Interim Results
Hansard Global plc
29 March 2007
Hansard Global PLC
('Hansard Global' or the 'Company')
Interim results for the six months ended 31 December 2006
Hansard Global plc, the specialist long-term savings provider, today announces
its results for the six months ended 31 December 2006.
Financial highlights
• Profit after tax was £10.6 million, an increase of 28% (H1 05/06: £8.3
million)
• EEV of the Group has risen to £193.2 million, up 8% compared to the
value at 30 June 2006
• New business premiums on an APE basis were £17.3 million, up 9% (H1 05/06:
£15.9 million)
• Assets under administration at 31 December, at £1,035 million, up 9%
compared with 30 June 2006
• The Board is recommending an interim dividend of 4 pence per share
• Successful IPO in December 2006
Operational highlights
• Stable New Business Margins of 8.0%
• Excellent ongoing operational platform
• New business initiatives providing growth
• Enhanced ability to attract and compete for new business from a wider
range of Intermediaries
• Four new non-executive directors added to the Board
• Hansard Online continues to differentiate
Dr Leonard Polonsky, Hansard Global's Chairman, commented:
'I am pleased to report that the strong performance in profitability and new
business achieved over the last two years has continued in the first half of the
financial year and that new business margins have been maintained.
'Hansard Global's objective remains to grow by attracting new business and
positioning itself to adapt rapidly to market trends and conditions. The
scaleability and flexibility of the Group's operations allow Hansard Global to
enter or develop new geographic markets and exploit growth opportunities within
our existing markets, without the need for significant further investment.
'The Board is confident that the Group operates in a growing marketplace. The
long-term trends in all our chosen markets will allow Intermediaries, with whom
Hansard works, to capitalise on these opportunities.'
< ends >
For further information, please contact
Hansard Global Plc
Dr Leonard Polonsky, Executive Chairman
Tel: 01624 688 000
Bell Pottinger Corporate and Financial
Dan de Belder/ Mike Davies
Tel: 020 7861 3232
Hansard Global plc
Half-yearly report
For the six months ended 31 December 2006
HANSARD GLOBAL plc
HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
Contents
1. Summary of results and highlights
2. Chairman's statement
3. Financial commentary on the results for the six months ended 31
December 2006
4. Half-yearly financial statements
5. Independent review report on the half-yearly financial statements
6. European Embedded Value Information
7. Notes to European Embedded Value Information
8. Reviewing actuaries' report on the European Embedded Value Information
9. Contacts, advisors and Financial calendar
HANSARD GLOBAL PLC
SUMMARY OF RESULTS AND HIGHLIGHTS
Half-year ended Half-year ended %
31 December 2006 31 December 2005 change
UK GAAP highlights
Profit after tax
(£millions) 10.6 8.3 27.7%
Earnings per
share (pence) 7.7 6.0 28.3%
Dividend per
share (pence) 4.0 N/a N/a
At 31 December At 31 December %
2006 (£m) 2005 (£m) change
European Embedded Value
highlights
EEV 193.2 162.8 18.7%
Half-year ended Half-year ended %
31 December 2006 31 December 2005 change
(£m) (£m)
New Business Contribution 10.3 9.8 5.1%
Other highlights
Annualised Premium
Equivalent 17.3 15.9 8.8%
At 31 December At 31 December %
2006 (£m) 2005 (£m) change
Assets under
Administration 1,034.6 886.3 16.7%
CHAIRMAN'S STATEMENT
This is Hansard Global's first interim results announcement as a listed Company.
It covers the six months to 31 December 2006 and incorporates five and a half
months as a privately held Company and half a month as a public Company. I am
pleased to report that the strong performance in profits and new business
achieved over the last two years has continued in the first half of the
financial year ending on 30 June 2007.
We have started to see some early benefits of the IPO, primarily in terms of
providing the Group with access to a wider range of intermediaries.
The listing of the Company, coupled with continued growth in new business and
profits, could not have been achieved without the on-going commitment and
dedication of our employees. The progress that we have made is a reflection of
their skill and enthusiasm. On behalf of the Board and shareholders I thank them
all.
FINANCIAL PERFORMANCE
The financial results have been presented in accordance with UK GAAP.
Additionally certain information relating to embedded value is presented, using
the European Embedded Value ('EEV') methodology. The Board believes that the EEV
information, read in conjunction with the other financial information produced
by the Group, provides a helpful insight into the financial performance of the
Group, year on year.
The Group has delivered strong performance in all the measures discussed within
this report, as can be seen on the summarised table of results.
The profit after tax for the period was £10.6 million, an increase of 27.7% over
the profit of £8.3m earned in the corresponding period of the previous financial
year. Earnings per share are 7.7p, an increase of 28.3% over the earnings per
share of the corresponding period.
All the costs of listing Hansard Global were met by the holding Company, Polar
Cap Limited ('Polar Cap'). The Company recovered £1.47m from Polar Cap for
services rendered in connection with the listing. This amount is included in the
profit for the current period referred to above.
The EEV of the Group has risen to £193.2m, an increase of 8.2% from the value at
30 June 2006. This represents an after-tax EEV operating profit of £14.6m.
DIVIDEND
The strong performance in the first six months of this financial year is
encouraging and in line with management's expectations. The Board has therefore
resolved to pay an interim dividend of 4 pence per share. This is the first
dividend to be paid by the Company and will be paid on 4 May 2007 to those
shareholders on the Register at the close of business on 10 April 2007.
NEW BUSINESS
I am pleased to report continued growth in new business during the six months to
31 December 2006. New business premiums on an Annualised Premium Equivalent
('APE') basis in sterling terms were £17.3 million during the period, compared
with £15.9m in the corresponding period of the previous financial year, an
increase of 8.8%. This reflects continued strong new business flows,
particularly in Scandinavia, Latin America and the Far East, that offset some
weakness that was experienced in European markets during the latter part of the
period.
