Final Results

Teather & Greenwood Holdings PLC 27 June 2001 TEATHER & GREENWOOD HOLDINGS PLC 27 APRIL 2001 TEATHER & GREENWOOD HOLDINGS PLC PREIIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2001 HIGHLIGHTS - Turnover £34.6 million (2000: £30.9 million) - Profit before taxation £6.3 million (2000: £9.7 million) - Earnings per share 15.1 pence (2000: 24.8 pence per share) - Diluted earnings per share 13.9 pence (2000: 23.2 pence per share) - Final dividend of 1.5 pence per share (2000: 1.3 pence per share), making a total distribution for the year of 2.0 pence per share (2000: 1.3 pence per share) Commenting upon the outlook, Jeremy Delmar-Morgan, Chairman said: 'Clearly the stockmarket is quieter than this time last year, which inevitably influences the performances of some areas of our business. Equally, other areas have made more promising starts to the new financial year. I look forward to reporting on progress in due course.' Ken Ford, Chief Executive, adds: 'Progress has been made across the company with the development of existing and new services and products. The overall shape and balance of the company is now well established and those business areas that have been added more recently are in the early stages of contributing. In parallel, we shall continue to invest in information technology and support services.' For further information, please contact: TEATHER & GREENWOOD HOLDINGS PLC 020 7426 9000 Jeremy Delmar-Morgan, Chairman Ken Ford, Chief Executive Nick Stagg, Chief Operating Officer Brian Rowbotham, Finance Director Tim Davis, Marketing Director, Teather & Greenwood Limited NOTE TO EDITORS Teather & Greenwood Limited is one of the UK's leading independent stockbrokers. It has four principal business areas: Corporate Finance - specialising in corporate finance advisory (including mergers and acquisitions), institutional sales and market making services for an increasing number of growing smaller and mid-cap public companies; Equities Research - comprising individually rated and award-winning analysts covering 17 sectors; Institutional - providing institutional sales and research coverage of significant UK and international equities, including dedicated teams for bonds and fixed-interest instruments, derivatives and closed-end funds - corporate finance, research, sales and market making, both for investment trusts and foreign-listed funds; and Investment Management - providing private clients with discretionary, advisory, execution-only and 'on-line' broking services and a range of tax-efficient products. Teather & Greenwood Limited is the principal operating company of Teather & Greenwood Holdings plc. For more information on Teather & Greenwood Limited and its services, please visit the company's website: www.teathers.com CHAIRMAN'S STATEMENT Our development plans highlight the Board's continuing objective of building an enduring and profitable business for the long-term. In the last financial year, growth was assisted by exceptionally buoyant equity markets, which, by their nature, can be cyclical. It was therefore disappointing to have to announce in March, that, in common with many of our competitors, we had been experiencing significantly reduced demand for our retail-orientated services since January and that there would be a consequent reduction in profitability in the year ended 30 April 2001. A detailed review of trading follows in the accompanying Chief Executive's Review. Financial Highlights And Dividend Turnover increased to £34.6 million (2000: £30.9 million), producing operating profit of £5.2 million (2000: £9.6 million) and profit before taxation of £6.3 million (2000: £9.7 million). The balance sheet remains sound, with net assets of £16.0 million (2000: £12.3 million) and cash of £13.8 million (2000: £9.6 million). These results take into account significant investment made during the period across the company, but mainly in revenue-generating areas. The priority when making such investments is for an early contribution to profitability, although in some cases, the benefits have yet to accrue. In addition, we have continued to invest in information technology and support services, ensuring that both are in keeping with the needs of a growing company. During the year, we disposed of 35% of our holding in the London Stock Exchange at a profit of £996,000. The remaining holding is in our Balance Sheet under Fixed Asset Investments at cost of £1 but with a market value at the financial year-end of £1.8 million. Earnings per share were 15.1 pence (2000: 24.8 pence). The Board is recommending a final dividend for the year ended 30 April 2001 of 1.5 pence (2000: 1.3 pence). The dividend will be payable on 17 August 2001 to shareholders on the register at 6 July 2001. The Board believe that this dividend reflects a balance between profitability during the period, our confidence in the future and the need to reinvest in the continuing development of the Group. Board and employees In March, the Board announced that following the Group's Annual General Meeting in August, I shall move to a non-executive role. At the same time, Philip Ashfield, currently an executive director, will