Final Results

Parkmead Group (The) PLC 27 September 2007 Thursday 27 September 2007 THE PARKMEAD GROUP PLC ('Parkmead' or the 'Group') Preliminary results for the 12 months ended 30 June 2007 The Parkmead Group plc (PMG) today announces its unaudited preliminary results for the year ended 30 June 2007. Financial highlights - Return to profitability with Â£0.3 million profit after tax and minority interest (2006: loss Â£6.4 million restated) - Cash balances increased by 106% from Â£6.2 million to Â£12.8 million - Debt free balance sheet - Successful sale of the Group's technology based former trading subsidiaries and certain other technology investments - Profit per share 0.08 pence (2006: Loss per share 3.71 pence, restated) Commenting on the results, Colin Goodall, Chairman of The Parkmead Group plc, said: 'We have successfully restructured the Group and have returned it to profitability. Our balance sheet has been strengthened though the successful exit from our former technology portfolio; as at the year end the Group had Â£12.8 million in cash and no debt. The Group will now focus on the energy sector; providing corporate finance services and making principal investments. 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 - Nominated Adviser 0207 149 6482 Rick Thompson/Carl Holmes CHAIRMAN'S STATEMENT Development of the Group, Results and Dividends I am pleased to announce that the Group returned to profitability for the year ended 30 June 2007 recording a profit before tax and minority interests of Â£0.3 million (2006: loss Â£6.2 million, restated). This is a significant improvement over 2006 and is indicative of the progress that the Group has made. At the operating level the Group recorded a loss of Â£4.6 million (2006: loss Â£3.9 million restated). There were, however a number of exceptional items, one off costs, amortisation of goodwill and impairment charges which gave rise to this. In particular, the Group wrote down the carrying value of Quayside Corporate Services Limited ('Quayside' the Group's turnaround business) by Â£2.6 million from Â£5.3 million to Â£2.7 million and also expensed Â£0.6 million of amortisation relating to Quayside. During the year, the Group invested in a number of business development activities. The costs associated with this investment of Â£0.6 million were expensed in the year. Prior to the Group relocating in August this year a provision was made for dilapidations, onerous lease commitments and accelerated depreciation (relating to the Group's former offices) of Â£0.3 million. Accordingly, the operating loss before these exceptional and impairment costs was Â£0.5 million; a significant improvement on 2006 (loss Â£3.9 million restated). The Group was particularly successful in divesting of a number of its trading subsidiaries and certain portfolio investments. Overall a profit on sale of subsidiaries of Â£4.6 million was recorded (2006: Â£nil). In accordance with its accounting policy, the Group revalued its remaining portfolio investments which gave rise to a charge of Â£0.2 million in the year (2006 charge: Â£2.7 million). Net interest income was significantly higher at Â£0.4 million (2006: Â£nil) due mainly to higher than anticipated proceeds from asset sales. Overall the Group recorded a profit for the year, after tax and minority interests and share based payments of Â£0.3 million (2006 loss: Â£6.4 million restated). The Board is not recommending the payment of a dividend (2006: Â£nil). Principal Investment and Advisory Our revenues grew 17% to Â£3.7 million (2006: Â£3.2 million). The Group provided corporate finance and advisory services to clients predominantly in the energy sector including advising on disposals, acquisitions and corporate restructurings. Following the successful realisation of proceeds from the disposal of the Group's former subsidiaries, the Group will look to make investments either as principal or along side financing partners in energy related assets during the course of the coming year. Our turnaround business activities are carried out through Quayside. Before provisions for