FOR IMMEDIATE RELEASE                                                                        31 March 2010

Eatonfield Group plc

("Eatonfield" or "the Group")

 

Unaudited Interim Results for the six months ended 31 December 2009

 

Eatonfield Group plc (AIM: EFD), the commercial property company and house builder announces its unaudited interim results for the six months ended 31 December 2009.

 

SUMMARY

 

·      Revenue £2.71million (Dec 2008: £5.04 million)

·      Trading loss £2.96million (Dec 2008: £3.06million loss)

·      Loss for the period £5.10million (Dec 2008: £7.48million)

·      Net debt £25.3million (2008: £30.3million: 30 June 2009: £28.7million)

 

 

For further information, please contact:

 

Eatonfield Group plc
Rob Lloyd, Chief Executive	Tel: (+44) (0)1829 261 910
Evolution Securities
Joanne Lake/Peter Steel	Tel: (+44) (0)113 243 1619
Orbis Equity Partners Limited
Jeremy King	Tel: (+44) (0)203 137 1904
Threadneedle Communications
Graham Herring/John Coles	Tel: (+44) (0)207 653 9850

 

 

Chairman's Statement

 

Introduction

Throughout the six month period to 31 December 2009 covered by this interim statement, conditions in the UK property sector remained challenging. Evidence of any recovery has been patchy at best and realisations remain difficult. Despite the successful outcome of the placing approved by shareholders at General Meeting on 19 November 2009, the Company's financial position remains under threat.

 

Since the period end, we have raised new equity funding by way of an equity drawdown facility with Jenard Properties Limited, one of the Group's joint venture partners. We also intend to raise further new equity, once we have arranged a "standstill agreement" with our banking partners, to provide the Group with a more secure financial position.  

 

Financial results

During the period the Group generated turnover of £2.7 million (2008: £5.0 million).  Of this, £2.2 million was generated from the sales of residential units, and some £300k from construction activity in the affordable housing sector. The loss for the period amounted to £5.1 million (2008: £7.5 million loss, which included a provision of £5.34 million against previously notified profit share arrangements with Rob Lloyd Racing Limited ("RLRL"), a party connected to Rob Lloyd, Eatonfield's Chief Executive).

 

An inventory write down of £3.2 million has been included in the results for the period (2008: £2.4 million) reflecting the continuing difficult conditions in the UK property market. £2.04 million of this relates to a write down in carrying value of the Company's Corus site.

 

Administration costs for the period were £1.472 million (2008: £1.463 million).  Our underlying recurring staff costs reduced from £714k to £556k and our establishment and general costs reduced from £258k to £213k. The benefit of these savings in the period was offset by additional non-recurring costs incurred by way of legal and professional fees, amounting to £224k more than in the comparable period for the previous year.

 

 

Our joint venture with Jenard Properties Limited incurred losses of £655k (2008: £152k) as a direct result of the write down of inventory.

 

Finance costs in the period to 31 December amounted to £1.17million (2008: £344k) with a non-recurring charge of £786k reflecting the cost of share warrants issued to one of the Company's banks.

 

Net debt at 31 December 2009 amounted to £25.3 million (2008: £30.3 million), Net debt at 30 June 2009 stood at £28.7 million, with the reduction of £3.4 million during the period to 31 December 2009 attributable to the proceeds of the placing referred to above. Achieving ongoing reductions in net debt remains a key priority for the Group. Further commentary on recent developments in the Group's funding arrangements is provided below. 

 

Major projects

Corus

The terms of the s.106 agreement have been finalised and it is currently awaiting signature by the banks.  We were fortunate that the devastating floods at Workington in November 2009 had no impact on our site. We are currently actively researching the availability of grant funding for the infrastructure on our site.

 

Port Derwent option 

We protected the option to acquire this site, located adjacent to our Corus project, by submitting a successful planning application for an hotel prior to 31 August 2009. Work is continuing on the outline planning application for the whole of the site, so that we will be in a position to exercise the option before 31 December 2010. Upon exercise of the option, Eatonfield has an agreement to acquire 50% of Port Derwent Developments (Workington) Limited, the company which has the benefit of the option.

