31 Jul 2009 09:31
For immediate release: Friday 31 July 2009, 7AM
Creon Corporation Plc Preliminary Results for the year ended 31 January 2009
Creon Corporation Plc (AIM: CRO), today announces its preliminary results for the year ended 31 January 2009.
CHAIRMAN'S STATEMENTIntroduction
I am pleased to present the annual results of Creon Corporation Plc ("Creon", the "Group", or the "Company") for the year ended 31 January 2009. As notified in previous announcements, the last financial year has been another extremely challenging one for Creon. The collapse in UK property lending during 2008 and the first half of 2009 caused a complete stalling of activity in the property development sector and a material decline in property prices. Interest rate cuts and increased government spending, which has the intention of mitigating the current economic downturn, do not yet appear to have had time to take effect and lenders to developers remain scarce. We therefore believe that activity in the property market sector will be, at best, at its current low levels during 2009 and that property values are likely to decline further, though hopefully not at the same rates as have recently been experienced.
During the financial year under review we made one new mezzanine finance loan of 0.25 million, at the beginning of the year in February 2008, when the scale of the economic slowdown was not yet so apparent. We have struggled to make headway in recovering any of the mezzanine loans that were outstanding at the beginning of the financial year under review, all four of which are now well overdue for repayment. In addition the loan which we made in February 2008 has also, since the financial period end, become overdue. We are pursuing a variety of options in order to try to generate at least some repayment of the five loans and fees that are outstanding, including pursuing all the loan guarantees that have been provided. However, in the circumstances, we believe that it is prudent to write down all the outstanding mezzanine loans (including accrued fees) to zero (31 January 2008: 2.23 million; 31 July 2008: 0.58 million).
Turnover for the year under review was 0.01 million, comprising rental income only, down from 0.4 million in the previous year, due to the fact that none of the mezzanine loans are now considered to be `performing'. The total amount of loans advanced during the year under review was 0.27 million, (including follow-on loans) compared to 1.05 million in the previous year. Full year loss was 3.70 million, compared to a post tax loss of 0.12 million last year, equating to a loss per share of 24.9 pence (LPS of 1.22 pence the previous year). The full year loss was higher than the previous year due partly to the Directors decision to provide against all of the Company's accrued loans and fees totaling approximately 2.4 million, which are included in administration expenses, and partly due to the loss associated with the sale of Pinnacle Plus Limited of approximately 1.1 million, which is also included in administration expenses. Creon had cash balances of 0.002 million at the year end (2008: 0.48 million). Given the slowdown in the property sector, the Directors believe that it was appropriate to be cautious during most of the last financial year and feel justified in stopping all new investments into mezzanine property loans after the loan that was made in February 2008. The Directors do not expect to provide any further mezzanine loans in at least the short term and until conditions in the property sector begin to improve.
Historically, Creon's focus has been on providing mezzanine finance for property development but, as outlined above, we do not believe that it is likely that any further loans of this nature will be made in the short term at least. As a consequence, the Board recognises that it should re-appraise Creon's business model in order to make better use of its available assets and, having consulted with a number of shareholders, began to seek additional investment opportunities in the middle of last year.
Pinnacle
To this end, the Directors announced on 1 July 2008 the conditional acquisition ("Acquisition") of Pinnacle Plus Limited ("Pinnacle") for 0.65 million, payable by the issue of 2,005,381 new ordinary shares of 1 pence each in Creon (Ordinary Shares"), together with associated acquisition costs of approximately 0.10 million. The Acquisition was approved by Creon's shareholders at the Company's AGM and completed on 1 August 2008. It was envisaged at the time of the Acquisition that Creon would provide sufficient working capital in order for Pinnacle to continue with its growth plans. This working capital requirement was expected to be financed from the repayment of certain of Creon's existing property mezzanine loans during the second half of 2008. However, the significant and sudden deterioration in the UK property market meant that the mezzanine loans have not been repaid as was expected at that time. This in turn resulted in Creon not being in a position to continue to provide Pinnacle with the working capital as envisaged. The unfortunate consequence was that we announced, on 3 October 2008, that we had agreed to sell Creon's shareholding in Pinnacle to Felbright Limited, a vehicle principally owned by Pinnacle's management, for the sum of 1 ("Sale"). The Sale resulted in a loss on disposal during the year of approximately 1.1 million. In addition, as announced in the Company's interim results to 31 July 2008, we agreed, as part of the Sale, to the novation to Creon of loans (and interest accrued thereon) provided by certain third parties to Pinnacle which had been guaranteed by Creon as part of the Acquisition. The aggregate value of these loans and accrued interest was 319,598. These loans, together with certain other creditor balances of the Company were converted into new ordinary shares of 1 pence each in the Company on 6 November 2008.
