10th Mar 2006 07:00
Newcastle Building Society10 March 2006 Strictly embargoed until 7:00am Friday 10 March 2006 Newcastle Building Society today announces its results for the year ended 31 December 2005 Key features: • Significant new contracts secured with leading institutions; • Growth in total assets 10.92%; • Management expenses ratio 0.76%; • Credit quality of lending book remains excellent with only 0.31% of portfolio in arrears of more than 2.5% of the balance. Commenting on the results Chief Executive, Robert Hollinshead, said: '2005 was a highly successful year for the Society. We continued to grow thebusiness through strong and prudent lending and by developing innovativeproducts for our borrowers and savers. At the same time the performance of ourStrategic Solutions division, which offers the Society's skills and services toother businesses, more than met our expectations. Rapid expansion was fuelled bya number of agreements with leading blue chip companies. Last year was also an extremely important one for the Society. Faced withmounting pressure on margins in the traditional mortgage and savings market, wecarried out a comprehensive review of the Society's operations and of theproducts and services we offer. We are already reaping the benefits of this,with a number of new business areas enjoying healthy growth. Central to the review was a re-focusing of our member-based business into a moreclearly defined operation with a wide range of additional advice andrecommendation-based services. Providing good products and services for ourmembers represents the very essence of why we exist as a building society.Offering advice on the complexities and suitability of financial productsdemonstrates clearly how we are responding to changing needs. An advice-based approach means, of course, that we will recommend otherproviders' products where appropriate. This does not mean we will neglect ourown product range. Indeed, throughout 2005 our mortgage and savings productsfeatured regularly in the best buy tables. Strong lending in 2005 and impressiveretail funding from the sale of structured products, where the returns arelinked to indices such as the FTSE 100, are testimony to this. In August we announced the closure of our network of 19 branches outside ourNorth East heartland. This was a painful decision and made for a difficult timefor both those staff directly affected by the closures, and those in theremaining 33 branches and our head office. I am delighted to say that, as far aswe are aware, all those staff who actively sought alternative employment havebeen able to take up new positions. The impact on the business of maintaining these branches was having adetrimental effect on the rest of the operations and limiting our ability toprovide to members the products and services they want. We are totally committedto the remaining branch network and will continue to invest in it. Last year I reported on the success of the Strategic Solutions business with thelaunch of an Internet savings account for Bradford & Bingley. In 2005, we addedto this by signing similar agreements with two more leading financialinstitutions to provide a range of Internet savings accounts. For one of thesepartners we have also assumed the management of their existing savings bookoperated by post and telephone. In late July, our third success was to enter into a co-operation agreement witha prestigious non-financial brand to provide savings accounts to their customerdatabase. Full launch is not until mid 2006, but the initial response from thepilot has been very encouraging. Such has been the success of these partnerships that already we manage in excessof £3.5 billion for all our customers, in addition to our own funds of £2billion. By amalgamating the range of services we offer under the Strategic Solutionsumbrella I am confident our success and growth in this area will continue togather pace. We made good progress too with our Mortgage Services division. At the half yearI was pleased to announce that we had signed two major contracts for the supplyof mortgage processing. In the autumn we added a third, with Personal TouchPackaging, part of one of the largest mortgage networks in the UK. The success of our Strategic Solutions business is built on the corecompetencies already established in our member business, and on the skills wehave in the exploitation and management of IT. Throughout 2006 we expect to beable to announce further customers to these operations.Having made some difficult decisions in 2005 we have set the framework by whichwe can take the Society forward. I believe the Society is now in extremely goodshape to meet the challenges and