RNS Number:3991Z
Aquilo PLC
29 June 2007
Aquilo PLC ("Aquilo" or "the Company")
ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
29 June 2007
I am pleased to present the 2006 Aquilo Plc report and financial statements.
INTRODUCTION
The financial statements for the year ended 31 December 2006 reflect a period of
considerable change for the group. ITS (UK) Ltd - providing insurance claims
handling and sophisticated IT infrastructural projects - was acquired in June
for #1.5 million (before fees) through a mixture of cash and shares.
The business of the loss making subsidiary Aquilo Motor Services Ltd was sold in
December for #1.5 million to Nationwide Accident Repair Services PLC for a
mixture of cash and adoption of debt.
This disposal of the motor claims handling business allowed management to focus
on the essential changes required to allow the Aquilo Group to move forward
successfully and also enabled the management team to proceed with a fundraising
which was completed in January 2007 raising #3.6 million, which, as a post
balance sheet event, is not reflected in the balance sheet in these accounts.
As a requirement of the fundraising management agreed to take action to reduce
the cost base by #0.3 million, on an annualised basis.
EXCEPTIONAL ITEMS
Following a strategic review late in the year, it was evident that the Group had
to radically change its method of operating in order to stem the trading losses
and attract new investment. In the absence of significant and far reaching
changes to the Group, it was difficult to see how the Group could continue.
As a consequence an impairment review was carried out on the value of the
investment in all the Group's subsidiaries, which resulted in a substantial
write down of goodwill being made in the year, which in aggregate amounted to an
exceptional charge of #2.3 million.
Following the sale of the Motor Trade business the long lease on the building
previously occupied by that subsidiary has been completely sublet. However, the
rents receivable do not cover the passing rent and accordingly an exceptional
charge has been made for this onerous lease covering the shortfall over the
residual period of the lease.
POST BALANCE EVENTS
Following an agreed change in the management structure, both at Group and
operating company level, a fund raising round was initiated in December and
completed at the Extraordinary General Meeting held on January 15 2007.
Greater detail is given in the notes to these accounts but in summary existing
shareholders subscribed to #2.61 million of new equity, an existing shareholder
subscribed #1 million of new loan stock and other shareholders agreed to convert
#0.76 million of loan notes into equity.
We were delighted by the support we received from both the existing and new
shareholders associated with this fundraising.
The proceeds including the cash element arising from the sale of the motor
division were allocated to reducing the Group's gearing by #2.5 million and
payments to significant creditors and fees of #0.7 million and #1.1 million was
taken as working capital.
Following the successful fund raising the entire Board of Directors stood down,
with the exception of Clive Nichols, CEO, and Peter Friend, Non Executive, and I
was asked to take over the role as Chairman.
In May 2007 new banking facilities were arranged with the Hong Kong and Shanghai
Banking Corporation, which has taken over as the Group's principal banker. This
facilitated the Group in arranging with the largest shareholder in the Group, a
further loan of #1.5 million.
FINANCIAL REVIEW
Turning back to the year under review, the 2006 trading results were
disappointing with turnover at #19.4 million, being slightly below the 2005
figure of #19.7 million.
The increase in Group turnover arising from the acquisition of ITS (UK) Ltd for
the half year of #6.9 million was offset by a reduction in the turnover in the
motor division of #7.6 million, as the principal customer progressively took
more claims handling back in house.
The operating loss increased from #1.9 million in 2005 to #4.5 million, before
exceptionals, in 2006; on a like for like basis the loss in 2006 was #4.8
million - excluding the impact of the ITS (UK) Ltd acquisition.
The loss per share increased from #0.004 in 2005 to #0.015 in 2006.
DIVIDEND
The Group's financial position precludes the payment of a dividend for the year
under review.
TRADING OVERVIEW
In conclusion the poor results were a reflection of a period of considerable
change for the Group which was characterised by a reduction in the motor trade
revenues, the inability to reduce overheads in direct proportion to that fall,
significantly increased finance costs and the start up costs for Aquilo
Inspection and Re-instatement Services.
The shortage of working capital in 2006 prevented the required remedial actions
being taken and so it was not until the fund raising was completed in January
2007, that the Group was in apposition to make the necessary changes to people
and systems.
