24 Feb 2003

Egg plc 2002 Preliminary Results (Full Year to 31 December 2002)

“Egg has had another highly successful year. In the UK, customer acquisition remained strong with 610,000 net new customers joining Egg and an impressive UK profit of £35 million. Our unsecured lending book has performed extremely well, with Egg Card achieving a 5% market share of balances and Egg Loans delivering a record performance with disbursements doubling year on year to over £800 million. Our international expansion started as planned, with our successful launch in France in November.

Paul Gratton, Group Chief Executive, Egg plc

Highlights:

Analysis of Group Profit and Loss Account

Group

• Group operating income up 73% to £327.3 million (2001: £189.4 million)
• Group loss before tax of £16.6 million (2001: £87.8 million loss)
• Group loss per share 2.3p (2001: 7.6p)
• Total group assets increased to £10.6 billion (2001: £8.1 billion)

UK

• Egg UK delivered a profit before tax of £13.0 million in Q4 giving full year profit of £34.8 million (2001: £75.7 million loss), a turnaround of over £110 million
• 141,000 net new customers acquired in Q4 giving full year total of 610,000 (2001: 600,000) resulting in total customer base of almost 2.6 million
• Unsecured lending balances grew by £240 million in Q4 2002 leading to year end balances of £3.3 billion (2001: £2.4 billion)
• In particular, personal loans delivered record sales in 2002 with drawdowns of £829 million; up 98% on 2001 (£419 million) while cards continued to grow strongly with balances reaching £2.33 billion by year end (Dec 2001: £1.77 billion)
• Credit quality remains strong and benchmarks continue to show Egg’s card portfolio significantly outperforming the rest of the industry

France

• Successful launch in France, with Egg achieving high brand awareness and consideration amongst target market
• 44,000 people accepted as potential card customers in the first two months post launch, which we expect will convert to 27,000 customers (14,000 had completed the activation process by year end)
• Total French customer base now approximately 90,000 following conversion of selected Zebank customers

Chief Executive Paul Gratton said:

“Egg has achieved substantial growth again in 2002. In the UK, we acquired 610,000 net new customers during the year, principally through our credit card business, which has now captured over 5% of total balances in the UK card market.

“The UK business has demonstrated it is sustainably profitable, successfully growing customer numbers and revenues in a challenging and increasingly competitive marketplace, whilst at the same time reducing both unit operating costs and marketing acquisition costs. Credit quality remains strong and benchmarks continue to show Egg’s card portfolio significantly outperforming the rest of the industry in terms of lower arrears rates.

“In France, we launched successfully in November 2002, and we are satisfied with our achievements to date. We are particularly pleased that brand awareness and consideration, which were the key focus for us in this launch phase, reached 55% and 23% respectively after just three months, both metrics above their UK equivalents five months after launch. We have had 69,000 people apply for our first product, la Carte Egg, in the first two months. Of these 44,000 have been accepted, subject to completing all verification requirements, and we expect 27,000 of these to become customers following that process. This gives us a total Egg customer base in France of almost 90,000 following the selective migration of customers from the acquired Zebank portfolio.

We are pleased with the quality of customers we have attracted to date; early findings from our research shows customers using their card an average of 15 times per month, and that la Carte Egg is establishing itself as “front of wallet”.

Outlook

Mr Gratton continued:

“We remain 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.”

“In 2003, Egg UK’s key strategic goals are to continue to maximise value from our unsecured lending business in what we expect to be challenging market conditions. We take our responsibility as a lender seriously and believe we offer customers simple, flexible, good-value products to help them manage their finances. In addition, we will increase our focus on developing technology, such as Egg Money Manager, to make servicing and understanding money easier for our customers as well as investing further in our people to allow them to best help our customers. We are also looking to revamp our investments business to address the increased challenge facing consumers with regard to saving for their futures.

“In France we intend to enhance and extend our product range in line with developing a profitable business of scale in this market. Our next major product, to be launched in Q2 2003, will be a new loan account. We are excited about the opportunity to continue to revolutionise the credit market in France, building on la Carte Egg, and are determined to help customers to understand how to manage their borrowing more productively and to get better value than is currently available from our competitors.

“We remain committed to developing Egg as a global business and have been researching different territories throughout 2002. Specifically, we have been exploring potential entry strategies for the US market and have embarked on some qualitative and quantitative consumer research in Q1 2003 to establish the scale of the opportunity available.”

To download the full results in PDF format click here.