Final Results
Accuma Group PLC
31 October 2006
Press Release 31 October 2006
Accuma Group Plc
('Accuma' or 'the Group')
Preliminary Results
Accuma Group Plc, a leading provider of consumer financial solutions, today
announces its audited Preliminary Results for the year ended 31 July 2006.
Highlights
• Transformational year in which the Group has become a full consumer financial solutions
provider thus de-risking and diversifying its earnings
• Turnover increased 250% to £9.98m (2005: £2.85m)
• Gross profit increased to £4.5m (2005: £0.6m)
• Operating profit £1.9m (adjusted for goodwill amortisation) (2005: loss £463k)
• Strong balance sheet with cash of £4.44m (2005: £2m)
• EPS increased to 6.1p (adjusted fully diluted basis)
(2005: basic loss per share of 2.28p)
• £26m raised through placings for acquisitions and working capital
• Formation of Assist Mortgages and Loans
• IVA case numbers increased 245% to 2,537 (2005: 734)
• Significant investment in IT infrastructure
Commenting on the results, Charles Howson, Chief Executive of Accuma Group said:
'The 2006 financial year was transformational for us as we now have a full
consumer financial solutions platform enabling us to provide best advice to
people in financial difficulty.
'We are confident that referrals from third parties and intra-Group will
increase call conversion from 4% to an anticipated 30%. This will enable us to
fully capitalise on our marketing costs leading to more efficient client
acquisition.
'The integration of acquisitions is progressing ahead of plan and financials are
in-line with expectations. We are now able to clearly differentiate Accuma from
our competitors.'
- ends -
For further information:
Accuma Group Plc
Charles Howson, Chief Executive Tel: +44 (0) 161 751 6787
charles.howson@accumagroup.com www.accumagroup.com
Daniel Stewart & Company Plc
Lindsay Mair Tel: +44 (0) 20 7776 6550
lindsay.mair@danielstewart.co.uk www.danielstewart.co.uk
Media enquiries:
Abchurch
Chris Lane / Sarah Hollins Tel: +44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com
Chairman's Statement
This is the second year of record growth since Accuma's flotation and is
testament to the expertise and dedication of the Group's directors and
employees. These results are in line with market expectations and we believe
that we have the foundations in place to deliver substantial increases in
revenues and profits in the years to come.
The last year has again been exceptionally busy for the Group and we have made
significant progress towards achieving our goal of building a full consumer
financial solutions platform. To facilitate this transformation, the Group has
made three important acquisitions being Loan Line Holdings Limited ('Loan Line
'), Byrom & Keeley Financial Services Limited ('Byrom & Keeley') and Thomas
Charles & Co Limited ('Thomas Charles'). Each acquisition is complementary to
the Group's core business and were all earnings enhancing. The integration of
these acquisitions is progressing ahead of plan and the businesses are
performing in line with expectations.
Accuma is positioned within a market that continues to grow at a significant
rate, and with the full service platform that the Group now has, we are very
excited and optimistic about the prospects of the Group moving forward.
Accordingly we have significantly increased resource to accommodate the
anticipated growth in demand for the Group's services and have relocated both
Accuma and Wilson Phillips to new premises.
Once again, I would like to thank my fellow directors and all our staff for
their hard work and dedication throughout the year. I would like to welcome all
the staff in our newly acquired companies together with Lesley Gregory who was
appointed as Non Executive Director in August. In addition, I would like to
thank all our shareholders for continuing to support the Group during this
important stage of its development.
The Board looks forward to future growth with confidence.
Charles Taylor B.Comm.CA
Non Executive Chairman
Chief Executive's Statement
Introduction
The past financial year has seen the Group make significant progress on all
fronts. I am delighted to report on financial results which show significant
profitability and, as one of the leading providers in our industry, Accuma is
well positioned to prosper from the economic climate, which is resulting in
continued strong demand for our services.
The Group has made four acquisitions since its admission to AIM in March 2005
which, together with the formation of Assist Mortgages and Loans, transforms our
business and will accelerate our future growth and profitability.
The Group is now able to provide Individual Voluntary Arrangements ('IVAs'),
both through Accuma and Wilson Phillips; re-mortgages through Assist;
consolidation loans through Loan Line; and informal debt solutions through Byrom
& Keeley. The diversity of our product offering within the financial solutions
industry significantly de-risks the business model and in addition all
businesses are highly cash generative.
