Interim Results
Millfield Group PLC
01 December 2005
Millfield Group plc interim results to 30 September 2005
Millfield's focus shifts from successful restructuring to profitability
Millfield Group plc ("Millfield", "the company" or "the group"), a leading
national independent financial services advisory group, today announces its
interim results for the period ended 30 September 2005.
It is now one year since Millfield merged with Inter-Alliance Group Plc ("
Inter-Alliance") creating the largest national firm of independent financial
advisers in the UK. Significant management effort has been absorbed over the
last year in integration activities: harmonising systems and procedures for the
enlarged group, in divesting non-core activities and in extracting some very
significant synergies and cost savings post merger. The group is now 100% UK
based.
We have reached the stage where this core integration activity is complete and
management is focussing on the future development of the group; growing
turnover, adviser numbers, margin and profitability. The group's turnover is
now annualising in excess of £120m, we now have the scale and infrastructure
capability to take advantage of the positive outlook for the UK advisory market.
IFAs are and will remain the dominant distribution channel. Millfield Group will
continue to be a leading player and should benefit substantially from the
current market recovery in particular the changes to pension simplification
going forwards and the stability of the property market.
Highlights:
• Turnover up 135% to £64.1m (2004 - £27.3m)
• Gross profit up 48% to £15.0m (2004 - £10.1m)
• Reduced loss after tax and minority interests of £1.3m (2004 - £4.5m)
• Cost base reduction initiatives implemented in September 2005 resulted
in significant savings - the annualised rate for the cost base is now £30.8m
(£49m post merger) and it will reduce further to £29m by Q4 2005/6
• Further efficiencies will reduce the cost base to below £28m from Q1 2006/7
• Administrative staff headcount reduced from 509 on merger to 364 at
November 2005
• The group is on course for operating profitability for Q3 2005/6
• £7.3m cash - group operating cash flow has been positive since September 2005
• 73 new applications in membership to join Millfield Partnership
• 53 new applications in membership for Sage Financial Services
• Implementation of minimum standards throughout MPL national branch network
• Relocation of IT operations centre to London Docklands plus switching
all locations to Telstra, the AAA rated carrier, as a single telecoms
supplier
Paul Tebbutt, Chief Executive of Millfield, said:
"We have continued to make substantial savings in overhead expenses which were
running at an annual rate of £49m immediately post merger. With the cost
reduction initiatives implemented in September 2005 the annualised rate for the
cost base is now £30.8m and will reduce further to £29m by the 4th quarter 2005/
6. Our administrative staff headcount has been reduced from 509 on merger to 364
at November 2005.
We are focusing on achieving further cost efficiencies in the 1st quarter 2006/
7, which will reduce our cost base to £28m.
In September 2005, the group indicated that it was confident of achieving
operating profitability from the 3rd quarter 2005/6. We are pleased to report
that an operating profit (before goodwill amortisation) was recorded in our
management accounts for both October and November, hence we remain confident of
achieving our objectives. Furthermore we can confirm that the group was cash
generative in each of the last two months. With further cost savings yet to be
realised, and with positive trends emerging with respect to turnover, the group
looks forward to 2006 and 2007 with optimism."
Enquiries
Millfield Group plc
Paul Tebbutt, Chief Executive
Telephone 020 8604 2607
Mobile 07958 992812
Arthur Milton, Finance Director
Telephone 020 8604 2623
Mobile 07711 714215
Llewellyn-Slade PR Limited
Mark Llewellyn-Slade - 01444 242792
Francis Higney - 0207 7336557
Profile
Millfield Group plc ("Millfield") is a national independent financial advisory
group offering truly independent financial advice to both businesses and
individuals, primarily in the pensions, life assurance, investment and mortgage
sectors. Its principal Financial Services Authority authorised companies in the
UK are Millfield Partnership Limited and Sage Financial Services Limited.
