RNS Number:6443G
MG Capital PLC
30 October 2007
Stock Exchange Announcement
30 October 2007
MG CAPITAL PLC
("MG Capital" or the "Company")
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007
THE CHAIRMAN'S STATEMENT
During the twelve months to 30 June 2007 we have continued to make good progress
on the corporate advisory side of our business. At the interim stage I reported
on the successful launch of Sky Express, the first low cost Russian airline in
which we received a 4% beneficial equity interest as a result of our work in
putting together the parties and setting up the operation. The airline has grown
fast since its first commercial flight at the end of January. It is now flying
to six destinations within Russia from its base at Vnukovo Airport in Moscow.
The fleet has grown to seven leased aircraft which are currently averaging 14
flights a day between them, producing steadily increasing passenger numbers and
revenues each month. In terms of profits, the airline is targeting breakeven by
around the middle of next year. The launch of the airline has resulted in a
somewhat higher profile for us in this market and we are currently working on
interesting new transactions in Russia in various sectors including the
agricultural sector.
In China most but not all of our deal flow is derived from the activities of MG
Maple Capital and its team which is based principally in Beijing. Progress on
transactions has been slow over the past year for a number of reasons including
the need in some cases to wait for government approvals and authorizations, but
at least two deals now appear quite close to fruition.
For over almost three years we have owned a controlling shareholding in Jade
Absolute Fund Managers, which during that time produced excellent investment
performance for its funds. However, as I flagged in both last year's Annual
Report and also at the interim stage, we realized that Jade needed to capitalize
upon its good performance record and accelerate the rate of growth of its funds
under management in order to achieve the requisite scale to sustain it through
periods of less buoyant markets than we have enjoyed recently, given that its
profits were largely dependent on achieving performance fees. Despite strenuous
efforts on the marketing front this regrettably just did not happen, and we have
taken the opportunity on the retirement of Jade's senior fund manager to close
down this business and transfer the funds to other advisors.
Our intention is to replace the Jade funds with new funds centred around two of
our areas of core expertise, namely Chinese private equity and farming. I have
reported on a number of previous occasions about our activities in China, but we
have been no less active in agricultural investment, where Family Investments
Limited, a fund advised by our FSA authorized and regulated subsidiary MG Global
Investment, has been a long term and successful investor in farms in South
America and Australia (where its 49% owned subsidiary currently farms over
600,000 acres with the majority of that acreage having been acquired over the
past eighteen months). We are currently in advanced negotiations with
distributors for both a China product and a farming product and hope to be ready
to launch both of them in the next few months. Family Investments itself had
another relatively quiet year with no material realisations and as a result its
net asset value per share rose only slightly in US dollar terms.
After a reasonably good first half, when the contribution from Jade's
performance fees and the fee from the Sky Express transaction generated a small
consolidated profit for the Group, the second half of the year saw far fewer
fees booked as transactions were delayed, and as a result we recorded an
attributable loss for the whole year of #786,110 compared to the previous year's
attributable loss of #1,512,741.
We are entirely focused on the task of building upon the platform painstakingly
built up over the last two years to create a successful and profitable
investment house offering distinctive specialisations, and believe we are on the
cusp of doing just that.
This year's Annual General Meeting will be held at 10.30am on 10th December
2007. For details of the meeting and resolutions please refer to the Notice at
the end of this Report.
Peter Hannen
Chairman
30 October 2007
DIRECTORS' REPORT
The directors have pleasure in presenting their report and the consolidated
financial statements of the Group for the year ended 30 June 2007.
Principal Activities and Business Review
The principal activity of the Company during the year was to act as a holding
company for the Group. The Group provides fund management and advisory
services, corporate advisory, research and consultancy services, and other
investment and financial services.
Business Review
The business review is dealt with within the Chairman's statement.
Long Term Strategy and Business Objectives
The principal objective is for the Group to become a strong and independent
investment house offering a number of distinctive specialisations. There are
several key elements to the Group's strategy for achieving this objective:
* Growth of existing funds under management/advice by continued active
marketing;
* Development of new funds and other products and services in the Group's
specialist areas;
* Continued development of the Group's ability to identify, assess and
process individual investment opportunities in the Group's specialist areas;
* Continued development of the Group's ability to distribute its products
and services by extending the breadth and depth of its institutional
relationships in the UK, the rest of Europe and in Asia;
* Continuing to build up the Group's interests in emerging companies with
high growth potential by way of equity fees paid by client companies,
warrants and earned interests;
* Targeted investment in the resources required to support these strategies.
The Group has made progress during the year on some but not all of these key
elements to its strategy. Following the decision to wind down Jade Absolute
Fund Managers the advisory agreement with the Close Far East Equity fund was
terminated at the end of May 2007 and this had a significant impact on Group
funds under management or advice which dropped to $30 million over the period.
New products however have been developed during the year which it is hoped will
more than replace the Jade funds as core assets under management for the Group.
During the year the Group was involved in the launch of the Russian low cost
airline Sky Express in which it received an equity stake illustrating its
ability to identify and execute investment opportunities in the Group's
specialist areas. The Group's officers and employees throughout the year made
many visits and presentations to investment and other institutions in the UK and
overseas to introduce its products and services, with the Middle East being an
area of particular focus. The Group continued to invest in the resources
required to support its strategies, notably through its continuing investment in
the Beijing operations of its subsidiary MG Maple Capital Limited.
