TIDMMHG
RNS Number : 5156N
Merchant House Group PLC
28 September 2012
Merchant House Group PLC (the "Company" or the "Group")
Final results for the year ended 31 December 2011
Chairman's Statement
Revenues have continued to increase, up 258% to GBP7,696,000
(2010: GBP2,151,000). Although a loss of GBP5,613,000 was incurred,
this was after a number of significant one-off charges and costs as
detailed in the financial statements. Net debt was GBP1,291,000
compared to GBP419,000 at December 2010. Importantly, we have since
the year end secured the support of investors who, with the board,
see exciting prospects in the businesses going forward.
Investments
Shareholders are aware of the purchase of assets of the Clarkson
Hill Group (in administration) in December 2010 by Merchant House
Financial Services Limited ('MHFS'), our Independent Financial
Advisor business. This came with a pipeline receivable of
GBP2,710,000 which was recognised in the December 2010 accounts and
reported last year, although these monies were received during
2011. Furthermore, during the year under review, MHFS incurred a
loss of GBP2,447,000 before a subsidy from Merchant House Group.
This loss is largely the result of the costs related to the complex
process of arranging for the authorisation of the new advisors,
during which, they were unable to operate and write business. For
most advisers, this lasted until March or April 2011, and for some
until May and even June 2011. There was also a considerable one-off
investment in training, compliance and additional support required
at the time. Had the business operated during that period, much of
the loss could have been mitigated. For example, during the first
three months of 2011, the average gross income for MHFS was
GBP20,000 whilst in June 2011, after all advisors had been
authorised, income was GBP740,000. During this time, a team of some
120 advisors and the staff were not earning fees and had to be
supported by additional and exceptional expense by MHFS and the
Group. As shareholders can see, this amount accounts for a
considerable proportion of the Group loss for the year being
reported. However, following a year of restructuring and
investment, the directors view this business with more
confidence.
2011 also saw investment in new teams: PYXMarkets, the new
binary options trading business, a new foreign exchange trading
business and additional senior marketing staff for the existing
structured products business.
Growth
There has been considerable growth in the principal businesses
during the year under review. Sales of structured products grew by
116% with gross sales of GBP22,862,000 (2010: GBP10,540,000). MHFS
increased client numbers by 36% or 11,000 (to a total of 42,000)
and assets under influence by 30% or some GBP100m.
Assets under management in the asset management business grew by
25% from around US$36.2m to almost US$45.3m.
Current trading
2012 has seen revenues continue to rise, and new funding has
been secured. The second tranche subscription of loan notes by Beia
Capital Limited has been completed and FSA approval has been
received for the GBP400,000 placing of new ordinary shares with
Beia Investment Partners LLP, as announced on 26 June 2012, which
is expected to be completed in the next few weeks. The Company is
also in advanced discussions to secure further investment into the
business, which may include a standby equity distribution
agreement.
The interim results for the six months to 30 June 2102 are
expected to be published early next month and will provide
shareholders with a full update on the period under review.
Accordingly, trading in the Company's ordinary shares on AIM will
remain suspended pending release of the interim results.
As has been the case for all companies in the last few years,
the markets and environment remain challenging and cash flow is
tight and is being monitored by the Directors which underscores the
accomplishment of such growth for 2011 and for which I would like
to thank the whole team.
