PRESS RELEASE
4 March 2009
Rathbone Brothers Plc
Preliminary results for the 12 months to 31 December 2008
Growth in client base and dividend increased
Rathbone Brothers Plc, a leading provider of discretionary fund management and wealth management services for private investors, charities and trustees, announces its preliminary results for the year ended 31 December 2008.
Chief executive Andy Pomfret, commented:
'Rathbones is prospering in a difficult environment. Our core business, Rathbone Investment Management, continued to attract new funds under management in 2008 despite the turmoil across financial and investment markets. We are proposing a 4.0% increase in the final dividend to 26p.
'Rathbones is well-placed to weather the difficult climate, has a strong balance sheet and is in a good position to take advantage of growth opportunities.'
Highlights:
· Underlying rate of net organic growth of funds under management in Rathbone Investment Management was 7.4% in 2008. Including acquisitions, net inflows totalled £1.3 billion representing a growth rate of 11.0%. This reflects the robust nature of Rathbones' business in what have been and remain uncertain markets.
· Recommended final dividend of 26p, an increase of 4.0%, making a total of 42p for the year (2007: 41p), a total increase of 2.4%.
· Strong balance sheet with low borrowings (£9.2 million (2007: £12.5 million)) and a £49.6 million capital surplus over our minimum capital requirement of £63.7 million at 31 December 2008, (under the Internal Capital Adequacy Assessment Process recently agreed with the Financial Services Authority).
· Profit before tax from continuing operations decreased by 9.5% to £42.8 million (2007: £47.3 million) and operating income from continuing operations decreased by 2.0% to £131.8 million (2007: £134.5 million).
· Basic earnings per share from continuing operations fell by 12.0% from 77.79p to 68.47p, including a £1.4 million charge relating to the Financial Services Compensation Scheme. The sale of the overseas trust operations (treated as discontinued operations) is reflected in basic earnings per share, which reduced by 49.4% to 44.45p compared with 87.88p in 2007.
· Planned disposals of offshore trust businesses are substantially complete. Rathbones' exit was driven by the changing climate for the use of offshore structures and services, and a belief that these businesses are best owned offshore by their management. This will allow Rathbones to focus on discretionary investment management and wealth advisory services.
For further information contact:
Rathbone Brothers Plc
Tel: 020 7399 0000
email: marketing@rathbones.com
Mark Powell, Chairman
Andy Pomfret, Chief executive
Paul Stockton, Finance director
Emily Morris, Marketing director
Brunswick
Tel: 020 7404 5959
Kate Holgate/Helen Barnes
Rathbone Brothers Plc
Rathbone Brothers Plc specialises in providing, through its subsidiaries, high quality, personalised investment management and wealth management services for private investors and trustees, including discretionary fund management, unit trusts, tax planning, trust and company management, pension and banking services.
Rathbones is the third largest manager of segregated discretionary portfolios overall in the UK and the third largest of segregated charity portfolios (by funds under management)1. It has ten offices in the UK including London, Birmingham, Edinburgh and Liverpool.
1 Source Canaccord Adams January 2009 and Charity Finance Magazine November 2008
CHAIRMAN'S STATEMENT
In 2008 we saw extremely volatile and challenging conditions in financial markets. Despite this turmoil, Rathbones has achieved a net organic growth rate of 7.4% in our core discretionary investment management business. In October, we successfully completed the sale of our overseas trust operations in Jersey for £28.5 million.
Results and dividend
Profit before tax from continuing operations (excluding businesses disposed of and classified as held for sale) for the year to 31 December 2008 was £42.8 million, a decrease of 9.5% from £47.3 million in 2007. The FTSE 100 Index fell from 6454 at the beginning of 2008 to 4434 by the end of year, a fall of 31.3%. Basic earnings per share from continuing operations fell by 12.0% from 77.79p to 68.47p, including the impact of a £1.4 million charge relating to the Financial Services Compensation Scheme.
Basic earnings per share were 49.4% lower at 44.45p, compared with 87.88p in 2007, including the impact of the sale of the overseas trust businesses (discontinued operations).
The Board is recommending that the final dividend be increased by 4.0% to 26.0p (2007: 25.0p) making a total of 42.0p for the year (2007: 41.0p). This reflects our strong financial position and confidence in the ability of the business to withstand, and take advantage of, testing market conditions. The final dividend will be paid on 13 May 2009.
Market and environment
Early in 2008, the market was faced with considerable liquidity challenges arising from sub-prime mortgage losses in the USA. As the year unfolded, the repercussions led to the demise of a number of high profile financial institutions and unprecedented levels of government support for the financial system. Money market fragility and economic uncertainty continued for the remainder of 2008 driving stock market indices markedly lower in the second half of the year.
Funds under management in Rathbone Investment Management (including Rathbone Investment Management International) fell during 2008 by 16.0% to £9.43 billion (2007: £11.23 billion) compared to a fall in the FTSE/APCIMS Balanced Index of 20.1%. In spite of these difficult market conditions, we achieved an underlying net organic growth rate in funds under management within our core discretionary investment management business of 7.4% in the year compared to 7.8% in 2007.
The Board considers that this continued level of growth reflects the increasing reputation of Rathbones' investment process and service, where each client is the responsibility of an individual investment manager.
In contrast, our unit trust business has experienced a disappointing year, reflecting difficult market conditions and some performance issues.
Composition of the Board
In November we announced the retirement of Giles Coode-Adams from the Board with effect from 22 December 2008. Giles first joined Rathbones in 1999 and we have benefited enormously from his contribution over that time, particularly in his role as chairman of the Audit Committee. In September we were delighted to welcome Paul Stockton as group finance director.
In December David Harrel took on the role of senior independent director and Oliver Corbett became chairman of the Audit Committee. Both bring a great deal of experience and expertise with them, and we look forward to the additional value they will bring to us in these roles.
Outlook
In these extremely challenging times, Rathbones will continue its focus on building strong long-term client relationships by encouraging direct client contact with investment managers who provide individual investment solutions to private investors and trustees. Rathbones is well placed to weather the difficult climate and is in a strong position to take advantage of opportunities we expect to arise to grow the business. We remain confident of our future prospects.
Mark Powell
Chairman
3 March 2009
CHIEF EXECUTIVE'S STATEMENT
Key highlights
· Strong financial performance and organic growth in challenging market conditions
· Disposal of trust businesses
· Improvements to our investment process
· Prudent treasury management
· Opportunities for future growth
Rathbones' financial performance was strong in 2008 in spite of the turmoil we saw in financial markets. Our core discretionary investment management business added £0.8 billion of net new funds from new and existing clients in the year ended 31 December 2008 (2007: £0.8 billion) in addition to a further £0.4 billion as a result of business and team acquisitions (2007: £0.1 billion).
Rathbones' predominantly discretionary investment management business is a strong and compelling business model. Coupled with a very strong balance sheet we are very well placed in these challenging times.
In 2008 we restructured our business to complement our core investment management activity. In addition to growing our core business through the acquisition of Citywall Financial Management in April, we progressed substantially in disposing of our offshore trust operations through the completion in October of the sale of our Jersey trust operations. In February 2009 we completed the sale of our Geneva business. The disposals of Singapore and BVI operations are well advanced. These disposals will complete our exit from the offshore trust business - a move we started in 2008. We took the view that the businesses would best develop their potential if they were owned offshore by their management in light of the changing climate for the use of offshore structures and services.
We remain committed to our UK trust business and expect to continue to invest in its growth in 2009.
There is no doubt that 2008 has been a challenging year for all asset classes and we are acutely aware of the effects this has had on our clients' portfolios, particularly for those who rely on income levels. Replicating high levels of income is, and will continue to be, one of the great challenges of 2009. Rathbones has continued to work hard to search for investment opportunities for clients in the current climate and to enhance screening processes.
We continue to place great emphasis on high levels of communication between investment managers and their clients, which we believe is fundamental to our ability to serve our clients now and over the longer-term.
Financial performance
Operating income from continuing operations of £131.8 million in 2008 decreased 2.0% (compared to £134.5 million in 2007). Falls in stock markets were reflected in fee levels in Rathbone Investment Management (including Rathbone Investment Management International); however, this was offset by strong levels of net organic growth and high levels of interest income earned by our banking operation, which benefited from increasing client liquidity and exceptionally high credit spreads, especially in the final three months of the year when LIBOR and base rate differed substantially. We would not necessarily expect such high net interest levels to continue in 2009.
Rathbone Unit Trust Management saw a high level of outflows as disappointing investment performance resulted in net redemptions of £234million that, along with falling markets, reduced funds under management to £1.03 billion at 31 December 2008 (from £1.89billion at 31 December 2007). Action has been taken to reduce costs to a level commensurate with the business' current size, and considerable time is being dedicated to improving investment performance, notwithstanding that net fund sales cannot be expected to improve in the short-term.
Profit before tax for continuing operations of £42.8 million decreased 9.5% on the £47.3 million in 2007, largely reflecting market conditions and an increase of £1.4 million in the levy from the Financial Services Compensation Scheme mainly in relation to the Bradford & Bingley failure. Expenses were contained by our continued policy that performance related staff awards substantially reflect changes in bottom line profit before tax levels. We will continue to monitor cost levels carefully in 2009.
Marketing and business development
The underlying rate of net organic growth of 7.4% in investment management funds under management in 2008 has in large part been driven from existing clients or new clients taken on by investment managers who are not operating under earn out arrangements. The Rathbones brand is becoming increasingly known in the marketplace, and this, together with the instability we have seen in many other financial institutions, has allowed us to benefit from the adverse market conditions.
