Interim Results
W.H. Ireland Group PLC
01 August 2006
WH Ireland Group plc
Interim Results for the six months ended 31 May 2006
WH Ireland provides stockbroking, corporate finance, investment management and
financial services to both private and institutional clients from its national
network of offices and from its Australian subsidiary, based in Perth.
Key Points
• Turnover up by 45% to £15.9 million (2005: £11.0 million)
• Like for like turnover (excluding WHI Australia Pty and the acquisition
of the Leeds operation of TD Waterhouse) up by 19% from £10.9m to £13.2m
Pre-tax profit increased by 23% to £2.4 million (2005: £1.9 million)
• Earnings per share 9% higher at 8.9p (2005: 8.2p)
• Dividend increased by 15% to 1.4375p per share (2005: 1.25p)
• Acquisition of the Leeds operations of T D Waterhouse in February
2006
• Expansion of the financial services business in both Cardiff and
Manchester
• Total funds under management have grown to £1.1 billion
• Strong performance from the corporate finance division.
W H Ireland Group plc
David Youngman, Managing Director Mobile 07900 887142
Richard Lee, Director 0161 832 6644
Biddicks Associates
Zoe Biddick 020 7448 1000
Chairman's statement
Results and Dividend
Once again it is pleasing to be able to report good growth in both turnover and
pre tax profit for the six months ended 31 May 2006. Turnover, in which we now
also account for our Australian subsidiary, has increased by almost 45% to
£15.9m whilst our pre-tax profit has increased by 23% to approximately £2.35m.
Furthermore, these results were achieved during a period in which we have been
investing heavily in both our people and our infrastructure in order to achieve
further expansion of the business.
The sale of fixed asset investments, particularly the sale of part of our
holding in London Stock Exchange plc, has resulted in a contribution to pre tax
profit of £955,000 as against a contribution from sales of fixed asset
investments of £330,000 for the same period in 2005. Our share of profits from
associated companies, principally our holding in Ultimate Finance Group plc,
contributed £70,000 (2005: £5,000).
We continue to enjoy a strong balance sheet and the Company's shares have an
above average dividend cover for the financial services sector. Accordingly, we
have increased the interim dividend by 15% to 1.4375p per share, to be paid on
29 September 2006 to shareholders on the register on 11 August 2006. Once again
a scrip alternative is being offered.
Trading
We have continued to invest for the future in order to build the business in
line with our recently adopted internal three year business plan. In accordance
with the growth objective contained in the plan, we are investing heavily in
systems and in recruiting experienced and skilled employees in a number of
areas. This expansion will take time to feed through fully to profits and we
remain confident of the long term strategy.
The figures for the half year include an important contribution to turnover and
pre-tax profit from our Australian subsidiary, WHI Australia Pty Ltd ('WHIA'),
the holding company of DJ Carmichael Pty Ltd ('DJC'), the Perth based
stockbroking and corporate finance boutique. Similarly, the results include the
revenue and associated costs relating to the Leeds based institutional research
and sales business acquired from TD Waterhouse in February.
We are particularly pleased with the continued strong performance of our
corporate finance division where our three offices in London, Manchester and
Birmingham now act for over 70 corporate clients and where our annual retainer
income alone now exceeds £1.3m. In the period under review, the division was
responsible for 6 AIM flotations and 5 secondary fundraisings and two other
transactions, raising a total of £95.7m. The current levels of activity in the
division are good and we continue to expect another strong performance from this
division in the second half.
Expansion within our financial services businesses in both Cardiff and
Manchester continues apace, and, as with the other parts of our business, we
have acquired a number of highly professional individuals, taking the headcount
in this division from 12 to 19. The business model of the division has also been
modified to achieve higher levels of recurring income as opposed to upfront
fees. We are still looking for opportunities to expand this operation in a
controlled fashion.
The move into our new London premises at 24 Martin Lane has proved to be
successful and has aided further recruitment in that office. The additional
floor space will facilitate the level of expansion which we are planning for
this key location.
Our funds under management within the Group now total in excess of £570m. A
further £540m is held by our nominee company, leading to total funds of over
£1.1bn under Group control.
