7th Mar 2007 08:00
FBD Holdings PLC07 March 2007 FBD HOLDINGS PLC PRELIMINARY ANNOUNCEMENT RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2006 2006 2005FINANCIAL HIGHLIGHTS €000s €000s % •Gross written premiums 407,256 389,472 +4.6% •Net earned premiums 345,959 332,371 +4.1% •Operating profit* 158,515 162,624 -2.5% •Profit on sale of land at La 81,774 - n/a Cala Cent Cent •Operating earnings per share* 376.60 363.54 +3.6% •Dividend per share 69.00 57.50 +20.0% •Special dividend per share (paid) - La Cala 160.00 - n/a land sale •Net assets per share 1,424.76 1,250.62 +13.9% * Based on longer term investment return. Commenting on the results, Philip Fitzsimons, Chief Executive said: "We are pleased to announce another year of excellent results for 2006. During the year we continued to grow new business volumes and Premium Income while further reducing premiums. Sustainable and competitive pricing combined with good service levels supported expansion of our customer base. Continued premium reductions impacted the underwriting result, increasing the combined ratio to 77.9 per cent. Ongoing savings from national initiatives in road safety and claims costs are essential to enable further premium reductions. " ENDS 7th March 2007 For Reference Telephone--------------- ----------- FBD Philip Fitzsimons, Chief Executive 01 4093200 Andrew Langford, Finance Director 01 4093200 Murray Consultants Joe Murray 01 4980300 FBD HOLDINGS PLC PRELIMINARY RESULTS ANNOUNCEMENT FBD Holdings plc ("FBD" or "the Group") is pleased to announce excellent resultsfor the year ended 31st December 2006. RESULTS Group operating profit amounted to €158.5m., compared to €162.6m. in 2005. Total operating income grew to €427.9m (2005: €404.5m). It is comprised of netearned premiums of €346.0m (2005: €332.4m) and investment income (calculated onthe basis of longer term returns) of €48.0m (2005: €44.4m) arising in theGroup's insurance underwriting business plus net income (i.e after expenses) of€33.9m (2005: €27.7m) from the Group's non-underwriting activities. Expenses amounting to €269.4m. (2005: €241.9m) related to the Group'sunderwriting business. They comprise claim costs of €224.7m (2005: €202.5m.) andoperating expenses of €44.7m. (2005: €39.4m). Of the Group's operating profit of €158.5m, €124.6m (2005: €134.9m) isattributable to underwriting and €33.9m (2005: €27.7m) to non-underwriting, asdetailed below. Operating earnings per share, based on longer term investment returns amountedto 376.60c (2005: 363.54c) Group profit before tax reflects the operating profit of €158.5m (2005:€162.6m), profit on the sale of land at La Cala of €81.8m (2005: nocomparative), short-term fluctuations in investment returns of €61.4m (2005:€26.0m) and finance costs of €4.9m (2005: €3.4m). UNDERWRITING Insurance underwriting (FBD Insurance) is the Group's primary business activity. Gross written premiums (i.e. before reinsurance) increased to €407.3m., comparedto €389.5m. in 2005. In the light of the reductions in average premium levelsthat prevailed in the market in 2006, this increase is satisfactory and reflectscontinued growth in customer numbers in the period. Net earned premiums amounted to €346.0m. (2005: €332.4m). The net claims incurred charge, amounted to €224.7m. (2005: €202.5m). comprisedof net claims paid of €193.6m. (2005: €163.7m.) plus the movement in netoutstanding claims provisions of €31.1m (2005: €38.8m). Increased exposures dueto the increase in customer numbers together with less benign weather conditionsthan those experienced in 2005 contributed to the increase. Net operating expenses amounted to • 44.7m. (2005: €39.4m). The foregoing premium/claim/expenses figures resulted in an underwriting profitof €76.6m. (2005: €90.5m.). The 2006 net operating ratios were: loss ratio - 65.0% (2005: 60.9%); expenseratio - 12.9% (2005: 11.9%); combined ratio - 77.9% (2005: 72.8%). After crediting investment income of €48.0m. (2005: €44.4m), the operatingprofit of FBD's underwriting business amounted to €124.6m. (2005: €134.9m). NON-UNDERWRITING The Group's non-underwriting activities include leisure/property development,financial services and the investment of non-allocated capital ("capital fund").The contribution to operating profit from these activities amounted to €33.9m.