Final Results

BWD Securities PLC 10 February 2004 10 February 2004 BWD SECURITIES PLC ('BWD') PRELIMINARY RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2003 BWD, the Investment Management Group - Key Points: • Profit before tax, goodwill amortisation and exceptional items of £6.8m (2002: £8.0m) • Exceptional profit arising from the disposal of the Administration Services division of £10.5m. No tax charge is expected to arise from this exceptional profit • Basic earnings per share before goodwill amortisation and exceptional items of 22.6p (2002: 25.4p) • Total dividend unchanged at 18.0p per share • Total clients' funds under management increased to £3.81bn (2002: £3.52bn) • Proposed change of name to Rensburg plc Mike Burns, Chief Executive of BWD, commented: 'During such a difficult period, these results clearly demonstrate the resilience of our business. We now see most major economies showing signs of strength and an improving outlook for corporate profits in the UK. Consequently we are looking to build upon the opportunities that will arise from this more positive operating environment.' For further information, please contact: Michael Burns, Chief Executive Tel: 0151 227 2030 BWD Securities PLC Nick Lyon Tel: 020 7796 4133 Hudson Sandler CHAIRMAN'S STATEMENT This is my first statement to shareholders since becoming Chairman following last year's Annual General Meeting and I should like to start by acknowledging the tremendous contributions to the Group made both by my predecessor Alan Bottomley, and by Tim Jason Wood who retired in September 2003 after serving as a director for 15 years. Both Alan and Tim in their own different ways worked tirelessly on our behalf; I thank them warmly and wish them both well in their deserved retirement. Financial Results and Dividend These are covered in detail in the Chief Executive's review and in the main body of this report. I do believe that the Company's performance in another very volatile and difficult year for financial markets was extremely creditable, with only an 11% fall in underlying earnings per share. The successful disposal of the Group's Administration Services division resulted in an exceptional profit which somewhat distorts the reported numbers, but against underlying basic earnings of 22.6p (pre-goodwill), the Directors are recommending a final dividend of 12p (2002: 12p); taken with the interim dividend of 6p (2002: 6p), this produces an unchanged total dividend for the year of 18p per share. Disposal The disposal of the Administration Services division and an associated property for a cash consideration of £18.47 million and £1.42 million respectively was concluded on 21 February 2003. Despite significant effort, these disposal proceeds have not yet been suitably re-invested into expanding the investment management business. The Board remains fully committed to achieving this goal. Should opportunities fail to arise, however, then serious consideration will be given to making additional returns to shareholders through the most appropriate means. Annual General Meeting and Proposed Change of Name We look forward to welcoming shareholders to the meeting, which will this year be held in our Head Office in Leeds on 30 March 2004. At this meeting shareholder approval will be sought, in particular, to change the name of the Company to Rensburg plc. Further details of this will be included within the Annual Report & Financial Statements to be posted to shareholders on 25 February 2004. Board and Employees As mentioned above, I became Chairman at the conclusion of last year's Annual General Meeting, and as a consequence of this Andrew Tyrie succeeded me as the Senior Independent Non-Executive Director and Chairman of the Audit Committee. I would like to thank Andrew, and the other independent non-executive director, Katrina Michel, for their wholehearted support and expertise, which, between them, covers so many aspects of our business. However, the real impact on profitability is made by the employees and on behalf of shareholders I would like to record my appreciation to them all for another excellent result, in conditions which have proved very testing for many companies in the financial services business. Outlook Many challenges lie ahead, but I am confident that we have the management and employees to continue to move the Company forward as one of the few remaining specialist independent investment management businesses. C.G. Clarke 9 February 2004 CHIEF EXECUTIVE'S REVIEW OF OPERATIONS This year's financial results include the income and expenses arising from the Group's