Preliminary results for the Year Ending 31 March 2008
IMPACT HOLDINGS (UK) PLC
Preliminary results for the Year Ending 31 March 2008
Impact Holdings (UK) plc, the specialist lending business, announces its
preliminary results for the year to 31 March 2008.
FINANCIAL HIGHLIGHTS
The headline financial results reveal:-
* Results in line with management expectations;
* Operating losses before exceptional items of £615,763;
* Exceptional one off costs of £1,681,799, of which £1,246,529 is non-cash
write off of goodwill;
* Total assets up 53% to £9.2 million;
* Structured recovery process with £1.25 million realised from previously
provided bad debts;
* Year end cash balances of £1.1 million.
Commenting on the results Paul Davies, the Chief Executive, said 'Following a
difficult initial trading period and the uncertain market conditions seen over
the past twelve months ongoing operations have proved difficult as we continue
to re-structure the business and recruit new management and operational
personnel.
Considerable effort has been spent in improving the risk management,
operational and financial controls and the past twelve months have resulted in
a period of organic growth but due to the uncertain economic environment the
Board has decided a period of consolidation and a re-alignment of the business
model is now required.
Since joining as CEO in October 2006 the emphasis has been to secure the future
viability of the Group with the priorities being to ensure the Group had the
necessary systems to administer and control its own loan book coupled with the
securing of banking facilities.
The credit crisis which materialized in the latter part of 2007 has had a
profound effect on the availability of funding in the market generally but
Impact has continued to secure banking facilities to operate on a day-to-day
basis. We are seeing increasing activity in our key areas of term funding
solutions however the present economic uncertainty and in particular the
volatility in the property market has led us to take a very conservative
approach to funding new transactions until the market returns to a more stable
environment.
The Group's strategy continues to be to develop the business as a niche lender
and we have already earmarked a number of new opportunities which the Board is
confident will generate sufficient reward when measured against the potential
risks.
The future strategic objective of the Group in relation to the solicitor
disbursement funding business is being assessed with the potential to become a
vertically integrated Group that controls the risk of funding personal injury
claims from the sourcing of claims to the completion of the legal case. This
integrated model would result in the Group investing over time in a new Claims
Management Company to control the quality of Personal Injury cases funded, the
setting up of an insurance captive to ensure the relevant risks of funding such
cases are fully insured and once the Legal Services Act allows Impact would
consider investing in a law firm that would monitor and manage the personal
injury cases the Group funds.'
Further information:
Impact Holdings (UK) plc
Paul Davies
Chief Executive Officer
Tel: 0161 437 9499
Daniel Stewart & Company plc
Simon Leathers / Tessa Smith
Tel: 020 7776 6550
CHAIRMAN'S STATEMENT
The financial markets in 2007 and 2008 have seen unprecedented turmoil with the
collapse of the sub-prime mortgage market in the USA and the global banking
crisis having a profound effect. The impact and availability of inter-bank
funding has constrained the market considerably leading to an increased cost of
funding in the UK. This increased cost of funding has led the Financial
Institutions to review their lending criteria and consequently pass these
increases on to their clients and reduce the availability of credit. Impact has
not been immune to this and we anticipate the restriction on the availability
of increased banking lines and upward pressure on interest rates within the
market as a whole will continue for the foreseeable future.
THE BOARD
The Board is committed to adhering to strong Corporate Governance and has
committed to operating within a framework of prudent controls. This includes
ensuring that the future risks of the business are controlled and managed by a
separate Risk Committee.
The Board has been bolstered by the appointment of David Hughes with the
Non-Executives now being in the majority following the resignation of our
part-time Finance Director Chris Williams on 11 June who left the company as
planned to concentrate on his other business interests.
STRATEGY
We remain focused on the short term niche funding market in the UK but the
availability of funding lines in the present uncertain financial markets may
restrict growth and profitability over the foreseeable future. There remain
considerable opportunities and we aim to capitalize on the inflexibility and
lack of understanding of the larger banks where possible but we remain
conscious of the uncertain economic environment in which we trade.
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,
albeit with a conservative approach within the credit risk function. The panel
of solicitors utilise our web based system 'Veracity' for accepting personal
injury cases and funding and insuring them. However we intend to look at the
possibility of progressing a vertically integrated model of controlling the
sourcing; funding; insuring and managing of personal injury cases over the
coming months. In the interim, management is reviewing the existing panel of
solicitors and sourcing the claims through third party claims management
companies with the risks to the business being:-
* The credit and operational quality of the firms of solicitors managing the
individual personal injury claim;
* The quality of the individual claims introduced to the firms of solicitors
by the claims management companies.
Management now audit each individual firm of solicitors and claims management
companies at least twice each year to ensure each case introduced and funded is
being managed and progressed in a timely manner
The property bridging business which started to trade in July 2007 has seen
considerable interest albeit the 'credit crunch' has had an unprecedented
effect on the marketplace and according to the Bank of England is set to get
worse before it gets better. A large number of mortgage providers have simply
stopped lending, others have reined in loan to values and/or applied a 'cap' to
their property exposure.
The attendant risks for all bridging businesses are:
* Banks/Funders are wary of exposure to the sector and may rein in their
exposure;
* The 'take out' via refinance or property sale is slower and harder to
achieve, tying up bridging business's books with potentially non performing
debt;
* Prices of certain locations and types of property have fallen sharply,
eroding the secured margin even on short term loans and restricting the
ability to allow interest roll up;
* Reduced volumes of property transactions will affect the volume of good
quality bridging opportunities.
Management is addressing each of these items to ensure that Impact manages its
operating and financial risks in the present uncertain environment to ensure
the Group has a long term future.
DIVIDEND
No dividend will be declared for the period.
TRADING REVIEW
Impact has achieved a year of progress in the implementation of its strategy
for restructuring the business by the management team with the successful
incorporation of our property bridging
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