26 Mar 2009 07:00
26 March 2009
Mission Capital plc
Preliminary Results for the year ended 30 September 2008
Chairman's Statement
Introduction
I was appointed a non-Executive Director on 30 April 2008, and Chairman two months later. As shareholders will be aware, the background to my appointment had been difficult. On 5 February 2008 the then non-Executive Directors had summarily dismissed the then Executive Directors, Mr Neil Sinclair (then Executive Chairman) and Ms Emma Sinclair (then Managing Director), as they had lost confidence in the ability of the Sinclairs to manage the Company, and were in particular concerned at their persistent failure to supply to the non-Executive Directors adequate or timely financial information. A financial investigation revealed that the Company had minimal cash resources; significant and mounting unpaid liabilities; and no bank facilities.
The continuing Directors took emergency action to stabilise the Company's financial position. They obtained secured bank borrowing to enable the Company to pay its creditors, and took immediate steps to reduce the Company's overhead expenditure.
Overview
My first task as Chairman was to try to establish the best strategic way forward for the Company.
There were, however, two elephants in the room. One was the collapsing property market followed by the more general economic turmoil; the other, the continuing litigation by the Sinclairs to seek restoration to office.
The first entailed the write-off of the Company's investment in Athens Investments Holding Group Limited, which was already in difficulty because of previous management decisions. With better management and lower interest rates, however, the Gloucester property remains a positive asset, although subject to an impairment provision.
The second has, as you will see from these results, sadly caused massive damage to shareholder value in terms of cash outlay for professional fees. Perhaps even worse, on a longer-term basis, it has to date rendered the Company's shares unusable in terms of any potential acquisitions, either of property or to grow the Company's main trading subsidiary, Karspace Management Limited (KML), by acquisition or joint venture. That this litigation has still not been settled is not due to want of trying by myself and my colleagues; I have personally spent a very considerable amount of time and effort to this end. It has been agreed that there will be an attempt to settle it by mediation in the second half of May 2009, and I hope that this will be successful.
Within the constraints set out above, the Board is working with the management of KML (to whom we are very grateful for their continuing efforts) to secure the best way forward for its future success.
The Board
Mr Michael Guthrie retired from the Board, which is grateful for his past service, on 30 June 2008. The Board was significantly strengthened by the appointment of Mr Godfrey Thorpe, the Chairman of KML. I am very grateful to my colleagues for their selfless work for the Company, for little (or, in some cases, no) remuneration, in very difficult circumstances.
Outlook
I am also very grateful to the Company's bankers for their continuing support, not least in the midst of the current unprecedented constraints on them. This has enabled us to produce these Accounts on a going concern basis.
The prospects for the Company very much depend on a resolution of the litigation referred to above, which would obviate the significant expense of the matter proceeding to trial and also restore the ability of the Board to concentrate on the future of the Company rather than its past.
PHILIP GOLDENBERG
Chairman
Directors' Report
Principal activity and review of the business
The principal activity of Mission Capital Plc is a holding company of its trading subsidiaries.
The trading subsidiaries are Karspace Management Limited ("KML"), a company specialising in the provision of car park and traffic management services to both the public and private sectors, and Mission Capital (Gloucester) Limited, a property company.
Our key performance indicators are:
Results and dividends
The consolidated results of the Company for the year ended 30 September 2008 comprise gross turnover of £3.4 million (2007: £5.1 million), a loss on ordinary activities before taxation of £1.5 million (2007: loss £1.7 million), representing a basic and diluted loss per share of 1.367p (2007: loss 1.701p).
As at 30 September 2008, the Company had consolidated total assets of £3.4 million (2007: £4.4 million), which equated to total assets per share of 3.19p (2007: 4.22p).
The directors do not recommend payment of a dividend.
Review
A review of the business is contained in the Chairman's Statement above.
Management
Since the dismissal of the then executive directors on 5 February 2008, the business of the Company has been managed by its non-executive directors.
The group
The Company's investment portfolio consists of three assets - KML, which provides management services to car park owning businesses, Mission Capital (Gloucester) Limited (a company whose sole asset is the freehold of a building in Gloucester) and a 20 per cent. shareholding in Athens Investments Holding Group Limited ("Athens"), an associate investment with Chelsfield Partners LLP ("Chelsfield"), which holds a portfolio of three UK property assets.
Karspace Management Limited
In the year to 30 September 2008, KML reported gross revenues of approximately £3.3 million (18 month period ended 30 September 2007: £7.5 million) and profit after tax of £148,180 (18 month period ended 30 September 2007: £374,329). As at 30 September 2008, KML had net assets of approximately £0.7 million (2007: £0.8 million).
KML's management, led by Mike Pennett, is a high-quality, highly-motivated team which is seeking to expand its business. Like all businesses providing services to the public sector, contracts are put out to tender on a regular basis and from time to time such contracts are lost to other parties. We are confident that KML's management is well placed to win additional contracts and to continue to manage them effectively.
