MANX FINANCIAL GROUP PLC — Earnings Release 2013

Feb 26, 2014

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RNS Number : 9161A

Manx Financial Group PLC

26 February 2014

FOR IMMEDIATE RELEASE                                                                               26th February 2014

Manx Financial Group PLC (the 'Company')

Report and accounts for the year ended 31 December 2013

Manx Financial Group PLC (LSE: MFX), the financial services group which includes Conister Bank Limited, Conister Card Services Limited and Edgewater Associates Limited, presents its final results for the year ended 31 December 2013.

Jim Mellon, Executive Chairman commented "I am extremely pleased to report that the Group has returned to net profitability by recording a full year figure of nearly £1.1m."

The 2013 Audited Annual Report and Accounts will be posted to shareholders shortly and will also be available from the Company's website www.mfg.im 

Financial Highlights

Profit for the year:	£1.1 million   -  up 423% (2012: loss of £0.3 million)
Profit before tax:	£1.1 million   -  up 250% (2012: loss of £0.7 million)
Net interest income:	£8.3 million   -  up 49%   (2012: £5.5 million)
Loans:	£75.8 million -  up 30%   (2012: £58.5 million)
Total assets:	£93.7 million -  up 20%   (2012: £78.0 million)
Deferred income:	£16.6 million -  up 90%   (2012: £8.7 million)
Customer accounts:	£78.1 million -  up 23%   (2012: £63.7 million)

Contacts: 

Manx Financial Group PLC

Denham Eke, Chief Executive

Tel: +44 (0)1624 694694

Beaumont Cornish Limited

Roland Cornish/Felicity Geidt

Tel: +44 (0)20 7628 3396 

Britton Financial PR

Tim Blackstone

Tel: +44 (0)7957 140416

Chairman's Statement

Review of performance

Manx Financial Group PLC

Dear Shareholders,

I am extremely pleased to report that, for the first time since being appointed Executive Chairman, the Group has returned to net profitability, fulfilling my previous predictions by recording a full year figure of nearly £1.1 million. This encouraging result reinforces the strong performance recorded at the Interim stage. I believe that we have now turned the corner to ensure that this year's performance is not just a one-off, but sustainable, providing a stable platform for enhanced future profitability. The 2013 year showed not only a consistent gain in income, but also allowed the full effect of the savings from our 2012 re-structuring programme to filter to the bottom line. Thus we have become a far more efficient business. This is reflected in our operating cost to income ratio which has improved by 26 percentage points to 63%. This all bodes well for the future and I am confident that 2014 will show further strong growth.

Our share price opened the 2013 year at 6 pence. This reflected a market capitalisation of approximately £6 million, and a discount to our net asset value of 26%. At the time of writing this statement, our share price is trading in the 18 - 19 pence range and our market capitalisation has now increased to approximately £19 million: a premium to our year-end net asset value of 121%. This represents an effective rate of growth in our market capitalisation, since January 2013, of 350%, which I am sure all shareholders will welcome, and provides the Group with more flexible options when considering future acquisitions.

Manx Financial Group PLC

We have now simplified the face of the Group accounts by removing the Specific Items section. Thus the profit before income tax recovery was £1.07 million (2012: loss of £0.72 million): a turnaround of £1.79 million. The net profit for the year was thus £1.09 million (2012: loss of £0.34 million): an improvement of £1.43 million. The basic earnings per share were 1.12 pence (2012: negative 0.38 pence).

Turning to the Statement of Financial Position, our total assets have grown by 20.2% to £93.72 million (2012: £77.98 million). Our total liabilities have grown by 20.4% to £85.19 million (2012: £70.76 million), and the total liabilities plus equity by 20.2% to £93.72 million (2012: £77.98 million). I am pleased to note the growth in our loans and advances to customers balance to £75.82 (2012: £58.50 million): an increase of 29.6%. This is supported by a rise of 22.6% in our customer accounts balance to £78.12 million (2012: £63.73 million).

