23 Oct 2009 07:00
For immediate release: 23 October 2009, 7AM
Creon Corporation Plc Interim results for the six months ended 31 July 2009
Creon Corporation Plc (AIM: CRO) today announces its interim results for the six months ended 31 July 2009.
DIRECTORS' REPORTIntroduction
I am pleased to present these interim results of Creon Corporation Plc ("Creon", the "Group", or the "Company") for the six months ended 31 July 2009 to shareholders.
As notified in previous announcements, over the last 12 months there have been significant changes to Creon's business and the environment within which it operates. At the Company's annual general meeting held in August 2009, the Company's shareholders approved Creon's new broader investment strategy, providing the Company with a wider range of investment options and opportunities. This new investment strategy is expected to provide the directors with a wider range of investment prospects and also to make the Company more attractive to potential new investors.
Operations
During the six month period under review, the Company continued to prepare for its repositioning from a pure-play UK residential property mezzanine finance provider to a more general investment company. Towards the end of 2008, the Company was re-financed such that it could settle the majority of its historic creditors in order to attract new shareholders that wished to pursue new investment opportunities. We are expecting some potential new proposals from them in the near future. We also had a change of directors during the period and I'm pleased to say that Guus Berting has agreed to, with immediate effect, become Creon's executive director and Jonathan Freeman will continue to serve on the board as a non-executive director. We would like to thank Jonathan for his efforts over the last few years, particularly in the most recent difficult 12 months.
Financial review
Income during the period represented rental income from the two investment properties and loan income from a 200,000 loan made in February 2009. Administrative expenses during the period include an impairment charge of 13,000 in respect of the carrying value of the Group's quoted investments. There were no finance costs during the period due to overpayments of interest in the previous year on the 250,000 Bank of Scotland loan ("BoS Loan"). The loss for the period was 96,000, resulting in a loss per share for the period of 0.22 pence.
As at the period end, the Group held two investment properties which had been received in settlement of a previous mezzanine loan. At 31 July 2009, the properties had an aggregate carrying value of 335,000. We're pleased to report that both properties were sold after the period end for an aggregate sum of 340,000, before selling costs, and part of the net proceeds of these property sales were used to repay the BoS Loan. The Group also continues to hold the unquoted 7% preference shares in Pinnacle, the value of which remained at 400,000 in the Directors' view at the period end.
The Group's net debt position at the period end was 250,000. However, we're pleased to report that as at the date of this announcement, the Group had net cash of approximately 50,000. In addition, the Group is expecting repayment in the near future of its only remaining performing loan of 110,000 with interest. This, in addition to the Group's existing cash resources is, in the opinion of the Directors, sufficient working capital for the foreseeable future.
Outlook
The Directors continue to discuss ways of raising further funds with its current shareholders and advisers and are hopeful of making a further announcement in this regard in due course. For the moment, however, we are pleased to have secured a future for the Group, which has little or no debt, despite the unprecedented difficult market conditions over the last 18 months.
