PRELIMINARY RESULTS
6 JULY 2007
IMPACT HOLDINGS (UK) PLC
('Impact', 'the Group', or 'the Company')
PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2007
Impact Holdings (UK) plc, the specialist lending business, announces its
preliminary results for the year to 31 March 2007.
FINANCIAL HIGHLIGHTS 2007
Turnover £1,079,967
Group Operating Loss Before Interest £6,532,291
Exceptional costs £6,667,574
Loss before tax £6,509,220
Loss per share 7.9p
Year end cash balance £2,359,470
FOR FURTHER INFORMATION:
Impact Holdings (UK) plc
Paul Davies, Chief Executive +44 (0) 161 437 9499
Daniel Stewart & Company plc
Alastair Cade +44 (0) 207 776 6550
CHAIRMAN'S STATEMENT
INTRODUCTION
Following the reversal of Impact Funding (UK) Ltd into Nanotech Energy plc in
June of last year and the renaming of the group as Impact Holdings (UK) plc,
the business has had a very difficult first trading period.
Conduct of the Impact Funding (UK) Ltd loan book and subsequent lending by
original management has proved to be problematic. The entire 'right to buy'
disbursements loan book has been provided against. In addition a facility to
one counterparty representing £3.2m of the loan book, of which £2m was repaid
and the remaining £1.2m refinanced as a term loan, has also been provided
against due to the uncertainty of this being repaid.
Of the remaining loan book approximately £430k has been provided against. This
relates to 'personal injury' disbursement loans.
The remaining loan book is likely to be repaid and is currently valued at
approximately £950k.
A new management team has been recruited with Paul Davies (CEO) joining in
October last year and Chris Williams (FD) joining in February this year. They
bring with them significantly improved skills in credit risk management.
The key to the success of this business is the analysis of the counterparty
risk so as to ensure loans are only made to businesses and individuals that are
likely to repay. Over the past eight months Paul Davies has bolstered the legal
documentation and credit risk function.
There remains a market for short term funding solutions in areas such as
personal injury and property bridging that Impact intends to exploit.
FINANCIAL RESULTS
The results for the period ending 31st March 2007 are dominated by the large
bad debt provisions and are obviously disappointing when compared to the
expectations at the time of the reverse. The business has made a loss for the
period of £6.5m, after exceptional charges relating to the write down of the
loan book and related goodwill impairment charges of £6.7m, and has net assets
as at the year end of £4.1m.
DIVIDEND
No dividend will be declared for the period.
STRATEGY
We remain focused on the short term niche funding market in the UK. We aim to
capitalize on the inflexibility and lack of understanding of the larger banks.
We have now started to offer short term bridge funding relating to property and
are seeing considerable interest for this product.
The core business of solicitor lending, in relation to funding disbursements on
personal injury cases, continues to be a market that we are lending into, with
the support of the increased credit risk controls. The number of solicitors who
wish to utilise our web-based system for acquiring personal injury cases,
funding and insuring them, is growing each month.
We have increased the number of claims management companies that provide cases
onto the web based system, thereby improving the growth prospects.
The profitability of this business is driven by a number of factors:
* The number of cases being processed through the web based system.
* The number of cases that do not proceed past the first 120 days.
* The counterparty risk associated with the solicitor firms and claims
management companies.
Management is addressing each of these items to ensure that Impact has a long
term future.
TRADING REVIEW
Because of the issues relating to the loan book that became apparent to the new
management team, Impact has not actively traded whilst the existing position
was established and the credit risk function was put in place.
Management believes they have now quantified the extent of the bad debts and
have instructed a corporate recovery specialist to investigate all areas of
recourse. This engagement has been made on a conditional fee arrangement to
limit the ongoing cost to the business.
SUSTAINABILITY
At the period end, Impact had £2.4m cash on the balance sheet, enough to run
the business for a period of time sufficient to allow the management to
establish if the business model can be developed to provide the potential
returns originally anticipated.
OUTLOOK
There is no doubt that there will always be the opportunity for niche lending
in this ever more complex financial world. Capitalising on the opportunities
and being able to react quickly with a solid credit risk function will dictate
whether it is profitable for the lender.
I believe the new management team has the skills to react to and develop new
niche lending opportunities.
I would like to thank the new management team for all their efforts over recent
months and their continued commitment in what has been a difficult environment.
Richard Kilsby
Non-Executive Chairman
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
The year in question has proved problematical with a complete re-structure and
a new management and operational team. This has resulted in a period of
consolidation and analysis of the inherited loan portfolio.
TRADING
Since joining as CEO in October, the emphasis has been not only to assess and
maximize the returns from the inherited loan portfolio but to secure the future
viability of the Group. The priorities were therefore to ensure the Group had
the necessary systems to administer and control its own loan book, coupled with
the securing of banking facilities.
Until February 2006 the Group had been outsourcing the management of loans and
in accordance with our desire to bring this expertise in-house, the Company
purchased a software platform which eliminated some £400,000 of budgeted fees
for those services in 2007/8. Impact has employed two dedicated IT staff to
develop the systems in order to sustain a larger loan book with a broader range
of products.
In February 2007 Impact purchased for £1.55m a portfolio of solicitor
disbursement funding with a gross book value at the time of acquisition of £
1.86m. As part of this transaction the Manchester Building Society extended to
Impact a £10m revolving credit facility.
In June 2007 a new subsidiary commenced trading. Impact Bridging Solutions
Limited, which provides short term funding backed by property assets. It has
the ability to grow a profitable loan book and has a £5m funding line in place
together with the necessary regulatory licences to operate. This is already
seeing good levels of activity.
The Group strategy is to develop the business as a niche lender and we have
already identified a number of new opportunities.
PEOPLE
The key to the success of Impact's ongoing business is its ability to attract
high calibre individuals who can deliver the strategy outlined in the placing
document.
Impact has therefore made two key appointments over the past few months with
the recruitment of Chris Williams as Finance Director in February 2007 and
Stephen Ball as Managing Director of Impact Bridging Solutions Limited in April
2007.
Chris is a chartered accountant and equity partner in Jack Ross, a Manchester
City Centre practice of Chartered Accountants who concentrate on working with
the legal profession.
Stephen has a successful background in Corporate Banking and Property
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