RNS Number:0957S
Culver Holdings PLC
01 March 2007
Culver Holdings plc Unaudited Preliminary Results 2006
Chairman's Statement
The results for the year ended 31 December 2006 are attached.
I am pleased to report a significant improvement in the results for the year
with the Group showing a profit of #52,000 (2005 - #496,000 loss).
Both segments of the Group's business returned to profitability although on an
insufficient scale to produce an adequate return for shareholders after
absorbing the substantial costs of operating as a listed company.
In November, David Sullivan was appointed as chief executive of the Group's
insurance broking subsidiary, Culver Insurance Brokers Limited.
David joined the company from Willis where he was Regional Managing Director
with responsibility for Birmingham, Reading, Bristol and Cardiff. He is tasked
with leading the insurance broking business forward and setting and implementing
its strategy for the immediate and medium to long term future.
He is, in particular, responsible for the performance of the business, and for
setting and driving the overall sales and development policy, including client
relationships.
I am delighted to welcome Chris Yates to the board as a non-executive director.
Chris brings a wealth of experience to the Group and, in these times of
increased corporate governance expectations, his awareness of this area will be
invaluable.
Insurance Broking
The insurance broking business has increased its turnover by 8 per cent to
#2,632,000 (2005 - #2,445,000).
The profit of the segment was significantly improved at #261,000 compared with a
loss of #40,000 in 2005.
These improvements are against a background of a market which continued to
soften with the resultant negative effect on commission.
During the year the new management team has conducted a complete review of the
quality of our service levels and compliance procedures and, as a result, there
have been a number of staff departures from the London office which will
inevitably have an adverse effect on levels of business in the short term. These
personnel have all been replaced and management is confident that there will be
further high quality additions to the London, Thames Valley and Cardiff offices
during 2007 to enhance the quality and breadth of our service to clients.
As a first step towards its objectives management has:
* Revised the way in which the company negotiates with insurers to allow
it to deliver to clients the lowest premium commensurate with the widest cover;
* Invested, and continues to invest, heavily in the specialist claims
team; and
* Significantly enhanced the segment's investment in IT. The Group needs
the most advanced systems available in order to be as efficient as possible thus
keeping costs as low as possible.
New management believes that the team and systems it now has in place will
provide this segment with the platform to deliver its growth targets over the
coming year.
Employee Benefits
The employee benefits segment made a profit before tax of #55,000 for the year
(2005 - #270,000 loss) which is a substantial improvement over 2005. The income
for the year at #681,000 (2005 - #711,000) was slightly reduced as a result of
the loss of one large client based in South Wales, however the income of the
Thames Valley office increased which helped to offset the reduction in income in
the Cardiff office.
Considerable effort has been expended again in the year on improving and
streamlining compliance and commission tracking systems, which management feels
will enhance the business in 2007. Whilst a large number of complaints
relating to the historical sale of endowment policies have been received in the
period, these have all been rejected. It is regrettable that the business, in
common with its peers, has to bear the administrative cost of the Financial
Ombudsman's complaint resolution process where the majority of claims in respect
of endowment mis-selling are groundless. Further considerable management time
has been absorbed in the resolution of those redress liabilities which were
identified in 2005.
Prospects
Insurance Broking
As referred to earlier the management team has been strengthened by the
appointment of David Sullivan as Chief Executive.
Management continues to invest heavily in new business, and is in advanced
discussions with a number of teams of producers operating in speciality
segments. If one or more of these teams can be recruited these should provide a
significant part of this segment's growth, and provide it with revenue streams
in additional business sectors.
The schemes unit has successfully launched two schemes which are generating
revenue and there is also a significant prospect pipeline.
With effect from 1st January 2007, we have agreed with Norwich Union that they
would become our principal underwriter for our SME non-motor business. This
scheme has a delegated authority from Norwich Union which will allow us
to become the client's sole point of contact from the initial quotation stage
through each renewal, including the claims process.
Whilst there are obvious benefits to Norwich Union in reducing their costs, we
expect to be able to yield a significant improvement in our administrative
efficiency whilst at the same time increasing our brokerage
returns. Those benefits are already being seen.
