20 Sep 2010 07:00
Cavanagh Group plc
("Cavanagh" or "The Group")
Unaudited Interim Results for the six months ended 30 June 2010
Cavanagh Group plc, one of the leading firms of Independent Financial Advisers, announces its interim results for the six months ended 30 June 2010.
Key Results
| H1 2010 | H1 2009 | % change |
| £'000 | £'000 |
|
Revenue
| 7,671 | 7,948 | -3% |
EBITDA
| 544 | 700 | -22% |
EBITDA margin
| 7.1% | 8.8% | -19% |
Net Debt | 335 | 1,471 | +77% |
Discretionary Funds held by Cavanagh Asset Management | £196m | £69m | 184% |
Paul Sinnett, Chairman, comments:
"It is clear that the regulatory landscape is forcing all IFAs to re-think their future client proposition - the Board believes that it has a clear view of what this will mean for Cavanagh and, as evidenced by the already high level of recurring income which we generate, it is on a path towards its goal."
Cavanagh Group plc
Andrew Fay (Chief Executive) 01444 475400
Brewin Dolphin Investment Banking
Andrew Emmott 0845 213 4736
Cavanagh Group plc
CHAIRMAN'S STATEMENT
Financial Results
I am pleased to report the Group's results for the six months ended 30 June 2010, which show EBITDA of £544,000 (2009: £700,000) from revenue of £7,671,000 (2009: £7,948,000). Net debt at 30 June 2010 stood at £335,000 (2009: £1,471,000) down from £402,000 at the previous year end.
These results should be considered against the continued uncertainties in global financial markets and the fragile improvement in the UK economy together with the Board's commitment to develop Cavanagh's proposition to be RDR compliant well in advance of the 2012 deadline. Indeed, we have made a concerted effort to accelerate our business model to be less dependent on up-front commission as now over 65% of the Group's revenues are being generated from fees and recurring income.
- The reduction in both revenue and margins is largely a result of increased investment in our long term proposition and longer lead in periods for corporate work, which is a reflection of the distraction caused by the state of the current economic landscape.
The Board considers that we are in a period which requires Cavanagh to balance the need for development against profit and we have accepted that to achieve our objectives in the new RDR world we may have to sacrifice some short term profitability as our priority is to continue to improve the model so that we can provide the range of services which we believe our clients require.
Operations
At the time of reporting our discretionary fund management service, Cavanagh Asset Management (CAM), now holds assets in excess of £196m, a net increase in the first half of the year of over £60m of assets at a time during which the FTSE 100 dropped by over 9%. This is a significant achievement given the backdrop of market turbulence and fluctuating fund values.
We previously reported that we had engaged with SEI to supply Cavanagh Wealth Management with its own platform and I am pleased to report that this project remains on schedule to be launched in the fourth quarter of this year. This is one of the key offerings that we are promoting to improve our client offering and we will be announcing further significant enhancements to our investment proposition which we hope to also launch in the final quarter.
We retain a stronger presence in the London legal sector and continue to work with the Bar Council in expanding the services Cavanagh is able to offer. This is supplemented by our client base in other professional sectors such as accountancy and medical where we offer ongoing wealth management advice to help enable these clients plan their financial futures.
For certain levels of advice we also launched a telephone-based advisory service in January which includes our new annuity desk to compliment both our Wealth Management and Corporate consultants. These services have already shown a positive income stream and are expected to start to provide a return on capital in the near future.
Investment in recruitment remains a key part of our development for the future and we have been pleased with the quality of the candidates generated by our seminar programme so far this year. It has become clear to the Board that consultants need to share in its vision of providing a service to clients, not simply selling products, and this is being fully reflected in the recruitment and retention process.
Our corporate and actuarial divisions continue to add to our overall performance with their recurring revenues contributing to the stability and success of the Group, with additional new business wins achieved this year and a number of tenders currently in the pipeline.
Staff
The changes to the business model that we believe are required to meet the demands of the changing IFA marketplace could not be achieved without the commitment and loyalty of our staff and I would once again like to thank them for their dedication during these uncertain times and also for their efforts in helping to deliver the projects that have been completed or due to be delivered this year.