J Holmes
Chairman
Consolidated income statement
For the year ended 31 December
2011 2010
GBP GBP
Revenue 7,696,738 2,151,181
Cost of sales (7,451,698) (610,867)
Gross profit 245,040 1,540,314
Surplus of fair value
over purchase cost - 1,915,026
Sales and marketing
expenses (7,482)
Administrative expenses (4,336,148) (2,631,377)
Impairment of associate -
Other operating income 146,792 116,481
Unrealised (loss)/gain
on current asset investments - (4,463)
Disposal of non controlling 10,749 -
interest
Impairment loss on (500,000) -
investments
(Loss)/Profit from
operations (4,441,049) 935,981
Finance expense (719,974) (7,507)
Investment income 193,461 96,482
Share of loss of equity-accounted
investees (net of
tax) (665,490) 665,490
(Loss)/Profit Before
Taxation (5,633,052) 1,690,446
Income tax expense 19,493 (80,756)
(Loss)/Profit for
the financial period (5,613,559) 1,609,690
------------------- ---------------------------
Attributable to:
Owners of the Company (5,547,545) 1,609,690
Non-controlling interests (66,014) -
(5,613,559) 1,609,690
------------------- ---------------------------
(Loss)/Profit per
share (pence) including
share of associates'
results
Basic (0.26p) 0.38p
Diluted (0.16p) 0.07p
(Loss)/profit per
share (pence) excluding
share of associates'
results
Basic (0.23p) 0.22p
Diluted (0.14p) 0.04p
----------------------------------- ------------------- ---------------------------
Consolidated and Company statement of financial position
At 31 December
Group Company Group Company
2011 2011 2010 2010
GBP GBP GBP GBP
ASSETS
Non-current
Assets
Property, plant
and
equipment 13,429 13,429 17,230 17,230
Investment in
group
undertakings - 650,000 665,490 641,001
Trade and other - 1,230,013 - -
receivables
13,429 1,893,442 682,720 658,231
Current Assets
Trade and other
receivables 3,055,260 468,613 3,434,083 2,020,391
Cash and cash
equivalents 141,801 16,368 309,376 4,160
Investments 2,847 2,847 502,847 2,847
Total current
assets 3,199,908 487,828 4,246,306 2,027,398
TOTAL ASSETS 3,213,337 2,381,270 4,929,026 2,685,629
------------------- ------------------------- ---------------------------- --------------------------
EQUITY AND
LIABILITIES
Current
Liabilities:
Loans and
borrowings 661,646 156,385 185,200 185,200
Trade and other
payables 3,897,496 2,296,143 2,933,425 1,872,586
4,559,142 2,452,528 3,118,625 2,057,786
Non-current
liabilities:
Loans and
borrowings 199,866 78,928 123,957 123,957
Subordinated
loan 100,000 - 100,000 -
299,866 78,928 223,957 123,957
Equity and
Reserves
Called up share
capital 867,592 867,592 613,342 613,342
Shares to be
issued 12,235 12,235 57,857 57,857
Convertible loan
notes 471,572 471,572 293,043 293,043
Share premium 4,143,810 4,143,810 2,139,775 2,139,775
Retained
Earnings (7,065,118) (5,645,395) (1,517,573) (2,600,131)
Equity
attributable
to equity
holders
of the parent (1,569,909) (150,186) 1,586,444 503,886
Non-controlling (75,763) - - -
interest
Total Equity (1,645,672) (150,186) 1,586,444 503,886
------------------- ------------------------- ---------------------------- --------------------------
TOTAL EQUITY AND
LIABILITIES 3,213,336 2,381,270 4,929,026 2,685,629
----------------- ------------------- ------------------------- ---------------------------- --------------------------
Statement of changes in equity
Year ended 31 December 2011
Group Attributable to owners of the Company
Convertible Share Share Retained Total Non- Total Equity
Loan Note Capital Premium earnings Controlling
interest
GBP GBP GBP GBP GBP GBP GBP
Balance at
1 January
2010 18,682 542,350 1,031,924 (3,127,263) (1,534,307) - (1,534,307)
-------------------------- --------------------------- ---------------------------- -------------------------- -------------------------------- ---------------------- -------------------------------
Total
Comprehensive
Income for
the year - - - 1,609,690 1,609,690 - 1,609,690
Movement
in equity 274,361 - - - 274,361 - 274,361
274,361 - - 1,609,690 1,884,051 1,884,051
