Interim Results

Impact Holdings (UK) plc ("Impact" or "The Group") Interim Results 23 December 2014 Impact (AIM: IHUK), the specialist lender, announces its unaudited interimresults for the six months ended 30 September 2014. Financial Highlights * Cash and cash equivalents of £0.63 million (£0.78 million 30 September 2013) * Net assets of £5.34 million (£5.65 million 30 September 2013) * Debt reduced by 22% year on year to £1.22 million (£1.58 million 30 September 2013) * Loss after tax of £234,933 (Profit after tax £1,904 30 September 2013) * (Loss)/earnings per share (17.0p) (0.1p 30 September 2013) Operational Highlights * Ongoing business re-aligned in line with expectations * Continued reduction in borrowings from financial institutions 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: 01928 793 550 Zeus CapitalAndrew Jones / Nick Cowles Tel: 0161 831 1512 Notes to the Editors: Impact Holdings (UK) plc through its individual subsidiaries provides financialoutsourcing and ancillary services to the legal profession. In addition Impactwill fund other opportunities where debt instruments or debentures provide theprimary security and there are opportunities for short term bespoke fundingwhere serviceability precludes larger lenders from entering this area. Impact is regulated by the Office of Fair Trading through which it is licensedto lend under the Consumer Credit Act 1974. CHAIRMAN'S STATEMENT I am pleased to report our unaudited interim financial results for the sixmonths ended 30th September 2014. Revenue of £906,376 and pre-tax losses of£234,933 were in line with expectations, as the management team continued itsrealignment of the business. BUSINESS OVERVIEW The development of the strategic direction of the business has continued with areduction in our exposure to third party funders and a withdrawal from newexposures in the specialty funding market. We continue to incur upfront legal expenses in seeking to recover loans whichhave been previously provided against by the Group. Litigated matters continueto be concluded successfully however the ongoing costs of the more complexlitigation matters continue to erode positive financial results. We have recently settled one litigated claim against a firm of formerprofessional advisors on advantageous terms and are currently awaiting aCourt's decision which may accelerate settlement of a number of matters beingpursued. OUTLOOK The group remains focused on providing services to the legal and professionalsectors. The Board of Directors is committed to the opportunities earmarked andcontinues to develop this strategy which will provide, over time, enhancedshareholder value. Roger BarlowNon-Executive Chairman IMPACT HOLDINGS (UK) PLC UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 6 Months 6 Months Year ended ended Ended 30/09/2014 30/09/2013 31/03/2014 £ £ £ Revenue 906,376 957,652 1,740,529 Cost of Sales (376,397) (521,983) (1,307,442) Gross profit 529,979 436,669 433,067 Exceptional and (764,920) (434,781) (3,418,027)other operating expenses Exceptional - - 3,082,023interest and similar income Operating (loss)/profit (234,941) 1,888 97,063 Interest receivable 8 16 25 (Loss)/profit for the period from operations before tax (234,933) 1,904 97,088 Tax - - - Profit for the period (234,933) 1,904 97,088 (Loss)/earnings per share (pence) Basic (17.0)p 0.1p 3.7p Fully Diluted (17.0)p 0.1p 3.7p IMPACT HOLDINGS (UK) PLC UNAUDITED CONSOLIDATED BALANCE SHEET As at As at As at 30/09/2014 30/09/2013 31/03/2014 £ £ £ Non-current assets Goodwill 421,766 421,766 421,766 Property, plant and equipment 900,054 934,769 918,580 Deferred taxation 171,902 171,892 170,195 1,493,722 1,528,427 1,510,541 Current assets Trade and other receivablesincluding amounts fallingdue after more than one year 5,363,700 6,412,761 5,973,186 Cash and cash equivalents 635,866 782,214 692,685 5,999,566 7,194,975 6,665,871 Total assets 7,493,288 8,723,402 8,176,412 Capital and reserves Share capital 1,311,201 6,411,201 1,311,201 Share premium account - 5,125,291 - Shares held by Employee Benefit Trust (45,070) (45,070) (45,070) Retained earnings 4,075,955 -5,842,751 4,310,645 Equity attributable to equity shareholders 5,342,086 5,648,671 5,576,776of the parent Trade and other payables due after morethan one year 540,329 526,930 540,335 Trade and other payables due in lessthan one year 1,610,873 2,547,801 2,059,301 7,493,288 8,723,402 8,176,412 IMPACT HOLDINGS (UK) PLC UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD 6 Months 6 Months Year ended ended Ended 30/09/2014 30/09/2013 31/03/2014 £ £ £ Operating activities Cash generated from operations 154,717 180,753 456,145 Income taxes paid - - - Net cash generated by operating activities 154,717 180,753 456,145 Investing activities Purchase of property, plant and equipment - (19,865) (34,914) Interest received 8 16 25 Net cash in investing activities 8 (73,872) (34,889) Financing