TIDMRLX
RNS Number : 9133Z
Relax Group PLC
30 September 2009
Relax Group PLC
INTERIM Report and Accounts for the SIX MONTHS ENDED 30 jUNE 2009
The Relax Group today announces its unaudited interim results for the six months
ended 30 June 2009.
Relax Group plc is a leading provider of a range of consumer debt related
solutions, including Individual Voluntary Arrangements (IVAs), Protected Trust
Deeds (PTDs), Debt Management Programmes (DMPs), bankruptcy, secured loans and
remortgages, to over-indebted individuals.
Financial Headlines
* Total group revenue GBP2.9m (6 months to 31 July 2008 restated: GBP5.8m)
* Operating loss before exceptional charges GBP2.5m (6 months to 31 July 2008
restated loss: GBP0.7m )
* Basic loss per share 22.27p (6 months to 31 July 2008 loss: 7.16p)
* Net debt increased to GBP4.1m (31 July 2008: GBP3.3m)
* Historical results have been restated for a change in accounting policy in
relation to intangible assets
Operational Headlines
* Credit crunch and, in particular, lack of available lines of credit to loan
providers has severely affected the secured loans brokerage business acquired
with Relax Finance in 2008
* Loan brokerage business re-engineered to sell remortgage products and life
insurance
* Overall revenues also reduced by a revision of accounting estimates used in
evaluating work in progress
* Appointment of Ken Gaskell as Chief Executive Officer on 20 July 2009 and John
Simms as Acting Finance Director on 11 August 2009
* Strategic review completed and turnaround plan initiated
* Headcount reduced from 224 at December 2008 to 127 by September 2009
Outlook
* The Group's cost base has been reduced significantly and the resultant leaner
business is well positioned to benefit from favourable market conditions in the
debt management sector and the anticipated recovery in the remortgage broking
market
* As has been previously announced, banking facilities have been closely
monitored. It is expected that the change in accounting policy will have an
effect on the formal banking covenants going forward. The Group's bankers have
provided financial support and continue to do so however, the Group requires a
capital injection to reduce debt and provide working capital to grow the
business
* The Group is at an advanced stage in negotiations to raise further funds and the
future of the Group is dependent upon a successful conclusion to the discussions
with its lenders and the capital injection
Enquiries:
+------------------------------------+------------------------------------+
| Ken Gaskell/Bernard Asher | 020 7898 0512 |
+------------------------------------+------------------------------------+
| Relax Group plc | |
+------------------------------------+------------------------------------+
| | |
+------------------------------------+------------------------------------+
| Stephen Keys/Beth McKiernan | 020 7397 8900 |
+------------------------------------+------------------------------------+
| Cenkos Securities plc | |
+------------------------------------+------------------------------------+
INTERIM MANAGEMENT REPORT
for the SIX MONTHS ENDED 30 jUNE 2009
Results
In the six months to 30 June 2009, group turnover was GBP2.9m (6 months to 31
July 2008: GBP5.8m) and the operating loss before exceptional charges was
GBP2.5m (6 months to 31 July 2008 loss GBP0.7m). The reduction in turnover was
largely due to the impact of the credit crunch on the secured loans brokerage
business where the lines of credit available to the providers of such loans
reduced dramatically and a revision of accounting estimates used in evaluating
work in progress. The increased operating loss is due to the reduced turnover
coupled with increased operating costs due to including Relax Finance for a full
six months.
Exceptional charges of GBP4.2m, largely non-cash adjustments due to revision of
accounting estimates in the valuation of work in progress, result in an overall
loss for the period of GBP6.8m (6 months to 31 July 2008 loss GBP1.7m).
The basic loss per share was 22.27p (6 months to 31 July 2008: 7.16p).
Net debt, consisting of bank loans and overdrafts less cash and cash
equivalents, at 30 June 2009 was GBP4.1m (31 July 2008: GBP3.3m).
