Final Results

Close Brothers Group PLC
24 September 2001


Embargoed for release 7.00 am Monday 24th September, 2001 
 

                                                            
                    CLOSE BROTHERS GROUP plc                

           The specialist merchant banking group   

                           announces                               

           results for the year to 31st July, 2001 
     

                                                     
HIGHLIGHTS               
                                                                2001      2000 
                                                                              
  *   Operating profit before taxation, exceptional costs     £94.2m   £155.1m
      and goodwill amortisation                                               

  *   Earnings per share before exceptional costs              47.4p     78.8p
      and goodwill amortisation                                               

  *   Operating profit before taxation on ordinary            £89.5m   £144.8m
      activities                                                              

  *   Earnings per share                                       44.0p     72.9p

  *   Dividends per share                                      26.0p     25.0p

  *   Shareholders' funds                                      £408m     £371m

  *   Total assets                                            £2.8bn    £2.6bn

  *   Asset Management - substantial growth, contributing 
      23% of profits.     

  *   Corporate Finance - active year, results significantly 
      up, 12% contribution.                                                     
     

  *   Banking - significant progress, loan book up 33%, 
      39% contribution.     

  *   Market-Making - sharp decline with market down, 
      launch of Bondscape, 26% contribution.                                    
                  
 
 
Commenting on the results, Sir David Scholey, Chairman, said:
 
'Although our market-making profits reflected the dramatic declines in stock
market values and volumes compared with the previous exceptional year, the
profits of other businesses increased by 28%.
 
It is too soon to assess the impact on the group of the tragic recent events
in the USA. Our caution about trading conditions in 2001 has proved well
founded and looking to 2002 we retain our prudent stance.
 
We are confident that, with our long established and clear strategy of a mix
of specialist activities, we are well placed to weather challenging
conditions ahead.'

Enquiries to:

Rod Kent/Peter Winkworth (Close Brothers Group plc)         020 7426 4000

John Sunnucks (Brunswick Group Limited)                     020 7404 5959

Webcast video interview with Rod Kent, Group Managing Director at
www.closebrothers.co.uk or www.cantos.com


                          CLOSE BROTHERS GROUP plc
           PRELIMINARY ANNOUNCEMENT OF AUDITED GROUP RESULTS
                          AND CHAIRMAN'S STATEMENT
                      FOR THE YEAR ENDED 31ST JULY, 2001

The following is the full text of the preliminary announcement of results for
the financial year ended 31st July, 2001. The financial information in relation 
to 31st July, 2001 has been extracted from the statutory accounts of the 
company, which have yet to be adopted by shareholders at general meeting and 
have yet to be filed with the Registrar of Companies.

                                                                              
CONSOLIDATED PROFIT AND LOSS ACCOUNT 
                                       
                        For the year ended 31st July, 2001         Year ended  
                   Ordinary          Goodwill           Total      31st July,
                 activities      amortisation        ordinary            2000 
                     before                        activities      (Restated)
                   goodwill                                                   
               amortisation                                                  
                                                                              
                      £'000             £'000           £'000           £'000 

  Interest          208,982                 -         208,982         166,123  
  receivable                                                                  

  Interest        (112,598)                 -       (112,598)        (90,609) 
  payable                                                                     
                                                                              
  Net                96,384                 -          96,384          75,514  
  interest                                                                    
  income                                                                      

  Dividend              153                 -             153             479  
  income                                                                      

  Fees and          153,753                 -         153,753         122,048  
  commissions                                                                 
  receivable                                                                  

  Fees and         (21,542)                 -        (21,542)        (25,708) 
  commissions                                                                 
  payable                                                                     

  Net dealing        58,331                 -          58,331         203,954  
  income -                                                                    
  market-making                                                                 
         
  Other               5,600                 -           5,600           6,764  
  operating                                                                   
  income                                                                      
                                                                              
