Last checked at 30 Jun 2009 16:12
PAN PACIFIC AGGREGATES PLC
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
AND
NOTICE OF agm
Pan Pacific Aggregates plc ("PPA" or the "Group"), the British Columbia based aggregates company announces its final results for the year ended 31 December 2008.
Financial highlights
Loss before tax of £3,336,000 (2007: £2,279,000)
Loss per share of 1.8p per share (2007: 3.6p loss)
Balance of loan notes outstanding £4,571,000 (2007: £4,634,000)
Fundraising of £1.02m during the year
Cash reserves of £238,000 (2007: £742,000)
Operational highlights
Acquisition of Pumptown Quarry Inc. and CNI Equipment Ltd.
Strengthened operational management
Steady progress towards re-opening Pumptown Quarry
PPA confirms that, in accordance with AIM Rule 20, its annual report and accounts for the year ended 31 December 2008 has been sent to shareholders today.
Copies of the 2008 annual report and accounts are available from PPA's registered office at 7 Devonshire Square, Cutlers Gardens, London, EC2M 4YH and can also be downloaded from PPA's website, www.panagg.com.
NOTICE OF AGM
Notice is hereby given that the annual general meeting of Pan Pacific Aggregates plc will be held at 7 Devonshire Square, Cutlers Gardens, London, EC2M 4YH at 10.00 a.m. on Monday, 27 July 2009.
William Voaden, Managing Director, Pan Pacific Aggregates plc, commented:
"The immediate plan, subject to obtaining the operational permit (as described below), is to re-open the Pumptown Quarry. Going forward, the Group's strategy is to grow in the heavy building materials sector by developing a strong local position, both organically and by acquisition."
"The Directors believe that the Pumptown Quarry will have limited revenue generating operations by the end of August 2009."
On 29 June 2009, the last practicable date prior to the date of this announcement, the pounds sterling equivalent exchange rate was £1 = C$1.90.
For further information please visit www.panagg.com or contact:
| William Voaden | Pan Pacific Aggregates plc | Tel: +44 (0) 20 7096 9580 |
| James Caithie / Aaron Smyth | Dowgate Capital Advisers Ltd | Tel: +44 (0) 20 7492 4777 |
| Paul Backhouse | VSA Capital Limited | Tel: +44 (0) 20 7096 9589 |
| Michael Padley / Libby Moss | Lothbury Financial Limited | Tel: +44 (0) 20 7011 9411 |
MANAGING DIRECTOR'S STATEMENT
1. Introduction
2008 was a disruptive year and a period during which an acquisition led to an adverse impact on the Group's financial position due to several key factors. The Pumptown Quarry Inc. ("Pumptown") and CNI Equipment Ltd operations were consolidated into the Group following their acquisition on 11 June 2008.
PPA subsequently received notice from City of Abbotsford Council that, following an inspection of the public bridge near the quarry, the sole access road was not "fit for purpose" for the load limits of aggregate trucks and the quarry was forced to close. The Board is optimistic that the City of Abbotsford will soon allow an alternative access by-pass road to be built to resolve this problem.
On 27 October 2008, PPA announced that HSBC had served a claim on Pumptown in the amount of C$13.255 million in respect of lease payments due to HSBC. On 4 December 2008, the quantum of the claim was reduced to C$1.652 million and on 18 March 2009, Pumptown reached agreement to settle the claim for C$150,000, subject to certain agreed upon and acceptable conditions.
The combination of issues, in tandem with the impact of the credit crisis on the building material industry, has resulted in significant cost in maintaining operations (without corresponding revenue) and had adversely impacted the Group's financial position. This situation has improved, following the completion of an aggregate £582,250 (before expenses of £67,250) fundraising between April and June 2009.
Despite the closure of the quarry and the adverse impact this has had on the Group, the outlook for the Group is now cautiously optimistic. Our prospects and financial position are supported by £230,000 of net cash reserves as at 28 June 2009 to support our strategy as set out in paragraph 8 below.
The Group is dependent on the board's ability to obtain additional funding by September 2009 to meet its working capital requirements and planned development opportunities. In this regard it is noteworthy that the last funding round was oversubscribed and the Board feels confident that it will attract the necessary funds over the next 12 months to implement its strategy.
