(b)                Reconciliation of operating profit/(loss) to net cash flow from discontinued operations

				Group
				2008	2007
				UNAUDITED	UNAUDITED
				£	£
Operating profit/(loss)				143,295	(37,661)
Depreciation				1,453	25,338
Amortisation and impairment of intangible assets				-	63,771
(Gain)/Loss on disposal of fixed assets				(447)	1,488
Decrease/(Increase) in stocks				-	25,299
Decrease/(Increase) in debtors				(146,929)	(295,660)
(Decrease)/Increase in creditors				(1,622)	1,611,000
Net cash flow from operations				(4,250)	1,393,575

(c)                Reconciliation of cash flows from discontinued operations

Cash in/(out) flow from operating activities total £(3,911) (2007: £468,272). These figures were made up of; operating activities £(4,250) (2007: £1,393,575), interest received £339 (2007: £4,482), interest paid £nil (2007: £(137,926)), and taxation paid £nil (2007: £(791,859)). 

Cash flow from investing activities total £(8,685) (2007: £(400,876)). These figures were made up of: debt disposed of with subsidiary £nil (2007: £(463,092)), cash disposed of with subsidiary £(15,685) (2007: £67,870), acquisition of property, plant and equipment £nil (2007: £(5,654)), and proceeds from sale of property, plant and equipment £7,000 (2007: £nil).  

Cash flow from financing activities total £nil (2007: £(34,676)). These figures were made up of: finance lease principal payments £nil (2007: £(34,676)).

6.   TRANSITION FROM UK GAAP TO IFRS

The accounting policies were changed on 1 July 2007 to comply with IFRS. The transition to IFRS is accounted for in accordance with IFRS 1 'First-Time Adoption of International Financial Reporting Standards' with 1 July 2006 as the date of transition. The adoption of IFRS did not result in substantial changes to the Group's accounting policies previously under UK Accounting Standards as set out in the Group's audited Financial Statements for the year ended 30 June 2007. The changes in accounting policies as a consequence of the transition to IFRS are described below, along with reconciliations of the effects of the transition to IFRS.

The transition to IFRS resulted in the following changes in accounting policies:

(a) IFRS 3 Business Combinations

In accordance with IFRS 3 goodwill is tested for impairment every year and not amortised over its useful life.

(b) IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

In accordance with IFRS 5 Operations held for sale at the year end have been classified as held for sale assets and the activities as discontinued operations. Gain on disposal of subsidiaries has been reclassified in profit or loss from discontinued operation.

 (c) IAS 19 Employee Benefits

In accordance with IAS 19 all liabilities in respect of employees are recognised, accruals have been made in respect of unclaimed holiday entitlement and provisions have been made in respect of employers taxes on share options.

(d) IAS 39 Financial Instruments: Recognition and Measurement

In accordance with IAS 39 the reversal of a provision against an available for sale asset is put to equity. Also classification of assets has been adjusted.

The Group elected to apply the exemptions granted in IFRS 1 in respect of business combinations that occurred prior to the transition date of 1 July 2006 and in respect of share options granted prior to 7 November 2002. To explain the impact of the transition, reconciliations have been included that show the changes made to the statements previously reported under UK GAAP.

The following reconciliations are included:

• Reconciliation of Consolidated and Company UK GAAP balance sheet to the Consolidated and Company IFRS balance sheet at 1 July 2006 and 30 June 2007

• Reconciliation of the Consolidated and Company UK GAAP profit and loss account to the Consolidated and Company IFRS income statement for the year ended 30 June 2007

• Notes on financial impact on adoption of IFRS statements

Reconciliation of consolidated loss for year ended 30 June 2007
	UK GAAP	(a) IFRS 3	(b) IFRS 5	(c) IAS 19	(d) IAS 39	IFRS
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£	£	£	£	£	£
Revenue	7,647,087	-	(5,369,216)	-	-	2,277,871
Cost of sales	(2,305,074)	-	2,305,074	-	-	-
Other operating income	150,987	-	-	-	-	150,987
Operating expenses	(10,794,600)	10,606	3,101,803	(12,416)	-	(7,694,607)
Operating loss	(5,301,600)	10,606	37,661	(12,416)	-	(5,265,749)
Finance income	527,887	-	(7,518)	-	-	520,369
Finance costs	(138,592)	-	137,926	-	-	(666)
Profit on sale of investments	4,613,262	(10,606)	(4,167,107)	-	-	435,549
Amounts written off investments	(154,286)	-	-	-	(108,439)	(262,725)
Loss before tax	(453,329)	-	(3,999,038)	(12,416)	(108,439)	(4,573,222)
Taxation	(5,342)	-	5,342	-	-	-
Loss after tax- continuing operations	(458,671)	-	(3,993,696)	(12,416)	(108,439)	(4,573,222)
Loss after tax- discontinued operations	-	-	3,993,696	-	-	3,993,696
Loss for the financial year	(458,671)	-	-	(12,416)	(108,439)	(579,526)
Attributable to:
Equity shareholders	(408,820)	-	-	(12,416)	(108,439)	(529,675)
Minority interest	(49,851)	-	-	-	-	(49,851)
Loss for the financial year	(458,671)	-	-	(12,416)	(108,439)	(579,526)

