The Clarkson Hill Group plc (the "Group")
Preliminary Announcement for the year to 31 July 2006
HIGHLIGHTS
* Turnover increased 39% to �13.8 million (2005 �9.9 million)
* Operating efficiency improved to 21% (2005 26%)*
* Production per adviser up to approximately �71,220 (2005 �67,128)
* Admission to AIM in March 2006
Trading Highlights Year to Year to
31 July 2006 31 July 2005
Turnover 13,889,271 9,993,673
Gross Profit 2,909,106 2,455,733
Operating Costs (excluding development costs) (2,986,498) (2,602,079)
Loss before Tax (230,151) (198,837)
Loss after Tax (169,977) (102,865)
CHAIRMAN'S STATEMENT
Results
Turnover increased by approximately 39% to �13.8 million (2005 �9.9 million),
as a result of both the continued recruitment drive, adviser numbers increasing
to 253 (2005 234) and the work done to "add value" by way of training and
development. Average adviser production has risen to �71,220 (2005 �67,128).
The Company's results have been impacted by the implementation of the
accounting standard UITF abstract 40 "Revenue recognition and service
contracts" which has resulted in certain revenues amounting to approximately �
700,000 which previously the Company would have recognised immediately,
instead, being recognised in subsequent accounting periods.
The Group continues to monitor and control its administrative costs (excluding
development costs), which amounted to �2,986,498 for the year to 31 July 2006
(21% of turnover) (2005: �2,602,079 which represents approximately 26% of
turnover) and the results demonstrate the benefits obtained by efficiency based
developments in administration. This has been achieved without any reduction in
regulatory control.
* Operating costs (excluding development costs) as a percentage of turnover
AIM
Whilst the listing on AIM incurred significant costs and took up considerable
management time, the directors firmly believe that this will support all
elements of our growth strategy, not least of which is our continued
recruitment drive.
Business Progress
Mortgage Business
The Group now has 130 advisers registered to give mortgage advice; this has
resulted in an increase in earnings from mortgage business by approximately 53%
to �2,362,000 (2005: �1,547,000). Over the past two years the Group has advised
on approximately �975 million of lending.
Clarkson Hill Gold, the Group's mortgage analysis and recording system, enables
the application process to be completed and compliance vetted online. The
directors expect further growth can be expected in this area.
Relocation - financial services
During the year the Group re-tendered and won the contract to provide mortgage
advice to the relocation clients of Cartus. It is anticipated by Cartus that
the use of this service will be increased in the future, as they have won
further client contracts and also propose to broaden the offering to client
employees who are not relocating.
Single Premium Business
Single Premium business, both life and pensions, continue to grow. Investment
income has risen to �7,698,000 (2005: �5,645,000). In aggregate, the total
funds under advice with the Group's advisers are approximately �378 million.
This increase has yet to be significantly impacted by `A' Day, which will, over
the next 12 months, generate further significant investment by way of SIPPs, as
clients come to understand and benefit from this relatively new opportunity to
invest efficiently and more broadly, to generate retirement funds.
Seminar Training - Inheritance Tax Planning
The Group continues to focus on enhancing adviser skills and understanding in
the area of Inheritance Tax Planning. The Group now has 103 advisers, who have
completed the in-house training course in this area and further high quality
business has been generated as a result of this training. Further work is
anticipated in this area.
Branch Offices
Since January 2006, the Group has opened two further offices, London (January
2006) and North Cheshire (March 2006).
London has recruited 7 advisers and written business for the seven months to
July 2006 of approximately �776,000 - an average of approximately �15,800 per
adviser per month.
Mike Robinson (Group MD) has taken responsibility for the recruitment and
development of the London branch office and further recruitment is anticipated.
A Leeds branch has now been opened with a very experienced adviser in post to
run and develop the branch.
Development Projects
Since his appointment in 2005, Bill Moncrieff (Director of Strategy and
Development), has focused on developing online e-commerce solutions to
administrative processes, in partnership with product providers and advisers.
The major benefits from this development are yet to be seen, specifically in
relation to integrated processing for protection cases. However, as is
demonstrated by the continued improvement in the Group's operating efficiency,
the Group has benefited from improved online processes.
Regulatory Matters
The board and the Group attach huge importance to the quality of advice given
to its clients hence the insistence on a review by a Compliance Officer of the
vast majority of advice given by the Group's advisers. The Board intend that
this level of review will continue and, as technology allows, increase further.
The FSA has recently introduced a `Treating Customers Fairly' initiative and
whilst the board believe that this is the fundamental basis of client service
and future company growth, further quality monitoring is being developed to
ensure the Group fully meets any regulatory requirement.
Summary
The Board continues to focus on profitability by way of recruiting both
mortgage and IFA qualified and quality advisers.
The board believes that further developments of the Group's operating systems
will generate efficiencies, which will facilitate the growth of the Group and
enhance the proposition that can be offered to IFAs in the market place.
Since July the Group has continued to trade in line with the board's
expectations.