Progress on the key elements of its strategy is also monitored by the Directors
by reference to the following key performance indicators (KPIs) applied on a
group wide basis. Performance for the year to 30 June 2007 is set out in the
table below together with prior year comparison.
2007 2006
Assets under management or advice $30m $138m
Corporate advisory, research and consultancy fees $611,706 $110,112
The table shows that while assets under management or advice have fallen, fees
for corporate advisory, research and consultancy activities rose strongly.
Results and Dividends
The trading results for the year and the Group's financial position at the end
of the year are shown in the attached financial statements.
The Directors have not accrued for any dividends.
Risks and Uncertainties
The Group's principal financial assets are cash, receivables and an investment
in the shares and warrants of Celtic Resources. A major part of its revenues are
currently derived from fund management/advisory fees. The key risks to which the
Group is exposed are credit risks, currency risks, market risks and operational
risks. The Group's investment in Fin-First Limited (the parent company of Sky
Express) should be regarded as relatively high risk in that Sky Express is a
recently launched low cost airline operation in Russia which has yet to achieve
positive cash flow.
Credit Risk
The Group's credit risk is mainly attributable to its debtors including trade
and other debtors; this is the risk that a client or other debtor will fail to
pay amounts when they fall due. The credit risk on liquid funds is limited as
cash is deposited with banks with high credit-ratings assigned by international
credit-rating agencies. Exposure to credit risk is spread over a number of banks
and clients.
Currency Risk
The Group's currency exposure is mainly to the US Dollar in which its revenues
at present are principally denominated. The Group is aware of this currency
exposure and would be prepared to take steps to hedge that exposure if
considered appropriate.
Market Risk
The Group is exposed to market risk in two main ways. Funds under management or
advice are mainly invested in equity markets in Asia and in the UK, and falls in
the relevant stock markets are likely to be reflected in lower asset values for
the funds and consequently lower fees. Sustained falls in stock markets also
often result in redemptions of units in funds. The second way in which the
Group is exposed to market risk is through its investment in Celtic Resources, a
stock quoted on the AIM market, which has experienced recent share price
volatility.
Operational Risk
Operational, reputational and legal risks are actively monitored by the Managing
Director and the other executive directors. Wherever practical, measures are
taken to control or mitigate risks.
Substantial Shareholdings
At 12 October 2007, the Directors were aware of the following shareholdings in
excess of 3% of the company's issued share capital.
Number of Percent of issued
Ordinary shares ordinary share capital
Peter Hannen 1,836,596 38.2 %
Chase Nominees Limited 420,000 8.7 %
Ferlim Nominees Limited 350,000 7.3 %
Hero Nominees Limited 300,000 6.2 %
Giltspur Nominees Limited 250,000 5.2 %
Global Fiduciary (Canada) Inc 217,500 4.5 %
Prism Nominees Limited 184,500 3.8 %
W B Nominees Limited 155,032 3.2 %
Apple Tree Nominees Limited 145,000 3.0 %
The Directors and their Interests
The Directors who served the Company during the year were:
P M L Hannen
C A Fowler
M G C T Baines
P D N Robertson
P F Curtin
J Scott-Barrett
In accordance with the Company's Articles of Association at the forthcoming
Annual General Meeting M G C T Baines and P D N Robertson will retire by
rotation and offer themselves for re-election.
The Directors interests in the share capital of the company are as follows:-
2007 2006
Ordinary shares Deferred Ordinary Deferred shares
Shares Shares
P M L Hannen 1,836,596 - 1,836,596 32,068,230
C A Fowler 162,677 - 75,677 -
M G C T Baines 6,500 - 6,500 -
P D N Robertson 10,100 - 5,100 -
P J Curtin 115,212 - 115,212 95,726,035
J Scott-Barrett 115,212 - 115,212 95,726,035
On 26 May 2006 C A Fowler was granted the option to purchase 470,000 shares in
the Company. The exercise price is 100 pence; the options are exercisable from
19 August 2008 and expire on 26 May 2016. The options are exercisable subject to
various performance related conditions.
Share Capital
Details of the Company's share capital at 30 June 2007 and its movements during
the year are shown in note 14 to the Financial Statements.
Corporate Governance
The Company intends to comply with the principles of best practice set out in
the combined code on corporate governance published by the London Stock Exchange
in so far as the Directors consider that they are appropriate to a company of
the Company's size and structure. The Company currently has three Non-Executive
Directors.
The Company has established an audit and a remuneration committee whose members
are the non-executive directors. The audit committee is responsible for ensuring
that the Company's financial performance is properly monitored and reported and
for reviewing reports from the auditors. The remuneration committee will make
recommendations for the remuneration of the Directors. Note 5 of the financial
statements details the Directors' remuneration received during the year. The
full board acts as the nomination committee.
Policy on the Payment of Creditors
The Company last year did not follow any formal code or standard dealing with
the payment of creditors. Since the restructure of the Company in September 2004
it has been the intention of the Company to agree terms of payment before
business is transacted and to settle accounts in accordance with these terms.
The creditor payment days outstanding for the Group at 30 June 2007 was 26 days
(2006 - 22 days).
