29th Aug 2007 08:00
FBD Holdings PLC29 August 2007 INTERIM RESULTS ANNOUNCEMENT For half year ended 30th June 2007 2007 2006FINANCIAL HIGHLIGHTS €000's €000's •Gross written premiums 205,445 203,996•Net earned premiums 175,596 173,166•Operating profit * 65,118 75,721 Cent Cent•Operating earnings per share * 158.45 173.11•Interim dividend proposed per share 27.50 24.00•Distribution of financial reserves per share (paid) 500.00 - * Based on a longer term rate of investment return Commenting on the results, Philip Fitzsimons, Chief Executive, said: "We achieved strong and profitable growth in target markets with higher volumesof business offsetting premium reductions in the half year. The developmentpotential of the business was further enhanced with the Company continuing toextend its customer footprint based on efficiency, profitability and brandreputation. Shareholders and customers have benefited from the progress whichthe Group has maintained. The Group expects to achieve full year marketexpectations for operating earnings." 29th August 2007 For Reference Telephone FBDPhilip Fitzsimons, Chief Executive +353 1 4093208Andrew Langford, Finance Director Murray ConsultantsJoe Murray +353 1 4980300 FBD HOLDINGS PLC INTERIM STATEMENT FBD Holdings plc ("FBD" or "the Group") reports continued solid trading in thehalf year ended 30th June 2007. RESULTSOperating profit in the period amounted to €65.1m (H1 2006: €75.7m). The Group's trading businesses delivered profitable performances that were in line with overall targets. The decline in profit from H1 2006 was due to anticipated lower underwriting margins and to the small loss that arose in the non-allocated capital (i.e. equity) fund, a major portion of which had been realised early in the second quarter of the period to part fund the distribution of €176m of reserves to shareholders which occurred during the period (see below). As detailed below, underwriting contributed €53.7m to operating profit (H1 2006: €65.4m), with the remaining €11.4m arising from non-underwriting activities (H1 2006: €10.3m). Profit before tax was impacted adversely by the short-term fluctuations ininvestment returns, which amounted to a negative €12.5m (H1 2006: positive€0.3m). These fluctuations reflected the weakness in government bond marketsduring the period and the downturn in equity markets at 30th June 2007. Aftercharging finance costs of €2.9m (H1 2006: €2.2m), profit before taxationamounted to €49.7m (H1 2006: €157.4m which included the profit of €83.6m on the La Cala Tranche I land sale). Operating earnings per share, based on longer term investment returns, amounted to 158.45c (H1 2006: 173.11c). UNDERWRITINGInsurance underwriting is the Group's primary business activity. Gross written premiums (i.e. before reinsurance) amounted to €205.4m, upmarginally on last year's corresponding figure of €204.0m. This outcome was achieved through volume growth which offset the effect of premiumreductions. The market remained soft during the period. Net earned premiums amounted to €175.6m (H1 2006: €173.2m), an increase of 1.4%. The net claims incurred charge amounted to €122.7m (H1 2006: €108.6m),comprising the movement in net provisions for outstanding claims of €8.8m (H12006: €13.8m) and net claims paid of €113.9m (H1 2006: €94.8m). The increasedclaims charge, compared to H1 2006, is due to a number of factors; increasedexposure resulting from the growth in policy count, weather related claimoccurrences and a higher than normal incidence of severe personal injury claims in the period. Savings on provisions have continued to emerge on claimsettlements, benefiting the overall claims charge. These are in line with levels experienced in recent accounting periods. Net operating expenses amounted to €26.7m (H1 2006: €23.0m). The increasedexpenditure is attributable in large measure to the ambitious development plans we are pursuing - i.e. investment in staff, training, technology, facilities and marketing generally, and particularly in relation to our new Support Centre which commenced operations in Mullingar in February of this year. The foregoing premium/claims/expenses figures resulted in an underwritingprofit of €26.2m (H1 2006: €41.6m). The net operating ratios for the period were: an underwriting loss ratio of69.9% (FY 2006: 65%), a net expense ratio of 15.2% (FY 2006: 12.9%) and acombined ratio of 85.1% (FY 2006: 77.9%). After crediting investment income of €27.5m (H1 2006: €23.8m), the operatingprofit from the Group's underwriting business amounted to €53.7m (H1 2006:€65.4m). NON-UNDERWRITINGNon-underwriting activities include leisure/leisure property development,financial services and the investment of non-allocated capital (i.e. capitalfund). They contributed €11.4m (H1 2006: €10.3m) to operating profit. Leisure and leisure property development interests, which embrace La Cala andSunset Beach resorts in Spain and the Tower Hotel Group in Ireland, deliveredoperating profits of €7.4m (H1 2006: €3.7m). Each of these units performed ahead of budget and contributed to the increased profits compared to H1 2006. Insurance broking (FBD Brokers), life assurance/pension broking/investmentadvice (FBD Life) and insurance premium instalment finance are the Group's principal non-underwriting financial services businesses. The contribution from financial services at €4.3m (H1 2006: €2.8m) was ahead of the corresponding period last year and in line with budget. The capital fund incurred a loss of €0.2m (H1 2006: profit of €3.8m), as stated earlier. As previously mentioned, a major portion of the fund was realised for distribution as part of the €176m payout to shareholders in H1 2007. The loss reflects the downturn in the market value of the remaining equities in the fund at 30th June 2007. DISTRIBUTION OF €176MOn 17th April 2007, the Board of FBD advised the market of its decision todistribute to shareholders financial reserves not required to pursue ourambitious growth plans. Payment, which equated to €5 per share, and totalled€176m, was made on 27th June 2007. BALANCE SHEETAt 30th June 2007, total assets amounted to €1,531.6m and equity shareholders' funds amounted to €320.7m. This compares with €1,686.6m and €497.5m respectively at 31st December 2006, reflecting the special distribution referred to above and the buyback of 956,923 shares at a cost of €31.1m during the period. The adverse gilt markets in the period and the downturn in equity markets that obtained at 30th June 2007, referred to earlier, also impacted the net worth of the Group. INTERIM DIVIDENDIn the light of the Group's favourable results and in keeping with the Board's stated intention of increasing the proportion of earnings distributed to shareholders, an interim dividend of 27.50c (H1 2006: 24.00c) per share has been decided on by the Directors. This equates to a 14.6% increase on the 2006 interim dividend. The interim dividend will be paid on 28th September 2007 to shareholders on the Company's Register at the close of business on 7th September 2007. The interim dividend is subject to withholding tax (DWT) except for shareholders who are exempt from DWT and who have furnished a properly completed Exemption Claim Form to the Company's Registrar. OUTLOOKIn the year to date, the Group has continued to achieve strong and profitablegrowth in its target markets and has enhanced further the development potential of its businesses. The Company expects to achieve the market's expectation** for full year operating earnings. UnderwritingThe factors that have been a feature of the Irish insurance market in recentyears continue to exist. Intense price competition persists, reducing margins.The claims environment has scope for further improvement; sustained governmentaction is vital, however, if the opportunity for accident reductions is to berealised and if lower claims delivery costs are to be achieved. Policyholdershave benefited from substantial premium reductions in recent years. We agreewith other insurers that further reductions can only be justified if progress on the accident/claims cost fronts is maintained. Against this industry backdrop, we have maintained our focus on extending ourcustomer reach based on the premise of business efficiency, sustainability,profitability and brand reputation. We have continued to succeed in thisobjective in the year to date, building on market share gains we have achievedin recent