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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Sumus | LSE:SUMU | London | Ordinary Share | GB00B0630574 | ORD 0.5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 39.45 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:2452M Sumus plc 22 January 2008 22 January 2008 Sumus Plc 2007 Preliminary results Sumus Plc ('Sumus', the "Company" or the 'Group'), the AIM listed holding company for IFA businesses providing investment and financial advisory services and network support services to IFA firms, today announces its preliminary results for the year ended 30 September 2007. Highlights Revenue up 96% to £29.8m (2006: £15.2m) Operating profit up 94% to £1.24m (2006: £639,000) Profit before tax up 76% to £1.51m (2006: £857,000) Basic earnings per share up 64% to 3.55p (2006: 2.17p) Total dividend per share for year up 47% to 1.0p (2006: 0.68p) Cash generated from operating activities up 54% to £1.59m (2006: £1.03m) Cash balances up 19% to £5.1m (2006: £4.3m) Number of advisers up 6% to 335 (2006: 315) Average revenue per adviser up 7% to £92,000 (2006: £86,000 as restated to reflect a full year's contribution from FSAS) Acquisition of 50.1% of Deverill Black & Company Limited in June 2007, immediately earnings enhancing Establishment of Brunel Fund of Funds OEIC - nearly £5 million invested to date Continuing investment in technology and senior management infrastructure financed from operating cash flow The Group's IFA networks ranked first in the Henry Samuel Market Research Survey* Commenting on the results, Allan Rosengren, Chief Executive said; "Sumus has continued its impressive performance despite the challenges of today's equity and investment markets. Reassuringly, the performance is reflected right through to the EPS level which demonstrates the success of our strategy of expanding through carefully considered earnings enhancing acquisitions and strong organic growth. This growth has been achieved whilst also improving our balance sheet strength. The Group's current cash balances exceed £5m, providing a strong platform to pursue further suitable acquisitions and to invest in management and systems within the business. Our strategy going forward remains unchanged. The IFA market has seen discerning investors consult more closely with their advisers in times of volatility and uncertainty. The 'reputational pull' of our network affords us the opportunity for sustained organic growth while the continued fragmentation of the IFA market place provides many acquisition opportunities for Sumus to consider. We look forward to another successful year in 2008." Contact Paul Bradshaw 07931 511 936 Chairman - Sumus Plc Allan Rosengren 0117 9330777 CEO - Sumus Plc 07973 511941 Peter Smith 0117 9330777 FD - Sumus Plc 07713 885286 Tom Griffiths / Neil Kirton Arbuthnot Securities 020 7012 2000 Tom Cooper / Paul Vann 0117 9200092 Winningtons Financial 0797 122 1972 Chairman's Statement I am pleased to present the results for the year ended 30 September 2007. The Group has continued to perform creditably during a year of increasing volatility, in both debt and capital markets. During the year, we bedded in FSAS which has proved itself a timely and profitable acquisition. In June we acquired 50.1% of one of our most successful Appointed Representative firms, Deverill Black & Company Limited, increasing both our gross margins and operating profits. We have continued to develop added value investment services, for both our advisers and our clients. Overall, the Group has made excellent progress and the strong management team is to be congratulated on a further significant and profitable year. Financial performance Pre-tax profits have increased by 76% to £1.51 million reflecting a first time full year contribution from FSAS. Cash generated from operating activities amounted to £1.59 million (an increase of 54% over 2006), with cash balances rising by 18% to £5.1 million, notwithstanding ongoing corporate activity. The Board is recommending a final dividend of 0.68p per share, payable on 29 February 2008 to shareholders on the register on 1 February 2008, subject to shareholder approval at the forthcoming Annual General Meeting. This makes a total dividend for the year of 1.00p per share, which represents an increase of 47% on 2006 and is 3.4 times covered. Corporate activity The acquisition of 50.1% of Deverill Black & Company Limited in June was important as it increased our exposure to fee based and annually recurring revenue. The business continues to perform strongly under the leadership of Iain Black. FSAS contributed strongly to the Group's results in 2007, generating revenue and operating profit of £15.2 million and £351,000 respectively. This is an excellent result and I heartily congratulate the entire team at FSAS on such an outstanding performance. The strong trading resulted in an increase in the deferred consideration payable of £247,000 over the original estimate at the time of the acquisition, with £1.063 million being paid in December 2007, half in cash and half in new shares - a great outcome for all concerned. Brunel Funds The Brunel Funds investment proposition was formally launched in March 2007. These products give Sumus an opportunity to participate more actively and derive more value from offering Independent Financial Advice and associated investment management services. Funds raised to date have been below plan, amounting to just under £5 million by 30 September 2007, against a backdrop of stagnant equity markets. We remain committed to this strategic development, have significantly strengthened the management and will focus hard on increasing volumes in the coming periods. Market developments The past year has witnessed a growing realisation in the broader market that there is significant value in independent financial advice and in distribution and we have witnessed both new entrants and more aggressive peer companies seeking to participate in this sector. We welcome more sophisticated investors taking a greater interest in our market, but we have to recognise that the future may drive more demanding valuations for our own acquisition activity. We remain totally committed to only entering into transactions which will be immediately earnings enhancing. The Retail Distribution Review has generated uncertainty in the sector and we await developments with much interest. We are committed to the belief that, irrespective of regulation, the ever more sophisticated consumers of financial advice will always place a premium on high quality independent advice. The uncertainty introduced by the potential changes to Capital Gains Tax is most unwelcome and has impacted on conditions within some of our market sectors, but overall demand for advice has held up well. Technology provision to the IFA market place continues to develop and it will be increasingly important for all businesses operating within the IFA space. Clearly there is now emerging opportunity to identify and deliver productivity and efficiency gains together with more innovative product and service offerings in order to maintain margin and differentiate us from our competitors. Our excellent track record of being a reliable partner to all of our stakeholders leaves us well placed to grow and develop as this dynamic market evolves over future years. Current trading Progress in the current year is satisfactory with trading (including a full contribution from Deverill Black) at acceptable levels. Your Board will continue to focus on delivering value through a combination of organic growth, profitable acquisition, joint venture and partnership arrangements, and I look forward to another successful year. Paul Bradshaw Chairman Chief Executive's Review During the year Sumus continued to grow organically. We further strengthened our executive team, embedded the FSAS business acquired in September 2006, launched