RNS Number:2452M
Sumus plc
22 January 2008
22 January 2008
Sumus Plc
2007 Preliminary results
Sumus Plc ('Sumus', the "Company" or the 'Group'), the AIM listed holding
company for IFA businesses providing investment and financial advisory services
and network support services to IFA firms, today announces its preliminary
results for the year ended 30 September 2007.
Highlights
Revenue up 96% to �29.8m (2006: �15.2m)
Operating profit up 94% to �1.24m (2006: �639,000)
Profit before tax up 76% to �1.51m (2006: �857,000)
Basic earnings per share up 64% to 3.55p (2006: 2.17p)
Total dividend per share for year up 47% to 1.0p (2006: 0.68p)
Cash generated from operating activities up 54% to �1.59m (2006: �1.03m)
Cash balances up 19% to �5.1m (2006: �4.3m)
Number of advisers up 6% to 335 (2006: 315)
Average revenue per adviser up 7% to �92,000 (2006: �86,000 as restated to
reflect a full year's contribution from FSAS)
Acquisition of 50.1% of Deverill Black & Company Limited in June 2007,
immediately earnings enhancing
Establishment of Brunel Fund of Funds OEIC - nearly �5 million invested to date
Continuing investment in technology and senior management infrastructure
financed from operating cash flow
The Group's IFA networks ranked first in the Henry Samuel Market Research Survey*
Commenting on the results, Allan Rosengren, Chief Executive said;
"Sumus has continued its impressive performance despite the challenges of
today's equity and investment markets. Reassuringly, the performance is
reflected right through to the EPS level which demonstrates the success of our
strategy of expanding through carefully considered earnings enhancing
acquisitions and strong organic growth. This growth has been achieved whilst
also improving our balance sheet strength. The Group's current cash balances
exceed �5m, providing a strong platform to pursue further suitable acquisitions
and to invest in management and systems within the business.
Our strategy going forward remains unchanged. The IFA market has seen discerning
investors consult more closely with their advisers in times of volatility and
uncertainty. The 'reputational pull' of our network affords us the opportunity
for sustained organic growth while the continued fragmentation of the IFA market
place provides many acquisition opportunities for Sumus to consider. We look
forward to another successful year in 2008."
Contact
Paul Bradshaw 07931 511 936
Chairman - Sumus Plc
Allan Rosengren 0117 9330777
CEO - Sumus Plc 07973 511941
Peter Smith 0117 9330777
FD - Sumus Plc 07713 885286
Tom Griffiths / Neil Kirton
Arbuthnot Securities 020 7012 2000
Tom Cooper / Paul Vann 0117 9200092
Winningtons Financial 0797 122 1972
Chairman's Statement
I am pleased to present the results for the year ended 30 September 2007.
The Group has continued to perform creditably during a year of increasing
volatility, in both debt and capital markets. During the year, we bedded in FSAS
which has proved itself a timely and profitable acquisition. In June we acquired
50.1% of one of our most successful Appointed Representative firms, Deverill
Black & Company Limited, increasing both our gross margins and operating
profits.
We have continued to develop added value investment services, for both our
advisers and our clients. Overall, the Group has made excellent progress and the
strong management team is to be congratulated on a further significant and
profitable year.
Financial performance
Pre-tax profits have increased by 76% to �1.51 million reflecting a first time
full year contribution from FSAS. Cash generated from operating activities
amounted to �1.59 million (an increase of 54% over 2006), with cash balances
rising by 18% to �5.1 million, notwithstanding ongoing corporate activity. The
Board is recommending a final dividend of 0.68p per share, payable on 29
February 2008 to shareholders on the register on 1 February 2008, subject to
shareholder approval at the forthcoming Annual General Meeting. This makes a
total dividend for the year of 1.00p per share, which represents an increase of
47% on 2006 and is 3.4 times covered.
Corporate activity
The acquisition of 50.1% of Deverill Black & Company Limited in June was
important as it increased our exposure to fee based and annually recurring
revenue. The business continues to perform strongly under the leadership of Iain
Black.
FSAS contributed strongly to the Group's results in 2007, generating revenue and
operating profit of �15.2 million and �351,000 respectively. This is an
excellent result and I heartily congratulate the entire team at FSAS on such an
outstanding performance. The strong trading resulted in an increase in the
deferred consideration payable of �247,000 over the original estimate at the
time of the acquisition, with �1.063 million being paid in December 2007, half
in cash and half in new shares - a great outcome for all concerned.
Brunel Funds
The Brunel Funds investment proposition was formally launched in March 2007.
These products give Sumus an opportunity to participate more actively and derive
more value from offering Independent Financial Advice and associated investment
management services. Funds raised to date have been below plan, amounting to
just under �5 million by 30 September 2007, against a backdrop of stagnant
equity markets. We remain committed to this strategic development, have
significantly strengthened the management and will focus hard on increasing
volumes in the coming periods.
Market developments
The past year has witnessed a growing realisation in the broader market that
there is significant value in independent financial advice and in distribution
and we have witnessed both new entrants and more aggressive peer companies
seeking to participate in this sector. We welcome more sophisticated investors
taking a greater interest in our market, but we have to recognise that the
future may drive more demanding valuations for our own acquisition activity. We
remain totally committed to only entering into transactions which will be
immediately earnings enhancing.
The Retail Distribution Review has generated uncertainty in the sector and we
await developments with much interest. We are committed to the belief that,
irrespective of regulation, the ever more sophisticated consumers of financial
advice will always place a premium on high quality independent advice.
The uncertainty introduced by the potential changes to Capital Gains Tax is most
unwelcome and has impacted on conditions within some of our market sectors, but
overall demand for advice has held up well.
Technology provision to the IFA market place continues to develop and it will be
increasingly important for all businesses operating within the IFA space.
Clearly there is now emerging opportunity to identify and deliver productivity
and efficiency gains together with more innovative product and service offerings
in order to maintain margin and differentiate us from our competitors.
Our excellent track record of being a reliable partner to all of our
stakeholders leaves us well placed to grow and develop as this dynamic market
evolves over future years.
Current trading
Progress in the current year is satisfactory with trading (including a full
contribution from Deverill Black) at acceptable levels. Your Board will continue
to focus on delivering value through a combination of organic growth, profitable
acquisition, joint venture and partnership arrangements, and I look forward to
another successful year.
Paul Bradshaw
Chairman
Chief Executive's Review
During the year Sumus continued to grow organically. We further strengthened our
executive team, embedded the FSAS business acquired in September 2006, launched
the Brunel Funds and cemented our relationship with Deverill Black & Company
Limited, one of our most productive Appointed Representative firms, by acquiring
50.1% of that company.
