Final Results
4Less Group plc (The)
16 September 2004
16 September 2004
The 4Less Group plc
Preliminary results for the year to 31 March 2004
Key points
• Gross profit rises 55% to £2.904 million (2003: £1.874 million)
• Profit before tax increases 176% to £297,921 (2003: £107,626)
• Gross turnover reaches £319.2 million, up 17% (2003: £271.9 million)
• Prior year adjustment of £231,076 after tax to 31 March 2002 balance sheet
• Strong balance sheet with £1.3 million in cash, following placing in
April 2004
• Significant new product launches to retail and corporate markets
Eric Peacock, Non-executive Chairman, said:
'The year under review has been very successful for The 4Less Group and the
current year has started well. Demand for our services remains strong and the
level of interest in our new products, both retail and commercial, is
encouraging. Trading conditions in our key markets are buoyant and we look
forward with confidence'
Contacts:
The 4Less Group plc 020 7594 0515
Charles McLeod
Chief Executive Officer
Nigel Paul
Finance Director
Corporate Synergy 020 7626 2244
Lindsay Mair
Oliver Cairns
The 4 Less Group is a leading provider of financial services for corporate and
private customers, linked principally to asset and currency purchases. Its
innovative products are backed by a team of attentive and high quality
specialist staff. We are committed to delivering attractive returns for
customers and investors.
The Group is headquartered in Central London with a branch office in Marbella;
it is listed on AIM, a market regulated by the London Stock Exchange.
www.the4lessgroup.com
THE 4 LESS GROUP PLC
CHAIRMAN'S STATEMENT
Introduction
The year under review has been very successful for The 4Less Group Plc.
Business volumes grew strongly while the Group took significant steps to further
develop its position as one of the leading providers of foreign exchange and
other financial services to retail and corporate clients both in the UK and
overseas. This advance was strengthened shortly after the year end with the
Group's listing on AIM on 15 April 2004 when we raised £1.3 million (after
expenses). These funds are being used to provide working capital and support
two new initiatives targeted at the business finance and insurance markets.
Performance
Gross turnover for the 12 months to 31 March 2004 was £319.2 million generating
a gross profit of £2.9 million. This represents an increase in gross profit of
55% over the 2003 result. Margins improved from 0.73% to 0.81% in our core
currencies business while the Group profit on ordinary activities before tax of
£298,000 was a rise of 176% on the previous year. This result was slightly
ahead of the forecast for profit before tax of £290,000 issued at the time of
the AIM listing and placing. The Group has ample cash resources to fund its
planned activities. The move to AIM gives the Group increased visibility and
raises its profile with investors and in its industry sector, while also helping
to build a broader shareholder base and greater liquidity in the stock.
Prior Period Adjustment
The accounts include a prior period adjustment to correct a net overstatement of
trade debtors and trade creditors contained in the balance sheet at 31 March
2002. The effect on net assets is £232,000 after taxation. The net assets at
31 March 2004, adjusted for the net proceeds of the flotation and the prior
adjustment are £1.7 million. The overstatement relates wholly to the years
ended 31 March 2002, the first two years of trading. Since 31st March 2002, the
Group's management and its financial and accounting systems have been
significantly strengthened and we are satisfied that the Group's systems and
internal controls are robust.
Board
In October 2003 the Board was strengthened through the appointment of Greg
Begley as Chief Operating Officer and Nigel Paul as Finance Director who both
have many years of experience in banking and finance. I joined the Board in
March 2004, prior to the move to AIM.
People
The number of people in the Group has grown significantly during the year. I
have been greatly impressed by the quality and professionalism demonstrated by
staff at all levels. The Group places strong emphasis on training and is
committed to the on-going development of its staff. I would like to thank
everyone associated with the Group for their commitment, hard work and above
all, enthusiasm.
Outlook
The year has started well; demand for our services remains strong and the level
of interest in our new products, both retail and commercial, is encouraging.
Trading conditions in our key markets are buoyant and we look forward with
confidence.
Eric Peacock
Non-executive chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
The year to 31 March 2004 has been productive in terms of business performance
and also seen considerable change as we have taken major steps in positioning
the Group for future development. We continued to broaden our customer base
with new client registrations increasing by 37% per cent over the year. Our new
Spanish Office directly serves the extensive and important business
relationships we have in that country.
