RNS Number:1740T
THB Group PLC
12 December 2003
THB Group plc
Announcement of Interim Results for the six months ended 31 October 2003
CHAIRMAN'S STATEMENT
Highlights
* Profit before tax #1.05 million (2002: #1.64 million) on turnover of
#13.76 million (2002: #10.54 million) reflects:
- changes in the mix of the North American business, from
open market to binding authorities, further accentuating the second
half bias;
- loss of US open market terrorism business and continued
decline of the US dollar, slowing growth in the North American
division, which nonetheless achieved budget;
- higher E&O insurance costs (despite no claims);
- growing competition in the motor fleet sector; and
- satisfactory performances from THB Clowes provincial
broking operations and British Equestrian, but poor trading in two
other provincial businesses.
* Acquisition of a North American team from Alexander Forbes fully
integrated into North American division and trading profitably.
* Acquisition of Rarrigini & Rosso Group completed - trading below
expectations to date and likely for the balance of the current year.
However, long term prospects still remain very positive.
Results and dividend
For the six months to 31 October 2003, profit before tax was #1.05 million
(2002: #1.64 million) on turnover of #13.76 million (2002: #10.54 million). A
reduction in the trading result against the same period last year had been
anticipated, as a result of the loss of US terrorism business (#0.5 million
profit earned in 2002) and higher Errors & Omissions insurance costs in the
continuing hard liability market (up by #0.3 million in the period, despite no
claims). However, the continued decline of the dollar and growing competition in
the motor fleet sector added more pressure and poor trading in two provincial
businesses, although being addressed, was disappointing.
The reduction in short term liquidity shown in the change in net current assets
over the year to 31 October 2003 reflects the application of monies raised in
the flotation, and some surplus cash held by the Group, for the purpose of
acquisitions, as planned. The Group has increased its gearing net of free cash
to 53% at 31 October 2003 (2002: Nil) as a result of the acquisition of
Rarrigini & Rosso.
The Board has declared an interim dividend of 1.5p per share (2002: 1.5p),
payable on 12 January 2004 to shareholders on the register on 30 December 2003.
Trading
Trading in the six months to 31 October 2003 saw a mixed performance from THB
businesses.
Income in the Group's core North American division was adversely affected by the
decline of the dollar. An average rate of $1.63 achieved in the period compared
with $1.55 in the same period last year. In addition, as noted above, in the
first half of last year, this division was able to take advantage of the
opportunity to place open market terrorism business in the wake of the 9/11
terrorist attack. This opportunity was closed off by the US Terrorism Act of
December 2002, by which the US Government effectively became underwriter of last
resort. Although the division saw good growth in its binding authority business,
it was unable to replace this open market business in the period. As a result of
both of these factors, the division saw income grow by only 6%, before
acquisitions, significantly down on growth rates achieved in recent periods.
The Motor Fleet and Motor Sport divisions held up well in the face of increased
competition in the first half of the year, but saw growth slow.
The Group's provincial retail businesses enjoyed mixed fortunes. THB Clowes in
Leamington continued on a strong growth track, adding 30% to prior year income,
and THB Northern saw income up 18%. THB Financial Services also grew income by
17%. THB's other provincial operations, however, saw income fall compared to
last year. In particular, Marshall Ewart & Graham, based in Glasgow, has been
slow to rebuild income following a number of departures from its life team and
THB Egger Lawson, a rally driving specialist and a loss making operation when
acquired in December 2002, is taking longer to turn around than forecast. The
Board is, nonetheless, confident that this will be achieved.
British Equestrian, on the other hand, a market leader in equine insurance
acquired in April 2003, performed very satisfactorily, contributing #0.3 million
to operating profit in the six months.
Acquisitions
THB made two acquisitions in the period.
A North American property team was acquired from Alexander Forbes in June 2003,
at a price of #0.5 million, comprising its first five months' brokerage. This
business, with the geographic profile of its clients and its focus on
non-catastrophe property, complements that of the Group's North American
division. The new team has been fully integrated into the North American
division and is performing in line with expectations.
