12th Apr 2006 07:01
IFG Group PLC12 April 2006 PRELIMINARY RESULTSFOR THE YEAR ENDED 31 DECEMBER 2005 Adjusted Adjusted Total Total measures measures IFRS IFRS 2005 2004 2005 2004 •'000 •'000 Notes •'000 •'000 Revenue 92,674 83,836 1 92,674 95,328 Operating profit 12,868 10,315 2 5,152 386 Profit/(loss) beforetaxation 10,683 6,718 2 2,967 (3,211) Adjusted earnings pershare - in cent 12.58 7.49 3 n/a n/a Basic earnings perordinary share - incent n/a n/a 1.69 (5.15) Renewal income 24,993 23,859 n/a n/a Group net debt 29,600 36,700 Dividend per ordinaryshare - in cent 3.00 2.40 Notes: 1. Revenue in relation to adjusted measures excludes amounts in respect of employee leasing in 2004. The results of the employee leasing unit are included under associates in 2005. 2. Adjusted profit/(loss) and earnings per share figures are stated before exceptional items, amortisation of intangible assets and share option charges. 3. Reconciliation of adjusted earnings: Year ended Year ended 31 Dec 2005 31 Dec 2004 Per share cent Earnings Per share cent Earnings •'000 •'000Profit/(loss)attributable toequity holders 1.69 1,098 (5.15) (3,353)Exceptionaladjustments (net oftax) (note 4) 10.15 6,595 12.08 7,865Amortisation ofintangible assets 0.16 101 0.18 115Share optioncharges 0.58 378 0.38 247 -------- -------- -------- --------Adjusted earnings 12.58 8,172 7.49 4,874 ======== ======== ======== ======== Commenting on the results, Mark Bourke, Interim Chief Executive, said: "The quality of our people combined with the strength of our financial positionwill deliver strong growth in each of our divisions going forward. We willmaintain our focus on cash generation and the growth of high quality incomestreams. 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 actuarial and pensioneer trustee business. The Group operates in two business segments: •Financial Services; •Trustee and Corporate Services 2005 saw a continuing improvement in the performance of both segments. Withinthe segments there was strong growth in both the Irish Property and UK basedActuarial and Pensioneer Trustees businesses. There was also continued growth inthe International business. These results were complemented by steadyperformances in the UK and Irish advisory businesses. Adjusted profits before tax were €10.7 million on revenues of €92.7 million(total profit before tax of €3.0 million) after the items noted below. Thiscompares with €6.7 million and €83.8 million respectively in the previous year(total loss before tax of €3.2 million on total revenues of €95.3 million). Adjusted profits before tax for the year as reflected are before: (i) Provision for the past business review of the Pension Release business of €1.9 million;(ii) Funding of senior directors' pension of €0.6 million;(iii) Proceeds from the sale of Irish business of €0.1 million;(iv) Loss on sale of investment of €0.2 million;(v) Share option charges of €0.4 million;(vi) Amortisation of intangible assets of €0.1 million. The net effect of these items is a charge of €3.1 million and, in addition, goodwill of €4.6 million has been written off in relation to IFG FinancialServices Limited, the general UK IFA business. Total adjustments to operatingprofit are €7.7 million. Details of 2005 and 2004 exceptional items are set outin Note 4. Adjusted earnings per share were 12.58 cent (2004: 7.49 cent). On a total IFRSbasis, basic earnings per share were 1.69 cent (2004: losses of 5.15 cent).Group Financing As at 31 December 2005 As at 31 December 2004 Core Investment Total Core Investment Total •'m •'m •'m •'m •'m •'mTotal net bankcommitment 26.6 3.0 29.6 30.2 3.8 34.0 Deferred consideration - 2.7 ------- ------- Total net commitment 29.6 36.7 ======= ======= The gross cash generation was in excess of €13.0m, of which €6.0m was reinvestedin the International Division with the remainder reducing debt. The €13.0m cashgenerated was substantially operating cash with €0.8m coming from a propertydisposal in Kent. 2005 also saw the final payment of our deferred considerationof €2.7m and therefore the conclusion of Trade Credit Brokers' earnout. While we will continue with the disciplined approach to the Group's debt, wewill in parallel seek to develop each of our core divisions through acombination of organic growth and bolt on acquisitions where price and fitcombine to make a compelling case. Group Performance The performance of the Group in the twelve months split between its mainactivities was as follows: Total operating Total operating profit/(loss) profit/(loss) 