20th Mar 2008 07:00
Accuma Group PLC20 March 2008 Accuma Group Plc ("Accuma" or "the Group") FINAL RESULTS FOR THE FIVE MONTH PERIOD TO 31 DECEMBER 2007 Chairman's Statement As was reported to the market in the Group's trading update on 25 February 2008,Accuma has experienced difficult trading conditions throughout the five monthperiod to 31 December 2007* particularly within its Insolvency division.Although this division has been restructured and costs have been significantlycut which has now stabilised its trading performance, the effects of thesetrading conditions have had a significant impact on these results. This, inconjunction with the well publicised "credit crunch" affecting the performanceof the Loan Broking division, resulted in an EBITDA loss of £2.7 million for theperiod. Turnover at £5.5 million also reflects the significantly reduced levels of IVAfees and the reduction in Loan Broking business during the period. Gross profit for the period was £944,000, giving a gross profit margin of 17%. The EBITDA loss for the period was £2.7 million and included significant staffrestructuring costs, a provision of £625,000 in respect of the lease commitmenton leaving one floor of Accuma's Manchester office and other restructuring costsin the Division, and the losses incurred by the Loan Broking division. Cash inflow from operations for the period to 31 December 2007 was £454,000 (31July 2007: £1.6 million) and our Balance Sheet remained strong with £3.4 millionof cash (31 July 2007: £3.3 million), before provision for the imminent expectedearn out payments in respect of 2007 for Byrom Keeley and Loan Line. As previously reported to shareholders in the Group's trading update, given theon-going turbulence in the credit markets, the Board has prudently decided toprovide £11.8 million for the impairment on the carrying value of the LoanBroking division's goodwill. This will lead to a loss after tax for the periodof £14.5 million (July 2007: £1.7 million profit). On a divisional basis, Group revenues are as follows: Turnover - £000s EBITDA - £000s Insolvency division 2,029 (1,885) Debt management 1,423 589 Loan broking 2,025 (375) Referrals / other 70 (321) Group overheads - (751) Total 5,547 (2,743) Operational review The Group continues to provide a full platform of consumer financial solutionsfrom IVAs to informal debt management, consolidation loans and re-mortgaging. Following the significant changes in the sector the Group undertook a fullreview of the business which resulted in staff numbers reducing from 251 at theend of 2006 to 196 at the end of 2007. Debt management division Byrom Keeley, the informal debt management solutions business, produced anEBITDA of £589,000 in the period to December 2007, despite the seasonal effectof changing the company year end. The division continues to perform well, and as pressure on IVA acceptancescontinues, and with the consolidation of unsecured debt no longer an option formany consumers, debt management plans are often the only viable alternative tothe consumer. Accordingly, the Board is confident of continued growth of this business duringthe year ahead. Insolvency division As a result of previously reported reduced volumes and a significant reductionin average IVA set-up fees from £2,700 to £1,700 this division has beenrestructured in the period to 31 December 2007. We incurred significant restructuring costs, as outlined above, and which led tostaff reduction and the relocation of new cases to the Group's Blackburn basedsubsidiary, Wilson Phillips. We have altered our business model for the division, positioning it to takeadvantage of referrals from newly acquired businesses within the Group ratherthan relying on costly advertising. I am pleased to say that this radicalsurgery seems to have stemmed losses: the business is currently tradingprofitably once again and continues to accept approximately 80 new cases permonth. Acceptance rates have also improved to 85% (at one point acceptance rateshad fallen to 78%), The business has 5,906 live cases representing future contracted revenue predelinquency of £16.8 million, a substantial "book" of business and a major assetof the Group. Loan broking division In the period to 31st December 2007 the sub prime crisis in the USA and theresulting "credit crunch" impacted the general market for lending in the UK. Loan Line, along with its competitors, was severely affected which resulted inthe division incurring an EBITDA loss for the period of £375,000. The business was refocused during the period and has subsequently returned tomarginal profitability in January 2008. The Board has taken a prudent view and,in the current circumstances and giving regard to the provisions ofInternational Financial Reporting Standards, provided for full impairment of thegoodwill which