Preliminary Results

RNS Number : 7487N

Baydonhill PLC

07 September 2011

 



7 September 2011

Baydonhill plc

("Baydonhill" or "the Company")

Preliminary results for the year ended 31 March 2011

HIGHLIGHTS

·      Turnover (value of foreign exchange transactions) for the year up 107 per cent to £1,465 million (2010: £709 million)

·      Gross profit (foreign exchange commission earned) up 86 per cent to £6.7 million (2010: £3.6 million)

·      Profit before tax of £467,000 (2010: loss £739,000)

·      Profit after tax of £397,000 (2010: profit £681,000 after exceptional deferred tax credit)

·      Business strategically re-positioned to focus on core Corporate and Retail divisions

Sir Eric Peacock, Chairman of Baydonhill, commented:

"In the year to 31 March 2011 the Company produced a pleasing result; a year of maiden pre-tax profits. Towards the end of the year, the business undertook some important and necessary strategic changes which the board believes will bring long term benefits to shareholders. Whilst the current year will see these changes absorbed fully in the business, we expect good growth to come through from 2012 onwards."

 

 

Contacts:

Baydonhill plc
Sir Eric Peacock, Chairman Wayne Mitchell, Chief Executive	Tel: [phone]
Merchant Securities Limited
Simon Clements/David Worlidge	Tel: [phone]
Square1 Consulting Limited	Tel: [phone]
David Bick/Mark Longson

Chairman's and Chief Executive Officer's Statement

Introduction

In the year under review the Company generated a profit before tax after several years of losses resulting from the investment in the business. Whilst revenue growth remained strong, the Company made some strategic changes to improve quality of earnings in the final quarter of the year. This included exiting the Money Service business within the Corporate Division. These changes are expected to have a short term impact on the growth of earnings during the current year.

Revenues from the Corporate Division have continued to show consistent growth in new business during the year and the Company has continued to focus on platform developments and developing the core corporate business.  The Retail Division had a very positive year but the division continues to be impacted by the difficult economic climate.

During the period the Company entered into an affiliate arrangement to provide payment services to clients of Interchange Limited, a competitor in the Retail Sector, which ceased to trade in March 2011. This has resulted in a significant increase in the number of retail clients using the Company's services.

Following the recent regulatory changes in the UK under the new PSD regulations the Company is now an Authorised Payment Institution with the Financial Services Authority ("FSA").

Financial Review

The profit before tax for the financial year was £467,000, compared to a loss of £739,000 in 2010.  The Company reported a profit after tax for the financial year of £397,000 (2010: profit £681,000). The result for the current year includes an unrecognised profit of £158,795 (2010: loss £68,723) relating to the fair value adjustment in respect of foreign exchange contracts required in order to comply with IAS 39.  This unrealised profit reverses as the contracts with both customers and the bank are delivered.  Last year's profit after tax was a result of the Directors deciding to recognise the deferred tax asset arising from cumulative trading losses incurred in previous years.  The Directors remain satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.  The Company prepared a revised five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2011.  The forecast indicated that the losses would be utilised in full by March 2015.

Gross turnover (representing the gross value of foreign exchange currency transactions undertaken) for the Company for the year under review was £1,465 million, an increase of 107 per cent from the previous year's figure of £709 million.  Gross profit (representing foreign exchange commissions earned net of payments to affiliates and bank charges) increased by 86 per cent to £6.7 million from £3.6 million in the previous year.

In 2011, there was a charge of £16,342 in respect of share based payments relating to the options issued in December 2010 (2010: £1,048) which vest in September 2013. All share options issued in previous years were fully vested at 31 March 2011.

Total equity at 31 March 2011 amounted to £1.4 million compared to £0.5 million at 31 March 2010. This increase is due to the profit achieved in the year under review, the exercise of warrants and the issue of new shares during the year, as a result of Ekwienox Fx Limited ("Ekwienox Fx"), the Company's largest shareholder, exercising its right to convert a convertible loan.

Divisional Review

Revenues from the Corporate Division have shown continued growth in the year under review. Gross turnover was £1.3 billion compared to £604 million in the prior year. The growth is a result of the continuing sales effort and the recurring nature of the corporate business.