Social, Environment and Community
While it is recognised that the Group is a financial services organisation with
a duty to its shareholders and to the discharge its contractual responsibilities
to its clients, there are non-financial considerations which may affect the long
term value of the companies in the Group and careful attention is paid to
minimising the environmental impact of those companies
Employment Policy
It is the Group's policy to give appropriate consideration to applications for
employment from disabled persons, having proper regard to their particular
aptitudes. For the purposes of training, career development and promotion
disabled employees, including any who become disabled during the course of their
employment, are treated on equal terms with other employees.
Health and Safety
The Group has a policy of adopting procedures where appropriate to monitor and
maintain health and safety standards as they affect the Group's employees. None
of the Group's activities involve any significant health and safety risks.
During the year there were no injuries, illnesses or dangerous occurrences which
needed reporting under the Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 1995.
Statement of Directors' Responsibilities
Company law requires the Directors to prepare Financial Statements for each
financial year which give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that year. In preparing
those Financial Statements the Directors are required to:
* select suitable Accounting Policies (as described on pages 15 and 16) and
then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the Financial
Statements; and
* prepare the Financial Statements on the going concern basis unless it is i
nappropriate to presume that the Company will continue in business.
The Directors are responsible for maintaining proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the Financial Statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. The Directors are responsible for
ensuring that the Directors' report is prepared in accordance with company law
in the United Kingdom.
The maintenance and integrity of the website is the responsibility of the
Directors; the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the information contained in the Financial
Statements since they were initially presented on the website. Legislation in
the United Kingdom governing the preparation and dissemination of the Financial
Statements and other information included in annual reports may differ from
legislation in other jurisdictions.
So far as each of the Directors is aware at the time this report is approved:
* there is no relevant audit information of which the Company's auditors are
unaware, and
* the Directors have taken all steps that they ought to have taken to make
themselves aware of any relevant audit information and to establish that
the auditors are aware of that information (s. 234ZA (2)).
Auditors
A resolution to re-appoint CLB Littlejohn Frazer as auditors for the ensuing
year will be proposed at the annual general meeting in accordance with section
385 of the Companies Act 1985.
Signed by order of the directors
C A Fowler
Director
30 October 2007
INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOLDERS OF MG CAPITAL PLC
We have audited the Group and Parent Company Financial Statements (the "
Financial Statements") of MG Capital Plc for the year ended 30 June 2007 which
comprise the Group Profit and Loss Account, the Group and Company Balance
Sheets, the Group Cash Flow Statement and the related notes 1 to 25. These
Financial Statements have been prepared under the accounting policies set out
therein.
This report is made solely to the Company's shareholders, as a body, in
accordance with Section 235 of the Companies Act 1985. Our audit work has been
undertaken so that we might state to the Company's shareholders those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's shareholders
as a body, for our audit work, for this report, or for the opinions we have
formed.
Respective Responsibilities of Directors and Auditors
The Directors' responsibilities for preparing the Annual Report and the
Financial Statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are
set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the Financial Statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the Financial Statements give a true
and fair view and are properly prepared in accordance with the Companies Act
1985. We also report to you whether in our opinion the information given in the
Directors' Report is consistent with the Financial Statements.
In addition we report to you if, in our opinion, the Company has not kept proper
accounting records, if we have not received all the information and explanations
we require for our audit, or if information specified by law regarding
directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited Financial Statements. This other information
comprises only the Directors' Report and the Chairman's Statement. We consider
the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the Financial Statements. Our responsibilities
do not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the Financial Statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the Financial Statements, and of whether the accounting policies are appropriate
to the Group's and Company's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the Financial Statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the Financial Statements.
Opinion
In our opinion:
* the Financial Statements give a true and fair view, in accordance with United
Kingdom Generally Accepted Accounting Practice, of the state of the Group's
and the Parent Company's affairs as at 30 June 2007 and of the Group's loss
for the year then ended;
* the Financial Statements have been properly prepared in accordance with the
Companies Act 1985; and
* the information given in the Directors' Report is consistent with the
Financial Statements.
CLB Littlejohn Frazer
1 Park Place
Chartered Accountants Canary Wharf
and Registered Auditors London E14 4HJ
30 October 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 June 2007
Note 2007 2006
Turnover 1a
Continuing operations 705,731 349,357
Discontinued operations 821,301 341,017
________ ________
1,527,032 690,374
Net operating expenses 1b (1,933,700) (1,702,351)
________ ________
Operating Loss
Continuing operations (720,612) (820,161)
Discontinued operations 313,944 (191,816)
________ ________
2 (406,668) (1,011,977)
Exceptional write off/loss on sale of investment 3 (320,561) (534,120)
Share of operating loss in associated company - (24,997)
Interest payable and similar charges 4 (9,525) (868)
Interest receivable 15,020 14,896
_______ _______
Loss on Ordinary Activities before Taxation (721,734) (1,557,066)
Tax on loss on ordinary activities 6 (5,124) 5,772
_______ ________
Loss on Ordinary Activities after Taxation (726,858) (1,551,294)
Equity minority interest (59,252) 34,259
Equity dividend received - 4,294
________ ________
Loss Attributable to the Members of the Parent Company #(786,110) #(1,512,741)
_______ ________
Basic and Diluted Loss per share 7 (1.16p) (0.66p)
_______ ________
There were no recognised gains or losses other than the profit for the financial
year as set out above.
