16th Nov 2006 07:01
ARC Risk Management Group PLC16 November 2006 ARC RISK MANAGEMENT GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2006 ARC Risk Management Group plc ("ARC" or the "Group"), is a provider of securityrisk management services, offering preventative and reactive advice to helpindividuals avoid and manage personal risks to themselves and their families.The products are distributed through leading international financial servicecompanies. Highlights •Operating loss halved to £212k, compared with £423k in the first half of 2005. •Turnover up 42% to £1,270k, compared with £893k in the first half of 2005. •New five year distribution agreement with AIG generating minimum $250k cash flow per quarter. •red24 sales up 72% on corresponding period last year. •Significant overseas product launches likely in 2007, through key distribution partners AIG and HSBC, who have over 30m potential customers. Simon Richards, Chairman, commented: "ARC is strongly positioned as a leading provider of security risk managementservices, which are meeting the growing requirement for greater protection,particularly for those traveling whether on business or for pleasure - a marketwhich, at present, remains largely untapped. Our core division, red24, has continued to develop its relationships with keypartners AIG and HSBC and its prospects are encouraging as awareness of thebrand, and how it can assist in the financial services and insurance industries,continues to grow." Enquiries: ARC Risk Management Group plcSimon Richards, Chairman Tel: 0208 080 0217Simon Wakeling, Director Threadneedle CommunicationsGraham Herring, Josh Royston Tel: 0207 936 9605 CHAIRMAN'S STATEMENT Introduction I am pleased to report that continued growth in our revenues has fed through toan improved financial performance and a substantial reduction in the operatingloss. The most significant development of the first half of the current year hasbeen the signing of a five year distribution agreement with AIG InternationalServices for the distribution of the red24 products to the travel industry. Thisprovides a significant regular minimum cash flow to the Group though revenuescannot be taken until the products are used. The potential revenue from thisproject is considerable as AIG alone have over 8,000,000 travel policy holders.Financial Overview Turnover demonstrated a healthy 42% period on period growth to £1,270,000, whilethe operating loss £212,000 for the half year compares favourably with theoperating loss of £423,000 incurred in the same period last year. The new AIGdistribution agreement supersedes the earlier agreement relating to Japan and aone-off charge to eliminate unrecovered costs of £63,000 has been incurred. Thusit can be seen that there has been continued progress in the direction ofbreakeven and ultimately profitability. The adoption of Financial ReportingStandard 20, relating to the pricing of share options, has led to a non-cashcharge of £15,000 in the half year, comparative figures have been restated andover the full year a charge of £29,000 is anticipated. The AIG distribution agreement has had a significant beneficial effect on cashflow without, to date, much benefit to revenue and, when coupled with theraising of a further £100,000 of loan notes and the extension of the loan notes,due for repayment on 30 September 2006, for a further twelve months, there hasbeen little change to the Group's overall cash position. red24 red24 is a global security service providing preventative and reactive advice tohelp individuals avoid and manage personal risks to themselves and theirfamilies. We have two key distribution channels, one through HSBC and the otherthrough AIG International Services. In June 2005 we entered into an agreement with HSBC Bank plc to incorporatered24's personal security service as part of HSBC's Premier banking offering andID imposter into their HSBC Plus banking offering. The inclusion of our offeringhas helped HSBC market both these types of account and, over a twelve monthperiod, the numbers of clients has grown by some 50%. Each month severalthousand new customers are added and the English language service of red24 nowhas sufficient mass to cover its costs on a monthly basis. Our experience in the UK has shown that the red24 product works best whenincluded in a financial product on a mandatory basis as this enables us todeliver the product at a very much lower cost without major external marketing.Our new distribution agreement with AIG International Services recognises thisand we are working hard with them to include red24 on a mandatory basis on alltravel books. This is likely to be done on a country by country basis and itwill be some time before all countries are covered. Significant markets in theUK and the Far East are expected to be first. Upsell opportunities to red alertare expected to make an increasing contribution through 2007. Between our two key distributors there are over 30 million potential customers,of which only a little over 1 million currently receive a red24 product andsubstantial growth is expected to occur just from these two agreements.Nonetheless we are not neglecting the rest of the market place. Significant investment in product development continues to be made. Essentiallywe have developed a modular approach to the management of security risk advicewhich enables us to tailor quite readily the core red24 product to meet theneeds of particular markets. The modular approach then gives an opportunity toour distributors to purchase product upgrades appropriate to their client needsand budgets. Our CorporateCare product continues to add some major corporateaccounts and the product is almost ready to be offered as part of a generalbusiness insurance product by insurance companies as a way of differentiatingtheir offering. red24 differs from many competing products in being able to offer response fromour own personnel to customers faced with security difficulties. However,developing a retail product has attracted the attentions of security industrycompetitors who have traditionally only serviced the corporate market. Imitationmay be the sincerest form of flattery but, nonetheless we are disappointed to belosing the Hiscox business, with effect from 31 December 2006, to a