Interim Results
Mattioli Woods PLC
19 February 2008
Press Release 19 February 2008
Mattioli Woods plc
('Mattioli Woods' or 'the Group')
Interim Results
Mattioli Woods plc (AIM: MTW.L), the specialist pensions consultancy, reports
its Interim Results for the six months ended 30 November 2007.
Financial highlights
• Turnover up 22.1% to £5.30m (1H07: £4.34m)
• PBT up 15.8% to £1.83m (1H07: £1.58m)
• EPS up 15.9% to 7.3p (1H07: 6.3p)
• Interim dividend up 17.6% to 1.00p (1H07: 0.85p)
• Core funds under trusteeship £1.1bn (1H07: £0.8bn)
• Cash at period end £2.23m (1H07: £1.59m)
Operational highlights
• Number of core schemes increased to 2,032 (1H07: 1,492)
• Average scheme value of £0.53m (1H07: £0.51m)
• Organic growth of 8.6% in SIPP numbers (1H07: 6.4%)
• Investing in recruitment and technology to increase capacity
• PCL acquired in July 2007 and fully integrated
• Michael Kershaw appointed as second independent director
In addition, the Group is pleased to announce the acquisition of the trade and
assets of John Bradley Financial Services ('JBFS') and North Star SIPP LLP ('
North Star') (together 'the JB Group') on 18 February 2008 for a cash
consideration of up to £2.59 million. As stated in an announcement dated 19
February 2008, the acquisition of the JB Group enhances Mattioli Woods'
consultancy offering and consolidates the Group's position in what remains a
highly fragmented market.
Since its admission to AIM, the Group has been committed to expanding the skills
and range of experience represented on our Board of Directors. We are now
pleased to announce the appointment of Michael Kershaw as a second independent
non-executive director, following a highly successful career in investment
banking with Dresdner Kleinwort Wasserstein and UBS.
Commenting on the Interim Results, Bob Woods, Executive Chairman of Mattioli
Woods, said:
'We have continued to deliver strong growth over the six months ended 30
November 2007, with turnover up 22.1% and profit before tax up 15.8% compared to
the same period last year. Organic growth in the number of self invested
personal pension ('SIPP') schemes we act for has been a healthy 8.6% (1H07:
6.4%), illustrating that the appeal of SIPPs is spreading to a much wider
audience. We believe this also reflects the growing market presence of Mattioli
Woods and a greater awareness of the bespoke services we provide. The recent
difficulties in both credit and equity markets have made life more challenging
for investment advisors generally. However, our experience is that demand for
bespoke, high quality pension advice is increased during periods of uncertainty.
Our first half results reflect this and the robust nature of our fee-based
business model, which has multiple revenue streams and a high proportion of
recurring income. Trading in the current period continues in line with
expectations and I believe we are very well-placed to take advantage of new
opportunities in our key markets as they continue to develop.'
- Ends -
For further information:
Mattioli Woods plc
Bob Woods, Executive Chairman Tel: +44 (0) 116 240 8700
bob.woods@mattioli-woods.com www.mattioli-woods.com
Ian Mattioli, Chief Executive Tel: +44 (0) 116 240 8700
ian.mattioli@mattioli-woods.com www.mattioli-woods.com
Nathan Imlach, Finance Director Tel: +44 (0) 116 240 8700
nathan.imlach@mattioli-woods.com www.mattioli-woods.com
Evolution Securities Limited
Joanne Lake, Corporate Finance Tel: +44 (0) 113 243 1619
joanne.lake@evosecurities.com www.evosecurities.com
Media enquiries:
Abchurch Communications
Sarah Hollins / Louise Thornhill Tel: +44 (0) 207 398 7783
louise.thornhill@abchurch-group.com www.abchurch-group.com
Chairman's statement
I am pleased to report that we have continued to deliver strong growth over the
six months ended 30 November 2007, with turnover up 22.1% and profit before tax
up 15.8% compared to the same period last year. Organic growth in the number of
SIPP schemes we act for has been a healthy 8.6% (1H07: 6.4%), illustrating that
the appeal of SIPPs is spreading to a much wider audience. We believe this also
reflects the growing market presence of Mattioli Woods and a greater awareness
of the bespoke services we provide.
We now act for over 2,000 SIPP and small self-administered pension scheme ('SSAS
') clients (1H07: 1,492) throughout the UK, with funds under trusteeship at 30
November 2007 totalling £1.1bn (1H07: £760m). We believe that our average
scheme value of over £0.5m is well in excess of the industry average.
The acquisition of Pension Consulting Limited ('PCL') was completed in July 2007
and I am very satisfied with the successful integration of PCL's business into
the Group. We have seen strong demand for our pension consultancy and
investment advice from the PCL client base, with 100% retention of the acquired
portfolio achieved to date.
The acquisition of the JB Group consolidates our market position by adding a
further 235 SSASs and 55 SIPPs to our core portfolio of clients. Like PCL, the
JB Group is an excellent cultural fit with Mattioli Woods and we are also able
to offer its clients a range of additional services, including our syndicated
property initiative and guaranteed investment products.
Market overview
The recent difficulties in both credit and equity markets have made life more
challenging for investment advisors generally. However, our experience is that
demand for bespoke, high quality pension advice is increased during periods of
uncertainty. We also anticipate the current volatility in global markets will
lead to increased demand for our investment advice and capital-guaranteed
structured products.
Despite general market conditions, the demand for SIPPs continues to grow,
supporting our previously stated view that the appeal of SIPPs is extending due
to the control, flexibility and cost-effectiveness the product offers.
However, not all SIPPs are the same. A Mattioli Woods SIPP is extremely
flexible, allowing investment in all areas permitted by HM Revenue & Customs.
This includes commercial property and structured products, as well as equities.
As trustees of their SIPP, our clients have control of their investments and
access to proactive and personalised investment advice. Our fee-based services
are cost-effective and are supported by our robust administration systems.
My prediction that the vast Defined Benefit market will wither over the next few
years has been evidenced by us receiving five new instructions to provide
consultancy on the wind-up of final-salary schemes during the period. I
anticipate the demise of the Defined Benefit market will gather momentum,
bringing enormous change within the pensions arena and further consultancy
opportunities for pensions advisers, including Mattioli Woods.
