The Clarkson Hill Group Plc (the "Group")
Interim Report for the period 1 August 2006 to 31 January 2007
Chief Executive Officer's Statement
I am delighted to present the interim statement for the six months to 31
January 2007.
Highlights
* Profit before tax up by 58% to �119,000 (2006 �75,000)
* Turnover increased by 42% to �8.71 million (2006 �6.14 million)
* Operating efficiency improved to 19.8%* (2006 23.1%)
* Number of advisers increased by 26% to 303 as at 31 January 2007 (31
January 2006 240 advisers)
* Group now ranked 9th** largest in the UK on sales
* Group now ranked 6th** most efficient in the UK
* Pension business increased by 78% to �2.67 million (2006 �1.50 million)
*See operating efficiency below
**Plimsoll Top 200 IFA, March 2007
Financial Results
6 months to 6 months to
31 Jan 07 31 Jan 06
(�'000) (�'000)
Turnover 8,710 6,145
Gross profit 1,860 1,526
Administrative Expenses 1,726 1,420
Profit on ordinary activities before 119 75
tax
Profit for the group 88 53
Cash and cash equivalents 469 28
Profits
The Group's progress has resulted in first half pre-tax profits of �119,000,
compared with �75,000 for the same period to 31 January 2007.
Trading
Turnover for the six months to 31 January 2007 increased by 42% to �8.71
million (2006 �6.14 million). This reflects the Board's short-term strategy of
continued organic growth, by way of recruitment of high quality advisers and
the development of existing advisers.
Gross profit increased by 22% to �1.86 million (2006 �1.53 million). During
this period significant recruitment costs were incurred in achieving this
increase in advisers from 240 (2006) to 303.
Operating Efficiency
The Board continues to focus an operational efficiency that has improved to
19.8% in the half year (2006 23.1%). The Board determine this by way of the
administration costs as a percentage of the gross income. The Board's success
in this area is demonstrated by the Group's appearance yet again in the
independently determined Plimsoll Top 200 IFA report, dated March 2007. In the
latest report, the Group is rated as the 6th most efficient IFA, based on sales
returns as a percentage of employee remuneration.
Dividends
It is the intention of the Board to establish the payment of dividends to
shareholders as soon as is appropriate. The Board, therefore, is considering a
proposal to reduce the company's share premium account thereby eliminating the
deficit created by goodwill impairment and accumulated losses from previous
years.
The procedure to achieve their objectives is to seek approval by the High Court
to a reduction in capital. Shareholders need to appreciate that this will not
reduce the company's net assets and will not adversely impact the company's
working capital and solvency requirements. Shareholders will be advised on this
topic and if and when appropriate an extraordinary general meeting will be
convened.
International Accounting Standards
The interim accounts represent the first opportunity the company has had to
present its accounts in line with International Accounting Standards and
International Financial Reporting Standards, with disclosure of business
segment analysis, which highlights:
- Single Premium Investments up by 42%
- Pension Investments up by 78%
- Fees (including mortgages) up by 25%
- Protection up by 24%
The Financial Services Compensation Scheme
I have made reference in previous statements to the cost of the FSCS and its
iniquitous impact on IFAs.
The reform of the FSCS recently announced by the FSA will have a beneficial
effect on the company's costs for the year 2008/9 onwards. As AIFA (Association
of Independent Financial Advisers) have stated, the reform "..will see the
average adviser's bill cut by half..". This will produce a significantly
beneficial effect for the company, which incurred some �300,000 on the FSCS
costs for the year to March 2007.
Unlike its competitors, who charge these costs on to their advisers, the
company meets the FSCS costs itself and will clearly benefit from this proposed
significant reduction in cost.
Appointments
I am pleased to advise that John Milroy BA (Hons) FCA has joined the group to
head up the Accounting function at a senior management level reporting directly
to the C.E.O. with a mandate to strengthen the company's financial controls.
John qualified with KPMG and has many years experience in both the service and
manufacturing sectors.
Treating Customer's Fairly
The Board continue to give full regard for the requirements determined by the
FSA for Treating Customers Fairly. The necessary programmes and developments
are in place and will ensure this important regulatory requirement is cascaded
down to our advisers and our clients will benefit as a result.
Future Developments
Online communications (Extranet). The installation of the Extranet facility
began in March 2007. This will improve and speed up communication between the
company, advisers and product providers.
This offers further efficiency savings for the company aimed at maintaining the
position as a top 10 efficiency based operation.
