Panmure Gordon & Co. Plc

Final Results

Final Results

Panmure Gordon & Co.Plc

PANMURE GORDON & CO. PLC

(“Panmure Gordon” or the “Group”)

Preliminary results for the year ended 31 December 2011

Panmure Gordon & Co. plc today announces preliminary results for the year ended 31 December 2011.

Financial performance

Operating and business highlights

Ed Warner, Chairman of Panmure Gordon commented:

“We have made an encouraging start to 2012, having agreed to divest control of ThinkEquity, which has historically been responsible for a significant proportion of statutory losses incurred in recent years, whilst also substantially reducing UK costs. I am delighted that we have secured a new Chief Executive, Phillip Wale, since the period-end whilst retaining the services of Tim Linacre, who will remain on the board and with the business as chairman of investment banking.

“While markets remain cautious, we believe the UK business is now right–sized. We are focused entirely on serving our institutional and corporate clients and in the first quarter of this year we have seen an increase in commission levels and the establishment of a good investment banking pipeline.”

Enquiries:

Panmure Gordon

Tim Linacre, Chief Executive

Philip Tansey, Chief Financial Officer

      020 7459 3600
 
FTI Consulting

Billy Clegg/Ed Gascoigne-Pees

020 7831 3113

 
Grant Thornton Corporate Finance (NOMAD)

Gerry Beaney/Salmaan Khawaja/Jen Hatter

020 7383 5100

CHAIRMAN’S STATEMENT

2011 was a very difficult year for our industry and for Panmure Gordon. The continuing effects of the global financial crisis were seen in low levels of commission and the deferral or cancellation of investment banking transactions.

We experienced a particularly challenging second half and took decisive action across the Group accordingly.

After an encouraging first half, our US business, ThinkEquity, recorded substantial losses in the second half. ThinkEquity was acquired in 2007, just before the onset of the financial crisis. Since then, market conditions have changed beyond all recognition and it was the view of the board that the business would fail to achieve an acceptable level of profitability in the foreseeable future as a subsidiary of Panmure Gordon. After an approach from management, agreement was reached for a management buy-out of ThinkEquity after the year end. Following US regulatory approval, Panmure Gordon will initially retain a shareholding in the business and we wish the team well for the future.

The results we announce today reflect a number of extraordinary costs associated with ThinkEquity, in addition to its underlying loss for the year. Some extra one-off redundancy costs were also incurred in relation to the decisive action taken to reduce UK costs at the end of 2011. As a result, what remains is a more efficient business better able to return to profitability.

In difficult markets, Panmure Gordon’s reputation helped to attract 17 new corporate clients during the year, bringing our total number of clients to 77. These clients provide the bedrock for future investment banking deals.

Panmure Gordon’s international focus remains strong, despite having agreed to divest control of ThinkEquity. Our clients are increasingly active internationally and our new office in Singapore will be a valuable conduit for Asian clients seeking access to United Kingdom and European capital markets. Our connections to the India and Middle-East markets through Ambit Capital and QInvest also provide further opportunities.

During the year Simon Heale stood down as a non-executive director and I thank him for the time and commitment he put into the role. During the year Lesley Watkins and Philip Tansey were welcomed as directors, as non-executive chair of the audit committee and as chief financial officer respectively and both have already proved to be strong additions to the board.

In November of 2011, Tim Linacre notified the board of his intention to stand down as Chief Executive before the end of 2012. The board commenced a thorough executive search programme and I was delighted to announce the appointment of Phillip Wale as our new Chief Executive on 18 April 2012. Phillip has more than 30 years’ experience in the City, including service at Goldman Sachs and Commerzbank and most recently as Chief Executive of Seymour Pierce. Tim Linacre has been with the firm for over 20 years and has been Chief Executive for nine, most of which have been in particularly challenging conditions. When he took over as Chief Executive, Panmure Gordon was a subsidiary of WestLB. He engineered the move to Lazard and the subsequent merger with Durlacher to create the independent business of today. I am delighted that Tim will be staying on the board and with the firm as chairman of investment banking when Phillip joins in the summer.

While the results of 2011 were very disappointing, the agreement to divest control of ThinkEquity and the cost-reduction exercise carried out in the UK are among the many reasons to be encouraged by the firm’s prospects. Despite continuing low market volumes, the UK business has commenced the year well and we look to 2012 with increased confidence.

