21st Feb 2005 07:00
W.H. Ireland Group PLC21 February 2005 W.H. IRELAND GROUP plc ("W.H. Ireland" or "the Group") PRELIMINARY RESULTS FOR THE YEAR TO 30 NOVEMBER 2004 The principal activity of W.H. Ireland is the provision of stockbroking,corporate finance, investment management and financial services to both privateand institutional clients. It has a national network of offices includingManchester, London, Birmingham and Cardiff. Key Points * Turnover up by 82% to £16.9m (2003: £9.3m) * Pre-tax profit increased to a record £2.6m (2003: £0.2m) * Net assets increased by 40% to £10.1m (2003: £7.2m) * Strong asset base including shares in LSE, Euroclear and property. * Proposed final dividend of 1.50p per share, giving a total of 2.25p for the year (2003: 1.25p) * Special dividend of 2.00p per share - a distribution of the net proceeds of the LSE's special dividend. * Strong progress across our core business areas: - Investment management - funds under management up 39% to £291m - Corporate finance - record year with 25 AiM introductions (2003: 13) - IFA business - making excellent progress - Stockbroking commission up by 72.32% * Continued expansion of London office * Outlook remains encouraging Laurie Beevers, chief executive, commenting, said, "We are continuing to grow the business and expand the quality, range and depthof the services we offer. This has the effect of broadening our revenue streamsand establishing firm foundations from which to grow the business, bothgeographically and by business area." Press enquiries: W.H. Ireland Group plc Tel: 020 7448 1000 (today)Laurie Beevers, chief executive Tel: 0161 832 6644 Mobile: 07903 164004David Youngman, managing director Tel: 0161 832 6644 Mobile: 07900 887142Richard Lee, director Tel: 0161 832 6644 Mobile: 07831 170298 Biddicks Tel: 020 7448 1000Zoe Biddick or Katie Tzouliadis Chairman's Statement I am very pleased to report on a record year for the Company. Turnover increasedby 82% to a record £16,889,225 whilst pre-tax profit was another record at£2,624,143. We have taken advantage of improved trading conditions to deliver a substantialand sustained recovery. All core areas of our business have made strong progressand we are well positioned to continue growing both organically and by selectiveacquisitions. In view of this progress, we are proposing to pay a final dividend of 1.5p pershare, an increase of 0.75p. During the year, we received an exceptionaldividend on our shareholding in the London Stock Exchange plc which has beencredited to our profit and loss account, as opposed to any increase in the valueof the holding itself which is credited to reserves. We have, therefore, decidedto pay a special dividend to shareholders to distribute the net proceeds of thisexceptional dividend and this will amount to 2.00p per share, making a totaldividend for the year of 4.25p per share. The final and special dividends willbe paid on 29 April 2005 to shareholders on the register as at 11 March 2005and, again, a scrip dividend alternative will be available. Over the last three years we have significantly expanded our corporate financeactivities building on an already established niche market positionconcentrating upon companies trading on AiM. Our drive for expansion has led toa significant increase in the number of clients advised on a retained basis,with some 49 corporate clients retained at the year end. According to AiMstatistics recorded by the London Stock Exchange, we were the leading NominatedAdviser and Broker by number of new introductions in the first 9 months of 2004,a splendid achievement. During the year, we advised on 29 transactions, raisinga total of £67 million. The team is now functioning as a truly nationaloperation with offices in London, Manchester and Birmingham. Corporate feesaccounted for 24% of our turnover during the year and, at the year end, theannual retainer base was over £780,000. We continue to offer our traditional style stockbroking services to privateclients, providing both discretionary and advisory services. This business hasgrown substantially with very strong performances from our spread of offices.Client investment funds under discretionary or advisory management grew to £291million as at 30 November 2004, compared with £209 million at the previous yearend. In London, the team has performed particularly strongly and we are lookingto acquire new premises to cater for continued expansion. Our Cardiff team hasalso developed very successfully during the year. In Birmingham, we were able toattract a team of 15 executives and their business performed in line withbudget. Our IFA operations in Manchester and Cardiff have performed well and now employa total of 13 people. Our objective is to expand this area of activity as andwhen we can recruit or purchase small teams of highly qualified advisers withprofitable client bases. In addition to the increase in value of our shareholding in the London StockExchange, our other investments continue to show good progress, in particularour 22.5 per cent. stake