Final Results

Teather & Greenwood Holdings PLC 10 June 2003 TEATHER & GREENWOOD HOLDINGS PLC Preliminary results for the year ended 30 April 2003 HIGHLIGHTS • Positioned to benefit from current and any further improvement in market conditions • Successful Rights Issue and Sale of part of TGIM • Loss for the year £6.76 million (2002: £3.84 million) • Fourth largest corporate broker in UK by number of brokerships • Group has started the current financial year trading profitably • The Right Honourable Lord Baker of Dorking joins the Board as a non-executive director Commenting on the results, Ken Ford, Chief Executive, said: 'A third year of bear market conditions and lack of IPO and secondary market activity has inevitably affected our performance. However, there are early signs of a recovery in the IPO market and our potential deal 'pipeline' looks healthy. Action to further adjust overheads has been completed and shareholders should see the benefit of that action in the current year, which has started profitably.' 10 June 2003 ENQUIRIES: Teather & Greenwood Tel: 020 7426 9000 Ken Ford, Chief Executive Nick Stagg, Chief Operating Officer College Hill Tel: 020 7457 2020 Richard Pearson Gareth David CHAIRMAN'S STATEMENT Introduction We have noted on a number of previous occasions in the last three years the challenging trading conditions the group has been operating in and unfortunately, whilst market conditions have shown some recovery in the last six weeks, the difficult trading conditions experienced in the first half of the last financial year continued throughout the second half. In response to these poor trading conditions the Board took a number of key actions during the second half. These included reducing the cost base further to its current level of under £16 million per annum, selectively recruiting to strengthen our core areas of activity, disposing of part of the loss making private client department (TGIM) for £3.65 million and successfully concluding a one for one rights issue to raise £3.42 million. We believe that these actions have positioned the Group so that it should be profitable even if market conditions remain subdued and enable it to enjoy a geared recovery if those conditions improve. Initial trading for the current financial year, which has been profitable to date, bears this out. Financial Summary and Dividend Turnover for the year was £18.74 million (2002 £34.43 million), comprising £15.18 million from continuing activities (2002: £29.29 million) and £3.56 million relating to discontinued activities (2002 £5.14 million). This turnover produced an operating loss of £7.18 million (2002 £3.57 million) of which £3.22 million related to continuing activities (2002 profit £1.34 million) and £3.97 million to discontinued activities (2002 £4.91 million). The results show a loss before tax of £6.76 million compared to a loss in 2002 of £3.84 million. This loss includes costs of redundancy and other exceptional items of £1.87 million arising from the fundamental reorganisation of our business in the period under review, principally in the retail area. This included the reduction of the Group's headcount which, at the start of the year stood at 235, had been reduced to 184 at the half year and was 142 as at the end of the year. It also includes a profit of £0.76 million arising from the sale of the remaining London Stock Exchange shares held by the Group and a profit of £1.81 million from the disposal of discontinued activities, being principally the sale of part of TGIM to Prudential-Bache Limited. To date we have received consideration of £2.75 million and we expect to receive up to £0.9 million of further consideration over the course of the next 12 months, although this latter amount has not been included in these annual results. The balance sheet shows net assets of £8.99 million (2002 £12.76 million). The movement in net assets reflects the loss for the year and the net proceeds of £2.99 million from the successful one for one rights issue at 12 pence per share in February 2003. The Board is not proposing the payment of a dividend for the year ended 30 April 2003. Strategy The strategy of the group is to leverage off its independence and strong institutional relationships in the areas of Corporate Finance and Institutional Agency Sales. The small/mid cap team has been further strengthened during the year by recruitment and provides strong equity distribution, sales trading and market-making, supported by high quality research. Teather & Greenwood is the fourth largest corporate broker in the UK to quoted companies (by number of brokerships). Our agency sales business, which encompasses equities, fixed income, convertible securities and investment trusts constituted over 2% of all agency trades on the London Stock Exchange in 2002 (and about 3% of all small cap trades). Having realigned our cost base to current market conditions we believe that