RNS Number:2326Q
Inter-Alliance Group PLC
26 September 2003
26 September 2003
Inter-Alliance Group plc ("Inter-Alliance" or the "Group")
Half-year results ended 30 June 2003
Inter-Alliance half-year results in line with previous trading statements
Group sees positive results from restructuring measures
"As we reported in July, the performance of Inter-Alliance during the first half
of this year was below our expectations. At that time, we announced that we
were taking a number of corrective actions and successfully raised #15 million
gross to meet working capital requirements. I am now pleased to confirm that
these actions are on track to deliver material improvements in the second half
of the year and, with current trading well on plan, we remain confident that the
Group will be cash flow positive during the first half of 2004 without recourse
to further funding."
Keith Carby, Chairman and Chief Executive Inter-Alliance Group plc
Current trading in line with expectations
* The Directors confirm that current trading is in line with
expectations and that they remain confident that the Group will be cash flow
positive during the first half of 2004 without recourse to further funding, as
stated in their announcement dated 18 July 2003.
* The recovery in turnover in the second quarter, after a weak start to
the year, has been maintained through July and August, and levels of submitted
business in September are encouraging.
* PMH Alliance, the new non-regulated business channel for the Group's
Registered Individuals ("RIs"), was launched in June and is performing in line
with expectations. 488 of the Group's 1,256 RIs are now contracted to transact
non-regulated business through PMH Alliance. The value of business submitted
though PMH Alliance to date exceeds #2 million.
* Significant cost cutting measures have been taken and will continue in
the second half of the year. The Directors are confident that these measures
will reduce cash overheads to less than #21 million per annum by the end of this
year.
* Whilst the Directors continue to expect the Group to incur losses
throughout the second half of the year, as stated in the announcement dated 18
July 2003, they are encouraged by the Group's progress against plan.
* The Group had 1,256 RIs in the UK as at 30 June 2003.
Financial performance for the half year to 30 June 2003 in line with recent
trading statements
* Turnover up 21 per cent to #28.9 million (H1 2002: #23.9 million,
restated).
* Gross Profit, after payment of commissions to Inter-Alliance's
advisers, up 67 per cent to #8 million (H1 2002: #4.8 million, restated).
* Operating loss after exceptional items #14.7million (H1 2002: #5.1
million, restated).
* Net cash #4.9 million (2002: #16.2 million).
Successful share placing in July 2003
* Placing was fully subscribed and raised #15 million gross, providing
sufficient working capital to allow the Group to realise the benefits of the
actions taken. The Directors remain confident that this will result in the
Group achieving positive cash flow during the first half of 2004.
ENQUIRIES
Inter-Alliance Group plc Financial Dynamics
Keith Carby, Chairman & Chief Executive Geoffrey Pelham-Lane
020 8971 4400 020 7269 7194
Steve Hartley, Finance Director Emma Buchanan
020 8971 4400 020 7269 7294
Carey Shakespeare, Marketing Director
01793 441 456
NOTES TO EDITORS
Inter-Alliance Group plc is the largest National firm of Independent Financial
Advisers ("IFAs") in the UK. It has 1,256 IFAs in the UK. Its shares are
listed on the Alternative Investment Market ("AIM").
Chairman's Statement
Summary and update on current trading
The first six months of 2003 were dominated by fundamental restructuring and
intense development for Inter-Alliance.
As we reported in June, we have substantially completed the restructuring of the
87 limited companies thereby giving us far greater control over the business. We
introduced improved technology and the ATLAS operating system, which bring the
potential for significant economies of scale and the opportunity to leverage the
value of our national brand. In addition, the implementation of a rigorous
rationalisation programme to reduce costs is progressing with a significant
reduction in headcount. Plans to realise efficiencies from our properties and
the centralisation of all group purchasing are now being actioned. We
strengthened the management team, which included the appointment on 19 June of
Steven Hartley as Group Finance Director.
There is no doubt that we have made demonstrable progress in 2003. The cost
cutting programme is on plan to ensure that cash overheads of the consolidated
Group will fall to less than #21 million per annum by the end of 2003.
