Interim Results
Berkeley Berry Birch PLC
1 December 2003
For Immediate Release 1 December 2003
Berkeley Berry Birch plc (BBB)
Interim Results
December 1, 2003: Berkeley Berry Birch, the financial services distribution
group, today announces its interim results for the 6 months to 30 September 2003
Key Points - Group Performance
• Revenue growth of 15% to £29.8m, with trend upwards
• Gross margin increase from 18% (H1 2002/3) to 26% (H1 2003/4)
• Annualised cost savings of £4m implemented by end of Q3
• Central costs reduced by 18% to £2.1m
• Net cash outflow from operating activities down 23% at £3.1m
• Cash on balance sheet of £11m
• Number of regulated advisers increased from 750 to 830
• Average annualized productivity maintained at £80,000 (£81,000)
compared to industry average of £60,000
• Average case size increased from £900 to £1,100 - near top of industry
• Successful integration of acquisitions
• Launch of new product initiatives - Self-Invested Personal Pension,
Pensions Exchange and Estate Planning
Commenting on the interim results, Stephen Ingledew, CEO of Berkeley Berry
Birch, said:
'The Group has increased revenue and removed further costs from the business in
the last six months and this has been achieved through the sheer hard work,
determination and innovation of everyone at BBB. Most importantly, the Group's
three key performance measures of gross margin, central cost and cash burn have
all shown improvement during the first six months of this year.
The management team recognises the importance of maintaining the current
momentum which will lead to the delivery of the operational and financial
objectives; in particular to ensure that the benefit of the cost reduction
programmes start to be realised in the second half of the Group's financial
year.'
Commenting on the market outlook for the Group, Clifford Lockyer, Executive
Chairman, said:
'The Group is now well placed to take advantage of the improving external
conditions as customers gain greater confidence. The Group will also continue
its strategy of being a market consolidator and will consider acquisition
opportunities in order to increase scale and achieve critical mass.
In summary, the Group is cautiously confident of making further progress in the
second six months of the financial year. Group revenue trends continue to show
upwards momentum as a result of both increased adviser numbers and maintained
productivity levels.'
For further information, please contact:
Berkeley Berry Birch
Stephen Ingledew, Chief Executive Officer 07774 185779
Craig Butcher, Finance Director 07968 486750
Grandfield
Matthew Jervois 0207 417 4170
Chairman's and Chief Executive's Statement
Group Performance
In the first six months of the financial year Berkeley Berry Birch plc (BBB) has
further established itself as a major distributor in retail financial services.
The financial performance for the first six months of the year is in line with
expectations. This is a notable achievement against a background of one of the
most difficult periods of market uncertainty and trading conditions the industry
has ever experienced.
The Group has reduced central costs by 18% whilst at the same time increasing
revenue by 15%. As a result of this, the Group's quarterly operating loss has
been falling. In quarter four of the previous financial year the loss was £2.6
million and this was reduced in quarter one of the current financial year to
£1.7 million and then reduced further in quarter two to £1.4 million.
The cost savings have been achieved largely through the successful integration
of the four acquisitions which were completed in the last twelve months as well
as greater efficiencies extracted from the Group's divisional operating
structure.
The difficult trading conditions in the financial services market place have
impacted each division's progress and this has offset the impact of some of the
efficiencies, although our expectation is that the benefits will become more
transparent in the second half of the current financial year.
Importantly, the Group's three key performance measures of gross margin, central
cost and cash burn have all shown improvement during the first six months of
this year whilst we have maintained the productivity per adviser of £80,000,
compared to an industry average of £60,000.
In addition, the management team has, since the end of September, identified
further efficiencies. The cost saving actions are being implemented in quarter
three of the current financial year and will continue the downward pressure on
costs across the Group.
These additional efficiencies, and reduced employee and other costs, will
generate annualised cost savings of approximately £4 million without impacting
our revenue generating capability.
The next six months will see the Group make further progress. Group revenue
trend continues to be upwards as a result of increasing adviser numbers whilst
maintaining productivity levels.