doubtful debts Quayside recorded a profit of Â£0.2 million, however, at present, given the unpredictable nature of the distressed company debt markets, we have decided to set aside Â£0.5 million for doubtful debts associated with trade receivables. The impact of this provision caused Quayside to record a loss for the year of Â£0.3 million. Portfolio and Subsidiary Investments The Group was successful in disposing of the majority of its technology assets. The Group sold its holding in AVM in September 2006 for a cash consideration of Â£1.3 million before expenses. AVM was carried in the Company's balance sheet at Â£0.5 million giving a profit before expenses of Â£0.8 million, however, on deconsolidation this profit reduced to Â£0.2 million. The Group's holding in Yospace was sold for a cash consideration of Â£5.0 million before expenses in February 2007. On deconsolidation and repayment of debt the sale realised a profit of Â£4.0 million. In February of this year the Group disposed of its holding in Respond Group Limited for a cash consideration of Â£2.1 million before expenses, which after repayment of debt, gave rise to a profit of Â£0.4 million. The successful conclusion of these deals demonstrates the Group's capacity to execute transactions. Furthermore, as a result, the Group's balance sheet has been strengthened significantly which provides funds for the Group's principal investment activities. The Group's remaining technology portfolio is comprised of small holdings in Future Route Limited, Metapraxis Limited, Red M Group Limited, Retento Limited and Speed Trap Limited. The Group revalued these holdings with an overall charge of Â£0.2 million being recognised during the year. The Group's investment in Thruvision Limited has been revalued by Â£0.2 million from Â£1.1 million to Â£1.3 million following a further funding round subsequent to the Group's investment. Key Performance Indicators The Board monitors the performance of its businesses through the reporting of monthly management accounts that show progress against budget, highlighting significant variances, positive and negative. The Board also receives cash flow reports on a monthly basis. The Board considers the Group's pipeline of business at each Board meeting and tests Executive Management's expectation of conversion. Additionally, key performance indicators are set, against which the Board can assess performance and prospects for the businesses. With regard to Quayside, the Board monitors each assignment undertaken against budgeted profit and gross profit margin and for the year ended 30 June 2007 gross margins averaged 54%. With regard to the corporate finance business, revenue is analysed between recurring revenue streams and success fees. The baseline target is to cover fixed costs with recurring revenues and for the year under review fixed costs were covered 127% by recurring revenues. Executive Directors report progress on the Group's investments at each Board meeting. Principal Risks and Uncertainties The principal trading risks of the Group's business are the sourcing of suitable transactions (deal flow) and the ability to recruit and retain experienced executives. With regard to deal flow, the Group has via its Board and other intermediary relationships, access to a number of sources of deal flow which the Board believes is satisfactory to grow the business. With regard to recruitment the Group has been actively recruiting at senior levels over the past year, however, the market remains tight for high quality individuals. As a mitigating strategy the Group has entered into a number of retainer relationships whereby it has access to high quality corporate finance and investment experts such that it can resource deals in a cost effective manner. Outlook Overall it has been a satisfactory year, we have taken steps to focus our business and our core division is performing well. Our balance sheet is significantly strengthened, with cash balances more than doubled to Â£12.8 million (2006: Â£6.2 million) following the asset realisation programme. We have successfully restructured the