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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Thb Group | LSE:THB | London | Ordinary Share | GB0032008293 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 77.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:1740T THB Group PLC 12 December 2003 THB Group plc Announcement of Interim Results for the six months ended 31 October 2003 CHAIRMAN'S STATEMENT Highlights * Profit before tax #1.05 million (2002: #1.64 million) on turnover of #13.76 million (2002: #10.54 million) reflects: - changes in the mix of the North American business, from open market to binding authorities, further accentuating the second half bias; - loss of US open market terrorism business and continued decline of the US dollar, slowing growth in the North American division, which nonetheless achieved budget; - higher E&O insurance costs (despite no claims); - growing competition in the motor fleet sector; and - satisfactory performances from THB Clowes provincial broking operations and British Equestrian, but poor trading in two other provincial businesses. * Acquisition of a North American team from Alexander Forbes fully integrated into North American division and trading profitably. * Acquisition of Rarrigini & Rosso Group completed - trading below expectations to date and likely for the balance of the current year. However, long term prospects still remain very positive. Results and dividend For the six months to 31 October 2003, profit before tax was #1.05 million (2002: #1.64 million) on turnover of #13.76 million (2002: #10.54 million). A reduction in the trading result against the same period last year had been anticipated, as a result of the loss of US terrorism business (#0.5 million profit earned in 2002) and higher Errors & Omissions insurance costs in the continuing hard liability market (up by #0.3 million in the period, despite no claims). However, the continued decline of the dollar and growing competition in the motor fleet sector added more pressure and poor trading in two provincial businesses, although being addressed, was disappointing. The reduction in short term liquidity shown in the change in net current assets over the year to 31 October 2003 reflects the application of monies raised in the flotation, and some surplus cash held by the Group, for the purpose of acquisitions, as planned. The Group has increased its gearing net of free cash to 53% at 31 October 2003 (2002: Nil) as a result of the acquisition of Rarrigini & Rosso. The Board has declared an interim dividend of 1.5p per share (2002: 1.5p), payable on 12 January 2004 to shareholders on the register on 30 December 2003. Trading Trading in the six months to 31 October 2003 saw a mixed performance from THB businesses. Income in the Group's core North American division was adversely affected by the decline of the dollar. An average rate of $1.63 achieved in the period compared with $1.55 in the same period last year. In addition, as noted above, in the first half of last year, this division was able to take advantage of the opportunity to place open market terrorism business in the wake of the 9/11 terrorist attack. This opportunity was closed off by the US Terrorism Act of December 2002, by which the US Government effectively became underwriter of last resort. Although the division saw good growth in its binding authority business, it was unable to replace this open market business in the period. As a result of both of these factors, the division saw income grow by only 6%, before acquisitions, significantly down on growth rates achieved in recent periods. The Motor Fleet and Motor Sport divisions held up well in the face of increased competition in the first half of the year, but saw growth slow. The Group's provincial retail businesses enjoyed mixed fortunes. THB Clowes in Leamington continued on a strong growth track, adding 30% to prior year income, and THB Northern saw income up 18%. THB Financial Services also grew income by 17%. THB's other provincial operations, however, saw income fall compared to last year. In particular, Marshall Ewart & Graham, based in Glasgow, has been slow to rebuild income following a number of departures from its life team and THB Egger Lawson, a rally driving specialist and a loss making operation when acquired in December 2002, is taking longer to turn around than forecast. The Board is, nonetheless, confident