TIDMREAL
RNS Number : 6808F
Real Office Group PLC
28 April 2011
Real Office Group plc
Unaudited interim results for
the six months ended 31 January 2011
CHAIRMAN'S STATEMENT
Following the capital reduction which took place in August 2010
an extraordinary general meeting held on March 23 2011 gave
approval to a reduction of the company's ordinary shares to a
nominal value of 0.1p and the creation of a class of deferred
shares of 1.9p. This action was to give the company greater
flexibility in terms of its ability to issue shares and raise fresh
capital in the future.
Concurrently, the Board took the decision to reduce its interest
in Pacific India Limited to a level at which the activities of that
company no longer require consolidation and the results of the
company can be treated as those of an affiliate and recorded as an
investment. The cost and time constraints of managing an operation
that far away are better dealt with at this time by local
management.
The loss for the period reflected the impact of the poor
economic environment, with weak demand, intense competition and as
a consequence a reduction in both the volume of business and
margins. Economic uncertainty resulted in existing and potential
new clients curbing capital expenditure and delaying or cutting
back on planned expansion. Design and build fit out businesses
thrive in an environment where speed and quality of service are
paramount. In the current economic environment clients have the
time to consider options and appear less willing to appoint
directly and increasingly turn to project managers to approve and
select contractors. We have seen an increase in tendered work which
inevitably results in increased competition and pressure on
margins.
Restructuring of the company's principal UK trading vehicle,
Pacific Interiors Limited took place during the first half
resulting in departure of a number of directors and staff and, the
appointment in of a new chief executive in November 2010. These
changes gave rise to a material reduction in fixed costs with the
objective of curbing losses and repositioning the business
commensurate with reduced volumes of activity.
Similar reductions were made in Real Office Group with one
director leaving. Although I remain Chairman and a director, my
remuneration package with the company was suspended in March 2010
and I have not drawn any remuneration since that time. I am
currently negotiating a compromise agreement whereby all amounts
due but unpaid under my existing contract from 1 April 2010 will be
expunged. Although I will continue in my current role I shall not
be entitled to any salary until the company makes a profit at which
point a new employment contract will be negotiated. The effect of
these changes will be reflected in the second half results.
Major cutbacks in public expenditure announced by the Coalition
Government, which are yet to impact on the market place has
increased uncertainty. Despite the measures referred to above as
announced in March, second half trading by Pacific Interiors
Limited has been weaker than expected with further reductions in
volume of business, reduced margins and continued losses. With no
sign of an immediate change in prospects the Board has taken
appropriate insolvency advice and bids have been sought with a view
to a sale of the business of Pacific Interiors Limited. A further
announcement on this process will be made shortly.
Roger Smee
Chairman
28 April 2011
Income statements
For the period ended 31 January 2011
Six month Six month period
period ended ended Twelve month
31 January 31 January period ended
2011 2010 31 July 2010
Continuing activities: Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue 3 4,673.7 8,553.2 22,612.6
Cost of sales (3,870.5) (7,222.7) (19,784.0)
Gross profit 803.2 1,330.5 2,828.6
Administrative expense-
excluding exceptional
items. (1,277.9) (1,836.8) (3,199.8)
Finance revenue 2.9 - 29.6
Finance costs - (2.4) (3.7)
Other income - - (1.8)
(Loss)/profit before
exceptional items (471.8) (508.7) (347.1)
Administrative expenses
- exceptional items 4 (224.6) (8,849.1) -
Operating (loss)/ profit (696.4) (9,357.8) (347.1)
(Loss)/profit on discounted
activities 5 - (1,045.5) (8,512.5)
(Loss)/profit before
tax (696.4) (10,403.3) (8,859.6)
Tax - (42.9) (29.4)
Minority Interest - 49.3 25.7
(Loss)/profit after tax (696.4) (10.396.9) (8,863.3)
Attributable to:-
Equity holders of the
parent (696.4) (10,396.9) (8,863.3)
Minority interests - (49.3) (25.7)
Earnings per share -
basic (pence) 6 (0.46) (7.24) (0.24)
Earnings per share -
diluted (pence) 6 (0.46) (7.24) (0.24)
The accompanying notes are an integral part of this consolidated
interim financial information
Balance sheets
As at As at As at
31 January 2011 31 January 2010 31 July 2010
As at 31 January 2011 Unaudited Unaudited Audited
Continuing activities:
GBP'000 GBP'000 GBP'000
Non Current assets
Investments - - -
Property, plant and
equipment 112.0 223.2 208.2
112.0 223.2 208.2
Current Assets
Trade and other receivables 7 1,322.6 2,702.0 4,056.7
Cash and short term
deposits 1.2 424.2 1,876.3
1,323.8 3,126.2 5,933.0
Total assets 1,435.8 3,349.4 6,141.2
Current Liabilities
Trade and other payables 8 (3,109.4) (5,629.0) (7,197.8)
Bank overdrafts (79.4) - -
Finance lease obligations - - -
3,188.8) (5,629.0) (7,197.8)
Net current (liabilities)/assets (1,865.0) (2,502.8) (1,264.8)
Non- current liabilities
Other payables - - -
Finance lease obligations - - -
Total liabilities (3,188.8) (5,629.0) (7,197.8)
Net (liabilities)/assets (1,753.0) (2,279.6) (1,056.6)
Equity
Share capital 3,039.0 14,366.9 15,194.9
Share premium - 1,646.6 1,646.6
Special reserve 2,848.3 - -
Unity of interest reserve (7,642.9) (7,983.0) (7,642.9)
Translation reserve - (5.8) 10.6
Minority interest - (49.3) (25.7)
Retained earnings 2.6 (10,255.0) (10,240.1)
Total equity (1,753.0) (2,279.6) (1,056.6)
The accompanying notes are an integral part of this consolidated
interim financial information.
