PMR.L Regulatory News (PMR)

22 Aug 2006 07:00

Panmure Gordon & Co. plc22 August 2006 PANMURE GORDON & CO. PLC ("PANMURE GORDON" OR THE "GROUP") Interim Results for the Six Months ended 30 June 2006 • Revenue increased 158% to £18.3m (2005:£7.1m), following the successful combination of Panmure Gordon and Durlacher • Adjusted profit before tax of £5.0m (2005:£0.4m) • Adjusted earnings per share of 7.45p (2005:1.08p) • Panmure Gordon has made good progress in the first half of 2006 and is well positioned to perform strongly in the second half of the year and beyond • Revenue growth has exceeded growth in costs as we continue to maintain control of costs and working capital • The performance by Institutional Equities has been encouraging. Corporate Finance has been impacted by market volatility but we have an encouraging pipeline for the second half of the year • Panmure Capital has now made five investments and will be a significant contributor to our future IPO pipeline • The Board has authorised a share buy back programme Tim Linacre, Chief Executive of Panmure Gordon & Co, said: "In the period since Panmure Gordon was combined with Durlacher in April lastyear, significant progress has been made. Despite recently challenging marketconditions, the institutional equity business has performed creditably, andprofitably. Our new issue and corporate finance pipeline is strong and we view the outlook for the second half of the year, and beyond, with confidence." For further information, please contact Tim Linacre, Chief ExecutiveDavid Liddell, Finance DirectorPanmure Gordon & Co. plc 0207 614 8300 David Rydell/Nick Lambert/Chris HamiltonBell Pottinger Corporate & Financial 0207 861 3232 CHIEF EXECUTIVE'S REVIEW Introduction Panmure Gordon made good progress in the first half of 2006 and is wellpositioned to perform strongly in the second half of the year and beyond. Thebusiness has moved forwards on a broad front attracting additional high qualitypersonnel, launching Panmure Capital and further strengthening the profile ofthe Corporate Finance business. We have done this while continuing to keep atight control of costs and working capital. Our Institutional Equities business traded robustly in the first half of theyear. While our Corporate Finance business was impacted by the sharp downturn inIPO activity towards the end of the first half, it has shown resilience throughsecuring appointments on M&A transactions and building a strong pipeline of IPOsand secondary fundraisings for the second half. Results Revenue in the first half rose to £18.3m (2005: £7.1m) and adjusted profitbefore tax to £5.0m (2005: £0.4m). Comparisons with the same period in 2005 arenot particularly relevant as Panmure Gordon & Co. was combined with Durlacher on26 April 2005. The first half numbers for 2005 therefore included the results ofDurlacher for the period from 1 January 2005 to 26 April 2005 and for thecombined business for the period 27 April 2005 to 30 June 2005, though for thesake of completeness they are given below. It is encouraging to note thatrevenue has grown significantly ahead of expenses including bonus accrual. Adjusted operating profit and earnings are stated before FRS 20 option charges,exceptional items (which in 2006 only relate to FRS 20 option charges) and prioryear tax credits. 2006 2005 % H1 H1 Net revenue 18,349 7,110 +158 Administrative expenses (including bonus (13,878) (6,953) +100accrual) -------- -------- Adjusted operating profit 4,471 157 Net interest receivable 561 194 -------- -------- Adjusted profit before taxation 5,032 351 Taxation (431) - -------- --------Adjusted earnings (see note 6) 4,601 351 ======== ======== Adjusted earnings per share (see note 6) 7.45p 1.08p Review of Activities Research, Sales and Trading (Institutional Equities) During the six months we have continued to make selective hires and to upgradefurther the quality of our offering. We write research on more than 220companies and 300 investment trusts and make markets in 481 companies. We experienced a particularly strong start to the year and while we saw someweakening in commission and trading results following the market volatility inthe last seven weeks of the period, the performance of Institutional Equitieshas been encouraging. Our trading approach remains focused on client facilitation rather thangenerating proprietary trading profits. Corporate Finance Corporate Finance entered 2006 with a strong pipeline. As I commented in thestatement accompanying the results for the year ended 31 December 2005, the 2006pipeline was weighted towards the second half of the year. This has beenmagnified by the difficult market conditions for IPOs over the last two months,which led to a number of sizeable transactions being postponed. Despite the back end