Preliminary Results

W.H. Ireland Group PLC 28 February 2007 W.H. IRELAND GROUP plc ('W.H. Ireland' or 'the Group') PRELIMINARY RESULTS FOR THE YEAR TO 30 NOVEMBER 2006 The principal activity of W.H. Ireland is the provision of stockbroking, corporate finance, investment management and financial services to both private and institutional clients. It has a national network of offices including Manchester, London, Birmingham and Cardiff. Key Points * Pre-tax profit increased by 16% to a record £3.7m (2005: £3.2m) * Turnover up by 32% to £30.3m (2005: £23.0m) * Excluding acquisitions, operating profit up by 12% to £2.7m and turnover up by 29% to £29.6m * Equity shareholders funds increased by 13% to £14.9m (2005: £13.2m)relating to 92p per share (2005: 82p), and excluding intangibles an increase of 15% to £11.4m (2005: £9.9m) relating to 70p per share (2005: 62p) * Proposed final dividend of 3.0p per share giving a total of 4.4375p for the year (2005: 3.75p) an increase of 18% * Strong progress across three core business areas: - Corporate finance - turnover up 17% - IFA business - turnover up by 23% - Stockbroking - commission up by 42% * A consolidation of our presence in Australia by increasing our holding in WHI Australia Pty Limited by a further 8.94% to 59.94%. * Establishment of the Leeds office through the acquisition of TD Waterhouse's Institutional team based in Leeds, together with the addition of a retail stockbroking team and a Corporate finance team. Laurie Beevers, chief executive, commenting, said, ' I am delighted to be able to report once again on record results. With the benefit of our strong balance sheet, we are driving the business forward both organically and through strategic acquisitions. As we continue to invest in developing both our core stockbroking activities as well as our complementary corporate finance and financial services businesses, I remain confident that our strategy will result in continued progress'. Press enquiries: W.H. Ireland Group plc Laurie Beevers, chief executive Tel: 0161 832 6644 Mobile: 07903 164004 David Youngman, managing director Tel: 0161 832 6644 Mobile: 07900 887142 Richard Lee, director Tel: 0161 832 6644 Mobile: 07831 170298 Biddicks Tel: 020 7448 1000 Zoe Biddick or Katie Tzouliadis Chairman's Statement Results and Dividend I am delighted to report increased turnover, profits, assets and funds under management & advice for the fourth year in succession. Our pre-tax profit has increased by 16% to £3.7m, while turnover, which now includes a full year for our Australian subsidiary, has grown by over 32% to £30.3m. These results have been achieved in a period where stock market turnover has fluctuated significantly and during which we have been investing significantly in people and systems to facilitate the future growth objectives of the company. During the year we have completed the sale of the majority of our shares in the London Stock Exchange, which has contributed £1.1m out of the total profit from sales of fixed asset investments of £1.3m compared with profits of £0.7m last year. We have also consolidated operating profits of £0.2m from associated companies, principally from our holding in Ultimate Finance. We are proposing a final dividend of 3p making an increased dividend of 18% for the year as a whole, comprising an interim of 1.4375p (2005: 1.25p) and a final of 3p (2005: 2.5p). This dividend is covered 3.3 times. The final dividend will be paid on 27 April 2007 to holders on the register on 9 March 2007. A scrip alternative is available to shareholders who wish to take up that option. Trading Our accounts now include a significant contribution from our subsidiary in Australia, WHI Australia, the holding company of DJ Carmichael, the Perth based stockbroker, where we have increased our holding to 59.9%. We are delighted with its performance since we made our initial investment in June 2005. We would like to congratulate everyone in Perth for their hard work and commitment. DJ Carmichael now has representation in Melbourne, and it is our intention to support its continued expansion. WH Ireland Financial Services has continued to grow its business and headcount in Manchester and Cardiff and has contributed £1.9m (2005: £1.6m) to this year's turnover, an excellent performance. We are continuing to look at potential acquisitions for this subsidiary. Our Corporate Finance division has again performed strongly and has a significant presence in the AIM market nationally and internationally. In the year it