Final Results

Pochin's PLC

Preliminary Results for the year ending 31 May 2012

Pochin's PLC ("Pochin" or "the group") the construction and property group announces its preliminary results for the year ending 31 May 2012.

Chairman's statement

The group result for the year ended 31 May 2012 shows a loss of £3.3m after tax (2011: £3.4m), of which £2.0m (2011: £4.4m) arose from discontinued activities. There was an operating profit on continuing activities of £1.7m (2011: £4.5m) before adverse property revaluations and impairments of investments and inventories, which in total amounted to £2.9m. The directors do not recommend payment of a final dividend.

In my statement a year ago, I referred to two key steps which were prerequisites for restoring the group's fortunes. First, there was the implementation of the board's decision to dispose of the concrete pumping division. This took longer than the board intended, and the division remained part of the group for the whole of the year under review but, as has been separately reported, the disposal was finally achieved with the sale of Pochin Concrete Pumping Limited to Alcedo Limited, announced on 31 July 2012. The business continues under new ownership and it is appropriate to thank the 108 employees, transferred with it, for their forbearance over a long period of uncertainty.

The second key step was the settling of the group's liabilities arising out of the Liverpool office joint ventures. This was achieved in September 2011. There has been a need for impairments in other joint venture investments in the year to 31 May 2012, but the settlement of the Liverpool exposure represented an important turning point for the group.

Looking forward, the group now consists of two core divisions, namely construction and property development and investment.

The group's construction activity, in contrast to that of the concrete pumping business, stems mainly from the private sector. It is to be hoped that recent Government announcements aimed at stimulating the construction industry, within the confines of restricted public expenditure, will have some effect in re-invigorating the market in which the construction business principally operates. It seems inevitable that the group's property development and investment division will have to endure a further period of subdued market conditions. The combination of reduced demand for commercial property, notably in the retail sector, together with the tightened criteria now applied by banks to property lending, has taken its well-publicised toll both on values and on development activity in the regional property market.

In the context of the above, each of the two remaining divisions has performed creditably during the year. Construction revenue increased during the year, and the current order book suggests a maintained level of activity. While the majority of its contracts are in North West England, work for established regular clients has taken the division further afield, including to London and Edinburgh. In uncertain times, the group's reputation for quality and service continues to be of the greatest importance in winning new business.

In property, the division's rental income, which underpins the group, has been successfully maintained. The group's investment portfolio is well managed and there is a wide spread of tenants from whom the core income is derived. Development activity, however, remains at a low level given the necessary resistance to speculative risk. Nonetheless, some modest schemes in both the office and retail sectors have been successfully undertaken in the year. It remains difficult to achieve the division's programme of planned property disposals given the lack of liquidity in the regional market, and this represents an impediment to the profitable re-investment of funds which will be important to the future success of the division.

It is encouraging to be in a position to report that new and extended group banking facilities have been agreed with The Royal Bank of Scotland plc, principal bankers to the group over many years. This confirmed ongoing support is reassuring in a sector where such commitment is not readily forthcoming. These new facilities should enable the group to look forward with renewed confidence to a period of stability following the steps taken regarding concrete pumping and joint ventures described above.

There is an increasing appreciation that urgent steps need to be taken by the Government to stimulate construction activity, particularly in the country's regions. It is to be hoped that new Government initiatives, designed to encourage demand and to increase the availability of construction finance, will start to have the much needed beneficial effects. These are difficult times for a construction and property business, and the group has had to take steps which have been painful for employees and shareholders alike.

Given the ongoing strong client relationships together with the renewed banking arrangements, and provided that there is no further decline in the market in which it operates, the group looks forward to being able to repay the loyalty of both employees and shareholders, which is greatly appreciated.

