RNS Number : 3970E
Network Data Holdings PLC
26 September 2008
26 September 2008
NETWORK DATA HOLDINGS PLC
("Network Data" or "the Group")
Unaudited interim results for the period ended 30 June 2008
Highlights
Network Data Holdings plc, the AIM traded financial intermediary company, today announces its results for the six month period to 30
June 2008.
* Group turnover down 34% to �10.6m in H1 2008 (�16.1m in H1 2007) reflecting the overall decline in the mortgage and property
markets during the period.
* Group trading loss of �132,000 in H1 2008 (�1.0m profit in H1 2007). Closure of loss-making Hipstar subsidiary. Shown as a
discontinued business with an exceptional loss before tax of �1.5m in H1 2008.
* Network Data Ltd breaks even in H1 2008 (�1.2m profit in H1 2007)
* Network Surveyors Ltd loss of �134,000 in H1 2008 (�172,000 loss in H1 2007)
* Administrative head count reduced to 75 in Sept 2008 (203 in Sept 2007)
Richard Griffiths, Chief Executive of Network Data, commented:
"As indicated in our July trading statement, revenues in the first half of 2008 have been below original expectations. This has resulted
from the faster than expected decline in transactions in the mortgage and property markets which has received extensive coverage in the
national media throughout the course of 2008.
Statistics published by the Council of Mortgage Lenders show overall mortgage lending is down 23% and Land Registry figures show
property sales down 42% in H1 2008 from 12 months earlier.
Faced with this difficult property market, we announced in August that we would be closing our loss-making Hipstar subsidiary which was
formally placed into liquidation on September 12.
The Group has been also actively involved in reducing its cost base throughout the year which has resulted in the ongoing activities
trading close to break even in the first half despite the exceptional falls in market activity".
The Group continues to aggressively pursue cost reductions with a view to improving trading performance in the face of a challenging
market.
A copy of the interim results will be available on the Company's website at www.networkdataholdings.co.uk.
Enquiries:
Network Data Holdings plc
Richard Griffiths, Chief Executive
01932 875728
Noble & Company Limited
John Riddell
Chairman's Statement
Our interim results for the six month period to 30 June 2008 reflect an unprecedented and challenging market environment.
The mortgage market has been severely affected by the global liquidity crisis, affecting all classes of mortgages, while the sub-prime
market has seen a number of high-profile closures of UK-based lending operations owned by a number of American investment banks.
Sales have declined 34% in line with the overall market. Gross profit margin has been maintained at 27.0% in H1 2008 vs. 26.4% in H1
2007.
Overall, the group made a loss of �132,000 compared to a profit of �1.0m for H1 2007. The Board took a decision in August to close the
loss-making Hipstar business and this is shown in the full accounts as an exceptional item.
As a result of the H1 loss, and in the light of the Hipstar closure, the Group is in the process of re-setting its banking covenants and
is actively taking steps to reduce or eliminate its borrowings by disposing of surplus assets, including its freehold head office.
We are focussing our efforts on our core mortgage business and will continue to re-size the operation in line with market conditions in
order to return to a profitable operation.
Financial Performance of the Continuing Business Segments
Business segment H1 2008 H1 2007
�'000 �'000
Revenue
Intermediary services (NDL) 10,390 14,783
Valuations and surveys (NSL) 712 1,348
Less inter segment revenue (519) (71)
Total revenue 10,583 16,060
Profit / (Loss) before tax
Intermediary services (NDL) 2 1,219
Valuations and surveys (NSL) (134) (172)
(Loss)/profit before tax (132) 1,047
Network Data Limited ("NDL")
The UK mortgage market lending experienced a significant slowdown throughout the first half of 2008 The Council of Mortgage Lenders'
(CML) figures show that gross lending for house purchase declined 43% to �43.6bn H1 2008 compared to �76.4bn in H1 2007.