the Brunel Funds and cemented our relationship with Deverill Black & Company Limited, one of our most productive Appointed Representative firms, by acquiring 50.1% of that company. The Group delivered against its objectives during the year under review and I am delighted to report on an excellent set of results for the year ended 30 September 2007. As mentioned in the Chairman's Statement, our key performance indicators give a very positive overview of the Group's performance during the year and its financial position as at 30 September 2007. Group revenue and pre-tax profit both increased significantly to £29.8 million and £1.5 million respectively, whilst cash balances grew to £5.1 million and the Group remained debt free. We have recommended a 47% increase in the total dividend for the year, as noted in the Chairman's Statement. I will comment on the main events at operating areas of the Group as follows: Acquisition of 50.1% of Deverill Black & Company Limited ("Deverill Black") On 5 June 2007 the Company acquired 50.1% of the issued share capital of Deverill Black, one of the most productive Appointed Representative businesses of The Falcon Group Plc ("Falcon"), the Company's wholly owned IFA network subsidiary, for £750,000. This secured the continued retention of that business, with its well above average level of annual fee based and further recurring revenues. The transaction was immediately earnings enhancing, as well as providing Iain Black, the principal of the firm who, until December 2006, was a non-executive director of the Company, with a partial realisation of capital. Acquisition of Financial Services Advisory and Support Limited (FSAS) The integration of FSAS has proceeded very well and during the year under review FSAS contributed additional revenue and operating profit of £15.2 million and £351,000 respectively, exceeding our already high expectations at the time of the acquisition. This was an excellent performance and the executive management team at FSAS are to be congratulated on the results generated. As a result the final deferred contingent consideration payable under the sale and purchase agreement for FSAS, based on its results for the year ended 30 September 2007, exceeded our estimate at the time of the acquisition of £816,000 and a final payment of £1.063 million, settled 50% in cash and 50% by the issue of new shares, was made on 28 December 2007. Corporate interests Sumus owns 100% of Falcon, 100% of FSAS, 50.1% of Deverill Black and 85% of Financial Synergies Plc. We also work with other large independent financial advisory businesses through the IFA Consortium, which welcomed its fifth member, Alpha to Omega (UK) Limited, in November 2007. Brunel Funds The Group launched its Brunel Funds OEIC in March 2007, offering both Growth and Distribution sub-funds and providing Fund of Funds investments managed by Premier Asset Management Plc. Although funds inflows have been somewhat slower than anticipated, albeit against a backdrop of challenging UK equity and commercial property markets, we remain confident that, over the medium term, these funds will offer an attractive, carefully risk managed investment for clients, whilst enabling the Group to develop and participate in asset management revenues. The Group continues to encourage the growth of recurring income and advice fees to reduce the dependency on initial commission. We view the Brunel Funds as important in achieving this objective. Growth and Group Development During 2007 we further increased our team of advisers, with the number of Registered Individuals reaching 335 as at 30 September 2007 (2006: 315). Average annual revenues generated per adviser at Falcon and FSAS amounted to £97,000 and £88,000 respectively (2006: £100,000 and £73,000 respectively). During the year we have again strengthened our senior management team resources. Tim Collyer joined as Head of Investment Solutions in June 2007 and in October 2007 Stephen Gazard and Louise Whelan were appointed to the Board of Falcon. Stephen joined Falcon as Head of Group Development in July 2006 and Louise has managed Falcon's Compliance and Risk Management Department for a number of years. These appointments reflect the considerable contribution they have both made and add depth to and strengthen the senior operations team within Falcon. Risk management and the proactive provision of high levels of client care remain of paramount importance to the Group. We continue to add to our operational resources, investing in systems and processes. During the year we initiated a remotely hosted, web based server IT environment which, once fully available to our advisers, will enable the delivery of significantly increased functionality and centralised mobile data access for advisers whilst enhancing security and data integrity features. Client demand for appropriate and properly advised financial products and services remains high. Particular emphasis is placed on investments, pensions and tax mitigation strategies, including inheritance tax planning. Following a full year contribution from FSAS, some 62% of our gross revenue in 2007 was derived from investment, pension and tax planning advice, with the balance being from mortgage and protection advice. Approximately 80% of all revenue is earned on a non-indemnified basis, and some 20% of all revenue is derived from client fees and recurring income from renewals, trail and fund based sources. Strategy and Prospects Demand for financial advice in the UK remained strong during the year. Whilst equity and debt markets have proved challenging in recent months, business levels appear to be holding up well. The Group's demonstrable skills in mitigating client risk and providing holistic and truly independent financial advice across the whole of the market will continue to stand us in good stead. Cash resources remain substantial at £5.1 million having increased from £4.3 million in 2006 - despite the £565,000 initial net cash outlay (including costs) in respect of the Deverill Black transaction. After allowing for the minimum regulatory capital adequacy requirements within our regulated subsidiaries, in excess of £2 million remains available for investment or acquisitions to expand the Group. Sumus is profitable, self-sustaining and has no debt. It has grown its revenues by on average 25% or more per annum, over the last several years. Our aim is to be a cost effective and efficient provider of services and associated benefits to those high quality advisers and businesses that are looking to offer excellent client service, manage their risks for the long-term and build value. We focus on delivering value added transactions and organic growth opportunities that fit with our business strategy, thus we aim for them to be earnings enhancing from an early stage and for them to offer good long term growth prospects. Where new advice or product opportunities are identified - such as the Brunel Funds offering - we will develop them in ways that maintain and enhance our existing proposition whilst always focusing on what is appropriate for clients. We maintain our core principles of delivering sustainable and profitable growth, effective risk management and providing independent financial advice across the whole of the market in order to serve the best interests of the Group, our clients and all of our stakeholders. Outlook The Board is enthused by the opportunities we see for developing the business during the coming year and with the scale and capabilities we have within the Group, I am confident that we will enjoy continued success in 2008. Our achievements are made possible by the efforts of a great many people across the Group. I thank them all for doing what they do so very well. Allan Rosengren Chief Executive Consolidated income statement for the year ended 30 September 2007 2007 2006 Notes (as restated) £'000 £'000 Revenue 1 29,757 15,196 