The Company has taken advantage of section 230 of the Companies Act 1985 not to
publish its own profit and loss account.
CONSOLIDATED BALANCE SHEET
As at 30 June 2007
Note 2007 2006
Fixed Assets
Intangible assets 8 115,585 208,921
Tangible assets 9 15,077 25,357
Investments 10 195,918 1,074,649
___________ _____________
326,580 1,308,927
Current Assets
Debtors 11 308,527 316,093
Investments 188,578 -
Cash at bank and in hand 324,177 200,287
_______ _______
821,282 516,380
Creditors: amounts falling due within one year 12 (342,737) (206,586)
_______ _______
Net Current Assets 478,545 309,794
_______ _______
Total Assets less Current Liabilities #805,125 #1,618,721
_______ ________
Capital and Reserves
Called up share capital 14 2,402,255 4,637,458
Share premium account 15 - 5,101,552
Profit and loss account 16 (1,671,007) (8,221,652)
________ ________
Shareholders' Funds 17 731,248 1,517,358
________ _______
Total Capital Employed 731,248 1,517,358
Minority Interest - Equity 73,877 101,363
_______ ________
#805,125 #1,618,721
_______ ________
These financial statements were approved by the Board of Directors on 30 October
2007 and were signed on its behalf by:
C A Fowler )
)
) Director
)
M G C T Baines )
BALANCE SHEET
As at 30 June 2007
Note 2007 2006
Fixed Assets
Investments 10 5,489,312 7,069,231
Current Assets
Debtors due within 1 year 11 92,711 90,247
Debtors due after 1 year 11 2,658,612 2,429,129
Investments 188,578 -
Cash at Bank and in hand 389 2,293
_______ ________
2,940,290 2,521,669
Creditors: amounts falling due within one year 12 (1,454,476) (1,493,612)
________ _________
Net Current Assets 1,485,814 1,028,057
________ _________
Total Assets less Current Liabilities #6,975,126 #8,097,288
________ _________
Capital and Reserves
Called-up share capital 14 2,402,255 4,637,458
Share premium account 15 - 5,085,311
Profit and Loss account 16 4,572,871 (1,625,481)
________ _________
Shareholders' Funds 6,975,126 8,097,288
________ _________
Total Capital Employed #6,975,126 #8,097,288
________ ________
The financial statements were approved by the Board of Directors on 30 October
2007 and were signed on its behalf by:
C A Fowler )
)
) Director
)
M G C T Baines )
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 June 2007
Note 2007 2006
Net Cash (Outflow) from Operating Activities 19 (429,100) (1,053,052)
Returns on Investments and Servicing of Finance
Interest paid (9,525) (868)
Interest received 15,020 14,896
Dividends received - 4,294
______ ______
Net cash inflow from returns on investments and servicing of
finance 5,495 18,322
Taxation (5,124) -
Capital Expenditure and Financial Investment
Payment to acquire tangible fixed assets (2,083) (15,565)
Receipts from sale of investments 565,510 576,419
_______ _______
563,427 560,854
Cash Inflow/(Outflow) before Financing #134,698 #(473,876)
______ _______
Increase/(Decrease) in Cash 20 #134,698 #(473,876)
________ _________
ACCOUNTING POLICIES
Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards. The principal
accounting policies of the Group are set out below.
Basis of Consolidation
The Group financial statements consolidate those of the Company and of its
subsidiary undertakings drawn up to 30 June 2007. All intra-group transactions
are eliminated on consolidation.
Acquisitions are accounted for under the acquisition method and goodwill on
consolidation is capitalised and written off over its estimated useful life.
The results of companies acquired or disposed of are included in the Group
profit and loss account after or up to the date that control passes respectively
The parent Company has not presented its own profit and loss account as
permitted by section 230 of the Companies Act 1985.
Turnover
Turnover is the total amount receivable by the Group from clients for services
provided to them during the year, excluding Value Added Tax. Performance fees
are not recognised in the accounts until their value has been determined.
Amortisation
Amortisation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Goodwill - over 10 years
Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Improvements to Leasehold Property - Over term of lease
Fixtures & Fittings - 5 Years Straight Line
Equipment - 3-5 Years Straight Line
Operating Lease Agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against the profit and
loss account on a straight line basis over the period of the lease.
Goodwill
Positive purchased goodwill arising on acquisitions is capitalised, classified
as an asset on the balance sheet and amortised over its estimated useful life up
to a maximum of 10 years. This length of time is presumed to be the maximum
useful life of purchased goodwill because it is difficult to make projections
beyond this period. Goodwill is reviewed for impairment at the end of the first
full financial year following each acquisition and subsequently as and when
necessary if circumstances emerge that indicate that the carrying value may not
be recoverable.
Pension Costs
The Company operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Company. The annual
contributions payable are charged to the profit and loss account.
Deferred Taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay more,
or a right to pay less or to receive more, tax, with the following exceptions:
* Provision is made for tax on gains arising from the revaluation (and
similar fair value adjustments) of fixed assets, and gains on disposal of fixed
assets that have been rolled over into replacement assets, only to the extent
that, at the balance sheet date, there is a binding agreement to dispose of the
asset concerned. However, no provision is made where, on the basis of all
available evidence at the balance sheet date, it is more likely than not that
the taxable gain will be rolled over into replacement assets and charged to tax
only where the replacement assets are sold;
* Provision is made for deferred tax that would arise on remittance of
the retained earnings of overseas subsidiaries, associates and joint ventures
only to the extent that, at the balance sheet date, dividends have been accrued
as receivable;
* Deferred tax assets are recognised only to the extent that the
directors consider that it is 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 tax is measured on an undiscounted basis at the tax rates that are
expected to apply in the periods in which timing differences reverse, based on
tax rates and laws enacted or substantively enacted at the balance sheet date.
