RNS Number:1141M
London Scottish Bank PLC
10 June 2003
Strong Interim Results For The Half Year Ended 30 April 2003
10 June 2003
London Scottish Bank, the speciality provider of financial services, today
announces a strong set of interim results for the half year ended 30 April 2003.
Highlights Include
* Operating profit before goodwill amortisation increased by 13.2% to
#9.4m (2002 : #8.3m)
* Group profit before tax increased by 10.8% to #8.9m (2002 : #8.0m).
* The Group's gross receivables increased by 16.9% to #240.7m (2002 :
#205.9m).
* Basic earnings per share increased by 9.3% to 4.7p (2002 : 4.3p).
* The interim dividend payable to shareholders is 1.65p, an increase
of 7.8% (2002 : 1.53p).
Trevor Furlong, Chairman of London Scottish Bank plc said :
"I am pleased to announce that the Group has continued to deliver double digit
growth in pre-tax profits whilst continuing to successfully invest in the
infrastructure of the business to support its future growth.
The investment in information technology has continued in the first half of this
financial year and the new IT hardware infrastructure has now been implemented
across all of the Group's branches.
The recent acquisition of Pacific Home Loans has added to our broking activities
and is a further illustration of our strategic investment in the Consumer Credit
division.
The Group launched its first retail deposit offering to the general public in
March 2003. This initiative was extremely successful and has met our objectives
in full by raising #28m of retail funding.
Whilst significant investments are being made throughout the business the trend
in profitable growth has continued and although there are suggestions of a
reduction in UK consumer confidence the Group remains positive about the
prospects for its business."
For more information please contact :
London Scottish Bank plc Tel: 020 638 9571 (10 June until 12.30pm)
Roy Reece, Chief Executive Tel: 0161 830 2306 (thereafter)
Mark Tattersall, Finance Director
Citigate Dewe Rogerson Tel: 020 7638 9571
Patrick Toyne Sewell
Sarah Gestetner
Results for the half year ended 30 April 2003
London Scottish Bank reports a strong set of interim results with pre-tax
profits up by 10.8% compared to the first half of the last financial year. The
Board is committed to continuing the investment in the Group's range of
specialist businesses.
Segmental Analysis
April 2003 April
#000's 2002 %
#000's
Consumer Credit 4,097 3,716 10.3
Robinson Way 2,833 2,409 17.6
Reinsurance 1,342 1,142 17.5
Factoring & Leasing 1,138 1,043 9.1
Operating Profit Before 9,410 8,310 13.2
Goodwill Amortisation
Goodwill Amortisation 525 294 78.6
Group Profit Before Tax 8,885 8,016 10.8
The Group's gross receivables grew by 16.9%; the divisional summary is as
follows :
April 2003 April 2002
#000's #000's %
Unsecured 182,764 160,410 13.9
Secured 22,593 14,623 54.5
Factoring 10,570 10,060 5.1
Leasing 24,797 20,849 18.9
240,724 205,942 16.9
Consumer Credit
Operating profit for the division was up by 10.3% to #4.1m (2002: #3.7m) and
gross receivables grew by 17.3% to #205.4m (2002 : #175.0m). Unsecured lending
increased by 13.9% to #182.8m with secured receivables up 54.5% to #22.6m at 30
April 2003. The Group's Broking division continues to increase the amount of
both secured and unsecured leads it places with the division's lending
operations. Over 75% of new business written by the secured lending unit was
sourced via the Group's broking activities. Pacific Home Loans, which was
acquired in February 2003, is performing in line with expectations, and is now
working closely with the Group's other broking units to maximise lending
opportunities for the Consumer Credit business.
The division's bad debt charge at #2.6m is #154k (6.2%) higher than last year.
An increase of 6.2% in the bad debt charge when receivables grew by 17.3%
emphasises the high credit quality of the Group's new business. Overall,
Consumer Credit bad debt provisions of #23.4m are #2.0m up on last year and
represent 15.3% of net balances outstanding at 30 April 2003.
