RNS Number:8487I
Park Row Group PLC
18 March 2003
Park Row Group plc
Preliminary announcement of results for the period ended 31 December 2002.
CHAIRMAN'S STATEMENT
Introduction
This is my first report to you since becoming your new Chairman in September
2002. It has been a period of considerable change, not only for Park Row Group
plc (the Group) but for the retail financial services sector as a whole. Some
of the reasons for this are the uncertainty of proposed regulatory change, set
against a worsening economic climate and a weakening investment sentiment.
Despite this background, the reverse merger of Park Row Limited with Birchin
International plc in May 2002 brought about a significant change in the
direction of your Company, enabling the Group to be established and to continue
to grow to become one of the UK's largest financial advisory groups.
Consolidated turnover reported for the fifteen months ended 31 December 2002 was
#7.4 million. However, this included turnover for the Park Row financial
advisory business only from the date of acquisition in May 2002.
Since it was founded, the Park Row financial advisory business has achieved
significant sales growth each year and indeed this calendar year is no exception
with turnover reaching a record #9.9 million for the twelve months ended 31
December 2002 compared with #5.4 million for the eight months to 31st December
2001 and #4.8 million for the year to 30th April 2001.
Our position as one of the UK's largest producers of protection business and our
growing mortgage advisory activity has significantly helped to achieve this
success.
At the time of writing, the Group has increased its team of advisers from around
200 in May 2002 to in excess of 300 today, 80 of whom are operating as mortgage
advisers. The Group has achieved this considerable organic growth through a
successful recruitment programme, accomplished without external funding.
The Group's core businesses operate on a multi-distribution platform enabling
individual or corporate customers to get financial advice, on a fee or
commission basis, by telephone, internet or face-to-face. This flexible
structure maximises the opportunities which will arise from the Financial
Services Authority's (FSA's) regulatory review on the polarisation regime in the
financial services industry. This structure, coupled with the Group's growing
range of national lead generation schemes, offers excellent career opportunities
for advisers as well as increasing the number of new clients each month.
Under the holding company of Park Row Group plc there are three main operating
subsidiaries:
Park Row Associates which houses the majority of self-employed advisers;
Park Row Financial Advisers, the former Birchin Wealth Management company; and
Park Row Independent Mortgages which houses all the self-employed mortgage
advisers. Although mortgage advice is currently not regulated by the FSA, we
operate this business under controls and processes consistent with our regulated
business, so we are prepared for the date when the FSA does extend regulation to
mortgages (scheduled for 2004).
Park Row Associates is currently regulated by the Kestrel Network (a member of
the MISYS group), however, over the last nine months we have invested heavily in
compliance, systems and personnel with a view to becoming directly regulated by
the FSA. We aim to have completed this by the end of April 2003. We are
confident that this infrastructure will enable us to make a smooth transition
and to maintain robust regulatory controls thereafter. It also means that we
can eliminate the duplication of costs relating to both the Network services and
our newly developed in-house functions.
Results for the 15 months - Historical Issues
The results presented are for the fifteen months ended 31 December 2002. The
reverse merger of Park Row Limited with Birchin International plc was completed
in May 2002, and the results presented represent the results of Birchin
International plc (now renamed Park Row Group plc) to the date of the reverse
merger and the consolidated results of the combined entity from the date of the
reverse merger to 31 December 2002.
The results for the fifteen months have to be viewed in the context of the
situation that the new management team was confronted with during the early part
of 2002. Birchin International plc had invested heavily in a range of assets
which had been expected to yield profits on disposal in the medium term. This
has not proved to be the case and the Board came to the conclusion immediately
after the merger in May 2002 that to continue to retain these assets would not
be in the best interests of shareholders in the medium term. Therefore the Board
has pursued an aggressive policy of realising non-core assets wherever possible.
In addition, the Board inherited a cost structure that was materially out of
proportion to the current and projected income of the Group in terms of people,
premises and other central costs. Addressing the above issues has had a material
one-off impact on the results as noted below.
The loss on ordinary activities before taxation for the fifteen months to 31st
December 2002 was #9.3 million.
Since May 2002, we have set about restructuring the Group from the investment
business that was Birchin International to ensure that the central cost base is
in line with the revenue potential of the growing financial advice business.
As previewed in the Trading Statement for the period to 30th September 2002
management has carried through a programme of cost reduction including reduced
central staff numbers, the closure of offices in London and the transfer of all
administration from London to Leeds. By the time this programme is complete,
approximately #1 million of operating costs will have been stripped out of the
business on an annualised basis.
As set out later in this statement, the Group has been actively disposing of its
non-core assets with the exception of its stakes in Quay Software Solutions and
Intellexis plc which are being retained for strategic reasons. This disposal
programme has been conducted against a backdrop of materially declining equity
markets and considerable caution on the part of potential asset acquirers. Where
other assets have been retained, they have been written down to values which
more fairly reflect current market conditions.