Furthermore, short term funding provided to Pinnacle by Creon ahead of the Acquisition of approximately 0.4 million, was converted into preference shares in Pinnacle earning interest at 7% per annum and redeemable by Pinnacle within 5 years. At 31 January 2009, these have been fair valued at 0.4 million.
Loans
As at 31 January 2008, the Company had five outstanding mezzanine loans to UK property developments, four for ongoing development projects totalling 1.65 million, and one with a completed development project which has been partially sold with an outstanding balance owing of 0.58 million. During the course of the year to 31 January 2009, a total of 0.17 million of capital was repaid to Creon from the completed development.
Creon provided one new loan to a UK property development during the year to 31 January 2009 totalling 0.25 million, which was due to be repaid in February 2009. In addition Creon provided loans to Pinnacle of approximately 0.4 million, as detailed above.
Creon now has five loans that have passed their original repayment date and an outstanding 25,000 bank retention. In addition Creon has taken possession of 2 residential properties in lieu of fees and re-payment which, at 31 January 2009, had a combined resale value of approximately 0.34 million.
Creon's operations
When Creon was set up in 2004, it was set up in a way that aimed to keep operating costs to a minimum in order to maximise any available funds for lending. Accordingly, the Company entered into a consultancy agreement with Creon Equity LLP (the "Manager") that provided the Directors with specialist advice regarding the provision of finance to property developers. Given the Directors do not envisage providing any further finance for any new property projects in the short term, the agreement with the Manager is currently under review and it is intended that the ongoing responsibilities of the Manager will be focused solely on recovering loans and fees previously made.
On 2 February 2008, the Company acquired three wholly owned subsidiaries, Creon Estates Limited ("Estates"), Creon Investments Limited ("Investments") and Creon Properties Limited ("Properties"). All three companies were shell companies and were acquired to allow Creon to hold assets to be received by the Group in lieu of finance repayments and associated fees and also in anticipation of making non-property related investments.
During the year under review, Estates took ownership of the two residential properties received in lieu of loans previously made by Creon and Investments made an investment of 0.04 million in an AIM listed company, such investment remaining on the Group balance sheet as at the date of these results. As at the year end and as at the date of these results, Properties remains dormant.
Investment policy
The Board remains committed to continue to provide mezzanine finance that can provide a suitable return with an acceptable risk profile when the market for such finance returns. However, the Board believes that it is in the best interests of shareholders to broaden Creon's investment strategy to enable the Group to provide finance to, and make investments in, other industry sectors rather than being confined to the UK property sector. The Directors will be seeking approval of, inter alia, the broader investment policy as set out below at the Annual General Meeting of shareholders, which is to be held on 24 August 2009.
The Group will broaden its investment policy to also include investments in private companies, publicly quoted companies and partnerships. The Group will not focus on any particular industry sector but will seek investments in sectors where there is potential for suitable returns. This is expected to include sectors such as financial services and property, where values have declined markedly over the last 12 months. The Company will primarily focus on European based businesses but will also consider investments in other geographical areas if appropriate. The Group will not seek to limit the size of the investment or the size of the entities in which it invests.
The Group will not be limited to a fixed number of investments or seek to diversify the investments over particular sectors or particular indexes, however it is envisaged that the total number of investments at any given time will not exceed 50 investments. The Group does not envisage at this stage gearing its investments but may consider doing so in the future. The Board is currently reviewing a number of investment opportunities and will make an investment within the next three years.
The Company will generally be a passive investor in the entities in which it invests but if the Board or the Group's consultants are able to add value to the investee entities then the Group may take a more activist stance.
The Group plans to locate its non-property related investments through the extensive network of contacts of the Board and the Group's financial advisers and consultants. Once potential investments have been identified, the Board will evaluate them on the basis of research prepared and presented to the Board by its financial advisers and consultants. The Board believes that this investment policy will help maintain the Group's low cost base whilst having the potential to deliver improved returns for shareholders.
