RNS Number : 4576X
Invocas Group plc
25 June 2008
25 June 2008
INVOCAS GROUP PLC
("Invocas" or the "Group")
PRELIMINARY RESULTS FOR THE 52 WEEK PERIOD TO 31 MARCH 2008
Invocas, one of the UK's leading providers of personal debt solutions, today announces its preliminary results for the 52 week period to
31 March 2008 (the comparative figures for 2007 are based on a 54 week period).
FINANCIAL HIGHLIGHTS
Year ended 54 week period ended
31 March 31 March 2007
2008
�m �m
Revenue 9.88 8.54
Underlying profit before taxation* 3.43 3.36
Underlying earnings per share (pence)* 8.46p 8.01p
Profit before taxation 3.18 3.36
Earnings per share (pence) 7.85p 8.01p
Dividend per share (pence) 2.50p -
Bank balances 4.27 3.41
* Revenue increased by 16% to �9.88m (2007: �8.54m)
* Underlying pre tax profit increased by 2% to �3.43m (2007: �3.36m)*
* Underlying EPS increased by 6% to 8.46p (2007: 8.01p)*
* Strong balance sheet with net cash of �4.27m (2007: �3.41m), providing significant headroom for further growth
* The value of shareholders' equity at 31 March 2008 increased by 21.2% to �13.41m (2007: �11.06m), including �4.53m (2007: �2.29m)
of retained profit
* Proposed maiden dividend payment to shareholders of 2.5 pence per share
* pre one-off charges of �0.25m (see Note 4)
OPERATIONAL HIGHLIGHTS
* Total caseload of formal personal insolvency cases up to 5,402 (2007: 5,153) including Trust Deeds, Individual Voluntary
Arrangements (IVAs) and Sequestrations - providing cash generation and highly visible future income stream
* Successful launch of The Insolvency Exchange (TIX) compliant IVAs and informal debt management service lines
* Substantial moves forward in re-engineering our lead acquisition model with improving trend in revenue opportunities and good
progress in replacing referrers of Trust Deeds lost last year:
* now producing 300 opportunities a month, double the number produced per month in summer 2007
* just over 70% of leads currently coming through marketing subsidiary, Newtomorrow (2007: approximately 20%)
* since the year end, launch of Newtomorrow Broker Services, web-based offering to Independent Financial Adviser (IFA) networks,
packagers and distributors across the UK. User agreements signed with nine groups representing over 2,000 firms of IFAs
* since the year end, we acquired a small personal debt advisory team that will grow to cover England and Wales, enabling us to
offer a personal counselling service to clients at their preferred location - we now have 346 IVA cases under management
* Confident of achieving a significant increase in volume of IVAs and Debt Management Plans (DMPs) in the coming year
* Invocas continues to enjoy industry-leading low creditor objections and failure rates
* The weakening macro economic environment leads the Group to predict a significant increase in the demand for our services in the
second half of 2008 and beyond
Commenting on the results, Chairman, Howard Bell, said:
"With Invocas' skill set and infrastructure geared to the delivery of personal insolvency and related services, we intend to reduce our
reliance on Trust Deed services and to develop considerably our IVA and debt management offering in the year ahead. We believe that there
are significant opportunities for us to leverage our unique caring and professional ethos and approach into the English market.
The weakening macro economic environment leads us to expect demand for both our formal and informal personal debt solutions and our
corporate insolvency services to increase significantly during the second half of 2008 and into 2009.
Invocas benefits from a strong financial position, a long and successful track record, excellent relationships with creditors and a
clear marketing strategy that is already bearing fruit. In addition, Invocas' broadening service range and increasing numbers of revenue
opportunities leaves me confident that the Group will continue to build upon improving trends and is well placed for growth in the year
ahead."
For further information:
Invocas Group plc Tel: +44(0)131 222 2460
Howard Bell, Chairman
Stephen Lightley, CEO
Gavin Anderson (Financial PR Adviser) Tel: +44(0)20 7554 1400
Ken Cronin / Michael Turner / Anthony Hughes Email:
invocas@gavinanderson.
co.uk
Charles Stanley Securities (Nominated Adviser) Tel: +44 (0)20 7149 6000
Philip Davies / Carl Holmes
Website: www.invocas.com
Notes to editors
Invocas is one of the UK's leading providers of personal debt solutions. Its Personal Insolvency Division is firmly established as a
leading provider of Protected Trust Deeds (the Scottish equivalent of IVAs). Invocas applies stringent minimum case acceptance criteria to
Trust Deeds and IVAs. 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.
The Group's 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
Preliminary results for the financial year to 31 March 2008 (the comparative figures for 2007 are based on a 54 week period).
CHAIRMAN'S STATEMENT
In what has been a challenging year for our sector, I am delighted to be able to report a strong set of financial results for the Group
and a positive outlook for the coming year.
We are pleased with the improving trends in our levels of trading since the year end and are confident that we are now emerging from the
difficult times of last year.
Revenue for the period increased 15.8% to �9.88m (2007: �8.54m). The underlying profit before tax increased to �3.43m (2007: �3.36m).