Ed Warner
Chairman
23 April 2011

CHIEF EXECUTIVE’S REVIEW

As the Chairman’s statement makes clear, 2011 was an exceptionally difficult year for the firm. Those difficulties are fully reflected in the results we announce today.

After an encouraging start to 2011, the markets entered a further excessively turbulent phase in the second half of the year caused by Eurozone and global economic concerns. This led to a sharp fall in commission levels and the deferral or cancellation of a significant number of investment banking transactions on both sides of the Atlantic in the last three months of the year.

We took decisive action to reduce costs, alongside the decision to divest control of ThinkEquity since the year end.

Panmure Gordon remains totally focused on serving its institutional clients, its London listed corporate clients and those seeking to come to the London market. In spite of the year’s extraordinary challenges, the firm continued to grow its corporate client list which now stands at 77. During the year Panmure Gordon maintained its position as a Top 5 UK broker in the highly regarded Thomson Reuters Extel 2011 Mid & Small Cap survey.

The past few years have been extremely challenging and I thank colleagues for their efforts. With over 20 years at the firm so far, with the last nine as Chief Executive, I look forward to working with Phillip Wale when he joins in the summer to drive the firm’s profitability and continue to improve our market share.

Results

Given the size of the statutory loss in the reporting period, in the table below we break out the significant one-off costs primarily associated with ThinkEquity in its final year within the Panmure Gordon Group; a year which saw significant impairments and write downs.

As the table shows, the largest one-off cost reflected in the statutory accounts is the £16.8m impairment of the full carrying value of goodwill associated with ThinkEquity. Additionally, based on ThinkEquity’s history of continued losses, the Company reviewed the level of deferred tax assets held in the US business and wrote-off the previously recognised entire amount of £3.4m.

  UK   US   Swiss   Consolidated   Consolidated
 
2011 2011 2011 2011 2010
£‘000 £‘000 £‘000 £‘000 £’000
 
Statutory loss for period (4,189) (26,882) (402) (31,473)

(7,431)

 
Adjusted for significant one-off costs
US deferred tax asset written off - 3,413 - 3,413 -
Goodwill Impairment - 16,841 - 16,841 -
Redundancy and restructuring charges 516 4 - 520 1,252
Amortisation of intangibles - 164 - 164 141
         

Underlying operating loss adjusted for significant one-off costs

(3,673) (6,460) (402) (10,535)

(6,038)

Dividend

The board has not recommended a dividend for the year.

Outlook

We have made an encouranging start to 2012, having agreed, subject to regulatory approval, to divest control of ThinkEquity, which has historically been responsible for a significant proportion of statutory losses incurred in recent years, whilst also substantially reducing UK costs. While markets remain cautious, we believe the UK business is now right–sized. We are focused entirely on serving our institutional and corporate clients and in the first quarter of this year we have seen an increase in commission levels and the establishment of a good investment banking pipeline.

Tim Linacre
Chief Executive
23 April 2012


Consolidated income statement

For the year ended 31 December 2011

     

 

2011 2010
£‘000 £‘000
 
Commission and trading income 19,210 21,929
Commission and trading expense (2,532) (3,568)
   
Net commission and trading income 16,678 18,361
 
Corporate finance and other fee income 21,267 22,094
   
Net commission and fee income 37,945 40,455
 
Net (loss)/gain on available for sale investments (1,201) 446
 
Administrative expenses1 (46,740) (46,254)
 
Redundancy, restructuring and other non-recurring charges1 (520) (1,252)
   
Operating loss before share-based payments and goodwill impairment (10,516) (6,605)
 
Share-based payments1 (1,211) (437)
Goodwill impairment1 (16,841) -
   
Operating loss (including goodwill impairment) (28,568) (7,042)
 
Financial income 69 111
Financial expense (60) (202)
 
Net financial income/(expense) 9 (91)
   
Loss before tax (28,559) (7,133)
 
Taxation (2,914) (298)
   
Loss for the period attributable to the owners of the Company (31,473) (7,431)
 
Basic loss per share (21.21)p (5.10)p
 
Diluted loss per share (21.21)p (5.10)p

 

1 These are all part of administrative expenses which total £65.3m (2010: £47.9m)

 

Consolidated statement of comprehensive income & expense

 

For the year ended 31 December 2011

 