Mission Capital (Gloucester) Limited
We have recently re-let two-thirds of Roebuck House to its lead tenant, Jardine Lloyd Thompson. They have also been granted an option over the remaining space, should it become available. A refurbishment and redecoration programme has also been completed.
Athens Investments Holding Group Limited
It is expected that Athens will be wound up during the next few months, with no payment to its members.
Litigation
There is outstanding litigation between the Sinclairs and the Company following the dismissal by the Company of the Sinclairs from executive office on 5 February 2008. The Sinclairs seek restoration to office in a High Court case, and are simultaneously seeking damages for unfair dismissal before an Employment Tribunal; the latter proceedings have been stayed pending the outcome of the former. The Company is counter-claiming in the High Court in relation to improper use of the Company's funds. The cost to the Company in 2007/8 of those proceedings (net of certain costs recovered from the Sinclairs after their application for interlocutory relief, and for the right to launch a derivative action against the then non-Executive Directors, failed in March 2008) amounted to £263,363, to which should be added the amount of £20,753 expended by the Company on professional advice to deal with various complaints (all of which have been rejected) by the Sinclairs and/or their allies to various regulatory bodies.
The High Court case will be the subject to a mediation in the second half of May. If it is not settled then, the likely cost to the Company of a full trial is upwards of a further £250,000.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2008
| 2008 | 2007 | |||
| £ | £ | |||
| Gross turnover | 3,393,106 | 5,149,776 | ||
| Less: landlords' share of parking receipts | (1,723,277) | (2,624,713) | ||
| Revenue | 1,669,829 | 2,525,063 | ||
| Cost of sales | (666,355) | (1,337,513) | ||
| Gross profit | 1,003,474 | 1,187,550 | ||
| Distribution costs | (141,331) | (202,854) | ||
| Administrative expenses | (2,285,484) | (1,756,862) | ||
| Operating loss | (1,423,341) | (772,166) | ||
| Share of loss in associated undertakings | - | (497,944) | ||
| Other interest receivable and similar income | 27,721 | 47,788 | ||
| Other interest receivable and similar income (associate) | - | 3,992 | ||
| Interest payable and similar charges | (56,388) | (55,792) | ||
| Interest payable and similar charges (associate) | - | (450,966) | ||
| Loss on ordinary activities before taxation | (1,452,008) | (1,725,088) | ||
| Tax on loss on ordinary activities | 13,777 | - | ||
| Loss on ordinary activities after taxation | (1,438,231) | (1,725,088) | ||
| Attributable to shareholders of Mission Capital plc | (1,438,231) | (1,725,088) | ||
| Basic and diluted loss per share | 1.367p | 1.701p | ||
All the activities of the group in the current year are classed as continuing.
CONSOLIDATED BALANCE SHEET
At 30 September 2008
| 2008 | 2007 | |||
| £ | £ | |||
| Non-current assets | ||||
| Goodwill | 1,516,907 | 1,971,477 | ||
| Property, plant and equipment | 18,558 | 100,843 | ||
| Investment property | 850,000 | 1,100,000 | ||
| Long-term financial assets | - | - | ||
| 2,385,465 | 3,172,320 | |||
| Current assets | ||||
| Trade and other receivables | 459,014 | 453,938 | ||
| Cash and cash equivalents | 601,444 | 726,828 | ||
| 1,060,458 | 1,180,766 | |||
| Total assets | 3,445,923 | 4,353,086 | ||
| Equity | ||||
| Called up share capital | 1,081,749 | 1,030,672 | ||
| Share premium account | 3,960,673 | 3,654,208 | ||
| Equity reserve | 54,390 | 87,023 | ||
| Retained earnings | (3,404,432) | (1,998,834) | ||
| Total equity | 1,692,380 | 2,773,069 | ||
| Liabilities | ||||
| Non-current | ||||
| Borrowings | 713,177 | 777,024 | ||
| Current | ||||
| Trade and other payables | 783,655 | 728,984 | ||
| Borrowings | 256,711 | 35,457 | ||
| Current tax liabilities | - | 29,790 | ||
| Obligations under finance leases | - | 8,762 | ||
| 1,040,366 | 802,993 | |||
| Total liabilities | 1,753,543 | 1,580,017 | ||
| Total equity and liabilities | 3,445,923 | 4,353,086 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2008
| Share capital | Share premium account | Equity reserve | Profit and loss account | Total equity | |
| £ | £ | £ | £ | £ | |
| Balance at 1 October 2006 | 998,203 | 3,464,677 | 87,023 | (273,746) | 4,276,157 |
| Issue of share capital | 32,469 | 189,531 | - | - | 222,000 |
| Loss for the year and total recognised income and expenditure for the year | - | - | - | (1,725,088) | (1,725,088) |
| Balance at 30 September 2007 | 1,030,672 | 3,654,208 | 87,023 | (1,998,834) | 2,773,069 |
| Issue of share capital | 51,077 | 306,465 | - | - | 357,542 |
| Loss for the year and total recognised income and expenditure for the year | - | - | - | (1,438,231) | (1,438,231) |
| Warrants exercised | - | - | (32,633) | 32,633 | - |
