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PGI Group Plc

Chairman's statement

The Group profit before tax, biological asset and hyperinflation adjustments for the half year to 30 June 2008 increased by 14% to £2,117,000 (half year to June 2007: £1,863,000).

The adjustments for the biological assets and Zimbabwe hyperinflation are again shown in a separate column and, for the reasons I explained in my Chairman's statement when this presentation was introduced, they should be viewed with caution.

Including these adjustments, the Group profit before tax was £2,291,000 (half year to June 2007 £2,878,000).

Profit for the food group increased by 6%. The star performer has been the Malawi tea business, which has benefited from a rising tea price that has more than offset the significant increases in input costs that we have faced across all our businesses.

The perishable businesses in Zambia have traded satisfactorily, though they have not yet succeeded in recovering all of the higher input costs through price rises to our customers.

It has been a difficult growing season, with unusual extremes of rainfall and temperature. Tea and rose production has been about 5% below budget. In Zambia we have also suffered some damage to the estate infrastructure from very heavy rains.

Operating conditions in Zimbabwe have deteriorated further, as the wider economy collapses. With inflation now running into millions of percent, it is impossible to recruit enough labour. The estate is operating at half the productive levels of a year ago.

Jensen, the group's Russian property management and investment operation, continued to develop and enhance the management of the properties in its funds. The US$101 million fund raised by Jensen in 2006 has reported an increase in net assets of 28%, based on the unaudited accounts for the six months to 30 June.

At the end of June we announced that an agreement had been reached with Steven Wayne, at that time Chief Executive of the Group and Jensen's Chief Executive, to change the arrangements with him and with Jensen. Full details of this were set out in a circular sent to shareholders, and the proposals were passed at a meeting held on 24 July 2008. The particulars of the transactions effected during July/August 2008 resulting from these arrangements are detailed in note 10 to these interim statements.

When the transaction with Mr Wayne was concluded, we were pleased to announce that Sebastian Hobhouse was appointed Chief Executive. Mr Hobhouse has been a director for the past fifteen years, responsible for the Group's African interests. Mr Wayne stood down from the Board, but remains Chief Executive of the Jensen Group.

Turning to the outlook for the second half, this is always difficult to predict when a large part of the Group's businesses are seasonal. However, if tea prices remain at their current levels and reasonable weather conditions prevail, we expect a satisfactory result.

Rupert Pennant-Rea

Chairman

27 August 2008

Enquiries:

PGI	020 7236 6135
Geoff Moores, Finance Director
Panmure Gordon	020 7459 3600
Andrew Potts

  Interim condensed consolidated income statement

for the six months ended 30 June 2008

		Six months ended 30 June
			2008			2007
		Result before			Result before
		biological	Biological		biological	Biological
		assets and	assets and		assets and	assets and
		hyperinflation	hyperinflation		hyperinflation	hyperinflation
		adjustments	adjustments	Total	adjustments	adjustments	Total
	Notes	£000	£000	£000	£000	£000	£000
Continuing operations
Revenue	3	12,843	(37)	12,806	11,206	(416)	10,790
Cost of sales		(5,868)	(270)	(6,138)	(5,077)	125	(4,952)
Gross profit		6,975	(307)	6,668	6,129	(291)	5,838
Distribution costs		(1,580)	(1)	(1,581)	(1,148)	-	(1,148)
Administrative expenses		(3,146)	(9)	(3,155)	(2,985)	64	(2,921)
Other operating income		100	(3)	97	102	(3)	99
Fair value adjustment to biological assets		-	162	162	-	1,197	1,197
Operating profit		2,349	(158)	2,191	2,098	967	3,065
Finance revenue		53	-	53	50	-	50
Finance costs		(293)	8	(285)	(296)	-	(296)
Share of associate's results		8	-	8	11	-	11
Monetary working capital hyperinflation adjustment		-	324	324	-	48	48
Profit before taxation		2,117	174	2,291	1,863	1,015	2,878
Taxation	4	(735)	(61)	(796)	(490)	(261)	(751)
Profit for the period	3	1,382	113	1,495	1,373	754	2,127
Profit attributable to:					Restated
Equity holders of the parent		1,223	130	1,353	1,118	739	1,857
Minority interests		159	(17)	142	255	15	270
		1,382	113	1,495	1,373	754	2,127
					Restated
					Pence		Pence
Earnings per ordinary share	5
From continuing operations
- basic		0.94		1.04	0.86		1.44
- diluted		0.94		1.04	0.86		1.43
Dividend per ordinary share	6			-			0.25