Our appointed representative brokers have been operating in a market where the downturn in mortgage business relating to house purchase
has been severe, with property sales some 42% less than the comparable period in 2007 according to Land Registry statistics on property
sales in England & Wales.
However, in line with expectations the remortgage market has proved to be more robust, with the CML figures show gross lending for
remortgages to be �65.2bn in H1 2008, a slight increase on the �64.4bn figure for H1 2007.
In total, gross lending for purchases and remortgages decreased 23%.
Our packaging operation for sub-prime mortgages has declined substantially as a result of the withdrawal of many lenders and their
mortgage products from this segment of the marketplace.
Overall, revenues are down 30% to �10.4m in H1 2008 compared to �14.8m in H1 2007.
The core mortgage business has managed to break-even in this turbulent period.
Current trading continues to be flat in line with market conditions.
Network Surveyors Limited ("NSL")
NSL, the panel manager for property valuations on behalf of mortgage lenders, completed 4,228 surveys in H1 2008 compared to 7,144 in H1
2007.
Despite an encouraging start to the year, volumes were particularly weak in Q2. This was due to a combination of lower mortgage
transactions and lenders' increased reliance on automated valuations models (AVMs). An AVM valuation means that no physical inspection of a
property is carried out. AVMs are generally restricted to low loan-to-value (LTV) mortgages where is LTV is typically 60% or less.
Lenders have generally lowering their LTVs over the course of the year in a flight to quality - less risk and better pricing of their
mortgage products.
Trading over the summer period is traditionally slow and the valuations market has not yet shown any signs of improvement.
Hipstar Limited ("HIPSTAR")
As reported in a statement issued on August 26th the Board of Directors has decided to draw a line under the losses incurred by its
operating subsidiary Hipstar Ltd. Since August 1st last year, Hipstar has been a provider of Home Information Packs (HIPs) to estate agents
and solicitors operating in the residential property market in England & Wales.
The market in 2007 saw a slow and staggered start to the HIPs legislation, while 2008 has witnessed property sales being the lowest in
40 years, down 42% on the 2007 levels. There is no sign of any medium-term improvement in the housing market and some industry commentators
are predicting at least another 12 to 24 months of depressed property sales.
The Directors have concluded there is no realistic prospect of recovering the investment that has been put into Hipstar Ltd since its
incorporation in 2005. Accordingly the company was formally placed into liquidation in September 12.
Outlook
With no real indication of when, or how quickly, the mortgage market will recover, we believe the correct strategy for the foreseeable
future will be on-going cost reduction to ensure a return to profitability for the core mortgage business.
The market conditions also favour the merger of networks whereby overlapping functions such as accounts, marketing, training and
compliance offer significant opportunities for amalgamation and hence cost reduction.
Network Data Ltd, the largest mortgage network in the UK, intends to play its full part in this process. We are currently evaluating
acquisition opportunities that can be merged with our existing operation at very little additional cost.
Finally we are grateful to our customers for their continued support and to our employees for their hard work and enthusiasm through
these stressful times.