Administration Services division up until its sale, which occurred approximately a quarter of the way through the year; this is reflected by the reductions in turnover of 11% and in fee and other recurring income of 8% when compared with the prior year. However, making this comparison within the continuing Investment Management division, turnover fell by only 1.5% to £32.0 million and within this, fee and other recurring income increased by 5% to £20.6 million. This increase in fee and other recurring income enabled such income for the Group to cover 78% of total operating expenses, unchanged from the prior year. Profit before tax of £6.8 million (2002: £8.0 million) and basic earnings per share of 22.6p (2002: 25.4p) were achieved, despite the loss of contribution from the Administration Services division and the difficult prevailing conditions. These figures are prior to goodwill amortisation of £917,000 (2002: £952,000) and exceptional profits in 2003 of £10.5 million arising from the disposal of the Group's Administration Services division and £390,000 arising from a sale of 11% of our shareholding in the London Stock Exchange plc. No tax charge is expected to arise from the exceptional profit on the sale of the Administration Services division. Investment Management - Turnover £32.0 million (2002: £32.5 million); Operating profit before goodwill amortisation £5.5 million (2002: £6.3 million). Around Christmas 2002 we suggested to our clients that the worst of the bear market appeared to be behind us. We felt that recovering economies and low interest rates were making equities look particularly attractive; nevertheless, shares continued to decline until that notable day in March 2003 when the yield on equities exceeded that on gilts for the first time since 1959. Our first half year was consequently difficult, however the improvement since the end of the war in Iraq has been marked, with the summer months being noticeably busier than usual. As we look forward, we now see most major economies showing signs of strength and an improving outlook for corporate profits in the UK. BWD Rensburg Investment Management - Fee paying clients' funds increased by 13% to £1.78 billion (2002: £1.57 billion). We have continued the drive to convert clients into fee paying services and to review those that do not reward us fairly for our services; this accounts for the small decline in the other managed funds to £1.62 billion (2002: £1.65 billion). Total clients' funds under management increased to £3.40 billion (2002: £3.22 billion). We continue to manage two Venture Capital Trusts; these funds, which have historically been separately disclosed, are included within the fee paying clients' funds stated above. As with any financial services organisation, personnel costs are our largest expense. During the period of weak markets, we have examined our cost base and have reduced our headcount within the investment management business by 57 to 337 over the last two financial years. It is a credit to our employees that over the last few years our client bank has increased and service levels maintained, despite the reductions in headcount and difficult market conditions that have prevailed. In spring 2003, the Lord Mayor of London formally opened our new office in Throgmorton Avenue; this provides a more attractive working environment for our growing team based in the Capital. Earlier in the year our Glasgow operation moved to a modern open-plan office and we expect our Belfast operation to move to similarly improved premises within the first half of this year. We believe it is important that our offices should be of a high standard to ensure optimal performance from our employees and to provide a conducive environment in which to meet and conduct business with our clients. Although a continual process, considerable time has been devoted during this year to reviewing our IT platforms. This investment is central to us achieving our aim of delivering improved service levels to our clients, whilst complying with the ever-increasing requirements placed upon us by the Financial Services Authority and the European Union in particular. We intend during the current financial year to implement significant enhancements to our IT platforms, but only once rigorous testing has been undertaken and genuine benefits to our clients and to our working practices can be clearly seen. The latest enhancement was completed during December 2003 when our Self-Invested Personal Pension ('SIPP') administration system went live, enabling us to now offer our clients a comprehensive in-house