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Kensington Group PLC
27 January 2004
27 January 2004
Kensington Group plc
Full-year results ended 30 November 2003
KENSINGTON DELIVERS STRONG EARNINGS AND DIVIDEND GROWTH, EXCEEDING EXPECTATIONS,
AND REPORTS INCREASING MOMENTUM IN POSITIVE TRADING UPDATE
"2003 saw another excellent performance from Kensington. New business
completions doubled, credit quality remained strong and we continued to maintain
tight control over costs. Recent trading has seen new business volumes
remaining high with a valuable contribution from our direct distributor TML,
resulting in accelerating growth in the mortgage book and greater momentum for
future earnings. We are therefore confident in our ability to sustain strong
and disciplined earnings growth in our specialist developing market."
John Maltby, CEO Kensington Group plc
Financial Highlights
* Profit before tax and goodwill amortisation up 23% to #37.1 million
(2002: #30.2 million)
* Earnings per share before goodwill amortisation up 21% to 48.5p (2002:40.0p)
* Annualised post tax return before goodwill amortisation on average equity
of 25% (2002: 25% on a fully taxed basis)
* Recommended final dividend per share up 100% to 7.0p (2002: 3.5p), a
total of 10.0p for the year (2002: 5p)
Significant growth through broadening distribution
* New business completions up 98% to #2.0 billion, TML contributing #545m.
* Increased distribution via 2,500 new brokers, a 50% increase in Mortgage
Packager introductions, and a 100% increase in National Accounts business,
which is business introduced by other mainstream lenders such as
Lloyds TSB, Zurich, Derbyshire Building Society and Norwich Union.
Improving Credit Performance
* Average new business Loan to Value ratio ("LTV") remains low at 78% with
less than 0.1% having an LTV of above 90%. The ratio of mortgages advanced
to borrowers' income steady at 2.5 compared with an industry average of 2.7.
* The number of accounts 90 days or more in arrears at the year end fell to
5.2% (Nov 2002: 6.4%). Annualised losses remained below 0.1% for the year
and provisions for bad and doubtful debts fell to 0.5% of mortgage assets
under management (2002: 0.6%), reflecting excellent risk performance.
Low cost funding
* #1.9 billion of bonds were successfully issued through three securitisations,
which attracted a broad and diverse investor base. The credit ratings of
subordinated bonds from the first twelve securitisations have been upgraded
and the outstanding bonds from the first seven deals have been called and
their investors successfully repaid.
Positive outlook
* Increasing earnings momentum supported by a 63% increase in mortgage assets
under management to #3.1 billion.
* New business completions in the first month of the new financial year
(December 2003) were up 38% compared to December 2002 and, at the end of
December 2003, the new business pipeline was up 35% at over #400m.
FINANCIAL HIGHLIGHTS
2003 2002 Change
#m #m %
Net interest income 59.1 43.5 +36
___ ___ ___
Total operating income 88.0 60.6 +45
Operating expenses (45.5) (25.2) +81
Provisions for bad and doubtful debts (5.4) (5.2) +4
___ ___ ___
Profit before taxation and goodwill amortisation 37.1 30.2 +23
Goodwill amortisation (2.4) (0.4) +500
___ ___ ___
Profit before taxation 34.7 29.8 +16
Tax on profit (11.0) (7.5) +5
___ ___ ___
Profit after taxation 23.7 22.3 +6
___ ___ ___
Mortgage assets under management 3,117.8 1,907.9 +63
New business originations 2,015.5 1,018.3 +98
Shareholders' funds 99.2 86.8 +14
2003 2002 Change
p p %
Earnings per share - basic 44.1 39.3 +12
Earnings per share - basic before goodwill amortisation 48.5 40.0 +21
Earnings per share - diluted 43.2 38.9 +11
Dividend per share 10.0 5.0 +100
ENDS.
Enquiries
John Maltby, Group Chief Executive Geoffrey Pelham-Lane
Kensington Group plc - 020 7297 7800 Financial Dynamics - 020 7269 7194
Notes to Editors
Kensington Group plc, ("Kensington") which trades as Kensington Mortgages and
The Mortgage Lender, is a leader in the UK specialist residential mortgage
market. Kensington provides mortgages to borrowers who do not conform to the
underwriting criteria of traditional suppliers of mortgages in the UK such as
the self-employed, contractors, older borrowers, temporary employees, borrowers
who require larger loans and those with an adverse credit history. Kensington
is the only independent lender in the non-conforming mortgage market listed on
the London Stock Exchange.
PRELIMINARY ANNOUNCEMENT OF RESULTS
YEAR ENDED 30 NOVEMBER 2003
FINANCIAL HIGHLIGHTS AND FINANCIAL RECORD
2003 2002 2001 2000 1999
Continuing operations #m #m #m #m #m
Interest receivable 183.5 138.8 136.2 116.5 64.3
Interest payable (124.4) (95.3) (96.3) (86.2) (48.5)
_____ _____ _____ _____ _____
Net interest income 59.1 43.5 39.9 30.3 15.8
Fees and commissions receivable 61.1 37.8 23.0 14.0 6.8
Profit on sale of mortgages 1.2 - - - -
Fees and commissions payable (33.4) (20.7) (14.2) (12.6) (7.2)
_____ _____ _____ _____ _____
Total operating income 88.0 60.6 48.7 31.7 15.4
Operating expenses (45.5) (25.2) (17.8) (18.0) (13.6)
Goodwill amortisation (2.4) (0.4) - - -
Provisions for bad and doubtful debts (5.4) (5.2) (5.9) (5.5) (2.4)
_____ _____ _____ _____ _____
Profit before taxation 34.7 29.8 25.0 8.2 (0.6)
Tax on profit (11.0) (7.5) (7.5) (2.4) 1.5
_____ _____ _____ _____ _____
Profit after taxation being the profit
for the financial year 23.7 22.3 17.5 5.8 0.9
_____ _____ _____ _____ _____
Mortgage assets under management 3,117.8 1,907.9 1,500.5 1,261.0 844.7
New business originations 2,015.5 1,018.3 686.1 680.7 526.4
Shareholders' funds 99.2 86.8 70.6 53.8 9.6
2003 2002 2001 2000 1999
p p p p p
Earnings per share - basic 44.1 39.3 30.6 14.6 2.4
Earnings per share - basic (before
goodwill amortisation) 48.5 40.0 30.6 14.6 2.4
Earnings per share - diluted 43.2 38.9 30.2 14.4 2.3
Dividend per share 10.0 5.0 2.0 - -
The figures for the years ending 30 November 2000 and 30 November 1999 were
restated in the annual report for the year ending 30 November 2001. Further
details of the restatement are given in that report.
