RNS Number : 1162C
PGI Group PLC
27 August 2008
PGI Group Plc
Chairman's statement
The Group profit before tax, biological asset and hyperinflation adjustments for the half year to 30 June 2008 increased by 14% to
�2,117,000 (half year to June 2007: �1,863,000).
The adjustments for the biological assets and Zimbabwe hyperinflation are again shown in a separate column and, for the reasons I
explained in my Chairman's statement when this presentation was introduced, they should be viewed with caution.
Including these adjustments, the Group profit before tax was �2,291,000 (half year to June 2007 �2,878,000).
Profit for the food group increased by 6%. The star performer has been the Malawi tea business, which has benefited from a rising tea
price that has more than offset the significant increases in input costs that we have faced across all our businesses.
The perishable businesses in Zambia have traded satisfactorily, though they have not yet succeeded in recovering all of the higher input
costs through price rises to our customers.
It has been a difficult growing season, with unusual extremes of rainfall and temperature. Tea and rose production has been about 5%
below budget. In Zambia we have also suffered some damage to the estate infrastructure from very heavy rains.
Operating conditions in Zimbabwe have deteriorated further, as the wider economy collapses. With inflation now running into millions of
percent, it is impossible to recruit enough labour. The estate is operating at half the productive levels of a year ago.
Jensen, the group's Russian property management and investment operation, continued to develop and enhance the management of the
properties in its funds. The US$101 million fund raised by Jensen in 2006 has reported an increase in net assets of 28%, based on the
unaudited accounts for the six months to 30 June.
At the end of June we announced that an agreement had been reached with Steven Wayne, at that time Chief Executive of the Group and
Jensen's Chief Executive, to change the arrangements with him and with Jensen. Full details of this were set out in a circular sent to
shareholders, and the proposals were passed at a meeting held on 24 July 2008. The particulars of the transactions effected during
July/August 2008 resulting from these arrangements are detailed in note 10 to these interim statements.
When the transaction with Mr Wayne was concluded, we were pleased to announce that Sebastian Hobhouse was appointed Chief Executive. Mr
Hobhouse has been a director for the past fifteen years, responsible for the Group's African interests. Mr Wayne stood down from the Board,
but remains Chief Executive of the Jensen Group.
Turning to the outlook for the second half, this is always difficult to predict when a large part of the Group's businesses are
seasonal. However, if tea prices remain at their current levels and reasonable weather conditions prevail, we expect a satisfactory result.
Rupert Pennant-Rea
Chairman
27 August 2008
Enquiries:
PGI 020 7236 6135
Geoff Moores, Finance Director
Panmure Gordon 020 7459 3600
Andrew Potts
Interim condensed consolidated income statement
for the six months ended 30 June 2008
Six months ended 30 June
2008 2007
Result before Result before
biological Biological biological Biological
assets and assets and assets and assets and
hyperinflation hyperinflation hyperinflation hyperinflation
adjustments adjustments Total adjustments adjustments Total
Notes �000 �000 �000 �000 �000 �000
Continuing operations
Revenue 3 12,843 (37) 12,806 11,206 (416) 10,790
Cost of sales (5,868) (270) (6,138) (5,077) 125 (4,952)
Gross profit 6,975 (307) 6,668 6,129 (291) 5,838
Distribution costs (1,580) (1) (1,581) (1,148) - (1,148)
Administrative expenses (3,146) (9) (3,155) (2,985) 64 (2,921)
Other operating income 100 (3) 97 102 (3) 99
Fair value adjustment to - 162 162 - 1,197 1,197
biological assets
Operating profit 2,349 (158) 2,191 2,098 967 3,065
Finance revenue 53 - 53 50 - 50
Finance costs (293) 8 (285) (296) - (296)
Share of associate's results 8 - 8 11 - 11
Monetary working capital
hyperinflation adjustment - 324 324 - 48 48
Profit before taxation 2,117 174 2,291 1,863 1,015 2,878
Taxation 4 (735) (61) (796) (490) (261) (751)
Profit for the period 3 1,382 113 1,495 1,373 754 2,127
Profit attributable to: Restated
