TIDMCLEA
RNS Number : 7749O
Cleardebt Group PLC
23 September 2011
ClearDebt Group plc ("ClearDebt" or "the Group")
Preliminary announcement of audited results for the year ended
30 June 2011
ClearDebt is delighted to present another excellent set of both
financial and operational results.
Financial Highlights: Strong financial performance as
demonstrated by growth in fundamentals.
% increase 2011 2010
Revenue 17 GBP7,776,362 GBP6,633,995
Gross Profit 20 GBP3,963,959 GBP3,300,688
EBITDA 47 GBP2,222,411 GBP1,515,271
GBP1.1m spent on acquiring revenue generating books of both IVA
and Debt Management Plans to further enhance on-going positive cash
flow.
Operational Highlights: Huge progression in new IVAs drives
strong revenue growth.
Number of new IVAs
Period % increase 2011 2010
First quarter 102 355 176
Second quarter 135 407 173
Third quarter 123 411 184
Fourth quarter 61 428 266
Continued successful diversification
-- Abacus, ClearDebt's debt management plan subsidiary continues
to make a profit.
-- ClearCash prepaid master card showing growth in both total
cards in use and revenue per card.
Outlook
-- Fragmented corporate market provides acquisition
opportunities.
-- Complex economic environment and strong marketing will drive
continued organic growth.
-- Initial signs from new financial year are positive, with
continued growth in IVAs following record Q4 performance.
-- Successful development of trade association, the Debt
Resolution Forum, and professionalisation of the industry will grow
both regulatory and consumer confidence, providing enhanced growth
opportunities.
David Mond, CEO of ClearDebt commented
"Whilst some sections of society have been able to escape the
worst consequences of the recession, we at ClearDebt are here to
provide counsel and support to the large sections that are unable
to cope with the proliferation of consumer debt. By working in
partnership with the Debt Resolution Forum to professionalise the
industry, the IVA and Debt Management Plan solutions are now
recognised as advantageous by all key parties: consumers, creditors
and regulators. Without the solutions that ClearDebt provides,
there could be a genuine personal financial meltdown in the UK.
The economy is not going to improve overnight. We expect
continued strong organic growth due to the combination of the
prevailing economic situation and the realisation that ClearDebt's
"appropriate advice" model offers our clients the opportunity to
stabilise their financial situation.
ClearDebt's competitive advantage is our kaizen based model that
is entirely scaleable. We will continue to acquire books of IVAs
and DMPs that are unprofitable for other players, but make us
strong and profitable revenues. We believe that we will be able to
continue our successful acquisitive growth".
Enquiries:
ClearDebt Group plc David Mond, Chief Executive Officer
Tel No: 0161 968 6805
Seymour Pierce Limited John Cowie/Guy Peters (Corporate
Finance)
(Broker and Nominated Adviser) David Banks/Katie Ratner
(Corporate Broking)
Tel No: 020 7107 8000
Chairman's Statement
I am delighted to present the Group's financial statements for
the year ended 30 June 2011. The Group performance has again been
driven by the IVA division which doubled the number of new IVAs
arranged during the year.
The Group increased revenue to GBP7,776,362 (2010: GBP6,633,995)
producing a much increased gross profit of GBP3,963,959 (2010:
GBP3,300,688). Earnings before interest, tax, depreciation and
amortisation increased to GBP2,222,411 (2010: GBP1,515,271)
resulting in a pre-tax profit for the year of GBP227,219 (2010:
GBP465,709).This was after finance charges of GBP532,404 (2010:
GBP206,660) relating to the convertible secured loan note issued in
2010 and other loans, together with amortisation relating to the
acquisition of back books and other intangibles of GBP1,388,809
(2010: GBP993,980).
During the year the Group acquired two further back books of
Debt Management Plans (DMPs) and completed the purchase of a
sizeable IVA book from Invocas Group plc (Invocas) just prior to
the year end. The acquisitions resulted in a gain on bargain
purchase of GBP54,985 which was offset by the write off of
GBP55,612 of goodwill relating to the Debt Advice Portal
acquisition in January 2009. A tax charge of GBP156,183 for the
year includes a GBP75,000 provision against holding company tax
losses previously recognised as a deferred tax asset which,
although they may ultimately be recoverable, will take a number of
years to be fully utilised.
