Annual Financial Report (7749O)

TIDMCLEA

RNS Number : 7749O

Cleardebt Group PLC

23 September 2011

ClearDebt Group plc ("ClearDebt" or "the Group")

Preliminary announcement of audited results for the year ended 30 June 2011

ClearDebt is delighted to present another excellent set of both financial and operational results.

Financial Highlights: Strong financial performance as demonstrated by growth in fundamentals.

% increase 2011 2010

Revenue 17 GBP7,776,362 GBP6,633,995

Gross Profit 20 GBP3,963,959 GBP3,300,688

EBITDA 47 GBP2,222,411 GBP1,515,271

GBP1.1m spent on acquiring revenue generating books of both IVA and Debt Management Plans to further enhance on-going positive cash flow.

Operational Highlights: Huge progression in new IVAs drives strong revenue growth.

Number of new IVAs

Period % increase 2011 2010

First quarter 102 355 176

Second quarter 135 407 173

Third quarter 123 411 184

Fourth quarter 61 428 266

Continued successful diversification

-- Abacus, ClearDebt's debt management plan subsidiary continues to make a profit.

-- ClearCash prepaid master card showing growth in both total cards in use and revenue per card.

Outlook

-- Fragmented corporate market provides acquisition opportunities.

-- Complex economic environment and strong marketing will drive continued organic growth.

-- Initial signs from new financial year are positive, with continued growth in IVAs following record Q4 performance.

-- Successful development of trade association, the Debt Resolution Forum, and professionalisation of the industry will grow both regulatory and consumer confidence, providing enhanced growth opportunities.

David Mond, CEO of ClearDebt commented

"Whilst some sections of society have been able to escape the worst consequences of the recession, we at ClearDebt are here to provide counsel and support to the large sections that are unable to cope with the proliferation of consumer debt. By working in partnership with the Debt Resolution Forum to professionalise the industry, the IVA and Debt Management Plan solutions are now recognised as advantageous by all key parties: consumers, creditors and regulators. Without the solutions that ClearDebt provides, there could be a genuine personal financial meltdown in the UK.

The economy is not going to improve overnight. We expect continued strong organic growth due to the combination of the prevailing economic situation and the realisation that ClearDebt's "appropriate advice" model offers our clients the opportunity to stabilise their financial situation.

ClearDebt's competitive advantage is our kaizen based model that is entirely scaleable. We will continue to acquire books of IVAs and DMPs that are unprofitable for other players, but make us strong and profitable revenues. We believe that we will be able to continue our successful acquisitive growth".

Enquiries:

ClearDebt Group plc David Mond, Chief Executive Officer

Tel No: 0161 968 6805

Seymour Pierce Limited John Cowie/Guy Peters (Corporate Finance)

(Broker and Nominated Adviser) David Banks/Katie Ratner (Corporate Broking)

Tel No: 020 7107 8000

Chairman's Statement

I am delighted to present the Group's financial statements for the year ended 30 June 2011. The Group performance has again been driven by the IVA division which doubled the number of new IVAs arranged during the year.

The Group increased revenue to GBP7,776,362 (2010: GBP6,633,995) producing a much increased gross profit of GBP3,963,959 (2010: GBP3,300,688). Earnings before interest, tax, depreciation and amortisation increased to GBP2,222,411 (2010: GBP1,515,271) resulting in a pre-tax profit for the year of GBP227,219 (2010: GBP465,709).This was after finance charges of GBP532,404 (2010: GBP206,660) relating to the convertible secured loan note issued in 2010 and other loans, together with amortisation relating to the acquisition of back books and other intangibles of GBP1,388,809 (2010: GBP993,980).

During the year the Group acquired two further back books of Debt Management Plans (DMPs) and completed the purchase of a sizeable IVA book from Invocas Group plc (Invocas) just prior to the year end. The acquisitions resulted in a gain on bargain purchase of GBP54,985 which was offset by the write off of GBP55,612 of goodwill relating to the Debt Advice Portal acquisition in January 2009. A tax charge of GBP156,183 for the year includes a GBP75,000 provision against holding company tax losses previously recognised as a deferred tax asset which, although they may ultimately be recoverable, will take a number of years to be fully utilised.

