6th Sep 2007 07:01
IFG Group PLC06 September 2007 IFG Group plc INTERIM RESULTSFOR THE SIX MONTHS ENDED 30 JUNE 2007 Financial Highlights Adjusted Adjusted IFRS IFRS measures measures Six months ended Six months Six months Six months ended ended ended 30 June 2007 30 June 2006 30 June 2007 30 June 2006 Unaudited Unaudited Unaudited Unaudited Restated Restated •'000 •'000 Notes •'000 •'000 Revenue 61,539 51,119 61,539 51,119 Operating profit 11,012 8,242 1 8,955 8,282 Profit before income tax 9,940 7,098 1 7,883 7,138 Adjusted earnings per ordinary share - 12.11 8.18 2 n/a n/ain cent Basic earnings per ordinary share - in n/a n/a 9.13 8.90cent Group net debt 24,389 27,634 Interim dividend per ordinary share - 3 1.16 1.05in cent Commenting on the results, Mark Bourke, Chief Executive, said: "We are pleased with the performance of all Divisions which shows the robustnature of the business even in rapidly changing markets." Notes: 1. Adjusted profit and earnings per share are stated before exceptionaladjustments, amortisation of intangible assets and share based paymentcompensation. 2. Reconciliation of adjusted earnings: Six months ended Six months ended 30 June 2007 30 June 2006 Per share Earnings Per share Earnings cent cent •'000 •'000 Profit attributable to equity holders 9.13 6,294 8.90 5,730Exceptional adjustments (net of tax) - - (1.36) (872)Amortisation of intangible assets 1.15 791 0.33 212Share based payment compensation 1.83 1,266 0.31 200Adjusted earnings 12.11 8,351 8.18 5,270 3. In accordance with IFRS the interim dividend is not accrued until paid and assuch is not included as a reduction in reserves. Commentary on Interim Results The directors report that adjusted operating profit for the six months ended 30June 2007 was €11.0 million compared with €8.2 million in the previous period,an increase of 34%, on turnover of €61.5 million (2006 HY €51.1m). Profitbefore taxation was up 10% to €7.9 million compared with a profit beforetaxation of €7.1 million in the previous period. Adjusted earnings per sharewere 12.11 cent (2006HY 8.18 cent) representing an increase of 48% on theprevious period. The Group has performed to expectation in the first six months of the year.This reflects significant improvement in the underlying performance across allDivisions. The Board has decided to pay an interim dividend of 1.16 cent (2006HY 1.05 cent)per share subject to withholding tax at 20%. The dividend, which represents anincrease of 10% on the previous period, will be paid to qualifying shareholderson the Register at the close of business on 16 November 2007. Dividend warrantswill be posted on 30 November 2007. Group Performance The Group earns revenue from two sources: • Commissions earned in the intermediation of financial services products; • Fees from the provision of services including, in particular, trustee and corporate services and pensioneer trustee business. The Group operates in two business segments: • Financial Services; • Trustee and Corporate Services. The performance of the Group in the first six months split between its mainactivities was as follows: Operating profit Operating profit Six months ended Six months ended 30 June 2007 30 June 2006 •'000 •'000 Trustee & Corporate ServicesInternational Trustee & Corporate Services 4,315 3,256 Financial Services & UnallocatedPensioneer Trustee - UK 1,902 1,623Financial Services - UK 1,708 780Mortgage and Title Insurance - Ireland 2,435 2,088Financial Services including Central Overhead - Ireland 652 495 Adjusted operating profit 11,012 8,242*Reconciling items (2,057) 40Total operating profit 8,955 8,282 *Reconciling items 30 June 30 June 2007 2006Exceptional items - 452 - Financial ServicesShare based payment compensation - Trustee & (236) (40)Corporate ServicesShare based payment compensation - Financial (1,030) (160)ServicesAmortisation of intangibles - (715) (135)Trustee & Corporate ServicesAmortisation of intangibles - (76) (77)Financial ServicesTotal reconciling items (2,057) 40 Trustee & Corporate Services The International Trustee and Corporate Service business has shown an increasein adjusted operating profit from €3.3 million to €4.3 million, an increase of33% on the previous period. The International business continued to grow strongly in the first half withcontribution from the Langtry Trust Company (Channel Islands) Limited ('Langtry') prior year acquisition coming through in the first six months. Langtrywas purchased for €15.4 million (€5.1 million cash and €10.3 million contingentconsideration). The integration of this business was carried out in the firsthalf of 2007. During the period the Group made further bolt-on acquisitions, in Switzerland(Gestinor AG) and Isle of Man (Northern Trust International Fund AdministrationServices (Isle of