RNS Number:5852Y
Debtmatters Group PLC
19 June 2007
DEBT.L
Debtmatters Group plc
Preliminary Results for the Year Ended 31 March 2007
Key points:
* Group turnover up 282% to #29.8m (#7.8m: 2006)
* Group profit before tax up 230% to #8.6m (#2.6m: 2006)
* IVA business delivers significant organic growth:
* IVA turnover up 141 % to #18.1m (#7.8m: 2006) Operating Profit from IVA
operations up 169% to #7m (#2.6m: 2006)
* Successful integration of secured loan brokerage business:
* #11.8m of turnover and #2.1m operating profit from acquisition
generated in 9 1/2 months.
* Greater regulation secures long term future of IVA
* Further product diversification expected to underpin growth
Ges Ratcliffe, CEO of Debtmatters Group plc, said:
"Debtmatters has delivered a strong performance at a crucial time for our
industry. These results underline our confidence that we have the systems and
measures in place to consolidate and diversify our business as the industry
matures. I look forward to updating shareholders on continued good progress."
Enquiries:
Ges Ratcliffe CEO, Debtmatters Group plc 01204 678 200
Rick Thompson / Freddy Crossley Charles Stanley Securities 020 7739 8200
Shane Dolan Biddicks 020 7448 1000
Debtmatters Group plc
Chairman's Statement
The Company
Another year of significant organic growth in our IVA business and the
successful integration of our secured loan brokerage have resulted in another
excellent set of results. Much has also taken place behind the scenes to
strengthen both businesses including relocating to new adjacent sites, investing
in people and processes and the ongoing development of the senior management
teams.
Market
As the market for debt solutions continues to grow and attract more participants
we are starting to see signs of the market maturing. Against this background we
welcome the moves towards greater self-regulation amongst interested parties and
a closer working relationship with creditors. Our business models and systems
must be robust and adaptable to changing market conditions and it is here that
our investment in staff, training and processes is paying dividends.
Strategy
Your Board believes that there are numerous opportunities for further growth in
the debt solutions market and that increasingly acquisition opportunities are
likely to present themselves. These will continue to be evaluated and measured,
particularly against changing market conditions in certain sectors, as we
continue to build a rounded group of debt solutions businesses.
Finance
We have taken the decision to implement International Financial Reporting
Standards (IFRS) early and have adopted these standards in our 2007 results.
Whilst this has necessitated a considerable amount of additional work we feel
this investment has been worthwhile and will be appreciated by investors.
Management and staff
The expansion of our business has only been achieved through the hard work and
dedication of my fellow directors as well as all our staff. I would like to take
this opportunity to thank them all for their commitment and their ongoing
support in the current year.
Together with the increase in the number of our insolvency practitioners we now
have the management and infrastructure in place to take full advantage of the
significant opportunities that exist for our business.
Outlook
Debtmatters has delivered impressive growth during the period under review and
is well positioned to continue its momentum. Significant opportunities exist for
the Group and I look forward to updating shareholders with further progress in
due course.
Noel Guilford BA FCA MSI
Non Executive Chairman
Debtmatters Group plc
Chief Executive's Review
Summary of performance
Turnover for the IVA business has grown from #7.8m for the year to March 2006 to
#18.1m for the year to March 2007 and profits from continuing IVA operations for
the same periods have grown from #2.6m to #7m respectively. To accommodate this
growth the Group relocated to new offices in April 2006 and took on further
additional space at the new location in September 2006.
Certain important factors have resulted in the achievement of market
expectations for the year:
* Debtmatters has been awarded Investors in People and continues to
encourage its staff to reach their full potential
* In September 2006 the Group was awarded the prestigious ISO9001
accreditation demonstrating our commitment to and emphasis on good systems
* The Group has developed a strong brand both nationally and locally,
assisting in the generation of leads at competitive prices and staff
recruitment.
We have also seen the completion of our first major acquisition, Loanmakers
Limited, its relocation to Debtmatters premises and its integration into the
Group. In the 91/2 months since acquisition, Loanmakers has added #11.8m to
group turnover and #2.1m to group profit before tax. We are extremely pleased
with the performance of Loanmakers and its contribution to the Group.
The year under review can be divided into two very distinct halves. H1 was
characterised by rapid organic growth in IVA numbers but H2 proved to be a more
challenging trading period. Creditors implemented new criteria for accepting
IVAs which had a significant impact on conversion rates. In response, the
British Bankers Association and the Insolvency Service have coordinated all
party talks in order to establish a common set of standards acceptable to all
stakeholders. This provides greater confidence for the future of IVAs within the
debt solution industry.
Strategy
As the IVA market evolves, the Company's established strategy of product
diversification remains central with the acquisition of Loanmakers representing
the first stage of diversification into other debt solution markets. It has
always been a long term aim of the Group to broaden the number of products
offered to its consumer audience and reduce the Group's dependency on IVAs.
However, the timetable originally anticipated to implement this strategy will
almost certainly be accelerated as opportunities for market consolidation arise.
Acquisition of Loanmakers
In June 2006 we completed the acquisition of Loanmakers Limited. This step was
important to the Group for a number of reasons.
* The enlarged Group has moved away from being a single product business
* Loanmakers has a positive cashflow profile in contrast to the IVA
business's high working capital requirements
* There are opportunities for cross selling, thereby increasing return
from marketing spend.
In November/December 2006 the business relocated into Debtmatters premises in
Bolton. Loanmakers had been located within a mile of the Group but had reached
capacity in terms of staff numbers. The move to new premises has allowed
Loanmakers to expand staff numbers and achieve its own organic growth plans.
