TIDMBHL
RNS Number : 7487N
Baydonhill PLC
07 September 2011
7 September 2011
Baydonhill plc
("Baydonhill" or "the Company")
Preliminary results for the year ended 31 March 2011
HIGHLIGHTS
-- Turnover (value of foreign exchange transactions) for the year up 107 per cent to GBP1,465 million (2010: GBP709 million)
-- Gross profit (foreign exchange commission earned) up 86 per cent to GBP6.7 million (2010: GBP3.6 million)
-- Profit before tax of GBP467,000 (2010: loss GBP739,000)
-- Profit after tax of GBP397,000 (2010: profit GBP681,000 after exceptional deferred tax credit)
-- Business strategically re-positioned to focus on core Corporate and Retail divisions
Sir Eric Peacock, Chairman of Baydonhill, commented:
"In the year to 31 March 2011 the Company produced a pleasing result; a year of maiden pre-tax profits. Towards the end of the year, the business undertook some important and necessary strategic changes which the board believes will bring long term benefits to shareholders. Whilst the current year will see these changes absorbed fully in the business, we expect good growth to come through from 2012 onwards."
Contacts:
Baydonhill plc
Sir Eric Peacock, Chairman Tel: 020 7594 0584
Wayne Mitchell, Chief Executive
Merchant Securities Limited
Simon Clements/David Worlidge Tel: 020 7628 2200
Square1 Consulting Limited Tel: 020 7929 5599
David Bick/Mark Longson
Chairman's and Chief Executive Officer's Statement
Introduction
In the year under review the Company generated a profit before tax after several years of losses resulting from the investment in the business. Whilst revenue growth remained strong, the Company made some strategic changes to improve quality of earnings in the final quarter of the year. This included exiting the Money Service business within the Corporate Division. These changes are expected to have a short term impact on the growth of earnings during the current year.
Revenues from the Corporate Division have continued to show consistent growth in new business during the year and the Company has continued to focus on platform developments and developing the core corporate business. The Retail Division had a very positive year but the division continues to be impacted by the difficult economic climate.
During the period the Company entered into an affiliate arrangement to provide payment services to clients of Interchange Limited, a competitor in the Retail Sector, which ceased to trade in March 2011. This has resulted in a significant increase in the number of retail clients using the Company's services.
Following the recent regulatory changes in the UK under the new PSD regulations the Company is now an Authorised Payment Institution with the Financial Services Authority ("FSA").
Financial Review
The profit before tax for the financial year was GBP467,000, compared to a loss of GBP739,000 in 2010. The Company reported a profit after tax for the financial year of GBP397,000 (2010: profit GBP681,000). The result for the current year includes an unrecognised profit of GBP158,795 (2010: loss GBP68,723) relating to the fair value adjustment in respect of foreign exchange contracts required in order to comply with IAS 39. This unrealised profit reverses as the contracts with both customers and the bank are delivered. Last year's profit after tax was a result of the Directors deciding to recognise the deferred tax asset arising from cumulative trading losses incurred in previous years. The Directors remain satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. The Company prepared a revised five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2011. The forecast indicated that the losses would be utilised in full by March 2015.
Gross turnover (representing the gross value of foreign exchange currency transactions undertaken) for the Company for the year under review was GBP1,465 million, an increase of 107 per cent from the previous year's figure of GBP709 million. Gross profit (representing foreign exchange commissions earned net of payments to affiliates and bank charges) increased by 86 per cent to GBP6.7 million from GBP3.6 million in the previous year.
In 2011, there was a charge of GBP16,342 in respect of share based payments relating to the options issued in December 2010 (2010: GBP1,048) which vest in September 2013. All share options issued in previous years were fully vested at 31 March 2011.
Total equity at 31 March 2011 amounted to GBP1.4 million compared to GBP0.5 million at 31 March 2010. This increase is due to the profit achieved in the year under review, the exercise of warrants and the issue of new shares during the year, as a result of Ekwienox Fx Limited ("Ekwienox Fx"), the Company's largest shareholder, exercising its right to convert a convertible loan.
Divisional Review
Revenues from the Corporate Division have shown continued growth in the year under review. Gross turnover was GBP1.3 billion compared to GBP604 million in the prior year. The growth is a result of the continuing sales effort and the recurring nature of the corporate business.
The Retail Division has experienced a positive year, with turnover growing to GBP163 million in 2011 from GBP105 million in 2010. This was due to signs of a recovery in the economy.