arose on the acquisition of Loan Line. This has resulted in aprovision for impairment charged to the profit & loss account of £11.8 million. The Board continue to monitor the performance of Loan Line closely. Outlook Although these results are extremely disappointing, the Board is confident thatthe early identification of problems and the radical restructuring will protectthe Group in the current financial year. The Group is debt free, cash generative and at the end February had a cashposition (net of imminent earn out payments in respect of Byrom Keeley and LoanLine) of £914,000. Current macro economic conditions favour the Group's debt management division,which is performing well, and the Board is confident of its future prospects. Aspreviously stated the Board has received some approaches which may lead to asatisfactory offer for the Insolvency division: with the restructuring of thisbusiness now completed, the Board believes that the realisable value of thisbusiness alone considerably exceeds our existing market capitalisation. We will continue to review all options to ensure the best outcome for the Groupand Shareholders. Charles TaylorChairman20 March 2008 *On 13th December 2007 the Group announced its intention to change its year endto 31st December resulting in a 5 month period. The change will smooth theeffect of the seasonality of the debt solutions market on our results, which aremost active in the period from February to July, in future years. However theeffect of reporting a five month period to 31 December would tend to flatter thefirst half results at the expense of the second half. Enquiries to: Charles HowsonChief ExecutiveAccuma Group Plc Tel: 0845 202 6787 Lindsay MairDaniel Stewart & Company plc Tel: 0207 776 6550 Simon Rothschild, Oliver WintersBankside Consultants Tel: 0207 367 8888 CONSOLIDATED INCOME STATEMENT PERIOD ENDED 31 DECEMBER 2007 5 months ended Year ended 31 December 2007 31 July 2007 £ £REVENUEExisting operations 5,546,953 20,450,479 Cost of sales (4,602,806) (12,278,928) Gross profit 944,147 8,171,551 Administrative expenses (3,687,420) (5,746,716) EARNINGS BEFORE INTEREST, TAX, DEPRECIATION,AMORTISATION AND IMPAIRMENT LOSSES (2,743,273) 2,424,835 Depreciation (202,016) (374,224) Amortisation (4,963) (13,865) Provision for impairment losses (11,774,764) - (LOSS)/PROFIT FROM OPERATIONS - Existing (14,725,016) 2,036,746operations Finance income 106,814 240,853Finance costs (165,084) (129,548) (LOSS)/PROFIT BEFORE TAX (14,783,286) 2,148,051 TAXATION 253,186 (435,903) (LOSS)/PROFIT FOR THE PERIOD (14,530,100) 1,712,148 EARNINGS PER SHARE(Loss)/earnings per share - Basic (44.43)p 5.30p All of the activities of the Group are classed as continuing. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY PERIOD ENDED 31 DECEMBER 2007 Share Share Other Share Retained Total capital premium reserve option earnings reserve £ £ £ £ £ £ Balance at 1 August 2,573,006 11,719,907 (762,595) - 688,555 14,218,8732006Prior period - - - 282,387 (282,387) -adjustmentAt 1 August 2006 as 2,573,006 11,719,907 (762,595) 282,387 406,168 14,218,873restatedChanges in equityfor the year ended 31 July 2007Profit for the year - - - - 1,712,148 1,712,148Issue of share 696,667 - - - - 696,667capitalPremium on share - 17,342,934 - - - 17,342,934issueExpenses of share - (654,964) - - - (654,964)issueShare capital to be - - (500,000) - - (500,000)issuedProvision for share - - - 84,864 - 84,864optionsBalance at 31 July 3,269,673 28,407,877 (1,262,595) 367,251 2,118,316 32,900,5222007 Changes in equityfor the 5 monthperiod ended 31December 2007Loss for the period - - - - (14,530,100) (14,530,100)Provision for share - - - 28,977 - 28,977optionsBalance at 31December 2007 3,269,673 28,407,877 (1,262,595) 396,228 (12,411,784) 18,399,399 Other reserve The other reserve is a merger reserve created on the establishment of AccumaInsolvency Practitioners Limited as a subsidiary of Accuma Group PLC. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007 31 December 2007 31 July 2007ASSETS £ £ £ £ NON-CURRENT ASSETSIntangible assets 15,560,940 27,609,659Property, plant and equipment 789,630 855,546Total non-current assets 16,350,570 28,465,205 CURRENT ASSETSTrade and other receivables 6,637,148 8,876,714Deferred tax asset 309,807 2,421Cash and cash equivalents 3,367,340 3,331,502 Total current assets 10,314,295 12,210,637 TOTAL ASSETS 26,664,865 40,675,842 EQUITY AND LIABILITIES CURRENT LIABILITIESTrade and other payables 2,271,596 1,492,405Financial liabilities 2,259,027 2,065,801Provision for onerous lease 510,687 -commitmentCurrent tax liabilities 246,709 616,220Total current liabilities 5,288,019 4,174,426 NON-CURRENT LIABILITIESTrade and other payables 2,898,536 3,500,000Financial liabilities 78,911 100,894Total non-current liabilities 2,977,447 3,600,894 Total