RNS Number:3953T
Culver Holdings PLC
29 April 2008
CHAIRMAN'S STATEMENT
The results for the year ended 31 December 2007 are attached and, as presaged in
the announcement on 8 February of the acquisitions of Lloyd's broker, LPH Pitman
Ltd, and aviation specialist broker, AMS Corporate Risks Ltd, show an overall
loss for the year of #617,000.
This is not what I had hoped for at the half year when I reported to
shareholders that the outcome for the full year would depend crucially on the
speed at which new producers begin to book income. I am disappointed to have to
report that the speed was not what we had anticipated. This is in no small part
due to significant challenges encountered, and later overcome, in closing the
key acquisitions to give the Group access to the Lloyd's market. The delay in
concluding these transactions coupled with the costs of restructuring the Group
for its future have weighed heavily on these results.
Having said that, both operating segments were profitable in the year. Insurance
broking made a profit before taxation of #383,000, and employee benefits made a
profit of #12,000. The comparative figures for 2006 are #267,000 and #55,000
respectively. Unallocated costs, on the other hand, have increased significantly
due mainly to the costs of reviewing the Group's structure. The board had
anticipated that the new structure would come on stream at the beginning of the
final quarter of 2007 but is only now beginning to show signs of starting to
produce income.
Insurance Broking
The turnover of the insurance broking business decreased from #2,632,000 in 2006
to #2,295,000. This reflected the loss of renewal business following the loss of
personnel in late 2006, the delays in adding business as referred to above and
the extension, in 2006, of a number of policies to 31 December 2007, which meant
no income was earned on these accounts in 2007.
Notwithstanding that, the profit of the segment improved to #383,000 from
#267,000 in 2006.
The business has now been substantially refocused as a specialist insurance
broker operating in two divisions in the following sectors:
* Retail broking
o Large corporate risks
o Small commercial risks
* Lloyd's, wholesale and speciality broking
o Speciality risks
o Wholesale risks
The retail broking activities represent the traditional broking operations of
the Group.
The Lloyd's, wholesale and speciality broking business comprised the
professional indemnity and trade credit specialist teams. In February 2008, the
specialist aviation team and the wholesale broking team were added to this
division. Attracting and developing these and other specialist teams was and
remains critically dependent on direct access to the Lloyd's market. It is here
that the unexpected delays encountered in concluding the acquisition were most
keenly felt.
Employee Benefits
The employee benefits segment made a profit before tax of #12,000 for the year
(2006: #55,000). The income for the year at #692,000 (2006: #681,000) was
slightly increased due to the recruitment of additional qualified personnel
whose production made up for the loss of the business's largest client in mid
2006. Increased recruitment costs for advisers contributed to the diminution in
profit however the advisers concerned having been through training and induction
are expected to contribute at their full potential by the end of 2008.
Prospects and current trading
Insurance Broking
The traditional retail broking operations of the Group face significant
challenges in weathering the difficult conditions in today's insurance market.
Rates continue to soften and the consolidation of the industry has given certain
intermediaries access to pricing that the independent broker has to invest very
significant effort to compete with, if it can at all. That said, this division
has achieved broking income in the first quarter which is ahead of the
equivalent period last year and is close to budget for the period.
By providing wholesale products and services that allow independent brokers
(including its own retail broking operations) to compete effectively the Group
hopes to be able to generate more attractive returns than those to be derived
from competing directly with the consolidators. The Group is also seeing
enquiries from outside the UK which may develop in a profitable way. These
activities are in an earlier stage of development and their progress is (and
will continue for a while) to be less predictable than the retail business. The
results from this division have not met our expectations in the first quarter of
2008, in particular because of a slowdown in the professional risks activity.
Employee Benefits
Having spent considerable management effort on the recruitment of suitably
qualified advisers and installation and refinement of the new management
information system for the business, this segment is now well placed to fulfil
its potential in 2008. For the first time the business has a full complement of
productive personnel who are targeted closely on performance. Performance in the
first quarter has been satisfactorily ahead of the same period in 2007 in terms
of both income and trading outcome although at both levels the plan was for an
even better performance.
The portfolio of funds under influence has been verified and is in the process
of being rationalised in order to ensure the best possible service proposition
can be offered to clients.
It is anticipated that the results of the business in 2008 and beyond will
reflect the streamlining and focus of the business by its management.
Conclusion
While the business has now been reorganised and refocused, turning the strategy
into an attractive economic return is likely to take at least until the end of
the 2008 trading year. While I remain confident that in due course the benefits
of this strategy will be recognised by shareholders there may remain some pain
to bear over the year to come.
