RNS Number:2359C
Culver Holdings PLC
28 April 2006
Culver Holdings plc Unaudited Preliminary Results 2005
CHAIRMAN'S STATEMENT
The results for the year ended 31 December 2005 are attached.
It is a great disappointment that after showing a modest profit for the half
year to June, a loss of #496,000 (2004 - #69,000) was made in the year as a
whole.
Substantial losses were incurred in both segments of the Group's business in the
second six months of the year, primarily as a result of events which have either
come to light or been quantified since the end of the year and which the Board
do not expect to recur.
In order to give shareholders a clearer understanding of the results, the table
below sets out the operating results excluding the items which are not expected
to recur and which items are commented on below:-
#000's #000's
Profit before items listed below 29
New production office start-up costs (181)
Additional provision for redress payments (117)
Amortisation and Impairment of Intangibles (178)
Registration business no longer conducted (49)
(525)
Loss for the year (496)
Insurance Broking
In the insurance broking business the new production office in the Thames Valley
about which I expressed optimism in my statement accompanying the interim
results did not maintain its initial momentum. All the personnel involved have
now left the Group and the start-up expenses have been written off. In addition,
the Cardiff office which had made a small profit in the first half recorded a
loss of #107,000 in the second half of the year. The effect of this together
with the softness of the market for general insurance is that the insurance
broking segment showed a loss of #268,000 in the second half, and a loss of
#40,000 for the year (2004 -#195,000 Profit).
Mr K. John Powell, the Chief Executive of the insurance broking business of the
Group has resigned as a director of the Company and of its subsidiaries without
compensation and has ceased his executive responsibilities within the Group.
Employee Benefits
The results of the Employee benefits business were affected by the need to
revisit the provision for redress payments for both Pensions Review and
Endowment mis-selling. Assurances were received from, and representations were
made by, the former directors of the Group's subsidiary which had provided
Independent Financial Advice to individuals that all Pensions mis-selling cases
had been recognised and the redress liability provided for. However, it was
discovered during the final quarter of 2005 that one pensions case which was
sold in 1991 had been wrongly described and improperly provided. The liability
has been quantified in the current year and this case has now been settled at a
cost to the Group in excess of #100,000, the charge for which has been provided
in the second half of 2005. The former directors concerned in the management of
this subsidiary and the conduct of the pensions review process left the Group in
early 2005.
As a result of the discovery noted above, a further review of the potential for
redress liabilities has been conducted by the board with the assistance of its
external compliance advisers and additional provisions made to cover the sums
for which the Group is advised that claims may be awarded against it.
In addition to these provisions which relate to types of business no longer
conducted by the Group the Board has decided to write off the remaining
Intangible Assets in the Employee Benefits Segment at a total cost in the second
half of #115,000. The overall effect is that this segment showed a loss of
#268,000 in the second half and a loss of #270,000 for the year (2004 -
#267,000).
Prospects
Insurance Broking
Following the change in management which followed these results the Board has
taken the opportunity to undertake a comprehensive review of the strategy of the
insurance broking business. Existing staff have been redeployed to the Thames
Valley office which operated profitably in the first quarter. The Board feels
that in order to return this segment to proper profitability, additional
experienced personnel need to be recruited and revenue streams developed that
derive from a range of products rather than clients. These will complement the
more traditional revenue upon which this business has relied.
A dedicated schemes unit has been formed and a number of products have been
developed for niche markets. The aim is for at least two of these to produce
income in 2006.
The Board believes that the steps it has taken should allow this segment to
fulfil its potential and restore it to its historical levels of profitability.
Employee Benefits
The Board, now having again reviewed and provided for the liabilities of the
employee benefits business and having written off the intangible assets, has
ensured that this segment's management is focused on building the business from
what is now a solid foundation.
The business has reduced its exposure to personal investment advice and other
consumer oriented business (for example mortgage advice) and is actively
developing its corporate customer base. The management team is hopeful that the
significant operational distraction of dealing with past mis-selling problems is
now over.