Investments
Investments are included at cost less amounts written off for permanent
diminution in value.
Foreign Currencies
Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. Exchange differences are dealt with through the profit and loss account.
Group Relief
Taxable losses acquired by a company from another company within the Group are
charged / credited to the profit and loss account at a fair value reflecting the
reduction in corporation tax liability of the Company.
NOTES TO THE FINANCIAL STATEMENTS
1a. Turnover 2007 2006
United Kingdom 700,707 356,861
United States of America 410,195 239,245
Far East/Australasia 89,600 23,623
Other European 326,530 70,645
_______ _______
#1,527,032 #690,374
________ _______
1b. Net Operating Expenses
Continuing Operations
Cost of Sales (130,612) -
Administration Expenses (1,299,453) (1,179,968)
Other Operating income 3,722 10,450
________ ________
#(1,426,343) #(1,169,518)
________ _________
Discontinued Operations
Cost of Sales - -
Administration Expenses (507,357) (532,833)
Other Operating income - -
________ ________
#(507,357) #(532,833)
_______ ________
Total operating expenses #(1,933,700) #(1,702,351)
________ ________
2. Operating Loss
The loss on ordinary activities is stated after charging:
Auditors remuneration:
Audit services #22,394 #21,521
Non audit services - tax services #5,000 #3,550
- other services pursuant to legislatio n #850 #750
- other #1,600 #1,250
Amortisation #93,386 #24,558
Depreciation #7,631 #15,091
Operating lease costs:
Land and Buildings #188,628 #49,500
________ ________
3. Exceptional Items
Loss on sale of investment
During the year, the company disposed of some of its holdings in Celtic
Resources Holdings Plc at a loss. This followed on from the decision as at 30
June 2006 by the Board of Directors that the investment held in this company
should be written down to the market value as at that date as it was believed
that there was a permanent diminution in value. As such the investment was
written down in the Group to #975,083 at 30 June 2006.
4. Interest Payable and Similar Charges 2007 2006
Interest payable on bank loans and overdrafts 9,525 868
______ ______
#9,525 #868
______ ______
5. Directors and Employees
Staff costs were as follows:
Wages and salaries 797,087 656,353
Social security costs 85,110 71,409
Other pension costs 25,039 35,582
______ _______
#907,236 #763,344
_______ _______
The directors' remuneration for the year ended 30 June 2007 was as follows:
Remuneration Pension Other 2007 2006
Contribution
C A Fowler 86,205 - - 86,205 86,224
M G C T Baines 10,636 - - 10,636 10,653
P D N Robertson 10,636 - - 10,636 10,653
P M L Hannen 37,701 - - 37,701 41,121
P F Curtin 10,636 - - 10,636 10,653
J Scott-Barrett - - - - 52,170
______ _____ _____ ______ ______
#155,814 #- #- #155,814 #211,474
______ _____ ______ ______ _______
Retirement benefits are accruing to no directors (2006 - 1) under a money
purchase scheme.
Average number of employees during the year was as follows:
2007 2006
No No
Accounts and administration 4 2
Technical and support 8 6
Research staff - -
Sales staff 4 4
___ ___
16 12
___ ___
6. Tax Loss on Ordinary Activities 2007 2006
UK Corporation tax based on the results for the year at 30% (2006 - 30%) - -
Over provision relating to prior year - (5,772)
Overseas taxation 5,124 -
_____ _____
#5,124 #(5,772)
_____ _____
Analysis of Taxation Charge in the Year
The tax charge for the year is at the standard rate of corporation tax in the UK
of 30% (2006 - 30%). The differences are explained below.
2007 2006
Loss on ordinary activities before taxation #(721,734) #(1,557,066)
_______ ________
Expected tax credit at standard rate of UK Corporation
Tax of 30% (2006 - 30%) (216,520) (467,120)
Effects of:
Expenses not deductible for tax 1,349 167,444
Excess of capital allowance over depreciation (235) (3,803)
Tax losses to carry forward 298,231 282,181
(Loss)/Profit on sale of fixed asset (82,825) 21,298
______ ______
#- #-
______ ______
The Group has tax losses of approximately #7.1 million carried forward as at 30
June 2007.
7. Earnings per Share
The calculation of earnings per share is based on the loss on ordinary
activities after taxation for the financial year of #786,110 (2006 - loss
#1,512,741) and on 67,880,102 (2006 - 228,324,810 (restated)) ordinary shares,
being the weighted average number of ordinary and deferred ordinary shares in
issue during the year. As the Company has made a loss for the year no option is
potentially dilutive and hence both basic and diluted loss per share are the
same. There were no options in place in the previous year.
