Impact Holdings (UK) plc
("Impact" or "The Group")
Interim Results
23 December 2014
Impact (AIM: IHUK), the specialist lender, announces its unaudited interim
results for the six months ended 30 September 2014.
Financial Highlights
* Cash and cash equivalents of £0.63 million (£0.78 million 30 September
2013)
* Net assets of £5.34 million (£5.65 million 30 September 2013)
* Debt reduced by 22% year on year to £1.22 million (£1.58 million 30
September 2013)
* Loss after tax of £234,933 (Profit after tax £1,904 30 September 2013)
* (Loss)/earnings per share (17.0p) (0.1p 30 September 2013)
Operational Highlights
* Ongoing business re-aligned in line with expectations
* Continued reduction in borrowings from financial institutions
A copy of the interim results is also available on the Group's website
(www.impactholdings.net).
For further information:
Impact Holdings (UK) plc
Paul Davies, Chief Executive Officer Tel: 01928 793 550
Zeus Capital
Andrew Jones / Nick Cowles Tel: 0161 831 1512
Notes to the Editors:
Impact Holdings (UK) plc through its individual subsidiaries provides financial
outsourcing and ancillary services to the legal profession. In addition Impact
will fund other opportunities where debt instruments or debentures provide the
primary security and there are opportunities for short term bespoke funding
where serviceability precludes larger lenders from entering this area.
Impact is regulated by the Office of Fair Trading through which it is licensed
to lend under the Consumer Credit Act 1974.
CHAIRMAN'S STATEMENT
I am pleased to report our unaudited interim financial results for the six
months ended 30th September 2014. Revenue of £906,376 and pre-tax losses of
£234,933 were in line with expectations, as the management team continued its
realignment of the business.
BUSINESS OVERVIEW
The development of the strategic direction of the business has continued with a
reduction in our exposure to third party funders and a withdrawal from new
exposures in the specialty funding market.
We continue to incur upfront legal expenses in seeking to recover loans which
have been previously provided against by the Group. Litigated matters continue
to be concluded successfully however the ongoing costs of the more complex
litigation matters continue to erode positive financial results.
We have recently settled one litigated claim against a firm of former
professional advisors on advantageous terms and are currently awaiting a
Court's decision which may accelerate settlement of a number of matters being
pursued.
OUTLOOK
The group remains focused on providing services to the legal and professional
sectors. The Board of Directors is committed to the opportunities earmarked and
continues to develop this strategy which will provide, over time, enhanced
shareholder value.
Roger Barlow
Non-Executive Chairman
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 Months 6 Months Year
ended ended Ended
30/09/2014 30/09/2013 31/03/2014
£ £ £
Revenue 906,376 957,652 1,740,529
Cost of Sales (376,397) (521,983) (1,307,442)
Gross profit 529,979 436,669 433,067
Exceptional and (764,920) (434,781) (3,418,027)
other operating expenses
Exceptional - - 3,082,023
interest and similar income
Operating (loss)/profit (234,941) 1,888 97,063
Interest receivable 8 16 25
(Loss)/profit for the period from
operations before tax (234,933) 1,904 97,088
Tax - - -
Profit for the period (234,933) 1,904 97,088
(Loss)/earnings per share (pence)
Basic (17.0)p 0.1p 3.7p
Fully Diluted (17.0)p 0.1p 3.7p
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED BALANCE SHEET
As at As at As at
30/09/2014 30/09/2013 31/03/2014
£ £ £
Non-current assets
Goodwill 421,766 421,766 421,766
Property, plant and equipment 900,054 934,769 918,580
Deferred taxation 171,902 171,892 170,195
1,493,722 1,528,427 1,510,541
Current assets
Trade and other receivables
including amounts falling
due after more than one year 5,363,700 6,412,761 5,973,186
Cash and cash equivalents 635,866 782,214 692,685
5,999,566 7,194,975 6,665,871
Total assets 7,493,288 8,723,402 8,176,412
Capital and reserves
Share capital 1,311,201 6,411,201 1,311,201
Share premium account - 5,125,291 -
Shares held by Employee Benefit Trust (45,070) (45,070) (45,070)
Retained earnings 4,075,955 -5,842,751 4,310,645
