MIL.L Regulatory News (MIL)

1 Dec 2005 07:17

Millfield Group PLC01 December 2005 Millfield Group plc interim results to 30 September 2005 Millfield's focus shifts from successful restructuring to profitability Millfield Group plc ("Millfield", "the company" or "the group"), a leadingnational independent financial services advisory group, today announces itsinterim results for the period ended 30 September 2005. It is now one year since Millfield merged with Inter-Alliance Group Plc ("Inter-Alliance") creating the largest national firm of independent financialadvisers in the UK. Significant management effort has been absorbed over thelast year in integration activities: harmonising systems and procedures for theenlarged group, in divesting non-core activities and in extracting some verysignificant synergies and cost savings post merger. The group is now 100% UKbased. We have reached the stage where this core integration activity is complete andmanagement is focussing on the future development of the group; growingturnover, adviser numbers, margin and profitability. The group's turnover isnow annualising in excess of £120m, we now have the scale and infrastructurecapability to take advantage of the positive outlook for the UK advisory market.IFAs are and will remain the dominant distribution channel. Millfield Group willcontinue to be a leading player and should benefit substantially from thecurrent market recovery in particular the changes to pension simplificationgoing forwards and the stability of the property market. Highlights: • Turnover up 135% to £64.1m (2004 - £27.3m) • Gross profit up 48% to £15.0m (2004 - £10.1m) • Reduced loss after tax and minority interests of £1.3m (2004 - £4.5m) • Cost base reduction initiatives implemented in September 2005 resulted in significant savings - the annualised rate for the cost base is now £30.8m (£49m post merger) and it will reduce further to £29m by Q4 2005/6 • Further efficiencies will reduce the cost base to below £28m from Q1 2006/7 • Administrative staff headcount reduced from 509 on merger to 364 at November 2005 • The group is on course for operating profitability for Q3 2005/6 • £7.3m cash - group operating cash flow has been positive since September 2005 • 73 new applications in membership to join Millfield Partnership • 53 new applications in membership for Sage Financial Services • Implementation of minimum standards throughout MPL national branch network • Relocation of IT operations centre to London Docklands plus switching all locations to Telstra, the AAA rated carrier, as a single telecoms supplier Paul Tebbutt, Chief Executive of Millfield, said: "We have continued to make substantial savings in overhead expenses which wererunning at an annual rate of £49m immediately post merger. With the costreduction initiatives implemented in September 2005 the annualised rate for thecost base is now £30.8m and will reduce further to £29m by the 4th quarter 2005/6. Our administrative staff headcount has been reduced from 509 on merger to 364at November 2005. We are focusing on achieving further cost efficiencies in the 1st quarter 2006/7, which will reduce our cost base to £28m. In September 2005, the group indicated that it was confident of achievingoperating profitability from the 3rd quarter 2005/6. We are pleased to reportthat an operating profit (before goodwill amortisation) was recorded in ourmanagement accounts for both October and November, hence we remain confident ofachieving our objectives. Furthermore we can confirm that the group was cashgenerative in each of the last two months. With further cost savings yet to berealised, and with positive trends emerging with respect to turnover, the grouplooks forward to 2006 and 2007 with optimism." Enquiries Millfield Group plc Paul Tebbutt, Chief Executive Telephone 020 8604 2607 Mobile 07958 992812 Arthur Milton, Finance Director Telephone 020 8604 2623 Mobile 07711 714215 Llewellyn-Slade PR Limited Mark Llewellyn-Slade - 01444 242792 Francis Higney - 0207 7336557 Profile Millfield Group plc ("Millfield") is a national independent financial advisorygroup offering truly independent financial advice to both businesses andindividuals, primarily in the pensions, life assurance, investment and mortgagesectors. Its principal Financial Services Authority authorised companies in theUK are Millfield Partnership Limited and Sage Financial Services Limited. Millfield companies retain the services of 1,575 self-employed advisersoperating from locations spread extensively across the whole of the UnitedKingdom and 21 qualified accounting professionals