MCAP.L Regulatory News (MCAP)

6 Dec 2006 07:00

Mission Capital PLC05 December 2006 05 December 2006 MISSION CAPITAL PLC PRELIMINARY STATEMENT CHAIRMAN'S STATEMENT I have much pleasure in announcing the maiden audited preliminary results ofMission Capital plc ("Mission Capital" or the "Company") for the period ended 30September 2006. We have also announced today the details of an investmentalongside Chelsfield LLP in a joint venture company formed to make a substantialacquisition of a portfolio of four properties for £36 million. We report a loss on ordinary activities before taxation of £175,368 representinga basic and diluted loss per share of 0.267p. At this stage of our development,the Company will not be recommending the payment of a dividend. Background Mission Capital was founded on 22 August 2005 specifically to invest in propertybacked trading businesses, property related businesses and property where activemanagement could substantially increase value. The Company's shares wereadmitted to trading and dealings commenced on the AIM market of the London StockExchange on 5 December 2005. At the same time, the Company raised £3.0 millionby way of a placing of 60,560,000 new Ordinary Shares at 5p per share withinstitutional and other investors and issued 9,569,106 new Ordinary Shares at 5pper share to the Company's founders in exchange for their aggregateshareholdings in Abraxus Investments plc, an AIM quoted company, whichrepresented approximately 19 per cent of that company's issued share capital. Investment strategy The Company raised the funds by way of the placing to enable it to initiate andfurther its investment strategy, which is aimed at securing both cash generativeand medium-to-high yield businesses and real estate in the UK. During the periodended 30 September 2006, the Company has made two acquisitions, details of whichare set out below. On 5 June 2006, the Company announced the acquisition of Karspace ManagementLimited ("KML") for a total maximum consideration of £2.6 million excludingcosts. KML is a privately owned company specialising in the provision of carpark and traffic management services to both the public and private sector.Founded in 1992 and based in Tonbridge in Kent, KML currently manages carparking contracts throughout the UK in both the public and private sectors,including a number of niche Local Authority and NHS Trust contracts. Since theperiod end, two additional public sector contracts have been secured. For theyear ended 31 March 2006, KML reported gross revenues of approximately £5.3million and a pre-tax profit of £0.25 million. As at 31 March 2006, KML's netassets were £0.6 million. The initial consideration payable by the Company for KML was £1.9 million, whichcomprised £1.2 million in cash and £0.7 million through the issue of 10,370,370new Ordinary Shares. The remaining consideration of up to £0.7 million wasdeferred and subject to two conditions. The first related to the resolution ofan issue in respect of an existing contract between KML and a local authority,which, once concluded satisfactorily, would trigger the release of up to £0.4million, of which up to £0.2 million would be paid in cash and an equal amountwould be satisfied by the issue of new ordinary shares at 6.75p per share to theformer owners of KML. Subsequently, the Company announced on 2 November 2006,that sufficient progress had been made with the local authority contract suchthat the Board authorised an interim release of £0.2 million to be satisfied asto £0.1 million in cash and the balance through the issue of 1,481,481 newOrdinary Shares at 6.75 pence per share to the KML sellers. The second conditionrelates to the level of adjusted audited pre-tax profit of KML for the yearending 31 March 2007, and depending on the level of such profit up to £0.3million may be payable in cash to the former owners of KML. Emma Sinclair, Managing Director, and I have joined the board of KML. Weconsider that the acquisition of KML represents the first stage of ourinvolvement in the car parking sector. We intend to expand our car parkingbusiness both through acquisition and organic growth as we see significantopportunities in this area and in similar property related businesses with assetbacking. As indicated above, a further element of our investment strategy is to purchaseproperties where active management could increase the value or select corporateopportunities where some investment potential has been identified. In line withthis aspect of our strategy, we were therefore pleased to announce on 28September 2006 that we had completed the acquisition of First Property TradingLimited ("FPT") which has now been re-named Mission Capital (Gloucester)Limited. This is a privately owned property trading company whose only asset isthe freehold of Roebuck House, Brunswick Road, Gloucester. The initialconsideration payable was £518,000, comprising £400,000 in cash and the balanceby the issue of 1,685,714 new Ordinary Shares at 7p per share. This was on thebasis that as at 28 September 2006 the net assets, excluding the property heldas stock was £157,228. The completion accounts provided to us last monthindicated a net asset figure of £145,812 thus the final cash sum payable was£388,583 excluding costs. The property, which is fully let, occupies a prominent position on the southernside of Gloucester city centre and comprises a small retail element on theground floor with three floors of offices over providing a net internal floorarea of approximately 10,560 sq.ft. The property produces a gross income of£96,250 per annum of which £60,000 per annum is from JLT Corporate Risks, partof Jardine