The market for the outsourcing of insurance claims remains strong as the major
insurers continue to look at ways of saving money, in non customer facing
operations.
The Aquilo Group has maintained a strong reputation for a high quality of
customer service during the turbulent times it experienced in 2006 and following
the fund raising, is in a position to capitalise on these skills, while
implementing the controls and disciplines which were lacking.
Chris Langridge
Chairman
29 June 2007
Contacts:
Clive Nicholls - Chief Executive Officer - Tel: 07734 157841
John Riddell - Nobles Company Limited - 0131 225 9677
The Directors present their annual report and the audited financial statements
for the year ended 31 December 2006.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The company's principal activity is that of a holding company. The business of
the group is insurance claims management.
The dual strategies pursued in 2006 were firstly to integrate the new
acquisitions (the motor division and HFC which were acquired in 2005 and IT
Solutions (GB) Limited which was acquired in 2006) which therefore continued the
original strategy of providing a "one stop shop" for most categories of domestic
claims management. This integration strategy was not altogether successful in
2006 and resulted in the significant changes noted in the Chairman's report. The
second strategy pursued in 2006 was to focus on increasing the trading volumes
passing through Aquilo Inspection and Reinstatement Services Limited to achieve
a break even trading position in early 2007.
PRINCIPAL RISKS AND UNCERTAINTIES
The directors regularly review principal risks and uncertainties that affect the
Group. These include key customer changes, managing the volatility in the volume
of claims notified and managing the changes in customers' requirements for the
supply chain businesses.
RESULTS AND DIVIDENDS
The Group's turnover for the year amounted to #19.4 million (2005 - #19.7
million) and the operating loss amounted to #4.7 million (2005 - #2.0 million).
The net loss, after exceptional items, was #7.4 million (2005 - #1.5 million).
No dividend was paid during the year (2005 - nil) and the directors do not
propose the payment of a final dividend (2005 - nil).
POST BALANCE SHEET EVENTS
As mentioned in the Chairman's report and in the post balance sheet events note
to the financial statements, a significant fundraising round was completed in
January 2007 and further funds were raised in May 2007.
NON CURRENT ASSETS
The movement in non current assets during the year is set out in notes 11, 12
and 13 to the financial statements.
DIRECTORS AND THEIR INTERESTS
The following directors have held office during the whole of the period from 1st
January 2006 to the date of this report.
Ordinary shares of 1p each
2006 2005
C G Nicholls 287,715 287,715
P R H Friend - -
Other changes in directors holding office
are as follows:
J Ashcroft (resigned 1 October 2006) - -
M Dean (resigned 1 October 2006) - -
M Eve (resigned 15 January 2007) 5,051,906 5,776,192
Prof K Keasey (resigned 15 January 2007) 24,656,193 24,656,193
K Vella (resigned 15 January 2007) - -
C T Langridge (appointed 10 January 2007) - -
A G Rackstraw (appointed 12 January 2007) 4,000 1,000,000
Options over shares in the company held or granted to the directors serving at
the year end were as follows:
Number of Granted Option Exercised Lapsed Number of Exercisable Expiry
Options at in price in in options at from date
01/01/2006 period period period 31/12/2006
M Eve 121,528 - 1.75p - 121,538 - May 2003 Apr 2006
M Eve 800,000 - 1.75p - 800,000 - Jul 2004 Jul 2014
Mike Eve - 1,316,339 1.75p - - 1,316,339 Jan 2006 Jan 2016
C G Nicholls 643,400 - nil - - 643,400 Nov 2003 Nov 2013
C G Nicholls 800,000 - 1.75p - 800,000 - Jul 2004 Jul 2014
C G Nicholls 1,000,000 - 1.75p - 1,000,000 - Oct 2004 Oct 2014
C G Nicholls 39,583 - 1.75p - 39,583 - Oct 2002 Oct 2005
C G Nicholls - 13,839,583 1.75p - 3,960,000 9,879,583 Jan 2006 Jan 2016
K Keasey 375,000 - nil - 375,000 - Nov 2003 Nov 2006
K Keasey 800,000 - 1.75p - 800,000 - Jul 2004 Jul 2014
K Keasey - 800,000 1.75p - - 800,000 Jan 2006 Jan 2016
12,000,000 of the options granted to C Nicholls were subject to vesting
conditions over three years. These conditions were not met, leaving 8,040,000 of
his current options subject to vesting conditions over the next two years.
