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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Davenham | LSE:DAV | London | Ordinary Share | GB00B0P32071 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.95 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMDAV
RNS Number : 7395W
Davenham Group PLC
24 November 2010
For immediate release 24 November 2010
Davenham Group plc
Final results for the year ended 30 June 2010
Davenham Group plc today announces its final results for the year ended 30 June 2010.
Chairman and Group Managing Director's Statement
Overview
Having taken the decision in October 2008 to collect-out the Group's property book, whilst only very selectively underwriting new business in our asset and trade books, we have made continued progress during the year under review in reducing the size of the Group's loan portfolio and operating cost base.
In addition, the Group worked closely with Hawkpoint Partners, the Group's NOMAD and financial adviser, to complete the strategic review of the Group's options.
This review was completed on 30 June 2010 concluding that Davenham should cease to write new business and that, with the support of its banking syndicate, Davenham would collect in its loan books in a prudent and orderly manner.
In view of this outcome of the strategic review, the Board considered (having consulted with Hawkpoint Partners) that there was likely to be no value for ordinary shareholders in the Company.
Results summary
The Board have concluded that following the announcement on 30 June 2010 that it is not appropriate to prepare its financial statements on a going concern basis. The results for the year ended 30 June 2010 have therefore been prepared on a break-up basis as defined in the Group's accounting policies.
The financial results reflect an environment that has remained challenging during the year with the Group finding it difficult, especially in respect of its property portfolio, to sell assets for value. The vast majority of the property portfolio has remained non-performing, resulting in reduced income and continued operating losses.
-- Loan portfolio (including letters of credit) reduced to GBP108.2m at 30 June 2010 from GBP193.0m a year earlier
-- Provisions before gross up of GBP10.7m were made during the year
-- Bank facility reduced from GBP181m to GBP130m during the year
-- Cost base reduced substantially by GBP4m
-- Net liabilities of GBP24.0m (2009: Net assets GBP10.9m)
People
On 1 March 2010 Davenham announced that David Coates had stepped down as Chief Executive of the Group and that Paul Burke, the Group Finance Director, had been appointed Group Managing Director. Since the year end Graham "Sam" Footitt and David Stewart have retired as Non-Executive Directors of the Company.
The Board thanks David, Sam and David for their contributions to the Company during their tenures.
AIM
On 30 June 2010, the Company announced its intention to propose the cancellation of the admission of its securities to the Alternative Investment Market ("AIM"), having regard to the ongoing costs of maintaining that admission. A general meeting was subsequently convened on 13 August 2010, at which a special resolution ("the Resolution") was proposed to approve this cancellation. The Resolution, which was conditional upon the approval of not less than 75% of the votes cast by shareholders, was not approved by a sufficient majority of shareholders.
The Board will make further announcements as appropriate.
Post year end
Following the Board's announcement that the Group would cease to write new business and that, with the support of its banking syndicate, it would collect in its loan books in a prudent and orderly manner, the detailed parameters of that run-off were finalised with the banking syndicate. This has ensured that a stable platform is maintained during the run-off period and that the Group has access to the required levels of working capital, ensuring the day to day liabilities of the Group are met as they fall due.
The key financial indicators as at 23 November 2010 are as follows:
-- Loan portfolio reduced to c.GBP80m
-- Bank facility reduced from GBP130m to GBP111m
Further reductions to the cost base/headcount are expected as the Group continues to run-off its loan portfolios.
Summary
The Board confirms that Davenham continues to collect in its loan book with the support of the banking syndicate and that the Board remains of the view that there is likely to be no value for ordinary shareholders in the Company.
James Kerr-Muir Paul Burke Chairman Group Managing Director 24 November 2010
For further information, please contact:
Davenham Group plc 0161 832 8484 Paul Burke, Group Managing Director www.davenham.co.uk Hawkpoint Partners Limited (Nominated Adviser) Lawrence Guthrie / Shaun Holmes 020 7665 4642 MHP Reg Hoare/Katie Hunt 020 3128 8100/07884 494112
Business Review
The year under review continued to be very challenging for the Group as the impact of the depressed property market continues to seriously affect the financial performance of the Group, in addition to the uncertainty surrounding the future of the business whilst the Strategic Review was being conducted.
Financial Highlights
In an environment which saw the Property book being collected in and restricted new business being written in the Asset and Trade portfolios, Group revenues decreased by 35% to GBP32.0m (2009: GBP49.1m). The loan portfolio including letters of credit reduced by 44% to GBP108m (2009: GBP193m).
Loss before tax and exceptional items was GBP23.3m (2009: GBP48.9m) after charging GBP29.9m (2009: GBP66.7m) for impairment, the vast majority relating to the performance of the property portfolio. The impairment charge is inclusive of gross up which amounted to GBP19.3m (2009: GBP17.5m) for the year reflecting the opportunity loss on many of the Group's property loans.
Exceptional costs of GBP6.5m increased the loss before tax to GBP29.8m (2009: GBP55.4m).
The Group's effective tax rate during the year was 28% (2009: 26.7%). A full analysis of the tax charge for the year is set out in note 7 to the financial statements.
Exceptional costs
During the year, the Group recognised a number of items, within administrative expenses, which due to their size and unusual nature are disclosed as exceptional costs. These costs primarily related to the strategic review process and new basis of preparation, including the new banking facilities, office closures and redundancies. These costs have been disclosed as exceptional.
Borrowing facilities
In March 2009 a two year facility with the Group's existing syndicate of banks was agreed. The facility was tailored to ensure the working capital requirements of the Asset and Trade divisions were met whilst reflecting the recovery of cash from the reduction of the Property loan book.
Following the Board's announcement on 30 June 2010 (and the expiry of temporary waivers of covenant breaches), the detailed parameters of the run-off were finalised with the banking syndicate with the result that the facility is now repayable on demand.
This on demand facility will expire on 31 March 2011, at which point the banking syndicate is expected to review their ongoing support for the run-off process.
Cash flow
Considerable time was invested towards cash generation resulting in a net reduction of the Groups indebtedness by GBP55.1m in the year to GBP123.9m, as at 30 June 2010. The cessation of lending within the areas of property, small ticket asset and professional loans and associated run-off and the writing of very selective new business in Asset and Trade were the prime drivers in the Group's overall reduction in its debt levels.
Administrative expenses
During the run-off period the Group continues to carefully manage its business, taking hard decisions to remove costs as the business contracts.
Shareholders' Return
The Board remains of the view that there is likely to be no value for ordinary shareholders.
Key Performance Indicators
A number of KPIs are used by the Group in managing the business. The following provides an explanation of the purpose and basis of the calculation for these KPIs:
Revenue
Measurement of income generated from the deployment of the Group's product portfolio. Income is calculated based upon the various product margins charged and fees applied and recognised in accordance with the Group's income recognition policies, excluding the impact of gross-up adjustments (the nature of this adjustment is explained in note 2 of the annual report and accounts).
2006 UK GAAP GBP32.7m
2007 IFRS GBP38.6m
2008 IFRS GBP49.5m
2009 IFRS GBP31.6m
2010 IFRS GBP12.7m
The reduction in revenue is primarily reflective of a high number of non-performing accounts, predominantly within Property, being suspended, resulting in income being frozen, due to the quality of the underlying Loan to Value. Declining portfolio levels in Asset and Trade have also contributed to lower income streams.
Profit/ (Loss) before tax and exceptional items
Measurement of the Group's return on employed business resources. The measurement is based upon income less interest payable, impairment and administrative expenses.
2006 UK GAAP GBP10.4m
2007 IFRS GBP11.6m
2008 IFRS GBP13.1m
2009 IFRS (GBP48.9m)
2010 IFRS (Break-up basis) (GBP23.3m)
The reduction in revenue combined with the requirement for continued levels of impairment charges has led to the Group recording a loss.
In accordance with IAS37 the loss for 2010 as prepared on a break-up basis does not include forecast future operating costs.
Loan Portfolio**
Total amount of the lending portfolio outstanding at the end of the financial year.
The measure assesses the size of the portfolio and associated dynamics.
** including letters of credit and after loan loss provisions
2006 UK GAAP GBP183.7m
2007 IFRS GBP248.0m
2008 IFRS GBP284.4m
2009 IFRS GBP193.0m
2010 IFRS (Break-up basis) GBP108.2m
The net loan portfolio has continued to decrease in 2010 as a result of the run - off of property, small ticket leasing and professional loans portfolios, and a very cautious lending approach in the asset and trade divisions. In addition, the continued requirement for substantial loan loss provisioning has impacted on net portfolio levels.
Portfolio Mix
The portfolios for the three divisions within the Group have differing risk and margin characteristics.
Property Trade Asset
2006 GBP91.1m GBP56.0m GBP40.2m
2007 GBP150.4m GBP56.0m GBP65.2m
2008 GBP154.6m GBP58.4m GBP71.4m
2009 GBP110.1m GBP29.7m GBP53.2m
2010 GBP58.9m GBP18.6m GBP30.7m
The net loan portfolios have decreased across all three divisions in line with the Group's revised strategy.
