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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ultimate Fin. | LSE:UFG | London | Ordinary Share | GB0031685414 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 25.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jul 2019 to Jul 2024
TIDMUFG
RNS Number : 6218O
Ultimate Finance Group PLC
21 September 2011
21 September
Embargoed until 07:00
Ultimate Finance Group plc
("Ultimate Finance", the "Company" or the "Group")
Final Results
Continued Growth & Increasing Market Opportunities
Ashley Integration ahead of expectations
Ultimate Finance Group plc (AIM:UFG), a leading provider of financial solutions to SMEs, is pleased to announce its Final Results for the year ended 30 June 2011.
Financial Highlights
-- Operating Profit has increased 103% to GBP904,000 (2010: GBP446,000)
-- Excluding acquisition, amortisation and group organisation related costs of GBP380,000, the operating profit would have been GBP1,284,000, up 146%
-- Turnover increased 51% to GBP9,706,000 (2010: GBP6,441,000)
-- Final dividend of 0.35p per share (2010: 0.30p)
-- A consistent level of headroom within the GBP34m banking facility of GBP6.3m
-- Earnings per share of 1.20p (2010: 1.33p)
Operational Highlights
-- Ashley integration has been achieved
o Cross-selling & joint marketing opportunities are being leveraged
-- The asset finance division has grown to plan
-- Investment has been made into the business to support further growth
o National presence has been increased to include Birmingham and Cardiff
o The sales team has been strengthened
Clive Garston, Chairman of Ultimate Finance Group plc, commented:
"I believe that this is a very strong performance, particularly given the economic and trading environment which existed in the period. The acquisition of Ashley Commercial Finance Ltd. in October last year has strengthened our range of products and services and provided excellent cross-selling opportunities
There is evidence that some of our competitors are adopting short term tactics to buy market share at the expense of unacceptable risk. We will not follow that path and will continue to maintain high standards of underwriting and risk management.
The Board remains optimistic about the prospects for the group and looks forward to the future with confidence."
For further information please contact:
Ultimate Finance Group plc Tel: +44 (0)845 251 3030 Richard Pepler, Chief Executive Shane Horsell, Finance Director Arbuthnot Securities Tel: +44 (0) 20 7012 2000 (Nominated Adviser and Joint Broker) Antonio Bossi / Paul Gillam WH Ireland Tel: +44 (0) 20 7220 1666 (Joint Broker) John Wakefield / Richard smith Threadneedle Communications Tel. +44 (0) 20 7653 9850 (Financial PR) Graham Herring / John Coles / Fiona Conroy
About Ultimate Finance Group plc
Ultimate Finance group is a leading provider of financial solutions to SMEs across the UK. The Company is headquartered in Bristol with offices in Manchester, Tunbridge Wells, Birmingham and Cardiff and through its three divisions, (invoice finance, asset finance, and trade finance), provides support to SMEs by funding their growth. As bank lending to SMEs is increasingly restricted in the current climate, the benefits of ultimate finance's flexible and fast-moving solutions become even more compelling.
The Company acquired Ashley Commercial Finance, an invoice finance company, in October 2010, which significantly broadened the Company's target market. This, coupled with the increased facility of GBP34 million from Lloyds TSB Commercial Finance, provides a strong platform for growth.
The Company boasts an experienced management team with over 55 years of combined experience in the invoice finance sector. With a diverse offering of products and services now available to its clients, ultimate finance is well placed to capitalise on the increasing demand for finance for SMEs.
Chairman's Statement
Results
I am pleased to report that for the full year ended 30 June 2011 Ultimate Finance has achieved a 103% rise in operating profit to GBP904,000 (2010: GBP446,000). The operating profit includes costs incurred in connection with the acquisition of Ashley Commercial Finance Ltd ("Ashley"), which was completed on 29 October 2010. The acquisition, amortisation and group reorganisation costs amounted to GBP380,000 (2010: GBP77,000). If these costs were excluded the operating profit would have risen by 146% to GBP1,284,000.
Turnover for the full year was up 51% to GBP9,706,000 (2010: GBP6,441,000). This includes turnover of GBP2,059,000 deriving from eight months' trading from Ashley.
Basic earnings per share amounted to 1.20p (2010: 1.33p). Adjusted earnings per share (excluding acquisition, amortisation costs and Group restructuring costs in relation to the Ashley acquisition) amounted to 2.10p (2010:1.83p). The results include an eight month contribution from Ashley.
