Final Results
London Stock Exchange Plc
15 May 2003
15 May 2003
LONDON STOCK EXCHANGE PLC
ANNOUNCEMENT OF PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2003
Highlights:
• Turnover up 10 per cent to £237.3 million
• Operating profit before exceptional items and goodwill amortisation up
16 per cent to £81.7 million
• Earnings per share up six per cent to 18.1 pence
• Adjusted earnings per share up 14 per cent to 20.9 pence
• Final dividend 3.0 pence per share bringing the total dividend for the
year to 4.3 pence per share, up 19 per cent
Commenting on the results, Don Cruickshank, Chairman of the Exchange, said:
"Despite difficult market conditions, the Exchange delivered a creditable
financial performance during the year, whilst strengthening its market position
and diversifying its business. At the same time, we continued to lead industry
change by encouraging more competitive markets in the UK and Europe. The
Directors have recommended a 19 per cent increase in the total dividend for the
year, reflecting our commitment to maximising shareholder value and our
confidence in the business."
Clara Furse, Chief Executive, said:
"The breadth and quality of the Exchange's products and services were key in the
delivery of a strong performance across all our business areas. Despite the
difficult environment we continue to invest in new markets in order to underpin
longer term growth. During the year we announced a number of initiatives that
will enable us to develop important new markets. These include the announcement
of our new international equity derivatives business EDX London, the acquisition
of software and data provider Proquote and the introduction of the covered
warrants market.
"The Exchange is well placed to deliver future growth although the year ahead
will be challenging."
Further information is available from:
London Stock Exchange John Wallace - Media 020 7797 1222
Paul Froud - Investor Relations 020 7797 3322
Ruth Anagnos - Investor Relations 020 7797 3322
Finsbury James Murgatroyd 020 7251 3801
Melanie Gerlis 020 7251 3801
Financial results
Financial performance for the year ended 31 March 2003 has been creditable
despite difficult market conditions. Turnover increased 10 per cent to £237.3
million (2002: £215.6 million). Administrative expenses increased six per cent
to £144.3 million (2002: £136.1 million) principally reflecting additional IT
support costs relating to the Exchange's new high capacity communications
network.
The increase in turnover and further improvement to operating margin to 36 per
cent (2002: 34 per cent), resulted in a 16 per cent increase in operating profit
before exceptional items and goodwill amortisation to £81.7 million (2002: £70.5
million). Profit before tax was £79.5 million (2002: £75.2 million).
During the period, a net exceptional loss of £11.6 million was recognised (2002:
£3.6 million). This comprised a £10.4 million gain relating to the recovery of
VAT offset by a £22.0 million charge to the provision for leasehold properties
in respect of space to be sublet in our new headquarters at Paternoster Square.
Profit after tax including the exceptional loss increased to £52.7 million
(2002: £49.9 million).
Earnings per share increased to 18.1 pence per share from 17.1 pence per share.
Earnings per share adjusted for exceptional items and goodwill amortisation
increased 14 per cent to 20.9 pence per share (2002: 18.3 pence per share).
For the year, operating cash flows were £74.8 million (2002: £82.4 million). At
£211.0 million, cash balances at 31 March 2003 were £21.1 million higher
compared to last year (2002: £189.9 million) after i) £28.1 million of capital
expenditure reflecting increased investment in the business (2002: £15.8
million), ii) £11.8 million relating to the acquisition of Proquote and iii)
£15.0 million additional funding contribution to the Exchange's defined benefit
pension scheme.
Issuer Services
Issuer Services' turnover for the year increased 34 per cent from £26.9 million
to £36.0 million, accounting for 15 per cent of total turnover. This increase
was largely attributable to selective tariff changes which took effect on 1
April 2002.
The number of companies on our markets at 31 March 2003 was 2,777 (2002: 2,879).
The Exchange receives an annual fee from each company on its markets and, for
the year, annual fees contributed 59 per cent of Issuer Services' turnover
(2002: 48 per cent).
The number of new issues on the Exchange's markets in the financial year
decreased to 202 (2002: 289) reflecting continued difficult conditions in the
IPO market. Nevertheless, a total of £17.9 billion of new capital was raised on
the Exchange's markets during the year (2002: £28.7 billion). Moreover, the
Exchange accounted for 69 per cent of the IPOs in Western Europe, demonstrating
the continued relative attractiveness of the Exchange's markets (2002: 64 per
cent). In particular, AIM, our market for younger enterprises, continued to
attract new participants. At 31 March 2003, the number of companies on AIM had
increased 10 per cent to 705 (2002: 641).
