Cleardebt Group PLC
02 October 2007
ClearDebt Group Plc
('ClearDebt' or 'the Group')
Preliminary Results for the year ended 30 June 2007
ClearDebt Group Plc, the Aim Quoted IVA provider is pleased to announce its
preliminary financial results for the year ended 30 June 2007
Corporate Highlights
O Completed acquisition of Abacus (Financial Consultants) Limited for a
total consideration of £6.2m
o Raised £1.9m in debt and equity to fund acquisition
o Potential to significantly increase IVA total
o Broadened offering to debt management plans and loan referrals
o Daniel Morris joined ClearDebt as Business Development Director
Financial Highlights
O Operating loss of £1,018,081 (18 months ended 30 June 2006: £697,791)
O Net current assets of £1,195,387 (2006:£878,549)
O Cash balance £849,795 (2006: £721,599)
Agreed IVA's recognised to income
Year ended 18 months ended
30 June 2007 30 June 2006
No No
First quarter 74 23
Second quarter 53 31
Third quarter 46 44
Fourth quarter 31 81
204 179
CEO David Mond Commented
'It has been a highly eventful year. On a corporate basis we have been
successful, acquiring Abacus and concluding our agreement with The Money Helper
will eventually increase our IVA pipeline, but also diversified our product
range into a synergistic and potentially lucrative suite.
The agreed IVA figures very much tell the story of the market. Initial
impressive success which proves ClearDebt's ability to drive the business
forward has been pulled back by the turmoil created by the major creditors'
attitude to many IVA providers and has effectively capped the industry's
capabilities.
However, following negotiations, both individually and collectively through the
Debt Resolution Forum, we believe that there is light at the end of the tunnel.
We also believe that our low cost IVA, where income must be recognised
throughout the life of the IVA, will become the industry standard and allow us
to compete for market share on an effective basis - punching well above our
weight'
For further information, please contact:
David Mond, ClearDebt Group plc Tel: 0161 969 2030
David Youngman, WH Ireland Limited Tel: 0161 832 2174
(Nominated adviser)
Ruari McGirr, St Helen's Capital Plc Tel: 020 7628 5582
(Broker)
Paddy Blewer, College Hill Associates Tel: 020 7457 2020
(Financial PR)
CHAIRMAN'S STATEMENT
I present the Group's financial statements for the year ended 30 June 2007.
For the period under review, the Group made an operating loss of £1,018,081 (18
months ended 30 June 2006: £697,791) after amortisation of goodwill and
capitalised development costs of £346,558 (2006: £173,277), a disappointing
result. However, the figures cover a period of considerable turmoil within the
industry resulting from the resistance of certain creditors to individual
voluntary arrangements. The challenging market place is in line with that which
we reported at the time of our interim results on 5 March 2007. We believe a
resolution to these industry problems is nearing a satisfactory conclusion and
we believe it is expected that a favourable announcement will be forthcoming
from the Insolvency Service/British Bankers Association in the not too distant
future.
The Group's balance sheet shows net current assets of £1,195,387 (2006:£878,549)
including cash of £849,795 (2006: £721,599) which is sufficient to continue to
develop the Group's strategy over the next 12 months.
I am happy to report the acquisition of Abacus (Financial Consultants) Limited
which was completed on 17 July 2007. This will add considerable support to the
ClearDebt model especially now that the Group has successfully consolidated its
move to new offices, bringing Abacus and ClearDebt together within the same
building.
I have every confidence regarding the Group's prospects and look forward to a
successful future, encompassing the integration of Abacus and the provision of a
complete offering of appropriate debt solutions to financially impaired debtors.
Gerald Carey FCIB
Chairman
1 October 2007
CHIEF EXECUTIVE'S STATEMENT
THE CONSUMER DEBT MARKET
ClearDebt Group operates within the debt relief sector, an established
sub-category of financial services. The sector has seen considerable growth over
the last 2 years due to the expansion in consumer debt and insolvency.
There is currently a debate within the wider financial services industry as to
how best to deal with the UK's rising level of consumer debt, with a particular
emphasis on the fees charged by IVA providers. ClearDebt believes that a number
of banks and credit card companies have decided to reject certain IVAs on the
grounds that the fees proposed are too high.
This policy has led to a reduction in the number of IVAs passed during the past
six months, a theme that is reflected across the industry.
