RNS Number:7696N
Invocas Group plc
13 December 2006
13 December 2006
Invocas Group PLC
("Invocas" or "the Group")
MAIDEN INTERIM RESULTS
FOR THE PERIOD ENDED 30th SEPTEMBER 2006
Invocas, one of the UK's leading providers of personal and corporate debt
solutions, is pleased to announce its maiden interim results for the period
ended 30 September 2006*.
Invocas' Personal Insolvency Division is firmly established as the number one
provider of Protected Trust Deeds (the Scottish equivalent of IVAs). The
Corporate Solutions Division has grown rapidly in recent years and enjoys an
excellent reputation in the Scottish market place.
Highlights
* Strong performance across the Group. Personal insolvency appointments
increased 41% to 731 (2005: 518)
* Turnover increased 50% to #4.12m (2005: #2.74m)
* Operating profit grew by 22% to #1.52m (2005: #1.25m)
* Strong balance sheet with net cash of #2.59m up from #2.27m following
Admission - headroom for further growth
* Headcount increased to 96 at 30 September 2006 (March 2006: 70)
* Insolvency Practitioners increased from 3 at Admission in March to 7,
providing capacity for significant growth
* Successful launch of Newtomorrow, Invocas' consumer debt solutions
service - continuing promotion of this service to intermediaries and
lenders
* Invocas welcomes moves that will improve the regulation of all debt
related services and extend regulation throughout the rest of the debt
sector
* Current trading has continued to be very strong, confirming the scale
of the market and opportunities available to Invocas in the debt
solutions market
Howard Bell, Chairman, commented:
"It has been a very busy and successful period for the business. We have
delivered an excellent performance across all of our key business measures
including turnover and profit, whilst investing to support our future expansion.
We are continuing to grow our market share, cementing our position as the first
choice provider of personal debt solutions in Scotland and building on our
routes to market.
"The key drivers of our business remain positive. With such favourable market
conditions, excellent relationships with banks and other financial institutions
and ongoing investment in strengthening and expanding the business, I look
forward to reporting further significant progress and growth for the Group in
2007 and beyond."
Website: www.invocas.com
For further information:
Invocas Group plc Tel: 020 7839 4321 on Wednesday 13 December 2006 only
John Hall, Chief Executive Tel: 0131 225 4661 thereafter
Stephen Lightley, Finance Director
Fishburn Hedges Tel: 020 7839 4321 or 07747 113 930
James Benjamin invocas@fishburn-hedges.co.uk
Andy Berry
Charles Stanley Securities Tel: 020 7149 6000
Russell Cook
Henry Fitzgerald-O'Connor
* The financial results in this announcement relate to the period of trading by
Invocas in the 28 week period from 17 March to 30 September 2006. The
comparative numbers for 2005 quoted in this announcement are for the 26 weeks
ended 30 September 2005 and are based on the financial results of the former
partnership, adjusted for the estimated additional costs that might have been
incurred, had the business been incorporated throughout the period.
Notes to editors
Invocas is a market leader in debt solutions in Scotland. Its Personal
Insolvency Division is firmly established as the number one provider of
Protected Trust Deeds (Scottish equivalent of IVAs). Its Corporate Services
Division has grown rapidly in recent years and already enjoys an excellent
reputation in the Scottish market place.
Invocas applies stringent minimum case acceptance criteria to Trust Deeds. It
will only accept a case if it is likely to progress smoothly to completion and
result in a successful outcome which balances the interests of both the indebted
individual and their creditors.
Its Newtomorrow service aims to provide indebted individuals with the right
advice, first time, every time. This is achieved in a caring and professional
manner by a team of highly experienced debt advisors delivering front line
advice. Further information on Newtomorrow can be found at www.newtomorrow.com
Invocas Group plc
Unaudited results for the period ended 30 September 2006
Chairman's Statement
I am delighted to present the maiden interim results of Invocas Group plc. It
has been a very busy and successful period for the business. We have delivered
an excellent performance across all of our key business measures including
turnover and profit, whilst investing to support our future expansion. We are
continuing to grow our market share, cementing our position as the first choice
provider of personal debt solutions in Scotland, and building on our routes to
market.
Our network of work providers is expanding on the back of excellent service
delivery and our unique geographical coverage in Scotland. The Group also
continues to develop further referral flows, serviced by the development of
Newtomorrow, our direct offering to affinity partners, lenders, intermediaries
and debtors. This is supported by the successful launch of our call centre and
website. The increase in the number of Insolvency Practitioners from three to
seven in the period since our Admission to AIM in March provides considerable
capacity for further significant growth. Nevertheless, we continue to apply our
stringent minimum case acceptance criteria with a view to delivering truly
sustainable solutions and optimum returns to creditors.
