At the Annual General Meeting in February, the Company reported that, despite a good start to the year with turnover up over 30%, the underlying profitability of the Group in the first four months of the year was lower than last year as a result of our investment in staff and premises.
The Board of the Company now estimates that turnover in the six months ended 31 March 2005 will be approximately £7.0 million compared to £5.6 million for Compass Finance Ltd in 2004.
During the first half of the year, £740,000 was invested in expanding the infrastructure of the group to meet the demand that was anticipated for loans and mortgages. While secured loans were in line with expectations, mortgage lending since the end of January has not grown at the rate that was projected and the Board reluctantly decided to reduce the number of staff in the mortgage lending division. This resulted in the loss of three jobs and two people being redeployed to other parts of the Group. In addition there will be an exceptional charge of around £100,000 covering the relocation of the head office to Bury in Greater Manchester.
With mortgage lending likely to be at a lower level during the remainder of the year, the results for the year to 30 September 2005 are likely to be materially below last year’s results. However, we believe that the cost base is now in line with the likely level of business.
Following a strategic review of the group’s business, Mike Sutcliffe, aged 36, who was previously with CitiFinancial, a member of Citigroup Inc., latterly on the management board, has today been appointed Chief Executive. Prior to that, he spent 8 years with Household International, Inc, which is now a subsidiary of HSBC. To ensure a satisfactory handover, Chris Smith, will remain in an executive role with the group for the next three months and will then assume a position as a non-executive director of the Company.
The Directors believe the actions taken to restructure the cost base to reflect the current levels of activity place the business in a good position to improve its financial performance in 2006.
The interim results are expected to be published in June.