Senior Management Changes
Ken Gaskell was appointed as Chief Executive on 20 July 2009, taking over from
Paul Carter who has stepped down to pursue other interests. On 11 August 2009
the group announced that Trevor Moore, the Finance Director had left the group
and John Simms had been appointed as Acting Finance Director.
Strategic Review
Following his appointment, the new Chief Executive Officer, Ken Gaskell,
initiated a detailed review of the group's operations in order to define a
strategy to establish operational improvements, return the group to
profitability and for future growth.
The Chief Executive Officer has now concluded this strategic review which has
been adopted by the Board. The key conclusion was that the Group has suffered
historically, principally from:
* paying premium prices for acquisitions
* over-manning and an excessive cost base due to delays in integrating the
acquired businesses and in reacting to market changes
* poor business and management discipline
A detailed financial review has also been undertaken, including a review of
accounting policies. This has led to a change in accounting policy for the
treatment of Intangible Assets and a review of accounting estimates, in
particular for the calculation of work in progress ('WIP'). Intangible assets
have been reduced by GBP7.7m and WIP by GBP4.0m.
The strategic review has formed the basis of a detailed business turnaround
plan, the first part of which has concentrated on further reducing the cost base
of the group and has now largely been completed.
The Group's strategy is to focus on profitable growth opportunities in the
rapidly growing debt management and remortgage markets.
However the issues noted above have left the Group in a heavily indebted
position, and further funding is required to pay down a backlog of creditors,
reduce debt and to provide the working capital investment required to grow
revenues in order to return the Group to profitability.
Funding process
The Group is reliant on the existing and extended support of its bankers and
creditors. As has been previously announced, banking facilities have been
closely monitored. It is expected that the change in accounting policy will have
an effect on the formal banking covenants going forward. The Group's bankers
have provided financial support and continue to do so however, the Group
requires a capital injection to reduce debt and provide working capital to grow
the business.
The Group is at an advanced stage in negotiations to raise further funds and the
future of the Group is dependent upon a successful conclusion to the discussions
with its lenders and the capital injection. Until these matters are resolved
there remains fundamental uncertainty over the Group's ability to continue as a
going concern.
The interim financial information does not include any adjustments that might
arise if the Group were not to be a going concern.
Operating Review
* IVAs and Debt Management
* revenues in this segment were down 30% compared to the prior year, largely as a
result of more appropriate application of the accounting policy covering revenue
recognition. The revision of the accounting estimates used in evaluating work in
progress has distorted the comparison of the revenues and has resulted in an
exceptional charge in the six months to 30 June 2009 which coupled with the
over-manning in the debt management businesses has resulted in a segment loss of
GBP5.0m for the period.
* the cost base of this segment has been reduced significantly during the period
and since 30 June 2009. The administration of the Scottish trust deeds has been
transferred from the Aberdeen office to the IVA administration department in
Chesterfield which itself has been streamlined and headcount has been reduced
overall from 123 staff at December 2008 to 55 staff at August 2009.
* Secured Lending and Remortgages
* revenues have fallen to GBP0.3m in the period from GBP2.1m in the previous
period due to the collapse of the secured lending market at the end of 2008
* following the closure of the Doncaster office at the end of 2008, the headcount
has been further reduced by 18 staff to 26 staff
* The brokerage operation has been refocused into the remortgage and the related
life insurance market, however the segment result was a loss of GBP1.7m due to
the revenue reduction and delays in reducing the cost base
Outlook
The Group's cost base has been reduced significantly over the last nine months.
Although headcount has halved since the final quarter of 2008, management are
confident that improved efficiencies in operational processes give the Group
more than adequate capacity to take full advantage of favourable trading
conditions in the debt management sector.
The secured lending staff are now fully trained and experienced in the
remortgage market which is showing very positive signs of recovery. We expect
this will enable revenue growth in that segment.
The Group remains optimistic that the restructured business is capable of
delivering well above market growth rates, although this is subject to a
successful fund raising to stabilise the group's financial position.
