TIDMDGT
Dowgate Capital plc / Ticker: DGT / Index: AIM / Sector: Finance
Dowgate Capital plc (the "Group", the "Company" or "Dowgate")
Final Results
Dowgate Capital plc, the AIM quoted corporate finance and stockbroking group
focused on smaller quoted companies, is pleased to announce its preliminary
results for the year ended 31 December 2008.
Chairman's statement
2008 results
Given the reliance of the Company's advisory and broking subsidiaries on the
buoyancy of smallcap quoted markets, 2008 was a difficult year, but one in
which our established operations (Dowgate Capital Advisers Limited ("DCA") and
Dowgate Capital Stockbrokers Limited ("DCS")) performed satisfactorily, with
Group turnover declining by only 18% from GBP6.25m to GBP5.10m.
However, as mentioned in the trading statement in December 2008, due to
exceptional costs, including the establishment of DCS's City based corporate
broking team and continued weakness in corporate broking activity, the Group
overall made a loss for the year with DCA making a profit before tax of GBP371k
on turnover of GBP2.55m and DCS making a loss before tax of GBP1.166m on turnover
of GBP2.55m. Before exceptional items the Group loss was GBP390,000.
In addition, as required by International Financial Reporting Standards, the
Board is required each year to review the carrying value of the Company's
investment in subsidiaries. In the case of DCS, the Board has decided to write
down the value of goodwill by approximately GBP1.6m to approximately GBP1.5m
resulting in a revised carrying value of approximately GBP2.9m including tangible
net assets. The write down reflects the Board's view of future profitability of
DCS on the assumption that present market conditions persist during 2009 but
with some improvement in conditions and performance in 2010 and 2011. The
goodwill write-down is charged to the Company's income statement and adds to
the Group's operating loss. The carrying value of DCA is GBP448,000 comprising
only tangible net assets, as all goodwill relating to it was written off some
years ago.
Tangible net assets of the Group at the end of the year were GBP1.88m.
With regard to DCA, the Board received some weeks ago, a proposal from its
management team to acquire the business for an aggregate sum of GBP1.5m. The
disposal would have been subject to shareholders' approval. In view of the
recent approach from Blue Oar plc, the MBO discussions have been terminated.
Based on the current carrying value of DCS of GBP2.9m and the proposed buy out
price of DCA of GBP1.5m, the value of the Company's subsidiaries, ignoring any
sale premium in the case of DCS, is GBP4.4m equating to just over 11p per share.
This compares with the Company's share price of 6p as at the close of business
on 20 April 2009 and following the announcement of Blue Oar's approach.
Market conditions are challenging for both DCA and DCS. Shareholders should
however be aware that both DCA's and DCS's businesses are cyclical with
activity levels and profitability being very depressed at present due to market
conditions, but likely to improve in line with market conditions. In
particular, DCS's private client stockbroking division is well placed to
benefit from a general upturn in stock market conditions with activity in the
Main Market likely to improve well before AIM.
Dividends
In view of the loss during the period the Board will not be proposing a final
dividend for the year. However, the Board intend to resume paying dividends
when able to do so.
2009
Whereas DCA traded satisfactorily up to the end of 2008, trading conditions in
the first quarter of 2009 have been significantly more challenging. Flotations
which were mandated in 2008 have failed so far to raise the necessary funds
although DCA has successfully completed a number of smaller "technical"
transactions for its clients. In addition, DCA's retained client base has been
volatile and, in common with other AIM advisers, there has been downward
pressure on fees. DCA has however been successful in gaining some new retained
clients.
DCS has continued to trade at around the same level as in the final months of
2008 with private client stockbroking business continuing to hold up well and
showing signs of improvement, but corporate broking activity remaining
depressed. DCS's experience has been similar to DCA's in respect of retainer
income.
Outlook for the remainder of 2009
In our view, conditions on the AIM Market, where the Group principally
operates, will remain depressed for some time unless and until new factors
arise or incentives are introduced providing investors with the potential, once
again, to make profits.
Approach by Blue Oar plc
Shareholders will be aware of the recent approach by Blue Oar plc and should
take no action until such time as the Board is able to provide formal advice
which it will do if and when a formal offer is made. In the event that Blue Oar
plc decides to make an offer, it would need to be at a minimum of 6p per share.
Stakeholders
I would personally like to sincerely thank our clients for their loyalty and
support. We will continue to provide you with excellent service. I am also
deeply appreciative of the hard work and support of our staff in what have been
very difficult market conditions alongside the more recent unsettling effect of
external factors.
Tony Rawlinson
Chairman
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2008
Year Year
ended ended
31 31
December December
2008 2007
Note GBP000 GBP000
Continuing Operations
Revenue 5,099 6,251
Operating costs (5,489) (5,123)
Trading (loss)/profit (390) 1,128
Impairment of goodwill (1,559) -
Cost of share based payments (179) (198)
Exceptional costs (629) (71)
Operating (loss)/profit (2,757) 859
Investment revenues 141 201
Finance costs (12) (32)
Other gains and losses (149) (15)
(Loss)/profit before tax (2,777) 1,013
Tax 235 (377)
(Loss)/Profit for the year from continuing operations
attributable to equity holdings of the parent
1 (2,542) 636
Earnings per share from continuing operations
attributable to equity holdings of the parent
Basic 2 (6.42)p 1.71p
Diluted 2 (6.42)p 1.68p
All the activities of the current period are classed as continuing.
A separate statement of recognised income and expense is not presented because
the only recognised income and expense is the loss for the year, all of which
is attributable to the equity holders of the parent.
