TIDMIHUK
25 September 2009
IMPACT HOLDINGS (UK) PLC
Preliminary results for the year ended 31 March 2009
Impact Holdings (UK) plc, the specialist lending business, announces its
preliminary results for the year to 31 March 2009.
FINANCIAL HIGHLIGHTS
The headline financial results reveal:-
* The Group's first pre-tax profit of GBP290,634
* Cash and cash equivalents of GBP0.4 million
* Net assets of GBP3.4 million
* Consolidation of existing operations on track
* Earnings per share 26p
Commenting on the results Paul Davies, the Chief Executive, said "The Board and
Management have spent considerable effort in improving the risk management,
operational and financial controls within the business. This has resulted in a
period of controlled organic growth and the Group has been able to report its
first pre-tax profit in what has probably been the most challenging and
uncertain economic environment seen in recent times.
This performance is a credit to the management and staff, who have collectively
worked with commitment and resilience to deliver this performance.
TRADING
The credit and liquidity crisis which materialised in the latter part of 2007
has had a profound effect on the availability of funding in the market
generally. Impact has continued to work closely with its funders and continues
to have their full support and enjoy sufficient banking facilities for its
operational needs.
The proposed acquisition of Sutherland Professional Funding Limited will
improve profitability and growth opportunities together with providing access
to a further banking line. This acquisition underlines our strategic objective
of delivering a Group of businesses that delivers integrated solutions to the
legal sector and will provide a further avenue to grow the Group's core
activities.
We are seeing an increasing appetite for creative short term funding solutions
primarily due to the economic environment. However, the present economic
uncertainty, deteriorating credit risk of counterparties in general and the
volatility in the property market have led us to continue to take a very
conservative approach to funding new transactions or entering into new lending
relationships.
The Group's strategy continues to be to develop the business and we have
identified a number of new opportunities which will hopefully come to fruition
should the proposed Legal Services Act be passed. This would offer the
opportunity of investment in a Law firm that could monitor and manage the
personal injury cases we fund."
Further information:
Paul Davies
Chief Executive Officer
Tel: 0161 437 9499
Daniel Stewart & Company plc
Simon Leathers/Oliver Rigby
Tel: 020 7776 6550
CHAIRMAN'S STATEMENT
The financial markets have continued to see unprecedented turmoil with the
crisis stemming from the systematic failure of the world inter banking system
which has contributed to a lack of liquidity for many businesses.
This lack of liquidity has continued to impact on the availability of much
needed funding and has constrained growth across the world economy as banks
have systematically increased their margins. In addition to this increase in
margins, Financial Institutions have reviewed their lending criteria and
implemented more rigorous credit processes which have reduced the availability
of credit.
Impact has not been immune to this and the restriction on the availability of
increased banking lines and upward pressure on interest rates within the market
could restrict growth as this situation is forecast to continue for the
foreseeable future.
There remain considerable opportunities in our niche sector and the recent
announcement that the Group had signed heads of terms to acquire Sutherland
Professional Funding Limited reinforces this. The Group had been providing
outsourced Loans Administration, Information Technology, Risk Management and
Audit services to Sutherlands as part of its due diligence process. The
directors of both businesses acknowledged the compelling merits of integrating
the two businesses onto a common platform with the knowledge that this would
deliver immediate growth and profitability.
We remain conscious of the uncertain economic environment in which we trade and
the lack of liquidity many businesses are experiencing.
The business of solicitor lending, in relation to funding disbursements on
personal injury cases, continues to be our core market albeit we have adopted a
more conservative approach within the credit risk function.
The Group instigated its property bridging business to fund short term property
transactions in July 2007 but the severe downturn in the property market and
the "credit crunch" has resulted in an unprecedented effect on the marketplace.
The Banks and Building Societies reduced the availability of mortgages and as a
consequence the refinancing options for bridging loan transactions have
diminished. This lack of liquidity has therefore resulted in a strategic
decision to restrict new exposures to lower loan to values and only to lend
where a refinancing is not perceived to be problematic.
In recent months the Board has successfully renewed its banking facilities and
the Group looks forward to continued support from banks and shareholders alike
as the business model evolves.
The management continues to work closely with its advisers to maximise
shareholder value.
OUTLOOK
I believe the Group is well positioned to react to and develop new niche
opportunities and feel the proposed strategy of providing services to the legal
sector and looking at niche lending opportunities will provide a foundation for
controlled growth and enhanced profitability.