  Interim condensed consolidated balance sheet

at 30 June 2008

	Group
	30 June 2008		31 December 2007
	Excluding	Including		Excluding	Including
	hyperinflation	hyperinflation		hyperinflation	hyperinflation
	adjustments	adjustments*		adjustments	adjustments*
	£000	£000		£000	£000
ASSETS
Non-current assets
Goodwill	2,046	2,046		2,047	2,047
Biological assets	12,771	12,771		12,984	12,984
Property, plant and equipment	10,093	10,093		10,189	10,189
Hyperinflation adjustment	-	137		-	246
	10,093	10,230		10,189	10,435
Investment properties	1,742	1,742		2,208	2,208
Investments
- associate	320	320		320	320
- other	53	53		45	45
	27,025	27,162		27,793	28,039
Current assets
Inventories	1,983	1,983		2,128	2,128
Hyperinflation adjustment	-	133		-	134
	1,983	2,116		2,128	2,262
Trade and other receivables	3,409	3,409		1,983	1,983
Other financial assets	-	-		17	17
Cash and cash equivalents	1,806	1,806		2,006	2,006
	7,198	7,331		6,134	6,268
Total assets	34,223	34,493		33,927	34,307
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital	32,401	32,401		32,365	32,365
Share premium account	425	425		425	425
Capital redemption reserve	250	250		250	250
Revaluation reserve	462	462		457	457
Retained earnings	(16,901)	(16,660)		(17,066)	(16,746)
	16,637	16,878		16,431	16,751
Minority interests	3,828	3,828		3,920	3,920
Total equity	20,465	20,706		20,351	20,671
Non-current liabilities
Interest bearing loans and borrowings	1,191	1,191		1,552	1,552
Other payables	159	159		177	177
Provision for deferred tax liabilities	2,561	2,561		2,540	2,540
Hyperinflation adjustment	-	29		-	60
	2,561	2,590		2,540	2,600
Defined pension plan deficit	4,083	4,083		3,497	3,497
	7,994	8,023		7,766	7,826
Current liabilities
Interest bearing loans and borrowings	2,784	2,784		3,291	3,291
Trade and other payables	2,251	2,251		2,229	2,229
Other financial liabilities	-	-		9	9
Current tax liabilities	729	729		281	281
	5,764	5,764		5,810	5,810
Total liabilities	13,758	13,787		13,576	13,636
Total equity and liabilities	34,223	34,493		33,927	34,307

* These are the Group's balance sheets for the six months ended 30 June 2008 and for the year ended 31 December 2007.

  Interim condensed consolidated cash flow statement 

for the six months ended 30 June 2008

	Six months ended 30 June
		2007
	2008	(restated)
	Including	Including
	hyperinflation	hyperinflation
	adjustments	adjustments
	£000	£000
Operating activities
Profit before tax from continuing operations	2,291	2,878
Adjustments to reconcile profit before tax to net cash flows
Non cash:
Depreciation of property, plant and equipment	451	408
Disposal of property, plant and equipment	(6)	(18)
Disposal of investment property	60	-
(Additional)/ reduced retirement benefit costs	(133)	49
Net finance costs	232	246
Fair value adjustments	(162)	(1,197)
Share of net profit of associate	(8)	(11)
Hyperinflation indexation adjustment	438	221
Monetary working capital hyperinflation adjustment	(324)	(48)
Working capital adjustments:
Decrease in inventories	387	483
Increase in trade and other receivables	(1,409)	(1,633)
(Decrease)/increase in trade and other payables	(5)	622
Exchange differences on working capital	(302)	(530)
Oversea tax paid	(337)	(375)
Net cash generated from operating activities	1,173	1,095
Cash flows from investing activities
Capital expenditure	(489)	(1,290)
Disposal of property, plant and equipment	6	25
Disposal of investment property	404	-
Additions to investments (net)	-	9
Net cash from investing activities	(79)	(1,256)
Cash flows from financing activities
Issue of shares (net of expenses)	36	44
Payment of loans	(445)	(200)
Finance costs, net of bank interest received	(164)	(307)
Dividends paid to equity holders of the parent	-	(323)
Dividends and other payments to minority interests (net)	(296)	(53)
Distributions from property fund (net)	(25)	(7)
Net cash from financing activities	(894)	(846)
Net increase/(decrease) in cash and cash equivalents	200	(1,007)
Cash and cash equivalents at beginning of period	(459)	959
Effects of exchange rate changes on cash and cash equivalents	23	109
Cash and cash equivalents at end of period	(236)	61
Cash and cash equivalents comprise:
Cash	1,806	1,702
Overdrafts	(2,042)	(1,641)
Cash and cash equivalents	(236)	61
Interest bearing loans and borrowings due within one year	(2,784)	(2,342)
Less: short term debt	742	701
Overdrafts	(2,042)	(1,641)