Equity holders of the parent 1,223 130 1,353 1,118 739 1,857
Minority interests 159 (17) 142 255 15 270
1,382 113 1,495 1,373 754 2,127
Restated
Pence Pence
Earnings per ordinary share 5
From continuing operations
- basic 0.94 1.04 0.86 1.44
- diluted 0.94 1.04 0.86 1.43
Dividend per ordinary share 6 - 0.25
Interim condensed consolidated balance sheet
at 30 June 2008
Group
30 June 2008 31 December 2007
Excluding Including Excluding Including
hyperinflation hyperinflation hyperinflation hyperinflation
adjustments adjustments* adjustments adjustments*
�000 �000 �000 �000
ASSETS
Non-current assets
Goodwill 2,046 2,046 2,047 2,047
Biological assets 12,771 12,771 12,984 12,984
Property, plant and equipment 10,093 10,093 10,189 10,189
Hyperinflation adjustment - 137 - 246
10,093 10,230 10,189 10,435
Investment properties 1,742 1,742 2,208 2,208
Investments
- associate 320 320 320 320
- other 53 53 45 45
27,025 27,162 27,793 28,039
Current assets
Inventories 1,983 1,983 2,128 2,128
Hyperinflation adjustment - 133 - 134
1,983 2,116 2,128 2,262
Trade and other receivables 3,409 3,409 1,983 1,983
Other financial assets - - 17 17
Cash and cash equivalents 1,806 1,806 2,006 2,006
7,198 7,331 6,134 6,268
Total assets 34,223 34,493 33,927 34,307
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent company
Share capital 32,401 32,401 32,365 32,365
Share premium account 425 425 425 425
Capital redemption reserve 250 250 250 250
Revaluation reserve 462 462 457 457
Retained earnings (16,901) (16,660) (17,066) (16,746)
16,637 16,878 16,431 16,751
Minority interests 3,828 3,828 3,920 3,920
Total equity 20,465 20,706 20,351 20,671
Non-current liabilities
Interest bearing loans and 1,191 1,191 1,552 1,552
borrowings
Other payables 159 159 177 177
Provision for deferred tax 2,561 2,561 2,540 2,540
liabilities
Hyperinflation adjustment - 29 - 60
2,561 2,590 2,540 2,600
Defined pension plan deficit 4,083 4,083 3,497 3,497
7,994 8,023 7,766 7,826
Current liabilities
Interest bearing loans and 2,784 2,784 3,291 3,291
borrowings
Trade and other payables 2,251 2,251 2,229 2,229
Other financial liabilities - - 9 9
Current tax liabilities 729 729 281 281
5,764 5,764 5,810 5,810
Total liabilities 13,758 13,787 13,576 13,636
Total equity and liabilities 34,223 34,493 33,927 34,307
* These are the Group's balance sheets for the six months ended 30 June 2008 and for the year ended 31 December 2007.
Interim condensed consolidated cash flow statement
for the six months ended 30 June 2008
Six months ended 30 June
2007
2008 (restated)
Including Including
hyperinflation hyperinflation
adjustments adjustments
�000 �000
Operating activities
Profit before tax from continuing operations 2,291 2,878
Adjustments to reconcile profit before tax to
net cash flows
Non cash:
Depreciation of property, plant and 451 408
equipment
Disposal of property, plant and equipment (6) (18)
Disposal of investment property 60 -
(Additional)/ reduced retirement benefit (133) 49
costs
Net finance costs 232 246
Fair value adjustments (162) (1,197)
Share of net profit of associate (8) (11)
Hyperinflation indexation adjustment 438 221
Monetary working capital hyperinflation (324) (48)
adjustment
Working capital adjustments:
Decrease in inventories 387 483
Increase in trade and other receivables (1,409) (1,633)
(Decrease)/increase in trade and other (5) 622
payables
Exchange differences on working capital (302) (530)
Oversea tax paid (337) (375)
Net cash generated from operating activities 1,173 1,095
Cash flows from investing activities
Capital expenditure (489) (1,290)
Disposal of property, plant and equipment 6 25
Disposal of investment property 404 -
Additions to investments (net) - 9
Net cash from investing activities (79) (1,256)
Cash flows from financing activities
Issue of shares (net of expenses) 36 44
Payment of loans (445) (200)
Finance costs, net of bank interest received (164) (307)
Dividends paid to equity holders of the parent - (323)
Dividends and other payments to minority (296) (53)
interests (net)
Distributions from property fund (net) (25) (7)
Net cash from financing activities (894) (846)
Net increase/(decrease) in cash and cash 200 (1,007)
equivalents
Cash and cash equivalents at beginning of (459) 959
period
Effects of exchange rate changes on cash and 23 109
cash equivalents
Cash and cash equivalents at end of period (236) 61
