RNS Number:7289I
Property Recycling Group PLC
11 September 2006
Embargoed until 0700, 11 September 2006
PROPERTY RECYCLING GROUP PLC
Interim results
Property Recycling Group plc ("the Company") (AIM: PROP), which acquires and
improves brownfield sites before selling them to developers or end users,
announces interim results for the six months ended 30 June 2006.
Financial highlights
* Profit before tax of #0.4 million on a turnover of #1 million (2005
figures of #2.3 million and #3.9 million respectively, were significantly
influenced by the disposal of the Saddlebow site which was sold for #3.5
million - underlining the fact that the Company's results are affected by
the timing of significant realisations)
* Earnings per share was 0.77p, all of which is attributable to continuing
operations
* Strong balance sheet with net cash of #6.4 million
* Interim dividend of 0.5p per share reflecting the Board's confidence in
the Company
Operational highlights
* Acquisition of a 4.7 hectare site from the Ministry of Defence at Stoke
Holy Cross, Norwich, which has considerable potential
* Disposal of 14.95 hectares of the Fornham site, which has planning
permission for one residential building, for a consideration of #400,000
* Planning approval granted for 27 timber lodges and a 9 hole golf course at
Fornham Park
* Planning permission granted since the period end for a 1.2 million
square foot distribution centre at the Company's Stanton site, which is
under option to Ikea
* The Company currently owns five freehold sites totalling 198.8 hectares.
Paul Rackham, the chairman of Property Recycling Group plc, said: "While we did
not make any significant disposals as we did during the same period last year,
the Company did progress a number of initiatives. We acquired a former MOD site
near Norwich, which has great potential, and disposed of a further approved
building plot at our Fornham Park site. In addition, we were very pleased to be
granted planning permission for a 1.2 million square foot distribution centre at
our Stanton site, which is under option to Ikea.
"The Government's continued commitment to increasing the proportion of
development land sourced from brownfield sites, combined with progress within
our current portfolio gives me confidence in the future performance in the
Company. This confidence is underlined by the Board's proposed dividend of 0.5
pence for the period.
"We are reviewing a number of potential opportunities and hope to be able to
make further announcements in the future."
-Ends-
For further information:
Property Recycling Group: Tavistock Communications:
Paul Rackham, executive chairman Jeremy Carey/Rachel Drysdale
01953 717176 020 7920 3150
EXECUTIVE CHAIRMAN'S REPORT
Introduction
I am pleased to present Property Recycling Group plc's interim results for the
six months ended 30 June 2006.
Background
Our objective is to create shareholder value through recycling brownfield sites.
With continued demand for development land for both commercial and residential
uses and significant pressure on greenfield sites, brownfield sites represent an
attractive alternative source of development land.
Government policy is to increase significantly the proportion of development
land sourced from brownfield sites and it has recently emphasised that using
recycled land in any new development is a priority. Current figures indicate
that seventy four per cent. of new developments are on previously developed land
and existing stocks of brownfield land could accommodate up to one million new
homes. The Government has confirmed that even more homes will need to be built
on brownfield land.
The East of England Regional Assembly plan requires 23,900 net additional
dwellings per annum to be built in the East of England between 2001 and 2021, a
total of 478,000 new dwellings focusing on the potential for new housing to be
accommodated on previously developed land or by reuse of existing buildings.
We identify and acquire brownfield sites where we can see the opportunity to
improve valuation significantly through remediation and planning gain. During
this process we seek to generate income from letting accommodation on the sites.
The Group particularly seeks complex sites; for example those which require
demolition and treatment of contaminated land before being suitable for
development. The Group is not a property developer itself but will sell to, or
enter into agreements with such developers and other purchasers.
Financial results
I have previously indicated that results in any period will vary significantly
according to the level of realisations, and the comparison between the first
halves of 2005 and 2006 illustrate this.
The results for the six months ended 30 June 2006 have been prepared using
merger accounting. In the period the Group achieved an operating profit of #0.2m
(2005: #2.2m) and a profit before tax of #0.4m (2005: #2.3m). The corresponding
2005 results included a contribution from discontinued activities of #0.4m and
were stated after charging transaction costs arising from the merger which
created the Group of #0.2m, neither of these affected 2006. Earnings per share
was 0.77p (2005: 7.99p) all of which is attributable to continuing operations
(2005: 6.62p). The result for 2005 was significantly influenced by the disposal
of the Saddlebow site which was sold for #3.5m. The results of future periods
will be affected by the timing of significant realisations. At 30 June 2006 the
Group had net funds of #6.4m (2005: #3.5m) with cash and short term bank
deposits of #7.8m (2005: #6.9m).