step-down from the Board, but remain a director of Teather & Greenwood Limited. Ken Ford continues as Chief Executive, Brian Rowbotham as Finance Director and Derek Boothman and Robin Derville as non-executive directors. It was also announced that Nicholas Stagg, 41, a non-executive director since August of last year, was appointed Chief Operating Officer of Teather & Greenwood Holdings plc with immediate effect. He has a proven track record of managing and developing complex businesses within the public company arena and has particular responsibility for improving the company's overall efficiency and profitability and developing information technology, systems and administration. On behalf of the Board, I would like to welcome those who joined during the year and thank everybody for their continuing dedication and effort in building this successful business. Move to the Official List and share bonus issue In July 2000, the Group moved to the Official List of the London Stock Exchange. This was followed in August by a two-for-one share bonus issue to improve liquidity of the shares. Deloitte & Touche/Independent on Sunday Award I am pleased to report that in May of this year, the company won this award ahead of 99 other finalists. The criteria was that turnover had to have grown by at least 25% per annum over the last four years. In addition, candidates were required to have a turnover between £5 million and £100 million in the last financial year. This award says much of the public recognition of the Group, the dedication of the staff and the success of the business. Strategy The Board's strategy remains to develop the Group as a broadly-based financial services organisation, serving the wide-ranging needs of corporate, institutional and private clients, principally in the United Kingdom, but increasingly abroad. In parallel, the directors seek to develop a complementary and profitable mix of revenue streams, in order to manage the risk of earnings volatility. Historically, growth has been achieved via organic means, largely through the attraction and retention of high quality, well-regarded employees. Selective recruitment will continue and with the increased management resource now available, the Board expects to devote more time to the evaluation of possible acquisitions. Outlook Clearly the stockmarket is quieter than this time last year, which inevitably influences the performances of some areas of our business. Equally, other areas have made more promising starts to the new financial year. I look forward to reporting on progress in due course. Jeremy Delmar-Morgan Chairman 27 June 2001 Chief Executive's Review The year ended 30 April 2001 was one of progress as we continue to build - for the long-term - a broadly based, independent financial services organisation. Emphasis has been placed on the measured and profitable expansion of the fee and income generating business areas, with significant investment also being made in essential support services. Our main business areas - Corporate Finance (corporate finance advisory, M&A, institutional sales and market making for smaller and growing companies); Equities Research (comprising individually rated and award-winning analysts covering 17 sectors); Institutional (institutional sales for larger capitalisation companies and dedicated teams for bonds, derivatives and closed-end funds (corporate finance, research, sales and market making, both for investment trusts and foreign-listed funds); and Investment Management (a comprehensive range of private client investment management services and products) - performed well, particularly in the light of more challenging market conditions in the second half of the year. Corporate Finance This team had another very good year, raising approximately £390 million on behalf of clients in the course of 33 transactions, compared to £340 million and 35 transactions last year. The corporate finance department increased its corporate client list from 73 to 91. Transactions completed during the year included 10 flotations and 19 secondary fund raisings. The flotation of new companies apart, the department has also won quoted clients as a direct consequence of larger competitors' diminishing interest in smaller companies. The mergers and acquisitions team worked on transactions with the corporate finance team and also completed three where they worked independently. The dedicated team of institutional salesmen and sales traders had a very productive year, dealing in house and increasingly, non-house stocks. Their reputation within the smaller company arena is deservedly high, as evidenced by their ability to place stock in quality new companies in often challenging stockmarket conditions, a feature which has continued into the current year, with approximately £100 million raised on behalf of clients in May and June. Their marketing efforts were helped by the introduction during the year of new-style smaller company and sector-specific events for the benefit of corporate, non-corporate and institutional clients. The market-making team has increased coverage to approximately 100 stocks. Apart from providing this essential service to the growing