in Ultimate Finance Group plc. Our head office buildingin Manchester is due for a refurbishment which will enable us to increase therental value of the building. A number of tenants' leases come up for review orrenewal in the next 18 months, and we are confident of being able to improve thevalue of the building which is in a prime location in the centre of Manchester. As anticipated in my statement in last year's report and accounts, MohammedMarafie, a non-executive Director of the firm for seven years, retired from theboard during the year. Since the year end his shareholding has been placed witha number of institutions whom we are pleased to welcome as new shareholders. I would like to extend my very genuine thanks to all our staff and colleagueswho due to their hard work, loyalty, teamwork and expertise have all contributedto a very successful year for their and your Company. During the year, the market has regained its confidence and composuresubstantially and, with property values softening, the medium and long termadvantage of equity investment is once more being recognised. The current year has started well. The benefits of our broadly based expansionin services and people are showing through with good levels of activity in allareas of the business. We look forward to the future with confidence. Sir David Trippier RD JP DL Chief Executive's Statement The firm has continued to grow, both organically and through the recruitment ofspecialist teams. This continued development, coupled with better tradingconditions, has produced a record result for the year. Our turnover has grownfrom £9,260,811 to £16,889,225, and our pre-tax profit from £188,338 to£2,624,143. During the year we changed our accounting policy on the valuation ofcertain fixed asset investments in association with the adoption of the carriedinterest scheme which has resulted in a significant increase in the book valueof these investments at the year end which, together with our record profits,has seen our net asset value rise to £10,114,056 from £7,254,322. This equatesto 64.32p per share compared to 47.70p per share last year. Our discretionaryand advisory funds under management have increased during the year from £209million, at the last year end, to £291 million. All areas of the firm have contributed to this growth and I am pleased to beable to detail below the developments during the year. PRIVATE CLIENT STOCKBROKING Our businesses around the country have continued to grow. In particular, theLondon office has had an outstanding year. During the year we made the finalpayment on our acquisition of Stockholm Investments, the discretionary fundmanagement business we bought in October 2001. We continue to act for a widerange of private clients and as a result of its strong performance, our Londonactivities have outgrown our Cannon Street offices. Therefore, we areconsidering a move to larger offices in the City during the current year. In Birmingham, we have expanded considerably and now occupy two floors of ourleased premises in the city centre. We are pleased to welcome formally the teamof 15 brokers and support staff who joined us half way through the year. Theyhave already proved a successful and profitable addition to the firm. In our Manchester head office, which also houses our administration function,further appointments have been made, in particular strengthening our back officeand compliance capabilities to cater for our expansion. Meanwhile we arecontinually developing our IT facilities through the installation of the latesttechnology available in the market to ensure that our clients receive thehighest quality of service. We have built a significant presence in Wales. Our two Cardiff based brokingoffices, one of which has re-located to the Cardiff Bay area, are bothperforming well. Combined with our four-strong office in Colwyn Bay, NorthWales, we now have a total of 14 people in our stockbroking offices, making usone of the larger stockbrokers in the Principality. Our other regional offices continue to perform satisfactorily, although we havedecided to close our small office in Tunbridge Wells. CORPORATE BROKING AND INSTITUTIONAL SALES Our Corporate Broking and Institutional Sales departments, located in Manchesterand London, have had a successful year and have taken part in a number ofprimary and secondary placings. In our day to day activities, we also act for anumber of institutional fund management groups and hedge funds. Throughselective sector specialisation, we now have a particular expertise in miningand exploration, healthcare, and technology companies in the small and mid capsectors. RESEARCH Our research capability has expanded during the year, both in numbers ofpersonnel and scope of research. We do not set out to be a major research house,as the costs of doing so would be prohibitive for a broker of our size.Furthermore, there is a vast amount of research available from major researchhouses. However, we do aim to have the in house expertise necessary at a highlevel to support the