18th Oct 2007 07:01
Accuma Group PLC18 October 2007 Press Release 18 October 2007 Accuma Group Plc ("Accuma" or "the Group") Preliminary Results Accuma Group Plc, a leading provider of consumer financial solutions, todayannounces its Preliminary Results for the year ended 31 July 2007. Highlights • Turnover more than doubled to £20.5 million (£10.0 million) • EBITDA up 32% to £2.4 million (£1.8 million) • Acquisition of Byrom Keeley & LoanLine completed • Gross Future Contracted Revenue increased to £18.3 million • Strong Balance Sheet with £3.3 million cash at year end (Currently £3.7 million) • Diluted and Adjusted (for tax and amortisation) EPS at 6.61p Commenting on the results, Charles Howson, Chief Executive of Accuma Group said: "The past year has been a testing time for both the Group and the sector as awhole and conditions remain difficult. However, our strategy of building a fullservice platform has mitigated some of the pressure felt within our IVA divisionand we are confident this strategy will stand us in good stead for the future." - ends - For further information: Accuma Group PlcCharles Howson, Chief Executive Tel: +44 (0) 161 751 [email protected] www.accumagroup.com Daniel Stewart & Company PlcLindsay Mair Tel: +44 (0) 20 7776 [email protected] www.danielstewart.co.uk Media enquiries:AbchurchChris Lane / Emma Johnson Tel: +44 (0) 20 7398 [email protected] www.abchurch-group.com Chairman's Statement A Year of Market Turbulence Changes in the acceptance criteria and fee levels introduced by UK Banks andtheir advisers created considerable turbulence in the IVA market and thisadversely affected the Group and its competitors. Two profits warnings wereneeded when it became apparent that the scale and length of the dispute andnegotiation, was materially greater than forecast. A resolution to the issuesappears to be in sight and the size of the average IVA handled by the Groupstill makes this business viable. The strategy of acquiring additional but complementary businesses has proved awise one and has cushioned the Group from the full impact of the IVA shortfall.The full consumer financial solutions vision has been delivered and is asuccess. In addition to this a rigorous cost cutting exercise and businessprocess review has been carried out to make the Group leaner and fitter and ableto prosper at the current market fee levels. This was not an easy task and Iwould like to thank the executive Board members for robustly addressing theissue and delivering the necessary cost savings. Lastly I would again like to thank the staff for their hard work and enthusiasmin difficult times and to also thank our shareholders who continue to supportthe Group through this transitional period as we adjust to external marketpressures. The Board looks forward to future growth with confidence. Charles Taylor B.Comm.CANon-executive Chairman Chief Executive's Statement The last year has certainly been a testing time for the Group and indeed oursector. In January and again in May we highlighted the trading difficultieswithin our IVA division which resulted from deterioration in marketingperformance, increased competition and moreover from continued creditor pressureresulting in IVA approval rates falling. This has clearly impacted ourfinancial performance. On a divisional basis, our revenues can be analysed as follows: Turnover - £'000s EBITDA - £'000s Debt Management 2,903 1,669Loan/Mortgage Broking 6,130 1,244IVA Division 9,854 855Referrals/other 1,563 159Group Overheads - (1,502)Total 20,450 2,425 Financial Results Turnover at £20.5 million was up 105% on last year, mainly as a result of theacquisitions made in the early part of the year. Gross profit was £8.2 million(2006: £4.5 million) giving a gross profit margin of 40% compared to 45% lastyear. This reduction is mainly as a result of lower margins in the IVAdivision. Moreover, increased resource in anticipation of significant growth inthe IVA market impacted both our gross margin and administration expenses thatwere higher than the previous year at £7.4 million (2006: £3.0 million).Included in administration expenses there was a significant increase inamortisation of intangible assets of £1.3 million (2006: £0.2 million) and fixedasset depreciation of £374k (2006: £154k). Earnings before Interest Tax Depreciation and Amortisation (EBITDA) for the yearare £2.4 million compared to £1.8 million for the year to July 2006. Cash inflow from