RNS Number:8762H
Absolute Capital Mgmt Holdings Ltd
21 August 2006
Absolute Capital Management Holdings Limited
("ACMH" or "the Company")
Interim Report and Accounts 2006
HIGHLIGHTS
Financial
*Assets under management up 125% since 30 June 2005, and up 46% since 1
January 2006
*Pre-tax profit up 142% (compared to 6 months to 30 June 2005)
*Industry leading margin of 56% (excluding share-based payments)
*Basic EPS excluding non-cash items up 153% (compared to 6 months to 30
June 2005)
*Combined management and performance fee income up by 137% (compared to 6
months to 30 June 2005). Management fees up by 186% (compared to 6 months to
30 June 2005)
Operational
*Strong investment performance with significant out-performance versus
peer group in a volatile May/June
*Joint-winner of Best Hedge Fund Group at Hedge Funds Review's 2006
European Performance Award ceremony in June
Sean Ewing, Chairman and CEO, commented: Driven by the significant growth in
assets under management we have increased our group profitability by 152%. As
the business continues to grow at a significant rate, the Group has continued to
produce investment returns in excess of target returns through a rigorous
investment approach and strong idea generation. In addition, the Group continues
to maintain a low fixed cost base delivering operating margins significantly in
excess of most investment management businesses.
Post the interim period, we have launched two new funds, the Absolute India Fund
and the Absolute Activist Value Fund. As we move into a traditionally busy
period in terms of asset growth, the Group is well placed to deliver further
shareholder and fund investor returns.
Enquiries:
ACMH Sean Ewing, Chairman and CEO T: 020 7659 6155
M: 07768 255 472
Cardew Group Tim Robertson T: 020 7930 0777
Shan Shan Willenbrock
Assets Under Management
30 June 31 December 30 June
2006 2005 2005
$m $m $m
Absolute Return Europe 447.2 346.7 291.3
European Catalyst 218.2 211.8 129.8
Absolute Germany 199.2 167.8 124.2
Absolute East West 94.1 41.8 -
Absolute Octane 215.4 72.9 -
Absolute Large Cap 53.1 - -
Absolute India launched July -
Absolute Activist Value launched July -
---------- ---------- ------------
1,227.2 841.0 545.3
---------- ---------- ------------
CHAIRMAN'S STATEMENT
Absolute Capital Management, the investment management group focused on
delivering investment returns through the management of absolute return funds,
continued to make significant progress in its first six month period with strong
growth in all key areas namely, management fee income, performance fee income,
assets under management and profitability.
The Company successfully joined the AIM market in March 2006. The new listing
has increased the Group's transparency among fund investors and potential
investors, enhanced the Group's profile and provided an important way of
incentivising and retaining key employees. The Company has continued to be very
active throughout the period and reflection of the Group's development was
recognised by the industry when it was awarded joint winner of Best Hedge Fund
Group at the Hedge Fund Review's 2006 European Award Ceremony.
On an IFRS basis, in the first half, Group operating profit was up 175% to
Euro13.97m before non-cash related charges of Euro2.1m in respect of staff share-based
payments, generating earnings per share of Euro0.27, an increase of 153% on the
same period last year. Assets under management grew from $841m to $1,227m, an
increase of some 46%. In addition, the Group continues to align the interests of
its fund investors with staff and shareholders by maintaining a low fixed cost
base, and this is reflected in the Group's industry leading margins, in excess
of 50%.
All of the Group's funds performed well in the two different trading
environments that surrounded the first half of 2006. The first four months
provided a favourable environment for us to deliver significant absolute
returns. These returns were challenged by a major change in investor appetite in
light of global inflationary concerns during May and June. During this volatile
period it was a significant achievement to retain the client investors' gains
which we had accumulated during the first four months.
In the last 18 months alone, organically, assets under management have increased
by 212% and the number of funds we manage has grown from 3 to 8. These
additional funds have diversified the Group's business to cover European and
Global, Long/Short, Event Driven, Special Situations, Germany, Global Large
Capitalised Stocks, Eastern European Convergence, India and Activist. This
diversification in both product set and risk has permitted swift and further
asset growth among our existing investors.
With the recent strategic acquisition of TCA we intend to significantly broaden
our investor base both geographically and by type. In addition, our ability to
source talented managers will be increased through TCA's ability to identify
emerging global market talent.
The Group has continued to deliver superior risk adjusted absolute returns to
our investors.
