30th Sep 2008 17:28
Merchant House Group Plc ("Merchant House" or the "Company")
Interim results statement for the six month period ended 30 June 2008
Issue of equity
CHAIRMAN'S STATEMENT
I am pleased to report on the first six months of 2008 which has seen a number of developments at the Group.
Fundraising
On the 30 June 2008 the company announced that a corporate investor had entered into an unconditional and irrevocable placing arrangement to raise £1.5 million by way of convertible preference shares with funds due by today, the 30 September 2008. Regrettably the Company has not, at the time of writing, received the placing monies and the Company has indicated to the investor that, whilst reserving its rights in full, providing the subscription monies for the placing are received no later than 31st October 2008, the Company will not seek to compel performance prior to the expiry of that period.
In light of the uncertainty above, the directors have sought additional new funds. £375,000 has so far been placed of which £200,000 has today been remitted to the company. The Company will seek admission to trading on AIM for 31,250,000 new ordinary shares which have been placed at 1.2p per share. These funds will be invested in the business, including the set up of a dealing platform with a new management team which we will announce in due course.
Interim period review
During the six months under review, the Company announced the establishment of Merchant Wealth Management to provide a range of wealth management services to the directors and senior management of our clients. The business has now started generating revenue. We also announced the opening of a joint venture office in the Far East which has already introduced a number of companies for fundraising and listing on PLUS with work currently ongoing with respect to two transactions.
Merchant Capital worked during the period on Awabi Plc, a PLUS listed client, advising on the reverse of a carbon related business. Merchant House group owns shares and warrants in this client. We are hopeful that the Awabi board will make a full announcement in the near future regarding this transaction. Merchant Capital also worked during the period under review on Stageworx Plc which has now been renamed Petrocapital Resources Plc and has been listed on the XETRA market in Frankfurt. Petrocapital is currently raising funds to acquire the first stage of a significant resources opportunity in Central Asia. Merchant House group owns warrants in Petrocapital.
Merchant House Finance, the asset and lease financing business in which the Merchant House group has a 49 per cent. stake has continued to expand its sales force during the period. Key transactions include a £1 million financing of coaches for a well known bus/tour operator and £1.5 million financing of broadcasting equipment for a company whose main activity is the delivery of TV networks in doctors' surgeries, health centres and schools.
Latest developments and outlook
I have previously reported that the Company needed to develop a more effective fundraising capacity in order to attract and assist more corporate clients. I am pleased to announce today the establishment of new Stockbrokers as an appointed representative and tied agent of Merchant Capital, our wholly owned FSA-regulated subsidiary. The Appointed Representative will act as a corporate and private client stockbroker, has raised its own funding and is currently recruiting its own team. Certain overheads at Merchant Capital will be met by the Appointed Representative and in addition, Merchant Capital will receive a share of commission on all fundraisings, a fee per trade and 15 per cent. of profits. This fulfils a commitment of the board to introduce a fundraising capacity to the Group.
The Group has been working to establish a Corporate Finance and Stockbroking business with a view to acquiring the assets, contracts, work in progress and pipeline of work from this business. The negotiations are now complete and we will update shareholders shortly regarding the outcome. In connection with this, we expect to announce two additional board appointments in due course both of whom will be executive directors of the Company. A fundraising to support the working capital needs of the expanded Group and which is fully underwritten is underway and shareholders will be updated in due course
The Group is clearly operating in challenging markets at present, however, the significant and ongoing cuts in overhead, the establishment of complimentary revenue earners without additional overhead and the unrealised profits currently in the investment portfolio are points for shareholders to note.
Financial summary
The Group incurred losses totalling £563,418 during the six month period, including losses in the investment portfolio due to the current economic environment. The £213,579 loss reported for the comparable six month period in 2007 was materially reduced by the £201,919 unrealised gain on current asset investments resulting from favourable market conditions.
Revenues at £7,000 have been significantly affected by the turmoil and lack of confidence in the financial markets but administrative expenses have been reduced by £266,691 (45%) when compared with the first six months of 2007.
Martin Eberhardt
Chairman
30 September 2008
INDEPENDENT REVIEW REPORT TO MERCHANT HOUSE GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Statement of Changes in Equity, the Consolidated Cash Flow Statement and the related notes numbered 1 to 8. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM Rules require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
The report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union.
