Half Yearly Report
Released: 07:00 26-Mar-10
Number: 2049J
RNS Number : 2049JCleardebt Group PLC26 March 2010ClearDebt Group plc
("ClearDebt" or "the Group")
Unaudited Interim Results for the six months ended 31 December 2009
ClearDebt, the AIM quoted personal debt resolution adviser is very pleased to announce its Interim Results for the six months ended 31 December 2009. The period saw significant growth in revenues from the provision of both Individual Voluntary Arrangements ("IVAs") and Debt Management Plans ("DMPs"), with the prospect of continued growth to the year-end. The acquisition of some 6,500 clients through the purchase of IVAs, DMPs and Protected Trust Deeds ("PTDs") from a number of the subsidiaries of Relax Group plc (in Administration) (who were based in Staveley, Chesterfield) in December 2009 has more than doubled the number of clients under management.
Financial Highlights:
Ø Revenues increased to £2.3m (2008: £1.5m) up 57%
Ø Profit before tax of £425,185 (2008: £101,393) after the recognition of a gain on bargain purchase of £252,914
Operational Highlights
Ø Significant increase in number of IVAs passed: 350 agreed in period (2008: 200)
Month 2009/10 2008/09 Month 2009/10 2008/09
July 65 23 Oct 68 35
Aug 59 26 Nov 55 40
Sep 52 34 Dec 51 42
Total 176 83 Total 174 117
Ø Alternative cash flow/business diversity continues to be provided by Abacus, the Group's debt management arm who now have:
o 3,949 debt management plans providing income
o Expansion into other services is beginning to show progress
Ø Acquisition of 2,400 IVAs, 1,300 PTDs and 2,800 DMPs from certain Relax Group subsidiaries in December 2009. Integration is proceeding well with cases transferred to our systems this week following the successful relocation of a reduced staff base to a smaller office in Staveley.
Outlook
Ø Number of IVAs passed continues to increase and future looks highly positive
Month 2009/10 2008/09
Jan 20 29
Feb 74 41
Pipeline of new business suggests strong continued growth through to the year-end
Ø Current economic environment creates increasing demand for personal debt resolution. ClearDebt is in a position to cope with substantial growth due to its scalable model based around web-based algorithms - thereby helping to minimise the cost per case and enhancing profitability
David Mond, CEO of ClearDebt commented:
"We are very pleased by our performance throughout the period and are encouraged by what appear to be highly positive signs for continued future growth across all product lines. The Group is becoming a major player in the industry. As a profitable and highly scalable debt resolution group, we are confident that we will be able to manage our growth for the benefit of our shareholders.
Although the current macro economic conditions are of significant benefit to ClearDebt, we understand that this is a time of considerable personal pain and anxiety to many. Through our leading position in the Debt Resolution Forum, we are committed to the highest of standards in the industry, ensuring that consumers will get the most appropriate solution for their needs.
The combination of the wider economy forcing more individuals into debt, our diversified and scalable business model and crucially the realisation by the major lenders that a well-designed IVA is in their best interests leads us to believe that prospects for further growth are encouraging for the foreseeable future."
25 March 2010
For further information, please contact:
ClearDebt Group plc
David Mond, Chief Executive Officer
Tel No: 0161 968 6805
Seymour Pierce Limited
(Broker and Nominated Adviser)
John Cowie or Nicola Marrin
Tel No: 020 7107 8000
INTERIM FINANCIAL STATEMENTS
FOR THE 6 MONTHS ENDED
31 DECEMBER 2009
Chairman's Statement
I present our Interim results for the 6 months ended 31 December 2009.
I am delighted to report that during this period the Group made a profit before taxation of £425,185 (2008: £101,393), after the recognition of a gain on bargain purchase of £252,914 on revenue of £2,265,316 (2008: £1,444,784). These results reflect continued progress across all the Group's business activities and include the first month's revenue from the back books of Individual Voluntary Arrangements ("IVAs"), Protected Trust Deeds ("PTDs") and Debt Management Plans ("DMPs") purchased from the Administrator of Relax Group plc on 2 December 2009.
Relax Acquisition
On 3 December 2009 it was announced that we had acquired certain assets of Relax Group plc (in administration).
