(REAL.L) Real Office Group PLC Buy/Sell

RNS Number : 9181H Real Office Group PLC 02 March 2010

For immediate release 2 March 2010

REAL OFFICE GROUP PLC ("ROG" the "Group" or the "Company")

ISSUE OF SHARES TO SETTLE INTERCOMPANY BALANCE AND EARNOUT

Further to the announcement on 1 February 2010 regarding the disposal of ISIS Projects Limited ("ISIS"), ISIS has been sold on to the management team by CFC Holdings Limited a company controlled by Roger Smee who is also Chairman and Chief Executive Officer and majority shareholder of the Company with 78% of the ordinary share capital.

Real Office Group plc, the AiM quoted global design and build business, has today issued:

· 5,029,892 ordinary shares of 10 pence each to settle the outstanding intercompany between ROG and ISIS; and

· 3,250,000 ordinary shares of 10 pence each and in satisfaction of the amounts due to members of the management team under the earnout provisions of the original sale to ROG as set out in the Company's Admission Document dated 2 April 2009.

An application for admission to trading to AiM has been submitted and these shares are expected to be admitted to trading on 6 March 2010. All shares issued above are subject to a 12 month lock in and orderly market agreement as set out in the Company's Admission Document dated 2 April 2009. Once admitted the total number of shares in issue will be 151,948,975.

Enquiries:

Real Office Group plc

Roger Smee, Chairman

Philip Brady, Finance Director

0207 822 0989

Cenkos, Nominated Advisor to the Company

Nick Wells/Elizabeth Bowman

0207 397 8900

Smithfield

020 7360 4900

This information is provided by RNS The company news service from the London Stock Exchange

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RNS Number : 6929G Real Office Group PLC 04 February 2010

Real Office Group

("ROG" or the "Company") Real Office Group strategic partnership in India

AIM-listed Real Office Group PLC (ROG), a company led by property entrepreneur Roger Smee with a strategy to acquire and manage commercial design and fit-out businesses has bolstered its global footprint strategy by joining forces on its Indian operation with renowned Delhi-based property developer and businessman Paul Dass and his company Mayaland Developers.

Paul Dass has subscribed for 49% of the equity in the ROG subsidiary, Pacific Interiors India Private Ltd (Pacific India) and will become Chairman and Managing Director. As noted in the Company's recent trading statement, Pacific India has begun to move into profitability and Mr Daas has been part of the team driving this business forward. Mr Dass has committed his own resources and those of Mayaland to develop Pacific India to date.

Paul founded the successful Mayaland Developers and has over 30 years experience in commercial property development and construction. He runs a significant property portfolio in India. Paul will be using local teams and an international network to amplify Pacific India's growth and ultimately look to add new locations to the company's existing offices in Bangalore and New Delhi. Pacific India recently completed large-scale design and fit-out projects for recruiters Hays in Mumbai and for multi-brand skincare manufacturers Urban Shore in Delhi.

Pacific India has identified increasing demand from international corporates based in India who want the same level of reliability, quality and high-end design they can achieve in Western markets. Office rents across the major cities in India have dropped over the past year and companies are looking to take advantage of this reduction by reorganising their office space to expand or consolidate accordingly.

The deal with Paul Dass boosts ROG's expanding international platform and is an important step towards building a 'one stop shop' for their global clients' design and build needs.

Mike Linforth, who heads up Pacific in the UK, comments: "We have seen a huge demand for our services from large international businesses with either an existing base in India, or are looking for new office space there. They are looking for reliability, delivery on time and a high-quality sophisticated office specification."

"We are delighted to have joined forces with Paul Dass, who has an established professional network and an extensive knowledge of the market we are expanding into. With his direction we plan to rapidly build up a powerful market presence by targeting the untapped end of the market where occupier needs are often not met by the larger property players and architects."

Paul Dass adds: "This is an exciting move. I have been very impressed by the management and solid reputation Pacific has built up in the market over the past 25 years. They are clearly a major business with a global vision. Together we are bringing a new concept to the Indian market with the Pacific 'one-stop' design and build offering."

