RNS No 2002h
CRESTON PLC
18 October 1999
CHAIRMAN'S STATEMENT
The group has had another very successful year. Net asset value per share
increased by 45% to 187 pence per share, which arose from a combination of the
profit for the financial year of #1,959,000, an increase of 9% over last year,
and a property revaluation surplus of #3,183,000. Profit on ordinary
activities before taxation amounted to #1,740,000 and there was a tax credit
of #219,000 arising from the write-back of a deferred tax provision no longer
required.
In light of these excellent results, and as forecast in the Interim Report,
the board is recommending a final dividend of 3 pence per share payable on 29
November 1999.
In my report last year I mentioned that the board was concerned by the high
discount to net asset value per share at which the company's shares have
traded. The board's concern was, and remains, that shareholders should receive
full value for their shareholdings, which can only be achieved if the market
price of the shares properly reflects the considerable success of the group
over recent years and its future prospects. Between 30 June 1995 and 30 June
1999 the group's net asset value per share increased by 335%. Research shows
that this was an achievement substantially better than the performance of the
vast majority of the company's competitors that are listed on the London Stock
Exchange over the same period of time. Nevertheless, the company's shares
continue to trade at a significant discount to net asset value per share,
which at 13 October 1999 amounted to 26%.
It is clear that the market has failed to recognise the company's performance
and, with sentiment very much against companies with small market
capitalisations, the board is of the view that it may be some time before
shareholders can achieve full value. Your board has therefore decided to
realise the value of the group's assets and to return the funds raised to
shareholders in a tax efficient manner. It would not be prudent at this stage
to make a forecast, but it is expected that the amount returned will be
considerably in excess of the level at which the company's shares have
recently traded. No decisions have been taken yet regarding the time period
over which this new strategy will be pursued, except that it will be
implemented in a fashion designed to obtain the greatest value for
shareholders. When the board is able to be more specific about the company's
proposals, further information will be made available to shareholders.
As shareholders will appreciate, the results achieved over the last four years
were the product of a sound strategy devised and implemented by the executive
directors, Tom King and Carl Fry, who were well supported by the group's other
senior employees and staff. We owe the increase in shareholder value to them
and, accordingly, I and the other non-executive directors would like to record
our considerable appreciation to them for the success achieved.
I will be standing down as Chairman prior to the annual general meeting. I am
not in agreement with the new strategy and it is, therefore, fitting that the
board should elect a new Chairman. I will resign from the board at the year
end.
RONALD G HOOKER CBE FREng
Chairman
OPERATING REVIEW
The Chairman's Statement sets out the company's new strategy, which is to
realise the value of the group's assets and return the proceeds to
shareholders. As the Chairman has explained, the board decided on this new
direction because of market sentiment in companies with small market
capitalisations along with the significant discount to net asset value per
share at which the company's shares have traded.
Our strategy until now has been highly focused on achieving shareholder value
through growth in net asset value per share and our policies in terms of
property activities and financial structuring have closely reflected this
objective. The success of our strategy is demonstrated in the 335% growth over
the last four years in net asset value per share, which equates to a compound
annual return of 35%. In the last financial year alone there was an increase
in net asset value per share of 45%.
Whilst the board's decision reflects market sentiment, from a personal view I
am disappointed that it has not allowed me to continue to pursue my ambition
of taking the company onto a larger stage. However, the task now is to realise
the value of the company's assets in a controlled fashion to the benefit of
all shareholders and this task is already underway.
I will be stepping down as Managing Director from 30 November 1999, but will
remain with the company as a consultant and non-executive director to assist
in implementing the new strategy.
THOMAS P KING
Managing Director
FINANCIAL REVIEW
As I mentioned in my review last year, the group's principal financial
objective was to increase consistently net asset value per share. I also said
that the purpose of the group's financial policies was to set a framework
within which such growth could be achieved with an acceptable level of risk.
The financial policies adopted over the last four years have been particularly
successful. The strong emphasis on cash flow enabled us to look forward with
confidence that the group's base business was sound and to concentrate on new
projects. The high level of gearing provided the funds to invest in a broad
range of high profit potential investments that have delivered considerable
additional value to the group. At the same time by fixing the interest rates
applying to most of the group's borrowings risk was contained to a modest
level.
The revolving credit facility arranged with Bank of Scotland has been of
considerable benefit to the group. It enabled property transactions to
proceed very quickly without the need for fresh loan documentation for each
transaction. It also gave property vendors considerable confidence of our
ability to proceed with transactions.
As planned, the company's 6% Convertible Redeemable Unsecured Loan Stock was
redeemed on 30 April 1999. Further repurchases of the company's ordinary
shares were made during the year with a total of 480,000 shares repurchased at
an average price of 84 pence per share. This brings the number of shares
repurchased over the last two years to 717,481 shares at an average price of
83 pence per share, which was considerably below net asset value per share
over the same period.
