Impact Capital writes down UK investment

Finance company Impact Capital took the unusual step of issuing preliminary results yesterday, two weeks ahead of the scheduled date for the announcement of its 2006/07 results.

The company was prompted to issue a statement to the Australian Securities Exchange after it wrote down a significant investment in a UK business. It holds 16 per cent of Impact Holdings (UK) PLC.

Following "poor financial performance" by the UK company Impact has reduced the carrying value of the shares from 7.8 to 3.7 pence.

The company said its Australian operations made an unaudited pre-tax profit of between $2.8 million and $3.1 million in 2006/07. The UK writedown will reduce earnings by $2.4 million.

Impact lends against contingent assets - benefits likely to flow from personal injury claims, matrimonial settlements and inheritances. It also offers a line of credit to litigants.

The business has been lumped in with litigation funders but Impact is different because it does not share in the outcome of a case; it charges interest on loans.

Impact's chief financial officer Alison Hill said the company needed to inform the market about the UK situation but also reassure investors that the local business was performing well. Pre-tax profit from Australian operations in 2005/06 was $60,000.

Impact is one of a small group of companies that have benefited from a High Court ruling last August that funding and controlling litigation for profit was not an abuse of process. The decision was widely read as giving legitimacy to litigation funding and related finance activities.

Hill said the level of activity had picked up over the past year, although she could not say whether that was the result of the High Court decision.

Impact also announced yesterday that it arranged a new debt facility with BankWest. Hill said the loan from BankWest was on better terms than the previous one from National Australia Bank and increased Impact's debt facility from $40 million to $50 million.