other areas of the business, particularly corporate brokingand corporate finance. As is required by the compliance rules, our researchersare structurally independent in their reporting and analysis. CORPORATE FINANCE Our Corporate Finance department has had another excellent year. Our decision tofocus on AiM has been amply justified by our moving up from third to secondposition in the UK, measured by the number of AiM flotations for which we haveacted as Nominated Adviser. I would like to congratulate our three teams inLondon, Manchester and Birmingham on their success in achieving such a memorableoutcome for the year. We have a good pipeline of future deals in hand. FINANCIAL SERVICES WH Ireland Financial Services Ltd, our IFA arm, continued to perform well andexpand with further appointments of advisers at Ingram Phillips in Cardiff andManchester. In this subsidiary we remain focused on recruiting only high calibreadvisers, capable of transacting substantial business but avoiding the pitfallsof acquiring high employee-low return business. INVESTMENTS AND PROPERTY We retain a substantial holding in the London Stock Exchange, which hasincreased in value significantly during the year and post the balance sheetdate. We also have a holding in Euroclear which is shown in the accounts at acost of £75,052 and we estimate that its current value is significantly higher. Our investment in Ultimate Finance, the asset finance business quoted on AiM,has shown solid improvement in its level of business and we are very happy withits progress. The team there are to be congratulated on their success in acompetitive market place. Our head office in Manchester, whose freehold we own, is located in the primecentral area of the city. We have applied for planning permission foralterations to the building which we believe will enable us to enhance itsappearance and facilities, and so increase the rents payable significantly asrent reviews occur in the next two years. STAFF I would like to add my heartfelt thanks to those of the Chairman to all mycolleagues who have played their part in achieving a successful outcome for theyear. OUTLOOK We are continuing to grow the business and expand the quality, range and depthof the services we offer. This has the effect of broadening our revenue streamsand establishing firm foundations from which to grow the business, bothgeographically and by business area. The new year has started well with a goodpipeline of corporate activity and, subject to favourable market conditions, weexpect a successful outcome for the year. We continue to examine further areasof growth whereby, organically or by acquisition, we can add value and build onthe success achieved to date. Laurie BeeversChief Executive W.H. Ireland Group plcConsolidated profit and loss accountfor the year ended 30 November 2004 Year ended Year ended 30 November 30 November 2004 2003 Note £ £------------------------------------------------------------------------------Group turnover 16,889,225 9,260,811 Administrative expenses (14,951,179) (8,759,317)------------------------------------------------------------------------------ Group operating profit 1,938,046 501,494Share of operating profit/(loss) before taxin associates 2,919 (130,787)------------------------------------------------------------------------------ 1,940,965 370,707 Profit on disposal of fixed asset investments 1 & 2 359,057 -Income from fixed asset investments(including exceptional item of £330,000) 3 368,704 - ------------------------------------------------------------------------------ 2,668,726 370,707Other interest receivable and similar income 354,367 151,436Amounts written off investments 6,730 (33,815)Interest payable and similar charges (405,680) (299,990)------------------------------------------------------------------------------Profit on ordinary activities before taxation 2,624,143 188,338Tax on profit on ordinary activities (763,273) (131,895)------------------------------------------------------------------------------Profit on ordinary activities after taxation 1,860,870 56,443Dividends on equity shares 4 (668,095) (192,829)------------------------------------------------------------------------------Retained profit/(loss) for the year for Group 1,192,775 (136,386)------------------------------------------------------------------------------Earnings per share(in accordance with FRS 14)Basic 5 11.88p 0.38pDiluted 5 11.18p 0.38p------------------------------------------------------------------------------Headline earnings per share (in accordancewith guidelines issued byUK Society of Investment Professionals)Basic 5 10.72p 1.12pDiluted 5 10.09p 1.10p------------------------------------------------------------------------------ All turnover and results in the current and previous year relate to continuingoperations. W.H. Ireland Group plcStatement of total recognised gains and lossesfor the year ended 30 November 2004 Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Profit/(Loss) for the financial year 1,192,775 (136,386)Unrealised