RNS Number : 4624V
Conister Financial Group plc
29 May 2008
FOR IMMEDIATE RELEASE 29 MAY 2008
Conister Financial Group PLC
Audited results announcement for the year ended 31 December 2007
Highlights
Conister Financial Group ("CFG") was formed as part of a "Scheme of Arrangement" in January 2008 to establish a non-regulated parent
company of Conister Trust PLC. The figures presented are therefore those of Conister Trust Limited (formerly Conister Trust PLC) for the
year ended 31 December 2007.
CFG comprises two trading divisions; TransSend - the newly created prepaid card division formed in 2006 to take advantage of the
worldwide explosion in the prepaid card market, and Conister Trust - the banking division that was formed in the Isle of Man in 1935 that
specialises in providing finance for personal and business use. Conister Trust is actively developing additional business opportunities
including premium finance and fiduciary deposits.
Financial Highlights
* Total operating income flat �3.88m (2006 - �3.91m)
- Premium finance interest income up 123% to �0.64m (2006 - �0.29m)
- Litigation funding interest income (in run-off) down 54% to �0.36m (2006 - �0.81m)
- TransSend contributes income for the first time �0.19m (2006 - �nil)
* Investment in TransSend �2.47m (2006 - �0.33m)
* Conister Trust strongly capitalised - Tier 1 capital ratio of 25% (2006 - 22%)
- Compared to the average of UK banks 5.5% and European banks 6.5%
* Additional capital raised �7.09m
* Conister Trust ongoing Asset and Personal Finance returns to profit, �0.52m (2006 - loss �0.05m)
* Pre-tax loss �3.97m (2006 - �0.97m), reflecting
- Significant investment in TransSend �2.47m (2006 - �0.33m)
- Litigation funding (in run-off) loss �0.69m (2006 - profit �0.13m)
Operating Highlights
* Conister Financial Group
- New Chief Executive to drive growth
* TransSend
- Successful launch of first prepaid card programme with 28,000 cards now issued
- First European company to be approved by Mastercard for payout cards in non-US gaming sector
- Recognised as a significant industry player only 18 months after formation, creating significant value for shareholders
- Extensive pipeline of card programmes ready for launch in 2008/9
* Conister Trust
- Asset and Personal Finance back into profit
- Litigation Funding now discontinued
- Premium Finance growing rapidly
- Fiduciary Deposits introduced and growing
- Well capitalised with strong liquidity (�21m).
Jim Mellon, Chairman of CFG commented:
"I am pleased with the Group's progress this year. During the year we have invested well in TransSend and it is pleasing to see that
Conister Trust's ongoing Asset and Personal Finance business is back into profit.
Decisions to introduce Premium Finance and Fiduciary Deposits and to cease the Litigation Funding business leave us well positioned in
2008 as we invest again in TransSend.
We are well capitalised, unlike many of the UK banks and European banks, and have strong liquidity. As a result we look forward with
confidence."
Contacts:
Conister Financial Group PLC
Arron Banks, CEO
Tel: 07867 520048
Chris Johnstone, Interim Finance Director
Tel: 07918 608480
Britton Financial PR
Tim Blackstone
Tel : 020 7251 2544 / 07957 140416
Beaumont Cornish Limited
Roland D Cornish
Tel: 0207 628 3396
The 2007 Annual Report and Accounts will be posted to shareholders on 6 June 2008 and will be available from the company's website
www.cfgplc.com
The financial information set out below comprises non-statutory accounts. The financial information for the year ended 31 December 2007
has been extracted from published accounts for the year ended 31 December 2007 on which the report of the auditors was unqualified.
Chairman's Statement
TRANSFORMATIONAL YEAR
It is a pleasure to report to shareholders, as the first ever Chairman of Conister Financial Group PLC ("CFG").
2007 has been an exciting and transformational year for the company.
The new holding company (CFG) was created as part of a "Scheme of Arrangement" to establish a non-regulated parent company, free to
acquire and expand other non-regulated businesses. This structure is common to most financial groups with regulated entities; Conister Trust
Limited is a licensed bank and regulated by the Financial Supervision Commission in the Isle of Man. The new structure will reduce cost and
administrative burden in the long run but its creation has been a costly (�481,000) and time-consuming process.