  Interim condensed consolidated statement of changes in equity

	Attributable to equity holders of the Company
		Share
		premium &
		capital
	Share	redemption	Revaluation	Retained		Minority	Total
	capital	reserves	reserve	earnings	Total	interests	equity
Six months ended 30 June 2008	£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2008	32,365	675	457	(16,746)	16,751	3,920	20,671
Changes in equity
Hyperinflation indexation movement	-	-	-	228	228	-	228
Exchange differences on translation of net oversea assets:
- before hyperinflation indexation	-	-	(5)	(454)	(459)	62	(397)
- hyperinflation indexation movement	-	-	-	(320)	(320)	-	(320)
Actuarial loss (net) of defined benefits pension plan	-	-	-	(659)	(659)	-	(659)
Investments valuation gain taken to equity	-	-	10	-	10	-	10
Deferred tax on property revaluations:
- before hyperinflation indexation	-	-	-	(38)	(38)	-	(38)
- hyperinflation indexation movement	-	-	-	1	1	-	1
Net income/(expense) recognised directly in equity	-	-	5	(1,242)	(1,237)	62	(1,175)
Profit for the six months	-	-	-	1,353	1,353	142	1,495
Total recognised income	-	-	5	111	116	204	320
Issue of new ordinary shares on exercise of share options	36	-	-	-	36	-	36
Dividends paid to minority interests	-	-	-	-	-	(152)	(152)
Distributions from property fund (net)	-	-	-	(25)	(25)	(195)	(220)
Advances from non-equity minority interests (net)	-	-	-	-	-	51	51
Balance at 30 June 2008	32,401	675	462	(16,660)	16,878	3,828	20,706

  Interim condensed consolidated statement of changes in equity 

continued

	Attributable to equity holders of the Company
		Share
		premium &
		capital
	Share	redemption	Revaluation	Retained		Minority	Total
	capital	reserves	reserve	earnings	Total	interests	equity
Six months ended 30 June 2007	£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2007	32,326	670	700	(16,528)	17,168	2,690	19,858
Prior year adjustment to restate minority interest in consolidated investment property fund, acquired in 2005, tax effect nil	-	-	-	(83)	(83)	237	154
Restated balance	32,326	670	700	(16,611)	17,085	2,927	20,012
Changes in equity
Hyperinflation indexation movement	-	-	-	343	343	-	343
Exchange differences on translation
of net oversea assets:
- before hyperinflation indexation	-	-	(4)	(1,778)	(1782)	(89)	(1,871)
- hyperinflation indexation movement	-	-	-	(511)	(511)	-	(511)
Actuarial gain (net) of defined benefits pension plan	-	-	-	1,313	1,313	-	1,313
Deferred tax on property revaluations:
- before hyperinflation indexation	-	-	(5)	(49)	(54)	(12)	(66)
- hyperinflation indexation movement	-	-	-	1	1	-	1
Net income recognised directly in equity	-	-	(9)	(681)	(690)	(101)	(791)
Profit for the six months	-	-	-	1,857	1,857	270	2,127
Total recognised income and (expense)	-	-	(9)	1,176	1,167	169	1,336
Issue of new ordinary shares on exercise of share options	39	5	-	-	44	-	44
Dividends paid to equity holders of the parent	-	-	-	(323)	(323)	-	(323)
Distributions from property fund (net)	-	-	-	-	-	(7)	(7)
Repayment of advances from non-equity minority interests (net)	-	-	-	-	-	(53)	(53)
Balance at 30 June 2007	32,365	675	691	(15,758)	17,973	3,036	21,009

  Notes to the interim condensed consolidated financial statements

1. Corporate information

PGI Group Plc is a public limited company incorporated and domiciled in the United Kingdom, whose shares are publicly traded. The principal activities of the Company and its subsidiaries ('the Group') are described in Note 3.

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2008 were authorised for issue in accordance with a resolution of the directors on 27 August 2008.

