RNS Number:3305N
Millfield Group PLC
09 July 2003
Date: 9 July 2003
On behalf of: Millfield Group plc
Embargoed until: 0700hrs
Millfield Group plc
Results for the year ended 31 March 2003
Millfield Group plc ("Millfield" or "the Company" or "the Group"), a leading
independent financial services advisory group, today announces its audited
results for the year ended 31 March 2003.
The Group has also announced today that it proposes to raise approximately #8.85
million (net of expenses) by means of a Placing and Open Offer underwritten by
Collins Stewart, and details of the intended investment by Norwich Union in
Lifetime, the Group's personal portfolio services venture.
Highlights
* Turnover up 53% to #31.3 million (2002: #20.5 million)
* Gross profit up 80% to #10.6 million (2002: #5.9 million)
* Loss before amortisation and tax of #11.5 million (2002:
#7.1 million)
* Loss before tax of #12.3 million (2002: #7.4 million)
* Through its continued recruitment programme and a number of
acquisitions made during the second half, Millfield has over 500 advisers
and accountancy professionals today (2002: 362)
* Group now offers national coverage, with 35 offices operating across the UK
Commenting on the results and the Open Offer, Paul Tebbutt, Chief Executive of
Millfield, said:
"Our vision and goal is to achieve profitability, security and wealth for our
shareholders, clients, financial advisers and employees. We will build on the
significant advances made in the year under review by continuing to focus on the
quality, selection and recruitment of IFAs and advisers, developing,
implementing and monitoring our activities to ensure we achieve the required
productivity per adviser and hit our quality improvement targets for all
employees.
"The ever increasing complexity of our clients' personal and business lives
means that the demand for new solutions, products, services and advice will
grow. We believe that Millfield Group plc remains well positioned to take
advantage of the changing landscape of financial services advice."
Enquiries:
Millfield Group plc
Paul Tebbutt, Chief Executive Tel: 020 8604 2607
Harry Roome, Finance & Operations Director Tel: 020 8604 2623
Collins Stewart Limited Tel: 020 7523 8350
Simon Atkinson/Stephen Keys
Redleaf Communications Tel: 020 7955 1410
Emma Kane/Katharine Sharkey Mob: 07876 338339
Notes to Editors
* Millfield Group plc was floated on the Alternative
Investment Market of the London Stock Exchange in March 2001.
* Millfield is a national independent financial advisory
company in the UK, offering truly independent advice, primarily in the pensions,
life insurance, investment and mortgage sectors, as well as long-term care
provision, personal wealth management and the corporate financial planning
arena. Millfield also has specialist divisions dealing with offshore
investment, insurance and employee benefits.
* Further information is available on the Millfield website:
www.millfield-partnership.co.uk
CHAIRMAN'S STATEMENT
Introduction
This report covers the second full year since Millfield joined the Alternative
Investment Market on 1 March 2001. In addition to reviewing the results and
performance of the Group for the year ended 31 March 2003, I also take the
opportunity to comment on our plans in the changing financial environment and
the prospects of the Group for the future.
Results
These results should be viewed within the context of the three principal phases
of our original business plan as outlined at the time of our AIM Listing in
2001. First, to build an infrastructure capable of supporting a high quality
business of independent financial advisers; secondly, to raise the number of our
advisers to 700; and thirdly, to increase productivity levels of individual IFAs
from an average turnover of #100,000 to #200,000 per annum. In terms of how we
have performed against these targets, the infrastructure is now substantially in
place with a national coverage provided by 35 offices, most of which are now
satisfactorily located and equipped, together with a business centre based in
Hull and which employs 77 people. At 31 March 2002, Millfield comprised 362
IFAs and by 31 March 2003 this number had increased to 462, with a further 35
accounting professionals in RST. Productivity per IFA has, however, fallen
short of our target partly because many of the 114 new IFAs were in place for
only part of the year and partly because of the difficult economic environment
compounded by uncertainties regarding pensions and the continuing volatility of
the stock market.
