21st Dec 2011 07:00
Impact Holdings (UK) plc ("Impact" or "The Group") Interim Results
Impact (AIM: IHUK), the specialist lender, announces its unaudited interim results for the six months ended 30 September 2011.
Financial Highlights
- Results in line with management expectations
- £1.61 million reduction in borrowings from financial institutions from £7.52 million at 31 March 2011 to £5.91 million at 30 September 2011
- Cash and cash equivalents of £1.37 million (31 March 2011 £1.89 million)
- Net assets of £4.91 million (31 March 2011 £4.77 million)
- Profit after tax of £141,024 ( 30th September 2010 £139,534)
- Earnings per share 6p ( 30th September 2010 6p)
Operational Highlights
- Structured risk management to support monitoring of existing exposures
- Growth opportunities for ancillary services identified
- Further reduction in operating expenses
A copy of the interim results is also available on the Group's website (www.impactholdings.net).
For further information:Impact Holdings (UK) plc
Paul Davies, Chief Executive Officer Tel: 01928 793 550
Zeus CapitalTom Rowley Tel: 0161 831 1512 CHAIRMAN'S STATEMENT
I am pleased to report our unaudited interim financial results for the six months ended 30th September 2011. Revenue of £848,754 and pre-tax profit of £141,024 were in line with expectations, as were cash flows and origination levels.
The general economic downturn experienced in 2009 has continued through 2010 with a further deterioration in 2011 and a significant lack of confidence in the economy and a shortage of liquidity in the banking markets which has resulted in a strategic decision to continue to reduce our indebtedness.
Business Overview
The Board remains concerned at the lack of liquidity in the bankingmarkets and for the overall economic environment in which we trade. Theconsequence to these concerns and our desired strategy of concentrating onbetter quality covenants has been a slowing down of our organic growth withinthe solicitor lending business over the past thirty months or so. The Boardintends to continue this prudent strategy until the economy returns to a morestable platform.The business of solicitor lending, in relation to fundingdisbursements on personal injury cases, continues to be our core market albeitwe have adopted a more conservative approach within the credit risk functionby only lending new monies to the larger multi-partner law practices.We continue to incur upfront legal expenses in seeking to recoverloans which have been previously provided against by the Group. Some of thesematters have been successfully concluded at mediation avoiding furtherexpensive litigation to trial however repayment of these settlements will bereceived over a longer period under agreed terms of repayment.The Board remains committed to diversifying its product offering,reducing its reliance on speciality funding and re-aligning the business toprovide various ancillary services to the legal and professional sectors. Weare presently well progressed in assessing a number of new initiatives, someof which we expect will come to fruition in 2012.
Outlook
The Group remains focussed on providing services to the legal and professional sectors and maximising niche funding opportunities. The Board of Directors is committed to the future growth opportunities earmarked and remains committed to developing this strategy and anticipates this, coupled with our existing businesses, will provide the foundation for controlled growth, improved profitability and enhanced shareholder value.
