Final Results

Teather & Greenwood Holdings PLC 2 July 2002 TEATHER & GREENWOOD HOLDINGS PLC Preliminary results for the year ended 30 April 2002 HIGHLIGHTS • Turnover virtually unchanged at £34.4m (2001: £34.6 million) • Loss before taxation of £3.8m (2001: profit of £6.3million) • Progress made in restructuring parts of the business and repositioning of the Group to create additional recurring earnings in the future • Dividend maintained at 1.5p, making a total of 2p for the year • Liverpool office added, with experienced corporate finance team and further brokership relationships • Net assets of £12.8 million Commenting on the results, Ken Ford, Chief Executive, said: 'The year under review has been difficult. However, progress has been made internally, with selective recruitment and some restructuring, and a reduction in costs of 20% from the peak. There has also been an increase in the products and services provided for the benefit of our clients. Good progress has been made and the Directors are confident that the firm has the critical mass, infrastructure and personnel to now return to profitability and to prosper in the years ahead.' 1 July 2002 ENQUIRIES: Teather & Greenwood Tel: 020 7426 9000 Ken Ford, Chief Executive Nick Stagg, Chief Operating Officer College Hill Tel: 020 7457 2020 Richard Pearson CHAIRMAN'S STATMENT Against a background of deteriorating stock market conditions, I am pleased to be able to report that progress has been made in the necessary restructuring of parts of the business and repositioning of the Group to create additional recurring revenues in the future and to raise the quality of the services that Teather & Greenwood provide. A more detailed review of these changes follows in the Chief Executive's Review. Financial Highlights and Dividend Turnover fell £0.2 million to £34.4 million (2001 £34.6 million). Losses as indicated in our trading statement of 28 February 2002, which forecast a loss to the year end of up to £4 million has turned out to be £3.8 million. (2001 £6.3 million profit) The balance sheet remains sound with net assets of £12.8 million. The loss reflects not only difficult trading conditions, but the cost of redundancies since the total number of employees has fallen from a peak in summer 2001 of over 300 to 245 currently. It also includes the write-down of a small number of unquoted investments and restructuring costs incurred in strengthening the business for the future. Loss per share was 10.2p (2001 earnings 15.1p) and as previously indicated, the Board is recommending a final dividend for the year ended 30 April 2002 of 1.5p per share (2001 1.5p) making a dividend for the year of 2p per share. It is proposed to give shareholders the option of receiving the final dividend in the form of shares rather than cash and I refer to my letter of 1 July 2002 which is being sent to shareholders with the annual report and accounts, which explains the operation of the proposed share dividend alternative scheme. The Executive Directors intend to avail themselves of this option in respect of their entire holdings. Part of the business of the AGM will be to approve the scheme. The dividend will be payable on 19 August 2002 to shareholders on the register at 26 July 2002. The maintenance of the dividend reflects the confidence of the Directors in the Group's future prospects. Strategy The Board's strategy is to continue to develop a broadly-based financial services organisation serving the wide-ranging needs of corporate, institutional and private clients principally in the United Kingdom. Within this strategy the company has focused on recruiting high-quality personnel where appropriate. The company continued to invest in the development of its infrastructure ensuring it has the financial controls, compliance, information technology and support services to keep pace within an increasingly complex financial services environment. A number of acquisition possibilities have been explored and rejected on the grounds of price or lack of synergy. Board and Employees At the AGM in August 2001, I became non-Executive Chairman of the Group. At the same time, Philip Ashfield, stepped down as a Director but remains a director of Teather & Greenwood Limited, the operating subsidiary of the Group. Philip Ashfield's contribution to the Group has proved invaluable over the years. We were pleased to welcome Nicholas Stagg in April 2001 as Chief Operating Officer of Teather and Greenwood Holdings plc. In April 2002 he took on the additional responsibilities of Finance Director, Brian Rowbotham having retired. The Board would like to thank Brian for his work with the Teather and Greenwood partnership and the successful flotation of the company on AIM in 1998 and its subsequent move to a full listing in 2000. On behalf of the Board I would like to welcome those recruited by Teather & Greenwood during the year and thank staff for the hard work and dedication in further building the group in difficult market conditions. Outlook At the time of writing stock market conditions continue to deteriorate. Nevertheless, The board believe that Teather & Greenwood has the infrastructure, critical mass and financial resources with the potential and ability to grow and expand. The Board will continue to structure the Group to achieve a sound profitable business whatever the prevailing market conditions. Jeremy Delmar-Morgan Non-Executive Chairman 1 July 2002 CHIEF EXECUTIVE'S REVIEW There were many changes last year. A more difficult IPO market and depressed private client activity in particular have adversely affected business. Whilst deteriorating market conditions required overhead reduction in all areas, there has also been a repositioning of the teams and new business areas added for the benefit of future growth. Corporate Finance During the year a number of interesting and growing companies were added to the list of brokerships and a number of successful transactions completed. The team raised approximately £200m in the course of 24 transactions (excluding closed end funds). In addition, a Liverpool office was added with an experienced corporate finance team joining the Group, bringing expertise and further brokership relationships. The corporate client list currently stands at 98 at the year-end (excluding closed end funds). An equity capital markets team was established specifically for new fundraisings for clients. Sales trading was further strengthened and market making increased to cover 110 stocks (2001-100). Equities Research Teather & Greenwood's research department covered 17 industry sectors encompassing about 70% of the UK Market, as well as contributing to pan-European sector research as part of the European Securities Network. It produces high quality and independent equity-based sector and company research on over 350 UK corporates. The sectors covered are: aerospace and defence; banks; beverages; construction and building materials; electronic and electrical equipment; engineering and machinery; food and general retailers; leisure, entertainment and hotels; oil and gas; media; pharmaceuticals; real estate; software and computer services; specialist finance; telecommunication services and miscellaneous smaller companies. Over the coming months, the research department plans to widen its coverage of mid-cap stocks and thereby provide new value-added secondary advice in the FTSE250 arena. To this end we have added coverage of the important sector of support services bringing the total number of sectors covered to 18. Institutional The sales trading function was expanded and now covers all UK equities. This better serves clients who, for regulatory and other reasons, increasingly use a centralised dealing function. Our secondary agency sales teams of large and smaller capital market companies have been merged to provide total UK equity coverage based on client requirements through client account management. Our investment funds business, which has expanded during the year under review, is now firmly established as one of Teather & Greenwood's core businesses. We were joined in May 2001 by the highly regarded country funds team from Bear Stearns. With this, and with additional resource on the corporate finance side of the business, we now have a team of eighteen, providing sales and distribution, market making, analysis and research and corporate finance. During the year under review we have successfully sponsored the launch of four new closed end funds: this is a considerable achievement in difficult market conditions. In addition, we have carried out a number of advisory mandates and taken on 14 new brokerships, bringing our total number of brokerships in this area to 27. We have capacity to take on more brokerships and intend to do so on a selective basis, as and when suitable opportunities arise. This has been a successful and profitable year for our investment funds business. Coupled with the recent departure of several of the larger investment banks from this area, it has vindicated the investment we made at the start of the year. I am confident that we have the necessary expertise and long-term commitment to continue to grow this business with a view to becoming one of the leading participants in the sector. The bond and fixed interest team continued to develop its client base and had a successful year. An equity convertible service was added in February 2002 and has had an encouraging reception from clients. The derivatives team, specialising in Contracts for Difference increased revenue as new clients were added as many took the advantage of 'shorting' stocks as well as going long over an extended period, without the imposition of stamp duty. Investment Management Difficult market conditions have inevitably affected our investment management division, but this has not interrupted the modernisation of the department during the last 12 months. The emphasis continues to be the conversion of clients, whether discretionary or advisory, to a fee-based agreement, in exchange for which they benefit from a rigorous investment process and in the coming months, a new and highly sophisticated front office system, capable of up-to-date modelling and risk measurements, of the kind normally found in only the very