CVH.L Regulatory News (CVH)

12 Apr 2006 09:00

Cavanagh Group PLC12 April 2006 Cavanagh Group plc Preliminary Results for the 12 months to 31 December 2005 Key Highlights • Turnover increased pro rata by 16% to £12.2 million • Substantial turnaround in EBITDA at £0.4 million (2004 (14 months): loss of £2.7 million) • Overheads reduced pro rata by 20% • New back office software installed improving efficiencies and management information Andrew Fay, Chief Executive, comments "Following our acquisition of Ernst & Young Financial Management, it wasessential that we were able to demonstrate a turnaround in the business'financial performance following the trading losses we sustained in 2004, and Iam pleased to note that this has been achieved in 2005. Both an increase inturnover and a substantial reduction in overheads have contributed to a positiveEBITDA, in such sharp contrast to the previous year. We believe Cavanagh is nowin a strong position to pursue profitable growth." For further information please contact Andrew Fay, Chief Executive 01444 475400 Cavanagh Group plc CHAIRMAN'S STATEMENT FINANCIAL PERFORMANCE I am pleased to report on a year of significant progress for Cavanagh with thefinancial performance turnaround achieved in the first six months continuinginto the second half of the year. The results for the 12 months ended 31st December 2005 show turnover of£12.2million, up by 16% from the pro rata equivalent achieved in the previousyear. EBITDA (earnings before interest, tax, depreciation, amortisation andexceptional items) for 2005 was £0.4 million against a pro rata loss of £2.3million in 2004. As well as increasing turnover, we have continued to make substantial savings inour overheads and gross margins have improved to 44.7%. I am pleased to reportthat we are now focused on generating controlled, profitable growth in ourbusiness. Client assets invested by the Group now exceed £1.0 billion providing both trailcommission and additional business opportunities. Indeed, our recurring income,including annual fees and trail commission, is approaching £4 million per annum,representing approximately 33% of Group turnover. Also, in line with my half year report, I can report that CPRM, our actuarialand advisory service which was launched in September 2004, produced a modest pretax profit thereby truly contributing to the Group's performance with itsrecurring income totalling approximately 40% of its total revenue. OPERATIONS In the first quarter of 2005 we rationalised the finance function bycentralising it in Cuckfield and we also appointed Ian Henson as FinanceDirector. In mid 2005 we introduced a new back office system which has enabled us tocontinue to drive operational efficiencies through the business and generateimproved management information which has contributed to the overall progressachieved in the year. This is reflected in the pro rata reduction in overheadsof approximately 20% from 2004 to 2005. We anticipate further improvement during2006. The average revenue per consultant is now around £190,000, which when comparedto the industry puts our advisors at the top end of the range, supported bytheir colleagues from the technical and administrative departments. BUSINESS OPPORTUNITIES The outlook for 2006 continues to be promising for a number of reasons. Thepositive equity markets indicate that retail investment business will continueto grow. Additionally, planning for pensions "A-day" has provided the Group'sconsultants with considerable opportunities to offer advice to High Net Worthclients at a time of significant change in pension regulation. We continue to advance our professional connections, especially with seniorpartners of law firms and we anticipate further growth in this area. Another core area of development for Cavanagh is servicing the corporate market,which is a significant focus for our Glasgow, Birmingham and London offices. Since the year end we have strengthened our Management team by making a keyappointment who will be responsible in coordinating the growth of three officesin our central region. This will enable greater focus to be given to our otherregional offices by our existing management team. We believe that these activities, together with our growing introducer network,will continue to assist in growing our revenue streams. GROUP STRATEGY Cavanagh's strategic objective is to become one of the top 10 IFA groups in theUK, with a profitable business model. We will achieve this by a combination ofincreasing the number of top quality advisers, improving our operationalefficiencies and selectively looking at suitable acquisition opportunities. STAFF I would like to thank all the Cavanagh staff and the product providers who havesupported us for their contribution throughout 2005. I would also like to thankmy colleagues on the Board for their hard work and commitment in what has been asuccessful year. John CampbellChairman11th April 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2005 Year to 31 14 months to 31 December 2005 December 2004 £ £ Notes TURNOVER: Group and share