TIDMCB.
RNS Number : 3506D
CBG Group Plc
22 March 2011
22 March 2011
CBG GROUP PLC
(AIM: CB.)
PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2010
CBG Group plc ("CBG" or the "Group"), the Manchester based
insurance broker and financial services specialist, is pleased to
announce full year results for the year to 31 December 2010.
HIGHLIGHTS
-- Revenue GBP7,708,000 (2009: GBP8,961,000);
-- Adjusted * EBITD GBP1,160,000 (2009: GBP1,386,000);
-- Adjusted * pre-tax profits GBP842,000 (2009:
GBP1,026,000);
-- Diluted adjusted * earnings per share 3.83p (2009:
4.69p);
-- Earnings per share - diluted (pence) adjusted for loss on
disposal of Personal Lines business 1.79p (2009: 1.18p);
-- Final dividend proposed 0.75p per share (2009: 0.70p per
share);
-- Acquisition of Rockbridge Healthcare Limited;
-- Deferred consideration payments of GBP1,055,000 fully
settled, including cash payments of GBP945,000;
-- New product initiatives, including the development of PALM, a
strategic partnership with MPS Risk Solutions (17 January
2011).
* Adjusted to add back exceptional operating and non-operating
expenses, amortisation, and share option charges.
Mike Askew, Group Managing Director of CBG said:
"I am in no doubt that the trading environment will continue to
be tough in 2011. While some of our customer markets remain under
pressure, our future prospects are encouraging. I remain confident
that the fundamentals of our businesses are strong, our balance
sheet is in good shape and new management is in place with the
background, experience and ambition to drive the business
forward."
---ENDS---
Enquiries
CBG Group plc 0161 920 0200
Mike Askew, Group Managing Director 07720 400356
Martyn Hughes, Group Finance Director 07734 543454
www.cbg-group.co.uk
Zeus Capital (Nomad & Broker) 0161 831 1512
Alex Clarkson / Nick Cowles
Daniel Stewart & Company plc (Joint
Broker) 020 7776 6550
Martin Lampshire
Bishopsgate Communications Ltd 020 7562 3350
Nick Rome / Laura Stevens
Chairman's statement
Financial overview
I am pleased to be announcing my first set of year end results
for our business as Chairman. Like the prior year, 2010 was one of
continued market uncertainty and economic fragility which has
impacted heavily on the performance of the majority of our core
client base. Their revenues and activity levels have fallen,
ensuring that the year has not been without challenge for CBG given
the knock on effect on our supporting advisory business.
Decisive actions have been undertaken in moving away from
non-core business activities and marginally profitable areas and,
whilst this has been detrimental to revenues, the return on capital
employed has been enhanced. We have a clear plan to improve the
fortunes of the business built upon the high level of client
retention we maintain. We are passionate about customer service and
strive for operational excellence across the breadth of our
activities. Our management structure is focused upon a customer
centric operation and we have continued to evolve the CBG brand
successfully within a changing market.
In the twelve months to 31 December 2010 the Group's revenue
fell by GBP1,253,000 to GBP7,708,000 (2009: GBP8,961,000), with the
fall in adjusted * pre tax profit limited to GBP184,000 to
GBP842,000 (2009: GBP1,026,000). In recognition of disposing of our
non-core private client car and household activities it has been
appropriate to allocate GBP902,000 of goodwill to the disposal of
these activities thus generating a loss on disposal of GBP944,000
in these accounts. The basic diluted loss per share for the year
ended 31 December 2010 was 4.18 pence (2009: Profit 1.18 pence).
However, adjusting for the effects of the loss on disposal outlined
above, the basic diluted earnings per share equates to a profit of
1.79 pence. In the same period diluted adjusted * earnings per
share was 3.83 pence (2009: 4.69 pence).
* Adjusted to add back exceptional operating and non-operating
expenses, amortisation, and share option charges.
Strategy
We have announced our intention to prioritise our future
investment in speciality schemes, by putting service and the
customer at the heart of the business, and giving our teams the
tools and resources to serve our clients, I am confident that CBG
can fulfil its mission and rank amongst the most profitable
independent brokers in the UK.