These assets comprised 2,400 IVAs, 1,300 PTDs and 2,800 DMPs. The total consideration to be paid amounts to £2.7m of which £350,000 had been paid at 31 December 2009 which, together with estimated restructuring, relocation and financing costs estimated at £500,000 will bring the total cash cost to £3.2m. These costs will be expensed in the second half of the year in accordance with current accounting standards
The Board of ClearDebt see this acquisition as the opportunity to expand its operations in the growing IVA and Debt Management sector. It enables us to review the acquired debt management cases for possible IVAs and now give us the capability to take on new business in Scotland rather than referring PTDs onto third parties as we have done previously.
The acquisition of these assets should provide strong and predictable additional cash flow for the Group and our lean administration means we are very confident that we will manage these cases effectively and at a higher margin than Relax found possible. The timing of cash flows from the cases to date has exceeded our expectations.
Existing businesses
ClearDebt - IVAs
As the general economic climate has worsened, the last two quarters of 2009 have seen increasing numbers of IVAs being approved, and the quarterly numbers are now above the record levels recorded during 2006.
The number of Individual Voluntary Arrangements (IVAs) approved in the six months ended 31 December 2009 was 350 (2008: 200). These results not only represent a substantial increase over the equivalent period last year and the previous six months, but also demonstrate a step change in the numbers of new IVAs being passed each month compared to the first six months of calendar year 2009.
1st Quarter 2nd Quarter
2009/10 2008/09 2009/10 2008/09
July 65 23 Oct 68 35
Aug 59 26 Nov 55 40
Sep 52 34 Dec 51 42
Total 176 83 Total 174 117
In the first two months of 2010 (the third quarter of our 2009-10 financial year) the number of IVAs increased by approximately 34% when compared to the same two months of 2009.
2009/10 2008/09
Jan 20 29
Feb 74 41
January case numbers habitually dip (there is less effective time in December in which to book creditor meetings), but this year the extensive disruption caused by the snow to our postage collections in late December and January led to delays in holding creditor meetings and the corresponding numbers of cases approved in January.
Importantly, March 2010 looks like being a record month, with some 95 meetings (as at 19 March 2010) already held, or booked to be held in the month for creditor approval of IVA proposals.
ClearDebt continues to benefit from its low overhead, high quality model, which allows the company's cost base to be kept to a minimum level whilst still providing high levels of service. More importantly, the model also facilitates efficient and rapid growth as there is minimal need to hire new staff until high customer number thresholds have been breached.
This continues to give ClearDebt the capacity to handle lower levels of debt than many of our major competitors and thereby broadens our addressable market. Moreover, with IVAs increasingly demonstrating their value as an effective debt recovery tool and with re-financing options for debtors still very difficult the growth in market acceptance of IVAs should continue for the foreseeable future.
Abacus - DMPs
Excellent progress continues to be made by Abacus, with 3,949 DMPs (as at 19 March 2010) currently generating income. A steady run rate of approximately 250 new DMPs per month is currently being achieved.
Abacus provides services to indebted individuals by negotiating and putting in place a DMP with their creditors. The debtor makes a monthly payment to Abacus which then distributes the payment to the creditors as agreed in the plan, less an administration fee at an agreed percentage of the monthly payment. An initial set up fee is also charged. DMPs are suitable for individuals whose debts are more manageable and rely on the goodwill of creditors as they are not a formal insolvency procedure and interest usually continues to accrue on outstanding debts, though attempts are made to suspend interest wherever possible and some bank creditors do agree to same.
Many clients are cross referred between ClearDebt and Abacus allowing the Group to offer an appropriate advice solution to all individuals.
These intra-Group synergies may become more prevalent when the current consultation process being undertaken by the Ministry of Justice into the possibility of Regulated Debt Management Plans is completed. Representatives of the Group are closely involved with this consultation process which should introduce important changes to the industry in 2011. Abacus is well placed and prepared to benefit from these changes.
Related Debt Advisory Services
Through Abacus, the Group has extended its activities into related services, such as helping to prevent repossession of debtors' homes and obtaining redress for debtors who have had payment protection insurance ("PPI") incorrectly sold to them. These activities continue to provide a worthwhile income and we are starting to see some acceleration in the settlement of PPI claims and receipt of commissions from the large pipeline of potential fees that has been built up over the last 12 months.