Issuer Services continued to make progress on extending the reach of the
Exchange's markets attracting 18 new international companies during the year,
including the first Russian share listing, LUKOIL, and our first Chilean
company, Banco de Chile. Further, the Exchange announced a listing facilitation
collaboration with the Hong Kong Stock Exchange and established a local presence
in the Nordic region. Based in Stockholm, the office opened on 1 October 2002
and aims to accelerate the growth of the Exchange's Nordic business.
Broker Services
Turnover from Broker Services increased eight per cent to £87.3 million (2002:
£81.2 million), contributing 37 per cent of total turnover. This increase was
driven by the continued strong growth in the number of bargains transacted
through our electronic order book, SETS.
For the year ended 31 March 2003, the total number of equity bargains increased
eight per cent to 54.3 million (2002: 50.1 million), a daily average of 215,000
(2002: 200,000). Over the same period, the daily average number of equity
bargains transacted on SETS grew by 58 per cent to 109,000 (2002: 69,000), a
total of 27.5 million (2002: 17.4 million). SETS contributed approximately 55
per cent of Broker Services' income for the year (2002: 50 per cent).
The growth in the number of SETS bargains was offset in part by a 32 per cent
fall in the average value of a SETS bargain to £25,000 (2002: £37,000) and a
decline in the number of off book and international bargains reported to the
Exchange. The daily average number of UK off book bargains was 51,000 (2002:
61,000), principally reflecting further migration of trades on to SETS.
The Exchange aims to align tariff structures with customers' business
requirements and the value of services provided. As such, the Exchange initiated
a re-alignment of its tariffs for reporting of international bargains during the
year. However, due to an overall reduction in global levels of international
trading reflecting difficult market conditions and a change in reporting
structure by some customers, the daily average number of international bargains
for the year decreased 21 per cent to 55,000 (2002: 70,000). In April 2003, the
daily average number of international bargains fell to 40,000 (April 2002:
58,000). The Exchange continues to keep market conditions and its tariff
structure in the changing international equities market under review.
In July 2002, working with CRESTCo and the London Clearing House (LCH), the
second stage of the Central Counterparty project, Central Counterparty Netting
(CCP Netting), was successfully launched. CCP Netting allows customers to
net-off multiple transactions in a single security for settlement purposes, thus
reducing their marginal trading costs and increasing operational efficiency.
Currently over 50 per cent of all SETS trades are netted.
Broker Services undertook a number of new business initiatives during the year,
including:
• Covered warrants - launched in October, is a new market principally aimed at
private investors. There are currently 388 warrants traded on our markets
through four issuers and since inception over 850 million warrants have been
traded. For the year, revenue contribution from covered warrants has been
marginal however, given difficult market conditions, the Exchange believes
this is an encouraging start;
• Retail Services Provider (RSP) Gateway - providing a single connection point
for retail brokers to access the widest possible number of execution options
was introduced in July 2002. To date, the service has performed well with
brokers able to access five RSPs offering prices in equities and bonds,
with covered warrants to be available shortly; and
• EDX London - a joint venture with OM AB, is our new international equity
derivatives business. Announced in December, EDX London's initial focus
will be on the development, in conjunction with LCH, of an over-the-counter
(OTC) UK equity derivatives trade confirmation and clearing service for
wholesale market participants. Aimed at reducing the cost and risk of
conducting OTC derivatives business for market participants, EDX London will
offer a facility not currently available in London. Subject to regulatory
approval, the Exchange anticipates EDX London will begin trading by mid-2003.
The Exchange continues to develop a number of other projects including SETSmm, a
new trading service for mid-cap securities. Designed to be a hybrid market,
SETSmm will offer order book participants the benefits of the electronic order
book combined with committed market making trading for FTSE 250 securities. The
Exchange is currently in consultation with market participants regarding the
functionality of this new service and anticipates launch by the end of this
calendar year.
Information Services
Information Services' turnover was up eight per cent to £102.2 million from
£94.9 million. This division generated 43 per cent of total turnover.