years. This success is made possible and underpinned by ongoinginvestment in our operational platform - people, technology, facilities,marketing - and by optimum cost management. These are the business pillars wecontinue to strengthen and recent developments, such as the establishment of the Business Support Centre in Mullingar, our technology enhancements programme, the formation of a dedicated strategic developments unit and key additions to our management team are evidence of this. Non-UnderwritingOur non-underwriting businesses are focused on and succeeding in pursuing plans to optimise returns to shareholders. Whether it be financial services or leisure/property, profitable opportunities exist and management and staff in these units are committed to maximising them. In relation to La Cala, and specifically the Tranche II land sale agreemententered into last year, as previously advised, receipt of payment is notexpected in the current year. Following the municipal elections in Andalucia in May of this year, the indications are that matters are being advanced withgreater intent by all of the parties involved in the planning process. We nowlook forward to the regional planning approval necessary to trigger payment ofthe €80m in respect of Tranche II coming through in H1 2008. CapitalWe reiterate the Group's ongoing commitment to capital efficiency as afundamental principle to be applied in all our businesses. Our development plans and consequent capital needs, and regulatory requirements, are primaryconsiderations as regards capital generated by the Group. The utilisation ofcapital surplus to these business requirements in ways that benefit shareholders to the maximum remains a key objective. Repatriations to shareholders since March 2005 amounting to €472m in total, in the form of distributions and share buybacks (excluding ordinary dividends), are evidence of the ongoing attention the Board gives to efficient capital management. ** An FBD survey of the forecasts of the analysts who cover the Group indicates a mean market expectation for 2007 operating earnings per share to be 321 cents per share. Note: Management will present these results to analysts at 10.30 a.m. today. Acopy of the presentation will be posted on the Group's website, www.fbd.ie, at that time. FBD HOLDINGS PLC GROUP INCOME STATEMENT For half year ended 30th June 2007 Half Year Half Year Year Ended Ended Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) Notes €000's €000's €000's Turnover 287,982 403,286 693,926 ======= ======= ======= IncomeNet premiums earned 175,596 173,166 345,959Non underwriting operating income 11,437 10,299 33,919Investment income - longer term rate of return 2 27,523 23,773 48,054 ------- ------- ------- 214,556 207,238 427,932ExpensesChanges in insurance liabilities net of reinsurance (8,846) (13,816) (31,064)Claims paid, net of recoveries from reinsurers (113,931) (94,742) (193,648)Other operating expenses (26,661) (22,959) (44,705) ------- ------- -------Operating profit 3 65,118 75,721 158,515 Profit on sale of land at La Cala 5 - 83,626 81,774Investment income - short term fluctuation (12,458) 318 61,350Finance costs (2,912) (2,220) (4,859) ------- ------- -------Profit before taxation 49,748 157,445 296,780Income tax expense (5,048) (34,845) (49,948) ------- ------- -------Profit for the period 44,700 122,600 246,832 ======= ======= ======= Attributable to:Equity holders of the parent 44,540 122,599 246,641Minority interest 160 1 191 ------- ------- ------- 44,700 122,600 246,832 ======= ======= ======= Cent Cent Cent Earnings per 60c ordinary share 127.34 321.99 678.82 ====== ====== ======Diluted earnings per 60c ordinary share 126.27 318.92 671.30 ====== ====== ====== FBD HOLDINGS PLC GROUP BALANCE SHEET At 30th June 2007 As at As at As at 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000'sASSETSProperty and equipmentLand and buildings 214,396 199,599 213,564Fixtures and fittings 17,307 13,759 16,815 ------- ------- ------- 231,703 213,358 230,379 ------- ------- -------Intangible assetsDeferred acquisition costs 15,342 13,043 13,517 ------- ------- ------- InvestmentsInvestment property 81,291 59,916 81,181Investments held for trading 525,661 