MHG.L Regulatory News (MHG)

15 Jun 2006 07:07

Merchant House Group PLC15 June 2006 Merchant House Group plc(the "Company") Preliminary results for the year ended 31 December 2005 Chairman's statement I am pleased to report on my first set of results since joining the Board asChairman in February 2006. The year to 31 December 2005 showed a sizeable improvement over the previousyear, with turnover up more than fourfold, reflecting a marked increase incorporate finance activity and associated fundraisings. Transactions during theyear included corporate advice on AIM IPO's, reverse takeovers and AIM secondarymarket issues. In addition, our policy of investing in quoted client companiesbegan to show significant rewards, in terms of market value and, since the yearend, through realisations. We believe that the corporate team's experience enables the Company to providecomprehensive advice to small cap clients both prior to IPO, through the IPOprocess and thereafter. Taking a stake in their future either throughinvestment or warrants assists in building a longer term relationship andenables us to leverage on their success, when achieved. Since the year end we have strengthened the corporate team and taken steps tobroaden the Company's services to corporate clients. We have become an OFEXadviser and completed our first OFEX transactions and the Company has a numberof developments in hand which it hopes will broaden the scope of its corporateservices. Turnover for the year rose to £656,864 (2004: £142,625) and, with reductions inadministrative and exceptional costs, the loss on ordinary activities beforetaxation fell to £385,777 (2004: £926,645), giving a loss per share of 1.99p(2004: 6.32p). The success to date of our investment policy is reflected in a significantuplift in the market value of our investments. At the year end, the market valueof quoted investments was £696,733 (excluding warrants with a value of £132,359)against a book value of £186,608. Since the year end, there has been a furtherincrease in the value of these investments, and we have crystallised some ofthis value by realising £248,292 net cash on one of these investments. The shares in two of our investee companies, Future Internet Technologies plcand Weatherly International plc, have meanwhile been suspended from AIM pendingthe completion of major transactions; while the Directors hope that these willbe successfully completed there can of course be no guarantee that this will bethe case. The balance sheet at the year end reflects the refinancing and share capitalreorganisation which were approved in August 2005 and completed in October 2005(on which we have already reported on 21 October 2005). The refinancing raisedsome £915,000, largely through the issue of convertible loan notes but includingalso a small additional equity placing. By the year end, £218,000 of theconvertible loan notes had been converted into ordinary shares resulting in areduction in the convertible loan stock in issue to £656,000 and the consequentissue of 10,900,000 new ordinary shares. Group net assets were consequently £227,204 at the year end. Assuming fullconversion of the loan notes, which are otherwise repayable in 2010,shareholders' funds on a pro-forma basis would increase to £883,204, excludingthe surplus over book cost of our investments. The principal effects of the capital reorganisation were to reduce the called-upequity share capital and the share premium account but also to reduce theaccumulated deficit on the consolidated profits and loss account. These mattersare explained more fully in notes 17 to 19 of the accounts. Since our last interim results announcement, there have been some significantboard changes. Following the appointment of James Holmes as a non-executivedirector in November 2005 and my appointment as non-executive chairman inFebruary 2006, Peter Redmond, who was formerly Chairman, is now full time GroupChief Executive, concentrating on building our corporate finance business andour fundraising resources and developing other aspects of our service tocorporate clients. We are delighted to welcome Daniel Edelman, who joins theboard with the prime objective of developing our fundraising and relatedactivities. With the announcement of the year's results, Frank Sauer andRichard Armstrong are resigning from the Board to pursue their other interests;we should like to thank them for their valuable contribution to the developmentof the Group. The Directors believe that the Company is now well placed to develop itsexisting business and to build in new directions which will hopefully enhanceits offering to corporate clients and create enhanced shareholder value. Martin EberhardtChairman CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2005 Year to Year to 31 December 31 December 2005 2004 £ £ Turnover 656,864 142,625Cost of sales (368,757) (58,978) Gross Profit 288,107 83,647Administrative costs (631,425) (672,077)Exceptional costs (56,951) (303,549)Other operating income 18,682 42,321Realised gains on current asset investments - 4,005Unrealised loss on current asset investments (10,827) (102,375) Operating Loss (392,414) (948,028)Interest payable on loan notes (10,279) -Interest receivable 