The Board also continues to assess a number of acquisition opportunities in
similar and related businesses with the objective of broadening the base of the
core personal debt solutions business and building an integrated full service
debt solutions business.
Results
Turnover for the period to 30 September increased to #4.12 million, up by 50%
from that for the period to 30 September 2005 of #2.74 million. The profit of
the Group before interest and tax for the 28 weeks was #1.52 million, an
increase of 22% from the adjusted profit of the partnership for the period to 30
September 2005 of #1.25 million.
These are excellent results, especially in the context of our internal budget
which assumed both increasing levels of activity and profitability throughout
the year and that all the establishment costs of our Newtomorrow offering would
be incurred in these six months in advance of any significant income being
generated.
The business manages a mixed portfolio of both personal and corporate insolvency
cases and is the major provider of Protected Trust Deeds. Approximately 79% of
our turnover for the period was derived from Protected Trust Deed work, 10% from
sequestrations (the Scottish term for bankruptcies) and other personal
insolvency services, and the balance of 11% from formal and informal corporate
insolvency services.
The results show that we increased our share of personal insolvency appointments
in Scotland, an area of work in which we are the pre-eminent provider, by 41% to
731 (2005: 518), with our market share of Protected Trust Deed appointments in
the six months ended 30 September 2006 increasing to 16.9% (2005: 14.2%). This
increase in activity is a significant achievement against the backdrop of our
unique minimum case acceptance criteria. At 30 September 2006 the Group had a
portfolio of approximately 3,700 live Trust Deed cases.
Invocas' share of the number of new formal corporate appointments in Scotland
remained static in a market that showed a decrease in the number of formal
appointments in the six months ended 30 September 2006.
Regulation
There has been much public comment recently about the need for more regulation
in the debt sector. The debt sector encompasses a wide spectrum of businesses,
not all of whom are formally regulated. As a professional services business that
has operated successfully in the highly regulated insolvency profession for
almost nine years, we remain committed to complying fully with the regulatory
standards currently in place. We have also built up excellent relationships with
the banks and other financial institutions.
Invocas welcomes moves that will improve the regulation of all debt related
services and extend regulation throughout the rest of the debt sector. In this
regard, the Board will continue to play a full part in supporting evolving
initiatives designed to ensure consistent application of best advice and best
practice at all levels.
The Market
The underlying economic fundamentals, which identify the UK as a society of over
indebted consumers who are now suffering from living beyond their means for too
long on the back of easily available credit, are now a given. However, the
detail reveals the scale of the problem that is only likely to worsen for the
foreseeable future.
We understand that some 3.4 million UK credit card holders regularly make only
the minimum repayment on their cards; an estimated 2.0 million consumers in the
UK are deemed to be "irretrievably indebted" and some 770,000 people throughout
the UK are reported to have missed one or more mortgage or secured loan payments
in the last twelve months.
In Scotland, our experience suggests that whilst the average per capita debt is
lower than in the rest of the UK, the average Scot's asset base is substantially
less. As a result, proportionately more Scots are in financial difficulties and
are seeking a voluntary solution at a much lower age.
In Scotland, the number of Protected Trust Deed appointments increased by 18% to
4,313 in the six months ended 30 September 2006 (2005: 3,655). Whilst this
represents a slower rate of growth than the increase in IVAs seen throughout the
rest of the UK, we expect the rate to increase as public awareness of the
benefits of Protected Trust Deeds in Scotland grows to match the knowledge of
IVAs which exists elsewhere in the UK. In our opinion the Trust Deed market is
about three years behind the IVA market in England and Wales in terms of public
awareness.
The effect of recent interest rate rises on mortgage repayments has yet to fully
impact on household net income levels. These rate rises, allied to significant
increases in household energy and council tax bills, are likely to put even more
consumers into a position where they find it difficult to meet their ongoing
financial obligations. We are ideally placed to take advantage of the strong and
growing demand for both personal and corporate debt services in Scotland and are
increasingly set to benefit from our uniquely strong geographical spread which
enables us to access work all over Scotland.
Whilst formal corporate insolvency appointments throughout Scotland for the six
months ended 30 September 2006 reduced to 383 from 430 in the equivalent period
in 2005, our experience suggests that the full impact of increasing mortgage and
other household costs has not yet fed through fully into the retail,
manufacturing and leisure sectors. We expect an increase in informal advisory
assignments and formal corporate failures towards the end of 2007.
