Interim Results
Rathbone Brothers PLC
6 September 2001
6th September 2001
RATHBONE BROTHERS Plc
INTERIM RESULTS ANNOUNCEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE 2001
Funds under management rise as markets decline
Summary
* Rathbone Brothers Plc ('Rathbones'), one of Britain's largest, independent
discretionary investment management and private client services groups,
enjoyed good growth in assets under management (up 20%) in stark contrast to
declining market index levels (down 11%).
* Progress was achieved through organic growth and actively attracting strong
new private client investment management teams.
* Fee-based revenues from discretionary management continued to grow, as the
Group benefited from its strategy of fee based investment management rather
than dealing-volume based stockbroking business. Fee-based revenues from
trust administration also continued to grow well, largely unaffected by
stockmarket levels.
* Pre-tax profits and earnings dipped as new business acquisition costs fed
through ahead of new revenue streams secured.
* Interim dividend will be unchanged.
Highlights
Six months Six months
to to
30th June 30th June %
2001 2000 change
Operating income £39.1m £37.8m +3%
Pre-tax profits (before goodwill amortisation and
exceptional items) £11.2m £14.2m -21%
Basic earnings per share (before goodwill
amortisation) 22.27p 27.76p -20%
Interim dividend 10p 10p -
Discretionary funds under management £6.0bn £5.0bn +20%
FTSE 100 Index 5643 6312 -11%
For further information, please contact:
Micky Ingall Chairman
Mark Powell Managing Director
Andy Pomfret Finance Director Rathbone Brothers Plc 020 7399 0000
Julian Polhill/
Lucy Copeman Polhill Communications 020 7655 0500
RATHBONE BROTHERS Plc
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2001
Chairman's Statement
I have pleasure in presenting the interim results for the trading period to
30th June 2001. Pre-tax profits (before goodwill amortisation and exceptional
items) are £11.2m and earnings per share (before goodwill amortisation) are
22.27p and show a decrease of 21% and 20% respectively compared to the same
period last year. The interim dividend is maintained at 10p per share.
It is disappointing to be reporting a downturn in both pre-tax profits and
earnings per share. However despite the headline declines, these figures are
not wholly depressing and indeed disguise some very positive developments
within the Group.
Shareholders will be aware of the extremely depressed state of world equity
markets at the present time. The FTSE 100 Index at 30th June 2001 was nearly
20% below its high at 31st December 1999 and 9% lower than at the beginning of
the year.
During this first half of 2001, discretionary funds under management, which we
have always adopted as our most accurate barometer of the Group's progress,
have risen from £5.5 to £6 billion. Given the market fall this is an
eminently satisfactory increase. As announced with our figures in March 2001,
this increase in funds under management has been achieved by both organic
growth and a significant recruitment of new investment managers who have been
very successful in attracting new investment clients. The take-on of new
clients is both a costly and time consuming activity which generates little
immediate income and inevitably this has had an adverse impact on the profit
and loss account.
I am pleased to report that our trust activities, which are only marginally
affected by stockmarket levels and activity, have had a very successful
period. Profits have increased, in part reflecting our recent acquisitions in
Jersey, which have continued to perform strongly.
Over many years we have pursued a policy which is designed to insulate the
Group as far as possible from volatile stockmarkets by means of increasing fee
income be it from investment management or trust activities. However, as some
80% of Rathbones' earnings are derived from investment management, these
figures demonstrate that it is not possible to insulate ourselves totally from
a stockmarket which, in terms of indices, has now stood still for nearly four
years and has fallen by 20% in the last 18 months. Nevertheless, the rise in
funds under management and the comparative resilience of these figures
emphasise the success of our approach. The Group has always adopted a strategy
of financing acquisitions either from its own cash resources or by issuing
equity. This has left the Group well placed to expand further with a strong
balance sheet with no debt finance. At the time of writing, stockmarkets
remain weak but the underlying business is growing and I am confident that
when stability or, dare I say, growth returns to the market, this underlying
strength to our business will show through.