CHAIRMAN'S STATEMENT
"What does Kensington do?" is a question I am frequently asked. In this
statement, I will outline what we do and put the group in perspective in the UK
mortgage market.
The Kensington Group provides mortgages to the growing number of people that
find themselves excluded from the lending criteria of the traditional banks and
building societies. This applies to the increasing number of the recently
self-employed who have not yet developed a financial track record. It also
applies to contract workers as well as those who may have experienced
difficulties in the past and have an adverse credit history.
"Isn't lending in this sector more risky?" Whilst Kensington's customers have
different credit profiles from the standard, they have good, above-average
incomes (on average around #40k p.a.), they have significant equity to invest in
their home (on average over 22%) and are borrowing on good quality properties
(the vast majority are valued between #70k and #250k). Sustaining a successful
business in this market requires a thorough, considered and informed approach to
understanding, pricing and managing the risks of these loans. Kensington is a
leading independent specialist in this field and employs an experienced team of
underwriters to check, verify and approve every application. Whilst we use
sophisticated technology tools to support our risk decisions we do not rely on
automated credit scoring techniques to make decisions for us. We have specialist
risk experts in all parts of our business such as the staff who manage our
customer relationships including those who help customers that are having
difficulty with their mortgage payments. It is this specialist approach and
expertise that has made Kensington successful and will continue to do so in the
future.
"How do we fund the business?" We lend money from funds provided by a number of
leading international banks. These lines of credit (known as "warehouse lines")
typically amount to several hundred million pounds and, as at the end of
November 2003, we had #1.5bn of warehouse capacity. Two or three times a year we
package the mortgage loans from the warehouse lines together and refinance them
by selling bonds into the capital markets. This is known as securitisation and
Kensington has completed more securitisation transactions over the past five
years than any other lender in Europe. In the last year Kensington securitised
on three occasions for a total amount of #1.9bn.
"Which products do we market and how?" We sell to consumers through
intermediaries (typically mortgage brokers and Independent Financial Advisors);
we sell through relationships with other high street lenders or national
financial institutions and we provide mortgages through our direct distribution
business, The Mortgage Lender ("TML"). In 2003 around 45% of these mortgages
were provided to fund the purchase of a borrower's home. The other 55% were
re-mortgages often for home improvements and for those who wish to consolidate
debt. Both these markets are expanding and the Kensington Group has
considerable expertise and distribution capability. It is therefore well
positioned for future growth.
Kensington is prudently and efficiently managed. The average loan to value ("LTV
") on new business in 2003 was 78% and the average mortgage written was
#100,000. Arrears remained low and actual losses remained below 0.1% of mortgage
assets under management. Kensington monitors its costs as a percentage of income
closely and this was little changed during the year at 38% for the Kensington
Mortgage Company ("KMC") business. Cash flow was sound and on 30 November 2003
the cash resources of the group totalled #92 million.
You will see from John Maltby's report that gross lending for the year was over
#2bn and net lending was well over #1bn resulting in a mortgage book at the end
of 2003 of over #3bn. Profit before tax and goodwill increased by 23% to #37
million and the Board are recommending a final dividend of 7p payable on 30
April 2004, making the total dividend for the year 10p.
Last year in my statement I said that the 'outlook for interest rates is
benign'. The situation remains little changed, with a similar outlook for 2004.
Bank of England base rates were recently increased by 0.25% to 3.75%.
Historically this is low. But then so is inflation. With the pound relatively
strong against the dollar and the euro it is likely that inflation will remain
around current levels. The housing market is stable - particularly in the sector
of the market in which Kensington operates - and is likely to remain so. Even
so, Kensington is not complacent and continues to strengthen and implement risk
management systems and processes to support the business should interest rates
or unemployment increase.
The group is growing strongly and to accommodate this growth we moved the head
offices in November to Paddington. Kensington now employs 410 people, largely
based in London and Southampton. I should like to place on record my thanks to
all our employees and management who oversaw another highly successful year for
the Kensington Group. Their dedication and expertise are highly valued and
appreciated.
In addition, John Herring, who has had many years experience in corporate
finance, joined the group as a non-executive director in April 2003. We welcome
him.
Our objective is to continue to enhance shareholder value. We remain committed
to this and have confidence that we shall continue to grow through strong
organic growth and through selective acquisitions.
P G Birch
Chairman
CHIEF EXECUTIVE'S REVIEW
2003 saw another great performance from Kensington Group plc ("Kensington").
Strong earnings growth and excellent new business volumes were underpinned by
disciplined credit controls, strong portfolio performance and a continued focus
on cost-efficiency.
The 23% improvement in pre-tax profits to over #37m (prior to goodwill
amortisation) was supported by a doubling of new business completions to over
#2bn. Earnings per share (before goodwill amortisation) rose by 21% to 48.5p
(2002 - 40.0p) and return on equity has been maintained above 25%.
Kensington's significant growth in 2003 has been delivered through the
successful implementation of its distribution strategy and a sustained careful,
prudent and specialist approach to managing and mitigating risk.
Each of the three main distribution channels; mortgage intermediaries, direct
distribution through TML and National Accounts relationships have grown well
during the year. TML has proved to be an excellent acquisition, delivering
incremental, lower-risk business, and providing first-hand feedback from
prospective mortgage consumers about their specific requirements and needs,
allowing us to enhance product development.
Mortgage assets under-management grew by over 60% from #1.9bn to #3.1bn and,
this, together with a healthy new business offer pipeline indicates significant
earnings momentum for the future. Kensington continues to grow and, in 2003,
outgrew its existing premises and relocated its head office to Paddington, West
London.
Market Context
The economic climate during 2003 remained positive with continuing low interest
rates and low unemployment. Consumer confidence remained high, recovering from
a dip around the time of the Iraqi conflict. This environment together with a
continuing shortage of quality residential properties resulted in another
buoyant year for the housing market.
Competition across the traditional mortgage market continued to be fierce. This
led to increasing interest in the higher margin and higher growth specialist
sector where Kensington remains a leader. This competition and the continuing
consumer appetite for investing in property helped the UK mortgage market to
grow by 24% in 2003 (source: Council of Mortgage Lenders). During this period of
strong growth and intensifying competition, Kensington maintained its leadership
position and increased its market share through developments in distribution and
service delivery.
In November 2003, the UK saw its first increase in interest rates for nearly 4
years. We expect interest rates to continue to rise during 2004 but that they
will remain at historically low levels. However, Kensington has taken care to
ensure that it is not overly exposed to changes in the interest rate environment
or to "cooling-off" in property hot spots. This has been achieved through
ensuring that income multiples remain below industry averages, average
loan-to-value ratios ("LTV") remain low and we continue to lend on quality
properties (mainly in the #70,000 to #250,000 value range). We have ensured that
we do not have concentrations in geographic areas and market segments that we
view as more vulnerable to a changing economic environment, with less than 0.6%
of new lending on properties above #500,000. In addition, only around 3% of the
portfolio is for buy-to-let and only around 7% is in Inner London.
