Interim Results
Rathbone Brothers PLC
7 September 2000
RATHBONE BROTHERS PLC
INTERIM RESULTS
Rathbone Brothers Plc ('Rathbones'), the investment management and private
client services Group with £5 billion of investors funds under discretionary
management, announces interim results for the six months ended 30 June 2000.
Interim Results for the Six Months Ended 30 June 2000
Highlights:
Turnover up by 24% to £44.9m (£36.3m)
Pre-tax profits (before goodwill amortisation) up 22% to £14.2m (£11.6m)
Earnings per share (before goodwill amortisation) up 20% to 27.76p per share
(23.20p)
Interim dividend up 25% to 10p per share (8p)
Discretionary funds under management up 11% to £5 billion (£4.5 billion)
Significant recruitment: 19 new investment and trust managers have joined
the Group
Commenting on these interim results, Micky Ingall, Chairman, said:
'Rathbones continues to grow both organically and by acquisition, and we see
significant further opportunities in our chosen field of providing investment
management and trust services to the private individual.
'The second half has started well and I look forward to another year of good
progress.'
For further information, please contact:
Micky Ingall, Chairman
Mark Powell, Group Managing Director
Andy Pomfret, Finance Director
Rathbone Brothers Plc 020 7399 0000
Julian Polhill
Lucy Copeman
Polhill Communications 020 7369 9333
Chairman's statement
I am pleased to report another successful trading period for the first half of
2000. Pre-tax profits of £14.2m and earnings per share of 27.76p (both figures
before goodwill amortisation) have risen by 22% and 20% respectively. The
interim dividend is raised to 10p per share, an increase of 25%.
The first half of 2000 has been a period of high volatility for UK
stockmarkets with the FTSE 100 share index down nearly 10% from its peak at
the end of 1999. This fall, though in itself significant, disguises a far
greater volatility in the performance of individual sectors of the market.
The first quarter was characterised by a boom in Telecom, Media and Technology
(TMT) stocks at the expense of the old economy followed by an equally
violent reversal of these sectors' performances in the second quarter. As I
pointed out in my annual statement in March the high level of dealing activity
seen in some areas of retail stockbroking in the first quarter of the year has
little significant effect on our investment management activities. Therefore
I view the profit performance and the maintenance of discretionary funds under
management above £5bn with satisfaction.
The first half of 2000 has been a period of significant recruitment in both
the investment management and trust operations and this has continued into the
second half. Some nineteen new investment and trust managers have joined the
Group this year in the UK.
At the beginning of April we announced the acquisition of Nigel Harris Trust
Company Limited, a trust company in Jersey for a maximum consideration of £15m
payable in shares. Included in these interim figures is a contribution to
group pre-tax profits (before goodwill amortisation) of £474,000 from Nigel
Harris which is above budget and is earnings enhancing in the context of the
Group.
Rathbones continues to grow both organically and by acquisition, and we see
significant further opportunities in our chosen field of providing investment
management and trust services to the private individual.
The second half has started well and I look forward to another year of good
progress.
Micky Ingall
Chairman
6th September 2000
Unaudited consolidated profit and loss account
For the six months ended 30th June 2000
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
Unaudited Unaudited 1999
£'000 £'000 Audited
£'000
Turnover
- continuing operations 43,854 36,307 71,895
- acquisitions 1,075 - -
44,929 36,307 71,895
Operating costs (31,310) (25,059) (49,442)
Operating profit before
goodwill amortisation 14,182 11,617 23,224
Goodwill amortisation (563) (369) (771)
Operating profit being
profit on ordinary
activities before
taxation
- continuing operations 13,324 11,248 22,453
- acquisitions 295 - -
13,619 11,248 22,453
Tax on profit on ordinary (4,396) (3,543) (6,922)
activities
Profit for the period
attributable to 9,223 7,705 15,531
shareholders
Dividends (3,580) (2,786) (7,648)
Retained profit for the 5,643 4,919 7,883
period
Basic earnings per
ordinary share
- before goodwill 27.76p 23.20p 47.28p
amortisation
- after goodwill 26.16p 22.47p 45.04p
amortisation
Diluted earnings per
share
- before goodwill 27.24p 22.94p 46.11p