I believe that this is a strong performance, particularly given the economic and trading environment during the period. The financial performance reflects the efforts which have been made to grow the business and it is pleasing that the client base grew during the period, with a substantial number of new clients having been gained.
Dividend
I am pleased to announce that the Company is proposing to pay a final dividend of 0.35p per share to be paid on 22 December 2011 to shareholders on the register at the close of business on 25 November 2011.
The Company will maintain a progressive dividend policy going forward and the Board has resolved that they intend to distribute to shareholders by way of dividend a significant proportion of retained profits in each financial year, subject to trading, profitability and the requirements of the business.
Funding
The Company currently enjoys a strong relationship with Lloyds TSB Commercial Finance and is financed with a GBP34 million back-to-back financing facility, which has a minimum term of three years, expiring in July 2013. We currently have GBP6.3m of headroom and no need to increase our finance arrangement.
Risk Management
The Directors' report and financial statements both discuss the risk management of the business fully.
Risk management is crucial to the success of the business and Ultimate Finance maintains high standards of underwriting and management of risk. The Company's credit control staff are experienced in both client and risk management. In the current economic climate there has inevitably been a marked increase in the number of business failures. As a result of this, the Company has had to be increasingly careful in guarding against the risk of fraud and financial failure. We are selective in growing client numbers and continually keep underwriting procedures under review.
Ultimate Finance remains robust in its strict underwriting procedures and risk management during these challenging times for the UK economy. This is reflected in our very low level of bad debt. In the longer term the market for factoring, invoice discounting and complementary products continues to present real growth opportunities and the recession has increased the level and quality of enquiries. The percentage of SMEs using receivable finance facility is relatively small and presents opportunities for the Group.
Our client base continues to represent an appropriate spread of risk in terms of size of investment, industry type and geographical location. The single largest investment at 30 June 2011 was GBP919,000 (2010: GBP1,199,000), which constituted 3% (2010: 5%) of total funds advanced.
People
Our senior management have performed well during the period and we continue to attract new recruits with a proven track record in the industry. The importance of a well-trained and dedicated workforce cannot be underestimated and the success of Ultimate Finance is entirely attributable to its committed team. I would like to thank all my co-directors and staff for their efforts in what have been difficult economic conditions.
Outlook
With the acquisition and successful integration of Ashley Commercial Finance, Ultimate is well placed to continue to grow. Trading continues to be challenging although demand for our services remains strong .We will continue to take the necessary steps to build solid, sustainable shareholder value from the opportunities that present themselves, but our growth rate will be influenced by economic conditions. Notwithstanding this we do expect our book to grow in the current year.
There is evidence that some of our competitors are adopting short term tactics to buy market share at the expense of unacceptable risk. We will not follow that path and will continue to maintain high standards of underwriting and risk management.
The Board remains optimistic about the prospects for the group and looks forward to the future with confidence
Clive R Garston
Chairman
Chief Executive's Review
Introduction
Ultimate Finance Group plc provides bespoke invoice discounting, factoring and asset finance facilities to the UK Small Medium Enterprise ("SME") market. Our clients range from promising start-ups to well established small and medium-sized businesses from a wide spectrum of sectors, covering manufacturing, distribution and services. Our service is underpinned by a robust risk management IT system which also provides clients with internet-based access to their account information in real-time.
We pride ourselves on our ability to deliver a flexible, responsive and supportive service and believe that this distinguishes us in the marketplace. This ability also enables us to have a high level of client retention. The encouraging level of new client enquiries alongside the positive feedback from intermediaries confirms our view that we have established a valuable and important niche in a crowded marketplace, where funding for SMEs presents many challenges given the broader macro-economic backdrop.
Whilst the economic climate has undoubtedly been challenging, this has created opportunities for the Group, as we are able to offer SMEs funding that would be difficult, or in some cases impossible, to achieve through traditional means. Consequently there is increasing demand for an alternative; Ultimate Finance's operational strength and flexible offering positions it well to support this demand from SMEs.
Developments and Prospects
Our clients give us the opportunity to be a good barometer of the economic climate and allow us to identify trends early. This enables us to react quickly to change, which we have done successfully over the years. Recession has created new opportunities: the reduction in lending by the banks and more recently, the Enterprise Finance Guarantee Scheme, has driven even more SMEs to look for alternative, more flexible solutions.
