RNS Number:1660O
ARC Risk Management Group PLC
31 July 2003
ARC Risk Management Group plc
Final Results for the Year Ended 31 March 2003
CHAIRMAN'S STATEMENT
Introduction
The results cover the year to 31st March 2003 and incorporate the acquisition of
ARC Risk Management Limited ("ARC"), which was completed on 29th July 2002. The
initial prospects for ARC were described in the prospectus issued last July and
in the Interim Statement sent to shareholders in November last year.
Results and Dividend
The losses on ordinary activities for the 12 months to 31 March 2003 amounted to
#903,015 (2002 15 months: loss #994,249). This figure includes a provision of
#250,579 in respect of the impairment of the book value of certain intangible
fixed assets. The loss per share is 1.09p (2002: loss 2.89p) and no dividend is
recommended. As a result of this loss, shareholders funds at 31st March 2003
amounted to #348,758.
Business review
ARC has three business divisions: security training, consultancy and Red24.
However, although sales from these divisions rose from #431,877 in the 10 months
to 31 March 2002 to #858,024 in the 12 months to 31 March 2003, only the sales
for the 8 months from the date of acquisition of ARC to 31 March 2003 are
included in the Group accounts.
The training division has had a sound year, significantly increasing sales and
developing new training courses to meet the needs of our blue chip client base.
The division strengthened its team during the year and is now recognised as the
UK's leading provider of security management training and, internationally, as
one of the leading security management training organisations in the world. This
division is profitable at the operating level and has continued to develop its
income since the year end, sales in the first quarter being 50% up on the same
period in the previous year.
The consultancy division incorporates the work done for insurance underwriters,
project management and the sale of contingency planning products derived from
the original investment in Level One. In my Interim Report I said that sales in
this area had been disappointing, but I am pleased to report that the division
has now been reorganised with some success to focus on developing work for key
underwriters. Revenue in the second half year was 45% higher than in the first
half year and has continued to grow since, the first quarter's revenue being
twice that of the same period in the previous year. This improvement in revenue
has made the division profitable at the operating level and has enabled it to
develop further its product offering to address the concerns of underwriters
that the cover offered was too wide for the premium charged. The new product
incorporates a significant training element and will benefit both this division
and the training division. The division is in advanced discussions with a
leading broker to launch the product on an exclusive basis this autumn with the
product cover backed up by a leading underwriter.
Red24 and the products derived from it remain both the most exciting and, at the
same time, the most frustrating part of the business. Red24 was launched in the
summer of 2002 and has been well received both by assistance companies and
financial institutions, who perceive the need to provide their customers with a
security assistance product along the lines of the well established medical,
travel and legal assistance products. The division has spent a considerable
amount of time and money in developing and providing this assistance and, during
the year, non English language versions have been made available as have
specialist assistance products for particular markets such as Red24 Auto. A
major international bank now incorporates Red24 as a standard part of its
Platinum and International insurance products and Red24 is also offered at
advantageous rates in many employment benefit packages. In the UK, Times Right
Marketing have been appointed as marketing agents for the product and we are
also close to signing a licensing agreement for the North American market. In
South Africa we are endeavouring to develop the market itself through links with
car rental and tourist organisations. Whilst it has taken considerably longer
than anticipated to translate all this activity into sales revenues, your Board
still believes that Red24 is not only the best security assistance product
commercially available but also the least expensive. Revenue is building, albeit
slowly, and if it continues to grow according to plan this division should have
acquired sufficient mass to be self sufficient by the end of the year.
Financial position
Your Board has been making significant efforts to boost revenues and reduce
costs, and losses in the current financial year are substantially below budget.
It is therefore anticipated that breakeven can be achieved before the year end.
However, the delays in translating the Red24 sales activity into revenue has
increased the Group's working capital requirements beyond the level anticipated
last July. Consequently, although a further #250,000 was raised in May 2003,
principally in equity, after the AGM the Board will be seeking to place further
shares to raise up to #250,000 to satisfy the Company's working capital
requirements, and your authority to do so will be sought at the AGM.
