Interim Report and Financial Statements

RNS Number : 4769Q

Scholium Group PLC

30 November 2016

 

Scholium Group plc

Interim Report & Financial Statements

30 November 2016

The directors of Scholium Group plc ("Scholium", the "Company" or, together with its subsidiaries, the "Group") present their report and financial statements for the Group for the six months ended 30 September 2016.

During the period under review, the business suffered from a slowdown in material discretionary purchases by customers in the three months surrounding the UK referendum on EU membership.  This slowdown caused sales in May, June and July to be poor, but in August and September there was renewed interest in stock, particularly from non-Sterling buyers.   In addition, weaker Sterling has made it more attractive to sell some items by auction in the USA. Numerous items, both valuable and less valuable, have been placed into carefully selected auctions, which should benefit the results, and cash, for the second half of the financial year.

The pick-up in sales has continued since 30 September. Nevertheless the board is taking action to reduce both the size of its operating costs and stock of rare books.  Annualised savings of approximately £320,000 have been identified and are in the process of being implemented. Furthermore, an orderly but accelerated process to realise a segment of book and print stock has commenced.

Financial Summary

Six months ended September (all figures £'000)	2016	2015	Change
Revenue	2,127	3,320	-36%
Gross Profit	903	1,107	-18%
Gross Margin	42%	33%	9%
Pre-Tax (Loss) / Profit	(239)	6	n/a
Cash	1,154	1,619	-29%
Net Asset Value	9,908	10,159	-2%
NAV/Share	72.8p	74.7p

Jasper Allen, Chairman of Scholium, noted "We are disappointed to have incurred a loss of £239,000 in the first half of the year, particularly due to concerns over the referendum period, but we are encouraged that sales are showing signs of improvement.  The cost savings we are implementing as well as the stock optimisation programme will deliver a leaner, more effective business for shareholders.

"We remain encouraged by the improved level of sales since August and are focussing our efforts on delivering the best result possible for the full year."

For further information, please contact:

Scholium Group plc Jasper Allen, Chairman Simon Southwood, Chief Financial Officer	[phone]
WH Ireland Ltd - Nominated Adviser Chris Fielding/Nick Prowting	[phone]

Business Review

Scholium Group companies are involved primarily in the trading and retailing of antiquarian books and other works on paper, as well as dealing in rare and collectible items in the wider art market.

The group of businesses comprises:

•                   Shapero Rare Books, a dealer in rare and antiquarian books and works on paper, located in Mayfair, London; and

•                   Scholium Trading, a company set up to trade in conjunction with other dealers in high value rare and collectible items.

Revenue Streams

The Group earns revenue from:

•                   the sale of rare books and works on paper through Shapero Rare Books; and

•                   the sale of other rare and collectible items through Scholium Trading.

Key objectives and key performance indicators (KPIs)

The Group's strategy is to:

•                   Increase the profitable trade of Shapero Rare Books;

•                   optimise the level of antiquarian stock whilst maintaining the trade of Shapero Rare Books; and

•                   continue to develop Scholium Trading by trading alongside other dealers in high value rare and collectible items and by participating in the acquisition for onward sale of large consignments.

The Directors intend, in due course, to provide an attractive level of dividends to shareholders along with stable asset-backed growth driven by the markets in which the Group operates.

Our current principal KPIs are:

•                   gross margin, EBITDA, earnings per share;

•                   the breadth and distribution of the stock of rare books held by the Group;

•                   stock turnover; and

•                   various key risk indicators including capital resources, portfolio allocation and cash.

Performance Review

Overall Performance

The Group struggled in the first quarter of the current financial year.  Whilst its core business slowed, there was a perception that customers were delaying material acquisitions around the period of the UK referendum on EU membership.  After the referendum, the business broadly performed to expectations.

This weakness materially affected performance for the 6 months under review as a whole.  Turnover decreased by 36% compared to the same period in the prior year.  However, as announced on 13 October, the business has been successful in increasing its margins, with the result that Gross Profit decreased by only 18% to £903k (2015: £1,107k).  