liabilities 8,265,466 7,775,320 CAPITAL AND RESERVES - EQUITYShare capital 3,269,673 3,269,673Share premium account 28,407,877 28,407,877Share option reserve 396,228 367,251Retained earnings (12,411,784) 2,118,316 Other reserve (1,262,595) (1,262,595)Total Equity 18,399,399 32,900,522 TOTAL EQUITY AND LIABILITIES 26,664,865 40,675,842 CONSOLIDATED CASHFLOW STATEMENT PERIOD ENDED 31 DECEMBER 2007 5 months ended Year ended 31 December 31 July 2007 2007 OPERATING ACTIVITIES £ £ (Loss)/profit from operations (14,725,016) 2,036,746 Impairment provision 11,774,764 - Depreciation 202,016 374,224 Amortisation 4,963 13,865 Loss on sale of fixed assets - 6,000 Decrease in trade and other receivables 1,901,165 (494,633) Increase in trade and other payables 1,267,584 (422,416) Provision for share options 28,977 84,864 Cash inflow from operations 454,453 1,598,650 Interest paid (73,216) (129,548) Income taxes paid (110,000) (1,013,719) Interest element of finance leases (8,113) (25,113) Net cash inflow from operating activities 263,124 430,270 Payments to acquire property plant and (136,100) (452,570) equipment Interest received 106,814 240,853 Acquisition of subsidiaries - (16,496,016) Net cash used in investing activitites (29,286) (16,707,733) Cash flow from financing activities Capital element of finance lease agreements (33,040) (20,120) Proceeds from issue of ordinary shares - 18,039,601 Cash deposit in respect of loan notes issued (164,960) (1,941,806) Expenses in connection with share capital - (654,964) Repayment of bank loans - (254,554) Net cash (used in)/received from financing (198,000) 15,168,157 activities Net change in cash equivalents 35,838 (1,109,306) Cash and cash equivalents at the beginning of 3,331,502 4,440,808 the year Cash and cash equivalents at the end of the 3,367,340 3,331,502 year CONSOLIDATED CASHFLOW STATEMENT PERIOD ENDED 31 DECEMBER 2007 RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS 5 months ended Year ended 31 31 December 2007 July 2007 £ £ Net increase/(decrease) in cash and cash 35,838 (1,109,306) equivalents Repayment of lease financing 41,154 45,233 Repayment of loans - 254,554 Movement in net funds/(debt) during the 76,992 (809,519) year Net funds at beginning of the year 3,106,613 3,916,132 Net funds at the end of the year 3,183,605 3,106,613 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PERIOD ENDED 31 DECEMBER 2007 1. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The financial statements for the 5 month period ended 31 December 2007 arepresented under IFRS for the first time. The last financial statements under UKGAAP related to the year ended 31 July 2007 and the date of transition to IFRSwas therefore 1 August 2006. Key IFRS adjustments and their impact The acquisitions of Byrom & Keeley Limited and LoanLine (Holdings) Limitedduring the year ended 31 July 2007 were re-considered in order to identifyseparable intangible assets, according to the criteria of IAS 38 IntangibleAssets. Some potential separable assets were identified, however, it wasconcluded in each case that the asset was intrinsic to the business operationand could not be viewed in isolation to other business components in terms ofits commercial impact, and, for the same reason, the asset could not beindependently valued. It was therefore concluded that intangibles acquired couldonly be treated in the context of their combined impact, goodwill associatedwith each business operation. In accordance with the requirements of IAS 38, amortisation charges relating togoodwill arising on these acquisitions has been reversed, increasing reportedprofit for the year ended 31 July 2007 by £1,259,513. Detailed reconciliation The following note provides reconciliations and explanatory notes detailing howthe transition has impacted upon the reported performance and net assetsposition previously stated under UK GAAP. Reconciliation of equity at 1 August 2006 (date of transition to IFRS) As reported Effect of As restated under UK transition under IFRS GAAP to IFRS £ £ £Non current assetsProperty, plant and 726,450 - 726,450equipmentGoodwill 6,842,053 - 6,842,053Other intangible assets 97,409 - 97,409 7,665,912 - 7,665,912Currents assetsTrade and other receivables 6,064,689 - 6,064,689Cash and cash equivalents 4,440,808 - 4,440,808 10,505,497 - 10,505,497Total assets 18,171,409 - 18,171,409 Current liabilitiesTrade and other payables 1,075,962 - 1,075,962Financial liabilities 195,971 - 195,971Tax liabilities 493,749 - 493,749Accruals and deferred income 355,227 - 355,227 2,120,909 - 2,120,909Non current liabilitiesFinancial liabilities 1,828,705 - 1,828,705Taxation liabilities 2,922 - 2,922 1,831,627 - 1,831,627Total liabilities 3,952,536 - 3,952,536 EquityShare capital 2,573,006 - 2,573,006Share premium account 11,719,907 - 11,719,907Share option