During the year the Group raised significant new capital of �7.09m (totalling �12.49m over the last eighteen months) which has been used
to strengthen the banking operation and �2.47m has been invested in our exciting prepaid card business, TransSend, with a similar investment
planned in 2008.
We are delighted to welcome Helvetica as a major new shareholder in the Group. Helvetica is an established fund manager that in 2006 was
appointed as an investment manager for the Treasury Reserves of the Isle of Man Government. Helvetica also has strong links with the State
of Qatar and they invested in CFG via a placing of 8.3m shares at a price of 85 pence per share. In making this significant investment,
Helvetica recognised the substantial growth and profit potential of TransSend. Helvetica's support, network and expertise will be invaluable
in the Group's future.
TransSend
TransSend is well positioned to take advantage of the worldwide explosion in the global prepaid market and the opportunities arising
from it. This investment has been signalled to shareholders as a necessary step to take CFG into a new era, one which it is planned will
eventually yield much higher levels of profitability, capital strength and stability than previously experienced by the Group.
TransSend launched its first major global prepaid card programme in September 2007 in three currencies, GBP, USD and Euros. To date it
has issued in excess of 28,000 cards with a very impressive 72% activation rate, representing over 20,000 active card users. Card activity
and usage has been high with a total programme cash load of over �34m and in excess of 240,000 transactions.
TransSend and Conister Trust are the first companies in Europe to have received MasterCard approval to deliver prepaid payout cards to
the non-US online gaming sector. This is a key target market and is expected to continue to be one of the fastest growing segments of the
overall gaming market, reaching $14.6bn by 2010 (source: Global Betting and Gaming Consultants) with an estimated growth rate in excess of
16% per annum.
With a growing demand for new prepaid payment solutions, a strong pipeline and exciting products in development, we are confident in the
outlook for TransSend and our ability to create value for our shareholders.
We are happy with the progress made to date, given the relatively small investment made compared to other highly rated operators in the
market. This reflects the skills and expertise of our staff and our focus on the more desirable B2B approach - rather than the cash
intensive B2C model adopted by early entrants to the market. Our preferred approach has firmly positioned TransSend as a "Premier League"
player in the rapidly growing prepaid card sector.
Those wishing to review the progress made at TransSend can go to www.transsend.eu which explains the prepaid card business in detail.
Conister Trust
Conister Trust (the "banking division") made good progress in 2007, despite difficult trading conditions. The banking division improved
the performance of its ongoing Asset and Personal Finance business from a loss of �49,000 in 2006 to a �516,000 profit in 2007 before
increased provisions against litigation funding loans - a line of business that we have been withdrawing from for some time.
The detailed analysis of TransSend and Conister Trust are contained within the Chief Executive's Review.
New Executive Team
We recently announced the strengthening of the executive team with the appointment of Arron Banks as Chief Executive, and Chris
Johnstone as interim Finance Director, of CFG.
Arron was a non-executive director of CFG and a significant shareholder, with a beneficial interest of nearly 15% of the issued share
capital.
He has had a successful and dynamic career in the financial services industry creating significant shareholder value. He founded Group
Direct, a top 30 UK insurance broker and Southern Rock Insurance Company, one of the fastest growing direct internet insurers in the UK.
Chris had a long and successful track record at Provident Financial plc. As Managing Director of its Insurance Division he expanded the
motor insurance business from 100,000 customers to over 850,000 customers in a little over 5 years. The business was generating �40m profits
when it was sold in 2007 to GMAC Insurance Holdings Inc.
In 2001 Chris was appointed to the Provident Financial plc Board with responsibility for its UK consumer credit operations.
Outlook
With the introduction of a new executive team with an enviable track record in shareholder value creation within the financial services
industry, CFG is well placed to exploit opportunities occurring due to the credit crunch and general financial environment and through its
further investment in TransSend.
The opportunities in the prepaid sector are clear, and we have made excellent progress in developing TransSend from a start up business
to a live trading business with active cards already in circulation.
With a strong balance sheet and a talented board of directors, we expect to be able to report further progress in the continuing
development of CFG.
The company has no debt on its balance sheet, has raised �12.45m of new capital over the last 18 months and almost uniquely among banks
it has absolutely no exposure to the sub-prime market or housing sector.
Despite our significant investment programme, we have ended the year with much more capital than at the outset of 2007, and we have
taken a sleepy organization and galvanized it into action. The profit potential of CFG is now in a different league to the company of just
eighteen months ago.
