Interim Results

Mercury Group PLC 28 June 2007 28 June 2007 Mercury Group ('Mercury' or 'the Company') Half-yearly report for the six months ended 31 March 2007 Highlights • Mercury focused on SMPA as its sole core activity • Newly constituted Board working hard to develop SMPA • £1.0 million refinancing achieved by way of unsecured loan notes • SMPA generated an EBITDA profit of £29,000 in the six months ended 31 March 2007 (2006: £286,000) • Group operating loss of £500,000 due to fund raising costs, Central costs and Discontinued Activity losses • High level of Central costs now significantly curtailed • Loss making activities now eliminated • SMPA's sales showing signs of recovery • Calder Russell Conway business acquired in January 2007 for a maximum consideration of £100,000 • Other acquisitions under review Chairman's statement Introduction I am pleased to be able to report significant progress in the six months ended 31 March 2007. Your new Board has focussed on the objectives of reinvigorating the core SMPA business, following the recent extended period of uncertainty surrounding the successful refinancing, and bringing costs into line with sustainable income. The previously disproportionately high level of central and plc related costs, which amounted to over £1.4 million in the year ended 30 September 2006, were cut to £194,000 in the period under review. Since 31 March 2007, central and plc related costs have been reduced even further. Following completion of the disposal programme of all loss making subsidiaries, SMPA is now the Group's core business offering a range of property services to corporate clients. SMPA is a well respected commercial property consultancy and estate agency with offices in the West End and City of London. It offers a wide range of professional services including investment, development, valuation, management and all aspects of occupancy and has clients throughout the UK. Your board believes that SMPA provides a firm base from which to develop, by acquistion and organic growth, a successful Group focussed upon clear areas of property expertise. Against the background of the now resolved uncertainty surrounding the successful refinancing and essential reorganisation, the Group incurred a loss in the six months ended 31 March 2007. However, all former loss making activities have now been disposed of and the Group is well positioned to concentrate on developing SMPA's core commercial property consultancy and estate agency business. Group financial performance SMPA generated an EBITDA profit in the six months ended 31 March 2007 of £29,000 (2006: £286,000). SMPA performed above management's expectations in the first quarter, but sales in the second quarter were below expectations, due to lower than expected transactions on the investment and agency side of the business. Group turnover fell to £1.516 million from £3.131 million, due to the inclusion of discontinued activities in the corresponding period. SMPA's turnover fell to £1.504 million from £1.760 million in the same period last year. After charging central and plc related costs of £194,000 (2006: £361,000), exceptional costs of £234,000 on the recent refinancing and losses on discontinued activities of £56,000 (2006: £75,000), the Group's EBITDA loss was £455,000. Depreciation and goodwiil amortisation amounted to £45,000 (2006: £209,000), resulting in an operating loss for the period of £500,000 (2006: £359,000). Acquisition of the Calder Russell Conway business On 18 January 2007, SMPA acquired the business and assets of Calder Russell Conway Limited, a niche commercial property consultancy focussed primarily in retail and leisure, for a total cash consideration of £100,000, of which £50,000 is deferred for one year and conditional on the vendors remaining within the employment of SMPA. The initial consideration of £50,000 was payable in monthly instalments. The first £12,500 was paid on 31 January 2007, followed by five monthly instalments of £7,500 each. The Directors will be looking for further acquisitions, which they consider will strengthen SMPA's service to clients and add shareholder value. Discontinued activities Telco Solutions Limited was sold in June 2007 for a maximum consideration of £85,000 and, as a consequence, its results have been reported under Discontinued Operations. Telco provided property management services and its disposal has eliminated the last chronic loss making activity from the Group. Telco incurred an operating loss of £56,000 in the six months ended 31 March 2007 and a loss of £171,000 in the year ended 30 September 2006. Following the disposal of Navitas Hemway in September 2006, the sale of Telco Solutions completes the planned programme to dispose of the Group's previously