Final Results

Accuma Group PLC 18 October 2005 Press Release 18 October 2005 Accuma Group Plc ('Accuma' or 'the Group') Preliminary Results Accuma Group Plc, a leading provider of personal debt advice specialising in Individual Voluntary Arrangements (IVAs), announces its maiden results for the year ended 31 July 2005. Highlights • Admission to AIM on 9 March 2005 and placing to raise £4.1m • Turnover increased 191% to £2.85m (2004: £977k) • Gross profit increased 83% to £642k (2004: £349k) • Loss before tax of £473k - better than expectations • Strong balance sheet with net cash of £1.8m • Acquisition of Wilson Phillips and associated placing to raise £3m • Future contracted revenue now stands at £8.8m at the end of September 2005 • IVA cases completed in the period increased 232% to 734 (2004: 221) • Strengthened senior management and operational resource • Significant investment in IT to ensure scalability and robustness of systems • Group market share increased significantly - currently 11% Commenting on the results, Charles Howson, Chief Executive of Accuma Group, said: 'I am pleased to report Accuma Group's maiden results since listing on AIM in March 2005. The Group has made significant progress, both operationally and financially, in the period since flotation. Accuma has benefited from investment in marketing and resources and our increased profile has enabled us to build our strategic referral relationships. This will ensure highly efficient client acquisition and enable us to maintain our competitive advantage. 'The current, and indeed widely forecast, macro indicators point to further strong growth for our industry. Given the significant increase in new case volumes and future contracted revenues, together with investment in both management and operational resources, I am confident that we have established the momentum for strong earnings growth for the year ahead and beyond.' For further information: Accuma Group Plc Charles Howson, Chief Executive Tel: +44 (0) 161 235 6408 charles.howson@accumagroup.com www.accumagroup.com Daniel Stewart & Company Plc Tom Jenkins/Marc Young Tel: +44 (0) 20 7776 6550 tom.jenkins@danielstewart.co.uk Media enquiries: Abchurch Chris Lane / Sarah Hollins Tel: +44 (0) 20 7398 7700 chris.lane@abchurch-group.com www.abchurch-group.com Chairman's Statement I am delighted to be reporting Accuma's maiden results as an AIM quoted company. The last year has been an exceptionally busy period in our history, a period in which the Group listed on AIM, raised new funds to grow our business, and acquired Wilson Phillips whose activities are highly complementary to ours. We have achieved significant levels of growth since flotation. The Board took the decision to list on AIM earlier this year to raise Accuma's profile and accelerate the Group's expansion. Accuma floated in March 2005 raising £4.1 million in an oversubscribed issue to institutional shareholders. The funds raised are enabling Accuma to reach the next stage in its development and target selective value-adding acquisitions to complement the strong organic growth that we have witnessed so far. We operate in a market which is growing significantly and whose growth shows no signs of abating in the short to medium term. We intend to take advantage of the opportunity this affords us, and we are accordingly optimistic about the prospects for the current financial year and beyond. I would like to thank my fellow directors and all of our staff for their hard work during the year. Finally, I would like to extend my thanks to our shareholders for supporting Accuma. Charles Taylor B Comm. CA Non Executive Chairman Chief Executive's Statement Introduction We are delighted to present Accuma Group's maiden set of results since our flotation on the AIM market. The Group has made significant progress over the past year and I am pleased to report that, over this period, turnover has increased to £2.85 million from £978k in 2004. Moreover, our market share has grown significantly since flotation and continues to outpace that of the IVA market generally. This has been further enhanced by the additional 2.2% market share of Wilson Phillips, which we acquired for £3.3 million at the end of August 2005. We estimate that Accuma's share of the IVA market now stands at 11%. The credibility, increased profile and strong financial position that Accuma's listing has provided are already reaping benefits in line with our strategy for future growth. The Group has as a result been able to broaden its routes to market and, in addition to the growth we are achieving organically, we now have the opportunity, where appropriate, to grow both market share and earnings through strategic acquisitions as demonstrated by the acquisition of Wilson Phillips. Our strong performance is attributable to several factors. Firstly, we operate in a market that is growing significantly, with well publicised record levels of consumer debt with aggregate secured and unsecured consumer debt having breached £1 trillion in July 2004. One of the key drivers in our sector is the £190 billion of this which is unsecured on credit cards, store cards and personal loans. Accuma's principal product, an Individual Voluntary Arrangement (IVA), is a highly attractive alternative to bankruptcy, both for the debtor and his or her creditors. For the debtor, it affords the opportunity to regain control of their finances, with interest frozen and a proportion of the debt written off, and for creditors it affords above average recovery rates - all detailed in a legally binding contract and operated in a highly regulated environment. Our 'client first' philosophy of providing best advice, at no cost to the debtor, based on the debtor's particular circumstances, has allowed the Group to gain a strong foothold in this expanding market in a relatively