Trading results
The first half's results reflect the robust nature of our fee-based business
model, which has multiple revenue streams and a high proportion of recurring
income. In the six months ended 30 November 2007 we achieved increased turnover
of £5.30m (1H07: £4.34m).
Profit before tax was up 15.8% to £1.83m (1H07: £1.58m), with EBITDA of £1.86m
(1H07: £1.69m). A reported operating margin of 32.1% was achieved (1H07: 35.1%)
and earnings per share increased by 15.9% to 7.3 pence (2006: 6.3 pence).
The financial result for the equivalent period last year was boosted by £0.1m of
non-recurring revenue associated with the introduction of Pension
Simplification. In addition, the accrual for consultants' bonuses at 30
November 2006 was £0.1m lower than that eventually paid following excellent
results for the full year, meaning normalised operating margin has improved to
32.1% (1H07: 30.9%).
Our pension investment strategy is based around flexible asset management. We
aim to balance our clients' exposure to equity market risk by giving access to
other asset classes and have seen strong growth in demand for both commercial
property investments and structured products.
Our clients are able to take a long-term view on investment. Many regard the
current weakness in the commercial property market as a buying opportunity.
During the first half we facilitated the creation of five new property
syndicates (1H07: four), purchasing prime commercial property with a total value
of £15.9m (1H07: £9.6m) on our clients' behalf. In the same period we saw
clients' cash balances rise to £132m (2H07: £110m).
Due to the greater number and higher value property syndicates established in
the period, revenues from this area of our business increased to 18.3% (1H07:
10.3%) of total revenues. This included £0.65m (1H07: £0.26m) of one-off fees
from the creation of new property syndicates and £0.32m (1H07: £0.19m) from a
growing base of annual administration fees relating to existing syndicates.
The increase in property syndicate debtors at the period end to £0.6m (1H07:
£0.1m) had the effect of reducing cash generated from operations to £0.9m or
47.7% of EBITDA (1H07: £1.8m or 108.9%). Net cash generated from operations was
also impacted by a £0.5m increase in trade debtors and accrued income, together
with a £0.2m increase in taxes paid during the period. Cash at the period end
increased to £2.23m (1H07: £1.59m).
Dividends
The Board is pleased to recommend the payment of an interim dividend for the
half year ended 30 November 2007 of 1.00 pence (2006: 0.85 pence) per ordinary
share, and I reiterate our intention to grow dividend distributions sensibly
going forward. The interim dividend will be paid on 28 March 2008 to
shareholders on the Register at the close of business on 29 February 2008.
Capacity
Our people continue to demonstrate an enormous amount of enthusiasm and
commitment in responding to the challenges faced by our fast-growing
organisation. PCL's thirteen staff moved into our Leicester office immediately
following the acquisition and it is pleasing they have integrated into Mattioli
Woods so quickly.
Maintaining capacity remains crucial in an environment of growing demand, and
our graduate recruitment programme remains on target. Seven new graduates
joined the Group (2006: seven), increasing our total headcount at the end of the
period to 123 (2006: 96). Our increased business profile following the
admission to AIM has enhanced our ability to recruit graduates and experienced
pension administration and support staff.
The development of a scalable technology platform also remains a key objective
for the Group. We introduced a new time accounting and invoicing system during
the period and are continuing to invest in the next phase of development of our
bespoke pension administration system 'MWeb'.
Staff
Since its admission to AIM, the Group has been committed to expanding the skills
and range of experience represented on our Board of Directors. We are now
pleased to announce the appointment of Michael Kershaw as a second independent
non-executive director. Michael joins us following a highly successful career
in investment banking with Dresdner Kleinwort Wasserstein and UBS. I am
confident his experience will enhance our ability to deliver future
profitability and growth.
I have highlighted previously that Mattioli Woods enjoys a strong team spirit
and commitment from all of its staff and it remains our aim to build on that
culture by continuing to facilitate wider equity participation within the
organisation. The introduction of the Mattioli Woods Share Incentive Plan in
March 2008 will be an important step towards this objective.
Principally, the share incentive plan will enable our employees to buy shares in
the Company at an effective discount to the Stock Exchange price by having an
amount deducted from pre-tax salary each month.
Shareholders
Following the placing of a further 3,239,594 shares by Ian Mattioli and myself
during the period we have expanded the excellent institutional shareholder base
we have enjoyed since joining the AIM market. We are also pleased to be
developing a wider private client shareholder base. It is your Board's
intention to continue to communicate fully with all our shareholders, and the
wider market, and in so doing build further awareness of Mattioli Woods over the
coming years.
Regulation
Currently, money built up from national insurance rebates when people contract
out of the state second pension ('protected rights monies') can only be held in
a restricted range of insured funds, bank deposits and mutual funds. In
December 2007 the Government published plans to permit SIPPs to hold protected
rights monies from October 2008. This is likely to be the catalyst for further
growth in the SIPP market, with predictions that much of the £75bn to £100bn
locked up in protected rights savings could move into SIPPs.
The Financial Services Authority ('FSA') published the discussion paper 'A
Review of Retail Distribution' in June 2007, seeking to improve the efficiency
of the market for the distribution of retail investment products. I believe the
increased regulatory and professional requirements proposed by the FSA's review
may lead to further consolidation within our key markets.
The review also proposes wider adoption of a more transparent remuneration model
(known as 'Customer Agreed Remuneration') where the costs of intermediary
services are separated from the costs of the product. Our fee-based revenue
model means Mattioli Woods is well-placed to deal with any such regulatory
change.
Outlook
The demand for bespoke pensions advice is amplified during periods of
uncertainty. To capitalise on this and other opportunities, we are developing a
number of sales initiatives including direct marketing to individual businesses,
internal seminars for accountancy practices and the use of telemarketing to
support our various marketing initiatives.
In anticipation of difficult investment markets our clients have been advised to
take profits and build liquidity within their schemes. Client cash balances
have continued to grow to over £145m today, with an additional £17m invested in
treasury accounts. We expect this to lead to increased investment planning work
when more stable markets return.
