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Half Yearly Report

31st Mar 2010 15:43

RNS Number : 5494J

Wren Extra Care Group PLC

31 March 2010

For release on 31 March 2010

Wren Extra Care Group Plc (WREN.L)

("Wren" or "the Group" or "the Company"),

Interim Results

for the Half Year Ended 31 January 2010

Wren Extra Care Group Plc, the AIM listed provider of retirement living, through a range of Extra Care and other services for the independent elderly, announces interim results for

the half year ended 31 January 2010.

·; Despite the frustrating financial performance, Wren is pleased to emerge from this deep recession with an enhanced land bank and superior business model

·; The Group has progressed discussions with several providers of finance necessary for the Group to roll out its first Extra Care scheme

·; Wren expects to be a position to start construction of its first Extra Care scheme within the next few months

·; Equity draw down facility of up to £3m now in place.

Brian Nathan, Chairman of Wren Extra Care Group Plc, commented:

"Whilst the global economy in general, and the UK's in particular, show few signs of recovery, Wren appears to be holding its own, with over a hundred significant potential purchasers of Warlingham Two (our first Extra Care scheme of 54 units due to complete in 2011)"

"Wren's challenge for the foreseeable future is to continue to identify good sites and hold them under option at minimal cost, to obtain the necessary planning consents for its Extra Care Schemes and to source the necessary finance to acquire and develop such sites. Despite the challenges that 2010 may well present, I look forward with cautious optimism."

Enquiries:

Wren Extra Care Group plc
Paul Treadaway CEO	Tel: 01372 742 244 www.wrenextracare.co.uk

Shore Capital
Pascal Keane	Tel: 020 7408 4090

Peckwater PR
Tarquin Edwards	Tel: 020 7034 4758

WREN EXTRA CARE GROUP PLC

CHAIRMAN'S STATEMENT

HALF YEAR ENDED 31 JANUARY 2010

Trading Results

The global economy continues to suffer from a severe and prolonged recession, but there are signs that this has bottomed out.

Whereas it is frustrating to have to report yet again a loss on minimal turnover, the encouraging news is that Wren has emerged from this deep recession with an enhanced land bank and a superior business model, Wren Extra Care, which has been recognised by financial institutions and others as leading the way forwards in the provision of housing for the elderly. As a result the company changed its name to Wren Extra Care Group Plc during the period, to more accurately reflect the nature of the Wren Business.

It is possible to be slightly more optimistic about the property market and the residential property market in particular with continuing low interest and mortgage rates and the corresponding pickup in demand for property sales, prices and mortgage advances.

The company has also progressed discussions with several potential providers of finance for its schemes. The company has optimism about concluding these discussions but there can be no guarantee at this time that they will be concluded successfully.

Wren has continued to implement cost cutting measures during the period wherever possible and these steps, together with subsequent sales, will assist in reducing bank indebtedness.

For the six months ended 31 January 2010, I am disappointed to report an interim loss of £539,328 (2009: £549,960) on revenues of £Nil (2009: £53,900).

Dividend

The Directors continue to take the prudent view, to preserve cash, that no dividend (2009: Nil) is to be paid until there is a marked and sustained upturn in the property markets and a resultant return to profitability.

Extra Care Marketplace

Wren has completed its repositioning exercise to focus on the Extra Care element of the retirement housing market, and to this end, it has three sites already with planning consent and others sites in the planning process, all for developments of in excess of 50 units each. This move aims to position Wren between the traditional retirement homes and the full care nursing home and will offer residents the best of both models, with independent living, but also the opportunity to receive care based on individual needs. Wren's Extra Care is at the forefront of the second generation of retirement housing.

The Company will then be in a position to provide a wider range of services, including 24/7 staffing, restaurant, lounge/conservatory, bistro, activities and treatment rooms, hair salon, laundry etc, to support the "independent" elderly, so that they may continue to live longer in the comfort and security of their own homes.

Wren expects to be in a position to start construction of the first of its Extra Care Schemes within the next few months.

Capital investment

On 1 December 2009 the Company has secured an equity draw-down facility of up to £3m, which is intended to be utilised as a standby facility to provide for additional working capital and to enable the Group to be able to take advantage of potential opportunities, as and when they arise.

Work-in-Progress & Land Bank

The Company continues to develop its land bank and "virtual land bank" for retirement housing schemes (where the sites are held under minimal cost options until suitable planning consent is gained) a summary of which is set out below:

Units

Planning Consent Granted/Owned 169

Planning expected imminently 94

Built & Completed for Sale (traditional flats &

Sheltered housing apartments) 9

New site being worked up/optioned 258

------

Total 530

===

This progress only serves to underline the effectiveness and determination of Wren's small and dedicated team of staff and quite clearly adds significant but undisclosed value to its business.