amortisation
- after goodwill 25.67p 22.21p 43.93p
amortisation
Unaudited consolidated balance sheet
30th June 2000
30th June 30th June 31st
2000 1999 December
Unaudited Unaudited 1999
Restated Audited
(Note 3)
£'000 £'000 £'000
Fixed assets
Intangible assets 28,566 14,120 14,860
Tangible assets 8,368 6,753 7,069
Investments 65 65 65
36,999 20,938 21,994
Current assets
Work in progress 1,589 469 436
Debtors 67,829 56,679 56,265
Investments 244,301 104,791 128,248
Cash and short term 40,773 33,222 46,200
deposits
354,492 195,161 231,149
Creditors: amounts falling
due (319,284) (163,833) (197,672)
within one year
Net current assets 35,208 31,328 33,477
Total assets less current 72,207 52,266 55,471
liabilities
Creditors: amounts falling
due after more than one (313) (206) (310)
year
Provision for liabilities (4,172) (3,630) (3,722)
and charges
Net assets 67,722 48,430 51,439
Capital and reserves
Called up share capital 1,790 1,732 1,735
Share premium account 5,457 4,940 5,160
Other reserves 23,811 13,803 13,803
Profit and loss account 36,664 27,955 30,741
Equity shareholders' funds 67,722 48,430 51,439
Approved by the Board on 6th September 2000
Statement of total group recognised gains and losses
Reconciliation of movements in equity shareholders' funds
For the six months ended 30th June 2000
Statement of total group recognised gains and losses
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
Unaudited Unaudited 1999
£'000 £'000 Audited
£'000
Profit for the period
attributable 9,223 7,705 15,531
to equity shareholders
Currency adjustments 280 11 (167)
Total group recognised
gains and losses for the 9,503 7,716 15,364
period
Reconciliation of movements in equity shareholders' funds
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
Unaudited Unaudited 1999
£'000 £'000 Audited
£'000
Profit for the period
attributable 9,223 7,705 15,531
to equity shareholders
Dividends (3,580) (2,786) (7,648)
Retained profit for the 5,643 4,919 7,883
period
Currency adjustments 280 11 (167)
Shares issued 55 84 87
Premium on shares issued 10,305 3,085 3,305
Goodwill adjustment in
respect - (82) (82)
of earlier acquisitions
Net addition to equity
shareholders' funds 16,283 8,017 11,026
Opening equity 51,439 40,413 40,413
shareholders' funds
Closing equity 67,722 48,430 51,439
shareholders' funds
Consolidated cash flow statement
For the six months ended 30th June 2000
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
Unaudited Unaudited 1999
£'000 £'000 Audited
£'000
Net cash inflow from
operating activities 123,111 1,373 49,296
Taxation
-UK Corporation tax (2,261) (95) (6,556)
-Overseas tax (241) (250) (618)
(2,502) (345) (7,174)
Capital expenditure
- Purchase of tangible (2,633) (1,526) (2,798)
fixed assets
- Sale of tangible fixed 149 72 144
assets
Net cash outflow for
capital expenditure (2,484) (1,454) (2,654)
Acquisitions and disposals
- Acquisition of (5,226) (89) (864)
subsidiaries
- Net cash acquired with
subsidiary undertakings 628 - -
Net cash outflow for (4,598) (89) (864)
acquisitions
Equity dividends paid (4,860) (4,115) (6,886)
Cash inflow/(outflow)
before use of liquid 108,667 (4,630) 31,718
resources and financing
Management of liquid
resources
- (Increase)/Decrease in
current asset investments (116,053) 4,827 (18,630)
- Decrease/(Increase) in
short term deposits 7,423 (1,871) (6,757)
(108,630) 2,956 (25,387)
Financing
- Issue of shares 302 460 683
- Capital element of
financial lease rental (32) (15) (41)
payments
Net cash inflow from 270 445 642
financing
Increase/(Decrease) in
cash in the period 307 (1,229) 6,973
Notes to the Interim Accounts
For the six months ended 30th June 2000
1. Basis of preparation
The unaudited interim financial information, which has been approved by the
Board of Directors, has been prepared on the basis of accounting policies
set out in the Group's accounts for the year ended 31st December 1999. The
comparative balance sheet figures as at 30th June 1999 have been restated
as described in note 3 below. The Group's accounts for the year ended 31st
December 1999 have been reported on by the auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and did
not contain a statement under section 237(2) or (3) of the Companies Act
1985.
2. Basis of consolidation
The consolidated accounts are based on the accounts of Rathbone Brothers
Plc, its subsidiary undertakings and its quasi subsidiary made up to 30th
June. The consolidated profit and loss account includes the results of
subsidiary undertakings acquired during the period from the effective date
of acquisition.
