Egg plc
Q1 Financial Results and New Business Figures
'In the UK Egg has had a solid start to the year. First quarter profits were
£15 million and we added a further 148,000 net new customers. Unsecured lending
balances continued to grow strongly, with record personal loan drawdowns of £563
million in the period. Total balances outstanding on credit cards and personal
loans are now over £5 billion.
In France, as previously reported, we are managing discretionary expenditure
tightly as we await the conclusion of the ongoing process whereby Prudential is
considering proposals for its shareholding in Egg. As a result losses in France
for the quarter reduced to £16 million.'
Paul Gratton, CEO, Egg plc
Highlights:
Analysis of Group Profit and Loss Account:
Q1 2004 Q1 2003
£m £m
Egg UK Operating Profit 15.2 17.3
Egg France Operating Loss (15.8) (23.9)
Other International - (2.3)
Subsidiaries/Associates/JV's (0.7) (1.6)
Transaction Costs (1.3) -
Restructuring Costs (2.3) (5.2)
Group Loss before Tax (4.9) (15.7)
Group
• Group operating income up 26% to £120.3 million (Q1 2003: £95.2
million)
• Group loss before tax of £4.9 million (Q1 2003: £15.7 million)
• Group loss per share was 0.7p (Q1 2003: 2.2p)
• Total group assets of £11.2 billion (Q1 2003: £10.5 billion)
UK
• Egg UK delivered an operating profit of £15.2 million (Q1 2003: £17.3
million)
• 148,000 net new customers acquired in the first quarter (Q1 2003:
165,000)
• Unsecured lending balances grew by £238 million (Q1 2003: £200
million) leading to quarter end balances of £5.0 billion (31 March
2003: £3.5 billion)
• Strong sales growth in personal loans with drawdowns of £563 million,
up 164% on Q1 2003 (£213 million).
• Credit quality remains strong and benchmarks continue to show Egg's
card portfolio significantly outperforming industry norms.
France
• Operating loss of £15.8 million (€23.2 million) for Q1 reduced from
£19.6 million (€27.6 million) in Q4 2003.
• Card balances growing to €186 million, up 9% on Q4 2003
• 71,000 cards in issue with 85% of card balances now revolving
Chief Executive Paul Gratton said:
'The UK business has performed solidly in the first quarter. Profits were £15
million and we have grown our customer base by a further 148,000.
'Within unsecured lending in the UK we have seen net lending growth of £238
million this quarter which is encouraging compared to the £200 million growth in
the same period last year. Total balances now exceed £5 billion with credit
cards contributing £3 billion and personal loans £2 billion. We continue to
successfully cross sell personal loans into our credit card customer base which
has helped Egg to grow unsecured lending balances in a traditionally quiet
period for the card market.
'The UK operating profit of £15 million was in line with internal forecasts.
Revenues grew almost 6% compared to Q4 2003 and 24% compared to the same period
last year. Net interest income growth has slowed as expected this quarter given
the margin pressures created by base rate increases. We expect revenues to grow
strongly again over the rest of the year as card balances grow. Credit quality
remains good and provision levels reflect the continuing growth in the unsecured
lending portfolio, the stage in life cycle of the card and loan books and the
increasing proportion of personal loans in the book. The bad debt charge for Q1
was 2.4% of average assets, in line with our plans, and as we outlined within
our preliminary results we expect the charge to stay at this level for the rest
of 2004.
'In Egg France, as previously reported, our search for a strategic partner has
been superseded by Prudential considering proposals for its shareholding in Egg.
In the meantime we are managing discretionary expenditure tightly as we await
the conclusion of this process. This is reflected in the reduction in quarterly
losses from £20 million to £16 million.'