Cost of sales (25,687) (12,662) --------- ---------- Gross profit 4,070 2,534 Administrative expenses excluding depreciation and amortisation (2,785) (1,867) --------- ---------- Earnings before interest, tax, depreciation and amortisation 1,285 667 Depreciation and amortisation (43) (28) --------- ---------- Operating profit 3 1,242 639 Finance income 4 263 218 --------- ---------- Profit before tax expense 1,505 857 Tax expense 7 (457) (259) --------- ---------- Profit for the year 1,048 598 ========= ========== Attributable to equity holders of the Company 1,008 597 Minority interests 24 40 1 --------- ---------- Earnings per share - from continuing operations and acquisitions Basic 8 3.55p 2.17p Fully diluted 8 3.41p 2.08p ========= ========== Consolidated statement of changes in equity for the year ended 30 September 2007 2007 2006 £'000 £'000 Balance at start of year As originally stated 4,876 3,823 Adjustment for elimination of goodwill amortisation under IFRS (see note 25) 17 - Adjustment for reclassification of shares to be issued in respect of deferred contingent consideration as non-current liability under IFRS (see notes 15 and 25) (408) - --------- ------- As restated 4,485 3,823 Profit for the year (2006 as restated) 1,048 598 Minority interests (40) (1) Dividends paid (220) (150) Issue of shares 225 215 --------- ------- Balance at end of year 5,498 4,485 ========= ======= Consolidated balance sheet as at 30 September 2007 Notes 2007 2006 (as restated) £'000 £'000 Assets Non-current assets Property, plant and equipment 9 90 52 Intangible assets 10 2,736 1,733 Investments 11 27 27 -------- --------- Total non-current assets 2,853 1,812 -------- --------- Current assets Trade and other receivables 13 1,888 1,896 Cash and cash equivalents 5,064 4,283 -------- --------- Total current assets 6,952 6,179 -------- --------- Total assets 9,805 7,991 ======== ========= Current liabilities Trade and other payables 14 (1,853) (1,797) Tax liabilities 14 (358) (135) Provision for contingent consideration 14 (1,063) (-) -------- --------- Total current liabilities 14 (3,274) (1,932) -------- --------- Non-current liabilities Provision for contingent consideration 15 - (816) Other provisions 16 (977) (757) -------- --------- Total non-current liabilities (977) (1,573) -------- --------- Total liabilities (4,251) (3,505) ======== ========= Net assets 5,554 4,486 ======== ========= Equity Issued share capital 17 143 141 Share premium 18 2,897 2,674 Merger reserve 18 160 160 Retained earnings 18 2,298 1,510 -------- --------- -------- --------- Total equity attributable to equity holders of 5,498 4,485 the company Minority interests 24 56 1 -------- --------- -------- --------- Total equity 5,554 4,486 ======== ========= The financial statements were approved by the Board of Directors and authorised for issue on 22 January 2008. Consolidated cash flow statement for the year ended 30 September 2007 2007 2006 (as restated) £'000 £'000 Profit before tax expense 1,505 857 Adjustments for: Depreciation and amortisation 44 28 Finance income (263) (218) Changes in working capital (excluding the effects of acquisitions): Trade and other receivables 51 (97) Trade and other payables 33 314 Other provisions 220 147 ------- -------- Cash generated from operating activities 1,590 1,031 Tax (paid)/received (364) (325) ------- -------- Net cash from operating activities 1,226 706 ------- -------- Cash flows from investing activities Finance income received 263 218 Acquisition of subsidiaries (Group - net of cash acquired) (445) (416) Purchase of property, plant and equipment (43) (22) ------- -------- Net cash used by investing activities (225) (220) ------- -------- Cash flows from financing activities Dividends paid (220) (150) ------- -------- Net cash used in financing activities (220) (150) ------- -------- Net increase in cash and cash equivalents 781 336 Cash and cash equivalents at start of year 4,283 3,947 ------- -------- Cash and cash equivalents at end of year 5,064 4,283 ======= ======== Notes to the preliminary announcement for the year ended 30 September 2007 Sumus is a company incorporated in England and Wales. The financial statements are presented in pounds sterling, and were authorised for issue by the directors on 22 January 2008. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"). 1 Basis of preparation and significant accounting policies Basis of preparation The preparation of the Group financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. The key estimates and assumptions are set out in the accounting policies below, together with the related notes to the financial statements. Such estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and constitute management's best judgement at the date of the financial statements. In the future, actual experience may deviate from these estimates and assumptions, which could affect the financial statements at the original estimates. Assumptions are modified, as appropriate, in the year in which the circumstances change. The financial statements have been prepared on the historical cost basis. The accounting policies set out below have, unless otherwise stated, been applied consistently by the Group to all years presented in these financial statements. Basis of consolidation The consolidated financial statements include the financial statements of Sumus Plc and its subsidiaries. There are no associates or joint ventures to be considered. Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group uses the purchase method of accounting to account for the acquisition of subsidiaries (with the exception of The Falcon Group Plc, which was acquired and consolidated in 2000 using the merger method of accounting). The cost of an acquisition is measured at 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 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. Revenue Revenue represents fees and commissions receivable from product providers and clients, excluding VAT. Revenue is only recognised when there is persuasive evidence that a contract exists, the fee is fixed or determinable and collection of the resulting receivable is considered probable. Full provision is made for all known or expected losses. Revenue is recognised on a receivable basis, net of any claw backs where applicable. Commission earned on indemnity terms is included in the financial statements when it is considered due. A provision for lapses on commission received on an indemnity basis is included within the financial statements. Revenue recognised but not yet received at the year end is included as accrued income, when due from providers or clients, or as trade debtors when due from Appointed Representatives. Goodwill Goodwill is determined by comparing the amount paid, including the full undiscounted value of any deferred and contingent consideration, on the acquisition of a subsidiary or associated undertaking, and the group's share of the aggregate fair value of its separable net assets. Goodwill is capitalised and is subject to annual impairment reviews in accordance with applicable accounting standards. Acquired customer relationships (including Appointed Representative contracts) The value of acquired customer relationships is determined by estimating the net present value of the future profits expected from those customer relationships that relate to contracts covering a pre-determined period or having a definite useful economic life, and the resultant carrying value is amortised to the income statement over that estimated useful economic life. Where the relationships have an indefinite estimated useful economic life, the carrying value is subject to annual impairment reviews in accordance with applicable accounting standards. In the case of Appointed Representative contracts, the directors consider that these have an indefinite useful economic life as the contracts are with Appointed Representative