Bristol & West PLC
31 May 2007
BRISTOL & WEST PLC
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 MARCH 2007
INTRODUCTION
This announcement constitutes non-statutory accounts, as defined by Section 240
of the Companies Act 1985, which have been extracted from the Group's latest
financial statements. The financial statements have not yet been delivered to
the Registrar of Companies.
The auditors' report under Section 235 of the Companies Act 1985 on the full
annual accounts of the Group for the year ended 31 March 2007, which has been
signed, was unqualified. It did not include any statement under sections 237(2)
(inadequate accounting records or returns or accounts not agreeing with records
and returns) or 237(3) (failure to obtain necessary information and
explanations) of the Companies Act 1985.
CHIEF EXECUTIVE'S COMMENTARY ON RESULTS
Overview
This has been a successful year for Bristol & West plc. Our focused business
strategy is ensuring continued volume and profit growth despite continued
competitive pressures in our core mortgage markets.
Business and Financial Review
We have delivered strong growth in our lending operations. Despite a competitive
market our mortgage book has increased by 10% to £23.7bn representing over 2% of
the market. The mortgage book remains well diversified between standard and
specialised products and continues to outperform the market in asset quality
terms.
We are no longer a major retail deposit taker following the successful transfer
of our deposit business to Britannia Building Society in 2005. Deposits are
still taken within our professional and corporate business unit, an area that
has grown by 23% to £3.6bn year on year.
Profit before taxation from continuing operations is £100.5m, an increase of 6%
over the previous year. Effective cost management was a priority during the year
and costs fell by 7% to £104.8m.
Customers
Delivering excellent customer service is paramount, and our commitment to our
customers is reflected in a range of customer programme initiatives, including
the Financial Services Authority's initiative Treating Customers Fairly, which
continues to be embedded into all our products and services.
Regulation
Programmes have been established to ensure compliance with the requirements of
Basle II and Sarbanes Oxley, the latter being necessary for Bank of Ireland
Group under US listing rules.
Simplifying our corporate structure
In February 2007, our parent company announced its intention to simplify the
Bank of Ireland operating structure in the UK. This planned re-organisation
will involve the transfer of the Bristol & West businesses, and the business of
our wholly owned subsidiary, Bank of Ireland Home Mortgages Limited to the
Governor and Company of the Bank of Ireland, our ultimate parent company.
The transfer process is in its initial stages, and will be conditional on
obtaining High Court approval and other regulatory clearances. Subject to these
approvals, we expect the transfer to take effect in the second half of 2007.
We will continue to use the 'Bristol & West' and 'Bank of Ireland Home
Mortgages' trading names and brands.
A comprehensive communications programme is in place to ensure all stakeholders
are provided with further information on the proposed transfer.
Bristol & West in the Community
Bristol & West has continued to support the community through a wide range of
initiatives. For example, our partnership with Withywood School in Bristol has
seen members of staff involved in volunteering activities outside the work
environment to support students and teachers in extra curricular activities.
During the past 12 months our Charities of the Year were the Association of
Children's Hospices and Starlight, and funds raised went towards helping
terminally ill children.
Our Staff
I would like to thank all our staff for their contribution towards yet another
successful year. Their commitment and enthusiasm has been, and will continue to
be, a significant factor in the achievement of our future success. Our
continued focus on employee engagement ensures that we continually work towards
ensuring we create a working environment in which employees feel valued for the
contribution they make.
Outlook
We have continued to make excellent progress, and I am confident that our
business strategy will enable us to build further on our success and deliver
continued profit growth.
Desmond E Crowley
Chief Executive
30 May 2007
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2007
2007 2006
£m £m
Continuing operations
Interest and similar income 1,371.4 1,051.0
Interest expense and similar charges (1,171.9) (830.2)
Net interest income 199.5 220.8
Fee and commission income 10.8 15.5
Fee and commission expense (3.4) (13.3)
Net fee and commission income 7.4 2.2
Net trading income (3.2) (18.4)
