Final Results
Embargoed until 0700 hours, Wednesday 26th May 2004
STOCK EXCHANGE ANNOUNCEMENT
LIONTRUST ASSET MANAGEMENT PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED
31ST MARCH 2004
Doubled core profit, core earnings per share, core dividend
and funds under management partially offset by lower performance fees.
Liontrust Asset Management PLC ('Liontrust' or 'the Group'), the independent
specialist UK equities fund management group, today announces its preliminary
results for the year ended 31st March 2004.
Highlights are as follows:
* 99% growth in core operating profits before tax to £8.452 million.
* 122% growth in core earnings per share to 22.65 pence.
* 6% growth in total operating profits before tax (including performance
related earnings) to £9.070 million.
* 22% growth in total earnings per share to 22.98 pence.
* 88% increase in total core dividend proposed: 6.0 pence per share core
final dividend (core total for year 7.5 pence compared with 4.0 pence in
the previous year) together with 0.75 pence per share performance related
dividend (last year 8.25 pence). Total dividend for the year 8.25 pence per
share (last year 12.25 pence).
* 96% growth in funds under management, which now exceed £5 billion.
* £780 million net new institutional business won during year; £440 million
net unit trust sales.
Commenting on the results, Nigel Legge, Joint Chief Executive, said:
'We have come a long way in twelve months. £1.2 billion of net new business,
doubling core profits and increasing core margins catch the eye, but keeping
the increase in our non-people costs to 11% is particularly satisfying. We
continue to look forward with confidence'.
- ENDS -
For further information please contact:
Liontrust Asset Management:
Nigel Legge, Joint Chief Executive Tel: 020-7412 1700
Cazenove & Co.:
Richard Locke, Director - Corporate Finance Tel: 020-7155 4706
Chairman's Statement
It is very pleasing to report another set of good results. New business gains
have been strong and these, coupled as before with the way we are organised,
have allowed us to make healthy progress again this year.
Our income continues to be generated in two main ways. We have recurring fees
from funds under management which make up our core earnings and we have
performance related fees which are only earned if our investment performance
exceeds agreed benchmarks. Performance fees do not apply to all our funds under
management and are potentially erratic, so we focus primarily on `core'
earnings when assessing our progress. Our core profits in the year to 31st
March 2004 are £8.5 million, up 99% from £4.3 million a year ago. (For a full
reconciliation of core earnings to total profit before tax, see Note 4 of the
Notes to the Financial Statements.) Our control over costs has led to a core
cost: income ratio of 64.4% down from 69.0% last year. Core earnings per share
have increased by 122% to 22.65 pence from 10.20 pence last year and your board
has decided to recommend a final core dividend of 6.0 pence per share, payable
on 14th July 2004 to shareholders on the register at 18th June 2004, the shares
going ex-dividend on 16th June 2004. With the 1.5 pence interim dividend
already paid, the total core dividend for the full year amounts to 7.5 pence
per share and is covered more than 3 times by core earnings per share. Last
year's total core dividend was 4.0 pence per share.
As we have previously indicated, performance related fees were much lower this
year than those earned a year ago. At £0.34 million after compensation they
bring our total profits before taxation to £9.1 million up 6% from £8.6 million
last year. Total earnings per share rose 22% to 22.98 pence per share from
18.86 pence per share last year and our total cost: income ratio rose slightly
to 64.1% from 63.8% last year. Our dividend policy remains to grow our core
dividend progressively and, other than in unforeseen circumstances, pay out any
performance related profit as special dividends. This year, in addition to the
core dividend, the board has decided to recommend a special dividend of 0.75
pence per share funded from performance fees (2003 special dividend was 8.25
pence per share), payable at the same time as the core final dividend. The
total dividend of 8.25 pence per share for the year compares with 12.25 pence
per share last year, the increase in the core dividend offset by the decrease
in the special dividend. Because performance fees are likely to fluctuate,
these special dividends will vary too: in some years we might not earn any
performance related fees, in which case no special dividend would be paid.
Our funds under management increased by 96% during the year in which the FTSE
All-Share index rose 27%. On 31st March 2004 funds under management stood at £
5.035 billion, with a further £145 million in transition, that is funds that we
have won but that have not yet been transferred to us. At the same time last
year, funds under management stood at £2.569 billion with £705 million in
transition. Funds under management on 24th May 2004 stood at £5.116 billion
with £43 million in transition. During the year we were awarded the management
of a net £780 million of pension fund mandates, while net unit trust sales were
£440 million.