The number of our charity clients has grown by 9% in the year and charity funds under management were £1.1billion at 31 December 2008. It was very satisfying to win the Investment Management award (in partnership with the Charity Commission and the Community Foundation) at the Charity Times Awards in September and due credit goes to the individuals involved.
We have also recognised that IFAs are increasingly turning to Rathbones for investment management expertise. In 2008 the principles underlying the Retail Distribution Review placed increased and often unwanted responsibilities on distributors, who are increasingly looking for a partner to help manage their client needs. We still see considerable potential for growth in this area. The stability of Rathbones and strength of our systems and investment processes has combined well with our 'whole-of-market' approach to investment, creating a strong proposition to IFAs. In October we launched our online valuations facility. This provides web-based portfolio valuations, which very much enhances our service offering to clients and intermediaries.
We continue to develop our approach to SIPP panels and are a recognised provider of discretionary investment management services through several life company SIPP products. Our Edinburgh office has seen considerable growth this year, working closely with selected providers. SIPPs are a very powerful product for retirement planning for our typical client and an attractive way of growing funds under management. The number of SIPPs managed has grown by 28% in 2008.
Rathbone Pension & Advisory Services separately offers the Rathbone SIPP and provides a range of independent financial advice, largely to Rathbones clients. This business is growing well and saw the number of new SIPPs it has advised on increase by 18.1%. Our highly qualified pensions advisory team (which now has chartered planner status) works closely with many investment managers and their clients.
The Rathbone Investment Process
We have continued to invest significantly in the Rathbone Investment Process, which guides investment managers as they tailor individual portfolios to differing client circumstances. This adds to detailed sector, asset class and geographical commentaries, and macroeconomic analysis to provide internal support and input to our asset allocation and stock selection committees.
Communication amongst investment managers has been enhanced to ensure investment ideas and market opportunities are more effectively shared amongst investment managers.
Rathbones is committed to its independent stance, which allows us to look across the whole of the marketplace for the best available products in which to invest our clients' assets. This is something we continue to place great emphasis upon as managers look increasingly for future value opportunities in depressed markets and for risk mitigation strategies that best match client requirements.
Corporate activity
We completed the sale of our Jersey trust operations in October, and the Geneva business in February 2009. The disposals of our Singapore and BVI operations are also well advanced. None of these transactions will affect Rathbones' investment management business in the Channel Islands (Rathbone Investment Management International) or its UK-based tax and trust services (Rathbone Trust Company Limited).
Regulatory capital
In 2009 we completed our discussions with the Financial Services Authority regarding the amount of capital we are expected to hold for regulatory purposes. Our £49.6 million capital surplus over a minimum capital requirement of £63.7 million places us in a strong position to take advantage of future opportunities.
Treasury and financing
As a net provider of liquidity to the banking markets Rathbones does not rely on wholesale funding to finance its operations and does not anticipate that this will change.
The turmoil in the credit markets has required us to be especially vigilant. As a regulated deposit taker we are able to make use of a range of appropriate instruments issued by a relatively wide number of counterparties with Fitch ratings of A and above when placing funds in the money markets. As liquidity in client portfolios rose to £1.1 billion in the year (31 December 2007: £1.0 billion) and credit markets tightened considerably, we worked hard to set appropriate exposure limits and monitor counterparty quality throughout the year to keep within our conservative treasury policy, which recognises the fundamental importance of financial stability to our clients. Rathbones is virtually ungeared with borrowings of £9.2 million (2007: £12.5 million).
Investing in people
Staff turnover at Rathbones has continued to be low in 2008 at 10%, which is very much in line with expectations and in keeping with our culture of stability and maintaining longer-term client relationships. Equity ownership by staff and former staff remains at approximately 20%, with UK Share Incentive Plan ('SIP') participation at 88% and we will continue to encourage share ownership by Rathbones staff in 2009.
We continue to place a high premium on training, completing our structured graduate training programme and supplementing core regulatory training with management and personal development which amounts, on average, to two full days of training per employee (2007: two days).
Operations and resources
We have continued to invest in the efficiency of the business and now complete the vast majority of security trades and a large proportion of unit trust trades using electronic settlement platforms on a 'straight through' basis. After detailed consideration of project priorities in light of current market conditions, we would still expect to invest at similar levels in 2009 to continue to improve business efficiency and support business growth in the long term.
We have also aligned lease terms in both our New Bond Street offices and we are now a long way through the major refurbishment programme being conducted by the landlord of our Liverpool offices. Although the level of disruption has been considerable, I would like to thank all of our staff in Liverpool for their patience in working through the issues associated with this development.
Regulation
Whilst the fair treatment of clients has always been central to Rathbones' way of doing business, we have further enhanced our management information, governance and monitoring processes in this area as a response to improved FSA guidance.
We also anticipate that the impact of recent market events will create a proportionate regulatory response that will impact our banking operations. We will continue to monitor developments closely.
Outlook
Financial markets are expected to remain volatile for some time to come and in addition the economy is expected to face a prolonged period of very low interest rates. Whilst these factors will impact on our operating income in the short term, our track record for growth is strong and our continued investment in our people and operations means that we are in a strong position to take advantage of opportunities that may arise to grow our business both organically and through acquisition.
Andy Pomfret
Chief executive
3 March 2009
BUSINESS REVIEW
This business review has been prepared in line with guidance provided by the Accounting Standards Board to provide a balanced picture of Rathbones' business and prospects, without prejudicing the confidential nature of commercially sensitive information.
This business review contains certain forward-looking statements which are made by the directors in good faith based on the information available to them at the time of their approval of this review. Statements contained within the business review should be treated with some caution due to the inherent uncertainties, including economic, regulatory and business risk factors, underlying any such forward looking statements. The business review has been prepared by Rathbone Brothers Plc to provide information to its shareholders and should not be relied upon by any other party or for any other purpose.
Investment Management
Table 1. Key performance indicators for Investment Management
|
2008 |
2007 |
Underlying rate of net organic growth in investment management funds under managment1 |
7.4% |
7.8% |
Funds under management at 31 December1 |
£9.43bn |
£11.23bn |
Average net operating income basis point return2 |
104 bps |
94 bps |
1 See Table 3
2 Net operating income (see Table 4) excluding interest on own reserves divided by the
average funds under management on the quarterly billing dates (see Table 5)
Business environment
The behaviour of financial markets in 2008 has been very well-publicised as the credit crunch took its toll on all asset classes and all sectors, particularly in the second half of the year. Rathbone Investment Management funds under management fell 16.0% over the year from £11.23 billion to £9.43 billion compared to falls of 31.3% and 20.1% in the FTSE 100 and the FTSE APCIMS Balanced indices respectively.
Table 2. Investment Management - funds under management and market levels1
|
2008 |
2007 |
2006 |
2005 |
2004 |
Investment Management funds under management |
9429 |
11226 |
10380 |
8280 |
6865 |
FTSE 100 Index |
6323 |
9208 |
8871 |
8013 |
6865 |
APCIMS Balanced Index |
6904 |
8640 |
8427 |
7890 |
6865 |
1 FTSE APCIMS Balanced and FTSE 100 indices rebased to 6865
Organic inflows represent the amount of new funds brought in by our existing fund managers, either from existing clients or from new clients, and totalled £1.56 billion in the year ended 31 December 2008, up 7.6% from £1.45 billion in 2007. Net organic growth (stated after fund outflows which naturally occur because clients withdraw capital and/or income from portfolios to meet other financial requirements, or close their account) was £833 million, which translates into an annualised rate of 7.4%. This was a strong performance in difficult market conditions. Investment managers who joined us recently also added £413 million of acquired funds under management during the year, which was exceptional compared to the £150 million in 2007. Outflows of funds continued at normal levels, around 6.5% of funds under management, and account closures were also at expected levels in spite of the challenging market conditions.
Table 3. Investment Management - funds under management
|
2008 £bn |
2007 £bn |
As at 1 January |
11.23 |
10.38 |
Inflows1 |
1.97 |
1.60 |
- organic |
1.56 |
1.45 |
- acquired |
0.41 |
0.15 |
Outflows1 |
(0.73) |
(0.64) |
Market adjustment2 |
(3.04) |
(0.11) |
As at 31 December |
9.43 |
11.23 |
Net organic new business3 |
0.83 |
0.81 |
Underlying rate of net organic growth4 |
7.4% |
7.8% |
1 Valued at the date of transfer in/out
2 Impact of market movements and relative performance
3 Organic inflows less outflows
4 Net organic new business as a % of opening funds under management
Rathbones has a significant presence in the small to medium charity market (ie those charities with less than £50 million of funds under management) and, according to this year's Charity Finance survey, is placed 15th by value of funds (up two places on 2007) and 3rd place (2007: 3rd) when measured by number of segregated discretionary funds. In September, Rathbones won the Investment Management award (in partnership with the Charity Commission and the Community Foundation) at the Charity Times Awards. Charity funds under management of £1.1billion at 31 December 2008 were at similar levels to last year as net inflows offset market movements. The number of charity clients has grown by 9% in the year.
IFA-sourced growth continued to be strong. In October we launched our online valuations facility, allowing access to clients portfolios. This significantly enhanced our service offering.
The number of SIPPs managed has grown by 28% in the year ended 31 December 2008. Growth in total SIPP funds held with Rathbone Investment Management under the Rathbone SIPP helped to reduce the impact of falling markets as funds fell by 7.5% to £225.3 million (from £243.6 million in 2007). Our Edinburgh office saw considerable growth this year by working closely with selected providers, and Rathbone Pension & Advisory Services saw the number of new SIPPs upon which it has advised increased by 18.1% to 789 (2007: 668).