Bank Support

On 26 January 2010 the Group's bank confirmed that it intends to continue its banking and financial relationship with Wren and at the time of writing they saw no reason why existing loans cannot be renegotiated and extended, with sufficient facilities being made available to support the company. The banking facilities will be subject to the normal course of business. Current facilities are due for renewal on 30 April 2010.

Going Concern

As set out in the notes to the consolidated Interim Statement, the Group's working capital facility and loan agreements are currently being renegotiated with its bankers. The Directors, after making appropriate enquiries, as described in note 1 to these interim results, believe that the Group, with renegotiated loans and facilities, has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in the preparation of these interim statements.

Outlook and Prospects

Wren itself is holding its own with a slight, albeit to Wren significant, increase in sales of existing units. Further, it has already received very encouraging interest for its new Extra Care Schemes and the first one planned for completion in Surrey in 2011 has received over 100 written enquiries for the 54 units, without any advertising.

Wren's challenge for the foreseeable future, having identified and optioned a number of good sites, for which some already have the requisite planning consent, is to complete the funding packages necessary to acquire and build these schemes. Despite the challenges that 2010 may well hold, I look forward with cautious optimism.

B Nathan - Chairman

31 March 2010

WREN EXTRA CARE GROUP PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 31 January 2010		Six months	Six months	Year
		ended	ended	ended
		31 Jan 2010	31 Jan 2009	31 July 2009
		Unaudited	Unaudited	Audited

	Note	£	£	£

Continuing operations
Revenue		-	53,900	90,740
Cost of sales		-	(70,117)	(70,129)

Gross profit/(loss)		-	(16,217)	(20,611)

Administration expenses		(479,397)	(566,839)	(1,094,215)


Loss from operations		(479,397)	(583,056)	(1,073,604)

Investment income		107,300	114,368	225,974

Finance cost		(167,231)	(81,272)	(228,463)

Loss before tax from continuing operations		(539,328)	(549,960)	(1,076,093)

Income tax		-	-	-

Loss for the period from continuing operations after tax (and total comprehensive income)		(539,328)	(549,960)	(1,076,093)
All attributable to equity holders of the parent

Loss per share

The weighted number of shares in issue		52,422,387	46,976,735	49,672,387

Basic and diluted	2	(1.03)p	(1.17)p	(2.17)p

WREN EXTRA CARE GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEET

		31 Jan 2010	31 Jan 2009	31 July 2009
		Unaudited	Unaudited	Audited
	Note	£	£	£
Non-current assets
Goodwill	3	3,135,203	3,135,203	3,135,203
Investment property	5	230,000	230,000	230,000
Property plant & equipment	4	4,184	152,407	23,217
Trade & other receivables		2,675,000	2,675,000	2,675,000

Total non-current assets		6,044,387	6,192,610	6,063,420
Current assets
Inventories		7,318,330	7,074,719	6,993,585
Trade & other receivables		1,644,431	1,452,225	1,798,861
Cash & cash equivalents		755,677	2,033,163	1,438,825

Total current assets		9,718,438	10,560,107	10,231,271

Total assets		15,762,825	16,752,717	16,294,691
Current liabilities
Trade payables		193,186	161,397	224,734
Tax liabilities		206,119	98,494	131,356
Obligations under finance leases		-	31,357	7,809
Other payables		94,914	152,583	69,141
Bank overdrafts and loans		4,892,034	4,802,188	4,887,907

Total current liabilities		5,386,253	5,246,019	5,320,947
Non-current liabilities
Obligations under finance leases		-	98,943	-
Convertible loan note		2,837,809	2,696,559	2,781,522

Total non - current liabilities	11	2,837,809	2,795,502	2,781,522

Total liabilities		8,224,062	8,041,521	8,102,469

		7,538,763	8,711,196	8,192,222
Equity
Issued share capital	6	5,242,238	5,242,238	5,242,238
Share premium account		3,526,353	3,650,480	3,650,480
Capital redemption reserve		98,028	98,028	98,028
Equity reserve		228,474	303,441	218,478
Retained earnings Total equity attributable to equity holders of the parent		(1,556,330) 7,538,763	(582,991) 8,711,196	(1,017,002) 8,192,222

WREN HOMES GROUP PLC

CONDENSED STATEMENT OF CHANGES IN EQUITY

Six months ended 31 January 2010

	Share Capital	Share Premium	Capital Redemption Reserve	Equity Component	Retained Reserves	Total
	£	£	£	£	£	£