Man) Limited). The consideration for the former is €6.6million of which €2.3 million was payable up front and €4.8 million in the caseof Northern Trust. The acquisitions in both cases mark continued and successful execution of thestrategy laid out in 2005 of developing the core business around the keyOffshore and Onshore Centres (IOM; Jersey; Cyprus; Switzerland and Ireland). Inaddition, the acquisition of Northern Trust in the Isle of Man will acceleratethe Division's development in the expert funds area and complement the set up ofa fund administration unit in the first quarter. While Gestinor will contribute to operating profits in 2007, the Northern Trustacquisition will not have a significant impact until 2008 with its contributionbeing offset by the fund administration set up cost. The Division performedwell in the first half and a strong second half is expected. Financial Services & Unallocated Pensioneer Trustee - UK The Pensioneer Trustee business has continued its good rate of acquisition ofnew specialist SIPP (self invested pension plan) business and development of itsbrands in the first half year. The business continues to focus on the coreintermediary market whilst also tendering for larger institutional referrals.Steady growth is expected to continue in this area throughout the second halfyear. Financial Services - UK The IFA (Independent Financial Advisor) side has continued to deliver ahead ofexpectation with this business growing both its income and profitability. Theperformance of Saunderson House, a fee based personal financial advisorybusiness, continues to surpass expectations. This business under strongmanagement has produced excellent results continuing its successes of the past 3- 4 years. Growth is organic and underlines the high quality of serviceprovided to an expanding client base. Siddalls, which advises people on moving abroad, is beginning to lay thefoundations for future growth. The non-fee based IFA business also turned in asolid performance for the first half. Mortgage & Title Insurance Ireland The Mortgage Intermediary business performed very well in a highly challengingmarket. Prime cheque issues for the period were €670 million versus a first halfof 2006 at €766 million, a drop of 13%. The non conforming side of the businessperformed well as did the Title Insurance operation, more than compensating forreduced activity in the prime business. This performance proves the strategic positioning of the property division andthe appropriateness of the business model. The Group's Seniors Money joint venture continued its successful developmentdespite considerable negative publicity. We continue to believe, however, thatlifetime mortgages are a product of immense benefit and importance to the futureof financial planning for the over 60s. Financial Services - Ireland The Group's other Irish Financial Services businesses have delivered a strongperformance across life, pensions and our specialist credit insurance and policybroking business, with each contributing positively overall. Debt Group net debt is summarised and compared to the previous half year and year-endbelow. As at 30 June 2007 As at 31 December 2006 As at 30 June 2006 Core Investment Total Core Investment Total Core Investment Total •'m •'m •'m •'m •'m •'m • 'm •'m •'m Banking net debt 21.5 2.9 24.4 16.1 2.9 19.0 24.7 2.9 27.6Contingentconsideration 15.7 10.3 -Total net debt 40.1 29.3 27.6 During the period acquisition payments and contingent consideration totalling€12.7 million resulted in Group net debt increasing by €10.8 million. Netoperating cash generation of €1.9 million is historically consistent, as workingcapital requirements increase in the first half with significant bonus andscheduled creditor payments. The year end will, however, show a markedimprovement in banking net debt as has happened in previous periods. The Group's primary debt was entirely refinanced during 2007 and the marginsconsiderably improved through redemption of 8.0% Bonds and a prime facilitypriced at 1.75% over Euribor. Outlook The Group continues to go from strength to strength. The management team isfurther enhanced, the capital structure is robust and each Division continuesthe successful execution of its strategy even where the market has undergonerapid change. We are optimistic that we will continue this performance in thesecond half of 2007 and future years. Consolidated Income Statement Six months ended 30 June 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited Restated Restated Notes •'000 •'000 •'000 Revenue 4 61,539 51,119 107,792Cost of sales (2,628) (2,434) (4,662) Gross profit 58,911 48,685 103,130 Administrative expenses (49,165) (40,643) (88,861) Operating profit before exceptional items 9,746 8,042 14,269and intangible amortisation