Final Results - Year Ended 31 December 1999
Rathbone Brothers PLC
30 March 2000
RATHBONES EARNINGS PER SHARE INCREASED BY 20%
Rathbone Brothers Plc ('Rathbones'), which has £5 billion of investors funds
under discretionary management, announces preliminary results for the year
ended 31 December 1999 (year ended 31 December 1998). The highlights are:
- Pre-tax profit (before goodwill amortisation) increased by 29% to £23.2m
(£18.1m)
- Earnings per share (before goodwill amortisation) increased by 20% to
47.28p (39.55p)
- Total dividends per share raised by 16% to 22p net (19p net)
- Acquisition in Jersey successfully integrated
- Discretionary funds under management increased by 22% to £5 billion
Micky Ingall, Chairman commented: 'No significant acquisitions have taken
place during the course of 1999 and the figures therefore represent a year of
solid achievement.'
'These fast changing markets give further weight to our belief that
discretionary investment management is by far the most effective way to
manage the investment affairs of private clients.'
'The Curzon Acquisition made in December 1998 has fully lived up to
expectations and has significantly strengthened services available from the
Trust Division in the Channel Islands.'
For further information please contact:
Micky Ingall, Chairman Hamish McFall
Andy Pomfret, Finance Director Tavistock Communications Limited
Rathbone Brothers Plc Tel: 020 7600 2288
Tel: 020 7399 0000
CHAIRMAN'S STATEMENT
It is a great pleasure to report another successful year for 1999. Pre-tax
profits have risen by 29% to £23.2m and earnings per share by 20% to 47.3p
both figures before amortisation of goodwill. The final dividend is
increased to 14p, making a total of 22p for the year, an increase of 16%.
No significant acquisitions have taken place during the course of 1999 and
the figures therefore represent a year of solid achievement.
Investment Management
The Group's principal business activity is the provision of private client
investment management services and funds under discretionary management have
now increased to £5bn. The Group's policy of moving progressively towards
fee based services rather than commission income continues to improve the
quality and reliability of Group revenues. The high level of dealing activity
seen in some areas of retail stockbroking does not therefore have a
significant impact on the Group.
The first nine months of 1999 saw relatively buoyant stock markets in the UK
with, in particular, a welcome out-performance by small companies relative to
larger ones. Small companies have suffered many years of under-performance
and this trend appears to have been reversed. However, markets are always
changing and the final quarter of the year was characterised by an
unprecedented boom in technology and other related stocks accompanied by a
severe mark down of old economy stocks. Whilst this has been an extremely
exciting market in which to participate, it has at the same time presented
significant difficulties in the management of portfolios requiring even a
modest level of yield. These fast changing markets give further weight to our
belief that discretionary investment management is by far the most effective
way to manage the investment affairs of private clients.
April 1999 marked the launch of the new Individual Savings Account (ISA)
replacing the Personal Equity Plan (PEP). It is difficult to see how the ISA
as finally constituted is in any way superior to its predecessors and
enormous effort has been required by everybody in the industry to implement
what appears to be an unnecessary change. Nevertheless, ISAs are an
important tax saving vehicle for our clients and as at 31 December 1999 we
had £40m invested in this medium whilst retaining £715m in the old PEP
accounts.
Unit Trusts
Building on the excellent performance of our stable of unit trusts, we have
decided to market them to a wider audience. They have been rebadged
'Rathbone Unit Trusts' and a significant marketing initiative has been
undertaken to promote them in particular to the IFA market. Funds under
management in this division have more than doubled, much assisted by the
Rathbone Technology Fund launched in May 1999, which has had a spectacular
performance in a very favourable market.
Trust
1999 marked the first full year that Rathbone Jersey Limited (formerly Curzon
Secretaries & Trustees Limited) has been included in the Rathbone Group.
This acquisition made in December 1998 has fully lived up to expectations and
has significantly strengthened the services available from the Trust Division
in the Channel Islands. Following this acquisition, our Trust business
accounts for 12% of Group pre-tax profits. Trust services are an excellent
complement to investment management providing significant opportunities for
business referral and also a stable source of revenue largely unconnected
with stock market movements.
Technology
Over the past two years we have been implementing a comprehensive upgrade of
all our computer systems, with a view to all investment management clients
being managed from a single integrated computer system. The first stage of
this process is largely complete and will be followed by further enhancements
including internet access. Our objective is to improve office efficiency and
client communications in our principal service of discretionary investment
management.
Directors
Andy Pomfret was appointed Finance Director in September 1999. He joined us
from Kleinwort Benson Private Bank and we are already benefiting from his
expertise.