undertook 17 IPOs, 14 secondary placings and acted in two advisory transactions, raising in total in excess of £136m (2005: £82m). In addition to our Birmingham, London and Manchester offices we have recently opened in Leeds to further support this growth. On the stockbroking side we continue to recruit highly experienced personnel to our London office which is now developing well following the move to new premises last year. Our acquisition of the institutional business of T.D. Waterhouse in Leeds early last year has seen the addition of new personnel and is locating to new offices in the centre of Leeds in Granary Wharf. It will be joined there by our newly established Corporate Finance operation and our private client stockbroking team. Group funds under management & advice now amount to £1.35bn, up from £1.17bn last year. Investments We have in the past made reference to the fixed asset and equity investment that we have undertaken in order to both de-risk the business while at the same time balancing the profit streams. Our Manchester property, which is in our books at £4.9m, is undergoing a major refurbishment. The ground floor, comprising three shop units, will be available for let, as will the first floor by the end of March. On completion of the work the building will be revalued. The uplift in value is expected to show an increase in excess of £1.0m over the refurbishment cost. Ultimate Finance, where we have a 23.17% holding, which is itself quoted on AIM continues to grow and we continue to be very pleased with its development. In 2005 we made an investment in Acceleris, a venture capital boutique specialising in mainly high tech start ups. This is developing well and we have invested a further £140k after the year end to maintain our equity position. Board During the year we have added two non executive directors to the main board. John Padovan is well known in the city having been managing director of three merchant banks and a non-executive director of a number of listed companies including Tesco and Whitbread. Roger Lane-Smith is a lawyer who until recently was Chairman and Senior Partner of DLA Piper UK. He is Chairman of JJB Sports and a Director of a number of other companies. The additional wise counsel and vast experience of these two senior figures is genuinely appreciated. Outlook World equity markets remain in good form but volumes, particularly in the UK market from where we derive the majority of our income, are below last year's levels. Our spread of activities and the commitment of a loyal, able and expanding staff should ensure continued progress in the development of the Group. Sir David Trippier RD JP DL MSI Chairman Year ended Year ended 30 November 30 November 2006 2005 Note £ £ Group turnover Continuing operations 29,645,609 23,007,247 Acquisitions 695,787 - ---------------------------------------------- 30,341,396 23,007,247 Administrative expenses (28,211,746) (20,562,231) ---------------------------------------------- Group operating profit Continuing operations 2,733,316 2,445,016 Acquisitions (603,666) - ---------------------------------------------- 2,129,650 2,445,016 Share of operating profit 210,503 67,675 before tax in associates Total operating profit: group 2,340,153 2,512,691 and share of associates ---------------------------------------------- Profit on disposal of fixed 2 1,268,272 653,993 asset investments Income from fixed asset 3 31,775 47,109 investments ---------------------------------------------- 3,640,200 3,213,793 Other interest receivable and 516,461 494,059 similar income Amounts written off (25,544) (34,224) investments Interest payable and similar (410,286) (473,579) charges ---------------------------------------------- Profit on ordinary activities 3,720,831 3,200,049 before taxation Tax on profit on ordinary (1,228,034) (1,043,694) activities ---------------------------------------------- Profit on ordinary activities 2,492,797 2,156,355 after taxation Minority interests (120,620) (20,806) ---------------------------------------------- Profit for the financial year 2,372,177 2,135,549 ============================================== Earnings per share (in accordance with FRS 14) Basic 5 14.71p 13.48p Diluted 5 13.30p 12.13p ============================================== All turnover and results in the current and previous year relate to continuing operations. Year Year ended ended 30 30 November November 2006 2005 £ £ Profit for the financial year 2,372,177 2,135,549 Unrealised surplus on revaluation