TIDMMHG
RNS Number : 6942P
Merchant House Group PLC
29 October 2012
MERCHANT HOUSE GROUP PLC
("MHG or "the Group")
INTERIM STATEMENT
For the 6 months ended 30 June 2012
The Board of MHG is pleased to announce interims results for the
six month period ended 30 June 2012.
Financial Results
In the half year to June 2012:
-- Turnover increased by 31% to GBP4.0 million (6 months to June 2011: GBP3.1 million)
-- Gross profit increased by 20% to GBP1.3 million (6 months to June 2011: GBP1.1 million)
-- Operating loss of GBP1.4 million (6 months to June 2011:
GBP0.5 million loss) after charging GBP0.5 million in respect of
acquisition costs of IFA members
Revenues have continued to grow, especially within our IFA
business, Merchant House Financial Services Ltd, where sales of
GBP2.7 million in the first half compare to sales of GBP2.2 million
for the same period last year and GBP4.7 million in the whole of
2011.
Within Merchant Capital Ltd, predominantly Structured Products,
sales were GBP1.3 million compared to GBP0.9 million for the same
period last year and GBP2.9 million for the whole of 2011.
Net debt grew to GBP1.6 million at the period end (30 June 2011:
net cash of GBP0.09 million). As shareholders will know, the Group
has procured an aggregate investment of GBP2 million from Beia
Capital Ltd and Beia Investment Partners LLP (together "Beia") of
which these results reflect the first GBP0.25 million, received as
a convertible loan. Subsequent to the period end, a further GBP1.35
million before expenses has been received leaving GBP0.4 million to
be remitted by 22 November 2012.
Operating Review
In the structured products division of Merchant Capital Limited,
following a strong start to the year, sales slowed following the
difficulties previously reported around the loss and subsequent
replacement of our custodian. Whilst the UK retail business has
been particularly difficult and is likely to remain so in the short
term, the marketing of plans offshore has provided a continuing
source of sales. In order to expand the latter market, a new sales
team has recently been appointed and as it is settles into the
business is expected to contribute to more diversified sales.
The client assets held by the previous custodian have been
transferred in full to Reyker Securities plc, our new custodian.
Whilst some client monies remain to be released by the special
administrator of the previous custodian, it is understood that the
Financial Services Compensation Scheme protections will mean that
no clients affected by the special administration will incur a
loss.
The asset management division has also been through a difficult
period as a consequence of the suspension of the Group's shares and
weak stock markets caused largely by the uncertainty in Europe.
Four UCITS funds were liquidated in 2012 as redemptions resulted in
uneconomic fund sizes. In contrast, a new UCITS fund has recently
been approved by the central bank of Ireland and is expected to
launch in the near future. Whilst assets under management have
fallen in the UCITS business, revenues have not as yet been
adversely affected but new funds will have to be launched if this
is to be sustained. Current total assets under management are
approximately USD25 million and there are plans to launch
additional funds.
PYXMarkets, the options trading platform was, as reported,
launched in the second quarter of 2012. Following an initial period
of low trading volumes, the group expects to accelerate the
promotion of this business.
Merchant House Financial Services Limited has since the
beginning of the year made progress in the reduction of its monthly
running costs and in reducing the number of low profit advisors.
This has been implemented during a period, in which as previously
mentioned, revenues have increased by approximately 22% over the
same period last year. The business, in partnership with our
regulatory principal, has also made progress in being RDR (the new
regulatory regime under which IFA businesses will have to operate
from early 2013) ready. This is against a generally accepted
opinion that much of the IFA market still has some way to go to be
RDR ready.
Financial Position and Prospects
The difficulties outlined above and reported this year, as well
as the suspension on AIM, have inevitably impacted the business,
the Group's financial and trading position and its performance
within the regulatory framework in which it operates. The directors
have considered the short term trading prospects of the Group
together with the current financial position of the Group. That
includes a number of creditors who are due monies outside their
normal settlement terms and with which the Company is in ongoing
discussions to allow settlement over a period of time. The final
GBP0.4 million due from Beia in respect of their investment in 1
billion shares at a price of 0.04p, the receipt of which having
initially been delayed by the need for approval by the FSA, is now
expected shortly but it is clear that additional funds will be
required in the short term to provide sufficient working capital
and investment in the business.