Consolidated statement of comprehensive income for the six months ended 30 June
2009
+----------------------------------------+-----------+-------------+-------------+------------+
| | | Six months | Six months | Five |
| | | | | months |
+----------------------------------------+-----------+-------------+-------------+------------+
| | | ended | ended | ended |
+----------------------------------------+-----------+-------------+-------------+------------+
| | | 30 June | 31 July | 31 |
| | | 2009 | 2008 | December |
| | | | | 2008 |
+----------------------------------------+-----------+-------------+-------------+------------+
| | | (unaudited) | (unaudited) | (restated) |
+----------------------------------------+-----------+-------------+-------------+------------+
| | Note | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+-----------+-------------+-------------+------------+
| Revenue | | 2,888 | 5,790 | 4,011 |
+----------------------------------------+-----------+-------------+-------------+------------+
| Direct costs | | (1,003) | (2,575) | (3,708) |
+----------------------------------------+-----------+-------------+-------------+------------+
| Gross profit | | 1,885 | 3,215 | 303 |
+----------------------------------------+-----------+-------------+-------------+------------+
| Operating costs | | (4,352) | (3,890) | (3,788) |
+----------------------------------------+-----------+-------------+-------------+------------+
| Operating loss prior to exceptional | | (2,467) | (675) | (3,485) |
| costs | | | | |
+----------------------------------------+-----------+-------------+-------------+------------+
| Exceptional costs | 7 | (4,216) | (759) | - |
+----------------------------------------+-----------+-------------+-------------+------------+
| Finance income | | 8 | 5 | 20 |
+----------------------------------------+-----------+-------------+-------------+------------+
| Finance cost | | (116) | (150) | (148) |
+----------------------------------------+-----------+-------------+-------------+------------+
| Loss before taxation | | (6,791) | (1,579) | (3,613) |
+----------------------------------------+-----------+-------------+-------------+------------+
| Income tax expense | | - | (136) | - |
+----------------------------------------+-----------+-------------+-------------+------------+
| Loss for the period attributable to | | (6,791) | (1,715) | (3,613) |
| equity holders of the parent company | | | | |
+----------------------------------------+-----------+-------------+-------------+------------+
| | | | | |
+----------------------------------------+-----------+-------------+-------------+------------+
| Earnings per share | | | | |
+----------------------------------------+-----------+-------------+-------------+------------+
| Basic earnings per ordinary share | 8 | (22.27)p | (7.16)p | (11.85)p |
+----------------------------------------+-----------+-------------+-------------+------------+
| Diluted earnings per ordinary share | 8 | (22.24)p | (7.16)p | (11.83)p |
+----------------------------------------+-----------+-------------+-------------+------------+
There were no other gains and losses other than those recognised in the
statement of comprehensive income. All activities relate to continuing
operations.
