Parkmead Regulatory News (PMG)

31 Mar 2009 07:00



31 March 2009

The Parkmead Group plc (the "Group")

Interim Results for the 6 months ended 31 December 2008

Interim results summary

Operating loss before impairments for the year of £1.11 million (2007: £1.00 million)

Cash and cash equivalents at 31 December 2008 were £3.85 million with no debt obligations

Net assets per share 2.0 pence (2007: 4.3 pence)

The Group's Chairman, Colin Goodall said, "the past six months have seen unprecedented turmoil in global financial, equity and commodity markets. This has had a marked effect on our investments and consequently we have impaired these in line with the current markets. The Group retains strong cash balances with no debt. We believe that our investment in Faroe Petroleum provides a solid long term capital gain opportunity. We continue to see investment openings in the energy sector and have seen a number of opportunities arising as a result of the deterioration in the economic climate. In particular we are in advanced discussions at the current time with regard to participation in some exciting exploration assets. In line with my statement made at the time of the 2008 Annual Report our Corporate Finance Team has refocused on the energy sector and has been active in evaluating opportunities for the Group to explore at the corporate level"

Ends 

Enquiries

The Parkmead Group plc 020 7494 5770

Niall Doran (Chief Executive)

Gordon Ashworth (Chief Financial Officer)

Charles Stanley Securities (NOMAD and broker) 020 7149 6000

Rick Thompson

Carl Holmes  

Financial Review

During the six months ended 31 December 2008 the Group recorded an operating loss of £1.11 million before impairments (2007: £1.00 million). Finance income in the period reduced to £0.17 million (2007:  £0.34 million) due to lower interest rates and lower cash balances following the investments made in the second half of 2007. After impairment and other net losses the Group reported a loss before tax of £4.27 million (2007: £0.66 million). After discontinued operations the loss after tax was £4.72 million.

Investments

The Group has two investments in listed companies, Faroe Petroleum ("Faroe") and Reservoir Exploration Technology ("RXT") and a debenture investment in Transeuro Energy.

Faroe is a fully funded exploration company focused on the Atlantic Margin, North Sea and the Southern Gas Basin. We are pleased to note that Faroe has attracted increasing coverage from the analyst community as the company further develops its high potential exploration assets. In the Atlantic Margin, Faroe has a unique track-record for successfully partnering with major oil companies in licensing rounds. Faroe maintains a strong financial position and has a large and diversified portfolio underlying its quality drilling programme. Faroe's near term drilling programme encompasses nine committed and five likely wells over the next two years. Faroe's potential resources amount to 162 mmboe (risked). Upcoming exploration wells of note include Anne Marie and Tornado. In summary, The Group believes that Faroe has the potential to realise strong investment returns. 

Our investment in RXT fared worse, although this decline is in line with the oilfield services market. By way of example Nordic oilfield services stock indices have fallen 60 per cent. over the past nine months. RXT provides geo science services to the exploration industry. The investment cycle in the energy sector is long, with exploration projects being generally first in line to be scaled back or deferred in the face of a downturn. Despite having been recently recapitalised by Lime Rock Partners, RXT has suffered from the market down turn and whilst we believe this is not wholly out of line with its industry peers, we have taken the opportunity to impair the carrying value of the holding by £1.24 million.

The Group invested £0.65 million, by way of debenture, in Transeuro Energy (Transeuro) in May 2008. Transeuro is developing gas and oil shale assets in the Ukraine and Canada respectively. In particular Transeuro's Canadian shale gas well exploration programme has produced strong initial production and bodes well for further development of the property. The accounting for this asset was complex as the debenture had warrants attached to it and also convertibility rights. As at 30 June 2008 the warrants had material intrinsic value and were recorded at a value of £0.62 million. Subsequently, as Transeuro's share price fell, so has the value of the warrants. This has led to a reduction in the value of the warrants leading to a charge of £0.56 million being made in the period to 31 December 2008. Notwithstanding the write down in the value of the warrant, the value of the debenture instrument remains intact. We will continue to monitor the position of Transeuro and our debenture investment. Since the year end the terms of the debenture have been renegotiated such that the strike price on the warrant has been reduced to C$ 12.5 cents from C$ 25 cents following bondholder approval to allow Transeuro to settle interest payments by way of allotment of shares rather than cash payment.

With regard to our residual technology portfolio assets, in line with the Group's accounting policies, we have re-valued these as at 31 December 2008. As a result we have recorded an impairment charge of £1.48 million. The Board believes that this is prudent and appropriate in the current economic environment. We continue to seek buyers for these remaining technology investments as we focus the business towards our stated strategy of being a leading oil and gas investment house. 

Outlook

Despite volatile markets, the Group is in a strong position to capitalise on opportunities within the oil and gas sector due to our strong cash balance and liquid investments. We believe that as the economic climate improves our targeted investments will realise significant value for our shareholders.

Notes to the Interim financial statements for the six months to 31 December 2008

1 Basis of preparation

The consolidated financial information has been prepared on accordance with accounting policies which will be adopted in presenting the full year annual report and accounts.

The interim financial information is unaudited and does not constitute statutory financial statements within the meaning of the Companies Act 1985.

The Group's statutory consolidated financial statements for the year ended 30 June 2008 were presented under IFRS. The report of the auditors on those financial statements was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

2 Discounted operations

The results of discontinued operations were as follows:

3 Reconciliation of operating profit to net cash from operating activities