RNS Number:7391L
Kingsbridge Holdings PLC
30 May 2003
KINGSBRIDGE HOLDINGS PLC
30 May 2003
Interim Statement for the six months ended 28 February 2003
Chairman's statement
This is my first report to shareholders, having succeeded Charles Green as
Chairman in January this year. I have to report that the last six months have
been a particularly difficult time for the Company. This is reflected in the
very disappointing results for the half year to 28th February 2003.
Turnover in the period was #3,945,000 compared to #6,914,000 in the same period
last year, while the loss before taxation, goodwill amortisation and exceptional
items of #1,397,000 compares to a profit of #1,503,000. In the light of the
Company's results, the directors do not propose to pay a dividend (2002 - #Nil).
As shareholders will be aware, trading conditions have been particularly
difficult. Almost all those involved in the investment market have suffered and
we have not been spared. The Company's divisions are primarily focused on
investment products targeted at high net worth clients, whether in sport or
elsewhere. With the background of the continuing fall in stock markets around
the world, the stalling of the commercial property market and low interest
rates, the confidence of investors has fallen from already low levels and
investment flows have almost dried up. Our financial advisers, as always, have
had to focus on the best interests of our clients and have not felt it
appropriate to promote some of the investment products directly linked to stock
market performance. Allied to this has been the prominence given to mis-selling
by the Financial Services Authority and even the most dedicated and careful
advisers have been accused of mis-selling products and have had to defend
themselves at high cost, both in terms of cash and time. Product providers have
caused some problems too, with rumour about insurance companies solvency adding
to the well publicised issues surrounding split-capital investment trusts,
endowments and Equitable Life further sapping investor confidence.
A particular victim of product provider's probity was our Harrogate subsidiary,
formerly IFP Ltd. In the period prior to our acquisition of this company, it had
sold investment products in Imperial Consolidated Mutual, whose problems have
been well publicised. We have spent over #300,000 on legal bills alone in
attempting to ascertain the facts of this case, in trying to protect our
investors and obtain a return of their funds. An inevitable consequence of the
immense effort put into this was that senior executives spent considerably less
time than was desirable in dealing with clients. The result was that the
Harrogate division showed a negative contribution of #496,000 in the half year
ended 28th February 2003, which after costs of administration, compliance,
technical and information technology, increased to a loss before taxation of
#1.052m on a turnover of #1,618,000.
Whilst in the long-term the directors considered that there was a good prospect
of recovery from professional indemnity and warranty claims that were available,
in the short-term the impact of these issues posed a serious threat to the
group's cash flow. This meant that the sale of the business was by far the best
solution available. After negotiation Ross Hyett, the managing director of IFP
Ltd, agreed with others to buy back the division and a deal, which was announced
on 4th March 2003, was finally completed on 19th March 2003.
As a consequence of the sale, the much smaller group could no longer afford the
services of Martin Greenwood as Chief Executive and he agreed to depart on
sensible terms. I am grateful to Martin for his efforts. I have assumed
executive responsibility for a short period to try to resolve the group's
future. In keeping with the group's reduced size, other cuts to central costs
have been made.
The Sports division fared rather better in the period under review and provided
a contribution to central overhead of #239,000. They too suffered the market
problems I mentioned above, and giving proper advice to our clients has meant a
much restricted sales opportunity.
The cash constraints caused by the IFP problems were only partially relieved by
the sale of that division, and a continuing problem for the Sports division has
been the debt owed to the League Managers Association (LMA). This arose in the
heady days of dot.com fever in mid 2001 when a licence to manage the LMA website
was granted at a cost of #1.5 million payable in annual instalments of #200,000
together with interest costs. Two years' payments are now overdue and no income
is being received from the site, contrary to the original expectations of high
returns on this investment. The LMA have been very understanding and shown great
forbearance, but a solution to the problem needed to be found, as they are
contractually due to be paid.
As recently announced, David McKee and Kevin McMenamin, the original founders of
Kingsbridge's business in Nottingham, have agreed to re-purchase their original
business unit, taking with it the LMA liability as well as any liability that
might arise in the future on mis-selling or related issues. Some potential
problems have been identified which could incur considerable cost to resolve.