"I look forward to matching my regional knowledge and contacts with their solid business vision - and to working closely with the Pacific team and existing client base in London."

Roger Smee, Chairman and Chief Executive Officer of ROG, says: "India fits perfectly with our immediate strategic expansion plans to move into countries where significant GDP growth remains. Our deal with Paul Dass represents the next step on Real Office Group's path to creating a truly global group of fit-out companies, where we can offer framework agreements to major clients, on a global basis. I hope to be able to announce further beneficial strategic partnerships and acquisitions in the near future."

Financial advisers to Mayaland were Sandeep Dinodia of S.R. Dinodia and Partners in Delhi together with legal advisers Toby Greenbury and Christopher Jones of solicitors Mishcon de Reya in London.

Enquiries

Real Office Group plc

Roger Smee, Chairman

Philip Brady, Finance Director

0202 7822 0989

Cenkos, Nominated Advisor to the Company

Nick Wells/Elizabeth Bowman

0207 397 8900

Smithfield

Reg Hoare

020 7360 4900

This information is provided by RNS The company news service from the London Stock Exchange

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RNS Number : 4137G
  Real Office Group PLC
  01 February 2010
   

                        Real Office Group plc ("ROG", the "Group" or "the Company")

Further commentary regarding the Final Results 

Real Office Group, the AIM quoted global design and build business today has posted its audited financial statements to shareholders for the year ended 31 July 2009. 

On the 1 December 2009 the company issued its unaudited final results.  However, the audit had not been completed by that date and subsequent to this release a number of changes to the presentation and disclosures in the accounts were discussed and agreed with the Company's Auditors. Accordingly, the results issued at that time differ materially from the results that appear in the audited accounts released today for the reasons set out below.  The directors believe that the audited financial statements present a more appropriate and relevant analysis of the Company's financial position than those un-audited results released on 1 December 2009.  As a general point the audited financial statements reflect disclosure akin to that included in the pro forma analysis of Group trading set out the trading statement released on 30 October 2009.   

Results presentation

·    In conjunction with its Auditors  the Company accepted that the "pooling of interests" method or as more commonly known merger accounting method should be adopted rather than acquisition accounting. The reason for this was that on the acquisition of ROG by Leander Group Limited ('Leander')on 10 November 2008, all of the companies subsequently acquired by ROG on 2 April 2009 were under the common control of the Chairman Roger Smee. After discussion with its Auditors, the unaudited results were prepared on the basis that ROG was the acquirer. In the unaudited preliminary statement the Group results for 2008 were those of the company alone for the thirteen month period to 30 April 2008, and the results for 2009 for the Company alone from 1 May 2008 to 10 November 2008, with the results of the trading subsidiaries being consolidated from 10 November 2008 to 31 July 2009. 

·    The Company, through the Chairman of its audit committee subsequently argued that this approach to presentation failed to adequately reflect the results of the trading group as envisaged under merger accounting principles which require that the results for the current (2009) and preceding (2008) years should be presented as if the merged entities had existed throughout the period. After lengthy technical consideration on 15 January 2010, the Auditors' agreed that it was acceptable to adopt the approach proposed by the Company, which gave priority to the results of the trading subsidiaries rather than ROG. The audited accounts therefore now include the results of the trading subsidiaries for the years to 31 July 2008 and 2009 and the accounts of ROG from the date of its acquisition on 10 November 2009.

·    The unaudited preliminary statement did not identify the minority interests in profits which existed at 10 November 2008 and were acquired by ROG on 29th April 2009. The audited financial statements reflect the interests of the minority throughout the period prior to acquisition on 29 April 2009.

·    The tax charge appearing in the unaudited financial statements  of £149.6k was increased to £349.4k in the audited financial statements.  