Divisional operating performance
All three of the Group's divisions made important operational progress in the
first period of the trading year and we believe the growing market confidence
amongst customers will further support progress in the second half of the
Group's financial year. Although, as with other retail financial services
companies, the Group's operational performance will of course depend upon the
sensitivity of customer sentiment.
An analysis of turnover and operating result, before the impact of exceptional
items and goodwill, by division is set out below:
6 months to Year to
------------------ -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
------------------------- ------ ------ ------
Network division 20,060 21,473 43,783
Financial Advisory division 7,725 2,847 8,595
Insurance division 1,987 1,639 3,474
------------------------- ------ ------ ------
Turnover 29,772 25,959 55,852
------------------------- ------ ------ ------
Network division 42 386 1,510
Financial Advisory division (2,019) (2,378) (6,120)
Insurance division 110 399 720
Central costs (1,204) (1,475) (2,972)
------------------------- ------ ------ ------
Operating loss before goodwill amortisation
and impairment and exceptional items (3,071) (3,068) (6,862)
------------------------- ------ ------ ------
The Network division has increased the number of regulated advisers from 584 at
31 March 2003 to 671 at 30 September 2003 whilst also seeing an increase in the
average case size from £900 to £1,100.
The Network's recruitment plans are being supported by the positive profile of
the Group, most notably publicity in respect of Berkeley Independent Advisers
being once again voted the number one IFA network in the UK (for the eighth time
in the last nine years).
The changes introduced to the Financial Advisory division earlier this year are
now starting to give rise to improved operating performance reflected by higher
revenue (30% plus up on last year excluding the impact of acquisitions).
It is part of our corporate strategy to increase the product offerings made
available to customers through the Group's advisers in order to increase
productivity levels. As part of this strategy the division has developed a
number of new revenue generation initiatives in respect of corporate pensions,
estate planning and personal pensions. All of these initiatives are now
generating new revenue for the Group.
The Insurance division's revenue has increased by 21% in the period compared to
the same period last year. Cross selling of the division's insurance products
through the Group's advisers is now starting to reap benefits and the addition
of new corporate affinity channels will provide additional cost effective
channels to market.
The above divisional results are after allocating the costs of the shared
support services infrastructure which, as a percentage of revenue, fell from 10%
to 8%. Central costs which are not allocated to divisions fell by 18% to £1.2
million.
Dividend
Due to the financial performance of the Group, the Directors believe it
inappropriate to declare an interim dividend.
Summary and outlook
The Group has increased revenue and removed further costs from the business in
the last six months and this has been achieved through the sheer hard work,
determination and innovation of everyone at BBB.
Most importantly, the Group's three key performance measures of gross margin,
central cost and cash burn have all shown improvement during the first six
months of this year.
The management team recognises the importance of maintaining the current
momentum which will lead to the delivery of the operational and financial
objectives; in particular to ensure that the benefit of the further cost
reduction programmes start to be realised in the second half of the Group's
financial year.
We will maintain this focus on developing advisory services whilst continuing to
take advantage of the new opportunities being created by regulatory and market
changes, in particular the introduction of depolarisation and the widening of
regulation to include mortgages and general insurance.
The Group is now well placed to take advantage of the improving external
conditions as customers gain greater confidence. The Group will also continue
its strategy of being a market consolidator and will consider acquisition
opportunities in order to increase scale and achieve critical mass.
In summary, the Group is cautiously confident of making further progress in the
second six months of the financial year. Group revenue trends continue to show
upwards momentum as a result of both increased numbers and maintained
productivity levels.