surplus on revaluation of fixed assetinvestments (Note 1) 1,722,124 459,686Unrealised gain on revaluation of properties - 505,000Taxation on realised surplus on revaluation offixed assets - (90,873)Non trading increase in net assets of associatearising from external subscriptions 43,081 -------------------------------------------------------------------------------Total recognised gain for the year 2,957,980 737,427------------------------------------------------------------------------------ Note of historical cost profits and lossesfor the year ended 30 November 2004 Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Reported profit on ordinary activities before tax 2,624,143 188,338Realisation of fixed asset investment revaluationgains 1,915 366,288------------------------------------------------------------------------------Historical cost profit on ordinary activitiesbefore taxation 2,626,058 554,626------------------------------------------------------------------------------Historical cost profit retained for the year afterthe provisions for taxation and dividends 1,194,690 139,029------------------------------------------------------------------------------ W.H. Ireland Group plcConsolidated Balance Sheetfor the year ended 30 November 2004 2004 2004 2003 2003 Note £ £ £ £-----------------------------------------------------------------------------------------Fixed assetsIntangible assets 3,052,104 3,229,325Tangible assets 5,173,591 5,205,695Investments 6 6,060,443 2,547,086Investments in associates 484,512 268,879----------------------------------------------------------------------------------------- 14,770,650 11,250,985Current assetsDebtors 122,661,229 113,831,227Investments 15,191 11,209Cash at bank and in hand 10,883,582 5,083,127----------------------------------------------------------------------------------------- 133,560,002 118,925,563Creditors: amounts fallingdue within one year 7 (131,789,786) (117,646,103) -----------------------------------------------------------------------------------------Net current assets 1,770,216 1,279,460-----------------------------------------------------------------------------------------Total assets less currentliabilities 16,540,866 12,530,445Creditors: amounts fallingdue after more than one year 8 (6,162,692) (5,266,628)Provisions for liabilitiesand charges (264,118) (9,495) -----------------------------------------------------------------------------------------Net assets 10,114,056 7,254,322-----------------------------------------------------------------------------------------Capital and reservesCalled up share capital 786,161 765,187Shares to be issued - 283,333Share premium account 1,239,687 1,566,085Capital redemption reserve 226,333 226,333Merger reserve 490,511 -Revaluation reserve 4,641,072 2,920,863Other reserves 753,704 753,704Profit and loss account 1,976,588 738,817-----------------------------------------------------------------------------------------Equity shareholders' funds 10,114,056 7,254,322----------------------------------------------------------------------------------------- W.H. Ireland Group plcConsolidated cash flow statementfor the year ended 30 November 2004 Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Net cash inflow from operating activities 5,995,730 2,568,333Returns on investments and servicing of finance 370,222 (148,554)Taxation (116,161) 114,581Capital expenditure and financial investment 426,385 294,989Acquisitions and disposals (222,471) (515,128)Equity dividends paid (211,104) (78,666)------------------------------------------------------------------------------Cash inflow before financing 6,202,601 2,235,555Financing (402,849) (157,442)------------------------------------------------------------------------------Increase in cash in the period 5,799,752 2,078,113------------------------------------------------------------------------------ W.H. Ireland Group plcReconciliation of Movement in equity shareholders' fundsfor the year ended 30 November 2004 Group Group 2004 2003 £ £------------------------------------------------------------------------------Profit for the financial year before dividends 1,860,870 56,443Dividends (668,095) (192,829)------------------------------------------------------------------------------Profit/(Loss) for the financial year 1,192,775 (136,386)Surplus on investment revaluation reserve 1,722,124 459,686Surplus on property revaluation reserve - 505,000Tax in respect of realised surplus on revaluation - (90,873)Non trading increase in net assets of associates 43,081 -Shares issued in payment of scrip dividends in theyear 24,244 70,376Shares issued on acquisition of trades or businesses - 100,000New shares issued 19,176 -Shares issued in payment of deferred consideration 141,667 141,667Transfer from shares to be issued (141,667) (141,667)Payment in settlement of shares to be issued (141,666) -Redemption of deferred ordinary shares - (226,333)Transfer to capital redemption reserve - 226,333Transfer from profit and loss account - (226,333)Consolidation adjustment on redemption of deferredordinary shares - 209,070------------------------------------------------------------------------------Increase in shareholders funds during the year 2,859,734 890,540Opening equity shareholders' funds 7,254,322 6,363,782------------------------------------------------------------------------------Closing equity shareholders' funds 10,114,056 7,254,322------------------------------------------------------------------------------ W.H. Ireland Group plcNotes to the preliminary statementfor the year ended 30 November 2004 1. Accounting policiesThe following accounting policies have been applied consistently in dealing withitems that are considered material in relation to the Group's financialstatements. Basis of preparationThe financial statements have been prepared in accordance with applicableaccounting standards subject to the true and fair view overrides detailed belowand under the historical cost accounting rules, except as modified by therevaluation of certain assets. The Group has adopted UITF38 regarding sharesheld in the Employee Benefit Trust although there is no impact on the financialstatements as no shares were held in the Trust at the beginning and the end ofthe year. Basis of accounting for the carried interest schemeDuring the year the company adopted a carried interest bonus scheme under whichbonuses may be payable to certain corporate finance personnel when certainwarrants or shares acquired as part of a corporate finance transaction areultimately sold at a profit. The relevant warrants and shares are includedwithin fixed asset investments and are revalued at the year end reporting dateand a bonus is provided on 50% of the expected profit should the warrants orshares be sold at that revalued amount, being the maximum amount of bonus thatmay be paid out. The amount of the bonus provision relating to warrants wherethe expiry date is less than one year are shown in creditors under one year, andthe balance is shown in creditors over one year. At the 30 November 2004 the relevant warrants had a revaluation gain of£2,763,582 and the shares a revaluation gain of £803,441 and accordingly bonusesof £1,381,791 and £401,720 respectively would need to be provided on thosegains. Under the specific requirements of the Companies Acts and relevantFinancial Reporting Statements the full amount of the revaluation gain would betaken through the statement of total recognised gains and losses to therevaluation reserve in the balance sheet whilst the provision for the bonuseswould be taken to the profit and loss account. The Directors do not considerthat adopting this accounting treatment truly matches the bonus expense againstthe relevant gain and thus does not show a true and fair view of the reasoningand substance behind the relevant accounting entries. In order to show a trueand fair view of the carried interest scheme the Directors have departed fromthe prescribed accounting treatment and have credited a sufficient amount of thegain to the profit and loss account to match the relevant bonus provision, as acredit within administrative expenses where the related bonus is charged. Theeffect of this is to avoid a reduction in profits of £1,744,041 should the bonusalone be reported in the profit and loss account. During the current year certain warrants within the carried interest scheme wereexercised and the shares acquired therefrom were sold for a realised profit of£718,123 and a bonus of £359,066 was paid out from that profit. Under thespecific requirements of the Companies Acts and relevant Financial ReportingStatements the profit on sale of the shares should be disclosed below theoperating profit line under the heading profit on disposal of fixed assets andthe bonus should be included in staff costs above the operating profit line. TheDirectors do not believe that this accounting treatment properly reflects thematching of the bonus and the specific gain it is paid out from, nor with theequivalent revaluations within operating profit (see above). Accordingly theDirectors have departed from these accounting requirements and have taken asufficient amount of the gain as matches the bonus paid and have reported thisabove the operating profit line as a credit to administration expenses. Thistreatment has no effect on the reported profits before tax for the year, but itmoves a realised gain of £359,066 from below to above the operating profit line. 2. Profit on disposal of fixed asset investments Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Gross Profit on disposal of fixed assetinvestments 718,123 -Amount taken to administration expenses tooffset against the bonus payment thereon, (seenote 1) (359,066) -------------------------------------------------------------------------------Net profit on disposal of fixed assetinvestments 359,057 ------------------------------------------------------------------------------- 3. Income from fixed asset investments Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Quoted investments 359,151 -Unquoted investments 9,553 ------------------------------------------------------------------------------- 368,704 ------------------------------------------------------------------------------- Income from quoted investments in 2004 includes an exceptional item of a specialdividend of £330,000 received on our holding of shares in the London StockExchange. 