Throughout the period under review new business has been written by the Group on
profitable terms and at consistent new business margins. These factors have
contributed to significant growth in the Group's EEV.
Variations in the timing of large single premium cases mean that contributions
from new business in any period can be impacted by the relative weight of single
premium new business, compared with regular premium flows.
ASSETS UNDER ADMINISTRATION
Assets under administration at 31 December 2006, at £1,034.6 million, have risen
by 9.2% since 30 June 2006 and by 16.7% compared with 31 December 2005. The main
drivers for these increases have been new business single premium flows and
movements in capital markets.
BOARD CHANGES
During the period under review, there were a number of changes in the
composition of the Board. In preparation for the IPO, Joe Kanarek and Vince
Watkins stepped down from the Board in November 2006 and four non-executive
directors joined the Board prior to the IPO to allow the Company to comply with
good corporate governance practice. I would like to reiterate my welcome to
Bernard Asher, Maurice Dyson, Uwe Eymer and Harvey Krueger.
There have been no changes to the composition of the Management Board.
SIGNIFICANT SHAREHOLDINGS
At the date of this report I have the largest beneficial shareholding in the
Company, as a result of my holdings in Polar Cap. Polar Cap is currently the
registered holder of 57.6% of the Company's issued share capital. Polar Cap
intends to complete the reorganisation referred to in our prospectus by 31
December 2007. As a result of that reorganisation, I will hold a direct interest
of 43% in the Company and there may be other shareholders with notifiable
interests in the Company at that date. The reorganisation will not affect the
number of the Company's shares in issue.
Lloyds TSB Group Plc have advised us that they have an interest in 4,191,580
shares or 3.05% of the Company's share capital at the date of this report.
OUTLOOK
The Group's objective is to grow by attracting new business and positioning
itself to adapt rapidly to market trends and conditions. The scalability and
flexibility of the Group's operations allow us to enter or develop new
geographic markets and exploit growth opportunities within our existing markets,
without the need for significant further investment.
The Board is confident that the Group operates in a growing marketplace. The
long-term trends in all our chosen markets will allow intermediaries with whom
we work to capitalise on these opportunities.
Dr L S Polonsky
Chairman
28 March 2007
FINANCIAL COMMENTARY
Introduction
The Group offers long-term savings products packaged as single and regular
premium unit-linked life assurance policies, providing exposure to the
performance of a wide range of underlying investments.
Whilst the Group's products are packaged as life assurance products, they do not
transfer significant life assurance risk and therefore are characterised under
UK GAAP in accordance with FRS 26 as investment contracts and are accounted for
using deposit accounting principles. Accordingly, premiums received on such
contracts are treated as deposits rather than revenue and recognised in the
balance sheet and not in the income statement. Similarly, benefits paid are
treated as repayments of deposits and are not reflected in the income statement.
The classification of the Group's products as investment contracts results in
the Group not disclosing premium income as income in the UK GAAP financial
information; instead, the fees and costs deemed to be associated with the
provision of services to policyholders are recognised in the consolidated income
statement.
In addition to UK GAAP reporting, the Group prepares embedded value information
in accordance with the European Embedded Value (''EEV'') methodology. In the
Directors' opinion, the EEV information, read in conjunction with the other
financial information produced by the Group, provides a helpful insight into the
financial performance of the Group year on year. Commentary on the Group's
business during the periods under review, reported on the EEV basis, is set out
later in this section.
I am pleased to report that the Group has delivered strong performance in all
the measures discussed within this report, as can be seen on the summarised
table of results.
1. Results for the six month period ended 31 December 2006
The profit for the period under UK GAAP is £10.6 million, compared with a profit
for the corresponding period of the previous financial year of £8.3m. This
represents an increase of 27.7%. Earnings per share are 7.7p, an increase of
28.3% over the earnings per share of the corresponding period.
All the costs of listing the Company were met by the holding Company, Polar Cap
Limited. This has had the impact of the Company recovering some £1.47m from its
holding Company for services rendered in connection with the listing. This
amount is included in the profit for the current period referred to above. Net
of the impact of all amounts received from Polar Cap in the periods under
review, the Group's underlying profit for the period reflects growth of 13.9%
over the profit of the corresponding period.
1.1 Revenues
Fees and commissions for the period are £24.2 million, compared with revenues
for the corresponding period of the previous financial year of £21.2m. This
represents an increase of 14.2%, caused principally by the timing of new
business flows in the current period and the impact of fees received from
investment contracts that were being administered by the Group at the beginning
of the period.
The geographical analysis of fees and commissions reflects the growth in revenue
attributable to new business issued in the Republic of Ireland over the period.
This is principally single premium business that has contributed to a growth in
assets under administration by Hansard Europe Limited of more than 50% since 31
December 2005.
1.2 Expenses
New business commissions, together with the directly attributable incremental
costs incurred on the issue of a policy by the Group, are included within
Origination costs in the consolidated income statement in the relevant period
and are deferred as an explicit deferred origination cost asset in the
consolidated balance sheet. All other costs are reflected within Administration
and other expenses.
Investment management expenses and administration costs payable by the Group are
met from charges deducted from the relevant investment contracts administered.