Transactions
with owners
recorded
directly
in equity:
Share issue - 70,992 719,015 - 790,007 - 790,007
Shares to
be issued - 57,857 388,836 - 446,693 - 446,693
- 128,849 1,107,851 - 1,236,700 - 1,236,700
-------------------------- --------------------------- ---------------------------- -------------------------- -------------------------------- ---------------------- -------------------------------
Balance at
31 December
2010 293,043 671,199 2,139,775 (1,517,573) 1,586,444 - 1,586,444
Disposal - - - - - - -
of non
controlling
interest
Total
Comprehensive
Income for
the year - - - (5,547,545) (5,547,545) (66,014) (5,613,559)
Movement
in equity
component
of Loan Note 178,529 - - - 178,529 - 178,529
Pre-acquisition
losses - - - - - (10,749) (10,749)
178,529 - - (5,547,545) (5,369,016) (76,763) (5,445,779)
Transactions
with owners
recorded
directly
in equity:
Share Capital - - - - - 1,000 1,000
Shares issued - 208,628 2,004,035 - 2,212,663 - 2,212,663
- 208,628 2,004,035 - 2,212,663 1,000 2,213,663
-------------------------- --------------------------- ---------------------------- -------------------------- -------------------------------- ---------------------- -------------------------------
Balance at
31 December
2011 471,572 879,827 4,143,810 (7,065,118) (1,569,909) (75,763) (1,645,672)
----------------- -------------------------- --------------------------- ---------------------------- -------------------------- -------------------------------- ---------------------- -------------------------------
Company
Convertible Share Capital Share Premium Retained Total
Loan Note Earnings
GBP GBP GBP GBP GBP
Balance at 1
January 2010 18,682 542,350 1,031,924 (3,146,907) (1,553,951)
-------------------------- --------------------------- ---------------------------- -------------------------- ------------------------
Total
Comprehensive
Income for
the
year - - - 546,776 546,776
Movement in
Equity 274,361 - - - 274,361
274,361 - - 546,776 821,137
Transactions
with owners
recorded
directly
in equity:
Share issue - 70,992 719,015 - 790,007
Shares to be
issued - 57,857 388,836 - 446,693
- 128,849 1,107,851 - 1,236,700
-------------------------- --------------------------- ---------------------------- -------------------------- ------------------------
Balance at 31
December 2010 293,043 671,199 2,139,775 (2,600,131) 503,886
Total
Comprehensive
Income for
the
year - - - (3,045,264) (3,045,264)
Movement in
Equity 178,529 - - - 178,529
178,529 - - (3,045,264) (2,866,735)
Transactions
with owners
recorded
directly
in equity:
Share issue - 208,628 2,004,035 - 2,212,663
Balance at 31
December 2010 471,572 879,827 4,143,810 (5,645,395) (150,186)
--------------- -------------------------- --------------------------- ---------------------------- -------------------------- ------------------------
Consolidated and Company cash flow statement
For the year ended 31 December
2011 2010
Group Company Group Company
GBP GBP GBP GBP
Reconciliation of
operating loss to
net cash flow from
operating activities
Operating
(loss)/profit (4,441,049) (2,800,492) 935,981 554,282
Decrease/(Increase)
in trade & other
receivables 378,823 321,764 (3,122,639) (1,995,002)
Increase in trade
& other payables 990,113 449,599 1,239,464 285,035
Depreciation 8,239 8,239 5,414 5,414
Impairment of 500,000 - - -
investment
Unrealised
loss/(gain)
on current asset
investments - - 4,464 4,463
Disposal of non (10,749) - - -
controlling
interest
Tax repayable 19,493 - - -
Net cash
(outflow)/inflow
from operating
activities (2,555,130) (2,020,889) (937,316) (1,145,808)
Investing Activities
Financial income 193,461 17,096 96,482 -
Sales of investments 1,000 1,000 - -
Purchase of plant
& equipment (4,438) (4,438) (20,800) (20,800)
Investment in - (9,999) - -
subsidiary
Net cashflow from
investing
activities 190,023 3,659 75,682 (20,800)
Financing activities
Proceeds from share
issue 2,212,663 2,212,663 790,008 790,008
Loan proceeds 1,391,247 275,000 417,000 417,000