Roger BarlowNon-Executive ChairmanIMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 Months 6 Months Year ended ended Ended 30/09/2011 30/09/2010 31/03/2011 £ £ £Revenue 848,754 1,019,392 1,554,389Cost of Sales (125,206) (213,123) (377,518)Gross profit 723,548 806,269 1,176,871 Operating expenses (582,524) (667,446) (877,129) Operating profit 141,024 138,823 299,742Interest receivable - 711 1,477 Profit for the period fromoperations before tax 141,024 139,534 301,219 Tax charge - - (3,996)Profit for the period 141,024 139,534 297,223 Earnings per shareBasic and Fully Diluted (pence) 6p 6p 13p
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
As at As at As at 30/09/2011 30/09/2010 31/03/2011Non-current assets £ £ £ Goodwill 421,766 421,766 421,766Other intangible assets 23,311 70,395 46,263Property, plant and equipment 612,954 24,768 599,820Deferred taxation 181,613 190,049 181,613 1,239,644 706,978 1,249,462Current assets Trade and other receivablesincluding amounts fallingdue after more than one year 8,397,545 10,409,283 9,322,186Cash and cash equivalents 1,374,746 2,023,594 1,894,065 9,957,179 12,432,877 11,216,251 Total assets 11,011,935 13,139,855 12,465,713 Capital and reserves Share capital 6,211,201 6,211,201 6,211,201Share premium account 5,005,288 5,005,288 5,005,288Share based payment reserve 172,199 172,199
172,199
Shares held by Employee Benefit Trust (45,070) (44,876) (45,070)Retained earnings (6,430,925) (6,729,638) (6,571,949)Equity Attributable to equityshareholders of the parent 4,912,693 4,614,174 4,771,669 Trade and other payables due after morethan one year 395,955 -
395,955
Trade and other payables due in lessthan one year 5,703,287 8,525,681 7,298,089 11,011,935 13,139,855 12,465,713IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
6 Months 6 Months Year ended ended Ended 30/09/2011 30/09/2010 31/03/2011 £ £ £Operating activities Cash generated from operations 1,108,068 1,518,249 2,796,555Income taxes paid - - (4,635)Net cash generated by operating activities
1,108,068 1,518,249 2,791,920
Investing activities
Purchase of property, plant and equipment (15,669) (1,577) (583,977)Acquisition of own shares by Employee Benefit Trust - (44,876) (45,070)Disposal of own shares by Employee Benefit Trust - 11,645 -Interest received - 711 1,477Net cash (used in)/ generated by investing activities
(15,669) (34,097) (627,570)
Financing ActivitiesDecrease in amount owed tolending institutions (1,611,718) (1,674,055) (2,483,782)Net cash used in financing activities
(1,611,718) (1,674,055) (2,483,782)
Net decrease incash and cash equivalents
(519,319) (189,903) (319,432)
Opening cash and cash equivalents
1,894,065 2,213,497 2,213,497
Closing cash and cash equivalents
1,374,746 2,023,594 1,894,065
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Share Shares Profit and Total Capital Premium based held by loss payment EBT account reserve £ £ £ £ £ £Balance at 31 March 2010 6,211,201 5,005,288 172,199 (11,645) (6,869,172) 4,507,871Net profit for the year - - - - 297,223 297,223Movement on shares held by EBT - - - (33,425) - (33,425)Balance as at 31 March 2011 6,211,201 5,005,288 172,199 (45,070) (6,571,949) 4,771,669Net profit for the period - - - - 141,024 141,024Balance at 30 September 2011 6,211,201 5,005,288
172,199 (45,070) (6,430,925) 4,912,693
Impact Holdings (UK) plc
Notes to the Interim Financial Statements
1. Accounting policies
The financial statements have been prepared in accordance with International Financial Reporting Standards as endorsed by the EU ("IFRS").
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below.
The financial statements have been prepared on a going concern basis.
New and revised accounting standards
The effect of changes on the group's financial statements as aresult of adopting new standards issued since the last reference period (whereapplicable) is not significant. The group has elected not to adopt any otherstandards earlier than the proposed effective dates.
Further detail in relation to the above International Accounting Standards is available from the IASB's website, www.iasb.org.
Basis of consolidation
The consolidated financial statements of the Group incorporate the financial statements of Impact Holdings (UK) plc (the "Company") and enterprises controlled by the Company (its subsidiaries) made up to the balance sheet date. Control is achieved where the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain economic benefit from its activities. Subsidiaries are fully consolidated from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The purchase method of accounting is used to account for theacquisition of subsidiaries by the Group. The cost of an acquisition ismeasured as the fair value of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange, plus costs directlyattributable to the acquisition. Identifiable assets acquired and liabilitiesand contingent liabilities assumed in a business combination are initiallymeasured at fair value at the acquisition date irrespective of the extent ofany minority interest.The excess of cost of acquisition over the fair values of theGroup's share of identifiable net assets acquired is recognised as goodwill.Any deficiency of the cost of acquisition below the fair value of identifiablenet assets acquired (i.e. discount on acquisition) is recognised directly inthe income statement.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.