The Group delivered against its objectives during the year under review and I am
delighted to report on an excellent set of results for the year ended 30
September 2007. As mentioned in the Chairman's Statement, our key performance
indicators give a very positive overview of the Group's performance during the
year and its financial position as at 30 September 2007. Group revenue and
pre-tax profit both increased significantly to �29.8 million and �1.5 million
respectively, whilst cash balances grew to �5.1 million and the Group remained
debt free. We have recommended a 47% increase in the total dividend for the
year, as noted in the Chairman's Statement.
I will comment on the main events at operating areas of the Group as follows:
Acquisition of 50.1% of Deverill Black & Company Limited ("Deverill Black")
On 5 June 2007 the Company acquired 50.1% of the issued share capital of
Deverill Black, one of the most productive Appointed Representative businesses
of The Falcon Group Plc ("Falcon"), the Company's wholly owned IFA network
subsidiary, for �750,000. This secured the continued retention of that business,
with its well above average level of annual fee based and further recurring
revenues. The transaction was immediately earnings enhancing, as well as
providing Iain Black, the principal of the firm who, until December 2006, was a
non-executive director of the Company, with a partial realisation of capital.
Acquisition of Financial Services Advisory and Support Limited (FSAS)
The integration of FSAS has proceeded very well and during the year under review
FSAS contributed additional revenue and operating profit of �15.2 million and
�351,000 respectively, exceeding our already high expectations at the time of
the acquisition.
This was an excellent performance and the executive management team at FSAS are
to be congratulated on the results generated. As a result the final deferred
contingent consideration payable under the sale and purchase agreement for FSAS,
based on its results for the year ended 30 September 2007, exceeded our
estimate at the time of the acquisition of �816,000 and a final payment of
�1.063 million, settled 50% in cash and 50% by the issue of new shares, was made
on 28 December 2007.
Corporate interests
Sumus owns 100% of Falcon, 100% of FSAS, 50.1% of Deverill Black and 85% of
Financial Synergies Plc. We also work with other large independent financial
advisory businesses through the IFA Consortium, which welcomed its fifth member,
Alpha to Omega (UK) Limited, in November 2007.
Brunel Funds
The Group launched its Brunel Funds OEIC in March 2007, offering both Growth and
Distribution sub-funds and providing Fund of Funds investments managed by
Premier Asset Management Plc. Although funds inflows have been somewhat slower
than anticipated, albeit against a backdrop of challenging UK equity and
commercial property markets, we remain confident that, over the medium term,
these funds will offer an attractive, carefully risk managed investment for
clients, whilst enabling the Group to develop and participate in asset
management revenues.
The Group continues to encourage the growth of recurring income and advice fees
to reduce the dependency on initial commission. We view the Brunel Funds as
important in achieving this objective.
Growth and Group Development
During 2007 we further increased our team of advisers, with the number of
Registered Individuals reaching 335 as at 30 September 2007 (2006: 315).
Average annual revenues generated per adviser at Falcon and FSAS amounted to
�97,000 and �88,000 respectively (2006: �100,000 and �73,000 respectively).
During the year we have again strengthened our senior management team resources.
Tim Collyer joined as Head of Investment Solutions in June 2007 and in October
2007 Stephen Gazard and Louise Whelan were appointed to the Board of Falcon.
Stephen joined Falcon as Head of Group Development in July 2006 and Louise has
managed Falcon's Compliance and Risk Management Department for a number of
years. These appointments reflect the considerable contribution they have both
made and add depth to and strengthen the senior operations team within Falcon.
Risk management and the proactive provision of high levels of client care remain
of paramount importance to the Group.
We continue to add to our operational resources, investing in systems and
processes. During the year we initiated a remotely hosted, web based server IT
environment which, once fully available to our advisers, will enable the
delivery of significantly increased functionality and centralised mobile data
access for advisers whilst enhancing security and data integrity features.
Client demand for appropriate and properly advised financial products and
services remains high. Particular emphasis is placed on investments, pensions
and tax mitigation strategies, including inheritance tax planning. Following a
full year contribution from FSAS, some 62% of our gross revenue in 2007 was
derived from investment, pension and tax planning advice, with the balance being
from mortgage and protection advice. Approximately 80% of all revenue is earned
on a non-indemnified basis, and some 20% of all revenue is derived from client
fees and recurring income from renewals, trail and fund based sources.
Strategy and Prospects
Demand for financial advice in the UK remained strong during the year. Whilst
equity and debt markets have proved challenging in recent months, business
levels appear to be holding up well. The Group's demonstrable skills in
mitigating client risk and providing holistic and truly independent financial
advice across the whole of the market will continue to stand us in good stead.
Cash resources remain substantial at �5.1 million having increased from �4.3
million in 2006 - despite the �565,000 initial net cash outlay (including costs)
in respect of the Deverill Black transaction. After allowing for the minimum
regulatory capital adequacy requirements within our regulated subsidiaries, in
excess of �2 million remains available for investment or acquisitions to expand
the Group.
Sumus is profitable, self-sustaining and has no debt. It has grown its revenues
by on average 25% or more per annum, over the last several years. Our aim is to
be a cost effective and efficient provider of services and associated benefits
to those high quality advisers and businesses that are looking to offer
excellent client service, manage their risks for the long-term and build value.
We focus on delivering value added transactions and organic growth opportunities
that fit with our business strategy, thus we aim for them to be earnings
enhancing from an early stage and for them to offer good long term growth
prospects. Where new advice or product opportunities are identified - such as
the Brunel Funds offering - we will develop them in ways that maintain and
enhance our existing proposition whilst always focusing on what is appropriate
for clients.
We maintain our core principles of delivering sustainable and profitable growth,
effective risk management and providing independent financial advice across the
whole of the market in order to serve the best interests of the Group, our
clients and all of our stakeholders.
Outlook
The Board is enthused by the opportunities we see for developing the business
during the coming year and with the scale and capabilities we have within the
Group, I am confident that we will enjoy continued success in 2008.
Our achievements are made possible by the efforts of a great many people across
the Group. I thank them all for doing what they do so very well.