(2005: €27.7m.) Leisure and property interests, which include the La Cala and Sunset Beachresorts in Spain and the Tower Hotel Group in Ireland, contributed €10.1m (2005:€13.6m.) to operating profits. The 2005 comparative figure included fees arisingon completion of a property related loan. As noted earlier, the profit of €81.8machieved on the Tranche 1 portion of land sold at La Cala contributedsignificantly to the Group's pre-tax profits. La Cala's golf and hotel resultsimproved and residential property sales of 38 units were achieved. The SunsetBeach Resort and Tower Hotels Group's results were ahead of 2005. The Group's financial service businesses, which include general insurancebroking (FBD Brokers), life assurance/pension broking/investment advice (FBDLife) and instalment finance (Abbey Finance) contributed €4.3m. (2005: €3.3m.)to operating profits. FBD Life maximised the opportunities for growth in thefavourable climate that has existed in its markets, particularly for retailinvestment products. Meanwhile, FBD Brokers continued to be impacted by ongoingreductions in premium levels. The capital fund, which is invested in "blue chip" equities delivered strongreturns which amounted to €19.5m. (2005: €10.8m.) BALANCE SHEET Total assets at year end amounted to €1,686.6m (2005: €1,564.4m), an increase of7.8% on 2005. Ordinary shareholders' funds amounted to €497.5m (2005: €476.1m),an increase of 4.5% for the year. The strong operating performance, the profiton the sale of land at La Cala and the performance of our equity portfoliocontributed to the increase. Included in short term fluctuations in investmentreturns is a gain of €33.7m in respect of the disposal of "available for saleinvestments". Shareholders' funds at 31st December 2005 included €27.0m of thisgain. The share buyback, amounting to €129.0m undertaken by the Company in June2006 and the La Cala special dividend of €55.0m impacted the year endshareholders' funds' figure. Net Assets per share have grown to 1,424.76c (2005:1,250.62c), an increase of 13.9%. The buyback and cancellation of shares,already mentioned, contributed to this increase. FINAL DIVIDEND Reflecting the Group's excellent results and the Board's commitment to increasethe dividend to earnings ratio, a final dividend of 45.0c (2005: 37.5c) pershare is being recommended by the Directors. This will bring the total dividendfor the year to 69.0c (2005: 57.5c) an increase of 20%. The final dividend will be paid on the 25th May 2007 to shareholders on theCompany's Register at close of business on 16th March 2007. The final dividendis subject to withholding tax ("DWT") except for shareholders who are exemptfrom DWT and who have furnished a properly completed Composite Resident Form tothe Company's Registrar. OUTLOOK The Board is confident that the Group will continue its successful developmentin the year ahead. Underwriting: Year to date, the trend of premium reductions which has been a feature of theIrish insurance market in recent years has continued, with intense pricecompetition occurring across all classes of business. We will continue to targetchallenging new business volumes at premium levels we deem to be appropriate andare pleased to report that, year to date, premium income is ahead of last year'scorresponding figure. The insurance environment experienced in Ireland in recent years is the resultof unique factors. These include fraudulent claim prevention measures that wereintroduced, road safety initiatives (e.g. random breath testing, better lawenforcement, extension of penalty points), health and safety measures in theworkplace/home and the establishment of the Personal Injuries Assessment Board("PIAB"). The assumptions which each individual insurer makes as to the ongoingimpact these matters will have on future claims costs, influences its pricingdecisions. Unless further ongoing savings from these and other initiatives areachieved, the pace of premium reductions will advance the convergence of Irish &European combined ratios. FBD is exercising its own judgements in this environment and will continue tofocus on strategies and plans that are designed to grow our underwritingbusiness on the basis of efficiency, sustainability and profitability. These arethe critical measures we apply in pursuing our growth objectives. Our approachfor growing our business in the prevailing market is built around these keyperformance criteria. Our ongoing investment in people, technology and facilities underpins our growthplans. This investment commitment is evidenced by the recent establishment ofour new Business Support Centre in Mullingar, Co. Westmeath. The new Centre,which has a start-up complement of 50 new staff, will increase the capacity ofour network and play