Future growth through recruitment and adviser development
Our business structure has been developed in such a way that it can offer a
defined and valuable career path to our advisers. With the vastly improved
business infrastructure, remuneration and support models, as well as the
potential to generate substantial client leads for all advisers, we believe that
the Group has an industry leading proposition. This has been borne out by our
recruitment successes over the last twelve months.
This is possible due to the simplified requirements for mortgage advisers within
the separate mortgage business. This allows us to ensure new recruits can
become commercially active as quickly as possible, as well as offering a home to
advisers that may want to migrate through to full IFA status in the future.
A key to our strategy is the substantial investment we have made in terms of
resource and commitment to develop relevant and stimulating in-house training
and development programmes to increase the knowledge and skills of all our
advisers and their support staff.
The ability to train and develop new advisers means that we can help the
industry attract individuals to bring new ideas and experience.
Another core benefit of this development programme will be to greatly enhance
the quality of the range of services which we can provide to our clients.
Acquisitions
In May 2002 we acquired 75% of AdviceOnline (www.adviceonline.co.uk), one of the
first online FSA regulated financial advisory companies. It offers a full range
of financial services and products online backed up with access to advice from
Park Row advisers either face-to-face or on the telephone. AdviceOnline has
continued to improve its market share of online traffic and enquiries and has
traded profitably since it joined the Group.
Towards the end of 2002 Park Row GmbH was established and is receiving strong
interest from German retail clients. It currently has 25 personnel and we are
hopeful it will grow during 2003. Out of all European financial sectors we see
the German retail financial sector as an exciting growth prospect. With our
experience in the UK, and the adaptation of many of the FSA's regulatory
procedures to the German market, we believe that this venture will be an
attractive proposition with clients.
Investments and Disposals
As part of the strategy of continuing to develop our advisory services, the
Board stated its intention to dispose of non-core investments and redeploy the
proceeds in building a national multi-distribution platform.
During 2002 the business of Global Risk Management Services Limited was sold to
Core Ratings, a subsidiary of Fitch and Co, the international rating agency.
Following the year end the stake in Fairplace Consulting plc has been sold and
we have exchanged contracts on the sale of Bluebridge House.
For the time being we wish to retain our stakes in the other two main
investments, Intellexis plc and Quay Group, as both offer the prospect of good
returns in the medium term. Our holding in Intellexis is 28.7% and we are
confident under the new Managing Director, Ken Scott, Intellexis will continue
to develop as a leading e-learning company.
Towards the end of 2002 we converted our 30% investment in My Money Adviser
Limited to a 10% investment in its holding company Quay Group. Quay has a unique
position in the UK retail financial sector, offering software solutions to
intermediaries and product providers. Its clients include Park Row, Millfield,
and Berkeley Berry Birch and we believe its business model is highly scaleable.
During the course of 2002, we looked at many potential investments and
acquisitions in the IFA sector which, as mentioned, continues to consolidate.
However, we have felt our strategy of organic growth has been more appropriate
to date as we consider many of the valuations for small IFAs paid by other
groups to have been expensive. This has resulted in our being able to create a
homogeneous business model and common incentive schemes across the business.
This, together with the comprehensive infrastructure which has been put in place
over the last nine months to support our advisers, gives us a solid base from
which to build the number of advisers to around 700 by the end of 2005.
Board Changes
Ted Gardener resigned from the Board in October 2002.
Tony Minns was appointed to the Board in May 2002 as a non-executive director,
and brings with him enormous experience in wealth management. Tony's other
directorships include Millnet Financial, Cathedral Capital plc, Keygate Property
Investments, and Pavilion Angel Investors Ltd.
In August 2002 Colyn Gardner, chairman of Birchin International plc and
subsequently chairman of Park Row Group plc decided to resign on completion of
the integration of the merged businesses.
Outlook
The regulatory uncertainty surrounding the IFA sector continues to offer
opportunity to the Group, particularly with our broad mix of products and our
lead generation schemes which are producing in excess of 4,000 leads per month.
This has meant our performance is proving to be more resilient to the current
economic climate than many of our competitors.
We do not see much growth coming from the investment side of our product
offering in the near future, but with a strong business in mortgages and
protection products, we believe that the Group is well positioned given the
current weak equity markets. The strategy we are developing will position us
well for the time when the investment outlook improves.
As a small cap company our share price continues to suffer from illiquidity and
as a result the current price does not in the view of your Board represent the
fair value of the Group. We are mindful of this and are actively seeking ways to
rectify this situation.