Micky Ingall
Chairman
5th September 2001
Consolidated profit and loss account
for the six months ended 30th June 2001
Six
Six months
months ended Year
ended 30th June ended
30th June 2000 31st December
2001 (Restated) 2000
Unaudited Unaudited Audited
£'000 £'000 £'000
Operating income 39,134 37,779 74,760
- continuing operations 39,134 37,088 71,253
- acquisitions - 691 3,507
Operating costs (28,683) (24,160) (49,590)
Group operating profit 10,451 13,619 25,170
Group operating profit before amortisation 11,231 14,182 26,542
of goodwill
Amortisation of goodwill (780) (563) (1,372)
Net profit on sale of regional office
- continuing operations 251 - -
Group operating profit on ordinary 10,702 13,619 25,170
activities before tax
- continuing operations 10,702 13,324 23,902
- acquisitions - 295 1,268
Tax on Group profit on ordinary activities (3,455) (4,396) (8,297)
- current (3,126) (4,316) (8,341)
- deferred (329) (80) 44
Group profit on ordinary activities after 7,247 9,223 16,873
tax
Dividends (3,618) (3,580) (8,993)
Retained profit for the year 3,629 5,643 7,880
Earnings per ordinary share
Basic after goodwill amortisation 20.11p 26.16p 47.45p
Basic before goodwill amortisation 22.27p 27.76p 51.31p
Diluted after goodwill amortisation 19.92p 25.67p 46.39p
Diluted before goodwill amortisation 22.07p 27.24p 50.16p
Consolidated balance sheet
as at 30th June 2001
30th June 31st
30th June 2000 December
2001 (Restated) 2000
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Cash and balances at central banks 5,360 3,401 18,349
Settlement balances 32,563 27,069 26,111
Loans and advances to banks 30,279 37,372 40,405
Loans and advances to customers 30,183 27,496 32,550
Debt securities 347,089 244,301 234,591
Equity shares 65 65 65
Intangible fixed assets 29,182 28,566 29,378
Tangible fixed assets 8,650 8,368 7,764
Other assets 3,729 3,912 3,582
Prepayments and accrued income 13,762 10,941 12,838
Total assets 500,862 391,491 405,633
Liabilities
Deposits by banks 868 1,596 3,127
Customer accounts 385,117 262,982 289,643
Settlement balances 16,151 32,592 13,632
Other liabilities 7,704 9,416 11,065
Accruals and deferred income 6,785 5,797 4,981
Provision for liabilities and charges 8,396 11,386 12,506
Called up share capital 1,809 1,790 1,800
Share premium account 6,584 5,457 6,156
Other reserves 24,817 23,811 23,811
Profit and loss account 42,631 36,664 38,912
Equity shareholders' funds 75,841 67,722 70,679
Total liabilities 500,862 391,491 405,633
Memorandum items
Contingent liabilities and commitments 9,217 4,072 1,935
Consolidated statement of total recognised gains and losses
for the six months ended 30th June 2001
Six Six
months months Year
ended ended ended
30th June 30th June 31st December
2001 2000 2000
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period attributable
to shareholders 7,247 9,223 16,873
Currency adjustments 90 280 291
Total recognised gains and losses for the 7,337 9,503 17,164
period
Reconciliation of movements in shareholders' funds
Six Six
months months Year
ended ended ended
30th June 30th June 31st December
2001 2000 2000
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period attributable
to shareholders 7,247 9,223 16,873
Dividends (3,618) (3,580) (8,993)
Retained profit for the period 3,629 5,643 7,880
Currency adjustments 90 280 291
Shares issued 9 55 65
Premium on shares issued 1,248 10,305 11,004
Goodwill on disposal previously
eliminated against reserves 186 - -
Net addition to shareholders' funds 5,162 16,283 19,240
Opening shareholders' funds 70,679 51,439 51,439
Closing shareholders' funds 75,841 67,722 70,679
Consolidated cash flow statement
for the six months ended 30th June 2001
Six
Six months
months ended Year
ended 30th June ended
30th June 2000 31st December
2001 (Restated) 2000
Unaudited Unaudited Audited
£'000 £'000 £'000
Net cash inflow from operating activities 111,465 132,131 144,462
Taxation
- UK corporation tax (2,737) (2,261) (7,520)
- Overseas tax (428) (241) (193)
Net cash outflow for taxation (3,165) (2,502) (7,713)
