RNS Number:5806K
Exploration Co PLC
30 April 2003
THE EXPLORATION COMPANY p.l.c.
CHAIRMAN'S STATEMENT
results for the year ended 31 December 2002
Total net assets at market value or Directors valuation show a decrease of
#3,599,207 compared to last year.
The Group profit before tax, including #292,090 (#1,255,901 for 2001) share of
profit, after interest payable, applicable to Associated Undertakings, was
#2,049,125 for 2002 against a loss of #75,552 for 2001. Group net assets, taking
investments at market value, were #37,324,826 (equal to 310p per stock unit)
against #40,924,033 for 2001 (340p per stock unit) a decrease of 8.79%, compared
to a fall of 25.03% for the FTSE All Share Index over the same period.
Evasive action was taken in the first half of last year, which avoided some of
the severe declines that occurred through to the lows of early October, on both
sides of the Atlantic. This has been coupled with redemptions of several of our
Loan notes received in exchange for takeovers in earlier years. Christmas also
came early in the form of the sale, at a most attractive price, of a long-held
commercial property, significantly in excess of its most-recent valuation. It
would be unrealistic to expect such largesse to be repeated, although low equity
valuations in the U.K. are beginning to attract predators at the present time.
Our goal, in the unappealing environment that confronts us, is to garner income
from safe sources, even at seemingly unattractive fixed rates as bonds appear to
present, whilst protecting ourselves from an expected decline in Sterling.
Preservation of capital remains top priority, as we are not believers in the
Second Coming of a Financial Saviour, or anything similar to the absurdities
seen at the start of this Millennium. Our sound Smaller Company stocks will, we
believe, improve our profitability over the medium term.
Last year's Corporate horrors, typified by Enron's accounting shenanigans
abetted by their auditors, helped precipitate the decline in markets which
continued until early in October, after which a rally ensued until early
December. Much comment has been made about the rewards for failure, and little
seems to have changed in this regard. We cannot help feeling, nonetheless, that
the Higgs report will do little to enhance the efficacy of boards and the
performance of the companies which comply, especially where the executive
management has embarked on a policy which destroys shareholder value. The former
mainstays of many portfolios, including our own, such as Invensys (what price
another foolish name, oh for British Tyre and Rubber), ICI, Cable and Wireless,
have left the loyalists in despair. Fortunately the Bonds of countries such as
Switzerland, New Zealand and Australia, and perversely for ourselves, German
Bunds, are lining up with comfortable yields of the Hardy and Hansons and James
Halsteads of this world to help tide us over whatever discomfort the Bear market
may bring. We have, in addition to our overseas Bond portfolio, established an
exposure to the underwriting cycle, with its substantial rises in premium
income, over a range of Lloyd's vehicles, and are looking for an improved risk/
reward ratio in this area.
As the drums of war fade into the distance, leaving the detritus of weaponry,
edifices, and reputations, it would be churlish indeed not to salute our own
Prime Minister for his forthright and consistent stand in pursuing the overthrow
of the Iraqi leader, and more importantly maintaining the tradition of alliance
with the United States, so sadly spurned by the French and Germans, not to
mention many of his own party. We have hoped in the past for a more forthright
pursuit of British interests, and reiterate our concern and disappointment that
the murderous Mugabe escapes unscathed whilst retaining his knighthood, and
enjoying the distasteful obsequiousness of President Chirac, eager to assert
French influence in Central Africa and lay claim to the diamond wealth
sequestrated by the Zimbabwean dictator and his henchmen.
We are hugely heartened and in awe of the quality and bravery of our own
soldiers, as exemplified by the words of Lt. Col Tim Collins to his 1st
Battalion of the Royal Irish: "If you are ferocious in battle, remember to be
magnanimous in victory. Iraq is steeped in history. It is the site of the Garden
of Eden, of the Great Flood and the birthplace of Abraham. Tread lightly there.