3. Merger Relief
The unaudited consolidated balance sheet comparatives as at 30th June 1999
have been restated to take account of Section 131 merger relief which
should have been taken in 1998 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 £8,471,000 from the share premium account to other reserves. This
restatement has no effect on the net assets of the Group as at 30th June
1999.
4. Investments
The Group has acquired a holding of 200,000 shares in the London Stock
Exchange which is included in the balance sheet at a cost of £nil.
5. Goodwill
Purchased goodwill arising on consolidation in respect of acquisitions
before 1st January 1999, when FRS 10 Goodwill and intangible assets was
adopted, was written off to reserves in the year of acquisition.
Purchased goodwill (representing the excess of the fair value of the
consideration given over the fair value of the separable net assets
acquired) arising on consolidation in respect of acquisitions since 1st
January 1999 is capitalised. Positive goodwill is amortised to nil by
equal annual instalments over its estimated useful life, normally 20 years.
Such goodwill is subject to periodic review for impairment in accordance
with FRS 11: Impairment of tangible fixed assets and goodwill.
6.Acquisitions
The acquisitions in the six month period to 30th June 2000 have contributed to
the Group's financial results as follows:
£'000
Turnover 1,075
Profit before taxation (before goodwill 474
amortisation)
The total consideration payable in respect of the acquisition of Nigel Harris
Trust Company Limited comprises initial and deferred contingent consideration
and is capped at £15m. The initial part of the consideration, £9,945,000,
together with the vendor placing costs was satisfied by the issue of 996,930
ordinary shares at an average allotment price of 1008.95p on 1st April 2000
pursuant to an agreement on that date. The deferred contingent consideration
estimated by the directors to be £3,449,000 will be determined by the profit
after tax for the year ending 31st December 2000.
The net assets acquired with the acquisition of Nigel Harris Trust Company
Limited were as follows:
£'000
Fixed assets
Tangible assets 177
Current assets
Work in progress 743
Debtors 542
Cash at bank 628
Total assets 2,090
Liabilities (682)
Net assets 1,408
Goodwill arising on 12,324
acquisition
Fair value of consideration 13,732
Comprising:
Acquisition costs 225
New ordinary shares of 5p 10,058
Deferred contingent 3,449
consideration
13,732
The Group paid £1,544,000 in cash on the 13th June 2000 in consideration for
the goodwill of the business of Nigel Packer & Company.
7. Turnover
All amounts derive from continuing activities.
8. Taxation
The interim taxation charge is calculated by applying the Directors' best
estimate of the effective annual corporation tax rate (31% (1999: 31.5%)) to
the profit for the period.
9.Earnings per ordinary share
The calculation of basic earnings per share is based on profit after taxation,
before dividends, for each period and 35,249,967 ordinary shares at 30th June
2000, 34,480,634 ordinary shares at 31st December 1999, and 34,296,278
ordinary shares at 30th June 1999, where this is the weighted average number
of ordinary shares in issue during the relevant period.
The directors believe that the provision of additional EPS figures, in
particular before goodwill amortisation, is beneficial to the users of these
interim accounts 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 in relation to deferred consideration
for the acquisition of subsidiary undertakings and employee share options
remaining capable of exercise weighted for the relevant periods. The
directors believe that the contingently isssuable shares as part of the total
consideration for the acquisition of Nigel Harris Trust Company Limited will
be earnings enhancing.
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
1999
Weighted average number
of ordinary shares in 35,249,967 34,296,278 34,480,634
issue during the period
Effect of ordinary share 503,367 396,310 420,345
options
Weighted average number
of contingently issuable
ordinary shares during 174,491 - 453,924
the period
Diluted ordinary shares 35,927,825 34,692,588 35,354,903
10.Dividend per share
The directors have declared an interim dividend of 10p (1999: 8p) per share
amounting to £3,580,000 (1999: £2,786,000) payable on 10th October 2000 to
shareholders on the register at the close of business on 22nd September 2000.