2011 2010
£‘000 £‘000
 
Loss for the period attributable to the owners of the Company (31,473) (7,431)
 
Other comprehensive (loss)/income
Foreign exchange translation differences (200) 369
 
Available for sale gains transferred to the income statement - (569)
   
Total other comprehensive loss for the period net of tax (200) (200)
   
Total comprehensive loss for the period attributable to the owners of the Company (31,673) (7,631)


Consolidated statement of financial position

As at 31 December 2011

 

  2011   2010
£‘000 £‘000
Assets
 
Intangibles 13,201 30,168
Plant and equipment 1,710 1,999
Available for sale investments 1,365 2,640
Deferred tax asset 1,694 4,490
Other receivables 2,332 2,458
   
Total non-current assets 20,302 41,755
 
Securities held for trading 3,952 5,082
Trade and other receivables 32,156 29,172
Cash and cash equivalents 15,855 26,166
   
Total current assets 51,963 60,420
 
Current liabilities
 
Trade payables (26,508) (21,252)
Tax and social security (638) (663)
Other payables (6,848) (8,808)
Held for trading liabilities (327) (693)
Interest bearing loans and borrowings -- (3,000)
   
Total current liabilities (34,321) (34,416)
   
Net current assets 17,642 26,004
 
Deferred tax liability (925) (856)
   
Total non-current liabilities (925) (856)
   
Net assets 37,019 66,903
 
Equity
 
Issued share capital 6,009 5,914
Shares to be issued (including share premium) 86 129
Share premium account 36,620 36,084
Merger reserve 21,810 21,810
Special reserve 9,595 9,595
Other reserve (3,873) (2,725)
Foreign currency translation reserve 3,140 3,340
Treasury shares (2,526) (3,454)
Retained earnings (33,842) (3,790)
   
Total equity 37,019 66,903

Approved by the board on 23 April 2012 and signed on its behalf by:

Philip Tansey
Chief Financial Officer

Consolidated statement of cash flow

 

Year ended

31 December
2011

 

Year ended

31 December
2010

£‘000 £‘000
Cash flows from operating activities
Loss before tax (28,559) (7,133)
Net financial (income)/expense (9) 91
Depreciation and amortisation 794 956
Goodwill impairment 16,841 -

Net loss/(gain) on available for sale
investments

1,201 (367)
Loss on disposal of fixed assets - 9
Movement in securities held for trading 764 (1,043)

Increase in net amounts owed by market
counterparties

900 1,559

Decrease/(increase) in trade and other
receivables

946 (295)
Decrease in trade payables and provisions (2,169) (7,154)
IFRS 2 share-based payment charges 1,421 720
Net cash outflow from operating activities (7,870) (12,657)
 
Income taxes received/(paid) 429 (201)
Net cash from operating activities (7,441) (12,858)
 
Cash flows from investing activities
Financial income received 69 111
Acquisition of plant and equipment (350) (190)
Proceeds from disposal of investments 43 1,030
Net cash from investing activities (238) 951
 
Cash flows from financing activities
Proceeds from the issue of share capital 588 76
Purchase of own shares for treasury - (148)
Purchase of own shares for EBT (257) (385)
Financial expense (60) (202)
Repayment of EBT loan 37 143
Repayment of subordinated loan (3,000) -
Net cash from financing activities (2,692) (516)
 
Net decrease in cash and cash equivalents (10,371) (12,423)
Cash and cash equivalents at 1 January 26,166 38,903
Effect of exchange rate fluctuations 60 (314)
Cash and cash equivalents at 31 December 15,855 26,166


Consolidated statement of changes in equity for the year ended 31 December 2011

£‘000   Issued share capital   Shares to be issued   Share premium   Merger reserve   Special reserve   Fair value reserve   Other reserve   Foreign currency translation reserve   Treasury shares   Retained earnings   Total equity
 
At 1 January 2011 5,914 129 36,084 21,810 9,595 - (2,725

)

3,340 (3,454 ) (3,790 ) 66,903
 
Total comprehensive income for the period
Loss for the year - - - - - - - - - (31,473 ) (31,473 )
 
Other comprehensive income
 
Foreign currency translation differences - - - - - - - (200 ) - - (200 )
 
Other items recorded directly in equity
Share-based payments - - - - - - - - - 1,421 1,421
 
