Ifg Regulatory News (IFP)

IFG Group plc - Preliminary statement of results for the year ended 31 December 2011

Highlights

IFG Group plc today (29 March 2012) released its preliminary statement of results for the year to 31 December 2011. Key highlights include:

Financial Highlights

·; Revenue of £110.8 million (2010: £103.5 million)

·; Adjusted earnings of £18.6 million (2010: £18.5 million)

·; Adjusted operating profit up 8% to £22.6 million (2010: £20.9 million)

·; Operating profit of £12.2 million (2010: £3.8 million)

·; Adjusted EPS in pence per share of 14.84 (2010: 16.11)

·; EPS in pence per share of 8.38 (2010: 4.04)

·; 10% increase in dividend to 4.40 cent per share (GBP equivalent 3.68 pence per share)

·; Net debt reduced by 28% from £12.7 million to £9.1 million

·; Total assets under administration and advice of circa £14 billion in James Hay Partnership and £3 billion in Saunderson House

Business Highlights

·; Integration of James Hay completed and re-launched the James Hay Partnership SIPP

·; Launched mid-range SIPP offering

·; 2,150 new SIPPs; total SIPPs under administration of 38,289 at year end

·; Increase in independent financial advisory profits of 30% on 2010. Saunderson House well-placed from regulatory perspective and 137 new client wins (2010: 100)

·; IFG International performed well during the year despite difficult market conditions

·; Unsolicited approach made by 3rd party to purchase IFG International in March 2012

Commenting on the results, Mark Bourke, CEO of IFG Group plc said;

"In 2011, once again, the Group businesses have proven resilient in volatile and challenging markets. 2012 promises to be a significant year for the Group in which we capitalise on our position in the SIPP and Advisory market and see the flow through of the restructuring and strategic positioning of our business".

-ends-

For reference:

Mark Bourke Niamh Hore

Group CEO Investor Relations Manager

IFG Group plc IFG Group plc

Tel: 01 275 2800 Tel: 01 275 2866

Financial Highlights

Notes:

1. Adjusted earnings per share arestated before amortisation of intangible assets, share based payment compensation, exceptional items, salaries of employees laid off and discontinued operations.

Reconciliation of adjusted earnings per ordinary share:

2. Dividend per ordinary share is calculated as the sum of the interim dividend per share of 1.50 cent and the 2.90 cent per share to be proposed at the forthcoming Annual General Meeting. The above dividend per ordinary share of 4.40 cent has been translated into the current pence equivalent at the 2011 closing €:GBP exchange rate of 0.8353 for disclosure purposes. The dividend will be declared in Euro with the option for payment in Euro or GBP net of Irish withholding tax.

3. The Group's presentation currency was changed to GBP effective 1 January 2011. This change was effected because a significant majority of the Group's revenues and costs are now sourced and incurred in GBP. The functional currency changed in March 2011 in line with completion of the refinancing of the Group's borrowings. The financial information is presented in GBP with comparative figures restated.

GROUP PERFORMANCE

IFG Group ("IFG" or the "Group") is pleased to announce results for the year ended 31 December 2011, an eventful year of significant business progress and corporate activity.

IFG is now a Group with approximately 65% of Group profit being generated in its UK business segment and 35% being generated by our International business segment.

We are emerging from the financial crises with both business and balance sheet strengthened having taken the opportunity to build a leading position in our chosen markets.

The majority of our revenue and substantially all of our profit are built on long term annuity profile revenues, be they SIPP fees, trustee fees or hourly based billing to our clients in our advisory and trust and corporate businesses.

In 2011 we finished the integration of James Hay and started the rebuilding of its distribution in earnest.

In the period we re-launched the James Hay Partnership SIPP and our iSIPP mid-range product which is focused on a range of standard asset classes and is highly competitive.

In parallel with the new product launches, we have rebuilt our distribution function and built a sales strategy which has defined our market. We focused our sales efforts on the advisors who will win in a post Retail Distribution Review ("RDR") world and who value James Hay's service, technology platform, brand and reliability.