The directors are therefore pursuing a number of fund raising
opportunities with a view to raising additional funds. This
includes a funding agreement under negotiation which the Board
believes would, in conjunction with the GBP0.4 million to be
received from Beia, deliver the required finance, either
immediately on completion or in stages. There are also other
opportunities in negotiation.
However, the adequacy of working capital at this time remains
uncertain and as sufficient funding may not be received in the
short term, the Board is also exploring all other options available
to it, which may include asset or business disposals, and there is
also a risk of cancellation of trading on AIM. The Company's shares
remain suspended from trading on AIM and shareholders will be
updated in due course.
Outlook
While the Board's immediate focus is on the successful
conclusion to raising sufficient funds, it is positive that the
underlying businesses have made good progress this year and the
Board looks forward to the continued development of the business in
the final quarter and into next year.
Also during the period under review, the board has been
strengthened with the addition of Mr James Keane and Mr Stephen
Drew, who were appointed on 19 June.
I would like to take this opportunity to thank all our employees
for their continued hard work and commitment and shareholders for
their continued support.
James Holmes
Chairman
26 October 2012
Enquiries;
Merchant House Group PLC
James Holmes, Chairman +44 (0) 20 3544 4793
Chris Day, CEO
Allenby Capital Ltd, Nominated Adviser
+44 (0) 20 3328 5656
Jeremy Porter
James Reeve
Consolidated income statement
Period ended 30 June 2012
Six month Six month Year ended
period period 31 December
ended ended
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
Revenue 4,011,907 3,061,626 7,696,738
Cost of sales (2,714,562) (1,979,261) (7,451,698)
Gross profit 1,297,345 1,082,365 245,040
Surplus of fair value - -
over purchase cost -
Sales and marketing
expenses (36,331) - (7,482)
Administrative
expenses (2,130,028) (1,952,845) (4,336,148)
Acquisition cost of (533,082) -
IFA Members & -
Clawbacks
Other operating income - 313,379 146,792
Realised gain on - 33,643 -
current
asset investments
Unrealised (loss)/gain - (470) -
on current asset
investments
Disposal of non
controlling
interest - - 10,749
Impairment loss on
investments - - (500,000)
(Loss)/Profit from
operations (1,402,096) (523,928) (4,441,049)
Finance expense (55,965) (10,507) (719,974)
Investment income - 109,943 193,461
Share of profit of
equity-accounted
investees
(net of tax) - - (665,490)
(Loss)/Profit Before
Taxation (1,458,061) (424,492) (5,633,052)
Income tax expense 3 - - 19,493
(Loss)/Profit for
the financial period (1,458,061) (424,492) (5,613,559)
--------------------------- --------------------------- ----------------------------
Attributable to:
Owners of the Company (1,400,959) (424,492) (5,547,545)
Non-controlling
interests (57,102) - (66,014)
(1,458,061) (424,492) (5,613,559)
--------------------------- --------------------------- ----------------------------
(Loss)/Profit per
share (pence) 4 (0.03)p (0.05)p (0.26p)
Diluted (Loss)/Profit
per share (pence) 4 (0.03)p (0.02)p (0.16p)
----------------------- ----- --------------------------- --------------------------- ----------------------------
Consolidated statement of comprehensive income
Period ended 30 June 2012
Six month Six month Year ended
period period 31 December
ended ended
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Profit/(Loss) for
the year attributable
to the parent's equity
holders (1,400,959) (424,492) (5,547,545)
Total comprehensive
income/(expense) for
the year attributable
to the parent's equity
holders (1,400,959) (424,492) (5,547,545)
------------------------- ------------------ ------------ -------------------
Consolidated statement of financial position
at 30 June 2012
As at
As at As at 31 December
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
ASSETS
Non Current Assets
Property, plant and
equipment 15,401 15,702 13,429
Investment in group - 665,490 -
undertakings
15,401 681,192 13,429
Current Assets
Trade and other receivables 3,787,424 3,656,175 3,055,260
Cash and cash equivalents 184,815 387,042 141,801
Investments 2,847 502,371 2,847
Total current assets 3,975,086 4,545,588 3,199,908
TOTAL ASSETS 3,990,487 5,226,780 3,213,337
--------------------------- --------------------------- ----------------------------
EQUITY AND LIABILITIES
Current Liabilities:
Loans and borrowings 748,560 160,200 661,646
Trade and other payables 5,096,137 3,040,670 3,897,496