The overall basis point return on funds under management increased in 2008 largely as a result of exceptionally high net interest income, itself a consequence of the abnormally high credit spreads experienced throughout the year.
Financial performance
Table 4. Investment Management - financial performance
|
2008 £m |
2007 £m |
Net fee income1 |
54.3 |
57.7 |
Commission |
28.2 |
32.5 |
Interest and other income2 |
31.4 |
19.1 |
Net operating income |
113.9 |
109.3 |
Underlying operating expenses3 |
(72.1) |
(69.2) |
Underlying profit before tax |
41.8 |
40.1 |
Financial Services |
(1.4) |
- |
Profit before tax |
40.4 |
40.1 |
Underlying operating % margin4 |
36.7% |
36.7% |
1 Net fee income is stated after deducting fees and commissions expenses paid to introducers
2 Interest and other income is presented net of interest expense paid on client accounts
3 See table 6
4 Investment Management profit before tax and exceptional items divided by net operating income
Net fee income decreased by 5.9% from £57.7 million to £54.3 million in 2008, largely reflecting falls in the average quarter calendar end FTSE 100 Index (when clients are billed). An average FTSE of 5227 in 2008 is 19% down on the average in 2007. Average funds under management on the quarterly billing dates of £10.14 billion were 8.8% down compared to £11.12billion in 2007.
Table 5. Investment Management - average funds under management
|
2008 £bn |
2007 £bn |
Valuation dates for billing |
|
|
- 5 April |
10.75 |
10.93 |
- 30 June |
10.49 |
11.16 |
- 30 September |
9.87 |
11.14 |
- 31 December |
9.43 |
11.23 |
- Average |
10.14 |
11.12 |
Commission income of £28.2 million in 2008 was 13.2% lower than the previous year (2007: £32.5 million) as higher trading levels in the first half slowed in the second half due largely to considerable market uncertainty.
Interest income benefited both from the exceptionally high credit spreads which were seen throughout the year, and higher levels of client liquidity which rose to £1.1 billion at 31 December 2008 from £1.0 billion at 31 December 2007. It is expected that interest income in 2009 will be adversely impacted by future reduction in credit spreads, margin erosion and possible regulation, in what will be an environment of exceptionally low interest rates.
Net operating income for 2008 of £113.9 million increased 4.2% from £109.3 million in 2007 as market effects on fees and commission levels were more than offset by higher interest income.
Table 6. Investment Management - operating expenses
|
2008 £m |
2007 £m |
Staff costs1 |
|
|
- fixed |
24.1 |
22.8 |
- variable |
13.6 |
14.0 |
Total staff costs1 |
37.7 |
36.8 |
Underlying operating expenses |
72.1 |
69.2 |
Financial Services |
1.4 |
- |
Operating expenses |
73.5 |
69.2 |
Underlying cost/income ratio2 |
63.3% |
63.3% |
1 Represents the costs of investment managers and teams directly involved in client facing activities
2 Operating expenses before Financial Services Compensation Scheme costs divided by operating income excluding gains from disposal of available for sale securities
Underlying operating expenses for 2008 were £72.1million, compared to £69.2 million in 2007, an increase of 4.2%. This largely reflects inflationary salary increases and new office costs offset by lower performance related rewards. Full time equivalent headcount was 438 at 31 December 2008 compared to 405 at 31 December 2007. The proportion of variable staff costs to profit before tax was 33.7% in 2008 (2007: 34.9%) reflecting the fact that investment managers are largely incentivised based on a share of profit before tax as well as other schemes which are aimed at maintaining and growing the value of funds they manage. Whilst the recruitment of investment managers will generally result in a decrease in operating margins until they have attracted sufficient funds to cover their employment costs, the impact for 2008 has not been significant.
Other operating expenses include property, depreciation, settlement, IT, finance and other central support services costs. These are largely fixed and were 47.7% of total operating expenses in 2008 (2007: 46.8%).
The recent arrangements put in place by the Financial Services Compensation Scheme ('FSCS') to protect the depositors of Bradford & Bingley and other failed deposit-taking institutions will result in a significant increase in the levies made by the FSCS on the industry. Rathbones has recorded a provision of £1.4 million in respect of its share of the estimated cost of FSCS borrowings; this additional charge is expected to be billed as part of the 2008/09 and 2009/10 levy years. Further levy charges are likely to be incurred in future years although the ultimate cost remains uncertain.
Outlook
In spite of recent market conditions, the business remains strong and continues to benefit from solid growth. Rathbones' reputation as one of the leading providers of discretionary investment management services to private investors, charities and trustees remains an important asset. Whilst 2009 will undoubtedly be a challenging year, our long-term investment approach together with our ongoing investment in efficiency and other distribution sources will see the business well-placed to grow and take advantage of opportunities that may arise from the general market instability. We will continue to seek to attract new investment managers to join Rathbones with their clients. We will also continue to look for acquisitions which will enhance the overall quality of our business and take advantage of our operational efficiency and ability to service both small and large clients.
Unit Trusts
Table 7. Key performance indicators for Unit Trusts
|
2008 |
2007 |
Funds under management at 31 December |
£1.03bn |
£1.89bn |
Underlying rate of net growth in funds under management |
(12.2)% |
9.1% |
Business environment
The retail asset management sector had a very difficult year in 2008 with some high profile names finding life very difficult as a result of the fall out effects of market turmoil. As reported by the Investment Management Association, industrywide retail outflows were circa 17% of industry funds under management in the year and typical of an industry that can be volatile in a downturn as intermediaries rebalance client portfolios and institutional monies move to safer havens.
Table 8. Unit Trusts - funds under management
|
2008 £bn |
2007 £bn |
As at 1 January |
1.89 |
1.86 |
Net (outflow)/inflows |
(0.23) |
0.17 |
- Inflows1 |
0.15 |
0.52 |
- Outflows1 |
(0.38) |
(0.35) |
Market adjustment2 |
(0.63) |
(0.14) |
As at 31 December |
1.03 |
1.89 |
Underlying rate of net growth3 |
(12.2)% |
9.1% |
1 Valued at the date of transfer in/out
2 Impact of market movements and relative performance
3 Net inflows as a % of opening funds under management
Funds managed fell 45.5% in 2008 from £1.89 billion to £1.03 billion as adverse market movements combined with total net redemptions of £234 million. These effects not only reflect the general market turbulence, but also our market positioning, which has historically been largely focused on an income fund sector which has been generally out of favour during 2008.
The performance of the largest fund (the Rathbone Income Fund) was disappointing, slipping into the fourth quartile over one year and three years and the third quartile over five years. This reflects a concentration in small and mid cap stocks, which have suffered in recent times. Progress has been made in adjusting the composition of this fund.
Table 9. Units Trusts - fund details
|
Morningstar Fund Stars |
31 Dec 2008 £m |
31 Dec 2007 £m |
Ethical Bond Fund |
2 |
36 |
46 |
Global Opportunities Fund |
4 |
52 |
60 |
Income Fund |
4 |
544 |
1,112 |
High Income Fund |
N/A |
16 |
25 |
Income and Growth Fund |
4 |
34 |
54 |
Smaller Companies Fund |
3 |
24 |
47 |
Special Situations Fund |
2 |
54 |
164 |
Other |
N/A |
269 |
379 |
Total |
|
1,029 |
1,887 |
Actions are underway to reduce the cost base of the business and improve future investment performance.
Financial performance
Table 10. Unit trusts - financial performance
|
2008 |
2007 £m |
Initial charges net of discounts |
0.9 |
1.0 |
Annual management charges |
17.7 |
26.1 |
Net dealing profits |
0.5 |
1.7 |
Interest and other income |
1.3 |
1.5 |
|
20.4 |
30.3 |
Initial commission payable |
(0.1) |
(0.4) |
Rebates and trail commission payable |
(7.8) |
(11.1) |
Net operating income |
12.5 |
18.4 |
Operating expenses |
(10.1) |
(11.9) |
Profit before tax |
2.4 |
6.9 |
Operating % margin1 |
19.2% |
36.7% |
1 Unit trust profit before tax divided by net operating income
The 32.2% reduction in annual management charges from £26.1 million in 2007 to £17.7 million in 2008 is almost entirely reflective of the reduction in funds under management. Average funds under management in 2008 decreased by 28.6% from £2.1 billion to £1.5 billion. Annual management charges as a percentage of average funds under management remained consistent at 1.2% (2007: 1.2%).
Rebates and trail commission payable as a percentage of annual management charge income were 44.1% compared to 42.5% in 2007. Managers' box dealing profits constituted 4.0% of net operating income in the year (2007: 9.0%) largely as a consequence of fund and market movements. Net operating income as a percentage of average funds under management was 0.8% in 2008 compared to 0.9% in 2007.
Table 11. Units Trusts - operating expenses
|
2008 |
2007 £m |
Staff costs1 |
|
|
- fixed |
2.8 |
2.8 |
- variable |
3.4 |
4.4 |
Total staff costs1 |
6.2 |
7.2 |
Other operating expenses |
3.9 |
4.7 |
Operating expenses |
10.1 |
11.9 |
Cost/income ratio |
80.8% |
63.3% |
1 Represents the costs of investment managers and teams directly involved in investment or distribution activities
Fixed staff costs of £2.8 million for the year ended 2008 were consistent with 2007. Full time equivalent headcount was 27 at 31 December 2008 compared to 31 at 31 December 2007. The ratio of variable staff costs to profit before tax was 141.7% in 2008 (2007: 63.8%) largely reflecting the way in which costs of the profit share schemes for this business are accounted for. As costs of three year bonus schemes are required to be spread over the employee service period, the effect has been to distort 2008 performance with costs which were derived from higher profit levels in previous years. The following table demonstrates the effect this has had.