Balance at 1 August 2008	4,042,238	3,751,365	98,028	-	19,392	7,911,023
Loss for the year	-	-	-	-	(1,076,093)	(1,076,093)
Issue of ordinary shares Rental income Issue of loan notes	1,200,000 - -	5,000 - -	- - -	- - 303,441	- 9,765 -	1,205,000 9,765 303,441
Share issue costs Share options Deferred tax on loan notes	- - -	(105,885) - -	- - -	- - (84,963)	- 82,354 -	(105,885) 82,354 (84,963)
Payment of dividends	-	-	-	-	(52,420)	(52,420)
Balance at 31 July 2009	5,242,238	3,650,480	98,028	218,478	(1,017,002)	8,192,222
	Share Capital £	Share Premium £	Capital Redemption £	Equity Reserve £	Retained Reserves £	Total £
Balance at 1 August 2009	5,242,238	3,650,480	98,028	218,478	(1,017,002)	8,192,222
Net loss for the period	-	-	-	-	(539,328)	(539,328)
Equity draw down costs Deferred tax	-	(124,127)	- -	- - 9,996	- -	(124,127) 9,996

Balance at 31 January 2010	5,242,238	3,526,353	98,028	228,474	(1,556,330)	7,538,763

WREN EXTRA CARE GROUP PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 January 2010		Six months	Six months	Year
		ended	ended	ended
		31 Jan 2009	31 Jan 2009	31 July 2009

		Unaudited	Unaudited	Audited

	Note	£	£	£
Cash flows from operations	8	(395,062)	(1,458,965)	(2,088,509)
Interest paid on loans and bank overdrafts		(167,231)	(74,943)	(228,463)
Net cash generated from operating activities		(562,293)	(1,533,908)	(2.316,972)
Investing activities
Interest received		75,300	114,368	225,974
Interest paid on hire purchase		-	(6,329)	-
Sales of tangible assets		14,179	20,000	103,909

Cash flows from investing activities		89,479	128,039	329,883

Financing activities
Convertible loan note		-	3,000,000	3,000,000
Other loans repaid		-	-	(94,624)
Loans repaid		-	(29,177)	-
Hire purchase repayments		(7,809)	(33,938)	(156,829)
Share issue Equity draw down costs		- (124,127)	1,099,116 -	1,099,116 -
Dividends paid		-	(52,423)	(52,420)

Cash flows from financing activities		(131,936)	3,983,578	3,795,243

Net (decrease)/increase in cash and cash equivalents		(604,750)	2,577,709	1,808,154
Cash and cash equivalents brought forward		845,078	(963,076)	(963,076)

Cash and cash equivalents carried forward		240,328	1,614,633	845,078

WREN EXTRA CARE GROUP PLC

NOTES TO THE INTERIM RESULTS

For the six months ended 31 January 2010
1.	Accounting policies

	These condensed interim financial statements are for the six months ended 31 January 2010.They have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and as are effective or are expected to be effective as at 27 March 2010.They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 July 2009. These condensed consolidated interim financial statements have been approved for the issue by the Board of Directors on 31 March 2010. These financial statements have been prepared under the historical cost convention, except for the revaluation of certain properties and financial instruments.

	The Directors have projected cash flow information for the period to July 2014. In preparing these cash flows, the Directors are assessing on a regular basis the sales activity and costs of the business. On the basis of this cash flow information, the Directors are of the opinion that a working capital facility and development bank loans are required to fund new developments and running costs. In addition, there are loans and overdraft facilities of £4,892,034 which are due for renewal on 30th April 2010. On 1 December 2009 the Company has secured an equity draw-down facility of up to £3m, which is intended to be utilised as a standby facility to provide for additional working capital and to enable the Group to be able to take advantage of potential opportunities, as and when they arise. The financial statements have been prepared on the going concern basis. This basis of preparation relies on the successful outcome of the renewal of the working capital facility and loans. The directors are confident of a successful outcome. Accordingly the directors consider that the going concern basis for the preparation of the condensed financial statements is appropriate.
	The financial information contained in this report has been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting'. It has not been audited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for 2009, which were prepared under International Accounting Standards (IAS), have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was modified and contained two emphasis of matter paragraphs relating to goodwill and going concern. The audit report does not contain a statement made under Section 498 of the Companies Act 2006.

2.	Loss per share

	Basic loss per share
	The calculation of basic loss per share for the year ended 31 July 2009 and for the six months ended 31 January 2009 and 2010 have been determined as the net loss after tax divided by the weighted average number of equity shares in issue in the period.