in a further 9 locations inthe United Kingdom. Millfield companies concentrate on providing services and advice to businesses,affluent individuals and affinity groups. Millfield intends to maintain itsfocus on these target markets and significantly increase its market presence.Its advisers work closely with estate agents, lawyers, accountants and otherprofessional advisers to benefit their corporate and domestic clients. Millfield's goal is to offer a friendly, professional service built on long-termrelationships with its advisers, their clients and to deliver our vision "creating security and wealth for clients, advisers, shareholders and employees". Chairman's Statement It is now one year since Millfield merged with Inter-Alliance Group Plc ("Inter-Alliance") creating the largest national firm of independent financialadvisers in the UK. Significant management effort has been absorbed over thelast year in integration activities: harmonising systems and procedures for theenlarged group, in divesting non-core activities and in extracting some verysignificant synergies and cost savings post merger. The group is now 100% UKbased. We have reached the stage where this core integration activity is complete andmanagement is focussing on the future development of the group; growingturnover, adviser numbers, margin and profitability. The group's turnover isnow annualising in excess of £120m, we now have the scale and infrastructurecapability to take advantage of the positive outlook for the UK advisory market.IFAs are and will remain the dominant distribution channel. Millfield Group willcontinue to be a leading player and should benefit substantially from thecurrent market recovery in particular the changes to pension simplificationgoing forwards and the stability of the property market. Results The Inter-Alliance merger was effected on 1 October 2004. Accordingly thecomparative results for the six months to 30 September 2004 relate solely toMillfield operations as they existed pre-merger. The first half of the year includes the following: • Turnover up 135% to £64.1m (2004 - £27.3m) • Gross profit up 48% to £15.0m (2004 - £10.1m) • Reduced loss after tax and minority interests of £1.3m (2004 - £4.5m). • Operating loss before goodwill amortisation and exceptional items was £4.0m (2004 - £2.3m pre-merger). This reflects a continued reduction from a £6.8m loss in the six months immediately following the merger. • An exceptional loss of £0.6m (2004 - £nil) comprises a write-back of an onerous lease provision of £0.6m after surrender of a lease in London West End, net of redundancy and relocation costs of £1.2m incurred in September 2005. These result in annualised cost savings of £3.7m from October 2005 onwards. • The loss before tax of £1.2m (2004 - £4.5m) includes a profit of £5.0m which arises on disposal of the group's 24.7% holding in Lifetime Group Ltd to Norwich Union on 5 August 2005. • The non-core international businesses of the group which comprised turnover of £5m were sold on 15 September 2005 for a gross consideration of £0.75m. • The group is on course to make an operating profit before goodwill amortisation for the 3rd quarter 2005/6 • £7.3m cash - group operating cash flow has been positive since September 2005 • Further cost savings have been made to reduce administrative expenses (excluding goodwill amortisation) to £29m by the 4th quarter 2005/6 We have continued to make substantial savings in overhead expenses which wererunning at an annual rate of £49m immediately post merger. With the costreduction initiatives implemented in September 2005 the annualised rate for thecost base is now £30.8m and will reduce further to £29m by the 4th quarter 2005/6. Our administrative staff headcount has been reduced from 509 on merger to 364at November 2005. We are focusing on achieving further cost efficiencies in the 1st quarter 2006/7, which will reduce our cost base to £28m. In September 2005, the group indicated that it was confident of achievingoperating profitability from the 3rd quarter 2005/6. We are pleased to reportthat an operating profit (before goodwill amortisation) was recorded in ourmanagement accounts for both October and November, hence we remain confident ofachieving our objectives. Furthermore we can confirm that the group was cashgenerative for the last two months. With further cost savings yet to berealised, and with positive trends emerging with respect to turnover, the grouplooks forward to 2006 and 2007 with optimism. Operating Businesses The principal operating businesses of the group are described below. UK turnoverin the