| Balance at 30 September 2008 | 1,081,749 | 3,960,673 | 54,390 | (3,404,432) | 1,692,380 |
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2008
| 2008 | 2007 | ||
| £ | £ | ||
| Cash outflow from operations | (590,000) | (393,540) | |
| Interest paid | (56,388) | (55,792) | |
| Tax paid | (16,012) | (57,013) | |
| Net cash outflow from operations | (662,400) | (506,345) | |
| Investing activities | |||
| Additions to property, plant and equipment | (3,322) | (76,315) | |
| Additions to investments | - | (1,206,140) | |
| Proceeds from sale of property, plant and equipment | 6,430 | 9,250 | |
| Proceeds from sale of investments | - | 652,713 | |
| Interest received | 27,721 | 47,788 | |
| Acquisition of subsidiary undertaking, net of cash acquired | - | (182,360) | |
| Net cash inflow/(outflow) from investing activities | 30,829 | (755,064) | |
| Financing | |||
| Issue of share capital | 357,542 | - | |
| Repayment of long-term borrowings | (36,712) | (21,216) | |
| Repayment of finance lease liabilities | (8,762) | (14,235) | |
| Cash inflow/(outflow) from financing activities | 312,068 | (35,451) | |
| Net changes in cash and cash equivalents | (319,503) | (1,296,860) | |
| Cash and cash equivalents, beginning of year | 726,828 | 2,023,688 | |
| Cash and cash equivalents, end of year | 407,325 | 726,828 |
NOTES
1 Basis of preparation
The financial statements set out above in this preliminary announcement do not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information has been extracted from the group's 2008 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985.
The preliminary results have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The date of transition to IFRS from UK GAAP was 1 October 2006 and therefore the 30 September 2008 financial statements are the first full financial statements prepared in accordance with IFRS. The full IFRS accounting policies and notes on the impact of transition to IFRS are included within the 31 March 2008 interim financial statements, and additional notes on critical judgements and key sources of estimation and uncertainty, together with the accounting policy for investment property, are as follows:
Critical accounting judgements and key sources of estimation and uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Impairment of goodwill
There are a number of assumptions management have considered in performing their review of goodwill, as determining whether goodwill is impaired requires an estimation of the value of the cash generating unit to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. Further details are included in the 2008 financial statements.
Investment property
The key assumptions and judgements in determining the fair value of the investment property are provided in the 2008 financial statements.
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are revalued annually and are included in the balance sheet at their open market values. The surplus or deficit resulting from either a change in the fair value or the sale of an investment property is immediately recognised in the income statement.
2 LOSSES PER SHARE
The calculation of the basic loss per share is based on the losses attributable to the shareholders of Mission Capital plc divided by the weighted average number of shares in issue during the period. All losses per share calculations relate to continuing operations of the Company.
| Losses attributable to shareholders | Weighted average number of shares | Basic loss per share amount in pence | |
| £ | £ | £ | |
| Year ended 30 September 2008 | (1,438,231) | 105,230,297 | 1.367 |
| Year ended 30 September 2007 | (1,725,088) | 101,404,654 | 1.701 |
Fully diluted loss per share is also based upon the above figures as there are no potential dilutive ordinary shares in issue.
3 NOTES TO THE CASH FLOW STATEMENT
Cash flows from operating activities
| 2008 | 2007 | |
| £ | £ | |
| Loss before taxation | (1,452,008) | (1,725,088) |
| Adjustment for: | ||
| Depreciation | 29,553 | 57,702 |
| Impairment of goodwill | 454,570 | - |
| Impairment of interest in associated undertaking | - | 261,222 |
| Share of loss before taxation of associate | - | 944,918 |
| Loss/(profit) on disposal of Property, Plant and Equipment | 49,624 | (1,693) |
| Profit on disposal of investments | - | (4,547) |
| (Increase)/decrease in trade and other receivables | (5,076) | 163,465 |
| Decrease in value of investment property | 250,000 | 100,000 |
| Increase/(decrease) in trade and other payables | 54,670 | (197,523) |
| Interest received | (27,721) | (47,788) |
| Interest paid | 56,388 | 55,792 |
| Cash generated from operating activities | (590,000) | (393,540) |
4 REPORT AND ACCOUNTS
Copies of the annual report and accounts will be posted to the shareholders shortly and will be available at www.missioncapitalplc.co.uk.
| Enquiries: | |
| Mission Capital plc Philip Goldenberg | 020 7291 8807 / 01483 765 377 |
| Arbuthnot Securities Limited Tom Griffiths | 020 7012 2000 |