Profits grew 8 per cent from £51.8m in 2004 to £56.1m in 2005, while new business completions rose 53 per cent to £3.5bn from £2.3bn in 2004.
John Maltby, CEO of Kensington Group plc, said: “I am delighted to report another strong set of results. In 2005, Kensington delivered earnings growth prior to goodwill amortisation of 12 per cent, reflecting a strong increase in operating income, supported by market share gains, a lower cost of funding, further improvements in cost efficiency and a solid credit performance.
"The growth was delivered without compromising margins or credit quality and the group’s profitability remained high with return on equity above 30 per cent. Cash generation remained strong, enabling the board to recommend a 34 per cent increase in dividend.
"Since its year end, Kensington has continued to deliver good volumes of new business and we remain confident of the group’s continuing ability to deliver strong earnings growth.”
Financial Highlights
- Profit before tax and goodwill amortisation up 8 per cent to £56.1m (2004: £51.8m).
- Earnings per share before goodwill amortisation up 12 per cent to 76.6p (2004: 68.6p).
- Post tax return on average equity (before goodwill amortisation) of 31 per cent (2004: 33 per cent).
- Recommended final dividend per share of 15p (2004: 11p), making a total for the year of 21.5p (2004: 16p).
Above market growth based on distribution strength, product innovation and enhanced systems:
- New business completions rose 53 per cent to £3.5bn (2004: £2.3bn), net lending for the year increased to £2.3bn and assets under management grew by 38 per cent to £5.7bn (2004: £4.1bn).
- Over 6,300 intermediaries introduced business to Kensington in 2005, up almost 30per cent over 2004.
- Money Partners Limited (MPL) added an incremental 24 per cent of new business and Start Mortgages in Ireland, in its first year, received business from over 25 per cent of intermediaries in the country, completing over ?300m worth of applications.
- 15 per cent of incremental new business was delivered by the near-prime product range.
- Service was enhanced through a new application processing and broker support centre in Reading and over 50 per cent of applications into Reading are now received electronically.
Healthy margins and strong credit quality
- Gross new business margins remained high at 3.3 per cent above LIBOR and net interest margin remained healthy at 2.3 per cent, the same level as 2004.
- New business average loan-to-values (LTV) reduced to 75 per cent (2004: 77 per cent), arrears remained stable in 2H 2005 at an average of 9.1 per cent and annualised loan losses remained low at 0.23 per cent (2004: 0.1 per cent).
Increased efficiency
- Operating expenses rose modestly by 14 per cent to £69.1m (2004: £60.7m) despite new business growth increasing over 50 per cent and including the costs of establishing two new businesses
- Cost income ratio for the Group improved to 44.4 per cent (2004: 48.1 per cent) and improved for Kensington Mortgages to 28.7 per cent (2004: 33.3 per cent)
Broader funding and stronger balance sheet
- A record total of £2.55bn of bonds were issued via 4 securitisations and £740m of mortgages were sold to trade buyers via 5 whole loan sales.
- Total shareholder funds increased to £138.8m and cash flow from operating activities increased by 15 per cent to £49.3m (2004: £42.7m).
- Balance sheet strengthened further through debut subordinated bond issue raising £75m of unsecured Tier 2 debt.
