14 Nov 2011 07:01
14 November 2011 Sterling Green Group plc ("Sterling Green" or "the Company") Final Results for the year ended 31 March 2011
CHAIRMAN'S STATEMENT
Introduction and review of activities
I am pleased to present the financial statements of Sterling Green Group plc and its subsidiaries ("the Group") covering the year ended 31 March 2011. As forecast in my Chairman's Statement accompanying the interim results announcement in November 2010, I am able to report the Group's maiden profit for the full year ended 31 March 2011.
Results and dividends
Revenue for the year ended 31 March 2011 was £2,801,000 (2010 - £2,106,000). Revenue was made up of £2,681,000 (2010 - £1,977,000) from debt management services and £120,000 (2010 - £129,000) relating to mortgage business.
The Group profit after taxation for the year amounted to £32,000 (2010 - £ 238,000 loss). The Directors are not able to recommend the payment of a dividend.
Trading review
The Group's overall performance during the year showed a significant improvement on the prior year's results as the Group was able to increase total revenues by 33%, while maintaining its gross margins and restricting the increase in total overhead costs to just 2.8%.
Debt management revenues of £2,681,000 for the year reflected an increase of 35.6% on the prior year figure of £1,977,000. Gross margins on debt management were only slightly down at 46.4% compared to 47.6% whilst debt management overheads of £983,000 were £51,000 or 5.5% higher than the £932,000 shown in the prior year. Overall, debt management activities showed an operating profit of £262,000 compared with an operating profit of £10,000 in the prior year.
Re-mortgaging revenues of £120,000 were down on the prior year figure of £ 129,000. However, further cost cutting during the year enabled this activity to show an operating profit of £33,000 compared to £12,000 in the prior year.
Current performance and future developments
Disappointingly, the Group's debt management activities have shown a small loss in the period since the year end.
Whilst the Group has been successful in growing its client base and the associated revenues derived from those clients, it has struggled in a very competitive environment, to generate sufficient income and profits to fully offset the costs associated with the Company being on AIM. The Company has seen a marked increase in costs associated with acquiring robust client leads and, in order to grow the business, the Group has taken on debt to fund specific marketing campaigns and/or payments to lead providers. As a result, the on-going running costs are now at a level that would require substantial growth in the Group's client base in order to continue to be able to service the debt and maintain the Group's lead generation programme. The Directors believe that the Group does not have the necessary capital or ability to raise sufficient capital to compete with other larger competitors.
As a result, the Company has entered into a conditional sale and purchase agreement to dispose of the majority of its debt management book (the "Debt Books"). DRSP Limited has agreed to acquire the Debt Books for a price of £ 50,000 plus an amount equal to 12 times the total average monthly fee of the Debt Books. The Directors estimate that this will be approximately £1.05 million on completion, with the consideration being satisfied entirely in cash.
STERLING GREEN GROUP PLC CHAIRMAN'S STATEMENT (continued)
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The transaction is dependent upon shareholder approval and a Circular has today been sent to shareholders outlining the details of the proposed transaction. In the opinion of the Directors, the proposed disposal represents the best chance for shareholders to realise some value from their investment.
The proposed disposal constitutes a fundamental change of business under Rule 15 of the AIM Rules and is, therefore, conditional on shareholder approval. If the transaction is approved by shareholders, the Group will have limited trading activities, which in the absence of a sale, the Directors anticipate will continue for the foreseeable future. The proceeds of the disposal will be used to repay the Group's indebtedness amounting to approximately £440,000 and for working capital generally. Following the disposal the Group will retain cash balances of approximately £500,000 after repaying debt, certain other long term creditors and expenses relating to the transaction.
J M EdelsonChairman14 November 2011Further enquiries:Sterling Green Group plc Tel: 0161 975 5757 Michael Edelson Merchant Securities Limited Tel: 020 7628 2200 Simon Clements/David Worlidge
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2011
Note 2011 2010 £000 £000 Revenue 2,801 2,106 Cost of sales (1,506) (1,128) Gross profit 1,295 978 Administrative expenses (1,175) (1,143) Profit/(Loss) from operations 120 (165) Finance costs (88) (72) Profit/(Loss) before tax 32 (237) Income tax charge 2 - (1) Profit/(Loss) and total comprehensive 32 (238) income for the year attributable to equity holders of the parent Earnings/(Loss) per share 3 0.01p (0.08p) Basic and diluted
There were no other items of comprehensive income other than the profit for the year.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2011
Note 2011 2010 £000 £000 Non-current assets Intangible assets 1,115 1,115 Property, plant and equipment 89 116 Total non-current assets 1,204 1,231 Current assets Trade and other receivables 143 108 Cash and cash equivalents 44 28 Total current assets 187 136 Current liabilities Trade and other payables (243) (361) Current tax liabilities - (1) Borrowings (424) (39) Total current liabilities (667) (401) Net current liabilities (480) (265) Non-current liabilities Borrowings (5) (279) Total non-current liabilities (5) (279) Net assets 719 687 Equity attributable to the owners of the parent Called up share capital 304 304 Share premium account 1,794 1,794 Capital reserve 6 6 Other reserve 891 891 Accumulated losses (2,276) (2,308) Total equity 719 687
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2011
Note 2011 2010 £000 £000 Cash flows from operating activities Profit/(Loss) before tax 32 (237) Adjustments for: Depreciation of property, plant and equipment 62 98 Finance costs 88 72 Operating cash flows before movement in working 182 (67)capital (Increase)/Decrease in trade and other (35) 34receivables (Decrease)/Increase in trade and other payables (118) 42 Corporation tax paid (1) - Net cash from operating activities 28 9 Cash flows used in investing activities Purchase of property, plant and equipment (35) (5) Net cash used in investing activities (35) (5) Cash flows from/(used in) financing activities Capital element of lease payments (39) (86) Loans received 150 - Finance costs paid (88) (72) Net cash from/(used in) financing activities 23 (158) Net increase/(decrease) in cash and cash 16 (154)equivalents Cash and cash equivalents at the start of the 28 182year Cash and cash equivalents at the end of the 4 44 28year
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2011
Attributable to equity holders of the parent Share Share Share Capital Other Accum-ulated Total capital premium capital reserve reserve losses £000 £000 account to be £000 £000 £000 £000 issued £000
At 1 April 2009 288 1,710 100 6 891 (2,070) 925
Loss and total - - - - - (238) (238)comprehensive income for the year Issue of share 16 84 (100) - - - -capital
At 31 March 2010 304 1,794 - 6 891 (2,308) 687
Profit and total - - - - - 32 32comprehensive income for the year
At 31 March 2011 304 1,794 - 6 891 (2,276) 719
Other reserve
The other reserve is a merger reserve created on the acquisition of Sterling Green Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2011
1. Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 March 2011 or 31 March 2010. Statutory accounts for 31 March 2010 have been delivered to the Registrar of Companies and those for 31 March 2011 will be delivered in due course. The auditors have reported on those accounts. The accounts did not contain a statement under the Companies Act 2006 s498(2) or (3), and both received an unqualified audit opinion. However there was an emphasis of matter in relation to going concern.