Overview of Group Results
Summary profit and loss account by quarter (Unaudited)
Q1 2004 Q4 2003 Q3 2003 Q2 2003 Q1 2003
UK £m £m £m £m £m
Net Interest Income 73.7 72.5 64.6 61.6 64.3
Other Operating Income 44.7 39.4 43.6 43.0 30.6
Egg UK Operating Income 118.4 111.9 108.2 104.6 94.9
Operational and Administrative Expenses (41.3) (39.7) (36.8) (34.3) (32.9)
Brand and Marketing Costs (9.6) (8.5) (6.5) (9.9) (9.0)
Development Costs (5.9) (4.5) (5.9) (4.6) (4.9)
Depreciation and Amortisation (5.2) (6.5) (4.4) (3.4) (4.0)
Amounts written off Fixed Asset - (4.3) - - -
Investment
Provisions for Bad and Doubtful Debts (41.2) (32.3) (34.6) (33.0) (26.8)
Egg UK Operating Profit 15.2 16.1 20.0 19.4 17.3
France
Net Interest Income 1.9 1.5 1.8 1.3 0.9
Other Operating Income - (0.2) (0.3) (0.1) (0.7)
Egg France Operating Income 1.9 1.3 1.5 1.2 0.2
Operational and Administrative Expenses (9.1) (10.4) (12.8) (11.7) (10.3)
Brand and Marketing Costs (1.6) (3.2) (3.6) (9.5) (9.7)
Development Costs (0.4) (0.9) (0.5) (1.0) (1.0)
Depreciation and Amortisation (1.7) (2.1) (2.1) (2.1) (2.1)
Provisions for Bad and Doubtful Debts (4.9) (4.3) (3.3) (1.7) (1.0)
Egg France Operating Loss (15.8) (19.6) (20.8) (24.8) (23.9)
Other International - (0.7) (0.7) (0.5) (2.3)
Subsidiaries/Associates/JV's (0.7) (0.2) (0.6) (1.2) (1.6)
Transaction Costs (1.3) - - - -
Restructuring Costs (2.3) (5.1) - - (5.2)
Group Loss Before Tax (4.9) (9.5) (2.1) (7.1) (15.7)
Egg UK
Revenues
Net interest income in Q1 2004 was £73.7 million. The increase over previous
quarters was in line with expectations. The margin improvements we have seen as
the card portfolio matures and the 0% offers become a smaller proportion of the
total book were partially offset by base rates rising a further 25 basis points
in February. While our forecasts indicate margins will remain relatively flat
this year we do expect continued growth in net interest income this year on the
back of card and loan balance increases.
Egg has maintained a high level of non-interest income over the past few
quarters with the Q1 2004 total at £44.7 million. This has mainly resulted from
commissions earned cross-selling insurance at point of sale on loans and cards,
reflecting the higher product sales volumes achieved, particularly on loans.
Looking ahead we expect further growth in other income over the remainder of
2004 as we continue to improve our penetration levels on payment protection
insurance on cards and loans.
Costs
Operational and administrative costs at £41.3 million for the quarter remain
tightly managed with the slight increase over previous quarters arising mainly
from the continuing growth in business volumes.
Brand and marketing costs were £9.6 million in Q1 2004. This included an
investment in new brand creative designs which will benefit the remainder of the
year. Sales performance remained strong with 148,000 customers acquired in the
first quarter, which puts us well on track to achieve our target of 500,000
customers for the year. We have just launched a new advertising campaign in Q2
which will be the peak quarter for investment in brand and marketing, as it was
in 2003.
UK development costs were £5.9 million for the quarter. We expect the total
expenditure on this line to be higher in the first half of 2004 than the second
half with the full year investment to be at similar levels to 2002 and 2003.
Depreciation at £5.2 million in Q1 2004 was in line with plans and we expect the
charge to remain stable at this level over the remainder of this year.
Bad Debt Provisions
Credit quality remains good and provision levels reflect the continuing growth
in the unsecured lending portfolio, the stage in the life cycle of the card and
loan books and the increasing proportion of personal loans in the book. The bad
debt charge for Q1 was 2.4% of average assets, in line with our plans, and as we
outlined within our preliminary results we expect the charge to stay at this
level for the rest of 2004. In the first quarter the most significant factor
affecting the relative bad debt charge was the fact that the maturing loan book
is now within the peak period for the emergence of bad debt on such portfolios.