Statements of changes in equity
As at 31 January 2011
Unity
of
Continuing Share Share Convertible interest Forex Retained Minority
activities: capital premium loan reserve reserve earnings interest Total
GBP,000 GBP,000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 July
2009 14,366.9 1,646.6 1,902.7 (19,975.2) (148.1) (952.9) - (3,160.0)
Loss for
the
Period (10,347.6) (49.3) (10,396.9)
Discontinued
activities
before tax 1,045.5 1,045.5
Intercompany
balances 2,033.8 2,033.8
Convertible
loan repayment (19.6) (19.6)
Convertible
loan write-off (1,883.1) (1,883.1)
Forex
translation 142.3 142.3
Reversal
on impairment
of PME 9,958.4 9,958.4
At 31 January
2010 14,366.9 1,646.6 - (7,983.0) (5.8) (10,255.0) (49.3) (2,279.6)
Unity
of
Share Share Special interest Forex Retained Minority
capital premium reserve reserve reserve earnings interest Total
GBP,000 GBP,000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 July
2010 15,194.9 1,646.6 - (7,642.9) 10.6 (10,240.1) (25.7) (1,056.6)
Capital
reconstruction
August 2010 -12,155.9 -1,646.6 2,848.3 - 10,954.2 -
(Loss) for the
period before
exceptional
items (471.8) (471.8)
Exceptional
item: dilution
of interest
in Pacific
India (10.6) (239.7) 25.7 (224.6)
Discontinued
activities
after tax -
At 31 January
2011 3,039.0 - 2,848.3 (7,642.9) - 2.6 - (1,753.0)
The accompanying notes are an integral part of this consolidated
interim financial information.
Cash flow statements
For the period ended 31 January 2011
Six month period Six month period Twelve month
ended ended period ended
31 January 2011 31 January 2010 31 July 2010
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Continuing activities:
Net cash flow from activities
9 (1,945.8) (438.1) 357.5
Cash flows from investing
activities
Capital expenditure (4.3) (8.7) (20.8)
Acquisitions - (12.1) 12.4
Investment income received 2.9 - 29.6
Net cash disposed of
within subsidiaries (7.3) - (91.1)
Cash flow from investing
activities- discounted - - (54.5)
Net cash used in investing
activities (1.4) (20.8) (124.4)
Cash flows from investing
activities
Interest paid - (2.4) (3.7)
Cash flow from investing
activities - discontinued - - (21.1)
Net cash flows from financing
activities - (2.4) (24.8)
Net (decrease) in cash
and cash equivalents (1,954.5) (461.3) 208.3
Effect of foreign exchange
rate changes - 5.7 13.5
Cash and cash equivalents
at start of the period 1,876.3 879.8 1,654.5
Cash and cash equivalents
at the end of the period (78.2) 424.2 1,876.3
The accompanying notes are an integral part of this consolidated
interim financial information.
Notes to the interim financial statement
For the six months ended 31 January 2011
1. Basis of preparation
Real Office Group plc (the "Company") and its subsidiaries
(together the "Group") is a global office design and fit out group
specialising in commercial real estate. The Company is incorporated
and domiciled in the United Kingdom under the provisions of The
Companies Act 2006 with the registered number 06195939. The
Company's registered office is Thavies Inn House, 3-4 Holborn
Circus, London EC1N 2HA.