11.Provisions for liabilities and charges
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
£'000 £'000 1999
£'000
Contingent
consideration on
acquisition of
- Rathbone Jersey - 2,690 3,057
Limited
- Nigel Harris Trust 3,449 - -
Company Limited 723 940 665
Deferred taxation
4,172 3,630 3,722
12. Consolidated Cash Flow Statement
(i)Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
£'000 £'000 1999
£'000
Operating profit 13,619 11,248 22,453
Profit on disposal of (88) (54) (100)
fixed assets
Depreciation charges 1,460 1,538 2,464
Amortisation of goodwill 563 369 771
Increase in debtors (10,632) (11,694) (11,280)
Increase in work in (421) (67) (34)
progress
Increase in creditors 118,610 33 35,022
Net cash inflow from 123,111 1,373 49,296
operating activities
(ii) Reconciliation of net cash flow to movement in net funds
Six months Six months Year
ended ended ended
30th June 30th June 31st
2000 1999 December
£'000 £'000 1999
£'000
Increase/(Decrease) in cash 307 (1,229) 6,973
for the period
Exchange movements 92 179 69
Finance charges on leases (1) (3) (4)
Changes in net debt resulting 33 15 45
from cash flows
Movement in net funds in the 431 (1,038) 7,083
period
Net funds at beginning of 31,928 24,845 24,845
period
Net funds at end of period 32,359 23,807 31,928
(iii) Analysis of net funds
At 1st Cash Flow Non-cash Exchange At 30th
January changes movements June 2000
2000
£'000 £'000 £'000 £'000 £'000
Cash 31,972 1,904 - 92 33,968
Overdrafts - (1,597) - - (1,597)
Net Cash 31,972 307 - 92 32,371
Finance (44) 33 (1) - (12)
leases
Total 31,928 340 (1) 92 32,359
Cash and short term deposits in the balance sheet of £40,773,000 comprise cash
of £33,968,000 and short term deposits of £6,805,000.
(iv) Analysis of changes in financing
Share Share Other Finance
Capital Premium Reserves leases
Restated Restated
(Note 3) (Note 3)
£'000 £'000 £'000 £'000
Balance at 1st 1,735 5,160 13,803 44
January 2000
Cash 5 297 - (33)
inflow/(outflow)
Other movements 50 - 10,008 1
Balance at 30th June 1,790 5,457 23,811 12
2000
13. Segmental information
Turnover Profit before taxation
Six Six Year Six Six Year
months months ended months months ended
ended ended 31st ended ended 31st
30th 30th December 30th 30th December
June June 1999 June June 1999
2000 1999 2000 1999
£'000 £'000 £'000 £'000 £'000 £'000
By class of
business:
Investment
management 30,336 27,209 53,455 11,134 8,883 18,735
Banking 7,536 3,949 8,159 1,191 816 1,480
Trust 7,057 5,149 10,281 1,294 1,549 2,238
services
44,929 36,307 71,895 13,619 11,248 22,453
By geographical
segment:
United 38,945 32,635 63,641 12,143 10,014 20,248
Kingdom
Europe 4,584 2,663 5,863 1,317 956 1,736
The Americas 1,400 1,009 2,391 159 278 469
44,929 36,307 71,895 13,619 11,248 22,453
Total Assets Net Assets
Six Six Year Six Six Year
months months ended months months ended
ended ended 31st ended ended 31st
30th 30th December 30th 30th December
June June 1999 June June 1999
2000 1999 2000 1999
£'000 £'000 £'000 £'000 £'000 £'000
By class of
business:
Investment
management 67,557 62,782 63,465 20,981 25,029 22,918
Banking 276,994 127,280 163,085 16,699 9,147 12,879
Trust 46,940 26,037 26,593 30,042 14,254 15,642
services
391,491 216,099 253,143 67,722 48,430 51,439
By geographical
segment:
United 345,150 187,363 227,189 40,540 33,989 39,062
Kingdom
Europe 42,163 23,206 22,669 24,526 10,997 9,978
The Americas 4,178 5,530 3,285 2,656 3,444 2,399
391,491 216,099 253,143 67,722 48,430 51,439
Interest Receivable Fees & Commissions
Receivable
Six Six Year Six Six Year
months months ended months months ended
ended ended 31st ended ended 31st
30th 30th December 30th 30th December
June June 1999 June June 1999
2000 1999 2000 1999
£'000 £'000 £'000 £'000 £'000 £'000
United 8,233 7,860 12,629 30,173 24,169 49,530
Kingdom
Europe 332 41 416 4,250 2,622 5,444
The Americas 265 315 525 1,131 694 1,865
8,830 8,216 13,570 35,554 27,485 56,839
Other Operating Income
Six Six Year
months months ended
ended ended 31st
30th 30th December
June June 1999
2000 1999
£'000 £'000 £'000
United 539 606 1,481
Kingdom
Europe 2 - 4
The Americas 4 - 1
545 606 1,486
The Group interest income receivable included in group turnover comprises:
Six Six Year
months months ended
ended ended 31st
30th 30th December
June June 1999
2000 1999
£'000 £'000 £'000
Gross interest earned on own funds 7,919 5,854 9,488
and banking activities
Net interest earned on client money 911 2,362 4,082
accounts
8,830 8,216 13,570
The banking book has risen by over £100 million since 31st December 1999 as a
result of clients becoming banking clients by transferring their client
agreements to Rathbone Investment Management Limited from other subsidiary
undertakings. Gross interest earned on own funds and banking activities has
risen accordingly.