Against this background, however, we increased our turnover by 53% to #31.3
million (2002: #20.5 million) and gross profits grew by 80% from #5.9 million to
#10.6 million. As a result of administrative expenses rising from #13.8 to
#22.0 million, loss before amortisation and tax increased from #7.1 million to
#11.5 million (including #0.5 million of losses incurred by Lifetime our
personal portfolio and wealth management joint venture start up) and loss before
tax increased from #7.4 million to #12.3 million.
Acquisitions and Investments
In July 2002 we raised #16 million, net of expenses, through new share issues,
with the primary purposes of funding a programme of strategic acquisitions of
IFA businesses and to fund our Lifetime joint venture.
Since that time, we have made good progress on these programmes. During the
year we acquired equity interests in seven firms of IFAs. In February RST, a
consolidator of small accountancy firms, which also has a separate IFA division,
was acquired. In addition, #3.5 million has been invested in Lifetime which is
developing a 'wrap' account for use by IFAs and their clients.
Position in relation to the industry
Millfield now has a variety of different distribution channels: its traditional
core IFA business, Millfield Partnership; its associated companies held through
Millfield Associate Partnership which I referred to above; Moncur Jackson, the
specialist employee benefits adviser; and Simply Millfield, a distributor of
insurance products through the medium of television advertising. These are
complemented by RST and Lifetime.
The industry in which we operate is rapidly consolidating. The role of product
providers has become even more important as a number of them have acquired or
made an investment in a number of IFA firms. The ending of polarisation and the
introduction of multi-tie will accelerate the trend for consolidation and in due
course increase the influence product providers have within the distribution
sector. Millfield is in active discussion with other parties regarding the
development of multi-tie and we believe this will provide excellent growth
opportunities going forward and offer greater flexibility to our advisers.
Prospects
Since Millfield's flotation in March 2001, we have built a business from a small
base of 100 advisers to 462 which achieves the critical mass necessary to
deliver our business objectives. The market's expectation is for the Group to
reach profitability (before goodwill amortisation and losses incurred by
Lifetime) in 2003/04 and the Directors retain their determination to achieve
this. This is a turnaround from the results of 2002/03 and as well as the
organic growth and the acquisitions referred to above reflects work that we are
doing on the cost base of our wholly owned advisory businesses, and the measures
we have already put in place will result in full year overheads in these
businesses down 10% year on year, despite the increase in scale of the business.
New share issue
We are also announcing today a Placing and Open Offer to raise approximately
#8.85 million net of expenses. The proceeds raised will be used to fund the
pipeline debtor in our core advisory businesses, so as to support continued
planned growth and for general working capital. Detailed information on and
background to the share issue is contained within a separate announcement. A
prospectus will be posted to shareholders later today.
Appointment of Nominated Adviser
The Company is pleased to announce the appointment of Collins Stewart as its
Nominated Adviser with immediate effect. KPMG Corporate Finance has resigned
as Nominated Adviser.
Board
In an evolving company, it is necessary from time to time to review the
composition of the Board looking towards the requirements for the future. The
result of our review was the decision to combine the finance and operations
functions under one main Board Director, Harry Roome, and to give greater
emphasis to distribution by inviting Roger Brosch to join the Board as
Distribution Director. At the same time, Laurence Nesbitt and Tony Read, who
now report to Harry Roome, agreed to step down from the Board, although of
course continuing with their important roles within the Group. Terry Stannard
joined the Board as a non-executive Director in December 2002 but resigned in
May this year due to the demands of his other commitments. We thank him for his
contribution and wish him well in the future.
Conclusion
We have a group of outstanding IFAs and a wonderful staff throughout the
Millfield Group. Through mutual respect we develop the cohesiveness which is
essential to deliver an excellent service to our clients which will then drive
the profitability which are shareholders require. This year has not been an
easy one and I would particularly like to thank everyone at Millfield for their
efforts and wish them the rewards which their continued commitment deserves.