The underlying basic earnings per share increased to 8.46p (2007: 8.01p). However, as the result of one-off charges of �0.25m, profit before
tax was �3.18m (2007: �3.36m) with basic earnings per share of 7.85p (2007: 8.01p).
The value of shareholders' equity at 31 March 2008 increased by 21.2% to �13.41m (2007: �11.06m), including �4.53m (2007: �2.29m) of
retained profit.
The cash inflow from operations, after investment in working capital of �1.22m (2007: �1.31m), was �2.01m (2007: �2.08m) before tax
payments of �1.1m (2007: �nil). Closing cash balances stood at �4.27m (2007: �3.41m).
Our balance sheet is, therefore, in good shape providing a solid platform for future expansion and investment.
In light of the strong financial performance and the cash balances held, I am delighted to report that the Directors have proposed the
payment of a maiden final dividend of 2.5p per share aggregating to a cost of some �714,000 based on 28,566,585 ordinary shares. This final
dividend is to be proposed on 31 July at the Annual General Meeting. The ex-dividend date is 9 July, with a record date of 11 July and an
intended payment date of 8 August 2008. The dividend will be charged to equity in the 2008/09 financial year.
Strategy
The current turmoil in the personal debt sector has not affected Invocas to the extent that it has impacted many of our comparator
businesses based in England and our significant cumulative case load means that we have been able to maintain a strong financial
performance. However, along with others, we saw the number of leads coming into the Group and the level of new Trust Deed cases signed
decrease significantly in the second half of 2007.
We accelerated the re-engineering of our lead generation model to make us more self reliant. We invested in our internet capability and
entered the lead purchase market in a limited and controlled way via our call centre and marketing subsidiary, Newtomorrow. In the final
quarter of the year, we began a series of TV advertising campaigns across Scotland consistent with a style that we consider appropriate to
our core professional services-based values.
We are now seeing the benefits of these changes and our total revenue opportunity streams, covering the full range of our services,
increased substantially towards the end of the year. They are currently running at approximately 300 per month, double what they were last
summer.
Newtomorrow is now our biggest source of revenue opportunities on a month to month basis, providing just over 70% of our current total
revenue opportunities as compared to approximately 20% a year ago. Newtomorrow now accounts for almost 50% of our Trust Deed opportunities
compared to less than 20% a year ago.
We have also made good progress in replacing the referrers of Trust Deeds that were lost last year. The current credit crunch provides
further opportunities for referrals from businesses within the financial services sector, particularly those advising on mortgages, that
previously did not see debt solutions as a priority and we look forward to providing further updates on progress in this area in the coming
year.
Latterly, we have made significant appointments to our sales and marketing team to drive the promotion of our services to new business
referrers in the financial services sector. As announced to the market on 1 May 2008, Brian Ferguson has been appointed as Director of
Sales, having formerly been Head of Distribution and Strategy at Standard Life Bank and Bob Ollason has joined the Group as a Corporate
Account Director. Bob was Vice Chairman of the Council of Mortgage Lenders in Scotland. We are in no doubt that the addition of their
experience within the financial services sector will help drive forward the success of the Group.
We have made significant progress in the year towards our strategy of offering a full range of personal debt solutions in house and, in
September, we opened a new office in Altrincham which houses our TIX compliant Individual Voluntary Arrangements and debt management
operations. We will also continue to explore acquisition opportunities which meet our criteria and, with a strong cash position, we believe
that we are in an excellent position to take advantage of the opportunities which are likely to arise in the sector.
To help grow our new IVA business, we have, to date, acquired four IVA portfolios, representing 317 cases with potential revenue in
future years of approximately �1.0m.
With Invocas' skill set and infrastructure geared to the delivery of personal insolvency and related services, we intend to reduce our
reliance on Trust Deed services and to develop considerably our IVA and DMP offering in the year ahead. We believe that there are
significant opportunities for us to leverage our unique caring and professional ethos and approach into the English market.
Our objective remains to provide a high quality personal and professional service to indebted individuals across the UK and to generate
a return that is acceptable to their creditors.
The Market
The numbers of Protected Trust Deeds (PTDs) and IVAs approved across the UK in the year ended 31 March 2008 fell by 9.6% and 18.8%
respectively from the levels in the year ended 31 March 2007 (Source: Insolvency Service).
These decreases do not reflect a reduction in the number of indebted persons needing these solutions but, rather, increased levels of
objections by lenders reluctant to see further increases in the numbers of personal insolvencies. We understand the reasons for their
concerns which stemmed, not unreasonably, from a wish to see higher standards within the insolvency industry and more consistency in the fee
level and structure.
After negotiations during the past year, we welcome the agreement that has now been reached between the insolvency industry and the
British Bankers Association (BBA) on the key criteria required for approval of IVAs. Provided that these criteria are met, this should now
lead to higher numbers of IVAs being approved.
The weakening macro economic environment leads us to predict a significant increase in the demand for our services in the second half of
2008 and beyond, on the back of unprecedented levels of secured and unsecured personal debt and a reduction in available credit to indebted
individuals as a result of the credit crunch.