six months to 30 September 2005 increased to £59.1m up 8% from a level of£54.7m in the previous six months to 31 March 2005. Turnover includes £56.2m inrespect of the regulated businesses, of which RST generated £0.8m together with£1.6m of accountancy services revenue. The average number of advisers in the six months period was 1588 and annualisedproductivity per adviser £71,000. This comprised productivity of £74,000 forMillfield Partnership (including Millfield Enterprise firms) and £58,000 for theSage network. Millfield offers flexibility of distribution through its businesschannels, independent status, whole of market & Multi Tie. Millfield Partnership - high quality professional National IFA with strong brandimage This is Millfield's National branch fully serviced business (includingprofessional indemnity insurance) where the advisers are referred to aspartners. Our commitment to independent and whole of market advice is paramountto the advisers and their client's propositions. Millfield Enterprise - a group of entrepreneurial firms building theirbusinesses within the framework of Millfield Millfield Enterprise incorporates the firms within Millfield AssociatePartnership ("MAP") and those previously in Inter-Alliance Group Practices. Thefirms within Millfield Enterprise provide their own premises and localfacilities whilst receiving all of the Millfield central services, purchasingpower, systems, compliance, training & development, professional indemnityinsurance etc. Sage Financial Services - a premium network Sage provides core services to its member firms encompassing compliance,training & competence, commission processing and professional indemnityinsurance. RST Group - an Accounting business specialising in the small business market RST comprises a firm of accountants based in the north of England, Scotland anda financial services firm providing services to the client base. Integration of the Merged Group Our activities in integrating the merged group were fully described in the lastannual report. During the last quarter we have divested all non-core operationsand have completed all branch closures. We are now fully focussed on our core UKbusinesses from 14 strategic national locations; down from 46 at the time of themerger. We completed the relocation of our IT operations and development centre toLondon Docklands in October 2005 and throughout November 2005 have switched alllocations to Telstra Network, the AAA rated carrier, as a single telecomssupplier. Our Operations Centre in Europa House Hull is continuing to expand andwill have 114 employees by the end of 2005. Accordingly we will move into 2006 with a streamlined technology platform andwith a concentration in developing ongoing services for our advisers, growingturnover, controlling costs and improving margins across each of our UK businesschannels. Business Closures and Disposals We have continued to focus our resources on the opportunities that exist withinour core UK business channels. To contain costs the following businesses havebeen closed or sold during the half year: Sale of Lifetime Group On 5 August 2005, the group's 24.73% shareholding in Lifetime Group Limited wassold by the joint holders, the company and its subsidiary Millfield PartnershipLimited, to Norwich Union Life Investment Partnership Limited. Consideration for the sale was an initial amount of £9m paid on completiontogether with deferred consideration of up to a maximum £6m, contingent uponcertain performance targets being achieved, a portion of which will be ceded toadvisers. The deferred consideration is payable in four instalments as follows: 31 May 2006 £2.0m 30 April 2007 £1.5m 30 April 2008 £1.5m 30 April 2009 £1.0m The excess of initial proceeds net of expenses over the carrying value of theinvestment is £5.0m, and is reflected in the consolidated profit and lossaccount for the half year. Sale of International businesses On 15 September 2005 the non-core international financial advisory arm ofMillfield (comprising the entire issued share capital of Inter-AllianceInternational Group (Cyprus) Limited, PGMS Holdings Limited and SterlingAssociates Limited) was sold to de Vere Holding Company Limited for an aggregateconsideration of £750,000, payable as £600,000 on completion and £150,000 on 31March 2006. After deducting related costs and amounts paid to settle certainliabilities of the international companies, the net proceeds provide additionalworking capital of £310,000. Board The Board of the company consists of myself as non-executive Chairman, PaulTebbutt, Bryan Beeston, Mike Duncan and Arthur Milton