Grenville Folwell
Chairman
26 September 2008
CONSOLIDATED INCOME STATEMENT
For the 6 months ended 30 June 2008
Restated Restated
Notes Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 December 2007
30 June 30 June
2008 2007
�'000 �'000 �'000
Continuing Operations 5
Revenue 10,583 16,060 31,688
Cost of sales (7,872) (11,817) (23,709)
Gross profit 2,711 4,243 7,979
Administrative expenses (2,692) (3,051) (5,230)
Operating profit 19 1,192 2,749
Investment revenues - 2 5
Finance costs (151) (147) (280)
Loss before tax (132) 1,047 2,474
Tax 37 (314) (542)
(Loss)/profit for the period (95) 733 1,932
from continuing operations
Discontinued Operations
Loss for the period from (2,213) (1,094) (3,557)
discontinued operations
Loss for the period
attributable to equity (2,308) (361) (1,625)
shareholders
Earnings per share 3
From continuing operations
Basic (0.3)p 2.6p 6.9p
Diluted (0.3)p 2.4p 6.3p
From continuing and
discontinued operations
Basic (8.2)p (1.3)p (5.8)p
Diluted (8.2)p (1.3)p (5.8)p
CONSOLIDATED BALANCE SHEET
At 30 June 2008
Restated
Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 December 2007
30 June 30 June
2008 2007
�'000 �'000 �'000
Non-current assets
Intangible assets 16 354 497
Property, plant and equipment 5,772 5,716 6,009
Deferred tax asset - 632 552
5,788 6,702 7,058
Current assets
Trade and other receivables 1,251 1,214 819
Cash and cash equivalents - 313 25
1,251 1,527 844
Total assets 7,039 8,229 7,902
Current Liabilities
Trade and other payables 4,768 3,848 4,535
Current tax liabilities - 441 241
Obligations under finance leases 153 204 200
Bank overdrafts and loans 1,322 358 661
6,243 4,851 5,637
Net current liabilities (4,992) (3,324) (4,793)
Non-current liabilities
Bank loans 3,063 2,622 2,484
Deferred tax liabilities 415 - -
Obligations under finance leases 73 197 142
3,551 2,819 2,626
Total liabilities 9,794 7,670 8,263
Net (liabilities) / assets (2,755) 559 (361)
EQUITY
Share capital 2,827 2,818 2,827
Share premium account 4 - 4
Other reserves (1,110) (1,454) (1,123)
Retained earnings (4,476) (805) (2,069)
Total equity (2,755) 559 (361)
CONSOLIDATED CASH FLOW STATEMENT
For the 6 months ended 30 June 2008
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 June 31 December
30 June 2007 2007
2008
�'000 �'000 �'000
Operating profit for the period 19 1,192 2,749
Adjustments for
Depreciation of property, plant and 163 171 352
equipment
Amortisation of intangible assets 481 - 77
Share based payment expense 13 20 36
(Gain) / loss on disposal of property, 8 (3) (2)
plant and equipment
Operating cash flows before movements in 684 (1,380) 3,212
working capital
Decrease / (increase) in receivables (432) (1) 393
Increase / (decrease) in payables 242 908 1,501
Cash generated by operations 494 2,287 5,106
Income taxes paid - - (113)
Interest paid (151) (122) (250)
Net cash from operating activities 343 2,165 4,743
Investing activities
Interest received - 2 4
Discontinued activity (1,459) (1,562) (4,249)
Proceeds on disposal of property, plant 83 32 60
and equipment
Purchases of property, plant and (17) (134) (171)
equipment
Expenditure on intangible assets - (304) (524)
Net cash used in investing activities (1,393) (1,966) (4,880)
Financing activities
Dividends paid (99) (98) (98)
Repayments of borrowings (2,760) (254) (436)
New bank loan raised 3,413 - -
Repayments of obligations under finance (116) (86) (214)
leases
Proceeds on issue of shares - 8 21
Increase / (decrease) in bank overdrafts 587 - 345
Net cash (used in) / from financing 1,025 (430) (382)
activities
Net increase / (decrease) in cash and (25) (231) (519)
cash equivalents
Cash and cash equivalents at beginning 25 544 544
of period
Cash and cash equivalents at end of - 313 25
period
Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2007
Ordinary
Share Share Retained Other reserves
capital premi earnings
um Total
�'000 �'000 �'000 �'000 �'000
Balance at 1 January 2007 2,810 - (346) (1,474) 990
Loss for the period - - (361) - (361)
Shares issued in period 8 - - - 8
Share based payments - - - 20 20
Dividend paid - - (98) - (98)
Balance at 30 June 2007 2,818 - (805) (1,454) 559
For the year ended 31 December 2007
Ordinary
Share Share Retained Other reserves
capital premi earnings
um Total
�'000 �'000 �'000 �'000 �'000
Balance at 1 January 2007 2,810 - (346) (1,474) 990
Loss for the period - - (1,625) - (1,625)
Property revaluation - - - 315 315
Shares issued in period 17 4 - - 21
Share based payments - - - 36 36
Dividend paid - - (98) - (98)
Balance at 31 December 2007 2,827 4 (2,069) (1,123) (361)
For the 6 months ended 30 June 2008
Ordinary
Share Share Retained Other reserves
capital premi earnings
um Total
�'000 �'000 �'000 �'000 �'000
Balance at 31 December 2007 2,827 4 (2,069) (1,123) (361)
Loss for the period - - (2,308) - (2,308)
Share based payments - - - 13 13
Dividend paid - - (99) - (99)
Balance at 30 June 2007 2,827 4 (4,476) (1,110) (2,755)
Notes to the Accounts
1. General Information
Network Data Holdings Plc is a company incorporated in the United Kingdom under the Companies Act 1985. The address of the registered
office is Botleys Mansion, Stonehill Road, Chertsey, KT16 0AP.