Clifford Lockyer Stephen Ingledew
Chairman Chief Executive
28 November 2003
Unaudited consolidated profit and loss account
6 months to Year to
--------------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Turnover 29,772 25,959 55,852
-------------------------- ------ ------ ------
Operating loss before goodwill
amortisation, impairment and exceptional
items (3,071) (3,068) (6,862)
Exceptional items (note 2) - (600) (2,882)
Goodwill impairment - - (26,563)
Goodwill amortisation (914) (1,349) (2,852)
-------------------------- ------ ------ ------
Operating loss (3,985) (5,017) (39,159)
Net interest 161 55 228
-------------------------- ------ ------ ------
Loss before taxation (3,824) (4,962) (38,931)
Taxation (note 3) 72 - (30)
-------------------------- ------ ------ ------
Loss after taxation (3,752) (4,962) (38,961)
Minority interests (1) - 99
-------------------------- ------ ------ ------
Loss for the financial period (3,753) (4,962) (38,862)
-------------------------- ------ ------ ------
Loss per share (note 4)
Adjusted basic and diluted (3.2p) (5.0p) (9.2p)
Basic and diluted (4.2p) (8.2p) (53.6p)
-------------------------- ------ ------ ------
Unaudited statement of total recognised gains and losses
6 months to Year to
----------------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Loss for the financial period (3,753) (4,962) (38,862)
Unrealised loss on revaluation of
property - - (124)
-------------------------- ------ ------ ------
Total recognised gains and losses
relating to the period (3,753) (4,962) (38,986)
-------------------------- ------ ------ ------
Segmental information
6 months to Year to
----------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Turnover
Network division 20,060 21,473 43,783
Financial Advisory division 7,725 2,847 8,595
Insurance division 1,987 1,639 3,474
-------------------------- ------ ------ ------
29,772 25,959 55,852
-------------------------- ------ ------ ------
Operating loss before goodwill amortisation and
impairment and exceptional items
Network division 42 386 1,510
Financial Advisory division (2,019) (2,378) (6,120)
Insurance division 110 399 720
Central costs (1,204) (1,475) (2,972)
-------------------------- ------ ------ ------
(3,071) (3,068) (6,862)
-------------------------- ------ ------ ------
Exceptional items
Network division - - (446)
Financial Advisory division - (600) (2,436)
Insurance division - - -
-------------------------- ------ ------ ------
- (600) (2,882)
-------------------------- ------ ------ ------
Goodwill amortisation and impairment
Network division (630) (1,322) (28,895)
Financial Advisory division (254) (25) (508)
Insurance division (30) (2) (12)
-------------------------- ------ ------ ------
(914) (1,349) (29,415)
-------------------------- ------ ------ ------
Operating loss
Network division (588) (936) (27,831)
Financial Advisory division (2,273) (3,003) (9,064)
Insurance division 80 397 708
Central costs (1,204) (1,475) (2,972)
-------------------------- ------ ------ ------
(3,985) (5,017) (39,159)
-------------------------- ------ ------ ------
The Group's entire turnover and operating loss arises within the United Kingdom.
Unaudited consolidated balance sheet
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
------------------------- ------ ------ ------
Fixed assets
Intangible assets 33,880 51,289 33,561
Tangible assets 2,350 2,378 2,441
------------------------- ------ ------ ------
36,230 53,667 36,002
------------------------- ------ ------ ------
Current assets
Debtors 14,369 9,932 14,970
Cash at bank 11,391 5,347 14,575
------------------------- ------ ------ ------
25,760 15,279 29,545
Creditors: amounts falling due within one
year (15,267) (13,521) (16,375)
------------------------- ------ ------ ------
Net current assets 10,493 1,758 13,170
------------------------- ------ ------ ------
Total assets less current liabilities 46,723 55,425 49,172
Creditors: amounts falling due after more
than one year (1,104) (537) (1,239)
Provisions for liabilities and charges (3,324) (1,684) (2,636)
------------------------- ------ ------ ------
Net assets 42,295 53,204 45,297
------------------------- ------ ------ ------
Capital and reserves
Called up share capital 8,986 6,026 8,871
