Bigblu Broadb. Regulatory News (BBB)

29 Dec 2005 16:49

Berkeley Berry Birch PLC29 December 2005 Interim report for the six months ended 30 September 2005 Group Managing Director's Statement Introduction These are the first set of results for the Group to be published underInternational Financial Reporting Standards. The comparative figures for the sixmonths ended 30 September 2004 and for the year ended 31 March 2005 have beenrestated accordingly. The main change is that the deficit of approximately £3million in respect of the Group's defined benefit pension scheme is nowrecognised as a liability on the Group's balance sheet. These interim results have been prepared on a going concern basis, which assumesthat the Group will continue to trade for the foreseeable future. The Group'sability to continue to trade is dependent upon the Group raising sufficientfunds to resolve the regulatory capital position and to meet the Group's workingcapital requirements. The regulatory capital position was explained in ourannouncement on 1 December 2005, in which we also announced that the Board isprogressing an equity issue, together with planned disposals of certain businesslines in Berry Birch & Noble Insurance Brokers Limited, to provide the fundsrequired. On 15 December 2005 a proposed capital reorganisation to facilitate anequity issue was announced with full details set out in the circular issued onthat day. While our plans are well advanced, to date the Financial Services Authority('FSA') has not yet satisfied itself of their adequacy. We will continue todiscuss the position with the FSA with a view to obtaining their agreement torescind their decisions notices to withdraw the permissions of the regulatedgroup companies concerned. However, if this is not possible, and the FSA were tocontinue the formal regulatory process such that the permissions were to bewithdrawn, or should the plans, as implemented, not provide sufficient workingcapital to meet the Group's needs, the going concern basis on which theseresults have been prepared would be inappropriate. On 1 December 2005, the Company requested the temporary suspension of trading inits shares with immediate effect pending clarification of its financialposition. As noted above, the Company is in active discussions with the FSA onthe proposals to resolve the regulatory capital position and it is hoped that,if a successful conclusion of these discussions is reached, the Company will bein a position to apply to have its securities restored to trading. On 19 December 2005, we announced that it is intended to combine the activitiesof the Group's two national independent financial advisory businesses, BerryBirch & Noble Financial Planning Limited ('BBN FP') and Berry Birch & NobleFinancial Planning (Weston) Limited ('Weston'). Additional charges have beenmade to the profit and loss account to reflect the extent to which assets havebeen impaired or liabilities at the balance sheet date have been increased as aresult of this combination. No provision has been made for redundancy and othercosts which will arise from the combination which will be included in theGroup's results for the second half of the financial year. Overview Revenue for the Group fell by 18.6% from £35.0 million to £28.5 million, largelyin respect of network services. The operating loss was £1,385,000, whichincluded a credit of £979,000 in respect of the disposal of subsidiaries.Excluding this gain on disposals, the operating loss was £2,364,000 against aprofit of £67,000 in the corresponding period last year. The downturn reflectsthe lower revenue, an increase in operating expenses and additional charges inrespect of the combination of BBN FP and Weston. The credit on disposal of subsidiaries was in respect of Berry Birch & NobleTrustees Limited ('BBN Trustees') and Direct Protect Limited ('Direct Protect').BBN Trustees was sold in May 2005 as part of a management buy-out. As previouslyannounced, Direct Protect, the Group's non-regulated network, entered intocreditors' voluntary liquidation in June 2005. Direct Protect is no longer beingconsolidated resulting in an accounting credit. Operating performance An analysis of revenue and operating result by business segment is set outbelow: 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000------------------------------------------------------------------ ------- Network services 17,944 23,453 44,596Financial services 8,310 9,322 18,120Insurance broking 2,248 2,251 4,567------------------------------------------------------------------ -------Revenue 28,502 35,026 67,283================================================================== ======= Network services 1,755 945 (21,488)Financial services (1,994) (283) (3,769)Insurance broking 47 471 922Central costs (1,193) (1,066) (1,587)------------------------------------------------------------------ -------Operating (loss)/profit (1,385) 67 (25,922)================================================================== ======= Network services Revenue was down £5.5 million (18.6%) on the same period last year at £17.9million (2004: £23.4 million), in part due to the closure of the Group'snon-regulated network, Direct Protect, which contributed some £3 million torevenue for the six months ended 30 September 2004. Revenue from the Group'sregulated network, BIA, was down £2.5 million (12.1%), largely reflecting alower number of advisers. Gross margin in this business segment increased from 14.5% in the six monthsended 30 September 2004 to 15.5%, due to an underlying improvement in BIA andthe absence of lower margin sales in Direct Protect. The improvement in the operating profit