Final Results and Notice of A

30th Jun 2008 15:12

Pan Pacific Aggregates PLC

Final Results for year ended 31 December 2007 and Notice of AGM

LONDON, 30 June 2008: Pan Pacific Aggregates PLC ("Pan Pacific" or the "Company"), announces its audited results for the year ended 31 December 2007.

Chief Executive Officer's Report

This is a year which has seen progress for the company especially during the latter part of 2007. Frustration was probably the other watch word during this year which has been reflected in our share price which has drifted due to the lack of news from the company on the permitting front.

Progress had been made in the early part of the year by ensuring that all the permitting studies and data completed was ready for submission in May; later on in this report I will reflect on why we decided not to make that submission. 

Your board also carried out further restructuring of the company to cut costs and a refocusing of our objectives throughout the different stages of the year. 

Our frustrations began in May when there was uncertainty regarding the format and the participants for the mandatory consultation phase for the forthcoming Pan Pacific permit submission. Furthermore, our terms of reference which define the extent of our submission were extended to cover additional environmental impacts including limestone Karsts that had not been previously notified. The consequence being that even if we had submitted the permit application during that period, no progress would have been made in the determination of this submission until the terms of reference and consultation format had been resolved. The Board took the decision not to submit a permit application in order to preserve our cash. The reason being that we would have had to retain the consultants for some 2-3 years to liaise with the Provincial and Federal Governments on details of the company's submission during an extended consultation period. Therefore during this extended period we would have had to have spent considerable money without any guarantee of success; so we were of the opinion that not to submit at that stage was in the best interests of the company and its shareholders.

Your board then undertook a strategic review to determine the best options to take the company forward of which two options were pursued.

1) To discuss the matter of compensation with the Federal and Provincial Governments given the extended time before submission.

2) To seek opportunities to acquire operational assets. 

The executive pursued both these options simultaneously. 

On the compensation issue detailed discussions were undertaken with Government seeking compensation to recover all the costs for data acquisition that had been spent on the project to date. These discussions did meet with a positive response; however, the identification of possible acquisition targets refocused the company and the claim for compensation was not followed further. 

The company's decision to focus on option 2 was based on the fact that the company already had permit approval for small producer extraction at its existing operations. Therefore option 2 was considered to be the company's preferred strategy, whereby a search for suitable acquisition targets to complement the company's focus of generating returns from its permitted area was conducted. The search identified three potential acquisitions. After initial discussions the executive decided to pursue the Pumptown Aggregates option, which was owned by the CNI Group; because the latter option is permitted, operational and synergistic with the Pan Pacific existing land holdings.

The details of this proposed acquisition were set out in the circular sent to shareholders on 2 May 2008. The sale and purchase agreement has now been agreed between the parties and the shareholders approved the transaction on the 27 May 2008. The directors have estimated that the potential acquisition will provide the company with immediate cash flow and potential forecast earnings of up to $13 million and a combined asset base in the order of $15 million in the first year's operations, which will be generated in part through the company's existing operations but also through the opportunity afforded to the Group by improved utilization of the enlarged group's assets. In addition this acquisition includes sufficient items of mobile plant and processing machinery to allow, not only a fully operational output at the Pumptown quarry, but also a commencement of Pan Pacific operations in their permitted areas within the Sechelt land claims.

The acquisition of Pumptown Quarry Incorporated and CNI Equipment Ltd was completed on 6 June 2008 on the terms set out in the shareholders circular dated 2 May 2008. We are now integrating these businesses into Pan Pacific and we are increasing production and sales from the Pumptown quarry with immediate effect.

