29th Sep 2005 06:00
29 September 2005News Release iimia Investment Group announces Interim Resultsiimia Investment Group plc, the AIM listed company encompassing fundmanagement, wealth management and administration services, announces itsinterim results for the six months ended 30 June 2005.Interim Results for the six months ended 30 June 2005 * Pre tax loss of ‚£815,000 on gross revenue of ‚£5,261,000, after incurring restructuring costs of ‚£350,000 and one-off legal fees of ‚£115,000. * Funds under management and advice totalled ‚£440 million as at 30 June 2005 analysed as follows: Fund Management division: ‚£167 million Discretionary Private Client Management division: ‚£125 million Financial Planning division advisory funds: ‚£148 million * Strategic review of business completed with cost savings in the second half of 2005 expected to be approximately ‚£390,000 and over ‚£780,000 in a full year. * Resolution of splits related issues with FSA. * Acquisition of Intelli that will bring exciting opportunities and a new stream of business revenue. * Excellent fund performance has led to performance fees being generated. The launch of a new ‚£50m stable of funds with a performance fee structure should enhance future earnings. * Administration businesses are growing from a solid base. * Continued commitment to growing both funds under management and fund administration coupled with the impact of the cost savings, will have a significant positive impact going forward.For further information please contact:William Long, Chairman, iimia Investment Group plc 01392 475951Roland Cross, Broadgate 020 7726 6111iimia Investment Group plcwebsite www.iimia.co.ukCHAIRMAN'S STATEMENTFor the six months ended 30 June 2005 the Group made an interim pre-tax loss of‚£815,240 on gross revenue of ‚£5,260,869. Shareholders will be aware that thisis the first full six months period on which we have reported since ouradmission to AIM in August 2004 and therefore the only comparative figuresshown in the accounts are for the trading period from 6 July to 31 December2004.Your Board does not recommend payment of a dividend at this time.The interim results have been impacted by two significant non recurringfactors: * Legal costs incurred in the period of ‚£115,000 relating to the decision by Exeter Fund Managers Limited to appoint an Administrator and the settlement between Exeter Asset Management Limited (EAM) and the Financial Services Authority (FSA) in relation to EAM's involvement in the Split Capital Investment Trust market * Restructuring costs of ‚£350,085 relating to ongoing cost reductions following a further post merger review of the business after the merger with Exeter Investment Group.Funds under management and advice totalled ‚£440 million as at 30 June 2005analysed as follows: * Fund Management division: ‚£167 million * Discretionary Private Client Management division: ‚£125 million * Financial Planning division advisory funds: ‚£148 million I gave a full description of the resolution of the issues surrounding Splits inthe Annual Report. It is, however, relevant to the period under review thatbecause of EAM's inability to join the original settlement of 24 December 2004the management team's attention remained distracted by Splits until EAM reachedagreement with the FSA on 13 April 2005. This had an inevitable adverse effecton performance.The Board has completed a strategic review of the business to ensure thatresources are concentrated on the areas where we see the best prospects ofreturn. Notwithstanding the recent strength in world stock markets, it isevident that the retail private client's appetite for equity based investmenthas diminished. Accordingly we have taken steps to trim our cost base torecognise that the levels of new business opportunities we can expect in thefuture within the wealth management division will reflect this mood. Theexercise has identified potential cost savings in the second half of 2005 ofapproximately ‚£390,000 and over ‚£780,000 annually. The main focus of thereorganisation has been in the Investment Services and Central Services areas.The cost of the reorganisation is as shown above.On a positive note, the Group has received its first performance related fee inrespect of the first full year of operation of iimia Investment Trust PLC. YourBoard believes strongly that performance fees should form a significant elementof an investment manager's remuneration. This feature was incorporated into thethree sub-funds of the new OEIC launched at the beginning of this year and weare pursuing the possibility of extending it to other existing products.Unusually among our peer group, we now offer a performance fee option for ourDiscretionary Management service for private clients.I am very pleased to be able to welcome Nicholas Hamilton, who joined the Boardon 20 July 2005 as an independent non-executive Director. Nicholas qualified asa Chartered Accountant with Deloitte & Touche where he