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Annual Results 2003 Press Release
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2003 was a year in which strong growth in many of our main core activities, particularly in our International and Irish businesses was negatively impacted by the costs associated with the regulatory review and restructuring of our pension release business in the UK. The year saw a continued and successful focus on debt reduction and on increasing recurring income.
Profits on continuing activities before tax, goodwill amortisation and exceptional items were €8.1 million on revenues of €91.4 million (total profit and revenues of €1.7 million and €91.7 million respectively). This compares with €9.6 million and €89.0 million respectively in the previous year (total loss and revenues of €32.8 million and €91.8 million respectively).
Results for the year as reflected are before:
- Restructuring costs and provisions for compensation of €4.37 million in pension release business
- UK IFA restructuring cost of €0.75 million
- Funding of senior directors pensions of €0.57 million
- Profit on disposal of 50% of Mortgage distribution business €6.24 million
- Residual losses on disposal of endowment policies €0.33 million
- Profit on disposal of property €0.10 million
- Write-down of equity investments €0.26 million
- Loss on disposal of Discount Brokerage business in UK €0.17 million
The net effect of these items stated is a loss of €0.11 million.
Adjusted earnings per share were 10.51 cent (2002 (restated): 11.48 cent). On a total basis, basic earnings per share were 0.22 cent (2002: loss of 51.87 cent)
Group Financing Group Banking and deferred consideration commitments are summarised and compared to the previous year end below.
| As at Dec 31 2003 | As at Dec 31 2002 | |||||
| Core | Investment | Total | Core | Investment | Total | |
| €m | €m | €m | €m | €m | €m | |
| Net debt per balance sheet | 22.2 | 5.2 | 27.4 | 21.0 | 19.4 | 40.4 |
| Bank guaranteed deferred consideration | 19.6 | - | 19.6 | 26.3 | 0.0 | 26.3 |
| Total bank committment | 41.8 | 5.2 | 47.0 | 47.3 | 19.4 | 66.7 |
| Contingent deferred consideration | 10.5 | 18.9 | ||||
| Total committment | 57.5 |
85.6 | ||||
Through a combination of asset sales and business performance we have reduced our overall commitments by €23.4 million. In addition to this, we had included an expected deferred consideration liability of €4.7 million as at 31 December 2002 which as a result of developments since that time, will not now be payable. The total reduction in our commitments is thus €28.1 million.
Post year end cash of €9.05 million was received following the sale of 50% of the Group's interest in the mortgage distribution business.
Group investment related debt at year end 2003 was €5.2 million (2002 €19.4 million) in total which was offset by ring-fenced assets as follows:
| 2003 | 2002 | |
| €m | €m | |
| Debtors for sale and surrender of endowment policies | 1.4 | 14.8 |
| Remaining assets valued at year end | 4.7 | 6.3 |
| 6.1 | 21.1 |
The debt for the sale and surrender of policies has been reduced to €0.2 million as at 31 March 2004.
Recurring Income
Recurring income credited was €23.3 million, an increase of 6% from 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. Recurring income is a key measurement for the future of the Group and the increase reported, despite the reduction in the underlying value of many of the funds on which some of it is based, is the eleventh successive annual increase achieved.
Group Performance
| Cont. activities operating profit/loss 2003 €'000 |
Cont. activities operating profit 2002 €'000 |
Total operating profit/(loss) 2003 €'000 |
Total operating profit/loss 2002 restated €'000 |
|
| International | ||||
| International & Corporate Services | 4,150 | 3,348 | 4,150 | 3,348 |
| UK | ||||
| Actuarial & Pensioneer Trustee | 2,896 | 3,156 | 2.896 | 3,156 |
| Financial Services | 2,018 | 1,627` | 1,817 | 609 |
| Pension Release & Discount Brokerage | (153) | 3,570 | (4,521) | 3,570 |
| Ireland | ||||
| Mortgage Broker Solutions | 2,084 | 1,130 | 2,084 | 1,130 |
| Financial Services including Central Overhead | 1,317 | 200 | 1,245 | 200 |
| Investment Division (Discontinued) | - | - | (798) | (2,869) |
| Exceptional losses | - | - | (828) | (3,955) |
| Operating Profit/(loss) before goodwill amortisation | 12,312 | 13,031 | 6,045 | 5,189 |
| Goodwill amortisation | (4,684) | (4,573) | (4,684) | (8,137) |
| Operating Profit/(loss) | 7,628 | 8,458 | 1,361 | (2,948) |
Note: Continuing activities operating profit is stated before exceptional items
Review of the Principal Trading Businesses
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 24% during the period from €3.35 million to €4.15 million. This continued the record over the last five years of achieving compound annual growth in the business in excess of 20%.
