RNS Number : 3614E
Money Debt & Credit Group Plc
26 September 2008
MONEY DEBT & CREDIT GROUP PLC
Unaudited Interim Results for the six months ended 30 June 2008
Money Debt & Credit Group PLC ("Money Debt & Credit Group" or "the Group") is a leading provider of financial solutions to over-indebted
individuals who are seeking to manage and reduce their debt burden in a responsible manner.
EXECUTIVE CHAIRMAN'S STATEMENT
Financial Overview
The trading environment in the first half of 2008 has continued to present opportunities and challenges for the Group.
Revenues have grown strongly. Turnover for the 26 week period to 30 June 2008 was �2.5m, an increase of �1.1m compared with the same
period in 2007. The Group made a loss of �868,000 in the period (2007: �1,778,000 loss.) Net cash inflow was �74,000 (2007: �465,000.)The
significant narrowing of the trading loss and the decline in the rate of cash utilisation represents further progress towards profitability
and positive cash flow for the Group. As at 30 June 2008, the Group was currently managing a portfolio of 2,325 active IVAs and 1,523 Debt
Management Plans (DMPs), building a firm base to achieve the Group's financial objectives.
The cash flows from the IVA business model were always likely to take at least 2 years to mature to the extent that they would cover
operating costs. The challenges faced by the debt solutions industry in the last 2 years undoubtedly made it more difficult than expected to
generate positive net cash flow from the IVA business. The need to broaden the Group's product range into Debt Management last year also
required significant investment, making it more difficult than expected to bridge this operating cash flow gap. However, the Group is now
benefiting from the annuity effect from its growing portfolio of debt solutions built over the last two years and consistent positive net
cash flow is within sight over the next 12 months.
We continue to see further opportunity to grow and develop our business, our infrastructure and our staff resources for the long term
and take investment decisions which will ultimately benefit investors, despite the fact that these decisions may reduce cash flow in the
very short term. The Group continues to have access to adequate cash resources to reach profitability and take advantage of these
opportunities.
I am pleased to report that the Group has now reached gross profitability, an important financial milestone and proof that our strategy
of investing and building our case load is set to deliver positive returns for shareholders. Further growth in our case load during the rest
of 2008, will position the Group for profitable trading for 2009.
Operating Review: IVA Business
The Group completed 873 new IVAs during the 6 months ended 30 June 2008, an increase of 28% compared with the same period in 2007. Fee
levels on new cases have stabilised and the Group is being selective in relation to case volumes and fee levels to ensure that only work
which can make a positive contribution to fixed costs and cash flow is undertaken.
The flow of new leads through our network of referral partners has continued to perform satisfactorily. However, the Group is mindful
that referral fees have to be sustainable and reflect the economic value provided by the partner. There is some evidence that higher
referral fees are on offer elsewhere in the market, but we believe this unrealistic pricing is unlikely to continue for long.
Ultimately, the businesses in the sector which will prosper will be those with the optimum marketing mix, the highest standards of
professional services to clients and creditors, the most efficient processes, and the lowest transaction costs. The Group believes it has
made significant progress in all these areas and the results are encouraging. In August 2008, the last full month for which data is
available, 193 new IVAs were agreed with creditors. In our forecasts for 2008, we set 200 IVAs as our monthly target and it is encouraging
to report a performance close to the budget level as our business model and our process continues to develop.
Operating Review: Debt Management Business
The Group took the decision in June last year to form its debt management subsidiary to address the growing demand for informal debt
solutions and the hardening of creditors' attitudes towards IVAs and fees. This investment decision was critical to the long term success of
the Group to ensure we could offer a full range of services to clients and reduce dependence on a single product. The debt management
business required significant investment in staff and infrastructure but I am pleased to report that this investment is now yielding a
positive contribution to the business and covering its direct costs. Monthly case volumes in debt management now regularly exceed those in
the IVA business.
In August 2008, the latest complete month for which data is available, 248 new DMPs were completed, a strong performance from our
recently re-organised and expanded team of debt management specialists.
We also see an opportunity to develop a Full & Final Settlement service alongside our debt management business. Full & Final Settlement
can be an appropriate solution for clients able to offer a lump sum to settle their debts but the offer to creditors needs to be
professionally constructed to meet the needs of all parties.
Strategy and Market Outlook
Whilst most of the Group's existing referral arrangements for prospective clients involve payments of referral fees only on satisfactory
completion of a debt solution, the Group is now working with a number of lead providers to purchase leads meeting strict criteria which are
expected to build into a valuable source of new business over the rest of 2008. The Group also plans to broaden its marketing mix in 2008/9
with a new on-line strategy and other direct routes to market to complement our referral programmes.