Conister Bank Limited

The Bank continues to grow with interest income increasing by 37.8% to £10.75 million (2012: £7.80 million), driven by a 44.1% increase in new lending to £54.96 million (2012: £38.15 million). In turn the net loan book grew by 29.4% to £75.65 million (2012: £58.48 million).This gain has increased our deferred income to be recognised in future years by 89.9% to £16.56 million (2012: £8.72 million): a significant achievement.

Further progress has been made in matching loans to deposits, as any over funding results in a negative impact on the income statement. The loan to deposit ratio improved by 5 percentage points to 97.1% and our goal is to achieve 100% by 2015. We believe that our market penetration of the available Isle of Man deposit market is no more than 1% so future growth should not be limited by any lack of available depositor funding.

This growth has been achieved without compromising credit quality. This is evidenced by the decrease in impaired loans, both in absolute terms, having improved by £1.11 million to £4.31 million (2012: £5.42 million) and as a percentage of net loans, 5.7% (2012: 9.3%). Despite this improved arrears performance, the Bank has taken a conservative view by further increasing the provisions buffer to cushion future years' profit from failures in prior years' lending.

During the year, the Bank substantially reduced the provision against the litigation funding debtor, arising from a business stream that was discontinued in 2007, following certain settlements and expects to have any remaining position fully cleared by the next Interim report.

As reported in my previous two annual statements, the Bank considers its VAT recovery rate as being neither fair nor reasonable and has raised this concern with the Isle of Man Government's Custom & Excise Division. Customs & Excise confirmed that their decision would follow the outcome of the Volkswagen Financial Services Limited case against HM Revenue & Customs which had an appeal scheduled for autumn 2013. This hearing was adjourned until the European Court rules on a case relating to a similar point of law which means no decision is expected in relation to our VAT debtor until 2015.

The transitional period for the introduction of Basel III is currently scheduled for 2015 with its full adoption on 1 January 2019. Whilst this is still some time off, it is important we engage in discussions with our Regulator on the impact of its adoption and measure ourselves against its current methodology. Basel III revises and tightens the definition of regulatory capital with a minimum total capital plus conservation buffer requirement of 10.0%. The Bank's equivalent ratio is currently 13.2%, and we therefore believe that we should be able to increase the deployment of non-reserve capital.

Investment in our IT infrastructure has continued apace and in 2014 we will launch both online lending and deposit management systems which should greatly improve our existing customers' experience and introduce our products to a wider market.  The innovative use of IT will allow the Bank to compete with high street majors by delivering both lending and deposit solutions to customers in the most efficient manner.

We continue to manage the balance sheet conservatively and indeed we are the only bank of which I am aware with a positively matched loan book.

We do not rely on behavioural adjustments to create a matched position nor do we rely on the vagaries of the UK wholesale market for funds. This conservatism comes at some cost to the income statement but it is a cost that I believe protects future earnings and positions our Bank well for the imminent changes to UK and Isle of Man legislation driven by both the Vickers report and the Basel committee.

We support the recommendations of the Vickers report and look forward to their implementation as a more stable and transparent banking sector will be created, providing additional opportunities for us to grow. With our high regulatory capital base, we are already in a positive position for the adoption of the Basel III accord.

Edgewater Associates Limited

As reported in the Interims, our Isle of Man based wealth management and general insurance subsidiary has made great strides in improving its financial performance. The company recorded a full year profit of £0.28 million (2012: £0.05 million) and further cost savings will flow through the financial statements in 2014. The final financial liability relating to the company's acquisition was paid in the year with no dilution to the Group's shareholders and at no cost to this year's income statement.

Our financial targets for this company are twofold. Firstly, to grow the renewal income element of turnover, currently standing at 45.9%, to 75.0% of turnover within four years. By focusing on renewal income, we will both increase earnings and reduce earnings volatility. To do so will require investment in both our people and the systems they use. Secondly, but interlinked, we will increase market share in the provision of IFA and general insurance services to businesses, potentially by acquisition, this will be building on the successes we made in this market sector this year. 

