RNS Number:3533L
Prestbury Holdings PLC
21 May 2003
for immediate release
PRESTBURY HOLDINGS PLC
Interim Accounts for the 8 month period ended 30th April 2003
Report of the Chairman
Prestbury Holdings PLC, the AIM-listed financial intermediary business, today
announced its results for the eight-month period to 30 April 2003. The
highlights were:
* New income recognition policy adopted: no recognition of work in
progress - the most transparent in the sector.
* Turnover increased by 130% to #2.37m (2002: #1.03m).
* Gross profit up 35% to #653,000 (2002: #481,000)
* Mortgage lending increased 1150% to #20m per month (April 2002 #1.6
million per month).
* Operating loss of #594,000, due to increased overhead needed for
second half expansion.
* Successful #500,000 fundraising in March to fuel growth.
* Relocation to Alderley Edge premises with capacity for planned
further growth up to 200 staff.
* Scalable IT & telephony infrastructure successfully rolled out.
* "The Telegraph Life Assurance Service" awarded to the Moneybrain
division - trading commenced 17th May 2003, with encouraging early signs.
Commenting on the results, Francis Maude, Chairman of Prestbury, said:
"This has been an encouraging start to Prestbury's life as a publicly quoted
company. Under Lee Birkett's energetic leadership, Prestbury is powering ahead
while much of the financial intermediary sector languishes. Under the income
recognition policies common throughout the sector we would already be in profit
month by month. However we no longer recognise any future revenues for work in
progress. This makes Prestbury about the most transparent business in the
sector. Even on this much more demanding basis, we expect to move into month by
month profit during the last six months of this year. With #500,000 of new
equity raised in March, we are well placed to expand further as our new joint
ventures start to deliver enhanced revenues.
"The sharp growth in revenues in this period was due to increasing numbers of
IFAs and former Tied agents joining Solution Network. Building out the network
has been a priority in this period, at the expense of promoting the consumer
business. This has led to a percentage reduction in gross profit. The
operating loss for this period results from the combination of lower overall
gross profit coupled with overheads growing fast in order to transact the
consumer business expected from the consumer joint ventures.
"Prestbury's low cost distribution model for low risk products means we are
positioned ideally for the new "Sandler" world. With a custom-built electronic
trading platform and without the overhang of investment misselling issues from
the past, Prestbury is able to trade both direct with customers and through our
network members at significantly lower cost than our competitors.
"Prestbury has multiple routes to market.
1. Solution Network:
Under the leadership of Geoff Iveson, who joined us in March with a long and
successful background in managing intermediary businesses, Solution Network
continues to attract members from the IFA/Tied Agent marketplace. The products
distributed via Solution Network are life assurance, mortgages, personal loans
and general insurance.
The IFA community is suffering from bad press, poor investment performance and
an uncertain business model for the future. Solution Network can provide a
fresh start for many by providing a long-term sustainable business model.
Currently profits in the financial services industry are driven by life
assurance and mortgages. Solution Network specialises in these two products,
and is not affected by investment misselling issues. Solution Network's current
low risk product portfolio will be supplemented in the post-2004 Sandler world
by distributing only low risk investment products. This will enable Solution
Network to keep Professional Indemnity insurance costs significantly below those
of any comparable IFA network.
2. Moneybrain:
The Moneybrain division became fully operational in March 2003 following the
move to Alderley Edge, when Mark Rowlands took up his appointment as Managing
Director. Mark spent a number of years as the Legal and General key account
handler serving the UK's top ten accounts.
Moneybrain is a direct to customer intermediary, specialising in high value
mortgages and large sum life assurance. The recently awarded joint venture to
provide "The Telegraph Life Assurance Service" illustrates the target market.
Since March the focus has been on building a high quality team of individuals to
serve Moneybrain's growing number of joint ventures. The team is now in place.
The sales from these joint ventures will be produced in the second half of the
year and we anticipate strong growth. The Telegraph joint venture went live a
few days ago, and early signs are encouraging.
