TIDMCLKH
The Clarkson Hill Group plc (the "Group")
Preliminary Announcement for the Seventeen months to 31 December 2008
HIGHLIGHTS
* Loss before tax GBP669,207 (2007 Profit: GBP25,279).
* Turnover increased 12%pa to GBP29.0 million (2007 GBP18.3 million).
* Gross profit decreased by 13%pa to GBP4.5 million (2007: GBP3.6 million).
* New single premium investments increased to GBP277 million (2007: GBP250
million).
* Total funds under management grew by 39% to approximately GBP989 million
(2007: GBP712 million). (It should be noted that these figures are based on
input values not current fund values, clearly the impact on asset values of
the recession and market volatility are not reflected in these figures)
* Operating efficiency improved to 17.7% (2007: 19.6%). (Operating efficiency
is calculated as being the operating costs as a percentage of turnover)
CHAIRMAN'S STATEMENT
Trading Highlights 17 months to Year to
31 December 31 July 2007
2008
Turnover 29,093,190 18,300,143
Gross Profit 4,502,191 3,651,013
Operating Costs (5,147,286) (3,595,257)
Profit/(loss) before Tax (669,207) 25,279
Profit/(loss) after Tax (505,486) 703
Introduction
The first point to make is that this may not have been the most appropriate
time to change our financial year-end. However, the decision was made early in
2008 on the sound basis that the historical year-end of July did not match with
the operating timetable of the Company, and economies will eventually flow from
this decision.
These accounts compare a 17-month period for the December 2008 accounts as
opposed to the normal 12 months to July 2007.
Notwithstanding the variation in accounting period, what is clear from the
results is that the Group has performed adequately against a dramatically
deteriorating economic situation.
Results to July 2008 as presented in the Interim results, demonstrated both
growth and a small profit; performance to the end of the period reflects the
deteriorating mortgage and investment market.
The results reflect a continued growth in turnover, calculated on an annualised
basis as a 12% per annum increase over 2007.
However, the directors have recognised that the previous growth strategy is not
appropriate in the current economic climate. As a consequence, post the
December year-end, cost reductions have been implemented as cost centre
profitability is highlighted, and steps taken to ensure a return to
profitability despite the inevitable delay in economic recovery.
Results
Despite the result of both increased turnover and continued attention to
operating efficiencies, the Group reports a loss of GBP669,207 (2007: Profit GBP
25,279). This is due to the negative impact of the extreme economic conditions
in the final months of the period.
Turnover has increased by 12%pa to GBP29 million (2007: GBP18.3 million) and
operating efficiency improved to 17.7% (2007: 19.6%).
Funds under advice
New single premium investment business, both life and pensions, increased to GBP
277 million (2007: GBP250 million), with total funds under advice growing to
approximately GBP989 million (2007: GBP712 million), an increase of 39%.
It should be noted that these figures are currently based on values at
inception, not current fund values. The Group launched its core investment
solutions alongside its tested Risk Profile Questionnaire during the
second-half of 2008. This provides our clients with a recognised method of
determining their attitude and acceptance of risk and reward in an
understandable manner. From this, detailed investment recommendations that
offer ongoing asset reallocation (to maintain risk profiles), can then be
readily made.
In our view there has not been a better time to engage our clients in this
process. Results from this programme will influence future company returns.
Treating Customers Fairly
2008 was a big year for the FSA's Treating Customers Fairly programme and the
Group has obviously taken this on board, with the board of directors leading
the company in the implementation of the necessary reporting structures
required to evidence the service the Group's advisers provide to our clients.
A major element of TCF has been to canvass our clients' opinion of the service
our advisers and we provide to them. Of the 15 questions asked in the survey we
have utilised, the following gives an indication of our clients' views.
Q How did we perform? Percentage of Maximum Score
September to December 2008
2 Are you confident in the knowledge of the 91%
adviser you dealt with?
7 If a problem occurred, did we rectify it 100%
satisfactorily?
15 Did you feel Clarkson Hill and its advisers 95%
treated you fairly?
Included in this survey is a question that determines a recognised standard,
the `Net Promoter Score'. The survey asks the client, `Would you recommend to
friends and colleagues that they should use Clarkson Hill?'