operations for the year was £1.599 million (2006: Outflow£910k) and our balance sheet remains strong with £3.7 million of cash, up £400ksince July 2007 year end. Shareholders funds increased to £31.6 million from £14.2 million the previousyear. Operational Review Following the acquisitions of Loan Line and Byrom Keeley in August 2006, theGroup now provides a full platform of consumer financial solutions from IVAs, toinformal debt management, consolidation loans and re-mortgaging. The Group'sstrategy of providing best advice through a full platform of solutions has inpart mitigated the impact of difficulties within the IVA sector. Although thismay not be entirely evident in these results, this is due to the significantinvestment in infrastructure to provide greater capacity that was required priorto a major change in creditor attitudes that has significantly impacted our newIVA case run rate. Following the significant changes in our sector and asreported earlier this year, major operational changes have been implemented thathave resulted in significant cost savings, not least in our payroll where sinceMarch, our annual cost has been reduced by £1.1 million. Group staff numbers now stand at 206 against 251 at the end of 2006 with thereductions coming from our IVA division. In particular the group now employs 5Insolvency Practitioners against 8 previously as IVA run rates have declined. Given increased competition, particularly with direct advertising, the Group'sfull service platform has become an attractive model with which we are nowbuilding stronger referral relationships. Our client acquisition strategymoving forward is focused on these affinity relationships in addition to theinternet where we have seen some success at acquiring clients more efficientlythrough advertising and search engine optimisation, in particular through oursubsidiary Thomas Charles. Debt Management Byrom Keeley was acquired in August 2006 and was relocated to our Group headoffice in March. This relocation has provided a more efficient referral processand in particular with pressure on IVA acceptances, debt management plans areoften the only viable alternative. Consequently, performance in this divisionwas better than anticipated and the Board is confident that Byrom Keeley willcontinue to contribute significantly to the group in the future. Loan/Mortgage Broking LoanLine was acquired on 4th September 2006 and is an FSA regulated secured loanand mortgage broker. Despite strong historic growth we revised our expectationsfor this division in February following the reduction in referrals from oneparticular source. Despite this, the business has performed well due to acombination of strong management and new business wins, finishing the year aheadof our revised expectation. The outlook for the loan broking sector is somewhatuncertain at this time due to the well publicised issues within the sub-primecredit market. However, with the majority of its business remaining outside ofthe sub prime sector, any impact should be marginal. IVA Business As reported throughout the year and in common with volume competitors, our IVAbusiness suffered significantly from a more competitive environment andincreased creditor pressure which resulted in lower approval rates. As aconsequence the number of new IVA cases set up increased by only 8% to 2,646(2006: 2,460) with a run rate across the final quarter of the year averaging 193a month. It had been hoped that high level discussions that took place throughout theyear with key stakeholders in the process would result in a streamlined processand although much progress has been made, some creditors, and theirrepresentatives, have decided to stand outside of the process that was set up bythe Insolvency Service and the British Bankers Association and have enforced afee regime that we do not believe to be in the best interest of all stakeholdersand least of a ll the over-indebted consumer. This new fee structure, which is being enforced through the creditors votingprocess, has already seen IVA providers withdrawing from the market and othersstating that they can only provide a service to those debtors with monthlycontributions above circa £400, leaving many over-indebted consumers withoutaccess to an IVA; something which is contrary to stated Government policy. This new structure restricts the set up costs (nominee fee) of an IVA in mostcases to just five times the client monthly