The management team was strengthened in October 2003 by the appointment of Greg
Begley as Chief Operating Officer and Nigel Paul as Finance Director.
Immediately following the year under review the Group moved its listing from
OFEX to AIM, raising £1.7m gross (£1.3m net) for the purposes of developing the
infrastructure of the group, expanding the existing operations especially into
the corporate arena, and to support increased foreign exchange lines with our
bankers.
A key part of the development of the infrastructure of the Group has been our
commitment to regulation and compliance with Anti-money Laundering and Proceeds
of Crime legislation. We continue to develop our internal control and client
registration systems, and work closely with external specialist consultants to
ensure staff are aware of the changing legislation and adequately trained. We
have also expanded our back office infrastructure in line with the expansion in
the number of foreign currency transactions.
Our Property Finance division is now FSA authorised to conduct mortgage
business, and FLG Insurance Brokers Limited, our insurance subsidiary is a
member of the General Insurance Standards Council and has completed the process
of applying for FSA registration which comes into force in January 2005.
We constantly listen to the requirements of our clients and as a result of great
demand we have created International Equity Release. This is a unique product
available from Banks in France, Spain and Portugal, which will allow UK
residents with unencumbered properties in these countries to take out Euro
mortgages secured on their overseas property. At present this facility is not
generally available in these countries and is only available through Property
Finance 4Less.
With over one million UK nationals owning properties in Europe and this is
expected to grow by a further two million over the next five years, the
prospects for the business are good.
We have developed the infrastructure and recruited high calibre staff for our
new FLG Corporate Services division which acting as broker, assists in the
arrangement of bespoke trade and asset finance products for clients from a wide
range of financial institutions. This business is now ready to formally launch
its products and services.
Trading review
The Group continued to develop its trading base during the year. The major
contributors were our foreign currency and overseas mortgages divisions. The
referrals now coming through the overseas mortgage division have lead to the
Group setting up an insurance broking operation to service the substantial
demand for insurance cover for overseas properties.
The Group commenced trading in March 2000 as a foreign currency exchange service
providing an alternative to the UK Clearing Banks, whose high charges and low
levels of customer support had just been severely criticised in the Cruickshank
Report. Today in addition to currency services the Group provides a range of
lending and insurance products for the consumer and business market. The Group's
rapid growth has resulted from focusing on outstanding customer service backed
by people with the requisite skills to fulfil our clients' needs. We do not take
principal risk on any of our lending products or facilitate speculative currency
transactions. The number of fully registered customers has grown through
personal recommendation, targeted marketing and innovative use of the internet.
This has been further boosted by reciprocal referral relationships with overseas
property agents and a number of UK-based car dealerships. The client base is now
in excess of 20,000.
Satisfied customers are our greatest asset and most effective advertisement. We
are encouraged that over thirty per cent of our business comes from
recommendations or referrals. Our large customer base of high net worth
individuals expect excellence and we are constantly looking at ways of
developing new products which we believe they would find attractive.
Currencies4less is our principal business activity and accounted for over 99.8%
per cent of Group sales and profit in the year under review. We expect this
business to continue to grow strongly although as a proportion of the whole
Group it will gradually reduce as the other businesses, including the new
corporate operations, become more established.
Propertyfinance4Less had a good year boosted by the continuing strong demand
from UK citizens for homes overseas. There are now over one million UK nationals
owning property abroad, principally in France, Italy, Portugal and Spain and
demand in other countries, including the USA, is also buoyant. This trend is
expected to continue and we can now benefit significantly from the high level of
requests we have received for insurance cover through our newly established FLG
Insurance Services division.
Car-finance4less was formed to arrange financing for clients wishing to purchase
cars abroad. However as the financial benefit of importing cars has gradually
diminished this business now focuses on building referral relationships with the
larger independent dealerships who operate mainly in the quality brands market.
The business is making steady progress in offering competitive financial
products aimed at higher value cars for personal use.