Developments
Since the year end, we have launched Newtomorrow Broker Services, a web based offering to IFA networks, packagers and distributors
across the UK. In addition, in order to assist our expansion in England, we have acquired a small personal debt advisory team that we will
grow to cover England and Wales, thereby enabling us to offer a personal counselling service to clients at their preferred location.
We are confident that these initiatives will enable us to achieve a significant increase in the volume of IVAs and DMPs in the coming
year and beyond.
People
We could not have achieved the financial results for the year and strengthened our platform for the future without the hard work and
professionalism of the entire Invocas team. I would like to extend the thanks of the Board and shareholders to all our staff and management
for their skill, enthusiasm and commitment.
We were delighted that David Macmillan agreed to join our Board as Non-executive Director in November and he has already made a
significant contribution to the development of our marketing strategy. I would also like to thank John Hall personally for his significant
contribution as Chief Executive of the Group and I am pleased that we will continue to benefit from his skills in his new role as
Non-executive Director.
We are also very pleased that, since the year end, on 1 May, Stephen Lightley has been appointed as Chief Executive Officer. Stephen and
Ian Wright, our Managing Director, have played a significant role in building Invocas into the market leading business that it is today and
will be responsible for the future development and implementation of the Group's business strategy. Together, they form a strong team to
take the Group forward. The search for a new Finance Director is underway, to enhance the composition of the Executive Board, and a further
announcement in this regard will be made in due course. In the meantime, Stephen will continue to oversee the finance function, supported by
the Group Financial Controller.
Outlook
We expect demand for both our formal and informal personal debt solutions and our corporate insolvency services to increase
significantly during the second half of 2008 and into 2009.
The trend of increasing levels of new work, together with the significant potential opportunity that we have developed with Newtomorrrow
Broker Services, gives us considerable optimism for the future.
Consolidation is already happening within the debt industry sector and we intend to play a full part in this process as opportunities
arise.
Invocas benefits from a strong financial position, a long and successful track record, excellent relationships with creditors and a
clear marketing strategy that is already bearing fruit. In addition, Invocas' broadening service range and increasing numbers of revenue
opportunities leaves me confident that the Group will continue to build upon improving trends and is well placed for growth in the year
ahead.
Howard Bell, Non-executive Chairman
25 June 2008
INVOCAS GROUP PLC
Preliminary results for the financial year to 31 March 2008 (the comparative figures for 2007 are based on a 54 week period).
OPERATING REVIEW
The Business
Invocas has made significant progress with our chosen strategy of becoming a full service provider of both personal and corporate debt
solutions throughout the UK. We have diversified our range of services significantly by opening an office in Altrincham to deliver TIX
compliant IVAs and informal Debt Management Plans and have now acquired four IVA portfolios, representing 317 cases under management. We
expect this office to grow significantly in the coming year.
Since the year end, we have launched Newtomorrow Broker Services, our web based offering to IFA networks, packagers and distributors
across the UK, and have made good progress in replacing referrers of Trust Deeds. We have grown substantially our total revenue streams and
we expect the need for our services to increase significantly during 2008 and beyond.
At a time when new leads coming into the Group from traditional sources decreased significantly, our large cumulative case load has
enabled us to maintain a strong financial performance, with levels of revenue and profits for the year broadly in line with market
expectations.
These are good figures, especially when account is taken of the initial set up costs of the new office in Altrincham which have amounted
to some �0.15m and which have been charged in this period.
The core activity of the business in the year has been the provision of personal insolvency services in Scotland. Approximately 85% of
our turnover for the year ended 31 March 2008 was derived from PTDs (2007: 80%), 10% from Sequestrations (the Scottish term for
bankruptcies) and other personal insolvency services (2007: 11%), 4% from formal and informal corporate insolvency services (2007: 9%) and
1% from IVAs (2007: nil%).
The total number of formal personal insolvency cases under management grew to 5,402 (2007: 5,153).
Our portfolio of PTD cases represents 14.6% of the total number of PTDs extant at 31 March 2008.
As a consequence of the stringent acceptance criteria that we apply to all cases, we continue to enjoy industry leading low creditor
objections and failure rates. Our failure rates for Trust Deed proposals that do not progress to protection are approximately 5% for the
year ended 31 March 2008 (2007: 7%). We understand from TIX that their overall objection rates have now stabilised at between 20% and 25% of
all Trust Deed proposals. We are emphasising this clear market leading position to creditors with a view to differentiating Invocas as the
provider of choice, delivering optimal returns to creditors.
More importantly, almost all of our Trust Deed proposals that do not proceed subsequently result in sequestrations where Invocas
provides the nominated insolvency practitioner. These generate an income stream which, due to the nature of the process, is higher than
would have been earned from a PTD. Only 1% (2007: 2%) of our Trust Deed proposals do not progress to a formal insolvency solution.
Our Approach
Our approach to both customer service and delivery continues to differentiate us from much of our peer group.
We always seek to balance the interests of the lenders and the borrowers and we continue to apply stringent minimum acceptance criteria
to Trust Deeds and IVAs with a view to delivering truly sustainable solutions and optimum returns to creditors, both of which are even more
imperative in today's climate. We undertake face to face interviews with debtors to obtain comfort as to their commitment to the process
they are about to commence and to confirm the completeness and accuracy of their financial position.