Lloyd Thompson Group plc. As at 14 September 2006, when contractswere exchanged, FPT had outstanding loans from the mortgagees of £833,697. We are looking into the possibility of securing planning consent for aresidential development and/or conversion on our site upon the expiry of theexisting leases or to grant renewals on appropriate terms and then tosubsequently sell the property. Abraxus Investments plc ("Abraxus") In the period to 30 September 2006, the Company has increased its shareholdingto 10,041,740 ordinary shares in Abraxus, representing 29.15 per cent of itsissued share capital through the issue of a further 2,635,103 new OrdinaryShares. Abraxus recently sold its wholly owned Hungarian subsidiary First ABKft, realising a profit on disposal of £8,256. According to its chairman'sstatement issued at the time of its preliminary results on 29 September 2006,Abraxus had approximately £1.6 million in cash which is currently being held ondeposit pending discussions with major shareholders. Furthermore, Abraxusannounced that if an appropriate way forward could not be reached followingdiscussions with its shareholders, then it was the intention of its board ofdirectors to return existing funds to shareholders by way of a members'voluntary liquidation or otherwise. The Company's Directors do not believe thatthe liquidation of Abraxus would be in the best interests of all Abraxusshareholders, including the Company, and have communicated this to the chairmanof Abraxus To date, the Directors are not aware that the discussions referredto in the above announcement have taken place. No further announcement has beenmade by Abraxus. The Portfolio acquisition The Board's view remains that ready made good value property investments aredifficult to find. We have therefore continued to focus on either corporateopportunities or portfolios where the vendors prefer to sell groups ofproperties rather than individual lots and preferably "off market". Weidentified such an opportunity a few months ago and have spent a considerabletime investigating its potential and assessing whether the properties could bepurchased at a satisfactory price. Initially, the portfolio comprised of threeproperties and an additional property was included only relatively recently. One of the significant attractions of this particular portfolio was that twoproperties were virtually fully let whilst the other two were vacant butdemonstrated considerable development potential. We have progressed discussionswith the owners whilst simultaneously seeking out a joint venture partner due tothe potential size of the transaction. This has led to the separate announcementbeing made today of the creation with Chelsfield of Athens Investments HoldingGroup Limited ("Athens Investments"), a special purpose joint venture vehicleincorporated in the British Virgin Islands, to acquire the portfolio of the fourproperties. Subject to obtaining shareholder approval, Mission Capital willinvest £1.0 million in Athens Investments while Chelsfield will invest £4.0million. The balance of the consideration payable will be funded by bankingfacilities being provided to Athens Investments. The four properties comprised in the portfolio are as follows: 1. 2-8, Morley Road, Tonbridge, Kent This comprises three industrial office buildings totalling approximately 140,000sq. ft. located in the main commercial area of Tonbridge. The main building,built in the 1980s is approximately 116,000 sq. ft. with modern brick two-storeyoffices. There are two older buildings built in the 1950s/60s on a sitetotalling approximately 8 acres. The property is let to Huntaven PropertiesLimited on a 25 year lease from 10 November 1993, subject to a five yearlyupward only rent reviews. The lease is guaranteed for the term by Hunting plc, acompany whose shares are listed on the Official List, at a current passing rentof £780,000 per annum. 2. Brenchley House, 123-125, Week Street, Maidstone, Kent including BrewerStreet Car Park Site This is a 1970's built retail and office building adjacent to Maidstone Eastrailway station and only a few hundred yards from County Hall, the headquartersof Kent County Council. It comprises approximately 87,000 sq. ft. of retail andoffice space plus basement parking for 33 cars. The current rent isapproximately £0.85 million per annum. In addition there is a 28 space car parkat Brewer Street within 500 metres of the building. Current tenants include KentCounty Council, Norwich Union (not in occupation) and Wetherspoon (J.D.) plc 3. Hamlet Green, Ehringhausen Way, Haverhill, Suffolk This comprises a number of vacant single adjoining warehouse buildings, part ofwhich was completed in the 1950's and 1960's with the balance constructed in the1980's, with a total area of approximately 170,000 sq. ft. on a split-level siteof approximately 6 acres situated about 18 miles south east of Cambridge. TheDirectors believe that the front building of approximately 59,000 sq. ft. couldbe adapted for retail use subject to planning permission. Currently there areapproximately 170 car parking spaces and 15 HGV parking spaces on site. The siteis located east of Haverhill town centre and benefits from a prominent cornerposition along the A143. 