The economic outlook for aggregates within British Columbia and especially the Fraser Valley is buoyant with the economic stimulus packages which have been implemented by the Canadian Federal Government. Consequently, there are a number of supply contracts which Pumptown Quarry would be in a good position to win following receipt of the operational and by-pass road permits.
2. Financial Performance
The results for the year are disappointing, and reflect the costs associated in maintaining quarry operations and associated finance costs (without corresponding revenue).
Loss per share, basic and diluted, was 1.8p (2007: 3.6p loss).
Cash used in operations in the period was £1,120,000 (2007: £1,093,000).
In July 2008 we raised £1.02 million at a price of 1p per share for working capital during very difficult market conditions. Proceeds have been used to acquire Pumptown and CNI Equipment and for additional working capital purposes.
Finance costs, increased by 2.6% to £1,085,000 from £1,057,000 in 2007. This increase is mainly due to the Pumptown mortgage which was part of the acquisition. During the year £1,018,000 of interest payable on the conversible loan notes issued to RAB Capital Special Situations (Master) Fund Limited ("RAB") was capitalised. The loan note balance at the year end was £4,571,000 which included £821,000 of interest capitalised against the loan note value.
3. Operational Performance
In June 2008, we acquired the entire issued share capital of Pumptown Quarry Inc. and CNI Equipment Inc. for consideration of £1,804,000. The type of aggregate produced by Pumptown is which is primarily used as base material for local roads and buildings.
In the year under review, Pumptown's operations proved challenging for local management. In addition to learning to cope with the impact of the closure of the sole access to the quarry and no production, further issues arose following the acquisition of Pumptown regarding the payment due to HSBC under its equipment leases. The dispute with HSBC led to it making a claim against Pumptown for C$13.255 million, the amount of which was reduced to C$1.652 million. On 18 March 2009, PPA announced that it had reached an agreement with HSBC to settle the abovementioned claim for C$150,000, subject to certain agreed upon and acceptable conditions.
During the year, the Board evaluated the fair value of the Pumptown assets and liabilities acquired. In light of the difficulties faced by the newly acquired subsidiary and the number of accounting adjustments identified post acquisition, the Directors wrote the carrying value of goodwill acquired for Pumptown down to £nil from £629,000.
Further to the announcement of 27 March 2009, the Group is currently marketing the property situated at Wood Bay on the Sechelt Peninsular of British Columbia ("Wood Bay"). Wood Bay is a freehold property and will become unoccupied in July 2009.
Wood Bay is a potential site for a ship loading terminal. The site does not currently generate any revenues or profits. The net book value of the property is £0.9 million. On disposal of Wood Bay, RAB will receive the net sale proceeds, such proceeds to be applied in part to discharging the outstanding principal amount of the loan notes outstanding. A further announcement will be made once the terms of sale are agreed.
4. Environmental performance
The Group is subject to various Canadian laws concerning the environment. Management ensures that any registrations, licenses or permits required for the Group's operations are obtained and observed. All operations have access to safety and environmental legislation summaries specific to their activities and a group-wide safety, health and environmental management system ("SH&E") is in place for monitoring, reporting and addressing SH&E matters.
The Group monitors environmental matters by site and business division, and information about the Group's performance is regularly reported and reviewed by the Group's senior management and the Board.
5. Dividend
The Board does not to recommend the payment of a dividend at this stage.
6. Board Changes and Senior Appointment
Following the purchase of Pumptown, Don Nicholson resigned as a director and was replaced by James Ladner as Non-executive Chairman. In addition, the Board was strengthened by the appointment of Euan McAlpine (Executive Director - Operations) and David Shaw (Non-executive Director). I would like to extend my sincere thanks to Don for his contribution to the development of PPA, playing a lead role in securing and developing our aggregate interests.
Euan McAlpine was until recently employed by Cazenove Capital Management Ltd, where for the past eight years he has worked as a fund manager with an emphasis on business development in the north-west of England. He joined Cazenove from Seamless Holdings Ltd, a manufacturer and installer of epoxy resin floor systems and decorative flake wall systems for industrial use, where he was Chairman and Managing Director for 3 years.
