RNS Number:8467I
Durlacher Corporation PLC
18 March 2003
Embargoed until 07:00 18 March 2003
DURLACHER CORPORATION PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2002
Durlacher Corporation ("Durlacher" or the "Company"), the UK investment bank,
announces its interim results for the six months ended 31 December 2002.
Highlights:
* Pre tax profits of #2.60 million (2001: #1.74 million loss), after
exceptional gains of #5.54 million relating to the early redemption of
convertible debentures
* Operating loss on continuing operations reduced by 40.6 per cent to
#2.47 million (2001: #4.16 million)
* Turnover on continuing operations increased by 14.5 per cent to #3.16
million (2001: #2.76 million)
* Successful conclusion of share capital reorganisation on basis of 1
new ordinary share for every 140 existing ordinary shares
* Post balance sheet: completion of placing and offer for subscription
of new shares (Jan 2003) raising #4.00 million of cash
* Post balance sheet: sale of stake in kVault Software raising #2.84
million in cash (Feb 2003)
* Board further strengthened with appointment of Simon Hirst, executive
Director and Head of Corporate Finance, and Howard Flight MP, non-executive
Director
* Restructuring of the Company continues with business focused on
traditional UK investment banking and stockbroking
* Trading outlook optimistic despite poor market conditions
Tony Caplin, Chairman, said:
"The outlook for financial markets is challenging but Durlacher has made real
progress in restructuring and developing its business to face such conditions.
The Company has a growing base of corporate and private clients. After closing
its loss making divisions, the Board remains optimistic that Durlacher is well
placed to take advantage of any upturn in market sentiment. Even in the absence
of such change, the Company has made significant strides in implementing its new
strategy over the last six months."
For further information please contact:
Christopher Stainforth, Chief Executive 0207 459 3600
Sophie Dawn, Marketing / Communications 0207 459 5762
David Rydell / Billy Clegg, Bell Pottinger Financial 0207 861 3232
Chairman's Statement
The second half of 2002 remained a period of depressed market conditions,
impacted by general negative investor sentiment, declining national and
international economic prospects and the threat of a war in the Middle East.
During the period, major indices again fell and there was a general downturn in
corporate activity and fundraising.
Despite these adverse conditions, Durlacher continued to make progress both
during the period under review and since - and its restructuring and refocusing
remains on course. The Company has continued to make key strategic changes and,
under the stewardship of Chief Executive Christopher Stainforth, a number of
important mile stones were achieved, notably an equity fundraising, completion
of the share capital restructuring and the sale of non-core assets. The Group
continues to expand its business with new client wins and new management,
including the appointment of two main Board Directors.
Your Board has not shied away from difficult decisions and loss making elements
of the Company have been closed or disposed of with resultant restructuring
costs. At the same time the Company has continued to invest in its future as a
broader-based investment bank and stockbroker, able to provide a market leading
range of services to corporate and retail clients in a wide range of sectors.
Total revenues in the first half increased to #3.16 million (2001: #2.76
million) which included income from non-core operations currently under contract
for sale - principally nothing ventured.com - of #239,000. On a comparable
basis, operating losses on continuing operations were reduced to a loss of #2.47
million (2001: #4.16 million loss). The Company realised an exceptional gain of
#5.54 million through the early redemption of its convertible debentures at a
favourable 60 per cent discount to the nominal value, which after other
exceptional items, contributed to a Group profit before tax of #2.60 million
(2001: #1.74 million loss).
It is the intention of the Company to reinvest profits into working capital and
the Directors do not recommend payment of an interim dividend.
During the period, the Directors took the opportunity to restructure the
Company's share capital which had become cumbersome and unwieldy. Consequently
the share capital was reorganised on a 1 for 140 basis with the effect of
providing a more substantial market price per share and reducing the very large
number of existing ordinary shares in issue. The consolidation also ensured
that the market value of each new ordinary share is well in excess of its
nominal value, allowing the Company to issue shares as and when considered
appropriate.
In line with the Company's intention to invest in the recruitment of experienced
and innovative personnel, a number of senior appointments were made. Simon
Hirst joined the Board in November 2002 as Head of Corporate Finance, having
worked in corporate finance for 22 years for a number of leading banks in both
London and New York. These included Lehman Brothers, Salomon Smith Barney, ABN
Amro Corporate Finance Ltd and Commerzbank Securities. Howard Flight MP also
joined the Board as a non-executive Director in November 2002, bringing with him
a significant degree of experience and a wide network base. Howard's career in
the financial services and banking sectors spans 32 years.