Ultimate Asset Finance Limited, launched in July 2010, has proven very complementary to our main invoice finance products and gives us greater sales opportunities and market presence. It operates either stand-alone, or can be combined with one of our invoice finance products to create more favourable growth conditions for our clients. In-line with management expectations, this division has had a strong performance in the year.
Our presence in the South East and North West has strengthened considerably over the last 12 months and new offices were also opened in Birmingham and Cardiff, allowing us to better service prospects and clients on a local basis. In particular the Group expanded its regional presence in the North West region through the acquisition of Ashley in the period.
Integration of Ashley Commercial Finance (ACF)
The Group continues to grow in terms of profitability and the acquisition of Ashley Commercial Finance Limited ("Ashley") in October 2010 has enhanced the Group's performance, contributing eight months of trading in the financial year. The Ashley business is highly complementary and provides Ultimate Finance with an enhanced offering and scale - as Ashley works with clients of a smaller size than Ultimate Finance's existing client base.
Ultimate Finance has already leveraged several client opportunities in terms of cross-selling and joint marketing. In addition, Ashley has moved into new, larger offices with Ultimate Finance's Manchester team, leveraging the cost-savings and operational synergies identified at the time of the acquisition. The integration has performed in-line with expectations to date, and the development of further potential solutions and/or product enhancements based on Ashley's expertise, systems and structure are currently being researched.
Facility with Lloyds TSB Commercial Finance
The acquisition of Ashley also led to Lloyds increasing the funding available to the enlarged Group to GBP34 million, providing further capacity for growth with GBP6.3m of headroom within this facility which is sufficient for our needs for some considerable time.
People
During the year we have appointed a number of significant, senior-level staff, and continue to promote those making invaluable contributions to the continued growth and success of the Group. We now have regional directors in most areas of the UK, offering clients a personal presence across an even greater geographical area and a much wider range of services and products.
Strategy
Our strategy remains to focus on the SME sector, from good quality start-up businesses to more established SMEs. As economic conditions continue to result in tightening credit, our services become increasingly attractive to SMEs - either to fund their growth or to support them through challenging times. Even in cases where traditional bank finance is available, many businesses seek alternative solutions in order to provide more flexibility.
Our clients are loyal and long-standing. We expect steady client growth as we continue to market our existing products and services, expand our sales team still further, and, look for opportunities to develop further complementary products to help SMEs. We believe we are ideally positioned as the economy recovers - bigger, stronger and with an increased share of this competitive market.
With banks continuing to keep a tight rein on lending and many more businesses looking for alternative, flexible solutions, we have continued to see a rise in the number of enquiries. However, we continue to be selective in taking on clients, applying strict underwriting procedures and avoiding taking unnecessary risks. Our approach has always been to focus on quality businesses with credible management teams, building close relationships with them so that we are aware of any important changes in circumstances at an early stage.
Consolidated Statement of Comprehensive Income
for year ended 30 June 2011
Hot Features
Premium
Note 2011 2010
GBP000 GBP000
Restated
Revenue 9,706 6,441
Cost of sales - finance costs (730) (536)
Cost of sales - other (403) (178)
--------- ----------
Gross profit 8,573 5,727
Administrative expenses (7,289) (5,204)
Administrative costs - other
Acquisition costs (118) (77)
Group reorganisation costs (60) -
Amortisation (202) -
--------- ----------
Total administrative expenses (7,669) (5,281)
--------- ----------
Operating profit 904 446
Finance expense (186) -
--------- ----------
Profit before tax 718 446
Taxation 2 (210) (179)
--------- ----------
Profit for the year being total
comprehensive income 508 267
========= ==========
Earnings per share 13
Basic 1.20p 1.33p
Diluted 1.18p 1.29p
All amounts are attributable to the owners of the parent.
