Interim Results
Millfield Group PLC
09 December 2002
Date: 09 December 2002
On behalf of: Millfield Group plc ("Millfield")
Embargoed until: 0700hrs
Millfield Group plc
Interim Results 2002
Millfield Group plc, the AIM-listed national independent financial advisory
organisation, today announced its results for the six months period to 30
September 2002. The highlights are:
• Turnover more than doubled to £14.2m (2001: £6.7m);
• Gross profit up 172% to £4.9m (2001: £1.8m). Loss before
amortisation of goodwill and share of joint venture loss of £5.4m
(2001: £2.2m);
• Increase in total number of advisers to 422 (106 at 30th September
2001);
• Increase in number of UK locations to 31 (September 2001: 8);
• Formation of Lifetime Portfolio Services ("Lifetime") a joint
venture company to provide online portfolio management services to IFAs
and their clients;
• Unique stepped acquisition programme devised to participate in the
consolidation of the advisory market funded by £12m Placing with five
leading product providers;
• Establishment of Adviserco Limited, a vehicle to service advisers
clients at an enhanced margin with fees and commissions shared between
the adviser & Millfield; and
• Appointment of Terry Stannard as a Non-Executive Director.
Commenting on the results, Richard Mansell-Jones, Chairman of Millfield, said:
"Our focus since our successful flotation on AIM in March 2001 has been to
create a robust, scaleable infrastructure, to develop a network of offices
spanning the length and breadth of the UK, and to recruit several hundred high
calibre IFAs. We have successfully achieved these objectives in an environment
of low investor confidence, volatile stockmarkets and uncertainty about the
nature of change in the regulatory regime in the financial services sector. Our
primary goal now is to drive profitability from these investments."
Enquiries to:
Paul Tebbutt, Chief Executive, Millfield Group plc Tel 020 8604 2607
Mob 07958 992812
Harry Roome, Finance Director, Millfield Group plc Tel 020 8604 2623
Mob 07855 259148
Simon Atkinson, Collins Stewart, Stock brokers Tel 020 7523 8000
Emma Kane, Redleaf Communications, City PR Consultants Tel 020 7955 1410
CHAIRMAN'S STATEMENT
Since its flotation in March 2001, Millfield has created a national independent
financial advisory organisation offering truly independent financial advice to
both individuals and businesses across the length and breadth of the UK. This
has been achieved against a background of economic uncertainty, high levels of
volatility in global stockmarkets and significant, on-going uncertainty about
regulatory changes in the financial services industry. While this has impacted
on investors' confidence generally, Millfield's diverse range of specialist
services has enabled the Group to minimise the impact of these conditions.
During the period, Millfield has continued its investment programme and today
has a robust, scaleable infrastructure, and a nationwide network of offices.
Most importantly it has recruited excellent, high calibre advisers and employees
- essential foundations for this long-term, fast growing business.
RESULTS
Results for the first half of the year, historically the slower half, show
turnover more than doubled to £14.2 million (2001: £6.7m), administration costs
before goodwill amortisation at £10.5 million (2001: £4.5m), and losses of £5.9
million (2001: £2.2m). Against the second half of last year costs before
goodwill amortisation are up 13 per cent with flattening infrastructure spend,
resulting in an 11 per cent increase in losses before goodwill amortisation and
our £0.2 million share of the losses of our joint venture company, reflecting
its initial investment costs. At 30 September 2002, companies within the Group
held £14.4 million of cash balances with a further £3.3 million held by
Lifetime.
On 18 July 2002,we successfully completed share issues to raise £17.2 million
before expenses of £1.1 million, £12.0 million from product providers to support
our stepped acquisition programme and £5.2 million from institutional and other
existing shareholders for working capital primarily for investment in Lifetime
and to replace cash deployed in the acquisition of Moncur Jackson.
ACHIEVING CRITICAL MASS AND DRIVING PROFITABILITY
The level of business in the second half of our financial year is historically
higher than in the first half of the year. This coupled with the continuing
growth in the number of our advisers means that we expect turnover to increase
substantially in the second half of the year and in our next financial year.
The key to Millfield's success is its ability to recruit top quality IFAs and
drive profitability. This is the primary focus of the Group. During the period,
we increased the number of advisers operating within the Group to 422 (2001:
106). Our recruitment programme remains strong and is focused on established
IFAs. The goal is to achieve in excess of 750 professional advisers.