The quantitative results for the six months ended 30 June 2003 reflect the
investment cost of these initiatives as well as a particularly difficult trading
environment in the first quarter of the year. Since then trading has recovered.
The second quarter showed a strong improvement in turnover and this has been
sustained through July and August. Levels of submitted business in September
have also been encouraging. PMH Alliance, the new non-regulated business
channel launched in June of this year, is growing strongly. From a total of
over 1,200 advisers in the Group, we now have 488 Registered Individuals ("RIs")
transacting non-regulated business through PMH Alliance. The value of business
submitted though PMH Alliance since its launch in June 2003 is now #2 million.
The improvements in turnover, corporate structure, operating systems and
financial controls mean that we are well set to deliver improvements in trading
performance in the second half.
Results for the six months ended 30 June 2003
Despite the distractions described above and a weak market, gross turnover
increased by #5 million, 21 per cent to #28.9 million (H1 2002: #23.9 million,
restated). This included a #7.7 million contribution from HST Financial plc ("
HST"), which was acquired in the second half of last year. In the first quarter
of this year, trading conditions across the sector were particularly weak and,
despite a 29 per cent increase in our own second quarter performance, this
impacted on the Group's results and cash resources.
After deducting the commissions that we pay to the advisers, gross profit rose
by #3.2 million, 67 per cent to #8 million (H1 2002: #4.8 million, restated)
reflecting the change in the basis of commissions paid to advisers following the
restructuring and the acquisition of HST.
Conversely, total operating expenses increased by #12.9 million to #22.8 million
(H1 2002: #9.9 million, restated). A significant proportion of this increase
represents overheads assumed from the old limited companies, which at 1 January
2003 had an estimated annualised rate of at least #17 million. Other
non-recurring overheads included consultancy fees and temporary staff costs
associated with the restructuring programme, as well as costs of the completion,
training and launch of the ATLAS software, the cost of exiting former business
premises, and professional fees relating to acquisitions and financing projects
all contributed further to this increase in costs. The result of the above is an
operating loss of #14.7 million (H1 2002: #5.1 million, restated).
Specific one-off costs and provisions of #4.3 million relating to liabilities
acquired during the restructuring have been included as exceptional costs below
the line.
The Group elected to make these fundamental changes and to incur the related
costs. As a consequence of this expenditure, our advisers are now benefiting
from centralised management of support functions, including research, premises,
accounting, and technology, which allows for economies of scale and enables them
to focus on client acquisition and client servicing rather than administration.
Positive outlook
The Independent Financial Adviser ("IFA") market in the UK offers significant
opportunities for long-term profitable growth. Over two thirds of new business
in regulated products is sold by IFAs. If non-regulated products are included,
such as mortgages, IFAs account for approximately 30 per cent of all new
business in retail financial products in the UK. As a result, the IFA channel
is a vitally important means of distribution for the product producers,
particularly as many of these no longer have direct salesforces.
Two major developments are expected to impact our marketplace in the near
future. Firstly, the sector's regulatory environment is about to change and the
Financial Services Authority is expected to implement a number of measures
following the publication of its Consultation Papers CP121 and CP166. The
current framework ("polarisation") segregates the market into two distinct and
mutually exclusive groups. Under the new proposals, the concept of IFA and tied
agent will be retained, but there will also be a middle ground that allows
advisers to be "multi-tied". Multi-tied advisers will be able to offer products
from, not just one, but a range of producers.
Secondly, the arrival of "Wrap" propositions, whereby clients can be offered a
comprehensive service covering all their investments in aggregation and
independent of individual product providers, will be a major benefit to
advisers. Some of the biggest financial institutions in the UK are placing
major importance on this development and they appreciate clients are much more
likely to use Wraps when guided by an adviser. This development will further
increase the importance of advisers and also provide an opportunity for them to
generate more revenue.
We believe that, as the leading independent National IFA by number of advisers,
Inter-Alliance is particularly well placed to benefit from both of these
changes. Inter-Alliance is a national brand, which we believe will give us
competitive advantage.
The first half of 2003 has undoubtedly been a period of considerable upheaval
for the Group. Much has been achieved to give us the appropriate platform to
succeed in the new regulatory environment. The re-building of Inter-Alliance
to suit the needs and opportunities of the modern Financial Services Market has
been difficult and costly. There is clearly more to do but we are well on plan.
