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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Radicle Proj. | LSE:RDP | London | Ordinary Share | GB00B0996108 | ORD 3P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.375 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 9181E
Radicle Projects Plc
04 January 2010
Preliminary Audited Results for the year to 30 June 2009
The Company has today announced the audited results for the year to 30 June
2009.
Enquiries
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| Radicle Projects PLC | 020 7016 5300 |
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| Tim Bennett, CEO | |
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| | |
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| Charles Stanley Securities | 020 7149 6000 |
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| Nominated Adviser | |
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| Russell Cook / Ben Johnston | |
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Chairmans Statement
The results for the year to 30 June 2009 reflect the challenging circumstances
that have faced Radicle andmany other companies during this year. Whilst we
anticipate stabilisation of the business circumstances in the next financial
year, significant improvements in the business will depend largely on the
restructuring Radicle is currently working on.
The 2009 result reflects the higher operating expenses following acquisition of
the apples projects and outgoings on projects that are not yet mature and
producing positive cash flow, and coupon financing costs.
On 31 March 2009, the Company announced that the Board had been concentrating on
implementing cost reductions and developing strategies to bring the Company's
portfolio of agricultural assets through to production as quickly as possible so
as to increase cash flow.
Whilst a cost reduction program has been implemented by the Board, at this stage
the Group is yet to generate profitable cash flow from its agricultural assets
due to a number of factors including reduced grape and wine sales as a result of
market oversupply conditions, and the immature stage of growth of its apples
projects, which were established in June 2008 and are expected to be in
commercial production in 2010 for Early Season apples, and 2011 for Organic
apples. Radicle has also been impacted by the failure, and subsequent
liquidation, of Timbercorp Limited, a manager of certain of the Groups
biological assets. Whilst preserving cash by not making full payment for
management fees, these fees are still included in liabilities. Anticipated
positive cash income was not forthcoming in 2008-09.
Unexpected write downs affecting profit, but which are reflected in the 2009
valuations, include the provisions for the loss of value on the Timbercorp
managed assets, which have not yet been realised, as well as a write down on the
future cash value of the grains co-production project (primarily due to a softer
wheat market as a result of the global financial crisis coupled with a strong
Australian dollar and high global wheat stocks) and a reduced valuation on the
Gumeracha vineyard (as a result of reduced prices for grapes and wine, again
mainly as a result of the global financial crisis).
The valuations produced for the year ended 30 June 2009 have all been completed
taking into account current market conditions, in compliance with IFRS
standards, with the exception of the Timbercorp assets as described below.
The cropping rights held by Radicle for biological assets managed by Timbercorp
will form part of the sale of Timbercorps assets by the liquidator. The
Directors believe from press and liquidator reports that the liquidator is
seeking to progress sales of almond assets and eucalypt timber. The Directors
expect a net positive cash result to Radicle when the liquidation is settled.
Additionally, going forward, the Directors believe that the Group will save
operational expenses as a result of the sale of Timbercorp managed assets.
The Group historically has had higher operating expenses in the first half of
the financial year, and many of the expenses for the 2009-10 financial year have
already been met from existing cash resources.
However, the remaining available cash is insufficient to fund the coupon payment
due on the Convertible Loan Notes on 31 December 2009 of approximately GBP1.21m
and other liabilities of the Group and its agricultural assets. The Group is
therefore raising GBP0.82m, before expenses, in order to provide additional
working capital and to secure the agreement of Noteholders to the Note
Restructure, the main features of which are a deferral of the coupon payment due
in December and reduction in the face value of the Notes (more detail below).
On 16 September 2009 the Company announced that it has reached an agreement in
principle with the holders of the Notes representing more than 75 per cent. of
the Noteholders, to restructure the terms of the Notes. This agreement was not
legally binding.
On 30 December 2009, Shareholders voted to approve the placing subject to the
Noteholders voting to amend the note terms in line with the "in principle"
agreement. The Noteholders are due to meet on 8 January 2010 to approve the
proposals and the Directors believe that the necessary majority of Noteholders
will agree to the proposals
The Company is aiming to finalise the Note Restructure with a majority of
Noteholders imminently. Completion of the Note Restructure would be conditional
upon the passing of the Resolutions at the General Meeting.
The Note Restructure allows for a deferral of the 8 per cent. coupon from 31
December 2009 to 30 June 2010. It may also provide the Company an opportunity to
repurchase a significant proportion of the Notes at a discount to their par
value. The Directors believe that when the Note Restructure is implemented, the
proceeds of the Placing should allow the Company to conduct an asset sale
program and potentially tender early to repay the Notes, significantly
decreasing the gearing of the Company and improving the balance sheet, as well
as saving significant cash expense by way of coupon payments.
Sales of immature assets not yet generating cash will also reduce the outlays on
operating expenses and should return net cash to the Group, provided always that
sales are made at or near valuation.
Subject to the Note Restructure proceeding, it is the intention of the Board to
continue to focus Radicle's skills and experience on agribusiness project
selection and management, which the Directors believe will create a more revenue
generative agribusiness management, development and services business in future.
To that end, the Company is in early discussions with a number of parties with
strategic interest in Australian agribusiness investment, with a view to
identifying both potential clients and Shareholders.
As a result of the lack of available capital in the equity markets and the
tightening of debt markets Radicle has done all it can to preserve cash during
2008-09. The beginning of the year saw Radicle make some minor secondary
investments.
Performance this year has been marred by several factors:
The first is due to a significant provisioning for the write-down of assets
managed by Timbercorp Limited. In April 2009 Timbercorp entered voluntary
administration. Expected practice in these circumstances is for management to be
changed so that projects continue. In this case, at the time of writing only
Timbercorp Mangoes and Olives projects had transitioned to new management.
Timbercorp entered liquidation on 29 June 2009.
