Interim Results

BWD Securities PLC 01 July 2003 1 July 2003 BWD SECURITIES PLC ('BWD') INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MAY 2003 BWD, the Investment Management Group - Key Points: • Profit before tax, goodwill amortisation and exceptional profit of £3.0m (2002: £4.5m) • Exceptional profit arising from the disposal of the Administration Services division of £10.5m. No tax charge is expected to arise from this exceptional profit • Basic earnings per share before goodwill amortisation and exceptional profit of 9.5p (2002: 14.1p) • Interim dividend unchanged at 6.0p per share • BWD Rensburg managed client funds at £3.15bn (2002: £3.79bn) • BWD Rensburg Unit Trusts increased to £356m (2002: £325m) Mike Burns, Chief Executive of BWD Securities, commented: 'Against the backdrop of an extremely difficult operating environment, the last six months has seen the Group continue to trade profitably and significantly strengthen its balance sheet through the disposal of its non-core Administration Services division. This leaves the Group well placed as equity markets recover and investor confidence returns.' For further information, please contact: Michael Burns, Chief Executive Tel: 0151 227 2030 BWD Securities PLC Nick Lyon Tel: 020 7796 4133 Hudson Sandler INTERIM STATEMENT Financial Results The first half of this financial year began with a further deterioration in already difficult market and trading conditions. Subsequently, there has been a gradual recovery over the latter two months of the period, which has continued to date. The FTSE All-Share index averaged 1,839 over this half year compared to 2,516 in the corresponding period in 2002. Inevitably, these conditions have impacted both the Group's fee and transaction based income over the period. The Group's profit before tax, goodwill amortisation and exceptional items for the six months ended 31 May 2003 was £3.0 million (2002: £4.5 million) from a total income of £16.0 million (2002: £19.7 million). Fee and other recurring income was £10.3 million (2002: £12.0 million). Basic earnings per share before goodwill amortisation and exceptional items was 9.5p (2002: 14.1p). The above figures include the trading results of the Administration Services division up until its disposal on 21 February 2003. Including the associated disposal of a freehold property which was occupied by the Administration Services division, an exceptional profit of £10.5 million arose from this disposal during the period. No tax charge is expected to arise from this exceptional profit. Excluding the trading results of the Administration Services division, operating profit before goodwill amortisation was £2.4 million (2002: £3.5 million) from a total income of £14.8 million (2002: £17.2 million). Fee and other recurring income on this basis was £9.4 million (2002: £10.1 million). Net interest receivable rose to £0.45 million (2002: £0.33 million) reflecting the increase in the Group's cash balances following the disposal mid-way through the period. Dividend The Directors have declared an unchanged interim dividend of 6.0p payable on 1 October 2003 to shareholders on the register at 22 August 2003. Board Christopher Clarke succeeded Alan Bottomley as Chairman at the Company's Annual General Meeting on 31 March 2003. As a consequence of this, Andrew Tyrie succeeded Christopher Clarke as Senior Independent Non-Executive Director from this date. Operations BWD Rensburg managed clients' funds were £3.15 billion (2002: £3.79 billion). Fee paying funds included in these figures were £1.56 billion (2002: £1.77 billion). Despite the challenging operating environment, it is pleasing to be able to report that over the last six months the number of fee paying clients has been increased by 3%. Experience across the business indicates that since the market reached its near eight year low point on 12 March 2003, clients are beginning to commit new funds to the equity markets. Capital for Companies currently manages a total of £27 million (2002: £34 million), this includes £24 million (2002: £32 million) on behalf of two Venture Capital Trusts. BWD Rensburg Unit Trust Managers increased the value of funds under management to £356 million (2002: £325 million) against a reduction of 20.5% in the FTSE All-Share index over the corresponding period. The BWD UK Micro-Cap Growth Trust launched in October 2002 has now been capped, having achieved its target size of £20 million during May 2003. The investment record of the fund management team remains strong. The cost base of the Group continues to be kept under regular review and modest reductions in personnel levels have recently been made. The Board remains committed to retaining a well resourced operation, which will continue to offer clients high levels of