I should like to place on record my appreciation for the efforts of the
executive, management and staff during this period. I also appreciate the
enthusiasm and support of my fellow directors and thank them for their
continued encouragement and counsel.
OPERATING AND FINANCIAL REVIEW
Impact has achieved another year of progress in the implementation of its
restructuring strategy against what has been unprecedented economic turmoil.
The results achieved are a credit to the management team but the Board remains
fully aware of the current economic climate and is focused on delivering its
strategic objectives in a controlled and structured way.
Richard Kilsby
Non-Executive Chairman
CHIEF EXECUTIVE'S REPORT
PEOPLE
The key to the success of Impact's ongoing business continues to be its ability
to attract high calibre individuals who can deliver the strategy and growth.
Impact has continued to bolster its Board and management with the appointment
of Roger Barlow as Non-Executive Chairman designate, David Hughes as Legal
Director and the appointment on 22 September 2009 of Stuart Burn as Operations
Director.
Roger is FCA qualified and is presently Chairman of the Marsden Building
Society having previously been a senior Audit Partner with KPMG before becoming
a board member of various private and public companies. He was Executive
Director and CFO of Libertas Capital Group plc, an AIM listed company, until
November 2007, and thereafter served as a Non Executive Director.
David is a Solicitor and Member of the Law Society and has, during his
successful career to date, held a number of senior positions, the most recent
of which was as a Partner of Yaffe Jackson Ostrin, Solicitors where he was
responsible primarily for dealing with major commercial clients of the practice
on property related matters. David also has considerable property interests in
both the UK and Europe and acts in an advisory capacity on all legal matters
and property related matters for the Group.
Stuart has been promoted to Operations Director having joined the business in
April 2008 as Head of Finance. Stuart was previously Practice Director of
Cooper Kenyon Burrows Solicitors and has held senior positions in a number of
large law firms both in the North East and North West of England. Stuart has
considerable knowledge of managing solicitor practices and this detailed
knowledge is an asset in managing solicitor disbursement funding. Stuart is
also a Director of Rosemount (Whitley Bay) Management Company Limited. Stuart
does not hold any shares in IHUK and there are no further disclosures required
under Schedule 2(g) of the AIM Rules for Companies.
RISK MANAGEMENT
The risk management of the business continues to be strengthened with all new
and existing counterparty risks regularly assessed by an independent risk
committee. This committee consists of the key executives within the Group who
between them have over 60 years experience in risk management and financial
analysis.
Credit and fraud risk
The Group is exposed to the risk that clients owing the Group money will not
fulfil their obligations. The Group regularly reviews credit exposure for every
client, including the level of security available in the event of default.
Nevertheless, credit default risk may arise from events or circumstances that
are difficult to detect and handle, such as fraud.
Inadequate security
The Group is exposed to the risk that security and undertakings upon which its
loan advances are made may reduce in value, so that the Group may not recover
some or all of its loan advances in an event of default. This risk is mitigated
by the spread of loans and clients involved, along with a detailed assessment
of the value of the security and undertakings at the time the loans are made
and appropriate ongoing monitoring.
Funding and treasury
The Group relies on a mix of equity funding and both committed and uncommitted
debt finance from Manchester Building Society and Yorkshire Bank in order to
maintain an adequate level of working capital and to fund loan advances to the
Group's clients.
STRATEGIC AND FINANCIAL OBJECTIVES
Our strategic objective continues to create a successful Group of companies
delivering a diverse range of services to the Legal sector together with niche
funding opportunities.
Our financial objective is to deliver shareholder value by reporting profitable
results whilst maintaining control over the commercial and financial risks
facing the Group.
Paul Davies
Chief Executive Officer
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
Year Year
ended ended
31/03/09 31/03/08
GBP GBP
Revenue 2,044,973 1,590,442
Cost of sales (787,220) (615,593)
Gross profit 1,257,753 974,849
Other operating expenses (1,013,915) (1,590,612)
Exceptional:
Bad debt recovery - 815,075
Goodwill impaired - (1,246,529)
Operating profit/(loss) 243,838 (1,047,217)
Interest receivable 46,796 74,034
Profit/(loss) for the year from operations 290,634 (973,183)
before tax
Tax expense - _______-
Profit/(loss) for the year 290,634 (973,183)
____ ___ ________
Earnings/(loss) per share (pence) 26p ( restated)
Basic and Fully Diluted (86p)
No separate consolidated statement of recognised gains and losses has been
presented as all such gains and losses have been dealt with in the consolidated
income statement.