You will see things that no man could pay to see and you will have to go a long
way to find a more decent, generous and upright people than the Iraqis. You will
be embarrassed by their hospitality even though they have nothing. Don't treat
them as refugees for they are in their own country. Their children will be poor,
in years to come they will know that the light of liberation in their lives was
brought by you.... As for ourselves, let's bring everyone home and leave Iraq a
better place for us having been there."
We must sincerely hope that the sacrifice many have made can achieve for Iraq
what liberation of the Falklands brought to Argentina with the demise of the
junta, but also that co-operation with the new government can start immediately,
to the mutual advantage of both nations.
The events in the Middle East have, needless to say, overshadowed and perhaps
masked the gravity of the economic downturn affecting Western economies. It is
important to realise, as it would appear few European politicians are capable of
seeing, that the alliance with the United States has formed the bedrock of
stability and peace in the world for the last 50 years. In a similar way, the
United States economy has become the mainstay of worldwide prosperity.
It is possible that as the fog of fear lifts, and the worst possibilities of
renewed war with unknown weapons dissolve, that a new sense of confidence and
encouragement will emerge, that will help lead the United States and
subsequently the Western world out of recession, or at least prevent the decline
into a "double dip". We do not discount this possibility. We do not however,
consider it the likely outcome, much as we would wish it to be. As Dr.
Richebacher has so succinctly summarised "when consumption is boosted by an
increase in asset values, at the expense of investment and the foreign trade
balance, the net result from a macro perspective is overall impoverishment".
The myth, comforting British and American economists, that rising house prices
and continuing consumer expenditure has benefitted and will further enhance the
well being of their economies is sadly far from the truth. We are firmly of the
opinion that deflation of exalted asset values and earnings ratios has still,
particularly in the United States, far further to go. It has, to date been a
drawn-out decline, and we would consider it likely to continue to be so, with
moments when it would appear that it has at last changed for the better. We
intend, therefore, to keep our powder dry and restrain ourselves, as far as
possible, from over exposure to the market, except where we see convincing
value, either through the cushion of an asset value substantially in excess of
the share price, or, and preferably in conjunction with, a high and maintainable
dividend yield.
The British economy, whilst apparently more reasonably priced than that of the
States, faces the disagreeable prospect of rapidly rising State spending, led by
a Chancellor showing scant regard for the travails of industry or the wealth
creators. His attempt to raise tax from the expatriate community of foreigners
living and plying their trade in Britain is likely to lead to their departure.
The egregious 'You need a relationship with the workplace' Mr. Clarke decries
erudition and contemplation, whilst attempting to impose on our universities the
debasement of talent by mediocrity. The raft of regulations is already leading
to the demise of many smaller companies, which were and whose survivors remain,
the backbone of the British economy. The suzerainty of Brussels, and its
stifling diktats, are more suited to the quasi-state structures prevailing in
its mainstays, France and Germany. Even our artistic triumphs succumb to this
nihilistic regime, such as the cast iron lampposts adorning the Embankment, and
St. Pancras's fine windows, on the absurd premise that their heat retention does
not comply with newly imposed standards.
The successful British entrepreneur, who stands stalwartly at the base of
British industry, is in many cases unable to cope with the compliance costs of
conforming with the increasingly complex regimes. Farming is a case in point;
Defra, led by the incomparably incompatible Mrs. Beckett, with her extraordinary
and naive reliance on, and obsequious deference to, any scientific mumbo-jumbo
emanating from Brussels, is, at its behest, introducing a new regime which will
undoubtedly lead to the demise of Farming as we now know it. Subsidies will be
paid on the basis of acreage, rather than production. An industry once at the
forefront of scientific advances, animal husbandry and innovation, will atrophy
and die, with incalculable consequences for the countryside and those who have
laboured in it over the generations: all this to help a few Polish peasants, but
primarily the farmers of France and Germany.