the group is well placed to increase the number of corporate clients and our share of market volumes. Board and Employees As already announced, Derek Boothman retired as non-executive director at the end of our financial year. Derek has worked for the company since 1994 and the Group owes him a debt of gratitude for his counsel and input as former chairman and senior non-executive director. I am delighted to announce that The Right Honourable Lord Baker of Dorking has agreed to join the Board as a non-executive director. Lord Baker had a distinguished political career during which his Cabinet posts included Environment Secretary, Education Secretary and Home Secretary. He is currently Chairman of Business Serve Plc and non-executive director of Hanson Plc, Millenium Chemicals Inc., and Stanley Leisure Plc. He is also a member of the European Advisory Board of the American investment house, Cross Border Enterprises LLC. We are looking forward to benefiting from his considerable expertise and experience. On behalf of the board I would like to welcome our new recruits who joined Teather & Greenwood during the year and to thank all staff for their hard work and dedication during an exceptionally difficult year. Outlook The UK Stock Market has rallied since March 2003 and, although conditions remain subdued, I am pleased to report that the recent increased volumes in all areas have resulted in the Group starting the current financial year profitably. JEREMY DELMAR-MORGAN Chairman 10 June 2003 CHIEF EXECUTIVE'S REVIEW The main events during the year, alongside deteriorating market conditions which affected the performance of all our divisions, exacerbated by weaker volumes during the Iraq incursion, were the Board's significant reduction of Group operating costs which are now at an annualised level of under £16 million, less than half the level of 2001-2, the sale of part of the loss making private client department (TGIM) for £3.65 million and a rights issue to raise £3.4 million. Corporate Finance Advisory and Broking This team now consists of 17 individuals in corporate finance (including 4 directors), 4 dedicated sales professionals with 2 in client care, supported by 3 market makers, 5 sales traders and 3 dealers. We believe this is a strong team able to support future growth. The year was notable for the absence of significant fundraisings in all but a few specialist sectors. Nevertheless the Group was involved in the completion of a number of transactions. The Group acted as broker for Duke Street Capital in its successful £145 million hostile bid for Esporta and advised both Dana Petroleum, on the acquisition of a portfolio of oil assets valued at £54 million from AGIP, and Rok Property Solutions on their purchase of Llewellyn for £16 million with its associated fundraising. Other notable fundraisings have included involvement in the £59 million placing for Unite Group and the flotations of Medico-Legal Consultancy, Volvere and the Smart Approach Group. During the year the Liverpool office increased its brokership list by two (Park Group and Lloyds British) and handled an issue on AIM (raising £4.5 million for Lloyds British) and three other fund raisings for Basepoint, Transport Systems and T&G AIM VCT 'C' shares. With the internationalisation of the London markets now established as a long-term trend, the firm expects the percentage of its business originating from overseas clients looking for a quote in London to increase. Equities Research Despite market conditions, the department continued to provide comprehensive research coverage and now covers eleven sectors, which encompass almost 70% of the UK equity market, as well as contributing to pan-European sector research as the UK part of the European Securities Network. The team produces high quality and independent equity-based sector and company research on over 250 UK corporates. In line with its strategy of further strengthening its mid-cap franchise, the research department has increasingly focussed its resources on core sectors with a weighting in the FTSE250 index. We believe providing an independent research product in this arena should broaden and deepen our appeal to our large institutional client-base. Institutional & Market Making Earlier in the year the secondary agency sales teams were merged to provide total UK equity coverage from large to small/mid capitalisation companies, supported by a sales trading function serving the central dealing requirements of institutions. This team has been enhanced by the arrival of additional highly rated personnel who have further strengthened our institutional relationships and provided new corporate opportunities. As other brokers and investment banks withdraw from the small/mid cap market, we are well placed to increase market share. Market Making has had a satisfactory start to the new financial year and over the next few months we intend to add further