corporate client list, the team continues to add non-house stocks. Equities research This department now covers 17 sectors, producing research on over 400 companies, together with related sector-specific publications. The quality and impartiality of Teather & Greenwood Limited's research was again recognised, for the third year in succession, by the winning of the prestigious AIM Awards Best Research prize. This increased profile has assisted the analysts in their continuing programme of direct contact with institutional clients, an essential exercise to help maintain existing relationships and to build new ones, thus ensuring the maximum return on investment in this area. Indeed, this month the annual Reuters Smaller Companies Survey showed significant improvements in our analysts' rankings in the key criteria of how they are rated by institutional investors and the management of listed companies. Institutional The larger market capitalisation sales team had a good year overall, continuing to build their client base and increasing the range of stocks in which they deal. They are also playing a full part in the marketing of the research product to institutional clients and have been active in building our presence in the European Securities Network. This is an affiliation of eight independent European stockbrokers and investment banks, of which Teather & Greenwood Limited is the UK member. The bonds and fixed-interest team, which provides in-depth coverage of convertible debt, permanent interest-bearing bonds, preference shares and floating rate notes, continues to develop its client base. Its offering and appeal has been expanded by the recruitment of a well-known global economist. The derivatives team, whose main product is currently Contracts for Difference, continues to develop its service and has added a wide range of new clients. It deals both with private investors (some of whom are clients of the Investment Management Department) and with other brokers. The introduction of other products is currently under review. The closed-end funds team, which provides an integrated corporate finance, research, sales and market-making service and focused historically upon UK-listed investment trusts, had an extremely profitable year, during which time it completed two transactions on behalf of clients, raising a total of £ 145 million. Since the year-end, it has already completed the Group's largest-ever fund raising of £180 million. As we seek to develop closed-end funds as a major business area, we announced in May of this year the recruitment of a seven-strong, UK-based country funds team from a global investment bank, together with a dedicated corporate finance ability. Both have profitable track records and are progressing well. Investment Management This department has been the subject of reorganisation as we seek to develop it into a modern investment management business with the objective of significantly increasing the proportion of discretionary investment management business. This process has entailed a thorough review of the department's investment policies, systems and infrastructure, the gradual elimination of unprofitable business and the introduction of a new stock selection process. The regeneration of this business, which is being executed against a three-year plan, also necessitates developing the scale of the operation and its range of discretionary services. This is in part being achieved by the selective recruitment of highly regarded people, whose efforts are beginning to bear fruit. A team specialising in managing portfolios for charities has been recruited since the financial year-end. This area incorporates a dedicated tax-efficient solutions team which had a very good year, increasing its fee income by some 85%. It successfully launched the Take 2 and Take 3 TV Partnerships, which are designed to provide income tax relief. Take 3 has been a major success and demand has greatly exceeded supply. Funds under management for tax-efficient portfolios (TG Portfolios) increased significantly during the period and there was also a further successful fund raising for the latest children's nursery EIS issue. Teathers-i-deal (www.teathers-i-deal.com), our internet-based trading facility, has been operational since April 2001. This is a premium service available to institutional and private clients and to Independent Financial Advisers and their clients. It offers subscribers comprehensive news and analysis, together with Teather & Greenwood's equities research. Support services All of this growth requires an efficient infrastructure. We shall continue to invest in our information technology systems, to ensure they are flexible and scalable as the volumes of business grow. Our finance and compliance departments have also been expanded in line with our growth. During the year, the latter oversaw the application of the Turnbull guidelines to the company, with action taken as appropriate to ensure compliance. The department is currently working on the implementation of ' N2'. This is a complex set of requirements and regulations laid-down by the Financial Services Authority. It is anticipated these will become