Final Results
18 Mars 2003 - 3:58PM
UK Regulatory
RNS Number:8829I
Lionheart PLC
18 March 2003
Lionheart plc 18 March 2003
Preliminary results for the year ended 31 December 2002
Lionheart plc ("Lionheart" or "the Company") today announces its preliminary
results for the year ended 31 December 2002.
Highlights
* Sigma offer lapsed on 18 March 2003
* EGM to be called for 8 May 2003, at which a resolution
will be proposed for a Members' Voluntary Winding Up of the Company
Enquiries
Lionheart plc
Peter Pollock 07881 626123
Bridgewell Limited
Ian Dighe 0207 003 3100
Chairman's statement
The Board and its advisors continued to pursue acquisition opportunities during
the year and during the first half a deal came close to being consummated, but
failed after due diligence costs of #336,450, including irrecoverable Value
Added Tax, had been incurred. As a consequence the Company suffered a net loss
before tax of #62,929 in the year.
Given the loss incurred and the deficit on distributable reserves, no dividend
is proposed.
The United Kingdom business of Arthur Andersen, the company's Auditors,
transferred to Deloitte and Touche on 31 July 2002. Accordingly Deloitte &
Touche were appointed auditors of the Company with effect from 1 August 2002.
The Company had just under #11.6m in cash on interest bearing account on 31
December 2002.
David Gawler, who joined the board in December 2001, decided to retire from the
Board on 30 September 2002, given other business commitments. I am grateful to
him for his wise counsel and wish him well in the future.
Shareholders will recall that an announcement was made at last year's Annual
General Meeting that in the absence of an appropriate transaction by the next
Annual General Meeting the board would consider mechanisms for the return of
cash to shareholders.
On 8 January 2003 it was announced that Sigma Technology Plc had made a
recommended Offer for the Company. On 17 February, the first closing date of the
Offer, it was announced that Sigma had received valid acceptances of the Offer
representing 47.4% of the issued share capital of the Company. The Offer was
extended until the 17 March 2003, at which time it was announced that the Offer
had attracted acceptances representing 56.49% of the issued share capital of the
Company. Since a condition of the Offer was that it should be accepted by
shareholders representing 90% of the share capital, and this was not achieved,
the offer lapsed.
Documents of title in respect of Lionheart shares which have been assented to
the Offer will be returned to the relevant Lionheart shareholders within 14
days. Lionheart Shares which have assented to the Offer through CREST will be
returned to the originating account within 14 days. If in doubt Shareholders
should call Northern Registrars on 01484 600900.
The Company incurred approximately #100,000 of costs including irrecoverable
VAT, in processing the Offer.
On 7 March, the Company made an announcement in respect of certain contingent
liabilities, the potential significance of which had increased as the result of
information received by the Company. On 26 February 2003, the Company received
notification from the advisers to the Lionheart Group Pension Scheme (the
Scheme) of an anticipated deficit in the Scheme. Lionheart was replaced as
participating employer of the scheme in November 1999 by its former subsidiary,
The Croydex Company Limited (Croydex), as part of the sale process of Croydex.
It is not possible, at this stage, to quantify the possible liability of
Lionheart, but the Board has been advised that any liability will be restricted
to those participants in the Pension Scheme that were employed directly by
Lionheart. The directors of Lionheart believe, on the basis of the information
currently available, that there have been approximately 10 such employees of
Lionheart out of a total of 975 members of the pension scheme. It is likely
that these employees were directors or other senior management of the Lionheart
Group.
In addition it was announced that, as a result of the anticipated deficit in the
Pension Scheme, there was an increased risk of a liability arising from a
guarantee, given by Lionheart, of a lease of a property at Earl's Barton,
Northamptonshire. A former subsidiary of Lionheart, which is now itself a
subsidiary of Croydex, was the tenant until recently. When Lionheart disposed
of Croydex, it was indemnified against any liability arising under the lease.
However, if Croydex is unable to fulfil its obligations under the lease or the
indemnity, Lionheart may have a residual liability to the landlord. As stated
in the announcement of 7 March, the lease expires on 31 December 2004 and the
current annual rental is #100,000 plus insurance. A provision for dilapidations
may be required. This further information was received by the Company on 6
March 2003.
Further information on these contingent liabilities may be found in Note 9 to
this preliminary announcement.
In the absence of an appropriate alternative and notwithstanding the
implications of the above potential contingent liabilities, the Board, in
consultation with its advisors and major shareholder, has determined that the
liquidation of the Company is the most straightforward course now available to
the Company and its shareholders. To that end, an Extraordinary General Meeting
of the Company will be held at 12:30pm on 8 May 2003, at The Institute of
Chartered Accountants at which a resolution will be proposed for a Members'
Voluntary Winding Up of the Company. If a majority carries the resolution, a
resolution for the appointment of a liquidator will be put to the meeting. If
the resolution to wind up the Company is not passed, the AGM will take place at
the conclusion of the EGM or any adjournment thereof, where the normal business
will be conducted.