Group and have returned it to profitability. Our strategy will be to focus on the energy sector; providing corporate finance services and making principal investments to create shareholder value, at an acceptable level of risk. I look forward to the continued development of the Group over the coming year. Colin Goodall 27 September 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2007 (UNAUDITED) NOTES CONTINUING DISCONTINUED TOTAL TOTAL OPERATIONS OPERATIONS 2007 2007 2007 2006 As restated Â£ Â£ Â£ Â£ Turnover 3 3,687,006 3,960,081 7,647,087 13,006,387 Cost of sales 3 (563,840) (1,741,234) (2,305,074) (4,989,539) Gross Profit 3,123,166 2,218,847 5,342,013 8,016,848 Administrative expenses 3 (7,968,244) (2,117,975) (10,086,219) (12,037,581) Other operating income 3 150,987 150,987 106,054 - Operating (loss)/profit 3 (4,694,091) 100,872 (4,593,219) (3,914,679) Profit on disposal of 5 4,613,262 subsidiaries/ investments - Exceptional profit on deemed - 363,715 disposal Amounts written off 4 (154,286) (2,670,624) investments Net interest receivable/ 389,295 (payable) (1,553) Profit/(Loss) on ordinary 3 255,052 (6,223,141) activities before taxation Taxation (5,342) (41,873) Profit/(Loss) on ordinary 249,710 (6,265,014) activities after taxation Minority interest 49,851 (86,587) Profit/(Loss) for the 299,561 (6,351,601) financial year Profit/(Loss) per 5 pence ordinary share (pence) - basic 6 0.08p (3.71p) - diluted 6 0.08p (3.71p) GROUP NOTE OF HISTORICAL COST PROFITS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2007 (UNAUDITED) 2007 2006 As restated Â£ Â£ Profit/(Loss) on ordinary activities before taxation 255,052 (6,223,141) Write-down of previous temporary diminution in value of fixed asset - (306,464) investments charged against revaluation reserve Historical cost profit/(loss) on ordinary activities before taxation 255,052 (6,529,605) Historical cost profit/(loss) for the year retained after taxation and 299,561 (6,658,065) minority interest GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2007 (UNAUDITED) 2007 2006 As restated Â£ Â£ Profit/(Loss) for the financial year attributable to members of the parent 299,561 (6,351,601) Company Unrealised surplus on revaluation of fixed asset investments 235,943 - Write-down of previous revaluation of fixed asset investments - (1,095,754) Currency translation adjustment - 9,772 Total recognised gains/(losses) relating to the year 535,504 (7,437,583) Prior year adjustment - FRS 20 (1,750,798) Total recognised loss since the last annual report (1,215,294) CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2007 (UNAUDITED) NOTES 2007 2007 2006 2006 As restated As restated Â£ Â£ Â£ Â£ Fixed assets Intangible assets 2,672,793 8,176,776 Tangible assets 127,660 598,355 Investments 1,547,308 3,059,365 Investments in joint ventures Share of gross assets 50,000 - 4,397,761 11,834,496 Current assets Stock 252,971 - Debtors 1,118,585 4,127,827 Cash at bank and in hand 12,758,804 6,207,315 13,877,389 10,588,113 Creditors Amounts falling due within one year (1,192,949) (5,187,657) Net current assets 12,684,440 5,400,456 Total assets less current liabilities 17,082,201 17,234,952 Creditors Amounts falling due after more than one year - (694,982) Provision for liabilities and charges (343,798) (108,816) Net assets 16,738,403 16,431,154 Capital and reserves Called up share capital 18,417,089 18,417,089 Merger reserve (952,109) (952,109) Revaluation reserve 235,943 - Other reserve (1,128,008) (1,128,008) Profit and loss account 165,488 (243,049) Equity shareholders' funds 7 16,738,403 16,093,923 Minority interests - 337,231 Capital employed 16,738,403 16,431,154 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2007 (UNAUDITED) NOTES 2007 2006 Â£ Â£ Net cash inflow/(outflow) from operating activities 8(a) 384,107 (1,018,444) Returns on investments and servicing of finance 8 (b) 314,084 (1,553) Taxation (791,859) 83,483 Capital expenditure and financial investment 8 (b) 1,925,921 (1,221,727) Acquisitions and disposals 8 (b) 5,574,315 (406,776) Cash inflow/(outflow) before financing 7,406,568 (2,565,017) Financing 