Basic Earnings/ (Loss) per share
Assessment of the creation of shareholder value, measured as the profit/ (loss) on ordinary activities after taxation divided by the weighted average number of ordinary shares in issue during the year.
2006 27.4p ----- ---------- 2007 33.44p ----- ---------- 2008 35.75p ----- ---------- 2009 (163.99p) ----- ---------- 2010 (159.11p) ----- ----------
There have been minimal movements in the weighted average number of ordinary shares in issue. The reduction in the earnings per share has been a result of the Group's trading losses as prepared on a break-up basis.
Arrears and Impairment
In addition to the KPIs noted above the Group closely manages the following credit performance indicators:
-- Arrears
-- Non-performing debt
-- Bad debt charge
As an asset based lender, the Group assesses the underlying value of the asset against which it advances funds using the asset held as collateral security. Historically, it has been the detailed initial assessment of the underlying collateral that has been important in ensuring the levels of actual capital losses in a "normal economic environment" reflected as a bad debt charge, are kept to a minimum. However, the unprecedented reduction in property values and lack of liquidity continues to result in a substantial reduction in the value of collateral security held.
The deterioration of credit quality will typically manifest itself through three main stages which are reflected by the three indicators.
Arrears on an account reflect the full balance regardless of the underlying security, which should be equivalent to the capital outstanding. This occurs where a customer is unable to service contractual repayments. Remedial action is taken to address the level of arrears and ensure that the funds advanced remain asset secured. Should the customer not be able to remedy the arrears an account becomes defined as non-performing. At this point further interest accrued to the account is suspended.
While non-performing accounts can result in a loss of income, this historically has not necessarily resulted in a capital loss as the Group looks to realise the maximum value of underlying collateral. In the current environment, the Group has seen the value of this underlying collateral eroded substantially below values originally expected.
A bad debt charge is incurred where there is objective evidence to show that the carrying value is more than the future expected cashflows discounted at the original effective interest rate. In practical terms the value of the underlying collateral would be less than the outstanding loan.
The speed at which credit quality has deteriorated, due to the current economic environment, has continued to see accounts pass directly to the bad debt stage.
The definitions of the metrics used and recent performance of each of these indicators are as follows:
Arrears, measured as the value of the Group's customers' accounts contractually in arrears shown as a percentage of the gross portfolio balance, are 69.2% (2009: 66.7%).
Non-performing debt, measured as the value of the Group's customers' accounts where the recognition of interest has been suspended shown as a percentage of the gross portfolio balance, is 67.8% (2009 : 64.5%).
Hot Features
Premium
Property Trade Asset Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- --------- --------- ---------
Arrears
--------------- --------- --------- --------- ---------
2010 - 5 2,151 2,156
--------------- --------- --------- --------- ---------
2009 1,852 9 3,870 5,731
--------------- --------- --------- --------- ---------
Non-performing
--------------- --------- --------- --------- ---------
2010 93,586 5,396 5,155 104,137
--------------- --------- --------- --------- ---------
2009 132,332 4,941 8,745 146,018
--------------- --------- --------- --------- ---------
Bad debt charge, defined as the specific provisioning charge (net of recoveries and before the effects of discounting) is GBP13.4m (2009: GBP37.8m).
In addition to the specific bad debt charge, the Group makes charges under IAS 39 'Financial Instruments - Recognition and Measurement' under the headings of gross up, cash discounting and collective impairment. These are defined below:
Gross up
IAS39 requires that income continues to be recognised on the outstanding balance of a loan at the original effective interest rate, irrespective of the contractual term and whether interest has been suspended or frozen. Currently interest is suspended or frozen if the Group believes the serviceability of the debt is significantly at risk. IAS 39 requires more interest to be recognised than actually deemed recoverable from the customer. As this interest is not deemed recoverable a corresponding loan loss charge is made.
Cash Discounting
The cash discounting charge is the amount of the loss measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate. The cash discounting charge unwinds as the related cashflows are received.
Collective Impairment
Future cash flows for a group of loan assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets and the historical loss experience.
The total impairment charge for the year is analysed as follows into its constituent parts as defined by the Group's accounting policies:
Property Trade Asset Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- ---------
Specific bad
debt charge 7,809 1,592 4,009 13,410
----------------------- --------- --------- --------- ---------
Cash discounting (1,244) (30) (239) (1,513)
----------------------- --------- --------- --------- ---------
Collective impairment (306) (177) (746) (1,229)
----------------------- --------- --------- --------- ---------
Sub-total 6,259 1,385 3,024 10,668
----------------------- --------- --------- --------- ---------
Gross up 17,106 683 1,487 19,276
----------------------- --------- --------- --------- ---------
Total 23,365 2,068 4,511 29,944
----------------------- --------- --------- --------- ---------
This analysis highlights that the Group has released impairment provisions of approximately GBP2.7m in relation to cash discounting and collective impairment. A material element of this relates to the property portfolio.
As at 30 June 2010 the property portfolio has released impairment provisions in relation to cash discounting and collective impairment of approximately GBP1.6m (2009 charge : GBP8.4m) as a result of the ongoing collect out of the portfolio. As highlighted in the definitions above, as the property portfolio is disposed of the cash discounting provision will be released, provided the actual cashflows are the same as forecast back into the income statement reflecting a positive impact on the Group's financial performance over the coming year(s).
The impairment charge is also increased by the level of gross up (see note 10). This charge is offset by a corresponding increase in the Group's revenues of GBP19.3m for the year. The charge is reflective of that element of the Group's portfolio where it is unable to recognise income. This is primarily in relation to the property portfolio as analysed in note 10.
The level of capital loss the Group has or is expecting to incur (i.e. the shortfall between capital balances outstanding and the underlying collateral security) for the year ended 30 June 2010 amounted to GBP13.4m (2009 : GBP37.8m) of the headline impairment level charged under IFRS of GBP29.9m (2009:GBP66.7m).
The total balance sheet provisions as at 30 June 2010 under a break-up basis are as follows:
Property Trade Asset Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- ---------
Specific provision 30,157 2,307 2,146 34,610
----------------------- --------- --------- --------- ---------
Cash discounting 9,172 275 146 9,593
----------------------- --------- --------- --------- ---------
Collective impairment - 754 1,347 2,101
----------------------- --------- --------- --------- ---------
Total 39,329 3,336 3,639 46,304
----------------------- --------- --------- --------- ---------
Risk Environment
The Group is exposed to a number of risks arising from its current business strategy and the environment in which it operates. The Group historically operated in an environment that exposes it to higher risks than those faced by other more traditional mainstream business to business asset secured finance providers.
Risk Management Framework
The risk framework is adopted and implemented through various risk management groups and committees.
The principal risk management groups and their responsibilities are:
The Board of Davenham Group plc
Responsibility for the overall risk framework and governance lies with the Board of Directors. The historical Group risk function has now been incorporated within the responsibilities of the Board.
The Audit Committee
The Audit Committee operated as a non-executive committee that worked on behalf of the Board. Its key responsibilities included monitoring external auditor performance and ensuring the financial reporting, accounting policies and internal controls were monitored and assessed and correctly applied to the Group's reporting statements.
Risk Categorisation
The Group has identified the following key risks in relation to its various portfolio types which could impact on the Group's ability to deliver its stated strategy:
-- Credit Risk;
-- Property Risk
-- Treasury Risk;
-- Capital Risk;
-- Operational Risk; and
-- Strategic Risk
The following definitions of the Group's key risks also reflect how they are managed and mitigated.
Credit Risk
The Group acknowledges that the taking of credit risk in order to earn a return is a central facet of the Group's business model. This is the risk that a financial loss both in terms of earnings or capital will arise through a customer failing to meet the terms and obligations of their contract as they become due. This risk relates to the Group's exposure to its portfolio of loans and receivables.
Adverse changes in the credit quality of the Group's portfolio through a general deterioration in economic conditions has affected the recoverability and value of the Group's assets, including its loans and receivables and therefore its financial performance.
Concentration Risk
The loan portfolio within each product segment is broadly spread by both sector and geography.
Risk Management
The Group maintains a focused risk management ethic and framework, core to the strategy and culture of the business.
Portfolio Meetings
A key risk management control is the monthly portfolio meeting, used to discuss actions required on delinquent accounts, trends, recommendations for policy changes and provisions.
The monthly portfolio reviews are managed by Divisional Risk Management on behalf of each product and division, with independent oversight provided by Group. They are held in conjunction with the divisional senior management, underwriters, customer facing teams and divisional risk managers.
In addition to the monthly portfolio management meeting as noted earlier the Property Committee meets every week to discuss the performance of the property portfolio - both performing and non-performing accounts.
Risk Control
Risk is managed through the deployment of specialist and dedicated risk professionals within each division, with oversight provided by the Board of Directors.
Credit risk in relation to approved advances is closely monitored by account managers through a rigorous control framework, which exists to escalate account level risk from an individual to the divisional management team. All accounts are reviewed for emerging risks on at least a monthly basis.