In June 2011, just prior to the year end, a decision was made in
favour of Paymex Limited against HM Revenue & Customs (HMRC)
which ruled that fees for services in relation to IVAs should be
treated as exempt from VAT. HMRC confirmed in July that they would
not appeal the outcome of the case. Accordingly, as a result of the
ruling, we have put a protective claim into HMRC to recover net
output tax of some GBP850,000 incorrectly paid to HMRC over the
last 4 years. A proportion of this VAT may be due to us and a
proportion due to creditors. The timing, quantum and split of any
refunds received will very much be dependent on the stance that
HMRC adopt in relation to such reclaims by us and many other
companies in the sector. No entries have been made in the accounts
due to the uncertainty on the timing and recoverability of any
claim. We expect the loss of input tax recovery on our costs going
forward to be broadly neutral.
At the year end the group had net assets of GBP5,150,582 (2010:
GBP5,016,621) including cash of GBP336,636 (2010: GBP541,504) after
spending some GBP1.1m on acquisitions (2010: GBP2.7m) in the year
financed out of cash flow and net new loans of GBP315,000.
The Group finances continue on a sound footing and I am pleased
to report continued growth in the number of new IVAs being passed
since the year end with a record number of cases passed in August
2011. Client retention of debt management clients remains excellent
which is a testament to the service our teams provide to creditors
and clients alike. Growth in new debt management clients remains
limited going forward, given an increasing acceptance by debtors
and creditors alike that the IVA product is generally more
appropriate to debtor's circumstances than a DMP.
I look forward to another profitable year as we continue to
nurture and expand our referral base whilst maintaining our web
marketing presence and we continue to look for opportunities to
acquire back books of clients wherever possible at sensible
prices.
Gerald Carey FCIB
Chairman
23 September 2011
Chief Executive's Statement
The Group has enjoyed another excellent year underpinned by
further substantial growth in the numbers of new IVA cases arranged
during the past financial year, which doubled to 1,601 (2010: 799).
In addition 953 IVAs were acquired from Invocas in June 2011 and as
at 30 June 2011 the total number of IVAs and PTDs generating income
was 5,893 (2010: 4,894).
This is a pleasing result against a backdrop of an IVA market
that has remained flat over the last 2 years at approximately
50,000 new IVAs per annum with slight declines in case numbers
being seen in the first 2 quarters of 2011.
During the year, two books of DMPs totalling approximately 1,000
clients were acquired and as at 30 June 2011, the total number of
active DMPs was 5,761 (2010: 6,316). Client retention rates remain
at excellent levels although the fall in numbers reflects natural
attrition in the DMP books, the majority of new clients opting for
an IVA rather than DMP, together with existing DMP clients
converting to an IVA where appropriate.
For the majority of clients we see, the IVA remains the most
appropriate solution freezing interest and charges and writing off
the balance of debts generally after 5 years. Whereas in previous
years clients have preferred to opt for the DMP solution as a short
term fix awaiting improved prospects to clear their debts, there is
now general acceptance that this will not happen in the short to
medium term and the IVA solution is now the preferred
option.ClearDebt has always felt that DMP's are only applicable for
clients who expect to see a rapid recovery in their finances.
In November 2010 we rationalised the debt management operation
in Staveley and closed the office transferring the DMP book to our
main operation in Timperley where it was absorbed without the need
for any additional staff recruitment.
The IVA operation in Staveley continues to perform well and is
now receiving new IVAs drafted by Timperley as spare capacity has
been freed up through the natural completion of the older IVA cases
acquired in 2009. The Invocas cases acquired in June have been
transferred to Staveley and the electronic case management data
will shortly be migrated onto our standard systems. In addition we
are continuing to purchase new cases referred to us by Invocas on a
monthly basis over the next few months on a trial basis. We
continue to balance our workload between the two sites as
required.
I would like to take this opportunity to thank all our staff for
their dedication and hard work over the last year and I am proud of
the work they do to provide continuing advice and assistance to our
thousands of clients - as well as advice to many others to whom we
have spoken over the same period. We continue to train and
encourage all of our staff to obtain the Certificate of Debt
Resolution (CertDR), exclusively offered by the DRF and presently
all of our client advisers who have been with us over 3 months are
qualified, which we believe is one of the highest rates in the
industry. Industry regulation and consultation are increasingly
focusing on the formal training and qualification of staff and we
are therefore well placed to deal with the ever changing demands
being made by the regulatory authorities.
