30th Dec 2010 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 2010.
Financial Highlights
- results in line with management expectations
- cash and cash equivalents of £2.02 million
- net assets of £4.6 million
- profit after tax of £139,534
- earnings per share 10p
Operational Highlights
- bolstering of the Board with the appointment of Justin Bates as a Non-Executive Director replacing Richard Kilsby who has now left the board as planned but remains a significant and supportive shareholder
- successful acquisition of new HQ building completed on 15th November 2010
- full integration of Sutherland Professional Funding Limited
- significant reduction in borrowings from financial institutions
- structured risk management to support monitoring of existing exposures
- further growth opportunities for primary business lines identified
A copy of the interim results is also available on the Group's website (www.impactholdings.net).
For further information:
Impact Holdings (UK) plcPaul Davies, Chief Executive Officer Tel: 0161 437 9499Zeus CapitalAlex Clarkson/Tom Rowley Tel: 0161 831 1512Notes to Editor:
Impact Holdings (UK) plc through its individual subsidiaries provides short term funding solutions, loans administration and IT support services in two specific sectors:
1. The legal disbursements market;
2. Property based bridging and development market.
In addition Impact will fund other opportunities where debt instruments or debentures provide the primary security and there are opportunities for short term bespoke funding where serviceability precludes larger lenders from entering this area. Impact is regulated by The Office of Fair Trading through which it is licensed to lend under the Consumer Credit Act 1974.
CHAIRMAN'S STATEMENT
I am pleased to report our unaudited interim financial results for the six months ended 30th September 2010. Revenue of £1,019,392 and pre-tax profit of £139,534 were in line with expectations, as were cash flows and origination levels.
The general economic downturn experienced in 2009 has continued into 2010 with a lack of confidence in the economy and a lack of liquidity in the banking markets.
Business Overview
The Board remains concerned at the lack of liquidity in the banking markets and for the overall economic environment in which we trade. The consequence to these concerns and our desired strategy of concentrating on better quality covenants has been a slowing down of our organic growth within the solicitor lending business over the past eighteen months. The Board intends to continue this prudent strategy until the economic environment returns to a more stable platform.
The business of solicitor lending, in relation to funding disbursements on personal injury cases, continues to be our core market albeit we have adopted a more conservative approach within the credit risk function by only lending new monies to the larger law practices.
We continue to incur upfront legal expenses in seeking to recover loans which have been previously provided against by the Group. A number of these matters have been successfully concluded at mediation avoiding further expensive litigation to trial however repayment of these settlements will be received over a longer period under agreed terms of repayment.
The Board remains committed to diversifying its product offering as we align the business to providing ancillary services to the legal and professional sectors and are presently assessing a number of new initiatives.
In preparation for the future growth of the business we have taken advantage of the depressed property market values and purchased a 4,250 square foot new Head Office based in Daresbury which is sufficient to accommodate the aspirations of the Board in its development of ancillary business services.
Board Appointment
I was delighted to announce the appointment of Justin Bates to the Board on 1st November 2010 which was part of our continued strengthening of the Board allowing us to pursue our broader strategic objectives.
Justin is Senior Vice President of Keefe, Bruyette & Woods Limited, the largest full-service investment bank specialising exclusively in the financial services sector. Justin has significant experience in the UK Speciality Financial market having been involved in numerous IPO's and will assist the Board in its growth strategy.
I would also like to place on record the Board's thanks to Richard Kilsby who resigned as a Non-Executive director as planned but remains a committed and substantial shareholder.
