RNS Number:0057N
Prestbury Holdings PLC
31 January 2008
31 January 2008
Prestbury Holdings PLC
("Prestbury", "the Company" or "the Group")
Second Interim Results for the six months ended 31 October 2007
Prestbury, the AIM-listed low risk financial intermediary company, announces its
unaudited results for the six months ended 31 October 2007.
The highlights were:
- Turnover improved to �4.7m (six months ended 30 April 2007: �4.5m*).
- Margin improved to 18.9 per cent (six months ended 30 April 2007: 18.7 per
cent*)
- Gross Profit improved to �0.9m (six months ended 30 April 2007: �0.8m*)
- Shareholders' funds unchanged at �2.3m
- Cash position improved to �412,000 (six months ended 30 April 2007: �354,000)
- Overheads reduced to �756,051 - (six months ended 30 April 2007: �871,104*)
- EBITDA improved to �0.1m - (six months ended 30 April 2007: �0.0m*)
- Advanced stage discussions for acquisition of entire share capital of the
Company by Management.
* The results for the six months ended 30 April 2007 have been restated
primarily to reflect the re-allocation of personnel costs between Prestbury
Financial Limited and Prestbury Investment Management Limited, which
historically have been reviewed annually in arrears in December of each year,
and an increase in broker commission payable for the period.
Chairman's Statement
Prestbury's trading has remained remarkably stable through an intensely
difficult period in the mortgage market. However the business will be subject to
intense pressure over the period ahead, with margins being squeezed. Other
networks will be increasingly stressed and there are real opportunities for
Prestbury to recruit new advisers.
Your Board believes that the costs associated with being quoted on the AIM
market are at a level that makes it much harder for Prestbury to deliver growth
in shareholder value. The independent directors are therefore currently in
discussions with the executive management team of Prestbury (the "Management")
regarding a proposal from the executive management to make an offer to acquire
the entire issued share capital of the Company ("Prestbury Shares").
Such discussions are at an advanced stage (but have not yet been concluded and
therefore this announcement does not constitute a firm intention to make an
offer for the Prestbury shares nor is there any certainty that an offer will be
made) and it is intended that the consideration for the offer would be new
shares in a company which is to be newly formed by the Management for the
purposes of the offer ("Newco" and "Offeror"), such new shares to be issued on a
one for one basis, with a loan note as an alternative form of offer
consideration. The loan notes would be non interest bearing, unsecured and
issued by Newco in the amount of 20p per Prestbury Share and would be redeemable
in the same amount. It is intended that there would be no fixed date for
redemption of the loan notes, but that they would be redeemed as soon as
possible following issue as the first payment priority of Newco out of the net
financial resources available to Newco (after payment of the operating costs of
Newco and its subsidiaries) from time to time. Investors should note that
although the principal amount and redemption terms of the loan notes are
expected to be as described in this paragraph, there is no certainty as to what
the actual value to investors of the loan notes will be. Further details in
this regard will be set out in any offer document, if or when an offer is made
by the Offeror. 20p is the price at which new shares in the Company were last
placed in December 2006. This statement is made with the agreement and approval
of the Offeror.
Francis Maude
Chairman
Chief Executive's Statement
The credit crunch in the second half of 2007 has hit the entire mortgage sector
hard. Prestbury has understandably not been immune to the impact and downturn in
property and mortgage transactions that followed, but I feel we have managed the
associated risks well.
The Northern Rock debacle has caused a great deal of concern and uncertainty in
our industry, but the low risk whole of market business model that Prestbury
champions has stood up well to the market downturn. Whilst Northern Rock
accounted for 15 per cent of lending in the first half of 2007, this lending has
now been taken up by Banco Santander - Abbey. Overall, however, mortgage
transactions were down in the second half, but this drop in mortgage income was
offset by an improvement in insurance margin delivering total revenues in the
second half of the 2007 financial year marginally ahead of the first half.
Less than one per cent of our lending partners have actually withdrawn from
providing new mortgages to the prime market, i.e. those free of any bad credit.
However, nearly all have increased the rates and reduced the loan-to-value ratio
on their mortgage products. The costs associated post credit crunch of the
mortgage market to the consumer and the lenders themselves have put such a
squeeze on the market that new net lending across the industry has dropped by
approximately 20 per cent, predominantly down to affordability of the higher
interest rates and the higher loan to value products being withdrawn from the
market.