Costs increased by 6% compared to the prior year to £1,142k (2015: £1,077k).  The increase is largely due to increased spend on marketing, reflecting a desire at the end of March 2016 to support growth of the rare books business.  This is also reflected in the change in stock value year-on-year; stock increased 6% to £7,879k (2015: £7,420k). 

The Group result for the six months was a loss before tax of £239k (2015: profit of £30k).

Summary Group Financials

Six months ended September (all figures £'000)	2016	2015	Change
Revenue	2,127	3,320	-36%
Gross Profit	903	1,107	-18%
Gross Margin	42%	33%	9%
Direct Costs	(141)	(116)	22%
Administrative Expenses	(1,007)	(961)	4%
Pre-Tax (Loss) / Profit	(239)	30	n/a
Stock	7,879	7,420	6%
Cash	1,154	1,619	-29%
Net Asset Value	9,908	10,159	-2%
NAV/Share	72.8 p	74.7p

Financial Position & Cashflow

The Group retains a strong balance sheet.  Net assets of £9,908k (2015: £10,159k) are supported by £7,879k of Stock (2015: £7,420k) and £1,154k of cash (2015: £1,619k).  This equates to 72.8p of net assets per share (2015: 74.7p).

Group Strategy

Your board has recognised that the performance of the business does not justify its relatively high fixed cost base; and that applying capital to grow the asset base of the book dealership has not delivered the expected return on capital.  As such, we are taking steps to reduce the cost base - approximately £320,000 of annualised savings have been identified across the business and are in the process of being implemented. Furthermore, an orderly but accelerated process to realise a segment of book and print stock has been commenced.

Shapero Rare Books & Shapero Modern

The Shapero brand trades out of the St. George Street premises.  It includes Shapero Rare Books and Shapero Modern.  The bulk of the trade, through Shapero Rare Books, is in rare and antiquarian books and works on paper.  Shapero Modern is a newer brand which was set up in 2014 to participate in the increasingly large international trade in modern and contemporary prints.

At 30 September, the Group had allocated capital of £8,085k (2015: £7,238k) to the Shapero brand.  Of this, approximately £425k is attributable to Shapero Modern. 

In the first six months of the year performance from the Shapero brand suffered primarily in the run-up to the UK referendum on EU membership.  Turnover fell by 32% as compared to the prior-year period to £1,929k (2015: 2,856k) albeit partly offset by an enhanced gross margin of 41% (2015: 33%).  The loss incurred by this division for the first six months of the financial year was £186k (2015: profit of £38k).

Summary Performance, Shapero

Six months ended September (all figures £'000)	2016	2015	Change
Revenue	1,929	2,856	-32%
Gross Profit	788	951	-17%
Gross Margin	41%	33%	8%
Pre-Tax (Loss) / Profit	(186)	38	n/a

Approximately £280,000 of annualised savings have been identified in this business which, the board believes, can be implemented without a material reduction in operating profitability.  Some of these costs are contractual and will take time to be implemented whilst others are purely discretionary and have been executed in each case at negligible cost. 

The Shapero Modern brand is currently under review. Whilst it provides a valuable gross profit contribution to the business, it is expensive to operate and occupies valuable prime West End floorspace.

Scholium Trading

Scholium Trading was set up to trade alongside third party dealers in rare and collectible items.  It typically trades in larger-value items and shows a lumpier, but higher margin revenue stream. Scholium Trading had approximately £975k of capital allocated to it as at 30 September 2016 (2015: £1,035k).  We do not allocate any costs to the business, but its capital makes a material contribution to the overall profitability of the business.

Whilst the lumpy nature of revenue resulted in first half sales of £197k (2015: £463k), a higher gross margin of 58% (2015: 33%) was achieved. This meant that the decrease in Gross Profit was limited to 26%, equivalent to £114k (2015: £155k).