CBG's key strengths have helped us manage our way through this
undoubtedly difficult period. Our management took decisive action
to stabilise the business in the face of the downturn, focussing on
our customers, managing our business tightly, and with a close eye
on costs and cash. We have introduced further operational
efficiencies to improve our business and I believe very strongly
that CBG is at a very exciting stage of its journey.
These changes are described in more detail in the Group Managing
Director's review. Through these changes we will build the platform
from which we will deliver sustainable long-term growth.
Dividend
The Board is recommending a final dividend of 0.75p, up 7% on
the dividend paid in the previous year. The dividend will be paid,
subject to shareholders approval, on 27 May 2011 to shareholders on
the register on 6 May 2011.
Board
There have been changes to the composition of the Group Board
this year. Stephen Darcy, an Executive Director and Managing
Director of CBG Insurance Brokers, left the Company in August 2010.
Stephen Rees, the Managing Director of our Financial Services
division, was appointed to the Board on 23 March 2010.
Going concern
The directors acknowledge the guidance on going concern and
financial reporting published by the Financial Reporting Council in
October 2009. The Group is well placed to manage its business risks
and has adequate resources to continue in operational existence for
the foreseeable future. Our current banking arrangements are due
for renewal in August 2011 and based on ongoing discussions with
current banking partners, the directors are confident that
facilities will be available and appropriate for our
requirements.
The directors have reviewed the Group's forecasts and budgets
for the next 12 months and based on the information set out above,
the directors believe that it is appropriate to prepare the
financial statements on a going concern basis.
Outlook
As expected, there has been no let up to the significant changes
that are taking place in our chosen markets, and we will continue
to take a realistic view about how these are likely to impact our
business.
We know that we need to be both thoughtful and vigorous in
addressing these changes and, though there is much for us to do to
execute this plan, the Board is satisfied that appropriate steps
have been taken. While the rate of recovery in our markets is
difficult to predict I am confident that our underlying
profitability will recover significantly as end-markets
improve.
We remain cautious about 2011 but very optimistic that we are
well positioned to meet the challenges ahead. More than most
sectors, we depend heavily on the quality of our people. It is
people who make a difference and I believe we have a great team of
loyal hard-working staff, a team which has been collectively
responsible for the progress the Group has made this year. I look
forward to working with them in the year ahead.
Robin Slinger
Chairman
22 March 2011
Group Managing Director's statement
Our business has faced similar challenges to those in the prior
year, in what still remains a very difficult market to trade in. We
have continued to focus on our client retention policy, ensuring we
deliver value and quality service to our relationships, albeit at
the same time continuing to take out costs where we can, so as to
maintain our operating margins. We will continue to focus on
profitable organic growth in the existing businesses, constantly
looking for opportunities in niche markets where we have knowledge
and expertise, and where we believe we can make an acceptable
margin.
Group Overview
CBG has coped well in difficult trading conditions, improving
margins through careful management of resource, costs and
investment. The Group has delivered an adjusted * pre-tax profit of
GBP842,000 (2009: GBP1,026,000) and the 7% increase in the final
dividend reflects our confidence in the future outlook. We have
undertaken a review of our operating management structure and made
changes in the final quarter of 2010 that will enable us to utilise
our resources effectively to achieve our goals.
* Adjusted to add back exceptional operating and non-operating
expenses, amortisation, and share option charges.
Our strategic focus remains on four core elements: consistently
delivering excellent customer service, strong leadership and
sensible business practices, profitable organic growth and a
results driven culture.
Acquisitions
The general outlook for acquisitions towards the end of 2010 has
seen a cautious optimism return, although this outlook is tempered
by a general lack of quality targets and ongoing differences in
perception of value between buyers and sellers.
CBG acquired Rockbridge Healthcare Limited on the 30 September
2010, immediately integrating the trade into our already profitable
healthcare division. This has broadened the number of opportunities
to cross-sell other services to the acquired client base as well as
allowed us to accelerate our review of the management structure . A
deferred consideration amount of GBP35,000 is payable based on earn
out targets contingent on the achievement of minimum income
levels.