We are seeking to provide a broader range of retirement wealth management
services to more of our clients, and hence I expect us to increase assets under
advice through a combination of attracting new clients and advising on a greater
proportion of our existing clients' wealth.
Trading in the current period continues to be in line with expectations and I
believe we are very well-placed to take advantage of new opportunities in our
key markets as they continue to develop.
Bob Woods
Chairman
19 February 2008
Independent review report to Mattioli Woods plc
Introduction
We have been engaged by the Group to review the condensed set of financial
statements in the interim financial report for the six months ended 30 November
2007 which comprises the income statement, balance sheet, statement of
recognised income and expense and associated notes. We have read the other
information contained in the interim financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report, including the conclusion, has been prepared for and only for the
Group for the purpose of meeting the requirements of the AIM Rules for Companies
and for no other purpose. We do not, therefore, in producing this report,
accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Directors' Responsibilities
The interim financial report, is the responsibility of, and has been approved by
the directors. The directors are responsible for preparing and presenting the
interim financial report in accordance with the AIM Rules for Companies.
As disclosed in Note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards ('IFRS')
and International Financial Reporting Interpretations Committee ('IFRIC')
pronouncements as adopted by the European Union. The condensed set of financial
statements included in this interim financial report has been prepared in
accordance with International Accounting Standard ('IAS') 34 'Interim Financial
Reporting', as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Group a conclusion on the condensed set
of financial statements in the interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the interim financial report
for the six months ended 30 November 2007 is not prepared, in all material
respects, in accordance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union, and the AIM Rules for Companies.
Baker Tilly UK Audit LLP
Chartered Accountants
2 Whitehall Quay
Leeds
LS1 4HG
18 February 2008
Interim condensed consolidated income statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2007 2006 2007
For the six months ended 30 November 2007 Notes £ £ £
Revenue 4 5,295,879 4,342,664 8,997,191
Employee benefits expense (2,666,122) (1,878,673) (4,219,130)
Other administrative expenses (762,612) (770,282) (1,605,889)
Depreciation and amortisation (163,731) (166,047) (213,359)
Loss on disposal of property, plant and equipment (5,392) (3,876) (7,407)
Operating profit before financing 4 1,698,022 1,523,786 2,951,406
Financial income 144,793 53,187 194,734
Financial expenses (13,139) (51) (1,012)
Net financing income/(costs) 131,654 53,136 193,722
Profit before tax 1,829,676 1,576,922 3,145,128
Income tax expense 7 (567,426) (495,759) (952,274)
Profit for the period 1,262,250 1,081,163 2,192,854
Attributable to:
Equity holders of the parent 1,262,250 1,081,163 2,192,854
Earnings per ordinary share:
Basic (pence) 5 7.3 6.3 12.8
Diluted (pence) 5 7.3 6.3 12.8
Dividend per share (pence) 6 1.00 0.85 2.55
The operating profit for each period arises from the Group's continuing
operations.
Interim condensed consolidated statement of recognised income and expense
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2007 2006 2007
For six months ended 30 November 2007 Notes £ £ £
Deferred tax on share-based payments 7 31,862 18,211 102,031
Income and expense recognised directly in equity 31,862 18,211 102,031
Profit for the period 1,262,250 1,081,163 2,192,854
Total recognised income and expense for the period 1,294,112 1,099,374 2,294,885
Interim condensed consolidated balance sheet
Unaudited Unaudited Audited
30 Nov 2007 30 Nov 2006 31 May 2007
As at 30 November 2007 Notes £ £ £
Assets
Property, plant and equipment 10 465,910 374,404 429,312
Intangible assets 7,695,576 5,744,065 5,804,209
Investments 9 15 - -
Deferred income tax assets 7 191,081 41,738 143,936
Total non-current assets 8,352,582 6,160,207 6,377,457
Trade and other receivables 4,396,144 2,870,761 3,179,978
Financial assets 964,378 1,817,442 1,954,315
Cash and cash equivalents 12 2,357,758 1,593,425 2,799,569
Total current assets 7,718,280 6,281,628 7,933,862
Total assets 16,070,862 12,441,835 14,311,319
Equity
Issued capital 172,159 172,159 172,159
Share premium 13 5,601,458 5,601,458 5,601,458
Other reserves 13 2,286,660 2,086,545 2,202,469
Retained earnings 13 4,850,394 2,915,459 3,880,814
Total equity attributable to equity holders of 12,910,671 10,775,621 11,856,900
the parent
Non-current liabilities
Deferred income tax liabilities 7 304,666 - -
Provisions and other liabilities 316,167 130,607 127,446
620,833 130,607 127,446
Current liabilities
Trade and other payables 1,601,610 888,669 1,627,889
Current income tax liabilities 7 558,546 515,841 477,234
Bank overdraft 12 115,565 - 72,818
Provision and other liabilities 263,637 131,097 149,032
2,539,358 1,535,607 2,326,973
Total liabilities 3,160,191 1,666,214 2,454,419
Total equities and liabilities 16,070,862 12,441,835 14,311,319
Interim condensed consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2007 2006 2007
For the six months ended 30 November 2007 Notes £ £ £
Cash flows from operating activities
Cash receipts from customers 4,331,327 4,661,087 9,006,546
Cash paid to suppliers and employees (3,473,143) (2,869,943) (5,290,352)
Cash generated from operations 858,184 1,791,144 3,716,194
Interest paid (13,139) (51) (1,012)
Income taxes paid 7 (594,727) (360,607) (874,107)
Net cash from operating activities 250,318 1,430,486 2,841,075
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 10 4,000 474 15,225
Interest received 144,793 53,187 194,734
Acquisition of subsidiaries 8 (1,627,485) - (231,892)
Cash received on acquisition of subsidiaries 8 183,805 - 234,443
Acquisition of other investments 9 (15) - -
Acquisition of property, plant and equipment 10 (89,581) (62,400) (164,853)
Acquisition of software (35,646) - (78,193)
New loans advanced to property syndicates (964,378) (1,817,442) (1,954,315)
Loan repayments from property syndicates 1,954,315 1,915,994 1,915,994
Net cash from investing activities (430,192) 89,813 (68,857)
Cash flows from financing activities
Proceeds from the issue of share capital - 225,000 225,000
Repayment of Directors' loans (12,014) (6,693) 21,050
Dividends paid 6 (292,670) (238,636) (384,972)
Net cash from financing activities (304,684) (20,329) (138,922)
Net (decrease)/increase in cash and cash equivalents (484,558) 1,499,970 2,633,296
Cash and cash equivalents at start period 12 2,726,751 93,455 93,455
Cash and cash equivalents at end period 2,242,193 1,593,425 2,726,751
Notes to the interim condensed consolidated financial statements
1 Corporate information
Mattioli Woods plc ('the Company') is a public limited company incorporated and
domiciled in England and Wales. The Company's ordinary shares are traded on the
AIM market of the London Stock Exchange plc. The interim condensed consolidated
financial statements of the Company for the six months ended 30 November 2007
comprise the Company and its subsidiaries (together referred to as the 'Group').