Cash flow from the former Relax cases remains good and well
ahead of our expectations at the time of acquisition in December
2009. Total fees of GBP5.7m have been received to the end of June
2011 against a purchase price inclusive of costs of circa GBP3.2m,
showing the value that can be generated by acquisitions bought at
the right price and successfully and efficiently integrated into
our systems and processes.
We continue to maintain our internet activities across the Group
acquiring web leads at cost effective rates wherever possible
although we continue to see competitors paying for leads at prices
we view as uneconomic. We have in the last year actively expanded
our referral base and continue to explore new opportunities for
lead sources and referrals. We have a strong pipeline of potential
referrers whom we are currently in discussions with, some of whom
may substantially boost the numbers of leads to our sales
operation. We are also investing in new software to manage our
sales operation which we expect to be in place in the next month or
so which we anticipate will boost conversion and allow the
marketing of more products to our substantial databases of leads
and clients.
We are closely monitoring consolidation opportunities within our
industry and will finance smaller acquisitions through cash flow.
Our successful history in profitably integrating acquired back
books - both operationally and financially means we are confident
of raising additional finance for larger acquisitions, although the
cost of such funding in the current economic climate is high.
THE CONSUMER DEBT MARKET
ClearDebt Group operates within the debt resolution sector, an
established sub-category of financial services. Personal
insolvencies saw a step change in 2006 with a 58% increase in
individual insolvencies to over 100,000 per annum which has grown
steadily each year to 136,000 in 2010. In 2010 IVAs showed growth
of 6% although the first half of 2011 has seen a decline of 13% on
the same period last year.
Traditional refinancing options through secured or unsecured
lending remain closed to the majority of people leading us to
believe that demand in our sector will remain robust although
slightly off its peak in 2011/12.
Against this background the government is actively looking to
increase regulation and has already started to enforce much
stricter compliance monitoring of companies in the sector and it is
now much more difficult to renew existing consumer credit licences
or obtain new ones. We continue to see this as an opportunity for
ourselves and those larger organisations with cash who maintain the
highest standards to purchase back books and consolidate the sector
as the many smaller players are unwilling or unable to comply with
the increased regulation.
THE CLEARDEBT MODEL - IVAs and PTDs
Unlike most of its major competitors in the consumer IVA market,
ClearDebt has developed a low overhead, high quality model, based
on Kaizen manufacturing principles and an intelligent internet
interface - www.cleardebt.co.uk. This model allows the company's
cost base to be kept to a minimum level whilst still providing high
levels of service even on lower levels of debt and disposable
income.
Demand for lower value IVAs has been evident which favours our
low cost model allowing us to service levels of the market other
providers will not touch. Due to this distinctive operating model,
ClearDebt is able to offer a more effective debt resolution
solution than many of its rivals.
THE ABACUS MODEL - Debt Management Plans
Abacus provides services to indebted individuals by negotiating
and putting in place a debt management plan with their creditors.
The debtor makes a monthly payment to Abacus who then distributes
the payment to the creditors as agreed in the plan less an
administration fee at an agreed percentage of the debtor's monthly
payment. An initial set up fee is also charged.
Such plans are suitable for individuals whose debts are more
manageable and rely on the goodwill of creditors as they are not a
formal insolvency procedure and interest usually continues to
accrue on outstanding debts although today the majority of
creditors that we work with are prepared to waive the interest for
short periods.
Many clients are cross referred between ClearDebt and Abacus
allowing the Group to offer an appropriate advice solution to all
individuals.
As a leading member of the trade body, The Debt Resolution
Forum, ClearDebt has been in regular communication with the
creditor community, the Office of Fair Trading (OFT), the
Department of Business Innovation and Skills and the Ministry of
Justice who have issued several consultation papers intending that
stricter guidance on practices in the debt resolution industry
which will need to be adhered to if operators wish to maintain
their Consumer Credit Licence without which they cannot
operate.
OPERATIONAL REVIEW
ClearDebt - IVA Division
Since 1 July 2010 (2010: 1 July 2009), the following numbers of
new IVAs have been arranged through ClearDebt:-
Year ended Year ended
30 June 2011 30 June 2010
First quarter 355 176
Second quarter 407 173
Third quarter 411 184
Fourth quarter 428 266
____ ____
1,601 799
____ ____
The growth of new IVAs continues to be strong and ClearDebt
enjoyed an excellent year with a 100% increase in the number of
IVAs passed in the year with 1,601 new cases (2010: 799). I am
pleased to say this growth has continued and case numbers in the
first quarter of our current financial year are expected to be
ahead of the fourth quarter with 362 cases already passed by the
end of August.