503,113 558,850Investments held to maturity 275,730 13,768 171,799Deposits with banks 93,441 485,184 327,973Available for sale investments 3,466 47,071 3,727 --------- --------- --------- 979,589 1,109,052 1,143,530 --------- --------- ---------Inventories 69,553 59,484 66,433 --------- --------- ---------Loans and receivables 119,252 158,073 122,762 --------- --------- --------- Reinsurers' share of technical provisionsProvision for unearned premiums 22,988 20,347 21,953Claims outstanding 58,156 59,147 50,600 --------- --------- --------- 81,144 79,494 72,553 --------- --------- --------- Cash and cash equivalents 35,022 37,747 37,423 --------- --------- ---------Total assets 1,531,605 1,670,251 1,686,597 ========= ========= ========= FBD HOLDINGS PLC GROUP BALANCE SHEET At 30th June 2007 As at As at As at 30/06/07 30/06/06 31/12/06 Notes (Unaudited) (Unaudited) (Audited) €000's €000's €000'sEQUITY Share capital 7 21,277 21,277 21,277Capital reserves 12,956 12,434 12,605Revaluation reserves 27,104 41,381 27,540Translation reserves 41 101 162Retained earnings 259,277 375,401 435,935 ------- ------- -------Shareholders' funds - equity interests 320,655 450,594 497,519 Preference share capital 2,923 2,923 2,923 ------- ------- -------Total shareholders' funds 323,578 453,517 500,442Minority interests 6,636 6,424 6,476 ------- ------- -------Total equity 330,214 459,941 506,918 ------- ------- ------- LIABILITIESTechnical provisionsProvision for unearned premiums 200,698 196,150 197,507Claims outstanding 751,500 725,738 734,439 ------- ------- ------- 952,198 921,888 931,946 ------- ------- -------Bank and other loans 103,492 100,803 112,350 ------- ------- -------Creditors 95,512 118,570 90,841 ------- ------- -------Current tax 15,082 34,916 7,728 ------- ------- -------Deferred tax 31,520 32,077 33,227 ------- ------- -------Retirement benefit obligation 3,587 2,056 3,587 ------- ------- -------Total liabilities 1,531,605 1,670,251 1,686,597 ========= ========= ========= FBD HOLDINGS PLC GROUP CASH FLOW STATEMENT For half year ended 30th June 2007 Half Year Half Year Year Ended Ended Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000'sOperating activities Profit before taxation for the period 49,748 157,445 296,780 Adjustments for:Losses (gains) on investments held for trading and held to maturity 20,107 3,186 (30,128)Depreciation of property, plant and equipment 2,608 1,978 3,525Share-based payment expense - 341 512Increase in technical provisions 11,660 21,029 37,077Increase in fair value of investment property - - (4,200)Profit on sale of land at La Cala - (83,626) (81,774) -------- ------- -------Operating cash flows before movement in working capital 84,123 100,353 221,792 Decrease (increase) in receivables 6,294 (31,350) (26,261)Increase in payables 10,954 64,418 29,326 ------- ------- -------Cash generated from operations 101,371 133,421 224,857 Income taxes paid (100) (3,458) (44,348) ------- ------- -------Net cash from operating activities 101,271 129,963 180,509 ------- ------- ------- Investing activitiesInvestments held for trading 12,850 (29,578) (51,495)Investments available for sale 261 751 13,456Investments held to maturity (103,699) - (157,976)(Purchase)/sale of lands, buildings & inventory (10,172) 83,960 69,469Purchase of fixtures & fittings (3,100) (5,248) (7,038)Purchase of investment property (113) (11,060) (28,125)Loans and advances (4,610) 13,755 43,504Deposits invested with financial institutions 234,247 (42,142) 115,069 ------- ------- -------Net cash from (used in) investing activities 125,664 10,438 (3,136) ------- ------- ------- Financing activitiesDividends paid (15,967) (14,446) (77,672)Repurchase of shares (31,134) (129,212) (129,213)Proceeds of re-issue of ordinary shares 1,730 414 5,432Return of capital (175,996) - -(Decrease) increase in bank loans (7,848) (973) 19,879 ------- ------- -------Net cash used in financing activities (229,215) (144,217) (181,574) ------- ------- ------- Net decrease in cash and cash equivalents (2,280) (3,816) (4,201)Cash and cash equivalents at the beginning of the period 37,423 41,897 41,897Effect of foreign exchange rate changes (121) (334) (273) ------- ------- -------Cash and