Fundraising
On 31 March 2011, Ekwienox Fx exercised 300,000 warrants at an exercise price of 12 pence per share, representing all the warrants that Ekwienox Fx held at that date.
On 31 March 2011, Ekwienox Fx also converted an existing GBP476,000 loan facility provided by Ekwienox Fx in May 2007, and amended in February 2010, into new ordinary shares ("Ordinary Shares") in the capital of the Company. Under the terms of the loan agreement, the loan was convertible into new ordinary shares at 5.75 pence per share at any time up to the repayment date, 30 September 2011. Since the loan was made, no principal amounts have been repaid.
People
There has been no change to the composition of the Board in the year under review.
The Company has continued to grow with the ongoing support of the employees and the Board would like to thank them for their continuing dedication and efforts this year.
Outlook
As previously announced, the Company made some strategic changes to its business in the final quarter of the year under review by exiting the Money Service business within the Corporate Division. This will impact revenue growth for the coming year. The Directors expect that during 2011 there will be continued new business growth from the core Corporate Division to replace revenue lost as a result of the strategic changes. The Company is also examining several opportunities which exist in specific industry channels.
The Directors believe that the current financial year will continue to be challenging for the Retail Division although there are some signs of recovery. The economic outlook remains uncertain and the retail clients remain cautious about asset and property transactions overseas. The Company has decided to increase marketing expenditure to help capitalise on any recovery in this area and plans to recruit additional staff as and when the opportunity arises.
Whilst the current year will see the impact of the strategic changes, as they are absorbed fully in the business, we expect profitable growth to come through from 2012 onwards.
Sir Eric Peacock KCMG Wayne Mitchell
Chairman Chief Executive Officer
7 September 2011 7 September 2011
INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2011
Notes 2011 2010
GBP GBP
Continuing Activities
Turnover 3 1,465,444,124 709,023,274
-------------------- --------------
Cost of sales (1,458,896,795) (705,339,214)
Cost of sales - Exceptional
items 2 158,795 (68,723)
-------------------- --------------
Total cost of sales (1,458,738,000) (705,407,937)
-------------------- --------------
Gross profit 6,706,124 3,615,337
Administrative expenses (6,100,471) (4,206,883)
-------------------- --------------
Operating profit /(loss) 605,653 (591,546)
Finance costs (167,453) (213,204)
Finance income 29,001 65,435
-------------------- --------------
Profit /(loss) before taxation 467,201 (739,315)
Taxation 4 (70,239) 1,420,200
-------------------- --------------
Profit for the financial year 396,962 680,885
==================== ==============
Earnings per share
Basic 5 0.80p 1.95p
Diluted 5 0.72p 1.28p
==================== ==============
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011
2011 2010
GBP GBP
Profit for the financial year 396,962 680,885
Other comprehensive income for the
year, net of tax - -
------------- --------
Total comprehensive income for the
year 396,962 680,885
============= ========
STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011
Notes 2011 2010
GBP GBP
Non-current assets
Plant and equipment 41,145 24,720
Intangible assets 573,990 658,085
Investments in subsidiaries 10 10
Deferred tax 9 1,349,961 1,420,200
-------------- -------------
Total non-current assets 1,965,106 2,103,015
-------------- -------------
Current assets
Trade and other receivables 6 106,984,758 83,823,792
Derivative financial assets -
forward contracts 1,031,212 1,390,708
Cash and cash equivalents 15,386,282 5,544,679
Total current assets 123,402,252 90,759,179
-------------- -------------
Current liabilities
Trade and other payables 7 (123,139,993) (90,695,587)
Derivative financial liabilities
- forward contracts (369,945) (330,853)
-------------- -------------