firms, rather than individual financial advisers or their clients. Deferred and contingent consideration Deferred and contingent consideration payable is shown as a creditor within current or non-current liabilities (as appropriate) on the balance sheet to the extent that a contractual obligation exists, or may exist, to make payment in cash. Where the consideration is payable by way of a variable number of shares equal in value to the amount of the contractual obligation, the shares to be issued are shown as a financial liability. Segment reporting A business segment is a distinguishable component of a group engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographic segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. Depreciation Property, plant, and machinery are stated at cost less accumulated depreciation. Depreciation on these assets is provided at rates estimated to write off the cost, less estimated residual value, of each asset over its expected useful life as follows: Leasehold improvements - over the period of the lease Fixtures, fittings and equipment - 4 years Taxation Current tax, including UK corporation tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is provided in full in respect of temporary differences between the treatment of certain items for taxation and accounting purposes. Deferred tax assets are recognised where unused tax losses are available to offset against future profits and where there is convincing evidence that sufficient taxable profits will be available against which the unused tax losses can be offset. Leasing and hire purchase commitments Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the income statement so as to produce constant periodic rates of charge on the net obligations outstanding in each period. All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Provisions Provisions for client compensation claims and for lapses in respect of indemnity commission are recognised where the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligations and the amount has been reliably estimated. Amounts recoverable from third parties in respect of such claims or lapses are included within "Trade and other receivables" where such recovery is reasonably certain. Defined contribution pension scheme The pension costs charged in the financial statements represent the contributions payable by the Group during the year. The Group operates two defined contribution schemes for the benefit of its employees. Contributions payable are charged to the income statement in the period to which they relate and are invested separately from the Group's assets. Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Trade payables Trade payables are stated at their nominal value. Future changes in accounting standards Certain new standards, amendments and interpretations to existing standards have been published that will be applicable to the financial statements of the Group in future years. These comprise the following which relate to the presentation and disclosure of information in the financial statements: IFRS 7, Financial Instruments: Disclosures (effective for periods beginning on or after 1 January 2007); IFRS 8, Operating Segments (effective for periods beginning on or after 1 January 2009); IAS 1 Presentation of Financial Statements: a Revised Presentation (effective for periods beginning on or after 1 January 2009). Certain interpretation documents ("IFRICs") have been published that relate to accounting treatments as follows: IFRIC 10, Interim Financial Reporting and Impairment (effective for periods beginning on or after 1 November 2006), which provides guidance on whether certain impairment losses should subsequently be reversed; and IFRIC 11 - IFRS 2, Group and Treasury Share Transactions (effective for periods beginning on or after 1 March 2007), which provides guidance on share-based transactions. Other new IFRICS that are not considered to be relevant to Group operations are: IFRIC 12, Service Concession Arrangements; IFRIC 13, Customer Loyalty Programmes; and IFRIC 14 - IAS 9: The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction. 2 Segment reporting The Group operates in one primary business segment, being that of supplying Independent Financial Advice (IFA) and IFA Network services. In the opinion of the directors the risks and returns of each class of business e.g. investment, pensions, assurance and mortgage products are not significantly different from each other and so they make up one business segment as a whole. Further information concerning the revenues achieved for each class of business is set out in the Chief Executive's Review. The secondary segment is geographic and as the Group operates wholly within the UK no further segmental analysis is appropriate. 3 Operating profit Operating profit is stated after charging: 2007 2006 £'000 £'000 Depreciation 27 28 Amortisation of intangible assets 17 - Operating lease rentals - land and buildings 126 97 - other assets 18 1 Fees receivable by the Group's auditors: Audit of financial statements 43 28 Other services relating to taxation 9 8 Services relating to corporate finance transactions 4 14 Other services 23 8 ======== ======== Of the services relating to corporate finance transactions, £4,450 (2006, £20,000) has been capitalised as part of the acquisition cost of subsidiaries. 4 Finance income 2007 2006 £'000 £'000 Bank interest receivable 263 218 ======== ======== 5 Employees' and directors' remuneration The average monthly number of employees (including the directors) during the year were: 2007 2006 Management and administrators 43 25 ======== ======== Their total remuneration was: 2007 2006 £'000 £'000 Wages and salaries 1,237 707 Social security costs 116 66 Pension costs 89 64 -------- -------- 1,442 837 ======== ======== The employees' and directors' remuneration is reflected in the financial statements within administration expenses. Directors' emoluments can be analysed as follows: 2007 2006 £'000 £'000 Remuneration and other emoluments 373 301 Less amount charged as part of the cost of the acquisition of subsidiaries (10) (35) -------- -------- 363 266 ======== ======== 2007 2006 £'000 £'000 Highest paid director 111 101 ======== ======== There are two directors to whom retirement benefits are accruing under a money purchase scheme (2006: 2). Contributions of £60,000 were paid during the year (2006: £60,000). 6 Pension costs The Group operates a number of defined contribution pension schemes, one for the benefit of 2 executive directors and the others for the benefit of certain employees. The schemes and their assets are held by independent managers. The pension charge represents contributions due from the Group which amounted to £89,000 (2006: £64,000). 