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Portman Building Sty (31BH)

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Wednesday 30 July, 2003

Portman Building Sty

Interim Results

Portman Building Society
30 July 2003



                          CONTINUED SUCCESS AT PORTMAN

Portman, the UK's fourth largest building society, today announces another
strong set of interim results, showing that borrowers and savers value the
competitive products and high quality service provided by one of the country's
largest and most successful mutual societies.

                                   HIGHLIGHTS

•        Total assets now exceed £11 billion, up 20% in the past year

•        Gross new mortgage lending of £1.5 billion, up 8% on the record levels
         achieved a year ago

•        Net mortgage lending some 50% ahead of the Group's natural market share

•        Growth in savings balances to a new record of almost £8 billion

•        Group pre-tax profit continuing to grow, up 6% at £33 million

•        Profits from Sun Bank up 18%

•        Proposed merger with Staffordshire Building Society, announced on 24
         June

Robert Sharpe, Chief Executive of Portman, said, 'I am delighted to present yet
another excellent set of interim results, which confirm the competitiveness of
our products for both savers and borrowers.  Our members clearly appreciate good
value and quality service, which is why we are able to consistently punch above
our weight in terms of market share.

'These results follow the recent announcement of our intention to join with
Staffordshire Building Society in a ground-breaking merger that will benefit the
members of both societies and help us continue to deliver competitive products
and services as an enlarged mutual.'

                                      ENDS



Editor's notes:

•        The interim results in their entirety are appended.

•        Portman is the fourth largest UK building society, with Group assets of
         over £11 billion.

•        The Portman Group consists of:

(i)      Portman Building Society which primarily operates through a network of
         over 100 branches (predominantly in the south of England);

(ii)     Sun Bank plc, a specialist mortgage lender;

(iii)    Portman Channel Islands Ltd, the Group's offshore deposit taker.



For further information please contact:


          Robert Sharpe                Glyn Smith                            Lynsey Hallam
          Chief Executive              Group Finance Director                Group Press Officer
          01202 563602                 01202 563606                          01202 562256
                                                                             07887 830000



             INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003

Review

The first six months of 2003 have been very successful for the Society and its
members:

•        Total assets now exceed £11 billion, up 20% in the past year;

•        Pre-tax profit up 6% to £33 million;

•        Gross mortgage lending of £1.5 billion was 8% up on the record levels
         of first half 2002;

•        Net residential mortgage lending and net retail inflows both
         substantially ahead of the Group's natural market share;

•        Our market leading ISA range attracted £226 million of deposits from
         savers;

•        Underlying profits from the Society's Sun Bank subsidiary increased by
         18%, the benefits of which continue to flow to members primarily 
         through highly competitive products; and

•        Despite further strong growth in lending, the arrears experience of the
         Group has shown no deterioration; indeed, balances in arrears have 
         fallen by 9% since the year end.

In addition to these achievements, the Society's ongoing programme of member
research and face-to-face communication ensures that we continue to listen to
our members and improve our products and services better to meet their needs.

Business Volumes

Savings balances increased to almost £8 billion as further market leading
products and member only offers proved very attractive to savers.  The Members'
Tracker Bond, exclusive to Portman members, was extremely popular, attracting
over £90 million of balances, whilst our market leading 30 Day Notice ISA
generated balances in excess of £108 million.  The new Bonus Extra Notice
Account, launched on 19 June, has attracted over £46 million in just 12 days.
Portman Channel Islands, the Society's offshore subsidiary, also achieved an
impressive performance in an intensely competitive environment, with deposits
increasing by 20% in the first 6 months.

Ongoing coverage in best buy tables clearly demonstrates the attractiveness of
Portman's mortgage offering in the market.  This is reflected by the Group's
achievements in attracting new business, with gross new residential mortgage
lending of £1.5 billion substantially ahead of the Group's natural market share.
In a market where remortgaging has reached 50% of new lending activity,
retaining existing borrowers is clearly a challenge.  The fact that Portman has
achieved a market share in net lending of some 50% above its natural level shows
that borrowers are not leaving the Society in anything like the volumes
experienced by many other lenders.  This is further testimony to the Society's
focus on delivering consistently good value over time.

Financial Performance

The Society continues to generate profit growth to support its capital ratios.
Pre-tax profit increased by 6% to £33 million compared with the same period in
2002.  The solvency ratio continues to be strong at 12.8%.   At the end of 2002,
the Society announced its decision to transfer the business operations of Sun
Bank from Stevenage to Bournemouth in order to achieve operational efficiencies 
in handling the levels of business growth being experienced.  The first phase of 
this has been completed and this, combined with other investments in efficiency 
made during 2002, meant that the management expenses ratio reduced to 0.76%.

The outlook for the next six months

The second half of the year will present further challenges for both Portman and
the industry as a whole.  Clear evidence has emerged during the first half of
the year that the predicted slowdown in the housing market has started.
Encouragingly, this evidence does appear to show that it is a slowdown and not
the type of hard landing that has followed high growth cycles in the past.
However, there is a possibility that, should remortgage activity fall away,
volumes of new lending in the sector as a whole may reduce.