Consolidated statement of financial position as at 30 June 2009
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | As at | As at | As at |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | 30 June | 31 July | 31 |
| | | | | | | | December |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | 2009 | 2008 | 2008 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | (unaudited) | (restated) | (restated) |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Assets | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Non-current assets | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Goodwill | | | | | 5,068 | 5,505 | 5,193 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Property, plant and equipment | | | | | 586 | 620 | 644 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | 5,654 | 6,125 | 5,837 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Current assets | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Trade and other receivables | | | | | 4,081 | 12,851 | 9,511 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Cash and short-term deposits | | | | | 336 | 186 | - |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | 4,417 | 13,037 | 9,511 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Total assets | | | | | 10,071 | 19,162 | 15,348 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Equity and liabilities | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Equity attributable to equity holders of the | | | | | | | |
| parent company | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Share capital | | | | | 3,049 | 3,049 | 3,049 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Share premium | | | | | 8,708 | 8,708 | 8,708 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Merger reserve | | | | | (1,513) | (1,513) | (1,513) |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Retained earnings | | | | | (10,782) | (378) | (3,991) |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | (538) | 9,866 | 6,253 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Current liabilities | | | | | | | |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Trade and other payables | | | | | 10,346 | 8,112 | 8,979 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Corporate income tax payable | | | | | 72 | 895 | 80 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| | | | | | 10,418 | 9,007 | 9,059 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Liabilities due after one year | | | | | 191 | 289 | 36 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Total liabilities | | | | | 10,609 | 9,296 | 9,095 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
| Total equity and liabilities | | | | | 10,071 | 19,162 | 15,348 |
+------------------------------------------------+-+----------+-+----+-------------+------------+------------+
Statement of changes in equity for the six months ended 30 June 2009
+---------------------------------------+----------+----------+----------+----------+----------+
| | Share | Share | Merger | Retained | |
+---------------------------------------+----------+----------+----------+----------+----------+
| | capital | premium | reserve | earnings | Total |
+---------------------------------------+----------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------------+----------+----------+----------+----------+----------+
| Group | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Changes in equity for the PERIOD | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| to 31 July 2008 | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Balance at 1 February 2008 (restated) | 2,109 | 5,527 | (1,513) | 1,337 | 7,460 |
+---------------------------------------+----------+----------+----------+----------+----------+
| Total comprehensive expenditure for | - | - | - | (1,715) | (1,715) |
| the period | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Issue of share capital | 940 | 3,290 | - | - | 4,230 |
+---------------------------------------+----------+----------+----------+----------+----------+
| Issue costs | - | (109) | - | - | (109) |
+---------------------------------------+----------+----------+----------+----------+----------+
| Balance as at 31 July 2008 (restated) | 3,049 | 8,708 | (1,513) | (378) | 9,866 |
+---------------------------------------+----------+----------+----------+----------+----------+
| | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Group | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Changes in equity for the period | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| to 31 December 2008 | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Total comprehensive expenditure for | - | - | - | (3,613) | (3,613) |
| the period | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Balance as at 31 December 2008 | 3,049 | 8,708 | (1,513) | (3,991) | 6,253 |
| (restated) | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Group | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Changes in equity for the period | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| to 30 JUNE 2009 | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Total comprehensive expenditure for | - | - | - | (6,791) | (6,791) |
| the period | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
| Balance as at 30 JUNE 2009 | 3,049 | 8,708 | (1,513) | (10,782) | (538) |
+---------------------------------------+----------+----------+----------+----------+----------+
| | | | | | |
+---------------------------------------+----------+----------+----------+----------+----------+
Consolidated statement of cash flows for the six months ended 30 June 2009
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| | | | | | Six | Six | Five |
| | | | | | months | months | months |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| | | | | | ended | ended | ended |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| | | | | | 30 June | 31 July | 31 |
| | | | | | 2009 | 2008 | December |