2005 2004 •'000 •'000Trustee & Corporate Service International Trustee & Corporate Service 5,106 5,338 Financial Services & Unallocated 3,220 2,496Pensioneer Trustee - UK 872 (1,496)Financial Services - UK ---------- ----------Mortgage and Title Insurance - Ireland 3,005 2,024FinancialServices including Central Overhead - Ireland 665 1,814Employee Leasing - 139 ---------- ----------Adjusted operating profit 12,868 10,315Exceptional items - Financial Services (7,237) (9,567)Share option charges - Trustee & Corporate Services (76) (52) - Financial Services (302) (195)Amortisation of intangibles - Financial Services (101) (115) ---------- ----------Total operating profit 5,152 386 ========== ========== Operating profit - Trustee & Corporate Services 5,030 5,286 - Financial Services 122 (4,900) ---------- ----------Total operating profit 5,152 386 ========== ========== International Trustee and Corporate Services Adjusted profits of this division remain strong at €5.1m (2004: €5.3m). Thisresult belies the strength of the underlying business as the division alsogenerated interest income of €470k (included in finance income) and incurred setup costs of €250k for its new operations in Spain. The underlying growth is alsohighly favourable when considered against an exceptional performance in theprior year. During the year the International Business made two bolt on acquisitions. (i) In April the Group purchased Mularon Limited ('Mularon') which was a small privately owned corporate trust business based in Shannon, Ireland. Total consideration was €525k; (ii)Bank of Scotland Trust Company (International) Limited ('BOST') was purchased on 23 December 2005. This acquisition is a bolt on to IFG Jersey Limited and has, in addition to standard corporate services, a specialism in offshore employee benefit trust administration. The total consideration was €10.0m which included cash acquired of €4.4m. These acquisitions mark the execution of the International strategy in terms ofservice locations and distribution capability. In addition to the acquisition weare already benefiting from our newly established relationship with Halifax Bank of Scotland.In conjunction with these acquisitions the Group continued todevelop its Eastern European client base and has invested in resources toservice the opportunities in this area. The division will continue to perform in 2006 and expects to maintain its trackrecord of strong growth. The business environment continues to be favourable asoffshore locations tighten up compliance and large institutions retreat fromcustodial work. Financial Services Pensioneer Trustee - UK The results of the Pensioneer Trustee business show growth year on year of 29%.This is due to good growth in both Bristol and London, as well as theelimination of losses in Manchester. Although the benefits anticipated by the original "A" day proposals relating towider asset classes (in particular residential property) will not nowmaterialise, we expect continued organic growth in the SIPP market and there maybe opportunities for bolt on acquisitions. Financial Services - UK Over the past three years the Financial Services business has been adisappointing performer overall coping with legacy business complaints, everincreasing regulatory burdens and generally poor market conditions. The combined performance of these businesses has improved from a loss of €1.5mto an adjusted profit of €0.9m. This improvement is largely due to losselimination in our pension release business, with turnover growing byapproximately 8%. This growth is a significant achievement given the complaintsexperience in relation to legacy issues. As stated last year the UK was subject to a number of remedial actions whichhave resulted in the successful turnaround of certain loss makers. This wasagainst a back drop of a high level of complaints and a requirement forintensive work on the past business review of the pension release business whichis now closed to new business. There has been an additional provision in relation to the now concluded pastbusiness review. We believe, as stated on 15 March 2006, that this issue is nowbehind us. Leaving aside the successful management of the past business related issues, theUK now looks set for positive performance going forward particularly in theniche carved out by Saunderson House Limited and John Siddalls Group. Saunderson House Limited, the high quality fee based advisory business, has beenthe most significant contributor to profits of the