The acquisition of the Rarrigini & Rosso ("R&R") businesses (now renamed as 'THB
Risk Solutions' and 'THB Risk Management') was announced with the 2003 results
on 3 September 2003. The Board believes that this acquisition offers significant
growth opportunities to THB in wholesale motor fleet, with its focus on the
composite market, and particularly in risk management advice and driver
training. Whilst we were aware that R&R had concentrated its resources heavily
on its '24 7' IT service (divested prior to acquisition by THB), the
interruption to new business development in the core insurance business during
the sale process was aggravated by the strict underwriting criteria adopted by
the main carrier for the period before and after the sale. The Group is now
working more closely with this insurer to improve retention rates on the
existing book. Although this business is still expected to be profitable in the
current financial year, it will significantly under-perform initial expectations
for this year. Notwithstanding the under-performance in the current year, the
Board remains very positive about its long term prospects.
Staff
The Board feels it is important to ensure that staff are properly rewarded and
motivated with an equity interest in the future of the business. In September
and October 2003, we announced the grant of options to all staff with over 12
months' service. In total, including discretionary awards to key staff,
1,996,539 options were granted (including only 26,055 to directors), all of
which were subject to performance criteria.
THB continues to secure and retain the services of first class insurance
professionals. I would like to thank all our staff for their hard work and
diligence over the last six months.
I would particularly like to thank David Ulph, who is retiring and leaves the
Board at the end of January 2004, having given 22 years' outstanding service to
THB, directly overseeing significant growth in Thompson Heath & Bond Limited ("
THB Limited"), the Lloyd's broker, for more than 10 years. David's recruitment
of Frank Murphy in 1999 formed part of our succession planning and foresaw
David's retirement at this time.
I am pleased to announce that Frank Murphy now moves from the role of Chief
Operating Officer to become Managing Director of THB Limited in place of Gill
Cotter, who becomes Deputy Chairman of that company. Gill will continue to be
closely involved with THB Limited, through her main Board role as Director of
Group Operations.
Outlook
Despite the positive long term prospects for the Group, the current year will be
adversely affected by the weakness of the US dollar, the poor initial
performance of R&R and the under-performance of two of the Group's provincial
operations.
In spite of this, trading conditions for the Group as a whole remain favourable.
Transition from hard to soft market continues in most of our classes of
business. The Board believes that THB can grow irrespective of market
conditions, but is actually better placed to benefit in a softer market.
Nonetheless, the transition period brings its own challenges, as different
markets adjust at different speeds, and Lloyd's, where two-thirds of THB's
brokerage is earned, has traditionally been slow to adjust its rates to be
competitive, even when the market rate would still produce an excellent
underwriting profit. Unfortunately, as all too often in the past, premium volume
leaves the Lloyd's market at the stage of the cycle when it should be willing to
accept a slightly lower, but still good, underwriting profit, rather than adhere
to a policy of not reducing prices.
Whilst we expect to see further opportunities to acquire good quality
businesses, the immediate priority is to concentrate on securing value from the
core business and the acquisitions made over the last twelve months. The Board
will actively seek smaller 'bolt-on' acquisitions and will continue to seek to
recruit teams to complement existing businesses.
THB continues to recruit key staff to support the future growth of the business.
For example, the opening of a reinsurance division is an investment which,
although unlikely to deliver a return in the current financial year, offers the
opportunity to further develop relationships with the Group's existing insurer
base. Inevitably, investing ahead of growth in this way, results in short term
pressure on margins.
The Group faces challenges over the next year, arising largely out of growth and
increasing regulation of the industry, but also opportunities, to maximise the
potential benefit of our leading position in wholesale motor fleet insurance,
following the R&R acquisition, and to ensure that all parts of the Group are
contributing profitably. These are challenges which THB is well equipped to
handle and we therefore remain confident of the Group's long term prospects.
