Final Results
03 Februar 2003 - 1:15PM
UK Regulatory
RNS Number:9594G
Recycled Waste PLC
03 February 2003
Recycled Waste plc ("Recycled Waste" or the "Company")
Preliminary results for the year ended 31 May 2002
CHAIRMAN'S STATEMENT
I wrote to you in December 2001 outlining the proposed acquisition of Recycled
Waste Solutions Limited together with a fund raising exercise to provide working
capital for the enlarged group. Those transactions were successfully completed
and the company was readmitted to AIM on 7 January 2002.
Since then we have made some progress in the business, however that progress has
not been as quick as had been hoped, caused by, amongst other things, accounting
irregularities being uncovered which have adversely affected the Company.
I will now deal with each business sector in turn.
Reverse Polymerisation
The MD 1000 has successfully undergone pre-environment microbiological
certification tests. The resulting report under Environment Agency draft
Technical Guidelines, confirms the MD 1000's ability to totally sterilise all
tested pathogens including E-Coli, Vegetative Bacteria, Bacterial Spores and
Fungi. In addition to the original equipment we have added an emission
management system which allows us to convert the waste gases to energy.
Unfortunately the licensing to operate the machine has taken significantly
longer than originally anticipated. It may indeed be the case that we are unable
to operate the machine at its present location for the disposal of clinical
waste.
There are a number of good enquiries for the MD1000 within our licence
territories but they are taking much longer to bring to fruition than originally
anticipated.
Airless Drying Systems
As previously announced we have entered into a limited liability partnership to
use airless drying technology for processing biomass and organics on a worldwide
basis. Due to design problems the first working machine is only in production at
the date of this report.
Accounting Irregularities
Since the financial year end we have uncovered a number of accounting
irregularities. These principally relate to two areas. The first concerns the
issued share capital of Recycled Waste Solutions Limited where the ordinary
shares acquired were classified as fully paid when in fact they were partly
paid. The unpaid element has subsequently been paid.
The second area relates to turnover reported in the prospectus in the business
we acquired. The turnover was attributable to the traditional recycling
activities and was substantially overstated. Detailed audit and forensic work
has been carried out on the reported figures which have been difficult to
establish due to collusion with third parties.
In both cases the financial loss to the group has been minimal but the cost in
terms of time and fees has been great. In order to protect the interests of
shareholders, the non-executive directors sought independent legal advice and
commissioned an independent accountants' report to establish the detail and
extent of the issues. The company's Chief Executive has been suspended during
this investigation and the financial controller was dismissed in October 2002.
The board is extremely disappointed to have to report these matters to you. I
can confirm that appropriate action will be taken against all individuals
involved in these irregularities and that shareholders will be fully informed.
The Directors are in discussions with a number of parties with a view to
securing additional funding to move the business forward. The going concern
opinion in the accounts is dependant on the successful conclusion of these
discussions.
Whilst the Company continues its investigations into the accounting
irregularities, the directors believe it is necessary to continue with the
suspension in the Company's shares, and will seek to lift the suspension when
appropriate action has been taken.
The Directors do not recommend the payment of a dividend.