Millfield companies retain the services of 1,575 self-employed advisers
operating from locations spread extensively across the whole of the United
Kingdom and 21 qualified accounting professionals in a further 9 locations in
the United Kingdom.
Millfield companies concentrate on providing services and advice to businesses,
affluent individuals and affinity groups. Millfield intends to maintain its
focus on these target markets and significantly increase its market presence.
Its advisers work closely with estate agents, lawyers, accountants and other
professional advisers to benefit their corporate and domestic clients.
Millfield's goal is to offer a friendly, professional service built on long-term
relationships with its advisers, their clients and to deliver our vision "
creating security and wealth for clients, advisers, shareholders and employees".
Chairman's Statement
It is now one year since Millfield merged with Inter-Alliance Group Plc ("
Inter-Alliance") creating the largest national firm of independent financial
advisers in the UK. Significant management effort has been absorbed over the
last year in integration activities: harmonising systems and procedures for the
enlarged group, in divesting non-core activities and in extracting some very
significant synergies and cost savings post merger. The group is now 100% UK
based.
We have reached the stage where this core integration activity is complete and
management is focussing on the future development of the group; growing
turnover, adviser numbers, margin and profitability. The group's turnover is
now annualising in excess of £120m, we now have the scale and infrastructure
capability to take advantage of the positive outlook for the UK advisory market.
IFAs are and will remain the dominant distribution channel. Millfield Group will
continue to be a leading player and should benefit substantially from the
current market recovery in particular the changes to pension simplification
going forwards and the stability of the property market.
Results
The Inter-Alliance merger was effected on 1 October 2004. Accordingly the
comparative results for the six months to 30 September 2004 relate solely to
Millfield operations as they existed pre-merger.
The first half of the year includes the following:
• Turnover up 135% to £64.1m (2004 - £27.3m)
• Gross profit up 48% to £15.0m (2004 - £10.1m)
• Reduced loss after tax and minority interests of £1.3m (2004 - £4.5m).
• Operating loss before goodwill amortisation and exceptional items was
£4.0m (2004 - £2.3m pre-merger). This reflects a continued reduction from a
£6.8m loss in the six months immediately following the merger.
• An exceptional loss of £0.6m (2004 - £nil) comprises a write-back of
an onerous lease provision of £0.6m after surrender of a lease in London West
End, net of redundancy and relocation costs of £1.2m incurred in September
2005.
These result in annualised cost savings of £3.7m from October 2005 onwards.
• The loss before tax of £1.2m (2004 - £4.5m) includes a profit of £5.0m
which arises on disposal of the group's 24.7% holding in Lifetime Group Ltd
to Norwich Union on 5 August 2005.
• The non-core international businesses of the group which comprised
turnover of £5m were sold on 15 September 2005 for a gross consideration of
£0.75m.
• The group is on course to make an operating profit before goodwill
amortisation for the 3rd quarter 2005/6
• £7.3m cash - group operating cash flow has been positive since
September 2005
• Further cost savings have been made to reduce administrative expenses
(excluding goodwill amortisation) to £29m by the 4th quarter 2005/6
We have continued to make substantial savings in overhead expenses which were
running at an annual rate of £49m immediately post merger. With the cost
reduction initiatives implemented in September 2005 the annualised rate for the
cost base is now £30.8m and will reduce further to £29m by the 4th quarter 2005/
6. Our administrative staff headcount has been reduced from 509 on merger to 364
at November 2005.
We are focusing on achieving further cost efficiencies in the 1st quarter 2006/
7, which will reduce our cost base to £28m.
In September 2005, the group indicated that it was confident of achieving
operating profitability from the 3rd quarter 2005/6. We are pleased to report
that an operating profit (before goodwill amortisation) was recorded in our
management accounts for both October and November, hence we remain confident of
achieving our objectives. Furthermore we can confirm that the group was cash
generative for the last two months. With further cost savings yet to be
realised, and with positive trends emerging with respect to turnover, the group
looks forward to 2006 and 2007 with optimism.