Management has identified those areas in which it has particular expertise and
is utilising its knowledge and experience of these markets to increase its
revenue. A graduate recruitment program has been instituted to overcome the
difficulty experienced in recruiting satisfactory qualified personnel. In
addition, steps are being taken to ensure that there is proper succession
planning in the business to protect the value of the business from the effects
of an ageing sales force. The initial results of the graduate recruitment
program are very encouraging.
The business has the customer base and personnel to meet its plans in both the
Cardiff and Thames Valley offices. The marketing strategy of the segment has
been reviewed in the first quarter of the financial year, and a more robust
marketing plan has been developed with the management team against which it will
report on a regular basis.
Conclusion
As these results show, 2005 has been a difficult year for the Company. Your
board believes that important changes, as outlined above, have now been made and
that once new management is settled and further production resource is in place
hopes that significant resultant improvements in the business will begin to be
evident during 2006.
R.M.H. Read
Chairman
28 April 2006
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2005
Note 2005 2004
#'000 #'000
Fees and commissions 3,165 3,442
Direct broking expenses (1,343) (1,098)
Administrative expenses (2,238) (2,468)
Operating loss (416) (124)
Gain arising on termination of subsidiary - 148
Finance costs - net (80) (93)
Loss before income tax (496) (69)
Income tax expense - -
Loss for the period attributable to equity holders of (496) (69)
the Company
Loss per share attributable to the equity holders of the
Company during the period expressed in pence per share
- Basic and diluted 8 (217)p (30)p
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2005
2005 2004
#'000 #'000
ASSETS
Non-current assets
Property, plant and equipment 61 32
Goodwill 2,115 2,115
Intangible assets - 406
Financial receivables 7 7
2,183 2,560
Current assets
Trade and other receivables 2,058 1,162
Cash and cash equivalents 6 1,049 676
3,107 1,838
Total assets 5,290 4,398
EQUITY
Capital and reserves attributable to equity holders
Share capital 2,859 2,859
Share premium 4,403 4,403
Other reserves 30 30
Retained earnings (7,862) (7,366)
Total equity (570) (74)
LIABILITIES
Non-current liabilities
Borrowings 956 959
Retirement benefit obligations 21 21
Provisions 7 115 340
1,092 1,320
Current liabilities
Trade and other payables 4,140 2,632
Borrowings 462 376
Provisions 7 166 144
4,768 3,152
Total liabilities 5,860 4,472
Total equity and liabilities 5,290 4,398
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to equity holders of the
Company
Share Share Other Retained Total
capital premium Reserves earnings Equity
#'000 #'000 #'000 #'000 #'000
Balance at 1 January 2004 2,859 4,403 - (7,298) (36)
Recognition of equity value of compound - 30 - 30
financial instrument
Loss for the period - - - (68) (68)
Balance at 31 December 2004 2,859 4,403 30 (7,366) (74)
Balance at 1 January 2005 2,859 4,403 30 (7,366) (74)
Loss for the period - - - (496) (496)
Balance at 31 December 2005 2,859 4,403 30 (7,862) (570)
CONSOLIDATED CASH FLOW STATEMENT
Note 2005 2004
#'000 #'000
Cash flows from operating activities
Cash generated from operations 9 426 178
Interest paid (142) (114)
Net cash generated from operating activities 284 64
Cash flows from investing activities
Purchases of property, plant and equipment (PPE) (19) (10)
Proceeds from sale of PPE 11 38
Purchases of intangible assets - (14)
Interest received 62 26
Net cash generated from investing activities 54 40
Cash flows from financing activities
Proceeds from borrowings 259 77
Repayments of borrowings (including finance leases) (207) (203)
Net cash generated from/(used in) financing activities 52 (126)
Net increase/(decrease) in cash and cash equivalents 390 (22)
Cash and cash equivalents at beginning of period 460 482
Cash and cash equivalents at end of period 6 850 460
Cash and cash equivalents include amounts of #1,038,000 (2004 - #610,000) in
respect of balances held in trust.
NOTES
1. General information
Culver Holdings plc ('the Company') and its subsidiaries (together 'Culver
Holdings' or 'the Group') provide a full range of insurance broking and
employee benefits and independent financial advisory services to businesses
and high net worth individuals in the UK and other parts of the world.