CREON CORPORATION PLC
CONSOLIDATED INCOME STATEMENT
for the six months ended 31 July 2009
Note 6 months 6 months 12 months ended ended ended 31.7.09 31.7.08 31.1.09 '000 '000 '000 Revenue 2 4 43 9 Cost of Sales (10) 20 (16) Exceptional item: Loans impairment - - (2,328) ______ ______ ______ Gross (loss) / profit (6) 63 (2,303) Administrative expenses 3 (101) (2,007) (282) Exceptional items: Loss on sale of - - (1,100)investment ______ ______ ______ Loss from operations (107) (1,944) (3,685) Financial income 4 11 4 5 Financial expense 4 - (8) (19) ______ ______ ______ Loss on ordinary activities before tax (96) (1,948) (3,699)ation Tax on (loss) on ordinary activities 5 - - 1 ______ ______ ______ Loss on ordinary activities after (96) (1,948) (3,700)taxation ______ ______ ______ Loss per share 6 (0.22)p (19.41)p (1.22)p
Consolidated unaudited interim balance sheet
Note As at As at As at 31.7.09 31.7.08 31.1.09 '000 '000 '000 Assets: Non CurrentAssets Investment properties 7 335 250 335 Investment in unquoted preference 8 400 - 400shares _____ _____ _____ 735 250 735 Current Assets Investments in quoted shares 6 - 19 Loans receivable 9 135 990 - Other receivables 22 78 241 Cash and cash equivalents - 11 2 _____ ____ ____ 163 1,079 262 Total Assets 898 1,329 997 Liabilities: Current Liabilities Trade and other payables (101) (65) (104) Interest bearing loan 10 (250) (250) (250) _____ ____ ____ Total Liabilities (351) (315) (354) Net Assets 547 1,014 643 Capital and Reserves Called up equity share capital 11 440 100 440 Share premium account 3,816 2,775 3,816 Retained earnings (3,709) (1,861) (3,613) ____ ____ ____ Total Equity 547 1,014 643
Unaudited consolidated cash flow statement
6 months 6 months 12 months ended ended ended 31.7.09 31.7.08 31.1.09 GBP'000 GBP'000 GBP'000 Reconciliation of operating profit to net cash flow from operating activities Loss for the year before tax (96) (1,948) (3,699) Adjustments for: Finance cost - 8 19 Investment income (11) (4) (5) Loss on disposal of investment - - 1,100 Impairment of property - - 65 Impairment of investment 13 - 24 Loan impairment - 1,406 2,231 Property accepted in lieu of cash - - (400) settlement Change in receivables 219 271 139 Change in payables (3) (100) (30) ________ ________ ________
Cash flows from operating activities 122 (367) (557)
Interest received 11 4 5 Taxation refunded/(paid) - 3 33 ______ ______ ______ 133 (360) 38 Investing activities Mezzanine finance loans advanced - (286) - Mezzanine finance loans repaid - 336 - Purchase of investments - - (43) Purchase costs of acquisition of - - (105) Pinnacle Other loans advanced (200) (403) (404) Other loans repaid 65 - - Interest paid - (8) (19) _______ _______ _______ Net cash used in investing (135) (361) (571) activities Financing activities Issue of ordinary shares - - 360 Proceeds from bank borrowings - 250 250 ______ ______ ______ Net cash from financing activities - 250 610 Net (decrease) in cash and (2) (471) (480) equivalents Cash and equivalents at beginning of 2 482 482 year Cash and equivalents at end of year - 11 2
NOTES TO THE INTERIM ACCOUNTS
1. Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year unless stated.
Basis of accounting
The interim accounts of the Group and the Company have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union.
The interim accounts have been prepared on the historical cost basis, except where IFRS requires an alternative treatment. The principal variations from historical cost relate to financial instruments (IAS 39).
Going concern
The Directors have reviewed the current budgets and cash flow projections for a period of more than 12 months from the date of these results. The forecasts take into account the current cash balances and assume repayment in full of the loan of 0.2 million made in February 2009, 0.09 million of which has already been repaid (together with fees due thereon), with the balance of 0.11 million (plus interest) due to be repaid in November 2009.
Various sources of additional financing have been considered by the board to strengthen the balance sheet, including injecting additional fresh equity, although a final decision regarding the source of financing has not yet been made.
Accordingly the Directors have prepared the interim accounts on the going concern basis.
Basis of consolidation
Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its two active subsidiary undertakings, Creon Investments Limited ("Investments") and Creon Estates Limited ("Estates") ("the group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
Revenue
Turnover represents rental income which is spread on a straight-line basis over the period of the lease.
Investment property
The Group applies the fair value model in accounting for investment property. The Group's investment property is revalued annually to open market value, with changes in the carrying value recognised in the consolidated income statement.
Investments in unquoted and quoted shares
Investments in unquoted and quoted shares are initially measured at cost, including transaction costs. Subsequent measurement of all investments is at fair value. The fair values of listed investments are based on bid prices at the balance sheet date.
