Interim Results - Replacement

Close Brothers Group PLC 6 March 2000 The Issuer has made the following amendments (denoted by **) to the Interim Results announcement released today at 07:23 under RNS Number 6921g. The full corrected version appears below. CLOSE BROTHERS GROUP plc The specialist merchant banking group announces RECORD 2000 INTERIM RESULTS Close Brothers Group plc today announced its results for the six months ended 31st January, 2000: 2000 1999 ______ _____ * Profit before tax, reorganisation costs and goodwill write-off £75.2m £33.2m +126% Profit before tax on ordinary activities £66.2m £33.2m +99% * Earnings per share before reorganisation costs and goodwill write-off 38.47p 18.36p +110% Earnings per share on profit attributable to shareholders 33.46p 18.35p +82% * Interim dividend 8.0p 5.3p +51% * Total assets £2.88bn £1.66bn +73% Commenting on the results, Sir David Scholey, the Chairman, said: 'These are sparkling results and the major force in their achievement was the outstanding performance of our market-making division. Our merchant banking division performed well and increased its contribution by some 70 per cent. Our second half has started well and we continue to be confident of the future organic growth of our business.' Enquiries: Rod Kent/Peter Winkworth Close Brothers Group plc 020 7 426 4000 John Sunnucks Brunswick Group Limited 020 7 404 5959 DIRECTORS' STATEMENT Interim Report Due to exceptional circumstances we wrote to shareholders on 31st January, 2000 regarding our profits for the six months ended on that date. We estimated that the profit before tax, reorganisation costs and goodwill write-off for the period would be in excess of £72.5 million. We are now writing to shareholders with the full text of our Interim Announcement of Results, which was made today. Profit and Dividend The profit before tax, reorganisation costs and goodwill write-off for the six months ended 31st January, 2000 was £75.2 million compared to £33.2 million last year, and earnings per share were 38.47p, up 110 per cent. from 18.36p last year. These are sparkling results and the major force in their achievement was the outstanding performance of our market- making division. After deducting a charge for goodwill amortisation of £1 million (1999 nil) under the new accounting rules for this item and reorganisation charges of £8 million (1999 nil), which relate mainly to Rea Brothers Group, the profit on ordinary activities before taxation was £66.2 million (1999 £33.2 million). The directors have declared an interim dividend of 8p net per share, an increase of 51 per cent. over last year. This is payable on 14th April, 2000 to shareholders on the register at the close of business on 17th March, 2000. Overall Business Review In September last year we said that our established businesses had started our new financial year encouragingly. This promising beginning was maintained and our interim results are not only well ahead of those in the somewhat depressed same period last year but substantially better than expected and at a record level. The mix of operating profits from our three main divisions was more uneven than hitherto, principally because of the excellent performance of our market-making division. First half First half Full year 2000 1999 1999 City Merchant Banking 25% 34% 28% Market-Making 64% 32% 44% Asset Finance 11% 34% 28% In the period under review the group balance sheet has developed well, reflecting acquisitions and the current level of trading. Total assets increased to £2.9bn from £1.7bn at the last year end; customer deposits increased to £924 million compared to £536 million and with goodwill at £49 million (1999 £1 million) total equity shareholders funds grew to £338 million from £266 million. The loan book grew by 24 per cent. to £825 million since 31st January, 1999 reflecting the addition of Warrior Finance and Granville Bank during the period under review and net interest income increased by 21 per cent. Bad debts were at broadly the level in the second half of last year despite an increase in the area of car finance where there have been uncertainties in the market. While expecting it to increase somewhat following recent acquisitions, our cost income ratio of 55.9 per cent. (1999 51.7 per cent.) again demonstrates both our grip upon costs and also the performance related nature of a significant proportion of our costs. Divisional Business Review Our City Merchant Banking division performed well and, with the inclusion of the former Rea Brothers Group for the first time, increased its contribution by some 70 per cent. Our Corporate Finance activity has had a busy period, adding new clients and increasing its profits compared to last year. This activity was focused on medium-sized growth companies particularly in the technology, leisure and business services sectors, where we have particular expertise. During the period we acquired a substantial minority interest in a growing French M&A house, now called Dome Close Brothers SA. This enhances our medium-term objective of providing high quality advisory services to the awakening medium-sized growth company markets in France and Germany. Our second half has started well and our pipeline is healthy, with trading conditions continuing to be favourable. Our Asset Management activity has continued apace and the integration of the recently acquired Rea Brothers is going well. Investment funds under management now total approximately £2.5 billion (1999 £0.6 billion), with further substantial cash and trust assets managed and administered off- shore. A recent success has been the launch of our Close Fund Management's FTSE Techmark Fund in November, which now exceeds £150 million. Our Banking activity has performed well with a solid result. Total customer deposits have grown substantially and our Treasury operation completed the integration of Rea Brothers' London banking business. Our property lending activity has been brisk, bolstered by acquiring Granville Bank in November. PROMPT Commercial has benefited from improved volumes and additional senior management. This business is being moved to Tolworth from the City to the same premises as our fledgling PROMPT Personal operation, which has got off to a satisfactory start. Our debt factoring company produced, once again, record interim results with strong sales based on high service levels. Mortgage Intelligence, a near start-up in which we invested in 1997 has rapidly built up a leading mortgage broking network in the UK and has moved, on plan, into profit; it is also working to launch a mortgage product on the Internet. Our Asset Finance division (67 per cent. of the group loan book) saw lower results in the period. This was principally because of the uncertainty in the UK car industry, where used car volumes and prices have fallen, reflecting the anticipated one-off reduction in new car prices. We believe that as this uncertainty dissipates, the market will become more stable and that our trading will improve as the year progresses. In September 1999 we acquired Warrior Group, in which NAAFI remain as a minority investor. As planned, this Group is going through a period of significant operational reorganisation which is unlikely to be completed until next financial year, when the emphasis will then be put on marketing. In our commercial asset sector, we have experienced a mixed market and lower than planned volumes of new business. On the important printing equipment side we have seen signs of improvement in the market, although it still remains somewhat patchy. Other assets experienced mixed fortunes, with commercial vehicles holding up well, but light aircraft experiencing low volumes. However the sector continues to deliver an excellent return on capital and towards the end of the period we recruited two new teams in the North West with specialist knowledge of machine tools and other commercial assets. Our Market-Making division, Winterflood Securities ('WINS'), showed spectacular growth in its volumes and profits. For the last five years, WINS' profits have been rising year on year, even though during that time small company stocks were comparatively out of favour. Over this period WINS took considerable steps to broaden its business by investing in the ability to deal with orders automatically and electronically, by increasing the number of stocks in which it deals and by diversifying into retail gilts market-making. More recently WINS has started market- making in European stocks mainly in Germany and France. WINS currently makes markets in over 1,800 stocks and gilts. In the last three months of the period, the amount of activity in small company stocks, and technology stocks in particular, has increased substantially. One of the reasons, we believe, for the increase in this overall activity is the ease of dealing which new technology provides for private investors. We have also seen a substantial and continued growth in the number of bargains which we book through our automatic execution systems. WINS' careful positioning in the market place, and its investment in people and systems, are being amply justified. WINS Gilts is now established as one of the pre-eminent participants in the retail market for gilts and also produced record interim results. It is currently expanding its market-making into other fixed interest instruments, such as Eurosterling Bonds, Preference Shares and PIBS. WINS second half has started well with trading levels to date in line with those of recent months. Directors It was with deep sadness that we reported the death of Michael Morley, on 20th October, 1999 shortly before he was due to retire. Sir David Scholey was appointed chairman on that date. Outlook Notwithstanding the interest rate rises of recent months, the UK economy continues to expand and corporate profits continue to grow. These conditions are likely to persist for the remainder of our financial year but it remains to be seen whether the recent levels and activity in the London Stock Market are sustained. Our second half has started well and we continue to be confident of the future organic growth of our business as a specialist merchant banking group. CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months ended 31st Six Year January, 2000 months ended Ordinary Goodwill Total ended 31st activit- ordinary 31st July, ies before amortis- January 1999 goodwill ation activit- , 1999 amortisa- and ies tion and except- except- ional ional items items (Unaudi- (Unaudi-(Unaudi- (Unaudi- (Audit- ted) ted) ted) ted) ed) £'000 £'000 £'000 £'000 £'000 _______ ______ _______ _______ _______ Interest receivable 77,864 - 77,864 62,532 121,277 Interest payable (41,491) - (41,491) (32,504) (61,422) _______ _______ _______ _______ _______ Net interest income 36,373 - 36,373 30,028 59,855 _______ _______ _______ _______ _______ Dividend income 272 - 272 263 398 Fees and commissions receivable 57,717 - 57,717 29,704 66,162 Fees and commissions