5,844,697 3,200,870 4,559,142
Non current liabilities:
Loans and borrowings 556,498 262,645 199,866
Subordinated loan 100,000 100,000 100,000
656,498 362,645 299,866
Equity and Reserves
Called up share capital 967,504 720,252 867,592
Shares to be issued 12,235 - 12,235
Convertible loan notes 376,572 307,855 471,572
Share premium 4,731,923 2,577,224 4,143,810
Retained Earnings (8,466,077) (1,942,065) (7,065,118)
Equity attributable
to equity holders
of the parent (2,377,843) 1,663,266 (1,569,909)
Non-controlling interest (132,865) - (75,763)
Total Equity (2,510,708) 1,663,266 (1,645,672)
--------------------------- --------------------------- ----------------------------
TOTAL EQUITY AND LIABILITIES 3,990,487 5,226,781 3,213,337
------------------------------ --------------------------- --------------------------- ----------------------------
Consolidated statement of changes in equity
Period ended 30 June 2012
Attributable to owners of the Company Non- Total Equity
Controlling
interest
----------------------------------------------------------------------------------------------------------------------------------------------------
Convertible Share Capital Share Premium Retained Total
Loan Note earnings
GBP GBP GBP GBP GBP GBP GBP
Balance at 1
January
2011 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)
Total
Comprehensive
Income for the
year - - - (1,400,959) (1,400,959) (57,102) (1,458,061)
Movement in
equity (95,000) - - - (95,000) - (95,000)
376,572 879,827 4,143,810 (8,466,077) (3,065,868) (132,865) (3,198,733)
Transactions
with
owners recorded
directly
in equity:
Share issue - 99,912 588,113 - 688,025 - 688,025
Shares to be - - - - - - -
issued
Balance at 30
June
2012 376,572 979,739 4,731,923 (8,466,077) (2,377,843) (132,865) (2,510,708)
----------------- --------------------------- --------------------------- ---------------------------- -------------------------- -------------------------------- ---------------------- --------------------------------
Consolidated cash flow statement
Period ended 30 June 2012
Six month Six month Year ended
period period 31 December
ended ended
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Reconciliation of
operating loss to
net cash flow from
operating activities
Operating profit/(loss) (1,402,096) (523,928) (4,441,049)
(Increase) in trade
& other receivables (801,831) (222,092) 378,823
Increase in trade
& other payables 1,065,968 107,245 990,113
Depreciation - 4,381 8,239
Impairment of investment - - 500,000
Unrealised loss/(gain) - (33,173) -
on current asset investments
Disposal of non controlling
interest - - (10,749)
Tax payable 213,632 - 19,493
Net cash (outflow)/inflow
from operating activities (924,327) (667,567) (2,555,130)
Investing Activities
Financial income - 109,943 193,461
Sales of investments - - 1,000
Purchase of plant
& equipment (1,974) (2,853) (4,438)
Net cashflow from
investing activities (1,974) 107,090 190,023
Financing activities
Proceeds from share
issue 688,025 345,000 2,212,663
Loan proceeds 1,301,297 303,650 1,391,247
Loans repaid (857,752) - (518,862)
Loan notes converted
to ordinary shares (95,000) - (141,500)
Financial expense (67,255) (10,507) (719,974)
Net cash inflow from
financing activities 969,315 638,143 2,223,574
Increase/(decrease)
in cash & cash equivalents 43,014 77,666 (141,533)
------------------------------ --------------------------- --------------------------- ----------------------------
Reconciliation of net cash flow to movement in net debt
Period ended 30 June 2012
Six month Six month Year ended
period period 31 December
ended ended
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Increase/(decrease)
in cash in the period 43,014 77,666 (141,533)
Cash inflow from issue
of loan note (1,301,297) (303,650) (1,391,247)
Loan note repaid 857,752 - 518,862
Loan notes converted
to ordinary shares 95,000 - 141,500
Movement in year (305,531) (225,984) (872,418)
Net (debt) brought
forward (1,291,284) 318,866 (418,866)
Net (debt) carried
forward (1,596,815) 92,882 (1,291,284)
------------------------ -------------------- --------------------------- --------------------
Notes
1. Basis of accounting
The condensed consolidated interim financial statements for the
six months ended 30 June 2012 have been prepared under applicable
International Financial Reporting Standards adopted by the European
Union ('IFRS') and in accordance with IAS 34 Interim Financial
Reporting. They do not include all of the information required for
full annual financial statements and should be read in conjunction
with the financial statements of the Group for the year ended 31
December 2011.