A summary of Administrative and other expenses in each of the reporting periods
is set out below:
Half-year ended Half-year ended Year ended
31 December 2006 31 December 2005 30 June 2006
£m £m £m
Investment
management and
other fees 1.6 1.4 2.6
New business
related costs 1.1 0.9 2.8
Administrative
expenses 6.0 5.7 10.9
£8.7m £8.0m £16.3m
1.3 Assets Under Administration
Assets under administration at 31 December 2006, at £1,034.6 million, have risen
by 9.2% since 30 June 2006 and by 16.7% compared with 31 December 2005. The main
drivers for these increases have been new business single premium flows and
movements in capital markets. A significant proportion of new business premiums
is denominated in currencies other than sterling (principally in US$ and €) and,
as a result, the value of assets under administration is sensitive to movements
in exchange rates. Using the exchange rates in force at 31 December 2005, the
value of assets would have been increased by a further £50m at 31 December 2006.
1.4 Cash Flows
Cash flows in the period were strongly positive, allowing the Group to fund its
growth in new business from its own resources and providing sufficient funds to
meet the proposed interim dividend. Cash and cash equivalent balances at 31
December 2006 stood at £64.4 million, an increase of almost £20m since 31
December 2005.
2. EEV Information
The methodology used to derive the European Embedded Values at 31 December 2006
and 31 December 2005 is consistent with the methodology used in relation to the
consolidated audited financial statements in respect of the year ended 30 June
2006, and in relation to the EEV information published in the Company's
prospectus document.
2.1 Analysis of Embedded Value
The EEV as at 31 December 2006 was £193.2 million, representing an increase of
8.2% or £14.6m over the value at 30 June 2006. Throughout the period under
review new business has been written by the Group on profitable terms and at
consistent New Business Margins. These factors have contributed to the growth in
the Group's EEV. A significant proportion of new business premiums is
denominated in currencies other than sterling (principally in US$ and €) and, as
a result, the EEV is sensitive to movements in exchange rates. The fall in
foreign exchange rates against sterling over the last six months has reduced EEV
by £3.4m at 31 December 2006.
Net worth is the market value of shareholders' funds, adjusted to exclude
certain assets such as deferred origination costs and liabilities such as
deferred income reserve. At the balance sheet date the net worth of the Group is
represented by liquid cash balances.
The table below provides a summarised breakdown of the EEV at the reporting
dates.
31 December 2006 31 December 2005 30 June 2006
£m £m £m
Net worth 52.9 35.8 43.3
Value of future profits 140.3 127.0 135.3
European Embedded Value 193.2 162.8 178.6
2.2 EEV Return
The EEV Return after tax provides a measure of the Group's performance over the
period. It is defined as the change in EEV over a period, adjusted for any
amounts such as dividends or capital movements released from or invested in the
Group. The EEV Return in a particular period comprises the new business
contribution and return from existing business.
The EEV Return remains strongly positive, notwithstanding the impact of
significant items impacting on this period and the corresponding period. The EEV
Return for the period is £14.6 million, compared with £20.3m in the half year
ended 31 December 2005. This represents a return of 8.2% on opening embedded
value generated principally by profitable new business. The New Business
Contribution ('NBC') for the period was £10.3m (£9.8m in the half year ended 31
December 2005), and the expected return on existing business was £3.2m (£2.6m).
During the period improvements were introduced to the modelling of single
premium cases with a premium above £1m. This has led to a one-off negative
adjustment of £3.9m that is reflected within the return for the period.
3. New Business
3.1 New Business Volumes
New business sales volumes are expressed on two bases: Annualised Premium
Equivalent ('APE') and the Present Value of Future New Business Premiums
(''PVNBP''). The calculation of APE is in accordance with the life assurance
industry convention of adding together new regular premiums and one tenth of
single premiums.
New business premiums on an APE basis in sterling terms were up 8.8% to £17.3
million during the first six months of the year (compared with £15.9m for the
corresponding period). This reflects continued strong new business flows,
particularly in Scandinavia, Latin America and the Far East.
A significant proportion of new business premiums is denominated in currencies
other than sterling (principally in US$ and €). The continued growth in APE
despite the adverse currency movements throughout the period shows the benefits
of having a well-diversified portfolio of new business.
The tables below provide a summarised breakdown of New Business APE for each of
the periods reported, analysed between single and regular premium cases, and
also by residence of policyholder.
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Annualised regular premiums 8.7 8.3 16.7
Single premiums 8.6 7.6 18.5
--------------------------------------------------------------------------------
Annualised premium equivalent 17.3 15.9 35.2
--------------------------------------------------------------------------------
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
EU and EEA 6.9 7.4 11.1
Rest of world 10.4 8.5 24.1
--------------------------------------------------------------------------------
Annualised premium equivalent 17.3 15.9 35.2
--------------------------------------------------------------------------------
3.2 New business profitability and margin
New Business Margin is defined as NBC divided by PVNBP. The calculation of PVNBP
is equal to total single premium sales in the period plus the discounted value
of regular premiums expected to be received over the term of new regular premium
policies, and is calculated at the point of sale.
New Business premiums on a PVNBP basis were £129.5m during the first six months
of the year (compared with £121.8m for the corresponding period of the previous
financial year), an increase of 6.3%.
Throughout the period under review new business has been written by the Group on
profitable terms and has contributed to significant growth in the Group's EEV.
The New Business Margin, in sterling terms, has been maintained at 8.0% for the
period ended 31 December 2006 as compared to the period ended 31 December 2005
and the year ended 30 June 2006. The change in the mix of new business compared
with the corresponding period resulted in increased amounts of regular premium
business which had the impact of increasing NBC by £0.3m. The combined impacts
of changes in the level of the Risk Discount Rate and the impact of currency
movements has been to reduce the NBC by £0.2m.
4. Net Asset Value
The net asset value per share at 31 December 2006, on a UK GAAP basis, is 34.6p.
This represents an increase of 72.7% or 14.6p from the net asset value at 31
December 2005. The net asset value per share is based upon the consolidated
shareholders' funds at the balance sheet date divided by the number of shares in
issue at that date, being 137,281,202 ordinary shares.
On the EEV basis, the net asset value per share at 31 December 2006 is 141p.