During April 2007 we negotiated a further loan draw down facility from RAB Capital PLC totaling some £4 million. Only the first stage of this loan facility has been drawn down amounting to £1.5 million. The current cash position at the end of the year being that there was approximately £740,000 in the bank and our monthly cash costs are now below $50,000, which has been achieved through cost cutting exercises during the reported and prior financial periods. The directors have considered the cash position of the group and have concluded that they have sufficient cash reserves to continue running the company for a period of not less than 12 months from the date of this report, before seeking to draw down any further monies from our debt facility. This is based on the continuing expectation that the group's loan note holders will not request payment in cash for the capitalized interest on the loan notes. We continue to discuss the terms of the final draw downs with the loan note holders. The original purpose of the loans was for the submission of large producer permits and other operational requirements for the commencement of production at Sechelt.

The building materials sector has seen further corporate activity and further consolidation with the acquisition of Hanson PLC by Heidelberg with other smaller acquisitions being completed during the year. We have also seen Ennstone begin trading on the FTSE main board, while Pan Pacific is the only quarrying operation on the AIM market. The market conditions in the Vancouver and surrounding markets are still buoyant due to the 2010 Winter Olympics and the infrastructure work that is now being carried out within the region. In fact growth rates for the local economy are forecast at 10% per annum. The board still believes that the building materials sector is the right sector for investment and any operational quarrying group will still flourish on AIM.

Looking forward to 2008, your board believes that this will be a critical year for Pan Pacific with the acquisition having been completed and potential further acquisitions that could take place later in 2008 or at the beginning of 2009. Your board also believes that this year will be the period when Pan Pacific commences quarrying operations and producing positive cash flow. It is interesting to note, that the completion of the acquisition, allows the company to commence quarrying operations on the original timetable set out in our 2005 admission document. 

As the company will now change its status from a development company to an operational quarrying business I have decided to stand down as your Chief Executive Officer but remain as an Executive Director of the company. Don Nicholson your Chairman will become the Interim Chief Executive Officer until we have recruited a suitably experienced local Chief Executive Officer to run the operational business.

William Voaden
Chief Executive Officer

Commenting on the results, William Voaden said: 

"We are delighted that having refocused the Company's activities during last year, we were able to complete an acquisition with associated production during the first half of 2008. This acquisition is the first of a number we plan for the expanded group, which will provide substantial cashflow for the continued growth of the Pan Pacific Group. 

This year will be a critical year for the future of Pan Pacific and we believe that it will provide the platform for future growth and reward to our shareholders"

The audited Accounts and Reports have today been posted to shareholders. Additional copies of the Annual Report and Accounts may be requested directly from the Company and are available on the Company's website: www.panagg.com 

The Annual General Meeting of the Company will be held at the Company's registered offices at Hammonds, 7 Devonshire Square, Cutlers Gardens, London EC2N 2HE on 25 July 2008 at 10 am. The Company has also today posted a circular to shareholders giving notice of the AGM, the full text of which is available on the Company's website: www.panagg.com

Enquires:
Pan Pacific Aggregates PLC William Voaden	Tel: 020 7096 9580
Hanson Westhouse Limited Tim Metcalfe / Harry Barraclough	Tel: 020 7601 6100

  CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2007

Note		2007  £'000	2006  £'000
Revenue		21	35
Cost of sales		(15)	(27)
Gross profit		6	8
Administrative expenses		(1,262)	(1,698)
Loss from operations		(1,256)	(1,690)
Financial expense		(1,057)	(49)
Financial income		34	7
Loss  before taxation		(2,279)	(1,732)
Taxation		-	-
Loss for the year		(2,279)	(1,732)
Attributable to:
Equity holders of the parent		(2,278)	(1,731)
Minority interest		(1)	(1)
Loss for the year after taxation		(2,279)	(1,732)
Loss per ordinary share
Basic and diluted (pence)	3	(3.6)	(2.7)
All amounts relate to continuing activities.