Certain other liabilities are also being taken on and we therefore estimate the
value of the sale to be around #3million.
If this sale is successfully completed, which is conditional on FSA compliant
professional indemnity insurance being obtained on satisfactory financial terms,
the group will then comprise Benson McGarvey and Kingsbridge Advisors, our
Scottish subsidiary. While Benson McGarvey is trading as well as can be expected
in this difficult market, Kingsbridge Advisors has recently lost some senior
sales staff and business loss is inevitable. We are working to improve the
subsidiaries' prospects, but it is too early to predict the outcome.
I can also advise that the Company has received notification from the original
Vendors of the Benson McGarvey business that they intend to exercise their
rights in respect of #3 million of Fixed Rate Unsecured Convertible Loan Notes.
As it seems unlikely that the company will be in a position to satisfy the Loan
Notes in cash, the Benson McGarvey Vendors will be entitled under the provisions
of the Notes to the issue of new shares to the value of #3 million at the
average mid market closing price on the 30 days prior to the date of the
announcement of the preliminary results for the year ending 31st August 2003.
In conclusion, I am not content to allow the company to continue in this way and
I am exploring several alternative strategies to return some value to
shareholders. I hope to be able to report progress in the near future. I would
like to take this opportunity to offer my thanks to all our employees for their
efforts and commitment in what has been a difficult time.
Eric Cater
Executive Chairman
Consolidated profit and loss account
For the six months ended 28 February 2003
Unaudited Unaudited Audited
to 31
to 28 to 28 August
February February 2002
Contin-uing Discont-inuing
2003 2002
#000 #000 #000 #000 #000
TURNOVER 2,327 1,618 3,945 6,914 11,987
------ ------- -------- --------- ---------
OPERATING (LOSS) PROFIT (670) (1,052) (1,722) 560 (25,679)
------- --------
Net interest (payable) receivable (15) 5 (12)
------- -------- ---------
(LOSS) PROFIT ON ORDINARY ACTIVITIES (1,737) 565 (25,691)
BEFORE TAXATION
- after goodwill amortisation and (1,737) 565 (25,691)
exceptional items
- goodwill amortisation 340 938 1,915
Exceptional items
- goodwill impairment - - 23,696
- licence impairment - - 1,438
- other exceptional items - - 159
(LOSS) PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION, GOODWILL AMORTISATION AND
EXCEPTIONAL ITEMS (1,397) 1,503 1,517
======== ========= ========
Tax on (loss) profit on ordinary (51) (452) (429)
activities
------- -------- --------
(LOSS) PROFIT ON ORDINARY ACTIVITIES AFTER (1,788) 113 (26,120)
TAXATION
======== ======== ========
(Loss) earnings per share
Basic (1.82p) 0.12p (26.75p)
Basic EPS excluding goodwill amortisation (1.48p) 1.08p 1.11p
and exceptional items
Diluted (1.82p) 0.11p (26.75p)
======== ======== =========
There are no other recognised gains or losses other than the (loss) profit for
the period.