14.Interim report
The interim report will today be sent to registered shareholders.
Further copies will be available to the public from the Company's registered
office:
159 New Bond Street, London W1S 2UD
Independent Review Report by KPMG Audit Plc
to Rathbone Brothers Plc
Introduction
We have been instructed by the Company to review the financial information set
out on pages 4 to 13 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements
or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The Listing
Rules of the Financial Service Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with
those applied in preparing the preceding annual accounts except where they are
to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4 Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of Group
management and applying analytical procedures to the financial information and
underlying financial data and, based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed. A review is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30th June 2000.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London
EC4Y 8BB
6th September 2000
Group offices
If you would like further information about any of the services offered by the
Rathbone Group, please visit our website at www.rathbones.com or telephone
Mary Leuchter in London on (020) 7399 0000 or Henry Robertson in Liverpool on
(0151) 236 6666, or contact them by Email at marketing@rathbones.com.
Alternatively, write to the Managing Director at any of the following offices:
159 New Bond Street, London W1S 2UD
Telephone (020) 7399 0000 Facsimile (020) 7399 0011
Port of Liverpool Building, Pier Head, Liverpool L3 1NW
Telephone (0151) 236 6666 Facsimile (0151) 243 7001
1 Place de Saint-Gervais, PO Box 2049, 1211 Geneva 1, Switzerland
Telephone (0041) 22 909 8900 Facsimile (0041) 22 909 8939
PO Box 986, The Geneva Place, 333 Waterfront Drive, Road Town, Tortola,
British Virgin Islands
Telephone (001284) 494 6544 Facsimile (001284) 494 6532
17 Seaton Place, St Helier, Jersey, Channel Islands JE1 1BG
Telephone (01534) 721 565 Facsimile (01534) 721 987
Nigel Harris & Company, Oak Walk, St Peter, Jersey, Channel Islands JE3 7EF
Telephone (01534) 495555 Facsimile (01534) 495501
Barclays Bank Chambers, Queen's Square, Bowness, Cumbria LA23 3BY
Telephone (015394) 42141 Facsimile (015394) 47255
Prince House, Prince Street, Bristol BS1 4PS
Telephone (0117) 929 1919 Facsimile (0117) 929 1939
5 North Pallant, Chichester, W. Sussex PO19 1TJ
Telephone (01243) 775 373 Facsimile (01243) 776 103
Charlotte House, 2 South Charlotte Street, Edinburgh EH2 4AW
Telephone (0131) 247 8100 Facsimile (0131) 247 8200
1 Langley Court, Pyle Street, Newport, Isle of Wight PO30 1LA
Telephone (01983) 520 922 Facsimile (01983) 510 897
Devonshire House, 61 Devonshire Road, Southampton, Hampshire SO15 2GR
Telephone (023) 8033 0130 Facsimile (023) 8063 1463
Hanover Place, 8 Church Road, Tunbridge Wells, Kent TN1 1JL
Telephone (01892) 709 400 Facsimile (01892) 543 121
Calpe House, St Thomas Street, Winchester, Hampshire SO23 8BJ
Telephone (01962) 852 362 Facsimile (01962) 842 835
Rathbone Laurence Keen Limited and Rathbone Neilson Cobbold Limited are member
firms of the London Stock Exchange and are regulated by the Securities and
Futures Authority.
Rathbone Unit Trust Management Limited and Albyn Investments Limited are
regulated by the Investment Management Regulatory Organisation.
Rathbone Investment Management Limited is an authorised institution under the
Banking Act 1987 and regulated by the Securities and Futures Authority.
Registered office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW.
Registered in England No. 1448919. VAT Registration No. GB 241 6893 49
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