CVH.L Regulatory News (CVH)

29 Apr 2005 08:00

Cavanagh Group PLC29 April 2005 CAVANAGH GROUP PLCPRELIMINARY RESULTS FOR THE 14 MONTHS ENDED 31 DECEMBER 2004 HIGHLIGHTS • Turnover increased to £12.2m (£10.4m on a pro rata basis) from £4.7m in 2003 • Operating loss pre goodwill and exceptional costs £2.5m (2003 : £0.4m) • Acquisition and integration of Ernst & Young Financial Management completed • Now ranked one of the top 20 firms of IFA's in the UK Andrew Fay, Chief Executive, comments : "With the integration of the two companies complete, Cavanagh are now wellplaced to take advantage of our excellent client base and professionalconnections to develop new and existing opportunities in our sector of themarket." John Campbell, Chairman, comments : "After a difficult period of integration, Cavanagh is poised to demonstrate thatit has established a platform of sustainable profitable growth." For further information please contact : Andrew Fay, Chief ExecutiveCavanagh Group plc 01444 475400 CHAIRMAN'S STATEMENTFor the period ended 31 December 2004 2004 has seen a significant transformation in Cavanagh. The period started withthe acquisition of Ernst & Young Financial Management (EYFM) in December 2003,and has been dominated by its consolidation into a much larger Group. Turnoverhas increased from £4.7m in the year ended 31 October 2003 to £12.2m for the 14months to December 2004. The Group is now amongst the top 20 IFAs in the UK. Operations The acquisition has enabled us to strengthen our London presence, and we nowoperate from a network of 9 locations (Aberdeen, Glasgow, Edinburgh, Newcastle,Leeds, Manchester, Birmingham, London and Cuckfield) giving us an excellentcoverage which in turn has helped improve client contact and will betterfacilitate the growth of the Group. As anticipated, 2004 has been an extremely challenging year when it wasrecognised that the acquisition of EYFM would have an adverse affect in theshort-term and therefore on 2004's trading results. Indeed, the operating lossfor the period (before non-recurring charges and goodwill amortisation)increased to £2.5m (2003: £0.4m). This was partly as a result of bringingtogether the two companies which diverted some of the management's focus awayfrom customer-facing activities whilst the integration was in progress. Despitethis, the Board feel that the original investment of £3m plus the lossesincurred still represent an excellent investment which should soon start toenhance shareholder value, evidence of which is expected to be shown in 2005. Business Opportunities With effect from 1 January 2005, the two wholly owned trading subsidiarycompanies were merged into one company, Cavanagh Financial Management Limited,trading as the Cavanagh Group. The operations continue to be streamlined, witha savings programme of £0.5m still in progress which will add to the savings of£1.5m that were implemented in 2004. Although the full benefits of the acquisition of EYFM are still to be reflectedin our financial performance, it has meant that our fee to total income ratio isin excess of 25%. We believe that Cavanagh is well placed to offer the range ofremuneration options being encouraged by the FSA to service its high net worthclient base, which includes many of the partners of Ernst & Young and theirclients, as well as a significant client base of barristers and solicitors basedin London. During 2004 the Group recognised the need for a specialist unit to provideactuarial advice to pension trustees and employers and a new subsidiary startedto trade in September 2004. Whilst it made a small loss in the period toDecember 2004, it is budgeted to contribute to the Group's profit in 2005. Outlook I am pleased to report that the unaudited management accounts for the firstquarter of 2005 show an operating profit; this shows a significanttransformation from any period in the previous reporting period, and reflectsthe extraction of cost and restructuring of the group which occurred during2004, giving significant cost savings coupled with management focus returningto developing additional income opportunities. This launches 2005 with an integrated business giving the opportunity to expandprudently without compromising the quality base already established. We arepleased to see the results of the efforts made in 2004 coming to fruition, andwe look forward to the remainder of 2005. At a time when depolarisation is at the forefront of debate in the financialservices sector in which we operate Cavanagh is committed to remainingindependent although we continue to work closely with product providers toensure we are able to market competitive products. The board believes that thisapproach is in the best interests of the Cavanagh client base. I am pleased that we have recently been able to announce the appointment of IanHenson as our Finance Director. Ian has been working with us over the past 5months, helping to direct the continuing improvement in operationalefficiencies. In summary, we believe that after a difficult period of integration Cavanagh ispoised to demonstrate that it has established a platform of sustainableprofitable growth. John CampbellChairman 29th April 2005 GROUP PROFIT AND LOSS ACCOUNTFor the 14 month period ended 31 December 2004------------------------------------------------------------------------------------------------------ Period to 31 Dec 04 Year to Continuing Acquisition Total 31 Oct 03 £'000 £'000 £'000 £'000 TURNOVER 5,326 6,891 12,217 4,694 ------- ------- ------ -------Operating profit / (loss) Before exceptional costs and goodwill amortisation (760) (1,693) (2,453) (382)Exceptional costs - (645) (645) - ------- ------- ------ ------- (760) (2,338) (3,098) (382)Goodwill