Richard Fildes

Chairman

28 September 2012

Enquiries:

Pochin's PLC

John Moss, Chief Executive 01606 833 333

John Edwards, Group Finance Director 01606 833 333

Charles Stanley Securities

Russell Cook/Carl Holmes 020 7149 6476

Business review

Group overview

The UK construction and property markets have again failed to recover during the year. The Office of National Statistics shows a continued slowdown, with a 40% reduction in public sector non-house building work and a flat private sector.

Against the backdrop of these difficult market conditions, the group has been working towards a business model comprising two core trading divisions that can operate with a degree of autonomy, whilst being able to deliver an integrated property development and construction product where appropriate. To this end, the group has continued to reduce exposure to joint venture liabilities and dispose of non-core activities. Following protracted negotiations with several interested parties, Pochin Concrete Pumping Limited was sold on 31 July 2012 to Alcedo Limited. In addition, since the year end, the contracting activities of the residential division have now been integrated within the construction division.

With only a limited number of joint venture commitments remaining, the group has achieved its goal of streamlining the business into the two core operating divisions of construction and property.

The strategy to maintain core capabilities and skills through the prolonged downturn leaves the two operating divisions well placed to grow profitably as the economy recovers. Pochin's has established a first class reputation in both the private and public sectors and offers added value to all of its clients and stakeholders through a focus on sustainable practices, timely completion and quality of service. To maintain margins, relationships with these reliable, well funded key clients are being used to expand geographically, in a controlled manner. The existing supply chain is being utilised for much of this geographical expansion, thereby maintaining the standards of delivery for which Pochin's is held in high regard.

Despite the continued downturn in the wider construction market, group revenues improved to £71.6m (2011: £59.3m) from continuing activities. Activity in the property division was mainly restricted to the sale of surplus assets, the pace of which was heavily influenced by the general market. Property (including residential) turnover was £4.9m (2011: £17.7m). Turnover in construction was the biggest contributor to the recovery in group activity delivering revenues of £66.7m (2011: £41.6m), a year on year growth of 60%. This justifies the decision made last year, in the face of a major drop in activity, to retain the group's core capabilities in property and construction with staff numbers at the year end maintained at 266 (2011: 262).

The increase in group activity, against the national trend, highlights the value of the Pochin brand in securing repeat work from existing clients in difficult times. The principles and values of the group have been upheld and these have ensured continued support from clients, professionals and the supply chain. In all cases, these values and principles can only be upheld through the actions of our employees and they remain the key asset of the business. The group recognises the contribution made by its employees through these difficult trading conditions and looks forward to providing them with increased opportunities as the market recovers.

There was an underlying operating profit before tax from continuing activities of £1.7m (2011: £4.5m), which reduces to a loss before tax of £1.2m (2011: £0.7m profit) after investment and property impairments mainly associated with the anticipated exit from the Keele Park Developments Limited joint venture.

The delays encountered in disposing of the concrete pumping business resulted in an additional full year of trading losses and further costs of disposal. Classified as a "discontinued activity", the charge to the group before tax was £2.0m (2011: £4.8m).

Divisional review

Construction

The division started the year slowly, but as previously secured contracts finally commenced, turnover increased throughout the year to £66.7m. The profit generated of £0.4m (2011: £nil) although modest, is considered a success in these difficult conditions. It is through the use of tried and tested suppliers and active risk management that the division has delivered this positive result. However, the business is aware that the supply chain has been under strain and there have been a number of significant subcontractor failures.

During the year, revenues continued to shift towards the private sector (84%) as public sector spending reduced in all areas other than major infrastructure. Maintaining good client relationships and effective key account management, supported by delivery of quality projects on time and to budget, has allowed the division to increase revenue in a shrinking market.

The divisional strategy to maintain a presence in all sectors has stood the business in good stead. A balanced portfolio has been maintained that will provide a good platform for growth, whichever sectors recover soonest.

As a result of the controlled expansion outside the North West, the business secured a £27m student accommodation project in Edinburgh, a £12m scheme in Hyde Park, London and smaller contracts in Leeds and Nottingham. Several more opportunities in both Scotland and the South East can now be delivered using existing teams.