stayed until 1984latterly in the roles of Group Manager of Corporate Finance and also Marketing.He then spent six years at Schroder Securities as Head of Corporate Finance.Following the decision by Schroders to close their UK equity broking activitiesin 1991, Nicholas moved across to Carr Kitcat & Aitken where he worked for twoyears as Head of Corporate Finance.He became a Non-Executive Director of Claremont Garments in 1991 and in 1994 hebecame executive Group Finance Director. In 1998 he launched his ownconsultancy business. Turning to the activities of the Group's operating divisions I can report asfollows:Investment Services DivisionOur Fund Management business has had an excellent first half. In January welaunched a fund of funds OEIC with industry leading product features includinga performance fee, an absolute return benchmark, and the ability to invest inboth open-ended and closed-ended funds. The new OEIC is already valued at morethan ‚£50m and, with returns running ahead of the benchmark, has, since theperiod end, qualified for its first performance fee. iimia Investment TrustPLC, a closed-ended fund of investment trusts, out-performed over its firstfull year and as already stated also attracted a performance fee. Havingestablished our investment credentials, we are currently strengthening our fundsales team. We are confident that we will continue to make significant headwayin the fund of funds arena.We have recently completed a review of our Exeter-branded range of investmenttrusts and it is likely that the number of investment mandates will be reduced:further announcements will be made in due course. During the period we agreedterms with the directors of Exeter Financials Fund and with New Star AssetManagement for the transfer of this investment mandate to New Star. Thetermination notice period within the management agreement ran for six months.The proceeds resulting from this transaction of ‚£377,650 have been treated asother operating income over this notice period.The prospects for our Wealth Management business, which combines financialplanning with portfolio management, are, as noted above, challenging. Sincethe period end we have implemented a major restructuring of this division, as aresult of which we will achieve significant cost savings. We are already seeingthe benefits of our new structure, which emphasises local delivery of ourservices through our regional offices in the Midlands, the South and the SouthWest. However, we expect it to be the first half of next year before thebenefits feed through fully to our bottom line.Investment Administration DivisionThe administration division has experienced significant setbacks over recentyears due to the loss of split capital investment trust clients, the quiet newlaunch market and the loss of the administration contract for the old Exeterstable of open ended funds following the sale of fund mandates to New Star in2003. However, whilst profitability has not yet returned to the levelsachieved previously there has been a very encouraging improvement in thefortunes of this business since my last report.The first half of this year has seen the take on of seven new closed end fundsincluding a stable of five Venture Capital Trusts for Close VentureManagement. The market for new investment trust mandates also appears to bemore buoyant with two other clients being prepared for launch in the secondhalf of this year.The lead-time for open-ended funds is often long but we have secured a numberof new clients in the year to date and the increasing use of performancerelated fees under new legislation issued in 2004 has created significantopportunities. Our new accounting system, SimCorp Dimension, introduced atthe end of 2004 has allowed us to cope with these developments automaticallywhich has given us a competitive advantage. To date we have taken on threefunds with performance fees with several more planned for later in the year.The transfer to our new accounting system was completed for open-ended funds atthe end of 2004 and will be finalised for closed ended funds by September 2005,bringing to an end the parallel running costs currently being incurred.Acquisition of IntelliShareholders will be aware from our announcement issued today of your Company'sacquisition of Intelli Partners Limited. This is a specialist provider ofcorporate finance advisory services to the Investment Fund sector and willenable iimia Investment Group to broaden the range of services it provides. TheStock Exchange membership of our subsidiary iimia plc will in turn enableIntelli to add to its service offering to its clients by acting as corporatebroker. We regard this as an exciting opportunity for the Group and GordonNeilly, Intelli's Chief Executive, who has joined your Board will be a valuableaddition.Prospects for the Current YearAs presaged in the Annual Report we have now made great progress with theintegration of the merger of iimia and Exeter Investment Group. The