We believe that this model can be replicated with other affinity groups within
our business and are working to introduce these in a number of other areas.
Management anticipates launching a further significant scheme in the first
quarter of 2007. This will be in a business sector where we already have
significant penetration.
Premium rates across most general classes of business have remained "soft" for
the last 4 years. Traditionally, the insurance market has endured a cycle where
low periods have been immediately followed by definite periods of rating
increases. Since the dramatic increase in rates following September 11th 2001
(and the subsequent influx of capital into the insurance underwriting market)
the current cycle appears to be longer.
Rates fell dramatically in 2003 and appeared at the end of 2005 to have reached
the bottom. We would then have expected a period of strong rate growth. Whilst
2006 showed a firming up of existing prices there are no signs of the market
hardening further, with only a very few increases on selected cases, rather than
the wholesale portfolio increases that have been seen in the past.
The outlook for 2007 appears to be that insurers will be either reluctant, or
unwilling, to reduce individual rates further but will offer, for those risks
that they deem to be attractive, selected cover enhancements. The continued
profitable underwriting results from insurers would support the view that whilst
rates appear low, they are profitable and unlikely to increase.
This should mean that 2007 should be a period in which our brokerage income
stabilises.
Employee Benefits
Management has taken advantage of the appointment of a strengthened management
team for the insurance broking segment to review the cross selling opportunities
available to the two segments and is hopeful that the results of that review
will lead to benefits in the performance of both segments. Both segments of the
business will take advantage of joint marketing initiatives which it is intended
will improve the revenue to the group from each client, where appropriate.
Advances in the technology solutions available in the market should lead in turn
to efficiencies both of cost and working, and it is anticipated that a new
technology solution will be implemented by the half year which will lead to
increased productivity as well as improvements to the integrity of compliance
and audit trails.
The IFA segment continues to seek strategic alliances where suitable and
mutually beneficial, and there are a number of strategic initiatives in place
based on a review of the employee benefits and wealth management sectors which,
together with the advantages of offering a full service of insurance broking and
employee benefit consulting services to small to medium sized enterprise,
generate some optimism.
Conclusion
2006 with its management changes has been another difficult year for the Group,
albeit a much less difficult year than 2005.
The management, personnel and systems changes which have occurred during the
year have changed the approach Culver is adopting to its business and the early
signs of this appear encouraging. I believe that this places the Group in a
better position to exploit the opportunities the board believes exist and that,
with the addition of further productive personnel, 2007 can be a year in which
further significant improvements in the business will become evident.
It is still too early to project the outcome for 2007 with confidence but there
is an enthusiasm and optimism throughout the team which is very encouraging for
the future.
It only remains for me to thank all the staff for their unstinting support
during this period of change from which we should all benefit in the future.
R.M.H. Read
Chairman
1 March 2007
Culver Holdings plc Unaudited Preliminary Results 2006
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
Note 2006 2005
#'000 #'000
Fees and commissions 3,313 3,165
----- -----
Direct broking expenses (1,237) (1,343)
Administrative expenses (1,924) (2,238)
----- -----
Operating profit/(loss) 5 152 (416)
Finance costs - net (94) (80)
-- --
Profit/(loss) before tax 58 (496)
Income tax expense (6) -
-- ---
Profit/(loss) for the period
attributable to equity
holders of the Company 52 (496)
-- ---
Profit/(loss) per share attributable
to the equity holders of the Company
during the period expressed in pence
per share
- Basic 6 22.7p (217)p
- Diluted 6 16.4p (217)p
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2006
2006 2005
#'000 #'000
ASSETS
Non-current assets
Property, plant and equipment 40 61
Goodwill 2,115 2,115
Financial receivables 7 7
--- ---
2,162 2,183
----- -----
Current assets
Trade and other receivables 2,540 2,058
Cash and cash equivalents 7 1,451 1,049
