PMR.L Regulatory News (PMR)

12 Sep 2007 07:02

Panmure Gordon & Co. plc12 September 2007 PANMURE GORDON & CO. PLC ("PANMURE GORDON" OR THE "GROUP") Interim Results for the Six Months ended 30 June 2007 Panmure Gordon & Co. plc today announces Interim Results for the six monthsended 30 June 2007. Panmure Gordon together with its subsidiaries is a corporateand institutional stockbroker focusing on investment banking and broking,institutional sales and trading, equity research and market making withoperations in the UK and the USA. HIGHLIGHTS Financial Highlights • Group revenue of £33.4m in the first six months of the year (2006: £18.3m) • Revenue in the UK increased to £25.2m (2006: £18.3m), an increase of 38% • Revenue from the US operations in the first quarter of ownership of $16m (£8.2m) following the acquisition of ThinkEquity • Adjusted profit before tax of £8.7m (2006: £5.0m), an increase of 74% • Adjusted basic earnings per share of 9.08p (2006: 7.45p), an increase of 22% • Maiden interim dividend declared of 1.5p per share • Strong balance sheet with net cash of £34m Business Highlights • Very strong performance in executing corporate finance deals in the UK • Involved in seven IPOs raising £350m • Involved in eight secondary fundraisings raising over £560m • Ranked as the most active NOMAD and second most active broker by funds raised on the AIM market in the first six months of the year* • Acquisition of ThinkEquity and strengthening of the US investment banking team Tim Linacre, Chief Executive of Panmure Gordon & Co, said: "These are an excellent set of results. In the UK we had a particularly activesix months winning and executing corporate finance business. ThinkEquity, the USinvestment banking business we acquired on 30 March, provides a significantgrowth opportunity. The last few weeks have seen volatile markets and while it is too early to tellwhat effect this will have, it is likely there will be some impact. The mediumterm outlook remains very encouraging, and the business is in good shape to takeadvantage of opportunities which become available and to continue to progressstrongly." * Growth Company Investor (issue July 2007) For further information, please contact Tim Linacre, Chief ExecutiveDavid Liddell, Finance DirectorPanmure Gordon & Co. plc 020 7614 8300 David Rydell/Nick Lambert/Chris HamiltonBell Pottinger Corporate & Financial 020 7861 3232 Chairman's Statement Introduction I am pleased to report that the business performed well in the first half of2007 and is well positioned for further growth. Panmure Gordon acquired ThinkEquity, a US investment bank on 30 March 2007. Thishas increased our size greatly, with the Group's headcount rising from 120 to300, provided international reach with principal offices in the major financialcentres in the UK and the US, and added depth to our analytical and investmentbanking coverage. We are particularly pleased that ThinkEquity broke even in thefirst quarter of ownership despite the natural upheaval resulting from thetransaction. In the UK the Group continues to move forward on a broad front. We had aparticularly active first six months in Corporate Finance in fundraisings forcorporate clients and had a good performance in Institutional Equities. Weopened a northern office based in Liverpool following the recruitment of anexceptionally talented team of individuals and have continued to attract highcalibre staff to the firm. It is too early to say how big an impact recent market turbulence will have onthe second half of the year, though it is worth remembering that we are buildinga firm for the medium term, not the short term. Interim Dividend As a result of the performance of the business, and the confidence the Board hasin the company's prospects, the Board believes it is appropriate that thecompany pays a maiden interim dividend. The Directors have declared an ordinarydividend in respect of the six months ended 30 June 2007 of 1.5p per share. Weplan to pay the dividend on 12 October 2007 to shareholders on the register on21 September 2007. Going forward the intention is to pay a sustainable flow of ordinary dividendsout of recurring operating profits balancing returns to shareholders by way ofdividends and, as appropriate, share buybacks. Board We have added to the independent element of our Board recently with theappointment of Anthony Cann as a Non-Executive Director. Anthony brings with hima wealth of experience, most notably as senior partner at Linklaters, working inthe firm's corporate team in the UK, US, and worldwide. The board expects hisdetailed legal experience to prove a valuable addition to the Board'sdiscussions, particularly in light of the growth of the firm within the UK andinto the US. Charles StonehillChairman12 September 2007 Chief Executive's Review Operating performance Revenue in the first half rose to £33.4m (2006: £18.3m) reflecting both thegrowth in the UK business (where revenue was £25.2m, up 38% on 2006) and threemonths of ThinkEquity. Adjusted operating profit and earnings, which were up 77%and 34% respectively, are stated before share based payments and related chargesand the tax benefits thereof. 2007 2006 H1 H1 £'000 £'000 Net Revenue 33,428 18,349Administrative expenses (25,505) (13,878) -------- --------Adjusted operating profit 7,923 4,471Net interest receivable 816 561 -------- --------Adjusted profit before taxation 8,739 5,032Taxation (2,574) (431) -------- --------Adjusted earnings (see note 5) 6,165 4,601Adjusted earnings per share (see note 5) 9.08p 7.45p -------- -------- Review of Activities UK Corporate Finance We had a particularly active first six months on a wide variety of deals. Wewere involved in seven IPOs, six on the AIM market and one on the main marketraising over £350m. We were involved in eight secondary fundraisings raisingover £560m. In aggregate we were involved in raising more than £900m on behalfof corporate clients, more than in the whole of 2006. We were also involved infour public M&A transactions. We were pleased to see that we were ranked as themost active NOMAD and second most active broker by funds raised on the AIMmarket in the first six months of the year. We have seen, and continue to see, a change in our corporate client list as wewin new clients, or see clients leave the quoted arena, or exit therelationship. We currently act for 91 corporate clients having gained over adozen clients in the first six months of the year. UK Research, Sales & Trading (Institutional Equities) We have seen considerable change in our institutional equities