The financial statements have been prepared on a going concern
basis which assumes that the Group will be able to meet its
liabilities as they fall due for at least 12 months following the
date of approval of these financial statements.
This financial information comprises a consolidated balance
sheet as of 31 January 2011 and related consolidated income
statement, consolidated statement of recognized income and
expenses, consolidated cash flow statements and related notes for
the six months then ended of Real Office Group plc (hereinafter
referred to as 'financial information').
The interim financial results are unaudited and do not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory accounts for the twelve months ended
31(st) July 2010 were approved by the Board of Directors on 1
December 2010 and delivered to the Registrar of Companies. The
report of the auditors on these accounts was unqualified and did
not contain a statement under section 498 of the Companies Act
2006.
The acquisitions of the subsidiaries are deemed to be
'combinations under common control' as ultimate control before and
after the acquisition was the same. As a result, these acquisitions
are outside the scope of IFRS 3 "Business combinations" and have
been consolidated under the principles of the pooling of interest
method of accounting from November 2008, the date common control
was established by the acquisition of the Company.
The directors have reconsidered their capitalization of
"acquisition costs settled in cash" as per the audited accounts to
31 July 2009 released on 30 January 2010 and reiterated in the
further commentary release on 1 February 2010. They remain of the
view that this is the correct treatment and these interim financial
statements have been prepared on that basis.
2. Accounting policies
The accounting policies adopted in the financial information are
consistent with those of the annual financial statements for the
twelve months ended 31 July 2010, as described in those financial
statements.
The preparation of financial statements 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 accounting policies.
3. Segmental information
Geographical segments
The Group operates on a global basis with a subsidiary company
in the United Kingdom and an affiliated company, in which the
company has a minority interest, in India.
Business segments
The group operates in only one business segment, the provision
of office design and fit out services.
Six month period
ended Six month
31 January period ended 31
2011 January 2010
Unaudited Unaudited
GBP'000 GBP'000
Continuing activities:
Geographical analysis by revenue
United Kingdom 4,673.7 8,598.3
India (see Note 4) - 276.3
4,673.7 8,874.6
Inter-company - (321.4)
Total revenue 4,673.7 8,553.2
Geographical analysis by operating
(loss)/profit (pre exceptional costs)
United Kingdom (471.8) (86.7)
India (see Note 4) - (100.6)
(471.8) (187.3)
Inter-company - (321.4)
Total (471.8) (508.7)
4. Exceptional items
Included in the group's financial statements are number of costs
that are considered to be exceptional. These are disclosed separately
on the face of the income statements. A breakdown of these costs
is set out below.
Six month period
ended Six month
31 January period ended 31
2011 January 2010
Unaudited Unaudited
Exceptional items GBP'000 GBP'000
Impairment of investment on PME - 7,637.1
Write-off of non-recoverable balances - 1,212.0
Dilution of Group interest in Pacific
India 224.6 -
Total 224.6 8,849.1
The Group's equity interest in Pacific India was diluted to less
than 25% following issue of further shares to the Company's Indian
partner, Mayaland Hotels Pty Ltd. As the Group no longer has any
control or influence over this company's activities, its interest
in the company's net assets has been written off as an exceptional
item with effect from 1 August 2010. The Group results to 31 January
2011 therefore do not include any share of the trading results
of Pacific India.
5. Discontinued activities
As part of a short term strategy of disposing of or closing down
unprofitable activities, on 28 January 2010 the company disposed
of its investment in Isis Projects Limited. After a major customer
in the Middle East defaulted on its contractual obligations, on
28 February 2010 the decision was taken to close down the operations
in the Pacific Middle East LLC. The impact of these decisions was
reflected in the interim results to 31 January 2010 by excluding
the loss from those discontinued activities in the income statement
in accordance with IAS 34 and by providing for the impairment of
the investment in Pacific Middle East LLC (see note 4). The results
from discontinued activities were as follows:-
Twelve
Six month Six month month
period ended period ended period
31 January 31 January ended 31
2011 2010 July 2010
(Loss)/ Profit for the year Unaudited Unaudited Audited
from discontinued operations GBP'000 GBP'000 GBP'000
Discontinued activities:
Revenue - 5,140.6 7,175.8
Expenses - (6,186.1) (9,809.9)
Loss for the period from
discontinued
operations(attributable to
owners of the company - (1,045.5) (2,634.1
Cash flow from
discontinued
activities
Net cash (outflow) from operating activities- (641.7) (406.6)
Net cash (outflow) from investing activities (13.7) (54.5)
Net cash (outflow) from financing activities
- (6.5) (21.1)
Net cash (outflows) - (661.9) (482.2)
6. Earnings per share
Basic
The basic earnings per share are calculated by dividing the net
(loss)/profit attributable to equity holders of the company by the
weighted number of ordinary shares in issue during the year.
