(ABB) Abbey Protection

1 September 2011

Interim Results for the six months ended 30 June 2011

Abbey Protection plc ("Abbey Protection" or the "Group"), the specialist supplier of legal and professional fees insurance products and services to UK small-and-medium sized enterprises, today announces interim results for the six months ended 30 June 2011.

Highlights

·      6% increase in pre-tax profits to £5.0m

·      Revenue in principal trading divisions up 9% to £16.5m

·      Earnings per share up 10% to 3.79p

·      Steady and profitable underwriting results with a claims ratio of 65.2%

·      Shareholders' funds up to £26.9m

·      12% increase in half year dividend to 1.9p (H1 2010: 1.7p)

·      Outlook encouraging, with ongoing demand for services and continued opportunities for both legal and specialist tax services

Colin Davison, Chief Executive Officer, commented:

"The results reflect the progress the Group has made during the first six months of the year, against an increasingly volatile economic backdrop. The Group has produced another period of sustained growth in revenues and profits, driven by a continued demand for our core services and products, together with an increasing appetite for our specialist consultancy services.

The Group and its resilient business models are well positioned to overcome the challenges ahead and we're confident that we can take advantage of the many opportunities arising from the rapidly evolving legal and specialist tax services market."

Financial Highlights

Analyst Presentation

There will be an analyst presentation to discuss the results at 09.30am today at Financial Dynamics, 26 Southampton Buildings, London WC2A 1PB.

Those analysts wishing to attend are asked to contact Ed Berry at Financial Dynamics on +44 020 7269 7297 or at edward.berry@fd.com 

Abbey Protection's interim report for the six months ended 30 June 2011 will be available on Abbey Protection's website http://www.abbeyprotectionplc.com 

Enquiries

About Abbey Protection plc

Abbey Protection plc is an integrated specialist insurance and consultancy group, and the UK's leading supplier of legal and professional fees insurance products and services to small-to-medium sized enterprises. The Group's principal products provide protection against costs incurred as a result of legal actions and HM Revenue & Customs investigations.

Founded in 1992, the Group operates from offices in London, Rugby, Croydon and Milton Keynes and had 242 employees as at 30^th June 2011. Abbey Protection distributes its products and services through the following divisions: Abbey Legal Protection, Abbey Legal Services, Abbey Tax Protection, Abbey HR, Accountax and After The Event Services.

Visit the Abbey Protection website at www.abbeyprotectionplc.com for more information.

Chief Executive's Statement

Summary

This is the fourth interim report, covering the six months ending 30 June 2011 for Abbey Protection plc ("the Group").

A 6% increase in pre tax profits to £5.0m (2010: £4.7m) in challenging trading conditions is a very pleasing result and with revenues up 6% too at £18.3m (2010: £17.3m), we are delighted that there remains strong demand for our services.

After tax, profits grew by 10% to £3.8m (2010: £3.4m) and earnings per share also grew 10% to 3.8 pence per ordinary share (2010: 3.4 pence per ordinary share) reflecting the lower tax rate regime that the UK government has begun to implement.

The principal trading divisions (Abbey Legal, Abbey Tax and Ibex) demonstrated again the resilience of our core business models, with revenues increasing by 9% to £16.5m (2010: £15.1m) and profits up 12% to £4.9m (2010: £4.4m).

Current trading - principal trading divisions

Abbey Legal, comprising Abbey Legal Protection ("ALP") and Abbey Legal Services ("ALS"), produced a strong performance in the period with profit before tax up over a quarter at £1.2m, in part buoyed by revenues emanating from affinity schemes business incepting in the latter half of 2010. Call volumes in our Legal Services Centre have stabilised and fee income from employment related services increased by 12% in the first half of the year to £1.2m.

Abbey Tax Protection ("ATP") delivered excellent results with profit before tax for the period increasing by 19% to £1.6m. Sales in our core fee protection product remained strong, notwithstanding continuing price competition. Sales from our various consultancy products including tax planning insurance, capital allowances and tax advisory increased by 27.5% to £1.7m.

Gross premiums at Ibex, our reinsurance subsidiary for ALP and ATP were higher in 2010 due to a change in the way that premiums were ceded to the Company. Net earned premiums increased by 9% to £7.4m in the period. A slight increase in the claims ratio to 65.2% (2010: 63.3%), coupled with continued low investment yields, meant that the overall profit contribution from Ibex for the first six months of 2011 was static at £2.1m.

