RNS Number:4513K
Debtmatters Group PLC
21 December 2007
DEBT.L
DEBTMATTERS GROUP PLC
("the Group")
Interim results for The Six Months Ended 30th September 2007
Highlights
* Loan broking division performing well and comfortably in line with Board
expectations
* Disappointing performance from IVA division as a result of sector
weakness
* Revenues up to �14.3 million (H1 2006: �13.8 million as restated for
IFRS)
* EBITDA down to �770k (H1 2006: �4.6 million as restated)
* Segmental analysis of EBITDA shows Loanmakers Limited achieved �1.63m
whilst Debtmatters Limited incurred an EBITDA loss of �861k
* 165 approved IVA cases per month on average for the period
* Strategic review progressing, announcement expected early in New Year
Ges Ratcliffe, Chief Executive of Debtmatters, commented,
"2007 has been a disappointing year for the Group. Well publicised difficulties
in the IVA sector have resulted in a significant reduction in approved IVA case
volumes. Having reached a peak of over 600 a month just one year ago, current
monthly IVA run rates are in the region of 100. Debtmatters had built an
infrastructure over the previous two years to process these case numbers but the
business model relied on direct marketing. Since the start of 2007 our case
acquisition costs trebled in a matter of months and this, combined with a
reduction in nominees' fees from September 2007 of around 50%, forced the Group
to undertake a strategic review of activities. This review is ongoing and a
further announcement is anticipated early in the New Year."
Enquiries:
Ges Ratcliffe CEO, Debtmatters Group plc 01204 845 700
Richard Thompson / Freddy
Crossley Charles Stanley Securities 020 7149 6000
Nominated Adviser
Shane Dolan / Dan Bradley Biddicks 020 7448 1000
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Chairman's Statement
As a Group we have experienced a turbulent period of trading in our core area of
activity, IVAs. As a result, the financial performance of our IVA division,
Debtmatters Limited, has been disappointing. By contrast, we have seen our
loan broking division, Loanmakers Limited ("Loanmakers"), strengthen its market
position and increase its market share, performing comfortably in line with
expectations.
Despite the difficulties of the IVA sector, the Group continues to be
profitable, primarily as a result of a successful period of trading by
Loanmakers. Loanmakers is recognised amongst its peers as a high quality
operator, reinforcing the decision to acquire this business 18 months ago.
As previously reported, the Board of directors has, on shareholders' behalf,
embarked upon a strategic review during which we have been considering all
available strategies for the Group. This process is now nearing an end and we
have dealt with a number of interested parties who have expressed an interest in
various aspects of the Group. We look forward to updating shareholders on
strategy and the results of discussions with interested parties early in the New
Year.
Noel Guilford BA FCA MSI
Non Executive Chairman
Debtmatters Group plc
Interim results for the six months ended 30 September 2006
Chief Executive's Statement
Financial Summary
Turnover for the group for the six month period to September increased by 3.8
per cent to �14.31 million (2006: �13.79 million) over the prior year. Turnover
from Loanmakers was �9.23 million (2006: �4.31 million for the 3 1/2 month
period to 30 September 2006). Turnover from Debtmatters Limited fell by 46 per
cent to �5.08 million (2006: �9.48 million).
Earnings before interest, tax, depreciation and amortisation (EBITDA) were
�0.77 million (2006: �4.57 million). Loanmakers' EBITDA contribution was �1.63m
(2006: �0.70 million for a period of 3 1/2 months). Debtmatters Limited
incurred a loss of �0.86 million (2006: �3.87 million profit).
Operating profit margins as a percentage of revenue decreased to 4.6 per cent
(2006: 32.4 per cent) and profit before taxation decreased by 92 per cent to
�0.35 million (2006: �4.32 million). However, as an indicator of the improved
performance of Loanmakers, EBITDA as a percentage of revenue increased to 17.6
per cent (2006: 16.1 per cent).
Basic earnings per share were 0.93 pence (2006: 12.17 pence) representing a
decrease of 87 per cent, and fully diluted earnings per share fell by 92 per
cent to 0.88 pence (2006: 10.73 pence).
We continue to operate in two contrasting markets. Economic uncertainty and
negative sentiment continue to depress the debt resolution market, in particular
the IVA sector. Our loan broking subsidiary however, whilst operating against
the backdrop of the recent "credit crunch," moves from strength to strength.
The IVA industry has been beset by problems since the end of 2006. Increased
costs of case acquisition and lower fees have combined to create a challenging
environment in which to operate. At this stage, the level of fees chargeable on
a typical IVA case seems to have stabilised at its new lower level, making it
very difficult to source work in high volumes and at acceptable profit margins.
