31st Mar 2008 07:01
Mercury Group PLC31 March 2008 Mercury Group Plc ('Mercury' or 'the Company') Results for the year ended 30th September 2007 CHAIRMAN'S STATEMENT Introduction I am reporting the results for Mercury Group plc for the year ended 30 September2007. The Group suffered a long period of instability during 2006 and the early partof 2007, consequent upon the refinancing of the business in February 2007.Since that date, all of the contentious issues have been resolved and the newlyconstituted Board started the task of growing the Group's core business, SMPA,both organically and by acquisition. The Group's development since the new Board took up office in February 2007 hasbeen hindered by the significant downturn in the property sector, which startedto emerge during the summer of 2007 and the inability to raise additional equityin the markets to fund acquisitions. Against this background, the Groupcontinued to incur losses in the year ended 30 September 2007, which have beenmitigated by making significant reductions in the Group's high historic overheadcost base. Group financial performance The Group's turnover for the year ended 30 September 2007 was £2.7 millioncompared with £5.6 million in 2006. SMPA incurred a loss before exceptionalitems of £174,000 (after charging goodwill amortisation and impairment of£121,000), compared with a profit of £51,000 in 2006. After much reduced centralcosts of £499,000 (after charging goodwill impairment of £227,000), comparedwith £1.6 million in 2006, the Group's loss on continuing activities beforeexceptional items was £799,000. The exceptional items incurred in 2007 of £451,000 relate to the fund raisingcosts associated with the 2007 refinancing of £185,000, redundancy costs of£50,000 and write-offs associated with the agreement of SMPA's earn out accountsof £216,000. Net losses on discontinued operations amounted to £48,000 and£15,000 was provided to write-off the Company's investment in Dialog Group Inc.After charging interest of £60,000, the Group incurred a significantly reducedloss before tax in 2007 of £1.3 million (2006: loss of £4.8 million). The loss before tax for the year ended 30 September 2007 includes total goodwillamortisation and impairment charges of £348,000. This comprises £79,000 for thefull impairment of goodwill arising on the acquisition of the CRC businessacquired in January 2007 and £269,000 for SMPA. Goodwill recorded on the Groupbalance sheet at 30 September 2007 for SMPA is £812,000. Continuing operations SMPA continues to be the Group's core business offering a range of propertyservices to corporate clients. SMPA is a commercial property consultancy andestate agency with over 50 years' experience providing a personal service to UKand international clients. With offices in the West End and City of London, itoffers a wide range of professional services including investment, development,valuation, management and all aspects of occupancy. Although based in London, itis able to service clients throughout the UK. Discontinued operations On 12 June 2007, the Company disposed of its shareholding in Telco SolutionsLimited for a net consideration of £8,500. Telco's business of projectmanagement was considered by the new Board to be non-core. Subsequent to thedisposal, the acquiring company went into administration, with only £8,500 ofthe contracted £85,000 of total consideration actually received. Telco SolutionsLimited was a loss making business throughout its period of ownership, incurringoperating losses of £60,000 in the year ended 30 September 2007 and £170,000 inthe year ended 30 September 2006. Dividends The Board does not recommend the payment of a dividend (2006: £nil). Funding In February 2007, the Board secured additional funding by issuing a loan noteinstrument constituting £1,000,000 of Unsecured Loan Stock, which has all nowbeen drawn down. Earn Out Accounts The Board was pleased to report agreement of the earn out accounts on SMPA afterthe year end with the vendor partners of that business. The total additionalconsideration arising on the acquisition of SMPA was agreed at £182,000 of which50% was settled by the issue of shares and 50% by way of convertible loan notes. Directors Following the 2007 refinancing, a number of changes were made to the Board. Aspreviously stated, I joined the Board as Chairman in February and I was pleasedto welcome Brian Basham and Andrew Lovelady who were appointed directors at thesame time. I was also pleased that both Walter Goldsmith and James Lugg remainedon the Board as non-executive directors and Ronnie Franks as Chief ExecutiveOfficer. Simon Michaels resigned from the Board as Finance Director on 13 February 2007and I would like to thank him for his commitment and support. Andrew Loveladybecame part-time Finance Director in his place. Management and employees I would like to thank the Group's employees who have continued to worktirelessly in spite of the Group's difficult trading conditions. Proposed capital reorganisation and de-listing Earlier today, the Company announced that it intends to effect a capitalreorganisation and seek shareholders' approval to cancel