Amortisation (12) (190) (202) (10) ------- ------- ------ ------- (772) (2,528) (3,300) (392) ------- ------- ------ ------- Share of joint venture operating profit 109 130Net interest (payable) / receivable (225) 12 ------ -------LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,416) (250) Tax on loss on ordinary activities 1,065 52 ------ -------LOSS FOR THE FINANCIAL PERIOD (2,351) (198) Minority interest 5 - ------ ------- RETAINED LOSS FOR THE FINANCIAL PERIOD (2,346) (198) ====== =======Loss per share (pence) - basic and fully diluted (22.62) (1.98) ====== ======= The operating loss for the period arises from the group's continuing operations.No separate Statement of Total Recognised Gains and Losses has been presentedas all such gains and losses have been dealt with in the Profit and LossAccount. The company has taken advantage of section 230 of the Companies Act 1985 not topublish its own Profit and Loss Account. GROUP BALANCE SHEET31 December 2004 2004 2003 £'000 £'000 FIXED ASSETSIntangible assets 1,795 81Tangible assets 706 174Investments - 260Share of assets of joint venture 2 2 --------- -------- 2,503 517 CURRENT ASSETSDebtors 3,233 1,182Cash at bank and in hand 1,122 494 --------- -------- 4,355 1,676CREDITORSAmounts falling due within one year (2,243) (1,094) --------- --------NET CURRENT ASSETS 2,112 582 --------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 4,615 1,099 CREDITORSAmounts falling due after more than one year (4,100) - PROVISIONS FOR LIABILITIES AND CHARGESOther provisions (307) (191) --------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 208 908 ========= ======== CAPITAL AND RESERVESCalled-up equity share capital 109 100Share premium account 2,706 1,064Profit and loss account (2,602) (256)Minority interest (5) - --------- --------SHAREHOLDERS' FUNDS 208 908 ========== ========== GROUP CASH FLOW STATEMENTFor the period ended 31 December 2004 Period to 31 Period to 31 Dec 04 Oct 03 £'000 £'000 Net cash outflow from operating activities (2,364) (324) Net cash (outflow) / inflow from returns on investments and servicing of finance (121) 86 Taxation (13) 11 Capital expenditure (781) (61) Acquisitions (2,243) (49) ----------- ------------Cash outflow before financing (5,522) (337) Net cash inflow / (outflow) from financing 6,150 (3) ----------- ------------Increase / (decrease) in cash in the period 628 (340) =========== ============ NOTES : 1. Accounting policies These financial statements have been prepared using the accounting policies setout in the Annual Report and Financial Statements for 2003. 2. Financial statements These Financial Statements do not constitute statutory accounts. The resultsfor the period ended 31 December 2004 are extracts from the Group Annual Reportand Financial Statement for that period which will be delivered to the Registrarof Companies in due course and on which the auditors have given an unqualifiedreport which does not contain a statement under Section 237(2) or (3) of theCompanies Act 1985. The results for the year 31 October 2003 have beenextracted from the Annual Report and Financial Statements for that year, whichhave been delivered to the Registrar of Companies and on which the auditors havegiven an unqualified report which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 3. Loss per share Period to Year to 31 Dec 04 31 Oct 03 pence penceLoss per ordinary share (22.62) (1.98) ============= ========== Loss per share has been calculated on the net basis on the loss on ordinaryactivities after taxation of £2,345,853 (2003 - £198,265) using the averagenumber of ordinary shares in issue of 10,372,181 (2003 - 10,000,000). As theGroup made a loss for the period, the fully diluted loss per share is identicalto the basic earnings per share. 4. Net cash outflow from operating activities Period to Year to 31 Dec 04 31 Oct 03 £ £Operating loss (3,300) (392)Amortisation of goodwill 202 10Depreciation 251 81Loss on disposal of fixed assets - 1Decrease/(increase) in debtors 138 (406)Increase in creditors 345 382 ----------- ------------Net cash outflow from operating activities (2,364) (324) =========== ============ 5. Analysis of changes in net debt 2004 2003 £'000 £'000Increase/(decrease) in cash in the period 628 (340)Cash inflow in respect of hire purchase 1 3Cash flow in respect of bank loans (4,500) - ----------- ------------Change in net funds (3,872) (337) Net funds at 1 November 2003 494 831 ----------- ------------Net borrowings at 31 December 2004 (3,378) 494 =========== ============ 6. Acquisition The company acquired the entire issued share capital of Cavanagh FinancialManagement Limited (formerly Ernst & Young Financial Management Limited) on 19December 2003 for £3,000,000. The acquisition has been accounted for by theacquisition method of accounting. Book and fair value at acquisition £'000Tangible fixed assets 3Debtors 1,106Cash at bank 1,322Creditors (521) ---------------------- 1,910Goodwill 1,916 ----------------------Consideration (including costs) 3,826 ======================Consideration satisfied by cash 3,000Costs of acquisition 826 ---------------------- 3,826 ====================== 7. Annual report and financial statements The Annual Report and Financial Statements will be posted to shareholdersshortly. Copies of the Annual Report and of this announcement will be availableat the Company's registered office : The Courtyard, Staplefield Road, Cuckfield,West Sussex, RH17 5JT 8. Annual general meeting The Annual General Meeting will be held at The Courtyard, Staplefield Road,Cuckfield, West Sussex on 29th June 2005 at 10.00 am. This information is provided by RNS The company news service from the London Stock Exchange