of fixed 548,886 1,083,223 asset investments Unrealised gain on revaluation of properties - 76,805 Taxation on current year's realised surplus on (625,535) (426,734) revaluation of fixed assets Currency translation differences (90,155) 23,724 --------------------- Total recognised gain for the year 2,205,373 2,892,567 ===================== Note of historical cost profits and losses for the period ended 30 November 2006 Restated Year Year ended ended 30 30 November November 2006 2005 £ £ Reported profit on ordinary activities before 3,720,831 3,200,049 tax Realisation of fixed asset investment 2,084,321 1,422,445 revaluation gains --------------------- Historical cost profit on ordinary activities 5,805,152 4,622,494 before taxation --------------------- Historical cost profit retained for the year 3,830,963 3,131,260 after the provisions for taxation and minority interests. ===================== Restated Restated 2006 2006 2005 2005 Note £ £ £ £ Fixed assets Intangible assets 3,509,706 3,319,466 Negative goodwill (33,063) - Tangible assets 6,105,899 5,685,833 Investments - Fixed asset investments 6 4,767,838 6,181,536 - Investment in 837,191 765,942 associates ------------ ------------ 5,605,029 6,947,478 ------------------------------------------------- 15,187,571 15,952,777 Current assets Debtors 76,387,142 69,730,570 Investments 11,268 14,702 Cash at bank and in hand 14,819,199 7,362,131 ------------------------------------------------- 91,217,609 77,107,403 Creditors: amounts 7 (85,337,320) (72,373,849) falling due within one year ------------------------------------------------- Net current assets 5,880,289 4,733,554 ------------------------------------------------- Total assets less current 21,067,860 20,686,331 liabilities Creditors: amounts 8 (5,194,992) (6,177,135) falling due after more than one year Provisions for (16,980) (115,608) liabilities and charges ------------------------------------------------- Net assets 15,855,888 14,393,588 ------------------------------------------------- Capital and reserves Called up share capital 812,017 800,820 Share premium account 1,785,965 1,604,644 Capital redemption 228,083 226,333 reserve Merger reserve 490,511 490,511 Other reserves 753,704 753,704 Revaluation reserve 2,844,042 4,378,655 Profit and loss account 8,038,173 4,931,680 Treasury shares (86,561) - ------------------------------------------------- Equity shareholders' 14,865,934 13,186,347 funds Minority Interests (all 989,954 1,207,241 equity) ------------------------------------------------- Total capital employed 15,855,888 14,393,588 ------------------------------------------------- Year ended Year ended 30 November 30 November 2006 2005 £ £ Net cash inflow/(outflow) from operating 7,263,974 (3,465,512) activities Returns on investments and servicing of 261,868 169,915 finance Taxation (857,762) (1,583,066) Capital expenditure and financial investment 2,762,903 1,977,037 Acquisitions and disposals (616,836) 327,710 Equity dividends paid (479,465) (691,679) ------------------------ Cash inflow/(outflow) before financing 8,334,682 (3,265,595) Financing (870,031) (276,400) ------------------------ Increase/(decrease) in cash in the year 7,464,651 (3,541,995) ------------------------ Restated Group Group 2006 2005 £ £ Profit for the financial year before dividends 2,372,177 2,135,549 Dividend - restatement adjustment (400,410) (550,312) Dividend - current year (233,084) (199,892) ----------------------- Restated profit for the financial year 1,738,683 1,385,345 Surplus on investment revaluation reserve 548,886 1,083,223 Surplus on property revaluation reserve - 76,805 Tax in respect of current year realised surplus on (625,535) (426,734) revaluation Shares issued on payment of scrip dividends in the year 153,866 58,525 Shares issued on acquisition of subsidiary undertaking - 321,091 Shares issued on exercise of options 85,652 - Shares bought back for cancellation (45,250) - Treasury shares acquired (86,561) - Exchange rate adjustments (90,154) 23,724 ---------------------- Increase in shareholders' funds during the year 1,679,587 2,521,979 Opening equity shareholders' funds 13,186,347 10,664,368 ---------------------- Closing equity shareholders' funds 14,865,934 13,186,347 ---------------------- 1. Accounting policies The following accounting policies have been applied consistently in dealing with items that are considered material in relation to the Group's financial statements. Basis of preparation The financial statements have been prepared in