Lenders recognise the benefits of our high quality service and optimum returns and debtors consider us to be professional, trustworthy
and caring. We believe this balanced approach leaves us well positioned to play an increasing role in the future of the sector.
We continue to enjoy a good relationship with TIX, who act for a number of major creditors, including HBOS and The Royal Bank of
Scotland.
The Personal Market
The sector saw a fall in IVA and Trust Deed acceptances in 2007 due to the raising of hurdle rates by consumer lenders who have started
to appreciate the extent of their potential exposure to over-indebted consumers. The reduction in overall PTD and IVA appointments in the
year ended 31 March 2008 reflected, in part, the reluctance of creditors to accept the significantly increasing trend in formal appointments
that was seen in the year ended 31 March 2007, preferring, instead, the informal solution provided by DMPs.
In Scotland, the overall number of Trust Deeds achieving protection fell by some 9.6% to 7,509 for the year ended 31 March 2008 (2007:
8,302) with a 4.4% reduction in the quarter to 31 March 2008 compared to the corresponding quarter of 2007 (Source: Insolvency Service).
The number of IVAs approved in the year ended 31 March 2008 fell by some 18.8% to 39,451 from 48,601 in the year ended 31 March 2007,
with a 22% reduction in the quarter to 31 March 2008 compared to the corresponding quarter of 2007 (Source: Insolvency Service).
Statistics on DMPs are difficult to obtain but The Debt Exchange Group estimate that the number of DMPs taken out in 2007 was 160,000
and that this will double to 320,000 in 2008 (Source: Credit Action). We have also seen a strong demand for DMP services from debtors since
we launched our new service at the end of 2007.
DMPs are appropriate for debtors facing a temporary period of financial difficulty until a more favourable change of circumstances can
be anticipated in the relative short term. However, one in four DMPs are forecast to fail within 12 months (Source: Credit Action),
suggesting that a formal solution will ultimately be required in many of these cases.
Following resolution between the insolvency industry and the BBA as to the criteria to be met for approval of IVAs, it seems likely that
higher numbers of IVA proposals should now be approved. This will restore to the indebted person the opportunity for a voluntary solution to
his problems which has traditionally been at the cornerstone of debt legislation, at the same time as offering the lender a potentially
higher real level of return.
We firmly believe that the underlying macro economic conditions point to a huge embedded consumer debt problem which is likely to become
much worse.
The pressures on consumers are well documented. The increase in the retail price index is greater than the increase in average earnings
and domestic energy, car fuel and food prices continue to increase steadily as the oil price remains high or increases further. The elderly
face additional pressures, typically having under-provided for pensions in days gone by.
The turmoil in the credit markets continues to cause upward pressure on mortgage repayments and leads us to expect that a significant
number of borrowers will face substantial increases in their monthly repayments, and possibly the requirement to find deposits, when
existing fixed and discounted rate mortgage deals come to an end. Approximately 1.4 million fixed-rate mortgages will come to the end of
their fixed-rate term over the next 12 months (Source: Credit Action). Anyone with a less than perfect credit history is likely to find it
both harder and substantially more expensive to obtain a re-mortgage, as lenders re-price risk, severely hampering the ability of consumers
to release equity to consolidate unsecured debts.
With house prices now falling across the UK, unemployment increasing towards a nine year high, the threat of increasing business
failures and redundancies, the demand for our range of formal and informal personal debt solutions is likely to be significant.
UK personal debt at the end of April exceeded �1,436 billion. This represents an annual growth rate of 8.4%. Secured lending on homes
amounted to �1,207 billion, an annual growth rate of 8.7%. Consumer credit lending amounted to �230 billion, an increase of 6.5% over the
last 12 months. Total credit card debt was �54.9 billion (Source: Credit Action).
The Corporate Market
There is usually a time lag before any downturn in consumer spending flows through into signs of financial distress in the corporate
market and, in Scotland, there was a decrease in the number of formal insolvencies during the year of 9.9% from 700 to 631.
Our new formal corporate appointments were 44 (2007: 39) representing 7.0% of the formal appointments in Scotland (2007: 6.7%).
The last two months of the year saw an upturn in the number of corporate referrals coming into the Group but, as yet, we have not seen a
sustained uplift in activity. However, we do expect to see an increase in formal appointments later in 2008, particularly in the property,
construction, retail, transport and leisure sectors, in all of which we have significant experience.
New Work in the Personal Market
During the year the Group's number of new PTD appointments was 871 (2007: 1,391). Our market share was 11.6% (2007: 16.8%). The number
of Trust Deeds signed by Invocas in the year ended 31 March 2008 was 780 (2007: 1,521).
Our total revenue opportunities are currently running at approximately 300 per month, twice what they were last summer. Typically, our
monthly Trust Deed opportunities are approaching 120. A year ago, they were higher at 140 per month but the current trend is encouraging as
the monthly number had fallen to 80 per month in the autumn of 2007. There has been a marked increase in DMP opportunities which have run at
120 per month in the quarter to March 2008, whereas, a year ago, the monthly number was less than 20.
