Afentra Plc. Regulatory News (AET)

8 Sep 2005 06:00

Draft 3 embargo to 7 a.m. Thursday 8th 2005FOR IMMEDIATE RELEASE8 September 2005RESURGE PLC("Resurge" or "the Company")Unaudited Financial Statement for 6 months to 30 April 2005Proposed Reorganisation of Share Capital and Secured IndebtednessChange of Nominated Adviser and BrokerRecommencement of trading on AIMBACKGROUNDOn 8 March 2005, following the appointment of administrative receivers atChesterton International Limited ("Chesterton"), the Directors of the Companyrequested the suspension of dealings in ordinary shares of the Company on AIM. On 14 March 2005 the Company received a demand for immediate payment of ‚£1,591,494 plus interest from NatWest under a guarantee relating to certainborrowings of Chesterton from NatWest. On 17 March 2005 NatWest issued astatutory demand on the Company in the amount of ‚£1,624,936. The Directorsconsulted with Kaloshar, the secured creditor of the Company. As a resultKaloshar, as the secured creditor, took steps to place the Company inadministration and on 30 March 2005, Anthony Batty was appointed asAdministrator under the Insolvency Act 1986.Following the sale of some of the Chesterton businesses and realisation of theother assets that secured the borrowings owing to NatWest, NatWest haswithdrawn its claim against the Company under the guarantee mentioned above. The Administrator has taken account of the release of the NatWest claim toreassess the financial position of the Company and the objectives of theAdministration. The Administrator has determined that, as a result of thewithdrawal of Natwest's claim and with the support of the creditors, includingKaloshar which has agreed to the proposed restructuring of the SecuredIndebtedness, the Administration ceased with effect from 6 September 2005. ProposalsThe Administrator has considered the position of the Company, and in particularthe status of its remaining assets and rights compared to its obligations andliabilities, both secured and unsecured. The indebtedness of the Company toKaloshar, which at present amounts to about ‚£7,200,000, is secured, inter alia,by a debenture containing fixed and floating charges over all the assets of theCompany. The Administrator has estimated that the realisable value of theassets of the Company, taking account of the insolvency of Chesterton, will besubstantially less than the Secured Indebtedness of Kaloshar.The Administrator has determined that the most beneficial outcome of theAdministration would be the restoration of the financial viability of theCompany by means of an agreement to reconstitute the Secured Indebtedness ofKaloshar. To this end, the Administrator and Kaloshar have entered into anagreement by which the Secured Indebtedness would, subject to the terminationof the Administration and the passing of the Resolutions, be reconstituted asfollows:-‚£750,000 of the Secured Indebtedness would be reconstituted by the issue toKaloshar of the First Convertible Notes, carrying interest at 5 per cent perannum, convertible at the rate of 1000 Redesignated Ordinary Shares for every ‚£1 of principal converted and repayable from the proceeds of sale of the SecuredAssets, to the extent that such proceeds are not required for the workingcapital requirements of the Company (to be agreed with Kaloshar) and, in anyevent, finally on 7 October 2007;‚£500,000 of the Secured Indebtedness would be reconstituted by the issue toKaloshar of the Second Convertible Notes, carrying interest at 5 per cent perannum, convertible at the rate of 1000 Redesignated Ordinary Shares for every ‚£1 of principal converted and repayable, if not converted on 7 October 2012; and‚£5,950,000 of the Secured Indebtedness would be reconstituted by the issue toKaloshar of the Third Convertible Notes carrying no interest, convertible atthe rate of 1000 Redesignated Ordinary Shares for every ‚£1 of principalconverted and, if not converted, repayable on 7 October 2012.All of the Convertible Loan Notes will, for so long as they are held byKaloshar, be secured under the debenture and charges created by the Company tosecure all monies owing by the Company to Kaloshar.In addition, a total of ‚£32,000 of the indebtedness owing by the Company tounsecured creditors has been either cancelled or assumed by Lavonia Limited,one of the existing shareholders of the Company, on terms that Lavonia hasagreed to transfer shares in the Company to those creditors. Those unsecuredcreditors who remain are either subject to disputes and counterclaims by whichthe Company intends to resist their claims or otherwise considered by the Boardto be capable of being settled from the Company's available resources.The Board believes that the issue by the Company of the Convertible Loan Notes,combined with the restructuring of the capital of the