Kensington Mortgage Company ("KMC")
We are encouraged by the performance of our lending business ("KMC"). The 98%
growth in new business volumes was supported by strong operational performance.
Arrears fell again, loan losses continued to reduce from their historic low
levels, costs remained under control with the KMC cost/income ratio stable at
38%, and product margins on new business remained healthy at 3.73% above LIBOR.
With new mortgage completions of over #2bn and mortgage redemptions remaining
stable, over #1.25bn of net lending was added to the portfolio which ended the
year above #3bn.
Continuing our focus - Market leadership through specialism and broad and valued
distribution
KMC has continued to offer an attractive and broad range of products designed
for the wide diversity of customers in its market. During 2003, lower risk,
lower margin products (offered by KMC for the first time in 2002) delivered
around 38% of new business. In addition, well over 2,500 brokers used KMC for
the first time in 2003 justifying the investments we have made in our sales and
distribution.
Distribution via mortgage intermediaries grew by over 50% during 2003 and
remained KMC's largest distribution channel representing over 60% of new
business.
National Accounts business, which is introduced by other mainstream lenders such
as high street banks, insurance companies and estate agents, once again more
than doubled during 2003. For the first time, during the fourth quarter of 2003,
we completed over #20m of mortgages in a month from National Accounts. In 2003
Kensington was successful in being selected for the national roll-out for Lloyds
TSB and it has added Zurich, Derbyshire Building Society and Norwich Union to
its National Account relationships which now total over 25.
KMC is recognised by introducers as a leader in the specialist secured lending
market. The breadth and attractiveness of our products and the quality of our
service resulted in KMC being awarded joint 2nd place in a 2003 national survey
of mortgage introducers for "Overall Lender of the Year".
Risk Management at the core of the KMC business
KMC operates in specialist markets that require a focused and specialist
approach to risk management. Lending to the self-employed, to borrowers with
adverse credit history and other non-conforming borrowers requires expertise,
experience and discipline. The KMC business has been designed to understand,
price, mitigate and manage the risks inherent in its market. The approach has
been developed over the past eight years and has been enhanced by the depth of
experience in its management team. Throughout the life of a relationship with a
customer, from enquiry through to redemption, we have built in verification
processes, contact strategies and relationship techniques that bring together
the best technology solutions with the individual skills and expertise of our
experienced risk professionals.
New Business Risk Management
In 2003, KMC continued to originate first charge mortgage loans in line with its
prudent lending criteria. The average LTV ratio for new business was 78% and
high LTV lending was avoided with less than 0.1% above 90% LTV.
Affordability of mortgage payments was also maintained with the average ratio of
the loan advanced to the borrower's income at around 2.5 compared with the
industry average of 2.7 (source: Council of Mortgage Lenders).
Kensington continued to invest heavily in developing our underwriting resource.
Our 42 mortgage underwriters have an average of 14 years mortgage lending
experience and now represent more than 33% of the staff working in the KMC
business.
Collections
The success of KMC's proactive, innovative and effective consumer management
process has once again been demonstrated during 2003. The number of accounts 30
days or more in arrears in November 2003 fell to 11.5% (down from 12.4% in
November 2002) and the number of accounts 90 days or more in arrears in November
2003 fell to 5.2% (down from 6.4% in November 2002). Annualised losses were
again below 0.1 % of mortgage assets under management for the year. KMC
maintained its prudent approach to bad-debt provisioning with provisions falling
to 0.50% of the mortgage assets under management as a result of the excellent
risk performance.
Low cost funding
During 2003, Kensington issued #1.9bn of bonds into the fixed income markets
through three successful securitisations: Residential Mortgage Securities ("RMS
") 14; RMS 15 and RMS 16. At #800m, RMS16 was its largest deal to date and was
issued in three currencies (#, $ and Euro) to continue to attract a broad and
diverse bond investor base. In the early part of the year the bond markets
became more volatile, partially as a result of the Iraqi conflict. However,
investor appetite remained strong for Kensington's securities which continued to
sell well. The credit ratings of subordinated bonds from the first twelve RMS
transactions have been upgraded and the outstanding bonds from the first seven
deals have been called and their investors successfully repaid. Bond spreads
returned to more normal levels by the fourth quarter of 2003 and we continue to
believe that securitisation is a reliable and secure funding method for the
group. However, we have started to implement new funding strategies. In November
2003, Kensington completed its first portfolio sale totalling #60m of loans, to
West Bromwich Building Society.
TML
TML was acquired by Kensington in September 2002. During 2003 it has performed
well and has reinforced its position as a leading direct-to-consumer distributor
of specialist mortgages.
TML distributed #545m of first-charge mortgages for KMC under its own brand. In
addition, TML's broker business, Your Personal Finance ("YPF") generated a
further #50m of mortgage loans for other lenders. As a result, income from YPF
and insurance protection policies continued to grow strongly and both are
expected to be an increasing source of profits for the Group.
The quality of business originated by TML remains high with product margins in
excess of 3.4% over LIBOR and average LTV's below 72%. During 2003 around 92% of
TML's business was re-mortgages. In contrast around 36% of KMC's intermediary
and National Account business was re-mortgages.
TML's brand has been established as a recognised, quality brand in this
increasingly competitive distribution channel. It has been able to maintain its
efficient approach to generating enquiries and, in a recent NOP poll, its
product icon ("Henry the House") achieved an encouraging level of unprompted
awareness of 50% from its target sector.
During 2003 the effect of the TML business on the Group's results was broadly
earnings neutral as all of its origination costs are written off in the first
year. However, from 2004, we expect TML to have a material and positive impact
on Kensington's earnings as the interest income from the business originated by
TML gains momentum.
Looking forward - Continuing to prosper in a changing and developing market
Current Trading
Trading has remained strong with new business generation for the fourth quarter
of 2003 at #615m (up by over 75% on the fourth quarter 2002). This momentum has
continued during December 2003 with completions up by over 38% compared with the
same period in the previous year. The new business pipeline stood at over #400m
at the end of December 2003, up by 35% on the position at the end of 2002.