Preparation of the interim financial information
This interim report does not constitute statutory accounts of the Group within the meaning of section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 December 2007 have been filed with the Registrar of Companies. The Auditors' report on those
accounts was unqualified and did not contain a statement under section 237 of the Companies Act 1985. The condensed financial information
has been prepared in accordance with IAS 34 "Interim Financial Reporting".
Accounting Policies
The accounting policies and presentation followed in the preparation of this interim report have been applied consistently to all
periods in these financial statements and are the same as those applied by the Group in the preparation of its Annual Report for the year
ended 31 December 2007. Home Information Packs have been disclosed as a discontinued operation to be consistent with the statutory accounts
for the year ended 31 December 2008.
Restatement of prior period
The results for the consolidated income statement for the six months ended 30 June 2007 have been restated to disclose Homeowners as a
discontinued operation. The consolidated balance sheet for the six months to 30 June 2007 has been restated to reflect an additional
deferred tax liability on the revaluation of the property. This has reduced the deferred tax asset and other reserves but has no effect on
the consolidated income statement.
2. Other reserves
Unaudited Unaudited Audited
6 months 6 months Year to
to to 31 December 2007
30 June 30 June
2008 2007
�'000 �'000 �'000
Shares to be issued 49 20 36
Reserve arising on group (1,732) (1,732) (1,732)
reconstruction
Property revaluation reserve 573 238 573
Other reserves (1,110) (1,474) (1,123)
3. Earnings per share
From continuing and discontinued operations
The calculation of the basic earnings per share is based on the following data:
Earnings
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 June 31 December
30 June 2007
2008 2007
�'000 �'000 �'000
Earnings for the purposes of basic
earnings per share being net losses (2,308) (361) (1,625)
attributable to equity holders of the
parent
The effects of dilution have been ignored for each period due to losses.
Number of shares
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 June 31 December
30 June 2007
2008 2007
Weighted average number of ordinary
shares for the purposes of basic earnings 28,267,890 28,151,055 28,191,276
per share
Effect of dilutive potential ordinary
shares:
Share options 2,804,145 2,790,050 2,381,405
Weighted average number of ordinary
shares for the purposes of diluted 31,072,035 30,941,105 30,572,681
earnings per share
From continuing operations
Earnings
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 June 31 December
30 June 2007
2008 2007
�'000 �'000 �'000
Earnings for the purposes of basic
earnings per share being net losses (95) 733 1,932
/profits attributable to equity holders of
the parent
The effects of dilution have been ignored for the current period due to losses.
From discontinued operations
Earnings
Unaudited Unaudited Audited
6 months 6 months to Year to
to 30 June 31 December
30 June 2007
2008 2007
�'000 �'000 �'000
Earnings for the purposes of basic
earnings per share being net losses (2,213) (1,094) (3,557)
attributable to equity holders of the
parent
The effects of dilution have been ignored for each period due to losses.
