John Maltby, ceo Kensington Group plc said: “I am delighted that Kensington has again delivered strong growth in the first half of 2005. New business volumes were up 26% at £1.3 billion. This has been achieved in a tougher market, where new business in the UK mortgage market, as a whole, has fallen by 14%. Kensington’s above-market performance was delivered through strengthened distribution, incremental business from its two new businesses (Money Partners and Start Mortgages) and further product development in lower risk areas. Credit quality remains strong, with annualised loan losses at 0.2% of average mortgage assets, and profitability continues to be high, with the return on equity at 30%. Momentum is increasing and the outlook remains positive with the new business offer pipeline at the end of June up over 20% on last year. In line with our policy of increasing returns to shareholders as the business grows, we are pleased to announce a 30% increase in the interim dividend to 6.5p.”
Summary:
- Profit before tax and goodwill amortisation up 8% to £24.6 million (H1 2004: £22.8 million).
- Earnings per share before goodwill amortisation up 17% to 34.6p (H1 2004: 29.5p).
- Return on average equity (before goodwill amortisation) of 30.0% (H1 2004: 30.1%).
- Interim dividend per share up 30% to 6.5p (H1 2004: 5.0p).
- Above market new business growth at healthy margins, lower costs and consistent credit quality
- New business completions increased to £1.31 billion (H1 2004: £1.04 billion) despite a 14% fall in new business for the UK mortgage market overall. Mortgage assets under management grew by 30% to £4.7 billion (31 May 2004: £3.6 billion).
- Net interest margin was slightly lower at 2.27% (H1 2004: 2.38%), reflecting a deliberate and prudent expansion into the lower margin and lower risk near-prime sector at this point in the cycle.
- Group cost: income ratio improved again to 49% (H1 2004: 52%).
- Average new business loan-to-value (“LTV”) remained low and fell to 74% (H1 2004: 77%).
Continued strong portfolio performance through disciplined risk management
- As a percentage of the portfolio, actual losses remained low at 0.2% of average assets under management. These are slightly higher than the exceptionally low levels seen in 2004 (0.1%), but are at similar levels to 2001 and are within management expectations.
- Number of accounts 90 days or more in arrears rose in line with expectations to 9.2% of assets under management (30 Nov 2004: 7.3%). Arrears were stable for the last three months to June.
- Provisions as a percentage of mortgage assets under management rose slightly to 0.66% (30 Nov 2004: 0.60%).
- Lower funding costs were delivered through the successful completion of its 22nd securitisation in March 2005 at an initial average weighted cost of funds of 0.21% over LIBOR and through lower cost on-balance sheet warehouse financing which was increased to £2.15 billion in line with increasing volumes.
- Further funding diversification through the completion of two mortgage loan sales totalling £270 million, to Britannia Building Society and Derbyshire Building Society.
