Trading Statement, Disposal & Funding Commitment


 

TIDMREAL 
 
RNS Number : 4134G 
Real Office Group PLC 
01 February 2010 
 

Real Office Group plc ("ROG", the "Group or "the Company") 
Trading Statement, Disposal of ISIS Projects and Funding Commitment 
 
Trading update 
 
The Board of ROG is pleased to set out below a trading update for the Group. The 
Board views the current financial performance as satisfactory when set against 
the challenging global economy and specific local issues and is working towards 
improving the position further.  It  is confident in the strong current order 
book and is particularly pleased with the trading position of Pacific Interiors 
Limited and the move into profit for Pacific India.  The Board looks forward to 
updating investors on its results for the interim period ended 31 January 2010 
in due course. 
 
·    The Group's financial performance for the period has been impacted by 
losses incurred in ISIS Projects Limited ("ISIS") due to some unexpected 
contract delays in late 2009.  ISIS has now been sold to Leander Group Limited 
meaning these losses will no longer impact Group results. 
 
·    It is expected that, excluding the results of ISIS, the Group will still 
have incurred a modest loss mainly due to continued difficulty in trading in its 
subsidiary Pacific Middle East LLC ("PME") in Qatar. 
 
·    PME has suffered delays in the commencement of certain key projects and 
continued difficulties in executing its existing projects.  Further its cash 
position has been stretched by the non-settlement of its invoices by a major 
customer. 
 
·    Pacific Interiors Limited ("PIL") continues to trade ahead of management's 
expectations and has secured a number of large projects which underpin its 
future trading to 31 July 2010. 
 
·    Pacific Turnkey Middle East LLC ("PTME") our subsidiaries in the UAE are 
trading positively and although they receive support from PME are starting to 
build their own presence.  They are currently in detailed discussions over a AED 
40m (GBP6.7m) project which would underpin our financial performance in the 
region. 
 
·    Pacific Interiors India Pvt. Limited ("Pacific India") continues to gain 
momentum and has moved into a profitable trading position on a monthly basis. 
Therefore, it is starting to reduce the set up losses incurred in the period to 
date.  Further our partner in India has invested for a 49% equity stake in the 
Pacific India displaying his belief in the future potential of India as a design 
and build market place. 
 
·    The Company remains in early stage discussions with a bank regarding a 
working capital facility and the Chairman has committed to subscribing for GBP1 
million of ROG shares on refinancing of property assets. 
 
 
 
Disposal of ISIS 
 
The Board of ROG announces that on 28th January 2010 the Company disposed of its 
shareholding in ISIS Projects Limited back to CFC Holdings Limited, a wholly 
owned subsidiary of Leander Group Limited ("Leander"), a company controlled by 
Roger Smee who is also Chairman and Chief Executive Officer and majority 
shareholder of the Company with 78% of the ordinary share capital.  Under the 
terms of the original sale agreement the purchase was based upon the net assets 
of ISIS plus an earnout.  Leander has waived its right to more shares under the 
earnout and as such Leander received GBP71k of shares for the sale of ISIS. 
 
The terms of sale were as follows:- 
 
The independent directors took into account the following factors in considering 
the sale of ISIS: 
 
·    Waiver by Leander of deferred consideration of GBP1,505k for the original 
sale of its shares in ISIS to ROG. 
·    The commitment by Roger Smee to invest a further GBP1m in ROG from the sale 
or refinance of property. 
·    Losses incurred by ISIS for the year to date and the prospects to the end 
of the financial year. 
·    Liquidity and burden of the working capital requirements of ISIS on the 
rest of the Group. 
·    Low margins and lack of contribution by ISIS to group results. 
·    Risk of failure based on past performance to achieve growth targets and 
projections for revenue and margins 
·    No loss on sale, final settlement of a liability of GBP986k without any 
cash loss to the group. 
·    Limited exposure to loss going forwards. 
·    Concentration of management focus on Pacific Interiors, Pacific Middle 
East, Pacific India and Pacific UAE which follow a design and build business 
model. 
 
The audited profits attributable to ISIS for the year ended 31 July 2009 were 
GBP308k and the net assets were GBP1,280k.  The sale of ISIS is expected to 
materially reduce the revenue for the Group in the 2010 financial year and 
compared with the prior year.  However, ISIS was not expected to contribute to 
profitability during 2010 and accordingly it is expected that the sale should 
strengthen the remaining Group's financial position. 
 
The Directors of the Company, with the exclusion of Roger Smee and Paddy 
Greenwood who are not considered independent for the purposes of this 
transaction, having consulted with the Nominated Adviser, that the terms of the 
transaction are fair and reasonable insofar as the Company's shareholders are 
concerned. 
 
Irrevocable commitment to subscribe for shares in ROG if required by the Board 
 
The Board is pleased to announce that, on 28th January 2010, Roger Smee 
irrevocably undertook to subscribe for GBP1 million of ROG shares at the higher 
of 10p per share or the 10 day rolling average share price prior to the date of 
subscription should the Board of ROG deem that the Company require additional 
cash resources.  Mr Smee has undertaken to refinance or sell property assets to 
fund this subscription and the Company will update the market in due course. 
The commitment has been entered into as a show of support for Real Office Group 
during a time where financial resources are limited. 
 
Roger Smee commented "I am pleased with the continued progress of the Real 
Office Group companies towards consolidating their position as an international 
design and fit out Group during very difficult trading conditions.  Whilst 
trading has been satisfactory, the one off costs associated with the reverse 
acquisition last year placed pressure on resources and my commitment to invest 
GBP1 million in the Company should help to ensure our strategy implementation is 
not in any way delayed." 
 
 
Enquiries 
 
Real Office Group plc 
Roger Smee, Chairman 
Philip Brady, Finance Director 
0207 822 0989 
 
Cenkos, Nominated Advisor to the Company 
Nick Wells/Elizabeth Bowman 
0207 397 8900 
 
Smithfield 
Reg Hoare 
020 7360 4900 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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