Outlook
It is clear that the regulatory landscape is forcing all IFAs to re-think their future client proposition - the Board believes that it has a clear view of what this will mean for Cavanagh and, as evidenced by the already high level of recurring income which we generate, it is on a path towards its goal. However, as stated earlier, short-term profitability may be sacrificed while the Group's model and client offerings are improved through continued investment to provide not just a robust RDR-compliant proposition, but one that is market leading. Assuming similar market conditions, we expect to see an improvement in our level of profitability during 2011.
Paul Sinnett
Chairman
20 September 2010
Cavanagh Group plc
CONSOLIDATED INCOME STATEMENT
for the period ended 30 June 2010
|
|
| 6 months 30-June -10 | 6 months 30-June -09 | Year ended 31-Dec -09 |
|
|
| Unaudited | Unaudited | Audited |
|
| Notes | £'000 | £'000 | £'000 |
REVENUE | 7,671 | 7,948 | 16,078 |
|
|
|
|
PROFIT FROM OPERATIONS | 496 | 655 | 1,453 | |
Share of joint venture profit after tax | 48 | 45 | 112 | |
|
| ---------------- | --------------- | -------------- |
EARNINGS BEFORE INTEREST, DEPRECIATION, AMORTISATION AND TAX | 544 | 700 | 1,565 | |
Net finance costs |
| (40) | (39) | (99) |
Depreciation |
| (56) | (101) | (189) |
Amortisation and impairment |
| (246) | (248) | (495) |
| ---------------- | --------------- | -------------- | |
PROFIT BEFORE TAX EXPENSE | 202 | 312 | 782 |
Tax expense |
| (56) | (98) | (173) |
| ---------------- | -------------- | --------------- | |
PROFIT FOR THE FINANCIAL PERIOD | 146 | 214 | 609 | |
| ======== | ======= | =========== |
PROFIT ATTRIBUTABLE TO :
|
|
|
|
| |||
Owners of Parent company |
| 148 | 211 | 576 | |||
Non-Controlling Interest |
| (2) | 3 | 33 | |||
| --------------- | --------------- | ---------------- | ||||
|
| 146 | 214 | 609 | |||
|
| ======== | ======= | ============ | |||
Earnings per share |
|
|
|
| |||
Basic - pence | 2 | 1.3 | 1.8 | 5.0 | |||
Fully diluted - pence | 2 | 1.3 | 1.8 | 5.0 | |||
The profit arises from the Group's continuing operations.
There was no recognised income or expenditure other than the profit for the period. Accordingly no statement of Comprehensive Income and Expenditure has been prepared.
Cavanagh Group plc
CONSOLIDATED BALANCE SHEET
| 30-June-10 | 30-June -09 | 31-Dec -09 |
| Unaudited | Unaudited | Audited |
| £'000 | £'000 | £'000 |
ASSETS
Non-current assets
Property plant and equipment |
| 198 | 208 | 127 | |||
Intangible assets |
| 5,204 | 5,692 | 5,445 | |||
Investment in Joint Venture |
| 4 | 4 | 4 | |||
Deferred tax asset |
| 134 | - | 134 | |||
| ---------------- | ---------------- | -------------- | ||||
| 5,540 | 5,904 | 5,710 | ||||
| ---------------- | ---------------- | --------------- | ||||
Current assets |
|
|
|
| |||
Trade and other receivables |
| 1,081 | 1,569 | 1,321 | |||
Cash and cash equivalents |
| 2,148 | 2,281 | 2,791 | |||
| --------------- | ---------------- | --------------- | ||||
| 3,229 | 3,850 | 4,112 | ||||
| -------------- | ---------------- | --------------- | ||||
TOTAL ASSETS | 8,769 | 9,754 | 9,822 | ||||
| -------------- | --------------- | --------------- | ||||
LIABILITIES |
|
|
| ||||
Current liabilities |
|
|
| ||||
Trade and other payables |
| 1,193 | 1,809 | 1,753 | |||
Corporation tax payable |
| 487 | 188 | 364 | |||
Borrowings |
| 1,160 | 1,220 | 1,270 | |||
Provisions |
| 252 | - | 302 | |||
| --------------- | ---------------- | ---------------- | ||||
| 3,092 | 3,217 | 3,689 | ||||
| -------------- | ---------------- | ---------------- | ||||
Non-current liabilities |
|
|
| ||||
Trade and other payables |
| 55 | - | - | |||
Borrowings |
| 1,323 | 2,532 | 1,923 | |||
Deferred tax liability |
| 592 | 726 | 659 | |||
Provisions |
| 78 | 176 | 69 | |||