Current trading - other trading divisions

Although revenue at Accountax was down by £0.2m to £0.9m for the period, this was largely a factor of a reduced number of successful no win/no fee cases in the consultancy division which boosted income in 2010. However, the underlying consultancy business is much stronger with an increased number of retainer customers which has reduced the reliance on one off assignments.  The marketing side of Accountax suffered in the first part of the year due to pressures in the accountancy market, but pleasingly, sales are beginning to revive and we expect a better second half of the year.

Revenue within the After the Event ("ATE") division fell marginally to £0.6m and profit before tax was also slightly down at £0.1m. The division faces its own challenges, particularly with the Law Society's Accident Line insurance product suffering wholesale reductions in road traffic accident premiums and the forthcoming implementation of the Jackson reforms. However, on the positive side, Commercial After the Event insurance sales continued to progress well, with gross premiums written for insurers reaching £0.8m for the period.

A good performance from Abbey HR ("AHR") increased divisional revenue by 22% in the period to £0.3m, with a break even profit contribution.

Cash flow and investment income

Whilst cash flow remained strong for the first half of the year, operational cash flow was some £1.1m lower than the comparative period. The principal cause was an increase in paid claims of some £0.8m at the insurance subsidiary, Ibex, reflecting the settlement of a large claim in the period, account growth and the slight worsening of the claims ratio reported above.

We remain committed to paying trade suppliers within contractual terms whilst providing flexible terms for our customers where possible and appropriate.

Although investment returns remain stubbornly low, we continue to follow our low risk investment strategy of investing in cash, short term deposits and certificates of deposit.

  Dividend

The board is delighted to approve an increase of 12% in the interim dividend to 1.9 pence per share (2010: 1.7 pence per share), which will be payable on 7 October 2011 to all shareholders on the register at 9 September 2011.

  Outlook

Although there remain challenges ahead, we are confident of the resilience of our business models - and with our ongoing commitment to the highest of service standards, we believe we are well placed to maintain our pre-eminent position as the market leader in the supply of legal expenses and professional fees insurance to UK SMEs.

The Jackson reforms will undoubtedly impact the ATE market, but our exposure (through the Law Society's Accident Line scheme) is significantly less than a number of our competitors - and we are already well advanced in our plans to replace this income through commercial after the event sales and other ancillary income streams.

Whilst the organic growth potential remains in our core legal and professional fees insurance markets, we are well positioned to take advantage of the opportunities afforded in specialist consultancy services in the tax market and the deregulation of legal services (now delayed until the end of 2011).

Colin Davison

Chief Executive

September 2011

Consolidated income statement

Unaudited for the 6 months ended 30 June 2011

There were no discontinued operations.

There was no other comprehensive income.

Consolidated statement of changes in equity

Unaudited for the 6 months ended 30 June 2011

Consolidated balance sheet

Unaudited as at 30 June 2011

Consolidated cash flow statement

Unaudited for the 6 months ended 30 June 2011

Notes to the financial statements

1    Basis of preparation

The consolidated financial information contained within these financial statements is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2010, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance with International Financial Reporting Interpretations Committee (IFRIC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The report of the independent auditor on those statutory accounts contained no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.          

The preparation of the interim financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant judgements and estimates applied by the Group in these interim financial statements have been applied on a consistent basis with the statutory accounts for the year ended 31 December 2010. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those of estimates.

The accounting policies applied in these interim financial statements are the same as those published in the Group's statutory accounts for the year ended 31 December 2010.                                                 

2    Segment information

(a) Primary reporting format - business segments

Abbey Protection plc's reportable segments are strategic business units that offer different products and services. They are managed separately because each business requires different skill sets, technology and marketing strategies.            

Abbey Protection plc has four reportable segments: Abbey Legal Protection, Abbey Tax Protection, Accountax and Insurance Underwriting.  Abbey Legal Protection comprises the intermediation of legal expenses insurance together with the provision of related advice and consultancy. Abbey Tax Protection comprises the intermediation of professional fee protection insurance together with the provision of related advice and consultancy. Accountax comprises the provision of tax consultancy and marketing services. Insurance Underwriting comprises reinsuring a proportion of the business the Group introduces to underwriting partners.      

Other segments represent business units whose operations fall below the quantitative disclosure thresholds. These businesses offer human resources consultancy, after the event insurance intermediation and insurance run-off services.                                                                 

The accounting policies applied in preparing operating segment disclosures are the same as those applied throughout these financial statements. Abbey Protection plc evaluates performance on the basis of profit from operations before tax expense.