Robinson Way
The debt collection market in the first half of 2003 has seen the same trends as
in the previous financial year, with a shift away from the traditional third
party collection business. As a result the number of accounts for traditional
collection is down compared to the first six months of 2002, but Robinson Way
has continued to respond to the changes in the marketplace by acquiring further
portfolios for collection. Long term portfolios costing #6.8m have been
acquired since October 2002. The collections performance on this debt and the
portfolios purchased in earlier years has enabled Robinson Way to continue to
grow its profits to #2.8m for the first six months, up by 17.6% on the first
half of 2002. Collections commission increased by 16% to #8.3m with the
increased income from the debt portfolios compensating for a flat performance in
the traditional third party collections business.
Reinsurance
Profits in the Reinsurance business at #1.3m were #200k (17.5%) up compared to
2002. Underwriting profit of #710k was #80k (12.7%) up on the first 6 months of
2002. The average interest earning funds for the period ending April 2003 were
#16.4m, an increase of #2.3m on the six months ending April 2002. Interest
income fell marginally from #338k for 2002 to #330k for the first six months of
this financial year, despite the increase in deposits held offshore. The
reduction in interest income was as expected and reflected the lower interest
rate environment this year. The offshore deposit balances are matched against
our variable rate borrowings and, consequently, the reduction in interest
receivable in the Isle of Man was compensated for elsewhere in the Group where
interest payable was lower.
Factoring and Leasing
The combined Factoring and Leasing profits at #1.1m are #95k (9.1%) up compared
to the six months ending 30 April 2002. The Factoring business has performed
well in the first six months with profits increasing to #703k representing a
9.7% (#62k) increase compared to 2002. Competitive pressures persist which are
having some impact on new business volumes, with funds advanced at #10.6m, #0.5m
(5.1%) higher than April 2002. Income increased by 10.8% (#170k) to reach #1.7m
for the first 6 months. The bad debt charge at #70k is consistent with the
previous financial year and provides further evidence of the excellent credit
management of the Factoring business. Overall, the Factoring division has
performed well with good profit and income growth in what remains a very
competitive marketplace.
The Leasing business has moved forward strongly with receivables up to #24.8m,
an increase of #4m (18.9%) compared to April 2002. Client numbers increased by
22.4% and income at #1.5m is #0.3m up (27.1%) reflecting the increase in
receivables. The bad debt charge of #148k is up by #82k compared to 2002
(#66k), comprising actual losses of only #28k (2002 : #18k) and an increase in
provisions. In fact, provisions of #257k now represent 1.04% of balances in
line with our target for the expanded business. Leasing profits at #435k for
the first six months were slightly ahead of expectations and were up by 8.2%
(#33k) compared to the first six months of 2002 (#402k).
IT Development
The IT development, which we referred to in our last two announcements, has
continued in the first six months. The investment will transform the Group's
Branch operations as well as providing the platform to integrate all our
Consumer Credit business units into a network linked to our central support
services. The benefits in terms of efficiency and effectiveness are anticipated
to be significant once the systems are implemented, but we will incur increased
costs over the development period.
In the first six months the project has progressed in line with our plan. All
London Scottish's branches now have IT equipment installed and are connected to
our internal network delivering basic systems and services. Bespoke software
was delivered in line with our timetable and detailed testing has now started;
it remains our plan to roll out the software to the branches during the last
quarter of 2003 and the first quarter of 2004 and the project remains on budget.
For the six months ended 30 April 2003 the Group has incurred #0.5m of cost
associated with the project, which is in line with our plan. We anticipate
benefits to be delivered from the second half of 2004.
Retail Funding
In mid March, for the first time, the Group marketed a retail deposit offering
to the general public. This offering was initiated to develop a new avenue of
funding, whilst broadening the range of services London Scottish provide to the
retail financial services sector, as well as raising the public profile of the
Group.
The product offering was fixed interest bonds with terms of one, two or three
years with interest rates of 4.10%, 4.35% and 4.40% respectively. The target
was to raise #20m - #30m within a 3-6 month period, whilst developing a new
client base of around 2,000 customers. The initiative has been a great success
with #28m of funds raised from 1,700 new customer accounts.
