TIDMCGA
RNS Number : 1187H
China Gateway International PLC
23 May 2011
For Immediate Release
23 May 2011
CHINA GATEWAY INTERNATIONAL PLC
("CHINA GATEWAY", "CGI" or the "COMPANY")
AUDITED RESULTS FOR THE PERIOD ENDED 30 NOVEMBER 2010
NOTICE OF ANNUAL GENERAL MEETING
CHINA GATEWAY INTERNATIONAL PLC
CHAIRMAN'S STATEMENT
As for most companies, 2010 was a difficult year for CGI Plc and
your board has had to change its priorities in order to move
forward.
In my statement that accompanied the interim figures, I said
that we needed to conclude the Section 106 Planning Agreement and
obtain the final planning permission before we could complete the
first Seat Sales for the Manston site.
The cost of this was to be financed from part of the proceeds of
the sale of land at Dover. Despite the completion date being
deferred by some three months, the purchaser was still unable to
complete and their deposit was forfeited.
Unfortunately, these delays have meant that the Seat Sales
contracts could not be completed with the result that the valuation
of Manston has been drastically written down in these financial
statements.
After discussions with the Local Authority and consultations
with our lending bank, Israel Discount Bank, it was agreed that our
overdraft facility would be increased so that we could pursue
planning on the Dover site in line with the latest Dover District
Council plan for the area.
At Manston, the work on the Section 106 Agreement has
subsequently progressed with costs financed within the increased
overdraft facility referred to above. The terms of the Section 106
Agreement have been agreed in principle and we await the next
meeting of the Thanet District Council planning committee.
We believe that there is still significant opportunity once
planning permission has been obtained to achieve a satisfactory
return on Manston should the full development value be
achieved.
These events are set out in more detail in the Chief Executive's
Review and the Directors' Report and I hope that in my next
statement I can bring you some positive news of progress. In
closing I would like to thank the Directors for the immense amount
of work they have put in on planning matters for both sites and to
the Israel Discount Bank and our major shareholders for their
continued support.
Robin Bolton
Chairman
20 May 2011
CHIEF EXECUTIVE'S REVIEW
Introduction
As explained below, the Company was obliged to change its
emphasis during the period under review in order to concentrate on
the potential value of the Dover properties, which the Directors
believe can be realised within a relatively short timeframe.
This change of emphasis has resulted in the Manston properties,
which are held as fixed assets, being written down although an
increase in the value of the Dover properties is not fully
recognised as they are held as current assets. The net result is
that negative equity is disclosed in the Statement of Financial
Position and a significant loss is shown in the Statement of
Comprehensive Income.
Nevertheless, the Board remains hopeful that the value at
Manston can be re-established in due course, in addition to the
realisation of increased value at Dover. The key to this is the
availability of funding, which currently restricts the rate at
which the Company can move forward not withstanding the continued
support from our bankers.
Dover
On 5 March 2010 the Company announced it had exchanged contracts
for the disposal of its Dover properties to Dover Gateway Limited
(DGL) for a cash consideration of GBP5 million. DGL failed to
complete the purchase and the contract was rescinded on 22
September 2010.
In October 2010, Israel Discount Bank (IDB) commissioned Drivers
Jonas Deloitte (DJD) to report on values at Western Heights and
Farthingloe. This report detailed values, assuming the land is
suitable for a wholly private residential development and with the
special assumption that planning permission has been granted, that
totalled GBP35.8 million. The report also stated that prior to the
granting of such permission, but with the assumption that the site
is suitable for residential development including a degree of
affordable housing, the values total GBP16.97 million.
The Company has been working closely with Dover District Council
(DDC) to ensure that its proposed scheme for such development fits
in with their Core Strategy document. On 20 December 2010 the
Council published the 'East Kent Local Investment Plan (EKLIP) 2011
- 2026' which outlines the 'programme of projects that will
translate the East Kent Sustainable Communities Strategy's vision
and priorities into reality'.
Under the heading 'Western Heights/Farthingloe' the EKLIP stated
'A proposed mix use development comprising hotel, residential homes
and commercial and leisure facilities'.
The Company have instructed an experienced team to progress the
project which includes Cgms Consulting, WSP Transport, MVA
Associates and LCE Architects and work on the Master Plan commenced
in January 2011.
I am pleased to report that the Company received a letter on 8
April 2011 from Mr Michael Dawson, Director of Community and
Development at DDC stating that 'the emerging proposals for the
Western Heights/Farthingloe scheme have the potential to make a
very significant contribution to its wider regeneration strategy'.
Mr Dawson also confirmed that DDC is 'willing in principle to agree
a PPA/service level agreement that includes a realistic set of
programme targets'. This agreement is an agreement between DDC and
CGI to provide a project management framework for handling a major
planning application.
Manston
As previously reported the agreement to lease between 900,000
and 1,100,000 square foot of business accommodation on
approximately 50 acres of the Company's Manston Site which was
entered into on 22 June 2007 expired in May 2010. The continued
global financial downturn and the lack of available development
funding resulted in the Company being unable to commence
construction of the business accommodation before the pre lease
agreement expired.
As a result, the strategy for the development of Manston was
revised to develop the Euro-China Cultural Technology Industry Hub
(E-CC & TIH) Project. Progress was hampered by the delay in
concluding the Section 106 Agreement for the development of the
Manston site and the consequent delay in the granting of final
planning permission in line with the earlier Resolution to Grant
issued by Thanet District Council. The delay was due primarily to
the unavailability of funds that the Company had expected to be
available from the sale of the Dover properties as detailed above
and in the section on Funding below.
My last report detailed the position regarding progress with
regard to Seat Sales as part of the E-CC & TIH project where
contract terms had been agreed with initial seat purchasers.
Unfortunately these sales were unable to proceed to completion as
the purchasers were not willing to exchange contracts in the
absence of full planning permission.
I am however pleased to report that the necessary surveys and
reports have been carried out and the terms of the Section 106
Agreement have been agreed in principle by all parties. This matter
will be referred to the next meeting of the Thanet District Council
Planning Committee.
A copy of a valuation of the Manston Site that was carried out
by DJD on behalf of IDB in October 2010 was provided to the Company
in April 2011. The Valuation Report indicated a value for the site
of GBP3,490,000 rising to GBP4,210,000 once the Section 106 is
signed and planning permission is implemented. The lower of these
figures has been included in these financial statements. This
figure is dramatically lower than the previous valuations carried
out. Matthews & Goodman LLP prepared a valuation report on the
freehold interest of the site dated 26 November 2008 based on the
pre-lease agreement and determined the value to be in the order of
GBP55,650,000.
Following the expiration of the agreement to lease Matthews
& Goodman LLP considered the position taking into account the
Seat Sales structure detailed in last year's review and commented
on the Directors valuation as follows "If all the seats are sold,
then the composite receipts realised together with the profit from
the management contract for the site would be equal to or exceed
the previous gross value of the completed development. It follows
that the Market Value of the site in its existing configuration,
given this successful conclusion, could be similar to that as
previously reported".
The October 2010 Valuation Report also indicated that the "Gross
Development Value of Land at Manston Business Park, based on the
special assumption that the employment zoned land is developed to
provide 1.48 million sq ft of mixed use commercial accommodation
and a Pre-Let Agreement is in place, as at the date of this report,
is GBP125,000,000". The report also stated that the value of the
land should the Company not pursue the Section 106 agreement would
be as low as GBP1.8 million however as stated above significant
progress has already been achieved in this respect.
As soon as a valid planning permission is received the Company
will review the opportunities for the Manston site and recommence
discussions with potential tenants from China.
Trading Result
As explained above the Company has been obliged to change its
focus during the year to the realisation of the potential value of
its development properties. Due to the protracted nature of the
abortive disposal of the Dover properties and the unavailability of
funding to progress its property investment or development
activities the Directors have sought to keep the Company's
operating costs as low as possible. The retention of the
non-returnable deposit received on the abortive Dover sale and the
write back of amounts written off the value of these properties
under a previous impairment review (together with the control of
costs) has resulted in a profit after taxation for the year of
GBP5.2 million before the write down of value of the Manston
property. The loss after that write down and after taxation is
GBP44.4 million.