CORPORATE GOVERNANCE
The Board is committed to the highest principles of corporate governance. As the
company is quoted on the Alternative Investment Market, there is no requirement
to comply with the requirements of the Combined Code.
The Board meets ten times a year and is responsible for maintaining a sound
system of internal controls to safeguard shareholder investment and Group
assets.
The Board has appointed a Remuneration Committee, consisting of the Chairman and
the non-executive director, P Friend.
EMPLOYMENT OF DISABLED PERSONS
The group gives full and fair consideration to applications for employment
received from disabled persons having regards to their particular aptitudes and
abilities and wherever possible the Group continues the employment of, and
arranges for reasonable adjustments to the working conditions of, employees who
have become disabled persons while employed by the Group. Disabled employees are
treated no differently from any other employees as regards training, career
development and promotion opportunities. The Group operated this policy
throughout the year.
EMPLOYEE INVOLVEMENT
Effective employee relations are seen as key drivers in motivating the Group
forward. Consequently human resources, quality, heath and safety and training
functions need to establish good communications with individual sites and are
therefore provided as required. Regular review meetings are held at local level
to ensure that all employees are kept informed of the Group's objectives.
SUPPLIER PAYMENT POLICY
The Group requires its subsidiaries to negotiate clear and satisfactory
arrangements for payment of suppliers as part of the overall terms and
conditions of supply and to make payments accordingly. Neither the Company nor
the Group has a standard code that deals specifically with the payment of
suppliers. However, suppliers are made aware of payment terms and how any
disputes are to be settled, and payment is made in accordance with those terms.
Trade creditor days at the year end were 47 days (2005 - 52 days).
SHARE CAPITAL
Full details of the authorised and issued share capital of the Company are set
out in note 21 to the financial statements.
SUMMARY OF KEY PERFORMANCE INDICATORS
The Directors have monitored the progress of the overall Group/Company strategy
and the individual elements by reference to certain financial and non-financial
key performance indicators.
Key performance indicator Method of calculation.
Gross profit margin (%) Gross profit is the ratio of gross profit
to sales expressed as a percentage
Repudiated claims The percentage of all claims received
which are not covered, withdrawn by the
customer or are within the policy
deductible.
Average repair cost The average cost of settling valid claims.
Job life cycle The number of days from instruction to
invoicing.
FINANCIAL RISK MANAGEMENT
The Group and Company are exposed to a variety of financial risks which result
from its operating and investing activities. The Group and the Company's risk
management is coordinated by its executives and is regularly discussed at Board
meetings. The Group and the Company do not engage in the trading of financial
assets. The most significant risks to which the Group and the Company are
exposed to are:
i) Credit risk
The Group and Company's trade and other receivables are actively monitored to
avoid significant concentrations of credit risk.
ii) Cash flow and interest rate risks
The Group and the Company are in a cash negative situation and is therefore
exposed to interest rate fluctuations on its borrowings. As described in the
post balance sheet events note to the financial statements, longer term
borrowings were arranged in January 2007.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the annual report and the financial
statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors are required to prepare the group
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
The financial statements are required to give a true and fair view of the state
of affairs of the company and the Group and of the profit or loss of the group
for that period. In preparing these financial statements, the directors are
required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
* prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and the group and enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website. Legislation in the
United Kingdom governing the preparation and dissemination of the financial
statements and other information included in annual reports may differ from
legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as
defined by Section 234ZA of the Companies Act 1985) of which the company's
auditors are unaware, and each director has taken all the steps that he ought to
have taken as a director in order to make himself aware of any relevant audit
information and to establish that the company's auditors are aware of that
information.
AUDITORS
PKF (UK) LLP have offered themselves for reappointment in accordance with
Section 385 of the Companies Act 1985.