of joint venture's turnover 12,160,516 12,328,006 Less: share of joint venture's turnover (107,088) (110,922) ------------------ ----------------- TURNOVER 12,053,428 12,217,084 Cost of sales 6,617,198 6,833,221 ----------------- ------------------Gross profit 5,436,230 5,383,863 ----------------- ------------------ Administrative expenses - exceptional items - 644,684 - goodwill amortisation 201,660 201,660 - other 5,406,422 7,837,584 ----------------- ----------------- Total administrative expenses 5,608,082 8,683,928 ----------------- ----------------- Operating profit/(loss) before exceptional items and goodwill 29,808 (2,453,721) amortisation - exceptional items - (644,684) - goodwill amortisation (201,660) (201,660) ----------------- ----------------- OPERATING LOSS (171,852) (3,300,065) Share of joint venture operating profit 105,202 109,478 Interest receivable 33,698 107,095 Interest payable (297,267) (332,205) ----------------- ----------------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (330,219) (3,415,697) Tax on loss on ordinary activities 3 (123,552) 1,064,555 ------------------- -----------------LOSS FOR THE FINANCIAL YEAR (453,771) (2,351,142) Minority interest (2,334) 5,289 ------------------ -----------------RETAINED LOSS FOR THE FINANCIAL YEAR (456,105) (2,345,853) ================== =================Basic loss per share (pence) 4 (4.20) (22.62) ================== =================Fully diluted loss per share (pence) 4 (4.20) (22.62) ================== ================= The operating loss for the year arises from the Group's continuing operations. No separate Statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the Profit and Loss Account. CONSOLIDATED BALANCE SHEETAs at ended 31 December 2005 2005 2004 £ £ FIXED ASSETSIntangible assets 1,525,410 1,794,672Tangible assets 604,477 705,628Share of assets of joint venture 2,000 2,000 ------------------ ----------------- 2,131,887 2,502,300 CURRENT ASSETSDebtors 3,280,492 3,232,959Cash at bank and in hand 906,472 1,122,108 ------------------ ----------------- 4,186,964 4,355,067 CREDITORS: Amounts falling due within one year (2,816,634) (2,242,533) ------------------ -----------------NET CURRENT ASSETS 1,370,330 2,112,534 ------------------ -----------------TOTAL ASSETS LESS CURRENT LIABILITIES 3,502,217 4,614,834 CREDITORS: Amounts falling due after more than one year (3,500,000) (4,100,000) PROVISIONS FOR LIABILITIES AND CHARGESOther provisions (247,682) (306,528) ------------------ ----------------- (245,465) 208,306 ================== ================= CAPITAL AND RESERVESCalled-up equity share capital 108,684 108,684Share premium account 2,705,800 2,705,800Profit and loss account (3,056,994) (2,600,889)Minority interest (2,955) (5,289) ------------------ -----------------SHAREHOLDERS' (DEFICIT)/FUNDS (245,465) 208,306 ================== ================= CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2005 Notes Year to 31 14 months to December 2005 31 December 2004 £ £ Net cash inflow/(outflow) from operating activities 5 450,927 (2,363,864) RETURNS ON INVESTMENTS AND SERVICING OF FINANCEDividends received from joint venture 88,786 104,500Interest received 33,698 107,095Interest paid (297,267) (332,205) ------------------ -------------------NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (174,783) (120,610) TAXATION - (13,217) CAPITAL EXPENDITUREPayments to acquire tangible fixed assets (159,382) (780,745) ------------------ -------------------NET CASH (OUTFLOW)/INFLOW FROM CAPITAL EXPENDITURE (159,382) (780,745) ACQUISITIONS AND DISPOSALSPurchase of subsidiary undertaking 67,602 (3,565,301)Net cash acquired with subsidiary - 1,322,186 ------------------ -------------------NET CASH INFLOW/(OUTFLOW) FROM ACQUISITIONS 67,602 (2,243,115) ------------------ -------------------CASH OUTFLOW BEFORE FINANCING 184,364 (5,521,551) FINANCINGIssue of equity share capital - 1,649,999New long term loans - 4,500,000Repayment of long term loans (400,000) -Capital element of hire purchase - (578) ------------------ -------------------NET CASH (OUTFLOW)/INFLOW FROM FINANCING (400,000) 6,149,421 ------------------ -------------------(DECREASE)/INCREASE IN CASH IN THE PERIOD (215,636) 627,870 ================== =================== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2005 2004 £ £ (Decrease)/increase in cash in the period (215,636) 627,870 Cash inflow in respect of hire purchase - 578Cash flow in respect of bank loans 400,000 (4,500,000) ------------------ -------------------CHANGE IN NET FUNDS 184,364 (3,871,552) NET (DEBT)/FUNDS AT 1 JANUARY 2005 (3,377,892) 493,660 ------------------ -------------------NET DEBT AT 31 DECEMBER 2005 (3,193,528) (3,377,892) ================== =================== 1 presentation of financial information Information in this preliminary announcement does not constitute statutoryaccounts of the Group within the meaning of Section 240 of the Companies Act1985. The figures for the year ended 31 December 2005 are audited. Thepreliminary announcement is prepared on the same basis as set out in