contribution, including VAT. At £400the average nominee fee equates to £1,700 net of VAT and as such isapproximately a £1,000 reduction on the previous average set up fee. Despitethis sizeable reduction, there are only minimal positive changes to the process.In addition, fees for managing the case on an ongoing basis will be 15% ofpayments made or realisations and only for the remaining term, not including thefirst five months contributions. Whilst the vast majority of Insolvency firms have not agreed to this new feestructure, we would only be causing our clients more hardship and suffering ifwe were to reject the cases because of the creditors fee capping. Like manyfirms, for the time being, we have decided to accept creditor enforcedmodifications to our fee structure whilst we continue in dialogue with thecreditors concerned and indeed the Insolvency Service and our regulatory bodies. Accuma have always carried out a rigorous vetting process to ensure that theclient is suitable for an IVA, that the payment offered to the creditors is themaximum the client can afford and that the payment is sustainable. Because ofthis our average dividend to creditors, net of fees is 40p. We will continue toprovide the same high standards that have allowed us to build excellent workingrelationships with creditors and provide dividends that are amongst the highestin the industry.Following our trading update in May, we anticipated a significant decrease infee levels in our future planning. As such, and with an average client paymentof over £400 a month, we remain well positioned to provide IVAs and moreover,our existing bank of 6,052 cases under management with £18.3 million of futurecontracted revenue provide a significant income stream over the next few years. Earn-outs All three acquisitions made in the summer of 2006 have earn-out provisions inthe Sale and Purchase Contract. A payment of £2.4million was made to the vendors of Byrom Keeley in April 2007and further payments may be due depending on the financial performance for theyears to December 2007 and 2008. Given progress so far this year, a provisionof £2.1 million has been made in the accounts for payment due in respect of theyear to December 2007. This provision has been based on pre-tax profits of£1.8million. LoanLine's vendors will be paid £1.4 million in October 2007, and acorresponding provision has been made in these accounts. One further paymentequal to the pre-tax profit is possible for the year to July 2008, payable inOctober 2008. As pre-tax profits at Thomas Charles were below £1 million, no payment is dueand based on current performance it is unlikely that any payments will be madein the future. Outlook Despite the issues that our IVA division has faced over the past year, prospectsfor this division and indeed for the Group remain positive. The Group is nowless reliant on its IVA revenues and has reduced its operational costssignificantly. Moreover, general economic conditions favour our business model.With consumer indebtedness at an all time high, disposable incomes continuing todecrease and further uncertainty in the housing market the opportunities forover-indebted individuals to seek more conventional solutions to their problemswill inevitably reduce. IVAs and debt management will become more attractive inmost cases both to the over-indebted consumer and indeed creditors; certainlymore attractive than bankruptcy. Charles HowsonChief Executive ACCUMA GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 JULY 2007 2007 2006 Notes As restated £ £GROUP TURNOVERExisting operations 11,417,833 9,980,429Acquisitions 9,032,646 - 20,450,479 9,980,429 Cost of sales 12,278,928 5,500,310 GROSS PROFIT 8,171,551 4,480,119 Administration expenses 7,394,318 2,972,664 GROUP OPERATING PROFITExisting operations (1,049,477) 1,507,455Acquisitions 1,826,710 - 777,233 1,507,455 Interest receivable 240,853 124,340Interest payable and similar charges 129,548 37,499 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 888,538 1,594,296 TAXATION 1 435,903 482,528 PROFIT FOR THE FINANCIAL YEAR 452,635 1,111,768 Earnings per share - Basic 2 1.40p 4.71p - Diluted 2 1.38p 4.63p ACCUMA GROUP PLCCONSOLIDATED BALANCE SHEET31 JULY 2007 2007 2006 As Restated Notes £ £ £ £ FIXED ASSETSIntangible assets 26,350,146 6,939,462Tangible assets 855,546 726,450 27,205,692 7,665,912CURRENT ASSETSDebtors 8,876,714 6,064,689Cash at bank and in hand 3,331,502 4,440,808 