In the meantime, due to the lack of funding from the manager, the current crop
proceeds were largely used to fund the next crop. These projects were to have
provided a significant cash injection to Radicle on an annual basis. At this
stage we anticipate the project interests will be sold by the Liquidator and the
proceeds apportioned between Timbercorps creditors and Growers including
Radicle. As a result, your Board has reduced the carrying value of the assets to
approximately 33% of the 2008 valuations in respect of the Timbercorp managed
Eucalypt plantations, and around 20% of the 2008 valuations for the Almond
assets. The 2008 valuations were carried out by independent valuation experts
and included in the audited 2008 accounts.
Radicle received notice from the liquidator of Timbercorp of expected
distributions from the Eucalpyt plantations on 22 December 2009 which support
the 33% assumptions, and other information on the process of liquidation of
other Timbercorp managed project units.
We will keep the market posted as the Timbercorp business is unwound and the
proceeds are distributed.
The performance of the Managed Investments sector in Australia, and the
unanticipated outcomes arising from the administration of Timbercorp in
particular, have resulted in Radicles decision to suspend for now the part of
its business devoted to secondary MIS assets. We will seek to realise cash from
the sale of existing MIS interests and either invest the funds in agribusinesses
directly managed by Radicle, or reduce debt.
A write down in the value of the Gumeracha vineyard (due to grape oversupply,
reduced prices and a high number of vineyards for sale) has adversely impacted
profits but a recovery in value is expected and this asset is improving under
the appointed Operational Manager; Clarity Limited. The first wine produced
under the "Clarity" label (owned by Adelaide Hills Investments Limited, of which
Radicle owns 19.9%) was released for sale in November 2009.
A major rainfall event in the middle of the Western Australian harvest season
caused a significant quality downgrade to much of our grain project wheat pool
and reduced an anticipated small profit into a moderate loss for a net
difference of about GBPGBP0.45m (AU$0.8m). At the time of writing the Australian
crop is progressing well but lower overall prices are expected with higher
global stocks and a strong Australian dollar reducing competitiveness. A small
cash surplus is anticipated from this project in 2010 and the final crop for
this project will be established in 2010 and harvested by January 2011. A return
in excess of GBP2.4m (AU$5m) is currently anticipated at that time.
This years loss includes higher farm operating expenses due to a larger number
of assets owned. In future years as our remaining assets mature we expect cash
generation to significantly exceed expenses. We also anticipate cash from asset
sales and sustainable revenue streams from the development of new business in
operational agribusiness asset management and from a stake in agribusiness funds
management.
On a more positive note, in 2007-08 Radicle invested in two significant
intensive apple production projects in South Australia. These projects have
developed very well and have significantly increased in value over the course of
the last 12 months. The Organic apple project is expected to begin production in
2011 harvest season, whilst a small but marginally commercial crop is expected
from the Early Season apple project in 2010. These projects support Radicles
claimed ability to identify early stage projects with excellent prospects with a
focus on niche markets that have lower risk than main markets. Whilst these
projects have consumed significant cash resources they are developing well and
we expect excellent future cashflows from these operations starting in the
2010-11 year.
Radicles direct management of the Paulownia asset is working well and the
valuation of that asset has remained consistent with last year (decrease in fair
value of GBP0.1m (AU$0.2m)). This asset is now an attractive and reliable one
which is expected to produce significant cashflows in the next few years, with
early thinning harvests expected to be starting within 12 months. It is
surprising that management changes recognised in the valuers report did not
translate into improved value. The valuer was far more conservative in yield
estimates this year compared to last.
The change of board members has saved significant cost since January 2009, and
has improved operational oversight of the assets as all directors are frequently
in Australia and able to meet informally regularly whilst maintaining the UK
jurisdiction of Radicle Projects PLC, holding each board meeting in London and
focusing management decisions and investor relations in London.
The cost of servicing debt is a major expense for Radicle and one which is being
addressed by the agreement with Noteholders, struck "in principle" in September
2009. The main terms of this "in principle" agreement are:
· A deferral of the interest coupon payment due on 31 December 2009 until 30
June 2010.
· A reduction in the face value of notes to 60% of the original face value, with
an escalation on a monthly basis to full face value on remaining outstanding
notes by June 2012.
· Reduced interest coupon payments based on the reduced face value.
Radicle is aware that currently a significant proportion of issued notes are
likely to be sold to Radicle at a discounted face value if Radicle is able to
fund such purchases by asset sales, raising new equity or refinancing. This will
have a major impact in reducing overall debt, especially if the current benefit
provided by a strong Australian dollar relative to the Pound can be capitalised
upon. Accordingly this activity is your Boards first priority beyond the
optimal operation of the Group and its assets.
Radicle began its process of transition to an agribusiness operational manager
with interests in funds management in 2008, with the development of the timber
fund and the establishment of the Guernsey Management company Radicle Investment
Management Limited ("RIM") and Radicle Timber Plantations Limited, a Guernsey
regulated company. At present these entities are dormant but RIM has signed a
Memorandum of Understanding (MOU) to merge with entities in the next few months
to form a funds management business, the scope of which is anticipated to be
modestly profitable but which will allow Radicle Projects to take project
management and operational management opportunities on its own and in
partnership with others in the sector. If the MOU is taken through to a
completed transaction, Radicle Projects PLC will own slightly less than 20% of
RIM.
Radicle Projects PLC has agreed with Radicle Research LLP that Radicle
Researchs annual fee will be reduced from 1 July 2008 to 50% of the originally
contracted amount. Radicle Research also agreed to take up to GBP0.88m of its
outstanding fee in shares in Radicle Projects PLC in December 2009, and has
agreed in principle to take future payment in shares at prevailing market
prices.
During 2009-10 Radicle is continuing to seek to establish funds management and
operational management opportunities with third party investors.
Key areas for future development are:
· Identifying and seeking investors wanting to develop, intensify or renovate
agricultural holdings in order to take development profits and exit by sale.
· Managing mature large scale farms for strategic and institutional investors,
especially those seeking to secure food supplies for growing populations ("food
security funds").