  

CONSOLIDATED AND COMPANY STATEMENT OF

RECOGNISED INCOME AND EXPENSES

for the year ended 31 December 2007

		Group 2007  £'000	Group 2006  £'000	Company 2007 £'000	Company 2006 £'000
Exchange differences arising on the translation of foreign subsidiaries		(14)	(7)	-	-
Net expense recognised directly in equity		(14)	(7)	-	-
Loss for the year		(2,279)	(1,732)	(4,546)	(1,039)
Total recognised losses for the year		(2,293)	(1,739)	(4,546)	(1,039)
Attributable to:
Equity holders of the parent		(2,292)	(1,738)	(4,546)	(1,039)
Minority interest		(1)	(1)	-	-
		(2,293)	(1,739)	(4,546)	(1,039)

 CONSOLIDATED BALANCE SHEET 

 at 31 December 2007

		2007	2006
		£'000	£'000
Assets:
Non-current assets
Intangible assets		4,664	4,243
Property, plant and equipment		138	176
Total non-current assets		4,802	4,419
Current assets
Inventories		-	14
Receivables		30	80
Cash and cash equivalents		742	705
Total current assets		772	799
Total assets		5,574	5,218
Liabilities:
Current liabilities
Loan Notes		4,634	2,077
Trade payables		83	272
Other payables		105	103
		4,822	2,452
Non-current liabilities Other payables		-	119
Total liabilities		4,822	2,571
Total net assets		752	2,647
Capital and reserves attributable to equity holders of the company
Called up share capital		64	64
Share premium account		5,342	5,144
Foreign exchange reserve		(321)	(307)
Reserve for options granted		822	562
Reserve for warrants granted		-	198
Retained deficit		(5,156)	(3,015)
		751	2,646
Minority Interest		1	1
Total equity		752	2,647

  COMPANY BALANCE SHEET

 

 at 31 December 2007

		2007	2006
		£'000	£'000
Assets:
Non-current assets Investments and advances		4,691	6,308
Total non current assets		4,691	6,308
Current assets
Receivables		8	37
Cash and cash equivalents		707	688
Total current assets		715	725
Total assets		5,406	7,033
Liabilities:
Current liabilities
Loan Notes		4,634	2,077
Trade Payables		20	56
Total liabilities		4,654	2,133
Total net assets		752	4,900
Capital and reserves attributable to equity holders of the company
Called up share capital		64	64
Share premium account		5,342	5,144
Reserve for options granted		822	562
Reserve for warrants granted		-	198
Retained deficit		(5,476)	(1,068)
Total equity		752	4,900

  

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT

for the year ended 31 December 2008

	Group  2007  £'000	Group  2006  £'000	Company 2007 £'000	Company 2006 £'000
Operating activities
Loss before taxation	(1,256)	(1,690)	(3,522)	(997)
Adjustments for
Depreciation	21	15	-	-
Impairment of investments	-	-	2,672	-
Fair value of options granted	398	562	398	562
	419	577	3,070	562
Cash outflows from operating activities before changes in working capital and provisions	(837)	(1,113)	(452)	(435)
Decrease /(increase) in trade and other receivables	50	8	29	(7)
Decrease in inventories	14	34	-	-
Decrease in trade and other payables	(320)	(68)	(36)	(120)
	(256)	(26)	(7)	(127)
Cash outflows from operating activities	(1,093)	(1,139)	(459)	(562)
Investing activities
Interest received	34	7	33	7
Investment in group companies	-	-	(1,055)	(2,399)
Purchase of property, plant and equipment	(1)	(104)	-	-
Proceeds from sale of property, plant and equipment	18	-	-	-
Purchase of intangible assets	(421)	(1,835)	-	-
Cash flows from investing activities	(370)	(1,932)	(1,022)	(2,392)
Financing activities
Interest paid	-	(49)	-	(49)
Issue of ordinary share capital (net of issue costs)	_-	436	_-	436
Issue of convertible loan notes	1,500	2,000	1,500	2,000
Cash flows from financing activities	1,500	2,387	1,500	2,387
Increase/(decrease) in cash	37	(684)	19	(567)
Cash and equivalents at beginning of the year	705	1,389	688	1,255
Cash and equivalents at end of the year	742	705	707	688

  NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2007

1  Financial information

The announcement set out above does not constitute a full financial statement of the Group's affairs for the year ended 31 December 2007. The consolidated balance sheet at 31 December 2007 and the consolidated income statement, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2007 statutory financial statements.