Having begun to cross sell loans in earnest towards the end of 2002 and
delivered record volumes in 2003 the average age of the book is increasing.
Experience shows that bad debt typically peaks between 9 and 18 months after a
loan is written.
Egg France
The operating loss for the first quarter was £15.8 million (€23.2 million). The
increased savings compared to the quarterly run rate last year were mainly
achieved in operational and administrative expenses at £9.1 million (Q4 2003:
£10.4 million) and brand and marketing at £1.6 million (Q4 2003: £3.2 million)
as discretionary expenditures were kept under tight control.
Subsidiaries/Associates/JV's
The £0.7 million net loss in Q1 2004 was primarily in respect of Egg's 85%
subsidiary Investment Funds Direct Holdings Limited ('FundsDirect') which mainlyrelates to development costs for the integrated business to business platform
scheduled for launch later this year.
Transaction Costs
The costs of £1.3 million in Q1 2004 relate to incremental expenses incurred in
relation to the ongoing process whereby Prudential is considering proposals for
its shareholding in Egg.
Restructuring Costs
The charge of £2.3 million in Q1 2004 relates to exit costs on one of our leased
properties within Egg France which is redundant as employees now work on other
premises.
Business Performance
Egg UK
Summary New Business Figures by Quarter
Q1 Q4 Q3 Q2 Q1
2004 2003 2003 2003 2003
Net New Egg UK Customers ('000) 148 150 145 175 165Net New Customers by product ('000)- Savings 17 4 (1) (15) 10
- Credit Card 157 160 167 196 181
- Personal loans 23 23 23 21 13
- Mortgages (1) (1) - - -
- Egg Invest 1 1 - - 1
- Egg Insure (1) 2 (8) 17 27
Products £m £m £m £m £m
- Egg Card Balance Growth (5) 122 250 241 71
- Egg Personal Loan Drawdowns 563 526 490 427 284
- Egg Mortgage Drawdowns 60 58 64 72 83
- Egg Savings Flows (net) (47) (229) (637) (345) (334)
Cumulative Figures
31 Mar 31 Mar 31 Dec
2004 2003 2003
Total Egg UK Customers (1) (2) 3,345,230 2,725,915 3,196,435
Customers by product (1)
- Credit Card (4) 2,774,001 2,093,229 2,616,505
- Savings (3) 756,030 750,658 738,565
- Personal loans (3) 249,875 160,745 227,195
- Mortgages (3) 28,427 30,444 28,929
- Egg Invest (3) 58,713 56,465 57,942
- Egg Insure (3) 117,327 112,633 118,242
Product balances (1) £m £m £m
- Egg Card 3,010 2,401 3,015
- Egg Savings 6,117 7,374 6,164
- Egg Personal Loans 2,015 1,096 1,773
- Egg Mortgages 1,181 1,253 1,197
- Prudential Savings 161 215 185
- Prudential Mortgages 738 1,054 798
- Prudential Personal Loans 1 4 2
Notes:
(1) Cumulative as at the date indicated.
(2) If a customer holds more than one Egg product they are treated as
a single customer for the purposes of this line item.
(3) Joint holders are treated as two or more customers.
(4) Includes second cardholders and individuals whose applications
have been accepted in principle and who have been allocated a
credit limit but for whom the application process has not yet been
completed.
Egg UK
Customers
Egg now has over 3.3 million customers including the 148,000 net new customers
who joined during the first quarter. We have just launched a new advertising
campaign in April 2004 and we expect acquisition levels over the remainder of
the year to remain strong. We believe that our target level of 500,000 net new
customers per annum remains achievable over the next few years as our target
market grows in line with internet penetration and usage and the widening appeal
of the brand.
Unsecured Lending
The UK credit card business attracted 157,000 net new customers during the
quarter, taking the total to almost 2.8 million, with card balances standing at
£3.0 billion at period end. In Q1 2004 we have maintained our market share in
credit cards. This is particularly pleasing given we are also successfully
cross selling record volumes of unsecured personal loans to card customers, with
consequent shift in card balances into structured lending and, based on BBA
statistics, VISA card balances actually reduced by £232 million in the UK market
across January and February.