My thanks go to all the staff, who have worked incredibly hard this year to make such progress.
Jim Mellon - Chairman
29 May 2008
Chief Executive's Business and Financial Review
Introduction
I am delighted to have been appointed as the new chief executive of CFG and look forward to leading the company with a strong management
team, as we create a flagship financial group for the Isle of Man.
CFG is the ultimate holding company for TransSend (the prepaid card division) and Conister Trust (the banking division), the two trading
divisions of the Group.
Overall in 2007 the Group made a pre-tax of loss of �3.97m (2006 - �0.97m loss) reflecting the investment in TransSend of �2.47m (2006 -
�0.33m), costs arising at Conister Trust in the Litigation Funding business (now in run-off) of �0.69m, the Scheme of Arrangement costs of
�0.48m and Shareholder litigation (as referred to in 30 June 2007 Interim Statement) settlement costs of �0.38m.
The banking divisions ongoing Asset and Personal Finance business reported a profit of �0.52m (2006 - �0.05m loss).
TransSend - Prepaid Card Division
TransSend launched its first major global prepaid card programme ("Globewallet") using the Conister MasterCard licence in September
2007. The programme was launched in three currencies, GBP, USD and Euros and has grown rapidly with more than 28,000 cards already issued.
The key to a successful prepaid card programme is the level of activation and the extent to which active cards are utilised. We have been
thrilled with the progress of Globewallet which has experienced an excellent 72% activation rate with over �34m being deposited onto 20,000
active cards and nearly a quarter of a million transactions so far.
The business earns money in a number of ways: revenue from card transactions, foreign exchange charges, interest on the deposit float,
and set-up fees on new cards.
The dynamics of the card business is that revenue is slow to build but as the number of cards in issue grows, so the monthly revenue
increases against a relatively fixed cost base.
We are delighted with the performance of our first major programme; we have demonstrated the ability to work closely with our programme
owner, MasterCard and our processor to design, implement and deliver a successful prepaid card to the market in a relatively short
time-frame.
We have continued to invest in the expansion of the business and have created a team with significant card industry expertise and
believe that such an organisation with a strong focus on scheme compliance and regulatory control is an essential requirement as well as a
key success factor.
The team is based in Windsor in the UK, and led by its CEO, Richard Jones, whose previous roles include Regional Business Director at
Pfizer PLC and Commercial Director of the Brightside Group. Richard has done a great job of building a talented team not only with the right
card experience but also the creativity to leverage quickly the opportunities we have identified:
* TransSend has built up a healthy pipeline of new prepaid card programmes waiting to be implemented in 2008 and beyond. The gaining
of an e-money licence, the application process for which is close to completion, will strengthen the operational capabilities of the
business, enabling rapid growth in the pipeline.
* TransSend and Conister Trust are the first companies in Europe to be approved by MasterCard to issue prepaid payout cards to the
huge and rapidly expanding non-US gaming sector.
In partnership with Intercash, an experienced payments provider to the gaming industry, we will be launching the first European prepaid
programme for payout in gaming. The product we have developed integrates easily into existing online gaming payment platforms and provides a
superior solution to existing cheque payouts and bank transfers - this is due to be launched by the summer of 2008. We are planning to have
launched programmes for three other gaming companies by the end of 2008.
* TransSend has been working over the last year with a number of other partners in our target sectors to design sector specific
prepaid cards. We have developed MasterCard products for the substantial corporate payout and online transaction sectors, where we have
already have a number of interested parties committed. These sectors represent an addressable market of EUR19bn within Europe alone (source:
PSE Consulting).
* TransSend is also actively targeting a number of other sectors within the prepaid market and is working with its partners to
develop a range of exciting and innovative solutions to address the online payments and under-banked sectors.
* Although our core business focus is providing prepaid solutions, we have also provided the expertise to deliver credit card BIN
(Bank Identification Number) sponsorship for CompuCredit Corporation with Conister Trust as the issuing bank. The programme is in the final
stages of implementation with a live date into the UK market in the middle of 2008.The processing of this programme will be undertaken by
TSYS a market leading provider of electronic payment services around the world.
* Furthermore, TransSend will be launching its own generic prepaid card for use in the corporate payroll and expenses sector,
hopefully in the 3rd quarter, 2008. Early signs are encouraging as we have already received a number of substantive enquiries.