On a more positive note however, 60 per cent of Prestbury mortgage income is
actually originated from existing client re-mortgages at below 75 per cent loan
to value, and we expect this percentage of mortgage revenue to continue. The net
drop in Prestbury advisers' income from mortgages has therefore only been around
10 per cent as a result of the credit crunch.
Since August 2007, the money markets have effectively closed the doors for
business to lenders who specialise in the higher margin sub-prime sector. These
lending businesses have been unable to access affordable capital elsewhere,
thereby removing their ability to lend competitively to the UK's poor credit
population to the same levels they had previously achieved.
The zero appetite to do business in the current market is as a direct result of
the American sub-prime crisis. The American lenders have been hit the worst
because of record levels of mortgage and loan defaults, and affecting the
worldwide banking giants Citibank and Merrill Lynch to name just two, are also
major lenders in the UK's bad credit market, so the UK lending arms have
naturally been hit as a result.
It also needs noting that Northern Rock, whilst not being a bad credit lender,
used the same method of funding as the bad credit lenders and, as a result, the
doors where closed to them also, resulting in the current Northern Rock crisis
and the emergency funding being provided by the Bank of England.
The result of the downturn in the sub-prime sector has only marginally hit the
underlying operational margin and performance of the Prestbury Holdings PLC
business, as the sub-prime activities were taken out of the Group as part of a
risk strategy implemented in 2005. The business directly involved in the
sub-prime crisis, Prestbury Investment Management Limited ("PIM"), a company
owned by Stephen Keenan and myself, has seen new enquiries and demand hold up
well, but due to the reduced ability of lenders to provide funding, completed
transactions have recently fallen by 50 per cent.
The reason that such a dramatic downturn has occurred so quickly is as a result
of the credit crunch and the lenders historical business plans no longer being
viable. These lenders sold the mortgages soon after they completed as part of a
pool of securitised loan and mortgage bonds sold into the markets around the
world. Two fundamental elements to these lenders business models, as a result of
the credit crunch, have failed, not only being able to get the money in the
front door to lend, but nobody to buy it at the back end either.
As a result of the dramatic downturn, and in a similar way to the mainstream
prime lenders, the sub-prime lenders who lend via PIM and operate a traditional
risk-based balance sheet lending model, i.e. buildings societies and savings
banks, have increased the interest rates to sub-prime borrowers by approx 40 per
cent and the loan-to-value of products have reduced equally aggressively. This
market is now operating at a level more akin to common sense lending, as the
majority of lenders now price to risk, as opposed to those that operated via the
money markets who priced to sell. Prestbury Investment Management Limited
maintains strong relationships with these lenders.
Lee Birkett
Chief Executive Officer
31 January 2008
Consolidated profit and loss account for the six months ended 31 October 2007
Note Six months Six months Year ended 31
ended ended October 2006
31 October 2007 30 April (audited)
(unaudited) 2007
(unaudited)
(restated)
�'000 �'000 �'000
� � �
Turnover 4,669,527 4,502,131 10,216,920
Cost of sales (3,786,149) (3,658,124) (7,918,327)
--------- ---------- ---------
Gross Profit 883,378 844,007 2,298,593
Administrative
expenses (756,051) (871,104) (1,717,655)
Other
operating
income - 24,206 53,482
--------- ---------- ---------
Profit before
interest,
depreciation
and
amortisation 127,327 (2,891) 634,420
Depreciation
and amortisation (89,282) (91,802) (192,443)
--------- ---------- ---------
Operating
profit/(loss) 38,045 (94,693) 441,977
Interest
receivable and
similar income 26,156 5,538 339
--------- ---------- ---------
64,201 (89,155) 442,316
Interest
payable and
similar
charges (795) (1,439) (15,645)
--------- ---------- ---------
Profit/(loss)
on ordinary
activities