Group net debt stands at £9.1 million (£12.7 million at 31 December 2010). In March 2011, the Group renegotiated banking facilities on very favorable terms with margins of 2.25% - 2.75%. The refinancing has added Barclays Bank Ireland plc (Barclays) and HSBC Bank plc (HSBC) to our banking syndicate. This reflects the strength of our business as a banking proposition in a world where debt remains scarce and expensive.

Operating cash flows from the business have been strongand we have increased total dividend pay-out by £2.5 million and paid once-off liabilities relating to amounts refundable to a customer of the International segment of £2 million.

The combination of the above, we believe, will allow us to build from here and to become the leading player in terms of quality, size and geographical presence in each of our core markets.

UNITED KINGDOM

Pension administration

The SIPP continues to be the vehicle of choice for provision of individual pensions in the UK.

The drivers of this business are as follows:

- it allows individuals the freedom to manage their own assets (with or without an advisor). Management of assets by individuals has continuously grown over the past 10 years;

- it is supported by Government policy and related legislation which;

- simplified the UK pension regime in 2006;

- is removing the obligation to purchase an annuity at 75 years of age; and

- has simplified the contribution rules to allow full tax relief on £50,000 per annum (there are even greater short term opportunities from transition arrangements).

- in general, defined benefit schemes are being wound down or closed to new entrants;

- the government may reduce public sector benefits which will drive the need for private provision; and

- there is a general trend toward individual control of pension assets as the insured and other alternatives have disappointed over time.

In 2011, we saw the start of a significant shift in the SIPP market. In the past, structurally it broke down into three clearly defined segments; bespoke, mid-range and platform. We are seeing low single digit growth in the bespoke markets and continued higher levels of growth in the mid-range and platform offerings. It is for this reason that we have moved into the mid-range market with our iSIPP. In addition, we have ambitious plans to build around these core offerings over the coming months in 2012.

James Hay believe the winning formula is more tailoring of the offering to the individual client needs.

Internally, in addition to restructuring the business, we have re-modeled the client service model to one where our IFA client deals with individual teams. As with all changes of business model, this has had its challenges. However, the response has been overwhelmingly positive from our business clients and the wider market.

The financial performance of the business was impressive with a combined £11.0 million profit for the year despite no increase in the UK interest rates in the 2nd half of the year.

Although sales momentum is slower than hoped, we expect to hit an annualised rate of 3,000 new SIPPs by September 2012 thus meeting the 3 year target set on acquisition by year end. We believe that with our 2012 sales strategy we will achieve this aim.

We will have then delivered on all aspects of our original acquisition plans within the time frames set out.Beyond this, we believe the potential for James Hay as a business is enormous.

The rate of new business is shown below:

Independent financial advisory

In terms of financial performance, independent financial advisory has had a good year, both in terms of new client wins of 137 (2010: 100) and time charges. The profits in our advisory business were £4.2 million (2010: £3.2 million), an increase of 30% on the prior year. This is an excellent result and has been delivered in a challenging market.

Our fee based advisory offering, Saunderson House Limited, continued to make progress in 2011.

In this period we have changed management with the former CEO replaced in the interim by a long term and highly experienced director, Tony Overy.

The business remains as always focused on a flawless delivery to the client, developing our people and always adhering to the principle of unconflicted advice.

Saunderson House Limited now employs in excess of 100 people. As a pure fee based proposition, the business is well positioned in light of the "Retail Distribution Review" (RDR) which will be implemented by the Regulator by 2013. The core recommendation of the RDR is to remove commission bias in the IFA and client relationship.

The Group has significant ambitions for the business. In the immediate term, Saunderson House Limited will streamline the valuation and reporting process for clients assets and thus create efficiency of service delivery, an ability to increase client acquisition activities.

Our commission based advisory businesses, including Siddalls which specialises in clients relocating outside the UK, were profitable in 2011.

