2 July 2010
Clarkson Hill Group Plc
("Clarkson Hill" or the "Group")
Final Results for the year to 31 December 2009
Results
There was a Group operating loss before exceptional costs of £(104,999) (2008:
£(645,095)), reflecting both the continued impact of economic uncertainty on
investment business and the costs incurred in reorganisation and additional
regulatory requirements placed on the group. Operating efficiency deteriorated
to 21.7% (2008 17.7%) due largely to the reduction in turnover.
The proportion of income derived from pension and investments increased by 9%
over 2008. The proportion of protection remained broadly the same but mortgage
related activities decreased by 47% down to just 8% of group income, as a
result of the dramatic reduction in house sales and remortgages.
Gross profit increased to 18.5% (2008 15.5%) this reflects the attention given
to ensuring commission scale payments were in line with adviser production.
Transition
In order to prepare the Group for the impact of the Retail Distribution Review
(RDR) the directors and advisers continue to focus on the creation of recurring
income (trail and fees). Whilst RDR will not be implemented until the beginning
of 2013, it is essential that this preparatory work is put in place now.
As previously stated in the half year results, in order to establish recurring
income, less initial commission is being received on single premium investment
and pension sales. This is reflected in the fact that the average single
premium investment commission income received in 2009 was 3.7% of premium, 4.5%
in 2008 and 5.36% in 2007.
Whilst income from Assets under management (AUM) continues to grow and is now
running at the rate of approximately £3 million per year, it takes some time
for the accumulated trail to fully compensate for the loss of initial
commission. From the commencement of AUM in 2007 to December 2009 the effect of
the decreased initial commission against the present increase in trail has
caused a drop in gross profit of just over £300,000.
Notwithstanding this transitional shortfall, the directors are clear that the
work being done in this area is fundamental to the future strength of the Group
post RDR and its valuation.
Regulatory Costs
During the second half of the year, the Group was subject to a regulatory
review of its systems and controls. Independent consultants have reviewed the
group's processes and revisions have taken place to bring them in line. This
has resulted in changes in the Compliance department and significant
exceptional costs.
In April of 2010, The Financial Services Compensation Scheme raised a levy of £
80 million in respect of Pacific Continental Securities (UK) Ltd, Square Mile
Securities Ltd and Keydata Investment Services. As a consequence the group
received an invoice, 75% of which is backdated to the year 2009. This has been
reflected in the accounts and identified as an exceptional item.
In addition to the above costs the Group met its regulatory and P.I. annual
costs of £608,000. Clearly the additional costs incurred against a background
of a recession hit income, has resulted in the Group's loss for 2009.
Qualifications for RDR
The Group continues to assist its advisers in reaching the necessary
qualification levels to be able to continue to provide client advice in 2013.
85% of advisers are either already qualified or completing the process of
achieving the necessary level. The recent clarifications provided will assist
in advisers obtaining the necessary qualifications.
The Group will continue to provide both in-house and provider supported
training to enable advisers to pass the examination within the time frame.
The directors are confident that the vast majority of our advisers will achieve
the necessary qualifications. For those advisers who chose not to pursue the
examinations, plans are in place to enable them to continue to introduce
clients to the group. It should be noted that some 7.5% of the CF30 advisers
yet to proceed with the examination transact 90% of their business in the
mortgage and protection market.
The work already begun on moving Assets under Management will greatly assist
both the Group and advisers in meeting the challenge of RDR.
Treating Customers Fairly
The Group continues to pay attention to regulatory and consumer aspects of
Treating Customers Fairly.
Since inception the group has carried out 132,300 advisory transactions. To
date 30 complaints have been upheld, representing 0.022%.
The directors continue to believe that the group's approach to compliance
checking is the way to provide suitable advice to its clients and protect the
group from future complaints.
Outlook
2009 has been a difficult year for the Group, however, substantial steps have
been taken, in the areas of cost savings, and increased recurring income, which
will assist in going forward.
The directors believe that continued focus on developing and recruiting
professional qualified advisers, available to provide appropriate advice on a
wide range of financial issues, to clients on a face to face basis is the way
forward.
This approach allied to an ever increasing recurring income base for the group
will enhance the value of the Group.
Following the losses incurred in 2009 and the increased regulatory costs, the
Group needs to raise further capital to meet regulatory capital requirements.
The directors are currently in discussions with a number of parties and are
confident that this objective will be achieved.