TransSend continues to work very closely with its key strategic partner MasterCard and the regulatory authorities to ensure that it has
the right foundations in place to produce and maintain successful card programmes.
Conister Trust - the Banking Division
Conister Trust, CFG's Isle of Man banking division is performing well, amid the current crisis in the financial and banking markets,
which is creating a flow of attractive lending opportunities.
Credit quality has been maintained with no discernible increase in the level of impairment (bad debts) for the local business. The
profile of the bank has ensured that we have no exposure to "sub prime problems" or the housing sector, which are currently inflicting such
damage on other banks.
Conister Trust has a strong capital base and liquidity position following the injection of �7.09m of new share capital during the year.
The Tier 1 capital ratio of the bank (a measure of its financial strength) improved from 22% at the end of 2006 to 25% at the end of 2007.
This compares very favourably with the average for UK and European Banks of 5.5% and 6.5% respectively. At the end of 2007 the bank had �21m
of cash readily available in the balance sheet.
The deposit book stands at a record �62m (up from �52m last year) also reflecting our strength. We have long standing customer deposits
with no reliance whatsoever on the wholesale banking market and we are proud of the fact that we are the only independent Isle of Man
("IOM") bank.
Asset and Personal Finance (the continuing business)
The banking division made good progress in 2007 improving the underlying performance of its Asset and Personal Finance business from a
loss of �49,000 in 2006 to a profit of �516,000 in 2007. Asset and Personal Finance currently comprises Asset Finance, Premium Finance and
Fiduciary Deposits.
Asset Finance
The IOM banking business and military funding, for armed forces personnel stationed overseas to purchase new motor vehicles is stable
and profitable. While we have maintained a prudent approach to lending, the onset of the credit crunch has increased our flow of lending
opportunities.
We expect to win a larger market share of the IOM lending and deposit business, with the constraints placed on our high street
competitors meaning we can write high quality business at attractive rates. The result of the credit crunch has meant a reduced appetite for
lending from the other banks with operating branches on the IOM.
Premium Finance
Premium Finance (loans to customers to pay for insurance premiums) experienced significant growth in 2007 with over �17m of new loans
made during the year compared to �5m in 2006. We expect to lend over �25m in 2008.
Since we started Premium Finance lending in May 2006, we have experienced no bad debt on the book and the interest rate charged is 10.5%
APR, against the average of circa 10% APR we receive on asset finance agreements but with minimal risk. We have identified new opportunities
to expand this low risk lending business which we will continue to develop in 2008.
Fiduciary Deposits
Fiduciary Deposits were introduced during the year for high net worth and corporate clients who want to mitigate the risk of placing all
of their funds with one financial institution. Conister Trust places the funds on behalf of the client, in various currencies, across a
range of top quality banks for which a fee is earned.
This service was identified last year as an area of expansion and we are pleased to report that we have made good progress. At the end
of 2007 deposits of �34m were held, this is expected to grow significantly in 2008 providing a risk free income stream. The value of
Fiduciary Deposits has already more than quadrupled so far this year.
We intend to focus in the future on Fiduciary Deposits, as a core component of the banking division.
Litigation Funding (in run-off)
Following a steady withdrawal from Litigation Funding in 2006 and the early part of 2007, new loans were ceased altogether in June 2007.
While the bank has stopped lending in this sector, the recovery of certain outstanding loans is proving to be problematic.
A small number of solicitors that arranged these loans for their clients have stopped making repayments. In response, Conister Trust has
commenced proceedings against one of these solicitors to establish and then enforce its position pending the outcome of litigation to
establish the enforceability of their agreements with Conister.
At the time of writing we have been successful at the Court hearing of the "Preliminary Issue" but the case is now the subject of an
Appeal. Whilst we are confident of the strength of our position we have provided for all legal costs to date and those anticipated in
running the Appeal to its conclusion. As a consequence this discontinued line of business made a loss of �688,000 in 2007 (2006 - �13,000
profit).
The good news is that balances outstanding on these loans (before allowance for impairment) have been steadily reduced from �6.06m in
2006, to �3.75m in 2007.
The Way Forward
The route forward for TransSend is clear and the plans to capture a significant share of a rapidly growing attractive market are well
established. We have created a talented team and have launched our first prepaid card programme successfully in 2007 within a small
investment budget. The investment in TransSend will continue in 2008 at similar levels to 2007. More importantly however, we have secured a
significant number of programmes in the pipeline for launch in 2008 and beyond, and it is planned that these will drive the business into
profitability.