Richard Mansell-Jones
Chairman
9 July 2003
CHIEF EXECUTIVE'S REVIEW
Leading the way in financial advisory services
Since flotation in March 2001, Millfield has created a national (independent)
financial advisory organisation offering independent and specialist financial
advice to businesses and individuals throughout the UK. This has been achieved
against a background of economic uncertainty, high levels of volatility in
global stock markets and on-going regulatory changes in the financial services
industry. While this has impacted on investors' confidence generally,
Millfield's diverse range of specialist advisers and services has enabled the
Group to reduce the impact.
During the year under review, Millfield has continued its investment programme
as consolidation has become one of the main industry drivers. Today we have a
robust, scaleable infrastructure, and a nationwide network of offices. A number
of experienced advisers have researched the market and been attracted by the
Millfield culture and proposition. These high calibre advisers and employees
are essential foundations for us to achieve our goal of increasing the number of
advisers and productivity, in this consistently evolving business.
Results
The last twelve months have been a critical period in transforming Millfield
into a substantial multi distribution business. A small measure of the success
our strategy has been the growth in turnover by 53%, primarily within Millfield
Partnership. This has been achieved despite continuing difficult market
conditions and lack of consumer confidence.
Our share issue in July 2002 allowed us to become an industry consolidator. As
a large advisory firm we now have the scale, infrastructure and investment
capability to undertake strategic acquisitions. In the second half of the year
we made a number of stepped acquisitions, bringing in businesses complementary
in culture, geographical coverage, specialities and business fit.
We are consistently engaged in effective cost and quality control which in turn
means continually developing internal procedures, initiatives and support
mechanisms to maximise the full potential, resource of each of our advisers and
employees.
Our business plan for the year under review envisages the average new Millfield
adviser delivering annual turnover of between #75,000 and #100,000 and this
takes account of current economic indicators. Over a four-year period we expect
the average adviser to be producing #200,000 turnover. We have found that
through recruiting established and experienced Independent Financial Advisers
(IFAs, advisers) their initial business plans exceed #100,000. However, the
significant growth in the number of advisers during this period means that many
have yet to achieve the higher levels of productivity. The 462 advisers at 31
March 2003 are net of 83 advisers who left the Company because they failed to
achieve their business plans. They did not comply with the Millfield process and
failed to meet the required activity and skills levels.
Millfield drives profitability through specialising in a number of key markets
and continuous development of its advisers, thereby enhancing the range of
services available to them which will result in greater efficiencies.
Substantial progress has been made during the financial year, including:
* Establishment of the Millfield Business Centre in Hull which is staffed by
77 employees who deal with all telephony, proposal submission, business
chasing and administration;
* Employment of 133 paraplanners / researchers and personal assistants in
the branches to enhance the support for the advisers, increase productivity
and improve time management;
* The licensing and appointment of specialist advisers in the following
areas: employee benefits, specialist tax advice, inheritance tax planning,
pensions, protection and long term care;
* Implementation and creation of our marketing strategies. These include:
the development of our business through professional connections,
particularly solicitors and accountants; the launch of Millfield Business
Solutions, providing a range of services to the SME market; Millfield Care
Partnership, providing advice and services to the long-term elderly care
market; and Millfield Private Client Services, meeting the more complex
needs of High Net Worth individuals. In addition, we have developed
market-leading campaign management processes in Hull, enabling us to manage,
monitor and report on a variety of lead generation programmes including the
Guardian newspaper pension guide; and
* Specialist training, advanced qualifications and knowledge within niche
market segments is provided through Millfield Academy (for our advisers)
which is supported by leading insurance groups, fund managers and specialist
firms such as actuaries etc.
Millfield Partnership - creating value in a tough market
MPL is a company that we believe is unique with a true stakeholder culture and
consultative business style. This is Millfield's core business with 378
advisers, (of which 12 are Millfield Mortgage & Protection advisers), in 21
locations.
The turnover of Millfield Partnership in the year was #25.7 million, up from
#19.1 million in the previous year. The gross margin earned was 32 per cent in
the year up from 28 per cent last year, as a result of our progressive
commissions and fee structure for our advisers.
Productivity in this business has fallen short of our expectations, primarily
because of the economic conditions experienced during the year. Productivity
per adviser in the South was #103,000 and the North #62,000, against south
#112,000 and the North #70,000 in the previous year. Nevertheless our
recruitment and selection of new advisers is of an increasingly high calibre and
when combined with the marketing initiatives that we are implementing to support
adviser activity, I am confident that the number of Advisers and productivity
will increase this year.