 

Birkwood

Expressions of interest are being shown and the site continues to be marketed. Work is progressing on the s.75 agreement, which will be finalised once considerations surrounding the sale of the building for conversion to an hotel have been clarified.

 

Ystalyfera

We recently received outline planning permission for a 40,000 sq. ft. food store on part of this site, held as a joint venture with Jenard Properties Limited. We are currently seeking a buyer for the food store and are promoting the site to the UK's major supermarket chains. The one existing building on the site has been sold subject to detailed planning permission for use as a National Fire Engine Museum. Offers are currently being considered for the residential land element of the site.

 

Paignton

We have previously announced that our offer for this 24 acre site had been accepted and that our application for funding from Bank of Ireland had been approved. Subsequently, however, we determined that the local authority had changed its planning policy and that it would not favour out of town shopping. As a result, an application for a planning consent for a food store on the site was unlikely to meet with approval, at least in the short term.

 

We have decided not to proceed with the purchase of this site in the manner originally considered, but we are continuing to discuss a variety of other options with the administrator of Modus (Paignton) Limited, the company which formerly owned the site.  At the very least, these discussions will be designed to protect the £1.5 million Eatonfield currently has on deposit with Bank of Ireland as part of the Company's former agreement with Modus.

 

 

 

Residential properties

Our residential property activities are focused on the affordable housing sector, which provides regular funding and a guaranteed exit. We are currently building for Pembroke Housing Association in South Wales.

 

Of the 14 completed open market housing units we had  for sale at the time of our preliminary results announcement in December 2009, two have now been sold, with a further two sales scheduled for the near future. Although the recovery in the residential property market remains fragile and depends to a large extent on the return of availability of mortgage finance, we are aiming to sell the remainder of the units over the next few months.

 

Investment properties

We will look at investment opportunities at the appropriate time, but at present this is not currently a key area of focus for management.

 

Funding

In November 2009, we raised £6.9 million net of expenses through the placing of 147,220,000 Ordinary Shares with new and existing investors. As part of the placing arrangements, Rob Lloyd and RLRL were also allotted 58,000,000 Ordinary Shares by way of the capitalisation of £2.9 million due to them from Eatonfield Developments Limited, a wholly owned subsidiary of the Company. Arrangments were also made for senior employees of the Group including myself and certain members of Rob Lloyds family to participate in the Placing by way of the allotment of 2,600,000 Ordinary Shares in an aggregate amount of £0.13 million. The proposals were approved by shareholders at a general meeting of the Company held on 19 November 2009. The proceeds of the placing were used to provide the Company with additional working capital funding, fund the ongoing development of certain sites within its major projects portfolio and reduce net debt.

 

During the period under review, a number of banking covenants were breached and details of these are shown in note 6 to the financial statements. No formal demands have been made by any of our banks for repayment of any of the facilities, although one bank has formally reserved its rights.

 

On 18 February 2010, we announced that due to the expectation at that time of a deterioration in the future cash flows of the Group, a previously agreed overdraft facility would not be made available. We have since been working to secure further working capital funding for the Group and as previously notified, on 10 March 2010 we put in place a £900,000 equity drawdown facility provided by Jenard Properties Limited, which we can draw down at any time until 31 August 2010. If drawn down in full, the facility will provide the Company with sufficient working capital through to 31 August 2010. As at 29 March 2010, we had not started to draw down under this facility.

 

We continue to pursue options to raise further equity funding for the Company in order to ensure that it has adequate working capital available to it for the foreseeable future. We believe that the provision of such funding will largely depend on the arrangement of a "standstill agreement" with all of our banks, pursuant to which each bank would agree not to make formal demand for repayment of their facilities during a specific period. A further announcement in relation to these matters will be made at the appropriate time.

 

Going concern

The Directors have prepared the half yearly financial report on a going concern basis. The ability of the Company and the Group to continue as a going concern is dependent upon the continuing support of its banks. As mentioned above, the Company is in the process of negotiating a "standstill agreement" with its banks. Indications have already been received from a number of the banks concerned, that such an agreement is likely to be forthcoming; the majority of banks have also indicated support in terms of their overdrafts and project loans until 30 September 2010.