Group's advisory operation inthe UK. This has grown both top line and operating profit at margins which arerarely found in this area. John Siddalls Group, which deals with UK nationalsgoing offshore, has outperformed against expectations and is a business which,we believe, has significant potential in a growing but under serviced market.These niche specialisms are the UK's growth engines and will feature more aslegacy issues recede.Mortgage and Title Insurance - Ireland In Ireland our property division surged ahead in 2005 with the combined mortgageand title insurance profit growing by 48% (excluding the non-conformingdividend). This was achieved on the back of a 25% growth in turnover on both mortgages andtitle insurance. In 2005 cheque issues to clients from lenders were €1.5bn (2004€1.16bn). This represents an increase of 30%on the prior year. The venture withGE Capital Woodchester in non-conforming lending performed to target but wasdisappointing in the context of overall development of the non-conforming orsub-prime market. The Group has now developed a mortgage product for the over sixties inconjunction with Sentinel (a New Zealand provider) which is new to the Irishmarket. This is expected to grow significantly in the 2006-2007 periods and hasalready met with considerable interest in the market place. Financial Services including Central Overhead - Ireland The financial advisory business has recovered from a weak first six months whichhad been impacted by losses in the Group's investment management business, grouppensions business and policy trading unit. The latter two operations have beenturned around whilst the Group has exited its investment management business inthe first quarter of 2006. Our credit insurance subsidiary has successfully negotiated its first year postearn-out and is increasing its focus on ways to build on its dominant positionin the market. As a Group, we see considerable scope in our advisory business going forwardparticularly in the context of an advisory network which operates in the samemanner as our mortgage division.Dividends Your Board is recommending a final dividend of 2.05 cent per share which whenadded to the interim dividend already paid, makes a total of 3.00 cent pershare, an increase of 25% on the previous year. Subject to shareholder approval,the final dividend will be paid on 21 July 2006 to shareholders on the Registeron 7 July 2006. Consolidated Income StatementYear Ended 31 December 2005 2005 2004 Notes •'000 •'000 Revenue 3 92,674 95,328Cost of sales (4,385) (19,226) -------- -------- Gross profit 88,289 76,102 Operating expensesAdministrative expenses (76,470) (66,719)Other expenses (6,667) (8,997) -------- -------- Total operating expenses (83,137) (75,716) -------- -------- Operating profit 3 5,152 386 -------- -------- Operating profit before exceptional items 12,389 9,953Exceptional items 4 (7,237) (9,567) -------- --------Operating profit 3 5,152 386 Finance income 996 718Finance costs (3,287) (4,421)Share of profit of associates 106 106 -------- -------- Profit/(loss) before income tax 2,967 (3,211)Income tax (expense)/credit 5 (845) 516 -------- -------- Profit/(loss) for the period 2,122 (2,695) ======== ======== Profit/(loss) for period attributable to: Equity holders of the Company 1,098 (3,353)Minority interest 1,024 658 -------- -------- 2,122 (2,695) ======== ======== Earnings per ordinary share (cent) Basic 6 1.69 (5.15) Diluted 6 1.69 (5.15) The 2004 consolidated income statement has been restated since the release ofthe Group's transition document. See Note 8 for details. Consolidated Balance SheetAs at 31 December 2005 2005 2004 •'000 •'000Assets NotesNon-current assetsProperty, plant & equipment 4,891 5,870Intangible assets 54,581 51,203Investments in associates 527 471Deferred income tax assets 1,347 1,492Investments - 630Available for sale financial assets 188 -Other receivables 266 526 --------- --------Total non-current assets 61,800 60,192 --------- -------- Current AssetsInventories - 228Trade and other receivables 35,009 34,511Current income tax asset 320 265Cash and cash equivalents 7 17,281 17,944 --------- --------Total current assets 52,610 52,948 --------- -------- --------- --------Total assets 3 114,410 113,140 --------- -------- LiabilitiesNon-current liabilitiesBorrowings 29,616 39,026Deferred income tax liabilities 543 -Retirement benefit obligations 912 881Provisions for liabilities and charges 893 -Other non-current liabilities 1,250 1,250 --------- --------Total non-current