13th Aug 2007 07:00
Daniel Stewart Securities PLC13 August 2007 13 AUGUST 2007 DANIEL STEWART SECURITIES PLC (AIM) ("Daniel Stewart" or "the Company") FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2007 The Board of Daniel Stewart Securities plc, the investment bank offeringcorporate advisory and institutional stockbroking services, announces its finalresults for the year ended 31 March 2007. FINANCIAL AND OPERATIONAL HIGHLIGHTS • Group Turnover £7,547,344 (2006: £8,990,710); • Gross Profit £6,560,629 (2005: £ 8,191,495); • Pre Tax Loss (£3,735,246) before exceptional item (2006: Profit £3,022,327); • Net Assets £7,250,713 (2006: £13,891,756); • Loss/Earnings per share fully diluted (2.12p) (2006: 0.80p); • Opportunity turnover loss as a result of US legislation estimated to be £1.5 million; • Asset depletion as a result of US legislation £1.4 million; • Significant investment in hiring high quality staff across the business; - one-off costs incurred of £1.7 million; and • Establishment costs one-off £1.6 million incurred in transferring shares to Employee Benefit Trust. Commenting on today's announcement, Peter Shea, Group Chief Executive, said "Theyear just completed has been one of change for the Company. We have successfullycreated a high quality team of market professionals delivering an upgradedproduct to both our corporate and institutional clients. "The year was severely impaired by unexpected legislation changes in the USinternet gaming creating what we consider to be a temporary hiatus during atremendous growth period for the Company. This is now firmly behind us. The newfinancial year has commenced well with a return to profitability and we lookforward to the balance of the year with confidence". --ENDS-- Enquiries: DANIEL STEWART SECURITIES PLC Tel: 020 7776 6550Peter SheaAlastair Cade BISHOPSGATE COMMUNICATIONS LIMITED Tel: 020 7562 3350Maxine BarnesNick Rome/Sophie [email protected] BLUE OAR SECURITIES PLC Tel: 020 7448 4400David SealWilliam Vandyk Notes to Editors: About Daniel Stewart Daniel Stewart Securities is an AIM-listed company providing a range ofinvestment banking services to Small Cap publicly traded and non-publicly tradedcompanies. The Group has two subsidiaries, Daniel Stewart and Company, theGroup's principal operating subsidiary, which is authorised and regulated by theFinancial Services Authority and is a member of the London Stock Exchange, andDaniel Stewart Capital, the Group's leasing and debt financing division. CHAIRMAN'S LETTER TO THE SHAREHOLDERS Dear Shareholder I am pleased to present our final results for the year ended 31 March 2007. After a difficult year, the new financial year has started well; we havereturned to profitability and are beginning to see the benefits of ourdevelopment programme with improvements in both the size and quality oftransactions completed and mandates won. The 2006/2007 year was one of substantial change for the Company. Tradingconditions throughout the first half of the year were fairly favourable althoughour performance was marred by the unexpected introduction in the USA oflegislation in the online gaming industry which substantially impaired theperformance for the year. Two clients, both of whom had US facing businesses,had to cease trading. This created a loss for us of some £1.5 million, asoptions and stock positions became worthless. Additionally, transactions whichwere about to be consummated were cancelled with a transaction fee loss to us ofa further £1.5 million. Trading conditions during the second half of the yearwere decidedly more difficult. Revenue in the second half of the year was £2.2million, down from £5.3 million in the first half. This was partly as a resultof poor market conditions and partly due to the widespread restructuring of thebusiness. As AIM has matured, the need for upgraded services has become more apparent, andwe took the opportunity during the year to successfully add to our researchteam, recruiting high quality analysts from across the spectrum of the market.This now enables us to offer our services across all sectors. To support thisexpansion, we have recruited additional sales personnel as well as strengtheningour corporate finance capability. We opened our first regional office in Manchester in November and this expansionhas already led to new business opportunities. We are confident that we are nowsubstantially fully staffed with personnel able to provide quality services toour clients. In line with industry practice, we also introduced a new employee benefit trustto provide incentive share payments to staff to align their interest with ourshareholders. In order to minimise the dilutive effect of the new employeebenefit, we have acquired in the market a sufficient number of shares to enablethe first allocation of shares to staff to be met without issuing any new stock.It is the Board's intention to continue with this practice when appropriate. The year under review has proved to be difficult but thanks to a team ofdedicated professional staff we have weathered it well and are now wellpositioned for the future. The business is now