Interim results

30th Apr 2009 11:30

Wren Homes Group plc
Paul Treadaway CEO	Tel: 01372 742 244 www.wrenhomesplc.co.uk
Shore Capital
Pascal Keane	Tel: 020 7408 4090
Adventis Financial PR
Tarquin Edwards / Chris Steele	Tel: 020 7034 4758/59 - 07879 458 364 / 07979 604 687

For the six months ended 31 January 2009		Six months	Six months	Year
		ended	ended	ended
		31 Jan 2009	31 Jan 2008	31 July 2008
		Unaudited	Unaudited	Audited
	Note	£	£	£
Continuing operations
Revenue		53,900	84,000	84,000
Cost of sales		(70,117)	(95)	(141,255)
Gross (loss)/profit		(16,217)	83,905	(57,255)
Administration expenses		(566,839)	(540,950)	(1,178,471)
Loss from operations		(583,056)	(457,045)	(1,235,726)
Net loss from fair value adjustment		-	-	(10,000)
Investment income		114,368	90,440	161,253
Finance cost		(81,272)	(27,365)	(38,578)
Loss before tax from continuing operations		(549,960)	(393,970)	(1,123,051)
Income tax		-	124,240	212,914
Loss for the period from continuing operations after tax		(549,960)	(269,730)	(910,137)
All attributable to equity holders of the parent
Earnings per share
The weighted number of shares in issue		46,976,735	40,422,387	40,422,387
Basic and diluted	2	(1.17)p	(0.66)p	(2.25)p

		31 Jan 2009	31 Jan 2008	31 July 2008
		Unaudited	Unaudited	Audited
	Note	£	£	£
Non-current assets
Goodwill	3	3,135,203	3,135,203	3,135,203
Investment property		230,000	240,000	230,000
Property plant & equipment	4	152,407	216,470	194,214
Trade & other receivables		2,675,000	2,675,000	2,675,000
Total non-current assets		6,192,610	6,266,673	6,234,417
Current assets
Inventories		7,074,719	6,797,555	6,932,160
Trade & other receivables		1,452,225	1,300,991	1,035,384
Cash & cash equivalents		2,033,163	5,182	80
Total current assets		10,560,107	8,103,728	7,967,624
Total assets		16,752,717	14,370,401	14,202,041
Current liabilities
Trade payables		161,397	328,090	365,474
Tax liabilities		98,494	184,934	122,327
Obligations under finance leases		31,357	66,212	35,497
Other payables		152,583	122,811	286,639
Bank overdrafts and loans		4,802,188	4,879,019	5,352,340
Total current liabilities		5,246,019	5,581,066	6,162,277
Non-current liabilities
Obligations under finance leases		98,943	116,638	128,741
Convertible loan note	7	2,696,559	-	-
Total non – current liabilities		2,795,502	116,638	128,741
Total liabilities		8,041,521	5,697,704	6,291,018
		8,711,196	8,672,697	7,911,023
Equity
Issued share capital	6	5,242,238	4,042,238	4,042,238
Share premium account		3,650,480	3,751,365	3751,365
Capital redemption reserve		98,028	98,028	98,028
Equity reserve	7	303,441	-	-
Accumulated (losses)/ profits Total equity attributable to equity holders of the parent		(582,991)   8,711,196	781,066   8,672,697	19,392   7,911,023

Six months ended 31 January 2009
	Share Capital     £	Share Premium   £	Capital Redemption   £	Equity Reserve   £	Retained Reserves   £	Total     £
Balance at 1 August 2008	4,042,238	3,751,365	98,028	-	19,392	7,911,023
Net loss for the period	-	-	-	-	(549,960)	(549,960)
Share issues	1,200,000	5,000	-	-	-	1,205,000
Cost of share issues	-	(105,885)	-	-	-	(105,885)
Convertible loan note	-	-	-	303,441	-	303,441
Dividends	-	-	-	-	(52,423)	(52,423)
Balance at 31 January 2009	5,242,238	3,650,480	98,028	303,441	(582,991)	8,711,196
Six months ended 31 January 2008
	Share Capital     £	Share Premium   £	Capital Redemption   £	Equity Reserve   £	Retained Reserves   £	Total     £
Balance at 1 August 2007	4,042,238	3,751,365	98,028	-	1,050,796	8,942,427
Net loss for the period	-	-	-	-	(269,730)	(269,730)
Balance at 31 January 2008	4,042,238	3,751,365	98,028	-	781,066	8,672,697
Year ended 31 July 2008
	Share Capital     £	Share Premium   £	Capital Redemption   £	Equity Reserve   £	Retained Reserves   £	Total     £
Balance at 1 August 2007	4,042,238	3,751,365	98,028	-	1,050,796	8,942,427
Net loss for the period	-	-	-	-	(910,137)	(910,137)
Dividends	-	-	-	-	(121,267)	(121,267)
Balance at 31 July 2008	4,042,238	3,751,365	98,028	-	19,392	7,911,023

