28th Jun 2007 07:01
Mercury Group PLC28 June 2007 28 June 2007 Mercury Group ("Mercury" or "the Company") Half-yearly report for the six months ended 31 March 2007 Highlights • Mercury focused on SMPA as its sole core activity • Newly constituted Board working hard to develop SMPA • £1.0 million refinancing achieved by way of unsecured loan notes • SMPA generated an EBITDA profit of £29,000 in the six months ended 31 March 2007 (2006: £286,000) • Group operating loss of £500,000 due to fund raising costs, Central costs and Discontinued Activity losses • High level of Central costs now significantly curtailed • Loss making activities now eliminated • SMPA's sales showing signs of recovery • Calder Russell Conway business acquired in January 2007 for a maximum consideration of £100,000 • Other acquisitions under review Chairman's statement Introduction I am pleased to be able to report significant progress in the six months ended31 March 2007. Your new Board has focussed on the objectives of reinvigoratingthe core SMPA business, following the recent extended period of uncertaintysurrounding the successful refinancing, and bringing costs into line withsustainable income. The previously disproportionately high level of central and plc related costs,which amounted to over £1.4 million in the year ended 30 September 2006, werecut to £194,000 in the period under review. Since 31 March 2007, central and plcrelated costs have been reduced even further. Following completion of the disposal programme of all loss making subsidiaries,SMPA is now the Group's core business offering a range of property services tocorporate clients. SMPA is a well respected commercial property consultancy andestate agency with offices in the West End and City of London. It offers a widerange of professional services including investment, development, valuation,management and all aspects of occupancy and has clients throughout the UK. Yourboard believes that SMPA provides a firm base from which to develop, byacquistion and organic growth, a successful Group focussed upon clear areas ofproperty expertise. Against the background of the now resolved uncertainty surrounding thesuccessful refinancing and essential reorganisation, the Group incurred a lossin the six months ended 31 March 2007. However, all former loss makingactivities have now been disposed of and the Group is well positioned toconcentrate on developing SMPA's core commercial property consultancy and estateagency business. Group financial performance SMPA generated an EBITDA profit in the six months ended 31 March 2007 of £29,000(2006: £286,000). SMPA performed above management's expectations in the firstquarter, but sales in the second quarter were below expectations, due to lowerthan expected transactions on the investment and agency side of the business.Group turnover fell to £1.516 million from £3.131 million, due to the inclusionof discontinued activities in the corresponding period. SMPA's turnover fell to£1.504 million from £1.760 million in the same period last year.After charging central and plc related costs of £194,000 (2006: £361,000),exceptional costs of £234,000 on the recent refinancing and losses ondiscontinued activities of £56,000 (2006: £75,000), the Group's EBITDA loss was£455,000. Depreciation and goodwiil amortisation amounted to £45,000 (2006:£209,000), resulting in an operating loss for the period of £500,000 (2006:£359,000). Acquisition of the Calder Russell Conway business On 18 January 2007, SMPA acquired the business and assets of Calder RussellConway Limited, a niche commercial property consultancy focussed primarily inretail and leisure, for a total cash consideration of £100,000, of which £50,000is deferred for one year and conditional on the vendors remaining within theemployment of SMPA. The initial consideration of £50,000 was payable in monthlyinstalments. The first £12,500 was paid on 31 January 2007, followed by fivemonthly instalments of £7,500 each. The Directors will be looking for furtheracquisitions, which they consider will strengthen SMPA's service to clients andadd shareholder value. Discontinued activities Telco Solutions Limited was sold in June 2007 for a maximum consideration of£85,000 and, as a consequence, its results have been reported under DiscontinuedOperations. Telco provided property management services and its disposal haseliminated the last chronic loss making activity from the Group. Telco incurredan operating loss of £56,000 in the six months ended 31 March 2007 and a loss of£171,000 in the year ended 30 September 2006. Following the disposal of Navitas Hemway in September 2006, the sale of TelcoSolutions completes the