7 Tax expense 2007 2006 £'000 £'000 Current tax charge 457 259 Deferred tax - - -------- -------- Tax expense for the year 457 259 ======== ======== Factors affecting the tax expense for the year Profit before tax 1,505 857 -------- -------- Profit before tax multiplied by standard rate of UK corporation tax of 30% (2006: 30%) 452 257 Effects of: Non-deductible expenses 12 2 Depreciation in excess of capital allowances (2) 1 Tax losses utilised (2) (1) Amortisation of intangibles 5 - Benefit of lower tax rate (1) - Prior year adjustments (7) - -------- -------- Current tax charge 457 259 ======== ======== 8 Earnings per share The calculation of basic earnings per share is calculated by dividing profit attributable to the equity shareholders of the Company of £1,008,000 (2006: £597,000) by the weighted average number of shares in issue during the year. 2007 2006 Profit for the year attributable to equity holders of the Company £1,008,000 £597,000 Weighted average number of shares for basic earnings per share 28,374,439 27,544,660 -------- -------- Basic earnings per share 3.55p 2.17p ======== ======== Fully diluted earnings per share is calculated by dividing profit attributable to the equity shareholders of the Company of £1,008,000 (2006: £597,000) by the weighted average number of shares in issue during the year and the actual number of shares issued as deferred consideration subsequent to the year end. 2007 2006 Profit for the year attributable to equity holders of the Company £1,008,000 £597,000 Fully diluted weighted average number of shares 29,532,533 28,744,660 -------- -------- Fully diluted earnings per share 3.41p 2.08p ======== ======== 9 Property, plant and equipment Leasehold Fixtures, Total improvements fittings and equipment £'000 £'000 £'000 Cost At 30 September 2005 22 125 147 Additions - 22 22 On acquisition of subsidiary - 25 25 Disposals - - - ---------- ----------- --------- At 30 September 2006 22 172 194 ---------- ----------- --------- Additions - 43 43 On acquisition of subsidiary - 57 57 Disposals - - - ---------- ----------- --------- At 30 September 2007 22 272 294 ---------- ----------- --------- Depreciation At 30 September 2005 17 88 105 Charge for the year 4 24 28 On acquisition of subsidiary - 9 9 Disposals - - - ---------- ----------- --------- At 30 September 2006 21 121 142 Charge for the year 1 26 27 On acquisition of subsidiary - 35 35 Disposals - - - ---------- ----------- --------- At 30 September 2007 22 182 204 ---------- ----------- --------- Net book value At 30 September 2007 - 90 90 At 30 September 2006 1 51 52 At 30 September 2005 5 37 42 ========== =========== ========= 10 Intangible fixed assets Goodwill Acquired Acquired Total Appointed Representative contracts customer relationships Cost £'000 £'000 £'000 £'000 At 30 September 2005 6 - - 6 Additions - - 1,727 1,727 -------- --------- ---------- ------- At 30 September 2006 6 - 1,727 1,733 Additions - 773 - 773 Adjustment to deferred contingent consideration - - 247 247 -------- --------- ---------- ------- At 30 September 2007 6 773 1,974 2,753 -------- --------- ---------- ------- Amortisation At 30 September 2005 and 2006 - - - - Charge in year - 17 - 17 -------- --------- ---------- ------- At 30 September 2007 - 17 - 17 -------- --------- ---------- ------- Net book value At 30 September 2007 6 756 1,974 2,736 ======== ========= ========== ======= At 30 September 2006 6 - 1,727 1,733 ======== ========= ========== ======= At 30 September 2005 6 - - 6 ======== ========= ========== ======= The addition during the year arose on the acquisition of 50.1% of the issued share capital of Deverill Black & Company Limited. The remaining amortisation period for these assets as at 30 September 2007 was 14 years and 8 months. Further details are set out in note 12 below. The intangible asset arising in respect of the Acquired Appointed Representative contracts relates to the fair value of the contractual relationships between FSAS and its Appointed Representative firms, where FSAS is considered to be a cash generating unit ("CGU") as defined by International Accounting Standard No. 36. The recoverable amount of the intangible asset arising from the acquisition of that CGU has been determined based on fair value less costs to sell. The initial fair value was derived from an observable market price when FSAS was acquired in September 2006. Based on the performance of FSAS since that date, the directors consider that the recoverable amount of the CGU has increased and therefore the carrying value of this intangible asset has not been impaired. £17,000 previously charged as amortisation of goodwill arising on the acquisition of Financial Services Advice and Support Limited ("FSAS") in 2006 under UK GAAP has been credited back to the income statement in the comparative information for that year following the transition to IFRS. This is required as the associated goodwill has now been re-classified as an intangible asset arising from the acquisition of the underlying Appointed Representative Contracts of FSAS (see note 25). 11 Investments Listed investment at cost £'000 At 30 September 2006 and 2007 27 ====== The market value of the listed investment as at 30 September 2007 was £127,000 (2006: £113,000). 12 Investments in subsidiary undertakings The Company has the following subsidiary undertakings: Name Principal Activity Holding Registered The Falcon Group Plc IFA and IFA network services 100% England & Wales Financial Services Advice and Support Limited IFA network services 100% Scotland Financial Synergies Plc Commission aggregation services 85% England & Wales Deverill Black & Company Limited IFA services 50.1% England & Wales These companies have all prepared accounts to 30 September 2007. Details of the movements and adjustments arising from the acquisition of subsidiary undertakings during the year were as follows: Purchase of subsidiary undertaking - Deverill Black & Company Limited On 5 June 2007 the Company acquired 50.1% of the issued ordinary share capital of Deverill Black & Company Limited ("Deverill Black"). This was acquired for £750,000 plus costs, paid by £525,000 in cash and £225,000 by the issue of new ordinary shares of 0.5p in the Company, issued as fully paid. The fair values of the identifiable assets and liabilities of Deverill Black at the date of acquisition were as follows: Net assets acquired Book value Revaluation Fair value £'000 £'000 £'000 Goodwill 109 (109) - Tangible fixed assets 22 - 22 Trade and other receivables 43 - 43 Cash at bank and in hand 122 - 122 Trade and other payables (23) - (23) Corporation tax (130) - (130) ---------- -------- -------- Net assets 143 (109) 34 ========== ======== ======== Group share at 50.1% 17 Acquisition costs (40) Group's share of intangible assets arising on consolidation - customer relationships (note 10) 773 -------- 750 ======== Satisfied by Shares allotted 225 Cash paid 525 -------- 750 ======== The intangible assets identified relate to the Group's share of the estimated fair values of the customer relationships of Deverill Black as at the date of acquisition. The £225,000 share payment was made by way of an issue of 512,528 new ordinary shares fully paid to the vendors. Fair value for these shares was set at 43.9p, being the average mid market price of the Company's shares for the five business days immediately preceding the date of issue. These shares are subject to a 12 month lock-in arrangement whereby for that period following the date of acquisition no sales may be made without the prior written consent of the Company which may be withheld for any reason. The shares are also subject to an orderly marketing restriction for the subsequent 12 months following the end of the lock-in period. Prior years - Deverill Black & Company Limited The summarised income statement of the acquired entity for the 27 week period from the beginning of its financial year on 1 December 2006 to the effective date of acquisition, and for its previous financial year, is set out below. 27 weeks to Year ended 5 June 2007 30 November 2006 £'000 £'000 Revenue 387 920 Cost of sales (61) (105) ------- -------- Gross profit 326 815 Administrative expenses (113) (468) ------- -------- Operating profit and profit before tax expense 213 347 Tax expense (51) (78) ------- -------- Profit after tax 162 269 ======= ======== Reconciliation of amounts paid for acquisition of Deverill Black & Company Limited £'000 Cash consideration paid (525) Acquisition costs (40) Net cash balances acquired 122 ------- Net cash outflow on acquisition (443) ======= Deferred consideration in respect of prior year acquisition - Financial Services Advice and Support Limited ("FSAS") On 7 September 2006 the Company acquired 100% of the issued share capital of FSAS. The consideration payable was an initial amount of £859,000, settled by a cash payment of £644,000 and by the issue of 728,745 new ordinary shares of 0.5p each in the Company, fully paid, with a fair value of £215,000, and a further amount of deferred consideration up to a maximum of £1,141,000. The deferred consideration was to be calculated as a multiple of the Earnings Before Interest and Tax ("EBIT") of FSAS for the year ended 30 September 2007 and at 30 September 2006 was estimated at £816,000. The results of FSAS for the year ended 30 September 2007 have now been finalised and the deferred consideration payable has been agreed at £1,063,132. This was settled on 28 December 2007 and, in accordance with the provisions of the related sale and purchase agreement, was satisfied by a cash payment of £531,566 and by the issue of 1,158,094 new ordinary shares of 0.5p each in the Company, fully paid, with a fair value of £531,566. Acquisition of 15% of the issued share capital of Financial Synergies Plc In June 2007 the Company acquired a further 15% of the issued share capital of Financial Synergies Plc, a company in which it previously held a 70% stake. The consideration for the shares acquired was their partly paid up nominal value of £1,875 and the fair value of assets acquired was £1,725. 