13th Jun 2005 07:00
Daniel Stewart Securities PLC13 June 2005 FOR IMMEDIATE RELEASE 13 JUNE 2005 DANIEL STEWART SECURITIES PLC ("Daniel Stewart" or "the Group") (AIM) FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2005The Board of Daniel Stewart Securities plc ("Daniel Stewart" or "the Group") ispleased to announce its final results for the year ending 31 March 2005. FINANCIAL AND OPERATIONAL HIGHLIGHTS • Group Turnover up 231% to £19,863,300 (2004: £8,596,565) • Gross Profit of £5,649,663 (2004: 1,701,498) • Profit before Tax of £2,004,947 (2004: £4,745) • Net Assets £8,287,705 (2004: £5,852,099) • Continued strong performance of the Group's principal operating subsidiary, Daniel Stewart & Company • Significant investment in hiring high quality staff across the business • Number of retained AIM clients increased significantly in the last 12 months from 6 to 34 Commenting on today's announcement, Peter Shea, Group Chief Executive, said:"'It is now eighteen months since we embarked on the expansion of DanielStewart, throughout that period the Group has developed strongly, successfully integrating our new and expanded operational teams, as a result our profilewithin the London Market has been significantly enhanced which has led to anincreased corporate client list and the associated growth in revenue and profits. We expect to continue this expansion during the next twelve months andyour Board is confident of further success in 2005." --ENDS-- Enquiries: DANIEL STEWART SECURITIES PLC Tel: 020 7374 6789Peter SheaAlastair Cade BISHOPSGATE COMMUNICATIONS LIMITED Tel: 020 7430 1600Maxine BarnesDominic Barretto Chairman's Letter to Shareholders Dear Shareholder I am pleased to present our first year of accounts since our AIM listing inOctober 2004. Market conditions showed a considerable improvement during the financial yearenabling us to advance our business. We have continued with our focus on thesmaller capitalised companies and this has resulted in an improved profile,enhanced profitability and increase to our balance sheet size. AIM saw a considerable increase in market applicants many of which were advisedby Daniel Stewart. We successfully completed 12 Initial Public Offerings and 10Secondary Offerings on AIM raising in excess of £60 million in primary andsecondary issues. There were a number of transactions worthy of particular noteincluding Teleunit, an Italian regional telecoms company, for whom we raisedEuros 15 million and XN Checkout for whom we raised, via 4 offerings, a total of£16 million. We were also very busy within our corporate finance departmentwhere in addition to acting as Nomad on 15 transactions we also advised on tworeverse takeovers. We commenced the financial year with 6 AIM clients and added28 to finish the year with 34. Our own AIM flotation was well received, our share price steadily improvingduring the course of the year following listing. Our financial position, whichis excellent, has been enhanced by the completion of two placings that haveimproved our shareholder profile. Shareholders who have supported us for sometime were heavily weighted towards individual investors and your Board felt thatthis issue should be addressed. The management team undertook a number ofinstitutional presentations and completed two small placings, the second closingjust after the year-end. These placings attracted four institutionalshareholders to our list, Fidelity Asset Management, The Marlborough SpecialSituations Fund, Slater Asset Management and New Star Asset Management. During the year we established a new division, Daniel Stewart Capital. Thiscompany provides structured lending products to our clients and during the yearcompleted 4 transactions for 4 clients at a capital value of some £2 million.After a very successful year where the business has competed very effectively inall areas amongst a wide range of competition, we look forward to the year aheadwith confidence. We enter it with a substantial order book and strong demand forour products and services. We have successfully added a number of high calibrepersonnel to the firm ensuring that we will be able to continue to offer qualityexecution as a fully integrated investment bank, servicing smaller capitalisedcompanies. The Board would like to thank shareholders for their continued confidence andsupport for the business and also to