Summary Performance, Scholium Trading

Six months ended September (all figures £'000)	2016	2015	Change
Revenue	197	463	-57%
Gross Profit	114	155	-26%
Gross Margin	58%	33%	25%
Pre-Tax Profit	103	141	-27%

Central Costs

The Central Costs of the business include all board directors (no costs are allocated to subsidiaries) and the various incremental costs associated with the AIM listing.  In the six months ended 30 September 2016 these costs fell by 10% to £157k (2015: £174k) as compared to the prior year.  More than £40,000 (part of the £320,000 from above) of annualised cost savings has been identified, and is being implemented.

Summary Performance, Central Costs

Six months ended September (all figures £'000)	2016	2015	Change
Pre-Tax (Loss)	(157)	(174)	-10%

Outlook

We are pleased that the improved trading first noted in August continues. We are confident that rationalising the Shapero brands and converting many of the fixed costs to variable costs will deliver a business which can be more reliable when trading through adverse conditions and will be better aligned with the interests of shareholders. It remains, at this stage, too early to assess whether the outcome for the full year will meet market expectations.

Key Risks

Like all businesses, the Group faces risks and uncertainties that could impact on the Group's strategy. The Board recognizes that the nature and scope of these risks can change and regularly reviews the risks faced by the Group and the systems and processes to mitigate such risks.

The principal risks and uncertainties affecting the continuing business activities of the Group were outlined in detail in the Strategic Report section of the annual report covering the full year ended 31 March 2016.

In preparing this interim report for the six months ended 30 September 2016, the Board has reviewed these risks and uncertainties and considers that there have been no changes since the publication of the 2016 Annual Report.

 

Independent Review Report to Scholium Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 30th September 2016 which comprises the condensed consolidated statement of comprehensive income, the consolidated statement of changes in equity, the condensed consolidated statement of financial position and the consolidated statement of cash flows and the related explanatory notes.  We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement.  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibilities

The interim report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the interim report in accordance with the AIM rules.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IRFSs as adopted by the EU.  The condensed set of financial statements included in this interim report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.

Our Responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30th September 2016 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM rules.

A K Bahl BA FCA

For and on behalf of

Wenn Townsend Chartered Accountants

Oxford, United Kingdom

29 November 2016
 

Consolidated statement of total comprehensive income (unaudited)

					Six-month Period Ended (Unaudited)	Six-month Period Ended (Unaudited)	Year Ended (Audited)
					30 Sept	30 Sept	31 Mar
					2016	2015	2016
				Note	£000	£000	£000
Revenue				3	2,127	3,320	6,742
Cost of Sales					(1,224)	(2,213)	(4,366)
Gross profit					903	1,107	2,376
					-	-	-
Distribution costs					(141)	(116)	(345)
Administrative expenses					(1,001)	(961)	(2,007)
Exceptional items:					-	-	-
Loss of office					-	(24)	(24)
Total administrative expenses					(1,001)	(985)	(2,031)
					-	-
Profit/(Loss) from operations					(239)	6	-
Exceptional Items					-	24	24
Adjusted Operating Profit					(239)	30	24
Profit/(Loss) from operations					(239)	6	-
Financial income						1	2
Financial expenses					-	(1)	(5)
Profit/(loss) before taxation					(239)	6	(3)
Income tax credit/(expense)				4	-	-	(3)
Profit/(Loss) for the period from continuing operations					(239)	6	(6)
Discontinued operations
Profit for the period from discontinued operations					-	-	-
Profit/(loss) on sale of discontinued operations					-	(10)	(10)
					-	-	-
Profit/(Loss) for the period and total comprehensive income attributable to equity holders of the parent company					(239)	(4)	(16)
Basic and diluted profit/(loss) per share:
From continued operations - pence				5	(1.75)	0.04	(0.05)
From discontinued operations - pence					-	(0.07)	(0.07)
Total Diluted (loss)/profit per share - pence					(1.75)	(0.03)	(0.12)