competitorin whom Hiscox have a significant shareholding. Over the medium term, webelieve, that the effect of this will not be overly detrimental as morecompetition should lead to more rapid growth of the market. Overall awareness of the need for security advice and of red24 in particular hasbeen increasing due to our PR activity and red24 personnel have appearedregularly on Sky News, Fox and the BBC to comment on security related topics. Consultancy Our consultancy business has had a difficult half year and revenues fromcontracts that have been held for some years have reduced due to changing marketconditions. However we have been appointed as retained advisers on new books ofbusiness and this should translate into additional revenue as these books grow. Training The Training business has enjoyed an excellent start to the year with revenuesup 30% and generating good profitability. The university accredited courses areproving popular and encouraging repeat business. Each of the three courses runstwice a year at present but this could be expanded as demand grows. A newtrainer has been recruited to help in this expansion and to enable us to meetgrowing demand for training courses overseas.Outlook ARC Risk Management is well positioned as a leading provider of security riskmanagement services to meet the growing requirement for greater protection forthose traveling, whether on business or for pleasure; the additional competitionin these markets should assist in the faster growth of the overall market and weare well placed to win a significant share of this business. We continue to develop our relationships with existing and new partners in thefinancial service and insurance industries and envisage increasing growth in theadoption worldwide of red24. Simon RichardsChairman 16 November 2006 CONSOLIDATED PROFIT & LOSS ACCOUNT 6 months ended 6 months ended 12 months ended 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 (unaudited) (unaudited & restated) (restated) TurnoverContinuing 1,270 893 2,009operations Operating(loss)Continuing (212) (423) (683)operations Net interest(payable)/ (23) 1 (17)receivable Loss on (235) (422) (700)ordinaryactivitiesbeforetaxation Taxation on 37 0 157loss onordinaryactivities Retained lossfor the (198) (422) (543)period aftertaxation Loss per share (0.06p) (0.15p) (0.18p) MOVEMENT IN RESERVES 6 months ended 6 months ended 12 months ended 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 (unaudited) (unaudited & restated) (restated) Profit & Fair Profit & Fair Profit & Fair Loss Value Loss Value Loss Value account Reserve account Reserve account Reserve At 1 April (3,567) 115 (3,028) 45 (3,028) 45 Currencytranslationdifferenceonforeigncurrency 3 - 2 - 4 -netinvestments Loss forthe (198) - (422) - (543) -period Issue ofshare - 15 - 29 - 65options Issue ofshare - 3 - - - 5warrants At balancesheet date (3,762) 133 (3,448) 74 (3,567) 115 CONSOLIDATED BALANCE SHEET 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 (unaudited) (unaudited & restated) (restated)Fixed AssetsIntangible assets 220 292 256 Tangible assets 90 54 103 310 346 359 Current AssetsDeferred tax asset 167 - 157 Debtors 536 644 358 Cash at bank and inhand 337 140 307 1,040 784 822 Creditors: Amounts 1,315 859 952falling due withinone year Net CurrentLiabilities (275) (75) (130) Total Assets less 35 271 229CurrentLiabilities Creditors: Amounts 74 55 91falling due aftermore than oneyear (39) 216 138 Capital andReservesCalled up sharecapital 3,032 3,032 3,032 Share premium 558 558 558account Fair value reserve 133 74 115 Profit and lossaccount (3,762) (3,448) (3,567) Shareholders' Funds- Equity (39) 216 138 CONSOLIDATED CASH FLOW 6 months ended 6 months ended 12 months ended 30 September 2006 30 September 2005 31 March 2006 £'000 £'000 £'000 (unaudited) (unaudited & restated) (restated) Operating loss (212) (423) (683) Depreciation 19 10 25charges Amortisation 36 37 73charges Fair valuecharges on 15 29 65options Loss on disposalof - - 2tangible fixedassets Increase in (178) (384) (98)debtors Increase in 292 417 227creditors Net cash outflowfrom (28) (314) (389)operatingactivities Returns oninvestments andservicing offinance Interest received 2 2 4Interest paid (22) (1) (20) (20) 1 (16)CapitalexpenditurePurchase oftangible (6) (9) (13)fixed assets (6) (9) (13) Net cash outflowbefore financing (54) (322) (418) FinancingCapital elementof (10) 0 (7)finance leases Issue of ordinaryshare capital - 320 320 Expenses of issueof - (6) (6)ordinary shares Repayment of bankloans (6) (6) (10) Other loans 100 (0) 275 Net cash inflowfrom 84 308 572financing Increase/(decrease) in 30 (14) 154cash Notes: 1. Except where there has been a change in policy following the adoptionof Financial Reporting Standard 20, the interim financial statements for the sixmonths ended 30 September 2006 have been prepared using accounting policiesconsistent with those set out in the annual report and accounts of ARC RiskManagement Group plc for the year ended 31 March 2006 and which will be appliedfor the year ending 31 March 2007. The interim financial information for the sixmonths ended 30 September 2006 is unaudited and does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. 2. The figures for the year ended 31 March 2006 are extracted from theCompany's statutory accounts for that year as adjusted to take account ofFinancial Reporting Standard 20. The accounts for 31 March 2006 have been filedwith the Registrar of Companies and contain a report from the auditors that isunqualified save as to matters of emphasis. Copies of the statutory accounts maybe obtained from the Company or Hoodless Brennan. 3. The loss per share for the six months ended 30 September 2006 has beencalculated based on the loss on ordinary activities after taxation divided bythe weighted average number of shares in issue during the period. 4. Copies of this interim financial statement will be available for atleast one month from HB Corporate Limited, 40 Marsh Wall, London E14 9TP. Enquiries: ARC Risk Management Group plcSimon Richards, Chairman Tel: 0208 080 0217Simon Wakeling, Director Threadneedle CommunicationsGraeme Herring, Josh Royston Tel: 0207 936 9605 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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