30th Jun 2008 14:20
Merchant House Group PLC (the "Company")
30 June 2008
Final results for the year ended 31 December 2008
Chairman's statement
I am pleased to present the final results for the year ended 31 December 2007.
Financial headlines
Revenue from financial services increased by 16% over the year to 2006 to £535,559 with increased gross profit.
Excluding exceptional expenses, loss for the year of £502,427, a reduction of 16% on previous year.
Excluding exceptional expenses, loss per share of 1.17p a reduction of 34% on previous year
As outlined in the recent EGM notice, the company has been working on a fundraising to allow the acceleration of the Group strategy of having a stronger ability to invest funds in clients. I am pleased to announce today that the Group has successfully raised £1.5m in unconditional funds to date which the board regard as important to enhancing shareholder value. This fund raising is for 1.5m £1 Convertible Preference Shares, details of which were announced by the Company on 13 March 2008 and approved by shareholders at the Company's General meeting held on 7 April 2008. The Convertible Preference Shares carry a coupon of 8% and are convertible into Ordinary shares at any time after 30 June 2011 at a price of 2.5p per share. The Company will have the option to redeem the Convertible Preference Shares at its discretion, should the then directors deem it beneficial to do so at any time prior to 30 June 2011 at a premium of £2.00 per Convertible Preference Share.
In connection with the fund raising referred to above, the company will shortly enter into an important new strategic partnership which will offer the company a number of opportunities to broaden its revenue base with new and growing diversified income streams. Further information regarding detailed strategy, additional directors and the strategic partnership will be announced shortly.
As I have previously reported to you, the board decided during 2007 that, despite the revenues earned from Corporate Finance activity and the disposal of longer term investments, the Group strategy was not proving successful due to a lack of resource to raise funds for or invest in client companies in a significant way.
Accordingly, the board took the decision to re structure the Corporate Finance Department which will in time have the effect of significantly reducing the overhead of the Group and to recruit a new, performance related team whose potential value to the group is already becoming apparent. In line with the strategy I outlined in the autumn, the company has established a number of new teams to offer broad based merchant banking services to our traditional corporate finance clients, which the board hope will lead to an increased number of revenue streams and additional reasons for clients to approach the company. We have announced the formation of Merchant Wealth Management led by Paul Hassall, the opening of a new Singapore office led by Adam Chan in order to attract clients from the fast growing Asian market and the association with Merchant Legal led by Alan O'Doherty to offer corporate legal advice to Group clients. On behalf of the board, I welcome these new associates.
2007 was a challenging year for the company as the results indicate but the board are confident that the cut in the overhead, the introduction of performance related remuneration, new team members and significant funding should have laid a strong foundation for future growth.
Martin Eberhardt
Chairman
Merchant House Group plc
Martin Eberhardt
Tel: 020 7332 2200
Shore Capital and Corporate Limited
Alex Borrelli
Tel: 020 7408 4090
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2007
|
Note |
Year to 31 December 2007 £ |
Year to 31 December 2006 Restated £ |
|
|
Revenue |
2 |
535,559 |
687,217 |
|
Purchase of shares for proprietary trading |
- |
(228,367) |
|
|
Cost of sales |
(168,261) |
(124,799) |
|
|
Gross Profit |
367,298 |
334,051 |
|
|
Administrative expenses |
(1,084,533) |
(890,650) |
|
|
Exceptional expenses |
3 |
(414,338) |
(24,311) |
|
Other operating income |
33,804 |
34,349 |
|
|
Realised gains on current asset investments |
295,458 |
168,295 |
|
|
Unrealised loss on current asset investments |
(29,483) |
(201,485) |
|
|
(Loss) from operations |
4 |
(831,794) |
(579,751) |
|
Share of operating loss in associate undertakings |
(65,161) |
(3,969) |
|
|
Finance expense |
(30,964) |
(33,644) |
|
|
Investment income |
11,154 |
17,405 |
|
|
(Loss) Before Taxation |
(916,765) |
(599,959) |
|
|
Income tax expense |
7 |
- |
- |
|
(Loss) for the financial period |
(916,765) |
(599,959) |
|
|
(Loss) per share (pence) |
9 |
(2.12p) |
(1.76p) |
|
Diluted loss per share (pence) |
9 |
(1.27p) |
(0.89p) |
The Group has no recognised gains or losses other than the results for the year as set out above. The Company has taken advantage of Section 230 of the Companies Act 1985 not to publish its income statement.