service and is ready to take full advantage of any market recovery and associated return of investor confidence. Outlook The recent disposal of the Administration Services division leaves the Group with an enhanced balance sheet which will assist in funding growth of the investment management business. Although the Board continues to remain active in identifying and exploring opportunities to grow by acquisition, we recognise that we must exercise caution in order that businesses are not acquired at unrealistically high prices. During the last quarter, the UK financial market has recovered from the lows experienced during March 2003. Whilst the sustainability of this recovery over the short term is hard to gauge with certainty, over the longer term the Board firmly believes that the private client market in which the Group operates has potential for growth, as the onus on individuals to invest for their own futures continues to increase. Christopher Clarke Michael Burns Chairman Chief Executive 30 June 2003 Consolidated Profit and Loss Account 2003 2002 2002 6 months ended 31 May 6 months 12 months ended ended Continuing Discontinued Total 31 May 30 Nov £'000 £'000 £'000 £'000 £'000 Note Turnover 1 14,787 1,245 16,032 19,653 37,499 Operating expenses (12,387) (1,088) (13,475) (15,525) (30,194) Goodwill amortisation (434) (48) (482) (450) (952) Total administrative expenses (12,821) (1,136) (13,957) (15,975) (31,146) _______ _______ _______ _______ _______ Operating profit 1 1,966 109 2,075 3,678 6,353 _______ _______ Profit on disposal of subsidiaries 2 10,472 - - Net interest receivable 451 330 721 _______ _______ _______ Profit on ordinary activities 12,998 4,008 7,074 before taxation Tax on profit on ordinary 2 (942) (1,399) (2,517) activities _______ _______ _______ Profit on ordinary activities 12,056 2,609 4,557 after taxation Dividends (1,308) (1,304) (3,913) _______ _______ _______ Retained profit for the period 10,748 1,305 644 _______ _______ _______ Earnings per share before goodwill 3 amortisation and profit on disposal of subsidiaries -Basic 9.5p 14.1p 25.4p -Diluted 9.4p 13.9p 25.0p Earnings per share 3 -Basic 55.4p 12.1p 21.0p -Diluted 54.6p 11.8p 20.7p Dividend per share 6.0p 6.0p 18.0p The Group has no recognised gains and losses other than those included in the profits above and therefore no separate statement of total recognised gains and losses is presented. Consolidated Balance Sheet Restated 2003 2002 2002 31 May 31 May 30 Nov £'000 £'000 £'000 Fixed assets Intangible assets 14,990 15,925 19,038 Tangible assets 3,088 6,066 5,281 Investments 500 511 500 _______ _______ _______ 18,578 22,502 24,819 _______ _______ _______ Current assets Debtors 26,111 27,107 27,103 Cash at bank and in hand 32,845 22,047 21,618 _______ _______ _______ 58,956 49,154 48,721 Creditors Amounts falling due within one year (32,486) (31,173) (38,469) _______ _______ _______ Net current assets 26,470 17,981 10,252 _______ _______ _______ Total assets less current liabilities 45,048 40,483 35,071 Creditors Amounts falling due after more than one year (3,272) (8,761) (4,024) Provisions for liabilities and charges (103) (136) (122) _______ _______ _______ Net assets 41,673 31,586 30,925 _______ _______ _______ Capital and reserves Called up share capital 2,208 2,208 2,208 Reserves 39,465 29,378 28,717 _______ _______ _______ Equity shareholders' funds 41,673 31,586 30,925 _______ _______ _______ Consolidated Cash Flow Statement 2003 2002 2002 6 months 6 months 12 months ended ended ended 31 May 31 May 30 Nov £'000 £'000 £'000 Note Net cash inflow from operating activities (a) 1,633 2,740 8,780 Returns on investment and servicing of finance Net interest received 432 673 988 Taxation paid (1,045) (1,008) (2,559) Capital expenditure and financial investment Purchase of tangible fixed assets (495) (377) (614) Proceeds from sale of tangible fixed assets 1,430 93 820 Acquisitions and disposals Purchase of subsidiary undertakings - - (4,400) Costs associated with acquisition - - (107) Cash acquired with subsidiary undertakings - - 838 Proceeds from sale of subsidiary undertakings 18,469 - - Costs associated with disposal (704) - - Cash disposed of with subsidiary undertakings (1,704) - - Equity dividends paid (2,609) (2,594) (3,898) _______ _______ _______ Cash inflow/(outflow) before financing 15,407 (473) (152) Financing Issue of ordinary share capital - 52 52 Decrease in debt (4,000) - - Redemption of loan notes (180) - (750) _______ _______ _______ Increase/(decrease) in cash in the period (b) 11,227 (421) (850) _______ _______ _______ Notes to the Cash Flow Statement a. Reconciliation of operating profit to operating cash flows 2003 2002 2002 6 months 6 months 12 months ended ended ended 31 May 31 May 30 Nov £'000 £'000 £'000 Operating profit 