an important role in enabling us to deliver on our businessdevelopment plans. Non-Underwriting: As regards our non-underwriting businesses, we will continue to effectstrategies that are focused on maximising returns to shareholders. Our property,leisure and financial service interests face challenges and opportunities thatare unique to their individual sectors. Each of these businesses are pursuingambitious plans to ensure success and we are confident that they will perform toexpectations. Regarding La Cala, the decision last year to dispose of development land at theresort, at significant profit, confirms the ongoing commercial assessment theGroup undertakes in relation to all its businesses and the focus it maintains onoptimising shareholders' interests. As investors are aware, a special dividend,amounting to €55m in total, was paid in August 2006 in respect of Tranche 1 landnet proceeds. Payment for the second Tranche of land awaits final approval fromthe Regional Planning Authority. As previously advised, due to delays beingexperienced in this process, final approval is unlikely to be received beforeyear end. A distribution of the remaining net sale proceeds, estimated at €65m,will be made when payment of final monies, triggered by the planning approval,is received. As regards La Cala's ongoing activities, we expect golf and hotelperformance and residential property sales to deliver their budgets for theyear. Likewise, we are optimistic that Sunset Beach Resort and Tower Hotel Groupwill achieve their profit targets. Our financial services businesses have commenced the year well and we areconfident that they will deliver satisfactory performances. Capital: Capital efficiency is a fundamental principle which the Group applies in all itsbusinesses. The Company has repatriated €265m of capital to shareholders, inaddition to significantly increased ordinary dividend payments, over the past 2years. The utilisation of capital generated for the maximum benefit ofshareholders will continue to be determined in the context of the developmentstrategies which the Group pursues. It is a matter to which the Board givesongoing attention. Meanwhile, shareholders' funds will continue to be investedprudently. ENDS Note Management will present these results to analysts at 10 am. to-day. A copy ofthe presentation will be posted on the Group's website, www.fbd.ie, at thattime. FBD HOLDINGS PLC GROUP INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2006 2006 2005 €000s €000s Turnover 693,926 531,747 ====== ====== Income Net premium earned 345,959 332,371 Non-underwriting 33,919 27,739operating income Investment income -longer term rate of return 48,054 44,435 ------------ ------------ 427,932 404,545 Expenses Change in insuranceliabilities net of (31,064) (38,809)reinsurance Claims paid, net ofrecoveries from (193,648) (163,666)reinsurers Operating expenses (44,705) (39,446) ------------ ------------ Operating profit Note 1 158,515 162,624 Profit on the sale of Note 3 81,774 -land at La Cala Investment income - 61,350 25,956short term fluctuation Finance costs (4,859) (3,425) ------------ ------------ Profit before tax 296,780 185,155 Income tax expense (49,948) (23,701) ------------ ------------ Profit for the year 246,832 161,454 ====== ====== Attributable to: Equity holders of the parent 246,641 161,500 Minority interest 191 (46) ------------ ------------ 246,832 161,454 ====== ====== 2006 2005 Cent Cent Earnings per 60c 678.82 416.09ordinary share ====== ====== Diluted earnings per 60c 671.28 411.45ordinary share ====== ====== FBD HOLDINGS PLC GROUP BALANCE SHEET - ASSETS AT 31ST DECEMBER 2006 2006 2005 €000s €000s Property and equipmentLand and buildings 213,564 196,923Fixtures and fittings 16,815 13,302 ------------- ------------- 230,379 210,225 ------------- ------------- Intangible assetsDeferred acquisition costs 13,517 11,849 ------------- ------------- InvestmentsInvestment property 81,181 48,856Investments held for trading 558,850 477,310Available for sale investments 3,727 47,290Investments held to maturity 171,799 13,740Deposits with banks 327,973 443,042 ------------- ------------- 1,143,530 1,030,238 ------------- ------------- Inventories 66,433 62,496 ------------- -------------Loans and receivables 122,762 141,673 ------------- ------------- Reinsurers' share of technicalprovisionsProvision for unearned premiums 21,953 19,412Claims outstanding 50,600 46,622 ------------- ------------ 72,553 66,034 ------------- ------------ Cash and cash equivalents 