We believe Radicle and its partners can demonstrate skill in both categories and
have been in discussions with potential investors since May 2009. We believe
that our specialisation in our home region of Asia/Pacific, with a focus on
Australia, will serve us well in both markets as Australia, New Zealand,
Malaysia and possibly some Pacific nations have opportunities to develop and
export agribusiness production, and at present regularly produce crops surplus
to the needs of their own populations. They also have well developed
infrastructure and similar legal and financial standards to those employed by
the UK and EU.
Cost Management
As a growing company Radicle needs to manage costs whilst not destroying
inherent value embodied in growth opportunities.
Also, excessive cost cutting at farm level is counter-productive as production,
value and harvest proceeds all suffer.
The Board has taken and is taking action to try to reduce operational costs,
reduce debt and maximise return on funds investment going forward. Direct
management of assets has proved to give Radicle better control over the costs
and timing of payments.
Financial Review
For the year to 30 June 2009, the Group reported a loss before tax of
GBP6,292,833 (2008: restated loss of GBP2,980,859). Loss per share increased
from 12.33p (restated) to 32.15p.
A prior year adjustment has been made in the accounts in respect of the
treatment of investments. Please see note 26 for more information.
Revenue for the year was GBP0.62 million (2008: GBP1.13 million), reflecting
lower returns from vineyard assets due to the market downturns. No revenue was
earned from advisory services this year (2008: GBP0.43 million).
Details of the contribution from each project are set out in the Operating
Review below.
Operating expenses for the year were GBP3.45 million (2008: GBP2.64 million). In
addition, GBP0.05m (2008: GBP0.43m) was attributable to one-off costs in
relation to the Timber Fund, which may in due course be partially recoverable.
Further details of this are given below.
The value of the Groups biological assets was slightly lower than last year,
totaling GBP14.35 million at 30 June 2009 (2008: GBP15.36 million). Total assets
fell to GBP20.92 million (2008: GBP28.83 million) as a result of the loss for
the year. Cash and cash equivalents represented GBP1.17 million (2008: GBP7.72
million).
Under IFRS accounting rules, an increase or decrease in biological asset
valuations must be reflected in the income statement. In the year to 30 June
2009 the gain reflected in the income statement is GBP0.26 million (2008: loss
of GBP1.75 million), before the exceptional write-down in fair value of GBP1.83
million in relation to the assets managed by Timbercorp Limited (in
liquidation).
The value of the Groups Paulownia timber plantation was revalued at GBP5.12
million (2008: GBP5.15 million). This write down followed a reduction in
projected future timber volumes from the Paulownia plantations. These losses
were offset by increases in the fair value of some of the Groups other
biological assets, notably the Organic and Early Season apple projects, the
valuation of which increased by GBP1.01m and GBP0.21m respectively. Further
details are set out in the operating review.
As at 30 June 2009 the Group had net assets of GBP3.75 million (2008: GBP9.82
million).
Trade and other payables fell to GBP2.09 million (2008: GBP3.90 million). As
noted in the 2008 accounts, the 2008 balance included the purchase of the Apples
project (GBP1.31 million) and 50% of the Grain project (GBP1.59 million)
contracted prior to 30 June 2008 but settled in July 2008.
Dividend
On the basis of the results for the year under review, the Board will not
propose the payment of a final dividend (2008: no dividend). Following the loss
for the year the Company does not have adequate distributable reserves to make a
dividend payment although the Board intends to take appropriate measures to
enable the Company to resume dividend payments as soon as possible.
Timber Fund
As noted in the 2008 accounts, the Company announced on 9 June 2008 that it
intended to establish and manage Radicle Timber Plantations Limited, a fund
which was to be listed on AIM. In light of prevailing stock market conditions
the Board decided not to proceed with the AIM listing. Transaction costs in
relation to the timber fund totalling GBP0.05 million (2008: GBP0.43 million)
were incurred in the year to 30 June 2009 and the total costs incurred to date
are approximately GBP0.48 million.
Operating Review
Premium Wine Grapes, Adelaide Hills (South Australia)
The 2009 harvest of wine grapes at the Adelaide Hills vineyards has been
successfully completed. Radicle had sufficient water to ensure a healthy crop.
Record heat-wave temperatures were recorded over the harvest period but this did
not impact upon fruit quality and quantity harvested. The overall result appears
to be positive however there were a number of factors which impacted on the
value of the crop. These factors included the oversupply of Chardonnay in the
market, the decrease in global demand for Australian wine and the decision by
one of the buyers of grapes from the site in previous years electing not to
continue its contract (as it was entitled to do under contract provisions
between them and the previous owners).
The Gumeracha Vineyard is operated by Hop and Grape Pty Ltd, the operating and
management company at Radicles existing Adelaide Hills vineyards. The
maintenance of the vineyard during the year with the assistance of Fosters
grower relationship team has resulted in a much improved vineyard and the
changes to plant nutrition are beginning to show positive results. The industry
is still in major upheaval and we will be working to ensure our grapes are sold
at prices above average to new buyers that we developed last season.
Timbercorp Managed Assets
In April 2009 Timbercorp Securities Limited and a number of other entities owned
and controlled by the Timbercorp group entered voluntary administration. As part
of its MIS secondaries acquisition program, Radicle had acquired project units
in projects managed by Timbercorp and its subsidiaries.
In many cases, the assets on the site were owned by Timbercorp and licenced to
Growers including Radicle for periods up to 20 years. The administrator (now
liquidator) has sought to sell these assets, and a proportion of the asset sale
value will be returned to Growers along with any net income from harvests in the
2009 season not yet distributed.
Radicle had acquired very small stakes in some projects in order to test the
viability of the project. In circumstances where the project was not considered
viable, Radicle has "opted out" of the project, saving future expenses. The
status of Radicles interest in each of these projects is detailed below, and is
current at the time of writing.
Olives
Whilst the agronomic performance of the Olives project has, we understand, been
satisfactory, as a result of the Timbercorp liquidation Radicle has little
information on the financial performance of the project for the year.
Almonds
Radicle warned in December 2007 that Almond crops and returns may be adversely
impacted by drought. Final results are yet to be determined but initial
indications are that yields and quality are close to expectations for the 2009
season, although the strength of the Australian dollar against the US currency
reduced prices paid. Whilst the agronomic performance of the Almonds project
has, we understand, been satisfactory, as a result of the Timbercorp liquidation
Radicle has little information on the financial performance of the project for
the year.
