Preliminary Results
Accuma Group PLC
18 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, today
announces 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 a
whole and conditions remain difficult. However, our strategy of building a full
service platform has mitigated some of the pressure felt within our IVA division
and we are confident this strategy will stand us in good stead for the future.'
- 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 / Emma Johnson Tel: +44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com
Chairman's Statement
A Year of Market Turbulence
Changes in the acceptance criteria and fee levels introduced by UK Banks and
their advisers created considerable turbulence in the IVA market and this
adversely affected the Group and its competitors. Two profits warnings were
needed when it became apparent that the scale and length of the dispute and
negotiation, was materially greater than forecast. A resolution to the issues
appears to be in sight and the size of the average IVA handled by the Group
still makes this business viable.
The strategy of acquiring additional but complementary businesses has proved a
wise 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 a
success. In addition to this a rigorous cost cutting exercise and business
process review has been carried out to make the Group leaner and fitter and able
to prosper at the current market fee levels. This was not an easy task and I
would like to thank the executive Board members for robustly addressing the
issue and delivering the necessary cost savings.
Lastly I would again like to thank the staff for their hard work and enthusiasm
in difficult times and to also thank our shareholders who continue to support
the Group through this transitional period as we adjust to external market
pressures.
The Board looks forward to future growth with confidence.
Charles Taylor B.Comm.CA
Non-executive Chairman
Chief Executive's Statement
The last year has certainly been a testing time for the Group and indeed our
sector. In January and again in May we highlighted the trading difficulties
within our IVA division which resulted from deterioration in marketing
performance, increased competition and moreover from continued creditor pressure
resulting in IVA approval rates falling. This has clearly impacted our
financial performance.
On a divisional basis, our revenues can be analysed as follows:
Turnover - £'000s EBITDA - £'000s
Debt Management 2,903 1,669
Loan/Mortgage Broking 6,130 1,244
IVA Division 9,854 855
Referrals/other 1,563 159
Group 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 the
acquisitions 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% last
year. This reduction is mainly as a result of lower margins in the IVA
division. Moreover, increased resource in anticipation of significant growth in
the IVA market impacted both our gross margin and administration expenses that
were higher than the previous year at £7.4 million (2006: £3.0 million).
Included in administration expenses there was a significant increase in
amortisation of intangible assets of £1.3 million (2006: £0.2 million) and fixed
asset depreciation of £374k (2006: £154k).
Earnings before Interest Tax Depreciation and Amortisation (EBITDA) for the year
are £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 £400k
since July 2007 year end.
Shareholders funds increased to £31.6 million from £14.2 million the previous
year.
Operational Review
Following the acquisitions of Loan Line and Byrom Keeley in August 2006, the
Group now provides a full platform of consumer financial solutions from IVAs, to
informal debt management, consolidation loans and re-mortgaging. The Group's
strategy of providing best advice through a full platform of solutions has in
part mitigated the impact of difficulties within the IVA sector. Although this
may not be entirely evident in these results, this is due to the significant
investment in infrastructure to provide greater capacity that was required prior
to a major change in creditor attitudes that has significantly impacted our new
IVA case run rate. Following the significant changes in our sector and as
reported earlier this year, major operational changes have been implemented that
have resulted in significant cost savings, not least in our payroll where since
March, 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 the
reductions coming from our IVA division. In particular the group now employs 5
Insolvency Practitioners against 8 previously as IVA run rates have declined.
Given increased competition, particularly with direct advertising, the Group's
full service platform has become an attractive model with which we are now
building stronger referral relationships. Our client acquisition strategy
moving forward is focused on these affinity relationships in addition to the
internet where we have seen some success at acquiring clients more efficiently
through advertising and search engine optimisation, in particular through our
subsidiary Thomas Charles.
Debt Management
Byrom Keeley was acquired in August 2006 and was relocated to our Group head
office in March. This relocation has provided a more efficient referral process
and in particular with pressure on IVA acceptances, debt management plans are
often the only viable alternative. Consequently, performance in this division
was better than anticipated and the Board is confident that Byrom Keeley will
continue 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 loan
and mortgage broker. Despite strong historic growth we revised our expectations
for this division in February following the reduction in referrals from one
particular source. Despite this, the business has performed well due to a
combination of strong management and new business wins, finishing the year ahead
of our revised expectation. The outlook for the loan broking sector is somewhat
uncertain at this time due to the well publicised issues within the sub-prime
credit market. However, with the majority of its business remaining outside of
the sub prime sector, any impact should be marginal.
IVA Business
As reported throughout the year and in common with volume competitors, our IVA
business suffered significantly from a more competitive environment and
increased creditor pressure which resulted in lower approval rates. As a
consequence 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 193
a month.
It had been hoped that high level discussions that took place throughout the
year with key stakeholders in the process would result in a streamlined process
and although much progress has been made, some creditors, and their
representatives, have decided to stand outside of the process that was set up by
the Insolvency Service and the British Bankers Association and have enforced a
fee regime that we do not believe to be in the best interest of all stakeholders
and least of a ll the over-indebted consumer.
This new fee structure, which is being enforced through the creditors voting
process, has already seen IVA providers withdrawing from the market and others
stating that they can only provide a service to those debtors with monthly
contributions above circa £400, leaving many over-indebted consumers without
access 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 most
cases to just five times the client monthly contribution, including VAT. At £400
the average nominee fee equates to £1,700 net of VAT and as such is
approximately a £1,000 reduction on the previous average set up fee. Despite
this 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% of
payments made or realisations and only for the remaining term, not including the
first five months contributions.