ClearDebt believes that this is part of a policy to persuade IVA providers to
change their business models to charging a lower fee, based on the life of the
IVA, rather than the model favoured by many IVA providers, which focuses on
taking the majority of the fee at the start of the contract. This policy has led
to a considerable level of failure and disenchantment within the creditor
community.
As a leading member of the Debt Resolution Forum, ClearDebt has been in constant
negotiation with the creditor community. There is a genuine will on both sides
to come to an amicable agreement, with both creditors and debt resolution
companies aware that the current governmental position is stated as being in
favour of the provision of IVAs for consumer insolvency. As mentioned in the
Chairman's statement the industry debate is coming to a satisfactory conclusion
and an announcement is expected shortly.
ClearDebt believes that its model, based on a lower initial fee and with
supervisory income taken as a percentage of contributions drawn over the life of
the IVA, which matches the preferences of the creditor community, will become
the industry standard. Whilst the current situation has put pressure across the
sector, ClearDebt believes that once agreement has been reached, the Group will
be in a relatively strong position.
THE ClearDebt MODEL
Unlike many of its major competitors in the consumer IVA market, ClearDebt has
developed a low overhead, high quality model, based on Kaizen manufacturing
principles and an intelligent internet interface - www.cleardebt.co.uk. This
model allows the Group's cost base to be kept to a minimum level that is still
compatible with the higher level of service provided. It also facilitates
efficient growth as there is minimal need to hire new staff until customer
number thresholds have been breached.
Due to this distinctive operating model, ClearDebt is able to offer a more
effective debt resolution solution than many of its rivals. The model allows
ClearDebt to offer IVAs (if that is the appropriate solution) at lower cost not
only to the debtor, but also the creditor - thereby increasing the chance that
an IVA will be approved by the creditor and completed by the debtor, benefiting
all parties involved in the proposal.
It is significant that this provides the Group with a capacity to handle lower
levels of debt than many of our major competitors. The Group believes that this
will prove advantageous following the expected introduction of the proposed '
SIVA', a simplified IVA procedure, following which the Company believes that
there will be a rapid increase in lower level IVA cases.
This model is also vital in the emerging industry discussion between creditors
and debt resolution companies. ClearDebt already has a model in place which
meets many of the major creditors' arguments, which primarily focus on IVA
providers taking the majority of fees upfront. ClearDebt believes that its model
will eventually become an industry standard, and could lead to the potential
referral of large numbers of new clients directly from creditor institutions.
OPERATIONAL REVIEW
Since 1 July 2006, the following numbers of IVAs have been arranged:
Year ended Year ended
30 June 2007 30 June 2006
No No
First quarter 74 23
Second quarter 53 31
Third quarter 46 44
Fourth quarter 31 81
204 179
Whilst the second half of the year shows a reduction in growth for reasons
mentioned above, ClearDebt's web based model is attracting considerable
interest and generating customers for our services. The increase in both website
hits and current IVAs in the pipeline has been driven by an intelligent
marketing mix. Natural search is augmented by search engine optimization, cost
per click, recommendations and email newsletters, augmented by a growing band of
independent referrers. This programme has established a strong brand awareness,
built around the 'Debt is a Monster - Tame it' campaign.
FINANCIAL REVIEW
The results for the year are disappointing and steps have been implemented to
address the slow acquisition of cases and to adjust our marketing expenditure
accordingly. The increase in operating costs in the main reflects expenditure on
advertising and other marketing initiatives which because of the industry
problems referred to above has had a negative impact on our performance.
ACQUISITION OF ABACUS
On 17 July 2007, the Group completed the acquisition of Abacus (Financial
Consultants) Limited ('Abacus') for a total consideration of up to £6.2m. The
rationale for the acquisition was threefold:
- to utilise the Abacus call centre as the first interface with
prospective clients which will improve conversion rates and times;
- to broaden the Group's product offering by adding Abacus's developed
debt management plan ('DMP') and loan services; and
- to build up our pipeline of IVAs.
The Group now has a more balanced product offering.
Abacus has proven its marketing expertise in the consumer debt market. The Board
expects the integration of these skills to enhance ClearDebt's distribution
capabilities.
The results from the transaction are yet to be seen. However, with the move to
new premises on 7 September 2007, the integration of Abacus has now taken place
and is beginning to show increases in business. The Board believes that the
combination of low cost IVAs, DMPs and loan offerings as well as internal lead
generation will provide the Group with the ability to compete in the debt
resolution market and that the Group will be in a strong position to grow going
forward.