The interim condensed consolidated financial statements were authorised for
issue in accordance with a resolution of the directors on 18 February 2008.
The principal activities of the Group are described in Note 4.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements for the six months ended
30 November 2007 have been prepared in accordance with IAS 34 Interim Financial
Reporting.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual financial statements as at
31 May 2007.
The information relating to the six months ended 30 November 2007 and the six
months ended 30 November 2006 is unaudited and does not constitute statutory
accounts. The comparative figures for the year ended 31 May 2007 are not the
Company's statutory accounts for that financial year. The statutory accounts
for the year ended 31 May 2007, prepared in accordance with accounting standards
adopted for use in the European Union (International Financial Reporting
Standards ('IFRS')), have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. The interim financial statements are unaudited but have
been reviewed by the auditors and their report to the Board of Mattioli Woods
plc is included within these financial statements.
2.2 Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31 May
2007 except for the adoption of new Standards and Interpretations, noted below.
Adoption of these Standards and Interpretations did not have any effect on the
financial position or performance of the Group.
• IFRS 7 Financial Investments: Disclosures
The Group adopted IFRS 7 as of 1 June 2007, which requires that an entity must
disclose additional information about financial instruments, their significance
and the nature and extent of risks that they give rise to. More specifically,
the Company and Group will need to disclose the fair value of financial
instruments and their risk exposure in greater detail. There will be no effect
on reported income or net assets.
• Amendment to IAS 1 Presentation of financial statements -
capital disclosures
The Group adopted IAS 1 as of 1 June 2007, which requires that an entity must
disclose additional information about management of its capital, including
quantitive information on what it manages as capital.
• IFRIC 9 Reassessment of Embedded Derivatives
The Group adopted IFRIC Interpretation 9 as of 1 June 2007, which states that
the date to assess the existence of an embedded derivative is the date that an
entity first becomes party to the contract, with reassessment only if there is a
change to the contract that significantly modifies the cash flows.
• IFRIC 10 Interim Financial Reporting and Impairment
The Group adopted IFRIC Interpretation 10 as of 1 June 2007, which requires that
an entity must not reverse an impairment loss recognised in a previous interim
period in respect of goodwill or an investment in either an equity instrument or
a financial asset carried at cost.
• IFRIC 11 IFRS2 Group and Treasury Share Transactions
The Group adopted IFRIC Interpretation 11 as of 1 June 2007, which requires
arrangements whereby an employee is granted rights to an entity's equity
instruments to be accounted for as an equity-settled scheme, even if the entity
buys the instruments from another party, or the shareholders provide the equity
instruments needed.
The Group has also elected to early adopt IFRS 8 Operating Segments as of 1 June
2007. IFRS 8 introduces the 'management approach' to segment reporting, which
requires the disclosure of segment information based on the internal reports
regularly reviewed by the Board of Directors (the Chief Operating Decision
Maker) in order to assess each segment's performance. Adoption of this standard
did not have any effect on the financial position or performance of the Group.
The Group determined that the operating segments were the same as the business
segments previously identified under IAS 14. Additional disclosures about each
of these segments is shown in Note 4, including revised comparative information.
The accounting policies have been applied consistently throughout the Group for
the purposes of these interim condensed consolidated financial statements.
New standards and interpretations not yet effective
The International Accounting Standards Board ('IASB') and International
Financial Reporting Interpretation Committee ('IFRIC') have issued Standards and
Interpretations with an effective date for periods starting on or after the date
on which these financial statements start. The directors do not anticipate that
the adoption of these Standards and Interpretations, wherever relevant to
Mattioli Woods, will have a material impact on the Company's or the Group's
financial statements in the period of initial application.
Standards and Interpretations that are not yet effective and have not been early
adopted by the Company or Group are explained as follows:
• Revised IAS 23 Borrowing Costs removes the option to expense
borrowing costs and requires that an entity capitalise borrowing costs directly
attributable to the acquisition, construction or production of a qualifying
asset as part of the cost of that asset. The revised IAS 23 applies to
borrowing costs relating to qualifying assets for which the commencement date
for capitalisation is on or after 1 January 2009, and will constitute a change
in accounting policy for the Group. In accordance with the transitional
provisions the Group will apply the revised IAS 23 to qualifying assets for
which capitalisation of borrowing costs commences on or after the effective
date.
• IFRIC 12 Service Concession Arrangements provides guidance on
certain recognition and measurement issues that arise in accounting for
public-to-private service concession arrangements. IFRIC 12, which would first
apply to the accounting period beginning on 1 June 2008, is not expected to have
any effect on the consolidated financial statements.
• IFRIC 13 Customer Loyalty Programmes addresses the accounting by
entities that operate, or otherwise participate in, customer loyalty programmes
for their customers. It relates to customer loyalty programmes under which the
customer can redeem credits for awards such as free or discounted goods or
services. IFRIC 13, which would first apply to the accounting period beginning
on 1 June 2009, is not expected to have any impact on the consolidated financial
statements.
• IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction clarifies when refunds or reductions
in future contributions in relation to defined benefit assets should be regarded
as available and provides guidance on the impact of minimum funding requirements
('MFR') on such assets. It also addresses when a MFR might give rise to a
liability. IFRIC 14, which would first apply to the accounting period on 1 June
2008, is not expected to have an effect on the consolidated financial
statements.