Shares issued under employee share plans 95 (43 ) 536 - - - - - - - 588
 
Shares transferred under employee share plans - - - - - - (928 ) - 928 - -
 
Purchase of own shares for EBT - - - - - - (257 ) - - - (257 )
 
Decrease in shares held by EBT -   -     -   -   -   -   37     -     -     -     37    
At 31 December 2011 6,009   86     36,620   21,810   9,595   -   (3,873 )   3,140     (2,526 )   (33,842 )   37,019    


Consolidated statement of changes in equity for the year ended 31 December 2010

£‘000   Issued share capital   Shares to be issued   Share premium   Merger reserve   Special reserve   Fair value reserve   Other reserve   Foreign currency translation reserve   Treasury shares   Retained earnings   Total equity
 
At 1 January 2010 5,874 298 35,879 21,810 9,595 569 (776

)

 

2,971 (5,013

)

 

2,921 74,128
Total comprehensive income for the period
Loss for the year - - - - - - - - - (7,431

)

 

(7,431

)

 

 
Other comprehensive income

 

 

 
Foreign currency translation differences - - - - - - - 369 - - 369
 
Available for sale

gain recycled

- - - - - (569

)

 

- - - - (569

)

 

 
Other items recorded directly in equity
Share-based payments - - - - - - - - - 720 720

 

Shares issued under employee share plans 40 (169

)

 

205 - - - - - - - 76
 
Shares transferred under employee share plans - - - - - - (1,707

)

 

- 1,707 - -

 

Purchase of own shares for EBT - - - - - - (385

)

 

- - - (385

)

 

 
Decrease in shares held by EBT - - - - - - 143 - - - 143
 
Purchase of shares for treasury -   -       -   -   -   -       -       -   (148

)

 

  -       (148

)

 

 
At 31 December 2010 5,914   129       36,084   21,810   9,595   -       (2,725

)

 

  3,340   (3,454

)

 

  (3,790

)

 

  66,903      

1 Segmental analysis

The Group has reported its operating segments according to how the Group’s chief operating decision maker (“CODM”) allocates resources to each segment and assesses performance. In this respect the Group’s CODM has been defined as the Group’s CEO. The CODM allocates resources across the Group based on results and performance in each geographic area of operation. This is consistent with the basis of segmentation in the Report and Financial Statements 2010.

Segmental analysis for the year ended 31 December 2011 and reconciliation to the statutory income statement

  UK   US   Swiss   Consolidated
       
2011 2010 2011 2010 2011 2010 2011 2010
£‘000 £‘000 £‘000 £‘000 £‘000 £‘000 £‘000 £‘000
 
Net commission and trading income 6,692 7,417 8,743 9,174 1,243 1,770 16,678 18,361
Corporate finance fee income 9,194 11,828 9,711 8,067 70 - 18,975 19,895
Wealth management and other income 503 112 1,789 2,087 - - 2,292 2,199
Net (loss)/gain on AFS investments (1,045) 471 (156) (25) - - (1,201) 446
Foreign exchange (loss)/gain - - (72) 314 12 (19) (60) 295
Ongoing administration costs (20,395) (20,303) (24,394) (24,220) (1,727) (1,885) (46,516) (46,408)
Segmental operating loss (5,051) (475) (4,379) (4,603) (402) (134) (9,832) (5,212)
 
Redundancy and restructuring charges (516) (561) (4) (691) - - (520) (1,252)
Amortisation of intangibles - - (164) (141) - - (164) (141)
Share-based payment charges (363) (58) (848) (379) - - (1,211) (437)

Goodwill impairment

- - (16,841) - - - (16,841) -
               
Operating loss (5,930) (1,094) (22,236) (5,814) (402) (134) (28,568) (7,042)
 
Net financial income/(expense) 1,235 994 (1,226) (1,085) - - 9 (91)
               
Loss before tax (4,695) (100) (23,462) (6,899) (402) (134) (28,559) (7,133)
 
Income tax 506 (298) (3,420) - - - (2,914) (298)
               
Loss for period attributable to the owners of the Company (4,189) (398) (26,882) (6,899) (402) (134) (31,473) (7,431)
 

All revenue is from external customers.  There are no regular major customers that account for more than 10% of revenue.  The segmental operating loss reconciles to the statutory loss above.  There were no discontinued activities during the period.