Business Operations
Whilst our two main trading divisions continue to operate as
separate legal entities the responsibility for the day to day
management of the businesses is now undertaken by a Group operating
management team. The team of five, including myself, all have clear
roles and responsibilities for the key functions of operations
& finance, client services, business development and strategic
planning.
Beneath this team is a second tier of management all of who
represent the future succession plans for the Group. All have
defined accountabilities and are measured in their performance by
agreed key performance indicators. Whilst these changes are still
in their infancy, the early signs are that they are having a
positive impact, particularly in how we interact with our clients
and a developing creativity in everything we do.
Trading conditions in 2010 have continued to be difficult
particularly in our insurance broking division where market rates
remained stubbornly soft, and revenues were impacted by the
disposal of our non-core personal lines business in the first
quarter of the year, but it remains very competitive with the
obvious pressure on margins. The financial services division
responded well to the challenges of the slower market conditions
and further progress has been made in repositioning the division to
enable greater revenue resilience.
New product initiatives, including the development of PALM, a
strategic partnership with MPS Risk Solutions
www.palm-insurance.co.uk launched in January 2011, and major
marketing campaigns feature heavily in the plan to combat the
challenges of a difficult market. The business now has a strongly
motivated and high calibre team, focused on growth and profit
delivery and we will continue to develop our proposition to our end
user customers.
Compliance
We operate in a highly regulated industry and compliance is a
significant and increasingly demanding obligation. New and improved
professional standards come into force in December 2012 within
financial services, representing a fundamental change to the way in
which advisors do business. We will ensure our training &
competence schemes are fit for purpose, as well as ensuring our
sales processes deliver the right quality of service.
We feel it is important that we look for the advantages rather
than focus on resisting change and will be presenting clients with
a clear picture of what they are being offered as a service and
importantly explain how they will pay for that service.
We will continue to ensure uniformity across all areas of the
business by applying in depth knowledge of the regulatory
obligations.
Employees
Our employees are passionate about what they do and have an
exceptional commitment to our customers. Their performance
underpins my confidence in our ability to deliver in the coming
years. On behalf of the Board, I would like to thank everyone at
CBG for their determined efforts in a difficult year and their
commitment to the future success of our business.
Outlook
I am in no doubt that the trading environment will continue to
be tough in 2011. While some of our customer markets remain under
pressure, our future prospects are encouraging. I remain confident
that the fundamentals of our businesses are strong, our balance
sheet is in good shape and new management is in place with the
background, experience and ambition to drive the business
forward.
Mike Askew
Group Managing Director
22 March 2011
Consolidated Income Statement
Year ended 31 December 2010
Year to Year to
31/12/10 31/12/09
Note GBP'000 GBP'000
Revenue 2 7,708 8,961
Administrative expenses (7,776) (8,774)
Operating profit before amortisation,
exceptional operating expenses
and share option charges 910 1,133
Amortisation (600) (704)
Exceptional operating expenses 3 (302) (177)
Share option charges (76) (65)
--------------------------------------- ----- --------- ---------
Administrative expenses excluding
exceptional items (6,798) (7,828)
--------------------------------------- ----- --------- ---------
Operating (loss)/ profit 2 (68) 187
Investment income 6 10
Finance costs (74) (117)
--------------------------------------- ----- --------- ---------
(Loss) / profit before tax from
continuing operations (136) 80
Loss for the year from the disposal
of Personal Lines business 3 (944) -
(Loss) / profit before tax (1,080) 80
Income tax 419 106
(Loss) / profit attributable to
ordinary shareholders (661) 186
--------------------------------------- ----- --------- ---------
(Loss) / earnings per share from
continuing operations: Pence Pence
(Loss) / earnings per share -
basic 4 (4.18) 1.19
--------------------------------------- ----- --------- ---------
(Loss) / earnings per share -
diluted 4 (4.18) 1.18
--------------------------------------- ----- --------- ---------
The Group has no items, other than the profit for the year, to
be recognised in the "Consolidated statement of comprehensive
income" and consequently this statement has not been shown.