Strategy
We have taken steps to strengthen our position as the first choice provider of
personal debt solutions in Scotland and we anticipate a significant increase in
enquiries from indebted consumers as public awareness of the benefits of a Trust
Deed as a debt solution tool increases helped, in part, by the launch of our
Newtomorrow service.
We continue to adopt an approach which seeks to balance the interests of debtors
and their creditors. We will also continue to be selective about those cases we
take on, operating stringent minimum acceptance criteria. As a consequence, we
expect to continue to enjoy low Trust Deed failure rates and also to pay a
higher than average dividend to creditors.
Our work providers have all reacted very positively to the IPO. We have taken
steps to underpin what were principally personal relationships with more formal
arrangements. We are pleased to have gained a number of new work providers in
the period, whilst none have been lost.
We continue to expand our network of work providers on the back of excellent
service delivery and our unique geographical coverage of offices in Scotland,
which allows us to carry out effective and efficient mandatory home visits to
debtors.
We are keen to develop the business further through strategic acquisitions of
similar and complementary businesses. In June, we completed our first
acquisition when Derek Wilson and his practice joined us. We are looking to make
further acquisitions to underpin our growth, with the aim of being able to offer
a full suite of debt solutions in house, enabling us to benefit from the cross
selling opportunities and efficiency savings this "multiliner" approach
presents.
On 1 October 2006, we implemented an internal reorganisation within the Group to
facilitate our planned future expansion into other complementary service lines.
Our formal insolvency activities were transferred from the parent company to a
subsidiary company, Invocas Business Recovery and Insolvency Limited. The parent
company will, in future, operate solely as a holding company with investments in
various Group subsidiaries. These subsidiary companies will undertake discrete
trading activities, thereby enabling tight operational control and key
performance measurement of our various activities.
Newtomorrow
We have successfully launched our new helpline and website, primarily as a
source of advice to debtors looking for a truly professional, holistic and
caring approach to finding the appropriate solution to their financial problems.
The majority of these debtors will be referred via affinity relationships with
financial and other intermediaries, which we are now putting in place.
The service is designed to give best advice based on a full suite of personal
debt solutions. Referrals, for which commission income is earned, are currently
made to providers of loans and debt management services which are not presently
available within the Group.
Whilst the call centre is already fully operational with a staff of seven, we
anticipate that additional debt advisors will be required in the New Year as
demand for this service increases with the seasonal post Christmas uplift in
consumers seeking solutions to their debt problems. The set up costs have all
been incurred in the period and we expect to see a material impact on revenues
in the coming year.
People
To service the growing demand for our services, we are investing in additional
staff. Our headcount has grown in the period to 30 September from 70 to 96 and
now stands at 101.
Key to the success of our growth plans is the number of licensed Insolvency
Practitioners employed by the Group. In spite of the small pool of licensed
Insolvency Practitioners in Scotland, we have increased the number in the Group
to seven, a significant increase on the three employed at the time of our IPO in
March. This provides considerable case handling capacity which will allow for
significant growth in case numbers and for these cases to be managed efficiently
and professionally.
As a professional services business, our staff are our greatest asset. I would
like to extend the thanks of the Board and shareholders to all our people,
whether in management, operational or support functions. They have responded
extremely well to the additional challenges posed by our IPO and to our growth
in activity and their skill, enthusiasm and commitment every single day ensure
that we provide an optimum service.
Infrastructure
We continue to invest in our infrastructure and IT processes across the Group to
underpin our growth strategy.
We have taken an additional 3,500 sq. feet of extra space in Glasgow which
approximately doubles the size of that office. This extra space has been used to
house our Newtomorrow call centre and associated debt advisory staff together
with an increased number of insolvency staff. We have invested in the necessary
IT spend to ensure that the new call centre has a state of the art call
processing and management capability to facilitate its efficient operation.
We have also committed to the relocation of our Edinburgh office to
substantially bigger premises early in the New Year.
Outlook
Since the period end, trading has continued to be very strong. New Trust Deed
appointments signed in October and November are up 44% at 282 (2005: 196),
confirming the scale of the market and opportunities available to us.
The Board continues to assess a number of acquisition opportunities in what is a
fragmented market with the objective of broadening the base of our core personal
debt solutions business. We shall focus on good quality businesses that share
our ethos of professionalism. We remain of the view that further consolidation
is necessary and desirable within the debt solutions market and we intend to
play a full part in that process.
