Final Results

RNS Number : 1366T

Parkmead Group (The) PLC

23 September 2010

 



23 September 2010

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

Preliminary Results for the year ended 30 June 2010

Parkmead, the specialist investment and advisory company into the oil and gas exploration and production sectors, today announces its preliminary results for the year ended 30 June 2010.

Financial highlights

·      Acquisition of Aupec Limited (announced 3 November 2009)

·      Revenues increased to £2.4 million (2009: £0.2m)

·      Total assets increased to £11.3 million as at 30 June 2010 (2009: £9.6m)

·      Improving outlook for the Group's investment portfolio

The Group's Chairman, Colin Goodall, commented, "I am pleased to report an encouraging set of results for the Group for the year to 30th June 2010.  Revenues have increased, operating losses have been reduced substantially, net assets have increased and the Group remains debt free.

"The enlargement of the Group through the acquisition of Aupec Ltd ("Aupec") was completed on 3 November 2009.  Since that time the enlarged Group has been actively pursuing a number of investment and advisory opportunities using the combined capabilities and relationships of Aupec and Parkmead.  We have also been reviewing our operations in order to identify synergies and, in particular, areas where cost savings can be made.  I am pleased to report that significant cost reductions have already been realised by focusing the operating base of the enlarged group at Aupec's offices in Aberdeen and releasing our central London offices.

"We remain focused on the energy sector and will continue to pursue investment opportunities that create shareholder value at an acceptable level of risk.  We are also working to further increase Aupec's successful lines of business in energy sector benchmarking and in petroleum economics strategic advice to governments."

-Ends-

For further information:

The Parkmead Group plc	0845 604 8806
Niall Doran CEO
Donald MacKay, CFO
Charles Stanley Securities	0207 149 6000
Nominated Adviser & Broker
Marc Milmo/Carl Holmes

THE PARKMEAD GROUP PLC

CHAIRMAN'S STATEMENT

I am pleased to report an encouraging set of results for the Group for the year to 30th June 2010.  Revenues have increased, operating losses have been reduced substantially, net assets have increased and the Group remains debt free.

The enlargement of the Group through the acquisition of Aupec Limited ("Aupec") was completed on 3 November 2009.  Since that time the enlarged Group has been actively pursuing a number of investment and advisory opportunities using the combined capabilities and relationships of Aupec and Parkmead.  We have also been reviewing our operations in order to identify synergies and, in particular, areas where cost savings can be made.  I am pleased to report that significant cost reductions have already been realised by focusing the operating base of the enlarged group at Aupec's offices in Aberdeen and releasing our central London offices. Total annualised savings for the coming year will be in excess of £250k.

Furthermore, Aupec's substantial technical capabilities have enabled the Group to undertake asset evaluation work in-house.  This internal expertise now allows the Group to identify and evaluate investment opportunities in the oil and gas sector more quickly and cost effectively.

We remain focused on the energy sector and will continue to pursue investment opportunities that create shareholder value at an acceptable level of risk.  We are also working to further increase Aupec's successful lines of business in energy sector benchmarking and in petroleum economics strategic advice to governments.

Results and Dividends

Our revenues increased to £2.4m (2009: £0.2m) mainly due to Aupec revenues since November 2009, which contributed £2.2m.  Administrative expenses were £2.3m (2009: £2.7m).  The Group's operating loss for the year was reduced to £1.5m (2009: £2.5m).

The loss before tax was £1.4m (2009: £6.3m) after amounts written off investments of £0.5m (2009: £3.5m).  After discontinued operations, which relate to the reduction in value of the deferred consideration due on the sale of Quayside Corporate Services Limited, the loss increased to £1.6m (2009: £6.9m).

The Group's total assets increased to £11.3m (2009: £6.3m), including goodwill on the acquisition of Aupec of £2.2m, increased available-for-sale financial assets of £5.4m (2009: £3.0m), increased receivables of £3.2m (2009: £0.7m) and cash and cash equivalents of £0.3m (2009: £2.5m).  The total liabilities increased to £2.8m (2009: £0.8m) mainly due to increased payables of £2.7m (2009: £0.7m).

The Group's net asset value increased to £8.5m (2009: £5.6m).  Some 235.3m new ordinary shares were issued as part consideration of the acquisition of Aupec, bringing the Group's total ordinary shares in issue to 603.6m (2009: 368.3m).  The net asset value per share at 30th June 2010 was 1.41p (2009: 1.52p).

The Board is not recommending the payment of a dividend in 2010 (2009: nil).