Loans repaid (518,862) (28,815) (59,800) (59,800)
Loan notes converted
to ordinary shares (141,500) (141,500) - -
Financial expense (719,974) (261,867) (7,507) (7,507)
Net cash inflow from
financing
activities 2,223,574 2,055,481 1,139,701 1,139,701
Increase/(decrease)
in cash & cash
equivalents (141,533) 38,251 278,067 (26,907)
--------------------- ------------------- -------------------- ---------------------------- --------------------------
Reconciliation of net cash flow to movement in net
debt
2011 2010
Group Company Group Company
GBP GBP GBP GBP
Increase/(decrease)
in cash in the period (141,533) 38,250 278,067 (26,907)
Cash inflow from issue
of loan note (1,391,247) (275,000) (417,000) (417,000)
Loan note repaid 518,862 28,815 59,800 59,800
Loan notes converted
to ordinary shares 141,500 141,500 223,000 223,000
Movement in year (872,418) (66,435) 143,867 (161,107)
Net (debt) brought
forward (418,866) (624,083) (562,733) (462,976)
Net (debt) carried
forward (1,291,284) (690,518) (418,866) (624,083)
------------------------ -------------- -------------------- --------------------- --------------------
Analysis of changes in cash and cash equivalents
and net(debt)
Group At 1 January Cashflows Other non At 31 December
2011 cash changes 2011
GBP GBP GBP GBP
Cash at bank and in
hand 309,376 (167,575) - 141,801
Bank overdraft (26,042) 26,042 - -
Cash and cash
equivalents 283,334 (141,533) - 141,801
Debt due within one
year:
Secured loan notes (160,200) 18,815 - (141,385)
Unsecured loan notes (442,000) (265,000) 141,500 (565,500)
Other unsecured loans (100,000) (626,200) - (726,200)
Net debt (418,866) (1,013,918) 141,500 (1,291,284)
----------------------- -------------------- -------------------- ---------------------------- -------------------
Company At 1 January Cashflows Other non At 31 December
2011 cash changes 2011
GBP GBP GBP GBP
Cash at bank
and in
hand 4,160 12,208 - 16,368
Bank
overdraft (26,042) 26,042 - -
Cash and
cash
equivalents (21,882) 38,250 - 16,368
Debt due
within one
year:
Secured loan
notes (160,200) 18,815 - (141,385)
Unsecured
loan notes (442,000) (265,000) - (707,000)
Other
unsecured
loans - - 141,500 141,500
Net debt (624,082) (207,935) 141,500 (690,517)
------------- -------------------------- --------------------------- ---------------------------- -------------------
Notes
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 December 2011 or
2010, but is derived from those accounts. Statutory accounts for
2010 have been delivered to the registrar of companies, and those
for 2011 will be delivered in due course. The auditors have
reported on those accounts; their reports (i) were unqualified),
(ii) except as noted below did not include a reference to any
matters to which the auditors drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The audit report on the accounts for 2011 includes an Emphasis
of Matter paragraph regarding the disclosures in the accounts about
the ongoing applicability of the going concern basis in preparing
those accounts.
The financial statements include the following notes:
Going concern
The financial statements have been prepared on a going concern
basis, which contemplates continuity of normal business activities
and the realisation of assets and settlement of liabilities in the
ordinary course of business. In applying the going concern basis,
the directors have considered the current financial position of the
Group and Company, its trading prospects and the funding provided
by Beia Capital Limited, an investor in the Company. They have
considered all of the above factors in relation to a period of at
least the next 12 months. Taking all these factors into account,
the directors have concluded that it remains appropriate to prepare
the financial statements on a going concern basis. This indicates
the existence of material uncertainty which may cast significant
doubt about the company's ability to continue as a going concern.
