RNS Number:9764H
Singer & Friedlander Group PLC
26 February 2003
Group Operating Profits by Business Activity
2002 2001
#'000 #'000
Banking :
Core banking (Note 1) 16,516 14,028
Consumer financing and leasing 4,346 4,351
20,862 18,379
Property trading and investment 4,652 8,417
Asset management 6,037 10,104
Other Group income, less costs (Note 1) (5,725) (346)
Profit of the Continuing Group, before taxation,exceptional items
and amortisation of goodwill 25,826 36,554
Carnegie (Note 2) 7,221 30,321
Terminated activities (Note 3) (1,547) (2,567)
Group operating profit, before taxation, exceptional
items and amortisation of goodwill 31,500 64,308
Amortisation of goodwill 1,486 (379)
Pension Scheme curtailment 7,715 -
Group operating profit, before taxation and non-operating
exceptional items 40,701 63,929
Notes
1. Historically, the Group has deployed a portion of its capital into carrying
investments in corporate bonds and equities for its own account. At the
beginning of 2002, the Group decided to reallocate the capital invested in
corporate bonds to its core banking operations and from that date the income
therefrom has been accounted for within core banking with the results for 2001
being restated accordingly.
The equity portion of the portfolio was transferred to the parent company with
effect from the beginning of 2002 and the comparative figures for income and
costs have also been restated accordingly; other group income, less costs
comprises:
2002 2001
#'000 #'000
Interest income 2,454 5,744
Gains / (losses) on equity investments (1,591) 2,378
863 8,122
Central costs (6,588) (8,468)
(5,725) (346)
Central costs for 2001 have been restated by #19,000 (net) to reflect the impact
of the full implementation of FRS 17.
2. On the listing of the shares of Carnegie on the Stockholm Stock Exchange on 7
June 2001, the Group sold part of its holding and, as a consequence of that
disposal, the Group's holding in Carnegie was reduced from 55% to 30.85%.
Accordingly, with effect from that date, Carnegie has been accounted for as an
associated undertaking.
3. The results from terminated activities relate to Singer & Friedlander
Factors.
CHAIRMAN'S STATEMENT
Group profits for 2002 after deducting minority interests, but before taxation
and non-operating exceptional items, amounted to #40.7 million, against #63.9
million in 2001. After taxation and minority interests, but before non-operating
exceptional items, Group profits were #31.0 million (2001: #45.4 million) and
earnings per share (diluted under IIMR guidelines) amounted to 15.29p (2001:
20.51p).
Over the previous three years your Group has significantly reduced its exposure
to the securities industry so that the activities of the Continuing Group are
Banking and Asset Management. The pre-tax operating profits of this Continuing
Group amounted to #25.8 million, compared with #36.6 million in 2001. A good
underlying performance from banking and a substantial reduction in central costs
has been offset by lower profits from our asset management business, by reduced
interest income following the payment of the special dividend to shareholders in
November 2001 and the one-off contribution to our pension scheme in September
2002 and by losses on our investment portfolios.
Our share of the profits of Carnegie amounted to #7.2 million compared with
#30.3 million last year; this decline partly arises from the reduction in our
holding from 55% to 31% at the time of the floatation in June 2001, but is
principally attributable to a reduction in the absolute level of Carnegie's
profits. Group profits have also however benefited from a non-recurring credit
amounting to #7.7 million arising in accordance with Financial Reporting
Standard 17, which we have adopted this year, in relation to the reduction in
benefits under our final salary pension schemes.
I reported in my interim statement on the 2002 half year accounts that the Board
would consider the level of the total dividend for the year in the light of the
earnings from our on-going business. By reference to the after tax profits of
the Continuing Group, adjusted to include notional interest on the market value
of our holding in Carnegie, the Board would recommend a final dividend of 1.5p
per share which, together with the interim dividend of 4.5p per share paid,
would produce a total dividend for the year of 6p per share which would be
covered 1.88 times by those earnings. However, as noted later in this statement,
the 2002 dividend recommended by Carnegie includes a special element and the
amount which your Group will receive amounts to approximately 4p per share. The
Board recommends that this amount should be passed through to shareholders by
way of an enhancement to the dividend that they would otherwise recommend.
Subject to the dividend recommended by Carnegie being approved by its
shareholders at its Annual General Meeting to be held on 13 March, your Board
therefore recommends a final dividend of 5.5p per share making a total for the
year of 10p per share, (2001 : 11p per share). If approved by shareholders, the
final dividend will be paid on 23 May to shareholders who are on the register at
the close of business on 2 May 2003.
Banking
Our banking operations continued the growth achieved in recent years, reporting
profits for the year of #20.9 million, an increase of 14% over those of 2001;
excluding the impact of provisions for credit losses, the increase in profits
was some 25%. When set against the less favourable economic climate which
prevailed in 2002 compared with the previous year, this is a positive
performance. At 31 December 2002 banking advances and the interest earning
assets of our consumer finance and leasing businesses amounted to #1,162
million, an increase of 18% over those at the previous year end.
The private banking teams which we recruited at the end of 2001, have been
highly successful in novating the advances which they managed in their previous
employments and in generating new business; private banking advances amounted to
#183 million at 31 December 2002 compared with #46 million a year previously.
Our consumer finance and leasing businesses performed well. The results for the
year were adversely affected by a provision of #2.25 million required in our
insurance premium finance company in respect of losses arising from an
unsuccessful new product development and launch, and, as a consequence, overall
profits from the consumer finance and leasing businesses are no better than
those achieved in 2001 despite strong underlying growth. The acquisitions which
we made in 2001 have all been successfully integrated and each has made a
valuable contribution to this year's profits with a notably encouraging result
from Hermes Leasing. Our healthcare leasing business continues to benefit from
the substantial investment being made in the National Health Service.
Whilst the general economic environment is, without doubt, less positive than it
was a year ago, we have not experienced a material deterioration in the credit
quality of our banking book. We have decided to increase our general provision
by a further #500,000 broadly maintaining its proportion to the banking book.
Asset management
The revenues of our asset management business are crucially dependent on market
levels and hence portfolio values on which management fees are calculated and,
for commission income on the volume and value of transactions. During 2002, the
FTSE All Share Index declined by 25.0%, with the majority of the fall occurring
in the second half of the year. The erosion of investor confidence resulted in a
reduction in transactions, in value terms, of some 12% compared with 2001. These
two factors were the principal causes of a reduction of 23% in gross revenues in
2002.