We are continually developing internal procedures, initiatives and support
mechanisms to maximise the full potential of each of our advisers. Our business
plan envisages the average new adviser delivering annual turnover of between
£75,000 and £100,000, increasing to an average of £200,000 in a four year
period. We have found that through recruiting established IFAs their initial
business plans exceed £100,000. The significant growth in the number of advisers
during this period means that many have yet to achieve the higher levels of
productivity. The 422 advisers at 30 September 2002 are net of 25 advisers who
left because they unfortunately failed to achieve the required productivity
levels.
Millfield drives profitability through specialisation, continuous development
and by providing our advisers with a time and cost efficient environment in
which to operate. Substantial progress has been made in this area during the
first six months of the financial year, including:
• Establishment of the Millfield Business Centre in Hull which is
staffed by 70 people who deal with all telephony and proposal
submission administration;
• Employment of over 100 paraplanners and personal assistants in the
branches to support the advisers;
• The appointment of specialist advisers in areas such as employee
benefits, specialist tax advice, inheritance tax planning, pensions,
protection and long term care;
• Creation of lead generation programmes, principally through our
affinity groups, a growing number of accountants and solicitors, our
corporate appointment programme, and the pensions campaign we have
been running in a leading national newspaper; and
• Specialist training and advanced qualifications for advisers through
the Millfield Academy which is supported by leading insurance groups
and fund managers.
OFFERING FLEXIBLE SOLUTIONS FOR CUSTOMERS AND ADVISERS
Developments arising from Government reports through Sandler on investments,
Pickering on pensions and Consultative Paper 121 from the FSA on depolarisation
and the future structure of the industry, continue to endorse the approach we
are taking. Millfield has developed a structure which it believes will enable it
to maximise the full potential of these developments for the benefit of all its
advisers, employees and clients. We are delighted that the question of adviser
remuneration raised within Consultative Paper 121 has been settled, in
principle, with the adoption of a menu based system for our clients.
• Millfield Partnership
This is Millfield's core business with 347 advisers, (of which 11 are Millfield
Protection & Mortgages advisers), in 14 locations, including those acquired
through the acquisition of HFP Holdings Limited (Heritage) on 1 October 2001.
The turnover of Millfield Partnership in the first half of the year was £11.8
million, up from £6.6 million in the first half of last year. This is a
satisfactory result, demonstrating the continued growth of the business. The
gross margin earned was 35.5 per cent in the first half, up from 25.7 per cent
in the first half of last year, as a result of our progressive commissions and
fee structure for our advisers.
• Millfield Associate Partnership
We have developed a model for bringing firms into the Millfield Group,
participating in the industry trend of consolidation and, securing for Millfield
existing firms and groups of advisers, led by vigorous entrepreneurs, where
payment is linked to proven value. Millfield provides a Board structure and a
range of services to these firms in order to develop their businesses and ensure
the achievement of their business plan. Following the fund raising completed in
July this year, we have been looking to take equity stakes in qualifying firms
for cash and shares, to provide working capital to support the development of
these businesses, with stepped acquisitions over two to six years to acquire 100
per cent of the equity, in return for Millfield Group plc shares, at a price
based on a multiple of post tax profits.
The stepped acquisition programme was delayed during the first half of this year
while we raised the funds required and developed the deal structure.
Accordingly, during the first half of the year, we took on just one additional
firm with a resulting aggregate turnover of £1.3 million, compared to £0.6
million turnover in the second half of the last financial year. At 30 September
2002, we had eight associate firms with 63 advisers including 13 Millfield
Protection & Mortgages advisers.
• Millfield Private Clients S.a.r.l
MPC is a Guernsey based financial services advisory company that has 12 advisers
offering a variety of offshore products to high net worth offshore investors.
EVENTS SINCE 30 SEPTEMBER 2002
On 21 November 2002, Millfield announced the acquisitions of three financial
services businesses - Sureline, Mortgage Savings Centre and Simply Online.
• Sureline Asset Management Limited
Millfield has entered into a stepped acquisition agreement with Sureline Asset
Management Limited ("Sureline") an IFA business based in Hertford with 14
advisers and an audited turnover of over £1 million with the growth potential
and culture that fits our model.
