Source - RNS
RNS Number : 7501K
City Of London Group PLC
26 September 2016
 

 

 

26 September 2016

 

City of London Group plc ("COLG" or "the Company" or "the Group")

 

Preliminary announcement of final results

 

The Company announces its audited final results for the year ended 31 March 2016.

 

Key points

 

Business developments

·     Litigation funding associate, Therium sold in April 2015 for a profit of £1.4m

·     Credit Asset Management Limited ("CAML") raised £5m in 7% preference shares in July and completed a restructuring resulting in COLG increasing its interest in CAML from 51% to 85%

·     Company raised £5m (before expenses) and transferred to AIM in October 2015

·     Company applied £2m of net proceeds in buying 7% preference shares in CAML and repaid debt with the balance

·     CAML increases its portfolio of owned and managed funds overall by 31% to £21.3m at year end

·     Wider strategic options for CAML are being examined to help it achieve scale.   This may result in the sale of the business.

·     Following a significant deterioration in its financial position, Trade Finance Partners Limited ("TFPL") ceased undertaking new business in the second half of the year and is now focused on recovering advances

 

Financial results

·     Loss before tax £6.8m after losses of £7.2m relating to TFPL and a profit of £1.4m on the sale of Therium  (2015: loss before tax £1.6m)

·     NAV per share of the Company 6p (2015: 42p)

·     Consolidated NAV per share attributable to shareholders 6p (2015: 28p)

 

For further information:

 

 

 

 

City of London Group plc

 

Paul Milner (Chairman)

+44 (0)20 7634 9811

 

 

Peel Hunt LLP (Nominated Adviser and Broker)

 

James Britton

+44 (0)20 7418 8900

Guy Wiehahn

 

             

 

 

 

 

Notes to Editors:

 

 

City of London Group plc ("COLG" or "the Company") is quoted on AIM (LSE: CIN) and is an investment company focused on providing finance to the SME sector, including professional service firms. It does this through investments in companies providing lease finance and loan finance.

 

 

www.cityoflondongroup.com 

 

 

 

 

 

Business review

 

Overview

The objectives for the year remained consistent: to improve financial performance, to address the need for growth capital, and to simplify the Group through the disposal and orderly wind down of non-core activities.

 

While some objectives were achieved, the position of the Group has been materially affected by the deterioration in the financial position of its associate TFPL, which became apparent in the second half of the year. As a result, full provision has been made against the Group's equity and loan investments in TFPL, resulting in a charge of £6.3m.

 

The results for the Group show a loss before tax of £6.8m (2015: loss of £1.6m), which includes losses of £7.2m relating to TFPL (for impairment of the Group's investments and its share of losses) and a profit of £1.4m arising on the sale of Therium.

 

The sale of our non-core activity Therium and its associated entities was completed in April 2015 for a total consideration of £3.4m of which £1.75m was received in cash with the balance being deferred. Part of the balance was received during the year, with £1.2m being receivable over the period to April 2017. The disposal gave rise to a profit of £1.4m in the Group results.

 

Our lease and professions funding platform was restructured in July 2015. As part of this capital restructuring, CAML issued £5m 7% redeemable preference shares for cash to a third party. This additional capital assisted CAML to grow its portfolio of SME leases and loans to £13.7m at year end (being both CAML's and PFL's own books), from £6.6m prior to these funds becoming available. CAML continued to demonstrate strong growth until the events at TFPL further impacted the availability of funds. As a result the Board is now looking at wider strategic options for CAML to help it achieve scale, including the addition of potential investors or a sale of the business and/or loan book.

 

In October 2015, the Company raised a net amount of £4.5m by way of a placing of ordinary shares. The proceeds were used to pay down debt and to purchase £2m of the CAML 7% redeemable preference shares issued in July from the third party.

 

As part of the Group's strategy to contain costs, the Company cancelled its listing on the main market of the London Stock Exchange on 19 October 2015 and since that date the ordinary shares have been traded on the Alternative Investment Market ("AIM").

 

In light of the events at TFPL and knock on implications for CAML, the Group is now focused on maximising recoveries on its remaining investments.

 

TFPL

In the first half of the year, the Group's associate, TFPL, underwent a period of consolidation following management changes, which included the appointment of a new co-CEO and the departure of the Commercial Director, with a modest increase in the half year revenue and gross profit.

 

 

However, the financial position deteriorated sharply in the second half of the year after TFPL's principal secured lender, Macquarie, which also has a large equity holding, restricted the scope of business it would consider funding and TFPL identified a number of advances which were significantly impaired. Since the resignation of the TFPL directors appointed by Macquarie in November 2015, TFPL has focused on recovering its existing advances. The TFPL directors appointed by the Company resigned in March 2016.

