Final Results -15-
27 March 2009 - 6:01PM
UK Regulatory
In all cases the lowest ranking debt tranches are held for CLO and CDO
investments. As such, the Directors consider these investments pose a credit
risk, particularly as there is no active market for these assets and underlying
portfolio asset defaults are increasing and expected to continue. However as
these investments accounted for only 14 percent of the Group's revenue, the
Directors believe that the Group's cash flows would not be severely affected if
some of the counterparties defaulted on interest payments.
To mitigate against potential interest default and loss in value, investments
are managed on an ongoing basis as follows:
* Review of monthly reports.
* Daily monitoring of watch- listed companies in CLO portfolios.
* Monthly contact with CLO and CDO managers in particular to determine steps to
remedy defaults on covenants and performance of portfolio assets.
* Review of quarterly financial covenant compliance certificates.
* Regular contact with agent banks or in some instances the borrower directly, to
determine covenant compliance, trading status and performance.
* Regular contact with CEOs where equity is held.
* Attendance at board meetings where equity is held and we have a board seat.
However, there is no guarantee that these credit risk management procedures will
be able to limit potential loss in investment value or loss of income from
counterparties who default on their obligations. If any or the Group's
counterparties default on interest payments, the Group's revenues and
profitability will be adversely affected.
f) Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its financial
commitments.
During the year the Group repaid its borrowings and at 31 December 2008 the
Group had working capital of GBP23.0 million represented by GBP20.6 million of
cash, GBP5.1 million of short-term receivables and GBP2.7 million of short-term
liabilities.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due and to budget for a high
multiple of operating costs to revenue such that ongoing operating costs are
fully covered by the income currently generated by the Group's assets.
To monitor liquidity risk, the Board receives rolling 12 month cash flow
projections on a quarterly basis as well as information regarding cash balances
and indications of any potential defaults on income from its investments.
g) Capital risk management policies and objectives
Following the EGM on 17 July 2008, the Group's capital management policy and
objective is to return capital to shareholders by way of distributions.
7 Other operating expenses
Other operating expenses include the following amounts:
Services provided by the Group's auditor
During the year the Group obtained the following services from the Group's
auditors, Kingston Smith LLP and BDO Stoy Hayward LLP:
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Audit services | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Statutory audit | | 161,203 | | 37,500 | | 125,745 | | 37,500 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Non audit services | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Taxation services | | 46,046 | | 13,081 | | 46,046 | | 13,081 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Other services | | 48,922 | | 15,550 | | 34,426 | | 15,550 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | 256,170 | | 66,131 | | 206,217 | | 66,131 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
Staff costs
Staff costs (including Directors) comprise:
+--------------------------------------+---+------------+--+------------+
| | | Group | | Group |
+--------------------------------------+---+------------+--+------------+
| | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+------------+
| | | GBP | | GBP |
+--------------------------------------+---+------------+--+------------+
| | | | | |
+--------------------------------------+---+------------+--+------------+
| Wages and salaries | | 1,482,045 | | 1,224,323 |
+--------------------------------------+---+------------+--+------------+
| Social security costs | | 381,553 | | 150,487 |
+--------------------------------------+---+------------+--+------------+
| | | 1,863,598 | | 1,374,810 |
+--------------------------------------+---+------------+--+------------+
| | | | | |
+--------------------------------------+---+------------+--+------------+
| Number of employees | | 13 | | 12 |
+--------------------------------------+---+------------+--+------------+
See note 21 for details of share based payments.
Director emoluments
+--------------------------------------+---+----------+--+-----------+
| | | Group | | Group |
+--------------------------------------+---+----------+--+-----------+
| | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+
| | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+
| Aggregate emoluments (Directors' | | 462,641 | | 572,000 |
| fees) | | | | |
+--------------------------------------+---+----------+--+-----------+
The Company had five Directors at 31 December 2008 (2007: nine Directors)
Bad debts
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| Bad debt expense | | 4,229,019 | | - | | 2,252,080 | | - |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
8 Net finance costs
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Finance income | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Interest received on bank deposits | | (2,247,272) | | (2,243,316) | | (968,896) | | (2,243,316) |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Finance expense | | | | | | | | |
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