In the meantime the Group continues to trade as expected.
Contact:
Ron Pritchard The Clarkson Hill Group Tel: 01945 585721
plc
Antony Legge / Stuart Lane Astaire Securities plc Tel: 020 7492 4750
www.clarksonhillgroup.co.uk
The Clarkson Hill Group PLC
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2009
12 months 17 months
ended ended
31 December 31 December
Notes 2009 2008
£ £
Revenue 3 17,551,520 29,093,190
Cost of sales (14,300,750) (24,590,999)
Gross profit 3,250,770 4,502,191
Net operating expenses (3,355,769) (5,147,286)
Operating loss 4 (104,999) (645,095)
Exceptional items: 6 (465,107) -
(570,106) (645,095)
Interest receivable and similar 1,962 47,159
income
Finance costs (68,555) (71,271)
Loss on ordinary activities before (636,699) (669,207)
taxation
Tax on loss on ordinary (68,000) 163,721
activities
Total comprehensive income for the (704,699) (505,486)
year
Basic loss per share 5 -2.6p -2.11p
The Clarkson Hill Group PLC
Consolidated Statement of Financial Position
as at 31 December 2009
31 December 31 December
2009 2008
ASSETS £ £
Non current assets
Intangibles 120,055 120,055
Property, Plant & Equipment 133,733 153,978
Investments 7,000 7,000
Deferred Tax 435,919 503,919
696,707 784,952
Current assets
Trade and other receivables 3,509,013 3,189,357
Cash and cash equivalents 277,658 586,640
3,786,671 3,775,997
Total assets 4,483,378 4,560,949
EQUITIES & LIABILITIES
Called up share capital 591,005 479,154
Share premium 2,205,159 2,087,011
Merger reserve (99,000) (99,000)
Retained earnings (2,602,151) (1,897,452)
Total equity 95,013 569,713
Non-current liabilities
Long term borrowings 458,333 534,444
Current liabilities
Trade and other payables 3,448,293 3,077,838
Short term borrowings 346,745 142,258
Current portion of long term 53,066 187,031
borrowings
81,928 49,665
Current taxes payable
3,930,032 3,456,792
Total equity and 4,483,378 4,560,949
liabilities
The Clarkson Hill Group PLC
Consolidated Statement of Cash Flows
for the year ended 31 December 2009
12 months 17 months
ended ended
31 31
December December
2009 2008
£ £
Cash flows from operating activities
Loss before taxation (636,699) (669,207)
Depreciation 73,500 80,200
Impairment - (1,775)
Interest net 66,593 24,112
Operating loss before working capital (496,606) (566,670)
changes
(Increase)/decrease in trade and other (319,656) 211,095
receivables
Increase in trade and other payables 402,718 405,316
Cash generated from operations (413,544) 49,741
Interest paid (68,555) (71,271)
Net cash outflow from operating (482,099) (21,530)
activities
Cash flows from investing activities
Net Disposals of intangibles - 18,000
Purchase property, plant & equipment (53,255) (40,645)
Interest received 1,962 47,159
(51,293) 24,514
Cash flows from financing activities
Share issue / Forfeiture of shares 229,999 (56,062)
Proceeds from (repayment of) long term (4,444) 350,000
borrowings
Movement in short term borrowings (1,145) (364,846)
Payment of hire purchase and finance - (8,462)
liabilities
Net cash used in financing operations 224,410 (79,370)
Net decrease in cash and cash (308,982) (76,386)
equivalents
Cash and cash equivalents at the 586,640 663,026
beginning of the period
Cash and cash equivalents at the end 277,658 586,640
of the period
The Clarkson Hill Group PLC
Consolidated Statements of Changes in Equity
for the year ended 31 December 2009
Share Share Merger Retained Total
capital Premium reserve earnings equity
At 1 January 2009 479,154 2,087,011 (99,000) (1,897,452) 569,713
Total comprehensive - - - (704,699) (704,699)
income for the year
Share issues 111,851 118,148 - - 229,999
Balance at 31 591,005 2,205,159 (99,000) (2,602,151) 95,013
December 2009
carried forward
At 1 August 2007 482,154 2,140,073 (99,000) (1,391,966) 1,131,261
Total comprehensive - - - (505,486) (505,486)
income for the year
Share forfeiture (3,000) (53,062) - - (56,062)
Balance at 31 479,154 2,087,011 (99,000) (1,897,452) 569,713
December 2008
carried forward
Notes to the Accounts
1 Basis of preparation
The accounts set out above do not constitute statutory accounts as
defined by Section 428 of the UK Companies Act 2006. The balance sheets
at 31 December 2009 and the income statement, cash flow statements and
statement of changes in equity for the year then ended have been
extracted from the Group's 2009 statutory financial statements upon
which the auditors' opinion is unqualified. The results for the period
ended 31 December 2008 have been extracted from the statutory accounts
for that period, which contain an unqualified auditors' report.