Personal loan customers increased by another 23,000 in the quarter with record
levels of disbursements (£563 million). The loan book now exceeds £2 billion in
balances.
Savings
Q1 2004 saw a net outflow on deposits of £47 million. This reflected two
different trends within the quarter with an outflow of £273 million in January
and February combined followed by a net inflow of £226 million in March
following the launch of a new bonus account to raise additional monies from the
retail savings market as part of Egg's funding strategy.
Egg France
In France we issued a further 5,000 cards and balances grew by €15 million.
Total unsecured lending balances now exceed €200 million with 85% of the credit
card balances now revolving.
Financial Review
This section analyses Q1 2004 Group results compared to Q1 2003.
Net interest income increased by 16% to £75.6 million for the period (Q1 2003:
£65.3 million) resulting from the continued growth in UK retail asset balances
(31 March 2004: £6.8 billion, 31 March 2003: £5.7 billion). Margins have
remained relatively stable with improved card yields offset by more competitive
pricing on loans and the additional cost of debt capital.
Other operating income increased by £14.8 million (49%) to £44.7 million. This
has largely resulted from the continued success of our cross sale strategy in
unsecured personal loans, with commissions and profit share from selling
creditor insurance on loans in the UK up by £13.0 million (193%) to £26.9
million in line with the near doubling in sales volumes (23,000 in Q1 2004
compared to 13,000 in Q1 2003). Profit on disposal of investment securities
totalled £1.5 million for the period (Q1 2003: nil).
Operational and administrative expenses increased by £5.7 million (12%) to £54.6
million. This has resulted from a combination of factors; there has been an
increase in the core UK operational cost of £8.4 million (26%) in line with
growth in customers and the £1.3 million of transaction related costs. In
addition there has been an increase in the Egg France operating costs of £1.1
million due to the Q1 2004 restructuring costs of £2.3 million. However
offsetting these variances is the £5.2 million of UK restructuring costs,
incurred in Q1 2003 and not repeated in Q1 2004.
Brand and marketing costs decreased by £7.5 million (40%) to £11.2 million,
predominantly reflecting a reduction in the marketing costs incurred in Egg
France of £8.1 million, offset by a small increase in UK costs (£0.6 million).
Development costs decreased by £2.4 million (28%) to £6.2 million. There was a
decrease in France costs of £0.6 million as the infrastructure for France is now
in place. In addition UK costs decreased by £1.7 million; during Q1 2003 there
was R&D expenditure in the USA of £2.3 million which has not been repeated this
year.
Depreciation and amortisation increased by £0.8 million (13%) reflecting an
increase of £1.2 million in the UK charge offset by a reduction in the Egg
France charge of £0.4 million.
The charge for bad and doubtful debts at £46.1 million (Q1 2003: £27.9 million)
reflects the continuing strong growth in the UK retail asset portfolio and
includes £4.9 million for the French business. The proportion of unsecured
assets, especially personal loans, has continued to increase within the
portfolio. This change in the mix of the portfolio has resulted in an increase
in closing provisions as a percentage of advances to customers to 3.01% at 31
March 2004 (31 March 2003: 2.41%). Our delinquency levels remain well below the
industry average.
The tax charge was £0.9 million (31 March 2003: £2.7 million). The reduction in
the charge reflects the fact that tax relief on French losses has been
recognised following the amalgamation of the French business into a branch of
Egg Banking plc in April 2003.
Loss attributable to ordinary shareholders after tax was £5.7 million compared
to a loss of £18.3 million for the quarter ended 31 March 2003.
Loss per share was 0.7p compared to 2.2p for the quarter ended 31 March 2003.
Total assets increased moderately to £11.2 billion as at 31 March 2004 (31 March
2003: £10.5 billion). Retail assets increased by £1.2 billion to £6.9 billion
(31 March 2003: £5.7 billion) mainly due to the ongoing growth in UK unsecured
lending balances. Treasury assets decreased slightly by £0.3 billion to £3.8
billion (31 March 2003: £4.1 billion).