Consolidated and Company statements of financial position
At 30 June 2011
Company number 04350565
Note Group Company
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Non-current assets
Investment in
subsidiary - - 7,052 64
Intangible asset 3 6,000 -
Property, plant and
equipment 499 222 - -
---------- ---------- --------- --------
6,499 222 7,052 64
---------- ---------- --------- --------
Current assets
Loans and other
receivables 6 34,656 26,336 2,683 3,113
Cash and cash
equivalents 8 963 556 - 1
---------- ---------- --------- --------
35,619 26,892 2,683 3,114
---------- ---------- --------- --------
Total assets 42,118 27,114 9,735 3,178
========== ========== ========= ========
Current liabilities
Bank borrowings and
overdrafts 8 (27,937) (22,988) - -
Trade and other
payables 10 (4,186) (887) (1,466) (9)
Bank loans 7 (400) - (400) -
Tax payable (310) (160) - -
---------- ---------- --------- --------
(32,833) (24,035) (1,866) (9)
Non-current
liabilities
Bank loans (1,288) - (1,288) -
---------- ---------- --------- --------
Contingent
consideration (1,053) - (1,053) -
---------- ---------- --------- --------
Other payables (441) - - -
---------- ---------- --------- --------
Deferred tax liability 5 (111) (8) - -
---------- ---------- --------- --------
(2,893) (8) (2,341)
Total liabilities (35,726) (24,043) (4,207) (9)
========== ========== ========= ========
Net assets 6,392 3,071 5,528 3,169
========== ========== ========= ========
Equity attributable to
owners of the parent
Share capital 12 2,479 1,000 2,479 1,000
Share premium 11 3,505 1,949 3,505 1,949
Retained earnings 11 408 122 (456) 220
---------- ---------- --------- --------
Total equity 6,392 3,071 5,528 3,169
========== ========== ========= ========
These financial statements were approved by the board of directors on 20 September 2011 and were signed on its behalf by:
Richard Pepler
Director
Consolidated and company statements of cash flows
for year ended 30 June 2011
Note Group Company
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Cash flows from
operating activities
Profit before tax for
the year 718 446 (425) (127)
Adjustments for:
Depreciation,
Amortisation and
impairment 324 49 - -
Financial income - - (68) -
Financial expense 186 - 177 -
Loss/(profit) on
sale of PPE 1 - - -
Equity settled
share-based payment
expenses 12 7 - -
---------- ---------- --------- --------
1,241 502 (316) (127)
(Increase)/decrease
in loans and other
receivables (3,449) (7,316) 419 239
Increase/(decrease)
in trade and other
payables 1,223 443 53 8
(Decrease)/increase
in tax payable (18) 37 - (10)
---------- ---------- --------- --------
(2,244) (6,836) 472 237
Tax paid (158) (18) - -
---------- ---------- --------- --------
Net cash from operating
activities (1,161) (6,352) 156 110
Cash flows from
investing activities
Acquisition of
subsidiary net of
cash acquired (6,524) - (3,700) -
Proceeds from sale
of equipment 5 - - -
Acquisition of
property, plant and
equipment (336) (199) - -
---------- ---------- --------- --------
Net cash outflow from
investing activities (6,855) (199) (3,700) -
Cash flows from
financing activities
Proceeds from issue
of share capital 2,750 - 2,750 -
Issue costs on issue
of ordinary shares (648) - (648) -
Financial income - - 68 -
Financial expense (65) - (64) -
Repayment of long term
borrowings (200) (200)
Proceeds from long term
borrowings 1,871 1,871
Dividends paid (234) (110) (234) (110)
---------- ---------- --------- --------
Net cash from financing
activities 3,474 (110) 3,543 (110)
---------- ---------- --------- --------
Net
(decrease)/increase
in cash and cash
equivalents (4,542) (6,661) (1) -
Cash and cash
equivalents at 1 July (22,432) (15,771) 1 1
Cash and cash
equivalents at 30 June 8 (26,974) (22,432) - 1
Consolidated and company statements of changes in equity
for year ended 30 June 2011
Share Retained
Consolidated Capital Share premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
30 June 2009 1,000 1,949 (42) 2,907
Total
comprehensive
income - - 267 267
Equity-settled
share based
payment
transactions - - 7 7
Dividends paid - - (110) (110)
---------- --------------- --------------- ---------
30 June 2010 1,000 1,949 122 3,071
New shares
issued 1,479 2,204 - 3,683
Share issue
costs - (648) - (650)
Equity-settled
share based
payment
transactions - - 12 12
Dividends paid - - (234) (234)
Total
comprehensive
income - - 508 525
---------- --------------- --------------- ---------
30 June 2011 2,479 3,505 408 6,392
========== =============== =============== =========
Share Retained
Company Capital Share premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
30 June 2009 1,000 1,949 450 3,399
Capital
contributions
in respect of
share options - - 7 7
Dividends paid - - (110) (110)
Total
comprehensive
income - - (127) (127)
---------- --------------- --------------- ---------
30 June 2010 1,000 1,949 220 3,169
New shares
issued 1,479 2,204 - 3,683
Share issue
costs - (648) - (648)
Dividends paid - - (234) (234)
Total
comprehensive
income - - (442) (442)
---------- --------------- --------------- ---------
30 June 2011 2,479 3,505 (456) 5,528
========== =============== =============== =========
1. Accounting policies
Basis of preparation and statement of compliance
Ultimate Finance Group plc (the "company") is a company incorporated in the UK.