largest houses. We continue to look at ways of providing a wide and innovative stable of investment vehicles. Towards the end of last year, we launched our own Open Ended Investment Company (OEIC), and now run four UK biased funds - UK Growth, UK Income, UK Smaller Companies, and Ethical. These are run by experienced, successful fund managers recruited externally. In an extremely difficult environment, we also successfully launched our own VCT for the first time, as well as a SIPP. Our on-line system, Teathers-i-deal (www.teathers-i-deal.com) continues to attract substantial interest from clients and intermediaries alike. The tax-efficient solutions team had another successful year despite generally very depressed levels of investment and a marked drop in requirements for capital gains tax shelters. The unit is now fully established as a supplier of high quality tax efficient investments to the retail market. During the period, subscription to the 'Take 3 TV Partnerships' was completed and 'Take 4' launched. Due to changes in the Finance Act 2002, 'Take 4' was closed in April and has been replaced by 'Take 5'. The fifth in the successful series of children's nursery EIS issues was launched. There was also steady continuing demand for the team's range of tax-efficient portfolios, which can shelter capital gain and income. Much work has been done over the year to lower the cost base and adjust the make-up of our revenue stream. The result of this is that we are now far better positioned to weather current market conditions and well placed for any upside. The integration of our new front-office system will provide us with the very latest technology to provide our clients with the services and products they require, as well as the tools for a sophisticated investment process. The goal remains to establish a modern fund management organisation to serve clients, whether individuals, charities or pension funds with the same levels of disciplines and expertise and high levels of service. After a difficult year, we look forward to the coming months with greater confidence, with the right systems and people in place to deliver modern and creative solutions to our clients. Support Services An information technology director was recruited during the year and progress has been made on system upgrading as well as negotiations on reducing costs of some services. The main thrust of compliance activity throughout the year was aimed at ensuring that Teather & Greenwood Limited was ready for N2, when all the financial regulators became combined into the FSA, which became effective on 1 December 2001. This has involved extensive work on training for staff, introduction of new rules and responsibilities, new systems and controls and a complete overhaul and upgrading of documentation, as well as completing the work necessary on phase two when the transitional period ended on the 30 June 2002. This has resulted in the cost of compliance increasing by at least a factor of 2. Other During the year I accepted the appointment as non-Executive Chairman of the Quoted Companies Alliance, which is relevant to work at Teather & Greenwood. It has seven committees and looks after the interests of smaller quoted companies. In particular, it is campaigning against the pernicious 0.5% stamp duty on UK equities. This is not levied in most competitor countries and is leading to a loss of client business from the UK. The government has increasingly added to smaller companies' regulatory costs and 'HR' burdens whilst raising taxes directly affecting employment (NIC) and via pensions tax; at the same time exhorting companies to be more productive. No political party has adopted the necessary removal of stamp duty, which while not a populist move could increase volumes of shares traded, benefit our clients, and lead to a higher overall tax 'take' in the UK over time, as firms benefit. Staff During the year, a number of high quality individuals were recruited into many areas of the business and regrettably some have had to leave Teather & Greenwood due to the restructuring of the cost base to suit the current market conditions. I would like to thank all the staff for their contributions during the year in difficult market conditions. Summary The year under review has been difficult. However, progress has been made internally with selective recruitment and some restructuring, and a reduction in costs of 20% from the peak. There has also been an increase in the products and services provided for the benefit of our clients. Good progress has been made and the Directors are confident that the firm has the critical mass, infrastructure and personnel to now return to profitability and to prosper in the years ahead. Ken Ford Chief Executive 1 July 2002 GROUP PROFIT & LOSS ACOUNT For year ended 30 April 2002 Year ended Year ended 2002 2001 £'000 £'000 Turnover 34,431 34,584 Operating costs (38,001) (29,394) Operating (loss)/profit (3,570) 5,190 Profit on disposal of fixed asset investments 1,777 1,009 Reorganisation costs (1,510) - Amounts written off investments (440) - (Loss)/profit on ordinary activities before