  Other income      196,295                 -         196,295         307,537  

  Operating         292,679                 -         292,679         383,051  
  income                                                                      

  Administrative    173,732                 -         173,732         217,764  
  expenses                                                                 

  Depreciation        6,861                 -           6,861           5,688  
                                                                              
  Provisions         17,919                 -          17,919          12,533  
  for bad and                                                                 
  doubtful                                                                    
  debts                                                                       

  Amortisation            -             4,671           4,671           2,305  
  of goodwill                                                                 
                                                                              
  Total             198,512             4,671         203,183         238,290  
  operating                                                                   
  expenses                                                                    

  Operating          94,167           (4,671)          89,496         144,761  
  profit on                                                                   
  ordinary                                                                    
  activities                                                                  
  before                                                                      
  taxation                                                                    

  Taxation on        28,639                 -          28,639          45,516  
  profit on                                                                   
  ordinary                                                                    
  activities                                                                  

  Profit on          65,528           (4,671)          60,857          99,245  
  ordinary                                                                    
  activities                                                                  
  after                                                                       
  taxation                                                                    

  Minority            1,754                 -           1,754           2,668  
  interests -                                                                 
  equity                                                                      
                                                                              
  Profit             63,774           (4,671)          59,103          96,577  
  attributable                                                                
  to                                                                          
  shareholders                                                                
                                                                              
  Dividends:                                                                  
  Interim                                              12,121          10,659  
  dividend                                                                    
  9.0p per                                                                    
  share (2000                                                                 
  - 8.0p)                                                                     

  Proposed                                             22,927          22,697  
  final                                                                       
  dividend                                                                    
  17.0p per                                                                   
  share (2000                                                                 
  - 17.0p)                                                                    

  Total                                                35,048          33,356  
  dividends                                                                   
  26.0p per                                                                   
  share (2000                                                                 
  - 25.0p)                                                                    

  Retained                                             24,055          63,221  
  profit for                                                                  
  the year                                                                    

  Earnings                                                                    
  per share                                                                   
  before                                                                      
  exceptional                                                                 
  costs and                                                                   
  amortisation                                          47.4p           78.8p 
  of goodwill                                                                 

  Earnings                                              44.0p           72.9p 
  per share                                                                   
  on profit                                                                   
  attributable                                                                
  to shareholders                                                               
                                                                              
  Diluted                                               43.6p           72.3p 
  earnings                                                                    
  per share                                                                   

All income and profits are in respect of continuing operations. The
comparative figures for the year ended 31st July, 2000 have been restated as
a result of the group adopting Financial Reporting Standard No. 19 on
Deferred Taxation.


                                                                              
CONSOLIDATED BALANCE SHEET                                                  
                                                                              
At 31st July, 2001                                                          
                                                             2001         2000
                                                                    (restated)
                                                            £'000        £'000
  Assets                                                                      
  Cash and balances at central banks                          586          235
  Loans and advances to banks                             593,894      631,824
  Loans and advances to customers                       1,189,405      895,334
  Less:- non-recourse borrowings                         (33,000)            -
                                                        1,156,405      895,334
  Debt securities - long positions                         35,764       23,521
  Debt securities - other                                 481,936      486,488
  Settlement accounts                                     147,750      301,340
  Equity shares - long positions                           33,413       52,917
  Equity shares - investments                              27,957       21,100
  Intangible fixed assets - goodwill                      114,080       50,264
  Tangible fixed assets                                    20,468       20,817
  Other assets                                            119,060      136,529
  Deferred taxation                                        11,507       10,466
  Prepayments and accrued income                           23,863       17,508