8. Intangible Fixed Assets Goodwill
Cost
At 1 July 2006 252,107
Write off (94,570)
_______
At 30 June 2007 157,537
_______
Amortisation
At 1 July 2006 43,186
Charge for the year 93,336
Write off (94,570)
______
At 30 June 2007 41,952
______
Net Book Value
At 30 June 2007 #115,585
______
At 30 June 2006 #208,921
______
9. Tangible Fixed Assets Short Fixtures and Computer
leasehold fittings equipment Total
property
Group
Cost
At 1 July 2006 51,380 45,945 302,746 400,071
Addition - 144 1,939 2,083
Write off - (11,002) 6,106 (4,896)
______ ______ ______ ______
At 30 June 2007 51,380 35,087 310,791 397,258
______ ______ ______ ______
Depreciation
At 1 July 2006 51,380 33,860 289,474 374,714
Charge for year - 333 7,380 7,713
Write off - (77) (169) (246)
______ ______ _______ _______
51,380 34,116 296,685 382,181
______ ______ _______ _______
Net book Value
At 30 June 2007 - #971 #14,106 #15,077
_____ ______ ______ ______
At 30 June 2006 - #12,085 #13,272 #25,357
_____ ______ ______ ______
10. Fixed Asset Investments Listed Unlisted
investments investments Total
Cost
1 July 2006 1,510,194 99,566 1,609,760
Additions - 195,918 195,918
Disposals (1,321,616) (99,566) (1,421,182)
Transfer to current asset investments (188,578) - (188,578)
________ ________ ________
At 30 June 2007 - 195,918 195,918
________ ________ ________
Provision
1 July 2006 (535,111) (535,111)
-
Disposals 535,111 - 535,111
_______ ________ _______
At 30 June 2007 - - -
_______ ________ _______
Net Book Value
30 June 2007 #- #195,918 #195,918
_______ ________ ________
30 June 2006 #975,083 #99,566 #1,074,649
_______ _______ _______
The market value of the listed investments at 30 June 2007 was #158,362 (2006:
#975,083). All listed investments held at 30 June 2007 have been included in
current asset investments.
Company Listed
Subsidiaries investments Total
Cost
1 July 2006 6,882,050 187,181 7,069,231
Additions 50,688 45,850 96,538
Disposals (561) (642,400) (642,961)
Revaluations - 702,453 702,453
Transfer to current asset investments - (293,084) (293,084)
________ _______ ________
At 30 June 2007 6,932,177 - 6,932,177
________ _______ ________
Provision
1 July 2006 - - -
Additions (1,442,865) (104,506) (1,547,371)
Transfer to current asset investments - 104,506 104,506
________ _______ ________
At 30 June 2007 (1,442,865) - (1,442,865)
________ _______ _______
Net Book Value
30 June 2007 #5,489,312 #- #5,489,312
________ _______ ________
30 June 2006 #6,882,050 #187,181 #7,069,231
_______ _______ ________
The market value of the listed investments at 30 June 2007 was #158,362 (2006:
#975,083). All listed investments held at 30 June 2007 have been included in
current asset investments.
The subsidiary undertakings are as stated below:
Class of Shareholding Proportion of class Activity
held and share of
voting rights
MG Global Investment Limited Ordinary shares 100% Portfolio investment
advisory services
MG Research Limited Ordinary shares 100% Investment research
Resources Fund Management (Cayman Ordinary shares 100% Company wound up
Limited)
Hannen & Company Limited Ordinary shares 100% Investment administration
Jade Absolute Fund Managers Ordinary shares 75.5% Fund Management advice
Limited
MG Maple Capital Limited Ordinary shares 100% Fund management and
financial advisory
Aztec Capital Limited* Ordinary shares 100% Fund marketing company
AIM pre-IPO Company Limited Ordinary shares 100% Investment company
On 5 June 2007 Aztec Capital Limited was dissolved.
During the year, the Company acquired a further 24.5% of the issued share
capital in Jade Absolute Fund Managers Limited, taking the total holding in the
company to 75.5%.
AIM Pre-IPO Company Limited was set up during the year as a 100% subsidiary of
MG Capital Plc. This company is registered in the Isle of Man.
All companies are incorporated in England and Wales, with the exception of
Resources Fund Management (Cayman) Limited which is incorporated in the Cayman
Islands and MG Maple Capital Limited which is incorporated in Hong Kong.
11. Debtors 2007 2006
Group Company Group Company
Trade debtors 11,427 - 25,454 -
Amounts owed by group undertakings
- 2,658,612 - 2,429,129
Corporation tax recoverable - - 16,054 -
VAT recoverable - - 4,611 -
Other debtors 215,118 89,310 109,908 86,992
Prepayments and accrued income 81,982 3,401 160,066 3,255
______ ________ _______ ________
#308,527 #2,571,323 #316,093 #2,519,376
_______ ________ _______ ________
Amounts in the Company falling due after one year of #2,658,612 (2006:
#2,429,129) comprise the amounts due from subsidiary undertakings as these debts
are not considered recoverable in less than one year.
Included within other debtors is an amount totalling #70,749 (2006: #54,960)
which represents a loan made by MG Capital Plc. The loan agreement includes an
option to convert the loan value into shares in the debtor company.