as executive directors andMike Walmsley (Deputy Chairman), Tom Morton and Peter Connell (IFARepresentative) as non-executive directors. The Group Executive Board, the main operational board for the group, is now madeup of Paul Tebbutt, Chief Executive, Bryan Beeston, Group Sales Director, MikeDuncan, Operations Director, Arthur Milton, Interim Finance Director, FrankGorrie, Managing Director Sage Network, Darrell Smith, National Sales Director,Neil Stevens, Marketing Director and Alec Adams, Business Quality Director. Following the restructuring of the company and the sale or closure of non-coreand foreign businesses, Bryan Beeston will step down from the company's Boardson 31 December 2005, he will continue his association with Millfield bylaunching a new venture within the group in the new year. Outlook The group has now reached a very positive stage in its development in that allmajor core activity surrounding the merger of Millfield and Inter-Alliance iscomplete. Moving forward we will continue to focus all of our efforts indeveloping and growing the business; the main drivers of profitability areadviser numbers, productivity, gross margin and expenses. The group is nowsignificantly larger than many of its competitors. As such it has greaterresources to allocate to future technology investment and is well placed toaccommodate further sector consolidation. The group's turnover is now annualising in excess of £120m and with the adventof pension simplification ("A" day) we are already experiencing increased levelsof activity in this market sector, which we believe will continue throughout2006 and beyond. The company will report an operating profit from the 3rdquarter 2005/6 onwards and there remains capacity to achieve further costsavings in the 1st quarter 2006/7. Richard Mansell-Jones Non-Executive Chairman 1 December 2005 Consolidated Profit & Loss Account Six months ended Year ended 30 September 31 March 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 TURNOVER 64,066 27,300 84,956Cost of Sales (49,102) (17,204) (58,991)Gross Profit 14,964 10,096 25,965 Operating loss before goodwill amortisation and (4,002) (2,333) (8,865)exceptional items Goodwill amortisation (893) (721) (1,915)Exceptional items (590) - (7,970)Administrative expenses (20,449) (13,150) (44,715) OPERATING LOSS (5,485) (3,054) (18,750)Share of operating loss in: Joint venture - (1,350) (1,444) Associates (95) (48) (105)Profit on disposal of subsidiaries - - 19Profit on disposal of joint venture interests 5,003 - 824Interest receivable and similar income: Group 164 59 328 Joint venture - 20 20Interest payable and similar charges Group (757) (113) (942) Joint venture - (9) (11)LOSS ON ORDINARY ACTIVITIESBEFORE TAXATION (1,170) (4,495) (20,061)Tax on loss on ordinary activities (127) 8 7LOSS ON ORDINARY ACTIVITIESAFTER TAXATION (1,297) (4,487) (20,054) Equity minority interests (39) (10) 388 RETAINED LOSS FOR THE PERIOD (1,336) (4,497) (19,666) Basic and diluted loss per share (1.1p) (4.8p) (18.4p) CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Loss attributable to members of the company (1,336) (4,497) (19,666)Surplus arising in issue of shares in joint - - 1,713ventureTotal recognised gains and losses relating to (1,336) (4,497) (17,953)the period Consolidated Balance Sheet 30 September 31 March 2005 2004 2005 Restated (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 FIXED ASSETSGoodwill 27,395 14,298 28,665Tangible assets 3,154 4,520 3,001Investments 172 1,955 3,980 30,721 20,773 35,646 CURRENT ASSETSStocks 5 5 5Debtors 24,648 12,755 21,944Investments - 251 251Cash at bank and in hand 7,267 4,029 7,773 31,920 17,040 29,973CREDITORS: amounts falling due within one year (22,206) (8,826) (21,804)NET CURRENT ASSETS 9,714 8,214 8,169 TOTAL ASSETS LESS CURRENT LIABILITIES 40,435 28,987 43,815 CREDITORS: amounts falling due after more than one year (13,077) (2,347) (14,731) 27,358 26,640 29,084PROVISIONS FOR LIABILITIES AND CHARGES (12,052) (4,567) (12,430)MINORITY INTERESTSEquity minority interests 44 270 32NET ASSETS 15,350 22,343 16,686 CAPITAL AND RESERVESCalled up share capital 207 172 207Deferred consideration 1,751 1,309 1,751Share premium account 48,482 48,482 48,482Merger reserve 19,031 11,709 19,031Capital reserve - 2,227 3,940Profit and loss account (54,121) (41,556) (56,725)EQUITY SHAREHOLDERS' FUNDS 15,350 22,343 16,686 These interim financial statements were approved by the Board of Directors on 1 December 2005.Signed on behalf of the Board of Directors: Richard Mansell-Jones Paul TebbuttNon-Executive Chairman Chief Executive Consolidated Cash Flow