RNS Number:9425Z
Dipford Group PLC
10 July 2007
Dipford reports year of consolidation
Dipford Group plc, a leading operator in the business broking market, announces
its preliminary results for the year ended 30 April 2007.
Non-Executive Chairman, Chris Pople, comments "It has been a difficult year
resulting in reduced expectations as outlined in our trading statement last
September. Since then, we have assessed the problems, formulated the solutions
and have been actively implementing them. The second half results have met
revised expectations indicating that we are back on track and we look forward to
a resumption of steady growth."
For further information please contact:-
Jonathan Custance Baker, Chief Executive, Dipford Group plc 01392 256800
Miles MacEacharn, Finance Director, Dipford Group plc 01392 256800
Mike Coe, Director, Blue Oar Securities Plc 0117 933 0020
www.dipford.com
Non-Executive Chairman's Statement
Introduction
Although I have been a non-Executive Director since the Group's formation, this
is my first statement as Chairman of Dipford Group plc following my appointment
in February 2007.
Notwithstanding significant advances made by the Group during 2006/7, the final
results did not meet the market expectations that existed at the start of the
year. Since our trading statement in September 2006, the management team has
been very active in restructuring the business. I am very pleased that these
efforts have led to us meeting the revised adjusted earnings per share
expectations for the year. Further information on our results can be found in
the Financial Review.
Overview of the business
Dipford acts, in simple terms, as an "estate agent" for small businesses. During
the year to 30 April 2007, the Group, through its three trading divisions, sold
approximately 800 businesses worth around #150m. With a hugely experienced
operational management team and a state of the art central computer system,
Dipford is well placed to capitalise on the UK's appetite for entrepreneurial
activity and help people realise the dream of running their own business.
Results
The Group achieved a 12% increase in sales during the year, up from #5,086,724
to #5,704,207. However, as mentioned in our trading statement in September 2006,
our ongoing prudent approach to debt management has led to increased levels of
provision. The overall charge and associated debt recovery costs are #537,000
higher than in 2006 including an amount related to the end of the earnout year
for Kings Business Transfer. This increased level of provision, together with
disappointing earnings from the other two divisions, have contributed to our
earnings before exceptional items, tax, and amortization of goodwill being down
38%, from #950,192 to #585,569.
Board Changes
In February, Dipford's former Group Managing Director, Rupert Cattell left the
Group. Mr Cattell's position had become redundant with the planned recruitment
of a Chief Executive for Redwoods Dowling Kerr which is presently underway. The
costs associated with Mr Cattell's departure are shown in the accounts as an
exceptional item. Consequent upon this departure, Jonathan Custance Baker moved
from Executive Chairman to a new role as Chief Executive and I took over as
non-Executive Chairman. These changes have worked well.
I wish to thank both Jonathan and Miles MacEacharn, the Finance Director, for
the great resolve which they have shown during this period of transition and
express my confidence that we have in place a team which will enable us to grow
strongly in the future.
Outlook
Despite rising interest rates and a possible slowdown in the housing market, our
business continues to thrive on all fronts. There will, inevitably, be
variations from sector to sector but we are well placed to position our
activities to take advantage of changes in our different markets. In the near
term I foresee a period of organic growth before looking to resume expansion
through acquisitions.
C J Pople
Non-Executive Chairman
9 July 2007
Chief Executive's Statement
Overview
After five years of expansion through acquisition, this has been a year of
reconstruction and stabilisation. Each of the three divisions which make up the
Group has been configuring itself to meet the challenges and opportunities which
lie ahead. This process is largely complete and we look forward to future
organic growth based on cleaner, more focussed lines of approach.
Central Marketing
Based in Honley, Yorkshire, the Central Marketing department provides marketing
and PR services to the rest of the Group. A new Marketing Manager has just been
appointed to provide additional resource to the department. With substantial PR
activity, major advertising programmes and over 700,000 pieces of direct mail
sent out from this office, Central Marketing is a vital part of the Group.
Information Technology and Systems (IT)
The Group's bespoke customer relationship management software, Unite, was
initially set up to service Redwoods Dowling Kerr and its clients. During the
year, Unite has been substantially upgraded and rolled out to the other two
divisions. This would not have been possible without the (internal) appointment
of a Systems and Training Manager whose experience and expertise significantly
reduced the potential hazards of such an operation.
Whilst the rollout process inevitably caused disruption during its
implementation, the benefits are now starting to come through. A common platform
creates significant efficiencies as well as economies of scale. Being able to
match businesses for sale from any part of the group with prospective buyers
regardless of their source of origin allows a superior service to be provided to
both sides of the transaction.
In addition, management reporting, accounting and a Group overview are available
more quickly and with less time spent, enabling us to have a closer control of a
more efficient business. I must thank all the staff who have coped valiantly
with the transition process and congratulate them on the helpful and effective
way they have enabled it to take place.