8 (b) (647,768) 10,584,419 Increase in cash 6,758,800 8,019,402 CONSOLIDATED RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS NOTES 2007 2006 Â£ Â£ Increase in cash in the year 6,758,800 8,019,402 Decrease in debt and lease financing 647,768 1,632,262 Finance leases acquired with subsidiaries (9,132) - Other non-cash changes - new finance leases (12,690) - Other non-cash changes - share based award - (2,678,849) Movement in net funds 7,406,568 6,950,993 Net funds/(debt) at 1 July 5,352,236 (1,598,757) Net funds at 30 June 8 (c ) 12,758,804 5,352,236 NOTES TO THE PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2007 1 PRELIMINARY ANNOUNCEMENT The preliminary results for the year ended 30 June 2007 are unaudited. The financial information contained in this announcement does not constitute the Group's audited statutory financial statements for the year ended 30 June 2007 within the meaning of Section 240 of the Companies Act 1985. The financial information for the period from incorporation to 30 June 2006 has been extracted from the Group's statutory financial statements for that period which have been delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified and did not contain any statements under either Section 237(2) (accounting records or returns inadequate or accounts not agreeing with records and returns) or 237(3) (failure to obtain necessary information and explanations) of the Companies' Act 1985. The financial information contained in this announcement has been prepared under accounting policies set out in Group financial statements for the period ended 30 June 2006, except where noted below in the basis of preparation. As at the date of this announcement, the auditors have not reported on the Group's financial statements for the year ended 30 June 2007, nor have such financial statements been delivered to the Registrar of Companies. The financial statements for the year ended 30 June 2007 will be distributed to shareholders prior to the Annual General Meeting, and then filed with the Registrar of Companies. 2 ACCOUNTING POLICIES Basis of preparation The financial statements are prepared on a going concern basis, under the historical cost convention modified to include the revaluation of fixed asset investments and in accordance with the Companies Act 1985 and applicable accounting standards in the United Kingdom. Changes in accounting policy The Group has adopted FRS 20 'Share based payments' during the year. The adoption of this standard represents a change in accounting policy and the comparative figures have been restated accordingly. The effect was to increase administrative expense by Â£108,976 (2006: Â£169,343 for share options and Â£1,441,556 for other share based awards). The effect on net assets as at 1 July 2006 for the share options was Â£nil as the credit entry for the option charge has been taken directly to equity in accordance with FRS 20. With regard to other share based awards, the effect was to reduce net assets by Â£2,569,564 which comprised recognition of the charge of Â£1,441,556 included in administrative expenses plus a debit to other reserves of Â£1,128,008 representing the remainder of the transaction through the employee benefit trust. 3 SEGMENTAL ANALYSIS a. Business Segment The Group is organised into three business segments: Investment and advisory, Software development, support and marketing and Design, supply and install of audio visual systems. Turnover Profit/(Loss) on Ordinary Net Assets Activities Before Taxation and Minority Interest 2007 2006 2007 2006 2007 2006 As restated As restated Â£ Â£ Â£ Â£ Â£ Â£ Continuing Operations: Investment and advisory 3,719,006 3,286,875 358,831 (5,956,616) 16,738,403 16,128,397 Less: inter segmental sales (32,000) (132,000) - - - - 3,687,006 3,154,875 358,831 (5,956,616) 16,738,403 16,128,397 Discontinued Operations: Software development, support 1,153,658 1,884,640 (266,455) (245,846) (963,426) and marketing - Investment and advisory - 22,497 3,834 (376,550) - (2,975) Design, supply and install of 2,806,423 7,944,375 158,842 355,871 - 1,269,158 audio