Investments

The Group's main energy sector investments at the start of the year were in Faroe Petroleum plc ("Faroe"), Reservoir Exploration Technologies ASA ("RXT") and Transeuro Energy Corporation ("Transeuro").  The total value of the Group's investment portfolio increased from £3.0m at the start of the year to £5.4m at year-end. 

Faroe's share price rose from 70p at 30th June 2009 to 118p at 30th June 2010 following a successful year for the company during which it had two exploration discoveries with the Glenlivet and Tornado wells in the UK West of Shetland area.  As planned, Faroe also sold two undeveloped gas fields, Breagh and Trym.  A further exploratory success with the Maria oil discovery in the Norwegian sector in July further boosted the company's share price. 

Faroe completed a 2 for 3 rights issue at 100p per share in May 2010.  The Group exercised 1.458m of its 1.946m total entitlement under the Faroe rights issue.  The total consideration paid was £1.46m which was satisfied in cash from the Group's existing cash resources.  Following the rights issue, Parkmead remains the holder of 4.377m ordinary shares in Faroe, representing 2.5% of the issued share capital of Faroe.

We remain of the view that Faroe has significant medium and long-term upside.  This investment is held as available-for-sale and the increase in its value has been reflected in equity.  Faroe's share price as at 20 September 2010 was 163.5p, valuing the Group's investment in Faroe at £7.2m.

With regard to RXT, the company, being a specialised exploration technology company, suffered during the market downturn.  At the start of our financial year our shareholding in RXT had been impaired to £56k.  During the year we sold our RXT shares for £80k, recording a profit of £24k in the current year.

The performance of our investment in Transeuro, a Canadian oil and gas exploration and development company, was ultimately successful.  The original investment was in a C$1.250m convertible debenture.  Following a suspension of the company's shares and a capital reorganisation the investment was restructured and its value was impaired to £225.6k at the year ended 30th June 2009.  Subsequently Transeuro's shares recommenced trading and the company has repaid the total capital and interest outstanding in the course of the current financial year.

Residual Investments

The Group continues to hold a number of technology investments including Future Route Limited, Prevx Group Limited and Speed-Trap Holdings Limited.  These investments are in unquoted private companies which are unlikely to make dividend payments in the foreseeable future.  We have therefore impaired these investments to nil.

Principal Risks and Uncertainties

The principal trading risk of the Group is that of sourcing, appraising and managing suitable investments.  As noted the Group is focused on making investments in the oil and gas sector and there are inherent risks associated with investing in this sector.  These mainly relate to fluctuations in crude oil and gas prices and also the exchange rate of the US dollar (in which these commodity prices are expressed) against sterling which is the Group's functional and reporting currency.

A significant proportion of Aupec's revenues are denominated in US dollars and this is also subject to currency exchange fluctuations.  In addition, around 75% of Aupec's revenue is derived from a 3-year contract with a developing world government ministry.  The contract which is governed by the local law of the Aupec counterparty expires on 24th March 2011, however the Group expects that this contract will be renewed for a further 3-year period.

Outlook

Following the acquisition of Aupec and the successful merger of the Parkmead and Aupec organisations to form the enlarged Group, the Directors believe that the Group is now better placed to deliver value in the medium and long term.  The enlargement of the Group has allowed:

·      Diversification of the Group's revenue stream

·      A significant increase in our economic, financial and technical analytical skills, specifically in relation to the energy sector

·      Promotion of Aupec's consultancy services across Parkmead's wider network

We continue to seek investment opportunities in the energy sector at both the asset and corporate levels and will update shareholders as we make further progress.

Colin Goodall

22 September 2010

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2010

		2010	2009
	NOTES	£	£
Continuing operations
Revenue		2,346,151	161,498
Cost of sales		(1,549,871)	-
Gross Profit		814,480	161,498
Administrative expenses		(2,274,291)	(2,704,221)
Operating loss		(1,459,811)	(2,542,723)
Finance income		531,403	399,901
Finance costs		(6,739)	(803)
Profit on sale of investments		74,396	-
Amounts written off available-for-sale financial assets and loans		(539,995)	(3,493,967)
Other (losses)/gains on financial assets at fair value through profit or loss		(8,033)	(689,130)
Loss before taxation		(1,408,779)	(6,326,722)
Taxation		(85,773)	-
Loss for the year from continuing operations		(1,494,552)	(6,326,722)
Discontinued operations
Loss for the year from discontinued operations		(108,825)	(569,652)
Loss for the year attributable to the equity holders of the Parent		(1,603,377)	(6,896,374)
Loss per share (pence)
Continuing operations- basic and diluted	3	(0.29)	(1.72)
Total- basic and diluted	3	(0.31)	(1.87)