Performance to 30 June 2006
Performance
Size Month Year to Since Annualised Open / Down
Date Inception Closed Months
Single strategy Launch date $ m % % % %
Absolute
Return Europe Mar-02 447.2 0.80 4.25 101.90 17.60 Open 2 out of
52
European
Catalyst Fund Oct-03 218.2 1.08 4.58 73.96 22.30 Closed 4 out of
33
Absolute
Germany Fund Jan-04 199.2 0.15 9.89 66.80 22.71 Closed 2 out of
30
Absolute East
West Fund Jul-05 94.1 1.38 16.64 28.73 28.73 Open 1 out of
12
Absolute
Octane Fund Jul-05 215.4 2.19 15.10 70.79 70.79 Open 1 out of
12
Absolute Large
Cap Fund Feb-06 53.1 2.51 14.32 14.32 37.90 Open 1 out of
5
In February we launched the Absolute Large Cap fund to provide our investors
with exposure to highly liquid larger capitalised stocks throughout the globe.
In June we made a strategic move to enter the Capital Introduction and Fund
Distribution arena with the acquisition of TCA. This acquisition provides the
Group with the opportunity to add significant new funds not only for Absolute
Capital but also for other emerging and talented managers. The intention is to
greatly increase our global reach and to access Institutional Investment clients
in many parts of the globe heretofore untouched by the Group. We believe the
acquisition will further enhance our ability to attract talented individuals and
teams to the Group through a proven and dedicated in-house Capital Introduction
and Fund Distribution business.
Internally we have increased our Dealing, Risk Management and Financial Control
capabilities whilst also further strengthening our investment team. In the first
six months we added a number of talented managers with additional geographic and
sector expertise.
We have continued our concentration on equity markets and in particular higher
risk/return equity markets. We are currently opening a new Zug office and are
increasing our Cayman presence. We have launched the Absolute India Fund and the
Absolute Activist Value Fund as of July 1st, both of which have started strongly
and provide significant capacity for further asset growth.
Outlook
Given the Group's strong performance in the first half of the year and the
Board's continued confidence for the full year and our strong cash position, it
is intended that the Group will pay a dividend post the year end, after the
audit of its 2006 results. In addition, the Board will consider the repurchasing
of shares in the Group for cancellation within pre-defined price parameters.
Assets under management have increased since June 30 and all funds performed
positively in July. With the launch of the 2 new funds and all funds performing
in line with or exceeding their stated target return objectives the Board is
confident of continued and significant growth for the remainder of 2006.
Sean Ewing
Chairman and Chief Executive Officer
21 August 2006
CONDENSED CONSOLIDATED STATEMENT OF INCOME
for the 6 months to 30 June 2006
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
Euro Euro Euro
Notes
Subscription fees 262,935 157,944 388,249
Management fees 8,633,926 3,023,042 8,720,763
Incentive fees 15,546,641 7,173,031 20,535,642
Redemption fees 313,828 242,519 868,451
Other income 22,606 - -
--------- --------- ---------
Revenue 24,779,936 10,596,536 30,513,105
Legal and professional
expenses (204,340) (154,596) (271,406)
Management and incentive
fees payable (5,674,418) (3,396,215) (8,654,996)
Operational expenses (748,957) (548,089) (976,881)
Employee costs (4,145,261) (1,459,048) (4,688,681)
Foreign exchange gain /
(loss) (19,417) 20,049 18,776
Excess of acquirer's
interest in net value of
identifiable net assets - 14,254 14,254
Depreciation (12,909) (284) (3,355)
--------- --------- ---------
Operating profit excluding
share-based payments 13,974,634 5,072,607 15,950,816
Share-based payments 2 (2,114,940) (379,785) (379,785)
--------- --------- ---------
Operating profit 11,859,694 4,692,822 15,571,031
Exceptional costs 3 (565,413) - -
--------- --------- ---------
11,294,281 4,692,822 15,571,031
Financial revenue 123,943 21,335 114,877
Unrealised gain on
investments - 312 312
--------- --------- ---------
Profit on ordinary
activities before 11,418,224 4,714,469 15,686,220
taxation
Taxation 4 (35,207) (4,933) (35,663)
========= ========= =========
Profit for the period after
taxation 11,383,017 4,709,536 15,650,557
attributable to members of the
company ========= ========= =========
Earnings per share 5 Euro 0.23 Euro 0.10 Euro 0.31
(basic) ========= ========= =========
Earnings per share
(diluted) 5 Euro 0.20 Euro 0.10 Euro 0.30
========= ========= =========
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2006
30 June 2006 30 June 2005 31 Dec 2005
Notes Euro Euro Euro
Assets
Non current assets
Intangible assets 6 15,721,917 - -
Property, plant and machinery 269,246 1,586 46,553