The key drivers of our business remain positive. With favourable market
conditions, excellent relationships with banks and other financial institutions
and ongoing investment in strengthening and expanding the business, I look
forward to reporting further significant progress and growth for the Group in
2007 and beyond.
Howard Bell
Non Executive Chairman
13 December 2006
Invocas Group plc As at
Consolidated balance sheet 30 September
2006
#'000
Unaudited
Assets
Non-current assets
Property, plant and equipment 162
Intangible assets 4,135
Deferred tax assets 12
Total non - current assets 4,309
Current assets
Inventories 28
Trade and other receivables 4,623
Cash and cash equivalents 2,594
Total current assets 7,245
Total assets 11,554
Equity and liabilities
Equity attributable to equity holders of the parent company
Share capital 71
Share premium 8,641
Share-based payment reserve 37
Retained earnings 1,109
Total equity 9,858
Current liabilities
Trade and other payables 1,220
Current tax payable 476
Total current liabilities 1,696
Total liabilities 1,696
Total equity and liabilities 11,554
Invocas Group plc Period to
Consolidated income statement 30 September
2006
#'000
Notes Unaudited
Revenue 2 4,122
Direct costs (1,102)
Gross profit 3,020
Marketing and distribution costs (314)
Administrative expenses (1,148)
Share based payments (37)
Profit before investment income 1,521
Investment income 54
Finance costs (2)
Profit before taxation 1,573
Income tax expense 4 (464)
Profit for the period 1,109
Basic earnings per share 5 3.88
Diluted earnings per share 5 3.79
Statement of changes in equity
Share Share Share based Retained Total
capital premium payment reserve earnings
#'000 #'000 #'000 #'000 #'000
Opening balance - - - - -
Shares issued 71 8,641 - - 8,712
Profit for the period - - - 1,109 1,109
Employee share incentive - - 37 - 37
charges
Balance at 71 8,641 37 1,109 9,858
30 September 2006
Consolidated cash flow statement
Notes Period to
30 September
2006
Unaudited
#'000
Cash flows from operating activities
Net profit before tax 1,573
Adjustments for:
Depreciation 26
of property, plant and equipment
Share based payment charges 37
Investment income (54)
Finance costs 2
1,584
Decrease in inventories 4
Increase in trade and other receivables (1,516)
Increase in trade and other payables 1,005
Cash generated from operations 1,077
Net cash inflow from operating activities 1,077
Cash flows from investing activities
Purchase of property, plant and equipment (93)
Purchase of businesses 6 (6,656)
Interest received 54
Net cash used in from investing activities (6,695)
Cash flows from financing activities
Proceeds of share issue 8,712
Repayment of loans (500)
Net cash generated from financing activities 8,212
Net increase in cash and cash equivalents 2,594
Cash and cash equivalents at beginning of period -
Cash and cash equivalents at end of period 2,594
Accounting policies
The accounting policies used in the preparation of the financial information for
the period ended 30 September 2006 are in accordance with the recognition and
measurement criteria of IFRS and are consistent with those which will be adopted
in the annual statutory financial statements for the period ending 31 March
2007.
Notes to the accounts
1 Interim financial information
This interim statement for the period to 30 September 2006 is unaudited and was
approved by the directors on 11 December 2006. The information set out does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985.
Invocas was incorporated on 20 January 2006 and began to trade on 17 March 2006
on which date the trade and certain assets and liabilities of the former
Scottish insolvency practice of Haines Watts (Haines Watts Business Recovery and
Insolvency Scotland) were acquired by Invocas from the partners of that
business. Proforma summarised comparative numbers for 2005, shown in note 8, are
for the 26 weeks ended 30 September 2005 and the 50 weeks ended 16 March 2006
and are based on the financial results of the former partnership adjusted for
the estimated additional costs that might have been incurred, had the business
been incorporated throughout the period.
2 Revenue
Turnover in the profit and loss account represents fees earned during the period
from the provision of financial solutions to individuals experiencing debt
problems, inclusive of direct disbursements incurred on assignments but
exclusive of value added tax.
The amounts taken to turnover are calculated on a time charged basis with due
provision made for cases for which the fee may not be recoverable.
Unbilled revenue is included in debtors as "amounts recoverable on contracts".
Turnover is stated net of the value of subcontract charges for services provided
by third parties, which were previously included in equal amounts within both
Turnover and Direct Costs in the Admission Document. The exclusion of these
subcontract charges from both income and direct costs has no impact on the
overall gross profit.