All intra-group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Goodwill
Goodwill arising on consolidation represents the excess of the costof acquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary, associate or jointly controlled entityat the date of acquisition. Goodwill on acquisition of subsidiaries isseparately disclosed.Goodwill is recognised as an asset and reviewed for impairmentsemi-annually or on such other occasions that events or changes incircumstances indicate that it might be impaired. Any impairment is recognisedimmediately in the income statement and is not subsequently reversed. Goodwillis allocated to cash generating units for the purpose of impairment testing.
Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment.
Intangible assetsThe cost of developing or acquiring computer software including ownlabour costs incurred directly in connection with software development, iscapitalised as an intangible asset where the related expenditure is separatelyidentifiable and where there is reasonable expectation that future economicbenefits will arise from the development. Software costs are amortised usingthe straight line method over 3 years.
Interest income and expense
Revenue shown in the profit and loss account represents interest,commission and arrangement fees receivable on loans made to third parties.Interest income and expense are recognised in the profit and loss account forall financial assets and liabilities using the effective interest method,being the rate that exactly discounts estimated future cash payments orreceipts through the expected life of the financial instrument to the netcarrying amount of the financial asset or financial liability. Whencalculating the effective interest rate, the Group includes all establishmentand arrangement fees, commissions and administrative fees paid or receivedbetween parties to the contract that are an integral part of the effectiveinterest rate.Interest on legal disbursement funding is added to the principal,is calculated on a daily basis and is repaid to the Group at the end of theterm of the agreement. Interest and commissions are reversed retrospectivelyin circumstances where a loan is unwound within 120 days of issue. Amountsreceived in respect of interest on property bridging loans relating to futureperiods are held on the balance sheet as deferred income within creditors.
Financial assets and liabilities
Financial assets and liabilities used by the Group include loansmade to third parties and debt finance received by the Group. Financial assetsare recognised initially at fair value and measured subsequently at amortisedcost using the effective interest method, less provision for impairment.Financial liabilities are recognised initially at fair value and measuredsubsequently at amortised cost.
Bad and doubtful debts
Specific provision is made against all advances considered to be impaired. When there is reasonable doubt over recovery, provision is made against the outstanding debt including interest and further interest is suspended until the directors are satisfied as to the recoverability of the total amount due.
Segmental reporting
No separate segmental reporting information is provided as in the directors' opinion all of the Group's operations are similar and no separation would be meaningful.
Leasing
Rentals payable under operating leases are charged to income on a straight line basis over the term of the lease.
Retirement benefits costs
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.
Taxation
The tax expense represents the sum of the current tax expense and deferred tax expense.
The tax currently payable is based on taxable profit or loss for the year. Taxable profit or loss differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable ondifferences between the carrying amount of assets and liabilities in thefinancial statements and the corresponding tax bases used in the computationof taxable profit, and is accounted for using the balance sheet liabilitymethod. Deferred tax liabilities are recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it isprobable that taxable profits will be available against which deductibletemporary differences can be utilised. Such assets and liabilities are notrecognised if the temporary difference arises from the initial recognition ofgoodwill or from the initial recognition (other than in a businesscombination) of other assets and liabilities in a transaction which affectsneither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulateddepreciation. Depreciation is charged so as to write off the cost or valuationof assets over their useful economics lives, using the straight line method onthe following basis:-
Leasehold improvements - unexpired length of lease
Plant and machinery - 3 years
Fixtures, fittings & equipment - 3 years
Motor Vehicles - 4 years
The directors consider that the freehold property is maintained in such a state of repair that its residual value is at least equal to its carrying value. Accordingly, no depreciation is charged on the grounds of immateriality.
Non-depreciation of the freehold property is a departure from the Companies Act 2006, and is considered to be necessary by the directors to ensure that the financial statements give a true and fair view.
Equity Instruments
Equity instruments, which are contracts that evidence a residual interest in the assets of the Group after deducting all of its liabilities, are recorded at the proceeds received, net of direct issue costs.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated.