Operating Businesses
The principal operating businesses of the group are described below. UK turnover
in the six months to 30 September 2005 increased to £59.1m up 8% from a level of
£54.7m in the previous six months to 31 March 2005. Turnover includes £56.2m in
respect of the regulated businesses, of which RST generated £0.8m together with
£1.6m of accountancy services revenue.
The average number of advisers in the six months period was 1588 and annualised
productivity per adviser £71,000. This comprised productivity of £74,000 for
Millfield Partnership (including Millfield Enterprise firms) and £58,000 for the
Sage network. Millfield offers flexibility of distribution through its business
channels, independent status, whole of market & Multi Tie.
Millfield Partnership - high quality professional National IFA with strong brand
image
This is Millfield's National branch fully serviced business (including
professional indemnity insurance) where the advisers are referred to as
partners. Our commitment to independent and whole of market advice is paramount
to the advisers and their client's propositions.
Millfield Enterprise - a group of entrepreneurial firms building their
businesses within the framework of Millfield
Millfield Enterprise incorporates the firms within Millfield Associate
Partnership ("MAP") and those previously in Inter-Alliance Group Practices. The
firms within Millfield Enterprise provide their own premises and local
facilities whilst receiving all of the Millfield central services, purchasing
power, systems, compliance, training & development, professional indemnity
insurance etc.
Sage Financial Services - a premium network
Sage provides core services to its member firms encompassing compliance,
training & competence, commission processing and professional indemnity
insurance.
RST Group - an Accounting business specialising in the small business market
RST comprises a firm of accountants based in the north of England, Scotland and
a financial services firm providing services to the client base.
Integration of the Merged Group
Our activities in integrating the merged group were fully described in the last
annual report. During the last quarter we have divested all non-core operations
and have completed all branch closures. We are now fully focussed on our core UK
businesses from 14 strategic national locations; down from 46 at the time of the
merger.
We completed the relocation of our IT operations and development centre to
London Docklands in October 2005 and throughout November 2005 have switched all
locations to Telstra Network, the AAA rated carrier, as a single telecoms
supplier. Our Operations Centre in Europa House Hull is continuing to expand and
will have 114 employees by the end of 2005.
Accordingly we will move into 2006 with a streamlined technology platform and
with a concentration in developing ongoing services for our advisers, growing
turnover, controlling costs and improving margins across each of our UK business
channels.
Business Closures and Disposals
We have continued to focus our resources on the opportunities that exist within
our core UK business channels. To contain costs the following businesses have
been closed or sold during the half year:
Sale of Lifetime Group
On 5 August 2005, the group's 24.73% shareholding in Lifetime Group Limited was
sold by the joint holders, the company and its subsidiary Millfield Partnership
Limited, to Norwich Union Life Investment Partnership Limited.
Consideration for the sale was an initial amount of £9m paid on completion
together with deferred consideration of up to a maximum £6m, contingent upon
certain performance targets being achieved, a portion of which will be ceded to
advisers. The deferred consideration is payable in four instalments as follows:
31 May 2006 £2.0m
30 April 2007 £1.5m
30 April 2008 £1.5m
30 April 2009 £1.0m
The excess of initial proceeds net of expenses over the carrying value of the
investment is £5.0m, and is reflected in the consolidated profit and loss
account for the half year.
Sale of International businesses
On 15 September 2005 the non-core international financial advisory arm of
Millfield (comprising the entire issued share capital of Inter-Alliance
International Group (Cyprus) Limited, PGMS Holdings Limited and Sterling
Associates Limited) was sold to de Vere Holding Company Limited for an aggregate
consideration of £750,000, payable as £600,000 on completion and £150,000 on 31
March 2006. After deducting related costs and amounts paid to settle certain
liabilities of the international companies, the net proceeds provide additional
working capital of £310,000.
Board
The Board of the company consists of myself as non-executive Chairman, Paul
Tebbutt, Bryan Beeston, Mike Duncan and Arthur Milton as executive directors and
Mike Walmsley (Deputy Chairman), Tom Morton and Peter Connell (IFA
Representative) as non-executive directors.