On behalf of the Board
Chris Langridge
Chairman
29 June 2007
Directors' report and consolidated financial statements
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2006
2006 2006 2005
Notes # # #
TURNOVER
Continuing operations 2,680,654 2,826,221
Acquisitions 6,880,816
-----------
9,561,470
Discontinued operations 9,810,764 16,868,148
----------- ------------ -----------
19,372,234 19,694,369
Cost of Sales (15,909,800) (15,974,420)
------------ -----------
GROSS PROFIT 3,462,434 3,719,949
Administrative expenses 3
- exceptional - (52,395)
- other (8,164,981) (5,728,115)
----------- ------------ -----------
(4,702,547 (2,060,561)
Other operating income 170,000 87,050
------------ -----------
OPERATING PROFIT/(LOSS) 2,3
Continuing operations (4,047,575) (2,417,300)
Acquisitions 192,127
------------
(3,855,448)
Discontinued operations (677,099) 443,789
------------ ------------ -----------
(4,532,547) (1,973,511)
Exceptional costs 3 (2,556,277) 686,497
------------ -----------
LOSS ON ORDINARY ACTIVITIES
BEFORE INTEREST (7,088,824) (1,287,014)
Interest receivable and
similar income 6 9,585 34,617
Interest payable and similar
charges 7 (408,814) (193,581)
------------ -----------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (7,488,053) (1,445,978)
Tax on losses on ordinary
activities 8 13,600 4,545
------------ -----------
LOSS FOR THE FINANCIAL YEAR
AFTER TAXATION (7,474,453) (1,441,433)
MINORITY INTERESTS 65,067 (10,752)
------------ -----------
LOSS FOR THE YEAR (7,409,386) (1,452,185)
============ ===========
LOSS PER SHARE (BASIC &
DILUTED) 1.86p 0.45p
------------ -----------
LOSS PER SHARE (BASIC &
DILUTED - CONTINUING
OPERATIONS) 1.80p 0.5p
------------ -----------
There are no recognised gains and losses other than as reflected in the profit
and loss account. There are no differences between the loss on ordinary
activities before taxation above and the historical cost loss. The notes on
pages 14 to 33 form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2006
2006 2005
Notes # # # #
FIXED ASSETS
Intangible assets 11 1,000,018 1,640,297
Tangible assets 12 66,966 615,124
Investments 13 - 51,550
---------- ----------
1,066,984 2,306,971
CURRENT ASSETS
Stocks 14 322,528 103,897
Debtors 15 3,438,012 2,528,413
Cash at bank and in hand 292,663 841,948
---------- ----------
4,053,203 3,474,258
CREDITORS:
Amounts falling due within
one year 16 (8,497,210) (4,180,867)
---------- ----------
NET CURRENT LIABILITIES (4,444,007) (706,609)
CREDITORS:
Amounts falling due after
more than one year 17 (1,907,132) (1,685,502)
Provisions for liabilities
and charges 20 (429,000) (13,473)
---------- ----------
(5,713,155) (98,613)
========== ==========
CAPITAL AND RESERVES
Called up share capital 21 4,511,306 3,297,957
Share premium account 22 2,233,683 1,410,042
Shares to be issued 23 - 250,000
Consolidated loan stock 22 57,489 22,025
reserve
Share option reserve 22 37,457 -
Profit and loss account 22 (12,518,872) (5,109,486)
---------- ----------
SHAREHOLDERS' FUNDS 23 (5,678,937) (129,462)
MINORITY INTERESTS (34,218) 30,849
---------- ----------
(5,713,155) (98,613)
========== ==========
The notes on pages 14 to 33 form an integral part of these financial statements.
The financial statements were approved and authorised for issue by the board of
directors on 29 June 2007 and were signed on its behalf by:-
Chris Langridge
Chairman
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
2006 2005
Note # #
CASH FLOW STATEMENT
Cash flow from operating activities 27 (389,659) (554,732)
Returns on investments and servicing of
finance 28 (285,943) (158,964)
Taxation 28 (13,249) (13,517)
Capital expenditure and financial investment 28 (42,829) 2,698,397
Acquisitions and disposals 28 (814,955) (1,831,757)
--------- ---------
Cash inflow/(outflow) before management of
liquid resources and financing (1,546,635) 139,427
Financing 28 815,420 675,828
--------- ---------
(Decrease)/Increase in cash in the year (731,215) 815,255
========= =========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/Increase in cash in the year (731,215) 815,255
Cash outflow from changes in net debt (705,054) 297,811
Loans and finance leases acquired with
subsidiary - (1,981,327)
Loan notes issued for acquisition of
subsidiary - (402,437)
--------- ---------
Movement in net debt in the year (1,436,269) (1,270,698)
Net fund/(debt) at the start of the year (1,261,597) 9,101
--------- ---------
Net fund/(debt) as at the end of the year 29 (2,697,866) (1,261,597)
========= =========
These notes on pages 14 to 33 form an integral part of these financial
statements.