Total liabilities also increased moderately to £10.8 billion as at 31 March 2004
(31 March 2003: £10.1 billion).
Capital ratios at 31 March 2004 were 9.6% (tier 1) and 17.4% (total) (31 March
2003: 10.9% (tier1) and 14.6% (total)).
Independent review report by KPMG Audit Plc to Egg plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 14 to 22 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in the Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review is substantially less in scope than an
audit performed in accordance with auditing standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the three months
ended 31 March 2004.
KPMG Audit Plc
Chartered Accountants
London
21 April 2004
Consolidated profit and loss account (Unaudited)
Three months to Three months to (Audited)
31 March 31 March Full Year
2004 2003 2003
£m £m £m
Interest receivable 214.0 202.7 830.8
Interest payable (138.4) (137.4) (562.0)
Net interest income 75.6 65.3 268.8
Other operating income 44.7 29.9 155.2
Operating income 120.3 95.2 424.0
Administrative expenses
- operational and administrative expenses (54.6) (48.9) (202.6)
- brand and marketing costs (11.2) (18.7) (60.0)
- development costs (6.3) (8.6) (25.7)
Depreciation and amortisation (6.9) (6.2) (26.9)
Amounts written off fixed asset investment - - (4.3)
Provisions for bad and doubtful debts (46.1) (27.9) (137.0)
Operating loss (4.8) (15.1) (32.5)
Share of operating profit/(loss) of joint ventures 0.3 (0.1) 0.1
Share of associates losses (0.4) (0.5) (2.0)
Loss on ordinary activities before tax (4.9) (15.7) (34.4)
Tax (charge)/group relief on loss on ordinary activities (0.9) (2.7) 1.4
Minority interests 0.1 0.1 0.2
Retained loss for the financial period (5.7) (18.3) (32.8)
Loss per share (pence per share) (0.7p) (2.2p) (4.0p)
All of the Group's losses arose from continuing operations.
Consolidated statement of total recognised gains and losses
Three months to Three months to (Audited)
31 March 31 March Full Year
2004 2003 2003
£m £m £m
Retained loss for the financial period (5.7) (18.3) (32.8)
Currency translation differences on foreign currency net 0.2 3.9 4.4
investments
Total recognised losses related to the period (5.5) (14.4) (28.4)
Consolidated balance sheet (Unaudited)
31 March 31 March (Audited)
2004 2003 31 December
2003
Restated Restated
£m £m £m
Assets
Cash and balances at central banks 13.2 13.3 13.3
Loans and advances to banks 268.6 253.1 329.6
Securities purchased under agreement to resell - 75.0 -
Loans and advances to customers 6,864.0 5,692.9 6,718.0
Debt securities 3,557.6 4,127.2 4,156.5
Shares in joint ventures 1.2 0.7 1.0
Investment in associated undertakings 5.0 6.9 5.4
Intangible fixed assets 5.9 6.5 6.0
Tangible fixed assets 95.1 78.4 95.3
Other assets 336.7 152.2 268.5
Deferred tax 23.3 19.4 23.3
Prepayments and accrued income 64.0 76.0 75.5
Total assets 11,234.6 10,501.6 11,692.4
Liabilities
Deposits by banks 1,613.5 1,050.4 1,610.4
Securities sold under agreements to repurchase 239.2 - 829.2
Customer accounts 6,408.8 7,672.3 6,451.7
Debt securities issued 1,581.6 719.5 1,422.9
Other liabilities 358.8 271.1 340.1
Accruals and deferred income 147.5 141.3 153.7
Subordinated liabilities
- Dated loan capital 450.8 201.7 450.8
Total liabilities 10,800.2 10,056.3 11,258.8
31 March 31 March (Audited)
2004 2003 31 December
2003
Restated Restated
£m £m £m
Shareholders' funds
Called up share capital 411.8 410.1 410.3
Share premium account 110.4 107.3 107.5