By contrast, Loanmakers has continued to grow in line with expectations.
Although there has been a great deal of negative comment surrounding the "credit
crunch," Loanmakers has thus far been relatively unaffected. Its customers
typically have credit ratings nearer to "prime" than many other secured loan
brokers and we have therefore been less affected by the tightening of credit
criteria and availability of funds than our competitors. Consequently,
Loanmakers' results for the period have been excellent and in line with our
expectations.
Outlook
The Board continues its strategic review of Group activities. Once the review is
concluded, we will communicate the outcome to shareholders (anticipated early in
the New Year). I look forward to updating shareholders in due course.
Ges Ratcliffe
Chief Executive
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Consolidated Income Statement
Notes Unaudited Unaudited
6 months ended 6 months ended
30 September 30 September Year ended 31
2007 2006 March 2007
(Restated) (Restated)
� � �
REVENUE 2,3 14,306,874 13,789,954 29,832,760
Cost of sales (9,112,965) (6,949,365) (15,461,367)
-------- -------- --------
Gross Profit 5,193,909 6,840,589 14,371,393
Administrative
expenses (4,423,720) (2,269,321) (5,850,009)
-------- -------- --------
EBITDA 3 770,189 4,571,268 8,521,384
Amortisation and
depreciation (115,609) (104,732) (256,829)
Non trading items - - (6,036)
-------- -------- --------
PROFIT FROM
OPERATIONS 3 654,580 4,466,536 8,258,519
Finance costs (308,535) (146,179) (446,104)
-------- -------- --------
PROFIT BEFORE
TAXATION 346,045 4,320,357 7,812,415
Taxation 4 (103,814) (1,323,507) (2,561,632)
-------- -------- --------
PROFIT AFTER
TAXATION 242,231 2,996,850 5,250,783
-------- -------- --------
Earnings per share
Basic - pence 5 0.93p 12.17p 21.33p
Diluted - pence 5 0.88p 10.73p 18.62p
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Consolidated Balance Sheet
Notes Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
(Restated) (Restated)
� � �
Non-current assets
Intangible assets 13,449,490 11,809,934 17,094,607
Property, plant and
equipment 399,825 396,932 394,418
Deferred tax assets 90,510 - 90,510
---------- --------- ---------
13,939,825 12,206,866 17,579,535
Current assets
Work in progress 737,508 321,278 842,066
Trade and other receivables 13,800,165 11,233,661 14,146,199
Cash and cash equivalents 712,104 68,669 665,771
---------- --------- ---------
15,249,777 11,623,608 15,654,036
---------- --------- ---------
Total assets 29,182,602 23,830,474 33,233,571
---------- --------- ---------
Current liabilities
Trade and other payables 2,281,643 1,332,084 4,063,296
Financial liabilities 1,266,270 3,439,036 2,920,255
Current tax liabilities 3,086,499 2,706,604 3,407,876
---------- --------- ---------
6,634,412 7,477,724 10,391,427
Non-current liabilities
Trade and other payables 552,728 2,767,071 1,888,800
Financial liabilities 5,912,500 6,093,748 6,537,500
Deferred tax liabilities - 50,642 -
---------- --------- ---------
Total liabilities 13,099,640 16,389,185 18,817,727
---------- --------- ---------
Equity
Share capital 6 3,107,150 2,461,539 2,461,539
Contingent share
consideration 6 368,486 - 4,662,226
Share premium account 6,959,904 1,956,614 1,956,614
Merger reserve (1,999,996) (1,999,996) (1,999,996)
Share based compensation
reserve 415,244 280,122 338,518
Retained earnings 7,239,174 4,743,010 6,996,943
---------- --------- ---------
Total equity 16,089,962 7,441,289 14,415,844
---------- --------- ---------
Total liabilities and equity 29,189,602 23,830,474 33,233,571
---------- --------- ---------
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Statement of Changes in Equity
Share Share Based
Share Premium Merger Compensation Retained
Capital account Reserve Reserve Earnings Total
(Restated) (Restated)
� � � � � �
Equity as at 1
April 2006 2,461,539 1,956,614 (1,999,996) 225,132 1,746,160 4,389,449
Share based payments - - - 54,990 - 54,990
Profit for the period - - - - 2,996,850 2,996,850
----------- ----------- ----------- ----------- ----------- -----------
Equity as at 30
September 2006 2,461,539 1,956,614 (1,999,996) 280,122 4,743,010 7,441,289
----------- ----------- ----------- ----------- ----------- -----------
Share Share Based
Share Premium Merger Compensation Retained
Capital account Reserve Reserve Earnings Total
(Restated) (Restated)
� � � � � �
Equity as at 1
April 2007 7,123,765 1,956,614 (1,999,996) 338,518 6,996,943 14,415,844
Shares issued under
