MHG.L Regulatory News (MHG)

30 Jun 2005 10:40

Merchant House Group PLC30 June 2005 Merchant House Group Plc(the "Company") Preliminary results for the year ended 31 December 2004 Chairman's statement The results for the year ended 31 December 2004 cover the first full year inwhich the Company's new strategy to provide corporate finance and investmentservices was in operation. As I highlighted in my interim statement, the resultswere adversely affected to a significant degree by the Company's withdrawal at avery late stage from the reverse acquisition of a private client stockbrokingbusiness in July. This resulted in significant exceptional costs and disruptionto the business, in addition to the commitment of considerable management timeand resource. The disruption continued well into the second half as the Company had to dealwith the fallout from this withdrawal. Consequently, the Group operating lossfor the year before exceptional costs of £303,000 was £645,000. The Company was, however, able to strengthen its corporate finance team duringthe period without significant cost increase and this was reflected in anincreased level of corporate activity. While this made only a modestcontribution to turnover in the period under review, one significant assignmentworked on in the latter part of the year completed only after the year end, withthe result that fees relating to this have come mainly into the current year.The improved level of activity has continued into 2005 while operating costs areat a lower level than last year. However, the Company has continued to incurlosses in the current year to date. While this improving trend is encouraging, the result of the legacy of theevents of the last financial year is that the Company needs to raise additionalcapital to be able to support its business plan. This requirement ishighlighted in the auditors' report which, in the paragraph headed "FundamentalUncertainty", states that, while the accounts have been prepared on a goingconcern basis, this depends on the Company obtaining additional funding andbeing able to implement its business plan. The Company is currently indiscussions to secure the necessary funding and the Directors hope to make anannouncement to this effect in the near future. However, in view of the present share price, it is not practical to raisecapital at or above the par value of the ordinary shares. It will, therefore,be necessary to seek shareholders' approval to effect a reorganisation of theshare capital of the Company in order to reduce the par value of the ordinaryshares. A circular in connection with these proposals will be despatched toshareholders shortly. The Directors are of the opinion that the Company's net assets are half or lessof its called-up share capital and the circular referred to above will includein the notice of EGM a reference to section 142 of the Companies Act in thisregard. The Directors consider that the proposals to raise additional fundingrepresent the appropriate steps to deal with this situation. Also included inthis notice of EGM will be a resolution to enable the Directors to effect thefundraising through a placing and disapplication of pre-emption rights. Noticeof the AGM and EGM will follow as soon as practical. Once again, I would like to thank our staff, consultants and advisers for theirsupport and hard work during the period. I am confident that, assuming wesecure the necessary additional funding, the Company will be well placed toimplement its business plan and generate positive returns for our shareholders. Press enquiries: Peter Redmond, Chairman 020 7332 2200 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 Year to Year to 31 December 2004 31 December 2003 £ £ Turnover 142,625 101,964 Cost of sales (58,978) (113,259) _______________________________________________________________________________________ Gross Profit/(Loss) 83,647 (11,295) Administrative costs (672,077) (640,833) Exceptional costs (303,549) - Other operating income 42,321 5,312 Realised gains on current asset investments 4,005 17,050 Unrealised loss on current asset investments (102,375) - _______________________________________________________________________________________ Group Operating Loss (948,028) (629,766) Interest receivable 21,383 26,280 ________________________________________________________________________________________ Loss on Ordinary Activities Before Taxation (926,645) (603,486) Tax on loss on ordinary activities - - Loss on Ordinary Activities After Taxation (926,645) (603,486) ________________________________________________________________________________________ Loss per share (pence) 6.32p 8.88p Diluted loss per share (pence) 6.13p 8.88p The Group has no recognised gains or losses other than the results for the yearas set out above. CONSOLIDATED BALANCE SHEET 31 December 2004 2004 2003 £ £ Fixed Assets Tangible fixed assets 11,929 17,495 ________________________________________________________________________________ Debtors falling due after one year 50,000 50,000 Current Assets Debtors 119,907 90,028 Cash at bank and in hand 333,012 392,211 Investments 80,125 73,625 ________________________________________________________________________________ 533,044 555,864 Creditors: Amounts falling due within one year (237,526) (171,267) _______________________________________________________________________________Net Current Assets 295,518 384,597 ________________________________________________________________________________ Total Assets Less Current Liabilities 357,447 452,092 ________________________________________________________________________________ Capital and Reserves Called-up equity share capital 877,500 340,000 Share premium account 1,333,940 1,039,440 Profit and loss account (1,853,993) (927,348) ________________________________________________________________________________ Equity Shareholders' Funds 357,447 452,092 ________________________________________________________________________________ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2004 Year to Year to 31 December 2004 31 December 2003 £ £ Reconciliation of operating loss to net cash (Outflow) from operating activities Operating loss (948,028) (629,766) Increase in debtors (29,879) (90,784) Increase in creditors 66,259 98,227 Depreciation 7,802 5,007 Realised gain (4,005) (17,050) Unrealised loss 102,375 - ________________________________________________________________________________________ Net cash outflow from operating activities (805,476) (634,366) Returns on investments and servicing of finance Interest received 21,383 26,280 ________________________________________________________________________________________ Capital Expenditure and Financial Investment Purchase of investments (120,000) (106,250) Sales of investments 15,130 49,675 Purchase of tangible fixed assets (2,936) (22,502) Sale of tangible fixed assets 700 - ________________________________________________________________________________________ Net cash outflow for capital expenditure and financial investment (107,106) (79,077) ________________________________________________________________________________________ Financing Proceeds from share issue 832,000 - ________________________________________________________________________________________ Decrease in Cash (59,199) (687,163) NOTES Accounting policies The financial information set out in this announcement does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985for the years ended 31 December 2004 and 2003. The financial information forthe year ended 31 December 2003 is derived from the statutory accounts for thatyear which have been delivered to the Registrar of Companies. The auditorsreported on those accounts; their report was unqualified and did not contain astatement under s237(2) or (3) of the Companies Act 1985. The statutory accountsfor the year ended 31 December 2004 will be finalised on the basis of thefinancial information presented by the directors in this preliminaryannouncement and will be delivered to the Registrar of Companies following thecompany's annual general meeting. Loss per share The loss per share has been calculated on the net basis on the deficit for thefinancial year, after taxation, of £926,645 (2003: £603,486) using theweighted average number of ordinary shares in issue of 14,655,191 (2003:6,800,000). Diluted earnings per share have been calculated using the weighted averagenumber of ordinary shares in issue, diluted for the effect of share options.There were unexercised options on 453,000 shares in existence at the year end(2003: NIL). 2004 accounts Copies of the 2004 accounts are being posted today to shareholders. Copies ofthis announcement are available from the Company at Aldermary House, 15 QueenStreet, London EC4N 1TX. This information is provided by RNS The company news service from the London Stock Exchange