CONSOLIDATED BALANCE SHEET
At 31 December 2008
2008 2007
GBP000 GBP000
Non-current assets
Goodwill 1,459 3,018
Property, plant and equipment 221 220
Deferred tax asset - 22
1,680 3,260
Current assets
Trading investments 128 496
Trade and other receivables 1,233 1,246
Tax receivable 262 -
Cash and cash equivalents 861 1,850
2,484 3,592
Total assets 4,164 6,852
Liabilities
Current Liabilities
Trade and other payables 646 932
Current tax liabilities - 254
Bank loan 174 -
820 1,186
Net current assets 1,664 2,406
Non-current liabilities
Deferred tax liabilities 5 -
Net assets 3,339 5,666
Equity
Share capital 3,108 2,786
Own shares (216) (59)
Share premium account 1,943 1,773
Retained earnings (1,496) 1,166
Total equity 3,339 5,666
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2008
Year ended Year ended
31 31
December December
2008 2007
Note GBP000 GBP000
Net cash (outflows)/inflows from operating 4 (1,277) 89
activities
Investing activities
Interest received 141 201
Purchase of property, plant and equipment (51) (210)
Acquisition of own shares (157) (59)
Net cash used in investing activities (67) (68)
Cash flows from financing activities
Dividends paid (299) (149)
Proceeds from issue of share capital 492 -
Interest paid (12) (32)
Bank loan advanced (repaid) in year 174 (1,001)
Net cash from (used in) financing activities 355 (1,182)
Net decrease in cash and cash equivalents (989) (1,161)
Cash and cash equivalents at beginning of year 1,850 3,011
Cash and cash equivalents at end of year 861 1,850
Notes to the Report and Financial Statements
For the year ended 31 December 2008
Segmental information
Income Statement
2008 2007
Financial Stock Financial Stock
advisory broking Group advisory broking Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue -
external sales
2,551 2,548 5,099 2,740 3,511 6,251
Segmental (loss)/ 371 (1,166) (795) 474 713 1,187
profit before
impairment of
goodwill
Impairment of - (1,559) (1,559) - - -
goodwill
371 (2,725) (2,354) 474 713 1,187
Unallocated
corporate
expenses (411) (142)
Operating (loss)/ (2,765) 1,045
profit before
financing costs
Finance costs (12) (32)
(Loss)/profit (2,777) 1,013
before tax
Tax 235 (377)
(Loss)/profit for (2,542) 636
period
Balance Sheet
2008 2007
Financial Stock Financial Stock
advisory broking Group advisory broking Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
Segment assets 774 2,888 3,662 987 5,549 6,536
Unallocated
corporate assets
502 316
Consolidated total
assets
4,164 6,852
Liabilities
Segment 326 241 567 557 346 903
liabilities
Unallocated
corporate
liabilities 258 283
Consolidated total
liabilities
825 1,186
Capital additions 5 33 12 14
Depreciation 14 16 12 8
Note: Segmental assets exclude corporation tax refund of GBP262,000 in respect of
DCS (2007: GBPnil).
Earnings per share
The calculation of basic earnings per share is based on the loss attributable
to ordinary shareholders of GBP2,542,000 (2007: profit GBP636,000) divided by the
weighted average of 39,579,268 (2007: 37,110,257) ordinary shares in issue
during the period.
The basic loss per share is 6.42p (2007: basic earnings per share 1.71p). The
diluted loss per share for 2008 is the same as the basic loss per share as the
options that were in existence have an anti-dilutive effect on the loss per
share and therefore have not been taken into account.
Reserves and reconciliation of movement in equity
Share Total
Share Own premium Profit and shareholders
capital shares account loss funds
account
GBP000 GBP000 GBP000 GBP000 GBP000
Group
At 1 January 2008 2,786 (59) 1,773 1,166 5,666
Shares issued in year 322 - 170 - 492
Loss for the year - - - (2,542) (2,542)
Treasury shares acquired
in year - (157) - - (157)
Dividend paid in the year - - - (299) (299)
Adjust for share based - - - 179 179
payments
At 31 December 2008 3,108 (216) 1,943 (1,496) 3,339
Note to the Cash Flow Statement
Net cash (outflows)/inflows from operating activities
Year ended Year ended
31 31
December December
2008 2007
GBP000 GBP000
Operating (loss)/profit (2,757) 859
Depreciation 50 27
Decrease/(increase) in receivables
13 (15)
Impairment of goodwill 1,559 -
Cash flows from purchase and sales of trading
investments
219 (268)
Decrease in payables (286) (157)
Share based payments 179 198
Corporation tax paid (254) (555)
Net cash from operating activities
(1,277) 89
Status
This preliminary statement has been approved for release by the Company's
auditors. The financial information in this statement does not constitute the
Company's statutory accounts for the year ended 31 December 2008 or 2007. The
auditors have not yet reported on the statutory accounts for the year ended 31
December 2008 nor have they been delivered to the Registrar of Companies. The
auditors have reported on the statutory accounts for the year ended 31 December
2007 and their report was unqualified, did not include any matter to which the
auditors drew attention by way of emphasis without qualifying their report and
did not contain a statement under Section 237 of the Companies Act 1985. The
statutory accounts for the year ended 31 December 2007 have been delivered to
the Registrar of Companies.
Report and Accounts
Copies of the Report and Accounts for the year ended 31 December 2008 will be
sent to shareholders in due course. Further copies will be available from the
Company's registered office at 46 Worship Street, London EC2A 2EA.
Enquiries:
Dowgate Capital plc
Tony Rawlinson, Chairman
Tel: 020 7492 4777
Nominated Adviser to Dowgate Capital plc
Grant Thornton UK LLP
Philip Secrett / Colin Aaronson
Tel: 020 7383 5100
END
Dowgate Capital (LSE:DGT)
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Dowgate Capital (LSE:DGT)
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