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Egg losses mount as France fails to deliver

23 July 2003  |  3827 views  |  0 Mr Paul Gratton CEO Egg

UK Internet bank Egg says it is closely monitoring the performance of its fledgeling operation in France as sales volumes continue to disappoint.

Egg reported a first half pre-tax loss of £22.8 million against a profit last year of £1.2 million, with the French business contributing a loss of £48.7 million.

While Egg UK has delivered strong growth in customer numbers, lending balances and profits during the first half of the year, sales volumes in France have been slower than expected, admits Egg CEO Paul Gratton (pictured).

Commenting, he says: "We continue to closely monitor performance having regard to our planned €300 million profit and loss investment."

The customer base in France now totals 115,000, with 42,000 cards in issue. Card balances stand at €68 million, up from €34 million at the end of Q1, and revolving balances have risen from 41% in the first quarter to 70% by end-Q2.

Egg UK delivered a profit before tax for the half year of £36.7 million (H1 2002: £11.6 million), with sales of personal loans at £711 million, tripling the values achieved in the year-ago period. Q2 2003 profit before tax was £19.4 million up from £17.3 million in Q1 2003.

Says Gratton: "Looking at Q2 in particular, revenues exceeded £100 million in the quarter for the first time with strong growth in fees and commissions, especially from cross selling insurance products to new loan and card customers."

In joint ventures, a £1.2 million net loss in Q2 2003 includes £0.8 million for Funds Direct which is mainly in relation to development costs for the integrated business to business platform currently being built. Egg's share of Marlborough Stirling Mortgage Services Limited and IfOnline Group Limited losses amounted to £0.2 million.

Despite the disappointing view from across the Channel, the City took heart from the continued strength of the UK business, pushing Egg shares up by 5.2% to 131 pence in mid-morning trading.

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