16 Dec 2004
Pre close trading statement Egg plc
UK business performing well
Egg France exit process ahead of schedule
Egg plc (“Egg”) will shortly commence briefings with analysts ahead of its close period for the year ending 31 December 2004.
Trading has been strong in the final quarter and we expect full year profit before tax in the UK to be slightly above market consensus of £69 million. Growth in credit card accounts across our Visa and MasterCard products is consistent with the strong showing in Q3 2004 with a resulting healthy increase in card balances. In addition, cross sales of loan products into the card customer base have returned to the record levels seen in H1 following the seasonal reduction experienced in Q3 2004.
There has been an increased investment in brand and marketing this quarter both to support the unsecured lending business and to start to drive sales of general insurance policies. Encouragingly Q4 2004 is on track to deliver our highest ever insurance volumes.
On the funding side of our business we have been raising fresh customer deposits this quarter using a six month bonus interest offer which has brought in over £300 million of new funds thus far and also successfully issued £650 million of floating rate notes which is expected to lead to a net £325 million increase in wholesale funding in Q4.
In France the exit process is continuing and we are on track to complete it ahead of schedule next year. The sale of the unsecured lending assets to Banque Accord completed in December and the sale of the savings and brokerage businesses to ING Direct should complete by year end leaving a small portfolio of current accounts as the last remaining product in the French business. Agreement on the social plan for Egg employees in France has also been reached with the Works Council. Our expectations with regard to the total exit costs for France remain unchanged.
At Group level, in addition to the results from the UK and France, we will book a provision for the transfer of Egg Invest to Fidelity FundsNetwork of approximately £3 million this quarter as noted in our Q3 results announcement. The partnership with Fidelity is expected to improve UK profits by £3 million per annum. We have also incurred further costs in Q4, principally retention bonuses and advisory fees, in respect of the process whereby Prudential was considering proposals for its stake in Egg.
We have made good progress in our preparations for the introduction of International Financial Reporting Standards in 2005. Current indications are that the impact on Egg’s reported profits and regulatory capital position will not be material. We propose to give a full briefing on the various policies and elections that Egg will be adopting under IFRS at our Preliminary Results Presentation on 23 February 2005 which will include more detail on the financial impact. Furthermore we will be providing complete disclosures on the transition adjustments in April 2005 when we publish our Q1 2005 results on an IFRS basis.
Paul Gratton, Chief Executive said, “It has been a challenging year for Egg with the uncertainty caused by the auction process and the strong competition in the early part of the year impacting our first half results. However recent trading confirms that the sales momentum seen in the third quarter is continuing and we look forward to 2005 with confidence.”
Egg’s preliminary results for the year ending 31 December 2004 will be released to the London Stock Exchange on 23 February 2005.
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For further information:
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Notes to Editors:
- Egg plc is the world’s largest pure online bank, providing financial services products through its Internet site and other distribution channels.
- Egg plc floated on 12 June 2000 and is listed on the London Stock Exchange. Prudential plc holds 78% of the share capital.