Table 12. Units Trusts - variable staff costs
|
2008 |
2007 £m |
Total variable staff costs |
3.4 |
4.4 |
Deferred profit share adjustment |
(1.7) |
1.5 |
Variable staff costs excluding deferred profit share |
1.7 |
5.9 |
Variable staff costs excluding deferred profit share as a % of profit before tax and total variable staff costs |
29.3% |
52.2% |
Outlook
2008 has been a difficult year for the unit trust business and actions are already underway to maximise profitability. We expect investor confidence to remain brittle although we will place considerable focus on improving fund performance whilst maintaining continuity of service and contact with advisers and distribution platforms, which should facilitate a recovery of new business levels when markets improve in the medium term.
Trust and Tax (continuing operations)
Table 13. Key performance indicators for Trust and Tax
|
2008 |
2007 % |
Operating % margin1 |
11.1 |
2.0 |
1 Trust and tax profit before tax from continuing operations divided by trust and tax net operating income (see Table 15)
Business environment
Following discussions with the management of the respective offshore trust businesses, Rathbones reviewed the most appropriate ownership structure for these businesses in light of the changing focus of regulators and fiscal authorities. This review resulted in the sale of our offshore trust business in Jersey on 15 October 2008 to Hawksford Holdings Limited for £28.5 million, consisting of a cash consideration of £23.5 million and deferred consideration of unsecured subordinated loan notes with an initial issue value of £5 million. The loan notes will be repaid on the earlier of a future sale or listing of the Jersey trust business.
The sale of the Geneva business to its management was completed on 10 February 2009 and it is anticipated that the sale of the Singapore and British Virgin Islands businesses will be completed in the first half of 2009.
The resulting impairment charges recognised in the results for 2008, arising from the disposal of these businesses, is shown in the table below.
Table 14. Impairment loss on disposals
As at 31 Dec 2008 |
Value of consideration £'000 |
Carrying value |
Impairment £'000 |
Planned disposals |
|
|
|
- Singapore |
48 |
1,249 |
1,201 |
- Geneva |
(16) |
190 |
206 |
- BVI |
186 |
330 |
144 |
|
|
|
1,551 |
Completed disposal |
|
|
|
- Jersey |
|
|
10,678 |
Total related professional costs |
|
|
451 |
|
|
|
12,680 |
The continuing business is now concentrated wholly in the UK and it is closely aligned with our core discretionary investment management business so as to benefit from available synergies within the UK client base. Our continuing operations comprise:
· the UK trust business which provides advice on tax planning, including wills and inheritance tax, family office services and trust and estate administration; and
· the taxation services business which prepares tax returns for individuals and trusts, provides income and capital tax planning services as well as the ability to assist with tax investigations.
Both of these businesses have performed satisfactorily in 2008 with considerable focus being placed on managing increasingly complex regulation for clients as well as improving administration processes.
Table 15. Trust and Tax - financial performance
|
2008 |
2007 £m |
Net operating income |
5.4 |
5.1 |
Operating expenses |
(4.8) |
(5.0) |
Profit before tax from continuing operations |
0.6 |
0.1 |
Discontinued operations |
2.2 |
4.9 |
Profit before tax |
2.8 |
5.0 |
Operating % margin1 |
11.1% |
2.0% |
1 Trust and tax profit before tax from continuing operations divided by net operating income
Operating income increased by 5.9% from £5.1million in 2007 to £5.4 million in 2008. Changes in inheritance tax legislation for trusts in the 2006 Finance Act drove increased activity levels and fees in the first half of 2008 as restructuring of accumulation and maintenance trusts and life interest trusts had to be completed before April 2008.
Table 16. Trust and Tax - operating expenses
|
2008 |
2007 £m |
Staff costs1 |
|
|
- fixed |
2.7 |
3.0 |
- variable |
0.4 |
0.4 |
Total staff costs1 |
3.1 |
3.4 |
Other operating expenses |
1.7 |
1.6 |
Operating expenses |
4.8 |
5.0 |
Cost/income ratio |
88.9% |
98.0% |
1 Represents the costs of fee earning staff and teams involved in client facing activities
Fixed staff costs of £2.7 million for 2008 reduced by 10.0% due to lower headcount. Full time equivalent headcount was 44 at 31 December 2008 compared to 49 at 31 December 2007. Other operating expenses represent property, depreciation, settlement costs, fees, IT and other support costs which are largely fixed and were 35.4% of total operating expenses in 2008 (2007: 32.0%).
Outlook
In the UK, proposed changes in legislation for 2009 appear benign in terms of capital taxation but other changes in personal taxation may result in an increase in activity for private clients. We will continue to seek opportunities to grow the business on a selective basis in 2009.
Tax
The effective tax rate for the year is 31.5% (2007: 30.0%), calculated as the total tax charge on continuing operations of £13.5 million (2007: £14.2 million) divided by the profit before income tax on continuing operations of £42.8 million (2007: £47.3 million).
The effective rate of tax in 2008 is higher than the composite UK standard rate of 28.5% due principally to the effect of disallowable expenditure, a fall in the expected deduction for share based payments and the release of certain deferred tax assets held in prior years.
A full reconciliation of income tax expense is included in note 5 to the consolidated accounts.
Dividend
An interim dividend of 16p per share was paid to shareholders on 8 October 2008 and the Board is recommending a final dividend of 26.0p, resulting in a total payment of 42.0p (2007: 41.0p). This dividend is covered 1.1 times by reported basic earnings per share and 1.7 times by underlying earnings per share.
Capital
A summary of the capital position for the Group at 31 December 2008 is shown in the table below.
Table 17. Regulatory capital
|
31 Dec 2008 |
Tier 1 capital resources |
|
Share capital |
2.1 |
Share premium |
29.0 |
Other reserves (excluding available for sale reserve) |
32.6 |
Retained earnings1 |
116.6 |
Deduction for intangibles |
(68.2) |
Total Tier 1 capital |
112.1 |
Tier 2 capital resources |
|
Upper Tier 2 |
|
- available for sale reserve |
2.1 |
- deduction - material holdings |
(0.9) |
Total Tier 2 capital resources |
1.2 |
Total Tier 1 and Tier 2 capital resources after deductions |
113.3 |
Total capital requirement |
63.7 |
Surplus of capital resources over capital requirement |
49.6 |
1 Excluding £2.2 million in Rathbone Insurance Limited
Rathbones has adopted the standardised approach to calculating its Pillar I credit risk component and the basic indicator approach to calculating its operational risk component.
Rathbones is well capitalised and does not rely on the wholesale market to fund its operations. Whilst susceptible to market conditions, future earnings are protected somewhat by variable rewards being closely linked to profit before tax. It is estimated that Rathbone Investment Management would in theory be profitable should it be faced with a scenario that the FTSE Index remain at a level around 2500 for a sustained period.
Rathbones' Pillar III disclosure is given on our website at www.rathbones.com.
Treasury and financing
Rathbone Investment Management holds most of the Group's surplus liquidity on its balance sheet and this includes clients' cash that it holds in its capacity as a deposit taker, which is authorised and regulated by the Financial Services Authority.
The treasury department of Rathbone Investment Management, reporting through the banking committee to the Board, operates in accordance with procedures set out in an approved treasury manual and monitors exposure to market, credit and liquidity risk.
The turmoil in the credit markets has resulted in a considerable amount of activity for the banking committee which has continued to manage the Group's counterparty risk. Our banking licence allows our treasury department to make use of a range of appropriate instruments issued by a relatively wide number of counterparties. Counterparties must be A rated or higher by Fitch and are regularly reviewed to prevent ratings being out of date. As liquidity in client portfolios rose to £1.1 billion (2007: £1.0 billion) during 2008 and credit markets tightened considerably, we worked hard to set appropriate exposure limits and monitor counterparty quality throughout the year to keep within our conservative treasury policy, which recognises the fundamental importance of financial stability and continuity to our clients. No losses have been incurred on treasury counterparty exposures.
As a net provider of liquidity to the banking markets Rathbones does not rely on wholesale funding to finance its operations and does not anticipate that this will change. External borrowings are limited to a term loan facility of £9.2 million at 31 December 2008 from Barclays Bank PLC. An amount of £3.1 million was repaid during the year. The balance is repayable in six-monthly equal instalments ending on 4 April 2011.
Cash flow
As Group fee income is largely debited directly from client portfolios, Rathbones operates with modest working capital. Larger cash flows are principally generated from the Group's banking/treasury operations. Excluding these cash flows, the most significant non-operating cash flows during the year were as follows:
· Cash outflows relating to the payment of dividends of £17.5 million.
· £11.3 million of capital expenditure.
· Net cash inflows of £16.3 million on the disposal of the Jersey trust business.
Pensions
Rathbones operates two defined benefit schemes (both of which are closed to new members) and a defined contribution pension scheme. At 31 December 2008, the combined accounting deficit for the two defined benefit schemes totalled £5.7 million (2007: £6.5 million). Details of the assumptions supporting the accounting valuation are included in note 9 to the accounts. The Board recognises that the calculation of the pension deficit is subjective. International Accounting Standards require that pension liabilities be discounted based upon a 15 year AA rated corporate bond rate. In 2008, credit spreads on corporate bonds were artificially high. Following completion of the triennial review of the Rathbones 1987 Scheme in 2008, and after taking into account the sensitivity of the valuation to discount rate changes shown in note 9 to the financial statements, the Board has approved a schedule of contributions of £22.0 million for the next eight years to fund the scheme deficit.