Allan Rosengren
Chief Executive
Consolidated income statement
for the year ended 30 September 2007
2007 2006
Notes (as restated)
�'000 �'000
Revenue 1 29,757 15,196
Cost of sales (25,687) (12,662)
--------- ----------
Gross profit 4,070 2,534
Administrative expenses excluding depreciation
and amortisation (2,785) (1,867)
--------- ----------
Earnings before interest, tax, depreciation and
amortisation 1,285 667
Depreciation and amortisation (43) (28)
--------- ----------
Operating profit 3 1,242 639
Finance income 4 263 218
--------- ----------
Profit before tax expense 1,505 857
Tax expense 7 (457) (259)
--------- ----------
Profit for the year 1,048 598
========= ==========
Attributable to equity holders of the Company 1,008 597
Minority interests 24 40 1
--------- ----------
Earnings per share - from continuing operations
and acquisitions
Basic 8 3.55p 2.17p
Fully diluted 8 3.41p 2.08p
========= ==========
Consolidated statement of changes in equity
for the year ended 30 September 2007
2007 2006
�'000 �'000
Balance at start of year
As originally stated 4,876 3,823
Adjustment for elimination of goodwill amortisation under
IFRS (see note 25) 17 -
Adjustment for reclassification of shares to be issued in
respect of deferred contingent consideration as non-current
liability under IFRS (see notes 15 and 25) (408) -
--------- -------
As restated 4,485 3,823
Profit for the year (2006 as restated) 1,048 598
Minority interests (40) (1)
Dividends paid (220) (150)
Issue of shares 225 215
--------- -------
Balance at end of year 5,498 4,485
========= =======
Consolidated balance sheet
as at 30 September 2007
Notes 2007 2006
(as restated)
�'000 �'000
Assets
Non-current assets
Property, plant and equipment 9 90 52
Intangible assets 10 2,736 1,733
Investments 11 27 27
-------- ---------
Total non-current assets 2,853 1,812
-------- ---------
Current assets
Trade and other receivables 13 1,888 1,896
Cash and cash equivalents 5,064 4,283
-------- ---------
Total current assets 6,952 6,179
-------- ---------
Total assets 9,805 7,991
======== =========
Current liabilities
Trade and other payables 14 (1,853) (1,797)
Tax liabilities 14 (358) (135)
Provision for contingent consideration 14 (1,063) (-)
-------- ---------
Total current liabilities 14 (3,274) (1,932)
-------- ---------
Non-current liabilities
Provision for contingent consideration 15 - (816)
Other provisions 16 (977) (757)
-------- ---------
Total non-current liabilities (977) (1,573)
-------- ---------
Total liabilities (4,251) (3,505)
======== =========
Net assets 5,554 4,486
======== =========
Equity
Issued share capital 17 143 141
Share premium 18 2,897 2,674
Merger reserve 18 160 160
Retained earnings 18 2,298 1,510
-------- ---------
-------- ---------
Total equity attributable to equity holders of 5,498 4,485
the company
Minority interests 24 56 1
-------- ---------
-------- ---------
Total equity 5,554 4,486
======== =========
The financial statements were approved by the Board of Directors and authorised
for issue on 22 January 2008.
Consolidated cash flow statement
for the year ended 30 September 2007
2007 2006
(as restated)
�'000 �'000
Profit before tax expense 1,505 857
Adjustments for:
Depreciation and amortisation 44 28
Finance income (263) (218)
Changes in working capital (excluding the effects of
acquisitions):
Trade and other receivables 51 (97)
Trade and other payables 33 314
Other provisions 220 147
------- --------
Cash generated from operating activities 1,590 1,031
Tax (paid)/received (364) (325)
------- --------
Net cash from operating activities 1,226 706
------- --------
Cash flows from investing activities
Finance income received 263 218
Acquisition of subsidiaries (Group - net of cash acquired) (445) (416)
Purchase of property, plant and equipment (43) (22)
------- --------
Net cash used by investing activities (225) (220)
------- --------
Cash flows from financing activities
Dividends paid (220) (150)
------- --------
Net cash used in financing activities (220) (150)
------- --------
Net increase in cash and cash equivalents 781 336
Cash and cash equivalents at start of year 4,283 3,947
------- --------
Cash and cash equivalents at end of year 5,064 4,283
======= ========
Notes to the preliminary announcement
for the year ended 30 September 2007
Sumus is a company incorporated in England and Wales. The financial statements
are presented in pounds sterling, and were authorised for issue by the directors
on 22 January 2008.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
The Group financial statements have been prepared and approved by the directors
in accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union ("EU").
1 Basis of preparation and significant accounting policies
Basis of preparation
The preparation of the Group financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities at the date of the financial statements. The key
estimates and assumptions are set out in the accounting policies below, together
with the related notes to the financial statements.
Such estimates and assumptions are based on historical experience and various
other factors that are believed to be reasonable in the circumstances and
constitute management's best judgement at the date of the financial statements.
In the future, actual experience may deviate from these estimates and
assumptions, which could affect the financial statements at the original
estimates. Assumptions are modified, as appropriate, in the year in which the
circumstances change.
The financial statements have been prepared on the historical cost basis.
The accounting policies set out below have, unless otherwise stated, been
applied consistently by the Group to all years presented in these financial
statements.
Basis of consolidation
The consolidated financial statements include the financial statements of Sumus
Plc and its subsidiaries. There are no associates or joint ventures to be
considered.
Intra-group balances, and any unrealised gains and losses or income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. The Group uses the purchase method of
accounting to account for the acquisition of subsidiaries (with the exception of
The Falcon Group Plc, which was acquired and consolidated in 2000 using the
merger method of accounting).
The cost of an acquisition is measured at the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The excess of the cost of acquisition over the fair value of the Group's
share of the identifiable net assets acquired is recorded as goodwill.
Revenue
Revenue represents fees and commissions receivable from product providers and
clients, excluding VAT. Revenue is only recognised when there is persuasive
evidence that a contract exists, the fee is fixed or determinable and collection
of the resulting receivable is considered probable. Full provision is made for
all known or expected losses.
Revenue is recognised on a receivable basis, net of any claw backs where
applicable.
Commission earned on indemnity terms is included in the financial statements
when it is considered due. A provision for lapses on commission received on an
indemnity basis is included within the financial statements.
Revenue recognised but not yet received at the year end is included as accrued
income, when due from providers or clients, or as trade debtors when due from
Appointed Representatives.
Goodwill
Goodwill is determined by comparing the amount paid, including the full
undiscounted value of any deferred and contingent consideration, on the
acquisition of a subsidiary or associated undertaking, and the group's share of
the aggregate fair value of its separable net assets. Goodwill is capitalised
and is subject to annual impairment reviews in accordance with applicable
accounting standards.
Acquired customer relationships (including Appointed Representative contracts)
The value of acquired customer relationships is determined by estimating the net
present value of the future profits expected from those customer relationships
that relate to contracts covering a pre-determined period or having a definite
useful economic life, and the resultant carrying value is amortised to the
income statement over that estimated useful economic life. Where the
relationships have an indefinite estimated useful economic life, the carrying
value is subject to annual impairment reviews in accordance with applicable
accounting standards.
In the case of Appointed Representative contracts, the directors consider that
these have an indefinite useful economic life as the contracts are with
Appointed Representative firms, rather than individual financial advisers or
their clients.
Deferred and contingent consideration
Deferred and contingent consideration payable is shown as a creditor within
current or non-current liabilities (as appropriate) on the balance sheet to the
extent that a contractual obligation exists, or may exist, to make payment in
cash. Where the consideration is payable by way of a variable number of shares
equal in value to the amount of the contractual obligation, the shares to be
issued are shown as a financial liability.
Segment reporting
A business segment is a distinguishable component of a group engaged in
providing products or services that are subject to risks and returns that are
different from those of other business segments.
A geographic segment is engaged in providing products or services within a
particular economic environment that is subject to risks and returns that are
different from those of segments operating in other economic environments.