RMH Read
Chairman
29 April 2008
This statement includes the information required in an Interim Management
Statement by the Disclosure Rules and Transparency Rules of the UK Listing
Authority in respect of the period from 1 January 2008 to the date hereof.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
Note 2007 2006
#'000 #'000
Fees and commissions 2,987 3,313
---------------------- ------ ---------- -----------
Direct broking expenses (946) (1,237)
Administrative expenses (2,537) (1,924)
---------------------- ------ ---------- -----------
Operating (loss)/profit 5 (496) 152
Finance costs - net (118) (94)
---------------------- ------ ---------- -----------
(Loss)/profit before tax (614) 58
Income tax expense (3) (6)
---------------------- ------ ---------- -----------
(Loss)/profit for the period (617) 52
---------------------- ------ ---------- -----------
Attributable to:-
Equity holders of the Company (638) 52
---------------------- ------ ---------- -----------
Minority interests 21 -
---------------------- ------ ---------- -----------
Total recognised income and expense for the
period (617) 52
---------------------- ------ ---------- -----------
(Loss)/profit per share attributable to the
equity holders of the Company during the period
expressed in pence per share
- Basic 6 (278.6)p 22.7p
---------------------- ------ ---------- -----------
- Diluted 6 (278.6)p 16.4p
---------------------- ------ ---------- -----------
BALANCE SHEET
AT 31 DECEMBER 2007
Note 2007 2006
#'000 #'000
ASSETS
Non-current assets
Property, plant and equipment 91 40
Goodwill 2,115 2,115
Financial receivables 7 7
---------------------- ------ ----------- -----------
2,213 2,162
---------------------- ------ ----------- -----------
Current assets
Trade and other receivables 2,084 2,540
Cash and cash equivalents 7 789 1,451
---------------------- ------ ----------- -----------
2,873 3,991
---------------------- ------ ----------- -----------
Total assets 5,086 6,153
---------------------- ------ ----------- -----------
EQUITY
Capital and reserves attributable to equity
holders
Share capital 2,859 2,859
Share premium 4,403 4,403
Other reserves 48 48
Retained earnings (8,448) (7,810)
---------------------- ------ ----------- -----------
(1,138) (500)
Minority interest 21 -
---------------------- ------ ----------- -----------
Total equity (1,117) (500)
---------------------- ------ ----------- -----------
LIABILITIES
Non-current liabilities
Borrowings 749 778
Retirement benefit obligations - 32
---------------------- ------ ----------- -----------
749 810
---------------------- ------ ----------- -----------
Current liabilities
Trade and other payables 4,378 4,561
Borrowings 1,033 1,194
Current income tax liabilities 9 6
Provisions 34 82
---------------------- ------ ----------- -----------
5,454 5,843
---------------------- ------ ----------- -----------
Total liabilities 6,203 6,653
---------------------- ------ ----------- -----------
Total equity and liabilities 5,086 6,153
---------------------- ------ ----------- -----------
CASH FLOW STATEMENT
Note 2007 2006
#'000 #'000
Cash flows from operating activities
Cash absorbed by operations 8 (310) (67)
Interest paid (114) (100)
---------------------- ------ ----------- -----------
Net cash absorbed by operating activities (424) (167)
---------------------- ------ ----------- -----------
Cash flows from investing activities
Purchases of property, plant and equipment
(PPE) (45) (2)
Interest received 57 59
---------------------- ------ ----------- -----------
Net cash generated from investing activities 12 57
---------------------- ------ ----------- -----------
Cash flows from financing activities
Proceeds from borrowings 200 96
Repayments of borrowings (including finance
leases) (323) (264)
---------------------- ------ ----------- -----------
Net cash used in financing activities (123) (168)
---------------------- ------ ----------- -----------
Net decrease in cash and cash equivalents (535) (278)
---------------------- ------ ----------- -----------
Cash and cash equivalents at beginning of
period 572 850
---------------------- ------ ----------- -----------
Cash and cash equivalents at end of period 37 572
---------------------- ------ ----------- -----------
Cash and cash equivalents include amounts of #235,000 (2006: #773,000) in
respect of balances held in trust.
Consolidated statement of changes in shareholders' equity
Attributable to equity holders of the
Company
Share Share Other Retained Minority Total
capital premium reserves earnings interest equity
#'000 #'000 #'000 #'000 #'000 #'000
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)
------------------- ------ ------ ------ ------- ------ ------
Balance at 1 January 2007 2,859 4,403 48 (7,810) - (500)
(Loss)/profit for the
period - - - (638) 21 (617)
------------------- ------ ------ ------ ------- ------ ------
Balance at 31 December
2007 2,859 4,403 48 (8,448) 21 (1,117)
------------------- ------ ------ ------ ------- ------ ------
NOTES
These notes are an integral part of these unaudited preliminary results
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 29 April 2008.
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 2007.
The board's current policy is restructuring the business in preparation for
development of new products in more specialist areas where there is less intense
price competition.
The Group has prepared its business plan on a conservative basis and the
directors have renewed the Group's borrowing 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 2009.
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 (April 2008). 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. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are disclosed
in Note 3.
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.