Consolidated balance sheet
28 February 2003
Unaudited Unaudited Audited
to 31 August
to to 2002
28 February
2003 28 February
2002
#000 #000 #000
FIXED ASSETS
Licences - 1,438 -
Goodwill 11,903 36,224 12,243
---------- --------- ---------
Intangible assets 11,903 37,662 12,243
Tangible assets 1,107 1,354 1,398
Investments 11 11 11
---------- --------- ---------
13,021 39,027 13,652
---------- --------- ---------
CURRENT ASSETS
Debtors 1,901 4,298 1,933
Loan note deposit 3,734 11,563 10,213
Cash at bank and in hand - 193 602
--------- -------- ---------
5,635 16,054 12,748
CREDITORS: Amounts falling due within one year (9,284) (14,417) (12,232)
--------- --------- ---------
NET CURRENT (LIABILITIES) ASSETS (3,649) 1,637 516
--------- --------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 9,372 40,664 14,168
CREDITORS: Amounts falling due after more than one year (2,200) (2,707) (2,200)
PROVISION FOR LIABILITIES AND CHARGES (25) - (33)
---------- ---------- ----------
NET ASSETS 7,147 37,957 11,935
========== ========== ==========
CAPITAL AND RESERVES
Called-up share capital 981 981 981
Share premium account 20,113 20,113 20,113
Shares to be issued 1,350 4,350 4,350
Merger reserve 12,244 12,033 12,244
Profit and loss account (27,541) 480 (25,753)
---------- ---------- ----------
EQUITY SHAREHOLDERS' FUNDS 7,147 37,957 11,935
========== ========== ==========
Consolidated cash flow statement
For the six months ended 28 February 2003
Unaudited Unaudited Audited
to 28 February to 31 August
2003 to 28 2002
February
2002
#000 #000 #000
NET CASH (OUTFLOW) INFLOW FROM OPERATING ACTIVITIES
(1,246) 763 1,871
Returns on investments and servicing of finance (15) (29) (12)
Taxation paid (82) (230) (914)
Capital expenditure and financial investment 173 (522) (710)
Acquisitions and disposals - (136) 88
---------- ---------- ---------
CASH (OUTFLOW) INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND
FINANCING (1,170) (154) 323
Management of liquid resources - 63 -
Financing - - (5)
---------- ---------- ---------
(DECREASE) INCREASE IN CASH IN THE PERIOD (1,170) (91) 318
========== ========== =========
Reconciliation of movements in group equity shareholders' funds
For the six months ended 28 February 2003
Twelve
Six months Six months
months ended
ended ended
31 August
28 February 28 February 2002
2003 2002
#000 #000 #000
(Loss) profit for the period (1,788) 113 (26,120)
New shares issued - 598 -
Shares to be issued (3,000) (809) -
--------- ---------- ---------
Net reduction in equity shareholders' funds (4,788) (98) (26,120)
--------- --------- ---------
Opening equity shareholders' funds 11,935 38,055 38,055
--------- --------- ---------
Closing equity shareholders' funds 7,147 37,957 11,935
========= ========== =========
Notes to financial statements
28 February 2003
1. TAXATION
The tax charge is based on UK Corporation Tax payable at the current rate.
2. DIVIDENDS
The directors do not propose to pay a dividend.
3. (LOSS) EARNINGS PER SHARE
The calculations of earnings per share are based on the following losses or
profits and numbers of shares:
Six months Six months Twelve
ended ended months ended
28 February 28 February 31 August
2002
2003 2002
#000 #000 #000
(Loss) profit on ordinary activities after taxation (1,788) 113 (26,120)
Goodwill amortisation 340 938 1,915
Exceptional items
- goodwill impairment - - 23,696
- licence impairment - - 1,438
- other exceptional items - - 159
---------- --------- ---------
(Loss) profit before goodwill amortisation and exceptional items (1,448) 1,051 1,088
========= ========== =========
Number Number Number
of shares of shares of shares
000 000 000
Weighted average number of shares:
For basic (loss) earnings per share 98,147 97,115 97,629
Contingently issuable shares - 1,849 -
Exercise of share options - 1,024 -
--------- --------- ---------
For diluted (loss) earnings per share 98,147 99,988 97,629
========== ========== =========
Basic (1.82p) 0.12p (26.75p)
Basic EPS excluding goodwill amortisation and impairment,
exceptional items and licence impairment (1.48p) 1.08p 1.11p
Diluted (1.82p) 0.11p (26.75p)
========== ========= =========
The directors have presented an alternative earnings per share figure to give a
better indication of the long term results of the business. FRS14 requires
presentation of diluted EPS when a company could be called upon to issue shares
that would decrease net profit or increase net loss per share. For a loss making
company with outstanding share options, net loss per share would only be
increased by the exercise of out-of-the-money options and warrants. Since it
seems inappropriate to assume that option and warrant holders would act
irrationally, no adjustment has been made to diluted EPS for out-of-the-money-
share options and warrants.