During the year, the Group made contributions of £2.3 million into the Rathbone 1987 Scheme.
A triennial valuation of the Laurence Keen Scheme as at 31 December 2008 is planned for 2009.
Operations and resources
Rathbones' Information Technology department has continued to provide a robust operations infrastructure. Our integrated core systems, comprising 3i's core Rhymesight processing engine, the internally developed Rathbone Investment Desk and Equipos' STR client reporting package, operated very successfully during the year. 2008 also saw us complete our planned transition to a Microsoft desktop.
There have been a large number of different developments in our investment systems and our business support systems to drive forward our business and its efficiency. Some of the more significant examples have been:
· significant enhancements to the intermediary and client website;
· an improved data repository for electronic copies of valuations and reports, allowing easy access and e-mail functionality;
· introduction of market leading contribution analysis and attribution software to support existing sophisticated performance software;
· regulation-driven upgrades eg PEP to ISA migrations, capital gains tax, Budget and VAT changes;
· further developments to electronic workflow for account opening and account amendment, allowing smooth handling of record levels of business; and
· launch of a branded 'white label' service for an intermediary, covering documentation, reporting and client website.
We have also completed a full migration of our unit trust outsourcing contract to IFDS and HSBC successfully moving the business platform to our own core Rhymesight/RID investment platform with new direct electronic links to HSBC.
Rathbones' particular strength is that we offer bespoke solutions with different approaches for different client needs through various approaches. In addition we do not aim to generate 'index' returns over short periods but look to provide longer-term wealth management. From an investment perspective, this means that we need to provide a full range of assets to our clients including traditional equities and bonds, fund of hedge funds, structured products and investment into areas such as commodities, private equity and property funds when appropriate. This requires greater operational capabilities. In the latter part of 2008, for example, we adapted a number of operational processes to ensure that higher volumes of gilt and treasury bill orders could be settled efficiently.
This year we achieved our best ever CREST and overseas settlement rates, and will continue to invest in our core processes to secure future efficiencies. In 2009 we expect to begin a two year development of a comprehensive client documentation and relationship management solution, review our key market data providers following the recent decision of Global Topic to withdraw from the market, upgrade our Microsoft Office suite to Office 2007 and invest in our Sun accounting systems.
This year has seen a major refurbishment project in our Port of Liverpool Building premises (part of a World Heritage Site) resulting in a number of operational difficulties which we have worked hard to overcome. The majority of the project is now complete although some work will inevitably continue into 2009. Rental rates are fixed at attractive levels until 2013.
In London we have now agreed to terms which align leases on our 159 and 161 New Bond Street premises. Fit out work in our new Exeter and Birmingham offices has been completed and we have relocated to an attractive new office in Bristol. We will continue to work hard to secure optimal use of space as part of our overall plans to manage costs carefully.
Consolidated income statement
for the year ended 31 December 2008
|
Note |
2008 £'000 |
2007 £'000 restated (note 1) |
Interest and similar income |
|
69,095 |
51,573 |
Interest expense and similar charges |
|
(38,035) |
(32,282) |
Net interest income |
|
31,060 |
19,291 |
Fee and commission income |
|
106,656 |
122,130 |
Fee and commission expense |
|
(8,565) |
(11,499) |
Net fee and commission income |
|
98,091 |
110,631 |
Dividend income |
|
134 |
67 |
Net trading income |
|
480 |
1,676 |
Net income from sale of available for sale securities |
|
- |
1,297 |
Other operating income |
|
1,986 |
1,518 |
Operating income |
|
131,751 |
134,480 |
Operating expenses |
|
(88,995) |
(87,178) |
Additional levy for Financial Services Compensation Scheme |
|
(1,404) |
- |
Other operating expenses |
|
(87,591) |
(87,178) |
Profit before income tax from continuing operations |
|
42,756 |
47,302 |
Income tax expense |
5 |
(13,489) |
(14,212) |
Profit after income tax from continuing operations |
|
29,267 |
33,090 |
Discontinued operations |
|
|
|
Profit before income tax from discontinued operations |
|
2,215 |
4,922 |
Income tax credit/(charge) on profit from discontinued operations |
|
198 |
(632) |
Loss recognised on remeasurement of assets of the disposal group |
|
(12,680) |
- |
Net (loss)/profit from discontinued operations |
6 |
(10,267) |
4,290 |
Profit for the year attributable to equity holders of the Company |
|
19,000 |
37,380 |
|
|
|
|
Dividends paid and proposed for the year per ordinary share (p) |
7 |
42.00p |
41.00p |
Dividends paid and proposed for the year (£'000) |
7 |
17,984 |
17,479 |
|
|
|
|
Earnings per share for the year attributable to equity holders of the Company: |
8 |
|
|
Basic (p) |
|
44.45p |
87.88p |
Diluted (p) |
|
44.09p |
86.46p |
|
|
|
|
Earnings per share from continuing operations for the year attributable to equity holders of the Company: |
8 |
|
|
Basic (p) |
|
68.47p |
77.79p |
Diluted (p) |
|
67.90p |
76.54p |
Consolidated balance sheet
as at 31 December 2008
|
Note |
2008 £'000 |
2007 £'000 |
Assets |
|
|
|
Cash and balances at central banks |
|
351 |
275 |
Settlement balances |
|
15,751 |
21,573 |
Loans and advances to banks |
|
175,973 |
250,103 |
Loans and advances to customers |
|
39,412 |
39,380 |
Investment securities |
|
|
|
- available for sale |
|
81,991 |
6,948 |
- held to maturity |
|
874,979 |
765,274 |
Assets of disposal groups classified as held for sale |
|
5,813 |
- |
Intangible assets |
|
68,232 |
85,734 |
Property, plant and equipment |
|
6,816 |
8,131 |
Deferred tax asset |
|
2,483 |
3,528 |
Prepayments, accrued income and other assets |
|
38,646 |
45,677 |
Total assets |
|
1,310,447 |
1,226,623 |
|
|
|
|
Liabilities |
|
|
|
Deposits by banks |
|
9,201 |
12,460 |
Settlement balances |
|
14,048 |
19,926 |
Due to customers |
|
1,044,351 |
946,608 |
Accruals, deferred income, provisions and other liabilities |
|
42,450 |
49,637 |
Current tax liabilities |
|
6,035 |
6,790 |
Liabilities of disposal groups classified as held for sale |
|
4,008 |
- |
Long term employee benefits |
9 |
5,723 |
6,452 |
Total liabilities |
|
1,125,816 |
1,041,873 |
|
|
|
|
Equity |
|
|
|
Share capital |
|
2,143 |
2,134 |
Share premium |
|
28,957 |
27,758 |
Other reserves |
10 |
34,740 |
54,181 |
Retained earnings |
10 |
118,791 |
100,677 |
Total equity |
|
184,631 |
184,750 |
Total equity and liabilities |
|
1,310,447 |
1,226,623 |
Approved by the Board of directors on 3 March 2009 and signed on its behalf by
A D Pomfret
Chief executive
R P Stockton
Finance director
Consolidated cash flow statement
for the year ended 31 December 2008
|
Note |
2008 £'000 |
2007 £'000 restated (note 1) |
Cash flows from operating activities |
|
|
|
Profit before income tax from continuing operations |
|
42,756 |
47,302 |
Net interest income |
|
(31,060) |
(19,291) |
Net income from sale of available for sale securities |
|
- |
(1,297) |
Impairment losses on loans and advances to customers |
|
58 |
- |
Profit on disposal of property, plant and equipment |
|
(45) |
(3) |
Depreciation and amortisation |
|
4,614 |
4,150 |
Net unrealised gains on foreign exchange |
|
(361) |
(91) |
Defined benefit pension scheme charges |
|
1,942 |
2,554 |
Share based payment charges |
|
1,299 |
2,692 |
Interest paid |
|
(38,617) |
(31,525) |
Interest received |
|
69,150 |
46,985 |
|
|
49,736 |
51,476 |
Changes in operating assets and liabilities |
|
|
|
- net decrease in loans and advances to banks and customers |
|
33,735 |
15,276 |
- net decrease/(increase) in settlement balance debtors |
|
5,822 |
(1,945) |
- net decrease/(increase) in prepayments, accrued income and other assets |
|
5,360 |
(2,129) |
- net increase in amounts due to customers and deposits by banks |
|
89,287 |
280,980 |
- net (decrease)/increase in settlement balance creditors |
|
(5,878) |
1,848 |
- net (decrease)/increase in accruals, deferred income, provisions and other liabilities |
|
(3,302) |
8,537 |
Cash generated from operations |
|
174,760 |
354,043 |
Defined benefit pension contributions paid |
|
(2,715) |
(6,595) |
Tax paid |
|
(10,950) |
(12,730) |
Discontinued operations |
|
2,145 |
3,481 |
Net cash inflow from operating activities |
|
163,240 |
338,199 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Acquisition of businesses, net of cash acquired |
|
(734) |
(422) |
Disposal of businesses, net of cash transferred |
|
16,340 |
- |
Purchase of property, equipment and intangible assets |
|
(11,311) |
(9,775) |
Proceeds from sale of property and equipment |
|
151 |
29 |
Purchase of investment securities |
|
(2,545,080) |
(1,276,420) |
Proceeds from sale and redemption of investment securities |
|
2,435,375 |
1,070,811 |
Discontinued operations |
|
(266) |
(409) |
Net cash used in investing activities |
|
(105,525) |
(216,186) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Purchase of shares for share-based schemes |
|
(1,728) |
(3,210) |
Issue of ordinary shares |
|
1,208 |
2,963 |
Dividends paid |
7 |
(17,503) |
(15,914) |
Net cash used in financing activities |
|
(18,023) |
(16,161) |
|
|
|
|
Net increase in cash and cash equivalents |
|
39,692 |
105,852 |
Cash and cash equivalents at the beginning of the year |
|
214,220 |
108,343 |
Amounts reclassified as assets of businesses held for sale |
|
(791) |
- |
Effect of exchange rate changes on cash and cash equivalents |
|
1,109 |
25 |
Cash and cash equivalents at the end of the year |
|
254,230 |
214,220 |
Consolidated statement of recognised income and expense
for the year ended 31 December 2008
|
Note |
2008 £'000 |
2007 £'000 |
|
Profit for the year |
|
19,000 |
37,380 |
|
Exchange translation differences |
|
1,001 |
14 |
|
Actuarial (loss)/gain on long term employment benefits |
|
(44) |
270 |
|
Revaluation of available for sale investment securities: |
|
|
|
|
- net (loss)/gain from changes in fair value |
|
(3,957) |
2,069 |
|
- net profit on disposal transferred to income during the period |
|
- |
(1,297) |
|
|
|
(3,957) |
772 |
|
Deferred tax on equity items: |
|
|
|
|
- available for sale investment securities |
|
1,108 |
(93) |
|
- actuarial gains and losses |
|
12 |
34 |
|
- share-based payments |
|
(515) |
694 |
|
|
|
605 |
635 |
|
Net (expense)/income recognised directly in equity |
|
(2,395) |
1,691 |
|
Recognised income and expense for the year attributable to equity holders of the Company |
|
16,605 |
39,071 |
NOTES TO THE CONSOLIDATED ACCOUNTS
1. Principal accounting policies
In preparing the financial information included in this statement the Group has applied accounting policies, which are in accordance with International Financial Reporting Standards as adopted by the European Commission at 31 December 2008. The accounting policies have been applied consistently to all periods presented in the consolidated accounts, except as noted below.