Since 30 June 2009 Radicle has estimated the value of the Timbercorp Almonds
assets based on anticipated net cash returns as a result of the sale of assets
to third parties by the Timbercorp Liquidator.
Mangoes
During the year Radicle acquired a small interest in mango assets. Radicle has
disclaimed this project interest as the likely costs of maintaining it were
greater than the value of the asset following the Timbercorp liquidation.
Apples
The Organic Apple Project and Early Season Apple Project were well established
with 550 apple trees per unit at 30 June 2009, following their acquisition by
Radicle in 2008. Radicle expects the trees to reach full maturity in 2013 with
cashflow from harvests beginning in the 2010 harvest season for Early Season
apples and the following year for organic apples.
The project term is initially planned for 15 years (for the Early Season) and 17
years (for the Organic Apples) with the potential to extend at the end of the
periods. Five different varieties of apples have been planted on the Organic
Apple Project: Fuji (20%), Pink Ladies (30%), Sundowner (20%), Gala (20%) and
Granny Smith (10%). On the Early Season Apples Project three varieties have been
established equally: Granny Smith, Gala and Pink Ladies.
The areas chosen for planting the Early Season Project were selected primarily
for their warmer climate. The warmer weather encourages early ripening resulting
in apples going to market earlier - during January and February of each year -
when market prices are typically higher. The land owning company, Rivercorp Land
and Water Limited, in which Radicle holds a 19.6% stake, has invested in netting
on part of the orchard to prevent sunburn, hail damage and superficial skin
damage, which is expected to result in high quality crops with a high percentage
of first grade fruit relative to industry standards.
The Organic Apples Project is established in a non-traditional apple production
area to reduce pest and disease pressure on the crop. Both of these measures put
the crop into market niches where potential competition is very limited.
The apples projects are both managed by Advanced Horticultural Management Ltd
("AHM"). Incorporated in 1997, it operates as the Responsible Entity to maintain
and manage the project and to harvest the crops. It currently operates as
Responsible Entity over six agribusiness Managed Investment Schemes and is
regulated by Australian Financial Services.
AHM and its related party Clarity Agri-Management Pty Ltd also operate the
Adelaide Hills and Gumeracha vineyards for Radicle, as well as overseeing
operational management of the Companys Paulownia assets.
BP Fruits Pty Ltd, Riverlands largest processor and marketer of apples, has
been appointed to process and market the apple crop. The apples will be sold to
domestic and international markets using distribution networks already developed
by BP Fruits Pty Ltd over the past 20 years.
Radicle is a shareholder of Rivercorp Land and Water Limited and benefits from a
share of dividends on a pro-rata basis for income derived from leasing the
grower project land and from the sale of the assets at the end of the investment
term. As noted above, Rivercorp developed netting over a portion of the project
orchard, and in light of difficult market conditions for fund raising elected to
reduce the dividend payout from the company from that initially expected by
Radicle, from about GBP0.09m (AU$0.18m) to approximately GBP0.04m (AU$0.09m).
Wheat and Barley
In 2008 Radicle acquired 1500 co-production units (an amount of farming area
capable of producing 40 tonnes of grain, with the actual size varied between
regions relative to their productivity, managed in similar fashion to
sharefarming interests) in wheat (90%) and barley (10%) growing areas of
Australia.
The harvest of the first crop was completed at about the time of the publication
of the 2008 Report and Accounts. We reported a successful crop at the time with
substantial pre-sales at good prices. Unfortunately in the following weeks a
significant proportion of the crop was downgraded due to rain at harvest and
prices anticipated for "prime hard" high protein grain were not achieved upon
sale. Additionally some grain was held for sale in longer term pools resulting
in a lower cash yield that anticipated in the 2009 year.
This is a three year investment and is expected to be very strongly cash
generative in the third (and final) year, 2011. Positive cashflows to Radicle
are anticipated in 2010 after a loss of around GBP0.3m (AU$0.6m) in 2009, a
result about GBP0.5m (AU$1m) worse than originally budgeted.
Forestry
Radicles forestry assets are primarily the Paulownia hardwood plantations.
Radicle took control of the management of the Queensland sites in June 2007 as
the result of an arrangement with the administrator of Queensland Paulownia
Forests Limited ("QPFL"), in order to secure Radicles investment in Paulownia
forestry with QPFL following the management companys failure to make
satisfactory progress.
There has been adequate rainfall on most of the Queensland sites and there has
been significant growth in the trees as a result of soaking rains that have been
lacking in the last few years. No additional water expenses have been incurred
to water these trees. The health of the plantations has improved.
Following the purchase of the QPFL assets from the administrator, Radicle
undertook a full review of the Paulownia assets. The asset review revealed that
as a result of very low inputs and poor silvicultural management in the past,
its immediate productive capacity was lower than had been projected.
Nevertheless with improved management the Paulownia plantations offer the
prospect of significantly higher returns well into the future. Radicle began a
program of more intensive management and pruning, as well as soil and leaf
nutrient analysis and fertiliser program development and implementation. In
January 2009, trees were marked for thinning harvests, allowing optimisation of
the growth of remaining trees and improved coppice performance based on earlier
trial results. Thinning harvests are expected to produce positive cashflows and
an opportunity to develop markets in order to meet apparent demand for Paulownia
timber.
Radicle is now equipping the plantations for good coppice management and to
increase productivity by applying best practice silvicultural techniques to the
remaining trees, whilst also reducing costs as far as possible. Radicle remains
positive about the future of the Paulownia and is now focusing attention on the
marketing and sale of timber from maturing plantations.
Bio forests
In the 2007-08 year Willmott Forests Limited ("Willmott"), an ASX listed
plantation forest manager based in Melbourne, acquired the balance of the
management company for this project. The Directors were supportive at the time,
on the basis that Willmott Forests is a professional business which is well run.