 

In respect of assets and non-current assets, the basis of segmentation is the same as in the Report and Financial Statements 2010.

 
UK US Swiss1 Consolidated
 

2011

2010

2011

2010

2011

2010

2011

2010

£‘000

£‘000

£‘000

 

£‘000

£‘000

£‘000

 

£‘000

 

£‘000

 

   
Non-current assets (inc goodwill) 2

18,833

19,610

1,469

22,145

-

-

20,302

41,755

Current assets

44,470

51,668

7,493

8,752

-

-

51,963

60,420

Current liabilities

(29,801)

(29,315)

(4,520)

(5,101)

-

-

(34,321)

(34,416)

Non-current liabilities

(925)

(897)

-

41

-

-

(925)

(856)

Capital expenditure

(121)

(95)

(229)

(95)

-

-

(350)

(190)

1 The Swiss business operates as a representative office of the UK business and therefore shares assets with the UK business.

2 The amounts disclosed as non-current exclude intragroup balances of £39.1m (2010: £35.4m) payable to the UK business.


2 Staff costs

  Year ended

31 December 2011

  Year ended

31 December 2010

£‘000 £‘000
Staff costs including directors’ emoluments
Wages and salaries 25,190 25,006
Social security costs 2,017 2,214
Pensions (defined contribution scheme) 1,709 1,636
Total 28,916 28,856

The Group operates a defined contribution pension scheme. At the balance sheet date the Group had no outstanding pension contribution liabilities. The charge for the period to 31 December 2011 was £1.7m (2010: £1.6m).

Actual number of persons, including directors, employed by the Group as at 31 December 2011:

  Group total 2011   UK 2011   Swiss 2011   US 2011   Group total 2010
 
Institutional equities 102 44 3 55 115
Corporate finance 49 21 0 28 50
Other 73 35 5 33 67
Total 224 100 8 116 232

Average number of persons, including directors, employed by the Group during the year was:

  Group total 2011   UK 2011   Swiss 2011   US 2011   Group total 2010
 
Institutional equities 110 44 4 62 116
Corporate finance 52 23 0 29 46
Other 70 39 5 26 68
Total 232 106 9 117 230


3 Income tax expense

The analysis of the total income tax credit/(expense) is as follows:

  Year ended

31 December

2011

  Year ended

31 December

2010

£‘000 £‘000
Analysis of tax credit/(charge) in period:

UK corporation tax at 26.5% (2010: 28%)

Current year tax credit/(charge) - 217

 Prior year adjustment – loss carry back claim

(44) 466
Other prior year adjustments (35) (254)
(79) 429
Deferred tax
Prior year adjustments to deferred tax credit 1 43
Current year deferred tax charge (2,836) (770)
(2,835) (727)
   
Tax charge on profits on ordinary activities (2,914) (298)
 
Effective tax rate charge (10.2)% (4.2)%
 
Factors affecting tax charge:
 
Loss on ordinary activities before tax (28,559) (7,133)
Taxation on ordinary activities multiplied
by rate of UK corporation tax at 26.5% (2010: 28%) 7,568 1,997
 
Effects of:

 Expenses not deductible for tax purposes

(84) (117)
US goodwill write-off (5,781) -
US losses not recognised (490) (1,854)
US DTA on losses write off (3,413) -
Differences relating to share schemes (551) (266)
Foreign tax (35) -
Change in corporation tax rate (84) (9)
Deemed goodwill on amortisation 132 148
Goodwill on consolidation (132) (148)
Adjustment to tax charge in respect of previous periods (44) (49)
   
Total tax charge on profits on ordinary activities (2,914) (298)


4 Earnings per share

Earnings per share (EPS) are calculated on a net basis using the profit on ordinary activities after taxation divided by the weighted average number of shares detailed below.