Millfield Sureline Limited
Millfield entered into a stepped acquisition agreement in November 2002 with
Sureline Asset Management Limited ("Sureline") an IFA business based in Hertford
with 14 advisers and it is now being managed with Millfield Partnership.
Millfield Associate Partnership - finding the right deal
We have developed a stepped acquisition model for bringing firms into the
Millfield Group, thereby participating in the industry trend of consolidation
(and, securing for Millfield existing firms and groups of advisers, led by
vigorous entrepreneurs, where final payment is linked only to proven value).
Millfield provides a Board structure and a range of services to these firms in
order to implement corporate governance develop their businesses and ensure the
achievement of their business plans. Following the fund raising completed in
July 2002, we have taken equity stakes in qualifying firms cash, shares or a
combination of the two. We provide working capital to support the development
of these businesses, with stepped acquisitions over two to six years to acquire
100% of the equity, in return for Millfield Group plc shares, at a price based
on a multiple of each firm's post tax profits.
Millfield Associate Partnership now comprises nine firms, six of which have
stepped acquisition agreements in place. The six firms acquired in November
2002 i.e. Millfield (AAP) Limited, Millfield (J.P. Associates) Limited,
Millfield Fountain Limited, Millfield (SW) Limited, Millfield (SE) Limited and
Millfield (MSC) Limited have added 73 advisers to the Group. Cash expenditure
on these five acquisitions amounted to #885,500.
RST Group Limited - a new opportunity
Millfield has entered into a stepped acquisition agreement to acquire RST Group
Limited ("RST"). RST is a firm of Chartered Accountants operating from nine
offices in the north of England and in Scotland and incorporates RST Financial
Consultancy Limited, a firm of independent financial advisers. RST has 110 staff
including 35 accounting professionals and seven IFAs.
RST is a consolidator in the small accounting firm market, having developed from
a firm of Chartered Accountants in Richmond in Yorkshire and having grown
through various acquisitions in recent years. It is expected to grow further
through acquisition over the next year, broadening its geographic spread. It
currently has some 2,500 clients, generally owner-managed businesses with
turnover of up to #5 million. RST shares our approach of providing high quality
advisory services to clients.
Millfield has acquired 20% of RST for #630,000 plus #210,000 deferred
consideration contingent on RST achieving turnover and profit targets. The
initial consideration for the acquisition was satisfied by #630,000 of cash
which was subscribed for new RST shares. Further tranches of 5.1%, 25% and 49.9%
will be acquired in June 2004, 2005 and 2006 respectively in exchange for
Millfield shares or (at Millfield's option) for loan notes.
Simply Millfield Limited - a fresh perspective providing on-line term assurance
direct
Simply Millfield has been established as a 90% owned subsidiary following the
acquisition of the assets including the intellectual property rights of Simply
Online Limited from the liquidators. This expands our distribution capability
by generating new business through advertising and online enquiries and it
commenced trading in February 2003. Our first four months' trading experience
with this company shows positive signs for its potential. The purchase of this
company has enabled us to bring forward our plans for electronic processing by
some 12-18 months and we now have the vehicle to deliver a variety of simple
products online.
Product Innovations Limited - applying fresh thinking to product development
PIL, the Group's recently established product design and consulting business,
provides consulting services to asset managers and investment banks.
Its first product was launched in December 2002 with a closing date in February
2003 and met our minimum expectations. A second product has now been designed
and launched in association with Bristol & West and initial signs are very
positive.
Adviserco Limited - driving revenues and servicing clients within Millfield
Partnership Limited
Millfield announced on 7 December 2002 arrangements that will enable it to
provide services direct to its advisers' clients, giving these clients the
option of dealing direct through Millfield's Business Centre in Hull thereby
providing the clients with a choice of services at an enhanced margin with fees
and commissions being shared between the adviser and Millfield.