Intangible amortisation (791) (212) (395)Exceptional items 5 - 452 452 Operating profit 4 8,955 8,282 14,326 Finance income 388 262 655Finance costs (1,473) (1,400) (2,861)Share of profit/(loss) of associates and 13 (6) 162joint ventures Profit before income tax 7,883 7,138 12,282Income tax expense 6 (1,341) (905) (1,367) Profit for the period 6,542 6,233 10,915 Profit for period attributable to:Equity holders of the Company 6,294 5,730 9,743Minority interest 248 503 1,172 6,542 6,233 10,915 Earnings per ordinary share (cent) Basic 3 9.13 8.90 15.01 Diluted 3 8.81 8.74 14.27 Consolidated Balance Sheet As at 30 June 2007 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000AssetsNon-current assetsProperty, plant & equipment 6,299 5,237 6,135Intangible assets 82,589 53,920 71,946Investments in associates 313 131 300Deferred income tax assets 1,431 1,323 1,481Available-for-sale financial assets 456 1,472 87Other receivables - 263 -Total non-current assets 91,088 62,346 79,949 Current assetsTrade and other receivables 46,580 37,235 39,180Current income tax asset 65 368 62Cash and cash equivalents 21,156 17,498 26,715Total current assets 67,801 55,101 65,957 Total assets 158,889 117,447 145,906 LiabilitiesNon-current liabilitiesBorrowings 35,101 29,576 23,808Deferred income tax liabilities 3,275 516 2,425Retirement benefit obligations 390 912 687Provisions for liabilities 9,446 884 6,698Other non-current liabilities 1,250 1,250 1,250Total non-current liabilities 49,462 33,138 34,868 Current liabilitiesTrade and other payables 39,155 36,924 40,361Current income tax liabilities 2,359 1,560 1,946Borrowings 10,444 15,556 21,860Provisions for liabilities 9,374 1,771 6,680Total current liabilities 61,332 55,811 70,847 Total liabilities 110,794 88,949 105,715 Net assets 48,095 28,498 40,191 EquityCapital & reserves attributable to equityholders of the companyShare capital 8,344 7,848 8,239Share premium 53,457 45,047 52,300Other reserves 3,360 1,409 2,619Retained earnings & translation reserve (18,907) (27,583) (24,562) 46,254 26,721 38,596Minority interest 1,841 1,777 1,595 Total equity 48,095 28,498 40,191 Consolidated Cash Flow Statement Six months ended 30 June 2007 Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited Restated Restated Notes •'000 •'000 •'000 Cash flows from operating activitiesCash generated from operations 8 4,944 5,151 15,275 Interest received 388 262 655Income taxes paid (1,238) (702) (1,378) Net cash generated from operating 4,094 4,711 14,552activities Cash flows from investing activitiesPurchase of property, plant & equipment (976) (999) (2,739) Sale of property, plant & equipment 8 3 10 Purchase of available-for-sale financial (369) (1,424) -assetsSale of available-for-sale financial - - 124assetsSale of interest in associate undertakings - 960 960Purchase of interest in joint venture - - (118)Purchase of subsidiary undertakings net of (7,335) (25) (4,029)cash acquired Contingent consideration on prior year (285) - -acquisitions Net cash used in investing activities (8,957) (1,485) (5,792) Cash flows from financing activitiesDividends paid - - (1,986)Interest paid (1,164) (1,387) (2,793)Dividends paid to minority interests - - (851) Proceeds from issue of share capital 737 206 7,850 Repayment of debt (221) (178) (20,950)Proceeds from long term borrowings 12,203 - 26,869Senior unsecured notes repaid (12,642) - (5,951)Payment of finance lease liabilities (14) (48) (115) Net cash (used)/generated in financing (1,101) (1,407) 2,073activities Net (decrease)/increase in cash and cash (5,964) 1,819 10,833equivalents Cash and cash equivalents at the beginning 25,421 14,336 14,336of the periodEffect of foreign exchange rate changes (81) (155) 252 Cash and cash equivalents at end of period 19,376 16,000 25,421 Cash and cash equivalents are comprised of cash and short term deposits net ofbank overdrafts that are repayable on demand. For the purpose of the cash flow statement cash and cash equivalents include thefollowing: Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000 Cash and short term deposits 21,156 17,498 26,715Bank overdrafts (1,780) (1,498) (1,294) 9 19,376 16,000 25,421 Consolidated Statement of Changes in Equity Share Share Other Translation Retained Attributable Minority Total capital premium reserves reserve earnings to equity interest Equity holders •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 At 1 January 2007 8,239 52,300 2,619 (4,698) (19,864) 38,596 1,595 40,191 Currency translation - - - (639) - (639) (2) (641)adjustmentsNet expense recognised - - - (639) - (639) (2) (641)directly in equityProfit for the period - - - - 6,294 6,294 248 6,542Total recognised income for - - - (639) 6,294 5,655 246 5,901the period Issue of share capital 75 662 - - - 737 - 737Share