TIDMCLKH
The Clarkson Hill Group Plc (the "Group")
Interim Report for the period 1 January 2009 to 30 June 2009
HIGHLIGHTS
* Operating loss before exceptional reorganisation costs and tax was GBP16,074
(2008 Profit: GBP173,552).
* Turnover decreased 28% to GBP8.5 million (2008 GBP11.8 million).
* Gross profit decreased by 8% to GBP1.65 million (2008: GBP1.796 million).
* Operating efficiency deteriorated to 19.4% (2008: 13.7%). Operating
efficiency is calculated as being the operating costs as a percentage of
turnover
CHAIRMAN'S STATEMENT
Trading Highlights 6 months to 6 months to
30 June 2009 30 June 2008
Turnover 8,558,381 11,839,240
Gross Profit 1,650,841 1,796,597
Net Operating Costs (1,666,915) (1,623,045)
Exceptional reorganisation costs (129,320) -
Operating (loss)/profit excluding exceptional (16,074) 173,552
costs
Profit/(loss) before Tax (178,479) 145,999
Results
There was a group operating loss before exceptional reorganisation costs of GBP
16,074 (2008: Profit GBP173,552), reflecting the impact of the unfavourable
economic conditions during the six month period. Turnover reduced by some 28%
to GBP8.5 million (2008: GBP11.8 million). Operating efficiency deteriorated to
19.4 % (2008: 13.7%) largely due to the reduction in turnover.
Impact of recession
It is only to be expected that uncertainty over financial markets and the
impact of global recession has had an adverse impact on investment and mortgage
activities throughout the group. This was particularly evident during the last
quarter of 2008 and the first quarter of 2009, as clients and advisers got to
grips with the decline in equity and property markets and the far reaching
impact of the failure of companies such as Lehman Brothers, which has
significantly undermined confidence in the financial sector.
There has been some recovery coming through in the second quarter 2009 as the
benefits of the financial rebuilding of banks worldwide and quantative easing
have been seen. The resultant improvements in equity markets have given clients
more confidence to invest on the upswing. Clearly there is still some way to
go, the continuing increase in unemployment and the likely future cutbacks in
government expenditure will slow down the economic recovery.
Group response to the Impact of recession
In recognition of the impact of the recession, the group began a restructuring
programme in the first quarter 2009. Various cost reduction activities have
been put in place, and are continuing and will result in the reduction in
annual costs of approximately GBP1m.
This has been achieved by a combination of redundancies, cost savings and
renegotiated contracts, which resulted in exceptional reorganisational costs of
some GBP130,000 in the six month period which is shown on a separate line within
the financial statements.
The full benefits of these cost reductions have not been immediately seen.
Redundancy payments and lease exit payments have an immediate impact. In the
main these costs savings have now fed through the system and the benefit will
be seen both in the second half of this year and in future years.
The directors believe that these cost savings have not in anyway reduced the
group's ability to develop and take advantage of future opportunities in the
market place.
The cost review that has taken place has sharpened our focus and the company
will benefit from this exercise.
It is important to note that these cost reductions have not impacted on our
commitment or resources in the area of compliance and Treating Customers
Fairly.
Move to Assets under Management
This continues to be a significant driver in the activities of both the company
and its advisers.
However, the impact of recession has been exacerbated by the reduction in
initial commissions received on single premium business, as the company and
advisers move towards the new regulatory model.
The drive to increase Assets under Management by generating ongoing trail
income to reflect the ongoing advice given, has resulted in a 20% reduction in
initial commission taken on this business.
Trail income is now growing at an annualised rate in excess of 25%.
The benefit of this fundamental shift in company and adviser remuneration will
be seen in future years, as the trail income reflecting the value of the
investments, will continue to be received. This in itself will bring more
certainty of income both for the company and the adviser.
Further developments are planned in this area, to consolidate the value to the
group of its total Assets under influence as Assets under Management.
Treating Customers Fairly (TCF)
The group continues to pay attention to regulatory and consumer aspects of TCF.
Since inception the group has carried out 113,913 advisory transactions. To
date 30 complaints have been upheld, this represents 0.026%
The directors continue to believe that the group's approach to compliance
checking is the way to provide suitable advice to its clients and protect the
group from future complaints.
Retail Distribution Review (RDR)
The group continues to plan for the introduction of RDR.
As described above, the move to capture ongoing trail income from Assets under
Management continues to be a main focus of the group. This is very much in line
with the proposed post 2012 situation.