2 Going Concern
The directors have acknowledged the latest guidance on going concern and
liquidity risk published by the Financial Reporting Council. Whilst the
current uncertainty in financial markets has created general
uncertainty, the group has well established trading and client
relationships.
The directors recognise that in order to meet regulatory capital
requirements, an injection of capital is required. Currently the
directors are in discussions with a number of parties and are confident
that this objective will be achieved, however if it is not forthcoming
the company may not continue as a going concern. If the company did not
continue as a going concern some assets would need to be revalued, in
particular the amount of £435,919 shown in non current assets as
deferred tax recoverable would not exist. After making enquiries the
directors have formed a judgement, at the time of approving the
financial statements, that there is a reasonable expectation that the
group will have adequate resources to continue in operational existence
for the foreseeable future. For this reason, the directors continue to
adopt the going concern basis in preparing the annual report and
financial statements.
3 Segmental analysis
During the year the group adopted IFRS 8 "Operating Segments". IFRS 8
replaces IAS 14 "Segmental reporting" and requires operating segments to
be identified based on reporting to the Chief operating decision maker,
which is the plc Board.
The group operates as a National IFA, with all its advisers regulated
through the company with the FSA. The clients advised and the products
utilised are similar for all advisers. Therefore there is not considered
to be any material difference in the identification of operating
segments on the revised basis and accordingly the determination of the
Group's operating segment continues to be by business type and as all
business is carried out in the UK a secondary geographical segment is
not considered relevant. The business segments can be analysed to the
gross profit level; other costs, assets and liabilities are not directly
attributable to any of the segments and apportionment is not considered
meaningful.
12 months 12 months 17 months 17 months
ended ended ended ended
31 31 31 31 December
December December December
2009 2009 2008 2008
Turnover Gross Turnover Gross
Profit Profit
£ £ £ £
Investments 6,744,914 1,234,993 10,121,105 1,551,437
Pensions 5,548,766 1,063,345 8,675,232 1,313,374
Fees/Mortgages 1,327,285 245,107 4,337,616 624,187
Protection 3,771,080 597,850 5,783,488 873,750
Other 159,475 109,475 175,749 139,443
17,551,520 3,250,770 29,093,190 4,502,191
31 31 December
December
4 Operating loss 2009 2008
£ £
Operating loss is stated
after charging:
Depreciation of owned fixed 73,500 72,573
assets
Depreciation of - 7,627
assets held under
finance leases and
hire purchase
contracts
Amortisation - (1,775)
Operating lease rentals - 299,427 481,192
land & buildings
Auditors'
remuneration
Audit fee 42,400 27,050
5 Loss per share
The earnings per share is calculated on the loss attributable to
ordinary shareholders of £704,699 (2008: loss £505,486) divided by
27,115,161 (2008: 23,957,677) being the weighted average number of
ordinary shares in issue during the year.
During 2009 and 2008, the share warrants and options were antidilutive
and accordingly there is no dilution of loss per share. However, the
share options could potentially dilute basic earnings per share in the
future
6 Exceptional items 2009 2008
£ £
Exceptional costs (465,107) -
As highlighted in the Interim report, £129,320 of exceptional costs were
incurred in a combination of redundancies and the renegotiation of
office contracts.
In order to meet the requirements of the FSA, Independent consultants
were employed to review and then revise the groups processes and
procedures resulting in an exceptional cost of £230,787.
In April of 2010 The Financial Services Compensation Scheme raised a
levy of £80 million in respect of Pacific Continental Securities (UK)
Ltd, Square Mile Securities Ltd and Keydata Investment Services. As a
consequence the group received an invoice, £105,000 of which, is
backdated to the year 2009. This has been reflected in the accounts and
identified as an exceptional item, as this is now subject to a judicial
review.
A mounts owed to group undertakings and undertakings in which the company has a
participating interest