A comparison between the unaudited results issued on 1 December 2009 ( shown in italics below) and the audited results issued today for 2009 and 2008 is set out below:-

                               Audited   Unaudited       Audited  Unaudited
                                  2009        2009          2008       2008
                                 £'000       £'000         £'000      £'000
 Revenue                      45,011.0    30,317.0      37,846.4        0.0
 Cost of sales              (36,828.6)  (24,914.4)    (32,254.3)        0.0
 Gross profit                  8,182.4     5,402.6       5,592.1        0.0
 Administrative expenses     (7,144.4)   (5,822.5)     (4,295.9)  (1,004.9)
 Other income                    139.9       139.9           0.0        0.0
 Operating profit/(loss)       1,177.9     (280.0)       1,296.2  (1,004.9)
 Finance revenue                  73.6        95.0          68.6       99.3
 Finance costs                   (1.0)       (1.0)         (4.1)        0.0
 Profit/ (loss) before tax     1,250.5     (186.0)       1,360.7    (905.6)
 Tax                           (349.4)     (149.6)       (527.4)        0.0
 Profit/ (loss) after tax        901.1     (335.6)         833.3    (905.6)
                                                    

Financial position

·    At the time of the release of the unaudited accounts the Company was advised by its Auditors that the brought forward reserves of the trading subsidiaries of £2.593m.as at 10 November 2008 should be posted to Unity of Interest Reserve (or as more commonly known Merger Reserve).  It  has subsequently been agreed that  they should be posted to retained earnings. 

·    Subsequent to issuing the unaudited preliminary statement and prior to issuing the audited accounts, the Company re-evaluated its forecasts for ISIS Projects Limited ("ISIS") for 2010 and 2011 and released £1.086m of provision for deferred consideration included in other payables under Non Current Liabilities in the unaudited financial statements. On 4th January 2010, Leander Group Limited waived its entitlement to £1.505m of deferred consideration due in respect of the audited results of ISIS to 31 July 2009, which was included in trade and other payables under Current Liabilities in the unaudited financial statements but released in the audited financial statements. 

A reconciliation of the main differences between the financial position at 31 July 2009 in the unaudited financial statements and the financial position in the audited financial statements at the same date is as follows:
                                                                                                                          2009
                                                                                                                               £'000

Net liabilities in the unaudited financial statements                                    4,384.0

Deferred consideration in Current Liabilities waived by Leander                      (1,505.0)

Provision for deferred consideration in Non Current Liabilities released           (1,085.9)

Increase in tax provision referred to above                                                           199.8

Other adjustments                                                                                                 94.3

Net liabilities in the audited financial statements                                        2,087.2

Other matters arising from the Audited Financial Statements

On13 December 2009  the Company proposed an alternative approach to accounting methodology to that which had been used to prepare the unaudited statements released on 1 December and which had previously been agreed with the Auditors.  The proposed methodology included using the accounting periods of the subsidiaries for the accounts.  Discussions continued during December regarding the accounting periods disclosed in the consolidated accounts for the Company and subsidiary and the matter was deliberated on numerous times by the Auditors technical panel. On 15 January 2010 it was agreed that the accounting periods of the subsidiaries, rather than those of the Company could be followed. This left the Company with very limited time to alter and re-issue its accounts under the IFRS principals.  In their audit report the Auditors draw attention to a number of limitations of audit scope, and non compliances relating to various disclosures. For the most part the Directors assert that these issues arose because of the delay in agreeing technicalities relating to the accounting approach to be adopted  leading to insufficient time to meet all of the Auditors' requirements.  However, the Directors believe that the revised accounts were necessary for investors to be presented with an accurate picture of the Company's financial position.

The Auditors have qualified the accounts because of disagreement over the treatment of costs described in the audited accounts on their advice under investments ( note 10) as "acquisition costs settled in cash" £763,417 which they describe differently in their Auditors report as representing the "costs of reorganizing the Group". The Company agrees with the Auditors that under FRS6 group reorganization costs should be written off , however it disagrees that these costs, including legal and accounting due diligence, acquisition agreements including minorities and the costs of re-admitting the Company on AIM, are in the nature of  group re-organization costs. The costs were capitalized on advice from the Auditors and were not written off on consolidation in the unaudited accounts released on 1 December 2009.       

