21st Dec 2007 07:01
Merchant Securities PLC21 December 2007 Merchant Securities plc ("Merchant Securities" or "the Company") Interim Results for the six months ended 30th September 2007 INTERIM REPORT TO SHAREHOLDERS The board of Merchant Securities PLC is pleased to announce its financialresults for the six months to 30 September 2007. HIGHLIGHTS • Turnover up 10% to £2.11m (2006: £1.92m) • Gross profit up 7% to £1.90m (2006: £1. 78m) • Net profit before tax: £90,905 (2006: £302,740) • Cash generated from operating activities of £179,010 • Net assets up by £41,294 since 31st March to £5,327,236 • Cash and cash equivalents up by £161,388 to £2,275,026 • Total funds under advisory management increased by 13% to £124 million • New office opened in Manchester • Launch of CFD business • Senior appointments made across all areas of the business • Significant development post period end with the acquisition of John East & Partners Limited group for £4.9m and an associated placing to raise £1.5m. Commenting on the results for the six months Tony Fabrizi, Group ChiefExecutive, said, "The first half of the financial year has seen the businessdevelop in accordance with our stated ambition of building a high qualitybroadly based financial services company. We have focused our attention onimproving the quality of our services and have invested heavily both in terms ofour systems and people. This investment is continuing and we anticipatecompleting significant systems changes across our business in the second half." "We have also expanded our areas of activity with the acquisition of the JohnEast & Partners Limited group ("JEP"), which is already proving itself anexcellent strategic fit. Since the acquisition in October, JEP has completedthree transactions and is currently acting on a number of transactions which areanticipated to close in the first quarter of 2008." "We will continue to seek out opportunities to expand our business further andalso intend to increase our range of services within the current operations." "We expect market conditions to remain volatile in the second half of ourfinancial year, but, as long as these do not prevent us from completing what isa strong pipeline of business, we expect to produce a satisfactory profitoutcome for the year." Enquiries: Merchant Securities plc Anthony Fabrizi (Chief Executive) Tel: 020 7375 9060 Arden Partners plc Paul Davies Tel: 020 7398 1600 Broadgate Roland Cross/Emma Murphy Tel: 020 7726 6111 About Merchant Securities plc Merchant Securities plc provides a range of financial service products andadvice to high net worth private clients, institutions and small businesses. TheCompany is now the ultimate parent undertaking of two trading subsidiarycompanies, both of which are authorised by the Financial Services Authority.Merchant Securities Group Limited provides a variety of services including assetand advisory management to high net worth private clients, sales trading toinstitutional investors, and private equity funding and corporate advice forsmall UK companies. John East & Partners Limited whose immediate parent wasacquired by the Company on 9 October 2007 is a corporate member of the LondonStock Exchange, an approved nominated adviser and broker and a registeredsponsor, specialising in providing corporate finance advice services and raisingcapital for smaller companies. MERCHANT SECURITIES PLC Interim unaudited accounts for the six months ended 30th September 2007 CONSOLIDATED INCOME STATEMENT Six months to Six months to Year ended 31st 30th September 30th September March 2007 2007 2006 Unaudited Audited Unaudited (as restated) £ £ £ Revenue 2,110,753 1,920,885 4,090,737Cost of sales (213,239 ) (139,037 ) (352,740 )Gross Profit 1,897,514 1,781,848 3,737,997 Other income 7,932 6,266 9,135General administrative expenses (1,900,456 ) (1,513,693 ) (3,471,019 )Impairment of goodwill - - (422,041 )Revaluation of assets held for sale (55,250 ) - (95,875 )Alternative Investment Market (AIM) admission expenses and other non-recurring items - - (385,950 )Operating profit/(loss) (50,260 ) 274,421 (627,753 ) Investment revenues 188,287 81,079 195,249Interest payable (47,122 ) (49,546 ) (83,190 )Loss on disposal of fixed assets - (3,214 ) (11,733 )Profit on disposal of available-for-sale - 89,418investmentsProfit/(loss) before taxation 90,905 302,740 (438,009 )Taxation (37,723 ) (97,120 ) (76,859 )Profit/(loss) attributable to equity holders 53,182 205,620 (514,868 ) Earnings per share Basic 0.27p 1.61p (3.23p )Diluted 0.24p 1.44p (3.23p ) The profit / (loss) for the periodattributable to equity holders of the Companyis as follows:Profit before tax, goodwill impairment,revaluation of investments and non-recurringitems 146,155 302,740 465,857Impairment of goodwill - - (422,041 )Revaluation of investments held for sale (55,250 ) - (95,875 )AIM admission expenses and other - - (385,950 )non-recurring items 90,905 302,740 (438,009 )Taxation (37,723 ) (97,120 ) (76,859 ) 53,182 205,620 (514,868 ) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSES Loss on revaluation of available-for-saleshares, options and warrants taken to equity (64,760 ) (20,556 ) (58,907 )Deferred tax on losses on available-for-saleshares, options and warrants 19,428 (7,589 ) 17,672Net expenses recognised directly in equity (45,332 ) (28,145 ) (41,235 )Released from equity on disposal of assets - - (110,684 )Gain/(loss) for the period 53,182 205,620 (514,868 )Total recognised income and expenses in the 7,850 177,475 (666,787 )period BALANCE SHEET 30th September 30th September 31st March 2007 2007 2006 Unaudited Audited Unaudited (as restated) £ £ £ Non-current assetsGoodwill 2,708,015 2,708,015 2,708,015Property, plant and equipment 70,154 87,051 76,489Available-for-sale investments 10,000 455,731 74,760 2,788,169 3,250,797 2,859,264Current assetsTrade and other receivables 2,916,087 4,435,467 3,022,949Trading investments 334,750 - 390,000Cash and cash equivalents 2,275,026 1,776,682 2,113,638Deferred tax asset 56,629 - 35,654 5,582,492 6,212,149 5,562,241 Total assets 8,370,661 9,462,946 8,421,505 Current liabilitiesTrade and other payables (2,897,767 ) (4,565,827 ) (2,999,528 )Current tax liabilities (142,658 ) (95,856 ) (113,607 ) (3,040,425 ) (4,661,683 ) (3,113,135 )Non-current liabilitiesDeferred tax liabilities (3,000 ) (95,125 ) (22,428 ) Total liabilities (3,043,425 ) (4,756,808 ) (3,135,563 ) Total assets less liabilities 5,327,236 4,706,138 5,285,942 EquityShare capital 1,942,000 454,561 1,942,000Share premium account 7,408,351 3,690,440 7,408,351Other reserves (3,845,350 ) - (3,845,350 )Retained earnings (188,708 ) 478,598 (241,890 )Revaluation reserve/(deficit) (86,567 ) 82,539 (41,235)Share-based payment reserve 97,510 - 64,066Equity attributable to equity holders 5,327,236 4,706,138 5,285,942 CASH FLOW STATEMENT Six months to 30th Six months to 30th Year ended 31st September 2007 September 2006 March 2007 Unaudited Unaudited Audited (as restated) £ £ £ Cash flow from operating activitiesCash generated from operations 67,492 1,144,113 1,103,544Interest received 188,287 81,079 195,249Interest paid (47,122 ) (49,546 ) (83,190 )Tax paid (29,647 ) (9,992 ) (9,993 )Net cash generated from / (used in) 179,010 1,165,654 (1,205,610 )operating activities Cash flows from investing activitiesAcquisition of subsidiary business - (3,534,858 ) (3,534,858 )Reverse acquisition of MSPLC - - 43,486Purchase of property, plant and equipment (17,622 ) (22,471 ) (42,877 )Cost of disposal of tangible fixed assets - (98 ) (96 )Proceeds from disposal ofavailable-for-sale investments - - 273,918Net cash generated from investing (17,622 ) (3,557,427 ) (3,260,427 )activities Cash flows from financing activitiesProceeds from sale of shares - 4,055,000 4,055,000Net cash generated from financing - 4,055,000 4,055,000activities Net increase in cash and cash equivalents 161,388 1,663,227 2,000,183Cash and cash equivalents at beginning of 2,113,638 113,455 113,455periodCash and cash equivalents at end of period 2,275,026 1,776,682 2,113,638 NOTES Note 1 - Accounting policies Basis of preparation The consolidated interim financial information has been prepared in accordancewith IAS 34 'Interim Financial Reporting'. These policies are in accordancewith International Financial Reporting Standards (IFRS) as endorsed by theEuropean