Bruce & Company Limited
Previously this division, which operates solely within Scotland, has focussed on
the licensed sector (Pubs and Hotels). This has now been extended to include Day
Nurseries and Care Homes using expertise from other parts of the Group to extend
the penetration into these sectors.
In addition, the staffing has been strengthened by the recruitment of more
valuers and negotiators. Allied to the move onto Unite, Bruce & Co has been able
to offer a wider range of services at an enhanced level. Despite the increased
competition from newer and smaller entrants to the Scottish market, we expect to
see further growth as a result of these developments.
Kings Business Transfer
Headquartered in Bury, Lancashire, Kings has always had a strong North Western
focus. This has been extended into the North East and is now broadening its
activities into the Midlands. It is intended that this expansion will continue
resulting, ultimately, in full national coverage. This will be governed by the
need to ensure that each stage of the growth is cost effective and is matched by
the recruitment of high quality business managers in each new area.
Like Bruce & Co, Kings has moved onto Unite during the year and the business has
used this opportunity to raise the standard and training of its staff and is now
fully prepared for the expansion as it takes place.
This has been a year in which the investment in marketing and staff that we have
made in Kings has started to pay dividends with sharply increased sales.
However, the nature of the market sector in which Kings operates means that the
level of debt provision has been much higher than expected. We have now
substantially improved our debt management procedures and expect that this will
lead to a reduction in the provision over the medium term.
Redwoods Dowling Kerr
As was announced in September 2006, we have decided to appoint a Chief Executive
for this business, to provide a focal point for what is the Group's largest
trading division and to align the structure to that of Bruce & Co. and Kings.
The recruitment for this position is continuing and, in the interim, I have been
taking direct responsibility for the division.
A number of changes have taken place in recent months, including the
streamlining of the negotiations team (with a consequent lifting of both quality
and efficiency) and a major improvement in the marketing and mailing material.
By using the skills and experience of the senior members of the RDK management
team, a fresh approach has been adopted which is already producing increased
response rates which should, in due course, translate into increased revenues.
In addition, we have decided to stick to the division's strengths by focussing
on a limited number of sectors where the strength and reputation already lies.
This has resulted in an increase in the average fee level and an improved
service.
Summary
This year has been one in which the final results were below initial
expectations. However, since our trading statement in September 2006, the
changes and improvements we have made to the business have started to have an
effect and we were delighted to be able to meet the revised expectations for the
year to 30 April 2007. As additional resources become available, we look forward
to increasing our rate of growth. I would like to take this opportunity to thank
the Group's staff for their hard work during this difficult period and look
forward to capitalising on their efforts in the coming months.
J J Custance Baker
Chief Executive
9 July 2007
Financial Review
Capital Structure
As at 30 April 2007, Group shareholders' funds were #4,529,627. Cash at hand
totalled #527,664, of which #521,775 represented deposits held on behalf of
purchasers. Debt totalled #2,399,097 consisting of #2,204,827 in respect of bank
loans, #174,558 in relation to bank overdraft and #19,712 in respect of finance
leases.
Turnover and Pre-tax Profit
Results for year to 30 April 2007
The Group achieved turnover of #5,704,207 in the year to 30 April 2007 (2006:
#5,086,724). The operating profit for the year before exceptional items was
#297,139 (2006: #698,181) and the loss before tax was #1,536,241 (2006: profit
of #590,104). The loss per share for the year was 11.8p (2006: earnings of
3.6p).
After adding back to the fully diluted loss per share of 11.8p the goodwill
amortisation of #461,580, exceptional items of goodwill write down of #1,500,000
and termination costs of #160,230, and then applying a composite tax rate
equivalent to 22.5%, the Group's adjusted EPS equated to 4.5p (2006: 7.0p)
For future accounting periods the Group will be required to adopt International
Financial Reporting Standards. Under these rules, the adjusted EPS of 4.5p
mentioned above would reduce to 3.9p.
Exceptional items
There are two exceptional items for the year to 30 April 2007.
a) Departure of founding Group Managing Director
As previously mentioned, Rupert Cattell left the Group by mutual agreement in
February 2007. The total costs of his departure amounted to #160,230.
b) Write down of goodwill
Having given regard to the carrying value of goodwill in respect to its
acquisition of Redwoods Agencies in the period November 2005 - May 2006, the
Directors felt it was appropriate to adjust this value to reflect the current
state of the Company's business activities. Consequently on 30 April 2007 an
impairment charge of #1,500,000 was made against the carrying value of goodwill.
A result of this write down was the generation of significant tax losses that
have been applied to the taxable profits of Bruce & Co Limited for the 12 months
to 30 April 2007 and to the profits of Dipford Group plc for the previous 12
months to 30 April 2006. This generated the tax credit of #160,000 for the year
to 30 April 2007.