Equity attributable to equity shareholders 5,342,086 5,648,671 5,576,776
of the parent
Trade and other payables due after more
than one year 540,329 526,930 540,335
Trade and other payables due in less
than one year 1,610,873 2,547,801 2,059,301
7,493,288 8,723,402 8,176,412
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
6 Months 6 Months Year
ended ended Ended
30/09/2014 30/09/2013 31/03/2014
£ £ £
Operating activities
Cash generated from operations 154,717 180,753 456,145
Income taxes paid - - -
Net cash generated by operating activities 154,717 180,753 456,145
Investing activities
Purchase of property, plant and equipment - (19,865) (34,914)
Interest received 8 16 25
Net cash in investing activities
8 (73,872) (34,889)
Financing Activities
Net decrease in amounts owed to lending (301,073) (13,080) (418,813)
institutions
Net cash outflow from financing activities (301,073) (13,080) (418,813)
Net increase/(decrease) in cash and cash (146,348) 93,801 2,443
equivalents
Opening cash and cash equivalents 782,214 688,413 690,242
Closing cash and cash equivalents 635,866 782,214 692,685
IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to the equity holders of parent company
Shares Profit
Share Share held by Share and loss
capital premium EBT options account Total
£ £ £ £ £ £
Balance as at 31 6,411,201 5,125,291 (45,070) - (6,051,083) 5,440,339
March 2013
Share premium - (5,125,291) - - 5,125,219 -
reduction
Cancellation of (5,100,000) - - - 5,100,000 -
ordinary B shares
Share options - - - 39,349 - 39,349
Net Profit for the - - - - 97,088 97,088
Year
Balance as at 31 1,311,201 - (45,070) 39,349 4,271,296 5,576,776
March 2014
Net (loss) for the - - - - (234,933) (234,933)
period
Balance as at 30 1,311,201 - (45,070) 39,349 4,036,363 5,341,843
September 2014
Notes to the Interim Financial Statements
1. Accounting policies
This half-year report for the period ended 30 September 2014 has been prepared
on the basis of the accounting policies set out in Impact Holdings (UK) plc's
annual report and financial statements 2014 and in accordance with the
International Financial Reporting Standards as adopted by the European Union
and IAS34, 'Interim financial reporting'.
The half-year report does not constitute statutory financial statements as
defined in section 434 of the Companies Act 2006.
It does not include all of the information and disclosures required for full
annual financial statements, and should be read in conjunction with the annual
report and financial statements for the year ended 31 March 2014.
The financial information contained in this half-year report in respect of the
year ended 31 March 2014 has been produced from the annual report and financial
statements for that year which have been filed with the Registrar of Companies.
The financial statements have been prepared on the historical cost basis,
except for the valuation of certain financial instruments. The principal
accounting policies adopted are set out below.
The financial statements have been prepared on a going concern basis.
New and revised accounting standards
At the date of issue of these financial statements, the following accounting
Standards and Interpretations, which have not been applied, were in issue but
not yet effective. The directors do not anticipate that adoption of these will
have a material impact on the financial statements.
IFRS2 Share Based Payments
IFRS3 Business Combinations
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS14 Regulatory Deferral Accounts
IFRS15 Revenue from Contracts with Customers
IAS 16 Property Plant and Equipment
IAS 19 (as revised in 2011) Employee Benefits
IAS 24 Related Party Disclosures
IAS 27 (as revised in 2011) Separate Financial Statements
IAS 28 (as revised in 2011) Investments in Associates and Joint Ventures
IAS 32 Offsetting Financial Assets and Financial Liabilities
IAS 36 Recoverable Amount Disclosures for Non- Financial Assets
IAS 38 Intangible Assets
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
IAS 40 Investment Property
IAS 41 Bearer Plants
The effect of changes on the group's financial statements as a result of
adopting these standards (where applicable) is not significant. The group has
elected not to adopt any other standards earlier than the proposed effective
dates.