Victor H. Thompson
12 December 2003
THB GROUP plc
GROUP PROFIT AND LOSS ACCOUNT
Unaudited results for the six months ended 31 October 2003
Year to
30 April
Continuing Acquired 2003 2002 2003
Notes # # # # #
Turnover 2 12,754,300 1,005,442 13,759,742 10,542,763 22,909,320
Cost of sales - (189,593) (189,593) -
Operating charges (11,697,759) (563,530) (12,261,289) (8,931,334) (19,145,145)
Goodwill amortisation (267,826) (122,543) (390,369) (181,367) (395,485)
Administrative expense (11,965,585) (686,073) (12,651,658) (9,112,701) (19,540,630)
Other operating income 75,731 - 75,731 16,962 56,892
__________ ________ __________ _________ __________
Operating profit 864,446 129,776 994,222 1,447,024 3,425,582
Share of operating profit
in associate - - - - 9,307
Interest receivable 338,802 355,038 715,571
Interest payable (280,467) (161,215) (322,971)
__________ _________ __________
Profit on ordinary
activities before taxation 1,052,557 1,640,847 3,827,489
Taxation 3 (436,088) (613,090) (1,419,483)
__________ _________ __________
Profit on ordinary
activities after taxation 616,469 1,027,757 2,408,006
Dividend for year 4 (397,500) (395,513) (1,058,013)
__________ _________ __________
Profit transferred to
reserves 218,969 632,244 1,349,993
__________ _________ __________
Earnings per share 5
Basic 2.33p 4.70p 10.03p
Diluted 2.31p 4.70p 10.03p
Excluding goodwill
amortisation:
Basic 3.80p 5.53p 11.68p
Diluted 3.78p 5.52p 11.68p
The company has no recognised gains or losses other than the profit for the
period.
THB GROUP plc
GROUP BALANCE SHEET
Unaudited as at 31 October 2003
31 October 31 October 30 April
2003 2002 2003
Notes # # #
Fixed assets
Intangible assets 23,146,196 6,948,191 9,958,508
Tangible assets 7,343,463 5,059,431 6,696,377
Investments 528,262 458,616 473,351
Investment in associated company 162,178 - 162,178
__________ __________ __________
31,180,099 12,466,238 17,290,414
__________ __________ __________
Current assets
Debtors 63,661,010 58,074,224 58,210,566
Cash at bank and in hand 27,335,969 28,973,594 29,369,671
__________ __________ __________
90,996,979 87,047,818 87,580,237
Creditors: Amounts falling
due within one year (91,195,525) (78,752,538) (81,500,926)
__________ __________ __________
Net current (liabilities)/assets (198,546) 8,295,280 6,079,311
__________ __________ __________
Total assets less current liabilities 30,981,553 20,761,518 23,369,725
Creditors : Amounts falling
due after more than one year (12,054,961) (3,544,149) (4,583,014)
Provisions for liabilities and charges
Deferred taxation 27,495 - (51,593)
__________ __________ __________
18,954,087 17,217,369 18,735,118
__________ __________ __________
Capital and reserves
Called up share capital 2,650,000 2,610,000 2,650,000
Share premium account 9,335,252 8,875,252 9,335,252
Revaluation reserve 1,892,462 2,066,572 1,899,047
Other reserves 826,000 526,000 826,000
Profit and loss account 4,250,373 3,139,545 4,024,819
__________ __________ __________
Shareholders' funds 7 18,954,087 17,217,369 18,735,118
(All equity interests) __________ __________ __________
THB GROUP plc
GROUP CASH FLOW STATEMENT
Unaudited for the six months ended 31 October 2003
Year to
30 April
2003 2002 2003
Notes # # #
Net cash inflow from operating activities 8 2,020,659 (1,009,208) 1,904,175
__________ __________ __________
Return on investments and
servicing of finance
Interest received 338,802 355,038 715,571
Interest paid (275,772) (152,414) (311,916)
Finance lease interest paid (4,695) (8,801) (11,055)
__________ __________ __________
Net cash inflow from return on investments
and servicing of finance 58,335 193,823 392,600
__________ __________ __________
Taxation
Tax paid (814,578) (535,001) (1,280,222)
__________ __________ __________
Capital expenditure and financial investments