The group financial statements consolidate those of the company and its subsidiaries (together referred to as the "group"). The financial statements were approved by the board of directors on 20 September 2011.
The group and company financial statements have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union ("adopted IFRSs"), and its interpretations adopted by the International Accounting Standards Board ("IASB") or the International Financial Reporting Interpretations Committee ("IFRIC") of their predecessors, which had been approved by the European Commission at 30 June 2011.
On publishing the parent company financial statements here together with the group financial statements, the company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual statement of consolidated income and related notes that form a part of these approved financial statements.
The financial statements are presented in Pounds Sterling, the group's functional and presentational currency.
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue during the reporting period. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Information about such judgments and estimates are discussed in note 2.
The directors have not adopted the following standards, which although endorsed by the EU are not yet effective:
- IAS24 Related party disclosures (Revised), effective from 1 January 2011
- Improvements to IFRSs 2010 (Amendment clarifying the requirements of IFRSs), effective from 1 January 2011
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
Basis of consolidation
The financial information contained in the group financial statements represent the results, cash flows, assets and liabilities of the company and its subsidiaries made up to 30 June each year. Subsidiaries are entities controlled by the group. Control exists when the group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
All income and expenses and unrealised gains and losses arising on transactions between entities within the group, and balances between entities within the group that exist at the balance sheet date, are eliminated on consolidation.
In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.
Going Concern
The Group is financed with a GBP34,000,000 back to back financing facility, which is in place until July 2013.
The availability of this facility and the access of funds from Lloyds TSB Commercial Finance Ltd in the short to medium term supports the directors in their opinion that the going concern basis of preparation is appropriate.
Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Cost comprised the fair value of assets given, liabilities assumed and equity instruments issues. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows).
Goodwill is allocated on initial recognition to each of the Group's cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill. Impairment charges are included in the administrative expenses line item in the consolidated statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.
Revenue recognition
Revenue comprises fees for the provision of invoice financing and trade financing services, net of Value Added Tax, and is recognised as follows:
Interest income
Interest income is recognised in the income statement for all financial assets measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period. The effective interest rate (EIR) is the rate that exactly discounts estimated future cash flows through the expected life, or contractual term if shorter, of the financial asset to the net carrying amount of the financial asset. When calculating the EIR, the company estimates cash flows considering all contractual terms of the financial instruments, but does not include an expectation for future credit losses. Interest income is calculated and applied to clients' accounts on a daily basis.
Service fee income
The company charges its clients a factoring fee for managing their sales ledgers which is based on the value of invoices assigned. The variable fee for each particular assignment of invoices is then recognised as revenue on a straight line basis over the average repayment period of the assigned invoices, reflecting the provision of the management service over the life of those invoices. On average this will be approximately 60 days.
Other fee income
Other fee income, which includes disbursements, is credited to the income statement when the service has been provided or the disbursement expenditure incurred. Foreign exchange gains for Trade finance transactions are shown within other fee income.
Asset finance income
Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the group's net investment outstanding in respect of the leases.
Expenses
Operating lease payments
Leases are categorised as operating leases where the lessor retains substantially all the risks and rewards of ownership of the leased asset.
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease.
Asset finance and finance leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risk and rewards of ownership to the lessee. Assets leased to customers on finance leases are recognised within trade receivables in the Statement of Financial Position at the amount of the group's net investment in the lease.
Borrowing costs
Borrowing costs in relation to the back-to-back financing facility with Lloyds TSB Commercial Finance are shown within cost of sales. The facility is used to finance loans provided to clients and is backed by the underlying debts of the clients.
Interest on other loans and borrowings is charged using the effective interest rate method. Interest expense in this context includes initial transaction costs as well as any interest or coupon payable while the liability is outstanding.
Taxation
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the temporary differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.
Share-based payment transactions
The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase recognised in retained earnings within equity, over the period in which the employees become unconditionally entitled to the options. The fair value of the options granted is measured at grant date using an option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is due only to share prices not achieving the threshold for vesting.