loss making activities. Dividends The Board does not recommend the payment of a dividend (2006: £nil). Funding The Board secured additional funding by issuing a loan note instrument constituting £1.0 million of Unsecured Loan Stock ('ULS'), of which £500,000 was issued at 31 March 2007. The Group also received binding commitments to subscribe for up to a further £500,000 of ULS at the Company's option up until 31 July 2007. Since 31 March 2007, a further drawdown of ULS has been made of £150,000. Directors A number of changes have been made to the Board. As previously reported, I joined the Board as Chairman in February 2007 and I was pleased to welcome Brian Basham and Andrew Lovelady, both of whom were appointed directors at the same time. Walter Goldsmith and James Lugg remained on the Board as non-executive directors and Ronnie Franks continues as the Chief Executive Officer. Simon Michaels resigned from the Board as Finance Director on 13 February 2007 and I would like to thank him for his commitment and support over recent months. Andrew Lovelady has become part-time Finance Director in his place. Management and employees I would also like to thank the Group's employees who have continued to work tirelessly in spite of the Group's difficult trading conditions. Current trading and prospects The Group has incurred losses since 31 March 2007, due to the continued low level of SMPA's investment and agency side of the business, following the deferral or loss of a number of key projects. However, the future sales pipeline has strengthened during June and is now showing the potential for much more encouraging levels of future sales. The Group's overhead cost base is being constantly monitored and further significant cost cutting measures are currently being implemented. Whilst there remains many challenges to overcome in the months ahead, your Directors believe there are good growth opportunities in SMPA's marketplace and therefore remain focused on building the business, both organically and through acquisition. George Kynoch Chairman 28 June 2007 Group profit and loss account For the six months ended 31 March 2007 Continuing Discontinued 6 months to 6 months to Year to Operations Operations 31 March 31 March 30 September Unaudited Unaudited 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 £000 £000 Turnover 1,504 12 1,516 3,131 5,557 Cost of (84) (4) (88) (870) (1,615) sales -------- --------- -------- -------- --------- Gross profit 1,420 8 1,428 2,261 3,942 Administrative expenses (1,864) (64) (1,928) (2,620) (6,596) Operating loss -------- --------- -------- -------- --------- Before exceptional items (210) (56) (266) (359) (2,092) Exceptional items (234) - (234) - (562) -------- --------- -------- -------- --------- (444) (56) (500) (359) (2,654) Sale of subsidiary undertaking - - - - (2,133) Amounts written off investments - - - - (70) Interest receivable 3 - 3 25 95 Interest payable (15) (2) (17) (17) (17) -------- --------- -------- -------- --------- Loss on ordinary activities before taxation (456) (58) (514) (351) (4,779) Tax on loss on ordinary activities - - - (19) - -------- --------- -------- -------- --------- Loss on ordinary activities after taxation (456) (58) (514) (370) (4,779) Dividends on - - - - - equity -------- --------- -------- -------- --------- shares Transfer from reserves (456) (58) (514) (370) (4,779) ======== ========= ======== ======== ========= Loss per share: Basic (0.40)p (0.05)p (0.45)p (0.35)p (4.39)p ======== ========= ======== ======== ========= There are no other recognised gains or losses other than as recorded in the profit and loss account for the period. Group balance sheet At 31 March 2007 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Fixed assets Intangible assets 1,419 6,242 1,360 Tangible assets 95 144 97 Investments 15 121 50 --------- --------- --------- 1,529 6,507 1,507 --------- --------- --------- Current assets Debtors 781 2,253 1,222 Cash at bank 135 805 86 --------- --------- --------- 916 3,058 1,308 Creditors - amounts falling due within one year Bank overdraft (28) (356) (102) Other creditors (619) (1,013) (901) --------- --------- --------- Net current assets 269 1,689 305 --------- --------- --------- Total assets less current liabilities 1,798 8,196 1,812 Creditors- amounts falling due after one year Unsecured loan stock (500) - - --------- --------- --------- 1,298 8,196 1,812 ========= ========= ========= Capital and reserves Called up share capital 1,130 1,065 1,130 Share premium account 847 319 847 Shares to be issued 370 2,938 370 Distributable reserve 4,711 4,711 4,711 Other reserves 156 156 156 Profit and loss account (5,916) (993) (5,402) --------- --------- --------- Equity shareholders' funds 1,298 8,196 1,812 ========= ========= ========= Reconciliation of movements in shareholders' funds For the six months ended 31 March 2007 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Loss for the financial period (514) (370) (4,779) Decrease in shares to be issued - - (2,569) Issue of ordinary shares - - 65 Increase in share premium - - 491 Cost of capital reduction scheme - (38) - --------- --------- --------- Movements in shareholders' funds (514) (408) (6,792) Shareholders' funds at beginning of period 1,812 8,604 8,604 --------- --------- --------- Shareholders' funds at end of period 1,298 8,196 1,812 ========= ========= ========= Group cash flow statement For the six months ended 31 March 2007 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Cash outflow from operating (366) (498) (1,334) activities Returns on investment and servicing of (14) 8 78 finance Capital expenditure and financial investment (5) (121) (110) Disposal of investments 35 - - Corporation tax - (33) (33) Acquisitions and disposals: --------- --------- --------- Purchase of subsidiary undertakings - (1) (99) Proceeds of disposal of subsidiary - - 100 Purchase of the Calder Russell Conway business (27) - - Net overdraft disposed of with - - 291 subsidiary --------- --------- --------- (27) (1) 292 --------- --------- --------- Cash outflow before financing (377) (645) (1,107) Financing: Cost of capital reduction scheme - (38) - Net cash proceeds from share issue - - (38) Change in debt 500 - - --------- --------- --------- Increase/(reduction) in cash during period 123 (683) (1,145) ========= ========= ========= Reconciliation of net cash flow to movement in net debt Increase/(reduction) in cash in 123 (683) (1,145) period Change in debt (500) - - --------- --------- --------- Change in net debt resulting from cash (377) (683) (1,145) flows Capital element of finance lease - (1) (4) payments --------- --------- --------- Increase in net debt (377) (684) (1,149) Net (debt)/cash at start of period (16) 1,133 1,133 --------- --------- --------- Net (debt)/cash at end of period (393) 449 (16) ========= ========= ========= Reconciliation of operating loss to operating cash flows Operating loss (500) (359) (2,654) Depreciation 8 42 52 Amortisation 37 167 869 Stocks - 80 80 Debtors 441 (438) (56) Creditors (352) 10 375 --------- --------- --------- Operating cash outflow (366) (498) (1,334) ========= ========= ========= Notes to the accounts For the six months ended 31 March 2007 1. Financial information The financial information provided for the six months ended 31 March 2007 has been prepared using consistent accounting policies as used in the preparation and filing of the statutory accounts for the year ended 30 September 2006 and will be used in the preparation of the accounts to 30 September 2007. The financial information set out in this announcement does not constitute statutory accounts as defined by Section 240 of the Companies Act 1985. The financial information for the period ended 30 September 2006 is an abridged version of Mercury Group Plc's published statutory financial statements which received an unqualified auditors' report, contained no statement under section 237(2) or (3) of the Companies Act 1985 and which have been filed with the Registrar of Companies. 2. Segmental analysis 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Turnover SMPA 1,504 1,760 3,340 Discontinued activities 12 1,371 2,217 ---------- ---------- ----------- 1,516 3,131 5,557 ========== ========== =========== EBITDA SMPA 29 286 191 Central and plc related costs (194) (361) (1,410) Exceptional costs of fund raising (234) - - Discontinued activities (56) (75) (514) ---------- ---------- ----------- (455) (150) (1,733) Depreciation and amortisation (45) (209) (921) ---------- ---------- ----------- Operating loss (500) (359) (2,654) ========== ========== =========== 3. Loss per share The loss per share calculations have been arrived at by reference to the following losses and weighted average number of shares in issue during the periods. 6 months to 6 months to Year to 31 March 31 March 30 September 2007 2006 2006 Unaudited Unaudited Audited £000 £000 £000 Basic Loss after tax (514) (370) (4,779) No. No. No. Weighted average number of shares in issue 112,975,684 106,494,600 108,927,248 4. Posting to shareholders In an effort to further reduce costs, this Interim Report will only be announced on the Regulatory News Service and will not be posted to shareholders this year. Further Enquiries: Mercury Group Plc Andrew Lovelady Tel: 020 7393 4000 John East & Partners Limited Tel: 020 7628 2200 David Worlidge/Virginia Bull This information is provided by RNS The company news service from the London Stock Exchange

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