Statement Six months ended Year ended 30 September 31 March 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Operating loss (5,485) (3,054) (18,750)Depreciation charge 697 721 1,546Loss/(gain) on disposal of fixed assets - (23) 842Amortisation of goodwill 893 721 1,915Decrease in stocks - 1 1(Increase)/decrease in debtors (2,897) 153 1,872(Decrease)/increase in creditors (734) (3,760) 1,522(Decrease)/increase in provisions (376) 217 474Net cash outflow from operating activities (7,902) (5,024) (10,578) Returns on investments and servicing of financeInterest received 164 59 285Interest paid (438) (113) (371)Dividend paid to minority interests (50) - - (324) (54) (86)Taxation UK corporation tax paid - 13 (12) Capital expenditure and financial investmentPurchase of tangible fixed assets (981) (1,215) (953)Sale of tangible fixed assets - 95 352 (981) (1,120) (601)Acquisitions and disposalsPurchase of subsidiary undertakings - - (150)Acquisition expenses - - (1,236)Net cash acquired with subsidiaries - - 1,446Proceeds from disposal of subsidiaries 262 - -Net cash disposed with subsidiaries (407) - (12)Cash of associates formerly subsidiaries - - (175)Payments for unincorporated businesses (211) - (1,024)Proceeds from disposal of joint venture interests 8,967 - 824 8,611 - (327)FinancingIssue of ordinary share capital - 3,840 3,840Expenses paid in connection with share issue - (222) (222)Repayment of bank loans (58) (186) (754)Receipt of secured bank deposits - - 457Proceeds of new loans 200 2,300 13,000Repayment of other loans (17) - (1,372) 125 5,732 14,949 Net cash (outflow)/inflow (471) (453) 3,345 Notes 1. Basis of preparation The interim accounts, which are unaudited, have been prepared on the basis ofthe accounting policies set out in the 2005 group accounts. The figures shownfor the full year ended 31 March 2005 represent an abridged version of the fullaccounts of Millfield Group plc for that year, which have been filed with theRegistrar of Companies and on which the auditors have given an unqualifiedreport. The financial information contained in this interim report does notconstitute the group's statutory accounts within the meaning of section 240 ofthe Companies Acts 1985. The group has cash balances of £7.3m at 30 September 2005 and the directors haveprepared cash flow forecasts which show that the group will record an operatingprofit from October 2005 and will generate increasing levels of incomesufficient to meet its future financial obligations. Accordingly, the directors have prepared the financial statements on a goingconcern basis consistent with this assumption. The group's regulated companies also reported a surplus on all regulatorycapital adequacy requirements imposed by the Financial Services Authority until30 September 2005 although the directors expect to report a shortfall of capitaladequacy on test 2 throughout the fourth quarter of 2005. They intend toimplement further measures to strengthen the group balance sheet and areconfident that it will be possible to obtain additional funding to achieve this. 2. Exceptional items Six months ended Year ended 30 September 31 March 2005 2004 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Property closure and onerous lease (credits)/charges (571) - 4,920Redundancy, relocation and legal costs 1,161 - 1,931Fixed asset write-off - - 764Integration and corporate restructuring costs - - 355 590 - 7,970 3. Loss per share The calculation of loss per share on losses attributable to shareholders isbased on losses after taxation of £1,336,000 (2004: £4,497,000) and on118,127,119 (2004: 94,029,824) ordinary shares, being the weighted averagenumber of shares in issue during the six months. FRS 14 requires presentation of diluted EPS when a company could be called uponto issue shares that would decrease net profit or increase net loss per share.For a loss making company with outstanding share options, the exercise ofin-the-money options would reduce rather than increase the net loss per shareand thus such options are not dilutive as defined in the FRS. Similarly,although net loss per share would be increased by the exercise ofout-of-the-money options, it seems inappropriate to assume that option holderswould act irrationally and exercise those options. Accordingly no adjustment hasbeen made to diluted EPS for either in-the-money or out-of-the-money shareoptions and, since there are no other diluting future share issues, the dilutedloss per share is the same as the basic loss per share for the year. This information is provided by RNS The company news service from the London Stock Exchange