Purchase of fixed assets (1,022,252) (450,741) (2,866,449)
Purchase of investments (11,159) (261,159) (272,317)
Proceeds on disposal of fixed assets 29,286 33,858 565,147
__________ __________ __________
Net cash outflow from capital
expenditure and financial investment (1,004,125) (678,042) (2,573,619)
__________ __________ __________
Acquisitions
Purchase of subsidiary undertakings (11,137,237) (1,496,704) (4,613,483)
Net cash from purchase of subsidiary undertakings
106,490 - 2,364,160
__________ __________ __________
Net cash (outflow) / inflow from acquisitions (11,030,747) (1,496,704) (2,249,323)
__________ __________ __________
Dividends
Equity dividends paid (662,500) (421,999) (813,499)
__________ __________ __________
Net cash (outflow) / inflow before financing (11,432,956) (3,947,131) (4,619,888)
Financing
Issue of shares - 5,263,240 5,263,240
Receipts from new borrowing 9,500,000 1,099,451 2,852,334
Repayments of amounts borrowed (256,843) (209,616) (862,208)
Capital repayments of finance leases (84,084) (51,081) (64,899)
__________ __________ __________
Net cash inflow from financing 9,159,073 6,101,994 7,188,467
__________ __________ __________
(Decrease)/increase in cash 9 (2,273,883) 2,154,863 2,568,579
__________ __________ __________
THB GROUP plc
NOTES TO THE INTERIM REPORT - 31 October 2003
1 Accounting policies and basis of preparation
The interim financial information has been prepared on the basis of
accounting policies consistent with those set out in the Group's statutory
accounts for the year ended 30 April 2003. It was prepared under the historical
cost convention, modified to include the revaluation of certain land and
buildings, and in accordance with applicable Accounting Standards.
The interim financial information has not been audited nor has it been
reviewed under Bulletin 99/4 of the Auditing Practices Board. The above
unaudited financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. Statutory accounts for the
year ended 30 April 2003, which included an unqualified auditors' report, have
been filed with the Registrar of Companies.
2 Turnover and operating profit
Turnover and operating profit were derived from the activity of
insurance broking.
Turnover was received from activities in the following geographical
areas:
Year to
30 April
2003 2002 2003
# # #
United Kingdom 7,877,514 6,074,492 13,398,019
Other European countries 512,581 231,516 802,296
United States of America 5,305,756 4,157,185 8,403,184
Other countries 63,891 79,570 305,821
__________ __________ __________
13,759,742 10,542,763 22,909,320
__________ __________ __________
3 Taxation
The taxation charge for the period is based upon the estimated effective rate
for the full year.
4 Dividend
The interim dividend of 1.5p per share (2002: 1.5p) is payable on 12 January
2004 to shareholders who are registered at the close of business on 30 December
2003. The ex-dividend date will be 24 December 2003. The charge to the Profit &
Loss Account for the six months ended 31 October 2002 includes #4,013 of final
dividend for the year ended 30 April 2002 paid in respect of shares issued after
the accounts for that year were signed.
5 Earnings per share
Basic earnings per share are calculated by dividing the net profit attributable
to shareholders of #616,469 (2002: #1,027,757) by the weighted average number of
shares in issue during the period of 26,500,000 (2002: 21,875,861).
Diluted earnings per share are calculated by dividing the net profit
attributable to shareholders by the weighted average number of shares in issue
during the period, adjusted to take account of the effect of share options, of
26,662,755 (2002: 21,887,299).
Earnings per share excluding the effect of goodwill amortisation has been
presented because the Directors believe it to be a key performance indicator.