 

Taking into account the above, the Company will also require further equity investment to ensure an adequacy of working capital. As mentioned above the Group is actively pursuing access to further equity and subject to the ability to negotiate a standstill agreement, the Board has reasonable confidence that this will be forthcoming.

 

The Company's Directors are required to consider whether it is appropriate to prepare the half yearly financial statements on the basis that the Group and the Company are going concerns.   However, given the current uncertainties of both the financial and property markets, the Group's need to reduce its debt profile and to maintain adequate working capital, the Directors have concluded that these conditions represents a material uncertainty which could affect the Company's and the Group's ability to continue as a going concern. After making enquiries and considering the uncertainties outlined above, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing these interim financial statements.

 

Going concern is also further discussed in note 1 to the accounts.

 

Related party transactions and transactions with Directors

Details of related party transactions and transactions with Directors entered into during the period have been provided in note 4 to the accounts.

 

Corporate governance

Your Board has previously indicated that it views the appointment of one or more non-executive directors to be of great importance. Efforts are currently being made to find suitable candidates to fill these roles.

 

The future

We are currently investigating a number of options to increase the level of Eatonfield's recurring income and provide a degree of stability to the Group's financial position. As highlighted above, we also continue to pursue options to raise further equity and therefore increase the level of working capital funding available to the Group.

 

We are hopeful that, once achieved, these two measures would provide the Group with sufficient financial flexibility to withstand the difficult conditions in the property sector, which we believe will remain challenging for the time being. Whilst we recognise the difficulties that the Company continues to experience, I would like to repeat our belief that the major projects in our portfolio have the potential, in the fullness time, to deliver significant shareholder value.

 

I would like to conclude by thanking all of our employees for their continued efforts.

 

Paul Williams

Chairman

31 March 2010

  

 

 

Eatonfield Group plc		6 Months	6 Months	Year
Consolidated Statement of Comprehensive Income		ended 31-Dec-09	ended 31-Dec-08	ended 30-Jun-09
		Unaudited	Unaudited	Audited
		£	£	£
REVENUE		2,710,062	5,037,042	8,455,643
Direct costs		(2,479,099)	(5,723,584)	(9,131,019)
Inventory write down		(3,195,623)	(2,370,000)	(3,800,237)
Trading loss		(2,964,660)	(3,056,542)	(4,475,613)
Investment property revaluation (losses) / gains		(226,625)	-	4,377,343
Administration expenses		(1,471,897)	(1,463,456)	(2,805,966)
LOSS FROM OPERATIONS		(4,663,182)	(4,519,998)	(2,904,236)
Loss on disposal of  plant and equipment		-	-	(20,436)
Share of result from joint venture		(655,127)	(151,835)	(55,185)
Finance income		530	24,655	51,009
Other operating income		8,603	-	10,621
Finance costs		(1,173,964)	(344,260)	(2,770,666)
Provision for profit share		-	(5,340,000)	-
LOSS BEFORE TAXATION		(6,483,140)	(10,331,438)	(5,688,893)
Income tax		1,383,990	2,850,289	1,336,338
LOSS FOR THE PERIOD		(5,099,150)	(7,481,149)	(4,352,555)
LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY		(5,099,150)	(7,481,149)	(4,352,555)
Loss per share - basic (pence)	8	(2.24)	(3.24)	(1.88)
Loss per share - diluted (pence)	8	(2.24)	(3.24)	(1.88)

 

The results for the period are derived from continuing activities.