SELECTED NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2005
LOSS PER SHARE
Group 2006 2005
# #
Loss on ordinary activities after taxation 7,409,386 1,441,433
========= =========
Weighted average number of shares in issue 1,594,442 1,295,760
========= =========
Loss per share - continuing operations 1.80p 0.5p
- discontinued operations 0.06p 0.05p
========= =========
On 16 January 2007 Aquilo plc reorganised its share capital by issuing 1
ordinary 10p share and 240 deferred shares for every 250 shares in issue at that
date. The number of shares in issue in 2005 and 2006 have been restated for this
event.
There are share options in place at the year end, but these would have an
anti-dilutive effect on the earnings per share and, as such, have not been
included in the calculations.
The loss per share for continuing operations in 2006 (on operating profit/
(loss)) was #2.33 per share (2005 - #1.31 per share) (this includes a profit per
share in 2006 of #0.12 on acquisitions). The loss per share for discontinued
operations in 2006 (on operating loss) was #0.42 per share (2005 - #0.21 per
share).
CALLED UP SHARE CAPITAL
2006 2005
# #
Authorised
600,000,000 ordinary shares of 1p each 6,000,000 6,000,000
========= =========
Allotted, called up and fully paid
451,130,615 (2005: 329,795,672) ordinary shares
of 1p each 4,511,306 3,297,957
========= =========
During the year:
The Company issued 70,085,715 1p ordinary shares at a premium of 0.75p per share
as part of the consideration for the acquisition of IT Solutions (GB) Limited.
The Company issued 9,375,000 1p ordinary shares at a premium of 0.2p per share
via a share issue during the year.
The Company issued 27,703,354 1p ordinary shares at an average premium of 0.62p
per share in the year in respect of legal fees incurred.
The #250,000 of shares to be issued at 31 December 2005 were issued during the
year (14,170,874 shares at a premium of 0.75p per share).
POST BALANCE SHEET EVENTS
Following discussions with the key institutional shareholders, a fundraising
round was completed and approved by the members at an EGM on 15 January 2007.
Equity
A total of 3,163,636 new shares were issued at #0.825 per share, resulting in
#2.61 million being raised.
In addition a consolidation of the existing shares was approved, whereby for
every 250 of the "old" shares one new share of #0.10 was issued and 240 deferred
shares of #0.01. The deferred class of shares has no voting rights. The total
number of voting shares in issue after the consolidation was 1,804,409.
Convertible loan notes
The holders of #0.8 million of convertible loan notes elected to convert their
loans into ordinary shares, resulting in 917,413 new shares being issued.
Debt
A total of #1.0 million of new term debt was raised, the terms of which are
interest of 3.5% over LIBOR payable quarterly in arrears with a capital
repayment holiday of two years and then repayment of the principal by
instalments over the next three years.
The terms of the existing #0.5 million convertible unsecured loan were converted
to the same terms as the new #1 million terms debt.
A total of #1.2 million of loans, repayable on demand and bearing interest rates
of 2.5 % over LIBOR were also converted to the same terms as the new #1 million
term loan.
In a subsequent fund raising round in May 2007, a shareholder who had already
participated in the January round, advanced a further #1.5 million, the terms of
which are interest at base rate plus 6% plus 6% fees, together with an up-front
arrangement fee.
Copies of the Annual Report, of which this announcement is an abridged version,
for the year ended 31 December 2006 will be sent to shareholders as soon as
practicable. Further copies will be available from the Company's registered
address: Edwinstowe House, High Street, Edwinstowe, Nottingham, NG21 1PR or can
be downloaded from the company's website. www.aquiloplc.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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