Asset management profits before taxation amounted to #6.0 million, a reduction
of 40% against the #10.1 million earned in 2001. Although that decline is a
disappointment, it should be placed in the context of the performance of markets
generally, and points to the underlying resilience of our business and to the
effectiveness of the cost economy programmes which we implemented in the early
part of the year. Our net margin on average funds under management was 15 bps
(2001: 22 bps).
Funds under management at 31 December 2002 amounted to #2.8 billion compared
with #3.6 billion at the previous year end - a decline of 22%. Our client base
has remained loyal and generally stoic in the face of extremely adverse
conditions and client losses to other managers have been at a minimal level. The
net outflow of new money, ignoring market movements and the relative performance
factor, amounted to #0.2 billion; this outflow arose principally from the loss
of a number of balanced pension fund mandates.
During the year, we have continued to examine opportunities for growth through
acquisition, as we did in 2001. We continue to be of the view that, in general,
the consideration being sought by vendors does not provide a basis that will add
value for our shareholders, and the decline in profitability in the industry
vindicates our decision not to proceed. It may be that more attractive
opportunities will arise in the future as a consequence of the pressure on
profitability in the industry. A more fertile area for growth has been the
recruitment of key individuals and teams and we have continued to exploit such
opportunities during the year most notably by bringing on board in September a
team from Atlantic Wealth Management.
Other activities
I have previously reported our intention to re-deploy that part of the Bank's
capital base which was invested in property. Our divestment from property, other
than in respect of our owner-occupied buildings, is now effectively complete and
the assets converted into cash, the benefit from which will be reported in the
results of our banking operations from 2003 onwards. In its final year, our
property trading and investment business earned profits of #4.7 million before
taxation (2001: #8.4 million).
I have also previously advised shareholders of our decision to curtail, and in
due course discontinue, investments on our own account as a separate activity.
Our investments in corporate bonds amounting to #25.4 million were transferred
into our banking operations at the start of 2002 with the income therefrom (with
the prior year figures re-stated) included in the results of Banking. The
results from our investments in equities which are now included with Other Group
Income and Costs (again with the 2001 figures restated) were a loss of #1.6
million (2001 : profit #2.4 million). The carrying value of the Group's equity
investments at 31 December 2002 was #7.1 million.
We continue to focus critically on the level of our central costs and have
achieved a reduction of #1.8 million from the level in 2001.
Carnegie
Carnegie has reported profits before tax of #23.4 million for 2002, a decline of
59% compared with the #57.4 million earned in 2001, which were in turn some 48%
lower than the record level achieved in 2000. Your Group's share of Carnegie's
profits amounted to #7.2 million (2001 : #30.3 million). The Directors of
Carnegie have declared a dividend for 2002 costing #42.7 million, of which our
share amounts to #13.2 million. Because of the downturn in its business volumes,
Carnegie's capital adequacy ratio is significantly in excess of the target
stated in its June 2001 prospectus, and the recommended dividend includes an
element which represents a return to shareholders of a portion of that excess.
Our share of that element of the dividend amounts to #7.9 million.
In common with markets globally, the Nordic markets, in which Carnegie operates,
suffered substantial declines during 2002 which impacted directly on its
securities business in particular and its investment banking operations were
adversely affected by the low level of corporate activity in the region. During
the year, Carnegie reduced its headcount by some 11% in response to the
depressed trading conditions.
As I have previously reported, we are not a long-term holder of our investment
in Carnegie and it remains our intention to dispose of it when market conditions
are appropriate. The current market value of our holding in Carnegie is #82.9
million.
Pensions
We reported at the interim stage that we had made a one-off contribution of #30
million (before taking into account tax relief thereon) to our UK final salary
pension scheme, being the amount which our Independent Trustee required us to
pay in order to address the past service deficit as at 31 December 2001 within
the context of agreement to changes in the terms and benefits of the scheme. For
the same reason, we have subsequently made a one-off contribution of #800,000 to
our Isle of Man final salary scheme. The changes to the UK scheme, being
principally a reduced rate of accrual for future service and the requirement for
contributions from members, were implemented with effect from 1 October 2002 and
have resulted in a significantly lower rate of employer contribution; we have
also implemented a cap on increases in pensionable salaries. Similar amendments
are being made in respect of the Isle of Man Scheme, effective from the same
date.
As recommended by the Accounting Standards Board, we have decided to implement
the provisions of Financial Reporting Standard 17 in full in our 2002 Financial
Statements and the effect of the above transactions is reflected in accordance
with FRS 17. This includes, in the current year's results, the credit from the
one-off gain amounting to #7.7 million, arising from the reduction in future
benefits.
At 31 December 2002, the aggregate deficit of our two schemes under FRS 17
principles amounted to #3.4 million, after deferred tax relief.
Directors and Staff
Sir Harry Djanogly has advised the Board that he wishes to retire as a Director
at the Company's Annual General Meeting to be held on 29 April 2003. Sir Harry
is Deputy Chairman and senior Non-Executive Director and has been a director of
the Company since its floatation in 1987. His long experience in industry has
been a most valuable ingredient in your Board's deliberations over the years and
we shall miss his counsel and guidance.
In the light of Sir Harry's retirement from the Board and in order to align
responsibilities at director level with good corporate governance practice, the
Board has agreed to my request that I relinquish the position of Chairman in
order to concentrate on my role as Chief Executive. I am delighted to report
that Paul Selway-Swift, one of our Non-Executive Directors, has agreed to become
Chairman in my place with effect from the date of the Annual General Meeting.
We intend to strengthen the breadth of experience at Board level with further
Non-Executive Director appointments and hope to be able to make an announcement
in that regard in the near future.
2002 proved to be one of the most difficult years I have experienced for any
business in the securities industry. The commitment of our staff has remained
undiminished in very trying conditions and it is a tribute to their endeavour
and expertise that your Group has nevertheless produced a creditable profits
achievement for the year. Shareholders will, I am sure, wish to join the Board
in thanking all our staff for their efforts in 2002.
Outlook
We see no reason why our banking business should not continue to grow. We are a
lender able to be flexible and tailor solutions to our customers' needs. We have
been able to and will continue to be able to develop new specialist lending
activities. The outlook for the asset management industry is less certain and
the sectors within which we operate are subject to considerable competitive
pressures. The strong niche positions that we have created provide us with a
solid platform to move forward again if and when conditions improve.
Your Group is soundly based and strongly capitalised and our businesses have
demonstrated their resilience in an adverse environment. We are therefore well
positioned to benefit from any improvement in trading conditions.