John Carrington
CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 MAY 2002
Notes 2002 2001
#'000s #'000s
Turnover - acquisitions 7 -
Cost of sales - acquisitions (66) -
Gross loss - acquisitions (59) -
Administrative costs -acquisitions (448) -
Operating loss - acquisitions (507) -
Administrative costs (323) (17)
Exceptional charges:
Professional fees (300) -
Impairment provision - goodwill (2,087) -
Impairment provision - fixed assets - acquisitions (249) -
Operating (loss) (3,466) (17)
Exceptional credit arising from arrangement with 3,860 -
creditors
Amounts written off investments (56) -
Interest payable (13) -
Profit/(loss) on ordinary activities before taxation 325 (17)
Taxation - -
Profit/(loss) on ordinary activities after taxation 325 (17)
Dividends paid - -
Retained profit/(loss) for the period 325 (17)
Earnings/(loss) per share 2 0.24 p (0.07 p)
Fully-diluted earnings/(loss) per share 2 0.24 p (0.07 p)
CONSOLIDATED BALANCE SHEET as at 31 MAY 2002
Notes 2002 2001
#'000s #'000s
Fixed assets
Goodwill - -
Tangible fixed assets 594 -
Investments 10 -
604 -
Current assets
Debtors 478 -
Cash at bank 151 -
629 -
Creditors: amounts falling due within one year (692) (4,101)
Net current liabilities (63) (4,101)
Creditors: amounts falling due after one year (8) -
Net assets/(liabilities) 533 (4,101)
Capital and reserves
Called up share capital 2,723 255
Share premium account 5,114 4,491
Merger reserve 1,218 -
Profit and loss account (8,522) (8,847)
Shareholders' funds 533 (4,101)
COMPANY BALANCE SHEET as at 31 MAY 2002
Notes 2002 2001
#'000s #'000s
Fixed assets
Investments 11 -
11 -
Current assets
Debtors 774 -
774 -
Creditors: amounts falling due within one year (252) (4,101)
Net current assets 522 (4,101)
Total assets less current liabilities 533 (4,101)
Net assets/(liabilities) 533 (4,101)
Capital and reserves
Called up share capital 2,723 255
Share premium account 5,114 4,491
Profit and loss account (7,304) (8,847)
Shareholders' funds 533 (4,101)
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 MAY 2002
Notes 2002 2001
#'000s #'000s
Cash inflow from operating activities 211 -
Returns on investments and servicing of finance
Interest paid (13) -
Net cash inflow from returns on investments and (13) -
servicing of finance
Capital expenditure
Payments to acquire fixed assets (26) -
Investments (66)
(92) -
Cash outflow before financing 106 -
Financing
Issue of ordinary share capital (net of issue costs) 1,871 -
Issue of funds by third party - 3
Net cash inflow from financing 1,871 3
Increase in cash in the period 1,977 3
1 Accounting policies
The financial statements have been prepared in accordance with applicable
accounting standards. A summary of the more important accounting policies
adopted are described below.
Basis of preparation
Going concern
The financial statements have been prepared on a going concern basis, which
assumes that the company and its subsidiaries will continue in operational
existence for the foreseeable future. The validity of this assumption depends on
the successful conclusion of fundraising negotiations with which the directors
are engaged. The directors are currently in discussions with a number of parties
in order to secure that funding and move the business forward. The financial
statements do not include any adjustments that might result if the fundraising
were not concluded successfully. Such adjustments would include providing for
further costs, reclassifying tangible fixed assets and investments to current
assets at their forced sale value, which might be significantly below their net
book value.
Whilst the directors are presently uncertain as to the outcome of the matter
mentioned above, they believe that it is appropriate for the financial
statements to be prepared on a going concern basis.
Accounting irregularities
The group has suffered some irregularities arising from suspected collusion
between parties connected to it and third parties. The irregularities involved
the recording of transactions that are not thought to have been entered into on
a proper commercial basis and involved, most significantly, the material
overstatement of sales and fixed assets. On discovery of the possible
irregularities, the directors investigated the matters and also commissioned an
independent report from a well-known firm of chartered accountants. The accounts
have been prepared after adjustments have been made to eliminate the
transactions that the directors believe were wrongly recorded and provision has
been made for costs arising from the irregularities. The directors are
confident that these financial statements show the proper transactions of the
company after eliminating the irregular accounting entries. Further details of
this matter are described in the Chairman's statement above.
2 Loss per share
Earnings per share are based upon the profit on ordinary activities after
taxation of #325,000 (2001: Loss #17,000), divided by the weighted average
number of shares in issue during the year of 135,673,074 (2001:
25,466,668)
3 Related party transactions
In the year to 31 May 2002 payments of #21,200 were made to R C Heath, the
company secretary, in addition to the salary he was entitled to.
