DIRECTORS REPORT AND FINANCIAL STATEMENTS Company Registration No. 3512304 (England and Wales)
COMPANY INFORMATION Directors Secretary A C Drury N J Kenvyn R E Guilbert R Abbott M Hudson Company number 3512304 Registered Office Auditors Business address Solicitors Corporate advisers 15 St. Helen s Place London EC3A 6DE UHY Hacker Young St Alphage House 2 Fore Street London EC2Y 5DH 15 St. Helen s Place London EC3A 6DE mhlaw 36 Great St. Helens London EC3A 6AP Chiltern Corporate Finance Limited 3 Sheldon Square London W2 6PS
CONTENTS Page Chairman s statement 1-2 Managing Director s statement 3 Directors report 4-5 Independent auditors report 6-7 Profit and loss account 8 Statement of recognised gains and losses 9 Balance sheet 10 Cash flow statement 11 Notes to the financial statements 12-18
CHAIRMAN S STATEMENT I am pleased to confirm that the twelve months to 31 December 2005 have been a period of strong growth and development for the core functions of the Company. Although difficulties in the market in which the Company operates have been widely reported, I would like to reassure shareholders that your Company has a completely different business model and is one which focuses on the corporate sector as opposed to other leasing companies whose main area of business has been focused within the retail sector. In my former Statement for the year to 31 December 2004, I reflected upon the Company having a solid start, that the outlook was positive and how the level of deals continues to increase. I am delighted to report in today s Statement that this has indeed continued and has proven to be the case. The Company s portfolio has grown with gross receivables increasing by 463% to 1.6 million while turnover and operating income for the period was up by 726% to 182,553, and by 602% to 77,024, respectively. Losses for the period are in line with forecasts, and are as expected for a young asset finance company building its business base. The task in hand is to take advantage of economies of scale by increasing the size of the portfolio so that the income it generates on a monthly basis exceeds all expenses and the Company becomes profitable. Consequently, the Company needs to increase its available cash resources and, as a result and following the Directors negotiations with a leading bank, I am pleased to report that the Company has received a formal offer to provide a facility of up to 1.5 million, subject to certain covenants. This bank facility was conditional upon the review and acceptance of our operations and procedures by an external accountancy firm. The formal approval from the bank clearly ratifies the professional and robust approach we have taken in building St. Helen s Finance. This is a significant step in the development of the Company and on the strength of the new bank facility, the independent report on our procedures and the expected growth of the Company, the Directors will be seeking to raise 1 million of additional equity via a Private Placing. Should the Placing be over subscribed, it is the intention of the Directors to accept additional applications for a further 500,000 making a maximum equity placing of 1.5 million. I have confirmed to our advisers that I will be personally investing a further 50,000 in the Placing. I can also advise that St. Helen s Capital Plc, a major shareholder in the Company, will also be investing a further 50,000 in the Private Placing. In light of the Company s continued growth and advancements, and in conjunction with our auditors and corporate advisers, the directors have completed a review of St Helen s Finance s accounting policies and, in particular, the treatment of the minimum-term rental agreements under the current accounting standards. Based upon this review, your Board has taken the decision to re-classify those agreements as finance leases. This has been applied to the previous year s figures, reflecting a decrease in turnover but an increase in operating profit and a decrease in losses. 1
CHAIRMAN S STATEMENT THE FUTURE The Board has been reviewing the strategy for the business and the coming 12 months should reflect the continued growth of the Company and I look forward to reporting positively at the announcement of our interim results, later in the year. Rick Abbott Chairman 26 May 2006 2
MANAGING DIRECTOR S STATEMENT Highlights The last 12 months of trading has seen St Helen s Finance move forward significantly, with the Board continuing to focus on positioning the Company within the corporate sector rather than the retail sector. Key points include: The establishment of 1.1million lines of debt across three funders, thereby enabling the Company to grow its portfolio of customers; Development of strong and complementary working relationships with introducers of deals to St Helen s Finance, including 10 signed broker agreements, which have generated over 300 opportunities for the Company to consider; Enhancement of St Helen s Finance s customer portfolio, across 65 agreements generating in excess of 1.6million of receivables. Strengthening of the experienced St Helen s Finance team through the appointment of a full time Finance Manager. Post Balance Sheet Events It has been a highly active period since the Company announced its Final Results in February. Key points within this period include: Closure of the Restricted Circulation Offer which successfully raised 543,000 by the issue of new shares; The increase in St Helen s Finance s debt facilities (outside the 1.5 million as provided by the Royal Bank of Scotland) by a further 400,000, bringing total debt facilities as at 15 May 2006 available to the Company to 3 million; Appointment of specialist Financial & Corporate PR advisor. Summary St Helen s Finance is now an established, progressive finance company with significantly improved financial support and the potential for profitable growth in the coming year. Norman Kenvyn Managing Director 26 May 2006 3
