Interim Results

Capitaltech PLC 11 December 2001 CapitalTech plc Half-Yearly Report 6 months to 31 October 2001 CapitalTech plc CHAIRMAN'S STATEMENT HALF-YEAR TO 31 OCTOBER 2001 I am pleased to submit our report for the half-year to 31 October 2001. Significant improvements throughout the figures reported reflect that we are continuing to achieve our desired strategy of creating a solid and valuable asset base, comprising a sound residential property portfolio. The loss for the half-year, £692,250 was substantially less than either half of the previous year. During the period we reduced property voids and arrears, increased rentals, worked through the bulk of our repair programme, came to the end of a period of incurring costs in cutting costs, and saw the first three months' results from our acquisition of 220 flats south of the River Clyde in Glasgow, which we call 'Portfolio 220'. As a result, we returned to a healthy operating profit of £595,000. Turnover was only slightly down despite completing a large disposal in the final days of the previous year and including only three months' results of Portfolio 220. Turning to the balance sheet, total net asset value has increased to £ 19,187,469, reflecting our October rights issue. We do not carry out a property revaluation at the half-year date. Our residential property portfolio amounted to £51,785,755, having been increased by the acquisition of Portfolio 220, valued on acquisition at £ 9,404,000, less disposals. During the half-year we continued our policy of selling with vacant possession flats and houses where we did not foresee good rental prospects or future capital growth, completing in the half-year sales of 155 units at an aggregate price of £7,327,451. That loss on disposal of so much property of £72,000 was less than the sale costs confirms that the sales were achieved at prices above the 30 April 2001 valuation. Perhaps the most striking feature of the balance sheet follows our re-arrangement of our banking facilities and loans, as earlier reported to you. The report shows net current assets of £2,637,791, almost wholly represented by cash of £2,589,021. As you are already aware, we had not drawn fully on our new bank facility, and still have not despite the acquisition of the Belgrave companies referred to below. Total borrowings at 31 October of £ 35,319,077, were of a similar amount to the borrowings at 30 April 2001 (which were shown partly as current and partly as longer-term borrowings) despite the acquisition of Portfolio 220. Negative goodwill was introduced by FRS 10 in 1998. In our case, it is reflected in the accounts as follows: Property acquired is brought in at the valuation at the time of acquisition. When we acquire property at less than valuation, the discount is deducted from the balance sheet as negative goodwill unless and until the properties are sold, at which time the negative goodwill is transferred to the profit & loss account as profit. Thus, in the case of Portfolio 220, the total cost of acquiring it was less than the value at acquisition by £923,948, which is included in negative goodwill. CapitalTech plc CHAIRMAN'S STATEMENT The practical value of our assets is found by adding back negative goodwill. The net asset value per share was diluted by the rights issue, partly counteracted by the share buy back, but does not reflect the additional value, beyond cost, of Portfolio 220, this being negative goodwill. Accordingly, it is fair of me to set out the realistic value per share of the Company's net assets as follows:- Net assets per accounts £19,187,469 Negative goodwill £1,178,114 Practical value of net assets £20,365,583 With 74,353,688 shares in issue this results in a practical value of net assets per share of 27.4p. Since 31 October 2001, we acquired Belgrave Residential Investments Limited and Belgrave Residential Assets Limited. On this transaction a further £3,920,000 of negative goodwill arises, being valuation at acquisition less costs of acquisition, which is equivalent to a further 5.3p per share. The portfolio of the Belgrave companies, already announced in some detail, contains some excellent property. The borrowings taken to pay part of the consideration, when aggregated with the level of borrowings in the Belgrave companies at acquisition, is at a level higher than we intend to maintain in respect of that portfolio and you can anticipate that we shall be making sales from the Edinburgh Trinity and Glasgow West End properties, where the values have shown substantial growth with consequently lower rental yields. Among the other properties in the portfolio are some, such as the Edinburgh West properties, which we could very easily sell very quickly, but it could be better to retain them in view of the prospects of further capital growth ahead. As you are aware, our whole portfolio comprises modestly priced flats and houses, where lower interest rates do appear to be maintaining a strong market. As to the immediate future, while we continue to look at other opportunities, and shall look further if more present themselves, in general you can expect a period of consolidation as we seek to achieve full cover of all costs from rentals and to reduce gearing. Robert F M Adair Chairman 10 December 2001 CapitalTech plc UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 months to 6 months to 12 months to 31-Oct 01 31-Oct-00 30-Apr-01 £000 £000 £000 (unaudited) (unaudited) (audited) TURNOVER Continuing operations 1,573 1,951 4,211 Acquisitions 240 - - Share of joint venture 2 5 ----- ----- ----- 1,815 1,951 4,216 ----- ----- ----- GROUP OPERATING PROFIT/(LOSS) Ongoing operations 394 (238) 182 Acquisitions 200 - - ----- ----- ----- 594 (238) 182 Share of operating profit of joint venture 1 - 1 ----- ----- ----- TOTAL OPERATING PROFIT/(LOSS) 595 (238) 183 Continuing operations: Provision for unlisted investments (83) (202) (1,639) Gain on disposal of other fixed asset 1 - 