The Board has yet to finalise its `platform' strategy as it contemplates the
benefits available to the company from efficiencies of advice for wealth
management and recurring income from funds under management. The overall
increase in investment business in the period (that being both single premium
and pension business) is up to 57%. This augurs well for the potential
recurring income available to the company once these assets and existing assets
are held on an acceptable platform. By the end of 2007, the Board expects the
platforms to be in operation and income beginning to flow.
Current Trading
Trading continues in line with the Board's expectations.
Outlook
The Board intends that recruitment of advisers continue as the basic plan for
growth, enhanced by the improvements made in existing advisers taking further
advantage of opportunities available to them.
The Board continues to believe that the company is well placed to take
advantage of market conditions during 2007 and grow the business further. The
importance of IFA distribution is gradually being recognised by the product
providers and the market in general.
Ron Pritchard
Chief Executive Officer
4 April 2007
Group Income Statement
Unaudited Interim Results to 31 January 2007
6 months to 6 months to Year ended
31 January 31 January 31 July
2007 2006 2006
Unaudited Unaudited Audited
� � �
Revenue from continuing operations 8,710,474 6,144,847 13,889,271
Cost of sales (6,850,163) (4,618,540) (10,980,165)
Gross profit 1,860,311 1,526,307 2,909,106
Net operating expenses (see note 1) (1,725,711) (1,420,899) (3,063,748)
Operating profit/(loss) from 134,600 105,408 (154,642)
continuing operations
Interest receivable and similar 9,408 - 8,376
income
Finance costs (25,174) (30,630) (53,475)
Profit (loss) on ordinary 118,834 74,778 (199,741)
activities before taxation
Taxation on profit/(loss) on (30,579) (21,920) 60,174
ordinary activities
Profit/(loss) attributable to 88,255 52,858 (139,567)
shareholders
Earnings per share - basic 0.37p 0.27p (0.65)p
- diluted N/A N/A N/A
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
Unaudited Interim Results at 31 January 2007
31 January 31 January 31 July
2007 2006 2006
Unaudited Unaudited Audited
� � �
ASSETS
Non-current assets
Intangibles (see note 1) 126,959 - 75,693
Property, plant and equipment 182,677 173,423 177,963
Investments 7,000 7,000 7,000
Deferred tax 205,953 154,951 236,532
522,589 335,374 497,188
Current Assets
Trade receivables 5,041,125 4,075,999 4,607,005
Cash and cash equivalents 469,149 27,892 546,637
5,510,274 4,103,891 5,153,642
Total Assets 6,032,863 4,439,265 5,650,830
EQUITIES & LIABILITIES
Equity attributable to equity holders
of the parent
Called-up share capital 482,154 393,039 482,154
Share premium 2,140,073 1,072,353 2,140,073
Merger reserve (99,000) (99,000) (99,000)
Retained earnings (see note 1) (996,899) (892,729) (1,085,154)
Total equity 1,526,328 473,663 1,438,073
Non-current liabilities
Long-term borrowings 269,320 17,413 341,213
Total non-current liabilities 269,320 17,413 341,213
Current liabilities
Trade and other payables 3,795,800 3,018,711 3,566,674
Short term borrowings 166,818 852,231 96,094
Current portion of long-term 139,591 7,933 136,453
borrowings
Current tax payable 135,006 69,314 72,323
Total current liabilities 4,237,215 3,948,189 3,871,544
Total liabilities 4,506,535 3,965,602 4,212,757
Total equity & liabilities 6,032,863 4,439,265 5,650,830
Group Cash Flow Statement
Unaudited Interim Results to 31 January 2007
6 months to 6 months to Year ended
31 January 31 January 31 July
2007 2006 2006
Unaudited Unaudited Audited
Cash flows from operating activities
� � �
Profit before taxation 118,834 74,778 (199,741)
Adjustments for :
Depreciation 24,000 14,147 47,408
Amortisation (see note 1) 8,734 - 11,645
Interest net 15,766 30,630 45,099
Operating profit before working 167,334 119,555 (95,589)
capital changes
Increase in trade and other (434,120) (557,516) (1,088,009)
receivables
Increase in trade and other payables 291,809 540,229 1,091,201
Cash generated from operations 25,023 102,268 (92,397)
Interest paid (25,174) (30,630) (53,475)
Net cash from operating activities (151) 71,638 (145,872)
Cash flows from investing activities
Purchase of intangibles (60,000) - (87,338)
Purchase of property, plant and (28,714) (22,333) (60,134)
equipment
Interest received 9,408 8,376
Net cash used in investing activities (79,306) (22,333) (139,096)
Cash flows from financing activities