Sawin & Edwards
Chartered Accountants
15 Southampton Place
WC1A 2AJ
30 September 2008
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six month period ended 30 June 2008
|
Note |
Six month period ended 30 June 2008 (Unaudited) £ |
Restated Six month period ended 30 June 2007 (Unaudited) £ |
Year ended 31 December 2007 (Audited) £ |
|||
|
Revenue |
7,000 |
387,922 |
535,559 |
|||
|
Purchase of shares for proprietary trading |
- |
(30,457) |
- |
|||
|
Cost of sales |
(2,492) |
(61,935) |
(168,261) |
|||
|
Gross Profit |
4,508 |
295,530 |
367,298 |
|||
|
Administrative expenses |
(322,168) |
(588,859) |
(1,084,533) |
|||
|
Loss on disposal of associate |
(65,821) |
- |
- |
|||
|
Exceptional expenses |
- |
(110,000) |
(414,338) |
|||
|
Other operating income |
10,621 |
2,630 |
33,804 |
|||
|
Realised gains/(losses) on current asset investments |
(11,287) |
- |
295,458 |
|||
|
Unrealised gains/(losses) on current asset investments |
(10,180) |
201,919 |
(29,483) |
|||
|
Loss from operations |
(394,327) |
(198,780) |
(831,794) |
|||
|
Share of operating loss in associate |
(129,114) |
(3,404) |
(65,161) |
|||
|
Finance expense |
2 |
(14,401) |
(15,000) |
(30,964) |
||
|
Investment income |
1,424 |
3,605 |
11,154 |
|||
|
Loss Before Taxation |
(536,418) |
(213,579) |
(916,765) |
|||
|
Income tax expense |
3 |
- |
- |
- |
||
|
Loss for the financial period |
(536,418) |
(213,579) |
(916,765) |
|||
|
Loss per share (pence) |
4 |
(0.67)p |
(0.50)p |
(2.12)p |
||
|
Diluted loss per share (pence) |
4 |
(0.27)p |
(0.30)p |
(1.19)p |
The Group has no recognised gains or losses other than the results for the period as set out above.
UNAUDITED CONSOLIDATED BALANCE SHEET
|
Note |
As at 30 June 2008 (Unaudited) £ |
Restated As at 30 June 2007 (Unaudited) £ |
As at 31 December 2007 (Audited) £ |
|||
|
ASSETS |
||||||
|
Non Current Assets |
||||||
|
Property, plant and equipment |
4,706 |
14,314 |
8,484 |
|||
|
Investment in associate undertaking |
27,613 |
78,817 |
17,112 |
|||
|
32,319 |
93,131 |
25,596 |
||||
|
Receivables falling due after one year |
50,000 |
50,000 |
50,000 |
|||
|
Current Assets |
||||||
|
Trade and other receivables |
176,371 |
208,279 |
191,959 |
|||
|
Cash and cash equivalents |
78,650 |
186,298 |
134,826 |
|||
|
Investments |
40,960 |
401,278 |
36,625 |
|||
|
Total current assets |
295,981 |
795,855 |
363,410 |
|||
|
TOTAL ASSETS |
378,300 |
938,986 |
439,006 |
|||
|
EQUITY AND LIABILITIES |
||||||
|
Current Liabilities: Trade and other payables |
278,963 |
251,530 |
296,012 |
|||
|
Bank overdraft |
32,603 |
39,665 |
- |
|||
|
311,566 |
291,195 |
296,012 |
||||
|
Non current liabilities: Convertible loans |
432,926 |
421,329 |
429,786 |
|||
|
744,492 |
712,524 |
725,798 |
||||
|
Equity and Reserves |
||||||
|
Called up share capital |
407,233 |
219,233 |
271,733 |
|||
|
Convertible loan notes |
35,074 |
46,671 |
38,214 |
|||
|
Share premium |
826,047 |
355,500 |
501,389 |
|||
|
Special Reserve |
- |
52,742 |
- |
|||
|
Retained Earnings |
(1,634,546) |
(447,684) |
(1,098,128) |
|||
|
Total Equity |
(366,192) |
226,462 |
(286,792) |
|||
|
TOTAL LIABILITIES |
378,300 |
938,986 |
439,006 |
UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six month period 30 June 2008
|
Convertible Loan Note £ |
|
Share Capital £ |
|
Share Premium £ |
|
Profit and Loss £ |
|
Total £ |
|
|
|
Balance at 1 January 2008 |
38,214 |
271,733 |
501,389 |
(1,098,128) |
(286,792) |
|||||
|
Share issue |
- |
135,500 |
324,658 |
- |
460,158 |
|||||
|
Movement in equity |
(3,140) |
- |
- |
- |
(3,140) |
|||||
|
Loss for the period |
- |
- |
- |
(536,418) |
(536,418) |
|||||