cash equivalents at the end of the period 35,022 37,747 37,423 ======= ======= ======= FBD HOLDINGS PLC GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For half year ended 30th June 2007 Half year Half year Year Ended Ended Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000'sIncome recognised directly in equityGain on available for sale investments - 531 806 Deferred Tax on insurance contracts - 1,261 -Revaluation of owner occupied property - - 8,476Actuarial loss - - (3,869)Taxation on income/expense recognised directly in equity - (66) (2,400) ------- ------- -------Net income recognised directly in equity - 1,726 3,013 ------- ------- -------TransfersTransfers to income statement on sale of available for sale investments - (6,856) (30,913)Transfer to income statement on sale of land and buildings (434) - -Taxation on transfers to income statement 87 857 3,865 ------- ------- ------- (347) (5,999) (27,048) ------- ------- -------Profit after taxation 44,700 122,600 246,832 ------- ------- -------Total recognised income and expense 44,353 118,327 222,797 ======= ======= ======= Attributable to:Equity holders of the parent 44,353 118,327 222,744Minority interest - - 53 ------- ------- ------- 44,353 118,327 222,797 ======= ======= ======= FBD HOLDINGS PLC GROUP STATEMENT OF CHANGES IN EQUITY For half year ended 30th June 2007 Revaluation Attributable Preference Share Capital and Other Translation Retained to Ordinary Share Minority Capital Reserves Reserves Reserve Earnings Shareholders Capital Interests Total €000's €000's €000's €000's €000's €000's €000's €000's €000's Balance at 1January 2006 23,557 9,813 47,706 435 394,616 476,127 2,923 6,423 485,473 Profit aftertaxation - - - - 122,599 122,599 - 1 122,600 Exchangetranslationadjustment - - - (334) - (334) - - (334) Ordinarydividends paid - - - - (14,277) (14,277) - - (14,277) Buyback of ownshares - - - - (129,212) (129,212) - - (129,212) Cancellationof own shares (2,280) 2,280 - - - - - - - Reissue ofordinaryshares - - - - 414 414 - - 414 Recognition ofshare basedpayments - 341 - - - 341 - - 341 Transfer toincomestatement onsale ofavailable-for-saleinvestments - - (6,856) - - (6,856) - - (6,856) Gain onavailable-for-saleinvestments - - 531 - - 531 - - 531 Deferred taxon insurancecontracts - - - - 1,261 1,261 - - 1,261 ------ -------- ------- -------- ------- -------- -------- ------- --------Balance at 30June 2006 21,277 12,434 41,381 101 375,401 450,594 2,923 6,424 459,941 ====== ======== ======= ======== ======= ======== ======== ======= ======== Revaluation Attributable Preference Share Capital and Other Translation Retained to Ordinary Share Minority Capital Reserves Reserves Reserve Earnings Shareholders Capital Interests Total €000's €000's €000's €000's €000's €000's €000's €000's €000's Balance at 1January 2007 21,277 12,605 27,540 162 435,935 497,519 2,923 6,476 506,918 Profit aftertaxation - - - - 44,540 44,540 - 160 44,700 Return ofcapital - 351 - - (175,996) (175,645) - - (175,645) Buyback of ownshares - - - - (31,134) (31,134) - - (31,134) Ordinarydividends paid - - - - (15,798) (15,798) - - (15,798) Reissue ofordinaryshares - - - - 1,730 1,730 - - 1,730 Transfer toincome statementon sale of land and buildings - - (436) - - (436) - - (436) Exchangetranslationadjustment - - - (121) - (121) - - (121) ------ -------- ------- -------- ------- -------- -------- ------- --------Balance at 30June 2007 21,277 12,956 27,104 41 259,277 320,655 2,923 6,636 330,214 ====== ======== ======= ======== ======= ======== ======== ======= ======== FBD HOLDINGS PLC SUPPLEMENTARY INFORMATION For half year ended 30th June 2007 Note 1 - Accounting policies The accounting policies used by the Group to prepare the interim financialstatements for the six month period ended 30th June 2007 are the same as thoseused to prepare the annual financial statements for the year ended 31st December 2006. Note 2 - Longer term investment return The rates of investment return underlying the calculation of the longer terminvestment return are set out below. These rates are reviewed annually andreflect both historical experience and the directors' current expectations for investment returns. Half Year Half Year Ended