For a consideration of five million Millfield Group plc shares of 0.175p,
Millfield will acquire the "A" shares of Adviserco Limited, a new company which
has been set up to acquire servicing rights for selected clients which were
serviced by Millfield advisers. The number of Millfield shares acquired by each
adviser will be dependent on the levels of business written during the five-year
period to 31 March 2006. Advisers will have a two-year earn out period to 31
March 2008. This initiative secures long-term retention benefits for advisers,
clients and shareholders.
Lifetime - building something big and powerful
The Lifetime Group was established in June 2002 as a joint venture with AM
Corporation Limited to provide online portfolio and wealth management services
to advisers and their clients. The service is intended to be launched towards
the end of this year following regulatory approval in the autumn and live
testing.
In addition to its joint venture share in Lifetime, Millfield acquired in
December 2002 a further 41.8% from its original joint venture partner which is
being held for resale.
The market for personal portfolio services continues to grow and several new
entrants are expected to join what is increasingly being seen as the most
significant change in the provision of services for advisers and clients in the
aggregation of risk based wealth management.
Millfield Private Clients S.a.r.l.
This Guernsey based business has been providing offshore investment products
primarily to the expatriate community. Following changes in regulation this
type of business is better serviced through London or through local agents in
their own jurisdictions and the business has therefore been transferred back
into Millfield Partnership Limited.
Providing more value upstream
Our vision and goal is to achieve profitability security and wealth for our
shareholders, clients, financial advisers and employees. We will build on the
significant advances made in the year under review by continuing to focus on the
quality, selection, recruitment of quality IFAs and advisers, developing,
implementing and monitoring our activities to ensure we achieve the required
productivity per adviser and hit our quality improvement targets for all
employees.
The IFA Market is estimated to be valued at around #1.6 billion in commissions
and fees, and the long-term drivers for growth are positive. Our clients are
looking for more tax efficient ways to invest and diversify and, the current
taxation system in the UK means that more and more people are looking for
professional advice. Low interest rates have meant a change in strategy for many
advisers and clients with a greater emphasis on diversification and a better
understanding of risk management.
The ever-increasing complexity of our clients' personal and business lives means
that the demand for new solutions, products, services and advice will grow. We
believe that Millfield Group plc remains well positioned to take advantage of
the changing landscape of financial services advice.
Paul Tebbutt
Chief Executive
9 July 2003
Consolidated Profit & Loss Account
for the year ended 31 March 2003
Before
goodwill
amortisation Total before Goodwill Total Total
and goodwill amortisation
acquisitions Acquisitions amortisation 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
TURNOVER 28,906 2,437 31,343 - 31,343 20,505
Cost of sales (19,376) (1,379) (20,755) - (20,755) (14,573)
Gross profit 9,530 1,058 10,588 10,588 5,932
Administrative expenses (20,533) (1,453) (21,986) - (21,986) (13,773)
Amortisation of goodwill - - - (794) (794) (266)
OPERATING LOSS (11,003) (395) (11,398) (794) (12,192) (8,107)
Share of operating loss in
joint venture - (472) (472) (9) (481) -
Interest receivable and
similar income:
Group 378 - 378 - 378 699
Joint venture - 16 16 - 16 -
Interest payable and
similar charges:
Group (27) (34) (61) - (61) (4)
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION (10,652) (885) (11,537) (803) (12,340) (7,412)
Tax on loss on ordinary
activities (1) (20) (21) - (21) -
LOSS ON ORDINARY
ACTIVITIES AFTER TAXATION (10,653) (905) (11,558) (803) (12,361) (7,412)
Equity minority interests 145 - 145 - 145 -
RETAINED LOSS FOR THE YEAR (10,508) (905) (11,413) (803) (12,216) (7,412)
Basic and diluted loss per
share (15.7p) (1.35p) (17.06p) (1.20p) (18.25p) (14.18p)
CONTINUING OPERATIONS
All of the group's activities are continuing.
TOTAL RECOGNISED GAINS AND LOSSES
The group has no recognised gains or losses other than the loss for the current
year (2002- #nil).