At 31 March 2003, the total number of terminals receiving Exchange data on a
real-time basis was 94,000 (2002: 105,000). Approximately 88,000 terminals
(2002: 96,000) were attributable to professional users. The decline in terminals
was offset by demand for the Exchange's other information products including
RNS, the company news distributor from the London Stock Exchange, and FTSE, the
Exchange's joint venture with Pearson Group, owner of the Financial Times.
RNS contributed £6.8 million to turnover following the start of commercial
operations in April 2002 (2002: £2.1 million). RNS has retained a significant
share of the highly competitive regulatory news distribution market, with over
90 companies in the FTSE 100 using RNS to release regulatory announcements.
The Exchange also benefited from its share of the FTSE joint venture which
contributed £11.4 million in turnover, an increase of 27 per cent over last year
(2002: £9.0 million). The growth in FTSE turnover is attributable to an increase
in sales of its All-World indices.
In February 2003, the Exchange acquired Proquote, a growing business supplying
competitively priced, financial market software and real-time price data.
Proquote made a marginal contribution to Information Services' turnover for the
year and with over 1,000 screens and over 80 corporate customers, Proquote is
making good progress.
During the year, Information Services developed other new business initiatives
to further diversify its range of products and services. These initiatives build
on existing data assets to help meet the specific needs of market users and
include:
• Corporate Data Warehouse - an extensive database exploiting our existing range
of market data to increase the range and depth of information available to
market participants. The Corporate Data Warehouse will provide a central source
for data thus reducing costs for users; and
• SEDOL - extension of Exchange's securities identifier targeted at reducing the
cost of failed cross-border trades. Aiming to provide global securities
identifier benchmark, SEDOL is expected to be launched in the beginning of
2004 (calendar year).
Together with EDX London and Proquote, the Exchange expects the above
initiatives to be overall broadly earnings neutral before goodwill amortisation
for the year ending 31 March 2004.
Exceptional items
During the year, a net exceptional loss of £11.6 million was recognised. This
reflects an exceptional VAT credit of £10.4 million offset by a £22.0 million
exceptional property charge.
VAT credit
Following successful negotiations with Customs and Excise, the Exchange secured
the recovery of £10.4 million of VAT paid on certain expenditure between 1990
and 2001.
Property provision
London's commercial property market conditions have deteriorated in recent
months with an increase in available office accommodation and a reported decline
in rental values. In view of this, the level of provision in respect of
the excess of rents payable over rents receivable for space to be sublet in our
new headquarters at Paternoster Square has been assessed at £22.0 million and
charged as an exceptional item.
Final dividend
The Directors propose a final dividend of 3.0 pence per share to those
shareholders on the register on 25 July 2003, for payment on 18 August 2003.
Combined with the interim dividend of 1.3 pence per share paid in January, this
takes the total dividend for the year to 4.3 pence per share (2002: 3.6 pence
per share), an increase of 19 per cent.
Pensions
The Exchange continues to account for pension costs in accordance with SSAP 24,
Accounting for Pension Costs. The valuation of the pension plan at 31 March
2003, based on the requirements of accounting standard FRS 17 on Retirement
Benefits shows a post-tax deficit of £19.6 million (2002: £13.2 million). The
effect of FRS 17 is shown in Note 10.
The Exchange reviewed the funding position of the defined benefit pension scheme
and made an additional contribution of £15.0 million during the year as an
accelerated funding payment. The level of contributions for future years will
be determined following the full actuarial valuation, which will be carried out
as at 31 March 2003.
Listing Rule 15.3
The Exchange will table a resolution at the 2003 Annual General Meeting (AGM)
seeking general authority from shareholders to purchase up to 30,000,000
ordinary shares on market, representing approximately 10 per cent of the
Exchange's issued capital. The Exchange intends to renew this authority annually
if approved by shareholders.
The Exchange has no current intention of utilising the buy-back authority if
granted and remains committed to maintaining a strong balance sheet. However,
like most companies, the Exchange considers it desirable to have the flexibility
conferred by this authority.
Board of Directors
Following Don Cruickshank's decision not to seek to extend his term beyond the
next AGM, the Board of Directors appointed Chris Gibson-Smith as its next
Chairman. Chris Gibson-Smith joined the Exchange's Board on 1 May 2003 and will
succeed Don Cruickshank when his term of office concludes at the end of the
Exchange's AGM on 16 July 2003.
