24 Apr 2003
Egg plc Q1 2003 Financial Results and New Business Figures
“Our UK business has delivered strong growth in both customers and profits during the quarter. In France, our first product, la Carte Egg, which we recently launched has taken off more slowly than we had hoped for but having achieved high levels of brand awareness we remain confident about Egg France’s long term prospects.”
Paul Gratton, CEO, Egg plc
Highlights:
Analysis of Group Profit and Loss Account
| |
Q1 2003 |
Q1 2002 |
| |
£m |
£m |
| Egg UK |
17.3 |
5.0 |
| Egg France |
(23.9) |
(0.5) |
| Other International |
(2.3) |
(1.3) |
| Subsidiaries/Associates/JV's |
(1.6) |
(0.8) |
| Restructuring |
(5.2) |
- |
| Group (Loss)/Profit before Tax |
(15.7) |
2.4 |
Group
- Group operating income up 29% to £95.2 million (Q1 2002: £73.7 million)
- Group loss before tax of £15.7 million (Q1 2002: £2.4 million profit)
- Group loss per share 2.2p (Q1 2002: earnings per share of 0.2p)
- Total group assets of £10.5 billion (Q1 2002: £8.8 billion)
UK
- Egg UK delivered a profit before tax of £17.3 million (Q1 2002: £5.0 million)
- 165,000 net new customers acquired in the first quarter (Q1 2002: 157,000)
- Unsecured lending balances grew by £200 million (Q1 2002: £160 million) leading to quarter end balances of £3.5 billion (31 March 2002: £2.5 billion)
- Strong sales growth in personal loans with drawdowns of £213 million, up 85% on Q1 2002 (£116 million).
- Credit quality remains strong and benchmarks continue to show Egg’s card portfolio significantly outperforming industry norms.
France
- Brand awareness (55%) and consideration (23%) are highly encouraging
- We expect 45,000 of our accepted applications since launch to convert to full customers (27,000 had completed the activation process by period end).
- Total French customer base now approximately 108,000.
- Loss before tax of £23.9 million (€35.3 million) for Q1 reduced from £27.3 million (€42.3 million) in Q4 2002.
- Based on experience to date we expect to increase the profit and loss account investment in France over the next three years by €140 million compared to original estimates. We believe the new plan, with a total investment of approximately €300 million, delivers an attractive French business of equal value to that anticipated prior to launch.
Other
- Q1 2003 saw £2.3 million spent on research into potential international market entry strategies.
- Restructuring costs of £5.2 million were incurred in Q1.
Chief Executive Paul Gratton said:
“The UK business has delivered strong growth having successfully increased both customer numbers and profits in an increasingly competitive marketplace and in a market where we have seen some weakening in consumer confidence.
“Personal loan sales were strong again in Q1 with disbursements of £213 million, up 85% on the same period last year. Revenues exceeded £95 million for the quarter on the back of improving margins and healthy levels of other operating income. In addition we continue to actively manage costs and we have seen no deterioration in the credit quality of our retail asset portfolio which remains industry leading for credit cards.
“France remains an attractive market for Egg, with 9 million consumers within our target customer base. High brand awareness and consideration are both encouraging, giving us a platform on which to build. We remain very pleased with the quality of customers we have attracted to date. Early usage of the card is higher than anticipated and the percentage of customers borrowing is increasing in line with our plans. We have successfully migrated our card proposition from the launch focus on cashback to a clear and attractive credit offer to our customers.
“That said the business has started more slowly than we had anticipated and based on experience to date, we are adjusting our targets for Egg France which we set at the beginning of 2002. We intend to increase the profit and loss account investment over the next three years by approximately €140 million and now expect breakeven to be delivered in 2005. We are concentrating on building value through a deeper relationship with customers.
“As indicated in February we have been conducting research during the first quarter in the USA. Early findings suggest that there would appear to be attractive opportunities in the USA for an Egg branded proposition, however in the short term we do not intend to progress market entry plans. We are committed to delivering long-term value to shareholders through building an international business of scale and leading the industry for innovation in financial services to the ultimate benefit of our customers.”
To download the full press release in PDF format click here.