  Total assets                                          2,766,683    2,648,343

  Liabilities                                                                 
  Deposits by banks                                        55,643       67,382
  Customer accounts                                     1,144,155    1,066,388
  Bank loans and overdrafts                               607,629      453,685
  Debt securities - loan notes issued                      18,140       36,281
  Debt securities - short positions                        38,182       25,891
  Settlement accounts                                     114,174      249,741
  Equity shares - short positions                           9,594       10,657
  Other liabilities                                       197,372      243,745
  Accruals and deferred income                             71,910       63,302
  Subordinated loan capital                                96,937       51,937
  Minority interests - equity                               5,056        7,975
                                                        2,358,792    2,276,984
  Shareholders' funds                                                         
  Called up share capital                                  34,055       33,760
  Share premium account                                   193,253      185,243
  Profit and loss account                                 180,583      152,356

  Total equity shareholders' funds                        407,891      371,359

  Total liabilities and shareholders' funds             2,766,683    2,648,343


CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES                 

For the year ended 31st July, 2001                           2001         2000
                                                                    (restated)
                                                            £'000        £'000
  Profit attributable to shareholders                      59,103       96,577
  Exchange adjustment                                          13         (80)
  Total recognised gains and losses related to the year    59,116       96,497
  Prior period deferred taxation adjustment                 3,517             
  Total recognised gains and losses since the last         62,633             
  annual report                                                               
                                                                              
                                                                              
                                                        
                                                          
CONSOLIDATED CASH FLOW STATEMENT    

For the year ended 31st July, 2001  

                                                                             
                                                           2001        2000  
                                                          £'000       £'000 
  Net cash inflow from operating activities             238,063     117,306  

  Returns on investments and servicing of finance:                           
  Dividends paid to minorities                           (1,703)       (719) 

  Taxation:                                                                  
  UK corporation taxation paid                          (47,608)    (36,983) 

  Capital expenditure and financial investment:                              
  Purchase of tangible fixed assets                      (8,243)    (13,033) 
  Sale of tangible fixed assets                           2,073       1,014  
  Purchase of equity shares held for investment         (14,885)     (6,279) 
  Sale of equity shares held for investment               5,655       7,505  
                                                        (15,400)    (10,793) 
  Acquisitions and disposals:                                                
  Minority interests (acquired)/sold for cash           (22,537)      2,443  
  Purchase of subsidiaries                              (64,424)    (15,103) 
                                                        (86,961)    (12,660) 

  Equity dividends paid                                 (34,818)    (25,024) 

  Net cash inflow before financing                       51,573      31,127  

  Financing:                                                                 
  Issue of ordinary share capital including premium       2,455       2,906  
  Issue of subordinated loan capital                     45,000      30,000  

  Increase in cash                                       99,028      64,033  

In the directors' view, cash is an integral part of the operating activities
of the group, since it is a bank's stock in trade. Nevertheless, as required
by Financial Reporting Standard No. 1 (Revised), cash is not treated as cash
flow from operating activities but is required to be shown separately in
accordance with the format above. 

                                                   
                                                   
THE NOTES

1. The calculation of earnings per share on profit attributable to
shareholders is based on profit after taxation and minority interests of
£59,103,000 (2000 - £96,577,000) and on 134,422,000 (2000 - 132,501,000)
ordinary shares, being the weighted average number of shares in issue during
the year, excluding those held by the employee benefit trust.

2. The final ordinary dividend of 17.0p per share is proposed to be paid on
6th November, 2001 to holders of ordinary shares on the register at the close
of business on 5th October, 2001.

3. The financial information included in this announcement as regards the
group does not constitute statutory accounts for the relevant periods within
the meaning of Section 240 of the Companies Act 1985. Statutory accounts of
the company for the financial year ended 31st July, 2000, upon which the
auditors of the company have given an unqualified report, have been delivered
to the Registrar of Companies.

                                                   
                                                   
CHAIRMAN'S STATEMENT

RESULTS

The operating profit on ordinary activities before taxation, exceptional
costs and goodwill amortisation was £94.2m, compared to £155.1m last year,
and earnings per share, on the same basis, were 47.4p compared to 78.8p.