Further detail in relation to the above International Accounting Standards is
available from the IASB's website, www.iasb.org.
Basis of consolidation
The consolidated financial statements of the Group incorporate the financial
statements of Impact Holdings (UK) plc (the "Company") and enterprises
controlled by the Company (its subsidiaries) made up to the balance sheet date.
Control is achieved where the company has the power to govern the financial and
operating policies of an investee enterprise so as to obtain economic benefit
from its activities. Subsidiaries are fully consolidated from the effective
date of acquisition or up to the effective date of disposal, as appropriate.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are initially measured at fair
value at the acquisition date irrespective of the extent of any minority
interest.
The excess of cost of acquisition over the fair values of the Group's share of
identifiable net assets acquired is recognised as goodwill. Any deficiency of
the cost of acquisition below the fair value of identifiable net assets
acquired (i.e. discount on acquisition) is recognised directly in the income
statement.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
other members of the Group. All intra-group transactions, balances, and
unrealised gains on transactions between Group companies are eliminated on
consolidation. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, associate or jointly controlled entity
at the date of acquisition. Goodwill on acquisition of subsidiaries is
separately disclosed.
Goodwill is recognised as an asset and reviewed for impairment semi-annually or
on such other occasions that events or changes in circumstances indicate that
it might be impaired. Any impairment is recognised immediately in the income
statement and is not subsequently reversed. Goodwill is allocated to cash
generating units for the purpose of impairment testing.
Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts subject to being tested for
impairment.
Intangible assets
The cost of developing or acquiring computer software including own labour
costs incurred directly in connection with software development, is capitalised
as an intangible asset where the related expenditure is separately identifiable
and where there is reasonable expectation that future economic benefits will
arise from the development. Software costs are amortised using the straight
line method over 3 years. The amortisation charge is included within operating
expenses.
Interest income and expense
Revenue shown in the profit and loss account represents interest, commission
and arrangement fees receivable on loans made to third parties. Interest income
and expense are recognised in the profit and loss account for all financial
assets and liabilities using the effective interest method, being the rate that
exactly discounts estimated future cash payments or receipts through the
expected life of the financial instrument to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest
rate, the Group includes all establishment and arrangement fees, commissions
and administrative fees paid or received between parties to the contract that
are an integral part of the effective interest rate.
Interest on legal disbursement funding is added to the principal, is calculated
on a daily basis and is repaid to the Group at the end of the term of the
agreement.
Amounts received in respect of interest on property bridging loans relating to
future periods are held on the balance sheet as deferred income within trade
and other payables.
Revenue generated by Midas Marketing Management Limited represents marketing
fees generated by the business activities ad is recognised when the services
are provided or concluded.
Financial assets and liabilities
Financial assets and liabilities used by the Group include loans made to third
parties and debt finance received by the Group. Financial assets are recognised
initially at fair value and measured subsequently at amortised cost using the
effective interest method, less provision for impairment. Financial liabilities
are recognised initially at fair value and measured subsequently at amortised
cost.
Bad and doubtful debts
Specific provision is made against all advances considered to be impaired. When
there is reasonable doubt over recovery, provision is made against the
outstanding debt including interest and further interest is suspended until the
directors are satisfied as to the recoverability of the total amount due.
Segmental reporting
No separate segmental reporting information is provided as in the directors'
opinion there are no material segments other than the provision of short term
niche funding solutions.
Leasing
Rentals payable under operating leases are charged to income on a straight line
basis over the term of the lease.
Retirement benefits costs
Payments to defined contribution retirement benefit plans are charged as an
expense as they fall due.
Taxation
The tax expense represents the sum of the current tax expense and deferred tax
expense.
The tax currently payable is based on taxable profit or loss for the year.
Taxable profit or loss differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated by using tax
rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction which affects neither the tax profit
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled based upon tax
rates that have been enacted or substantively enacted by the balance sheet
date. Deferred tax is charged or credited in the income statement, except when
it relates to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated depreciation.