Depreciation
Property, plant, and machinery are stated at cost less accumulated depreciation.
Depreciation on these assets is provided at rates estimated to write off the
cost, less estimated residual value, of each asset over its expected useful life
as follows:
Leasehold improvements - over the period of the lease
Fixtures, fittings and equipment - 4 years
Taxation
Current tax, including UK corporation tax is provided at amounts expected to be
paid (or recovered) using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is provided in full in respect of temporary differences between the
treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised where unused tax losses are available to
offset against future profits and where there is convincing evidence that
sufficient taxable profits will be available against which the unused tax losses
can be offset.
Leasing and hire purchase commitments
Assets obtained under hire purchase contracts and finance leases are capitalised
as tangible assets and depreciated over the shorter of the lease term and their
useful lives. Obligations under such agreements are included in creditors net of
the finance charge allocated to future periods. The finance element of the
rental payment is charged to the income statement so as to produce constant
periodic rates of charge on the net obligations outstanding in each period. All
other leases are regarded as operating leases and the payments made under them
are charged to the income statement on a straight line basis over the lease
term.
Provisions
Provisions for client compensation claims and for lapses in respect of indemnity
commission are recognised where the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligations and the amount has been
reliably estimated. Amounts recoverable from third parties in respect of such
claims or lapses are included within "Trade and other receivables" where such
recovery is reasonably certain.
Defined contribution pension scheme
The pension costs charged in the financial statements represent the
contributions payable by the Group during the year.
The Group operates two defined contribution schemes for the benefit of its
employees. Contributions payable are charged to the income statement in the
period to which they relate and are invested separately from the Group's assets.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks and other short-term highly liquid investments with original maturities of
three months or less.
Trade payables
Trade payables are stated at their nominal value.
Future changes in accounting standards
Certain new standards, amendments and interpretations to existing standards have
been published that will be applicable to the financial statements of the Group
in future years.
These comprise the following which relate to the presentation and disclosure of
information in the financial statements: IFRS 7, Financial Instruments:
Disclosures (effective for periods beginning on or after 1 January 2007); IFRS
8, Operating Segments (effective for periods beginning on or after 1 January
2009); IAS 1 Presentation of Financial Statements: a Revised Presentation
(effective for periods beginning on or after 1 January 2009).
Certain interpretation documents ("IFRICs") have been published that relate to
accounting treatments as follows: IFRIC 10, Interim Financial Reporting and
Impairment (effective for periods beginning on or after 1 November 2006), which
provides guidance on whether certain impairment losses should subsequently be
reversed; and IFRIC 11 - IFRS 2, Group and Treasury Share Transactions
(effective for periods beginning on or after 1 March 2007), which provides
guidance on share-based transactions.
Other new IFRICS that are not considered to be relevant to Group operations are:
IFRIC 12, Service Concession Arrangements; IFRIC 13, Customer Loyalty
Programmes; and IFRIC 14 - IAS 9: The Limit on a Defined Benefit Asset Minimum
Funding Requirements and their Interaction.
2 Segment reporting
The Group operates in one primary business segment, being that of supplying
Independent Financial Advice (IFA) and IFA Network services. In the opinion of
the directors the risks and returns of each class of business e.g. investment,
pensions, assurance and mortgage products are not significantly different from
each other and so they make up one business segment as a whole. Further
information concerning the revenues achieved for each class of business is set
out in the Chief Executive's Review.
The secondary segment is geographic and as the Group operates wholly within the
UK no further segmental analysis is appropriate.
3 Operating profit
Operating profit is stated after charging:
2007 2006
�'000 �'000
Depreciation 27 28
Amortisation of intangible assets 17 -
Operating lease rentals - land and buildings 126 97
- other assets 18 1
Fees receivable by the Group's auditors:
Audit of financial statements 43 28
Other services relating to taxation 9 8
Services relating to corporate finance transactions 4 14
Other services 23 8
======== ========
Of the services relating to corporate finance transactions, �4,450 (2006,
�20,000) has been capitalised as part of the acquisition cost of subsidiaries.
4 Finance income
2007 2006
�'000 �'000
Bank interest receivable 263 218
======== ========
5 Employees' and directors' remuneration
The average monthly number of employees (including the directors) during the
year were:
2007 2006
Management and administrators 43 25
======== ========
Their total remuneration was:
2007 2006
�'000 �'000
Wages and salaries 1,237 707
Social security costs 116 66
Pension costs 89 64
-------- --------
1,442 837
======== ========
The employees' and directors' remuneration is reflected in the financial
statements within administration expenses.
Directors' emoluments can be analysed as follows:
2007 2006
�'000 �'000
Remuneration and other emoluments 373 301
Less amount charged as part of the cost of the acquisition
of subsidiaries (10) (35)
-------- --------
363 266
======== ========
2007 2006
�'000 �'000
Highest paid director 111 101
======== ========
There are two directors to whom retirement benefits are accruing under a money
purchase scheme (2006: 2). Contributions of �60,000 were paid during the year
(2006: �60,000).
6 Pension costs
The Group operates a number of defined contribution pension schemes, one for the
benefit of 2 executive directors and the others for the benefit of certain
employees. The schemes and their assets are held by independent managers. The
pension charge represents contributions due from the Group which amounted to
�89,000 (2006: �64,000).
7 Tax expense
2007 2006
�'000 �'000
Current tax charge 457 259
Deferred tax - -
-------- --------
Tax expense for the year 457 259
======== ========
Factors affecting the tax expense for the year
Profit before tax 1,505 857
-------- --------
Profit before tax multiplied by standard rate of UK
corporation tax of 30% (2006: 30%) 452 257
Effects of:
Non-deductible expenses 12 2
Depreciation in excess of capital allowances (2) 1
Tax losses utilised (2) (1)
Amortisation of intangibles 5 -
Benefit of lower tax rate (1) -
Prior year adjustments (7) -
-------- --------
Current tax charge 457 259
======== ========
8 Earnings per share
The calculation of basic earnings per share is calculated by dividing profit
attributable to the equity shareholders of the Company of �1,008,000 (2006:
�597,000) by the weighted average number of shares in issue during the year.
2007 2006
Profit for the year attributable to equity holders
of the Company �1,008,000 �597,000
Weighted average number of shares for basic earnings
per share 28,374,439 27,544,660
-------- --------
Basic earnings per share 3.55p 2.17p
======== ========
Fully diluted earnings per share is calculated by dividing profit attributable
to the equity shareholders of the Company of �1,008,000 (2006: �597,000) by the
weighted average number of shares in issue during the year and the actual number
of shares issued as deferred consideration subsequent to the year end.