John Hodson, Chairman
26 February 2003
REVIEW OF ACTIVITIES
Composition and structure of the Group
On 7 June 2001, the Group disposed of part of its holding in Carnegie through
the floatation of the shares of Carnegie on the Stockholm Stock Exchange. The
Group's holding in Carnegie was reduced from 55% to 30.85% as a result of that
disposal and accordingly, with effect from 7 June 2001, Carnegie is accounted
for as an associated undertaking with its pre-tax results being presented within
a single line in the Consolidated Profit and Loss Account. This change in
accounting treatment gives rise to certain distortions in the comparison of
financial information between 2001 and 2002.
As previously reported, the Group is not a long-term holder of its investment in
Carnegie and intends to dispose of it when market conditions are appropriate.
Therefore, the Group's share of the results of Carnegie are not regarded as
being part of the core activities of the Group, which comprise Banking and Asset
Management. These core activities, excluding Carnegie and terminated activities,
are referred to as "the Continuing Group".
Historically, the Group has deployed a portion of its capital into carrying
investments in corporate bonds and equities for its own account. With effect
from 1 January 2002, the Group decided to reallocate the capital invested in
corporate bonds to its banking operations and, from the same date, its
investments in equities were transferred to the parent company.
Overview of results
The total operating income of the continuing Group in 2002 amounted to #107.1
million (2001 : #116.4 million), as follows:
OPERATING INCOME
2002 2001
#m #m
Net interest income 69.1 64.8
Net fees and commissions 30.8 40.0
Dealing profits 5.3 3.7
Other operating income 1.9 7.9
Total operating income of the Continuing Group 107.1 116.4
Add : Operating income of Carnegie and
terminated activities 0.5 120.7
Total operating income per Consolidated profit
and loss account 107.6 237.1
Within the Continuing Group, net interest income increased by #4.3 million, or
7%, reflecting the 18% growth in interest earning assets offset by lower
interest earnings on Group cash balances. The latter arises in part from lower
average deposit rates, but more importantly from reduced cash balances following
the payment of the #80.5 million special dividend in November 2001 and the #30.8
million one-off pension contributions paid during 2002.
The decline in net fees and commissions arises principally in our Asset
Management business. The reduction in other operating income of #6.0 million
arises from our own account investment portfolios, which produced a net gain in
2001 in contrast to a net loss in 2002, and reduced rental income following the
disposal of our investment property portfolio.
The total administrative expenses of the Continuing Group in 2002, excluding the
exceptional pension curtailment credit, amounted to #60.7 million (2001 : #62.9
million) as follows:
ADMINISTRATIVE EXPENSES
2002 2001
#m #m
Staff related expenses (excluding pension curtailment credit) 38.0 41.1
Other costs 22.7 21.8
Total administrative expenses of the Continuing Group 60.7 62.9
Add : Administrative expenses of Carnegie and terminated activities 0.6 84.1
61.3 147.0
Less : Pension curtailment credit (7.7) -
Total administrative expenses per Consolidated
profit and loss account 53.6 147.0
The reduction in administrative expenses of the Continuing Group, before the
impact of the curtailment credit, amounting to #2.2 million, or 3%, lower than
2001, arises principally from a reduction in staff costs being partly offset by
an increase of #0.9 million in other administrative costs. Staff related
expenses are #3.1 million or 7% lower than 2001, principally due to lower profit
related bonus charges. The impact of this saving has been partly offset by
increased salary costs, most notably within Private Banking and the consumer
finance and leasing businesses, where increased resources have been recruited to
respond to the higher business volumes.
Control over costs is achieved through strict authorisation and approval
procedures. Budgets are prepared at the commencement of each year and are
updated regularly during the year in the light of actual performance. The
monthly reporting process includes an analysis of cost variances against budget
and against prior year actual figures.
In overall terms, staff related expenses are the largest component of the
administrative costs of the Continuing Group and in 2002 amounted to 62.6% of
the total (2001 : 65.3%). A significant proportion of staff related expenses is
directly linked to profitability at both Group and individual business levels.
The cost to income ratio of the Continuing Group, derived by expressing
administrative expenses as a percentage of total operating income, amounted to
56.7% in 2002 compared with 54.0% in 2001.
Provision for credit losses is made on the basis of regular review of exposures
with the objective of writing down assets to a conservative expectation of net
realisable value where there is a realistic prospect of a less than full
recovery. Non performing assets and those which otherwise give cause for concern
are reviewed at each meeting of the Risk Review Committee.
In the banking book, specific provisions are made on a case by case basis,
including, where necessary, the costs associated with recovery. We also carry a
general provision in the banking book in recognition that credit losses may
emerge which are not apparent at the time of drawing up the financial
statements. Our policy, based on industry norms, is that the general provision
should be maintained at around 0.7% of total advances and in the light of the
growth in the banking book during 2002, we have increased the general provision
by #500,000 at 31 December 2002; at that date, it stood at #4.25 million,
equivalent to 0.76% of the banking book.
Because of the volume of customers, it would be impractical for our consumer
finance and leasing companies to make provision wholly on a specific case by
case basis. Accordingly, these businesses make provision for credit losses
principally on formulaic bases by reference to the value of their interest
earning assets and repayment instalments in arrears supplemented, where
necessary, by additional provisions where specific cases of loss are identified.
The net charge for provisions for the Continuing Group amounted to #5.4 million
in 2002 (2001 : #2.5 million,) as follows:
CHARGE FOR PROVISIONS
2002 2001
#m #m
Banking book:
Specific provisions 2.6 2.3
General provision 0.5 1.0
Less : Release of specific provisions made in earlier years. (2.4) (2.6)
Total : Banking book 0.7 0.7
Consumer finance and leasing businesses 4.7 1.8
Total charges for provisions : Continuing Group 5.4 2.5
Terminated activities 1.4 2.0
Total charge for provisions per Consolidated profit and loss account 6.8 4.5
The release of specific provisions made in the banking book in earlier years
which are no longer required (#2.4 million) relates principally to the provision
made in 2000 against the advance to Independent Energy. The amount of the
advance has now been recovered in full. The provisions in respect of the
consumer finance and leasing businesses include an amount of #2.25 million (2001
: nil) for losses incurred and to be incurred by our insurance premium finance
subsidiary arising from the development and launch of a new product.
The amount of goodwill shown in the Consolidated Balance Sheet represents the
unamortised portion of the difference between net assets acquired and the
consideration paid for those net assets. We undertake an annual assessment of
the carrying value of goodwill if there is an indication that its value is
impaired, and if so an appropriate write down is made. The balance is amortised,
generally over twenty years, but over a shorter period if circumstances dictate.
The amount of annual amortisation is taken to profits for the year.