|
Balance at 30 June 2008 |
35,074 |
407,233 |
826,047 |
(1,634,546) |
(366,192) |
|||||
|
Convertible Loan Note £ |
|
Share Capital £ |
|
Share Premium £ |
|
Special Reserve £ |
|
Profit and Loss £ |
Total £ |
||||
|
Balance at 1 January 2007 |
- |
194,233 |
280,500 |
52,742 |
(383,053) |
144,422 |
|||||||
|
IFRS transition adjustments |
62,215 |
- |
- |
- |
148,948 |
211,163 |
|||||||
|
Restated balance at 1 January 2007 |
62,215 |
194,233 |
280,500 |
52,742 |
(234,105) |
355,585 |
|||||||
|
Conversion loan notes |
- |
8,000 |
24,000 |
- |
- |
32,000 |
|||||||
|
Share issue |
- |
17,000 |
51,000 |
- |
- |
68,000 |
|||||||
|
Movement in equity |
(15,544) |
(15,544) |
|||||||||||
|
Loss for the period |
- |
- |
- |
- |
(213,579) |
(213,579) |
|||||||
|
Balance at 30 June 2007 |
46,671 |
219,233 |
355,500 |
52,742 |
(447,684) |
226,462 |
|||||||
|
Convertible Loan Note £ |
|
Share Capital £ |
|
Share Premium £ |
|
Special Reserve £ |
Profit and Loss £ |
|
Total £ |
|||
|
Balance at 1 January 2007 |
- |
194,233 |
280,500 |
52,742 |
(383,053) |
144,422 |
||||||
|
IFRS transition adjustments |
62,215 |
- |
- |
- |
148,948 |
211,163 |
||||||
|
Restated balance at 1 January 2007 |
62,215 |
194,233 |
280,500 |
52,742 |
(234,105) |
355,585 |
||||||
|
Conversion loan notes |
- |
8,000 |
24,000 |
- |
- |
32,000 |
||||||
|
Exercise of warrants |
- |
17,000 |
51,000 |
- |
- |
68,000 |
||||||
|
Share issue |
- |
52,500 |
145,889 |
- |
- |
198,389 |
||||||
|
Transfer |
- |
- |
- |
(52,742) |
52,742 |
- |
||||||
|
Movement in equity |
(24,001) |
- |
- |
- |
- |
(24,001) |
||||||
|
Loss for the period |
- |
- |
- |
- |
(916,765) |
(916,765) |
||||||
|
Balance at 31 December 2007 |
38,214 |
271,733 |
501,389 |
- |
(1,098,128) |
(286,792) |
||||||
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the six month period 30 June 2008
|
Six month period ended 30 June 2008 (Unaudited) £ |
Restated Six month period ended 30 June 2007 (Unaudited) £ |
Year ended 31 December 2007 (Audited) £ |
||||
|
Reconciliation of operating loss to net cash (outflow) from operating activities |
||||||
|
Operating loss |
(394,327) |
(198,780) |
(831,794) |
|||
|
Loan written off |
- |
- |
107,020 |
|||
|
Investment transfer |
- |
- |
30,060 |
|||
|
Associated company losses written off |
(139,666) |
- |
- |
|||
|
Decrease in trade & other receivables |
15,590 |
138,811 |
155,128 |
|||
|
(Decrease) / Increase in trade & other payables |
(17,049) |
(38,195) |
6,288 |
|||
|
Depreciation |
3,777 |
5,191 |
9,783 |
|||
|
Loss on disposal |
- |
- |
184 |
|||
|
Realised (gain)/loss |
11,287 |
(201,919) |
(295,458) |
|||
|
Unrealised loss |
10,180 |
- |
29,483 |
|||
|
Net cash outflow from operating activities |
(510,208) |
(294,892) |
(789,306) |
|||
|
Investing |
||||||
|
Investing Activities |
||||||
|
Interest received |
1,424 |
3,605 |
11,154 |
|||
|
Purchase of investments |
(260,400) |
(280,324) |
(389,291) |
|||
|
Sales of investments |
234,598 |
352,840 |
753,438 |
|||
|
Purchase of plant & equipment |
- |
(1,761) |
(1,761) |
|||
|
Sale of plant & equipment |
- |
- |
1,053 |
|||
|
Investment in associate |
51 |
- |
(51) |
|||
|
Net cash (outflow)/ inflow from investing activities |
(24,327) |
74,360 |
374,542 |
|||
|
Financing activities |
||||||
|
Proceeds from share issue |
460,158 |
68,000 |
266,389 |
|||
|
Increase/(decrease) in bank overdraft |
32,602 |
30,306 |
(9,359) |
|||
|
Interest paid |
(14,401) |
(15,000) |
(30,964) |
|||
|
Net cash inflow from financing activities |
478,359 |
83,306 |
226,066 |
|||
|
Decrease in cash & cash equivalents |
(56,176) |
(137,226) |
(188,698) |
|||
|