 

 

 

 

Eatonfield Group plc
Consolidated Statement of Financial Position		31-Dec-09	31-Dec-08	30-Jun-09
As at 31 December 2009		Unaudited	Unaudited	Audited
		£	£	£
ASSETS
NON CURRENT ASSETS
Property, plant and equipment		47,737	68,095	57,186
Investment properties		5,114,954	24,122,057	22,306,626
Investment in joint ventures
Share of joint venture		(870,476)	(312,000)	(215,349)
Deferred taxation		-	-	1,356,880
		4,292,215	23,878,152	23,505,343
CURRENT ASSETS
Inventories		16,653,699	16,826,080	19,307,394
Assets held for resale		19,206,999	919,154	976,154
Trade and other receivables		5,885,430	5,240,122	5,207,815
Cash		3,521,356	1,700,223	1,815,376
		45,267,484	24,685,579	27,306,739
TOTAL ASSETS		49,559,699	48,563,731	50,812,082
EQUITY AND LIABILITIES
EQUITY
Issued capital	7	4,429,678	2,306,478	2,306,478
Share premium		15,625,070	8,218,939	8,218,939
Merger reserve		(1,499,000)	(1,499,000)	(1,499,000)
Share based payment reserve		1,170,269	1,190	-
Profit and loss account		(1,761,998)	208,558	3,337,152
TOTAL EQUITY		17,964,019	9,236,165	12,363,569
NON CURRENT LIABILITIES
Provision for deferred tax		350,000	87,705	3,068,879
Provision for profit share		-	5,340,000	-
Obligations under finance leases		-	33,197	25,790
Financial liabilities		-	15,256,603	1,123,570
Other liabilities		400,000	-	400,000
		750,000	20,717,505	4,618,239
CURRENT LIABILITIES
Financial liabilities		28,801,528	16,681,704	29,361,049
Taxation		-	262,173	-
Trade payables and other payables		2,010,262	1,651,290	4,453,025
Obligations under finance leases		33,890	14,894	16,200
		30,845,680	18,610,061	33,830,274
TOTAL LIABILITIES		31,595,680	39,327,566	38,448,513
TOTAL EQUITY AND LIABILITIES		49,559,699	48,563,731	50,812,082

 

 

Eatonfield Group plc		6 Months	6 Months	Year
Consolidated Statement of Cash Flows For the period to 31 December 2009		ended 31-Dec-09	ended 31-Dec-08	ended 30-Jun-09
		Unaudited	Unaudited	Audited
		£	£	£
Loss before taxation		(6,483,140)	(10,331,438)	(5,688,893)
Adjustments to reconcile loss before taxation to cash generated from/(used in) operating activities
Net finance costs		1,173,434	319,605	2,719,657
Loss on disposal of property, plant and equipment		-	-	20,436
Share of joint venture operating result		655,127	151,835	55,185
Share based compensation			(14,669)	(15,859)
Depreciation		10,267	35,558	42,563
Investment property revaluation losses/(gains)		226,625	-	(4,377,343)
Increase in provision for profit share		-	5,340,000	-
Decrease in inventories and assets for resale		1,422,850	4,560,867	8,179,553
(Increase)/decrease in trade and other receivables		(619,371)	817,462	953,774
Increase /(decrease) in trade and other payables		587,236	(489,477)	(250,439)
Cash (utilised in)/generated from operations		(3,026,972)	389,743	1,638,634
Taxation		21,991	1,158,964	1,004,067
Cash (utilised in)/generated from operating activities		(3,004,981)	1,548,707	2,642,701
Investing activities
(Increase) in investment properties		(34,953)	(390,432)	(439,657)
Acquisition of property, plant and equipment		(818)	(2,610)	-
Proceeds from the disposal of property, plant and equipment		-	-	65,217
Interest received		530	24,655	51,009
Cash used in investing activities		(35,241)	(368,387)	(323,431)
Financing
Net proceeds from the issue of ordinary shares		6,825,831	-	-
Net movement in short term borrowings		(559,521)	(450,086)	12,621,048
Net movement in long term borrowings		(1,123,570)	(411,635)	(13,786,349)
Finance costs paid		(388,438)	(344,260)	(1,058,377)
Repayment of finance leases		(8,100)	(8,813)	(14,913)
Cash from/(used in) financing		4,746,202	(1,214,794)	(2,238,591)
Increase/(decrease)  in cash and cash equivalents		1,705,980	(34,474)	80,679
Opening cash and cash equivalents		1,815,376	1,734,697	1,734,697
Closing cash and cash equivalents		3,521,356	1,700,223	1,815,376

 

 

 

 

 

Eatonfield Group plc
Consolidated Statement of Changes in Equity
As at 31 December 2009