The Company strongly disagrees with the statement in the audit report which says that the directors have adopted FRS 6 as the basis for the pooling of interest accounting in the Group Financial Statements. In the absence of an IFRS standard on merger accounting  no one standard fully and comprehensively addresses all of the complex accounting issues that arise in this case. Indeed FRS 6 does not address reverse acquisitions, or common control transactions at all. Furthermore the Company does not meet the criteria under FRS 6 to be able to prepare accounts on a unity of interests or merger accounting basis.  Under FRS6 the ROG transactions should be accounted for as acquisitions, in which case the costs of acquisition would not be written off.

IAS 8- Accounting Policies, Changes in Accounting Estimates and Errors requires that in the absence of specific guidance in IFRS, management shall use its judgement in developing and applying accounting policy that is relevant and reliable. As part of that process management considered all relevant guidance including  IFRS 3, Chapter 10 of iGAAP 2009 as well as FRS 6 but adopted none of them in isolation. Instead judgement was exercised under IAS8 to select a policy that was relevant and reliable. and presented the financial performance  of the group on a comparable and consistent basis  The impact of the disagreement over acquisition costs is set out below:

                                                             Method adopted                  Method proposed
                                                             by the directors                        by the Auditors
                                                                      £'000                                         £'000                                                               

Profit before tax                                          1,250.5                                       487.1

Tax                                                             (349.4)                                    (349.4)

Profits after tax                                              901.1                                       137.7

Consolidated retained earnings                 (1,010.2)                                  (1,857.4)

Unity of interest reserve                          (18,840.8)                                (17,993.6)

All of  the matters raised by the auditors in their report will be addressed subsequently and scrutinized by the Audit Committee to reduce, so far as is possible, any impact on audit reports in future years.  Procedures and controls will be out in place to ensure clear audit trails and the timely preparation of  cashflow statements by subsidiary companies.

Real Office Group plc

Roger Smee, Chairman

Philip Brady, Finance Director

0202 7822 0989

Cenkos, Nominated Advisor to the Company

Nick Wells/Elizabeth Bowman

0207 397 8900

Smithfield

Reg Hoare

020 7360 4900

This information is provided by RNS
The company news service from the London Stock Exchange
 
  END 
 
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RNS Number : 4134G Real Office Group PLC 01 February 2010

Real Office Group plc ("ROG", the "Group or "the Company")

Trading Statement, Disposal of ISIS Projects and Funding Commitment

Trading update

The Board of ROG is pleased to set out below a trading update for the Group. The Board views the current financial performance as satisfactory when set against the challenging global economy and specific local issues and is working towards improving the position further. It is confident in the strong current order book and is particularly pleased with the trading position of Pacific Interiors Limited and the move into profit for Pacific India. The Board looks forward to updating investors on its results for the interim period ended 31 January 2010 in due course.

· The Group's financial performance for the period has been impacted by losses incurred in ISIS Projects Limited ("ISIS") due to some unexpected contract delays in late 2009. ISIS has now been sold to Leander Group Limited meaning these losses will no longer impact Group results.

· It is expected that, excluding the results of ISIS, the Group will still have incurred a modest loss mainly due to continued difficulty in trading in its subsidiary Pacific Middle East LLC ("PME") in Qatar.

· PME has suffered delays in the commencement of certain key projects and continued difficulties in executing its existing projects. Further its cash position has been stretched by the non-settlement of its invoices by a major customer.

· Pacific Interiors Limited ("PIL") continues to trade ahead of management's expectations and has secured a number of large projects which underpin its future trading to 31 July 2010.

· Pacific Turnkey Middle East LLC ("PTME") our subsidiaries in the UAE are trading positively and although they receive support from PME are starting to build their own presence. They are currently in detailed discussions over a AED 40m (£6.7m) project which would underpin our financial performance in the region.

· Pacific Interiors India Pvt. Limited ("Pacific India") continues to gain momentum and has moved into a profitable trading position on a monthly basis. Therefore, it is starting to reduce the set up losses incurred in the period to date. Further our partner in India has invested for a 49% equity stake in the Pacific India displaying his belief in the future potential of India as a design and build market place.