3.2. 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.
4. Segment information
4.1. Primary reporting format - business segments
At 31 December 2007, the Group was 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.
4.2. The segment results for the year ended 31 December 2007 were as
follows:
Insurance Employee
Broking benefits Unallocated Group
#'000 #'000 #'000 #'000
Fees and commissions 2,295 692 - 2,987
Direct broking expenses (718) (228) - (946)
Administrative expenses (1,217) (439) (881) (2,537)
--------------- -------- -------- -------- ---------
Operating profit/(loss) 360 25 (881) (496)
Finance costs - net 23 (13) (128) (118)
--------------- -------- -------- -------- ---------
Profit/(loss) before taxation 383 12 (1,009) (614)
Income tax expense (3) - - (3)
--------------- -------- -------- -------- ---------
Profit/(loss) after taxation 380 12 (1,009) (617)
--------------- -------- -------- -------- ---------
Depreciation of tangible fixed
assets 27 4 2 33
--------------- -------- -------- -------- ---------
Capital expenditure 57 6 22 85
--------------- -------- -------- -------- ---------
Segment assets 5,836 467 (1,217) 5,086
--------------- -------- -------- -------- ---------
Segment liabilities (4,457) (922) (824) (6,203)
--------------- -------- -------- -------- ---------
Net assets/(liabilities) 1,379 (455) (2,041) (1,117)
--------------- -------- -------- -------- ---------
4.3. The segment results for the year ended 31 December 2006 were 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 taxation 267 55 (264) 58
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)
--------------- -------- -------- -------- ---------
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.
The insurance broking net assets increased primarily as a result of the increase
in the share capital of the primary insurance broking subsidiary to meet FSA
requirements.
The increase in central costs reflects the costs incurred in reorganising the
Group's businesses and establishing the infrastructure for the new specialist
divisions.
5. Operating (loss)/profit
2007 2006
#'000 #'000
Operating (loss)/profit is stated after charging/(crediting):
Fees payable to the company's auditor for the audit of the
company's annual accounts 12 11
Fees payable to the company's auditor for other services:
the audit of the company's subsidiaries pursuant to
legislation 26 23
other services pursuant to legislation 2 2
Depreciation of tangible fixed assets
owned 15 14
hire purchase 18 9
Rentals payable under operating leases
PPE 31 15
other 89 39
Exceptional items
recruitment costs - 47
surplus arising on de-recognition of liabilities - (175)
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.
2007 2006
#'000 #'000
(Loss)/ profit attributable to equity holders of the Company (638) 52
---------------------- ------- -------
Weighted average number of ordinary shares in issue
(thousands) 229 229
---------------------- ------- -------
(Loss)/profit per share (pence per share) (278.6p) 22.7p
---------------------- ------- -------
6.2. Diluted
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding to assume 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 save to
an immaterial extent 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.
2007 2006
#'000 #'000
(Loss)/profit attributable to equity holders of
the Company (638) 52
Effect of interest on 2011 Convertible Loan Stock 55 52
---------------------- ---------- ------- -------
(Loss)/profit attributable to equity holders of
the Company (diluted) (583) 104
---------------------- ---------- ------- -------
Weighted average number of ordinary shares in
issue (thousands) 229 229
---------------------- ---------- ------- -------
Adjustment for loan stock (thousands) 423 405
---------------------- ---------- ------- -------
Weighted average number of ordinary shares for
diluted earnings per share (thousands) 652 634
---------------------- ---------- ------- -------
---------------------- ---------- ------- -------
Diluted (loss)/profit per share (pence per (278.6p)* 16.4p
share) ---------- ------- -------
----------------------
* The 2007 number is shown as the Basic earnings per share as the calculation
would reduce the loss per share.
7. Cash and cash equivalents
2007 2006
#'000 #'000
Cash held in trust accounts 235 773
Other cash balances 554 678
---------------------- ------- -------
Total 789 1,451
---------------------- ------- -------
Cash and cash equivalents include the following for the purposes of the cash
flow statement.
Cash as above 789 1,451
Bank overdrafts (752) (879)
------------- ------- -------
Total 37 572
------------- ------- -------
8. Cash absorbed by operations
2007 2006
#'000 #'000
Cash flows from operating activities
(Loss)/profit before tax (614) 58
Interest receivable (57) (59)
Interest payable 169 153
Depreciation of tangible fixed assets 33 23
Unwinding of discounting 6 6
Payments to pensions mis-selling creditors - (150)
Decrease/(increase) in receivables 456 (472)
(Decrease)/increase in payables (303) 374
------------------------------ ------- -------
Net cash outflow from operating activities (310) (67)
------------------------------ ------- -------
9. Financial Information
The comparative figures for the financial year ended 31 December 2006 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 2007 are unaudited and
statutory accounts have not yet been delivered to the Registrar of Companies.
Statutory accounts for the year ended 31 December 2007 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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