weighting of the pipeline, and more difficult markets, wewere involved in five IPOs and five secondary issues raising in aggregate over £300m. We have also been successful in being appointed to a number of public M&Atransactions working alongside independent investment banks where the fees willbe earned in the second half of the year, and we expect to see furtheropportunities in this area. We act for 91 corporate clients. While this is the same number with which westarted the year, our list of clients has undergone change as we continue toseek clients where we can both add value to the relationship and make aneconomic return. We have been pleased with the progress we have made in thisregard. Panmure Capital We announced at the beginning of this year the creation of Panmure Capital, a joint venture between Panmure Gordon and Bank of Scotland, targeting late stagepre IPO funding opportunities. To fund our participation we issued 4.89m sharesto Bank of Scotland, raising £10.75m. We and the managers of Panmure Capital have been pleased by the number andquality of potential investment opportunities that have been presented. The fundhas now made five investments, one of which has already floated. No profit oninvestments has been recognised in the first half. We announced in July that we were looking, together with the Bank of Scotlandand the managers of Panmure Capital, to seek to create a larger fund to addressthe market opportunity. Richard Wyatt, who was the Executive Chairman of Panmure Gordon and is one ofthe managers of the fund, stood down from his role as Chairman on 24 July toconcentrate on the expansion of Panmure Capital. Charles Stonehill, previouslythe Deputy Chairman of Panmure Gordon, has taken over as Executive Chairman. The amount of any further investment by Panmure Gordon in any larger fund hasnot been decided and will depend upon a number of factors including the likelyeconomic return, our appetite for risk and alternative uses for cash. The Board of Panmure Gordon believes that Panmure Capital will be a significantcontributor to our future IPO pipeline for 2007 and beyond. Current Trading and Outlook The sharp correction in equity markets impacted our ability to complete variouscorporate transactions at the end of the first half and has in the short termrestrained our secondary market business. We have responded to this bycontinuing to keep a tight control on costs while still permitting recruitmentof high quality personnel. We anticipate that pre bonus costs for the year willbe at least £1m below the previous guidance of £21m. While markets and activity have not yet returned to the levels of earlier in theyear we have seen an improvement in recent weeks. Our performance in the second half of the year will continue to depend on marketconditions. However we have an encouraging corporate pipeline which includes anumber of sizeable fundraisings both for IPO candidates and existing listedclients. We are also active on a number of public takeovers. We have £34m of available cash resources, which provide a strong platform toenable us to continue to grow the business and seek opportunities to addshareholder value. As a consequence the Board has authorised a programme to buyback our shares into Treasury when they are perceived to be under-valued. Sharesacquired in this way may in the future contribute to a new staff incentivisationplan. The Board believes we have made considerable progress in establishing PanmureGordon as a leading independent stockbroker. While there will always be more tobe achieved, we expect further progress in the second half of the year. Tim LinacreChief Executive21 August 2006 CONSOLIDATED PROFIT & LOSS ACCOUNTfor the six months ended 30 June 2006 6 months 6 months 12 months 30 June 30 June 31 December Notes 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 --------- --------- --------- Turnover 2 19,327 7,606 31,606 Costs of sales (978) (496) (1,592) --------- --------- ---------Gross profit 18,349 7,110 30,014 Administrative expenses (13,878) (6,953) (24,556) --------- --------- ---------Operating profit before FRS 20 option charges and exceptional items 4,471 157 5,458 FRS 20 option charges deemed not exceptional 3 (122) (370) (542) --------- --------- ---------Operating profit/(loss) before exceptional items 4,349 (213) 4,916 Exceptional costs 4 (3,485) (5,144) (9,826) --------- --------- --------- Total administrative expenses (17,485) (12,467) (34,924) --------- --------- --------- Operating profit/(loss) after exceptional items 864 (5,357) (4,910) Net (costs)/income on termination of discontinued activities - (162) 242 Net interest receivable and similar items 561 194 612 --------- --------- ---------Profit/(Loss) on ordinary activities before taxation 1,425 (5,325) (4,056) Taxation on