4. Dividends and other appropriations Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Equity shares:Interim dividend paid at 0.75p per share (2003:0.5p) 117,783 75,156Final dividend proposed at 1.5p per share (2003:0.75p) 235,848 117,673Special final dividend proposed at 2.0p pershare (2003:nil) 314,464 ------------------------------------------------------------------------------- 668,095 192,829------------------------------------------------------------------------------ The final proposed dividend is provided on the number of shares currently inissue. 5. Earnings per share Year ended Year ended 30 November 30 November 2004 2003 £ £------------------------------------------------------------------------------Profit for the year used for the basiccalculation 1,860,870 56,443Profit on sale of fixed asset investments (359,057) -Goodwill amortisation 177,221 108,730------------------------------------------------------------------------------Profit for the year used in the "headlineearnings" calculation under the guidelinesissued by the UK Society of InvestmentProfessionals 1,679,034 165,173------------------------------------------------------------------------------Weighted average number of shares used in thebasic calculation 15,665,720 14,796,324Weighted average number of options outstandingfor the period 974,352 154,930------------------------------------------------------------------------------Weighted average number of shares used in thediluted calculations 16,640,072 14,951,254------------------------------------------------------------------------------ The earnings per share calculated on a headline earnings basis has beencalculated in addition to the earnings per share as required by FRS14 'Earningsper Share' and has been produced to give shareholders a cleaner understanding ofthe performance of the Group. 6. Fixed asset investments Unquoted Quoted investments Warrants investments TotalGroup (excluding investments £ £ £ £in associates) ------------------------------------------------------------------------------Cost or valuationAt beginning of year 110,872 - 2,436,214 2,547,086Additions 32 513,526 63,877 577,435Reclassification ofpreviously unquoted to quotedinvestments (25,085) - 25,085 -Revaluation adjustment - 2,763,582 702,583 3,466,165Gain on fixed assetinvestments previously written down - - 132 132Write back of prior yeardiminution in value - - 6,730 6,730Disposals - (513,526) (23,579) (537,105)------------------------------------------------------------------------------At end of year 85,819 2,763,582 3,211,042 6,060,443------------------------------------------------------------------------------ This historical cost value of the above quoted investments at the year end was£287,743 (2003 : £158,740). If these shares were sold at their market value apotential tax charge of £874,190 (2003 : £660,336) would arise. 7. Creditors: amounts falling due within one year Group Group 2004 2003 £ £-----------------------------------------------------------------------------Bank overdraft 703 -Bank loans 280,935 277,258Floating rate loan notes 2004/05 - 141,667Trade creditors 127,198,502 115,340,604UK corporation tax payable 910,576 292,782Taxation and social security 461,954 156,848Obligation under finance leases and hire purchasecontracts 21,543 18,917Deferred purchase consideration 161,560 493,667Other creditors 340,028 202,338Accruals and deferred income 1,863,673 604,349Dividend proposed 550,312 117,673----------------------------------------------------------------------------- 131,789,786 117,646,103----------------------------------------------------------------------------- Accruals and deferred income includes £299,284 relating to bonuses providedunder the carried interest bonus scheme. Details of the accounting treatmentthereof is given in note 1. The floating rate loan notes 2004/05 were redeemed on 1 April 2004 8. Creditors: amounts falling due after more than one year Group Group 2004 2003 £ £------------------------------------------------------------------------------Bank loans 4,238,794 4,519,315Deferred purchase consideration 400,000 699,666Obligations under finance leases and hire purchasecontracts 10,772 16,912Accruals and deferred income 1,483,927 -Deferred rent creditor 29,199 30,735------------------------------------------------------------------------------ 6,162,692 5,266,628------------------------------------------------------------------------------ Accruals and deferred income includes £1,483,927 relating to bonuses providedunder the carried interest scheme. Details of the accounting treatment thereofis given in note 1. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WHIreland