Outlook
The Group remains focussed on providing services to the legal and professional sectors and maximising niche funding opportunities. The Board of Directors has earmarked a number of future growth opportunities and remains committed to developing this strategy and 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) PLCUNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 6 Months 6 Months Year ended ended ended 30/09/2010 30/09/2009 31/03/2010 £ £ £ Revenue 1,019,392 893,606 1,679,362Cost of sales (213,123) (225,760) (448,613)Gross profit 806,269 667,846 1,230,749 Operating expenses (667,446) (531,159) (907,712) Operating profit 138,823 136,687 323,037 Interest receivable 711 667 1,427 Profit for the period fromoperations before tax 139,534 137,354 324,464 Tax credit - - 725Profit for the period 139,534 137,354 325,189 Earnings per shareBasic and Fully Diluted (pence) 10p 12p 23pIMPACT HOLDINGS (UK) PLCUNAUDITED CONSOLIDATED BALANCE SHEET As At As At As At 30/09/2010 30/09/2009 31/03/2010 £ £ £Non-current assets Goodwill 421,766 - 421,766Other intangible assets 70,395 86,993 93,547Property, plant and equipment 24,768 42,295 46,196Deferred taxation 190,049 - 190,049 706,978 129,288 751,558
Current assets
Trade and other receivablesincluding amounts fallingdue after more than one year 10,409,283 8,832,097 11,914,133Cash and cash equivalents 2,023,594 406,994 2,213,497 12,432,877 9,239,091 14,127,630 Total assets 13,139,855 9,368,379 14,879,188 Capital and reserves Share capital 6,211,201 5,666,667 6,211,201Share premium account 5,005,288 4,759,823 5,005,288Share based payment reserve 172,199 373,836 172,199Shares held by Employee Benefit Trust (44,876) (26,646) (11,645)Retained earnings (6,729,638) (7,258,644) (6,869,172)Equity attributable to equityshareholders of the parent 4,614,174 3,515,036 4,507,871 Creditors: amounts fallingdue within one year 8,525,681 5,853,343 10,371,317 13,139,855 9,368,379 14,879,188IMPACT HOLDINGS (UK) PLCUNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 6 Months 6 Months Year ended ended ended 30/09/2010 30/09/2009 31/03/2010 £ £ £Operating activitiesCash generated from operations 1,518,249 311,455 3,008,430Net cash generated byoperating activities 1,518,249 311,455 3,008,430Investing activitiesPurchase of other intangible assets - - (51,147)Purchase of property, plant and equipment (1,577) 152 (505)Acquisition of own shares byEmployee Benefit Trust (44,876) - -Disposal of own shares by Employee Benefit Trust 11,645 - -Acquisition costs - (21,345)Net cash acquired withsubsidiary undertaking - - 403,116Interest received 711 667 1,427Net cash (used in)/by generatedinvesting activities (34,097) 819 331,546 Financing activitiesShare issue expenses - - (10,000)Decrease in amount owed tolending institutions (1,674,055) (314,853) (1,526,052)
Net cash used in financing activities (1,674,055) (314,853) (1,536,052)
Net (decrease)/increase incash and cash equivalents (189,903) (2,579) 1,803,924
Opening cash and cash equivalents 2,213,497 409,573 409,573
Closing cash and cash equivalents 2,023,594 406,994 2,213,497
IMPACT HOLDINGS (UK) PLCUNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Profit Based Shares and Share Share Payment held by Loss Capital Premium Reserve EBT Account Total Balance as at 31 March 2009 5,666,667 4,759,823 373,836 (26,626) (7,395,998) 3,377,702Profit for the period - - - - 137,354 137,354
Balance as at 30 September 2009 5,666,667 4,759,823 373,836 (26,626) (7,258,644) 3,515,056
Profit for the period - - - - 187,835 187,835Movement on shares held by EBT - - - 14,981 - 14,981Shares issued 544,534 272,715 - - - 817,249Issue expenses - (27,250) - - - (27,250)Transfer re lapsed options (201,637) - 201,637 -Balance as at 31 March 2010 6,211,201 5,005,288 172,199 (11,645) (6,869,172) 4,507,871 Profit for the period - - - - 139,534 139,534Movement on shares held by EBT - - - (33,231) - (33,231)
Balance as at 30 September 2010 6,211,201 5,005,288 172,199 (44,876) (6,729,638) 4,614,174
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 introduction of new standards and revisions to IFRS 1, 2, 3, 5, 7, 8 and revisions to IAS 1, 16, 19, 20, 23, 27, 28, 29, 31, 32, 36, 38, 39, 40 and 41 are relevant to the group
The effect of changes on the group's financial statements as a result of adopting these standards (where applicable) is not significant. The group has elected not to adopt any other standards 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 the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest.