CONSOLIDATED AND COMPANY STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2010

	GROUP		COMPANY
	2010	2009	2010	2009
	£	£	£	£
Loss for the year	(1,603,377)	(6,896,374)	(2,057,345)	(6,846,203)
Other comprehensive income
Available-for-sale financial assets
Fair value gain/(loss) on available-for-sale financial assets	1,716,492	(3,860,830)	1,716,492	(3,860,830)
	1,716,492	(3,860,830)	1,716,492	(3,860,830)
Income tax relating to components of other comprehensive income	-	-	-	-
Other comprehensive income for the year, net of tax	1,716,492	(3,860,830)	1,716,492	(3,860,830)
Total comprehensive income for the year attributable to the equity holders of the Parent	113,115	(10,757,204)	(340,853)	(10,707,033)

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

AS AT 30 JUNE 2010

		GROUP			COMPANY
	2010		2009	2010		2009
	£		£	£		£
Non-current assets
Property, plant and equipment	60,778		166,850	16,072		166,850
Goodwill	2,173,532		-	-		-
Other intangible assets	99,106		-	-		-
Investment in subsidiary and joint ventures	-		-	3,883,353		51,000
Available-for-sale financial assets	5,384,124		2,983,951	5,384,124		2,983,951
Trade and other receivables	33,320		-	94,715		-
Deferred tax assets	101,574		-	-		-
Total non-current assets	7,852,434		3,150,801	9,378,264		3,201,801
Current assets
Trade and other receivables	3,199,194		674,762	206,834		709,030
Other financial assets	878		2,673	878		2,673
Cash and cash equivalents	291,869		2,516,892	6,661		2,491,807
Total current assets	3,491,941		3,194,327	214,373		3,203,510
Total assets	11,344,375		6,345,128	9,592,637		6,405,311
Current liabilities
Current portion of capital lease obligations	(1,043)		(12,521)	(1,043)		(12,521)
Trade and other payables	(2,737,838)		(734,689)	(1,445,640)		(707,518)
Current tax liabilities	(66,097)		-	-		-
Provisions	(1,959)		(3,619)	(1,959)		(3,619)
Total current liabilities	(2,806,937)		(750,829)	(1,448,642)		(723,658)
Non-current liabilities
Capital lease obligations	-		(1,044)	-		(1,044)
Deferred tax liabilities	(26,829)		-	-		-
Total non-current liabilities	(26,829)		(1,044)	-		(1,044)
Total liabilities	(2,833,766)		(751,873)	(1,448,642)		(724,702)
Net assets	8,510,609		5,593,255	8,143,995		5,680,609
Equity attributable to equity holders
Called up share capital	18,652,383		18,417,089	18,652,383		18,417,089
Share premium	2,647,059		-	2,647,059		-
Merger reserve	(952,109)		(952,109)	1,454,546		1,454,546
Employee benefit trust reserve	(1,128,008)		(1,128,008)	(1,128,008)		(1,128,008)
Foreign exchange reserve	7,377		157,382	7,377		157,382
Revaluation reserve	(1,182,639)		(2,892,904)	(1,182,639)		(2,892,904)
Retained deficit	(9,533,454)		(8,008,195)	(12,306,723)		(10,327,496)
Total Equity	8,510,609		5,593,255	8,143,995		5,680,609

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
	Share capital	Share premium	Merger reserve	Employee Benefit Trust reserve	Foreign exchange reserve	Revaluation reserve	Retained earnings	Total
	£	£	£	£	£	£	£	£
At 1 July 2008	18,417,089	-	(952,109)	(1,128,008)	159,149	966,159	(1,248,288)	16,213,992
Loss for the year	-	-	-	-	-	-	(6,896,374)	(6,896,374)
Fair value (loss) on available-for-sale financial assets	-	-	-	-	(1,767)	(3,859,063)	-	(3,860,830)
Total comprehensive income for the year	-	-	-	-	(1,767)	(3,859,063)	(6,896,374)	(10,757,204)
Share-based payments	-	-	-	-	-	-	136,467	136,467
At 30 June 2009	18,417,089	-	(952,109)	(1,128,008)	157,382	(2,892,904)	(8,008,195)	5,593,255
Loss for the year	-	-	-	-	-	-	(1,603,377)	(1,603,377)
Fair value gain on available-for-sale financial assets	-	-	-	-	6,227	1,710,265	-	1,716,492
Total comprehensive income for the year	-	-	-	-	6,227	1,710,265	(1,603,377)	113,115
Foreign exchange gain on available-for-sale financial asset recognised in profit or loss on derecognition	-	-	-	-	(156,232)	-	-	(156,232)
Issue of new ordinary shares	235,294	2,647,059	-	-	-	-	-	2,882,353
Share-based payments	-	-	-	-	-	-	78,118	78,118
At 30 June 2010	18,652,383	2,647,059	(952,109)	(1,128,008)	7,377	(1,182,639)	(9,533,454)	8,510,609