Dividend
The Board is recommending an interim dividend of 0.5p per share payable on 23
October 2006 to shareholders on the register at the close of business on 22
September 2006. The dividend has been set to reflect the results for the period
ended 30 June 2006. Dividends for the full year will be considered in the light
of achieved profits which will be significantly affected by the timing of
realisations, and with reference to the overall objective of the Company to make
substantial gains by investing cash in further properties.
Property portfolio
In June 2006 the Group acquired from the Ministry of Defence a 4.7 hectare site
at Stoke Holy Cross, to the south of Norwich which was previously the location
for a radar station. We believe that the site has considerable potential.
Since the period end planning permission has been granted for a 1.2 million
square foot distribution centre at our Stanton site which is under option to
Ikea, the global retailer. We have worked with Ikea over the last five years to
progress this former airfield which is a good example of what can be achieved
with a brownfield site.
We also obtained during the period planning approval for 27 timber lodges and a
9 hole golf course at our Fornham Park site.
The Group currently owns five freehold sites totalling 198.8 hectares. We
actively seek to enhance the value of these sites by remediation and obtaining
new and improved planning permissions.
Prospects
There is continued demand for land for industrial, commercial and residential
development especially in the South East and Eastern England. Government policy
continues to press for further land to be made available for residential
development, in particular affordable housing. Over the last year we have seen
strong demand for all types of property which has made it difficult to acquire
sites at prices which enable us to achieve an appropriate return for
shareholders. We will not purchase sites unless they meet the criteria we apply
to all opportunities. However the recent increase in interest rates will reduce
the amount of speculative money which has been forcing values to unsustainable
levels.
We continue to investigate properties available for acquisition and are flexible
in our approach. We would consider joint ventures and company acquisitions to
secure the right profile. Our net funds can be augmented by borrowings where
appropriate.
I hope to report progress in the development of the Group over the coming
months.
Paul Rackham
Executive chairman
11 September 2006
PROPERTY RECYCLING GROUP PLC
Unaudited Consolidated Profit & Loss Account
for the six months ended 30 June 2006
Notes Six months Six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
# # #
Turnover 3 984,251 3,893,508 4,852,697
Cost of sales (188,119) (1,496,371) (1,950,996)
---------------------------------------------------------
Gross profit 796,132 2,397,137 2,901,701
-------------------------------------------------------------------------------------------
Share based payments to
directors & employees (31,284) - -
Other administrative expensese (557,863) (157,020) (673,401)
-------------------------------------------------------------------------------------------
Administrative expenses (589,147) (157,020) (673,401)
---------------------------------------------------------
Operating profit 206,985 2,240,117 2,228,300
Merger transaction
expenses (continuing
operations) 6 - (199,363) (200,047)
Income from fixed asset
investments (discontinued
operations) - 380,725 380,725
Net interest receivable/
(payable) 172,454 (113,546) 11,430
---------------------------------------------------------
Profit on ordinary
activities before
taxation 379,439 2,307,933 2,420,408
Tax on profit on ordinary
activities (101,950) (534,900) (756,765)
---------------------------------------------------------
Retained profit for the
financial period 277,489 1,773,033 1,663,643
=========================================================
Earnings per share -
basic (pence) 4
Continuing operations 0.77 6.62 4.65
Continuing & discontinued
operations 0.77 7.99 5.69
Earnings per share -
diluted (pence) 4
Continuing operations 0.77 6.62 4.65
Continuing & discontinued
operations 0.77 7.99 5.69
Unaudited Consolidated Balance Sheet
as at 30 June 2006
Notes As at As at As at
30 June 30 June 31 December
2006 2005 2005
# # #
Fixed assets
Tangible assets 2,964,027 2,953,817 2,964,293
2,964,027 2,953,817 2,964,293
---------------------------------------------------------
Current assets
Stocks 2,549,441 2,915,585 2,516,185
Debtors
- due within one year 600,866 3,764,517 276,100
- due after more than
one year 1,108,918 129,468 751,219
Investments - short term
bank deposits 7,658,121 6,820,000 8,006,783
Cash at bank and in hand 135,681 75,958 327,986
---------------------------------------------------------
12,053,027 13,705,528 11,878,273
Creditors: amounts falling
due within one year (1,849,886) (697,995) (1,527,090)
---------------------------------------------------------
Net current assets 10,203,141 13,007,533 10,351,183
---------------------------------------------------------
Total assets less current
liabilities 13,167,168 15,961,350 13,315,476
Creditors: amounts falling
due after more than one
year (1,236,183) (3,867,748) (1,331,264)
---------------------------------------------------------
Net assets 11,930,985 12,093,602 11,984,212
=========================================================
Capital and reserves
Called up share capital 1,810,000 1,810,000 1,810,000