    Year ended   Year ended
31 December 31 December
2011 2010
£‘000 £‘000
 
Loss on ordinary activities after taxation (LAT) (31,473) (7,431)
 
Weighted average number of shares in issue 148,409,933 145,759,376
Fully diluted weighted average number of shares in issue 160,774,267 147,971,186
 
Basic earnings per share (based on LAT) (21.21)p (5.10)p
 
Diluted earnings per share (based on LAT) (21.21)p (5.10)p


5 Goodwill and other intangibles

  Goodwill

UK

  Goodwill US   Intangible US   Total
£‘000 £‘000 £‘000 £‘000
Cost
At 1 January 2011 13,201 34,353 709 48,263
Exchange differences - 51 1 52
At 31 December 2011 13,201 34,404 710 48,315
 
Accumulated impairment and amortisation
At 1 January 2011 - (17,552) (543) (18,095)
Charge for the year - (16,841) (164) (17,005)
Exchange differences - (11) (3) (14)
At 31 December 2011 - (34,404) (710) (35,114)
       
Net at 31 December 2011 13,201 - - 13,201
Goodwill

UK

  Goodwill US   Intangible US   Total
£‘000 £‘000 £‘000 £‘000
Cost
At 1 January 2010 13,201 32,844 678 46,723
Exchange differences - 1,509 31 1,540
At 31 December 2010 13,201 34,353 709 48,263
 
Accumulated impairment and amortisation
At 1 January 2010 - (16,781) (384) (17,165)
Charge for the year - - (141) (141)
Exchange differences - (771) (18) (789)
At 31 December 2010 - (17,552) (543) (18,095)
       
Net at 31 December 2010 13,201 16,801 166 30,168

Goodwill represents the excess of purchase price paid over net assets acquired, being in respect of:

(i) The acquisition of Panmure Gordon (UK) Limited in April 2005, which represents the UK cash-generating unit (“CGU”).

(ii) The acquisition of ThinkEquity in March 2007, which represents the US CGU.

(iii) The intangible assets acquired relate to customer relationships, the estimated useful life of which is five years.

Goodwill impairment

Approach to goodwill impairment testing

The process of identifying and evaluating goodwill impairment is inherently uncertain because it requires significant management judgment in making a series of estimations, the results of which are highly sensitive to the assumptions used.

If the results of the impairment testing demonstrate that the estimated recoverable amount is lower than the carrying value of the CGU, a charge for impairment of goodwill will be recognised in the Group’s income statement for the year.

Goodwill following the acquisition of Panmure Gordon (UK) Limited (UK CGU)

The recoverable amount of the UK cash-generating unit (“CGU”) was measured based on value in use. The key assumptions and approach to determine value in use calculations are solely estimates for the purpose of assessing impairment on acquired goodwill. The calculation uses cash flow projections based on budgets and forecasts approved by management covering three years. These projections are then extrapolated using a nominal long-term growth rate appropriate for the CGU.

The review of goodwill impairment represents management’s best estimate of the factors below:

Detailed cash flow forecasts for the UK business are over three years. The effect of a decline in the expected cash flows is to reduce the CGU’s estimated recoverable amount.

These variables are subject to fluctuations in external market factors and economic conditions outside of management’s control and are therefore established on the basis of management judgment and are subject to uncertainty. When the CGU’s cost of capital increases, the effect is to reduce the estimated recoverable amount of the CGU.

Key Assumptions

The three key assumptions upon which management has based its determination of the recoverable amount of the CGU are: three-year cash flow forecasts, in addition to long-term sustainable cash flows (discussed above); the discount rate (discussed above); and the long-term growth rate, which is based on expected long-term GDP growth for the UK. Further detail regarding the assumptions used and the results of sensitivity analyses performed are outlined below.

Results of Impairment Review

Management considers that the business and cash flows emanating from Panmure Gordon (UK) Limited are integral to the operations of the Group in the UK. As such management has reviewed forecast cash flows in respect of the business and is satisfied that the present value of these cash flows is considerably in excess of the carrying value of the CGU, thus fully supporting the allocated goodwill of £13.2m at 31 December 2011.

              2011               2010            
Long-term growth rate 1.8% 2.0%
Discount rate 9.2% 10.9%

The pre-tax discount rate applied was 11.9% (2010: 14.4%).

The result of the value in use calculations determine that there is a significant amount of headroom over the goodwill balance allocated to the UK CGU. A 100 basis point increase in the discount rate, assuming no effects on other variables, would not lead to any impairment of the goodwill. In terms of cash flow forecasts, a drop of 10% in cash flow estimates, assuming no effects on other variables, would not lead to any impairment of the goodwill.

Goodwill following the acquisition of ThinkEquity (US CGU)

The recoverable amount of the US CGU was measured based on fair value less costs to sell (2010: value in use). As at the balance sheet date management recognised that ThinkEquity, in its current form, was unlikely to produce an acceptable level of profitability in the foreseeable future.