David Shaw has a doctorate in Geology and is a senior mining analyst having worked with Yorkton Securities and Chevron Resources in Vancouver over the past 7 years. He has worked with several junior natural resource companies and has a close relationship with the technical and financial communities in Vancouver.
We are fortunate to be able to welcome Euan and David to the Board and can only benefit from their considerable industry experience and business acumen.
In addition, on 4 December 2008, PPA announced the appointment of Thomas Masney to the senior management team as Chief Financial Officer (designate). This is not a board appointment.
Based in Vancouver, Thomas Masney will be responsible for the financial strategy of the Group, reporting to the Managing Director and the Board on all financial matters, also being responsible for all day-to-day running of the financial management within the Group.
Thomas Masney is a chartered accountant who is a specialist in company turnarounds and restructuring situations. He has held a number of posts as either Financial Director or CFO in Canada, London and Hong Kong, following his early careers with Ernst & Young and PricewaterhouseCoopers.
7. Post Balance Sheet Date Events
On 27 March 2009, PPA entered into a Deed of Variation with RAB to amend the terms of the secured loan notes issued to them, subject to certain conditions being met. Those conditions have been met. The Deed provides, in addition, for the sale of Wood Bay and the receipt of net the proceeds by RAB, and upon PPA raising a further £2,500,000 at any time prior to 31 March 2010, the loan notes will be convertible on the revised basis.
On 18 March 2009, PPA reached agreement to settle the claim served by HSBC against Pumptown for C$150,000, subject to certain agreed upon and acceptable conditions. HSBC have since agreed that the amount due to them will be settled on the same basis as other unrelated unsecured creditors of Pumptown, as futher decribed below.
Between April and June 2009 PPA raised, in aggregate, £582,250 (before expenses of £67,250). The net proceeds will provide PPA with additional working capital, enabling it to satisfy the agreed settlement of the claim made by HSBC and to recommence operations at Pumptown Quarry in due course. The rasing of this amount satisfied one of the conditions to the above Deed of Variation becoming effective. If the revision of the terms of conversion of the loan notes is achieved, we will have transformed the Group's balance sheet. We will continue to keep the market informed of any further developments.
On 15 June 2009, PPA announced that Pumptown filed a Proposal to offer unrelated unsecured creditors of Pumptown a total payment of 9.554 per cent. of proven claims, representing a total payment of approximately C$210,000. This was necessary as a number of creditor claims had arisen following the acquisition of Pumptown that needed to be settled on the same basis as the HSBC claim. The Proposal was approved at a meeting of creditors on 25 June 2009 and will be submitted to the Court for approval.
On 29 June 2009, at the Executive Committee meeting of the City of Abbotsford Council, a report from the Manager, Engineering Inspections and Permits regarding a Soil Removal Application (an operational permit) of Pumptown was presented and approved to proceed to a public information meeting which is expected to occur in July. On the assumption there is a positive outcome from the July meeting, the next step is for Council to ratify the Soil Removal Application, which is expected to take place in August 2009, further details are set out in paragraph 10 below.
The operational permit, the subject of the Soil Removal Application enables the Company to operate the quarry (meaning blast and process stone in the quarry), subject to conformity with local regulations.
8. Strategy
Our strategy for growth lies in three key areas, namely:
1. increase the size of the Group's aggregate resource;
2. deliver the Group's products to customer within the western seaboard of Canada; and
3. develop strategic alliances with large volume consumers of construction and industrial aggregates.
Our strategy has been to expand the Group in existing markets and carefully increase the size of our operations organically, via joint ventures and acquisitions.
9. People
I would like to thank all our employees for their continuing dedication to serving the Group and its customers effectively. I am confident in the more challenging times I see ahead they will respond and outperform accordingly.
10. Outlook
The temporary closure of Pumptown and the challenge of re-capitalising our business make forecasting difficult. We are pleased with the progress the business has made over the past year in resolving the various challenges facing it.