Statement of Financial Position
As illustrated by the Statement of Financial Position on page 17
of the Financial Statements the significant write down in the value
of the Company's investment property has resulted in an overall
negative equity position. As referred to above the Company has been
progressing both the section 106 issues at Manston and the
preparation of the application for planning consent at Dover in
close consultation with its bankers and has in addition made what
cost savings as are practical. Accordingly I believe that the
Company has taken and continues to take appropriate action to
address the negative equity position.
Funding
IDB continued to provide a GBP31.4 million facility throughout
the year and discussions to reschedule the facility took place
during the latter part of the year . Shortly after the accounting
date IDB formally agreed to extend the facility to GBP34.5 million
for a period to 30 November 2011 subject to compliance with
covenants. In addition they have indicated that should sufficient
progress have been achieved with regard to planning permission at
both Dover and Manston by 30 November 2011 they will give
favourable consideration to an extension of the existing facility
to at least 31 May 2012, subject to continuing compliance with the
conditions associated to the facility.
The on-going expenses of the Company remain a challenge. The
Directors have continued to defer their remuneration and company
operating costs have been reduced to a minimum. Major shareholders
have indicated that they will continue to support the Company with
regard to existing and on-going overhead requirements subject to
continued bank support and satisfactory progress on planning
matters. The continued support of the major shareholders has been
demonstrated by the raising of a further GBP120,000 since the year
end. We are grateful for the support and assistance of both IDB and
the major shareholders during this period and the Company will
continue to work closely with the bank to maximise potential
returns.
The Directors have considered the going concern position which
is reliant on continued support from Israel Discount Bank and the
shareholders. Further details are explained in the statement of
going concern on page 21.
China
Despite the continuation of difficult international conditions,
China's economy continues to grow strongly with an estimated growth
of 9.5% in 2010. Exports from China grew to US$1.506 Trillion in
2010, an increase from US$1.202 Trillion in 2009.
The Company recognises that its relationships in China are an
essential element of the plan to realise the full potential and
deliver maximum value at its Manston site and the Directors will
ensure that the strong links with business and economic leaders in
China are maintained pending the recommencement of marketing of
Manston.
Wigan
In the 2009 Review I reported that the Board had decided to put
this project on hold whilst focusing on the progress of the Manston
site. We now understand that Wigan Council are in the process of
re-evaluating the site to establish current market conditions as a
key employment site. Whilst the exclusivity agreement that was held
by the Company expired some considerable time ago, Wigan Council
have indicated that they will not enter in to an agreement with any
other party without giving the Company first option. Our position
with regard to the Wigan project however, has not changed since the
2009 review.
Outlook
It has been an extremely difficult year as a result of which the
Company was obliged to change its emphasis as previously explained,
but we now look forward to the exciting opportunities that still
exist for the Company.
The Board believes that given the continued support of its
principal Bank and shareholders, the Company can maximise and
realise the value of the Dover properties, after which we can
return our focus to the Manston project in order to re-establish
its value by capitalising on the continuing requirement for the
globalisation of Chinese businesses.
Ken Wills
CEO
20 May 2011
DIRECTORS' REPORT
The Directors present their Report, together with the Financial
Statements and Auditor's Report, for the year ended 30 November
2010.
The Company is domiciled and registered in England and Wales,
under the Companies Act, with registered number 5868936 as a public
company limited by shares.
Principal Activities and Review of the Business
The principal activities of the Company are property investment
and development.
A review of the Company's activities and performance for the
year and its future prospects are contained in the Chairman's
Statement and Chief Executive's Review.
Results and Dividends
The trading results for the year and the Company's financial
position at 30 November 2010 are shown in the attached Financial
Statements. The Directors do not propose to recommend any dividends
for the reporting period ended 30 November 2010.
Statement of financial position
As illustrated by the Statement of Financial Position on page 17
of the Financial Statements the significant write down in the value
of the Company's investment property has resulted in an overall
negative equity position. This resulted in the Company issuing an
RNS announcement on 12 May 2011 confirming that the matter would be
put to shareholders at the Annual General Meeting as required under
section 656 of the Companies Act 2006.
Working Capital
A mixture of bank borrowing and equity has been utilised to fund
the Company's operations. The Company's bankers continued to
provide a GBP31.4 million facility throughout the year and shortly
after the year end formally agreed to extend the facility to
GBP34.5 million through to 30 November 2011 subject to compliance
with covenants.
The bank facility granted on 7 December 2010 is repayable on
demand. The loan element of GBP31.4 million carries interest at
LIBOR and the overdraft facility of GBP3.1 million carries interest
at IDB base rate. In addition a fee will be payable on repayment of
the facility of the greater of a 5% margin on all interest from 18
February 2010 and 50% of the net proceeds of sale of the sites
charged to the bank, after deduction of legal and agent's fees,
less the outstanding loan and overdraft balances at the time of
sale.
During the year under review the Company's major shareholders
and certain Directors have invested further in the share capital of
the Company. As detailed in the going concern note on page 21 of
the Financial Statements, they have also invested further funds
since the year end and indicated their willingness to provide
additional support to the Company for overhead costs, subject to
continuing bank support and satisfactory progress on the Dover and
Manston planning permissions.
Financial and Key Performance Indicators during the year
The Board intends to monitor the current stage of progress of
the Company's overall strategy and individual strategic elements by
reference to progress in relation to obtaining planning permission
at both Dover and Manston and in relation to the realisation of the
value of the Dover project. In addition the Board will monitor
three other KPIs, being the value of the Company's property
investment, the returns on that investment and the cost of capital.
As the Company has not yet commenced the construction of the
Manston property or, at the year end, significantly progressed the
Dover development, these KPIs will be more relevant once planning
applications have progressed and construction and development are
complete.
Directors
The Directors who held office during the year under review were
as follows:
Robin Bolton - Non-Executive Chairman
Kenneth Wills - Chief Executive Officer
Christopher Seymour-Prosser - Managing Director
Brian Moritz - Non-Executive Director
Julie Wing - Executive Director
Substantial Shareholders
The Company has been notified of the following interests in its
ordinary shares as at 19 April 2011 of 3% shareholders and
above:
Number of Ordinary
Shares %
Credit Suisse Client Nominees (UK) Limited 6,378,333 24.64%
Omega Properties Limited 5,314,413 20.53%
The Bank of New York (Nominees) Limited 5,283,316 20.41%
Heritage Building Limited 2,261,374 8.73%
Chase Nominees Limited 2,169,923 8.38%
Blenheim Limited 1,520,777 5.87%
Directors' Interests
The beneficial and non-beneficial interests in the Company's
shares of the current Directors and their families, as at the date
of this report, are as follows:
Number of Ordinary
Shares
Christopher Seymour-Prosser 9,274,761
Kenneth Wills 7,065,342
Brian Moritz 211,640
Robin Bolton 105,820
Julie Wing 50,000
The interests of Mr Wills and Mr Seymour-Prosser arise partly
through shares in Omega Properties Limited, Blenheim Limited and
Heritage Building Limited (both substantial shareholders) who's
issued share capitals are held by Alliance Trust Company Limited, a
Company incorporated in Malta. This Company holds them on
discretionary trust for a class of beneficiaries including Mr Wills
and Mr Seymour-Prosser; shares held by the Bank of New York
(Nominees) Limited (a substantial shareholder), are held on
discretionary trust for a class of beneficiaries including Mr
Seymour-Prosser.
