IMPACT HOLDINGS (UK) PLC - Interim Results

Impact Holdings (UK) plc
("Impact" or "The Group")

Half Year Results

Impact (AIM: IHUK), the specialist lender, announces its unaudited half year results for the six months ended 30 September 2015.

Financial Highlights

• Cash and cash equivalents of £0.79 million (£0.63 million 30 September 2014)

• Net assets of £5.59 million (£5.34 million 30 September 2014)

• Debt reduced by 14% year on year to £1.04 million (£1.22 million September 2014)

• Loss after tax of £248,582 (Loss after tax £234,933 30 September 2014)

• Earnings/(loss) per share (9.4p)  ((8.9p) 30 September 2014)

Operational Highlights

• Ongoing business re-aligned to focus on recoveries from third parties   

• Continued reduction in borrowings from financial institutions

• Continuation of complex litigation

A copy of the half year results is also available on the Group's website (www.impactholdings.net).

For further information:

Impact Holdings (UK) plc
Paul Davies, Chief Executive Officer                  Tel: [phone]

Zeus Capital
Andrew Jones / Nick Cowles                              Tel: [phone]

 CHAIRMAN'S STATEMENT

I report on our unaudited half year financial results for the six months ended 30th September 2015. Revenue of £86,288 and pre-tax losses of £248,582 were in line with expectations.

The recognition of revenue, normally generated from loans to clients of solicitor firms, has been suspended pending the outcome of a hearing in the Supreme Court to be heard in June 2016. The Directors and their legal team remain confident that the Appeal Court decision handed down in February 2015 will be upheld by the Supreme Court which would result in further recoveries thereafter from a number of professional indemnity insurers of those solicitor firms who have defaulted on the loans advanced.

BUSINESS OVERVIEW

The development of the strategic direction of the business has continued with a reduction in our exposure to third party funders and a withdrawal from new exposures in the specialty funding market.

We continue to incur upfront legal expenses in seeking to recover loans which have been previously provided against by the Group. Litigated matters continue to be concluded successfully however the ongoing costs of the more complex litigation matters continue to erode positive financial results.

We have recently settled one litigated claim against a firm of former professional advisors on advantageous terms and are currently awaiting the Supreme Court’s decision which may accelerate settlement of a number of matters being pursued.

OUTLOOK

The group remains focused on recovering monies owed to it by third parties. The Board of Directors is committed to the opportunities Identified and continues to develop this strategy which is expected to provide, over time, enhanced shareholder value.

Roger Barlow
Non-Executive Chairman

IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			6 Months	6 Months	Year
			ended	ended	Ended
			30/09/2015	30/09/2014	31/03/2015
			£	£	£
Revenue			86,288	906,376	1,988,087
Cost of Sales			(15,727)	(376,397)	(467,606)
Gross profit			70,561	529,979	1,520,481
Operating expenses			(319,145)	(764,920)	(1,267,812)
Operating (loss)/profit			(248,584)	(234,941)	252,669
Interest receivable			2	8	-
(Loss)/profit for the period from
operations before tax			(248,582)	(234,933)	252,669
Tax			-	-	(10,904)
(Loss)/Profit for the period			(248,582)	(234,933)	263,573
(Loss)/earnings per share (pence)
Basic Fully Diluted			(9.4)p (8.1)p	(8.9)p (7.7)p	10.0p 8.3p

IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED BALANCE SHEET

				As at	As at	As at
				30/09/2015 £	30/09/2014 £	31/03/2015 £
Non-current assets
Goodwill				421,766	421,766	421,766
Property, plant and equipment				866,463	922,024	882,397
Deferred taxation				181,703	171,902	181,074
Current assets				1,469,932	1,493,722	1,485,237
Trade and other receivables
including amounts falling
due after more than one year				4,740,741	5,363,700	4,451,612
Cash and cash equivalents				790,004	635,866	1,604,945
				5,530,745	5,999,566	6,056,557
Total assets				7,000,677	7,493,288	7,541,794
Capital and reserves
Share capital				1,311,201	1,311,201	1,311,201
Shares held by Employee Benefit Trust				(45,070)	(45,070)	(45,070)
Retained earnings				4,325,636	4,075,955	4,574,218
Equity attributable to equity shareholders of the parent				5,591,767	5,342,086	5,840,349
Trade and other payables due after more
than one year				467,376	540,329	481,782
Trade and other payables due in less
than one year				941,534	1,610,873	1,219,663
				7,000,677	7,493,288	7,541,794

IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD

					6 Months	6 Months	Year
					ended	ended	Ended
					30/09/2015 £	30/09/2014 £	31/03/2015 £
Operating activities
Cash (used in)/generated from operations					( 700,537)	244,246	1,278,528
Net cash generated by operating activities					(700,537)	244,246	1,278,528
Investing activities
Purchase of property, plant and equipment					-	-	(783)
Interest received					2	8	25
Net cash in investing activities					2	8	(758)
Financing Activities
Net decrease in amounts owed to lending institutions					(114,406)	(301,073)	(365,510)
Net cash outflow from financing activities					(114,406)	(301,073)	(365,510)
Net (decrease)/increase in
cash and cash equivalents					(814,941)	(56,819)	912,260
Opening cash and cash equivalents					1,604,945	692,685	692,685
Closing cash and cash equivalents					790,004	635,866	1,604,945

IMPACT HOLDINGS (UK) PLC
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

				Attributable to the equity holders of parent company
				Share	Shares	Share	Profit and	Total
				Capital	held by	options	loss
					EBT		account
				£	£	£	£	£
Balance as at 31 March 2014				1,311,201	(45,070)	39,349	4,271,296	5,576,776
Profit for the year				-	-	-	263,573	263,573
Balance as at 31 March 2015				1,311,201	(45,070)	39,349	4,534,869	5,840,349
Net (loss) for the period				-	-	-	(248,582)	(248,582)
Balance as at 30 September 2015				1,311,201	(45,070)	39,349	4,286,287	5,591,767

Notes to the Interim Financial Statements

1. Accounting policies

This half-year report for the period ended 30 September 2015 has been prepared on the basis of the accounting policies set out in Impact Holdings (UK) plc’s annual report and financial statements 2015 and in accordance with the International Financial Reporting Standards as adopted by the European Union and IAS34, 'Interim financial reporting'.

The half-year report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006.

It does not include all of the information and disclosures required for full annual financial statements, and should be read in conjunction with the annual report and financial statements for the year ended 31 March 2015.

The financial information contained in this half-year report in respect of the year ended 31 March 2015 has been produced from the annual report and financial statements for that year which have been filed with the Registrar of Companies.

The financial statements have been prepared on the historical cost basis, except for the valuation of financial assets and liabilities. The principal accounting policies adopted are set out below.

The financial statements have been prepared on a going concern basis.

New and revised accounting standards

At the date of issue of these financial statements, the following accounting Standards and Interpretations, which have not been applied, were in issue but not yet effective. The directors do not anticipate that adoption of these will have a material impact on the financial statements.

IFRS 9                                                     Financial Instruments

IFRS14                                                    Regulatory Deferral Accounts

IFRS15                                                    Revenue from Contracts with Customers

The effect of changes on the group’s financial statements as a result of adopting these standards (where applicable) is not significant. The group has elected not to adopt any other standards earlier than the proposed effective dates.

Further detail in relation to the above International Accounting Standards is available from the IASB’s website, www.iasb.org.

Basis of consolidation

The consolidated financial statements of the group incorporate the financial statements of the company and enterprises controlled by the company (its subsidiaries) made up to the balance sheet date. Control is achieved where the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain economic benefit from its activities. Subsidiaries are fully consolidated from the effective date of acquisition or up to the effective date of disposal, as appropriate.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest.

The excess of cost of acquisition over the fair values of the group's share of identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the income statement.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All intra-group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill on acquisition of subsidiaries is separately disclosed.

Goodwill is recognised as an asset and reviewed for impairment semi-annually or on such other occasions that events or changes in circumstances indicate that it might be impaired. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Goodwill is allocated to cash generating units for the purpose of impairment testing.

Goodwill arising on acquisitions before the date of transition to IFRS has been retained at the previous UK GAAP amounts subject to being tested for impairment.

Intangible assets

The cost of developing or acquiring computer software including own labour costs incurred directly in connection with software development, is capitalised as an intangible asset where the related expenditure is separately identifiable and where there is reasonable expectation that future economic benefits will arise from the development. Software costs are amortised using the straight line method over 3 years. The amortisation charge is included within operating expenses. Intellectual property and computer development is fully written off in the period it is incurred.

Interest income and expense

Revenue shown in the profit and loss account represents interest, commission and arrangement fees receivable on loans made to third parties. Interest income and expense are recognised in the profit and loss account for all financial assets and liabilities using the effective interest method, being the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group includes all establishment and arrangement fees, commissions and administrative fees paid or received between parties to the contract that are an integral part of the effective interest rate.

Interest on legal disbursement funding is added to the principal, is calculated on a daily basis and is repaid to the group at the end of the term of the agreement.