Union. Comparatives for the period to 30th September 2006 have beenrestated in accordance with IFRS. The Company's transition date to IFRS was 1stApril 2006 being the first day of the comparative year to 31st March 2007, andaccordingly the interim financial report and the comparative information havebeen prepared using accounting policies consistent with IFRS. The disclosuresrequired by IFRS 1 concerning the transition from UK GAAP to IFRS along with theIFRS standards and interpretations that have not been adopted early by the groupare presented in the Group's consolidated financial statements for the yearended 31st March 2007. The interim financial statements have been prepared on the basis of theaccounting policies as stated in the consolidated financial statements for theyear ended 31st March 2007. The interim financial statements should be read inconjunction with those audited financial statements for the year ended 31stMarch 2007. The financial information set out in this interim statement is unaudited anddoes not constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The statutory accounts for the year ended 31st March 2007, which were preparedunder IFRS, have been delivered to the Registrar of Companies. The auditors ofthe Group, Horwath Clark Whitehill LLP, reported on those accounts: their reportwas unqualified and did not contain a statement under either Section 237 (2) orSection 237 (3) of the Companies Act 1985. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) _____________________________________________________________________________________________________ Note 2 - Basis of consolidation The financial information incorporates the results of the Company and entitiescontrolled by the Company (its subsidiaries). Control is achieved where theCompany has the power to govern the financial and operating policies of aninvestee entity so as to obtain benefits from its activities. As stated in the audited financial statements for the year ended 31st March2007, the Company purchased the entire share capital of Merchant SecuritiesHoldings Limited ("MSHL") in October 2006 by issuing new shares to MSHL'sshareholders. As a result, the former shareholders of MSHL became the majorityshareholders of the Company, owning 86% of the newly increased share capital,and the executive managers of MSHL replaced the Company's previous management.In substance, therefore, MSHL acquired MSPLC by a reverse takeover. IFRS 3prescribes the application of reverse acquisition accounting as the basis ofconsolidation. The restated comparative figures for the period ended 30thSeptember 2006 are therefore those of MSHL. All intra-group transactions, balances, income and expenses have been eliminatedon consolidation. Note 3 - Revenue and gross profit by segment The Group's results for the period ended 30th September 2007, all of which weregenerated within the United Kingdom, can be analysed by product as follows: Six months to Six months to Year ended 31st 30th September 30th September March 2007 2007 2006 Unaudited Audited Unaudited (as restated) £ £ £ Revenue Private client and institutional broking 1,504,758 1,018,625 2,577,231 Corporate finance and private equity 585,995 902,260 1,513,506 Unallocated 20,000 - - 2,110,753 1,920,885 4,090,737Cost of sales Private client and institutional broking (152,910 ) (139,037 ) (352,740 ) Corporate finance and private equity (34,350 ) - - Unallocated (25,979 ) - - (213,239 ) (139,037 ) (352,740 ) Gross Profit 1,897,514 1,781,848 3,737,997 Note 4 - Taxation Taxation disclosed in the Consolidated Income Statement represents an estimateof the sum of corporation tax currently payable, any adjustments to previouslydisclosed corporation tax, and deferred tax income and charges. The corporation tax currently payable is based on the estimated taxable profitfor the period. Taxable profit differs from net profit or loss as reported inthe Consolidated Income Statement because it excludes items of income andexpense that are taxable or deductible in other periods and it further excludesitems that are never taxable or deductible. The Group's current tax iscalculated using tax rates that have been enacted or substantively enacted bythe balance sheet date. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The tax charge is based on the results for the period of ordinary activities andmovement in deferred tax. Six months to 30th Six months to 30th Year ended 31st September 2007 September 2006 March 2007 Unaudited Unaudited Audited (as restated) £ £ £ Current tax 58,698 77,302 88,656Deferred tax (20,975 ) 19,818 (11,797 ) 37,723 97,120 76,859 Note 5 - Earnings per share The basic and diluted earning per share is calculated based on: Six months to 30th Six months to 30th Year ended 31st September 2007 September 2006 March 2007 Unaudited Unaudited Audited (as restated) £ £ £ Basic EPSProfit/(loss) for the period 53,182 205,620 (514,868 )Weighted average number of shares in issue 19,420,000 12,747,827 15,932,619 Diluted EPSProfit/(loss) for the period 53,182 205,620 (514,868 )Weighted average number of shares in issue 22,583,165 14,278,255 15,932,619 Note 6 - Dividend The directors do not propose payment of an interim dividend. Note 7 - Acquisition of East Worlidge Holdings Limited On 9th October 2007, Merchant Securities acquired the entire issued ordinaryshare capital of East, Worlidge Holdings Limited ("EWH") for a consideration of£4.9 million, of which £2.3 million was settled in cash and the remaining £2.6million was settled by the issue of 7,428,571 new ordinary shares of 10p in thecapital of the Company. The acquisition agreement stated that the cashconsideration would be adjusted to the extent that EWH's final agreed netcurrent assets exceeded, or fell short of £900,000. EWH is the holding companyfor John East & Partners Limited ("JEP"). The company is in the process ofdetermining the fair value of net assets acquired. JEP is a member firm of theLondon Stock Exchange, specialising in providing corporate finance advice andraising capital for smaller public companies and companies seeking a publiclisting. It is intended that JEP will continue as a separate commercial entityoperating in an ordinary course of business. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 8 - Reconciliation of changes in equity Share Retained Called up Revaluation Share based Other earnings Total share reserve premium payment reserves equity capital reserve £ £ £ £ £ £ £ Equity as at 1st April 2006 90,001 110,684 272,978 473,663Revaluation ofinvestments availablefor sale at fair value (20,556) (20,556)Deferred tax charge (7,589) (7,589)Profit for the 6months ended 30thSeptember 2006 205,620 205,620 Total recognisedincome and expensesfor the period (28,145) 205,620 177,475Issue of shares -reorganisation MSHL 364,560 3,690,440 4,055,000Equity as at 30thSeptember 2006 454,561 82,539 3,690,440 478,598 4,706,138 Revaluation ofinvestment at fairvalue (162,323) (162,323)Deferred tax credit 48,697 48,697Transfer of realised gain (10,148) (10,148)Loss for the 6 monthsended 31st March 2007 (720,488) (720,488) Total recognisedincome and expensesfor the period (123,774) (720,488) (844,262)Share based payments 35,000 35,000Deferred tax arisingon tax treatment ofshare based expenses 29,066 29,066 Consolidated Adjustments 1,487,439 3,717,911 (3,845,350) 1,360,000 Equity as at 31stMarch 2007 1,942,000 (41,235) 7,408,351 64,066 (3,845,350) (241,890)5,285,942Revaluation ofinvestment at fairvalue (64,760) (64,760)Deferred tax credit 19,428 19,428Profit for the 6months ended 30thSeptember 2007 53,182 53,182Total recognisedincome and expensesfor the period (45,332) 53,182 7,850Share based payments 33,444 33,444Equity as at 30thSeptember 2007 1,942,000 (86,567) 7,408,351 97,510 (3,845,350) (188,708) 5,327,236 Note 9 - Related party transactions One of the Company's bankers, Ruffler Bank plc ("Ruffler"), owns 1,220,591(6.29%) of the Company's issued ordinary shares. Charles Price, a director ofthe Company, is also a director of Ruffler. Anthony Fabrizi resigned as adirector of Ruffler on the 30th August 2007. The Company has taken advantage of the exemption provided by FRS 8 fromdisclosing transactions between group companies, as consolidated financialstatements are publicly available. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mercia Asset