Where the company grants options over its own shares to the employees of its subsidiaries it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the management team including the Chief Executive, Group Managing Director and Finance Director.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
-- plant and equipment 3 years
-- fixtures and fittings 2-5 years
Investments
Investments in subsidiaries are carried at cost less provisions for impairment.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within the other administrative expenses line in the consolidated statement of comprehensive income.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.
Financial assets
Management determine the classification of the group's financial assets at initial recognition into one of the following categories - loans and other receivables, held-to-maturity financial assets, available-for-sale financial assets and financial assets at fair value through profit or loss. The group has not held any held-to-maturity, available for sale financial assets or financial assets at fair value through profit or loss at any point during the year.
All financial assets are initially measured at fair value plus, in the case of financial assets not classified as a fair value through income statement, transaction costs that are directly attributable to their acquisition.
The group initially recognises advances to clients and deposits on the date that they are originated. These balances are included in loans and other receivables and are initially recognised at fair value and subsequently measured at amortised cost less impairment losses.
The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition, minus principal repayments, plus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
The group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Assets held under finance leases are recognised as assets at their fair value or, if lower, at the present value of the minimum lease payments each determined at the inception of the lease, The corresponding liability is included in the statement of financial position as a finance lease obligation.
Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.
Dividends on the ordinary shares, which are classified as financial liability, are treated as finance costs and are recognised on an accruals basis when there is a legal liability to pay at the reporting date.
Impairment of loans & receivables
In respect of loans and receivables, the group assesses on an ongoing basis whether there is objective evidence that an individual loan asset is impaired. If any such indication exists, the assets' recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Impairment losses are reversed through the income statement if there is a change in the estimates used to determine the recoverable amount.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The back to back financing facility with Lloyds TSB Commercial Finance forms an integral part of the group's cash management and as such is included as a component of cash and cash equivalents for the purpose only of the statement of cash flows. The borrowing on this back to back financing facility is shown as a current liability in the statement of financial position.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
2. Taxation
Recognised in the Statement of Comprehensive income
2011 2010
GBP000 GBP000
Current tax expense
Current year 295 159
Adjustments for prior years (51) -
-------- --------
244 159
Deferred tax expense
Origination and reversal of temporary differences (34) 23
Adjustment in respect of prior year - (3)
-------- --------
(34) 20
-------- --------
Total tax in income statement 210 179
======== ========
Reconciliation of effective tax rate
2011 2010
GBP000 GBP000
Profit before tax 718 446
======== ========
Tax using the UK corporation tax rate of 27.5%
(2010:28.0 %) 197 125
Non-deductible expenses 62 57
Prior year adjustment (50) (3)
Impact of change in tax rate (1) -
-------- --------
Total tax expense 210 179
======== ========
3. Intangible Assets
Customer
Goodwill Website relationships Total
GBP000 GBP000 GBP000 GBP000
Cost
Balance at 1 July 2010 - - - -
Acquired through
business combinations
(note 11) 5,339 181 682 6,202
---------- --------- ---------------- --------
Balance at 30 June 2011 5,339 181 682 6,202
========== ========= ================ ========
Balance at 1 July 2010 - - - -
Amortisation charge for
the year - 50 152 202
---------- --------- ---------------- --------
Balance at 30 June 2011 - 50 152 202
========== ========= ================ ========
Net book value
At 30 June 2011 5,339 131 530 6,000
---------- --------- ---------------- --------
Current estimates of useful economic lives of intangible assets are as follows:
Goodwill - indefinite
Website - 3 years
Customer relationships - 3 years
Goodwill has arisen on the acquisition of Ashley Commercial Finance Ltd. Management have carried out an impairment test on this goodwill and based on their projections of cashflows arising from future profits no impairment of this goodwill is required.
The Goodwill recorded all relates to the acquisition of Ashley Commercial Finance in the year. Management have concluded that this represents one Cash Generating Unit (CGU). The recoverable amount of the CGU has been determined from value in use calculations based on cash flow projections over ten years from formally approved budgets covering a three year period to June 2014.
The major assumptions used are as follows:
Discount rate 10%
Growth rate 3.65%*
The growth rate for cash flows from operating activities applies only to the period beyond the formal budgeted period with the value in use calculation based on an extrapolation of the budgeted cash flows for years 3-5. Growth rates beyond the first five years are based on the long term UK growth rate of 2%.