For some time now we have been contemplating the issues of capacity constraints
on the amount of money we can run. We firmly believe that there is a limit to
the amount of money that we can manage in accordance with our four processes.
At current market levels this figure stands at around £6 billion. Any
significant amounts above this will sharply reduce the prospects of our funds
outperforming their benchmarks and generating performance fees. It is therefore
not in shareholders' interest for us to continue to grow funds under management
willy nilly. Thus we will need to consider alternative initiatives as and when
we near the limit of our present investment management capacity. We recognise
that whatever initiatives we undertake they must not threaten the successful
Liontrust formula which by then should be generating very healthy core profits
and with the prospect of additional profits from performance related fees.
During the year we have reorganised two parts of our business. We outsourced
our dealing, settlement and registration functions to Bank of New York, which
meant most of our staff involved in these functions transferred to Bank of New
York. This decision was not taken lightly but was largely forced upon us by the
pending withdrawal of the computer system on which we had performed these
functions. The transfer took place on 31st January 2004 and has been
successful.
We also transferred our Administration Services (AS) funds to another
administrator during the first quarter of 2004. Administering these funds was
never one of our core activities and the transfer of these funds has eased the
workload for some of our team. It will have the added effect of driving up
margins on residual funds under management.
Our staff have worked very effectively again this year and I thank them all
enormously, in particular those who oversaw the transfer of administrative
functions to Bank of New York and those who moved there.
In my statement last year I referred to the need for us to deal with the
recommendations on corporate governance in the Higgs report. The Board has
considered the implications of the New Combined Code ('the New Code') and
intends to implement during the coming year those provisions of the New Code as
may be appropriate to the size and business of the Company.
We believe our prospects remain excellent. Smaller fund management companies
with specialist skills are in demand and continue to be supported by
professional advisers; UK equities remain the largest proportion of UK based
portfolios. There continues to be scope for us to grow funds under management
to capacity while still improving margins and core profitability. Now, more
than ever, it is vital that we keep our business model simple and concentrate
on those things in our control, namely investment process, client relationships
and our people.
Our market is highly competitive but we remain confident that the
characteristics that have made Liontrust successful since 1995 still give us a
sustainable competitive advantage. We are excited about moving the business
forward and continue to see a bright future for the company and all those
associated with it.
As we announced recently we are making some board changes. William Carey and I
will be standing down as Directors at the Annual General Meeting on 6th July
2004. Bernard Asher joined the board as a non-executive Director in April and
it is intended that he will succeed me as Chairman. He brings a vast range of
relevant experience to the board and I am sure Liontrust will prosper under his
leadership.
William Carey founded Liontrust with Nigel Legge and the Company owes him a
great deal. William will continue as a Director of Liontrust Investment Funds
Limited and we will thus continue to benefit from his expertise and knowledge
of Liontrust's affairs. Nigel Legge will become sole Chief Executive after the
Annual General Meeting.
Our Annual General Meeting will be held in the Beaufort Room at The Savoy
Hotel, Strand, London WC2R 0EU at 11.00am Tuesday 6th July 2004 and I hope many
of our shareholders will be with us then.
