28th Sep 2007 08:30
Merchant House Group PLC28 September 2007 MERCHANT HOUSE GROUP PLC CHAIRMAN'S STATEMENT For the six month period ended 30 June 2007 Turnover increased to £387,922 for the six months to 30 June 2007 from £134,353in the comparative period and operating loss was £194,082 compared to a restatedoperating loss of £309,472 in 2006. The 2006 results have been restated tocomply with the new accounting standard, IAS 39 on the carrying value ofinvestments. Before taking account of the new accounting standard there wouldhave been an operating loss of £212,775 in the first six months of 2007 comparedto a loss of £157,973 in the same period in 2006. Shareholders funds at 30June 2007 were £138,281 although if convertible loan notes were converted, thiswould increase to £606,281. In my previous statement I reported a better start to 2007 than had been thecase in 2006 but this progress has not been maintained and therefore, followingthese results, the Board has undertaken a comprehensive review of the businessareas in which the group is engaged with a view to reducing costs, increasingprofitability and thereby enhancing shareholder value. Shareholders willalready know that, since we published our results for 2006, Peter Redmondresigned for family reasons on 13 July. However, he has remained with theCompany as a consultant. Following this review, the Board resolved to restructure the current corporatefinance activities which have continued to incur significant losses.Accordingly, Dan Edelman resigned as a director of Merchant House Group and itssubsidiary, Merchant Capital Limited, on 28 September. The Board wishes himwell. The Board now intends to focus on the following activities which have provedmore successful and profitable for the Group in the last two years. • To identify under priced public situations in which to make strategicinvestments along with our appointment as financial adviser and/or brokers inorder to assist management in improving their share performance in line withunderlying value and performance. • To provide corporate advice to pre IPO situations requiring funding andadvice preparatory to their listing. • To continue the investment strategy which has yielded a total gain of£201,919 in the 6 months period to 30 June 2007. • To expand the previously announced proprietary trading in shares. As previously reported, Merchant Capital is a broking member of the StockExchange and a PLUS market adviser. This, together with our in house access todebt funding through Merchant House Finance Limited for leasing and our bankingrelationships means we can bring a comprehensive funding package together for aclient or investee. I am also pleased to report that Merchant House Finance, in which we currentlyhold 49% has made a good start with sales of £116,737 (2006: nil). Shareholderswill know that the Company has an option to acquire a further 26%. The Board are now in the process of recruiting professionals to support theexecution of this strategy, including staff with executive directorresponsibilities. Announcements will follow in due course. In conclusion, the Board believes that the focusing on its core strengths in theareas of advisory services, investment and proprietary share trading with ourrecruitment programme will generate increasing value for our shareholders. Martin Eberhardt Chairman 27th September 2007 INDEPENDENT REVIEW REPORT TO MERCHANT HOUSE GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007, set out on pages 4 to 9. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved, by the directors. The AIM Rulesrequire that the accounting policies and presentation applied to the interimfigures should be consistent with those applied in preparing the precedingannual accounts except where any changes, and the reasons for them, aredisclosed. The report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 ''Review of interim financial information'' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Sawin & EdwardsChartered Accountants15 Southampton PlaceWC1A 2AJ 27 September 2007 MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED INCOME STATEMENT For the six month period ended 30 June 2007 Six month period Restated Restated ended 30 June 2007 Six month period Year ended 31 (Unaudited) ended 31 December December 2006 2006 (Unaudited) (Audited) Note £ £ £ Revenue 387,922 134,353 687,217Purchase of shares for proprietary (30,457) - (228,367)tradingCost of sales (61,935) (79,336) (124,799) Gross Profit 295,530 55,017 334,051Administrative expenses (584,161) (422,696) (936,858)Exceptional expenses 2 (110,000) (-) (24,311)Other operating income 2,630 21,793 34,349Realised and unrealised gains/(loss) 201,919 36,414 (33,190)on current asset investments (Loss) from operations (194,082) (309,472) (625,959)Share of operating loss in associate (3,404) - (3,969)Finance expense 3 (15,000) (18,213) (33,644)Investment income 3,605 11,813 17,405 (Loss) Before Taxation (208,881) (315,872) (646,167)Income tax expense 4 - - - (Loss) for the financial period (208,881) (315,872) (646,167) (Loss) per share (pence) 5 (0.48)p (0.97)p (1.90p) The Group has no recognised gains or losses other than the results for theperiod as set out above. MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED BALANCE SHEET 30 June 2007 As at 30 June Restated Restated 2007 As at 30 June 2006 As at 31 December 2006 (Unaudited) (Unaudited) (Audited) Note £ £ £ASSETSNon Current AssetsProperty, plant and equipment 14,314 19,513 17,744Investment in associate 78,817 - 82,222undertakingNegative goodwill arising on (41,510) - (46,208)associate undertaking 51,621 19,513 53,758 Receivables falling due after 50,000 50,000 50,000one year Current AssetsTrade and other receivables 208,279 339,035 347,089Cash and cash equivalents 186,298 301,255 323,524Investments 401,278 492,346 271,875 Total current assets 795,855 1,132,636 942,488 TOTAL ASSETS 897,476 1,202,149 1,046,246 EQUITY AND LIABILITIESCurrent Liabilities: 291,195 124,692 299,084 Trade and other payables Non current liabilities: 468,000 606,000 500,000Convertible loans 759,195 730,692 799,084Equity and ReservesCalled up share capital 219,233 167,733 194,233Share premium 355,500 201,000 280,500Special Reserve 52,742 52,742 52,742Retained Earnings (489,194) 49,982 (280,313)Total Equity 138,281 471,457 247,162TOTAL LIABILITIES 897,476 1,202,149 1,046,246 MERCHANT HOUSE GROUP PLC UNAUDITED STATEMENT OF CHANGES IN EQUITY for the six month period 30 June 2007 Share Share Special Capital Premium Reserve Profit and Total £ £ £ Loss £ £ Balance at 1 January 2007 194,233 280,500 52,742 (383,053) 144,422IFRS transition adjustments - - - 102,740 102,740 Restated balance at 1 194,233 280,500 52,742 (280,313) 247,162January 2007 Conversion loan notes 8,000 24,000 - - 32,000Share issue 17,000 51,000 - - 68,000Loss for the period - - - (208,881) (208,881)Balance at 30 June 2007 219,233 355,500 52,742 (489,194) 138,281 Balance at 1 January 2006 155,233 163,500 102,742 (194,271) (227,204)Conversion loan notes 12,500 37,500 - - 50,000Prior year adjustment - - - 510,125 510,125 167,733- 201,000 102,742 315,854 787,329Transfer - - (50,000) 50,000 -Loss for the period - - - (164,373) (164,373) Balance at 30 June 2006 167,733 201,000 52,742 201,481 622,956IFRS transition adjustments - - - (151,499) (151,499)Restated balance at 30 June 167,733 201,000 52,742 49,9822006 471,457 Balance at 1 January 2006 155,233 163,500 102,742 (194,271) (227,204)Conversion loan notes 39,000 117,000 - - 156,000Prior year adjustment - - - 510,125 510,125 194,233 280,500 102,742 315,854 893,329Transfer - - (50,000) 50,000 -Loss for the period - - - (238,782) (238,782) Balance at 31 December 2006 194,233 280,500 52,742 127,072 654,547IFRS transition adjustments - - - (407,385) (407,385)Restated balance at 31 194,233 280,500 52,742 (280,313) 247,162 December 2006 MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the six month period 30 June 2007 Six month period Restated Restated ended 30 June Six month period Year ended 31 2007 (Unaudited) ended 30 June 2006 December 2006 £ (Unaudited) (Audited) £ £Reconciliation of operating loss to netcash (outflow) from operatingactivitiesOperating loss (194,082) (309,472) (625,959)(Increase)/Decrease in trade & other 168,811 (189,076) (227,129)receivables(Decrease) / Increase in trade & other (68,195) 29,701 224,734payablesDepreciation 5,191 5,064 10,272Realised/Unrealised gain/(loss) (201,919) (36,414) 33,190Negative goodwill (4,698) - (783) Net cash outflow from operating (294,892) (500,197) (585,675)activities InvestingInvesting ActivitiesInterest received 3,605 11,813 17,405Purchase of investments (280,324) (10,000) (172,700)Sales of investments 352,840 250,800 564,367Purchase of plant & equipment (1,761) (9,011) (12,451)Investment in associate - - (39,200) Net cashflow from investing activities 74,360 243,602 357,421 Financing activitiesProceeds from share issue 68,000 - -Interest paid (15,000) (18,213) (33,644) Net cash inflow/(outflow) from 53,000 (18,213) (33,644)financing activities (Decrease) in cash & cash equivalents (167,532) (274,808) (261,898) Reconciliation of net cash flow tomovement in net debt(Decrease) in cash in the period (167,532) (274,808) (261,898)Conversion loan note into ordinary 32,000 50,000 156,000shares Movement in year (135,532) (224,808) (105,848)Net (debt) brought forward (185,835) (79,937) (79,937) Net (debt) carried forward (321,367) (304,745) (185,835) MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the six month period 30 June 2007 Analysis of changes in net (debt) At 1 Cashflows Other non At 30 June January cash changes 2007 2007 £ £ £ Cash at bank and in hand 78,157 (33,707) - 44,450Cash held in stockbroker's client 236,008 (133,825) - 102,183accounts Cash and cash equivalents 314,165 (167,532) - 146,633Debt due after one year:Secured loan notes (426,000) - 18,000 (408,000)Unsecured loan notes (74,000) - 14,000 (60,000) (185,835) (167,532) 32,000 (321,367) Other non cash changes During the year £18,000 of the secured and £14,000 of the unsecured convertibleloan notes were converted into £32,000 of ordinary share capital. The exceptional bad debt write off is included in the decrease in trade andother