Cash and cash equivalents comprise:
Cash 1,806 1,702
Overdrafts (2,042) (1,641)
Cash and cash equivalents (236) 61
Interest bearing loans and borrowings due (2,784) (2,342)
within one year
Less: short term debt 742 701
Overdrafts (2,042) (1,641)
Interim condensed consolidated statement of changes in equity
Attributable to equity holders of the Company
Share
premium &
capital
Share redemption Revaluation Retained Minority Total
capital reserves reserve earnings Total interests equity
Six months ended 30 June 2008 �000 �000 �000 �000 �000 �000 �000
Balance at 1 January 2008 32,365 675 457 (16,746) 16,751 3,920 20,671
Changes in equity
Hyperinflation indexation - - - 228 228 - 228
movement
Exchange differences on
translation of net oversea
assets:
- before hyperinflation - - (5) (454) (459) 62 (397)
indexation
- hyperinflation indexation - - - (320) (320) - (320)
movement
Actuarial loss (net) of - - - (659) (659) - (659)
defined benefits pension plan
Investments valuation gain - - 10 - 10 - 10
taken to equity
Deferred tax on property
revaluations:
- before hyperinflation - - - (38) (38) - (38)
indexation
- hyperinflation indexation - - - 1 1 - 1
movement
Net income/(expense) - - 5 (1,242) (1,237) 62 (1,175)
recognised directly in equity
Profit for the six months - - - 1,353 1,353 142 1,495
Total recognised income - - 5 111 116 204 320
Issue of new ordinary shares 36 - - - 36 - 36
on exercise of share options
Dividends paid to minority - - - - - (152) (152)
interests
Distributions from property - - - (25) (25) (195) (220)
fund (net)
Advances from non-equity - - - - - 51 51
minority interests (net)
Balance at 30 June 2008 32,401 675 462 (16,660) 16,878 3,828 20,706
Interim condensed consolidated statement of changes in equity
continued
Attributable to equity holders of the Company
Share
premium &
capital
Share redemption Revaluation Retained Minority Total
capital reserves reserve earnings Total interests equity
Six months ended 30 June 2007 �000 �000 �000 �000 �000 �000 �000
Balance at 1 January 2007 32,326 670 700 (16,528) 17,168 2,690 19,858
Prior year adjustment to
restate minority interest in
consolidated investment
property fund, acquired in - - - (83) (83) 237 154
2005, tax effect nil
Restated balance 32,326 670 700 (16,611) 17,085 2,927 20,012
Changes in equity
Hyperinflation indexation - - - 343 343 - 343
movement
Exchange differences on
translation
of net oversea assets:
- before hyperinflation - - (4) (1,778) (1782) (89) (1,871)
indexation
- hyperinflation indexation - - - (511) (511) - (511)
movement
Actuarial gain (net) of - - - 1,313 1,313 - 1,313
defined benefits pension plan
Deferred tax on property
revaluations:
- before hyperinflation - - (5) (49) (54) (12) (66)
indexation
- hyperinflation indexation - - - 1 1 - 1
movement
Net income recognised directly - - (9) (681) (690) (101) (791)
in equity
Profit for the six months - - - 1,857 1,857 270 2,127
Total recognised income and - - (9) 1,176 1,167 169 1,336
(expense)
Issue of new ordinary shares 39 5 - - 44 - 44
on exercise of share options
Dividends paid to equity - - - (323) (323) - (323)
holders of the parent
Distributions from property - - - - - (7) (7)
fund (net)
Repayment of advances from
non-equity minority interests - - - - - (53) (53)
(net)
Balance at 30 June 2007 32,365 675 691 (15,758) 17,973 3,036 21,009
Notes to the interim condensed consolidated financial statements
1. Corporate information
PGI Group Plc is a public limited company incorporated and domiciled in the United Kingdom, whose shares are publicly traded. The
principal activities of the Company and its subsidiaries ('the Group') are described in Note 3.
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2008 were authorised for issue in
accordance with a resolution of the directors on 27 August 2008.
2. Basis of preparation and accounting policies
The interim condensed consolidated financial statements for the six months ended 30 June 2008 and 2007 are unaudited. They have been
prepared in accordance with International Accounting Standard (IAS) 34, 'Interim Financial Reporting'. The accounting policies adopted are
consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2007.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the Group's audited financial statements for the year ended 31 December 2007.