Many of the group's advisers have already begun the process of adding
qualifications and their progress towards an as yet ill-defined qualification
will be aided by plans to be implemented later in 2009.
Whilst the group is confident that its advisers will meet the new qualification
levels, and put the group in a strong position, we remain concerned that the
impact of this regulatory driven change will be a significant reduction in the
number of IFA's available to advise clients.
Whilst this will offer the group potentially wider opportunities post 2012, it
is difficult to see how the savings gap will be reduced, when fewer financial
advisers will be available to the general public.
The timescale for the implementation of "professional" qualifications needs to
be reviewed otherwise the loss of advisers will have an adverse impact on the
availability of quality advice.
Capital Raising
5,000,000 ordinary shares of 2p nominal value were placed on 27 May 2009 at a
price of 4p per share, raising net proceeds of GBP190,000 to provide additional
working capital. Following the placing the enlarged share capital increased to
28,957,677 ordinary shares of 2p each.
Outlook
The directors continue to recognise that we need to focus both on cost
efficiencies to ensure the group fully benefit from the programme established
and the continued recruitment of quality advisers, which is considered
essential and will continue.
Since June the group has continued to trade in line with the board's
expectations.
RD Pritchard, CEO
24 September 2009
Consolidated Income Statement
Unaudited Interim Results to 30 June 2009
6 months to 6 months to 17 months
30 June 2009 30 June 2008 ended
Unaudited Unaudited 31 December
2008
Audited
GBP GBP GBP
Turnover 8,558,381 11,839,240 29,093,190
Cost of sales (6,907,540) (10,042,643) (24,590,999)
Gross profit 1,650,841 1,796,597 4,502,191
Net operating expenses (1,666,915) (1,623,045) (5,147,286)
Exceptional reorganisation costs (129,320) - -
Group operating (loss)/profit (145,394) 173,552 (645,095)
Interest receivable and similar 1,699 (3,761) 47,159
income
Interest payable and similar (34,784) (23,792) (71,271)
charges
(Loss)/profit on ordinary (178,479) 145,999 (669,207)
activities before taxation
Tax on (loss)/profit on 0 6,298 163,721
ordinary activities
(Loss)/retained profit for the (178,479) 139,701 (505,486)
group
Basic earnings/(loss) per share (0.74)p 0.58p (2.11)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.
Consolidated Balance Sheet
Unaudited Interim Results at 30 June 2009
30 June 2009 30 June 2008 31 December
2008
Unaudited Unaudited Audited
GBP GBP GBP
ASSETS
Non current assets
Intangible assets 120,055 180,055 120,055
Property, Plant & Equipment 156,021 169,364 153,978
Investments 7,000 7,000 7,000
Deferred Tax 503,919 333,900 503,919
786,995 690,319 784,952
Current Assets
Trade and other receivables 3,523,126 3,954,904 3,189,357
Cash and cash equivalents 455,993 694,666 586,640
3,979,119 4,649,570 3,775,997
Total Assets 4,766,114 5,339,889 4,560,949
EQUITIES AND LIABILITIES
Called up share capital 579,154 482,154 479,154
Share premium account 2,177,011 2,140,073 2,087,011
Merger reserve (99,000) (99,000) (99,000)
Retained earnings (2,075,931) (1,362,166) (1,897,452)
Total Equity 581,234 1,161,061 569,713
Non-current liabilities
Long term borrowings 530,000 150,000 534,444
Current Liabilities
Trade and other payables 3,149,291 3,733,791 3,077,838
Short term borrowings 276,448 125,000 142,258
Current portion of long term 121,963 120,000 187,031
borrowings
Current taxes payable 107,178 50,037 49,665
3,654,880 4,028,828 3,456,792
Total equity and liabilities 4,766,114 5,339,889 4,560,949
Consolidated Cash Flow Statement
Unaudited Interim Results to 30 June 2009
6 months 6 months 17 months
ended ended ended
30 June 30 June 31
2009 2008 December
2008
Unaudited Unaudited Audited
GBP GBP GBP
Cash flows from operating activities
(Loss)/Profit before taxation (178,479) 139,701 (669,207)
Depreciation 36,300 28,200 80,200
Impairment - - (1,775)
Interest net 33,085 7,122 24,112
Operating (loss)/profit before working capital (109,094) 175,023 (566,670)
changes
Decrease/(Increase) in trade and other (333,769) 33,152 211,095
receivables
Increase in trade and other payables 128,966 179,268 405,316
Cash generated from operations (313,897) 387,443 49,741
Interest paid (34,784) (19,861) (71,271)
Net cash outflow from operating activities (348,681) 367,582 (21,530)
Cash flows from investing activities
Net disposals of intangibles - (58,706) 18,000