Risk Classification and Monitoring
Each part of the Group's lending activities has defined risk classifications, consistently used across product ranges to ensure complete transparency. The main categories of debt are:
-- Performing
-- Arrears
-- Impaired
Sub-categories of the primary groups are adopted to give the Board greater depth to the performance of individual products. The assignment of loans to different risk categories is based upon the monthly portfolio review which reflects an assessment of the relative risk of default and the strength of the underlying security. The presentation of agreements to each monthly portfolio review is conducted on all debts that have or may breach the terms of their facilities. Each loan is subject to an independent assessment which determines the allocation of a risk category.
Detailed account level exception reports are produced monthly to clarify the status of known risks to the Group and highlight potential emerging and new risks. The detailed account level information is collated in order for the Group to clarify its position on account level risk but also to build a picture of the portfolio trends.
Treasury Risk
The Group has categorised its treasury risk across the following elements:
-- Liquidity risk,
-- Financing risk,
-- Market risk - interest rate and currency risk, and
-- Counterparty credit risk
Liquidity Risk
As explained in note 1 to the financial statements, a revised facility was agreed with the banks in July 2010. The facility is now repayable on demand.
If demand were made the Board considers that the Group would be unable to meet that demand, with the result that one or more members of the Group would need to seek the protection of an administration and/or to enter into some form of insolvency process.
This is also the risk to both current and prospective earnings or capital arising from the Group's inability to meet its obligations when they become due without incurring unacceptable or unexpected losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources due to changes in market conditions. Liquidity risk also arises from the failure to recognise or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal loss in value if necessary.
The Group maintains a formal treasury function via Davenham Treasury Services Limited. This manages the day to day treasury function and is charged with providing daily management information to manage daily liquidity requirements.
Interest Rate Risk
The Group's long standing treasury strategy is to minimise interest rate volatility from its bank borrowings.
The Group looks to fix that element of its floating rate borrowings against its fixed rate lending thus locking in its profit element.
The Group has minimal risk to revenue from changes in market interest rates as the majority of advances made to the Group's customers are at rates of interest that are fixed over the term of the contract. However, elements of the Trade finance portfolio are priced at floating rates and historically any impact to revenue from changes in market rates would be offset by a corresponding reduction in the cost of funding in relation to that element of the portfolio.
The Group is currently locked into fixed rates of interest on its debt due to the excess swap portfolio which has resulted in the Trade portfolio suffering from reduced income on its floating rate lending following interest rate reductions whilst still incurring a fixed rate of borrowing at levels in excess of current market rates.
Funding facilities provided by the banking syndicate are at a floating rate. The Group was therefore exposed to the risk of rising interest rates. However this has been avoided through the use of financial hedging derivatives. The counterparties to these derivatives are from the top three of the Group's banking syndicate. The Group reviews on a regular basis counterparty credit risk; currently this is not considered a material risk to the business.
An independent valuation of the swap portfolio has now been undertaken which shows a negative fair value of the total portfolio of GBP6.0m as at 30 June 2010 (2009: GBP9.8m negative fair value). This represents a GBP3.8m reduction from 30 June 2009 position. As the Group's borrowings have now moved to an on demand basis none of the Group's interest rate swaps are now forecast to remain fully effective for their remaining lives and therefore GBP1.1m has been recognised as a charge within the income statement in the year.
Given that this charge has arisen because of the requirement to down-size the Group, this cost has been treated as an exceptional item.
Currency Risk
The Group has very little exposure to currency risk with all product foreign exchange transactional risk being the responsibility of the customer. However certain funding received or deposits held by the Group at times may not be in sterling. This creates a potential exposure to accounting risk of adverse changes in exchange rate movements on re-translation. As at 30 June 2010 the Group had foreign currency cash balances equivalent to GBP2.3m (2009: GBP1.9m). The Group uses formal hedging techniques in the form of forward contracts where the Group acts as agent on behalf of its clients.
Operational Risk
This is the risk to earnings or capital resulting from inadequate or failed internal processes, systems and the actions of our people across the whole Group. The major areas of operational risk surround:
-- Dependence on key suppliers;
-- IT security;
-- Product documentation and execution;
-- Internal and external fraud;
-- Implementation of strategic change; and
-- Process errors.
The Group manages these risks through a variety of controls and processes, and mitigation actions including insurance. The implementation and monitoring of these actions are reviewed by each of the individual divisional risk functions which then report into the Board.
External risk advice and support is provided in connection with human resources, health and safety and IT security including business continuity planning. Whilst the Group remains ultimately responsible for the management of these risks, the support and advice offered by these external advisers forms an important part of the risk management matrix. The Board is updated on a monthly basis regarding issues surrounding human resource and health and safety.
Strategic Risk
On 30 June 2010 the Group advised that the strategic review had been concluded and that it would cease writing new business and collect out its loan books in a prudent and orderly manner.
The Group's current goals and its expectations in relation to the future run-off of the Group's portfolio involve risks and uncertainties which are dependent on future events and circumstances which may be beyond its control. These include, among others, UK economic and business conditions and market-related risks (such as fluctuations in interest rates) and any decision by the Group's banking syndicate to call in the facility (or not to extend it beyond its expiry in March 2011).
Consolidated Income Statement
for the year ended 30 June 2010
2010 2009
-------------------------------------- --------------------------------------
Exceptional
Before Exceptional Before items
exceptional items exceptional (Note
items (Note 6) Total items 6) Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 31,973 - 31,973 49,074 - 49,074
Finance costs 5 (13,940) - (13,940) (15,907) - (15,907)
---------------- ------ ------------ ------------ ---------- ------------ ------------ ----------
Gross profit 18,033 - 18,033 33,167 - 33,167
Administrative
expenses (11,404) (6,473) (17,877) (15,382) (6,479) (21,861)
Loan loss
impairment 10 (29,944) - (29,944) (66,713) - (66,713)
---------------- ------ ------------ ------------ ---------- ------------ ------------ ----------
Operating loss
before
taxation 6 (23,315) (6,473) (29,788) (48,928) (6,479) (55,407)
Taxation 7 (9,308) (302) (9,610) 12,986 1,814 14,800
---------------- ------ ------------ ------------ ---------- ------------ ------------ ----------
Loss for the
year after
taxation 16 (32,623) (6,775) (39,398) (35,942) (4,665) (40,607)
---------------- ------ ------------ ------------ ---------- ------------ ------------ ----------
Loss per share
- basic 9 (131.75)p (27.36)p (159.11)p (145.15)p (18.84)p (163.99)p
- diluted 9 (131.75)p (27.36)p (159.11)p (145.15)p (18.84)p (163.99)p
Dividends per
share
- Paid during 8 Nil Nil
the period
- Proposed 8 Nil Nil
All results are from continuing operations.
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2009
2010 2009
GBP'000 GBP'000
Loss for the year
Other comprehensive income: (39,398) (40,607)
Effective portion of changes in fair value
of interest rate cashflow hedges:
- fair value adjustment - (9,590)
- tax on fair value adjustment - 2,686
------------------------------------------------- --------- ---------
Total comprehensive income for the year (39,398) (47,511)
------------------------------------------------- --------- ---------
There are no movements to be recognised through the Parent Company Statement of Comprehensive Income in 2010 or 2009.
Consolidated Balance Sheet
as at 30 June 2010
30 June 30 June
Notes 2010 2009
GBP'000 GBP'000
ASSETS
Non-current assets
Goodwill - 1,909
Other intangible assets - 415
Property, plant & equipment 771 868
Loans & advances to customers 10 40,583 68,635
Deferred taxation asset 12 4,913 14,451
Derivative financial instruments 718 155
46,985 86,433
Current assets
Loans & advances to customers 10 66,728 122,309
Other receivables, prepayments
& accrued income 11 591 827
Derivative financial instruments 120 63
Cash and cash equivalents 13 5,470 2,562
---------------------------------- ------ --------- --------
72,909 125,761
Total assets 119,894 212,194
---------------------------------- ------ --------- --------
LIABILITIES
Current liabilities
Borrowings 14 129,407 82,879
Current tax liabilities 2,898 2,396
Derivative financial instruments 3,151 6,051
Trade and other payables 15 4,753 7,319
---------------------------------- ------ --------- --------
140,209 98,645
Non-current liabilities
Borrowings 14 - 98,707
Derivative financial instruments 3,685 3,920
---------------------------------- ------ --------- --------
3,685 102,627
Total liabilities 143,894 201,272
---------------------------------- ------ --------- --------
Net (liabilities)/assets (24,000) 10,922
---------------------------------- ------ --------- --------
SHAREHOLDERS' EQUITY
Share capital 261 261
Share premium 16 26,528 26,528
Own shares held reserve 16 (1,507) (1,507)
Retained earnings 16 (49,282) (9,884)
Share based payment reserve 16 - 406
Hedging reserve 16 - (4,882)
---------------------------------- ------ --------- --------
Total Shareholders' equity (24,000) 10,922
---------------------------------- ------ --------- --------
The financial statements were approved by the board of directors on 24 November 2010 and were signed on its behalf by:
PE Burke
Director
Consolidated Statement of Cash Flow
for the year ended 30 June 2010
2010 2009
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 17 4,291 5,414
Tax repaid 429 2,188
--------- ---------
Net cash inflow from operating activities 4,720 7,602
--------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (20) (113)
Purchase of intangible assets (5) (43)
Proceeds from sale of property, plant
and equipment 21 16
--------- ---------
Net cash outflow from investing activities (4) (140)
--------- ---------
Net increase in cash and cash equivalents 4,716 7,462
Cash and cash equivalents at 1 July 683 (6,779)
--------- ---------
Cash and cash equivalents at 30 June 5,399 683
--------- ---------
For the purposes of the cash flow statement,
cash and cash equivalents comprise:
Cash at bank and in hand 13 5,470 2,562
Bank overdrafts included within current
borrowings 14 (71) (1,879)
--------- ---------
5,399 683
--------- ---------
Notes to the Financial Statements
for the year ended 30 June 2010
1. Basis of preparation
Basis of accounting
These consolidated and Company financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board.