• Contemporary Life Limited (Trading as Mortgage Savings Centre "MSC")
Millfield has entered into a stepped acquisition agreement with MSC, a
specialist mortgage advisory business based in Edgware with 10 advisers and an
unaudited turnover of £500,000 in the year ended 31 July 2002.This business has
excellent potential and fits our model.
• Simply Millfield Limited (providing on-line term assurance direct to
customers)
Simply Millfield has been established as a 90% owned subsidiary following the
acquisition of the assets including the intellectual property rights of Simply
Online Limited from the liquidators. This expands our distribution capability by
generating new business through advertising and online which will commence in
January 2003. The purchase of this company has enabled us to bring forward our
plans for electronic processing by some 12-18 months and we now have the vehicle
to deliver simple products online.
• Millfield Associate Partnership
In the last week of November, we signed new stepped acquisition transactions
with five of the firms that joined us based on our original MAP contract, where
we acquired 10% equity in year 1 with an option to increase this in year 3. Our
new contract starts at 25%, provides working capital and a new Board structure
on completion. In total, these five firms now comprise 54 advisers. Cash
expenditure on these five acquisitions amounts to £888,500. Including the
acquisitions announced on 21 November 2002 we now have 73 advisers. Cash
expenditure and loan note commitments on all these acquisitions amounts to £1.5
million.
Company Primary Location Initial % Acquired
Millfield (AAP) Ltd Northern Ireland/Scotland 25%
Millfield (JP Associates) Ltd Cambridge 25%
Millfield Fountain Ltd Cheltenham 25%
Millfield (SW) Ltd Devon 25%
Millfield (SE) Ltd Croydon 30%
• Product Innovations Limited
PIL has been recently formed as an offshore product design and consulting
business. It provides consulting services to asset managers and investment
banks.
• Lifetime
Lifetime was established in June 2002 as a joint venture with AM Corporation Ltd
to provide online portfolio and wealth management services to IFAs and their
clients. Millfield has recently increased its stake in Lifetime to acquire a
controlling interest of 78.2% which is expected to diminish as the shareholder
base of the business is expanded. The service is scheduled to be launched during
the course of the next financial year following regulatory approval.
• Driving Revenues and Servicing Clients within Millfield Partnership
Limited
Millfield today also announces arrangements that will enable it to provide
services direct to its advisers' clients, giving these clients the option of
dealing direct through Millfield's Business Centre in Hull thereby providing the
clients with a choice of services, at an enhanced margin with fees and
commissions being shared between the adviser and Millfield.
For a consideration of 5 million Millfield Group plc shares of 0.175p, Millfield
will acquire the "A" shares of Adviserco Limited, a new company which has been
set up to acquire servicing rights for selected clients which were serviced by
Millfield advisers. The number of Millfield shares acquired by each adviser will
be dependent on the levels of business written during the 5 year period to 31
March 2006. Advisers will have a two year earn out period to 31 March 2008. This
initiative secures long term retention benefits for advisers, clients and
shareholders.
• The plc Board
The Board is pleased to announce the appointment of Terry Stannard as an
independent Non-Executive Director with effect from 19 December 2002.
Terry, aged 52, has held executive directorships of several major plc companies
including his appointment as Chief Executive of Uniq plc (formerly Unigate plc).
He brings a wide range of skills particularly in the area of brand management
and distribution which we believe will make a strong overall contribution to our
business.
In addition to his directorship in the Company, he holds or has held the
following directorships and/or been a partner in the following partnerships
within the last five years:
Current - Alpha Airports PLC, S.Daniels PLC, James Beattie PLC.
Past - Hillsdown Holdings PLC,Terranova Foods PLC, Unigate PLC, Uniq PLC.
Derek Noone and Jeremy Bradburne who became Non-Executive Directors on 21
February 2001 and 1 April 2002 respectively are now both developing the Lifetime
business as Executive Directors.
OUTLOOK
Millfield has continued to develop in line with its strategy and the plans we
set out at both the flotation last year and the fundraising in the summer. Our
Associate Partnership is now moving ahead strongly following the fundraising and
restructuring of the existing companies and the new firms that have joined.
The uncertainty of the financial markets has affected business levels across the
Group, and a number of our business clients have deferred implementing the
advice that we have given them. Because Millfield offers a broad range of advice
across all areas this means that our performance has been relatively resilient
despite the current economic environment. Our focus for the second half is to
increase turnover and manpower. I am confident that we have the people and the
infrastructure to deliver this plan.