		6 Months ended 31 Jan 2010	6 Months ended 31 Jan 2009	Year ended 31 July 2009
		£	£	£
	Net loss attributable to ordinary shareholders	(539,328)	(549,960)	(1,076,093)

	Number of ordinary shares
	Issued ordinary shares at the beginning of the period	52,422,387	40,422,387	40,422,387
	Issue of shares in the period	-	12,000,000	12,000,000

	Issued ordinary shares at the end of the period	52,422,387	52,422,387	52,422,387

	Weighted average number of ordinary shares

	Issued ordinary shares at the beginning of the period	52,422,387	40,422,387	40,422,387
	Issue of shares part way through the period	-	6,554,348	9,672.387

	Weighted average number of ordinary shares during the period	52,422,387	46,976,735	49,672,387
	Basic loss per share	(1.03)p	(1.17)p	(2.17)p
	Diluted loss per share	6 Months ended 31 Jan 2010	6 Months ended 31 Jan 2009	Year ended 31 July 2009

	Diluted loss per share at period end	(1.03)p	(1.17)p	(2.17)p

	Loss per share requires presentation of diluted loss per share when a company could be called upon to issue shares that would decrease net profits or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be decreased by the exercise of out-of-the-money share options. No adjustment has been made to dilute loss per share for out-of-the-money share option and there are no other diluting future share issues, therefore diluted loss per share is identical to the basis loss per share.

3.		Goodwill

		The group conducts annual impairment tests of the carrying value of goodwill, based on the recoverable amount of the cash generating unit (CGU), of which the Group only has one. The recoverable amounts for the cash-generating units is determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect the current market assessments of the time value of money and the risks specific to the cash-generating unit. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next three years and extrapolates cash flows for the following two years based on the development of the company's property portfolio. This rate does not exceed the average long term growth rate for the relevant markets. The approved cash flow projections in the two financial years following this year reflect management's expectation of the performance of the CGU and growth prospects in the Extra Care retirement sector. Whilst these cash flows do show the value in use is in excess of the carrying value of the goodwill, there are uncertainties as to the assumption used in the calculation and to the performance of the business and developments due to the current economic environment.
4.	Plant and equipment
				Fixtures, fittings and equipment		Motor vehicles		Total
	Cost			£		£		£
	At 31 July 2009			36,592		46,136		82,728
	Disposals in the period			-		(46,136)		(46,136)
	At 31 January 2010			36,592		-		36,592
	Depreciation
	At 31 July 2009			28,396		31,115		59,511
	Charge for the period Eliminated on disposals			4,012 -		- (31,115)		4,012 (31,115)
	At 31 January 2010			32,408		-		32,408
	Net book values
	At 31 January 2010			4,184		-		4,184
	At 31 July 2009			8,196		15,021		23,217


	Included above are assets held under finance leases or hire purchase contracts as follows :


					Motor vehicles
					£
	Net book values
	At 31 January 2010				-
	At 31 July 2009				15,021

	Depreciation charge for the period		6 months ended 31 Jan 2010		6 months ended 31 Jan 2009		Year ended 31 July 2009

	Six months to 31 January 2010		4,012		18,747		24,079

5	Investment Property Fair Value	31 January 2010 £	31 January 2009 £	31 July 2009 £

	Balance bought forward	230,000	230,000	230,000
	Balance carried forward	230,000	230,000	230,000

	Investment properties have been valued by the directors on 31 January 2010 at fair value at an open market value basis. An impairment charge has been made in the period of £Nil (2009: £Nil). The property rental income earned by the group from its investment property, which is leased out under an operating lease, amounted to £5,400 (31 January 2009: £2,685, 31 July 2009: £10,800). Direct operating expenses arising on the investment property in the period amounted to £3,310 (31 January 2009: £3,721, 31 July 2009 £9,500).

6.	Share Capital	31 Jan 2010	31 Jan 2009	31 July 2009
		£	£	£
	Authorised

	100,000,000 Ordinary shares of 10p each	10,000,000	10,000,000	10,000,000

	Allotted, issued and fully paid

	52,422,387 Ordinary shares of 10p each	5,242,238	5,242,238	5,242,238

7.	Operating lease arrangements
	The Group as a lessee
	The total of future minimum lease payments under non cancelable operating leases are as follows:
		Land and Building			Other
		31 January 2010	31 January 2009	31 July 2009	31 January2010	31 January2009	31 July 2009
	Expiry Date : Less than one year	£ 33,120	£ 33,210	£ 33,210	£ 1,565	£ 1,565	£ 1,565
	In the second to fifth years inclusive	46,980	102,310	102,310	-	2,380	2,380