In addition we purchased 953 IVAs from Invocas in June 2011
which will generate additional income in the new financial year and
we continue to be referred a number of new cases by them going
forward. Including this purchase, we had as at 30 June 2011 a total
of 5,893 (2010: 4,894) IVAs and PTDs generating income.
The Board monitors several key performance indicators ("KPIs")
for the business on a monthly basis including the number of cases
passed, various conversion ratios from lead to cases passed, the
cost per case acquired and the staff to caseload numbers. Your
Board is pleased to advise that these KPIs continue to deliver
positive messages about the business and we are hopeful of gaining
additional referral sources in the first half of the current
year.
Revenue in respect of nominee fees is recognised on the approval
of the IVA whilst supervisory fees are recognised evenly over the
expected life of the IVA.
Abacus- Debt Management Division
The division made a profit in the period although we have seen a
slowdown in the recruitment of new clients and an increase in the
number of plans that cease as the age of the relatively young DMP
book at Abacus matures. There have also been a number of clients
who have ceased a DMP and commenced an IVA with us.
In the year 2010/11, Abacus has arranged 1,570 new plans
(2009/10: 2,366). During the year two books of DMPs totalling
approximately 1,000 were acquired and as at 30 June 2011 the total
number of DMPs generating income was 5,761 (2010: 6,316). Our
attrition rates on DMPs are well within our normal expectations and
we are actively looking for further back books to acquire as a
means of boosting income over the short and medium term.
The Board has KPIs to monitor the number of active income
generating plans as well as the value of monthly payments made by
debtors. Revenue is only recognised by Abacus upon receipt of fees
which are drawn from debtor payments as received.
Generally the costs of acquisition of cases and plans are also
monitored closely. We continue to resist the temptation to grow the
book through lead sources providing leads at what are, in our view
uneconomic prices.
ClearCash - prepaid MasterCard
Steady progress continues to be made with our Pre-Paid
MasterCard, ClearCash, as the new version of the card, without a
monthly fee, is taken up in larger numbers than the original which
included the monthly fee. The rate of new card signings continues
to grow and as at 30 June 2011 there were 5,749 ClearCash cards in
issue (2010: 1,662). The card currently makes a small loss each
month after referral costs, but revenue from card usage has
increased steadily month on month since inception.
The card can effectively be used as a bank account with the
exception of direct debit and we see the ClearCash card as an
integral service offering to our clients who often find it
difficult to obtain normal banking facilities. As numbers increase
we expect it to produce a profit in due course.
FINANCIAL REVIEW
Group turnover increased by 17% to GBP7,777,362 (2010:
GBP6,633,995) and gross profit by 20% toGBP3,963,959 (2010:
GBP3,300,688). The performance was driven by good demand for IVAs
and the benefit of the increased supervisory revenue which is
growing steadily as the number of IVA cases under management grows.
Amortisation charges in respect of acquisitions and impairment
amounted to GBP1,388,809 (2010: GBP993,980).
Finance costs rose to GBP532,404 (2010: GBP206,660 ) reflecting
a full years charge of GBP467,960 (2010:GBP91,147) in respect of
the 3yr 10% secured convertible loan notes issued in April 2010.
Actual interest paid in respect of the convertible totalled
GBP230,000 with the balance being an accounting charge for the
redemption premium due on maturity in 2013.
Cash resources at the year end amounted to GBP336,636 (2010:
GBP541,504) after acquisitions of GBP1.1m in the year financed with
net new loans of GBP315,000 advanced by David Mond. Operational
cash flow remains strong and GBP350,000 of loans have been repaid
since the year end.
GOING CONCERN
As part of its going concern review the Board has followed the
guidelines published by the Financial Reporting Council entitled
"Going Concern and Liquidity Risk: Guidance for UK Companies 2009.