12,208,216 10,505,497CREDITORSAmounts falling due within one year 4,174,426 2,120,909 NET CURRENT ASSETS 8,033,790 8,384,588 TOTAL ASSETS LESS CURRENT LIABILITIES 35,239,482 16,050,500 CREDITORSAmounts falling due after more than oneyear 100,894 328,705 PROVISIONS FOR LIABILITIES 3,497,579 1,502,922 NET ASSETS 31,641,009 14,218,873 CAPITAL AND RESERVESCalled up share capital 3,269,673 2,573,006Share premium account 28,407,877 11,719,907Other reserve (1,262,595) (762,595)Share option reserve 367,251 282,387Profit and loss account 858,803 406,168 SHAREHOLDERS' FUNDS 31,641,009 14,218,873 ACCUMA GROUP PLCCONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 JULY 2007 Notes 2007 2006 As restatedReconciliation of operating profit to net cash outflow from £ £operating activitiesOperating profit 777,233 1,507,455Provision for share options 84,864 185,826 Loss on sale of fixed assets 12,549Amortisation of intangible assets 1,279,378 170,669Depreciation of tangible fixed assets 374,224 153,837(Increase) in debtors (494,633) (3,152,909)(Decrease)/Increase in creditors (422,416) 212,194Net cash inflow/(outflow) from operating activities 1,598,650 (910,379) CASH FLOW STATEMENTNet cash inflow/(outflow) from operating activities 1,598,650 (910,379)Returns on investments and servicing of finance 86,192 86,841Taxation (1,013,719) (656)Capital expenditure (452,570) (242,549)Acquisitions (16,496,016) (4,136,600)Financing 15,168,157 7,602,633 (Decrease)/Increase in cash (1,109,306) 2,399,290 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS(Decrease)/Increase in cash in the year (1,109,306) 2,399,290Cash (inflow)/outflow from (increase)/decrease in leasefinancing 45,233 (252,394)Cash outflow from repayment of loans 254,554 143,435 Loans and leases acquired with subsidiaries - (153,942)Change in net funds (809,519) 2,136,389Net funds at 1 August 2006 3,916,132 1,779,743 Net funds at 31 July 2007 3,106,613 3,916,132 1 TAXATION 2007 2006 £ £Current tax UK corporation taxCurrent tax on income for the year 340,858 353,614Tax charge relating to prior periods (16,371) - 324,487 353,614Deferred taxChanges in deferred tax balances arising from:Origination or reversal of timing differences 111,416 128,914 Tax on profit on ordinary activities 435,903 482,528 2007 2006 £ £Profit on ordinary activities before tax 888,538 1,780,122Profit on ordinary activities multiplied by the rate of corporationtax of 30% (2006: 30%) 266,561 534,037Effects of:Expenses not deductible for tax purposes 43,308 60,439Capital allowances in excess of depreciation 383,813 (20,658)Tax rate differences (17,401) (11,036)Other timing differences (335,423) (2,134)Unrelieved tax losses - (207,034)Adjustment to prior period tax charge (16,371) -Current tax charge for the year 324,487 353,614 2 EARNINGS PER SHARE The calculations of earnings per share are calculated by dividing the earningsattributable to ordinary shares by the weighted average number of shares inissue during the year. For diluted earnings per share, the weighted averagenumber of ordinary shares is adjusted to assume conversion of all dilutivepotential ordinary shares. These represent share options granted to employeeswhere the exercise price is less than the average market price of the company'sordinary shares over the year ended 31 July 2007. 31 July 31 JulyBasic 2007 2006 £ £Profit for the year 452,635 1,111,768 Weighted average number of shares 32,295,911 23,592,884 Diluted Profit for the year 452,635 1,111,768 Weighted average number of shares for basic earnings per share 32,295,911 23,592,884Share options 492,550 393,997 Weighted average number of shares 32,788,461 23,986,881 Diluted and adjusted Profit for the year 2,167,916 1,764,965 Weighted average number of shares 32,788,461 23,986,881 3. STATUS OF FINANCIAL INFORMATION The financial information set out in this report does not constitute thecompany's statutory accounts for the year ended 31 July 2007, but is derivedfrom those accounts. Statutory accounts for the year ended 31 July 2007 will bedelivered to the Registrar of Companies shortly. They will carry an unqualifiedaudit report and no statements under section 237(2) or 237(3) of the CompaniesAct 1985. The annual report and accounts will be dispatched to shareholders assoon as practicable and a copy shall shortly be available on the Company'swebsite. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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