IFRIC 12, IFRIC 13 and IFRIC 14 have not yet been endorsed by the European
Union.
2.3 Basis of consolidation
The interim condensed consolidated financial statements consolidate the
financial statements of the Company and its subsidiary undertakings drawn as at
30 November each year. The financial statements of subsidiaries are prepared
for the same reporting period as the parent company, using consistent accounting
policies.
Subsidiaries are fully consolidated from the date of acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases. Control exists when the Company has the power,
directly or indirectly, to govern the financial and operating policies of an
entity so as to obtain benefit from its activities and is achieved through
direct or indirect ownership of voting rights; currently exercisable or
convertible potential voting rights; or by way of contractual agreement. All
inter-group balances, transactions, income and expenses and profits and losses
resulting from inter-group transactions that are recognised in assets are
eliminated in full.
2.4 Significant accounting estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are discussed below.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the fair value less cost to sell of the
cash-generating unit to which the goodwill is allocated. Estimating a fair
value less cost to sell amount requires management to make an estimate of the
realisable value of the cash generating unit. The carrying amount of goodwill
at 30 November 2007 was £3,327,937 (2006: £2,347,130). Further details on the
calculation of goodwill arising on acquisitions during the period are given in
Note 8.
Deferred tax assets
Deferred tax assets include temporary differences related to employee benefits
settled via the issue of share options. Recognition of the deferred tax assets
assumes share options will have a positive value at the date of vesting, which
is greater than the share option cost recognised in the income statement.
Recoverability of accrued time costs
The Group recognises accrued income in respect of time costs incurred on
clients' affairs during the accounting period, which have not been invoiced at
the balance sheet date. This requires an estimation of the recoverability of
the time costs incurred but not invoiced to clients. The carrying amount of
accrued time costs at 30 November 2007 was £1,496,452 (2006: £1,069,355).
Accrued commission income
Accrued commission income is recognised in respect of commissions due to the
Group on investments and bank deposits placed during the accounting period which
have not been received at the balance sheet date. This requires an estimation
of the amount of commission income that will be received subsequent to the
balance sheet date in respect of the accounting period. The carrying amount of
accrued commission income at 30 November 2007 was £603,849 (2006: £451,630).
Deferred consideration
The Group has entered into certain acquisition agreements that provide for
deferred consideration to be paid via an earn-out. A provision is recognised
for all amounts management anticipates will be paid under the relevant
acquisition agreement. This requires management to make an estimate of the
expected future cash flows from the acquired client portfolio and also to choose
a suitable discount rate for the calculation of the present value of those cash
flows. The deferred consideration provision at 30 November 2007 was £401,630
(2006: £103,030). Further details of the deferred consideration payable on
acquisitions during the period are given in Note 8.
3. Seasonality of operations
The Group's operations are not subject to any recurrent seasonal fluctuations as
a result of external factors. Historically, revenues in the second-half year
typically have been higher than in the first half, primarily due to SSAS scheme
year-ends being linked to the sponsoring company's year-end, which is often in
December or March. However, with the growth in the number of SIPP schemes under
administration and further diversification of the Group's revenue streams in
recent periods, the Board of Directors believes the seasonal impact of SSAS
scheme year-ends will no longer be material.
4. Segment information
The Group is comprised of the following operating segments:
• Time-based fees - income earned for setting up and administering
pension schemes. Additional fees are generated from consultancy services
provided for special one-off activities;
• Investment planning - income generated from the placing of investments
on clients' behalf with banks and other financial institutions; and
• Property syndicates - income generated where the Group facilitates
commercial property transactions on behalf of its clients.
Each segment represents a revenue stream subject to risks and returns that are
different to other operating segments, although each operating segment's
products and services are offered to the same market. The Group operates
exclusively within the United Kingdom.
There are no transfers between operating segments and hence there are no
differences between total segment revenue and consolidated revenue.
Each operating segment utilises the same intangible and tangible assets, and the
segments have been financed as a whole, rather than individually. The
reportable operating segments are managed together, as one business operating
from one location. Accordingly, only employee benefit expenses and other direct
costs have been allocated across the reportable operating segments.
Segment profit or loss reflects the measure of segment performance reviewed by
the Board of Directors (the Chief Operating Decision Maker). This measure
differs from the numbers used in the financial statements prepared in accordance
with IFRS as follows:
• Finance revenue - Interest revenue from loans receivable and
cash at bank is not included in the measure of segment profit or loss as it is
not considered part of the core operations of any segment.
• Finance costs - Finance costs are not included in the measure of
segment profit or loss.
• Indirect overheads - Indirect overheads including property
costs, amortisation and impairment of intangible assets, depreciation of
property, plant and equipment, sales and marketing costs, legal and professional
fees and insurance are not included in the measure of segment profit or loss as
it is not possible to allocate these overheads to individual segments without
making arbitrary allocations.
Segment assets exclude property, plant and equipment, intangible assets,
investments, current and deferred tax balances, cash and cash equivalents, as
these assets are considered corporate in nature and are not allocated to a
specific operating segment.
Operating segments
The following table presents revenue and profit information regarding the
Group's operating segments:
4. Segment information (continued)
Time-based fees Investment planning Property syndicates
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
30 Nov 30 Nov 31 May 30 Nov 30 Nov 31 May 30 Nov 30 Nov 31 May
2007 2006 2007 2007 2006 2007 2007 2006 2007
Operating segments £ £ £ £ £ £ £ £ £
Total revenue 2,228,321 2,010,838 3,986,367 2,095,818 1,883,547 4,077,908 971,740 448,279 932,916
Results
Employee
benefits
expense 1,945,562 1,403,397 3,036,168 363,044 185,062 503,138 357,516 290,214 679,824
Other
administrative
expense 72,278 141,240 269,909 93,352 43,475 256,655 9,195 - -
Segment profit 210,481 466,201 680,290 1,639,422 1,655,010 3,318,115 605,029 158,065 253,092
Unallocated
indirect
overheads
Operating profit
before financing
Net finance
income
Profit before
income tax
Income tax
expense
Net profit for
the period
Total
Six months Six months Year ended
ended ended 31 May 2007
30 Nov 30 Nov
2007 2006
Operating segments £ £ £
Total revenue 5,295,879 4,342,664 8,997,191
Results
Employee benefits expense 2,666,122 1,878,673 4,219,130
Other administrative expense 174,825 184,715 526,564
Segment profit 2,454,932 2,279,276 4,251,497
Unallocated indirect overheads 756,910 755,490 1,300,091
Operating profit before financing 1,698,022 1,523,786 2,951,406
Net finance income 131,654 53,136 193,722
Profit before income tax 1,829,676 1,576,922 3,145,128
Income tax expense (567,426) (495,759) (952,274)
Net profit for the period 1,262,250 1,081,163 2,192,854
4. Segment information (continued)
Total segment assets
The following table compares total segment assets as at 30 November 2007, 30
November 2006 and 31 May 2007 (the date of the last annual financial
statements).