Since the period end, we have increased our equity holding in WHIA by a further
8% to 59%. We have also established a private client department within our Leeds
office and a corporate finance operation will commence shortly. These activities
will come together in new offices before the end of the calendar year, providing
a complete service to clients based east of the Pennines.
The next major investment program to be undertaken by the Group is the
substantial upgrade and refurbishment of the Manchester head office, where
formal planning permission was received last year. This work is expected to
commence during the second half of the current year and, based on current
expectations, will result, on completion, in a substantial uplift in the net
value of the building.
Board
On 10 April 2006, we were delighted to welcome John Padovan as an independent
non-executive director. John is an experienced City figure, having been a
managing director of a number of merchant banks, following which he has been a
director of many listed and unlisted companies, including Tesco plc and
Whitbread plc.
Outlook
Since the half year end, global stock markets have been impacted, not least of
all by geopolitical events in the Middle East and a consequent further rise in
oil prices, which has led to a degree of volatility. However, the Group's spread
of businesses has been brought together to enable the Company to weather any
storms that may arise. The Group has a committed and experienced team and well
diversified income streams, which should ensure continued satisfactory progress.
Sir David Trippier RD JP DL
Chairman
Consolidated Profit and Loss Account
for the six months ended 31 May 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 May 31 May 30 November
2006 2005 2005
£'000 £'000 £'000
---------------------------------------------------------------------------------
Group turnover 15,906 10,982 23,007
Administration expenses (14,677) (9,446) (20,562)
---------------------------------------------------------------------------------
Group operating profit 1,229 1,536 2,445
Share of operating profit in associates 70 5 68
---------------------------------------------------------------------------------
Total operating profit 1,299 1,541 2,513
Profit on disposal of fixed asset 955 330 654
investments
Income from fixed asset investments 17 11 47
---------------------------------------------------------------------------------
2,271 1,882 3,214
Other interest receivable and similar income 252 274 494
Amounts written off investments - - (34)
Interest payable and similar charges (175) (248) (474)
---------------------------------------------------------------------------------
Profit on ordinary activities before
taxation 2,348 1,908 3,200
Tax on profit on ordinary activities (825) (619) (1,043)
---------------------------------------------------------------------------------
Profit on ordinary activities after 1,523 1,289 2,157
taxation
Minority interest (93) - (21)
---------------------------------------------------------------------------------
Profit for the financial period 1,430 1,289 2,136
---------------------------------------------------------------------------------
Earnings per share (in accordance with FRS 14)
Basic 8.91p 8.20p 13.48p
Diluted 7.96p 7.37p 12.13p
---------------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
for the six months ended 31 May 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 May 31 May 30 November
2006 2005 2005
£'000 £'000 £'000
---------------------------------------------------------------------------------
Profit for the period 1,430 1,289 2,136
Unrealised surplus on revaluation of fixed
asset investments (note 4) 168 321 1,083
Unrealised gain on revaluation of properties - - 77
Taxation on realised surplus on revaluation of
fixed asset investments (505) (244) (427)
Currency translation differences (88) - 24
---------------------------------------------------------------------------------
Total recognised gain for the period 1,005 1,366 2,893
---------------------------------------------------------------------------------
Note of Historical Cost Profits and Losses
for the six months ended 31 May 2006
Restated Restated
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 May 31 May 30 November
2006 2005 2005
£'000 £'000 £'000
---------------------------------------------------------------------------------
Profit on ordinary activities before taxation 2,348 1,908 3,200
Realisation of fixed asset investment
revaluation gains 1,808 678 1,422
---------------------------------------------------------------------------------
Historical cost profit on ordinary activities
before taxation 4,156 2,586 4,622
---------------------------------------------------------------------------------
Historical cost profit retained for the
period after the provision for taxation and
Minority Interests 2,733 1,723 3,131
---------------------------------------------------------------------------------
Consolidated Balance Sheet
as at 31 May 2006
Restated Restated
Unaudited Unaudited Audited
31 May 2006 31 May 2005 30 November 2005