----- -----
3,991 3,107
----- -----
Total assets 6,153 5,290
----- -----
EQUITY
Capital and reserves attributable to
equity holders
Share capital 2,859 2,859
Share premium 4,403 4,403
Other reserves 48 30
Retained earnings (7,810) (7,862)
----- -----
Total equity (500) (570)
----- -----
LIABILITIES
Non-current liabilities
Borrowings 778 956
Retirement benefit obligations 32 21
Provisions 8 - 115
--- -----
810 1,092
--- -----
Current liabilities
Trade and other payables 4,561 4,140
Current income tax liabilities 6 -
Borrowings 1,194 462
Provisions 8 82 166
----- -----
5,843 4,768
----- -----
Total liabilities 6,653 5,860
----- -----
Total equity and liabilities 6,153 5,290
----- -----
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 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)
----- ----- -- ----- ---
Balance at 1 January 2006 2,859 4,403 30 (7,862) (570)
Recognition of increase in
net equity value on
exchange of loan stock - - 18 - 18
Profit for the period - - - 52 52
-- -- -- -- --
Total recognised income and
expense for the period - - 18 52 70
-- -- -- -- --
Balance at 31 December 2006 2,859 4,403 48 (7,810) (500)
----- ----- -- ----- ---
Consolidated cash flow statement
Note 2006 2005
#'000 #'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations 9 (67) 426
Interest paid (100) (142)
--- ---
Net cash (absorbed by) /generated from
operating activities (167) 284
--- ---
Cash flows from investing activities
Purchases of property, plant and equipment
(PPE) (2) (19)
Proceeds from sale of PPE - 11
Interest received 59 62
-- --
Net cash generated from investing activities 57 54
-- --
Cash flows from financing activities
Proceeds from borrowings 96 259
Repayments of borrowings (including finance
leases) (264) (207)
--- ---
Net cash (used in)/generated from financing
activities (168) 52
--- ---
Net (decrease)/increase in cash and cash
equivalents (278) 390
--- ---
Cash and cash equivalents at beginning of
period 850 460
--- ---
Cash and cash equivalents at end of period 7 572 850
--- ---
Cash and cash equivalents include amounts of #773,000 (2005 - #1,038,000) in
respect of balances held in trust.
NOTES TO THE FINANCIAL STATEMENTS
The attached notes are an integral part of these financial statements
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 1 March 2007.
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 2006.
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. 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 2008.
Accordingly the financial statements have been prepared on the 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 (February 2007). The
policies set out below have been consistently applied to all the periods
presented.
2.2. Accounting policies
The preparation of financial statements requires the use of certain critical
accounting estimates. It also requires management to exercise judgement in the
process of applying the Company's accounting policies.
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. There are no geographical 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 8).
4. Segment information
4.1. Primary reporting format - business segments
At 31 December 2006, the Group is organised into two main business segments,
insurance broking, and employee benefits including the provision of independent
financial advice.
There is no secondary reporting format for the Group. All Group business arose
in the United Kingdom.
The segment results for the year ended 31 December 2006 are as follows:
Insurance Employee
broking benefits Unallocated Group
#'000 #'000 #'000 #'000
Fees and commissions 2,632 681 - 3,313
Direct broking expenses (1,024) (213) - (1,237)
Administrative expenses (1,357) (400) (167) (1,924)
----- --- --- -----
Operating profit/(loss) 251 68 (167) 152
Finance costs - net 16 (13) (97) (94)
--- -- -- --
Profit/(loss) before 267 55 (264) 58
taxation
Income tax expense (6) - - (6)
--- -- --- --
Profit/(loss) after
taxation 261 55 (264) 52
Depreciation of tangible
fixed assets 20 3 - 23
Capital expenditure 2 - - 2
-- - - --
Segment assets 5,010 628 515 6,153
Segment liabilities (4,579) (899) (1,175) (6,653)
----- --- ----- -----
Net assets/(liabilities) 431 (271) (660) (500)
--- --- --- ---
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 taxation (40) (270) (186) (496)
Depreciation of tangible
fixed assets 24 4 - 28
Amortisation of intangible
fixed assets - 115 - 115
Impairment of intangible
fixed assets - 63 - 63
Profit on sale of fixed 6 - - 6
assets
Capital expenditure 60 2 - 62
-- - - --
Segment assets 4,462 636 192 5,290
Segment liabilities (4,124) (984) (752) (5,860)
---- --- --- -----
Net assets/(liabilities) 338 (348) (560) (570)
--- --- --- ---
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.