Other Group income less central costs in 2002 amounted to a net charge of #5.7
million (2001 : a net charge of #0.3 million), as follows:
OTHER GROUP INCOME AND COSTS
2002 2001
#m #m
Net interest income 2.5 5.7
Results from equity investments for own account (1.6) 2.4
Central costs (6.6) (8.4)
Net charge for the year (5.7) (0.3)
Net interest income comprises principally the interest receivable on the cash
balances held by Singer & Friedlander Group PLC less, in 2001, that payable on
the convertible unsecured loan stock 2009/14, the remaining outstanding balance
of which was converted into ordinary shares of the Company on 31 May 2001.
As stated earlier in this Review, the Group's investments in equities for its
own account are now accounted for within the parent company. The results from
these investments were:
RESULTS FROM OWN ACCOUNT INVESTMENTS
2002 2001
#m #m
Income - including interest on cash balances within
the portfolios 0.7 0.8
Realised and unrealised gains/(losses) net (2.3) 1.6
Net (loss)/profit for the year (1.6) 2.4
Central costs are the direct expenses of Singer & Friedlander Group PLC and the
costs of certain of the central functions of the Group, such as Internal Audit,
Risk Control and Compliance, as well as property occupancy costs to the extent
that they cannot properly be allocated to the operating businesses.
During 2001, a new accounting standard, Financial Reporting Standard 17 ("FRS
17"), for accounting for the costs and other financial information relating to
defined benefit pension schemes came into force. Although full implementation of
FRS 17 is not mandatory until 2005, its earlier full implementation is
encouraged by the Accounting Standards Board and we have accordingly done so as
at 31 December 2002. Because we are introducing a new accounting standard, the
opening position, namely the FRS 17 deficit at 1 January 2002, amounting to
#34.4 million (before tax relief) as noted in our 2001 financial statements,
falls to be accounted for as an adjustment to Group reserves of the prior year.
As reported at the time of our 2002 interim results, we were required by the
Independent Trustee of our UK scheme, to make a one-off contribution amounting
to #30 million, before tax relief, to address the past service deficit as at 31
December 2001 as part of the negotiations to secure agreement to changes in the
terms of and benefit structure of the scheme. In December 2002, we made a
similar one-off contribution of #800,000 (gross) in respect of the defined
benefit scheme operated by our subsidiary based in the Isle of Man. These
one-off contributions, aggregating #30.8 million, are accounted for as a
reduction in the FRS 17 deficit as at 31 December 2001.
With effect from 1 October 2002, we implemented certain changes to the terms and
benefits of the UK scheme, being principally a reduction in the rate of accrual
of pension entitlements, the requirement for employees to contribute a
percentage of their salaries to the scheme and a cap on increases in pensionable
salaries. We are in the process of introducing the same changes for our Isle of
Man scheme also to be effective from 1 October 2002. The calculated benefit to
the Group arising under the provisions of FRS 17, which amounts to #7.7 million,
is accounted for as a credit to operating profits.
Our final salary schemes currently have 235 active members out of our total
staff complement of 646. Staff who are not in the final salary schemes
participate in money purchase schemes.
The effective rate of corporation tax on the profit from ordinary activities is
23.7% (2001: 29.4%). The effective rate of corporation tax is lower than the
standard rate of 30%, primarily because a new accounting standard (Financial
Reporting Standard 19) no longer permits us to make provision for the difference
between the UK rate and the lower rates applicable on profits earned by our
subsidiaries in certain overseas jurisdictions until such profits are remitted
to the UK. The effective rate is further reduced as a result of the release of
tax provisions made in previous years which are no longer required and because
goodwill amortisation is non-taxable.
Where a discrete business as opposed to a business segment has been disposed of
outside the Group, the results from its operations are disclosed separately in
the Consolidated Profit and Loss Account as terminated activities. The loss from
terminated activities in 2002 amounting to #1.5 million, and that in 2001 (#2.6
million), relates to Singer & Friedlander Factors.
Transactions which, under accounting principles, are not regarded as part of the
Group's normal trading operations are not included in the operating results in
the Consolidated Profit and Loss Account but are separately disclosed as
non-operating exceptional items.
NON-OPERATING EXCEPTIONAL ITEMS
2002 2001
#m #m
Profit / (loss) on disposal of businesses and associated
undertakings:
-24.15% holding in Carnegie - 38.9
-Other 0.9 (0.4)
0.9 38.5
Profits / (losses) on sales of investment properties (0.3) 0.3
Losses on sales of fixed asset investments - (2.1)
0.6 36.7
Taxation thereon (0.4) (13.5)
Non-operating exceptional items after taxation 0.2 23.2
The capital requirements of our two core businesses of Banking and Asset
Management are significantly different, given the differing nature of the
businesses and the applicable regulatory requirements. However, we consider
return on capital to be a key yardstick in measuring the overall performance of
the Group. After taxation, but before non-operating exceptional items, the
return on capital earned by the Group in 2002 was 7.6% (2001: 12.3%).
The Group is strongly capitalised. The increase of #178 million in our banking
advances and interest earning assets in 2002 was comfortably covered by
reserves. Our consolidated risk asset ratio at 31 December 2002, comprised
almost entirely of Tier 1 capital, was 15.1% (31 December 2001: (restated for
the impact of changes in accounting standards), 15.7%) a level which does not
constrain further growth in our banking activities.
Our banking and asset management operations are both subject to regulation by
the Financial Services Authority or its equivalent in non UK jurisdictions and
the costs involved in complying with the regulatory requirements are a
significant and increasing burden. Additional costs of regulation arising in
2002 related to the procedures following the enactment of the Financial Services
and Markets Act at the end of 2001, which unified the various separate
regulatory bodies into the FSA, and a total review of our customer status
information base which we, along with all regulated institutions, have been
required to carry out in connection with money laundering controls. We are now
embarking on the very considerable work that will be necessary to comply with
the EU regulatory directive known as Basel II whose introduction has now been
postponed until 2006. We acknowledge and accept the importance of financial
regulation but are concerned at the increasing cost of compliance which impacts
smaller institutions, such as ours, particularly severely.
Banking
The Group's banking operations are headquartered at our head office in the City
of London, with other offices in Manchester, Glasgow and other key locations in
Great Britain together with an offshore subsidiary located in the Isle of Man.
We undertake traditional banking activities for a broad spectrum of corporate
and private customers, and specific financing in a number of sectors. The
majority of advances to corporate customers are made on a bilateral basis, but
we are also active in the syndicated credit market and in the purchase of
publicly traded bonds. Advances to private customers are made principally in
respect of personal property transactions. The vast majority of banking
advances, to both corporate and private customers are made on a secured basis.
