Acg Metals Regulatory News (ACG)

25 Feb 2008 07:00

Accuma Group PLC24 February 2008 25 February 2008 Accuma Group Plc ("Accuma" or "the Group") Trading Update Accuma Group Plc today releases a trading update and provides commentary inrespect of the five month period* ending 31st December 2007, the Group's newfinancial year end. Throughout 2007 the Group experienced difficult trading conditions within itsIVA division. In addition the consumer loan broking division was impacted by thecredit crunch in the second half. Edward Armitage was appointed Finance Director on 7th January 2008 and, togetherwith other Board members, has conducted a thorough review of the financialposition of the Group's businesses, particularly in light of the restructuringof the IVA division during the period. The results for the period to 31 stDecember 2007 will therefore include significant exceptional costs, particularlywithin the IVA division which is largely responsible for the Group's anticipated(unaudited) EBITDA loss of £2.7m. for the period. Included in this loss is some£700,000 of Group overhead which will be charged to the profit & loss accountand is a similar amount to that charged in the first half of 2007. IVA Division This division, in common with its competitors, has been under severe pressurethroughout 2007. Rising creditor pressure on fees - which at one point led tocreditor acceptance rates of IVA proposals dropping from Accuma's average of 96%to 78% - culminated in the recently introduced IVA protocol. This is a voluntarycode between creditors, their representatives and the IVA industry and wewelcome the increased transparency this brings to the process, although the codehas meant a significant reduction in average IVA set-up fees from £2,700 to£1,700. The pressure on fees coincided with a more competitive environment as Accuma, incommon with its competition, geared up its operations for what was commonlyexpected to be a significant increase in activity in its market, in line withtrends established in 2006. This increased activity did not materialise andAccuma, as has been reported, took early action to restructure this division'sactivities, reducing headcount, dramatically reducing its advertising spend andaltering its business model to take advantage of referrals from newly acquiredbusinesses within the Group. In addition new cases have largely been relocatedto the Group's Blackburn based subsidiary Wilson Phillips. The Manchester officecontinues to manage its existing case load although one floor of this office isno longer being used, leading to a provision of £625,000 in respect of the leasecommitment together with other restructuring costs and trading losses, whichtogether bring the (unaudited) EBITDA loss for this division to £1.9m. Acceptance rates have improved to 85% of IVA cases since the New Year. Thenumber of new cases being generated largely through group referrals would, ifrepeated over the remainder of the year, lead to a profit for this division. Debt Management Byrom Keeley, the informal debt management solutions business, has had a goodstart to the year with a significant increase in volume. This business hasbenefited from consumer concerns about the credit crunch, with disposableincomes continuing to be eroded by higher cost of living expenses and theconsolidation of unsecured debt no longer an option for many consumers.Moreover, creditors are generally more positive towards debt managementsolutions. It is anticipated that the results for five months to 31 December 2007 will showan (unaudited) EBITDA of £589,000 in respect of this division. Due to the buoyant demand for its services, the Board has continued to invest inthis division. We are confident of continued growth during the year ahead. Loan & Mortgage Broking Loan Line, our loan broking and mortgage subsidiary, has been significantlyimpacted by the substantial changes within not just the sub-prime market but thesector as a whole, resulting in an expected (unaudited) EBITDA loss for theperiod of £375,000. Having refocused this business, the division recorded areturn to profitability in January 2008. Notwithstanding the current improvement in performance, the Board is taking aprudent view on the goodwill value of this business given the turmoil and somerecent high profile failures in this sector. It is anticipated the results willfeature a significant goodwill write-off in respect of this business. Outlook As outlined above, the Board has undertaken a stringent review both of theoperational and financial position of the Group, resulting in what will be asubstantial loss for the period. The Board believes that as a result of this recent restructuring the Group is ina much improved position for the year ahead. Despite trading difficulties within our IVA division, the Group has 5,906 liveIVA cases with future contracted revenue pre delinquency of £16.8m.,representing a substantial book of business. Shareholders should note thatconsolidation in this sector is gathering pace: the Board has received someapproaches which may lead to a satisfactory offer for the IVA business. With therestructuring of this business now complete, the Board believes that therealizable value of this business alone considerably exceeds our existing marketcapitalisation. The Group's debt management business continues to perform well, is experiencingsignificant growth and is favoured by conditions in the macro economy. The Boardremains confident of its prospects. The Group is debt free with a current cash position (net of expected imminentearn out payments in respect of 2007 for Byrom Keeley and Loan Line) of£933,000. The measures taken will significantly strengthen the Group's balancesheet in the year ahead. Current cash flow is strong and the Board anticipates amuch improved performance during 2008. The Group anticipates reporting its full year results by the end of March 2008. *On 13th December 2007 the Group announced its intention to change its year endto 31st December resulting in a 5 month period. The change will smooth theeffect of the seasonality of the debt solutions market on our results, which aremost active in the period from February to July. Enquiries to: Charles HowsonChief ExecutiveAccuma Group Plc Tel: 0845 202 6787 Lindsay MairDaniel Stewart & Company plc Tel: 0207 776 6550 Simon Rothschild, Oliver WintersBankside Consultants Tel: 0207 367 8888 This information is provided by RNS The company news service from the London Stock Exchange