 

With the change in its activities, TFPL has cut its cost base with staff numbers reducing progressively from 24 to 11 at the year end and now to a single operations director who is working to maximise recovery of advances. There are likely to be minimal, if any, amounts available for equity and loan note holders or other unsecured creditors.

 

While the effective failure of TFPL is very disappointing, as it is a stand-alone business with no cross-guarantees or other financial obligations from either COLG or CAML, the Group is insulated from the problems specific to this investment.

 

COLG increased its shareholding in TFPL from 44% to 48.9% at the beginning of the financial year when it acquired shares from a minority shareholder under the terms of the shareholder agreement.

 

CAML and Professions Funding Limited ("PFL")

CAML undertook a significant capital restructuring in July 2015 when it acquired PFL from the Company in exchange for the issue of shares in CAML, so increasing the Group's shareholding in CAML from 51% to 85%. At the same time CAML issued £5m 7% redeemable preference shares for cash to a third party: the Company subsequently acquired £2m of these redeemable preference shares.

 

The restructured balance sheet assisted in the growth of CAML and PFL's own lease and loan books to £13.7m at 31 March 2016 (2015: £3.8m). In spite of this increase in its net investment portfolio CAML and PFL's consolidated results show a loss before tax of £0.5m (2015: £0.3m), with the business needing further investment and growth of its investment portfolio to reach a break even position.

 

With the need for expansion and further requirements for external funding to meet this objective, the business has begun to scale back its operations in both its cost base and its lending in the SME loan and lease markets. This is due to the business being constrained by the capital available, partly due to concerns surrounding the events at TFPL and wider implications for COLG, whilst wider strategic options for CAML to achieve scale are considered.

 

COLG

The results of the Company for the year were impacted materially by the impairment of the Group's investment in TFPL. The loss of £10.7m (2015: loss of £1.1m) includes provisions for impairment of £7.2m relating to TFPL and £2.8m relating to CAML.

 

The two executive directors reduced their time commitment to the Company following the completion of the share placing in October 2015. Howard Goodbourn, the finance director, resigned in March 2016 and John Kent, the chief executive, resigned in April 2016.

 

Dividend

The Board does not recommend payment of a dividend.

 

Outlook

The parent company has continued to incur costs but with the changes to the Group structure and the impairment of the TFPL investment the focus of the Group is on maximising the recoveries of the remaining investments having taken a strategic view on the future of CAML and PFL, and recognising the challenges of finding the necessary funding to realise the underlying value of CAML within the current ownership structure.

 

 

 

 

Paul Milner

Chairman

23 September 2016

 

 

This report may contain certain statements about future outlook for COLG and its subsidiaries and associates. Although the directors believe their expectations are based on reasonable assumptions, any statements about the future outlook may be influenced by factors that could cause actual outcomes to be materially different. Such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking statements.

 

This report has been drawn up and presented with the purpose of complying with English law. Any liability arising out of or in connection with this report will be determined in accordance with English law.

 

 

 

 

 

 

 

Consolidated income statement

for the year ended 31 March 2016

 

 

 

31 March 2016 £'000

31 March 2015

£'000

 

 

Note

 

Continuing operations

 

Discontinued operations*

Revenue

 

2,534

1,769

 

585

Cost of sales

 

(51)

(64)

 

(571)

Gross profit

 

2,483

1,705

 

14

Administrative expenses

5

(2,512)

(2,159)

 

(11)

Profit/(loss) on sale of investments

 

2

(39)

 

-

Provision for impairment of investments

 

(51)

(99)

 

-

Loss on legal case investments

 

-

(411)

 

-

Profit on the disposal of assets classified as held for sale

 

 

1,398

 

-

 

 

-

Share of profits and losses of associates

 

(898)

(27)

 

-

Provision for impairment of the investment in and amounts owed by TFPL

 

 

(6,260)

 

-

 

 

-

Other income

 

326

316

 

-

(Loss)/profit from operations

 

(5,512)

(714)

 

3

Finance expense

 

(1,252)

(867)

 

-

(Loss)/profit before tax

 

(6,764)

(1,581)

 

3

Corporation tax

9

-

-

 

-

(Loss)/profit after tax

 

(6,764)

(1,581)

 

3

Profit after tax from discontinued operations

 

 

-

 

3

 

 

Loss for the year

 

(6,764)

(1,578)

 

 

 

Loss for the year attributable to:

 

 

 

 

 

Owners of the parent

 

(6,646)

(1,418)

 

2

Non-controlling interests

 

(118)

(163)

 

1

 

 

(6,764)

(1,581)

 

3

 

 

-

3

 

 

Loss for the year

 

(6,764)

(1,578)

 

 