Net proceeds of issue of shares - (38,100) 1,118,735
Proceeds from (repayment of) long term (62,627) - 448,551
borrowings
Movement in short term borrowings 70,724 7,357 (740,384)
Payment of hire purchase and finance (6,128) (7,041) (11,668)
liabilities
Net cash used in financing activities 1,969 (37,784) 815,234
Net increase in cash and cash (77,488) 11,521 530,266
equivalents
Cash and cash equivalents at the 546,637 16,371 16,371
beginning of the period
Cash and cash equivalents at the end 469,149 27,892 546,637
of the period
Group Statement of Changes in Equity
Unaudited Interim Results to 31 January 2007
Share Share Merger Retained Total
Capital Premium Reserve Reserves
� � � � �
At 1 August 2006 482,154 2,140,073 (99,000) (573,164) 1,950,063
Adjustment for goodwill - - - (511,990) (511,990)
impairment (see note 1)
Profit for the period - - - 88,255 88,255
As at 31 January 2007 482,154 2,140,073 (99,000) (996,899) (1,526,328)
1. Basis of Preparation and Accounting Policies
The interim financial information has been prepared in accordance with
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS). This interim statement is the first consolidated financial
report prepared in accordance IFRS. It does not include all the information
required for full annual financial statements. Full details of the accounting
policies adopted will be included in the financial figures for the year ending
31 July 2007 and are not expected to be materially different from those set out
in Audited Financial Statements for the year ended 31 July 2006, with the
exception of the policy in relation to Impairment of Goodwill. This will be
adopted in the 2007 Annual Report and accordingly has been in this Interim
Statement with the comparative figures being restated. This change in
accounting policy resulted in full impairment of Goodwill on consolidation in
the Balance sheet at 31 July 2005 and in a reduction in amortisation of �15,205
for the six months ended 31 January 2007, �15,205 for the six months ended 31
January 2006 and �30,410 for the year ended 31 July 2006.
2. Nature of Financial Information
The financial information contained in this report does not constitute the
Group's Statutory Accounts within the meaning of Section 240 of The Companies
Act 1985. The financial information shown in respect of the year ended 31 July
2006 has been extracted from the Audited Financial Statements which have been
filed with the Registrar of Companies. The Auditors' Report on those Financial
Statements was unqualified and did not contain any statement under Section 273
of the Companies Act 1985.
3. Earnings/(loss) per share
The earnings/(loss) per share is calculated on the profit attributable to
ordinary shareholders of �88,255 (period ended 31 January 2006: profit �52,858
and year ended 31 July 2006: loss �139,567) divided by 24,107,700 (period ended
31 January 2006: 19,651,952 and year ended 31 July 2006: 21,558,510) being the
weighted average number of ordinary shares in issue during these periods.
During the periods reported on, the share warrants and options in issue were
antidilutive and accordingly there is no dilution of profit/(loss) per share.
However, they could potentially dilute basic earnings per share in the future.
4. Segment Analysis
The Group's primary reporting segment is by business type and as all business
is carried out in the UK a secondary geographical segment is not considered
relevant. The business segments can be analysed to the gross profit level;
other costs, assets and liabilities are not directly attributable to any of the
segments and apportionment is not considered meaningful.
6 months to 6 months to 6 months to 6 months to Year ended Year ended
31 January 31 January 31 January 31 January 31 July 31 July
2007 2007 2006 2006 2006 2006
Unaudited Unaudited Unaudited Unaudited Audited Audited
Turnover Gross Turnover Gross Turnover Gross
Profit Profit Profit
�'000 �'000 �'000 �'000 �'000 �'000
Investments 2,797 586 1,969 434 4,481 930
Pensions 2,674 568 1,500 330 3,714 679
Fees/ 1,445 307 1,153 303 2,497 487
mortgages
Protection 1,746 351 1,412 348 3,056 672
Other 48 48 111 111 141 141
8,710 1,860 6,145 1,526 13,889 2,909
Copies of the Interim Report
Copies of the Interim Report will be sent to shareholders and are also
available from the Company Secretary at the company's registered office:
Alexandra House, 33 Alexandra Road, Wisbech, Cambridgeshire, PE13 1HQ.
END
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