The principal sectors in which specific financing advances are made include
property, commodity trading, equipment finance and leasing, consumer finance for
the purchase of motor vehicles and insurance premiums, and trade bill and block
discounting. The vast majority of the banking advances and interest earnings
assets were within and subject to the jurisdictions of the United Kingdom and
the Isle of Man.
Advances to customers and interest earning assets at 31 December 2002 amounted
to #1,162 million compared with #984 million at 31 December 2001 - growth of 18%
during the year. The profile of the book at the end of 2002 was as follows:
PROFILE OF THE BANKING BOOK
2002 2001
#m #m
Wholesale banking 284 305
Equipment finance and leasing 274 251
Consumer finance 213 165
Private banking 183 46
Property related advances 151 140
Commodity trade finance 29 31
Other 28 46
1,162 984
Our banking book is financed entirely by customer deposits. We had another
successful year in attracting and retaining customer deposits which amounted to
#1,223 million at 31 December 2002 (2001: #1,120 million), thus comfortably
exceeding customer lending.
The profits from our core banking activities in 2002 amounted to #16.5 million,
an increase of 18% over the profits of #14.0 million earned in 2001.
PROFITS FROM BANKING ACTIVITIES
2002 2001
#m #m
Total Revenues 39.6 34.4
Costs 23.1 20.4
Profit from banking activities 16.5 14.0
Total revenues increased by 15% compared with those achieved in 2001, the
increase arising principally from the growth in advances. Costs increased by 13%
in 2002, the increase arising from higher headcount driven salary costs in the
private banking business area and higher profit related bonus costs offset to an
extent by a lower depreciation charge on our main banking system. The cost to
income ratio, excluding from the former, depreciation, amortisation of goodwill
and the charge for provisions, amounted to 53.7% (2001: 51.6%).
The continuing growth in both the assets and profits of our banking operations,
demonstrates the value of our concentrating on ensuring that we deliver a high
quality service to our customers and maintaining close personal relationships
with them and by the identification and development of expertise in niche
opportunities for lending and financing. These attributes have enabled us in
some cases to negotiate attractive levels of total return by enhancing the
appropriate level of margin with bespoke fee arrangements and the sale of
additional profitable products.
During 2002, the private banking teams which we recruited at the end of 2001
have made excellent progress in novating the loans which they managed in their
previous employments and in developing new business. At 31 December 2002,
private banking advances amounted to #183 million, an increase of nearly 300%
during the year. The majority of these advances are to high net worth
expatriates working in the UK and are secured on residential property, thereby
having the advantage of being 50% weighted for regulatory capital purposes and
affording, through the relationship, the potential for cross-selling into our
asset management and trust services. Our subsidiary in the Isle of Man has been
instrumental in facilitating this business and has, as a result, had a most
successful year.
The rigorous management of credit risk is a vital component of our ability to
maintain and sustain the profit performance of our banking operations. Our
procedures and process for the management of credit risk are set out in the
Financial Statements and the bases on which we make provision for amounts which
we consider to be actually or potentially irrecoverable are described earlier in
this Review. In addition to a detailed assessment of the credit risk of
individual borrowers and individual specific financing activities, supported by
a sophisticated loan grading matrix, we further control the overall risk profile
of the book by setting limits on our exposure to particular industry and
commercial sectors and on transactional structure profiles. The profits for the
year as summarised above are struck after making net new provisions of #5.4
million (2001: #2.5 million), excluding those relating to terminated activities,
of which #0.7 million was in respect of banking advances and #4.7 million was in
respect of the consumer finance and leasing activities; the provisions made in
the banking book include a sum of #0.5 million (2001: #1.0 million) set aside to
increase the level of the general provision. Releases of provisions previously
made on a specific basis, which are deducted in arriving at the figure of net
new provisions made in the year amounted to #2.4 million (2001 : #2.6 million).
Our consumer finance and leasing businesses have achieved solid growth in 2002
with interest earning assets increasing by 22%. The businesses which we acquired
in 2001 have all been successfully integrated and each has traded profitably
during 2002 with a notably strong performance from Hermes, which we acquired at
the end of 2001 and which leases vehicles and equipment. We are a leader in the
field of leasing medical and healthcare equipment to National Health trusts
under operating leases and our business has expanded with the increased
government expenditure on the National Health Service; the profits of this
business were some 26% ahead of those achieved in 2001. We are now at the stage
that the primary terms of the earlier leases which we wrote are coming to an end
and a satisfactory pattern of secondary lease terms and resale values is
emerging which gives us comfort that the residual values implicit in the primary
lease terms are robust. Our car finance business faced less buoyant trading
conditions with severe competitive pressure on margins; despite that pressure,
credit quality in the car finance business improved. However volumes and new
business intake held up well, bolstered by initiatives which included commencing
the finance of motor cycles and a marketing thrust directed at military
personnel. The interest earning assets of our insurance premium financing
business increased substantially in the year, driven by organic growth and the
continuing hardening of premium rates.
In addition to growing our banking activities organically and through the
identification of fresh niche opportunities, we continue to search for suitable
acquisitions. We examined a number of potential targets during 2002, but
concluded that none provided both added value for shareholders and a commercial
and strategic adjunct to our existing business.
Against a difficult economic background, our banking activities have performed
well and we are optimistic that the achievements of recent years provide the
basis for further growth in 2003.
Asset Management
Our asset management operations consist of the management of funds, in the vast
majority of cases on a discretionary basis, for private clients, charities and
institutions from our head office in London, from branch offices in Birmingham
and Leeds as well as offshore in the Isle of Man, together with a collective
funds operation based in Dublin.
2002 was a difficult year for our asset management business. Our principal
sources of revenue are management fees which are virtually exclusively charged
by reference to the value of funds under management, and commissions which are
charged by reference to the value of transactions in the market. We are
primarily an equity house and therefore the value of the funds under our
management, and hence the management fees which we earn therefrom, are directly
affected by movements in the equity markets. The FTSE All Share index ended 2002
25% lower than its level at the end of 2001 and its average level in 2002 was
some 19% below that for the previous year. Our revenues from management fees
declined by 24% year on year, thus broadly tracking the fall in the market. The
level of fee income was also affected by the fact that market conditions were
such that there was no investor appetite for the launch of tax driven products
and we were therefore unable to repeat the successful AIM VCT offerings of
earlier years which, in 2001, earned us fee income of #0.9 million. The
significant fall in the market, which followed falls in each of the two previous
years, together with pervasive political and economic uncertainty created a much
less favourable environment against which our managers adopted a more cautionary
stance, especially in regard to trading; this directly affected our gross
commission income which was 32% lower than our earnings from that source in
2001.