These consolidated and Company financial statements have also been prepared in accordance with the Companies Act 2006 as applicable to companies reporting under IFRS.
Basis of preparation
These financial statements have been prepared under the historical cost convention, as modi ed by the revaluation of derivative nancial instruments.
The financial statements have been prepared in accordance with the accounting policies described in note 2 below.
Standards, amendments and interpretations that are not yet effective and have not been early adopted
The following standards, amendments and interpretations to existing standards have been published and are mandatory for accounting periods beginning on or after 1 January 2010 or later periods, but which the Group and the Company have not early adopted.
-- IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" (effective for annual periods beginning on or after 1 July 2010) - the interpretation clarifies the accounting when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor (referred to as "debt for equity swap"). This will have no significant impact for the Group.
-- IFRS 9 "Financial Instruments" (effective for annual periods beginning on or after 1 January 2013) - it
is not expected that this standard will have a material impact on the classification and measurement of the Group's financial assets.
-- Annual improvements 2010 (effective for annual periods beginning on or after 1 July 2010 and 1 January 2011) - these include several small amendments with no significant impact for the Group.
-- Amendments to IFRS 7 Financial Instruments: Disclosures (effective for annual periods beginning on or after 1 July 2011) - the amendment clarifies and enhances disclosures about fair value measurements and the liquidity risk of financial instruments. We expect the amendment will result in further changes and enhancements to the risk disclosures.
Other new standards, amendments and interpretations have been considered but are not deemed relevant to the Group.
Going Concern
Company law requires the Directors to prepare financial statements that give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for the period under review. Fundamental to this requirement is that the Directors consider whether it is appropriate to prepare the financial statements on a going concern basis.
As noted in the Business Review section the Group considered a number of potential strategic options during the year on behalf of shareholders, however due to the continued difficult economic conditions, particularly in relation to the property market, the Group was unsuccessful in securing a sale on satisfactory terms for either the whole or any part of the business.
The Group has continued to incur ongoing losses, primarily attributable to the levels of impairment and non-performing property portfolio along with the associated debt burden, and the Group's existing swap portfolio which has continued to result in the Group being in an over-hedged position with fixed interest rates higher than LIBOR. Consequently, during the year the Group's net asset base was eroded such that it is now in a net liability position.
In light of the above, it became apparent that the Group's lenders were likely to suffer a material shortfall on the amount repayable to them under the Group's current borrowing facilities. The Group has therefore held detailed discussions with the banking syndicate to secure their ongoing support for the revised collect out strategy of the Group's existing portfolio as the Directors believe this will result in a smaller loss for the banking syndicate.
On 31 July 2010 the lenders agreed to amendments to the Group's current Revolving Credit Facility ("RCF") whereby the facility step-downs have been removed and the facility has become a repayable on-demand type nature. The contractual maturity of the facility remains as 31 March 2011.
In securing the above support the Group has prepared detailed forecasts to support the collect out process which indicate that this will extend beyond the RCF's contractual maturity date. The Group therefore intends that prior to this date the actual performance of the collect out process will be reviewed against the forecasts, in conjunction with the lenders, following which the Group will seek agreement to extend the current maturity date or secure a new facility tailored to the expected remaining period of the run down.
As the Directors no longer consider the Group or Company to be a going concern, the financial statements have been prepared on a break-up basis and all assets and liabilities stated at their recoverable value.
Break-up Basis
The accounting policies have been applied to derive the recoverable amounts of the Group's and Company's assets and liabilities. The assets and liabilities have not been prepared using fair values, except where stated, but based upon expected cashflows following an orderly collect out of outstanding loans. No provision has been made for future operating losses in accordance with IAS 37 requirements.
Use of assumptions and estimates
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.
Estimates and judgements made by management in the application of IFRS that have a significant effect on the financial statements are:
IAS 39 'Financial Instruments: Recognition and Measurement'
The Group reviews its loans and receivables on an ongoing basis to assess the level of impairment. Future cash flows are estimated on the basis of the contractual cash flows of the assets and historical loss experience. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. To the extent that the net present value of estimated future cash flows differs by +/-3%, the loan loss provision in the balance sheet would be an estimated GBP3.2 million lower/higher (2009: GBP3.6 million lower/higher).
IAS 36 'Impairment of assets'
Determining whether goodwill is impaired requires an estimation of the value in use of the CGU's to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the CGU's and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was GBPnil million (2009: GBP1.9 million).
IAS 12 'Income taxes'
In applying the Group's accounting policy in relation to deferred tax, as set out below, the Directors are required to make assumptions regarding the Group's ability to utilise historical tax assets following an assessment of the likely quantum and timing of future taxable profits. A deferred tax asset is recognised to the extent that the Directors are confident that the Group's future profits will utilise historical tax assets. Details of deferred tax are contained in note 12.
2. Accounting Policies
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these group financial statements.
Basis of consolidation
A business combination is recognised where separate entities or businesses have been brought together within the Group. Subsidiaries are all entities over which the Group has the power to govern the nancial and operating policies so as to obtain bene ts from its activities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The purchase method of accounting is used to account for business combinations made by the Group. The cost of a business combination is measured as the fair value of the assets acquired and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the business combination.
Identifiable assets, liabilities and contingent liabilities acquired in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.
Intra group transactions, including income and profits, are eliminated fully on consolidation. Segmental reporting
A business segment is a distinguishable component of the Group that provides products that are subject to risks and returns that are different from those of other business segments. For management purposes the Group is organised into three operating segments: Property Finance, Trade Finance and Asset Finance. Management believe that there is only one geographical segment, being the UK market.
Financial assets
Management determines the classi cation of the Group's nancial assets at initial recognition into one of the following categories:
Loans and receivables
Loans and receivables are non-derivative nancial assets with xed or determinable payments that are not quoted in an active market. They arise when the Group provides money directly to a customer with no intention of trading the receivable. Loans and receivables are initially recorded at fair value including any transaction costs and are subsequently measured at amortised cost using the effective interest rate (EIR) method.
Financial assets at fair value through pro t or loss
This category comprises derivatives that are not designated as hedges, and any financial assets that are designated as fair value through the profit and loss on inception. These financial assets are initially recognised at fair value, with transaction costs recorded immediately in the income statement, and are subsequently measured at fair value. Gains and losses arising from changes in fair value are recognised in the income statement.
Held-to-maturity
Held-to-maturity investments are non-derivative nancial assets with xed or determinable payments and xed maturities that the Group has a positive intention and ability to hold to maturity. Were the Group to sell a signi cant amount of held-to-maturity assets the entire category would be tainted and reclassi ed as available-for-sale.
Available-for-sale
Available-for-sale investments are those intended to be held for an inde nite period of time, which may be sold in response to needs for liquidity or changes in interest rates.
The Group has not held any held-to-maturity investments or available-for-sale nancial assets at any point during the reporting periods.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable, net of value added tax, and is recognised as follows:
Interest and similar income
Interest income is recognised in the income statement for all financial assets measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period. The effective interest rate ('EIR') is the rate that exactly discounts estimated future cash receipts through the expected life, or contractual term if shorter, of the financial asset to the net carrying amount of the financial asset. When calculating the EIR, the Group estimates cash flows considering all contractual terms of the financial instruments, such as early settlement income, but does not include an expectation for future credit losses. The calculation includes all fees charged to customers, such as acceptance or similar fees and direct and incremental transaction costs, such as broker commissions.
Amounts due from lessees under nance leases and hire purchase contracts are recorded as receivables at the amount of the Group's net investment in the contract. Finance income is allocated to accounting periods so as to re ect a constant periodic rate of return on the Group's net investment (before tax) outstanding in respect of the lease.
Interest income continues to be recognised at the EIR once a nancial asset or a group of similar nancial assets has been written down as a result of an impairment loss, irrespective of the terms of the loan and whether interest has been suspended on the customer's account. A gross-up adjustment to income is offset by a corresponding gross-up adjustment to the loan loss charge (refer to the accounting policy entitled 'Impairment of loans and receivables').
Fee and commissions income
The Group earns fee income from services provided to clients. Fee income can be divided into two broad categories, fees earned from services that are provided over a period of time which are recognised over the period in which the service is provided, and fees that are earned on the completion of a significant act or on the occurrence of an event such as the completion of a transaction, which are recognised when the act is completed or the event occurs.
Fees and commissions that are an integral part of a loan or receivable are deferred (together with related direct costs) and recognised over the life of the agreement as an adjustment to the effective interest rate.