This represents an increase of 18.1% or 22p from the net asset value at 31
December 2005.
5. Financial Reporting
It is our intention to deliver, whenever practicable, interim and final
reporting to shareholders through electronic media. This is in line with our
objectives to maintain an appropriate level of operational expenditure, reduce
the impact on the environment of our activities, and facilitate wider
distribution of information. In due course shareholders will be requested to
provide an indication of their preferences in this regard.
V P Watkins
Chief Financial Officer
28 March 2007
Consolidated income statement
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
-----------------------------------------------------------------------------------------------
Fees and commissions 2 24.2 21.2 44.5
Investment income 51.1 85.1 102.6
Other income 3 1.8 0.7 0.8
-----------------------------------------------------------------------------------------------
77.1 107.0 147.9
-----------------------------------------------------------------------------------------------
Investment contract benefits (49.9) (84.0) (99.3)
Origination costs (7.9) (6.7) (14.6)
Administrative and other
expenses (8.7) (8.0) (16.3)
-----------------------------------------------------------------------------------------------
(66.5) (98.7) (130.2)
-----------------------------------------------------------------------------------------------
Profit on ordinary activities
before taxation 10.6 8.3 17.7
Taxation on profit on ordinary
activities 4 - - -
-----------------------------------------------------------------------------------------------
Profit for the
period after
taxation 10.6 8.3 17.7
-----------------------------------------------------------------------------------------------
All of the activities of the Group are continuing.
The Group has no recognised gains or losses other than those included in the
profits above and therefore no separate statement of total recognised gains and
losses has been prepared.
Earnings per share expressed in pence per share
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
--------------------------------------------------------------------------------
Basic 5 7.7 6.0 12.9
Diluted 5 7.7 6.0 12.9
Reconciliation of movement in consolidated shareholders' funds
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
---------------------------------------------------------------------------------------
Profit for the period after
taxation 10.6 8.3 17.7
Opening consolidated
shareholders' funds 36.9 19.2 19.2
---------------------------------------------------------------------------------------
Closing consolidated
shareholders' funds 47.5 27.5 36.9
---------------------------------------------------------------------------------------
Consolidated balance sheet
As at As at As at
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
--------------------------------------------------------------------------------
Assets
Tangible assets 0.6 0.6 0.6
Financial
investments 6 1,034.6 886.3 947.3
Deferred origination costs 90.1 81.6 86.6
Other receivables 12.0 11.9 11.7
Cash and cash
equivalents 64.4 44.5 57.9
--------------------------------------------------------------------------------
Total assets 1,201.7 1,024.9 1,104.1
--------------------------------------------------------------------------------
Liabilities
Financial liabilities under
investment contracts 7 1,034.4 886.1 947.2
Amounts due to investment
contract holders 8.7 9.0 10.2
Deferred income
reserve 105.7 98.6 103.0
Other payables 5.4 3.7 6.8
--------------------------------------------------------------------------------
Total liabilities 1,154.2 997.4 1,067.2
--------------------------------------------------------------------------------
Net assets 47.5 27.5 36.9
--------------------------------------------------------------------------------
Shareholders'
equity
Called up share
capital 8 68.6 68.6 68.6
Other reserves 9 (48.5) (48.5) (48.5)
Profit and loss account 27.4 7.4 16.8
--------------------------------------------------------------------------------
Total shareholders'
equity 47.5 27.5 36.9
--------------------------------------------------------------------------------
Consolidated cash flow statement
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
Notes £m £m £m
--------------------------------------------------------------------------------
Net cash inflow from operating
activities 10 4.7 2.4 14.4
Returns on investments and
servicing of finance
Interest on
investments 1.8 1.1 2.6
Capital expenditure
Purchase of tangible
assets (0.1) - (0.2)
Taxation
Taxation paid - - -
--------------------------------------------------------------------------------
Net cash inflow 6.4 3.5 16.8
--------------------------------------------------------------------------------
Cash flows were invested as follows:
--------------------------------------------------------------------------------
Increase in cash holdings 6.3 3.6 16.9
Net portfolio investments 0.1 (0.1) (0.1)
--------------------------------------------------------------------------------
6.4 3.5 16.8
--------------------------------------------------------------------------------
In accordance with Financial Reporting Standard No.1 the cash flow statement
excludes cash flows relating to the long-term assurance business of the Group.
Notes to the consolidated half-yearly financial statements
1 Basis of preparation
The consolidated half-yearly financial statements for the six months ended 31
December 2006 comprise the half-yearly financial statements of Hansard Global
plc (the 'Company') and its subsidiaries (together referred to as the 'Group').
The consolidated half-yearly financial statements have been prepared in
accordance with the Listing Rules of the UK Financial Services Authority.
The accounting policies applied by the Group in the preparation of these
consolidated half-yearly financial statements are consistent with those applied
by the Group in the preparation of the audited consolidated financial statements
for the year ended 30 June 2006. The audited consolidated financial statements
for the year ended 30 June 2006 are available at www.hansard.com.