Company, (as describedbelow) would enable the Company to be re-admitted to AIM with the prospect ofbeing able to realise value for Shareholders as a result.Each of Mr Leo Knifton and Mr Jonathan Rowland, two of the directors, haveagreed to advance to the Company ‚£10,000 (the "Directors' Loans") to be usedfor working capital by the Company on terms that, subject to the Resolutionsbeing passed, the Directors' Loans will be convertible at the rate of 1000Redesignated Ordinary Shares for every ‚£1 of principal converted and, if notconverted, repayable on 7 October 2007. Caldicot Management Limited("Caldicot") has also agreed to advance the sum of ‚£30,000 on the same terms asthe Directors' Loans (the "Caldicot Loan"). If the Resolutions are not passedat the EGM the Company will be obliged to pay a redemption premium on each ofthe Directors' Loans and the Caldicot Loan of 100% of the principal amount andthe Directors' Loans and the Caldicot Loan, together with the redemptionpremium will be repayable by the Company on demand.By implementing the proposal to reconstitute all outstanding SecuredIndebtedness of the Company into the Convertible Loan Notes, there is aprospect that the Ordinary Shares, once readmitted to trading on AIM, mayachieve a value that may provide a better return than would otherwise beavailable to creditors and Shareholders.Related party transactionThe Directors Loans are being advanced by two Directors of the Company andthese arrangements accordingly qualify as a related party transaction under AIMRULE 13.The Caldicot Loan is being provided by Caldicot. The owner and director ofCaldicot is the trustee of the Rowland Purpose Trust 2001. The trustee of theRowland Purpose Trust 2001 is also the ultimate controller of Lavonia Limitedwhich is a Shareholder. In the circumstances, it is appropriate to treat theCaldicot Loan as a related party transaction. The Convertible Loan Notes are being entered into by Kaloshar. The ultimatecontrol of Kaloshar is the trustee of the Rowland Purpose Trust 2001. Thetrustee of the Rowland Purpose Trust 2001 is also the ultimate controller ofLavonia Limited which is a Shareholder. In the circumstances, it isappropriate to treat the Convertible Loan Notes as related party transactions.Mr Graham Robeson, the independent Director, having consulted the NominatedAdviser, considers that the terms of the Directors Loans, the Caldicot Loanand the Convertible Loan Notes are each fair and reasonable insofar as theShareholders are concerned.Working CapitalThe Board is satisfied that, subject to the implementation of the Proposals, the Company is solvent and has sufficient working capital to enable it to moveforward. The Board has given its assurances in this regard to the NominatedAdviser. As a consequence arrangements will be made for the Ordinary Shares tobe re-admitted to trading on AIM on the morning of 8 September 2005.AdvisersThe Board has appointed Beaumont Cornish Limited as the Company's NominatedAdviser and Falcon Securities (UK) Limited have been appointed as the Company'sBroker.Proposed Capital ReorganisationIt is proposed that, as a first step, each of the 72,025,963 issued ordinaryshares of 2p each in the capital of the Company be sub-divided into oneordinary share of 0.1p and one Deferred Share of 1.9p each credited as fullypaid up. The Deferred Shares shall have the special rights, and shall besubject to the restrictions, set out in the Articles of Association of theCompany which, it is proposed, will be amended accordingly pursuant to theResolutions. The Deferred Shares will carry negligible value and will not beadmitted to trading.The Resolutions to carry out the proposed capital reorganisation are to be putto Shareholders at the Extraordinary General Meeting convened for 7 October2005. If the Proposals are not approved by Shareholders and the restructuringof the Secured Indebtedness is not implemented it is likely that the Companywill remain in Administration as there are insufficient assets to repay theSecured Indebtedness. In this situation it is likely that there will be noreturn to Shareholders.Financial informationThe financial statements for the period to 31 October 2004 have been sent toshareholders. The results and position shown by these financial statements willhave been superseded by events that have occurred after the year end, asdescribed herein. Copies of the Report & Accounts are available for one monthat the Company's office at 43 North Audley Street, London W1K 6WH.Business strategy of the Company following the ProposalsAssuming the Proposals are implemented, the strategy of the Board will be toconduct a programme for the realisation of the remaining assets of the Companyand to seek suitable investment opportunities. Your Board believes that LeoKnifton (the newly appointed Director) has relevant