Kevin Hindley and Tim Wheeldon (the business's former owners) remain fully
active in the business and committed to driving it forward. Ambitious organic
growth plans are being implemented and I remain confident in the company's
prospects and its contribution to the future of the Group.
Employees
I would like to take this opportunity to thank all of our employees for their
hard work and dedication over the year. In the difficult trading conditions of
H2, it is our employees who have enabled us to meet market expectations.
I would also like to welcome Loanmakers staff to the Group and wish them success
in their future careers within Debtmatters Group plc.
2008 Outlook
As the new financial year progresses I look forward to continued progress with
both our major products. The IVA industry is settling after a period of upheaval
and Loanmakers continues to exceed our initial expectations.
Our management are firmly aligned to the strategy of broadening the operations
of the group and we will continue to seek opportunities which will assist in
delivering the Group's strategy.
G N Ratcliffe
Chief Executive
Debtmatters Group plc
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2007
2007 2007 2007 2006
Continuing Acquisitions Total
Notes # # # #
REVENUE 1 18,062,550 11,770,210 29,832,760 7,793,549
Cost of sales (7,643,431) (6,990,318) (14,633,749) (3,240,556)
--------------- --------------- --------------- ---------------
Gross profit 10,419,119 4,779,892 15,199,011 4,552,993
Administrative
expenses (3,272,403) (2,577,606) (5,850,009) (1,853,077)
--------------- --------------- --------------- ---------------
EBITDA 7,146,716 2,202,286 9,349,002 2,699,916
=============== =============== =============== ===============
Amortisation
and depreciation (156,529) (100,300) (256,829) (73,596)
Non trading items - (6,036) (6,036) (25,857)
--------------- --------------- --------------- ---------------
Profit from
operations 6,990,187 2,095,950 9,086,137 2,600,463
=============== =============== =============== ===============
Finance (costs) /
income (446,104) 20,825
----------- ------------
PROFIT BEFORE
TAXATION 8,640,033 2,621,288
Taxation 3 (2,561,632) (868,044)
----------- ------------
PROFIT FOR THE
FINANCIAL YEAR 6,078,401 1,753,244
=========== ===========
Basic earnings
per share - pence 4 24.69p 7.44p
Fully diluted
earnings per
share - pence 4 21.56p 7.05p
Debtmatters Group plc
CONSOLIDATED BALANCE SHEET
31 March 2007
2007 2006
Notes # #
Non-current assets
Property, plant and
equipment 394,418 227,414
Intangible assets 5 17,094,607 294,811
Deferred tax assets 90,510 -
--------------- ---------------
17,579,535 522,225
--------------- ---------------
Current assets
Work in progress 842,066 129,090
Trade and other
receivables 15,330,774 6,020,676
Cash and cash
equivalents 665,771 189,615
--------------- ---------------
16,838,611 6,339,381
--------------- ---------------
Total assets 34,418,146 6,861,606
=============== ===============
Current liabilities
Trade and other payables 4,063,296 856,141
Financial liabilities 2,920,255 124,477
Current tax liabilities 3,407,876 1,085,221
--------------- ---------------
10,391,427 2,065,839
Non-current liabilities
Trade and other payables 1,888,800 30,161
Financial liabilities 6,537,500 30,161
Deferred tax liabilities - 19,200
--------------- ---------------
Total liabilities 18,817,727 2,115,200
--------------- ---------------
Equity
Share capital 8 2,461,539 2,461,539
Contingent share
consideration 8 4,662,226 -
Share premium account 1,956,614 1,956,614
Merger reserve (1,999,996) (1,999,996)
Share based
compensation reserve 338,518 225,132
Retained earnings 8,181,518 2,103,117
--------------- ---------------
Total equity 15,600,419 4,746,406
--------------- ---------------
Total liabilities
and equity 34,418,147 6,861,606
=============== ===============
These financial statements were approved by the board of directors and
authorised for issue on 19 June 2007 and are signed on their behalf by:
G N Ratcliffe
(Chief Executive)
M Prideaux
(Finance Director)
Debtmatters Group Plc
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2007
GROUP
Share Share Based
Share Premium Merger Compensation Retained
Capital Account Reserve Reserve Earnings Total
# # # # # #
Equity as at
April 1, 2005 2,000,000 - (1,996,996) - 349,873 349,877
Share issue 461,539 2,538,461 - - - 3,000,000
Share issue costs - (581,847) - - - (581,847)
Share based
payments - - - 225,132 - 225,132
Profit for the
period - - - - 1,753,244 1,753,244
--------- --------- --------- --------- --------- ---------
Equity as at
31 March, 2006 2,461,539 1,956,614 (1,996,996) 225,132 2,103,117 4,746,406
Shares to be
issued 4,662,226 - - - - 4,662,226
Share based
payments - - - 113,386 - 113,386
Profit for the
period - - - - 6,078,401 6,078,401
--------- --------- --------- --------- --------- ---------
Equity as at
31 March, 2007 7,123,765 1,956,614 (1,999,996) 338,518 8,181,518 15,600,419
========== ========== ========== ========== ========== ==========
Debtmatters Group Plc
GROUP CASH FLOW STATEMENT
for the year ended 31 March 2007
2007 2006
Notes # #
Cash flows from operating activities
Profit from operations 9,086,137 2,600,463
Share based compensation 113,386 225,132
Depreciation 195,670 61,678
Amortisation of IPS licenses 61,159 11,918
Loss on disposal of tangible fixed assets 6,036 25,857
Increase in work in progress (712,976) (34,571)
Increase in trade and other receivables (8,552,498) (4,466,361)
Increase in trade and other payables 1,612,277 563,650
-------- --------
Cash outflow from operations 1,809,191 (1,012,234)