Total current liabilities (123,509,938) (91,026,440)
-------------- -------------
Net current liabilities (107,686) (267,261)
-------------- -------------
Total assets less current liabilities 1,857,420 1,835,754
Non-current liabilities
Borrowings 8 (493,556) (1,371,094)
-------------- -------------
Net assets 1,363,864 464,660
============== =============
Equity
Share capital 578,338 492,555
Share premium 4,672,645 4,246,427
Retained earnings (3,887,119) (4,300,423)
Equity component of convertible
loans - 26,101
-------------- -------------
1,363,864 464,660
============== =============
STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 MARCH 2011
Equity
component
of
Share Share convertible Retained Total
Capital Premium loan notes Earnings Equity
GBP GBP GBP GBP GBP
Balance at 1
April 2010 492,555 4,246,427 26,101 (4,300,423) 464,660
Total
comprehensive
income for
the year - - - 396,962 396,962
Share based
payments - - - 16,342 16,342
Conversion of
loan note 82,783 393,218 (26,101) - 449,900
Exercise of
warrants 3,000 33,000 - - 36,000
--------- ---------- ------------ ------------ ----------
Balance at 31
March 2011 578,338 4,672,645 - (3,887,119) 1,363,864
========= ========== ============ ============ ==========
Equity
component
of
Share Share convertible Retained Total
Capital Premium loan notes Earnings Equity
GBP GBP GBP GBP GBP
Balance at 1
April 2009 243,841 3,005,551 57,888 (4,982,356) (1,675,076)
Total
comprehensive
income for
the year - - - 680,885 680,885
Share based
payments - - - 1,048 1,048
Conversion of
loan note 5,298 26,489 (31,787) - -
Issue of
equity share
capital 243,416 1,214,387 - - 1,457,803
-------- ---------- ------------ ------------ ------------
Balance at 31
March 2010 492,555 4,246,427 26,101 (4,300,423) 464,660
======== ========== ============ ============ ============
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2011
Notes 2011 2010
GBP GBP
Net cash generated from operating
activities 10 10,124,419 2,325,316
----------- ----------
Investing activities
Interest received 29,001 13,966
Purchases of intangible assets (137,975) (148,893)
Purchases of plant and equipment (32,204) (27,197)
----------- ----------
Net cash used in investing activities (141,178) (162,124)
----------- ----------
Financing activities
Decrease in borrowings (177,638) (180,767)
Increase in borrowings - 139,425
Issue of shares 36,000 789,591
Interest paid - (77,312)
----------- ----------
Net cash (used in) / generated
from financing activities (141,638) 670,937
----------- ----------
Net increase in cash & cash equivalents 9,841,603 2,834,129
Cash and cash equivalents at beginning
of year 5,544,679 2,710,550
----------- ----------
Cash and cash equivalents at end
of year 15,386,282 5,544,679
=========== ==========
NOTES TO THE FINANCIAL INFORMATION FOR THE YEAR ENDED 31 MARCH 2011
1. BASIS OF PREPARATION
This announcement has been prepared in accordance with the Company's accounting policies, which in turn are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission. The accounting policies comply with each IFRS that is mandatory for accounting periods ended 31 March 2011.
2 COST OF SALES - EXCEPTIONAL
2011 2010
GBP GBP
Unrealised fair value adjustment
on forward contracts (158,795) 68,723
The exceptional cost of sales item relates to the unrealised (gain) / loss arising from the fair value adjustment relating to outstanding contracts with both customers and the bank. As these contracts mature, the unrealised (gain) / loss will reverse. This adjustment is required in order to comply with IAS 39.
3 BUSINESS AND GEOGRAPHICAL SEGMENTS
Management has determined the operating segments by considering the business from both a geographic and product perspective. For management purposes, the Company is currently organised into two operating divisions: Corporate and Retail. These divisions are the business segments for which the Company reports its segment information internally to the Board of Directors. The Company's operations are predominately in the one geographical segment, the United Kingdom.
The results of each segment have been prepared using accounting policies consistent with those of the Company as a whole.