Impairment of loans and receivables
In respect of loans and receivables, the Group assesses on an ongoing basis whether there is objective evidence that a loan asset or a group of loan assets is impaired. A loan asset or a group of loan assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and the loss event has an impact on the estimated future cash ows of the loan asset or group of loan assets that can be reliably estimated.
The Group reviews its leasing and loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss is to be recorded in the income statement the Group makes judgements as to whether there is observable data indicating that there is a measurable decrease in the estimated cash flows from an individual lease or loan. This evidence can be as a result of non-payment or other evidence of a deterioration of the financial status of the customer. The Group takes account of the value of collateral held and also any movements in market conditions that impact on the value of collateral when calculating the level of impairment loss to be charged to the income statement.
The Group rst assesses whether objective evidence of impairment exists individually for loan assets that are individually signi cant, and either individually or collectively for loan assets that are not individually signi cant.
If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash ows, excluding future credit losses that have not been incurred, discounted at the loan asset's original EIR. The carrying amount of the asset is reduced through the use of a loan loss provision. The amount of the loss is recognised in the income statement.
For the purposes of a collective evaluation of impairment, loan assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows for a group of loan assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets and historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.
The accuracy of the allowances and provisions made depends on how accurately the Group estimates future cash flows for specific counterparty allowances and provisions and the model assumptions and parameters used in determining collective allowances. While this necessarily involves judgement, the Group believes that its allowances and provisions are reasonable and supportable.
Where interest income continues to be recognised on impaired loans, which cannot be collected from the customer due to the interest being xed at the outset or interest having been suspended on the customer's account, referred to as the 'gross-up adjustment' to income, a corresponding loan loss charge is made.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
Interest payable
Interest payable is stated after charging amortisation of loan arrangement fees. Loan arrangement fees are deducted from the liability recorded in the balance sheet and amortised over the life of the relevant arrangement.
Operating leases - as lessee
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are charged to the income statement on a systematic straight line basis over the period of the lease.
Foreign currency
The Group's nancial statements are presented in Pounds Sterling, which is the Group's functional and presentational currency. All subsidiaries of the Group have Pounds Sterling as their functional currency. Foreign exchange gains and losses resulting from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement as part of administrative expenses.
Exceptional Items
Exceptional items are those significant items which are separately disclosed by virtue of their size or nature to enable a full understanding of the Group's financial performance, and are shown separately on the face of the income statement.
Intangible assets
Goodwill and Other Intangible Assets
Goodwill arising on acquisition represents the excess of the cost of a business combination over the fair values of the Group's share of the identi able net assets acquired. Goodwill is not amortised, but is reviewed annually for impairment. Any impairment is recognised immediately through the income statement and is not subsequently reversed.
Other intangible assets, including customer relationships, are valued on acquisition and shown separately from goodwill. These intangibles are amortised over their estimated useful lives (5 - 10 years) unless otherwise stated.
Computer software
Acquired software licenses are capitalised as intangible assets and after impairment amortised over their useful lives, 3 years, on a straight line basis.
Costs that are directly attributable with the creation of identi able software, which meet the development asset recognition criteria as laid out in IAS 38 'Intangible assets', are recognised as internally generated intangible assets.
Direct costs include the employment costs of internal software developers, consultancy costs and borrowing costs. Borrowing costs are capitalised until such time as the internally generated software is substantially ready for its intended use.
Computer software development costs recognised as assets are amortised over their estimated useful lives (3 years) on a straight line basis. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
All other software development and maintenance costs are recognised as an expense as incurred.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Cost represents expenditure that is directly attributable to the purchase of the asset.
Land and buildings are not subject to regular revaluations.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic bene ts associated with the items will ow to the Group and the cost of the item can be measured reliably.
Land is not depreciated. Depreciation on other assets is calculated using the straight line basis on tangible fixed assets at rates calculated to write off the assets over their anticipated useful lives as follows:
Freehold buildings 50 years
Fixtures and fittings 4 - 5 years
Computer and ancillary equipment 3 years
Motor vehicles 4 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the income statement.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are initially and subsequently recognised at cost. The Company recognises income from the investment only to the extent that it receives distributions from post-acquisition accumulated profits. Distributions received in excess of such profits are regarded as a recovery of investment and recognised as a reduction in the cost of the investment.
At each reporting date, an assessment is made as to whether there is any indication that the investment may be impaired. If such an indication exists, the Company estimates the investment's recoverable amount. The investment is written down to the recoverable amount if this is lower than its carrying value. The impairment loss is recognised in the Company's income statement.
Cash and cash equivalents
For the purposes of the cash ow statement, cash and cash equivalents includes cash in hand, deposits held with banks, which have a residual maturity of less than 3 months at the date of acquisition, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
Employee bene ts
Pension obligations
The Group operates a money purchase pension scheme for the members of the Group. The assets of the scheme are held separately from those of the Group in independently administered funds. The pension cost charge represents contributions payable by the Group to the scheme.
The Group provides no other post-retirement bene ts to its employees or directors.
Share-based payments
The Group operates a number of share based payment award schemes. The fair value of the options is measured at grant date and spread over the vesting period through the Income Statement with a corresponding increase in equity. The fair value of the share options and awards are measured using an option-pricing model taking into account the terms and conditions of the individual schemes. The fair value of the options awarded under the schemes with market based performance conditions is estimated using a Monte-Carlo simulation model. The fair value of options awarded under schemes with market and non-market based performance conditions is estimated using the Binomial and Black-Scholes models respectively.
The Group makes charges to the income statement for employer's National Insurance liabilities on options granted as incurred.
Borrowings
Borrowings include bank borrowings and other borrowings, overdrafts and obligations under finance leases and hire purchase contracts.
Bank borrowings and other borrowings are recognised initially at fair value, being their issue proceeds net of any transaction costs incurred. These borrowings are subsequently stated at amortised cost; any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Current tax
The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. It is calculated using rates of tax that have been enacted by the balance sheet date.
Deferred tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the nancial statements.
Deferred tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Deferred tax is determined using tax rates and laws that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable pro t will be available against which the temporary differences can be utilised.
Share capital
Ordinary shares are classi ed as equity.
Shares are recorded at their nominal value with any surplus received on their issue taken to the share premium account. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
Where any group company purchases the Company's equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders, via the own shares held reserve, until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.
Dividend distribution
Final dividends payable to the Group's shareholders are recognised in the Group's nancial statements in the period in which the dividends are approved by the Group's shareholders. Interim dividends payable are recognised in the period in which the dividends are paid.
Derivative nancial instruments and hedging activities
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. The fair value of derivatives is determined by using a valuation model and is primarily based on observable market data. The method of recognising the resulting gain or loss from the re-measurement depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group's policy is to designate derivatives on the date that the derivative contract is committed to. The Group designates its derivatives as a hedge of the variability of cash flows associated with highly probable forecast transactions and recognised assets and liabilities ('cash ow hedging instrument').
To qualify for hedge accounting, the Group is required, at inception, to document prospectively the relationship between the item being hedged and the hedging instrument. The Group is also required to document and perform an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective in offsetting changes in cash ows of the hedged item on an ongoing basis. This effectiveness testing is re-performed at each reporting date to ensure that the hedge remains highly effective.
The effective portion of changes in the fair value of derivatives designated as cash ow hedging instruments is recognised in equity within the hedging reserve. The change in the fair value relating to the ineffective portion is recognised immediately in the income statement within nance costs.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect pro t, i.e. when the forecast interest payment that is hedged is expensed.
When a cash ow hedging instrument expires or is sold, or when a cash ow hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued prospectively. Any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
3. Revenue
2010 2009
GBP'000 GBP'000
Interest and similar income receivable from customers 29,575 46,088
Fees and commissions income 2,398 2,986
------------------------------------------------------- --------- ---------
31,973 49,074
------------------------------------------------------- --------- ---------
Interest and similar income includes the 'gross-up adjustment' of GBP19 276,000 (2009: GBP17,467,000) (note 10).
4. Segmental information
A business segment is a distinguishable component of the Group that provides products that are subject to risks and returns that are different from those of other business segments. Management has determined the operating segments based on the reports reviewed by the Directors that are used to make strategic decisions. The reportable operating segments derive their revenue primarily from the granting of credit to the businesses including loans, hire purchase, finance lease arrangements and working capital facilities. The three operating segments are Property Finance, Trade Finance, and Asset Finance.
The segmental income and results for the year ended 30 June 2010 and segment assets and liabilities as at that date are as follows:
Property Trade Asset
finance finance finance Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Revenue 19,048 4,941 7,984 - 31,973
Finance costs (10,115) (801) (2,223) (791) (13,940)
---------
Gross Profit/Loss 8,933 4,140 5,751 (791) 18,033
------------------------ --------- -------- -------- -------- ---------
Result
Segment result (16,904) (281) (1,485) (4,645) (23,315)
Exceptional
items (6,473)
Taxation (9,610)
---------
Loss for the financial year (39,398)
------------------------------------------------------- -------- ---------
Property Trade Asset
finance finance finance Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ --------- -------- -------- -------- ---------
Segment assets and
liabilities
Segment assets
--------- -------- -------- --------
Total assets 58,899 17,711 30,701 12,583 119,894
------------------------ --------- -------- -------- -------- ---------
Segment liabilities
--------- -------- -------- --------
Total liabilities 70,987 21,346 37,003 14,558 143,894
------------------------ --------- -------- -------- -------- ---------
Other segment
items
Capital expenditure - - - 20 20
Depreciation 24 24 24 24 96
Amortisation - other
intangible assets 40 40 300 40 420
Loan loss charge 23,365 2,068 4,511 - 29,944
The loan loss charge includes the 'gross-up adjustment'
GBP19,276,000 (note 10).
