Interim Results - Part 1

BARCLAYS PLC 5 August 1999 PART 1 Interim Results Announcement 1999 1999 INTERIM RESULTS Page Summary 1 Financial highlights 3 Half-year review 4 Summary of results 6 Consolidated profit and loss account (unaudited) 7 Consolidated profit and loss account for the ongoing business (unaudited) 8 Consolidated balance sheet (unaudited) 9 Financial review 10 Additional information (unaudited) 36 Notes (unaudited) 39 Consolidated statement of changes in shareholders' funds (unaudited) 52 Statement of total recognised gains and losses (unaudited) 53 Consolidated cash flow statement (unaudited) 54 US GAAP data (unaudited) 57 Independent review report by the auditors 58 Other information 59 The information in this announcement does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31st December 1998, which also included the Group's annual report on Form 20-F to the Securities and Exchange Commission in the United States of America, have been delivered to the Registrar of Companies in accordance with Section 242 of the Act and contained an auditors' report which was unqualified and did not make any statements under Section 237 of the Act. BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 020 7699 5000 5th August 1999 BARCLAYS PLC - SUMMARY RESULTS FOR SIX MONTHS TO 30TH JUNE 1999 Half-year ended 30.6.99 31.12.98 30.6.98 £m £m £m Operating profit before provisions* 1,754 1,059 1,480 Provisions for bad and doubtful (320) (363) (129) debts Provisions for contingent - (76) - liabilities and commitments Operating profit * 1,434 620 1,351 Restructuring charge (345) - - Former BZW businesses - (14) (19) Exceptional items (net) (119) 5 (4) Write-down of leases - - (40) Write-down of fixed asset - (4) - investments Profit before tax 970 607 1,288 Tax charge (252) (153) (380) Profit attributable to shareholders 696 431 886 Earnings per share 46.2p 28.9p 58.3p Earnings per share (and excluding 70.7p 29.6p 60.0p exceptional items) * Dividend per share 17.5p 27.5p 15.5p *Figures exclude the 1999 restructuring charge, the results of the former BZW businesses and are stated prior to the impact of the Finance Act 1998. Amounts reported below and in the first half review and summary of results on pages 4, 5 and 6 for operating profit, earnings per share and post tax return on average shareholders funds are on a similar basis unless indicated otherwise. - Operating profit rose by 6% to £1,434 million (1998: £1,351 million). Earnings per share increased to 70.7p (1998: 60.0p). - Operating income improved by 8% to £4,149 million (1998: £3,834 million) and there was tighter control of operating costs, up 2% to £2,395 million (1998: £2,354 million). - Operating profit before provisions improved by 19% to £1,754 million (1998: £1,480 million). - The post-tax return on average shareholders' funds improved to 25.5% (1998: 23.5%) - The interim dividend increased by 13% to 17.5p (1998: 15.5p). The Group returned £168 million of capital to shareholders through its share buy-back programme as part of the expected share buy-back of around £500 million in 1999. - Retail Financial Services increased operating profit by 14% to £820 million (1998: £721 million). Net interest income improved by 6% reflecting strong growth in UK consumer lending and extended credit balances at Barclaycard together with continued growth in mortgage lending and UK savings balances. Fees and commissions grew by 4% predominantly in Wealth Management. Total costs fell slightly. - Corporate Banking produced a good underlying performance. Net fees and commissions rose by 9% as a result of good growth in lending related fees and foreign exchange related income. Provisions for bad and doubtful debts increased to £65 million (1998: net credit £44 million), mainly as a result of lower credit risk releases and recoveries. Operating profit was £458 million (1998: £544 million excluding write-down of leases). - Barclays Capital increased operating profit by 14% to £178 million (1998: £156 million). Total income increased by 24% with both the Rates and Credit businesses performing well in a fair trading environment. - Barclays Global Investors operating profit was £28 million (1998: £29 million). Total assets under management and advice grew to £434 billion (31st December 1998: £370 billion). Increased revenues in the securities lending business helped maintain the overall margin. - Although costs in the first half of the year increased slightly compared to the same period last year, costs for the full year, excluding the restructuring charge of £345 million, are not expected to exceed the 1998 level of £4,877 million. - The restructuring charge for 1999 primarily relating to Retail Financial Services and Corporate Banking is estimated at £345 million and has been charged in full in the first half of the year. The overall provision for the 6,000 UK job losses announced in May is now expected to be approximately £300 million. This is based on the estimated number of staff opting to take their redundancy entitlement by way of enhanced pension borne by the pension fund surplus. In