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
	Share capital		Share premium	Merger reserve	Employee Benefit Trust reserve	Foreign exchange reserve	Revaluation reserve	Retained earnings	Total
	£		£	£	£	£	£	£	£
At 1 July 2008	18,417,089		-	1,454,546	(1,128,008)	159,149	966,159	(3,617,760)	16,251,175
Retained loss for the year	-		-	-	-	-	-	(6,846,203)	(6,846,203)
Fair value (loss) on available-for-sale financial assets	-		-	-	-	(1,767)	(3,859,063)	-	(3,860,830)
Total comprehensive income for the period	-		-	-	-	(1,767)	(3,859,063)	(6,846,203)	(10,707,033)
Share-based payments	-		-	-	-	-	-	136,467	136,467
At 30 June 2009	18,417,089		-	1,454,546	(1,128,008)	157,382	(2,892,904)	(10,327,496)	5,680,609
Retained loss for the year	-		-	-	-	-	-	(2,057,345)	(2,057,345)
Fair value gain on available-for-sale financial assets	-		-	-	-	6,227	1,710,265	-	1,716,492
Total comprehensive income for the year	-		-	-	-	6,227	1,710,265	(2,057,345)	(340,853)
Foreign exchange gain on available-for-sale financial asset recognised in profit or loss on derecognition	-		-	-	-	(156,232)	-	-	(156,232)
Issue of new ordinary shares	235,294		2,647,059	-	-	-	-	-	2,882,353
Share-based payments	-		-	-	-	-	-	78,118	78,118
At 30 June 2010	18,652,383		2,647,059	1,454,546	(1,128,008)	7,377	(1,182,639)	(12,306,723)	8,143,995

CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2010

		GROUP			COMPANY
		2010	2009	2010		2009
	NOTES	£	£	£		£
Cash flows from operating activities
Continuing activities	4	(2,613,588)	(1,405,380)	(462,728)		(1,398,571)
Income tax paid		(124,288)	-	-		-
Net cash (used in) operating activities		(2,737,876)	(1,405,380)	(462,728)		(1,398,571)
Cash flow from investing activities
Interest received		14,075	136,836	13,575		132,401
Proceeds from sale of investments		439,083	280,000	439,083		280,000
Liquidation dividend received from subsidiary		-	-	-		178,621
Acquisition of subsidiary net of cash acquired		1,558,808	-	(1,000,000)		-
Acquisition of investments		(1,458,315)	(716,500)	(1,458,315)		(716,500)
Acquisition of intangible assets		(7,834)	-	-		-
Acquisition of property, plant and equipment		(20,264)	(9,233)	(4,240)		(9,233)
Net cash (used in)/generated by investing activities		525,553	(308,897)	(2,009,897)		(134,711)
Cash flow from financing activities
Interest paid		(179)	-	-		-
Finance lease principal payments		(12,521)	(12,521)	(12,521)		(12,521)
Net cash (used in) financing activities		(12,700)	(12,521)	(12,521)		(12,521)
Net decrease in cash and cash equivalents		(2,225,023)	(1,726,798)	(2,485,146)		(1,545,803)
Cash and cash equivalents at beginning of year		2,516,892	4,243,690	2,491,807		4037,610
Cash and cash equivalents at end of year		291,869	2,516,892	6,661		2,491,807

NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2010

1.         BASIS OF PREPARATION

The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 30 June 2010 or 30 June 2009.

The financial information has been extracted from the audited statutory accounts for the years ended 30 June 2010 and 30 June 2009. The auditors reported on those accounts; their reports were unqualified and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

The statutory accounts for the year ended 30 June 2009 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 June 2010 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The accounting policies are consistent with those applied in the preparation of the interim results for the period ended 31 December 2009 and the statutory accounts for the year ended 30 June 2009, which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

2.         BUSINESS COMBINATIONS

Acquisition of Aupec Limited

On 3 November 2009, the Group acquired 100% of the issued share capital of Aupec Limited ("Aupec"), an unlisted company based in Scotland. Aupec is a respected global authority in energy sector economics, valuation and benchmarking and has been providing economic consultancy services to the oil and gas sector for over 20 years. Further information about the acquisition is available in the Circular issued 12 October 2009 and approved by shareholders in 2 November 2009; this document is available on the Group's website (www.parkmeadgroup.com). The acquisition has been accounted for using the purchase method of accounting.

The acquisition of Aupec will further strengthen the Group's high level financial, government, major energy company and technical relationships in the oil and gas sector. Furthermore, Aupec's substantial technical capabilities will enable the Group to undertake asset evaluation work in-house.

Details of net assets acquired and goodwill are as follows:

		2010
		£
Purchase consideration
-       Cash paid		1,000,000
-       Shares issued of 235,294,118 New Ordinary Shares		2,882,353
Total purchase consideration		3,882,353
Share of fair value of net assets acquired (see below)		(1,708,821)
Goodwill		2,173,532

The goodwill is attributable to the value of the assembled professional team in place acquired with this business as well as the company's relationships with a number of developing world government ministries, which cannot be separately recognised as an intangible asset.

The assets and liabilities arising from the acquisition are as follows;

	Fair value	Acquiree's carrying amount
	£	£
Cash and cash equivalents	2,558,808	2,558,808
Plant and equipment	38,996	38,996
Intangible assets	3,773	3,773
Contracts and Customer relationships	211,574	-
Inventories	-	22,033
Deferred tax asset	59,125	-
Trade and other receivables	414,339	414,075
Trade and other payables	(1,465,977)	(1,707,918)
Current tax liabilities	(53,200)	-
Deferred tax liability	(58,617)	-
Net assets acquired	1,708,821	1,329,767

Cash flow on acquisition		£
Net cash acquired with the company		2,558,808
Cash paid		(1,000,000)
Net cash inflow		1,558,808

The amounts recognised at acquisition date in respect of trade receivables acquired in the business combination approximate their fair value. The trade receivables are short-term in nature and therefore the amounts recognised at acquisition date equal the gross contractual amounts receivable.

Transaction costs of £255,297 relating to the acquisition of Aupec Limited have been recognised as an expense and included within administrative expenses in the Income Statement.

If the acquisition of Aupec Limited had been completed on the first day of the financial year, group revenues for the period would have been £3,765,229 and group profit attributable to equity holders of the parent would have been £1,188,764.

Aupec Limited contributed £2,244,151 to the Group's revenue and £515,685 to the Group's profit before tax for the period from the date of acquisition to the year end date.

The Directors believe that the Group has only one reportable business segment, which is investment and advisory as all revenues were generated by corporate finance advisory fees, and one geographical segment, as all activity is carried out from the United Kingdom.

3.         LOSS PER SHARE

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

		2010		2009
	Loss per 0.01p (2009 - 5p) ordinary share from continuing operations (pence)- basic and diluted	(0.29p)		(1.72p)
	Loss per 0.01p (2009 - 5p)  ordinary share from discontinued operations (pence)- basic and diluted	(0.02p)		(0.15p)
	Loss per 0.01p (2009 - 5p)  ordinary share from total operations (pence)- basic and diluted	(0.31p)		(1.87p)

The calculations were based on the following information:

			2010		2009
	Loss attributable to ordinary shareholders (£)
	- continuing operations		(1,494,552)		(6,326,722)
	- discontinued operations		(108,825)		(569,652)
	- total		(1,603,377)		(6,896,374)
	Weighted average number of shares in issue
	- basic		522,411,079		368,341,780
	- diluted		522,411,079		368,341,780

Loss per share is calculated by dividing the loss for the year by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share

Loss 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 which were not included in the calculation for the period presented.

4.         NOTES TO THE STATEMENT OF CASH FLOWS

Reconciliation of operating loss to net cash flow from continuing operations

		GROUP		COMPANY
		2010	2009	2010	2009
		£	£	£	£
Operating loss		(1,459,811)	(2,542,723)	(1,950,034)	(2,518,479)
Depreciation and impairment of property, plant and equipment		162,081	71,024	151,767	71,024
Amortisation of intangible assets		124,075	-	-	-
Gain on disposal of fixed assets		3,251	-	3,251	-
Charge for share based payments		78,118	136,467	78,118	136,467
Decrease/(Increase) in receivables		(3,116,336)	1,214,775	583,739	1,203,179
(Decrease)/Increase in payables		1,596,694	(269,706)	672,091	(275,545)
Decrease in other provisions		(1,660)	(15,217)	(1,660)	(15,217)
Net cash flow from operations		(2,613,588)	(1,405,380)	(462,728)	(1,398,571)

5.         APPROVAL OF THIS PRELIMINARY ANNOUNCEMENT

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 22 September 2010.

6.         POSTING OF ANNUAL REPORT & ACCOUNTS

Copies of the Annual Report & Accounts will be posted to shareholders on 24 September 2010. 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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