The business continued to focus in the following key areas:-
- Client services
- Marketing and product development
- Management development
- Enhanced IT
- Control of risk
UK Actuarial
The Actuarial and Pensioneer Trustee division is based in London, Manchester and Bristol. This division administers and provides trustee and actuarial services for SSASs (small self administered pension schemes) and SIPPs (self invested personal pension plans). We believe that we have approximately 10% of the market for SSASs and 5% of the market for SIPPs. The marginal decrease in profit (from €3.2 million to €2.9 million) in this division is attributable to a poor performance by our Manchester based business being offset by IPS Pension Limited, which was acquired in April 2002 and is performing well.
The Pension reform scheduled to be introduced in April 2006 will provide a significant opportunity for the division to develop as a low cost provider of pension administration services.
UK Financial Services (IFA)
The 24% profit increase to €2.02 million in the main reflects loss elimination rather that any growth in underlying business.
The substantial restructuring started in 2002 involving much of our IFA activity has been completed and, while now profitable, has been slow to deliver results. Despite the difficult market our city based business performed well with good growth in profits. The Norwich and Fareham businesses were profitable, albeit at a reduced level when compared to previous years.
While there remain challenges in the UK, we believe that we are well placed to deliver good service in a timely and effective manner and that this will enable us to achieve good growth in the future.
Pension Release
Our pension release business Berkeley Jacobs has, for the past year, been the subject of a regulatory investigation by the FSA into its sales and compliance procedures. This has led to an agreement between the company and the FSA whereby a fine of Stg£175,000 was imposed in February 2004 and the company further agreed to carry out a review of its business conducted over the last two years. The Group has made provisions for the above fine, future costs of this review and potential payments of redress to customers of €2.7 million in total.
While the review was ongoing Berkeley Jacobs effectively ceased to trade. During that period not only were the sales and advice processes radically changed but the business was restructured and the existing management replaced. It is our view that the Group is rebuilding a compliant specialist business devoted to the provision of pension release and related services for which there is a continuing demand in the UK. This area will however, no longer be as significant a contributor to the Group's operations as in the past.
Discount brokerage
We disposed of our discount brokerage business in May 2003. The decision was taken as the business had under performed over the past two years with little expectation of recovery.
Ireland
Mortgages
In 2003, cheques issued by lenders to clients of the group amounted to €858 million (2002:€590 million) an increase of 45% representing some 7% of the total market. The 84% increase in profits to €2.08 million represents an outstanding achievement by management and reflects the benefits flowing from achieving scale in the sector. During the year the Group entered into a joint venture with GE Capital Woodchester to develop the non-conforming lending business in Ireland. (Non-conforming lending attracts a higher margin due to the non-standard profile of the clients.) As part of this joint venture, the Group disposed of 50% of its interest in our mortgage distribution business. The transaction puts IFG and GE Capital Woodchester in a very strong position to develop a significant market which to date has not been serviced.
In addition to the business opportunity, the joint venture has significantly enhanced the Group's financial position. It is also worth noting that IFG retains control of the mortgage business and should GE Capital Woodchester withdraw from the non-conforming market IFG has an option to buy back its 50% stake at a pre-determined price.
Title Insurance
In February, the Group bought out its joint venture partner in First American Title Company (Ireland) Limited and now holds 100% of that company. IFG agreed to pay €271,000 for our partners holding and entered, at the same time, into a 10 year exclusivity agreement with the vendor. The business continues to go from strength to strength and has comfortably repaid the acquisition price since its purchase.
Financial Services
In 2002, the Group had invested heavily in the group pensions business which was then loss making. This business has contributed to profit in 2003 and exceeded expectations. The Group's individual business has invested in new resources in 2003 but has still exceeded expectations for the year.
Trade Credit Brokers, a niche market provider of credit insurance performed on a par with the previous year.
Investment Division
At the year end the assets still held were valued as follows
- Equities and Oil and Gas interests with a value of €0.5 million
- 35% of Rayband Limited with an estimated total market value of €7.2 million representing an investment value of €2.5 million
- Properties in Cambridgeshire and Kent with a market value of €1.7 million
- Debtors relating to the sale and surrender of policies €1.4 million (€1.2 million collected since the year end)
The ring-fenced debt which is secured against the above assets (total valuation €6.1 million) at the year end was €5.2 million thus leaving a small surplus.
Dividends
The Board is recommending a final dividend of 1.57 cent per share which when added to the interim dividend already paid, makes a total of 2.30 cent, an increase of 4.5% on the previous year. Subject to shareholder approval, the final dividend will be paid on 23 July 2004 to shareholders on the Register on 9 July 2004.
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