| -------------- | --------------- | ---------------- | ||||
|
| 2,048 | 3,434 | 2,651 | |||
| -------------- | --------------- | ---------------- | ||||
TOTAL LIABILITIES | 5,140 | 6,651 | 6,340 | ||||
| -------------- | --------------- | --------------- | ||||
NET ASSETS | 3,629 | 3,103 | 3,482 | ||||
| =========== | =========== | =========== | ||||
EQUITY |
|
|
| ||||
Issued share capital |
| 116 | 116 | 116 | |||
Share premium account |
| 7 | 7 | 7 | |||
Share based payment reserve |
| 239 | 261 | 238 | |||
Retained earnings |
| 3,192 | 2,655 | 3,044 | |||
| --------------- | --------------- | --------------- | ||||
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY | 3,554 | 3,039 | 3,405 | ||||
|
|
|
| ||||
Minority interests | 75 | 64 | 77 | ||||
| -------------- | ---------------- | --------------- | ||||
TOTAL EQUITY | 3,629 | 3,103 | 3,482 | ||||
| ========== | =========== | ============ | ||||
Cavanagh Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2010
|
Share capital | Share premium account | Share based payment reserve |
Retained earnings | Equity available to the Group | Non-Controlling Interest |
Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
|
|
|
|
|
|
|
At 31 December 2008 (audited) | 116 | 7 | 256 | 2,444 | 2,823 | 61 | 2,884 |
|
|
|
|
|
|
|
|
Total comprehensive income for the period | - | - | - | 211 | 211 | 3 | 214 |
Share-based payment charge | - | - | 5 | - | 5 | - | 5 |
| ----------------------- | --------------------- | ---------------------- | ----------------------- | --------------------- | --------------------- | --------------------- |
At 30 June 2009 | 116 | 7 | 261 | 2,655 | 3,039 | 64 | 3,103 |
|
|
|
|
|
|
|
|
Total comprehensive income for the period | - | - | - | 365 | 365 | 30 | 395 |
Transactions with owners in their capacity as owners - dividends | - | - | - | - | - | (17) | (17) |
Reserves transfer in respect of lapsed options | - | - | (24) | 24 | - | - | - |
Share-based payment charge | - | - | 1 | - | 1 | - | 1 |
| ----------------------- | --------------------- | ---------------------- | ----------------------- | --------------------- | --------------------- | --------------------- |
At 31 December 2009 (audited) | 116 | 7 | 238 | 3,044 | 3,405 | 77 | 3,482 |
Total comprehensive income for the period | - | - | - | 148 | 148 | 18 | 166 |
Transactions with owners in their capacity as owners - dividends | - | - | - | - | - | (20) | (20) |
Share-based payment charge | - | - | 1 | - | 1 | - | 1 |
| ----------------------- | --------------------- | ----------------------- | ----------------------- | --------------------- | --------------------- | --------------------- |
At 30 June 2010 | 116 | 7 | 239 | 3,192 | 3,554 | 75 | 3,629 |
| ================= | ================= | ================= | ================= | ================= | ================ | ================ |
Cavanagh Group plc
CONSOLIDATED CASH FLOW STATEMENT
for the period ended 30 June 2010
| 6 months 30-June-10 | 6 months 30-June-09 | Year ended 31-Dec-09 | |
| Unaudited | Unaudited | Audited | |
| £'000 | £'000 | £'000 | |
CASH FLOW FROM OPERATIONS |
|
|
|
|
Profit before tax |
| 202 | 312 | 782 |
Share of profit in joint venture |
| (48) | (45) | (112) |
Share based payment |
| 1 | 5 | 6 |
Depreciation |
| 56 | 101 | 189 |
Amortisation and impairment of intangible assets |
| 246 | 248 | 495 |
Loss on disposal of property |
| - | 23 | 26 |
Decrease in trade and other receivables |
| 211 | 193 | 468 |
Decrease in trade and other payables |
| (560) | (221) | (278) |
(Decrease) / increase in provisions |
| (41) | (1) | 195 |
Finance costs (net) |
| 40 | 39 | 99 |
|
| --------------- | ------------- | -------------- |
NET CASH GENERATED FROM OPERATIONS |
| 107 | 654 | 1,870 |
Corporation tax paid |
| - | - | (93) |
Interest paid |
| (48) | (59) | (130) |
|