addition to the 6,000 job losses, Retail Financial Services has finalised plans relating to certain of its international operations resulting in an additional charge of £45 million and a further 1,000 job losses. - Total provisions for bad and doubtful debts rose by £191 million to £320 million, as a result of a £134 million rise in new and increased specific credit risk provisions and a reduction in releases and recoveries. The higher level of new and increased provisions mainly reflected strong volume growth within Retail Financial Services. - Shareholders' funds were £8.2 billion at 30th June 1999 (31st December 1998: £7.8 billion) and the tier 1 ratio 7.4% (31st December 1998: 7.3%). The Group estimates it needs shareholders' funds of £6.6 billion to £7.0 billion to support its current business and to allow for future growth. - The exceptional loss of £119 million is primarily in respect of the loss on the sale of Merck Finck & Co, which includes £138 million of goodwill previously written-off to reserves. FINANCIAL HIGHLIGHTS Half-year ended 30.6.99 31.12.98 30.6.98 RESULTS £m £m £m Net interest income* 2,278 2,211 2,142 Non-interest income* 1,871 1,371 1,692 Operating income* 4,149 3,582 3,834 Operating expenses* (2,395) (2,523) (2,354) Operating profit before 1,754 1,059 1,480 provisions* Provisions for bad and doubtful (320) (363) (129) debts Provision for contingent - (76) - liabilities and commitments Operating profit* 1,434 620 1,351 Restructuring charge (345) - - Former BZW businesses - (14) (19) Exceptional items (119) 5 (4) Write-down of leases - - (40) Write-down of fixed asset - (4) - investments Profit before tax 970 607 1,288 Profit attributable to 696 431 886 shareholders Profit retained 433 17 654 BALANCE SHEET Shareholders' funds 8,218 7,842 7,822 Loan capital 4,117 3,734 3,597 Total capital resources 12,684 11,890 11,798 Total assets 241,265 219,494 248,956 Weighted risk assets 113,994 109,800 111,521 PER ORDINARY SHARE P P P Earnings 46.2 28.9 58.3 Earnings (and excluding 70.7 29.6 60.0 exceptional items) * Dividend 17.5 27.5 15.5 Net asset value 547 519 519 PERFORMANCE RATIO % % % Post-tax return on average 16.8 11.0 22.8 shareholders' funds Post-tax return on average shareholders' funds (and 25.5 11.2 23.5 excluding exceptional items) * RISK ASSET RATIO Tier 1 7.4 7.3 7.2 Total 10.9 10.6 10.4 GROUP YIELDS, SPREADS & MARGINS % % % Gross yield 6.90 7.70 7.93 Interest spread 2.96 2.71 2.66 Interest margin 3.50 3.45 3.38 EXCHANGE RATES US$/£ US$/£ US$/£ Period end 1.58 1.66 1.67 * Figures exclude the 1999 restructuring charge, the residual losses of the former BZW businesses and are stated prior to the impact of the Finance Act 1998. HALF YEAR REVIEW Barclays made good progress in the first half of 1999. Operating profit was £1,434 million, an increase of 6% over the first half of 1998. Earnings per share increased to 70.7 pence from 60.0 pence and average return on equity improved to 25.5% (1998: 23.5%). Group operating income increased by 8% to £4,149 million. The interim dividend is being increased by 13% to 17.5p. We continue to return capital to shareholders through share buy-backs and during the first half of 1999 completed around a third of our target of £500 million for the year. All four businesses performed well in meeting their objectives to grow revenue, to contain costs and to innovate. This was achieved at a time of considerable change to bring about customer focus throughout Barclays which is essential to our future. Retail Financial Services now has three customer-focused business groupings: Retail Customers, Wealth Management and Barclaycard. Its operating profit rose by 14% to £820 million. This reflected good performances from UK consumer lending, mortgages and savings and strong growth within Wealth Management, where profit improved by 43% to £221 million. Barclaycard profits rose as a result of growth in extended credit balances and through cost savings from the change programme announced in September 1998. Barclays.net was launched in March and is the first free internet service to be provided by a UK bank and has led to increased demand for on-line banking. On-line and telephone banking customers now total 1.3 million. Underlying income growth remains strong within Corporate Banking, with good levels of acquisition finance activity from our large corporate customers and greater product sales to our middle market customers to whom we offer an integrated approach. Operating profit declined from £544 million to £458 million. The decrease in profit resulted from a higher net provisions charge of £65 million following a net credit of £44 million in 1998. This largely reflected the expected reduction in the high levels of releases and recoveries experienced a year ago. The quality of the lending portfolio has also improved. A full range of euro products, including current and deposit accounts, euro denominated overdrafts and loan products and specialised leasing and sales financing, has been launched and supports our position as one of the world's top cross-border payment banks. Barclays