Whilst the overall reduction in new Trust Deeds is disappointing, there was an improving trend towards the end of the year as our new
marketing strategy began to take effect. During the period from June to December 2007, the number of cases signed was running at less than
50% of the numbers signed in the equivalent quarters in the previous year. However, in the quarter to 31 March 2008, the numbers have
climbed to 52% of the numbers signed in the equivalent quarter a year ago and this improving trend is carrying forward beyond the year end
into the current period. We anticipate that, in June, we will achieve a level of new Trust Deed cases signed that is greater than that
achieved in June last year. This will be the first month for over a year in which this has been achieved.
The reasons for our relative fall in market share are threefold:
* there was a marked reduction in the levels of referrals from a number of our traditional providers which we attribute to the
impact of commercial pressures throughout the UK which resulted in a general withdrawal from the advertising of formal insolvency
solutions;
* a small number of English based work introducers recruited Scottish insolvency practitioners to provide Trust Deed services in
house. One of these was a significant provider to Invocas; and
* we also understand that higher referral fees are being paid to work providers that, in our experience, may not be commercially
sustainable.
Principally as a result of the lower numbers of Trust Deed cases signed, the overall value of new work won in the year ended 31 March
2008 from all sources was �4.30m (2007: �7.14m).
Alongside our new work won, in order to grow our new IVA business, we acquired three IVA portfolios during the year, the two principal
acquisitions arising during the final quarter, representing 132 cases with potential revenue in future years of approximately �0.5m. Since
the year end, we have completed the acquisition of a further portfolio of 185 IVA cases with potential future revenue of a further �0.5m. We
now have 346 IVA cases under management.
In respect of our DMP business, we won 92 cases, principally in the final quarter of the year. We also anticipate that the number of DMP
cases signed in June will be one of the highest achieved by us to date.
The increasing trend in the level of new work, together with the significant potential opportunity that we now have developed with
Newtomorrow Broker Services, gives us considerable optimism for the future.
The Opportunities
We have always believed that our caring and professional approach was unique and that, when the timing was right, we were well placed to
bring this approach to the IVA market and DMP market in England and Wales. The sector has seen some fall out and, with the upsurge in demand
which is anticipated in the second half of 2008, we believe that Invocas is well placed to build a strong IVA and DMP presence. We remain
convinced that it is possible to deliver a quality service and make good returns.
Our model assumes relatively modest costs of acquisition as we do not intend to incur significant expenditure on advertising and
promotion. We will spend selectively on the purchase of quality leads and we will build a base of business referrers who are rewarded on the
successful conversion of leads. We will target the higher earning cases where realisations are higher and we will not take on cases for the
sake of merely achieving higher numbers. Internally, we will continue to operate on lean staff levels, utilising the expertise of our staff
in Scotland, and we will continue to develop and refine our IT platform to drive efficiencies and improve the processing of PTDs, IVAs and
DMPs.
We anticipate that the volume of IVAs will start to grow. This will be driven by:
* a realisation among creditors that the ultimate returns from IVAs do typically exceed those from DMPs;
* an increasing number of bankruptcies into which debtors will be forced, if a voluntary solution is denied to them, and which will
be seen to offer no meaningful return to creditors;
* the increasing debt mountain in England and Wales; and
* the reduction in available credit.
Further, the reduction in the number of competitors in the sector should assist in achieving volume savings for those providers
continuing to offer IVA services.
The credit crunch provides fresh opportunities for referrals from businesses within the financial services sector that previously did
not see debt solutions as a priority. These opportunities are significant and we will target these with our new web based service,
Newtomorrow Broker Services.
We have invested in key senior sales and marketing staff with expertise and a firm background in the financial services industry to lead
the promotion of our services in this sector.
Our new offering is available to IFA networks, packagers, distributors and individual IFA firms across the UK advising on mortgages and
provides brokers with easy access to advice for their indebted clients who are struggling to find a refinancing solution to their problems.
The initial response to our new service, which we only launched in June, has been very promising. Nine groupings, representing over 2,000
firms of IFAs, have already signed user agreements with us and we are in talks with a number of others that will increase the coverage
considerably.
Since the year end, and in order to assist our expansion into England, we have acquired a small personal debt advisory team that we will
grow to cover England and Wales, thereby enabling us to offer a personal counselling service to clients at their preferred location. This is
consistent with the approach we have traditionally taken in Scotland as we have always believed in the importance of face to face meetings
in order to provide best advice and the right solution for both debtors and creditors.
Our objective remains to provide a high quality personal and professional service to indebted individuals across the UK and to generate
a return that is acceptable to their creditors.
Regulatory Changes
Scotland
1 April 2008 saw the introduction of the Bankruptcy and Diligence etc (Scotland) Act 2007 (BAD Act) and the Protected Trust Deeds
(Scotland) Regulations 2008 (PTD Regulations 2008).
BAD Act
This introduced wholesale procedural changes to the bankruptcy process in Scotland. The headline change for debtors is the reduction in
the bankruptcy term from three years to one year. Anecdotal evidence from England suggests that the volume of appointments will increase.