The comparative balances have been restated in the Income statement, Cash flow statement and the related notes where applicable to reflect the presentation of certain subsidiary entities as disposal groups in accordance with IFRS 5. Further details, including the impact on the financial statements, are given in note 6.
2. Critical accounting judgements and key sources of estimation and uncertainty
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Retirement benefit obligations
The Group makes estimates about a range of long-term trends and market conditions to determine the value of the deficit on its retirement benefit schemes, based on the Group's expectations of the future and advice taken from qualified actuaries. The principal assumptions underlying the reported deficit of £5,723,000 are given in note 9.
Long-term forecasts and estimates are necessarily highly judgemental and subject to risk that actual events may be significantly different to those forecast. If actual events deviate from the assumptions made by the Group then the reported surplus or deficit in respect of retirement benefit obligations may be materially different. The history of experience adjustments and information on the sensitivity of the retirement benefit obligation to changes in underlying estimates is set out in note 9.
Impairment of goodwill
The Group makes estimates in relation to the value in use of the cash generating units to which goodwill has been allocated in determining whether goodwill is impaired. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £47,023,000.
Share-based payments
In determining the fair value of equity settled share-based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgements must be formed as to the likely number of shares that will vest, and the fair value of each award granted. The fair value of awards is determined using a valuation model which is dependent on further estimates, including the Group's future dividend policy, employee turnover, the timing with which options will be exercised and future volatility in the price of the Group's shares. Such assumptions are based on publicly available information, where available, and reflect market expectations and advice taken from qualified actuaries. Different assumptions about these factors to those made by the Group could materially affect the reported value of share-based payments.
Income recognition
Revenue in the Trust and Tax business is calculated by reference to the estimated stage of completion of the service rendered. Estimates are also made as to the recoverability of work in progress and debtors in relation to this income. At the year end, total work in progress and debtors for Trust and Tax services, net of related provisions for impairment, amounted to £6,300,000, of which £4,545,000 was included within disposal groups (2007: £13,363,000).
Conversely, very little judgement is required in the recognition of income arising from the Investment Management and Unit Trusts businesses due to the close proximity of billing dates to the year end and the inherently non-judgemental nature of interest accrual calculations.
3. Segmental information
(a) Business segments
For management purposes, the Group is currently organised into three operating divisions: Investment Management, Unit Trusts and Trust and Tax. These divisions are the basis on which the Group reports its primary segment information.
Transactions between the business segments are on normal commercial terms and conditions. Intra-segment income constitutes trail commission. Revenues and expenses are allocated to the business segment that originated the transaction. Revenues and expenses that are not directly originated by a business segment are reported as unallocated. Centrally incurred expenses are allocated to business segments on an appropriate pro-rata basis. Segment assets and liabilities comprise operating assets and liabilities, being the majority of the balance sheet, but exclude items such as taxation and borrowings.
At 31 December 2008 |
Investment Management £'000 |
Unit Trusts £'000 |
Trust and Tax (continuing) £'000 |
Central Shared Services £'000 |
Total (continuing) £'000 |
Trust and Tax (discontinued) £'000 |
Total |
Gross external revenues |
151,723 |
20,337 |
6,291 |
- |
178,351 |
18,643 |
196,994 |
Fee, commission and interest expense |
(39,130) |
(6,738) |
(732) |
- |
(46,600) |
- |
(46,600) |
Revenues from other segments |
1,284 |
(1,160) |
(124) |
- |
- |
- |
- |
Operating income |
113,877 |
12,439 |
5,435 |
- |
131,751 |
18,643 |
150,394 |
Operating expenses |
(50,589) |
(8,305) |
(3,711) |
(26,390) |
(88,995) |
(16,428) |
(105,423) |
Recharges |
(22,847) |
(1,771) |
(1,089) |
25,707 |
- |
- |
- |
Profit before tax |
40,441 |
2,363 |
635 |
(683) |
42,756 |
2,215 |
44,971 |
Taxation |
|
|
|
|
(13,489) |
198 |
(13,291) |
Impairment charge |
|
|
|
|
- |
(12,680) |
(12,680) |
Profit for the year |
|
|
|
|
29,267 |
(10,267) |
19,000 |
Total assets |
1,231,678 |
10,611 |
31,125 |
31,220 |
1,304,634 |
5,813 |
1,310,447 |
Total liabilities |
1,076,507 |
5,950 |
17,155 |
22,196 |
1,121,808 |
4,008 |
1,125,816 |
Other segment items: |
|
|
|
|
|
|
|
Capital expenditure |
11,018 |
97 |
196 |
- |
11,311 |
487 |
11,798 |
Depreciation and amortisation |
4,407 |
72 |
135 |
- |
4,614 |
529 |
5,143 |
Other non-cash expenses |
1,010 |
71 |
145 |
131 |
1,357 |
745 |
2,102 |
Provisions charged in the period |
298 |
- |
52 |
- |
350 |
- |
350 |
Provisions utilised in the period |
4,622 |
- |
- |
- |
4,622 |
480 |
5,102 |
At 31 December 2007 (restated - note 1) |
Investment Management £'000 |
Unit Trusts £'000 |
Trust and Tax (continuing) £'000 |
Central Shared Services £'000 |
Total (continuing) £'000 |
Trust and Tax (discontinued) £'000 |
Total |
Gross external revenues |
141,075 |
30,303 |
5,586 |
1,297 |
178,261 |
20,331 |
198,592 |
Fee, commission and interest expense |
(33,368) |
(9,943) |
(470) |
- |
(43,781) |
(286) |
(44,067) |
Revenues from other segments |
1,606 |
(1,606) |
- |
- |
- |
- |
- |
Operating income |
109,313 |
18,754 |
5,116 |
1,297 |
134,480 |
20,045 |
154,525 |
Operating expenses |
(47,810) |
(10,205) |
(4,011) |
(25,152) |
(87,178) |
(15,123) |
(102,301) |
Recharges |
(21,411) |
(1,669) |
(1,019) |
24,099 |
- |
- |
- |
Profit before tax |
40,092 |
6,880 |
86 |
244 |
47,302 |
4,922 |
52,224 |
Taxation |
|
|
|
|
(14,212) |
(632) |
(14,844) |
Profit for the year |
|
|
|
|
33,090 |
4,290 |
37,380 |
Total assets |
1,115,899 |
27,837 |
19,828 |
23,165 |
1,186,729 |
39,894 |
1,226,623 |
Total liabilities |
974,760 |
21,390 |
13,121 |
27,261 |
1,036,532 |
5,341 |
1,041,873 |
Other segment items: |
|
|
|
|
|
|
|
Capital expenditure |
9,043 |
262 |
593 |
- |
9,898 |
319 |
10,217 |
Depreciation and amortisation |
3,711 |
148 |
290 |
- |
4,149 |
574 |
4,723 |
Other non-cash expenses |
1,852 |
256 |
159 |
406 |
2,673 |
149 |
2,822 |
Provisions charged in the period |
1,080 |
- |
58 |
- |
1,138 |
853 |
1,991 |
Provisions utilised in the period |
5,512 |
- |
121 |
- |
5,633 |
801 |
6,434 |
Unallocated external revenues comprise gains on disposal of available for sale securities.