 

	Issued capital	Share premium	Merger reserve	Share based payment reserve	Retained earnings	Total equity
	£	£	£	£	£	£
Balance at 1 July 2008	2,306,478	8,218,939	(1,499,000)	15,859	7,689,707	16,731,983
Loss for the period	-	-	-	-	(7,481,149)	(7,481,149)
Share based compensation	-	-	-	(14,669)	-	(14,669)
Balance as at 31 December 2008	2,306,478	8,218,939	(1,499,000)	1,190	208,558	9,236,165
Profit for the period	-	-	-	-	3,128,594	3,128,594
Share based compensation	-	-	-	(1,190)	-	(1,190)
As at 1 July 2009	2,306,478	8,218,939	(1,499,000)	-	3,337,152	12,363,569
Loss for the period	-	-	-	-	(5,099,150)	(5,099,150)
Share based compensation	-	(326,500)	-	1,170,269	-	843,769
Issue of shares	2,123,200	7,732,631	-	-	-	9,855,831
Balance at 31 December 2009	4,429,678	15,625,070	(1,499,000)	1,170,269	(1,761,998)	17,964,019

 

Issued capital

 

The issued capital account includes the par value for all shares issued.

 

Share premium account

 

This comprises the premium over nominal value on issued shares. The use of this reserve is restricted by the Companies Act 2006.

 

Merger reserve

 

The Group reconstruction before flotation in 2006 was accounted for in accordance with the principles of merger accounting.

 

Share based compensation

 

This reflects the expected value to the company of options issued to date upon vesting for the period to 31 December 2009. During the period under review the share based payment reserve has been increased for the fair value (in accordance with IFRS 2) of share warrants issued in the six months to 31 December 2009.

 

Notes to the Interim Financial Statements

 

1.         Accounting policies and basis of preparation

 

These interim financial statements do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. They do not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 30 June 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.    The Group's statutory accounts for the year ended 30 June 2009 have been delivered to the Registrar of Companies. The report of the auditors was unqualified, but did include a reference to matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

 

The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups, in the preparation of these interim financial statements.

 

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.  Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events and are believed to be reasonable under the circumstances.  Actual results may differ from these estimates.  In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended 30 June 2009.

 

The interim financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 30 June 2010. The Group financial statements for the year ended 30 June 2009 were prepared under International Financial Reporting Standards.

 

These interim financial statements have been prepared on a consistent basis and format except for the adoption of IAS 1 'Presentation of Financial Statements (Revised 2007)', IFRS 8 'Operating Segments' and the amendment to IFRS 2, "Share-based payments: vesting conditions and cancellations".

 

Changes in accounting policies

 

IAS 1 Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive Income (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The first option has been adopted by the Group. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group.

 

IFRS 8, Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ("CODM"). By contrast IAS 14, "Segmental Reporting" required business and geographical segments to be identified on a risks and rewards approach. The business segmental reporting bases used by the Group in previous years are those which are reported to the CODM, so the changes to the segmental reporting for 2009 will be in respect of additional disclosure only.

 

 

Going Concern

 

These accounts have been prepared on a going concern basis.

 

Since the start of the current financial year, by way of a placing, the Group has raised £6.9 million, net of expenses, part of which has been utilised in reducing overdraft facilities and secured loans. Since the period end, a further £1,000,000 has been made available to the Group, £900,000 of which is under an Equity Drawdown Facility with Jenard Properties Ltd (one of Eatonfield's joint venture partners). This is to be used to support the Group's working capital requirements and £100,000 of this facility was drawn down on 9 March 2010, resulting in the issue of 10,000,000 new shares. It is envisaged that this facility will provide the Group with sufficient working capital until 31 August 2010.

 

Efforts are currently being made to secure a "standstill" agreement from the Company's banks, whereby each bank would agree not to make formal demands for repayment of their facilities during a specific period. Indications have already been received from a number of the banks concerned, that such an agreement is likely to be forthcoming; the majority of banks have also indicated support in terms of their overdrafts and project loans until 30 September 2010.