accordance with applicable accounting standards subject to the true and fair view overrides detailed below and under the historical cost accounting rules, except as modified by the revaluation of certain assets. During the year the group adopted FRS21 and FRS25 paragraphs 1 to 50. The figures for the year ended 30 November 2005 have been restated to comply with FRS21 and FRS25 paragraphs 1 to 50 as if these policies had been adopted throughout the year. Basis of accounting for the Carried Interest Scheme During the year the Group maintained a Carried Interest Bonus Scheme under which bonuses may be payable to certain corporate finance personnel when certain warrants or shares acquired as part of a corporate finance transaction are ultimately sold at a profit. The relevant warrants and shares are included within fixed asset investments and are revalued at the year end reporting date and a bonus is provided on 50% of the expected profit should the warrants or shares be sold at that revalued amount, being the maximum amount of bonus that may be paid out. The amount of the bonus provision relating to warrants where the expiry date is less than one year is shown in creditors under one year, and the balance is shown in creditors over one year. At the 30 November 2006 revaluation the relevant warrants had a revaluation loss of £193,047 and the shares a revaluation loss of £234,663 and accordingly £94,723 need to be written back on the warrant revaluation loss and £121,645 on the revaluation losses on shares. Under the specific requirements of the Companies Acts and relevant Financial Reporting Standards the full amount of the revaluation loss would be taken through the statement of total recognised gains and losses to the revaluation reserve in the balance sheet whilst the credit for the bonuses would be taken to the profit and loss account. The Directors do not consider that adopting this accounting treatment truly matches the bonus credit against the relevant loss and thus does not show a true and fair view of the reasoning and substance behind the relevant accounting entries. In order to show a true and fair view of the Carried Interest Bonus Scheme the Directors have departed from the prescribed accounting treatment and have debited a sufficient amount of the loss to the profit and loss account to match the relevant bonus write back, as a debit within administrative expenses where the related bonus is credited. The effect of this is to avoid an increase in profits of £216,368 should the bonus alone be reported in the profit and loss account. During the current year certain warrants within the Carried Interest Scheme were exercised and the shares acquired there from were sold resulting in a profit being credited to profit and loss of £306,309 and a bonus being charged of £165,154. Under the specific requirements of the Companies Acts and relevant Financial Reporting Standards the profit on sale of the shares should be disclosed below the operating profit line under the heading profit on disposal of fixed assets and the bonus should be included in staff costs above the operating profit line. The Directors do not believe that this accounting treatment properly reflects the matching of the bonus and the specific gain it is paid out from, nor with the presentation of equivalent revaluations within operating profit (see paragraph above). Accordingly the Directors have departed from these accounting requirements and have taken a sufficient amount of the gain as matches the bonus paid and have reported this above the operating profit line as a credit to administration expenses. This treatment has no effect on the reported profits before tax for the year, but it moves a realised gain of £165,154 from below to above the operating profit line. 2. Profit on disposal of investments Year Year ended ended 30 30 November November 2006 2005 £ £ Gross Profit on disposal of fixed asset investments 1,443,950 817,466 Loss on disposal of current asset investments (10,524) - Amount taken to administration expenses to offset (165,154) (163,473) against the bonus payment thereon (see note 1) --------------------- Net profit on disposal of fixed asset investments 1,268,272 653,993 --------------------- 3. Income from fixed asset investments Year ended Year ended 30 30 November November 2006 2005 £ £ Quoted investments 31,775 31,839 Unquoted investments - 15,270 ----------------------- 31,775 47,109 ----------------------- 4. Dividends Restated Year ended Year ended 30 30 November November 2006 