Hansard bullish despite profit drop as latest figures announced

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Hansard bullish despite profit drop as latest figures announced

Hansard Global plc has issued its results for the year ended 30 June 2019. 

The Isle of Man-headquartered specialist long-term savings provider announced a £2.2m drop in profits from £6.8m to £4.6m from the same time last year following expenditure on what it called a "major IT project" to replace its back-office administration systems, alongside a significant increase in new business levels. 

The publicly listed company said that, as previously announced, new business levels were £155.9m (based on a Present Value of New Business Premiums ("PVNBP") basis), 6.3% higher than in 2018, with the primary driver of growth in 2019 the company's strategic relationship with Union Insurance in the UAE. 

In the Middle East the company said that new business in 2019 had more than doubled year on year and with "further developments", including potential new products, planned for 2020. 

Other expenditure from has come in Asia following the granting of regulatory approval of the company's investment management licence application in Japan as well as ongoing legacy litigation costs, particularly relating to Hansard's insurance position in Europe, which has been closed to new business since 2013.

Platform

Speaking to International Investment this morning the company said that it believed that its "controlled spending" on a "once in a generation" major expenditure on its back-office administration technology has given it a strong platform for the coming years.

Gordon Marr, group CEO, said: "We are trying to get ahead of the curve. Business models don't stay static 

Graham Morrall, global sales and marketing director at Hansard, added: "We are doing this from our own resources, which I think makes us different in the industry. In the UAE we have come a long way since we launched in 2019 and we will continue to grow. We have new development around distribution and possibly new product before the end of the year.

European legacy costs 

The company said it believed that there had been positive progress with litigation rulings and its insurance position, in Europe.

In its statement to the City, Hansard said: "The Group continues to manage carefully its litigation exposures relating to the legacy operations of Hansard Europe. We continue to believe we have strong defences against the claims being made. Exposures from outstanding writs total €21.7m (£19.4m) at 30 June 2019, up €1.6m (£1.6m) from 30 June 2018. The primary driver of the increase has been in relation to litigation in Italy focused on a range of funds which have been illiquid for a number of years.

"During the year, the Group successfully defended ten cases with net exposures of approximately €0.6m (£0.5m), eight of which have been appealed by the plaintiffs. Our policy is to maintain contingent liabilities even where we win cases in the court of first instance if such cases have been subsequently appealed. These successes continue to affirm confidence in the Group's legal arguments," the statement read.

CEO Marr said in the statement:  "Our 2019 results reflect a year of change for the Group, as we have refocused the business to deliver future growth. In particular, in June 2019 we were granted our Japanese investment management licence, enabling us to operate in this key market. 

'Milestone'

"This was a major milestone and the culmination of a number of years of hard work. We also successfully launched our new insurance subsidiary, Hansard Worldwide Limited and streamlined the number of markets that we operate in and the distributors we use in those markets. 

"Together with a major IT project to replace our back-office administration systems and a focus on cost efficiencies, we believe this offers a strong base to improve the profitability of the business in the coming years."

IFRS profit after tax for the year was £4.6m (FY 2018: £6.8m). Excluding litigation defence costs and other smaller one-off items, underlying IFRS profit was £6.1m compared with £8.6m in FY 2018.

Fee and commission income was £48.5m for the year (2018: £52.6m) with lower income earned in both Hansard International and Hansard Europe. Hansard International experienced lower contract surrender levels than in 2018 and as a consequence had lower releases of deferred income and lower surrender charges. Hansard Europe income continued to reduce in line with its closure to new business in 2013.

Administrative expenses, exclusive of litigation and one-off items, were £23.3m (2018: £22.1m). Key drivers of this increase include general salary inflation, project contractor costs and increased premium collection costs, the company said

Board changes

Maurice Dyson, having served on the Board for 13 years, will not be seeking re-election at the Annual General Meeting ("AGM") on 6 November 2019. Andy Frepp has also advised that he will not be seeking re-election at the AGM due to work commitments taking him to the USA, the statement added

The first trading update in respect of the year ending 30 June 2020 is expected to be published on 7 November 2019.

SUMMARY

  FY 2019 FY 2018
New business sales - PVNBP1 basis £155.9m £146.6m
IFRS profit after tax £4.6m £6.8m
Underlying profit £6.1m £8.6m
Operating cash surplus £20.6m £25.0m
Recommended final dividend per share2 2.65p 2.65p
IFRS earnings per share 3.3p 4.9p

 

As at 30 June
2019
30 June
2018
Assets under Administration £1,080m £1,036m
Value of In-Force3 £140m £144m

1 Present Value of New Business Premiums
2 Subject to approval at the AGM
3 Basis moved from European Embedded Value basis in FY 2018 to Solvency II equivalent basis in FY 2019.

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