Consolidated Statement of Financial Position
31 December 2010
2010 2009
Note GBP'000 GBP'000
Non-current assets
Goodwill 12,342 13,067
Other intangible assets 2,119 2,907
Property, plant and equipment 357 550
Deferred tax asset 136 27
------------------------------- ----- -------- ---------
14,954 16,551
------------------------------- ----- -------- ---------
Current assets
Trade and other receivables 3,731 4,652
Cash and cash equivalents 1,207 1,844
------------------------------- ----- -------- ---------
4,938 6,496
------------------------------- -----
Total Assets 19,892 23,047
------------------------------- ----- -------- ---------
Current liabilities
Bank overdraft (389) -
Trade and other payables (4,573) (5,825)
Deferred consideration (35) (1,055)
Current tax (364) (122)
Borrowings (2,325) (410)
------------------------------- ----- -------- ---------
(7,686) (7,412)
------------------------------- ----- -------- ---------
Non-current liabilities
Deferred tax (302) (820)
Borrowings - (2,325)
(302) (3,145)
Total liabilities (7,988) (10,557)
------------------------------- ----- -------- ---------
Equity
Ordinary shares 7 636 627
Share premium account 7,891 7,790
Merger reserve 449 449
Retained earnings 2,928 3,624
Shareholders' equity 11,904 12,490
------------------------------- ----- -------- ---------
Total equity and liabilities 19,892 23,047
------------------------------- ----- -------- ---------
These financial statements were approved by the Directors on 22
March 2011.
Consolidated Statement of Changes in Shareholders' Equity
Year ended 31 December 2010
Share
Share premium Merger Retained Total
capital account reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2009 620 7,675 449 3,534 12,278
Dividends paid - - - (102) (102)
Issue of ordinary
shares 7 115 - - 122
Other reserves
movement due to share
options charge - - - 65 65
Impact of deferred tax
on share option
charge - - (59) (59)
Transactions with
owners 627 7,790 449 3,438 12,304
Net profit for the
period attributable
to equity
shareholders - - - 186 186
Balance at 31 December
2009 627 7,790 449 3,624 12,490
Dividends paid - - - (111) (111)
Issue of ordinary
shares 9 101 - - 110
Other reserves
movement due to share
options charge - - - 76 76
Transactions with
owners 636 7,891 449 3,589 12,565
Net profit for the
period attributable
to equity
shareholders - - - (661) (661)
Balance at 31 December
2010 636 7,891 449 2,928 11,904
----------------------- --------- --------- --------- ---------- --------
The Group has applied s131 of the Companies Act (1985) in
respect of Merger Relief in relation to a prior period
acquisition.
Consolidated Statement of Cash Flows
Year ended 31 December 2010
2010 2009
Note GBP'000 GBP'000
Operating Activities
Cash generated by operations 8 542 2,998
Income taxes paid 6 (507)
Interest paid (74) (117)
---------------------------------------- ----- -------- --------
Net cash inflow from operating
activities 474 2,374
---------------------------------------- ----- -------- --------
Investing activities
Interest received 6 8
Proceeds from disposal of Personal
Lines business 268 -
Purchases of property, plant and
equipment (92) (196)
Deferred consideration paid (945) (1,850)
Acquisition of subsidiary net
of cash acquired 6 (216) -
Net cash used in investing activities (979) (2,038)
----------------------------------------------- -------- --------
Financing activities
Dividends paid (111) (102)
Proceeds from issue of shares - 14
Repayment of bank loans - (1,250)
Repayment of other loans (410) (420)
Repayment of hire purchase obligations - (36)
Net cash used in financing activities (521) (1,794)
---------------------------------------- ----- -------- --------
Net decrease in cash and cash
equivalents 9 (1,026) (1,458)
Cash and cash equivalents at start
of period 1,844 3,302
Cash and cash equivalents at end
of period 818 1,844
---------------------------------------- ----- -------- --------
Cash 1,207 1,844
Overdraft (389) -
Cash and cash equivalents at end
of period 818 1,844
---------------------------------------- ----- -------- --------
1. Results and accounting policies
The financial information set out in this announcement does not
constitute the statutory accounts of the Group for the year ended
31 December 2010. The auditors reported on those accounts; their
report was unqualified and did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2010 will be delivered to
the registrar of Companies following the Company's Annual General
Meeting.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement in itself
does not contain sufficient information to comply with IFRS.