contingent equity
consideration 382,839 2,427,203 - - - 2,810,042
Adjustment to
contingent equity
consideration (4,293,740) - - - - (4,293,740)
Shares issued
on AIM placing 262,772 2,706,552 - - - 2,969,324
Share issue costs - (130,465) - - - (130,465)
Share based payments - - - 76,726 - 76,726
Profit for the period - - - - 242,231 242,231
----------- ----------- ----------- ----------- ----------- -----------
Equity as at 30
September 2007 3,475,636 6,959,904 (1,999,996) 415,244 7,239,174 16,089,962
----------- ----------- ----------- ----------- ----------- -----------
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Consolidated Cash Flow Statement
Cash flows from operating Unaudited Unaudited
activities 6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
2007 2006 2007
(Restated) (Restated)
� � �
Profit from operations 654,580 4,466,536 8,258,519
Share based compensation 76,726 54,990 113,386
Depreciation 70,417 81,484 195,670
Amortisation of IPS licences 45,192 23,248 61,159
Loss on disposal of tangible fixed assets - - 6,036
Decrease / (Increase) in work in progress 104,558 (192,188) (712,976)
Decrease / (Increase) in debtors 346,034 (5,208,812) (7,724,880)
(Decrease) / Increase in creditors (938,064) 596,999 1,612,277
-------- -------- --------
Cash inflow / (outflow) from operations 359,443 (177,743) 1,809,191
Interest paid (308,535) (151,029) (446,104)
Income taxes paid (425,191) (348,587) (1,169,977)
-------- -------- --------
Net cash (outflow) / inflow from
operating activities (374,283) (677,359) 193,110
-------- -------- --------
Cash flows from investing activities
Payments to acquire property, plant and
equipment (72,290) (46,219) (191,359)
Payments to acquire intangible assets (66,968) (68,984) (119,850)
Receipts from sale of property, plant
and equipment - - 2,520
Acquisition of subsidiary undertaking - (10,235,633) (10,235,633)
Net cash acquired with subsidiary undertaking - 1,524,251 1,524,251
-------- -------- --------
Net cash used in investing activities (139,258 (8,826,585) (9,020,071)
-------- -------- --------
Cash flows from financing activities
Proceeds on issue of ordinary shares 2,969,324 - -
Share issue costs (130,465) - -
Net movement in short term borrowings - 1,406,250 1,250,000
Net movement in long term borrowings (625,000) 6,093,750 6,537,500
Capital element of finance lease agreements (14,770) (6,237) (12,178)
Interest received - 4,850 -
-------- -------- --------
Net cash inflow from financing 2,199,089 7,498,613 7,775,322
-------- -------- --------
Net increase/(decrease) in cash and
cash equivalents 1,685,548 (2,005,331) (1,051,639)
Cash & cash equivalents at the beginning
of the financial period (973,444) 78,195 78,195
-------- -------- --------
Cash & cash equivalents at the end of
the financial period 712,104 (1,927,136) (973,444)
-------- -------- --------
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2007 2006 2007
� � �
Net increase/(decrease) in cash and
cash equivalents 1,685,548 (2,005,331) (1,051,639)
Cash outflow/(inflow) from debt
financing 625,000 (7,500,000) (7,787,500)
-------- -------- --------
Movement in net debt in the period 2,310,548 (9,505,331) (8,839,139)
Net (debt)/cash at beginning of the
period (8,760,944) 78,195 78,195
-------- -------- --------
Net debt at the end of the period (6,450,396) (9,427,136) (8,760,944)
-------- -------- --------
Debtmatters Group plc
Interim results for the six months ended 30 September 2007
Notes to the Interim Financial Statements
1. Basis of preparation
These financial statements are the unaudited interim consolidated financial
statements for the six month period ended 30 September 2007. They have been
prepared in accordance with IAS 34 "Interim Financial Reporting" and should be
read in conjunction with the Consolidated Financial Statements for the year
ended 31 March 2007.
The Interim Consolidated Financial Statements have been prepared in accordance
with the accounting policies set out in the consolidated financial statements
for the year ended 31 March 2007, except for the accounting policy change as
detailed in note 7.
2. Revenue
Revenue in the Consolidated Income Statement represents amounts billed or to be
billed in respect of services performed on behalf of clients. The amounts taken
to turnover are calculated as follows:
Nominee fees: on approval of a proposal in a formal creditor meeting the
full amount of the nominee fee is taken less a provision for
cases on which the full fee may not be recoverable.