The official statistics on bankruptcies and IVAs appear to show little correlation with the numbers of individuals actively seeking help
to resolve debt problems. Debt enquires to the Citizens Advice Bureau are at an all time high, increasing by 20% in the last year and
bringing the total to 1.7 million in 2006/07. However, the Insolvency Service data for IVAs for Q2 2008 show a 3.2% decline in IVAs
completed compared with the previous quarter and a decrease of 12.4% on the corresponding quarter of the previous year.
This tends to point to an increase in non-statutory debt solutions such as debt management and refinancing and re-mortgaging which
benefits creditors in the short term as there is often no write-off of debt, merely a rescheduling of the term and the interest cost. Even
before the recent turmoil in the banking sector, the Governor of the Bank of England had indicated that the mortgage market was unlikely to
ever return to pre-credit crunch levels, when 100% mortgages or even higher loan-to-value multiples were commonplace to finance and
re-finance consumer debt.
Undoubtedly, the economic climate is continuing to develop in the Group's favour. There is growing evidence that the problems of
consumer debt are accelerating but at the same time there remains reluctance on the part of consumers and creditors to recognise the extent
of these problems and deal with them effectively. Economic slow-down or recession, combined with rising unemployment will inevitably force
these problems to be addressed probably in the next 12-18 months. The Group is particularly well placed to take advantage of this with our
highly trained and motivated workforce, infrastructure investment, marketing programmes and relationships with referral partners and
creditors.
I remain confident of reporting further significant progress for the Group in 2008.
Simon Johnson
Executive Chairman
INDEPENDENT REVIEW REPORT TO MONEY DEBT & CREDIT GROUP PLC
Introduction
We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30
June 2008 which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Statement of Changes in Shareholders'
Equity, Consolidated Cash Flow Statement and notes 1 to 6. We have read the other information contained in the half yearly financial report
which comprises only the Chairman's 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 guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim
Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the
company those matters we are required to state to them in a review 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 conclusion we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock
Exchange require that the accounting policies and presentation applied to the interim figures are consistent with those which will be
adopted in the annual accounts having regard to the accounting standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with the basis of preparation.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial 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 United
Kingdom. 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 financial information in the half-yearly
financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the basis of accounting
described in Note 1.
GRANT THORNTON UK LLP
Auditor
Hemel Hempstead
25 September 2008
CONSOLIDATED INCOME STATEMENTS
for the 6 months ended 30 June 2008
Unaudited Unaudited
6 month 6 month Audited
period period Year ended
ended ended 31 December
30 June 2008 30 June 2007 2007
�'000 �'000 �'000
Revenue 2,535 1,460 4,115
Cost of Sales (1,850) (1,843) (4,492)
Gross profit 685 (383) (377)
Administrative expenses (1,372) (1,322) (2,820)
Operating loss (687) (1,705) (3,197)
Interest payable (185) (115) (259)
Interest receivable 4 42 47
Loss before tax (868) (1,778) (3,409)
Tax - - -
Loss for the period (868) (1,778) (3,409)
Loss per share
Basic and diluted loss per 2.2p 4.4p 8.5p
ordinary share
CONSOLIDATED BALANCE SHEETS
as at 30 June 2008
Unaudited Unaudited Audited
As at As at Year ended
30 June 2008 30 June 2007 31 December
�'000 �'000 2007
�'000
Assets
Non-current assets
Property, plant & equipment 623 681 677
Total non-current assets 623 681 677
Current assets
Trade and other receivables 1,757 1,579 1,575
Cash and cash equivalents 74 465
Total current assets 1,831 2,044 1,575
Total assets 2,454 2,725 2,252
Equity and liabilities
Share capital 4,000 4,000 4,000
Share premium account 1,635 1,635 1,635
Merger reserve 4,200 4,200 4,200
Reverse acquisition reserve (7,000) (7,000) (7,000)
Retained loss (7,108) (4,609) (6,240)
Total equity (4,273) (1,774) (3,405)
Non-current financial
liabilities
Hire purchase obligations 220 274 246
Shareholder loan 4,615 3,216 3,714
Total non-current liabilities 4,835 3,490 3,960
Current liabilities
Trade & other payables 1,770 899 1561
Hire purchase obligations 122 110 132
Bank overdraft - - 4
Total current liabilities 1,892 1,009 1,697
Total liabilities 6,727 4,499 5,657
Total equity & liabilities 2,454 2,725 2,252
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the 6 months ended 30 June 2008
Reverse
Share Share Merger Retained Acquisi
Capit Premi Reserv Earnings tion
al um e �'000 Reserve Total
�'000 �'000 �'000 �'000 �'000
Balance as at
1 January 2007 4,000 1,635 4,200 (2,831) (7,000) 4