Interest paid (446,104) (12,119)
Income taxes paid (1,169,977) (127,392)
-------- --------
Net cash inflow / (outflow) from operating
activities 193,110 (1,151,745)
Cash flows from investing activities
Payments to acquire property, plant and equipment (191,359) (232,006)
Payments to acquire intangible assets (119,850) (102,204)
Receipts from sale of property, plant and equipment 2,520 21,843
Acquisition of subsidiary undertaking (note 6) (14,897,859) (400,000)
Net cash acquired with subsidiary undertaking (note 6) 1,524,251 -
Interest received - 32,944
-------- --------
Net cash used in investing activities (13,682,297) (679,423)
Cash flows from financing activities
Proceeds on issue of ordinary shares - 3,000,000
Share issues costs - (581,847)
Contingent share consideration 4,662,226 -
Capital element of finance lease agreements (12,178) (35,590)
Net movement on short term borrowings 1,250,000 -
Net movement on long term borrowings 6,537,500 -
-------- --------
Net cash inflow from financing 12,437,548 2,382,563
-------- --------
Net (decrease) / increase in cash and cash
equivalents (1,051,639) 551,395
Cash & cash equivalents at the beginning of the
financial year 78,195 (473,200)
-------- --------
Cash & cash equivalents at the end of the
financial year (973,444) 78,195
-------- --------
-------- --------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 31 March 2007
2007 2006
Notes # #
Net (decrease) / increase in cash and cash
equivalents (1,051,639) 551,395
Cash inflow from debt financing (7,787,500) -
-------- --------
Movement in net debt in the year (8,839,139) 551,395
Net debt at beginning of the year 78,195 (473,200)
-------- --------
Net debt at the end of the year (8,760,944) 78,195
-------- --------
Debtmatters Group plc
NOTES TO THE FINANCIAL STATEMENTS
1 SEGMENTAL INFORMATION
Business Segments
Segment information is presented in respect of the Group's business segments,
which are based on the Group's management and internal reporting structure as at
31st March 2007. Segment results include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Geographical Segments
Revenue originates wholly within the United Kingdom and as a result, no
geographical segments are presented within these financial statements.
Segment Analysis
The business segment results for the year ended 31st March 2007, together with
comparative figures are as follows:
Insolvency Secured loans Group
2007 2006 2007 2006 2007 2006
# # # # # #
Segment
Revenues 18,062,550 7,793,549 11,770,210 - 29,832,760 7,793,549
------------ ------------ ------------ ------------ ------------ ------------
EBITDA 7,146,716 2,699,916 2,202,286 - 9,349,002 2,699,916
Amortisation and
Depreciation (156,529) (73,596) (100,300) - (256,829) (73,596)
Non trading items - (25,857) (6,036) - (6,036) (25,857)
------------ ------------ ------------ ------------ ------------ ------------
Profit from
Operations 6,990,187 2,600,463 2,095,950 9,086,137 2,600,4635
Finance (costs) /
income (446,104) 20,825
------------ ------------
Profit before tax 8,640,033 2,621,288
Income taxes (2,561,632) (868,044)
------------ ------------
Profit after tax 6,078,401 1,753,244
=============== ===============
Other Information
Total Segment Assets 15,460,704 6,861,606 18,957,442 - 34,418,146 6,861,606
------------ ------------ ------------ ------------ ------------ ------------
Total Segment
Liabilities 10,507,484 2,115,200 8,310,243 - 18,817,727 2,115,200
------------ ------------ ------------ ------------ ------------ ------------
Capital
Expenditure 145,633 232,006 45,726 - 191,359 232,006
------------ ------------ ------------ ------------ ------------ ------------
2 PARTICULARS OF EMPLOYEES
The average number of staff employed by the group, including executive directors,
during the financial year amounted to:
2007 2006
No No
Administration 247 65
Management 27 8
-------------- --------------
274 73
============== ==============
The aggregate payroll costs, including directors' emoluments, of the above were:
2007 2006
# #
Wages and salaries 6,108,149 1,652,771
Social security costs 613,743 165,497
Other pension costs 5,995 5,036
------------ ------------
6,727,887 1,823,304
============ ============
3 TAXATION ON ORDINARY ACTIVITIES
2007 2006
# #
Current tax:
Corporation tax at 30% (2006: 30%) 2,699,188 855,213
Adjustment in respect of
prior periods (2,095) 855,213
------------ ------------
Total current tax 2,697,093 855,213
Deferred tax:
Origination of and reversal
of temporary differences (138,721) 12,831
Adjustment in respect of
prior periods 3,260 -
------------ ------------
(135,461) 12,831
------------ ------------
Income tax expense 2,561,632 868,044
=============== ===============
The charge for the year can be reconciled to the profit per the Income Statement
as follows:
2007 2006
# #
Profit on ordinary
activities before tax 8,640,033 2,621,288
------------ ------------
Tax at the UK corporation
tax rate of 30.0% (2006:30.0%) 2,590,964 851,739
Expenses not deductible for
tax purposes 6,428 15,637
Capital allowances in
excess of depreciation 37,168 (12,833)
Losses not recognised
arising in the year - 302
Income not taxable for
tax purposes (36,926) -
Marginal relief - (306)
Adjustments in respect of
prior periods (2,095) -
Other short term timing
differences 101,554 674
------------ ------------
Current tax charge 2,697,093 855,213
=============== ===============
4 EARNINGS PER SHARE
Year ended 31 Year ended 31
March 2007 March 2006
# #
Profit for the year 6,078,401 1,753,244
Weighted average number of shares in issue: No. No.