The Group also welcomes Daniel Morris, now appointed as Business Development
Director.
FUTURE OUTLOOK
The immediate outlook for the Group is highly dependent on the resolution of the
current debate between creditors and the debt resolution companies. There are,
however, numerous positives for the longer term.
Firstly, the Government's stated position is in favour of IVAs. Vitally, the
long term commercial gain for creditors will be made through passing IVAs and
not through constant moves towards bankruptcy. Unsecured consumer debt continues
to rise. In combination with rising interest rates, this could cause a consumer
insolvency explosion, for which IVAs are the only viable solution. Finally,
ClearDebt's low cost model is closely aligned to the creditors' position and
could be a source of referrals from creditors.
When taking these points into account, and considering the more diverse product
offering created through the Abacus acquisition, the Board remains confident for
the Group's long term future prospects.
David Emanuel Merton Mond FCA FCCA
Chief Executive Officer
1 October 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2007
Notes 18 Months
ended
Year ended 30 June 2006
30 June 2007 (Restated)
£ £
TURNOVER 1 420,963 174,796
Cost of sales (647,457) (284,289)
GROSS LOSS (226,494) (109,493)
Administrative expenses excluding amortisation (445,029) (146,497)
Goodwill and capitalised development cost amortisation (346,558) (173,277)
Share based payment charge - (268,704)
Total administrative expenses (791,587) (588,478)
OPERATING LOSS 2 (1,018,081) (697,971)
Interest receivable 37,535 16,151
Interest payable and similar charges 5 - (89,512)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (980,546) (771,332)
Taxation on loss on ordinary activities 6 - -
RETAINED LOSS FOR THE FINANCIAL YEAR/PERIOD 15 (980,546) (771,332)
Loss per share (basic and diluted) 7 (0.36)p (0.85)p
The Group has no recognised gains or losses other than the results for the year
as set out above.
No note of historical cost profits and losses has been prepared as the
historical cost profits and losses are the same as detailed in the above profit
and loss account.
All items above from turnover to operating loss are derived from continuing
operations.
CONSOLIDATED BALANCE SHEET
at 30 June 2007
Notes 2007 2006
£ £
FIXED ASSETS
Intangible assets 9 2,790,987 3,137,545
Tangible assets 10 155,378 116,404
2,946,365 3,253,949
CURRENT ASSETS
Debtors 12 594,246 443,387
Cash at bank and in hand 849,795 721,599
1,444,041 1,164,986
CREDITORS: Amounts falling due within one year 13 (248,654) (286,437)
NET CURRENT ASSETS 1,195,387 878,549
TOTAL ASSETS LESS CURRENT LIABILITIES 4,141,752 4,132,498
CAPITAL AND RESERVES
Called up share capital 14 5,776,812 5,141,891
Share premium account 15 407,046 52,167
Profit and loss account 15 (2,042,106) (1,061,560)
EQUITY SHAREHOLDERS' FUNDS 4,141,752 4,132,498
The financial statements were approved and authorised for issue by the Board on
1 October 2007
D E M Mond
Director
COMPANY BALANCE SHEET
at 30 June 2007
Notes 2007 2006
£ £
FIXED ASSETS
Investments 11 3,085,000 3,085,000
CURRENT ASSETS
Debtors 12 1,540,487 702,647
Cash at bank and in hand 814,130 714,380
2,354,617 1,417,027
CREDITORS: Amounts falling due within one year 13 (113,124) (29,921)
NET CURRENT ASSETS 2,241,493 1,387,106
NET ASSETS 5,326,493 4,472,106
CAPITAL AND RESERVES
Called up share capital 14 5,776,812 5,141,891
Share premium account 15 407,046 52,167
Profit and loss account 15 (857,365) (721,952)
EQUITY SHAREHOLDERS' FUNDS 5,326,493 4,472,106
The financial statements were approved and authorised for issue by the board on
1 October 2007
D E M Mond
Director
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2007
Notes Year 18 months
ended ended
30 June 2007 30 June 2006
£ £
Net cash outflow from operating activities 17a (809,137) (291,781)
Returns on investments and servicing of finance 17b 37,535 16,151
Taxation - -
Capital expenditure and financial investment 17b (90,002) (31,333)
Acquisition of subsidiary - 5,922
CASH OUTFLOW BEFORE FINANCING (861,604) (301,041)
Financing 17b 989,800 1,010,734
INCREASE IN CASH IN THE YEAR / PERIOD 17c 128,196 709,693
Year 18 months
ended ended
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 30 June 2007 30 June 2006
£ £
Movement in cash 128,196 709,693
Net funds brought forward 721,599 11,906
Net funds carried forward 849,795 721,599
RECONCILIATION OF SHAREHOLDERS' FUNDS