In April 2011, the FSA carried out an ARROW visit. On foot of this, the UK business and Group have invested in additional resources in the Internal Audit, Risk and Compliance functions. As previously indicated, we expect the annualised cost of this additional investment to run at circa £0.8 million.

We have recently also augmented our Non-Executive team with two new UK based Non-Executives, Evelyn Bourke and Robin Phipps.

INTERNATIONAL

The International business segment has delivered profits of £8.0 million (2010: £9.4 million). This segment has performed well in difficult market conditions.

Although the International business held up well in the first six monthsof the year,client activity levels which were expected to rise significantly remained subdued in the second half. We also invested for the future by integrating businesses and strengthening teams, particularly in business development and sales in Switzerland, Ireland and Eastern Europe.

New business by entity and annual fee levels tracked the prior year but were short of expectation. The performance of the business, however, does not change our view of the growth prospect of the business in the medium to long term.

The International business is based on the administrative management of high net worth private clients' investment vehicles and the implementation of their investment strategies in a transparent and tax efficient manner. This business will continue to grow as the global economy grows and capital mobility increases.

The drivers of the business are:

- tax differentials and arbitrage between jurisdictions;

- long term family and estate planning;

- global growth and expansion;

- increasing regulation; and

- increasing vigilance by individual nations in protecting their tax base.

In 2011, the Isle of Man performed well in terms of revenue although profit was down on prior year as we invested in additional IT and sales. Resilience is attributable to an entrepreneurial and globally diverse client base which remains active even in times of depressed asset prices. New business intake was slightly down on 2010.

IFG Jersey had a difficult year in 2011. The intake of new business was much lower for the year. We expect business in Jersey to resume growth having stabilised in 2010.

IFG Cyprus has had a mixed year which after a reasonable pick-up in business to H1 disappointed in H2. The Cyprus business has a large dependency on Eastern Europe and Russia. We remain convinced, however, of the strategic importance of Cyprus as a centre within the EU.

The Ireland and Switzerland business centres performed well as the increased marketing effort in both showed results.

IFG Fund Administration business has had a poor year with no significant advance on 2010. While still unprofitable it is an area where management believe that capability to administer is important to existing as well as prospective clients.

Our strategy to continue developing the business in the centres where we have a presence as well as selective expansion into others such as Hong Kong, Singapore and Luxembourg.

On 9 March 2012, we announced that the Group has had an unsolicited approach for the International Segment. These talks are continuing and if this results in a compelling offer, this will be brought to the shareholders.

IRELAND

Financial services including central overhead

Our core corporate pensions and individual advisory business continues to grow in difficult market conditions. Total income was up 6% from 2010. Operating profit was resilient at £1.8 million (2010: £2.1 million) and includes additional costs in strengthening our sales resources.

The business secured 36 new corporate customers and the individual advisory business had a good year in securing new clients. The business also entered into a partnership in Munster with Quintas Wealth Management.

We continue to look for ways to build our core offering and to leverage the Group's pension business in developing the individual client base and product offering.

The Group continues to explore opportunities to improve efficiencies in order to reduce overhead. In the current year this has been demonstrated by the reduction in the adjusted operating loss.

General broking

The losses in our general broking business continue to reduce through increased income, the benefit of cost reduction programmes and the development of our product proposition for the broker network. In 2011, we continued to develop our offering as demonstrated by the acquisition of 70% of the issued share capital of A.R.B. Underwriting Limited (and its subsidary A.R. Brassington & Co) for £0.4 million.

GROUP FINANCING

Group net debt is summarised and compared to 2010 year end below.

In the year to 31 December 2011 our net debt has been reduced from £12.7 million to £9.1 million, a reduction which leaves a favourable net debt to EBITDA covenant at circa 0.4.

In March 2011 we concluded our refinancing adding HSBC and Barclays to our syndicate of bankers. The new facilities have the following key characteristics:

- margin 2.25% to 2.75%;

- 5 year term; and

- annual repayments vary from £7.6 million to £11.4 million per year.

This facility (total £69.5 million) is shared equally between our banks and also includes circa £19 million of headroom which may be used for acquisitions in our principal business segments.