For basic earnings per share 24,615,385 23,578,504
Executive share options 1,281,980 1,280,015
Contingent share consideration 2,297,574 -
------------ ------------
For diluted earnings per share 28,194,939 24,858,519
============ ============
Earnings per share:
Basic 24.69p 7.44p
Diluted 21.56p 7.05p
The dilution in number of ordinary shares arises in respect of executive share
options outstanding.
5 INTANGIBLE ASSETS
Group Software
Development IPS Domain
Goodwill Costs Licences Names Total
# # # # #
Cost:
At 1 April 2006 174,975 - 126,237 10,018 311,230
Arising on
acquisitions
(see note 6) 16,652,844 124,162 - - 16,777,006
Additions - 51,348 68,502 - 119,850
------------ ------------ ------------ ------------ ------------
At 31 March
2007 16,827,819 175,510 194,739 10,018 17,208,086
------------ ------------ ------------ ------------ ------------
Amortisation:
At 1 April 2006 - - 16,419 - 16,419
Arising on
acquisitions
(see note 6) - 35,901 - - 35,901
Charge for
the year - 30,719 30,440 - 61,159
------------ ------------ ------------ ------------ ------------
At 31 March
2007 - 66,620 46,859 - 113,479
------------ ------------ ------------ ------------ ------------
Net book
value:
At 31 March
2007 16,827,819 108,890 147,880 10,018 17,094,607
========== ========== ========== ========== ==========
At 31 March
2006 174,975 - 109,818 10,018 294,811
========== ========== ========== ========== ==========
Goodwill acquired in a business combination is allocated, at acquisition, to the
cash generating units that are expected to benefit from that business
combination. A summary of the allocation of the carrying value of goodwill and
intangibles with indefinite useful lives by business segment is as follows:
2007 2006
Cost # #
Insolvency 184,993 184,993
Secured loans 16,652,844 -
---------- ----------
16,837,837 184,993
========== ==========
Insolvency cost includes Goodwill with a carrying value of #174,975 and
Intangibles with an indefinite useful life of #10,018. Secured loans cost is
made up of entirely of Goodwill.
The Group tests goodwill annually for impairment or more frequently if there are
indications that goodwill might be impaired.
The recoverable amounts of the cash generating units are determined from value
in use calculations. The key assumptions for the value in use calculations are
those regarding the discount rates, growth rates and expected changes to revenue
and direct costs during the period.
Management estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks specific to the cash
generating units. The growth rates are based on industry growth forecasts.
Changes in revenue and direct costs are based on past practises and expectations
of future changes in the market.
The Group prepares cash flow forecasts derived from the most recent financial
budgets approved by management for the next five years and extrapolates cash
flows thereafter in perpetuity based on an estimated growth rate.
6 FINANCIAL ASSET INVESTMENTS
2007 2006
Company: # #
At beginning of year 2,225,132 -
Additions 18,648,126 2,402,000
Share based payments 113,386 225,132
Disposals - (402,000)
------------ ------------
At end of year 20,986,644 2,225,132
============ ============
Details of subsidiaries, all wholly owned and included in the consolidated
financial statements are as follows:
Country of Holding Proportion of Nature of
incorporation voting rights business
and shares held
Debtmatters
Limited England Ordinary shares 100% Personal debt
solutions
Debtmatters
Commercial
Limited England Ordinary shares 100% Commercial debt
solutions
Loanmakers
(Holdings)
Limited England Ordinary shares 100% Holding company
Loanmakers
Limited* England Ordinary shares 100% Loanconsolidation
Broker
Unique Business
Finance Limited England Ordinary shares 100% Dormant
* Loanmakers Limited is a 100% owned subsidiary of Loanmakers (Holdings)
Limited. It is a sub-subsidiary of Debtmatters Group Plc.
On 15 June 2006 Debtmatters Group Plc acquired the entire share capital of
Loanmakers (Holdings) Limited. The total consideration (including contingent
consideration) amounted to #18,648,126. The transaction has been accounted for
by the purchase method of accounting.
Fair Value
#
Property, plant and equipment 179,870
Intangible assets 88,261
Work in progress 422,094
Trade and other payables 335,506
Net Cash 1,524,251
Trade and other payables due within one year (554,700)
------------
Net assets 1,995,282
Goodwill arising on acquisition of subsidiary 16,652,844
------------
18,648,126
============
Discharged by:
Cash consideration 13,985,899
Contingent share consideration 4,662,226
------------
18,648,126
============
The contingent consideration of #18,648,126 is provisional based on the future
performance of Loanmakers Limited. Contingent share consideration and contingent
cash consideration amount to #4,662,226 (2,932,218 shares at #1.59 per share)
and #3,750,267 respectively.
Fair Value
#
Net assets acquired 1,995,282
Goodwill arising on acquisition of subsidiary 16,652,844
------------
Total purchase price 18,648,126
Less contingent cash (3,750,267)
------------
Cash flow on acquisition 14,897,859
Less cash acquired with acquisition (1,524,251)
------------
Cash flow on acquisition net 13,373,608
============
The goodwill arising on the acquisition of Loanmakers (Holdings) Limited is
attributable to the expected profitability arising from new business and the
anticipated future operating synergies from assimilation into the Group.
If the acquisition had been completed on 1 April 2006 instead of the date above,
the total Group revenue for the period would have been approximately #32.3m, and
profit before tax would have been approximately #9.8m on a pro forma basis.
7 SHARE BASED PAYMENTS
The company has granted equity settled share options to selected employees. The
exercise price is the market value of the shares at the date of grant. The
vesting period is three years. If the options remain unexercised after a period
of ten years from the date of grant the options expire.