| | | | | | | | 2008 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| | | | | | (unaudited) | (unaudited) | (restated) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| | | | | | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash flows from operating activities | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Operating loss | | | | | (6,683) | (1,434) | (3,485) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Depreciation of property, plant and equipment | | | | | 82 | 77 | 74 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Impairment of goodwill | | | | | - | - | 312 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Profit on disposal of property, plant and | | | | | - | (8) | - |
| equipment | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Other non-cash movement | | | | | - | 20 | 1 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Decrease/(increase) in receivables | | | | | 5,430 | 511 | 3,340 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Increase/(decrease) in payables | | | | | 829 | (527) | 143 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Income taxes paid | | | | | (8) | (9) | (815) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net cash INFLOW/(OUTFLOW) FROM operating | | | | | (350) | (1,370) | (430) |
| activities | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash flows from investing activities | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net interest paid | | | | | (108) | (145) | (128) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Acquisition of Relax Finance Limited (including | | | | | - | (1,099) | - |
| costs of GBP123,000) | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Acquisition of PB Recovery Limited (including | | | | | - | (1,314) | - |
| costs of GBP104,000) | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Acquisition of property, plant and equipment | | | | | (30) | (18) | (98) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Disposal of property, plant and equipment | | | | | 6 | 63 | - |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net cash used in investment activities | | | | | (132) | (2,513) | (226) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash flows from financing activities | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net increase in borrowings | | | | | - | 1,387 | 250 |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Proceeds on issue of shares | | | | | - | 2,730 | - |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash outflow from decrease in debt and finance | | | | | (66) | (127) | (268) |
| leasing | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cost of share issue | | | | | - | (109) | - |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net cash from financing activities | | | | | (66) | 3,881 | (18) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Net INCREASE/(decrease) in cash and cash | | | | | (548) | (2) | (674) |
| equivalents | | | | | | | |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash and cash equivalents at start of PERIOD | | | | | (875) | (199) | (201) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
| Cash and cash equivalents at end of PERIOD | | | | | (1,423) | (201) | (875) |
+--------------------------------------------------+-+----------+----------+---+-------------+-------------+------------+
Notes to the interim consolidated financial statements for the six months ended
30 June 2009
1. FUNDAMENTAL UNCERTAINTY
The Group is reliant on the existing and extended support of its bankers and
creditors. The directors are currently in negotiations regarding proposals for
re-financing the Group. These negotiations are progressing in a positive manner
however there is no guarantee that they will lead to a successful re-financing
and there is therefore fundamental uncertainty in respect of the Group's ability
to continue as a going concern.
The interim financial information does not include any adjustments that might
arise if the Group were not to be a going concern.
2. BASIS OF PREPARATION
The interim financial report for the six months ended 30 June 2009 has been
prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by
the European Union. The interim financial report is unaudited and has not been
reviewed by the auditors. The financial information does not constitute
statutory accounts within the meaning of section 434 of the Companies Act 2006.
The company's accounting reference date was changed to 31 December from 31 July
during 2008 and the comparative figures in this report are shown for the six
month period to 31 July 2008 and for the five month period to 31 December 2008.
The comparative figures for the period ended 31 December 2008 have been
extracted from the Group's financial statements, on which the auditors gave an
unqualified opinion, were approved by the Board on 4 June 2009 and delivered to
the Registrar of Companies. The comparative figures have been restated to
include the effects of the change in accounting policy and the correction of
prior period errors described in notes 4 and 5 below. The restatements have not
been audited.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies that have been applied in the preparation of the Interim
Financial Statements are the same as will be applied in the preparation of the
forthcoming annual financial statements and are the same as were applied in the
preparation of the Group's consolidated financial statements for the period
ended 31 December 2008 other than as set out in note 4 below.
4. ACCOUNTING POLICY CHANGE
The directors have reviewed the accounting policy applied by the Group in regard
to Intangible Assets - Databases.
The Group acquires data on potential customers by purchase of data from
specialist lead providers and by the capture of data using the various internet
websites operated by the Group. This data is used by the selling and customer
service teams to contact potential customers and market the Group's products.
The data is retained but is not updated as a matter of course.
In previous accounting periods the lead data purchase costs and data capture
costs have been capitalised as an intangible fixed asset.In carrying out their
review the directors have taken into account that the Group has no exclusivity
arrangements or any rights to protect access by others to the customers and
therefore has little control over any future economic benefits from this data.