before
taxation 63,406 (90,594) 426,671
Tax on
(loss)/profit
on ordinary
activities (20,052) 28,343 (180,893)
--------- ---------- ---------
Profit/(loss)
for the
financial
period after
taxation 43,354 (62,251) 245,778
Retained loss
brought
forward (4,047,979) (3,985,728) (4,231,506)
--------- ---------- ---------
Retained loss
carried
forward (4,004,625) (4,047,979) (3,985,728)
========= ========== =========
Basic
profit/(loss)
per share 5 0.14p (0.22p) 0.98p
========= ========== =========
Consolidated Balance Sheet
As at 31 October 2007
At At At
31 October 30 April 31 October
2007 2007 2006
(unaudited) (unaudited) (audited)
�'000 (restated) �'000
�'000
Fixed Assets
Tangible 127,171 139,150 141,775
assets
Intangible 834,065 888,460 942,855
assets -------- -------- --------
961,236 1,027,610 1,084,630
Current
assets:
Debtors due
within one
year
Amounts due
from related 188,593 188,592 76,667
undertaking
Other debtors 459,162 427,329 666,485
Debtors due
after one
year
Amounts due
from related 660,072 754,368 774,692
undertaking
Deferred tax 1,057,232 1,077,284 870,331
asset -------- --------- --------
2,365,059 2,447,573 2,388,175
Cash at bank 412,010 354,728 24,394
-------- --------- --------
2,777,069 2,802,301 2,412,569
Creditors:
Amounts
falling due (1,334,976) (1,452,774) (1,933,841)
within one -------- --------- --------
year
Net current 1,442,093 1,349,527 478,728
assets -------- -------- --------
Total assets
less 2,403,329 2,377,137 1,563,358
current
liabilities
Creditors:
Amounts
falling due (5,585) (7,370) (9,115)
after more
than one year
Provisions
for (75,679) (91,056) (105,498)
liabilties -------- -------- --------
and charges
2,322,065 2,278,711 1,448,745
======== ======== ========
Capital and
reserves
Called up 1,517,389 1,517,389 1,267,389
share capital
Share premium 4,840,006 4,840,006 4,197,789
account
Treasury (30,705) (30,705) (30,705)
shares
Profit and (4,004,625) (4,047,979) (3,985,728)
loss account -------- -------- --------
Shareholders' 2,322,065 2,278,711 1,448,745
Funds ======== ======== ========
Consolidated Cash Flow Statement
For the six months ended 31 October 2007
Six months Six months Year ended to
ended 31 ended 30 April
October
2007 2007 31 October
(unaudited) (unaudited) 2006
(restated) (audited)
Notes �'000 �'000 �'000
Net cash
inflow/(outflo
w) from
operating
activities 1 149,316 (475,002) 79,462
Returns on
investments
and servicing
of finance 2 25,361 4,099 (15,306)
Capital
expenditure
and financial
investment 2 (22,385) (34,782) (36,404)
Financing 2 (95,010) 836,019 (10,455)
------------ ------------- ------------
Increase in
cash in the
period 57,282 330,334 17,297
============ ============= ============
Reconciliation of net cash
flow to movement in net debt
Increase in
cash in the
period 3 57,282 330,334 17,297
Cash outflow
from decrease
in debt and
lease
financing 8,343 2,866 10,455
------------ ------------- ------------
65,625 333,200 27,752
Movement in net funds in the
period
Net
funds/(debt)
at beginning
of period 337,270 4,070 (23,682)
------------ ------------- ------------
Net funds at
end of period 402,895 337,270 4,070
============ ============= ============
1. Reconciliation of operating profit to net cash outflow from operating
activities
Six months Six months Year ended
ended ended
31 October 2007 30 April 31 October 2006
(unaudited)
�'000 2007 (audited)
(unaudited)
(restated) �'000
�'000
Operating
profit/(loss) 38,045 (94,693) 441,977
Profit on sale of
fixed assets (523) - -
Depreciation
charges 34,887 37,407 88,652
Amortisation of
goodwill 54,395 54,395 103,791
Decrease/(increase)
in debtors 62,462 (31,055) (813,724)
(Decrease)/
increase in
creditors (24,573) (426,614) 285,002
Decrease in
provisions (15,377) (14,442) (26,236)
--------- --------- ---------
Net cash
inflow/(outflow)
from operating
activities 149,316 (475,002) 79,462
========= ========= =========
2. Analysis of Cash Flows for headings netted in the cash flow statement
Six months Six months Year ended
ended ended
31 October 2007 30 April 31 October 2006
(unaudited)
�'000 2007 (audited)
(unaudited)
(restated) �'000
�'000
Returns on investments and
servicing of finance
Interest received 26,156 5,538 339
Interest paid (528) (1,011) (14,159)
Hire purchase
interest (267) (428) (1,486)