Capital's profits improved by 14% to £178 million and reflect a significant turnaround following the loss suffered in the second half of 1998. Both the Rates and Credit businesses performed well in favourable trading conditions. The results were achieved while running a significantly lower risk profile and using less regulatory capital. The focus has been on strengthening the underlying business and delivering higher quality earnings. Barclays Capital is making progress in building its European franchise, following the introduction of the euro, and is among the leaders in the developing debt markets in Europe. Closer working between Barclays Capital and Corporate Banking is resulting in greater opportunities to offer more effective and flexible finance solutions for our large corporate and institutional customers. Barclays Global Investors (BGI) profits were flat at £28 million (1998: £29 million), reflecting an increase in its investment programme in new products, channels and infrastructure to support its goal of leadership in global fund management. It has taken on significant new business in all the regions in which it operates and continues as the top-ranked manager of tax-exempt assets in the world. Total assets under management grew by 17% to £434 billion in the first half of the year. In May, we announced the reshaping of our operations through the centralisation of core processes and the application of new technologies to enable us to improve service to our customers. As a result we will cut the number of jobs in the United Kingdom by 6,000 this year, principally in Retail Financial Services and Corporate Banking. At the same time we are creating 1,800 new positions, largely in call centres within Retail Financial Services, some of which will be filled by staff whose jobs have gone. We have also worked closely with the unions to ensure the best outcome for all affected staff. In addition we have now finalised plans relating to certain of Retail Financial Services' international operations resulting in a reduction of a further 1,000 jobs. As a result the total restructuring charge is £345 million for 1999. The programme is expected to yield annual gross savings in excess of £200m. We are managing costs with determination and are committed to maintaining costs for this year at 1998 levels, excluding the exceptional charge for restructuring. We are confident that Barclays is now prepared for the Year 2000. All our mission critical systems, being those which could directly impact our customers and our ability to continue to operate effectively, are now Year 2000 ready. Matthew Barrett as Group Chief Executive and David Allvey as Group Finance Director will join us over the next two months. They bring valuable experience to the central leadership of the Group which already has strong leaders at business level. Work to add value to the Barclays brand - arguably the most valuable brand in the UK - is progressing well; all our businesses are working to ensure we strengthen this important asset. We are also in the process of introducing an updated visual identity across the Group. Barclays is winning business through our strengthening brand, the commitment and creativity of our staff and their determination to maintain our business values. They will enable us to meet our customers needs as the business changes aggressively to stay ahead of the competition. Sir Peter Middleton Chairman and Group Chief Executive SUMMARY OF RESULTS Half-year ended PROFIT BEFORE TAX 30.6.99 31.12.98 30.6.98 £m £m £m Retail Financial Services 820 780 721 Corporate Banking* 458 447 544 Barclays Capital 178 (426) 156 Barclays Global Investors 28 23 29 Businesses in Transition** - 24 24 Other operations (12) (111) (92) Head office functions (32) (35) (25) Goodwill amortisation (6) (6) (6) Provision for litigation - (76) - settlement*** Operating profit 1,434 620 1,351 Restructuring charge (345) - - Former BZW businesses - (14) (19) Exceptional items (119) 5 (4) Write-down of leases - - (40) Write-down of fixed asset - (4) - investments 970 607 1,288 30.6.99 31.12.98 30.6.98 TOTAL ASSETS £m £m £m Retail Financial Services 45,746 46,150 42,671 Corporate Banking 46,662 45,341 42,519 Barclays Capital 135,941 114,706 150,094 Barclays Global Investors 199 183 167 Businesses in Transition - - 88 - former BZW businesses - other - 554 443 Other operations and Head office 5,204 5,475 6,223 functions Retail life-fund assets 7,513 7,085 6,751 attributable to policyholders 241,265 219,494 248,956 WEIGHTED RISK ASSETS Retail Financial Services 31,657 31,499 29,712 Corporate Banking 46,381 43,507 40,162 Barclays Capital 31,652 29,344 36,053 Barclays Global Investors 297 207 150 Businesses in Transition - - 61 - former BZW businesses - other - 594 470 Other operations**** 4,007 4,649 4,913 113,994 109,800 111,521 * Figures are stated prior to the impact of the Finance Act 1998. ** Businesses in Transition profit before tax excludes the results of former BZW businesses which are shown separately. ***The provision in the second half of 1998 relates to the settlement of