	Operating lease payments in respect of land and building represents rentals payable by the group for its registered office. The lease expires on 15 October 2011. Other operating lease payments represent rentals payable by the Group for office equipment. Leases are negotiated for an average term of five years and rentals are fixed for an average of five years. The Group as a lessor Property rental income earned during the period was £32,000 (31January 2009: £32,494 31July 2009:£63,714). The properties held by the Group are expected to generate rental yields of 4.02% on an ongoing basis. The Group only held one investment property at the balance sheet date. This property has a committed tenant on a two month rolling basis, generating future operating annual lease income of £10,800.


8.	Cash flow statement

	Reconciliation of operating profit to operating cash flow

		31 Jan 2010		31 Jan 2009	31 July 2009
		£		£	£

	Loss from operations	(447,397)		(583,056)	(1,073,604)
	Depreciation and loss of tangible assets	5,026		21,807	67,088
	Share option costs	82,354		-	92,088
	Increase in work in progress	(324,745)		(142,559)	(61,425)
	Decrease/(Increase) in receivables	220,712		(416,841)	(763,447)
	Increase/(Decrease) in payables	68,988		(338,316)	(349,209)

	Cash flows from operating activities	(395,062)		(1,458,965)	(2,088,509)
9. Share based payments
Equity-settled share option plans

The Group offers vested share options, without payment, to senior employees. On 10 July 2008 the first such share options were granted to three employees, to subscribe for a total of 450,000 shares at a price of 16p. The options are exercisable between 10 July 2011 and 10 July 2018.

The fair values of the options granted on 10 July 2008 under the share option scheme and expected to vest have been calculated using the Black-Scholes option pricing model. The following inputs were used in the calculation:

Share price at date of grant			16p
Expected volatility			53.54 %
Expected life			3 years
Risk free rate			4 %

Expected volatility was based on flotation on Plus Markets (formally OFEX) in November 2001 to the date of the grant. On 7 August 2008 share options were granted to the directors and certain key employees to subscribe for a total of 3,732,238 shares at a price of 15p. The share price at the date of the grant was 15p. The options are exercisable between 7 August 2009 and 7 August 2018. The fair values of the options granted on 7 August 2008 under the share option scheme and expected to vest have been calculated using the Black-Scholes option pricing model. The following inputs were used in the calculation: Share price at date of grant 11.75p Expected volatility 53.54% Expected life 10 years Risk free rate 4% The option outstanding at 31 July 2009 had a weighted average remaining contractual life of 9 years (time until options expire). The group recognised total expenses of £24,000 (31 January 2009 £Nil, 31 July 2009: £82,354) in respect of the fair value of these options.

10	Transactions with Directors

	During the period £12,182 (31 January 2009 £15,000, 31 July 2009 £39,579) was paid to Haines Watts (of which P Self is a partner) for the provision of consultancy services. During the period £6,000 (31 January 2009 £6,000 31 July 2009 £12,000) was paid to B Nathan and £6,000 (31 January 2009: Nil, 31 July 2009:£12,000) to J Butterfield for their services as non-executive directors. On 7 August 2008 certain directors were granted the following share options:

	B Nathan	100,000
	P Treadaway	762,238
	J Butterfield	1,320,000
	P Self	500,000

	Details of the terms of the options are shown under note 9.

11	Convertible loan note
	The convertible loan note was issued on 31 October 2008. The note is convertible into ordinary shares of the company at any time by the loan note holder between the date of issue of the note and 31 October 2013. On issue, the loan note was convertible at 30,000,000 Ordinary shares at 10p. Interest of 5% per annum will be paid quarterly until the settlement date. The loan has been recognised at fair value, using the market rate for a similar instrument of 7.5% for the purposes of the valuation. The difference between the nominal value of the loan and the fair value has been recognised directly in profit or loss as a finance charge. The fair value of the convertible loan note has been split between a liability element and an equity component, to represent the fair value of the embedded option to convert the liability into equity of the group, as follows:
			£
	Nominal value of convertible loan notes issued		3,000,000
	Equity component		(303,441)
	Liability component at date of issue		2,696,559
	Deferred tax thereon Interest component		74,968 66,282
	Liability component at 31 January 2010		2,837,809
12.		Availability

		Copies of the interim results will be available to all shareholders at the registered office of the Company, Suite 4, Oaks House, 12-22 West Street, Epsom, KT18 7RG and at the Company's website: www.wrenextracare.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR WGUQWWUPUGCG

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