In June 2011, just prior to the year end, a decision was made in favour of Paymex Limited against HM Revenue & Customs (HMRC) which ruled that fees for services in relation to IVAs should be treated as exempt from VAT. HMRC confirmed in July that they would not appeal the outcome of the case. Accordingly, as a result of the ruling, we have put a protective claim into HMRC to recover net output tax of some GBP850,000 incorrectly paid to HMRC over the last 4 years. A proportion of this VAT may be due to us and a proportion due to creditors. The timing, quantum and split of any refunds received will very much be dependent on the stance that HMRC adopt in relation to such reclaims by us and many other companies in the sector. No entries have been made in the accounts due to the uncertainty on the timing and recoverability of any claim. We expect the loss of input tax recovery on our costs going forward to be broadly neutral.

At the year end the group had net assets of GBP5,150,582 (2010: GBP5,016,621) including cash of GBP336,636 (2010: GBP541,504) after spending some GBP1.1m on acquisitions (2010: GBP2.7m) in the year financed out of cash flow and net new loans of GBP315,000.

The Group finances continue on a sound footing and I am pleased to report continued growth in the number of new IVAs being passed since the year end with a record number of cases passed in August 2011. Client retention of debt management clients remains excellent which is a testament to the service our teams provide to creditors and clients alike. Growth in new debt management clients remains limited going forward, given an increasing acceptance by debtors and creditors alike that the IVA product is generally more appropriate to debtor's circumstances than a DMP.

I look forward to another profitable year as we continue to nurture and expand our referral base whilst maintaining our web marketing presence and we continue to look for opportunities to acquire back books of clients wherever possible at sensible prices.

Gerald Carey FCIB

Chairman

23 September 2011

Chief Executive's Statement

The Group has enjoyed another excellent year underpinned by further substantial growth in the numbers of new IVA cases arranged during the past financial year, which doubled to 1,601 (2010: 799). In addition 953 IVAs were acquired from Invocas in June 2011 and as at 30 June 2011 the total number of IVAs and PTDs generating income was 5,893 (2010: 4,894).

This is a pleasing result against a backdrop of an IVA market that has remained flat over the last 2 years at approximately 50,000 new IVAs per annum with slight declines in case numbers being seen in the first 2 quarters of 2011.

During the year, two books of DMPs totalling approximately 1,000 clients were acquired and as at 30 June 2011, the total number of active DMPs was 5,761 (2010: 6,316). Client retention rates remain at excellent levels although the fall in numbers reflects natural attrition in the DMP books, the majority of new clients opting for an IVA rather than DMP, together with existing DMP clients converting to an IVA where appropriate.

For the majority of clients we see, the IVA remains the most appropriate solution freezing interest and charges and writing off the balance of debts generally after 5 years. Whereas in previous years clients have preferred to opt for the DMP solution as a short term fix awaiting improved prospects to clear their debts, there is now general acceptance that this will not happen in the short to medium term and the IVA solution is now the preferred option.ClearDebt has always felt that DMP's are only applicable for clients who expect to see a rapid recovery in their finances.

In November 2010 we rationalised the debt management operation in Staveley and closed the office transferring the DMP book to our main operation in Timperley where it was absorbed without the need for any additional staff recruitment.

The IVA operation in Staveley continues to perform well and is now receiving new IVAs drafted by Timperley as spare capacity has been freed up through the natural completion of the older IVA cases acquired in 2009. The Invocas cases acquired in June have been transferred to Staveley and the electronic case management data will shortly be migrated onto our standard systems. In addition we are continuing to purchase new cases referred to us by Invocas on a monthly basis over the next few months on a trial basis. We continue to balance our workload between the two sites as required.

I would like to take this opportunity to thank all our staff for their dedication and hard work over the last year and I am proud of the work they do to provide continuing advice and assistance to our thousands of clients - as well as advice to many others to whom we have spoken over the same period. We continue to train and encourage all of our staff to obtain the Certificate of Debt Resolution (CertDR), exclusively offered by the DRF and presently all of our client advisers who have been with us over 3 months are qualified, which we believe is one of the highest rates in the industry. Industry regulation and consultation are increasingly focusing on the formal training and qualification of staff and we are therefore well placed to deal with the ever changing demands being made by the regulatory authorities.

