Interim Results

BERRY BIRCH & NOBLE PLC 30 September 1999 Berry Birch & Noble, a leading Independent Financial Services Group, today announced interim results for the half year ended 31 July 1999. Berry Birch & Noble plc - results for the half year ended 31 July 1999 Financial highlights Unaudited Unaudited Change Audited half year half year year ended ended ended 31 July 31 July 31 January 1999 1998 1999 £000 £000 £000 Turnover 4,537 4,411 +3% 8,308 Operating profit before 373 534 -30% 750 exceptional item Profit before exceptional 411 571 -28% 840 item and taxation Exceptional item - (150) (519) Profit before taxation 411 421 -2% 321 Basic earnings per share before exceptional item 5.9p 8.4p -30% 11.3p Basic earnings per share after exceptional item 5.9p 6.1p -3% 5.8p Interim Dividend 1p 1p Unchanged Net Funds 545 536 +£9K 602 ------------------------------------------------------------------------------ Group results We are pleased to be able to announce a Group profit before taxation for the half year ended 31 July 1999 of £411,000 (1998: £421,000). Whilst the result represents a reduction of 2% in the Group profit before taxation when compared to the corresponding period last year, it does, however, confirm the Board's commitment to deliver a solid profit-base from which to grow the business further. The current result was realised by an increase in turnover of 3% over the corresponding period last year, whereas operating costs increased by some 7%. As explained in last year's annual accounts, the Board recognises that enhancing long-term shareholder value can only be achieved by continued expansion, either organically or by acquisition. Whilst the Board is committed to keeping costs firmly under control, the strengthening of the organisational structure, considered necessary as a base for future expansion, together with additional expenditure on computer systems relating to the year 2000 issue, contributed to operating costs increasing at a faster rate than revenue. In accordance with the Group's strategic review carried out in 1998, the Group has started to expand by acquisition, having entered into a number of agreements since the beginning of the current financial year. In March 1999, the Group agreed to purchase the ongoing business operations of Bernard Denver Associates, a small IFA based in Surrey. In June 1999, the Group agreed to purchase the ongoing Personal Financial Planning and Group Pensions business operations of Moores Marr Bradley Ltd. In July 1999, the Group entered into an agreement to market financial services products to the clients of South Essex Insurance Brokers Ltd. In August 1999 and after the end of our latest half year, the Group agreed to purchase the ongoing Insurance Broking business operations of Peter Stewart Associates Ltd. Whilst the effects of these transactions were broadly neutral on the operating results for the half year, the benefits will start to flow through for the first time during the second half of our current financial year. In respect of the Pensions Review, a full assessment of the Group's exposure was completed in May 1999. Between then and now little has changed and it is the Board's view that no further increase in the provision already constituted is necessary at the current time. As a result of the slightly reduced Group profit after taxation of £384,000 (1998: £400,000), basic earnings per share after exceptional item for the half year fell to 5.9p per share (1998: 6.1p). Review of operations Our Personal Financial Planning Division remains extremely buoyant. Following the Moores Marr Bradley and South Essex Insurance Brokers transactions, we are seeking to expand this Division at an accelerated rate to meet the needs of our increased client base. A significant development for this Division has also been the rapid increase in the direct marketing of investment opportunities to our clients which has proved a profitable and effective means of keeping our clients in touch with offers on the market. The half year also saw a significant increase in activity in the provision of personal financial seminars for the employees of our large corporate clients. Our Mortgage Division had a mixed half year. Despite the property market becoming more active, and with property prices moving ahead strongly, particularly in the South East, the results of this Division have been below expectations. This Division, which principally relies on its business from the new build sector of the housing market, is dependent on the rate of housing starts from our developer contacts. We are currently in the process of restructuring our Mortgage Division to develop a multifaceted approach to sales, and our team of consultants has been reduced accordingly. Whilst we are keen to retain the business of our key developers, we are strengthening our telesales team and introducing mortgages through the intranet sites of some of our corporate connections. Our Pensions Division is finding increased demand for advice on a wide range of employee benefits issues. The message from the Government is clear - everyone will need to take more responsibility for their own financial security. This fact, together with