The Society was very pleased to announce, on 24 June, a proposed merger with
Staffordshire Building Society.  Whilst it is not anticipated that the merger
will be finalised until the year end, Portman will be very well positioned to
take advantage of the enhanced distribution and some economies of scale which
the enlarged group will offer.


GROUP INCOME AND EXPENDITURE ACCOUNT
for the six months ended 30 June 2003

                                                                  6 months      6 months               Year
                                                                     ended         ended              ended
                                                                   30 June       30 June        31 December
                                                                      2003          2002               2002

                                                                        £m            £m                 £m

Net interest receivable                                               59.0          50.3              108.2
Other income and charges                                              16.4          18.7               36.7
Total income                                                          75.4          69.0              144.9
Administrative expenses                                              (41.2)        (37.9)             (79.2)
Operating profit before provisions                                    34.2          31.1               65.7
Provisions for bad and doubtful debts                                 (1.2)          0.1               (1.6)
Profit before tax                                                     33.0          31.2               64.1
Taxation                                                             (10.2)         (9.9)             (19.9)
Profit after tax                                                      22.8          21.3               44.2


Financial ratios:                                                        %             %                  %
Profit after tax as % of mean total assets                            0.42          0.47               0.46

Management expenses as % of mean total assets                         0.76          0.83               0.82





GROUP BALANCE SHEET
as at 30 June 2003


                                                                30 June          30 June        31 December
                                                                   2003             2002               2002

                                                                     £m               £m                 £m


ASSETS
Liquid assets                                                     2,175            1,818              1,971
Loans to customers   -  residential mortgages                     8,665            7,133              7,934
                     -  other                                       282              331                303
Fixed and other assets                                              143              142                165
Total assets                                                     11,265            9,424             10,373


LIABILITIES AND RESERVES
Shares                                                            7,935            7,118              7,660
Borrowings                                                        2,620            1,636              2,013
Other liabilities                                                    47               53                 60
Subordinated debt                                                   130              130                130
Subscribed capital                                                   60               60                 60
Reserves                                                            473              427                450
Total liabilities and reserves                                   11,265            9,424             10,373


Movements:
Gross residential lending                                         1,486            1,375              2,913
Net increase in residential mortgages                               731              656              1,456
Net increase in share balances                                      275              319                861

Financial ratios:                                                     %                %                  %
Liquid assets                                                      20.6             20.8               20.4
Gross capital                                                       6.3              7.0                6.6
Solvency                                                           12.8             14.0               13.3
Tier 1 capital                                                      9.9             10.6               10.2




CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2003


                                                                   6 months         6 months              Year
                                                                      ended            ended             ended
                                                                    30 June          30 June       31 December
                                                                       2003             2002              2002
                                                                         £m               £m                £m


Net cash inflow from operating activities                             266.8            229.4             507.2
Returns on investments and servicing of finance                        (3.8)            (3.9)            (12.9)
Taxation                                                               (7.9)           (12.5)            (19.3)
Net financial investment                                             (248.2)          (199.3)           (454.1)
Net capital investment                                                 (4.9)            (9.1)            (18.7)
Increase in cash                                                        2.0              4.6               2.2








NOTES TO THE FINANCIAL INFORMATION
for the six months ended 30 June 2003

1.   The interim financial information, which has not been audited, was approved 
     by the Board of Directors on 29 July 2003 and does not constitute accounts 
     within the meaning of the Building Societies Act 1986.


2.   The interim financial information has been prepared on the basis of the 
     Group accounting policies set out in the Annual Accounts to 31 December 
     2002.


3.   Reconciliation of profit before tax to net cash inflow from operating 
     activities:

                                                                      6 months      6 months            Year
                                                                         ended         ended           ended
                                                                       30 June       30 June     31 December
                                                                          2003          2002            2002
                                                                            £m            £m              £m

            Profit on ordinary activities before tax                      33.0          31.2            64.1
            Depreciation and amortisation                                  4.7           3.9             8.5
            Net (increase)/decrease in:
                Loans and advances to customers                         (711.2)       (444.1)       (1,221.3)
                Loans and advances to credit institutions                 38.5         284.4           388.0
            Net increase in:
                Shares (excluding accrued interest)                      340.8         413.5           874.2
                Owed to credit institutions and other customers          472.1          60.5            50.0
                Debt securities in issue                                 143.8           0.1           385.8
            Other                                                        (54.9)       (120.1)          (42.1)
            Net cash inflow from operating activities                    266.8         229.4           507.2


            Analysis of cash balances included in the balance sheet:

                                                                       30 June         Flows     31 December
                                                                          2003                          2002
                                                                            £m            £m              £m

            Cash in hand and balances with Bank of England                 9.4           1.0             8.4
            Loans and advances to credit institutions
            repayable on demand                                           11.2           1.0            10.2
                                                                          20.6           2.0            18.6

4.   The financial information for the year ended 31 December 2002, has been 
     extracted from the statutory accounts for that year, which have been filed 
     with the Financial Services Authority and on which the auditors gave an 
     unqualified opinion.


                      This information is provided by RNS
            The company news service from the London Stock Exchange                                    

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