--------- --------- ---------
Net cash inflow /
(outflow) for
returns on
investments and
servicing of
finance 25,361 4,099 (15,306)
========= ========= =========
Capital expenditure and financial
investment
Sale of tangible
fixed assets 5,772 - -
Purchase of
tangible fixed
assets (28,157) (34,782) (36,404)
--------- --------- ---------
Net cash outflow
for capital
expenditure (22,385) (34,782) (36,404)
========= ========= =========
Financing
Share issue - 892,217 -
Deferred
consideration
repayment (86,667) (53,332) -
Capital element of
hire purchase and
finance lease
rental payments (8,343) (2,866) (10,455)
--------- --------- ---------
Net cash inflow/ (outflow) from
financing
(95,010) 836,019 (10,455)
========= ========= =========
3. Analysis of changes in net debt
At 31 October Cash flow At Cash flow At 31 October
2006 2007
30 April 2007
� � � � �
Cash at bank 24,394 330,334 354,728 57,282 412,010
======= ======== ======== ========= ========
Debt:
Hire purchase (20,324) 2,866 (17,458) 8,343 (9,115)
======= ======== ======== ========= ========
Total 4,070 333,200 337,270 65,625 402,895
======= ======== ======== ========= ========
4. Basis of Consolidation
The unaudited interim group accounts consolidate the accounts of Prestbury
Holdings plc and its subsidiary undertaking Prestbury Financial Limited.
The combination between Prestbury Holdings Plc and Prestbury Financial Limited
has been accounted for as a merger and accordingly the financial information has
been presented as if Prestbury Financial Limited had been a subsidiary from the
date of its incorporation.
5. Profit/(Loss) per share
The calculation of the profit/(loss) per share is based on the profit/(loss)
attributable to ordinary shareholders of �43,354 (six months ended 30 April
2007: �62,251 loss; year ended 31 October 2006: �245,778 profit) divided
by 30,347,778 (six months ended 30 April 2007: 28,745,038; year ended 31 October
2006: 25,019,011), being the weighted average number of shares in issue during
the period.
6. Dividends
No dividend is proposed for the six months ended 31 October 2007.
7. Copies of the Interim Financial Statements
Copies of the second interim financial statements are available on request from
the Company's registered office at Prestbury Holdings Plc, Barrington House,
Heyes Lane, Alderley Edge, Cheshire, SK9 7LA and on the Company's website
www.prestbury.com.
Further enquiries
Prestbury Holdings plc Telephone
Lee Birkett (Chief Executive) 01625 591 400
John East & Partners Limited 020 7628 2200
David Worlidge
Simon Clements
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Code, if any person is, or becomes,
'interested' (directly or indirectly) in 1 per cent. or more of any class of
'relevant securities' of Prestbury Holdings Plc, all 'dealings' in any 'relevant
securities' of that company (including by means of an option in respect of, or a
derivative referenced to, any such 'relevant securities') must be publicly
disclosed by no later than 3.30 pm (London time) on the London business day
following the date of the relevant transaction. This requirement will continue
until the date on which any offer (if made) becomes, or is declared,
unconditional as to acceptances, lapses or is otherwise withdrawn or on which
the 'offer period' otherwise ends. If two or more persons act together pursuant
to an agreement or understanding, whether formal or informal, to acquire an
'interest' in 'relevant securities', they will be deemed to be a single person
for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant
securities' by the Offeror or Prestbury Holdings Plc, or by any of their
respective 'associates', must be disclosed by no later than 12.00 noon (London
time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant
securities' 'dealings' should be disclosed, and the number of such securities in
issue, can be found on the Takeover Panel's website at
www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an 'interest' by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the
Panel's website. If you are in any doubt as to whether or not you are required
to disclose a 'dealing' under Rule 8, you should consult the Panel.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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