Competing in a regulated environment
In October 2004, first-charge mortgage lending will be regulated by the
Financial Services Authority ("FSA"). Kensington is highly supportive of the
forthcoming regulation and has been actively involved in the development of the
rules and guidelines. Mortgage regulation will set rules and guidance covering
the level, format and clarity of information presented to consumers and the
processes and competence of regulated firms. Mortgage regulation will apply to
lenders, intermediaries, mortgage servicers and mortgage arrangers. Kensington
is well prepared for regulation and plans to submit its applications early in
2004 for its three regulated businesses. KMC will be regulated as a lender, TML
as a direct distributor and YPF, our broker business, as an adviser on mortgage
and general insurance products.
We expect mortgage regulation to have some important implications for the
mortgage lending and intermediary markets such as increasing costs of compliance
and it may also result in intermediary consolidation. Kensington is a
responsible lender and has invested heavily in its lending and management
processes and controls. It has broad distribution sources and works with its
introducers closely. As a result, Kensington is well-positioned to benefit from
the changes arising from regulation.
Competing successfully in a less buoyant market
Whilst we expect interest rates and unemployment to remain relatively low, our
business model, lending practices and processes have been designed for a full
economic cycle and we are therefore well prepared for a change in the economic
environment or a change in the mortgage market.
The strengths of the Kensington approach - prudent LTV's, low income multiples,
specialist underwriting and collections, will prove to be even more critical in
a more challenging environment. We believe strongly that the investment in these
core skills and experience will further differentiate Kensington from less
specialist or developed lenders and will lead to further opportunities for the
Group.
In a more challenging environment, losses and arrears may rise across the whole
mortgage industry, although we do not anticipate a return to the levels seen in
the last downturn. In addition, we believe that there are specific factors to
consider when appraising the industry. We believe that customers will prioritise
payments on their secured lending above unsecured debt, particularly given that
with Kensington loans they have on average 20-30% of their own equity at stake.
Whilst the number of house purchase transactions may reduce, we expect the
impact to be lower in Kensington's market due to the immaturity of this sector.
Similarly, although a slow-down in house-price inflation may reduce remortgage
volumes in the prime market, Kensington is well-placed to benefit from growth
arising from customers consolidating their unsecured debt through remortgaging
their primary residence. A slowdown in remortgage activity in the prime market
is also likely to lead to a reduction in redemptions for KMC resulting in a
larger portfolio generating more net interest income. Finally, we expect some
recent entrants into our market to find trading more difficult and as a result
they may tighten lending criteria which will provide further opportunities for
specialist lenders like Kensington.
Strategy - Continued delivery of profitable, sustained and disciplined growth
Kensington's success over the past eight years has been delivered through its
focus on risk management, specialist skills, distribution breadth and funding
expertise. These strengths will continue to underpin Kensington's future success
as it delivers against its strategy for each of its core businesses.
KMC will continue to lead the market in specialist mortgages through
intermediaries. In particular, we expect to see fast growth in our relationships
with our Corporate Accounts comprising our National Account partners and leading
intermediary firms. We believe that our investment in technology, specialist
risk approaches and skills together with the impact of regulation will mean that
KMC continues to grow ahead of the market. Further broadening of distribution
and product range is expected as KMC seeks to leverage its recognised strengths
in the market.
TML will build on its initial success. It will focus on capturing a larger share
of the direct distribution market, and is re-engineering its processes to
increase cost-efficiency and increase the conversion rate of enquiries into
mortgage completions. Furthermore, it will invest in growing the broker
business, YPF, to maximise the return by offering a full range of mortgage
products to consumers that contact us.
Kensington will continue to seek development opportunities in other specialist
markets that require a combination of superior risk management, funding and
distribution skills together with a considered and innovative growth approach.
Opportunities will be judged using strict criteria, the most important of which
is that they will deliver value to shareholders.
In Conclusion
The Kensington Group is performing well. The business continues to generate
positive cash flow. This enabled the Board to buy-back over 3.2 million shares
in 2003 and recommend, once again, a significant increase in dividend. During
2004, we will seek to further enhance shareholder value by continuing our
progressive dividend policy and through the use of share buy-backs if
appropriate.
The current position of the business is sound. We are excited about the further
opportunities for growth through acquisition and organic development and we
remain confident in Kensington's continuing ability to deliver strong earnings
growth.
J N Maltby
Chief Executive
FINANCIAL REVIEW
Result for the year
Kensington Group plc ("Kensington") has made substantial progress during 2003.
Significant increases in new business volumes, encouraging progress in TML and
investment in new offices and infrastructure have improved the momentum for new
business and earnings growth for the coming years.
Profit before tax and the amortisation of goodwill increased by 23% to #37.1m
(2002 - #30.2m). The profit after tax was #23.7m, compared to #22.3m for 2002
which had included the benefit of a reduced tax charge.
Earnings per share, before goodwill, are up 21% to 48.5p (2002 - 40.0p). The
directors are recommending payment of a final dividend of 7p per share, making a
total of 10p per share for the year, following which #18.5m of retained earnings
will be credited to reserves.
Total shareholders' funds have increased by 14% to #99.2m (2002 - #86.8m). The
retained earnings were supplemented by #1.1m in respect of new shares issued to
satisfy the exercise of share options and reduced by #7.2m following the
buy-back and cancellation of existing shares during the year.
Trading performance
During the year we advanced #2,015m of first charge mortgage loans to our
customers which represents a 98% increase over the amount lent during 2002 of
#1,018m. As a result, total mortgage assets under management at the end of the
year increased by 63% to #3,118m (2002 - #1,908m).
Net interest income increased by 36% to #59.1m during the year (2002 - #43.5m).
This reflects a 49% increase in the average assets under management, reduced by
the lower net interest margin earned on the portfolio. An increasing proportion
of new business volumes comprises products which have a lower risk profile and
hence attract a lower rate of interest from borrowers. Consequently, the
weighted average product margin over LIBOR achieved on the portfolio during 2003
has reduced by 0.25%. However, the cost of originating these products is lower
and there is a lower provision required for potential losses.
Income from fees and commissions receivable, which includes application fees,
insurance commissions and early redemption charges, increased by 62% to #61.1m
(2002 - #37.8m). Arrangement fees earned by TML during 2003, included in this
category, amounted to #21.9m for the first full year, compared to #5.8m included
in this category of income for 2002. Mortgage Early Redemption fees increased by
21% to #32.5m (2002 - #26.9m) reflecting the growth in the portfolio.
During the year we completed our first sale of mortgage loans to a subsidiary of
West Bromwich Building Society which generated a profit on sale of #1.2m.
Further details of the transaction are given below.
Of the #2,015m new business originated during the year, #1,470m was generated
from our traditional distribution and #545m from TML.