Current trading and prospects
Since 31 March 2003, trading conditions have been similar to those experienced
in the second half of the 2003 financial year. In particular:
• Issuer Services' turnover continues to be impacted by weak IPO markets;
• SETS trading volumes have remained strong, however the number of international
bargains reported to the Exchange remains in decline; and
• professional terminal numbers remain under pressure.
Although the Exchange does not foresee any improvement in market conditions in
the immediate term it continues to invest in several initiatives that focus on
expanding the business. The benefits from these new projects are expected to
begin in 2004. As such, the Directors remain confident about the Exchange's
future.
Further information
The Exchange will host a presentation of its Preliminary Results for analysts
and institutional shareholders today at 9:30am at the Exchange Tower. The
presentation will be accessible via live web cast which can be viewed at
www.londonstockexchange-ir.com. For further information, please call the
Exchange's Investor Relations department at 020 7797 3322.
The Exchange will also host a presentation of its Preliminary Results for
members of the press today at 11:00am at the Exchange Tower. For further
information, please call the Exchange's Press Office at 020 7797 1222.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 March 2003
2003 2002
Notes £m £m
Continuing operations
________________________________________________________________________________
Turnover
Group and share of joint venture 237.3 215.6
Less: share of joint venture's turnover (11.4) (9.0)
________________________________________________________________________________
Net turnover 1 225.9 206.6
Administrative - Operating costs (144.3) (136.1)
expenses - Exceptional items 2 (11.6) (3.6)
________________
(155.9) (139.7)
Operating profit - Before exceptional items
and goodwill amortisation 81.7 70.5
- Before exceptional items 81.6 70.5
________________
- After exceptional items 70.0 66.9
Share of operating profit of joint venture and income
from other fixed asset investments 1.1 1.0
Net interest receivable 3 8.4 7.3
________________________________________________________________________________
Profit on ordinary activities before taxation 79.5 75.2
Taxation on profit on ordinary activities 4 (26.8) (25.3)
________________________________________________________________________________
Profit for the financial year 52.7 49.9
Dividends (12.5) (10.6)
________________________________________________________________________________
Retained profit for the financial year 40.2 39.3
________________________________________________________________________________
Earnings per share 5 18.1p 17.1p
Diluted earnings per share 5 17.9p 17.0p
Adjusted earnings per share 5 20.9p 18.3p
Dividend per share 4.3p 3.6p
There were no other recognised gains and losses during the two years ended 31
March 2003.
BALANCE SHEET
31 March 2003
Group
_______________
2003 2002
Notes £m £m
________________________________________________________________________________
Fixed assets
Intangible assets - goodwill 11 14.1 -
Tangible assets 126.3 115.4
________________________________________________________________________________
140.4 115.4
Investments
Investments in joint venture:
Share of gross assets 9.9 8.6
Share of gross liabilities (8.4) (7.1)
_______________
1.5 1.5
Other investments 6 10.1 12.1
_______________
11.6 13.6
________________________________________________________________________________
152.0 129.0
Current assets
Debtors 64.3 46.8
Investments - term deposits 207.0 186.0
Cash at bank 4.0 3.9
_______________
275.3 236.7
Creditors - amounts falling due within one year 64.0 62.7
_______________
Net current assets 211.3 174.0
________________________________________________________________________________
Total assets less current liabilities 363.3 303.0
Provisions for liabilities and charges 7 41.6 21.7
________________________________________________________________________________
Net assets 321.7 281.3
________________________________________________________________________________
Capital and reserves
Called up share capital 14.9 14.9
Reserves
Revaluation reserve 44.0 45.8
Profit and loss account 262.6 220.6
________________________________________________________________________________
Equity shareholders' funds 321.5 281.3
Equity minority interest 0.2 -
________________________________________________________________________________
Total shareholders' funds 321.7 281.3
________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2003
2003 2002
Notes £m £m
________________________________________________________________________________
Net cash inflow/(outflow) from continuing operations:
- Ongoing operating activities 9(i) 74.8 82.4
- Exceptional items 9(i) 10.4 (3.8)
________________________________________________________________________________
Net cash inflow from operating activities 85.2 78.6
Dividends from joint venture 1.2 0.1
Returns on investments and servicing of finance
Interest received 9.5 8.8
Dividends received - 0.1
_______________
Net cash inflow from returns on investments and
servicing of finance 9.5 8.9