Richard Mansell-Jones
Non-Executive Chairman
6 December 2002
Consolidated Profit & Loss Account
Year
Six months ended ended
30 September 31 March
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
TURNOVER 14,175 6,742 20,505
Cost of sales (9,280) (4,900) (14,573)
Gross profit 4,895 1,842 5,932
ADMINISTRATIVE EXPENSES
Goodwill amortisation (316) (1) (266)
Other (10,484) (4,521) (13,773)
(10,800) (4,522) (14,039)
OPERATING LOSS (5,905) (2,680) (8,107)
Share of operating loss in joint venture (190) 0 0
Interest receivable and similar income
Group 190 432 699
Joint venture 4 0 0
Interest payable and similar charges (16) 0 (4)
LOSS ON ORDINARY ACTIVITIES
BEFORE AND AFTER TAXATION (5,917) (2,248) (7,412)
Equity minority interests (3) 0 0
LOSS FOR THE FINANCIAL PERIOD
ATTRIBUTABLE TO SHAREHOLDERS (5,920) (2,248) (7,412)
Deficit brought forward (8,265) (853) (853)
DEFICIT CARRIED FORWARD (14,185) (3,101) (8,265)
Loss per share (9.82p) (4.77p) (14.18p)
Consolidated Balance Sheet
30 September 31 March
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
FIXED ASSETS
Intangible assets 11,960 21 12,275
Tangible assets 3,235 1,244 2,899
Investments 98 0 0
Investments in joint venture:
Share of gross assets 2,803 0 0
Share of gross liabilities (121) 0 0
Goodwill arising on acquisition less amortisation 282 0 0
18,257 1,265 15,174
CURRENT ASSETS
Debtors 9,026 3,163 7,641
Cash at bank and in hand 14,409 14,063 8,675
23,435 17,226 16,316
CREDITORS: Amounts falling due within one year (6,183) (3,010) (6,356)
NET CURRENT ASSETS 17,252 14,216 9,960
TOTAL ASSETS LESS CURRENT LIABILITIES 35,509 15,481 25,134
CREDITORS: Amounts falling due after more than one year (1,050) 0 (1,050)
34,459 15,481 24,084
PROVISIONS FOR LIABILITIES AND CHARGES (856) (346) (752)
MINORITY INTERESTS
Equity minority interests (3) 0 0
NET ASSETS 33,600 15,135 23,332
CAPITAL AND RESERVES
Called up share capital 123 83 101
Deferred consideration 325 0 325
Share premium account 35,628 16,624 19,462
Merger reserve 11,709 1,529 11,709
Profit and loss account (14,185) (3,101) (8,265)
EQUITY SHAREHOLDERS' FUND 33,600 15,135 23,332
These financial statements were approved by the Board of Directors on
6 December 2002.
Signed on behalf of the Board of Directors:
Richard Mansell-Jones
Paul Tebbutt
Harry Roome
Consolidated Cash Flow Statement
Year
Six months ended ended
30 September 31 March
2002 2001 2002
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Operating loss (5,905) (2,680) (8,107)
Depreciation charge 364 205 361
Loss on disposal 0 0 98
Goodwill amortisation charge 316 1 266
Increase in debtors (1,385) (1,695) (6,385)
(Decrease)/increase in creditors (173) 634 3,980
Increase in provisions 104 101 507
Net cash outflow from operating activities (6,679) (3,434) (9,280)
Returns on investments and servicing of finance
Interest received 190 222 470
Interest paid (16) 0 (4)
174 222 466
Capital expenditure and financial investment
Purchase of tangible fixed assets (700) (1,236) (3,013)
Sale of tangible fixed assets 0 0 92
(700) (1,236) (2,921)
Acquisitions and disposals
Acquisition expenses 0 0 (853)
Overdraft acquired with subsidiary 0 0 (90)
Purchase of fixed asset investments (98) 0 0
Purchase of joint venture interest (3,151) 0 0
(3,249) 0 (943)
Financing
Cash receipts from share issues 17,238 0 2,945
Expenses paid in connection with share issues (1,050) 0 (103)
16,188 0 2,842
Increase/(decrease) in cash in the period 5,734 (4,448) (9,836)
Reconciliation of net cash flow to movements in funds
Increase/(decrease) in cash in the period 5,734 (4,448) (9,836)
Net funds at beginning of period 8,675 18,511 18,511
Net funds at end of period 14,409 14,063 8,675
Notes
1. BASIS OF PREPARATION
The interim accounts, which are unaudited, have been prepared on the basis of
the accounting policies set out in the 2002 group accounts. The figures shown
for the full year ended 31 March 2002 represent an abridged version of the full
accounts of Millfield Group plc for that year, which have been filed with the
Registrar of Companies and on which the auditors have given an unqualified
report. The financial information contained in this interim report does not
constitute the Group's statutory accounts within the meaning of section 240 of
the Companies Act 1985.