12. Creditors: amounts falling due within one year 2007 2006
Group Company Group Company
Bank overdraft 1,406 - 12,214 -
Trade creditors 55,197 - 60,627 -
Amounts owed to group undertakings - 1,249,766 - 1,484,062
Amounts owed to participating interest - - - -
Corporation tax - - 44,834 -
PAYE and social security 15,664 - 16,400 -
Other creditors 201,741 193,860 333 -
Accruals & deferred income 68,729 10,850 72,178 9,550
______ ________ _______ ________
#342,737 #1,454,476 #206,586 #1,493,612
_______ ________ _______ ________
13. Deferred Tax
The Group has significant accumulated tax losses but no deferred tax asset has
been recognised as it is unlikely that significant profits will arise in the
short term.
14. Share Capital 2007 2006
Authorised:
10,000,000 ordinary shares of 50p 5,000,000 5,000,000
245,224,000 deferred shares of 1p - 2,452,240
________ ________
#5,000,000 #7,452,240
________ ________
Allotted, issued and paid up
4,805,510 new ordinary shares of 50p each 2,402,255 2,402,255
223,520,300 deferred ordinary shares of 1p each - 2,235,203
________ ________
#2,402,255 #4,637,458
________ ________
On 11 October 2006 223,520,300 deferred ordinary shares of 1p each were
cancelled after the Company obtained court approval.
On 24 October 2006 the Company granted share options to two members of staff
totalling 60,000 ordinary shares in the Company. The exercise price of the
shares is 70 pence and the options may be exercised at any time up until 24
October 2011.
On 26 May 2006 C A Fowler, a director and shareholder of the Company, was
granted the option to purchase 470,000 shares in the Company. The exercise price
is 100 pence; the options are exercisable from 19 August 2008 and expire on 26
May 2016. The options are exercisable subject to various performance related
conditions.
The charge for these options has been reviewed and is not deemed to be
significant and therefore is not recognised in these financial statements.
15. Share Premium 2007 2006
Group Company Group Company
At 1 July 2006 5,101,552 5,085,311 5,102,380 5,086,139
Premium on allotment of shares less expenses of (5,101,552) (5,085,311) (828) (828)
issue cancelled after court approval
_______ ________ ________ ________
At 30 June 2007 #- #- #5,101,552 #5,085,311
_______ ________ _______ ________
16. Profit and Loss Account 2007 2006
Group Company Group Company
At 1 July 2006 (8,221,652) (1,625,481) (6,708,911) (1,662,421)
(Loss)/profit for the year (786,110) (1,122,162) (1,512,741) 36,940
Cancellation of share premium 5,101,552 5,085,311 - -
Cancellation of deferred ordinary shares 2,235,203 2,235,203 - -
_______ ________ ________ ________
At 30 June 2007 (1,671,007) 4,572,871 (8,221,652) (1,625,481)
_______ ________ _______ ________
17. Reconciliation of Movements in Shareholders' Funds 2007 2006
Shareholders' Funds - Group
Loss for the financial year (786,110) (1,512,741)
Movement in share premium - (828)
________ _______
Net decrease in funds (786,110) (1,513,569)
Opening shareholders' funds 1,517,358 3,030,927
________ ________
Closing shareholders' funds #731,248 #1,517,358
________ ________
Shareholders' funds #731,248 #1,517,358
________ ________
18. Financial Instruments
Set out below are the disclosures relating to financial instruments. The Group
has taken advantage of the exemption available under Financial Reporting
Standard 13, "Derivatives and other financial instruments" not to provide
numerical disclosures in relation to short-term debtors and creditors apart from
the interest rate disclosure below.
Fair Values
The Directors have given serious consideration to this issue and have reached
the conclusion that there is no significant difference between the book values
and the fair values of the assets and liabilities of the Group as at 30 June
2007.
Currency Risk
The Group has no material balances of monetary assets or liabilities
denominated, other than in the functional currency of operation, where the Group
is liable to the currency risk. However one of the Company's subsidiaries major
income flows are denominated in US$ whilst its expenditure is in sterling. The
Group does not hedge this currency trading risk.
Interest Rate Risk At Floating interest rates
2007 2006
Borrowing #1,406 #12,214
______ ______
Floating rate financial liabilities comprise bank borrowings and overdrafts at
commercial rates.
Market Price Risk
Market price risk arises mainly from uncertainty about future movements in
equity prices which applies to the Group's listed and unlisted investments. The
Directors review the market risk on an ongoing basis.
19. Reconciliation of Operating Loss to Net Cash Outflow Group
from Operating Activities 2007 2006
Operating loss (406,668) (1,011,977)
Depreciation of tangible fixed assets 7,713 15,091
Amortisation of intangible fixed assets 93,336 24,558
Write off of fixed assets 4,650 -
Decrease in debtors 7,566 3,440
Increase/(decrease) in creditors 146,959 (64,647)
Share of loss in associated company - (24,997)
Movement on share premium account - (828)
Write down of fixed asset investment - 991
Minority interest movement (86,738) 5,317
Non cash fixed asset investments addition (195,918) -
_______ ________
Net cash outflow from operating activities #(429,100) #(1,053,052)
_______ _______
20. Reconciliation of net Cash Flow in Movement is Net Funds Group
2007 2006
Shareholders' Funds - Group
Increase/(decrease) in cash 134,698 (473,876)
_______ _______
Change in net funds arising from cashflows 134,698 (473,876)
Net funds 30 June 2006 188,073 661,949
______ _______
Net funds 30 June 2007 #322,771 #188,073
_______ _______
21. Analysis of Changes in Net Funds Other non
2006 Cash flow Cash changes 2007
Cash at bank and in hand 200,287 123,890 - 324,177
Bank overdraft (12,214) 10,808 - (1,406)
_______ ________ _______ ________
#188,073 #134,698 #- #322,771
_______ ________ _______ ________
22. Capital Commitments
There are no capital commitments at the balance sheet date.