Basic and diluted earnings per share attributable to owners of the parent:

 

 

 

 

 

Continuing operations

2

(24.36)p

(7.17)p

 

 

Discontinued operations

2

-

0.01p

 

 

Total

2

(24.36)p

(7.16)p

 

 

             

 

*  Discontinued operations in 2015 comprised the consolidated results of TFP Trading Company Limited up to 31 December 2014 when the shares owned by the Company were sold to its associate, TFPL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income

for the year ended 31 March 2016

 

 

31 March 2016

£'000

31 March 2015

£'000

Loss for the year from continuing operations

(6,764)

(1,581)

Profit for the year from discontinued operations

-

3

Total loss for the year

(6,764)

(1,578)

 

Other comprehensive income/(expense) from continuing operations

Items that will or may be reclassified to profit or loss 'Available-for-sale' financial assets


- Valuation losses taken on equity investments

 

 

 

 

 

 

(20)

 

 

 

 

 

 

(57)

- Provision for impairment transferred to income statement

51

90

- (Profit)/ loss on sale transferred to income statement

(2)

55

Other comprehensive income from continuing operations

29

88

Total other comprehensive income

29

88

 

Total comprehensive expense from continuing operations

 

(6,735)

 

(1,493)

Total comprehensive income from discontinued operations

-

3

Total comprehensive expense

(6,735)

(1,490)

 

Total comprehensive expense attributable to:

Owners of the parent

 

 

 

(6,617)

 

 

 

(1,328)

Non-controlling interests

(118)

(162)

 

(6,735)

(1,490)

 

 

Consolidated statement of changes in equity

 

 

Attributable to owners of the parent company

 

 

 

 

Fair value reserve

£'000

Accumulated

losses

£'000

Share

premium

£'000

Share capital

£'000

Total

£'000

Attributable to non-controlling

interests

£'000

 

Total equity

£'000

At 31 March 2014

(193)

(6,512)

11,497

2,021

6,813

(986)

5,827

'Available-for-sale' investments

 

 

 

 

 

 

 

- Valuation gains/(losses) taken to equity

(57)

-

-

-

(57)

-

(57)

- Provision for impairment transferred to income statement

 

90

 

-

 

-

 

-

 

90

 

-

 

90

- Loss on sale transferred to income statement

55

-

-

-

55

55

Net income recognised directly in equity

88

-

-

-

88

-

88

Loss for the year - continuing operations

-

(1,418)

-

-

(1,418)

(163)

(1,581)

Profit for the year - discontinued operations

-

2

-

-

2

1

3

Total comprehensive income

88

(1,416)

-

-

(1,328)

(162)

(1,490)

Contributions by and distributions to owners

 

 

 

 

 

 

 

Value of employee services

-

40

-

-

40

-

40

Total contributions by and distributions to owners

-

40

-

-

40

-

40

Transfer on sale of subsidiary (note 26)

-

-

-

-

-

(6)

(6)

At 31 March 2015

(105)

(7,888)

11,497

2,021

5,525

(1,154)

4,371

'Available-for-sale' investments

 

 

 

 

 

 

 

- Valuation gains/(losses) taken to equity

(20)

-

-

-

(20)

-

(20)

- Provision for impairment transferred to income statement

 

51

 

-

 

-

 

-

 

51

 

-

 

51

- Profit on sale transferred to income statement

(2)

-

-

-

(2)

(2)

Net income recognised directly in equity

29

-

-

-

29

-

29

Loss for the year - continuing operations

-

(6,646)

-

-

(6,646)

(118)

(6,764)

Total comprehensive income

29

(6,646)

-

-

(6,617)

(118)

(6,735)

Contributions by and distributions to owners

 

 

 

 

 

 

 

Value of employee services

-

20

-

-

20

-

20

Issue of shares

-

-

2,835

1,664

4,499

-

4,499

Total contributions by and distributions to owners

-

20

2,835

1,664

5,519

-

5,519

Reduction in non-controlling interests (note 26)

-

(1,218)

-

-

(1,218)

1,172

(46)

At 31 March 2016

(76)

(15,732)

14,332

3,685

2,209

(100)

2,109

 

(i)            The fair value reserve shows the movement in the fair value of the 'available-for-sale' financial assets.