Ellen Winser
Chairman
25th May 2004
Unaudited Consolidated Profit and Loss Account
for the Year Ended 31st March 2004
Year ended Year ended
31st March 2004 31st March 2003
Notes £'000 £'000
Turnover (Gross profit) 24,485 22,402
Staff costs (11,363) (10,390)
Exceptional staff costs (189) 121
Total staff costs (11,552) (10,269)
Total operating charges (4,327) (3,893)
Operating Profit 8,606 8,240
Interest receivable 464 345
Profit on ordinary activities 9,070 8,585
before taxation
Tax on profit on ordinary (1,536) (2,506)
activities
Profit on ordinary activities 7,534 6,079
after taxation
Dividends paid and proposed 3 (2,890) (3,961)
Profit for the financial period 4,644 2,118
transferred to reserves
Pence Pence
Basic earnings per share 2 22.98 18.86
Basic earnings per share (adjusted) 2 23.39 18.59
Basic earnings per share (core) 2 22.65 10.20
Diluted earnings per share 2 22.29 18.16
Diluted earnings per share 2 22.68 17.91
(adjusted)
Diluted earnings per share (core) 2 21.97 9.82
Unaudited Consolidated Balance Sheet
as at 31st March 2004
31st March 2004 31st March 2003
£'000 £'000 £'000 £'000
Fixed assets
Tangible assets 299 286
Own shares held by the Liontrust 6,667 3,454
Asset Management Employee Trust
6,966 3,740
Current assets
Short-term investments 197 174
Debtors 23,615 32,006
Cash at bank and in hand 15,813 9,915
39,625 42,095
Creditors: (amounts falling due within (30,529) (36,270)
one year)
Net current assets 9,096 5,825
Total assets less current 16,062 9,565
liabilities
Capital and reserves
Called up share capital 350 335
Share premium account 8,630 2,777
Profit and loss account 7,082 6,453
Shareholders' funds (all 16,062 9,565
equity interests)
Unaudited Consolidated Cash Flow Statement
for the Year Ended 31st March 2004
Reconciliation of operating profit to net cash inflow from operating activities
Year ended Year ended
31st March 2004 31st March 2003
£'000 £'000
Operating profit 8,606 8,240
Exceptional staff costs (314) (165)
Depreciation charges 104 104
(Increase) in short term (23) (60)
investments
Decrease/ (increase) in debtors 8,391 (17,067)
(Decrease)/ increase in (3,493) 16,692
creditors
Net cash inflow from operating 13,271 7,744
activities
Cash Flow Statement
£'000 £'000
Net cash inflow from operating 13,271 7,744
activities
Returns on investment and servicing of 464 345
finance
Taxation (2,066) (1,854)
Capital expenditure and financial (3,330) (3,534)
investment
Equity dividends paid (4,294) (2,651)
4,045 50
Financing 1,853 305
Increase in cash 5,898 355
Notes to the Financial Statements
1. Accounting policies
The accounting policies are consistent with those set out in the Group's last
audited accounts.
2. Earnings per share
The calculation of basic earnings per share is based on profit after taxation
and the weighted average number of Ordinary Shares in issue for each period.
The weighted average number of Ordinary Shares for the year was 32,781,687
(2003: 32,237,093). Shares held by the Liontrust Asset Management Employee
Trust are not eligible for dividends and are treated as cancelled for the
purposes of calculating earnings per share.
Basic earnings per share (adjusted) are calculated after removing the
exceptional items and associated tax credit/ (charge). Basic earnings per share
(core) are calculated after removing the exceptional items, the performance
related fees and costs and related tax charges.
Diluted earnings per share are calculated on the same bases as set out above,
after adjusting the weighted average number of Ordinary Shares for the effect
of options to subscribe for new Ordinary Shares that were in existence at 31st
March 2004. The adjusted weighted average number of Ordinary Shares so
calculated for the year was 33,797,605 (2003: 33,475,251)
3. Proposed dividend
The Board will propose a final dividend of 6.75 pence per share, payable on
14th July 2004 to all shareholders on the register at 18th June 2004. This
comprises a core dividend of 6.0 pence and a special dividend of 0.75 pence.
Year Year
Ended Ended
31st March 2004 31st March 2003
Pence £'000 Pence £'000
per per
share share
Interim dividend 1.50 495 1.00 323
paid (core)
Final dividend 6.00 1,986 3.00 970
proposed (core)
Total core dividend 7.50 2,481 4.00 1,293
Special dividend 0.75 248 8.25 2,668
proposed
Current year 8.25 2,729 12.25 3,961
dividend
Final dividend 2003 - 161 - -
8.25 2,890 12.25 3,961
4. Analysis of profit for the year
The table below shows the split in revenues between core and performance
related earnings:
Core Performance Total Core Performance Total
earnings related 31st earnings related 31st
March
March 2003
2004
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 23,723 762 24,485 13,714 8,688 22,402
Staff (10,944) (419) (11,363) (5,567) (4,823) (10,390)
compensation
Other (4,327) - (4,327) (3,893) - (3,893)
operating
costs
8,452 343 8,795 4,254 3,865 8,119
Exceptional (189) 121
costs
Operating 8,606 8,240
Profit
Interest 464 345
Profit 9,070 8,585
before
tax
This preliminary announcement constitutes non-statutory accounts under section
240 of the Companies Act 1985. The results for the year ended 31st March 2004
are unaudited. The results for the year to 31st March 2003 have been extracted
from the Group's statutory accounts for that period, which have been filed with
the Registrar of Companies, the audit report on which was not qualified and did
not contain a statement under section 237(2) or (3) of the Companies Act 1985.
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