The Board has prepared detailed financial forecasts and cash flows
for the three years to 30 June 2014 and in drawing up these
forecasts the Board has made assumptions based upon its view of the
current and future economic conditions in the UK that will prevail
over the forecast period - given that the business is likely to be
solely focused on the UK market for the foreseeable future. The
timing of the cash flows and covenants to the debt holders in
respect of loans provided have been taken into consideration and in
addition to the forecasts we have also produced sensitivities to
these forecasts to test our ability to trade as a going concern for
at least the following 12 months based upon a 12% rise or fall in
projected turnover without any reduction in overhead costs. In
practice the Board believes that it can quickly realign overheads,
in particular marketing spend, to allow for any reduced levels of
activity within the business that may occur going forward.
The Board believes that the use of the going concern basis of
accounting is appropriate and there are no material uncertainties
related to events or conditions that may cast significant doubt
about the ability of the company to continue as a going
concern.
FUTURE OUTLOOK
The IVA market is still at high levels and we continue to gain
market share as our monthly run rate for new IVAs grows against the
background of a static to slightly declining IVA market.
The last quarter of the financial year produced a record number
of IVAs for the Group and the first two months of the current year
have continued in a similar vein.
We continue to look for acquisitions of client books wherever we
can at reasonable prices to supplement our growth as we know these
can be highly profitable given the ease with which we can
assimilate them into our scaleable business model and systems.
Given the current economic outlook in the UK with unemployment
showing no signs of falling together with high taxation and
continued public sector cuts I believe the Group is well placed for
another highly profitable and successful year.
Once again I would like to pay tribute to all our employees who
continue to offer the highest standards of service and commitment
to all our clients at all levels.
David Emanuel Merton Mond FCA FCCA
Chief Executive Officer
23 September 2011
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2011
2011 2010
Notes GBP GBP
Revenue
- ongoing 2 7,582,367 6,633,995
- acquisitions 193,995 -
_________ _________
7,776,362 6,633,995
Cost of sales (3,812,403) (3,333,307)
_________ _________
Gross profit 3,963,959 3,300,688
Administrative expenses (before
separately identifiable items) (1,678,623) (1,293,371)
Separately identifiable items 5 - (449,473)
Administrative expenses (1,678,623) (1,742,844)
Share based payment (62,925) (42,573)
_________ _________
Profit before interest, tax,
depreciation and amortisation 2,222,411 1,515,271
Depreciation (132,437) (102,875)
Amortisation (1,388,809) (993,980)
Gain on bargain purchase 3 54,985 252,914
_________ _________
Profit from operations 756,150 671,330
Finance costs 4 (532,404) (206,660)
Finance income 3,473 1,039
_________ _________
Profit before taxation 227,219 465,709
Taxation 6 (156,183) (123,474)
_________ _________
Profit after taxation for year 71,036 342,235
_________ _________
Amount attributable to:
Owners of the parent 71,036 342,235
Earnings per ordinary share - basic (pence) 7 0.02p 0.11p
Earnings per ordinary share - diluted (pence) 7 0.02p 0.11p
_________ _________
The results for the period are derived from continuing
activities.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
2011 2010
GBP GBP
Profit for the year 71,036 342,235
Other comprehensive income net of tax - -
_______ _______
Total comprehensive income for the year 71,036 342,235
_______ _______
Attributable to:
Owners of the parent 71,036 342,235
_______ _______
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2011
2011 2010
GBP GBP
Assets
Non-current assets
Intangible assets 6,476,691 6,765,047
Property, plant and equipment 252,998 227,992
Deferred taxation 78,188 163,720
__________ _________
6,807,877 7,156,759
Current assets
Trade and other receivables 2,181,959 1,153,226
Corporation tax receivable - 8,372
Cash and cash equivalents 336,636 541,504
__________ _________
2,518,595 1,703,102
__________ _________
Total assets 9,326,472 8,859,861
__________ _________
Equity and liabilities
Equity
Issued capital 6,166,812 6,166,812
Share premium 279,948 279,948
Share based compensation 203,312 140,387
Other reserves 96,495 96,495
Retained losses (1,595,985) (1,667,021)
__________ _________
Total equity attributable to the owners of the parent 5,150,582
5,016,621
__________ _________
Current liabilities
Trade and other payables 698,255 1,009,151
Corporation tax payable 92,662 -
__________ _________
790,917 1,009,151
Non-current liabilities
Financial liabilities 3,318,309 2,765,350
Deferred taxation 66,664 68,739
__________ _________
Total liabilities 4,175,890 3,843,240
__________ _________
Total equity and liabilities 9,326,472 8,859,861
__________ _________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011
Share Share Share Based Other Retained Total
Capital Premium Compensation Reserve Losses Equity
GBP GBP GBP GBP GBP GBP
Balance as at 1 July 2009 6,166,812 279,948 97,814 - (2,009,256)
4,535,318
Equity component on issue of - - - 96,495 - 96,495
convertible loan notes
Share based compensation - - 42,573 - - 42,573
Total comprehensive income
for the year - - - - 342,235 342,235
________ ________ ________ _______ ________ ________
Balance as at 30 June 2010 6,166,812 279,948 140,387 96,495
(1,667,021) 5,016,621
Share based compensation - - 62,925 - - 62,925
Total comprehensive income
for the year - - - - 71,036 71,036
________ ________ ________ _______ _________ ________
Balance as at 30 June 2011 6,166,812 279,948 203,312 96,495
(1,595,985) 5,150,582
________ ________ ________ _______ _________ ________
Share capital
Share capital has arisen on the issue of shares and represents
the nominal value of shares issued.