planned programme to dispose of the Group's previouslyloss making activities. Dividends The Board does not recommend the payment of a dividend (2006: £nil). Funding The Board secured additional funding by issuing a loan note instrumentconstituting £1.0 million of Unsecured Loan Stock ('ULS'), of which £500,000 wasissued at 31 March 2007. The Group also received binding commitments tosubscribe for up to a further £500,000 of ULS at the Company's option up until31 July 2007. Since 31 March 2007, a further drawdown of ULS has been made of£150,000. Directors A number of changes have been made to the Board. As previously reported, Ijoined the Board as Chairman in February 2007 and I was pleased to welcome BrianBasham and Andrew Lovelady, both of whom were appointed directors at the sametime. Walter Goldsmith and James Lugg remained on the Board as non-executivedirectors and Ronnie Franks continues as the Chief Executive Officer. Simon Michaels resigned from the Board as Finance Director on 13 February 2007and I would like to thank him for his commitment and support over recent months.Andrew Lovelady has become part-time Finance Director in his place. Management and employees I would also like to thank the Group's employees who have continued to worktirelessly in spite of the Group's difficult trading conditions. Current trading and prospects The Group has incurred losses since 31 March 2007, due to the continued lowlevel of SMPA's investment and agency side of the business, following thedeferral or loss of a number of key projects. However, the future sales pipelinehas strengthened during June and is now showing the potential for much moreencouraging levels of future sales. The Group's overhead cost base is beingconstantly monitored and further significant cost cutting measures are currentlybeing implemented. Whilst there remains many challenges to overcome in the months ahead, yourDirectors believe there are good growth opportunities in SMPA's marketplace andtherefore remain focused on building the business, both organically and throughacquisition. George KynochChairman28 June 2007 Group profit and loss accountFor the six months ended 31 March 2007 Continuing Discontinued 6 months to 6 months to Year to Operations Operations 31 March 31 March 30 September Unaudited Unaudited 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 £000 £000 Turnover 1,504 12 1,516 3,131 5,557Cost of (84) (4) (88) (870) (1,615)sales -------- --------- -------- -------- --------- Gross profit 1,420 8 1,428 2,261 3,942Administrativeexpenses (1,864) (64) (1,928) (2,620) (6,596) Operatingloss -------- --------- -------- -------- ---------Beforeexceptionalitems (210) (56) (266) (359) (2,092)Exceptionalitems (234) - (234) - (562) -------- --------- -------- -------- --------- (444) (56) (500) (359) (2,654) Sale ofsubsidiaryundertaking - - - - (2,133)Amountswritten offinvestments - - - - (70)Interestreceivable 3 - 3 25 95Interestpayable (15) (2) (17) (17) (17) -------- --------- -------- -------- --------- Loss onordinaryactivitiesbeforetaxation (456) (58) (514) (351) (4,779) Tax on loss onordinaryactivities - - - (19) - -------- --------- -------- -------- --------- Loss onordinaryactivitiesafter taxation (456) (58) (514) (370) (4,779)Dividends on - - - - -equity -------- --------- -------- -------- ---------shares Transfer fromreserves (456) (58) (514) (370) (4,779) ======== ========= ======== ======== ========= Loss pershare:Basic (0.40)p (0.05)p (0.45)p (0.35)p (4.39)p ======== ========= ======== ======== ========= There are no other recognised gains or losses other than as recorded in theprofit and loss account for the period. Group balance sheetAt 31 March 2007 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Fixed assetsIntangible assets 1,419 6,242 1,360Tangible assets 95 144 97Investments 15 121 50 --------- --------- --------- 1,529 6,507 1,507 --------- --------- --------- Current assetsDebtors 781 2,253 1,222Cash at bank 135 805 86 --------- --------- --------- 916 3,058 1,308 Creditors - amounts falling due withinone yearBank overdraft (28) (356) (102)Other creditors (619) (1,013) (901) --------- --------- --------- Net current assets 269 1,689 305 --------- --------- --------- Total assets less current liabilities 1,798 8,196 1,812Creditors- amounts falling due after oneyearUnsecured loan stock (500) - - --------- --------- --------- 1,298 8,196 1,812 ========= ========= ========= Capital and reservesCalled up share capital 1,130 1,065 1,130Share premium account 847 319 847Shares to be issued 370 2,938 370Distributable reserve 4,711 4,711 4,711Other reserves 156 156 156Profit and loss account (5,916) (993) (5,402) --------- --------- --------- Equity