theprevious year's statutory accounts except for the changes in accountingstandards as detailed below. FRS 21 "Events after the Balance Sheet Date" and FRS 22 "Earnings Per Share" andthe disclosure requirements of FRS 25 "Financial Instruments: Disclosure andPresentation" are effective for accounting periods beginning on or after 1January 2005 but have had no impact on the financial statements. Statutory accounts for the year ended 31 December 2004, which were preparedunder accounting practices generally accepted in the UK, have been filed withthe Registrar of Companies. The auditors' report on those accounts wasunqualified and did not contain any statement under Section 237 (2) or (3) ofthe Companies Act 1985. The group has incurred a loss of £456,105 for the period, and has netliabilities at the balance sheet date of £245,465. The directors have preparedprojections for the group for the current financial year. These demonstratethat the group can continue to meet its liabilities as they fall due for aperiod of at least twelve months from the date of signing these financialstatements. On this basis, the directors consider it appropriate to prepare thefinancial statements on a going concern basis. 2 Turnover and segmental analysis The total turnover, losses before tax and net assets are attributable to the oneprincipal activity of the Group. 3 TAx on loss on ordinary activities Year to 14 months to 31 Dec 05 31 Dec 04 £ £ Current tax: UK Corporation tax based on the results for the period at 30% (2004 - 30%) - - Share of joint venture corporation tax 16,416 17,707 Over provision in prior year - (4,490) ------------------ -----------------Total current tax 16,416 13,217 Deferred tax: Decrease/(increase) in deferred tax asset 107,136 (1,077,772) ------------------- ------------------ Tax on loss on ordinary activities 123,552 (1,064,555) =================== ================== 3 TAx on loss on ordinary activities (continued) Factors affecting current tax charge The tax assessed on the profit on ordinary activities for the year is higherthan the standard rate of corporation tax in the UK of 30% (2004 - 30%). Year to 14 months to 31 Dec 05 31 Dec 04 £ £ Loss on ordinary activities before taxation (330,219) (3,415,697) ==================== ================== Loss on ordinary activities by rate of tax (99,066) (1,024,709) Decelerated/(accelerated) capital allowances 7,902 (9,676) Expenses disallowed 102,412 60,104 Income not taxable (475) - Unrelieved tax losses 25,999 994,376 Losses utilised in the year (5,281) - Difference in rates (11,589) - Other 115 - Over provision in prior year (3,601) (6,878) -------------------- ------------------- Total current tax 16,416 13,217 ==================== =================== 4 LOSS PER SHARE Losses per share are calculated in accordance with FRS 22. The calculation ofbasic loss per ordinary share is based on losses of £456,105 (2004 - £2,345,853)and on 10,868,400 ordinary shares (2004 - 10,372,181) being the weighted averagenumber of shares in issue during the year. The loss for the year and the weighted average number of ordinary shares forcalculating the diluted loss per share for the year ended 31 December 2005 areidentical to those used for the basic loss per share. This is because theoutstanding share options and warrants would have the effect of reducing theloss per ordinary share and would therefore not be dilutive under the terms ofFinancial Reporting Standard FRS 22. 5 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES Year to 14 months to 31 Dec 05 31 Dec 04 £ £Operating loss (171,852) (3,300,065)Amortisation of goodwill 201,660 201,660Depreciation 260,533 251,742(Increase)/decrease in debtors (154,669) 137,965Increase in creditors 374,101 344,834(Decrease) in provisions (58,846) - ------------------- -------------------Net cash inflow/(outflow) from operating activities 450,927 (2,363,864) =================== =================== 6 Group analysis of changes in net debt ANALYSIS OF CHANGES IN NET DEBT At At 1 Jan 2005 Cash flows 31 Dec 2005 £ £ £Net cash:Cash in hand and at bank 1,122,108 (215,636) 906,472 ------------------ ------------------ ------------------Debt:Bank loans (4,500,000) 400,000 (4,100,000) ------------------ ----------------- -------------------Net debt (3,377,892) 184,364 (3,193,528) ================== ================= =================== 7 Basis of the preliminary announcement The board of directors of Cavanagh Group Plc approved the Preliminary Results on11th April 2006. The statutory accounts for the year ended 31 December 2005 will be delivered tothe Registrar of Companies following the Annual General Meeting. The statutoryaccounts will be posted to shareholders shortly. Further copies will availableto the public, free of charge, at the company's registered office, TheCourtyard, Staplefield Road, Cuckfield, West Sussex. The Annual General Meeting will be held at The Courtyard, Staplefield Road,Cuckfield, West Sussex on Wednesday 24th May 2006 at 10.00. This information is provided by RNS The company news service from the London Stock Exchange