Corporate Retail
Division Division Unallocated Total
Year ended 31
March 2011 GBP GBP GBP GBP
Turnover 1,302,024,168 163,419,956 - 1,465,444,124
Cost of Sales (1,297,216,303) (161,680,492) 158,795 (1,458,738,000)
---------------- -------------- ------------ ----------------
Gross profit 4,807,865 1,739,464 158,795 6,706,124
================ ============== ============ ================
Operating
profit /
(loss) 729,528 572,399 (696,274) 605,653
Finance costs - - (167,453) (167,453)
Finance
income - - 29,001 29,001
---------------- -------------- ------------ ----------------
Profit /
(loss)
before
taxation 729,528 572,399 (834,726) 467,201
Taxation - - (70,239) (70,239)
Profit /
(loss) for
the year
from
continuing
operations 729,528 572,399 (904,965) 396,962
================ ============== ============ ================
Capital
expenditure 137,975 - 32,204 170,179
Depreciation
&
amortisation 222,070 - 15,779 237,849
Share-based
payment
costs (5,546) (1,947) (8,849) (16,342)
---------------- -------------- ------------ ----------------
Corporate Retail
Division Division Unallocated Total
Year ended 31
March 2010 GBP GBP GBP GBP
Turnover 603,731,706 105,291,568 - 709,023,274
Cost of Sales (601,272,705) (104,203,955) 68,723 (705,407,937)
-------------- -------------- ------------ --------------
Gross profit 2,459,001 1,087,613 68,723 3,615,337
============== ============== ============ ==============
Operating
profit /
(loss) (213,034) 74,690 (453,202) (591,546)
Finance costs - - (213,204) (213,204)
Finance income - - 65,435 65,435
-------------- -------------- ------------ --------------
Profit / (loss)
before
taxation (213,034) 74,690 (600,971) (739,315)
Taxation - - 1,420,200 1,420,200
Profit / (loss)
for the year
from
continuing
operations (213,034) 74,690 819,229 680,885
============== ============== ============ ==============
Capital
expenditure 148,893 - 27,197 176,090
Depreciation &
amortisation 191,006 18,851 12,000 221,857
Share-based
payment costs 262 262 524 1,048
-------------- -------------- ------------ --------------
Included in revenues arising from the sale of foreign currency exchange are two customers with total revenues of approximately GBP400 million (2010: GBP86.5 million) which each contributed more than 10 per cent of the Company's revenues. However, in terms of gross profit these clients accounted for only 18 per cent of the Company's Gross Profit (2010: 2 per cent.).
4 TAXATION
Note 2011 2010
GBP GBP
Current tax - -
Deferred tax 11 (70,239) 1,420,200
(70,239) 1,420,200
========= ==========
Tax has been calculated using an estimated annual effective tax rate of 15 per cent (2010: Nil per cent) on profit before tax.
The difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the loss before tax is as follows:
2011 2010
GBP GBP
Profit / loss before taxation 467,201 (739,315)
--------- ------------
Tax on loss on ordinary activities at standard
UK corporation tax rate of 28 per cent (2010:
28 per cent) 130,816 (207,008)
Effects of:
Expenses not deductible for tax purposes 11,858 5,596
Fair value adjustment on derivative financial
instruments - (19,242)
Change in tax rates (72,435) -
Prior year trading losses / short term timing
differences - (1,199,546)
--------- ------------
Total tax charge / (credit) for the year 70,239 (1,420,200)
========= ============
5 EARNINGS PER SHARE
Basic profit per share and diluted profit per share are based on a profit after tax of GBP396,962 and GBP414,836 respectively the difference relates to interest on the convertible loan GBP24,823 and the tax effect of this GBP6,951 (2010: profit GBP681,000). The basic profit per share has been calculated on a weighted average of 49,915,356 (2010: 34,863,807) Ordinary Shares in issue. Diluted profit per share is calculated on a weighted average of 57,950,934 Ordinary Shares (2010: 54,012,448). The convertible debt is assumed to have been converted into Ordinary Shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For the share options and warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's share) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated is compared with the number of shares that would have been issued assuming the exercise of the share options.
2011 2010
GBP GBP
Basic weighted average number of shares 57,558,751 53,920,140
Potential dilutive effect of share options schemes 392,183 92,308
----------- -----------
Dilutive weighted average number of shares 57,950,934 54,012,448
=========== ===========
6 TRADE AND OTHER RECEIVABLES
2011 2010
GBP GBP
Trade receivables 107,095,179 83,954,549
Less: provision for impairment (410,274) (277,090)
------------ -----------
Trade receivables - net 106,684,905 83,677,459
Prepayments and accrued income 299,853 146,333
------------ -----------
106,984,758 83,823,792
Trade receivables and forward contracts constitute the only financial assets within the category "Loans and Receivables" as defined by IAS 39.
Trade receivables and forward contracts are non-interest bearing and are generally not yet due or less than 30 days past due.
Of the trade receivables and forward contracts balance at the end of the year, GBP17 million (2010: GBP13 million) is due from the Company's largest counterparty. There is one (2010: one) counterparty where the balance of trade receivables represents more than 5 per cent. of the total balance of trade receivables.
A provision for impairment of trade receivables is established when there is no objective evidence that the Company will be able to collect all amounts due according to the original terms. The Company considers factors such as default or delinquency in payment, significant financial difficulties of the debtor and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired.