Reconciliation of consolidated equity for the year ended 30 June 2007
	UK GAAP	(b) IFRS 5	(c) IAS 19	(d) IAS 39	IFRS
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£		£	£	£
Assets
Non-current assets
Goodwill and other intangible	2,177,829	(2,177,829)	-	-	-
Property, plant and equipment	127,660	(18,884)	-	-	108,776
Available-for-sale assets	1,547,308	-	-	(40,554)	1,506,754
Loans and other receivables	50,000	-	-	40,554	90,554
Total non-current assets	3,902,797	(2,196,713)	-	-	1,706,084
Current assets
Trade and other receivables	905,168	(281,830)	-	-	623,338
Cash and cash equivalents	12,758,804	(12,596)	-	-	12,746,208
Total current assets	13,663,972	(294,426)	-	-	13,369,546
Non-current assets classified as held for sale	-	2,491,139	-	-	2,491,139
Total assets	17,566,769	-	-	-	17,566,769
Liabilities
Current liabilities
Trade and other payables	(1,192,949)	324,581	(6,600)	-	(874,968)
Short-term provisions	(343,798)	-	(26,478)	-	(370,276)
Total current liabilities	(1,536,747)	324,581	(33,078)	-	(1,245,244)
Liabilities associated with non-current assets held for sale	-	(324,581)	-	-	(324,581)
Total liabilities	(1,536,747)	-	(33,078)	-	(1,569,825)
Net assets	16,030,022	-	(33,078)	-	15,996,944
Capital and reserves
Called up share capital	18,417,089	-	-	-	18,417,089
Merger reserve	(952,109)	-	-	-	(952,109)
Other reserve	(1,128,008)	-	-	-	(1,128,008)
Revaluation reserve	235,943	-	-	108,439	344,382
Profit and loss account	(542,893)	-	(33,078)	(108,439)	(684,410)
Equity shareholders' funds	16,030,022	-	(33,078)	-	15,996,944
Total equity	16,030,022	-	(33,078)	-	15,996,944

Reconciliation of consolidated equity for the year at 1 July 2006 (date of transition to IFRS)
	UK GAAP	(b) IFRS 5	(c) IAS 19	(d) IAS 39	IFRS
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£	£			£
Assets
Non-current assets
Goodwill and other intangibles	8,176,776	(2,316,297)	-	-	5,860,479
Property, plant and equipment	598,355	(500,145)	-	-	98,210
Available-for-sale assets	3,059,365	-	-	(45,000)	3,014,365
Loans and other receivables	-	-	-	45,000	45,000
Total non-current assets	11,834,496	(2,816,442)	-	-	9,018,054
Current assets
Stock	252,971	(252,971)	-	-	-
Trade and other receivables	4,127,827	(2,357,589)	-	-	1,770,238
Cash and cash equivalents	6,207,315	(62,896)	-	-	6,144,419
Total current assets	10,588,113	(2,673,456)	-	-	7,914,657
Non-current assets classified as held for sale	-	5,489,897	-	-	5,489,897
Total assets	22,422,609	(1)	-	-	22,422,608
Liabilities
Current liabilities
Trade and other payables	(5,187,657)	3,134,602	-	-	(2,053,055)
Short-term provisions	(108,816)	8,816	(20,662)	-	(120,662)
Total current liabilities	(5,296,473)	3,143,418	(20,662)	-	(2,173,717)
Non-current liabilities
Trade and other payables	(694,982)	694,982	-	-	-
Total non-current liabilities	(694,982)	694,982	-	-	-
Liabilities associated with non-current assets held for sale	-	(3,838,399)	-	-	(3,838,399)
Total liabilities	(5,991,455)	1	(20,662)	-	(6,012,116)
Net assets	16,431,154	-	(20,662)	-	16,410,492
Capital and reserves
Called up share capital	18,417,089	-	-	-	18,417,089
Merger reserve	(952,109)	-	-	-	(952,109)
Other reserve	(1,128,008)	-	-	-	(1,128,008)
Profit and loss account	(243,049)	-	(20,662)	-	(263,711)
Equity shareholders' funds	16,093,923	-	(20,662)	-	16,073,261
Minority interests	337,231	-	-	-	337,231
Total equity	16,431,154	-	(20,662)	-	16,410,492