ClearCash card
Steady progress is being made in the new offering of our Pre-Paid MasterCard ClearCash. Over 1,200 clients (as at 19 March 2010) have signed up taking advantage of the online icount and our exclusive BudgetMaster tool. Significantly we were pleased to win the award of Best New Unbanked Pre-Paid Card and coming runner up as Best Newcomer at the Prepaid365 Card Awards 2010. We anticipate a higher rate of growth during the next 12 months.
Outlook
ClearDebt has now successfully integrated a debt management offering, a third party introducer and a contact management system into the Group, thereby diversifying our offering, allowing larger and more stable income streams and providing a strong platform for continued growth.
I therefore continue to be optimistic about the Group's prospects for the rest of the financial year to June 2010; the number of IVAs passed and DMPs being arranged continues to grow strongly and this growth is being augmented by the new services we have introduced.
The Abacus debt management business is extremely busy and is now generating significant profits and cash flows as it maximises the cross selling opportunities and marketing synergies between it and the ClearDebt business. As at 19 March 2010, our cash at bank amounted to £311,053, which gives us sufficient flexibility for current purposes.
I believe that the Group is well positioned to continue its growth and to benefit from any consolidation opportunities which may occur in our industry.
Gerald Carey FCIB 25 March 2010
ClearDebt Group plc 6 Months 6 Months Year
Consolidated Income Statement ended ended ended
31 December 2009 31 December 2008 30 June 2009
Unaudited Unaudited Audited
Note £ £ £
Revenue
- ongoing 1,999,836 1,444,784 3,386,935
- acquisitions 265,480 - -
__________ __________ __________
4 2,265,316 1,444,784 3,386,935
Cost of sales (1,430,828) (912,952) (1,950,570)
__________ __________ __________
Gross profit 834,488 531,832 1,436,365
Administrative expenses (396,391) (361,747) (770,835)
Separately Disclosable items 8 - 77,500 77,500
__________ __________ __________
Profit before interest, tax,
depreciation and amortisation 438,097 247,585 743,030
Depreciation (48,675) (45,574) (90,279)
Amortisation (154,834) (41,541) (76,623)
Gain on bargain purchase 252,914 - -
__________ __________ __________
Profit from operations 487,502 160,470 576,128
Finance costs (63,300) (63,300) (126,600)
Finance income 983 4,223 11,395
__________ __________ __________
Profit before taxation 425,185 101,393 460,923
Taxation 6 (119,052) (21,293) (53,861)
__________ __________ __________
Profit after taxation for period 306,133 80,100 407,062
__________ __________ __________
Earnings per ordinary share -
basic (pence) 5 0.10 0.03 0.13
Earnings per ordinary share -
diluted (pence) 5 0.10 0.03 0.13
The results for the period are derived from continuing activities.
There was no recognised income or expenditure other than the profit for the period. Accordingly no Statement of Recognised Gains and Losses has been prepared.