business. Weopened an office in Liverpool at the end of the first half following therecruitment of a number of talented individuals. We have also seen a higher thannormal turnover in staff reflecting the strong markets of the first part of theyear. Since the end of the half year we have been successful in making a numberof high quality hires to our Sales and Sales Trading teams. ThinkEquity ThinkEquity joined the Panmure Gordon Group on 30 March this year. During thefirst three months of ownership the business broke even. During this period anumber of high quality new hires were made, particularly in investment banking. One of the key strengths of ThinkEquity is the quality and depth of the researchteam. It is pleasing to see that over the past 12 months their Buyrecommendations are up 28% against markets which have grown substantially lessthan this. During the three months of ownership ThinkEquity completed 12 corporate dealsand increasingly are winning mandates on larger deals, underpinning the futureinvestment banking pipeline. The Wealth Management business is also showing growth. Since the end of the halfyear a new team has been recruited which will increase the funds underadvisement to approximately $1.2bn. We expect to see further growth in this areain the coming months. There is considerably more work to be done in integrating the Panmure Gordon andThinkEquity businesses and operations to maximise cross selling opportunitieswhich will be an area of increased management focus over the next six months. Current Trading and Outlook The business entered the second half in good shape with an encouraginginvestment banking pipeline. The period since the end of the first half has seen extremely turbulent equitymarkets. It is too early to say what impact this will have on the second halfresults. Early indications are that some corporate finance deals, both in the UKand the US, could be delayed until the outlook is clearer. The volatile marketshave also had a limited impact on our institutional equities business, althoughthis has been minimised by running a client facilitation trading business ratherthan taking proprietary trading positions. The business is in excellent shape toweather turbulent markets and to move forward strongly when market conditionspermit. We have over £30m of available cash resources, which provides a robust platformto enable us to grow the business and seek opportunities to grow long term,sustainable, shareholder value. Tim LinacreChief Executive12 September 2007 Consolidated interim income statement (unaudited)For the six months ended 30 June 2007 6 months 6 months 12 months 30 June 30 June 31 December£'000 Notes 2007 2006 2006 Commission and trading income 14,527 11,216 20,494Commission and trading expense (950) (978) (1,737) Net commission and trading income 13,577 10,238 18,757 Fee income 19,582 8,111 23,368Other operating income 269 - 387 -------- -------- --------Net commission and fee income 2 33,428 18,349 42,512 -------- -------- -------- Administrative expenses before sharebased payments (25,505) (13,878) (30,849) -------- -------- --------Operating profit before share basedpayments 7,923 4,471 11,663 -------- -------- -------- Share based payments arising as aresult of the acquisition of PanmureGordon (UK) Limited 3 (3,544) (3,485) (6,908) Other share based payments 3 (842) (122) (214) -------- -------- --------Operating profit 3,537 864 4,541 -------- -------- -------- Financial income 945 671 1,554Financial expenses (129) (110) (218) Net financial income 816 561 1,336 -------- -------- --------Profit before tax 4,353 1,425 5,877 -------- -------- -------- Income tax credit / (expense) 4 2,072 (51) (1,849) -------- -------- --------Profit for the period 6,425 1,374 4,028 -------- -------- -------- Basic earnings per share 5 9.45p 2.22p 6.49p Diluted earnings per share 5 9.11p 2.12p 6.23p Proposed Interim Dividend per share 1.5p - - The notes on pages 10 to 20 form part of these financial statements. The profit per ordinary share before share based payments is disclosed in note5. Consolidated interim statement of recognised income & expense (unaudited)For the six months ended 30 June 2007 6 months 6 months 12 months Notes 30 June 30 June 31 December£'000 2007 2006 2006 Foreign exchange translationdifferences (657) - - Change in fair value of availablefor sale investments 1.6.5 900 - - Deferred tax arising thereon (252) - - -------- -------- --------Income and expense recogniseddirectly in equity (9) - - -------- -------- -------- -------- -------- --------Profit for the period 6,425 1,374 4,028 -------- -------- -------- -------- -------- --------Total recognised income and expensefor the period 6,416 1,374 4,028 -------- -------- -------- Consolidated interim balance sheet (unaudited)As at 30 June 2007 As at As at As at Note 30 June 30 June 31 December£'000 2007 2006 2006Assets Goodwill 9 39,219 13,201 13,201Intangible assets 9 554 - -Plant and equipment 3,082 1,632 1,628Available for sale investments 1.6.5 6,031 1,900 5,459Deferred income tax asset 4 4,646 - - --------- --------- ---------Total non-current assets 53,532 16,733 20,288 Investment securities held fortrading 5,676 7,632 7,763Trade and other receivables 135,000 126,614 30,030Cash and cash equivalents 35,330 34,447 43,782 --------- --------- ---------Total current assets 176,006 168,693 81,575 Current liabilities Bank overdraft (982) - (819)Trade and other payables (119,695) (117,732) (19,680)Current tax liabilities (2,812) (455) (1,404)Provisions and other creditors (22,205) (8,010) (15,870)Investment securities held fortrading (1,838) (3,069) (4,636) --------- --------- ---------Total current liabilities (147,532) (129,266) (42,409) --------- --------- ---------Net current assets 28,474 39,427 39,166 --------- --------- --------- Interest bearing loans and borrowings (3,000) (3,000) (3,000)Provisions (946) (1,047) (766) --------- --------- ---------Total non current liabilities (3,946) (4,047) (3,766) --------- --------- ---------Net assets 78,060 52,113 55,688 --------- --------- --------- Equities Issued share capital 6 2,820 2,524 2,530Shares to be issued (includingshare premium) 6 4,136 - -Share premium account 12,632 12,402 12,595Merger reserve 9 32,526 21,690 21,810Special reserve 9,595 9,595 9,595Fair value reserve 648 - -Other reserve (672) (730) (712)Foreign currency translation reserve (657) - -Treasury shares (4,334) - (2,810)Retained earnings 21,366 6,632 12,680 --------- --------- ---------Total equity 7 78,060 52,113 55,688 --------- --------- --------- Total assets 