In August, Zoe Appleyard, formerly of Rothschild Ventures, joined the Company as
a consultant to form Durlacher Ventures, a new operation focused on venture
capital and private equity services. Durlacher has today acquired the entire
issued share capital of Life Capital Limited ("Life Capital"), the private
equity fundraising company owned by Zoe Appleyard.
The maximum consideration payable for Life Capital is #1.60 million; of which
#59,200 is payable in Durlacher shares and the balance in a mixture of cash and,
where relevant, shares in third party client companies over a 2 year period
following completion and subject to certain performance criteria being met. Zoe
has also received warrants over 100,000 Durlacher shares at an exercise price of
#1. The net liabilities of Life Capital at completion are approximately #80,000
and Life Capital made a loss of #53,918 in the year ended 30 September 2002.
As part of the transaction Zoe Appleyard will be joining Durlacher Limited as a
full time employee to manage its Durlacher Ventures division. The acquisition
of Life Capital brings with it the benefit of a number of existing fundraising
mandates.
Nick Martin resigned from the Board in November to pursue other business
interests. Graeme Gordon has resigned from the Board of Directors as Finance
Director to pursue other interests. I would like to thank Graeme and Nick on
behalf of the Board for their contribution to the business.
Substantial progress was made on the sale or closure of loss making non-core
operations. In line with our stated ambition to reduce the Company's exposure
to the new technology sector the ShareCast and nothing ventured.com businesses
were sold, or are under a contract for sale, for a mix of cash, service
provision and shares.
The Madrid office continued to make losses and was closed in December. A new
office was opened in Birmingham, providing a range of existing products and
services to private clients.
In December 2002, the Company embarked on a fundraising by way of a Placing and
Open Offer for Subscription for new ordinary shares at #1 per share. The funds
were to be used in part to repay loans associated with the early redemption of
the Company's convertible debentures and for working capital purposes. The
fundraising was completed in February 2003, having raised #4.00 million and
attracted a number of influential and experienced investors who joined the share
register as declarable interests. A number of Directors, including Christopher
Stainforth and myself, took the opportunity to invest in the Company at the same
time. The success of the fundraising, in difficult markets, is testament to the
confidence of new and existing shareholders in Durlacher's new direction and in
its management's resolve to deliver returns on behalf of its stakeholders.
Since the year-end further progress has also been made on the sale of non-core
investments owned by the Company. By February 2003, gross proceeds of #2.84
million had been generated from the sale of shares in kVault Software Ltd (KVS).
The total cost of the Group's investment in KVS was #519,000 and the total
proceeds from the sale of shares, during and prior to the review period, amounts
to #4.12 million, resulting in a significant profit for your Company. The
combination of the fundraising, the sale of the KVS stake and the early
repayment of debentures has significantly enhanced the cash position of the
Company.
Durlacher continues to hold material investments in a number of companies,
notably On-Line Travel Corporation Plc, and the Directors continue to keep the
future of these investments under active review.
Current trading remains stable against the backdrop of difficult market
conditions and there are key internal indicators of progress being made. In
corporate finance, while transactions are being delayed or taking longer to
complete, the department has increased its number of clients and is working on a
significant number of active projects. Our market-making department increased
its number of stocks from 31 to 40 in the period while the research department
was expanded to cover a number of new sectors, including the retail and leisure
markets.
Durlacher Ventures has made an impressive start and is currently working on a
number of projects, which if successful, would produce significant income for
the Company.
Our private client services have exceeded our expectations, partly as a result
of the demand for derivative products, particularly in times of market turmoil.
The Company has appointed a new head of Wealth Management, Nicholas Taylor, to
supplement existing services.
The Directors are committed to expanding Durlacher's fund management services,
organically and where appropriate, through strategic acquisitions and alliances.
It is their ambition that this will include a significant stand-alone asset
management business at some point in the future.
The outlook for financial markets is challenging, but your Company has made real
progress in restructuring and developing its business to face such conditions.
The Company has a growing corporate and private client base and is increasing
its services to small and mid-cap UK companies and clients. The Board remains
optimistic that Durlacher is well placed to take advantage of an upturn in
market sentiment, but believes that even in the absence of change, the Company
has made significant strides to sustain its continuing progress.