16,916 21,383 Loss on Ordinary Activities Before Taxation (385,777) (926,645)Tax on loss on ordinary activities - - Loss on Ordinary Activities After Taxation (385,777) (926,645) Loss per share (pence) (1.99p) (6.32p)Diluted loss per share (pence) (0.64p) (6.13p) The Group has no recognised gains or losses other than the results for the yearas set out above. The Company has taken advantage of Section 230 of the Companies Act 1985 not topublish its own profit and loss account. CONSOLIDATED BALANCE SHEET 31 December 2005 2005 2004 £ £Fixed AssetsTangible fixed assets 15,565 11,929 Debtors falling due after one year 50,000 50,000 Current AssetsDebtors 149,959 119,907Cash at bank and in hand 576,063 333,012Investments 186,608 80,125 912,630 533,044Creditors: Amounts falling due within one year (94,991) (237,526) Net Current Assets 817,639 295,518 Total Assets Less Current Liabilities 883,204 357,447 Creditors: Amounts falling due after more than one year (656,000) -(convertible loan note 2010) Total Assets less Total Liabilities 227,204 357,447 Capital and ReservesCalled-up equity share capital 155,233 877,500Share premium account 163,500 1,333,940Special Reserve 102,742 -Profit and loss account (194,271) (1,853,993) Shareholders' Fund 227,204 357,447 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2005 Year to Year to 31 December 31 December 2005 2004 £ £Reconciliation of operating loss to net cash (outflow) fromoperating activitiesOperating loss (392,414) (948,028)Increase in debtors (30,052) (29,879)Increase in creditors (152,813) 66,259Depreciation 10,368 7,802Realised gain - (4,005)Unrealised loss 10,827 102,375 Net cash outflow from operating activities (554,084) (805,476) CASH FLOW STATEMENTNet cash outflow from operating activities (554,084) (805,476)Returns on investments and servicing on financeInterest received 16,916 21,383 Capital Expenditure and Financial InvestmentPurchase of investments (117,310) (120,000)Sales of investments - 15,130Purchase of tangible fixed assets (14,004) (2,936)Sale of tangible fixed assets - 700 Net cash outflow for capital expenditure and financial (131,314) (107,106)investment FinancingProceeds from share issue 37,533 832,000Proceeds from issue of loan notes 874,000 - Net cash inflow from financing 911,533 832,000 Increase/(Decrease) in Cash 243,051 (59,199) Reconciliation of net cash flow to movement in net (debt)/funds Increase/(Decrease) in cash in the period 243,051 (59,199)Inflow from issue of loan notes (874,000) -Conversion loan note into ordinary shares 218,000 - Movement in year (412,949) (59,199)Net funds at 1 January 333,012 392,211 Net (debt)/funds at 31 December (79,937) 333,012 CONSOLIDATED CASH FLOW STATEMENT Continued Analysis of changes in net (debt)/funds At 1st Cashflows Other non At 31st January cash changes December 2005 2005 £ £ £ Cash at bank and in hand 333,012 243,051 - 576,063Debt due after one year:Secured loan notes - (500,000) - (500,000)Unsecured loan notes - (374,000) 218,000 (156,000) 333,012 (630,949) 218,000 (79,937) Other non cash changes During the year £218,000 of the unsecured convertible loan notes issued wereconverted into £54,500 of ordinary share capital and £163,500 of share premium. NOTES 1. The financial information set out in this announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 for the years ended 31 December 2005 and 2004. The financial information for the year ended 31 December 2004 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2005 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. 2. Exceptional Costs Exceptional legal and professional costs totalling £56,961 were incurred as aconsequence of the Company's decision that it was unable to proceed with arefinancing proposal with GCG Limited in July 2005. In 2004 exceptional coststotalling £208,466 were incurred as a consequence of the Company's decision thatit was unable to proceed with the acquisition of Forum Finance Group Ltd ('Forum') and Forum's wholly owned subsidiary SP Bell Ltd, announced on 15 July2004. In addition the Company incurred a total of £95,083 of related exceptionalcosts, resulting from reorganisation and severance payments. 3. Loss per share 2005 2004Loss per ordinary share (pence) (1.99p) (6.32p) Diluted loss per ordinary share (pence) (0.64p) (6.13p) The loss per share has been calculated on the net basis on the deficit for thefinancial year, after taxation, of £(385,777) (2004: £(926,645)) using theweighted average number of ordinary shares in issue of 19,457,267 (2004:14,655,191). Diluted earnings per share have been calculated using the weighted averagenumber of ordinary shares in issue, diluted for the effect of share options,loan conversion rights and warrants. There were unexercised options, loanconversion rights and warrants on 40,888, 871 shares in existence at the yearend (2004: 453,000). On 15th March 2006 the company issued a further 2,500,000 Ordinary 0.5p sharesat a price of 2p per share by way of conversion of £50,000 of unsecuredconvertible loan note. 4. Copies of this announcement are available from the Company atAldermary House, 15 Queen Street, London EC4N 1TX. This information is provided by RNS The company news service from the London Stock Exchange