Assets held by the Group at the period end include unlisted redeemable preference shares and listed investments received in lieu of repayment of a mezzanine loan.
When managing its investments, the Group aims to profit from changes in the fair value of equity investments. Accordingly, all quoted equity investments are designated as "at fair value through the profit and loss" and are subsequently recorded in the balance sheet at fair value.
Loans receivable
Loans receivable are valued at nominal amount less provisions against recoverability. No hedging transactions have been entered into with respect to the loan portfolio.
Impairment
At each balance sheet date, the Group reviews the carrying amounts of its property and equipment and intangible assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amounts of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of the individual asset, the Group estimates that recoverable amount of the cash-generating unit to which the asset belongs.
Cash
Cash and cash equivalents comprise cash at bank and in hand.
Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of the financial instrument's contractual obligations rather than the financial instrument's legal form. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
2. Revenue
Revenue in the period ended 31 July 2009 represents rental income received by Creon Estates Ltd from the two investment properties acquired during the period in lieu of repayment of a mezzanine loan. There was no revenue received in respect of the mezzanine finance advances in the period ended 31 July 2009.
Subsequent to 31 July 2009, the Group disposed of its two investment properties for an aggregate of 340,000, before payment of fees and costs associated with their sale.
3. Administrative expenses
Administrative expenses include costs for premises, legal, accounting, regulatory, plc and consultancy costs, together with impairment costs of the quoted investments during the period.
4. Finance income and finance costs
Finance income represents interest income on short-term deposits and loans. There was no finance cost in the period under review due to an over-payment of interest made in the prior year in respect of the 250,000 loan.
5. Taxation
The Company is subject to UK corporation tax. No allowance has been made for tax credits on current year losses.
6. Loss per share
The basic and diluted loss per share for the period ended 31 July 2009 was 0.22p. The calculation of loss per share is based on the loss of 96,000 for the period ended 31 July 2009 and the weighted average number of shares in issue during the period of 43,990,545.
7. Investment property
The Directors valued the properties at 335,000 as at 31 January 2009 and for part of the period ended 31 July 2009, the properties were let on assured short-hold tenancies. During August and September 2009, the Group sold both investment properties for an aggregate 340,000, before the payment of fees and associated selling costs.
8. Investment in unquoted preference shares
The investment in unquoted preference shares represents 400,000 1 non-voting redeemable preference share held in Pinnacle Plus Limited ("Pinnacle"). The preference shares accrue interest at an annual rate of 7.0 per cent., payable on the date of redemption, with redemption being at Pinnacle's discretion at any time up to September 2013, upon which date they will be automatically redeemed.
9. Loans receivable
Loans receivable represents a short-term loan made by the Company in February 2009 of 200,000, 90,000 of which has been repaid, including interest due thereon, with the balance of 110,000 due for repayment in November 2009, unless deferred to a later date, as agreed between the Company and the borrower.
10. Interest bearing loan
Fixed bank loan secured against the Company's assets and charged at base rateplus 2%. Repayment was made by the Company in full by the due date of 30September 2009.11. Share capital As at As at As at 31.7.09 31.7.08 31.1.09 '000 '000 '000 GBP GBP GBP Authorised
100,000,000 (2008:50,000,000) ordinary 1,000,000 500,000 1,000,000 shares of 1 p each
Allotted, called up and fully paid 43,990,545 Ordinary shares of 1p each 439,904 100,361 439,904 (2008:10,036,110 Ordinary shares of 1 p each)
12. Preparation of interim report
This report was approved by the Directors on 22 October 2009.
The Company's interim report for the period ended 31 July 2009 will be posted to shareholders today and the report is available to view and download from the Company's website at www.creoncorporation.com.
For further information please contact:
Creon Corporation Limited
Guus Berting +44 (0)20 7752 0215
Daniel Stewart & Company Plc Oliver Rigby +44(0)20 7776 6550GTH Communications TobyHall +44 (0)20 7153 8039Christian Pickel +44(0)20 7153 8036)
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