thank all staff that have contributed somuch to the success of the Company. Peter Dicks ChairmanChief Executive's Year in Review Equity Capital Markets. Our equity capital markets teams cover both corporate broking, which acts as thelink between corporate finance and institutional sales, and institutional sales,which acts as the primary point of contact for our primary and secondary issues.During the year we again expanded our institutional contact base and our abilityto place shares at both the primary and secondary level has been enhanced.We commenced the year with just six AIM listed clients and during the next 12months successfully completed 25 transactions on AIM adding 28 new clients. Weacted on the admission of in excess of £60 million in new capital on totaltransaction values of £434 million. Corporate Finance. Our corporate finance team, which has been substantially added to during theyear, has been busy in a wide range of activities. It successfully completed 2reverse takeovers as well as 15 AIM new listings where we acted as Nomad. Ourhigher profile is helping us attract larger small caps. In addition, our strongexpertise in structuring deals to suit Venture Capital Trusts should benefit usgiven the increase in fund-raising by the sector.Equity Research Our research department established just over 3 years ago now enjoys a firstclass reputation for quality production covering our in-house stocks as well asa small group of additional stocks that we believe represent valueopportunities. Our research is widely distributed to over 400 institutions. Itis produced regularly to ensure maximum exposure for our corporate clients. Trading and Investment With the increase in our corporate client list we have a seen a correspondingrise in our trading volumes and we expect this department to increase itscontribution to the Group as we continue to expand Equity Capital Markets,Corporate Finance and Research. In addition to, our agency business the tradingdepartment run Daniel Stewart Securities principal investments and ourproprietary trading book, both of which have expanded profitably throughout theyear. Specialist Debt Services We established Daniel Stewart Capital during the year to provide specialist debtservices to our clients. The establishment of this business furtherdifferentiates us from our competitors; the range of our services being offeredis now comprehensive covering all aspects of finance. We completed fourtransactions during the year for a capital value of just over £2 million and weexpect this department to grow substantially over the next twelve months. Employees We added a number of new employees during the year all of whom have broughttheir undoubted skills and enthusiasm to the business. The results for 2005reflect the commitment, energy and ability of all of our staff for which wethank them. Premises With the growth in the business we have had to consider the size andappropriateness of our premises and have decided to move. We are considering anumber of alternatives, all within a short distance of our current address, andwe would expect to conclude a new lease and move some time towards the end ofthe summer or early autumn 2005. Outlook As the first quarter of this financial year comes towards a conclusion, I ampleased to announce that our businesses are all continuing to progress well andyour Board is confident of further success in 2005. Peter SheaGroup Chief Executive Management Discussion Business Environment Markets across all of our product areas have been strong throughout the yearwith no sign of any abatement other than a short pause for breath in the summer.AIM has had an outstanding year and this has given us an opportunity to advanceboth the size and quality of our business. Institutional investors havesupported the market with record sums although they have been very selective interms of the underlying quality of the businesses brought to market. Results of Operations Revenue for the twelve months was £19,863,300, up from £8,596,565 for theprevious year, an increase of 231%. Of these revenues £15,813,703 million(£7,433,549 in 2004) is attributable to secondary and proprietary trading. Thebalance of £4,049,597 (£1,163,016 in 2004) is attributable to our corporatefinance business. At the gross profit level we improved our performance by 332%returning £5,649,663 versus £1,701,498 for 2004. This improvement was reflectedin the margin up from 19.8% to 28.4%. If we segregate our secondary andproprietary income of £1,978,245 the margin rises to 90% or £3,671,418.At the operating level we returned a profit of £1,922,803 or 10.3% of revenues,up from £62,535 or 0.72% of revenue for 2004. Staffing levels rose on averagefrom 16 to 21, although we ended the year with 25 employees and as such ouradministrative expenses rose in real terms from £1,638,963 in 2004 to£3,594,750. However, when measured against revenue this represented a slightimprovement down from 19.1% in 2004 to 18.1%. After taking into accountinterest, depreciation and amortisation our profit before tax was £2,004,947 or10.1% of revenues up from £4,745 or 0.05% in 2004. Liquidity and Capital Resources Net assets rose from £5,852,099 in 2004 to £8,287,705 in 2005 with our workingcapital position improving from £2,734,378 in 2004 to £6,388,581. Thisimprovement can be attributed to a number of factors but of significance was thegrowth of our fledgling loan portfolio of some £2 million, and our increasedcash position up to £3,000,157. Operating cashflow increased from £85,325 to£2,172,195. Our Return on Capital Employed, which in 2004 was insignificant, was23.47% and our Return on Equity was 8.05%. DANIEL STEWART SECURITIES PLC Consolidated profit and loss account for the year ended 31 March 2005 Year ended 31 March 31 March 2005 2004 £ £Turnover 19,863,300 8,596,565 Cost of sales (14,213,637) (6,895,067) ____________ ____________ Gross profit 5,649,663 1,701,498 Administration costs (3,594,750) (1,638,963) ____________ ____________ Operating profit / (loss) 2,054,913 62,535 Amortisation of goodwill (107,670) (98,375)Depreciation (24,440) (25,734)Interest receivable 124,105 66,402Finance costs (41,961) (83) ____________ ____________ Profit / (loss) on ordinary 2,004,947 4,745activities before taxation Tax on profit / (loss) on (180,000) -ordinary activities ____________ ____________Profit / (loss) on ordinary 1,824,947 4,745activities after taxation ____________ ____________ DANIEL STEWART SECURITIES PLC Consolidated balance sheet as at 31 March 2005 31 March 31 March 2005 2004 £ £ Share capital not paid 40,500 - ____________ ____________ 40,500 - ____________ ____________ Fixed assets Tangible 64,551 78,392 Investments 367,106 1,200,127 Goodwill 1,731,532 1,839,202 ____________ ____________ 2,163,189 3,117,721 ____________ ____________ Current assets Investments 1,530,704 767,757 Trade and other debtors 2,693,065 1,028,524 Cash at bank and in hand 3,000,157 1,155,489 ____________ ____________ 7,223,926 2,951,770 Creditors - amounts falling due within (835,345) (217,392) one year ____________ ____________ Net current assets 6,388,581 2,734,378 Creditors - amounts falling due within (304,565) - one year ____________ ____________ Net assets 8,287,705 5,852,099 ============ ============ Capital and reserves Called up share capital 508,123 456,526 Share premium account 2,889,480 1,917,410 Capital redemption reserve fund 49,998 49,998 Revaluation reserve (1,120,527) (707,519) Capital reserve 8,524,435 8,524,435 Profit and loss account (2,563,804) (4,388,751) ____________ ____________ Shareholders' funds 8,287,705 5,852,099 ============ ============ DANIEL STEWART SECURITIES PLC Consolidated cash flow statement for the year ended 31 March 2005 Year ended 31 March 31 March 2005 2004 £ £ £ £ Operating activities Net operating Profit / (loss) 1,922,803 (61,574)from consolidated companies Amortisation of goodwill 107,670 98,375Depreciation of tangible fixed 24,440 25,734assets ___________ ___________ 132,110 124,109 ___________ ___________ 2,054,913 62,635Movement in working capital Decrease in debtors 147,320 59,215Decrease in creditors 230,752 57,189Increase in investments held (342,934) (159,933)for trading _________ _________ 35,138 (43,529) ___________ ___________Operating cash flow 2,090,051 19,006 ___________ ___________ Investing activities Expenditure on tangible fixed (57,229) (56,669)assetsDisposal of tangible fixed 46,630 -assetsAcquisition of fixed asset - (150,056)investments ___________ ___________Cash flow from investing (10,599) (206,725)activities ___________ ___________ Financing activities Loans made to third parties (1,811,861) (298,980)Loans received from third 511,766 -partiesShare capital; issued 983,167Interest