effective in November of this year and our plans are well advanced towards meeting this target. Staff People are vital to a successful financial services company. Recruitment, motivation, training and staff retention are taken seriously. We have recently launched student intern and graduate trainee schemes and staff training programmes have become competency-based. I join the Chairman in thanking existing and new colleagues for their contributions during a period of difficult market conditions. Summary Progress has been made across the company with the development of existing and new services and products. The overall shape and balance of the company is now well established and those business areas that have been added more recently are in the early stages of contributing. In parallel, we shall continue to invest in information technology and support services. Ken Ford Chief Executive 27 June 2001 GROUP PROFIT & LOSS ACCOUNT For the year ended 30 April 2001 Year ended 2001 Year ended 2000 £'000 £'000 Turnover 34,584 30,904 Operating costs (29,394) (21,274) Operating profit 5,190 9,630 Profit on disposal of fixed 1,009 7 asset investments Profit on ordinary activities before interest 6,199 9,637 Net interest receivable 126 96 Profit on ordinary activities before taxation 6, 325 9,733 Taxation on profit on ordinary activities (2,135) (3,030) Profit for the year 4,190 6,703 Equity dividend (558) (370) Profit transferred to reserves 3,632 6,333 Earnings per share 15.1p 24.8p Diluted earnings per share 13.9p 23.2p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended Year ended 2001 2000 £'000 £'000 Profit for the year 4,190 6,703 BALANCE SHEETS as at 30 April 2001 Group Group Company Company Year Year Year Year ended ended ended ended 2001 2000 2001 2000 £'000 £'000 £'000 £'000 FIXED ASSETS Tangible assets 1,795 972 - - investments 924 100 9,171 9,111 2,719 1,072 9,171 9,111 CURRENT ASSETS Trading positions 10,725 3,073 - - Debtors 200,499 181,166 471 469 Cash 13,754 9,622 56 82 224,978 193,861 527 551 CREDITORS: amounts falling due within one year 211,690 182,601 2,057 1,826 NET CURRENT ASSETS/(LIABILITIES) 13,288 11,260 (1,530) (1,275) TOTAL ASSETS LESS CURRENT LIABILITIES 16,007 12,332 7,641 7,836 CAPITAL AND RESERVES Called up share capital 2,788 925 2,788 925 Share premium account 2,229 4,049 2,229 4,049 Other reserves 14 14 2,606 2,606 Profit and loss account 10,976 7,344 18 256 EQUITY SHAREHOLDERS' FUNDS 16,007 12,332 7641 7,836 Approved by the Board of Directors on 26 June 2001 J H Delmar-Morgan E K Ford Chairman Chief Executive GROUP CASH FLOW STATEMENT For the year ended 30 April 2001 Year Year Year Year ended ended ended ended 2001 2001 2000 2000 £'000 £'000 £'000 £'000 NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 12,386 (262) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 126 97 Interest paid - (1) Net cash inflow from returns on investments and servicing of finance 126 96 TAXATION Corporation tax paid (3,267) (1,229) CAPITAL EXPENDITURE Receipts from sales of tangible fixed - 1,048 assets Payments to acquire tangible fixed assets (1,455) (1,022) Payments to acquire trade investments (874) - Receipts from sale of trade investments 1,059 - Net cash (outflow) / inflow from capital expenditure (1,270) 26 Equity dividend paid (509) (112) Financing Issue of ordinary share capital 43 1,611 Increase in cash 7,509 130 NOTES 1. TURNOVER AND SEGMENTAL ANALYSIS 2001 Turnover Operating £'000 Profit £'000 Financial services 34,584 5,190 The net gain on trading in financial instruments was £4,745,389 (2000: £4,348,565) and is included in the turnover for financial services 2000 Turnover Operating £'000 Profit £'000 Financial services 30,897 9,774 Other income 7 (144) 30,904 9,630 2. EARNINGS PER SHARE The earnings and number of shares in issue or to be issued in calculating the earnings and diluted earnings per share were as follows: 2001 2001 2000 2000 Diluted Diluted Earnings Earnings Earnings Earnings £'000 £'000 £'000 £'000 Earnings 4,190 4,190 6,703 6,703 Number of shares 30,208,104 27,827,815 28,865,427 27,042,705 Earnings per share 13.9p 15.1p 23.2p 24.8p RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES Year Year Ended Ended 2001 2000 £'000 £'000 Operating profit 5,190 9,630 Depreciation 632 242 Increase in trading positions (1,889) (2,028) Increase in debtors (19,333) (62,979) Increase in creditors 27,786 54,873 Net cash inflow/(outflow) from operating activities 12,386 (262) 4. COMBINED RECONCILIATION OF NET CASHFLOW AND ANALYSIS OF MOVEMENT IN NET FUNDS At 30 April At 30 April 2000 Cashflow 2001 £'000 £'000 £'000 Bank balances 9,622 4,132 13,754 Bank overdrafts (5,069) 3,377 (1,692) Total net funds 4,553 7,509 12,062 5. STATUTORY ACCOUNTS The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 April 2001 or 2000. The financial information for the year ended 30 April 2000 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 April 2001 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement using the same accounting policies and will be delivered to the Registrar of Companies following the company's annual general meeting. END

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