Unaudited Unaudited Audited
30 Nov 30 Nov 31 May
2007 2006 2007
£ £ £
Time-based fees 2,796,969 2,123,468 2,136,427
Investment planning 603,849 485,956 588,923
Property syndicates 1,760,904 1,988,468 2,095,868
Total segment assets 5,161,722 4,597,892 4,821,218
Property plant and equipment 465,910 374,404 429,312
Intangible assets 7,695,576 5,744,065 5,804,209
Investments 15 - -
Deferred tax 191,081 41,738 143,936
Prepayments 72,508 47,637 97,649
Other receivables 126,292 42,674 215,426
Cash and cash equivalents 2,357,758 1,593,425 2,799,569
Total consolidated assets 16,070,862 12,441,835 14,311,319
5. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the Company by the weighted
average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2007 2006 2007
£ £ £
Net profit and diluted net profit attributable to equity 1,262,250 1,074,582 2,192,854
holders of the Company
Weighted average number of ordinary shares: Thousands Thousands Thousands
Issued ordinary shares at start period 17,216 17,045 17,045
Effect of shares issued in October 2006 - 42 107
Basic weighted average number of shares 17,216 17,087 17,152
Dilutive potential ordinary shares:
- non-employee share options - 48 27
Diluted weighted average number of shares 17,216 17,135 17,179
The Company has granted options under the Share Option Plan and Consultants'
Share Option Plan to certain of its senior managers and directors to acquire (in
aggregate) up to 8.05% of its issued share capital (see Note 11). Under IAS 33
Earnings Per Share, contingently issuable ordinary shares are treated as
outstanding and included in the calculation of diluted earnings per share if the
conditions (the events triggering the vesting of the option) are satisfied. At
30 November 2007 the conditions are not satisfied. If the conditions had been
satisfied, diluted earnings per share would have been 6.8 pence per share (2006:
6.0 pence).
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
6. Dividends paid and proposed
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 Nov 30 Nov 31 May
2007 2006 2007
£ £ £
Paid during the year period:
Equity dividends on ordinary shares:
- Final dividend for 2007: 1.70p (2006: 1.40p) 292,670 238,636 238,636
- Interim dividend for 2007: 0.85p (2006: nil) - - 146,336
Dividends paid 292,670 238,636 384,972
Proposed for approval:
Equity dividends on ordinary shares:
- Interim dividend for 2008: 1.00p (2007: 0.85p) 172,159 146,335 -
- Final dividend for 2007: 1.70p (2006: 1.40p) - - 292,670
Dividends proposed 172,159 146,335 292,670
The proposed dividend was approved on 21 January 2008.
7. Income taxes
Current tax
Current tax expense for the interim periods presented is the expected tax
payable on the taxable income for the period, calculated as the estimated
average annual effective income tax rate applied to the pre-tax income of the
interim period.
Current tax for current and prior periods is classified as a current liability
to the extent that it is unpaid. Amounts paid in excess of amounts owed are
classified as a current asset.
Deferred tax
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using the estimated average annual effective income tax rate for the interim
periods presented. The primary components of the entity's recognised deferred
taxed assets include temporary differences related to employee benefits,
provisions and other items.
The primary components of the entity's deferred tax liabilities include
temporary differences related to property, plant and equipment and intangible
assets (see Note 8).
The recognition of deferred tax in the income statement arises from the
origination and the reversal of temporary differences and the effects of changes
in tax rates. The primary component of the deferred tax credit for the six
months ended 30 November 2007 of £15,283 (2006: £6,581) is related to temporary
differences arising on share-based payments to employees.
The total deferred tax asset recognised directly in equity was £31,862 for the
six months ended 30 November 2007 (2006: £18,211).
Reconciliation of effective tax rates
The current tax expense for the six months ended 30 November 2007 was calculated
based on the estimated average annual effective income tax rate of 31.0% (2006:
31.4%), as compared to the tax rates expected to be enacted or substantively
enacted at the balance sheet date of 30% (2006: 30%). Differences between the
estimated average annual effective income tax rate and statutory rate include,
but are not limited to the effect of non-deductible expenses, tax incentives not
recognised in profit or loss and under/(over) provisions in previous periods.
8. Business combination
Acquisition of Pension Consulting Limited
On 9 July 2007, the Group acquired 100% of the voting shares of Pension
Consulting Limited ('PCL'), an unlisted company registered in England and Wales,
which administered pension schemes on behalf of 145 small self-administered
pension schemes ('SSAS') and 213 self-invested personal pension ('SIPP')
clients. As part of the transaction the Group also acquired PCL's 100%
subsidiary company, PC Trustees Limited, which acts as trustee to the pension
schemes. The acquisition has been accounted for using the purchase method of
accounting. The interim condensed consolidated financial statements include the
results of PCL for the period from the acquisition date.