DIRECTORS REPORT The directors present their report and financial statements for the year ended 31 December 2005. Principal activities and review of the business The principal activity of the Company is that of provider of lease and asset finance to the SME sector across a range of assets. Results and dividends The results for the year are set out on page 8. The directors do not recommend the payment of a dividend. Directors The following directors have held office since 1 January 2005: A C Drury J Lutterloch (Resigned 25 January 2006) N J Kenvyn R E Guilbert R Abbott Directors interests The directors interests in the shares of the Company were as stated below: Ordinary shares of 3.5p each 31 December 2005 1 January 2005 A C Drury 142,858 142,858 J Lutterloch (Resigned 25 January 2006) 385,716 285,716 N J Kenvyn 1,542,860 1,428,572 R E Guilbert 50,000 50,000 R Abbott 714,286 714,286 The Company has established a share option scheme, St Helen s Finance Plc 2004 Unapproved Executive Share Option Scheme for the benefit of directors and employees. The directors interests in share options were as follows: Number of options Exercise price Date of grant Exercise period N J Kenvyn 684,536 13p 14-6-2004 14-6-2007 to 13-6-2014 J Lutterloch 342,273 13p 14-6-2004 14-6-2007 to 13-6-2014 R Abbott 342,273 13p 14-6-2004 14-6-2007 to 13-6-2014 R E Guilbert 250,000 13p 26-1-2005 26-1-2008 to 26-1-2015 4
DIRECTORS REPORT (CONTINUED) There have been no changes in the interests of the directors in the year. Creditor Payment policy The Company s current policy concerning the payment of trade creditors is to: - settle the terms of payment with suppliers when agreeing the terms of each transaction; - ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts; and - pay in accordance with the Company s contractual and other legal obligations. Auditors In accordance with Section 385 of the Companies Act 1985, a resolution proposing UHY Hacker Young be reappointed as auditors of the Company will be put to the Annual General Meeting. Directors responsibilities Directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit and loss for that period. It is also the directors responsibility to maintain adequate accounting records, safeguard the assets of the Company and take reasonable steps in preventing and detecting fraud and other irregularities. The directors confirm that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the financial statements on a going concern basis, and that applicable accounting standards have been followed. On behalf of the board Norman Kenvyn Managing Director 26 May 2006 5
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF ST HELEN S FINANCE PLC We have audited the financial statements of St Helen s Finance Plc for the year ended 31 December 2005 which comprise the Profit and Loss Account, the Balance Sheet, the Cash Flow Statement, the Statement of Total Recognised Gains and Losses and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s 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 and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the Statement of Directors' Responsibilities the company's directors are responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. 6
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF ST HELEN S FINANCE PLC Opinion In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 December 2005 and of its loss for the year then ended; the financial statements have been properly prepared in accordance with the Companies Act 1985. UHY Hacker Young St Alphage House 2 Fore Street London EC2Y 5DH Chartered Accountants Registered Auditors 26 May 2006 7
PROFIT AND LOSS ACCOUNT 2005 2004 Restated Notes Turnover 2 182,553 22,100 Other interest receivable and similar Income 3 7,798 5,970 190,351 28,070 Operating expenses Interest payable and similar charges 4 (52,694) (1,425) Broker fees (60,633) (15,681) Net operating income 77,024 10,964 Administrative expenses (181,422) (74,715) Provisions for bad and doubtful debts (108,906) (10,660) Total administrative expenses (290,328) (85,375) Loss on ordinary activities before taxation 5 (213,304) (74,411) Tax on loss on ordinary activities 6 - - Loss on ordinary activities after taxation 13 (213,304) (74,411) Loss per share (pence) 7 (2.3) (1.6) The Company s operation in the year continued unchanged; no operations were disposed of or acquired. 8