The financial statements do not include the adjustments that would
result if the company was unable to continue as a going
concern.
(Loss)/earnings per share
The (loss)/profit per share has been calculated by dividing the
loss for the year after taxation, including share of associates'
losses of GBP665,490 (2010: profit of GBP665,490) attributable to
the equity holders of the Company of GBP(5,547,545) (2010:
GBP1,609,690) by the weighted average number of ordinary shares in
issue at the year end of 2,157,289,310 (2010: 424,618,438).
Diluted (loss)/profit per share has been calculated using the
weighted average number of ordinary shares in issue at the year
end, diluted for the effect of loan conversion rights, convertible
preference shares and warrants. There were unexercised loan
conversion rights, convertible preference shares and warrants on
1,375,535,419 shares in existence at the year end (2010:
1,777,797,247) in addition to the weighted average number of
ordinary shares in issue at the year end of 2,157,289,310 (2010:
424,618,438).
The (loss)/profit per share has been calculated by dividing the
loss for the year after taxation, excluding share of associates'
losses of GBP665,490 (2010: profit of GBP665,490) attributable to
the equity holders of the Company of GBP(4,882,055) (2010:
GBP944,000) by the weighted average number of ordinary shares in
issue at the year end of 2,157,289,310 (2010: 424,618,438).
Diluted (loss)/profit per share has been calculated using the
weighted average number of ordinary shares in issue at the year
end, diluted for the effect of loan conversion rights, convertible
preference shares and warrants. There were unexercised loan
conversion rights, convertible preference shares and warrants on
1,375,535,419 shares in existence at the year end (2010:
1,777,797,247) in addition to the weighted average number of
ordinary shares in issue at the year end of 2,157,289,310 (2010:
424,618,438).
Subsequent events
A total of 1,213,412,693 ordinary shares of 0.01p have been
issued since the year end for a total consideration of
GBP856,500.
On 23 February 2012, the Company agreed to terminate its
Shareholder Agreement of 28(th) November 2006 with Industrial
Investment Group Limited, disposing of its 49% stake in Merchant
House Finance Limited for GBP1.
On 9(th) May 2012, the Company subscribed for 50,000,000
ordinary shares of 0.5p each in Merchant Capital Ltd for a
consideration of GBP250,000 payable in cash.
On 19 June, the Company entered into an agreement with Beia
Capital Limited("BCL") whereby the Company will seek to issue and
BCL will seek to place for subscription GBP1,350,000 nominal value
secured non-convertible loan notes 2017 in the Company. The
interest rate is negotiable and will be announced when agreed. If
not subscribed for in full, BCL will either subscribe for the
shortfall itself or be obliged to make a loan to the Company for
the shortfall. GBP675,000 was subscribed for on 31 July 2012
On 26 June 2012, the Company issued, subject to FSA approval,
1,000,000,000 new ordinary shares of 0.01 pence each at 0.04 pence
per share ("Placing Shares") to Beia Investment Partners LLP
("Beia"). FSA approval was gained on 22 August.
On 3 July 2012 Beia subscribed for a 5-year convertible loan
note for GBP250,000 with a 6.5 per cent. coupon, convertible at the
option of the noteholder at 0.04 pence at any time until 10 May
2017. The loan notes are secured by way of a debenture dated 3 July
2012 and transferable. The notes, loan made by BCL and the 6.5 per
cent. convertible loan notes will rank pari passu as secured
obligations of the Company unless the Company, BCL and Beia agree
otherwise.
Annual Report
A copy of the Annual Report and Financial Statements for the
year ended 31 December 2011 will be posted to shareholders shortly
and will be available on the Company's website,
www.merchanthousegroup.com.
For further information:
Merchant House Group plc
James Holmes, Chairman
Christopher Day, CEO
+44 (0) 20 3544 4793
Allenby Capital Limited
Jeremy Porter / James Reeve
+44 (0) 20 3328 5656
This information is provided by RNS
The company news service from the London Stock Exchange
END
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