The Board has considered the Group's financial position and trading prospects using detailed forecasts covering the period ending 31 March 2013, which incorporate the current drawn down loan facility confirmed as available until 18 December 2011. These forecasts have been drawn up on the basis that the existing loan will be repaid following completion of the proposed partial Disposal of the Group's debt management book. On the basis that the partial Disposal is completed and having made appropriate consideration, the Board believes that the Group has adequate resources to continue trading for the foreseeable future, and accordingly, the going concern basis has been adopted in preparing these financial statements.
Additionally as the partial Disposal is subject to shareholder approval, the Board has considered the Group's financial position and trading prospects using detailed forecasts covering the period ending 31 March 2013 on the basis that the proposed partial Disposal of the Group's debt management book does not complete. These forecasts have been drawn up on the basis that the existing loan will not be repaid and accordingly the Group would have to apply for a further extension of that loan facility. Although the Board is not aware of any reason why a further extension would not be granted, there is no certainty that the Group would be able to extend those facilities beyond 18 December 2011. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group's and the Company's ability to continue as going concerns and, therefore, that they may be unable to realize their assets and discharge their liabilities in the normal course of business. However, subject to this uncertainty, the Board believes that the Group has adequate resources to continue trading for the foreseeable future, and accordingly, the going concern basis has been adopted in preparing these financial statements.
2. Income tax charge 2011 2010 £000 £000 Current year tax: UK corporation tax - - Prior year tax: UK corporation tax underprovided - (1) - (1)
Corporation tax is calculated at 28% (2010 - 28%) of the estimated assessable profit for the year.
The tax charge for the year can be reconciled to the consolidated statement of comprehensive income as follows:
2011 2010 £000 £000 Profit/(Loss) before tax 32 (237) Loss on ordinary activities multiplied by 9 (66) the relevant standard rate of corporation tax in the UK of 28% (2010 - 28%) Effect of: Income not taxable/expenses not deductible (5) 8 for tax purposes Utilisation of losses (4) - Losses carried forward - 58 UK corporation tax underprovided in prior - (1) year Current tax charge for the year - (1)
Unrecognised deferred tax assets
The following deferred tax assets have not been brought into account as assets:
2011 2010 £000 £000 Tax losses 532 534 Temporary differences 52 60 3. Earnings/(Loss) per share
The calculation of basic earnings/(loss) per share is based on the following:
2011 2010 Earnings/(Loss) 32 (238) Earnings/(Loss) for the purpose of basic and diluted earnings /(loss) per share being the net profit/(loss) attributable to equity holders of the parent (£000) Number of shares 303,675,390 303,587,719 Weighted average number of shares for the purpose of basic earnings/(loss) per share Effect of dilutive potential ordinary 12,567,280 -shares: - Share options
Weighted average number of ordinary shares 316,242,670 303,587,719
for the purpose of diluted earnings/(loss) per share Earnings/(Loss) per share (pence) 0.01 (0.08) Basic Diluted 0.01 (0.08)
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming conversion of all dilutive potential ordinary shares. During the year the Company's potential ordinary shares consist of share options. Due to losses in the preceding year there are no dilutive ordinary shares in that year.
4. Notes to the cashflow statement
Cash and cash equivalents
Cash and cash equivalents consist of bank balances. Cash and cash equivalentsincluded in the cash flow statement comprise the following balance sheetamounts: 2011 2010 £000 £000 Cash at bank 44 285. Related party transactions
The services of J M Edelson were provided to the Group under a service agreement by London & City Credit Corporation Limited. Amounts charged to the Group during the year for his services amounted to £25,000 (2010 - £25,000). At 31 March 2011 £2,500 (2010 - £2,448) of this amount remained outstanding.
S. T. Ali and J. McClean have provided personal guarantees up to a maximum of £ 250,000 as security for the £400,000 loan facility available to the Group.
6. Dividend
The directors are not able to recommend the payment of a dividend.
7. Copies of the Report & Accounts
Copies of the Report & Accounts will be posted to shareholders shortly and are also available from the Company's registered office at Number 14, The Embankment, Vale Road, Heaton Mersey, Stockport, Cheshire SK4 3GN and from the Company's website www.sterlinggreen.co.uk.
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