experience in identifyingsuch investments.Your Board have decided that the Company's business strategy will remainunchanged following the Proposals and the Company will continue to providecapital for companies in turnaround and distress situations.DirectorsLeo Knifton has agreed to act and has been appointed as a director of theCompany. He has agreed with the Company that his appointment is subject totermination on twelve months' notice. Leo Knifton started his career in theCity in 1970 as a Stock Jobber and Market Maker with Pinchin Denny. He became aMember of the Stock Exchange in 1982 and is a Fellow of the SecuritiesInstitute. In 1990 he formed Fort Knox Property Services and later ProshoreFinancial Services Ltd., developing the Proshore business into a significantprovider of mortgages and related financial products. He became an AppointedRepresentative of Alfred Henry Corporate Finance Limited in 2003 to develop abroad range of services to smaller listed businesses specialising inrestructuring and reverse acquisitions. He is Chairman of the following AIMquoted companies: Adorian PLC, SBS Group Plc, Alltrue Investments plc and LHPInvestments Plc, and a director of PNC Telecom plc, Caplay plc, BeaufortInternational Group plc and Azman plc. Leo Knifton's current directorships andhis directorships over the past five years are as follows -Current directorships: Previous directorships: Alltrue Investments plc Acclaimed Management Limited Beaufort International Group plc Century 21 Financial Services Limited Beaufort Nominees Limited Fort Knox Property Services NL Limited BTG Europe Limited Fort Knox Property Services Limited Bulawayo plc Futuragene plc Caplay plc Netwindfall Affinity Services Limited Great Monument Capital Limited Netwindfall Finance Services Limited Investor Easy Limited Netwindfall Insurance Services Limited Internet Music & Media plc Netwindfall Mortgage Brokers Limited Internet Music & Media Nominees Limited Netwindfall Property Services Limited Laurence plc NWD Group PLC LP Hill Investments plc Over Net Data (UK) Limited Oakgate Plc Proshore Financial Services Limited Over Net Data Plc Starguild Limited PNC Telecom plc Voss Net Plc Pountney plc Windfall Mortgage Services Limited PrimeEnt Limited Windfall Nominees Limited SBS Group Plc Windfall Packaging Limited SBS Nominees Limited Windfall Shares Limited Voss Net Nominees Limited Jonathan Rowland has agreed to continue to act as a director of the Company. He has agreed with the Company that his appointment is subject to terminationon twelve months' notice. Mr Brierley and Mr Tonkinson, who have resigned as directors, have agreed thatthey will have no claim for compensation or otherwise against the Company.Mr Robeson will continue to act as a director; however he is expected to resignfrom office in the near future.LitigationThe Company has been engaged in prospective claims arising as a result of itssecurity for indebtedness owing to it by Chesterton. The Company has acontinuing security interest over some assets of Chesterton, including thosethat have been sold by the receiver appointed by NatWest. The Company may beobliged to participate in claims arising as a result of its security, but anysuch claims are likely to be subject to prior security of NatWest andKaloshar. Resurge is also a defendant in a personal action brought by Mohammad JafariFini claiming approximately ‚£20 million in damages. Skillglass Limited (inadministration) (a subsidiary of the Company) ("Skillglass") is also adefendant. The Directors of Resurge believe the claim is totally spurious andof no merit but it is set down for a five day preliminary hearing in the HighCourt commencing on 12th December 2005. There is also a hearing on 15thNovember 2005 when Resurge's application for a strike out of the proceedingsagainst it will be heard and on the same day Skillglass has an application fora stay of the proceedings for failure by Mr Fini to pay cost orders. Resurgehas also made an application to the courts for summary judgement against MrFini for ‚£936,000 due on a share sale agreement relating to his proposedshareholding in Phoenix Acquisitions Limited; there is no date at present forthat hearing.Notwithstanding these outstanding matters, the Administrator does not considerthat the existence of these claims, or the prospects that the securedcreditors' ability to recover, would have any bearing on the position ofunsecured creditors and hence on the Proposals.Save for claims made by creditors in respect of debts owed by the Company andclaims by the Company referred to in this circular, no material legal orarbitration proceedings are active, pending or threatened against, or beingbrought by, the Company which are having or may have a significant effect onthe Company's financial position. Circular and Extraordinary General