229,538 185,426 101,863Total liabilities (151,478) (133,313) (46,175) --------- --------- ---------Total equity 78,060 52,113 55,688 --------- --------- --------- Consolidated interim statement of cash flows (unaudited) Reconciliation of profit before tax to net cash outflow from operatingactivities 6 months 6 months 12 months 30 June 30 June 31 Dec Notes 2007 2006 2006£'000 £'000 £'000 £'000Cash flows from operatingactivitiesProfit before tax 4,353 1,425 5,877Net financial income (816) (561) (1,336)Depreciation andamortisation 429 227 493Disposal of plant andequipment - - 17Impairment of availablefor sale investments 356 - -Movement in investmentsecurities held fortrading (705) (1,021) 415Decrease in net amountsowed by counterparties 2,562 3,520 3,056(Increase) in tradereceivables (3,665) (138) (698)(Decrease)/increase intrade payables andprovisions (3,473) (4,638) 2,478Other operating income - - (387)Foreign exchange 116 - -IFRS2 share based paymentsand related charges 4,386 3,607 7,123 -------- -------- --------Net cash inflow fromoperating activities 3,543 2,421 17,038 -------- -------- -------- Income taxes paid (1,418) (68) (918) -------- -------- --------Net cash from operatingactivities 2,125 2,353 16,120 -------- -------- -------- Cash flows from investingactivitiesInterest received 945 655 1,553Acquisition of subsidiarynet of cash acquired 9 (1,693) - -Transaction costs relatingto the subsidiaryacquisition 9 (1,483) - -Acquisition of plant andequipment (656) (175) (437)Acquisition of availablefor sale investments (1,906) (1,900) (6,192)Proceeds from disposal ofavailable for saleinvestments 1,890 - 1,121 -------- -------- --------Net cash from investingactivities (2,903) (1,420) (3,955) -------- -------- -------- Cash flows from financingactivitiesProceeds from the issue ofshare capital 38 12,647 12,846Purchase of own shares fortreasury (1,524) - (2,810)Interest paid (129) (94) (217)Repayment of borrowings (6,143) - -Repayment of loan 40 11 29Redemption of warrants - (120) (120) -------- -------- --------Net cash from financingactivities (7,718) 12,444 9,728 -------- -------- -------- Net increase in cash andcash equivalents (8,496) 13,377 21,893Cash and cash equivalentsat 1 January 42,963 21,070 21,070Effect of exchange ratefluctuations on cash held (119) - - -------- -------- --------Cash and cash equivalentsat 30 June / 31 December 8 34,348 34,447 42,963 -------- -------- -------- 1 Significant accounting policies Panmure Gordon & Co. plc (the "Company") is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Company for thesix months ended 30 June 2007 comprise the Company and its subsidiaries(together referred to as the "Group"). 1.1 Basis of preparation and statement of compliance The consolidated interim financial statements comply with all currentInternational Financial Reporting Standards as endorsed by the EU and have beenprepared in accordance with AIM listing rules. The AIM Rules require that the next annual consolidated financial statements ofthe Company, for the year ending 31 December 2007, be prepared in accordancewith International Financial Reporting Standards (IFRSs) as adopted by the EU("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of adopted IFRSs as at 30 June 2007that are effective (or available for early adoption) at 31 December 2007, theGroup's first annual reporting date at which it is required to use adoptedIFRSs. Based on these adopted IFRSs, the directors have applied the accountingpolicies, as set out below, which they expect to apply when the first annualIFRS financial statements are prepared for the year ending 31 December 2007. However, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 December2007 are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31 December 2007. In preparing these interim consolidated financial statements, the company haselected to take advantage of certain transitional provisions within IFRS1'First-time Adoption of International Financial Reporting Standards' which offerexemption from applying IFRSs retrospectively. The Company has elected to take the following exemptions affecting comparativefinancial data: (i) Business combinations The Company has elected not to restate business combinations that took placeprior to the 1 January 2006 transition date. (ii) Plant and equipment at deemed cost A first-time adopter may elect to measure individual items of plant andequipment at the book value under its previous GAAP, at the date of transitionto IFRSs and use that as deemed cost at that date. The company has made thiselection. An explanation of how the transition to IFRSs has affected the reportedfinancial position, financial performance and cash flows of the Group isprovided in the appendix, which does not form part of these consolidated interimfinancial statements. This appendix includes reconciliations of equity andprofit or loss for comparative periods reported under UK GAAP (previous GAAP) tothose reported for those periods under IFRSs. The comparative figures for the financial year ended 31 December 2006 are notthe company's statutory accounts for that financial year. Those accounts, whichwere prepared under UK GAAP, have been reported on by the company's auditors anddelivered to the registrar of companies. The report of the auditors was (i)unqualified, (ii) did not include a reference to any matters to which theauditors drew attention by way of emphasis without qualifying their report, and(iii) did not contain a statement under section 237 (2) or (3) of the CompaniesAct 1985. The financial statements are presented in pounds, rounded to the nearestthousand. The accounting policies set out below have been applied consistentlyto all periods presented in these consolidated interim financial statements.They also have been applied in preparing an opening IFRS balance sheet at 1January 2006 for the purposes of the transition to IFRSs, as required by IFRS1.The impact of the transition from previous GAAP to IFRSs is explained in theappendix. The accounting policies have been applied consistently throughout the Group forpurposes of these consolidated interim financial statements. 1.2 Basis of consolidation 1.2.1 Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Grouphas the power, directly or indirectly, to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities. In assessingcontrol, potential voting rights that presently are exercisable or convertibleare taken into account. The financial statements of subsidiaries are included inthe consolidated interim financial statements from the date that controlcommences until the date that control ceases. 