Report on Directors' Remuneration and Service Contracts
Contracts have been entered into with the Company in respect of
the services of the Directors as follows:
(i) The Company entered into an agreement with Wallis Limited on
24 January 2007 pursuant to which Wallis Limited agreed to make
available the services of Christopher Seymour-Prosser to be a
Director and act as Managing Director of the Company. The agreement
was for an initial period of 1 year from admission to AIM and is
terminable thereafter on 3 months' notice by either party. The fee
now payable in respect of the services of Christopher
Seymour-Prosser is GBP120,000 per annum from 1 June 2007 inclusive
of Director's fees. During the previous year the benefits of this
contract were transferred from Wallis Limited to Apsley Holdings
Limited.
(ii) Kenneth Wills was appointed as a Director and acts as Chief
Executive under a service agreement with the Company dated 24
January 2007. The agreement was for an initial period of 1 year
from admission to AIM and is terminable thereafter on 3 months'
notice by either party. The salary in respect of the services is
GBP120,000 per annum from 1 June 2007.
(iii) Brian Moritz was appointed Non-Executive Director - Part
Time under a service agreement with the Company dated 24 January
2007. The agreement was for an initial period ending 1 year after
admission to AIM and is thereafter terminable at any time by either
party on 3 months' notice. Fees payable in respect of the services
of Mr Moritz are GBP25,000 per annum until the appointment of a
full time Finance Director (at which time his remuneration will
reduce to GBP10,000 per annum).
The following Directors have entered into letters of appointment
with the Company:
(i) Robin Bolton was appointed Non-Executive Chairman under a
letter of appointment dated 24 January 2007. The appointment was
for an initial period ending 1 year after admission to AIM and is
thereafter terminable at any time by either party on 3 months'
notice. Fees of GBP25,000 per annum are payable in respect of the
services of Mr Bolton.
(ii) Julie Wing was appointed a Non-Executive Director under a
letter of appointment dated 24 January 2007 and subsequently became
an executive director on 8 May 2007. The appointment was for an
initial period ending 1 year after admission to AIM and is
thereafter terminable at any time by either party on 3 months'
notice. Ms Wing's salary as Executive Director is GBP50,000 per
annum including Directors' fees.
Pensions
The Group does not operate a pension scheme for Directors or
employees.
Directors' Remuneration
The remuneration charged in respect of the Directors or entities
related to Directors during the year ended 30 November 2010 was as
follows:
Directors Fees and Salaries
GBP
Robin Bolton 25,000
Kenneth Wills 120,000
Christopher Seymour-Prosser 120,000
Brian Moritz 25,000
Julie Wing 50,000
The Directors have agreed to defer payment of their remuneration
from 1 August 2009 until such a time as the Company has sufficient
working capital available to fund their payment.
Information to Shareholders - Website
The Company maintains a website www.cgiplc.com to facilitate
provision of information to external stakeholders and potential
investors and to comply with the AIM rules. Management of the
website is undertaken by the Company to ensure that it is kept up
to date and that all announcements are posted in a timely
manner.
Political and Charitable Contributions
There were no political or charitable contributions made by the
Company during the year ended 30 November 2010.
Policy on Payments to Suppliers
The Company seeks to maintain good relations with all of its
trading partners. It is the Company's policy to abide by the terms
of payment agreed with each of its suppliers. Where the Company has
not abided by these terms, the Company has contacted the creditors
and agreed revised payment terms. As at 30 November 2010 the
Company had an average of 153 days (2009 - 32 days) purchases
outstanding in trade and other payables.
Principal Risks and Uncertainties
The management of the business and execution of the Company's
strategy are subject to a number of risks. Risks are formally
reviewed by the Board and appropriate procedures are put in place
to monitor and mitigate them. The key business risks affecting the
Company are set out below.
Market Risk
The Company has an exposure to market risk in both areas of its
business. In relation to investment property this risk primarily
relates to the Company's ability to obtain appropriate prospective
tenants at commercial rates that produce an acceptable return on
its investment. With regard to properties intended for sale the
strength of the residential property market will reflect upon the
value of the sites concerned.
In both cases the Company protects itself from market risk by
employing Executive Directors and advisors with extensive
experience and expertise in these areas.
Planning Risk
The primary objective of the Company's business is to identify
and acquire land and property with the potential for planning and
development gains or high rental yields. Achieving such objectives
often requires the Company to obtain planning consents without
which the acquisition is unlikely to prove successful. There is
always a risk that such planning applications may not be
successful, however the Company mitigates this risk by employing
Executive Directors and advisors with high levels of experience and
expertise in this area.
Funding Risk
Funding is required to enable the Company to complete the
planning process at Dover. The funding required to complete the
planning stage of this project was agreed with the Company's
lending bank in December 2010.
In order to maximise returns on investment property currently
held it will be necessary for the Company to fully develop the
Manston site. The funding for this development is to be obtained
once the Company's Dover project has been successfully completed.
At that stage funding will be dependent upon the successful
marketing of the planned properties to potential tenants.
These risks are mitigated by the employment of Executive
Directors with extensive experience in the property market and
excellent contacts within China, by the appointment of advisors
with significant experience within this market and by the
maintenance of excellent relations with the Company's lending
bank.
The Company's major shareholders have indicated that future
requests for additional investment to fund ongoing working capital
requirements for overhead costs will be considered favourably
subject to continuing bank support and satisfactory progress on
planning matters at both Dover and Manston.
Political and Economic Risks
There are political and economic risks with regard to both
aspects of the Company's trade. At Dover the political risk
revolves around changes to the political control of local and
county councils which could affect the attitude taken to the
development of the sites owned by the Company. The Directors
mitigate this risk by maintaining good relations with not only
political appointees at local and county level but also with those
concerned with long term planning and policy.
The Manston project is designed primarily to appeal to an
international market and specifically to potential tenants in
China. The current economic downturn is a worldwide phenomenon and
the Company is aware of the potential for political reactions that
could result in a change of policy by the Chinese Government in
relation to the globalisation of their economy. Equally it is
possible that trade quotas or restrictions could be introduced by
governments in the UK and elsewhere. There are no indications,
however, that such actions are likely to occur in the immediate
future and with a gradual return to more stable economic conditions
the Company believes that these risks are receding. Nevertheless
the Company endeavours to protect itself from these risks by
maintaining a dialogue with political and business leaders both in
China and the UK.
Financial Risk Management and Financial Instruments
The Company's activities expose it to a variety of financial
risks which include liquidity risk and risks associated with the
value of the Company's property interests.
These areas of risk and uncertainty are dealt with in Note 1 to
the Financial Statements.
The Company does not use derivative financial instruments to
manage interest rate costs and as such no hedge accounting is
applied.
Going Concern
The Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future and they continue to adopt the going concern
basis in preparing the Annual Report and Financial Statements.
Further details on their assumptions and their conclusion thereon
are explained in the statement on going concern on page 21.
Subsequent Events
Subsequent events include the raising of a further GBP120,000 by
way of share issues in January 2011 and the formal confirmation of
the increase by Israel Discount Bank of the banking facilities to
GBP34.5 million for a period to at least 30 November 2011. The
agreement of this facility has given rise to a liability for fees
that will be payable upon disposal of the Company's properties or
upon refinancing. An amount of GBP3.8 million has been provided for
this within these Financial Statements (note 23). There has been no
other matter or circumstance that has arisen since 30 November 2010
and up to the date of this report that has significantly affected,
or may significantly affect:
the Company's operations in future financial years, or
the results of those operations in future financial years,
or
the Company's state of affairs in future financial years.
Further disclosures have been made in Note 24 to the Financial
Statements.
Disclosure of information to the auditors
Each of the Directors who held office at the date of approval of
this report confirms that, so far as they are individually
aware:
there is no relevant audit information of which the Company's
auditors are unaware;
the Directors have taken all steps that they ought to have taken
as Directors to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that
information.
Corporate Governance
The Company intends to comply with the principles of best
practice set out in the Combined Code on corporate governance
published by the London Stock Exchange in so far as the Directors
consider that they are appropriate to a company of the Company's
size and structure. The Company currently has two Non-Executive
Directors.