13 Trade and other receivables 2007 2006 (as restated) £'000 £'000 Trade receivables 115 90 Other receivables 36 100 Amounts recoverable from advisers and insurers in respect 777 610 of compensation claims and lapses (see note 16) Prepayments 167 178 Accrued income 793 918 Owed by subsidiary undertakings - - --------- -------- 1,888 1,896 ========= ======== The amounts recoverable from advisers and insurers in respect of compensation claims and lapses may not be recoverable within 12 months as the related provisions are held in respect of both current and future estimated compensation claims and lapses. In prior years such amounts were netted off the related provisions. Further details are set out in note 15 below. 14 Trade and other payables 2007 2006 £'000 £'000 Trade payables 668 910 Corporation tax 358 135 Other taxes and social security costs 48 31 Other creditors 351 318 Deferred contingent consideration (note 15) 1,063 - Accruals and deferred income 786 538 Owed to subsidiary undertakings - - ------- ------- 3,274 1,932 ======= ======= 15 Provision for non-current contingent consideration 2007 2006 (as restated) £'000 £'000 Deferred and contingent - 816 consideration ====== ======= Deferred and contingent consideration - 816 ====== ======= The deferred and contingent consideration in 2006 was the estimated additional deferred consideration payable after 30 September 2007 in respect of the acquisition of FSAS in September 2006. This amount was subject to an earn-out based on the EBIT of FSAS for the year ended 30 September 2007 (see note 12), was to be settled as to 50% in cash and 50% by the issue of new ordinary shares of 0.5p each in the Company, fully paid and was not due to be settled until December 2007. In the 2006 financial statements, the resultant estimated cash creditor as at 30 September 2006 was included within non-current liabilities with an equivalent amount being credited to share capital to be issued (see note 17). This treatment is not in accordance with IAS 32 and, following the transition to IFRS in the year ended 30 September 2007, the comparative figures as at 30 September 2006 have been restated to include the whole of the estimated deferred contingent consideration of £816,000 as at that date as a non-current liability. The equivalent deferred contingent consideration creditor as at 30 September 2007, which has been increased by £247,000 following the finalisation of the EBIT of FSAS for the year then ended, has been transferred to current liabilities and was settled in full on 28 December 2007. 16 Other provisions Client Lapses Total compensation claims £'000 £'000 £'000 At 1 October 2005 As previously reported 50 48 98 Adjustment to show the provision gross of amounts recoverable from advisers and insurers 253 240 493 ----------- ---------- ------------- As restated 303 288 591 Acquisition of subsidiary - 19 19 Utilised in year ----------- ---------- ------------- As previously reported (41) (276) (317) Adjustment to show the provision gross of amounts recoverable from advisers and insurers - (12) (12) ----------- ---------- ------------- As restated (41) (288) (329) Charge to income statement ----------- ---------- ------------- As previously reported 71 276 347 Adjustment to show the provision gross of amounts recoverable from advisers and insurers 129 - 129 ----------- ---------- ------------- As restated 200 276 476 ----------- ---------- ------------- At 30 September 2006 ----------- ---------- ------------- As previously reported 80 67 147 Adjustment to show the provision gross of amounts recoverable from advisers and insurers 382 228 610 ----------- ---------- ------------- As restated 462 295 757 Utilised in year (81) (308) (389) Charge to income statement 168 441 609 ----------- ---------- ------------- At 30 September 2007 549 428 977 =========== ========== ============= Client compensation claims A provision is held in relation to current and future client complaints across all product types. The assumptions used are based on previous experience and factors prevailing currently in the financial services industry. The amount provided is shown in these financial statements as the gross obligation, with the associated recovery from financial advisers and insurers being included within "Trade and other receivables" where such recovery is reasonably certain (see note 13). In prior years the amount provided was shown net of such anticipated recoveries and the comparative figures have been restated accordingly. There was no impact on profits as previously reported from this change in presentation, which was made in order to bring the Group in line with current industry practice. As at 30 September 2007, the recoverable amounts were estimated at £449,000 (2006: £382,000). Lapses for indemnity commissions The provision for lapses reflects the estimated clawback by product providers of commissions received under indemnity terms for future policy lapses. The assumptions used are based on current experience taking into account actual commission clawback in the last twelve months. The amount provided is shown in these financial statements as the gross obligation, with the associated recovery from financial advisers being included within "Trade and other receivables" where such recovery is reasonably certain (see note 13). In prior years the amount provided was shown net of such anticipated recoveries and the comparative figures have been restated accordingly. There was no impact on profits as previously reported from this change in presentation, which was made in order to bring the Group in line with current industry practice. As at 30 September 2007, the recoverable amounts were estimated at £328,000 (2006: £228,000). Deferred taxation The potential deferred tax liabilities of the Group were not material at either 30 September 2006 or 2007 and calculated at 30% arose as follows: 2007 2006 £'000 £'000 Accelerated capital allowances 1 (5) ======= ======= Financial instrument risks The Group is not subject to significant risks arising from financial instruments. The Group does not have any utilised borrowing facilities, it does not trade in foreign currencies, and there are therefore no material differences between the fair value and liabilities of such exposures. As at 30 September 2007, there were balances at the bank totalling £5,064,000 (2006: £4,083,000). These accounts earn interest at variable interest rates. 