Financial assets and liabilities

Financial assets and liabilities used by the Group include loans made to third parties and debt finance received by the Group. Financial assets are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method, less provision for impairment. Financial liabilities are recognised initially at fair value and measured subsequently at amortised cost.

Bad and doubtful debts

Specific provision is made against all advances considered to be impaired. When there is reasonable doubt over recovery, provision is made against the outstanding debt including interest and further interest is suspended until the directors are satisfied as to the recoverability of the total amount due.

Segmental reporting

No separate segmental reporting information is provided as in the directors' opinion there are no material segments other than the provision of short term niche funding solutions.

Leasing

Rentals payable under operating leases are charged to income on a straight line basis over the term of the lease.

Retirement benefits costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Taxation

The tax expense represents the sum of the current tax expense and deferred tax expense.

The tax currently payable is based on taxable profit or loss for the year. Taxable profit or loss differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Property, plant and equipment

Fixtures and equipment are stated at cost less accumulated depreciation. Depreciation is charged so as to write off the cost or valuation of assets over their useful economics lives, using the straight line method on the following basis:-

Plant and machinery - 3 years

Fixtures, fittings & equipment - 3 years

The directors consider that the freehold properties are maintained in such a state of repair that its residual value is at least equal to their original cost. Accordingly, no depreciation is charged on the grounds of immateriality. Annual impairment reviews are undertaken and provisions made at the end of each reporting period where necessary.

Equity Instruments

Equity instruments, which are contracts that evidence a residual interest in the assets of the group after deducting all of its liabilities, are recorded at the proceeds received, net of direct issue costs.

 Provisions

Provisions are recognised when the group has a present obligation as a result of a past event which it is probable will result in an outflow of economic benefits that can be reliably estimated.

Share-based payments

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions, and behavioural considerations.

At each balance sheet date, the group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement and a corresponding adjustment to reserves over the remaining vesting period. Costs are recognised in the income statement with a corresponding credit to a share based payment reserve.

 Financial Risk Management

Interest rate risk

The interest rate risks are limited to the revolving credit facilities which the group has in place. The group has no exposure arising from trading overseas.

Liquidity risk

The group has to monitor closely its access to bank and other funds and its ongoing loans and overdrafts to ensure that there are sufficient funds to meet its obligations.

The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next eighteen months, so that management can ensure that sufficient financing is in place as it is required.

Credit Risk

The group is exposed to the risk that any counterparty to which the group lends money will be unable to repay the amounts when they fall due. These risks are managed by ensuring that exposures to individual counterparties and particular market sectors or loans exhibiting particular attributes are minimized wherever possible. The Board and Risk Committee monitor such exposures on a regular basis, with figures being regularly reviewed. In respect of property bridging loans the group enforces repossession of property where necessary with a view to holding the asset for resale in order to extinguish the debt. In addition, impairment provisions are made when it becomes evident that the group may incur losses at the balance sheet date.

2. Earnings per Ordinary A share

					6 Months	6 Months	Year
					ended	ended	Ended
					30/09/2015	30/09/2014	31/03/2015
					£	£	£
(Loss)/profit for the purposes of basic earnings per ordinary share					(248,582)	(234,933)	263,573
Average number of shares basic  and diluted					2,662,402	2,662,402	2,662,402
EPS – basic (pence)					(9.4)p	(8.9)p	10.0p
EPS - diluted (pence)					(8.1)p	(7.7)p	8.3p

3. Trade and other receivables

					30/09/2015 £	30/09/2014 £	31/03/2015 £
Trade receivables
-Disbursement funding loans					4,026,598	4,584,612	4,065,173
- Property bridging loans   - Other trade debtors					- 22,026	131,371 237,960	- 42,660
Prepayments and accrued income					692,117	409,757	343,779
					4,740,741	5,363,700	4,451,612

4. Trade and other payables amounts falling due within one year     

					30/09/2015 £	30/09/2014 £	31/03/2015 £
Trade and other payables falling due within one year
Trade payables					45,911	163,646	18,025
Bank loans					580,044	685,933	680,043
Other taxation and social security					16,404	43,773	19,134
Accruals and deferred income					299,175	717,521	502,461
					941,534	1,610,873	1,219,663

Bank loans include a committed term loan secured by fixed and floating charges over the assets of the Sutherland Professional Funding Limited supported by a parent company guarantee to a maximum of £550,000.

5. Trade and other payables falling due after more than one year

					30/09/2015 £	30/09/2014 £	31/03/2015 £
Mortgage					467,376	540,329	481,782

The mortgages for Impact Property Management Limited are secured on the group’s freehold properties and supported by a parent company guarantee.

6. The Board of Directors approved the interim report on 17th December 2015.

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