Clients are asked to respond to this question on a scale from 0 to 10 (0 =
definitely would not recommend, 10 = definitely would recommend). The net
promoter question will be accompanied by a box in which respondents can give
the reason for the score they have given.
Returned questionnaires will be accumulated over three months and then a
quarterly net promoter score will be calculated as the percentage of
respondents to the survey who assign a 9 or 10 to this question, less the
percentage who assign between a 0 and a 6. Separate scores will be calculated
for surveys of new clients and surveys following annual reviews.
The `Net Promoter Score' for September to December 2008 is 62, which represents
an excellent score, confirming the directors' view that both advisers and
Company focus on providing appropriate advice for our clients, with a
high-level of service provision.
Retail Distribution Review
The Financial Services Authority has moved this project forward, with targets
for both adviser qualifications and increased transparency for charging, in
relation to both product manufacturing and advice for financial products.
The various steps the Group is taking in respect of Assets under Influence to
Assets under Management reflect the approach we intend to make to accommodate
these planned changes.
If there is an area of concern it must be the tight timescale envisaged by the
Regulator in respect of adviser qualifications and manufacturer system changes,
set against a paradigm shift in the economic environment. Too rigid a timetable
will inevitably result in fewer advisers available to meet significant consumer
requirements.
Regulatory Costs
In February 2009 the Financial Services Compensation Scheme advised that they
may need to levy up to GBP40 million on firms in the investment intermediary
sub-class (D2), to meet claims from the default of Pacific Continental
Securities (UK) Limited.
In March, the Company received a demand for GBP62,388 backdated to 2008 and
payable by the 29th April 2009. The sum of GBP46,791 has been added to our loss
for the year retrospectively.
The directors maintain the highest level of compliance possible, with
case-checking levels of between 90 and 100% of advice given. The results of our
survey and the very modest levels of complaints confirm the time, effort and
cost the directors, advisers and employees expend on giving clients the most
appropriate advice.
Regulatory costs paid by the Group have escalated from GBP67,466 for the year 03/
04 to GBP543,881 in the year 08/09. The method of charging is inequitable, as it
does not seek to recover costs from those companies or sectors, which take
inappropriate levels of risk.
Outlook
The focus on cost reduction and cost centre profitability has now created the
platform for the Group to move forward in the new economic environment.
Recruitment of quality advisers will continue at a lower rate than previously,
with the emphasis on investment pension based advisers.
Since December the Group has continued to trade in line with the board's
expectation.
RD Pritchard, CEO
29 April 2009
Consolidated Income Statement for the period from 1 August 2007 to 31 December
2008
17 months ended Year ended
31 December 31 July 2007
2008 Audited
Audited
GBP GBP
Turnover 29,093,190 18,300,143
Cost of sales (24,590,999) (14,649,130)
Gross profit 4,502,191 3,651,013
Net operating expenses (5,147,286) (3,595,257)
Group operating (loss)/profit (645,095) 55,756
Interest receivable and similar 47,159 18,631
income
Interest payable and similar (71,271) (49,108)
charges
(Loss)/profit on ordinary (669,207) 25,279
activities before taxation
Tax on (loss)/profit on 163,721 (24,576)
ordinary activities
Retained (loss)/profit for the (505,486) 703
group
Basic earnings/(loss) per share -2.11 p 0p
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.