Tony Caplin
Chairman
17 March 2003
CONSOLIDATED PROFIT & LOSS ACCOUNT
For the 6 months ended 31 December 2002
Year ended
Restated 30 June
2002 2001 2002
Notes (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Turnover
Continuing operations 2,921 2,512 6,650
Under contract for sale 239 252 496
Total turnover 2 3,160 2,764 7,146
Cost of sales (1,330) (1,743) (3,118)
Gross profit 1,830 1,021 4,028
Administrative expenses
Continuing operations (3,622) (4,565) (8,625)
Under contract for sale (454) (620) (1,240)
Non recurring exceptional expenses (225) - (1,843)
Operating loss on continuing operations (2,471) (4,164) (7,680)
Discontinued operations (238) - -
Total administrative expenses (4,539) (5,185) (11,708)
Operating loss 3 (2,709) (4,164) (7,680)
Profit on disposal of fixed asset investments 201 4,135 4,219
Net interest receivable and similar items
Exceptional gain on debenture redemption 5,536 - -
Other 104 (63) 1
Net interest receivable and similar items 4 5,640 (63) 1
Amounts written off fixed asset investments (531) (1,645) (6,446)
Profit/(loss) on ordinary activities before taxation 2,601 (1,737) (9,906)
Taxation on loss on ordinary activities (137) 324 (118)
Profit/(loss) on ordinary activities after taxation 2,464 (1,413) (10,024)
Retained profit/(loss) for the period 2,464 (1,413) (10,024)
Basic profit/(loss) per ordinary share 5&6 60.53p (34.94)p (247.15)p
Diluted profit/(loss) per share 5&6 60.53p (27.66)p (247.15)p
Profit/(loss) per ordinary share before
exceptional items 5&6 (69.96)p (34.94)p (201.70)p
The Group has no recognised gains or losses other than the results for the
period.
CONSOLIDATED BALANCE SHEET
As at 31 December 2002
Restated As at 30 June
2002 2001 2002
Notes (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Fixed assets
Intangible assets - 5 -
Tangible assets 543 1,019 517
Investments 907 6,522 1,790
Total fixed assets 1,450 7,546 2,307
Current assets
Investments 3,405 2,302 3,253
Debtors 3,345 2,620 1,492
Cash at bank and in hand 3,278 9,734 8,317
10,028 14,656 13,062
Creditors - amounts falling due within one year (6,344) (2,871) (3,918)
Net current assets 3,684 11,785 9,144
Total assets less current liabilities 5,134 19,331 11,451
Creditors - amounts falling due after one year (142) (9,094) (9,065)
Provision for liabilities and charges (857) - (709)
Net assets 4,135 10,237 1,677
Share capital & reserves
Ordinary shares 6&7 163 28,493 28,493
Deferred shares 6&7 28,330 - -
Called up share capital 28,493 28,493 28,493
Share premium account 14,543 14,543 14,543
Profit and loss account (38,901) (32,799) (41,359)
Equity Shareholders' funds 7 4,135 10,237 1,677
Approved for and on behalf of the Board on 17 March 2003 by
Christopher Stainforth
CONSOLIDATED CASH FLOW STATEMENT
For the period ended 31 December 2002
Year ended
Restated June
2002 2001 2002
Notes (Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Net cash flow from operating activities 8 (3,935) (5,079) (6,809)
Returns on investments and servicing of finance 9 20 427 675
Taxation - 236 702
Capital expenditure and financial investment 9 375 3,948 3,534
Cash outflow before financing (3,540) (468) (1,898)
Financing
Issue of ordinary share capital - 45 45
Increase in short term loans 2,001 - -
Repaid debt (3,500) - -
Net cash (outflow)/inflow from financing activities 9 (1,499) 45 45
Decrease in cash in the period (5,039) (423) (1,853)
Reconciliation of cash outflow to movement in net debt
Decrease in cash for the period (5,039) (423) (1,853)
Short term loans (2,001) - -
Non-cash movements on conversion of debentures - 5,040 5,040
Non-cash movements on redemption of debentures 5,250 - -
Cash movement on redemption of debentures 3,500 - -
Change in net debt resulting from cash flows 1,710 4,617 3,187
Net debt 1 July (433) (3,620) (3,620)
Net funds/(debt) 10 1,277 997 (433)
Notes to the interim report
1. Basis of preparation
Turnover represents the amount invoiced, excluding value added tax, in
respect of brokerage commissions, fees and charges, corporate finance fees,
publication sales, together with profits and losses on market making and
dealing.
The interim results have been prepared on a basis consistent with the
accounting policies set out on pages 23 to 25 of the Annual Report for the
year ended 30 June 2002.
Prior year restatement
Consistent with the audited accounts for the year ended 30 June 2002 and
in accordance with format 1 of schedule 4 of the Companies Act 1985, the
accounts for the period ended 31 December 2001 have been restated to
reflect the fact that profits and losses arising from market trades,
previously shown as " Dealing profits and losses" have been reclassified
and are now included within " Turnover". Also commissions payable and
profit and losses arising from the valuation of quoted investments other
than those held in respect of market making securities, that were
previously included within, respectively, " Administration expenses" and
"Other operating losses - exceptional", have been reclassified as "Cost of
sales" and "Amounts written off fixed asset investments".