Shareholders will wish to know what the consequences liquidation will be for
them and for the Company. Immediately upon appointment the Liquidator takes
responsibility for the management of the Company and its assets. The
Liquidator will be responsible for settling all debts and claims against the
Company and for distributing any cash surplus to shareholders and for the
ultimate dissolution of the Company. The directors cease to have any authority
with respect to the Company.
As at the 28 February 2003 the Company had approximately #11.6m in cash
representing approximately 161 pence cash per share. However, shareholders
should note that at this stage it is not possible to estimate with sufficient
accuracy the amount which will need to be paid to any creditors arising during
the liquidation process. Shareholders should not assume therefore, that the
figure of 161 pence reflects the amount of cash that will be returned to
shareholders during liquidation. The quantum of the liquidators' fees will
depend up on the difficulty of negotiation and settlement of contingent
liabilities. There will also be disbursements and Registrars fees. Given the
costs of communicating with in excess of 8,200 Lionheart shareholders expenses
and disbursements could be significant.
There is likely to be more than one distribution. Given the impossibility of
quantifying the potential liability to the Pension Scheme or for the guarantee
of the lease, and the possibility of further contingent liabilities, it is not
possible to quantify, at this stage, either the quantum of such distributions,
or their timing. However, on a theoretical basis, if the liquidator decided to
retain #2m to meet creditors, contingent liabilities and fees and to make a
first distribution of #9.6m, this would amount to a distribution in cash of
approximately 133 pence per share. Each additional #100,000 of cash distributed
would amount to approximately 1.4 pence per share. Shareholders should be aware
that the Liquidator is likely to adopt a cautious approach to the distribution
of cash to shareholders.
Peter Pollock
Chairman
Profit and loss account
Year to 31 Year to 31
December 2002 December 2001
#'000 #'000
Unaudited Audited
Operating expenses (524) (165)
__________ __________
Operating loss (524) (165)
__________ __________
Net interest received 461 595
__________ __________
(Loss) profit on ordinary activities before taxation (63) 430
Taxation on profit on ordinary activities - -
__________ __________
Retained profit for the year (63) 430
__________ __________
2002 2001
(Loss) earnings per share
Basic (0.87p) 5.97p
Diluted (0.87p) 5.97p
__________ __________
There are no recognised gains and losses other than the profit on ordinary
activities after taxation.
Reconciliation of movements in group shareholders' funds
Year to 31 Year to 31
December 2002 December 2001
#'000 #'000
Unaudited Audited
(Loss) profit on ordinary activities after taxation (63) 430
__________ __________
Net (decrease) increase to shareholders' funds (63) 430
Opening shareholders' funds 11,604 11,174
__________ __________
Closing shareholders' funds 11,541 11,604
__________ __________
Consolidated balance sheet
31 December 31 December
2002 2001
#'000 #'000
Unaudited Audited
Current assets
Debtors - 25
Cash at bank and in hand 11,579 11,612
__________ __________
11,579 11,637
Creditors: Amounts falling due within one year (38) (33)
__________ __________
Net assets 11,541 11,604
__________ __________
Capital and reserves
Called-up share capital 1,802 1,802
Share premium account 10,547 10,547
Other reserves 205 205
Profit and loss account (1,013) (950)
__________ __________
Total capital employed 11,541 11,604
__________ __________
Consolidated cash flow statement
Year to 31 December 2002 Year to 31 December 2001
#'000 #'000 #'000 #'000
Unaudited Unaudited Audited Audited
Net cash outflow from operating activities (511) (230)
Returns on investments and servicing of finance
Interest received 478 578
__________ __________
478 578
-
__________ __________
Cash inflow before financing 348 348
__________ __________
(Decrease) increase in cash in the year (33) 348
__________ __________
Notes
1 Accounting policies
This preliminary statement has been prepared using accounting policies stated in
the Group's Report and Accounts for the year ended 31 December 2001 with the
exception of deferred tax in accordance with Financial Reporting Standard No. 19
'Deferred tax'. This has had no material impact on the financial statements.
2 Basis of accounting
The financial information set out in the announcement does not constitute the
group's statutory accounts for the years ended 31 December 2002 and 2001. The
financial information for the year ended 31 December 2001 is derived from the
statutory accounts for that year, which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s237 (2) or (3) Companies Act 1985. The
statutory accounts for the year ended 31 December 2002 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the group's extraordinary general meeting.
