Final Results - Year Ended 31 December 1999

Secure Trust Banking Group PLC 14 March 2000 Preliminary results for the year to 31 December, 1999 Key Points * Dividends per share up 4% to 27p * Profit before exceptional goodwill item £10.1 million (1998: £11.4 million) * Earnings per share before exceptional goodwill item 47.8p (1998: 51.9p) Chairman, Henry Angest, commented; 'In 1999, Secure Trust Banking Group has recorded encouraging performances in certain of our activities, with profits increasing 25% in the Arbuthnot group and 18% in Personal Lending. These results were achieved despite the impact on overall Group profits of falling interest rates and job losses in the West Midlands, which is the principal location for our main business. Looking to the future, we have instigated a number of promising new initiatives which give me cause to be optimistic about the Group's medium-term prospects.' Press enquiries for Secure Trust Banking Group PLC: Henry Angest, Chairman Tel: 020 7374 0417 Stephen Lockley, Finance Director Tel: 020 7600 4022 Zoe Biddick / Katie Tzouliadis, Biddick Associates Tel: 020 7377 6677 CHAIRMAN'S STATEMENT As I envisaged at the time of our half-year results in September, trading conditions in the second half of the year to 31 December 1999 remained challenging, with low interest rates reducing our net interest income and job losses in the West Midlands affecting the business of Secure Trust Bank. Despite these factors, the resilience of the Group's businesses is shown in a rise in total income compared with the previous year. At the same time, we have continued to invest in developing the Group for the future and total costs, excluding bad debts, rose on a like-for-like basis by 9%. Including the effect of acquisitions, the rise was 13%. After a reduced bad debt charge of £0.7 million (1998: £1.1 million), profit before an exceptional goodwill item amounted to £10.1 million (1998: £11.4 million). Diluted earnings per share were 47.8p (1998: 51.9p). The financial position of the Group continues to be strong and the Board is expressing its confidence in the future by recommending an increase in the final dividend to 18.5p per share which, together with the interim dividend of 8.5p, makes a total for the year of 27p, an increase of 4% over 1998. The final dividend will be paid on 15 May 2000 to all shareholders on the register at 24 March 2000. Secure Trust Bank Profits in Secure Trust Bank were £8.7 million, compared with £10.3 million in 1998. In the core Household Cash Management business, management fees and commissions reduced by some 3%, caused by lower earnings from the Sickness, Accident and Redundancy insurance scheme offered to customers of Secure Trust Bank. Whilst this scheme is not underwritten by the Group, our earnings from it include a profit-based commission which has been adversely affected by the well publicised job losses in the West Midlands. On a positive note, loan advances in Personal Lending and Banking reached a record level, increasing by 6% over the previous year. This helped to offset the impact of average base rates falling by a quarter from 7.23% in 1998 to 5.35% in 1999. The fall in net interest earnings from this division was, therefore, restricted to some 9%. Commission earnings in the retail Insurance Consultancy business increased by 6%, reflecting an increase in average premium rates over the year. Arbuthnot Latham Each of the companies comprising the Arbuthnot group achieved good results in 1999, with divisional pre-tax profits rising by 25% to £1.35 million. Arbuthnot Latham has continued to win new clients and increased its loan book by 23% to £51.2 million and its deposits by 26% to £92.0 million. The acquisition of Weinel & Partners in July added to our investment management, financial advisory and insurance broking capabilities. The combination of this acquisition with the strong performances of the existing businesses meant that fees and commissions earned by the division increased by 32% over the level achieved in 1998. At the same time, our invoice factoring activity continued its successful growth, increasing profits by 53%. Exceptional Goodwill Write-Off As announced at the time of our interim results, the goodwill relating to West Yorkshire Insurance Company, which has previously been written-off directly against reserves, has been reinstated and instead written-off against the current year profit and loss account in accordance with the requirements of Financial Reporting Standard 10 'Goodwill and Intangible Assets'. This is an accounting entry only which has no effect on the Group's net assets or distributable reserves. Staff and Management The circumstances of the past year have been challenging and the manner in which our staff and management have responded has been excellent. Their loyalty and endeavour is the cornerstone of all that we do and, on behalf of the Board, I extend my thanks to each of them. In particular, I would like to pay tribute to the professionalism and hard work of all our IT staff in meeting the challenges of the so-called 'Millennium bug'. I am pleased to report that our computer systems have continued to function normally in the Year 2000. Future Plans and Outlook During the course of the last year, the Household Cash Management service has been piloted in new geographic areas and new products have been introduced by both Secure Trust Bank and Arbuthnot. Furthermore, work is underway on a number of exciting new projects, including an enhanced version of the Group's cash management service, incorporating an internet facility. We believe that this new version of the product has the potential to attract a wider customer grouping, both socially and geographically, by utilising the