based paymentcompensation: Value of employee services - - 239 - - 239 - 239- share option plans 30 495 502 - - 1,027 - 1,027 - long termincentive plan 105 1,157 741 - - 2,003 - 2,003 At 30 June 2007 8,344 53,457 3,360 (5,337) (13,570) 46,254 1,841 48,095 At 1 January 2006 7,828 44,861 1,224 (5,272) (27,615) 21,026 1,274 22,300 Currency translation - - - (426) - (426) - (426)adjustmentsFair value movement on - - (15) - - (15) - (15)available-for-sale financialassetsNet expense recognised - - (15) (426) - (441) - (441)directly in equityProfit for the period - - - - 5,730 5,730 503 6,233Total recognised income for - - (15) (426) 5,730 5,289 503 5,792the period Issue of share capital 20 186 - - - 206 - 206Share based paymentcompensation: Value of employee services - - 200 - - 200 - 200- share option plans 20 186 200 - - 406 - 406 At 30 June 2006 7,848 45,047 1,409 (5,698) (21,885) 26,721 1,777 28,498 At 1 January 2006 7,828 44,861 1,224 (5,272) (27,615) 21,026 1,274 22,300 Currency translation - - - 574 - 574 - 574adjustmentsRecycling of fair valuemovements to the incomestatement -sale of available-for-sale - - 153 - - 153 - 153financial assetsNet income recognised - - 153 574 - 727 - 727directly in equityProfit for the period - - - - 9,743 9,743 1,172 10,915Total recognised income for - - 153 574 9,743 10,470 1,172 11,642the year Dividends - - - - (1,992) (1,992) (851) (2,843)Issue of share capital 411 7,439 - - - 7,850 - 7,850Share based paymentcompensation: Value of employee services - - 468 - - 468 - 468- share option plans - - 774 - - 774 - 774 - longterm incentive plan 411 7,439 1,242 - (1,992) 7,100 (851) 6,249 At 31 December 2006 8,239 52,300 2,619 (4,698) (19,864) 38,596 1,595 40,191 Notes to the Financial Information 1. General Information IFG Group and its subsidiaries (together the 'Group') are engaged in theprovision of financial advisory services and international corporate and trusteeservices. The Company is a public company, incorporated and domiciled in theRepublic of Ireland. The address of its registered office is IFG House,Booterstown Hall, Booterstown, County Dublin, Ireland. This financialinformation statement was approved for issue by the Board of Directors on 6September 2007. 2. Basis of Preparation The Group's financial information for the period ended 30 June 2007 has beenprepared in accordance with the Listing Rules of the Irish Stock Exchange. TheGroup's financial information has been prepared in accordance with theaccounting policies that the Group expects to adopt for the 2007 year-end whichare consistent with the principal accounting policies which were set out in theGroup's 2006 consolidated financial statements. The principal accountingpolicies adopted by the Group for the 2006 year-end, as set out in the Group's2006 consolidated financial statements, were consistent with IFRSs issued by theIASB as adopted by the European Commission (EC) for use in the European Union(EU). The Group has chosen not to adopt IAS 34 'Interim Financial Reporting' inpreparing its 2007 interim accounts since adoption of this standard is notmandatory for the company until 2008. The preparation of the financial information includes the use of estimates andassumptions that affect items reported in the Consolidated Balance Sheet andIncome Statement and the disclosure of contingent assets and liabilities at thedate of the financial information. Although these estimates are based onmanagement's best knowledge of current circumstances and future events andactions, actual results may differ from those estimates, possibly significantly. The accounting policies have been consistently applied to all periods presented. The accounts in this interim report are not the statutory accounts of theCompany, a copy of which is required to be annexed to the Company's annualreturn to the Companies Registration Office in Ireland. A copy of the statutoryaccounts required to be annexed to the Company's annual return in respect of theyear ended 31 December 2006 has in fact been so annexed. The auditors of theCompany have made a report, without any qualification, on their audit of thestatutory accounts of the Company in respect of the year ended 31 December 2006. Notes to the Financial Information 3. Earnings per ordinary share Six months Six months ended Year ended ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited AuditedBasicProfit after income tax and minority interest (•'000) 6,294 5,730 9,743 Weighted average number of ordinary shares in issue for the 68,940,555 64,394,523 64,895,171calculation of earnings per share Basic earnings per share (cent) 9.13 8.90 15.01 DilutedProfit after income tax and minority interest (•'000) 6,294 5,730 9,743 68,940,555 64,394,523 64,895,171 Weighted average number of ordinary shares in issue