3. Loans UK:
The Loans UK division specialises in providing mortgages and loans to customers
who have experienced credit problems or been turned down for credit. Loans UK
will launch an enhanced marketing campaign in the second half of the year. This
is a high margin business and we expect to see growth in this sector. Loans UK
works with a panel of lenders, including igroup (owned by GE), GMAC (owned by
General Motors), Future Mortgages (owned by Citibank), and Kensington Group plc.
The Future
* The Intermediary Marketplace
According to a report by IFA Promotion, in 2001 #52.4 billion of Annual Premium
Equivalent (APE) was written, of which #38.5 billion (73.5%) is mortgages and
other non regulated products.
In 2004, polarisation will be ended and FSA regulation extended to the whole
sector. In this new marketplace mortgages and non-investment life assurance are
deemed low risk products, which we believe can only be distributed
cost-effectively through a low cost distribution model such as Prestbury's.
This combines low regulatory costs with a web-enabled electronic trading
platform.
Currently an IFA network member is required by contract to distribute low risk
products through the high cost paper-driven regime designed for the sale of high
risk investment products. This is not cost-effective. Tied agents have at
least the same regulatory burden, but with the additional competitive
disadvantage of a restricted product offering. The number of tied agents has
already fallen sharply, with many providers disbanding their sales forces.
Product sold by tied agents has lower persistency and retention rates, and rates
are therefore loaded by reassurers to an uncompetitive level.
As a result of these changes, most IFAs and tied agents need to change their
status to be competitive. Solution Network can provide those IFAs and tied
agents with an efficient, competitive and profitable trading platform.
Prestbury have planned for these marketplace and regulatory changes so as to be
able to offer intermediaries and consumers access to low risk financial products
in the most cost-effective and convenient way possible. We believe this gives
us a considerable competitive advantage.
* Consumers
We have secured a number of joint ventures for the Moneybrain division, the most
prominent being The Telegraph Group. Revenues from these should start to come
through in the last six months of the financial year.
Prestbury are in discussion with other blue chip partners to provide further
joint venture financial services offerings. These allow Prestbury access to the
customer base of our partners without the need for Prestbury to invest heavily
in brand-building and advertising.
Conclusion
Prestbury made a number of commercial decisions three years ago. The principal
one was the creation of a trading platform for the emerging financial services
marketplace that Lee Birkett foresaw. Like all contrarian positions, there were
risks in the view that Prestbury took. Everything that has transpired since
gives us confidence that these were the right decisions.
The next three years will be an exciting period for all at Prestbury."
Unaudited Interim Consolidated Profit and Loss Account
for the 8 Month Period Ended 30th April 2003
Period Period
21.08.02 to 21.08.01 to
30.04.03 30.04.02
# #
TURNOVER 2,371,644 1,033,028
Cost of sales 1,719,026 551,934
GROSS PROFIT 652,618 481,094
Administrative expenses 1,247,353 495,836
OPERATING LOSS (594,735) (14,742)
Interest receivable and similar income 594 -
(594,141) (14,742)
Amounts written off investments 78 -
(594,219) (14,742)
Interest payable and similar charges 6,616 3,222
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (600,835) (17,964)
Tax on loss on ordinary activities (7,436) 34,978
LOSS FOR THE FINANCIAL YEAR AFTER TAXATION (593,399) (52,942)
Retained loss brought forward (259,797) (141,750)
RETAINED LOSS CARRIED FORWARD #(853,196) #(194,692)
Retained profit at 30th April 2002 as previously stated 9,419
Effect of prior adjustment for change in income recognition
policy.