Dividends

The Board is recommending a final dividend of 2.90 cent per share (current GBP equivalent of 2.42 pence per share). This final dividend, when added to the interim dividend of 1.50 cent paid on 16 December 2011 (current GBP equivalent of 1.26 pence per share), makes a total of 4.40 cent per share (current GBP equivalent of 3.68 pence per share).

Consolidated Income Statement

Year Ended 31 December 2011

Consolidated Statement of Comprehensive Income

Year Ended 31 December 2011

Consolidated Balance Sheet

As at 31 December 2011

Consolidated Cash Flow Statement

Year Ended 31 December 2011

Consolidated Statement of Changes in Equity

Notes to the financial information

1. General information

IFG Group plc and its subsidiaries (together the "Group") are engaged in the provision of financial services and corporate and trustee services. The Company is a public company, listed on the Irish and London Stock Exchanges and is incorporated and domiciled in the Republic of Ireland. The address of its registered office is IFG House, Booterstown Hall, Booterstown, County Dublin, Ireland.

2. Basis of preparation

Financial information

The financial information in this announcement does not constitute the statutory accounts of the Company and the Group, a copy of which is required to be annexed to the Company's annual return to the Companies Registration Office in Ireland. A copy of the statutory accounts in respect of the year ended 31 December 2011 will be annexed to the Company's annual return for 2011. The annual report and accounts will be approved by the Board of Directors in due course. Accordingly, this financial information is unaudited. A copy of the statutory accounts required to be annexed to the Company's annual return in respect of the year ended 31 December 2010 has been annexed to the Company's annual return for 2010 to the Companies Registration Office. The 2011 statutory accounts of the Company will be available on the Company's website ifggroup.com as of 30 April 2012. The full financial statements for the year ended 31 December 2011 and the audit report thereon will be completed and available to all shareholders at least 20 working days before the AGM.

In accordance with EU Regulations, the Group is required to present its annual consolidated financial statements for the year ended 31 December 2011 in accordance with EU adopted International Financial Reporting Standards ("IFRS") and IFRIC interpretations and with those parts of the Companies Acts, 1963 to 2009 applicable to companies reporting under IFRS. This financial information comprises the Consolidated Balance Sheet as of 31 December 2011 and related Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statements of Changes in Equity and related notes of IFG Group plc for the year ended 31 December 2011. This financial information for the year ended 31 December 2011 has been prepared in accordance with the Listing Rules of the Irish Stock Exchange.

The consolidated financial statements are prepared under the historical cost convention as modified by fair value accounting for certain available-for-sale financial assets and derivative instruments at fair value through profit or loss. Except as described below, the accounting policies and methods of computation and presentation adopted in the preparation of this financial information are consistent with those applied in the Annual Report for the year ended 31 December 2010 and are described in those financial statements on pages 49 to 66.

The following interpretations or amended standards are mandatory for the first time for the financial year beginning 1 January 2011 and are either not relevant to the Group or they do not have any significant impact on the financial information:

- IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments';

- IAS 24 (Revised) 'Related Party Disclosures'; and

- IAS 32 (Amendment) 'Classification of Rights Issue'.

The Group has also adopted the 'Improvements to IFRS' standard (effective for financial periods beginning on or after 1 January 2011). The IASB has issued the 'Improvements to IFRS' standard which amends a number of standards, basis for conclusions and guidance. The improvements include changes in presentation, recognition and measurement plus terminology and editorial changes. These amendments do not have a significant impact on this financial information.

Going concern

The Group meets its working capital requirements through the operations of its subsidiaries and with the availability of banking facilities. The current economic environment in the territories in which the Group operates has led toincreased challenges to business in respect of overall demand for the services the Group offers. The Group completed its refinancing of its borrowings during 2011 which provided reassurance of the availability of bank facilities for the foreseeable future. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future; therefore the Group continues to adopt the going concern basis in preparing its financial statements.