In August, the Company raised #15 million before expenses which the Board
believes will be sufficient to ensure that the Group will become cash flow
positive during the first half of 2004. We look forward to building on this
platform to achieve the kind of return made possible by such investment.
Keith Carby
Chairman and Chief Executive
Inter-Alliance Group PLC
Interim Financial Statements for the period ended 30 June 2003
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Restated
6 months ended Year ended 6 months ended
30 June 31 December 30 June
2003 2002 2002
Note #000 #000 #000
Turnover 2
Existing operations 21,200 45,295 23,938
Acquisitions 7,721 6,204 -
Continuing operations 28,921 51,499 23,938
Discontinued operations - 429 429
28,921 51,928 24,367
Cost of sales (20,877) (41,738) (19,559)
Gross Profit 8,044 10,190 4,808
Operating expenses - normal (21,276) (21,170) (9,147)
Operating expenses - exceptional 4 (1,488) (1,505) (716)
Total operating expenses (22,764) (22,675) (9,863)
Operating Loss 2 (14,720) (12,485) (5,055)
Share of net operating loss of associates (486) (1,519) (394)
Profit on sale of subsidiary - 278 278
Costs of a fundamental restructuring (4,272) (4,293) 630
4
Loss before interest and taxation (19,478) (18,019) (4,541)
Net interest receivable/(payable) and similar
income/(charges) 42 245 55
Loss on ordinary activities before taxation (19,436) (17,774) (4,486)
Tax on loss on ordinary activities 1 18 -
Loss on ordinary activities after taxation (19,435) (17,756) (4,486)
Minority interests - 28 (7)
Loss for the period (19,435) (17,728) (4,493)
Basic and diluted loss per share 3 15.9p 21.3p 6.7p
There were no recognised gains or losses other than the loss for the period.
UNAUDITED CONSOLIDATED BALANCE SHEET
Restated
30 June 31 December 30 June
2003 2002 2002
Note #000 #000 #000
Fixed assets
Trademark 2 2 2
Goodwill 12,960 12,826 1,090
Intangible assets 12,962 12,828 1,092
Tangible assets 5,375 5,494 3,715
Investments in own shares 242 1,429 1,429
Investments in associates - - 119
18,579 19,751 6,355
Current assets
Debtors - due within one year 7,148 8,024 5,253
- due after one year 2,906 652 371
Cash at bank and in hand 4,908 8,080 16,216
14,962 16,756 21,840
Creditors: amounts falling due within one year (12,015) (9,679) (7,393)
Net current assets 2,947 7,077 14,447
Total assets less current liabilities 21,526 26,828 20,802
Creditors: amounts falling due after more than one (448) (564) (448)
year
Provisions for liabilities and charges (1,414) (2,092) (2,116)
Net assets 19,664 24,172 18,238
Capital and reserves
Called up share capital 1,557 1,033 842
Share premium account 89,060 74,106 55,341
Share option reserve 245 796 -
Merger reserve 130 130 130
Shares to be issued reserve 470 470 1,091
Profit and loss account (71,798) (52,363) (39,128)
Shareholders' funds - equity interests 5 19,664 24,172 18,276
Equity minority interests - - (38)
Total capital employed 19,664 24,172 18,238
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
6 months ended Year ended
30 June 31 December
2003 2002
Note #000 #000
Net cash outflow from operating activities (14,818) (21,944)
Returns on investments and servicing of finance 7 53 297
Taxation - -
Capital expenditure 7 (745) (3,929)
Acquisitions and disposals 7 (1,059) (3,274)
Cash outflow before financing (16,569) (28,850)
Financing 7 16,379 28,007
Decrease in cash in the period (190) (843)
No cash flow statement was included in the 2002 Interim report and therefore no
comparative figures have been included for the six months ended 30 June 2002 as
it is the directors' opinion that the cost of constructing them from historic
information would not be a valuable use of shareholders' funds.
RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
6 months ended Year ended
30 June 31 December
2003 2002
#000 #000
Operating Loss (14,720) (12,485)
Depreciation and amortisation 1,484 2,073
Loss on disposal of tangible fixed assets 3 385
Impairment of tangible fixed assets - 486
Increase in debtors (2,704) (6,120)
Increase/(decrease) in creditors 1,426 (1,830)
Decrease in provisions (326) (785)
Provision against investments in own shares 1,187 -
Cash impact of fundamental restructuring (1,168) (3,668)
Net cash outflow from operating activities (14,818) (21,944)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1 Basis of preparation and accounting policies
These interim financial statements have been prepared under the historical cost
convention. The directors have undertaken a process to satisfy themselves that
the Group will be a going concern for not less than twelve months after the date
of approval of these financial statements. This process included a review of
budgets, cash flow forecasts, known and contingent liabilities and future
business prospects. The cash flow forecasts assume that the cost reduction
programme will continue to achieve further cost savings and that the Gross
Profit achieved in the last quarter will be maintained. Following this review
in September 2003, the Board considers it appropriate to continue to adopt the
going concern basis in the preparation of this interim financial information
using accounting policies consistent with those disclosed in the statutory
financial statements for the year ended 31 December 2002.
The financial information is unaudited and does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. In
addition, the comparative figures for the period ended 30 June 2002 have not
been subject to independent review.
Statutory financial statements for the year ended 31 December 2002 have been
filed with the Registrar of Companies. The auditors' report on these accounts
did not contain any statement under Section 237 (2) or (3) of the Companies Act
1985 but was qualified in respect of the 2001 comparatives owing to limitation
in audit evidence. The full text of that opinion is included in the published
annual report and financial statements for the year ended 31 December 2002.
2 Segmental information
Geographical segments United Kingdom Rest of the World Group
6 months ended 6 months ended 6 months ended
30 June 30 June 30 June
Restated Restated Restated
2003 2002 2003 2002 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
Turnover by destination and origin:
Sales to third parties 27,042 22,543 1,879 1,824 28,921 24,367
Segment and operating (loss)/profit
Segment and operating (loss)/profit (14,754) (5,000) 34 (55) (14,720) (5,055)
Share of associates' operating loss (486) (394) - - (486) (394)
Costs of a fundamental restructuring (4,272) 630 - - (4,272) 630
Gain on disposal of subsidiary - - - 278 - 278
Interest receivable (net) 42 55
Loss on ordinary activities before taxation (19,436) (4,486)
3 Loss per share
The loss per ordinary share is based on the loss for the period of #19,435k
(2002: #4,493k restated) and the weighted average number of shares, excluding
investments in the Company's own shares held by the Employee Share Option Plan,
is as follows.
Weighted average
number of shares
6 months to 30 June 2002 66,629,450
Year to 31 December 2002 83,218,309
6 months to 30 June 2003 122,318,303
4 Exceptional items
Exceptional items included in operating loss
The following charges/(credits) have been included in other operating expenses
(net) - exceptional:
6 months ended Year ended 6 months ended
30 June 31 December 30 June
2003 2002 2002
#'000 #'000 #'000
Provision against investments in own shares 1,187 - -
ATLAS training and seminars 275 - -
Impairment of computer equipment development - 486 -
Write-off of computer equipment - 306 -
Lincoln and Prudential transfer costs 49 1,287 716
Exceptional VAT recovery (201) - -
Release of provisions for liabilities and charges - (400) -
Other exceptional charges/(credits) 178 (174) -
1,488 1,505 716
Costs of a fundamental restructuring
Certain costs incurred as a result of the fundamental restructuring in both 2002
and 2003 have been disclosed as an exceptional item after the operating loss for
the year.
6 months ended Year ended 6 months ended
30 June 31 December 30 June
2003 2002 2002
#'000 #'000 #'000
Provision for associate practice company net
liabilities 2,904 139 (1,800)
Legal, professional, redundancy and other
closure costs 1,368 3,668 1,170
Loans written off - 486 -
4,272 4,293 (630)
5 Movements in Group shareholders' funds
Restated
6 months ended Year ended 6 months ended
30 June 31 December 30 June
2003 2002 2002
#000 #000 #000
Opening shareholders' funds 24,172 1,570 1,570
Loss for the period (19,435) (17,728) (4,493)
New share capital subscribed 15,733 41,431 21,199
Shares to be issued reserve utilised - (134) -
Goodwill adjustment (542) (487) -
Share option grants (utilised)/reserved (9) 796 -
Expenses of share issues (255) (1,276) -
Net (decrease)/increase in shareholders' funds (4,508) 22,602 16,706
Closing shareholders' funds 19,664 24,172 18,276
Shareholders' funds at 31 December 2001 were restated to reflect prior year
adjustments in the financial statements for the year ended 31 December 2002.