that this will be achieved. British Equestrian, on the other hand, a market leader in equine insurance acquired in April 2003, performed very satisfactorily, contributing #0.3 million to operating profit in the six months. Acquisitions THB made two acquisitions in the period. A North American property team was acquired from Alexander Forbes in June 2003, at a price of #0.5 million, comprising its first five months' brokerage. This business, with the geographic profile of its clients and its focus on non-catastrophe property, complements that of the Group's North American division. The new team has been fully integrated into the North American division and is performing in line with expectations. The acquisition of the Rarrigini & Rosso ("R&R") businesses (now renamed as 'THB Risk Solutions' and 'THB Risk Management') was announced with the 2003 results on 3 September 2003. The Board believes that this acquisition offers significant growth opportunities to THB in wholesale motor fleet, with its focus on the composite market, and particularly in risk management advice and driver training. Whilst we were aware that R&R had concentrated its resources heavily on its '24 7' IT service (divested prior to acquisition by THB), the interruption to new business development in the core insurance business during the sale process was aggravated by the strict underwriting criteria adopted by the main carrier for the period before and after the sale. The Group is now working more closely with this insurer to improve retention rates on the existing book. Although this business is still expected to be profitable in the current financial year, it will significantly under-perform initial expectations for this year. Notwithstanding the under-performance in the current year, the Board remains very positive about its long term prospects. Staff The Board feels it is important to ensure that staff are properly rewarded and motivated with an equity interest in the future of the business. In September and October 2003, we announced the grant of options to all staff with over 12 months' service. In total, including discretionary awards to key staff, 1,996,539 options were granted (including only 26,055 to directors), all of which were subject to performance criteria. THB continues to secure and retain the services of first class insurance professionals. I would like to thank all our staff for their hard work and diligence over the last six months. I would particularly like to thank David Ulph, who is retiring and leaves the Board at the end of January 2004, having given 22 years' outstanding service to THB, directly overseeing significant growth in Thompson Heath & Bond Limited (" THB Limited"), the Lloyd's broker, for more than 10 years. David's recruitment of Frank Murphy in 1999 formed part of our succession planning and foresaw David's retirement at this time. I am pleased to announce that Frank Murphy now moves from the role of Chief Operating Officer to become Managing Director of THB Limited in place of Gill Cotter, who becomes Deputy Chairman of that company. Gill will continue to be closely involved with THB Limited, through her main Board role as Director of Group Operations. Outlook Despite the positive long term prospects for the Group, the current year will be adversely affected by the weakness of the US dollar, the poor initial performance of R&R and the under-performance of two of the Group's provincial operations. In spite of this, trading conditions for the Group as a whole remain favourable. Transition from hard to soft market continues in most of our classes of business. The Board believes that THB can grow irrespective of market conditions, but is actually better placed to benefit in a softer market. Nonetheless, the transition period brings its own challenges, as different markets adjust at different speeds, and Lloyd's, where two-thirds of THB's brokerage is earned, has traditionally been slow to adjust its rates to be competitive, even when the market rate would still produce an excellent underwriting profit. Unfortunately, as all too often in the past, premium volume leaves the Lloyd's market at the stage of the cycle when it should be willing to accept a slightly lower, but still good, underwriting profit, rather than adhere to a policy of not reducing prices. Whilst we expect to see further opportunities to acquire good quality businesses, the