The Board and Committees
The Board is made up of three Executive Directors and two
independent Non-Executive Directors. It has, from the Company's
inception, set up an Audit Committee and Remuneration Committee.
Copies of the schedule of matters reserved for the Board and of the
terms of reference of the Audit and Remuneration Committees are
available on request.
The full Board acts as the Nomination Committee.
Audit and Remuneration Committee
The Audit Committee of the Company comprises R C Bolton, B
Moritz and J Wing and meets at least once each year. The Audit
Committee is responsible for ensuring that the Company's financial
performance is properly monitored, controlled and reported. It also
meets the auditors and reviews reports from the auditors relating
to financial statements and internal control systems.
The Remuneration Committee will make recommendations for the
remuneration of the Directors. Details of the Directors'
remuneration charged during the period are on page 10.
Auditors
Littlejohn LLP has signified its willingness to continue in
office as auditors.
Signed by order of the Directors
Registered office
One America Square
Crosswall
London
EC3N 2SG
K E Wills
Director
Approved by the Directors on 20 May 2011.
CHINA GATEWAY INTERNATIONAL PLC
INDEPENDENT AUDITOR's REPORT
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CHINA GATEWAY
INTERNATIONAL PLC
We have audited the Financial Statements of China Gateway
International plc for the year ended 30 November 2010 which
comprise the Statement of Financial Position, the Comprehensive
Income Statement, the Statement of Changes in Shareholders' Equity,
the Cash Flow Statement and the related notes. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and Auditors
As explained more fully in the Directors' Responsibilities
Statement, the Directors are responsible for the preparation of the
Financial Statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the Financial Statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the Financial Statements
An audit involves obtaining evidence about the amounts and
disclosures in the Financial Statements sufficient to give
reasonable assurance that the Financial Statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of whether the accounting policies are
appropriate to the Company's circumstances, and have been
consistently applied and adequately disclosed, the reasonableness
of significant accounting estimates made by the Directors, and the
overall presentation of the Financial Statements.
Opinion on Financial Statements
In our opinion the Financial Statements:
-- give a true and fair view of the state of the Company's
affairs as at 30 November 2010 and of its loss for the year then
ended;
-- have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
-- have been prepared in accordance with the requirements of the
Companies Act 2006.
Emphasis of matter
Going concern
In forming our opinion on the Financial Statements, which is not
qualified, we have considered the adequacy of the disclosure made
in the statement on going concern on page 21 of the Financial
Statements. The future funding of the Company is dependent on the
successful granting of planning applications for the residential
development of its Dover sites and the subsequent disposal of these
sites with the approved relevant planning permissions to a
developer. The matters detailed in the disclosures indicate the
existence of a material uncertainty which may cast significant
doubt on the Company's ability to continue as a going concern. The
Financial Statements do not include the adjustments that would
result if the Company was unable to continue as a going
concern.
CHINA GATEWAY INTERNATIONAL PLC
INDEPENDENT AUDITOR'S REPORT
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the Financial Statements are
prepared is consistent with the Financial Statements.
Matters on which we are required to report by exception
The Companies Act 2006 requires us to report to you if, in our
opinion:
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the Financial Statements are not in agreement with the
accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit.
We have nothing to report in respect of the above matters.
Nicholas Light (Senior statutory auditor) 1 Westferry Circus
For and on behalf of Littlejohn LLP Canary Wharf
Statutory auditor London E14 4HD
20 May 2011
STATEMENT OF FINANCIAL POSITION
At 30 November 2010
Note 2010 2009
ASSETS GBP000 GBP000
Non-current assets
Fixtures and fittings 4 - 3
Investment property 5 3,490 55,900
Deferred tax asset 13 995 2,035
_______ _______
Total non-current assets 4,485 57,938
_______ _______
Current assets
Properties intended for sale 6 12,309 4,970
Trade and other receivables 7 37 83
Cash 8 - 95
_______ _______
Total current assets 12,346 5,148
_______ _______
TOTAL ASSETS 16,831 63,086
_______ _______
EQUITY AND LIABILITIES
Equity
Issued share capital 9 249 210
Share premium 9 15,499 15,065
Shares to be issued 9 - 148
Retained earnings 10 (36,086) 8,342
_______ _______
Total equity (20,338) 23,765
_______ _______
Non-current liabilities
Deferred tax provision 13 - 7,242
_______ _______
Total non-current liabilities - 7,242
_______ ______
Current liabilities
Trade and other payables 11 942 643
Interest bearing loans and borrowings 12 32,406 31,436
Provisions 23 3,821 -
_______ _______
Total current liabilities 37,169 32,079
_______ _______
Total liabilities 37,169 39,321
_______ _______
TOTAL EQUITY AND LIABILITIES 16,831 63,086
_______ _______
The Financial Statements were approved and authorised for issue
by the Board of Directors on 20 May 2011, and were signed on its
behalf by:
K E Wills
Director
The Notes on pages 21 to 39 form part of these Financial
Statements.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 November 2010
Note 2010 2009
GBP000 GBP000
Continuing Operations:
Revenue 14 500 -
Administrative expenses 16 (833) (1,098)
Other operating income 15 35 45
Writeback of properties intended
for sale 6 6,630 2,970
Fair value (losses) on investment
property 5 (54,862) (733)
_______ _______
Operating (Loss)/Profit (48,530) 1, 184
Finance income 19 - 1
Finance costs 19 (2,100) (886)
_______ _______
(Loss)/Profit before taxation (50,630) 299
Taxation 20 6,202 887
_______ _______
(Loss)/Profit and Total Comprehensive
Income for the Financial Period (44,428) 1,186
_______ _______
Attributable to:
Equity holders of the Company (44,428) 1,186
_______ _______
(Loss)/Earnings per Share from
Continuing
Operations Attributable to the
Equity
Holders of the Company during
the Period
Basic pence per share 21 (184.46)p 5.65p
_______ _______
Diluted pence per share 21 (184.46)p 5.61p
_______ _______
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Year Ended 30 November 2010
Attributable to the Equity Holders of
the Company
Shares
Share Share to Retained Total
Capital Premium be issued Earnings
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 December
2008 210 15,065 - 7,156 22,431
Shares allocated
but not
allotted - - 148 - 148
Profit and total
comprehensive
income for the
year - - - 1,186 1,186
_______ _______ _______ _____ _____
At 30 November
2009 210 15,065 148 8,342 23,765
Shares issued 39 434 (148) - 325
Loss and total
comprehensive
income for the
year - - - (44,428) (44,428)
_______ _______ _______ _______ _______
At 30 November
2010 249 15,499 - (36,086) (20,338)
_______ _______ _______ _______ _______
STATEMENT OF CASHFLOWS
Year ended 30 November 2010
2010 2009
GBP000 GBP000
Cash Flows from Operating Activities
(Loss)/profit before taxation (50,630) 299
Adjustments for:
Depreciation 3 3
Fair value losses on investment property 54,862 733
Interest income - (1)
Interest expense 2,100 886
Decrease in trade and other receivables 46 78
Increase in properties intended for sale (6,630) (2,970)
Increase/(decrease) in trade payables
and other payables 300 (309)
________ ________
Cash generated from/(used in) Operations 51 (1,281)
Interest paid (765) (886)
________ ________
Net Cash (used in) Operating Activities (714) (2,167)
________ ________
Cash Flows from Investing Activities
Additions to investment property (676) (983)
Interest received - 1
________ ________
Net Cash used in Investing Activities (676) (982)
________ ________
Cash Flows from Financing Activities
Receipts from shares allocated but not
allotted - 104
Proceeds from share issue 325 -
Proceeds from short-term borrowings - 3,071
________ ________
Net Cash from Financing Activities 325 3,175
________ ________
Net (Decrease)/Increase in Cash and Cash
Equivalents (1,065) 26
________ ________
Cash and Cash Equivalents at Beginning
of Period 59 33
________ ________
Cash and Cash Equivalents at End of Period (1,006) 59
________ ________
The major non-cash movement represents the accrued bank fees of
GBP3.821m (Note 23). Included in investment property is GBP1.776m,
GBP710k in properties intended for sale and GBP1.335m in finance
costs.