In June 1999, Giles Coode-Adams was appointed to the Board as a non-Executive
Director. He had spent 40 years with Lehman Brothers and its predecessor
companies as a stockbroker and investment banker. We are pleased to have the
benefit of his broad experience.
Ian Harvey retired as Finance Director in September 1999 and I would like to
pay tribute to him for his enormous contributions to the Group during the 18
years of his service.
Mark Pearson, who was Chairman and Chief Executive of Neilson Cobbold plc at
the time of the acquisition in 1996 and has been on our Board since, has
decided to retire with effect from 30 November 2000. We shall greatly miss
his participation and input on the Board and the Executive Committee.
You will note that Oliver Stanley, my predecessor as Chairman, is not seeking
re-election at the Annual General Meeting. It is difficult to adequately
describe Oliver's contribution to our Company. He founded Comprehensive
Financial Services Limited in 1971 and until his retirement from executive
duties in 1996 he played a pre-eminent role in our development. Since then,
we have been fortunate to retain his services in a non-executive capacity but
all good things come to an end and as he approaches his 75th birthday, he has
decided to fully retire. It has been a great privilege to work with him over
the last 15 years and we on the Board will miss his advice and support.
Finally, I would like to thank all our staff for their great efforts in 1999
and our clients for their continued support.
Consolidated profit and loss account
Year ended 31st December 1999
1999 1998
Restated
(see note 4)
£'000 £'000
Turnover - Continuing Operations 71,895 61,982
Operating Costs (49,442) (43,993)
Operating profit being profit on ordinary 22,453 17,989
activities before taxation
Tax on profit on ordinary activities (6,922) (5,766)
Profit for the financial year
attributable to shareholders 15,531 12,223
DIVIDENDS (7,648) (6,304)
RETAINED PROFIT FOR THE YEAR 7,883 5,919
Dividends per ordinary share 22p 19p
Earnings per ordinary share
Basic after goodwill amortisation 45.04p 39.31p
Basic before goodwill amortisation 47.28p 39.55p
Diluted after goodwill amortisation 43.93p 36.97p
Diluted before goodwill amortisation 46.11p 37.19p
Consolidated balance sheet
31st December 1999
1999 1998
Restated
(see note 4)
£'000 £'000
Fixed assets
Intangible assets 14,860 14,423
Tangible assets 7,069 6,791
Investments 65 65
21,994 21,279
CURRENT ASSETS
WORK IN PROGRESS 436 402
DEBTORS 56,265 44,985
INVESTMENTS 128,248 109,618
CASH AND SHORT TERM DEPOSITS 46,200 33,434
231,149 188,439
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR (197,672) (162,542)
NET CURRENTS ASSETS 33,477 25,897
TOTAL ASSETS LESS CURRENT LIABILITIES 55,471 47,176
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR (310) (449)
PROVISIONS FOR LIABILITIES AND CHARGES (3,722) (6,314)
TOTAL NET ASSETS 51,439 40,413
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 1,735 1,648
SHARE PREMIUM ACCOUNT 5,160 4,488
OTHER RESERVES 13,803 11,252
PROFIT AND LOSS ACCOUNT 30,741 23,025
EQUITY SHAREHOLDERS' FUNDS 51,439 40,413
Consolidated cash flow statement
Year ended 31st December 1999
1999 1999 1998 1998
Restated
£'000 £'000 £'000 £'000
Net cash inflow from 49,296 54,692
operating activities
Taxation
- UK Corporation tax (6,556) (3,793)
- Overseas tax (618) (107)
(7,174) (3,900)
Capital expenditure
- Purchase of tangible
fixed assets (2,798) (2,911)
- Sale of tangible
fixed assets 144 1,428
Net cash outflow for
capital expenditure (2,654) (1,483)
Acquisitions and disposals
- Acquisitions of
subsidiaries (864)
(1,300)
- Net cash acquired with
subsidiary undertakings - 629
Net cash outflow for
acquisitions and disposals (864) (671)
Equity dividends paid (6,886) (4,880)
Net cash inflow before use of
liquid resources and financing 31,718 43,758
Management of liquid
resources
- Increase in
current asset (18,630) (42,145)
investments
-
(Increase)/decrease (6,757) 4,189
in short term
deposits
(25,387) (37,956)
Financing
- Issue of shares 683 1,029
- Repayment of
secured loan - (1,500)
- Capital element
of finance lease
rental payments (41) (31)
Net cash
inflow/(outflow) 642 (502)
from financing
Increase in cash in 6,973 5,300
the year
Consolidated statement of total recognised gains and losses
Year ended 31st December 1999
1999 1998
£'000 £'000
Profit for the financial year
attributable to shareholders 15,531 12,223