This broadening of our service offering is in line with our strategy which has
always been to provide a full consumer financial solutions platform, enabling us
to ensure that the client is always provided with best advice and the right
solution to their financial problems. This strategy also ensures that the Group
maximises the benefit of its marketing expenditure by increasing the number of
individuals we are able to provide assistance to directly. I believe this
approach ultimately builds real affinity with our clients and as such we become
their trusted advisor for other financial offerings.
Best Advice
Before commenting on our financial results, we believe it appropriate to refer
to recent media coverage and finance industry commentary on the effects of
possible increased regulation of the personal insolvency sector.
The Group has always been mindful of fairness to creditors where debtors are
unable to maintain their contractual payments. Accuma undertakes stringent
verification procedures to ensure that where a repayment proposal is
recommended, whether it is an IVA or an informal arrangement, it delivers the
maximum return to creditors whilst being sustainable by the debtor.
Formal insolvency proceedings such as IVAs are highly regulated and the Group
currently employs eight licensed Insolvency Practitioners who are responsible
for ensuring the suitability of each proposal recommended. Our commitment to
best advice to the benefit of both the debtor and creditors is demonstrated by
the fact that approximately only 4% of the individuals who contact us undertake
an IVA.
Earlier in the year, the Group was subject to a routine but comprehensive
inspection by the Insolvency Practitioners Association. I am pleased to state
that we received an excellent inspection report that praised our effectiveness
and efficiency. Our significant investment in IT infrastructure and development
ensures that we are well placed to provide appropriate advice and solutions
whilst sustaining growth through changes in market sentiment, legislation or the
regulatory environment.
The Board would welcome any changes that ensure that debtors receive impartial
advice based on their individual circumstances and protects both the debtor and
their creditors.
Financial Results
These results demonstrate the Group's strong performance compared with the
equivalent financial period last year.
• Operating profit is £1.9 million (pre goodwill amortisation), which gives
an operating margin of 19.5%;
• Turnover increased 250% from £2.85 million to £9.98 million;
• Gross profit margin doubled to 45%, from £0.6 million to £4.5 million;
• Shareholders' funds increased to £14.2 million (2005: £3.4 million)
including cash of £4.4 million (2005: £2.0 million).
The increase in gross profit margin is derived principally from the increase in
the 'bank' of live IVA cases being supervised. Each has an average case length
of five years, giving excellent revenue visibility. The number of such cases
now stands at 4,139 and supervisory revenue has grown 449% from £493k at 31 July
2005 to £2.7 million at 31 July 2006.
We are particularly pleased with our financial performance given the significant
operational changes that took place throughout the year. In August 2005, we
acquired Wilson Phillips, a smaller competitor, and have since successfully
integrated this business within the Group.
During the year and immediately after the year end, the Group successfully
completed three placings raising funds for the acquisition of Wilson Phillips,
Loan Line and Byrom & Keeley, and for working capital. Institutional demand for
these placings was excellent and each was significantly oversubscribed with the
Group raising a total of £26 million. In addition, we acquired Thomas Charles &
Co at the end of June 2006. The Group established a mortgage company (Assist
Mortgages and Loans) in January 2006 and we expect to see the full benefit of
this investment in the current financial year.
In December 2005, the Group relocated Accuma's head office within Manchester and
in May 2006 relocated Wilson Phillips. Both moves have resulted in significant
opportunity for expansion to cope with anticipated future demand and have
created more efficient working environments.
In addition the Group has continued to invest in its IT infrastructure and
systems, to increase operating efficiency and to streamline our case management
processes. Investment was also made in Wilson Phillips with a roll out of new
IT systems and procedures. The result for the year was marginally impacted by
this investment in resource which we made in anticipation of an increase in
business volumes which we expect to lead to significant benefits in the future.
The Group became cash positive from June 2006 which was earlier than expected.
Cash levels increased by £2.3 million to £4.44 million at the year end and the
year ended with an increase in shareholder funds of 320% at £14.2 million.
IVA Case Growth
In our IVA business, continued growth in the IVA run rate has seen an increase
of 245% in the number of new cases commenced during the period, from 734 in 2005
to 2,537 in 2006. The Group has always counted joint cases (husband and wife or
partners) as one case as the increase in fee income is minimal. However for ease
of comparison within the industry, should Accuma present joint cases as two the
number of cases commenced in the year would have been 3,314.