4. RECONCILIATION OF OPERATING (LOSS) PROFIT TO OPERATING CASH FLOWS
Six months Six months Twelve
ended ended months ended
28 February 28 February 31 August
2002
2003 2002
#000 #000 #000
Operating (loss) profit (1,722) 560 (25,679)
Depreciation charges 172 117 247
Goodwill amortisation and impairment 340 938 25,611
Licence amortisation and impairment - - 1,438
Profit on disposal of tangible fixed assets (54) - (12)
Decrease (increase) in debtors 32 (680) 1,685
Decrease in creditors (14) (172) (871)
Adjustments to prior year goodwill - - (548)
--------- --------- ---------
NET CASH (OUTFLOW) INFLOW FROM OPERATING ACTIVITIES (1,246) 763 1,871
======== ======== =========
5 ANALYSIS OF CASH FLOWS
Six months Six months Twelve
ended ended months ended
28 February 28 February 31 August
2002
2003 2002
#000 #000 #000
Returns on investments and servicing of finance
Interest received - 249 479
Interest paid (15) (260) (491)
Interest element of finance lease rentals - (18) -
--------- --------- ---------
NET CASH OUTFLOW (15) (29) (12)
========== ========= =========
Taxation
UK corporation tax paid (82) (230) (914)
========= ========== =========
Capital expenditure and financial investment
Purchase of tangible fixed assets (6) (543) (737)
Sale of tangible fixed assets 179 21 27
--------- --------- ---------
NET CASH INFLOW (OUTFLOW) 173 (522) (710)
========= ======== ========
Twelve
Six months Six months
ended ended months ended
28 February 28 February
2003 31 August
2002 2002
#000 #000 #000
Acquisitions and disposals
Purchase of subsidiary undertaking - (136) 88
========= ========= =========
Management of liquid resources
Receipts for loan note deposit account - 63 -
========= ========= =========
Financing
Capital element of finance lease rentals - - (5)
========= ========= =========
6 ANALYSIS AND RECONCILIATION OF NET DEBT
1 September Other 28 February
2002 2003
Cash flow non-cash
changes
#000 #000 #000 #000
Cash in hand, at bank 602 (602) - -
Overdrafts - (568) - (568)
-------- -------- -------- ---------
602 (1,170) - (568)
-------- -------- -------- ---------
Investment - Loan note deposit 10,213 (6,479) - 3,734
Loan notes due within one year (10,213) 6,479 (3,000) (6,734)
Unsecured convertible loan notes - - 3,000 3,300
Finance leases (1,300) - - (1,300)
-------- -------- -------- ---------
Net debt (698) (1,170) - (1,868)
======== ======== ======== ========
The Benson McGarvey earn out was achieved but issue of the relevant shares was
deferred and Unsecured Convertible loan notes to the value of the Shares to be
issued were created.
ANALYSIS AND RECONCILIATION OF NET DEBT (CONTINUED)
Twelve
Six months Six months
Months ended
ended ended 31
28 February 28 February August
2002
2003 2002
#000 #000 #000
(Decrease) increase in cash in the period (1,170) (91) 318
Cash outflow from finance lease - - 5
-------- -------- --------
Change in net debt resulting from cash flows (1,170) (91) 323
Surrender of finance lease - - 26
-------- -------- --------
Movement in net debt in period (1,170) (91) 349
Net debt at 1 September 2002 (698) (1,047) (1,047)
-------- -------- --------
Net debt at 28 February 2003 (1,868) (1,138) (698)
======== ========= ========
7 SEGMENT INFORMATION
All turnover is derived from a single class of business, being the group's
principal activity of the provision of financial services and advice. All
turnover originates in the United Kingdom.
8 BASIS OF ACCOUNTS
The unaudited interim statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards using the
accounting policies set out in the report and accounts for the period ended 31
August 2002.
9 GENERAL INFORMATION
The financial information set out above does not constitute full accounts within
the meaning of Section 240 of the Companies Act 1985. The amounts shown in
respect of the period ended 31 August 2002 have been extracted from the full
statutory accounts, on which the auditors have made an unqualified report. The
statutory accounts have been filed with the Registrar of Companies.
Copies of this announcement will be posted to shareholders and are available to
members of the general public from the company's registered office: Kingsbridge
House, Castle Gate, Nottingham NG1 7AQ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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