2005 £ £ Equity shares: Final dividend for the year ended 30 November 2005 400,410 235,848 paid at 2.5p per share (2004: 1.50p) Special final dividend for year ended 30 November 2005 - 314,464 (2004: 2.0p) Interim dividend for the year ended 30 November 2006 233,084 199,892 paid at 1.4375p per share (2005: 1.25p) ---------------------- 633,494 750,204 ---------------------- Following the adoption of FRS21, dividends payable are accounted for in the period in which the Company is liable to pay them, rather than in the period in respect of which they are declared. This has resulted in a reduction of creditors due within one year and increase in retained profits for the year ended 30 November 2005 of £400,410. Following the adoption of the presentation requirements of FRS25, these dividends are now treated as a charge on reserves and accounted for through the reconciliation of movements in shareholders' funds rather than in the profit and loss account as previously. 5. Earnings per share Restated Year ended Year ended 30 30 November November 2006 2005 Profit for the year used for the basic calculation £2,372,177 £2,135,549 ---------------------- Weighted average number of shares used in the basic 16,124,635 15,840,949 calculation Weighted average number of options outstanding for the 1,715,122 1,764,713 period ---------------------- Weighted average number of shares used in the diluted 17,839,758 17,605,662 calculations ---------------------- 6. Fixed asset investments Unquoted Quoted investments Warrants investments Total Group (excluding investments in £ £ £ £ associates) Cost or valuation At beginning of year 75,071 2,911,107 3,195,358 6,181,536 Additions 275,000 - 477,656 752,656 Revaluation adjustment - (193,047) 525,705 332,658 Exchange rate adjustments - - (5,313) (5,313) Diminution in value - - (25,544) (25,544) Disposals - (704,687) (1,763,468) (2,468,155) --------------------------------------------- At end of year 350,071 2,013,373 2,404,394 4,767,838 --------------------------------------------- The historical cost value of the above quoted investments at the year end was £1,374,684 (2005: £748,140). The potential tax charge arising if the above quoted investments were sold at their market value is £330,118 (2005: £714,735). In the consolidated financial statements, the interests in the associated undertakings are accounted for using the equity method. In the Company financial statements the interests in the associated undertakings are accounted for at market value where quoted and at the lower of cost or net realisable value where unquoted. 7. Creditors: amounts falling due within one year Group Group 2006 2005 £ £ Bank overdraft 46,199 - Bank loans 314,727 292,365 Trade creditors 77,919,174 67,159,024 UK corporation tax payable 1,827,763 839,136 Taxation and social security 872,166 609,358 Obligation under finance leases and hire purchase 3,887 6,982 contracts Deferred purchase consideration - 461,560 Other creditors 311,715 177,931 Accruals and deferred income 4,041,689 2,827,493 ----------------------- 85,337,320 72,373,849 ----------------------- Accruals and deferred income includes £108,579 (Company: £nil) (2005: £nil (Company: £nil)) relating to bonuses provided under the carried interest scheme. Details of the accounting treatment thereof are given in note 1. 8. Creditors: amounts falling due after more than one year Group Group 2006 2005 £ £ Bank loans 3,594,718 3,971,899 Obligations under finance leases and hire purchase - 4,398 contracts Accruals and deferred income 1,575,834 2,097,059 Deferred rent creditor 24,440 103,779 ---------------------- 5,194,992 6,177,135 ---------------------- Accruals and deferred income includes £1,259,746 (Company: £215,192) (2005: £1,799,891 (Company: £336,836)) relating to bonuses provided under the carried interest scheme. Details of the accounting treatment thereof are given in note 1. 9. Financial Information The financial information in this press release, which has not been audited, does not constitute Statutory Accounts within the meaning of Section 240 of the Companies Act 1985. The Annual Report and Accounts for the year ended 30 November 2006 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Accounts for the year ended 30 November 2005 have been filed with the Registrar of Companies, and these accounts contain an unqualified, audited report and did not contain any statements under Section 237 (2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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