2007 2006
Profit for the year attributable to equity holders
of the Company �1,008,000 �597,000
Fully diluted weighted average number of shares 29,532,533 28,744,660
-------- --------
Fully diluted earnings per share 3.41p 2.08p
======== ========
9 Property, plant and equipment
Leasehold Fixtures, Total
improvements fittings and
equipment
�'000 �'000 �'000
Cost
At 30
September 2005 22 125 147
Additions - 22 22
On acquisition
of subsidiary - 25 25
Disposals - - -
---------- ----------- ---------
At 30
September 2006 22 172 194
---------- ----------- ---------
Additions - 43 43
On acquisition
of subsidiary - 57 57
Disposals - - -
---------- ----------- ---------
At 30
September 2007 22 272 294
---------- ----------- ---------
Depreciation
At 30
September 2005 17 88 105
Charge for the
year 4 24 28
On acquisition
of subsidiary - 9 9
Disposals - - -
---------- ----------- ---------
At 30
September 2006 21 121 142
Charge for the
year 1 26 27
On acquisition
of subsidiary - 35 35
Disposals - - -
---------- ----------- ---------
At 30
September 2007 22 182 204
---------- ----------- ---------
Net book value
At 30
September 2007 - 90 90
At 30
September 2006 1 51 52
At 30
September 2005 5 37 42
========== =========== =========
10 Intangible fixed assets
Goodwill Acquired Acquired Total
Appointed
Representative
contracts
customer
relationships
Cost �'000 �'000 �'000 �'000
At 30
September 2005 6 - - 6
Additions - - 1,727 1,727
-------- --------- ---------- -------
At 30
September 2006 6 - 1,727 1,733
Additions - 773 - 773
Adjustment to
deferred
contingent
consideration - - 247 247
-------- --------- ---------- -------
At 30
September 2007 6 773 1,974 2,753
-------- --------- ---------- -------
Amortisation
At 30 September 2005 and 2006 - - - -
Charge in year - 17 - 17
-------- --------- ---------- -------
At 30
September 2007 - 17 - 17
-------- --------- ---------- -------
Net book value
At 30
September 2007 6 756 1,974 2,736
======== ========= ========== =======
At 30
September 2006 6 - 1,727 1,733
======== ========= ========== =======
At 30
September 2005 6 - - 6
======== ========= ========== =======
The addition during the year arose on the acquisition of 50.1% of the issued
share capital of Deverill Black & Company Limited. The remaining amortisation
period for these assets as at 30 September 2007 was 14 years and 8 months.
Further details are set out in note 12 below.
The intangible asset arising in respect of the Acquired Appointed Representative
contracts relates to the fair value of the contractual relationships between
FSAS and its Appointed Representative firms, where FSAS is considered to be a
cash generating unit ("CGU") as defined by International Accounting Standard No.
36. The recoverable amount of the intangible asset arising from the acquisition
of that CGU has been determined based on fair value less costs to sell.
The initial fair value was derived from an observable market price when FSAS was
acquired in September 2006. Based on the performance of FSAS since that date,
the directors consider that the recoverable amount of the CGU has increased and
therefore the carrying value of this intangible asset has not been impaired.
�17,000 previously charged as amortisation of goodwill arising on the
acquisition of Financial Services Advice and Support Limited ("FSAS") in 2006
under UK GAAP has been credited back to the income statement in the comparative
information for that year following the transition to IFRS. This is required as
the associated goodwill has now been re-classified as an intangible asset
arising from the acquisition of the underlying Appointed Representative
Contracts of FSAS (see note 25).
11 Investments
Listed investment at cost
�'000
At 30 September 2006 and 2007 27
======
The market value of the listed investment as at 30 September 2007 was �127,000
(2006: �113,000).
12 Investments in subsidiary undertakings
The Company has the following subsidiary undertakings:
Name Principal Activity Holding Registered
The Falcon Group Plc IFA and IFA network services 100% England & Wales
Financial Services
Advice and Support
Limited IFA network services 100% Scotland
Financial Synergies
Plc Commission aggregation services 85% England & Wales
Deverill Black &
Company Limited IFA services 50.1% England & Wales
These companies have all prepared accounts to 30 September 2007.
Details of the movements and adjustments arising from the acquisition of
subsidiary undertakings during the year were as follows:
Purchase of subsidiary undertaking - Deverill Black & Company Limited
On 5 June 2007 the Company acquired 50.1% of the issued ordinary share capital
of Deverill Black & Company Limited ("Deverill Black"). This was acquired for
�750,000 plus costs, paid by �525,000 in cash and �225,000 by the issue of new
ordinary shares of 0.5p in the Company, issued as fully paid.
The fair values of the identifiable assets and liabilities of Deverill Black at
the date of acquisition were as follows:
Net assets acquired Book value Revaluation Fair value
�'000 �'000 �'000
Goodwill 109 (109) -
Tangible fixed assets 22 - 22
Trade and other receivables 43 - 43
Cash at bank and in hand 122 - 122
Trade and other payables (23) - (23)
Corporation tax (130) - (130)
---------- -------- --------
Net assets 143 (109) 34
========== ======== ========
Group share at 50.1% 17
Acquisition costs (40)
Group's share of intangible assets
arising on consolidation - customer
relationships (note 10) 773
--------
750
========
Satisfied by
Shares allotted 225
Cash paid 525
--------
750
========
The intangible assets identified relate to the Group's share of the estimated
fair values of the customer relationships of Deverill Black as at the date of
acquisition.
The �225,000 share payment was made by way of an issue of 512,528 new ordinary
shares fully paid to the vendors. Fair value for these shares was set at 43.9p,
being the average mid market price of the Company's shares for the five business
days immediately preceding the date of issue. These shares are subject to a 12
month lock-in arrangement whereby for that period following the date of
acquisition no sales may be made without the prior written consent of the
Company which may be withheld for any reason. The shares are also subject to an
orderly marketing restriction for the subsequent 12 months following the end of
the lock-in period.
Prior years - Deverill Black & Company Limited
The summarised income statement of the acquired entity for the 27 week period
from the beginning of its financial year on 1 December 2006 to the effective
date of acquisition, and for its previous financial year, is set out below.
27 weeks to Year ended
5 June 2007 30 November
2006
�'000 �'000
Revenue 387 920
Cost of sales (61) (105)
------- --------
Gross profit 326 815
Administrative expenses (113) (468)
------- --------
Operating profit and profit before tax
expense 213 347
Tax expense (51) (78)
------- --------
Profit after tax 162 269
======= ========
Reconciliation of amounts paid for acquisition of Deverill Black & Company
Limited
�'000
Cash consideration paid (525)
Acquisition costs (40)
Net cash balances acquired 122
-------
Net cash outflow on acquisition (443)
=======
Deferred consideration in respect of prior year acquisition - Financial Services
Advice and Support Limited ("FSAS")
On 7 September 2006 the Company acquired 100% of the issued share capital of
FSAS. The consideration payable was an initial amount of �859,000, settled by a
cash payment of �644,000 and by the issue of 728,745 new ordinary shares of 0.5p
each in the Company, fully paid, with a fair value of �215,000, and a further
amount of deferred consideration up to a maximum of �1,141,000. The deferred
consideration was to be calculated as a multiple of the Earnings Before Interest
and Tax ("EBIT") of FSAS for the year ended 30 September 2007 and at 30
September 2006 was estimated at �816,000.