The Group does not sell on any of the data. The directors have concluded that
the previously applied accounting policy is not appropriate and that lead data
purchase and data capture costs should be expensed as incurred. The effects of
this change in accounting policy have been applied retrospectively and the
effects on the comparative information are shown below:
+----------------------------------------+-----+------------+------------+----------+
| | | Five | Six months | |
| | | months | ended | |
| | | ended | | |
+----------------------------------------+-----+------------+------------+----------+
| | | 31 | 31 July | |
| | | December | 2008 | |
| | | 2008 | | |
+----------------------------------------+-----+------------+------------+----------+
| | | GBP'000 | GBP'000 | |
+----------------------------------------+-----+------------+------------+----------+
| (Decrease) in revenue | | (1,888) | (2,390) | |
+----------------------------------------+-----+------------+------------+----------+
| (Increase) in direct costs | | (1,782) | (330) | |
+----------------------------------------+-----+------------+------------+----------+
| Decrease in income tax expense | | - | 404 | |
+----------------------------------------+-----+------------+------------+----------+
| (Decrease) in profit | | (3,670) | (2,316) | |
+----------------------------------------+-----+------------+------------+----------+
| | | | | |
+----------------------------------------+-----+------------+------------+----------+
| | | As at | As at | As at |
+----------------------------------------+-----+------------+------------+----------+
| | | 31 | 31 July | 31 |
| | | December | 2008 | January |
| | | 2008 | | 2008 |
+----------------------------------------+-----+------------+------------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+-----+------------+------------+----------+
| (Decrease) in intangible assets | | (7,696) | (4,608) | (900) |
+----------------------------------------+-----+------------+------------+----------+
| Increase in goodwill | | 988 | 988 | - |
+----------------------------------------+-----+------------+------------+----------+
| (Decrease) in trade and other | | (582) | - | - |
| receivables | | | | |
+----------------------------------------+-----+------------+------------+----------+
| Decrease in corporate income tax | | 404 | 404 | - |
| payable | | | | |
+----------------------------------------+-----+------------+------------+----------+
| (Decrease) in equity | | (6,886) | (3,216) | (900) |
+----------------------------------------+-----+------------+------------+----------+
5. CHANGE IN ACCOUNTING ESTIMATE AND PRIOR PERIOD ERRORS
Revenue from services rendered is recognised in the income statement in
proportion to the stage of completion of the transaction at the balance sheet
date. The revenue work in progress ('WIP') is included under trade
receivables. The basis of valuing the revenue WIP including the phasing of work
carried out over the life cycle of each product has been reviewed, taking into
account the recoverability of the WIP from future revenues, in particular with
regard to Trust Deeds where actual time costs are booked to cases for recovery
on client fund distributions, and for Debt Management Plans where there is no
formal end date and the ongoing monthly fees are relatively low. The outcome of
the review has resulted in a change in accounting estimates which has reduced
the carrying value of revenue WIP by GBP4,046,000 which amount has been included
as an exceptional charge in the income statement for the current period.
The valuation of the WIP included in the comparative periods has been reviewed
and it has been found that the accounting policy had not been correctly applied
in two respects. Firstly some elements of the WIP have been found to include
amounts equivalent to output VAT and secondly some WIP had been included for
transactions in the sales pipeline but not completed at 31 December 2008.
Revenue in the income statement should not include VAT and revenue should only
be recognised when the sale transaction has completed. These prior period errors
have been corrected by retrospective restatement of the comparative amounts and
the effects are shown below:
+----------------------------------------+------+-----------+------------+----------+
| | | Five | Six months | |
| | | months | ended | |
| | | ended | | |
+----------------------------------------+------+-----------+------------+----------+
| | | 31 | 31 July | |
| | | December | 2008 | |
| | | 2008 | | |
+----------------------------------------+------+-----------+------------+----------+
| | | GBP'000 | GBP'000 | |
+----------------------------------------+------+-----------+------------+----------+
| (Decrease) in revenue | | (611) | (319) | |
+----------------------------------------+------+-----------+------------+----------+
| (Decrease) in profit | | (611) | (319) | |
+----------------------------------------+------+-----------+------------+----------+
| | | | | |
+----------------------------------------+------+-----------+------------+----------+
| | | As at | As at | As at |
+----------------------------------------+------+-----------+------------+----------+
| | | 31 | 31 July | 31 |
| | | December | 2008 | January |
| | | 2008 | | 2008 |
+----------------------------------------+------+-----------+------------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+------+-----------+------------+----------+
| (Decrease) in trade receivables | | (1,111) | (500) | (181) |
+----------------------------------------+------+-----------+------------+----------+
| (Decrease) in equity | | (1,111) | (500) | (181) |
+----------------------------------------+------+-----------+------------+----------+
| | | | | |
+----------------------------------------+------+-----------+------------+----------+
| | | | | |
+----------------------------------------+------+-----------+------------+----------+
| | | | | |
+----------------------------------------+------+-----------+------------+----------+
6. SEGMENTAL REPORTING
The Group has adopted IFRS 8 Operating Segments, which requires segments to be
identified on the basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision makers in order to
allocate resources to the segment and to assess its performance. Set out below
are highlights of segmental performance based on IFRS 8 with full disclosure to
be included at year end.