for the year ended 30 June 2007
GROUP
18 months
Year ended
ended 30 June 2006
30 June 2007 (Restated)
£ £
Loss for the financial period (980,546) (771,332)
New equity share capital subscribed 634,921 4,892,078
Share premium on new share capital subscribed 365,079 52,167
Share premium utilised for new share issue (10,200) (336,766)
Credit to equity for share based payment - 268,704
9,254 4,104,851
Opening equity shareholders' funds 4,132,498 27,647
Closing equity shareholders' funds 4,141,752 4,132,498
COMPANY
18 months
Year ended 30
ended June 2006
30 June 2007 (Restated)
£ £
Loss for the financial period (135,413) (431,724)
New equity share capital subscribed 634,921 4,892,078
Share premium on new share capital subscribed 365,079 52,167
Share premium utilised for new share issue (10,200) (336,766)
Credit to equity for share based payment - 268,704
854,387 4,444,459
Opening equity shareholders' funds 4,472,106 27,647
Closing equity shareholders' funds 5,326,493 4,472,106
ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost convention
and are in accordance with applicable accounting standards.
change in accounting policies
The company has consistently applied all relevant accounting standards except
for the changes in accounting standards as detailed below.
FRS 20 'Share based Payment' is effective for unlisted companies (including AIM
companies) for accounting periods beginning on or after 1 January 2006. In
accordance with the standard, the cost of share options awarded to employees
measured by reference to their fair value at the date of grant is recognised
over the vesting period of the options based on the number of options which in
the opinion of the Directors will ultimately vest. An analysis of the impact of
FRS 20 on prior year periods is shown at note 23.
BASIS OF CONSOLIDATION
The consolidated accounts incorporate the accounts of the Company and all Group
undertakings. The subsidiary undertaking's accounts are adjusted, where
appropriate, to conform to Group accounting policies. Acquisitions are
accounted for under the acquisition method and goodwill on consolidation is
capitalised and amortised over its estimated useful life from the year of
acquisition. The results of companies acquired or disposed of are included in
the profit and loss account after or up to the date that control passes
respectively.
As a consolidated profit and loss account is published, a separate profit and
loss account for the parent undertaking is omitted from the Group financial
statements by virtue of Section 230 of the Companies Act 1985.
GOING CONCERN
The financial statements are prepared on a going concern basis, which assumes
the Group will continue in operational existence for the foreseeable future. The
Group's ability to meet its future working capital requirements and therefore
continue as a going concern is dependent upon it being able to generate
significant revenues and free cash flow. The directors have prepared
projections, which they consider to be prudent and demonstrate that the business
can operate within its existing cash resources. These projections are dependent
on an increased number of new cases and the injection of new funds from one of
the directors in the post balance sheet period. The directors have identified a
series of realistically achievable actions that they are committed to taking to
mitigate the rate of cash outflow should revenues not be secured as predicted.
TURNOVER
The turnover shown in the group profit and loss account represents amounts in
respect of the provision of financial solutions to individuals experiencing
personal debt problems. Turnover is largely derived from nominee and
supervisory fees which results from individual voluntary arrangements (IVA).
These fees are recognised as follows:
Nominee fees: on the approval by the creditors of a finalised IVA proposal
Supervisory fees: on a monthly basis, commencing on approval by creditors of the
IVA
COST OF SALES
Cost of sales represent the direct staff costs, the cost of advertising, new
advertising creative, promotional and disbursements on specific cases. The cost
of advertising is carried forward for a period of four months from the date of
inception of the campaign and then amortised over a period which the directors
consider to match the benefits received from that campaign. This represents a
departure from GAAP the effect of which has been quantified and confirmed as
being immaterial.