STATEMENT OF RECOGNISED GAINS AND LOSSES AS AT 31 DECEMBER 2005 2005 2004 Restated Loss for the financial year (213,304) (74,411) Prior year adjustment 2,012 - Total gains and losses recognised since last financial statements (211,292) (74,411) 9
BALANCE SHEET AS AT 31 DECEMBER 2005 2005 2004 Restated Notes Fixed assets Tangible assets 8 3,233 2,221 Current assets Debtors: amounts falling due within one year 9 529,381 181,861 Debtors: amounts falling due after more than one year 9 763,007 178,966 Cash at bank and in hand 165,191 430,000 1,457,579 790,827 Creditors: amounts falling due within one year 10 (512,546) (155,501) Net current assets 945,033 635,326 Total assets less current liabilities 948,266 637,547 Creditors: amounts falling due after more than one year 11 (619,159) (95,136) 329,107 542,411 Capital and reserves Called up share capital 12 330,825 330,825 Share premium account 13 285,621 285,621 Profit and loss account 13 (287,339) (74,035) Shareholders funds equity interests 17 329,107 542,411 The financial statements were approved by the Board on 26 May 2006 N J Kenvyn Managing Director 10 R E Guilbert Director
CASH FLOW STATEMENT 2005 2004 Restated Notes Net cash (outflow) / inflow from operating activities 14 (1,065,772) (424,677) Returns on investments and servicing of finance Interest received 7,798 5,970 Interest paid (52,694) (1,425) Net cash inflow / (outflow) for returns on investments and servicing of finance (44,896) 4,545 Capital expenditure Payments to acquire tangible assets (2,453) (2,374) Net cash outflow for capital expenditure (2,453) (2,374) Net cash (outflow) / inflow before management of liquid resources and financing (1,113,121) (422,506) Financing Issue of ordinary share capital - 616,444 Other new long term loans 524,023 95,136 Other new short term loans 408,913 54,612 Net cash inflow / (outflow) from financing 932,936 766,192 (Decrease) / Increase in cash in the year 15 (180,185) 343,686 11
NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies 1.1 Basis of preparation The financial statements are prepared under the historic cost convention, and in accordance with applicable accounting standards. The accounts for 2004 have been restated as a result of the reclassification of all operating leases as finance leases. 1.2 Turnover Turnover represents gross earnings under finance leases, hire purchase contracts and operating leases. 1.3 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: Office equipment, furniture, fixtures and fittings Assets held for hire under operating leases 3 years straight line Over the term of the lease 1.4 Deferred taxation The accounting policy in respect of deferred tax reflects the requirements of FRS19 Deferred tax. Deferred tax where material is provided in full in respect of taxation deferred by timing differences between the treatment of certain items for taxation and accounting purposes. 1.5 Operating leases Rental income from operating leases, excluding charges for services such as insurance and maintenance, is recognised on a straight line basis over the period of the lease. 1.6 Finance leases and hire purchase agreements Amounts due from customers under finance leases and hire purchase agreements are recorded in the balance sheet as a debtor at the amount of the net investment in the agreements after making any provisions for bad and doubtful debts. Gross earnings are allocated to accounting periods to give a constant periodic rate of return. 2 Turnover and loss on ordinary activities before taxation Turnover 2005 2004 Class of business HP interest income 22,628 4,855 Finance lease interest income 142,187 10,769 Other fees 17,738 6,476 182,553 22,100 12
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 3 Other interest receivable and similar income 2005 2004 Bank interest 1,409 443 Other interest 6,389 5,527 7,798 5,970 4 Interest payable 2005 2004 On loans wholly repayable within five years 52,694 1,265 Other interest - 160 52,694 1,425 5 Loss on ordinary activities before taxation 2005 2004 Loss on ordinary activities before taxation is stated after charging: Depreciation of tangible assets 1,441 153 Auditors remuneration 1,750 2,500 Remuneration of auditors for non-audit work 3,500 3,000 6 Taxation 2005 2004 Current tax charge - - Factors affecting the tax charge for the year Loss on ordinary activities before taxation (213,304) (74,411) Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 30.00% (2004: 30.00%) (63,991) (22,323) Effects of: Non deductible expenses 1,742 364 Depreciation add back 432 46 Finance lease tax adjustments 115,920 15,965 Capital allowances (74,312) (5,846) Tax losses 9,993 8,596 Other tax adjustments 10,216 3,198 63,991 22,323 Current tax charge - - 13
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 7 Earnings per share The loss per share is calculated on a loss of 213,304 (2004: loss of 74,411) and on a weighted average of 9,452,154 (2004: 4,688,435) ordinary shares in issue during the year. 8 Tangible fixed assets Office equipment, furniture, fixtures and fittings Cost At 1 January 2005 2,374 Additions 2,453 At 31 December 2005 4,827 Depreciation At 1 January 2005 153 Charge for the year 1,441 At 31 December 2005 1,594 Net Book Value At 31 December 2005 3,233 At 31 December 2004 2,221 14
