Arbuthnot Regulatory News (ARBB)

22 Mar 2005 07:00

Secure Trust Banking Group PLC22 March 2005 SECURE TRUST BANKING GROUP PLC Preliminary results for the year to 31 December 2004 Key Points • Underlying profit before tax, exceptional items and goodwill amortisation increased by 54% to £5.6 million. • Underlying earnings per share before exceptional items and goodwill amortisation up 90% to 34.9p. • Total operating income 17% higher at £49.9 million. • Profit before tax increased to £4.0 million (2003: £3.9 million). • Dividend increased to 31.5p (2003: 31p). • Current year started positively. • Successful open offer raised £3.8 million after the year-end. • Name to be changed to Arbuthnot Banking Group PLC. Chairman, Henry Angest, commented: "These results reflect the progress being made across Secure Trust's businesses,most notably in Arbuthnot Securities, which traded profitably in the lastquarter of 2004 and in the first two months of 2005. The Directors are confidentabout the Group's prospects, as reflected in the decision to increase thedividend for the 16th consecutive year."______________________________________________________________________ Press enquiries: Secure Trust Banking Group PLCHenry Angest, Chairman and Chief Executive Tel: 020 7012 2400Stephen Lockley, Finance Director Tel: 020 7012 2055Andrew Salmon, Chief Operating Officer Tel: 020 7012 2424 BiddicksKatie Tzouliadis Tel: 020 7448 1000 CHAIRMAN'S STATEMENT I am pleased to report that Secure Trust Banking Group achieved a profit beforetax, exceptional items and goodwill amortisation in 2004 of £5.6 million, anincrease of some 54% over the comparable underlying profits of £3.6 million forlast year. Earnings per share before exceptional items and goodwill amortisation were34.9p, some 90% higher than the comparable underlying earnings per share of18.4p for 2003. This result reflects good progress in both investment banking and privatebanking, with the increase of 17% in the Group's total operating income to £50million being driven by increases of 72% in Arbuthnot Securities and 13% inArbuthnot Latham. We are beginning to reap the benefits of our sustainedinvestment programme in the Arbuthnot businesses. Recognising their growingimportance to the Group, we are proposing at the forthcoming Annual GeneralMeeting to change the name of the company to Arbuthnot Banking Group PLC. During the year, the Group consolidated its London-based operations into newfreehold premises in the City. Whilst this is yielding operational benefits, ithas led to an increase in our property and information technology costs whencompared with the previous year, particularly since some £1.4 million of suchcosts were borne in 2003 by Old Mutual Group, from whom we purchased ArbuthnotSecurities. Furthermore, last year's results reflected the effect of a cashcontribution by Old Mutual Group of £1 million towards other operating expensesin Arbuthnot Securities. Adjusting for these factors, the Group's comparableunderlying profit before tax, exceptional items and goodwill amortisation in2003 amounted to £3.6 million, compared with £5.6 million in 2004. After exceptional charges of £1.4 million, relating to reorganisation andredundancy costs and the costs of rationalising the Group's premises, profitbefore tax for 2004 increased to £4.0 million (2003: £3.9 million). Earnings pershare on this basis were 25.9p (2003: 20.1p). We propose to increase the finaldividend by 0.5p to 21p, which will be paid on 27 May 2005 to shareholders onthe register at 29 April 2005, bringing the total dividend for the year to 31.5p(2003: 31p). Secure Trust Bank Secure Trust Bank's investment programme continued during 2004 with upgrades tothe branch network to facilitate the selling of a wider range of financialservices and the development of new distribution channels. The benefits of thisprogramme were reflected in a particularly good performance from the division'sinsurance activities. The number of motor policies sold by SecureDirect rose by11% over the previous year. At the same time, earnings from other insuranceproducts also increased and overall fees and commissions earned by the divisionrose by 5%. Net interest income also increased by 5%, reflecting both highervolumes, with overall new lending increasing by 2%, and rising interest rates. This programme has also entailed investing in both staff and infrastructure, asa result of which the division's profit before exceptional items was £6.8million (2003: £7.1 million). Arbuthnot Latham The Group's private banking division has made progress in all areas of activityduring 2004 and was ranked second for customer satisfaction out of 130 UK-basedprivate banks in an independent survey carried out by Market Dynamics. Oursuccess has been reflected in an 18% increase in banking customers, 22% rise inthe loan book, 5% growth in customer deposits and 30% rise in factoring volumes.Fund management, pensions & investments and general insurance all displayedimproved results and our property lending activities produced a strongperformance. Overall, the division's revenues were 13% above last year. Following a thorough review of our bad debt provisions in anticipation of thechange to International Financial Reporting Standards in 2005, we have concludedthat the level of specific bad debt provisions held in Arbuthnot Latham issufficient to cover the risk of loan losses and therefore the additional generalbad debt provision which we have previously