AMORTISATION
Amortisation is calculated so as to write off the cost of intangible assets less
their estimated residual value, over the useful economic life of the asset as
follows:
Development costs - 25% straight line
Goodwill - 10% straight line
The directors review the carrying value of development costs and goodwill on a
regular basis and, if appropriate, impair the value of development cost and
goodwill as required.
DEPRECIATION
Depreciation is provided to write off the cost or valuation, less estimated
residual values, of all fixed assets over their expected useful lives. It is
calculated at the following rates:
Software development - 25% straight line
Fixtures and fittings - 25% straight line
The carrying values of tangible fixed assets are reviewed for impairment in
periods if events or changes in circumstances indicate the carrying value may
not be recoverable.
INVESTMENTS
Fixed asset investments are stated at cost except where in the opinion of the
directors, there has been permanent diminution in the value of the investments,
in which case an appropriate adjustment is made.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are difference between the Company taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax arrangements in periods different from those in which they are
recognised in the financial statements.
Deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can
be deducted.
Deferred tax is calculated based on tax rates and laws enacted or substantively
enacted at the balance sheet date. Deferred tax is measured on a non-discounted
basis.
CASH AND LIQUID RESOURCES
Cash, for the purpose of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand.
SHARE BASED COMPENSATION
The Group has applied the requirements of FR20 Share-based Payments.
The Group has issued warrants to subscriber shareholders and one of its
advisers. Equity-settled share-based payments (warrants) are measured at fair
value at the date of grant. The fair value determined at the grant date of
equity-settled share-based payments is expensed on a straight line basis over
the vesting period, based on the Group's estimate of shares that will eventually
vest.
Fair value is measured by use of the Black Scholes model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effect of non-transferability, exercise restrictions and behavioural
considerations.
A liability equal to the portion of the goods or services received is recognised
at the current fair value determined at each balance sheet date for cash-settled
share based payments.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 June 2007
1 TURNOVER
The whole of the turnover is attributable to the principal activity of the
Group, which is the provision of IVA and other financial advice and appropriate
solutions to individuals experiencing personal debt problems. All turnover
originated in the United Kingdom.
2 OPERATING LOSS 18 months
Year ended ended
30 June 2007 30 June 2006
£ £
Operating profit is stated after charging:
Amortisation 346,558 173,277
Depreciation:
- owned assets 51,028 16,666
Auditors' remuneration
Baker Tilly - audit services (2006 audit fees) - 18,450
- tax compliance - 2,000
Baker Tilly UK Audit LLP- audit services (2007 audit fees) 16,900 -
- tax compliance 2,500 -
- corporate finance 77,000 -
3 EMPLOYEES 18 months
Year ended ended
30 June 2007 30 June 2006
£ £
The aggregate payroll costs of the staff consist of:
Wages and salaries 228,533 105,220
Social security costs 22,350 7,462
250,883 112,682
The average monthly number of staff employed by the group during the
financial period amounted to:
Number Number
Directors 3 3
Advice team, management and administration 2 2
IVA processing team 8 6
13 11
4 DIRECTORS' EMOLUMENTS 18 months
Year ended ended
30 June 2007 30 June 2006
£ £
The aggregate emoluments in respect of qualifying services were:
Directors' fees 48,000 27,000
Directors' emoluments 19,656 12,667
67,656 39,667
5 INTEREST PAYABLE AND SIMILAR CHARGES 18 months
Year ended ended
30 June 2007 30 June 2006
£ £
Additional amounts payable on repayment of Sound Financial plc loan
(see note 24)
- 89,512
6 TAXATION Year ended 18 months
30 June 2007 ended
30 June 2006
£ £
Corporation tax at 30% (2006: 30%) - -
Total current tax - -
Deferred tax:
Origination of and reversal of timing differences - -
Tax on profit on ordinary activities - -
Factors affecting the tax charge for the year
18 months
Year ended ended
30 June 2007 30 June 2006
£ £
Loss on ordinary activities before taxation (980,546) (771,332)
Loss on ordinary activities before taxation multiplied by standard rate
of UK corporation tax of 30% (2006: 30%) (294,164) (231,399)
Effects of:
Non deductible expenses 233 49,721
Depreciation in excess of capital allowances 93,543 2,631
Origination of tax losses 200,388 179,047
- -
Current tax charge - -
The Group has unrecognised deferred tax assets of £338,132 at 30
June 2007 and £164,054 at 30 June 2006, which have arisen mainly due to trading
losses carried forward. This asset will be recognised when the Group's ability
to realise the asset becomes more certain.