We are equally disheartened by the Chancellor's insatiable appetite for our cash
to fund his NHS coffers, an impossible and unending task, that is at present
only achieving inflation in the wages of the many staff there employed. The
success in alienating British business achieved by Gordon Brown is only matched
by that of Ken Livingstone, with his enormously costly-to-collect congestion
charge, which however agreeable for the cyclist in its consequences, is surely
eliminating the sparkle from Central London, so essential for a capital City
depending on confidence and je ne sais quoi. It took a long time for Carnaby
Street and its environs to recover its vibrancy once the Beatles broke up.
Already a considerable body of evidence shows how badly West End shops are
suffering.
On the sporting front, we have the absurd spectacle of the destruction of
Wembley's Twin Towers in order to spend #750m on a stadium to serve the pinnacle
of a game whose grass-roots are being so badly starved that our finest
footballers are made to look pedestrian by the thoroughbreds of Real Madrid.
Perhaps the Irish breeders will rectify the situation.
The Pensions Crisis, which is devastating the prospects of a whole generation of
imminent retirees, received its greatest impetus from the Chancellor's removal
of the tax credit to pension funds. The collapse of equity prices has magnified
this malicious and ill-conceived act. The Commons Pension Committee, with its
head firmly rooted in the sand, speaking from the security of its index-linked
citadel, dismisses use of the term 'crisis', whilst the Government initiates
additional measures to exacerbate the situation, like most earlier amendments.
The medicine, however unpalatable, is that the retirement age will have to be
raised. Fortunately, Britain's position is less unappealing than that of Europe,
with its huge quasi-state-controlled infrastructure and the needs of its former
employees. That will be of little solace to us, if we are dragged into the
single currency.
All these factors could, perhaps, be sustained, in the middle of a conventional
economic cycle. We ourselves are convinced that we are in the.early stages of a
substantial downward economic adjustment, and the "Heavy Pounding" we predicted
last year still has much further to go. We have not removed our flak jackets,
nor our helmets, although like the British Army, we seem to have a mixture of
attire, between khaki and green. We are holding on to our gold stocks and
bullion, even though the highs in the shares attained last June have yet to be
surpassed.
I am indeed grateful that we have a board that has given the executive every
assistance in attempting to benefit shareholders at large. I hope that assets
will continue to be enhanced, within the constraints of the gloomy prognosis I
have outlined above. Over the coming years we hope that our cautious stance will
protect the asset base of your company.
The immediate future is cloudy indeed, and a 4th down year for Western markets
is a distinct possibility. The scintillating victory of the Oxford crew, matched
stroke for stroke by Cambridge, has shown how tenacity, dedication and
determination can triumph over shortcomings in size. We offer our
congratulations to both crews, and coaches, on a devastating display of courage
and endeavour. The newly elected Chancellor of Oxford, fresh from his robust
role in dismantling the Royal Ulster Constabulary, and asserting Europe's
influence on the world stage in its relations with America, may like to observe
that size does not count for everything, even though that has consistently been
the assertion of the Europhiles. Perhaps even he could conclude that a more
buoyant Britain can continue to thrive without the stranglehold of the Brussels
genre of socialism.
My thanks go to our staff: the enthusiastic and able Abbie, preparing to
introduce more Blondes in to England, for which we wish her well; the impeccable
Rosanna and adroit Chris Burman, as well as the various advisers and brokers who
have served us well over the past year.
C. Robin Woodbine Parish
Chairman
30 April 2003
The Director's Report and Financial Statements will be despatched to
shareholders on 2 June 2003 and the Annual General Meeting will be held on 26
June 2003.
The financial information for the preliminary results for the year ended 31
December 2002 are unaudited. The financial information for the preliminary
announcement does not comprise the Company's statutory accounts for the years
ended 31 December 2002 or 31 December 2001. Statutory accounts for the previous
financial year ended 31 December 2001 have been delivered to the Registrar of
Companies. The auditor's report on those accounts was unqualified and did not
contain any statement under section 237(2) or (3) of the Companies Act 1985.
The Auditors have not reported on the accounts for the year ended 31 December
2002, nor have any such accounts been delivered to the Register of Companies.