The Retail Division has experienced a positive year, with turnover growing to £163 million in 2011 from £105 million in 2010.  This was due to signs of a recovery in the economy. 

Fundraising

On 31 March 2011, Ekwienox Fx exercised 300,000 warrants at an exercise price of 12 pence per share, representing all the warrants that Ekwienox Fx held at that date.

On 31 March 2011, Ekwienox Fx also converted an existing £476,000 loan facility provided by Ekwienox Fx in May 2007, and amended in February 2010, into new ordinary shares ("Ordinary Shares") in the capital of the Company.  Under the terms of the loan agreement, the loan was convertible into new ordinary shares at 5.75 pence per share at any time up to the repayment date, 30 September 2011. Since the loan was made, no principal amounts have been repaid.

People

There has been no change to the composition of the Board in the year under review. 

The Company has continued to grow with the ongoing support of the employees and the Board would like to thank them for their continuing dedication and efforts this year.

Outlook

As previously announced, the Company made some strategic changes to its business in the final quarter of the year under review by exiting the Money Service business within the Corporate Division. This will impact revenue growth for the coming year.  The Directors expect that during 2011 there will be continued new business growth from the core Corporate Division to replace revenue lost as a result of the strategic changes. The Company is also examining several opportunities which exist in specific industry channels.  

The Directors believe that the current financial year will continue to be challenging for the Retail Division although there are some signs of recovery. The economic outlook remains uncertain and the retail clients remain cautious about asset and property transactions overseas. The Company has decided to increase marketing expenditure to help capitalise on any recovery in this area and plans to recruit additional staff as and when the opportunity arises.

Whilst the current year will see the impact of the strategic changes, as they are absorbed fully in the business, we expect profitable growth to come through from 2012 onwards.

Sir Eric Peacock KCMG                                               Wayne Mitchell

Chairman                                                                      Chief Executive Officer

7 September 2011                                                          7 September 2011

INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2011

	Notes		2011		2010
			£		£
Continuing Activities
Turnover	3		1,465,444,124		709,023,274
Cost of sales			(1,458,896,795)		(705,339,214)
Cost of sales - Exceptional items	2		158,795		(68,723)
Total cost of sales			(1,458,738,000)		(705,407,937)
Gross profit			6,706,124		3,615,337
Administrative expenses			(6,100,471)		(4,206,883)
Operating profit /(loss)			605,653		(591,546)
Finance costs			(167,453)		(213,204)
Finance income			29,001		65,435
Profit /(loss) before taxation			467,201		(739,315)
Taxation	4		(70,239)		1,420,200
Profit for the financial year			396,962		680,885
Earnings per share
Basic	5		0.80p		1.95p
Diluted	5		0.72p		1.28p

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011

	2011		2010
	£		£
Profit for the financial year	396,962		680,885
Other comprehensive income for the year, net of tax	-		-
Total comprehensive income for the year	396,962		680,885

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011

	Notes	2011		2010
		£		£
Non-current assets
Plant and equipment		41,145		24,720
Intangible assets		573,990		658,085
Investments in subsidiaries		10		10
Deferred tax	9	1,349,961		1,420,200
Total non-current assets		1,965,106		2,103,015
Current assets
Trade and other receivables	6	106,984,758		83,823,792
Derivative financial assets - forward contracts		1,031,212		1,390,708
Cash and cash equivalents		15,386,282		5,544,679
Total current assets		123,402,252		90,759,179
Current liabilities
Trade and other payables	7	(123,139,993)		(90,695,587)
Derivative financial liabilities - forward contracts		(369,945)		(330,853)
Total current liabilities		(123,509,938)		(91,026,440)
Net current liabilities		(107,686)		(267,261)
Total assets less current liabilities		1,857,420		1,835,754
Non-current liabilities
Borrowings	8	(493,556)		(1,371,094)
Net assets		1,363,864		464,660
Equity
Share capital		578,338		492,555
Share premium		4,672,645		4,246,427
Retained earnings		(3,887,119)		(4,300,423)
Equity component of convertible loans		-		26,101
		1,363,864		464,660

STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 MARCH 2011

	Share Capital	Share Premium	Equity component of convertible loan notes	Retained Earnings	Total Equity
	£	£	£	£	£
Balance at 1 April 2010	492,555	4,246,427	26,101	(4,300,423)	464,660
Total comprehensive income for the year	-	-	-	396,962	396,962
Share based payments	-	-	-	16,342	16,342
Conversion of loan note	82,783	393,218	(26,101)	-	449,900
Exercise of warrants	3,000	33,000	-	-	36,000
Balance at 31 March 2011	578,338	4,672,645	-	(3,887,119)	1,363,864

	Share Capital	Share Premium	Equity component of convertible loan notes	Retained Earnings	Total Equity
	£	£	£	£	£
Balance at 1 April 2009	243,841	3,005,551	57,888	(4,982,356)	(1,675,076)
Total comprehensive income for the year	-	-	-	680,885	680,885
Share based payments	-	-	-	1,048	1,048
Conversion of loan note	5,298	26,489	(31,787)	-	-
Issue of equity share capital	243,416	1,214,387	-	-	1,457,803
Balance at 31 March 2010	492,555	4,246,427	26,101	(4,300,423)	464,660

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2011

	Notes		2011		2010
			£		£
Net cash generated from operating activities	10		10,124,419		2,325,316
Investing activities
Interest received			29,001		13,966
Purchases of intangible assets			(137,975)		(148,893)
Purchases of plant and equipment			(32,204)		(27,197)
Net cash used in investing activities			(141,178)		(162,124)
Financing activities
Decrease in borrowings			(177,638)		(180,767)
Increase in borrowings			-		139,425
Issue of shares			36,000		789,591
Interest paid			-		(77,312)
Net cash (used in) / generated from financing activities			(141,638)		670,937
Net increase  in cash & cash equivalents			9,841,603		2,834,129
Cash and cash equivalents at beginning of year			5,544,679		2,710,550
Cash and cash equivalents at end of year			15,386,282		5,544,679

NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 MARCH 2011

1.    BASIS OF PREPARATION

This announcement has been prepared in accordance with the Company's accounting policies, which in turn are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.  IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission.  The accounting policies comply with each IFRS that is mandatory for accounting periods ended 31 March 2011.

2     COST OF SALES - EXCEPTIONAL

	2011	2010
	£	£
Unrealised fair value adjustment on forward contracts	(158,795)	68,723

The exceptional cost of sales item relates to the unrealised (gain) / loss arising from the fair value adjustment relating to outstanding contracts with both customers and the bank.  As these contracts mature, the unrealised (gain) / loss will reverse.  This adjustment is required in order to comply with IAS 39.

3     BUSINESS AND GEOGRAPHICAL SEGMENTS

Management has determined the operating segments by considering the business from both a geographic and product perspective.  For management purposes, the Company is currently organised into two operating divisions: Corporate and Retail.  These divisions are the business segments for which the Company reports its segment information internally to the Board of Directors.  The Company's operations are predominately in the one geographical segment, the United Kingdom.

The results of each segment have been prepared using accounting policies consistent with those of the Company as a whole.

	Corporate Division	Retail Division	Unallocated	Total
Year ended 31 March 2011	£	£	£	£
Turnover	1,302,024,168	163,419,956	-	1,465,444,124
Cost of Sales	(1,297,216,303)	(161,680,492)	158,795	(1,458,738,000)
Gross profit	4,807,865	1,739,464	158,795	6,706,124
Operating profit / (loss)	729,528	572,399	(696,274)	605,653
Finance costs	-	-	(167,453)	(167,453)
Finance income	-	-	29,001	29,001
Profit / (loss) before taxation	729,528	572,399	(834,726)	467,201
Taxation	-	-	(70,239)	(70,239)
Profit / (loss) for the year from continuing operations	729,528	572,399	(904,965)	396,962
Capital expenditure	137,975	-	32,204	170,179
Depreciation & amortisation	222,070	-	15,779	237,849
Share-based payment costs	(5,546)	(1,947)	(8,849)	(16,342)