Operating margins have been based on past experience and future expectations in the light of anticipated economic and market conditions. Discount rates are based on the group's beta adjusted to reflect management's assessment of specific risks related to the cash generating unit. The recoverable amount for the CGU exceeds its carrying amount by GBP460,000. Were the discount rate to increase to 11.5% then this would result in the carrying value and recoverable amount being approximately equal.
4. Acquisitions during the period
On 29 October 2010 the Group acquired 100% of the voting equity instruments of Ashley Commercial Finance Ltd, a company whose principal activity is factoring. The principal reason for this acquisition was to allow Ultimate to access a new pool of clients and introducers, a different segment of the market and strengthening the Ultimate's presence in the north west of England, whilst benefiting from joint-marketing and cross-selling to respective client bases, particularly in the debtor protection, trade finance and asset finance categories.
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Book value Adjustment Fair Value
GBP000 GBP000 GBP000
Website 181 - 181
Customer relationships - 682 682
Property, plant & equipment 70 - 70
Trade & other receivables 4,952 - 4,952
Cash & cash equivalents 483 - 483
Borrowings and overdrafts (3,307) - (3,307)
Corporation tax payable (143) - (143)
Trade & other payables (1,182) - (1,182)
Deferred tax -- (99) (99)
1,054 583 1,637
On acquisition, Ashley held trade receivables with a book and fair value of GBP4,012,000 representing contractual receivables of GBP4,258,000. Whilst the Group will make every effort to collect all contractual receivables, it considers it unlikely that the GBP246,000 will ultimately be received.
Consideration paid
GBP000
Initial consideration
Cash 3,700
Ordinary Shares 6,666,666 at GBP0.14 933
--------
Total initial consideration 4,633
Contingent consideration 2,343
--------
Total consideration 6,976
Goodwill note 3 5,339
========
The fair value of the shares issued was determined by reference to their quoted market price of GBP0.14 at the date of acquisition.
The contingent consideration is contingent and dependent on profits generated by Ashley Commercial Finance Ltd, over a two year period following the date of acquisition. The amount included above represents the directors best estimate of the amount payable which they consider is likely to be paid. This is payable in 2 tranches, GBP1,350,000 in January 2012 and GBP1,350,000 in January 2013. Each tranche is payable based on the profits of Ashley for the years ended 31 October 2011 and 31 October 2012. Should Ashley achieve their expected profits in these periods, the maximum payable is GBP2,700,000 which equates to the directors best estimate of the amounts payable.
The main factors leading to the recognition of goodwill are: the presence of certain intangible assets, such as the expertise of the workforce of Ashley Commercial Finance Ltd and synergistic cost savings which result in the Group being prepared to pay a premium.
The goodwill recognised will not be deductible for tax purposes.
Since the acquisition date Ashley Commercial Finance Ltd has contributed GBP2,059,000 to group revenue and GBP680,000 to group profits. If the acquisition had occurred on 1 July 2010, it would have contributed GBP3,010,000 to group revenue and GBP847,000 to group profits.
Cash and cash equivalents on acquisition include both the cash and cash equivalents balance of GBP483,000 and the back-to-back facility included within borrowings and overdrafts of GBP3,307,000. Therefore, total cash and cash equivalents as at the acquisitions date were (GBP2,844,000). The statement of cash flows includes 'acquisition of subsidiary net of cash acquired' of GBP6,524,000. This is comprised of cash consideration paid of GBP3,700,000 less the cash and cash equivalents acquired of (GBP2,844,000).
5. Deferred tax assets and liabilities - Group
Recognised deferred tax liabilities
Deferred tax liabilities are attributable to the following and are shown as a non-current liability on the consolidated and company statement of financial position:
2011 2010
GBP000 GBP000
Intangible assets (99) -
Other timing differences 18 (8)
Accelerated capital allowances (30) -
-------- --------
Net tax liabilities (111) (8)
======== ========
Movement in deferred tax during the year
GBP000
Brought forward (8)
Deferred tax arising on business acquisitions re: intangibles (138)
Origination and reversal of timing differences- recognised
in the statement of comprehensive income 35
(111)
========
6. Loans and other receivables
Group Company
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Loans and receivables 34,267 25,780 - -
Prepayments 324 437 13 159
Loan to subsidiary undertaking - - 2,670 2,954
Other receivables 65 119 - -
-------- -------- -------- --------
34,656 26,336 2,683 3,113
======== ======== ======== ========
7. Cash and cash equivalents / bank borrowings
Group Company
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Cash and cash equivalents
per statement of financial
position 963 556 - 1
Bank borrowings and overdrafts (27,937) (22,988) - -
---------- ---------- -------- --------
Cash and cash equivalents
per cash flow statements (26,974) (22,432) - 1
========== ========== ======== ========
8. Loans and borrowings
The book value and fair value of loans and borrowings (due within one year) are as follows:
Group and Company Book value Fair Value Book Value Fair Value
2011 2011 2010 2010
GBP000 GBP000 GBP000 GBP000
Bank loans(secured) 400 400 - -
============ ============ ============ ============
The loan originally for GBP2m was used to partially finance the acquisition of Ashley Commercial Finance Ltd.