pension service. BWD Rensburg Unit Trust Managers - Net sales of £63 million over the year, combined with the improvement in the leading UK financial indices, contributed to an increase in funds under management of 37% to £406 million (2002: £296 million). Achievement of this level of net sales in the poor operating environment is further testimony to the high regard held for the sales and fund management teams within this business. Administration Services - Turnover £1.2 million (2002: £5.0 million); Operating profit before goodwill amortisation £0.16 million (2002: £1.0 million). Following formal approval by shareholders, the disposal of the Administration Services division of the Group which comprised Northern Registrars, the Connaught St Michaels group and Northern Administration was completed on 21 February 2003. Finally, as we look forward to an improved operating environment in 2004 and beyond, I would like to express my gratitude to the Group's employees for achieving such a resilient performance during this past, challenging, year. M. H. Burns 9 February 2004 Consolidated profit and loss account for the year ended 30 November 2003 2003 2002 12 months ended 30 November 12 months Continuing Discontinued ended operations operations Total 30 Nov £'000 £'000 £'000 £'000 Note Turnover 32,005 1,245 33,250 37,499 Operating expenses (26,467) (1,088) (27,555) (30,194) Goodwill amortisation (869) (48) (917) (952) Total administrative expenses (27,336) (1,136) (28,472) (31,146) _______ _______ _______ _______ Operating profit 4,669 109 4,778 6,353 Profit on disposal of subsidiaries 1 - 10,472 10,472 - Profit on disposal of fixed asset 390 - 390 - investments _______ _______ _______ _______ Profit on ordinary activities before 5,059 10,581 15,640 6,353 interest _______ _______ Net interest receivable 1,150 721 _______ _______ Profit on ordinary activities 16,790 7,074 before taxation Tax on profit on ordinary activities 2 (1,928) (2,517) _______ _______ Profit on ordinary activities 14,862 4,557 after taxation Dividends 3 (3,933) (3,913) _______ _______ Retained profit for the year 10,929 644 _______ _______ Earnings per share before 4 goodwill amortisation and exceptional items -Basic 22.6p 25.4p -Diluted 22.1p 25.0p Earnings per share 4 -Basic 68.2p 21.0p -Diluted 66.8p 20.7p Dividend per share 18.0p 18.0p Statement of total recognised gains and losses 2003 2002 £'000 £'000 Profit for the financial year 14,862 4,557 _______ Prior year adjustment 302 _______ Total gains recognised since last annual report 4,859 _______ Consolidated balance sheet at 30 November 2003 2003 2002 £'000 £'000 Fixed assets Intangible assets 14,555 19,038 Tangible assets 3,267 5,281 Investments 500 500 _______ _______ 18,322 24,819 _______ _______ Current assets Debtors 23,662 27,103 Cash at bank and in hand 35,420 21,618 _______ _______ 59,082 48,721 Creditors Amounts falling due within one year (32,108) (38,469) _______ _______ Net current assets 26,974 10,252 _______ _______ Total assets less current liabilities 45,296 35,071 Creditors Amounts falling due after more than one year (3,340) (4,024) Provisions for liabilities and charges (92) (122) _______ _______ Net assets 41,864 30,925 _______ _______ Capital and reserves Called up share capital 2,208 2,208 Share premium account 9,244 9,234 Capital redemption reserve 100 100 Revaluation reserve - 275 Other reserves 6,086 6,086 Profit and loss account 24,226 13,022 _______ _______ Equity shareholders' funds 41,864 30,925 _______ _______ Consolidated cash flow statement for the year ended 30 November 2003 2003 2002 Note £'000 £'000 Net cash inflow from operating activities a 6,813 8,780 Returns on investment and servicing of finance Interest received 1,240 1,444 Interest paid (313) (456) Taxation paid (2,022) (2,559) Capital expenditure and financial investment Purchase of tangible fixed assets (817) (614) Proceeds from sale of tangible fixed assets 1,432 820 Proceeds from sale of fixed asset investments 390 - Acquisitions and disposals Purchase of subsidiary undertakings - (4,400) Costs associated with acquisition - (107) Cash acquired with subsidiary - 838 Proceeds from sale of subsidiary undertakings 18,469 - Costs associated with disposal (704) - Cash disposed of with subsidiary undertakings (1,704) - Equity dividends paid (3,920) (3,898) _______ _______ Cash inflow/(outflow) before financing 18,864 (152) Financing Issue of ordinary share capital 10 52 Decrease in debt (4,000) - Redemption of loan notes (1,072) (750) _______ _______ Increase/(decrease) in cash in the year b 13,802 (850) _______ _______ Notes to the