	Corporate Division	Retail Division	Unallocated	Total
Year ended 31 March 2010	£	£	£	£
Turnover	603,731,706	105,291,568	-	709,023,274
Cost of Sales	(601,272,705)	(104,203,955)	68,723	(705,407,937)
Gross profit	2,459,001	1,087,613	68,723	3,615,337
Operating profit / (loss)	(213,034)	74,690	(453,202)	(591,546)
Finance costs	-	-	(213,204)	(213,204)
Finance income	-	-	65,435	65,435
Profit / (loss) before taxation	(213,034)	74,690	(600,971)	(739,315)
Taxation	-	-	1,420,200	1,420,200
Profit / (loss) for the year from continuing operations	(213,034)	74,690	819,229	680,885
Capital expenditure	148,893	-	27,197	176,090
Depreciation & amortisation	191,006	18,851	12,000	221,857
Share-based payment costs	262	262	524	1,048

Included in revenues arising from the sale of foreign currency exchange are two customers with total revenues of approximately £400 million (2010: £86.5 million) which each contributed more than 10 per cent of the Company's revenues.   However, in terms of gross profit these clients accounted for only 18 per cent of the Company's Gross Profit (2010: 2 per cent.).

4     TAXATION

	Note	2011		2010
		£		£
Current tax		-		-
Deferred tax	11	(70,239)		1,420,200
		(70,239)		1,420,200

Tax has been calculated using an estimated annual effective tax rate of 15 per cent (2010: Nil per cent) on profit before tax.

The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the loss before tax is as follows:

	2011		2010
	£		£
Profit / loss before taxation	467,201		(739,315)
Tax on loss on ordinary activities at standard UK corporation tax rate of 28 per cent (2010: 28 per cent)	130,816		(207,008)
Effects of:
Expenses not deductible for tax purposes	11,858		5,596
Fair value adjustment on derivative financial instruments	-		(19,242)
Change in tax rates	(72,435)		-
Prior year trading losses / short term timing differences	-		(1,199,546)
Total tax charge / (credit) for the year	70,239		(1,420,200)

5     EARNINGS PER SHARE

Basic profit per share and diluted profit per share are based on a profit after tax of £396,962 and £414,836 respectively the difference relates to interest on the convertible loan £24,823 and the tax effect of this £6,951 (2010: profit £681,000).  The basic profit per share has been calculated on a weighted average of 49,915,356 (2010: 34,863,807) Ordinary Shares in issue.  Diluted profit per share is calculated on a weighted average of 57,950,934 Ordinary Shares (2010: 54,012,448).  The convertible debt is assumed to have been converted into Ordinary Shares, and the net profit is adjusted to eliminate the interest expense less the tax effect.  For the share options and warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's share) based on the monetary value of the subscription rights attached to outstanding share options.  The number of shares calculated is compared with the number of shares that would have been issued assuming the exercise of the share options.

	2011		2010
	£		£
Basic weighted average number of shares	57,558,751		53,920,140
Potential dilutive effect of share options schemes	392,183		92,308
Dilutive weighted average number of shares	57,950,934		54,012,448

6     TRADE AND OTHER RECEIVABLES

	2011		2010
	£		£
Trade receivables	107,095,179		83,954,549
Less: provision for impairment	(410,274)		(277,090)
Trade receivables - net	106,684,905		83,677,459
Prepayments and accrued income	299,853		146,333
	106,984,758		83,823,792

Trade receivables and forward contracts constitute the only financial assets within the category "Loans and Receivables" as defined by IAS 39.

Trade receivables and forward contracts are non-interest bearing and are generally not yet due or less than 30 days past due. 

Of the trade receivables and forward contracts balance at the end of the year, £17 million (2010: £13 million) is due from the Company's largest counterparty.  There is one (2010: one) counterparty where the balance of trade receivables represents more than 5 per cent. of the total balance of trade receivables.

A provision for impairment of trade receivables is established when there is no objective evidence that the Company will be able to collect all amounts due according to the original terms.  The Company considers factors such as default or delinquency in payment, significant financial difficulties of the debtor and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired.