As at 31 March 2011 trade receivables of GBP107,095,179 (2010: GBP86,954,549) were not yet due or past due but not impaired. The ageing analysis of these trade receivables is as follows:
2011 2010
GBP GBP
Not yet due 101,473,102 77,882,971
Up to 3 months past due 5,622,077 6,071,578
------------ -----------
107,095,179 83,954,549
The movement in the bad debt provision can be analysed as follows:
2011 2010
GBP GBP
Opening position 277,090 112,797
Amount charged to the income statement 192,807 188,937
Amount written off as uncollectible (59,623) (24,644)
Closing position
410,274 277,090
There are no impaired trade receivables not yet due. Trade receivables up to three months past due includes GBP410,274 (2010: GBP277,090) of impaired trade receivables.
7 TRADE AND OTHER PAYABLES
2011 2010
GBP GBP
Amounts owed to group undertakings 1,345,411 754,105
Trade payables 119,764,002 88,928,660
Trade payables in respect of expenses 123,145 167,512
Other tax and social security 345,198 214,934
Accruals and deferred income 1,356,959 517,592
Other creditors 205,278 112,784
------------ -----------
123,139,993 90,695,587
Trade payables in respect of expenses comprise amounts outstanding for administrative and other ongoing costs. The average credit period taken for trade purchases is 30 days (2010: 38). No interest is charged on the outstanding balance.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
8 BORROWINGS
2011 2010
GBP GBP
Loans - amounts owed to group undertakings 493,556 1,371,094
======== ==========
All the borrowings are stated at amortised cost using the effective interest method.
The amount due to ASPone Limited on deferred terms of GBP243,556 (2010: GBP385,960) attracts interest at 10 per cent. per annum and is repayable as to GBP20,000 (2010: GBP15,000) a month. There is no material difference between amortised cost and their fair value.
The convertible loan of GBP435,134 for the year ended 31 March 2010 attracted interest at a rate of 3.75 per cent and was converted during the year ended 31 March 2011 into 1 pence Ordinary Shares at a price of 5.75 pence per share.
The amount due to Wallich & Matthes Holding BV of GBP250,000 (2010: GBP550,000) is repayable by instalments between 30 September 2010 and 30 September 2012 and attracts interest at a rate of 12 per cent. There is no material difference between the amortised costs and their value.
9 DEFERRED TAX
2011 2010
GBP GBP
At 1 April 1,420,200 -
(Charge)/credited to the income statement (70,239) 1,420,200
At 31 March 1,349,961 1,420,200
Fair
value Potential
Short term Accelerated loss / deferred
Tax timing capital (gains tax not Total
losses differences allowances ) recognised recognised
GBP GBP GBP GBP GBP GBP
At 1
April
2010 1,047,704 38,312 334,184 (4,806) 4,806 1,420,200
For
the
year (51,471) 72,358 (91,126) 4,806 (4,806) (70,239)
At 31
March
2011 996,233 110,670 243,058 - - 1,349,961
Recognition of deferred tax
As a result of the change in the Company's performance referred to above, the Directors consider it appropriate to recognise the deferred asset arising principally from trading losses incurred in previous years. In order to recognise the deferred tax asset arising from prior period trading losses, the Directors must be satisfied that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. The Company prepared a five year profit forecast with underlying assumptions in line with those experienced in the year ended 31 March 2011. The forecast indicated that the losses would be utilised in full by March 2015, and the Directors therefore decided it would be appropriate to continue to recognise the deferred tax asset in full.
Other factors affecting future tax
As at 31 March 2011, trading losses of approximately GBP4.2 million (2010: GBP4.5 million) are available to carry forward against future profits of the same trade. These tax losses will reduce the corporation tax charge in future years until they have been utilised.
10 NET CASH GENERATED FROM / (USED IN) OPERATING ACTIVITIES
2011 2010
GBP GBP
Operating profit/(loss) 605,653 (591,546)
Depreciation charge 15,779 30,851
Amortisation charge 222,070 191,006
Increase in receivables (22,801,470) (43,553,681)
Increase in payables 32,082,387 46,248,686
Cash generated from operations 10,124,419 2,325,316
Tax paid - -
------------- -------------
10,124,419 2,325,316
11 DIVIDENDS
The directors have not recommended the payment of a dividend.
12 STATUS OF FINANCIAL INFORMATION
The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 March 2011 or 31 March 2010. The financial information has been extracted from the statutory accounts of the company for the year ended 31 March 2010. The auditors reported on these accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis. The statutory accounts for the year ended 31 March 2010 have been delivered to the Registrar of Companies.
The statutory accounts for the year ended 31 March 2011 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
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