Reconciliation of net cash flow to movement in net debt |
||||||
|
Decrease in cash in the period |
(56,176) |
(137,226) |
(188,698) |
|||
|
Conversion loan note into ordinary shares |
- |
32,000 |
32,000 |
|||
|
Movement in year |
(56,176) |
(105,226) |
(156,698) |
|||
|
Net debt brought forward |
(333,174) |
(176,476) |
(176,476) |
|||
|
Net debt carried forward |
(389,350) |
(281,702) |
(333,174) |
|||
|
Analysis of changes in net debt |
At 1 January 2008 £ |
Cashflows £ |
Other non cash changes |
At 30 June 2008 £ |
|||
|
Cash at bank and in hand |
132,808 |
(40,001) |
- |
92,807 |
|||
|
Cash held in stockbroker's client accounts |
2,018 |
(16,175) |
- |
(14,157) |
|||
|
Cash and cash equivalents |
134,826 |
(56,176) |
- |
78,650 |
|||
|
Debt due after one year: |
|||||||
|
Secured loan notes |
(408,000) |
- |
- |
(408,000) |
|||
|
Unsecured loan notes |
(60,000) |
- |
- |
(60,000) |
|||
|
(333,174) |
(56,176) |
- |
(389,350) |
||||
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
For the six month period ended 30 June 2008
1. Accounting policies
Basis of accounting
The interim results have been prepared in accordance with International Accounting Standards 34 "Interim Financial Reporting".
The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs).
The interim results have been prepared on the historical cost basis except that certain financial instruments are accounted for at fair values. The same principal accounting policies and methods of computation have been followed in the interim results as compared with the Group's 2007 Financial Statements.
Going concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The group incurred a loss of £536,418 for the period ended 30 June 2008.
The financial statements have been prepared on a going concern basis because the directors believe it is appropriate to prepare the financial report on this basis based upon the company's business plan. The directors believe that the two fund raisings, the unconditional placing of £1,500,000, and the £375,000 referred to in the Chairman's statement will provide sufficient funds for the company to continue its operations for at least the next twelve months.
2. Loan Interest
Loan interest is payable on secured and unsecured convertible loan notes 2010, at a floating rate of 100 basis points above Barclays Bank Plc base rate.
3. Taxation
No provision for corporation tax has been provided for, due to tax losses incurred in the current and previous periods.
4. Loss per Share
|
30 June 2008 |
30 June 2007 |
31 December 2007 |
|||
|
Loss per ordinary share (pence) |
(0.67)p |
(0.50)p |
(2.12)p |
||
|
Diluted loss per ordinary share (pence) |
(0.27)p |
(0.30)p |
(1.19)p |
||
The loss per share has been calculated on the net basis on the group deficit excluding associate for the period ended 30 June 2008, after taxation, of £(536,418) (June 2007: £(213,579), December 2007: (£916,765) using the weighted average number of ordinary shares in issue of 80,033,413 (June 2007: 42,381,407, December 2007: 43,196,600).
Diluted earnings per share have been calculated using the weighted average number of ordinary shares in issue, diluted for the effect of share options, loan conversion rights and warrants. There were unexercised loan conversion rights and warrants on 115,275,871 shares in existence at the period end (June 2007: 28,048,871, December 2007: 33,900,000).
5. Prior period adjustment
The consolidated income statement and balance sheet for the period ended 30 June 2007 have been restated due to the discovery of a material error regarding the treatment of negative goodwill under IFRS.