the complexity of new financial products introduced by the Government, means there is and will continue to be an ever-increasing need for professional financial advice. Our Insurance Broking Division which includes home, contents, motor and travel insurance, goes from strength to strength as we continue to increase our client numbers and market share. Individuals are becoming more and more cost-conscious and are being attracted to our products as a result of the competitive rates that we offer. The Insurance Broking Division will also benefit from the acquisition of the Insurance Broking business of Peter Stewart Associates. Year 2000 A review of the Group's computer systems for year 2000 compliance had previously been set out and the majority of these projects have now been completed. Those projects that have not been completed are nearing completion, and it is the Board's view that year 2000 compliance will be achieved by the end of October 1999. Outlook The Group remains committed to expansion, both organically and by acquisition. The acquisitions completed during the first half of the year will not only improve the Group's earnings during the current year but will also encourage the Board to continue expansion by acquisition. We remain confident in the future of the Group. Dividend The Group's dividend policy for interim dividends is to pay one-third of the prior year's total dividend, providing circumstances permit. In respect of the financial year to 31 January 1999, the Group paid a total dividend of 3p. Consequently, the Board has decided, in line with the Group's dividend policy, to maintain the interim dividend at 1p per share (1998: 1p). The interim dividend will be paid on 24 November 1999 to shareholders on the register on 15 October 1999. Staff members The hard effort and loyalty of our staff have helped us achieve an overall satisfactory result for the half year. No company could succeed without the support and dedication of its staff. The Board would therefore, once again, like to express their gratitude and sincere appreciation to those staff members who have made such a result possible. Sir Jeremy Black Derek Berry Chairman Chief Executive 30 September 1999 Consolidated profit and loss account for the half year ended 31 July 1999 Unaudited Unaudited Audited half year half year year ended ended ended 31 July 1999 31 July 1998 31 January 1999 Notes £000 £000 £000 Turnover 4,537 4,411 8,308 Operating costs (4,164) (3,877) (7,558) ____________ ____________ _____________ Operating profit before exceptional item 373 534 750 Exceptional item - Pensions review 3 - (150) (519) ____________ ____________ _____________ Operating profit 373 384 231 Net interest receivable 38 37 90 ____________ ____________ _____________ Profit on ordinary activities before taxation 411 421 321 Taxation 4 (27) (21) 57 ____________ ____________ _____________ Profit on ordinary activities after taxation 384 400 378 Dividends paid and proposed 6 (65) (65) (196) ____________ ____________ _____________ Retained profit 319 335 182 ____________ ____________ _____________ Earnings per share 5 - basic before exceptional item 5.9p 8.4p 11.3p - basic 5.9p 6.1p 5.8p - diluted before exceptional item 5.9p 8.4p 11.3p - diluted 5.9p 6.1p 5.8p ____________ ____________ _____________ The Group has no recognised gains or losses other than those included in the profit above, therefore no separate statement of total recognised gains and losses has been presented. Consolidated balance sheet at 31 July 1999 Unaudited Unaudited Audited at at at 31 July 1999 31 July 1998 31 January 1999 £000 £000 £000 Fixed assets Intangible assets - goodwill 98 - - Tangible assets 1,521 1,689 1,559 ____________ ____________ ____________ 1,619 1,689 1,559 Current assets Debtors 2,774 1,806 2,139 Cash at bank 1,340 1,573 1,468 ____________ ____________ _____________ 4,114 3,379 3,607 Creditors - amounts falling due within one year Borrowings (795) (679) (866) Other (2,839) (1,538) (2,520) ____________ ____________ _____________ (3,634) (2,217) (3,386) Net current assets 480 1,162 221 ____________ ____________ _____________ Total assets less current liabilities 2,099 2,851 1,780 Creditors - amounts falling due after more than one year Borrowings - (358) - ____________ ____________ _____________ 2,099 2,493 1,780 Provisions for liabilities and charges (700) (1,260) (700) ____________ ____________ _____________ 1,339 1,233 1,080 ____________ ____________ _____________ Capital and reserves Called up share capital 652 652 652 Share premium account 78 78 78 Profit and loss account 669 503 350 ____________ ____________ _____________ Equity shareholders' funds 1,399 1,233 1,080 ____________ ____________ _____________ Reconciliation of movements in shareholders' funds Unaudited half year ended 31 July 1999 £000 Profit for the period 384 Dividends (65) _____________ Net increase in shareholders' funds 319 Opening shareholders' funds 1,080 _____________ Closing shareholders' funds 1,399 _____________ Consolidated cash flow statement for the half year ended 31 July 1999 Unaudited Unaudited Audited half year half year year ended ended ended 31 July 1999 31 July 1998 31 January 1999 £000 £000 £000 