the admission of theordinary shares in the Company to trading on AIM. Full details are set out in acircular to the shareholder's dated 31 March 2008, including notice of theExtraordinary General Meeting of shareholders called to approve the proposals,which is being posted today. Summary details of the proposals are set out below: a) Capital reorganisation The Company presently has in excess of 3,700 Shareholders. This adds aconsiderable cost to the overheads of the Company caused by the need to produceannual accounts and registrar's costs. Over 60 % of shareholders have holdingswith a value of £3 or less. Accordingly, it is proposed that: • every 600 Existing Ordinary Shares will be consolidated into one new ordinary share of £6 each in the capital of the Company; • each new ordinary share of £6 each will be subdivided into 60 new ordinary shares of 10p each in the capital of the Company; • each of the issued ordinary shares of 10p each resulting from the consolidation will be subdivided and re-designated into one New Ordinary Share and one Deferred Share; • each of the authorised and unissued Ordinary Shares will be re-designated into one New Ordinary Share; and • all of the existing authorised but unissued deferred shares of 0.1p be and are hereby cancelled and the amount of the Company's share capital shall be diminished by the amount of the shares so cancelled. b) De-listing The Directors consider that one of the principal obstacles to the development ofthe Group is the cost of being a public company, which they estimate amounts toover £150,000 per annum. Given the low market capitalisation of the Company andthe low liquidity of the Existing Ordinary Shares, the Directors consider thatit would be in the best interests of the Company to seek a de-listing of itsshares on AIM. Current trading and prospects Whilst trading in the first five months of the current financial year has beenin line with management expectations, your Directors cannot expect the Group tobe immune from the current situation in the property market. George KynochChairman31 March 2008 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 30 September 2007 Notes Continuing Discontinued Total Total Operations Operations 2007 2007 2007 2006 £'000 £'000 £'000 £'000________________________________________________________________________________ TURNOVER 2 2,638 19 2,657 5,557 COST OF SALES (1,387) (4) (1,391) (1,615)________________________________________________________________________________GROSS PROFIT 1,251 15 1,266 3,942 Administrative expenses (2,441) (75) (2,516) (6,596) OPERATING LOSS________________________________________________________________________________Before exceptional items 2 (739) (60) (799) (2,092)Exceptional items 3 (451) - (451) (562)________________________________________________________________________________ OPERATING LOSS AFTEREXCEPTIONAL ITEMS (1,190) (60) (1,250) (2,654)Sale of subsidiaryundertaking - 12 12 (2,133)Amounts writtenoff investments (15) - (15) (70)Interest payable andsimilar charges (58) (2) (60) (17)Interest receivable andsimilar income - - - 95________________________________________________________________________________LOSS ON ORDINARYACTIVITIES BEFORE TAXATION (1,263) (50) (1,313) (4,779) Tax on loss on ordinary activities - - - -________________________________________________________________________________LOSS ON ORDINARY ACTIVITIESAFTER TAXATION (1,263) (50) (1,313) (4,779)________________________________________________________________________________LOSS FOR THE FINANCIAL YEAR (1,263) (50) (1,313) (4,779)________________________________________________________________________________ Loss per ordinary share 4 (1.12)p (0.04)p (1.16)p (4.39)p Loss per ordinary shareon a diluted basis 4 (1.12)p (0.04)p (1.16)p (4.39)p There are no recognised gains or losses other than those passing through theprofit and loss account. CONSOLIDATED BALANCE SHEETAt 30 September 2007 2007 2006 £'000 £'000________________________________________________________________________________FIXED ASSETS Intangible assets 812 1,360Tangible assets 80 97Investments - 50________________________________________________________________________________ 892 1,507________________________________________________________________________________CURRENT ASSETS Debtors 706 1,222Cash at bank 429 86________________________________________________________________________________ 1,135 1,308CREDITORS: amounts falling due within one year (716) (1,003)________________________________________________________________________________NET CURRENT ASSETS 419 305________________________________________________________________________________ TOTAL ASSETS LESS CURRENT LIABILITIES 1,311 1,812 CREDITORS: amounts falling due after more than one year (1,091) -________________________________________________________________________________ NET ASSETS 220 1,812________________________________________________________________________________ CAPITAL AND RESERVES Called up share capital 1,130 1,130Share premium account 847 847Shares to be issued 91 370Distributable reserve 4,711 4,711Other reserve 156 156Profit and