Cash flow from the former Relax cases remains good and well ahead of our expectations at the time of acquisition in December 2009. Total fees of GBP5.7m have been received to the end of June 2011 against a purchase price inclusive of costs of circa GBP3.2m, showing the value that can be generated by acquisitions bought at the right price and successfully and efficiently integrated into our systems and processes.

We continue to maintain our internet activities across the Group acquiring web leads at cost effective rates wherever possible although we continue to see competitors paying for leads at prices we view as uneconomic. We have in the last year actively expanded our referral base and continue to explore new opportunities for lead sources and referrals. We have a strong pipeline of potential referrers whom we are currently in discussions with, some of whom may substantially boost the numbers of leads to our sales operation. We are also investing in new software to manage our sales operation which we expect to be in place in the next month or so which we anticipate will boost conversion and allow the marketing of more products to our substantial databases of leads and clients.

We are closely monitoring consolidation opportunities within our industry and will finance smaller acquisitions through cash flow. Our successful history in profitably integrating acquired back books - both operationally and financially means we are confident of raising additional finance for larger acquisitions, although the cost of such funding in the current economic climate is high.

THE CONSUMER DEBT MARKET

ClearDebt Group operates within the debt resolution sector, an established sub-category of financial services. Personal insolvencies saw a step change in 2006 with a 58% increase in individual insolvencies to over 100,000 per annum which has grown steadily each year to 136,000 in 2010. In 2010 IVAs showed growth of 6% although the first half of 2011 has seen a decline of 13% on the same period last year.

Traditional refinancing options through secured or unsecured lending remain closed to the majority of people leading us to believe that demand in our sector will remain robust although slightly off its peak in 2011/12.

Against this background the government is actively looking to increase regulation and has already started to enforce much stricter compliance monitoring of companies in the sector and it is now much more difficult to renew existing consumer credit licences or obtain new ones. We continue to see this as an opportunity for ourselves and those larger organisations with cash who maintain the highest standards to purchase back books and consolidate the sector as the many smaller players are unwilling or unable to comply with the increased regulation.

THE CLEARDEBT MODEL - IVAs and PTDs

Unlike most of its major competitors in the consumer IVA market, ClearDebt has developed a low overhead, high quality model, based on Kaizen manufacturing principles and an intelligent internet interface - www.cleardebt.co.uk. This model allows the company's cost base to be kept to a minimum level whilst still providing high levels of service even on lower levels of debt and disposable income.

Demand for lower value IVAs has been evident which favours our low cost model allowing us to service levels of the market other providers will not touch. Due to this distinctive operating model, ClearDebt is able to offer a more effective debt resolution solution than many of its rivals.

THE ABACUS MODEL - Debt Management Plans

Abacus provides services to indebted individuals by negotiating and putting in place a debt management plan with their creditors. The debtor makes a monthly payment to Abacus who then distributes the payment to the creditors as agreed in the plan less an administration fee at an agreed percentage of the debtor's monthly payment. An initial set up fee is also charged.

Such plans are suitable for individuals whose debts are more manageable and rely on the goodwill of creditors as they are not a formal insolvency procedure and interest usually continues to accrue on outstanding debts although today the majority of creditors that we work with are prepared to waive the interest for short periods.

Many clients are cross referred between ClearDebt and Abacus allowing the Group to offer an appropriate advice solution to all individuals.

As a leading member of the trade body, The Debt Resolution Forum, ClearDebt has been in regular communication with the creditor community, the Office of Fair Trading (OFT), the Department of Business Innovation and Skills and the Ministry of Justice who have issued several consultation papers intending that stricter guidance on practices in the debt resolution industry which will need to be adhered to if operators wish to maintain their Consumer Credit Licence without which they cannot operate.

OPERATIONAL REVIEW

ClearDebt - IVA Division

Since 1 July 2010 (2010: 1 July 2009), the following numbers of new IVAs have been arranged through ClearDebt:-

Year ended Year ended

30 June 2011 30 June 2010

First quarter 355 176

Second quarter 407 173

Third quarter 411 184

Fourth quarter 428 266

____ ____

1,601 799

____ ____

The growth of new IVAs continues to be strong and ClearDebt enjoyed an excellent year with a 100% increase in the number of IVAs passed in the year with 1,601 new cases (2010: 799). I am pleased to say this growth has continued and case numbers in the first quarter of our current financial year are expected to be ahead of the fourth quarter with 362 cases already passed by the end of August.

