Bank Irel13.375 Regulatory News (BOI)

12 May 2005 07:02

Bristol & West PLC12 May 2005 BRISTOL & WEST PLC PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2005 Introduction This announcement constitutes non-statutory accounts, as defined by Section 240of the Companies Act 1985, which have been extracted from the Group's latestfinancial statements. The financial statements have not yet been delivered tothe Registrar of Companies. The auditors' report under Section 235 of the Companies Act 1985 on the fullannual accounts of the Group for the year ended 31 March 2005, which has beensigned, was unqualified. It did not include any statement under sections 237(2)(inadequate accounting records or returns or accounts not agreeing with recordsand returns) or 237(3) (failure to obtain necessary information andexplanations) of the Companies Act 1985. COMMENT ON RESULTS BY ROY KEENAN, CHIEF EXECUTIVE This past year has been one of growth and development for Bristol & West plc, aswe continue to maximise our strengths, improve our cost base, and benefit frombeing part of the Bank of Ireland Group. The Group's International Competitiveness and Growth strategy has identified theUK as a primary focus of expansion and growth. Our Bristol & West business is afundamental part of that future strategy, operating as part of the UK FinancialServices Division, alongside the growing Bank of Ireland's UK Business Bankingoperations, and the continued development of its relationship with the UK PostOffice. Our mortgage business delivered strong volume growth, despite mortgage marginpressure, by continuing to focus on niche sectors, such as Buy to Let and SelfCertified, where we are now a key player. We have continued to face challenges within our financial advice and savingsbusinesses, including the Bristol & West branch network, and a number of actionswere put in place during the year to address these. Business ReviewProfit on ordinary activities before exceptional items was £148.7m. Althoughthis was a slight decrease on last year, the successful management of our costshas led to a fall in our cost/income ratio from 55.5% to 51.8%. A number ofstrategic initiatives were successfully delivered to support this, and we alsocompleted the sale of our Independent Financial Adviser (IFA) business, Chase deVere Financial Solutions, and our Channel Isles mortgage book. LendingWe are successfully implementing a lending strategy which takes full advantageof our strengths in the UK mortgage market. The residential loan book grew by 9%during the year and non-standard lending now accounts for 39% of the totalmortgage book, up from 33% last year. The quality of the mortgage book remainsvery strong, and our arrears across all sectors are consistently below theindustry average. We maintain strong intermediary relationships and good riskand cost management skills. New product development is an integral part of our lending strategy as evidencedby the introduction of the First Start and Islamic mortgage products. Goingforward we will develop these strengths by launching further innovative productsand extending into other specialist niche markets, enabling us to grow our UKmortgage market share.Significant investment in a new mortgage system has enabled synergies andimproved productivity, further strengthening our good cost efficiency andproductivity. Financial Advice and SavingsConsiderable progress has been made during the year to refocus the Bristol &West branch network, through the successful implementation of a new sales model,supported by a wider product range and an extensive staff training programme.However, the highly competitive environment has continued and in November 2004we announced a strategic review of the Bristol & West branch network. We havereceived expressions of interest to purchase the network from a number ofinterested parties and we are evaluating these as part of the review of alloptions being considered. During 2004 we made significant progress to improve the performance of ourindependent financial adviser business, Chase de Vere Financial Solutions, andmade a material reduction in the cost base. At the same time, we conducted athorough review of the business and concluded that it was not an appropriatestrategic fit for the Group. In March 2005, following approval by the Financial Services Authority, wecompleted the sale of Chase de Vere Financial Solutions plc to AWD Group plc,part of AWD Holdings AG. We are confident that this sale was the best possibleoutcome for Chase de Vere Financial Solutions, including its clients and itsstaff, and for Bristol & West plc. Cost ManagementOur cost efficiency focus continues to be managed through the BusinessImprovement Programme. Strong customer service levels and increased productivityare being delivered, and the Programme has exceeded cost saving expectations for2004/05. We are on track to achieve our cost saving targets by 2006/07, at alower cost to the business than originally expected. RegulationWe have maintained an excellent regulatory record throughout 