I have previously explained that the Isle of Man has adopted the Retail Distribution Review ("RDR") and the company is fully RDR compliant. Edgewater is well positioned to act as a consolidator in the industry if any potential target is of sufficient quality.

Conister Card Services Limited

We continue to monitor the development of this industry and whilst various opportunities have been reviewed their long term profitability and hence their return on equity have been too subjective for us to accept. That said, we will continue with our Isle of Man based project which if successful could be rolled out to the UK.

Outlook

The Isle of Man economy remains stable despite pressures and UK economy now appears to be moving into a more buoyant phase. As sentiment recovers, I expect this to translate into a steady improvement in the economic environment. Competition will inevitably increase slightly as more liquidity returns to the market but as the high street banks still have considerable balance sheet pruning to complete before they will be Basel III compliant, it will still be some time before they can start lending in earnest.

It is against this backdrop of unsatisfied demand that I believe our own prudent balance sheet management will enable us to increase our income streams in a controlled and profitable manner. To supplement this growth, we intend to develop a commercially funded UK asset backed loan book which will act both as a parallel vehicle for additional profit and as an interest hedge for the Group.  We will continue with our success in diversifying our lending streams to ensure that we minimise a concentration risk in any one class or market.

As always, we continue to seek suitable potential acquisitions that are both priced fairly and will add profitability.

Thus the outlook for the Group is very promising with the 2013 second half profit of £0.81 million following the £0.26 million reported at the Interim stage. I would expect this trend of increasing profits to continue in the year to come. 

Finally I would like to put on record my thanks to staff and shareholders alike for their continued support.

Jim Mellon

Executive Chairman

24 February 2014

Consolidated Income Statement

For the year ended 31 December	Notes		2013                               £000		2012           £000
Interest income			10,750		7,800
Interest expense			(2,493)		(2,259)
Net interest income			8,257		5,541
Fee and commission income			1,399		1,226
Fee and commission expense			(990)		(612)
Commission share schemes			(2,249)		(1,032)
Net trading income			6,417		5,123
Other operating income			163		212
Operating income			6,580		5,335
Personnel expenses			(2,863)		(3,202)
Other expenses	7		(1,657)		(2,637)
Provision for impairment on loan assets			(850)		(7)
Depositors' Compensation Scheme recovery	9		100		37
Depreciation			(252)		(214)
VAT recoverable			-		71
Realised gains on available-for-sale financial assets			18		28
Unrealised loss on financial assets carried at fair value			(3)		(128)
Profit/(loss) before income tax recovery			1,073		(717)
Income tax recovery	11		14		380
Profit/(loss) for the year			1,087		(337)
Basic earnings per share (pence)	12		1.12		(0.38)
Diluted earnings per share (pence)	12		0.78		(0.38)

Consolidated Statement of Other Comprehensive Income

For the year ended 31 December	Notes		2013                               £000		2012           £000

Other comprehensive income:

Items that will be reclassified to profit or loss
Available-for-sale gains taken to equity			10		-
Items that will never be reclassified to profit or loss
Actuarial losses on defined benefit pension scheme taken to equity			(53)		(98)

Total comprehensive income for the period attributable to owners			1,044		(435)
Basic earnings/(loss) per share (pence)	12		1.08		(0.49)
Diluted earnings/(loss) per share (pence)	12		0.76		(0.49)