Changes in share capital
As stated in the Company's 2008 interim results, on 21 October 2008, in order for the Group to continue to operate and to pay creditors as they fall due, the Company raised 0.12 million via a subscription at 3 pence per Ordinary Share through the issue of 4.0 million new Ordinary Shares. In addition, at the general meeting of the Company held on 6 November 2008, the Company's shareholders approved the issue of further new Ordinary Shares, such that 11,974,527 new Ordinary Shares were issued in November 2008 to cancel Group debts of approximately 0.33 million and a further 15,974,527 new Ordinary Shares were issued in January 2009, pursuant to the exercise of warrants. No further issues of Ordinary Shares have been made since 31 January 2009 and no options or warrants remain outstanding as at 31 January 2009.
Annual General Meeting
The Company's Annual General Meeting ("AGM") is be held at its registered office, being 11 Grosvenor Crescent, Belgravia, London SW1X 7EE on Monday 24 August 2009 at 10:00 a.m. The notice of AGM, together with a form of proxy for use at the AGM, has today been sent to shareholders.
Current position and outlook
Given the continued uncertainty within the property market, the directors believe that it is in the Group's best interests to diversify the Group's activities away from providing mezzanine finance to UK property developers. The directors continue to seek out interesting and potentially profitable projects and the adoption of the Group's new investment strategy, if approved at the upcoming Annual General Meeting, will allow the Group to scope out additional investment opportunities. It is the Group's intention to dispose of its two residential properties during the course of 2009 and use the proceeds to repay the Group's bank borrowings.
The proceeds from the exercise of warrants in January 2009 allowed the Group to make one short-term mezzanine loan of 0.2 million in February 2009. 0.07 million of this loan has already been repaid (together with fees due thereon), with the balance of 0.14 million (including interest) due to be repaid during November 2009. This performing loan, together with the Group's cash balances of 0.07 million as at 12 June 2009, is sufficient to cover the ongoing operating and administration costs for the Group for the foreseeable future. Notwithstanding this, the directors are in discussions with the Company's existing shareholders about providing further working capital to the Group.
CREON CORPORATION PLC
CONSOLIDATED INCOME STATEMENT
for the year ended 31 January 2009
2009 2008 Note GBP GBP Revenue 2 9,275 401,862 Cost of sales 3 16,172 (145,985) Exceptional item: Loans impairment 4 (2,328,493) - ---________ ________ Gross profit (2,303,046) 255,877 Administration expenses (282,437) (425,166) Exceptional items: Loss on sale of 10 (1,100,034) -investment ________ ________ Loss from operations (3,685,517) (169,289) Finance income 5 4,635 26,736 Finance costs 5 (18,634) (10,435) _________ ________ Loss on ordinary activities before (3,699,516) (152,988)taxation Taxation 6 (751) 30,598 _________ ________ Retained loss for the year (3,700,26 7) (122,390) Basic and diluted loss per share 7 (24.9)p (1.22)p
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
Group Share Share premium Retained Total equity capital account earnings attributable to equity holders of parent GBP GBP GBP GBP At 1 February 2007 100,361 2,774,949 209,580 3,084,890 Loss for the year - - (122,390) (122,390) _________ _________ _________ _________ At 31 January 2008 100,361 2,774,949 87,190 2,962,500 Issue of shares 339,543 1,040,939 - 1,380,482 Loss for the year - - (3,700,267) (3,700,267) _________ _________ _________ _________ At 31 January 2009 439,904 3,815,888 (3,613,077) 642,715 _________ _________ _________ _________Company Share Share premium Profit and Total equity capital account loss account attributable to equity holders of parent GBP GBP GBP GBP At 1 February 2007 100,361 2,774,949 209,580 3,084,890 Loss for the year - - (122,390) (122,390) _________ _________ _________ _________ At 31 January 2008 100,361 2,774,949 87,190 2,962,500 Issue of shares 339,543 1,040,939 - 1,380,482 Loss for the year - - (3,611,397) (3,611,397) _________ _________ _________ _________ At 31 January 2009 439,904 3,815,888 (3,524,207) 731,585 _________ _________ _________ _________BALANCE SHEETSas at 31 January 2009 Group Company Assets Note 2009 2008 2009 2008 Non-current assets GBP GBP GBP GBP Investment property 8 335,000 - - - Amounts owed by 9 - - 443,021 -subsidiaries Investment in subsidiaries 10 - - 6 - Investment in unquoted 11 400,000 - 400,000 -preference shares ______ ______ ______ ______ 735,000 - 843,027 - ______ ______ ______ ______ Current assets Loan receivables 4 - 2,230,907 - 2,230,907 Investments in quoted 12 19,151 - - -shares Other receivables 13 241,254 414,557 241,254 414,557 Cash and cash equivalents 1,925 481,749 1,925 481,749 ----______ ________ ______ ________ 262,330 3,127,213 243,179 3,127,213 Total assets 997,330 3,127,213 1,086, 206 3,127,213 Liabilities Current liabilities