23. Other Commitments
At 30 June 2007 the Company had annual commitments under non-cancellable
operating leases as set out below.
Land and Buildings
2007 2006
Operating leases which expire:
Within 1 year #53,310 #72,600
______ _______
24. Controlling Party
In the Directors opinion there was no controlling party at 30 June 2007.
25. Related Party Transactions
In accordance with Section 3(c) of Financial Reporting Standard No.8 Related
Party Transactions, transactions with other companies have not been disclosed
where the ultimate parent holds 90% or more of the voting rights.
The Group paid #36,000 (2006 - #42,300) in respect of a contribution for the
Chairman's office to HSC Limited, a Company of which P M L Hannen is a Director
and shareholder.
During the year, P M L Hannen, a director and shareholder, lent the Company
#186,000 which is included within other creditors. Of this amount, #120,000 is
unsecured and the balance is secured on 40,000 ordinary shares in Celtic
Resources Plc which are held by the Company. The loan carries an interest rate
of 6% and is repayable on receipt of one month's notice from the lender.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the annual general meeting of the Company will be
held at the offices of MG Capital Plc, Ocean House, 10/12 Little Trinity Lane,
London EC4V 2DH, at 10.30am on 10 December 2007.
Ordinary Business
1. To receive and adopt the report of the Directors and the audited financial
statements for the financial year ended 30 June 2007.
2. To re-appoint CLB Littlejohn Frazer as auditors and to authorise the
Directors to fix their remuneration.
3. To re-elect M G C T Baines who retires by rotation as a Director.
4. To re-elect P D N Robertson who retires by rotation as a Director.
The biographies of the Directors being elected in resolution 3 and 4 above will
be distributed at the Annual General Meeting and will be available on request
beforehand.
Special Business
As special business, to consider and, if thought fit, to pass the following
resolutions, of which resolution no. 5 will be proposed as an ordinary
resolution and resolution no. 6 will be proposed as a special resolution:
Ordinary Resolution
5. THAT the Directors be and are hereby generally and unconditionally
authorised for the purposes of section 80 of the Companies Act 1985 (and in
substitution for any existing authority to allot relevant securities) to
exercise all the powers of the Company to allot relevant securities (within the
meaning of section 80(2) of that Act) up to an aggregate nominal amount of
#2,597,745 provided that this authority shall expire on the conclusion of the
next annual general meeting of the Company save that the Company may before such
expiry make offers, agreements or other arrangements which would or might
require relevant securities to be allotted after such expiry and the directors
may allot relevant securities in pursuance of such offers, agreements or other
arrangements as if the authority conferred hereby had not expired.
Special Resolutions
6. THAT, subject to and conditionally upon the passing of resolution no. 5
above, the directors be and are hereby empowered pursuant to section 95 of the
Companies Act 1985 to allot equity securities (within the meaning of section 94
of that Act) pursuant to the authority conferred by resolution no. 5 as if
sub-section (1) of section 89 of that Act did not apply to any such allotment
provided that this power shall be limited to:
a. the allotment of equity securities in connection with a rights issue in
favour of ordinary shareholders where the equity securities respectively
attributable to the interests of all such holders are proportionate (as nearly
as may be) to the respective number of ordinary shares held by them (but subject
to such exclusions or other arrangements as the Directors may deem necessary or
expedient in relation to fractional entitlements or legal or practical problems
arising under the laws of, or the requirements of any regulatory body or any
stock exchange in, any territory or otherwise howsoever); and
b. the allotment (otherwise than pursuant to sub-paragraph (a) above) of
equity securities up to an aggregate nominal amount #2,597,745,
and shall expire at the conclusion of the next annual general meeting of the
Company save that the Company may before such expiry make offers, agreements or
arrangements which would or might require equity securities to be allotted after
such expiry and the Directors may allot equity securities in pursuance of such
offers, agreements or other arrangements as if the power conferred hereby had
not expired.
By order of the Board
R Chudasama Ocean House
Company Secretary 10-12 Little Trinity Lane
London EC4V 2DH
30 October 2007
Notes:
1. A member of the Company entitled to attend and vote at the meeting is
entitled to appoint one or more proxies to attend and (on a poll) vote
instead of him. A proxy need not also be a member.
2. To be valid, a form of proxy and the power of attorney (if any) under which
it is signed, or a notarially certified copy of such power of attorney, must
be deposited at the Company's registrars, Capita IRG Plc, The Registry, 34
Beckenham Road, Beckenham, Kent, BR3 4TU not less than 48 hours before the
time appointed for holding the meeting or, in the case of a poll taken
otherwise than at or on the same day as the meeting, not less than 24 hours
before the time appointed for the taking of a poll.
3. The return of a form of proxy will not prevent a member from attending the
meeting and voting in person.
30 October 2007
-Ends-
For further enquiries:
Charles Fowler, Managing Director Tel: +44 20 7332 2040
MG Capital plc
Hugh Oram, Nominated Adviser Tel: +44 20 7710 7400
Nabarro Wells & Co. Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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