 

 

 

Consolidated balance sheet

as at 31 March 2016

 

 

 

Notes

31 March 2016

£'000

31 March 2015

£'000

Assets

 

 

 

Non-current assets

Intangible assets

 

 

-

 

46

Property, plant and equipment

 

27

40

'Available-for-sale' financial assets

7

151

177

Interests in associates

 

146

890

Legal case investments

 

138

232

Loans

 

9,005

10,613

Finance leases

 

2,477

970

Total non-current assets

 

11,944

12,968

 

Current assets

Loans

 

 

 

5,446

 

 

1,656

Finance leases

 

1,635

676

Trade and other receivables

 

810

903

Cash and cash equivalents

 

2,497

1,221

 

 

10,388

4,456

Assets classified as held for sale

 

-

1,831

Total current assets

 

10,388

6,287

Total assets

 

22,332

19,255

 

Current liabilities

Borrowings

 

 

 

(3,935)

 

 

(1,688)

Trade and other payables

 

(3,051)

(1,737)

Total current liabilities

 

(6,986)

(3,425)

 

Non-current liabilities

Borrowings

 

 

 

(13,237)

 

 

(11,459)

Total non-current liabilities

 

(13,237)

(11,459)

Total liabilities

 

(20,223)

(14,884)

 

Net assets

 

 

2,109

 

4,371

 

Equity

Share capital

 

 

8

 

 

3,685

 

 

2,021

Share premium

 

14,332

11,497

Accumulated losses

 

(15,732)

(7,888)

Fair value reserve

 

(76)

(105)

Equity attributable to owners of the parent

 

2,209

5,525

Non-controlling interests

 

(100)

(1,154)

Total equity

 

2,109

4,371

 

 

 

 

 

 

 

Consolidated statement of cash flows

for the year ended 31 March 2016

 

 

31 March 2016

£'000

31 March 2015

 £'000

Cash flows from operating activities

 

 

Loss before tax

(6,764)

(1,578)

 

 

 

Adjustments for:

 

 

Depreciation and amortisation

36

69

Share-based payments

20

40

Impairment of 'available-for-sale' financial assets

51

99

(Profit)/loss on disposal of 'available-for-sale' financial assets 

(2)

48

Profit on disposal of subsidiary

-

(9)

Loss on legal case investments

-

411

Loss on disposal of fixed assets

-

1

Share of profits and losses of associates

898

27

Provision for impairment of the investment in and amounts owed by TFPL

6,260

-

Profit on the disposal of assets classified as held for sale

(1,398)

-

Interest payable

1,252

867

Changes in working capital:

 

 

(Increase) in trade and other receivables

(724)

(1,090)

Increase/ (decrease) in trade and other payables

1,334

(1,458)

Purchase of non-current investments

-

(14)

Proceeds from sale of 'available-for-sale' financial assets

5

188

Leases advanced

(4,118)

(1,127)

Leases repaid

1,702

1,344

Loans advanced

(15,875)

(2,514)

Loans advanced to related parties

-

(1,558)

Loans repaid

8,958

2,619

Loans repaid by related parties

300

285

Cash used in operations

(8,065)

(3,350)

Corporation tax

-

-

Net cash used in operating activities

(8,065)

(3,350)

 

 

 

Cash flow from investing activities

 

 

Disposal of assets classified as held for sale, including part repayment of deferred consideration

2,216

-

Return of seed capital in legal case investments

94

-

Distribution of profits from related parties

39

-

Purchase of property, plant and equipment

(23)

(8)

Loss of control of subsidiary

-

(310)

Purchase of preference shares in subsidiary

(2,010)

-

Purchase of additional shares in related company

(193)

-

 

 

 

Net cash generated from/ (used in) investing activities

123

(318)

 

 

 

 

 

31 March 2016

 £'000

31 March 2015

 £'000

 

 

 

Cash flow from financing activities

 

 

Proceeds from issue of ordinary shares

4,499

-

Proceeds from the issue of preference shares by subsidiary

5,000

-

Loans drawn down

17,888

5,307

Repayment of loans

(16,863)

(3,503)

Interest paid

(1,306)

(698)

Net cash from financing activities

9,218

1,106

 

 

 

Net increase/ (decrease) in cash and cash equivalents

1,276

(2,562)

Cash and cash equivalents brought forward

1,221

3,783

Net cash and cash equivalents

2,497

1,221

 

 

 

Cash and cash equivalents

2,497

1,221

Bank overdraft

-

-

Net cash and cash equivalents

2,497

1,221

 

 

 

Operating, investing and financing activities are categorised as follows:

 

 

Net cash used in operating activities

 

 

Continuing operations

(8,065)

(3,398)

Discontinued operations

-

48

 

(8,065)

(3,350)

Net cash from/ (used in) investing activities

 

 

Continuing operations

123

(8)

Discontinued operations

-

(310)

 

123

(318)

Net cash from financing activities

 

 

Continuing operations

9,218

1,106

Discontinued operations

-

-

 

9,218

1,106

 

 

Notes

 

1 Basis of preparation

 

1.1 Preliminary announcement

The financial information contained in this preliminary announcement does not constitute full accounts as defined in section 434 of the Companies Act 2006 and has been extracted from the statutory accounts for the year ended 31 March 2016.   The auditors have issued an unqualified report on these statutory accounts.   The statutory accounts for the year ended 31 March 2015 have been filed with the Registrar of Companies and the statutory accounts for the year ended 31 March 2016 will be filed with the Registrar of Companies in due course.