2 Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied throughout the current period presented, unless otherwise stated. These financial statements, for both Parent company and Group, have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as adopted by the European Union issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRSs. The financial statements have been prepared on the going concern basis for the reasons noted in the Chief Executive Officers Statement of this announcement.

Basis of Consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries ("the group") as if they formed a single entity. Inter-company transactions and balances between Group companies are therefore eliminated in full.

The Company has taken advantage of the exemption allowed under section 230 of the Companies Act 1985 and has not presented its own income statement in these financial statements. The Group loss for the period includes a loss after tax and before dividends paid and payable of £1,874,000 (£1,039,000 in 2006) in respect of the Company.

Business combinations

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the consolidated balance sheet, the acquirer's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

3 Loss per share

Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue for the year is 64,136,765 (2006 - 63,913,066) and the losses for the group for the year are £2,279,426 (2006 - £1,731,935). Due to the losses incurred during the year, a diluted loss per share has not been calculated as the loss is considered anti-dilutive.

4 Related Parties

During the year, the company has paid to its Director William Voaden, consultancy fees, director fees and expense reimbursements in the amount of £70,000 (£80,000 in 2006). Details of directors remuneration are given in the remuneration report on page 7 and 8. The company paid £24,000 (2006 £42,000) to VSA Resources, a company related to William Voaden, company director, for professional services rendered, a further £75,000 (2006 £Nil) was paid to William Voaden in respect of the refinancing of the group. In addition the group paid £10,200 (2006 £Nil) to Iannacone Holdings, a company related to Donald Nicholson, for management services provided.

5 Post balance sheet events

On 29 February 2008, RAB Special Situations (Master) Fund Limited) ('RAB') converted £821,229 of Secured Convertible Loan Notes issued by the Company arising from the capitalisation of interest, resulting in the issue of 32,242,994 new ordinary shares in the Company, at a conversion price of 2.547 pence per share (the 'Conversion Price').

RAB has also been issued with a further 10,208,088 new ordinary shares in satisfaction (at the Conversion Price) of a redemption premium of £260,000 payable on the first redemption or conversion of any of the Loan Notes. In addition, RAB has been issued with warrants over a further 16,121,497 ordinary shares in the Company, which can be exercised at the Conversion Price within the 2 years from the date of issue. RAB now holds a total of 55,557,832 ordinary shares in the Company, or approximately 52.15 % of the enlarged issued share capital.

On the 27 May 2008 the Shareholders of the company passed Four resolutions (the "Resolutions"). By way of summary:

Resolution to increase the nominal amount of the authorised share capital of the Company by the sum of £200,000 from £550,000 (divided into 550,000,000 Existing Ordinary Shares) to £750,000 (divided into 750,000,000 Existing Ordinary Shares). This is to accommodate future issues of Shares under the Fundraising, the Acquisition and under the No. 2 Scheme; 

Resolution to give the Directors authority to allot and grant options to subscribe for Shares up to an aggregate nominal amount of £80,000 in accordance with section 80 of the Companies Act 1985 (the "Act") for the purposes of the Acquisition. 

Resolution to give the Directors authority to allot and grant options to subscribe for Shares for cash in an aggregate nominal amount of £154,151 without having to offer the Shares to existing Shareholders on a pre-emptive basis. This authority is required to allow the Fundraising to be undertaken and options under the No. 2 Scheme to be granted; and

Resolution to provide that the rules of the No.2 Scheme are amended as set out above.

On 6 June 2008 the acquisition of Pumptown Quarry Incorporated and CNI Equipment Ltd was completed on the terms set out in the shareholders circular dated 2 May 2008.

ENDFR UROORWSRNOAR

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