Radicle expected to see very high quality plantation management as a result of
Willmotts project management.
Two seasons of extremely heavy rain have made weed control and tree
establishment slower than planned on these sites. This has delayed cashflow
somewhat but personal communications between Radicles board and Willmotts
executive management indicate cashflows should be forthcoming within 12 months.
Radicle will closely monitor Willmotts management and will seek to maximize
value from this investment.
Radicle owns Willmott Shares which are listed on the Australian Stock Exchange.
The value of these shares has been hit by the swing against MIS management
businesses as a result of the collapse of both of the largest MIS timber
managers, Timbercorp and Great Southern, within months of each other during
2009.
General secondaries acquisitions
At present Radicles funds do not allow us to seek further acquisitions.
Profit Drivers and Risks
The agribusiness sector is exposed to the vagaries of climate, droughts, fire,
flood, pests and disease. These all play a part in Radicles ultimate
profitability. Radicles asset allocation model provides for acquisitions across
a wide range of regions within Australia, as well as a range of industries and
management teams with a view to minimising these risks over the whole portfolio.
Unfortunately the 2008-09 financial year created significant unforeseen impacts
on the value and cashflow of some of Radicles assets.
Some areas of Australia continue to experience severe drought but for Radicle
the 2008-09 year has not been dramatically adversely impacted by drought, apart
from wheat production in some states, especially New South Wales. Radicle has
purposely chosen assets with relatively low exposure to drought risk and Radicle
relies heavily on expert operational management to deliver the best possible
outcomes under all circumstances.
Currency
As a UK-based, Sterling-denominated company operating with an Australian
subsidiary, Radicle has an exposure to exchange risk, but the Board has
developed a treasury management policy which Radicle believes is appropriate to
manage this risk under current circumstances.
In the year to 30 June 2009 the Group reported a currency loss of GBP0.01m
(2008: GBP0.12m gain).
The Board takes the view that our shareholders are invested for exposure to food
and fibre returns in markets of global significance, and not in the ability to
hedge or trade currencies, so Radicle does not speculate on hedges, but does
seek to reduce downside exposure. Where the Board believe it is appropriate and
cost effective, Radicle will buy hedge products from leading providers that
limit downside movement to a modest percentage of the value of the asset, but
also limit the Groups opportunity to benefit from upside movement.
At present Radicle is seeking to lock in a beneficial exchange rate position to
provide a natural hedge to the debt secured by assets held by Radicle in the
security pool (valued in Australian dollars). The strong Australian currency
relative to the Pound offers Radicle an opportunity to prevent calls on the
security pool as a result of currency fluctuations by acquiring options to
purchase currency at prevailing rates at some time in the future. This "natural
hedge" is expected to help reduce overall debt as assets are sold to buy back
convertible notes.
Deal flow
2009 saw Radicle settle asset selection, development and acquisition deals.
Radicle is now developing deal flow channels which are expected to enable the
Company to act as a Project Manager and operator in large project acquisitions,
developments, operations and management, rather than to acquire assets on its
own balance sheet.
The Company remains alert to changes in taxation and other Australian government
policy areas which may provide opportunities for Radicle to expand its
activities profitably.
Radicle benefits from referrals from major asset managers, a result of strong
relationships which have been cultivated over many years. The Radicle brand is
becoming recognised amongst the financial and agribusiness community in
Australia and Radicle expects that the opportunity to build deal flow in the
future will be strong.
Valuation of biological assets
The accounting policy adopted by the Board is to value biological assets at fair
value, as determined by an independent third party. The fair value methodology
provides an independently determined valuation (based on discounted future
cashflow analysis consistent with IAS 41) for all biological assets. In some
cases Radicle uses acquisition cost as an approximation of fair value if the
assets have been recently purchased. In addition, in 2009 the fair value of the
Bioforest asset has also been estimated by the valuers using acquisition cost.
Key Performance Indicators
· Yield. Radicle seeks to obtain an overall yield from its pool of assets (value
increase plus cash return) of 12-16% per annum before tax.
· Fair value. An indicator of Radicles performance is its ability to improve
the fair value (after adding back cash returns) of the biological assets it
owns. Fair value improvements arise primarily from managements ability to
maintain or improve yields, reduce operational costs, maintain or improve prices
achieved (in GBP terms) and to manage risk so that excessive discount premiums
are not applied to compensate for manageable asset risk. Radicles performance
is difficult to evaluate when different valuers with different approaches need
to be engaged, and discussions on the valuation methodology should bring about
more stable and reliable valuations in future.
· Cash generation. Radicle has previously sought to acquire assets that are
projected to deliver positive cash flow within the first 12 months from
acquisition. In at least 70% of cases, Radicle now seeks to acquire long term
assets which will provide cash returns to the Group over an extended period
without repeated acquisition costs.
· Risk reduction by diversification of assets across a range of climates and
regions. Over time, Radicle intends to build its base of assets across at least
five significant growing areas of Australia, with not more than 50% of its
assets in any particular region. In the year to 30 June 2009 Radicle operated
about 80% of its project assets in five major areas of Australia, namely Central
Queensland, northern NSW, northwestern Victoria, Western Australia and South
East South Australia.
· Diversification of assets across a range of industries. Radicles base of
assets is spread across at least five industries, but not more than 15, as
targeted in the establishment of its diversification KPI in 2007. Radicle does
not have more than 40% of its assets in any particular industry sector.
Board Changes and Future Developments
The Company has invested in Australian assets and the Board took the decision to
strengthen the governance of the Company in the region where most of its income
originates and most of its assets are located. Accordingly in January 2009 the
Company announced the appointment to the Board of two Australian residents:
Myles Stewart-Hesketh and John McLennan. Both are now up for re-election at the
AGM.
Myles is focusing on the transition from the current business model to the new
business where Radicle will manage forestry and agricultural projects
off-balance sheet for other parties. His principle focus has been on the Saudi
Arabian Food Security Fund (SAFSF), largely because Myles previously worked for
the government of Saudi Arabia and has excellent contacts at both the government
level and at a senior level in the Saudi private sector. SAFSF involves both the
Saudi government and private sector investing in offshore agriculture to
guarantee food security in future years. The Saudis are particularly interested
in Australia and Brazil and in crops such as wheat, barley, soybean, sugar and
corn as well as cattle and sheep.