ASSET MANAGEMENT REVENUES
2002 2001
#m #m
Revenues:
Management fees 19.7 26.1
Front end fees 0.1 1.8
Commissions (net) 2.9 2.2
Other revenues 2.6 2.9
25.3 33.0
In the light of the adverse trading conditions, we have taken steps to manage
down the cost base of our asset management business. As reported last year we
transferred the assets of our Premier Funds Service, which managed smaller
portfolios by investing in third party collective vehicles, to another provider
and as part of that transfer we were able to reduce our headcount. In addition,
in the early part of 2002, we undertook a review of the resources in our
administration and back office areas, following which we made further reductions
in staff numbers. We have also seen the benefit in 2002 of the decision made in
2001 to insource the administration of Personal Equity Plans and Individual
Savings Accounts. In overall terms, costs in 2002 were 17% lower than those
incurred in 2001.
The profits earned by our asset management business in 2002 amounted to #6.0
million, a decline of 40% from the earnings of 2001. The profit for the year
includes the receipt of brokerage of #0.6 million (2001: #0.9 million), net of
related costs, being the second, and final, payment due in respect of the
transfer of assets managed by our Premier Funds Service. The reduction in
profitability is a disappointment, but given the falls in market levels and the
erosion of investor confidence, both being factors outside our control, the
level of earnings is indicative of the resilience of our underlying business, to
the success of our management of the cost base.
The net margin earned on the average level of funds under management during the
year amounted to 0.15% (2001: 0.22%).
Funds under management at 31 December 2002 amounted to #2.8 billion (2001: #3.6
billion) analysed as follows:
FUNDS UNDER MANAGEMENT AT YEAR END
2002 2001
#bn #bn
Private clients 1.6 2.1
Institutional clients 0.9 1.1
Collective vehicles 0.9 1.3
3.4 4.5
Less: Client assets invested in our own collective vehicles (0.6) (0.9)
2.8 3.6
The movement in funds under management is analysed as follows:
MOVEMENT IN FUNDS UNDER MANAGEMENT
2002 2001
#bn #bn
Funds under management at the beginning of the year 3.6 3.5
Market movement * (0.9) (0.6)
Inflow of new money 0.3 0.7
Outflow of money (0.5) (0.4)
(1.1) (0.3)
Effect of performance relative to the market 0.3 0.4
Funds under management at the end of the year 2.8 3.6
*Market movement is measured by reference to the FTSE 100 Index.
The principal area of our asset management business continues to be the
management of portfolios for private clients and charities, principally on a
discretionary basis which accounted for 62% of funds under management at 31
December 2002. This market remains intensely competitive and it and the retail
sector has come under the greatest pressure from the erosion of confidence in
the face of falling markets. Our clients, and their advisers, are becoming
increasingly demanding over performance evaluation and charging levels. Our
principal sources of new business are the professional service firms -
accountants, solicitors and trust companies - and referrals from our network of
other providers. We have strengthened our marketing team by further recruitment
during the year in order to expand our presence both in London and the regions.
The specialist institutional side of the business has consolidated its position
during the year following the significant number of new mandates won in 2001.
The majority of this part of the business involves the management of a
segregated portion of institutional portfolios and our reputation is
particularly strong in Continental European and Pan European equities. The fee
rates for institutional business are lower than those for private client
mandates but we have, in some cases, been able to negotiate the potential for
enhancement through performance fee arrangements.
During 2002, we have continued to explore opportunities for growth through
acquisition. Although there is no shortage of opportunities, the level of
consideration generally being sought by vendors is such that, in our view, the
commercial benefits and the value and financial returns to our shareholders have
not been sufficiently attractive for us to proceed. It is also becoming
increasingly apparent that, in current market conditions, the loyalty of clients
to a particular house comes under pressure on a change of ownership. A more
fruitful area for growth by acquisition continues to be the recruitment of key
individuals and teams and we have been successful in this respect during the
year, most notably in attracting a team of three fund managers from Atlantic
Wealth Management. Trading conditions in the industry generally are currently
such that an increasing number of teams are disposed to consider moving and we
are in active discussions with a number of potential targets.
The early part of 2003 has seen no improvement in markets from their depressed
levels of the second half of last year and we see little grounds for optimism
based on present fundamentals. Investor confidence and sentiment remains
depressed and is likely to remain so whilst major economic and political
uncertainties persist. The current year will, without doubt, be a difficult one
for our asset management business and further structural re-alignment may be
required if conditions show no sign of improvement in the medium term. We remain
however fully committed to the business and the steps which we have taken and
continue to take to strengthen its base leave it well positioned to take
advantage of any improvement in market conditions which may materialise.
SINGER & FRIEDLANDER GROUP PLC
Consolidated Profit and Loss Account Year Ended 31st December 2002
2002 2001
Restated
(note 3)
#000 #000
Interest receivable :
Interest receivable and similar income arising from debt 25,736 36,168
securities
Other interest receivable and similar income 107,485 124,928
Less: Interest payable (63,681) (88,932)
NET INTEREST INCOME 69,540 72,164
Dividend income from equity shares 2 93
Fees and commissions receivable 37,117 139,122
Less: Fees and commissions payable (6,317) (5,480)
Dealing profits 5,283 23,179
Defined benefit pension schemes - other finance income 157 104
Other operating income 1,797 7,892
38,039 164,910
OPERATING INCOME 107,579 237,074
Administrative expenses (net of #7,715,000 exceptional pension (53,600) (147,041)
credit (note 3))
Depreciation and amortisation - Tangible assets (12,463) (11,563)
- Goodwill (427) (379)
- Negative goodwill 1,913 -
Provisions for bad and doubtful debts (4,511) (4,538)
Provisions for commitments and contingencies (2,250) -
Amounts written off fixed asset investments (2,729) (2,134)
GROUP OPERATING PROFIT 33,512 71,419
Share of operating profit from associated undertakings 7,292 8,368
PROFIT ON ORDINARY ACTIVITIES BEFORE NON-OPERATING EXCEPTIONAL 40,804 79,787
ITEMS AND TAXATION
Continuing operations 42,351 82,354
Terminated activities (1,547) (2,567)
Non-operating exceptional items (excluding associated 566 35,102
undertakings) (Note 1)
Share of associated undertakings' non-operating items (Note 1) - 1,592
PROFIT ON ORDINARY ACTIVITIES AFTER EXCEPTIONAL ITEMS BUT 41,370 116,481
BEFORE TAXATION
Taxation on ordinary activities excluding non-operating (7,761) (20,598)
exceptional items and associates
Share of associated undertakings' taxation (1,917) (2,867)
Taxation on non-operating exceptional items (411) (13,500)
(10,089) (36,965)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 31,281 79,516
Minority Interests - equity (79) (10,936)
PROFIT FOR THE PERIOD ATTRIBUTABLE TO SHAREHOLDERS 31,202 68,580
Dividends (19,175) (103,423)
RETAINED PROFIT/(LOSS) FOR THE YEAR 12,027 (34,843)
Earnings per share excluding exceptional items and goodwill (under IIMR Guidelines)
- Basic 15.40p 21.37p
- Diluted 15.29p 20.51p
Earnings per share
- Basic 16.26p 32.03p
- Diluted 16.13p 30.64p
SINGER & FRIEDLANDER GROUP PLC
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 December 2002
2002 2001
Restated
(note 3)
#000 #000
Profit for the period attributable to shareholders 31,202 68,580
Revaluation of properties 164 137
Foreign exchange revaluation differences 2,498 (3,166)
Actuarial differences re defined benefit pension (6,302) (12,522)
schemes (net of tax)
Total recognised gains and losses for the period 27,562 53,029
Prior year adjustments :
FRS 17 adjustment (24,201)
FRS 18 adjustment (652)
FRS 19 adjustment 4,377
Total recognised gains and losses since the last report 7,086
Prior year comparative figures have been restated to reflect the effect of new
accounting standards (see note 3).