the Atlantic litigation. ****Including supervisory adjustments. CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED) Half-year ended 30.6.99 31.12.98 30.6.98 £m £m £m Interest receivable 4,497 4,938 5,014 Interest payable (2,219) (2,728) (2,876) Write-down of leases - - (40) Profit on redemption/repurchase of - - 3 loan capital Net interest income 2,278 2,210 2,101 Net fees and commissions 1,417 1,429 1,350 receivable Dealing profits 325 (230) 197 Other operating income 129 168 156 Total non-interest income 1,871 1,367 1,703 Operating income 4,149 3,577 3,804 Administration expenses - staff (1,668) (1,425) (1,386) costs Administration expenses - other (935) (969) (860) Depreciation and amortisation (137) (138) (137) Operating expenses (2,740) (2,532) (2,383) Operating profit before provisions 1,409 1,045 1,421 Provisions for bad and doubtful (320) (363) (129) debts Provisions for contingent - (76) - liabilities and commitments Operating profit 1,089 606 1,292 Exceptional items (119) 5 (4) Write-down of fixed asset - (4) - investments Profit on ordinary activities 970 607 1,288 before tax Tax on profit on ordinary (252) (153) (380) activities Profit on ordinary activities 718 454 908 after tax Minority interests (equity and non- (22) (23) (22) equity) Profit attributable to the members 696 431 886 of Barclays PLC Dividends (263) (414) (232) Profit retained 433 17 654 Earnings per ordinary share 46.2p 28.9p 58.3p Earnings per ordinary share for the ongoing business 70.7p 29.6p 60.0p Dividend per ordinary share: First interim (payable 1st October 17.5p - 15.5p 1999) Second interim - 27.5p - CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE ONGOING BUSINESS (UNAUDITED) Half-year ended 30.6.99 31.12.98 30.6.98 £m £m £m Interest receivable 4,497 4,938 5,014 Interest payable (2,219) (2,727) (2,875) Profit on redemption/repurchase - - 3 of loan capital Net interest income 2,278 2,211 2,142 Net fees and commissions 1,417 1,431 1,340 receivable Dealing profits 325 (225) 198 Other operating income 129 165 154 Total non-interest income 1,871 1,371 1,692 Operating income 4,149 3,582 3,834 Administration expenses - staff (1,421) (1,422) (1,367) costs Administration expenses - other (837) (962) (850) Depreciation and amortisation (137) (139) (137) Operating expenses (2,395) (2,523) (2,354) Operating profit before 1,754 1,059 1,480 provisions Provisions for bad and doubtful (320) (363) (129) debts Provisions for contingent - (76) - liabilities and commitments Operating profit for the ongoing 1,434 620 1,351 business Restructuring charge (345) - - Former BZW businesses - (14) (19) Exceptional items (119) 5 (4) Write-down of leases - - (40) Write-down of fixed asset - (4) - investments Profit on ordinary activities 970 607 1,288 before tax The results shown on page 7 include the restructuring charge in the first half of 1999 and the residual losses relating to the former BZW businesses and the impact of the 1998 Finance Act in previous periods. The table above presents the consolidated profit and loss account for the ongoing business excluding the impact of these items. CONSOLIDATED BALANCE SHEET (UNAUDITED) Half-year ended 30.6.99 31.12.98 30.6.98 Assets: £m £m £m Cash and balances at central 780 942 709 banks Items in course of collection 2,709 2,475 3,129 from other banks Treasury bills and other eligible 8,321 4,748 6,890 bills Loans and advances to banks 14,214 20,316 19,725 - banking - trading 25,805 16,296 18,109 40,019 36,612 37,834 Loans and advances to customers 88,952 81,469 76,483 - banking - trading 17,094 14,641 31,670 106,046 96,110 108,153 Debt and equity securities 56,767 50,068 62,173 Interests in associated 131 150 143 undertakings and joint ventures Intangible fixed assets - 209 196 183 goodwill Tangible fixed assets 1,878 1,939 1,909 Other assets 16,892 19,169 21,082 233,752 212,409 242,205 Retail life-fund assets 7,513 7,085 6,751 attributable to policyholders Total assets 241,265 219,494 248,956 Liabilities: Deposits by banks - banking 24,863 25,951 31,206 - trading 14,213 8,469 19,989 39,076 34,420 51,195 Customer accounts - banking 98,629 96,099 96,527 - trading 18,316 12,706 20,343 116,945 108,805 116,870 Debt securities in issue 22,976 17,824 21,625 Items in course of collection due 1,308 1,279 1,726 to other banks Other liabilities 40,763 38,191 38,991 Undated loan capital - 317 301 300 convertible to preference shares Undated loan capital - non- 1,463 1,441 1,410 convertible Dated loan capital - non- 2,337 1,992 1,887 convertible Other subordinated liabilities - - - 58 non-convertible 225,185 204,253 234,062 Minority interests and shareholders' funds: Minority interests: equity 72 51 59 Minority interests: non-equity 277 263 262 Called up share capital 1,503 1,511 1,509 Reserves 6,715 6,331 6,313 Shareholders' funds: equity 8,218 7,842 7,822 8,567 8,156 8,143 233,752 212,409 242,205 Retail life-fund liabilities 7,513 7,085 6,751 attributable to policyholders Total liabilities and 241,265 219,494 248,956 shareholders' funds MORE TO FOLLOW IR BRGBISUGCCCS

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