Subsequent to the year end and as disclosed in note 7, the Group reached agreement to divest control of ThinkEquity by way of a management buy-out for a nominal consideration. Accordingly the CGU’s carrying value significantly exceeded its recoverable amount. As such, a further impairment charge of £16.8m was recognised in the income statement. A prior impairment of this CGU of £13.7m was recognised in 2008.

In the prior year the CGU’s recoverable amount (determined through value in use) exceeded its carrying amount by £2.6m ($4.1m at 2010 year end exchange rate of 1.5524). The calculation of this recoverable amount was based on management’s assessment of detailed five year cash flow projections which were extrapolated at a rate of 2.0% per annum (based on the expected long-term growth rate of the US business), with discount rates of 11.4% applied to detailed cash flows and 12.8% to long-term sustainable cash flows.


6 Deferred tax asset and liabilities

Deferred tax asset          
Share-based payments UK losses US losses Plant and equipment Total
£‘000 £‘000 £‘000

£‘000

£‘000
 
Balance as at 1 January 2011 719 32 3,413 326 4,490
Movement during year (426) 1,167 (3,413) (46) (2,718)
Effect of tax rate change (53) (2) - (24) (79)
Prior year adjustment - - - 1 1
Balance at 31 December 2011 240 1,197 - 257 1,694

A deferred tax asset of £1.7m (2010: £4.49m) has been established to reflect the tax benefit which is expected to arise from the future exercise of share options, accelerated capital allowances and losses carried forward in the UK. The recognition of the deferred tax assets relies on the projection of future taxable profits. Forecasts prepared by the Company support the assumption that it is probable that the results of future operations will generate sufficient taxable income to utilise the deferred tax recognised.

At 31 December 2011, the Company reviewed the current level of deferred tax assets held in the US business. Based on the recent history of continued losses and the decision since the end of the year to divest control of ThinkEquity, the entire amount of deferred tax previously recognised of £3.4m has been written off.

At 31 December 2011, the Group also had a potential deferred tax asset of £13.8m (2010: £8.7m) relating to US trading losses. This asset has not been recognised in the balance sheet due to the uncertainty over timing and extent of future taxable profits beyond the levels that would support the value of the deferred tax asset already recognised.

The Group also had a potential deferred tax asset of £6.1m (2010: £6.6m) relating to UK losses brought forward. This asset has also not been recognised in the balance sheet due to the uncertainty over the extent and timing of its recoverability.

Deferred tax liability        
Goodwill
£‘000
 
Balance as at 1 January 2011 856
Effect of tax rate change (63)
Movement during year 132
Balance at 31 December 2011 925

A deferred tax liability of £0.9m (2010: £0.9m) has been established to reflect the difference between the carrying value and the tax value of goodwill generated following the acquisition of Panmure Gordon (UK) Limited in 2005.

7 Post balance sheet events

On 8 March 2012, the Company announced that it had reached agreement for the disposal of ThinkEquity LLC, its US based subsidiary, subject to US regulatory approval. The sale is structured such that the entire equity holding of the company will be transferred from Panmure Gordon Holdings LLC, a wholly owned subsidiary incorporated in the US, to a newly formed company, ThinkEquity Holdings LLC. The Company will receive a notional $1 sum for its holding and a 24.11% stake in the newly formed company in return for a $345,000 investment. The majority owners of ThinkEquity Holdings LLC, who will also have the power to control and govern the business, are management and employees of ThinkEquity LLC. The 2012 results of ThinkEquity LLC will be consolidated in the 2012 financial statements up until the date of sale. At the date of this report, the transaction remains subject to US regulatory approval.

To facilitate the disposal, the Company has committed to share costs with ThinkEquity Holdings LLC in relation to any claims arising from regulatory, litigation or arbitration cases brought against ThinkEquity LLC prior to the disposal date. The liability of the Company is, in relation to this, limited to a maximum contribution of $900,000.

The financial information set out above does not constitute the company’s statutory accounts for the year ended 31 December 2011, but is derived from those accounts. The annual report and statutory accounts will be sent to shareholders and will be made available to the public from the Company’s website: www.panmure.com or, upon request, at the registered office of Panmure Gordon & Co. plc, Moorgate Hall, 155 Moorgate, London EC2M 6XB.