Currency adjustments (167) 22
Total recognised gains and losses for the
financial year 15,364 12,245
RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Group Group Company Company
1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000
Profit for the financial
year attributable
To shareholders 15,531 12,223 8,751 6,974
Dividends (7,648) (6,304) (7,648) (6,304)
Retained profit for the
financial year 7,883 5,919 1,103 670
Currency adjustments (167) 22 - -
Shares issued 87 210 87 210
Premium on shares issued 3,305 9,191 672 1,012
Goodwill adjustment (82) (124) - -
Net addition to
shareholders' funds 11,026 15,218 1,862 1,892
Opening shareholders' funds 40,413 25,195 9,706 7,814
Closing shareholders' funds 51,439 40,413 11,568 9,706
Notes to Accounts
1. Segmental
information TURNOVER PROFIT BEFORE TAXATION
1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000
By class of business:
Investment management 53,455 47,758 18,188 14,827
Banking 8,159 6,941 1,480 1,237
Trust services 10,281 7,283 2,785 1,925
71,895 61,982 22,453 17,989
TOTAL ASSETS NET ASSETS
1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000
By class of business:
Investment management 63,465 51,626 30,239 21,551
Banking 163,085 131,601 12,878 9,555
Trust services 26,593 26,491 8,322 9,307
253,143 209,718 51,439 40,413
TURNOVER PROFIT BEFORE TAXATION
1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000
By geographical segment:
United Kingdom 63,641 57,038 19,701 16,606
Switzerland and other
European countries 5,863 3,154 2,283 736
The Americas 2,391 1,790 469 647
71,895 61,982 22,453 17,989
TOTAL ASSETS NET ASSETS
1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000
------ ------ ------ ------
By geographical segment:
United Kingdom 227,189 180,388 39,062 29,579
Switzerland and other
European countries 22,669 24,526 9,978 7,819
The Americas 3,285 4,804 2,399 3,015
253,143 209,718 51,439 40,413
The Group turnover comprises interest receivable, fees and commissions
receivable and other operating income and arises by segment as follows:
Fees and Other operating
Interest commissions Income
receivable receivable
1999 1998 1999 1998 1999 1998
Restated
£'000 £'000 £'000 £'000 £'000 £'000
------ ------ ------ ------ ------ ------
United Kingdom 12,629 13,096 49,530 42,868 1,481 1,074
Kingdom
Switzerland
and other
European
countries 416 496 5,444 2,655 4 3
The Americas 525 562 1,865 1,225 1 3
13,570 14,154 56,839 46,748 1,486 1,080
The Group interest income receivable included in Group turnover comprises:
1999 1998
Restated
£'000 £'000
Gross interest earned on own funds and
banking activities 9,488 9,897
Net interest earned on client money accounts 4,082 4,257
13,570 14,154
It is the opinion of the Directors that there is no material difference
between the sales origin and destination of turnover with regard to
geographical segment. None of the activities was discontinued in the above
two financial years. The tables include companies joining the Group with
effect from their dates of acquisition.
2. Dividends
The Board is recommending a final dividend of 14p per ordinary share (1998:
12p) payable on 17 May 2000 to shareholders on the register as at 14 April
2000, which, with the interim dividend of 8p (1998: 7p) makes 22p for the
year (1998: 19p).
1999 1998
£'000 £'000
Adjustment to 1998 final dividend 12.0p
per share on 142,100 shares 17 -
Interim dividend of 8.0p per share on
34,639,555 shares (1998: 7.0p per share
on 31,520,878 shares) 2,771 2,206
Final Dividend of 14.0p per share on
34,709,505 shares (1998: 12.0p per share
on 34,145,994) shares 4,860 4,098
Total dividends - 22.0p per share (1998:
19.0p per share) 7,648 6,304
3. Earnings per share
Basic earnings per share has been calculated by dividing the profit for the
financial year of £16,302,000 (1998: £12,297,000) before goodwill
amortisation and £15,531,000 (1998: £12,223,000) after goodwill amortisation
by the weighted average number of shares in issue throughout the year of
£34,480,634 (1998: 31,091,573).
The directors believe that the provisions of additional EPS figures, in
particular before goodwill amortisation, is beneficial to the users of the
financial statements to understand the performance of the Group.
Diluted earnings per share is the basic earnings per share, adjusted for the
effect of contingently issuable shares and conversion into fully paid shares
of the weighted average number of all employee share options during the year.