Myles has also been working with John McLennan on the Chinese Wine Trust, which
involves aggregating multiple vineyards (including Radicle's two vineyard
assets) and wine production facilities to produce wine for the rapidly growing
Chinese market. Radicle will manage the Trust, which will be financed by an
investment bank, which will later exit from the project by an IPO on the
Shanghai Stock Market. Radicle will benefit from the project, not only through
proceeds from the sale of our two vineyard assets, but also from management
fees, which are likely to be substantial.
John has been working with Myles on developing the possibility of a wine fund
and has also endeavored to develop a market for our wine in China as a backup to
the existing customers and also a potential buyer of the Clarity brand of wine
that we will be marketing. John has also been working on the marketing of our
Paulownia timber in readiness for the first harvest in 2010.
John has also been involved in the development of the new business strategies
and sees the opportunity of selling assets to repay debt and moving away from
investing in MIS as the only way forward for the Group. Focus has been on
reducing the overheads of the Group and looking at new ways to generate income.
Outlook
Radicle is focused this year on seeking purchasers for its assets in order to
reduce debt whilst increasing the value of its existing assets, developing
additional revenue streams, optimising management and structure, and reducing
costs further where possible. As stated last year, in the current world economic
climate, traditional sources of finance from banks and capital markets cannot be
relied upon. Radicle is therefore actively developing strategic partnerships for
joint investment and management in areas of its expertise.
Going Concern
In the year to 30 June 2009 the Group suffered a shortfall of cashflow, with
cash costs being higher than income from investments in biological assets.
As mentioned in previous trading updates, the Directors are dealing with this by
reducing operating costs where appropriate and raising new finance.
The directors have secured irrevocable commitments from investors for a placing
to provide net working capital of GBP0.78m, which will be available to the Group
in January 2010. This amount is not sufficient on its own to support Radicles
budgeted cash outgoings for the next twelve months.
The placing meets the condition set out in the "in principle" agreement between
Radicle and Noteholders to allow the restructuring of the convertible note to
proceed, which includes the deferral of the 31 December 2009 coupon payment of
GBP1.21m to 30 June 2010 and the reduction in the face value of the note to an
initial level of 60% of the original face value, allowing Radicle to buy debt
back from willing sellers at a discount to the original face value. The face
value will escalate back to 100% in equal increments between implementation of
the agreement and June 2012, the original maturity date. Interest coupons going
forward will be payable on the reduced but escalated face value.
In addition to the above, the board plans asset sales which will meet coupon
payments on the convertible note and allow for debt reduction with the surplus
proceeds.
Radicle has accrued expenses in relation to Timbercorp in 2009 for services
which were not fully provided due to Timbercorps administration. The board
expects net cash proceeds from the sale of assets and any remaining 2009 crop
proceeds from assets formerly managed by Timbercorp to be returned to Radicle.
Radicle intends to negotiate these matters with Timbercorps Liquidator in the
near future. Radicles directors have estimated the net cash return to Radicle
from the sale of Timbercorp managed assets to be approximately GBP0.30m. There
is uncertainty in relation to the size of the net return and the timing of this
process as the liquidation of Timbercorp is outside of Radicles control.
Radicle is also currently in early stage discussions with several potential
buyers of some of its other assets. The board hopes to close asset sales at
prices near to existing valuations within the next twelve months. These funds
will provide sufficient cash to further reduce debt. Radicles board will manage
sales of assets so that proceeds can be applied to meet the Companys
objectives. Radicle will need to sell assets in order to remain a "going
concern" and pay interest coupons on the loan notes outstanding.
The Directors believe that whilst there is some uncertainty about the timing and
amount of asset sales and consequent cashflows, following the deferral of the
note interest payment on 31 December 2009 and after the proceeds of the 2009
placing are provided to the Group, it is appropriate to prepare the financial
statements on a going concern basis.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
+------------------------------------------------------------------+--------------------+------------------+
| | Year ended | Year ended |
| | 30 June | 30 June |
| | 2009 | 2008 |
| | | Restated |
+------------------------------------------------------------------+--------------------+------------------+
| | GBP | GBP |
+------------------------------------------------------------------+--------------------+------------------+
| Continuing operations | | |
+------------------------------------------------------------------+--------------------+------------------+
| Revenue | 617,569 | 1,126,392 |
+------------------------------------------------------------------+--------------------+------------------+
| (Loss)/gain arising from changes in fair value of biological | 261,647 | (1,751,099) |
| assets | | |
+------------------------------------------------------------------+--------------------+------------------+
| Decrease in fair value of biological assets due to liquidation | (1,837,257) | - |
| of Timbercorp | | |
+------------------------------------------------------------------+--------------------+------------------+
| Increase in fair value of financial assets at fair value through | 4,067 | 1,536,523 |
| profit or loss | | |
+------------------------------------------------------------------+--------------------+------------------+
| Operating expenses | (3,449,871) | (2,642,206) |
+------------------------------------------------------------------+--------------------+------------------+
| Exchange (loss)/gain | (5,548) | 115,173 |
+------------------------------------------------------------------+--------------------+------------------+
| Investment income | 102,044 | 539,251 |
+------------------------------------------------------------------+--------------------+------------------+
| Finance costs | (1,396,971) | (1,332,841) |
+------------------------------------------------------------------+--------------------+------------------+
| Loss on disposal of investments | - | (144,961) |
+------------------------------------------------------------------+--------------------+------------------+
| Impairment of available for sale investment | (29,564) | - |
+------------------------------------------------------------------+--------------------+------------------+
| Aborted transaction costs | (54,622) | (427,091) |
+------------------------------------------------------------------+--------------------+------------------+
| Impairment of property, plant and equipment | (533,891) | - |
+------------------------------------------------------------------+--------------------+------------------+
| | ________ | ________ |
+------------------------------------------------------------------+--------------------+------------------+
| Loss on ordinary activities before taxation | (6,292,833) | (2,980,859) |
+------------------------------------------------------------------+--------------------+------------------+
| Taxation | 160,129 | 628,408 |
+------------------------------------------------------------------+--------------------+------------------+
| | ________ | ________ |
+------------------------------------------------------------------+--------------------+------------------+
| Lossprofit for the year attributable to equity holders of the | (6,132,704) | (2,352,451) |
| parent | | |