Change in accounting policy

Following its announcement on 31 August 2011, IFG Group plc, (the Company, together with its subsidiaries, the Group) has changed its presentation currency from Euro ("€") to pounds Sterling ("GBP"or "£") with effect from 1 January 2011. The 2011 financial statements will be the first financial statements to be presented in GBP and all comparative information has been restated in accordance with the requirements set out in IAS 21, The Effects of Changes in Foreign Exchange Rates.

Change in presentation currency

The Directors decided that effective 1 January 2011 the Group's presentation currency should be GBP.

Comparative information has been restated in GBP in accordance with the guidance in IAS 21. The 2010 and 2009 comparatives and associated notes have been retranslated from Euro to GBP using the procedures outlined below:

- assets and liabilities were translated into GBP at closing rates of exchange;

- income and expenses were translated into GBP at average rates of exchange as they are a suitable proxy for the prevailing rates at the date of transactions;

- differences resulting from the retranslation on the opening net assets and the results for the period have been taken to Other Comprehensive Income; and

- share capital, share premium and other reserves were translated at historic rates prevailing at the dates of the transactions.

The exchange rates used were:

Change in functional currency

IAS 21 "The Effects of Changes in Foreign Exchange Rates" describes functional currency as 'the currency of the primary economic environment in which an entity operates'.

As a significant majority of the Group's revenues and costs are now sourced and incurred in GBP, having considered the aggregate effect of all the relevant factors, the Directors concluded that the functional currency of the Company changed in March 2011. This arose from the following;

- the successful refinancing of new borrowings denominated in GBP; and

- the increased scale of the Group's UK segment following the successful integration of James Hay with the expectation that the future dividend capacity of the Company will be driven largely out of UK and International businesses where GBP is the primary currency.

In accordance with IAS 21 this change has been accounted for prospectively from 1 April 2011.

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are listed below:

- cashflows and discount rates used in goodwill impairment reviews performed by management;

- estimates of the amounts recoverable in respect of certain non-trade receivables;

- estimates of useful lives of non goodwill intangible assets;

- provisions based on management's estimates in respect of claims against subsidiaries of the Group; and

- discount rate and inflation rate used in measuring the retirement benefit obligation.

Management also exercise judgement in determining the revenue and expenses disclosed as exceptional items.

Further details on these critical accounting estimates and judgements will be included in the statutory accounts of the Company.

3. Principal Risks and Uncertainties

The markets in which the Group operates may be affected by numerous factors, many of which are beyond the Group's control and the exact effect of which cannot be accurately predicted. The Board is responsible for the Group's risk management systems, which are designed to identify, manage and mitigate potential material risks to the achievement of the Group's strategic and business objectives.

In accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the Directors note that the principal risks and uncertainties facing the Group include the following areas:

4. Business combinations

A.R.B. Underwriting Limited acquisition

On 29 July 2011 the Company acquired, through its wholly owned subsidiary IFG Nominees Limited, 70% of the issued share capital of A.R.B. Underwriting Limited and its subsidiary A.R. Brassington & Co Limited (ARB). The purchase consideration paid was €500,000 (GBP equivalent of £442,000). The investment in ARB gives equity, dividend and voting rights for 70% of the acquired business.

As a result of the acquisition, the Group is expected to increase its presence in the Irish market for wholesale insurance broking and insurance broking. The goodwill of £350,000 arising from the acquisition is largely attributable to the acquired customer base, the increased economies of scale and synergies the acquired business is expected to contribute to the Group. None of the goodwill recognised is expected to be deductible for income tax purposes.

The purchase consideration of €500,000 (£442,000) was paid in cash. There is no contingent consideration payable as part of the purchase agreement. Acquisition related costs of £56,000 have been recognised in the Consolidated Income Statement as "Other expenses".

The initial accounting for this business combination is incomplete but will be finalised for the 2012 Interim Report as work is ongoing to fair value the acquired intangible assets. However, management outlines the provisional analysis of the net assets, consideration and goodwill on acquisition below:

Management estimates that the carrying value of plant & equipment, receivables and payables acquired approximate fair value and no adjustment was required upon completion of the accounting for the business combination. The contractual value of the receivables acquired was £1,054,000 excluding a provision for impairment of £nil.