9. Non-current liabilities
The table below shows the ageing of non-current liabilities:
5 years
Group 1 - 2 years 2 - 5 years + Total
GBP000 GBP000 GBP000 GBP000
Bank loans (secured) (400) (888) - (1,288)
Asset finance payables (267) (174) - (441)
Contingent consideration (1,053) - - (1,053)
------------- ------------- --------- ---------
(1,721) (1,062) - (2,782)
============= ============= ========= =========
5 years
Company 1 - 2 years 2 - 5 years + Total
GBP000 GBP000 GBP000 GBP000
Bank loans (secured) (400) (888) - (1,288)
Contingent consideration (1,053) - - (1,053)
(1,453) (888) - (2,341)
10. Trade and other payables
Group Company
2011 2010 2011 2010
GBP000 GBP000 GBP000 GBP000
Trade payables (2,071) (413) - -
Other payables and accrued
expenses (2,115) (474) (1,466) (9)
--------- -------- --------- --------
(4,186) (887) (1,466) (9)
========= ======== ========= ========
11. Reserves
The following describes the nature and purpose of each reserve within owners' equity:
Share capital: amount subscribed for share capital at nominal value
Share premium: amount subscribed for share capital in excess of nominal value
Retained earnings: cumulative net gains and losses recognised in the consolidated income statement
12. Share capital
The movements of share capital in the year are shown below:
Allotted, called up and fully paid
2011 2010
Number GBP000s Number GBP000s
Ordinary shares of GBP0.05
each
Beginning of the year 19,997,018 1,000 19,997,018 1,000
Shares issued 22,916,668 1,146
Shares issued as
consideration in
acquisition (note 4) 6,666,666 333
At end of the year 49,580,352 2,479 19,997,018 1,000
============ ========= ============ =========
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company.
On 29 October 2010 22,916,668 shares were issued at 12p per share for cash consideration. Issue costs of GBP648,000 were included in this transaction.
13. Earnings per share
The basic earnings per share for the year to 30 June 2011 has been calculated from the profit on ordinary activities after taxation of GBP508,000 (2010: GBP267,000) and on the weighted average number of ordinary shares in issue during the year of 42,285,967 (2010: 19,997,018).
The company has dilutive potential ordinary shares in respect of the 'Company Share Option Plan'. The diluted earnings per share amounts to 1.18p (2010: 1.29p) and is based on profit on ordinary activities after taxation of GBP508,000 (2010: GBP267,000) and 42,905,206 ordinary shares being the weighted average of the shares in issue during the year adjusted to assume conversion of all dilutive potential ordinary shares (2010: 20,724,743).
The adjusted earnings per share for the year to 30 June 2011 has been calculated from the profit on ordinary activities after taxation (before acquisition, group reorganisation and amortisation costs of GBP380,000) of GBP888,000, (2010: GBP366,000) and on the weighted average number of ordinary shares in issue during the year of 42,285,967 (2010 19,997,018).
2011 2010
Pence Pence
Basic earnings per share 1.20 1.33
Diluted earnings per share 1.18 1.29
Adjusted Basic earnings per share 2.10 1.83
14. Preliminary Statement of Results
This preliminary statement was approved by the Board on 20 September 2011. It is not the company's statutory accounts.
The statutory accounts for the year ended 30 June 2011 have been audited and have been approved by the Board of directors on 20 September 2011. The audit report issued is unqualified. Copies of the Directors' Report and Consolidated Financial Statements will be available on the company's website www.ultimatefinance.co.uk and from the Group's Bristol office, Bradley Pavilions, Pear Tree Road, Bradley Stoke, Bristol BS32 0BQ and will shortly be posted to those shareholders who have requested copies to be sent to them.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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