MHG.L Regulatory News (MHG)

29 Sep 2006 07:03

Merchant House Group PLC29 September 2006 MERCHANT HOUSE GROUP PLC INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2006 MERCHANT HOUSE GROUP PLC CORPORATE DIRECTORY Directors Martin Eberhardt (Chairman) Peter Redmond (Chief Executive Officer) James Holmes Daniel Edelman Secretary Hugh Fleming Registered Office Aldermary House 15 Queen Street London EC4N 1TX Nominated Adviser Shore Capital and Corporate Limited Bond Street House 14 Clifford Street London W1S 4JU Broker Shore Capital Stockbrokers Limited Bond Street House 14 Clifford Street London W1S 4JU Solicitors Bircham Dyson Bell 50 Broadway London SW1H 0BL Auditors Sawin & Edwards 15 Southampton Place London WC1A 2AJ Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Bankers Lloyds TSB Bank Plc Anglo Irish Bank Corporation Plc St Paul's Branch 10 Old Jewry 15 Cheapside London EC2R 8DN London EC2V 6AJ Company Registration Number 04034645 MERCHANT HOUSE GROUP PLC CHAIRMAN'S STATEMENT For the six month period ended 30 June 2006 I am pleased to report that during the period under review we made good progressin delivering our strategy of providing clients with corporate advisory serviceswhile frequently taking a stake in their future through shareholdings andwarrants. Although sales reported for the period under review are lower than for the sameperiod last year, this does not reflect the present level of activity of ourCorporate Finance subsidiary, Merchant Capital Plc, which continues to actsuccessfully for a growing client base. Corporate finance projects necessarilyhave a lengthy and sometimes variable gestation period and there are currently anumber of significant projects in the pipeline. Based on the present position,we would expect there to be a significant uplift in fees billed in the secondhalf year of 2006, compared to the first half. We have continued to invest in people and have doubled the size of our corporatefinance team; the increase in operating expenses reflects that expansion. We areconfident this will result in increased revenues in the future. Our objective is to provide clients with as wide as possible a range of fundingalternatives and this capacity will shortly be enhanced by the addition of anin-house asset finance option, while we continue to develop our equityfund-raising capacity. During the period, in line with the Company's policy of progressivelycrystalising profits from its strategic investments, we took profits on part ofone such investment, realising £248,292 against an investment cost of £30,492. In line with our investment strategy, we made a number of new investments inclient companies. Meanwhile, the overall value of our investment portfolio hascontinued to rise during the period under review. As a result, while at 30 June2006 the book value, after provisions, of our investments stood at £133,720,their market value had risen to £492,346, an increase substantially in advanceof that of the AIM market as a whole. Subsequent increases have pushed themarket value higher still to £568,832, even after the realisation of furtherprofits of £33,543. Two of our client/investee companies made particular progress during the period.Weatherly International plc has returned to market following a successfulreverse acquisition which has transformed it into a copper producer withsignificant growth potential; at the date of this report, their shares had risento 21.25p against our average investment price of 4.8p. Weatherly was a shellcompany client where we were active in bringing in the management teamresponsible for its transformation and we have assisted them through a series oftransactions and fund-raisings at progressively higher prices over the past year Meanwhile, Byotrol plc has announced a number of important developments and itsshare price now stands at 65p against a 2005 IPO price of 23p. We advisedByotrol prior to and through its AIM IPO and we have continued since then to actas an adviser on its strategy and development. We hold warrants in Byotrol whichhave a significant value at the present share price and are not included in thevalue of investments quoted above. With net current assets of some £650,000, the Group is well funded for theexecution of its strategy and the Board looks forward with confidence toreporting good progress in the second half. Martin Eberhardt Chairman 28 September 2006 INDEPENDENT REVIEW REPORT TO MERCHANT HOUSE GROUP PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2006, set out on pages 4 to 9. We have read theother information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved, by the directors. The AIM Rulesrequire that the accounting policies and presentation applied to the interimfigures should be consistent with those applied in preparing the precedingannual accounts except where any changes, and the reasons for them, aredisclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006, except for any adjustments that may be required in order tocomply with FRS 20 as stated in note 8 Sawin & Edwards Chartered Accountants 15 Southampton Place WC1A 2AJ 28 September 2006 MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the six month period ended 30 June 2006 Note Six month period Six month period Year ended 31 ended 30 June 2006 ended 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £ £ £Turnover 134,353 427,044 656,864Cost of sales (79,336) (259,661) (368,757) Gross Profit 55,017 167,383 288,107Administrative costs (422,696) (274,841) (631,425)Exceptional costs - (57,100) (56,951)Other operating income 21,793 11,656 18,682Realised gains on current asset investments 217,800 - -Unrealised loss on current asset investments (29,887) - (10,827) Group Operating Loss (157,973) (152,902) (392,414)Interest payable on loan notes 2 (18,213) - (10,279)Interest receivable 11,813 7,942 16,916 Loss on Ordinary Activities Before Taxation (164,373) (144,960) (385,777)Tax on loss on ordinary activities 3 - - - Loss on Ordinary