The information for the year ended 31 December 2007 does not constitute the Group's statutory accounts for 2007 as defined in Section 240 of
the Companies Act 1985. Statutory accounts for 2007 have been delivered to the Registrar of Companies. The Auditors' report on those
accounts was unqualified and did not contain statements under Sections 237(2) or (3) of the Companies Act 1985.
Prior year adjustment
Due to a miscalculation of the minority interest percentage on the acquisition of a part of the Jensen Group in 2005, the minority
interest, goodwill and retained earnings have been restated. This restatement has been accounted for retrospectively and recognised in the
consolidated statement of changes in equity at 1 January 2007. The comparative statements for the six months ended 30 June 2007 have been
restated to reflect these changes. There was no effect on the previously reported profit after taxation for the six months ended 30 June
2007, but the profit attributable to the equity holders of the parent and the minority interests have been restated on the income statement.
The effect on basic and diluted earnings per share for the six months ended 30 June 2007 is as follows:
Results before TotalPence
biological assets
and hyperinflation
adjustmentsPence
Effect on earnings per
ordinary share from continuing
operations
* basic * 0.01
* diluted * *
The corrections to the �*000
balance sheet amounts, both
excluding and including
hyperinflation adjustments as
at 30 June 2007 are as
follows:
Goodwill + 150
Retained Earnings - 79
Minority Interests +229
3. Segmental reporting
The Group's primary reporting segments are the following business sectors:
Food group - Tea, roses, vegetables and macadamia nuts.
Investment property management - Properties in St. Petersburg, Russia.
Segment Revenue
Six months ended 30 June 2008 Six months ended 30 June 2007
Revenue before Revenue before
hyperinflation Hyperinflation hyperinflation Hyperinflation
adjustments adjustments Total adjustments adjustments Total
�000 �000 �000 �000 �000 �000
Food group 12,203 (37) 12,166 10,578 (416) 10,162
Investment property management 640 - 640 628 - 628
12,843 (37) 12,806 11,206 (416) 10,790
Segment Results
Six months ended 30 June 2008 Six months ended 30 June 2007
Result before Result before
biological Biological biological Biological
assets and assets and assets and assets and
hyperinflation hyperinflation hyperinflation hyperinflation
adjustments adjustment Total adjustment adjustment Total
�000 �000 �000 �000 �000 �000
Food group 3,031 (158) 2,873 2,869 967 3,836
Investment property management 32 - 32 50 - 50
Central costs net of sundry (706) - (706) (810) - (810)
income
2,357 (158) 2,199 2,109 967 3,076
Net finance costs (240) 8 (232) (246) - (246)
Monetary working capital
hyperinflation adjustment - 324 324 - 48 48
Profit before tax 2,117 174 2,291 1,863 1,015 2,878
Taxation (735) (61) (796) (490) (261) (751)
Profit for the period from 1,382 113 1,495 1,373 754 2,127
continuing operations
4. Taxation
Six months ended
30 June
2008 2007
Continuing operations �000 �000
Current taxation:
UK Corporation tax (after double taxation relief) - -
Foreign taxation:
Current taxation on income for the period 687 402
Adjustment in respect of prior periods - -
687 402
Deferred taxation:
Origination and reversal of timing differences 123 357
Adjustment in respect of prior periods (14) (8)
109 349
Taxation on profit from continuing operations 796 751
Following changes to the UK corporation tax regime introduced by the Finance Act 2007, from 1 April 2008 the standard rate of UK
corporation tax is 28% (previously 30%). This change has had no impact upon these interim financial statements, nor is it expected to affect
the Group's effective tax rate in the foreseeable future.
5. Earnings per ordinary share
a. Basic
Basic earnings per ordinary share is calculated by dividing the result attributable to equity holders of the company by the weighted
average number of ordinary shares in issue during the period.
Six months ended 30 June
2008 2007
Thousands Thousands
Weighted average number of ordinary shares in issue 129,493 129,351
Six months ended 30 June
2008 2007 (Restated)
Result before Result before
biological biological
assets and assets and
hyperinflation hyperinflation
adjustments Total adjustments Total
�000 �000 �000 �000
Profit for the period from
continuing operations 1,223 1,353 1,118 1,857
attributable to the equity
holders of the Company
pence pence pence pence
Basic earnings per ordinary share
- continuing operations 0.94 1.04 0.86 1.44
b. Diluted
Diluted earnings per ordinary share is calculated on a weighted average of shares which assume the exercise
of certain options.