interest (3,743) 6,199 Net interest (payable)/receivable & similar (101) 126 income (Loss)/profit on ordinary activities before taxation (3,844) 6,325 Tax credit/(charge) on (loss)/profit on ordinary activities 1,053 (2,135) (Loss)/profit for the year (2,791) 4,190 Equity dividend (552) (558) (Loss)/profit transferred (from)/to reserves (3,343) 3,632 (Loss)/earnings per share (10.2p) 15.1p Diluted (loss)/earnings per share (10.2p) 13.9p Dividend per share 2.0p 2.0p All operations are continuing, and there are no recognised gains or losses for the current or prior year other than as stated above BALANCE SHEETS As at 30 April 2002 Group Group Company Company Year ended Year ended Year ended Year ended 2002 2001 2002 2001 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 450 - 450 - Tangible assets 2,401 1,795 - - Investments 1,488 924 9,221 9,171 4,339 2,719 9,671 9,171 Current assets Trading positions 4,993 10,725 - - Debtors 127,709 200,499 472 471 Cash at bank and in hand 8,074 13,754 195 56 140,776 224,978 667 527 Creditors: amounts falling due within one year 131,851 211,690 2,099 2,057 Net current assets/(liabilities) 8,925 13,288 (1,432) (1,530) Total assets less current liabilities 13,264 16,007 8,239 7,641 Creditors: amounts falling due after one year 500 - 500 - Net assets 12,764 16,007 7,739 7,641 Capital and reserves Called up share capital 2,821 2,788 2,821 2,788 Share premium account 2,296 2,229 2,296 2,229 Other reserves 14 14 2,606 2,606 Profit and loss account 7,633 10,976 16 18 Equity shareholders' funds 12,764 16,007 7,739 7,641 Approved by the Board of directors on 1 July 2002. E K Ford N S Stagg Chief Executive Chief Operating Officer and Finance Director CONSOLIDATED CASH FLOW STATEMENT For the year ended 30 April 2002 Year ended Year ended Year ended Year ended 2002 2002 2001 2001 £'000 £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (6,450) 12,386 Returns on investments and servicing of finance Interest and other investment income received 33 126 Interest paid (114) - Net cash (outflow)/inflow from returns on investments and servicing of finance (81) 126 Taxation Corporation tax paid (1,206) (3,267) Capital expenditure Payments to acquire tangible fixed assets (1,650) (1,455) Payments to acquire fixed asset investments (1,004) (874) Receipts from sale of fixed asset investments 1,777 1,059 Net cash outflow from capital expenditure (877) (1,270) Equity dividend paid (561) (509) Financing Issue of ordinary share capital 100 43 (Decrease)/increase in cash (9,075) 7,509 NOTES 1. TURNOVER AND SEGMENTAL ANALYSIS Turnover arises entirely from financial services activities. All turnover was generated in the United Kingdom. 2002 Operating Net Assets Turnover (loss)/profit £'000 £'000 £'000 Financial services 12,764 34,431 (3,570) The net gain on trading in financial instruments was £1,653,876 (30 April 2001: £4,745,389) and is included in the turnover for financial services 2001 Operating Net Assets Turnover (loss)/profit £'000 £'000 £'000 Financial services 16,007 34,584 5,190 Analysis of turnover Turnover 2002 2001 £'000 £'000 Corporate Finance 9,981 14,000 Investment Management 7,438 10,184 Institutional 10,811 7,000 Investment Funds 6,201 3,400 Total 34,431 34,584 2. (LOSS)/EARNINGS PER SHARE The (loss)/earnings and number of shares in issue or to be issued used in calculating the earnings and diluted earnings per share were as follows: 2002 2002 2001 2001 Diluted Diluted Earnings Earnings Earnings Earnings (Loss)/earnings (£'000) (2,791) (2,791) 4,190 4,190 Number of shares 27,276,277 27,276,277 30,208,104 27,827,815 (Loss)/earnings per share (10.2p) (10.2p) 13.9p 15.1p Calculation of number of shares At 1 May 27,877,245 27,877,245 9,246,415 9,246,415 Bonus Issue 4 August 2002 - - 18,492,830 18,492,830 Weighted average number of shares issued during year 207,132 207,132 88,570 88,570 Dilutive effect of share option schemes - - 2,380,289 - Own shares purchased and held in EBT (808,100) (808,100) - - At 30 April 27,276,277 27,276,277 30,208,104 27,827,815 3. RECONCILIATION OF OPERATING (LOSS) /PROFIT TO NET CASH (OUTFLOW)/ INFLOW FROM OPERATING ACTIVITIES Year Ended Year Ended 2002 2001 £'000 £'000 Operating (loss)/profit (3,570) 5,190 Depreciation and amortisation 1,094 632 Reorganisation costs (766) - Decrease/(increase) in trading positions 1,196 (1,889) Decrease/(increase) in debtors 73,843 (19,333) (Decrease)/increase in creditors (78,247) 27,786 Net cash (outflow)/inflow from operating activities (6,450) 12,386 4. COMBINED RECONCILIATION OF NET CASHFLOW AND ANALYSIS OF MOVEMENT IN NET FUNDS At 30 April At 30 April 2001 Cashflow 2002 £'000 £'000 £'000 Bank balances 13,754 (5,680) 8,074 Bank overdrafts (1,692) (3,395) (5,087) Total net funds 12,062 (9,075) 2,987 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 2002 or 2001. The financial information for the year ended 30 April 2001 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 2002 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. This information is provided by RNS The company news service from the London Stock Exchange

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