THB GROUP plc
NOTES TO THE INTERIM REPORT - 31 October 2003 (continued)
6 Historical cost profits and losses
Six months Six months Year to
to 31 Oct to 31 Oct 30 April
2003 2002 2003
# # #
Profit on ordinary activities before taxation 1,052,557 1,640,847 3,827,489
Difference between historical cost depreciation
charge and depreciation charge based on
revalued amounts 6,585 6,889 13,171
Difference between profit on disposal of fixed
assets based on historic net book value and
revalued net book value - - 161,243
_________ _________ _________
Historical cost profit on ordinary activities before taxation 1,059,142 1,647,736 4,001,903
_________ _________ _________
Historical cost profit retained 225,554 639,133 1,524,407
_________ _________ _________
7 Reconciliation of movement in shareholders' funds
Six months Six months Year to
to 31 Oct to 31 Oct 30 April
2003 2002 2003
# # #
Retained profit for the period 218,969 632,244 1,349,993
Shares issued in the period - 6,144,490 6,644,490
Costs of issue - (881,250) (881,250)
Shares to be issued - - 300,000
__________ __________ __________
Net increase in shareholders' funds 218,969 5,895,484 7,413,233
Shareholders' funds at start of period 18,735,118 11,321,885 11,321,885
__________ __________ __________
Shareholders' funds at end of period 18,954,087 17,217,369 18,735,118
__________ __________ __________
THB GROUP plc
NOTES TO THE INTERIM REPORT - 31 October 2003 (continued)
8 Net cash flow from operating activities
Six months Six months Year to
to 31 Oct to 31 Oct 30 April
2003 2002 2003
# # #
Operating profit 994,222 1,447,024 3,425,582
Depreciation and amortisation 830,059 511,517 1,142,435
Loss on sale of fixed assets 1,595 11,361 12,886
Increase in value of investment (43,750) - -
Goodwill on acquisition of a business (491,552) - -
Increase in amounts due from client and insurers (4,478,494) (8,544,086) (7,339,419)
Decrease/(increase) in amounts due from associated
undertaking 57,662 - (212,095)
Increase in other debtors (484,931) (177,604) (208,380)
Increase in amounts due to clients and insurers 7,226,906 7,323,212 4,922,723
Increase in amounts due to associated undertaking 1,536 - 44,889
(Decrease)/increase in other creditors (1,592,594) (1,580,632) 115,554
__________ __________ __________
Net cash inflow/(outflow) from
operating activities 2,020,659 (1,009,208) 1,904,175
__________ __________ __________
9 Reconciliation of net cash flow to movement in net funds
Six months Six months Year to
to 31 Oct to 31 Oct 30 April
2003 2002 2003
# # #
(Decrease)/increase in cash for the period (2,273,883) 2,154,863 2,568,579
Cash (inflow)/outflow from finance leases (162,388) 51,081 45,078
Cash inflow from financing (9,243,157) (889,835) (1,990,126)
__________ __________ __________
Changes in net funds resulting from cash flows (11,679,428) 1,316,109 623,531
Inception of finance leases (56,495) - -
Net funds at start of period 23,932,682 23,309,151 23,309,151
__________ __________ __________
Net funds at end of period 12,196,759 24,625,260 23,932,682
__________ __________ __________
10 Interim Report
Copies of the Interim Report will be available from the registered office and at
the group's website, www.thbgroup.com.
THB GROUP plc
SHAREHOLDER INFORMATION
See our group website www.thbgroup.com for information about the group and other
shareholder information, including link to latest share price.
Registered office: Directors:
Murray House VH Thompson - chairman and chief executive
Murray Road GM Cotter - director of group operations
Orpington, Kent DA Ulph
BR5 3QY RS Wilkinson - finance director
Tel: 01689 883500 NJ Moorhouse - non executive director
MF Holbrook - non executive director
Company registration number:
1514749
Financial calendar:
24 December 2003 ex-dividend date
30 December 2003 record date
12 January 2004 interim dividend payable
July 2004 final results announcement
August 2004 final dividend payable
August 2004 next AGM
Registrars: Stockbroker:
Capita Registrars Numis Securities Limited
The Registry Cheapside House
34 Beckenham Road 138 Cheapside
Beckenham, Kent London EC2V 6LH
BR3 4TU
Tel: 0870 1623100 Tel: 020 7776 1500
www.capita-irg.com www.numiscorp.com
Auditors: Group Bankers:
Grant Thornton Lloyds TSB Bank plc
Singer & Friedlander Limited
Solicitors: Fleet Bank
Kendall Freeman Barclays Bank PLC
Addleshaw Booth & Co Clydesdale Bank PLC
Royal Bank of Scotland PLC
This information is provided by RNS
The company news service from the London Stock Exchange
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