Share premium account 17,911 812 17,703
Shares to be issued 7,057 - 6,630
Revaluation reserve 358 482 358
Merger reserve 26,056 56,239 26,685
Profit and loss account (18,075) (10,605) (14,951)
------------------------- ------ ------ ------
Equity shareholders' funds (note 5) 42,293 52,954 45,296
------------------------- ------ ------ ------
Minority interests
Equity 2 - 1
Non-equity - 250 -
------------------------- ------ ------ ------
2 250 1
------------------------- ------ ------ ------
------------------------- ------ ------ ------
Capital employed 42,295 53,204 45,297
------------------------- ------ ------ ------
Unaudited consolidated cash flow statement
6 months to Year to
--------------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Net cash outflow from operating
activities (note 6) (3,144) (4,085) (8,802)
Returns on investment and servicing of
finance 160 55 234
Taxation 72 (56) (215)
Capital expenditure and financial
investment (637) (319) (625)
Acquisitions and disposals 80 - (2,738)
-------------------------- ------ ------ ------
Net cash flow before management of liquid
resources and financing (3,469) (4,405) (12,146)
Management of liquid resources 700 6,001 5,301
------ ------ ------
Proceeds from issue of shares - - 19,017
Redemption of preference shares - - (250)
Decrease in debt (115) (566) (667)
------ ------ ------
Financing (115) (566) 18,100
-------------------------- ------ ------ ------
(Decrease)/increase in cash in the period
(note 7) (2,884) 1,030 11,255
Opening cash 13,875 2,620 2,620
-------------------------- ------ ------ ------
Closing cash (note 7) 10,991 3,650 13,875
-------------------------- ------ ------ ------
Reconciliation on net cash flow to movement
in net funds
(Decrease)/increase in cash in the period (2,884) 1,030 11,255
Decrease in debt 115 566 667
Decrease in liquid resources (700) (6,001) (5,301)
-------------------------- -------- ------ ------
Change in net funds resulting from cash
flows (3,469) (4,405) 6,621
Debt acquired on acquisition of
subsidiary undertaking - - (456)
Finance leases acquired on acquisition of
subsidiary undertaking - - (30)
Net funds at start of period 13,530 7,395 7,395
-------------------------- ------ ------ ------
Net funds at end of period (note 7) 10,061 2,990 13,530
-------------------------- ------ ------ ------
Notes
1. Accounting policies and basis of preparation
The financial statements comprise the Group's unaudited results for the six
months ended 30 September 2003 and 30 September 2002 and the audited results for
the year ended 31 March 2003.
The unaudited financial information has been prepared under the historical cost
convention as modified by the revaluation of freehold buildings and in
accordance with applicable accounting standards using the accounting policies
set out in the Group's Annual Report and Accounts for the year ended 31 March
2003.
The summary of results for the year ended 31 March 2003 does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The full financial statements for the year ended 31 March 2003 have been
reported on by the Group's auditors and delivered to the Registrar of Companies.
The audit report was unqualified and did not contain a statement under section
237 (2) or section 237 (3) of the Companies Act 1985.
2. Exceptional items
6 months to Year to
--------------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Pensions Review and de-commissioning - (600) (900)
Start up and restructuring costs - - (1,982)
-------------------------- ------ ------ ------
- (600) (2,882)
-------------------------- ------ ------ ------
3. Taxation
No tax is payable for the period due to the availability of losses. The credit
shown in the profit and loss account is in respect of prior year repayments.
4. Loss per share
The calculation of the basic loss per share is based on the loss for the
financial period and the weighted average number of shares in issue during the
period of 89,095,000 (six months to 30 September 2002: 60,258,000; year ended 31
March 2003: 72,537,000). At 30 September 2003 there were no share options that
may have a dilutive effect on the number of shares and hence the diluted loss
per share is the same as the basic loss per share.