3 Basis of preparation - going concern
The financial information has been prepared under the going concern basis
despite the directors putting forward a resolution to be considered, at the
Extraordinary General Meeting on the 8 May 2003, to wind the group up. The
directors believe this to be a suitable basis of preparation due to the
uncertainty of this resolution and believe all material actual and contingent
liabilities have been identified and can be satisfied in the foreseeable future
4 Uncertainties relating to pension scheme deficit and onerous lease
The directors believe there to be a fundamental uncertainty surrounding the
quantification of two contingent liabilities that have arisen post year end.
See note 9 for further information.
5 Taxation on profit on ordinary activities
No taxation is payable on the loss for the year (2001 - #Nil). The company had
approximately #4.7m of tax losses available to carry forward at 31 December 2002
to offset against future profits generated from the same trade.
A deferred tax asset of #1.4m (2001 - #1.4m) has not been recognised because in
the opinion of the directors there will be no suitable taxable gains available
in the foreseeable future. This asset will be utilised if the company starts to
generate taxable profits from its current trade.
6 Earnings per share
Basic and diluted earnings per share is calculated on the loss for the financial
year of #62,939 (2001 - profit #430,000) and on 7,205,227 (2001 - 7,205,227)
ordinary shares, being the weighted average number of shares in issue.
7 Reconciliation of operating profit to net cash flow from operating
activities
31 December 31 December
2002 2001
#'000 #'000
Unaudited Audited
Operating (loss) profit (524) 165
Decrease (increase) in debtors 8 (8)
Increase (decrease) in creditors 5 (57)
__________ __________
Net cash outflow from operating activities (511) (230)
__________ __________
8 Reconciliation of net cash flow to movement in cash
31 December 31 December
2002 2001
#'000 #'000
Unaudited Audited
(Decrease) increase in cash in the year (33) 348
Net cash at 1 January 11,612 11,264
__________ __________
Net cash at 31 December 11,579 11,612
__________ __________
9 Analysis of cash
At At
1 January 31 December
2002 Cash flow 2002
#'000 #'000 #'000
Audited Unaudited
Cash at bank and in hand 11,612 (33) 11,579
__________ __________ __________
10 Contingent liabilities
Notice of a potential claim has been received, post year end, from the advisers
to the Lionheart Group Pension Scheme ("the Pension Scheme") arising from an
anticipated funding deficit in the Pension Scheme. The group ceased to be a
participating employer in the Pension Scheme at the time of the disposal of The
Croydex Company Limited ("Croydex") in November 1999 when Croydex replaced
Lionheart as the principal employer of the Pension Scheme. The notification
advised that the anticipated funding deficit is estimated to be #6m, although
the basis of this calculation is not known. We are informed that this is likely
to lead to the Pension Scheme being wound up. The notification referred to the
potential liability of the Group to pay a debt to the Pension Scheme under the
Pensions Act 1995. Lionheart has taken legal advice following this
notification. This advice has confirmed that, if the Pension Scheme enters
winding up, its trustees can require the Group to pay a proportion of the
Pension Scheme's deficit calculated on the basis set out in the Pensions Act
1995 and the regulations made under it.
The legislation provides that, ordinarily, the Group should only be liable for
the proportion of the deficit that relates to their employees who have
participated in the Pension Scheme. On the basis of the information currently
available, the Board believe that there have been approximately 10 employees of
Lionheart, out of a total of 975 members of the Pension Scheme. These employees
are believed to have been directors and senior management of the Group. It is
therefore considered likely that the Group will be liable for a small proportion
of the total alleged deficit.
It is not possible, at this stage, to quantify this liability.
In addition to the Pension Scheme deficit the Group is guarantor for a lease on
a property at Earl's Barton, Northamptonshire which Croydex operates from.
Croydex, as an assignee under the lease is primarily responsible for any
liabilities arising. They also indemnified Lionheart under the sale agreement
when Croydex was sold. If they are unable to fulfil their obligations in
respect of such liabilities under the lease, the Group may be responsible to the
landlord. In view of the alleged deficit in the Pension Scheme, the Board
believe that there is an increased risk of an actual liability arising in
respect of this lease. The lease expires on 31 December 2004 and the current
annual rent is #100,000 plus insurance. A provision for dilapidations may also
be required.
11 Subsequent events
On 8 January 2003 the company announced it had received an offer from Sigma
Technology Group plc to acquire its entire share capital for consideration in
the form of cash and Sigma Technology Group plc shares. On 17 March 2003 this
offer lapsed.
Lionheart incurred approximately #100,000 on this transaction post year end.
12 It is proposed to send the Report and Accounts for the year ended 31
December 2002 to shareholders in early April 2002. Further copies will be
available from the Company's registered office, which is Suite 2, Stanley House,
29 Stanley Street, Warrington, WA1 1EZ. An Extraordinary General Meeting will
be held on 8 May 2003 at 12:30pm at The Institute of Chartered Accountants at
which a resolution will be proposed to for a Members' Voluntary Winding Up of
the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
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