--------- --------- ----------
15,991,163 1,586 46,553
Current assets
Trade and other receivables 4,107,952 1,758,344 6,696,433
Cash at bank 16,932,139 6,357,937 3,026,610
--------- --------- ----------
21,040,091 8,116,281 9,723,043
Financial assets
Investments at fair value
through profit and loss 7 4,018,373 36,620 600
Loans and advances receivable 13,528 2,048,823 187,205
Due from parent company - 620,777 -
--------- --------- ----------
4,031,901 2,706,220 187,805
--------- --------- ----------
Total assets 41,063,155 10,824,087 9,957,401
========= ========= ==========
Equity and liabilities
Equity
Issued share capital 8 535,625 2,367,832 500,000
Shares to be issued 6, 8 10,058,823 - -
Share premium 29,394,051 20,671,176 22,769,453
Revenue reserve 14,247,068 1,380,313 3,761,551
Other reserves 2 1,604,057 - 269,341
Merger reserve (22,950,745) (22,950,745) (22,950,745)
--------- --------- ----------
32,888,879 1,468,576 4,349,600
--------- --------- ----------
Current liabilities
Trade and other payables 8,100,219 9,347,391 5,568,951
Taxation payable 74,057 8,120 38,850
--------- --------- ----------
Total current liabilities 8,174,276 9,355,511 5,607,801
--------- --------- ----------
Total equity and liabilities 41,063,155 10,824,087 9,957,401
========= ========= ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the 6 months to 30 June 2006
Share Shares to Share Revenue Other Merger Total
Capital be Issued Premium Reserve Reserves Reserve
Euro Euro Euro Euro Euro Euro Euro
As at 31
December 500,000 - 22,769,453 3,761,551 269,341 (22,950,745) 4,349,600
2005
Profit for
the - - - 11,383,017 - - 11,383,017
year
Distribution
on 24
February - - - (897,500) - - (897,500)
2006
(Euro0.01795
per share)
Issue of
2,500,000
shares
(Euro0.01 25,000 - 5,600,000 - - - 5,625,000
each at
Euro2.25)
Shares to be
issued
(4,470,588) - 10,058,823 - - - - 10,058,823
Share-based
payments - - - - 2,114,940 - 2,114,940
Exercise of
share 10,625 - 1,024,598 - (780,224) - 255,000
options
------- -------- -------- -------- ------- --------- --------
As at 30
June 535,625 10,058,823 29,394,051 14,247,068 1,604,057 (22,950,745) 32,888,879
2006 ======= ======== ======== ======== ======= ========= ========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the 6 months to 30 June 2006
6 months to 6 months to Year to
30 June 30 June 31 December
2006 2005 2005
Notes Euro Euro Euro
Net cash inflow from operating
activities 17,957,639 6,791,080 15,675,820
-------- -------- ---------
Cash flows from investing
activities
Interest income received 123,943 21,335 114,877
Purchase of subsidiaries (39,789) (1,500) (1,500)
Proceeds on sale of investment - 92,602 128,626
Purchase of property, plant and
equipment (235,602) - (48,038)
Cash acquired on purchase of
subsidiary 133,775 33,914 33,914
Loans made to shareholders (net) - (600,809) (67,110)
Repayment of loans 173,677 - 1,352,788
Financial investments (3,000,200) - -
Flotation costs 3 (565,413) - -
Taxation paid - - -
-------- -------- ---------
Net cash inflow / (outflow) from
investing activities (3,409,610) (454,458) 1,513,557
-------- -------- ---------
Cash flows from financing
activities
Dividends paid 9 (897,500) - (14,304,082)
Issue of share capital 8 255,000 - 120,000
-------- -------- ---------
Net cash outflow from financing (642,500) - (14,184,082)
-------- -------- ---------
Net cash inflow / (outflow) 13,905,529 6,336,622 3,005,295
======== ======== =========
ANALYSIS OF CHANGES IN CASH DURING THE PERIOD
Euro
Cash at bank as at 31 December 2005 3,026,610
Net cash inflow during the period 13,905,529
--------
Cash at bank as at 30 June 2006 16,932,139
========
NOTES TO THE FINANCIAL STATEMENTS
for the period ended 30 June 2006
1. BASIS OF PREPARATION
The condensed financial statements have been prepared in accordance with
International Accounting Standard (IAS) 34, Interim Financial Reporting.
The interim results for the six months ended 30 June 2006 are unaudited. Results
for the six months ended 30 June 2005 and the year ended 31 December 2005 are
audited.
Other than as set out in Note 2 below, the accounting policies adopted are
consistent with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2005.
Subsidiaries are consolidated from the date control is transferred to the group
and cease to be consolidated from the date control is transferred from the
group.
2. SHARE-BASED PAYMENTS
4.06 million options to acquire ordinary shares were outstanding at the end of
the period. The fair value of options granted is recognized as an expense with a
corresponding increase in equity. The fair value is calculated at grant date
using an options pricing model with this cost then being recognized over the
option period. A non-cash charge of Euro2.1m has been recognized in the 6 month
period ending 30 June 2006.