Six month period Six month period
ended ended
31 January 2011 31 January 2010
Unaudited Unaudited
Continuing activities:
Loss)/profit attributable to
equity holders (in GBP'000) (696.4) (10,396.9)
Weighed average number of
ordinary shares in issue
(000's) 151,949.0 143,669.1
Basic (loss)/ earnings per
share (in GBP) (GBP0.005) (GBP0.072)
7. Trade and other receivables
As at
As at 31 31 January As at 31
January 2011 2010 July 2010
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Trade receivables 526.9 1,112.4 2,925.0
Amounts due by customers
for contract work 691.7 1,379.3 911.0
Prepayments 104.0 210.3 220.7
1,322.6 2,702.0 4,056.7
8. Trade and other payables
As at
As at 31 31 January As at 31
January 2011 2010 July 2010
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Trade payables 1,488.1 2,689.2 4,135.1
Related company payables 366.1 479.9 313.1
Amounts payable to
suppliers for contract
work 194.4 1,007.3 309.7
Other payables 1,060.8 623.8 2,439.9
Deferred purchase
consideration - 828.8 -
3,109.4 5,629.0 7,197.8
9. Cash flow generated from continuing
activities
Six months Twelve
Six months period ended months
period ended 31 31 January ended 31
January 2011 2010 July 2010
Continuing activities: Unaudited Unaudited Audited
Cash flow activities
GBP,000 GBP'000 GBP'000
(Loss)/profit before tax (696.4) (9,357.8) (8,859.6)
Adjustments for:
Finance income (2.9) - (29.6)
Finance expense - 2.4 3.7
Impairment of trade
receivable - - -
Impairment of investment 224.6 8,849.1 8,512.5
Depreciation of tangible
fixed assets 14.4 25.1 52.9
(460.3) (481.2) (320.1)
(Increase)/decrease in
inventories 123.3 (579.0) 532.6
(increase)/decrease in
operating receivables 2,377.0 (415.2) (2,883.8)
Increase/(decrease) in
operating payables (3,917.1) 1,156.4 3,584.1
(1,877.1) (319.0) 912.8
Dividends paid - -
Tax paid (68.7) (119.1) (148.7)
Cash flow from operating
activities - discontinued - - (406.6)
Net cash flow from
activities (1,945.8) (438.1) (357.5)
Aggregate cash flows arising from business combinations are presented
separately on the face of the cash flow statement and are classified
as investing activities, in accordance with IAS 7 'Cash Flow Statements'.
Therefore, movements in working capital included within operating
cash flows and presented above exclude working capital changes arising
from business combinations.
10. Capital reconstruction
As stated in the trading statement issued on 1 February 2010, Pacific
Middle East LLC had management issues and difficulties over deferred
and late contract payments by customers. The decision was taken
on 28 February 2010 to scale back operations and to reduce costs.
However during March a major customer defaulted on its contractual
obligations, and the Board resolved at a meeting on 28 April 2010
that it would for the time being cease all direct business through
its subsidiary companies in the Middle East. Pacific Middle East
has now been put into formal liquidation, and the other two Middle
East subsidiaries will follow suit shortly.
In accordance with IAS 35 "Discontinuing Activities" the effects
of discontinuing of these businesses, principally Pacific Middle
East LLC were reflected in discontinued activities at note 5 in
the accounts to 31 July 2010. All costs associated with this liquidation,
and the effect of the impairment on the investments held by the
company were recognized in the half year's and full year's results.
In order to offset the impact of losses arising by way of impairment
in the cost of investment in the subsidiaries closed of GBP7.637m
and the irrecoverable intercompany debt of GBP1.212m, the Board
therefore, with shareholder approval, made an application to the
Court for reduction of capital. This was approved by the Court in
August 2010 and is reflected in the statements on changes in equity
within this statement.
11. Contingent liability
A former employee of the Middle East subsidiary company, Pacific
Middle East LLC has brought a claim against the subsidiary. Pacific
Middle East LLC is now in liquidation and the board of Real Office
Group plc do not believe that this claim could result in any loss
to the Group.
Enquiries: Real Office 0207 822 0989
Group plc Roger Smee 0207 148 7900
Chairman Quentin Jones
Company Secretary Cairn
Financial Advisers LLP
Nominated Advisor Tony
Rawlinson
This information is provided by RNS
The company news service from the London Stock Exchange
END
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