Details of the share options outstanding during the year are as follows:
2007 2006
Number of share Weighted Number of share Weighted
options average options average
exercise price exercise price
(in p) (in p)
Outstanding at
beginning of year 1,660,202 66.29 - -
Granted during
the year 76,923 65.00 1,660,202 66.69
Forfeited
during the period (436,427) 68.80 - -
------------ ------------ ------------ ------------
Outstanding at
the end of the
period 1,300,698 65.38 1,660,202 66.29
============ ============ ============ ============
The Group recognised the following expenses related to share-based payments:
2007 2006
# #
Charged to Consolidated Income Statement 113,386 225,132
========== ==========
The weighted average share price at the date of exercise for share options
exercised during the period was 68.80p. The options outstanding at 31 March 2007
had a weighted average exercise price of 65.38p (2006: 66.29p), and a weighted
average remaining contractual life of 7.63 years (2006: 9.02 years).
In the year ended 31 March 2007, options were granted on 15th June 2006. The
aggregate of the estimated fair values of the options granted on this date is
#23,256. In the year ended 31 March 2006, options were granted on 20th June
2005, 4th July 2005 and 15th August 2005. The aggregate of the estimated fair
values of the options granted on those dates is #492,037.
The fair value of options granted under the scheme is measured by use of the
Black-Scholes model. The inputs into the Black-Scholes model are as follows:
2007 2006
Share price (p) 70-385 70-265
Exercise price (p) 65-97 65-97
Expected volatility (%) 72 77.1
Expected life (years) 10 10
Risk-free rate (%) 4.7 4.7
Expected dividends (%) - -
========== ==========
Expected volatility was based upon the historical volatility over the expected
life of the schemes. The expected life is based upon historical data and has
been adjusted based on management's best estimates for the effects of
non-transferability, exercise restrictions and behavioural considerations.
8 SHARE CAPITAL
2007 2006
# #
Authorised:
35,200,000 (2006: 35,200,000)
Ordinary shares of 10p (2006:
10p) each 3,520,000
============
2007 2006 2007 2006
No No # #
Allotted and called up:
24,615,385 (2006: 24,615,385)
Ordinary shares of 10p
(2006: 10p) each 24,615,385 24,615,385 2,461,539 2,461,539
Contingent share
consideration 2,932,218 - 4,662,226 -
------------ ------------ ----------- -----------
27,547,603 24,615,385 7,123,765 2,461,539
============ ============ ========== ============
Ordinary Shares
On 15 June 2006 Debtmatters Group Plc acquired the entire share capital of
Loanmakers (Holdings) Limited. The total consideration (including contingent
consideration) amounted to #18,648,126. The contingent consideration takes the
form of equity and cash. The equity element of the contingent consideration
amounts to #4,662,226.
The contingent equity consideration of #4,662,226 is provisional as it is based
on the future performance of Loanmakers Limited. The equity instruments
currently issuable as part of the contingent consideration amounts to 2,932,218
shares at #1.59 per share.
Options
At 31 March 2007 the Company had 1,300,698 (2006: 1,660,202) unissued ordinary
shares of 10p each under the Company's share option schemes, details of which
are as follows:
Grant date Granted in the Option Price Date from which Expiry date
year pence exercisable
20/06/05 461,538 65.0 01/07/08 20/06/15
20/06/05 692,307 65.0 01/07/10 20/06/15
04/07/05 34,965 71.5 01/07/08 04/07/15
04/07/05 34,965 71.5 01/07/10 04/07/15
15/06/06 76,923 65.0 01/09/08 15/06/16
Details of share options are disclosed in note 7 of the accounts.
9 ACCOUNTING POLICIES
BASIS OF PREPARATION
The consolidated and the company financial statements of Debtmatters Group Plc
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU) for the first time. In
these financial statements the 2006 Comparative figures have been restated in
accordance with IFRS.
The preliminary financial information for the year ended 31 March 2007 was
approved by the Board of Directors on 19 June 2007. The financial information
set out above does not constitute the Company's statutory accounts for the
financial years ended 31 March 2006 or 31 March 2007 but is derived from those
accounts (subject to restatements for the conversion to IFRS). Statutory
accounts for the financial year ended 31 March 2006 have been delivered to the
Registrar of Companies. 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. The statutory accounts for the financial year
ended 31 March 2007 will be delivered to the Registrar of Companies following
the Company's Annual General Meeting.
Debtmatters Group Plc is incorporated and domiciled in the United Kingdom. The
Company Income Statement has not been disclosed in accordance with section 230
of the Companies Act 1985. The profit for the year of the parent company
amounted to #10,282 (2006: #8,024).
The consolidated financial statements have been prepared under the historical
cost convention. The principal accounting policies adopted are set out below.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries. The results of subsidiaries acquired or
disposed of during the year are included in the Consolidated Income Statement
from the date of their acquisition.
The purchase method of accounting is used for the acquisition of subsidiaries.
The cost of the acquisition is measured at the aggregate fair values, at the
date of exchange, of assets and liabilities assumed or incurred by the Group to
obtain control and any directly attributable acquisition costs.
REVENUE
Revenue represents amounts billed or to be billed in respect of services
performed on behalf of clients. The amounts taken to turnover are calculated as
follows:
Nominee fees - on approval of a proposal at a formal creditors' meeting the full
amount of the nominee fee is taken less a provision for cases on which the full
fee may not be recoverable.
Supervisory fees - on a monthly basis as earned following the creditors'
meeting.