4. Guild House, 39-54, Farnsby Street, Swindon, Wiltshire This is a 1980's brick built office building of approximately 53,000 sq. ft.,which is located on the south side of Swindon town centre and is directlyopposite the Brunel shopping centre. The building is currently vacant but theschedule of dilapidations has still to be finalised with the previous tenant. In our opinion all four properties have the potential to add value throughactive management, in line with the strategy highlighted in our admissiondocument. The properties have been valued by King Sturge and their certificateforms part of the Company's Re-Admission document. We have entered into a management agreement with Athens Investments whichprovides that we receive an initial management fee equal to 0.35 per cent. ofthe purchase price of the properties per annum, which increases as theproperties are sold, and that after an initial hurdle rate of return has beenachieved by Chelsfield, we will be substantially participating on an increasingscale depending on the profitability. We will be managing the venture andimplementing all strategic aspects. We are very pleased to be entering into thisjoint venture with a company of such standing and repute as Chelsfield and welook forward to a successful and rewarding outcome to the venture. Outlook Finally your Managing Director, Emma Sinclair, has approached her task withconsiderable tenacity and I mentioned in my interim statement that she isdetermined to see that your Company becomes a significant one. In the 11 monthssince raising funds and floating on AIM, the Company has made two acquisitionsand, subject to your approval, a third will be completed shortly. I wish tothank her and my non-executive directors for their enthusiasm and support and welook to the future with confidence. Neil SinclairChairman 5 December 2006 For further enquiries:Mission Capital PlcNeil Sinclair (Chairman) Tel: 020 7917 2797Emma Sinclair (Managing Director) Tel: 020 7917 2799 Hudson SandlerMichael Sandler/Kate Hough Tel: 020 7796 4133 Mission Capital PlcConsolidated Profit and Loss AccountFor the period ended 30 September 2006 Audited Notes Period to 30 September 2006 £ £ Gross Revenues 1,683,836Less: landlords' share of parking receipts (869,287) Net turnover (acquisitions) 814,549Cost of sales (acquisitions) (484,164) Gross profit (acquisitions) 330,385Distribution costs (43,894)Administrative expenses (555,412) Operating (loss)/profitContinuing operations (365,706)Acquisitions 96,785 (268,921)Other interest receivable and similar income 94,167Interest payable and similar charges (614) Loss on ordinary activities before taxation (175,368)Tax on loss on ordinary activities (11,355) Loss on ordinary activities after taxation (186,723) Basic and diluted loss per share 5 (0.267)p The Group's activities were acquired during the current period. The profit and loss account has been prepared on the basis that all operationsare continuing operations. There are no recognised gains and losses other than those passing through theprofit and loss account. Mission Capital PlcConsolidated Balance SheetFor the period ended 30 September 2006 Audited Notes Period to 30 September 2006 £ Fixed assetsIntangible assets 2,067,117Tangible assets 89,787Investments 6 648,166 2,805,070Current assetsStocks 1,200,000Debtors 617,403Cash at bank and in hand 2,047,961 3,865,364 Creditors: amounts falling due within one year (1,080,086) Net current assets 2,785,278 Total assets less current liabilities 5,590,348Creditors: amounts falling due after more than one year (814,191)Provisions for liabilities (500,000) 4,276,157Capital and reservesCalled up share capital 998,203Share premium account 3,464,677Profit and loss account (186,723) Shareholders' funds - equity interests 4,276,157 Mission Capital PlcConsolidated Cash Flow StatementFor the period ended 30 September 2006 Audited Notes Period to 30 September 2006 £ Net cash outflow from operating activities 7 (168,585)Returns on investments and servicing of financeInterest received 94,167Interest paid (614) Net cash inflow from returns on investments and servicing of finance 93,553 Capital expenditurePayments to acquire tangible assets (6,670) Net cash outflow from capital expenditure (6,670)Acquisitions and disposalsPurchase of subsidiary undertakings (net of cash acquired) (887,649) Net cash outflow from acquisitions and disposals (887,649) Net cash outflow before management of liquid resources and financing (969,351) FinancingIssue of ordinary share capital 2,996,715Capital element of hire purchase contracts (3,676)Net cash inflow from financing 2,993,039 Increase in cash in the period 2,023,688 Mission Capital PlcNotes to the Consolidated Financial StatementsFor the period ended 30 September 2006 1. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. 2. The financial information has been extracted from the group's 2006 financial statements. Those financial statements have not yet been delivered to the Registrar. However, the group's auditors have given an unqualified opinion on those financial statements. 3. Basis of preparation The preliminary results have been prepared under the historical cost convention and in accordance with applicable UK accounting standards. The principal accounting policies of the group will be set out in the group's 2006 annual report and financial statements and are as follows. 4. Accounting Policies Basis of consolidation The consolidated profit and loss account and balance sheet include the financial statements of the Company and all of its subsidiary undertakings made up to 30 September 2006. Acquisitions of subsidiaries are dealt with by the acquisition method of accounting. The results of subsidiaries acquired are included in the profit and loss account up to, or from, the date control passes. Intragroup sales and profits are eliminated fully on consolidation. Turnover Group turnover comprises receipts from management and operation of car parks. Where the Group does not bear the significant risks and rewards of operating a car park, turnover comprises the net management fee receivable by the Group. In all other cases, turnover comprises gross receipts from customers. In these cases, also shown on the face of the profit and loss account is ''landlords' share of parking receipts'', which represents car parking receipts collected on behalf of car park owners. Turnover is exclusive of VAT. Goodwill Goodwill arising on consolidation, representing the excess of the fair value of consideration paid over the aggregate of the fair value of the acquired subsidiaries' identifiable assets and liabilities at the date of acquisition, is capitalised and amortised on a straight line basis over its useful life of 20 years. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Fixtures, fittings & equipment 5 years on a straight line basis or over the period of the contract if shorter. Motor vehicles Over the shorter of the period of the finance lease and the useful economic life, on a straight line basis. Leasing and hire purchase commitments Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce a constant periodic rate of charge on the net obligation outstanding in each period. Rentals payable under operating leases are charged against income on a straight line basis over the lease term. Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period until the date the rent is expected to revert to the prevailing market rate. Investments Fixed asset investments are stated at cost less any provision for impairment. Stock Stock is valued at the lower of cost and net realisable value. Pensions The Group operates a defined contribution pension scheme and the pension charge represents the amounts payable by the Group to the fund in respect of the period. Deferred taxation Deferred tax is recognised in respect of all timing differences between the recognition of gains and losses in the financial statements and recognition in the tax computation. A net deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted. Financial instruments 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 entity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. 5. Loss per share The calculation of loss per share is based on the loss after taxation for the period divided by 69,850,811 shares, being the weighted average number of shares in issue during the period. Fully diluted loss per share is also based upon the above figures as there are no potential dilutive ordinary shares in issue. 6. Fixed asset investments Cost Listed Investments Total £ £ Additions 648,166 648,166 At 30 September 2006 648,166 648,166 The above listed investment relates to Abraxus Investments Plc, a property development and investment company. Consequent to Mission Capital Plc's admission to trading on AIM, Ordinary Shares were issued at 5p per share to acquire approximately 19% of the issued share capital of Abraxus Investments Plc, an AIM listed company, under a Share Exchange Agreement. In March and May 2006 the Company increased its holding in Abraxus Investments Plc and at the balance sheet date the Company holds 29.15% of the issued share capital of Abraxus Investments Plc. In respect of Abraxus Investments Plc, for the last relevant financial year ended 31 March 2006, the aggregate of capital and reserves was £1,527,671 and a loss of £451,526 was made. The Company is not directly involved in the operational and financial policies of Abraxus Investments Plc and so does not exercise significant influence over its investment. Therefore, the investment is considered to be an ordinary fixed asset investment and not an associate. The market value of the Company's holding at 30 September 2006 was £401,670. The directors do not believe this is a realistic assessment of the medium-term value of the investment, and accordingly do not consider there is a permanent diminution in value 7. Reconciliation of operating loss to net cash outflow from operating activities £ Operating loss (268,921) Depreciation of tangible assets 19,320 Amortisation of intangible assets 33,603 Increase in debtors (205,023) Increase in creditors within one year 252,436 Net cash outflow from operating activities (168,585) 8. Major non-cash transactions On 5 June 2006 the Company issued 10,370,370 ordinary shares at 6.75p per share as part of the initial consideration on the acquisition of Karspace Management Limited. On 28 September 2006 the Company issued 1,685,714 ordinary shares at 7p per share as part of the consideration on the acquisition of Mission Capital (Gloucester) Limited (formerly First Property Trading Limited). The Company issued 9,569,106 shares at 5p per share in December 2005 in exchange for 6,624,444 shares in Abraxus Investments Plc. On 22 March 2006 a further 2,359,506 shares were issued at 6.375p per share in exchange for 2,935,000 shares in Abraxus Investments Plc and on 24 April 2006 a further 275,597 shares were issued at 7p per share in exchange for 482,296 shares in Abraxus Investments Plc. 9. Post Balance Sheet Events On 9 November 2006 Mission Capital Plc paid £100,000 and allotted 1,481,481 new ordinary shares of 1p each at 6.75p per share as part of the deferred consideration on the acquisition of Karspace Management Limited. The Company has announced on 5 December 2006 that, subject to shareholder approval, it proposes to invest in a joint venture, Athens Investments. The Company will invest £1 million, giving it a 20% holding in Athens Investments, to be funded through its existing cash resources. 10. Copies of the company's Annual Report and Accounts will be available from the Company's registered office. This information is provided by RNS The company news service from the London Stock Exchange