(b) Geographical segments
During 2008, the Group's operations were located in the United Kingdom, Jersey, Switzerland, the British Virgin Islands and Singapore. The following table provides an analysis of the Group's revenues by geographical market, by origin of the services:
Total gross revenues by geographical market
|
|
2008 £'000 |
2007 £'000 |
United Kingdom |
|
170,924 |
171,556 |
Jersey |
|
17,581 |
21,686 |
Rest of the world |
|
8,489 |
5,350 |
|
|
196,994 |
198,592 |
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:
Assets allocated to business segments
|
|
2008 £'000 |
2007 £'000 |
United Kingdom |
|
1,245,186 |
1,145,684 |
Jersey |
|
8,070 |
37,123 |
Rest of the world |
|
25,971 |
20,651 |
|
|
1,279,227 |
1,203,458 |
Additions to property, plant and equipment and intangible assets
|
|
2008 £'000 |
2007 £'000 |
United Kingdom |
|
11,297 |
9,790 |
Jersey |
|
445 |
301 |
Rest of the world |
|
70 |
126 |
|
|
11,812 |
10,217 |
(c) Total gross revenues
|
|
2008 £'000 |
2007 £'000 restated (note 1) |
Interest and similar income |
|
69,095 |
51,573 |
Fee and commission income |
|
106,656 |
122,130 |
Dividend income |
|
134 |
67 |
Net trading income |
|
480 |
1,676 |
Net income from sale of available for sale securities |
|
- |
1,297 |
Other operating income |
|
1,986 |
1,518 |
Discontinued operations |
|
18,643 |
20,331 |
Total gross revenues |
|
196,994 |
198,592 |
Interest expense and similar charges |
|
(38,035) |
(32,282) |
Fee and commission expense |
|
(8,565) |
(11,499) |
Discontinued operations |
|
- |
(286) |
Total operating income (including discontinued operations) |
|
150,394 |
154,525 |
4. Business combinations
On 1 April 2008, the Group acquired the entire share capital of Citywall Financial Management Limited for cash consideration of £1,214,000. Contingent, deferred consideration is also payable dependent on the value of discretionary funds under management introduced by the business at 5 April 2009 and 30 September 2009. The acquired business' net assets at the acquisition date were as follows:
|
Recognised values £'000 |
Fair value adjustments £'000 |
Carrying amounts £'000 |
Cash and cash equivalents |
480 |
- |
480 |
Other current assets |
115 |
- |
115 |
Property, plant and equipment |
10 |
- |
10 |
Client relationships |
565 |
565 |
- |
Current liabilities |
(225) |
- |
(225) |
Net identifiable assets acquired |
945 |
565 |
380 |
Goodwill on acquisition |
664 |
|
|
Purchase consideration |
1,609 |
|
|
Included within the Consolidated income statement for the year is a loss before tax, including acquisition costs, of £62,000 relating to the acquired business. If the business had been acquired on 1 January 2008, consolidated operating income from continuing operations would have been £131,986,000 and consolidated profit before income tax from continuing operations would have been £42,779,000.
The goodwill arising on the acquisition is attributable to the anticipated profitability of incorporating the business into the Group's operating model.
5. Income tax expense
|
|
2008 £'000 |
2007 £'000 restated (note 1) |
Current tax |
|
11,434 |
11,942 |
Adjustments in respect of previous years |
|
(178) |
(32) |
Deferred tax |
|
2,233 |
2,302 |
|
|
13,489 |
14,212 |
The tax charge on profit from continuing operations for the year is higher (2007: higher) than the standard rate of corporation tax in the UK of 28.5% (2007: 30%). The differences are explained below:
|
|
2008
£’000
|
2007
£’000
restated (note 1)
|
Tax on profit from ordinary activities at the standard rate of 28.5% (2007 – 30%)
|
|
12,185
|
14,190
|
Effects of:
|
|
|
|
Disallowable expenses
|
|
388
|
596
|
Share-based payments
|
|
273
|
(854)
|
|
|
|
|
|
|
|
|
Tax on overseas earnings
|
|
64
|
(311)
|
Underprovision for tax in previous years
|
|
579
|
45
|
Effect of change in corporation tax rate
|
|
-
|
546
|
Income tax expense
|
|
13,489
|
14,212
|
In addition to the amount charged to the income statement, deferred tax relating to actuarial gains and losses, share-based payments and gains and losses arising on available for sale investment securities amounting to £605,000 has been credited directly to equity (2007: £635,000 credited to equity).
The standard rate of corporation tax in the UK applicable for the accounting year end 31 December 2008 takes account of the reduction in the UK tax rate to 28% from 30% effective on 6 April 2008.
6. Disposal groups and discontinued operations
On 17 July 2008, the Group announced its intention to exit its international trust businesses.
On 15 October 2008 the Group disposed of its subsidiaries Rathbone Trust Company Jersey Limited and Rathbone Jersey Limited. On 10 February 2009, the Group disposed of its subsidiary Rathbone Trust Company SA.
On 30 January 2009, agreement was reached regarding the sale of Rathbone Trust (Singapore) Pte. Limited and non-binding heads of terms were signed with the management of Rathbone Trust Company (BVI) Limited. The sales of these companies have conditions precedent that remain unfulfilled.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
|
|
2008 £'000 |
2007 £'000 |
Operating income |
|
18,643 |
20,045 |
Operating expenses |
|
(16,428) |
(15,123) |
Profit before tax from discontinued operations |
|
2,215 |
4,922 |
Attributable tax credit/(expense) |
|
198 |
(632) |
Profit after tax from discontinued operations |
|
2,413 |
4,290 |
Loss recognised on remeasurement of assets of the disposal group |
|
(12,680) |
- |
Attributable tax expense |
|
- |
- |
Loss from discontinued operations |
|
(10,267) |
4,290 |
The operations of these businesses are included within Trust and Tax in the segmental analysis in note 3.
The major classes of assets and liabilities comprising the operations classified as held for sale are as follows:
|
|
2008 £'000 |
|
Cash and balances at central banks |
|
21 |
|
Loans and advances to banks |
|
790 |
|
Loans and advances to customers |
|
4,153 |
|
Intangible assets |
|
46 |
|
Property, plant and equipment |
|
148 |
|
Prepayments, accrued income and other assets |
|
655 |
|
Non-current assets held for sale |
|
5,813 |
|
|
|
|
|
Accruals, deferred income, provisions and other liabilities |
|
4,008 |
|
Non-current liabilities held for sale |
|
4,008 |
|
Net assets of the disposal group |
|
1,805 |
|
7. Dividends
|
2008 £'000 |
2007 £'000 |
Amounts recognised as distributions to equity holders in the year: |
|
|
- final dividend for the year ended 31 December 2007 of 25.0p (2006: 21.5p) per share |
10,662 |
9,107 |
- interim dividend for the year ended 31 December 2008 of 16.0p (2007: 16.0p) per share |
6,841 |
6,807 |
|
17,503 |
15,914 |
|
|
|
Proposed final dividend for the year ended 31 December 2008 of 26.0p (2007: 25.0p) per share |
11,143 |
10,672 |
The interim dividend of 16.0p per share was paid on 8 October 2008 to shareholders on the register at the close of business on 19 September 2008.
The final dividend declared of 26.0p per share is payable on 13 May 2009 to shareholders on the register at the close of business on 17 April 2009. The final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
8. Earnings per share
Basic earnings per share has been calculated by dividing the profits attributable to shareholders of £19,000,000 (2007: £37,380,000) by the weighted average number of shares in issue throughout the year of 42,745,197 (2007: 42,536,821).
Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable shares under the Long Term Incentive Plan, employee share options remaining capable of exercise and any dilutive shares to be issued under the Share Incentive Plan, weighted for the relevant period (see table below).
|
|
2008 |
2007 |
Weighted average number of ordinary shares in issue during the year - basic |
|
42,745,197 |
42,536,821 |
Effect of ordinary share options |
|
172,845 |
461,167 |
Effect of dilutive shares issuable under the Share Incentive Plan |
|
7,998 |
85,535 |
Effect of contingently issuable ordinary shares under the Long Term Incentive Plan |
|
172,823 |
148,431 |
Diluted weighted average number of ordinary shares |
|
43,098,863 |
43,231,954 |
Earnings per share from discontinued operations and underlying earnings per share were as follows:
|
|
2008 |
2007 |
Earnings per share from discontinued operations for the year attributable to equity holders of the Company: |
|
|
|
Basic (p) |
|
(24.02)p |
10.09p |
Diluted (p) |
|
(23.82)p |
9.92p |
|
|
|
|
Underlying earnings per share from continuing operations for the year attributable to equity holders of the Company: |
|
|
|
Basic (p) |
|
70.81p |
75.66p |
Diluted (p) |
|
70.23p |
74.44p |
Underlying earnings per share has been calculated with reference to the profits after tax from continuing operations, excluding the post-tax charge arising from the additional levy for the Financial Services Compensation Scheme of £1,004,000 (2007: £nil) and post-tax gains on disposal of London Stock Exchange Plc shares of £nil (2007: £908,000).
9. Long term employee benefits
The Group operates two funded pension schemes providing benefits based on final pensionable pay for executive directors and staff employed by the Company in the UK (the Rathbone 1987 Scheme and the Laurence Keen Scheme). The schemes are currently both clients of Rathbone Investment Management Limited, with investments managed on a discretionary basis, in accordance with the statement of investment principles agreed by the trustees. Scheme assets are held separately from those of the Group.
The Group provides death in service benefits to all employees through the 1987 pension scheme. Third party insurance is purchased for the benefits where available and £864,000 of related insurance premia were expensed to the income statement in the year (2007: £624,000). The estimated present value of the uninsured death in service benefits is included in long term employee benefits liabilities.