 

The Board is continuing to pursue options to raise further equity funding for the Company in order

to ensure that it has adequate working capital for the foreseeable future. Subject to the ability to negotiate a standstill agreement with its banks, the Board has reasonable confidence that this will be forthcoming.

 

However, the Directors consider that the greatest risk facing the Group, given the state of the financial markets and current economic uncertainty, and more particularly because a number of its development projects are of a long term nature, is the uncertainty as to whether it will be able to obtain further debt funding. This could impact upon the Group's ability to bring such projects to a profitable conclusion.

 

The Directors have prepared cash flow projections to the end of March 2011. These forecasts indicate that the Group should have sufficient working capital for that period, taking into account a realistic approach to income generation, the control of costs, the ability to negotiate a standstill agreement with the Company's banks and to raise fresh equity.

 

The Group has an overdraft facility to be repaid by 30 September 2010. In addition, the Group has a number of loans secured on particular assets, which are repayable at the earlier of the sale or at the end of a specific term.

 

However, should the overdraft facility not be renewed or other loan facilities become payable prior to the sale of the related asset, and in the absence of alternative funding sources, the Group would be required to dispose of assets to realise cash to meet its debts as they fall due. Given current market conditions, there is a risk that the assets would take an extended period to realise cash, which might also be less than their book values. As a result, should the Group be unable to repay its bank borrowings from asset sales or the refinancing of existing assets, a material uncertainty exists which casts doubt over the Group's ability to continue as a going concern.

 

The Directors have concluded that after making the appropriate enquiries and taking into consideration the uncertainties outlined above, there is a reasonable expectation that the Group and the Company have sufficient resources to continue in operational existence for the foreseeable future. For this reason, the financial statements have been prepared on a going concern basis.

 

2.         Segmental Reporting

Revenue, loss before taxation and net assets were all derived from the Group's principal activity of property development. All operations are carried out in the United Kingdom.

 

 

3.         Investment Properties

               

The investment properties valuations are based upon Directors' valuations and are considered appropriate in spite of the economic downturn.

 

4.         Related Party Transactions and transactions with Directors

 

In the Placing undertaken in November 2009, Rob Lloyd, Chief Executive Officer, invested £800,000 in cash, which was funded by a redemption of a similar amount of his loan account with Eatonfield Developments Limited ("EDL").

 

On 16 September 2009, EDL, RLRL and Rob Lloyd agreed to an amendment to the Profit Sharing Agreement entered into on 1 October 2008. In consideration of the sacrifice of the entitlement to a share of profits from an increase in value in the Corus Rail Site, the Birkwood Site and in respect of profits arising from profit sharing agreement with Jenard Ystalyfera Limited and EDL, a compensation payment of £1.4 million was agreed as payable to RLRL on the basis of the satisfactory review by the Board of a report, which addressed the fair value of the compensation payment and which was prepared for the Company by PKF. This sum was credited to a loan account within the Group.

 

This consideration was then capitalised, resulting in the issue of 28,000,000 New Ordinary Shares to RLRL. Appropriate approval to the transaction was obtained from shareholders.

 

Rob Lloyd also assigned to the Company the benefit of £1.63 million of his loan account with EDL, resulting in the issue of 32,600,000 New Ordinary Shares to him, his connected parties, certain other members of his family, Paul Williams, Keith Mather and two other senior employees of the Group.

 

The above transactions were considered to be related party transactions according to AIM Rule 13 and accordingly, as the only independent Director, Paul Williams considered, having consulted with Evolution, nominated adviser to the Company, and having reviewed the report prepared by PKF (referred to above) that the terms of these transactions relating to Rob Lloyd and RLRL were fair and reasonable insofar as Shareholders are concerned.

 

On 7 October 2009, the Group entered into an agreement to lease Haycroft Farm from Rob Lloyd for a period of 999 years. This property, which was already occupied in part by the Company under a tenancy agreement, was independently valued at £3.3m by Chartered Surveyors, Mason Owen. A tenancy has also been granted to RLRL, terminable at any time in writing. No commercial rent is payable under this agreement to compensate Rob Lloyd for the absence of interest on his loan account. An option has also been granted to Rob Lloyd to repurchase Haycroft Farm for its then current market value and the option is exercisable until the tenth anniversary of the option agreement.