Supervisory fees: on a monthly basis as earned following the creditors' meeting.
Loan commissions: on approval of loan applications.
3. Segmental information
The business segment results for the 6 months ended 30 September 2007, together
with comparative figures are as follows:
Unaudited Unaudited
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2007 2006 2007
(Restated) (Restated)
� � �
Segment Revenue
Insolvency 5,080,466 9,476,616 18,062,550
Secured loans 9,226,408 4,313,338 11,770,210
----------- ----------- ----------
14,306,874 13,789,954 29,832,760
----------- ----------- ----------
EBITDA
Insolvency services (860,904) 3,874,265 6,319,098
Secured loans 1,631,093 697,003 2,202,286
----------- ----------- ----------
770,189 4,571,268 8,521,384
----------- ----------- ----------
4. Taxation
Taxation is provided for at an estimated effective rate of 30%.
5. Earnings per share
Earnings and the number of shares used in the calculations of earnings per share
are set out below:
Unaudited 6 Unaudited 6
months ended 30 months ended 30 Year ended 31
September 2007 September 2006 March 2007
(Restated) (Restated)
� � �
Profit for the period 242,231 2,996,850 5,250,783
Weighted average number of
shares in issue: No. No. No.
For basic earnings per share 26,015,157 24,615,385 24,615,385
Executive share options 1,295,764 3,311,318 1,281,980
Contingent share consideration 231,752 - 2,297,574
-------- ------- -------
For diluted earnings per share 27,542,673 27,926,703 28,194,939
-------- ------- -------
Earnings per share:
Basic 0.93p 12.17p 21.33p
Diluted 0.88p 10.73p 18.62p
The diluted earnings per share for the period includes 1,295,764 shares arising
from the dilutive effect of share options and 231,752 shares arising from the
dilutive effect of contingent share consideration.
6. Called up share capital
No. �
Authorised
Ordinary shares of 10p each 35,200,000 3,520,000
--------- ---------
Unaudited Unaudited
30 September 30 September 31 March
2007 2006 2007
No. No. No.
Allotted, called up and fully paid
Ordinary shares of 10p each 31,071,499 24,615,385 24,615,385
Contingent share consideration 231,752 - 2,932,218
-------- ------- -------
31,303,251 24,615,385 27,547,603
-------- ------- -------
� � �
Allotted, called up and fully paid
24,615,385 Ordinary shares of 10p each 2,461,539 2,461,539 2,461,539
6,456,114 Ordinary shares of 10p each
issued during the period 645,611 - -
-------- ------- -------
3,107,150 2,461,539 2,461,539
Contingent share consideration 368,486 - 4,662,226
-------- ------- -------
3,475,636 2,461,539 7,123,765
-------- ------- -------
Ordinary Shares
On 15 June 2006 Debtmatters Group Plc acquired the entire share capital of
Loanmakers (Holdings) Limited. The total consideration (including contingent
consideration) amounted to �14,981,233. The contingent consideration takes the
form of equity and cash. The contingent consideration is provisional based on
the performance of Loanmakers Limited.
On 19th September 2007, 3,828,394 ordinary shares of 10p each were issued at
�0.73 per ordinary share as a part of the contingent consideration discussed
above. The equity element of the contingent consideration outstanding amounts to
231,752 ordinary shares at �1.59 per share.
On 13th July 2007, 2,627,720 ordinary shares of 10p each were issued at a price
of �1.13 per ordinary share.
7. Prior period adjustment
Change in accounting policy
The company has consistently applied all the relevant accounting standards
except for the change in accounting policy detailed below.
Advertising costs are now recognised when incurred and are not deferred to match
them against the income to which they relate. In the Directors' opinion, this
change in accounting treatment of advertising costs more accurately represents
the performance of the business in the period.
This change in accounting policy is also in line with IFRIC proposed changes as
part of the IFRS annual improvements process. The IFRIC indicate that the
correct treatment of advertising and promotional costs should be to recognise
them as an expense when the advertising is distributed to customers.
An analysis of the impact of the change in accounting policy is as follows:
Profit and loss account
Unaudited Unaudited
6 months 6 months Year
ended 30 ended 30 ended 31
September September March
2007 2006 2007
� � �
(Loss) / profit before change in
accounting policy (419,021) 3,253,680 6,078,401
Impact of change in accounting
policy 661,252 (256,830) (827,618)
-------- ------- -------
Restated profit after change in
accounting policy 242,231 2,996,850 5,250,783
-------- ------- -------
There is a corresponding credit to prepayments. The prior year adjustment and
corresponding adjustment to prepayments as at 1st April 2006 amounted to
�356,957.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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