profit/loss on ordinary activities 5 (51) - (396) --------- --------- ---------Profit/(Loss) on ordinary activities after taxation 1,374 (5,325) (4,452) --------- --------- ---------Basic profit/(loss) per ordinary share 6 2.22p (16.39)p (9.96)p The profit per ordinary share on continuingactivities before exceptional items and FRS 20 option charges is disclosed in note 6. The Group has no recognised gains or losses other than the results for theperiod. CONSOLIDATED BALANCE SHEETAs at 30 June 2006 30 June 30 June 31 December 2006 2005 2005 Notes Unaudited Unaudited Audited £'000 £'000 £'000 -------- --------- ---------Fixed assetsIntangible assets 13 13,201 13,201 13,201Tangible assets 1,632 1,958 1,702Investments in Panmure Capital (net of share of liabilities - nil) 7 1,900 - - -------- --------- ---------Total fixed assets 16,733 15,159 14,903 -------- --------- ---------Current assetsTrading Securities 7,632 7,190 8,114Debtors 126,614 130,290 42,759Cash at bank and in hand 34,447 5,531 21,070 -------- --------- --------- 168,693 143,011 71,943 Creditors - amounts falling due within one year (129,266) (124,955) (48,065) -------- --------- ---------Net current assets 39,427 18,056 23,878 -------- --------- --------- Total assets less current liabilities 56,160 33,215 38,781 Creditors - amounts falling due after one year - - - Subordinated loan (3,000) (3,000) (3,000)Provision for liabilities and charges (1,047) (1,446) (1,189) -------- --------- ---------Net assets 52,113 28,769 34,592 ======== ========= ========= Share capital & reservesOrdinary shares 8 2,524 2,257 2,260Deferred shares - 28,330 - -------- --------- ---------Called up share capital 2,524 30,587 2,260Share premium account 12,402 27,473 19Merger reserve 21,690 21,809 21,810Special reserve 9,595 - 9,595Other reserve (730) (741) (741)Profit and loss account 6,632 (50,359) 1,649 -------- --------- ---------Equity Shareholders' funds 9 52,113 28,769 34,592 ======== ========= ========= Approved for and on behalf of the Board on 21 August by Tim LinacreChief Executive CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2006 6 months 6 months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Notes £'000 £'000 £'000 -------- -------- -------- Net cash inflow/(outflow) from operating activities 10 2,421 (2,029) 11,787 Returns on investments and servicing of finance 11 561 198 635 Capital expenditure and financial investment 11 (2,064) (751) (812) Payment of taxation (68) - - Acquisitions and disposals 11 - (444) 809 -------- -------- --------Cash inflow/(outflow) before financing 850 (3,026) 12,419 FinancingProceeds from issue of ordinary share capital 11 12,527 - 94 -------- -------- --------Net cash inflow from financing activities 12,527 - 94 -------- -------- --------Increase/(decrease) in cash for the period 13,377 (3,026) 12,513 ======== ======== ======== Reconciliation of cash outflow to movementin net debtIncrease/(decrease) in cash for the period 13,377 (3,026) 12,513Subordinated debt acquired with subsidiary - (3,000) (3,000) -------- -------- --------Change in net debt resulting from cash flows 13,377 (6,026) 9,513 Net funds brought forward 18,070 8,557 8,557 -------- -------- --------Net funds 12 31,447 2,531 18,070 ======== ======== ======== NOTES TO THE INTERIM REPORT 1. Basis of preparation Turnover represents the amount invoiced, excluding value added tax, in respect of brokerage commissions, fees and charges and corporate finance fees, together with profits and losses on market making and dealing. The interim results have been prepared on a basis consistent with the accounting policies set out on pages 27 to 29 of the Annual Report for the 12 months ended 31 December 2005. 2. Segmental and analysis The Directors consider that the Group operates in one segment, being stock broking. The following provides an analysis of turnover by major activity: 6 months 6 months 12 months 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 --------- -------- ---------Institutional Equities and other commission 11,216 3,115 12,435Corporate Finance and other fees 8,111 4,491 19,171 --------- -------- ---------Total 19,327 7,606 31,606 ========= ======== ========= 3. FRS 20 Option Charges The Group has adopted the provisions of FRS 20 as regards share option charges. These provisions require a calculation of the fair value at the date of grant of share options granted to directors and employees. This fair value is then charged to the profit and loss account over the vesting period of the options. 