2 Segmental information
In the opinion of the directors, the Group operates in a single business
segment, that of the distribution and servicing of long-term investment products
through the Company's life assurance subsidiaries.
i) Fees and commissions analysed by type
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Contract fee income 17.2 15.2 31.5
Fund management charges 5.2 4.1 9.1
Commission receivable 1.8 1.9 3.9
--------------------------------------------------------------------------------
24.2 21.2 44.5
--------------------------------------------------------------------------------
ii) Geographical analysis of fees and commissions by origin
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Isle of Man 20.0 18.3 37.6
Republic of Ireland 4.2 2.9 6.9
--------------------------------------------------------------------------------
24.2 21.2 44.5
--------------------------------------------------------------------------------
iii) Geographical analysis of profit before taxation
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Isle of Man 10.3 8.6 16.8
Republic of Ireland 0.3 (0.3) 0.9
--------------------------------------------------------------------------------
10.6 8.3 17.7
--------------------------------------------------------------------------------
Notes to the consolidated half-yearly financial statements (continued)
2 Segmental information (continued)
iv) Geographical analysis of financial investments
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Isle of Man 726.7 682.3 698.8
Republic of Ireland 307.9 204.0 248.5
--------------------------------------------------------------------------------
1,034.6 886.3 947.3
--------------------------------------------------------------------------------
The geographical analysis of financial liabilities under investment contracts is
consistent with the analysis of financial investments
3 Other operating income
Included within other operating income are amounts totalling £1.57 million
received from Polar Cap Limited for services rendered by the Group in relation
to the listing of the Company on the London Stock Exchange on 18 December 2006
and other services. Amounts totalling £0.38m received from Polar Cap Limited for
software development services are reflected within other operating income in
respect of both the period ended 31 December 2005 and the year ended 30 June
2006.
4 Taxation
The Group's profits arising from its Isle of Man-based operations are taxable at
zero percent. No corporation tax liabilities have attached to the Ireland-based
operations due to tax losses incurred in prior periods. Charges for taxation
reflected in the income statements of a number of minor subsidiary companies are
immaterial to an understanding of the Group's taxation position for the periods
under review.
5 Earnings per share
Earnings per share expressed in pence per share
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
--------------------------------------------------------------------------------
Basic 7.7 6.0 12.9
Diluted 7.7 6.0 12.9
The earnings per share for each period is based upon the profit for the period
after taxation divided by the average number of shares in issue throughout that
period. The average number of shares in issue throughout each period is
137,281,202 ordinary shares.
The earnings per share for the year ended 30 June 2006 reflected within the
prospectus issued by the Company on 13 December 2006 in relation to the listing
of the Company on the London Stock Exchange was 13.3p. The difference between
that amount and the amount reflected above relates to different timing of
recognition of certain expenses in the audited consolidated financial
statements, compared with the treatment in the figures published in the
prospectus.
Notes to the consolidated half-yearly financial statements (continued)
6 Financial investments
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Equity securities 106.8 96.3 106.8
Investment in collective investment
schemes 820.5 713.6 737.0
Fixed income securities 43.0 9.7 28.6
Outstanding trades 8.2 12.0 12.8
Accrued investment income 0.4 0.4 0.2
Cash and cash equivalents 55.7 54.3 61.9
--------------------------------------------------------------------------------
1,034.6 886.3 947.3
--------------------------------------------------------------------------------
Included above are shareholders' assets
of: .02 .02 0.1
--------------------------------------------------------------------------------
7 Financial liabilities under investment contracts
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
At 1 July 947.2 771.2 771.2
Deposits to investment contracts 96.0 87.6 196.1
Benefits paid (58.7) (56.7) (119.4)
Investment contract benefits 49.9 84.0 99.3
--------------------------------------------------------------------------------
At the balance sheet date 1,034.4 886.1 947.2
--------------------------------------------------------------------------------
The value of these financial liabilities is determined by the fair value of the
linked assets at the balance sheet date.
8 Share capital
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Authorised:
200,000,000 ordinary shares of 50p 100 100 100
--------------------------------------------------------------------------------
Issued and fully paid:
137,281,202 ordinary shares
of 50p 68.6 68.6 68.6
--------------------------------------------------------------------------------
On 1 July 2005 the Company issued 68,640,600 shares of £1 each at par in
consideration for the acquisition of the subsidiary companies referred to in
note 9 below. The authorised and issued share capital was sub-divided into
ordinary shares of 50p each by resolution passed on 13 September 2006.
Notes to the consolidated half-yearly financial statements (continued)
9 Other reserves
Other reserves comprise the merger reserve arising on the acquisition by the
Company of its subsidiary companies on 1 July 2005. The merger reserve
represents the difference between the par value of shares issued by the Company
for the acquisition of the former subsidiaries of Polar Cap Limited, compared to
the par value of the share capital and the share premium of those companies at
the date of acquisition.
10 Notes to the consolidated cash-flow statement
(i) Reconciliation of profit before tax to net cash inflow from operating
activities
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Profit before taxation 10.6 8.3 17.7
Depreciation 0.2 0.2 0.4
Interest received (1.8) (1.1) (2.6)
Foreign exchange differences (0.3) (0.1) (0.2)
Increase in debtors (0.3) (4.7) (4.5)
Increase in deferred origination
costs (3.5) (4.8) (9.8)
Increase in deferred income
reserve 2.7 4.0 8.5
(Decrease) /increase in creditors (2.9) 0.6 4.9
--------------------------------------------------------------------------------
Net cash inflow from operating
activities 4.7 2.4 14.4
--------------------------------------------------------------------------------
(ii) Movement in opening and closing portfolio investments
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
Cash at bank
At 1 July 57.9 40.8 40.8
Foreign exchange differences 0.3 0.1 0.2
Cash flow 6.2 3.6 16.9
--------------------------------------------------------------------------------
At the balance sheet date 64.4 44.5 57.9
--------------------------------------------------------------------------------
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
---------------------------------------------------------------------------------
Shareholder investments
At 1 July 0.1 0.2 0.2
Purchases 0.1 - 0.1
Sales (0.1) (0.1) (0.2)
Changes to market values and
currencies 0.1 - -
---------------------------------------------------------------------------------
At the balance sheet date 0.2 0.1 0.1
---------------------------------------------------------------------------------
Notes to the consolidated half-yearly financial statements (continued)
11 Ultimate controlling party
The ultimate controlling party of the Company is Dr L S Polonsky, a director of
the Company.