Revenue from the special projects team has continued to grow, reaching £3.9m for the year (2011: £3.5m). Whilst small in terms of overall revenue, it enables the division to offer a range of services to clients large and small.

The division's continued aim is to deliver exceptional projects for its clients that reflect the group's core values. Despite the economic pressures, a high performing team has been maintained across all disciplines and this has been recognised in its achievements, which include:

·; a RoSPA Gold Award for Safety;

·; completion of two contracts to "exceptional" BREEAM standards;

·; completion of six contracts to "very good" BREEAM standards;

·; placed in the top 10% considerate contractors in the country; and

·; a Blackpool Civic Trust Community Award.

Property (including Residential)

The commercial property and investment markets in the UK continue to show a reduction year on year in both activity and capital values. Market reports indicate investment activity for the first half of 2012 was £14.9bn, down from £17.3bn for the same period a year ago. In view of this economic background, the strategy to limit developments to only those where an end user has been secured has been maintained. No speculative development is being undertaken either by the division or in joint venture, thereby reducing the risk and demands on the group's cash reserves.

In the year, the division commenced an office development for TATA Chemicals Europe Limited in Northwich, Cheshire and progressed interest in a number of other schemes, including several small retail opportunities for delivery in the coming financial year.

The division has continued its programme of asset disposal for the purpose of debt reduction, but only where a fair market value can be achieved. During the year, further disposals were concluded at Ellesmere, Shropshire to Bloor Homes Limited and McCarthy & Stone Retirement Lifestyles Limited. Also, two small investment property sales were secured in Middlewich. Progress towards creating future investment and development opportunities at Midpoint 18 in Middlewich received a boost in the year, following nomination for a grant from the Regional Growth Fund.

The investment portfolio continues to perform well maintaining occupancy levels at 96% at the year end. Income was also maintained through good property management and a high level of tenant retention. Given the current market conditions, these levels will be difficult to maintain.

Following the decision to cease all residential development activity, the house building capability retained within the group was transferred to the construction division after the year end and will only carry out future work as a house building contractor.

Sales of existing housing stock were sufficient to repay the outstanding residential development loans in full. This included all remaining units at Burslem, Staffordshire and stock at Cockshutt, Shropshire.

Small parcels of land at Anglesey and Winsford were also sold.

Concrete Pumping

Following the decision to dispose of the concrete pumping business, as reported last year, it was classified as a "discontinued activity". It has continued to be reported in this way, due to the protracted sale process.

Throughout this period, the division recorded a trading loss of £1.3m (2011: £1.2m). Despite further efforts to reduce the cost base and improve efficiencies, public infrastructure spending failed to recover and further losses were unavoidable. This reinforced the group's decision to progress with the disposal of the business, which was completed on 31 July 2012.

*Adjustments for impairments and restructuring

Joint ventures and associates

The group made progress with its policy of withdrawing from joint venture activity thereby limiting its financial exposure. As a consequence, contributions to operating profit from these ventures reduced significantly during the year.

There was a successful outcome to the asset sale process at Hawarden Business Park, where all financial obligations were fully settled. There remains future development opportunities for the group at this location.

The group also acquired full control of its associate UKLP (BrynCegin) Limited during the year, which will allow it to take full advantage of development opportunities at Parc Bryn Cegin, Bangor, North Wales.

The group's investment holding in Manchester Science Park Limited and 50% shareholding in Manchester Technopark Limited were also sold successfully during the year.

Despite near full occupancy of properties at Keele Park, open market values have fallen and additional financial support has been required to meet capital repayments, which has been a drain on group funds. Action is being taken to crystallise the financial burden of this scheme through negotiation with our joint venture partner and associated funder. The cost of this action has been reflected in the accounts of the group, amounting to £1.2m.