The fair value of the identifiable assets and liabilities of PCL as at the date
of acquisition were:
Unaudited
Fair value recognised Previous carrying
on acquisition value
£ £
Property, plant and equipment 16,511 17,545
Intangible asset - client portfolio 1,015,554 -
Investment 100 100
Prepayments and accrued income 165,220 165,220
Trade receivables 42,340 42,340
Other receivables 44,055 44,055
Cash and cash equivalents 183,805 183,805
1,467,585 453,065
Deferred income tax liability (304,666) -
Short term subordinated loan (29,883) (29,883)
Trade payables (19,421) (19,421)
Current income tax liability (61,468) (61,468)
Other payables (25,388) (25,388)
Accruals and deferred income (37,081) (37,081)
(477,907) (173,241)
Fair value of net assets 989,678 279,824
Goodwill arising on acquisition 980,807
Total acquisition cost 1,970,485
The total acquisition cost of £1,970,485 comprises an initial cash payment of
£1,525,000, deferred consideration of up to £400,000 and costs of £45,485
directly attributable to the acquisition. £240,000 of the deferred
consideration will be paid in the two years following completion, with the
remaining payment of up to £160,000 being determined by reference to an earn-out
mechanism based on growth in scheme numbers during the two years following
completion.
In accordance with IFRS 3 Business Combinations, a value has been applied to the
PCL client portfolio at the date of acquisition to recognise the value of this
asset to the Group. In accordance with IAS12 Income Taxes, an associated
deferred tax liability has also been recognised on the value of the client
portfolio.
Cash outflow on acquisition:
Unaudited
£
Net cash acquired with the subsidiary 183,805
Cash paid (1,525,000)
Acquisition costs (45,485)
Net cash outflow (1,386,680)
From the date of acquisition, PCL has contributed £106,389 to the profit of the
Group. If the combination had taken place at the beginning of the year, the
profit for the Group would have been £1,231,981 and revenue from continuing
operations would have been £5,308,351.
The goodwill recognised above is attributed to the expected synergies and other
benefits from combining the assets and activities of PCL with those of the
Group. On 30 November 2007 the trade and assets of PCL were transferred to
Mattioli Woods for a consideration of £386,212 equivalent to the net asset value
of PCL at that date.
9. Investments
On 1 October 2007, Mattioli Woods subscribed £15 for 15% of the issued share
capital of Mainsforth Developments Limited ('Mainsforth'), a company
incorporated in England and Wales with its principal activity being the
development and selling of real estate. On the same date, Mainsforth entered
into two conditional sales agreements ('CSAs') to acquire freehold land.
The first CSA gives Mainsforth the right to acquire certain freehold land ('Land
A') with vacant possession for a purchase consideration of £1.0m.
The second CSA gives Mainsforth the right to acquire other freehold land
adjacent to Land A ('Land B') with vacant possession for a purchase
consideration of £2.8m, subject to an upwards and downwards adjustment if the
consideration (the 'Development Consideration') payable to Mainsforth on the
sale of Land A and Land B (together 'the Development Land') is greater or less
than £10.0m, subject to the condition that the consideration payable for Land B
shall not be reduced below £2.2m.
Both CSAs are conditional upon Mainsforth submitting an application for planning
approval prior to 1 June 2008 and the effective date of the agreements will be
the date on which planning approval is granted for the development of the
Development Land as a mixed use scheme where residential property comprises at
least 50% of the built area. Any consideration payable by Mainsforth under the
CSAs only becomes payable on completion of its sale of the Development Land. If
planning approval has not been obtained by 1 December 2010 the agreements will
lapse, although the termination dates may be extended to 1 December 2011 if
certain conditions are fulfilled.
10. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 November 2007, the Group acquired assets with a
cost of £125,227 (2006: £62,400). Assets with a net book value of £9,392 were
disposed of during the six months ended 30 November 2007 (2006: £4,350),
resulting in a loss on disposal of £5,392 (2006: £3,876).
Capital commitments
During the six months ended 30 November 2006, the Group entered into a contract
to purchase and install new accounting software. At 30 November 2007 the Group
was committed to purchasing products and services costing £55,891 (2006:
£123,075) under this contract.
11. Share based payment
Share Option Plan
The Company operates the Share Option Plan by which certain of the executive
directors and other senior executives are able to subscribe for 875,000 ordinary
shares in the Company. The exercise price of the options is £1.32, equal to the
placing price of the shares issued on 15 November 2005. The options vest if and
when profit-based performance conditions between 1 June 2005 and 31 May 2011 are
fulfilled. A failure to meet these performance conditions causes the options
to lapse. The contractual life of each option once granted expires on 31 May
2015.
Consultants' Share Option Plan
On 4 September 2007, options to subscribe for up to 255,684 ordinary shares in
the Company were granted to senior executives under the Consultants' Share
Option plan. Options granted under the Consultants' Share Option Plan are
summarised as follows:
Exercise At 1 June Granted Exercised Lapsed during At 31 May
price 2007 during the during the the year 2008
year year
£ No. No. No. No. No.
Date of grant
5 September 2006 2.21 255,684 - - - 255,684
4 September 2007 2.79 - 255,684 - - 255,684
255,684 255,684 - - 511,368
The exercise price of the options is equal to the market price of the shares at
the close of business on the day immediately preceding the date of grant. The
options vest if and when the option holder achieves certain individual
performance hurdles. If these performance hurdles, which are linked to
individual sales revenues, are not met over the five financial years commencing
on 1 June before the date of grant, the options lapse.
The expense for share-based payments made in respect of employee services under
the Share Option Plan and the Consultants' Share Option Plan are recognised over
their expected vesting periods. The expense recognised during the six months
ended 30 November 2007 is £52,329 (2006: £30,658), which arises entirely from
equity-settled share-based payment transactions.
The fair value of equity-settled share options granted is estimated as at the
date of grant using the Black-Scholes-Merton model, taking into account the
terms and conditions upon which the options were granted. The following table
lists the inputs to the model used to estimate the fair value of options granted
during the six months ended 30 November 2007:
Consultants'
Share
Option Plan
Share price at date of grant £2.82
Option exercise price £2.79
Expected life of option (years) 7
Expected share price volatility (%) 30.0
Dividend yield (%) 1.11
Risk-free interest rate (%) 4.63
The share price at date of grant for options issued under the Share Option Plan
and Consultants' Share Option Plan is based on the market value of the shares on
that date as agreed by HM Revenue & Customs. The expected life of the options
is based on historical data and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that
the historical volatility is indicative of future trends, which may also not
necessarily be the actual outcome. No other features of options grant were
incorporated into the measurement of fair value.
