Final Results

Mercury Group PLC 28 March 2007 28 March, 2007 Mercury Group Plc ('Mercury' or 'the Company') Results for the year ended 30th September 2006 Chairman's Statement Introduction This is my first report for Mercury Group Plc, having joined the Board as Chairman on the 13 February 2007. As you may know the Group suffered a period of instability consequent upon the recently announced refinancing of the business. However, I am pleased to report that all contentious issues have been resolved with the result that your company has a newly invigorated Board that is working in harmony and is committed to taking the Company forward. Moreover, the recent refinancing, referred to later in this statement, has achieved support from a number of significant players in the UK and European property markets; all of which augurs well for the future of the business. Against the background of the now resolved uncertainty and the reorganisation activity that needed to be undertaken, the group incurred significant losses in the year ended 30 September 2006. Your Directors have been focussed over the last few months on making significant reductions in the Group's high historic cost base. Marked progress has been made in this area and the Group is now well positioned to concentrate on its core business of commercial agency. Group financial performance The Group's turnover for the year ended 30 September 2006 was £5.6 million compared to £3.9 million in 2005, with gross profit of £3.9 million (2005 - £2.9 million). Approximately 93 per cent. of the gross profit is attributable to continuing activities. Although the Group achieved year on year growth of over 41 per cent. in turnover, the high administrative costs outweighed any benefits gained. These high operating costs coupled with the loss on sale of Navitas Hemway resulted in a Group loss before tax of £4.8 million. Discontinued activities accounted for £2.7 million of this loss with a further £0.6 million attributable to operating exceptional items. Continuing activities The SMPA Group continues to be the Group's core business offering a range of property services to corporate clients. SMPA is a commercial property consultancy and estate agency with over 50 years' experience providing a personal service to UK and international clients. With offices in the West End and City of London, it offers a wide range of professional services including investment, development, valuation, management and all aspects of occupancy. Although based in London, it is able to service clients throughout the UK. Investment continues to be the largest revenue generator followed by property management, accounting for 24 per cent. and 23 per cent. respectively of the Group's turnover on continuing activities. Although the timing of sales is difficult to predict due to a large proportion of transactional work, the level of turnover was consistent throughout the year with 51 per cent. of turnover generated in the first half. The SMPA Group generated an operating profit of £161,000 before group management charges. Discontinued activities Navitas Hemway Limited was sold in September 2006 having provided facilities management services to a number of corporate clients. In the main its focus was on providing cleaning and security services to shopping centres. The company had generated losses of over £0.5million in the period to the date of disposal. Dividends The Board does not recommend the payment of a dividend (2005: £nil). Funding I am pleased to say that since the year end the Board have secured additional funding by issuing a loan note instrument constituting £1,000,000 of Unsecured Loan Stock ('ULS') of which £500,000 has been issued. The Group has also received binding commitments to subscribe for up to a further £500,000 of ULS at the Company's option up until 31 July 2007. Directors Following the year end, a number of changes were made to the Board. As previously stated I joined the Board as Chairman in February and I am delighted to welcome Brian Basham and Andrew Lovelady who were appointed directors at the same time. I am also pleased that both Walter Goldsmith and James Lugg remain on the Board as non-executive directors and Ronnie Franks as Chief Executive Officer. Simon Michaels resigned from the Board as Finance Director on 13 February 2007 and I would like to thank him for his commitment and support over recent months. Andrew Lovelady has become part-time Finance Director in his place. Management and employees I would like to thank the Group's employees who have continued to work tirelessly in spite of the Group's difficult trading conditions. Current trading and prospects Your Directors believe there are good growth opportunities in the marketplace and therefore remain focused on building your business, both organically and via acquisition. The first quarter of the current year is in line with expectations and turnover is 20 per cent. ahead of the first quarter of last year. On 18 January 2007 The SMPA Group acquired the business and assets of Calder Russell Conway Limited, a niche commercial property consultancy focussed primarily in retail and leisure for a total cash consideration of £100,000, of which £50,000 is deferred for one year and conditional on the vendors remaining within the employment of The SMPA Group. The initial consideration of £50,000 was payable in monthly instalments, the first being £12,500 on the 31 January 2007, followed by 5 monthly instalments of £7,500. The directors will be looking for further acquisitions which they consider will strengthen the Group's service to clients and add shareholder value. The Board is confident that with the benefits of the cost savings now coming through along with a focus on business development, the Group will continue to see improved results. George Kynoch Chairman 28 March 2007 Consolidated Profit and Loss Account for the year ended 30 September 2006 Note Continuing Discontinued Total Operations Operations 2006 2006 2006 2005 £'000 £'000 £'000 £'000 TURNOVER 3,852 1,705 5,557 3,915 COST OF SALES (189) (1,426) (1,615) (987) --------- --------- -------- -------- GROSS