Joint ventures at Exchange Flags (Horton House and Walker House) in Liverpool, in partnership with UK Land & Property Limited, have been the most challenging schemes. However, it is pleasing to report that the group has settled its guarantee obligations, at a cost of £5m, and is working with its partner and associated funder towards the disposal of both properties and complete withdrawal from these schemes.

Strategically, the group will continue the shift towards investment in opportunities developed and managed by its own in-house property team and away from a reliance on joint venture partners. Consequently, no new joint venture investment activity has been made in the period.

Earnings per share and dividend

Basic and diluted earnings per share was -16.0p (2011: -16.9p). Basic and diluted earnings per share for continuing activities was -6.3p (2011: 4.6p).

No final dividend is proposed resulting in a nil dividend for the year (2011: nil).

Balance sheet

The further losses incurred caused by the delay in disposing of the concrete pumping business, provisions for settlement of remaining joint venture obligations and IAS19 pension adjustments were the major contributing factors to a fall in net asset value of the group. Net asset value reduced to £19.2m (2011: £23.8m). This is equivalent to 92p per share (2011: 114p).

The total value of investment properties on the balance sheet is now £32.2m (2011: £33.0m). There were two small property disposals and relatively minor adjustments to values to reflect market yields, including the group's exposure to the Travelodge company voluntary arrangement after the year end.

Investment in joint ventures, associates and assets available for sale reduced by £2.7m to £3.6m due to the transfer of value in Parc Bryn Cegin to inventories following acquisition of the remaining shares from UKLP (Wales) Limited, the write down of investment value in Keele Park Developments Limited pending withdrawal from the venture and the disposal of holdings in Manchester Science Park Limited and Manchester Technopark Limited.

Inventories increased to £19.3m (2011: £17.8m). This was due to the recovery in construction activity during the year and partly offset by the continued disposal of remaining housing stock.

The liability for defined benefit pension obligations, reportable under IAS19, increased by £2.0m to £3.0m. This adverse movement resulted from the depressed corporate bond yields used to measure the scheme liabilities under IFRS.

Cash flow and borrowings

Cash generation was restricted by a continuation of difficult market conditions and ongoing losses from concrete pumping. However, underlying cash flow from operations and receipts from further disposals of non-income producing assets facilitated repayment of £4.1m of outstanding loans. A new loan was arranged to fund specific development activity and this was drawn down by £0.9m at the year end. The group also paid £5.0m from existing cash deposits in settlement of onerous joint venture guarantee liabilities.

At 31 May 2012 total group borrowings were £28.4m (2011: £29.3m) and cash held on deposit was £1.8m (2011: £6.3m), resulting in a net debt position of £26.6m (2011: £23.0m).

Operating activities (continuing) 0.5 5.9

Operating activities (discontinued) (1.2) (2.1)

Movement in net borrowings (3.6) 3.9

Going concern

As previously reported, existing borrowing facilities of the group with its principal banker, The Royal Bank of Scotland plc (RBS), were extended pending disposal of the concrete pumping business. This entity was sold successfully on 31 July 2012 and based on a revised business plan for the restructured group, new facilities have been agreed with RBS to October 2014, with covenants accordingly re-set. Renewal and term extension of the RBS facilities provides the group with funding security and ensures that it is adequately funded to meet its forecasted obligations and cash requirements for the facility term.

The new facilities comprise an investment loan of £17.9m, an asset disposal loan of £5.4m and an overdraft/multi-option facility of £4.1m. These facilities are secured against assets in the business.

Treasury and financing risk

The group continues to fund its operations through the use of cash, loans and various liquid resources such as debtors and trade creditors. Treasury management is performed by the finance department through implementation of the group's treasury policy, which is the responsibility of the finance committee. This remit includes development of relationships with principal funders, management of interest rates and liquidity risk. The finance committee is responsible to the main board.