Capital expenditure and financial investments
- Purchase of investment securities (836,308) (498,096) (1,087,513)
- Proceeds from sale and maturities of
investment securities 723,810 382,043 981,170
- Purchase of tangible fixed assets (2,862) (2,633) (3,776)
- Sale of tangible fixed assets 193 149 209
Net cash outflow for capital expenditure and
financial investments (115,167) (118,537) (109,910)
Acquisitions and disposals
- Acquisitions of subsidiaries (4,193) (5,226) (5,328)
- Disposal of regional office 438 - -
- Net cash acquired with subsidiary 11 628 628
undertakings
Net cash outflow for acquisitions and (3,744) (4,598) (4,700)
disposals
Equity dividends paid (5,401) (4,860) (8,452)
Net cash (outflow)/inflow before financing (16,012) 1,634 13,687
Financing
- Issue of shares 432 302 1,011
- Capital element of finance lease rental - (32) (44)
payments
Net cash inflow from financing 432 270 967
(Decrease)/increase in cash in the period (15,580) 1,904 14,654
Notes to the accounts
for the six months ended 30th June 2001
1 Basis of preparation
The unaudited interim financial information has been prepared on the basis of
accounting policies set out in the Group's accounts for the year ended 31st
December 2000. In 2001, the Group has adopted the provisions of the UK
Financial Reporting Standard ('FRS') 18 'Accounting Policies'. The accounts
have been prepared in accordance with the Statements of Recommended Practice
('SORPs') issued jointly by the British Bankers' Association ('BBA') and Irish
Bankers' Federation ('IBF').
The comparative figures for the six month period ended 30th June 2000 have
been restated to comply with the special provisions of Part VII Chapter II of
the Companies Act 1985 relating to banking groups.
2 Basis of consolidation
The consolidated accounts include the accounts of the Company and its
subsidiary and quasi-subsidiary undertakings made up to 30th June 2001.
Unless otherwise stated, the acquisition method of accounting has been
adopted. Under this method, the results of subsidiary undertakings acquired or
disposed of in the period are included in the consolidated profit and loss
account from the date of acquisition or up to the date of disposal.
3 Goodwill
Purchased goodwill (representing the difference between the fair value of the
consideration given and any associated costs and the fair value of the
separable net assets acquired) arising on consolidation in respect of
acquisitions before 1st January 1998, when FRS 10 'Goodwill and intangible
assets' was adopted, was written off to reserves in the year of acquisition.
When a subsequent disposal occurs, any related goodwill previously written off
to reserves is written back through the profit and loss account as part of the
profit or loss on disposal. Purchased goodwill arising on consolidation in
respect of acquisitions since 1st January 1998 is capitalised.
Positive goodwill is amortised to nil by equal instalments over its estimated
useful life, normally 20 years. Such goodwill is subject to periodic review
for impairment.
On the subsequent disposal or termination of a business acquired since 1st
January 1998, the unamortised amount of any related goodwill is taken into
account in calculating the profit or loss on disposal or termination.
4 Investments
As at 30th June 2001, the Group has a holding of 200,000 shares in the London
Stock Exchange which is included in the balance sheet at a cost of £nil.
5 Acquisitions
On 16th May 2001, the Company issued 88,442 new ordinary shares of 5p each,
valued at £824,278, in consideration for the acquisition of a UK based
company. The company acquired had, over a period, introduced investment
management clients to the Group and was due to receive continuing payments for
these introductions. The cost of this investment has been recorded in the
Company's books at the nominal value of the shares issued under the merger
relief provisions of Section 131 of the Companies Act 1985 in addition to
acquisition costs.