· The Company remains in early stage discussions with a bank regarding a working capital facility and the Chairman has committed to subscribing for £1 million of ROG shares on refinancing of property assets.

Disposal of ISIS

The Board of ROG announces that on 28th January 2010 the Company disposed of its shareholding in ISIS Projects Limited back to CFC Holdings Limited, a wholly owned subsidiary of Leander Group Limited ("Leander"), a company controlled by Roger Smee who is also Chairman and Chief Executive Officer and majority shareholder of the Company with 78% of the ordinary share capital. Under the terms of the original sale agreement the purchase was based upon the net assets of ISIS plus an earnout. Leander has waived its right to more shares under the earnout and as such Leander received £71k of shares for the sale of ISIS.

The terms of sale were as follows:-

· Sale of shares in ISIS to a subsidiary of Leander CFC Holdings at cost to ROG, £484k after adjustment to management earn out agreed with management - no loss on sale arises to the Company.· Consideration for shares to be offset against amount due by ROG to ISIS of £986k and the net balance of the debt due to ISIS of £502k assumed by CFC Holdings to be settled by the issue of shares in ROG at par- no continuing obligations and a long term liability settled in full by the issue of shares.· Facility for ISIS of £100k to be secured by book debts of the company - no cash loss to the Group.· Reasonable endeavours to remove parent company guarantees which are to be secured against shares issued in settlement of the inter company account. The independent directors took into account the following factors in considering the sale of ISIS:
· Waiver by Leander of deferred consideration of £1,505k for the original sale of its shares in ISIS to ROG.
· The commitment by Roger Smee to invest a further £1m in ROG from the sale or refinance of property.
· Losses incurred by ISIS for the year to date and the prospects to the end of the financial year.
· Liquidity and burden of the working capital requirements of ISIS on the rest of the Group.
· Low margins and lack of contribution by ISIS to group results.

· Risk of failure based on past performance to achieve growth targets and projections for revenue and margins

· No loss on sale, final settlement of a liability of £986k without any cash loss to the group.

· Limited exposure to loss going forwards.

· Concentration of management focus on Pacific Interiors, Pacific Middle East, Pacific India and Pacific UAE which follow a design and build business model.

The audited profits attributable to ISIS for the year ended 31 July 2009 were £308k and the net assets were £1,280k. The sale of ISIS is expected to materially reduce the revenue for the Group in the 2010 financial year and compared with the prior year. However, ISIS was not expected to contribute to profitability during 2010 and accordingly it is expected that the sale should strengthen the remaining Group's financial position.

The Directors of the Company, with the exclusion of Roger Smee and Paddy Greenwood who are not considered independent for the purposes of this transaction, having consulted with the Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Irrevocable commitment to subscribe for shares in ROG if required by the Board

The Board is pleased to announce that, on 28th January 2010, Roger Smee irrevocably undertook to subscribe for £1 million of ROG shares at the higher of 10p per share or the 10 day rolling average share price prior to the date of subscription should the Board of ROG deem that the Company require additional cash resources. Mr Smee has undertaken to refinance or sell property assets to fund this subscription and the Company will update the market in due course. The commitment has been entered into as a show of support for Real Office Group during a time where financial resources are limited.

Roger Smee commented "I am pleased with the continued progress of the Real Office Group companies towards consolidating their position as an international design and fit out Group during very difficult trading conditions. Whilst trading has been satisfactory, the one off costs associated with the reverse acquisition last year placed pressure on resources and my commitment to invest £1 million in the Company should help to ensure our strategy implementation is not in any way delayed."

Enquiries

Real Office Group plc

Roger Smee, Chairman

Philip Brady, Finance Director

0207 822 0989

Cenkos, Nominated Advisor to the Company

Nick Wells/Elizabeth Bowman

0207 397 8900

Smithfield

Reg Hoare

020 7360 4900

This information is provided by RNS The company news service from the London Stock Exchange

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