12 Statutory financial statements
The financial information contained within this report is unaudited and does not
constitute statutory financial statements. The comparative figures for the year
ended 30 June 2006 have been extracted from the Company's audited consolidated
financial statements for the financial year then ended. Certain items have been
restated to provide comparability with current period figures.
The consolidated financial statements for the financial year ended 30 June 2006
were reported on by the Company's auditors without qualification of opinion.
13 Approval of half-yearly report
The half-yearly report was approved by the Board of Directors on 28 March 2007.
Independent review report to Hansard Global plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2006 which comprises the consolidated balance
sheet as at 31 December 2006 and the related consolidated half-yearly income
statement, cash flow statement and reconciliation of movement in shareholders'
funds for the six months then ended and related notes. We have read the other
information contained in the half-yearly report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information. This other information comprises the summary results and
highlights, the Chairman's statement, the financial commentary, the European
Embedded Value information and the notes to the European Embedded Value
information.
Directors' responsibilities
The half-yearly report, including the financial information contained therein,
is the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the half-yearly figures should be consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
This half-yearly report has been prepared in accordance with the basis set out
in Note 1.
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 disclosed accounting policies have been applied. 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
and therefore provides a lower level of assurance. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the Company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
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 31 December 2006.
PricewaterhouseCoopers
Douglas
Isle of Man
28 March 2007
Notes:
(a) The maintenance and integrity of the Hansard Global plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the half-yearly report
since it was initially presented on the web site.
(b) Legislation in the Isle of Man governing the preparation and dissemination
of financial information may differ from legislation in other jurisdictions.
EUROPEAN EMBEDDED VALUE ('EEV') Information
1. Group EEV Balance Sheet
31 December 2006 31 December 2005 30 June 2006
£m £m £m
Free Surplus 47.8 30.9 38.3
Required capital 5.1 4.9 5.0
Net worth 52.9 35.8 43.3
Value of in-force
business 145.6 132.3 140.6
Cost of required capital (0.3) (0.3) (0.3)
Reduction for operational
risk (5.0) (5.0) (5.0)
Value of future profits 140.3 127.0 135.3
Embedded Value 193.2 162.8 178.6
The EEV as at 31 December 2006 was £193.2 million, representing an increase of
£14.6m or 8.2% over the value at 30 June 2006. Throughout the period under
review new business has been written by the Group on profitable terms and has
contributed to the growth in the Group's EEV. A significant proportion of new
business premiums is denominated in currencies other than sterling (principally
US dollars ('US$') and euros ('€')) and, as a result, the EEV is sensitive to
movements in exchange rates. The aggregate fall in the foreign currency exchange
rates against sterling over the last six months has reduced EEV by £3.4m at 31
December 2006.
2. New business profitability and margin
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
PVNBP 129.5 121.8 270.2
New Business Contribution 10.3 9.8 21.6
--------------------------------------------------------------------------------
New Business Margin 8.0% 8.0% 8.0%
--------------------------------------------------------------------------------
New Business Margin is defined as NBC divided by PVNBP. The calculation of PVNBP
is equal to total single premium sales in the period plus the discounted value
of regular premiums expected to be received over the term of new regular premium
policies, and is calculated at the point of sale.
The NBC during the period is the present value of the expected stream of
shareholder cash flows after tax from new business written in that period. The
Group's NBC has been calculated using the same economic assumptions as those
used to determine the EEV as at the start of the financial year and the same
operating assumptions used to determine the EEV as at the end of the period
under review (as described in the Notes to the EEV information), and is rolled
forward to the end of the financial period. NBC is shown after allowing for the
cost of required capital, calculated on the same basis as for in-force business.
Throughout the period under review new business has been written by the Group on
profitable terms and at new business margins consistent with prior periods.
These factors have contributed to significant growth in the Group's EEV. The
increased amounts of regular premium business sold during the period had the
impact of increasing NBC by £0.3m but the combined impacts of changes in the
level of the Risk Discount Rate and the impact of currency movements has been to
reduce the NBC by £0.2m. The New Business Margin, in sterling terms, was 8.0%
and maintains the level of margins earned for the periods ended 31 December 2005
and 30 June 2006.
3. EEV Return
The EEV Return after tax provides a measure of the Group's performance over the
period. It is defined as the change in EEV over a period, adjusted for any
amounts such as dividends or capital movements released from or invested in the
Group. The EEV Return in a particular period comprises the new business
contribution and Return from existing business. The components of the return for
the period under review are:
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
£m £m £m
--------------------------------------------------------------------------------
New business contribution 10.3 9.8 21.6
Expected return on existing business 3.2 2.6 5.2
Experience variances 1.2 1.9 4.0
Operating assumption / modelling changes (3.9) 0.0 (0.4)
Expected return on net worth 1.0 0.6 1.2
Investment return variances 2.3 5.4 5.2
Economic assumption changes 0.5 0.0 (0.7)
Movement in capital invested 0.0 0.0 0.0
EEV Return 14.6 20.3 36.1
The EEV Return for the period is £14.6 million, compared with £20.3m in the half
year ended 31 December 2005. This represents a return of 8.2% on opening
embedded value largely as a result of profitable new business. The expected
return on existing business was £3.2m (£2.6m) and represents the time value of
money.
Experience variances include the amounts received from Polar Cap during the
period and a number of smaller negative items relating to lapse and persistency
experience that offset higher than expected fees and commissions. The strongly
positive experience in the corresponding period relates primarily to lighter
than anticipated mortality experience and margins earned from policyholder
activity that were greater than expected in that period.
Investment return variances totalled £2.3m (£5.4m) driven largely by better than
expected returns on policyholders' funds of £4.9m and increases in marketing
allowances totalling £1.2m. These gains were offset by a reduction of £3.4m
relating to currency movements on funds denominated in US$ and € as discussed
above.