Trade and other payables 14 (104,615) (164,713) (104,621) (164,713)
Interest bearing loan 15 (250,000) - (250,000) - ----______--__ ________ ________ ________ Total liabilities (354,615) (164,713) (354,621) (164,713) ----______--__ _________ ________ _________ Net assets 642,715 2,962,500 731,585 2,962,500 Equity
Called up share capital 16 439,904 100,361 439,904 100,361
Share premium account 17 3,815,888 2,774,949 3,815,888 2,774,949 Retained earnings (3,613,077) 87,190 (3,524,207) 87,190 _______ ________ _______ ________ Total equity 642,715 2,962,500 731,585 2,962,500CASH FLOW STATEMENTS Group Company Note 2009 2008 2009 2008 GBP GBP GBP GBP Reconciliation of operating profit to net cash flow from operating activities
Loss for the year before tax (3,699,516) (152,988) (3,610,646) (152,988)
Adjustments for: Finance cost 18,634 - 18,634 - Investment income (4,635) (26,736) (4,635) (26,736) Loss on disposal of 1,100,034 - 1,100,034 - investment Impairment of property 65,000 - - - Impairment of investment 23,870 - - - Loan impairment 2,230,907 - 2,230,907 - Property accepted in lieu of (400,000) (400,000) cash settlement oloan Change in receivables 139,361 (255,949) 139,361 (255,949) Change in payables (30,581) 670 (30,581) 670 Change in loans to - - (43,021) - subsidiaries ________ _______ _______ ______
Cash flows from operating (556,926) (435,003) (599,947) (435,003) activities
Interest received 4,635 26,736 4,635 26,736
Taxation refunded/(paid) 33,191 (52,225) 33,191 (52,225)
______ ______ ______ ______ 37,826 (25,489) 37,826 (25,489) Investing activities Purchase of investments (43,021) - - - Purchase costs of 18 (105,187) - (105,187) - acquisition of Pinnacle Other loans (403,500) 8 (403,500) 8 Interest paid (18,634) - (18.634) - _______ _______ _______ _______ Net cash used in investing (570,342) 8 (527,321) 8 activities Financing activities Issue of ordinary shares 16 359,618 - 359,618 - Proceeds from bank 250,000 - 250,000 - borrowings ______ ______ ______ ______ Net cash from financing 609,618 - 609,618 - activities Net (decrease) in cash and (479,824) (460,485) (479,824) (460,485) equivalents Cash and equivalents at 481,749 942,234 481,749 942,234 beginning of year
Cash and equivalents at end 1,925 481,749 1,925 481,749 of year
NOTES TO THE FINANCIAL STATEMENTS
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 financial statements 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,. This is the first time the company has prepared its financial statements in accordance with IFRS, having previously prepared its financial statements in accordance with UK GAAP. There are no adjustments between UK GAAP and IFRS in the period or the prior period which require to be reported in these financial statements.
The financial statements 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).
At the date of authorisation of the financial statements there were Standards and Interpretations, which have not been applied in the financial information, that were in issue but not yet effective. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group or the Company, except for additional disclosures when the relevant Standards and Interpretations come into effect."
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 short-term mezzanine loan of 0.2 million made in February 2009, 0.07 million of which has already been repaid (together with fees due thereon), with the balance of 0.14 million (including interest) due to be repaid in November 2009. In addition, the Directors have taken into account the expected net proceeds realisable from the sale of two residential properties, offers on both of which have recently been accepted. The Directors have assumed that the bank loan will be repaid in full from the proceeds of the sale of the properties. Furthermore, no new mezzanine finance loans are anticipated to be made during the next 12 months.
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 financial statements 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 arrangement fees due in respect of mezzanine finance advances and additional fees arising from the extension of loans beyond their original repayment date. These are spread on a straight-line basis over the loan terms.
