CVH.L Regulatory News (CVH)

10 Sep 2007 07:00

Cavanagh Group PLC10 September 2007 Cavanagh Group plc ("Cavanagh" or "The Group") Unaudited Interim Results for the six months ended 30 June 2007 Cavanagh Group PLC, one of the leading firms of Independent Financial Advisers,announces its interim results for the six months to 30th June 2007. Highlights • Turnover up to £7,739,000 (2006: £7,068,000) • Pre-tax profit of £712,000 up by 38% from £517,000 in 2006 • Operating cash inflow of £927,000 Cavanagh Group plc Andrew Fay (Chief Executive) 01444 475400 Cavanagh Group plc ("Cavanagh" or "The Group") Unaudited Interim Results for the six months ended 30 June 2007 Chairman's Statement I am pleased to report with these interim results a continued improvement in theGroup's financial performance for the six months ended 30th June 2007 which showa group operating profit of £704,000 (2006: £543,000) on a turnover of£7,739,000 (2006: £7,068,000). All the results are reported under IFRS for thefirst time. The business has generated an operating cash inflow of £927,000 (2006:£1,026,000) in the first six months of the year, which has enabled us to furtherdecrease our net debt to £801,000 (2006: £1,663,000). The Board's key objective for 2007 is to continue to generate profitable growthin our business. As can be seen from the figures reported above, this has beenachieved during the first six months of 2007 with a 30% increase in operatingprofits. Operations The results outlined in this statement are against a backdrop of the earlierbusiness decision of improving the recurring income model, by reducing initialcommission and placing greater emphasis on fund based and recurring commissions-indeed recurring income revenue represents in excess of a quarter of the Group'sturnover. This, we believe, will help make Cavanagh a lasting success in thefinancial intermediary market. The initiative of "treating customers fairly" (TCF) remains core to ourprincipals and I am pleased to report that the implementation as directed by theFSA has now been completed and will remain under regular review. The Group has enjoyed considerable success in providing employee benefitpropositions to the corporate sector and is looking to further increase theproportion of its business generated from this area. This can also bedemonstrated by CPRM, our actuarial subsidiary, which has continued to make agood contribution to the Group's overall progress, with revenue up by 35%, andpre tax profits up fourfold on the same period last year. We look to further itssuccess in the future by advising corporates in what is an increasingly complexarea of the market. With the improvement in our management information systems I am able to reportthat senior management is now able to focus on new business opportunities,thereby targeting more productive activities without negatively impacting on theservice delivered to our client base. Business Opportunities Our range of introducers is expanding further as Cavanagh's reputation of beingable to deliver a high level of specialist advice to the professional marketgrows. As we move into the second half of the year we are continuing to buildthe support functions in the business to maximise the opportunities that arebecoming available to us. Additionally, we are looking to generate incremental profitability from ourexisting clients' asset base by increasing the proportion of their assets underadvice - currently we have over £1.5 billion of client funds under advice. As is well documented, a significant part of Cavanagh's client base emanatesfrom the legal sector, and as a sign of our continuing commitment to this areathe Cavanagh Group will again be a major sponsor of the annual Bar Conference. Much has been written about the adoption of Wrap products in the market - we seefurther significant growth opportunities within our client base for theseproducts and continue to look for developments which can enhance client servicewhile generating incremental income for the Group. Reduction in Capital As previously reported, the Board intends at an appropriate future date toobtain shareholder approval to eliminate the deficit on the Company's profit andloss account by means of a reduction in its share premium account so it may,subject to working capital requirements of the Group, commence the payment ofdividends. Outlook The recent 'Retail Distribution Review' ('RDR') published by the FSA this summerhas presented a number of interesting issues to the investment market place; weare considering these and intend to provide a formal response to the FSA.However, I am pleased to say that Cavanagh does not regard RDR as the potentialthreat that other firms seemingly do, primarily in view of our position in themarket and our relatively high proportion of qualified consultants. The improved financial performance demonstrated by the Group over the past 18months, and the resultant stability that this has generated, will continue topermit the senior management team to concentrate on new business opportunities.The Board believe that this is likely to result in further organic growth andthe consideration