receivable 124,105 66,402Interest payable (41,961) (83) ___________ ___________Cash flow from financing (234,784) (232,661)activities ___________ ___________ Cash and cash equivalents at 1 1,155,489 1,575,869April 2004Cash and cash equivalents at 31 3,000,157 1,155,489March 2005 ___________ ___________Increase/(decrease) in cash and 1,844,668 (420,380)cash equivalents ___________ ___________ The financial information for the year ended 31 March 2005 has not been auditedand does not constitute the Company's statutory financial statements within themeaning of S240 of the Companies Act 1985. The statutory accounts for the yearended 31 March 2005 have not been filed with the Registrar of Companies norreported on by the Company's auditors. Notes to the financial statements 1. Accounting policies These financial statements have been prepared in accordance with applicable law and United Kingdom accounting standards. Accounting convention The financial statements are prepared under the historical cost convention modified to include the revaluation of investments to market value. Turnover Turnover comprises income from advisory and asset management services inclusive of disbursements, and is recognised as work is carried out and fees have been agreed. Turnover also derives from principal share dealing and commissions receivable. Turnover is stated after deduction of value added tax. Basis of consolidation The consolidated financial statements include the subsidiary companies reported in note 11. Subsidiaries are bought into the consolidation at the time of acquisition on the basis of the fair value of the assets. Deferred taxation Deferred tax is provided at anticipated tax rates on differences arising from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Tangible fixed assets Depreciation is provided at the rate of 25% per annum on a written down value basis on office equipment and furniture in order to reduce to estimated realisable values over useful working lives, Depreciation in respect of computer equipment and software is provided at the rate of 25% per annum on a straight line basis . Improvements to leasehold property are written off over the remaining useful life of the lease. Fixed asset Investments Quoted investments are valued at closing sale price on the relevant stock exchange. The market value of certain securities may be discounted where there are restrictions on their disposal or whether other special factors apply. Unlisted investments are valued by the directors on the basis of all the information available to them at the time. In the cases of companies which are in an early stage, valuation will normally be at cost unless, in the directors' opinion there has been a permanent diminution in value or a change of valuation is justified by reference to subsequent issues of capital or dealings between third parties at a different price. Unrealised gains or losses are recognised in the revaluation reserve Realised profits or losses on disposal and provisions for permanent diminution in value of investments are transferred to the profit and loss account from the revaluation reserve. Current asset investments Current asset investments are valued at market value. Any unrealised gain or loss is recognised in the profit and loss account. Goodwill and amortisation Goodwill arising on consolidation, which represents the excess of the fair value of consideration given over the fair value of the separable net assets of the subsidiary undertaking, is capitalised and written off over it's estimated useful economic life, which in the opinion of the directors is twenty years. Leased assets Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profit as incurred. 2 Turnover and Gross Profit 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Share trading 15,813,703 6,171,553 7,433,549 2,608,921 Corporate finance 4,049,597 - 1,163,016 - _________________________________________________ Turnover 19,863,300 6,171,553 8,596,565 2,608,921 ================================================= Share trading 1,978,245 1,819,870 822,799 325,754 Corporate finance 3,671,418 878,699 _________________________________________________ Gross profit 5,649,663 1,819,870 1,701,498 325,754 ================================================= 3 Staff costs Total staff costs for the year ending 31 March 2005 were £2,430,660, (2004, £903,269). During the year the group had an average of twenty one employees, including the directors. The aggregate group directors' remuneration was £717,132 (2004:£250,000). The remuneration of the highest paid director was £386,667 (2004: £120,000). 