37,423 41,897 ------------- ------------ Total assets 1,686,597 1,564,412 ======= ====== FBD HOLDINGS PLC GROUP BALANCE SHEET - LIABILITIES AT 31ST DECEMBER 2006 2006 2005 €000s €000s EquityShare capital 21,277 23,557Capital reserves 12,605 9,813Revaluation reserves 27,540 47,706Translation reserves 162 435Retained earnings 435,935 394,616 ------------ ------------ Shareholders' funds - equity interests 497,519 476,127Preference share capital 2,923 2,923 ------------ ------------ Total shareholders' funds 500,442 479,050Minority interests 6,476 6,423 ------------ ------------Total equity 506,918 485,473 ------------ ------------ Liabilities Technical provisionsProvision for unearned premiums 197,507 188,953Claims outstanding 734,439 699,397 ------------ ------------ 931,946 888,350 ------------ ------------Bank and other loans 112,350 99,831 ------------ ------------ Creditors 90,841 51,434 ------------ ------------ Current tax 7,728 3,395 ------------ ------------Deferred tax 33,227 33,873 ------------ ------------Retirement benefit obligation 3,587 2,056 ------------ ------------Total liabilities 1,686,597 1,564,412 ====== ====== FBD HOLDINGS PLC GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2006 2006 2005 €000s €000s Operating activities Profit before tax for the year 296,780 185,155Adjustments for:Gains on investments held for trading and heldto maturity (30,128) (41,031)Depreciation of property and equipment 3,525 3,487Share-based payment expense 512 774Increase in fair value of investment property (4,200) -Increase in technical provisions 37,077 44,696Profit on sale of land at La Cala (81,774) - --------- --------- Operating cash flows before movement inworking capital 221,792 193,081Increase in receivables (26,261) (4,274)Increase (decrease) in payables 29,326 (26,665) --------- ---------Cash generated from operations 224,857 162,142 Income taxes paid (44,348) (20,516) --------- ---------Net cash from operating activities 180,509 141,626 --------- --------- Investing activitiesInvestments held for trading (51,495) (96,510)Investments held to maturity (157,976) -Investments available for sale 13,456 (5,162)Sale (purchase) of land, buildings and 69,469 (13,430)inventoryPurchase of fixtures and fittings (7,038) (6,242)Purchase of investment property (28,125) (24,656)Loans and advances 43,504 (3,789)Deposits invested with financial institutions 115,069 95,378 --------- ---------Net cash used in investing activities (3,136) (54,411) --------- --------- Financing activitiesDividends paid (77,672) (18,158)Repurchase of ordinary shares (129,213) (81,238)Proceeds of re-issue of ordinary shares 5,432 1,409Increase in bank loans 19,879 1,243 --------- ---------Net cash used in financing activities (181,574) (96,744) --------- ---------Net decrease in cash and cash equivalents (4,201) (9,529)Cash and cash equivalents at the beginning of 41,897 51,362the yearEffect of foreign exchange rate changes (273) 64 --------- --------- Cash and cash equivalents at the end of the 37,423 41,897year ======== ======== FBD HOLDINGS PLC GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31ST DECEMBER 2006 2006 2005 €000s €000s Income recognised directly in equityGain on available for sale investments 806 18,033Revaluation of owner occupied property 8,476 -Actuarial loss (3,869) (3,802)Taxation on income/expense recognised directlyto equity (2,400) (2,254) --------- ---------Net income recognised directly in equity 3,013 11,977 --------- --------- TransfersTransfers to income statement on sale ofavailable for sale investments (30,913) (6,384)Transfer to income statement on sale of landand buildings - (1,071) Taxation on transfers to income statement 3,865 801 --------- --------- (27,048) (6,654) --------- --------- Profit after taxation 246,832 161,454 --------- ---------Total recognised income and expense 222,797 166,777 ======== ======== Attributable to:Equity holders of the parent 222,744 166,823Minority interest 53 (46) --------- --------- 222,797 166,777 ========= ======== FBD HOLDINGS PLC GROUP RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31ST DECEMBER 20062005 Revaluation Attributable Preference Share Capital and other Translation Retained to ordinary share Minority capital reserves reserves reserve earnings shareholders capital interests Total €000s €000s €000s €000s €000s €000s €000s €000s €000s Balance at1st January 2005. 