17 Share capital Authorised 2007 2006 £'000 £'000 200,000,000 Ordinary shares of 0.5p each 1,000 1,000 ======== ========= Allotted, called up and fully paid Share capital Share capital No. of shares £'000 At 1 October 2005 27,500,000 137 Issue of shares on acquisition of subsidiary 708,745 4 --------- --------- At 30 September 2006 28,208,745 141 Issue of shares on acquisition of subsidiary 512,528 2 --------- --------- At 30 September 2007 28,721,273 143 ========= ========= On 5 June 2007 512,528 new ordinary shares of 0.5p each were issued, fully paid, at a value of 43.9p per share pursuant to the acquisition of 50.1% of Deverill Black & Company Limited (see note 12). The nominal value of those shares has been credited to share capital and the resultant premium on issue has been credited to the share premium account. In the 2006 financial statements £408,000 was included as shares to be issued in respect of the deferred and contingent consideration payable in respect of the acquisition of FSAS in September 2006. This has now been reclassified as a non-current liability in the comparative figures for the year ended 30 September 2006 following the transition to IFRS during the year. Further details of the movements are set out in notes 15 and 25. 18 Reserves Share premium Merger reserve Retained earnings £'000 £'000 £'000 At 1 October 2005 2,463 160 1,063 Premium on shares issued in the year (note 17) 211 - - Profit for the year ---------- --------- ----------- As previously reported - - 580 Adjustment on implementation of IFRS - write back of goodwill amortisation - - 17 ---------- --------- ----------- As restated - - 597 Dividends paid - - (150) ---------- --------- ----------- At 30 September 2006 ---------- --------- ----------- As previously reported 2,674 160 1,493 IFRS adjustment as above - - 17 ---------- --------- ----------- As restated 2,674 160 1,510 Premium on shares issued in the year (note 17) 223 - - Profit for the year - - 1,008 Dividends paid - - (220) ---------- --------- ----------- At 30 September 2007 2,897 160 2,298 ========== ========= =========== Share premium account The share premium account records the consideration premium arising on shares issued at a value that exceeds their nominal value, less any costs incurred by the Company relating directly to the issue of those shares. Details of the shares issued during 2006 and 2007 and the related premiums are set out above and in note 17. Merger reserve This reserve arose on a capital re-organisation undertaken in December 2000, whereby the Company acquired the whole of the issued share capital of The Falcon Group Plc by way of a share for share exchange. The balance on the reserve represents the excess of fair value of the assets acquired over the fair value of the consideration paid as at that date. 19 Related party transactions The Company has a related party relationship with its subsidiaries, its directors and other employees of the Company with management responsibility for the Company's affairs. In the opinion of the directors there are no members of key management, as defined by IAS 24 (Related Party Disclosures), who were not also directors of the Company during either 2006 or 2007. During the year the Company paid SMS Advisory Limited, a company controlled by P J Smith, a director of the Company, fees and expenses totalling £89,689, including VAT, in respect of director's services supplied and in connection with the acquisition of subsidiary undertakings (2006: £95,091). At 30 September 2007 the amount due to SMS Advisory Limited was £4,911 (2006: £4,554). During the year the Company paid Paul Bradshaw Consulting Limited, a company controlled by P Bradshaw, a director of the Company, fees and expenses totalling £19,103, including VAT, in respect of non-executive director's services supplied (2006: £Nil). At 30 September 2007 the amount due to Paul Bradshaw Consulting Limited was £2,146 (2006: £Nil). The Falcon Group Plc, a subsidiary undertaking of the Company, paid property rents totalling £99,317 during the year (2006: £96,000) to Capitecs Limited, a company under the control of A Rosengren and J P Telling who are directors of the Company and also of that company. At 30 September 2007 the amount due to Capitecs Limited was £Nil (2006: £Nil). With effect from 31 May 2007 Financial Services Advice and Support Limited ("FSAS") entered into a lease to occupy office premises in Dunfermline. Capitecs Limited, a company under the control of A Rosengren and J P Telling who are directors of the Company and also of that company, has a one-third interest in that property. The rents paid in the period to 30 September 2007 in respect of these premises amounted to £5,000, excluding VAT (2006: £Nil) and no amounts were due to or from Capitecs Limited under these arrangements as at 30 September 2007 (2006: £Nil). In June 2007 the Company provided an unsecured loan of £10,000 to FSAS to enable it to meet its minimum financial resources requirement under the Financial Services Authority's capital adequacy regime. The loan is unsecured, bears interest at 1% over LIBOR and is not repayable until 30 June 2009, unless the borrower elects to repay the loan early and subject to the approval of the Financial Services Authority. During the year the Company entered into certain transactions with its wholly owned subsidiary, The Falcon Group Plc, involving short term cash transfers, the defrayal of costs by either company on the other's behalf and recharged group relief to that company. The amounts involved were interest free and have no fixed repayment terms. 20 Ultimate parent undertaking and controlling interest There is no ultimate controlling party of the Company. 21 Operating leases At 30 September 2007 the Group had minimum commitments under non-cancellable operating leases as set out below: Land and Land and Other assets Other assets buildings buildings 2007 2006 2007 2006 £'000 £'000 £'000 £'000 Due within: One year - - - - Two to five years 101 11 15 11 Over five years 45 96 - - -------- -------- -------- -------- Total minimum lease payments 146 107 15 11 ======== ======== ======== ======== The Group leases four office spaces under operating leases. The outstanding lease terms range from less than five years to twenty years. Lease terms of greater than five years are subject to a rent review under the lease term. 22 Dividends 2007 2007 £'000 £'000 Final dividend at 0.46p per share (2006: 0.327p per share) 130 90 Interim dividend at 0.32p per share (2006: 0.22p per share) 90 60 -------- -------- 220 150 ======== ======== As stated in the Chairman's Statement, the directors recommend payment of a final dividend of 0.68 pence per share, making a total dividend for the year of 1.00 pence per share (2006: 0.68 pence per share), subject to shareholder approval at the Annual General Meeting on 26 February 2008. This dividend will be paid on 29 February 2008 to shareholders on the register at 1 February 2008. The ordinary shares will become ex-dividend on 30 January 2008. These financial statements do not reflect this dividend payable, which will be accounted for in the statement of changes in equity as an appropriation of retained earnings in the year ending 30 September 2008. 23 Business combinations The amount of operating profit since the acquisition date of acquired companies included within the Group's income statement is as follows: 2007 2006 £'000 £'000 Financial Services Advice and Support Limited - 8 Deverill Black & Company Limited 102 - ====== ====== The revenues and profits of the Group for the year, had the acquisition of Deverill Black & Company Limited been made at the beginning of the year, would have been as follows: Consolidated Pre-acquisition Total for the income trading of year ended statement Year Deverill Black 30September2007 ended & Company as though the 30September2007 Limited 1 acquisition October 2006 - date was 4June2007 1October2006 £'000 £'000 £'000 Turnover 29,757 - 29,757 Operating profit 1,242 268 1,510 ======= ======= ======= 24 Minority interests £'000 At 1 October 2005 - Share of profit after tax expense for the year 1 ------- At 30 September 2006 1 Arising on acquisition of 50.1% of Deverill Black & Company Limited in June 2007 17 Arising on acquisition of a further 15% of Financial Synergies Plc in June 2007 (2) Shares of profits after tax expense for the year 40 ------- At 30 September 2007 56 ======= The minority interests comprise minority shareholders' interests in the net assets of the following subsidiary undertakings. 