C.H. Bailey Plc Regulatory News (BLEY)

C H Bailey Plc

21 December 2015

Chairman's statement and unaudited financial results

for the six months ended 30th September 2015

C.H. Bailey plc ("CH Bailey", the "Company" or together with its subsidiaries the "Group"), announces its unaudited interim results for the half year ended 30th September 2015.

Interim Statement and Results

Our interim results for the 6 month period ended 30th September 2015 show a loss after tax of £717,182 (2014: profit £32,457), which also reflects a foreign currency swing of £471,271 (a loss of £248,755 compared to a gain of £222,516 in 2014) and fair value reductions on investments of £142,060 (2014: gain £13,906).

Revenue has decreased by 12.5% to £2.4m (2013: £2.7m) due largely to difficult hospitality trading conditions in Africa and the disposal of the hotel in Malta.

Key Highlights

· Trading loss £133k (2014 loss £35k);

· Bank debt (non current) reduced by £737k;

· Total External debt reduction by £ 1.4M;

· Special dividend paid of £0.20p per share paid on 16th October 2015; and

· Over £2.0 million spent on development properties in Malta and Les Hauts de Montagu, the hospitality property, with development potential, in Montagu, South Africa.

UK Operations

Bailey Industrial Engineering based in Newport, South Wales, is the Group's specialist heavy engineering operation. Last year the company saw a slight recovery in sales and reported a profit for the period.

We have seen some success in attracting business from new markets but the steel industry has been badly affected by cheap imported steel and high energy costs, which has led to much reduced levels of work sent out for repair. However, we are hopeful that this is a short term issue and we are cautiously optimistic for the future of this division.

Tanzania

The completion of Phase III at the Oyster Bay has seen an increase in revenues from the fully serviced, commercial, hospitality and retail accommodation. The East Africa economy has been badly affected this year with tourist numbers down in some instances by 50% but our commercial offices and retail outlets are still at 90% occupancy and account for 80% of the Group's Tanzanian revenues. There is currently a slowdown in trade and investment in the region but with our term leases in place we feel our business will maintain its position until the economic climate improves.

Malta

Having reported the purchase of Charles Street earlier in the year, we can now confirm that we have purchased two further properties in Valletta, 140 Arch Bishop Street and 123 St Lucia Street. We are in discussions with architects on all the buildings and the Board is evaluating redevelopment opportunities. We have in principal an agreement with Lombard Bank to finance the development of these projects, which will provide the group with a total of four buildings that will offer serviced, commercial, hospitality and residential accommodation. The first of the three projects is expected to be completed in 2016 and should start generating revenues in Q3.

South Africa

During the period under review, the Company invested in two large adjoining farms (450 hectares) in Montagu, on the Route 62, in the Klein Karoo. The site is two hours from Cape Town, next to the Robertson wine valley. The property has an ongoing hospitality business and boutique olive farm producing its own oil and olives, which are sold in the region. Operations will start in Q3 when the Company will further assess the existing business and potential development opportunities of the land.

Overall Development Strategy

To date, the company has purchased the Maltese and South African properties outright. We intend to use local financing to develop the respective properties and grow the businesses. This model has been successful elsewhere and offers security to shareholders and financiers of the projects. When developed, some of the projects will be operated by the local subsidiaries of the group and some of the properties may be traded to maintain cash flow and the liquidity of the ongoing developments.

Directors

At the end of September 2015, Mrs S A Bailey and Mr R Reynolds retired from the Board and I would like to take this opportunity to thank them for their hard work during their time in office.

Following the Annual General Meeting I took over the position as Non Executive Chairman with Mr Charles Bailey moving into the role of Chief Executive Officer, which allows him greater freedom to concentrate on the operations of the Group and I am looking forward to forging a close working relationship with Mr Bailey in order to maximise shareholder value and growth of the group.

In December 2015, Mr Christopher Fielding also joined the Board as a Non Executive director. Mr Fielding brings a wealth of experience in cross-border investments and a very commercial mindset, which will enhance the capabilities of the board.

Outlook

We continue to put in place measures to control costs whilst being vigilant about maintaining high levels of client service. We are conscious that there are difficult market conditions associated with the countries and sectors in which the Group operates in and so sales are always difficult to increase in the short term and require a team effort to achieve increases in a sustainable way.