As at 31 March 2011 trade receivables of £107,095,179 (2010: £86,954,549) were not yet due or past due but not impaired.  The ageing analysis of these trade receivables is as follows:

	2011		2010
	£		£
Not yet due	101,473,102		77,882,971
Up to 3 months past due	5,622,077		6,071,578
	107,095,179		83,954,549

The movement in the bad debt provision can be analysed as follows:

	2011		2010
	£		£
Opening position	277,090		112,797
Amount charged to the income statement	192,807		188,937
Amount written off as uncollectible	(59,623)		(24,644)
Closing position
	410,274		277,090

There are no impaired trade receivables not yet due.  Trade receivables up to three months past due includes £410,274 (2010: £277,090) of impaired trade receivables.

7     TRADE AND OTHER PAYABLES

	2011		2010
	£		£
Amounts owed to group undertakings	1,345,411		754,105
Trade payables	119,764,002		88,928,660
Trade payables in respect of expenses	123,145		167,512
Other tax and social security	345,198		214,934
Accruals and deferred income	1,356,959		517,592
Other creditors	205,278		112,784
	123,139,993		90,695,587

Trade payables in respect of expenses comprise amounts outstanding for administrative and other ongoing costs.  The average credit period taken for trade purchases is 30 days (2010: 38).  No interest is charged on the outstanding balance.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

8          BORROWINGS

	2011		2010
	£		£
Loans - amounts owed to group undertakings	493,556		1,371,094

All the borrowings are stated at amortised cost using the effective interest method.

The amount due to ASPone Limited on deferred terms of £243,556 (2010: £385,960) attracts interest at 10 per cent. per annum and is repayable as to £20,000 (2010: £15,000) a month.  There is no material difference between amortised cost and their fair value.

The convertible loan of £435,134 for the year ended 31 March 2010 attracted interest at a rate of 3.75 per cent and was converted during the year ended 31 March 2011 into 1 pence Ordinary Shares at a price of 5.75 pence per share. 

The amount due to Wallich & Matthes Holding BV of £250,000 (2010: £550,000) is repayable by instalments between 30 September 2010 and 30 September 2012 and attracts interest at a rate of 12 per cent.  There is no material difference between the amortised costs and their value.

9     DEFERRED TAX

	2011		2010
	£		£
At 1 April	1,420,200		-
(Charge)/credited to the income statement	(70,239)		1,420,200
At 31 March	1,349,961		1,420,200

	Tax losses	Short term timing differences	Accelerated capital allowances	Fair value loss / (gains )	Potential deferred tax not recognised	Total recognised
	£	£	£	£	£	£
At 1 April 2010	1,047,704	38,312	334,184	(4,806)	4,806	1,420,200
For the year	(51,471)	72,358	(91,126)	4,806	(4,806)	(70,239)
At 31 March 2011	996,233	110,670	243,058	-	-	1,349,961

Recognition of deferred tax

As a result of the change in the Company's performance referred to above, the Directors consider it appropriate to recognise the deferred asset arising principally from trading losses incurred in previous years.  In order to recognise the deferred tax asset arising from prior period trading losses, the Directors must be satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised.  The Company prepared a five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2011.  The forecast indicated that the losses would be utilised in full by March 2015, and the Directors therefore decided it would be appropriate to continue to recognise the deferred tax asset in full. 

Other factors affecting future tax

As at 31 March 2011, trading losses of approximately £4.2 million (2010: £4.5 million) are available to carry forward against future profits of the same trade.  These tax losses will reduce the corporation tax charge in future years until they have been utilised. 

10    NET CASH GENERATED FROM / (USED IN) OPERATING ACTIVITIES

	2011		2010
	£		£
Operating profit/(loss)	605,653		(591,546)
Depreciation charge	15,779		30,851
Amortisation charge	222,070		191,006
Increase in receivables	(22,801,470)		(43,553,681)
Increase in payables	32,082,387		46,248,686
Cash generated from operations	10,124,419		2,325,316
Tax paid	-		-
	10,124,419		2,325,316

11    DIVIDENDS

The directors have not recommended the payment of a dividend.

12    STATUS OF FINANCIAL INFORMATION

The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 March 2011 or 31 March 2010.  The financial information has been extracted from the statutory accounts of the company for the year ended 31 March 2010.  The auditors reported on these accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.  The statutory accounts for the year ended 31 March 2010 have been delivered to the Registrar of Companies.

The statutory accounts for the year ended 31 March 2011 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

END

 

 

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