Capital expenditure comprises additions to property, plant and equipment
and intangible assets.
Each of the trading divisions is provided with funding for its gross portfolio from Davenham Treasury Services Ltd against which a deduction is made for a pro-rata divisional share of the Group's equity base,to the extent there remained any equity during the year, calculated by reference to portfolio size, giving rise to a divisional 'net debt' position. Each division is then charged interest by Davenham Treasury Services Ltd on its net debt at a rate equivalent to that charged to the Group on its external borrowings.
The segmental income and results for the year ended 30 June 2009 and segment assets and liabilities as at that date are as follows:
Property Trade Asset
finance finance finance Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Revenue 27,534 10,358 11,182 - 49,074
Finance costs (10,554) (2,683) (4,426) 1,756 (15,907)
-------- ---------
Gross Profit 16,980 7,675 6,756 1,756 33,167
-------------------------- --------- -------- -------- -------- ---------
Result
Segment result (40,534) (464) (4,712) (3,218) (48,928)
Exceptional items (6,479)
Taxation 14,800
---------
Loss for the financial year (40,607)
--------------------------------------------------------- --------
Property Trade Asset
finance finance finance Central Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- -------- -------- ---------
Segment assets and
liabilities
Segment assets 110,071 27,666 53,207 21,250 212,194
--------- -------- -------- --------
Total assets
-------------------------- --------- -------- -------- -------- ---------
Segment liabilities 103,593 26,038 50,076 21,565 201,272
--------- -------- -------- --------
Total liabilities
-------------------------- --------- -------- -------- -------- ---------
Other segment items
Capital expenditure 40 40 40 36 156
Depreciation 46 46 46 26 164
Amortisation - other
intangible assets 70 67 134 47 318
Loan loss charge 54,398 4,082 8,233 - 66,713
The loan loss charge includes the 'gross-up adjustment'
of GBP17,469,000 (note 10).
Capital expenditure comprises additions to property,
plant and equipment and intangible assets.
The amount included as segment liabilities within the three trading divisions represents the total external bank borrowings. These have been allocated on a weighted average basis by reference to loan portfolio sizes.
Management believe that there is only one geographical segment, being the UK market.
5. Finance Costs
2010 2009
GBP'000 GBP'000
Interest on bank loans and overdrafts 5,838 12,715
Interest payable on swaps 8,102 3,192
13,940 15,907
6. Operating loss
2010 2009
GBP'000 GBP'000
Operating loss is stated after charging/(crediting):
Depreciation for the period 96 164
Loan loss provisions* 29,944 66,713
Loss on disposal of intangible assets 91
Loss on disposal of property, plant and equipment - 90
Operating lease payments 216 245
Amortisation of other intangibles 420 318
-------------------------------------------------------- --------- ---------
Exceptional costs relating to redundancy & refinancing 3,890 3,467
Exceptional costs relating to loss on de-designation
of interest rate swaps
Exceptional costs relating to impairment of goodwill 1,080 3,012
Exceptional gain relating to release of share 1,909 -
based payment reserve (406) -
--------- ---------
Total exceptional costs 6,473 6,479
--------- ---------
* The loan loss provisioning charge includes GBP19,276,000 (2009: GBP17 469,000) in respect of the 'gross-up adjustment' (note 10).
The Group's definition of exceptional items is disclosed in note 2.
As a result of the Group's decision to close the business, the Group implemented a number of further restructuring initiatives, leading to costs in respect of banking, office closures and redundancies. These costs totalled GBP3,890,000
In addition and directly linked to the Group's requirement under its new banking agreement to reduce levels of outstanding debt, the Group has incurred a charge in relation to fair value movements on interest rate swaps which no longer qualify for hedge accounting of GBP1,080,000.
Also in light of the decision to cease writing new business and collect in its existing portfolio the Directors have considered the carrying value of certain of its assets which they believe it is no longer appropriate to continue to recognise and have therefore charged an impairment loss to the income statement within exceptional costs of GBP1 909,000 in respect of goodwill.
The Directors have also credited to the income statement the carrying value of the share based payments reserve of GBP406,000 on the basis that these awards are no longer likely to be granted as performance conditions will not be met and thus the potential costs accrued within the reserve will no longer arise.
Services provided by the company's auditor and 2010 2009 its associates: GBP'000 GBP'000 During the year the group obtained the following services from the Company's auditor and its associates: Fees payable to the Company's auditor for the audit of parent company and consolidated accounts 76 106 Fees payable to the company's auditor and its associates for other services: The audit of company's subsidiaries pursuant to legislation 15 13 Tax services 64 2 Other assurance 46 47
7. Taxation
7(a) Analysis of tax charge/(credit) in the period
2010 2009
GBP'000 GBP'000
Current tax
- United Kingdom corporation tax on losses of
the period - (32)
- Adjustments in respect of previous periods 72 (4,597)
--------- ---------
Total current tax 72 (4,629)
Deferred tax
Current year deferred tax charge/(credit) 9,538 (7,740)
Adjustment in respect of prior periods - (2,431)
Deferred tax 9,538 (10,171)
---------------------------------------------------- --------- ---------
Tax charge/(credit) on loss on ordinary activities 9,610 (14,800)
The tax on the Group's loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the consolidated entities as follows:
7 (b) Factors affecting tax charge/(credit) for the period
2010 2009
GBP'000 GBP'000
Loss before tax (29,788) (55,407)
at the UK tax rate of 28.0% (2009: 28.0%) (8,341) (15,514)
Losses unutilised 8,341 -
Deferred tax charge (note 12) 9,538 -
Adjustment in respect of prior periods 72 (7,028)
Expenses not deductible for tax purposes - 103
Losses carried back - 7,639
--------- ---------
Total tax charge/(credit) for the year 9,610 (14,800)
========= =========
The standard rate of current tax for the year is 28% (2009: 28%).
A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010, which was substantively enacted on 20 July 2010, includes legislation reducing the main rate of corporation tax from 28 per cent to 27 per cent from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1 per cent per annum to 24 per cent by 1 April 2014. The changes had not been substantively enacted at the balance sheet date and therefore, are not included in these financial statements.
If it had been enacted at the balance sheet date, the effect of the changes enacted in the Captial Finance (No 2) Act 2010 would be to reduce the deferred tax asset provided at 30 June 2010 by approximately GBP175,000. This GBP175,000 decrease in the deferred tax asset would increase the loss for the year by the same amount. This decrease on the deferred tax asset is due to the reduction in the corporation tax rate from 28 per cent to 27 per cent with effect from 1 April 2011.
The proposed reductions of the main rate of corporation tax by 1 per cent per year to 24 per cent by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 27 per cent to 24 per cent, if these applied to the deferred tax balance at 30 June 2010, would be to reduce the deferred tax asset by approximately GBP525,000.
8. Dividends
No dividends were paid during the year (2009 : GBPnil) and the Directors do not propose payment of any further dividends.
9. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding own shares held which are treated, for this purpose, as being cancelled.
2010 2009
Weighted Weighted
average average
number number
of Loss per of Loss per
Loss shares share Loss shares share
GBP'000 '000 pence GBP'000 '000 pence
------------ --------- --------- --------- --------- --------- ---------
Shares in
issue
during the
year 26,061 26,061
------------ --------- --------- --------- --------- --------- ---------
Own shares
held (1,299) (1,299)
------------ --------- --------- --------- --------- --------- ---------
Basic EPS (39,398) 24,762 (159.11) (40,607) 24,762 (163.99)
------------ --------- --------- --------- --------- --------- ---------
Effect of
dilutive
securities
: Options - - - - - -
------------ --------- --------- --------- --------- --------- ---------
Diluted EPS (39,398) 24,762 (159.11) (40,607) 24,762 (163.99)
------------ --------- --------- --------- --------- --------- ---------
10. Loans and advances to customers
Credit risk
Credit risk in relation to loans and receivables is the risk that financial loss arises from the failure of a customer to meet their obligations under a loan agreement.
A description of the Group's objectives, policies and processes for managing credit risk and how it is measured is set out in the Business Review in the section entitled 'Credit risk'. Details are also given in relation to the concentration risk associated with the Group's receivables in the section entitled 'Concentration risk'.
