C.H. Bailey Plc Regulatory News (BLEY)

C.H. BAILEY PLC

Chairman's statement and financial results for the six months ended

30th September 2012 (unaudited)

Interim Statement & Results

Our interim results for the 6 month period ended 30 September 2012 show a net profit after tax of £309,423 (2011: profit £7,729,350). Revenue increased by 23% to £2.8m (2011:£2.3m) and cost of sales increased by 20% to £1.9m (2011:£1.6m). This resulted in a gross profit for the period of £914,017, an increase of 30% over last year with gross margin increasing from 31% to 33%.

Administrative costs fell by 11% to £699,641, resulting in a trading profit for the six months of £214,376. If the income from the sale of assets in Malta is excluded, the equivalent figure for last year was a loss of £87,704.

It is pleasing that our operating loss last year of (£605,101) has been converted into a profit of £460,863 for the same period this year.

Your company earned a net profit after tax for the period of £309,423 which represents a net margin of 11% and an EPS of 4.07p.

In my interim statement last year, I said that one of the Board's principle aims was to move the Group to trading profitably, and I am very pleased that we have achieved this.

UK Operations

Bailey Industrial Engineering, based in Newport, South Wales, is the Group's specialist heavy engineering operation. The progress I reported in my last interim statement has been carried through to this six month period: a general increase in demand for our services has seen turnover increase 22% over last year to £1.04m, with the operating profit increasing from £5,886 to £81,262. Indications are that this performance is likely to continue into the second half of the year.

Tanzania

After a slower start to the year than we had hoped in our tourism operations, there are encouraging signs that the second half of the year may yield a higher number of bed nights than in previous years, especially at Beho Beho, our safari camp in the Selous Game Reserve. Our safari camp in Mikumi National Park is currently closed for refurbishment and will reopen for Easter.

Our serviced commercial offices and retail space in Dar es Salaam remains fully let, and construction of the serviced apartments overlooking the Indian Ocean is under way, with the project remaining on time, within budget and with completion and opening scheduled for Q4 in 2013.

We continue to believe that the diversity of our revenue streams from operations is important for the Group, and I believe that we will see continued growth in profitability.

Malta

Following the sale of part of our assets in Malta, overall trading levels have been reduced. While St George's Bay Hotel traded profitably for the first half of the year, the hotel's operations reduce during the winter, and we expect it to break even for the year.

The refurbishment of our heritage property in St Barbara's Bastions overlooking the Grand Harbour in Valletta is well underway. We are investigating other potential commercial opportunities on the island.

Outlook

We expect that the Group will continue to trade profitably for the second half of this year, particularly as a result of our UK and Tanzanian operations. We continue to put in place measures to control costs, especially administration costs, while being vigilant about maintaining high levels of client service, in order to exceed our customer expectations.

Charles Bailey

Executive Chairman

18 December 2012

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

1. General Information

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 have been prepared using the historical cost basis of accounting except for:

i) Properties held at the date of transition to IFRS which are stated at deemed cost;

ii) Assets held for sale, which are stated at the lower of fair value less anticipated disposal costs and carrying value.

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 30th September 2012.

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 disposals, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in to 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 acquired method. The assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date except for non-current assets (or disposals 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 assets acquired. Goodwill is recognised as an asset and is not amortised. It is reviewed for impairment at each reporting date 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 at cost within non-current assets as they are held as long term investments. 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 and long leasehold property 1%

Short leasehold buildings Period of the lease

Plant and equipment Between 5% and 25%

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

Lessee accounting

Property leases are split into two elements, land and buildings and each considered in isolation and each element is reviewed to determine if it is operating or finance in nature. 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 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 their carrying value will be recovered through a sale transaction of 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 amount 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 change for taxation is based on the taxable profit or loss for the period 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 measured using tax rates that have been enacted, or substantively enacted, by the period end balance sheet date. 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 are charged or credited in the income statement except when they relate 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 of 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 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 at 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 contract and it does not use financial instruments for speculative purposes. Derivative financial instruments are initially measured at cost and are re-measured 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 fixed 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 income statement 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 director's 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 period 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 period 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 statement of recognised income and expense. All other exchange differences are included within the 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 period from continuing operating costs and income but before income from other participating interests, 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. Segmental information

4. Earnings 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 (2011: 8,335,414),(2012: 8,192,267). There are no share options, convertible equity or debt instruments in issue.

5. Called-up share capital

The company retains as treasury shares 727,658 ordinary shares of 10 pence at a cost of £960,509.

6. Cash generated from operations

7. Cash and cash equivalents

Deposit accounts comprise short term bank deposits with an original maturity of three months or less.

8. Analysis of net debt

9. Contingent asset

On 9th October 2009, St George's Bay Hotel Limited entered in to a conditional agreement to sell the majority of the group's hotel complex in Malta. A deposit of 815,300 Euros (£750,076) was paid by the purchaser. On completion a further 28,301,867 Euros was to be paid giving a total consideration of 29,117,167 Euros.

On 9th September 2011, the agreement was varied and pursuant to the variation, completion took place on the sale of part of the hotel complex for 15,373,884 Euros. Pursuant the variation, it was also agreed that the purchaser has until 30th March 2015 to complete the purchase of the remaining property. The total consideration of 29,117,167 Euros remains unchanged. Therefore, the consideration payable for the remaining property will be 13,743,283 Euros.

10. Distribution of interim financial statements

A copy of these interim financial statements is available from the company's registered office and is also available on the company's website.

Further information:

Charles Bailey, Executive Chairman

Bryan Warren, Secretary

Telephone: 01633 262961

Richard Day/Jamie Cameron

Arden Partners Plc

Telephone: 020 76145917