liabilities 33,214 41,157 --------- -------- Current liabilitiesTrade and other payables 38,334 32,425Current income tax liabilities 1,165 1,577Borrowings 17,210 12,936Provisions for liabilities and charges 2,187 3,441 --------- --------Total current liabilities 58,896 50,379 --------- -------- Total liabilities 3 92,110 91,536 --------- -------- --------- --------Net assets 22,300 21,604 ========= ======== EquityCapital & reserves attributable to equity holders ofthe companyShare capital 7,828 7,827Share premium 44,861 44,867Other reserves 1,224 661Retained earnings (32,887) (33,124) --------- -------- 21,026 20,231Minority interest 1,274 1,373 --------- -------- Total equity 22,300 21,604 ========= ======== The 2004 consolidated balance sheet has been restated since the release of theGroup's transition document. See Note 8 for details. Consolidated Cash Flow StatementAs at 31 December 2005 2005 2004 Note •'000 •'000 Cash flows from operating activitiesCash generated from operations 7 21,010 23,258Interest received 674 383Income taxes paid (1,347) (825) --------- -------- Net cash generated from operating activities 20,337 22,816 --------- -------- Cash flows from investing activitiesPurchase of property, plant and equipment (1,306) (2,011)Sale of property, plant and equipment 937 110Purchase of subsidiary undertakings net of cash (6,251) (492)acquiredDeferred consideration on prior year acquisitions (2,687) (29,136)Interest on loan notes issued on acquisitions - (75)Sale of interest in subsidiary undertaking - 8,381 --------- -------- Net cash used in investing activities (9,307) (23,223) --------- -------- Cash flows from financing activitiesDividends paid (1,663) (1,444)Interest paid (3,400) (3,819)Dividends paid to minority interests (1,123) (606)Proceeds from issue of share capital (5) 63Repayment of debt (1,219) (1,739)Proceeds from long-term borrowings - 20,897Senior unsecured notes repaid (5,860) (13,408)Payment of finance lease liabilities (182) (294) --------- -------- Net cash used in financing activities (13,452) (350) --------- -------- Net decrease in cash and cash equivalents (2,422) (757) Cash and cash equivalents at the beginning of the 16,307 17,033yearEffect of foreign exchange rate changes 451 31 --------- -------- Cash and Cash Equivalents at end of year 7 14,336 16,307 ========= ======== 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 flowstatement cash and cash equivalents include the following: 2005 2004 •'000 •'000 Cash and Cash Equivalents 7 17,281 17,944Bank overdrafts (2,945) (1,637) ---------- -------- 7 14,336 16,307 ========== ======== The 2004 consolidated cash flow statement has been restated since the release ofthe Group's transition document. See Note 8. 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 •'000At 1 January 2004 7,800 44,831 414 (4,773) (21,979) 26,293 1,370 27,663 Currency translation adjustments - - - (1,505) - (1,505) (1) (1,506) Net expense recogniseddirectly inequity - (1,505) - (1,505) (1) (1,506)Loss for the period - - - - (3,353) (3,353) 658 (2,695) -------- --------- -------- --------- --------- ----------- --------- ---------Total recognisedincome for 2004 - (1,505) (3,353) (4,858) 657 (4,201) -------- --------- -------- --------- --------- ----------- --------- --------- Dividends - - - - (1,514) (1,514) (606) (2,120)Issue of sharecapital 27 36 - - - 63 - 63Sale of interest insubsidiary with minorityinterest - - - - - - (48) (48) Equity shareoptions granted - - 247 - - 247 - 247 -------- --------- -------- --------- --------- ----------- --------- --------- 27 36 247 - (1,514) (1,204) (654) (1,858) -------- --------- -------- -------- --------- ----------- ---------- --------- At 31 December 2004 7,827 44,867 661 (6,278) (26,846) 20,231 1,373 21,604 ======== ========= ======== ========= ========= =========== ======== =========Adjustments on adoption of IAS 32 & IAS 39 Convertible bond-equitycomponent - - 338 - (184) 154 - 54Fair value losses -available for sale financial assets - - (119) - - (119) - (119) -------- --------- -------- --------- --------- ----------- --------- -------- At 1 January 2005 7,827 44,867 880 (6,278) (27,030) 20,266 1,373 21,639 Currency translationadjustments - - - 1,006 - 1,006 - 1,006 Fair value movement onavailable-for-saleinvestments - - (34) - - (34) - (34) -------- -------- -------- --------- --------- ----------- ------- ------Net(expense)/incomerecogniseddirectlyin equity - - (34) 1,006 - 972 - 972Profit for the period - - - - 1,098 1,098 1,024 