6 Operating income
Six months Six months Year
ended ended ended
30th June 30th June 31st December
2001 2000 2000
£'000 £'000 £'000
Gross operating income
- Interest receivable 11,327 8,830 18,218
- Dividend income 31 25 57
- Fees and commissions receivable 36,388 35,554 68,787
- Other operating income 375 520 1,395
48,121 44,929 88,457
Interest payable (6,041) (4,192) (9,131)
Fees and commissions payable (2,946) (2,958) (4,566)
Operating income 39,134 37,779 74,760
All amounts derive from continuing activities.
7 Taxation
The interim tax charge is calculated by applying the Directors' best estimate
of the effective annual corporation tax rate (30% (2000: 31%)) to the profit
for the period.
8 Earnings per share
The calculation of basic earnings per share is based on profit after taxation
before dividends, for each period and 36,043,359 ordinary shares at 30th June
2001, 35,560,272 ordinary shares at 31st December 2000, and 35,249,967
ordinary shares at 30th June 2000, 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 this
financial information when reviewing 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, employee share options
remaining capable of exercise and any dilutive shares to be issued under the
All Employee Share Ownership Plan, weighted for the relevant periods.
Six Six
months months Year
ended ended ended
30th June 30th June 31st December
2001 2000 2000
Weighted average number of ordinary shares in
issueduring the year - basic 36,043,359 35,249,967 35,560,272
Effect of ordinary share options 320,308 503,367 484,043
Effect of dilutive shares issuable under the
All Employee Share Ownership Plan 12,106 - -
Weighted average number of contingently
issuable ordinary shares during the period - 174,491 325,949
Diluted ordinary shares 36,375,773 35,927,825 36,370,264
9 Dividends per share
The directors have declared an interim dividend of 10p (2000: 10p) per share
amounting to £3,618,000 (2000: £3,580,000) payable on 12th October 2001 to
shareholders on the register at the close of business on 14th September 2001.
10 Provisions for liabilities and charges
Six months
Six months ended Year
ended 30th June ended
30th June 2000 31st December
2001 (Restated) 2000
£'000 £'000 £'000
Corporation tax 5,906 7,214 5,939
Contingent consideration on acquisitions - 3,449 4,414
Deferred taxation 1,503 723 1,175
Other 987 - 978
8,396 11,386 12,506
The deferred contingent consideration in respect of last year's acquisition of
Nigel Harris Trust Company Limited, estimated at £4,414,000 as at 31st
December 2000, was finalised at £4,148,000 which, with additional acquisition
costs of £41,000, has resulted in a decrease to goodwill on consolidation of £
225,000.
11 Cash flow statement
(i) Reconciliation of operating profit to net cash inflow from operating
activities
Six Six
months months Year
ended ended ended
30th 30th June 31st
June December
2001 2000 2000
£'000 £'000 £'000
Operating profit 10,451 13,619 25,170
Profit on disposal of tangible fixed assets (45) (88) (119)
Depreciation and amortisation 2,610 2,023 4,528
Provision for bad and doubtful debts 38 365 403
(Increase)/decrease in accrued income and (899) 646 (1,334)
prepayments
Increase in provision for liabilities and charges 28 - 1,039
Increase in accruals and deferred income 1,822 2,208 1,399
Net cash inflow from trading activities 14,005 18,773 31,086
Net decrease/(increase) in loans and advances to
banks and customers 9,490 1,488 (9,774)
Net (increase) in settlement debtor balances (6,452) (5,071) (4,113)
Net increase/(decrease) in settlement creditor 2,518 17,881 (238)
balances
Net increase in deposits by banks and customer 93,632 97,890 126,721
accounts
Net (decrease)/increase in other liabilities (1,573) 2,228 1,391
Net (increase) in other assets (155) (1,058) (611)
Net cash inflow from operating activities 111,465 132,131 144,462
(ii) Analysis of the balances of cash as shown in the balance sheet
At
At 1st 30th
January Cash Non-cash Exchange June
2001 flow changes movements 2001
£'000 £'000 £'000 £'000 £'000
Cash and balances at central banks 18,349 (13,012) - 23 5,360
Loans and advances to other banks
repayable on demand 28,386 (2,568) - 195 26,013
Total 46,735 (15,580) - 218 31,373
(iii) Analysis of changes in financing
Share Share
capital premium
£'000 £'000
Balance at 1st January 2001 1,800 6,156
Cash inflow 4 428
Other movement 5 -
Balance at 30th June 2001 1,809 6,584
(iv) Disposal of regional office
Net sale proceeds of £437,846 were received in relation to the sale of the
Group's Isle of Wight office - see Note 13.