Taxation
Corporation tax paid (25.2) (15.8)
Capital expenditure and financial investments
Payments to acquire tangible fixed assets (28.1) (15.8)
Payments to acquire own shares - (5.0)
Receipts from sale of fixed asset investments 0.7 0.7
_______________
Net cash outflow from capital expenditure and
financial investments (27.4) (20.1)
Acquisitions
Acquisition of subsidiary undertaking (11.8) -
Net cash acquired with subsidiary undertaking 0.5 -
_______________
Net cash outflow for acquisition (11.3) -
Dividends paid (11.1) (9.7)
________________________________________________________________________________
Net cash inflow before use of liquid resources
and financing 20.9 42.0
Management of liquid resources
Increase in term deposits (21.0) (43.0)
Financing
Issue of ordinary share capital to minority interest 0.2 -
________________________________________________________________________________
Increase/(decrease) in cash in the year 0.1 (1.0)
________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS
1. Turnover
2003 2002
£m £m
________________________________________________________________________________
Continuing operations
Issuer Services 36.0 26.9
Broker Services 87.3 81.2
Information Services 102.2 94.9
Other income 11.8 12.6
________________________________________________________________________________
Gross turnover 237.3 215.6
Less: share of joint venture's turnover (11.4) (9.0)
________________________________________________________________________________
Net turnover 225.9 206.6
________________________________________________________________________________
For the purposes of Segmental Reporting, the directors consider that the Company
has one class of business with the three principal revenue streams noted above
derived from that business, with principal operations being in the United
Kingdom.
2. Exceptional items
2003 2002
£m £m
________________________________________________________________________________
VAT repayment 10.4 -
Provision in respect of leasehold properties (22.0) -
Fees in respect of the Company's introduction to the
Official List - (3.6)
________________________________________________________________________________
(11.6) (3.6)
________________________________________________________________________________
Taxation effect 3.5 -
________________________________________________________________________________
The VAT repayment represents a recovery of VAT paid between 1990 and 2001.
Following successful negotiation with Customs and Excise, a retrospective
change in the method for calculating VAT recoverable on expenditure has been
agreed, resulting in this repayment.
The increase in provision for leasehold properties is in respect of space to be
sublet in new headquarters at Paternoster Square.
3. Net interest receivable
2003 2002
£m £m
________________________________________________________________________________
Interest receivable
Bank deposit and other interest 9.3 8.5
________________________________________________________________________________
Interest payable
Interest on discounted provision for leasehold
properties (see note 7) (0.9) (1.2)
________________________________________________________________________________
Net interest receivable 8.4 7.3
________________________________________________________________________________
4. Taxation
________________________________________________________________________________
2003 2002
£m £m
Current tax:
Corporation tax for the year at 30% (2002: 30%) 23.9 25.2
Adjustments in respect of previous years - (3.1)
________________________________________________________________________________
23.9 22.1
Deferred taxation 2.5 2.8
Joint venture 0.4 0.4
________________________________________________________________________________
Taxation charge 26.8 25.3
________________________________________________________________________________
The adjustments for previous years are mainly in respect of timing differences
and reflect revised assumptions for the allowance of certain expenses.
Factors affecting the tax charge for the year
The current tax assessed for the year is the same as the standard rate of
corporation tax in the UK of 30% (2002: 30%). The variances are explained
below:
2003 2002
£m £m
________________________________________________________________________________
Profit on ordinary activities before tax 79.5 75.2
________________________________________________________________________________
Profit on ordinary activities multiplied by standard
rate of corporation tax in the UK of 30% 23.9 22.6
Expenses disallowed for the purpose of tax provision
(primarily professional fees and depreciation on
expenditure not subject to capital allowances) 2.6 2.5
Accounting deduction (less)/greater than capital
allowances - timing differences (2.6) 0.1
Adjustments to tax charge in respect of previous periods - (3.1)
________________________________________________________________________________
Corporation tax charge 23.9 22.1
________________________________________________________________________________
Factors that may affect future tax charges
The disposal of properties at their revalued amount would not give rise to a tax
liability.