12. Cash and cash equivalents
For the purpose of the interim condensed consolidated cash flow statement, cash
and cash equivalents are comprised of the following:
Unaudited Unaudited Audited
30 Nov 2007 30 Nov 2006 31 May 2007
£ £ £
Cash at banks and on hand 2,257,758 1,593,425 2,799,569
Short-term deposits 100,000 - -
2,357,758 1,593,425 2,799,569
Bank overdrafts (115,565) - (72,818)
2,242,193 1,593,425 2,726,751
Cash at banks earns interest at floating rates based on daily bank deposit
rates. Short-term deposits are made for varying periods of between one day and
12 months, depending on the immediate cash requirements of the Group, and earn
interest at the respective short-term deposit rates. The fair value of cash and
short-term deposits at 30 November 2007 is £2,242,193 (2006: £1,593,425).
At 30 November 2007, the Group had available £3,134,435 (2006: £600,000) of
undrawn committed borrowing facilities.
13. Reserves
Share premium Equity - share Capital Retained
account based payments redemption earnings
reserve
£ £ £ £
At 1 June 2006 - audited 5,321,151 94,687 2,000,000 2,072,932
Arising on share issue 223,296 - - -
Share based payments - 30,658 - -
Exercise of share options 57,011 (57,011) - -
Deferred tax asset recognised in equity - 18,211 - -
Profit for the financial period - - - 1,081,163
Dividends - - - (238,636)
At 30 November 2006 - unaudited 5,601,458 86,545 2,000,000 2,915,459
Share-based payments - 32,104 - -
Deferred tax asset recognised in equity - 83,820 - -
Profit for the financial period - - - 1,111,691
Dividends - - - (146,336)
At 31 May 2007 - audited 5,601,458 202,469 2,000,000 3,880,814
Share-based payments - 52,329 - -
Deferred tax asset recognised in equity - 31,862 - -
Profit for the financial period - - - 1,262,250
Dividends - - - (292,670)
At 30 November 2007 - unaudited 5,601,458 286,660 2,000,000 4,850,394
14. Related party transactions
Transactions with key management personnel
The private pension schemes of Ian Mattioli, Robert Woods, Nathan Imlach and
Murray Smith, together with the private pension schemes of other key management
personnel of the Group, have a beneficial interest in MW Properties (No 16)
Limited. The Group leases its premises at Grove Park, Enderby from MW
Properties (No 16) Limited, and paid rentals of £84,000 during the six months
ended 30 November 2007 (2006: £84,000). At 30 November 2007 the Group had
prepaid future rentals of £11,047 (2006: £11,047).
Key management personnel receive compensation in the form of short-term employee
benefits and equity compensation benefits (see Note 11). Key management
personnel, representing the executive directors and four senior executives,
received total compensation of £789,776 for the six months ended 30 November
2007 (2006: £666,273). Total remuneration is included in 'employee benefits
expense'.
15. Events after the balance sheet date
Acquisition of the JB Group
On 18 February 2008 the Group acquired the trade and assets of John Bradley
Financial Services ('JBFS') and North Star SIPP LLP ('North Star') (together '
the JB Group') for a total consideration of up to £2.59 million, subject to
certain revenue and client retention targets being met during the three years
following completion.
On 18 February 2008 the Company also entered into separate agreements to acquire
the entire issued share capital of JB Trustees Limited and Bank Street Trustees
Limited (together 'the Trustee Companies') and John Bradley Financial Services
Limited (together with the Trustee Companies 'the Dormant Companies') for a
nominal consideration.
JBFS provides pensions consultancy and administration services to a core active
portfolio of 235 small self-administered pension scheme ('SSAS') and 55
self-invested personal pension ('SIPP') clients. In addition, the JB Group
provides third party administration services to more than 300 additional SSAS
and SIPP clients.
North Star was established in October 2006 and subsequently authorised by the
Financial Services Authority ('FSA') to establish and operate personal pension
schemes, including SIPPs, under the new regulatory regime introduced on 6 April
2007. The Dormant Companies have never traded.
The JB Group has total funds under trusteeship of over £400 million and the
Trustee Companies act as trustees to the pension schemes.
The total consideration includes an initial payment of £1.25 million funded from
the Group's existing cash resources and deferred consideration of up to £1.34
million, of which £0.64 million will be paid in the three years following
completion, with the remaining payment of up to £0.70 million being determined
with reference to an earn-out mechanism based on revenues generated during the
three years following completion.
In the year ended 31 March 2007 the JB Group generated a net profit for the year
of £0.40 million before partners' salaries and drawings, on revenues of £1.37
million. The JB Group's net assets at 31 March 2007 were £0.51 million.
New bank facilities
In January 2008 the Group renegotiated its borrowing facilities with Royal Bank
of Scotland plc ('RBS'). At 30 November 2007 the RBS facilities consisted of
one overdraft facility of £2.25m with interest payable at 1.375% over the bank's
base rate (currently 5.25%) and another £0.75m overdraft facility at 1.5% over
the bank's base rate. These facilities have been replaced by one overdraft
facility of £5.0m with interest payable at the bank's base rate plus 1.0% on the
first £1.5m, plus 1.25% on the next £1.5m and plus 1.375% on borrowings in
excess of £3m.
The RBS facility is repayable upon demand and is subject to review on at least
an annual basis. The next review date is 11 January 2009.
The Group also has an overdraft facility of £0.25m provided by Lloyds TSB plc ('
Lloyds TSB') with interest payable at 1.5% over the bank's base rate (currently
5.25%). The Lloyds TSB facility is renewable on 31 March 2008.
New property lease
The private pension schemes of Ian Mattioli, Robert Woods, Nathan Imlach and
Murray Smith, together with the private pension schemes of other key management
personnel of the Group, have a beneficial interest in MW Properties (No 60)
Limited.
In February 2008 the Group entered into an agreement to lease additional
premises at The Gateway, Grove Park, Enderby from MW Properties (No 60) Limited
at an initial rent of £75,600 per annum. The lease term expires on 1 February
2018.
16. Copies of interim report
Copies of the interim report will be posted to shareholders in due course and
are available from the Group head office at: MW House, 1 Penman Way, Grove Park,
Enderby, Leicester LE19 1SY.
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