1.2.2 Transactions eliminated on consolidation Intragroup balances, and any unrealised gains and losses or income and expensesarising from intragroup transactions, are eliminated in preparing theconsolidated interim financial statements. Unrealised losses are eliminated inthe same way as unrealised gains, but only to the extent that there is noevidence of impairment. 1.3 Foreign currency 1.3.1 Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rateruling at the date of the transaction, to the respective functional currenciesof the group entities. Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date are translated to pounds at the foreignexchange rate ruling at that date. Foreign exchange differences arising ontranslation are recognised in profit or loss. Non-monetary assets andliabilities that are measured in terms of historical cost in a foreign currencyare translated using the exchange rate at the date of the transaction.Non-monetary assets and liabilities denominated in foreign currencies that arestated at fair value are translated to pounds at foreign exchange rates rulingat the dates the fair value was determined. 1.3.2 Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated to pounds at foreignexchange rates ruling at the balance sheet date. The revenues and expenses offoreign operations, are translated to pounds at rates approximating the foreignexchange rates ruling at the dates of the transactions. Foreign exchangedifferences arising on retranslation of assets and liabilities are recogniseddirectly in a separate component of equity known as Foreign Currency TranslationReserve. When a foreign operation is disposed of, in part or in full, therelevant amount in the Foreign Currency Translation Reserve is transferred tothe profit and loss account. 1.4 Plant and equipment 1.4.1 Owned assets Items of plant and equipment are stated at cost less accumulated depreciation(see below) and impairment losses. 1.4.2 Depreciation Depreciation is charged to profit or loss on a straight-line basis over theestimated useful lives of each part of an item of plant and equipment. Theestimated useful lives are as follows: (i) Fixtures and fittings 5 years (ii) Furniture and office equipment 6 - 7 years (iii) Computer and telephone equipment 3 years 1.5 Intangible assets 1.5.1 Goodwill All business combinations are accounted for by applying the purchase method.Goodwill has been recognised in acquisitions of subsidiaries, associates andjoint ventures. In respect of business acquisitions that have occurred since 1January 2006, goodwill represents the difference between the cost of theacquisition and the fair value of the net identifiable assets acquired. In respect of acquisitions prior to this date, goodwill is included on the basisof its deemed cost, which represents the amount recorded under previous GAAP.The classification and accounting treatment of business combinations thatoccurred prior to 1 January 2006 has not been reconsidered in preparing theGroup's opening IFRS balance sheet at 1 January 2006. Goodwill is stated at cost less any accumulated impairment losses. Goodwill isallocated to cash-generating units and is not amortised but is tested annuallyfor impairment. 1.5.2 Other intangible assets Intangible assets other than goodwill that are acquired by the Group are statedat cost less accumulated amortisation (see below) and impairment losses. 1.5.3 Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only whenit increases the future economic benefits embodied in the specific asset towhich it relates. All other expenditure is expensed as incurred. 1.5.4 Amortisation Amortisation is charged to profit or loss on a straight-line basis over theestimated useful lives of intangible assets unless such lives are indefinite.Goodwill and intangible assets with an indefinite useful life are testedsystematically for impairment at each reporting date. Other intangible assetsare amortised from the date that they are available for use. The estimateduseful lives are as follows: • Brand names (5 - 10 years) • Customer relationships (up to 5 years) 1.6 Investments 1.6.1 Financial Assets and liabilities The Group classifies its financial assets and liabilities as: 1. investment securities held for trading - assets 2. investment securities held for trading - liabilities 3. available for sale investments The classification depends on the purpose for which the assets or liabilitieswere acquired. Management determines the classification of its investments atinitial recognition. A financial instrument is defined as any contract that gives rise to a financialasset of one entity and a financial liability or equity instrument of anotherentity. 1.6.2 Recognition All financial assets and liabilities are initially recognised, and measured atfair value on the trade date at which the Group becomes a party to thecontractual provisions of the financial instrument. 1.6.3 Derecognition The Group derecognises all investment securities held for trading when thecontractual rights to the cash flows on the financial asset expire, or ittransfers the rights to receive the contractual cash flows on the financialasset in a transaction in which substantially all the risks and rewards of thefinancial asset are transferred. 1.6.4 Held for trading assets and liabilities The terms "investment securities held for trading assets" and "investmentsecurities held for trading liabilities" (formerly long and short tradingpositions) represent the aggregate of trading positions in individual securitiesarising respectively from a net bought or net sold position. These positions insecurities are valued at market bid and offer prices respectively at the closeof business on the balance sheet date, and movements are recognised in theprofit and loss account. A financial asset is classified in this category ifacquired principally for the purpose of selling in the short term. Purchases andsales of investments are recognised on trade date, being the date on which theGroup commits to purchase or sell the asset. 