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 9 Debtors 2005 2004 Net investment in finance leases and hire purchase contracts 1,245,636 337,018 Other debtors 42,844 19,752 Prepayments and accrued income 3,908 4,057 1,292,388 360,827 Amounts falling due after more than one year and included in the debtors above are: 2005 2004 Net investment in finance leases and hire purchase contracts 763,007 178,966 The net investment in finance leases and hire purchase contracts relates to assets costing 1,864,382 (2004: 377,501). 10 Creditors: amounts falling due within one year 2005 2004 Bank loans and overdrafts - 84,624 Other loans 463,525 54,612 Trade creditors 38,509 8,081 Taxes and social security 3,788 - Directors current account - 2,051 Accruals 6,724 6,133 512,546 155,501 11 Creditors: amounts falling due after more than one year 2005 2004 Other loans 619,159 95,136 Other loans comprise loans from finance companies which are secured over certain client agreements. Analysis of loans Wholly repayable within five years 1,082,684 149,748 Included in current liabilities (463,525) (54,612) 619,159 95,136 Loan maturity analysis In more than one year but not more than two years 430,910 58,788 In more than two years but not more than five years 188,249 36,348 619,159 95,136 15
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 12 Share capital 2005 2004 Authorised 50,000,000 Ordinary shares of 3.5p each 1,750,000 1,750,000 Allotted, called up and fully paid 9,452,154 Ordinary shares of 3.5p each 330,825 330,825 At the year end there were 1,619,082 share options (2004: 1,619,082), details of which are set out in the Directors Report. Since the year end 342,273 share options have lapsed. Since the year end the company has successfully raised 543,030 by the issue of 4,936,636 new ordinary shares of 3.5p each at a price of 11p per share, through a restricted circulation offer. 13 Statement of movement on reserves Share premium Profit and loss account account Balance at 1 January 2005, as previously reported 285,621 (76,047) Prior year adjustment - 2,012 Balance at 1 January 2005 as restated 285,621 (74,035) Retained loss for the year - (213,304) Balance at 31 December 2005 285,621 (287,339) 14 Reconciliation of operating profit to net cash 2005 2004 (outflow) / inflow from operating activities Operating profit 77,024 10,964 Administrative expenses (290,328) (85,375) Net interest receivable / payable 44,896 (4,545) Depreciation of tangible assets 1,441 153 Increase in debtors (931,561) (357,055) Increase in creditors 32,756 11,181 Net cash (outflow) / inflow from operating activities (1,065,772) (424,677) 16
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 15 Analysis of net debt 1 January Cash flow 31 December 2005 2005 Net cash: Cash at bank and in hand 430,000 (264,809) 165,191 Bank overdrafts (84,624) 84,624-345,376 (180,185) 165,191 Debt: Debts falling due within one year (54,612) (408,913) (463,525) Debts falling due after one year (95,136) (524,023) (619,159) (149,748) (932,936) (1,082,684) Net (debt) / funds 195,628 (1,113,121) (917,493) 16 Reconciliation of net cash flow to movement in net debt 2005 2004 (Decrease) / increase in cash in the year (180,185) 343,686 Cash inflow from increase in debt (932,936) (149,748) Movement in net funds in the year (1,113,121) 193,938 Opening net funds 195,628 1,690 Closing net funds (917,493) 195,628 17 Reconciliation of movements in shareholders funds 2005 2004 (Loss) / profit for the financial year (213,304) (74,411) Proceeds from issue of shares - 616,444 Net addition to shareholders funds (213,304) 542,033 Opening shareholders funds 542,411 378 Closing shareholders funds 329,107 542,411 18 Directors emoluments 2005 2004 Emoluments for qualifying services 85,224 55,000 17
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 19 Employees Number of employees 2005 2004 The average number of employees (including directors) during Number Number the year was: 6 4 Employment costs Wages, salaries and benefits 97,224 55,000 Social security costs 8,375 5,743 105,599 60,743 20 Control The Company is not under the overall control of one company or person. 21 Related party transactions During the year introductory fees totalling 3,950 (2004: 686) were paid to St Helen s Leasing Limited, a related party through common directorship. There were no amounts owing at the year end date (2004: nil). The Company has six operating leases with St Helen s Capital Plc, a related party through significant shareholding and common directorship, for which income of 9,420 was received (2004: 3,717). At the year end the total amount of the minimum lease payments due from St Helen s Capital Plc was 16,304 (2004: 19,276). The lease payments made were up to date at the year end with no outstanding balances due (2004: Nil). Additionally, the Company uses certain office space leased by St Helen s Capital Plc, for which no charge was made during 2005 (2004: Nil). During the year a total of 6,000 was paid to Ropley Associates Limited (2004: 2,500 to Noygate Limited), a related party through common directorship, comprising director s remuneration to R Abbott. During the year a total of 22,282 was paid to R E Guilbert (2004: Nil), a director of the Company, comprising consultancy fees. 18