immediate priority is to concentrate on securing value from the core business and the acquisitions made over the last twelve months. The Board will actively seek smaller 'bolt-on' acquisitions and will continue to seek to recruit teams to complement existing businesses. THB continues to recruit key staff to support the future growth of the business. For example, the opening of a reinsurance division is an investment which, although unlikely to deliver a return in the current financial year, offers the opportunity to further develop relationships with the Group's existing insurer base. Inevitably, investing ahead of growth in this way, results in short term pressure on margins. The Group faces challenges over the next year, arising largely out of growth and increasing regulation of the industry, but also opportunities, to maximise the potential benefit of our leading position in wholesale motor fleet insurance, following the R&R acquisition, and to ensure that all parts of the Group are contributing profitably. These are challenges which THB is well equipped to handle and we therefore remain confident of the Group's long term prospects. Victor H. Thompson 12 December 2003 THB GROUP plc GROUP PROFIT AND LOSS ACCOUNT Unaudited results for the six months ended 31 October 2003 Year to 30 April Continuing Acquired 2003 2002 2003 Notes # # # # # Turnover 2 12,754,300 1,005,442 13,759,742 10,542,763 22,909,320 Cost of sales - (189,593) (189,593) - Operating charges (11,697,759) (563,530) (12,261,289) (8,931,334) (19,145,145) Goodwill amortisation (267,826) (122,543) (390,369) (181,367) (395,485) Administrative expense (11,965,585) (686,073) (12,651,658) (9,112,701) (19,540,630) Other operating income 75,731 - 75,731 16,962 56,892 __________ ________ __________ _________ __________ Operating profit 864,446 129,776 994,222 1,447,024 3,425,582 Share of operating profit in associate - - - - 9,307 Interest receivable 338,802 355,038 715,571 Interest payable (280,467) (161,215) (322,971) __________ _________ __________ Profit on ordinary activities before taxation 1,052,557 1,640,847 3,827,489 Taxation 3 (436,088) (613,090) (1,419,483) __________ _________ __________ Profit on ordinary activities after taxation 616,469 1,027,757 2,408,006 Dividend for year 4 (397,500) (395,513) (1,058,013) __________ _________ __________ Profit transferred to reserves 218,969 632,244 1,349,993 __________ _________ __________ Earnings per share 5 Basic 2.33p 4.70p 10.03p Diluted 2.31p 4.70p 10.03p Excluding goodwill amortisation: Basic 3.80p 5.53p 11.68p Diluted 3.78p 5.52p 11.68p The company has no recognised gains or losses other than the profit for the period. THB GROUP plc GROUP BALANCE SHEET Unaudited as at 31 October 2003 31 October 31 October 30 April 2003 2002 2003 Notes # # # Fixed assets Intangible assets 23,146,196 6,948,191 9,958,508 Tangible assets 7,343,463 5,059,431 6,696,377 Investments 528,262 458,616 473,351 Investment in associated company 162,178 - 162,178 __________ __________ __________ 31,180,099 12,466,238 17,290,414 __________ __________ __________ Current assets Debtors 63,661,010 58,074,224 58,210,566 Cash at bank and in hand 27,335,969 28,973,594 29,369,671 __________ __________ __________ 90,996,979 87,047,818 87,580,237 Creditors: Amounts falling due within one year (91,195,525) (78,752,538) (81,500,926) __________ __________ __________ Net current (liabilities)/assets (198,546) 8,295,280 6,079,311 __________ __________ __________ Total assets less current liabilities 30,981,553 20,761,518 23,369,725 Creditors : Amounts falling due after more than one year (12,054,961) (3,544,149) (4,583,014) Provisions for liabilities and charges Deferred taxation 27,495 - (51,593) __________ __________ __________ 18,954,087 17,217,369 18,735,118 __________ __________ __________ Capital and reserves Called up share capital 2,650,000 2,610,000 2,650,000 Share premium account 9,335,252 8,875,252 9,335,252 Revaluation reserve 1,892,462 2,066,572 1,899,047 Other reserves 826,000 526,000 826,000 Profit and loss account 4,250,373 3,139,545 4,024,819 __________ __________ __________ Shareholders' funds 7 18,954,087 17,217,369 18,735,118 (All equity interests) __________ __________ __________ THB GROUP plc GROUP CASH FLOW STATEMENT Unaudited for the six months ended 31 October 2003 Year to 30 April 2003 2002 2003 Notes # # # Net cash inflow from operating activities 8 2,020,659 (1,009,208) 1,904,175 __________ __________ __________ Return on investments and servicing of finance Interest received 338,802 355,038 715,571 Interest paid (275,772) (152,414) (311,916) Finance lease interest paid (4,695) (8,801) (11,055) __________ __________ __________ Net cash inflow from return on investments and servicing of finance 58,335 193,823 392,600 __________ __________ __________ Taxation Tax paid (814,578) (535,001) (1,280,222) __________ __________ __________ Capital expenditure and financial investments Purchase of fixed assets (1,022,252) (450,741) (2,866,449) Purchase of investments (11,159) (261,159) (272,317) Proceeds on disposal of fixed assets 29,286 33,858 565,147 __________ __________ __________ Net cash outflow from capital expenditure and financial investment (1,004,125) (678,042) (2,573,619) __________ __________ __________ Acquisitions Purchase of subsidiary undertakings (11,137,237) (1,496,704) (4,613,483) Net cash from purchase of subsidiary undertakings 106,490 - 2,364,160 __________ __________ __________ Net cash (outflow) / inflow from acquisitions (11,030,747) (1,496,704) (2,249,323) __________ __________ __________ Dividends Equity dividends paid (662,500) (421,999) (813,499) __________ __________ __________ Net cash (outflow) / inflow before financing (11,432,956) (3,947,131) (4,619,888) Financing Issue of shares - 5,263,240 5,263,240 Receipts from new borrowing 9,500,000 1,099,451 2,852,334 Repayments of amounts borrowed (256,843) (209,616) (862,208) Capital repayments of finance leases (84,084) (51,081) (64,899) __________ __________ __________ Net cash inflow from financing 9,159,073 6,101,994 7,188,467 __________ __________ __________ (Decrease)/increase in cash 9 (2,273,883) 2,154,863 2,568,579 __________ __________ __________ THB GROUP plc NOTES TO THE INTERIM REPORT - 31 October 2003 1 Accounting policies and basis of preparation The interim financial information has been prepared on the basis of accounting policies consistent with those set out in the Group's statutory accounts for the year ended 30 April 2003. It was prepared under the historical cost convention, modified to include the revaluation of certain land and buildings, and in accordance with applicable Accounting Standards. The interim financial information has not been audited nor has it been reviewed under Bulletin 99/4 of the Auditing Practices Board. The above unaudited financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. Statutory accounts for the year ended 30 April 2003, which included an unqualified auditors' report, have been filed with the Registrar of Companies. 2 Turnover and operating profit Turnover and operating profit were derived from the activity of insurance broking. Turnover was received from activities in the following geographical areas: Year to 30 April 2003 2002 2003 # # # United Kingdom 7,877,514 6,074,492 13,398,019 Other European countries 512,581 231,516 802,296 United States of America 5,305,756 4,157,185 8,403,184 Other countries 63,891 79,570 305,821 __________ __________ __________ 13,759,742 10,542,763 22,909,320 __________ __________ __________ 3 Taxation The taxation charge for the period is based upon the estimated effective rate for the full year. 4 Dividend The interim dividend of 1.5p per share (2002: 1.5p) is payable on 12 January 2004 to shareholders who are registered at the close of business on 30 December 2003. The ex-dividend date will be 24 December 2003. The charge to the Profit & Loss Account for the six months ended 31 October 2002 includes #4,013 of final dividend for the year ended 30 April 2002 paid in respect of shares issued after the accounts for that year were signed. 5 Earnings per share Basic earnings per share are calculated by dividing the net profit attributable to shareholders of #616,469 (2002: #1,027,757) by the weighted average number of shares in issue during the period of 26,500,000 (2002: 21,875,861). Diluted earnings per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of shares in issue during the period, adjusted to take account of the effect of share options, of 26,662,755 (2002: 21,887,299). Earnings per share excluding the effect of goodwill amortisation has been presented because the Directors believe it to be a key performance indicator. THB GROUP plc NOTES TO THE INTERIM REPORT - 31 October 2003 (continued) 6 Historical cost profits and losses Six months Six months