 

This announcement has been prepared using recognition and measurement principles of IFRS as endorsed for use in the European Union (IFRS).  This announcement does not contain sufficient information to comply with IFRS.

 

The same accounting and presentation policies were used in the preparation of the statutory accounts for the year ended 31 March 2015 except as stated below in sections 1.2 and 1.3.

 

1.2 Adoption of new standards and interpretations

The following amendments to existing standards became effective for the first time in the financial statements for the year ended 31 March 2016:

 IFRS 8 - (Annual improvements) - Operating Segments; and

IFRS 13 - (Annual improvements) - Fair Value Measurement

 

Neither has a material effect on the disclosures or presentation of information in the financial statements.

 

1.3 Presentation changes

Discontinued operations

In December 2014 the Company sold its 51% equity investment in TFP Trading Company Limited ("TFP Trading") to its associate Trade Finance Partners Limited ("TFPL") for £9,947. At that date TFP Trading ceased to be a subsidiary of the Group and became an associate, as it was then wholly owned by TFPL. Under IFRS 5 TFP Trading was required to be classified as a "discontinued operation" in the consolidated financial statements. The results of TFP Trading for that year (up to the date when it ceased to be a subsidiary) were classified as discontinued operations and were shown separately in the consolidated income statement.

 

2 Earnings per share

 

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year less those held in treasury and in the Employee Benefit Trust.   426,996 shares were held by the Employee Benefit Trust at 31 March 2016 (2015: 426,996).   The calculation of the basic and diluted earnings per share divides the loss by the weighted average number of shares of 27,284,000 (2015: 19,780,000).

 

3 Dividends

 

The directors do not recommend payment of a final dividend (2015: nil).

 

 

4 Segmental reporting

 

A reportable segment is identified based on the nature and size of its business and risk specific to its operations. It is reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the full Board of the Company.

 

The Group is managed through its operating platforms: lease and professions financing, trade financing, and legal case funding. The COLG segment includes the Group's central functions and an investment portfolio.

 

 

Pre-tax profit and loss

For the year ended 31 March 2016

 

Revenue

£'000

Operating profit/(loss)

£'000

 

 

Profit on the disposal of assets classified as held for sale

£'000

TFPL Provisions and share of profits and losses of associates

£'000

Finance expense

£'000

Profit/(loss) before tax

£'000

COLG

 

 

 

 

 

 

Intra-Group

689

789

 

 

(166)

623

Other

18

(897)

(158)

(6,260)

(180)

(7,495)

 

(108)

(158)

(6,260)

(346)

(6,872)

Platforms

 

 

 

 

 

 

Trade financing -TFPL *

468

489

 

(940)

(489)

(940)

Lease and professions financing

 

 

 

 

 

 

CAML/ PFL

1,734

215

 

-

(756)

(541)

Other

426

426

 

42

(466)

2

Legal case funding

4

(3)

 

-

-

(3)

Other

-

34

 

-

-

34

Intra-Group

(805)

(805)

 

-

805

-

Others

 

 

 

 

 

 

Assets classified as held for sale

-

-

 

1,556

-

-

1,556

 

2,534

248

1,398

(7,158)

(1,252)

(6,764)

Continuing operations

248

1,398

(7,158)

(1,252)

(6,764)

Discontinued operations

-

-

-

-

-

-

 

2,534

248

1,398

(7,158)

(1,252)

(6,764)

               

* Revenue represents interest earned on loans to Trade Finance Partners Limited.

The Loss from operations in the Consolidated income statement of £5,512,000 is the sum of £248,000 and £1,398,000 less £7,158,000 as shown above.

 

Pre-tax profit and loss

For the year ended 31 March 2015

 

 

Revenue
 

£'000

Operating
 (loss)/profit

£'000

Share of profits and losses of associates

£'000

Finance expense
 

£'000

Pre-tax
 (loss)/profit

£'000

COLG

Investment portfolio

-

(138)

 

-

(138)

 

Legal case investments

-

(411)

 

-

(411)

 

Intra-Group

766

841

 

(122)

719

 

Other

33

(1,063)

 

(276)

(1,339)

 

 

799

(771)

 

(398)

(1,169)

Platforms

Trade financing - TFPL *

432

431

(110)

(431)

(110)

 

Trade financing - other

585

3

-

-

3

 

Lease and professions financing

1,371

503

83

(870)

(284)

 

Legal case funding

55

5

-

(56)

(51)

 

Other

-

33

-

-

33

 

Intra-Group

(888)

(888)

-

888

-

 

 

2,354

(684)

(27)

(867)

(1,578)

 

Continuing operations

1,769

(687)

(27)

(867)

(1,581)

 

Discontinued operations

585

3

-

-

3

 

 

2,354

(684)

(27)

(867)

(1,578)

* Revenue represents interest earned on loans to Trade Finance Partners Limited.