Share premium
The share premium account arose from the issue of equity shares
above the nominal value less share issue costs.
Share based compensation
This reserve is the result of the Company's grant of equity
settled share options and warrants and measured in accordance with
IFRS2 share-based payment transactions.
Other reserve
This reserve is the result of the Company's issue of convertible
loan notes in April 2010 in accordance with IAS 32 - Financial
Instruments: Presentation.
Retained losses
The retained losses reflect losses incurred to date.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011
Notes 2011 2010
GBP GBP
Cash flow from continuing operating activities
Profit before taxation 227,219 465,709
Depreciation of property, plant and equipment 132,437
102,875
Amortisation of intangible assets 1,388,809 993,980
Gain on bargain purchase (54,985) (252,914)
Share based payment 62,925 42,573
Increase in trade and other receivables (928,733) (423,916)
Finance costs 532,404 206,660
Finance income (3,473) (1,039)
(Decrease)/increase in trade and other payables (310,896)
332,252
_________ _________
Cash generated by operations 1,045,707 1,466,180
Corporation tax refund 8,794 10,317
_________ _________
Net cash generated by operating activities 1,054,501
1,476,497
Investing activities
Acquisition of business and assets 3 (1,088,783) (2,700,000)
Acquisition of intangibles (37,170) (143,728)
Acquisition of property, plant and equipment (157,443)
(144,251)
Finance income 3,473 1,039
Sale of property, plant and equipment - 3,184
_________ _________
Net cash used in investing activities (1,279,923)
(2,983,756)
Financing activities
Proceeds from issue of convertible loan notes - 1,800,000
Issue costs - (184,379)
Proceeds from new loans advanced 315,000 -
Interest on loans (294,446) (151,451)
_________ _________
Cash generated by financing activities 20,554 1,464,170
Decrease in cash and cash equivalents (204,868) (43,089)
Opening cash and cash equivalents 541,504 584,593
_________ _________
Closing cash and cash equivalents 336,636 541,504
_________ _________
1. Basis of Preparation
The preliminary financial information does not constitute full
accounts within the meaning of section 434 of the Companies Act
2006 but is derived from accounts for the years ended 30 June 2011
and 30 June 2010. The figures for the year ended 30 June 2011 are
audited. The preliminary announcement is prepared on the same basis
as set out in the statutory accounts for the year ended 30 June
2011. Those accounts upon which the auditors issued an unqualified
opinion, did not include a reference to any matters to which the
auditors drew attention by way of emphasis, without qualifying
their report, and made no statement under section 498(2) or (3) of
the Companies Act 2006, will be delivered to the Registrar of
Companies following the Annual General Meeting. While the financial
information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), as
adopted by the European Union (EU), this announcement does not in
itself contain sufficient information to comply with IFRSs.
ClearDebt Group plc is incorporated and domiciled in the United
Kingdom. The consolidated financial information of ClearDebt Group
plc set out in this announcement is presented in Pounds Sterling
(GBP), which is also the functional currency of the parent. The
consolidated financial information has been approved for issue by
the Board of Directors on 23 September 2011.
Statutory accounts for the year ended 30 June 2010 have been
filed with the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis,
without qualifying their report, and did not contain any statement
under Section 498 (2) or 498 (3) of the Companies Act 2006.
2. Segmental Information
The Group's total income, profit before taxation and net assets
were all derived from its principal activities being the provision
of IVA and other financial advice and appropriate solutions to
individuals experiencing personal debt problems. All the Group's
activities were undertaken wholly in the United Kingdom.