of suitable acquisitions which fit our business model andenhance shareholder value. After a strong first six months, I anticipate that 2007 will be a year of solidgrowth for the Cavanagh Group. John Campbell Chairman 7 September 2007 Cavanagh Group plc Note 6 Months 6 Months Year endedGroup Income Statement 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited Unaudited Restated * Restated * £'000 £'000 £'000 REVENUE: 7,822 7,154 14,271Group and share of joint venture's revenueLess: share of joint venture'srevenue (83) (86) (159) -------- --------- ---------REVENUE 7,739 7,068 14,112 ======== ========= =========GROUP OPERATING PROFIT 704 543 1,127 Share of joint venture operatingprofit 82 85 158Finance cost (74) (111) (207) -------- --------- ---------PROFIT BEFORE TAXATION 712 517 1,078 Income tax expense (238) (143) (429) -------- --------- --------- --------PROFIT FOR THE PERIOD 474 374 649 ======== ========= ========= ========= Profit attributable to :Equity holders of Parent company 4 452 369 629Minority Interests 22 5 20 -------- --------- --------- 474 374 649 ======== ========= ========= Earnings per share - basic (pence) 3 4.16p 3.39p 5.78pEarnings per share - fully diluted(pence) 3 4.12p 3.38p 5.76p The profit for the period arises from the group's continuing operations.Accordingly no Statement of Recognised Income and Expenditure has been presentedas all such gains and losses have been dealt with in the Profit and LossAccount. *Restated to reflect the adoption of IFRS as per note 1 Cavanagh Group plcGroup Balance Sheet 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited Unaudited Restated* Restated *ASSETS £'000 £'000 £'000NON CURRENT ASSETSIntangible assets 1,565 1,525 1,525Tangible assets 315 494 372Deferred tax 445 916 659Investments 2 2 2 --------- --------- --------- 2,327 2,937 2,558 --------- --------- --------- CURRENT ASSETSTrade receivables 1,375 1,945 1,131Other receivables 211 177 508Cash 2,399 1,563 1,837 --------- --------- --------- 3,985 3,685 3,476 --------- --------- --------- TOTAL ASSETS 6,312 6,622 6,034 ========= ========= ========= EQUITY AND LIABILITIESEQUITYShare capital 109 109 109Share premium account 2,706 2,706 2,706Share based payment reserve 184 10 158Profit and loss account (2,089) (2,688) (2,541) --------- --------- ---------EQUITY SHAREHOLDERS' FUNDS 910 137 432Non-equity interests 39 2 17 --------- --------- ---------TOTAL EQUITY 949 139 449 --------- --------- --------- NON CURRENT LIABILITIESLoans 2,600 3,200 2,900 CURRENT LIABILITIESOther Liabilities 2,551 3,035 2,454Provisions 212 248 231 --------- --------- ---------TOTAL LIABILITIES 5,363 6,483 5,585 --------- --------- --------- --------- --------- ---------TOTAL EQUITY & LIABILITIES 6,312 6,622 6,034 ========= ========= ========= ========= *Restated to reflect the adoption of IFRS as per note 1 Group Cash Flow StatementFor the period to 30 June 2007 6 Months 6 Months Year ended 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited Unaudited Restated* Restated* £'000 £'000 £'000 NET CASH FROM OPERATIONS 927 1,026 1,620INVESTING ACTIVITIESAcquisition of tangible non currentassets (32) (27) (40)Acquisition of intangible non currentassets (40) - - -------- ---------- ---------CASH USED IN INVESTING ACTIVITIES (72) (27) (40) FINANCINGNew borrowing - - 1,500Repayment of bank loans (300) (300) (2,100)Dividends from joint venture 82 69 158Net interest paid (74) (111) (207) -------- ---------- ---------NET CASH OUTFLOW FROM FINANCING (292) (342) (649) Increase in cash and cash equivalents 562 657 931Opening cash and cash equivalents 1,837 906 906 -------- ---------- ---------Closing cash and cash equivalents 2,399 1,563 1,837 ======== ========== ========= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 6 Months 6 Months Year ended 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited Unaudited Restated* Restated* £'000 £'000 £'000 Increase in cash in the period 562 657 931Net cash outflow from debt financing 300 300 600 -------- ---------- ---------Change in net funds resulting fromcashflows 862 957 1,531Net debt at beginning of period (1,663) (3,194) (3,194) -------- ---------- ---------Net debt at end of period (801) (2,237) (1,663) ======== =========== ========= ========*Restated to reflect the adoption of IFRS as per note 1 Notes to the Interim Financial Statements 1. Basis of preparation of interim financial information The group's previous financial statements have been prepared under UK GenerallyAccepted Accounting Principles (UK GAAP). For the financial year ended 31December 2007, the group will prepare its annual consolidated financialstatements in accordance with IFRS as adopted by the European Union (EU) andimplemented in the UK. The Group's date of transition to IFRS was 1 January 2006 at which date theGroup prepared its opening IFRS balance sheet. The financial information for thesix months ended 30 June 2007 is unaudited and has been prepared in accordancewith the Group's accounting policies, based on IFRS standards that are expectedto apply for the financial year 2007. The financial information for the sixmonths ended 30 June 2006 and the twelve months ended 31 December 2006 is alsounaudited and has been restated under IFRS. The Group has not applied IAS 34,Interim Financial Reporting, which is not mandatory for UK Groups, in thepreparation of these interim financial statements. The presentation of financial information under IFRS is governed by IAS 1. Insome cases this will require the presentation of an item in a differentposition, or the use of a different description in the IFRS income statement orbalance sheet to that adopted in the UK GAAP profit and loss account or balancesheet. These reclassifications have been described in the explanatory notes. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's results and income statements for the period ended 30 June 2006 and theyear ended 31 December 2006 and the equity and balance sheets as at 1 January2006 (the date of transition), 30 June 2006 and 31 December 2006 is set outbelow. With the exception of IAS 38 - Intangible Assets, the principal accountingpolicies of the Group have remained materially unchanged from those set out inthe Group's 2006 Annual Report and Financial Statements. The interim resultsinclude the impact of IAS 36 and both comparative 2006 results have beenrestated to reflect the change in accounting policy. Intangible assets are stated at cost less provisions for impairments. The Grouphas elected not to apply IFRS 3 Business Combinations retrospectively totransactions that took place prior to the transition date. Consequently,goodwill arising on business combinations before the transition date remains atits previous UK GAAP carrying value as at the date of transition. Thereconciliation between UK GAAP and IFRS for the Group is presented below : 6 Months 12 Months 30-Jun-06 31-Dec-06 Unaudited Unaudited £'000 £'000 Profit after tax and minority interests under GAAP 269 433Amortisation of Goodwill 100 196 -------- ---------Profit after tax and minority interests under IFRS 369 629 ======== ========= There have been no changes to the Group's cash flows as a result of thisadjustment. The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefigures for the year ended 31 December 2006 have been extracted from thestatutory financial statements which have been filed with the Registrar ofCompanies. The auditors' report on those financial statements was unqualifiedand did not contain a statement under section 237(2) or 237 (3) of the CompaniesAct 1985. The accounts have been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules. The Board of Directors approved the interim financial statements on 7 September2007 2. Revenue The Group operates in the United Kingdom in one principal area of activity, thatof an Independent Financial Advisor. 3. Earnings per share The calculation of basic earnings per share are based on : 6 Months 6 Months 12 Months 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited* Unaudited* £'000 £'000 £'000Earnings --------- --------- ---------Profit on ordinary activities aftertaxation 452 369 629 ========= ========= ========= Weighted average number of shares Number Number NumberFor basic earnings per ordinary share 10,868,400 10,868,400 10,868,400Dilutive potential ordinary shares:Exercise of share options 81,495 14,310 33,109 --------- --------- --------- 10,967,895 10,882,710 10,901,509 ========= ========= ========= *Basic, adjusted and fully diluted earnings per share for the 6 months ended 30June 2006 and the year ended 31 December have been restated to reflect theadoption of IAS 38 as per note 1. 4. Reconciliation of equity shareholders' funds 6 Months 6 Months 12 Months 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited* Unaudited* £'000 £'000 £'000 Profit for the period 452 369 629Share based payment 26 10 45 --------- -------- ---------Increase in period 478 379 674Opening balance 432 (242) (242) --------- -------- ---------Closing balance 910 137 432 ========= ======== =========*Restated to reflect the adoption of IFRS as per note 1 5. Reconciliation of profit from operations to net cash from operatingactivities 6 Months 6 Months 12 Months 30-Jun-07 30-Jun-06 31-Dec-06 Unaudited Unaudited* Unaudited* £'000 £'000 £'000 Profit from operations 786 628 1,285Share based compensation 26 10 45Share of joint venture operating profit (82) (85) (158)Depreciation 89 138 273Decrease in trade and other receivables 54 116 600Increase/(decrease) in trade and otherpayables 73 219 (409)Decrease in provisions (19) - (16) --------- -------- ---------Net cash from operating activities 927 1,026 1,620 ========= ======== ========= *Restated to reflect the adoption of IFRS as per note 1 6. Analysis of net debt 1-Jan-07 Cash Flow Non-cash 30-Jun-07 movements £'000 £'000 £'000 £'000 Cash at bank 1,837 562 - 2,399 Bank loan (2,000) 300 - (1,700)Other loan (1,500) - - (1,500) --------- --------- -------- ---------Net debt (1,663) 862 - (801) ========= ========= ======== ========= Copies of this report will be sent to shareholders shortly and available fromThe Courtyard, Staplefield Road, Cuckfield, West Sussex RH17 5JT. This information is provided by RNS The company news service from the London Stock Exchange