for thecalculation of earnings per share Dilutive effect of share options and warrants 1,487,461 1,186,477 2,616,837Dilutive effect of long term incentive plan 1,031,250 - 750,000 Weighted average number of ordinary shares for the 71,459,266 65,581,000 68,262,008calculation of diluted earnings per share Diluted earnings per share (cent) 8.81 8.74 14.27 4. Segmental analysis Primary reporting format-business segments At 30 June 2007, the Group is organised on a worldwide basis into two mainbusiness segments: - Provision of financial services; - Provision of corporate and trustee services incorporating back officeservices. The segment results for the period ended 30 June 2007 are as follows: Financial Trustee & Unallocated Total corporate services services •'000 •'000 •'000 •'000 Revenue 43,689 17,850 - 61,539 Operating profit 5,656 3,364 (65) 8,955 The segment results for the period ended 30 June 2006 are as follows: Financial Trustee & Unallocated Total corporate services services •'000 •'000 •'000 •'000 Restated Restated Revenue 38,741 12,378 - 51,119 Operating profit 5,226 3,081 (25) 8,282 Notes to the Financial Information The segment results for the year ended 31 December 2006 are as follows: Financial Trustee & Unallocated Total corporate services services •'000 •'000 •'000 •'000 Restated Restated Revenue 81,353 26,439 - 107,792Operating profit 9,648 5,915 (1,237) 14,326 5. Exceptional items Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000 Disposal of Irish business - 452 452 Exceptional gain - 452 452 On the 27 January 2006 the Group disposed of its 25% interest in Rochford BradyOnline Services Limited, Lawlink Limited, Lawlink UK Limited and its 12.5%interest in Companies Information Direct Limited for €960,000. This resulted ina gain on disposal of €452,000. 6. Income tax expense The charge for taxation for the six months ended 30 June 2007 is based on theestimated effective rate of taxation for the year. Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000 Current tax - current period expense 1,350 1,320 2,111Current tax - prior period over provision (45) (41) (563)Total current tax 1,305 1,279 1,548Movement in deferred tax 36 46 (181)Exceptional tax credit - (420) -Net tax expense 1,341 905 1,367 The exceptional tax credit of €420,000 relates to the reversal of current taxprovisions that were provided in the 2005 financial statements for Isle of Mansubsidiaries. This tax was not paid due to change in local tax rates. The total tax charge for the period ending 30 June 2007 includes €1,061,000 (HY2006: €526,000) relating to tax on UK profits. 7. Dividends Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000 2005 Final dividend paid - - 1,3192006 Interim dividend paid - - 673 - - 1,992 A final dividend for 2006 of 2.25 cent per share was approved by theshareholders on 3 July 2007. An interim ordinary dividend of 1.16 cent (20061.05 cent) has been declared subsequent to 30 June 2007. In accordance with theGroup's accounting policy, these amounts are not included in the half yearresults. 8. Cash generated from operating activities Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Audited •'000 •'000 •'000 Profit for the period 6,542 6,233 10,915Depreciation and amortisation 1,698 930 2,132Loss on sale of property, plant & equipment 2 - 8Gain on disposal of investment in associate undertaking - (452) (452)Finance costs 1,473 1,400 2,861Finance income (388) (262) (655)Tax charge 1,341 905 1,367Loss on sale of available-for-sale financial assets - - 24Group share of (profit)/loss of associates and joint (13) 6 (162)venturesCurrency translation adjustment (266) (47) (51)Non-cash share based payment compensation 1,266 200 1,275(Increase) in trade & other receivables (4,554) (2,118) (2,499)Loan (to)/from associated undertakings (32) (260) 34(Decrease)/increase in trade & other payables (2,125) (1,384) 478 4,944 5,151 15,275 9. Analysis of net debt Opening Cash flow Other Closing balance non cash balance changes •'000 •'000 •'000 •'000 Cash 26,715 (5,665) 106 21,156Overdraft (1,294) (299) (187) (1,780) 25,421 (5,964) (81) 19,376 Loans due within one year (7,936) - - (7,936)Loans due after one year (22,093) (11,982) 33 (34,042)Senior unsecured notes due < 1 yr (12,553) 11,952 (89) (690)Senior unsecured notes due > 1 yr (1,601) 690 (9) (920)Finance leases (191) 14 - (177) Total (18,953) (5,290) (146) (24,389) 10. Comparative figures Revenue of €0.3 million and €0.6 million earned in the prior periods ended 30June 2006 and 31 December 2006 respectively which were classified as FinanceIncome in those periods have been reclassified to Revenue in order to easecomparability with the current period result. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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