2,122 -------- --------- -------- --------- --------- ----------- -------- -----Total recognisedincome for 2005 - - (34) 1,006 1,098 2,070 1,024 3,094 -------- --------- -------- --------- --------- ----------- --------- ----- Dividends - - - - (1,683) (1,683) (1,123) (2,806)Issue of share capital 1 6 - - - 7 - 7Equity share optionsgranted - - 378 - - 378 - 378Buy back oftreasury shares - (12) - - - (12) - (12) ------- ---------- -------- --------- --------- ----------- --------- ----- 1 (6) 378 - (1,683) (1,310) (1,123) (2,433) ------- ---------- -------- --------- --------- ----------- --------- ----- At 31 December 2005 7,828 44,861 1,224 (5,272) (27,615) 21,026 1,274 22,300 The 2004 consolidated statement of changes in equity has been restated since therelease of the Group's transition document. See Note 8. Notes 1. General information IFG Group and its subsidiaries (together the Group) are engaged in the provisionof financial advisory services and international corporate and trustee services.The Company is a public company, incorporated and domiciled in the Republic ofIreland. The address of its registered office is IFG House, Booterstown Hall,Booterstown, County Dublin, Ireland. The financial statements have been approvedfor issue by the Board of Directors on 11 April 2006. 2. Basis of preparation of the consolidated financial statements The consolidated financial statements of IFG Group plc, which are presented inEuro ('•') have been prepared using the historical cost convention as modifiedby the measurement at fair value of share options and available-for-salefinancial assets. Previously the Group prepared its audited annual financialstatements in accordance with Irish GAAP. In accordance with EU Regulations, theGroup is required to present its annual consolidated financial statements forthe year ended 31 December 2005 in accordance with IFRS issued by theInternational Accounting Standards Board ("IASB") and adopted for use by the EU. The Group's transition date to IFRS is 1 January 2004 and the comparativefinancial information for the year ended 31 December 2004 has been restated on aconsistent basis with those accounting policies applied by Group in preparingits first full financial statements in accordance with IFRS at 31 December 2005,except where otherwise required or permitted by IFRS 1 "First time adoption ofInternational Accounting Standards" (IFRS 1). Since the publication of thetransition document on 28 September 2005 a number of errors have come to lightthat have been corrected. See Note 8 for further details. The transition to IFRS is accounted for in accordance with IFRS 1. This standardsets out how to adopt IFRS for the first time and mandates that most standardsare to be fully applied retrospectively. There are certain limited exemptionsfrom this requirement. The significant decisions taken in respect of availing,or otherwise, of the exemptions available are outlined below. - Business combinations: Business combinations prior to the transition date (1January 2004) have not been restated;- Share-based payments: IFRS 2 'Share-based Payments' applies to equityinstruments such as share options. IFG has elected to implement the standard inrespect of share options granted after 7 November 2002 and not vested by 1January 2005;- Financial instruments: Financial instruments in the comparative periodspresented in the Annual Report 2005 are recorded on the Irish GAAP basisapplicable in that year, rather than in accordance with IAS 32 ' FinancialInstruments : Disclosure and Presentation' and IAS 39 'Financial Instruments:Recognition and Measurement';- Retirement benefit obligations: Cumulative actuarial gains and losses at dateof transition have been recognised in full in equity. IFG has elected to adoptthe 'corridor approach' in relation to recognition of actuarial gains andlosses;- Foreign exchange: Cumulative translation differences for all foreignoperations are deemed to be zero at date of transition. Upon subsequent disposalof a foreign operation, the gain or loss will exclude any translationdifferences prior to transition but will include all later differences. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise its judgment in the process of applying the Company's accountingpolicies. These assumptions affect the reported amounts of revenues, expenses,assets and liabilities, and the disclosure of contingent liabilities at the dateof the financial statements. If in the future such estimates and assumptionswhich are based on management's best judgement at the date of the financialstatements, deviate from the actual outcome, the original estimates andassumptions will be modified as appropriate in the year in which thecircumstances change.The accounts in this preliminary announcement are not the statutory accounts ofthe company 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 2004 has in fact been so annexed. A copy of the statutoryaccounts in respect of the year ended 31 December 2005 will be annexed to thecompany's annual return for 2005. The auditors of the company have made areport, without any qualification on their audit of the statutory accounts ofthe company in respect of the year ended 31 December 2004 and the directors haveapproved the statutory accounts of the company in respect the year ended 31December 2005 on 11 April 2006. 3. Segment information Primary reporting format-business segments At 31 December 2005, 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 year ended 31 December 2005 are as follows: Financial Trustee & Unallocated Total services corporate services •'000 •'000 •'000 •'000 Revenue 72,090 20,584 - 92,674 Operatingprofit/(loss) 631 5,030 (509) 5,152Finance costs(net) (2,291)Share ofprofit ofassociate 106 - - 106 -------- Profit beforeincome tax 2,967Income taxexpense (845) --------Profit for theyear 2,122 -------- The segment results for the year ended 31 December 2004 are as follows: Financial Trustee & Unallocated Total services corporate services •'000 •'000 •'000 •'000 Revenue 77,358 17,970 - 95,328 Operatingprofit/(loss) (3,648) 5,286 (1,252) 386Finance costs(net) (3,703)Share ofprofit ofassociate 106 - - 106 Profit beforeincome tax (3,211)Income taxexpense 516 --------Profit for theyear (2,695) -------- Other non-cash segment items included in the income statement are as follows: 2005 2004 Financial Trustee & Other Total Financial Trustee & Other Total services corporate services corporate services services •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Depreciation 685 474 210 1,369 754 368 289 1,411 -------- -------- ------ ------ -------- -------- ------ ------- Amortisationof intangibles 41 - 60 101 56 - 59 115 -------- -------- ------ ------ -------- -------- ------ ------- Impairment ofgoodwill 4,619 - - 4,619 7,374 - - 7,374 -------- -------- ------ ------ -------- -------- ------ ------- The segment assets and liabilities at 31 December 2005 and capital expenditurefor the year then ended are as follows: 2005 2004 Financial Trustee & Other Total Financial Trustee & Other Total services corporate services corporate services services •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Assets 74,559 33,131 6,720 114,410 79,700 24,311 9,129 113,140 -------- -------- -------- -------- -------- -------- ------- ------- Liabilities (13,341) (23,247) (55,522) (92,110) (14,122) (13,145) (64,269) (91,536) -------- -------- -------- -------- -------- -------- ------- ------- Capitalexpenditure 962 6,518 16 7,496 1,340 890 237 2,467 -------- -------- -------- -------- -------- -------- ------- -------Segment assets consist primarily of property, plant & equipment, intangibleassets, trade receivables and cash. They exclude both income tax and deferredtax and investments. Segment liabilities comprise operating liabilities. They exclude items such astaxation and corporate borrowings. Capital expenditure comprised additions to property, plant and equipment andintangible assets, including additions resulting from acquisitions throughbusiness combinations. It does not include additions acquired by finance leases. Secondary reporting format-geographical segments The Group's two main business segments operate in three main geographical areas. The home country of the company is Ireland. Revenue 2005 2004 •'000 •'000 Ireland 40,195 47,386UK 30,923 30,010IOM & Jersey 19,479 16,984Other countries 2,077 948 --------- ---------- 92,674 95,328 --------- ----------Revenue is allocated based on the country where thecustomer is located.Total assets 2005 2004 •'000 •'000 Ireland 28,218 32,654UK 52,624 55,227IOM & Jersey 32,843 23,887Other countries 198 901 --------- ---------- 113,883 112,669Associates 527 471 --------- ---------- 114,410 113,140 --------- ----------Total assets are allocated based on where the assets arelocated.Capital Expenditure 2005 2004 •'000 •'000 Ireland 623 757UK 327 820IOM & Jersey 6,512 890Other countries 34 - --------- ---------- 7,496 2,467 --------- ----------Capital expenditure is allocated based on where the assets are located. 