Your Group is a diverse group of international businesses, with investments and operations in leisure, property and engineering with its current key markets being Tanzania, Malta, the UK and, now, South Africa.

I am confident that the Group is well placed in these countries and the sectors in which we operate to offer a platform for growth. We also believe that the strategies that have been put in place to diversify our revenue streams will start to bear fruit.

David Wilkinson

18 December 2015

Further information:

Bryan Warren, Company Secretary

C H Bailey Plc

Tel: 01633 262961

James Felix / Ciaran Walsh

Arden Partners plc

Tel: 020 7614 5900

Consolidated Income Statement

for the six months ended 30 September 2015

*Earnings before interest, taxation, depreciation, loss on sale of plant and equipment and profit on sale of property.

Consolidated Statement of

Comprehensive Total Income

for the six months ended 30 September 2015

Balance Sheets

as at 30 September 2015

Consolidated Cash Flow Statement

for the six months ended 30 September 2015

Consolidated Statement of Changes in Equity

for the six months ended 30 September 2015

.

Notes to the Accounts

1. General information

Legal status and country of incorporation

C. H. Bailey plc, company number 190106, is incorporated in England and Wales under the Companies Act 2006.

Basis of preparation

These interim financial statements have been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union and with the Companies Act 2006. Therefore these financial statements comply with the AIM rules.

The interim financial statements are prepared using the historical cost basis of accounting except for:

· Properties held at the date of transition to IFRS which are stated at deemed cost; and

· Assets held for sales which are stated at the lower of fair value less anticipated disposal costs and carrying value.

Going concern

The directors have prepared these financial statements on the fundamental assumption that the group is a going concern and will continue to trade for at least 12 months following the date of approval of the financial statements.

Accounting period

The current period is for the six months ended 30 September 2015 and the comparative period is for the six months ended 30 September 2014.

Functional and presentational currency

The financial statements are presented in pounds sterling because that is the functional currency of the primary economic environment in which the group operates.

2. Significant accounting policies

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 30 September 2015. Control is achieved where the company has the power to govern the financial and operating policies of an investee so as to obtain benefits from its activities.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations and goodwill

The acquisition of subsidiaries is accounted for using the acquisition method. The assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at their acquisition date except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 which are recognised and measured at fair value less costs to sell. Any excess of the cost over the asset valuation as calculated above is recognised as goodwill.

Goodwill arising on consolidation represents the excess of consideration over the group's interest in the fair value of identified assets, liabilities and contingent liabilities recognised. Goodwill is recognised as an asset and is not amortised. It is reviewed for impairment annually as detailed in "impairment of non-financial assets" below.

In accordance with the options that are available under IFRS 1 on transition to IFRS, the group elected not to apply IFRS 3 retrospectively to past business combinations that occurred before the date of transition to IFRS.

Accordingly goodwill that had previously been offset against reserves under UK GAAP has not been recognised in the opening IFRS balance sheet. The interest of any minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Investments in associates and trade investments

The results of entities over which the group is not in a position to be able to exercise significant influence despite holding a significant shareholding are not accounted for as associates and therefore are not equity accounted. The companies are classified as trade investments and are carried as available for sale financial assets which are measured at cost, as the directors consider that fair value cannot be reliably measured, other than impairment losses which are recognised in the income statement. Dividend income is recognised in the income statement on a cash basis when received.

Property, plant and equipment

Property is carried at deemed cost at the date of transition to IFRS based on the previous UK GAAP valuations. Plant and equipment held at the date of transition and subsequent additions to property, plant and equipment are stated at purchase cost including directly attributable costs. The group does not have a revaluation policy. Freehold land is not depreciated. Depreciation of other property, plant and equipment is provided on a straight line basis using rates calculated to write down the cost of each asset over its estimated useful life as follows:

Property:

Freehold buildings Between 1% and 5%

Leasehold buildings Period of the lease

Plant and equipment Between 10% and 25%

Annual reviews are made of estimated useful lives and material residual values.