Rental income
Rent income 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 subsidiaries
Investment in subsidiary companies is stated at cost less provision for any impairment in value. Subsequent measurement of all investments is at fair value.
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 year 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. The maximum exposure of the Company in respect of the loan portfolio at the year end is the amount receivable shown in note 4. 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. In 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.
Current and deferred tax
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.
2. Revenue
Revenue in the year ended 31 January 2009 represents rental income received by Creon Estates Ltd from the two investment properties acquired during the year in lieu of repayment of a mezzanine loan. There was no rental income during the previous year. The Group's revenue in the year ended 31 January 2008 represents the arrangement fees due in respect of mezzanine finance advances and additional fees arising from the extension of loans beyond the original repayment date. There was no revenue received in respect of the mezzanine finance advances in the year ended 31 January 2009.
3. Expenses by nature
Expenses included in administrative expenses (net) are analysed below
2009 2008 GBP GBP Administrative expenses Auditor's remuneration - for audit work 29,694 18,212 Provision against doubtful fee income - 250,685 Premises costs 10,543 3,954 Administration costs 55,966 61,201 Other legal, professional and financial 58,239 51,739costs Employment costs and directors fees 39,095 39,375 Impairment of assets 88,870 - Sundry 30 -4. Loans impairment 2009 2008 GBP GBP Balance brought forward 2,230,907 1,859,204 New loans advanced in year 282,881 1,049,206 Loans repaid (165,017) (677,503) Property accepted in lieu of cash (400,000) -settlement Loans written off (1,948,771) - ______ ______ Balance carried forward - 2,230,907 ______ ______
As at 31 January 2008, the Company had five outstanding mezzanine loans to UK property developments, four for ongoing development projects totalling 1.65 million, and one from a completed development project which has been partially sold with an outstanding balance owing of 0.58 million. During the course of the year to 31 January 2009, a total of 0.17 million of capital was repaid to Creon from the completed development.
Creon provided one new loan to a UK property development during the year to 31 January 2009 totalling 0.25 million, which was due to be repaid in February 2009.
All the five loans have passed their original repayment date. The company is pursuing a variety of options in order to try to generate at least some repayment of the five loans and fees that are outstanding, including pursuing all the loan guarantees that have been provided. In addition Creon has taken possession of 2 residential properties in lieu of a fee re-payment which, at 31 January 2009, had a combined resale value of approximately 0.34 million.
Notwithstanding this, the directors consider it prudent to write down all the outstanding mezzanine loans (including accrued fees) to zero (31 January 2008: 2.23 million; 31 July 2007: 0.58 million). This, together with the write off of accrued income on the loans of 379,722, results in a charge to the income statement of 2,328,493 for the year (2008: nil).
5. Finance income and finance costs
2009 2008 GBP GBP Finance income - interest income on 4,635 26,736short-term deposits ______ _______ Interest expense on bank loan 18,634 10,435 ______ _______ 6. Taxation 2009 2008 GBP GBP UK Corporation Tax Current tax on loss for the year - (30,598) Underprovision in prior year 751 - ______ _______ 751 (30,598) ______ _______ Factors affecting tax charge in the year
Loss on ordinary activities before tax (3,700,267) (152,988)
Loss on ordinary activities at the effective - (30,598)rate of corporation tax in the UK of 20% Underprovision in prior year 751 - ______ _______ Tax charge for the year 751 (30,598) ______ _______7. Loss per share
The basic and diluted loss per share for the year ended 31 January 2009 was 24.9p. The calculation of earnings per share is based on the loss of 3,700,267 for the year ended 31 January 2009, and the weighted average number of shares in issue during the year of 14,852,682. The Company issued 33,954,435 shares during the year ended 31 January 2009, as set out in note 16 to these accounts. No options or warrants remain outstanding as of 30 January 2009 and no further shares have been issued since 30 January 2009.