2007 2006 % Minority Shareholding Deverill Black & Company Limited (50.1% acquired June 2007 - see note 12) 49.9% - Financial Synergies Plc (additional 15% acquired June 2007 - see note 12) 15% 30% ======= ======= 25 Explanation of transition to IFRS These are the Group's first annual financial statements prepared in accordance with IFRS. The accounting policies referred to in note 1 have been applied in preparing the financial statements for the year ended 30 September 2007, the comparative information for the year ended 30 September 2006, and the preparation of an opening IFRS balance sheet at 1 September 2005, the Group's date of transition to IFRS. In preparing its opening IFRS balance sheet and comparative information for the year ended 30 September 2006, the Group has adjusted amounts reported previously in financial statements prepared in accordance with UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position and financial performance is set out below. There have been no changes to the Group's cash flows as a result of the transition. Summary of changes resulting from the adoption of IFRS: (a) Goodwill and intangible assets on Business Combinations Previously under UK GAAP, the excess of the fair value of consideration payable in respect of the acquisition of subsidiary undertakings over the fair value of the underlying assets acquired, after deducting the costs of such acquisitions, was included on the Group balance sheet as goodwill and then amortised over the estimated useful economic lives of the related investments, up to a maximum of 20 years. The gross balance of goodwill as at 30 September 2006 was £1,733,000 (2006: £6,000) of which £1,727,000 arose on the acquisition of FSAS in September 2006. The charge to profit and loss account for amortisation of goodwill in the year ended 30 September 2006 was £17,000. No amortisation of goodwill was recorded prior to 1 October 2005. Under IFRS 3 (Business Combinations) it is necessary to identify and separate out those intangible assets that can be separately identified when acquired as part of a business combination. Such assets should be included at their estimated fair value as at the date of acquisition. Upon reviewing the accounting for the acquisition of FSAS as previously adopted under UK GAAP, it was considered that all of the value previously identified and attributed to goodwill should, under IFRS 3, be attributed to the fair value of FSAS's contractual relationships with its Appointed Representative firms. In addition, in the opinion of the directors these assets have indefinite useful economic lives as the contracts are with Appointed Representative firms, not individual financial advisers or their clients, and as such no amortisation is required. Instead, the fair value of such assets is assessed on an annual basis and provision is made for any impairment identified. As a result of the above, £1,727,000 previously included as goodwill in the Group's balance sheet has been reclassified as an intangible assets as at 30 September 2006 (2005: £Nil) and the amortisation of £17,000 previously charged to profit and loss account has been credited back to the income statement in the comparative figures for the year ended on that date. The net effect is to increase intangible assets by £1,727,000 and reduce goodwill by £1,710,000 as at 30 September 2006 and to increase profit for the year then ended by £17,000. (b) Classification of shares to be issued Previously under UK GAAP, shares to be issued as contingent consideration for acquisitions were included as a component of equity under FRS 7 (Fair Values in Acquisition Accounting). Under IAS 32 (Financial Instruments: Presentation), where the number of shares to be issued are variable and equal in value to the amount of the contractual obligation, these are to be presented as financial liabilities and not as equity. The amount included in the 2006 financial statements was reclassified accordingly, and this led to a reduction in equity and a corresponding increase in non-current liabilities of £408,000. This adjustment affected the balance sheet only. As a result of the two matters above, the profit for the year ended 30 September 2006 increased by £17,000 from £581,000 to £598,000. The impact on total equity as at 30 September 2006 was to decrease it from £4,877,000 to £4,486,000. In addition, and as detailed in note 15, £408,000 of deferred contingent consideration in respect of the acquisition of FSAS in 2006 which was previously included as shares to be issued within equity as at 30 September 2006 has been transferred to non-current liabilities in the comparative figures following the transition to IFRS during the year. The net effect of the above is to increase non-current liabilities and reduce shares to be issued (and therefore total equity) as at 30 September 2006, as previously reported, each by £408,000 in the Group's balance sheet as at that date. There was no impact on the net assets as previously reported as at 30 September 2005 or on the profit for the year as previously reported for the year ended 30 September 2006. 26 Capital commitments There were no capital commitments as at 30 September 2007 (2006: £Nil). 27 Client money The total balance on client bank accounts managed by the Group as at 30 September 2007 was £260,262 (2006: £217,185). 28 Cash and cash equivalents This represented cash and cash equivalents only at each year end. There was no debt at either 30 September 2006 or 2007. 29 Subsequent event On 28 December 2007 the Company settled the deferred, contingent consideration due in respect of the acquisition of FSAS in September 2006 in a total amount of £1,063,132. This was satisfied by a cash payment of £531,566 and by the issue of 1,158,094 new ordinary shares of 0.5p each in the Company, issued as fully paid and valued at 45.9p per share. Further details are set out in note 12. 30 Statutory accounts The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 30 September 2007. The financial information for the year ended 30 September 2006 is derived from the financial statements of the Group for that period, which were reported on by the auditors without qualification and such report did not contain any statement under section 237(2) or (3) of the Companies Act 1985. The financial statements for the year ended 30 September 2006 have been delivered to the Registrar of Companies; those for the year ended 30 September 2007 will be finalised on the basis of the financial information contained in this preliminary announcement and will be delivered to the Registrar of Companies after the forthcoming Annual General Meeting. Notes to Editors Sumus, admitted to AIM in February 2005, is the group holding company of The Falcon Group Plc ("Falcon"), a long established and consistently profitable IFA group, Deverill Black & Company Limited, one of Falcon's Appointed Representative firms, Financial Synergies Plc and Financial Services Advice and Support Limited ("FSAS"). Falcon was founded in 1983 by Allan Rosengren and Julian Telling, respectively the Group Chief Executive and Group Operations Director of Sumus. Sumus is a consolidator in the IFA sector, both by way of the organic expansion of its operating businesses and through carefully selected investments in IFA firms, which then become authorised through either Falcon or FSAS. The Sumus Group provides strategic direction, working capital, compliance and risk management resources to the IFA businesses within its networks. *The Henry Samuel Market Research Survey is a well respected IFA industry survey which measures service levels of IFA Networks to their membership. This information is provided by RNS The company news service from the London Stock Exchange END FR FKDKBCBKDDDB
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