5. Earnings per share
Earnings per share is presented on three bases: earnings per share; diluted
earnings per share; and adjusted earnings per share. Earnings per share is in
respect of all activities and diluted earnings per share takes into account the
dilution effects which would arise on the conversion or vesting of share
options and share awards under the Employee Share Ownership Plan (ESOP).
Adjusted earnings per share excludes exceptional items and amortisation of
goodwill to enable comparison of the underlying earnings of the business with
prior periods.
2003 2002
________________________________________________________________________________
Earnings per share 18.1p 17.1p
Diluted earnings per share 17.9p 17.0p
Adjusted earnings per share 20.9p 18.3p
£m £m
________________________________________________________________________________
Profit for the financial year 52.7 49.9
Adjustments:
Exceptional items 11.6 3.6
Amortisation of goodwill 0.1 -
Tax effect of exceptional items and amortisation of goodwill (3.5) -
________________________________________________________________________________
Adjusted profit for the financial year 60.9 53.5
________________________________________________________________________________
Weighted average number of shares - million 291.9 291.8
Effect of dilutive share options and awards - million 3.0 2.1
________________________________________________________________________________
Diluted weighted average number of shares - million 294.9 293.9
________________________________________________________________________________
The weighted average number of shares excludes those held in the ESOP, reducing
the weighted average number of shares to 291.9 million (2002: 291.8 million).
6. Fixed asset investments
Shares held in the Company are in a separately administered trust for the
purposes of the ESOP. The difference between the purchase price of shares and
the exercise price of awards/grants is charged to the profit and loss account
over the period of service for which the awards and options are granted.
7. Provisions for liabilities and charges
Deferred
Pensions Property consideration Total
£m £m £m £m
________________________________________________________________________________
1 April 2002 0.9 20.8 - 21.7
Utilised during the year (0.2) (5.7) - (5.9)
Interest on discounted provision - 0.9 - 0.9
Increase in provision - 22.0 - 22.0
Transfer to debtors (0.7) - - (0.7)
Deferred consideration - - 3.6 3.6
________________________________________________________________________________
31 March 2003 - 38.0 3.6 41.6
________________________________________________________________________________
Pensions
The pensions provision represents a pension surplus which first arose in 1990
and is being released to the profit and loss account over the expected
remaining service lives of scheme members, transferred to debtors at 31 March
2003 offset against prepaid pension contributions.
Property
The property provision represents the estimated net present value of future
costs for lease rentals and dilapidation costs less the expected receipts from
sub-letting space which is surplus to business requirements. The leases have
between 11 and 25 years to expiry. The increase in provision is in respect of
space to be sublet in new headquarters at Paternoster Square.
Deferred consideration
Deferred consideration relates to amounts payable to former shareholders of
Proquote Ltd, contingent upon Proquote Ltd achieving certain revenue targets.
The total deferred consideration has been estimated at £3.6m and can be up to a
maximum of £11.0m.
8. Reconciliation of movements in shareholders' funds
2003 2002
£m £m
________________________________________________________________________________
Profit for the financial year 52.7 49.9
Dividends (12.5) (10.6)
________________________________________________________________________________
Net addition to shareholders' funds 40.2 39.3
Opening equity shareholders' funds 281.3 242.0
________________________________________________________________________________
Closing equity shareholders' funds 321.5 281.3
________________________________________________________________________________
9. Notes to the consolidated cash flow statement
2003 2002
£m £m
________________________________________________________________________________
i) Reconciliation of operating profit to net cash inflow from operating
activities
Operating profit 70.0 66.9
Depreciation of tangible assets 19.0 17.5
Amortisation of goodwill 0.1 -
Increase in debtors (19.2) (0.7)
Decrease in creditors (1.6) (3.3)
Increase in property provision 22.0 -
Provisions utilised during the year (5.9) (2.6)
Amortisation of own shares 0.8 0.8
________________________________________________________________________________
Net cash inflow from operating activities 85.2 78.6
________________________________________________________________________________
Comprising:
Ongoing operating activities 74.8 82.4
Exceptional items (see note 2) 10.4 (3.8)
________________________________________________________________________________
Net cash inflow 85.2 78.6
________________________________________________________________________________
At 1 April Cash At 31 March
2002 flows 2003
£m £m £m
________________________________________________________________________________
ii) Analysis of changes in net funds
Cash in hand and at bank 3.9 0.1 4.0
Current asset investments 186.0 21.0 207.0
________________________________________________________________________________
Total net funds 189.9 21.1 211.0
________________________________________________________________________________
10. Pension costs
The Company operates one pension plan which includes separate defined benefit
and defined contribution schemes. The assets of the defined benefit and defined
contribution schemes are held separately from those of the Company and the
funds are managed by Schroder Investment Management Limited and Legal & General
Investment Management Limited respectively.