Activities After Taxation (164,373) (144,960) (385,777) Loss per share (pence) 4 0.50p 0.81p 1.99p The Group has no recognised gains or losses other than the results for theperiod as set out above. MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED BALANCE SHEET 30 June 2006 Note As at 30 June 2006 As at 30 June 2005 As at 31 December (Unaudited) (Unaudited) 2005 (Audited) £ £ £Fixed AssetsTangible fixed Assets 19,513 7.999 15,565 Debtors falling: due after one year 5 50,000 50,000 50,000 Current AssetsDebtors 6 339,035 379,317 149,959Cash at bank and in hand 301,255 9,505 576,063Investments 7 133,720 80,125 186,608 774,010 468,947 912,630 Creditors: Amounts falling due within one year (124,692) (287,779) (94,991) Net Current Assets 649,318 181,168 817,639 Total assets less current liabilities 718,831 239,167 883,204Creditors: Amount falling due after more than one year (convertible loan note 2010) (606,000) - (656,000) Total assets less total liabilities 112,831 239,167 227,204 Capital and ReservesCalled up equity share capital 167,733 904,180 155,233Share premium account 201,000 1,333,940 163,500Special Reserve 52,742 - 102,742Profit and loss account (308,644) (1,998,953) (194,271) Shareholders' Funds 8 112,831 239,167 227,204 MERCHANT HOUSE GROUP PLC UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the six month period 30 June 2006 Six month period Six month period Year ended 31 ended 30 June 2006 ended 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £ £ £Reconciliation of operating loss to netcash (outflow) from operating activitiesOperating loss (157,973) (152,902) (392,414)Increase in debtors (189,076) (259,410) (30,052)(Decrease) / Increase in creditors 29,701 50,253 (152,813)Depreciation 5,064 4,107 10,368Realised gain (217,800) - -Unrealised loss 29,887 - 10,827 Net cash outflow from operating activities (500,197) (357,952) (554,084) CASH FLOW STATEMENTNet cash outflow from operating activities Returns on investments and servicing offinance (500,197) (357,952) (554,084)Interest paid (18,213) - -Interest received 11,813 7,942 16,916 Net cash (outflow) / inflow on returns on (6,400) 7,442 16,916investments and servicing on finance Capital Investment and Financial InvestmentPurchase of investments (10,000) - (117,310)Sales of investments 250,800 - -Purchase of tangible fixed assets (9,011) (177) (14,004)Sale of tangible fixed assets - - - Net cash flow for capital expenditure and 231,789 (177) (131,314)financial investment FinancingProceeds from share issue - 26,680 37,533Proceeds from issues of loan notes - - 874,000 Net cash inflow from financing - 26,680 911,533 (Decrease)/Increase in Cash (274,808) (323,507) 243,051 Reconciliation of net cash flow to movementin net debt(Decrease) / increase in cash in the period (274,808) (323,507) 243,051Inflow from the issue of loan notes - - (874,000)Conversion loan note into ordinary shares 50,000 - 218,000 Movement in year (224,808) (323,507) (412,949)Net (debt) / funds brought forward (79,937) 333,012 333,012 Net (debt) / funds carried forward 304,745 9,505 (79,937) MERCHANT HOUSE GROUP PLC NOTES TO THE UNAUDITED FINANCIAL STATEMENTS For the six month period ended 30 June 2006 1. Accounting Policies Basis of Preparation The interim results for the six months to June 2006 and June 2005 have beenprepared under the historical cost convention, are unaudited and do notconstitute statutory accounts in accordance with Section 240 of the CompaniesAct 1985. Depreciation Depreciation has been provided for so as to write off the cost of an asset, lessits estimated residual value, over its useful economic life as follows: Office equipment 33% - 50% straight line Fixtures and fittings 33% straight line 2. Loan Interest Loan interest is payable on secured and unsecured convertible loan notes 2010,at a floating rate of 100 basis points above the Barclays Bank Plc base rate. 3. Taxation No provision for corporation tax has been provided for, due to losses incurredin the current and previous periods. 4. Loss per Share The loss per share has been calculated by dividing the loss after taxation of£164,373 (June 2005: £144,960) by the weighted average number of Ordinary sharesin issue of 32,631,560 (June 2005: 17,861,267). 5. Debtors falling due after one year Six month period ended Six month period ended Year ended 31 30 June 2006 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £ £ £Rent deposit 50,000 50,000 50,000 Debtors Trade debtors 41,315 50,884 51,112Prepayments & accrued income 110,239 288,855 74,455Other debtors 187,481 39,578 24,392 339,035 379,317 149,959 7. Current Investments Investments held as current assets are carried in the balance sheet at cost lessprovisions. Their value as quoted on AIM at 30th June 2006 was £492,346 (cost:£276,809). 8. Reconciliation of movement in shareholders' funds Six month period Six month period Year ended 31 ended 30 June 2006 ended 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £ £ £Loss for the period / year (164,373) (144,960) (385,777) Net deficit (164,373) (144,960) (385,777)Issue of shares - 26,680 37,534Conversion loan notes 50,000 - 218,000Opening shareholder funds 227,204 357,447 357,447 Closing shareholder funds 112,831 239,167 227,204 9. FRS 20 Share based payments The company has not yet implemented the requirements of FRS20 in relation to itsshare options and warrants. The directors are of the opinion that the costsinvolved in obtaining an independent valuation of the options and warrants isunjustified at the interim stage. The Company will incorporate the necessaryadjustments in the full statutory year end accounts. As no options or warrantswere granted or vested in the six month period the effect of any adjustmentwould be to reserves only. Press enquiries: Merchant House Group plc 020 7332 2200Peter Redmond, Chief Executive Officer First City Financial Ltd 020 7436 7486Allan Piper This information is provided by RNS The company news service from the London Stock Exchange