Unfortunately it will not be possible to undertake a formal rights issue or
similar share offer to all shareholders as the Board considers that, given the
costs and time involved when compared to the size of the fundraising being
considered, this would not be in the best interests of the Company. As there can
be no guarantee that such an equity fundraising can be successfully completed,
the Board will also explore other methods of finance and in that event, the
Company has received assurances from the Directors and their associates that
they would provide funds to a value of #100,000 if required.
The Board
In June 2003 Rupert Reid resigned to pursue other interests and has not been
replaced. The Board would like to express their appreciation of the contribution
he has made to the Company's development.
The Board have reviewed the needs of the Company and have concluded that these
can be met satisfactorily without replacing Mr Reid. The structure of the Board
will be kept under review as the business grows.
Outlook
I believe that your Company has developed an exciting range of security related
products and services and I am cautiously optimistic that, provided the
necessary finance is available, these products and services will produce the
income and profitability to justify the investment shareholders have made in
them and in the Company.
Simon Richards
Chairman
30th July 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 15 months
31 March ended 31
2003 March 2002
# #
TURNOVER 620,857 -
Acquired operations
Discontinued operations - 1,167,005
--------- ---------
620,857 1,167,005
Cost of sales (276,180) (375,924)
--------- ---------
Gross profit 344,677 791,081
Administrative expenses (998,855) (1,350,226)
Administrative expenses - impairment of (250,579) -
intangible fixed assets
--------- ----------
OPERATING LOSS
Continuing operations (187,868) (133,964)
Acquired operations (716,889) -
Discontinued operations - (425,181)
(904,757) (559,145)
Exceptional item - loss on disposal of fixed - (442,307)
assets (discontinued operations)
Interest receivable 7,255 9,428
Interest payable (5,513) (2,225)
--------- ---------
Loss on ordinary activities before (903,015) (994,249)
taxation
Taxation - -
--------- ---------
Loss for the period (903,015) (994,249)
Accumulated losses brought forward (1,407,103) (412,854)
--------- ---------
Accumulated losses carried forward (2,310,118) (1,407,103)
--------- ---------
Loss per share (1.09p) (2.89p)
--------- ---------
Total recognised gains and losses
The group had no recognised gains or losses other than those shown in the profit
and loss account.
CONSOLIDATED BALANCE SHEET
2003 2002
# # # #
FIXED ASSETS
Intangible assets 684,000 -
Tangible assets 47,444 683
-------- --------
731,444 683
Current assets
Debtors: amounts falling
due within one year 217,332 60,294
Cash at bank and in
hand 42,539 525,485
-------- --------
259,871 585,779
Creditors: amounts
falling due within one
year (561,739) (65,989)
-------- --------
Net current (liabilities)
assets (301,868) 519,790
-------- --------
Total assets less current
liabilities 429,576 520,473
Creditors: amounts
falling due after more
than one year (80,818) -
-------- --------
Net assets 348,758 520,473
-------- --------
EQUITY CAPITAL AND
RESERVES
Called up share capital 2,443,675 1,720,000
Share premium account 215,201 207,576
Profit and loss account (2,310,118) (1,407,103)
-------- --------
Equity shareholders' 348,758 520,473
funds -------- --------
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 15 months ended
March 31 March
2003 2002
# # # #
Net cash outflow from (Note 6) (684,249) (714,720)
operating activities
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 7,255 9,428
Interest paid (5,513) (2,225)
-------- --------
Net cash inflow from returns
on investments and servicing
of finance 1,742 7,203
CAPITAL EXPENDITURE
Proceeds of sale of tangible
fixed assets 50,000 945,559
Payments to acquire tangible
fixed assets (28,899) (3,558)
-------- --------
NET CASH INFLOW FROM CAPITAL 21,101 942,001
EXPENDITURE
ACQUISITIONS
Purchase of subsidiary
undertakings (137,436) -
Net cash acquired with
subsidiary undertakings 42,737 -
-------- --------
NET CASH OUTFLOW FROM
ACQUISITIONS (94,699) -
-------- --------
Net cash (outflow) inflow (756,105) 234,484
before financing
FINANCING
Repayment of hire purchase
loans - (32,674)
Issue of ordinary share
capital (net of expenses) 219,831 -
Repayment of bank loans (6,672) -
Other loans 60,000 -
-------- --------
Net cash INFLOW (outflow) 273,159 (32,674)
from financing -------- --------
(Decrease) Increase in cash (Note 7) (482,946) 201,810
-------- --------
NOTES
1. The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
2. The financial information has been extracted from the group's 2003 financial
statements. Those financial statements have not yet been delivered to the
Registrar, however the group's auditors have given an unqualified audit
opinion on those financial statements.