Six months ended30 June
2008 2007
Thousands Thousands
Weighted average number of ordinary shares in issue 130,046 130,083
assuming the exercise of certain options
Six months ended 30 June
2008 2007 (Restated)
Result before Result before
biological biological
assets and assets and
hyperinflation hyperinflation
adjustments Total adjustments Total
pence pence pence pence
Diluted earnings per ordinary
share
- continuing operations 0.94 1.04 0.86 1.43
6. Dividend paid and proposed
Six months ended 30 June
2008 2007
�000 �000
Declared and paid during the period
Equity dividends on ordinary shares:
Interim dividend for 2006 of 0.25p per share, paid - 323
23 January 2007
A final dividend for 2007 of 0.25p per share, payable on 5 August 2008 was declared on 1 July 2008 and will be recognised in the
financial statements for the year ended 31 December 2008.
7. Property, plant and equipment
Capital expenditure on property, plant and equipment in the six months ended 30 June 2008 amounted to �405,000.
8. Related party transactions
Two Russian companies owned by a director, Mr S. W. Wayne, provide services to subsidiary companies of Jensen Partners LLC and Jensen
Limited and the property funds they manage. Jensen Partners LLC and Jensen Limited are subsidiaries of PGI Group Plc. The Russian companies
are not designed to make profits but to reallocate expenses between the various entities. The amounts charged to the subsidiaries of Jensen
Partners LLC and Jensen Limited and the amounts outstanding were as follows:
Six months ended 30 June
2008 2007
�000 �000
Charges for services from related parties 166 188
Amounts owed to related parties 22 69
9. Contingent liabilities
Other than as noted below, there have been no changes to the contingent liabilities as reported in note 31 to the audited financial
statements for the year ended 31 December 2007.
a. Claim made by PT Shamrock Manufacturing Corpora ("Shamrock")
Following the High Court ruling in PGI Group's favour early in April 2008, Shamrock issued a notice of appeal to the Supreme Court in
Indonesia on 23 April 2008.
The directors remain of the opinion, based on legal advice received and both the District Court and High Court's rulings, that the claim
is substantially without merit. The directors are therefore of the opinion that no provision is necessary in the accounts.
b. Zimbabwe
The Indigenisation and Economic Empowerment Act has now been promulgated in Zimbabwe.
The directors remain of the opinion that it is too early to assess what impact this Act might have on the Group's investment in Eastern
Highlands Plantations Ltd, which is incorporated in Zimbabwe.
10. Events after the balance sheet date - related party transactions
On 30 June 2008, the Company announced that it had entered into a conditional agreement with its Chief Executive, Mr S. W. Wayne. Full
details of this were set out in a circular sent to shareholders. Shareholder approval to the proposals was obtained at a meeting held on 24
July 2008 and accordingly, PGI Group Plc has released Mr. Wayne (and his connected companies) from substantially all his obligations not to
compete with the business of the Jensen Group. PGI Group Plc retains its current interest in the existing Jensen Group companies.
Additionally, PGI Group Plc was granted an option to take a 20 per cent. equity interest in each of the management company, the general
partner and the carried interest partner of a new property fund, which the Jensen Group was preparing to raise at the date of the
agreement.
In accordance with the terms of the agreement, there was a private placing of ordinary shares owned by Mr. Wayne's company, Jensen Group
Holdings LLC, and PGI Group Plc received consideration amounting to approximately �340,000 (net of placing costs) from the sale of one-half
of the 3,750,000 ordinary shares sold at placement by Jensen Group Holdings LLC. Of the remaining balance, PGI Group Plc purchased on 31
July 2008, 2,725,000 ordinary shares from Jensen Group Holdings LLC, for an aggregate consideration of �1, as stipulated in the agreement,
representing one-half of the unplaced PGI Group Plc shares held by Jensen Group Holdings LLC. PGI Group Plc is currently holding these
2,725,000 ordinary shares in treasury.
On 8 August, the Jensen Group reported that it had achieved an initial closing for the new property fund amounting to some US$62 million
and on 19 August, PGI Group Plc announced that it had exercised its option to subscribe for a 20 per cent. share, as outlined above, for the
agreed nominal consideration of US$1.
The accounting entries for all these transactions will be recognised in the Group's financial statements for the year ended 31 December
2008.
This information is provided by RNS
The company news service from the London Stock Exchange
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