2,075 3,678 6,353 Amortisation of goodwill 482 450 952 Depreciation 279 548 1,006 Profit on disposal of tangible fixed assets (5) (51) (163) Loss on disposal of fixed asset investments - - 11 (Increase)/decrease in debtors (571) 4,144 4,494 Decrease in creditors and provisions (627) (6,029) (3,873) _______ _______ _______ Net cash inflow from operating activities 1,633 2,740 8,780 _______ _______ _______ a. Net cash inflow/(outflow) from operating activities comprises: Continuing operations 1,776 2,567 8,189 Discontinued operations (143) 173 591 _______ _______ _______ 1,633 2,740 8,780 _______ _______ _______ b. Analysis and reconciliation of net funds At 1 Dec Cash Other At 31 May 2002 flows changes 2003 £'000 £'000 £'000 £'000 Cash and deposits 21,618 11,227 - 32,845 Debt due after one year - - (982) (982) Debt due within one year (4,416) 4,180 (1,500) (1,736) _______ _______ _______ _______ Net funds 17,202 15,407 (2,482) 30,127 _______ _______ _______ _______ 2003 2002 2002 6 months 6 months 12 months ended ended ended 31 May 31 May 30 Nov £'000 £'000 £'000 Increase/(decrease) in cash in the period 11,227 (421) (850) Repayment of debt 4,180 - 750 Issue of loan notes (2,482) - - _______ _______ _______ Movement in net funds in the period 12,925 (421) (100) Net funds at beginning of period 17,202 17,302 17,302 _______ _______ _______ Net funds at end of period 30,127 16,881 17,202 _______ _______ _______ Notes 1. In the 2002 Report and Financial Statements, the Board announced that, subject to shareholder and regulatory approval, the Group had reached agreement to dispose of its Administration Services division for a total cash consideration of £18.47m. The Administration Services division comprised a group of companies, the parent of which was Northern Registrars Limited. The disposal was completed on 21 February 2003 and the results of the division to the date of disposal are reported as discontinued operations. The segmental analysis of the Group is as follows: Turnover Operating profit 2003 2002 2002 2003 2002 2002 6 months 6 months 12 months 6 months 6 months 12 months ended 31 ended 31 ended 30 ended 31 ended 31 ended 30 May May November May May November £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations 14,787 17,235 32,530 1,966 3,110 5,437 Discontinued operations 1,245 2,418 4,969 109 568 916 ______ ______ ______ ______ ______ ______ 16,032 19,653 37,499 2,075 3,678 6,353 ______ ______ ______ ______ ______ ______ Continuing operations comprise the Group's investment management activities. 2. The net profit on disposal of the Administration Services division of £10,472,000 comprises a profit on disposal of the subsidiary undertakings of £10,809,000 and a loss on the disposal of the property occupied by the division of £337,000. The net assets of the division at the date of disposal included goodwill of £3,566,000. The gain on the disposal of the subsidiary undertakings is not expected to give rise to a charge to corporation tax. 3. Basic earnings per share before goodwill amortisation and profit on disposal of subsidiaries is calculated with reference to earnings for shareholders of £2,066,000 (May 2002: £3,059,000; Nov 2002: £5,509,000) and the weighted average number of shares in issue during the period of 21,762,412 (May 2002: 21,652,532; Nov 2002: 21,695,323). Basic earnings per share is calculated with reference to earnings for shareholders of £12,056,000 (May 2002: £2,609,000; Nov 2002: £4,557,000). Diluted earnings per share is the basic earnings per share, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the period. The number of additional shares used for the diluted calculation is 312,992 (May 2002: 400,656; Nov 2002: 295,417). 4. The 2002 Report and Financial Statements set out the effect of the implementation of FRS 19 for the first time during the year ended 30 November 2002. The comparative figures at 31 May 2002 have been restated to recognise deferred tax assets at that date. There is no material effect on the profit and loss account for the six months ended 31 May 2002. 5. The information contained in the 30 November 2002 consolidated balance sheet, profit and loss account and cash flow statement does not constitute full financial statements and has been extracted from the latest published financial statements for year ended 30 November 2002, which have been delivered to the Registrar of Companies. The report of the auditors on these financial statements was unqualified. The consolidated profit and loss accounts and cash flow statements for the six month periods and the consolidated balance sheets at 31 May 2002 and 31 May 2003 are unaudited. This information is provided by RNS The company news service from the London Stock Exchange

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