Consolidated statement of financial position

					30 Sept	30 Sept	31 Mar
					2016	2015	2016
				Note	£000	£000	£000
					Unaudited	Unaudited	Audited
Assets
Non-current assets
Property, plant and equipment					67	79	92
Deferred corporation tax asset					277	280	277
					344	359	369
Current assets
Inventories					7,879	7,420	7,550
Trade and other receivables				6	1,323	1,890	2,034
Cash and cash equivalents					1,154	1,619	1,309
					10,356	10,929	10,893
Total assets					10,700	11,288	11,262
Current liabilities
Trade and other payables				7	792	1,129	1,115
Loans and borrowings					-	-	-
Current corporation tax liabilities					-	-	-
Total current liabilities					792	1,129	1,115
Total liabilities					792	1,129	1,115
					-	-	-
Net assets					9,908	10,159	10,147
Equity and liabilities
Equity attributable to owners of the parent
Ordinary shares					136	136	136
Share Premium					9,516	9,516	9,516
Merger reserve					82	82	82
Retained earnings					174	425	413
Total equity					9,908	10,159	10,147
Net Asset Value per Share					72.8p	74.7p	74.6p

These interim financial statements were approved by the Board of Directors on 29 November 2016 and signed on its behalf by Simon Southwood.

Statement of changes in equity

			Share	Share	Merger	Retained	Total
			Capital	Premium	reserve	earnings	equity
			£000	£000	£000	£000	£000
Balance at 1 Apr 2014			132	9,458	82	1,109	10,781
Loss for the year from continued and discontinued operations			-	-	-	(188)	(188)
Total comprehensive income for the period			-	-	-	(188)	(188)
Shares issued in the period			4	58	-	-	62
Share-based payments			-	-	-	19	19
Dividends paid			-	-	-	(136)	(136)
Total contributions by owners of the parent			4	58	-	(117)	(55)
Balance at 30 Sept 2014			136	9,516	82	804	10,538
Loss for the year from continued and discontinued operations			-	-	-	(375)	(375)
Total comprehensive income for the period			-	-	-	(375)	(375)
Balance at 31 March 2015			136	9,516	82	429	10,163
Loss for the year from continued and discontinued operations			-	-	-	(4)	(4)
Total comprehensive income for the period			-	-	-	(4)	(4)
Balance at 30 Sept 2015			136	9,516	82	425	10,159
Loss for the year from continued and discontinued operations			-	-	-	(12)	(12)
Total comprehensive income for the period			-	-	-	(12)	(12)
Balance at 31 March 2016			136	9,516	82	413	10,147
Loss for the year from continued and discontinued operations			-	-	-	(239)	(239)
Total comprehensive income for the period			-	-	-	(239)	(239)
Balance at 30 Sept 2016			136	9,516	82	174	9,908

Consolidated statements of cashflows

					30 Sept	30 Sept	31 Mar
					2016	2015	2016
					£000	£000	£000
Cash flows from operating activities
(Loss)/profit before tax					(239)	(4)	(16)
Depreciation of property, plant and equipment					13	15	31
Reclassification of property, plant and equipment					19	-	-
Profit/(loss) on disposal of discontinued operation					-	18	(8)
					(207)	29	7
Decrease/(increase) in inventories					(329)	51	(79)
Decrease/(increase) in trade and other receivables					730	(196)	(337)
Increase/(decrease) in trade and other payables					(343)	(505)	(514)
					-	-	-
Net cash generated from operating activities					(149)	(621)	(923)
Cash flows from investing activities
Purchase of property, plant and equipment					(6)	(2)	(31)
Disposal of discontinued operation					-	120	146
Net cash used in investing activities					(6)	118	115
Cash flows from financing activities
Interest paid					-	-	(5)
Net cash (used)/generated from financing activities					-	-	(5)
Net increase/(decrease) in cash and cash equivalents					(155)	(503)	(813)
Cash and cash equivalents at the beginning of the year					1,309	2,122	2,122
Cash and cash equivalents at the end of the year					1,154	1,619	1,309

Notes

1.    General information   

Scholium Group plc and its subsidiaries (together 'the Group') are engaged in the trading and retailing of rare and antiquarian books and works on paper primarily in the United Kingdom. The Company is a public company domiciled and incorporated in England and Wales (registered number 08833975).The address of its registered office is 32 St George Street, London W1S 2EA.   