Activities Net decrease in amounts owed to lending (301,073) (13,080) (418,813)institutions Net cash outflow from financing activities (301,073) (13,080) (418,813) Net increase/(decrease) in cash and cash (146,348) 93,801 2,443equivalents Opening cash and cash equivalents 782,214 688,413 690,242 Closing cash and cash equivalents 635,866 782,214 692,685 IMPACT HOLDINGS (UK) PLC UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to the equity holders of parent company Shares Profit Share Share held by Share and loss capital premium EBT options account Total £ £ £ £ £ £ Balance as at 31 6,411,201 5,125,291 (45,070) - (6,051,083) 5,440,339March 2013 Share premium - (5,125,291) - - 5,125,219 -reduction Cancellation of (5,100,000) - - - 5,100,000 -ordinary B shares Share options - - - 39,349 - 39,349 Net Profit for the - - - - 97,088 97,088Year Balance as at 31 1,311,201 - (45,070) 39,349 4,271,296 5,576,776March 2014 Net (loss) for the - - - - (234,933) (234,933)period Balance as at 30 1,311,201 - (45,070) 39,349 4,036,363 5,341,843September 2014 Notes to the Interim Financial Statements 1. Accounting policies This half-year report for the period ended 30 September 2014 has been preparedon the basis of the accounting policies set out in Impact Holdings (UK) plc'sannual report and financial statements 2014 and in accordance with theInternational Financial Reporting Standards as adopted by the European Unionand IAS34, 'Interim financial reporting'. The half-year report does not constitute statutory financial statements asdefined in section 434 of the Companies Act 2006. It does not include all of the information and disclosures required for fullannual financial statements, and should be read in conjunction with the annualreport and financial statements for the year ended 31 March 2014. The financial information contained in this half-year report in respect of theyear ended 31 March 2014 has been produced from the annual report and financialstatements for that year which have been filed with the Registrar of Companies. The financial statements have been prepared on the historical cost basis,except for the valuation of certain financial instruments. The principalaccounting policies adopted are set out below. The financial statements have been prepared on a going concern basis. New and revised accounting standards At the date of issue of these financial statements, the following accountingStandards and Interpretations, which have not been applied, were in issue butnot yet effective. The directors do not anticipate that adoption of these willhave a material impact on the financial statements. IFRS2 Share Based Payments IFRS3 Business Combinations IFRS 8 Operating Segments IFRS 9 Financial Instruments IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IFRS 13 Fair Value Measurement IFRS14 Regulatory Deferral Accounts IFRS15 Revenue from Contracts with Customers IAS 16 Property Plant and Equipment IAS 19 (as revised in 2011) Employee Benefits IAS 24 Related Party Disclosures IAS 27 (as revised in 2011) Separate Financial Statements IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures IAS 32 Offsetting Financial Assets and Financial Liabilities IAS 36 Recoverable Amount Disclosures for Non- Financial Assets IAS 38 Intangible Assets IAS 39 Novation of Derivatives and Continuation of Hedge Accounting IAS 40 Investment Property IAS 41 Bearer Plants The effect of changes on the group's financial statements as a result ofadopting these standards (where applicable) is not significant. The group haselected not to adopt any other standards earlier than the proposed effectivedates. Further detail in relation to the above International Accounting Standards isavailable from the IASB's website, www.iasb.org. Basis of consolidation The consolidated financial statements of the Group incorporate the financialstatements of Impact Holdings (UK) plc (the "Company") and enterprisescontrolled 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 andoperating policies of an investee enterprise so as to obtain economic benefitfrom its activities. Subsidiaries are fully consolidated from the effectivedate of acquisition or up to the effective date of disposal, as appropriate. The acquisition method of accounting is used to account for the acquisition ofsubsidiaries by the Group. The cost of an acquisition is measured as the fairvalue of the assets given, equity instruments issued and liabilities incurredor assumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingentliabilities assumed in a business combination are initially measured at fairvalue at the acquisition date irrespective of the extent of any minorityinterest. The excess of cost of acquisition over the fair values of the Group's share ofidentifiable net assets acquired is recognised as goodwill. Any deficiency ofthe cost of acquisition below the fair value of identifiable net assetsacquired (i.e. discount on acquisition) is recognised directly in the incomestatement. Where necessary, adjustments are made to the financial statements ofsubsidiaries to bring the accounting policies used into line with those used byother members of the Group. All intra-group transactions, balances, andunrealised gains on transactions between Group companies are eliminated onconsolidation. Unrealised losses are also eliminated unless the transactionprovides evidence of an impairment of the asset transferred. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition 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 impairment semi-annually oron such other occasions that events or changes in circumstances indicate thatit might be impaired. Any impairment is recognised immediately in the incomestatement and is not subsequently reversed. Goodwill is allocated to cashgenerating units for the purpose of impairment testing. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP amounts subject to being tested forimpairment. Intangible assets The cost of developing or acquiring computer software including own labourcosts incurred directly in connection with software development, is capitalisedas an intangible asset where the related expenditure is separately identifiableand where there is reasonable expectation that future economic benefits willarise from the development. Software costs are amortised using the straightline method over 3 years. The amortisation charge is included within operatingexpenses. Interest income and expense Revenue shown in the profit and loss account represents interest, commissionand arrangement fees receivable on loans made to third parties. Interest incomeand expense are recognised in the profit and loss account for all financialassets and liabilities using the effective interest method, being the rate thatexactly discounts estimated future cash payments or receipts through theexpected life of the financial instrument to the net carrying amount of thefinancial asset or financial liability. When calculating the effective interestrate, the Group includes all establishment and arrangement fees, commissionsand administrative fees paid or received between parties to the contract thatare an integral part of the effective interest rate. Interest on legal disbursement funding is added to the principal, is calculatedon a daily basis and is repaid to the Group at the end of the term of theagreement. Amounts received in respect of interest on property bridging loans relating tofuture periods are held on the balance sheet as deferred income within tradeand other payables. Revenue generated by Midas Marketing Management Limited represents marketingfees generated by the business activities ad is recognised when the servicesare provided or concluded. Financial assets and liabilities Financial assets and liabilities used by the Group include loans made to thirdparties and debt finance received by the Group. Financial assets are recognisedinitially at fair value and measured subsequently at amortised cost using theeffective interest method, less provision for impairment. Financial liabilitiesare recognised initially at fair value and measured subsequently at amortisedcost. Bad and doubtful debts Specific provision is made against all advances considered to be impaired. Whenthere is reasonable doubt over recovery, provision is made against theoutstanding debt including interest and further interest is suspended until thedirectors 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 there are no material segments other than the provision of short termniche funding solutions. Leasing Rentals payable under operating leases are charged to income on a straight linebasis over the term of the lease. Retirement benefits costs Payments to defined contribution retirement benefit plans are charged as anexpense as they fall due. Taxation The tax expense represents the sum of the current tax expense and deferred taxexpense. 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 incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and it further excludes items that are never taxableor deductible. The Group's liability for current tax is calculated by using taxrates that have been enacted or substantively enacted by the balance sheetdate. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method. Deferredtax liabilities are recognised for all taxable temporary differences anddeferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporarydifferences can be utilised. Such assets and liabilities are not recognised ifthe temporary difference arises from the initial recognition of goodwill orfrom the initial recognition (other than in a business combination) of otherassets and liabilities in a transaction which affects neither the tax profitnor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and associates, and interests in jointventures, except where the Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will notreverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled based upon taxrates that have been enacted or substantively enacted by the balance sheetdate. Deferred tax is charged or credited in the income statement, except whenit relates to items credited or charged directly to equity, in which case thedeferred 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 overtheir useful economics lives, using the straight line method on the followingbasis:- Plant and machinery - 3 years Fixtures, fittings & equipment - 3 years The directors consider that the freehold properties are maintained in such astate of repair that its residual value is at least equal to their originalcost. Accordingly, no depreciation is charged on the grounds of immateriality.Annual impairment reviews are undertaken and provisions made at the end of eachreporting period where necessary. Equity Instruments Equity instruments, which are contracts that evidence a residual interest inthe assets of the Group after deducting all of its liabilities, are recorded atthe proceeds received, net of direct issue costs. Provisions Provisions are recognised when the Group has a present obligation as a resultof a past event which it is probable will result in an outflow of economicbenefits that can be reliably estimated. Share-based payments Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value determined at the grant date of equity-settledshare-based payments is expensed on a straight-line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Fairvalue is measured by use of a binomial model. The expected life used in themodel has been adjusted, based on management's best estimate, for the effect ofnon-transferability, exercise restrictions, and behavioural considerations. At each balance sheet date, the Group revises its estimates of the number ofoptions that are expected to become exercisable. It recognises the impact ofthe revision of original estimates, if any, in the income statement and acorresponding adjustment to reserves over the remaining vesting period. Costsare recognised in the income statement with a corresponding credit to a sharebased payment reserve. Financial Risk Management Interest rate risk The interest rate risks are limited to the revolving credit facilities whichthe 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 itsongoing loans and overdrafts to ensure that there are sufficient funds to meetits obligations. The Board receives regular debt management forecasts which estimate the cashinflows and outflows over the next eighteen months, so that management canensure that sufficient financing is in place as it is required. Credit Risk The Group is exposed to the risk that any counterparty to which the Group lendsmoney will be unable to repay the amounts when they fall due. These risks aremanaged by ensuring that exposures to individual counterparties and particularmarket sectors or loans exhibiting particular attributes are minimized whereverpossible. The Board and Risk Committee monitor such exposures on a regularbasis, with figures being regularly reviewed. In respect of property bridgingloans the Group enforces repossession of property where necessary with a viewto 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 incurlosses at the balance sheet date. 2. Earnings per Ordinary A share 6 Months 6 Months Year ended ended Ended 30/09/2014 30/09/2013 31/03/2014 (Loss)/profit for the (234,933) 1,904 97,088purposes of basic earningsper ordinary share (£) Average number of shares - 2,662,402 2,662,402 2,662,402 basic and diluted EPS - basic (pence) (17.0)p 0.1p 3.7p EPS - diluted (pence) (17.0)p 0.1p 3.7p 3. Trade and other receivables 30/09/2014 30/09/2013 31/03/2014 £ £ £Trade receivables-Disbursement funding loans 4,584,612 4,516,789 4,873,848 - Property bridging loans 131,371 818,970 570,956 237,960 41,485 119,671- Other trade debtors Prepayments and accrued income 409,757 1,035,517 408,711 5,363,700 6,412,761 5,973,186 4. Trade and other payables amounts falling due within one year 30/09/2014 30/09/2013 31/03/2014 £ £ £Trade and other payables falling duewithin one year Trade payables 163,646 42,906 82,940 Bank loans 685,933 1,061,308 987,000 Other taxation and social 43,773 82,128 39,149security Accruals and deferred 717,521 1,361,459 950,212income 1,610,873 2,547,801 2,059,301 Bank loans include a committed term loan secured by fixed andfloating charges over the assets of the Sutherland ProfessionalFunding Limited supported by a parent company guarantee to a maximumof £700,000. 5. Trade and other payables falling due after more than one year 30/09/2014 30/09/2013 31/03/2014 £ £ £ Mortgage 540,329 526,930 540,335 The mortgages for Impact Property Management Limited are secured on the group'sfreehold properties and supported by a parent company guarantee. 6. The Board of Directors approved the interim report on 22 December 2014.