The results of FSAS for the year ended 30 September 2007 have now been finalised
and the deferred consideration payable has been agreed at �1,063,132. This was
settled on 28 December 2007 and, in accordance with the provisions of the
related sale and purchase agreement, was satisfied by a cash payment of �531,566
and by the issue of 1,158,094 new ordinary shares of 0.5p each in the Company,
fully paid, with a fair value of �531,566.
Acquisition of 15% of the issued share capital of Financial Synergies Plc
In June 2007 the Company acquired a further 15% of the issued share capital of
Financial Synergies Plc, a company in which it previously held a 70% stake. The
consideration for the shares acquired was their partly paid up nominal value of
�1,875 and the fair value of assets acquired was �1,725.
13 Trade and other receivables
2007 2006
(as restated)
�'000 �'000
Trade receivables 115 90
Other receivables 36 100
Amounts recoverable from advisers and insurers in
respect 777 610
of compensation claims and lapses (see note 16)
Prepayments 167 178
Accrued income 793 918
Owed by subsidiary undertakings - -
--------- --------
1,888 1,896
========= ========
The amounts recoverable from advisers and insurers in respect of compensation
claims and lapses may not be recoverable within 12 months as the related
provisions are held in respect of both current and future estimated compensation
claims and lapses. In prior years such amounts were netted off the related
provisions. Further details are set out in note 15 below.
14 Trade and other payables
2007 2006
�'000 �'000
Trade payables 668 910
Corporation tax 358 135
Other taxes and social security costs 48 31
Other creditors 351 318
Deferred contingent consideration (note 15) 1,063 -
Accruals and deferred income 786 538
Owed to subsidiary undertakings - -
------- -------
3,274 1,932
======= =======
15 Provision for non-current contingent consideration
2007 2006
(as restated)
�'000 �'000
Deferred and contingent - 816
consideration ====== =======
Deferred and contingent consideration - 816
====== =======
The deferred and contingent consideration in 2006 was the estimated additional
deferred consideration payable after 30 September 2007 in respect of the
acquisition of FSAS in September 2006. This amount was subject to an earn-out
based on the EBIT of FSAS for the year ended 30 September 2007 (see note 12),
was to be settled as to 50% in cash and 50% by the issue of new ordinary shares
of 0.5p each in the Company, fully paid and was not due to be settled until
December 2007.
In the 2006 financial statements, the resultant estimated cash creditor as at 30
September 2006 was included within non-current liabilities with an equivalent
amount being credited to share capital to be issued (see note 17). This
treatment is not in accordance with IAS 32 and, following the transition to IFRS
in the year ended 30 September 2007, the comparative figures as at 30 September
2006 have been restated to include the whole of the estimated deferred
contingent consideration of �816,000 as at that date as a non-current liability.
The equivalent deferred contingent consideration creditor as at 30 September
2007, which has been increased by �247,000 following the finalisation of the
EBIT of FSAS for the year then ended, has been transferred to current
liabilities and was settled in full on 28 December 2007.
16 Other provisions
Client Lapses Total
compensation
claims
�'000 �'000 �'000
At 1 October 2005
As previously reported 50 48 98
Adjustment to show the provision
gross of amounts recoverable
from advisers and insurers 253 240 493
----------- ---------- -------------
As restated 303 288 591
Acquisition of subsidiary - 19 19
Utilised in year
----------- ---------- -------------
As previously reported (41) (276) (317)
Adjustment to show the provision
gross of amounts recoverable
from advisers and insurers - (12) (12)
----------- ---------- -------------
As restated (41) (288) (329)
Charge to income statement
----------- ---------- -------------
As previously reported 71 276 347
Adjustment to show the provision
gross of amounts recoverable
from advisers and insurers 129 - 129
----------- ---------- -------------
As restated 200 276 476
----------- ---------- -------------
At 30 September 2006
----------- ---------- -------------
As previously reported 80 67 147
Adjustment to show the provision
gross of amounts recoverable
from advisers and insurers 382 228 610
----------- ---------- -------------
As restated 462 295 757
Utilised in year (81) (308) (389)
Charge to income statement 168 441 609
----------- ---------- -------------
At 30 September 2007 549 428 977
=========== ========== =============
Client compensation claims
A provision is held in relation to current and future client complaints across
all product types. The assumptions used are based on previous experience and
factors prevailing currently in the financial services industry. The amount
provided is shown in these financial statements as the gross obligation, with
the associated recovery from financial advisers and insurers being included
within "Trade and other receivables" where such recovery is reasonably certain
(see note 13).
In prior years the amount provided was shown net of such anticipated recoveries
and the comparative figures have been restated accordingly. There was no impact
on profits as previously reported from this change in presentation, which was
made in order to bring the Group in line with current industry practice.
As at 30 September 2007, the recoverable amounts were estimated at �449,000
(2006: �382,000).
Lapses for indemnity commissions
The provision for lapses reflects the estimated clawback by product providers of
commissions received under indemnity terms for future policy lapses. The
assumptions used are based on current experience taking into account actual
commission clawback in the last twelve months. The amount provided is shown in
these financial statements as the gross obligation, with the associated recovery
from financial advisers being included within "Trade and other receivables"
where such recovery is reasonably certain (see note 13).
In prior years the amount provided was shown net of such anticipated recoveries
and the comparative figures have been restated accordingly. There was no impact
on profits as previously reported from this change in presentation, which was
made in order to bring the Group in line with current industry practice.
As at 30 September 2007, the recoverable amounts were estimated at �328,000
(2006: �228,000).
Deferred taxation
The potential deferred tax liabilities of the Group were not material at either
30 September 2006 or 2007 and calculated at 30% arose as follows:
2007 2006
�'000 �'000
Accelerated capital allowances 1 (5)
======= =======
Financial instrument risks
The Group is not subject to significant risks arising from financial
instruments.
The Group does not have any utilised borrowing facilities, it does not trade in
foreign currencies, and there are therefore no material differences between the
fair value and liabilities of such exposures.
As at 30 September 2007, there were balances at the bank totalling �5,064,000
(2006: �4,083,000). These accounts earn interest at variable interest rates.
17 Share capital
Authorised
2007 2006
�'000 �'000
200,000,000 Ordinary shares of 0.5p each 1,000 1,000
======== =========
Allotted, called up and fully paid
Share capital Share capital
No. of shares �'000
At 1 October 2005 27,500,000 137
Issue of shares on acquisition of subsidiary 708,745 4
--------- ---------
At 30 September 2006 28,208,745 141
Issue of shares on acquisition of subsidiary 512,528 2
--------- ---------
At 30 September 2007 28,721,273 143
========= =========
On 5 June 2007 512,528 new ordinary shares of 0.5p each were issued, fully paid,
at a value of 43.9p per share pursuant to the acquisition of 50.1% of Deverill
Black & Company Limited (see note 12). The nominal value of those shares has
been credited to share capital and the resultant premium on issue has been
credited to the share premium account.