In addition we purchased 953 IVAs from Invocas in June 2011 which will generate additional income in the new financial year and we continue to be referred a number of new cases by them going forward. Including this purchase, we had as at 30 June 2011 a total of 5,893 (2010: 4,894) IVAs and PTDs generating income.

The Board monitors several key performance indicators ("KPIs") for the business on a monthly basis including the number of cases passed, various conversion ratios from lead to cases passed, the cost per case acquired and the staff to caseload numbers. Your Board is pleased to advise that these KPIs continue to deliver positive messages about the business and we are hopeful of gaining additional referral sources in the first half of the current year.

Revenue in respect of nominee fees is recognised on the approval of the IVA whilst supervisory fees are recognised evenly over the expected life of the IVA.

Abacus- Debt Management Division

The division made a profit in the period although we have seen a slowdown in the recruitment of new clients and an increase in the number of plans that cease as the age of the relatively young DMP book at Abacus matures. There have also been a number of clients who have ceased a DMP and commenced an IVA with us.

In the year 2010/11, Abacus has arranged 1,570 new plans (2009/10: 2,366). During the year two books of DMPs totalling approximately 1,000 were acquired and as at 30 June 2011 the total number of DMPs generating income was 5,761 (2010: 6,316). Our attrition rates on DMPs are well within our normal expectations and we are actively looking for further back books to acquire as a means of boosting income over the short and medium term.

The Board has KPIs to monitor the number of active income generating plans as well as the value of monthly payments made by debtors. Revenue is only recognised by Abacus upon receipt of fees which are drawn from debtor payments as received.

Generally the costs of acquisition of cases and plans are also monitored closely. We continue to resist the temptation to grow the book through lead sources providing leads at what are, in our view uneconomic prices.

ClearCash - prepaid MasterCard

Steady progress continues to be made with our Pre-Paid MasterCard, ClearCash, as the new version of the card, without a monthly fee, is taken up in larger numbers than the original which included the monthly fee. The rate of new card signings continues to grow and as at 30 June 2011 there were 5,749 ClearCash cards in issue (2010: 1,662). The card currently makes a small loss each month after referral costs, but revenue from card usage has increased steadily month on month since inception.

The card can effectively be used as a bank account with the exception of direct debit and we see the ClearCash card as an integral service offering to our clients who often find it difficult to obtain normal banking facilities. As numbers increase we expect it to produce a profit in due course.

FINANCIAL REVIEW

Group turnover increased by 17% to GBP7,777,362 (2010: GBP6,633,995) and gross profit by 20% toGBP3,963,959 (2010: GBP3,300,688). The performance was driven by good demand for IVAs and the benefit of the increased supervisory revenue which is growing steadily as the number of IVA cases under management grows. Amortisation charges in respect of acquisitions and impairment amounted to GBP1,388,809 (2010: GBP993,980).

Finance costs rose to GBP532,404 (2010: GBP206,660 ) reflecting a full years charge of GBP467,960 (2010:GBP91,147) in respect of the 3yr 10% secured convertible loan notes issued in April 2010. Actual interest paid in respect of the convertible totalled GBP230,000 with the balance being an accounting charge for the redemption premium due on maturity in 2013.

Cash resources at the year end amounted to GBP336,636 (2010: GBP541,504) after acquisitions of GBP1.1m in the year financed with net new loans of GBP315,000 advanced by David Mond. Operational cash flow remains strong and GBP350,000 of loans have been repaid since the year end.

GOING CONCERN

As part of its going concern review the Board has followed the guidelines published by the Financial Reporting Council entitled "Going Concern and Liquidity Risk: Guidance for UK Companies 2009. The Board has prepared detailed financial forecasts and cash flows for the three years to 30 June 2014 and in drawing up these forecasts the Board has made assumptions based upon its view of the current and future economic conditions in the UK that will prevail over the forecast period - given that the business is likely to be solely focused on the UK market for the foreseeable future. The timing of the cash flows and covenants to the debt holders in respect of loans provided have been taken into consideration and in addition to the forecasts we have also produced sensitivities to these forecasts to test our ability to trade as a going concern for at least the following 12 months based upon a 12% rise or fall in projected turnover without any reduction in overhead costs. In practice the Board believes that it can quickly realign overheads, in particular marketing spend, to allow for any reduced levels of activity within the business that may occur going forward.