opportunities for electronic cash collection and bill payment offered by new technologies such as the internet and interactive digital television. As a result of these medium-term initiatives, the Board is optimistic regarding the outlook for the Group. Henry Angest Chairman CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 1999 Profit before Exceptional 1999 1998 exceptional item item (unaudited) (audited) £'000 £'000 £'000 £'000 Interest receivable from loans, advances and investments 10,783 - 10,783 12,321 Less: interest payable (2,928) - (2,928) (3,837) ______ ______ ______ ______ Net Interest Income 7,855 - 7,855 8,484 Fees and commissions receivable 24,496 - 24,496 23,156 Less: fees and commissions payable (616) - (616) (537) ______ ______ ______ ______ Operating Income 31,735 - 31,735 31,103 ______ ______ ______ ______ Administrative expenses 19,810 - 19,810 17,705 Depreciation and amortisation 1,170 - 1,170 884 Provisions for bad and doubtful debts 693 - 693 1,107 ______ ______ ______ ______ Operating expenses 21,673 - 21,673 19,696 ______ ______ ______ ______ Operating Profit 10,062 - 10,062 11,407 Exceptional item (note 1) Goodwill previously eliminated against reserves - (2,472) (2,472) - ______ ______ ______ ______ Profit on ordinary activities before tax (note 2) 10,062 (2,472) 7,590 11,407 Tax on profit on ordinary activities (2,769) - (2,769) (3,445) ______ ______ ______ ______ Profit on ordinary activities after tax 7,293 (2,472) 4,821 7,962 Minority interests (128) - (128) (107) ______ ______ ______ ______ Profit attributable to shareholders of Secure Trust Banking Group PLC 7,165 (2,472) 4,693 7,855 Dividends (3,943) - (3,943) (5,418) ______ ______ ______ ______ Retained profit for the year 3,222 (2,472) 750 2,437 ______ ______ ______ ______ Earnings per ordinary share (note 3) Basic 47.8p 31.3p 52.3p Fully diluted 47.8p 31.3p 51.9p CONSOLIDATED BALANCE SHEET At 31 December 1999 1999 1998 (unaudited) (audited) £000 £000 Assets Cash 168 187 Loans and advances to banks and building societies 49,054 52,243 Loans and advances to customers 78,668 65,127 Debt securities 12,500 6,500 Intangible assets 2,278 310 Tangible fixed assets 7,250 7,519 Other assets 5,999 5,656 Prepayments and accrued income 2,538 3,149 _______ _______ Total assets 158,455 140,691 _______ _______ Liabilities Deposits by banks 12,297 9,479 Customer accounts 104,028 87,543 Insurance reserves 4,583 5,508 Other liabilities 13,116 14,544 Accruals and deferred income 2,585 2,507 Minority interests 79 54 _______ _______ 136,688 119,635 _______ _______ Called up share capital 144 150 Capital redemption reserve 6 - Share premium account 13,370 13,362 Profit and loss account (note 4) 8,247 7,544 _______ _______ Equity shareholders' funds 21,767 21,056 _______ _______ Total liabilities 158,455 140,691 _______ _______ NOTES 1. Exceptional Item In accordance with FRS 10, goodwill of £2,472,000 arising on the acquisition of West Yorkshire Insurance Company Limited, previously written off directly against reserves, has been reinstated and charged in the profit and loss account as the Group has no plans to resume motor insurance underwriting in the foreseeable future. There is no taxation charge or credit applicable to this item. 2. Segmental Analysis of Profits 1999 1998 unaudited) (audited) £'000 £'000 Personal Financial Services before exceptional item 8,715 10,327 Exceptional item (note 1) 2,472 - _______ _______ Personal Financial Services after exceptional item 6,243 10,327 Private and Merchant Banking 1,347 1,080 _______ _______ 7,590 11,407 _______ _______ Acquisitions contributed £177,000 to profit on ordinary activities before tax. 3. Earnings per Ordinary Share a) Basic Earnings per share are calculated on the net basis by dividing the profit attributable to shareholders of £4,693,000 (31.12.98: £7,855,000) by the weighted average number of ordinary shares 14,991,698 (31.12.98: 15,034,295) in issue during the year. b) Diluted Diluted earnings per ordinary share have been calculated in accordance with FRS 14 by dividing the profit attributable to shareholders of £4,693,000 (31.12.98: £7,855,000) by the weighted average number of ordinary shares 14,997,403 (31.12.98: 15,141,528) in issue during the year, adjusted to reflect the effect of outstanding share options. c) Adjusted The exceptional item charged against profit on ordinary activities before tax does not relate to the profitability of the Group on an ongoing basis. Therefore, an adjusted basic earnings per share is presented, as follows:- 1999 1998 (unaudited) (audited) £'000 pence £'000 pence Basic 4,693 31.3 7,855 52.3 Exceptional item 2,472 16.5 - - ______ ______ ______ ______ Earnings excluding exceptional item and adjusted earnings per share 7,165 47.8 7,855 52.3 ______ ______ ______ ______ 4. Profit and Loss Account 1999 1998 (unaudited) (audited) £'000 £'000 Retained profit 30,177 31,946 Premiums on acquisitions written off (21,930) (24,402) _______ _______ 8,247 7,544 _______ _______ Retained profit at 31 December 1999 is stated after deducting £2.52 million in respect of the cost of shares repurchased during the year. 5. Basis of reporting The figures for the year ended 31 December 1999 have been prepared in all material respects on the basis of the accounting policies set out in the Group's 1998 statutory accounts. The preliminary results were approved by the Board of Directors on 13 March 2000 and are unaudited. 6. Results for the year ended 31 December 1998 The figures for the year ended 31 December 1998 are extracted from the full Group Accounts for the year which have been delivered to the Registrar of Companies and on which the Auditors gave an unqualified report.

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