The Group Executive Board, the main operational board for the group, is now made
up of Paul Tebbutt, Chief Executive, Bryan Beeston, Group Sales Director, Mike
Duncan, Operations Director, Arthur Milton, Interim Finance Director, Frank
Gorrie, Managing Director Sage Network, Darrell Smith, National Sales Director,
Neil Stevens, Marketing Director and Alec Adams, Business Quality Director.
Following the restructuring of the company and the sale or closure of non-core
and foreign businesses, Bryan Beeston will step down from the company's Boards
on 31 December 2005, he will continue his association with Millfield by
launching a new venture within the group in the new year.
Outlook
The group has now reached a very positive stage in its development in that all
major core activity surrounding the merger of Millfield and Inter-Alliance is
complete. Moving forward we will continue to focus all of our efforts in
developing and growing the business; the main drivers of profitability are
adviser numbers, productivity, gross margin and expenses. The group is now
significantly larger than many of its competitors. As such it has greater
resources to allocate to future technology investment and is well placed to
accommodate further sector consolidation.
The group's turnover is now annualising in excess of £120m and with the advent
of pension simplification ("A" day) we are already experiencing increased levels
of activity in this market sector, which we believe will continue throughout
2006 and beyond. The company will report an operating profit from the 3rd
quarter 2005/6 onwards and there remains capacity to achieve further cost
savings in the 1st quarter 2006/7.
Richard Mansell-Jones
Non-Executive Chairman
1 December 2005
Consolidated Profit & Loss Account
Six months ended Year ended
30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
TURNOVER 64,066 27,300 84,956
Cost of Sales (49,102) (17,204) (58,991)
Gross Profit 14,964 10,096 25,965
Operating loss before goodwill amortisation and (4,002) (2,333) (8,865)
exceptional items
Goodwill amortisation (893) (721) (1,915)
Exceptional items (590) - (7,970)
Administrative expenses (20,449) (13,150) (44,715)
OPERATING LOSS (5,485) (3,054) (18,750)
Share of operating loss in:
Joint venture - (1,350) (1,444)
Associates (95) (48) (105)
Profit on disposal of subsidiaries - - 19
Profit on disposal of joint venture interests 5,003 - 824
Interest receivable and similar income:
Group 164 59 328
Joint venture - 20 20
Interest payable and similar charges
Group (757) (113) (942)
Joint venture - (9) (11)
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (1,170) (4,495) (20,061)
Tax on loss on ordinary activities (127) 8 7
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (1,297) (4,487) (20,054)
Equity minority interests (39) (10) 388
RETAINED LOSS FOR THE PERIOD (1,336) (4,497) (19,666)
Basic and diluted loss per share (1.1p) (4.8p) (18.4p)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Loss attributable to members of the company (1,336) (4,497) (19,666)
Surplus arising in issue of shares in joint - - 1,713
venture
Total recognised gains and losses relating to (1,336) (4,497) (17,953)
the period
Consolidated Balance Sheet
30 September 31 March
2005 2004 2005
Restated
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
FIXED ASSETS
Goodwill 27,395 14,298 28,665
Tangible assets 3,154 4,520 3,001
Investments 172 1,955 3,980
30,721 20,773 35,646
CURRENT ASSETS
Stocks 5 5 5
Debtors 24,648 12,755 21,944
Investments - 251 251
Cash at bank and in hand 7,267 4,029 7,773
31,920 17,040 29,973
CREDITORS: amounts falling due within one year (22,206) (8,826) (21,804)
NET CURRENT ASSETS 9,714 8,214 8,169
TOTAL ASSETS LESS CURRENT LIABILITIES 40,435 28,987 43,815
CREDITORS: amounts falling due after more than one year (13,077) (2,347) (14,731)
27,358 26,640 29,084
PROVISIONS FOR LIABILITIES AND CHARGES (12,052) (4,567) (12,430)
MINORITY INTERESTS
Equity minority interests 44 270 32
NET ASSETS 15,350 22,343 16,686
CAPITAL AND RESERVES
Called up share capital 207 172 207
Deferred consideration 1,751 1,309 1,751
Share premium account 48,482 48,482 48,482
Merger reserve 19,031 11,709 19,031
Capital reserve - 2,227 3,940
Profit and loss account (54,121) (41,556) (56,725)
EQUITY SHAREHOLDERS' FUNDS 15,350 22,343 16,686
These interim financial statements were approved by the Board of Directors on 1 December 2005.