Cash and cash equivalents include the following for the purposes
of the Statement of Cash Flows:
2010 2009
GBP000 GBP000
Cash (Note 8) - 95
Bank overdraft (Note 12) (1,006) (36)
________ ________
(1,006) 59
________ ________
ACCOUNTING POLICIES
Year ended 30 November 2010
Summary of Significant Accounting Policies
The principal Accounting Policies applied in the preparation of
these Financial Statements are set out below. These Policies have
been consistently applied to all periods presented, unless
otherwise stated.
Basis of Preparation of Financial Statements
The Financial Statements have been prepared in accordance with
EU-endorsed International Financial Reporting Standards (IFRS) and
IFRIC interpretations and the parts of the Companies Act 2006
applicable to companies reporting under IFRS. The Financial
Statements have also been prepared under the historical cost
convention, as modified by the carrying of investment property at
fair value.
Items included in the Financial Statements are measured using
the currency of the primary economic environment in which the
entity operates (its "functional currency"). The Financial
Statements are presented in Pounds Sterling (GBP), which is the
Company's functional and presentation currency.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Company's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
Financial Statements are disclosed in Note 2.
Going Concern
In considering the Company's ability to continue operations for
the foreseeable future, the Directors have considered the Company's
forecast operating cashflow for the period up to the end of May
2012 and the cashflow associated with the Company's properties over
periods appropriate to the development in each case.
In the view of the Directors the Company requires continued
financial support in order to continue as a going concern. These
Financial Statements have been prepared on a going concern basis in
view of the continued support being received from the Company's
lending bank Israel Discount Bank and from its shareholders.
The support received from Israel Discount Bank takes the form of
facilities available subject to both specific and general
conditions. The current facility was made available on 7 December
2010 in the amount of GBP34.5 million.
Of this facility the loan element of GBP31.4 million is fully
drawn and the overdraft facility is to be utilised as follows:
GBP115,000 to satisfy the Section 106 Agreement at Manston
thereby allowing full planning permission to be granted. The
property valuation detailed in Note 5 stated that the granting of
full planning permission will increase the value of the Manston
property by GBP720,000.
GBP1,585,000 towards the cost of obtaining a master plan
covering Western Heights and Farthingloe. This master plan will
illustrate that the sites are suitable for residential development
and in line with a valuation prepared by Drivers Jonas Deloitte in
October 2010, prior to the granting of planning permission this
will increase the value of these properties to approximately
GBP16.97 million from their current stock value of GBP12.31
million.
GBP1,400,000 to fund the banks future interest costs.
The facility is repayable on demand however the bank have
confirmed that, subject to no breach of covenants, it is their
present intention to continue to make this facility available until
at least 30 November 2011.
The property valuations on Western Heights and Farthingloe
further show that the granting of planning permission for private
residential development on those sites will result in an increase
in the value of the land concerned to a figure of up to GBP35.8
million. The Directors consider that the facility provided to
prepare the master plan will be sufficient to allow the Company to
deal with all matters in relation to the relevant planning
applications.
IDB have indicated that should sufficient progress have been
achieved with regard to planning permission at both Dover and
Manston by 30 November 2011 they will give favourable consideration
to an extension of the existing facility to at least 31 May 2012
subject to continuing compliance with the conditions associated
with the facility. The Directors are confident in achieving such
progress as detailed in the Chief Executive's Review on page 4.
The Directors have reviewed the relevant aspects of the
Company's forecasts and the potential position regarding the
Company's properties for the period to 31 May 2012 and consider
there should be no breaches of the covenants concerned. The
Directors believe that Company will meet all of the specific and
general conditions associated with the facility going forward.
During the year to 30 November 2010 the Company's shareholders
invested further funds totalling GBP325,000 and since the year end,
have invested a further GBP120,000 by way of private
placements.
The shareholders have indicated that future requests for
additional investment to fund ongoing working capital for overhead
costs will be considered favourably subject to continuing bank
support and satisfactory progress on planning matters at both Dover
and Manston.
After making enquiries and considering the matters described
above, the Directors have a reasonable expectation that the Company
has adequate resources to continue in operational existence for the
foreseeable future. For these reasons they continue to adopt the
going concern basis in the preparation of the Annual Report and
Financial Statements.
Standards and Interpretations in Issue but not yet Effective or
not yet Endorsed
Amendments to IFRS 7 "Financial Instruments: Disclosures" are
designed to help users of financial statements evaluate the risk
exposures relating to transfers of financial assets and the effect
of those risks on an entity's financial position for annual periods
beginning on or after 1 January 2011. The expected impact of these
disclosures will be reviewed by management once endorsed and where
relevant the Company will apply the disclosures in their Financial
Statements in the future.
IFRS 9 "Financial Instruments" specifies how an entity should
classify and measure financial liabilities for annual periods
beginning on or after 1 January 2013. The expected impact of this
specification will be reviewed by management once endorsed and
where relevant the Company will apply the requirements to their
Financial Statements in the future.
Amendments to IAS 12 "Income Taxes" introduce a presumption that
recovery of the carrying amount of an asset measured using the fair
value model in IAS 40 "Investment Property" will normally be
through sale for annual periods beginning on or after 1 January
2012. The expected impact of this amendmentwill be reviewed by
management once endorsed and where relevant the Company will apply
the requirements to their Financial Statements in the future.
Amendments to IFRS 1 "First-time Adoption of International
Financial Reporting Standards" address the retrospective
application of IFRSs to particular situations (oil and gas assets
and leasing contracts), and are aimed at ensuring that entities
applying IFRSs will not face undue cost or effort in the transition
process for annual periods beginning on or after 1 January 2010.
This is not expected to have an impact on the Company's financial
statements in the future.
An amendment to IFRS 1 "First-time Adoption of International
Financial Reporting Standards" relieves first-time adopters of
IFRSs from providing the additional disclosures introduced in March
2009 by "Improving Disclosures about Financial Instruments"
(Amendments to IFRS 7) this amendment is effective 1 July 2010.
This is not expected to have an impact on the Company's financial
statements in the future.
Amendments to IFRS 1 "First-time Adoption of International
Financial Reporting Standards" replace references to a fixed date
of 1 January 2004 with "the date of transition to IFRSs", thus
eliminating the need for companies adopting IFRSs for the first
time to restate derecognition transactions that occurred before the
date of transition to IFRSs, and provide guidance on how an entity
should resume presenting financial statements in accordance with
IFRSs after a period when the entity was unable to comply with
IFRSs because its functional currency was subject to severe
hyperinflation. This amendment applies to annual periods beginning
on or after 1 July 2011. This is not expected to have an impact on
the Company's financial statements in the future.
"Improvements to IFRSs" are collections of amendments to IFRSs
resulting from the annual improvements project, a method of making
necessary, but non-urgent, amendments to IFRSs that will not be
included as part of another major project. These amendments have
various implementation dates and are not expected to have an impact
on the Company's financial statements in the future.
An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their Interaction",
on prepayments of a minimum funding requirement, applies in the
limited circumstances when an entity is subject to minimum funding
requirements and makes an early payment of contributions to cover
those requirements. The amendment permits such an entity to treat
the benefit of such an early payment as an asset. This amendment
applies to annual periods beginning on or after 1 January 2011.
This is not expected to have an impact on the Company's financial
statements in the future.
Fixtures and Fittings
Fixtures and fittings are stated at cost, net of depreciation
and any provision for impairment. Cost includes expenditure that is
directly attributable to the acquisition of the items.
Depreciation is provided on fixtures and fittings at a rate
calculated to write off the cost or valuation, less estimated
residual value, of each asset on a straight-line basis over its
expected useful life, estimated to be 4 years.
Investment Property
Investment property, comprising property to be developed, is not
occupied by the Company. It is intended that the Company will
benefit from returns on this investment property in the long term.