2. LOSS PER SHARE
The calculation of loss per share on losses attributable to shareholders is
based on losses after taxation of £5,919,670 (2001: £2,248,000) and on
60,303,016 (2001: 47,120,401) ordinary shares, being the weighted average number
of shares in issue during the six months. FRS 14 requires presentation of
diluted EPS when a company could be called upon to issue shares that would
decrease net profit or increase net loss per share. For a loss making company
with outstanding share options, the exercise of in-the money options would
reduce rather than increase the net loss per share and thus such options are not
dilutive as defined in the FRS. Similarly, although net loss per share would be
increased by the exercise of out-of-the-money options, it seems inappropriate to
assume that option holders would act irrationally and exercise those options.
Accordingly no adjustment has been made to diluted EPS for either in-the-money
or out-of-the-money share options and, since there are no other diluting future
share issues, the diluted loss per share is the same as the basic loss per share
for the year.
3. POST BALANCE SHEET EVENTS
Since 30 September 2002, Millfield Group plc has signed stepped acquisition
transactions with five of the existing eight Millfield Associate Partnership
firms and with two additional firms. The cost of the initial tranches was
satisfied with £1,512,637 of cash/loan notes and 272,822 Millfield Group plc
shares. £468,598 of loans outstanding at 30 September 2002 are being repaid by
the firms.
Existing MAP Firms Initial % Acquired
Millfield (AAP) Limited 25%
Millfield (JP Associates) Limited 25%
Millfield Fountain Limited 25%
Millfield (SW) Limited 25%
Millfield (SE) Limited 30%
New MAP Firms
Millfield Sureline Limited 50%
Contemporary Life Limited 25%
(T/A Mortgage Savings Centre)
The remaining shareholdings will be acquired between 2004 and 2007 at a multiple
of profits or turnover based on agreed performance targets, with a two year earn
out period.
Independent Review Report to Millfield Group plc
INTRODUCTION
We have been instructed by the Company to review the financial information for
the six months ended 30 September 2002, which comprises the profit and loss
account, the balance sheet, the cash flow statement and related notes 1 to 3.We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
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 also responsible for ensuring that the accounting polices and presentation
applied to the interim figures are 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 the 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 2002.
Deloitte & Touche Chartered Accountants and Registered Auditors
London
6 December 2002
NOTES TO EDITORS:
Profile
• Millfield Group plc is today a national independent financial
advisory group offering independent financial advice to both businesses and
individuals through its principal operating company Millfield Partnership
Limited.
• Millfield currently retains the services of 450 self-employed advisers, up
from 422 at September 2002, operating from 31 locations across the United
Kingdom including a small number of advisers offering offshore products
through its Guernsey based company.
• Millfield concentrates on providing specialist and holistic financial
advice to individuals, companies and affinity groups focusing on strategies
that achieve financial security and wealth for our clients. This is
accomplished by utilising the full range of products and services that are
available within the independent marketplace. Our advisers specialise in
pensions planning pre and post retirement, the full range of protection,
investment, long term care, inheritance tax planning and the most up to date
mortgage solutions for our clients.
• Millfield intends to maintain its focus on these target markets and
significantly increase its market presence and professionalism through
sector specialists, working closely with lawyers, accountants, stockbrokers
to benefit their corporate and individual clients.
• Millfield's business model continues to meet the changing environment in
which modern financial advisers find themselves. We have recently
completed training programmes for all of our advisers based on the findings
and outputs from the Sandler report. The report recommended that independent
financial advisers improve their knowledge of investment advice, aggregation,
risk profiling and fund selection. This is part of our continuous development
programme for our advisers.
• Millfield's goal is to continue to create an organisation that is geared to
protecting and enhancing the productive time, abilities, energies and
achievements of its financial advisers. Our success to date has been built
on offering a friendly, professional service to our advisers and their
clients in order to create security and wealth for them.
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