Shareholders' funds at 30 June 2002 and the loss for the period then ended have
been restated accordingly, presenting profit and loss account and balance sheet
comparatives for the period consistently with the full year financial
statements.
6 Issue of share capital
Heartland
On 24 January 2003, Friends Provident provided a #4.0m convertible loan to the
Company which was partially used to finance the acquisition of certain business
and assets from Heartland Independent Advisers Limited for an initial net
consideration of #1.0m with further payment due dependent upon the number of
advisers transferring to the Company. Goodwill of approximately #1.0m is being
amortised over the useful economic life estimated to be 10 years. On 30 May
2003, the loan was partially converted into 10,473,838 Ordinary Shares at 29.5p
each. The balance of #0.9m remained as a loan repayable on 31 October 2003.
Equity Placing
The Company raised approximately #12.5m before expenses by way of a Placing
approved by the shareholders at an EGM on 10 April 2003. 41,700,000 New Ordinary
Shares were issued at a price of 30p per share.
Post balance sheet events
The Company raised #15m before expenses by way of a Placing approved by the
shareholders at an extraordinary general meeting of the company ("EGM") on 11
August 2003. 750,000,000 New Ordinary Shares were issued at a price of 2p per
share. Of these 25,000,000 were issued to Friends Provident in settlement of
#0.5m of their outstanding loan. The remaining #0.4m was settled in cash.
Section 142 of the Companies Act provides that, where the net assets of a public
company are half or less than its called up share capital, the directors of the
company shall convene an EGM to consider whether, and if so what steps should be
taken to deal with the situation. The directors called such an EGM that took
place on 11 August 2003. Having complied with their statutory obligations to
notify shareholders, the directors are continuing to consider what, if any,
steps should be taken.
7 Analysis of cash flows
6 months ended Year ended
30 June 31 December
2003 2002
#000 #000
Returns on investments and servicing of finance
Interest received 91 378
Interest paid (38) (81)
Net cash inflow 53 297
Capital expenditure
Purchase of tangible fixed assets (761) (3,939)
Proceeds from disposal of tangible fixed assets 16 10
Net cash outflow (745) (3,929)
Acquisitions and disposals
Purchase of business undertakings (1,062) (3,682)
Net cash acquired with business undertakings 3 408
Net cash outflow (1,059) (3,274)
Financing
Issue of ordinary share capital 12,634 28,888
Expenses paid in connection with share issue (255) (1,276)
Convertible loan proceeds 4,000 4,000
Other loan proceeds - 1,500
Repayment of loans - (1,527)
Deposits to secure borrowing - (3,578)
Net cash inflow 16,379 28,007
8 Interim report
Additional copies of this report are available from the Company Secretary,
Inter-Alliance Group PLC, Tuition House, 27-37 St George's Road, Wimbledon,
London SW19 4DS.
INDEPENDENT REVIEW REPORT TO INTER-ALLIANCE GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2003 which comprises the consolidated profit and
loss account, the consolidated balance sheet, the consolidated cash flow
statement and related notes 1 to 8. 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 Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review 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 formed.
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 also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 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 excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom 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. We draw your attention
to the fact that the comparatives for 30 June 2002 have not been subject to
independent review.
Going concern
In arriving at our review conclusion, we have considered the adequacy of the
disclosure made in note 1 to the interim financial information regarding the
going concern basis of the preparation of the interim financial information. In
view of the significance of this disclosure, we consider that it should be drawn
to your attention, but our review conclusion is not modified in this respect.
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 30 June 2003.
Deloitte & Touche LLP
Chartered Accountants London
26 September 2003
Notes: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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