| --------------- | -------------- | --------------- |
NET CASH INFLOW FROM OPERATING ACTIVITIES |
| 59 | 595 | 1,647 |
|
| --------------- | -------------- | --------------- |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
Payments to acquire property, plant and equipment |
| (45) | (16) | (30) |
Payments to acquire intangible assets |
| - | (5) | (5) |
Proceeds from sale of property, plant and equipment |
| - | 65 | 62 |
Interest received |
| 8 | 19 | 30 |
Income received from joint venture |
| 67 | 45 | 85 |
|
| -------------- | --------------- | --------------- |
NET CASH INFLOW FROM INVESTING ACTIVITIES |
| 30 | 108 | 142 |
|
| -------------- | --------------- | --------------- |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
Dividend paid to Non-Controlling Interest shareholders |
| (20) | - | (17) |
Repayment of borrowings |
| (710) | (635) | (1,195) |
Repayment under HP contracts and finance leases |
| (2) | - | - |
|
| -------------- | -------------- | --------------- |
NET CASH OUTFLOW FROM FINANCING |
| (732) | (635) | (1,212) |
|
| -------------- | --------------- | --------------- |
Net (decrease) / increase in cash and cash equivalents |
| (643) | 68 | 577 |
Cash and cash equivalents at the beginning of the financial period |
| 2,791 | 2,213 | 2,213 |
|
| -------------- | --------------- | --------------- |
Cash and cash equivalents at the end of the financial period |
| 2,148 | 2,281 | 2,791 |
|
| ========== | ========== | ========== |
NOTES TO THE RESULTS
1 Basis of PREPARATION OF INTERIM FINANCIAL INFORMATION
The interim financial information does not constitute full accounts within the meaning of section 434 of the Companies Act 2006. The preliminary announcement is prepared on the same basis as set out in the statutory accounts for the year ended 31 December 2009, which were prepared under accounting practices generally accepted in the UK, and have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under either Section 498 (2) or Section 498(3) of the Companies Act 2006.
While the financial information included has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRS's.
The interim financial statements which were not audited by the Auditors, were approved by the Board of Directors on 20 September 2010.
2 EARNINGS PER SHARE
| 6 months | 6 months | Year ended |
| 30-June-10 | 30-June-09 | 31-Dec-09 |
| Unaudited | Unaudited | Audited |
|
|
|
|
| £'000 | £'000 | £'000 |
|
|
|
|
Profit for the financial period after taxation attributable to Equity holders | 148 | 211 | 576 |
Share based compensation charge | 1 | 5 | 6 |
| ---------------- | ---------------- | ----------------- |
Adjusted profit after taxation | 149 | 216 | 582 |
| ======== | ======== | ========= |
Weighted average number of shares (No) |
|
|
|
For basic earnings per ordinary share | 11,597,047 | 11,597,047 | 11,597,047 |
Exercise of share options | - | 45,650 | - |
| ----------------------- | ----------------------- | ------------------------ |
For fully diluted earnings per ordinary share | 11,597,047 | 11,642,697 | 11,597,047 |
| ============= | ============= | ============= |
|
|
|
|
Earnings per ordinary share - basic | 1.3p | 1.8p | 5.0p |
|
|
|
|
Earnings per ordinary share - fully diluted | 1.3p | 1.8p | 5.0p |
| ====== | ===== | ===== |
3 ANALYSIS OF NET DEBT
| 1-Jan-10 | Cash Flow | Non-cash movements | 30-Jun-10 |
| £'000 | £'000 | £'000 | £'000 |
Cash at bank | 2,791 | (643) | - | 2,148 |
Bank loan | (3,193) | 710 | - | (2,483) |
| ------------------- | -------------------- | --------------------- | --------------------- |
Net debt | (402) | 67 | - | (335) |
| ========== | ========== | ========== | ========== |
Copies of this report will be sent to shareholders shortly and are available on the web site www.cavanagh.co.uk or from The Courtyard, Staplefield Road, Cuckfield, West SussexRH17 5JT.