CONSOLIDATED BALANCE SHEET
31 December 2007
|
Note |
2007 £ |
Restated 2006 £ |
|
|
ASSETS |
|||
|
Non Current Assets |
|||
|
Property, plant and equipment |
11 |
8,484 |
17,744 |
|
Investment in associate undertakings |
10 |
17,112 |
82,222 |
|
25,596 |
99,996 |
||
|
Receivables falling due after one year |
13 |
50,000 |
50,000 |
|
Current Assets |
|||
|
Trade and other receivables |
14 |
191,959 |
347,089 |
|
Cash and cash equivalents |
15 |
134,826 |
323,524 |
|
Investments |
16 |
36,625 |
271,875 |
|
Total current assets |
363,410 |
942,488 |
|
|
TOTAL ASSETS |
439,006 |
1,092,454 |
|
|
EQUITY AND LIABILITIES |
|||
|
Current Liabilities: Trade and other payables |
17 |
296,012 |
299,084 |
|
Non current liabilities: Convertible loans |
18 |
429,786 |
437,785 |
|
725,798 |
736,869 |
||
|
Equity and Reserves |
|||
|
Called up share capital |
19 |
271,733 |
194,233 |
|
Convertible loan notes |
18 |
38,214 |
62,215 |
|
Share premium |
501,389 |
280,500 |
|
|
Special Reserve |
20 |
- |
52,742 |
|
Retained Earnings |
(1,098,128) |
(234,105) |
|
|
Total Equity |
(286,792) |
355,585 |
|
|
TOTAL LIABILITIES |
439,006 |
1,092,454 |
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007
|
Note |
2007 £ |
Restated 2006 £ |
|
|
Reconciliation of operating loss to net cash (outflow) from operating activities |
|||
|
Operating loss |
(831,794) |
(579,751) |
|
|
Loan written off |
107,020 |
- |
|
|
Investment transfer |
30,060 |
- |
|
|
Decrease /(Increase) in trade & other receivables rerereceivablereceivables |
155,128 |
(227,128) |
|
|
Increase in trade & other payables |
6,288 |
224,733 |
|
|
Depreciation |
9,783 |
10,272 |
|
|
Loss on disposal |
184 |
- |
|
|
Realised gain |
(295,458) |
(168,294) |
|
|
Unrealised Loss |
29,483 |
201,484 |
|
|
Negative goodwill |
- |
(46,991) |
|
|
Net cash outflow from operating activities |
(789,306) |
(585,675) |
|
|
Investing |
|||
|
Investing Activities |
|||
|
Interest received |
11,154 |
17,405 |
|
|
Purchase of investments |
(389,291) |
(172,700) |
|
|
Sales of investments |
753,438 |
564,367 |
|
|
Purchase of plant & equipment |
(1,761) |
(12,451) |
|
|
Sale of plant & equipment |
1,053 |
- |
|
|
Investment in associate |
(51) |
(39,200) |
|
|
Net cashflow from investing activities |
374,542 |
357,421 |
|
|
Financing activities |
|||
|
Proceeds from share issue |
266,389 |
- |
|
|
Interest paid |
(30,964) |
(33,644) |
|
|
Net cash inflow/(outflow) from financing activities |
235,425 |
(33,644) |
|
|
(Decrease) in cash & cash equivalents |
(179,339) |
(261,898) |
|
|
Reconciliation of net cash flow to movement in net debt |
|||
|
Increase/(Decrease) in cash in the period |
(179,339) |
(261,898) |
|
|
Conversion loan note into ordinary shares |
32,000 |
156,000 |
|
|
Movement in year |
(147,339) |
(105,898) |
|
|
Net (debt) brought forward |
(185,835) |
(79,937) |
|
|
Net (debt) carried forward |
(333,174) |
(185,835) |
|
|
Reconciliation of net cash flow to movement in net (debt)/funds |
Year to 31 December 2007 £ |
Year to 31 December 2006 £ |
|
|
(Decrease)/Increase in cash in the period |
(179,339) |
(261,898) |
|
|
Inflow from issue of loan notes |
- |
- |
|
|
Conversion loan note into ordinary shares |
32,000 |
156,000 |
|
|
Movement in year |
(147,339) |
(105,898) |
|
|
Net (debt)/funds at 1 January |
(185,835) |
(79,937) |
|
|
Net (debt) at 31 December |
(333,174) |
(185,835) |
|
|
Analysis of changes in net (debt) |
At 1 January 2007 £ |
Cashflows £ |
Other non cash changes £ |
At 31 December 2007 £ |
|
Cash at bank and in hand |
78,157 |
54,651 |
- |
132,808 |
|
Cash held in stockbroker's client accounts |
236,008 |
(233,990) |
- |
2,018 |
|
Cash and cash equivalents |
314,165 |
(179,339) |
- |
134,826 |
|
Debt due after one year: |
||||
|
Secured loan notes |
(426,000) |
- |
18,000 |
(408,000) |
|
Unsecured loan notes |
(74,000) |
- |
14,000 |
(60,000) |
|
(185,835) |
(179,339) |
32,000 |
(333,174) |
|
Other non cash changes
During the year £18,000 of the secured and £14,000 of the unsecured convertible loan notes were converted into £32,000 of ordinary share capital.
The exceptional bad debt write offs are included in the decrease in trade and other receivables above.
1. The financial information set out in this announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 for the years ended 31 December 2007 and 2006. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2007 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.
2. Exceptional costs
During the year exceptional costs totalling £162,550 were incurred in writing off trade debts in connection with Merchant Capital Ltd clients, writing off a loan amounting to £107,020 made in the year to a third party and providing against a loan amounting to £144,768 made in the year to an associate. In 2006 exceptional legal and professional costs totalling £24,311 were incurred in setting up the acquisition of the associate undertaking and an ESOP.
3. Loss per share
|
2007 |
Restated 2006 |
|
|
Loss per ordinary share (pence) |
(2.12p) |
(1.76p) |
|
Diluted loss per ordinary share (pence) |
(1.27p) |
(0.89p) |
The loss per share has been calculated on the net basis on the group deficit excluding associate for the financial year, after taxation, of £(916,765) (2006: £(599,959)) using the weighted average number of ordinary shares in issue of 43,196,600 (2006: 34,163,267). Diluted earnings per share have been calculated using the weighted average number of ordinary shares in issue, diluted for the effect of share options, loan conversion rights and warrants. There were unexercised loan conversion rights and warrants on 33,900,000 shares in existence at the year end (2006: 33,048,871).
4. The annual report is being posted to shareholders today and is also available on the Company's website: www.merchanthousegroup.com
Related Shares:
MHG.L