Another aim of the BAD Act was to make it easier for debtors to access bankruptcy. Typically this applies to debtors who have
insufficient assets to cover the costs of bankruptcy meaning that hitherto an insolvency practitioner was unable to accept such an
appointment. In addition it was often the case that creditors had not taken formal action against the debtor meaning that the debtor had no
grounds to petition the Court for his sequestration. This left the debtor in a difficult situation where creditors could still pursue the
debtor who had no opportunity to find a solution to his financial problems.
These "Low Income Low Assets" debtors can now simply submit an application form to the Accountant in Bankruptcy who will, in most cases,
grant the application without verification work. It is anticipated that this will result in a large increase in bankruptcies but, due to the
circumstances of the individuals concerned, it is unlikely to change the size of the market that Invocas targets.
The most significant potential impact to our business comes from the abolition of the residency requirement. From 1 April 2008,
insolvency practitioners from throughout the EU will be able to act in Scottish insolvencies. Previously an insolvency practitioner had to
be resident within the Jurisdiction of the Court of Session, i.e. within Scotland. In practice, the differences in Scottish legislation will
represent a significant barrier to entry and it is not envisaged that this will have a significant impact on the market or on Invocas as a
number of key competitors already have a presence in the market, having acquired practices in Scotland in the course of the last year.
PTD Regulations 2008
The introduction of these regulations followed an extended period of uncertainty surrounding the Trust Deed market and various changes
which were included in the consultation process which could have had major effects on our business have not, in the end, been implemented.
Instead, the PTD Regulations 2008 have made subtle procedural changes and, while the Accountant in Bankruptcy has a greater supervisory
role to play, the Trust Deed remains the same flexible debt resolution tool that it was before, offering a positive solution to debtors and
creditors alike. The emphasis is on correct advice being given at the outset and, with the advisory model used by Newtomorrow, Invocas
remains well placed.
Future changes in Scotland
The Accountant in Bankruptcy has announced that the Agency scheme in Scotland (whereby in excess of 100 nominated insolvency
practitioners currently carry out administration of sequestration cases on the Accountant's behalf) will be put out to tender towards the
end of 2008, with a view to reducing significantly the number of agents who, as a result, will each potentially handle a much larger volume
of cases. Suppliers with a network of offices throughout Scotland are likely to be favoured, putting Invocas in a strong position to be one
of the successful bidders.
England and Wales
In England and Wales, we have seen agreement reached between the BBA and the industry as to the requirements to be met for an IVA
proposal to be approved. This should, in time, reduce the need for creditor modifications but initial experience suggests that modifications
continue to be raised on compliant IVA proposals. TIX has now issued a standard modification requiring quarterly distributions. This is
potentially an onerous requirement that may drive other providers out of the market. Invocas has recently invested in an advanced IT
platform that enables such distributions to be made efficiently.
There have been no further announcements as to the timescale for implementation of the Simplified Individual Voluntary Arrangement
(SIVA).
People
As our business expands, we continue to invest in additional staff. We have grown our headcount in the year to 31 March 2008 to 140 full
time staff (2007: 101).
Key to the success of our growth plans is the number of licensed insolvency practitioners employed by the Group. Excluding John Hall,
who is now a Non-executive Director, we have increased the number in the Group during the period to seven (2007: six) and we have a further
senior manager who has passed the insolvency exams and is awaiting grant of his permit. We therefore continue to have considerable case
handling capacity which allows for significant growth in case numbers and for these cases to be managed efficiently and professionally.
I would like to extend the thanks of the Board to all our staff for their commitment and professionalism.
Infrastructure
We continue to invest in our infrastructure and IT processes across the Group to underpin our growth strategy. During the year, in
addition to opening the Altrincham office, we have relocated our Edinburgh and Aberdeen offices to substantially bigger and more appropriate
premises and have taken additional office space in Glasgow.
Since the year end, we have committed to software investment of approximately �300,000 that will provide an integrated full case
management system linking all aspects of the business including the advice centre, cashiering, IVA, DMP and PTD services, delivering
automated documentation, improved standard workflows and decision trees which will lead to a simplification of work practices and processing
efficiencies across the business. This will facilitate the expansion of our IVA and DMP services.
Acquisitions
We have examined a number of potential acquisition opportunities and remain keen to develop the business further through strategic
acquisitions of similar and complementary businesses. However the turbulent conditions in the sector over the last nine months have made it
very difficult to evaluate with any degree of certainty the synergies and other benefits which might flow from acquisitions and vendors have
not moved their price expectations in line with the sector's overall rating.
We continue to explore opportunities and intend to play a full part in consolidation within our sector.
Current Trading
The percentage of new Trust Deeds signed as compared to the number in the equivalent period last year continues to improve. We
anticipate that, in June, we will achieve a level of new Trust Deed cases signed that is greater than that achieved in June last year. This
will be the first month for over a year in which this has been achieved.
The number of IVA revenue opportunities is increasing and the number of IVA revenue opportunities to date in June is the highest monthly
figure that we have ever received
We also anticipate that the number of DMP cases signed in June will be one of the highest achieved by us to date.