All unquoted investments have been shown as fixed assets.
2. Segmental and turnover analysis
The Directors consider that the Group operates in one segment, being
investment banking
The following provides an analysis of turnover by major activity:
Restated
Period ended Period ended Year ended
December December June
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Commissions 1,564 2,194 4,319
Fees 1,276 372 1,520
Dealing profits and losses 320 198 1,307
Total 3,160 2,764 7,146
A small proportion of turnover is attributable to non-UK markets
3. Operating loss
Operating losses include losses of #215,000 (31 December 2001: #368,000) in
relation to nothing ventured.com Limited which is currently under contract
for sale. The sale is expected to complete by 1 June 2004 up until this
date the Company will be reimbursed for associated operating losses up to a
maximum of #216,000 per annum.
4. Net Interest receivable
The interest receivable includes profit of #5.25 million made on the
purchase of the convertible debentures on 30 December 2002 together with
the release of interest of #364,000 accrued on the debentures in prior
years, less related costs incurred of #78,000. The #8.75 million
convertible debentures were purchased for #3.5 million (see note 17 of the
Annual Report for the year ended 30 June 2002 for details on the
convertible debentures). The #3.5 million was funded #1.5 million from
cash on deposit and #2 million short term loan.
As a part of the agreement to redeem the convertible debentures, the 43.75
million nil paid warrants over Ordinary Shares granted to the debenture
holders were cancelled.
5. Earnings per share
Earnings per share (EPS) are calculated on a net basis using the profit on
ordinary activities after taxation adjusted for the weighted average number
of shares detailed below. Prior periods EPS have been restated to reflect
the Share Capital Reorganisation announced on 1 November 2002.
For fully diluted earnings per share the weighted average number of shares
is adjusted for the effect of potentially dilutive share options issued
under the Group share options scheme and any dilution due to the conversion
of debt into equity.
At 31 December 2002 there were no dilutive shares as the exercise prices of
outstanding options were in excess of the average market price per share.
Restated
Period ended Period ended
December December Y/E June
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit/(loss) on ordinary activities after taxation used to
calculate basic profit/(loss) per ordinary share 2,464 (1,413) (10,024)
Net post tax impact of conversion of loan debenture 0 223 0
Profit/(loss) used to calculate diluted profit/(loss) per 2,464 (1,190) (10,024)
ordinary share
Profit/(loss) on ordinary activities after taxation 2,464 (1,413) (10,024)
Less exceptional gain on debenture redemption (5,536) 0 0
Add back non recurring exceptional items 225 0 1,843
Profit/(loss) before exceptional items used to calculate loss (2,847) (1,413) (8,181)
per ordinary share before exceptional items
Weighted average number of shares in issue 4,070,362 4,045,814 4,055,778
Adjusted weighted average number of shares in issue 4,070,362 4,303,641 4,055,778
The Directors consider that an earnings per share calculation that excludes
the impact of exceptional items provides a more useful guide to underlying
performance of the business and have therefore prepared an adjusted
earnings per share calculation, reconciled to the profit before exceptional
items.
6. Share capital
On 1 November 2002 the Ordinary Shares were sub-divided into one Interim
Ordinary Share and 174 Interim Deferred Shares. The Interim Ordinary
Shares and Interim Deferred Shares were then consolidated and holders
received one New Ordinary Share and one Deferred Share for every 140
existing Interim Ordinary Shares and 140 existing Interim Deferred Shares
respectively. The New Ordinary Shares rank pari passu, save as to the
nominal value, with the original Ordinary Shares which they replaced.
The Deferred Shares have no rights to vote or to participate in dividends
and only carry limited rights on any return of capital on liquidation.
The authorised but unissued Ordinary Share Capital was sub-divided into 175
Interim Ordinary Shares. Every 140 Interim Ordinary Shares which arose out
of the sub-division was then consolidated into one New Ordinary Share.
Finally, the authorised Share Capital of the Company was reduced to #29
million by the cancellation of the relevant number of authorised but
unissued New Ordinary Shares.
Following the Share Capital Reorganisation, the authorised Share Capital of
the Company is #29 million made up of 16,757,117 New Ordinary Shares of 4p
nominal value each (#670,285) and 708,242,883 unquoted Deferred Shares of
4p nominal value each (#28,329,715).