Loan commissions - on approval of loan applications.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation
and any impairment losses. Cost comprises purchase price and other directly
attributable costs. Depreciation is calculated by charging equal annual
instalments to the Consolidated Income Statement so as to write off the costs of
the assets over the period of their expected useful lives at the following
annual rates:
Fixtures & Fittings - 25% straight line
Motor vehicles - 25% straight line
Equipment - 33% straight line
INTANGIBLE ASSETS
Goodwill
Goodwill represents the difference between the cost of businesses acquired and
the aggregate of the fair value values of their identifiable net assets at the
date of acquisition.
Goodwill is recognised as an asset and reviewed for impairment at least
annually. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash
generating units). Goodwill is allocated to cash generating units based on the
way that it monitors and derives economic benefit from the acquired goodwill.
Any impairment is recognised immediately in the income statement and is not
subsequently reversed.
Other intangible assets
Other intangible assets acquired refer to IPS Licenses, Software Development
Costs and Domain Names.
Software Development Costs are capitalised, only when all the criteria of IAS 38
'Intangible Assets' are satisfied.
Domain Names are determined to have an indefinite useful life as there is no
foreseeable limit to their expected useful lives. These assets are not amortised
and are subject to an annual impairment review. The classification of Domain
Names as intangible assets with indefinite lives is reviewed annually.
IP Software Licences and Software Development Costs are amortised over their
expected useful lives by charging equal annual instalments to the Consolidated
Income Statement as follows:
IPS Licences - 20% straight line
Software Development Costs - 25% straight line
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
Consideration is given at each balance sheet date to determine whether there is
any indication of impairment of the carrying amounts of the Group's property,
plant and equipment. If any indication exists, an asset's recoverable amount is
estimated. Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount is the greater of the
fair value less cost to sell and value in use.
INVESTMENTS
Investments are initially recorded at cost, being the fair value of the
consideration given and including acquisition charges associated with the
investment. Subsequently they are reviewed for impairment if events or changes
in circumstances indicate the carrying value may not be recoverable.
WORK IN PROGRESS
Work in progress is valued on the basis of direct costs plus attributable
overheads based on normal levels of activity for cases on which instructions
have been received but not yet approved in a creditors' meeting for those cases
which, in the opinion of the directors, will proceed to approval by creditors.
Provision is made for any foreseeable losses where appropriate.
LEASING COMMITMENTS
Assets held under finance leases, which are leases where substantially all the
risks and rewards of ownership of the assets have passed to the company are
capitalised in the balance sheet and are depreciated over their useful lives.
The capital elements of future obligations under the finance lease contracts are
included as liabilities in the balance sheet.
The interest elements of the rental obligations are charged in the Income
Statement over the periods of the finance lease contracts and represent a
constant proportion of the balance of capital repayments outstanding.
Rentals payable under operating leases are charged in the Income Statement on a
straight line basis over the lease term.
TAXATION
The income taxes charge includes current taxes payable based on taxable profit
for the year end and deferred taxes, which have been calculated on the basis set
out in IAS 12 'Income taxes'.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited to the Consolidated Income Statement, except when it relates
to items charged or credited directly to equity, in which case the deferred tax
is also charged or credited within equity.
Income taxes include all taxes based on the taxable profits of the group.
Deferred taxes are calculated based on the temporary differences that arise
between the tax base of the asset or liability and its carrying value in the
Consolidated Balance Sheet.
Deferred tax is recognised on all temporary differences in existence at the
balance sheet date except as provided under IAS 12. Deferred tax assets are
recognised to the extent that it is probable that they will be recovered.
SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based payments.
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of equity-settled share-based
payments is expensed on a straight line basis over the vesting period, based on
the Group's estimate of share options that will eventually vest.
Fair value is measured by use of the Black-Scholes model. The expected life used
in the model has been adjusted, based on management's best estimate, for the
effect of non-transferability, exercise restrictions and behavioural
considerations.
A liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each balance sheet date for cash-settled
share based payments.
FINANCIAL INSTRUMENTS
Trade receivables are measured at initial recognition at fair value. Appropriate
allowances for estimated irrecoverable amounts are recognised in the income
statement where there is objective evidence that the asset is impaired.
Cash and cash equivalents consist of cash at bank held by the Group and are
shown within current assets on the Consolidated Balance Sheet. Bank Overdrafts
are shown within financial liabilities on the Consolidated Balance Sheet. The
carrying amount of these assets and liabilities approximates to their fair
value.
Debt instruments are initially recorded at the proceeds received, net of
transaction costs. Subsequently they are reported at amortised cost. Any
discount between the net proceeds received and the principle value due on
redemption is recognised as a finance cost in the Consolidated Income Statement
over the term of the instrument.
Trade payables are measured at fair value.
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes party to the contractual provisions of the
instrument.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Preparation of the consolidated financial statements requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities. These assumptions include but are not limited to the following
area:
Impairment of goodwill and intangible assets
Determining whether goodwill or intangible assets are impaired requires an
estimation of the value in use of the Groups cash-generating units to which
goodwill and intangible assets have been allocated. The key assumptions for the
value in use calculations are those regarding discount rates, growth rates and
expected changes to revenue and direct costs during the period.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event and it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation. If the
effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money.