7 LOSS PER SHARE
The calculations of earnings per share are based on the following losses and numbers of shares.
18 months ended
Year ended 30 June 2006
30 June 2007 £
£
Loss for the financial year / period (980,546) (771,332)
2007 2006
Weighted average number of shares No. of shares No. of shares
For basic earnings per share 273,011,039 91,235,958
There is no difference between the basic and diluted loss per
share as the outstanding warrants would have had the effect of reducing the loss
per ordinary share and would, therefore, not be dilutive under the terms of
Financial Reporting Standard ('FRS') 22.
8 LOSS ATTRIBUTABLE TO THE MEMBERS OF THE PARENT COMPANY
The loss dealt with in the accounts of the parent company for the year ended 30
June 2007 was £135,413 (2006: £431,724).
9 INTANGIBLE FIXED ASSETS Development
Goodwill costs Total
GROUP £ £ £
Cost
At 1 July 2006 and 30 June 2007 3,230,510 80,312 3,310,822
Amortisation
At 1 July 2006 161,524 11,753 173,277
Charge for the year 323,052 23,506 346,558
At 30 June 2007 484,576 35,259 519,835
Net Book Value
At 30 June 2007 2,745,934 45,053 2,790,987
At 30 June 2006 3,068,986 68,559 3,137,545
The Company holds no intangible fixed assets.
10 TANGIBLE FIXED ASSETS
Software Fixtures &
GROUP Development Fittings Total
£ £ £
Cost
At 1 July 2006 92,457 40,613 133,070
Additions 74,533 15,469 90,002
At 30 June 2007 166,990 56,082 223,072
Depreciation
At beginning of period 11,697 4,969 16,666
Charge for the year 37,230 13,798 51,028
At 30 June 2007 48,927 18,767 67,694
Net book value
At 30 June 2007 118,063 37,315 155,378
At 30 June 2006 80,760 35,644 116,404
The Company holds no tangible fixed assets.
11 INVESTMENTS
2007 2006
COMPANY £ £
Investments in subsidiary undertakings:
Cost 3,085,000 3,085,000
The subsidiary undertakings at 30 June 2007, all of which were incorporated in
England and Wales, are as follows:
Company Activity Class of Shares Holding
ClearDebt Limited Financial Advisors Ordinary 100%
Carrwood Limited Dormant Ordinary 100%
12 DEBTORS 2007 2006 2007 2006
Group Group Company Company
£ £ £ £
Trade debtors 147,370 209,380 - -
Other debtors 16,495 28,411 31,097 6,063
Amounts owed by group undertakings - - 1,218,733 680,366
Acquisition advancement (see note 18) 258,090 - 258,090 -
Prepayments and accrued income 172,291 205,596 32,567 16,218
594,246 443,387 1,540,487 702,647
Included within other debtors is £15,000 (2006: £nil) relating to amounts owed
by related parties (Note 24).
Included within prepayments and accrued income is £50,636 (2006: £nil) relating
to amounts owed by related parties (Note 24).
Regarding the amount owed by group undertakings of £1,218,733 at 30 June 2007,
the Company has agreed, by way of a letter of support, that this debt shall not
be payable by the subsidiary undertaking ClearDebt Limited until after more than
one year from the date of approval of the balance sheet.
13 CREDITORS: Amounts falling due within 2007 2006 2007 2006
one year Group Group Company Company
£ £ £ £
Trade creditors 104,356 143,143 95,756 -
Other creditors 15,510 35,097 - 22,627
Other taxes and social security costs 7,000 5,133 - -
Accruals 121,788 103,064 17,368 7,294
248,654 286,437 113,124 29,921
Included within other creditors is £15,510 (2006: £35,097) relating to amounts
owed by related parties (Note 24).
14 SHARE CAPITAL 30 June 2007 30 June 2006
£ £
Company
Authorised share capital
500,000,000 (2006: 500,000,000) ordinary shares of 2 pence each 10,000,000 10,000,000
Allotted, called up and fully paid
288,840,567 (2006: 257,094,536) ordinary shares of 2 pence each 5,776,812 5,141,891
On 29 December 2006 the Company issued 31,746,031 ordinary shares of 2p for cash
consideration of 3.15p per share.
On 4 January 2006 the Company issued 24,018,722 warrants to subscribers for new
share capital. At 30 June 2007 these warrants were still outstanding.