Our operating plans for the year ahead assume that the Pumptown Quarry will re-open in the second half of 2009, a fundraising by September 2009, and that demand for aggregates in the local region remains constant. Government focus on infrastructure spending will have a positive impact on our business.
We will maintain continuous dialogue with our stakeholders with a view to the re-opening of the quarry. The Directors believe that the Pumptown Quarry may have limited revenue generating operations by the end of August 2009. Once the Pumptown Quarry is re-opened, we will focus our efforts on production and meeting the needs of our customers and we will progress further value adding opportunities.
The Directors believe that access to the by-pass bridge for gravel trucks will be obtained and be fully operational by the end of September 2009. The Company may be required to contribute towards bridge engineering costs. The size of such contribution has not yet been determined.
That we are able to move forward positively is due in no small measure to the efforts of our management team and Canadian workforce, led most capably by our Chief Financial Officer designate, Thomas Masney. Thanks to them, we have managed not only to secure our operating base in British Columbia, but also taken a step (via the Proposal to creditors announced on 15 June 2009) to strengthen the financial position of Pumptown. I wish to congratulate Thomas and his staff for this achievement.
As part of our overall strategy, the Board intends to seek possible acquisition opportunities in the Fraser Valley to take full advantage of a fragmented market served by a number of local producers and consolidate the Group's position.
I would also like to thank Euan McAlpine and his operational team for the significant progress made during the year.
We will also continue our work to bring the Caren Ridge deposit on the Sechelt Peninsular into production. As announced on 8 December 2008, we are seeking a partner to operate the quarry. The Board expects to begin production in 2010.
Once in production, we plan to sell our aggregates in local markets and most of our product will be delivered by trucks, however, the Board plan to expand this to shipping our aggregates by barge in the future.
11. Conclusion
In the last twelve months the Group has overcome many obstacles in relation to resolving a number of issues and funding its operations. Subject to Court approval of the Pumptown Proposal, approval by the City of Abbotsford Council of a proposed by-pass road and its construction, and the operational permit being approved, the Group will focus on bringing the Pumptown Quarry back into production and to generating cash flow. There is demand in the area for our products and we are in discussions regarding several new aggregates contracts.
We believe we will be in a good position to benefit from the local economic phase recovery to come.
William Voaden
Managing Director
30 June 2009
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 2008
| Note | 2008 | 2007 | ||
| £'000 | £'000 | |||
| Audited | Audited | |||
| Revenue | 184 | 21 | ||
| Cost of sales | (252) | (15) | ||
|
| ||||
| Gross (loss)/profit | (68) | 6 | ||
| Impairment charge | (629) | - | ||
| Other administrative expenses | (1,569) | (1,262) | ||
| Total administrative expenses | (2,198) | (1,262) | ||
| Loss from operations | (2,266) | (1,256) | ||
| Financial expense | (1,085) | (1,057) | ||
| Financial income | 15 | 34 | ||
| Loss before taxation | (3,336) | (2,279) | ||
| Taxation credit | 7 | - | ||
| Loss for the year | (3,329) | (2,279) | ||
| Attributable to: | ||||
| Equity holders of the parent | (3,329) | (2,278) | ||
| Minority interest | - | (1) | ||
| Loss per ordinary share | ||||
| Basic and diluted (pence) | 2 | (1.8p) | (3.6p) | |
| All amounts relate to continuing activities |
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2008
| 2008 | 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | £'000 | |
| Audited | Audited | |||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 3,835 | 3,783 | ||
| Property, plant and equipment | 3,821 | 1,019 | ||
| Total non-current assets | 7,656 | 4,802 | ||
| Current assets | ||||
| Inventories | 126 | - | ||
| Receivables | 40 | 30 | ||
| Cash | 238 | 742 | ||
| Total current assets | 404 | 772 | ||
| Total assets | 8,060 | 5,574 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Loan Notes | 4,571 | 4,634 | ||
| Trade payables | 438 | 188 | ||
| Other loans | 894 | - | ||
| 5,903 | 4,822 | |||
| Non-current liabilities | ||||
| Deferred tax | 813 | - | ||
| Total liabilities | 6,716 | 4,822
| ||
| Total net assets | 1,344 | 752 | ||