Debt Total Debt Total
Insolvency Management 2011 Insolvency Management 2010
GBP GBP GBP GBP GBP GBP
Revenue
- Ongoing 4,843,540 2,738,827 7,582,367 3,408,373 3,225,622
6,633,995
- Acquisition - 193,995 193,995 - - -
_________ _________ _________ _________ _________ _________
Total Revenue 4,843,540 2,932,822 7,776,362 3,408,373 3,225,622
6,633,995
Cost of sales (2,355,997) (1,456,406) (3,812,403) (1,522,269)
(1,811,038) (3,333,307)
_________ _________ _________ _________ _________ _________
Gross Profit 2,487,543 1,476,416 3,963,959 1,886,104 1,414,584
3,300,688
Administrative expenses (1,072,653) (605,970) (1,678,623)
(701,513) (591,858) (1,293,371)
Share based payment (30,380) (32,545) (62,925) (19,579) (22,994)
(42,573)
Separately disclosable items - - - (363,543) (85,930)
(449,473)
________ _________ _________ _________ _________ _________
Profit before interest, tax 1,384,510 837,901 2,222,411 801,469
713,802 1,515,271
depreciation and amortisation
Depreciation (59,674) (72,763) (132,437) (30,307) (72,568)
(102,875)
Amortisation (892,425) (496,384) (1,388,809) (468,193) (525,787)
(993,980)
Gain on bargain purchase 33,648 21,337 54,985 202,914 50,000
252,914
________ _________ _________ _________ _________ _________
Profit from operations 466,059 290,091 756,150 505,883 165,447
671,330
Finance costs (374,368) (158,036) (532,404) (67,577) (139,083)
(206,660)
Finance income 3,473 - 3,473 1,039 - 1,039
_________ _________ _________ _________ _________ _________
Profit before taxation 95,164 132,055 227,219 439,345 26,364
465,709
Taxation (121,849) (34,334) (156,183) (116,093) (7,381)
(123,474)
_________ _________ _________ _________ _________ _________
Profit after tax (26,685) 97,721 71,036 323,252 18,983
342,235
_________ _________ _________ _________ _________ _________
Net operating assets are reconciled to equity funds as
follows:
2011 2010
GBP GBP
Gross assets
Insolvency 7,492,638 6,752,690
Debt management 1,833,834 2,107,171
_________ _________
9,326,472 8,859,861
_________ _________
Gross liabilities
Insolvency 2,530,762 2,597,551
Debt management 1,645,128 1,245,689
_________ _________
4,175,890 3,843,240
_________ _________
Capital expenditure to acquire property, plant and equipment
Insolvency 152,063 86,337
Debt management 5,380 57,914
_________ _________
157,443 144,251
_________ _________
Capital expenditure to acquire intangible assets
Insolvency 799,806 2,260,728
Debt management 300,647 961,000
_________ _________
1,100,453 3,221,728
_________ _________
Depreciation of property, plant and equipment
Insolvency 59,674 30,307
Debt management 72,763 72,568
_________ _________
132,437 102,875
_________ _________
Amortisation of intangible assets
Insolvency 892,425 468,193
Debt management 496,384 525,787
_________ _________
1,388,809 993,980
_________ _________
3. Acquisition
In November 2010 and February 2011 the Company purchased two
back books of Debt Management clients from One Aim Group Limited
which has subsequently gone into liquidation.
The assets acquired were exclusively intangible assets
represented by the future income due from the collection of the
back book of DMP cases.
At the date of acquisition the fair values of the assets
purchased comprised the following:
Fair value
Book value Adjustment Fair Value
GBP GBP GBP
Other intangible assets- Debt
Management - 330,282 330,282
Deferred taxation - (8,298) (8,298)
Gain on bargain purchase - negative
goodwill - (21,337) (21,337)
- 300,647 300,647
Settled by: GBP
Cash consideration 300,647
The intangible debt management assets acquired are being
amortised over 18 months which, in the directors' opinion, is the
useful economic life of the assets.
On 22 June 2011 the Company purchased from Invocas a book of IVA
cases together with certain debtors relating to the cases and the
right to the future income due on those cases. The total
consideration due to Invocas was GBP788,136 which has been paid in
full in cash.