The average fair value of one ordinary share during 1999 was £7.74 (1998:
£5.34) and the average exercise price for shares under option during 1999 was
£4.92 (1998: £3.32)
1999 1998
Weighted average number of ordinary
shares in issue during the year-basic 34,480,634 31,091,573
Effect of ordinary share options 420,345 408,346
Weighted average number of contingently
issueable ordinary shares during the year 453,924 1,563,103
Diluted ordinary shares 35,354,903 33,063,022
4. Restatement of 1998 figures
The consolidated profit and loss account and balance sheet have been restated
for the period ended 31st December 1998 to include Rathbone International
Finance BV, a quasi subsidiary incorporated in the Netherlands, from 1st
January 1998. The quasi subsidiary provides back to back loan facilities for
Rathbones' clients. The inclusion of this quasi subsidiary has no impact on
the results or net assets of the Group but increases current assets and
current liabilities by £9,403,000 at 31st December 1998 and turnover and
operating costs by £436,000 for the year to 31st December 1998.
The balance sheet comparatives have also been restated to take account of
Section 131 merger relief which should have been taken last year in respect
of the acquisitions of Rathbone Jersey Limited (formerly Curzon Secretaries &
Trustees Limited) and Albyn Investments Limited. The effect of the
restatement is the reclassification of £5,838,000 from the share premium
account to other reserves. This restatement has no effect on the net assets
of the Group.
5. Intangible fixed assets
Goodwill arising on acquisitions
Group Company
1999 1999
£'000 £'000
Cost at 1 January 1999 14,497 -
Additions 1,208 764
Cost at 31 December 1999 15,705 764
Amortisation at 1 January 1999 74 -
Charge for the year 771 3
Amortisation at 31 December 1999 845 3
Net book value at 31 December 1999 14,860 761
Net book value at 1 January 1999 14,423 -
Intangible fixed assets comprise purchased goodwill arising on acquisitions
of subsidiary undertakings and purchases of businesses since 1 January 1998.
Previously, goodwill arising on acquisitions of subsidiary undertakings and
purchases of businesses was taken directly to reserves. The cumulative
amount of goodwill taken to the merger reserve in previous periods by the
Group and not subsequently recognised in the profit and loss account, except
on disposals, is £42,182,000. Goodwill included above in respect of all
material acquisitions is currently being amortised over a period of 20 years.
The Company paid £764,000 on 6 December 1999 in consideration for the
businesses of Keith Clayton and Ann Cochrane. There is no profit or loss
from these business acquisitions included in the consolidated profit for the
year.
6. Group Cash Flow Statement
1999 1998
Restated
£'000 £'000
Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 22,453 17,989
Profit on disposal of fixed assets (100) (157)
Depreciation charges 2,464 1,884
Amortisation of goodwill 771 74
Increase in debtors (11,280) (10,789)
Increase in work in progress (34) (155)
Increase in creditors 35,022 45,846
Net cash inflow from operating activities 49,296 54,692
1999 1998
Restated
£'000 £'000
Reconciliation of net cash flow to
movement in net funds
Increase in cash for the year 6,973 5,300
Exchange movements 69 (33)
Finance charges on leases (4) (10)
Changes in net debt resulting from cash
flows 45 31
Movement in net funds in the year 7,083 5,288
Net funds at beginning of year 24,845 19,557
NET FUNDS AT END OF YEAR 31,928 24,845
ANALYSIS OF NET FUNDS
At 1 January Cash Non- Exchange At 31
Flow Cash Movements December
1999 Changes 1999
£'000 £'000 £'000 £'000 £'000
Cash 25,963 5,940 - 69 31,972
Overdrafts (1,033) 1,033 - - -
Net cash 24,930 6,973 - 69 31,972
Finance leases (85) 45 (4) - (44)
Total 24,845 7,018 (4) 69 31,928
Cash and short term deposits in the balance sheet of £46,200,000 (1998:
£33,434,000) comprise cash of £31,972,000 (1998: £25,963,000) and short term
deposits of £14,228,000 (1998: £7,471,000)
ANALYSIS OF CHANGES IN FINANCING
SHARE SHARE FINANCE
CAPITAL PREMIUM LEASES
Restated
£'000 £'000 £'000
Balance at 1 January 1999 1,648 4,488 85
Cash inflow/(outflow) 11 672 (45)
Other movements 76 - 4
Balance at 31 December 1999 1,735 5,160 44
7. Financial Information
The financial information set out in this preliminary announcement has been
extracted from the Group's accounts which have today been approved by the
Board of Directors.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 1999 or 1998. Statutory
accounts for 1998 have been delivered to the Registrar of Companies, and
those for 1999 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237(2) of (3) of the
Companies Act 1985.
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