(204,111)
#(194,692)
Basic loss per share 4.3 p 0.4 p
Diluted loss per share 4.3 p 0.4 p
Unaudited Interim Consolidated Balance Sheet
30th April 2003
30.04.03 30.04.02
Notes # # # #
FIXED ASSETS:
Tangible assets 3 183,149 115,206
Investment 4 750,000 -
933,149 115,206
CURRENT ASSETS:
Debtors 274,674 221,460
CREDITORS: Amounts falling due within one year 762,218 503,279
NET CURRENT LIABILITIES: (487,544) (281,819)
TOTAL ASSETS LESS CURRENT LIABILITIES: 445,605 (166,613)
CREDITORS: Amounts falling due after more than one year (8,544) (13,179)
PROVISIONS FOR LIABILITIES AND CHARGES: 5 (66,525) (14,500)
#370,536 #(194,292)
CAPITAL AND RESERVES:
Called up share capital 6 718,750 625,000
Share premium account 7 504,982 -
Merger reserve - (624,600)
Profit and loss account (853,196) (194,692)
SHAREHOLDERS' FUNDS: #370,536 #(194,292)
Unaudited Interim Consolidated Cash Flow Statement
for the 8 Month Period Ended 30th April 2003
Period Period
21.08.02 to 30.04.03 21.08.01 to 30.04.02
Notes # # # #
Net cash (outflow) / inflow 1 (432,310) 96,003
from operating activities
Returns on investments and 2 (6,022) (3,222)
servicing of finance
Taxation (715) (1,207)
Capital expenditure 2 (76,151) (24,084)
and financial investment
Financing 2 452,360 (122,350)
Decrease in cash in the period #(62,838) #(54,860)
Reconciliation of net cash flow to movement in net debt 3
Decrease in cash in the period (62,838) (54,860)
Cash outflow from decrease in debt and lease financing 29,759 25,920
(33,079) (28,940)
New finance leases (4,839) -
Movement in net debt in the period (37,918) (28,940)
Net debt at 21st August 2002 (91,867) (50,015)
Net debt at 30th April 2003 #(129,785) #(78,955)
Notes to the Unaudited Interim Consolidated Cash Flow Statement
for the 8 Month Period Ended 30th April 2003
1. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Period Period
21.08.02 21.08.01
to to
30.04.03 30.04.02
# #
Operating loss (594,735) (14,742)
Depreciation charges 35,496 18,236
Loss on sale of fixed assets - 999
Increase in debtors (154,956) (41,978)
Increase in creditors 254,493 133,488
Increase in provisions 27,392 -
Net cash (outflow) / inflow from operating activities (432,310) 96,003
2. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
Period Period
21.08.02 21.08.01
to to
30.04.03 30.04.02
# #
Returns on investments and servicing of finance
Interest received 594 -
Interest paid (5,010) (3,222)
Hire purchase interest (1,606) -
Net cash outflow for returns on investments and servicing of finance (6,022) (3,222)
Capital expenditure and financial investment
Purchase of tangible fixed assets (76,151) (24,084)
Net cash outflow for capital expenditure (76,151) (24,084)
Financing
Issue of share capital (net of issue costs) 473,293 -
Capital element of hire purchase and finance lease rental payments (3,788) -
Repayment of loans (25,971) (25,920)
Amount introduced / (withdrawn) by directors 8,826 (96,430)
Net cash inflow / (outflow) from financing 452,360 (122,350)
3. ANALYSIS OF CHANGES IN NET DEBT
At 21.08.02 Cash flow Non cash At 30.04.03
# # # #
Net cash:
Bank overdraft (54,071) (62,838) - (116,909)
(54,071) (62,838) - (116,909)
Debt:
Debts falling due within one year (21,538) 21,538 - -
Debts falling due after one year (4,433) 4,433 - -
Hire purchase (11,825) 3,788 (4,839) (12,876)
(37,796) 29,759 (4,839) (12,876)
Total (91,867) (33,079) (4,839) (129,785)
Notes to the Unaudited Interim Accounts
for the 8 Month Period Ended 30th April 2003
1. ACCOUNTING POLICIES
Accounting convention
The unaudited interim accounts have been prepared under the historical cost
convention.
Basis of consolidation
The unaudited interim group accounts consolidate the accounts of Prestbury
Holdings plc and of its subsidiary undertaking Prestbury Financial Limited
drawn up to 30th April each year. The combination has been accounted for as
a merger and accordingly the financial information for the current and
prior period has been presented as if it had been a subsidiary from the
date of its incorporation.