Capital reserve 359.7 359.7 359.7
Own Shares held in ESOP Trust (9.4) (10.7) (10.4)
Profit and loss account (439.2) (422.4) (434.7)
Shareholders' funds (all attributable to equity 433.3 444.0 432.4
interests)
Minority interests (equity) 1.1 1.3 1.2
Total liabilities and shareholders' funds 11,234.6 10,501.6 11,692.4
Consolidated Cash Flow (Unaudited)
Three months to Three months to (Audited)
31 March 31 March Full Year
2004 2003 2003
£m £m £m
Net cash outflow from operating activities (502.5) (169.0) (259.9)
Return on investments and servicing of finance (8.1) (3.4) (25.9)
Taxation:
Tax paid (1.8) (0.3) (3.8)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (6.9) (11.1) (46.7)
Sale of tangible fixed assets - 0.1 -
Restricted share plan purchase of shares - (0.9) (3.0)
Purchase of investments (1,377.6) (1,526.9) (5,960.7)
Sale of investments 1,941.1 1,695.7 5,996.9
Net cash inflow/(outflow) from capital 556.6 156.9 (13.5)
expenditure and investment
Financing:
Issue of dated loan capital - 249.1
Issue of share capital 4.4 - 0.4
Net cash inflow from financing 4.4 - 249.5
Increase/(decrease) in net cash 48.6 (15.8) (53.6)
Reconciliation of loss before tax to net operating cash flows (Unaudited)
Three months to Three months to (Audited)
31 March 31 March Full Year
2004 2003 2003
£m £m £m
Operating loss (4.8) (15.1) (32.5)
Decrease in prepayments and accrued income 11.5 0.1 0.6
(Decrease)/Increase in accruals and deferred income (6.6) (5.3) 8.1
Provision for bad and doubtful debts 20.4 11.8 64.2
Profit on sale of financial investments (1.5) (2.5) (5.3)
Depreciation and amortisation 10.3 9.7 25.9
Interest on subordinated liabilities 8.1 3.4 47.6
Net increase in loans and advances to banks and (56.4) (189.0) (1,379.0)
customers
Net decrease in securities purchased under - 75.0 150.0
agreements to resell
Net (decrease)/increase in deposits by banks and (39.8) 205.3 (455.2)
customer accounts
Net (decrease)/increase in securities sold under (590.0) - 829.2
agreements to repurchase
Net increase /(decrease) in debt securities in 158.7 (295.4) 408.0
issue
Net increase in other assets (34.0) (15.5) (47.1)
Net increase in other liabilities 6.4 71.1 165.8
Net (decrease)/increase in settlement balances 13.4 (26.5) (44.9)
Other non-cash movements 1.8 3.9 4.7
Net cash outflow from operating activities (502.5) (169.0) (259.9)
Reconciliation of movement in shareholders' funds (Unaudited)
Three Three (Audited)
months to Months to
31 March 31 March Full Year
2004 2003 2003
Restated Restated
£m £m £m
Retained loss for the financial period (5.7) (18.3) (32.8)
Exchange and other adjustments 0.2 3.9 4.4
Increase in share capital 1.5 - 0.2
Share premium 2.9 - 0.2
Awards under incentives schemes 2.0 0.5 2.5
Net increase/(decrease) in shareholders' funds 0.9 (13.9) (25.5)
Opening shareholders' funds 432.4 457.9 457.9
Closing shareholders' funds 433.3 444.0 432.4
Notes on financial information
a) The financial information has been prepared on the basis of the
accounting policies set out in the Notes to the Financial Statements within the
Egg plc Annual Report and Accounts for the year ended 31 December 2003 and are
unchanged for the period to 31 March 2004, with the exception of the adoption of
the requirements of Abstract 38 issued by the Urgent Issues Task Force on
Accounting for ESOP Trusts, the effect of which has been to reclassify shares
held by the Egg Employee Trust as a deduction from shareholders' funds. The
comparatives have been amended as appropriate.