We have now closed the offering but, given its success we anticipate
re-launching this particular market initiative later in the year.
Additional Financial Information
* London Scottish Reinsurance interest earning deposits held offshore
in the Isle of Man at 30 April 2003 were #17.4m (2002 : #14.8m) an
increase of 17.3%.
* The Group's bad debt charge at #2.9m was 9.4% higher than the half
year ending April 2002 (#2.6m). Outlined below is the charge by
division.
April 2003 April 2002
#000's #00's
Consumer Credit 2,634 2,480
Factoring 70 60
Leasing 148 66
2,852 2,606
* Group bad debt provisions at #24.1m are #2.1m higher than last
year (#22.0m), an increase of 9.4%.
* Goodwill amortisation of #525k is #231k up on the first six
months of 2002 (#294k) due to the increased goodwill arising from
a full six months charge for Sterling Direct and the acquisition
of Pacific Home Loans in February 2003.
* The Group's tax charge of #2.5m represents an effective rate of
28.3% (2002 : 29.6%).
* The net tangible assets of the Group amounted to #49.4m (2002 :
#43.2m).
* Group borrowings increased to #133.6m (2002 : #105.6m) and the
gearing ratio is 2.7 times (2002 : 2.4).
Current Trading
Our range of speciality businesses continue to show positive signs in the first
few weeks of trading since 30 April. New business in Consumer Credit remains
encouraging and the lending businesses continue to work with the enlarged
Broking division to source customers for the Group. Robinson Way has seen an
increase in numbers of accounts for collection and more opportunities to
purchase debt portfolios. The Leasing and Factoring businesses continue to grow
and Reinsurance is performing in line with expectations. The Board is confident
about the financial prospects for the current year.
RESULTS (unaudited)
For the half year ended 30 April 2003
2003 Increase 2002 31.10.02
#000's #000's #000's
%
Interest receivable
U K 23,383 11.9 20,895 41,521
Overseas 330 (2.4) 338 689
23,713 11.7 21,233 42,210
Interest payable 3,120 15.9 2,692 5,473
Net interest income 20,593 11.1 18,541 36,737
Fees and commissions receivable
Collection commission 8,273 16.0 7,129 15,852
Earned reinsurance premiums 1,716 9.5 1,567 3,268
Insurance commission 1,358 10.8 1,226 2,509
Introduction commission 6,569 122.9 2,947 9,093
Factoring income 1,749 10.8 1,579 3,092
Other income 1,804 31.9 1,368 1,820
21,469 35.7 15,816 35,634
Fees and commissions payable - bank charges (358) (18.6) (440) (702)
Operating income 41,704 23.0 33,917 71,669
Administrative expenses 28,732 29.6 22,177 46,600
Depreciation and amortisation 710 (13.8) 824 1,560
Provision for bad and doubtful debts 2,852 9.4 2,606 5,585
Operating expenditure 32,294 26.1 25,607 53,745
Group profit before goodwill amortisation 9,410 13.2 8,310 17,924
Goodwill amortisation 525 78.6 294 751
Group profit on ordinary activities before tax 8,885 10.8 8,016 17,173
Taxation on group profit 2,511 5.8 2,373 5,001
Group profit on ordinary activities after tax 6,374 13.0 5,643 12,172
Dividend 2,329 15.1 2,023 7,232
Retained profit 4,045 11.7 3,620 4,940
Dividend per share 1.65p 7.8 1.53p 5.40p
Earnings per share - basic 4.7p 9.3 4.3p 9.2p
Earnings per share - fully diluted 4.7p 9.3 4.3p 9.2p
CONSOLIDATED BALANCE SHEET (unaudited)
30 April 2003
2003 2002 31.10.02
#000's #000's #000's
Assets
Loans and advances to customers 240,724 205,942 216,000
Less:
Provision for bad and doubtful debts 24,105 22,043 22,778
Unearned interest and insurance 55,557 46,289 46,640
161,062 137,610 146,582
Cash and balances at central banks 378 416 1,384
Loans and advances to banks 24,071 18,116 17,256
Interest in associated undertaking 381 369 381
Intangible fixed assets 19,345 14,844 14,483
Tangible fixed assets 13,731 11,978 13,092