During the period improvements were introduced to the modelling of single
premium cases with a premium above £1m. This has led to a one-off negative
adjustment to EEV of £3.9m that is reflected under operating assumptions.
Shareholders are aware that no dividend has been paid during the period ended on
31 December 2006. The rate of growth of embedded value in the remainder of the
financial year will be impacted by the interim dividend which will be paid on 4
May 2007.
NOTES TO THE EUROPEAN EMBEDDED VALUE INFORMATION
1. BASIS OF PREPARATION
The half-yearly supplementary information shows certain of the Group's results
for the six months ended 31 December 2006 as measured on the European Embedded
Value (EEV) basis.
In preparing this EEV information, the Directors considered the EEV Principles
published by the CFO Forum, a group comprising the Chief Financial Officers of
certain major listed and unlisted European assurance companies, in May 2004 and
extended by additional guidance published in October 2005. The EEV information
has been prepared using a ''market consistent'' basis in respect of the economic
assumptions, in line with the EEV Principles.
Under the EEV methodology, profit is recognised as margins are released from
policy related balances over the lifetime of each policy within the Group's
in-force business. The total profit recognised over the lifetime of a policy
under EEV methodology is the same as under the UK GAAP basis of reporting, but
the timing of recognition is different. The Group's EEV calculations only
consider claims by policyholders in the normal course of business under the
terms of the policies issued. They also assume the continuation of current
policy terms and conditions, and the Group's interpretation thereof.
2. METHODOLOGY AND ASSUMPTIONS
The methodology used to derive the European Embedded Values at 31 December 2006
and 31 December 2005 is consistent with the methodology used in relation to the
consolidated audited financial statements in respect of the year ended 30 June
2006, and in relation to the EEV information published in the Company's
prospectus document.
Apart from the assumptions set out below, there have been no changes to
assumptions from those used in the documents referred to above.
The principal economic assumptions used in the EEV calculations are based on
risk free rates, being the market yields of government backed fixed interest
securities of comparable term to the policy cash flows at the end of each
reporting period. A proportion of the Group's income and expenditure is
contracted in currencies other than sterling, in particular US$ and €. In
practice the risk free rate used in the valuation is based on a weighted average
of the yields on fixed interest securities issued within the UK, US and Europe.
Any components of the EEV and other balance sheet items denominated in foreign
currencies have been translated to sterling using the appropriate closing
exchange rate.
The closing exchange rates used by the Group for the conversion of EEV
components and other balance sheet items from US$ and € to sterling were US$1.72
and €1.46, respectively at 31 December 2005 and US$1.96 and €1.48, respectively,
at 31 December 2006.
The risk discount rate used to value future expected shareholder cash flows is
assumed to be the risk free rate plus a margin for any risks that are not
allowed for elsewhere in the valuation. Since non-market risk is allowed for
separately, the risk margin is nil. All investments are assumed to provide a
return equal to the same risk free rate.
Principal economic and tax assumptions
The principal economic assumptions used are set out below:
Half year ended Year ended
31 December 31 December 30 June
2006 2005 2006
% p.a % p.a % p.a
--------------------------------------------------------------------------------
Weighted average pre-tax investment
return on fixed interest securities 4.4% 4.2% 4.8%
Risk discount rate 4.4% 4.2% 4.8%
Future expense inflation 5% 5% 5%
Current tax legislation and rates have been assumed to continue unaltered,
except where changes in future tax rates have been announced. A zero rate of
corporation tax in the Isle of Man and a 12.5 per cent. rate in Ireland have
been assumed.
3. SENSITIVITIES
Sensitivities provide an indication of the impact of changes in particular
assumptions on the EEV at 31 December 2006 and the New Business Contribution for
the period then ended. The impact on both measures of various sensitivities is
shown below. The sensitivities shown should not be considered as exhaustive, nor
should they be regarded as representing the boundaries of possible outcomes or
variations. The combined effect of two sensitivities may not equal the sum of
the separate parts.
In each sensitivity calculation, all other assumptions remain unchanged except
where they are directly affected by the revised economic conditions. No
management actions or changes in policyholder behaviour are modelled in response
to the changed assumption.
Impact on EEV (£m) New business
Contribution (£m)
As reported at 31 December 2006 193.2 10.3
1 per cent. increase in risk discount rate (6.7) (0.7)
1 per cent. decrease in risk discount rate 7.3 0.8
1 per cent. increase in interest rates Not material Not material
1 per cent. increase in investment return 5.3 0.4
1 per cent. decrease in investment return (5.0) (0.4)
10 per cent. increase in the value of equities
and property 8.5 Nil
10 per cent. decrease in the value of equities
and property (8.6) Nil
10 per cent. increase in sterling exchange rates (11.3) (0.8)
10 per cent. decrease in sterling exchange rates 11.2 0.8
10 per cent. increase in expenses (3.3) (0.3)
10 per cent. decrease in expenses 3.2 0.3
10 per cent. increase in maintenance expenses (2.8) (0.2)
10 per cent. decrease in maintenance expenses 2.7 0.2
10 per cent. increase in lapse rates (3.6) (0.4)
10 per cent. decrease in lapse rates 4.0 0.4
10 per cent. increase in mortality rates (0.8) (0.1)
10 per cent. decrease in mortality rates 0.7 0.1
10 per cent. increase in marketing allowances 2.5 0.1
10 per cent. decrease in marketing allowances (2.6) (0.1)
The sensitivity analysis indicates that the Group's EEV and NBC are relatively
insensitive to a number of external factors. However, the Group is exposed,
through the impact on the level of future fund-based management income, to
movements in equity, property and currency values. Further, it indicates the
exposure to movements in the expense base and lapse rates, with the latter
having a particular effect on the ability of the Group to sustain levels of
policy- and fund-based income.
