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Annual Results 2002 Press Release
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After nine successive years of growth in profits and earnings per share it is disappointing to report a sharp downturn in overall results for 2002.
Profits on continuing activities before tax, goodwill amortisation and exceptional items were €10.1 million on revenues of €87.3 million (total loss and revenues of €32.8million and €85.2 million respectively) as compared with €11.7 million and €71.7 million respectively in the previous year ( total profit and revenues of €10.4 million and €81.6 million respectively). Results of continuing activities, as reflected, are before charging/crediting exceptional restructuring costs of €2.8 million, losses on termination of UK operations of €1.6 million, losses on termination of endowment trading for investment purposes of €19.7 million, profits on sales of property investments of €1.4 million, losses on sale of Irish businesses €0.6 million and write-down on investments of €7.5 million. Adjusted earnings per share were 12.22 cents (2001: 14.49 cents). On a total basis, basic earnings per share were (51.87) cents (2001: 12.28 cents).
At year-end total group debt was €66.7m. This includes ring-fenced debt of €19.4m (reduced to €3.3 million since the year-end) leaving a total core debt of €47.3m. Contingent deferred consideration is expected to be €18.9m.
Recurring income credited was €22.0 million, an increase of 37.5% on the previous year. This income, which recurs over a long period of time, consists of insurance renewals, fund management fees, trustee fees and actuarial fees which are payable over the lifetime of the insurance policy, investment product, trust or pension fund. The Board believes that recurring income is a key measurement for the future of the company.
2002 was a very challenging year. In the first half of the year we decided to discontinue the investment and trading activities in the sterling traded endowment market and accordingly made a provision of €18.5m in the half year accounts to write down the valuation of the investment to surrender value in anticipation of selling the holdings at or above this price. A near 25% fall in the FTSE100 over the period in which we were disposing of these investments has resulted in a total loss on disposal after all costs of €22.6m. It was also decided to discontinue operations in the financial services middle market and to restructure part of the continuing UK and Irish business. This resulted in the closure of twelve offices and a significant reduction in staff numbers.
Apart from the activities subject to restructuring and cessation, the business performed reasonably. Of particular note was the strong growth achieved in corporate and trustee business, our mortgage and title insurance operations, and the city of London based IFA business. Profits in the international, corporate and trustee business grew by 36% in the year.
In 2002 our plan was to restructure part of the UK operations. This restructuring was carried out under difficult market conditions and resulted in slightly higher costs than previously envisaged.
The decision to exit our investment division and thereby substantially de-gear the Group was also driven by market conditions. In doing so a significant loss was realised. Gearing is now substantially reduced and the trading Group will not bear any residual debt burden as assets are divested and debt eliminated.
The Group banking and deferred consideration commitments are set out as follows:-
| €m | €m | €m | |
| Net debt per balance sheet | 21.0 | 19.4 | 40.4 |
| Bank guaranteed deferred consideration | 26.3 | 0.0 | 26.3* |
| Total bank committment | 47.3 | 19.4 | 66.7 |
* The core debt of the business is €47.3 million of which €26.3 million is shown in the balance sheet as part of deferred consideration payable.
€19.4 million of the Company’s debt at year-end is debt related to investments held at year-end. This debt is secured by the investment division’s assets and “ring-fenced” or isolated from the core trading business for security purposes.
This investment related debt of €19.4 million at year-end was offset by the assets of the investment division which are summarised as follows:
(1) Reduced to €3.3 million by 3 April 2003
The debt commitment must be looked at in conjunction with deferred consideration commitments in relation to acquisitions. This is summarised as follows:
(2) Included in Banking Commitment but shown in Balance Sheet as a Creditor for deferred consideration.
The Group is now clearly focused on its principal trading business which specialises in the provision of financial advisory and administrative services.
The performance of the Group in the twelve months split between its main activities was as follows:
| €m | ||
| (i)Debt for the sale and surrender of endowment policies | 14.8 | (1) |
| (ii)Remaining assets valued at year end | 6.8 | |
| 21.6 |
(1) Reduced to €3.3 million by 3 April 2003
The debt commitment must be looked at in conjunction with deferred consideration commitments in relation to acquisitions. This is summarised as follows:
| €m | ||
| Bank guaranteed deferred consideration | 26.3 | (2) |
| Contingent Deferred consideration | 18.9 | |
| 45.2 |
(2) Included in Banking Commitment but shown in Balance Sheet as a Creditor for deferred consideration.
The Group is now clearly focused on its principal trading business which specialises in the provision of financial advisory and administrative services.
The performance of the Group in the twelve months split between its main activities was as follows:
| Cont. activities operating profit 2002 €'000 |
Cont. activities operating profit 2001 €'000 |
Total operating profit/(loss) 2002 €'000 |
Total operating profit 2001 restated €'000 |
|
| International | ||||
| International & Corporate Services | 3,348 | 2,460 | 3,348 | 2,460 |
| UK | ||||
| Actuarial & Pensioneer Trustee Financial Services | 3,156 | 1,400 | 3,156 | 1,400 |
| - subject to restructuring | (1,449) | 621 | (2,949) | 360 |
| - not subject to restructuring | 3,558 | 2,995 | 3,558 | 2,995 |
| Pension Release & Discount Brokerage | 3,570 | 4,578 | 3,570 | 4,578 |
| Ireland | ||||
| Mortgage Broker Solutions | 1,130 | 421 | 1,130 | 421 |
| Financial Services including Central Overhead | 200 | 1,316 | 200 | 1,316 |
| Investment Division (Discontinued) | - | - | (2,869) | (4,863) |
| Exceptional losses | - | - | (3,995) | - |
| Operating Profit/(loss) before goodwill amortisation | 13,513 | 13,791 | 5,189 | 18,303 |
| Goodwill amortisation | (4,573) | (3,636) | (8,137) | (3,636) |
| Operating Profit/(loss) | 8,940 | 10,155 | (2,948) | 14,667 |
Note : Continuing activities operating profit is stated before exceptional items.
International Trustee and Corporate Services
This division operates in two main areas:-
- Provision of corporate and trustee services in the Isle of Man, Jersey, Geneva and London
- Provision of specialist trustee and back office services to the timeshare industry in Europe through FNTC.
Profits of this division grew by 36% during the period (from €2.46 million to €3.35 million) in line with expectations.
2002 saw the first full year of offshore services regulation in both the Isle of Man and Jersey. IFG has been able to benefit from its position in the market as a high quality independent corporate provider to the offshore markets.
Registered in the Republic of Ireland No. 21010
Registered Office: IFG House, Booterstown Hall, Booterstown, Co. Dublin
Tel: + 353 (0)1 2752800 | Fax: + 353 (0)1 2752801
Email: group@ifg.ie