2. Basis of preparation and accounting policies

The interim condensed consolidated financial statements for the six months ended 30 June 2008 and 2007 are unaudited. They have been prepared in accordance with International Accounting Standard (IAS) 34, 'Interim Financial Reporting'. The accounting policies adopted are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2007.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's audited financial statements for the year ended 31 December 2007. The information for the year ended 31 December 2007 does not constitute the Group's statutory accounts for 2007 as defined in Section 240 of the Companies Act 1985. Statutory accounts for 2007 have been delivered to the Registrar of Companies. The Auditors' report on those accounts was unqualified and did not contain statements under Sections 237(2) or (3) of the Companies Act 1985.

Prior year adjustment

Due to a miscalculation of the minority interest percentage on the acquisition of a part of the Jensen Group in 2005, the minority interest, goodwill and retained earnings have been restated. This restatement has been accounted for retrospectively and recognised in the consolidated statement of changes in equity at 1 January 2007. The comparative statements for the six months ended 30 June 2007 have been restated to reflect these changes. There was no effect on the previously reported profit after taxation for the six months ended 30 June 2007, but the profit attributable to the equity holders of the parent and the minority interests have been restated on the income statement. The effect on basic and diluted earnings per share for the six months ended 30 June 2007 is as follows:

 

	Results before biological assets and hyperinflation adjustments Pence	Total Pence
Effect on earnings per ordinary share from continuing operations
‑ basic	‑	0.01
‑ diluted	‑	‑
The corrections to the balance sheet amounts, both excluding and including hyperinflation adjustments as at 30 June 2007 are as follows:		£’000
Goodwill		+ 150
Retained Earnings		- 79
Minority Interests		+229

    

  3. Segmental reporting

The Group's primary reporting segments are the following business sectors:

Food group            - Tea, roses, vegetables and macadamia nuts.

Investment property management    - Properties in St. Petersburg, Russia.

	Segment Revenue
	Six months ended 30 June 2008			Six months ended 30 June 2007
	Revenue before			Revenue before
	hyperinflation	Hyperinflation		hyperinflation	Hyperinflation
	adjustments	adjustments	Total	adjustments	adjustments	Total
	£000	£000	£000	£000	£000	£000
Food group	12,203	(37)	12,166	10,578	(416)	10,162
Investment property management	640	-	640	628	-	628
	12,843	(37)	12,806	11,206	(416)	10,790

	Segment Results
	Six months ended 30 June 2008			Six months ended 30 June 2007
	Result before			Result before
	biological	Biological		biological	Biological
	assets and	assets and		assets and	assets and
	hyperinflation	hyperinflation		hyperinflation	hyperinflation
	adjustments	adjustment	Total	adjustment	adjustment	Total
	£000	£000	£000	£000	£000	£000
Food group	3,031	(158)	2,873	2,869	967	3,836
Investment property management	32	-	32	50	-	50
Central costs net of sundry income	(706)	-	(706)	(810)	-	(810)
	2,357	(158)	2,199	2,109	967	3,076
Net finance costs	(240)	8	(232)	(246)	-	(246)
Monetary working capital hyperinflation adjustment	-	324	324	-	48	48
Profit before tax	2,117	174	2,291	1,863	1,015	2,878
Taxation	(735)	(61)	(796)	(490)	(261)	(751)
Profit for the period from continuing operations	1,382	113	1,495	1,373	754	2,127

4. Taxation

	Six months ended
	30 June
	2008	2007
Continuing operations	£000	£000
Current taxation:
UK Corporation tax (after double taxation relief)	-	-
Foreign taxation:
Current taxation on income for the period	687	402
Adjustment in respect of prior periods	-	-
	687	402
Deferred taxation:
Origination and reversal of timing differences	123	357
Adjustment in respect of prior periods	(14)	(8)
	109	349
Taxation on profit from continuing operations	796	751

        

Following changes to the UK corporation tax regime introduced by the Finance Act 2007, from 1 April 2008 the standard rate of UK corporation tax is 28% (previously 30%). This change has had no impact upon these interim financial statements, nor is it expected to affect the Group's effective tax rate in the foreseeable future.

  5. Earnings per ordinary share

a. Basic

Basic earnings per ordinary share is calculated by dividing the result attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the period.

	Six months ended 30 June
	2008	2007
	Thousands	Thousands
Weighted average number of ordinary shares in issue	129,493	129,351

    

	Six months ended 30 June
	2008		2007 (Restated)
	Result before		Result before
	biological		biological
	assets and		assets and
	hyperinflation		hyperinflation
	adjustments	Total	adjustments	Total
	£000	£000	£000	£000
Profit for the period from continuing operations attributable to the equity holders of the Company	1,223	1,353	1,118	1,857

                

	pence	pence	pence	pence
Basic earnings per ordinary share
- continuing operations	0.94	1.04	0.86	1.44

                

b. Diluted

Diluted earnings per ordinary share is calculated on a weighted average of shares which assume the exercise 

of certain options.