Investment property is carried at fair value, representing open
market value determined annually. At 30 November 2010 the valuation
was carried out by external valuers (see note 5). Fair value is
based on active market data adjusted, if necessary, for any
difference in the nature, location or condition of the specific
asset. Changes in fair value are recorded in the Statement of
Comprehensive Income.
Properties Intended for Sale
Properties intended for sale are classified under current assets
and are stated at the lower of cost and net realisable value.
Cost comprises land cost and development costs including
attributable borrowing costs and charges allocated during the
development period.
Cash
Cash comprises cash at bank and in hand.
Financial Liabilities
Financial liabilities are recognised when the Company becomes a
party to the contractual provisions of the instrument. Financial
liabilities are measured initially at fair value, net of direct
issue costs, and subsequently at amortised cost.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged, is
cancelled, or expires.
Provisions
Provisions are recognised when the Company has a present legal
or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle
the obligation, and the amount has been reliably estimated.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation.
Taxation
Current tax is the tax currently payable based on the taxable
profit for the year.
Deferred tax is provided in full, using the liability method, on
temporary differences between the carrying amounts of assets and
liabilities and their tax bases, except when, at the initial
recognition of the asset or liability, there is no effect on
accounting or taxable profit or loss. Deferred tax is determined
using tax rates and laws that have been substantively enacted by
the year end and that are expected to apply when the temporary
difference reverses.
Tax losses available to be carried forward and other tax credits
are recognised as deferred tax assets to the extent that it is
probable that there will be future taxable profits against which
the temporary differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as
a component of the tax expense in the Statement of Comprehensive
Income, except where they relate to items that are charged or
credited directly to equity, in which case the related deferred tax
is also charged or credited directly to equity.
Share Capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Revenue Recognition
Revenue comprises the fair value of the consideration received
or receivable by the Company for services arising in the ordinary
course of the Company's activities from its property interests,
excluding VAT.
Borrowing Costs
The Company has adopted a policy of capitalising borrowing costs
in respect of qualifying assets. Borrowing costs that are directly
attributable to the acquisition, construction or production of a
qualifying asset are capitalised as part of the cost of that
asset.
The amount of borrowing costs eligible for capitalisation is
determined by calculating the weighted average of the borrowing
costs applicable to the qualifying assets that are outstanding
during the period.. Borrowing costs are not capitalised during
extended periods when development activity is suspended.
Segmental Information
The Company operates solely in the United Kingdom and its
principal activity is property investment and development.
NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 November 2010
1. Financial Risk Management and Financial Instruments
Financial Risk Factors
The Company's activities expose it to a variety of financial
risks. The main risks are identified as being the availability of
sufficient liquidity to continue operations and risks associated
directly with the value of the Company's property interests.
Liquidity Risk
The Company has borrowed to finance the acquisition and
development of its sites. Israel Discount Bank, which has provided
the finance to the Company, has reserved the right to demand
repayment of all advances made by it to the Company at any time.
However, provided the Company does not breach any covenants, the
facility is expected to be available until 30 November 2011 and the
bank have indicated that subject to sufficient progress on planning
matters at both Dover and Manston they will give favourable
consideration to an extension of the period of the facility to at
least 31 May 2012.
The Directors maintain a close relationship with Israel Discount
Bank and keep them fully informed of all aspects of the Company's
affairs so that ongoing facilities and funding can be agreed in
advance.
During the year the Company has received further support from
its major shareholders who have also indicated their willingness to
provide additional funding to cover working capital requirements
for overhead costs as required, subject to continuing bank support
and satisfactory progress with regard to planning matters at both
Dover and Manston.
The Company's primary liquidity risk therefore relates to
sufficient progress being achieved in relation to planning matters.
Significant progress has been achieved in this respect since the
year end and the directors are safeguarding against this risk by
continued and extensive negotiation with the relevant planning
authorities and the appointment of advisors with extensive
experience in such matters.
Credit Risk
The Company considers that it is not exposed to any significant
credit risk.
Interest Rate Risk
The Company has interest bearing liabilities. The Company has a
policy of negotiating competitive interest rates with its bankers
on an ongoing basis. The Directors will revisit the appropriateness
of this policy should the Company's operations change in size or
nature.
If interest rates were to rise by 1% this would result in an
increase in interest payable on the Company's loan and bank
overdraft of GBP324,000. An element of this additional interest
would be capitalised in properties intended for sale or development
in line with the accounting policy and the remainder would be
charged to equity.
Capital Risk Management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders, and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure the Company
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce
debt.
Financial Instruments
All financial assets are classified as loans and
receivables.
All financial liabilities are carried at amortised cost
Fair Value Estimation
The carrying value less impairment for trade receivables and
payable is assumed to approximate to their fair values, due to
their short term nature. Investment property is carried at fair
value representing open market value determined annually by the
directors or by external valuers.
2. Critical Accounting Estimates, Judgements and Assumptions
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectation
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates, judgements and assumptions
concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The
assumptions and judgements that have a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the financial statements are detailed below.
a) Planning Permission
The assumption that the Company can continue operating as a
going concern requires the eventual granting of planning permission
on all of the Company's properties.
With regard to Dover it is assumed that sufficient progress will
be achieved in relation to planning applications during the year to
30 November 2011 so as to increase the value of the properties and
to allow both the Company's lending bank and its shareholders to
consider favourably the provision of further support to the
Company.
It is assumed with regard to Manston that following the
satisfaction of the requirements of the Section
106 Agreement the existing resolution to grant will result in
full planning permission being granted. This will lead to an uplift
in the value of this property and will also allow the Company to
recommence its marketing efforts in relation to Manston.
b) Working capital and development finance
Note 12 to the Financial Statements details the position with
regard to the Company's banking facilities and judgements made with
regard to the going concern basis are detailed on page 21 of the
Financial Statements.
As explained in note 12 subject to other bank covenants not
being breached, the Company's principal bankers have agreed to make
the facility available until 30 November 2011. In addition the bank
has indicated a willingness to consider an extension of this period
to at least 31 May 2012. It is assumed that covenants will not be
breached and that the Company's banking facilities will be
available until at least 31 May 2012.
It is further assumed that additional funds will be made
available from private share placements to provide the ongoing
working capital requirement in respect of overhead costs of the
Company.
Should these assumptions prove to be incorrect the Company will
need to investigate alternative sources of funding to enable it to
continue operations.
It is the Directors' belief that their continued good
relationship with the Company's lending bank and with its major
shareholders will enable the working capital requirement to be met
until such time as significant progress has been made in relation
to planning permission on the Company's properties.
c) Deferred tax asset
Included in the statement of financial position is a deferred
tax asset of GBP0.995 million (2009 GBP2.035 million). As detailed
in the taxation accounting policy this relates to tax losses
recognised to the extent that there will be future taxable profits
against which the losses can be utilised. In recognising this
deferred tax asset the Company is assuming that such future profits
will arise. The creation of such profits from its main activities
is the Company's primary objective and the Directors are confident
that the objective will be achieved. The recognition of a deferred
tax asset has been based on the Directors' expectation that the
disposal of the Dover Properties will result in a taxable profit.
Should this assumption prove to be incorrect then the deferred tax
asset would be written down to nil.
d) General economic uncertainty
In preparing the Financial Statements and in planning for the
future development of the Company's trading activities the
Directors have had to make judgements regarding general economic
conditions and the uncertainties arising from the worldwide
recession. The Directors have actively discussed these issues with
senior business and political figures both locally and nationally
in the UK and in China and are of the opinion that the Company's
Dover development and Manston projects are well placed to benefit
from any subsequent upturn in the local, national and global
economies.