3. Basis of preparation
The preliminary results have been prepared under the historical cost
convention and in accordance with applicable United Kingdom accounting
standards. The principal accounting policies of the group are set out in the
group's 2002 annual report and financial statements. The policies in this
preliminary announcement have remained unchanged from those 2002 financial
statements.
4. Loss per share
Year ended 15 months ended
31 March 31 March
2003 2002
Attributable loss (#) (903,015) (994,249)
--------- ---------
Average number of ordinary 82,975,445 34,400,000
shares in issue --------- ---------
Basic loss per share (pence) (1.09p) (2.89p)
--------- ---------
5. Reconciliation of movement in equity shareholders' funds
Group Company
Year ended 15 months ended Year ended 15 months ended
31 March 31 March 31 March 31 March
2003 2002 2003 2002
# # # #
Opening
shareholders'
funds 520,473 1,514,722 520,473 1,514,722
Loss for the (903,015) (994,249) (398,102) (994,249)
year
Issue of 904,594 - 904,594 -
shares
Share issue (173,294) - (173,294) -
expenses --------- --------- --------- ---------
Closing 348,758 520,473 853,671 520,473
shareholders' --------- --------- --------- ---------
funds
6. Reconciliation of operating loss to net cash outflow from operating
activities
Year ended 31 15 months ended
March 2003 31 March 2002
# #
Operating loss (904,757) (559,145)
Depreciation charges 9,641 114,490
Amortisation charges 119,525 -
Impairment of intangible fixed assets 250,579 -
Loss on disposal of tangible fixed assets - 5,969
Decrease in stocks - 29,071
(Increase) decrease in debtors (24,334) 182,060
Decrease in creditors (134,903) (487,165)
--------- ---------
Net cash outflow from operating (684,249) (714,720)
activities --------- ---------
7. Reconciliation of net cash flow to movement in net funds
Year ended 31 15 month ended
March 31 March
2003 2002
# #
(Decrease) increase in cash (482,946) 201,810
Bank loan of subsidiary company on
acquisition (97,498) -
Decrease in hire purchase loans - 32,674
Decrease in bank loan 6,672 -
Increase in other loans (60,000) -
--------- ---------
(DECREASE) Increase in net funds (633,772) 234,484
Opening net funds 525,485 291,001
--------- ---------
Closing net (debt) funds (108,287) 525,485
--------- ---------
7. The Directors are not proposing that a dividend payment be made.
8. Copies of the Report and Accounts will be available from the Company's
office at 18 High St, Goring-on-Thames, Oxfordshire RG8 9AR.
Enquiries:
Simon Richards Tel: 020 7235 0036
Chairman
ARC Risk Management Group plc
Maxine Barnes Tel: 020 7430 1600
Dominic Barretto
Barnes and Walters Limited
Jeremy Porter Tel: 020 7107 8000
Seymour Pierce Limited
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