Additional disclosure has been provided in respect of loss per share as follows:
6 months to Year to
---------------------- -------
30.9.03 30.9.02 31.3.03
-------------------------- ------ ------ ------
Basic loss per share before exceptional
items, goodwill impairment and amortisation (3.2p) (5.0p) (9.2p)
Goodwill impairment and amortisation (1.0p) (2.2p) (40.6p)
-------------------------- ------ ------ ------
Exceptional items - (1.0p) (3.8p)
-------------------------- ------ ------ ------
Basic loss per share (4.2p) (8.2p) (53.6p)
-------------------------- ------ ------ ------
5. Reconciliation of movement in shareholders' funds
6 months to Year to
--------------------- --------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Loss for the financial period (3,753) (4,962) (38,862)
Ordinary shares issued, net of expenses 323 - 19,736
Shares to be issued 427 - 6,630
Loss on revaluation of property - - (124)
Opening equity shareholders' funds 45,296 57,916 57,916
-------------------------- ------ ------ ------
Closing equity shareholders' funds 42,293 52,954 45,296
-------------------------- ------ ------ ------
6. Net cash outflow from operating activities
6 months to Year to
--------------------- -------
30.9.03 30.9.02 31.3.03
£'000 £'000 £'000
-------------------------- ------ ------ ------
Operating loss (3,985) (5,017) (39,159)
Add exceptional items - 600 2,882
-------------------------- ------ ------ ------
(3,985) (4,417) (36,277)
Exceptional item - net Pensions Review
payments (43) (1,724) (2,822)
Exceptional item - start up and
restructuring costs (687) - (1,369)
Amortisation of goodwill 914 1,349 2,852
Impairment provision - - 26,563
Depreciation charges 347 265 594
Profit on sale of fixed assets - (2) (3)
Decrease/(increase) in debtors 750 962 (2,288)
(Decrease)/increase in creditors and
provisions (excluding the effect of
exceptional items) (440) (518) 3,948
-------------------------- ------ ------ ------
Net cash outflow from operating activities (3,144) (4,085) (8,802)
-------------------------- ------ ------ ------
7. Analysis of net funds
1.4.03 Cash flow Non cash 30.9.03
movements
£'000 £'000 £'000 £'000
------------------- ------ ------ ------ ------
Cash and bank balances 13,875 (2,884) - 10,991
------------------- ------ ------ ------ ------
Debt due after one year (802) - 108 (694)
Debt due within one year (192) 98 (108) (202)
Finance leases (51) 17 - (34)
------------------- ------ ------ ------ ------
(1,045) 115 - (930)
------------------- ------ ------ ------ ------
Short term deposits 700 (700) - -
------------------- ------ ------ ------ ------
13,530 (3,469) - 10,061
------------------- ------ ------ ------ ------
Cash and bank balances at 30 September 2003 shown above exclude a bank deposit
of £400,000 which does not meet the definition of either cash or liquid
resources under FRS1.
8. General
The interim report was approved by the Board of Directors on 28 November 2003.
This report will be sent to shareholders and will be made available to the
public, upon request, from the Registered Office, Eaton House, 1 Eaton Road,
Coventry, CV1 2FJ.
Independent review report to Berkeley Berry Birch plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2003 on pages 4 to 10. We have read the other
information in the interim report and considered whether it contains any
apparent misstatements or material inconsistencies with the financial
information.
Our report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2003.
BDO STOY HAYWARD
Chartered Accountants
London
28 November 2003
Shareholder information
The company's share price is quoted daily and classified under the business
sector 'Speciality & Other Financial' in The Financial Times and The Daily
Express, under the business sector 'Banking & Finance' in The Times and under
the business sector 'Financial Companies' in The Daily Mail. The current share
price is shown on the company's corporate internet site, www.bbb.co.uk, under
the Investors section (delayed by 15 minutes) and is also available on the FT
Cityline telephone service (calls are charged at 60p per minute) on 0906 8431815
(BT) or 0906 0031815 (Vodafone).
Enquiries concerning holdings of the company's shares (i.e. notification of
change of address or the loss of a share certificate) should be referred to the
company's registrars, Capita Registrars, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, telephone: 0870 162 3100. Shareholders who receive
more than one copy of this interim report may have more than one account on the
company's register of members. To amalgamate their holding, shareholders should
contact the registrars giving details of the accounts concerned and how they
wish them to be amalgamated.
Information about the Group, and the services it offers, can be found on the
corporate internet site www.bbb.co.uk.
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