The Board believes that the use of the going concern basis of accounting is appropriate and there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the company to continue as a going concern.

FUTURE OUTLOOK

The IVA market is still at high levels and we continue to gain market share as our monthly run rate for new IVAs grows against the background of a static to slightly declining IVA market.

The last quarter of the financial year produced a record number of IVAs for the Group and the first two months of the current year have continued in a similar vein.

We continue to look for acquisitions of client books wherever we can at reasonable prices to supplement our growth as we know these can be highly profitable given the ease with which we can assimilate them into our scaleable business model and systems.

Given the current economic outlook in the UK with unemployment showing no signs of falling together with high taxation and continued public sector cuts I believe the Group is well placed for another highly profitable and successful year.

Once again I would like to pay tribute to all our employees who continue to offer the highest standards of service and commitment to all our clients at all levels.

David Emanuel Merton Mond FCA FCCA

Chief Executive Officer

23 September 2011

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2011

2011 2010

Notes GBP GBP

Revenue

- ongoing 2 7,582,367 6,633,995

- acquisitions 193,995 -

_________ _________

7,776,362 6,633,995

Cost of sales (3,812,403) (3,333,307)

_________ _________

Gross profit 3,963,959 3,300,688

Administrative expenses (before

separately identifiable items) (1,678,623) (1,293,371)

Separately identifiable items 5 - (449,473)

Administrative expenses (1,678,623) (1,742,844)

Share based payment (62,925) (42,573)

_________ _________

Profit before interest, tax,

depreciation and amortisation 2,222,411 1,515,271

Depreciation (132,437) (102,875)

Amortisation (1,388,809) (993,980)

Gain on bargain purchase 3 54,985 252,914

_________ _________

Profit from operations 756,150 671,330

Finance costs 4 (532,404) (206,660)

Finance income 3,473 1,039

_________ _________

Profit before taxation 227,219 465,709

Taxation 6 (156,183) (123,474)

_________ _________

Profit after taxation for year 71,036 342,235

_________ _________

Amount attributable to:

Owners of the parent 71,036 342,235

Earnings per ordinary share - basic (pence) 7 0.02p 0.11p

Earnings per ordinary share - diluted (pence) 7 0.02p 0.11p _________ _________

The results for the period are derived from continuing activities.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2011

2011 2010

GBP GBP

Profit for the year 71,036 342,235

Other comprehensive income net of tax - -

_______ _______

Total comprehensive income for the year 71,036 342,235

_______ _______

Attributable to:

Owners of the parent 71,036 342,235

_______ _______

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011

2011 2010

GBP GBP

Assets

Non-current assets

Intangible assets 6,476,691 6,765,047

Property, plant and equipment 252,998 227,992

Deferred taxation 78,188 163,720

__________ _________

6,807,877 7,156,759

Current assets

Trade and other receivables 2,181,959 1,153,226

Corporation tax receivable - 8,372

Cash and cash equivalents 336,636 541,504

__________ _________

2,518,595 1,703,102

__________ _________

Total assets 9,326,472 8,859,861

__________ _________

Equity and liabilities

Equity

Issued capital 6,166,812 6,166,812

Share premium 279,948 279,948

Share based compensation 203,312 140,387

Other reserves 96,495 96,495

Retained losses (1,595,985) (1,667,021)

__________ _________

Total equity attributable to the owners of the parent 5,150,582 5,016,621

__________ _________

Current liabilities

Trade and other payables 698,255 1,009,151

Corporation tax payable 92,662 -

__________ _________

790,917 1,009,151

Non-current liabilities

Financial liabilities 3,318,309 2,765,350

Deferred taxation 66,664 68,739

__________ _________

Total liabilities 4,175,890 3,843,240

__________ _________

Total equity and liabilities 9,326,472 8,859,861

__________ _________

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2011

Share Share Share Based Other Retained Total

Capital Premium Compensation Reserve Losses Equity

GBP GBP GBP GBP GBP GBP

Balance as at 1 July 2009 6,166,812 279,948 97,814 - (2,009,256) 4,535,318

Equity component on issue of - - - 96,495 - 96,495

convertible loan notes

Share based compensation - - 42,573 - - 42,573

Total comprehensive income

for the year - - - - 342,235 342,235

________ ________ ________ _______ ________ ________

Balance as at 30 June 2010 6,166,812 279,948 140,387 96,495 (1,667,021) 5,016,621