All activities are continuing.
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2009
2009 2008
GBP GBP
Non-current assets
Goodwill - -
Other intangible assets 119,628 66,001
Property, plant and equipment 42,671 56,583
______ ________
162,299 122,584
Current assets
Trade and other receivables including 8,832,251 7,955,244
amounts falling due after more than
one year
Cash and cash equivalents 409,573 1,127,688
________ ________
9,241,824 9,082,932
________ _________
Total assets 9,404,123 9,205,516
Equity and liabilities
Share capital 5,666,667 5,666,667
Share premium account 4,759,823 4,759,823
Share based payment reserve 373,836 373,836
Shares held by employee benefit trust (26,646) 7,686,632)
Retained earnings (7,395,998)
Issued capital and reserves 3,377,682 3,113,694
attributable to equity holders of the
parent
Trade and other payables 6,026,441 6,091,822
9,404,123 9,205,516
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
2009 2008
GBP GBP
Operating activities
Cash generated used in operations (1,159,938) (4,992,558)
Net cash absorbed by operating activities (1,159,938) (4,992,558)
Investing activities
Interest received 46,796 74,034
Acquisition of subsidiaries, net of cash - -
acquired
Purchases of other intangible assets (89,173) -
Receipts from sale of tangible assets 5,448 15,028
Acquisition of own shares by Employee (26,646) -
Benefit Trust
(6,126) (48,580)
Purchases of property, plant and equipment
Net cash (used in)/generated by investing (69,701) 40,482
activities
Financing activities
Increase in amounts owed to lending 511,524 3,720,294
institutions
Net cash from financing activities 511,524 3,720,294
Net decrease in cash and cash equivalents (718,115) (1,231,782)
Cash and cash equivalents at 1 April 1,127,688 2,359,470
Cash and cash equivalents at end of 31 409,573 1,127,688
March
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2009
Attributable to the equity holders of parent
Share Share Share based Profit and Total
loss
capital premium payment account
reserve
GBP GBP GBP GBP GBP
Balance as at 1 April 2007 5,666,667 4,759,823 373,836 (6,713,449) 4,086,877
Net loss for the year - - - (973,183) (973,183)
Balance at 31 March 2008 5,666,667 4,759,823 373,836 (7,686,632) 3,113,694
Net profit for the year - - - 290,634 290,634
Total recognised income
and expense
Balance at 31 March 2009 5,666,667 4,759,823 373,836 (7,395,998) 3,404,328
Notes
Operating profit/(loss)
Profit/(Loss) from operations has been arrived at after charging/(crediting):
Year ended Year ended
31/3/09 31/3/08
GBP GBP
Depreciation of owned assets 14,592 18,128
Amortisation of intellectual property 35,546 48,027
Rentals under operating leases 42,406 39,756
Staff costs 532,063 540,562
Exceptional bad debt recovery - 815,025
Exceptional goodwill impaired - 1,246,529
Auditors remuneration for
- statutory audit services 48,435 40,185
- tax compliance and advisory services 10,113 8,643
- corporate recovery services - 159,840
The financial information set out in this announcement does not constitute the
Group's financial statements (as defined by s240 of the Companies Act 1985) for
the year ended 31 March 2009. The results for the year ended 31 March 2009 are
extracted from the Annual Report of Impact Holdings (UK) plc, on which the
auditors have issued an unqualified report. Pursuant to AIM Rule 20 copies of
the Annual Report may be downloaded from the Company's website
www.impactholdings.net and will be posted to shareholders on or before 30
September 2009. further copies will be available from Daniel Stewart & Company
plc, 36 Becket House, Old Jewry, London EC2R 8DD.
Notes to the Editor:
Impact Holdings (UK) plc through its individual subsidiaries provides short
term funding solutions, loans administration and IT support services in two
specific areas:
1. The legal disbursement market.
2. Property based bridging and development market
In addition Impact will fund other opportunities where debt instruments or
debentures provide the primary security and there are opportunities for short
term bespoke funding where serviceability precludes larger lenders from
entering this area.
Impact id regulated by The office of fair trading through which it is licensed
to lend under Consumer Credit Act 1974 and the Financial Services Authority for
regulated lending.
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