significantly more balanced bothin terms of the sector focus and the spread of primary and secondary business.Trading in the new year has started well and the Company has returned toprofitability. We look forward to the future with optimism. Peter Dicks Chairman Operating and financial review The operating and financial review has been prepared to provide shareholdersinformation in order to assess the group's strategies. This review should notbe used for any other purpose. This review contains several subjective and forward looking statements whichhave been made by the directors in good faith based upon the informationutilised by them and available to them at the time. Any subjective orforward-looking statement should be considered by the user within the context ofeconomic and business risk. Business environment The early part of the year presented favourable conditions and the market wasreasonably buoyant. The second half deteriorated and was compounded by fearsaround the debt market particularly relating to sub-prime. We saw concernsarising relating to personal debt and those companies providing services tothem. There was also a collapse in the internet gaming market as a result ofchange in US legislation. All of these issues affected our deal-flow in thesecond half of the year. Results of operations Revenue for the twelve months was £7.5 million down from £8.9 million for theprevious year - a decrease of 16%. At the gross profit level, the Company'sperformance fell by 20% on the previous year, returning £6.5 million versus £8.1million for 2006. At the operating level, we had a loss of £4.4 million downfrom a profit of £2.7 million for 2006. Staffing levels rose during the yearfrom 2006 although our administrative expenses fell from £8.6 million in 2006 to£6.9 million. This, however, was as a result of the implementation of IFRS 2relating to share based payments which reduced administrative costs by £1.7million this year and increased them by approximately £2 million in 2006. After taking into account interest, depreciation and exceptional item, the losswas £5.3 million down from a profit of £1.7 million in 2006. The loss is aftercharging £1.4 million resulting from US legislation changes in the gaming sectorand £1.6 million as an exceptional charge incurred after transferring previouslyowned shares and related loans to the employee benefit trust. It should also benoted that certain amounts attributable to revenue failed to materialise as aresult of US gaming legislation changes. While the sums are un-quantified, theBoard believes that the opportunity loss was significant. Equity capital markets At year-end 2006, the Company's retained AIM and other public market client baseconsisted of 40 companies. We completed 12 transactions (2006: 38) and acted onthe admission of over £70 million (2006: £160 million) in new capital on bothprimary and secondary issues on total transaction values of £450 million (2006:£860 million). Liquidity and capital resources Net Assets fell from £13.9 million in 2006 to £7.3 million. The working capitalposition remained positive although it fell by £5.5 million from £9.9 million in2006 to £4.4 million. Most of this reduction can be attributed to US legislationand exceptional charges relating to the new employee benefit trust. Losses inrespect of investment valuations and the employee benefit trust loan have noimpact upon cash, hence, despite the level of loss, cash and cash equivalentsonly reduced by £1.5million to £2.6million at 31 March 2007. Corporate finance Our corporate finance team acted on 16 transactions during the year including 12as Nomad. We successfully completed our first transaction with our US partner,Sanders Morris Harris, acting jointly in the sale of one of their corporateclients. Equity research As a result of a substantial upgrade in the quality and breadth of coverage, theresearch department now provides a service across the whole market. Trading and investment While underlying trading was profitable during the year this department suffereddue to events outside of its control primarily relating to US legislation anddebt market nervousness. Specialist debt services Both our debt finance and leasing divisions performed satisfactorily during theyear each providing a positive contribution. They were both hampered in theirgrowth due to limited capital commitments from the parent company, despite thisboth saw some growth in their underlying business. Employees As at 31 March 2007, the Company employed 40 members of staff, compared to 36 atthe end of 2006. Premises With the additional staff members our premises in London are now fully occupied. The Manchester office currently utilises serviced offices pending thecompletion of its own offices, which are expected to be available during theearly part of Autumn. Outlook The new financial year has commenced satisfactorily with a return toprofitability. The markets have been a little volatile during this first periodand as such we take comfort that we have performed well. We have restructuredour equity capital market teams with a substantial number of high