On 4 January 2006 the Company issued 7,580,336 warrants to advisers in lieu of
fees. At 30 June 2007 there were 7,580,336 warrants, each convertible into one
ordinary share at an exercise price of 2p, were still outstanding.
Details of the warrants outstanding during the year are as follows:
2007 2006
Number of Weighted Number of Weighted
share options average warrants average
exercise price exercise price
in (p) in (p)
Outstanding at beginning of year/
period 31,599,058 2.0 - -
Granted during the year - - 31,599,058 2.0
Outstanding at the end of the year 31,599,058 2.0 31,599,058 2.0
The Group recognised the following expense related to share-based payments made
to advisers in lieu of fees:
2007 2006
£ £
Profit and loss account:
Charged to Consolidated Profit and Loss Account - 268,704
No warrants were exercised during the year. The options outstanding at 30 June
2007 had a weighted average exercise price of 2.0p, and a weighted average
remaining contractual life of 1.5 years.
The fair value of options granted under the scheme and the warrants issued is
measured by use of the Black-Scholes model. The inputs into the Black-Scholes
model are as follows:-
2007 2006
Share price (p) - 4
Exercise price (p) - 2
Expected life (years) - 3
Risk-free rate (%) - 5.75
Expected dividends (%) - -
Expected volatility was based upon the historical volatility of the Group's
share price. The expected life is based upon historical data and has been
adjusted based on management's best estimates for the effects of
non-transferability, exercise restrictions and behaviour considerations.
15 RESERVES Share Profit &
premium Loss Total
£ £ £
GROUP
At beginning of year 52,167 (1,061,560) (1,009,393)
Premium on issue of shares 365,079 - 365,079
Loss for the year - (980,546) (980,546)
Share issue costs (10,200) - (10,200)
Balance carried forward 407,046 (2,042,106) (1,635,060)
COMPANY
At beginning of year 52,167 (721,952) (669,785)
Premium on issue of shares 365,079 - 365,079
Loss for the year - (135,413) (135,413)
Share issue costs (10,200) - (10,200)
Balance carried forward 407,046 (857,365) (450,319)
16 DEFERRED TAXATION
GROUP AND COMPANY 2007 2006
£ £
The movement in the deferred taxation account during the year / period was:
Balance brought forward - -
Charged in year/period - -
Balance carried forward - -
====== ======
17 NOTES TO THE STATEMENT OF CONSOLIDATED CASH FLOWS 18 months ended
Year ended 30 June 2006
30 June (Restated)
2007 £
£
a Reconciliation of operating loss to net cash outflow from operating activities
Operating loss (1,018,081) (697,971)
Share based compensation - 268,704
Amortisation 346,558 173,277
Depreciation 51,028 16,666
Increase in debtors (150,859) (269,499)
(Decrease)/increase in creditors (37,783) 217,042
Net cash outflow from operating activities (809,137) (291,781)
b Analysis of cash flows for headings netted off in the cash flow statement
Year ended 18 months
30 June Ended
2007 30 June
2006
£ £
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 37,535 16,151
Net cash inflow from returns on investments and servicing of finance 37,535 16,151
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (90,002) (31,333)
FINANCING
Issue of ordinary share capital 1,000,000 1,347,500
Issue costs (10,200) (336,766)
Net cash inflow from financing 989,800 1,010,734
c At 1 July Cash flow At 30 June
2006 2007
Analysis of net funds £ £ £
Net cash:
Cash at bank and in hand 721,599 128,196 849,795
Net funds 721,599 128,196 849,795
18 POST BALANCE SHEET EVENTS
The Company acquired the whole of the issued share capital of Abacus (Financial Consultants) Limited on 17
July 2007 for consideration of £1.47m inclusive of the costs of acquisition. At 30 June 2006, £258,090 of
the consideration had been advanced to the vendor and this prepayment is held within debtors and classed as
an acquisition advancement.
The acquisition was financed by the issue of 15,750,000 ordinary shares of 2p each on 17 July 2007 and by a
cash loan of £1.6m made by D E M Mond.
19 PENSION AND OTHER POST EMPLOYMENT COMMITMENTS
The Group intends to set up and operate a defined contribution pension scheme whose assets will be
held separately from those of the group in an independently administered fund.