 

An amount of £65,706 was owed to Rob Lloyd as at 31 December  2009 (June 2009: £753,555), notwithstanding withdrawals totalling £139,687 in the period 1 July 2009 to 31 December 2009 which are referred to in note 6(i) below.

 

5.         Post Balance Sheet Events

 

On 18 February 2010, the Company was notified by its principal banker that a previously agreed £900,000 overdraft facility had been withdrawn.

 

On 9 March 2010, the Company issued 10,000,000 new ordinary shares by way of a private placing. The shares were issued at a price of 1p per share to Jenard Properties Limited, one of the Company's joint venture partners.

 

On 10 March 2010 the Company announced the finalisation of a structured Equity Drawdown Agreement for £900,000 from Jenard Properties Limited.

 

 

6.         Breaches of banking covenants

 

During the period under review the following banking covenants were breached:

 

(i)         Subordination Agreements

   

In contravention of subordination agreements with two of the Company's banks amounts have been withdrawn from a director's loan account by the Company's Chief Executive Officer amounting in total, over the period July 1 2009 to December 31 2009, to £139,687.

 

(ii)         Repayment of Anglo Irish Bank Loan

 

A project loan provided by Anglo Irish Bank was due to be repaid by 29 August 2009. Since this date interest has continued to be paid on the due date and furthermore, the rental income received from the relevant property has facilitated further debt reduction of approximately £30,000 per quarter. In addition, an amount of £172,000, previously held by Anglo Irish Bank in a blocked deposit account, has been released to the bank, enabling further reduction of the loan.

 

Notwithstanding that negotiations for the renewal of the facility are continuing and that Anglo Irish Bank has not initiated any demand for repayment of the loan, failure to repay the loan on time constitutes a covenant breach in so far as the other Banks are concerned.

 

(iii)        Principality Building Society

           

            The facility provided by the Principality Building Society includes a financial covenant          which requires its loan not to exceed 70% of the value of the property secured by that loan. The latest offer received for the property secured by that facility was of an amount which would indicate that this covenant has potentially been breached. Principality Building Society has granted a formal waiver of this breach until 30 June 2010.

 

In respect of the above breaches no formal demand has been made by any of the Company's banks for repayment of any of the facilities although one bank has formally reserved its rights.

 

7.         Analysis of the changes in Share Capital

 

		6 Months ended 31-Dec-09 Unaudited		6 Months ended 31-Dec-08 Unaudited		Year ended 30-Jun-09 Audited
	No of shares	£	No of shares	£	No of shares	£
Authorised
Ordinary shares of 10p	-	-	30,000,000	3,000,000	30,000,000	3,000,000
Ordinary shares of 1p	389,267,025	3,892,670	-	-	-	-
Deferred shares of 9p	23,414,775	2,107,330	-	-	-	-
		6,000,000		3,000,000		3,000,000

 

 

 

 

 

 

 

 

Allotted, called up and fully paid
Ordinary shares of 10p
At the beginning of the period/year	23,064,775	2,306,478	23,064,775	2,306,478	23,064,775	2,306,478
Issued in the period	350,000	35,000	-	-	-	-
Capital reorganisation	(23,414,775)	(2,341,478)	-	-	-	-
As at end of the period/year	-	-	23,064,775	2,306,478	23,064,775	2,306,478
Ordinary shares of 1p
At the beginning of the period/year	-	-	-	-	-	-
Capital reorganisation	23,414,775	234,148	-	-	-	-
Issued in the period	208,820,000	2,088,200	-	-	-	-
As at end of the period/year	232,234,775	2,322,348	-	-	-	-
Deferred shares of 9p
At the beginning of the period/year	-	-	-	-	-	-
Capital reorganisation	23,414,775	2,107,330	-	-	-	-
Issued in the period	-	-	-	-	-	-
As at end of the period/year	23,414,775	2,107,330	-	-	-	-

 

On 14 September 2009 the Company issued 350,000 ordinary shares of 1p each at an effective price of 10p per share to two former non executive directors in consideration of services provided to the Company in respect of their former roles.