b) The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 December 2003 but is derived from
those accounts. Statutory accounts for 2003 will be delivered to the registrar
of companies following Egg plc's annual general meeting. The auditors have
reported on this set of accounts: their reports were unqualified and did not
contain statements under section 237(2) or (3) of the Companies Act 1985
c) Group operating loss is stated after charging provisions for bad and
doubtful debts of £46.1 million (31 March 2003 - £27.9 million). The balance
sheet provisions for bad and doubtful debts and movements thereon were:
General Specific Total
£m £m £m
Balance at 1 January 2004 51.2 142.2 193.4
Exchange adjustments (0.1) (0.6) (0.7)
Amounts written off - (25.3) (25.3)
New and additional provisions 0.9 45.2 46.1
Net charge against profit and loss 0.9 45.2 46.1
Balance at 31 March 2004 52.0 161.5 213.5
Balance at 31 March 2003 38.0 102.7 140.7
Provisions at 31 March 2004 were 3.01% of advances to customers (31 March 2003:
2.41%).
d) The taxation charge assumes a UK corporation tax rate of 30% (2003: 30%)
and comprises:
Three Three
months to months to
31 March 31 March
2004 2003
£m £m
Corporation tax payable (0.9) (2.7)
e) Loss per share of 0.7p (31 March 2003: 2.2p) is calculated by dividing
the loss after tax for the financial period of £5.7 million (31 March 2003:
£18.3 million) by the weighted average of 817.3 million (31 March 2003: 814.7
million) ordinary shares in issue during the period.
f) Egg's share of the gross assets and liabilities in respect of joint
venture undertakings is as follows:
March March
2004 2003
£m £m
Gross assets 2.9 3.0
Gross liabilities (1.7) (2.3)
Shares in joint ventures 1.2 0.7
g) The table below analyses the Group results for the 3 months to 31 March
2004 by the geographical area in which business is generated. Certain costs
incurred in the UK on behalf of France included in the results of France.
UK France Group
£m £m £m
Interest receivable 211.4 2.6 214.0
Fees and commissions receivable 52.2 1.6 53.8
Profit on disposal of investments 1.8 - 1.8
Other operating income 0.7 (0.1) 0.6
Gross income 266.1 4.1 270.2
Operating profit/(loss) 13.3 (18.1) (4.8)
Share of operating profit of joint venture 0.3 - 0.3
Share of operating loss of associates and amortisation of goodwill (0.4) - (0.4)
Profit/(loss) before taxation 13.2 (18.1) (4.9)
Average Balance Sheet (UK Business Only)
(£m, except percentages)
31 March 31 March 31 December
2004 2003 2003
Avg. Avg. Avg. Avg. Avg. Avg.
Balance Rate % Balance Rate % Balance Rate %
Assets
Wholesale assets 4,254 4.13 4,356 4.49 4,345 4.11
Mortgages 2,111 4.70 2,373 4.94 2,210 4.74
Personal loans 1,547 7.73 831 9.31 1,326 8.03
Credit cards 2,808 9.55 2,210 9.39 2,650 9.59
Total average
interest-earning assets 10,720 6.18 9,770 6.12 10,531 6.12
Fixed and other assets 156 128 159
Total assets 10,876 9,898 10,690
Liabilities
Customer accounts 6,754 3.28 7,577 3.76 7,149 3.32
Wholesale liabilities and
subordinated debt 3,471 4.13 1,646 4.20 2,875 4.04
Total average
interest-bearing liabilities 10,225 3.57 9,223 3.83 10,024 3.52
Other liabilities 235 196 234
Total liabilities 10,460 9,419 10,258
Shareholders' funds 416 479 432
Total liabilities and 10,876 9,898 10,690
shareholders funds
Note: The above analysis represents interest earned or borne on on-balance sheet
assets and liabilities only. In each case the average balances and yields have
been calculated on a 12-month rolling basis. Comparatives have been restated.
Average Yields (UK Business Only)
31 March 31 March 31 December
2004 2003 2003
Average rate Average rate % Average rate %
%
Interest income as a percentage of average 6.18 6.12 6.12
interest-earning assets
Interest expense as a percentage of average 3.57 3.83 3.52
interest-bearing liabilities
Interest spread 2.61 2.29 2.60
Net interest margin (includes interest on off-balance 2.54 2.38 2.50