from £0.9 million to £1.8 million wasmainly due to a lower level of overheads, provision releases and the credit inrespect of Direct Protect partly offset by the lower level of revenue. Financial services Revenue was down £1.0 million (10.9%) on the first half of 2004 at £8.3 million(2004: £9.3 million). The decrease is mainly attributable to the disposal of BBNTrustees, which resulted in a £0.5 million reduction in revenue. Gross margin in this business segment fell from 44.9% to 37.4%, mainly due tolower average productivity in BBN FP. The decline in average productivity in BBN FP, a higher level of overheads andcharges in respect of the combination of BBN FP and Weston, partly offset by theprofit on sale of BBN Trustees, contributed to the increase in the operatingloss to £2.0 million (2004: £0.3 million). Insurance broking Revenue at £2.2 million was broadly in line with the corresponding period lastyear. Gross margin in this business segment was 81.3% (2004: 83.4%). Theoperating profit from insurance broking was down £424,000 at £47,000 reflectinginvestment in developing the business. Central costs Central costs largely comprise the overheads of the parent company and theunderwriting result from the Group's captive insurance company. These costsincreased by £127,000 (11.9%) to £1,193,000. Summary and outlook The results for the six months ended 30 September 2005 are disappointing, withreduced revenue and another operating loss being reported. However, theDirectors are confident that we will soon resolve all of the regulatory issueswhich have affected the Group and that, with the implementation of the proposedplans, the Group's financial position will improve significantly. Thecombination of BBN FP and Weston is the first step to achieving the turnaroundrequired. I would like to thank all those clients, employees, advisers and suppliers whohave remained loyal to the Group during what has been a difficult period. Ibelieve we are now in a position to put our problems behind us and move theGroup forward for the benefit of all stakeholders in the business. Andrew ShortisGroup Managing Director 29 December 2005 Unaudited consolidated income statement 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000------------------------------------------------------------------ ------- Revenue (note 2) 28,502 35,026 67,283Cost of sales (20,782) (25,570) (48,914)------------------------------------------------------------------ -------Gross profit 7,720 9,456 18,369Operating expenses (10,084) (9,389) (42,545)Disposal of business - - (1,192)Disposal of subsidiaries (note 3) 979 - (554)------------------------------------------------------------------ -------Operating (loss)/profit (note 2) (1,385) 67 (25,922)Interest income 185 188 410Interest expense (81) (20) (35)------------------------------------------------------------------ -------(Loss)/profit before taxation (1,281) 235 (25,547)Taxation (note 4) (5) - 27------------------------------------------------------------------ -------(Loss)/profit for the financial period (1,286) 235 (25,520)================================================================== ======= Attributable to:Equity holders of the parent (1,288) 241 (25,496)Minority interests 2 (6) (24)------------------------------------------------------------------ ------- (1,286) 235 (25,520)------------------------------------------------------------------ ------- (Loss)/earnings per share (note 5)Basic and diluted (1.4p) 0.3p (28.1p)================================================================== ======= Unaudited consolidated statement of changes in total equity 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000------------------------------------------------------------------ ------- Actuarial losses on defined benefit pension scheme - - (358)------------------------------------------------------------------ -------Net losses recognised directly in equity - - (358)(Loss)/profit for the period (1,286) 235 (25,520)------------------------------------------------------------------ -------Total recognised income (expense) for the period (1,286) 235 (25,878) - equity holders of the parent (1,288) 241 (25,854) - minority interests 2 (6) (24) Ordinary shares issued, net of expenses - 278 278------------------------------------------------------------------ ------- (1,286) 513 (25,600)Opening total equity 790 26,390 26,390------------------------------------------------------------------ -------Closing total equity (496) 26,903 790================================================================== ======= Unaudited consolidated balance sheet 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000------------------------------------------------------------------ -------AssetsNon-current assetsIntangible assets 3,801 26,348 4,122Property, plant & equipment 503 1,928 777------------------------------------------------------------------ ------- 4,304 28,276 4,899------------------------------------------------------------------ ------- Current assetsTrade and other receivables 9,639 13,496 10,075Cash and cash equivalents 9,873 10,922 12,749------------------------------------------------------------------ ------- 19,512 24,418 22,824------------------------------------------------------------------ ------------------------------------------------------------------------- -------Total assets 23,816 52,694 27,723------------------------------------------------------------------ ------- LiabilitiesNon-current liabilitiesLong-term borrowings (23) (376) (32)Retirement benefit liabilities (3,245) (2,930) (3,251)Other provisions for liabilities and charges (4,991) (6,414) (5,729)Other