receivables above. MERCHANT HOUSE GROUP PLC NOTES TO THE UNAUDITED FINANCIAL STATEMENTS For the six month period ended 30 June 2007 1. Accounting Policies Basis of Preparation The transition date to International Financial Reporting Standard (IFRS) forMerchant House Group Plc is 1 January 2006. The Group will apply IFRS in itsconsolidated financial statements for the first time for the year ended 31December 2007. Therefore, these interim statements for the six month periodended 30 June 2007 are prepared using accounting policies in accordance withIFRSs and IFRIC interpretations which are expected to be applicable to theconsolidated financial statements for the year ended December 31, 2007. Thesestandards remain subject to ongoing amendment and/or interpretation andtherefore still subject to change. Accordingly, the information contained inthese interim financial statements may need updating for subsequent amendmentsto IFRS required for the first time adoption or for new standards issued postthe balance date. These interim financial statements and the comparativeinformation for the periods ended 30 June 2006 and 31 December 2006 do notconstitute statutory financial statements in accordance with Section 240 of theCompanies Act 1985. Depreciation Depreciation has been provided for so as to write off the cost of an asset, lessits estimated residual value, over its useful economic life as follows: Office equipment 33% - 50% straight lineFixtures and fittings 33% straight line 2. Exceptional Expenses The exceptional expense relates the write off of a doubtful debt in respect of aclient of Merchant Capital Ltd 3. Loan Interest Loan interest is payable on secured and unsecured convertible loan notes 2010,at a floating rate of 100 basis points above the Barclays Bank Plc base rate. 4. Taxation No provision for corporation tax has been provided for, due to losses incurredin the current and previous periods. 5. Loss per Share The loss per share has been calculated by dividing the loss after taxation of£208,881 (June 2006: loss £315,872) by the weighted average number of ordinaryshares in issue of 43,846,600 (June 2006: 32,631,560). MERCHANT HOUSE GROUP PLC NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) For the six month period ended 30 June 2007 6. First time adoption of IFRS The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) for the first time. A reconciliation between the 2006 Income Statement and Balance Sheet as shownunder UK GAAP and IFRS is shown below. INCOME STATEMENT Year ended 31 Reconciling Year ended 31 December 2006 item December 2006 IFRS UK GAAP £ £ £Revenue 687,217 687,217Purchase of shares for proprietary (228,367) (228,367)tradingCost of sales (124,799) (124,799) Gross Profit 334,051 334,051Administrative expenses (936,858) (936,858)Exceptional expenses (24,311) (24,311)Other operating income 34,349 34,349Realised and Unrealised gain/(Loss) on (33,190) (407,385) 374,195current asset investments Loss from operations (625,954) (407,385) (218,574)Share of operating loss in associate (3,969) (3,969)Finance expense (33,644) (33,644)Investment income 17,405 17,405 Loss Before Taxation (646,167) (407,385) (238,782)Income tax expense - - - Loss for the financial period (646,167) (407,385) (238,782) MERCHANT HOUSE GROUP PLC NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) For the six month period ended 30 June 2007 6. First time adoption of IFRS (continued) BALANCE SHEET Year ended 31 Reconciling Year ended 31 December 2006 item December 2006 IFRS UK GAAP £ £ £ASSETSNon Current AssetsProperty, plant and equipment 17,744 17,744Investment in associate undertaking 82,222 82,222Negative goodwill arising on associate (46,208) (46,208)undertaking 53,758 53,758 Receivables falling due after one year 50,000 50,000 Current AssetsTrade and other receivables 347,089 347,089Cash and cash equivalents 323,524 323,524Investments 271,875 102,740 169,135 942,488 102,740 839,748TOTAL ASSETS 1,046,246 102,740 943,506EQUITY AND LIABILITIESCurrent Liabilities: 299,084 299,084 Trade and other payables Non current liabilities: Convertible 500,000 500,000loans Total Liabilities 799,084 799,084 MERCHANT HOUSE GROUP PLC NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (Continued) For the six month period ended 30 June 2007 6. First time adoption of IFRS (continued) Equity and ReservesCalled up share capital 194,233 194,233Share premium 280,500 280,500Special Reserve 52,742 52,742Retained Earnings (280,313) 102,740 (383,053)Total Equity 247,162 102,740 144,422TOTAL EQUITY AND LIABILITIES 1,046,246 102,740 943,506 Reconciling items The reconciling items relate to current asset investments now being shown atmarket value as required by IAS 39 as follows: Prior year adjustment 510,125Current year adjustment (407,835) 102,740 For further information contact: Merchant House Group plcMartin EberhardtTel: 07710 982 370 Shore Capital and Corporate LimitedAlex BorrelliTel: 020 7408 4090 First City Financial Public RelationsTel: 020 7242 2666 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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