The Directors
Hansard Global plc
Harbour Court
Lord Street
Box 192
DOUGLAS
Isle of Man,
IM99 1QL
28 March 2007
Dear Sirs
Review of the European Embedded Value ('EEV') of Hansard Global plc for the six
months ended 31 December 2006.
Our role
Deloitte & Touche LLP has been engaged by Hansard Global plc to act as Reviewing
Actuaries in connection with results on an EEV basis published in Hansard Global
plc's half-yearly results for the six months ended 31 December 2006.
Responsibilities
The EEV Information (and the methodology and assumptions underlying it) is the
sole responsibility of the Directors of Hansard Global plc. It has been prepared
by the Directors of Hansard Global plc, and the calculations underlying the EEV
Statements have been performed by Hansard Global plc.
Our review was conducted in accordance with generally accepted actuarial
practices and processes. It comprised a combination of such reasonableness
checks, analytical reviews and checks of clerical accuracy as we considered
necessary to provide reasonable assurance that the EEV Information has been
compiled free of material error.
The EEV Information necessarily makes numerous assumptions with respect to
economic conditions, operating conditions, taxes, and other matters, many of
which are beyond the Group's control. Although the assumptions used represent
estimates which the Directors believe are together reasonable, actual experience
in future may vary from that assumed in the preparation of the EEV Information,
and any such variations may be material. Deviations from assumed experience are
normal, and are to be expected.
The EEV does not purport to be a market valuation of the Group and should not be
interpreted in that manner since it does not encompass all of the many factors
that may bear upon a market value. For example, it makes no allowance for the
value of future new business.
Opinion
In our opinion, on the basis of our review:
• the methodology and assumptions used to prepare the EEV Information
comply in all material respects with the European Embedded Values Principles
set out by the CFO Forum in May 2004, and additional guidance released in
October 2005 (the 'CFO Forum Principles');
• the EEV Information has been compiled on the basis of the methodology
and assumptions chosen by the Directors of Hansard Global plc, and complies
in all material respects with the CFO Forum Principles.
Reliances and Limitations
A half-yearly review excludes procedures such as tests of controls and
verification of models and historical information relevant to assumptions about
future cash flows. It is substantially less in scope than a full review and
therefore provides a lower level of assurance.
We have relied on data and information, including the value of net assets,
management accounting data and solvency information, supplied to us by the
Group.
We have relied on the reported mathematical reserves, the adequacy of those
reserves, and the methods and assumptions used to determine them. We have
assumed that all provisions made in the UK GAAP statements for any other
liabilities (whether actual, contingent or potential) of whatever nature, are
appropriate.
We have relied on information relating to the current and historical operating
experience of the Group's life insurance business, including the results of
experience investigations relating to policy persistency, and expense analysis.
In forming our opinion, we have considered the assumptions used in the EEV
Information in the context of the reported results of those investigations.
We have relied on the terms of the contracts, as they have been reported to us,
being enforceable. We have not attempted to predict the impact of potential
future changes in the competitive forces in markets on the assumptions.
Yours faithfully
Deloitte & Touche LLP
Deloitte & Touche LLP is a limited liability partnership registered in England
and Wales with registered number OC303675 and its registered office at
Stonecutter Court, 1 Stonecutter street, London EC4A 4TR.
Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche
Tohmatsu ('DTT'), a Swiss Verein whose member firms are separate and independent
legal entities. Neither DTT nor any of its member firms has any liability for
each other's acts or omissions. Services are provided by member firms or their
subsidiaries and not by DTT.
Contacts and Advisors
Registered Office Media Enquiries
Harbour Court Bell Pottinger Corporate &
Financial
Lord Street 6th Floor, Holborn Gate
Box 192 330 High Holborn
Douglas London
Isle of Man WC1V 7QD
IM99 1QL
Tel: +44 (0)1624 688000 Tel: +44 (0)20 7861 3881
Fax: +44 (0)1624 688008 Fax: +44 (0)20 7861 3233
www.hansard.com
Chairman & Chief Executive Broker
Dr L S Polonsky Panmure Gordon (UK) Limited
Dr.polonsky@hansard.com Moorgate Hall
155 Moorgate
London
EC2M 6XB
Tel. +44 (0)20 7459 3600
Fax. +44 (0)20 7459 3609
Financial Advisor
Lazard & Co. Limited
50 Stratton Street
London
W1J 8LL
Tel. +44 (0)20 7187 2000
Auditor Registrar
PricewaterhouseCoopers Chamberlain Fund Services Limited
Sixty Circular Road 3rd Floor Exchange House
Douglas 54-62 Athol Street
Isle of Man Douglas
IM1 1SA Isle of Man
Tel: +44 (0)1624 689689 IM1 1JD
Fax: +44 (0)1624 689690 Tel: + 44 (0)1624 641560
Fax: +44 (0)1624 641561
Reviewing Actuaries UK Transfer Agent
Deloitte & Touche LLP Capita IRG Limited
Stonecutter Court The Registry
1 Stonecutter Street 34 Beckenham Road
London Beckenham
EC4A 4TR Kent
Tel: +44 (0)20 7936 3000 BR3 4TU
Fax: +44 (0)20 7583 1198 Tel: +44 (0)20 8639 2236
Fax: +44 (0)20 8639 2279
Financial Calendar
Ex-dividend date for interim dividend 4 April 2007
Record date for interim dividend 10 April 2007
Payment date for interim dividend 4 May 2007
Announcement of 3rd quarter new business 30 April 2007
figures
Announcement of 4th quarter new business 30 July 2007
figures
Preliminary announcement of results 27 September 2007
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 14th May 2024
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