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 share option charge. The fair value of options on the date of grant has been estimated by anindependent third party using a proprietary valuation model. The significantinputs to the model were: (a) Share price on the date of grant(b) Exercise price (see below)(c) Expected volatility (50% 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 2005 2005 £'000 £'000 £'000 -------- ---------- ----------3.1 FRS 20 option charges not deemed exceptional 122 370 542 ======== ========== ========== Options issued under the 2002 approved and unapproved schemes, unconnected with the acquisition of Panmure Gordon (UK) Limited, are not deemed exceptional and are derived from the following issue of options: Type of Scheme Date of Grant No. of Options granted Exercise Price Vesting Period less exercised or (p) (years) lapsed 2002 Approved 06/06/2003 147,685 120 32002 Unapproved 06/06/2003 200,977 103 22002 Approved 11/08/2003 19,464 174 32002 Unapproved 11/08/2003 289,484 171 22002 Approved 12/05/2004 127,863 125 32002 Unapproved 12/05/2004 686,177 125 22002 Unapproved 07/12/2004 653,000 64 2 6 months 6 months 12 months 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 -------- --------- --------3.2 FRS 20 option charges deemed exceptional 3,485 2,430 7,112 ======== ========= ======== Options issued over shares granted to the Panmure Gordon 2005 scheme and optionsissued under the 2002 unapproved scheme on the date of the completion of theacquisition of Panmure Gordon (UK) Limited are deemed exceptional, as thesegrants were integral to the transaction by which Durlacher Corporation acquiredPanmure Gordon. This charge is derived from options granted as follows: Type of Scheme Date of Grant No. of Options granted Exercise Price Vesting Period less exercised or (p) (years) lapsed2002 Unapproved 26/04/2005 500,000 120 22005 EBT (tranches 1 - 3) 26/04/2005 5,656,587 4 1 - 32005 EBT (tranches 1 - 3) 31/05/2005 8,822,380 4 0.9 - 2.92005 EBT (tranches 1 - 3) 16/08/2005 203,001 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 1,171,454 4 1.1 - 3.12005 EBT (tranches 1 - 3) 15/05/2006 160,000 4 0.96 - 2.96Performance options (first tranche) 26/04/2005 872,731 4 0.02Performance options (second tranche) 26/04/2005 872,731 4 0.28 4. Exceptionals 6 months 6 months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 -------- -------- --------Redundancy and reorganisation - 2,714 2,714Expensing of share options under FRS 20 (see note 3.2) 3,485 2,430 7,112 -------- -------- --------Total 3,485 5,144 9,826 ======== ======== ======== 5. Taxation 6 months 6 months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 -------- -------- --------Current period UK corporation tax (431) - (16)Prior year corporation tax over/(under) provision 380 - (380) -------- -------- --------Total (51) - (396) ======== ======== ======== 6. 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 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 -------- -------- --------Profit/(Loss) on ordinary activities after taxation 1,374 (5,325) (4,452)Add back exceptional items on continuing activities 3,485 5,144 9,826Other FRS 20 charges 122 370 542Prior year tax (over)/under provision (380) - 380Add/less costs/(income) on termination of discontinued activities - 162 (242)Profit/(Loss) on continuing activities before exceptional items and FRS 20 charges 4,601 351 6,054 ======== ======== ======== Weighted average number of shares in issue 61,717,462 32,491,958 44,688,195Fully diluted weighted average number of shares in issue 64,862,811 36,687,741 46,850,789 Earnings per share on continuing activities before exceptional items and FRS 20 charges 7.45p 1.08p 13.55p Diluted earnings per share on continuing activities before exceptional items and FRS 20 charges 7.10p 0.96p 12,92p 7. Investments in Panmure Capital 6 months 6 months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 -------- -------- --------Citel 708 - -Groove Media Inc 475 - -Low Carbon Accelerator 717 - - -------- -------- -------- 1,900 - - ======== ======== ======== Unquoted investments are held at cost since they have been owned for less than12 months in accordance with BVCA guidelines. Citel was floated on AIM on 7 July 2006; our holding converted to 1,000,000shares. Two further investments totaling £1.5m have been made subsequent to 30 June 2006. 8. Share capital On 19 January 2006, the Company issued 4,886,363 ordinary shares to Bank ofScotland by way of a placing. During the six months to 30 June 2006, 1,691,759shares were allotted to satisfy the exercise of options. On 26 April 2005, the Company issued shares to acquire the entire share capitalof Panmure Gordon (UK) Limited, previously Panmure Gordon & Co. Limited. Thenumber of shares issued to the Lazard Group in respect of this acquisition was18,521,295. The market price of the shares on the day of completion was £1.125and, therefore, the transaction resulted in an increase in the Merger Reserve ofapproximately £20.1m, being the market value of the shares issued, less theirnominal value (see note 13). At the same time the Company issued a further18,521,295 shares to the Panmure Gordon & Co. plc No.2 Employee Benefit Trust atthe par value of 4p. Further details of these transactions are set out in theCircular dated 30 March 2005. As at 30 June 2006, the number of shares in issue was 63,088,900 and the fullydiluted share capital was 67,459,003. 