Details of the accounting policies are those set out in the annual
report for the year ended 31 December 2009. These accounting
policies have remained unchanged for the financial year ended 31
December 20010.
2. Segment information
For management purposes, the Group is organised into three
divisions; Insurance Broking, Financial Services and Premium
Finance. These divisions are the basis on which the Group reports
its major income generating and cash flow results to its chief
operating decision maker.
Revenue and operating profit
Year ended Year ended
31 December 2010 31 December 2009
Operating
profit Operating
Revenue / (loss) Revenue profit
GBP'000 GBP'000 GBP'000 GBP'000
By class of business:
Insurance Broking 5,839 1,324 6,795 1,461
Financial Services 1,775 111 1,833 48
Premium Finance 94 75 303 217
Other - - 30 30
--------------------------------- -------- ---------- -------- ----------
7,708 1,510 8,961 1,756
-------- --------
Amortisation (600) (704)
Exceptional operating expenses (302) (177)
Central costs (676) (688)
--------------------------------- ---------- ----------
(Loss) / profit from continuing
operations (68) 187
--------------------------------- ---------- ----------
Assets and liabilities
Year ended Year ended
31 December 2010 31 December 2009
Assets Assets
GBP'000 Liabilities GBP'000 Liabilities
GBP'000 GBP'000
By segment:
Insurance Broking 8,169 (5,390) 9,213 (5,751)
Financial Services 1,668 (1,203) 1,600 (1,104)
Premium Finance 414 (12) 286 (477)
Eliminations (5,243) 5,243 (1,674) 1,674
---------------------------- --------- ------------ --------- ------------
Segment assets and
liabilities 5,008 (1,362) 9,425 (5,658)
Unallocated corporate 14,884 (6,626) 13,622 (4,899)
---------------------------- --------- ------------ --------- ------------
Consolidated assets and
liabilities 19,892 (7,988) 23,047 (10,557)
---------------------------- --------- ------------ --------- ------------
3. Exceptional operating expenses
2010 2009
GBP'000 GBP'000
Redundancy costs 123 100
Reorganisation costs 154 35
Acquisition related 25 42
Exceptional operating expenses 302 177
======== ========
All redundancy and reorganisation costs have been charged
against operating profit derived from continuing operations.
Exceptional non-operating expenses
2010 2009
GBP'000 GBP'000
Disposal proceeds less legal costs (271) -
Goodwill associated with Personal 902 -
Lines business
Customer related intangibles associated 313 -
with Personal Lines business
Loss on disposal of Personal Lines 944 -
business
======== ========
4. Earnings per share
The calculation of basic earnings per share for the year ended
31 December 2010 is based on the loss attributable to ordinary
shareholders of GBP661,000 (2009: Profit GBP186,000) divided by the
weighted average number of shares in issue of 15,823,685 (2009:
15,576,570), amounting to 4.18p (2009: 1.19p)
At 31 December 2010, there were 658,875 (2009: 1,046,000) share
options in issue of which 7,546(2009: 195,622) were dilutive
potential ordinary shares on average during the year. At the year
end there were nil (2009: 239,130) shares to be issued in respect
of deferred consideration for acquisitions made during or prior to
the current year, and there were nil (2009: nil) dilutive potential
ordinary shares on average during the year. At 31 December 2010,
there were therefore a total of 7,546 (2009: 195,622) dilutive
potential ordinary shares on average during the year. At 31
December 2010, the share options in issue are anti-dilutive in
respect of the basic loss per share and have therefore not been
included. The calculation of diluted earnings per share for the
year ended 31 December 2010 is based on the loss attributable to
ordinary shareholders of GBP661,000 (2009: Profit GBP186,000)
divided by the weighted average number of diluted shares in issue
of 15,823,685 (2009: 15,772,192), amounting to 4.18p (2009:
1.18p)
The adjusted earnings per share is based on the profit
attributable to ordinary shareholders, after adding back
amortisation, exceptional operating and non-operating expenses,
share option charges and reflecting an ongoing tax charge of 28%
(2009: 28%), as follows:
2010 2009
GBP000 Pence GBP000 Pence
(Loss) / profit for the year (661) (4.18) 186 1.19
Exceptional non-operating charges 944 5.97 - -
Profit for the year before
loss on disposal of Personal
Lines business 283 1.79 186 1.19
Amortisation 600 3.79 704 4.52
Exceptional operating charges 302 1.91 177 1.14
Share option charge 76 0.48 65 0.42
Adjustment to reflect an ongoing
tax charge of 28% (655) (4.14) (393) (2.52)
Adjusted earnings per share 606 3.83 739 4.75
----------------------------------- ------- ------- ------- -------
Diluted adjusted earnings per
share 606 3.83 739 4.69
----------------------------------- ------- ------- ------- -------
5. Dividends
Amounts recognised as distributions to equity shareholders in
the year:
2010 2009
GBP'000 GBP'000
Dividend paid per share in the
period 0.70 pence (2009: 0.66p) 111 102
---------------------------------- -------- --------
A final dividend of 0.75p per share (2009: 0.70p per share)
amounting to GBP119,000 (2009: GBP109,000) in respect of the year
ended 31 December 2010 is proposed. If approved at the Annual
General Meeting, it will be paid on 27 May 2011 to those
shareholders on the register on 6 May 2011.