There has been a change of accounting policy from the financial statements to 31
December 2005. At this date, the equity instruments of the group were not traded
and their fair value could not be readily assessed. The cost of equity-settled
transactions were measured at the intrinsic value, this being the difference
between the fair value of the shares to which the counterparty has the right to
subscribe and the price the counterparty will be required to pay for those
shares at the date of grant. From the interim financial statements to 30 June
2006 and subsequently, an IFRS 2 - Share-based payment compliant valuation model
will be employed. This requires that equity settled share-based transactions
with employees are to be measured at the fair value of the option at the date of
grant, which forms the basis of the charge to the income statement over the
vesting period.
3. EXCEPTIONAL COSTS
This comprises the expenses related to the flotation of the Company on the
London Stock Exchange's Alternative Investment Market in March 2006. This cost
has been classified as exceptional due to its materiality and one-off nature.
4. TAXATION
Taxation has been calculated using the applicable corporation tax rates of each
group company.
5. EARNINGS PER SHARE
The calculations of earnings per share are based on the following numbers of
shares:
30 June 30 June 31 Dec
2006 2005 2005
Number of shares Number of shares Number of shares
millions millions millions
Weighted
average for
basic
earnings 50.29 48.00 49.72
per share
Effect of
potentially
dilutive
shares 7.40 0.75 1.95
------- ------- --------
Weighted
average
number
of ordinary
shares for
diluted
earnings
per 57.69 48.75 51.67
share ======= ======= ========
6. ACQUISITION OF TCA GROUP LIMITED
The group acquired 100% of the issued share capital of TCA Group Limited on 16
June 2006. 2.5 million fully-paid ordinary shares of Euro0.01 were issued to the
vendors of TCA Group Limited as initial consideration and further shares up to a
maximum of 4.47 million will be issued to the vendors if predetermined
performance targets are met. The Directors are of the opinion that these shares
will be issued in full and therefore have included these shares in the
calculation of the excess of the consideration over the fair value of assets
acquired. The market value of one ordinary share of the company immediately
prior to completion was Euro2.25 and this is the amount that has been used to value
the acquisition.
7. ACQUISITION OF TCA GROUP LIMITED (Continued)
At the date of this report and in the opinion of the Directors, the assets
purchased through the acquisition of TCA Group Limited have fair values as set
out below.
Euro
Investments 1,017,573
Trade debts 1,530,007
Other debtors 105,158
Cash at bank 133,775
Dividend payable (2,429,910)
Creditors payable in less than one year (354,907)
Fair value of net assets acquired 1,695
Other acquisition related costs (39,789)
Excess of consideration over fair value of assets acquired 15,721,917
----------
Consideration 15,683,823
----------
The excess of the consideration over the fair value of the assets acquired has
been classified as an intangible asset in the group accounts. This corresponds
to the customer base of TCA Group Limited. Maintaining this customer base will
depend on TCA Group Limited's ability to provide a satisfactory service to its
customers principally by identifying fund managers capable of providing
satisfactory returns.
8. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
After initial recognition, investments are measured at fair value, with
unrealized gains and losses on investments and impairment of investments
recognized in the consolidated statement of income.
The Directors believe that the fair value of investments as at 30 June 2006 is
equal to their initial cost, and consequently no unrealized gains or losses have
been recognized in respect of these investments as at 30 June 2006.
30 Jun 2006 31 Dec 2005
Investment Type Fair Value Fair Value
Euro Euro
Absolute Return Europe Fund management shares 100 100
European Catalyst Fund management shares 100 100
Absolute Germany Fund management shares 100 100
Absolute East West Fund management shares 100 100
Absolute Octane Fund management shares 100 100
Absolute Large Cap Fund management shares 100 100
Absolute India Fund management shares 100 -
Absolute Activist Value Fund management shares 100 -
Absolute India Fund participating shares 1,500,000 -
Absolute Activist Value Fund participating shares 1,500,000 -
Tara European Stars * participating shares 984,846 -
United Fuel & Energy Corp. * ordinary shares 32,727 -
--------- ---------
4,018,373 600
========= =========
* acquired on purchase of TCA Group
9. SHARE CAPITAL
During the period the company issued 3.56 million fully paid ordinary shares of
Euro0.01 each:
Number of shares millions
Share options exercised at Euro0.24 1.06
Issue of shares as initial consideration on the
acquisition of TCA Group 2.50
----------
Total shares issued 3.56
----------
Shares to be issued correspond to the market value of ordinary shares on
completion date that will be issued to the vendors of TCA Group Limited if
predetermined performance targets are achieved.
10. DIVIDENDS
A dividend of Euro0.01795 per ordinary share was declared on 24 February 2006 in
respect of the company's undistributed reserves at 30 November 2005. Qualifying
shareholders were deemed to be those on the register as at 2 December 2005. This
dividend was paid on 7 March 2006.
No further dividends have been proposed at this time. However, the group intends
to distribute a dividend post its annual results for 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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