10 EXPLANATION OF TRANSITION TO IFRS
This is the first year that the company has presented its financial statements
under IFRS. The last financial statements under UK GAAP were for the year ended
31 March 2006 and the date of transition to IFRS was therefore 1 April 2005.
Reconciliation of equity at 1 April 2005 (date of transition to IFRS)
As previously Effect of As restated
restated under transition to under IFRS
UK GAAP IFRS
#
1st April 2005 1st April 2005
# #
Non-current assets
Property, plant and
equipment 102,483 (10,018) 92,465
Intangible assets 19,532 10,018 29,550
--------------- --------------- ---------------
122,015 - 122,015
--------------- --------------- ---------------
Current assets
Work in progress 94,519 - 94,519
Trade and other
receivables 1,274,809 - 1,274,809
Cash and cash
equivalents 20,456 - 20,456
--------------- --------------- ---------------
1,389,784 - 1,389,784
--------------- --------------- ---------------
Total assets 1,511,799 - 1,511,799
=============== =============== ===============
Current liabilities
Trade and other payables 195,167 - 195,167
Financial liabilities 514,828 - 514,828
Tax liabilities 196,303 - 196,303
Accruals and deferred
income 191,619 - 191,619
--------------- --------------- ---------------
1,097,917 - 1,097,917
Non-current liabilities
Financial liabilities 57,636 - 57,636
Deferred tax liabilities 6,369 - 6,369
--------------- --------------- ---------------
Total liabilities 1,161,922 - 1,161,922
--------------- --------------- ---------------
Equity
Share capital 2,000,000 - 2,000,000
Merger reserve (1,999,996) - (1,999,996)
Retained earnings 349,873 - 349,873
--------------- --------------- ---------------
Total equity 349,877 - 349,877
--------------- --------------- ---------------
Total Liabilities
and equity 1,511,799 - 1,511,799
=============== =============== ===============
Key IFRS adjustments and their impact on the financial statements:
Domain Names with a carrying value of #10,018 previously recognised under
Property, plant and equipment has been reclassified to intangible assets under
IAS 38 'Intangible assets'.
Reconciliation of equity at 31 March 2006 (date of last UK GAAP Statements)
As previously Effect of As restated
restated under transition to under IFRS 31st
UK GAAP 31st IFRS March 2006
March 2006
# # #
Non-current assets
Property, plant and
equipment 237,432 (10,018) 227,414
Intangible assets 277,503 17,308 294,811
--------------- --------------- ---------------
514,935 7,290 522,225
--------------- --------------- ---------------
Current assets
Work in progress 129,090 - 129,090
Trade and
other receivables 6,020,676 - 6,020,676
Cash and cash
equivalents 189,615 - 189,615
--------------- --------------- ---------------
6,339,381 - 6,339,381
--------------- --------------- ---------------
Total assets 6,854,316 7,290 6,861,606
=============== =============== ===============
Current liabilities
Trade and other payables 377,321 - 377,321
Financial liabilities 124,477 - 124,477
Tax liabilities 1,085,221 - 1,085,221
Accruals and deferred
income 478,820 - 478,820
--------------- --------------- ---------------
2,065,839 - 2,065,839
Non-current liabilities
Financial liabilities 30,161 - 30,161
Deferred tax liabilities 19,200 - 19,200
--------------- --------------- ---------------
Total liabilities 2,115,200 - 2,115,200
--------------- --------------- ---------------
Equity
Share capital 2,461,539 - 2,461,539
Share premium account 1,956,614 - 1,956,614
Merger reserve (1,999,996) - (1,999,996)
Share based compensation
reserve 225,132 - 225,132
Retained earnings 2,095,827 7,290 2,103,117
--------------- --------------- ---------------
Total equity 4,739,116 7,290 4,746,406
--------------- --------------- ---------------
Total Liabilities
and equity 6,854,316 7,290 6,861,606
=============== =============== ===============
Reconciliation of profit for the year ended 31 March 2006 (date of last UK GAAP
Statements)
As previously Effect of As restated
restated under transition to under IFRS 2006
UK GAAP 2006 IFRS
# # #
REVENUE 7,793,549 - 7,793,549
Cost of sales 3,240,556 - 3,240,556
--------------- --------------- ---------------
Gross profit 4,552,993 - 4,552,993
Administrative
expenses (1,853,077) - (1,853,077)
--------------- --------------- ---------------
EBITDA 2,699,916 - 2,699,916
Amortisation and
Depreciation (80,886) 7,290 (73,596)
Non trading items (25,857) - (25,857)
--------------- --------------- ---------------
Profit from
Operations 2,593,173 7,290 2,600,463
Finance income 20,825 - 20,825
--------------- --------------- ---------------
PROFIT BEFORE
TAXATION 2,613,998 7,290 2,621,288
--------------- --------------- ---------------
Taxation (868,044) - (868,044)
PROFIT FOR THE
FINANCIAL YEAR 1,745,954 7,290 1,753,244
=============== =============== ===============
Restatement
The interim results for the period ending 31st September 2006 were prepared in
accordance with generally accepted accounting practise in the UK.
The UK GAAP results include the impact of FRS 20 'Share based payments' which
led to comparative results being restated to reflect the change in accounting
policy. The Share based payments charge to the Consolidated Income Statement in
2006 amounted to #225,132.
Reconciliation of Cash Flow at 31 March 2006 (date of last UK GAAP Statements)
As previously Effect of As restated
restated under transition to under IFRS 31st
UK GAAP 31st IFRS March 2006
March 2006
# # #
Profit for the year 2,593,173 7,290 2,600,463
Share based compensation 225,132 - 225,132
Depreciation 61,678 - 61,678
Amortisation of Goodwill 7,290 (7,290) -
Amortisation of IPS
licences 11,918 - 11,918
Loss on disposal of
tangible fixed assets 25,857 - 25,857
Increase in work in
progress (34,571) - (34,571)
Increase in trade and
other receivables (4,466,361) - (4,466,361)
Increase in trade and
other payables 563,650 - 563,650
--------------- --------------- ---------------
Cash outflow from
operations 1,012,234 - 1,012,234
=============== =============== ===============
The adoption of IFRS has had no further impact on the March 2006 cash flow
position of the Group, hence only the cash outflow from operations has been
disclosed.