Reconciliation of Company equity for the year ended 30 June 2007
	UK GAAP	(b) IFRS 5	(c) IAS 19	(d) IAS 39	IFRS
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£	£	£	£	£
Assets
Non current assets
Property, plant and equipment	108,776	-	-	-	108,776
Investment in subsidiary and joint ventures	-	200,000	-	-	200,000
Available-for-sale assets	3,936,537	(2,389,229)	-	(40,554)	1,506,754
Loans and other receivables	-	-	-	40,554	40,554
Total non-current assets	4,045,313	(2,189,229)	-	-	1,856,084
Current assets
Trade and other receivables	860,478	-	-	-	860,478
Cash and cash equivalents	12,572,224	-	-	-	12,572,224
Total current assets	13,432,702	-	-	-	13,432,702
Non-current assets classified as held for sale	-	2,189,229	-	-	2,189,229
Total assets	17,478,015	-	-	-	17,478,015
Liabilities
Current liabilities
Trade and other payables	(865,158)	-	(6,600)	-	(871,758)
Short-term provisions	(343,798)	-	(26,478)	-	(370,276)
Total current liabilities	(1,208,956)	-	(33,078)	-	(1,242,034)
Net assets	16,269,059	-	(33,078)	-	16,235,981
Capital and reserves
Called up share capital	18,417,089	-	-	-	18,417,089
Merger reserve	1,454,546	-	-	-	1,454,546
Other reserve	(1,128,008)	-	-	-	(1,128,008)
Revaluation reserve	235,943	-	-	108,439	344,382
Profit and loss account	(2,710,511)	-	(33,078)	(108,439)	(2,852,028)
Equity shareholders' funds	16,269,059	-	(33,078)	-	16,235,981
Total equity	16,269,059	-	(33,078)	-	16,235,981

Reconciliation of Company equity for the year at 1 July 2006 (date of transition to IFRS)
	UK GAAP	(b) IFRS 5	(c)  IAS 19	(d) IAS 39	IFRS
		UNAUDITED	UNAUDITED	UNAUDITED	UNAUDITED
	£	£	£	£	£
Assets
Non current assets
Property, plant and equipment	66,854	-	-	-	66,854
Investment in subsidiary and joint ventures	-	-	-	6,223,965	6,223,965
Available-for-sale assets	10,031,569	(750,000)	-	(6,268,965)	3,012,604
Loans and other receivables	-	-	-	45,000	45,000
Total non-current assets	10,098,423	(750,000)	-	-	9,348,423
Current assets
Trade and other receivables	1,346,784	-	-	-	1,346,784
Cash and cash equivalents	5,935,871	-	-	-	5,935,871
Total current assets	7,282,655	-	-	-	7,282,655
Non-current assets classified as held for sale	-	750,000	-	-	750,000
Total assets	17,381,078	-	-	-	17,381,078
Liabilities
Current liabilities
Trade and other payables	(1,425,529)	-	-	-	(1,425,529)
Short-term provisions	(100,000)	-	(20,662)	-	(120,662)
Total current liabilities	(1,525,529)	-	(20,662)	-	(1,546,191)
Net assets	15,855,549	-	(20,662)	-	15,834,887
Capital and reserves
Called up share capital	18,417,089	-	-	-	18,417,089
Merger reserve	1,454,546	-	-	-	1,454,546
Other reserve	(1,128,008)	-	-	-	(1,128,008)
Profit and loss account	(2,888,078)	-	(20,662)	-	(2,908,740)
Equity shareholders' funds	15,855,549	-	(20,662)	-	15,834,887
Total equity	15,855,549	-	(20,662)	-	15,834,887

Cash flows

There is no material difference between the UK GAAP and IFRS cash flow statements; hence no reconciliation has been prepared of the cash flow statements.

7.    APPROVAL OF THIS PRELIMINARY ANNOUNCMENT

The preliminary report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the report in accordance with the AIM rules issued by the London Stock Exchange.

This announcement was approved by the Board of Directors on 17 October 2008.

8.      POSTING OF ANNUAL REPORT & ACCOUNTS 

Copies of the Annual Report & Accounts will be posted to shareholders shortly. The Annual Report & Account will be made available to download, along with a copy of this announcement, on the investor relations section of the Company's website www.parkmeadgroup.com.

 

END

 

 

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