Conister Trust has not delivered on its huge potential for some time and we have plans to build upon the foundations laid in 2007 to
provide an exciting future for staff and shareholders and take full advantage of its regulatory licences and off-shore location.
Following the re-organisation of the Group and the appointment of myself and Chris Johnstone as CFG executives, Jerry Linehan will be
focusing on the expansion and performance of Conister Trust exclusively as its Chief Executive. The current financial environment throws up
lots of interesting opportunities and we are looking at a number of attractive new business ideas and acquisitions to transform the Group.
CFG is well capitalised and in good shape for the future - I look forward with confidence to report on further progress this year.
Arron Banks
29 May 2008
Consolidated Income Statement
for the year ended 31 December 2007 2007 2006
�000 �000
Interest income 6,851 6,989
Interest expense (2,631) (2,403)
Net interest income 4,220 4,586
Fee and commission expense (898) (754)
Net trading income 3,322 3,832
Net loss from financial assets carried at fair value (148) (25)
Dividend income from financial assets carried at fair 340 -
value
Other operating income 362 100
Operating income 3,876 3,907
Personnel expenses (3,167) (2,370)
Depreciation (60) (83)
Other expenses (3,353) (1,663)
Provision for impairment (464) (557)
Profit on sale of property - 356
Cost of discontinued potential acquisitions - (262)
Shareholder litigation costs (318) -
Scheme of arrangement costs (481) (300)
Loss before income tax (3,967) (972)
Income tax (expense)/income (174) 143
Loss for the year (4,141) (829)
Basic and diluted loss per share (GBP) (9.48) (2.31)
Consolidated Balance Sheet
as at 31 December 2007
2007 2006
�000 �000
Assets
Cash and cash equivalents 22,905 12,768
Financial assets at fair value through profit or loss 298 446
Loans and advances to customers 56,737 53,791
Property, plant and equipment 277 118
Deferred tax - 184
Trade and other receivables 1,072 500
TOTAL ASSETS 81,289 67,807
Liabilities
Customer accounts 61,973 52,398
Creditors and accrued charges 1,538 768
Pension liability 305 416
Total liabilities 63,816 53,582
Equity
Called up share capital 12,680 10,486
Share premium account 8,337 3,304
Share option reserve 238 115
Profit and loss account (3,782) 320
Total equity 17,473 14,225
TOTAL LIABILITIES AND EQUITY 81,289 67,807
Consolidated Cash Flow Statement
for the year ended 31 December 2007
Reconciliation of loss before taxation 2007 2006
to operating cash flow �000 �000
Loss before taxation (3,967) (972)
Movement in financial assets held at fair value through 148 25
profit and loss
Dividend income from financial assets carried at fair value (340) -
Loss (profit) on disposal of property, plant and equipment 25 (356)
Depreciation charge 60 83
Shares to be issued 123 40
Pension scheme (61) (27)
Increase in trade debtors (232) (361)
Increase in trade creditors 858 264 858 264
Net cash outflow from trading activities (3,386) (1,304)
(Increase)/decrease in loans and advances to customers (2,946) 1,301
Increase/(decrease) in deposit accounts 9,575 (486)
Cash inflow/(outflow) from operating activities 3,243 (489)
Cash flows from operating activities
Cash inflow/(outflow) from operating activities 3,243 (489)
Taxation paid (5) (1)
Net cash inflow/(outflow) from operating activities 3,238 (490)
Cash flows from investing activities
Purchase of tangible fixed assets (244) (13)
Sale of tangible fixed assets - 1,034
Purchase of investment - (471)
Net cash (outflow)/inflow from investing activities (244) 550
Cash flows from financing activities
Issue of ordinary share capital 7,227 5,910
Net cash inflow from financing activities 7,227 5,910
Increase in cash and cash equivalents 10,221 5,970
Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2007
2007 2006
�000 �000
Gain on pension scheme 48 95
Deferred tax associated with gain on pension scheme (11) (12)
Other 2 -
Income recognised directly in equity 39 83
Loss for the financial year (4,141) (829)
Total recognised expense for the year (4,102) (746)
Consolidated Statement of Changes in Equity
for the year ended 31 December 2007
Share capital Share premium Share option reserve Retained earnings 2007 2006
�000
�000 �000 �000
�000 �000
Balance at 1 January 10,486 3,304 115 320 14,225 9,021
Loss for the year - - - (4,141) (4,141) (829)
Arising on shares issued in 2,194 5,033 - - 7,227 5,910
the year
Movement on share option - - 123 - 123 40
reserve
Other recognised income - - - 39 39 83
attributable to equity holders
Balance at 31 December 12,680 8,337 238 (3,782) 17,473 14,225
Notes to the Consolidated Financial Statements
for the year ended 31 December 2007
1. Segmental Analysis
Segment information is presented in respect of the Group's business segments. The Directors consider that the Group currently operates
in one geographic segment, the Isle of Man and UK. The primary format, business segments, is based on the Group's management and internal
reporting structure. The Directors consider that the Group operates in three product orientated segments: Asset and Personal Finance
(including provision of HP contracts, leases, personal loans and premium finance); Litigation Finance; and a prepaid card division,
TransSend. The Group ceased to provide new Litigation Finance lending in June 2007.