4. Business and geographical segments continued
Segment information about the businesses is presented below.
Unaudited results for the 6 months ended 30 June 2008
Intermediary services Valuations and surveys
Eliminations Consolidated
�'000 �'000 �'000 �'000
REVENUE
External sales 9,871 712 - 10,583
Inter segment sales 519 - ( 519) -
Total revenue 10,390 712 (519) 10,583
Inter-segment sales are charged at prevailing market prices.
Profit / (loss) before tax
Segment result 2 (134) - (132)
Tax 37
Loss after tax (95)
Discontinued operations
Discontinued operations had the following effect in the period
Home Information Packs
�'000
REVENUE
External sales 1,845
Loss before tax (1,459)
Tax (754)
Loss after tax (2,213)
Home Information Packs
Intermediary services Valuations and surveys
Eliminations Consolidated
�'000 �'000 �'000 �'000 �'000
BALANCE SHEET
ASSETS
Segment assets 7,196 358 368 (984) 6,938
Unallocated corporate assets 101
Consolidated total assets 7,039
LIABILITIES
Segment liabilities 4,201 737 4,205 (3,589) 5,554
Unallocated corporate liabilities 4,240
Consolidated total liabilities 9,794
Unaudited results for the year ended 31 December 2007
Intermediary services Valuations and surveys
Eliminations Consolidated
�'000 �'000 �'000 �'000
REVENUE
External sales 29,594 2,094 - 31,688
Inter segment sales 102 - ( 102) -
Total revenue 29,696 2,094 (102) 31,688
Inter-segment sales are charged at prevailing market prices.
Profit before tax
Segment result 2,350 122 2 2,474
Tax (542)
Profit after tax 1,932
Discontinued operations
Discontinued operations had the following effect in the period
Home Information Packs
Homeowners Total
�'000 �'000 �'000
REVENUE
External sales 742 - 742
Inter segment sales - 2 2
Total revenue 742 2 744
Loss before tax (3,579) (802) (4,381)
Tax (824) - 824
(2,755) (802) (3,557)
Home Information
Packs
Intermediary services Valuations and surveys
Eliminations Consolidated
�'000 �'000 �'000 �'000 �'000
BALANCE SHEET
ASSETS
Segment assets 9,957 402 1,691 (4,156) 7,894
Unallocated corporate assets 8
Consolidated total assets 7,902
LIABILITIES
Segment liabilities 6,852 743 4,772 (4,350) 8,017
Unallocated corporate liabilities 246
Consolidated total liabilities 8,263
Unaudited results for the 6 months ended 30 June 2007
Intermediary services Valuations and surveys
Eliminations Consolidated
�'000 �'000 �'000 �'000
REVENUE
External sales 14,712 1,348 - 16,060
Inter segment sales 71 - ( 71) -
Total revenue 14,783 1,348 (71) 16,060
Inter-segment sales are charged at prevailing market prices.
Profit / (loss) before tax
Segment result 1,219 (172) - 1,047
Tax (314)
Profit after tax 733
Discontinued operations
Discontinued operations had the following effect in the period
Home Information Packs
Homeowners Total
�'000 �'000 �'000
REVENUE
External sales 106 - 106
Inter segment sales - 2 2
Total revenue 106 2 108
Loss before tax (1,365) (197) (1,562)
Tax 468 - 468
Loss after tax (897) (197) (1,094)
Homeowners
Mortgages
Network Data Network Surveyors
Hipstar Eliminations Conso
lidat
ed
�'000 �'000 �'000 �'000 �'000 �'000
BALANCE SHEET
ASSETS
Segment assets 9,273 478 1,521 93 (3,183) 8,182
Unallocated corporate assets 4
Consolidated total assets 8,186
LIABILITIES
Segment liabilities 6,596 599 3,410 231 (3,210) 7,626
Unallocated corporate liabilities 21
Consolidated total liabilities 7,647
This information is provided by RNS
The company news service from the London Stock Exchange
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