----------------------------------------------------------
£'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------------------
Fixed assets
Intangible assets 3,635 2,963 3,319
Tangible assets 5,725 5,127 5,686
Investments 4,403 5,869 6,182
Investment in
associates 765 443 766
----------------------------------------------------------------------------------
5,168 6,312 6,948
----------------------------------------------------------------------------------
14,528 14,402 15,953
Current assets
Debtors 78,221 89,702 69,731
Investments 20 7 15
Cash at bank and in
hand 11,938 10,479 7,362
----------------------------------------------------------------------------------
90,179 100,188 77,108
Creditors due within
one year (83,698) (97,026) (72,374)
----------------------------------------------------------------------------------
Net current assets 6,481 3,162 4,734
----------------------------------------------------------------------------------
Total assets less
current liabilities 21,009 17,564 20,687
Creditors due after
one year (5,729) (5,829) (6,177)
Provisions for
liabilities and charges (92) (228) (116)
----------------------------------------------------------------------------------
Net assets 15,188 11,507 14,394
----------------------------------------------------------------------------------
Capital and reserves
Called up share capital 811 787 801
Share premium account 1,774 1,266 1,605
Capital redemption reserve 226 226 226
Merger reserve 491 491 491
Revaluation reserve 2,739 4,284 4,379
Other reserves 754 754 754
Retained profits 7,176 3,699 4,931
----------------------------------------------------------------------------------
Equity shareholders' funds 13,971 11,507 13,187
Minority Interest
(all equity) 1,217 - 1,207
----------------------------------------------------------------------------------
Total capital employed 15,188 11,507 14,394
----------------------------------------------------------------------------------
Net assets (before minority
interest) per ordinary share 86.13p 73.10p 82.33p
----------------------------------------------------------------------------------
Consolidated Cash Flow Statement
for the six months ended 31 May 2006
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 May 2006 31 May 30 Nov
2005 2005
£'000 £'000 £'000
-------------------------------------------------------------------------------
Net cash inflow/(outflow) from operating
activities 3,219 (927) (3,466)
Returns on investments and servicing of
finance 165 84 170
Taxation (281) (71) (1,583)
Capital proceeds and financial investment 2,829 1,135 1,977
Acquisitions and disposals (440) - 328
-------------------------------------------------------------------------------
Cash inflow before management of liquid
resources and financing 5,492 221 (2,574)
Equity dividends paid (400) (523) (692)
Financing (471) (110) (276)
-------------------------------------------------------------------------------
Increase/(decrease) in cash in the period 4,621 (412) (3,542)
-------------------------------------------------------------------------------
Reconciliation of operating profit to operating cash flow
Unaudited Unaudited Audited
6 months 6 months 12 months
Ended ended ended
31 May 2006 31 May 30 Nov
2005 2005
£'000 £'000 £'000
------------------------------------------------------------------------------
Operating profit 1,229 1,536 2,445
Less non cash transfer from revaluation
reserve (note 4) (168) (321) (506)
Less adjustment from profit on disposal
of fixed asset investments 37 (77) (163)
Depreciation 165 151 323
Amortisation 121 89 184
Profit on sale of fixed assets (13) - (26)
(Increase)/decrease in debtors (8,892) 32,965 56,011
Increase/(decrease) in creditors 10,745 (35,278) (61,734)
(Increase)/decrease in current asset
investments (5) 8 -
------------------------------------------------------------------------------
3,219 (927) (3,466)
------------------------------------------------------------------------------
Analysis of net debt
Other non
At cash At the
beginning Cash changes Exchange end of
of the flow Movements the
period period
£'000 £'000 £'000 £'000 £'000
--------------------------------------------------------------------------------
Cash at bank and in hand 7,362 4,621 - (45) 11,938
Debt due within one year (292) 185 (185) - (292)
Debt due after one year (3,972) - 185 - (3,787)
Finance leases (11) 4 - - (7)
--------------------------------------------------------------------------------
3,087 4,810 - (45) 7,852
--------------------------------------------------------------------------------
Notes
for the six months ended 31 May 2006
1. The interim report, which is the responsibility of the Directors and has not
been audited, was approved by the Directors on 31 July 2006.
2. The figures for the six months ended 31 May 2006 have been prepared using the
same accounting policies as for the year ended 30 November 2005, except for the
adoption of FRS21 and the presentation requirements of FRS25 as detailed in note 4.
3. These unaudited interim financial statements do not constitute statutory
accounts. They have, however, been reviewed by the auditors whose report is included.
