3 September 2009

ABBEY PROTECTION PLC

Interim Results for the six months ended 30 June 2009

Abbey Protection plc ("Abbey Protection" or the "Group"), the specialist supplier of legal and professional fees insurance products and services to UK small-to-medium sized enterprises, today announces interim results for the six months ended 30th June 2009.

Highlights

• Revenue up 13% to £16.4m;  pre-tax profit up 10% to £4.3m 

• Underwriting results proving resilient, notwithstanding weak economic backdrop with claims ratio improving slightly to 67.7% (2008: 68.1%) 

• Shareholders' funds exceed £20.0m

• Earnings per share up 10% to 3.11p

• Interim dividend increased to 1.6p per share (2008: 1.5p)

• Outlook encouraging, as the Group trades in a non-cyclical sector of the insurance Market, with a robust demand for its services

Colin Davison, Chief Executive Officer of Abbey Protection, commented:

"I am delighted to report another strong set of results.  Despite a challenging market, we have grown revenue and profits, emphasising the strength and non-cyclical nature of our business model and reinforcing our market leading position in the supply of legal and professional fees insurance to UK SMEs."

Financial Highlights

*Earnings before interest payable, taxation, depreciation and amortisation charges

Chief Executive's Statement

This is the second interim report and covers the six months ending 30 June 2009 for Abbey Protection Plc.

In a challenging market, I am delighted to report a 10% growth in pre-tax profits to £4.3m (2008: £3.9m) and a 13% increase in revenue to £16.4m (2008: £14.5m). This is particularly pleasing, given the two thirds reduction in our investment income to £0.3m (2008: £0.9m) as a consequence of dramatically lower UK interest rates in the period.

Our view that we operate in a non-cyclical sector of the insurance market has been reflected not only in our revenue growth, where we have continued to see a robust demand for our services, but also by the consistent performance of our reinsurance subsidiary, Ibex Reinsurance Company Limited ("Ibex"), with an incurred claims ratio for the period of 67.7% (2008: 68.1%).

Current Trading - divisional performance

Abbey Tax Protection (ATP) has delivered an exceptional performance during the first half of the year, with net revenue, after deduction of insurance premiums and intermediary commissions, up 13% to £3.0m (2008: £2.7m). Expenses increased by only 4%, enabling the division to increase its pre-tax profit by 22% compared with the first half of 2008. ATP distributes Professional Expenses Insurance (PEI) and consultancy services through a network of 1,400 firms of accountants. In a highly competitive environment, ATP has confirmed its market leader status by exceeding its PEI new business targets and has achieved nearly 100% renewal (measured in financial terms) on its existing business. Encouragingly, once again, the consultancy arm of ATP has also shown very strong growth with revenues up 23%.

The legal protection divisions, Abbey Legal Protection/Services ("ALP"/"ALS"), delivered a strong performance during the first half of the year, with revenues up 9% to £4.3m (2008: £4.0m). Particularly pleasing was the level of new business in the affinity scheme markets, with over 30 new clients, producing projected annual revenues in excess of £0.5m. The recession has led to an upturn in legal advice call volumes with a 16% increase in employment related enquires - in support of which we have increased staffing levels, not only to maintain service levels but also to protect the underwriting account. Demand for our litigation and consulting services remains robust with a 30% increase to £0.9m (2008: £0.7m).

Our reinsurance subsidiary, Ibex, maintained a stable claims ratio (including provision for claims incurred but not reported 'IBNR') of 67.7% in the period (2008: 68.1%) emphasising how the Group's integrated approach to risk management and use of in-house lawyers and consultants has aided cost control. We operate in a non-cyclical sector of the insurance market and we anticipate that this stability will continue, even as the economic downturn unfolds.

The Group's first ever acquisition at the end of 2008, Accountax ("ACX") has delivered revenue of £1.1m and, before accounting charges for the amortisation of intangible assets, the division has made a pre-tax profit contribution to the Group of £0.3m. This was in line with expectations, but even more encouraging has been the level of cross selling opportunities that have been exploited with other divisions in the Group.

Revenue from the After the Event ("ATE") division was maintained at £0.9m, with reduced revenue from our run-off contracts being replaced by increased revenue from our Law Society Scheme, Accident Line, and revenue from our newly introduced commercial ATE products. 

The Group's division supplying Human Resource consultancy services direct to businesses, Abbey HR ("AHR"), has had a good start to its third year and has performed in line with budget in a challenging and competitive market. Sales of the division's products have increased by 34% compared with the first half of 2008 and over the next six months, we expect Abbey HR to continue to increase client numbers and achieve the critical mass required to produce meaningful profits in 2010.

Investment income was down two thirds to £0.3m (2008: £0.9m) as a result of significantly reduced yields from our highly conservative investment portfolio of certificates of deposit and bank deposits. This was as expected but has of course dampened the impressive growth in underlying operating performance.  We intend however to maintain an investment philosophy based on limited counterparty exposure and an emphasis on quality institutions.