9. Reconciliation of movements in equity shareholders' funds 6 Months 6 Months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 --------- -------- --------Profit/(Loss) for the period after taxation 1,374 (5,325) (4,452)FRS 20 Share Option Charges 3,607 2,800 7,654Shares issues re exercise of options 1,899 - 94Other shares issued 10,750 20,834 20,836Redemption of warrants (120) - -Reduction in shares held by Employee Benefit Trust 11 - -Opening shareholders' funds 34,592 10,460 10,460 --------- -------- --------Closing shareholders' funds 52,113 28,769 34,592 ========= ======== ======== 10. Reconciliation of operating profit/(loss) to net cash outflow from operating activities 6 Months 6 Months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 --------- -------- --------Operating profit/(loss) 864 (5,357) (4,910)Loss on sale of fixed assets - - 62Depreciation and amortisation 227 215 469Movement in long and short positions (1,021) 1,961 (2)Decrease in net amounts owed by counterparties 3,520 14,865 9,793Increase in debtors (138) (764) (1,770)Decrease in creditors and provisions (4,638) (15,749) 491FRS 20 share option charges 3,607 2,800 7,654 --------- -------- --------Net cash inflow/(outflow) from operating activities 2,421 (2,029) 11,787 ========= ======== ======== 11. Analysis of cash flow for headings netted in the cash flow statement 6 Months 6 Months 12 months 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited £'000 £'000 £'000 -------- -------- --------Returns on investment and servicing of financeInterest received 655 246 795Interest paid (94) (48) (160) -------- -------- --------Net cash inflow from returns on investment and servicing of finance 561 198 635 ======== ======== ========Capital expenditure and financial investmentPurchase of tangible fixed assets (175) (751) (812)Repayment of loan to EBT 11 - -Purchase of investments (1,900) - - -------- -------- --------Net cash outflow from capital expenditure and financial investment (2,064) (751) (812) ======== ======== ========Acquisitions and disposal(Costs)/proceeds in respect of termination of discontinued activities - (393) 860Acquisition costs - (1,569) (1,569)Cash acquired - 1,518 1,518 -------- -------- --------Net cash (outflow)/inflow from acquisitions - (444) 809 ======== ======== ========Proceeds from the issue of ordinary share capitalProceeds from share issue 12,647 - 94Redemption of warrants (120) - - -------- -------- --------Net cash inflow from the issue of ordinary share capital 12,527 - 94 ======== ======== ======== 12. Analysis of changes in net funds At 31 At 30 Dec June 2005 Cash flow 2006 £'000 £'000 £'000 -------- -------- --------Cash in hand and at bank 21,070 13,377 34,447Subordinated loans (3,000) - (3,000) -------- -------- --------Net funds 18,070 13,377 31,447 ======== ======== ======== 13. Purchase of Subsidiary Undertakings On 26 April 2005 the Group completed the acquisition of Panmure Gordon (UK)Limited (previously Panmure Gordon & Co. Limited). The net assets acquired wereas follows: £'000Net Long Positions 1,125Debtors 109,842Cash 1,518Creditors (100,281)Subordinated loan (3,000) --------Net assets 9,204 -------- Direct costs of acquisition (1,569) Add goodwill on consolidation 13,201 -------- 20,836 --------Satisfied by --------Issue of 18,521,295 shares (market price of £1.125) 20,836 -------- This acquisition, which has been accounted for under acquisition accounting,resulted in an increase in the merger reserve created on consolidation of£20,095,000 being the difference between the market value of the shares issuedand their nominal value of £741,000 (4p per share). 14. General The interim report was approved by the Board of Directors on 21 August 2006. This report has been 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 financial information for the six months ended 30 June 2006 which comprisesthe Consolidated Profit and Loss account, the Consolidated Balance Sheet, 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. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of management and applying analytical proceduresto the financial information and underlying financial data and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express 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. KPMG Audit PlcChartered AccountantsLondon21 August 2006 This information is provided by RNS The company news service from the London Stock Exchange