visual systems 3,960,081 9,851,512 (103,779) (266,525) - 302,757 7,647,087 13,006,387 255,052 (6,223,141) 16,738,403 16,431,154 b. Geographical Analysis All turnover originated in the UK 2007 2006 i. Turnover by destination Â£ Â£ UK 7,074,432 10,342,438 Europe 572,655 952,594 USA and Canada 1,697,303 - Other - 14,052 7,647,087 13,006,387 2007 2006 As restated ii. Profit/(Loss) on ordinary activities before taxation Â£ Â£ UK 251,218 (5,846,591) USA and Canada 3,834 (376,550) 255,052 (6,223,141) 2007 2006 As restated iii. Net assets/(liabilities) Â£ Â£ UK 16,738,403 16,434,129 USA and Canada - (2,975) 16,738,403 16,431,154 The segmental analysis of turnover, profit before tax and net assets for the United Kingdom includes Â£2,806,423 (2006: Â£7,944,375), Â£158,842 (2006: Â£355,871) and Â£nil (2006: Â£1,269,158) at 30 June 2007 in respect of Audio Visual Machines Limited and its subsidiaries which were sold during the year. The segmental analysis of turnover, loss before tax and net assets for the United Kingdom includes Â£588,366 (2006: Â£962,046), loss Â£(266,455) (2006: loss Â£ (245,846)) and Â£nil (2006: (Â£963,426)) at 30 June 2007 in respect of Yospace Technologies Limited which was sold during the year. The segmental analysis of turnover for Europe also includes Â£565,292 (2006: Â£922,594) in respect of Yospace Technologies Limited which was sold during the year. The segmental analysis of turnover, profit/(loss) before tax and net assets for the USA and Canada includes Â£nil (2006: Â£22,497), Â£3,834 (2006: loss Â£(376,550)) and Â£nil (2006: Â£(2,975)) in respect of US operations which were discontinued during the year. The analysis of operating (loss)/profit between continuing and discontinued operations is set out below: 2007 2006 Continuing Discontinued Total Continuing Discontinued Total Operations Operations As restated As restated As restated Â£ Â£ Â£ Â£ Â£ Â£ Turnover 3,687,006 3,960,081 7,647,087 3,154,875 9,851,512 13,006,387 Cost of sales (563,840) (1,741,234) (2,305,074) (316,625) (4,672,914) (4,989,539) Gross profit 3,123,166 2,218,847 5,342,013 2,838,250 5,178,598 8,016,848 Administrative (7,968,244) (2,117,975) (10,086,219) (6,820,469) (5,217,112) (12,037,581) expenses Other operating - 150,987 106,054 106,054 income 150,987 - Operating (loss)/ (4,694,091) 100,872 (4,593,219) (3,876,165) (38,514) (3,914,679) profit 4 AMOUNTS WRITTEN OFF INVESTMENTS In accordance with the Group's accounting policy, the Group has assessed the fair value of its fixed asset investments at the balance sheet date. The assessment has resulted in a write-down of Â£154,286 (2006: Â£2,670,624) to the profit and loss account. 5 PROFIT ON DISPOSAL OF SUBSIDIARIES/INVESTMENTS On 29 September 2006 the Group sold its entire holding in Audio Visual Machines Limited for a cash consideration of Â£1,275,000. After expenses the Group recognised a profit on disposal of Â£162,940 in the profit and loss account. On 2 February 2007 the Group sold its entire holding in Yospace Technologies Limited for a total cash consideration of Â£4,896,164, including repayment of debt and interest. After expenses the Group recognised a profit on disposal of Â£4,004,167 in the profit and loss account. On 20 February 2007 the Group sold its entire holding in Respond Group Limited for a consideration of Â£2,067,969, including repayment of debt and interest. After expenses the Group recognised a profit on disposal of Â£446,155. 6 PROFIT/(LOSS) PER SHARE The basic profit/(loss) per share has been calculated by dividing the profit/ (loss) attributable to equity shareholders funds by the weighted average number of shares in issue during the year. The profit/(loss) and weighted average number of shares used in the calculation of the profit/(loss) per share are set out below: 2007 2006 As restated Basic profit / (loss) per share Profit / (Loss) attributable to ordinary shareholders (Â£) 299,561 (6,351,601) Weighted average number of shares - number 368,341,780 171,332,649 Profit / (Loss) per 5 pence ordinary share (pence) 0.08p (3.71p) - basic Diluted Loss per share The diluted profit/(loss) per