The direct cost of originating new mortgage loans, being fees and commissions
payable, increased by 61% to #33.4m (2002 - #20.7m). Within this category,
origination costs for new business from sources other than TML were #21.7m (2002
- #17.6m) representing a 23% increase and reflecting the increase in new
business volumes from these sources. Origination costs for new business
generated by TML were #11.7m (2002 - #3.1m) reflecting the increase in new
business as the activities of TML are included for the first full year in 2003.
Operating expenses were increased by 81% to #45.5m (2002 - #25.2m), again as the
effect of TML is included for the first full year. Operating expenses within KMC
have increased by 32% to #28.8m (2002 - #21.8m) as the infrastructure of the
business is enhanced to accommodate the significant increases in new business
during the year. Importantly, the cost to income ratio within KMC has remained
constant at 38% when compared to 2002.
Operating expenses within TML are included for the first full year in 2003
amounting to #16.7m (2002 - #3.4m). We have made considerable investment in the
infrastructure in TML during the year to provide the platform for future growth
and the disciplines of mortgage regulation. The cost base is in line with our
expectations for the year.
The charge for provisions for losses against mortgage assets under management
includes the amount required to increase our balance sheet provisions to #15.5m
(2002 - #11.7m) representing 0.50% (2002 - 0.61%) of those assets. The actual
losses incurred continue to be low and the total charge for provisions for bad
and doubtful debts has increased by 4% to #5.4m (2002 - #5.2m). During the year,
the actual write off of losses reduced to #1.6m (2002 - #2.1m) reflecting the
improving performance of the portfolio. The provision for bad and doubtful debts
has been calculated prudently using an approach consistent with the previous
year.
TML
Kensington acquired TML in 2002 at an initial cost of #16.8m resulting in
initial goodwill of #16.0m. Further contingent consideration becomes payable if
TML exceeds certain thresholds for profit after tax and new business volumes
introduced to KMC in each of the three years to 30 November 2005.
A provision for further consideration of #8.0m has been made at 30 November 2003
based on the results for the year to 30 November 2003 and projections of the
performance of TML for the two years to 30 November 2005. This generates
additional goodwill of #8.0m which will be amortised over the remainder of the
period of amortisation for the initial goodwill. The adequacy of the provision
for additional consideration will be assessed at 30 November 2004 and 30
November 2005.
TML generates value to the Group through trading in its own right and through
the introduction of new mortgage business to KMC. However, the origination
costs of new business introduced by TML are written off as they are incurred and
before the new mortgages create income.
The impact of the trading results of TML, which are included in the consolidated
profit and loss account for the first full year in 2003, is broadly neutral. KMC
generated an operating profit on the mortgages originated by TML during the year
of #6.4m, compared to a negligible contribution in 2002. TML generated fee
income of #21.9m (2002 - #5.8m) and incurred overheads of #16.7m (2002 -#3.4m).
Direct origination costs were #11.7m (2002 - #3.1m) resulting in a negative
contribution of #6.5m (2002 -#0.7m).
Sales of mortgage loans
During the year we completed our first sale of mortgage loans as a complementary
diversification of our funding programme. #60m of mortgage loans were sold to
West Bromwich Mortgage Company Limited, a subsidiary of West Bromwich Building
Society, generating a profit on sale of #1.2m, after deducting the direct costs
of acquisition.
The market for the purchase and sale of portfolios of mortgage loans has
developed over the last few years. It represents an alternative long-term
strategy for the financing of new mortgage loans and we expect to complete
further sales in future years.
Cash flow
In 2003, cash balances and other liquid resources have increased by #28.3m.
Kensington generated positive cash flows of #18.0m (2002 - #29.5m) from
operating activities during the year. Financing the substantially increased new
business volumes restricted the free cash flow when compared to the previous
year. Payments of corporation tax and dividends amounted to #9.2m (2002 - #8.7m)
and a further #7.1m (2002 - #4.2m) was utilised to finance the share buy-backs.
A further #1,353.0m was generated from net new financing and the proceeds of new
share issues of which #1,326.4m was utilised for capital expenditure and net
investment in mortgage loans.
Surplus funds generated from operations and net new financing amounted to #28.3m
(2002 - #26.4m). In 2002, #15.9m of this surplus was utilised to finance the
acquisition of TML.
Mortgage loans
During the year mortgage assets under management increased by 63% to #3,118m
(2002 - #1,908m) of which #2,856m (2002 - #1,773) have been securitised.
Securitised loans are disclosed on the balance sheet with the appropriate net
non-recourse finance deducted from them.
The profile of new loans originated during the year, taken from the Kensington
data warehouse, is shown below:
Number of loans made 20,246
Total value of loans #2,015m
Average size of each loan #100,000
Weighted average loan-to-value (1) 77.6%
Loans for home purchase 45%
Loans for remortgage 55%
Weighted average product margin over LIBOR 3.73%
(1) The original loan as a percentage of the value of the property at the
date of the advance.
Mortgage redemptions during the year were #743m (2002 - #594m), representing a
25% increase. Net lending during the year was #1,272m, three times the level of
2002 of #424m and therefore creating a significant momentum for future earnings
growth.
Funding
Shareholders' funds increased by 14% to #99.2m (2002 - #86.8m).
At the year end, #281.4m (2002 - #141.1m) was drawn on short-term loans to
finance new mortgages. During the year we have successfully increased the
commitment to warehouse capacity from three of our existing banking
relationships and have added a new warehouse line provider. Barclays, Bear
Stearns and Morgan Stanley each increased their commitment to Kensington and The
Royal Bank of Scotland has provided a new #200m facility through a conduit over
a three year term. The total capacity of the short-term facilities used to
finance the new mortgage loans has therefore increased to #1,500m (2002 - #900m)
to provide for the increasing levels of new business.
Term loans increased to #158.1m (2002 - #87.4m), again reflecting the increased
levels of new business during the year. These loans which are obtained when the
mortgage portfolios are securitised, are secured on future cash flows from the
securitised mortgages.
The non-recourse finance obtained from the securitisation transactions increased
by 61% to #3,020m (2002 - #1,879m) during the year. #1,900m was raised in three
successful securitisation transactions, RMS 14, RMS 15 and RMS 16. The total
non-recourse finance was reduced by #759m from the redemption of mortgage loans.
The early part of 2003 saw difficult bond markets, exacerbated by the Iraqi
conflict. None-the-less, our securitisation transactions attracted strong demand
from global investors. In the latter part of the year, our largest
securitisation to date, RMS 16, was oversubscribed in all tranches of the
transaction and raised #800m of new finance.
Four earlier securitisation transactions, RMS 3, RMS 5, RMS 6 and RMS 7,
originally issued in 1998 and 1999, were successfully brought to a close during
the year and the outstanding note finance was repaid.