1.6.5 Available for sale investments Available for sale investments are those investments which are not held forshort term trading. Fair values in respect of available for sale investmentsthat are quoted in active markets are determined by reference to the currentquoted bid price. Where independent prices are not available, fair values may bedetermined using valuation techniques with reference to observable market data.The difference between acquisition cost and fair value is taken to equity, andto the profit and loss account if the asset is impaired. The Group makes anassessment at each balance sheet date as to whether there is any objectiveevidence of impairment, being any circumstance where an adverse impact onestimated future cash flows of the financial asset or group of assets can bereliably estimated. On disposal, any profit previously recognised within equity,or any impairment previously recognised in the profit and loss account arereversed and the actual profit or loss on disposal is recognised in the profitand loss account. 1.7 Trade and other receivables Trade and other receivables are initially recognised at fair value and thenmeasured at amortised cost. At each balance sheet date such receivables arereviewed to determine whether there is an indication of impairment. If any suchindication exists, the recoverable amount is estimated. Impairment losses arerecognised in the profit and loss account. 1.8 Cash and cash equivalents Cash and cash equivalents (including money funds) comprises cash balances andcall deposits with an original maturity of three months or less. Bank overdraftsthat are repayable on demand and form an integral part of the Group's cashmanagement are included as a component of cash and cash equivalents for thepurpose of the statement of cash flows. 1.9 Impairment 1.9.1 Available for sale investments When a decline in the fair value of an available-for-sale financial asset hasbeen recognised directly in equity and there is objective evidence that theasset is impaired, the cumulative loss that had been recognised directly inequity is recognised in profit or loss even though the financial asset has notbeen derecognised. The amount of the cumulative loss that is recognised inprofit or loss is the difference between the acquisition cost and current fairvalue, less any impairment loss on that financial asset previously recognised inprofit or loss. 1.9.2 Goodwill For goodwill, intangible assets that have an indefinite useful life andintangible assets that are not available for use, the recoverable amount isestimated at each balance sheet date. An impairment loss is recognised wheneverthe carrying amount of an asset or its cash-generating unit exceeds itsrecoverable amount. Impairment losses are recognised in the profit and lossaccount unless the asset is recorded at a re-valued amount in which case it istreated as a revaluation decrease. An impairment loss in respect of goodwill isnot reversed. 1.9.3 Plant and equipment For plant and equipment, an impairment loss is recognised whenever the carryingamount of an asset or its cash-generating unit exceeds its recoverable amount.Impairment losses are recognised in the profit and loss account unless the assetis recorded at a re-valued amount in which case it is treated as a revaluationdecrease. 1.10 Repurchase of share capital When share capital recognised as equity is repurchased, the amount of theconsideration paid, including directly attributable costs, is recognised as achange in equity. Repurchased shares that are not subsequently cancelled areclassified as treasury shares and presented as a deduction from total equity. 1.11 Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value lessattributable transaction costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any differencebetween cost and redemption value being recognised in profit or loss over theperiod of the borrowings on an effective interest rate basis. 1.12 Employee benefits 1.12.1 Defined contribution plans Obligations for contributions to defined contribution pension plans arerecognised as an expense in profit or loss as incurred. 1.12.2 Share-based payment transactions The share option programme allows group employees to acquire shares of theCompany. The fair value of options granted is recognised as an IFRS2 share basedpayment charge with a corresponding increase in equity. The fair value ismeasured at grant date and spread over the period during which the employeesbecome unconditionally entitled to the options. 1.14 Provisions Provisions are recognised when the Group has a present obligation as a result ofa past event, and it is probable that the Group will be required to settle thatobligation. Provisions are measured at the Directors' best estimate of theexpenditure required to settle that obligation at the balance sheet date. 1.15 Trade and other payables Trade and other payables are initially recognised at fair value and thenmeasured at amortised cost. 1.16 Revenue Income is accounted for as follows: - if the income is earned on the execution of a significant act, it isrecognised as revenue when the significant act has been completed (for example,fees arising from negotiating, or participating in the negotiation of, atransaction for a third party, such as the arrangement for the acquisition ofshares or other securities). - if the income is earned as services are provided, it is recognised asrevenue as the services are provided (for example, asset management, portfolioand other management advisory and service fees). - Trading income comprises all gains and losses from changes in the fairvalue of financial assets and financial liabilities held for trading, togetherwith related income, expense and dividends. - Interest income and expense is recognised using the effective interestrate method. 1.17 Operating leases Payments made under operating leases are recognised in profit or loss on astraight-line basis over the term of the lease. Under IAS17 guidelines, leaseincentives received are recognised in profit or loss as an integral part of thetotal lease expense. 1.18 Income tax Income tax on the profit or loss for the periods presented comprises current anddeferred tax. Income tax is recognised in profit or loss except to the extentthat it relates to items recognised directly in equity, in which case it isrecognised in equity. Current tax is the expected tax payable on the taxable income for the year,using tax rates enacted or substantively enacted at the balance sheet date, andany adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. Theamount of deferred tax provided is based on the expected manner of realisationor settlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. 