The assets acquired were intangible assets represented by the
future income due from the collection of the back book of IVA cases
together with certain debtors in relation to invoices already
raised for fees on the cases which had not yet been paid. At the
date of acquisition the fair values of the assets purchased
comprised the following:
Fair value
Book value Adjustment Fair Value
GBP GBP GBP
Other intangible assets - 733,000 733,000
Trade receivables 216,000 (116,000) 100,000
Deferred taxation - (11,216) (11,216)
Gain on bargain purchase - (33,648) (33,648)
216,000 572,136 788,136
Settled by: GBP
Cash consideration 788,136
The intangible IVAs acquired are being amortised over 4 years
which, in the directors' opinion, is the useful economic life of
the assets.
Included in the results for the year are revenues of GBP193,995
and a pre-tax profit of GBP9,038 excluding the gain on purchase of
a bargain asset of GBP54,985.
We have estimated the timing of, and the expected future income
due, from the back books acquired less a provision for future
expected delinquency together with the estimated costs necessary to
collect in the income. This has been produced on a net present
value basis to provide an estimate of the fair value of the
intangible assets acquired.
The fair value of the net assets acquired was GBP1,143,768 which
is in excess of the GBP1,088,783 cost of acquisition. Accordingly
under IFRS the Consolidated Income Statement has been credited with
a gain on bargain purchase of GBP54,985 in the period.
4. Finance Costs
2011 2010
GBP GBP
Interest payable on loans 64,444 115,513
Interest payable on convertible loan notes 230,000 44,924
Interest payable on redemption of convertible loan notes 237,960
46,223
________ ________
532,404 206,660
________ ________
5. Separately Identifiable Items
2011 2010
GBP GBP
Administrative expenses
Expenses relating to the acquisition and restructuring of the
business of Relax - (449,473)
________ ________
On 2 December 2009 the Group acquired the back books of IVA, DMP
and PTD cases from the Administrator of various companies of Relax
Group plc. In 2010 included in administration expenses were various
legal costs related to the acquisition, restructuring and
shareholders circular as well as additional costs and incidentals
incurred as part of the acquisition process.
6. Taxation
2011 2010
GBP GBP
Analysis of current year
Current tax
UK corporation tax payable 92,662 -
UK corporation tax repayment due - (8,372)
Over provision from prior years (422) (15,273)
________ ________
Total corporation tax 92,240 (23,645)
________ ________
Deferred tax
Temporary differences, origination and reversal (7,170)
147,119
Provision for irrecoverable losses 75,000 -
Effect of tax rate changing on opening balance (3,887) -
________ ________
Total deferred tax charge 63,943 147,119
________ ________
Tax on profit for the year 156,183 123,474
________ ________
Factors affecting charge for year
2011 2010
GBP GBP
Profit before taxation 227,219 465,709
________ ________
Profit multiplied by standard rate of corporation tax
in the UK of 26% (2010: 28%) 59,077 130,398
Effects of:
Expenses not deductible 4,878 1,873
Adjustment due to change of tax rate (3,887) -
Unrelieved tax losses 75,000 6,476
Other prior year adjustment 21,115 (15,273)
________ ________
Current tax expense for year 156,183 123,474
________ ________
7. Earnings per Ordinary Share
2011 2010
GBP GBP
Profit for the financial year 71,036 342,235
__________ __________
Weighted average number of ordinary shares in issue during the
year 308,340,567 308,340,567
Dilutive potential of share options - -
Dilutive potential of convertible loan notes - -
__________ __________
308,340,567 308,340,567
__________ __________
Earnings per share
Basic 0.02p 0.11p
Diluted 0.02p 0.11p
__________ __________
The calculation of the basic earnings per ordinary share of
0.02p (2010: 0.11p) each has been based on the profit for the
relevant financial year and on 308,340,567 shares (2010:
308,340,567). This represents the weighted average number of
ordinary shares in issue. The profit for the period for the purpose
of calculating the diluted earnings per share is the same as for
the basic earnings per share calculation adjusted in respect of the
interest charges in relation to the convertible loan notes. After
using this adjusted profit the diluted earnings per share is higher
than the basic earnings per share and would therefore not be
dilutive under the terms of IAS 33.
8. Copies of the Annual Report
Copies of the Annual Report are available from the Company
Secretary at the registered office which is situated at Nelson
House, Park Road, Timperley, Cheshire WA14 5BZ. The annual report
and AGM notices will also be available for download on the
Company's website www.cleardebtgroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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