Loss for the period - - - (1,778) - (1,778)
Balance as at 4,000 1,635 4,200 (4,609) (7,000) (1,774)
30 June 2007
Loss for the period - - - (1,631) - (1,631)
Balance as at 4,000 1,635 4,200 (6,240) (7,000) (3,405)
31 December 2007
Loss for the period - - - (868) - (868)
Balance as at 4,000 1,635 4,200 (7,108) (7,000) (4,273)
30 June 2008
CONSOLIDATED CASH FLOW STATEMENTS
for the 6 months ended 30 June 2008
Unaudited Unaudited
6 month 6 month Audited
period period Year ended
ended ended 31 December
30 June 2008 30 June 2007 2007
�'000 �'000 �'000
Cash flows from operating
activities
Net loss before taxation (868) (1,778) (3,409)
Adjustments for:
Depreciation 102 85 187
Cost of raising equity share - - -
capital
Loss on sale of property, plant & 14
equipment
Interest payable 185 115 259
Interest received (5) (42) (47)
Cash used by operations before (586) (1,620) (2,996)
changes in working capital
Movement in trade and other (182) (421) (417)
receivables
Movement in trade and other 209 265 914
payables
Cash used by operating activities (559) (1,776) (2,499)
Cash flows from investing
activities
Finance Leases 30 - 361
Proceeds from sale of property, 13 - 49
plant and equipment
Purchase of property, plant and (62) - (460)
equipment
Net cash used in investing (19) - (50)
activities
Cash flows from financing
activities
Hire purchase principal repayments (66) (38) (93)
Proceeds from shareholder loan 731 - 518
Proceeds of issue of shares - - -
Costs of share issue - - -
Interest receivable 5 42 47
Interest payable (14) (95) (259)
Net cash from financing activities 656 (91) 213
Net (decrease)/increase in cash 78 (1,867) (2,336)
and cash equivalents
Cash and cash equivalents at (4) 2,332 2,332
beginning of the period
Cash and cash equivalents at the 74 465 (4)
end of the period
NOTES TO THE INTERIM ACCOUNTS
1. Basis of Preparation
The accounts of the Group for the half year ended 30 June 2008 were approved by the Board on 25 September 2008. The interim financial
statements for the six months ended 30 June 2008 are unaudited and do not constitute statutory accounts as defined under S240 of the
Companies Act 1985. The interim financial statements have been prepared in accordance with applicable accounting standards and are
consistent with those adopted and disclosed in the Group's statutory accounts for the year ended 31 December 2007.
The comparative information for the year ended 31 December 2007 has been extracted from the statutory accounts for that year. These
accounts received an unqualified audit report and did not contain a statement made under sections 237(2) or (3) (accounting records or
returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the
Companies Act 1985. These accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of
Companies.
This interim report has been prepared in accordance with the recognition and measurements requirements of those IFRSs as adopted by the
EU expected to be applicable to the financial statements for the year ended 31 December 2008 and with the AIM listing rules.
2. Loss per Share
The earnings per share (basic) has been calculated using the loss for the period of �867,862 and a weighted average number of ordinary
shares in issue during the six month period from 1 January 2008 to 30 June 2008 of 40,000,000.
The share options currently in issue are options over existing shares held by the Directors and are deemed to be anti-dilutive.
3. Comparative Figures
The comparative figures represent the unaudited results for the six month period to 30 June 2007 and the audited results for the year
ended 31 December 2007.
4. Related Party Transactions
During the period, interest of �171,193 was accrued on the loan from Simon Johnson and interest of �187,478 was paid.
Included within current liabilities is an accrual of �403,260 in respect of salary due but not paid to Directors at 30 June 2008.
The Group paid �8,727 to Michael Bartman the father of Jon Bartman for data collection services.
5. Going Concern
After making enquiries, examining revenue and expenditure projections and cash flow forecasts,
and taking into consideration the facilities available to the Group, the Directors have a reasonable
expectation that the Group has access to adequate resources to continue in operational
existence for the foreseeable future, being at least 12 months from the date of approval of the financial statements. For this reason
they continue to adopt the going concern basis in preparing
the financial statements.
6. Distribution of the Interim Report
Copies of the Interim Report are being sent to shareholders. Further copies of the Interim and Annual Report and Accounts may be
obtained from the Company Secretary at the registered office: 45 Clarendon Road, Watford WD17 1SZ. In addition, an electronic version will
be available on the Company's website:
http://www.moneydebtandcredit.com/investor-relations
Enquiries:
Money Debt & Credit Group plc
Jon Bartman, Chief Executive Officer Tel: 01923 636800
Money Debt & Credit Group plc
Gerard Kelly, Finance Director Tel: 01923 636800
Smith & Williamson Corporate Finance Limited
David Abbott, Director Tel: 0117 376 2213
This information is provided by RNS
The company news service from the London Stock Exchange
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