+------------------------------------------------------------------+--------------------+------------------+
| | ======== | ======== |
+------------------------------------------------------------------+--------------------+------------------+
| Loss per share: | | |
+------------------------------------------------------------------+--------------------+------------------+
| Basic | (32.15)p | (12.33)p |
+------------------------------------------------------------------+--------------------+------------------+
| Fully diluted | (32.15)p | (12.33)p |
+------------------------------------------------------------------+--------------------+------------------+
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2009
+---------------------------------------------------------+------------------------+------------------------+
| | 2009 | 2008 |
| | | Restated |
+---------------------------------------------------------+------------------------+------------------------+
| | GBP | GBP |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Non-current assets | | |
+---------------------------------------------------------+------------------------+------------------------+
| Property, plant & equipment | 1,655,418 | 2,329,491 |
+---------------------------------------------------------+------------------------+------------------------+
| Available for sale investments | 1,958,274 | 1,931,493 |
+---------------------------------------------------------+------------------------+------------------------+
| Biological assets | 11,380,969 | 11,759,621 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | 14,994,661 | 16,020,605 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Current assets | | |
+---------------------------------------------------------+------------------------+------------------------+
| Biological assets | 2,966,125 | 3,602,888 |
+---------------------------------------------------------+------------------------+------------------------+
| Inventories | 130,521 | 98,676 |
+---------------------------------------------------------+------------------------+------------------------+
| Trade & other receivables | 1,654,143 | 1,385,434 |
+---------------------------------------------------------+------------------------+------------------------+
| Cash & cash equivalents | 1,169,759 | 7,723,115 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | 5,920,548 | 12,810,113 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| Total assets | 20,915,209 | 28,830,718 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| Current liabilities | | |
+---------------------------------------------------------+------------------------+------------------------+
| Trade & other payables | 2,093,472 | 3,899,510 |
+---------------------------------------------------------+------------------------+------------------------+
| Current tax | - | 95,471 |
+---------------------------------------------------------+------------------------+------------------------+
| Finance lease obligations | 9,540 | 2,783 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | 2,103,012 | 3,997,764 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| Net current assets | 3,817,536 | 8,812,349 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Non current liabilities | | |
+---------------------------------------------------------+------------------------+------------------------+
| Finance lease obligations | - | 9,429 |
+---------------------------------------------------------+------------------------+------------------------+
| Borrowings | 15,058,475 | 14,870,395 |
+---------------------------------------------------------+------------------------+------------------------+
| Deferred tax liabilities | - | 131,251 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | 15,058,475 | 15,011,075 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| Total liabilities | 17,161,487 | 19,008,839 |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | ________ |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Net assets | 3,753,722 | 9,821,879 |
+---------------------------------------------------------+------------------------+------------------------+
| | ======== | ======= |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Equity | | |
+---------------------------------------------------------+------------------------+------------------------+
| Share capital | 578,219 | 578,219 |
+---------------------------------------------------------+------------------------+------------------------+
| Share premium account | 9,370,827 | 9,370,827 |
+---------------------------------------------------------+------------------------+------------------------+
| Share based payment reserve | 90,880 | 87,975 |
+---------------------------------------------------------+------------------------+------------------------+
| Own shares held | (151,241) | (151,241) |
+---------------------------------------------------------+------------------------+------------------------+
| Fair value reserve | 1,109,197 | 1,075,566 |
+---------------------------------------------------------+------------------------+------------------------+
| Translation reserve | 1,767,532 | 1,705,890 |
+---------------------------------------------------------+------------------------+------------------------+
| Convertible bond | 284,165 | 284,165 |
+---------------------------------------------------------+------------------------+------------------------+
| Retained earnings | (8,186,660) | (2,053,956) |
+---------------------------------------------------------+------------------------+------------------------+
| | _________ | _________ |
+---------------------------------------------------------+------------------------+------------------------+
| | | |
+---------------------------------------------------------+------------------------+------------------------+
| Total equity attributable to equity holders of the | 3,753,722 | |
| parent | | 9,821,879 |
+---------------------------------------------------------+------------------------+------------------------+
| | ======== | ======== |
+---------------------------------------------------------+------------------------+------------------------+
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2009
+-------------------------------------------------------+-------------------------+-------------------------+
| | Year ended | Year ended |
| | 30 June | 30 June |
+-------------------------------------------------------+-------------------------+-------------------------+
| | 2009 | 2008 |
| | | Restated |
+-------------------------------------------------------+-------------------------+-------------------------+
| | GBP | GBP |
+-------------------------------------------------------+-------------------------+-------------------------+
| | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Operating activities | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| (Loss)/profit for the period before taxation | (6,292,833) | (2,980,859) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Adjustments for: | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Depreciation of property, plant and equipment | 173,013 | 78,704 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Investment income | (102,044) | (539,251) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Finance costs | 1,396,971 | 1,332,841 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Foreign exchange loss/(gain) | 5,548 | (115,173) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Increase in inventories | (30,682) | - |
+-------------------------------------------------------+-------------------------+-------------------------+
| Increase in trade and other receivables | (268,709) | (1,197,204) |
+-------------------------------------------------------+-------------------------+-------------------------+
| (Decrease)/increase in payables | (1,806,038) | 785,706 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Change in fair value of biological assets | (261,647) | 1,751,099 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Decrease in fair value of biological assets due to | 1,837,257 | - |
| liquidation of Timbercorp | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Change in fair value of financial assets through | (4,067) | (1,536,523) |