loss account (6,715) (5,402)________________________________________________________________________________EQUITY SHAREHOLDERS' FUNDS 220 1,812________________________________________________________________________________ Reconciliation of movement in consolidated shareholders' funds 30 September 30 September 2007 2006 £'000 £'000________________________________________________________________________________ Loss for the financial year (1,313) (4,779) Decrease in shares to be issued (279) (2,568) Increase in share capital - 65 Premium on shares issued - 491________________________________________________________________________________Net movement in shareholders' funds (1,592) (6,791) Opening shareholders' funds 1,812 8,603________________________________________________________________________________Closing shareholders' funds 220 1,812________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENTYear ended 30 September 2007 Note 2007 2006 £'000 £'000________________________________________________________________________________ Net cash outflow from operating activities A (537) (1,334) Returns on investments and servicing of financeInterest received - 95Interest paid (60) (17)________________________________________________________________________________Net cash (outflow)/inflow from returns oninvestments (60) 78and servicing of finance________________________________________________________________________________ Taxation Paid - (33)________________________________________________________________________________ Capital expenditure and financial InvestmentPayments to acquire tangible fixed assets (4) (60)Purchase of investments - (50)Purchase of business B (50) -________________________________________________________________________________Net cash outflow from investing activities (54) (110)________________________________________________________________________________ Acquisitions and disposals Purchase of subsidiary undertakings - (99)Proceeds of disposal of subsidiary C 8 100Net overdraft disposed with subsidiary - 291Proceeds from the disposal of shares 35 -________________________________________________________________________________Net cash inflow from acquisitions and disposals 43 292________________________________________________________________________________ Net cash outflow before financing (608) (1,107)________________________________________________________________________________Financing Net cash proceeds from share issue - (38)Capital element of finance lease - (4)Loan note drawn down 1,000 -________________________________________________________________________________Net cash inflow/(outflow) from financing 1,000 (42)________________________________________________________________________________Increase/(decrease) in cash in the year D,E 392 (1,149)________________________________________________________________________________ NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTYear ended 30 September 2007 A. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2007 2006 £'000 £'000________________________________________________________________________________Operating loss (1,250) (2,654)Depreciation charge 20 47Loss on sale of assets - 5Goodwill amortisation and impairment 348 869Decrease in work in progress - 80Decrease/(increase) in debtors 471 (56)(Decrease)/increase in creditors (126) 375________________________________________________________________________________Net cash outflow from operating activities (537) (1,334)________________________________________________________________________________ B. PURCHASE OF BUSINESS £'000________________________________________________________________________________Assets acquired:Tangible fixed assets 4Goodwill 79________________________________________________________________________________ 83________________________________________________________________________________Settled by:Cash paid 50Deferred consideration 33________________________________________________________________________________Cash received 83________________________________________________________________________________ C. SALE OF SUBSIDIARY UNDERTAKING £'000________________________________________________________________________________Assets disposed of:Tangible fixed assets 1Debtors 45Creditors (50)________________________________________________________________________________ (4)Surplus on disposal 12________________________________________________________________________________Cash received 8________________________________________________________________________________ Telco Solutions Limited contributed £60,000 to the Group's operating cashoutflow and paid £2,000 in respect of net returns on investments and servicingof finance. D. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2007 2006 £'000 £'000________________________________________________________________________________Increase/(decrease) in cash in the year 392 (1,353)(Increase)/decrease in debt in the year (1,000) 204________________________________________________________________________________Movement in net debt in the year (608) (1,149)Opening (net debt)/funds (16) 1,133________________________________________________________________________________Closing net debt (624) (16)________________________________________________________________________________ E. ANALYSIS OF CHANGES IN NET DEBT 30 September Cash flows 30 September 2006 2007 £'000 £'000 £'000________________________________________________________________________________Cash at bank 86 343 429Bank overdraft (102) 49 (53)________________________________________________________________________________ (16) 392 376Loan - (1,000) (1,000)________________________________________________________________________________ (16) (608) (624)________________________________________________________________________________ NOTES TO THE ACCOUNTSYear ended 30 September 2007 1. ACCOUNTING POLICIES The financial information set out above has been prepared using accountingpolicies consistent with 2006. The financial information for the year ended 30 September 2007 and 2006 set outabove does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. The information has been extracted from the statutoryaccounts of Mercury Group plc for the year ended 30 September 2007, which havenot yet been filed with the Registrar of Companies. Statutory accounts for theyear ended 30 September 2006 have been delivered to the Registrar of Companies.Statutory accounts for the year ended 30 September 2007 were approved by theBoard of Directors on 28 March 2008, are audited and will be delivered to theRegistrar of Companies following the Annual General Meeting on 1 May 2008. The Company's auditors, Kingston Smith LLP, have reported on the 2007 and 2006accounts under section 235(1) of the Companies Act 1985. Those reports were notqualified within the meaning of section 235(2) of the Companies Act 1985 and didnot contain statements made under section 237(2) and 237(3) of the Companies Act1985. 2. SEGMENTAL ANALYSIS 2007 2006 £'000 £'000________________________________________________________________________________SalesUnited Kingdom 2,657 5,557________________________________________________________________________________Sales SMPA 2,638 3,397 Discontinued operations 19 2,160________________________________________________________________________________ 2,657 5,557________________________________________________________________________________Operating profit/(loss) before exceptional items SMPA (174) 51Discontinued operations (60) (589)Central and plc related costs (499) (1,590)________________________________________________________________________________ (733) (2,128)Exceptional items (517) (526)________________________________________________________________________________Operating loss after exceptional items (1,250) (2,654)________________________________________________________________________________ Operating net assets SMPA 946 1,325Discontinued operations - 34Central and plc related costs (102) 469________________________________________________________________________________ 844 1,828Borrowings (624) (16)________________________________________________________________________________Net assets 220 1,812________________________________________________________________________________ 3. EXCEPTIONAL ITEMS 2007 2006 £'000 £'000________________________________________________________________________________Operating itemsRedundancies and employee termination costs 50 242Relocation costs - 31Deal abort costs - 289Re-financing costs 185 -Write-offs on agreement of SMPA's earn out accounts 216 -________________________________________________________________________________ 451 562________________________________________________________________________________ Non-operating items________________________________________________________________________________(Surplus)/loss on disposal of subsidiary undertaking (12) 2,133________________________________________________________________________________ There will be no tax impact related to this exceptional item due to the lossesfor tax purposes. 4. LOSS PER ORDINARY SHARE Loss per share are calculated on the results shown in the table below. The basicloss per share calculation are based on a weighted average number of ordinaryshares of 1p each of 112,975,684 (2006: 108,927,248). The diluted number ofordinary shares of 1p each is 114,645,684 (2006: 111,112,248). The effect of theshare options on the calculation of the earnings per share was anti-dilutive. 2007 2006 £'000 £'000________________________________________________________________________________Continuing operations (1,263) (2,166)Discontinued operations (50) (2,613)________________________________________________________________________________ Total (1,313) (4,779)________________________________________________________________________________ 5. POSTING OF REPORT AND ACCOUNTS The 2007 Report and Accounts will be posted to shareholders on 31 March 2008 andwill be available from the Company's website www.mgplc.co.uk. Contacts: George Kynoch, Chairman, 020 7393 4000 David Worlidge, John East Partners Limited 020 7628 2200 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MGP.L