2 Segmental analysis The Directors consider that the Group operates in one business segment, beinginvestment banking, and over two locations: UK and USA. The following provides an analysis of revenue by geographic location: TOTAL UK USA 6 months 6 months 3 months 30 June 30 June 30 June 2007 2007 2007 £'000 £'000 £'000Net Institutional Equities and othercommission 13,577 9,080 4,497Corporate Finance and other fees 19,582 15,828 3,754Other operational income 269 269 - -------- -------- ----------Total 33,428 25,177 8,251 -------- -------- ---------- All revenue prior to 2007 was generated in the UK. 3 IFRS2 Share based payments The Group has two active employee benefit trusts, the Panmure Gordon & Co. plcEmployee Benefit Trust (EBT1) and the Panmure Gordon & Co. plc No. 2 EmployeeBenefit Trust (EBT2). The assets and liabilities of each EBT are consolidatedwithin the Group financial statements. Certain options over the ordinary shares of Panmure Gordon & Co. plc issuedunder the Unapproved Share Option Plan have been granted in prior periods to anExecutive Share Option Scheme held in EBT1. Subsequently, options have beensub-trusted for the potential benefit of certain employees (including Directors)or their beneficiaries. The Panmure Gordon & Co. plc Matching Share Plan is in essence a buy one get onefree plan, under which for each ordinary share in Panmure Gordon & Co. plc whichis purchased and lodged with the Company, one Share is issued free of chargeafter three years, provided the shares have not been disposed of and providedthat the employee is still employed by the Company at the time of vesting. On completion of the acquisition by the Group of Panmure Gordon (UK) Limited on26 April 2005, the Company issued 18,521,295 new ordinary shares at par value tothe trustees of EBT2. The par value of these shares, less exercised shares, iscurrently shown within the other reserve section on the balance sheet. Thetrustees have granted options over some of the shares to employees, includingDirectors, at an exercise price equivalent to the par value of 4 pence pershare. Also consequent on completion of the acquisition of Panmure Gordon (UK)Limited the Company granted 1,500,000 options over ordinary shares to certainDirectors under the 2002 Unapproved Share Option Plan. The provisions of IFRS2have been applied to both these options and to the options granted over sharesheld in EBT2. The Group has adopted the provisions of IFRS2 as regards share based paymentcharges. These provisions require a calculation of the fair value at the date ofgrant of share options granted to directors and employees. This fair value isthen charged to the profit and loss account over the vesting period of theoptions. Since this charge is not a cash item nor a diminution in asset value,there is an equal and opposite credit to reserves of the amount of the sharebased payment charge. Where options have been granted with an exercise price of 4p or less, the fairvalue of options on the date of grant has been estimated at their intrinsicvalue. The fair value of all other options on the date of grant has beenestimated using a proprietary valuation model. The significant inputs to themodel were: (a) Share price on the date of grant (b) Exercise price (see below) (c) Expected volatility (30% based on historic volatility) (d) Risk free rate on the date of grant (e) Expected dividend yield (1% where applicable) (f) Expected lapse rates (15% per annum) 6 months 6 months 12 months 30 June 30 June 31 December 2006 2007 2006 £'000 £'000 £'000IFRS2 share based payment charges 842 122 214 -------- -------- ---------- IFRS2 share based payment charges are derived from the following issue ofoptions under the 2002 Approved Share Option Plan, the 2002 Unapproved ShareOption Plan and the Matching Share Plan, unconnected with the acquisition ofPanmure Gordon (UK) Limited: Type of Scheme Date of Grant No. of Options Exercise Price Vesting Period granted less (years) exercised or lapsed (p)2002 Approved 06/06/2003 43,036 120 32002 Unapproved 06/06/2003 195,263 103 22002 Approved 11/08/2003 8,464 174 32002 Unapproved 11/08/2003 265,925 171 22002 Approved 12/05/2004 95,863 125 32002 Unapproved 12/05/2004 589,450 125 22002 Unapproved 07/12/2004 473,000 64 2Accrued BonusPlan 30/03/2007 774,052 181.5 1-3Overseas Plan 30/03/2007 895,785 181.5 3Matching SharePlan 31/03/2007 1,607,533 0 32002 Approved 23/04/2007 18,750 160 32002 Approved 23/04/2007 17,964 167 32002 Unapproved 23/04/2007 156,250 160 42002 Unapproved 23/04/2007 7,036 167 4Accrued BonusPlan 16/05/2007 100,000 181.5 0.87-2.87Overseas Plan 16/05/2007 56,000 181.5 32002 Approved 20/06/2007 47,045 176 32002 Unapproved 20/06/2007 157,955 160 4Matching SharePlan 26/04/2007 200,000 0 32005 EBT(tranches 1 -3) 17/01/2007 115,000 4 1.27-3.272005 EBT(tranches 1 -3) 06/03/2007 235,000 4 1.14-3.142005 EBT(tranches 1 -3) 10/04/2007 369,000 4 1.04-3.042005 EBT 10/04/2007 265,000 4 32005 EBT(tranches 1 -3) 22/05/2007 57,500 4 0.93-2.932005 EBT 22/05/2007 20,000 4 2.88 6 months 6 months 12 months 30 June 30 June 31 December 2006 2007 2006 £'000 £'000 £'000IFRS2 share based payment chargesrelating to the acquisition of PanmureGordon (UK) Limited 3,544 3,485 6,908 -------- -------- --------- IFRS2 share based payment charges are derived from the following issue ofoptions under the Panmure Gordon 2005 Share Option Plan and options issued underthe 2002 Unapproved Share Option Plan on the date of the completion of theacquisition of Panmure Gordon (UK) Limited: Type of Scheme Date of Grant No. of Options Exercise Price Vesting Period granted less (p) (years) exercised or lapsed2002 Unapproved 26/04/2005 500,000 120 2Performanceoptions (firsttranche) 26/04/2005 872,731 4 0.02Performanceoptions(secondtranche) 26/04/2005 872,731 4 0.282005 EBT(tranches 1 -3) 26/04/2005 5,398,002 4 1 - 32005 EBT(tranches 1 -3) 31/05/2005 6,280,381 4 0.9 - 2.92005 EBT(tranches 1 -3) 16/08/2005 159,667 4 0.7 - 2.72005 EBT(tranches 1 -3) 24/11/2005 30,000 4 0.42 - 2.422005 EBT(tranches 1 -3) 10/03/2006 839,453 4 1.1 - 3.12005 EBT(tranches 1 -3) 15/05/2006 160,000 4 0.96 - 2.962005 EBT(tranches 1 -3) 17/07/2006 15,000 4 0.78-2.782005 EBT(tranches 1 -3) 14/09/2006 280,000 4 0.61-2.612005 EBT 14/09/2006 100,000 4 52005 EBT 14/09/2006 100,000 4 52005 EBT(tranches 1 -3) 11/10/2006 25,000 4 0.54-2.54 4 Taxation 6 months 6 months 12 months 30 June 30 June 31 Dec 2007 2006 2006 £'000 £'000 £'000Current period UK corporation tax (2,560) (431) (2,254)Current period USA corporation tax (14) - -Deferred tax credit 4,646 - -Prior year corporation tax over provision - 380 405 -------- -------- --------- Total 2,072 (51) (1,849) -------- -------- --------- A deferred tax asset of £4.6m has been established to reflect the tax benefitwhich is expected to arise from the future exercise of share options.Previously, a deferred tax asset was not recognised on the basis that it was notconsidered probable that the deferred tax asset would be recovered. 