6. Acquisitions
On 30 September 2010, the Company acquired the whole of the
issued share capital and voting rights of Rockbridge Healthcare
Limited.
This acquisition may be summarised as follows:
Rockbridge Healthcare
Limited
GBP'000
Trade and other receivables 7
Cash and cash equivalents 44
Trade and other payables (21)
Fair value of net assets acquired 30
Goodwill 177
Other intangible assets 122
Deferred tax on other intangible
assets (34)
Consideration 295
======================
Comprising:
Cash 260
Deferred consideration: Cash 35
295
======================
Purchase consideration settled
in cash 260
Cash and cash equivalents acquired (44)
Cash outflow on acquisitions 216
======================
The assets and liabilities included in net assets acquired are
stated at book values which are equivalent to their fair values.
The only fair value adjustments made are in respect of intangible
assets acquired. The initial accounting for the acquisitions made
during the year ended 31 December 2010 has only been provisionally
determined at the balance sheet date as adjustments may be
necessary to book values following assessment after a further
period of ownership.
The goodwill paid in respect of current period acquisitions
relates to expected synergies to be achieved. Synergies to be
achieved are as a result of a stronger presence in the market and
synergies in sourcing and selling.
7. Share capital
Authorised share capital:
2010 2009
GBP'000 GBP'000
20,000,000 (2009: 20,000,000)
Ordinary shares of GBP0.04
each 800 800
=========== ========
Allotted, called up and fully paid:
2010 2009
No GBP'000 No GBP'000
Ordinary shares of GBP0.04
each 15,878,753 636 15,665,161 627
=========== ======== =========== ========
Allotted, called up and fully paid:
2010 2009
GBP'000 GBP'000
At 1 January 627 620
Issued in the year:
Acquisitions 9 5
Share option exercises - 2
At 31 December 636 627
=========== ========
8. Reconciliation of profit before taxation to net cash inflow
from operating activities
2010 2009
GBP'000 GBP'000
(Loss) / profit before taxation (1,080) 80
Depreciation and loss on disposal
of property plant & equipment 250 253
Amortisation 600 704
Loss on disposal of Personal Lines
business 944 -
Share option charge 76 65
Investment income (6) (10)
Finance charges 74 117
Movements in working capital:
Decrease in receivables 928 3,770
Decrease in payables (1,244) (1,981)
Net cash inflow from operating
activities 542 2,998
======== ========
9. Reconciliation of net cash flow to movement in net debt
2010 2009
GBP'000 GBP'000
Net debt at 1 January (891) (1,139)
Decrease in cash in the period (1,026) (1,458)
Cash outflow from decrease in debt
financing 410 1,706
Net debt at 31 December (1,507) (891)
======== ========
10. Annual Report
The annual report will be posted to shareholders on or around
the 6 May 2011 and will also be available from the Group's website
(www.cbg-group.co.uk) or from the Company Secretary at the
Company's registered office: Southmoor House, Southmoor Road,
Manchester M23 9XD.
22 March 2011
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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