Consolidated and Company Statement of Financial Position

			Group				Company
As at 31 December	Notes		2013 £000		2012 £000		2013 £000		2012 £000
Assets
Cash and cash equivalents			4,183		1,918		-		-
Financial assets at a fair value through profit or loss			48		51		-		-
Available-for-sale financial instruments			9,000		12,484		-		-
Loans and advances to customers	17		75,819		58,495		-		-
Commissions receivable			289		312		-		-
Property, plant and equipment			629		742		-		-
Investment in Group undertakings	19		-		-		14,072		12,072
Trade and other receivables	20		1,014		1,252		130		98
Deferred tax asset	11		394		380		-		-
Goodwill	19		2,344		2,344		-		-
Total assets			93,720		77,978		14,202		12,170
Liabilities
Customer accounts			78,115		63,731		-		-
Creditors and accrued charges			754		2,162		9		339
Amounts owed to Group undertakings			-		-		1,772		1,512
Loan notes	23		6,065		4,510		6,065		4,510
Deferred consideration			-		160		-		160
Pension liability			252		200		-		-
Total liabilities			85,186		70,763		7,846		6,521
Equity
Called up share capital			18,933		18,433		18,933		18,433
Profit and loss account			(10,399)		(11,218)		(12,577)		(12,784)
Total equity			8,534		7,215		6,356		5,649
Total liabilities and equity			93,720		77,978		14,202		12,170

Consolidated Statement of Cash Flows

For the year ended 31 December	Notes		2013 £000		2012 £000
RECONCILIATION OF PROFIT / (LOSS) BEFORE TAXATION TO OPERATING CASH FLOWS
Profit/(loss) before tax on continuing activities			1,073		(717)
Unrealised loss on financial assets carried at fair value			3		128
Loss/(gain) on disposal of property, plant and equipment			17		(7)
Depreciation charge			252		214
Realised gains on available-for-sale investments			(18)		(28)
Actuarial loss on defined benefit pension scheme taken to equity			(53)		(98)
Pension liability			52		121
Share-based payment credit			(50)		-
Decrease in trade and other receivables			238		18
(Decrease)/increase in trade and other payables			(1,408)		1,307
Decrease/(increase) in commission debtors			23		(78)
Net cash inflow from trading activities			129		860
Increase in loans and advances to customers			(17,324)		(8,970)
Increase in deposit accounts			14,384		7,821
Cash outflow from operating activities			(2,811)		(289)
CASH FLOW STATEMENT
Cash flows from operating activities
Cash outflow from operating activities			(2,811)		(289)
Taxation paid			-		-
Net cash outflow from operating activities			(2,811)		(289)
Cash inflow/(outflow) from investing activities
Purchase of property, plant and equipment			(156)		(186)
Sale/(purchase) of available-for-sale financial instruments			3,512		(1,961)
Sale of property, plant and equipment			-		51
Payment of deferred consideration			(335)		(332)
Net cash inflow/(outflow) from investing activities			3,021		(2,428)
Cash flows from financing activities
Issue of loan notes			2,055		2,300
Net cash inflow from financing activities			2,055		2,300
Increase/(decrease) in cash and cash equivalents			2,265		(417)
Included in cash flows are:
Interest received - cash amounts			9,072		8,003
Interest paid - cash amounts			(2,101)		(2,396)
Significant non-cash flows in the year
Conversion of loan notes to share capital			500		-

Consolidated and Company Statement of Changes in Equity

For the year ended 31 December Group	Share Capital £000		Retained Earnings £000		2013 £000		2012 £000
Balance as at 1 January	18,433		(11,218)		7,215		7,650
Profit/(loss) for the year	-		1,087		1,087		(337)
Other comprehensive expense	-		(43)		(43)		(98)
Transactions with owners:
Shares issued	500		-		500		-
Shares to be issued	-		(175)		(175)		-
Share-based payment expense	-		(50)		(50)		-
Balance as at 31 December	18,933		(10,399)		8,534		7,215

For the year ended 31 December Company	Share Capital £000		Retained Earnings £000		2013 £000		2012 £000
Balance as at 1 January	18,433		(12,784)		5,649		6,341
Profit/(loss) for the year	-		432		432		(692)
Transactions with owners:
Shares issued	500		-		500		-
Shares to be issued	-		(175)		(175)		-
Share-based payment expense	-		(50)		(50)		-
Balance as at 31 December	18,933		(12,577)		6,356		5,649

Notes

Other expenses (note 7)