After deducting a charge for exceptional costs of £Nil (2000 - £8.0m) and
goodwill amortisation of £4.7m (2000 - £2.3m), the operating profit on
ordinary activities before taxation was £89.5m (2000 - £144.8m) and earnings
per share, on the same basis, were 44.0p (2000 - 72.9p).

The board is recommending a final dividend of 17p per share which, together
with the interim dividend, gives a total dividend for the year of 26p per
share (2000 - 25p). This represents an increase of 4 per cent. over last
year's total dividend and based on the above earnings per share of 47.4p is
covered over 1.8 times.

OVERVIEW
The year ended 31st July, 2001 produced the first reduction in the group's
profits for 26 years. This was not unexpected and was caused by the dramatic
decline in profits from £109 million last year to £27 million this year in
Winterflood Securities ('WINS'), our market-making division. Last year we
explained that WINS benefited from the exceptional boom in stock market
trading, to the tune of some £50 million of additional profits over the
normal levels of activity. This year, particularly since autumn 2000, there
has been a sustained bear market in small capitalisation stocks and levels of
trading have fallen far below previous normal levels.

It is important that shareholders understand that, despite this reverse of
fortunes in our market-making business, the other three main areas of our
business - asset management, corporate finance and banking - continued their
growth. Profits from these activities increased some 28 per cent. on last
year, which itself was up some 31 per cent. on the previous year:

                                                         
£ million                                  1999      2000      2001
                                                                       
Asset management, corporate                                        
 finance, banking                          45.6      59.8      76.8 
Market-making                              35.7     109.0      27.4 
Operating profit                           81.3     168.8     104.2 
Central costs                             (5.0)    (13.7)    (10.0) 

Profit before tax, exceptionals and                                
goodwill amortisation                      76.3     155.1      94.2 

The balance of the group's operating profits has returned to a more even and
sustainable pattern compared to last year's figures:

                                                             
                                           1999      2000      2001 
Asset management                             4%        9%       23% 
Corporate finance                            9%        6%       12% 
Banking                                     43%       20%       39% 
Market-making                               44%       65%       26% 
                                           100%      100%      100% 
TRADING

Asset Management
A notable feature of the past year has been the emergence of Close
Investments, our Asset Management division. This showed substantial growth
and contributed 23 per cent. of our profits. At the year end our funds under
management amounted to £3.1 billion, up from £2.6 billion the previous year.
Over the last few years we have built up a diverse range of specialist
investment businesses where we can earn commensurately higher fees than
mainstream products.

During the year, we expanded our offshore operations by making some in-fill
acquisitions and this area accounted for some 25 per cent. of this division's
profits.

In our UK-based operations we expanded by the acquisition of OLIM, which
concentrates on specialist institutional investment mandates. Overall, our
equity funds, including our technology funds, performed well in relation to
their peers, in difficult market conditions. We also achieved good
performance in our private equity funds and our tax and property-based
businesses.

This division now has in place the building blocks to achieve its long-term
growth objectives across a diverse range of activities, however our immediate
outlook is cautious, particularly for the half of our business which is
directly affected by stock market conditions.

Corporate Finance
Our Corporate Finance division had an active year and produced a result
significantly ahead of 2000. This division contributed around 12 per cent. of
our operating profits.

We have deliberately widened the base of revenue generation and have built
and recruited teams specialising in, for example, debt restructuring, energy
(Middle East), and private placement. We have also strengthened and developed
our Close Associates network in Europe, including our investment in Atlas
Capital in Madrid. During the year we restructured our French activities
focusing on the Dome Close Brothers M&A activities and we have won several
mandates in conjunction with our US associate.

In the past year we have completed some 61 transactions with a value of
approximately £6.7 billion.

Our pipeline is healthy but deals are taking longer than normal to fructify
and there remains the potential for less completions in the coming year.