The figures for the year ended 30 November 2005 have been extracted from the audited
accounts for that year, and restated to comply with FRS21 and FRS25 as if these
policies had been adopted throughout the year. The comparative figures for the
financial year ended 30 November 2005 are not the Company's statutory accounts for
that year. Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was unqualified
and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
4. Share premium and reserves
Capital
Share Share redemption Merger Revaluation Other Retained
capital premium reserve reserve reserve reserve profits
£'000 £'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------------
At beginning of
period 801 1,605 226 491 4,379 754 4,531
Restatement adjustment - - - - - - 400
-------------------------------------------------------------------------------------
At beginning of
period (Restated) 801 1,605 226 491 4,379 754 4,931
Payment of prior
year dividend (400)
Shares issued 10 169 - - - - -
Adjustment on
investment revaluation
(see below) - - - - 168 - -
Transfer of
realised gain - - - - (1,808) - 1,808
Tax on realised
investment gain - - - - - - (505)
Retained profit for
the period - - - - - - 1,430
Exchange rate
movement - - - - - - (88)
-------------------------------------------------------------------------------------
At end of period 811 1,774 226 491 2,739 754 7,176
-------------------------------------------------------------------------------------
Following the adoption of FRS21, dividends payable are accounted for in the
period in which the company is liable to pay them, rather than in the period in
respect of which they are declared. This has resulted in a reduction of
creditors due within one year and increase in retained profits for the six
months ended 31 May 2005 of £199,892 and the year ended 30 November 2005 of
£400,410.
Following the adoption of the presentation requirements of FRS25, these
dividends are now treated as a charge on reserves and accounted for through the
reconciliation of movements in shareholders funds rather than in the profit and
loss account as previously.
The adjustment on investment revaluation is after £167,751 has been credited
directly to the profit and loss account and offset against the applicable bonus
provision made under the carried interest scheme, as detailed in the 30 November
2005 audited accounts.
5. A final dividend for the year ended 30 November 2005 of 2.5p per share
totalling £400,410 was paid on 28 April 2006. On the same day 59,798 new
ordinary shares of 5p each were issued at 165.5p per share in satisfaction of
the scrip dividend alternative for this dividend.
6. The basic earnings per share for the period has been calculated by dividing
the profit for the financial period by the weighted average number of shares in
issue during the period being 16,050,641 (six months to 31 May 2005: 15,726,260
and year ended 30 November 2005: 15,840,949). 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 share options and warrants
outstanding during the year. The additional weighted average number of shares
used for the diluted calculation is 1,907,799 (six months to 31 May 2005:
1,778,656, and year ended 30 November 2005: 1,764,713).
7. The tax charged to the profit and loss account of £825,232 represents a tax
charge of 35.15% (six months to 31 May 2005: £619,000 and 32.44% and year ended
30 November 2005: £1,043,694 and 32.6%) in addition, there is a tax charge
transferred to reserves relating to tax payable on realised gains previously
credited to the revaluation Reserve of £504,896 (six months ended 31 May 2005:
£245,585 and year ended 30 November 2005: £426,734).
8. During the year the Group maintained a carried interest bonus scheme under
which bonuses may be payable to certain corporate finance personnel when certain
warrants or shares acquired as part of a corporate finance transactions are
ultimately sold at a profit.
Creditors due within one year includes £402,330 (six months ended 31 May 2005:
£303,334 and year ended 30 November 2005: nil) relating to bonuses provided under
the carried interest scheme, and creditors due after one year includes £1,239,223
(six months ended 31 May 2005: £1,663,752 and year ended 30 November 2005:
£1,799,891) relating to bonuses provided under the carried interest scheme.
Independent Review Report by KPMG Audit Plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 31 May 2006, which comprises: the consolidated profit and
loss account; statement of total recognised gains and losses; note of historical
cost profits and losses; consolidated balance sheet; consolidated cash flow
statement; reconciliation of operating profit to operating cash flow; analysis of
net debt and notes 1 to 8. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by company law we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the interim report in accordance with the AIM
rules which require that the interim report must be presented and prepared in a
form consistent with that which will be adopted in the company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board. A review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A review
is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 May 2006.
KPMG Audit Plc
Chartered Accountants
Leeds
31 July 2006
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