SINGER & FRIEDLANDER GROUP PLC
Consolidated Balance Sheet
31-Dec 31-Dec
2002 2001
Restated
(note 3)
#000 #000
ASSETS
Cash and balances at central banks 167 4,252
Loans and advances to banks 405,821 286,849
Loans and advances to customers 1,097,012 936,589
Debt securities 443,264 611,184
Equity shares 2,669 4,687
Interests in associated undertakings 34,584 38,633
Intangible fixed assets - goodwill 7,686 8,071
Intangible fixed assets - negative goodwill (2,716) (5,089)
Tangible fixed assets 106,916 90,056
Other assets 28,507 55,002
Prepayments and accrued income 18,796 19,556
Total assets 2,142,706 2,049,790
LIABILITIES
Deposits by banks 385,057 416,492
Customer accounts 1,223,197 1,129,139
Debt securities in issue 140,076 83,574
Other liabilities 42,811 53,037
Accruals and deferred income 24,683 28,801
Provisions for liabilities and charges - deferred taxation 170 301
Pension scheme liabilities - net of deferred tax 3,372 24,201
Equity minority interests 199 187
Called up share capital 23,104 23,009
Share premium account 129,054 128,183
Capital redemption reserve 4,240 4,240
Revaluation reserve 7,221 7,057
Profit and loss account 159,522 151,569
Equity shareholders' funds 323,141 314,058
Total liabilities and shareholders' funds 2,142,706 2,049,790
MEMORANDUM ITEMS
Contingent liabilities :
- acceptances and endorsements 78,423 71,273
- guarantees 46,457 61,129
124,880 132,402
Commitments 243,523 265,804
Consolidated Cash Flow Statement
For the year ended 31 December 2002
2002 2001
#000 #000
NET CASH FLOW FROM OPERATING ACTIVITIES (122,188) 140,195
DIVIDENDS FROM ASSOCIATES 12,287 2,525
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest paid on convertible loan stock and debenture stock (2,637) (2,175)
Dividends paid to minority interests - equity - (26,664)
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (2,637) (28,839)
TAXATION
UK corporation tax paid (15,582) (28,591)
Overseas tax paid (489) (20,332)
TAXATION PAID (16,071) (48,923)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (31,044) (31,779)
Proceeds from sale of tangible fixed assets 1,519 29,165
Purchase of investment securities (247,795) (226,934)
Proceeds from sale and maturity of investment securities 409,902 171,734
NET CASH INFLOW/(OUTFLOW) FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 132,582 (57,814)
ACQUISITIONS AND DISPOSALS
Purchase of further investment in subsidiary undertakings (net of cash (125) (16,620)
acquired)
Net proceeds from sale of investment in group and associated undertakings 948 47,921
NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 823 31,301
EQUITY DIVIDENDS PAID (21,116) (104,660)
NET CASH OUTFLOW BEFORE FINANCING (16,320) (66,215)
FINANCING
Issue of ordinary share capital (net of #270,000 contribution to employee 696 670
share trust (2001 : #808,000))
NET CASH INFLOW FROM FINANCING 696 670
NET CHANGE IN CASH (15,624) (65,545)
Notes to the preliminary announcement
1. Non-operating exceptional items are analysed as :
2002 2001
#000 #000
Net profit on sale/closure of subsidiary/associated undertakings 915 38,515
Loss on sale of investment properties (excluding associated (349) (1,336)
undertakings)
Loss on sale of fixed asset investments - (2,077)
566 35,102
Share of associated undertakings' non-operating exceptional items - 1,592
566 36,694
2. Earnings per share are calculated by reference to the profit attributable to
shareholders of #31,202,000 (2001: #68,580,000) and on a weighted average of
191,903,644 (2001: 214,129,149) shares in issue during the period. The Institute
of Investment Management and Research Headline Earnings are calculated excluding
the amortisation of goodwill and the non-operating exceptional items.
3. Changes in accounting policies
During 2002 the Group has adopted and applied three new accounting standards. The impact of these
is summarised below :
FRS 17 - Retirement benefits
Although full implementation of FRS 17 is not mandatory until 2005, its earlier
adoption is encouraged by the Accounting Standards Board and we have accordingly
done so as at 31 December 2002.
In respect of the Group's defined benefit pension schemes the full service cost
(as adjusted by the impact of any curtailments to the scheme) is charged to the
profit and loss account. A charge equal to the expected increase in the present
value of the scheme liabilities as a result of scheme liabilities being one
period closer to settlement and a credit reflecting the long-term expected
return on assets based on the market value of the scheme assets at the beginning
of the period is included in the profit and loss account within the category
"other finance income".
The balance sheet records, as an asset or liability (as appropriate), the
difference between the market value of the scheme assets and the present value
of the accrued scheme liabilities, net of deferred tax. The differences between
the expected return on assets and that actually achieved in the period is
recognised in the Consolidated Statement of Total Recognised Gains and Losses.