Income Recognition
Mortgage and loan income is recognised upon completion. Life commission is
recognised when the income is credited to the commission account by the
life company.
This represents a change in accounting policy. Previously an accrual was
made for net commissions and fees receivable based on estimated conversion
rates for all transactions in progress at the period end. The conversion
rates used were 85% for life assurance business, 80% for non status loan
and mortgage business under offer and 34% for non status mortgage and loan
business not yet under offer.
Tangible fixed assets
Depreciation is provided at the following annual rates in order to write
off each asset over its estimated useful life.
Website costs - 25% on cost
Fixtures and fittings - 15% on reducing balance
Motor vehicles - 25% on reducing balance
Computer equipment - 25% on cost
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date.
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases are
capitalised in the balance sheet. Those held under hire purchase contracts
are depreciated over their estimated useful lives. Those held under
finance leases are depreciated over their estimated useful lives or the
lease term, whichever is the shorter.
The interest element of these obligations is charged to the profit
and loss account over the relevant period. The capital element of the
future payments is treated as a liability.
Rentals paid under operating leases are charged to the profit and loss
account as incurred.
Pensions
The company operates a defined contribution pension scheme. Contributions
payable for the year are charged in the profit and loss account.
Investments
Fixed asset investments are stated at cost, less provision for any
diminution in value.
2. LOSS PER ORDINARY SHARE
The calculation of the loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in
issue during the period. The calculation of diluted loss per share is as
above, there being no potential shares which would dilute the calculation.
3. TANGIBLE FIXED ASSETS
Fixtures
Computer Website and Motor Total
equipment costs fittings vehicles
# # # # #
COSTS:
At 21st August 2002 5,325 146,702 11,430 15,585 179,042
Additions 41,943 26,680 8,603 3,764 80,990
At 30th April 2003 47,268 173,382 20,033 19,349 260,032
DEPRECIATION:
At 21st August 2002 1,589 33,795 1,753 4,250 41,387
Charge for the period 6,218 24,801 1,692 2,785 35,496
At 30th April 2003 7,807 58,596 3,445 7,035 76,883
NET BOOK VALUE:
At 30th April 2003 39,461 114,786 16,588 12,314 183,149
At 21st August 2002 3,736 112,907 9,677 11,335 137,655
4 FIXED ASSET INVESTMENTS
#
COST
At 21st August 2002 -
Additions 750,000
At 30th April 2003 750,000
PROVISIONS
At 21st August 2002 -
Provision during the period -
At 30th April 2003 -
NET BOOK VALUE
At 30th April 2003 750,000
At 21st August 2002 -
30.04.03 21.08.02
# #
Listed investments 750,000 -
The market value of listed investments at 30th April 2003 was #187,500.
5. PROVISIONS FOR LIABILITIES AND CHARGES
30.04.03 30.04.02
# #
Deferred taxation - accelerated capital allowances - 14,500
Clawback provision 66,525 -
66,525 14,500
Deferred Clawback
taxation provision
# #
Balance at 21st August 2002 (29,752) 39,133
Increase in the period (8,151) -
Provision for clawbacks - 27,392
Balance at 30th April 2003 (37,903) 66,525
A deferred tax asset amounting to #97,644 (2002: #nil) in respect of
additional corporation tax losses has not been recognised due to the
uncertainty regarding its recoverability.
6. CALLED UP SHARE CAPITAL
Authorised:
Number: Class: Nominal 30.04.03 30.04.02
Value: # #
400,000,000 Ordinary #0.05 20,000,000 250,000
(30.04.02 - 250,000)
Allotted, issued and fully paid:
Number: Class: Nominal 30.04.03 30.04.02
Value: # #
14,375,000 Ordinary #0.05 718,750 625,000
(30.04.02 - 625,000)
7. SHARE PREMIUM
30.04.03 30.04.02
# #
Premium on issue of shares 1,406,250 -
Less issue costs (276,717) -
Less merger adjustment (624,551) -
504,982 -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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