Consolidated Balance Sheet as at 31 December 2008
31 December 31 July 2007
2008
Audited
Audited
GBP GBP
Fixed Assets
Intangible assets 120,055 136,280
Property, Plant & Equipment 153,978 193,533
Investments 7,000 7,000
Deferred Tax 503,919 340,198
784,952 677,011
Current Assets
Trade and other receivables 3,189,357 3,400,452
Cash and cash equivalents 586,640 663,026
3,775,997 4,063,478
Total Assets 4,560,949 4,740,489
EQUITIES AND LIABILITIES
Called up share capital 479,154 482,154
Share premium account 2,087,011 2,140,073
Merger reserve (99,000) (99,000)
Retained earnings (1,897,452) (1,391,966)
Total Equity 569,713 1,131,261
Non-current liabilities
Long term borrowings 534,444 206,584
Current Liabilities
Trade and other payables 3,077,838 2,631,468
Short term borrowings 142,258 555,457
Current portion of long term 187,031 125,000
borrowings
Current taxes payable 49,665 90,719
3,456,792 3,402,644
Total equity and liabilities 4,560,949 4,740,489
Consolidated Cash Flow Statement for the period 1 August 2007 to 31 December
2008
17 months ended Year ended
31 December 31 July 2007
2008
Audited
Audited
Cash flows from operating activities
GBP GBP
(Loss)/Profit before taxation (669,207) 25,279
Depreciation 80,200 52,994
Impairment (1,775) 31,242
Interest net 24,112 30,477
Operating (loss)/profit before (566,670) 139,992
working capital changes
Decrease/(Increase) in trade and 211,095 (514,177)
other receivables
Increase in trade and other 405,316 366,433
payables
Cash generated from operations 49,741 (7,752)
Interest paid (71,271) (49,108)
Net cash outflow from operating (21,530) (56,860)
activities
Cash flows from investing
activities
Taxation - 1,730
Net disposals of intangibles 18,000 (91,829)
Purchase of property, plant and (40,645) (68,564)
equipment
Interest received 47,159 18,631
24,514 (140,032)
Cash flows from financing
activities
Forfeiture of shares (56,062) -
Proceeds from (repayment of) long 350,000 325,538
term borrowings
Movement in short term borrowings (364,846) -
Payment of hire purchase and (8,462) (12,257)
finance liabilities
(79,370) 313,281
Net (decrease)/increase in cash (76,386) 116,389
and cash equivalents
Cash and cash equivalents at the 663,026 546,637
beginning of the period
Cash and cash equivalents at the 586,640 663,026
end of the period
Consolidated Statement of Changes in Equity
Share Share Merger Retained Total
capital premium reserve earnings equity
Balance at 31 July 2006 482,154 2,140,073 (99,000) (1,392,669) 1,130,558
Changes in equity for 2007
Profit for the period - - - 703 703
Balance at 31 July 2007 482,154 2,140,073 (99,000) (1,391,966) 1,131,261
carried forward
Changes in equity for 2008
Share forfeiture (3,000) (53,062) - - (56,062)
Loss for the period - - - (505,486) (505,486)
Balance at 31 July 2008 479,154 2,087,011 (99,000) (1,897,452) 569,713
carried forward
Basis of preparation
The financial information has been prepared in accordance with accounting
policies as presented in the Financial Statements as at 31 December 2008.
Earnings/(loss) per share
The earnings per share is calculated on the loss attributable to ordinary
shareholders of GBP505,486 (2007: profit GBP703) divided by 23,957,677 (2007:
24,107,677) being the weighted average number of ordinary shares in issue
during the year.
During 2008 and 2007, the share warrants and options disclosed in note 19 were
antidilutive and accordingly there is no dilution of loss per share. However,
the share options could potentially dilute basic earnings per share in the
future
Analysis of changes in net debt
Opening Cash Closing
balance flows Balance
1 August 31 December
2008
2007
GBP GBP GBP
Cash at bank and in hand 663,026 (76,386) 586,640
Total 663,026 (76,386) 586,640
Financial Information
The financial information set out above does not constitute the Company's
statutory financial statements for the period ended 31 December 2008 or 31 July
2007 (but is derived from those financial statements). Statutory financial
statements for 2007 have been delivered to the Registrar of Companies and those
for 2008 will be delivered shortly. The auditors have reported on those
financial statements; their reports were unqualified and did not contain
statements under section 237 (2) or (3) of the Companies Act 1985.
Report and financial statements
Copies of the Report and financial statements for the year ended 31 December
2008 will be posted to shareholders by 30 April 2009. Further copies will be
available from the Company's registered office at Alexandra House, Alexandra
Road, Wisbech, Cambridgeshire PE13 1HQ. The financial statements are also
available on the Company's website www.theclarksonhillgroup.co.uk.
Contact
Ron Pritchard, Director
The Clarkson Hill Group Plc
Telephone 01945 585721
Liam Murray, Nominated Adviser
Dowgate Capital Advisers Limited
Telephone 020 7492 4777
END
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