To support Kensington's progress, we have developed a strategic funding plan to
diversify the sources of finance available. The first step in the plan was to
develop the mortgage portfolio sales capability and this has been achieved. We
are expecting to make further sales in 2004 and beyond.
In order to broaden the range of financing options for the future and underpin
the strength of the balance sheet, we are developing additional sources of both
short and long term funding, as a diversification from, but not a replacement
for, our securitisation programme.
International Accounting Standards
International Accounting Standards ("IAS") are being developed to harmonise
accounting principles internationally to provide comparability between the
financial statements of all companies. IAS will be compulsory for the
consolidated financial statements of all UK listed companies from 2005.
The harmonisation process is complex and the resultant changes to accounting
standards will require, in some areas, a complete change in the way we report on
the performance of the company.
Those IAS which will have the most effect on Kensington's financial reporting
have only recently been published. We are developing plans for the assessment
of the impact of the proposed changes on our systems and the financial
statements so that we can comment on the areas where we will see material
effects following the adoption of IAS in the Annual Report next year.
S C Kingdon
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 November 2003
Year ended Year ended
30 November 30 November
2003 2002
Note #m #m
Interest receivable 183.5 138.8
Interest payable 2 (124.4) (95.3)
_____ _____
Net interest income 59.1 43.5
Fees and commissions receivable 61.1 37.8
Profit on sale of mortgages 1.2 -
Fees and commissions payable (33.4) (20.7)
_____ _____
Total operating income 88.0 60.6
_____ _____
Operating expenses (45.5) (25.2)
Goodwill amortisation 9 (2.4) (0.4)
_____ _____
Total operating expenses (47.9) (25.6)
_____ _____
Provisions for bad and doubtful debts 3 (5.4) (5.2)
_____ _____
OPERATING PROFIT BEING PROFIT ON
ORDINARY ACTIVITIES BEFORE TAXATION 5 34.7 29.8
Tax on profit on ordinary activities 6 (11.0) (7.5)
_____ _____
PROFIT AFTER TAX BEING THE PROFIT FOR
THE FINANCIAL YEAR 23.7 22.3
Dividend 7 (5.2) (2.9)
_____ _____
RETAINED PROFIT FOR THE FINANCIAL YEAR 10 18.5 19.4
_____ _____
Earnings per ordinary share - basic 8 44.1 39.3
_____ _____
Earnings per ordinary share - basic
(before goodwill amortisation) 8 48.5 40.0
_____ _____
Earnings per ordinary share - diluted 8 43.2 38.9
_____ _____
The results for the years ended 30 November 2002 and 30 November 2003 all arise
from continuing operations.
There are no recognised gains and losses other than the profit for the years
shown above.
CONSOLIDATED BALANCE SHEET
30 November 2003
30 November 30 November
Note 2003 2002
#m #m #m #m
ASSETS EMPLOYED
FIXED ASSETS
Intangible assets 9 21.2 15.6
Tangible assets 3.1 1.3
Mortgage loans - unsecuritised balances 262.0 135.4
Mortgage loans - securitised balances 3,140.0 1,948.2
- less non recourse (3,019.8) (1,878.9)
finance
_____ _____
120.2 69.3
_____ _____
406.5 221.6
CURRENT ASSETS
Debtors 78.1 50.7
Cash at bank and in hand 92.7 64.4
_____ _____
170.8 115.1
_____ _____
577.3 336.7
_____ _____
FINANCED BY
EQUITY SHAREHOLDERS' FUNDS
Called up share capital 5.3 5.6
Share premium account 10 49.8 48.8
Capital redemption reserve 10 0.6 0.2
Other reserves 10 0.5 0.5
Profit and loss account 10 43.0 31.7
_____ _____
11 99.2 86.8
CREDITORS
Amounts falling due within one year 323.2 162.8
Amounts falling due after more than one 154.9 87.1
year _____ _____
478.1 249.9
_____ _____
577.3 336.7
_____ _____
The preliminary financial information was approved by the Board of Directors on
26 January 2004.
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 November 2003
Year ended Year ended 30
30 November November
Note 2003 2002
#m #m
Cash inflow from operating activities 12 18.0 29.5
Taxation (5.7) (6.7)
Capital expenditure and financial
investment 13 (1,326.4) (420.5)
Acquisitions 13 - (15.9)
Equity dividends paid (3.5) (2.0)
_____ _____
Cash outflow before use of liquid resources
and financing (1,317.6) (415.6)
Management of liquid resources 13 39.1 (8.1)
Financing 13 1,345.9 426.1
_____ _____
Increase in cash in the year 67.4 2.4
_____ _____
Reconciliation of net cash flow to movement
in net debt Year ended Year ended 30
30 November November
2003 2002
#m #m
Increase in cash in the year 67.4 2.4
Cash (outflow)/inflow from (decrease)/
increase in liquid resources 14 (39.1) 8.1
Cash inflow from increase in debt financing 14 (1,351.9) (429.5)
_____ _____
(1,323.6) (419.0)
Hire purchase loans acquired with
subsidiary 14 - (0.2)
New loan notes issued 14 - (0.3)
_____ _____
Movement in net debt in the year (1,323.6) (419.5)
Net debt brought forward 14 (2,043.5) (1,624.0)
_____ _____
Net debt carried forward 14 (3,367.1) (2,043.5)
_____ _____
NOTES to the financial information
Year Ended 30 November 2003
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable accounting
standards. All relevant accounting standards effective during the year have been
complied with.
The particular accounting policies adopted are described below.
Accounting convention
The financial statements are prepared under the historical cost convention.
Basis of consolidation
The consolidated financial statements include the results of the Company and all
its subsidiaries (together "Kensington") drawn up to 30 November 2003. The
consolidated financial statements also include the quasi-subsidiaries, subject
to the linked presentation of certain assets and liabilities.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and net
of any provision for impairment.
Depreciation
Depreciation is provided on cost in annual instalments over the lives of the
assets. The rates of depreciation are as follows:
Short term leasehold property Over the period of the lease
Computer equipment 25 per cent per annum and 33 per cent per annum
Furniture, fixtures and office equipment 20 per cent per annum and 15 per cent reducing balance
Motor vehicles 25 per cent per annum
Mortgage loans
Securitised and unsecuritised mortgage loans are stated at cost less provision
for bad and doubtful debts.
Linked presentation of quasi-subsidiaries
Kensington has sold by securitisation, certain mortgage loans to special purpose
vehicles ("SPV Companies") on a non-recourse basis. The amount of these loans is
disclosed on the face of the balance sheet, with the non-recourse finance raised
deducted from them.
Fixed asset investments
The Company's investments in subsidiary companies are stated at cost less any
provision for impairment in value.