David Norton, a director, was reimbursed #45,819 by way of business expenses
paid on behalf of the company and its subsidiaries. This amount is high as a
result of Mr Norton assisting with the funding of those subsidiaries prior to
the relisting. These payments were in addition to remuneration under his
contract of employment which are included in directors' emoluments. Included in
called up share capital not paid in a subsidiary undertaking is #100,000 due
from David Norton. This amount was paid up subsequent to the balance sheet
date. In addition, Mr Norton was reimbursed #35,000, which was applied as a
payment on account against the cost of a machine being purchased by the group.
This #35,000 was derived from the sale of shares in the company supplying the
machine. Mr Norton believes he had good title to these shares. The directors
are considering whether they have a claim to the title of these shares and
therefore the proceeds of sale. A further #50,000 was realised through a sale
of the balance of shares to which Mr Norton believes he had title, subsequent to
the balance sheet date.
David Norton transferred 133,347 in Recycled Waste Solutions Limited for nil
consideration to the Recycled Waste Employee Benefit Trust and Shares Scheme
immediately prior to the acquisition by Recycled Waste of Recycled Waste
Solutions Limited.
Payments of #59,000 were made by David Norton to Baxendale Walker in connection
with legal advice relating to the creation of the The Recycled Waste Employee
Benefits Trust and Shares Scheme. This sum is included in other creditors.
Payments of #67,322 and #18,227 for services were made to Co2umia Limited and
Kindlets Limited respectively, both companies of which a director, William
Erskine, is also a director. These payments were made in addition to
remuneration paid to Co2umia Limited in respect of the provision of Mr Erskine's
services as Technical Director of the company, which are included in directors'
emoluments.
Rent of #65,000 pa accrues to Readco 253 Ltd, of whom Mark Facer is a director.
This rent accrues in addition to remuneration under his contract of employment,
which is included in directors' emoluments.
Hoskyn Child, a company with which Simon Freedman is connected, received a
success fee of #50,000 plus disbursements of #8,645 in connection with the
reflotation and #3,000 in consultancy fees. He was also a director of Alpha
Insurance Consultants to whom premiums of #47,250 were due for the period.
Jonathan Castle, a former director, received #20,000 for his work in relation to
the re-admission of Alpha Accident plc.
Under the voluntary arrangement with creditors that the company entered into
during the year amounts claimed from the following related parties were waived:
#
Former directors:
J Castle 47,969
B Edwards 87,887
J Fergus 88,384
Carrington Communications, a company related to John Carrington, waived #10,090.
Venture Hire Limited, a company of which J Connah was a director, waived an
unspecified sum under the arrangement. A creditor of #1,437,500 was accrued in
the prior year.
In January 2003, Simon Freedman, John Carrington, Mark Facer and Roy Porter, all
directors of the company agreed to provide a loan of #25,000 to support the
company's short term funding requirements. This loan which was mistakenly
reported on January 29 as a loan of #30,000, is unsecured, bears
interest of LIBOR plus 3%, and is repayable in 3 months.
The loan, as it is being provided by certain directors of the Company is deemed
a related party transaction as defined by the AIM Rules. The Directors, save for
Simon Freedman, John Carrington, Mark Facer and Roy Porter, consider, having
consulted with the Company's nominated adviser, that the terms of the loan are
fair and reasonable insofar as its shareholders are concerned.
4. Financial Information
The financial information contained in this preliminary announcement of audited
results does not constitute the group's statutory accounts for the years ended
31 May 2002 or 30 May 2001. The financial information has been prepared using
consistent financial policies. The accounts for the year ended 31 May 2001 and
31 May 2002 have been delivered to the Registrar of Companies.
The statutory accounts for the years ended 30 May 2002 and 30 May 2001 have been
reported on by the company's auditors; the reports on these accounts were
unqualified and they did not contain a statement under section 237(2) or (3) of
the Companies Act 1985 (save for the accounts to May 2002 which contained a
statement under section 237(2) of the Companies Act 1985). As disclosed above,
the auditors report does however contain a statement drawing attention to
uncertainty regarding the ability of the company and group to continue to trade
as a going concern.
Copies of the full statutory accounts will be despatched to shareholders.
Further copies will be available, free of charge, from 7 Devonshire Square,
Cutlers Gardens, London EC2M 4YH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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