In the 2006 financial statements �408,000 was included as shares to be issued in
respect of the deferred and contingent consideration payable in respect of the
acquisition of FSAS in September 2006. This has now been reclassified as a
non-current liability in the comparative figures for the year ended 30 September
2006 following the transition to IFRS during the year. Further details of the
movements are set out in notes 15 and 25.
18 Reserves
Share premium Merger reserve Retained
earnings
�'000 �'000 �'000
At 1 October 2005 2,463 160 1,063
Premium on shares issued
in the year (note 17) 211 - -
Profit for the year
---------- --------- -----------
As previously reported - - 580
Adjustment on
implementation of IFRS -
write back of goodwill
amortisation - - 17
---------- --------- -----------
As restated - - 597
Dividends paid - - (150)
---------- --------- -----------
At 30 September 2006
---------- --------- -----------
As previously reported 2,674 160 1,493
IFRS adjustment as above - - 17
---------- --------- -----------
As restated 2,674 160 1,510
Premium on shares issued
in the year (note 17) 223 - -
Profit for the year - - 1,008
Dividends paid - - (220)
---------- --------- -----------
At 30 September 2007 2,897 160 2,298
========== ========= ===========
Share premium account
The share premium account records the consideration premium arising on shares
issued at a value that exceeds their nominal value, less any costs incurred by
the Company relating directly to the issue of those shares. Details of the
shares issued during 2006 and 2007 and the related premiums are set out above
and in note 17.
Merger reserve
This reserve arose on a capital re-organisation undertaken in December 2000,
whereby the Company acquired the whole of the issued share capital of The Falcon
Group Plc by way of a share for share exchange. The balance on the reserve
represents the excess of fair value of the assets acquired over the fair value
of the consideration paid as at that date.
19 Related party transactions
The Company has a related party relationship with its subsidiaries, its
directors and other employees of the Company with management responsibility for
the Company's affairs. In the opinion of the directors there are no members of
key management, as defined by IAS 24 (Related Party Disclosures), who were not
also directors of the Company during either 2006 or 2007.
During the year the Company paid SMS Advisory Limited, a company controlled by P
J Smith, a director of the Company, fees and expenses totalling �89,689,
including VAT, in respect of director's services supplied and in connection with
the acquisition of subsidiary undertakings (2006: �95,091). At 30 September 2007
the amount due to SMS Advisory Limited was �4,911 (2006: �4,554).
During the year the Company paid Paul Bradshaw Consulting Limited, a company
controlled by P Bradshaw, a director of the Company, fees and expenses totalling
�19,103, including VAT, in respect of non-executive director's services supplied
(2006: �Nil). At 30 September 2007 the amount due to Paul Bradshaw Consulting
Limited was �2,146 (2006: �Nil).
The Falcon Group Plc, a subsidiary undertaking of the Company, paid property
rents totalling �99,317 during the year (2006: �96,000) to Capitecs Limited, a
company under the control of A Rosengren and J P Telling who are directors of
the Company and also of that company. At 30 September 2007 the amount due to
Capitecs Limited was �Nil (2006: �Nil).
With effect from 31 May 2007 Financial Services Advice and Support Limited
("FSAS") entered into a lease to occupy office premises in Dunfermline. Capitecs
Limited, a company under the control of A Rosengren and J P Telling who are
directors of the Company and also of that company, has a one-third interest in
that property. The rents paid in the period to 30 September 2007 in respect of
these premises amounted to �5,000, excluding VAT (2006: �Nil) and no amounts
were due to or from Capitecs Limited under these arrangements as at 30 September
2007 (2006: �Nil).
In June 2007 the Company provided an unsecured loan of �10,000 to FSAS to enable
it to meet its minimum financial resources requirement under the Financial
Services Authority's capital adequacy regime. The loan is unsecured, bears
interest at 1% over LIBOR and is not repayable until 30 June 2009, unless the
borrower elects to repay the loan early and subject to the approval of the
Financial Services Authority.
During the year the Company entered into certain transactions with its wholly
owned subsidiary, The Falcon Group Plc, involving short term cash transfers, the
defrayal of costs by either company on the other's behalf and recharged group
relief to that company. The amounts involved were interest free and have no
fixed repayment terms.
20 Ultimate parent undertaking and controlling interest
There is no ultimate controlling party of the Company.
21 Operating leases
At 30 September 2007 the Group had minimum commitments under non-cancellable
operating leases as set out below:
Land and Land and Other assets Other assets
buildings buildings
2007 2006 2007 2006
�'000 �'000 �'000 �'000
Due within:
One year - - - -
Two to five years 101 11 15 11
Over five years 45 96 - -
-------- -------- -------- --------
Total minimum lease
payments 146 107 15 11
======== ======== ======== ========
The Group leases four office spaces under operating leases. The outstanding
lease terms range from less than five years to twenty years. Lease terms of
greater than five years are subject to a rent review under the lease term.
22 Dividends
2007 2007
�'000 �'000
Final dividend at 0.46p per share (2006: 0.327p per share) 130 90
Interim dividend at 0.32p per share (2006: 0.22p per share) 90 60
-------- --------
220 150
======== ========
As stated in the Chairman's Statement, the directors recommend payment of a
final dividend of 0.68 pence per share, making a total dividend for the year of
1.00 pence per share (2006: 0.68 pence per share), subject to shareholder
approval at the Annual General Meeting on 26 February 2008. This dividend will
be paid on 29 February 2008 to shareholders on the register at 1 February
2008. The ordinary shares will become ex-dividend on 30 January 2008. These
financial statements do not reflect this dividend payable, which will be
accounted for in the statement of changes in equity as an appropriation of
retained earnings in the year ending 30 September 2008.
23 Business combinations
The amount of operating profit since the acquisition date of acquired companies
included within the Group's income statement is as follows:
2007 2006
�'000 �'000
Financial Services Advice and Support Limited - 8
Deverill Black & Company Limited 102 -
====== ======
The revenues and profits of the Group for the year, had the acquisition of
Deverill Black & Company Limited been made at the beginning of the year, would
have been as follows:
Consolidated Pre-acquisition Total for the
income trading of year ended
statement Year Deverill Black 30September2007
ended & Company as though the
30September2007 Limited 1 acquisition
October 2006 - date was
4June2007 1October2006
�'000 �'000 �'000
Turnover 29,757 - 29,757
Operating
profit 1,242 268 1,510
======= ======= =======
24 Minority interests
�'000
At 1 October 2005 -
Share of profit after tax expense for the year 1
-------
At 30 September 2006 1
Arising on acquisition of 50.1% of Deverill Black & Company Limited in
June 2007 17
Arising on acquisition of a further 15% of Financial Synergies Plc in
June 2007 (2)
Shares of profits after tax expense for the year 40
-------
At 30 September 2007 56
=======
The minority interests comprise minority shareholders' interests in the net
assets of the following subsidiary undertakings.