The basic and diluted loss per share for the period to 31 January 2008 was 1.22p. The calculation of loss per share for that period was based on loss of 122,390 for the year to 31 January 2008 and the number of shares in issueduring the year of 10,036,110. No shares were issued by the Company during theyear ended 31 January 2008.8. Investment propertyFreehold 2009 2008 Cost or valuation GBP GBP At 1 February - - Additions 400,000 - (Deficit) on revaluation (65,000) - _______ _______ At 31 January 335,000 - _______ _______
The Directors valued the properties at 335,000 as at 31 January 2009. During the year ended 31 January 2009, the properties were let on assured short-hold tenancies
9. Amounts owed by subsidiaries
2009 2008 GBP GBP Creon Estates Limited 400,000 - Creon Investments Limited 43,021 - ______ _______ 443,021 - ______ _______
10. Investment in subsidiaries
2009 2008 Cost or valuation GBP GBP At 1 February - - Additions 776,942 - Disposals (776,936) - _______ _______ At 31 January 6 - _______ _______
On 1 August 2008, the Company acquired 100% of the issued share capital of Pinnacle Plus Limited ("Pinnacle"), a company engaged in the design and manufacture of telematics products for businesses operating ground support equipment at airports, for 651,749, payable by the issue of new ordinary shares of 1 pence each in the company. There were associated acquisition costs of 125,187.
On 3 October 2009, Creon's shareholding in Pinnacle was sold to Felbright Limited, a vehicle principally owned by Pinnacle's management, for the sum of 1.
In addition Creon agreed, as part of the sale, to the novation to Creon of loans (and interest accrued thereon) provided by certain third parties to Pinnacle which had been guaranteed by Creon as part of the acquisition. The aggregate value of these loans and accrued interest was 319,598. These loans, together with certain other creditor balances of the Company were converted into new ordinary shares of 1 pence each in the Company on 6 November 2008.
Furthermore, short term funding provided to Pinnacle by Creon ahead of the acquisition of 403,500, was converted into 400,000 1 preference shares in Pinnacle earning interest at 7% per annum and redeemable by Pinnacle within 5 years. At 31 January 2009, these have been fair valued at 0.4 million.
The total cost of the above transactions which fell to be written off as loss on disposal of investments 1,100,034.
During the period from 1 August 2009 to 3 October 2009, Pinnacle was a subsidiary undertaking of the Group, however, in view of the short period of ownership, the results of Pinnacle have not been consolidated. If it had been consolidated there would have been no effect on the balance sheet or the retained loss for the year.
The other subsidiaries of Creon, all of which have been included in these consolidated financial statements, are as follows:
Name Country of Proportion of ownership interest at incorporation 31 January 2009 2008 Creon Investments England 100% 0% Ltd Creon Estates Ltd England 100% 0% Creon Properties England 100% 0% Ltd
The principal activity of Creon Investments Ltd is that of making non-controlling investments in quoted and unquoted companies. Creon Estates Ltd's principal activity is that of holding residential property for resale. Creon Properties Ltd is dormant.
11. Investment in unquoted preference shares
2009 2008 Cost or valuation GBP GBP At 1 February - - Additions 400,000 - _______ _______ At 31 January 400,000 - _______ _______
The investment in unquoted preference shares represents 400,000 1 non-voting redeemable preference share held in 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.
12. Investments in quoted shares
2009 2008 Cost or valuation GBP GBP At 1 February - - Additions 43,021 - Impairment provision (23,870) - _______ _______ At 31 January 19,151 - _______ _______13. Other receivables Group & Company 2009 2008 GBP GBP Proceeds due from exercise of share warrants 232,299 - Corporation tax - 33,942 Prepayments and sundry debtors 8,955 888 Accrued income - 379,727 ______ ______ 241,254 414,557
All amounts fall due for payment within one year.
14. Trade and other payables Group & Company 2009 2008 GBP GBP Trade creditors - 488 Accruals and deferred income 104,615 164,225 ______ ______ 104,615 164,71315. Interest bearing loan
Fixed bank loan secured against the Company's assets and charged at base rate plus 2%. Repayment is due by 30 September 2009.
16. Share capital 2009 2008 GBP GBP Authorised
100,000,000 (2008: 50,000,000) ordinary shares 1,000,000 500,000 of 1 p each
Allotted, called up and fully paid 43,990,545 Ordinary shares of 1p each 439,904 100,361 (2008: 10,036,110 Ordinary shares of 1 p each
During the year ended 31 January 2009, the Company issued and allotted 33,954,435 ordinary shares of 1p each as follows:
* 2,005,381 issued and allotted on 24 July 2008 in relation to the acquisition of Pinnacle Plus Limited; * 4,000,000 issued and allotted on 21 October 2008 for cash at 3 pence per share; * 10,986,592 issued and allotted on 12 November 2008 in relation to the conversion of 329,598 of debts owed by the Company at 3 pence per share; * 987,935 issued and allotted on 19 November 2008 in relation to the conversion of 39,517 of debts owed by the Company at 4 pence per share; and * 15,974,527 issued and allotted on 30 January 2009 in relation to the exercise of warrants as approved by the Company's shareholders on 6 November 2008.