5. Operating profit/(loss)
2006 2005
#'000 #'000
Operating profit/(loss) is stated after charging/
(crediting):-
Remuneration of auditors
- statutory audit 34 31
- other 4 15
Depreciation of tangible fixed assets
- owned 14 15
- hire purchase 9 13
Amortisation of intangible fixed assets - 115
Impairment of intangible fixed assets and goodwill - 63
Rentals payable under operating leases
- plant and machinery 15 8
- other 39 60
Exceptional items:-
Recruitment costs 47 -
Surplus arising on derecognition of liabilities (175) -
New production office start-up costs - 181
Additional provision for redress payments - 117
Profit on sale of fixed assets - (6)
--- ---
6. Earnings per share
6.1. Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the period.
2006 2005
#'000 #'000
Profit/(loss) attributable to equity holders of the
Company 52 (496)
Weighted average number of ordinary shares in issue
(thousands) 229 229
Profit/(loss) per share (pence per share) 22.7p (217)p
6.2. Diluted
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding assuming conversion of all dilutive potential
ordinary shares.
The Company has the following categories of dilutive potential ordinary shares:
Convertible Loan Stock 2009 and 2011, and warrants.
As the conversion of the 2009 Convertible Loan Stock would have an anti-dilutive
effect on earnings per share, and the subscription price of the warrants is
above the market price of the shares, these have not been taken into account in
computing the diluted earnings per share.
The calculation is performed for the 2011 Convertible Loan Stock to determine
the number of shares that could have been acquired based on the conversion
rights attached to that stock. The number of shares calculated as above is
compared with the number of shares that would have been issued assuming the
conversion of the Loan Stock.
2006 2005
#'000 #'000
Profit/(loss) attributable to equity holders of the
Company 52 (496)
Effect of interest on 2011 Convertible Loan Stock 52 -
-- ---
Profit/(loss) attributable to equity holders of the
Company (diluted) 104 (496)
--- ---
Weighted average number of ordinary shares in issue
(thousands) 229 229
Adjustment for loan stock (thousands) 405 -
--- ---
Weighted average number of ordinary shares for
diluted earnings per share (thousands) 634 229
--- ---
Diluted profit/(loss) per share (pence per share) 16.4p (217)p
7. Cash and cash equivalents
2006 2005
#'000 #'000
Cash held in trust accounts 773 1,038
Other cash balances 678 11
--- ----
Total 1,451 1,049
----- -----
Cash and cash equivalents include the following for the purposes of the cash
flow statement.
Cash as above 1,451 1,049
Bank overdrafts (879) (199)
----- -----
Total 572 850
--- ---
8. 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 2005 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
Movements in
period (119) (26) (14) - (40) (199)
--- -- -- - -- ---
Current - 59 23 - - 82
Non-current - - - - - -
- -- -- - - --
Balance at 31
December 2006 - 59 23 - - 82
- -- -- - - --
Provisions categorised as current liabilities represent provisions for
liabilities which are expected to be settled within one year.
9. Cash (absorbed by)/generated from operations
2006 2005
#'000 #'000
Cash flows from operating activities
Profit/(loss) before tax 58 (496)
Interest receivable (59) (62)
Interest payable 153 142
Profit on sale of tangible assets - (6)
Depreciation of tangible fixed assets 23 27
Amortisation of intangible fixed assets - 115
Impairment of intangible fixed assets - 63
Unwinding of discounting 6 3
Payments to pensions mis-selling creditors (150) -
(Increase)/decrease in debtors (472) (896)
Increase/(decrease) in creditors 387 1,475
(Decrease)/increase in provisions (13) 61
-- --
Net cash (outflow)/inflow from operating
activities (67) 426
-- ---
10. Financial Information
The comparative figures for the financial year ended 31 December 2005 are
extracted from the Company's statutory accounts. 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.
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 2006 are unaudited and
statutory accounts have not yet been delivered to the Registrar of Companies.
Statutory accounts for the year ended 31st December 2006 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
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