The interim financial statements have been prepared under the
same accounting policies as those used for the financial statements
for the year ended 31 December 2011. A number of IFRS's and
Interpretations have been endorsed by the EU in the period to 30
June 2012 and although they have been adopted by the Group, none of
them has had a material impact on the Group's financial
statement.
The Group's 2011 annual report provides full details of
significant judgements and estimates used in the application of the
Group's accounting policies. There have been no significant changes
to these judgements and estimates during the period.
The financial information included in this document is unaudited
and does not comprise statutory accounts within the meaning of
section 498 of the Companies Act 2006. The comparative figures for
the financial year ended 31 December 2011 are not the company's
statutory accounts for that financial year. Those accounts have
been reported on by the company's auditor and delivered to the
registrar of companies. The report of the auditor was (i)
unqualified, (ii) did include a reference to matters to which the
auditor drew attention by way of emphasis without qualifying their
report (see below), and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
2. Going concern
The financial statements for the year ended 31 December 2011
drew attention to the significant uncertainties surrounding whether
the company would be able to continue as a going concern. The
directors have considered the short term trading prospects of the
Group together with the current financial position of the Group.
That includes a number of creditors who are due monies outside
their normal settlement terms and with which the Company is in
ongoing discussions to allow settlement over a period of time.
The directors are therefore pursuing a number of fund raising
opportunities with a view to raising sufficient funds, which in
conjunction with the GBP0.4 million still to be received from Beia,
is expected to deliver the required finance, either immediately on
completion or in stages.
Assuming these, compliance with regulatory requirements and the
trading prospects of the Group, the Board considers it remains
appropriate to prepare these statements on a going concern
basis.
3. Taxation
No provision for corporation tax has been provided for, due to
tax losses incurred in the current period.
Loss per share
Six month Six month Year ended
period period 31 December
ended ended
30 June 30 June 2011
2012 2011
(Unaudited) (Unaudited) (Audited)
(Loss)/Profit per
ordinary share (pence) (0.034)p (0.05)p (0.26)p
Diluted (Loss)/Profit
per ordinary share
(pence) (0.026)p (0.02)p (0.16)p
------------------------- ------------ ------------ ------------
The loss per share has been calculated on the net basis on the
consolidated loss excluding associate for the period ended 30 June
2012, after taxation, of GBP(1.4 million) (June 2011: GBP(0.4
million), December 2011: GBP(5.5 million)) using the weighted
average number of ordinary shares in issue at the period of
4,097,910,741 (June 2011: 774,540,549, December 2011:
2,157,289,310).
Diluted earnings per share have been calculated using the
weighted average number of shares in issue, diluted for the effect
of share and loan conversion rights and warrants. There were
unexercised share and loan conversion rights and warrants on shares
in existence at the period end of 1,289,950,166 (June 2011:
1,777,797,247, December 2011: 2,157,289,310).
Availability of statement
A copy of this statement is available to shareholders and
members of the public, free of charge, from the Company's website:
http://www.merchanthousegroup.com/investor-relations
This information is provided by RNS
The company news service from the London Stock Exchange
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