3 Segmental analysis
At this stage of the Group's development, the directors are of the opinion that
there is only one business segment within the activities of the Group and,
therefore, no segmental analysis has been prepared.
Notes to the Interim Financial Statements
4 The tax charge is based on the current rate of UK corporation tax
applicable to the company and comprises:
Period to
30 September
2006
Unaudited
#'000
UK corporation tax at 30% 476
Deferred tax (12)
Total current tax charge 464
5 Earnings per share
Earnings per share for the period ended 30 September 2006 has been calculated
using the following average number of shares in issue:
Period to
30 September
2006
Unaudited
Basic
Profit after tax (#'000s) 1,109
Weighted average number of shares (000s) 28,567
EPS (Pence) 3.88
Fully diluted
Profit after tax (#'000s) 1,109
Weighted average number of shares (000s) 29,224
EPS (pence) 3.79
Notes to the Interim Financial Statements
6 Acquisitions
On 17 March 2006, Invocas floated on AIM and on admission acquired the business
and certain assets and liabilities of the former Scottish insolvency practice of
Haines Watts (Haines Watts Business Recovery and Insolvency Scotland) from the
partners of that business. The assets and liabilities acquired were as follows:
Book Fair
Value Adjustments Value
#'000 #'000 #'000
Property, plant and equipment 89 - 89
Inventories 32 - 32
Trade and other receivables 3,097 - 3,097
Trade and other payables (713) - (713)
Net assets 2,505 - 2,505
Goodwill 3,995
6,500
Satisfied by:
Cash consideration 6,500
On 7 June 2006, Invocas acquired the business and certain assets of the
Edinburgh based insolvency practice of Wilson & Co. from the owner of that
business, Mr D Wilson, who took up employment with the Group. The assets
acquired were as follows;
Book Fair
Value Adjustments Value
#'000 #'000 #'000
Property, plant and equipment 6 - 6
Trade and other receivables 10 - 10
Net assets 16 - 16
Goodwill 140
156
Satisfied by:
Cash consideration 151
Cost of acquisition 5
156
7 Post balance sheet events
As part of a group reorganisation on 1 October 2006, the trade, assets and
liabilities of Invocas Group plc were transferred to one of its subsidiary
companies, Invocas Business Recovery and Insolvency Limited.
8 Comparatives
Period to Period to 50 weeks
30 Sept 30 Sept to 16 March
2006 2005 2006
#'000 #'000 #'000
Turnover 4,122 2,745 5,560
Staff costs and similar charges (1,102) (775) (1,521)
Gross profit 3,020 1,970 4,039
Other operating charges (1,499) (398) (968)
Allowance for estimated directors' - (325) (650)
salaries and corporate costs in
prior periods
EBIT 1,521 1,247 2,421
Interest receivable 54 - 5
Interest payable (2) (1) (6)
Illustrative net profit before tax 1,573 1,246 2,420
To assist with a proper interpretation of the current period's results, the
above table compares the current period's results with the illustrative profits
of the business for the periods ended 30 September 2005 and 16 March 2006. The
results for these two prior periods reflect the results of the partnership,
Haines Watts Business Recovery and Insolvency Scotland, adjusted for the
additional corporate costs and directors' salaries that might have been
incurred, had the business been incorporated throughout the period.
As detailed above in note 2, Turnover is stated net of the value of subcontract
charges for services provided by third parties, which were previously included
in equal amounts within both Turnover and Direct Costs in the Admission
Document. The exclusion of these subcontract charges from both income and
direct costs has no impact on the overall gross profit.
INDEPENDENT REVIEW REPORT TO INVOCAS GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the period ended 30 September 2006, which comprises the Group Income Statement,
Group Balance Sheet, Group Statement of Changes in Equity, Group Statement of
Cash Flows, and the related notes 1 to 8 and we have read the other information
in the interim statement and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of their interim statement and for no other purpose. We
do not, therefore, in producing this report, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
Directors' responsibilities
The interim statement, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Statement in accordance with the AIM Rules
which require that the accounting policies and presentation applied to the
interim figures must be consistent with those that will be adopted in the
company's annual accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board as if that Bulletin applied. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the period ended 30
September 2006.
BAKER TILLY
Chartered Accountants
Brazennose House
Lincoln Square
Manchester
M2 5BL
This information is provided by RNS
The company news service from the London Stock Exchange
END
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