The overall effect of the prior period adjustment has resulted in an increase of £41,510 in the retained earnings figure for the period ended 30 June 2007.
6. Related party transactions
During the period ended 30 June 2008, M Eberhardt was also a director of Merchant Corporate Ltd, Hollywood Media Services Plc, and Catering 4 Events Plc.
During the period ended 30 June 2008, J Holmes was also a director of Stokewell Ltd, Ricen K Plc (formerly Stokewell Ventures Plc) and Hollywood Media Services Plc.
At the 30 June 2008 current asset investments held by the company and investments held as inventories by an associate undertaking of the Group include the following at market value:
|
30 June 2008 £ |
30 June 2007 £ |
31 December 2007 £ |
|||
|
Hollywood Media Services Plc* |
- |
- |
343,688 |
||
*Relate to investments held as inventories by an associate company in which Merchant House Group had a 49% holding.
During the period ended 30 June 2008 transactions took place as follows:
|
Sales (Gross) 30 June 2008 £ |
Sales included in debtors at 30 June 2008 £ |
Sales (Gross) 30 June 2007 £ |
Sales included in debtors at 30 June 2007 £ |
Sales (Gross) December 2007 £ |
Sales included in debtors at December 2007 £ |
|
|
Ricen B Plc |
- |
61,746 |
- |
61,746 |
61,746 |
|
|
Hollywood Media Services Plc |
- |
1,175 |
- |
- |
372,184 |
1,175 |
|
Merchant House Finance Ltd |
3,605 |
3,605 |
- |
- |
28,813 |
- |
Merchant House Finance Ltd is an associate company.
During the period ended 30 June 2008, Merchant House Group Plc advanced Merchant Corporate Ltd, an associated company, a total of £113,196 in cash (June 2007: £Nil, December 2007: £237,060 in shares and cash), of which £Nil (June 2007: £Nil, December 2007: £92,240) remained outstanding at the period end. During the year Merchant House Group Plc loaned to Prop Trading and Investments Ltd, a company in which it held a minority interest, a total of £Nil (June 2007: £Nil, December 2007: £150,000 in shares); the value of the loan at the period end was £Nil (June 2007: £Nil, December 2007: £107,019 which has been fully provided against.: £22,020.)
During the period ended 30 June 2008, Merchant House Group Plc received £27,900 (June 2007: £159,740, December 2007: £258,060) in management fees and £Nil (June 2007: £Nil, December 2007: £111,000) as dividend from Merchant Capital Limited, a wholly owned subsidiary. At the period end the balance it owed to Merchant Capital Ltd was £31,657 (June 2007: £62,113, December 2007: £60,820).
On 30 April 2008, Merchant House Group Plc disposed of its entire interest in Merchant Corporate Limited, incurring a loss on disposal of £65,821.
During the period ended 30 June 2008 and at 31 December 2007, J Holmes was also a Director of and owned 100% of the issued shares in Stokewell Limited, which is the holder of £150,000 secured convertible loan notes and also holds Warrants over the Company's Ordinary Shares.
During the period ended 30 June 2008 Merchant Capital Ltd incurred Group indebtedness from one of its clients The C4E Group Plc of £91,516 (June 2007: £Nil, December 2007: £Nil). At the period end the amount due to Merchant House Group Plc was £91,516 (June 2007: £Nil, December 2007: £Nil). During the period The C4E Group Plc advanced Merchant House Group Plc loans totalling £Nil (June 2007: £Nil, December 2007: £22,000). At the period end the amount due to Catering 4 Events Plc was £Nil (June 2007: £Nil, December 2007: £22,000).
On 11 and 18 January 2008 MHG announced that a total of 27,100,000 of the Company's ordinary shares had been placed at an average price of 1.797p per share, raising £487,129. Both Merchant Corporate Limited and The C4E Group Plc, of which Martin Eberhardt was a director, participated in these placings as nominees for other investors, who have paid these nominee companies in full. Martin Eberhardt does not hold, and has not held, any interest in the ordinary shares of the Company
7. Post Balance Sheet Event
Subsequent to the period end, the amount owed by the C4E Group Plc to the Company has been fully settled together with interest.
On 18 September 2008 the Company issued 4,700,000 Ordinary 0.5p shares at a price of 0.5p per share, in respect of a conversion notice for £23,500 of unsecured convertible loan notes.
Related Shares:
MHG.L