MeetingA Circular and Notice of an Extraordinary General Meeting of the Company hasbeen posted today, copies of which will be available for one month from theCompany's office at 43 North Audley Street, London W1K 6WH). The EGM isconvened for 7 October 2005 at which the Resolutions will be proposed torestructure the share capital of the Company, to change the name of theCompany, to give the directors authority to issue the Redesignated OrdinaryShares and to re-appoint Baker Tilly as auditors.Interim Results for the 6 months ended 30 April 2005 are set out below:(copies will be available for one month from the Company's office at : 43 NorthAudley Street, London W1K 6WH).RESURGE PLCCONSOLIDATED PROFITAND LOSS ACCOUNT Six months Six months Year Ended Ended to 30th April Notes 2005 30th April 2004 31st October 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ TURNOVER 25,121 1,679,149 2,315,557 Direct costs (464,224) (991,703) (1,629,962) Other operating expenses - other (79,649) (368,478) (572,565) Other operating expenses - exceptional 5 22,658 (2,580,156) (12,738,185) OPERATING PROFIT/(LOSS) (496,094) (2,261,188) (12,625,155) Profit on disposal of fixed asset investments - 160 (104,085) Interest receivable 1,950 3,710 8,460 Interest payable - - (1,439) Amounts written off fixed asset investments - (149,850) (9,000) PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION (494,144) (2,407,168) (12,731,219) Taxation - 168,369 238,135 PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION (494,144) (2,238,799) (12,493,084) Dividends - - - RETAINED PROFIT/(LOSS) FOR THE PERIOD (494,144) (2,238,799) (12,493,084) Earnings/(loss) per share Basic 6 (0.69p) (3.11p) (17.35p) Diluted 6 (0.69p) (3.11p) (17.35p) The operating profit/(loss) for the period arises from the group's continuingoperations. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months Six months Year Ended Ended to 30th April 30th April 2005 2004 31st October 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Profit/(loss) for the period (494,144) (2,238,799) (12,493,084) Unrealised (deficit)/surplus on revaluation of fixed asset investments - (58,023) - Total recognised gains and losses relating to the period (494,144) (2,296,822) (12,493,084) RESURGE PLC CONSOLIDATED BALANCE SHEET Six months Six months Year Ended Ended to 30th April 30th April 31st October Notes 2005 2004 2004 (unaudited) (unaudited) (audited) FIXED ASSETS ‚£ ‚£ ‚£ Investments 33,789 1,386,466 33,789 33,789 1,386,466 33,789 CURRENT ASSETS Debtors - 79,334 22,171 Loans: due within one year 299,785 9,295,125 765,741 Cash at bank and in hand 100,398 336,581 132,169 400,183 9,711,040 920,081 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (7,946,650) (7,919,778) (7,972,404) NET CURRENT ASSETS (7,546,467) 1,791,262 (7,052,323) TOTAL ASSETS LESS CURRENT LIABILITIES (7,512,678) 3,177,728 (7,018,534) CAPITAL AND RESERVES Called up share capital 1,440,519 1,440,519 1,440,519 Share premuim account 2,890,013 2,890,013 2,890,013 Revaluation reserve - 214,867 - Profit and loss account (11,843,210) (1,367,671) (11,349,066) EQUITY SHAREHOLDERS' FUNDS (7,512,678) 3,177,728 (7,018,534) RESURGE PLC CONSOLIDATED CASH FLOW STATEMENT Six months Six months Year Ended Ended to 30th April 2005 30th April 2004 31st October 2004 Notes (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Net cash inflow/(outflow) from operating activities 7 57,937 1,419,867 1,332,141 Returns on investments and servicing of finance 8 1,950 3,710 7,021 Taxation - - (49,385) Capital expenditure and financial investment 9 - (167,586) 1,279,636 Equity dividends paid 10 - (79,229) (79,229) CASH INFLOW/(OUTFLOW) BEFORE FINANCING 59,887 1,176,762 2,490,184 Financing 11 (91,658) (801,187) (2,319,021) INCREASE/(DECREASE) IN CASH IN THE PERIOD (31,771) 375,575 171,163 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/ FUNDS Six months Six months Year Ended Ended to 30th April 2005 30th April 2004 31st October 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ (Decrease)/increase in cash in the year (31,771) 375,575 171,163 Cash (inflow)/outflow from increase in debt 91,658 801,187 2,319,021 CHANGE IN NET (DEBT)/FUNDS RESULTING FROM CASH FLOWS 59,887 1,176,762 2,490,184 Accrued loan interest and amortised loan finance costs (442,194) (939,879) (1,545,877) MOVEMENT IN NET (DEBT)/ FUNDS IN THE PERIOD (382,307) 236,883 944,307 NET FUNDS AT 1 NOVEMBER 2004 (6,667,605) (7,611,912) (7,611,912) NET FUNDS AT 30 APRIL 2005 (7,049,912) (7,375,029) (6,667,605) RESURGE PLCRECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS Six months Six months Year Ended Ended to 30th April 30th April 31st October (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ Profit/(loss) for the period (494,144) (2,238,799) (12,493,084) Dividends - - - (494,144) (2,238,799) (12,493,084) New