Key IFRS adjustments and their impact on the financial statements:
Intangible asset amortisation
Under IFRS 3, goodwill is no longer amortised and, instead, is assessed annually
for impairment. As a result of this change, the Group's profit from Operations
will be increased by the goodwill previously amortised under UK GAAP. For the
year to 31 March 2006, this was #7,290.
Domain Names with a carrying value of #10,018 previously recognised under
Property, plant and equipment has been reclassified to intangible assets under
IAS 38 'Intangible assets'.
11 TRANSITION FROM UK GAAP TO IFRS FOR THE INTERIMS STATEMENTS TO 30 SEPTEMBER
2006
In accordance with Rule 18 of the AIM rules the following comparative figures
for the half yearly report are included below restated under IFRS:-
RECONCILIATION OF EQUITY AS AT 30TH SEPTEMBER 2006
As previously Effect of As restated
restated under transition to under IFRS 30th
UK GAAP 30th IFRS September 2006
September 2006
# # #
Non-current assets
Intangible assets 11,627,129 182,805 11,809,934
Property, plant and
equipment 406,950 (10,018) 396,932
--------------- --------------- ---------------
12,034,079 172,787 12,206,866
--------------- --------------- ---------------
Current assets
Work in progress 321,278 - 321,278
Trade and other
receivables 11,847,448 - 11,847,448
Cash and cash
equivalents 68,669 - 189,615
--------------- --------------- ---------------
12,237,395 - 12,237,395
--------------- --------------- ---------------
Total assets 24,271,474 172,787 24,444,261
=============== =============== ===============
Current liabilities
Trade and other payables 1,332,084 - 1,332,084
Financial liabilities 3,439,036 - 3,439,036
Tax liabilities 2,706,604 - 2,706,604
--------------- --------------- ---------------
7,477,724 - 7,477,724
Non-current liabilities
Financial liabilities 6,093,748 - 6,093,748
Deferred payments on
acquisition 2,767,071 - 2,767,071
Deferred tax
liabilities 50,642 - 50,642
--------------- --------------- ---------------
Total liabilities 16,389,185 - 16,389,185
--------------- --------------- ---------------
Equity
Share capital 2,461,539 - 2,461,539
Share premium account 1,956,614 - 1,956,614
Merger reserve (1,999,996) - (1,999,996)
Other reserve 280,122 - 280,122
Retained earnings 5,184,010 172,787 5,356,797
--------------- --------------- ---------------
Total equity 7,882,289 172,787 8,055,076
--------------- --------------- ---------------
Total Liabilities
and equity 24,271,474 172,787 24,444,261
=============== =============== ===============
Key IFRS adjustments and their impact on the financial statements:
Intangible asset amortisation
Under IFRS 3, goodwill is no longer amortised and, instead, is assessed annually
for impairment. As a result of this change, the Group's profit from Operations
will be increased by the goodwill previously amortised under UK GAAP. For the
period to 30 September 2006, this was #165,497 (Total accumulated amortisation
#172,787).
Domain Names with a carrying value of #10,018 previously recognised under
Property, plant and equipment had also been reclassified to intangible assets
under IAS 38 'Intangible assets'.
RECONCILIATION OF PROFIT FOR THE YEAR ENDED 30TH SEPTEMBER 2006
As previously Effect of As restated
restated under transition to under IFRS 30th
UK GAAP 30th IFRS September 2006
September 2006
# # #
REVENUE 13,789,954 - 13,789,954
Cost of sales (6,692,535) - (6,692,535)
--------------- --------------- ---------------
Gross profit 7,097,419 - 7,097,419
Administrative
expenses (2,269,321) - (2,269,321)
--------------- --------------- ---------------
EBITDA 4,828,098 - 4,828,098
--------------- --------------- ---------------
Amortisation
and Depreciation (270,229) 165,497 (104,732)
--------------- --------------- ---------------
Profit from
Operations 4,557,869 165,497 4,723,366
Finance costs (146,179) - (146,179)
--------------- --------------- ---------------
PROFIT BEFORE
TAXATION 4,411,690 165,497 4,577,187
--------------- --------------- ---------------
Taxation (1,323,507) - (1,323,507)
--------------- --------------- ---------------
PROFIT FOR THE
FINANCIAL YEAR 3,088,183 165,497 3,253,860
=============== =============== ===============
Restatement
The UK GAAP results include the impact of FRS 20 'Share based payments' which
led to comparative results being restated to reflect the change in accounting
policy. The Share based payments charged to the Consolidated Income Statement in
the period to September 2006 amounted to #54,990.
RECONCILIATION OF CASH FLOW AS AT 30TH SEPTEMBER 2006
As previously Effect of As restated
restated under transition to under IFRS 30th
UK GAAP 30th IFRS September 2006
September 2006
# # #
Profit for the year 4,557,869 165,497 4,723,366
Share based
compensation 54,990 - 54,990
Depreciation 79,337 - 79,337
Amortisation
of Goodwill 165,497 (165,497) -
Amortisation
of IPS licences 23,248 - 23,248
Increase in
work in progress (192,188) - (192,188)
Increase in debtors (5,465,642) - (5,465,642)
Increase in creditors 599,146 - 599,146
--------------- --------------- ---------------
Cash outflow from
operations (177,743) - 1,012,234
=============== =============== ===============
The adoption of IFRS has had no further impact on the March 2006 cash flow
position of the Group, hence only the cash outflow from operations has been
disclosed.
12 ANNUAL REPORT
Copies of the annual report will be available, free of charge, until the end of
October 2007, from the offices of Charles Stanley Securities at 25 Luke Street,
London, EC2A 4AR.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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