Consolidated Balance Sheet
31 March 2003
2003 2002
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 17,451 12,275
Tangible assets 3,825 2,899
Investments in joint venture:
Share of gross assets 2,558 -
Share of gross liabilities (147) -
Goodwill arising on acquisition less 275 -
amortisation
23,962 15,174
CURRENT ASSETS
Stocks 706 -
Debtors 12,099 7,641
Investments 251 -
Cash at bank and in hand 6,926 8,675
19,982 16,316
CREDITORS amounts falling due within one year (11,127) (6,356)
NET CURRENT ASSETS 8,855 9,960
TOTAL ASSETS LESS CURRENT LIABILITIES 32,817 25,134
CREDITORS amounts falling due after more than one
year (2,308) (1,050)
30,509 24,084
PROVISION FOR LIABILITIES AND CHARGES (1,440) (752)
MINORITY INTERESTS
Equity minority interests (173) -
NET ASSETS 28,896 23,332
CAPITAL AND RESERVES
Called up share capital 124 101
Deferred consideration 1,656 325
Share premium account 35,888 19,462
Merger reserve 11,709 11,709
Profit and loss account (20,481) (8,265)
EQUITY SHAREHOLDERS' FUNDS 28,896 23,332
These financial statements were approved by the Board of Directors on 9 July
2003.
Signed on behalf of the Board of Directors:
Richard Mansell-Jones Paul Tebbutt Harry Roome
Non-Executive Chairman Chief Executive Finance and Operations Director
Consolidated Cash Flow Statement
for the year ended 31 March 2003
2003 2002
#'000 #'000
Net cash outflow from operating activities (12,012) (9,280)
Returns on investments and servicing of finance 317 466
Taxation 6 -
Capital expenditure and financial investment (1,422) (2,921)
Acquisitions and disposals (6,117) (943)
(19,228) (12,678)
Financing 16,183 2,842
Decrease in cash in the year (3,045) (9,836)
Reconciliation of net cash flow to movement in net
funds
Decrease in cash in the year (3,045) (9,836)
Change in net funds resulting from cash flows (3,045) (9,836)
Movement in net funds in the year (3,045) (9,836)
Net cash at 1 April 2002 8,675 18,511
Net cash at 31 March 2003 5,630 8,675
NOTES
1. ABRIDGED ACCOUNTS
The preceding financial information does not constitute statutory accounts as
defined in section 240 of the Companies' Act 1985. The financial information for
the year to 31 March 2002 is based on the statutory accounts for that year.
These accounts, upon which the auditors issued an unqualified opinion, and which
did not contain any statement under section 237 (2) or (3) of the Companies Act
1985, have been delivered to the Registrar of Companies.
The financial information for the year ended 31 March 2003 has been extracted
from the statutory accounts approved by the directors on 9 July 2003. The
auditors' report on those accounts was unqualified and did not contain any
statement under section 237 (2) or (3) of the Companies Act 1985. The statutory
accounts will be posted to the shareholders on 9 July 2003. After that time
they will also be available at the company's registered office at Knollys House,
17 Addiscombe Road, Croydon, Surrey, CRO 6SR.
2. LOSS PER SHARE
The calculation of loss per share on losses attributable to shareholders is
based on losses and equity minority interests after taxation of #12,215,215
(2002 - #7,412,667) and on 66,915,616 (2002 - 52,268,808) ordinary shares, being
the weighted average number of shares in issue during the year:
FRS 14 requires the presentation of diluted EPS when a company could be called
upon to issue shares that would decrease net profit or increase net loss per
share. For a loss making company with outstanding share options, the exercise of
in-the-money options would reduce rather than increase the net loss per share
and thus such options are not dilutive as defined in the FRS. Similarly,
although net loss per share would be increased by the exercise of
out-of-the-money options, it seems inappropriate to assume that option holders
would act irrationally and exercise those options. Accordingly no adjustment has
been made to diluted EPS for either in-the-money or out-of-the-money share
options and, since there are no other diluted future issues, the diluted loss
per share is the same as the basic loss per share for the year.
3. DIVIDENDS
No dividends have been paid or will be distributed for the year ended 31 March
2003 (2002: nil).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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