2007 2006
% Minority Shareholding
Deverill Black & Company Limited (50.1% acquired
June 2007 - see note 12) 49.9% -
Financial Synergies Plc (additional 15% acquired
June 2007 - see note 12) 15% 30%
======= =======
25 Explanation of transition to IFRS
These are the Group's first annual financial statements prepared in accordance
with IFRS. The accounting policies referred to in note 1 have been applied in
preparing the financial statements for the year ended 30 September 2007, the
comparative information for the year ended 30 September 2006, and the
preparation of an opening IFRS balance sheet at 1 September 2005, the Group's
date of transition to IFRS.
In preparing its opening IFRS balance sheet and comparative information for the
year ended 30 September 2006, the Group has adjusted amounts reported previously
in financial statements prepared in accordance with UK GAAP.
An explanation of how the transition from UK GAAP to IFRS has affected the
Group's financial position and financial performance is set out below. There
have been no changes to the Group's cash flows as a result of the transition.
Summary of changes resulting from the adoption of IFRS:
(a) Goodwill and intangible assets on Business Combinations
Previously under UK GAAP, the excess of the fair value of consideration payable
in respect of the acquisition of subsidiary undertakings over the fair value of
the underlying assets acquired, after deducting the costs of such acquisitions,
was included on the Group balance sheet as goodwill and then amortised over the
estimated useful economic lives of the related investments, up to a maximum of
20 years.
The gross balance of goodwill as at 30 September 2006 was �1,733,000 (2006:
�6,000) of which �1,727,000 arose on the acquisition of FSAS in September 2006.
The charge to profit and loss account for amortisation of goodwill in the year
ended 30 September 2006 was �17,000. No amortisation of goodwill was recorded
prior to 1 October 2005.
Under IFRS 3 (Business Combinations) it is necessary to identify and separate
out those intangible assets that can be separately identified when acquired as
part of a business combination. Such assets should be included at their
estimated fair value as at the date of acquisition.
Upon reviewing the accounting for the acquisition of FSAS as previously adopted
under UK GAAP, it was considered that all of the value previously identified and
attributed to goodwill should, under IFRS 3, be attributed to the fair value of
FSAS's contractual relationships with its Appointed Representative firms. In
addition, in the opinion of the directors these assets have indefinite useful
economic lives as the contracts are with Appointed Representative firms, not
individual financial advisers or their clients, and as such no amortisation is
required. Instead, the fair value of such assets is assessed on an annual basis
and provision is made for any impairment identified.
As a result of the above, �1,727,000 previously included as goodwill in the
Group's balance sheet has been reclassified as an intangible assets as at 30
September 2006 (2005: �Nil) and the amortisation of �17,000 previously charged
to profit and loss account has been credited back to the income statement in the
comparative figures for the year ended on that date. The net effect is to
increase intangible assets by �1,727,000 and reduce goodwill by �1,710,000 as at
30 September 2006 and to increase profit for the year then ended by �17,000.
(b) Classification of shares to be issued
Previously under UK GAAP, shares to be issued as contingent consideration for
acquisitions were included as a component of equity under FRS 7 (Fair Values in
Acquisition Accounting). Under IAS 32 (Financial Instruments: Presentation),
where the number of shares to be issued are variable and equal in value to the
amount of the contractual obligation, these are to be presented as financial
liabilities and not as equity. The amount included in the 2006 financial
statements was reclassified accordingly, and this led to a reduction in
equity and a corresponding increase in non-current liabilities of �408,000.
This adjustment affected the balance sheet only.
As a result of the two matters above, the profit for the year ended 30 September
2006 increased by �17,000 from �581,000 to �598,000. The impact on total equity
as at 30 September 2006 was to decrease it from �4,877,000 to �4,486,000.
In addition, and as detailed in note 15, �408,000 of deferred contingent
consideration in respect of the acquisition of FSAS in 2006 which was previously
included as shares to be issued within equity as at 30 September 2006 has been
transferred to non-current liabilities in the comparative figures following the
transition to IFRS during the year. The net effect of the above is to increase
non-current liabilities and reduce shares to be issued (and therefore total
equity) as at 30 September 2006, as previously reported, each by �408,000 in the
Group's balance sheet as at that date. There was no impact on the net assets as
previously reported as at 30 September 2005 or on the profit for the year as
previously reported for the year ended 30 September 2006.
26 Capital commitments
There were no capital commitments as at 30 September 2007 (2006: �Nil).
27 Client money
The total balance on client bank accounts managed by the Group as at 30
September 2007 was �260,262 (2006: �217,185).
28 Cash and cash equivalents
This represented cash and cash equivalents only at each year end. There was no
debt at either 30 September 2006 or 2007.
29 Subsequent event
On 28 December 2007 the Company settled the deferred, contingent consideration
due in respect of the acquisition of FSAS in September 2006 in a total amount of
�1,063,132. This was satisfied by a cash payment of �531,566 and by the issue of
1,158,094 new ordinary shares of 0.5p each in the Company, issued as fully paid
and valued at 45.9p per share. Further details are set out in note 12.
30 Statutory accounts
The financial information set out in this announcement does not constitute the
Group's statutory financial statements for the year ended 30 September 2007. The
financial information for the year ended 30 September 2006 is derived
from the financial statements of the Group for that period, which were reported
on by the auditors without qualification and such report did not contain any
statement under section 237(2) or (3) of the Companies Act 1985.
The financial statements for the year ended 30 September 2006 have been
delivered to the Registrar of Companies; those for the year ended 30 September
2007 will be finalised on the basis of the financial information contained in
this preliminary announcement and will be delivered to the Registrar of
Companies after the forthcoming Annual General Meeting.
Notes to Editors
Sumus, admitted to AIM in February 2005, is the group holding company of The
Falcon Group Plc ("Falcon"), a long established and consistently profitable IFA
group, Deverill Black & Company Limited, one of Falcon's Appointed
Representative firms, Financial Synergies Plc and Financial Services Advice and
Support Limited ("FSAS"). Falcon was founded in 1983 by Allan Rosengren and
Julian Telling, respectively the Group Chief Executive and Group Operations
Director of Sumus.
Sumus is a consolidator in the IFA sector, both by way of the organic expansion
of its operating businesses and through carefully selected investments in IFA
firms, which then become authorised through either Falcon or FSAS. The Sumus
Group provides strategic direction, working capital, compliance and risk
management resources to the IFA businesses within its networks.
*The Henry Samuel Market Research Survey is a well respected IFA industry survey
which measures service levels of IFA Networks to their membership.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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