Maximum exposure to credit risk
The maximum exposure to credit risk of the Group's loans and receivables is set out in the table below:
2010 2009
GBP'000 GBP'000
----------------------------- -------- --------
Group
Property Finance 58,899 110,071
Trade Finance 17,711 27,666
Asset Finance 30,701 53,207
----------------------------- -------- --------
Total loans and receivables 107,311 190,944
----------------------------- -------- --------
Comprising:
Current assets 66,728 122,309
Non-current assets 40,583 68,635
107,311 190,944
----------------------------- -------- --------
Other financial assets subject to credit risk include derivative financial instruments of GBP838,000 (2009 : GBP218,000), other debtors of GBP313,000 (2009 : GBP418,000) and cash and cash equivalents of GBP5 470,000 (2009: GBP2,562,000). These are subject to a maximum exposure to credit risk equal to their carrying value.
Credit quality
A summary of the arrears status of the Group's loans and receivables, by class, is shown below as at 30 June 2010 and 30 June 2009:
Property Trade Asset
Group Finance Finance Finance Total
2010 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- -------- ---------
Neither past due nor impaired 4,592 15,646 26,948 47,186
Past due but not impaired - 5 2,151 2,156
Impaired 93,586 5,396 5,155 104,137
------------------------------- --------- -------- -------- ---------
Outstanding customer balance 98,178 21,047 34,254 153,479
Unamortised fees and costs 50 - 86 136
------------------------------- --------- -------- -------- ---------
Gross loans and receivables 98,228 21,047 34,340 153,615
Loan loss provision (39,329) (3,336) (3,639) (46,304)
------------------------------- --------- -------- -------- ---------
Total loans and receivables 58,899 17,711 30,701 107,311
------------------------------- --------- -------- -------- ---------
Property Trade Asset
Group Finance Finance Finance Total
2009 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------- -------- ---------
Neither past due nor impaired 15,689 25,632 46,136 87,457
Past due but not impaired 1,852 9 3,870 5,731
Impaired 132,332 4,941 8,745 146,018
------------------------------- --------- -------- -------- ---------
Outstanding customer balance 149,873 30,582 58,751 239,206
Unamortised fees and costs (4) - (135) (139)
------------------------------- --------- -------- -------- ---------
Gross loans and receivables 149,869 30,582 58,616 239,067
Loan loss provision (39,798) (2,916) (5,409) (48,123)
------------------------------- --------- -------- -------- ---------
Total loans and receivables 110,071 27,666 53,207 190,944
------------------------------- --------- -------- -------- ---------
Loans and receivables - past due but not impaired
Property Trade Asset
Group Finance Finance Finance Total
2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- -------- -------- --------
Past due up to 31 days - 5 2,024 2,029
Past due 32-65 days - - 110 110
Past due 66-95 days - - 17 17
Past due 96 days or more - - - -
-------------------------- ---------- -------- -------- --------
Total - 5 2,151 2,156
-------------------------- ---------- -------- -------- --------
Property Trade Asset
Group Finance Finance Finance Total
2009 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- -------- --------
Past due up to 31 days 72 9 2,460 2,541
Past due 32-65 days 384 - 870 1,254
Past due 66-95 days 145 - 251 396
Past due 96 days or more 1,251 - 289 1,540
-------------------------- --------- -------- -------- --------
Total 1,852 9 3,870 5,731
-------------------------- --------- -------- -------- --------
Renegotiated loans and receivables
In Property, Trade and Asset renegotiated loans that would otherwise be past due or impaired totalled GBPnil, GBPnil and GBP0.8m at 30 June 2010 (2009: GBPnil, GBPnil and GBP1.5m) respectively.
Collateral
The Group holds collateral in relation to its loans and receivables, further details of which are provided below:
In accordance with IFRS 7 paragraph 36(b), as at 30 June 2010 the Group has not disclosed the fair value of the collateral held as security in respect of its hire purchase or lease receivables on the basis that it would be impractical to do so and instead provided below is an explanation of the nature of the collateral held. It would be impractical to fair value the collateral held because information on the current value of customers' assets and first charge liabilities is not maintained for all past due loans.
-- Property loans
Secured property loans were underwritten based upon equity in the asset and the customer's financial standing. A first legal charge was secured and registered against the customer's property, to ensure that the customer prioritises repayments of the secured loan. In many instances additional security was obtained in the form of personal guarantees and second and third ranking charges against other residential and commercial property.
The fair value of the collateral for all past due loans approximates to the carrying value of such loans.
-- Hire purchase & Lease
The majority of facilities provided for the acquisition of plant, vehicles and machinery are written on lease and unregulated hire purchase agreements. These can be terminated in the event of default. If this occurs, the assets financed can be immediately repossessed and disposed.
The terms of a regulated hire purchase contract allow the customer to voluntarily terminate and allow the Group to repossess the asset, both subject to meeting certain criteria.
A customer may voluntarily terminate the hire purchase contract provided they have paid at least 50% of the contract and have not received a notice of default. In this instance the asset is returned and disposed of, with the proceeds offset against the customer's outstanding balance.
Legally, the Group may repossess a vehicle financed on a regulated hire purchase contract, provided the customer has paid less than one third of the contract and a notice of default has been issued. The Group endeavour to negotiate arrangements with the customer to avoid the need for repossession. Vehicles that are repossessed are promptly disposed of at auction and the proceeds offset against the customer's outstanding balance. The customer is liable for any remaining balance.
The only way of estimating the fair value of used assets on hire purchase and lease would be on an aggregate basis which may result in the collateral disclosure being misleading when some loans in the portfolio are over collaterised and other loans have insufficient collateral. In these circumstances netting the fair value of the two types of collateral could under or over report the amount of credit risk.
-- Trade Finance
Trade Finance provides working capital secured against debtors and other tangible assets. Wherever possible, additional security is obtained. These include personal guarantees from major shareholders, charges over personal and other business property, debentures, a floating charge, cross company guarantees from associated companies, and unlimited warranties in the case of fraud. These additional forms of security are impractical to fair value as valuations of the guarantees or warranties are not capable of being accurately determined at the balance sheet date.
Loan loss provision
The following tables provide an analysis of the movement of the Group's loan loss provision and charge during 2010 and 2009:
Property Trade Asset
Group Finance Finance Finance Total
2010 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- -------- ---------
At 1 July 2009 39,798 2,917 5,408 48,123
Utilised (6,781) (966) (5,211) (12,958)
Recoveries of amounts previously
written off 53 - 418 471
Charged to the income statement:
Additional provisions created 6,312 1,385 3,442 11,139
Recoveries of amounts previously
written off (53) - (418) (471)
---------------------------------- --------- -------- -------- ---------
6,259 1,385 3,024 10,668
At 30 June 2010 39,329 3,336 3,639 46,304
---------------------------------- --------- -------- -------- ---------
Loan loss charge before gross-up
adjustment 6,259 1,385 3,024 10,668
Gross-up adjustment 17,106 683 1,487 19,276
Total bad and doubtful debt
charge 23,365 2,068 4,511 29,944
---------------------------------- --------- -------- -------- ---------
Property Trade Asset
Group Finance Finance Finance Total
2009 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- -------- ---------
At 1 July 2008 3,150 1,301 1,254 5,705
Utilised (5,011) (2,313) (5,286) (12,610)
Recoveries of amounts previously
written off 1,972 1,179 2,633 5,784
Charged to the income statement:
Additional provisions created 41,659 3,929 9,440 55,028
Recoveries of amounts previously
written off (1,972) (1,179) (2,633) (5,784)
---------------------------------- --------- -------- -------- ---------
39,687 2,750 6,807 49,244
At 30 June 2009 39,798 2,917 5,408 48,123
---------------------------------- --------- -------- -------- ---------
Loan loss charge before gross-up
adjustment 39,687 2,750 6,807 49,244
Gross-up adjustment 14,711 1,332 1,426 17,469
Total bad and doubtful debt
charge 54,398 4,082 8,233 66,713
---------------------------------- --------- -------- -------- ---------
Loans and advances to customers include hire purchase receivables as follows:
Gross investment in finance leases receivable:
2010 2009
GBP'000 GBP'000
--------------------------------------------- -------- ---------
No later than 1 year 19,455 5,857
Later than 1 year and no later than
5 years 15,715 57,364
Later than 5 years 486 1,806
-------- ---------
35,656 65,027
Unearned future finance income on finance
leases (4,955) (11,820)
Net investment in finance leases 30,701 53,207
Net investment in finance leases receivable
:
No later than 1 year 16,493 5,737
Later than 1 year and no later than
5 years 13,811 46,207
Later than 5 years 397 1,263
-------- ---------
30,701 53,207
-------- ---------
Company
Company loans and receivables, as shown in Note 11, of GBPnil (2009: GBP33,643.000), comprise amounts due from subsidiary companies, all of which are repayable on demand.
Fair value
There is no material difference between the fair value and the carrying value of the Group's and Company's loans and advances to customers.
11. Other receivables, prepayments and accrued income
Group Group Company Company
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Amounts owed by Group
undertakings - - - 33,643
Other debtors 313 418 - -
Other taxation - - 298 -
Prepayments and accrued income 278 409 220 393
591 827 518 34,036
There is no material difference between the fair value and the carrying value of the Group's and Company's other receivables.
12. Deferred tax
Deferred tax is calculated in full on temporary timing differences under the liability method using a tax rate of 28% (2009: 28%).
Deferred tax assets have been recognised in respect of all temporary differences giving rise to deferred tax assets because it is probable that these assets will be recovered.