For the 6 months ended 31 January 2009		Six months	Six months	Year
		ended	ended	ended
		31 Jan 2009	31 Jan 2008	31 July 2008
		Unaudited	Unaudited	Audited
	Note	£	£	£
Cash flows from operating activities	11	(1,458,965)	(4,239,124)	(4,659,725)
Investing activities
Interest received		114,368	90,440	161,255
Interest paid on loans and bank overdrafts		(37,443)	(15,857)	(42,362)
Interest paid on hire purchase		(6,329)	-	(8,606)
Other interest paid		(37,500)	(11,508)	12,390
Purchase of tangible assets		-	(152,527)	(153,431)
Sales of tangible assets		20,000	-	-
Cash flows from investing activities		53,096	(89,452)	(30,755)
Financing activities
Convertible loan note		3,000,000	-	-
New loans		-	3,141,151	3,209,364
Other loans repaid		-	-	136,853
Loans repaid		(29,177)	(269,633)	23,360
New hire purchase agreement		-	136,852	-
Hire purchase repayments		(33,938)	(7,363)	(235,974)
Share issue		1,099,116	-	(25,976)
Dividends paid		(52,423)	-	(121,267)
Cash flows from financing activities		3,983,578	3,001,007	2,986,360
Net increase/(decrease) in cash and cash equivalents		2,577,709	(1,327,569)	(1,704,120)
Cash and cash equivalents brought forward		(963,076)	741,044	741,044
Cash and cash equivalents carried forward		1,614,633	(586,525)	(963,076)

For the 6 months ended 31 January 2009
1.	Accounting policies
	The accounting policies used for the preparation of these condensed financial statements follow the same accounting policies and methods of computation as applied in the most recent financial statements and have been prepared under International Accounting Standards (IAS).
	The Directors have projected cash flow information for the period to July 2011. 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 £4,802,188 which aredue for renewal during the ensuing year. The group is still in the process of renegotiating the facility and loans with the bank, and subsequent to recent meetings has correspondence from the bank indicating that the bank is expecting to continue its banking and financing relationship with the Group and that at the time of writing, saw no reason why existing loans could not be renegotiated and extended, with sufficient facilities made available to support the company, subject to approval by the Bank's Credit Committee.    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 240 of the companies Act 1985. The statutory accounts for 2008, 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 237(2) and Section 237(3) of the Companies Act 1985.

2.	Loss per share
	Basic loss per share
	The calculation of basic loss per share for the year ended 31 July 2008 and for the six months ended 31 January 2008 and 2009 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 2009	6 Months ended 31 Jan 2008	Year ended 31 July 2008
		£	£	£
	Net loss attributable to ordinary shareholders	(549,960)	(269,730)	(910,137)
	Number of ordinary shares
	Issued ordinary shares at the beginning of the period	40,422,387	40,422,387	40,422,387
	Issue of shares in the period	12,000,000	-	-
	Issued ordinary shares at the end of the period	52,422,387	40,422,387	40,422,387
	Weighted average number of ordinary shares
	Issued ordinary shares at the beginning of the period	40,422,387	40,422,387	40,422,387
	Issue of shares part way through the period	6,554,348	-	-
	Weighted average number of ordinary shares during the period	46,976,735	40,422,387	40,422,387
	Basic loss per share	(1.17)p	(0.66p)	(2.25)p
	Diluted loss per share	6 Months ended 31 Jan 2009	6 Months ended 31 Jan 2008	Year ended 31 July 2008
	Diluted loss per share at period end	(1.17)p	(0.66)p	(2.25)p
	Loss per share requires presentation of diluted loss per share when a company could be called upon it 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 are 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 two years and extrapolates cash flows for the following five 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 2008						36,592		242,319		278,911
	Disposals in the period						-		(46,010)		(46,010)
	At 31 January 2009						36,592		196,309		232,901
	Depreciation
	At 31 July 2008						22,276		62,421		84,697
	Charge for the period Eliminated on disposals						3,060 -		18,747 (26,010)		21,807 (26,010)
	At 31 January 2009						25,336		55,158		80,494
	Net book values
	At 31 January 2009						11,256		141,151		152,407
	At 31 July 2008						14,316		179,898		194,214