 

On 19 November 2009, the Company undertook a Capital Reorganisation, whereby each Existing Ordinary Share of 10p each of the Company was subdivided and converted into one New Ordinary Share of 1p each and one Deferred Share of 9p each. Authorised but unissued Existing Ordinary Shares were also subdivided into 10 New Ordinary Shares. Each New Ordinary Share has the same rights (including voting and dividend rights and rights on a return of capital) as each Existing Ordinary Share had prior to the Capital Reorganisation. The Deferred Shares created under the Capital Reorganisation have no voting or dividend rights and, on a return of capital, will have the right to receive the amount paid up thereon only after the holders of the New Ordinary Shares have received, in aggregate, the amount paid up thereon together with the sum of £10,000,000 per New Ordinary Share.

 

On the same date, by way of a placing, 207,820,000 new ordinary shares of 1p were issued at a price of 5p, raising £6.9 million net of costs. As a result of the placing, warrants were issued to the Company's brokers over 6,531,000 ordinary shares at a price of 5p per share. These warrants are valid until 27 October 2011. In addition, on the same date, warrants to subscribe for 11,835,461 ordinary shares were issued to West Register (Investments) Limited at a price of 5p per share. These warrants are valid until 16 September 2014.

 

Also on 19 November 2009, 1,000,000 ordinary shares were issued to Evolution Securities Limited in consideration for advice in connection with the placing and warrants to subscribe for up to 700,000 ordinary shares at a price of 15p were issued to Paul Brett and Leslie Allen-Vercoe as part of the joint venture agreement entered into on 17 September 2009. These warrants are valid until 18 November 2010.

 

On the same date, the authorised share capital was increased by £3,000,000 by the creation of a further 300,000,000 ordinary shares of 1p each.

 

 

8.         Loss per ordinary share

 

	6 Months	6 Months	Year
	ended 31-Dec-09	ended 31-Dec-08	ended 30-Jun-09
	Unaudited	Unaudited	Audited
	£	£	£
Loss for the period	(5,099,150)	(7,481,149)	(4,352,555)
Weighted average number of shares
for basic earnings per share	227,654,608	230,647,750	230,647,750
Dilutive potential ordinary shares:
Employee share options	-	-	-
Warrants	-	-	-
For fully diluted earnings per share	227,654,608	230,647,750	230,647,750
Basic profit per ordinary share (p)	(2.24)	(3.24)	(1.88)
Fully diluted profit per ordinary share (p)	(2.24)	(3.24)	(1.88)

 

The weighted average number of ordinary shares for calculating the diluted loss per share for the period ended 31 December 2009 is identical to those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and would therefore not be dilutive under the terms of International Accounting Standard ("lAS") 33.

 

For the purposes of comparison the prior period loss per share figures have been amended to place them on the same post capital re-organisation footing as for the period under review.

 

The board of Directors approved the interim report on 31 March 2010.

 

 

INDEPENDENT REVIEW REPORT TO EATONFIELD GROUP PLC

 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2009 which comprises Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report, including the conclusion, has been prepared for and only for the Company for the purpose of meeting the requirements of the AIM Rules for Companies and for no other purpose.  We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

Directors' responsibilities

The half-yearly financial report, is the responsibility of, and has been approved by the directors.  The directors are responsible for preparing and presenting the half-yearly financial report in accordance with the AIM Rules for Companies.

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee ("IFRIC") pronouncements as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ("IFRIC") pronouncements, as adopted by the European Union.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2009 is not prepared, in all material respects, in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ("IFRIC") pronouncements as adopted by the European Union, and the AIM Rules for Companies.

 

 

Emphasis of matter - Going concern

In forming our conclusion, which is not qualified, we have considered the adequacy of the disclosure made in the basis of preparation note to the interim financial statements concerning the Group's ability to continue as a going concern.  The disclosure indicates the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern.  The interim financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

 

 

 

 

 

 

BAKER TILLY UK AUDIT LLP

                                                                                                                                                      

Chartered Accountants

3 Hardman Street

Manchester

M3 3HF

31 March 2010