Purchase of property, plant and equipment (38,343) (15,786) (40,645)
Interest received 1,699 12,739 47,159
(36,644) (61,753) 24,514
Cash flows from financing activities
Share issue / Forfeiture of shares 190,000 - (56,062)
Proceeds from (repayment of) long term (4,444) (60,000) 350,000
borrowings
Movement in short term borrowings 69,122 (87,512) (364,846)
Payment of hire purchase and finance - - (8,462)
liabilities
254,678 (147,512) (79,370)
Net (decrease)/increase in cash and cash (130,647) 158,317 (76,386)
equivalents
Cash and cash equivalents at the beginning of 586,640 536,349 663,026
the period
Cash and cash equivalents at the end of the 455,993 694,666 586,640
period
Consolidated Statement of Changes in Equity
Unaudited Interim Results to 30 June 2009
Share Share Merger Retained Total
capital premium reserve earnings equity
Balance at 31 December 2007 482,154 2,140,073 (99,000) (1,496,048) 1,027,179
Changes in equity for 2008
Share forfeiture (3,000) (53,062) - - (56,062)
(Loss) / Profit for the - - - (401,404) (401,404)
period
Balance at 31 December 2008 479,154 2,087,011 (99,000) (1,897,452) 569,713
carried forward
Changes in equity for 2009
Share Issue 100,000 90,000 - - 190,000
Loss for the period - - - (178,479) (178,479)
Balance at 30 June 2009 579,154 2,177,011 (99,000) (2,075,931) 581,234
carried forward
Basis of preparation
The interim financial information has been prepared in accordance with
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS). It does not include all the information required for full
annual financial statements. Full details of the accounting policies adopted
are presented in the Financial Statements for the seventeen months ended 31
December 2008. IFRS 8 Operating Segments applies for accounting periods commencing
from 1 January 2009 and has been adopted replacing IAS 14 Segment Reporting.
The group changed its accounting reference date from 31 July to 31 December 2008,
with the audited figures being for a seventeen month period. In order to provide
information on a consistent basis the unaudited comparative figures shown are for
the six month period to 30 June 2008. These have not been independently reviewed
and are not as reported previously in the last published interim statement which
was for the year to 31 July 2008.
Earnings/(loss) per share
The earnings per share is calculated on the loss attributable to ordinary
shareholders of GBP178,479 (6 months to 30 June 2008: profit GBP139,701, 17 months
to 31 December 2008: loss GBP505,486) divided by 23,957,677 (6 months to 30 June
2008: 24,107,677, 17 months to 31 December 2008: 23,957,677) being the weighted
average number of ordinary shares in issue during the period.
During 2009 and 2008, the share warrants and options 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 Cashflows Closing
balance Balance
1 January 2009 30 June 2009
GBP GBP GBP
Cash at bank and in hand 586,640 (130,647) 455,993
Segment Analysis
The Group's primary reporting segment is by business type and all business is
carried out in the UK. 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 6 months 6 months 6 months 17 Months 17 Months
to 30 June to 30 June to 30 June to 30 June ended ended
2009 2009 2008 2008 31 31
December December
2008 2008
Unaudited Unaudited Unaudited Unaudited Audited Audited
Turnover Gross Turnover Gross Turnover Gross
Profit Profit Profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investments 2,838 530 3,901 535 10,121 1,551
Pensions 2,928 558 3,594 504 8,675 1,313
Fees/ 799 153 1,538 342 4,338 624
mortgages
Protection 1,852 319 2,748 370 5,783 874
Other 141 91 58 46 176 140
8,558 1,651 11,839 1,797 29,093 4,502
Financial Information
The financial information set out above does not constitute the Company's
statutory financial statements for the period ended 31 December 2008 (but is
derived from those financial statements). Statutory financial statements for
2008 have been delivered to the Registrar of Companies. The auditors have
reported on those financial statements; their report was unqualified and did
not contain statements under section 237 (2) or (3) of the Companies Act 1985.
Report and financial statements
Copies of the Interim Report for the 6 months ended 30 June 2009 will be sent
to shareholders shortly. 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:
The Clarkson Hill Group Plc
Ron Pritchard, Director
Tel: 01945 585721
Nominated Adviser
Dowgate Capital Advisers Limited
Liam Murray / Aaron Smyth
Tel: 020 7492 4777
END
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