2004/5 andsuccessfully implemented new procedures to ensure we complied fully with theintroduction of the Financial Services Authority rules on the conduct ofmortgage business and the introduction of general insurance regulation. We arecommitted to embedding the principles of treating customers fairly into theculture of our business. International Financial Reporting Standards ("IFRS")For 2005/06 onwards we will be required to report our Annual Report and Accountsunder International Financial Reporting Standards (IFRS). We fully support themove to IFRS and improved comparability in accounting globally. No change to theeconomics or associated risks of our business is expected from IFRS althoughthere will be certain changes to the way they are reported. Bristol & West in the CommunityBristol & West continues to support the community through a wide range ofinitiatives. For example, our Temple Quay community partnership withneighbouring businesses in Bristol is focussed on providing support to helpraise educational attainment, increase the capacity of community organisationsand give opportunities to experience the workplace. In January 2005 staff voted overwhelmingly to adopt ChildLine as their "Charityof the Year". All funds raised for the charity will enable ChildLine to answermore calls from children and young people in danger or distress. Our StaffI would like to very sincerely thank all our staff for their contributiontowards our progress during a year of change. Our progress in 2004/05 is areflection of their hard work and commitment to create good levels of growth andexcellent standards of customer service. We have continued to strengthen ourmanagement teams, by developing our existing managers as well as transferringmanagers from Bank of Ireland Group, and recruiting new managers from outsidethe organisation. Approximately 80% of our staff replied to our annual employee engagement survey,and the results showed clear evidence of the significant increase in employeeengagement throughout the organisation. This demonstrates that we have continuedto keep focused on our people as well as our business. OutlookOur strategy has delivered good returns since its launch in September 2003, andour business has continued to deliver a good performance. Our strong marketposition, specialist knowledge and experience will enable our business tocontinue to prosper. Our priorities are to grow our lending business, decide onthe best way forward for our Bristol & West branch network, and maintain themomentum we have achieved in managing our costs. We are building a strong and sustainable business, and we will continue toinvest in that business where we can generate growth and value for all ourstakeholders. CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2005 Continuing Discontinued 2005 2004 £m £m £m £mINTEREST RECEIVABLE Interest receivable and similarincome arising from debt 15.9 - 15.9 14.3securitiesOther interest receivable andsimilar income 1,031.9 2.0 1,033.9 828.4 INTEREST PAYABLE (826.7) - (826.7) (590.3) -------- ---------- ------- ------- NET INTEREST INCOME 221.1 2.0 223.1 252.4 Fees and commissions receivable 65.2 31.6 96.8 86.4Fees and commissions payable (16.0) - (16.0) (7.6)Other operating income 14.5 1.3 15.8 15.2 -------- ---------- ------- ------- TOTAL OPERATING INCOME 284.8 34.9 319.7 346.4 Administrative expenses (137.3) (37.4) (174.7) (179.0)Depreciation (10.2) (1.1) (11.3) (13.4)Amortisation of goodwill andintangible asset (3.0) - (3.0) (4.4) -------- ---------- ------- ------- 134.3 (3.6) 130.7 149.6 Provisions for bad and doubtfuldebts 18.0 - 18.0 2.6 -------- ---------- ------- ------- PROFIT ON ORDINARY ACTIVITIESBEFORE EXCEPTIONAL ITEMS 152.3 (3.6) 148.7 152.2 Exceptional item: loss on disposalof subsidiaries, restructuring &asset impairment costs (50.3) (14.6) (64.9) (90.4) -------- ---------- ------- ------- PROFIT BEFORE TAXATION 102.0 (18.2) 83.8 61.8 ======== ========== Tax on profit on ordinary (40.2) (28.4)activities ------- ------- PROFIT AFTER TAXATION 43.6 33.4 Dividends - including non-equity (26.4) (86.4) ------- ------- TRANSFER TO / (FROM) RESERVES 17.2 (53.0) ======= ======= During the year the Group has disposed of its Independent Financial Adviser,Chase de Vere Financial Solutions plc, the financial results of which arepresented up to the point of disposal in the "Discontinued" column above. CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2005 2005 2004 £m £m ASSETS Cash and balances at central banks 3.1 3.3Loans and advances to banks 1,033.2 867.0Loans and advances to customers 17,337.3 17,079.5-------------------------------- ------- -------Securitisation and loan transfers 81.5 210.5Less: non-returnable amounts (72.2) (153.5)-------------------------------- ------- ------- 9.3 57.0Debt securities 335.3 335.3Shares in group undertakings - -Intangible fixed assets 26.3 29.3Tangible fixed assets 102.3 113.4Other assets 84.9 85.9Deferred taxation - 13.4Prepayments and accrued income 25.6 23.4 ------- -------Total assets 18,957.3 18,607.5 ======= ======= LIABILITIES Deposits by banks 10,723.3 9,507.8Customer accounts 6,704.4 7,589.6Other liabilities 153.1 186.6Accruals and deferred income 176.7 194.4Provisions for liabilities and charges 29.5 36.6Deferred taxation 0.7 -Subordinated liabilities 413.5 353.5-------------------------------- ------- -------Called up share capital 385.2 385.2ReservesShare premium account 18.5 18.5Revaluation reserve 4.4 7.3Profit and loss account 345.6 325.5Other capital reserve 2.4 2.5-------------------------------- ------- -------Shareholders' funds includingnon-equity interests 756.1 739.0 ------- -------Total liabilities 18,957.3 18,607.5 ======= ======= Shareholders' funds:Equity 677.5 660.4Non-equity 78.6 78.6 ------- ------- 756.1 739.0 ======= ======= ======= =======MEMORANDUM ITEMS 944.8 1,004.9Commitments ======= ======= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2005 2004 £m £m Profit for the financial year 43.6 33.4Unrealised deficit on the revaluation of property - (6.9) --------- ---------Total recognised gains for the financial year 43.6 26.5 ========= ========= NOTE OF HISTORICAL COST PROFITS AND LOSSES 2005 2004 £m £m Reported profit on ordinary activities before taxation 83.8 61.8Realisation of property revaluation gains of previous years 2.9 0.6 --------- --------- Historical cost profit on ordinary activities before 86.7 62.4taxation ========= ========= Historical cost profit / (loss) for the year retained aftertaxation and dividends 20.1 (52.4) ========= ========= RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group 2005 2004 £m £m Profit for the financial year 43.6 33.4Dividends - including non-equity (26.4) (86.4) --------- --------- 17.2 (53.0)Revaluation reserve movement - (6.9)Capital reserve write back (0.1) - --------- ---------Net increase / (decrease) in shareholders' funds 17.1 (59.9) Opening shareholders' funds 739.0 798.9 --------- ---------Closing shareholders' funds 756.1 739.0 ========= ========= CASHFLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2005 2005 2004 £m £m Reconciliation of Operating Profitto Net Operating Cash Flows Operating Profit 148.7 152.2Increase in prepayments and accrued income (3.9) (3.5)(Decrease) / increase in accruals and deferred income (17.6) 68.8Provisions for bad and doubtful debts (18.0) (2.6)Loans and advances written off net of recoveries (0.6) (1.3)Decrease in provisions for liabilities and charges (2.1) (3.0)Depreciation and amortisation 14.3 17.8Interest on subordinated liabilities 28.3 20.8Profit on disposal of fixed assets (2.6) (7.3)Cash outflows related to exceptional items (6.8) (8.0)Other non-cash movements 0.2 0.2 --------- --------- CASHFLOW STATEMENT Net cash flow from trading activities 139.9 234.1 Net increase in loans and advances to banks (150.0) (445.0)Net increase in loans and advances to customers (191.5) (1,825.2)Net increase in deposits by banks 1,220.0 2,331.9Net decrease in customer accounts (884.8) (55.6)Net increase in other assets (3.3) (20.9)Net (decrease) / increase in other liabilities (23.7) 29.7 --------- --------- Net cash flow from operating activities 106.6 249.0 Returns on investments and servicing of finance (34.9) (26.9)Taxation (38.1) (39.3)Capital expenditure and financial investment (2.2) (189.1)Acquisitions and disposals (55.3) -Equity dividends paid (20.0) (80.0)Financing 59.8 104.8 --------- ---------Increase in cash 15.9 18.5 ========= ========= ACCOUNTING POLICIES This preliminary announcement has been prepared on the basis of the accountingpolicies as set out in the most recently published set of financial statements. SEGMENTAL ANALYSIS The group has two principal business segments: Lending and Financial Advice andSavings. A profit of £135.3m on ordinary activities before exceptional items andtax arose in respect of Lending and a loss of £2.2m arose in respect ofFinancial Advice and Savings. The balance of profits of £15.6m related to groupand central activities. TAXATION The change in the effective tax rate from year to year is a result of a numberof matters as illustrated in the following breakdown of the tax charge for theyear and reconciliation of current statutory and effective tax rates. 2005 2004 £m £m United Kingdom corporation tax on profits for the year 7.7 19.9Adjustments in respect of previous years 2.4 (9.6)Overseas taxation 20.0 13.4 --------- --------- 30.1 23.7Deferred taxation charge 10.1 4.7 --------- --------- 40.2 28.4 ========= ========= The reconciliation of statutory corporation tax rate to the effective tax rateon ordinary activities is shown below: 2005 2004 % % Statutory corporation tax rate 30.0 30.0Adjustments to tax charge in respect of prior periods 2.8 (15.6)Goodwill charge not deductible for tax purposes - 33.4Loss on disposal of subsidiaries 18.9 -Timing differences (12.3) -Other items (3.5) (9.5) --------- ---------Effective tax rate 35.9 38.3 ========= ========= DATE OF APPROVAL This preliminary announcement was approved by the Board of Directors on 11 May2005. 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