quality hires. We are now operating a significantly more balanced business both in terms ofour sector focus and our spread of primary and secondary business. We are confident that the transformational steps that we have taken will resultin an enhanced performance providing solid returns for our shareholders. Peter Shea Group Chief Executive The preliminary results for the year ended 31 March 2007 were approved by theBoard on 13th August 2007 and accounts for the year ended 31 March 2007 will besent to shareholders in due course. Consolidated income statement Year ended 31 March 2007 RestatedContinuing operations 31 March 2007 31 March 2006 £ £ Revenue 7,547,344 8,990,710Cost of sales (986,715) (799,215) Gross profit 6,560,629 8,191,495 Share trading account (2,624,918) 1,622,499(Losses) / profits arising from gaming stocks (1,406,947) 1,512,832 Contribution to fixed costs 2,528,764 11,326,826 Administrative costs (6,976,795) (8,554,485) Operating (Loss) / Profit (4,448,031) 2,772,341 Bank interest receivable and similar income 862,259 397,333 Interest payable (149,474) (39,677) (3,735,246) 3,129,997 Exceptional item (1,632,472) - (Loss) / Profit before tax (5,367,718) 3,129,997 Taxation 350,000 (765,735) (Loss) / Profit for the year (5,017,718) 2,364,262 Earnings per share 31 March 31 March 2007 2007 Basic (2.35)p 0.88p Diluted (2.12)p 0.80p Consolidated balance sheet As at 31 March 2007 Restated 31 March 2007 31 March 2006 £ £Non current assets Goodwill 1,731,532 1,731,532Available for sale investments 389,364 337,056Property, plant and equipment 363,592 394,510Loans receivable 2,016,399 1,599,787Deferred taxation 81,000 690,000 4,581,887 4,752,885 Current assets Financial assets 1,369,744 3,293,002Trade and other receivables 3,223,383 5,286,748Corporation tax 280,498 -Cash and cash equivalents 2,623,549 4,124,883 7,497,174 12,704,633 Total assets 12,079,061 17,457,518 Liabilities Trade and other payables 3,118,861 1,548,068Corporation tax - 1,270,000 3,118,861 2,818,068 Non current liabilities 1,231,817 640,024 Total liabilities 4,350,678 3,458,092 Net assets 7,728,383 13,999,426 Equity Capital and reserves attributable to equity shareholders Share capital 538,459 527,596Share premium 4,298,270 3,838,632Retained earnings (5,366,888) (349,170)Revaluation reserve (1,150,577) (1,150,577)Capital redemption reserve fund 49,998 49,998Capital reserve 8,524,435 8,524,435Share compensation reserve 834,686 2,558,512 7,728,383 13,999,426 Consolidated statement of changes in equity For the year ended 31 March 2007 Restated Balance at 1 Shares Loss for the Cost to employee Total April 2006 issued in year of share options the year Share capital 527,596 10,863 - - 538,459Share premium 3,838,632 459,638 - - 4,298,270Retained earnings (349,170) - (5,017,718) - (5,366,888)Revaluation reserve (1,150,577) - - - (1,150,577)Capital redemption reserve 49,998 - - - 49,998Capital reserve 8,524,435 - - - 8,524,435Share compensation reserve 2,558,512 - - (1,723,826) 834,686 13,999,426 470,501 (5,017,718) (1,723,826) 7,728,383 Consolidated cash flow statement For the period ended 31 March 2007 Restated 31 March 2007 31 March 2006 £ £Operating activities Operating (loss) / profit (4,448,031) 2,772,341Provision for impairment of 166,137 124,229fixed assetsTax paid (628,498) (213,735)Share based payments (1,723,826) 2,052,685 (6,634,218) 4,735,520 Movement in working capitalDecrease / (Increase) in receivables 1,453,714 (1,884,805)Increase in payables 1,053,224 791,884Decrease / (increase) in financial assets 1,923,258 (1,762,298) 4,430,196 (2,855,219) Operating cash flow (2,204,022) 1,880,301 Investing activities Expenditure on tangible fixed assets (135,219) (454,188)Expenditure on available for sale investments (52,308) - Cash flow from investing activities (187,527) (454,188) Financing Loans made to third parties 324,207 (2,268,165)Loans received 1,015,188 640,497Loans written off (1,632,466) -Issue of share capital 470,501 968,625Interest receivable 862,259 397,333Interest payable (149,474) (39,677) Cash flow from financing activities 890,215 (301,387) Cash and cash equivalents at 1 April 2006 4,124,883 3,000,157Cash and cash equivalents at 31 March 2007 2,623,549 4,124,883 (Decrease) / increase in cash and cash equivalents (1,501,334) 1,124,726 Notes to the financial statements - (extract)Year ended 31 March 2007 1. Accounting policies General information Daniel Stewart Securities plc is a company incorporated in the United Kingdomunder the Companies Act 1985. Daniel Stewart Securities plc the ultimate parentcompany of the group. The group's principal activities are the provision offinancial advice to companies and trading in financial instruments. Thesefinancial statements are presented in pounds sterling because that is thecurrency of the primary economic environment in which the group operates. The financial information set out herein, which was approved by the board on 10August 2007 does not comprise the companies' statutory accounts. The auditorsissued an unqualified opinion on the full financial statements for the yearended 31 March 2007 on 10 August 2007. Statutory