share has been calculated by dividing the profit/ (loss) attributable to equity shareholders funds by the weighted average number of diluted shares in issue during the year. The profit/(loss) and weighted average number of shares used in the calculation of the profit/(loss) per share are set out below: 2007 2006 As restated Basic profit/(loss) per share Profit/(Loss) attributable to ordinary shareholders (Â£) 299,561 (6,351,601) Weighted average number of shares - number 368,341,780 171,332,649 Weighted average number of options - number 4,511,549 - Weighted average number of diluted shares - number 372,853,329 171,332,649 Profit/(Loss) per 5 pence ordinary share (pence) 0.08p (3.71p) - diluted 7 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS As restated 2007 2006 Â£ Â£ At 1 July as previously reported 18,663,487 6,274,489 Prior year adjustments (Note 2) (2,569,564) - At 1 July as restated 16,093,923 6,274,489 Shares Issued placing - 10,000,000 EBT and share options - 2,679,181 on acquisition of Quayside - 6,000,001 Transaction Costs - (462,500) Revaluation of investment upwards 235,943 - Write down of previously revalued investments - (1,095,754) Currency translation adjustment - 9,772 Other reserve - Shared based award - (1,128,008) Cost of share options 108,976 168,343 Profit / (Loss) for the year 299,561 (6,351,601) At 30 June 16,738,403 16,093,923 8 NOTES TO THE CASH FLOW STATEMENT (a) Reconciliation of operating (loss)/profit to net cash inflow/ (outflow) from operating activities 2007 2006 CONTINUING DISCONTINUED TOTAL TOTAL OPERATIONS OPERATIONS Â£ Â£ Â£ Â£ Operating (loss)/profit (4,694,091) 100,872 (4,593,219) (3,914,679) Depreciation 90,852 178,770 72,688 18,164 Amortisation and impairment of 3,198,292 74,377 3,272,669 426,894 intangible assets Gain on disposal of fixed assets (1,144) (1,078) 66 - Provision for share based payments 108,976 - 108,976 1,609,899 (Increase)/ Decrease in stocks 25,299 25,299 (22,566) - (Increase)/Decrease in debtors 642,678 (163,559) (294,315) (806,237) Increase/(Decrease) in creditors (210,631) 1,611,000 1,400,369 897,553 Increase in other provisions 243,798 243,798 100,000 - Net cash inflow/(outflow) from (639,434) 1,023,541 384,107 (1,018,444) operating activities (b) Analysis of cash flows for headings netted in the cash flow statement 2007 2006 Â£ Â£ Returns on investments and servicing of finance Interest received 452,676 300,353 Interest paid (137,474) (301,392) Interest element of finance lease rental payments (1,118) (514) Net cash inflow/(outflow) from returns on investments and servicing of 314,084 finance (1,553) Capital expenditure and financial investment Payments to acquire tangible fixed assets (113,104) (95,222) Payments to acquire fixed asset investments - (1,270,505) Receipts from sale of tangible fixed assets 423 - Receipts from sale of fixed asset investments 2,038,602 144,000 Net cash inflow/(outflow) from capital expenditure and financial 1,925,921 (1,221,727) investment Acquisitions and disposals Purchase of subsidiary (916,596) - Sale of subsidiaries 5,506,445 - Overdraft/(Cash) disposed of with subsidiaries 67,870 - Cash/(Overdraft) acquired with subsidiary 509,820 - Net cash inflow/(outflow) from acquisitions and disposals 5,574,315 (406,776) Financing Issue of ordinary share capital 12,679,181 - Transaction costs (462,500) - Capital element of finance lease rental payments (19,278) (2,544) Decrease in short term borrowings (51,795) (31,139) Decrease in long term borrowing (576,695) (1,598,579) Net cash inflow/(outflow) from financing (647,768) 10,584,419 (c) Analysis of Change in Net Funds At 1 July 2006 Cash flow Disposals At 30 June 2007 Â£ Â£ Â£ Â£ Cash 6,207,315 6,622,786 (71,297) 12,758,804 Overdraft (207,311) 68,144 139,167 - Short term loans (51,795) 25,000 26,795 - Finance lease obligations (19,278) 12,176 7,102 - Long term loans (426,695) (2,500) 429,195 - Loan stock (150,000) 150,000 - - 5,352,236 6,875,606 530,962 12,758,804 This information is provided by RNS The company news service from the London Stock Exchange

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