4 Result from operating activities Is stated after charging: 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Auditors' remuneration - for audit services 12,000 4,500 11,845 4,500 - for non audit services 17,388 6,260 3,105 1,200 Directors' remuneration including benefits in kind 719,132 59,389 324,500 50,000 Operating lease rentals 121,680 - 127,441 - =================== =================== 5 Bank interest receivable and similar income 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company On bank deposit 48,357 41,949 38,476 31,268 Loan stock interest receivable 73,140 15,340 27,141 27,141 Dividends receivable 2,608 2,608 785 710 ___________________ ___________________ 124,105 59,897 66,402 59,119 =================== =================== 6 Interest payable 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company On bank loan and overdraft 41,961 11,519 83 83 =================== =================== 7 Taxation on profit from ordinary activities 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Mainstream Corporation tax deriving from profits on operating activities 180,000 - - - No provision has been considered necessary for deferred taxation. These financial statements remain subject to Inland Revenue agreement. Factors affecting group tax charge 31 March 2005 31 March 2004 Profit per financial statements 2,004,947 4,745 Disallowable items 116,000 97,000 Losses utilised (1,520,947) (101,745) ____________ ____________ (1,404,947) (4,745) ____________ ____________ Taxable profit 600,000 - ____________ ____________ Taxation at 30% 180,000 - ============ ============ 8 Earnings per share The weighted average number of ordinary shares in issue during the period ended 31 March 2005 was 188,773,180 (2004 : 182,610,495). 31 March 2005 31 March 2004 pence pence pence pence Group Company Group Company Including amortisation of goodwill 0.00967 0.00842 0.00003 0.00041 Excluding amortisation of goodwill 0.01024 0.00842 0.00054 0.00041 9 Property, plant and equipment - Group only 31 March 2005 Improvements to leasehold Plant and premises equipment Total £ £ £ Cost at 1 April 2004 19,848 127,720 147,568 Additions - 57,229 57,229 Disposals (19,848) (75,147) (94,995) __________ __________ __________ At 31 March 2005 - 109,802 109,802 __________ __________ __________ Accumulated depreciation at 1 April 2004 4,665 64,511 69,176 Provided in respect of (4,665) (43,700) (48,365) disposals Provision in the year - 24,440 24,440 __________ __________ __________ At 31 March 2005 - 45,251 45,251 __________ __________ __________ __________ __________ __________ Net book value at 31 March 2004 15,183 63,209 78,392 ========== ========== ========== Net book value at 31 March 2005 - 64,551 64,551 ========== ========== ========== 10 Intangible assets Goodwill 31 March 2005 £ Group Arising on acquisition of 2,071,094 subsidiary ___________ Accumulated depreciation at 1 April 2004 231,892 Provision in the 107,670 year ___________ 339,562 ___________ Net book value at 31 March 2004 1,839,202 =========== Net book value at 31 March 2005 1,731,532 =========== 11 Investment in subsidiary companies 31 March 2005 £ Company Cost of 100% of ordinary share capital at 31 March 2004 2,647,923 100% share capital of subsidiary acquired in the year 75,000 Cost of 100% of ordinary share capital at 31 March 2005 2,722,923 Subsidiary companies Daniel Stewart & Company plc Registered in England and Wales Daniel Stewart Capital Limited Registered in England and Wales 12 Investments - fixed assets Investments in quoted companies 31 March 2005 £ £ Group Company Valuation at 1 April 2004 and 150,056 150,056 31 March 2005 ========== ========== Investments in unquoted companies 31 March 2005 £ £ Group Company Valuation at 1 April 2004 1,050,071 1,050,071 Addition 30,050 30,050 Reclassification to current (450,063) (450,063) asset investment Provided during period to (413,008) (413,008) revaluation reserve ========== ========== 217,050 217,050 ========== ========== Total 31 March 2004 1,200,127 1,200,127 ========== ========== Total 31 March 2005 367,106 367,106 ========== ========== 13 Investments - current assets 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Investments in quoted companies at 1,530,704 1,530,704 767,757 601,247 market valuation 14 Trade and other debtors 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Trade debtors 449,287 1,469 508,468 - Intercompany and associated - 689,055 126,400 527,261 organisations Loans outstanding 1,984,661 718,185 172,800 172,800 Other debtors and 259,117 20,025 220,856 51,287 prepayments __________ __________ _________ _________ 2,693,065 1,428,734 1,028,524 751,348 ========== ========== ========= ========= All debtors are receivable within one year of the balance sheet date, except a lease deposit of £40,000, refundable on lease expiry in January 2007. 15 Cash at bank and in hand 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Held by UK clearing bank 2,159,637 1,700,922 945,490 681,858 Held by third party service 840,520 657,737 209,999 157,780 providers __________ __________ _________ _________ 3,000,157 2,358,659 1,155,489 839,638 ========== ========== ========= =========16 Trade and other payables Due within one year 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Bank 207,201 - - - loan Trade creditors 112,961 2,300 81,029 9,863 Accruals 280,641 41,323 90,997 13,955 Tax and social security 54,542 - 45,366 13,657 Due to subsidiary 202,886 - - company Corporation tax 180,000 - - - __________ __________ _________ _________ 835,345 246,509 217,392 37,475 ========== ========== ========= ========= 17 Share capital 31 31 March March 2005 2004 £ £ Authorised Company Company 322,098,000 Ordinary shares of 0.25p 805,245 805,245 each 2,902,000 Deferred shares of 0.25p 7,255 7,255 each ________ ________ 812,500 812,500 ======== ======== Issued At start of year 182,610,495 Ordinary shares of 0.25p 456,526 456,526 each Issued during the year 20,638,571 Ordinary shares of 0.25p 51,597 - each ________ ________ 203,249,066 Ordinary shares of 0.25p 508,123 456,526 each ======== ======== During the year, under the rules of the Daniel Stewart Securities plc unapproved option scheme staff and directors were granted a total of 7,775,000 shares at between 6.5p and 12p. 18 Reconciliation of movement in shareholders funds 31 March 2005 31 March 2004 £ £ £ £ Group Company Group Company Profit / (loss) on ordinary 1,824,947 1,588,650 4,745 74,925 activities after taxation Opening shareholders funds 5,852,099 6,002,808 6,201,908 6,282,437 Other recognised gains and losses (413,008) (413,008) (354,554) (354,554) Issue of ordinary share capital 1,113,116 1,113,116 - - Costs relating to shares issued in (89,449) (89,449) the year ___________ ___________ ___________ ___________ 8,287,705 8,202,117 5,852,099 6,002,808 =========== =========== =========== =========== 19 Commitments and contingent liabilities There were no contingent liabilities at 31 March 2004 or 31 March 2004. The financial statements remain subject to Inland Revenue agreement on the corporation tax position. A contingent liability in respect of exposure to client share trading will exist at any given time. All unsettled trades at 31 March 2004 have now been fully satisfied. At 31 March 2005 the Company had guaranteed the borrowings of its subsidiary, Daniel Stewart Capital Limited. At that date Daniel Stewart Capital Limited owed Singer and Friedlander Limited £511,768. Daniel Stewart Securities plc have provided a guarantee on behalf of the same subsidiary to Lloydstsb plc; at 31 March 2005 these were no monies due under this agreement. 20 Operating leases At 31 March 2005 the Group had annual commitments under operating leases as follows: 31 March 2005 31 March 2004 £ £ £ £ Land and buildings Other Other Operating leases which expire: Within one year In the second to fifth year 116,000 12,612 116,000 13,408 inclusive After five years - - - 5,000 _________ ________ _________ ________ 116,000 12,612 116,000 18,408 ========= ======== ========= ========21 Related party transactions Consultancy fees of £5,000, (2004 - £29,000) have been rendered to Daniel Stewart & Co plc by the Daniel Stewart Partnership in which PD Shea is a partner. At 31 March 2005 the Company owed £202,886 to its subsidiary, Daniel Stewart & Co plc, at 31 March 2004, Daniel Stewart Securities plc was owed £439,861 by Daniel Stewart & Co plc. 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Daniel Stewart Securities Plc