Share-based payments
Equity-settled share-based payments are measured at fair value atthe date of grant. The fair value determined at the grant date ofequity-settled share-based payments is expensed on a straight-line basis overthe vesting period, based on the Group's estimate of shares that willeventually vest. Fair value is measured by use of a binomial model. Theexpected life used in the model has been adjusted, based on management's bestestimate, for the effect of non-transferability, exercise restrictions, andbehavioural considerations.At each balance sheet date, the Group revises its estimates of thenumber of options that are expected to become exercisable. It recognises theimpact of the revision of original estimates, if any, in the income statementand a corresponding adjustment to reserves over the remaining vesting period.Costs are recognised in the income statement with a corresponding credit to
ashare based payment reserve. Financial Risk ManagementInterest rate risk
The interest rate risks are limited to the revolving credit facilities which the Group has in place.
The Group has no exposure arising from trading overseas.
Liquidity risk
The Group has to monitor closely its access to bank and other funds and its ongoing loans and overdrafts to ensure that there are sufficient funds to meet its obligations.
The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next eighteen months, so that management can ensure that sufficient financing is in place as it is required.
Credit Risk
The Group exposes itself to the risk that any counterparty to whichthe Group lends money will be unable to repay the amounts when they fall due.These risks are managed by ensuring that exposures to individualcounterparties and particular market sectors or loans exhibiting particularattributes are minimized wherever possible. The Board and Risk Committeemonitor such exposures on a regular basis, with figures being regularlyreviewed. In respect of property bridging loans the Group enforcesrepossession of property where necessary with a view to holding the asset forresale in order to extinguish the debt. In addition, impairment provisions aremade when it becomes evident that the Group may incur losses at the balancesheet date.
2. Earnings per ordinary share
6 Months 6 Months Year ended ended Ended 30/09/2011 30/09/2010 31/03/2011 Profit for the period £141,024 £139,524 £297,223 Number of shares - basic and diluted 2,222,402 2,222,402 2,222,402 EPS - basic (pence) 6p 6p 13pEPS - diluted (pence) 6p 6p 13p
There is no difference between ordinary and fully diluted earnings per share.
3. Trade and other receivables
30/09/2011 30/09/2010 31/03/2011Trade receivables £ £ £-Disbursement funding loans 6,899,274 8,607,863 7,686,100- Property bridging loans 1,174,297 1,448,812 1,407,115Prepayments and accrued income 323,974 352,608
228,971
8,397,545 10,409,283
9,322,186
4. Trade and other payables amounts falling due within one year
30/09/2011
30/09/2010 31/03/2011
£ £ £Trade and other payables falling due within one year Trade payables 54,245 98,653 56,685Bank loans and overdrafts- Disbursement funding loans 5,038,692 7,715,022 6,507,303-Property Bridging Loans 474,000 615,070 617,107
Other taxation and social security 17,591
18,045 25,139Accruals and deferred income 118,759 78,891 91,855 5,703,287 8,525,681 7,298,089 30/09/2011 30/09/2010 31/03/2011 £ £ £Trade and other payables falling due after more than one year Mortgage 395,955 - 395,955 395,955 - 395,955The disbursement funding loans for Impact Funding Solutions Limitedare financed by uncommitted revolving credit facilities secured by a fixed andfloating charges over the assets of the company supported by a parent companyguarantee.
The disbursement funding loans for Sutherland Professional Funding Limited are financed by committed revolving credit facilities secured by fixed and floating charges over the assets of the company supported by a parent company guarantee.
Primarily both facilities represent individual funding loans, repayable when the related disbursement loan is collected.
The property bridging loans are uncommitted revolving credit facilities secured by secondary charges over all properties, where bank funding has been provided. In addition, there are fixed and floating charges over all properties and assets, present and future, of Impact Bridging Solutions Limited and Impact Bridging Developments Limited supported by a parent company guarantee.
5. The Board of Directors approved the interim report on the 20th December 2011.
XLONRelated Shares:
IHUK.L