The Loss from operations in the Consolidated income statement of £711,000 is the sum of £684,000 and £27,000 shown above.

The revenue in Trade financing -other arose from one customer.

 

 

Consolidated Net Assets

For the year ended 31 March 2016

 

 

£'000

Total

£'000

COLG

'Available-for-sale' financial assets

 

151

 

Legal case investments

 

138

 

 

 

 

Platforms

Lease and professions financing

2,010

 

 

Other

150

 

 

 

 

2,160

 

Net liabilities

 

(313)

Net assets per entity balance sheet

 

2,136

Other net liabilities of subsidiary companies

 

(27)

Consolidated net assets

 

2,109

 

Consolidated Net Assets

For the year ended 31 March 2015

 

 

£'000

Total

£'000

COLG

'Available-for-sale' financial assets

 

177

 

Legal case investments

 

232

 

Assets classified as held for sale

 

3,388

 

 

 

 

Platforms

Trade financing

6,154

 

 

Lease and professions financing

2,480

 

 

Legal case funding

158

 

 

Other

150

 

 

 

 

8,942

 

Net liabilities

 

(4,477)

Net assets per entity balance sheet

 

8,262

Other net liabilities of subsidiary companies

 

(3,891)

Consolidated net assets

 

4,371

 

The Board reviews the assets and liabilities of the Group on a net basis.

 

 

 

 

5 Administrative expenses

 

 

 

31 March 2016
£'000

31 March 2015
£'000

Staff costs

 

 

Payroll

1,415

1,067

Other staff costs

69

37

Establishment costs

 

 

Property costs

234

253

Other

444

277

Auditor's remuneration (see below)

89

126

Legal fees

17

24

Consultancy fees

98

165

Other professional fees

108

164

Depreciation

36

67

Amortisation

-

2

Foreign exchange (gain) / loss

2

(12)

Total

2,512

2,170

Total from continuing operations

2,512

2,159

Total from discontinued operations

-

11

Total administrative expenses

2,512

2,170

 

Auditor's remuneration

31 March 2016
£'000

31 March 2015
£'000

Fees payable to the Company's auditor for the audit of the parent company's
annual financial statements

35

38

Fees payable to the Company's auditors for other services:

 

 

The audit of subsidiaries pursuant to legislation

32

53

Audit related assurance services

2

12

Tax services

20

23

Total

89

126

Continuing operations

89

126

Discontinued operations

-

-

Total fees

89

126

 

 

 

 

6 Related party transactions and directors' remuneration

 

Directors' emoluments are disclosed in the directors' remuneration report. The aggregate emoluments paid to directors during the year were £332,535 (2015: £222,548) and there were no awards under the incentive scheme for 2015/16 (2015: nil). There are no other persons having the authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. Accordingly, the aggregate amounts payable to directors equate to the aggregate compensation to key management personnel. As all directors' emoluments are paid by the Company, the figure relates both to the Company and the Group.

 

Tables that summarise the main related party balances and transactions for both the Company and the Group are included in the financial statements to 31 March 2016.

 

A summary of the total remuneration for directors is given below:

 

Executive directors

 

John Kent

Howard Goodbourn

 
 

2016

£

2015

£

2016

£

2015

£

 

Salary

105,571

84,975

83,835

78,494

 

Payment in lieu of notice

-

-

41,358

-

 

Compensation for loss of office

-

-

30,000

-

 

All taxable benefits

2,244

2,129

2,167

1,950

 

Total

107,815

87,104

157,360

80,444

 

 

 

Non-Executive directors

 

Year ended

31 March 2016

£

Year ended

31 March 2015

£

Paul Milner

27,500

27,500

Andrew Crossley (a)

12,360

-

Andrew Crowe

27,500

27,500

 

(a)   The remuneration for A Crossley, who was appointed on 19 October 2015, was paid to Stockdale Securities Ltd.

 

 

 

Group related parties

The transactions of Group companies with related parties included:

 

Transactions of the Company

 

The Company purchased £2,000,000 of 7% preference shares in Credit Asset Management Limited at par for cash in November 2015 from Citymain Investments Limited, a related party of the Company.