4.	Plant and equipment (cont’d)
	Included above are assets held under finance leases or hire purchase contracts as follows :
					Motor Vehicles
					£
	Net book values
	At 31 January 2009				141,151
	At 31 July 2008				179,898
	Depreciation charge for the period			6 Months ended 31 Jan 2009	6 Months ended 31 Jan 2008	6 Months ended 31 July 2008
	Six months to 31 January 2009			18,747	8,305	28,465

5	Investment Property Fair Value			31 January 2009 £	31 January 2008 £	31 July 2008 £
	Balance bought forward			230,000	240,000	240,000
	Impaired Charge			-	-	(10,000)
	Balance carried forward			230,000	240,000	230,000
	Investment properties have been valued on 31 January 2009 at fair value at an open market value basis. An impairment charge has been made in the period of £Nil (2008: £10,000) to reflect the decrease in the value of property.   The property rental income earned by the group from its investment property, which is leased out under an operating lease, amounted to £2,685 (31 January 2008 £7,245, 31 July 2008 £10,992). Direct operating expenses arising on the investment property in the period amounted to £3,721 (31 January 2008 £5,196, 31 July 2008 £10,392).

6.	Share Capital			31 Jan 2009		31 Jan 2008	31 July 2008
				£		£	£
	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		4,042,238	4,042,238
	During the period under review, the following share issues took place:
	Date			Number		Issue Price	Proceeds
	31 August 2008			1,500,000		10p	150,000
	31 October 2008			10,000,000		10p	1,000,000
	03 November 2008			500,000		11p	55,000

7	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 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
	Interest charged but not paid		-
	Liability component at 31 January 2009		2,696,559

8.	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 2009		31 January 2008		31 July 2008		31 January2009		31 January2008			31 July 2008
	Expiry Date :	£		£		£		£		£			£
	In the second to fifth years inclusive	86,318		116,135		102,338		2,380		4,145			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 5 years and rentals are fixed for an average of 5 years.   The group as a lessor   Property rental income earned during the period was £32,494 (31 January 2008 £7,245 31 July 2008 £10,992). The properties held by the group are expected to generate rental yields of 4.38% on an ongoing basis. The group only held one investment property at the balance sheet date. This property has a committed tenant until April 2009, generating future operating lease income of £7,000.
9.	Transactions with Directors
	During the period £15,000 (31 January 2008 £20,000, 31 July 2008 £30,000) was paid to Self & Co (of which P Self is the sole proprietor) for the provision of accountancy services.   During the period £6,000 (31 January 2008 £5,000 31 July 2008 £12,000) was paid to B Nathan for his services as a non-executive director.   On 3 November 2008 P Treadaway converted his loan to the Company of £55,000 into 500,000 ordinary shares of 10p each at an issue price of 11p   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 10.

10.	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 3 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.
	On 7 August 2008 further options were granted to 4 directors and 3 employees, to subscribe for a further 3,732,238 shares at a price of 15p. The options are exercisable between 7 August 2011 and 7 August 2018.   The fair values of the options granted 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:
			10 July 2008		7 August 2008
	Share price at date of grant		16p		11.5p
	Expected volatility		53.54 %		53.54%
	Expected life		3 years		3 years
	Risk free rate		4 %		4 %
	Expected volatility was based on flotation on Plus Markets (formally OFEX) in November 2001 to the date of the grant.   The option outstanding at 31 July 2008 had a weighted average remaining contractual life of 10 years (time until options expire).
	The group recognized total expenses of £41,777 (2008: £623) in respect of the fair value of these options.
11.	Cash flow statement
	Reconciliation of operating profit to operating cash flow
		31 Jan 2009		31 Jan 2008		31 July 2008
		£		£		£
	(Loss)/profit from operations	(583,056)		(457,045)		(1,245,726)
	Depreciation of tangible assets	21,807		11,305		34,465
	Revaluation of investment property	-		-		10,000
	(Increase)/decrease in work in progress	(142,559)		(4,361,984)		(4,496,589)
	(Increase)/decrease in receivables	(416,841)		1,014,498		1,294,055
	(Decrease)/increase in payables	(338,316)		70,677		269,099
	Net cash (outflow) from operating activities	(1,458,965)		(3,722,549)		(4,134,696)
	Income tax paid	-		(516,575)		(525,029)
	Cash flows from operating activities	(1,458,965)		(4,239,124)		(4,659,725)

12.	Availability
	Copies of the interim results will be sent to all shareholders and will also be available 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.wrenhomesplc.co.uk.

ENDIR BBLFXKZBLBBB

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