7. Reconciliation of movements in equity shareholders' funds
Restated
As at As at As at
December December June
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Profit/(loss) for the period after taxation 2,464 (1,413) (10,024)
Shares issued - 5,452 5,452
Foreign exchange movement (6) 8 12
Share option charge per UITF 17 - - 47
Opening shareholders' funds 1,677 6,190 6,190
Closing shareholders' funds 4,135 10,237 1,677
8. Reconciliation of operating loss to net cash outflow from operating
activities
Restated
Period ended Period ended Year ended
December December June
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Operating loss (2,709) (4,164) (7,680)
Depreciation and amortisation of fixed assets 163 179 668
Unrealised (gain)/loss on current asset investments (152) 205 51
(Increase)/decrease in debtors (923) 991 675
Decrease in creditors and provisions (314) (2,290) (570)
Provision for share options granted - - 47
Net cash outflow from operating activities (3,935) (5,079) (6,809)
9. Analysis of cash flow for headings netted in the cash flow statement
Restated
Period ended Period ended Year ended
December December June
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
#'000 #'000 #'000
Returns on investment and servicing of finance
Interest received 263 123 626
Interest paid (110) - (226)
Cash acquired with Employee Benefit Trust (133) 304 275
Net cash inflow for returns on investment and servicing of 20 427 675
finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (205) (185) (224)
Purchase of investments - (583) (401)
Proceeds from sale of tangible fixed assets 27 - -
Proceeds from sale of investments 553 4,716 4,159
Net cash inflow from capital expenditure and financial 375 3,948 3,534
investment
Financing
Issue of ordinary share capital for cash - 45 45
Short term loan 2,001 - -
Repayment of debt (3,500) - -
Net cash (outflow)/inflow from financing (1,499) 45 45
10. Analysis of changes in net fund
At 30 At 31
June Cash Non cash December
2002 flow movements 2002
#'000 #'000 #'000 #'000
Cash in hand and at bank 8,317 (5,039) - 3,278
Convertible debentures (8,750) 3,500 5,250 -
Short term loans - (2,001) - (2,001)
Net (debt)/funds (433) (3,540) 5,250 1,277
11. Contingent liability
In a number of instances split capital investment trusts ("splits") have
either failed or performed poorly in the past 18 months. The Financial
Services Authority and the Financial Ombudsman Service are currently
undertaking a review of the splits sector. There has also been speculation
that legal action may be brought against a range of parties involved in the
sector. No legal action has been served against any company in the
Durlacher Group and in the event that the Group were to be included in any
such proceedings these would be defended robustly. A review of the Group's
exposure to clients deriving from their holdings of split trusts has been
undertaken. Based on this review and the present progress of the
regulatory proceedings the Board does not consider that any material
provision is required.
The Group has received a small number of complaints regarding the
management of certain investment portfolios. Legal action has been served
against subsidiaries of the Company in respect of certain of the complaints
while others have been referred to the Financial Ombudsman Service. Having
carefully considered the Company's position and after taking legal advice
on specific complaints the Directors have established a provision
representing their best estimate of the liabilities likely to arise in
respect of these complaints.
12. Post balance sheet events
Subsequent to the period end the Company sold 16,755,759 shares in Kvault
Software, realising cash of #2.8m and a profit of #2.4 million.
On 31 January, 2003 the shareholders approved a share placement which has
raised #4 million in cash.
13. General
The interim report was approved by the Board of Directors on 17 March 2003.
The comparative figures for the financial year ended 30 June 2002 are not
the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditors and delivered to the
registrar of companies. The report of the auditors was unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act
1985.
This report has been sent to shareholders and will be made available to the
public, upon request, at the registered office of Durlacher Corporation
Plc, 4 Chiswell Street, London EC1Y 4UP or from the company's website
www.durlacher.com.
Independent review report by KPMG Audit Plc to Durlacher Corporation Plc
Introduction
We have been engaged by the Company to review the Consolidated Profit and
Loss Account, the Consolidation Balance Sheet and the Consolidated Cash
Flow Statement and the notes attached thereto and we have read the other
information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company in accordance with the terms of
our engagement to assist the company in meeting the requirements of the
Listing Rules of the Financial Services Authority. Our review has been
undertaken so that we might state to the company those matters we are
required to state to it in this report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this report, or
for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the interim report in accordance
with the Listing Rules which require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where they are to
be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/ 4: Review of interim financial information issued by the Auditing
Practices Board for use in the United Kingdom. A review consists
principally of making enquiries of group management and applying analytical
procedures to the financial information and underlying financial data and,
based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review is
substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than
an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications
that should be made to the financial information as presented for the six
months ended 31 December 2002.
KPMG Audit Plc
Chartered Accountants
London
17 March 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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