Since the year end, we have completed the acquisition of a further portfolio of 185 IVA cases with potential future revenue of a further
�0.5m. This means that we now have 346 IVA cases under management. The increasing trend in the level of new work, together with the
significant potential opportunity that we have developed with Newtomorrow Broker Services, gives us considerable optimism for the future.
With macro economic factors moving strongly in our favour, a good reputation with lenders, a full range of services, an increasing
number of source of leads and a significant cash balance to allow us to take advantage of opportunities for acquisition, we firmly believe
that we are very well placed for the future.
Stephen Lightley, Chief Executive Officer
25 June 2008
INVOCAS GROUP PLC
Group Income Statement
for the year ended 31 March
2008
For the year ended For the 54 week period ended
31 March 31 March
2008 2007
(as restated)
Notes �'000 �'000
Revenue 2, 3 9,884 8,535
Direct costs ( 3,529) ( 2,609)
Gross profit 6,355 5,926
Marketing expenses ( 225) ( 328)
Administrative expenses ( 2,764) ( 2,283)
Share-based payment ( 104) ( 60)
Payment in lieu of notice and 4 (247) -
related costs
Profit from operations 4 3,015 3,255
Investment income 161 109
Profit before taxation 3,176 3,364
Income tax expense 5 ( 933) ( 1,076)
Profit for the year/period 2,243 2,288
attributable to
the equity holders of the
Parent
Company
Basic earnings per share 6 7.85p 8.01p
Diluted earnings per share 6 7.67p 7.85p
INVOCAS GROUP PLC
Balance Sheet
as at 31 March 2008
Group Group
2008 2007
Notes �'000 �'000
Assets
Non-current assets
Property, plant and equipment 362 348
Intangible assets 4,180 4,153
Investments - -
Deferred tax assets 51 18
Total non-current assets 4,593 4,519
Current assets
Inventories 75 68
Trade and other receivables 6,329 5,242
Cash and cash equivalents 4,265 3,405
Total current assets 10,669 8,715
Total assets 15,262 13,234
Equity and liabilities
Equity attributable to equity
holders of Parent Company
Share capital 7 71 71
Share premium 8,642 8,642
Share-based payment reserve 164 60
Retained earnings 4,531 2,288
Total equity 13,408 11,061
Non-current liabilities
Deferred tax liabilities 8 19
Total non-current liabilities 8 19
Current liabilities
Trade and other payables 883 946
Current tax payable 963 1,208
Total current liabilities 1,846 2,154
Total liabilities 1,854 2,173
Total equity and liabilities 15,262 13,234
INVOCAS GROUP PLC
Cash Flow Statement
for the year ended 31 March 2008
Group Group
31 March 31 March
2008 2007
Notes �'000 �'000
Operating activities
Cash generated from operations 8 2,012 2,077
Income taxes paid (1,104) -
Net cash generated from 908 2,077
operating activities
Investing activities
Purchase of property, plant and equipment (171) (316)
Purchase of intangibles (38) (22)
Purchase of businesses - (6,656)
Interest received 161 109
Net cash (used in) (48) (6,885)
investing activities
Financing activities
Proceeds from the issue of ordinary shares - 9,559
Share issue costs - (846)
Repayment of borrowings - (500)
Net cash generated from financing - 8,213
activities
Net increase in cash and cash equivalents 860 3,405
Cash and cash equivalents at beginning of 3,405 -
period
Cash and cash equivalents at end of period 4,265 3,405
Group Statement of Changes in Equity
for the year ended 31 March 2008
Share capital Share premium Share-based payment Retained earnings Total
reserve
�'000 �'000 �'000 �'000 �'000
Opening balance - - - - -
Shares issued 71 8,642 - - 8,713
Profit for the period - - - 2,288 2,288
Share-based payment - - 60 - 60
Balance at 31 March 2007 71 8,642 60 2,288 11,061
Profit for the year - - - 2,243 2,243
Share-based payment - - - 104
104
Balance at 31 March 2008 8,642 4,531 13,408
71 164
Summary of significant accounting policies
The financial statements of the Group and Company have been prepared in accordance with International Financial Reporting Standards
(IFRSs), including International Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted for use in the European
Union and in accordance with those parts of the Companies Act 1985 applicable to companies reporting under IFRSs. Invocas Group plc is
incorporated and domiciled in the United Kingdom.
The financial statements have been prepared on the historical cost basis, with the exception of share-based payments.
Comparatives
Direct costs have been reclassified to include the costs described within the direct costs accounting policy below. The effect of this
adjustment on the financial statements has been to reclassify wages and salaries, advertising and case acquisition costs of �962,000 (2007:
�383,000) from marketing costs within overheads into direct costs in order to match those costs that are directly attributable with the
related revenue. There has been no effect upon the operating profit.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its
subsidiaries) made up to 31 March each year. The excess of cost of acquisition over the fair values of the Group's share of identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair value of the identifiable net assets
acquired (i.e. discount on acquisition) is recognised directly in the income statement.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets, given equity instruments issued and liabilities incurred or assumed at the date of exchange, plus
costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate; the effective date being the date that control is
obtained or transferred to a third party.