3. Auditors' Remuneration 2010 2009
GBP000 GBP000
Fees payable to the Company's auditor for the
audit of the accounts for the year 12 20
_______ _______
The fees paid to the auditors in respect of
other services are as follows:
Other fees - 12
_______ _______
4. Fixtures and Fittings Fixtures
and
fittings Total
GBP000 GBP000
Cost
At 1 December 2008 and 30 November 2009 and
2010 12 12
_______ _______
Depreciation
At 1 December 2008 6 6
Charge for the year 3 3
_______ _______
At 30 November 2009 9 9
Charge for the year 3 3
_______ _______
At 30 November 2010 12 12
_______ _______
Net Book Value
At 30 November 2010 - -
_______ _______
At 30 November 2009 3 3
_______ _______
At 30 November 2008 6 6
_______ _______
A depreciation charge of GBP3,153 is included in administrative
expenses in the Statement of Comprehensive Income.
5. Investment Property 2010 2009
GBP000 GBP000
Beginning of year 55,900 55,650
Additions 2,452 983
Fair value (losses)/gains (54,862) (733)
_______ _______
End of year 3,490 55,900
_______ _______
The Company's land and buildings were re-valued as at 7 October
2010 by Drivers Jonas Deloitte, Property Consultants who have
confirmed that values would not have significantly changed between
the date of the valuation and 30 November 2010.
The valuation represents the market value of the freehold
interest of the land at Manston Business Park, in its present
condition with the benefit of any current leases and planning
permission.
Included in additions to investment property is interest of
GBP647,960 (2009 - GBP828,993) relating to finance costs and
GBP1,776,732 (2009 - GBPnil) relating to bank fees accrued as
detailed in note 23, which are directly attributable to this
asset.
Total bank borrowings of GBP32,403,249 (2009 - GBP31,435,638)
are secured by way of a legal charge against the investment
property noted above.
Direct operating expenses arising from investment property and
included within administrative expenses in the Statement of
Comprehensive Income amounted to GBP1,753 (2009 - GBP8,598).
6. Properties intended for sale 2010 2009
GBP000 GBP000
Properties intended for sale 12,309 4,970
_______ _______
12,309 4,970
_______ _______
Part of the total bank borrowings of GBP32,403,249 (2009 -
GBP31,435,638) are secured by way of a legal charge against the
properties intended for sale detailed above.
Included in properties intended for sale is GBP709,842 (2009 -
GBPnil) relating to bank fees accrued as detailed in note 23 which
are directly attributable to these assets.
The increase in value of these properties reflects the
accounting policy detailed on page 23 including them at the lower
of cost and net realisable value having regard to the potential
future realisable value supported by the Drivers Jonas Deloitte
valuation of 7 October 2010. This reflects the reversal of previous
impairments of GBP6,630,000 (2009 - GBP2,970,000) for the reasons
set out in the Chief Executive's Review.
7. Trade and Other Receivables 2010 2009
GBP000 GBP000
Trade receivables 2 -
Prepayments 10 10
VAT recoverable 12 13
Other receivables 13 60
_______ _______
37 83
_______ _______
8. Cash 2010 2009
GBP000 GBP000
Cash at bank and in hand - 95
_______ _______
Called-Up
Share
9. Capital
Authorised 2010 2009
GBP GBP
50,000,000
Ordinary shares
of GBP0.01 500,000 500,000
_______ _______
Number Ordinary Allocated Share
of but not
shares shares allotted Premium Total
000 GBP000 GBP000 GBP'000 GBP000
At 1 December
2008 21,000 210 - 15,065 15,275
Shares to be
issued - - 148 - 148
_____ _______ _______ _______ _______
At 30 November
2009 21,000 210 148 15,065 15,423
Shares issued 3,931 39 (148) 434 325
_____ _______ _______ _______ _______
At 30 November
2010 24,931 249 - 15,499 15,748
_______ _______ _______ _______ _______
During the year 3,930,532 shares were issued for GBP473,392 to
fund working capital requirements which includes GBP104,000
received in 2009.
10. Retained Earnings
Retained earnings include surpluses arising from the open market
valuation of investment property amounting to GBPnil (2009 -
GBP25.9 million) which are unrealised and not distributable.
11. Trade and Other Payables 2010 2009
GBP000 GBP000
Trade payables 191 68
Other payables 2 2
Social security and other taxes 11 3
Accrued expenses 738 570
_______ _______
942 643
_______ _______
All the trade and other payables are due within one year.
12. Borrowings 2010 2009
GBP000 GBP000
Current
Bank overdrafts 1,006 36
Interest bearing loan and borrowings 31,400 31,400
_______ _______
32,406 31,436
_______ _______
Bank borrowings are repayable on demand. However the bank has
indicated their intention to make the facility available until 30
November 2011. The borrowings to 30 November 2010 carried interest
at LIBOR plus 3%.
Bank borrowings of GBP32,403,249 (2009 - GBP31,435,638) are
secured by way of a legal charge against the investment property
and properties intended for sale.
The fair value of the borrowings is as stated above.
13. Deferred Tax 2010 2009
GBP000 GBP000
Deferred tax assets:
- to be recovered after more than 12 months (995) (2,035)
Deferred tax liabilities:
- to be settled after more than 12 months - 7,242
_______ _______
Net deferred tax (asset)/liability (995) 5,207
_______ _______
The deferred tax asset in 2009 represented Schedule A losses
carried forward which were expected to be offset against future
income from the Manston development. The deferred tax liability
represented the surplus arising from the fair value gain on the
investment property. In 2010 the deferred tax asset represents
Schedule D losses carried forward which are expected to be set off
against future trading profits.
The gross movement on the deferred tax account is:
Statement of comprehensive income debit - -
Statement of comprehensive income credit (6,202) (887)
_______ _______
Net credit to Statement of comprehensive income (6,202) (887)
At start of year 5,207 6,094
_______ _______
At end of year 995 5,207
_______ _______
13. Deferred Tax (continued) Tax
losses Total
Deferred tax assets GBP000 GBP000
At 1 December 2008 1,353 1,353
Credited directly to statement of comprehensive
income 682 682
_______ _______
At 30 November 2009 2,035 2,035
Charged directly to statement of comprehensive
income (1,040) (1,040)
_______ _______
At 30 November 2010 995 995
_ __ _ ___
Other Total
Deferred tax liabilities GBP000 GBP000
At 1 December 2008 7,447 7,447
Credited directly to statement of comprehensive
income (205) (205)
_______ _______
At 30 November 2009 7,242 7,242
Credited directly to statement of comprehensive
income (7,242) (7,242)
______ _______
At 30 November 2010 - -
_______ _______
14. Revenue 2010 2009
GBP000 GBP000
Revenue from aborted sale- UK 500 -
_______ _______
500 -
_______ _______
15. Other Income 2010 2009
GBP000 GBP000
Rental income 35 45
_______ _______
35 45
_______ _______
16. Expenses by Nature 2010 2009
GBP000 GBP000
Staff costs 424 436
Depreciation 3 3
Establishment expenses 96 77
Operating expenses 2 20
Legal and professional fees 132 168
Other costs 176 394
_______ _______
Total Expenses 833 1,098
_______ _______
17. Employees 2010 2009
GBP000 GBP000
Staff Costs (including Directors)
Wages and salaries 386 409
Social security costs 38 27
_______ _______
424 436
_______ _______
2010 2009
Average Number of Employees (including
executive Directors) Number Number
Administrative 6 6
_______ _______
6 6
_______ _______
18. Directors' Remuneration 2010 2009
GBP000 GBP000
Emoluments 340 340
_______ _______
340 340
_______ _______
Highest paid director 120 120
_______ _______
19. Finance Income and Costs 2010 2009
GBP000 GBP000
Finance income - Interest income on short-term
bank deposits - 1
_______ _______
Finance costs - Interest expense on bank
borrowings 765 886
- Bank fee (see note 23) 1,335 -
_______ _______
2,100 886
_______ _______
20. Taxation 2010 2009
GBP000 GBP000
Analysis of Charge in Year
Current tax:
UK corporation tax on profits of the year - -
Deferred taxation credit (6,202) (887)
_______ _______
(6,202) (887)
_______ _______
Factors affecting tax charge for year
The tax assessed for the period on the Company's loss before tax
differs from the theoretical amount that would arise using the rate
of corporation tax applicable in the UK of 28% (2009 - 28%).The
differences are explained below:
2010 2009
GBP000 GBP000
(Loss)/Profit on ordinary activities before tax (50,630) 299
_______ _______
(Loss)/Profit on ordinary activities multiplied by
applicable rate
of corporation tax applicable in the UK of 28% (2009
- 28%) (14,176) 84
Effects of
Permanent differences 1 19
Fair value (deficit)/surplus 15,361 205
Loan interest capitalised (877) (232)
Schedule A tax losses available to carry forward 851 627
Schedule DI tax losses available to carry forward (1,160) (703)
Deferred Tax (note 13) (6,202) (887
_______ _______
Total tax charge for year (6,202) (887)
_______ _______
The weighted average applicable tax rate was 28%.