Ended Year Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) % % % Government gilts - held for trading 4.00 3.50 3.50 - held to maturity Actual Rates Actual Rates Actual Rates Quoted shares 7.50 7.00 7.00Deposits with banks 3.63 2.75 2.75Investment properties held for rental 6.00 6.00 6.00 Note 3 - Operating profit by activity Half Year Half Year Ended Ended Year Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000's Underwriting 53,681 65,422 124,596Non underwriting 11,437 10,299 33,919 ------- ------- ------- 65,118 75,721 158,515 ======= ======= =======Non underwriting profit is analysed as follows: Half Year Half Year Ended Ended Year Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000'sLeisure and leisure property development 7,397 3,728 9,673Financial Services/Other 4,267 2,740 4,628Capital fund (227) 3,831 19,618 ------- ------- ------- 11,437 10,299 33,919 ======= ======= ======= Note 4 - Underwriting result Half Year Half Year Ended Ended Year Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000's Gross written premiums 205,455 203,996 407,256 ======= ======= ======= Net earned premiums 175,596 173,166 345,959Net claims incurred (122,777) (108,558) (224,712)Net operating expenses (26,661) (22,959) (44,705) ------- ------- -------Underwriting result 26,158 41,649 76,542 ======= ======= ======= Note 5 - Profit on sale of land at La Cala On 23rd February 2006, Ranchos Reunidos S.A., a 100% subsidiary of the Group,entered into a conditional agreement to sell a major portion of the buildingdevelopment land which it owned at La Cala Resort, Mijas, Costa del Sol, Spain, for a total consideration of €201,000,000. The consideration was constituted in two parts, apportioned between two tranches of land. On 22nd June 2006, the initial consideration payment of €100,000,000 arising on the Tranche I land was received. The remainder of the Tranche I consideration, amounting to €21,000,000 was received on 30th June 2007. The Group recognised a profit of €81,774,000 on the sale of the Tranche I development land in the year to 31st December 2006. The consideration, amounting to €80,000,000, for the Tranche II land, becomespayable at a later date, contingent on receipt of final planning approval from the Spanish Regional Planning Authority. Note 6 - Dividends Half year Half year Year Ended Ended Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) €000's €000's €000'sPaid in Period:2006 Interim dividend of 24.00c per share on ordinary shares of 60c each - - 8,2472006 Final dividend of 45.00c (2005: 37.50c) per share on ordinary shares of 60c each 15,798 14,277 14,277Dividend of 8.4c per share on 14% non-cumulative preference shares of 60c each - - -2006 Dividend of 4.8c (2005: 4.8c) per share on 8% non-cumulative preference shares of 60c each 169 169 169Special dividend of nil (2006: 160c) per share on ordinary shares of 60c each - - 54,979 ------ ------ ------ 15,967 14,446 77,672 ====== ====== ====== Proposed:2006 dividend of 8.4c per share on 14% non- cumulative preference shares of 60c each 113 - 1132006 Dividend of 4.8c per share on 8% non-cumulative preference shares of 60c each - - 1692006 Final dividend of 45.00c per share on ordinary shares of 60c each - - 15,7142007 Interim dividend of 27.5c (2006: 24.00c) per share on ordinary shares of 60c each 9,394 8,247 -Special dividend of nil (2006: 160c) per share on ordinary shares of 60c each - 54,979 - ------ ------ ------ 9,507 63,226 15,996 ====== ====== ====== Note 7 - Ordinary share capital Half year Half year Year Ended Ended Ended 30/06/07 30/06/06 31/12/06 (Unaudited) (Unaudited) (Audited) Number €000's €000's €000'sAuthorised:At beginning and end of period/year: Ordinary shares of 60c each 51,326,000 30,796 30,796 30,796 ========== ====== ====== ====== Issued and fully paid:At beginning of period/year 35,461,206 21,277 23,557 23,557Cancellation of shares - - (2,280) (2,280) ---------- ------ ------ ------At end of period/year 35,461,206 21,277 21,277 21,277 ========== ====== ====== ====== The total number of shares held as treasury shares at 30th June 2007 was1,296,730. ENDS This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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