non-current liabilities (286) (317) (310)------------------------------------------------------------------ ------- (8,545) (10,037) (9,322)------------------------------------------------------------------ ------- Current liabilitiesShort-term borrowings (831) (208) (255)Trade and other payables (9,201) (10,624) (12,034)Current tax payable (127) (27) (150)Other provisions for liabilities and charges (5,608) (4,895) (5,172)------------------------------------------------------------------ ------- (15,767) (15,754) (17,611)------------------------------------------------------------------ ------------------------------------------------------------------------- -------Total liabilities (24,312) (25,791) (26,933)------------------------------------------------------------------ ------------------------------------------------------------------------- -------Net (liabilities)/assets (496) 26,903 790================================================================== ======= Capital and reservesCalled up share capital 9,179 9,179 9,179Share premium account 17,019 17,019 17,019Merger reserve 5,589 26,406 5,589Profit and loss account (32,470) (25,904) (31,182)------------------------------------------------------------------ -------Equity shareholders' (deficit)/funds (683) 26,700 605 Minority interests 187 203 185------------------------------------------------------------------ -------Total equity (496) 26,903 790================================================================== ======= Unaudited consolidated cash flow statement 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000------------------------------------------------------------------ ------- Cash (used in)/generated from operations(note 6) (2,744) 409 1,801Interest received 185 188 411Interest paid (25) (20) (36)Taxation (28) 53 53------------------------------------------------------------------ -------Net cash from operating activities (2,612) 630 2,229------------------------------------------------------------------ -------Purchase of property, plant and equipment (77) (202) (288)Proceeds on disposal of property, plant and equipment - 4 1,116Purchase of intangible assets (64) (41) (354)Purchase of subsidiaries - - (19)Proceeds from disposal of subsidiaries 55 - -Costs paid in respect of disposal of subsidiaries (391) - (121)Cash in subsidiaries disposed of (354) - ------------------------------------------------------------------- -------Net cash from investing activities (831) (239) 334------------------------------------------------------------------ -------Proceeds from new borrowings 1,230 - -Repayments of borrowings and finance leases (655) (91) (444)------------------------------------------------------------------ -------Net cash from financing activities 575 (91) (444)------------------------------------------------------------------ -------(Decrease)/increase in cash and cash equivalents in the period (2,868) 300 2,119Opening cash and cash equivalents 12,741 10,622 10,622------------------------------------------------------------------ -------Closing cash and cash equivalents (note 7) 9,873 10,922 12,741================================================================== ======= Notes 1. Accounting policies and basis of preparation The interim financial statements comprise the Group's results for the six months ended 30 September 2005 and 30 September 2004 and a summary of the results for the year ended 31 March 2005, none of which have been audited. Until 31 March 2005, the Group prepared its audited annual financial statements and unaudited interim results under UK Generally Accepted Accounting Principles ('UKGAAP'). As an EU-listed company, Berkeley Berry Birch plc is required to adopt International Financial Reporting Standards ('IFRS') for the reporting of the Group's results with effect from 1 April 2005. The results for the six months to 30 September 2005 therefore represent the Group's first interim statements prepared in accordance with its accounting policies under IFRS. A description of how the Group's reported results and financial position are affected by this change, including reconciliations from UK GAAP to IFRS for prior year results and the revised summary of significant accounting policies under IFRS, is set out in the Announcement, "Restatement of Financial Information for the year ended 31 March 2005", which can be viewed on the Company's internet site, bbb.co.uk. The effect of the change to IFRS on equity at 30 September 2004 is as follows: £'000 ---------------------------------------------------------------------------- Total equity under UK GAAP 29,664 Goodwill 697 Post retirement benefits (2,930) Reclassification of deferred considerations from equity to liabilities (475) Holiday pay (53) ---------------------------------------------------------------------------- Total equity under IFRS 26,903 ============================================================================ The effect of the change to IFRS on the profit/(loss) for the six months ended 30 September 2004 is as follows: £'000 ---------------------------------------------------------------------------- Loss for the period under UK GAAP (499) Goodwill 697 Post retirement benefits 37 ---------------------------------------------------------------------------- Profit for the period under IFRS 235 ============================================================================ These results are based on the IFRS expected to be applicable as at 31 March 2006 and the interpretation of those standards. IFRS are subject to possible amendment by, and interpretive guidance from, the International Accounting Standards Board, as