20 COMMITMENTS UNDER OPERATING LEASES
At 30 June 2007 the Group and the Company had no annual commitments under
non-cancellable operating leases.
21 DERIVATIVES AND FINANCIAL INSTRUMENTS
It is not the Group's policy to enter into financial derivatives for
speculative or trading purposes. The financial instruments employed by the
Group other than short term debtors and creditors are used to fund its
operations and comprise cash and short term deposits.
The Group's policy during the year ended 30 June 2007 was to place the majority
of its cash on short term deposit with its bankers.
The Group's exposure to interest rate risk is limited to cash deposits which
are typically held at a floating rate. As permitted by Financial Reporting
Standard ('FRS') No.13 the disclosures below with the exception of currency
exposure, exclude short-term debtors and creditors.
Interest rate risk profile of financial assets
The interest rate profile of financial assets of the Group as at 30 June 2007 is
as follows:
Financial Floating rate
assets on which financial
no interest is assets
earned Total
£ £ £
2007 Sterling - 849,795 849,795
2006 Sterling - 721,599 721,599
Floating rate financial assets comprise cash deposits on money market deposit at
call and interest is received at a rate of between 0.5% and 5%.
Interest rate risk profile of financial liabilities
The Group has no interest bearing financial liabilities at the year end.
Currency exposures
The Group has no currency exposures at the year end.
Borrowing facility
At the year end the Group did not have a borrowing facility.
Fair Values of financial assets and financial liabilities
The fair value, based upon the market value or discounted cash flows of the
financial instruments detailed above was not materially different from their
book values.
22 CONTINGENT LIABILITIES
Neither Group nor the Company have any contingent liabilities (2006: nil).
23 PRIOR PERIOD ADJUSTMENT
An analysis of the prior period adjustment is as follows:
Total
£
Profit and loss account:
Loss for the period ended 30 June 2006 as originally stated (502,628)
FRS 20 - share based payment charge for warrants issued in the period (268,704)
Restated loss for the period (771,332)
24 TRANSACTIONS WITH DIRECTORS
D E M Mond is a partner in Hodgsons, Chartered Accountants, by whom ClearDebt
Limited were invoiced rent and utility charges to the value of £12,903 on normal
commercial terms in the year. ClearDebt Limited and Hodgsons operate a central
payroll function and, at the balance sheet date £15,510 (2006: £35,097) of wages
cost is due to Hodgsons and included within other creditors. ClearDebt Limited
have also re-charged Hodgsons £50,636 for certain staff salaries borne by
ClearDebt Limited in the year, this amount is outstanding in full at the balance
sheet date and included within prepayments and accrued income. ClearDebt Group
plc made several payments on behalf of Hodgsons during the year, of which
£15,000 (2006: £nil) was still due to be repaid by Hodgsons at the balance sheet
date. No interest is being charged for the outstanding amounts.
D E M Mond is a shareholder and director of Sound Financial plc. On the 29
December 2006 Sound Financial plc subscribed for 31,746,031 ordinary shares of
2p for cash consideration of 3.15p per share. Sound Financial plc made a
distribution in specie on the 22 March 2007. D E M Mond received 13,495,618
shares and 686,047 warrants in ClearDebt Group plc as a consequence. Interest
payable to Sound Financial plc of £nil (2006: £89,512) is shown in note 5.
D E M Mond made a cash loan of £1.6m to the company on 17 July 2007 (Note 18 -
Post balance sheet events).
25 CONTROL
D E M Mond, together with beneficial trusts, his immediate family and Sound
Financial plc, has control over more than 50% of the voting rights of the
company.
26 BASIS OF THE PRELIMINARY ANNOUNCEMENT
The board of directors of ClearDebt Group Plc approved the Preliminary Results
on 1 October 2007.
Information in these Preliminary Results does not constitute statutory accounts
of the Group within the meaning of Section 240 of the Companies Act 1985. The
figures for the year ended 30 June 2007 are audited.
Statutory accounts for the 18 months ended 30 June 2006, which were prepared
under accounting practices generally accepted in the UK, have been filed with
the Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain any statement under Section 237 (2) or (3) of
the Companies Act 1985.
The annual report will be sent to shareholders on 11 October 2007. Additional
copies will be available to the public free of charge, from the Company's
registered office at Nelson House, Park Road, Timperley, Cheshire, WA14 5BZ and
from the Company's website at www.cleardebtgroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