Based on historic conversion rates Accuma expects 330 IVA cases (434 counting
joint cases as two) to be completed in the month of October 2006.
During the period, client acquisition costs decreased from £1,015 in 2005 to
£960 in 2006. With the impact of our continued investment in operational
resource and processes, together with more efficient routes to market and the
benefit of our full financial solutions platform, we are confident that this
figure is sustainable and indeed would hope to see further reductions in the
year ahead.
Following a review in our operational processes, particularly in the area of
research and drafting IVA proposals, we have introduced a new system which
captures all data and relevant information of a debtor's financial
circumstances. This has increased the average volume of cases that a drafter
can complete by 66%, to circa 20 plus cases a month, with no detrimental impact
on the quality of due diligence. This has increased our capacity significantly.
The Group currently employs eight IPs which provides a capacity of approximately
560 cases per month.
Acquisitions
The acquisitions completed in the year and at the beginning of the current
financial year have propelled the Group from being an IVA based business model
to a full platform consumer financial solutions provider. This spreads risk
while diversifying earning streams through the ability to offer a broader suite
of financial solutions to indebted consumers.
The Group is already benefiting from extensive cross referrals and integration
of these acquisitions is proceeding well. The breadth of our platform has
greatly increased our profile and is leading to significant strategic alliances.
Each of the acquisitions has relatively few staff, effective management
information systems based around key performance indicators and each management
team is locked-in through their service contracts and earn-out incentives.
People
Following the acquisitions we announced the creation of an operational board
which would include the operational management of all the subsidiaries.
The Group today employs 200 people throughout the Group.
On 21 August 2006, Lesley Gregory was appointed to the Board of Accuma as a
Non-Executive Director. I would like to welcome Lesley to the Board and look
forward to working with her.
The Group has consistently sought to recruit and retain the best employees in
our market, which has contributed to the success in developing our growth. To
achieve our longer term strategy we will continue to implement this recruitment
policy. Accuma offers all of its staff training relevant to their roles, which
we believe has contributed to employee motivation and retention.
Outlook
We see the proposed introduction of Simple Voluntary Arrangements (SIVAs) and
the possibility of further legislation that could enable approved suppliers of
debt repayment plans that include an element of compulsion for creditors, as
beneficial to the Group's prospects.
In more general terms, unsecured consumer lending continues to increase, and
with the recent moreover and further anticipated increases in interest rates the
economic outlook provides significant growth potential for the Group. Having a
full financial consumer solutions platform enables the Group to provide best
advice available to consumers in financial difficulty.
The acquisitions now clearly differentiate us from our competitors and with the
continued energy and commitment of all our staff we believe the Group has the
platform to capitalise on the opportunities available within the market. We are
confident of achieving market expectations for 2007 and indeed of our prospects
in future years.
Charles Howson
Chief Executive
Accuma Group Plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31 JULY 2006
Period ended
31 July 31 July
Note 2006 2005
£k £k
TURNOVER
Existing operations 7,313 2,846
Acquisitions 2,667 -
9,980 2,846
Cost of sales (5,500) (2,204)
GROSS PROFIT 4,480 642
Administration expenses (2,787) (1,125)
OPERATING PROFIT/(LOSS)
Existing operations 1,050 (483)
Acquisitions 643 -
1,693 (483)
Interest receivable 124 40
Interest payable and similar charges (37) (30)
PROFIT/(LOSS) ON ORDINARY ACTIVITIES 1,780 (473)
BEFORE TAXATION
Taxation 1 (482) 83
PROFIT/(LOSS) ON ORDINARY ACTIVITIES 1,298 (390)
Earnings per share - basic 2 5.5p (2.28p)
- diluted 5.4p -
- adjusted diluted 6.1p -
All the activities of the Group are classed as continuing.
The Group has no recognised gains or losses other than the results of the year
as set out above.