well as the ongoing review and endorsement by the EU, and are therefore still subject to change. These figures may therefore require amendment, to change the basis of accounting and/or presentation of certain financial information, before their inclusion in the IFRS financial statements for the year ending 31 March 2006, when the Group prepares its first complete set of IFRS financial statements. The financial statements have been prepared on a going concern basis, which assumes that the Group will continue to trade for the foreseeable future. The Group's ability to continue to trade is dependent upon the raising of sufficient funds to resolve the regulatory capital position described below and to provide the Group with the additional resources, over and above those required to rectify the capital adequacy position, to meet its working capital requirements. At 30 September 2005, three of the Group companies regulated by the Financial Services Authority ('FSA'), namely Berkeley Independent Advisers Limited, Berry Birch & Noble Financial Planning Limited and Berry Birch & Noble Financial Planning (Weston) Limited, had a combined capital resource requirement deficit of £10.9 million, based on their unaudited FSA returns. On 29 July 2005, the FSA issued decision notices cancelling the permissions granted to the companies concerned under Part IV of the Financial Services and Markets Act 2000. On 29 August 2005 the companies referred these decision notices to the Financial Services and Markets Tribunal ('FSMT'). A hearing of the FSMT to consider this matter is scheduled for 13 February 2006. As announced on 1 December 2005, the Directors are progressing an equity issue, together with planned disposals of certain business lines in Berry Birch & Noble Insurance Brokers Limited, to provide the funds required to resolve the regulatory capital position and to provide the Group with sufficient working capital. To facilitate the equity issue, a capital reorganisation is being undertaken, as set out in the circular dated 15 December 2005. While the Directors' plans are well advanced, to date, the FSA has not yet satisfied itself of their adequacy. The Directors will continue to discuss the position with the FSA with a view to obtaining their agreement to rescind their decisions notices to withdraw the permissions of the regulated group companies concerned. However, if this is not possible, and the FSA were to continue the formal regulatory process such that the permissions were to be withdrawn, or should the plans, as implemented, not provide sufficient working capital to meet the Group's needs, the going concern basis on which these results have been prepared would be inappropriate. The Directors are confident that the plans will be implemented and that these will enable the FSA to end the formal regulatory enforcement action and provide the Group with sufficient funds to meet its working capital requirements. Accordingly, whilst inherent uncertainty remains, the Directors consider that it is appropriate to prepare the financial statements on a going concern basis. Therefore, the financial statements do not include any adjustments that would be required if this basis of preparation were no longer appropriate. The summary of results for the year ended 31 March 2005 does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The full financial statements for the year ended 31 March 2005, prepared under UKGAAP, have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified and did not contain a statement under section 237(2) or section 237(3) of the Companies Act 1985. 2. Segmental information 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000 --------------------------------------------------------------- ------- Revenue Network services 17,944 23,453 44,596 Financial services 8,310 9,322 18,120 Insurance broking 2,248 2,251 4,567 --------------------------------------------------------------- ------- 28,502 35,026 67,283 =============================================================== ======= Operating (loss)/profit Network services 1,755 945 (21,488) Financial services (1,994) (283) (3,769) Insurance broking 47 471 922 Central costs (1,193) (1,066) (1,587) --------------------------------------------------------------- ------- (1,385) 67 (25,922) =============================================================== ======= The analysis of the operating (loss)/profit by business segment shown above is shown before management charges levied by the parent company. The Group's entire revenue, and the majority of the operating (loss)/profit, arises within the United Kingdom. 3. Disposal of subsidiaries The disposal of subsidiaries is in respect of the profit arising on the disposal of Berry Birch & Noble Trustees Limited in May 2005 and a credit arising from Direct Protect Limited being placed into the liquidation process in June 2005. The loss on disposal reported in the year ended 31 March 2005 represented a reduction in the gain reported in the previous year on the liquidation of Berry Birch & Noble Financial Services Limited. 4. Taxation No tax is payable for the period ended 30 September 2005 due to the availabilityof losses. The tax charge shown in the profit and loss account is in respect ofan adjustment to tax arising in a prior accounting period. 5. (Loss)/earnings per share The calculation of the basic (loss)/earnings per share is based on the (loss)/profit for the financial period attributable to equity shareholders and the weighted average number of shares in issue during the period of 91,789,000 (six months to 30 September 2004: 89,864,000; year ended 31 March 2005: 90,826,000). At 30 September 2005 there were no share options that may have a dilutive effect on the number of shares and hence the diluted earnings/(loss) per share is the same as the basic earnings/(loss) per share. 