The group has no fixed interest rate borrowings and reviews the need to hedge against interest rate movements continually. There are currently no swap arrangements fixing LIBOR exposure. This allows the group to benefit across all of its facilities from the continued low floating rate of LIBOR, which in part, compensates for the higher commercial rates being charged by the banks.

Despite the absence of specialist financial instruments, the group continues to operate an effective interest rate hedging policy, which states that the sole purpose of any financial instrument employed by the group to fix interest rates is to protect the group from fluctuations in interest rates charged on its borrowings. As a consequence, any changes in the fair value of such hedging instruments when they arise are recognised directly in equity and not, unless deemed to be ineffective, through the income statement. The only remaining hedge exposure during the year was the group's share of the interest rate hedge on borrowings relating to the joint venture of Keele Park Developments Limited. However, as the hedge has been effectively discontinued it is no longer recognised.

 There remains both long term repayment loans and short to medium term development borrowings relating to joint venture entities, to which the group has exposure. As a consequence, the group regularly reviews the risk of exposure to interest rate movements with its partners and, where appropriate, hedges against that risk on a project by project basis.

The group continues to have minimal exposure to foreign currency exchange risk and accordingly does not require a policy to hedge such exposure.

Pensions

During the year the closed defined benefit (DB) pension scheme underwent a full triennial actuarial valuation, which resulted in a deficit of £3.3m. A revised recovery plan has been agreed with the trustees and is awaiting final approval from the Pensions Regulator. Annual contributions to the new recovery plan will be consistent with those currently made under the existing plan, albeit over a greater number of years.

As reported last year and following agreement with the DB scheme trustees, the pension liability relating to the concrete pumping business was apportioned across the remaining employers within the scheme. This was done to facilitate the disposal of that business by preventing the crystallisation of a debt arising under section 75 of the Pensions Act 1995.

The DB pension scheme obligations are shown in the group balance sheet and movement in the period reflected in the income statement and statement of comprehensive income. The actuarial deficit, calculated in accordance with IAS19, is reported as £3.0m (2011: £1.0m). Unlike the triennial valuation, IAS19 requires the scheme liabilities to be valued on the basis of corporate bond yields as at 31 May 2012 with the scheme assets being taken at market value. At that time, corporate bond yields were at an historic low, which has resulted in a significant increase in the calculated liabilities of the scheme under IAS19 reporting rules and a subsequent adverse movement in the retirement benefit obligation reported in the balance sheet.

Total contributions paid in the period to the DB scheme recovery plan were £0.1m (2011: £0.1m). Payments to the defined contribution scheme for existing employees were £0.4m (2011: £0.4m).

Financial reporting

The consolidated financial statements have been produced in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. There have been no changes to the IFRS requirements this year that have a material impact on the group results.

John Moss John Edwards

Chief Executive Group Finance Director

28 September 2012

Consolidated income statement

For the year ended 31 May 2012

Consolidated statement of comprehensive income

For the year ended 31 May 2012

Consolidated statement of changes in equity

For the year ended 31 May 2012

Consolidated balance sheet

As at 31 May 2012

Consolidated cash flow statement

For the year ended 31 May 2012

Notes to the preliminary results

1 Basis of preparation

The preliminary announcement is prepared in accordance with International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the 2011 annual report. They are also consistent with those in the full financial statements which have yet to be published.

The Board of Directors approved the preliminary announcement on 27 September 2012.

The financial information set out in this preliminary announcement does not constitute the group's financial statements for the years ended 31 May 2012 and 2011. The financial information for the year ended 31 May 2011 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The statutory annual accounts for the year ended 31 May 2012, upon which an unqualified audit opinion has been given and which did not contain a statement under sections 498 (2) and 498 (3) of the Companies Act 2006, will be sent to the Registrar of Companies following the Company's annual general meeting.

Going concern

The directors have taken steps during the year to settle the group's exposure to various significant parent company guarantee arrangements with joint venture parties.