This year the notes to the accounts contain the additional disclosures
required by FRS 13 regarding the group's financial assets and liabilities. In
light of the group's new strategy, perhaps the item of most interest to
shareholders relates to the difference between the book values and fair values
of the financial assets and liabilities. This sum amounts to #1,268,000,
which is equivalent to 15 pence per share. Net of this amount the group's net
asset value per share would reduce to 172 pence per share. However, it should
be noted that since 30 June 1999, interest rates of all maturities have
increased and at 28 September 1999 the difference between the book values and
fair values of the group's financial assets and liabilities had fallen to
#684,000 or 8 pence per share.
At the year end the group's investment properties were valued by the directors
leading to a revaluation surplus of #3,183,000.
CARL D FRY FCA
Finance Director
Consolidated Profit and Loss Account
for the year ended 30 June
1999 1998
#000 #000
Turnover 6,395 11,348
Cost of sales (2,687) (6,119)
Gross profit 3,708 5,229
Administrative expenses - including exceptional
cost of #759,000 in 1999 (2,099) (1,363)
Operating profit 1,609 3,866
Profit on disposal of investment properties 2,345 873
Profit on ordinary activities before interest 3,954 4,739
Net interest payable (2,214) (2,936)
Profit on ordinary activities before taxation 1,740 1,803
Tax on profit on ordinary activities 219 -
Profit for the financial year 1,959 1,803
Dividends (262) -
Retained profit for the financial year #1,697 #1,803
Earnings per share 22.0p 19.5p
Diluted earnings per share 20.1p 17.9p
Dividends per share 3.0p -
Consolidated Balance Sheet
at 30 June
1999 1998
#000 #000
Fixed assets
Investment properties 36,745 27,733
Other tangible fixed assets 34 47
36,779 27,780
Current assets
Stocks 4,297 10,339
Debtors 2,200 1,884
Cash at bank and in hand 767 892
7,264 13,115
Creditors: amounts falling due within
one year including convertible debt (4,670) (6,408)
Net current assets 2,594 6,707
Total assets less current liabilities 39,373 34,487
Creditors: amounts falling due after more
than one year including convertible debt (23,108) (22,479)
Provisions for liabilities and charges _ (219)
Net assets #16,265 #11,789
Capital and reserves
Called up share capital 868 916
Share premium account 2,541 2,541
Revaluation reserve 4,510 1,181
Special reserve 1,386 1,386
Other reserve 1,562 1,562
Capital redemption reserve 72 24
Profit and loss account 5,326 4,179
Total equity shareholders' funds #16,265 #11,789
Net asset value per share 187p 129p
Statement of Total Recognised Gains and Losses
for the year ended 30 June
1999 1998
#000 #000
Profit for the financial year 1,959 1,803
Unrealised surplus on revaluation of properties 3,183 7
Total recognised gains and losses for the year #5,142 #1,810
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 June
1999 1998
#000 #000
Total recognised gains and losses for the year 5,142 1,810
Issue of new ordinary shares _ 1
Repurchase of ordinary shares (404) (189)
Negative goodwill on acquisition _ 516
Dividends proposed (262) _
Net addition to shareholders' funds 4,476 2,138
Opening total equity shareholders' funds 11,789 9,651
Closing total equity shareholders' funds #16,265 #11,789
Historical Cost Profits and Losses
for the year ended 30 June
1999 1998
#000 #000
Reported profit on ordinary activities before taxation 1,740 1,803
Realisation of property revaluation (deficit)
surplus of previous years (146) 246
Historical cost profit on ordinary
activities before taxation 1,594 2,049
Historical cost retained profit for the year #1,551 #2,049
Consolidated Cash Flow Statement
for the year ended 30 June
1999 1998
#000 #000
Net cash inflow from operating activities 4,833 7,777
Returns on investments and servicing of finance
Interest received 56 55
Interest paid (2,261) (3,221)
Net cash outflow from returns on
investments and servicing of finance (2,205) (3,166)
Taxation
UK corporation tax refund 274 -
Capital expenditure and financial investment
Purchase of investment properties (7,235) (1,070)
Purchase of plant, vehicles and equipment (12) (23)
Sale of investment properties 7,377 7,957
Sale of plant, vehicles and equipment 2 32
Net cash inflow from capital expenditure
and financial investment 132 6,896
Acquisitions and disposals
Cash at bank acquired on purchase of subsidiary - 66
Cash balance forgone net of sale proceeds
on disposal of subsidiary - (74)
Net cash outflow from acquisitions and disposals - (8)
Net cash inflow before financing 3,034 11,499
Financing
Issue of share capital for cash consideration - 1
Purchase of own shares (404) (189)
Repayment of loans (330) (10,367)
Repurchase of 6% convertible redeemable
unsecured loan stock (2,425) (407)
Net cash outflow from financing (3,159) (10,962)
(Decrease) increase in cash #(125) #537
NOTE
The financial information set out in this announcement does not constitute the
company's statutory accounts for the years ended 30 June 1999 or 1998, but is
derived from those accounts. Statutory accounts for the year ended 30 June
1998 have been delivered to the Registrar of Companies and those for the year
ended 30 June 1999 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
The announcement is prepared on the basis of the accounting policies as stated
in the previous year's accounts. There have been no changes to these
accounting policies.
The announcement was approved by the directors on 18 October 1999.
END
FR ALLEIISLTLAA
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