PROFIT 3,663 279 3,942 2,928 Administrative expenses (5,837) (759) (6,596) (3,390) OPERATING LOSS -------------------- ------ --------- --------- -------- -------- Before exceptional items (1,612) (480) (2,092) (116) Exceptional items 2 (562) - (562) (346) -------------------- ------ --------- --------- -------- -------- (2,174) (480) (2,654) (462) Sale of subsidiary undertaking - (2,133) (2,133) - Share of loss of associate - - - (36) Amounts written (off)/back on investments (70) - (70) 70 Interest payable and similar charges (17) - (17) (34) Interest receivable and similar income 95 - 95 32 --------- --------- -------- -------- LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,166) (2,613) (4,779) (430) === Tax on loss on ordinary activities - - - 1 --------- --------- -------- -------- LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,166) (2,613) (4,779) (429) --------- --------- -------- -------- Retained LOSS for the financial YEAR (2,166) (2,613) (4,779) (429) ========= ========= ======== ======== === === Loss per ordinary share 3 (1.99)p (2.40)p (4.39)p (0.58)p ========= ========= ======== ======== Consolidated Balance Sheet as at 30 September 2006 2006 2005 £'000 £'000 FIXED ASSETS Intangible assets 1,360 6,406 Tangible assets 97 116 Investments 50 70 -------- ------- 1,507 6,592 -------- ------- CURRENT ASSETS Work in Progress - 80 Debtors 1,222 1,835 Cash at bank and in hand 86 1,439 -------- ------- 1,308 3,354 CREDITORS: amounts falling due within one year (1,003) (1,342) -------- ------- NET CURRENT ASSETS 305 2,012 -------- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,812 8,604 CREDITORS: amounts falling due after more than one year - (1) -------- ------- NET ASSETS 1,812 8,603 ======== ======= === === CAPITAL AND RESERVES Called up share capital 1,130 1,065 Share premium account 847 356 Shares to be issued 370 2,938 Distributable reserve 4,711 4,711 Other reserve 156 156 Profit and loss account (5,402) (623) -------- ------- EQUITY SHAREHOLDERS' FUNDS 1,812 8,603 ======== ======= Consolidated Cash Flow Statement for the year ended 30 September 2006 Notes 2006 2005 £'000 £'000 Net cash outflow from operating activities (a) (1,334) (2,399) Returns on investments and servicing of finance Interest received 95 32 Interest paid (17) (27) -------- ------- Net cash inflow from returns on investments and servicing of finance 78 5 -------- ------- Taxation Paid (33) (84) -------- ------- Capital expenditure and financial Investment Payments to acquire tangible fixed assets (60) (80) Purchase of investments (50) - ======== ======= Net cash outflow from investing (110) (80) activities ======== ======= Acquisitions and disposals Purchase of subsidiary undertakings (99) (411) Proceeds of disposal of subsidiary 100 - Net cash acquired with subsidiary - (130) Net overdraft disposed of with subsidiary 291 - -------- ------- Net cash inflow/(outflow) from acquisitions and disposals 292 (541) -------- ------- Net cash outflow before financing (1,107) (3,099) -------- ------- Financing Net cash proceeds from share issue (38) 3,284 Capital element of finance lease (4) (3) -------- ------- Net cash (outflow)/inflow from financing (42) 3,281 -------- ------- (Decrease)/increase in cash in the year (b),(c) (1,149) 182 ======== ======= (a) Reconciliation of operating loss to net cash inflow from operating activities 2006 2005 £'000 £'000 Operating loss (2,654) (462) Depreciation charge 47 56 Loss on sale of assets 5 - Goodwill and impairment of goodwill 869 215 Decrease in work in progress 80 - Decrease in debtors (56) (693) Increase/(decrease) in creditors 375 (1,515) -------- ------- Net cash outflow from operating activities (1,334) (2,399) ======== ======= (b) Reconciliation of net cash flow to movement in net funds 2006 2005 £'000 £'000 (Decrease)/increase in cash in the year (1,353) 182 Decrease in debt in the year 204 - -------- ------- Movement in net funds in the year (1,149) 182 Opening net funds/(debt) 1,133 951 -------- ------- Closing net funds (16) 1,133 ======== ======= (c) Analysis of changes in net funds 30 September Cash flows 30 September 2005 2006 £'000 £'000 £'000 Cash at bank and in hand 1,439 (1,353) 86 Bank overdraft (306) (204) (102) -------- ------- ------- 1,133 (1,149) (16) ======== ======= ======= Notes to the financial statements 1. The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 30 September 2005 is extracted from the Group's financial statements to that date which received an unqualified auditor's report and have been filed with the Registrar of Companies. The financial information for the year ended 30 September 2006 is extracted from the Group's financial statements to that date which received an unqualified auditor's report and will be filed with the Registrar of Companies in due course. 2. Exceptional items 2006 2005 £'000 £'000 Operating items Redundancies and employee termination costs 242 - Relocation costs 31 - Deal abort costs 289 346 ------------ ----------- 562 346 ============ ========== Non-operating items ---------------- -------------- Sale of subsidiary undertaking 2,133 - ================ ============== There will be no tax impact related to this exceptional item due to the losses for tax purposes. 3. Earnings per Ordinary share The figures for earnings per share are calculated on a loss of £4,779,000 (2005 - £429,000). The basic earnings per share calculation is based on a weighted average number of ordinary shares of 1p each of 108,927,248 (2005: 73,594,097). 4. Dividends No dividends have been declared for the year ended 30 September 2006. 5. Copies of the Report and Accounts will be sent to shareholders shortly and will be available from the registered office of the Company, Devonshire House, 60 Goswell Road, London, EC1M 7AD. Further Enquiries: Mercury Group Plc Andrew Lovelady Tel: 020 7393 4000 John East & Partners Limited Tel: 020 7628 2200 David Worlidge/Virginia Bull info@johneastpartners.com This information is provided by RNS The company news service from the London Stock Exchange

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