As a result of this accounting change the opening reserves as at 1 January 2001
have been reduced by #11,677,000. The results for the period to 31 December 2001
have been restated with a consequent further reduction in reserves as at 31
December 2001 of #12,522,000. The impact of this accounting change on the profit
and loss account for the year ended 31 December 2001 was immaterial, with
virtually all the reduction of #12,522,000 being a result of actuarial losses,
which are recorded in the Consolidated Statement of Total Recognised Gains and
Losses.
The impact of FRS 17 on the results of the year ended 31 December 2002 is a
decrease in reserves (before deferred tax) of #1,172,000 analysed as follows :
#'000s
Other finance income 157
Current service cost (2,706)
Exceptional pension credit (see below) 7,715
5,166
Actuarial losses (8,933)
(3,767)
Contributions on a SSAP 24 basis 2,595
1,172
EXCEPTIONAL PENSION CREDIT - During the course of 2002 the benefits of the
Group's defined benefit pension schemes were changed with the result that, inter
alia, the future rate of increase of active members' pensionable salaries was
reduced. FRS 17 requires the impact of such changes to defined benefit schemes
to be accounted for in the profit and loss account.
FRS 18 - Accounting policies
FRS 18 introduced a requirement to comply with all applicable Statements of
Recommended Practice ("SORPS"). Whilst the Group complies with all SORPS issued
by the British Bankers' Association it did not, previously, fully comply with
the SORP issued by the Finance and Leasing Association ("FLA") which affects
certain of our asset finance companies. In particular the FLA SORP restricts the
amount of income able to be recognised at the commencement of a new lease or
instalment credit agreement to that amount which can be matched to the initial
direct costs of entering into that lease/agreement.
The Group has altered its income recognition policy such that it does now fully
comply with the FLA SORP. The impact of this change in accounting policy was to
reduce reserves as at 31 December 2001 by #652,000. There was an immaterial
impact on the results for the year ended 31 December 2001 and on the results for
the year ended 31 December 2002.
FRS 19 - Deferred tax
FRS 19 introduced a requirement to account fully for deferred tax on differences
resulting from an item being recognised in the accounting results in a period
different to that in which its tax impact is recorded.
Following the adoption of FRS 19, both the profit and loss account and the
balance sheet for prior periods have been restated. Shareholders' funds as at 1
January 2001 increased by #4,640,000 - a result of the Group being able to
recognise previously unrecognised deferred tax assets and no longer being
permitted to make provision for the difference between the tax charge incurred
on profits earned by our subsidiaries operating in lower tax rate jurisdictions
and the full UK tax rate of 30%.
The adoption of FRS 19 resulted in an increase in the tax charge for the year
ended 31 December 2001 of #263,000.
The impact of FRS 19 on the results for the year ended 31 December 2002 is a
reduction in the tax charge of #2,970,000.
The adoption of FRS 19 has resulted in the recognition of negative goodwill in
respect of the Group's acquisition in December 2001 of Hermes Group Limited.
Prior to the restatement required by FRS 19 the Group reported, as at 31
December 2001, positive goodwill on this acquisition of #704,000. However, the
introduction of FRS 19 results in the recognition of a previously unrecognised
deferred tax asset with a corresponding restatement of the goodwill to show
negative goodwill of #5,089,000. This negative goodwill is being amortised
through the profit and loss account over a period of 5 years on a reducing
balance basis to match the benefit of the assets acquired, as required by FRS
10. The amount credited to the profit and loss account during the period to 31
December 2002 was #1,913,000.
Similarly, the adoption of FRS 19 has reduced the amount of goodwill arising on
the acquisition, in 2001, of W H Jones Limited. The reduction amounted to
#64,000.
4. RECONCILIATION OF GROUP OPERATING PROFIT TO NET OPERATING CASH FLOWS
2002 2001
Restated
(note 3)
#000 #000
Group operating profit 33,512 71,419
Change in prepayments and accrued income 760 (6,712)
Change in accruals and deferred income (4,503) (55,376)
Interest on convertible loan stock and debenture stock 2,637 2,175
Provision for bad and doubtful debts 842 5,019
Amortisation of premiums and discounts 498 216
Depreciation - tangible assets 12,499 11,563
Amortisation - goodwill (1,486) 379
Sale of tangible fixed assets (18) 1,576
Sale of and provisions against fixed assets - investments 2,729 2,134
Change in other assets 34,528 8,053
Change in other liabilities and provisions 2,841 6,168
Change in pension scheme liability (38,608) 19
Foreign exchange movement 2,103 (8,227)
Net cash flow from trading activities 48,334 38,406
Net (increase)/decrease in:
Treasury and other eligible bills - (2,847)
Loans and advances to customers (132,145) (41,116)
Loans and advances to banks (130,511) 93,327
Non investment securities 2,131 171,035
Hire purchase receivables (29,120) (60,963)
Net increase/(decrease) in:
Deposits and customer accounts 62,623 81,646
Certificates of deposit in issue 56,500 (3,891)
Settlement balances - (135,402)
Net cash inflow from operating activities (122,188) 140,195
5. ANALYSIS OF CHANGES IN CASH DURING THE PERIOD
31 DECEMBER 31 DECEMBER
2002 2001
#000 #000
Balance at 1 January 46,533 112,078
Net cash outflow (15,624) (65,545)
Balance at 31 December 30,909 46,533
6. ANALYSIS OF CASH BALANCES
31 DECEMBER 31 DECEMBER
2002 2001 CHANGE
#000 #000 #000
Cash and balances at central banks 167 4,252 (4,085)
Loans and advances to banks - repayable on 30,742 42,281 (11,539)
demand
30,909 46,533 (15,624)
OTHER INFORMATION
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2002. However, the financial
information for 2001 is derived from the statutory accounts for 2001, as
restated. These statutory accounts have been delivered to the Registrar of
Companies. The Auditors have reported on the 2001 accounts, their report was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
The statutory accounts for 2002 will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and will
be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The Company will be circulating the full Report and Accounts to
shareholders shortly and copies of the Report and Accounts will also be
available from the Registered Office of the Company, 21 New Street, Bishopsgate,
London, EC2M 4HR.
Dividend
Subject to the dividend recommended by Carnegie being approved by its
shareholders at its Annual General Meeting the Directors recommend the payment
of a final dividend of 5.5p per ordinary share in respect of the year ended 31
December 2002 (final dividend in respect of the year ended 31 December 2001,
6.5p per ordinary share). Subject to shareholders' approval at the Annual
General Meeting on 29 April 2003, the dividend will be paid on 23 May 2003 to
shareholders who appear on the register of members at the close of business on 2
May 2003.
Annual General Meeting
The Annual General Meeting will be held at 21 New Street, Bishopsgate, London,
EC2M 4HR on 29 April 2003 at 12.30pm.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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