Adjusting for Accountax, like-for-like acquisition and operating expenses have increased by 3.2% to £6.8m. We continue to maintain the appropriate infrastructure levels as the business expands and develops. Staff costs, including associated expenses, represent 70.7% (2008: 71.1%) of acquisition and operating expenses.

Net cash flow generated by operating activities for the period was £3.3m (2008: £1.3m) against profit after tax of £3.1m (2008: £2.8m). Second half operational cash flow is expected to correlate closely with profit after tax.

The Board has approved an interim dividend of 1.6 pence per share, an increase of 0.1p over 2008, which will be payable on 7 October 2009 to all shareholders on the register at 11 September 2009.

Outlook

Despite the continued economic weakness in the real economy and no short term prospect of a change to the prevailing historically low interest rates, we remain confident about the Group's prospects for the remainder of the year and beyond. The past 6-12 months have demonstrated our resilience and ability to grow in the face of tough economic conditions and in particular, the non-cyclical nature of our underwriting business. 

Although not completely immune to the current recession, we believe that our emphasis on risk management controls and continued demand for our services will enable us to not only maintain, but strengthen our market leading position in the supply of legal and professional fees insurance to UK SMEs. 

We will continue to pursue a strong organic growth strategy with continued investment in our legal and consultancy operations. We are also working in new areas such as the Commercial ATE and Tax Indemnities markets.

In addition, we continue to investigate suitable and complementary acquisition targets. In this respect, our healthy, debt free balance sheet provides us with considerable flexibility should an appropriate target become available.

Finally, the de-regulation of the Legal Services sector is on the horizon and the Group is actively looking at the opportunities this will provide.

Colin Davison

Chief Executive

September 2009

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 220 employees as at 31st December 2008. 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. 

Analyst Presentation

There will be an analyst presentation to discuss the results at 9.30am today at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB. 

Those analysts wishing to attend are asked to contact Kat Bloom at Financial Dynamics on +44 20 7269 7223 or at kat.bloom@fd.com.

Consolidated income statement

Consolidated statement of changes in equity

Consolidated balance sheet

Consolidated cash flow statement

    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 240 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2008, which were prepared in accordance with International Financial Reporting Standards, as endorsed by the European Union ('IFRS'), and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified.

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 2008. 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 2008.

During the period, the group has adopted IFRS 8, operating segments. Accordingly, disclosures relating to business segments have been amended and comparative information presented.

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: insurance underwriting, abbey legal protection, abbey tax protection and accountax. Insurance underwriting comprises reinsuring a proportion of the business Abbey Protection plc introduces to underwriting partners. 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 of the provision of tax consultancy and marketing services.

Other segments represent business units whose operations fall below the quantitative disclosure thresholds. These businesses offer HR 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 described in the summary of significant accounting policies. Abbey Protection plc evaluates performance on the basis of profit from operations before tax expense.

*Accountax was acquired on 21 October 2008.

Reconciliation of reportable segment assets - Unaudited

Information about major customers - Unaudited

Revenues from one customer represent approximately £2,568,000 of the Group's total revenue (6 months ended 30 June 2008 £2,382,000 and 12 months ended 31 December 2008 £4,856,000). Revenue from this customer is recorded in segmental revenue for insurance underwriting, abbey legal protection and abbey tax protection.

(b)    Secondary segment information - geographical analysis

All of the Group's revenues, costs, assets and liabilities are derived from providing its services in the United Kingdom.

4    Net insurance premium

There were no reinsurance policies in effect throughout the periods reported.

8    Tax expense

Income tax for the six months period is charged at 27.8% (six months ended 30 June 2008: 27.7%; year ended 31 December 2008: 26.9%), representing the best estimate of the average annual effective income tax rate expected for the full year, applied to the pre-tax income of the six month period.

On 29 October 2008 a dividend of £1,488,000 (net of £12,000 receivable by a group ESOP trust) was paid representing 1.5 pence per Abbey Protection plc share.

On 30 April 2009 a dividend of £1,984,000 (net of £16,000 receivable by a group ESOP trust) was paid representing 2.0 pence per Abbey Protection plc share.

The board declares the payment of an interim dividend of 1.6p per Abbey Protection plc ordinary share amounting to £1,600,000. The dividend will be payable on 7 October 2009 to all shareholders on the register on 11 September 2009. These financial statements do not reflect this dividend payable.

13    Cash and cash equivalents

Included in cash and cash equivalents held by the Group as at each period end are balances totalling £2.1m not available for use by the Group. Of this amount, £1m is held in trust to guarantee claims liabilities (see note 18). The balance of £1.1m is held in escrow to guarantee deferred acquisition consideration.