	Six months ended30 June
	2008	2007
	Thousands	Thousands
Weighted average number of ordinary shares in issue assuming the exercise of certain options	130,046	130,083

        

	Six months ended 30 June
	2008		2007 (Restated)
	Result before		Result before
	biological		biological
	assets and		assets and
	hyperinflation		hyperinflation
	adjustments	Total	adjustments	Total
	pence	pence	pence	pence
Diluted earnings per ordinary share
- continuing operations	0.94	1.04	0.86	1.43

6. Dividend paid and proposed

	Six months ended 30 June
	2008	2007
	£000	£000
Declared and paid during the period
Equity dividends on ordinary shares:
Interim dividend for 2006 of 0.25p per share, paid 23 January 2007	-	323

A final dividend for 2007 of 0.25p per share, payable on 5 August 2008 was declared on 1 July 2008 and will be recognised in the financial statements for the year ended 31 December 2008.

7. Property, plant and equipment

Capital expenditure on property, plant and equipment in the six months ended 30 June 2008 amounted to £405,000.

8. Related party transactions

Two Russian companies owned by a director, Mr S. W. Wayne, provide services to subsidiary companies of Jensen Partners LLC and Jensen Limited and the property funds they manage. Jensen Partners LLC and Jensen Limited are subsidiaries of PGI Group Plc. The Russian companies are not designed to make profits but to reallocate expenses between the various entities. The amounts charged to the subsidiaries of Jensen Partners LLC and Jensen Limited and the amounts outstanding were as follows:

	Six months ended 30 June
	2008	2007
	£000	£000
Charges for services from related parties	166	188
Amounts owed to related parties	22	69

9. Contingent liabilities

Other than as noted below, there have been no changes to the contingent liabilities as reported in note 31 to the audited financial statements for the year ended 31 December 2007.

a. Claim made by PT Shamrock Manufacturing Corpora ('Shamrock') 

Following the High Court ruling in PGI Group's favour early in April 2008, Shamrock issued a notice of appeal to the Supreme Court in Indonesia on 23 April 2008.

The directors remain of the opinion, based on legal advice received and both the District Court and High Court's rulings, that the claim is substantially without merit. The directors are therefore of the opinion that no provision is necessary in the accounts.

b. Zimbabwe

The Indigenisation and Economic Empowerment Act has now been promulgated in Zimbabwe.

The directors remain of the opinion that it is too early to assess what impact this Act might have on the Group's investment in Eastern Highlands Plantations Ltd, which is incorporated in Zimbabwe.

10. Events after the balance sheet date - related party transactions

On 30 June 2008, the Company announced that it had entered into a conditional agreement with its Chief Executive, Mr S. W. Wayne. Full details of this were set out in a circular sent to shareholders. Shareholder approval to the proposals was obtained at a meeting held on 24 July 2008 and accordingly, PGI Group Plc has released Mr. Wayne (and his connected companies) from substantially all his obligations not to compete with the business of the Jensen Group. PGI Group Plc retains its current interest in the existing Jensen Group companies. Additionally, PGI Group Plc was granted an option to take a 20 per cent. equity interest in each of the management company, the general partner and the carried interest partner of a new property fund, which the Jensen Group was preparing to raise at the date of the agreement.

In accordance with the terms of the agreement, there was a private placing of ordinary shares owned by Mr. Wayne's company, Jensen Group Holdings LLC, and PGI Group Plc received consideration amounting to approximately £340,000 (net of placing costs) from the sale of one-half of the 3,750,000 ordinary shares sold at placement by Jensen Group Holdings LLC. Of the remaining balance, PGI Group Plc purchased on 31 July 2008, 2,725,000 ordinary shares from Jensen Group Holdings LLC, for an aggregate consideration of £1, as stipulated in the agreement, representing one-half of the unplaced PGI Group Plc shares held by Jensen Group Holdings LLC. PGI Group Plc is currently holding these 2,725,000 ordinary shares in treasury.

On 8 August, the Jensen Group reported that it had achieved an initial closing for the new property fund amounting to some US$62 million and on 19 August, PGI Group Plc announced that it had exercised its option to subscribe for a 20 per cent. share, as outlined above, for the agreed nominal consideration of US$1.

The accounting entries for all these transactions will be recognised in the Group's financial statements for the year ended 31 December 2008.

ENDIR PUUBARUPRGUM