| profit or loss | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Share based payment charge | 2,905 | 30,376 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Loss on disposal of investment | - | 144,961 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Impairment of property, plant & equipment | 533,891 | - |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Cash used in operations | (4,816,435) | (2,245,323) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Interest paid | (1,208,891) | (638,647) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Tax paid | (69,132) | (671,712) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Net cash (used)/generated in operating activities | (6,094,458) | (3,555,682) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Investing activities | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Purchases of biological assets | (352,694) | (2,405,252) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Interest received | 98,298 | 529,512 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Purchase of investments | - | (153,384) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Purchases of property, plant & equipment | (10,724) | (2,070,422) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Proceeds on disposal of property, plant & equipment | 77 | - |
+-------------------------------------------------------+-------------------------+-------------------------+
| Income received from investments | 3,746 | - |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Net cash used in investing activities | (261,297) | (4,099,546) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Financing activities | | |
+-------------------------------------------------------+-------------------------+-------------------------+
| Repayments of borrowings | (2,783) | (1,319) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Dividends paid | - | (572,219) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Net cash (used)/generated in financing activities | (2,783) | (573,538) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Net increase/(decrease) in cash and cash equivalents | | |
| | (6,358,538) | (8,228,766) |
+-------------------------------------------------------+-------------------------+-------------------------+
| Cash and cash equivalents at beginning of period | 7,723,115 | 16,104,982 |
+-------------------------------------------------------+-------------------------+-------------------------+
| Effect of foreign exchange rate changes | (194,818) | (153,101) |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ________ | ________ |
+-------------------------------------------------------+-------------------------+-------------------------+
| Cash and cash equivalents at end of period | 1,169,759 | 7,723,115 |
+-------------------------------------------------------+-------------------------+-------------------------+
| | ======= | ======= |
+-------------------------------------------------------+-------------------------+-------------------------+
Notes
1. Basis of accounting
The financial statements have been prepared in accordance with International
Financial Reporting Standards and IFRIC interpretations endorsed by the European
Union ("IFRS") and in accordance with the Companies Act 1985 applicable to
companies reporting under IFRS.
The financial statements have been prepared on the historical cost basis, except
for the revaluation of biological assets and certain financial instruments.
2. Going concern
During the year ended 30 June 2009, the Group produced a loss before tax of
GBP6,292,833.
In the accounting period to 30 June 2009 the company suffered a shortfall of
cashflow, with cash costs being higher than income from investments in
biological assets.
As mentioned in previous trading updates, the Directors are dealing with this by
reducing operating costs where appropriate.
On 30 December 2009 existing shareholders approved a placing of new shares at 3p
to raise GBP822,000 subject to Noteholders agreeing changes drafted and agreed
in principle in September 2009. The Noteholders are due to meet toapprov the
changes on 8th January 2010, formalising the agreement. The directors believe
that the necessary majority of Noteholders will approve the proposals.
This amount is not sufficient on its own to support Radicles budgeted cash
outgoings for the next twelve months.
The change to the terms of the convertible note include the deferral of the 31
December 2009 coupon payment of GBP1.21million to 30 June 2010 and the reduction
in the face value of the note to an initial level of 60% of the original face
value, allowing Radicle to buy debt back from willing sellers at a discount to
the original face value. The face value will escalate back to 100% in equal
increments between implementation of the agreement and June 2012, the original
maturity date. Interest coupons going forward will be payable on the reduced but
escalated face value.
The board plans asset sales which will meet coupon payments on the convertible
note and allow for debt reduction with the surplus proceeds. In order to meet
the proposed deferred interest payment due on 30 June 2010, the Group will need
to generate net cash inflows from asset disposals, prior to 30 June 2010, of
GBP1,500,000 based on current budgets. This amount will change depending on
which assets are sold.
Radicle has accrued expenses in relation to Timbercorp in the 2009 financial
year for services which were not fully provided due to Timbercorps
administration. Radicles board expects net cash proceeds from the sale of
assets and any remaining 2009 crop proceeds from assets formerly managed by
Timbercorp to be returned to Radicle. Radicles directors have estimated the net
cash return to Radicle from the sale of Timbercorp managed assets to be
approximately GBP0.3m. There is uncertainty in relation to the size of the net
return and the timing of this process as the liquidation of Timbercorp is
outside of Radicles control.
Radicle is currently in early stage discussions with several potential buyers of
some other of its assets. The board hopes to close asset sales at prices near to
existing valuations within the next twelve months. In addition to meeting the
interest payment due in 2010 of GBP1.21m plus the 31 December 2010 coupon
payment of around GBP0.76m (depending on asset sales, bond buybacks and
conversions by that time) these funds are expected to provide sufficient cash to
further reduce debt. Radicles board will manage sales of assets so that
proceeds can be applied to meet the Companys objectives. Radicle will need to
sell assets in order to remain a "going concern" and pay interest coupons on the
loan notes outstanding.
On this basis, the Directors believe that whilst there is some uncertainty about
the timing of asset sales and consequent cashflows, following the deferral of
the note interest payment on 31 December 2009 as anticipated, and after the
proceeds of the 2009 placing are provided to the Group, it is appropriate to
prepare the financial statements on a going concern basis.
3. Prior year adjustment
The Groups unlisted investments were previously classified as 'available for
sale. These should have been classified as financial assets at fair value
through profit or loss (refer to the accounting policies for further details).
A prior year adjustment has been made in respect of this mis-classification in
prior years. The income statement now reflects the increase in fair value of
these financial assets. The impact on the 2008 result was to decrease the loss
by GBP1,075,566, comprising an increase in fair value of investments at fair
value through profit of loss of GBP1,536,523 and a deferred tax charge of
GBP460,957.
There was no impact on total equity, however the fair value reserve has
decreased by GBP1,075,566 and retained earnings increased by the equivalent
amount. The effect on earnings per share in 2008 was an increase of 5.64p.
4. The Annual Report is available on the Groups website
www.radicleprojects.com and from the Radicles registered office at 19/20
Grosvenor Street, London W1K 4QH.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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