shareholders' funds 1,298 8,196 1,812 ========= ========= ========= Reconciliation of movements in shareholders' fundsFor the six months ended 31 March 2007 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Loss for the financial period (514) (370) (4,779)Decrease in shares to be issued - - (2,569)Issue of ordinary shares - - 65Increase in share premium - - 491Cost of capital reduction scheme - (38) - --------- --------- --------- Movements in shareholders' funds (514) (408) (6,792)Shareholders' funds at beginning ofperiod 1,812 8,604 8,604 --------- --------- --------- Shareholders' funds at end of period 1,298 8,196 1,812 ========= ========= ========= Group cash flow statementFor the six months ended 31 March 2007 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Cash outflow from operating (366) (498) (1,334)activitiesReturns on investment and servicingof (14) 8 78financeCapital expenditure and financialinvestment (5) (121) (110)Disposal of investments 35 - -Corporation tax - (33) (33)Acquisitions and disposals: --------- --------- ---------Purchase of subsidiary undertakings - (1) (99)Proceeds of disposal of subsidiary - - 100Purchase of the Calder Russell Conwaybusiness (27) - -Net overdraft disposed of with - - 291subsidiary --------- --------- --------- (27) (1) 292 --------- --------- --------- Cash outflow before financing (377) (645) (1,107) Financing:Cost of capital reduction scheme - (38) -Net cash proceeds from share issue - - (38)Change in debt 500 - - --------- --------- --------- Increase/(reduction) in cash duringperiod 123 (683) (1,145) ========= ========= ========= Reconciliation of net cash flow tomovement in net debt Increase/(reduction) in cash in 123 (683) (1,145)periodChange in debt (500) - - --------- --------- --------- Change in net debt resulting fromcash (377) (683) (1,145)flowsCapital element of finance lease - (1) (4)payments --------- --------- --------- Increase in net debt (377) (684) (1,149)Net (debt)/cash at start of period (16) 1,133 1,133 --------- --------- --------- Net (debt)/cash at end of period (393) 449 (16) ========= ========= ========= Reconciliation of operating loss tooperating cash flows Operating loss (500) (359) (2,654)Depreciation 8 42 52Amortisation 37 167 869Stocks - 80 80Debtors 441 (438) (56)Creditors (352) 10 375 --------- --------- --------- Operating cash outflow (366) (498) (1,334) ========= ========= ========= Notes to the accountsFor the six months ended 31 March 2007 1. Financial informationThe financial information provided for the six months ended 31 March 2007 hasbeen prepared using consistent accounting policies as used in the preparationand filing of the statutory accounts for the year ended 30 September 2006 andwill be used in the preparation of the accounts to 30 September 2007. The financial information set out in this announcement does not constitutestatutory accounts as defined by Section 240 of the Companies Act 1985. Thefinancial information for the period ended 30 September 2006 is an abridgedversion of Mercury Group Plc's published statutory financial statements whichreceived an unqualified auditors' report, contained no statement under section237(2) or (3) of the Companies Act 1985 and which have been filed with theRegistrar of Companies. 2. Segmental analysis 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000TurnoverSMPA 1,504 1,760 3,340Discontinued activities 12 1,371 2,217 ---------- ---------- ----------- 1,516 3,131 5,557 ========== ========== ===========EBITDASMPA 29 286 191Central and plc related costs (194) (361) (1,410)Exceptional costs of fund raising (234) - -Discontinued activities (56) (75) (514) ---------- ---------- ----------- (455) (150) (1,733)Depreciation and amortisation (45) (209) (921) ---------- ---------- ----------- Operating loss (500) (359) (2,654) ========== ========== =========== 3. Loss per shareThe loss per share calculations have been arrived at by reference to thefollowing losses and weighted average number of shares in issue during theperiods. 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000BasicLoss after tax (514) (370) (4,779) No. No. No.Weighted average number of shares inissue 112,975,684 106,494,600 108,927,248 4. Posting to shareholdersIn an effort to further reduce costs, this Interim Report will only be announcedon the Regulatory News Service and will not be posted to shareholders this year. Further Enquiries: Mercury Group PlcAndrew Lovelady Tel: 020 7393 4000 John East & Partners Limited Tel: 020 7628 2200David Worlidge/Virginia Bull This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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