Goodwill
Goodwill arising on acquisitions representing the excess of the fair value of
the purchase consideration over the fair value of the net assets acquired, is
capitalised and written off to the profit and loss account on a straight line
basis over a period assessed by the Directors to represent a reasonable period
over which future earnings from the acquisition will arise. Specific periods of
amortisation are set out in note 9.
Profit on sale of mortgages
The profit on sale of mortgages outside the Group is recognised immediately in
the profit and loss account and represents the excess of the consideration
received over the book value of the mortgages, less the direct costs of
origination and direct transaction costs.
Origination costs deferral
The external variable costs incurred in originating mortgages are written off
over the period in which early redemption charges apply.
Fixed and discount mortgages
The cost of short-term interest rate discounts in respect of fixed and discount
rate mortgages are written off on a straight line basis over the period in which
early redemption charges apply.
Taxation
Current UK corporation tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less tax
at a future date, at the rates expected to apply when they crystallise based on
current tax rates and law. Deferred tax assets are recognised to the extent that
it is regarded as more likely than not that they will be recovered. Deferred tax
assets and liabilities are not discounted.
Operating leases
Rental costs under operating leases are charged to the profit and loss account
so as to spread the charge evenly over the life of the leases.
Finance leases
Assets held under hire purchase contracts or finance leases are capitalised in
the balance sheet and depreciated over their estimated useful lives or the lease
term, whichever is the shorter. The interest element of these obligations is
charged to the profit and loss account over the relevant period and the capital
element of the future payments is treated as a liability in the balance sheet.
Funding costs
Initial costs incurred in arranging funding facilities are amortised over the
period of the facility. Unamortised initial costs are deducted from the
associated liability. Costs amortised in the period are included in interest
payable.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction or, if hedged, at the forward contract rate. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date or, if
appropriate, at the forward contract rate.
Derivatives
Interest rate swap, interest rate cap and foreign currency swap contracts are
used by Kensington when deemed necessary. All such derivatives are used for
hedging purposes to alter the risk profile of any existing underlying exposure
of Kensington in line with Kensington's risk management policies. Amounts
payable or receivable in respect of the interest rate swaps, foreign currency
swap contracts or interest rate caps are recognised as adjustments to interest
payable over the period of the contracts.
Kensington does not enter into speculative derivative contracts.
Pension costs
Kensington operates a defined contribution pension scheme and contributions to
the scheme are charged in the accounts as they accrue.
Share options
Prior to flotation, the Company had issued share options at a discount to the
perceived market value at the date of grant to its employees, directors and
packagers. This discount is charged in the profit and loss account and credited
to other reserves over the period from the grant date to the first exercise
date.
2. INTEREST PAYABLE
2003 2002
#m #m
Interest payable on short-term loan
facilities repayable within five years 19.8 11.8
Interest payable on secured bank loans
repayable within five years 5.3 3.4
Interest payable on non-recourse finance
repayable after five years 99.3 80.1
_____ _____
124.4 95.3
_____ _____
3. Provisions for bad and doubtful debts
2003 2002
#m #m
Provision at 1 December 11.7 8.6
Losses in the year (1.6) (2.1)
Charge for the year 5.4 5.2
_____ _____
Provision at 30 November 15.5 11.7
_____ _____
2003 2002
Provision held as a percentage of the
mortgage assets under management 0.50% 0.61%
_____ _____
4. INFORMATION REGARDING EMPLOYEES
2003 2002
Number Number
Average number of persons employed 364 139
_____ _____
Employees by category at the year end
Sales and underwriting 280 203
Administration 130 108
_____ _____
410 311
_____ _____
2003 2002
#m #m
Staff costs during the year (including
directors)
Wages and salaries 17.0 8.1
Social security costs 1.9 0.9
Pension costs 0.4 0.3
_____ _____
19.3 9.3
____ _____
5. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is after 2003 2002
charging:
#m #m
Goodwill amortisation 2.4 0.4
Depreciation 0.8 0.3
Property rents 2.0 1.1
Other leases 0.7 0.1
Auditors' remuneration
Group audit fees 0.2 0.2
Non audit services - 0.1 0.1
recurring
Non audit services - 0.2 0.2
non-recurring
___ _____
The company audit fee was #21,000 (2002 - #20,000).
The recurring non audit services relate to taxation compliance and advice.
The non-recurring non audit services relate to securitisation transaction
services and other items such as regulatory consultancy.
6. TAX on Profit on ordinary activities
Analysis of the tax charge in the year
2003 2002
#m #m
Current tax
Corporation tax at 30% based on the profit for the year 10.1 3.7
Adjustment in respect of prior (0.6) (1.3)
periods
_____ _____
9.5 2.4
Deferred tax
Deferred tax - origination and
reversal of timing differences
1.5 5.1
_____ _____
11.0 7.5
_____ _____
Factors affecting the tax charge for the year
The current tax charge arising in respect of the year is lower (2002 - lower)
than the standard rate of UK corporation tax of 30%. The differences are
explained below.
2003 2002
#m #m
Profit on ordinary activities before tax 34.7 29.8
_____ _____
Expected charge at 30% 10.4 8.9
Recognition of profits in the consolidated
profit and loss account previously taxed in
subsidiary companies (1.1) (5.1)
Prior period adjustment (0.6) (1.3)
Non-deductible expenses (including goodwill)
0.9 0.3
Capital allowances and other timing
differences
(0.1) (0.4)
_____ _____
Current tax charge for the year 9.5 2.4
_____ _____
Kensington has made further refinements to its securitisation structure this
year such that it is anticipated that the deferred tax asset will reverse over
future periods. This reversal will reduce the current corporation tax charge
below the statutory rate for those periods.
7. DIVIDEND
2003 2002 2003 2002
Per share Per share #m #m
Dividend on ordinary shares
Interim paid 3.0p 1.5p 1.6 0.9
Final proposed 7.0p 3.5p 3.6 2.0
_____ _____ _____ _____
Total dividend 10.0p 5.0p 5.2 2.9
_____ _____ _____ _____
8. EARNINGS PER SHARE
Earnings per share is calculated using the following:
2003 2002
#m #m
Profit for the financial year 23.7 22.3
Goodwill amortisation 2.4 0.4
_____ _____
Profit for the financial year before goodwill amortisation 26.1 22.7
_____ _____
Number Number
Basic weighted average number of shares during the year 53,769,973 56,736,130
Dilutive effect of the weighted average number of share options 1,033,620 646,833
in issue during the year _____ _____
Diluted weighted average number of shares during the year 54,803,593 57,382,963
_____ _____
Earnings per share before goodwill amortisation have been disclosed as they
represent a meaningful comparative of earnings growth.