Share premium account 6,428,529 6,428,529 6,428,529
Equity reserve 31,284 - -
Merger reserve 821,833 821,833 821,833
Revaluation reserve 2,104,418 2,104,418 2,104,418
Profit & loss account 734,921 928,822 819,432
---------------------------------------------------------
Equity shareholders' funds 9 11,930,985 12,093,602 11,984,212
=========================================================
Unaudited Consolidated Cash Flow Statement
for the six months ended 30 June 2006
Notes Six months Six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
# # #
Net cash (outflow)/inflow
from operating activities
8 (263,238) (3,486,706) 3,399,075
---------------------------------------------------------
Returns on investments and
servicing of finance
Interest paid (52,287) (76,221) (212,588)
Interest received 224,741 11,761 224,018
Dividends received - 30,120 30,120
---------------------------------------------------------
Net cash inflow/(outflow) from
returns on investment and
servicing of finance 172,454 (34,340) 41,550
---------------------------------------------------------
Taxation - - -
---------------------------------------------------------
Capital expenditure and financial
investment
Purchase of tangible fixed assets - - (1,834)
Sale of tangible fixed assets - 22,305 8,169
Receipts from sale of investments - 1,133,947 1,133,947
---------------------------------------------------------
Net cash inflow from capital
expenditure and financial
investment - 1,156,252 1,140,282
---------------------------------------------------------
Equity dividends paid (362,000) - -
---------------------------------------------------------
Net cash (outflow)/inflow before
financing and management of
liquid resources (452,784) (2,364,794) 4,580,907
---------------------------------------------------------
Management of liquid resources
Movement in current asset
investments 348,662 - (8,006,783)
---------------------------------------------------------
Net cash inflow/(outflow) after
management of liquid resources (104,122) (2,364,794) (3,425,876)
---------------------------------------------------------
Financing
Issue of ordinary share capital - 7,286,029 7,188,529
Repayment of loans (88,183) (66,095) (127,384)
Increase/(decrease) in borrowings - 2,000,000 (3,348,101)
---------------------------------------------------------
Net cash (outflow)/inflow from
financing (88,183) 9,219,934 3,713,044
---------------------------------------------------------
(Decrease)/increase in cash (192,305) 6,855,140 287,168
=========================================================
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information has been prepared under the historical cost
convention, as modified by the revaluation of investment properties, and in
accordance with applicable United Kingdom accounting standards, applied on a
consistent basis. The accounting policies used are consistent with those used in
the 31 December 2005 audited accounts, with the addition of the requirements of
FRS 20 share based payments.
These interim financial statements do not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985. Results
for the six months ended 30 June 2006 and 30 June 2005 have not been audited.
The results for the year ended 31 December 2005 included in this statement do
not constitute full Group accounts within the meaning of Section 227 of the
Companies Act 1985. Full accounts for that year, on which the auditors made an
unqualified audit report, have been filed with the Registrar of Companies.
The Group issues equity-settled share based payments to certain employees.
Equity-settled share based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled share
based payments is expensed on a straight line basis over the vesting period,
based on the Group's estimate of the number of shares that will eventually vest.
There are both non-market and market based performance conditions attached to
the vesting and exercising of equity instruments. Fair value is measured by use
of the Monte Carlo Simulation. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations.
2. Corporate reorganisation
On 29 April 2005 the Company was party to a reorganisation. This reorganisation
resulted in the Company issuing shares to acquire the entire share capital of
Rossfleet Limited, Rossfleet Investments Limited, Rossfleet Brigg Limited,
Hensby Composts Limited, and Railroad Terminal Limited.
The reorganisation resulted in the five companies being acquired entirely in
exchange for shares and consequently, the restructuring has been accounted for
using merger accounting principles.
Therefore, although the Company did not become the parent company of the Group
until 29 April 2005, the Group financial information is presented as if the
companies had always been part of the same group.
In accordance with sections 131 and 133 of the Companies Act 1985, the Company
has taken no account of any premium on the shares issued to make the
acquisitions and has recorded the cost of the investment at the nominal value of
the shares issued. The resulting difference on consolidation was credited to a
merger reserve.
3. Turnover
Turnover comprises the invoiced value of property sales, property rentals and
other goods and services which fall within the Group's ordinary activities after
deduction of trade discounts and value added tax. The turnover and operating
profit for the period, all of which arises in the United Kingdom, are
attributable to the Group's principal activity.