12 Segmental information
Gross operating income Profit before taxation
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th June 2000 December 30th 2000 December
June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By class of business:
Investment management
and banking 38,711 37,872 73,065 8,559 12,325 21,549
Trust services 9,410 7,057 15,392 2,143 1,294 3,621
48,121 44,929 88,457 10,702 13,619 25,170
Total assets Net assets
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th June 2000 December 30th 2000 December
June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By class of business:
Investment management
and banking 451,473 344,551 358,325 42,304 37,680 48,706
Trust services 49,389 46,940 47,308 33,537 30,042 21,973
500,862 391,491 405,633 75,841 67,722 70,679
Gross operating income Profit before taxation
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th 2000 December 30th 2000 December
June June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By geographical segment:
United Kingdom 41,137 38,945 75,448 8,757 12,143 20,546
Jersey, Switzerland and
other European countries 5,888 4,584 10,862 1,609 1,317 3,881
The Americas 1,096 1,400 2,147 336 159 743
48,121 44,929 88,457 10,702 13,619 25,170
Total assets Net assets
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th 2000 December 30th 2000 December
June June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By geographical segment:
United Kingdom 453,487 345,150 355,915 44,357 40,540 49,278
Jersey, Switzerland and
other European countries 43,474 42,163 44,348 28,933 24,526 19,304
The Americas 3,901 4,178 5,370 2,551 2,656 2,097
500,862 391,491 405,633 75,841 67,722 70,679
Interest receivable Dividend income
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th 2000 December 30th 2000 December
June June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By geographical segment:
United Kingdom 10,660 8,233 17,205 31 25 57
Jersey, Switzerland
and other 573 332 833 - - -
European
countries
The Americas 94 265 180 - - -
11,327 8,830 18,218 31 25 57
Fees and commissions Other operating income
receivable
Six Six
Six months Year Six months Year
months ended ended months ended ended
ended 30th June 31st ended 30th June 31st
30th 2000 December 30th 2000 December
June June
2001 (Restated) 2000 2001 (Restated) 2000
£'000 £'000 £'000 £'000 £'000 £'000
By geographical segment:
United Kingdom 30,073 30,173 56,834 373 514 1,352
Jersey, Switzerland
and other 5,313 4,250 9,986 - 2 43
European
countries
The Americas 1,002 1,131 1,967 2 4 -
36,388 35,554 68,787 375 520 1,395
13 Net profit on sale of regional office
£'000
Net proceeds on disposal of regional office 437
Goodwill previously eliminated against reserves (186)
Net profit 251
On 26th January 2001, the Group's Isle of Wight office was sold.
The amount of tax attributable to the profit on sale included in the overall
tax charge is £131,000.
14 Interim report
The information in this interim report is not audited and does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985
('the Act'). This interim report was approved by the Board of Directors on 5th
September 2001. The statutory accounts for the year ended 31st December 2000
have been delivered to the Registrar of Companies in England and Wales in
accordance with Section 242 of the Act. The auditor has reported on those
accounts; its report was unqualified and did not contain a statement under
Section 237(2) or (3) of the Act.
Copies of the interim report will be sent to registered shareholders on or
about 17th September 2001 and further copies will be available to the public
from the Company's registered office at 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
which comprises the consolidated profit and loss account, consolidated balance
sheet, consolidated statement of total recognised gains and losses,
reconciliation of movements in shareholders' funds, consolidated cash flow
statement and notes 1 to 14. We have read the other information, which
comprises only the Chairman's Statement, 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 Services 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 2001.
KPMG Audit Plc
Chartered Accountants
8 Salisbury Square
London EC4Y 8BB
5th September 2001
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