15,974,527 warrants were issued during the year ended 31 January 2009 and all were exercised during the year ended 31 January 2009. No warrants or options were issued during the prior financial year or remained outstanding for exercise post 31 January 2009.
17. Share premium account
During the year, 33,954,435 (2008: nil) Ordinary Shares were issued for a total share premium of 1,040,939 (2008: nil). During the year (2008: nil), no transaction costs were deducted from the share premium account.
18. Acquisition of Pinnacle Cash Non-cash GBP GBP Acquisition costs 105,187 20,000 2,005,381 Ordinary shares issued to Pinnacle - 651,749shareholders at 32.5p each Third party loans to Pinnacle transferred to Creon as - 319,598part of Pinnacle sale ______ ______ Total 105,187 991,34719. Asset value per share
The net asset value per share at 31 January 2009 was 0.01 (31 January 2008; 0.30). Net asset value is based on the net assets as at 31 January 2009 of 642,715 (31 January 2008: 2,962,500) and on the number of Ordinary Shares in issue at 31 January 2009 being 43,990,545 Ordinary Shares (31 January 2008: 10,036,110).
20. Staff numbers and costs
The average monthly number of employees of the Group, including Directors,during the year, was 2 (2008: 2).The aggregate remuneration and associatedcosts were: 2009 2008 GBP GBP Wages and salaries 12,000 12,000 Social security costs 681 867 _____ _____ 12,681 12,867Directors' emoluments 2009 2008 GBP GBP
Amounts paid to third parties in respect of 52,828 54,142 Directors' services
Emoluments paid to a director 12,000 12,000
21. Capital commitments
There were no capital commitments at the year end (2008 - nil).
22. Related Party Transactions
The following information discloses the significant related-party transactions during the year
Name of related party and nature of Transaction Amount paid Balance relation type outstanding at year end 2009 2008 2009 2008 GBP GBP GBP GBP
Jonathan Freeman, Director of Creon Directors 15,463 24,299 13,160 2,209 is a 50% shareholder of Combined fees
Management Services Limited ("CMS")
Jonathan Freeman, Director of Creon Admin & 15,526 25,631 13,160 2,272 is a 50% shareholder of CMS
support services
Jonathan Freeman, Director of Creon Accountancy 16,113 1,958 15,630 1,958 is a 50% shareholder of CMS
services
Jonathan Freeman, Director of Creon Provision 9,400 2,350 3,493 2,350 is a 50% shareholder of CMS
of Office space
Related party balances outstanding at the year end attract zero interest and are payable on demand. The amounts included in the table above include expenses and disbursements. In addition, gth Media Relations invoiced Combined Management Services Limited ("CMS") a total of 14,075 (including VAT) for its services to Creon. CMS re-charged Creon this amount.
23. Analysis of cash and cash equivalents
2009 2008 GBP GBP Cash at bank and in hand 1,925 481,749 Interest bearing loan (250,000) - _______ ______ (248,075) 481,749
24. Emphasis of matter - Going concern
In forming their opinion, the Company's independent auditors have considered the adequacy of the disclosures made in Note 1 of the financial statements concerning the preparation of the financial statements on a going concern basis. The company incurred a net loss of 3,700,267 during the year ended 31 January 2009 and has written off all its mezzanine loans. These conditions, along with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty, which may cast significant doubt about the company's ability to continue as a going concern. The financial statements do not include any adjustment that would result if the company was unable to continue as a going concern and our opinion is not qualified in this respect.
The Company's Report and Accounts for the year ended 31 January 2009 will be posted to shareholders today and the full report is available to view and download from the Company's website at www.creoncorporation.com.
For further information please contact:
Creon Corporation Limited JonathanFreeman +44 (0)20 7752 0215Daniel Stewart & Company Plc OliverRigby +44 (0)207 776 6550GTH Communications TobyHall +44 (0)20 7153 8039Christian Pickel +44 (0)20 7153 8036
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