Signed on behalf of the Board of Directors:
Richard Mansell-Jones Paul Tebbutt
Non-Executive Chairman Chief Executive
Consolidated Cash Flow Statement
Six months ended Year ended
30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Operating loss (5,485) (3,054) (18,750)
Depreciation charge 697 721 1,546
Loss/(gain) on disposal of fixed assets - (23) 842
Amortisation of goodwill 893 721 1,915
Decrease in stocks - 1 1
(Increase)/decrease in debtors (2,897) 153 1,872
(Decrease)/increase in creditors (734) (3,760) 1,522
(Decrease)/increase in provisions (376) 217 474
Net cash outflow from operating activities (7,902) (5,024) (10,578)
Returns on investments and servicing of finance
Interest received 164 59 285
Interest paid (438) (113) (371)
Dividend paid to minority interests (50) - -
(324) (54) (86)
Taxation
UK corporation tax paid - 13 (12)
Capital expenditure and financial investment
Purchase of tangible fixed assets (981) (1,215) (953)
Sale of tangible fixed assets - 95 352
(981) (1,120) (601)
Acquisitions and disposals
Purchase of subsidiary undertakings - - (150)
Acquisition expenses - - (1,236)
Net cash acquired with subsidiaries - - 1,446
Proceeds from disposal of subsidiaries 262 - -
Net cash disposed with subsidiaries (407) - (12)
Cash of associates formerly subsidiaries - - (175)
Payments for unincorporated businesses (211) - (1,024)
Proceeds from disposal of joint venture interests 8,967 - 824
8,611 - (327)
Financing
Issue of ordinary share capital - 3,840 3,840
Expenses paid in connection with share issue - (222) (222)
Repayment of bank loans (58) (186) (754)
Receipt of secured bank deposits - - 457
Proceeds of new loans 200 2,300 13,000
Repayment of other loans (17) - (1,372)
125 5,732 14,949
Net cash (outflow)/inflow (471) (453) 3,345
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 2005 group accounts. The figures shown
for the full year ended 31 March 2005 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 Acts 1985.
The group has cash balances of £7.3m at 30 September 2005 and the directors have
prepared cash flow forecasts which show that the group will record an operating
profit from October 2005 and will generate increasing levels of income
sufficient to meet its future financial obligations.
Accordingly, the directors have prepared the financial statements on a going
concern basis consistent with this assumption.
The group's regulated companies also reported a surplus on all regulatory
capital adequacy requirements imposed by the Financial Services Authority until
30 September 2005 although the directors expect to report a shortfall of capital
adequacy on test 2 throughout the fourth quarter of 2005. They intend to
implement further measures to strengthen the group balance sheet and are
confident that it will be possible to obtain additional funding to achieve this.
2. Exceptional items
Six months ended Year ended
30 September 31 March
2005 2004 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Property closure and onerous lease (credits)/charges (571) - 4,920
Redundancy, relocation and legal costs 1,161 - 1,931
Fixed asset write-off - - 764
Integration and corporate restructuring costs - - 355
590 - 7,970
3. Loss per share
The calculation of loss per share on losses attributable to shareholders is
based on losses after taxation of £1,336,000 (2004: £4,497,000) and on
118,127,119 (2004: 94,029,824) 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.
This information is provided by RNS
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