In addition to the normal contributions to the defined benefit scheme, the
Company made an additional contribution of £15.0m during the year. This has
therefore been treated as a prepayment in the accounts at 31 March 2003 and
will be charged to the profit and loss account in future years over the
expected remaining service lives of scheme members. The level of contributions
for future years will be determined following the full actuarial valuation,
which will be carried out as at 31 March 2003.
The Company continues to account for pension costs in accordance with SSAP 24 -
Accounting for Pension Costs. The following information is provided under the
disclosure requirements of FRS 17 - Retirement Benefits. The Accounting
Standards Board has deferred the full adoption of FRS 17 until implementation
of International Accounting Standards in 2005.
The fair value of the assets and net position in the defined benefit scheme,
with the assumed expected rates of return at 31 March 2003 and 2002, are as
follows:
31 Long term 31 Long term
March expected March expected
2003 rate of 2002 rate of
£m return £m return
________________________________________________________________________________
Equities 35.9 8.00% 40.8 7.75%
Bonds 123.1 4.82% 107.3 5.57%
________________________________________________________________________________
Total market value of assets 159.0 148.1
Present value of liabilities 187.0 167.0
________________________________________________________________________________
Deficit in the plan (28.0) (18.9)
Related deferred tax asset 8.4 5.7
________________________________________________________________________________
Net pension liability (19.6) (13.2)
________________________________________________________________________________
If the above amounts had been recognised in the financial statements, the
Group's net assets and profit and loss reserve at 31 March 2003 would have been
reduced by £29.6m (2002: £12.6m) being the deficit of the pension scheme based
on assumptions at that date of £19.6m plus the prepaid pension contribution
(£15.0m) less the existing pension provision (£0.7m) and related deferred tax
adjustments. The plan's assets are invested approximately 23 per cent in
equities and 77 per cent in bonds at 31 March 2003 and the trustees of the plan
intend to move gradually to 100 per cent investment in bonds over the longer
term.
Under SSAP 24, the charge to the profit and loss relating to the defined benefit
scheme was £0.8m. Under FRS 17, the profit and loss charge comprising service
and finance costs would be £2.9m.
11. Acquisitions
On 17 February 2003 the Company acquired Proquote Ltd, a distributor of market
data. The estimated consideration, including expenses and deferred
consideration of £3.6m, is £15.4m. The book value of assets and liabilities at
the date of acquisition are set out below; no fair value adjustments were
required.
Fair value at
acquisition
£m
________________________________________________________________________________
Book value at date of acquisition:
Fixed Assets -
Debtors, including deferred tax 1.5
Cash 0.5
Creditors (0.8)
________________________________________________________________________________
Net Assets 1.2
Purchase consideration 15.4
________________________________________________________________________________
Goodwill arising 14.2
________________________________________________________________________________
Purchase consideration satisfied by:
Cash 11.0
Deferred consideration (see note 7) 3.6
Costs of acquisition 0.8
________________________________________________________________________________
Total 15.4
________________________________________________________________________________
For the year ended 31 May 2002, Proquote Ltd reported an audited post-tax loss
of £1.5m. For the period ended 17 February 2003, the unaudited post-tax profit
was £0.3m after recognising £1.2m deferred tax credit. In the post acquisition
period to 31 March 2003, turnover for Proquote Ltd was £0.4m and operating loss
was £0.4m.
Goodwill arising on the acquisition of subsidiaries is being amortised on a
straight line basis over 20 years from date of acquisition, with a charge of
£0.1m for the post acquisition period.
12. Abridged accounts
These abridged accounts do not constitute, but have been extracted from, the
Company's statutory financial statements. The statutory financial statements,
which include an unqualified audit report, will be delivered to the Registrar
of Companies in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
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