Depreciation is charged so as to write off the cost or valuation of assets over
their useful economics lives, using the straight line method on the following
basis:-
Plant and machinery - 3 years
Fixtures, fittings & equipment - 3 years
The directors consider that the freehold properties are maintained in such a
state of repair that its residual value is at least equal to their original
cost. Accordingly, no depreciation is charged on the grounds of immateriality.
Annual impairment reviews are undertaken and provisions made at the end of each
reporting period where necessary.
Equity Instruments
Equity instruments, which are contracts that evidence a residual interest in
the assets of the Group after deducting all of its liabilities, are recorded at
the proceeds received, net of direct issue costs.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event which it is probable will result in an outflow of economic
benefits that can be reliably estimated.
Share-based payments
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest. Fair
value is measured by use of a binomial model. The expected life used in the
model has been adjusted, based on management's best estimate, for the effect of
non-transferability, exercise restrictions, and behavioural considerations.
At each balance sheet date, the Group revises its estimates of the number of
options that are expected to become exercisable. It recognises the impact of
the revision of original estimates, if any, in the income statement and a
corresponding adjustment to reserves over the remaining vesting period. Costs
are recognised in the income statement with a corresponding credit to a share
based payment reserve.
Financial Risk Management
Interest rate risk
The interest rate risks are limited to the revolving credit facilities which
the Group has in place.The Group has no exposure arising from trading overseas.
Liquidity risk
The Group has to monitor closely its access to bank and other funds and its
ongoing loans and overdrafts to ensure that there are sufficient funds to meet
its obligations.
The Board receives regular debt management forecasts which estimate the cash
inflows and outflows over the next eighteen months, so that management can
ensure that sufficient financing is in place as it is required.
Credit Risk
The Group is exposed to the risk that any counterparty to which the Group lends
money will be unable to repay the amounts when they fall due. These risks are
managed by ensuring that exposures to individual counterparties and particular
market sectors or loans exhibiting particular attributes are minimized wherever
possible. The Board and Risk Committee monitor such exposures on a regular
basis, with figures being regularly reviewed. In respect of property bridging
loans the Group enforces repossession of property where necessary with a view
to holding the asset for resale in order to extinguish the debt. In addition,
impairment provisions are made when it becomes evident that the Group may incur
losses at the balance sheet date.
2. Earnings per Ordinary A share
6 Months 6 Months Year
ended ended Ended
30/09/2014 30/09/2013 31/03/2014
(Loss)/profit for the (234,933) 1,904 97,088
purposes of basic earnings
per ordinary share (£)
Average number of shares - 2,662,402 2,662,402 2,662,402
basic and diluted
EPS - basic (pence) (17.0)p 0.1p 3.7p
EPS - diluted (pence) (17.0)p 0.1p 3.7p
3. Trade and other receivables
30/09/2014 30/09/2013 31/03/2014
£ £ £
Trade receivables
-Disbursement funding loans 4,584,612 4,516,789 4,873,848
- Property bridging loans 131,371 818,970 570,956
237,960 41,485 119,671
- Other trade debtors
Prepayments and accrued income 409,757 1,035,517 408,711
5,363,700 6,412,761 5,973,186
4. Trade and other payables amounts falling due within one year
30/09/2014 30/09/2013 31/03/2014
£ £ £
Trade and other payables falling due
within one year
Trade payables 163,646 42,906 82,940
Bank loans 685,933 1,061,308 987,000
Other taxation and social 43,773 82,128 39,149
security
Accruals and deferred 717,521 1,361,459 950,212
income
1,610,873 2,547,801 2,059,301
Bank loans include a committed term loan secured by fixed and
floating charges over the assets of the Sutherland Professional
Funding Limited supported by a parent company guarantee to a maximum
of £700,000.
5. Trade and other payables falling due after more than one year
30/09/2014 30/09/2013 31/03/2014
£ £ £
Mortgage 540,329 526,930 540,335
The mortgages for Impact Property Management Limited are secured on the group's
freehold properties and supported by a parent company guarantee.
6. The Board of Directors approved the interim report on 22 December 2014.