consolidated cash flow statement a. Reconciliation of operating profit to operating cash flows 2003 2002 £'000 £'000 Operating profit 4,778 6,353 Amortisation of goodwill 917 952 Depreciation 462 1,006 Profit on disposal of tangible fixed assets (47) (163) Loss on disposal of fixed asset investments - 11 Decrease in debtors 2,157 4,494 Decrease in creditors and provisions (1,454) (3,873) _______ _______ Net cash inflow from operating activities 6,813 8,780 _______ _______ Net cash inflow/(outflow) from operating activities comprises:- Continuing operations 6,956 8,189 Discontinued operations (143) 591 _______ _______ 6,813 8,780 _______ _______ b. Analysis and reconciliation of net funds At 1 Dec Cash Other At 30 Nov 2002 Flow Changes 2003 £'000 £'000 £'000 £'000 Cash and deposits 21,618 13,802 - 35,420 Debt due after one year - - (982) (982) Debt due within one year (4,416) 5,072 (1,500) (844) _______ _______ _______ _______ Net Funds 17,202 18,874 (2,482) 33,594 _______ _______ _______ _______ 2003 2002 £'000 £'000 Increase/(Decrease) in cash 13,802 (850) Repayment of debt 5,072 750 Issue of loan notes (2,482) - _______ _______ Movement in net funds in the year 16,392 (100) Net funds brought forward 17,202 17,302 _______ _______ Net funds at 30 November 33,594 17,202 _______ _______ Notes 1. Disposal On 21 February 2003, the Group sold the entire issued share capital of Northern Registrars Limited to Capita IRG plc. Northern Registrars Limited was the parent of a group of companies that comprised the Administration Services division of the Group. Details of the net assets sold and the consideration received are as follows: £'000 Tangible fixed assets 2,399 Debtors 1,587 Creditors (548) Cash 1,704 Goodwill 3,566 8,708 Costs associated with the disposal 704 Profit on disposal 10,472 Consideration received in cash 19,884 The profit on disposal of the Administration Services division of £10,472,000 comprises a profit on disposal of the subsidiary undertakings of £10,809,000 and a loss on the disposal of the property occupied by the division of £337,000. The turnover, operating profit and cashflows shown in the profit and loss account and cashflow statement under discontinued operations relate entirely to the Administration Services division. The profit arising on disposal of the subsidiary undertakings is not expected to give rise to a charge to corporation tax. 2. Corporation tax Corporation tax at 30% (2002: 30%) 3. Dividends 2003 2002 £'000 £'000 Interim paid of 6.0p per share (2002: 6.0p) 1,311 1,304 Final proposed of 12.0p per share (2002: 12.0p) 2,622 2,609 _______ _______ 3,933 3,913 _______ _______ The Directors are recommending a final dividend of 12.0p per share (2002: 12.0p), which together with the interim dividend of 6.0p per share (2002: 6.0p) makes a total dividend for the year of 18.0p per share (2002: 18.0p). The proposed dividend, to be paid on 7 April 2004 to shareholders who are on the register at the close of business on 12 March 2004, is calculated on 21,850,255 ordinary shares. This excludes 233,750 ordinary shares held by the Employee Share Ownership Trust for which all dividends have been waived. 4. Earnings per share Basic earnings per share before goodwill amortisation and exceptional items is calculated with reference to earnings for shareholders of £4,917,000 (2002: £5,509,000) and the weighted average number of shares in issue during the year of 21,796,791 (2002: 21,695,323). Basic earnings per share is calculated with reference to earnings for shareholders of £14,862,000 (2002: £4,557,000). Diluted earnings per share is the basic earnings per share, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the year. The number of additional shares used for the diluted calculation is 438,568 shares (2002: 295,417). Basis of preparation The financial information in this press release does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985, but is derived from the accounts. Statutory accounts for 2002 have been delivered to the Register of Companies, and those for 2003 will be delivered following the Company's Annual General Meeting. The independent auditor has reported on the accounts for both 2002 and 2003; its reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. Full Accounts The full accounts will be posted to shareholders on 25 February 2004 and will be available at the Company's registered office from this date, and on the Group's website at www.bwd-securities.co.uk. This information is provided by RNS The company news service from the London Stock Exchange

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