4. Exceptional Costs 2005 2004 •'000 •'000 Goodwill impairment (i) (4,619) (7,374)Pension release provision (ii) (1,950) -Pension funding (iii) (570) (570)Sale of investments (iv) (233) -Disposal of Irish businesses (v) 135 483Pension release closure (vi) - (1,590)Exceptional payments (vii) - (419)Impairment of investments (viii) - (97) --------- -------- (7,237) (9,567) --------- -------- (i) Goodwill impairmentDuring the second half of the year the goodwill carried in IFG FinancialServices UK Limited was deemed to be impaired, due to a reduction inprofitability, and has been written off in full. An amount of €4,619,000 hasbeen charged to the income statement. 2004On 23 November 2004 the Group announced its intention to exit the pensionrelease business carried on by its subsidiary Berkeley Jacobs Financial ServicesLimited. The goodwill being carried at that time of €7,374,000 was deemed to beimpaired and was written off in full. (ii) Pension release provisionIn the year ended 31 December 2003 an amount for €2,700,000 was provided tocover the cost of undertaking a review of past business practices at BerkeleyJacobs Financial Services Limited and possible redress following aninvestigation by the FSA. This provision was based on best estimates at thattime. During 2005 as the review progressed, greater clarity was achieved on thenumber of cases to be reviewed and the methodology to calculate the potentialredress. Arising from these developments, an additional amount of €1,950,000 hasbeen provided. It is anticipated that the additional amount provided will besufficient.(iii) Pension fundingThe executive directors received an aggregate payment of €570,000 in each of2003, 2004 and 2005. These payments which are shown as part of directors'remuneration were made as the directors' pensions were deemed under-funded. Nofurther payments are expected in 2006. (iv) Sale of investmentsDuring 2005, the Group disposed of quoted equities for an amount of €56,000.Their market value had fallen during the year and this resulted in anexceptional loss on disposal of €233,000. (v) Disposal of Irish businessesIn December 2005 the Group disposed of its interest in an associate companyFIRSL Resources Limited for €150,000. The gain on disposal amounted to €135,000. 2004On 31 December 2001 the Group disposed of 75% of its interest in IFG Technologyand Development Limited, Lawlink Limited and Companies Information DirectLimited. Deferred consideration of €504,000 was recognised during 2004 as thefinal profit from the disposal of these interests. Additionally a loss of€21,000 arising from a correction of prior year estimates was recognised in thetwelve months to 31 December 2004 following the completion of the sale of 50% ofthe Group's share of IFG Investment and Mortgage Services Limited and IFGMortgage and Assurance Services Limited to GE Capital Woodchester. (vi) Pension release closureDuring 2004 the Group closed its pension release subsidiary to new business.Costs incurred and provisions for future costs as a result of this decisionincluded write-off of fixed assets, employee related costs and professional feesamounting to €1,590,000. (vii) Exceptional paymentsExceptional bonus payments of €419,000 were made during 2004 to employees anddirectors of the Irish pension business in lieu of earnout in future years. (viii) Impairment of investments At year end 2003, the Group held quoted equities at a value of €386,000. Theirmarket value fell during 2004 and the Group considered the investment to beimpaired. The exceptional charge in relation to this diminution in value was€97,000. 5. Income tax expense/ (credit) 2005 2005 2005 2004 Exceptional •'000 •'000 •'000 •'000 The taxation charge is based onprofit on ordinary activities for theyear and comprises: Corporation taxIrish (at 12.5%):- current year 429 - 429 533- prior year (39) - (39) 3 UK and other (primarily at 30%):- current year 730 - 730 729- prior year (538) - (538) - --------- --------- --------- -------- 582 - 582 1,265 Deferred taxationIrish:- current year (138) (45) (183) (1,372) UK and other;- current year 1,043 (597) 446 (409) --------- --------- --------- -------- 1,487 (642) 845 (516) --------- --------- --------- -------- 6. Earnings per ordinary share 2005 2004 •'000 •'000BasicProfit/(loss) after income tax and minority interest(•'000) 1,098 (3,353) -------- -------- Weighted average number of ordinary shares in issuefor the calculation of earnings per share 64,958,171 65,065,051 -------- -------- Basic earnings/(loss) per