Revenue and profit before tax are attributable to the Group's provision of a
range of financial solutions including Individual Voluntary Arrangements,
Scottish Trust Deeds, Debt Management Plans and Secured Loans or Second
Mortgages, to over-indebted individuals. All revenue originated in the UK.
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| | | | | | IVAs and | Secured | |
| | | | | | debt | lending | |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| | | | | | management | and | Consolidated |
| | | | | | | remortgages | |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Six months ended 30 June 2009 (unaudited) | | | | | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| External revenue | | | | | 2,548 | 340 | 2,888 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment result | | | | | (5,026) | (1,765) | (6,791) |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment assets | | | | | 4,578 | 5,493 | 10,071 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment liabilities | | | | | 5,950 | 4,659 | 10,609 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| | | | | | IVAs and | Secured | |
| | | | | | debt | lending | |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| | | | | | management | and | Consolidated |
| | | | | | | remortgages | |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Period 1 August 2008 to 31 December 2008 | | | | | GBP'000 | GBP'000 | GBP'000 |
| (restated) | | | | | | | |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| External revenue | | | | | 1,943 | 2,068 | 4,011 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment result | | | | | (1,539) | (2,074) | (3,613) |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment assets | | | | | 9,790 | 5,558 | 15,348 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
| Segment liabilities | | | | | 3,218 | 5,877 | 9,095 |
+-----------------------------------------------+--+-+--+--+------------+-------------+--------------+
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| | | | | | IVAs and | Secured | |
| | | | | | debt | lending | |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| | | | | | management | and | Consolidated |
| | | | | | | remortgages | |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| Six months ended 31 July 2008 (restated) | | | | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| External revenue | | | | | 3,653 | 2,137 | 5,790 |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| Segment result | | | | | (2,490) | 775 | (1,715) |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| Segment assets | | | | | 13,009 | 6,153 | 19,162 |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
| Segment liabilities | | | | | 5,864 | 3,836 | 9,700 |
+-------------------------------------------------+--+--+-+-+------------+-------------+--------------+
7. EXCEPTIONAL COSTS
+-----------------------------------+------+-------------+-------------+------------+
| | | Six | Six | Five |
| | | months | months | months |
+-----------------------------------+------+-------------+-------------+------------+
| | | ended | ended | ended |
+-----------------------------------+------+-------------+-------------+------------+
| | | 30 June | 31 July | 31 |
| | | 2009 | 2008 | December |
| | | | | 2008 |
+-----------------------------------+------+-------------+-------------+------------+
| | | (unaudited) | (unaudited) | (restated) |
+-----------------------------------+------+-------------+-------------+------------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------+-------------+-------------+------------+
| Restructuring costs | | 170 | 404 | - |
+-----------------------------------+------+-------------+-------------+------------+
| Compensation for loss of office | | - | 355 | - |
+-----------------------------------+------+-------------+-------------+------------+
| Adjustment to work in progress ( | | 4,046 | - | - |
| see note 4) | | | | |
+-----------------------------------+------+-------------+-------------+------------+
| | | 4,216 | 759 | - |
+-----------------------------------+------+-------------+-------------+------------+
8. EARNINGS PER SHARE
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| | | | | Six month | Six month | Five month | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| | | | | period | period | period | |
| | | | | ended | ended | ended | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| | | | | 30 June | 31 July | 31 | |