6. Cash (used in)/generated from operations 6 months to Year to ------------------------ ------- 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000 --------------------------------------------------------------- ------- (Loss)/profit before taxation (1,281) 235 (25,547) Adjustment for: Interest income (185) (188) (410) Interest expense 81 20 35 Impairment of goodwill - - 20,816 Disposal of subsidiaries and businesses (979) - 1,746 Depreciation, amortisation and other non cash items 670 365 629 --------------------------------------------------------------- ------- (1,694) 432 (2,731) Decrease in trade and other receivables 638 49 3,703 (Decrease)/increase in trade and other payables and provisions (1,688) (72) 829 --------------------------------------------------------------- ------- Cash (used in)/generated from operations (2,744) 409 1,801 =============================================================== ======= 7. Cash and cash equivalents 30.9.05 30.9.04 31.3.05 £'000 £'000 £'000 --------------------------------------------------------------- ------- Cash and cash equivalents per balance sheet 9,873 10,922 12,749 Overdrafts - - (8) --------------------------------------------------------------- ------- 9,873 10,922 12,741 =============================================================== ======= 8. Dividends No dividends have been paid by the Company and, given the financial position of the Group, none are currently proposed. 9. Post balance sheet event On 19 December 2005 the Group announced that it is intended to combine the activities of its two national independent financial advisory businesses, Berry Birch & Noble Financial Planning Limited and Berry Birch & Noble Financial Planning (Weston) Limited. Additional charges have been made to the profit and loss account to reflect the extent to which assets have been impaired or liabilities at the balance sheet date have been increased as a result of this combination. No provision has been made for redundancy and other costs which will arise from the combination, which will be included in the Group's results for the second half of the financial year. 10.General The interim report was approved by the Board of Directors on 29 December 2005. This report will be sent to shareholders and will be made available to the public, upon request, from the Registered Office, Eaton House, 1 Eaton Road, Coventry CV1 2FJ. Independent review report to Berkeley Berry Birch plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 September 2005 on pages 4 to 11 which comprises theconsolidated income statement, the consolidated statement of changes in totalequity, the consolidated balance sheet, the consolidated cash flow statement andthe related notes 1 to 10. We have read the other information in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our prior written consent. Save as above, we donot accept responsibility for this report to any other person or for any otherpurpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 1, the next annual financial statements of the Company willbe prepared in accordance with International Financial Reporting Standards('IFRS') as adopted for use in the European Union ('EU'). This interim reporthas been prepared in accordance with the basis set out in note 1. The accountingpolicies are consistent with those that the directors intend to use in the nextfinancial statements. As explained in note 1, there is a possibility that thedirectors may determine that some changes to those policies are required whenpreparing the full annual financial statements for the first time in accordancewith IFRS, since the IFRS and IFRIC interpretations that will be applicable andadopted for use in the EU at 31 March 2006 are not known with certainty at thetime of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom Auditing Standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. Fundamental uncertainty - going concern In arriving at our review conclusion, we have considered the adequacy of thedisclosures made in note 1 of the financial information concerning theappropriateness of the going concern basis which depends on the acceptability tothe Financial Services Authority of, and subsequent successful implementationof, proposals made by the Directors to enable the Group to meet its financialresources requirements, retain its permissions to carry out investment businessand meet its additional working capital requirements. In view of the significance of the uncertainty, we consider that it should bebrought to your attention. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. BDO STOY HAYWARD LLPChartered AccountantsLondon 29 December 2005 Shareholder information Enquiries concerning holdings of the Company's shares (i.e. notification ofchange of address or the loss of a share certificate) should be referred to theCompany's registrars, Capita Registrars, The Registry, 34 Beckenham Road,Beckenham, Kent, BR3 4TU, telephone: 0870 162 3100. Shareholders who receivemore than one copy of this interim report may have more than one account on theCompany's register of members. To amalgamate their holding, shareholders shouldcontact the registrars giving details of the accounts concerned and how theywish them to be amalgamated. Information about the Group, and the services it offers, can be found on thecorporate internet site www.bbb.co.uk. This information is provided by RNS The company news service from the London Stock Exchange