Share based compensation - - 62,925 - - 62,925

Total comprehensive income

for the year - - - - 71,036 71,036

________ ________ ________ _______ _________ ________

Balance as at 30 June 2011 6,166,812 279,948 203,312 96,495 (1,595,985) 5,150,582

________ ________ ________ _______ _________ ________

Share capital

Share capital has arisen on the issue of shares and represents the nominal value of shares issued.

Share premium

The share premium account arose from the issue of equity shares above the nominal value less share issue costs.

Share based compensation

This reserve is the result of the Company's grant of equity settled share options and warrants and measured in accordance with IFRS2 share-based payment transactions.

Other reserve

This reserve is the result of the Company's issue of convertible loan notes in April 2010 in accordance with IAS 32 - Financial Instruments: Presentation.

Retained losses

The retained losses reflect losses incurred to date.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

Notes 2011 2010

GBP GBP

Cash flow from continuing operating activities

Profit before taxation 227,219 465,709

Depreciation of property, plant and equipment 132,437 102,875

Amortisation of intangible assets 1,388,809 993,980

Gain on bargain purchase (54,985) (252,914)

Share based payment 62,925 42,573

Increase in trade and other receivables (928,733) (423,916)

Finance costs 532,404 206,660

Finance income (3,473) (1,039)

(Decrease)/increase in trade and other payables (310,896) 332,252

_________ _________

Cash generated by operations 1,045,707 1,466,180

Corporation tax refund 8,794 10,317

_________ _________

Net cash generated by operating activities 1,054,501 1,476,497

Investing activities

Acquisition of business and assets 3 (1,088,783) (2,700,000)

Acquisition of intangibles (37,170) (143,728)

Acquisition of property, plant and equipment (157,443) (144,251)

Finance income 3,473 1,039

Sale of property, plant and equipment - 3,184

_________ _________

Net cash used in investing activities (1,279,923) (2,983,756)

Financing activities

Proceeds from issue of convertible loan notes - 1,800,000

Issue costs - (184,379)

Proceeds from new loans advanced 315,000 -

Interest on loans (294,446) (151,451)

_________ _________

Cash generated by financing activities 20,554 1,464,170

Decrease in cash and cash equivalents (204,868) (43,089)

Opening cash and cash equivalents 541,504 584,593

_________ _________

Closing cash and cash equivalents 336,636 541,504

_________ _________

1. Basis of Preparation

The preliminary financial information does not constitute full accounts within the meaning of section 434 of the Companies Act 2006 but is derived from accounts for the years ended 30 June 2011 and 30 June 2010. The figures for the year ended 30 June 2011 are audited. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 30 June 2011. Those accounts upon which the auditors issued an unqualified opinion, did not include a reference to any matters to which the auditors drew attention by way of emphasis, without qualifying their report, and made no statement under section 498(2) or (3) of the Companies Act 2006, will be delivered to the Registrar of Companies following the Annual General Meeting. While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.

ClearDebt Group plc is incorporated and domiciled in the United Kingdom. The consolidated financial information of ClearDebt Group plc set out in this announcement is presented in Pounds Sterling (GBP), which is also the functional currency of the parent. The consolidated financial information has been approved for issue by the Board of Directors on 23 September 2011.

Statutory accounts for the year ended 30 June 2010 have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis, without qualifying their report, and did not contain any statement under Section 498 (2) or 498 (3) of the Companies Act 2006.

2. Segmental Information

The Group's total income, profit before taxation and net assets were all derived from its principal activities being the provision of IVA and other financial advice and appropriate solutions to individuals experiencing personal debt problems. All the Group's activities were undertaken wholly in the United Kingdom.