reserve 282,387 - 282,387Retained earnings 406,168 - 406,168Other reserve (762,595) - (762,595) 14,218,873 - 14,218,873Total liabilities and equity 18,171,409 - 18,171,409 Reconciliation of equity at 31 July 2007 (date of last UK GAAP financialstatements) As reported Effect of As restated under UK GAAP transition to under IFRS £ IFRS £ £Non current assetsProperty, plant and 855,546 - 855,546equipmentGoodwill 26,266,602 1,259,513 27,526,115Other intangible assets 83,544 - 83,544 27,205,692 1,259,513 28,465,205Currents assetsTrade and other 8,876,714 - 8,876,714receivablesDeferred tax asset 2,421 - 2,421Cash and cash 3,331,502 - 3,331,502equivalents 12,210,637 - 12,210,637Total assets 39,416,329 1,259,513 40,675,842 Current liabilitiesTrade and other payables 1,492,405 - 1,492,405Financial liabilities 2,065,801 - 2,065,801Current tax liabilities 616,220 - 616,220 4,174,426 - 4,174,426Non current liabilitiesTrade and other payables 3,500,000 - 3,500,000Financial liabilities 100,894 - 100,894 3,600,894 - 3,600,894 Total liabilities 7,775,320 - 7,775,320 EquityShare capital 3,269,673 - 3,269,673Share premium account 28,407,877 - 28,407,877Share option reserve 367,251 - 367,251Retained earnings 858,803 1,259,513 2,118,316Other reserve (1,262,595) - (1,262,595) 31,641,009 1,259,513 32,900,522Total liabilities and 39,416,329 1,259,513 40,675,842equity Reconciliation of profit for the year ended 31 July 2007 (date of last UK GAAPfinancial statements) As reported Effect of As restated under UK GAAP transition to under IFRS IFRS £ £ £ Revenue 20,450,479 - 20,450,479Cost of sales (12,278,928) - (12,278,928)Gross profit 8,171,551 - 8,171,551Administrative (5,746,716) - (5,746,716)expensesEBITDA 2,424,835 2,424,835Amortisation & (1,647,602) 1,259,513 (388,089)depreciationProfit from operations 777,233 1,259,513 2,036,746Net finance income 111,305 111,305Profit before taxation 888,538 1,259,513 2,148,051Taxation expense (435,903) - (435,903)Net profit 452,635 1,259,513 1,712,148 Reconciliation of cash flow at 31 July 2007 (date of latest UK GAAP financialstatements) As reported Effect of As restated under UK GAAP transition to under IFRS IFRS £ £ £ Profit from 777,233 1,259,513 2,036,746operationsDepreciation 374,224 - 374,224Amortisation 1,273,378 (1,259,513) 13,865Loss on sale of 6,000 - 6,000fixed assetsDecrease in trade (494,633) - (494,633)and otherreceivablesIncrease in trade (422,416) - (422,416)and other payablesProvision for share 84,864 - 84,864optionsCash inflow from 1,598,650 - 1,598,650operations 2 TAXATION Period ended 31 Year ended 31 December 2007 July 2007 £Current tax expenseUK corporation tax on income for the period (8,739) 340,858Tax charge relating to prior periods 62,939 (16,371) 54,200 324,487Deferred tax creditChanges in deferred tax balances arising from:Origination or reversal of timing differences (307,386) 111,416 Income tax (credit)/expense (253,186) 435,903 The charge for the period can be reconciled to the loss per the incomestatement as follows; Period ended 31 Year ended 31 December 2007 July 2007 £ £(Loss)/profit before taxation (14,783,286) 2,148,051 (Loss)/profit on ordinary activitiesmultiplied by the rate of corporationtax of 30% (2006: 30%) (4,434,986) 644,415 Adjusted for the effects of;Impairment provision 3,532,429 -Capital allowances in excess of 45,071 5,959depreciationExpenses not deductible for tax 116,637 43,308purposesTax rate differences - (17,401)Other timing differences 222,224 (224,007)Unrelieved tax losses - -Losses of overseas operations not available 202,500 -for relief in UKAdjustment to prior period tax charge 62,939 (16,371)Current tax charge for the year (253,186) 435,903 3 EARNINGS PER SHARE Earnings per share statistics disclosed are calculated by dividing the earningsattributable to ordinary share holders by the weighted average number of sharesin issue during the year. Period ended 31 Year ended 31 December JulyBasic 2007 2007 £ £(Loss) / profit for the year (14,530,100) 1,712,148 Weighted average number of shares 32,696,734 32,295,911 4 STATUS OF FINANCIAL INFORMATION The financial information set out in this report does not constitute thecompany's statutory accounts for the period ended 31 December 2007 but isderived from those accounts. Statutory accounts for the period ended 31 December2007 will be delivered to the Registrar of Companies shortly. The auditors havereported on those accounts; their report was unqualified, did not includereference to any matters to which the auditors drew attention by way of emphasiswithout qualifying their report and did not contain statements under theCompanies Act 2006, s 498(2) or (3). 5 The Report and Financial Statements over the 5 month period ending 31 December2007 will be sent to shareholders in due course. 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