Other assets 10,473 7,199 8,925
Prepayments and accrued income 3,440 1,483 1,192
Total assets 232,881 192,015 203,295
Liabilities
Deposits by banks 112,794 90,376 99,736
Customer accounts 20,991 3,181 2,862
Debt securities in issue 6,500 12,133 9,467
Loan notes 340 3,667 3,651
Other liabilities 11,209 11,098 13,440
Accruals and deferred income 9,527 10,676 11,441
161,361 131,131 140,597
Provisions for liabilities and charges
Deferred taxation 2,777 2,813 2,777
164,138 133,944 143,374
Share capital 14,116 13,222 13,446
Share premium 5,205 2,166 2,690
Merger reserve 8,135 2,293 4,124
Shares to be issued 3,081 7,500 5,500
Profit and loss account 38,206 32,890 34,161
Equity shareholders' funds 68,743 58,071 59,921
Total liabilities 232,881 192,015 203,295
CONSOLIDATED CASH FLOW STATEMENT (unaudited)
For the half year ended 30 April 2003
2003 2002
#000's #000's #000's #000's
Net cash inflow from operating activities (see note 1 below) 16,729 6,142
Taxation
Corporation tax paid (2,381) (2,213)
Capital expenditure and financial investment
Purchase of tangible fixed assets
(1,464) (888)
Sale of tangible fixed assets 111 2,394
(1,353) 1,506
Acquisitions
Purchase of business (669) (366)
Cash balances acquired - 143
(669) (223)
Equity dividends paid (5,204) (4,698)
Net cash inflow before financing 7,122 514
Financing
Issue of shares 59 21
Repayment of loan stock (3,311) (15)
Capital element of finance lease rental payments (103) (155)
Net cash outflow from financing (3,355) (149)
Increase in cash in the period (see note 3 below) 3,767 365
2003 2002
#000's #000's
Notes to Cash Flow Statement
1) Reconciliation of operating profit to net cash flow from operating activities
Profit on ordinary activities before tax 8,885 8,016
Increase in prepayments and accrued income (2,248) (84)
Decrease in accruals and deferred income (1,914) (103)
Depreciation and amortisation 1,235 1,118
Loss/(profit) on sale of tangible fixed assets 4 (275)
(Increase)/decrease in other assets (1,548) 1,444
Increase in other liabilities 617 1,981
Increase in advances to customers (14,480) (11,749)
Increase in loans and advances to overseas banks (2,042) (1,473)
(Decrease)/increase in customer accounts on demand (23) 314
Increase in customer accounts on deposits 18,152 -
Increase in deposits by UK banks 10,091 6,953
16,729 6,142
2) Analysis of changes in financing 2003
Share Capital, Share Premium and Merger Reserve #000's
At 1 November 2002 20,260
Share capital issued 7,196
At 30 April 2003 27,456
3) Analysis of balances of cash Change in
30.04.03 01.11.02 period
#000's #000's #000's
Cash and balances at central banks (378) (1,384) (1,006)
Loans and advances to UK banks - repayable on demand (6,697) (1,924) 4,773
Loans and advances to overseas banks - repayable on demand - - -
Increase in cash in the period (7,075) (3,308) 3,767
Shareholder Information
1. The interim dividend will be paid on 18 July 2003 to shareholders on
the register on 20 June 2003.
2. This announcement is to be sent to all Ordinary Shareholders of London
Scottish Bank plc. Copies will also be available for members of the
public at the Company's registered office: London Scottish House, Mount
Street, Manchester, M2 3LS - Tel: 0161 834 2861 or visit our website at
www.london-scottish.com
3. The figures for the year ended 31 October 2002 do not constitute the
Company's statutory accounts for that year. Those accounts have
been reported on by the Company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and
did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
4. The Company's Registrars are :
Capital IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent,
BR3 4TU - Tel: 020 8639 2000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR NKCKNOBKDOAK