Final Results
Rensburg plc
15 February 2005
15 February 2005
Rensburg plc
('Rensburg' or 'the Company')
Preliminary Results for the Year Ended 30 November 2004
Rensburg, the Investment Management Group -
Key Points:
• Profit before tax, goodwill amortisation and exceptional items of £8.8m
(2003: £6.8m) - an increase of 29%
• Basic earnings per share before goodwill amortisation and exceptional
items of 27.9p (2003: 22.6p) - an increase of 23%
• Total dividend unchanged at 18.0p per share
• Fee and other recurring income at £24.4m (2003: £20.6m) - an increase of
18%
• Group funds under management at £4.18bn (2003: £3.81bn) - an increase of
10%
Mike Burns, Chief Executive of Rensburg, commented:
'The current year has started well and we are pleased with the performance of
all our offices. Our strategy to capitalise on the opportunities to develop as
an investment management business remains unchanged.'
For further information, please contact:
gcg hudson sandler Tel: 020 7796 4133
Nick Lyon/Wendy Baker
CHAIRMAN'S STATEMENT
Financial Results and Dividend 2004 saw a continuation of the improvement in
investor confidence experienced in the latter half of 2003; with no political or
economic shocks to upset the equilibrium, equity markets rose steadily and this
has helped the Group to increase underlying earnings per share by 23%. Against
underlying basic earnings of 27.9 pence (pre-goodwill), the Directors are
recommending a final dividend of 12p (2003: 12p) which, taken with the interim
dividend of 6p (2003: 6p), produces an unchanged total dividend for the year of
18p per share. These financial results are covered in detail in the Chief
Executive's review and in the main body of this report.
Name change I would like to recognise that this is our first year end under the
name Rensburg; we believe that the concentration of all of the Group's
activities under a single name has helped to provide clarity and consistency to
both shareholders and clients.
Proposed acquisition and subsequent approach On 10 December 2004, the Company
announced that, subject, inter alia, to approval by its shareholders, agreement
had been reached for the Company to acquire the entire share capital of Carr
Sheppards Crosthwaite Limited, a private client stockbroking and investment
management company based in the southern half of the UK. Due to the size of
this transaction, under the UK Listing Rules trading in the Company's shares is
required to remain suspended until a circular, containing Listing Particulars,
is posted to shareholders, or if either party decides to withdraw. On 14
January 2005, shareholders were informed of a pre-conditional possible offer
proposal made to the Board by Rathbone Brothers Plc. Discussions with both of
these parties are continuing and further announcements relating to these events
will be made in due course.
Shareholding in London Stock Exchange plc Following increases in the share
price of London Stock Exchange plc, since 30 November 2004 the Company has sold
a total of 662,857 of its shares in London Stock Exchange plc at an average
price of 472 pence per share; Rensburg continues to hold an investment of
100,000 shares in this company.
Board and Employees Despite the modest recovery experienced, the operating
environment has remained competitive; hence, I would very much like to take this
opportunity to thank the directors and employees for all their skill and hard
work in achieving these results.
Outlook It is pleasing to see that the rise in the markets experienced over the
last quarter of our financial year has continued. As a result of this, our own
expectations of revenues, particularly from fee-based clients, continue to rise
and we expect to benefit significantly from the operational leverage inherent in
our business to the equity market. Whilst recognising the challenges that lie
ahead, the Board remains confident that we possess the personnel and financial
resources to continue to develop this business.
C.G. Clarke
14 February 2005
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
I am pleased to report that Group turnover increased by 11% to £36.9 million;
if the contribution during 2003 from the discontinued administration division is
excluded, the underlying growth in turnover was 15% and within this amount, fee
and other recurring income increased by 18% to £24.4 million. The increased
fee and other recurring income covered 82% of the Group's total operating
expenses (2003: 78%).
Profit before tax increased by 29% to £8.8 million (2003: £6.8 million) and
basic earnings per share increased by 23% to 27.9p (2003: 22.6p); these figures
are prior to goodwill amortisation and exceptional income.