	2013 £000		2012 £000
Professional and legal fees	281		737
Marketing costs	122		148
IT costs	298		303
Establishment costs	502		472
Communication costs	48		46
Travel costs	94		95
Bank charges	77		47
Insurance	97		102
Irrecoverable VAT	(41)		139
Other costs	179		548
	1,657		2,637

Depositors' Compensation Scheme (note 9)

	2013		2012
	£000		£000
Provision in respect of Kaupthing Singer & Friedlander (Isle of Man) Limited	100		37
	100		37

On 27 May 2009, the Isle of Man Government Depositors' Compensation Scheme (the Scheme) was activated in connection with the liquidation of Kaupthing Singer & Friedlander (Isle of Man) Limited. Three payments of £73,880 were made in to the Scheme. In 2011, a payment was made which was expected to be repaid, therefore no charge was made to the income statement in that regard.  Repayments from the Financial Supervision Commission of £133,506 and £32,737 have been received and a further £44,315 is expected from the Scheme.

Income tax expense (note 11)

The main rate of income tax in the Isle of Man is 0% (2012: 0%).  However the profits of the Group's Manx banking activities are taxed at 10% (2012: 10%). The profits of the Group's subsidiaries that are subject to UK corporation tax are taxed at a rate of 20% (2012: 20%).

The Group had sufficient tax losses brought forward to offset any profits in income streams that are taxable at a rate above 0% and therefore no provision for income tax is required. The value of tax losses carried forward increased to £394,000 (2012: £380,000) which has been recognised as a deferred tax asset and results in a £14,000 credit to the income statement.

Earnings per share (note 12)

			2013		2012
Profit/(loss) for the year			£1,087,000		£(337,000)
Weighted average number of ordinary shares in issue			96,899,019		89,570,252
Basic earnings/(loss) per share			1.12p		(0.38)p
Diluted earnings/(loss) per share			0.78p		(0.38)p
Total comprehensive income for the period			£1,044,000		£(435,000)
Weighted average number of ordinary shares in issue			96,899,019		89,570,252
Basic earnings/(loss) per share			1.08p		(0.49)p
Diluted earnings/(loss) per share			0.76p		(0.49)p

The basic earnings/(loss) per share calculation is based upon the profit/(loss) for the year after taxation and the weighted average of the number of shares in issue throughout the year.

The diluted earnings/(loss) per share calculation assumes that all convertible loan notes, warrants and share options have been converted/exercised at the beginning of the year where they are dilutive.

Loans and advances to customers (note 17)

Group			Gross Amount £000		2013 Impairment Allowance £000			Carrying Value £000			Gross Amount £000			2012 Impairment Allowance £000			Carrying Value £000
HP balances			46,222		(813)			45,409			37,955			(883)			37,072
Finance lease balances			8,882		(707)			8,175			6,543			(696)			5,847
Litigation funding			2,164		(1,487)			677			2,526			(1,627)			899
Unsecured personal loans			3,815		(306)			3,509			3,913			(362)			3,551
Vehicle stocking plans			1,476		-			1,476			1,404			-			1,404
Block discounting			5,192		-			5,192			4,601			-			4,601
Secured commercial loans			6,991		(435)			6,556			5,866			(745)			5,121
Secured personal loans			4,834		(9)			4,825			-			-			-
			79,576		(3,757)			75,819			62,808			(4,313)			58,495

Collateral is held, in the form of underlying assets, for HP, finance leases, vehicles stocking plans, block discounting and secured commercial loans. An estimate of the fair value of collateral on past due or impaired loans and advances is not disclosed as it would be impractical to do so.

Specific allowance for impairment			2013 £000		2012 £000
Balance at 1 January			4,150		4,305
Specific allowance for impairment made			460		69
Write-offs			(1,032)		(224)
Balance at 31 December			3,578		4,150

Collective allowance for impairment			2013 £000		2012 £000
Balance at 1 January			162		225
Collective allowance for impairment made			17		-
Release of allowances previously made			-		(62)
Balance at 31 December			179		163
Total allowances for impairment			3,757		4,313

Advances on preferential terms are available to all Directors, management and staff. As at 31 December 2013 £93,187 (2012: £133,740) had been lent on this basis. In the Group's ordinary course of business, advances may be made to Shareholders but all such advances are made on normal commercial terms.