Registered office: 41 Cheval Place, London, SW7 1EW.
THE EXPLORATION COMPANY p.l.c.
ACCOUNTING POLICIES
As permitted by The Companies Act 1985, the Directors have adapted the headings
in the consolidated profit and loss account from those prescribed in Schedule 4
in order to better reflect the special nature of the Group's business.
The following accounting policies have been applied consistently except as noted
in 1(b), in dealing with items which are considered material in relation to the
Group's financial statements:
(a) Basis of Accounting
The accounts have been prepared on the historical cost basis of accounting and
in accordance with applicable accounting standards.
(b) Changes in accounting policies
The Group has adopted FRS19 'Deferred Tax' in these financial statements. The
adoption of this standard represents a change in accounting policy and the
comparative figures have been restated accordingly. The adoption of this policy
has increased the tax charge by #474 (2001: decreased #4,074) and decreased
profit for the financial year by #474 (2001: increased #4,074). The Group has
also reclassified short sold investments as a liability on the balance sheet.
This has increased investments and creditors by #5,361,051 (2001: #773,713).
(c) Group Financial Statements
The Group financial statements include those of the wholly-owned Subsidiary,
Group Traders Limited, which is incorporated in England, and the Group's share
of the results of Associated Undertakings based on its effective interest.
(d) Investment Income
Income from investments includes all dividends, rents and interest on
non-government securities, the dates of payment of which fall within the year.
Interest on government securities is accounted for on an accruals basis.
Dividends received as scrip are not accounted for as income and no adjustment is
made to the book value of the relevant investment. The effect, therefore, is to
reduce the unit cost of the shares in the investment concerned.
(e) Investments
Listed investments and investments for which the primary market is a recognised
exchange are stated in the balance sheet at the lower of cost and market value
at the balance sheet date. Unlisted investments are stated at the lower of cost
and Directors' valuation at the balance sheet date. Overseas investments are
translated at the exchange rate ruling at the balance sheet date.
The Company has sold securities and options that it does not own and it will,
therefore, be obliged to deliver such securities at a future date. The Company
records a liability for such transactions. To the extent that an additional
liability arises from a market movement, the loss is recognised as an increase
in provision for diminution in value of investments.
(f) Fixed Assets
The cost of software and office equipment includes purchases at cost, and any
incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of fixed assets, less
their estimated residual values, on a straight-line basis over the expected
useful economic lives of the assets concerned. The principal annual rates used
for this purpose are:
Office equipment and software 33 1/3 %
(g) Deferred Taxation
Provision is made in full for all taxation deferred in respect of timing
differences that have originated but not reversed at the balance sheet date.
Such assets and liabilities are not discounted. No provision is made for
taxation on permanent timing differences. Deferred tax assets are recognised to
the extent that it is more likely than not that they will be recovered.
(h) Pension Costs
The Company contributes to a Self Investing Personal Pension Plan for the
benefit of C. R. W. Parish. The assets of the scheme are held separately from
those of the Company in an independently administered fund. Payments to the
pension scheme are accounted for in the year in which they arise.
(i) Foreign Currency Translation
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the profit and loss account.