costsavings I have referred to will have some impact on the current year, and asignificant positive effect on profitability going forward. In addition tointegrating the Intelli business, our focus for the rest of 2005 and beyond isnow to grow our funds both under management and administration and the signsare that given reasonable stability in markets, the results of this will befelt in 2006.William LongChairman29 September 2005CONSOLIDATED PROFIT AND LOSS ACCOUNT (unaudited)for the period ended 30 June 2005 6 months Period to to 30 June 31 Dec 2005 2004 ‚£'000 ‚£'000 Revenue 5,072 3,935 Administrative expenses (6,204) (10,514) Operating loss (1,132) (6,579) Profit on sale on management contract 189 - Operating loss on ordinary activities before interest (943) (6,579) Interest receivable 128 241 Loss on ordinary activities before taxation (815) (6,338) Taxation - 38 Retained loss for the period (815) (6,300) Earnings per share - basic and diluted (7.03)p (57.95)p There were no gains or losses recognised during the period other than theretained loss of ‚£815,000 (2004: retained loss of ‚£6,300,000).The financial information set out above does not constitute statutory accountsfor the period ended 30 June 2005 and has not been audited.The interim financial information has been prepared on the basis of theaccounting policies set out in the Group's statutory accounts for the periodended 31 December 2004.Audited Accounts for the holding company for the year ended 31 December 2004have been filed at Companies House. The Auditors have reported on thoseaccounts; their report was unqualified and did not contain a statement underSection 237(2) or (3) of the Companies Act 1985.CONSOLIDATED BALANCE SHEET (unaudited) 30 June 31 Dec 2004 2005 ‚£'000 ‚£'000 Fixed assets Intangible assets - goodwill 1,660 1,705 Tangible assets 1,141 1,093 2,801 2,798 Current assets Debtors 2,779 2,134 Cash at bank 1,891 9,633 4,670 11,767 Creditors - amounts falling due within one year 1,930 1,659 Net current assets 2,740 10,108 Total assets less current liabilities 5,541 12,906 Provisions for liabilities and charges 350 6,900 5,191 6,006 Capital and reserves Called up share capital 1,167 1,167 Merger reserve 6,314 6,314 Share premium account 97 97 Profit and loss account (2,280) (1,465) Shares held by ESOP (107) (107) Total equity shareholders' funds 5,191 6,006 CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)for the period ended 30 June 2005 6 months to Period to 30 June 2005 31 Dec 2004 ‚£'000 ‚£'000 Net cash outflow from operating activities - Note (2,080) (953)1 Returns on investments and servicing of finance Interest received 128 241 Net cash inflow from return on 128 241 investments and servicing of finance Taxation Tax (paid)/received (22) 18 Capital expenditure and financial investment Purchase of tangible fixed assets (246) (280) (246) (280) Acquisitions and disposals Cash balances of subsidiaries at acquisition - 10,638 Costs associated with acquisition - (992) Sale of management contracts 378 954 Cash balances of subsidiary at disposal - Note 2 (5,900) - (5,522) 10,600 Financing Issue of ordinary share capital - 7 Net cash inflow from financing - 7 (Decrease)/increase in cash (7,742) 9,633 The Directors of Exeter Asset Management Ltd ("EAM"), a wholly owned subsidiaryof iimia Investment Group plc, negotiated a resolution to the FinancialServices Authority's ("FSA") review of EAM's involvement in the split capitalinvestment sector. As a result of these negotiations an agreement was signedon 13 April 2005 which required EAM to make a contribution of ‚£1million to FundDistributions Ltd, the company established to administer payments to investorsin split capital investment trusts. Whilst this ‚£1million contribution has noimpact on the current period results because full provision was taken for itagainst pre-acquisition reserves in the accounts to 31 December 2004, theimpact on group cash flows has been disclosed above within net cash flows fromoperating activities for the period. The Directors of Exeter Fund Managers Ltd ("EFM"), a wholly owned subsidiary ofiimia Investment Group plc, were advised that due to insufficient certainty ofoutcome of the cases against it that have been referred to the FinancialOmbudsman Service ("FOS"), the company could be judged to be potentiallyinsolvent. Accordingly the Directors appointed an administrator to the companyon 3 March 2005. Within the accounts to 31 December 2004 a provision of ‚£5.9million was charged against pre-acquisition reserves which equated to thenet asset value of the company at that date. As a result of EFM passing intoadministration this provision has now been fully utilised and EFM has beenexcluded from the group consolidation with no material impact on the results ofthe group within the current period. The impact on group cash flows has beendisclosed above.ENDIIMIA INVESTMENT GROUP PLCRelated Shares:
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