MCM MacEacharn
Finance Director
9 July 2007
Group Profit and Loss Account
Year Ending 30 April 2007
2007 2006
# #
Turnover
Continuing operations 5,704,207 5,040,384
Discontinued operations - 46,340
5,704,207 5,086,724
Cost of sales
Continuing operations (1,058,970) (845,523)
Discontinued operations - (40,230)
(1,058,970) (885,753)
Gross profit 4,645,237 4,200,971
Net operating expenses
Continuing operations (4,381,861) (3,514,740)
Other operating income 33,763 11,950
Operating profit
Continuing operations 297,139 692,071
Discontinued operations - 6,110
Operating profit before exceptional items 297,139 698,181
Exceptional items (1,660,230) -
Operating (loss)/profit after exceptional items (1,363,091) 698,181
Interest receivable 21,002 14,651
Interest payable (194,152) (122,728)
(Loss)/profit on ordinary activities
before taxation (1,536,241) 590,104
Tax on (loss)/profit on ordinary activities 160,000 (200,000)
(Loss)/profit for the financial year (1,376,241) 390,104
(Loss)/Earnings per share
basic (11.8p) 3.6p
fully diluted (11.8p) 3.6p
There are no other recognised gains or losses other than the loss for the year.
Group Balance Sheet
30 April 2007
2007 2006
# #
Fixed assets
Intangible assets 6,820,013 8,772,915
Tangible assets 176,236 239,082
6,996,249 9,011,997
Current assets
Debtors 1,432,476 1,037,380
Cash at bank and in hand 527,664 762,472
1,960,140 1,799,852
Creditors - Amounts falling
due within one year (2,480,729) (2,574,184)
Net current liabilities (520,589) (774,332)
Total assets less current liabilities 6,475,660 8,237,665
Creditors - Amounts falling
due after more than one year (1,941,843) (2,327,607)
Provision for liabilities and charges
Deferred taxation (4,190) (4,190)
4,529,627 5,905,868
Capital and reserves
Called up share capital 581,126 581,126
Share premium account 5,117,259 5,117,259
Profit and loss account (1,168,758) 207,483
Shareholders' funds 4,529,627 5,905,868
Group Cash Flow Statement
Year Ending 30 April 2007
2007 2006
# #
Net cash inflow from operating
activities 705,561 999,216
Returns on investments and
servicing of finance
Interest received 21,002 14,651
Interest paid (194,152) (122,728)
Net cash outflow from returns on
investments and servicing of finance (173,150) (108,077)
Taxation
Corporation tax paid (327,281) (36,628)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (68,908) (96,538)
Payments to acquire intangible assets
-goodwill - (50,062)
-other (53,861) (61,648)
Proceeds on sale of fixed assets 30,813 -
Purchase of subsidiary undertaking - (2,163,429)
Purchase of Kings Business Transfer - (1,755,146)
Deferred consideration paid (291,118) (192,714)
Cash acquired with subsidiary undertaking - 768,535
Net cash outflow from investing activities (383,074) (3,551,002)
Net cash outflow before financing (177,944) (2,696,491)
Financing
Issue of ordinary share capital for cash - 1,511,190
New bank loans - 1,934,000
Loans from directors 75,000 -
Repayment of bank loans (248,206) (270,566)
Capital element of finance lease rental payments (58,216) (16,555)
Net cash (outflow)/inflow from financing (231,422) 3,158,069
(Decrease)/increase in cash (409,366) 461,578
Notes
1 The basic earnings per share has been calculated by dividing the loss on
ordinary activities after taxation of #1,376,241 (2006: profit of #390,104) by
11,622,512 (2006: 10,741,502), the weighted average number of 5p ordinary shares
in issue during the financial year.
2 The financial information on the Group set out above does not constitute
statutory information within the meaning of section 240 of the Companies Act
1985. The statutory accounts for the year ended 30 April 2007 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 Group's Annual General Meeting.
3 Copies of the 2007 Report and Accounts will be sent to shareholders in
due course. Further copies will be available from Dipford Group plc, Pynes,
Upton Pyne, Exeter, EX5 5EF or on the Company's website - www.dipford.com.
Note to editors:
Dipford Group is an AIM listed company which acts as an agent for vendors of
small and medium sized businesses throughout the UK across a wide range of
sectors. Dipford's business broking activities operate under the brand names
Redwoods Dowling Kerr, Kings Business Transfer and Bruce & Company. The strategy
for the Group is to expand the business through a combination of organic growth
and acquisition, consolidating what is a fragmented market. It is also part of
the strategy to develop activities which are complementary to the core business
broking sector.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RLMRTMMAMBTR
Dipford (LSE:DIP)
Historical Stock Chart
From Apr 2024 to May 2024
Dipford (LSE:DIP)
Historical Stock Chart
From May 2023 to May 2024