Net cash inflow from operating activities 224 557 677 (Note 7) Returns on investments and servicing of finance Interest received 54 66 144 Interest paid (16) (29) (54) ____________ ____________ _____________ 38 37 90 Taxation UK corporation tax received 11 - - Advance corporation tax - (16) (48) ____________ ____________ _____________ 11 (16) (48) Capital expenditure and financial investment Purchase of tangible fixed assets (158) (28) (124) Purchase of goodwill (100) - - Sale of tangible fixed assets 58 50 183 ____________ ____________ _____________ Net cash (outflow)/inflow from capital expenditure (200) 22 59 Equity dividends paid (130) (65) (130) ____________ ____________ _____________ Cash inflow before management of liquid resources and financing (57) 535 648 Financing Capital element of finance lease payments (71) (89) (307) ____________ ____________ _____________ (Decrease)/increase in cash in (128) 446 341 the period ____________ ____________ _____________ Reconciliation of net cash flow to movement in net funds Unaudited Unaudited Audited half year half year year ended ended ended 31 July 1999 31 July 1998 31 January 1999 £000 £000 £000 (Decrease)/increase in cash in the period (128) 446 341 Capital element of finance lease repayments 71 89 307 ____________ ____________ _____________ Change in net cash resulting from cash flows (57) 535 648 Other non-cash items - finance leases - (34) (81) ____________ ____________ _____________ Movement in net (debt)/funds in the period (57) 501 567 Net funds at commencement of period 602 35 35 ____________ ____________ _____________ Net funds at end of period 545 536 602 ____________ ____________ _____________ Notes to the interim results 1. Basis of preparation of interim financial information The interim financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 January 1999. The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the full preceding year is extracted from the statutory accounts for the financial year ended 31 January 1999. Those accounts, upon which the auditors issued an unqualified opinion have been delivered to the Registrar of Companies. 2. Segmental information Unaudited Unaudited Audited half year half year year ended ended ended 31 July 1999 31 July 1998 31 January 1999 Turnover by business £000 £000 £000 Financial services 3,598 3,560 6,589 Insurance broking 939 851 1,719 ____________ ____________ _____________ 4,537 4,411 8,308 ____________ ____________ _____________ Profit before tax by business Financial services 308 326 164 Insurance broking 103 95 157 ____________ ____________ _____________ 411 421 321 ____________ ____________ _____________ 3. Exceptional item The exceptional item relates to provisions made in respect of the Pensions Review. The amount included at 31 January 1999 was calculated to include amounts relating to both phase 1 and phase 2 of the Review. At present no further increase in the provision is considered necessary. 4. Taxation The taxation charge is calculated by applying estimated rates, based on the anticipated rate for the full year and is calculated after taking into account prior year tax losses and after writing back advance corporation tax previously written off. 5. Earnings per share The calculation of the basic earnings per share of 5.9p (1998: 6.1p) is based on profit after taxation of £384,000 (1998: £400,000) divided by the number of shares in issue during the year of 6,516,836 (1998: 6,516,836). The diluted earnings per share of 5.9p (1998: 6.1p) is based on the same profit after taxation of £384,000 (1998: £400,000) divided by 6,516,836 (1998: 6,516,836) shares. 6. Dividend The Directors have approved the payment of an interim dividend of 1p on each of the issued ordinary shares in the Company at a cost of £65,000 (1998: £65,000). The dividend will be paid on 24 November 1999 and sent to shareholders on the register on 15 October 1999 (the record date). 7. Reconciliation of operating profit to net cash inflow from operating activities Unaudited Unaudited Audited half year half year year ended ended ended 31 July 1999 31 July 1998 31 January 1999 £000 £000 £000 OPERATING ACTIVITIES Operating profit 373 534 750 Exceptional item - Pensions review payments made net of recoveries (252) (321) (622) Depreciation of fixed assets 128 163 284 Loss/(profit) on sale of tangible fixed assets 12 (5) 3 (Increase)/decrease in debtors (618) 120 57 Increase in creditors 581 66 205 ____________ ____________ _____________ Net cash inflow from operating 224 557 677 activities ____________ ____________ _____________ 8. Analysis of net funds At 1 Cashflow Other non-cash At 31 July February changes 1999 1999 £000 £000 £000 £000 Cash at bank 1,468 (128) - 1,340 Loan (500) - - (500) _________ __________ ___________ __________ 968 (128) - 840 Finance leases (366) 71 - (295) _________ __________ ___________ __________ Total 602 (57) - 545 _________ __________ ___________ __________ 9. General This report will be sent to shareholders and will be made available to the public, upon request, at the registered office of Berry Birch & Noble plc, 22-26 Station Road, West Wickham, Kent BR4 0PS.

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