The Company is a limited liability company incorporated and domiciled in
the UK. The address of its registered office is Llanmaes, St Fagans,
CF5 6DU.
The Company has its primary listing on the London Stock Exchange.
This preliminary announcement has been approved for issue by the Board of
Directors on 28 April 2006.
2. Summary of significant accounting policies
2.1. Basis of preparation
This preliminary announcement of Culver Holdings plc is for the year ended
31 December 2005.
Whilst the Group Board continues to pursue a tight cost control and cash
management policy, its primary focus is now on growing the business and
returning it to profitability.
The Group has prepared its business plan on a conservative basis and the
directors have renewed the Group's bank facilities and negotiated
additional facilities which have become necessary as a result of the losses
in the second half of 2005. They have also negotiated stand by borrowing
facilities. As a result the Group Board is satisfied that, despite having
net liabilities, adequate financial resources will be available to the
Group until at least 31 December 2007.
Accordingly the financial statements have been prepared on a going concern
basis.
The financial statements have been prepared in accordance with those IFRS
standards and IFRIC interpretations issued and effective or issued and
early adopted as at the time of preparing these statements (April 2006).
The policies set out below have been consistently applied to all the
periods presented.
2.2. Accounting policies and first time adoption of IFRS
The financial reporting requirements for listed companies have changed
since the publication of the Group's last annual accounts, for the year
ended 31 December 2004. The change is due to the EC Regulation that all
listed companies publish their consolidated financial statements under
IFRS, issued by the IASB but as adopted for use by companies in the EU.
The accounting policies and methods of computation adopted in these
statements differ from those disclosed previously in the consolidated
financial statements for the year ended 31 December 2004. Such consolidated
financial statements for the year then ended were prepared in accordance
with UK Generally Accepted Accounting Principles (UK GAAP), as required by
the Companies Act 1985.
UK GAAP differs in some areas from IFRS. In preparing Culver Holdings' 2005
consolidated financial statements, Management has amended certain
accounting, valuation and consolidation methods applied in the UK GAAP
financial statements to comply with IFRS. The comparative figures in
respect of 2004 were restated to reflect these adjustments, except as
described in the accounting policies.
Reconciliations and descriptions of the effect of the transition from UK
GAAP to IFRS on the Group's equity and its net income and cash flows are
provided in Note 4.
The consolidated financial statements have been prepared under the
historical cost convention.
The reconciliation of equity at 1st January 2004 and 31st December 2004 and
the profit and loss for the year then ended under the applicable UK
accounting standards to the equity and profit and loss under IFRS was
published in the Interim Results dated 29th September 2005. The full
reconciliation of shareholders' funds at 31st December 2004 and profit
before tax for the year then ended under the applicable UK accounting
standards to that under IFRS will be reproduced in the Annual Report and
Accounts for the year ended 31st December 2005.
However for the purposes of this preliminary statement summary information
is presented in note 4.2 below showing the effects of IFRS adoption on
profit before tax for the year to 31st December 2004 and shareholders funds
as at 31st December 2004.
2.3. Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are
different from those of other business segments.
2.4. Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment and whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
Assets that are subject to amortisation are tested for impairment whenever
events or changes in circumstance indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows
(cash-generating units).
2.5. Insurance broking assets and liabilities
A subsidiary of the Company acts as an agent in broking the insurable risks
of its clients and is generally not liable as principal for premiums due to
underwriters or for claims payable to clients. Notwithstanding the legal
relationship with clients and underwriters and since, in practice, premium
and claim monies are usually accounted for by insurance intermediaries, the
Group has followed generally accepted accounting practice by showing cash,
debtors and creditors relating to insurance business as gross assets and
liabilities of the Group itself.
Separate balances are maintained and are included in the respective trade
receivables and payables balances where the Group transacts business with a
party in more than one capacity.
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
3.1. Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed
below.
(a) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2.4. The recoverable
amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of estimates.