ClearDebt Group plc 6 Months 6 Months Year
Consolidated statement of ended ended ended
comprehensive income - unaudited 31 December 2009 31 December 2008 30 June 2009
Unaudited Unaudited Audited
£ £ £
Profit for the period 306,133 80,100 407,062
Other comprehensive income net of tax - - -
__________ __________ __________
Total comprehensive profit for the period 306,133 80,100 407,062
__________ __________ __________
Attributable to:
Owners of the parent 306,133 80,100 407,062
__________ __________ __________
ClearDebt Group plc
Consolidated Statement of Cashflows
6 Months
ended
31 December
2009
6 Months
ended
31 December
2008
Year
ended
30 June 2009
Unaudited
Unaudited
Audited
£
£
£
Cash flow from continuing operating activities
Profit before taxation
425,185
101,393
460,923
Depreciation of property, plant and equipment
48,675
45,574
90,279
Amortisation of intangible assets
154,834
41,541
76,623
Increase in trade and other receivables
(53,171)
(96,647)
(256,486)
Finance costs
63,300
63,300
126,600
Finance income
(983)
(4,223)
(11,395)
Negative goodwill arising on purchase of assets
(252,914)
-
-
Share based payment charge
14,827
-
-
Decrease in trade and other payables
(66,182)
(125,331)
(105,737)
Cash generated in operations
333,571
25,607
380,807
Income tax refund
10,317
-
123,585
Cash generated in operating activities
343,888
25,607
504,392
Cash flow from investing activities
Acquisition of business and assets
(350,000)
-
(10,612)
Acquisition of intangibles
(56,290)
-
(23,496)
Acquisition of property, plant and equipment
(81,633)
(9,550)
(36,023)
Finance income
983
4,223
11,395
Net cash absorbed by investing activities
(486,940)
(5,327)
(58,736)
Cash flow from financing activities
Interest on loans
(63,300)
(63,300)
(126,600)
Cash absorbed by financing activities
(63,300)
(63,300)
(126,600)
Decrease in cash and cash equivalents
(206,352)
(43,020)
319,056
Opening cash and cash equivalents
584,593
265,537
265,537
Closing cash and cash equivalents
378,241
222,517
584,593
ClearDebt Group plc
Consolidated Statement
of Changes in Equity
Issued
capital
Share premium account
Share based
compensation
Retained losses
Total
£
£
£
£
£
Balance at 1 Jul 2008
6,091,812
279,948
97,814
(2,416,318)
4,053,256
Profit for the period
-
-
-
80,100
80,100
Balance at 31 Dec 2008
6,091,812
279,948
97,814
(2,336,218)
4,133,356
Issue of shares
75,000
-
-
-
75,000
Profit for the period
-
-
-
326,962
326,962
As at 1 Jul 2009
6,166,812
279,948
97,814
(2,009,256)
4,535,318
Share based compensation
-
-
14,827
-
14,827
Profit for the period
-
-
-
306,133
306,133
Balance at 31 Dec 2009
6,166,812
279,948
112,641
(1,703,123)
4,856,278
Notes to the Interim Financial Statements
1. General information
The Group's interim financial statements consolidate the results of ClearDebt Group plc and its subsidiary companies made up to 31 December 2009.
The Group's functional currency is the £ Sterling.
ClearDebt Group plc is a limited liability company incorporated and domiciled in England and Wales whose shares have been admitted to trading on AIM, a market operated by the London Stock Exchange.
2. Accounting policies and basis of preparation
These interim financial statements do not constitute statutory accounts as defined by section 434 of the Companies Act 2006. It does not therefore include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 30 June 2009, which have been prepared in accordance with IFRS's as adopted by the European Union. The Group's statutory accounts for the year ended 30 June 2009 have been delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The Group has not applied IAS 34, Interim Financial Reporting, which is not mandatory for UK Groups, in the preparation of these interim financial statements.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended 30 June 2009.
The interim financial statements have been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 30 June 2010. The Group financial statements for the year ended 30 June 2009 were prepared under International Financial Reporting Standards.
The Relax acquisition comprised back books of insolvency and debt management cases. The future estimated income from these cases net of provisions and the costs of realisation have been discounted at the Groups weighted average cost of capital back to the date of acquisition to produce a fair value for the assets.
The intangible insolvency assets are being amortised over a period of three years and the debt management assets over one year. These periods have been selected by the directors to approximate as closely as possible to the period over which it is estimated that the vast majority of income will be received.
These interim financial statements have been prepared on a consistent basis and format except for the adoption of IAS 1 'Presentation of Financial Statements (Revised 2007)', IFRS 8 'Operating Segments' and the amendment to IFRS 2, "Share-based payments: vesting conditions and cancellations.
Changes in accounting policies
In the current financial year, the Group has adopted IAS 1, "Presentation of Financial Statements" (Revised), IFRS 8, "Operating Segments" and the amendment to IFRS 2, "Share-based payments: vesting conditions and cancellations".
IAS 1 Presentation of Financial Statements (Revised) includes the requirement to present a Statement of Changes in Equity as a primary statement and introduces the possibility of either a single Statement of Comprehensive Income (combining the Income Statement and a Statement of Comprehensive Income) or to retain the Income Statement with a supplementary Statement of Comprehensive Income. The second option has been adopted by the Group. As this standard is concerned with presentation only it does not have any impact on the results or net assets of the Group.