short period of time. The Group has invested in its IT infrastructure and the development and implementation of proprietary software, which will provide more robust systems and ensure future scalability along with further efficiencies in our operating processes. Strategy Our focus is on the provision of personal debt solutions, based on unbiased advice appropriate to an individual's circumstances. We operate in a clearly defined core market and we believe that we have built a reputation for being amongst the best in our sector and at the same time have achieved strong growth in our market share. The Group intends to continue to increase its share of the IVA market, whilst ensuring efficient client acquisition and effective client management. We will continue to seek ways of capitalising on our marketing expenditure without prejudicing our core activity and in addition will continue to explore sensible acquisition opportunities within our sector. Financial results These results demonstrate the Group's strong growth from the equivalent financial period last year. The Group has achieved a turnover increase of 191%, from £978k in 2004 to £2.85 million in 2005, with gross profit increasing 83% to £642k over the same period. The loss on ordinary activities before taxation of £473k, an increase from £311k in 2004, is primarily due to significantly increased marketing expenditure post flotation, the benefits of which will be reflected in 2006. As summarised under 'People' below, the Group now has the infrastructure in place to service the anticipated strong growth in our business. Due to the five year life cycle of an average case, the Group had £5.4 million of future contracted revenues at the period end, up from £1.3 million at 31 July 2004. This strong growth in future contracted revenues is continuing and, as at the end of September 2005, the figure stood at £8.8 million. Acquisition On 31 August 2005, Accuma acquired a smaller competitor, Wilson Phillips, for a maximum consideration of £3.35 million. In the year ended 31 May 2005, the business had a turnover of £1.13 million on which it achieved a gross profit of 65% and a pre-tax profit of £0.23 million. At the time of acquisition, the business was completing approximately 38-40 IVAs per month with 23 staff. We believe the acquisition will be immediately earnings enhancing, pre-goodwill and exceptional items, and in addition it increased our market share from 6.2% to 8.4%. In order to finance the cost of the acquisition and to provide working capital to develop the business, we raised £3 million at 155p per share, through a placing with new and existing shareholders. Wilson Phillips is complementary to Accuma in that it does not compete in routes to market having historically acquired its clients solely through referral relationships. In line with Accuma's stated strategy, these relationships can be exploited given our more sophisticated infrastructure and financial resource. We are confident this will increase case volumes whilst lowering average client acquisition costs throughout the Group. Wilson Phillips is based in Blackburn, Lancashire and it is intended that the business will operate independently of Accuma, save for systems and operational support. The business will be relocated in December 2005 to modern office premises locally in order to accommodate the anticipated increase in staff numbers and case volumes. This relocation will also aid more efficient business flows throughout the various departments. It has a lower fee structure than Accuma due to its lower cost base and as such is able to handle cases with lower debt levels, which Accuma has historically foregone but will now be able to refer to Wilson Phillips thus generating high margin incremental income. Wilson Phillips had £2.4 million of future contracted revenues at the date of acquisition. People Our business is underpinned by the quality of our people and we have invested significantly in building a highly experienced management team; our recruitment policy has been to select only those personnel with relevant sector experience who share with us the vision and commitment to deliver on our core philosophy. The Group has continued to build on the strength of our existing team. During the period since flotation we have recruited two additional licensed insolvency practitioners to ensure that we have the capacity to accommodate our future growth. In addition we have added to our advisory, research and supervisory teams and made key appointments in our IT department. Today the group employs 110 people (87 Accuma, 23 Wilson Phillips) and is currently handling over 200 new IVA clients per month, with capacity to handle approximately 350 per month, after further training of recent appointments. Outlook We are successfully building a client referral program through strategic relationships with other financial intermediaries and we expect to see the benefits of these relationships in the second half of 2006 through increased case volumes and margins. The building of such relationships will enhance our routes to market, reducing our reliance on more expensive media campaigns. This strategy should, at the very least, minimise our client acquisition costs although over time as our referrals increase, we would expect to see a reduction. The economic outlook will provide significant growth opportunities for our business and we believe that we have the energy, commitment and expertise to capitalise on these opportunities; we aim to clearly demonstrate our differentiation to our competitors during 2006 and beyond. Your Board is confident that having achieved our objectives to date, we will continue to achieve excellent growth and deliver further shareholder value. The significant progress we have achieved would not have been possible without our people and