Lessee accounting

Initial rental payments in respect of operating leases are included in current and non-current assets as appropriate and amortised to the income statement over the period of the lease. Ongoing rental payments are charged as an expense in the income statement on a straight line basis until the date of the next rent review. Finance leases are capitalised and depreciated in accordance with the accounting policy for property, plant and equipment. As permitted by IFRS 1 at the date of transition to IFRS, the carrying value of long leasehold properties are based on the previous UK GAAP valuations and this has been taken as deemed cost. Rental costs arising from operating leases are charged as an expense in the income statement on a straight line basis over the period of the lease.

Non-current assets held for sale

Non-current assets are reclassified as assets held for sale if they are immediately available for sale in their current condition and their carrying value will be recovered through a sale transaction on which is highly probable to be completed within 12 months of the initial classification. Assets held for sale are valued at the lower of carrying value at the date of initial classification and fair value less costs to sell.

Impairment of non-financial assets

Goodwill is tested annually for impairment or more frequently if there are any changes in circumstances or events that indicate that a potential impairment may exist. Goodwill impairments cannot be reversed. Property, plant and equipment are reviewed for indications of impairment when events or changes in circumstances indicate that the carrying amount may not be recovered. If there are indications then a test is performed on the asset affected to assess its recoverable amount against carrying value. An asset impaired is written down to the higher of value in use or its fair value less cost to sell.

Deferred and current taxation

The charge for taxation is based on the taxable profit or loss for the year and takes into account taxation deferred because of differences between the treatment of certain items for taxation and for accounting purposes. Full provision is made for the tax effects of these differences. Deferred tax is provided on unremitted earnings from overseas subsidiaries where it is probable that these earnings will be remitted to the UK in the foreseeable future. Deferred tax is measured using tax rates that have been enacted, or substantively enacted, by the year end balance sheet date. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the group expects, at the end of the reporting period, to recover or settle the carrying value of its assets and liabilities. Deferred tax assets and liabilities are not discounted.

The carrying amount of the deferred tax assets is reviewed at each reporting balance sheet date to ensure that it is probable that sufficient taxable profits will be available to allow the asset to be recovered. Assets and liabilities, in respect of both deferred and current tax, are only offset when there is a legally enforceable right to offset and the assets and liabilities relate to taxes levied by the same taxation authority.

Deferred and current tax is charged or credited in the income statement except when it relates to items charged directly to equity in which case the associated tax is also dealt with in equity.

Stocks

Stocks are valued at the lower cost of purchase and net realisable value. Cost comprises actual purchase price and, where applicable, associated direct costs incurred bringing the stock to its present location and condition. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow moving or defective items where appropriate.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated balance sheet when the group becomes a party to the contractual provisions of the instrument.

Financial assets are recognised and derecognised on a trade date where the purchase or sale of an asset is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned. Financial assets are classified as "loans and receivables", "held to maturity" investments, "available for sale" investments or "assets at fair value through the profit and loss" depending upon the nature and purpose of the financial asset. The classification is determined at the time of the initial recognition.

Financial assets are normally classified as "loans and receivables" and are initially measured at fair value including transaction costs incurred. The only financial assets currently held at "fair value through profit or loss" are the current asset investments.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Financial liabilities are normally classified as "other financial liabilities" and are initially measured at fair value, normally cost, net of transaction costs.

Loans and receivables

Trade receivables, loans and other receivables are measured on initial recognition at fair value and, except for short term receivables where the recognition of interest would be immaterial, are subsequently re-measured at amortised cost using the effective interest rate method. Allowances for irrecoverable amounts, which are dealt with in the income statement, are calculated based on the difference between the asset's carrying amount and the present value of estimated future cash flows, calculated based on past default experience, discounted at the effective interest rate computed at initial recognition where material.

Derivative financial instruments and hedge accounting

The group's borrowing is subject to floating interest rates based on LIBOR plus the most competitive margin available. The group's policy is not to hedge its international assets with respect to foreign currency balance sheet translation exposure, nor against foreign currency transactions. The group generally does not enter into any forward exchange contracts and it does not use financial instruments for speculative purposes. Derivative financial instruments are initially measured at cost and are remeasured at fair value at the balance sheet date. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.

Cash and cash equivalents

Cash and cash equivalents includes cash-in-hand, cash at bank and short term highly liquid investments that are readily convertible into known amounts of cash within three months from the date of initial acquisition with an insignificant risk of a change in value.