stocks to our current list of 107. Investment Funds Our investment funds business has performed well in the year; in the spring of 2002 we launched The Westbury Property Fund. We continue to make a market in over thirty funds to whom we act as brokers. Through the dedicated corporate finance side of the business, we have acted as financial adviser on four fund restructurings, including a successful recommended bid. These activities bode well for the continued growth of this core business. Retail Products & Tax Efficient Solutions The retained parts of Teather & Greenwood Investment Management had a reasonable year. The Teather & Greenwood AIM VCT was a top performing VCT over one year, and the Smaller Companies Open Ended Investment Company (OEIC) was a top quartile performer. The activities include PEPs, ISAs and SIPPs and trading for private clients both as a traditional stockbroker and using our 'on-line' platform. We continue to offer contracts for difference (CFD's) to private clients who are experienced investors. Notwithstanding a difficult market for their products, the Tax Efficient Solutions team had another successful year. With a substantial proportion of income deriving from recurring management fees, this department is well placed. Fundraising was completed for the Take 5 film partnership and Take 6 has started well in the new tax year. Similarly, Childcare 5, the team's children's nursery EIS issue, was closed and Childcare 6 launched. Staff During the year some high quality individuals were recruited and, regrettably, some have had to leave Teather & Greenwood due to the restructuring of the cost base. I would like to add my thanks to all staff for their contribution. Outlook A third year of bear market conditions and lack of IPO and secondary market activity has inevitably affected our performance. However there are early signs of recovery in the IPO market and our potential deal 'pipeline' looks healthy. Action to further adjust overheads has been completed and shareholders should see the benefit of that action in the current year, which has started profitably. KEN FORD Chief Executive 10 June 2003 GROUP PROFIT & LOSS ACOUNT For year ended 30 April 2003 2003 2003 2002 2002 (unaudited) (unaudited) (audited) (audited) £'000 £'000 £'000 £'000 Turnover Continuing operations 15,182 29,287 Discontinued operations 3,563 5,144 Total Turnover 18,745 34,431 Operating Costs (25,932) (38,001) Operating loss Continuing operations (3,217) 1,338 Discontinued operations (3,970) (4,908) Group operating loss (7,187) (3,570) Profit on disposal of fixed asset 764 1,777 investments Profit on disposal of discontinued 1,815 - operation Reorganisation costs (1,870) (1,510) Amounts written off investments (74) (440) Loss on ordinary activities before (6,552) (3,743) interest Net interest payable (209) (101) Loss on ordinary activities before taxation (6,761) (3,844) Taxation on profit on ordinary - 1,053 activities Loss for the year (6,761) (2,791) Equity dividend - (552) Loss transferred to reserves (6,761) (3,343) Loss per share (21.8p) (10.2p) Diluted loss per share (21.8p) (10.2p) Dividend per share 0.0p 2.0p There are no recognised gains or losses for the current or prior year other than as stated above. BALANCE SHEETS As at 30 April 2003 Group Group Company Company 2003 2002 2003 2002 (unaudited) (audited) (unaudited) (audited) £'000 £'000 £'000 £'000 Fixed assets Intangible assets 350 450 - - Tangible assets 1,696 2,401 - - Investments 1,398 1,488 9,921 9,721 3,444 4,339 9,921 9,721 Current assets Trading positions 4,800 4,993 - - Debtors 55,327 127,709 2,705 472 Cash at bank and in hand 1,044 8,074 111 195 61,171 140,776 2,816 667 Creditors: amounts falling due within one year 55,118 131,851 1,430 2,099 Net current assets/(liabilities) 6,053 8,925 1,386 (1,432) Total assets less current 9,497 13,264 11,307 8,289 liabilities Creditors: amounts falling due after one year 500 500 500 500 Net assets 8,997 12,764 10,807 7,789 Capital and reserves Called up share capital 5,703 2,821 5,703 2,821 Share premium account 2,408 2,296 2,408 2,296 Other reserves 14 14 2,606 2,606 Profit and loss account 872 7,633 90 66 Equity shareholders' funds 8,997 12,764 10,807 7,789 Approved by the Board of Directors on 9 June 2003. E K Ford N S Stagg Chief Executive Chief Operating Officer and Finance Director CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 April 2003 2003 2003 2002 2002 (unaudited) (unaudited) (audited) (audited) £'000 £'000 £'000 £'000 Net cash outflow from operating activities (9,292) (6,450) Returns on investments and servicing of finance Interest and other investment income received 19 33 Interest paid (230) (114) Net cash outflow from returns on investments and servicing of finance (211) (81) Taxation Corporation tax refunded/(paid) 928 (1,206) Capital expenditure and financial investment Payments to acquire tangible fixed assets (677) (1,650) Payments to acquire