5 Earnings per share Earnings per share (EPS) are calculated on a net basis using the profit onordinary activities after taxation divided by the weighted average number ofshares detailed below. 6 months 6 months 12 months 30 June 30 June 31 Dec 2007 2006 2006 £'000 £'000 £'000Profit on ordinary activities aftertaxation 6,425 1,374 4,028Add IFRS2 charges re: purchase ofPanmure Gordon (UK) 3,544 3,485 6,908Other IFRS2 charges 842 122 214Tax relief from exercise of options - - (828)Prior year tax over provision - (380) (405)Deferred tax asset (4,646) - -Less income on termination ofdiscontinued activities - - (84)Profit on continuing activities beforeIFRS2 charges 6,165 4,601 9,833 -------- -------- --------- Weighted average number of shares inissue 67,923,145 61,717,462 62,081,645Fully diluted weighted average numberof shares in issue 70,510,983 64,862,811 64,686,485 Basic earnings per share 9.45p 2.22p 6.49p Diluted earnings per share 9.11p 2.12p 6.23p Adjusted earnings per share 9.08p 7.45p 15.83p --------- --------- --------- 6 Share capital On 30 March 2007, the Company issued 7,192,241 ordinary shares (at a nominalvalue of 4p per share) in consideration for the acquisition of ThinkEquityPartners LLC. A further 1,575,385 ordinary shares are still to be issued, whichwere held back to compensate for contingencies, and are reflected within theshares to be issued line on the balance sheet. During the six months to 30 June2007, 60,000 shares were allotted to satisfy the exercise of options. The Company has continued its programme to purchase its own shares into treasuryat times when the shares were perceived by the Board to be under-valued. As at30 June 2007, the number of shares in issue was 70,502,439, of which 2,796,471were held in treasury. The fully diluted share capital was 77,493,378. 7 Reconciliation of movements in total equity 6 months 6 months 12 months 30 June 30 June 31 Dec 2007 2006 2006 £'000 £'000 £'000Profit for the period after taxation 6,425 1,374 4,028Fair value reserve 648 - -Foreign currency translation reserve (657) - -IFRS2 share based payments 2,262 3,607 7,123Shares issued re: exercise of options 38 1,899 2,096Other shares issued 11,004 10,750 10,750Shares to be issued 4,136 - -Redemption of warrants - (120) (120)Reduction in shares held by Employee BenefitTrust 40 11 29Treasury shares (1,524) - (2,810)Opening total equity 55,688 34,592 34,592 -------- -------- ---------Closing total equity 78,060 52,113 55,688 -------- -------- --------- 8 Analysis of changes in net funds At 31 At 30 Dec June 2006 Cash flow 2007 £'000 £'000 £'000Cash and cash equivalents 43,782 (8,452) 35,330Bank overdraft (819) (163) (982) -------- -------- ---------Cash and cash equivalents net of bank overdraft 42,963 (8,615) 34,348 -------- -------- ---------Subordinated loans (3,000) - (3,000) -------- -------- ---------Net funds 39,963 (8,615) 31,348 -------- -------- --------- 9 Purchase of Subsidiary Undertakings On 30 March 2007 the Group completed the acquisition of ThinkEquity Partners US.The net assets acquired were as follows: Book value Adjustments Fair value £'000 £'000 £'000Intangible assets - 554 554Plant and Equipment 1,327 (72) 1,255Available for sale investments 13 13Held for trading investments 7 7Trade and other receivables 3,795 3,795Cash 5,389 5,389Creditors (20,913) (20,913) -------- --------- --------Net liabilities (10,382) 482 (9,900) -------- --------- -------- Direct costs of acquisition (1,483) Add goodwill on consolidation 26,645 -------- 15,262 --------Satisfied byCash payment 1,847Issue of 8,767,626 shares (marketprice of 153p) 13,415 -------- 15,262 -------- The acquisition of ThinkEquity, which has been accounted for under acquisitionaccounting, has resulted in an increase in the merger reserve created onconsolidation of £10,716,439 being the difference between the market value ofshares issued, not including shares to be issued, and their nominal value of£287,690 (4p per share). The intangible assets acquired relate to customer relationships and brand names. Goodwill arising on the acquisition of ThinkEquity is attributable to thoseintangibles which are not recognised separately, such as an experienced workforce in place. 10 General The interim report was approved by the Board of Directors on 11 September 2007. This report will be sent to shareholders and will be made available to thepublic, upon request, at the registered office of Panmure Gordon & Co. plc,Moorgate Hall, 155 Moorgate, London EC2M 6XB or from the company's websitewww.panmure.com. INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO PANMURE GORDON & CO. PLC Introduction We have been instructed by Panmure Gordon & Co. plc ('the company') to reviewthe consolidated financial information for the six months ended 30 June 2007which comprises the Consolidated Income Statement, the Consolidated BalanceSheet, the Consolidated Statement of Recognised Income and Expense, theConsolidated Cash Flow Statement and the related notes. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the company's annual accountshaving regard to the accounting standards applicable to such annual accounts. As disclosed in note 1.1 to the financial information, the next annual financialstatements of the group will be prepared in accordance with IFRSs as adopted bythe EU. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the Directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe Directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with IFRSs as adopted by the EU. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the UK. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Statements onAuditing (UK and Ireland) and therefore provides a lower level of assurance thanan audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the consolidated financial information as presented for thesix months ended 30 June 2007. KPMG Audit PlcChartered AccountantsLondon12 September 2007 Appendix Reconciliation of equity, net assets and profit under UK GAAP to IFRS Panmure Gordon & Co. plc reported under UK GAAP in its previously publishedfinancial statements for the year ended 31 December 2006. The table below showreconciliations of equity, net assets and profit as reported under UK GAAP as at31 December 2006 to the revised equity, net assets and profit under IFRS asreported in this Interim Report. Reconciliation showing the effect of transition to IFRSs £'000 Previous Effect of IFRSs Previous Effect of IFRSs GAAP transition GAAP transition to IFRSs to IFRSs 01/01/2006 30/06/2006AssetsGoodwill(see note below) 13,201 - 13,201 13,201 - 13,201Plant andequipment 1,702 - 1,702 1,632 - 1,632Availableforsale investments - - - 1,900 - 1,900Deferred income tax assets - - - - - - -------- -------- -------- -------- -------- --------Totalnon-currentassets 14,903 - 14,903 16,733 - 16,733 CurrentAssetsInvestmentsecuritiesheld fortrading 8,114 - 8,114 7,632 - 7,632Trade andotherreceivables 42,759 - 42,759 126,614 - 126,614Cash andcash equivalents 21,070 - 21,070 34,447 - 34,447 -------- -------- -------- -------- -------- --------Totalcurrent assets 71,943 - 71,943 168,693 - 168,693 CurrentliabilitiesBank overdraft - - - - - -Trade andother payables (30,657) - (30,657) (117,732) - (117,732)Current taxliabilities (581) - (581) (455) - (455)Provisionsandother creditors (12,255) - (12,255) (8,010) - (8,010)Investmentsecuritiesheld fortrading (4,572) - (4,572) (3,069) - (3,069) -------- -------- -------- -------- -------- --------Totalcurrent liabilities (48,065) - (48,065) (129,266) - (129,266) -------- -------- -------- -------- -------- --------Net currentassets 23,878 - 23,878 39,427 - 39,427 -------- -------- -------- -------- -------- -------- Interestbearingloans andborrowings (3,000) - (3,000) (3,000) - (3,000)Provisions (1,189) - (1,189) (1,047) - (1,047) -------- -------- -------- -------- -------- --------Total noncurrentliabilities (4,189) - (4,189) (4,047) - (4,047) -------- -------- -------- -------- -------- --------Net assets 34,592 - 34,592 52,113 - 52,113 -------- -------- -------- -------- -------- -------- EquitiesIssuedshare capital 2,260 - 2,260 2,524 - 2,524 Shares to be issued - - - - - -Sharepremium account 19 - 19 12,402 - 12,402Merger reserve 21,810 - 21,810 21,690 - 21,690Special reserve 9,595 - 9,595 9,595 - 9,595 Fair value reserve - - - - - -Other reserve (741) - (741) (730) - (730)Foreign currencytranslationreserve - - - - - -Treasury shares - - - - - -Retainedearnings(see note below) 1,649 - 1,649 6,632 - 6,632 -------- -------- -------- -------- -------- --------Total equity 34,592 - 34,592 52,113 - 52,113 Reconciliation showing the effect of transition to IFRSs (continued) £'000 Previous Effect of transition to IFRSs GAAP IFRSs 31/12/2006AssetsGoodwill (see notebelow) 12,751 450 13,201Plant and equipment 1,628 - 1,628Available for saleinvestments 5,459 - 5,459Deferred income tax assets - - - -------- -------- --------Total non-currentassets 19,838 450 20,288 Current AssetsInvestment securitiesheld for trading 7,763 - 7,763Trade and otherreceivables 30,030 - 30,030Cash and cashequivalents 43,782 - 43,782 -------- -------- --------Total current assets 81,575 - 81,575 Current liabilitiesBank overdraft (819) - (819)Trade and otherpayables (19,680) - (19,680)Current taxliabilities (1,404) - (1,404)Provisions and othercreditors (15,870) - (15,870)Investment securitiesheld for trading (4,636) - (4,636) -------- -------- --------Total currentliabilities (42,409) - (42,409) -------- -------- --------Net current assets 39,166 - 39,166 -------- -------- -------- Interest bearing loansand borrowings (3,000) - (3,000)Provisions (766) - (766) -------- -------- --------Total non currentliabilities (3,766) - (3,766) -------- -------- --------Net assets 55,238 450 55,688 -------- -------- -------- EquitiesIssued share capital 2,530 - 2,530Shares to be issued - - -Share premium account 12,595 - 12,595Merger reserve 21,810 - 21,810Special reserve 9,595 - 9,595Fair value reserve - - -Other reserve (712) - (712)Foreign currency translation reserve - - -Treasury shares (2,810) - (2,810)Retained earnings (seenote below) 12,230 450 12,680 -------- -------- --------Total equity 55,238 450 55,688 Note During 2005, prior to the date of transition to IFRSs, the Group purchasedPanmure Gordon (UK) Ltd. This purchase generated £13,201,000 of Goodwill whichwas amortised in 2006 by £450,000 as per UK GAAP rules which requires Goodwillto be amortised over a period no longer than 20 years. As per IFRSs, Goodwillacquired in a business combination should not be amortised. Instead, Goodwillshould be tested annually for impairment. Reconciliation showing the effect of transition to IFRSs on the income statement £'000 Previous GAAP Effect of IFRSs transition to IFRSs 6 months to 30/06/2006 Commission and tradingincome 11,216 - 11,216Commission and tradingexpense (978) - (978) --------- --------- ---------Net commission andtrading income 10,238 - 10,238 Fee income 8,111 - 8,111Other operating income - - - --------- --------- ---------Net commission and feeincome 18,349 - 18,349 --------- --------- --------- Administrativeexpenses before sharebased payments (13,878) - (13,878) --------- --------- ---------Operating profitbefore share basedpayments 4,471 - 4,471 --------- --------- --------- Goodwill Amortisation - - - Share based paymentsarising as a result ofthe acquisition ofPanmure Gordon (UK)Limited (3,485) - (3,485)Other share basedpayments (122) - (122) --------- --------- ---------Operating profit 864 - 864 --------- --------- --------- Financial income 671 - 671Financial expenses (110) - (110) --------- --------- ---------Profit before tax 1,425 - 1,425 --------- --------- --------- Income tax expense (51) - (51) --------- --------- ---------Profit for the period 1,374 - 1,374 --------- --------- --------- Reconciliation showing the effect of transition to IFRSs on the income statement(continued) £'000 Previous GAAP Effect of transition to IFRSs IFRSs 12 months to 31/12/2006 Commission and tradingincome 20,494 - 20,494Commission and tradingexpense (1,737) - (1,737) --------- --------- ---------Net commission andtrading income 18,757 - 18,757 Fee income 23,368 - 23,368Other operating income 387 - 387 --------- --------- ---------Net commission and feeincome 42,512 - 42,512 --------- --------- --------- Administrativeexpenses before sharebased payments (30,849) - (30,849) --------- --------- ---------Operating profitbefore share basedpayments 11,663 - 11,663 --------- --------- --------- Goodwill Amortisation (450) 450 - Share based paymentsarising as a result ofthe acquisition ofPanmure Gordon (UK)Limited (6,908) - (6,908)Other share basedpayments (214) - (214) --------- --------- ---------Operating profit 4,091 450 4,541 --------- --------- --------- Financial income 1,554 - 1,554Financial expenses (218) - (218) --------- --------- ---------Profit before tax 5,427 450 5,877 --------- --------- --------- Income tax expense (1,849) - (1,849) --------- --------- ---------Profit for the period 3,578 450 4,028 --------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange