24 Sep 2009 16:46
LEGENDARY INVESTMENTS PLC
("Legendary" or the "Company")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2009
CHIEF EXECUTIVE'S STATEMENT
Review of Activities
The year under review was one of considerable contrast, with a good first half and an unfortunate second half. On the one hand, the Company realised profits of £154,000 (£59,000, H1 2008) from investments made in the first half of the year. In October, losses of £23,000 were made. Nonetheless, overall from investment activities, £131,000 of profit was made in the 7 months during which the Company was fully active.
The Company was, however, indirectly, but severely affected by the credit crunch. In November 2008, the Company received notification that Echelon Wealth Management Limited ("Echelon"), the broker for the majority of the Company's investments, went into administration. At that time Echelon was custodian for £612,000 of cash and equivalents for the Company and it appears from the communications received from the administrator that serious breaches of the requirement for the segregation of client funds were made. As a result of the situation regarding Echelon and the uncertainty of timing or recovery of assets, the Board decided to suspend the shares. The shares were suspended on 28 November at 0.12p. In addition, a provision of £250,000 was taken against non-recovery of assets from Echelon.
During the second half of the year, no investment activities were undertaken, although various discussions were had regarding shoring up the capital base of the Company.
Following the close of the period under review, after discussion with Eaitisham Ahmed, I agreed to become Chairman and Chief Executive Officer of the Company. Eaitisham Ahmed resigned as Chairman and Chief Executive Officer of the Company on 17 April 2009. I would like to thank him for his services and support to the Company. He is now our largest shareholder and continues to support the Company which he founded. In May 2009, the Company raised £135,000 through the issuance of 67,500,000 shares at 0.2p, a 67% premium to the price at which the shares were suspended. I personally subscribed to 6,250,000 shares investing £12,500 into the Company. The shares were re-admitted on 28 May 2009.
A review of the Company's affairs was conducted, including those concerning Echelon, and it was decided that an additional £300,000 should be provided against non-recovery of assets. During the audit, various matters relating to investments and funds held, principally at Echelon, could not be adequately verified by our auditor, Baker Tilly. Consequently, the accounts carry a qualification in this regard. In order to avoid this occurring again, the Company has reviewed and improved its record keeping procedures. In addition, it was decided to reclassify funds held with brokers as debtors and not as cash and cash equivalents. This results in a restatement of the debtors and cash and cash equivalents for the year ended 31 March 2008 as detailed in note 7 to the accounts. The loss for the year under review was £551,000 (profit of £524,000 FY 2008), and the shareholders' deficit at the end of the year under review was £67,000 (positive £484,000 FY 2008).
Outlook
The Board is confident that the Company will recover from the events of the year under review. Having raised £135,000 in May 2009 at a 67% premium to the suspension price, the year end shareholders' deficit has been extinguished. My salary is £15,000 per year, thereby reducing the running costs of the Company by £20,000 per year. Importantly I have elected to accrue and not take my salary until the Company is profitable.
The Company's investment policy which the Board intend to pursue is detailed below.
Investments will be made in sectors including but not limited to e-commerce and technology, specifically in businesses with the potential for high capital appreciation over a relatively short period of time. In certain cases, investments may be made in the anticipation of receiving dividends, and such investments may be held for longer periods. The focus will be primarily on UK companies that are listed or have high probability of becoming listed on the UK markets. The intention has been, and is, to build prudently yet rapidly the capital base of the Company with a view to expanding its investing base.
The investments will be structured using both equity and debt, including leverage through the use of derivatives. Such leverage is expected to be limited to 100 percent of the gross asset value of the Company at the time of investment. Dependent on the nature and size of the investments, the Company may take a passive or active role in the investments; typically, investments will be held for between one and three years, but may be held for shorter periods where appropriate.
The Directors believe that their broad collective experience together with their extensive network of contacts will assist them in the identification, evaluation and making of investments. In cases where it is deemed necessary, the assistance of external parties might be sought to assess investments.
The investment policy above carries a high degree of risk. Successful execution, however, will result in strong capital growth.
Your Board looks confidently to the future.
Gavin Preston
Chief Executive
24 September 2009
For further information please contact:
Gavin Preston, Legendary Investments Plc 0207 887 1335
James Caithie/Avi Robinson, Dowgate Capital Advisers Limited 0207 492 4777
PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2009
| Note | 2009 £'000 | 2008 £'000 | |
| Net gain on investments held for trading | 131 | 633 | |
| Net administrative expenses | (132) | (110) | |
| Exceptional provision against debtors | 2 | (550) | - |
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| Operating (loss)/profit | (551) | 523 | |
| Interest receivable | - | 1 | |
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| (Loss)/profit on ordinary activities before taxation | 1 | (551) | 524 |
| Tax on (loss)/profit on ordinary activities | 4 | - | - |
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| (Loss)/profit for the financial year | 11 | (551) | 524 |
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| (Loss)/earnings per share - basic and fully diluted | 5 | (0.08) | 0.08p |
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A separate statement of recognised gains and losses has not been prepared as the Company has no recognised gains or losses in the current or prior period other than the (loss)/profit noted above.
All activities derive from continuing operations.
BALANCE SHEET
As at 31 March 2009
| 2009 | 2008 Restated (see note 7) | ||
| Notes | £'000 | £'000 | |
| Current assets | |||
| Financial assets held for trading | 6 | 8 | 3,125 |
| Debtors due within one year | 7 | 66 | 705 |
| Cash at bank and in hand | - | 6 | |
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| 74 | 3,836 | ||
| CREDITORS: amounts falling due within one year | 8 | (141) | (3,352) |
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| NET CURRENT (LIABILITIES)/ASSETS | (67) | 484 | |
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| Capital and reserves | |||
| Called up share capital | 9 | 628 | 628 |
| Share premium account | 8,270 | 8,270 | |
| Profit and loss - deficit | 11 | (8,965) | (8,414) |
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| Equity Shareholders' (DEFICITS)/FUNDS | 12 | (67) | 484 |
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The financial statements were approved by the Board and authorised for issue on 24 September 2009.
CASH FLOW STATEMENT
For the year ended 31 March 2009
| Notes | 2009 £'000 | 2008 Restated (see note 7) £'000 | |
| Net cash outflow from operating activities | 13 | (75) | 44 |
| returns on investments and servicing of finance | |||
| Interest received | - | 1 | |
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| NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING | (75) | 45 | |
| Financing | |||
| Director's loan | 69 | (43) | |
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| (DeCREASE)/INCREASE in cash | 15 | (6) | 2 |
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NOTES TO THE FINANCIAL STATEMENTS
1 (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAX
| 2009 £'000 | 2008 £'000 | |
| (Loss)/profit on ordinary activities before tax for the year is stated after charging: | ||
| Auditor's remuneration - statutory audit | 17 | 14 |
| - Services relating to taxation | 9 | 3 |
| - Other services | 10 | 4 |
2 EXCEPTIONAL PROVISON AGAINST DEBTORS
| 2009 £'000 | 2008 £'000 | |
| Exceptional provision against balances held with brokers | £550 | - |
As announced on 28 November 2008, the Company received notification that Echelon Wealth Management Limited ("Echelon") was in provisional liquidation. Echelon acted a broker on the majority of the Company's investments. The balances with Echelon amounted to £612,000.
On the basis of information provided to the Company, at the half year, the Company provided £250,000 against non-recovery of assets held with Echelon. On the basis of further information, the Company has provided an additional £300,000 taking the total provision to £550,000 against non-recovery of these assets.
3 DIRECTORS
| 2009 Number | 2008 Number | |
| Number of employees The average monthly number of employees, including directors, during the year was: | 2 | 2 |
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| £'000 | £'000 | |
| Directors' emoluments Aggregate emoluments | 47 | 47 |
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4 TAX ON PROFIT ON ORDINARY ACTIVITIES
| 2009 £'000 | 2008 £'000 | |
| Analysis of charge in the year: | ||
| Current tax | - | - |
| Deferred tax | - | - |
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| - | - | |
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| Factors affecting tax charge for year: The tax assessed for the year is lower than the standard rate of corporation tax in the UK (28%). The differences are explained below: |
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| Profit on ordinary activities before tax | (551) | 524 |
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| Profit on ordinary activities multiplied by standard rate of corporation tax in the UK 28% (2008: 30%) | (154) | 157 |
| Expenses not deductible for tax purposes | 5 | 9 |
| Tax losses unutilised/(utilised) | 149 | (166) |
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| Current tax charge for year | - | - |
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As at 31 March 2009 the Company had losses of approximately £5.6m (2008: £5.2m) available to carry forward against future income. No deferred tax asset is recognised in respect of these losses due to the uncertainty as to the utilisation of the losses in the foreseeable future.
Future tax charges will be dependent on the split of profits for tax purposes as between revenue and capital items, and the utilisation of losses incurred to date.
5 EARNINGS PER ORDINARY SHARE
| 2009 £'000 | 2008 £'000 | |
| Profit/(loss) for the financial year | (551) | 524 |
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| Average number of ordinary shares in issue ('000) | 627,667 | 627,667 |
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| Basic profit/(loss) per share (pence) | (0.08)p | 0.08p |
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| Fully diluted profit/(loss) per share (pence) | (0.08)p | 0.08p |
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The share options and warrants do not give rise to any dilution and therefore the fully diluted (loss)/profit per share is equal to the basic (loss)/profit per share.
6 FINANCIAL ASSETS HELD FOR TRADING
| 2009 £'000 | 2008 £'000 | |
| Listed investments | 8 | 3,125 |
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7 Debtors: amounts due within one year
| 2009 £'000 | 2008 Restated £'000 | |
| Balances held with brokers | 616 | 705 |
| Less: provision for impairment | (550) | - |
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| 66 | 705 | |
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Balances held with brokers represent the company's financial assets.
Following the administration of one of the company's brokers during the year, it has become apparent that amounts which were confirmed as held as cash were not held in segregated accounts and therefore should more properly have been described as balances held with brokers. As a result there has been a prior adjustment to the 2008 balance sheet with cash decreasing from £711,000 to £6,000 and debtors increasing from £Nil to £705,000. This has had a corresponding effect on cash as presented in the cash flow statement.
There have been no movements in the provisions against debtors other than the charge for the year.
8 CREDITORS: amount falling due within one year
| 2009 £'000 | 2008 £'000 | |
| Trade creditors | - | 3,307 |
| Accruals | 57 | 30 |
| Director's loan (note 17) | 84 | 15 |
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| 141 | 3,352 | |
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Trade creditors and directors' loans represent the companies financial liabilities measured at amortised cost. Due to their short term nature, carrying value approximated to fair value.
9 SHARE CAPITAL
| 2009 £'000 | 2008 £'000 | |
| AUTHORISED 3,000,000,000 ordinary shares of £0.001 each | 3,000 | 3,000 |
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| ALLOTTED, CALLED UP AND FULLY PAID | ||
| 627,667,198 ordinary shares of £0.001 each | 628 | 628 |
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10 Share options
The Company has unapproved and approved share option schemes in which the Directors participate. Details of Directors' outstanding share options as at the year ended 31 March 2009 are shown below.
| Exercise | Number at | Number at | ||
| Price | 31 March | 1 April | ||
| (per share) | 2009 | 2008 | ||
| Eaitisham Ahmed | 2p | 125,000,000 | 125,000,000 | |
| Zafarullah Karim | 0.8p | 75,000,000 | 75,000,000 |
The options remain in force, as long as their holder remains an employee of the Company and are exercisable from the date of grant.
The Market price of the Company's ordinary shares ranged from a high of 0.255p to a low of 0.08p during the year and shares had been suspended from trading at 0.12p as at 31 March 2009.
Since 31 March 2009 to the date of this report, the following options were cancelled, repriced and granted.
| Exercise | Number | Resultant Number as at | ||
| Price (per share) | 24 September 2009 | |||
| Eaitisham Ahmed | Cancelled | 2.0p | 125,000,000 | 0 |
| Zafarullah Karim | Repriced | 0.4p | 75,000,000 | 75,000,000 |
| Granted | 0.4p | 25,000,000 | 25,000,000 | |
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| Total | 100,000,000 | 100,000,000 | ||
| Gavin Preston | Granted | 0.4p | 150,000,000 | 150,000,000 |
11 PROFIT AND LOSS RESERVE
| 2009 £'000 | 2008 £'000 | |
| At the start of the year | (8,414) | (8,938) |
| (Loss)/profit for the year | (551) | 524 |
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| At the end of the year | (8,965) | (8,414) |
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12 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS/(DEFICIT)
| 2009 £'000 | 2008 £'000 | |
| Opening shareholders' funds/(deficit) | 484 | (40) |
| (Loss)/profit for the financial year | (551) | 524 |
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| Closing shareholders' (deficit)/funds | (67) | 484 |
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13 RECONCILIATION OF OPERATING (LOSS)/PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
| 2009 £'000 | 2008 Restated £'000 | |
| Operating (loss)/profit | (551) | 524 |
| Gains on investments | (131) | (633) |
| Exceptional provision against debtors | 550 | - |
| Increase/(decrease) in creditors | 27 | (31) |
| Decrease/(increase) in debtors | 89 | (705) |
| Cash (outflow)/inflow on trading of current asset investments | (59) | 889 |
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| Net cash (outflow)/inflow from operating activities | (75) | 44 |
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14 ANALYSIS OF NET DEBT
| At 31 March 2008 Restated £'000 | Cash flows £'000 | At 31 March 2009 £'000 | ||
| Cash at bank and in hand | 6 | (6) | - | |
| Director's loan | (15) | (69) | (84) | |
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| (9) | (75) | (84) | ||
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15 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
| 2009 £'000 | 2008 £'000 | |
| (Decrease)/increase in cash in the year | (6) | 2 |
| Cash (outflow)/inflow from financing activities | (69) | 43 |
| Net debt at start of year | (9) | (54) |
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| Net debt at end of year | (84) | (9) |
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16 FINANCIAL INSTRUMENTS
Interest rate risk
The Company had no floating rate financial liabilities at 31 March 2008 and 31 March 2009. Cash at bank earns interest at floating rates based on LIBOR.
Borrowing facilities
At the year end the Company had no overdraft facility (2008: £Nil).
Currency risk
Due to the short term nature of trading in foreign currency investments, the Company has limited exposure to currency risk.
Credit risk
The events of the credit crunch led to extreme market conditions and a number of financial institutions failing. Among those that failed was Echelon Wealth Management Limited. Echelon was the broker for the majority of the Company's investments and as such, its failure has resulted in the Company having to make significant provisions for non-recovery of assets. Following this event, the Directors have adopted the policy of diversifying the brokers that the Company utilises. The Directors believe that this reduces the credit risk to which the Company is exposed.
Liquidity risk
The Company manages liquidity risk by investing primarily in listed investments. The Directors believe that this limits the Company's exposure to liquidity risk.
Market risk
The Company monitors its investments in listed investments on a regular basis, and takes action when it deems appropriate.
The Company's investment policy is detailed below.
Investments will be made in sectors including but not limited to e-commerce and technology, specifically in businesses with the potential for high capital appreciation over a relatively short period of time. In certain cases, investments may be made in the anticipation of receiving dividends, and such investments may be held for longer periods. The focus will be primarily on UK companies that are listed or have high probability of becoming listed on the UK markets. The intention has been, and is, to build prudently yet rapidly the capital base of the Company with a view to expanding its investing base.
The investments will be structured using both equity and debt, including leverage through the use of derivatives. Such leverage is expected to be limited to 100 percent of the gross asset value of the Company at the time of investment. Dependent on the nature and size of the investments, the Company may take a passive or active role in the investments: typically, investments will be held for between one and three years, but may be held for shorter periods where appropriate.
The Directors believe that their broad collective experience together with their extensive network of contacts will assist them in the identification, evaluation and making of investments. In cases where it is deemed necessary, the assistance of external parties might be sought to assess investments.
The investment policy above carries a high degree of risk. Successful execution, however, will result in strong capital growth.
17 RELATED PARTY TRANSACTIONS
During the year the Company received funding from Eaitisham Ahmed. As at the balance sheet date, the amount advanced by the Eaitisham Ahmed to the Company amounted to £84,379 (2008: £14,597). This sum includes conversion of the accrual of his salary for the period of £35,000 to a loan to the Company. This sum is interest free and there are no fixed terms for repayment. The maximum balance that was outstanding during the year was £84,379 (2008: £90,890).
18 POST BALANCE SHEET EVENTS
On 17 April 2009, Eaitisham Ahmed resigned as the Company's Chairman and Chief Executive Officer. On the same day Gavin Anthony Preston was appointed as the Chairman and Chief Executive Officer.
Following his resignation, Eaitisham Ahmed's options were cancelled.
Gavin Anthony Preston was granted 150,000,000 options with an exercise price of 0.4p. The exercise price on Zafarullah Karim's existing 75,000,000 options was adjusted from 0.8p to 0.4p and Zafarullah Karim was granted an additional 25,00,000 options with an exercise price of 0.4p. These were all granted on 18 May 2009 and were exercisable immediately.
These movements are detailed below:
| Exercise | Number | Resultant Number as at | ||
| Price | 24 September 2009 | |||
| (per share) | ||||
| Eaitisham Ahmed | Cancelled | 2.0p | 125,000,000 | - |
| Zafarullah Karim | Repriced | 0.4p | 75,000,000 | 75,000,000 |
| Granted | 0.4p | 25,000,000 | 25,000,000 | |
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| Total | 100,000,000 | 100,000,000 | ||
| Gavin Preston | Granted | 0.4p | 150,000,000 | 150,000,000 |
On 28 May 2009, the Company raised £135,000 by way of a placing of 67,500,000 new ordinary shares at 0.2p each. The Company's shares had been suspended at 0.12p since 28 November 2008. As part of the placing, Gavin Anthony Preston subscribed to 6,250,000 shares.
The effect of the fund raising is to return the Company to a net asset positive position from a net asset negative position. In addition, the funds provide working capital and investment capital for the Company.
19 QUALIFIED AUDITOR'S REPORT
The auditor's report gave the following detail as to why the audit opinion was qualified:
"Qualified opinion arising from limitation in audit scope
Except for the financial effects of such adjustments, if any, on the gain or loss on investments and the provision against balances held with brokers disclosed in the profit and loss account and the notes thereto, in our opinion:
the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Company's affairs at 31 March 2009 and of its loss for the year then ended and have been properly prepared in accordance with the Companies Act 1985; and
we have not obtained all the information and explanations that we considered necessary for the purpose of the audit; and
we were unable to determine whether proper accounting records had been maintained.
In our opinion the information given in the Directors' Report is consistent with the financial statements."
20 REPORT AND FINANCIAL STATEMENTS
Copies of the report and financial statements for the year ended 31 March 2009 will be sent to shareholders shortly. Further copies will be available from the Company's registered office at 2nd Floor, Berkeley Square House, Berkeley Square, London W1J 6BD. The financial statements will also be available on the Company's website www.legendaryinvestments.net.