fixed asset investments (20) (1,004) Receipts from sales of fixed asset investments 824 1,777 Receipt from sale of part of TGIM 1,065 - Net cash inflow/(outflow) from capital expenditure 1,192 (877) Equity dividends paid (349) (561) Financing Issue of ordinary share capital 2,994 100 Decrease in cash (4,738) (9,075) NOTES 1. ANALYSIS OF TURNOVER 2003 2002 Continuing Discontinuing Total Continuing Discontinuing Total Operations Operations Operations Operations £000 £000 £'000 £000 £000 £'000 Corporate Finance 4,016 - 4,016 9,981 - 9,981 Investment 1,775 3,180 4,955 3,065 4,373 7,438 Management Institutional 7,368 - 7,368 10,811 - 10,811 Investment Funds 2,023 383 2,406 5,430 771 6,201 Total 15,182 3,563 18,745 29,287 5,144 34,431 2. EARNINGS PER SHARE The loss and number of shares in issue or to be issued used in calculating the earnings and diluted earnings per share were as follows: 2003 2003 2002 2002 Diluted Diluted Earnings Earnings Earnings Earnings Loss (£'000) (6,761) (6,761) (2,791) (2,791) Number of shares 30,982,909 30,982,909 27,276,277 27,276,277 Loss per share (21.8p) (21.8p) (10.2p) (10.2p) Calculation of number of shares At 1 May 28,213,245 28,213,245 27,877,245 27,877,245 Weighted average number of shares issued in the year 3,588,175 3,588,175 207,132 207,132 Weighted average number of own shares purchased and held in EBT (818,511) (818,511) (808,100) (808,100) At 30 April 30,982,909 30,982,909 27,276,277 27,276,277 3. INVESTMENTS Fixed asset investments comprise shares in Channel Island Stock Exchange (unquoted), Crestco Ltd (unquoted), Beaumont Cornish Ltd (unquoted) and Teather & Greenwood Holdings plc. The 1,008,100 Teather & Greenwood Holdings plc shares (cost £1,168,000, market value £222,000) are held in an Employee Benefit Trust and are included in the balance sheet at cost. These shares are held to hedge future obligations that may fall due on exercise of employee share options, which are exercisable for periods up to February 2012. As a result it is considered that these shares have not been impaired. 4. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Year Ended Year Ended 2003 2002 £'000 £'000 Operating loss (7,187) (3,570) Depreciation and amortisation 1,482 1,094 Reorganisation costs (1,568) (766) Decrease in trading positions 1,574 1,196 Decrease in debtors 72,205 73,843 Decrease in creditors (75,798) (78,247) Net cash outflow from operating activities (9,292) (6,450) 2003 2002 £'000 £'000 Net funds at the end of the year Bank balances 1,044 8,074 Loan & Overdraft (2,795) (5,087) (1,751) 2,987 5. COMBINED RECONCILIATION OF NET CASHFLOW AND ANALYSIS OF MOVEMENT IN NET FUNDS At 30 April At 30 April 2002 Cashflow 2003 £'000 £'000 £'000 Bank balances 8,074 (7,030) 1,044 Bank overdrafts (5,087) 2,292 (2,795) Total net funds 2,987 (4,738) (1,751) 6 CONTINGENT LIABILITIES At the interim stage a VAT assessment in the amount of £265,000 was noted as a contingency as the Company had appealed against the assessment. The Company has now been notified by HM Customs that the assessment has been withdrawn and no VAT is due. Also at the interim stage we noted that higher salaried employees of the Group had agreed to defer a portion of their salary. As part of the fundamental restructuring of the Group higher paid employee contracts have now been re-negotiated to lower permanent levels of salary. The balance of unpaid deferred salaries has been provided in full, in these accounts, and hence no further contingent liability exists. At the interim stage we reported 40 complaints in respect of advice given to clients where their portfolios contained some split capital trusts and currently there are now 28 such complaints. 16 of these have been referred to the Financial Ombudsman Service. To date, no complaints relating to split capital trusts have been sustained against the Group and the Directors believe that the significant majority of complaints will not be sustained. This is borne out by the fact that 34 complaints previously received have not been taken forward by the complainants to the Financial Ombudsman Service. However, if there are any circumstances where the Group is found to be liable, the Directors are satisfied that such claims would fall within the level of the Group's insurance cover, and accordingly the Directors believe no provision to be necessary. 7 STATUTORY ACCOUNTS The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 April 2003 or 2002. The financial information for the year ended 30 April 2002 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 April 2003 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement using the same accounting policies for the year ended 30 April 2002 and will be delivered to the Registrar of Companies following the company's annual general meeting. This information is provided by RNS The company news service from the London Stock Exchange

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