IFRS 8, Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ("CODM"). By contrast IAS 14, "Segmental Reporting" required business and geographical segments to be identified on a risks and rewards approach. The business segmental reporting bases used by the Group in previous years are those which are reported to the CODM, so the changes to the segmental reporting for 2009 are in respect of the additional disclosure only.
3. Going Concern
The Group manages its cash requirements through its existing cash resources and operating cash flows. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current resources. Consequently, after making enquires, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements.
4. Segmental Information
The Group's total income, result before taxation and net assets were all derived from its principal activities being the provision of insolvency services (IVAs and PTDs) and DMPs to individuals experiencing personal debt problems. All the Group's activities were undertaken wholly in the United Kingdom.
4. Segmental Information (continued)
6 months to 31 December 2008
Management
Management
4. Segmental Information (continued)
The total income, result before taxation and net assets are attributable to the one principal activity of the Group, being the provision of financial solutions to individuals experiencing personal debt problems and the provision of advice regarding structured settlements and related financial services. All revenue and costs originate within the United Kingdom. The revenue shown in the Group Income Statement represents amounts in respect of the provision of financial solutions to individuals experiencing personal debt problems. Revenue is largely derived from IVA and PTDs which we define as Insolvency services (where a licensed insolvency practitioner is required by statute to manage the case) and the fees charged for the arrangement of debt management plans.
5. Earnings per ordinary share
The weighted average number of ordinary shares for calculating the diluted earnings per share above are identical to those for the basic earnings per share. This is because the outstanding share warrants and share options would not be dilutive under the terms of International Accounting Standard ("IAS") 33
6. Taxation
7. Acquisition
On 2 December 2009 the Group purchased from the Administrator of Relax Group plc and a number of its subsidiaries ("Relax") the goodwill and assets of certain subsidiaries of Relax. The assets purchased comprised the goodwill and fixtures of; the IVA business which traded as Synergi Partners; the Debt Management business which traded under the name of Debtcare; and the Protected Trust Deeds which traded under the name of Adie Financial Services or AFS.
The total consideration due was £2,700,000, of which £350,000 had been paid to the Administrator as at 31 December 2009 with the balance due included in other payables. Currently at 25 March 2010 there remains a balance payable of £1,150,000 which will be discharged in the not too distant future.
The assets acquired were exclusively intangible assets represented by the future income due from the collection of the back book of IVA, PTD and DMP cases managed by each business. At the date of acquisition the relevant Relax assets comprised the following:
Included in the results for the half year to 31 December 2009 is revenue of £265,480 and a pre tax profit of £5,395 after excluding the profit on purchase of a bargain asset of £252,194.
We have estimated the timing of, and the expected future income due, from the back books acquired less a provision for future expected delinquency together with the estimated costs necessary to collect in the income. This has been produced on a net present value basis to provide an estimate of the fair value of the intangible assets acquired.
The fair value arrived of the intangible assets acquired was £2,952,914 which is in excess of the £2.7m cost of acquisition. Accordingly under IFRS the profit and loss account has been credited with a gain on bargain purchase of £252,914 in the period.
8. Separately disclosable items
6 Months 6 Months Year
Ended Ended Ended
31 December 31 December 30 June
2009 2008 2009
Unaudited Unaudited Audited
£ £ £
Administration expenses
Release of provision for litigation costs - 77,500 77,500
ClearDebt Limited took legal action against several parties involved with the IVA Council for defamation and libel after the IVA Council sent correspondence to ClearDebt's customers (and customers of other IVA companies) alleging that they had been mis-sold IVAs. The case was settled in November 2008 with a full apology and award covering costs. A provision of £100,000 had previously been made in relation to legal costs incurred to 30 June 2008 in the event the case was not successful. Following the successful judgement £77,500 of this provision was released in the half year to 31 December 2008.
9. The Board of Directors approved the interim report on 25 March 2010. A copy of this Interim Statement is being sent to shareholders and copies are available for download by visiting our website at www.cleardebtgroup.co.uk.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR KMGZFDKLGGZM