Since the year end, and following the disposal of Pochin Concrete Pumping Limited, the group successfully renegotiated its borrowing facilities with RBS to October 2014.

As part of the refinancing process, the directors prepared a business plan together with forecasts to May 2015. These forecasts take account of reasonable changes in trading performance, the satisfaction of remaining parent company guarantee arrangements and other potential liabilities and show that the group should be able to operate within the level of its revised facilities.

On this basis and after making enquires, the directors have a reasonable expectation that the group and company has adequate resources to continue in operational existence for the foreseeable future, develop its property portfolio and advance its agreed business plan. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2 Segmental information

Operating segments have been determined based on the reports regularly reviewed by the group board and which are used to make strategic and operational decisions. The group board, excluding non-executive directors, is considered to be the CODM and reviews the segments based on the nature of the services provided.

During the year, the group was reorganised into two operating business segments based on the different services provided by each division: Construction and Property development and investment. The residential segment has been transferred to the property division during the year and comparative figures have been restated. The concrete pumping segment was classified as discontinued during the prior year.

As operations are carried out entirely within the UK, there is no further consideration of information on geographical areas in determining the groups operating segments. The measurement policies used for segment reporting reflect those used for internal reporting and for the group's financial statements. Inter-segmental pricing is done on an arms length open market basis.

Within the construction segment, external sales of £28,360,000 (43%) arise from customer A £6,900,000 (10%), customer B £7,800,000 (12%) and customer C £13,660,000 (21%) that individually account for more than 10 per cent of the entity's revenues. These three are also considered to be major customers.

Within the construction segment in 2011, external sales of £18,250,000 (44%) arise from customer A £4,750,000 (11%), customer B £4,900,000 (12%) and customer C £8,600,000 (21%) that individually account for more than 10 per cent of the entity's revenues.

3 Disposal group classified as held for sale

Pochin Concrete Pumping Limited has been treated as a discontinued operation as the business was sold as a going concern on 31 July 2012. The results of this operation are summarised below (with all amounts attributable to owners of the parent):

Included within the loss on remeasurement and cost of disposal are impairments amounting to £671,000 (2011: £2,383,000)

4 Earnings per share

The calculation of earnings per share (basic and diluted) is based on group loss after taxation and non-controlling interest of £3,262,000 (2011: £3,439,000) and the 20,800,000 ordinary shares of 25p in issue at 31 May 2012 and 31 May 2011. The number of shares used in the calculation has been reduced at 31 May 2012 for the 440,500 (2011: 440,500) shares held in the Employee Share Trust. The assumed conversion of dilutive options has no impact on the number of shares and so diluted earnings per share is equal to basic earnings per share.

Dividends paid in the year

No dividends were paid during the year (2011: nil).

The Directors are not proposing a final dividend in respect of the financial year ending 31 May 2012.

5 Post balance sheet event

Pochin Concrete Pumping Limited was sold as a going concern on 31 July 2012 for the sum of £1. It will continue to operate from Pochin group properties as a tenant for which it has entered into commercial lease arrangements that include a rent free period of 2 years. This cost has been taken into account when determining the fair value less cost to sell for the year ended 31 May 2012.

The fair value of the assets and liabilities at the date of disposal are not materially different from those detailed, as at 31 May 2012.

Following announcement in previous years that the concrete pumping business was no longer part of the group strategy, the continual requirement to re-invest in the pump fleet combined with its ongoing losses reinforced the decision to dispose of the business. To facilitate the sale as a going concern, a series of pre-sale cost saving measures were undertaken and the group agreed to retain exposure to existing lease payment guarantees, which reduce to nil by 2015.

6 Annual general meeting

The Annual General Meeting will be held at Mere Golf and County Club, Knutsford, Cheshire at 10.30 a.m. on Thursday 1 November 2012. The full annual report will be posted to shareholders on or before 10 October 2012. Copies will be available from the Company's website (www.pochins.plc.uk).