(b) Pensions mis-selling and other redress liabilities
While the directors consider that the provision made for Pensions
mis-selling and other redress liabilities is a reasonable estimate of the
ultimate cost, given the assumptions that must be made, there remain a
number of areas of uncertainty which may result in the ultimate cost being
different (note 7).
4. Transition to IFRS
4.1. Basis of transition to IFRS
4.1.1 Application of IFRS 1
The Group's financial statements for the year ended 31 December 2005 will
be the first annual financial statements that comply with IFRS. These
financial statements have been prepared as described in Note 2. The Group
has applied IFRS 1 in preparing these consolidated financial statements.
Culver Holdings' transition date is 1 January 2004. The Group prepared its
opening IFRS balance sheet at that date.
The reporting date of the consolidated financial statements is 31 December
2005.
In preparing the consolidated financial statements in accordance with
IFRS 1, the Group has applied the mandatory exceptions and certain of the
optional exemptions from full retrospective application of IFRS.
4.1.2 Exemptions from full retrospective application elected by the Group
Culver Holdings has elected to apply the following optional exemptions from
full retrospective application.
(a) Business combinations exemption
Culver Holdings has applied the business combinations exemption in IFRS 1.
It has not restated business combinations that took place prior to the 1
January 2004 transition date.
4.1.3 Exceptions from full retrospective application followed by the Group
Culver Holdings has applied the following mandatory exceptions from
retrospective application.
(a) De-recognition of financial assets and liabilities exception
Financial assets and liabilities derecognised before 1 January 2004 are not
re-recognised under IFRS. The application of the exemption from restating
comparatives for IAS 32 and IAS 39 means that the Group recognised from 1
January 2005 any financial assets and financial liabilities derecognised
since 1 January 2004 that do not meet the IAS 39 derecognition criteria.
Management did not choose to apply the IAS 39 derecognition criteria to an
earlier date.
(b) Estimates exception
Estimates under IFRS at 1 January 2004 should be consistent with estimates
made for the same date under previous UK GAAP, unless there is evidence
that those estimates were in error.
4.2. Reconciliations between IFRS and UK GAAP
4.2.1 Summary of equity
1 January 31 December
2004 2004
#'000 #'000
Total equity under local UK GAAP (19) (44)
Recognition of equity element of loan stock issued - 30
Unwinding of interest on Loan Stock - (3)
Provision for post employment benefit liability (22) (22)
Adjustment in provision for post employment - 1
benefit liability
Provision for short-term employee benefits 5 (37)
Recognition of impairment provisions against - (86)
goodwill using the guidance set out in IAS 36
Reversal of amortisation charges against goodwill - 202
Amortisation of intangible assets - (115)
Total equity under IFRS (36) (74)
4.2.2 Reconciliation of net income for year ended 31 December 2004
Effect of
UK Transition
GAAP to IFRS IFRS
#'000 #'000 #'000
Fees and commissions 3,442 - 3,442
Direct broking expenses (1,098) - (1,098)
Administrative Expenses (2,428) (40) (2,468)
Operating loss (84) (40) (124)
Gain on sale or termination of subsidiary 148 - 148
Finance costs - net (89) (4) (93)
Loss before income tax (25) (44) (69)
5. Segment information
5.1. Primary reporting format - business segments
At 31 December 2005, the Group is organised into two main business
segments, insurance broking, and employee benefits including the provision
of independent financial advice.
Other Group operations mainly comprise income from the use of the Company's
share registration technology and know-how from other quoted companies.
This does not constitute a separately reportable segment.
The segment results for the year ended 31 December 2005 are as follows:
Insurance Employee
broking benefits Unallocated Group
#'000 #'000 #'000 #'000
Fees and commissions 2,445 711 9 3,165
Direct broking expenses (1,113) (230) - (1,343)
Administrative expenses (1,383) (738) (117) (2,238)
Operating loss (51) (257) (108) (416)
Finance costs - net 11 (13) (78) (80)
Loss before income tax (40) (270) (186) (496)
The segment results for the year ended 31 December 2004 are as follows:
Insurance Employee
broking benefits Unallocated Group
#'000 #'000 #'000 #'000
Fees and commissions 2,434 947 61 3,442
Direct broking expenses (713) (331) (54) (1,098)
Administrative expenses (1,512) (869) (87) (2,468)
Operating profit/(loss) 209 (253) (80) (124)
Gain arising on termination of - - 148 148
subsidiary
Finance costs - net (14) (14) (65) (93)
(Loss)Profit/ before income tax 195 (267) 3 (69)
Unallocated costs represent corporate expenses together with investment
income and finance costs.
Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would also be available to unrelated
third parties.
6. Cash and cash equivalents
2005 2004
#'000 #'000
Cash held in trust accounts 1,038 610
Other cash balances 11 66
Total 1,049 676
Cash and cash equivalents include the following for the purposes of the
cash flow statement.
Cash as above 1,049 676
Bank overdrafts (199) (216)
Total 850 460
7. Provisions and other liabilities
Other Salaries
Pensions Redress and Deferred
Mis-selling Claims Benefits consideration Other Total
#'000s #'000s #'000s #'000s #'000s #'000s
Balance at 1 January 2004 242 178 95 - - 515
Movements in period (188) (129) (48) 263 71 (31)
Balance at 31 December 2004 54 49 47 263 71 484
Movements in period 65 36 (10) (263) (31) (203)
Balance at 31 December 2005 119 85 37 - 40 281
Provisions categorised as current liabilities represent provisions for
liabilities which are expected to be settled within one year.
Provision categorised as non-current liabilities represent provisions for
liabilities which cannot be accurately quantified and are not expected to be
settled within one year.
Since the year end #103,000 of the pensions mis-selling liabilities and #25,000
of the other redress claims have been settled.
8. Earnings per share
Earnings per share is calculated by dividing the Loss attributable to
equity holders of the Company by the weighted average number of ordinary
shares in issue during the period.
2005 2004
#'000 #'000
Loss attributable to equity holders of the Company (496) (69)
Weighted average number of ordinary shares in issue 229 229
(thousands)
Loss per share (pence per share) (217)p (30)p
As the conversion of convertible loan stock would have an anti-dilutive
effect on earnings per share, the basic and diluted earnings per share are
thus the same in accordance with IAS 33.
9. Cash generated from operations
2005 2004
#'000 #'000
Cash flows from operating activities
Loss before tax (496) (69)
Interest receivable (62) (26)
Interest payable 142 114
Profit on sale of tangible assets (6) (1)
Depreciation of tangible fixed assets: 27 60
Amortisation of intangible fixed assets: 115 115
Impairment of intangible fixed assets 63 86
Unwinding of provision discounting 3 4
Receipts from PI insurers - 228
Payments to pensions mis-selling creditors - (416)
Surplus on realisation of subsidiary - (148)
(Increase)/decrease in debtors (896) 869
Increase/(decrease) in creditors 1,475 (637)
Increase/(decrease) in provisions 61 (1)
Net cash inflow from operating activities 426 178
10. Companies Act requirements
As the net assets of the Company are half or less of its called up share
capital, an Extraordinary General Meeting will be held in due course
pursuant to the provisions of Section 142(1) of the Companies Act 1985, to
consider whether any, and if so what, steps should be taken to deal with
the situation arising by virtue of the fact that the net assets of the
Company are half or less of its called up share capital.
11. Comparative figures
The comparative figures for the financial year ended 31 December 2004 are
extracted from the Company's statutory accounts as adjusted for IFRS (Note
2). Those accounts have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under Section 237(2) or (3) of
the Companies Act 1985.
12. Financial Information
The financial information contained in this preliminary announcement does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The results for the year ended 31st December 2005 are
unaudited and statutory accounts have not yet been delivered to the
Registrar of Companies. Statutory accounts for the year ended 31st December
2005 will be posted to shareholders shortly and delivered to the Registrar
of Companies following the Annual General Meeting.
Copies of this announcement (and statutory accounts when available) may be
obtained from the Secretary, Culver Holdings plc, Llanmaes, St Fagans,
Cardiff CF5 6DU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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