| | | | | | | December | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| | | | | 2009 | 2008 | 2008 | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Earnings | | | | (unaudited) | (unaudited) | (restated) | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Basic EPS | | | | | | | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Reported earnings (GBP'000) | | | | (6,791) | (1,715) | (3,613) | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Reported EPS (p) | | | | (22.27)p | (7.16)p | (11.85)p | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Diluted EPS | | | | | | | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Diluted reported earnings | | | | (6,791) | (1,715) | (3,613) | |
| (GBP'000) | | | | | | | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
| Reported diluted EPS (p) | | | | (22.24)p | (7.16)p | (11.83)p | |
+-----------------------------------+----------+----------+---+-------------+-------------+------------+-+
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| | | | | | Six month | Six month | Five month |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| | | | | | period | period | period |
| | | | | | ended | ended | ended |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| | | | | | 30 June | 31 July | 31 |
| | | | | | | | December |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| | | | | | 2009 | 2008 | 2008 |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| No. of shares | | | | | Number | Number | Number |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Weighted average number of ordinary shares: | | | | | | | |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Issued ordinary shares at 1 January 2009 | | | | | 30,493,255 | 21,093,254 | 30,493,255 |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Effect of 18 March 2008 share issue | | | | | - | 2,243,836 | - |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Effect of 23 May 2008 share issue | | | | | - | 630,137 | - |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Weighted average number of ordinary shares | | | | | 30,493,255 | 23,967,227 | 30,493,255 |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Average shares used in calculating the | | | | | 30,493,255 | 23,967,227 | 30,493,255 |
| Basic EPS calculation | | | | | | | |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Dilutive share options outstanding | | | | | 36,309 | - | 36,309 |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
| Weighted average number of ordinary shares | | | | | 30,529,564 | 23,967,227 | 30,529,564 |
+---------------------------------------------+-+----------+----------+--+-------------+-------------+-------------+
9. RELATED PARTY TRANSACTIONS
All inter group transactions between Group enterprises have been eliminated on
consolidation.
During the period, the Group engaged Olivine Partners LLP and Olivine Capital
Partners Limited of which Stuart Cumberland is a Member and Director
respectively to undertake corporate finance and tax advisory services. Fees
payable totalled GBP110,729 in the six month period to 30 June 2009, for
professional services provided as a Director and for strategic tax advice. A
total of GBP52,478 was outstanding as at 30 June 2009.
The Company continues to honour a lease agreement with Paul Carter, the former
Chief Executive Officer, for the provision of four separate office buildings at
Gisborne Close, Ireland Business Park, Staveley, Chesterfield S43 3JT of which
Paul Carter is the landlord. During the period the Company incurred rent and
service charges in respect of the premises totalling GBP200,000. As at 30 June
2009 a total of GBP114,185 was due to Paul Carter.
As part of the acquisition of Relax Finance Limited, the Company issued
GBP300,000 in the form of unsecured loan notes which bear interest on the amount
outstanding at the Barclays Bank base rate, redeemable in 20 equal monthly
instalments of GBP15,000 each, beginning in January 2009. Ian Guy and Carl
Kroger received GBP153,000 and GBP57,000 loan notes respectively. During the
period no interest was paid to Ian and Carl respectively and at the period end
GBP145,350 and GBP45,259 was outstanding on the loan notes.
Included within creditors due within one year at 30 June 2009, is an amount of
GBP130,000 due to Ian Guy, in respect of a loan made to Relax Group PLC on 30
April 2009.
As at 30 June 2009 the Company's subsidiary undertaking, Relax Finance Limited,
owed Ian Guy GBP24,244 in respect of loans made to the Company.
10. SUBSEQUENT EVENTS
Since 30 June 2009 and as part of the ongoing strategic realignment, the Group
has vacated one of the buildings at Gisborne Close, Staveley, and will shortly
vacate another. The buildings are subject to lease agreements which expire in
2018 and 2016 respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLMBTMMMTTML
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