Chairman
18 March 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the period ended 31 December 2002
15 months ended Year ended
31 December 30 September
2002 2001
#'000 #'000
TURNOVER
Acquisitions 6,288 -
Continuing 658 874
Discontinued 437 -
7,383 874
Cost of sales
Acquisition (4,309) -
Continuing (72) (480)
Discontinued (231) -
(4,612) (480)
GROSS PROFIT 2,771 394
Administrative expenses
Acquisitions (2,235) -
Continuing (7,939) (4,873)
Discontinued (1,301) -
(11,475) (4,873)
Other income 77 121
(11,398) (4,752)
OPERATING LOSS
Acquisitions (256) -
Continuing (7,276) (4,358)
Discontinued (1,095) -
(8,627) (4,358)
Share of operating loss of associates (237) (491)
Profit on deemed disposal of interest in subsidiary 868 1,326
Profit on disposal of discontinued operations 192 -
Impairment of freehold property (137) -
Profit on disposal of freehold property 338 -
Loss on disposal of investments (153) (123)
Amounts written off investments (910) (1,846)
Impairment of goodwill (577) -
LOSS ON ORDINARY ACTIVITIES BEFORE INTEREST (9,243) (5,492)
Interest receivable 85 440
Interest payable (125) (327)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (9,283) (5,379)
Taxation (212) -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (9,495) (5,379)
Minority interest 92 645
LOSS FOR THE PERIOD (9,403) (4,734)
Earnings/(losses) per share - basic (45.9p) (0.40p)
- fully diluted (45.9p) (0.40p)
CONSOLIDATED BALANCE SHEET
31 December 2002
31 December 30 September
2002 2001
#'000 #'000
FIXED ASSETS
Intangible assets 12,203 1,446
Tangible assets 1,170 3,523
Investments 3,634 3,549
17,007 8,518
CURRENT ASSETS
Stock - 64
Debtors due within one year 2,166 1,180
Debtors due after more than one year 500 200
Cash at bank and in hand 173 3,310
2,839 4,754
CREDITORS: Amounts falling due within one year (4,346) (974)
NET CURRENT (LIABILITIES)/ASSETS (1,507) 3,780
TOTAL ASSETS LESS CURRENT LIABILITIES 15,500 12,298
CREDITORS: Amounts falling due after more than one year (49) (1,082)
PROVISIONS FOR LIABILITIES AND CHARGES (150) -
15,301 11,216
CAPITAL AND RESERVES
Called up share capital 24,587 10,539
Shares to be issued 428 -
Share premium 2,467 3,069
Revaluation reserve - (258)
Profit and loss account (12,195) (2,534)
SHAREHOLDERS' FUNDS - Equity 14,155 9,684
- Non-equity 1,132 1,132
SHAREHOLDERS' FUNDS 15,287 10,816
Minority interest 14 400
15,301 11,216
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the period ended 31 December 2002
15 months ended Year ended
31 December 30 September
2002 2001
#'000 #'000
Retained loss for the period (9,403) (4,734)
Unrealised deficit on revaluation of investment properties - (424)
Total recognised gains and losses relating to the period (9,403) (5,158)
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
for the period ended 31 December 2002
Group Company
31 30 31 30
December September December September
2002 2001 2002 2001
#'000 #'000 #'000 #'000
Loss for the financial year (9,403) (4,734) (9,990) (177)
New share capital issued net of issue
costs 13,446 - 13,446 -
Deferred share issue 428 - 428 -
Net addition to/(reduction in)
shareholders' funds 4,471 (5,158) 3,884 (601)
Opening shareholders' funds 10,816 15,974 14,000 14,601
Closing shareholders' funds 15,287 10,816 17,884 14,000
CONSOLIDATED CASH FLOW STATEMENT
for the period ended 31 December 2002
15 months ended Year ended
31 December 2002 30 September
2001
#'000 #'000
Cash flow from operating activities (5,323) (5,520)
Returns on investments and servicing of finance (40) 113
Taxation (106) (316)
Capital expenditure and financial investment 1,394 (2,037)
(4,075) (7,760)
Acquisitions and disposals (827) (294)
Management of liquid resources 3,310 6,961
Net cash outflow before financing (1,592) (1,093)
Financing 663 230
DECREASE IN CASH IN THE PERIOD (929) (863)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2002 2001
#'000 #'000
Decrease in cash in the period (929) (863)
Liquid resources used to increase cash (3,310) (6,961)
Cash outflow from decrease in debt and finance leases 1,176 (4)
New finance leases - (226)
Loans acquired with subsidiaries (21) -
MOVEMENT IN NET DEBT IN YEAR (3,084) (8,054)
NET FUNDS AT 1 OCTOBER 2001 2,060 10,114
NET (DEBT)/FUNDS AT 31 DECEMBER 2002 (1,024) 2,060
1 BASIS OF PREPARATION
The financial information included with this statement does not constitute
statutory accounts as defined by section 240 of the Companies Act 1985 for the
period ended 31 December 2002 and the year ended 30 September 2001.
It has been extracted from the statutory accounts on which the auditors have
issued an unqualified audit report and which will be delivered to the Registrar
of Companies in due course.
Accountancy policies are unchanged from published statutory accounts for the
year ended 30 September 2001.
2 BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the results of the company and
all of its material subsidiary undertakings as at 31 December 2002 using the
acquisition method of accounting as required. Where the acquisition method is
used, the results of subsidiary undertakings are included from the date of
acquisition. Associated undertakings are included on the equity accounting
basis.
3 TAXATION 2002 2001
#'000 #'000
Corporation tax
Adjustment in respect of prior years 212 Nil
4 GOODWILL
The difference between the fair value of the consideration paid and the fair
value of the assets and liabilities acquired for subsidiary undertakings is
capitalised as goodwill and written off over 10 years as, in the opinion of the
directors, this represents the period over which the goodwill is effective.
Goodwill arising on the acquisition of interests in associate undertakings is
also written off over 10 years. Goodwill is written off when, in the opinion of
the directors, there has been a permanent impairment of its value.
5 EARNINGS/(LOSSES) PER SHARE
Basic and diluted earnings/(losses) per share have been calculated using the
weighted average number of shares in issue during the period ended 31 December
2002 being #21,763,681 (2001: 1,175,848,630) and loss after taxation and
minority interests of #9,403,000 (2001: loss #4,734,000).
6 ACQUISITIONS
On 8 May 2002, the company acquired Park Row Group Limited, as detailed below:
Net assets acquired Book Fair Value Adjusted
value adjustment value
#'000 #'000 #'000
Intangible fixed assets 44 - 44
Tangible fixed assets 76 - 76
Trade debtors 653 - 653
Other debtors 222 - 222
Prepayments and accrued income 85 - 85
Cash at bank and in hand 71 - 71
Bank loans (21) - (21)
Trade creditors (814) - (814)
Other creditors (40) - (40)
Accruals and deferred income (137) - (137)
Provisions (137) - (137)
2 - 2
Goodwill 12,876
12,878
Satisfied by:
Shares allotted 10,747
Shares to be issued 415
Cash 780
Other pre existing commitments 334
Acquisition costs 602
12,878
The summarised consolidated profit and loss account of Park Row Group Limited
for the period 1 January 2002 to 8 May 2002 is detailed below:
#'000
Turnover 3,351
Operating profit 144
Loss before taxation and retained loss (99)
The loss after taxation for the year ended 31 December 2001 was (143)
In May 2002, the Group acquired a 75% interest in Adviceonline Limited, as
detailed below:
Net assets acquired Book Fair Value Adjusted
value adjustment value
#'000 #'000 #'000
Intangible fixed assets 56 - 56
Tangible fixed assets 1 - 1
Debtors 41 - 41
Cash at bank and in hand 11 - 11
Other creditors (84) - (84)
Accruals and deferred income (12) - (12)
Minority interest (3) - (3)
10 - 10
Goodwill 108
118
Satisfied by:
Cash 118
7 CASHFLOWS 15 months ended Year ended
a Reconciliation of operating (loss)/profit to net cash 31 December 30 September
(outflow)/ inflow from operating activities 2002 2001
#'000 #'000
Operating loss (8,627) (4,358)
Depreciation and amortisation 1,778 713
Decrease in stock 64 123
Increase in debtors (285) (1,055)
Increase in creditors 1,577 36
Increase in provisions for liabilities and charges 13 -
Loss on sale of fixed assets 157 224
Profit on dilution of investments - (1,326)
Loss on sale of investments - 123
Net outflow from operating activities (5,323) (5,520)
At Other At 31
b Analysis of net debt 1 October non-cash December
2001 Cash flow Acquisition changes 2002
#'000 #'000 #'000 #'000 #'000
Cash in hand, at bank - 173 - - 173
Bank overdrafts - (1,102) - - (1,102)
- (929) - - (929)
Debt due after 1 year (940) 940 - - -
Debt due within 1 year (36) 57 (21) - -
Finance leases (274) 179 - - (95)
Current asset investment 3,310 (3,310) - - -
2,060 (2,134) (21) - (95)
Total 2,060 (3,063) (21) - (1,024)
8 POST BALANCE SHEET EVENTS
After the balance sheet date the company disposed of its stake in Fairplace
Consulting plc and exchanged contracts on Bluebridge House which is due to
complete by the end of April 2003. The carrying value of Bluebridge House in
these financial statements has been adjusted to reflect disposal proceeds. The
disposal of the stake in Fairplace Consulting plc realised a further loss of
#249,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UBOOROUROAUR