share (cent) 1.69 (5.15) -------- -------- DilutedProfit/(loss) after income tax and minority interest(•'000) 1,098 (3,353) -------- --------Weighted average number of ordinary shares in issuefor the calculation of earnings per share 64,958,171 65,065,051Dilutive effect of share options and warrants 169,889 38,078 -------- -------- Weighted average number of ordinary shares for thecalculation of diluted earnings per share 65,128,060 65,103,129 -------- -------- Diluted earnings/(loss) per share (cent) 1.69 (5.15) -------- -------- The number of shares used in the calculation of basic earnings per share anddiluted earnings per share has been calculated in accordance with InternationalAccounting Standard No.33. Diluted earnings per share is based on the weightedaverage number of Ordinary Shares used in the basic earnings per sharecalculation, with an adjustment to reflect the bonus element of the averagenumber of options and warrants outstanding during the year. The bonus elementarises when the exercise price is lower than the average market price during theyear.7. Cash generated from operations Reconciliation of operating profit to net cash from operating activities 2005 2004 •'000 •'000Profit/(loss) for the period 2,122 (2,695)Impairment of investments and goodwill 4,852 7,471Depreciation and amortisation 1,660 1,689Profit on sale of fixed assets (5) (11)Finance costs 3,287 4,421Finance income (996) (718)Tax charge/(credit) 845 (516)Profit on associated undertakings (106) (106)Currency translation adjustment 3 (856)Non-cash share based payments 378 247Decrease in trade & other receivables 1,126 1,478Pension release closure - 823Decrease/(increase) in inventories 228 (598)Loan to associated undertakings (7) (90)Increase trade & other payables 7,623 12,719 --------- -------- 21,010 23,258 --------- -------- Analysis of net debt Opening balance Cash flow Acquisition Other Closing and non cash balance disposals changes •'000 •'000 •'000 •'000 •'000 Cash 17,944 4,876 (6,013) 474 17,281Overdraft (1,637) (1,285) - (23) (2,945) --------- --------- --------- --------- -------- 16,307 3,591 (6,013) 451 14,336 Loans due withinone year (5,485) (2,855) - (9) (8,349)Loans due afterone year (19,954) 4,074 - (14) (15,894)Senior unsecurednotes due < 1 yr (5,673) - - (164) (5,837)Senior unsecurednotes due > 1 yr (18,992) 5,860 - (556) (13,688)Finance leases (221) 182 - (74) (113) --------- --------- --------- --------- -------- Total (34,018) 10,852 (6,013) (366) (29,545) --------- --------- --------- --------- -------- 8. Reissue of transition document Since the publication of the Group's transition document a number of errors havecome to light that have been corrected against financial information of prioryears. The errors identified are as follows: •A tax debtor for an amount of €415,000 relating to 2003 has been written off due to an incorrect group relief election. In addition a tax debtor on consolidation of €735,000 has been written off. Opening retained earnings and current income tax asset have both been reduced at 1 January 2004 by €1.15 million to reflect this change. •An under-accrual of VAT on expenses incurred in 2002 and 2003 amounting to €72,000 has been reflected through a reduction in opening retained earnings and recognition of an additional creditor in trade and other payables in the transition balance sheet at 1 January 2004. A further expense for €83,000, for a similar error, has been recognised in the 2004 income statement by means of an increase in administration expenses. Trade and other payables has also increased by €83,000. •A review of the revenue recognition policy in one of the Group's subsidiaries required a reduction of €245,000 in opening retained earnings and an increase in deferred income on 1 January 2004. Additionally this has resulted in a deduction from revenue in 2004 of €44,000 being processed with a corresponding increase in trade and other payables. •Since the publication of the Group's transition document the Group has reconsidered its accounting policy for accounting for investment properties. The Group's policy is to carry investment properties at cost. In the transition document they were carried in error at valuation. This error has been corrected by reducing investment in associates and decreasing other reserves by €1.57 million. For further information: please contact Mark Bourke on +353 1 275 2800, e-mail: [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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