The schemes are valued by independent actuaries every three years using the projected unit credit method which looks at the value of benefits accruing over the years following the valuation date based on projected salary to the date of termination of services, discounted to a present value using a rate that reflects the characteristics of the liability. The valuations are updated at each balance sheet date in between full valuations. The assumptions used by the actuaries are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered by the liability, may not necessarily be borne out in practice. The principal actuarial assumptions used, which reflect the different membership profiles of the schemes, were:
|
|
2008 Laurence Keen Scheme % |
2007 Laurence Keen Scheme % |
2008 Rathbone 1987 Scheme % |
2007 Rathbone 1987 Scheme % |
Rate of increase in salaries |
|
4.05 |
4.55 |
4.05 |
4.55 |
Rate of increase in pensions in payment |
|
3.40 |
*3.60 |
2.80 |
*3.20 |
Rate of increase in deferred pensions |
|
2.80 |
3.30 |
2.80 |
3.30 |
Discount rate |
|
6.15 |
5.70 |
6.15 |
5.70 |
Expected return on scheme assets |
|
5.30 |
6.10 |
6.40 |
7.10 |
Inflation assumption |
|
2.80 |
3.30 |
2.80 |
3.30 |
* 5% for service prior to April 2001
The assumed duration of the liabilities for both schemes is 25 years (2007: 25 years). The overall expected return on scheme assets is a weighted average of the returns expected on each class of asset held by the scheme, as disclosed below.
Normal retirement age is 65 for members of the Laurence Keen Scheme and 60 for members of the Rathbone 1987 Scheme. The assumed life expectancy for the membership of both schemes is based on the PA00 actuarial tables. In 2008, the assumption for life expectancy was updated to take account of recent and expected future improvements in life expectancy by using the 'Medium Cohort' projection, with a 0.75% underpin for males and a 0.5% underpin for females. The assumed life expectations on retirement were:
|
|
2008 Males |
2008 Females |
2007 Males |
2007 Females |
Retiring today - aged 60 |
|
26.7 |
29.0 |
24.7 |
27.7 |
- aged 65 |
|
21.9 |
24.1 |
20.0 |
22.9 |
Retiring in 20 years - aged 60 |
|
28.4 |
30.3 |
25.9 |
28.7 |
- aged 65 |
|
23.5 |
25.3 |
21.1 |
23.9 |
The amount included in the balance sheet arising from the Group's obligations in respect of the schemes is as follows:
|
2008 Laurence Keen Scheme £'000 |
2008 Rathbone 1987 Scheme £'000 |
2008 Total £'000 |
2007 Laurence Keen Scheme £'000 |
2007 Rathbone 1987 Scheme £'000 |
2007 Total £'000 |
Present value of defined benefit obligations |
(9,750) |
(54,243) |
(63,993) |
(10,301) |
(60,274) |
(70,575) |
Fair value of scheme assets |
8,760 |
50,551 |
59,311 |
9,708 |
54,415 |
64,123 |
Deficit in schemes |
(990) |
(3,692) |
(4,682) |
(593) |
(5,859) |
(6,452) |
Death in service benefit reserve (unfunded) |
- |
(1,041) |
(1,041) |
- |
- |
- |
Total deficit |
(990) |
(4,733) |
(5,723) |
(593) |
(5,859) |
(6,452) |
The analysis of the scheme assets, measured at bid prices, and expected rates of return on those assets at the balance sheet date was as follows:
Laurence Keen Scheme
|
1.1.08 Expected return % |
1.1.07 Expected return % |
2008 Fair value £'000 |
2007 Fair value £'000 |
2008 Current allocation % |
2007 Current allocation % |
Equity instruments |
7.35 |
7.60 |
3,494 |
5,180 |
40 |
53 |
Debt instruments |
4.10 |
4.40 |
4,694 |
4,161 |
54 |
43 |
Cash |
2.00 |
4.40 |
572 |
367 |
6 |
4 |
|
|
|
8,760 |
9,708 |
|
|
Rathbone 1987 Scheme
|
1.1.08 Expected return % |
1.1.07 Expected return % |
2008 Fair value £'000 |
2007 Fair value £'000 |
2008 Current allocation % |
2007 Current allocation % |
Equity instruments |
7.35 |
7.60 |
33,232 |
42,099 |
67 |
77 |
Debt instruments |
6.15 |
5.70 |
5,431 |
9,323 |
11 |
17 |
Interest rate swap funds |
4.10 |
n/a |
9,135 |
- |
16 |
- |
Cash |
2.00 |
4.40 |
2,753 |
2,993 |
6 |
6 |
|
|
|
50,551 |
54,415 |
|
|
On 15 May 2008, the Rathbone 1987 Scheme acquired 496 shares in an interest rate swap fund for £5,000,000. The fund is invested in long dated interest rate swaps, the duration of which is intended to broadly align with the duration of the scheme's liabilities.
The expected return on equities was assumed to be 3.25% above the return on long dated Gilts (2007: 3.20% above). The expected rate of return on debt instruments is based on long-term yields at the start of the year, with an adjustment for the risk of default and future downgrade in relation to corporate bonds. Cash has been assumed to generate a similar return to short dated government bonds.
The sensitivities regarding the principal assumptions used to measure the schemes' liabilities are set out below:
Combined Impact on Schemes' Liabilities |
||
|
(Decrease)/ Increase £'000 |
(Decrease)/ Increase % |
0.5% increase to: |
|
|
- Discount rate |
(6,071) |
(9.5) |
- Rate of inflation |
4,701 |
7.3 |
- Rate of salary growth |
2,923 |
4.6 |
1 year increase to longevity at 60 |
1,620 |
2.5 |
The total regular contributions made by the Group to the Rathbone 1987 Scheme during the year were £2,260,000 (2007: £2,238,000) based on 13.9% of pensionable salaries (2007: 13.9%). No additional lump sum contributions were paid in 2008 (2007: £3,890,000). Following the triennial valuation of the Rathbone 1987 Scheme, the Group has committed to make additional contributions to the scheme of £2,750,000 per year until 2016. After 31 March 2002 the Rathbone 1987 Scheme was closed to new entrants and, consequently, the current pension cost will increase as the members of the Scheme approach retirement.
The total contributions made by the Group to the Laurence Keen Scheme during the year were £455,000 (2007: 467,000). Annual contributions of £420,000 will continue to be made to the Laurence Keen Scheme. As the scheme was closed to new entrants with effect from 1 October 1999, the current pension cost will increase as the members of the scheme approach retirement.
10. Reserves and retained earnings
|
Merger reserve £'000 |
Available for sale reserve £'000 |
Translation reserve £'000 |
Total other reserves £'000 |
Retained earnings £'000 |
At 1 January 2007 |
49,428 |
4,289 |
(229) |
53,488 |
79,029 |
Profit for the year |
|
|
|
|
37,380 |
Translation differences arising in the year |
|
|
14 |
14 |
|
Dividends paid |
|
|
|
|
(15,914) |
Actuarial gains and losses |
|
|
|
|
270 |
Revaluation of investment securities |
|
2,069 |
|
2,069 |
|
Net gains transferred to net profit on disposal of available for sale investment securities |
|
(1,297) |
|
(1,297) |
|
Sharebased payments |
|
|
|
|
|
- value of employee services |
|
|
|
|
2,692 |
- cost of shares issued/purchased |
|
|
|
|
(3,508) |
Tax on equity items |
|
(93) |
|
(93) |
728 |
At 1 January 2008 |
49,428 |
4,968 |
(215) |
54,181 |
100,677 |
Profit for the year |
|
|
|
|
19,000 |
Translation differences arising in the year |
|
|
1,001 |
1,001 |
|
Dividends paid |
|
|
|
|
(17,503) |
Actuarial gains and losses |
|
|
|
|
(44) |
Revaluation of investment securities |
|
(3,957) |
|
(3,957) |
|
Transfer of merger reserve to retained earnings on disposal of subsidiary |
(17,593) |
|
|
(17,593) |
17,593 |
Sharebased payments |
|
|
|
|
|
- value of employee services |
|
|
|
|
1,299 |
- cost of shares issued/purchased |
|
|
|
|
(1,728) |
Tax on equity items |
|
1,108 |
|
1,108 |
(503) |
At 31 December 2008 |
31,835 |
2,119 |
786 |
34,740 |
118,791 |
The Merger Reserve represents share premium that was not recognised on the issue of shares as consideration for an acquisition prior to the adoption of IFRS on 1 January 2004, in accordance with the Companies Act.
11. Events after the balance sheet date
On 10 February 2009, the Group completed the disposal of Rathbone Trust Company SA, for cash consideration of £98,000 and deferred consideration, receivable after two years, of up to £98,000. On 10 February 2009, the Group made an interest free loan to Rathbone Trust Company SA of £1,111,000 which is repayable over three years. At 10 February 2009, the net assets of Rathbone Trust Company SA were £9,000.
12. Financial information
The financial information set out in this preliminary announcement has been extracted from the Group's accounts, which have been approved by the Board of Directors and agreed with the Company's auditors.
The financial information set out above does not constitute the Company's statutory accounts for the years ended
31 December 2008 or 2007. Statutory accounts for 2007 have been delivered to the Registrar of Companies. Statutory accounts for 2008 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on both the 2007 and 2008 accounts. Their reports were unqualified and did not draw attention to any matters by way of emphasis. They also did not contain statements under section 237(2) or (3) of the Companies Act 1985.