9. INtangible fixed assets
Goodwill
Group #m
Cost
At 1 December 2002 16.0
Deferred consideration adjustment 8.0
_____
At 30 November 2003 24.0
_____
Accumulated amortisation
At 1 December 2002 0.4
Charge for the year 2.4
_____
At 30 November 2003 2.8
_____
Net book value
At 30 November 2003 21.2
_____
At 30 November 2002 15.6
_____
On 5 September 2002 Kensington Group plc purchased the entire issued share
capital of The Mortgage Lender Limited ("TML") for an initial cost of #16.8m.
The acquisition was accounted for by the acquisition method of accounting and
the initial goodwill of #16.0m was capitalised and is being amortised on a
straight line basis over 10 years. This is the period assessed by the Directors
to represent a reasonable period over which future earnings from the acquisition
will arise.
Under the terms of the acquisition, an initial consideration of #15.4m, in cash
and loan notes, was paid to the vendors and a further #1.4m incurred in costs.
The vendors are entitled to further contingent consideration over the three
financial periods following the acquisition depending on the future profits
after tax of TML and new mortgage loans referred by TML and completed by
Kensington Mortgage Company ("KMC").
The relevant thresholds for TML in each contingent consideration period are as
follows:
Profits New mortgage
after tax loans
#m #m
Periods
Year ended 30 November 2003 2.41 400
Year ended 30 November 2004 4.34 600
Year ended 30 November 2005 9.96 900
The contingent consideration payable by Kensington Group plc for each of these
periods will be the aggregate of the following:
* 200 per cent of the profits after tax generated by TML in excess of the
threshold for that period;
* 2 per cent of the new mortgage loans referred by TML and completed by KMC in
excess of the threshold for that period.
Where either of the thresholds is not achieved, then the corresponding shortfall
as derived from the above formula will be deducted from any contingent
consideration otherwise payable under the formula in that period.
An assessment has been made by the Directors of this further contingent
consideration of #8m. An adjustment to the initial goodwill has been made for
this amount.
10. RESERVES
Share Capital
premium redemption Other Profit and loss
account reserve reserves account
#m #m #m #m
Group
Balance at 1 December 2002 48.8 0.2 0.5 31.7
Buy back of shares - 0.4 - (7.2)
Exercise of options 1.0 - (0.1) -
Provision for share option discount - - 0.1 -
Retained profit for the year - - - 18.5
_____ _____ _____ _____
Balance at 30 November 2003 49.8 0.6 0.5 43.0
_____ _____ _____ _____
11. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2003 2002
Group #m #m
Profit for the financial year 23.7 22.3
Dividend (5.2) (2.9)
Buy back of shares (7.2) (4.2)
Exercise of options 1.0 0.8
Provision for share option discount 0.1 0.2
_____ _____
Net addition to shareholders' funds 12.4 16.2
Opening shareholders' funds 86.8 70.6
_____ _____
Closing shareholders' funds 99.2 86.8
_____ _____
12. Reconciliation of operating Profit to operating cash flows
2003 2002
#m #m
Operating profit 34.7 29.8
Depreciation charges and assets written off 0.8 0.3
Provision for share option discount - 0.2
Provision for bad debts 5.4 5.2
Amortisation of deferred origination costs and mortgage
incentives
31.3 21.0
Goodwill amortisation 2.4 0.4
Increase in debtors (60.1) (32.1)
Increase in creditors 3.5 4.7
_____ _____
Net cash inflow from operating activities 18.0 29.5
_____ _____
13. Analysis of cash flows for headings netted in the cash flow statement
2003 2002
#m #m #m #m
Capital expenditure and financial investment
Purchase of tangible fixed assets (2.6) (0.5)
Net increase in securitised mortgage loans (1,192.7) (379.7)
Net increase in unsecuritised mortgage loans (131.1) (40.3)
_____ _____
Net cash outflow for capital expenditure and
financial investment (1,326.4) (420.5)
_____ _____
Acquisitions
Acquisition of subsidiary - (16.5)
Net cash acquired with subsidiary - 0.6
_____ _____
Net cash outflow for acquisition - (15.9)
_____ _____
Management of liquid resources
Changes in cash deposits with maturities over 24
hours 39.1 (8.1)
_____ _____
Net cash inflow/(outflow) from management of liquid
resources
39.1 (8.1)
_____ _____
Financing
New share capital issued 1.1 0.8
Share buy backs (7.1) (4.2)
_____ _____
(6.0) (3.4)
New bank loans 133.6 66.0
Repayment of bank loans (62.9) (37.2)
Net movement in non-recourse finance 1,140.9 366.3
Net movement in short-term loan facilities 140.3 34.4
_____ _____
1,351.9 429.5
_____ _____
Net cash inflow from financing 1,345.9 426.1
_____ _____
14. Analysis of net debt
At At
1 December Cash 30 November
2002 Flows 2003
#m #m #m
Cash in hand and at bank 25.3 67.4 92.7
_____
67.4
_____
Short term loan facilities (141.1) (140.3) (281.4)
Bank loans (87.4) (70.7) (158.1)
Non-recourse finance (1,878.9) (1,140.9) (3,019.8)
Loan notes (0.3) - (0.3)
Hire purchase loans (0.2) - (0.2)
_____ _____
(1,351.9)
_____
Other liquid resources 39.1 (39.1) -
_____
(39.1)
_____
_____ _____ _____
(2,043.5) (1,323.6) (3,367.1)
_____ _____ _____
15. Other notes
1. The financial information has been prepared using the same accounting
policies as were used in preparing the statutory accounts of the Company for the
year to 30 November 2002.
2. The financial information set out in this announcement does not constitute
the Company's statutory accounts for the years ended 30 November 2003 or 2002
within the meaning of Section 240 of the Companies Act 1985. The financial
information for the year ended 30 November 2003 and 30 November 2002 is derived
from the statutory accounts for those years. The 30 November 2002 accounts were
delivered to the Registrar of Companies, contained an unqualified audit report
and did not contain an adverse statement under Sections 237 (2) or 237 (3) of
the Companies Act 1985. The 30 November 2003 accounts contained an unqualified
audit report and did not contain an adverse statement under Sections 237 (2) or
237 (3) of the Companies Act 1985.
3. A copy of the Annual Report and Financial Statements for the year ended 30
November 2003 will be posted to the shareholders in due course. Copies of this
announcement can be obtained from Kensington Group plc, 1 Sheldon Square,
London, W2 6PU.
4. The Annual General Meeting will be held on 30 March 2004.
5. If approved at the Annual General Meeting, the final proposed dividend of
7p per ordinary share will be paid to shareholders on 30 April 2004 based on
those listed on the register on 2 April 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKAKKKBKBBDB
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