FLG Insurance Brokers has recently commenced trading. We are excited about the
prospects for this business whose products span both the consumer and corporate
markets. The business provides a range of insurance products for property owners
overseas including house and contents insurance, mortgage linked life/protection
assurance, critical illness, health and travel insurance. It also provides
corporate customers with credit insurance, bonds, liability insurance and
personal indemnity cover. Early signs are encouraging and with the additional
benefit of annual renewal premiums, the outlook for the business is positive and
it should provide a stable and growing income stream to the Group.
FLG Corporate Services has also only recently commenced trading. This company
provides financial services to business customers requiring customised funding
packages to support their existing trading activities and growth ambitions. The
company will arrange asset and trade finance facilities and debt financing, with
particular emphasis on companies with a turnover broadly in the range £1 million
to £50 million. Our Corporate Services team has a long experience in this market
and over the years has built a wide network of business contacts and commercial
relationships. We are excited by the opportunities in this market and are
particularly encouraged by our discussions with the larger financial
institutions which will provide the financing to our clients. It is early days
but the feedback we have received suggests that this business has a bright
future.
Corporate identity
We have recently introduced a new corporate identity and have redesigned our
Group web site in order to provide more information for investors and others
interested in our company. This new style will be adopted Group wide.
Looking forward
The Group has come a long way in a short time. The management team is determined
to continue to grow the business in a controlled manner without curbing the
entrepreneurial drive and enthusiasm, which is so important in a fast developing
operation. Looking to the future we aim to reinforce our strong organic growth
with acquisitions that support and complement our existing businesses. We are
proud of what has been achieved but not complacent about the challenges that lie
ahead.
Charles McLeod
Chief Executive Officer
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2004 2003
£ £
TURNOVER 319,169,452 271,862,416
Cost of sales (316,264,498) (269,987,866)
GROSS PROFIT 2,904,954 1,874,550
Administrative expenses (2,736,518) (1,860,202)
OPERATING PROFIT 168,436 14,348
Interest receivable and similar income 133,496 95,395
Interest payable and similar charges (4,011) (2,117)
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 297,921 107,626
TAXATION (96,152) (31,747)
PROFIT FOR THE FINANCIAL YEAR 201,769 75,879
Earnings per share 3.923p 1.489p
Fully diluted earnings per share 3.815p 1.367p
All amounts relate to continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2004 2003
£ £
Profit for the financial year 201,769 75,879
Prior period adjustment
Adjustments in respect of the understatement of trade
Debtors and trade creditors relating to transactions
Wholly contained in the two accounting periods ended
31st March 2002 (as explained in note 23) (231,706) -
Total recognised gains and losses recognised since last (29,937) 75,879
Annual report
CONSOLIDATED BALANCE SHEET
2004 2003
(As restated)
£ £ £ £
FIXED ASSETS
Tangible 299,516 87,871
299,516 87,871
CURRENT ASSETS
Debtors 608,220 251,678
Cast at bank and in hand 7,844,363 4,669,598
8,452,583 4,921,276
CREDITORS: amounts falling due
within one year (8,310,210) (4,769,027)
NET CURRENT ASSETS 142,373 152,249
TOTAL ASSETS LESS CURRENT LIABILITIES 441,889 240,120
NET ASSETS 441,889 240,120
CAPITAL AND RESERVES
Called up share capital 51,427 51,427
Share premium account 160,805 160,805
Profit and loss account 229,657 27,888
EQUITY SHAREHOLDERS' FUND 441,889 240,120
The financial statements were approved by the board on 15 September 2004
Signed on behalf of the board of directors
Charles McLeod
Director
COMPANY BALANCE SHEET
2004 2003
(As restated)
£ £ £ £
FIXED ASSETS
Tangible 288,708 82,247
Investments 6 6
288,714 82,253
CURRENT ASSETS
Debtors 664,519 284,787
Cash at bank and in hand 7,784,558 4,665,129
8,449,077 4,949,916
CREDITORS: amounts falling
due within one year (8,229,371) (4,752,820)