maintained, amounting to £0.6million, is no longer required. After releasing this general bad debt provisionin full, the profit before exceptional items and goodwill amortisation of thedivision rose to £1.8 million (2003: £0.9 million). We will continue our investment in the business in 2005 and have recruitedseveral new key employees to supplement our technical and sales teams. Arbuthnot Securities Following the appointment of a new Chief Executive and the implementation ofcost-cutting measures last autumn, I am pleased to report that ArbuthnotSecurities traded profitably during the final quarter of 2004 and the first twomonths of 2005. The division's operating income for the year rose by 72% over2003, with significant improvements being achieved in each of the three revenuestreams, namely institutional stockbroking commissions, market-making profitsand corporate finance fees. During the year, the corporate finance team advised on some 25 transactions: wesponsored 10 AIM listings and are proud of the fact that, at the time ofwriting, all of our new issue fund raisings are trading above their issueprices. We also successfully completed 8 secondary fund raisings and advised onacquisitions with a total value in excess of £300 million. As I have mentioned earlier, the 2003 results of Arbuthnot Securities benefitedfrom a significant contribution to overheads by Old Mutual Group. Adjusting forthis, underlying operating costs rose by 25% and operating losses were reducedby 58% to £1.6 million. Having achieved profitability in the last quarter of2004 and so far this year, we are determined to ensure that Arbuthnot Securitiescontributes positively to the Group's results in 2005. Property Following the purchase of freehold premises in the City of London in 2003, theGroup's London-based businesses are now all located together at Arbuthnot Housein Ropemaker Street, EC2. This building has been revalued on a vacant possessionbasis at 31 December 2004 at £20.8 million, which represents an overall surplusof £2.6 million above the costs of acquiring and moving into it. This is thefirst year that the Group has had a head office location in London and theproperty costs relating to this head office are shown separately in thepresentation of the divisional results for the year. Outlook Trading has begun in positive fashion in 2005, with results for the first twomonths ahead of both budget and last year. Whilst it is too early to extrapolatea definitive trend from these results, particularly given the uneven nature ofcorporate finance revenues, we are nevertheless encouraged by the performancesbeing achieved across the Group's diverse portfolio of businesses. The successful Open Offer to shareholders, which was 130% subscribed, raisedapproximately £3.8 million for the Group in January 2005 and places our financeson a strong footing going forward. The Directors therefore remain confidentabout the Group's prospects and this confidence is reflected in our decision torecommend an increased dividend, a policy which we have maintained every yearsince the Company joined the stock market 16 years ago. Henry AngestChairman CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2004 Profit Before Execptional Exceptional 2004 2003 Items Items (Unaudited) (Audited) £000 £000 £000 £000Interest receivable fromloans, advances andinvestments 15,050 - 15,050 12,899Less: interest payable (6,285) - (6,285) (4,739) --------- --------- --------- --------Net interest income 8,765 - 8,765 8,160 Fees and commissionsreceivable 41,673 - 41,673 34,931Less: fees and commissionspayable (578) - (578) (405) --------- --------- --------- --------Operating income 49,860 - 49,860 42,686 --------- --------- --------- -------- Administrative expenses 41,735 - 41,735 34,331Exceptional administrativeexpenses - 1,386 1,386 1,256Depreciation 1,965 - 1,965 1,467Amortisation of goodwill 202 - 202 199Exceptional goodwillwrite-off - - - 655Provisions for bad anddoubtful debts 595 - 595 900 --------- --------- --------- --------Operating expenses 44,497 1,386 45,883 38,808 --------- --------- --------- -------- Profit on ordinaryactivities before tax (note 1) 5,363 (1,386) 3,977 3,878Tax on profit on ordinaryactivities (1,023) 416 (607) (1,250) --------- --------- --------- -------- Profit on ordinaryactivities after tax 4,340 (970) 3,370 2,628Minority interests (17) - (17) (10) --------- --------- --------- -------- Profit attributable toshareholders of SecureTrust Banking Group PLC 4,323 (970) 3,353 2,618Dividends (4,349) - (4,349) (4,015) --------- --------- --------- --------Retained loss for the year (26) (970) (996) (1,397) --------- --------- --------- -------- Earnings per ordinaryshare (note 2)Basic and fully diluted 33.4p 25.9p 20.1p The profit on ordinary activities before tax and retained profit on anhistorical cost basis are not significantly different from the profit onordinary activities before tax and retained profit for the periods above. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 December 2004 2004 2003 (Unaudited) (Audited) £000 £000 Loss for the financial year (996) (1,397) Unrealised gain arising on revaluation of freeholdproperties 2,380 1,931 ---------- --------Total recognised gains for the year 1,384 534 ---------- -------- CONSOLIDATED BALANCE SHEET At 31 December 2004 2004 2003 (Unaudited) (Audited) £000 £000Assets Cash 139 235Loans and advances to banks and building societies 52,367 74,346 Loans and advances to customers 130,054 110,268Debt securities 50,500 28,500Intangible fixed assets 2,358 2,560Tangible fixed assets 33,208 28,542Other assets 17,127 9,302 Prepayments and accrued income 4,483 3,069 ---------- --------Total assets 290,236 256,822 ---------- -------- Liabilities Deposits by banks 26,380 15,154Customer accounts 202,996 187,295 Other liabilities 21,931 18,874Accruals and deferred income 6,147 4,113Subordinated loan notes 7,817 7,817Equity minority interests 89 77 ---------- -------- 265,360 233,330 ---------- -------- Called up share capital 130 130Share premium account 13,370 13,370Capital redemption reserve 20 20Revaluation reserve 4,822 2,442Profit and loss account (note 3) 6,534 7,530 ---------- --------Equity shareholders' funds 24,876 23,492 ---------- -------- ---------- --------Total liabilities 290,236 256,822 ---------- -------- CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2004 2004 2003 (Unaudited) (Audited) £000 £000 Net cash inflow from operating activities (note 4) 45,094 37,998 Returns on investments and servicing of finance: Dividends paid to minority shareholders ofsubsidiary undertaking (5) (5) Taxation (1,499) (2,315) Capital expenditure and financial investment: Purchase of debt securities (net) (22,000) (11,500) Purchase of tangible fixed assets (5,060) (19,834)Sale of tangible fixed assets 914 238 ---------- -------- (26,146) (31,096) ---------- -------- Acquisitions: Acquisition expenses - (655) Less cash acquired - 4,693 ---------- --------Net cash inflow - 4,038 ---------- -------- Equity dividends paid (4,015) (3,950) Financing: Shares repurchased - (1,966) ---------- --------Increase in cash 13,429 2,704 ---------- -------- NOTES 1. Segmental Analysis of Profits Year to 31.12.04 (Unaudited) Personal Private Investment Subordinated Head Group financial banking Banking loan stock office total services property £000 £000 £000 £000 £000 £000 Segment profit 6,816 1,841 (1,622) - (887) 6,148Subordinatedloan note interest - - - (583) - (583)Amortisationof goodwill - (202) - - - (202) ------- ------- -------- --------- ------- -------Profit before exceptionalitems 6,816 1,639 (1,622) (583) (887) 5,363Exceptionalitems (214) (431) (741) - - (1,386) ------- ------- -------- --------- ------- -------Profitbefore tax 6,602 1,208 (2,363) (583) (887) 3,977 ------- ------- -------- --------- ------- ------- Year to 31.12.03 (Audited) Personal Private banking Investment Subordinated Head Group financial Banking loan stock office total services property £000 £000 £000 £000 £000 £000 Segment 7,110 921 (1,528) - - 6,503profitSubordinatedloan note interest - - - (515) - (515)Amortisationof goodwill - (199) - - - (199) ------- ------- -------- --------- ------- -------Profit before exceptionalitems 7,110 722 (1,528) (515) - 5,789Exceptionalitems - (496) (1,415) - - (1,911) ------- ------- -------- --------- ------- -------Profitbefore tax 7,110 226 (2,943) (515) - 3,878 ------- ------- -------- --------- ------- ------- 2. Earnings per Ordinary Share Earnings per ordinary share are calculated on the net basis by dividing theprofit attributable to shareholders of £3,353,000 (2003: £2,618,000) by theweighted average number of ordinary shares 12,951,974 (2003: 13,027,289) inissue during the year. There is no difference between basic and fully dilutedearnings per ordinary share. Adjusted earnings per share are calculated by dividing the profit attributableto shareholders before exceptional items of £4,323,000 (2003: £4,152,000) by theweighted average number of ordinary shares 12,951,974 (2003: 13,027,289) inissue during the year. NOTES (continued) 3. Profit and Loss Account 2004 2003 (Unaudited) (Audited) £000 £000Retained profit:Opening balance 29,460 32,823Cost of shares repurchased - (1,966)Loss for the period (996) (1,397) ---------- --------Closing balance 28,464 29,460Premiums on acquisitions written off (21,930) (21,930) ---------- -------- 6,534 7,530 ---------- -------- 4. Reconciliation of operating profit to net cash inflow from operations 2004 2003 (Unaudited) (Audited) £000 £000 Operating profit before exceptional item 5,363 5,789 Exceptional administrative costs (1,386) (1,256) Profit on sale of tangible fixed assets (104) (55) Increase in accrued income and prepayments (1,414) 981Increase in accruals and deferred income 2,034 (808) Provisions for bad and doubtful debts 595 900 Depreciation and amortisation 2,167 1,666 ---------- --------Net cash flow from trading activities 7,255 7,217 Net decrease in loans and advances to banks andcustomers 16,573 1,787 Net increase in deposits by banks and customeraccounts 26,927 29,760 Net increase in other assets (6,934) 6,807 Net increase in other liabilities 1,273 (7,573) ---------- --------Net cash inflow from operating activities 45,094 37,998 ---------- -------- 5. Basis of reporting The figures for the year ended 31 December 2004 have been prepared in allmaterial respects on the basis of the accounting policies set out in the Group's2003 statutory accounts. The preliminary results were approved by the Board ofDirectors on 21 March 2005 and are unaudited. 6. Results for the year ended 31 December 2003 The figures for the year ended 31 December 2003 are derived from the GroupAccounts for the year. A copy of the Group Accounts for that year, on which theauditors gave an unqualified opinion, has been delivered to the Registrar ofCompanies. This information is provided by RNS The company news service from the London Stock Exchange