The elements of the deferred taxation asset recognised in the financial statements are as follows:
Unclaimed Share
capital Loan loss based Hedging
allowances provisions payments Losses amounts Total
GROUP GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ----------- ----------- --------- -------- -------- --------
At 1 July
2009 7,673 3,603 28 405 2,742 14,451
----------- ----------- ----------- --------- -------- -------- --------
Charge to
income
statement
(note 7) (7,673) (369) (28) (405) (1,063) (9,538)
----------- ----------- ----------- --------- -------- -------- --------
At 30 June
2010 - 3,234 - - 1,679 4,913
----------- ----------- ----------- --------- -------- -------- --------
The unclaimed capital allowances of GBP7,673,000 are no longer considered to be recoverable due to the fact that the Group is unlikely to make any future taxable profits against which to offset these.
The deferred tax asset of GBP405,000 arising from losses carried forward has no longer been recognised as recoverable against future taxable profits as the directors no longer consider it more likely than not to occur on the basis of management forecasts.
The deferred tax assets relating to provisions and hedging are timing differences which arise from IAS 39 loan loss provisions and losses relating to cash flow hedging instruments.
Unclaimed Other timing
capital allowances differences Total
COMPANY GBP'000 GBP'000 GBP'000
---------------------------- -------------------- ------------- ---------
At 1 July 2009 62 1 63
---------------------------- -------------------- ------------- ---------
Charge to income statement (62) (1) (63)
---------------------------- -------------------- ------------- ---------
At 30 June 2010 - - -
---------------------------- -------------------- ------------- ---------
The Group and Company's deferred tax asset balances are expected to be realised as stated below:
2010 2009
GROUP GBP'000 GBP'000
------------------------------------------- --------- ---------
Deferred tax asset to be recovered within
12 months 2,380 4,731
------------------------------------------- --------- ---------
Deferred tax asset to be recovered after
more than 12 months 2,533 9,720
------------------------------------------- --------- ---------
4,913 14,451
------------------------------------------- --------- ---------
2010 2009
COMPANY GBP'000 GBP'000
------------------------------------------- ---------- ---------
Deferred tax asset to be recovered within
12 months - -
------------------------------------------- ---------- ---------
Deferred tax asset to be recovered after
more than 12 months - 63
------------------------------------------- ---------- ---------
- 63
------------------------------------------------------ ---------
The Group did not recognise deferred income tax assets of GBP9.7m in respect of accelerated capital allowances, GBP8.6m in respect of losses and GBP0.7m in respect of other short term timing differences that can be carried forward against future taxable income.
The Company did not recognise deferred income tax assets of GBP0.1m in respect of accelerated capital allowances and GBP1.3m in respect of losses that can be carried forward against future taxable income.
13. Cash and cash equivalents
Group Group Company Company
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Cash at bank and in hand 5,470 2,562 140 243
14. Borrowings
Group Group Company Company
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------- --------
Current
Secured bank overdraft 71 1,879 71 -
Secured bank loan 129,336 81,000 - -
Unsecured intra-group
borrowings - - - 9,966
129,407 82,879 71 9,966
------------------------ -------- -------- -------- --------
Non-current
Secured bank loan - 98,707 - -
Total borrowings 129,407 181,586 71 9,966
------------------------ -------- -------- -------- --------
The secured bank loan is stated net of GBP664,000 (2009: GBP1,293,000) of unamortised loan arrangement fees.
The interest rate on the secured bank loan is 300bps over Libor.
15. Trade and other payables
Group Group Company Company
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Current
Trade payables 1,621 1,929 587 796
Other taxation and social
security 607 1,062 30 28
Accruals 2,525 4,328 1,413 1,438
4,753 7,319 2,030 2,262
There is no material difference between the fair value and the carrying value of the Group's and Company's trade and other payables.
16. Statement of changes in Shareholders' equity
Called Own Profit Share
up Share shares and based Total
share premium held loss payment Hedging 2010
Group capital account reserve account reserve Reserve equity
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At beginning of
the year 261 26,528 (1,507) (9,884) 406 (4,882) 10,922
Loss for the
financial
year - - - (39,398) - - (39,398)
Impairment of
Share Based
Payment
Reserve - - - - (406) - (406)
Fair value
gains on cash
flow hedges - - - - - 913 913
Tax on fair
value on cash
flow hedges - - - - - (257) (257)
Transfer of
hedging
reserve on
de-designation - - - - - 4,226 4,266
Closing
shareholders'
equity 261 26,528 (1,507) (49,282) - - 24,000
---------------- -------- -------- -------- --------- -------- -------- ---------
Called Own Profit Share
up Share shares and based Total
share premium held loss payment Hedging 2009
Group capital account reserve account reserve Reserve equity
2009 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At beginning
of the year 261 26,528 (1,507) 30,427 477 2,022 58,208
Loss for the
financial
year - - - (40,607) - - (40,607)
Increase in
Share Based
Payment
Reserve - - - - 225 - 225
Transfer of
Share Based
Payment
Reserve
for expired
options - - - 296 (296) - -
Fair value
losses on
cash flow
hedges - - - - - (9,590) (9,590)
Tax on fair
value losses
on cash flow
hedges - - - - - 2,686 2,686
---------------
Closing
shareholders'
equity 261 26,528 (1,507) (9,884) 406 (4,882) 10,922
--------------- -------- -------- -------- --------- -------- -------- ---------
Called Own Share
up Share shares Profit based Total
share premium held and loss payment 2010
Company capital account reserve account reserve equity
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At beginning
of the year 261 26,528 - 2,645 406 29,840
Loss for the
financial
year - - - (30,853) - (30,853)
Impairment in
Share Based
Payment
Reserve - - - - (406) (406)
Closing
shareholders'
equity 261 26,528 - (28,208) - (1,419)
--------------- -------- -------- -------- --------- --------- ---------
Called Own Profit Share
up Share shares and based Total
share premium held loss payment 2009
Company capital account reserve account reserve equity
2009 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At beginning
of the year 261 26,528 - 5,278 477 32,544
Loss for the
financial
year - - - (2,929) - (2,929)
Increase share
based payment
reserve - - - - 225 225
Transfer of
share based
payments
reserve for
expired
options - - - 296 (296) -
Closing
shareholders'
equity 261 26,528 - 2,645 406 29,840
--------------- -------- -------- --------- -------- --------- ---------
Own Shares Held Reserve
The Own Shares Held reserve represents the cost of funding the purchase, by the Trustees of the Company's Employee Benefit Trust, of ordinary shares in the Company, at an open market value.
Share Based Payment Reserve
The share based payment reserve represents the fair value of equity-settled share-based instruments, which are determined at the date of grant and expensed over the vesting period.
The Directors believe it is unlikely that any future awards will be granted under the existing schemes as performance conditions will not be met due to the ongoing losses incurred by the Group. The carrying value of the Share Based Payment reserve has therefore been credited to the income statement.
Hedging Reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have yet to occur.
Following the recent amendments to the Group's loan facilities, which are now repayable on demand, the Group's hedging instruments are no longer likely to be effective and have therefore been de-designated and the changes in fair value are charged directly to the income statement.
Section 656 of the Companies Act 2006
A general meeting of the shareholders of the Company was held on 18 May 2010 (in compliance with section 656 of the Companies Act 2006) to consider whether any, and if so what, steps should be taken to deal with the fall in the value of the Company's net assets to less than half of its called up share capital. No resolutions were proposed at the meeting.
17. Reconciliation of loss before taxation to cash flows from operations
Group Group Company Company
2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000
Loss on ordinary activities
before taxation (29,788) (55,407) (30,790) (4,342)
Less : share based payments
reserve written off (406) - (406) -
Add back: share based payments
Add back: loss on de-designation - 225 - 225
of interest rate swaps 1,080 3,012 - -
Add back: fair value loss/(gain)
on foreign exchange contracts 48 (41) - -
---------------------------------- --------- --------- --------- ---------
Operating loss before share based
payments and loss on
de-designation of interest rate
swaps (29,066) (52,211) (31,196) (4,117)
Impairment of investment in Group
undertakings - - 7,618 -
Impairment of goodwill 1,909 - - -
Depreciation of property, plant
and equipment 96 164 4 2
Amortisation of intangible assets 420 318 104 152
Amortisation of loan arrangement
fees 629 1,000 - -
Decrease/(Increase) in other
receivables, prepayments and
accrued income 236 324 33,518 (7,622)
(Decrease)/Increase in other
creditors, trade and other
payables Decrease in amounts due
to Group undertakings - Group (2,566) 1,319 (10,198) 8,536
Relief - - - 1,110
Loss on disposal of property,
plant and equipment - 90 - -
Loss on disposal of intangibles - 91 - -
---------------------------------- --------- --------- --------- ---------
Net cash outflow from trading
activities (28,342) (48,905) (150) (1,939)
Decrease in loans and advances to
customers 83,633 85,642 - -
Decrease in bank borrowings (51,000) (31,323) - -
---------------------------------- --------- --------- --------- ---------
Net cash inflow/(outflow) from
operating activities 4,291 5,414 (150) (1,939)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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