| Capital and reserves attributable to equity holders of the company | ||||
| Called up share capital | 288 | 64 | ||
| Share premium account | 8,681 | 5,342 | ||
| Foreign exchange reserve | (453) | (321) | ||
| Reserve for options granted | 86 | 822 | ||
| Reserve for warrants granted | 72 | - | ||
| Retained deficit | (7,331) | (5,156) | ||
| 1,343 | 751 | |||
| Minority Interest | 1 | 1 | ||
| Total equity | 1,344 | 752 | ||
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 2008
| 2008 | 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | £'000 | |
| Audited | Audited | |||
| Loss before taxation | (3,336) | (2,279) | ||
| Adjustments for | ||||
| Depreciation and amortisation | 44 | 21 | ||
| Impairment of investments | 628 | - | ||
| Interest receivable | (15) | (34) | ||
| Interest payable | 1,085 | 1,057 | ||
| Share based payment expense | 419 | 398 | ||
| 2,161 | 1,442 | |||
| Cash outflows from operating activities before changes in working capital and provisions | (1,175) | (837) | ||
| Decrease in trade and other receivables | 51 | 50 | ||
| (Increase)/decrease in inventories | (54) | 14 | ||
| Increase/(decrease) in trade and other payables | 58 | (320) | ||
| 55 | (256) | |||
| Cash outflows from operating activities | (1,120) | (1,093) | ||
| Investing activities | ||||
| Interest received | 15 | 34 | ||
| Investment in group companies | (212) | - | ||
| Purchase of property, plant and equipment | (24) | (1) | ||
| Proceeds from sale of property, plant and equipment |
- |
18 | ||
| Purchase of intangible assets | (52) | (421) | ||
| Cash flows from investing activities | (273) | (370) | ||
| Financing activities | ||||
| Interest paid | (67) | - | ||
| Issue of ordinary share capital (net of issue costs) | 954 | - | ||
| Issue of convertible loan notes | - | 1,500 | ||
| Cash flows from financing activities | 887 | 1,500 | ||
| Increase (decrease) in cash | (506) | 37 | ||
| Cash and equivalents at beginning of the year | 742 | 705 | ||
| Exchange gains on cash and cash equivalents | 2 | - | ||
| Cash and equivalents at end of the year | 238 | 742 | ||
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information included within this announcement does not constitute the company's statutory accounts for the years ended 31 December 2008 or 31 December 2007, but it is derived from those accounts. Statutory accounts for 2008 will be delivered to the Registrar of Companies following the company's annual general meeting. The auditors have reported on those accounts: their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
The audit report for the year ended 31 December 2008 was unqualified but did contain an emphasis of matter in respect of going concern and Pumptown assets to which the auditors drew attention without qualifying their report.
The financial information included within this announcement has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRSs). The principle accounting policies used in preparing the financial information are unchanged from those included in the audited financial statements.
The final results were approved by the Board of Directors on 30 June 2009.
2. Earnings per share
Basic earnings per share is calculated on the loss for the year after taxation attributable to equity holders of the Company of £3,329,000 (2007: £2,279,426) and on 187,597,232 ordinary shares (2007: 64,136,765 ordinary shares), being the weighted number in issue during the year.
Diluted earnings per share is calculated on the weighted number of ordinary shares in issue adjusted to reflect the potential effect of the exercise of share warrants. No adjustment is required in either period because the fair value of warrants and options in issue were below the exercise price.
3. AIM compliance committee
In accordance with AIM Rule 31 the Company is required to have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules; seek advice from its nominated adviser ("Nomad") regarding its compliance with the AIM Rules whenever appropriate and take that advice into account; provide the Company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisers; ensure that each of the Company's directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director.
In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the "AIM Committee"), chaired by James Ladner, a non-executive director of the Company.
4. Distribution of the Annual Report
A copy of the Annual Report and Financial Statements has been sent to all shareholders today. Further copies will be available to the public from the Company Secretary at the Company's registered address at 7 Devonshire Square, Cutlers Gardens, London, EC2M 4YH or from the Company's website, www.panagg.com.