823 investment Net loss on disposal of investment (72) (227) (669) properties Discontinued operations 3 - (18) Other income - 286 - Net interest payable (1,141) (1,561) (3,257) ----- ----- ----- LOSS ON ORDINARY ACTIVITIES BEFORE TAX (697) (1,942) (4,577) Taxation 5 - (28) ----- ----- ----- LOSS ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY (692) (1,942) (4,605) Preference share dividend - (1) (8) ----- ----- ----- RESULT FOR PERIOD (692) (1,943) (4,613) ----- ----- ----- Loss per share - basic and diluted (1.17p) (4.93p) (9.51p) ----- ----- ----- CapitalTech plc UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEET 31-Oct 01 31-Oct-00 30-Apr-01 £000 £000 £000 (restated) (unaudited) (unaudited) (audited) FIXED ASSETS Intangible assets Positive goodwill 433 626 498 Negative goodwill (1,178) (360) (296) ----- ----- ----- (745) 266 202 Tangible assets Investment properties 51,786 67,043 49,500 Other 31 69 35 ----- ----- ----- 51,817 67,112 49,535 Investments Joint venture - share of gross assets 48 48 48 - share of gross (39) (36) (38) liabilities ----- ----- ----- 9 12 10 Other 788 1,046 862 ----- ----- ----- 797 1,058 872 ----- ----- ----- 51,869 68,436 50,609 CURRENT ASSETS Debtors 1,515 1,591 4,485 Cash at bank and in hand 2,589 835 1,655 ----- ----- ----- 4,104 2,426 6,140 CREDITORS: amounts falling due within one year Borrowings - 12,376 7,738 Other creditors 1,467 2,972 2,693 ----- ----- ----- 1,467 15,348 10,431 ----- ----- ----- NET CURRENT ASSETS/(LIABILITIES) 2,637 (12,922) (4,291) ----- ----- ----- TOTAL ASSETS LESS CURRENT LIABILITIES 54,506 55,514 46,318 CREDITORS: amounts falling due after more than one year (35,319) (37,072) (28,050) ----- ----- ----- 19,187 18,442 18,268 ----- ----- ----- CAPITAL AND RESERVES Called up share capital 1,487 1,909 1,798 Deferred consideration 193 193 193 Share premium account 9,937 8,631 8,631 Revaluation reserve - investment properties 4,658 1,747 4,673 other 3 97 38 Capital redemption reserve 792 30 141 Merger reserve 9,282 9,282 9,282 Profit and loss account (7,165) (3,447) (6,488) ----- ----- ----- 19,187 18,442 18,268 ----- ----- ----- CapitalTech plc STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months to 6 months to 12 months to 31-Oct 01 31-Oct-00 30-Apr-01 £000 £000 £000 (unaudited) (unaudited) (audited) Loss attributable to members of the parent (692) (1,942) (4,605) company Unrealised surplus on revaluation of - - 3,094 properties Unrealised deficit on revaluation of unlisted (35) - (58) investments ----- ----- ----- Total recognised gains and losses relating to (727) (1,942) (1,569) period ----- ----- ----- GROUP RECONCILIATION OF SHAREHOLDERS' FUNDS 6 months to 6 months to 12 months to 31-Oct 01 31-Oct-00 30-Apr-01 £000 £000 £000 (restated) (unaudited) (unaudited) (audited) Total recognised gains and losses (727) (1,942) (1,569) Preference share dividend - (1) (8) New shares issued 400 503 503 Share premium arising on new shares 1,544 8,584 8,584 issued Redemption of preference share capital - (19) (120) Purchase of ordinary shares (298) - (439) ----- ----- ----- Total movements during the year 919 7,125 6,951 Opening shareholders' funds 18,268 11,317 11,317 ----- ----- ----- Closing shareholders' funds 19,187 18,442 18,268 ----- ----- ----- BASIS OF PREPARATION The interim financial statements are unaudited and do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. These statements have been prepared on the basis of the accounting policies set out in the Group's 2001 Annual Report and Accounts and were approved by the board of directors on 10 December 2001. Financial statements for the year ended 30 April 2001 are abridged statements; full accounts with an unqualified audit report have been lodged with the Registrar of Companies. LOSS PER ORDINARY SHARE The calculation of basic and diluted loss per ordinary share is based on the following: 6 months 6 months 12 months to to to 31-Oct 01 31-Oct-00 30-Apr-01 £000 £000 £000 Deficit (692) (1,942) (4,605) Preference dividend - (1) (8) ----- ----- ----- (692) (1,943) (4,613) ----- ----- ----- The weighted average number of ordinary shares in issue during the period: Basic 59,046,527 39,447,227 48,492,361 Dilutive potential ordinary shares arising from share option schemes - - - ----- ----- ----- 59,046,527 39,447,227 48,492,361 ----- ----- ----- POST BALANCE SHEET EVENTS On 26 November 2001 the group acquired the entire issued share capital of Belgrave Residential Assets Limited and Belgrave Residential Investments Limited for a consideration of £3,950,000 and repaid to the vendors intercompany debt due by the Belgrave companies of £1,103,671. The group also arranged replacement banking for the bank borrowings of the Belgrave companies of £19,985,462. This acquisition, which added 465 flats to the group's portfolio, intercompany repayment and replacement borrowings were met by bank lending of £23,300,000 and group cash resources. DIVIDEND The Company does not intend to pay an interim dividend at this time. HALF-YEARLY REPORT The half-yearly report will be posted to shareholders shortly and copies will be available, free of charge for one month, from the Company Secretary, CapitalTech plc, James Sellars House, 144 West George Street, Glasgow, G2 2HG. INDEPENDENT REVIEW REPORT TO CapitalTech plc Introduction We have been instructed by the company to review the financial information for the six months ended 31 October 2001 set out on pages 4 to 7 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. Where a company is fully listed, the directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. The directors of CapitalTech plc have voluntarily complied with this requirement in preparing the interim review report. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999 /4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2001. BDO Stoy Hayward Chartered Accountants Glasgow 10 December 2001

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