Other operating income 2.7 4.4
Impairment losses on loans and advances (1.1) (1.8)
Other operating expenses (104.8) (112.7)
Profit before taxation from continuing operations 100.5 94.5
Taxation (28.2) (22.8)
Profit for the year from continuing operations 72.3 71.7
Discontinued operations
Result for the year from discontinued operations 4.6 121.7
Profit for the year 76.9 193.4
BALANCE SHEETS AT 31 MARCH 2007
Group Company
2007 2006 2007 2006
£m £m £m £m
Assets
Debt securities 120.5 341.5 120.5 341.5
Derivative financial instruments 130.5 117.6 130.5 117.6
Loans and advances to banks 8,537.8 1,655.4 7,953.6 1,139.9
Loans and advances to customers 23,710.9 21,541.4 23,452.4 21,270.6
Shares in group undertakings - - 591.7 591.7
Intangible assets 37.1 37.3 37.1 37.3
Property, plant and equipment 51.1 53.7 6.5 13.9
Asset classified as held for sale 3.2 - 3.2 -
Current tax asset - 7.7 2.7 9.1
Other assets 76.3 38.5 54.7 16.2
TOTAL ASSETS 32,667.4 23,793.1 32,352.9 23,537.8
LIABILITIES
Deposits from other banks 21,591.8 18,978.3 21,643.1 19,095.2
Derivative financial instruments 73.7 76.9 65.0 76.9
Due to customers 3,593.1 2,924.7 3,593.1 2,924.7
Debt securities in issue 5,535.6 61.3 (1.6) -
Other liabilities 418.1 338.4 5,909.7 322.8
Provisions 24.6 43.0 24.6 43.0
Current tax liabilities 23.2 22.0 - -
Deferred tax liabilities 14.9 8.7 7.3 2.7
Retirement benefit obligations 36.5 56.0 26.1 43.5
Subordinated liabilities 440.9 414.2 440.9 414.2
Other borrowed funds 78.6 78.6 78.6 78.6
TOTAL LIABILITIES 31,831.0 23,002.1 31,786.8 23,001.6
EQUITY
Share capital 306.6 306.6 306.6 306.6
Retained earnings 501.6 458.8 240.0 208.9
Other reserves 28.2 25.6 19.5 20.7
TOTAL EQUITY 836.4 791.0 566.1 536.2
TOTAL EQUITY AND LIABILITIES 32,667.4 23,793.1 32,352.9 23,537.8
STATEMENTS OF RECOGNISED INCOME AND EXPENSES AT 31 MARCH 2007
Group Company
2007 2006 2007 2006
£m £m £m £m
For the year ended 31 March
Profit for the financial year 76.9 193.4 25.2 142.6
Actuarial valuation of pension
fund 6.8 1.2 6.7 3.9
Deferred tax on actuarial gains
and losses (2.1) (0.3) (2.0) (1.2)
Revaluation of property, plant and
equipment 5.0 4.2 - 0.9
Deferred tax on revaluation of
property, plant and equipment (1.2) (1.0) - -
Total recognised income and
expense for year 85.4 197.5 29.9 146.2
First time adoption of IAS 39 - 73.8 - 57.4
Total 85.4 271.3 29.9 203.6
CASHFLOW STATEMENTS FOR THE YEAR ENDED 31 MARCH 2007
Group Company
2007 2006 2007 2006
£m £m £m £m
Net cash flow from operating activities
Profit before tax
- continuing operations 100.5 94.5 25.2 23.1
- discontinued operations 5.9 123.3 5.9 123.3
106.4 217.8 31.1 146.4
Adjusted for
Depreciation and amortisation 8.6 7.0 8.2 6.4
Impairment losses on loans and advances
to customers 1.1 1.8 0.1 1.4
Profit on sale of branch network - (120.4) - (120.4)
Profit on disposal of intangible assets
and property, plant and equipment - (7.7) - (10.2)
Interest expense: subordinated 37.2 35.6 37.2 35.6
liabilities
Other non-cash movements (0.1) 1.4 (1.5) 1.5
153.2 135.5 75.1 60.7
Changes in operating assets and liabilities
Debt securities 213.7 - 213.7 -
Loans and advances to banks (6,592.6) (667.4) (6,677.4) (667.4)
Loans and advances to customers (2,170.6) (4,027.0) (2,181.9) (3,980.3)
Other assets (37.8) 43.6 (38.5) 40.1
Deposits from other banks 2,613.5 8,209.5 2,547.9 8,210.8
Due to customers 651.5 (3,823.9) 651.5 (3,824.3)
Debt securities in issue 5,482.7 (17.9) (1.6) -
Other liabilities 63.6 64.7 5,573.9 70.9
Provisions (18.4) (2.8) (18.4) (2.8)
205.6 (221.2) 69.2 (153.0)
Taxes paid (17.7) (24.9) 3.1 (9.9)
Net cash from/(used in) operating activities 187.9 (246.1) 72.3 (162.9)
Cash flows from investing activities
Net investment in intangible assets and
property, plant and equipment (4.0) 24.7 (3.8) 14.0
*Net cash inflow from sale of branch
network - 146.0 - 146.0
Interest on subordinated liabilities (36.6) (35.9) (36.6) (35.9)
Net cash from/(used in) investing (40.6) 134.8 (40.4) 124.1
activities
Cash flows from financing activities
Subordinated debt issue 80.0 - 80.0 -
Subordinated debt repayment (50.0) - (50.0) -
Equity dividends paid (40.0) (80.0) - (80.0)
Capital repayment of finance lease (0.7) (0.4) (0.7) (0.4)
Net cash from/(used in) financing (10.7) (80.4) 29.3 (80.4)
activities
Net (decrease) / increase in cash and
cash equivalents 289.8 (56.2) 136.3 (58.5)
Opening cash and cash equivalents 854.6 910.8 329.8 388.3
Closing cash and cash equivalents 1,144.4 854.6 466.1 329.8
*Included in the net cash inflow from the sale of the branch network are £155.6m
of cash consideration received and £9.6m of cash outflow from disposal costs at
31 March 2006.
ACCOUNTING POLICIES
The accounting policies adopted for use in the preparation of the 2007
Preliminary results are included in the Annual Financial Statements for the year
ended 31 March 2007.
