29th Jun 2007 07:02
Merchant House Group PLC29 June 2007 Merchant House Group plc(the "Company") Final results for the year ended 31 December 2006 and posting of accounts For further information contact: Merchant House Group plcPeter Redmond, CEOTel: 020 7332 2200 Shore Capital and Corporate LimitedAlex BorrelliTel: 020 7408 4090 First City Financial Public RelationsAllan PiperTel: 020 7436 7486 & 07736 064 982 Final results for the year ended 31 December 2006 Chairman's statement The year to December 2006 was a period of significant corporate development forMerchant House Group, enabling it to increase the range of corporate servicesoffered to clients. In addition its policy of taking stakes in client companiesbore fruit as shown in the value of our investments at a time when we also beganto make realisations of earlier holdings. During the year, our subsidiary, Merchant Capital became a full broking memberof the London Stock Exchange and became an OFEX (now PLUS Markets) adviser whilethe Group also established an asset finance joint venture. We enhanced ourcorporate finance/equity fund raising capacity through the recruitment ofadditional experienced corporate finance and legal executives. While these developments did not fully show through in our turnover, there werea number of corporate transactions in hand during the latter part of 2006 thatreached a successful conclusion early in the current year. Our corporate team's experience enables us to provide comprehensive advice tosmall cap clients both prior to IPO, through the IPO process and thereafter. Weare now able to act as corporate broker to AIM and fully listed companies, thusextending the scope of our services, and we have taken on a number of AIM andPLUS Markets companies as broker and/or financial advisor. We intend to buildour position as AIM brokers and advisors but, while AIM has established itselfas probably the leading junior market internationally, PLUS is beginning todevelop as a real alternative for early stage and microcap companies. We have established an asset-finance joint venture, Merchant House FinanceLimited ("MHF"), in which we have an initial 49% stake, with an option in duecourse to take this up to 75%. MHF specialises in leasing and otherasset-backed finance and provides a significant addition to the Group's range offacilities. There have already been a number of introductions from the Group toMHF and vice versa and we expect this relationship to continue to develop andlook forward to significant growth in MHF's business. In addition, we established a proprietary share trading activity during the yearwhich generated turnover of £225,281 (2005: nil). Alongside these corporatedevelopments, we continued our successful investment policy. The market valueof our investments including warrants at 31st December 2006 was £672,595 (2005:£940,843) and this was struck after making net realisations during the year of£428,772. Between 1 January and 22 June 2007, the Company sold quotedinvestments with a cost of £87,621 and a market value at the year end of£163,337, realising £249,152 net of expenses. Investee companies which made particular progress during the year were copperproducer Weatherly International plc whose share price ended the year at 21.5pagainst an average investment price of 8.6p; Byotrol Plc, in which we holdwarrants, whose shares stood at 70p against a 2005 IPO price of 23p; and FutureInternet Technologies Plc (now Artilium Plc) which returned to market after along period of suspension and stood at 58.75p at the year end against ourinvestment price of 5p. Turnover for the year rose to £682,217 (2005: £656,864) and the operating resultimproved to a loss of £218, 574 from £392,414. As a result, the loss onordinary activities before taxation fell to £238,782 (2005: £385,777), giving aloss per share of 0.69p (2005: 1.99p). Group net assets were £144,422 at the year end. If investments were carried atmarket value, net assets would increase to £413,567 and assuming fullconversation of the loan notes, which are otherwise repayable in 2010,shareholders' funds on a pro-forma basis would increase further, to £913,567. The Directors believe that good progress has been made in 2006 and are pleasedto note a better start to 2007. Building on this foundation, the Board willcontinue to pursue and review opportunities to broaden our corporate advisoryservices in line with the Company's stated strategy. The Board and staff have worked hard in realising the achievements described inthis report and I thank them for their efforts. Martin EberhardtChairman28 June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2006 Year to Year to 31 December 31 December 2006 2005 £ £ Turnover 687,217 656,864Purchase of shares for proprietary trading (228,367) -Cost of sales (124,799) (368,757) Gross Profit 334,051 288,107Administrative costs (936,858) (631,425)Exceptional costs (24,311) (56,951)Other operating income 34,349 18,682Realised gains on current asset investments 428,772 -Unrealised loss on current asset investments (54,577) (10,827) Operating Loss (218,574) (392,414)Share of operating loss in associate (3,969) -Group interest payable on loan notes (33,644) (10,279)Group interest receivable 17,405 16,916 Loss on Ordinary Activities Before Taxation (238,782) (385,777)Tax on loss on ordinary activities - - Loss on Ordinary Activities After Taxation (238,782) (385,777) Loss per share (pence) (0.69p) (1.99p)Diluted loss per share (pence) (0.31p) (0.64p) The Group has no recognised gains or losses other than the results for the yearas set out above. The Company has taken advantage of Section 230 of theCompanies Act 1985 not to publish its own profit and loss account. CONSOLIDATED BALANCE SHEET 31 December 2006 2006 2005 £ £Fixed AssetsTangible fixed assets 17,744 15,565Investment in associate undertaking 82,222 -Negative goodwill arising on associate undertaking (46,208) - 53,758 15,565 Debtors falling due after one year 50,000 50,000 Current AssetsDebtors 347,089 149,959Cash balances 323,524 576,063Investments 169,135 186,608 839,748 912,630Creditors: Amounts falling due within one year (299,084) (94,991) Net Current Assets 540,664 817,639 Total Assets Less Current Liabilities 644,422 883,204Creditors: Amounts falling due after more than one year (500,000) (656,000) Total Assets less Total Liabilities 144,422 227,204 Capital and ReservesCalled-up equity share capital 194,233 155,233Share premium account 280,500 163,500Special Reserve 52,742 102,742Profit and loss account (383,053) (194,271) Shareholders' Funds 144,422 227,204 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2006 Year to Year to 31 December 31 December 2006 2005 £ £Reconciliation of operating loss to net cash (outflow)from operating activitiesOperating loss (218,574) (392,414)Increase in debtors (463,138) (30,052)Increase/(Decrease) in creditors 224,734 (152,813)Depreciation 10,272 10,368Realised gain (428,771) -Unrealised loss 54,577 10,827Negative goodwill (783) - Net cash outflow from operating activities (821,683) (554,084) CASH FLOW STATEMENTNet cash outflow from operating activities (821,683) (554,084)Returns on investments and servicing on financeInterest received 17,405 16.916Interest paid (33,644) - Net cash (outflow)/inflow from returns on (16,239) 16,916investments and servicing of finance Capital Expenditure and Financial InvestmentPurchase of investments (172,700) (117,310)Sales of investments 564,367 -Purchase of tangible fixed assets (12,451) (14,004)Investment in associate (39,200) - Net cash inflow/(outflow) for capital expenditure and 340,016 (131,314)financial investment FinancingProceeds from share issue - 37,533Proceeds from issue of loan notes - 874,000 Net cash inflow from financing - 911,533 (Decrease)/Increase in Cash (497,906) 243,051 CONSOLIDATED CASH FLOW STATEMENT Continued Reconciliation of net cash flow to movement in net Year to Year to(debt)/funds 31 December 31 December 2006 2005 £ £ (Decrease)/Increase in cash in the period (497,906) 243,051Inflow from issue of loan notes - (874,000)Conversion loan note into ordinary shares 156,000 218,000 Movement in year (341,906) (412,949) Net (debt)/funds at 1 January (79,937) 333,012 Net (debt) at 31 December (421,843) (79,937) Analysis of changes in net (debt) At 1 January Cashflows Other non At 31 2006 cash December 2006 changes £ £ £ £ Cash at bank and in hand 576,063 (497,906) - 78,157Debt due after one year:Secured loan notes (500,000) - 74,000 (426,000)Unsecured loan notes (156,000) - 82,000 (74,000) (79,937) (497,906) 156,000 (421,843) Other non cash changes During the year £74,000 of the secured and £82,000 of the unsecured convertibleloan notes were converted into £156,000 of ordinary share capital. NOTES 1. The financial information set out in this announcement does notconstitute statutory accounts within the meaning of section 240 of the CompaniesAct 1985 for the years ended 31 December 2006 and 2005. The financialinformation for the year ended 31 December 2005 is derived from the statutoryaccounts for that year which have been delivered to the Registrar of Companies.The auditors reported on those accounts; their report was unqualified and didnot contain a statement under s237(2) or (3) of the Companies Act 1985. Thestatutory accounts for the year ended 31 December 2006 will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the Company's annual general meeting. 2. Exceptional Costs During the year exceptional legal costs totalling £24,311 were incurred insetting up the acquisition of the associate undertaking and an ESOP. In 2005exceptional legal and professional costs totalling £56,961 were incurred as aconsequence of the Company's decision that it was unable to proceed with arefinancing proposal with GCG Limited. 3. Loss per share 2006 2005 Loss per ordinary share (pence) (0.69p) (1.99p) Diluted loss per ordinary share (pence) (0.31p) (0.64p) The loss per share has been calculated on the net basis on the group deficitexcluding associate for the financial year, after taxation, of £(234,813) (2005:£(385,777)) using the weighted average number of ordinary shares in issue of34,163,267 (2005: 19,457,267). Diluted earnings per share have been calculated using the weighted averagenumber of ordinary shares in issue, diluted for the effect of share options,loan conversion rights and warrants. There were unexercised options, loanconversion rights and warrants on 33,048,871 shares in existence at the year end(2005: 40,888,871). Posting of accounts The Company announces that the report and accounts for the year ended 31December 2006 are being sent to shareholders today. Copies are available fromthe registered office of the Company at Aldermary House, 10-15 Queen Street,London, EC4N 1TX This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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