 

 

 

Charged by City of London Group plc in year

Charged to City of London Group plc in year

Loans due to City of London Group plc at year end

Other amounts due to City of London Group plc at year end

Provision for other amounts due to City of London Group plc at year end

 

£'000

£'000

£'000

£'000

£'000

 

Year ended 31 March 2016

 

 

 

 

 

 

Trade Finance Partners Limited

211

-

-

123

(123)

Year ended 31 March 2015

 

 

 

 

 

 

Trade Finance Partners Limited

179

-

-

-

--

Therium Capital Management Limited

40

27

1,180

438

--

 

 

Transactions of other Group companies

 

 

Interest charged by Group  in year

Loans due to Group at year end

Provision for loans due to Group at year end

Other amounts due to Group at year end

Provision for other amounts due to Group at year end

 

£'000

£'000

£'000

£'000

£'000

Year ended 31 March 2016

 

 

 

 

 

Trade Finance Partners Limited

468

5,881

(5,881)

276

(276)

COLG SME Loans LP

105

1,500

-

26

-

COLG SME LP

204

2,750

-

48

-

Year ended 31 March 2015

 

 

 

 

 

Trade Finance Partners Limited

432

5,429

-

260

-

Novitas Futures Limited

37

108

-

61

-

Novitas Loans Limited

6

-

-

-

-

COLG SME Loans LP

105

1,500

-

26

-

COLG SME LP

175

3,050

-

49

-

 

 

 

7 'Available-for-sale' assets

 

Securities

31 March 2016
£'000

31 March 2015
£'000

Listed

 

 

Equity securities - UK

137

130

Equity securities - USA and Canada

1

3

Total listed

138

133

Unlisted securities

 

 

Equity securities traded on inactive markets

13

44

Total unlisted

13

44

 

151

177

 

 

8 Called-up share capital

Allotted, called up and fully paid

31 March 2016

£'000

31 March 2015

£'000

36,852,681 (2015: 20,206,617) ordinary shares of £0.10

3,685

2,021

 

The Company did not hold any shares in treasury at 31 March 2016 (2015: nil).   426,996 shares were held by the Employee Benefit Trust at 31 March 2016 (2015: 426,996).   The Company did not purchase any shares from the Trust during the year (2015: nil).

 

On 19 October 2015, the Company issued 16,646,064 new ordinary shares of 10p each for cash by way of a placing. Costs of £494,567 were incurred in relation to the issue of these shares, which have been offset against the Company's share premium.

 

 

9 Corporation tax

 

 

31 March 2016
£'000

31 March 2015
£'000

UK corporation tax

 

 

Current year charge

-

-

Total for continuing operations

-

-

Total for discontinued operations

-

-

Total UK corporation tax

-

-

 

 

 

Deferred tax

 

 

Total for continuing operations

-

-

Total for discontinued operations

-

-

Total tax (credit) / charge

-

-

 

 

 

Factors affecting the tax charge for the year

The tax charge for the year differs from the theoretical amount that would arise using the standard rate of corporation tax in the UK, which is 20% (2015: 21%). The differences are explained below.

Tax reconciliation

31 March 2016
£'000

31 March 2015
£'000

Loss before tax

(6,764)

(1,578)

 

 

 

At standard rate of corporation tax in the UK:

(1,353)

(331)

Effects of

 

 

Depreciation (less than)/ in excess of capital allowances

(1)

6

Items not deductible for tax purposes

1,273

41

Non-taxed dividend income

(1)

(1)

Movement on unrecorded deferred tax asset

82

285

 

-

-

 

Deferred tax

Total unrecognised deferred tax assets of the Group were £2,330,000 (2015: £1,709,000).

 

 

10 Financial instruments - price risk

 

The Group is subject to price risk on its 'available-for-sale' financial assets, including its legal case investments as well as its portfolio of financial assets. There is a concentration risk in the natural resources and technology sectors as the majority of the investment portfolio of £151,000 is invested in these sectors. At 31 March 2016, 9% of the Group's portfolio was invested in unlisted equity securities. There is no material sensitivity on the valuation of the 'available-for-sale' financial assets and the legal case investments.

 

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

 

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

 

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly

 

Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

 

The fair value of listed financial assets is established by reference to current bid market prices.

 

The fair value of unlisted investments is determined using appropriate valuation techniques.

 

The fair value of investments in legal funds is taken to be cost as at the balance sheet date there was not a sufficient track record on which to base a valuation. Due to their short maturity profiles, management is of the opinion that there is no material difference between the fair value and carrying value of trade and other receivables, cash and cash equivalents, and trade and other payables. The directors therefore consider that the carrying value of financial instruments equates to fair value.