SEGMENTAL ANALYSIS
The Group has two principal business segments, Mortgages and Consumer. A profit
of £120.7m on continuing operations before taxation arose in respect of
Mortgages and a profit of £3.8m arose in respect of Consumer. A loss before tax
of £24.0m related to Group and Central activities.
DISCONTINUED OPERATIONS FOR THE YEAR ENDED 31 MARCH 2007
On 21 September 2005 the branch network and savings book was transferred to
Britannia Building Society. The profit in 2007 results from the release of
provisions relating to the transfer and businesses previously disposed of.
2007 2006
£m £m
Group
Post tax results from discontinued operations 4.6 2.0
Gain on disposal branch operations - 120.4
Taxation thereon - (0.7)
Net gain on disposal - 119.7
Post tax gain for the period from discontinued operations 4.6 121.7
Discontinued operations contributed £5.9m (2006: £2.9m) to pre-tax profit,
comprising £nil (2006: £21.4m) to revenue, with a release through expenses of
£5.9m (2006: cost of £18.5m). The taxation relating to discontinued trading
operations was £1.3m (2006: £0.9m).
Pre tax results from discontinued operations 2007 2006
£m £m
Profit before tax for discontinued operations 5.9 2.9
Pre tax gain on disposal of branch operations - 120.4
5.9 123.3
DISPOSAL OF BRANCH OPERATIONS
2007 2006
£m £m
Carrying value of net tangible assets sold - 5.6
Cost of disposal
- Staff costs - 3.3
- Legal and professional fees - 5.3
- Systems costs - 8.6
- Impairment of software - 3.7
- Other - 8.7
Total cost of disposal - 29.6
Gain on disposal of branch operations - 120.4
Cash consideration received - 155.6
The disposal of branch operations took place on 21 September 2005.
TAXATION
The change in the effective tax rate from year to year is a result of a number
of matters as illustrated in the following breakdown of the tax charge for the
year and reconciliation of current statutory and effective tax rates.
2007 2006
£m £m
Current tax:
UK Corporation tax at 30% (2006: 30%) 25.7 22.0
Corporation tax adjustments in respect of prior periods 0.4 (2.2)
Deferred tax:
Current year 6.5 5.1
Adjustments in respect of prior periods (3.1) (0.5)
29.5 24.4
OTHER RESERVES AND RETAINED EARNINGS
Share Revaluation Profit & loss Other capital
premium reserve account reserve
Group £m £m £m £m
At 31 March 2005 18.5 4.2 267.9 2.4
Adoption of IAS 32 and IAS 39 - - 73.8 -
At 1 April 2005 18.5 4.2 341.7 2.4
Profit for the year - - 193.4 -
Dividends paid on ordinary shares - - (80.0) -
Actuarial valuation of pension fund - - 1.2 -
Deferred tax on valuation of pension fund - - (0.3) -
Revaluation of property - 4.2 - -
Deferred tax on revaluation of property - (1.0) - -
Transfer of reserve following sale of
property - (2.8) 2.8 0.1
At 31 March 2006 / 1 April 2006 18.5 4.6 458.8 2.5
Profit for the year - - 76.9 -
Dividend paid to fellow subsidiary - - (40.0) -
Actuarial valuation of pension fund - - 6.8 -
Deferred tax on valuation of pension fund - - (2.1) -
Revaluation of property - 5.0 - -
Deferred tax on revaluation of property - (1.2) - -
Transfer of reserve following sale of
property - (1.2) 1.2 -
At 31 March 2007 18.5 7.2 501.6 2.5
OTHER RESERVES AND RETAINED EARNINGS (continued)
Share premium Revaluation Profit & loss Other
reserve account capital
reserve
Company £m £m £m £m
At 31 March 2005 18.5 1.4 86.1 -
Adoption of IAS 32 and IAS39 - - 57.4 -
At 1 April 2005 18.5 1.4 143.5 -
Profit for the year - - 142.6 -
Dividends paid on ordinary shares - - (80.0) -
Actuarial valuation of pension fund - - 3.9 -
Deferred tax on valuation of pension
fund - - (1.2) -
Revaluation of property - 0.9 - -
Transfer of reserve following sale of
property - (0.1) 0.1 -
At 31 March 2006 /1 April 2006 18.5 2.2 208.9 -
Profit for the year - - 25.2 -
Actuarial valuation of pension fund - - 6.7 -
Deferred tax on valuation of pension
fund - - (2.0) -
Transfer of reserve following sale of
property - (1.2) 1.2 -
At 31 March 2007 18.5 1.0 240.0 -
Share premium
This comprises the premium arising on the issue of all equity shares.
Revaluation reserve
This comprises the revaluation of property to market value.
Profit and loss account
Profit and loss account reserves comprise accumulated retained profits.
Other capital reserve
This represents non-distributable reserves established on the acquisition of the
Bristol & West Building Society.
DATE OF APPROVAL
This preliminary announcement was approved by the Board of Directors on 30 May
2007.
This information is provided by RNS
The company news service from the London Stock Exchange