exploit the opportunities that lie ahead.' NEWCASTLE BUILDING SOCIETY GROUPGROUP INCOME STATEMENTS 2005 2004 £m £m Interest and similar income 188.4 166.5Interest expense and similar charges -155.3 -133.5 --------- ---------Net interest receivable 33.1 33.0 Other income and charges 9.6 9.9 --------- ---------Total operating income 42.7 42.9 Administrative expenses -28.0 -25.8Impairment losses 0.1 0.2 --------- ---------Profit before tax expense 14.8 17.3 Tax expense -4.4 -4.7 --------- ---------Profit for the financial year from continuing operations 10.4 12.6 Discontinued operations -3.4 -0.5 --------- ---------Profit for the financial year 7.0 12.1 ========= ========= STATEMENT OF RECOGNISED INCOME AND EXPENSE 2005 2004 £m £m Change in accounting policy on adoption of IAS 32 and IAS 39 -5.6 -Actuarial loss on retirement benefit obligations -3.9 -1.4Transferred from investment property revaluation reserve onreclassification of property 0.4 -Taxation 1.6 0.4 --------- ---------Net income recognised directly in equity -7.5 -1.0 Profit for the year 7.0 12.1 --------- ---------Total recognised income and expense since last annual -0.5 11.1accounts ========= ========= NEWCASTLE BUILDING SOCIETY GROUPGROUP BALANCE SHEETS 2005 2004 £m £mASSETSLiquid assets 653.3 574.8Derivative financial instruments 29.0 -Fair value adjustments for hedged risk 29.8 -Loans and advances to customers 3,076.6 2,835.5Investment securities 10.3 9.7Property, plant and equipment 23.7 23.8Investment property 0.1 3.0Other assets 38.4 36.1Non-current assets available for sale 2.2 - ---------- ----------TOTAL ASSETS 3,863.4 3,482.9 ========== ========== 2005 2004 £m £mLIABILITIESShares 2,060.3 1,948.9Deposits and debt securities 1,488.9 1,259.9Derivative financial instruments 33.1 -Fair value adjustments for hedged risk 3.8 -Other liabilities 23.4 19.5Retirement benefit obligations 15.6 15.5Subordinated liabilities 49.7 49.7Subscribed capital 19.9 19.9Reserves 168.7 169.5 ---------- ----------TOTAL LIABILITIES 3,863.4 3,482.9 ========== ========== NEWCASTLE BUILDING SOCIETY GROUPCONSOLIDATED CASH FLOW STATEMENTS 2005 2004 £m £m Cash flows from operating activities 109.8 31.1Taxation paid -3.9 -6.0Payment into defined benefit pension scheme -4.5 -Cash flows from investing activitiesPurchase of property, plant and equipment -2.2 -3.2Sale of property, plant and equipment 0.2 0.2Purchase of investment securities -1,000.9 -1,019.1Sale and maturity of investment securities 987.0 963.9 ---------- ----------Net cash flows from investing activities -15.9 -58.2 ---------- ---------- Cash flows from financing activitiesInterest paid on subscribed capital and subordinateddebt -5.5 5.3Repayments under finance leases -0.3 -0.4 ---------- ----------Net cash flows from financing activities -5.8 -5.7 ---------- ---------- Net increase / (decrease) in cash 79.7 -38.8Cash and cash equivalents at start of year 148.5 187.3 ---------- ----------Cash and cash equivalents at end of year 228.2 148.5 ========== ========== NOTES 1. The financial information set out above, which was approved by the Board of Directors on 9 March 2006, does not constitute accounts within the meaning of the Building Societies Act 1986. 2. The Annual Accounts have been prepared for the first time under International Financial Reporting Standards (IFRS). Comparative information has also been restated, as required by IFRS. The reconciliation of comparative information from previous UK GAAP accounting requirements to IFRS can be found on our website 'Financial Figures - Half year results - Accounting policies and reconciliation statements - 30 June 2005' and in the 2005 Annual Report and Accounts which will be available from 31 March 2006. 3. The financial information for the years ended 31 December 2005 and 31 December 2004 has been extracted from the Accounts for those years and on which the auditors have given an unqualified opinion. 4. During 2005, the closure of the network of branches outside our North East heartland qualified as a discontinued operation. Consequently, the post tax results of this discontinued activity for both 2005 and 2004 have been presented as a single line item of £3.4 million loss (2004: £0.5 million loss) on the face of the Income Statement. Comparative figures have been restated accordingly. 5. The announcement will be sent to holders of the Society's permanent interest bearing shares. Copies are available from the Society's Principal Office at Portland House, New Bridge Street, Newcastle upon Tyne NE1 8AL. ENDSFor more information please contact Rik Kendall, media relations manager, on0191 244 2024 or e:mail [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Newcastle 125/8