The excess of cost of acquisition over the fair values of the Group's share of identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the 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 cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed.
Goodwill is recognised as an asset and reviewed for impairment semi-annually or on such other occasions that events or changes in circumstances indicate that it might be impaired. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill is 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 assets
The cost of developing or acquiring computer software including own labour costs incurred directly in connection with software development, is capitalised as an intangible asset where the related expenditure is separately identifiable and where there is reasonable expectation that future economic benefits will arise from the development. Software costs are amortised using the 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 for all financial assets and liabilities using the effective interest method, being the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group includes all establishment and arrangement fees, commissions and administrative fees paid or received between parties to the contract that are an integral part of the effective interest 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 the term of the agreement. Interest and commissions are reversed retrospectively in circumstances where a loan is unwound within 120 days of issue. Amounts received in respect of interest on property bridging loans relating to future periods are held on the balance sheet as deferred income within creditors.
Financial assets and liabilities
Financial assets and liabilities used by the Group include loans made to third parties and debt finance received by the Group. Financial assets are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method, less provision for impairment. Financial liabilities are recognised initially at fair value and measured subsequently 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 on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither 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 accumulated depreciation. Depreciation is charged so as to write off the cost or valuation of assets over their useful economics lives, using the straight line method on the following basis:-
Leasehold improvements Unexpired length of lease
Plant and machinery 3 years
Fixtures, fittings & equipment 3 years
Motor Vehicles 4 years
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.
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 at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.
At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment to reserves over the remaining vesting period. Costs are recognised in the income statement with a corresponding credit to a share 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 which the Group lends money will be unable to repay the amounts when they fall due. These risks are managed by ensuring that exposures to individual counterparties and particular market sectors or loans exhibiting particular attributes are minimized wherever possible. The Board and Risk Committee monitor such exposures on a regular basis, with figures being regularly reviewed. In respect of property bridging loans the Group enforces repossession of property where necessary with a view to holding the asset for resale in order to extinguish the debt. In addition, impairment provisions are made when it becomes evident that the Group may incur losses at the balance sheet date.
2. Earnings per ordinary share
6 Months 6 Months Year ended ended ended 30/09/2010 30/09/2009 31/03/2010 £ £ £ Profit for the period 139,524 137,354 325,189 Number of shares - basic 1,422,399 1,133,334 1,422,399 Number of shares - diluted 1,422,399 1,133,334 1,422,399EPS - basic (pence) 10p 12p 23pEPS - diluted (pence) 10p 12p 23p
There is no difference between ordinary and fully diluted earnings per share.
3. Trade and other receivables
6 Months 6 Months Year ended ended ended 30/09/2010 30/09/2009 31/03/2010 £ £ £ Trade receivables-Disbursement funding loans 8,607,863 6,332,262 10,087,930-Property bridging loans 1,448,812 2,350,202 1,607,813
Prepayments and accrued income 352,608 149,633 218,390
10,409,283 8,832,097 11,914,133 4. Trade and other payables :amounts falling due withinone year 6 Months 6 Months Year ended ended ended 30/09/2010 30/09/2009 31/03/2010 £ £ £ Trade payables 98,653 118,934 170,844
Bank loans and overdrafts -Disbursement funding loans 7,715,022 4,580,370 9,291,742 -Property bridging loans
615,070 884,976 712,405
Other taxation and social security 18,045 15,881 48,285 Accruals and deferred income
78,891 253,182 148,041 8,525,681 5,853,343 10,371,317
The disbursement funding loans for Impact Funding Solutions Limited are financed by uncommitted revolving credit facilities secured by a fixed and floating charges over the assets of the company supported by a parent company guarantee.
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 29 December 2010.
vendorRelated Shares:
IHUK.L