Asset and Litigation Finance TransSend Division Total
Personal 2007
Finance
�000 �000 �000 �000
Net Interest Income 4,080 140 - 4,220
Operating Income 3,542 140 194 3,876
Provision for impairment (478) 14 - (464)
Profit/(loss) before 517 (688) (2,469) (2,640)
unallocated items
Group central costs (528)
Shareholder litigation costs (318)
Scheme of Arrangement costs (481)
Loss before income tax (3,967)
Capital expenditure 111 - 133 244
Total assets 78,976 2,116 197 81,289
Total liabilities 61,700 2,116 - 63,816
Asset and Litigation TransSend Division Total
Personal Finance 2006
Finance
�000 �000 �000 �000
Net Interest Income 4,082 504 - 4,586
Operating Income 3,403 504 - 3,907
Provision for impairment (435) (122) - (557)
Profit/(loss) before (49) 13 (331) (367)
unallocated items
Group central costs (399)
Discontinued potential (262)
acquisition
Scheme of arrangement (300)
Profit on sale of property 356
Loss before income tax (972)
Capital expenditure 13 - - 13
Total assets 63,011 4,796 - 67,807
Total liabilities 49,117 4,796 (331) 53,582
Segment capital expenditure is the total cost incurred during the year to acquire equipment and fund leasehold improvements.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2007
2. Loss Per Share
2007 2006
�000 �000
Loss for the year (4,141) (829)
Number Number
Weighted average number of ordinary shares in issue 43,689,141 35,946,198
Basic and diluted loss per share (9.48)p (2.31)p
The basic loss per share calculation is based upon loss for the period after taxation and the weighted average of the number of shares
in issue throughout the period.
The diluted loss per share calculation is based upon the loss for the period after taxation and the weighted average of the number of
shares in issue after adjustment to assume conversion of all dilutive potential shares. Other than the employee share option scheme, there
are no other potentially dilutive instruments.
3. Explanation of Transition To IFRS
These financial statements are the first that have been prepared using accounting policies that are consistent with IFRS. The date of
transition from UK GAAP to IFRS for the Group and Company was 1 January 2006.
In order to show the effect of the transition from UK GAAP to IFRS on the Group's reported financial position and financial performance,
IFRS 1 requires the following reconciliations to be presented and explained:
(i) A reconciliation of equity (i.e. net assets) at 1 January 2006 and 31 December 2006; and
(ii) A reconciliation of profit/loss for the year ended 31 December 2006
In addition, in order to show the effect of the transition from UK GAAP to IFRS on the Group's cash flows, a note explaining the impact
on cash flows has also been given. The IFRS adjustments included in the reconciliation of equity are explained as follows:
(a) IAS 17 Leases and IAS 39 Financial instruments: Recognition and Measurement
Customer accounts receivable as presented in the UKGAAP Consolidated Balance Sheet, includes amounts due for both customer borrowings
and finance leases. IFRS requires these to be classified as 'Loans and advances to customers' and for these balances to be held at the net
present value of the minimum lease payments and recognised in the income statement using the effective interest rate method (note 3(l)).
The effective interest rate method differs to that which had been adopted by the Group under UK GAAP. Previously interest was allocated
over the duration of each agreement on the "rule of 78 basis".
Notes to the Consolidated Financial Statements
for the year ended 31 December 2007
Explanation Of Transition To IFRS (continued)
Under UK GAAP the net investment in the finance lease was calculated as the present value of the minimum lease payments including
initial costs and estimated costs of collection.
Under IFRS the net investment in the finance lease is calculated as the present value of the minimum lease payments including initial
directly attributable costs, such as legal fees, only.
(b) IAS 19 Employee benefits
The scope of employee benefits which have to be accounted for under IAS 19 is broader than under UK GAAP. Consequently, under IFRS the
Group has recognised an additional expense accrual for holiday pay entitlement earned but not yet taken. As at 1 January 2007 this was
�21,000.
Deferred tax attributable to the pension liability was under UK GAAP, offset against the pension liability. Under IFRSs, the pension
liability and the deferred tax asset have been grossed up accordingly.
(c) Impact of IFRSs on the Cash Flow Statement
The impact of the adjustments described above has resulted in changes to the figures presented on the 'Reconciliation of loss before
taxation to operating cash flow' from those previously presented under UK GAAP. The changes are in line with those presented in the
'Reconciliation of equity' and the 'Reconciliation of profit'. As a result '(Increase)/decrease in loans and receivables', 'Increase in
trade creditors' and 'Loss before taxation' have been restated. There are no other material changes required to be made to the Cash Flow
Statement as a result of the implementation of IFRSs.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2007
Reconciliation Of Equity
Effect of Effect of
Previous transition Previous transition
GAAP to IFRS IFRS GAAP to IFRS IFRS
1 Jan 2006 1 Jan 1 Jan 2006 31 Dec 2006 31 Dec 2006 31 Dec 2006
2006
�000 �000 �000 �000 �000 �000
Assets
Property, plant and equipment 866 - 866 118 - 118
Deferred tax 26 53 79 142 42 184
Loans and receivables 55,739 (647) 55,092 54,442 (651) 53,791
Trade and other receivables 143 - 143 500 - 500
Financial assets at fair value - - - 446 - 446
through profit or loss
Cash and cash equivalents 6,827 - 6,827 12,768 - 12,768
Total assets 63,601 (594) 63,007 68,416 (609) 67,807
Liabilities
Customer accounts 52,884 - 52,884 52,398 - 52,398
Creditors and accrued charges 554 11 565 747 21 768
Pension liability 484 53 537 374 42 416
Total liabilities 53,922 64 53,986 53,519 63 53,582
Equity
Share capital 7,111 - 7,111 10,486 - 10,486
Share premium 769 - 769 3,304 - 3,304
Shares option reserve 75 - 75 115 - 115
Profit and loss account 1,724 (658) 1,066 992 (672) 320
Total equity 9,679 (658) 9,021 14,897 (672) 14,225
Total liabilities and Equity 63,601 (594) 63,007 68,416 (609) 67,807
Notes to the Consolidated Financial Statements
for the year ended 31 December 2007
Reconciliation Of Profit/Loss
Effect of Effect of
Previous transition Previous transition
GAAP to IFRS IFRS GAAP to IFRS IFRS
31 Dec 2005 31 Dec 2005 31 Dec 2005 31 Dec 2006 31 Dec 2006 31 Dec 2006
�000 �000 �000 �000 �000 �000
Interest receivable on loans 7,461 (19) 7,442 7,082 (93) 6,989
and receivables
Interest payable on deposit (2,492) - (2,492) (2,403) - (2,403)
accounts
Net interest income 4,969 (19) 4,950 4,679 (93) 4,586
Other operating income 56 - 56 100 - 100
Investment income - - - (25) - (25)
Total operating income 5,025 (19) 5,006 4,754 (93) 4,661
Commissions (848) 38 (810) (843) 89 (754)
Gross profit 4,177 19 4,196 3,911 (4) 3,907
Operating expenses (1,262) (11) (1,273) (1,653) (10) (1,663)
Personnel costs (1,845) - (1,845) (2,370) - (2,370)
Depreciation (103) - (103) (83) - (83)
Impairment recoveries/
(losses) (873) - (873) (557) - (557)
Costsof discontinued potential - - - (262) - (262)
acquisitions
Scheme of - - - (300) - (300)
arrangement costs
Profit on sale of property - - - 356 - 356
Profit/(Loss) before taxation 94 8 102 (958) (14) (972)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEIFWASASEDI
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