 

 

 

The following table presents the Group's assets that are measured at fair value at 31 March 2016:

 

 

Level 1
£'000

Level 3

£'000

Total
£'000

'Available-for-sale' financial assets

 

 

 

Equity securities

138

13

151

Legal case investments

-

138

138

 

138

151

289

 

The following table presents the Group's assets that are measured at fair value at 31 March 2015:

 

 

Level 1
£'000

Level 3

£'000

Total

£'000

'Available-for-sale' financial assets

 

 

 

Equity securities

133

44

177

Legal case investments

-

232

232

 

133

276

409

 

Level 1 assets are quoted ordinary shares.  There are no level 2 assets.

 

There were no transfers of assets between categories during the year (2015 - none).  An asset is transferred when, due to changes in circumstances, it falls into another category within the fair value hierarchy.

 

The movement on level 3 assets is as follows:

 

 

2016

2015

 

£'000

£'000

Balance at 1 April

276

720

Additions

-

11

Impairment

(29)

(411)

Disposals

(96)

(44)

Balance at 31 March

151

276

 

 

11 Risk statement

 

The principal risks of the Group are reviewed by the Board at least twice each year. A summary of the key risks is set out below together with their mitigation strategies.

 

(i)            Credit risk

Credit risk particularly arises in CAML. This is mitigated in a number of different ways. For the leasing business the exposure is reduced by ownership of the asset which can usually be resold. In the case of professional loans, personal guarantees are obtained wherever possible but in any event the professional reputation of the partners of the firm is at stake. In all cases there is a well-defined process for approval including credit committees with specific delegated powers.

 

 

(ii)           Interest rate risk

Where lending is longer term as in professional lending or leasing then borrowing rates are fixed at the start to avoid interest rate exposure. Group borrowing is all at fixed rates.

 

(iii)         Legal and regulatory risk

This risk arises in various ways but the risk of non-compliance with FCA regulations is considered low as limited business falling within this environment is undertaken.  City of London Financial Services Limited, which wound down its activities during the year, now undertakes only the activity of 'Operator' to CAML limited partnerships, generating income of a few thousand pounds. It is ranked in the lowest risk category by the FCA.  CAML has interim permission under the FCA consumer credit regulation and expects to receive full permission before the end of September 2016. The risk of non-compliance is considered low as the regulated activities represent only a minor part of its overall business. CAML lends only to businesses and is regulated for those businesses that fall within the Consumer Credit Act.

 

The risk of other legal and regulatory non-compliance (including non-compliance with the AIM rules) is mitigated by the use of external advisers.

 

(iv)          Cash flow

There is a risk that the strategy for CAML does not develop as planned and it may require further working capital funding from COLG. It has an annual budget including a budgeted funding requirement. There are some mitigations which can be invoked by it to reduce working capital including cost cutting and managing the portfolio growth.

 

(v)           Competition

There is a risk that the Group may become subject to increased competition in sourcing and making investments in the event that liquidity comes back into the SME market from the high street banks and other investors. This could lead to the platforms finding it difficult to invest at the planned yields. This risk is mitigated by specialist expertise and by increased sales and marketing activity. In the case of the leasing and loans business the speed of credit decisions and the quality of operations is a key differentiator.

 

(vi)          Business continuity

This is the risk that the business premises are unavailable due to fire or other disasters or of failure of IT systems. The consequential risk is the loss of key documentation and the inability to enter the business premises. This is mitigated by the ability of staff to work remotely from home and a disaster recovery plan. Key documents are held electronically and also separately with our lawyers. IT systems and data are backed up remotely and can be restored within acceptable timescales.

 

(vii)         People/ succession

There is a risk that key management in the platforms are poached or leave the business which would compromise the business. As a mitigation the management are incentivised with equity and bonuses comparable with the market.

 

 

12 Post balance sheet events

There are no reportable post balance sheet events to be disclosed.

 

 

 

Statement of directors' responsibilities

The directors are responsible for preparing the strategic report, annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgments and accounting estimates that are reasonable and prudent;

·      state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Website publication

The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained on the website.

 

By order of the Board

 

Paul Milner

Chairman

23 September 2016

 

 

Annual General Meeting and General Meeting

The 2016 annual general meeting will be held at 9am on Friday 30 September 2016 at the offices of Shakespeare Martineau, 60 Gracechurch Street, London EC3V 0HR.   The notice of meeting and proxy forms were sent to shareholders in 2 September 2016.

 

A general meeting to receive the accounts for the year ended 31 March 2016 and reappoint the auditors will be held at 10.00 am on Friday 21 October 2016 at the offices of Shakespeare Martineau, 60 Gracechurch Street, London EC3V 0HR.  The notice of meeting and proxy forms for the general meeting will be included in the Annual Report which will be posted to shareholders on 28 September 2016.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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