The acquired business contributed revenue of £836,000 and profit before tax of £nil for the period since the acquisition. If the acquisition had occurred on 1 January 2011, Group revenue would have been £111,572,000 and the profit before tax would have been £10,014,000.

5. Segmental information

In line with the requirements of IFRS 8, "Operating Segments", the Group has identified its Chief Operating Decision Maker (CODM). The Group has identified the Chief Executive Officer (CEO) of the company as its CODM. The CEO reviews the Group's internal reporting in order to assess the performance of the Group and allocate resources. The operating segments have been identified based on these reports.

The CEO considers the business from a largely geographic perspective based on 3 reporting segments: International, UK and Ireland. The International and Ireland segments are managed by an Executive Director who reports to the CEO and the Board of Directors. In 2011, the Group CEO has taken over responsibility for the UK segment but this has not changed the basis on which performance is assessed and resources are allocated.

The CEO assesses the performance of the segments based on a measure of adjusted earnings. He reviews working capital and overall balance sheet performance on a Group wide basis.

The Group earns its revenues in these segments from two sources:

- fees from the provision of services including Trustee & Corporate Services and Pensions Administration Services (formerly referred to as "Pensioneer Trustee Services") and

- commissions earned in the intermediation of financial services products ("Financial Services").

Goodwill is allocated by management to cash-generating units on a reporting segment level. There has been no change to the allocation of goodwill relating to prior period combinations.

The segment information provided to the CEO for the reportable segments for the year ended 31 December 2011 is as follows:

The 2010 comparatives are as follows:

Breakdown of revenue by country of operation is as follows:

The home country of IFG Group plc is Ireland. The Group's revenues are derived from the following countries:

Revenue in the table above has been allocated based on the country where the customer is located.

Analysis of revenue by category:

During the year there were no revenues derived from a single customer that represent 10% or more of total revenues.

The total non-current assets (excluding deferred tax assets, available for sale assets and other financial instruments) at the year end split by geographical region are as follows:

6. Exceptional items and salaries of employees laid off

Exceptional items

The table below highlights the exceptional items for the year:

Foreign currency gain

The exceptional gain of £596,000 relates to a foreign currency gain on unhedged Euro borrowings. This has been classified as part of "Other gains" on the face of the Consolidated Income Statement.

Impairment of assets of subsidary sold

An impairment charge of £318,000 relates to an impairment taken on the assets of Foster & Cranfield Limited, a subsidiary which formed part of the non-core business which was sold for a nominal amount in the year. The impairment charge arises as the fair value less costs to sell of the net assets of the subsidiary was lower than the carrying amount of those assets. This charge has been classified in "Other expenses" in the Consolidated Income Statement.

Impairment of non-current asset

An impairment charge of £891,000 relates to an impairment taken on non-current assets during the year. The impairment charge arose primarily as a result of changes in the repayment terms on a receivable in the International segment. This charge has been classified in "Other expenses" in the Consolidated Income Statement.

Redundancy costs

In the current year redundancy costs relate to a once-off charge for a redundancy provision of £1,070,000 in the UK and International segments. In the prior year the redudancy related to the UK segment specifically James Hay.

Acquisition related and integration costs

IFRS 3 Revised 'Business combinations' requires acquisition related costs to be expensed. Following the adoption of IFRS 3 Revised 'Business combinations' effective 1 January 2010, the Group expensed James Hay acquisition related costs of £280,000 which was recorded in the Consolidated Income Statement for the year ended 31 December 2010.

In 2010 James Hay integration costs amounted to £2,148,000 which consisted of costs associated with the migration of Information Technology systems, sales, accounting and human resources.

Other

Other exceptional items in the current year relate to once off costs incurred in association with reviews performed following the completion of an ARROW visit to some of the subsidiaries in the UK segment.