Impairment of financial assets

Financial assets, other than those designated as "assets at fair value through the profit and loss" are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the investment have been impacted.

Other financial liabilities

Other financial liabilities, including trade payables, are measured on initial recognition at fair value and, except for short term payables where the recognition of interest would be immaterial, are subsequently re-measured at amortised cost using the effective interest rate method.

Bank loans

Interest bearing bank loans are recorded at the proceeds received less capital repayments made. Finance charges are accounted for on an accruals basis in the profit and loss account using the effective interest rate method. They are included within accruals to the extent that they are not settled in the period in which they arise.

Provisions

Provisions are created where the group has a present obligation (legal or constructive) as a result of a past event where it is probable that the group will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date. Provisions are only discounted to present value where the effect is material.

Net debt

Net debt is defined as cash and cash equivalents, bank and other loans including finance lease obligations and derivative financial instruments stated at current fair value.

Revenue recognition

Revenue

Revenue represents the fair value of the consideration received and receivable for services provided and goods supplied to third party customers. In respect of long term contracts and contracts for on-going services, revenue is recognised as the contract progresses on the basis of work completed. Revenue excludes value added tax.

Investment and interest income

Dividend income is recognised in the income statement when the shareholder's right to receive payment has been established. Interest income from bank deposit accounts is accrued on a time basis calculated by reference to the principal on deposit and effective interest rate applicable.

Foreign currencies

Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated into pounds sterling at the financial reporting year end rates. Non monetary items that are measured in terms of historical cost in a foreign currency are not re-translated. The results of overseas subsidiary undertakings, associates and trade investments are translated into pounds sterling at average rates for the year unless exchange rates fluctuate significantly during that year in which case exchange rates at the date of transactions are used.

The closing balance sheets are translated at the year end rates and the exchange differences arising are transferred to the group's translation reserve as a separate component of equity and are reported within the consolidated statement of changes in equity. All other exchange differences are included within the consolidated income statement in the year. In accordance with IFRS 1, the translation reserve has been set to zero at the date of transition to IFRS.

Operating profit

Operating profit is defined as the profit for the year from continuing operations after all operating costs and income but before finance income, finance costs, and taxation. Operating profit is disclosed as a separate line on the face of the income statement.

Normalised operating profit is the same as the above but excludes non-recurring items, for example profit on the sale of property. Normalised operating profit is reconciled to operating profit on the face of the income statement.

Other gains and losses

Other gains and losses are material items that arise from unusual non-recurring events. They are disclosed separately, in aggregate, on the face of the income statement after operating profit where, in the opinion of the directors, such disclosure is necessary in order to fairly present the results for the financial period.

Finance costs

Finance costs are recognised in the income statement on the accruals basis in the year in which they are incurred.

3. Use of critical accounting assumptions and estimates

Estimates and judgements are continually evaluated and assessed based on historical experience and other factors, including expectations of future events that are believed to be reasonable given the circumstances prevailing when the accounts are approved.

The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The directors are not aware of any estimates and assumptions that have significant risk of causing a material adjustment to the carrying value of assets and liabilities.

4. Segmental information

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5. Investment activities and other income

6. Finance income

7. Finance costs

8. Earnings (loss) per share

The earnings per share has been calculated by reference to the weighted average number of ordinary shares of 10p each in issue of 7,607,755 (2014: 7,607,755) which excludes own shares held. The share options in issue have no dilutive effect on the weighted average number of ordinary shares.

9. Property, plant and equipment

10. Profit on the sale of property

On 17 March 2015, completion took place on the sale of the remaining property at the hotel complex at St Georges Bay, Malta for €13,743,283, pursuant to the agreement made on 9 September 2011 which gave the purchaser to 30 March 2015 to complete on the purchase for this amount. As a deposit of €400,000 had already been paid, the balance €13,343,283 was received on 17 March 2015.

11. Called-up share capital

The company retains as treasury shares 727,658 ordinary shares of 10 pence at a cost of £960,509. The company did not buy back any shares for cancellation during the year. The company has one class of ordinary shares, which carry no right to fixed income.

12. Cash generated from operations

13. Analysis of net funds (debt)

14. Significant investment in subsidiaries

Shareholder information