payable (12,569) - (12,569) (4,021) (9,367) Net dealing income - market-making 104,092 - 104,092 21,746 67,162 Other operating income 3,492 - 3,492 581 1,341 _______ _______ _______ _______ _______ Other income 153,004 - 153,004 48,273 125,696 _______ _______ _______ _______ _______ Operating income 189,377 - 189,377 78,301 185,551 _______ _______ _______ _______ _______ Administrative expenses 105,887 7,940 113,827 40,471 97,709 Depreciation 2,545 - 2,545 1,622 3,472 Provisions for bad and doubtful debts 5,733 - 5,733 2,977 8,028 Amortisation of goodwill - 1,039 1,039 11 24 _______ _______ _______ _______ _______ Total operating expenses 114,165 8,979 123,144 45,081 109,233 _______ _______ _______ _______ _______ Profit on ordinary activities before taxation 75,212 **(8,979) 66,233 33,220 76,318** Taxation on profit on ordinary activities 23,394 **(2,382) 21,012 10,717 24,473** _______ _______ _______ _______ _______ Profit on ordinary activities after taxation 51,818 **(6,597) 45,221 22,503 51,845** Minority interests - equity 1,144 - 1,144 376 982 _______ _______ _______ _______ _______ Profit attributable to shareholders 50,674 **(6,597) 44,077 22,127 50,863** _______ _______ Interim dividend 10,770 6,410 20,775 _______ _______ _______ Retained profit 33,307 15,717 30,088 ______________________________________________________________________ Interim dividend per share (net) 8.00p 5.30p 16.00p _______ _______ _______ Earnings per share before amortisation of goodwill and exceptional items 38.47p 18.36p 42.10p _______ _______ _______ Earnings per share on profit attributable to shareholders 33.46p 18.35p 42.08p _______ _______ _______ Diluted earnings per share 33.19p 18.22p 41.88p _______ _______ _______ All income and profits are in respect of continuing operations. CONSOLIDATED BALANCE SHEET 31st January, 31st July, 2000 1999 1999 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Assets Cash and balances at central banks 153 48 64 Loans and advances to banks 557,259 333,340 395,512 Loans and advances to customers 825,327 665,583 701,233 Debt securities - certificates of deposit 290,187 186,841 208,860 Debt securities - gilts long positions 17,047 89,156 18,473 Settlement accounts 914,868 201,603 215,628 Equity shares - long positions 60,416 24,459 36,549 Loans to money brokers against stock advanced 58,881 102,654 55,523 Equity shares - investments 25,498 14,842 19,345 Intangible fixed assets - goodwill 48,519 1,385 1,083 Tangible fixed assets 18,278 10,532 12,560 Other assets 43,637 25,117 27,884 Prepayments and accrued income 20,399 9,200 9,004 ________ ________ ________ Total assets 2,880,469 1,664,760 1,701,718 _____________________________________________________________________ Liabilities Deposits by banks 34,007 84,138 89,189 Customer accounts 924,376 511,546 535,715 Bank loans and overdrafts 416,567 285,090 330,043 Debt securities in issue - loan notes 54,422 54,422 54,422 Debt securities in issue - gilts short positions 18,942 78,404 20,297 Settlement accounts 740,475 179,663 177,119 Equity shares - short positions 17,765 9,117 10,822 Loans from money brokers against stock advanced 83,154 106,606 47,525 Other liabilities 170,791 88,893 107,056 Accruals and deferred income 54,540 29,665 39,323 Subordinated loan capital 21,937 21,937 21,937 Minority interest - equity 4,997 2,229 2,111 ________ ________ ________ Total liabilities 2,541,973 1,451,710 1,435,559 ________ ________ ________ Shareholders' funds Called up share capital 33,656 30,539 32,142 Share premium account 184,262 94,650 138,879 Other reserves - 1,800 - Profit and loss account 120,578 86,061 95,138 ________ ________ ________ Total equity shareholders' funds 338,496 213,050 266,159 ________ ________ ________ Total liabilities and shareholders' funds 2,880,469 1,664,760 1,701,718 _____________________________________________________________________ Memorandum items Contingent liabilities - guarantees 1,525 361 387 Commitments - other 133,178 94,754 123,761 THE NOTES 1. Basis of preparation The interim accounts, which are unaudited, have been prepared on the basis of the accounting policies set out in the 1999 group accounts. The figures shown for the full year ended 31st July, 1999 represent an abridged version of the full accounts of Close Brothers Group plc for that year, which have been filed with the Registrar of Companies and on which the auditors have given an unqualified report. 2. Earnings per share The earnings per share in 2000, both on profits before amortisation of goodwill and exceptional items and on profit attributable to shareholders, is based on a weighted average of 131,714,000 ordinary shares in issue during the period (1999 - 120,601,000). The diluted earnings per share is based on a weighted average of 132,782,000 (1999 - 121,426,000) ordinary shares after allowing for the exercise of options under the sharesave and executive share option schemes. ________________________________________________________________________ INTERIM REVIEW REPORT TO CLOSE BROTHERS GROUP PLC Introduction We have been instructed by the company to review the financial information set out on pages 4 and 5 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the London Stock Exchange require that the accounting polices and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31st January, 2000. Deloitte & Touche Chartered Accountants Hill House, 1 Little New Street, London, EC4A 3TR 6th March, 2000

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