As detailed below, at the end of the current financial year two loan exposures exceeded 10% of the capital base of the Group (2012: one loan exposures).

Exposure				Outstanding Balance 2013 £000			Outstanding Balance 2012 £000				Facility limit £000
Secured commercial loan				-			4,176				N/A
Block discounting facility				2,229			-				2,850

HP and finance lease receivables

Loans and advances to customers include the following HP and finance lease receivables:

			2013 £000		2012 £000
Less than one year			25,495		21,841
Between one and five years			42,754		30,520
Gross investment in HP and finance lease receivables			68,249		52,361

The investment in HP and finance lease receivables net of unearned income comprises:

			2013 £000		2012 £000
Less than one year			19,540		18,454
Between one and five years			35,564		26,044
Net investment in HP and finance lease receivables			55,104		44,498

Investment in Group undertakings (note 19)

The Company has the following investments in subsidiaries incorporated in the Isle of Man:

Carrying value of investments	Nature of Business			31 December 2013 % Holding		Date of Incorporation			Total 2013 £000		Total 2012 £000
Conister Bank Limited	Asset and Personal Finance				100		05.12.1935		12,067			10,067
TransSend Holdings Limited	Holding Company for Prepaid Card Division				100		05.11.2007		-			-
Bradburn Limited	Holding Company				100		15.05.2009		-			-
Edgewater Associates Limited	Wealth Management				100		24.12.1996		2,005			2,005
									14,072			12,072

Amounts owed to group undertakings are unsecured, interest-free and repayable on demand.

MFG issued two subordinated loans to the Bank during 2013 of £1 million each, with a repayment term of 6 years and 7% interest payable per annum levied at the discretion of the lender.

Goodwill

			Group 2013 £000		Group 2012 £000
Edgewater Associates Limited (EWA)			1,849		1,849
ECF Asset finance PLC (ECF)			454		454
Three Spires Insurance Services Limited (Three Spires)			41		41
			2,344		2,344

Goodwill impairment

The goodwill is considered to have an indefinite life and is reviewed on an annual basis by comparing its estimated recoverable amount with its carrying value.

The estimated recoverable amount in relation to the goodwill generated on the purchase of EWA is based on the forecasted 3 year cash flow projections, extrapolated to 10 years using a 5% annual increment, and then discounted using a 12% discount factor. The sensitivity of the analysis was tested using additional discount factors of 15% and 20% on stable profit levels.

The estimated recoverable amount in relation to the goodwill generated on the purchase of ECF is based on forecasted 3 year sales interest income calculated at 5% margin, extrapolated to 10 years using a 5% annual increment, and then discounted using a 12% discount factor. The sensitivity of the analysis was tested using additional discount factors of 15% and 20% on varying sales volumes.

There has been no change in the detailed method of measurement for EWA and ECF when compared to 2012.

The goodwill generated on the purchase of Three Spires has been reviewed at the current year end and is considered adequate given its income streams referred to EWA.

On the basis of the above reviews no impairment to goodwill has been made in the current year.

Trade and other receivables (note 20)

	Group				Company
	2013 £000		2012 £000		2013 £000		2012 £000
Trade debtors	116		53		-		-
Prepayments and other debtors	432		733		27		30
VAT recoverable	466		466		103		68
	1,014		1,252		130		98

Included in trade and other receivables is an amount of £466,000 (2012: £466,000) relating to a reclaim of value added tax (VAT).

Conister Bank Limited (the Bank), as the Group VAT registered entity, has for some time considered the VAT recovery rate being obtained by the business was neither fair nor reasonable, specifically regarding the attribution of part of the residual input tax relating to the HP business not being considered as a taxable supply. Queries have been raised with the Isle of Man Government Customs & Excise Division (C&E), and several reviews of the mechanics of the recovery process were undertaken by the Company's professional advisors.