Accuma Group Plc
CONSOLIDATED BALANCE SHEET
YEAR ENDED 31 JULY 2006
31 July 31 July
2006 2005
£k £k £k
FIXED ASSETS
Intangible assets 6,940 114
Tangible assets 726 111
7,666 225
CURRENT ASSETS
Debtors 6,065 2,112
Cash at bank 4,441 2,041
10,506 4,153
CREDITORS : Amounts falling due within one year (2,121) (816)
NET CURRENT ASSETS 8,385 3,337
TOTAL ASSETS LESS CURRENT LIABILITIES 16,051 3,562
CREDITORS : Amounts falling due after more than one year (329) (178)
Provisions for Liabilities and Charges (1,503) -
NET ASSETS 14,219 3,384
CAPITAL AND RESERVES
Called-up equity share capital 2,573 2,042
Share premium account 11,720 3,213
Other reserve (763) (1,262)
Profit & Loss 689 (609)
EQUITY SHAREHOLDERS' FUNDS 14,219 3,384
Accuma Group Plc
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 JULY 2006
Period ended
31 July 31 July
2006 2005
£k £k
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (912) (1,529)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 124 40
Interest paid (26) (26)
Interest element of finance lease rental payments (11) (4)
NET CASH INFLOW FROM RETURNS ON INVESTMENTS 87 10
AND SERVICING OF FINANCE
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (518) (110)
Proceeds from sale of fixed assets 276 (242) -
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (242) (110)
TAXATION - -
ACQUISITIONS (4,136) (24)
FINANCING
Issue of ordinary share capital 8,161 4,140
Issue costs charged to the share premium account (374) (495)
Capital element of finance lease rental payments (41) (9)
Repayment of loans (144) (6)
NET CASH INFLOW FROM FINANCING 7,602 3,630
INCREASE IN CASH 2,399 1,977
RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Period ended
31 July 31 July
2006 2005
£k £k
Operating profit/(loss) 1,693 (483)
Loss on disposal of fixed assets 12 -
Amortisation 170 10
Depreciation 154 34
(Increase) in debtors (3,153) (1,392)
Increase in creditors 212 302
Net cash outflow from operating activities (912) (1,529)
CONSOLIDATED CASH FLOW STATEMENT (continued)
YEAR ENDED 31 JULY 2006
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Period ended
31 July 31 July
2006 2005
£ £
Increase in cash in the year/period 2,399 1,977
Cash outflow from repayment of loans 143 6
Cash outflow from decrease in lease financing 42 8
Change in net debt resulting from cash flows 2,584 1,991
Loans and leases acquired with subsidiaries (154) -
New finance leases (293) (7)
Change in net funds 2,137 1,984
Net funds (debt) at 31 July 2005 1,779 (205)
Net funds at 31 July 2006 3,916 1,779
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 JULY 2006
1. TAXATION
Period ended
31 July 31 July
2006 2005
£k £k
Current Tax
UK corporation tax based on the results for the year/period at 30%/ 353 -
19%
Deferred taxation charge/(credit)
- origination and reversal of timing differences 129 (16)
- unrelieved tax losses - (67)
Total tax charge/(credit) 482 (83)
2. EARNINGS PER SHARE
The calculations of earnings per share are calculated by dividing the earnings
attributable to ordinary shares by the weighted average number of shares in
issue during the year/period. For fully diluted earnings per share the weighted
average number of shares is adjusted to assume conversion of all dilutive
potential ordinary shares. These represent share options granted to employees
where the exercise price is less than the average market price of the company's
ordinary shares over the year ended 31 July 2006.
Period ended
31 July 31 July
2006 2005
£k £k
Profit/(loss) for the year/period 1,298 (390)
Adjusted profit for the period 1,456 -
Basic weighted average number of shares 23,592,884 17,160,935
Share options 393,997 -
Diluted weighed average number of shares 23,986,881 -
For the period ended 31 July 2005, the share options in issue would have reduced
the loss per share and were therefore anti-dilutive.
3. STATUS OF FINANCIAL INFORMATION
The financial information set out in this report does not constitute the
company's statutory accounts for the year ended 31 July 2006, but is derived
from those accounts. Statutory accounts for the year ended 31 July 2006 will be
delivered to the Registrar of Companies shortly. They will carry an unqualified
audit report and no statements under section 237(2) or 237(3) of the Companies
Act 1985. The annual report and accounts will be dispatched to shareholders as
soon as practicable.
4. APPROVAL OF ACCCOUNTS
These accounts were approved by the Board of Accuma on 30 October 2006.
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