No deferred tax asset has been included in respect of Schedule A
tax losses of GBP10,307,000 (2009 - Schedule D1 losses
GBP7,920,000) as it is not probable that the Company will make such
taxable profits in the short term.
A deferred tax asset has been included in respect of Schedule D1
tax losses as disclosed in Note 13. This deferred tax asset is
significantly less than the prior year losses due to the prior year
impairments on properties intended for sale being reversed.
21. (Loss)/Earnings per Share
Basic
Basic (loss)/earnings per share is calculated by dividing the
(loss)/profit attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
period.
2010 2009
(Loss)/Profit attributable to equity
holders of the Company GBP(44,428,000) GBP1,186,000
__________ __________
Weighted average number of ordinary
shares in issue 24,085,948 21,000,000
__________ __________
Basic (loss)/earnings per share (pence (184.46)p 5.65p
per share)
__________ __________
Diluted
Diluted (loss)/earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares.
Pursuant to a signed subscription agreement, dated 30 October
2009, the Company allotted 1,570,283 shares on 22 December 2009.
The signed subscription agreement created an obligation before the
year ended 30 November 2009 and the number of dilutive potential
ordinary shares is calculated assuming the shares were
allotted.
2010 2009
(Loss)/Profit attributable to equity
holders of the Company and used to
determine diluted earnings per share GBP(44,428,000) GBP1,186,000
__________ __________
Weighted average number of ordinary
shares in issue 24,085,948 21,000,000
Adjustments: allotment of shares - 130,857
__________ __________
Weighted average number of ordinary
shares for diluted earnings per share 24,085,948 21,130,857
__________ __________
Diluted (loss)/earnings per share (pence (184.46)p 5.61p
per share)
__________ __________
22. Related Party Transactions
During the year, the Company received the following amounts on
an arm's length basis from related parties:
Licence income, which is included as part of other income, of
GBP1,702 (2009 - GBP12,000) from Kentish Barn Weddings Limited, a
company of which K E Wills is a director and shareholder. At the
year end GBPnil (2009 - GBPnil) was outstanding.
During the year, the Company paid the following amounts on an
arm's length basis to related parties:
Administration fees of GBP31,850 (2009 - GBP32,328), property
maintenance costs of GBP46,194 (2009 - GBP31,740) and reimbursement
of fees for helicopter flights and travel costs of GBP3,725 (2009 -
GBP9,704) and public relations expenses of GBP3,161 (2009 -
GBP4,582) to Summit Engineering Limited, a company of which K E
Wills is a director and shareholder. An amount of GBP12,812 (2009 -
GBP1,848) was outstanding at the year end.
The Directors' fees due to C Seymour-Prosser were charged in
accordance with an agreement with Apsley Holdings Limited. The fees
during the year were GBP120,000 (2009 - GBP120,000). At the year
end GBP160,000 (2009 - GBP40,000) was outstanding.
The Directors have agreed to defer the payment of their
remuneration from 1 August 2009 until such a time as the Company
has sufficient working capital to achieve their payment.At the year
end, the accrued fees and salaries deferred were GBP160,000 (2009 -
GBP40,000) in respect of C Seymour-Prosser, GBP220,000 (2009 -
GBP40,000) in respect of K E Wills, GBP66,667 (2009 - GBP16,666) in
respect of J A Wing, GBP33,333 (2009 - GBP8,333) in respect of R C
Bolton, and GBP33,333 (2009 - GBP8,333) in respect of B M
Moritz.
23. Provisions
As detailed in the going concern accounting policy on page 21 a
revised bank facility was formally agreed with Israel Discount Bank
on 7 December 2010. The fee due in relation to this facility is
payable upon the sale of the Company's property interests or the
re-financing of the facility. The fee is to be calculated as the
greater of:
A margin of 5% above the interest rate charged on all borrowings
from 18 February 2010 to the date of repayment and
50% of the net proceeds of sale of the sites charged to the
bank, after deduction of legal and agent's fees, less the
outstanding loan and overdraft balances at the time of sale.
Full provision has been made for the fee in accordance with the
revised bank facility as the obligating event in respect of this
facility was in place before the year end due to the Company's
dependence on such funds. There was a reasonable expectation by the
Company's bankers that the Company would discharge this
obligation.
Full provision in the sum of GBP3.821 million has been included
in these financial statements for the 5% margin for a period up to
31 May 2012 which the Directors believe is the best estimate of
this liability. A potential further liability therefore exists
should the latter calculation result in a higher figure than the
amount currently provided.
24. Subsequent events
A revised bank facility was formally agreed with Israel Discount
Bank on 7 December 2010 as detailed in the going concern accounting
policy on page 21. Subject to bank covenants not being breached, it
is the intention of the Company's principal bankers to make the
facility available until 30 November 2011 and they have indicated
that they will give favourable consideration to an extension of the
facility to 31 May 2012 assuming sufficient progress has been made
with regard to planning matters at both Dover and Manston. The
granting of this facility gave rise to a liability for fees of
GBP3.821million as detailed in note 23 above.
An amount of GBP120,000 was raised by way of share issue in
January 2011.
25. Ultimate Controlling Party
The Directors believe there to be no ultimate controlling
party.
26. Commitments
There were no capital commitments at 30 November 2009 or 30
November 2010.
Notes to the announcement:
1. Copies of the Preliminary Audited Results are available from
the Company's website as required by AIM Rule 26 which can be found
at www.cgiplc.com
2. Copies of the Audited Results are being posted to
Shareholders shortly.
3. The above financial information comprises non-statutory
accounts within the meaning of section 435 of the Companies Act
2006. The financial information for the year ended 30 November 2010
has been extracted from published accounts for the year ended 30
November 2010 that will be delivered to the Registrar of Companies
and on which the report of the auditors was unqualified and did not
contain statements under section 498 (2) or (3) of the Companies
Act 2006. The audited report contained the following Emphasis of
Matter
'Emphasis of matter
Going concern
In forming our opinion on the Financial Statements, which is not
qualified, we have considered the adequacy of the disclosure made
in the statement on going concern on page 21 of the Financial
Statements. The future funding of the Company is dependent on the
successful granting of planning applications for the residential
development of its Dover sites and the subsequent disposal of these
sites with the approved relevant planning permissions to a
developer. The matters detailed in the disclosures indicate the
existence of a material uncertainty which may cast significant
doubt on the Company's ability to continue as a going concern. The
Financial Statements do not include the adjustments that would
result if the Company was unable to continue as a going
concern.'
4. The Company will also post a Notice of Annual General Meeting
along with the Accounts. The Annual General Meeting is to be held
at the offices of Sprecher Grier Halberstam LLP, 5(th) Floor, One
America Square, Crosswall, London EC3N 2SG on Thursday 23(rd) June
2011 at 11:30am.
For further information, please contact:
China Gateway International
Plc
Ken Wills +44 (0) 1843 822444
Beaumont Cornish Limited
Roland Cornish +44 (0) 20 7628 3396
This information is provided by RNS
The company news service from the London Stock Exchange
END
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