THE EXPLORATION COMPANY p.l.c.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 Dec 2002
*
Unaudited (Restated)
31 Dec 31 Dec
2002 2001
# #
Income/(defecit) from investment trading 2,478,521 (570,011)
Management expenses 538,615 494,131
Operating profit/(loss) 1,939,906 (1,064,142)
Share of operating profit of associated undertakings 403,355 1,318,270
Profit on ordinary activities before interest payable 2,343,261 254,128
Interest payable
Group 182,871 267,311
Associated undertakings 111,265 62,369
294,136 329,680
Profit/(loss) on ordinary activities before taxation 2,049,125 (75,552)
Taxation
Group 413,167 (254,278)
Associated undertakings 88,980 403,275
502,147 148,997
Profit/(loss) on ordinary activities after taxation 1,546,978 (224,549)
Dividends (net of claimed/forfeited #(177), 2001:#46,999)) 1,265,734 1,218,558
Retained profit/(loss) for the period 281,244 (1,443,107)
Dividends per stock unit 10.50p 10.50p
Earnings per stock unit (Basic and diluted) 12.83p (1.86)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 Dec 2002
*
Unaudited (Restated)
31 Dec 31 Dec
2002 2001
# #
Profit/(loss) from ordinary activities after taxation 1,546,978 (224,549)
Share of own dividend received by Associated Undertakings 302,953 389,511
Total recognisd gains and losses for the year 1,849,931 164,962
Prior year adjustment - FRS 19 4,074 -
Total gains and losses recognised since last annual report. 1,854,005 164,962
* The 2001 figures have been restated in accordance with changes in accounting
policies (see note 1(b)).
THE EXPLORATION COMPANY p.l.c.
BALANCE SHEETS
at 31 Dec 2002
Group Company
* *
Unaudited (Restated) Unaudited (Restated)
31 Dec 31 Dec 31 Dec 31 Dec
2002 2001 2002 2001
# # # #
Fixed Assets
Office equipment & software 5,192 3,171 5,192 3,171
Subsidiary Company - - 2,747 2,747
Associated Undertakings 6,708,618 6,787,247 181,752 181,752
6,713,810 6,790,418 189,691 187,670
Current assets
Investments 17,180,186 17,210,917 11,819,135 17,210,917
Debtors 6,613,328 743,456 6,613,328 743,456
Cash and bank balances 35,295 52,176 35,295 52,176
23,828,809 18,006,549 18,467,758 18,006,549
Creditors: amounts falling due
within one year: 10,612,708 5,451,253 6,396,339 6,595,935
Net current assets 13,216,101 12,555,296 12,071,419 11,410,614
Total assets less current liabilities 19,929,911 19,345,714 12,261,110 11,598,284
Net Assets 19,929,911 19,345,714 12,261,110 11,598,284
Capital and reserves
Called up share capital 602,646 602,646 602,646 602,646
Share premium 6,017 6,017 6,017 6,017
Profit and loss account 19,321,248 18,737,051 11,652,447 10,989,621
Shockholders' funds (Equity) 19,929,911 19,345,714 12,261,110 11,598,284
Market value of investments
Listed 25,660,734 27,553,126 25,660,734 27,553,126
Unlisted 2,857,900 3,413,895 2,857,900 3,413,895
Property - 285,833 - 285,833
28,518,634 31,252,854 28,518,634 31,252,854
Short sold investments (5,217,225) (867,239) (5,217,225) (867,239)
23,301,409 30,385,615 23,301,409 30,385,615
Group net assets at market value 37,324,826 40,924,033
The potential corporation tax liability if the Group's net assets were realised at their market valuation or at
Directors' valuation would be approximately #7,176,000 calculated at the rate of 30%.
Group net assets (at market value) per stock unit 310p 340p
* The 2001 figures have been restated in accordance with changes in accounting policies (see note 1(b)).
THE EXPLORATION COMPANY p.l.c.
CONSOLIDATED CASHFLOW STATEMENT
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Net cash (outflow)/inflow from operating activities (942,696) 1,466,178
Dividends received from associated undertakings 584,692 584,692
Returns on investments and servicing finance (177,871) (265,555)
Taxation 472,501 261,122
Capital expenditure and management of non-liquid resources 1,742,692 415,351
Equity dividends paid (1,265,734) (1,580,146)
Net inflow before management of liquid resources 413,584 881,642
Management of liquid resources (439,355) 507,042
(Decrease)/increase in cash in the year (25,771) 1,388,684
THE EXPLORATION COMPANY p.l.c.
RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Operating profit/(loss) 1,939,906 (1,064,142)
Depreciation 3,389 10,839
Increase/(decrease) in provision for diminution in investments (718,264) 1,135,437
(Profit)/loss on investments realised (640,239) 438,108
Currency translation (losses) 80,488 281,400
(Increase)/decrease in debtors (6,351,184) 1,126,054
Increase/(decrease) in creditors 4,743,208 (461,518)
Net cash (outflow)/inflow from operating activities (942,696) 1,466,178
ANALYSIS OF CASH FLOW
for the year ended 31 Dec 2002
Unaudited
31 Dec 31 Dec
2002 2001
# #
Dividends received from associated undertakings
Dividends received from associated undertakings 584,692 584,692
Returns on investments and servicing finance
Interst paid (177,871) (265,555)
Taxation
UK Corporation tax refunded 472,501 289,113
Overseas tax paid - (13,574)
UK tax witheld - (14,417)
Net cash inflow 472,501 261,122
Capital expenditure and management of non-liquid resources
Purchase of fixed assets (5,409) (4,757)
Purchase of unlisted securities (562,793) (151,488)
Sale of unlisted securities 1,190,263 571,596
Sake of property 1,120,631 -
Net cash inflow 1,742,692 415,351
Equity dividend paid
Dividend paid (1,265,734) (1,580,146)
Management of liquid resources
Purchases of Investments (25,970,287) (14,972,670)
Sales of investments 25,530,932 15,479,712
Net cash (outflow)/inflow (439,355) 507,042
THE EXPLORATION COMPANY p.l.c.
ANALYSIS AND RECONCILIATION OF NET FUNDS
for the year ended 31 Dec 2002
1 Jan Unaudited 31 Dec
2002 Cash flow 2002
# # #
Cash and bank balances 52,176 (16,881) 35,295
Overdrafts and deal funding (3,245,422) (8,891) (3,254,313)
(3,193,246) (25,772) (3,219,018)
Current asset investments 17,210,917 (30,731) 17,180,186
Less: unlisted securities and property (1,930,626) 530,071 (1,400,555)
15,280,291 499,340 15,779,631
Net funds 12,087,045 473,568 12,560,613
Unaudited
31 Dec 31 Dec
2002 2001
# #
(Decrease)/increase in cash in year (25,772) 2,162,397
Cash outflow from increase in liquid resources (30,731) (3,393,659)
Cash inflow from decrease in non-liquid resources 530,071 341,183
Change in net funds resulting from cash flows 473,568 (890,079)
Net funds at 1 January 12,087,045 12,977,124
Net funds at 31 December 12,560,613 12,087,045
PROFIT AND LOSS ACCOUNT
for the year ended 31 Dec 2002
Associated
Undertaking Total
# # #
Group
Balance 1 January 2002 - as previously reported 12,128,840 6,604,137 18,732,977
Prior year adjustment - FRS19 2,716 1,358 4,074
Balance 1 January 2002 - as restated 12,131,556 6,605,495 18,737,051
Retained profit/(loss) for the year 662,826 (381,582) 281,244
Share of dividends from the Company 0 302,953 302,953
Balance 31 December 2002 12,794,382 6,526,866 19,321,248
Company
Balance 1 January 2002 - as previously reported 10,986,905 10,986,905
Prior year adjustment - FRS19 2,716 2,716
Balance 1 January 2002 - as restated 10,989,621 10,989,621
Retained profit for the year 662,826 662,826
Balance 31 December 2002 11,652,447 11,652,447
RECONCILIATION OF SHAREHOLDERS FUNDS
Unaudited
31 Dec 31 Dec
2002 2001
# #
Profit/(loss) from ordinary activities 1,546,978 (224,549)
Dividends (1,265,734) (1,218,558)
Share of own company dividend 302,953 389,511
584,197 (1,053,596)
Opening Shareholder funds - as previously reported 19,341,640 20,399,310
Prior year adjustment - FRS19 4,074 -
Opening Shareholder funds 19,345,714 20,399,310
Closing Shareholder funds - as restated 19,929,911 19,345,714
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URRVRORRSOAR
