CAP reform impacts on Group’s profits

CAP reform and the single farm payment system have impacted on the H&H Group's farmstock business and, as a result, both turnover and profit are down for the Group for the six months to December 31, 2005.

In the Group's interim report, chairman David Trimble said that, as advised at the annual meeting, the Group has been experiencing demanding trading conditions and both turnover at £4,082,000 and unaudited profit before tax at £175,000 are down on the same period a year ago.

Mr Trimble, who retired as chairman at the board meeting on February 17, said three main factors had affected profit. The first has been the impact on the Group's farmstock business of CAP reform and the delay in the receipt of the new single farm payments. "The downturn has been greater than expected and, though we have maintained - and in a number of areas improved - our share of a smaller market, falling numbers and prices have led to an 8 per cent reduction in throughput. We are tackling this matter by means of a wide ranging farmstock profit improvement programme.

A second factor influencing the Group's trading was the UK wide problem of claims under endowment policies taken out since 1988, when for a short period of time the insurance brokerage business advised upon such products often as a means to paying off mortgage loans. "As a result of the FSA's recent instructions to insurance companies, to warn investors of potential shortfalls on their policies following the dramatic fall in stock market values during the year 2000, a number of claims are currently arising across the industry," said Mr Trimble.

The third factor is the Group's commitment to further repair the old pension scheme deficit, in which it is making significant progress. "These issues aside, Borderway Finance, H&H Bowe, H&H King and Borderway Motor Auctions are all trading in line with our expectations and, in profit performance terms, are ahead of the same period last year," said Mr Trimble.

However, the Group share price has continued to increase with shares sold since the June 2005 year end averaging £10.33 per share. Against an uncertain future, the directors have declared a maintained interim dividend of 4 ½p per share, which will be paid on April 28, 2006 to shareholders on the register at April 7.

Mr Trimble also reported that, after some frustrating delays, a site has been found for the establishment of a new motor auction business in the north east, subject to agreeing terms and obtaining planning permission. An offer has been accepted on two building plots on land surplus to requirements at Newcastleton and other property matters remain under active negotiation.

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