Year to to 31 Oct to 31 Oct 30 April 2003 2002 2003 # # # Profit on ordinary activities before taxation 1,052,557 1,640,847 3,827,489 Difference between historical cost depreciation charge and depreciation charge based on revalued amounts 6,585 6,889 13,171 Difference between profit on disposal of fixed assets based on historic net book value and revalued net book value - - 161,243 _________ _________ _________ Historical cost profit on ordinary activities before taxation 1,059,142 1,647,736 4,001,903 _________ _________ _________ Historical cost profit retained 225,554 639,133 1,524,407 _________ _________ _________ 7 Reconciliation of movement in shareholders' funds Six months Six months Year to to 31 Oct to 31 Oct 30 April 2003 2002 2003 # # # Retained profit for the period 218,969 632,244 1,349,993 Shares issued in the period - 6,144,490 6,644,490 Costs of issue - (881,250) (881,250) Shares to be issued - - 300,000 __________ __________ __________ Net increase in shareholders' funds 218,969 5,895,484 7,413,233 Shareholders' funds at start of period 18,735,118 11,321,885 11,321,885 __________ __________ __________ Shareholders' funds at end of period 18,954,087 17,217,369 18,735,118 __________ __________ __________ THB GROUP plc NOTES TO THE INTERIM REPORT - 31 October 2003 (continued) 8 Net cash flow from operating activities Six months Six months Year to to 31 Oct to 31 Oct 30 April 2003 2002 2003 # # # Operating profit 994,222 1,447,024 3,425,582 Depreciation and amortisation 830,059 511,517 1,142,435 Loss on sale of fixed assets 1,595 11,361 12,886 Increase in value of investment (43,750) - - Goodwill on acquisition of a business (491,552) - - Increase in amounts due from client and insurers (4,478,494) (8,544,086) (7,339,419) Decrease/(increase) in amounts due from associated undertaking 57,662 - (212,095) Increase in other debtors (484,931) (177,604) (208,380) Increase in amounts due to clients and insurers 7,226,906 7,323,212 4,922,723 Increase in amounts due to associated undertaking 1,536 - 44,889 (Decrease)/increase in other creditors (1,592,594) (1,580,632) 115,554 __________ __________ __________ Net cash inflow/(outflow) from operating activities 2,020,659 (1,009,208) 1,904,175 __________ __________ __________ 9 Reconciliation of net cash flow to movement in net funds Six months Six months Year to to 31 Oct to 31 Oct 30 April 2003 2002 2003 # # # (Decrease)/increase in cash for the period (2,273,883) 2,154,863 2,568,579 Cash (inflow)/outflow from finance leases (162,388) 51,081 45,078 Cash inflow from financing (9,243,157) (889,835) (1,990,126) __________ __________ __________ Changes in net funds resulting from cash flows (11,679,428) 1,316,109 623,531 Inception of finance leases (56,495) - - Net funds at start of period 23,932,682 23,309,151 23,309,151 __________ __________ __________ Net funds at end of period 12,196,759 24,625,260 23,932,682 __________ __________ __________ 10 Interim Report Copies of the Interim Report will be available from the registered office and at the group's website, www.thbgroup.com. THB GROUP plc SHAREHOLDER INFORMATION See our group website www.thbgroup.com for information about the group and other shareholder information, including link to latest share price. Registered office: Directors: Murray House VH Thompson - chairman and chief executive Murray Road GM Cotter - director of group operations Orpington, Kent DA Ulph BR5 3QY RS Wilkinson - finance director Tel: 01689 883500 NJ Moorhouse - non executive director MF Holbrook - non executive director Company registration number: 1514749 Financial calendar: 24 December 2003 ex-dividend date 30 December 2003 record date 12 January 2004 interim dividend payable July 2004 final results announcement August 2004 final dividend payable August 2004 next AGM Registrars: Stockbroker: Capita Registrars Numis Securities Limited The Registry Cheapside House 34 Beckenham Road 138 Cheapside Beckenham, Kent London EC2V 6LH BR3 4TU Tel: 0870 1623100 Tel: 020 7776 1500 www.capita-irg.com www.numiscorp.com Auditors: Group Bankers: Grant Thornton Lloyds TSB Bank plc Singer & Friedlander Limited Solicitors: Fleet Bank Kendall Freeman Barclays Bank PLC Addleshaw Booth & Co Clydesdale Bank PLC Royal Bank of Scotland PLC This information is provided by RNS The company news service from the London Stock Exchange END IR GUGBWPUPWGQG
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