The decision of the First-Tier Tax Tribunal released 18 August 2011 in respect of Volkswagen Financial Services (UK) Limited v HM Revenue & Customs (TC01401) ("VWFS Decision") added significant weight to the case put by the Bank and a request for a revised Partial Exemption Special Method was submitted in December 2011. The proposal put forward by the Bank was that the revised method would allocate 50% of costs in respect of HP transactions to a taxable supply and 50% to an exempt supply. In addition at this time a Voluntary Disclosure was made as a retrospective claim for input VAT under-claimed in the last 4 years.

In November 2012, it was announced that the HMRC Upper Tribunal had overturned the First-Tier Tribunal in relation to the VWFS Decision. VWFS has subsequently been given leave to appeal and this was scheduled to be heard in October 2013.  However, this has now been delayed pending reference to a relevant European Court of Human Rights judgement.

The Bank's total exposure in relation to this matter is £589,000, comprising the debtor balance referred to above plus an additional £123,000 VAT reclaimed under the partial Exemption Special Method, in the period from Q4 2011 to Q3 2012 (from Q4 2012 the Bank reverted back to the previous method).

On the basis of the discussions and correspondence which have taken place between the Bank and C&E, in addition to the VWFS appeal, the Directors are confident that the VAT claimed referred to above will be secured.

Loan notes (note 23)

		Group				Company
	Notes	2013 £000		2012 £000		2013 £000		2012 £000
Related parties
J Mellon	JM	1,750		1,750		1,750		1,750
Burnbrae Limited	BL	1,200		1,200		1,200		1,200
Southern Rock Insurance Company Limited	SR	460		500		460		500
Copper Development Corporation	CDC	500		500		500		500
Rock Holdings Limited	RH	-		460		-		460
		3,910		4,410		3,910		4,410
Unrelated parties	UP	2,155		100		2,155		100
		6,065		4,510		6,065		4,510

JM - Two loans, one of £500,000 maturing on 31 July 2017 with interest payable of 7% per annum, and one of £1,250,000 maturing on 26 February 2015 paying interest of 9% per annum.  Both loans are convertible at the rate of 4 pence and 9 pence respectively. The £500,000 loan is also entitled to 8.3 million warrants at an exercise price of 6 pence.

BL - One loan consisting of £1,200,000 maturing on 31 July 2017 with interest payable of 7% per annum.  Jim Mellon is the beneficial owner of BL and Denham Eke is also a director. The loan is convertible at a rate of 4 pence and is entitled to 20 million warrants at an exercise price of 6 pence.

SR - One loan previously consisting of £500,000 maturing on 24 October 2017, paying interest of 7% per annum was converted into equity on 31 May 2013 at a rate of 4 pence, and remains entitled to 8.3 million warrants at an exercise price of 6 pence.  Arron Banks, a significant shareholder holds a 100% stake in SR.  On 24 April 2013 RH assigned its loan of £460,000 to SR.

CDC - One loan of £350,000 maturing on 5 September 2017 with interest payable of 5% per annum, and another loan of £150,000 maturing on 3 October 2017 paying interest of 5% per annum.  Denham Eke is a director of CDC.

RH - Previously one loan consisting of £460,000, maturing on 26 February 2015 with interest payable of 9% per annum.  The loan is convertible at the rate of 9 pence. RH is linked to Arron Banks, a significant shareholder. This loan was assigned to SR on 24 April 2013.

UP - Eleven loans consisting of an average £196,000, with an average interest payable of 3.5% per annum.  The earliest maturity date is 22 October 2014 and the latest maturity is 20 November 2018.

With respect to the convertible loans, the interest rate applied was deemed by the Directors to be equivalent to the market rate with no conversion option hence no equity component has been recognised with respect to any of these loans.

This information is provided by RNS

The company news service from the London Stock Exchange

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