NET CURRENT ASSETS 219,706 197,096
TOTAL ASSETS LESS CURRENT 508,420 279,349
LIABILITIES
CAPITAL AND RESERVES
Called up share capital 51,427 51,427
Share premium account 160,805 160,805
Profit and loss account 296,188 67,117
EQUITY SHAREHOLDERS' FUNDS 508,420 279,349
The financial statements were approved by the board on 15 September 2004
Signed on behalf of the board of directors
Charles McLeod
Director
CONSOLIDATED CASH FLOW STATEMENT
2004 2003
£ £
Reconciliation of operating profit to net cash
Inflow from operating activities
Operating profit 168,436 14,348
Depreciation of tangible fixed assets 108,113 62,400
Increase in debtors (397,280) (200,295)
Increase in creditors 3,520,958 3,378,388
Net cash inflow from operating activities 3,400,227 3,254,841
CASH FLOW STATEMENT (note 20)
Net cash inflow from operating activities 3,400,227 3,254,841
Returns on investments and servicing of finance 129,485 88,132
Taxation (35,189) (60,589)
Capital expenditure (319,758) (32,384)
Cash inflow before financing 3,174,765 3,250,000
Financing - (81,272)
Increase in cash in the period 3,174,765 3,168,728
Reconciliation of net cash flow to movement in net funds (note 21)
Increase in cash in the period 3,174,765 3,168,728
Finance lease - 19,576
Change in net funds 3,174,765 3,188,304
Net funds at 1 April 2003 4,669,598 1,481,294
Net funds at 31 March 2004 7,844,363 4,669,598
1 EARNINGS PER SHARE
Both basic earnings per share and fully diluted earnings per share are based on
a profit of £201,769 (2003: £75,879). The basic earnings per share has been
calculated on a weighted average of 5,142,850 (2003: 5,116,738) ordinary shares
in issue. The diluted earnings per share has been calculated on a weighted
average of 5,288,452 (2003: 5,573,448) of ordinary shares in issue and the
dilutive potential ordinary shares from warrants.
2 PRIOR PERIOD ADJUSTMENTS
Certain balances in the financial statements have been restated for the year
ended 31 March 2003 in relation to the following prior period adjustments.
a) Since the year end, it was found that trade debtors and trade creditors
were understated in prior years. This represents a fundamental error relating
to certain balances and transactions wholly contained in the two accounting
periods ended 31 March 2002.
b) Trade debtors and trade creditors have been restated following a change in
accounting policy.
As originally Adjustment as per 2 Adjustment as per 2 As restated 31
stated (a) above (b) above March 2003
£ £ £ £
Group
Trade debtors 13,465,918 104,309 (13,426,874) 143,353
Corporation tax recoverable - 35,068 - 35,068
Deferred tax asset - 13,220 - 13,220
Trade creditors 17,648,430 415,365 (13,426,874) 4,636,921
Corporation tax payable 31,062 (31,062) - -
Company
Trade debtors 13,402,307 104,309 (13,426,874) 79,742
Corporation tax recoverable - 33,798 - 33,798
Deferred tax asset - 5,000 - 5,000
Trade creditors 17,641,846 415,365 (13,426,874) 4,630,337
Corporation tax payable 31,062 (31,062) - -
The prior period adjustment in 2 (a) also has an effect on the cumulative
results to 31 March 2002. At that date, the pre-tax impact on the group profit
and loss reserves is a reduction of £311,056. Adjusting for the potential tax
relief on these losses, which eliminates the previously reported tax charge and
accounting for the deferred tax asset created by the tax losses, the prior
period tax effect is £79,350. The recognition of this asset is in accordance
with FRS 19 because the Group has made or will make sufficient profits in the
subsequent periods of account to be able to utilise the tax losses fully. The
post-tax impact on the cumulative group profit and loss reserves is, therefore,
a reduction of £231,076.
3 POST BALANCE SHEET EVENTS
On 15 April 2004, the Company floated on the Alternative Investment Market (AIM)
and raised £1.7m (before expenses) via the issue of 2,833,333 ordinary shares of
£0.01 each at a price of £0.60.
4 NATURE OF ACCOUNTS
The financial information set out in the announcement does not constitute the
company's statutory accounts for the year ended 31 March 2004 or 2003. The
financial information for the year ended 31 March 2003 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under s237(2) or (3) Companies Act 1985. The
statutory accounts are expected to be sent to shareholders shortly.
This information is provided by RNS
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