RD Pritchard, CEO
7 February 2007
Group Profit and Loss Account for the year ended 31 July 2006
Year ended Year ended 31
July 2005
31 July 2006 Audited
Audited
� �
Turnover 13,889,271 9,993,673
Cost of sales (10,980,165) (7,537,940)
Gross profit 2,909,106 2,455,733
Administrative expenses
Development costs (107,660) -
Other administrative expenses (2,986,498) (2,602,079)
Total administrative expenses (3,094,158) (2,602,079)
Group operating (loss) (185,052) (146,346)
Interest receivable and similar 8,376 2,322
income
Interest payable and similar (53,475) (54,813)
charges
Profit/(loss) on ordinary (230,151) (198,837)
activities before taxation
Tax on profit/(loss) on 60,174 95,972
ordinary activities
Retained profit/(loss) for the (169,977) (102,865)
group
Accumulated loss brought forward (403,187) (300,322)
Accumulated loss carried forward (573,164) (403,187)
Basic loss per share (0.79)p (0.55)p
There are no recognised gains or losses other than the profit or loss for the
above financial periods.
None of the group's activities were acquired or discontinued during the above
financial periods.
Group Balance Sheet as at 31 July 2006
31 July 2006 31 July 2005
Audited Audited
� �
Fixed Assets
Intangible assets 587,683 542,400
Tangible assets 177,963 165,237
Investments 7,000 7,000
772,646 714,637
Current Assets
Debtors 4,843,537 3,695,867
Cash at bank and in hand 546,637 16,371
5,390,174 3,712,238
Creditors: amounts falling due within (3,871,544) (3,396,240)
one year
Net Current Assets 1,518,630 315,998
Total Assets Less Current Liabilities 2,291,276 1,030,635
Creditors: amounts falling due (341,213) (29,330)
after more than one year
Net Assets 1,950,063 1,001,305
Capital and Reserves
Called up share capital 482,154 393,039
Share premium account 2,140,073 1,110,453
Merger reserve (99,000) (99,000)
Profit and loss account (573.164) (403,187)
Equity Shareholders' Funds 1,950,063 1,001,305
Equity interests 1,950,063 1,001,305
Group Cash Flow Statement for the period 1 August 2005 to 31 July 2006
Year ended Year ended
31 July 2006 31 July 2005
Audited Audited
Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from
operating activities
� �
Operating profit/(loss) (185,052) (146,346)
Depreciation 47,408 20,387
Amortisation of goodwill 42,055 23,742
Increase in debtors (1,239,684) (1,278,607)
Increase in creditors 1,091,201 961,486
Net cash inflow from operating (244,072) (419,338)
activities
CASH FLOW STATEMENT
Net cash inflow/(outflow) from (244,072) (419,338)
operating activities
Returns on investments and servicing (45,099) (52,491)
of finance
Taxation 151,675 -
Capital expenditure (147,472) (263,256)
(284,968) (735,085)
Financing 1,543,462 585,924
Increase/(decrease) in cash in the 1,258,494 (149,161)
period
Reconciliation of net cash inflow/ (outflow) to movement in net debt
Increase/(decrease) in cash in the 1,258,494 (149,161)
period
Cash (outflow)/inflow from increase (424,727) 95,968
in debts and lease financing
New finance leases - (36,770)
Movement in net (debt)/funds in the 833,767 (89,963)
period
Net debt at start of period (860,890) (770,927)
Net debt at period end (27,123) (860,890)
Basis of preparation
The financial information has been prepared in accordance with accounting
policies as presented in the Financial Statements as at 31 July 2005.
Earnings/(loss) per share
The loss per share is calculated on the loss attributable to ordinary
shareholders of �169,977 (2005: loss �102,865) divided by 21,558,510 (2005:
18,745,173) being the weighted average number of ordinary shares in issue
during the year.
During 2006 and 2005, the share warrants and options disclosed in note 19 were
antidilutive and accordingly there is no dilution of loss per share. However,
they could potentially dilute basic earnings per share in the future.
Gross cash flows
Year ended Year ended
31 July 2006 31 July 2005
Audited Audited
� �
Returns on investments and servicing
of finance
Interest received 8,376 2,322
Interest paid (51,060) (54,813)
Interest element of finance leases (2,415) -
(45,099) (52,491)
Capital expenditure
Payments to acquire intangible fixed (87,338) -
assets
Payments to acquire tangible assets (60,134) (76,950)
Payments on acquisition of group - (189,000)
interests
Net cash acquired with group - 2,694
interests
(147,472) (263,256)
Financing
Issue of ordinary share capital 1,561,001 707,616
Expenses paid in connection with (442,266) (62,494)
share issue
New loans raised - 36,770
Loan repayments 436,395 (91,585)
Capital element of hire purchase (11,668) (4,383)
contracts
1,543,462 585,924
Analysis of changes in net debt
Opening Cash Closing
balance flows Balance
1 August 31 July
2005 2006
� � �
Cash at bank and in hand 16,371 530,266 546,637
Overdrafts (728,228) 728,228 -
(711,857) 1,258,494 546,637
Debt due within one year (108,250) (112,844) (221,094)
Debt due after one year (8,396) (323,551) (331,947)
Finance leases (32,387) 11,668 (20,719)
(149,033) (424,727) (573,760)
Net debt (860,890) 833,767 (27,123)
Financial Information
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 July 2006 or 2005 (but is derived from
those accounts). Statutory accounts for 2005 have been delivered to the
Registrar of Companies and those for 2006 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
Report and Accounts
Copies of the Report and Accounts for the year ended 31 July 2006 are being
sent to shareholders today. Further copies will be available from the Company's
registered office at Alexandra House, Alexandra Road, Wisbech, Cambridgeshire
PE13 1HQ
Contact
Ron Pritchard, Director
The Clarkson Hill Group Plc
Telephone 01945 585721
Liam Murray, Nominated Adviser
City Financial Associates Limited
Telephone 020 7090 7800
END
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