25,151 7,445 38,581 371 334,905 406,453 2,923 16,333 425,709 Profit aftertaxation - - - - 161,500 161,500 - (46) 161,454 Exchangetranslationadjustment - - - 64 64 - - 64 Dividendspaid - - - - (18,158) (18,158) - - (18,158) Buyback ofown shares - - - - (81,238) (81,238) - - (81,238) Cancellationof own shares (1,594) 1,594 - - - - - - - Reissue ofordinaryshares - - - - 1,409 1,409 - - 1,409 Recognition ofshare based payments - 774 - - - 774 - - 774 Transfer to incomestatement on sale ofavailable for sale - - (5,583) - - (5,583) - - (5,583)investments Gain on availablefor sale - - 15,779 - - 15,779 - - 15,779investments Purchase of minority interest - - - - - - - (9,864) (9,864) Actuarial loss on pension fund valuation - - - - (3,802) (3,802) - - (3,802) Sale of landand buildings - - (1,071) - - (1,071) - - (1,071) ---------- ---------- -------- ------- -------- ------- ------ ----- ------ Balance at31 December 2005 23,557 9,813 47,706 435 394,616 476,127 2,923 6,423 485,473 2006Profit aftertaxation - - - - 246,641 246,641 - 191 246,832 Exchangetranslationadjustment - - - (273) - (273) - - (273) Dividends - - - - (77,672) (77,672) - - (77,672)paid Buyback ofown shares - - - - (129,213) (129,213) - - (129,213) Cancellationof own shares (2,280) 2,280 - - - - - - - Reissue ofordinaryshares - - - - 5,432 5,432 - - 5,432 Recognitionof sharebased - 512 - - - 512 - - 512payments Transfer toincome statement onsale of available for sale investments - - (27,048) - - (27,048) - - (27,048) Gain onavailablefor sale investments - - 706 - - 706 - - 706 Actuariallosson pension - - - - (3,869) (3,869) - - (3,869)fundvaluation Revaluationof owner occupied property - - 6,176 - - 6,176 - (138) 6,038 ------- ------- --------- -------- -------- --------- ------- -------- ------ Balance at31 December 2006 21,277 12,605 27,540 162 435,935 497,519 2,923 6,476 506,918 ===== ===== ===== ===== ====== ===== ===== ===== ===== FBD HOLDINGS PLC SUPPLEMENTARY INFORMATION FOR YEAR ENDED 31ST DECEMBER 2006 Note 1 - Operating profit by activity 2006 2005 €000s €000s Underwriting 124,598 134,885Non underwriting 33,917 27,739 -------- -------- 158,515 162,624 ======== ======== Note 2 - Underwriting result 2006 2005 €000s €000s Gross written premiums 407,256 389,472 ======== ======== Net earned premiums 345,959 332,371Net claims incurred (224,712) (202,475)Net operating expenses (44,705) (39,446) -------- --------Underwriting result 76,542 90,450 ======== ======== % % Ratios:Net loss ratio 65.0 60.9Net expense ratio 12.9 11.9Combined ratio 77.9 72.8 Note 3 Profit on sale of land at La CalaOn 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 intwo parts, apportioned between two tranches of land. On 22nd June 2006, the initial consideration payment of €100,000,000 arising onthe Tranche I land was received. The remainder of the Tranche I consideration,amounting to €21,000,000 is due to be received on 30th June 2007. The Group hasrecognised a profit of €81,774,000 on the sale Tranche I development land in theyear 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 fromthe Spanish Regional Planning Authority. FBD HOLDINGS PLC SUPPLEMENTARY INFORMATION (continued) FOR YEAR ENDED 31ST DECEMBER 2006 Note 4 - Dividends 2006 2005 €000s €000s Paid in Period 2006 Interim dividend of 24.00c (2005: 20.00c) pershare on ordinary shares of 60c each 8,247 7,5782005 Final dividend of 37.50c (2005: 27.28c) pershare on ordinary shares of 60c each 14,277 10,298Dividend of nil (2005: 8.4c) per share on 14%non-cumulative preference shares of 60c each - 113 Dividend of 4.8c (2005: 4.8c) per share on 8%non-cumulative preference shares of 60c each 169 169 Special dividend of 160.00c (2005: nil) per shareon ordinary shares 54,978 - --------- -------- 77,672 18,158 ========= ======== Proposed: Dividend of 8.4c (2005: nil) per share on 14%non-cumulative preference shares of 60c each 113 -Dividend of 4.8c per (2005: 4.8c) per share on 8%non-cumulative preference shares of 60c each 169 1692006 Final dividend of 45.00c (2005 37.50c) pershare on ordinary shares of 60c each 15,714 14,277 ---------- ---------- 15,996 14,446 ========== ========= Note 5 - Share capital 2006 2005 Number €000s €000s AuthorisedAt beginning of year:Ordinary shares of 60c each 51,326,000 30,796 30,796 ---------- --------- ---------- Issued and fully paid:At beginning of year 39,261,206 23,557 25,151Cancellation of shares (3,800,000) (2,280) (1,594) ---------- ---------- ---------- At end of year 35,461,206 21,277 23,557 ========== =========== ========= The total number of shares held as treasury shares at 31st December 2006 was541,775. 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