Debt Total Debt Total

Insolvency Management 2011 Insolvency Management 2010

GBP GBP GBP GBP GBP GBP

Revenue

- Ongoing 4,843,540 2,738,827 7,582,367 3,408,373 3,225,622 6,633,995

- Acquisition - 193,995 193,995 - - -

_________ _________ _________ _________ _________ _________

Total Revenue 4,843,540 2,932,822 7,776,362 3,408,373 3,225,622 6,633,995

Cost of sales (2,355,997) (1,456,406) (3,812,403) (1,522,269) (1,811,038) (3,333,307)

_________ _________ _________ _________ _________ _________

Gross Profit 2,487,543 1,476,416 3,963,959 1,886,104 1,414,584 3,300,688

Administrative expenses (1,072,653) (605,970) (1,678,623) (701,513) (591,858) (1,293,371)

Share based payment (30,380) (32,545) (62,925) (19,579) (22,994) (42,573)

Separately disclosable items - - - (363,543) (85,930) (449,473)

________ _________ _________ _________ _________ _________

Profit before interest, tax 1,384,510 837,901 2,222,411 801,469 713,802 1,515,271

depreciation and amortisation

Depreciation (59,674) (72,763) (132,437) (30,307) (72,568) (102,875)

Amortisation (892,425) (496,384) (1,388,809) (468,193) (525,787) (993,980)

Gain on bargain purchase 33,648 21,337 54,985 202,914 50,000 252,914

________ _________ _________ _________ _________ _________

Profit from operations 466,059 290,091 756,150 505,883 165,447 671,330

Finance costs (374,368) (158,036) (532,404) (67,577) (139,083) (206,660)

Finance income 3,473 - 3,473 1,039 - 1,039

_________ _________ _________ _________ _________ _________

Profit before taxation 95,164 132,055 227,219 439,345 26,364 465,709

Taxation (121,849) (34,334) (156,183) (116,093) (7,381) (123,474)

_________ _________ _________ _________ _________ _________

Profit after tax (26,685) 97,721 71,036 323,252 18,983 342,235

_________ _________ _________ _________ _________ _________

Net operating assets are reconciled to equity funds as follows:

2011 2010

GBP GBP

Gross assets

Insolvency 7,492,638 6,752,690

Debt management 1,833,834 2,107,171

_________ _________

9,326,472 8,859,861

_________ _________

Gross liabilities

Insolvency 2,530,762 2,597,551

Debt management 1,645,128 1,245,689

_________ _________

4,175,890 3,843,240

_________ _________

Capital expenditure to acquire property, plant and equipment

Insolvency 152,063 86,337

Debt management 5,380 57,914

_________ _________

157,443 144,251

_________ _________

Capital expenditure to acquire intangible assets

Insolvency 799,806 2,260,728

Debt management 300,647 961,000

_________ _________

1,100,453 3,221,728

_________ _________

Depreciation of property, plant and equipment

Insolvency 59,674 30,307

Debt management 72,763 72,568

_________ _________

132,437 102,875

_________ _________

Amortisation of intangible assets

Insolvency 892,425 468,193

Debt management 496,384 525,787

_________ _________

1,388,809 993,980

_________ _________

3. Acquisition

In November 2010 and February 2011 the Company purchased two back books of Debt Management clients from One Aim Group Limited which has subsequently gone into liquidation.

The assets acquired were exclusively intangible assets represented by the future income due from the collection of the back book of DMP cases.

At the date of acquisition the fair values of the assets purchased comprised the following:

 
                                                       Fair value 
                                         Book value    Adjustment   Fair Value 
                                                GBP           GBP          GBP 
 Other intangible assets- Debt 
  Management                                      -       330,282      330,282 
 Deferred taxation                                -       (8,298)      (8,298) 
 Gain on bargain purchase - negative 
  goodwill                                        -      (21,337)     (21,337) 
                                                  -       300,647      300,647 
 
 
 
 Settled by:               GBP 
 Cash consideration    300,647 
 
 

The intangible debt management assets acquired are being amortised over 18 months which, in the directors' opinion, is the useful economic life of the assets.

On 22 June 2011 the Company purchased from Invocas a book of IVA cases together with certain debtors relating to the cases and the right to the future income due on those cases. The total consideration due to Invocas was GBP788,136 which has been paid in full in cash.