Banking
Our Banking division, which includes all our lending activities together with
our central treasury operations, represented some 39 per cent. of group
operating profits. We continue to focus on a specialist range of assets
against which we will provide loans and to be careful to seek a proper margin
of security commensurate with the quality of asset financed.

During the past year, our loan book has grown from £0.9 billion to £1.2
billion. Approximately 45 per cent. of this growth arose from businesses
acquired, with the balance coming from organic growth. In particular our
insurance premium financing operation has achieved substantial growth both by
its acquisition of TIFCO and its own expansion, which is continuing.

Our credit management companies and Close Property Finance did well. The
increasing slowdown in the business of SMEs could have some impact on our
debt factoring business, although this will be offset by our recent
acquisition of Metropolitan Factors.

In asset finance, the past year has been patchy. On the commercial side, the
printing sector has picked up somewhat and we continue to diversify our
lending into other sectors, with our new business in the machine tools and
healthcare sectors growing well. On the consumer side, the car market appears
to have passed its worst and we have improved the quality of our business
considerably. Our armed forces business, Warrior, has taken longer than
expected to sort out but we have a clear turn-round strategy for the future.

Taken as a whole, the outlook for the banking division is encouraging.

Market-Making
Our Market-Making division suffered a sharp decline in profits following its
exceptional results in the previous year.

WINS trading fell into two distinct halves; the first half started buoyantly
but ended with a sharp fall in share prices; in the second half share prices
continued to fall persistently exacerbated by a downturn in volume. WINS made
profits of some £26 million in its first half and was only just profitable in
the second half.
     
Despite this, WINS still delivered a return on capital for the year well
above the group average and, through its variable remuneration structure,
kept its costs well contained.

WINS has continued to create different sources of revenue within its
market-place and to expand the range of instruments in which it makes
markets. Activity in bonds has expanded beyond our initial horizon of UK
gilts and, through Bondscape, our recent joint venture with Barclays, there
is now a transparent 'yellow strip' of touch prices for sterling bonds. We
have also commenced trading in US stocks and have expanded our European
coverage. These new initiatives, like WINS' core business in smaller cap and
AIM stocks, are targeted at the retail investor.

In current market conditions, it is likely to be some time before retail
investors' confidence and activities are restored to previous levels.
However, in the medium-term with the advance of technology and the greatly
improved access to market information across Europe, we expect private client
bargain activity to grow and WINS to benefit. WINS' trading in the opening
weeks of the current year remains difficult in view of current market
conditions.

DIRECTORS

Brian Winterflood, who joined us in 1993 and who was the founder of WINS in
1988, will be 65 next January and is to retire from the Board of Close
Brothers Group at that time. However, we will still continue to benefit from
his experience and business acumen as he will continue as chairman of WINS,
but in a non-executive capacity, for the foreseeable future, with Mike Hines
and David Macnamara as joint chief executives.

Brian has been in jobbing all his working life of nearly fifty years and has
long been the Stock Exchange champion of the retail investor. He is a widely
known and greatly respected figure in the City. The business that he founded
in the 1980s has blossomed into one of the UK's leading retail service
providers. He moves towards retirement in the knowledge that WINS is in great
shape after a difficult year and on a sound footing to move forward once the
retail market picks up, for all of which he has earned our warmest thanks.

OUTLOOK

The tragic recent events in the USA will inevitably affect business
conditions in many ways. It is as yet too soon to assess the impact on the
companies in our group. However the caution that we expressed in our interim
report about the trading conditions in 2001 has proved well founded and as we
look forward to 2002 we retain our prudent stance.

The slowdown in economic activity around the world is continuing and is now
more universally evident. We cannot predict when retail investors will regain
full confidence in the stock market but most areas of our banking and asset
management operations continue to have encouraging prospects and our
corporate finance side remains busy.

We are confident that, with our long established and clear strategy of a mix
of specialist activities, we are well placed to weather challenging
conditions ahead.

Sir David Scholey
Chairman