on behalf of the Board I extend my sincere appreciation to them for their efforts throughout the year. Finally, I would like to take this opportunity, on behalf of the Board, to thank our new shareholders for their support both at flotation and at the time of the acquisition of Wilson Phillips. Charles Howson Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT PERIOD ENDED 31 JULY 2005 Note 31 July 31 July 2005 2004 £ £ TURNOVER 2,846,201 977,959 Cost of sales (2,203,943) (628,306) ------------- ----------- GROSS PROFIT 642,258 349,653 Administrative expenses (1,125,464) (650,091) ------------- ----------- OPERATING LOSS (483,206) (300,438) Interest receivable 39,720 947 Interest payable and similar charges (29,939) (11,240) ---------- ---------- LOSS ON ORDINARY ACTIVITIES (473,425) (310,731) BEFORE TAXATION Taxation 1 83,300 50,841 -------- -------- LOSS ON ORDINARY ACTIVITIES (390,125) (259,890) ----------- ----------- Loss per share - basic 2 (2.28p) (1.73p) The Group has no recognised gains or losses other than the results of the year as set out above. All the activities of the Group are classed as continuing. CONSOLIDATED BALANCE SHEET 31 JULY 2005 31 July 31 July 2005 2004 £ £ £ FIXED ASSETS Intangible assets 113,571 - Tangible assets 111,496 27,633 --------- -------- 225,067 27,633 CURRENT ASSETS Debtors 2,111,960 636,724 Cash at bank 2,041,518 64,311 ----------- -------- 4,153,478 701,035 CREDITORS : Amounts falling due within one (816,485) (450,384) year ----------- ----------- NET CURRENT ASSETS 3,336,993 250,651 ----------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 3,562,060 278,284 CREDITORS : Amounts falling due after more than (178,491) (249,292) one year ----------- ----------- NET ASSETS 3,383,569 28,992 =========== ======== CAPITAL AND RESERVES Called-up equity share capital 2,042,408 1,500,000 Share premium account 3,212,795 - Merger reserve (1,262,595) (1,252,094) Profit & Loss (609,039) (218,914) ----------- ----------- SHAREHOLDERS' FUNDS 3,383,569 28,992 =========== ======== CONSOLIDATED CASH FLOW STATEMENT PERIOD ENDED 31 JULY 2005 31 July 31 July 2005 2004 £ £ NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1,528,778) (410,777) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 39,720 947 Interest paid (26,420) (8,296) Interest element of finance lease rental (3,519) (2,944) payments --------- --------- NET CASH INFLOW (OUTFLOW) FROM RETURNS ON INVESTMENTS 9,781 (10,293) AND SERVICING OF FINANCE CAPITAL EXPENDITURE Payments to acquire tangible fixed assets (109,949) (27,012) Proceeds from sale of fixed assets - (109,949) 12,005 ----------- -------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (109,949) (15,007) TAXATION - (5,508) ACQUISITIONS Acquisition of Debt Solver Limited (23,895) - ---------- --- CASH OUTFLOW BEFORE FINANCING (1,652,841) (441,585) FINANCING Issue of ordinary share capital 4,140,243 272,500 Issue costs charged to the share premium (495,541) (24,595) account Capital element of finance lease rental (8,701) (4,722) payments Repayment / (Proceeds) of loans (5,953) 250,000 --------- --------- NET CASH INFLOW FROM FINANCING 3,630,048 493,183 ----------- --------- INCREASE IN CASH 1,977,207 51,598 ----------- -------- RECONCILIATION OF OPERATING PROFIT TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 31 July 31 July 2005 2004 £ £ Operating loss (483,206) (300,438) Amortisation 10,324 - Loss on disposal of fixed assets - 1,939 Depreciation 33,653 18,849 (Increase) in debtors (1,391,936) (492,104) Increase in creditors 302,387 360,977 --------- --------- Net cash outflow from operating activities (1,528,778) (410,777) ============= =========== CONSOLIDATED CASH FLOW STATEMENT (continued) PERIOD ENDED 31 JULY 2005 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 31 July 31 July 2005 2004 £ £ Increase in cash in the period 1,977,207 51,598 Cash outflow/(inflow) from repayment/(proceeds) of loans 5,953 (250,000) Cash outflow from decrease in lease financing 8,701 4,722 ------- ------- Change in net debt resulting from cash flows 1,991,861 (193,680) New hire purchase agreement (7,567) (23,584) --------- ---------- Change in net funds 1,984,294 (217,264) Net (debt) funds at 31 July 2004 (204,551) 12,713 ----------- -------- Net funds (debt) at 31 July 2005 1,779,743 (204,551) ----------- ----------- NOTES TO THE FINANCIAL STATEMENTS PERIOD ENDED 31 JULY 2005 1. TAXATION 31 July 31 July 2005 2004 £ £ Current Tax UK corporation tax based on the results for the period at 19% - (3,227) Deferred taxation charge/(credit) - origination and reversal of timing differences (16,528) - - unrelieved tax losses (66,772) (47,614) ---------- ---------- Total tax credit (83,300) (50,841) ========== ========== 2. LOSS PER SHARE The calculation of basic loss per share is based on the loss of £390,125 (2004: loss of £(259,890)) and a weighted average number of ordinary shares in issue during the period of 17,160,935 (2004 : 15,000,000). The share options in issue would decrease the loss per share and are therefore anti dilutive. 3. STATUS OF FINANCIAL INFORMATION The financial information set out in this report does not constitute the company's statutory accounts for the period ended 31 July 2005, but is derived from those accounts. Statutory accounts for the year ended 31 July 2005 will be delivered to the Registrar of Companies shortly. The auditors have reported on the statutory accounts for the period ended 31 July 2005 and their opinion was unqualified for these financial statements. The annual report and accounts will be dispatched to shareholders as soon as practicable. 4. APPROVAL OF ACCCOUNTS These accounts were approved by the Board of Accuma on 17 October 2005. This information is provided by RNS The company news service from the London Stock Exchange

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