All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Notes to the financial statements
for the year ended 31 March 2008
1 Presentation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU.
2 Revenue
An analysis of the Group's revenue is as
follows:
Year ended 31 March Period ended 31 March 2007
2008 �'000
�'000
Continuing operations:
Insolvency services 9,568 8,423
Debt advisory services 280 112
Debt management services 36 -
9,884 8,535
3 Business and geographical segments
There are identifiable business segments within the Group but they are not considered significant in terms of IFRS 8, as
they are below the 10% threshold and so are not separately reportable.
4 Profit from operations
Profit from operations has been arrived at after charging:
Year ended Period
31 March ended
2008 31 March
�'000 2007
�'000
Depreciation
- owned assets 97 58
Amortisation of intangible 11 4
assets
Staff costs 4,054 3,188
Auditors' remuneration for 41 33
audit services
Payments under operating
leases
- land and buildings 290 155
- other assets 35 32
Payment in lieu of notice and 247 -
related costs
5 Income tax expense Year ended 31 March 2008 Period ended 31 March
�'000 2007 �'000
Current tax
UK Corporation tax 1,005 1,075
Deferred tax (26) 1
979 1,076
Prior year adjustments
UK Corporation tax (28) -
Deferred tax (18) -
(46) -
Tax attributable to the 933 1,076
Company and its subsidiaries
UK corporation tax is calculated at 30% of the estimated assessable profit for the year.
The charge for the year can be reconciled to the profit per the income statement as follows:
Year ended 31 March % Period ended 31 March 2007 %
2008 �'000 �'000
Profit before tax 3,176 3,364
Tax at the domestic income tax 953 1,009
rate 30%
Tax effect of expenses that 26 67
are not deductible in
determining taxable profit
Prior year adjustments (46) -
Tax expense and effective tax 933 29 1,076 32
rate for the period
6 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 31 March Period ended 31 March
2008 2007
�'000 �'000
Profit for the year 2,243 2,288
Weighted average no. of shares Number Number
in issue:
For basic earnings per share 28,566,585 28,566,585
Effect of share options issued 661,283 567,183
For diluted earnings per share 29,227,868 29,133,768
Earnings per share: Pence Pence
Basic 7.85 8.01
Diluted 7.67 7.85
Profit for the year has been used for calculating both basic and diluted earnings per share.
The basic and diluted earnings per share figures relate to all operations, all of which are continuing.
7 Share Capital
Group and Company 2008 Number 2008 �'000 2007 Number 2007 �'000
Ordinary shares of 0.25 pence
each
Authorised: 39,000,000 97 39,000,000 97
Issued and Fully Paid: 28,566,585 71 28,566,585 71
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going
concern in order to provide returns for shareholders and maintain an optimal capital structure to reduce the
cost of capital.
Options
During the period, options were granted over 110,000 ordinary shares (2007: 666,873). Options over 15,900
shares were forfeited during the year ( 2007: 99,690) and at 31 March 2008 the Company had 661,283 unissued
ordinary shares of 0.25p each (2007: 567,183) under the Company's share option scheme, details of which are
as follows:
Grant date Granted in the Option price (p) Date from which Expiry date
period to 31 March exercisable
2007
17 March 2006 420,180 111 17 March 2009 17 March 2016
17 March 2006 75,700 111 17 March 2008 17 March 2016
16 June 2006 27,625 182 16 June 16 June 2016
2009
27 June 2006 27,778 180 27 June 27 June 2016
2009
Grant date Granted in the year Option price (p) Date from which Expiry date
to 31 March 2008 exercisable
3 April 2007 85,000 136 3 April 3 April
2010 2017
10 October 2007 25,000 86 10 October 2010 10 October 2017
8 Reconciliation of profit from operations to net cash from operating activities
Group 2008 �'000 Group 2007 �'000
Profit from operations before taxation and dividends 3,015 3,255
Adjustments for:
Depreciation of plant and equipment 97 58
Amortisation of intangibles 11 4
Loss on disposal of plant and equipment - 6
Share-based payment 104 60
Operating cash flows before movements in working capital 3,227 3,383
(Increase) in inventories (7) (36)
(Increase) in trade and other receivables (1,087) (2,135)
(Decrease)/increase in trade and other payables (121) 865
Cash generated from operations 2,012 2,077
9 Status of Preliminary Announcement
The financial information set out in this Preliminary Announcement, which has been extracted from the audited accounts, does not
constitute the Company's statutory accounts for the year ended 31 March 2008.
The statutory accounts for the year ended 31 March 2008, which were approved by the Directors on 25 June 2008, will be delivered to the
Registrar of Companies, following the Company's Annual General Meeting. The Auditors reported on the accounts for the year ended 31 March
2008; their report was unqualified and did not contain a statement under s237 (2) or (3) of the Companies Act 1985. A copy of the Annual
Report and Financial Statements will be sent to all shareholders shortly and will be available from the Company at Capital House, 2 Festival
Square, Edinburgh EH3 9SU.
While the financial information included in this Preliminary Announcement has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union, this Announcement does not in
itself contain sufficient information to comply with IFRS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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