The assets acquired were intangible assets represented by the future income due from the collection of the back book of IVA cases together with certain debtors in relation to invoices already raised for fees on the cases which had not yet been paid. At the date of acquisition the fair values of the assets purchased comprised the following:

 
                                            Fair value 
                              Book value    Adjustment   Fair Value 
                                     GBP           GBP          GBP 
 Other intangible assets               -       733,000      733,000 
 Trade receivables               216,000     (116,000)      100,000 
 Deferred taxation                     -      (11,216)     (11,216) 
  Gain on bargain purchase             -      (33,648)     (33,648) 
 
                                 216,000       572,136      788,136 
 
 
 
 Settled by:             GBP 
 Cash consideration    788,136 
 
 

The intangible IVAs acquired are being amortised over 4 years which, in the directors' opinion, is the useful economic life of the assets.

Included in the results for the year are revenues of GBP193,995 and a pre-tax profit of GBP9,038 excluding the gain on purchase of a bargain asset of GBP54,985.

We have estimated the timing of, and the expected future income due, from the back books acquired less a provision for future expected delinquency together with the estimated costs necessary to collect in the income. This has been produced on a net present value basis to provide an estimate of the fair value of the intangible assets acquired.

The fair value of the net assets acquired was GBP1,143,768 which is in excess of the GBP1,088,783 cost of acquisition. Accordingly under IFRS the Consolidated Income Statement has been credited with a gain on bargain purchase of GBP54,985 in the period.

4. Finance Costs

2011 2010

GBP GBP

Interest payable on loans 64,444 115,513

Interest payable on convertible loan notes 230,000 44,924

Interest payable on redemption of convertible loan notes 237,960 46,223

________ ________

532,404 206,660

________ ________

5. Separately Identifiable Items

2011 2010

GBP GBP

Administrative expenses

Expenses relating to the acquisition and restructuring of the business of Relax - (449,473)

________ ________

On 2 December 2009 the Group acquired the back books of IVA, DMP and PTD cases from the Administrator of various companies of Relax Group plc. In 2010 included in administration expenses were various legal costs related to the acquisition, restructuring and shareholders circular as well as additional costs and incidentals incurred as part of the acquisition process.

6. Taxation

2011 2010

GBP GBP

Analysis of current year

Current tax

UK corporation tax payable 92,662 -

UK corporation tax repayment due - (8,372)

Over provision from prior years (422) (15,273)

________ ________

Total corporation tax 92,240 (23,645)

________ ________

Deferred tax

Temporary differences, origination and reversal (7,170) 147,119

Provision for irrecoverable losses 75,000 -

Effect of tax rate changing on opening balance (3,887) -

________ ________

Total deferred tax charge 63,943 147,119

________ ________

Tax on profit for the year 156,183 123,474

________ ________

Factors affecting charge for year

2011 2010

GBP GBP

Profit before taxation 227,219 465,709

________ ________

Profit multiplied by standard rate of corporation tax

in the UK of 26% (2010: 28%) 59,077 130,398

Effects of:

Expenses not deductible 4,878 1,873

Adjustment due to change of tax rate (3,887) -

Unrelieved tax losses 75,000 6,476

Other prior year adjustment 21,115 (15,273)

________ ________

Current tax expense for year 156,183 123,474

________ ________

7. Earnings per Ordinary Share

2011 2010

GBP GBP

Profit for the financial year 71,036 342,235

__________ __________

Weighted average number of ordinary shares in issue during the year 308,340,567 308,340,567

Dilutive potential of share options - -

Dilutive potential of convertible loan notes - -

__________ __________

308,340,567 308,340,567

__________ __________

Earnings per share

Basic 0.02p 0.11p

Diluted 0.02p 0.11p

__________ __________

The calculation of the basic earnings per ordinary share of 0.02p (2010: 0.11p) each has been based on the profit for the relevant financial year and on 308,340,567 shares (2010: 308,340,567). This represents the weighted average number of ordinary shares in issue. The profit for the period for the purpose of calculating the diluted earnings per share is the same as for the basic earnings per share calculation adjusted in respect of the interest charges in relation to the convertible loan notes. After using this adjusted profit the diluted earnings per share is higher than the basic earnings per share and would therefore not be dilutive under the terms of IAS 33.

8. Copies of the Annual Report

Copies of the Annual Report are available from the Company Secretary at the registered office which is situated at Nelson House, Park Road, Timperley, Cheshire WA14 5BZ. The annual report and AGM notices will also be available for download on the Company's website www.cleardebtgroup.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

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