accounts for the previousfinancial year ended 31 March 2006 have been delivered to the register ofcompanies. The auditors report on those accounts was unqualified and did notcontain any statement under Section 237 (2) or (3) of the Companies Act 1985. Basis of accounting These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as adopted for use in the European Union,for the first time. Up until 31 March 2006, the group prepared its financialstatements under UK Generally Accepted Accounting Principles ("UK GAAP"). From 1April 2006, the group consolidated financial statements are prepared inaccordance with IFRS and International Financial Reporting InterpretationsCommittee ("IFRIC") interpretations adopted by the European Union, and withthose parts of the Companies Act 1985 applicable to companies reporting underIFRS, with the prior period being presented on the same basis. The disclosures required by IFRS 1 concerning the transition from UK GAAP toIFRSs are given in note 28. The financial statements have been prepared on the historical cost basis asmodified by the valuation of certain financial instruments, as described below.The principal accounting policies adopted are set out below. 2. Exceptional Item In May 2007 the company established the Old Jewry Employee Benefit Trust. Thistrust was established with the purchase of 15,269,263 ordinary shares in DanielStewart Securities plc from The Daniel Stewart Securities plc Employee BenefitTrust and the transfer of an interest free loan of £1,632,466 due from TheDaniel Stewart Securities plc Employee Benefit Trust to Daniel StewartSecurities plc. Options were granted to Staff in May 2007 by the Old JewryEmployee Benefit Trust over 15,450,000 ordinary shares in Daniel StewartSecurities plc. The purchase price of these options is 0.25p per share andaccordingly the company has written off the loan. 3. Trade and other receivables 2007 2006 Trade receivables 632,081 1,844,120Due from subsidiary companies - -Loans outstanding 1,909,720 2,693,539Other debtors and prepayments 681,582 749,089 3,223,383 5,286,748 All debtors are receivable within one year of the balance sheet date. The group has no significant concentration of credit risk, with exposure spreadover a large number of counterparties and customers. 4. Trade and other payables 2007 2006 Bank loan 149,813 307,232Trade payables 442,597 177,277Other payables and accruals 1,640,380 691,147Income tax and social security 100,247 167,405Finance lease creditors 785,824 205,007 3,118,861 1,548,068 5. Share based payments The group has a two share option schemes for all employees of the group. Optionsare exercisable at a price agreed upon in the share option agreement on the dateof grant. The vesting period lies between immediate exercise and three years.If the options remain unexercised after a period of 10 years from the vestingdate, or the option holder ceases to be an employee or office holder within thegroup before the options vest, the options will lapse on the date of suchcessation. The share options outstanding at 31 March are as follows: Date of Vesting period Exercise Group and company grant price Number of shares 2007 2006Granted at start of period Unapproved 16 February 2002 None 11.00p 40,000 40,000 Approved 19 August 2004 Three years 4.00p 7,325,000 7,925,000 Unapproved 21 August 2004 None 6.50p 2,000,000 2,000,000 Unapproved 14 February 2005 Three years 10.00p 4,575,000 4,775,000 employment Unapproved 13 June 2005 Three years 12.00p 8,500,000 - employment Unapproved 31 October 2005 Three years 15.00p 750,000 - employment Unapproved 21 November 2005 Three years 15.75p 850,000 - employment Unapproved 6 January 2006 Three years 21.00p 250,000 - employment Exercised during the period Unapproved 14 February 2005 Three years 10.00p (2,345,000) (200,000) employment Unapproved 13 June 2005 Three years 12.00p (2,000,000) - employment Surrendered during the period Approved 19 August 2004 Three years 4.00p (2,875,000) (600,000) Unapproved 14 February 2005 Three years 10.00p (365,000) - employment Unapproved 13 June 2005 Three years 12.00p (1,000,000) - employment Unapproved 6 January 2006 Three years 21.00p (250,000) employment Issued during the period Unapproved 13 June 2005 Three years 12.00p - 8,500,000 employment Unapproved 31 October 2005 Three years 15.00p - 750,000 employment Unapproved 21 November 2005 Three years 15.75p - 850,000 employment Unapproved 6 January 2006 Three years 21.00p - 250,000 employment Unapproved 22 May 2006 Three years 27.75p 4,000,000 employment 19,455,000 24,290,000 6. Post balance sheet events In May 2007 the Old Jewry employee benefit trust was established. This trustawarded 15,450,000 options to staff. 5,350,000 of these shares were awarded togroup directors. These options are exercisable at 0.25p, the nominal value,after completion of three years service from the date of issue. They will onlyvest if the company achieve a closing mid share price of 18p for ten consecutivedays prior to the vesting date. These options are non dilutive. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Daniel Stewart Securities Plc