share capital issued net of costs - - - Other recognised gains and losses - (58,023) - Net addition to equity shareholders' funds (494,144) (2,296,822) (12,493,084) Opening equity shareholders' funds (7,018,534) 5,474,550 5,474,550 Closing equity shareholders' funds (7,512,678) 3,177,728 (7,018,534) RESURGE PLCNOTES TO THE INTERIM REPORT1 The financial information contained in this interim report doesnot constitute statutory accounts. The interim accounts, which have not beenaudited, have been prepared using accounting policies consistent with thoseused in the preparation of the accounts for the period ended 31 October 2004. Those accounts have been filed with the Registrar of Companies and received anunqualified audit report which did not contain a statement under section 237(2)or (3) Companies Act 1985. The interim accounts were approved by the directorson 5th September 2005. 2 Basis of consolidationThe group financial statements consolidate those of Resurge plc and all of itssubsidiary undertakings except for any subsidiaries that are held exclusivelywith a view to subsequent resale. Subsidiaries that are held exclusively forresale are classified as current asset investments and are stated at the lowerof cost and net realisable value.Taxation for the six months to 30 April 2005 is based on the effective rate oftaxation which is estimated to apply to the year ended 31 October 2005.4 The directors do not recommend the payment of a dividend.5 Other operating expenses - exceptional The exceptional other operating expenses relate to a recovery against theprovision of the debtor book purchase from Frayling Furniture Limited.6 The basic and diluted earnings per share are based on the profit/(loss) on ordinary activities after taxation of the company attributable toordinary shareholders and on 72,025,963 being the weighted average number ofordinary shares in issue during the period.The diluted earnings per share have been calculated in accordance with FRS14"Earnings per share". Six months Six months Year Ended Ended to 30th April 30th April 31st October 2005 2004 2004 (unaudited) (unaudited) (audited) ‚£ ‚£ ‚£ 7 Reconciliation of operating profit/(loss) to net cash flow from operating activities Operating profit/(loss) (496,094) (2,261,188) (12,625,155) Non-cash changes to long term debt 442,194 - 1,545,877 Increase/(Decrease) in creditors (375,290) 684,828 (632,521) Decrease/(Increase) in loans 464,956 2,731,390 12,748,329 Decrease/(Increase) in debtors 22,171 264,837 295,611 Net cash flow from operating activities 57,937 1,419,867 1,332,141 8 Returns on investments and servicing of finance Interest received 1,950 3,710 8,460 Interest paid - - (1,439) Net cash inflow from returns on investments and servicing of finance 1,950 3,710 7,021 9 Capital expenditure and financial investment Purchase of equity shares - (190,994) (190,994) Sale of equity shares - 23,408 1,470,630 Net cash (outflow)/inflow from capital expenditure and financial investment - (167,586) 1,279,636 10 Equity dividends Dividend paid - (79,229) - Net cash outflow from equity dividends - (79,229) - 11 Financing Issue of ordinary share capital - - - Expenses paid in connection with share issue - - - Increase/(Decrease) in loans (91,658) (801,187) (2,319,021) Net cash inflow from financing (91,658) (801,187) (2,319,021) 12 Analysis of net funds At other At 1st Nov non-cash 30th April 2004 Cashflow changes 2005 ‚£ ‚£ ‚£ ‚£ Cash at bank and in hand 132,169 (31,771) - 100,398 - 132,169 (31,771) 100,398 Loans due within one year (6,799,774) 91,658 (442,194) (7,150,310) (6,667,605) 59,887 (442,194) (7,049,912) Other non-cash changes comprise accrued loan interest. 13 Post Balance Sheet Events On the 6th September 2005 Jonathan Rowland, Leo Knifton and Caldicot ManagementLimited will provide ‚£50,000 by way off convertible loan notes to provideworking capital for the company going forward.National Westminster Bank Plc has withdrawn its demand served on the company onthe 17 March 2005 in respect of the guarantee the company had entered intorelating to certain borrowings of Chesterton.Mohammad Jafari Fini has joined the company as a defendant in his personalproceedings against the company's subsidiary Skillglass Limited (Inadministration). This is being contested by the company.Since 30 April 2005, the company has received from Philip Reid in part paymentof his loan facility with the company an amount of ‚£30,633.14 This interim report will be sent to all shareholders and is alsoavailable from the company's office at 43 North Audley Street, London W1K 6WH. For further information:RESURGE PLC Graham Robeson, Chairman Tel: 01692 650432 Leo Knifton Tel: 0207 251 3762 Jonathan Rowland Tel: 0207 493 9116 Beaumont Cornish Limited Nominated Adviser Tel: 0207 628 3396 Roland Cornish / Noelle Greenaway ENDRESURGE PLC