4. Earnings per share
Basic
Basic earnings per ordinary share is calculated by dividing the profit after
taxation for the periods by the weighted average number of ordinary shares in
issue as shown in the table.
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
Profit for period #277,489 #1,773,033 #1,663,643
Weighted average number of shares 36,200,000 22,175,691 29,245,479
Earnings per ordinary share
(pence)
- Continuing operations 0.77 6.62 4.65
- Continuing & discontinued
operations 0.77 7.99 5.69
Diluted
Diluted earnings per ordinary share is calculated by adjusting the weighted
average number of ordinary shares to assume conversion of share options as shown
in the table.
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2006 2005 2005
Profit for period #277,489 #1,773,033 #1,663,643
Weighted average number of shares 36,200,000 22,175,691 29,245,479
Adjustments for share options 59,997 - -
-----------------------------------------------------
Weighted average number of
shares for diluted earnings per
share 36,259,997 22,175,691 29,245,479
-----------------------------------------------------
Earnings per ordinary share
(pence)
- Continuing operations 0.77 6.62 4.65
- Continuing & discontinued
operations
0.77 7.99 5.69
The Company had ordinary shares in issue of 36,200,000 as at 30 June 2006.
5. Share capital and share premium
The Company was incorporated on 31 March 2005 and issued 2 ordinary shares of 5p
each. Subsequently it effected the reorganisation described in note 2 in order
to acquire, in exchange for shares, Rossfleet Limited, Rossfleet Investments
Limited, Rossfleet Brigg Limited, Hensby Composts Limited, and Railroad Terminal
Limited. Under the reorganisation the Company issued 20,999,998 ordinary shares.
On 16 June 2005 the Company placed 15,000,000 new ordinary shares at 50p and
issued 200,000 ordinary shares at 50p in settlement of part of the fees due in
connection with the placing. The net proceeds of the placing (after the issue of
shares in respect of fees) were #7,188,529 being #760,000 of share capital and
#6,428,529 of share premium after deduction of #411,471 in respect of costs
associated with the raising of equity. The Company's ordinary shares were
admitted to trading on AIM on 16 June 2005.
No further ordinary shares have been issued since flotation.
6. Exceptional costs
Six months Six months Year ended 31
ended 30 June ended 30 June December
2006 2005 2005
# # #
Merger transaction expenses - 199,363 200,047
--------------------------------------------------------
7. Dividend
Six months Six months Year ended 31
ended 30 June ended 30 June December
2006 2005 2005
pence pence pence
Ordinary Dividend:
Final paid in respect of
prior year (#362,000) 1.00 - -
--------------------------------------------------------
On 11 September 2006 the Board declared an interim dividend for the year ended
31 December 2006 of 0.5p per share (2005 - #nil) which totals #181,000. In
accordance with FRS 21, as this was announced after the balance sheet date, it
does not represent a present obligation at that date, and as such, is not
included in the financial statements presented herein. The dividend is payable
on 23 October 2006 to shareholders on the register on 22 September 2006.
8. Reconciliation of operating profit to operating cash (outflow)/inflow
Six months Six months Year ended 31
ended 30 June ended 30 June December
2006 2005 2005
# # #
Operating profit 206,985 2,240,117 2,228,300
Depreciation charge 266 12,250 17,745
Share based payment to
directors & employees 31,284 - -
Reorganisation costs - - (200,047)
(Increase)/decrease in stocks (33,256) 1,330,325 1,729,725
Increase in debtors (682,465) (1,826,418) (494,209)
Increase/(decrease) in
creditors 213,948 (5,242,980) 117,561
--------------------------------------------------------
(263,238) (3,486,706) 3,399,075
========================================================
9. Reconciliation of movements in equity shareholders' funds
Six months Six months Year ended 31
ended 30 June ended 30 June December
2006 2005 2005
# # #
Profit for the financial period 277,489 1,773,033 1,663,643
Dividends paid (note 7) (362,000) - -
New shares issued (net of
expenses) - 7,188,529 7,188,529
Equity reserve adjustment 31,284 - -
--------------------------------------------------------
Net (decrease)/increase
in shareholders' funds (53,227) 8,961,562 8,852,172
Opening shareholders' funds 11,984,212 3,132,040 3,132,040
--------------------------------------------------------
Closing shareholders' funds 11,930,985 12,093,602 11,984,212
========================================================
10. The Interim Statement will be posted to shareholders and will be available
from the Company's Registered Office at Manor Farm, Bridgham, Norwich, NR16 2RX
and from the Company's website: www.propertyrecycling.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
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