2.    Basis of preparation    

These condensed interim financial statements of the Group for the six months ended 30 September 2016 (the 'Period') have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest audited financial statements for the year ended 31 March 2016. Amendments made to IFRSs since 31 March 2016 have not had a material effect on the Group's results or financial position for the six-month period ended 30 September 2016. While the financial figures included within this half-yearly report have been computed in accordance with IFRSs applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as set out in International Accounting Standard 34 Interim Financial Reporting. These condensed interim financial statements have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 March 2016.The auditors' opinion on these Statutory Accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under s498 (2) or s498 (3) of the Companies Act 2006.

3.    Revenue

						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						Group	Group	Group
						£000	£000	£000
	Book Sales					2,126	3,309	6,727
	Commissions					1	11	15
	Other income					-	-	-
						2,127	3,320	6,742

4.    Income Tax

						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						£000	£000	£000
	Current tax (credit)/expense
	Current tax					-	-	-
	Deferred tax					-	-	-
	Origination and reversal of temporary differences					-	-	3
	Total tax expense					-	-	3
	The charge for the year can be reconciled
	to the profit/(loss) per the income statement as
	follows:
						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						£000	£000	£000
	Profit/(loss) before tax					(239)	(4)	(3)
	Applied corporation tax rates:					0	0	0
	Tax at the UK corporation tax rate of 20%:					(48)	0	(1)
	Expenses not deductible for tax purposes					-	-	1
	Non-provided deferred tax					48	-	-
	Origination and reversal of temporary differences					-	-	3
	Current tax charge					0	0	3

5.    Earnings/(Loss) per Share

						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						Group	Group	Group
						£000	£000	£000
	Profit/(loss) used in calculating basic and diluted earning
	per share attributable to the owners of the parent					(239)	6	(6)
	Profit/(loss) from discontinued operations					-	(10)	(10)
						(239)	(4)	(16)
	Number of shares
	'Weighted average number of shares for the purpose
	of basic and diluted earnings per share					13,600,000	13,600,000	13,600,000
	Basic (loss)/earnings per share from continuing
	operations (pence per share)					(1.75)	0.04	(0.05)
	'Basic (loss)/earnings per share from discontinued
	operations (pence per share)					-	(0.07)	(0.07)
	Total basic and diluted earnings per share - pence					(1.75)	(0.03)	(0.12)

Basic earnings per share amounts are calculated by dividing net (loss)/profit for the year or period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The Company has 704,000 potentially issuable shares all of which relate to share options issued in the year ended 31 March 2015 all of which have a strike price of 100p per share.  As a consequence, the number of basic and fully diluted shares in issue are equal.

No new shares were issued during the period, and the Company had 13.6 million shares in issue at the end of the period.

6.    Trade and Other Receivables

						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						Group	Group	Group
						£000	£000	£000
	Trade debtors					912	1,551	1,577
	Other debtors					39	28	15
	Prepayments and accrued income					372	311	442
						1,323	1,890	2,034

7.    Trade and Other Payables

						30 Sept	30 Sept	31 Mar
						2016	2015	2016
						Group	Group	Group
						£000	£000	£000
	Trade creditors					371	754	526
	Other taxes and social security					32	33	31
	Accruals and deferred income					204	184	460
	Other creditors					185	158	98
						792	1,129	1,115

 

END

 

 

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