Whilst the vast majority of Insolvency firms have not agreed to this new fee
structure, we would only be causing our clients more hardship and suffering if
we were to reject the cases because of the creditors fee capping. Like many
firms, for the time being, we have decided to accept creditor enforced
modifications to our fee structure whilst we continue in dialogue with the
creditors concerned and indeed the Insolvency Service and our regulatory bodies.
Accuma have always carried out a rigorous vetting process to ensure that the
client is suitable for an IVA, that the payment offered to the creditors is the
maximum the client can afford and that the payment is sustainable. Because of
this our average dividend to creditors, net of fees is 40p. We will continue to
provide the same high standards that have allowed us to build excellent working
relationships with creditors and provide dividends that are amongst the highest
in the industry.
Following our trading update in May, we anticipated a significant decrease in
fee levels in our future planning. As such, and with an average client payment
of 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 future
contracted 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 in
the Sale and Purchase Contract.
A payment of £2.4million was made to the vendors of Byrom Keeley in April 2007
and further payments may be due depending on the financial performance for the
years to December 2007 and 2008. Given progress so far this year, a provision
of £2.1 million has been made in the accounts for payment due in respect of the
year 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 a
corresponding provision has been made in these accounts. One further payment
equal to the pre-tax profit is possible for the year to July 2008, payable in
October 2008.
As pre-tax profits at Thomas Charles were below £1 million, no payment is due
and based on current performance it is unlikely that any payments will be made
in the future.
Outlook
Despite the issues that our IVA division has faced over the past year, prospects
for this division and indeed for the Group remain positive. The Group is now
less reliant on its IVA revenues and has reduced its operational costs
significantly. Moreover, general economic conditions favour our business model.
With consumer indebtedness at an all time high, disposable incomes continuing to
decrease and further uncertainty in the housing market the opportunities for
over-indebted individuals to seek more conventional solutions to their problems
will inevitably reduce. IVAs and debt management will become more attractive in
most cases both to the over-indebted consumer and indeed creditors; certainly
more attractive than bankruptcy.
Charles Howson
Chief Executive
ACCUMA GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 JULY 2007
2007 2006
Notes As restated
£ £
GROUP TURNOVER
Existing operations 11,417,833 9,980,429
Acquisitions 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 PROFIT
Existing operations (1,049,477) 1,507,455
Acquisitions 1,826,710 -
777,233 1,507,455
Interest receivable 240,853 124,340
Interest 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 PLC
CONSOLIDATED BALANCE SHEET
31 JULY 2007
2007 2006
As Restated
Notes £ £ £ £
FIXED ASSETS
Intangible assets 26,350,146 6,939,462
Tangible assets 855,546 726,450
27,205,692 7,665,912
CURRENT ASSETS
Debtors 8,876,714 6,064,689
Cash at bank and in hand 3,331,502 4,440,808
12,208,216 10,505,497
CREDITORS
Amounts 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
CREDITORS
Amounts falling due after more than one
year 100,894 328,705
PROVISIONS FOR LIABILITIES 3,497,579 1,502,922
NET ASSETS 31,641,009 14,218,873
CAPITAL AND RESERVES
Called up share capital 3,269,673 2,573,006
Share premium account 28,407,877 11,719,907
Other reserve (1,262,595) (762,595)
Share option reserve 367,251 282,387
Profit and loss account 858,803 406,168
SHAREHOLDERS' FUNDS 31,641,009 14,218,873
ACCUMA GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 JULY 2007
Notes 2007 2006
As restated
Reconciliation of operating profit to net cash outflow from £ £
operating activities
Operating profit 777,233 1,507,455
Provision for share options 84,864 185,826
Loss on sale of fixed assets 12,549
Amortisation of intangible assets 1,279,378 170,669
Depreciation of tangible fixed assets 374,224 153,837
(Increase) in debtors (494,633) (3,152,909)
(Decrease)/Increase in creditors (422,416) 212,194
Net cash inflow/(outflow) from operating activities 1,598,650 (910,379)
CASH FLOW STATEMENT
Net cash inflow/(outflow) from operating activities 1,598,650 (910,379)
Returns on investments and servicing of finance 86,192 86,841
Taxation (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) 2,399,290
Cash (inflow)/outflow from (increase)/decrease in lease
financing 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) 2,136,389
Net 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 tax
Current tax on income for the year 340,858 353,614
Tax charge relating to prior periods (16,371) -
324,487 353,614
Deferred tax
Changes 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 1,780,122
Profit on ordinary activities multiplied by the rate of corporation
tax of 30% (2006: 30%) 266,561 534,037
Effects of:
Expenses not deductible for tax purposes 43,308 60,439
Capital 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 earnings
attributable to ordinary shares by the weighted average number of shares in
issue during the year. For diluted earnings per share, the weighted average
number of ordinary 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 2007.
31 July 31 July
Basic 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 23,592,884
Share 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 the
company's statutory accounts for the year ended 31 July 2007, but is derived
from those accounts. Statutory accounts for the year ended 31 July 2007 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 and a copy shall shortly be available on the Company's
website.
This information is provided by RNS
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