The recovery in the equity markets helped increase total Group funds under
management by 10% to £4.18 billion (2003: £3.81 billion); more importantly,
within these figures, total fee-paying funds under management increased by 20%
to £2.62 billion (2003: £2.19 billion).
This year saw the start of significant enhancements to the running of our
business. We used the name change to improve the clarity of the offering to our
clients and we also made changes to our charging structure. Several IT
improvements have been made to strengthen the working practices within the
Group, which will improve services to our clients. The first major phase of
updating our database was also completed. We owe a debt of gratitude to all of
the employees across the Group for their dedication and the extra effort
required achieving all our targets. I am proud to be involved with such a
workforce.
There is currently considerable interest in the possibility of a bid for London
Stock Exchange plc. As an interested party on behalf of our clients, we are
watching the situation closely. We would expect any proposed merger to be
assessed on its ability to demonstrate that improved technology will increase
the liquidity within the market in order that our clients' business can be
completed even more quickly with closer spreads on quoted prices, together with
reduced clearing and settlement costs.
Rensburg Investment Management - Fee paying clients' funds increased by 17% to
£2.09 billion (2003: £1.78 billion). Other managed funds declined to £1.56
billion (2003: £1.62 billion) reflecting the conversion of clients onto a
fee-paying basis, together with the continued review of those clients that do
not reward us fairly for our services. In time for the tax gathering season,
Rensburg Aim VCT, one of the two venture capital trusts we manage, has recently
issued a prospectus to raise up to an additional £8 million.
The established team of three institutional sales traders, who joined us in
February 2004, have continued to settle in well in our London office.
The benefits of developments in our IT platforms previously referred to have
started to be delivered during this year. As a result of our investment, we
have an IT infrastructure that is not only more robust and adaptable to meet the
rapidly changing environment in which we operate, but is flexible to meet both
organic and acquisitional growth. Throughout the year, we have also continued
to test and develop our new client support system and we are both encouraged and
excited by the prospect of putting this into a live environment in order that we
further improve service delivery to our clients.
Reference has previously been made to the Group's position concerning split
capital investment trusts ('splits') and to the review into these being
undertaken by the UK's financial regulator, the Financial Services Authority ('
FSA'). The FSA announced on 24 December 2004 that they had reached settlement
regarding compensation for holders of certain splits. No company within the
Rensburg Group was a contributor to this settlement nor has any such company
ever been notified by the FSA that the FSA are investigating their conduct as
part of the splits review. The Group therefore remains satisfied that no
material provision for splits is currently required, nor is likely to be so in
the foreseeable future.
Rensburg Fund Management - Over the year net sales of £34 million were
achieved; this, together with consistent investment performance and the
continued market recovery, produced a 24% increase in unit trust based funds
under management to £505 million (2003: £406 million). During the second half
of the year, the Company successfully took on the management of its first
segregated mandate; at the year end £27 million was being managed by the
investment team under this mandate.
M. H. Burns
14 February 2005
Consolidated profit and loss account
for the year ended 30 November 2004
2004 2003
12 months 12 months
ended ended
30 Nov 30 Nov
Note £'000 £'000
Turnover
Continuing operations 36,936 32,005
Discontinued operations - 1,245
_______ _______
36,936 33,250
Operating expenses (29,866) (27,555)
Goodwill amortisation (868) (917)
Total administrative expenses (30,734) (28,472)
_______ _______
Operating profit
Continuing operations 6,202 4,669
Discontinued operations - 109
_______ _______
6,202 4,778
Profit on disposal of subsidiaries - 10,472
Profit on disposal of fixed asset investments - 390
_______ _______
Profit on ordinary activities before interest and 6,202 15,640
investment income
Income from fixed asset investments - exceptional 1 490 -
Net interest receivable 1,752 1,150
_______ _______
Profit on ordinary activities before taxation 8,444 16,790
Tax on profit on ordinary activities 2 (2,725) (1,928)
_______ _______
Profit on ordinary activities after taxation 5,719 14,862
Dividends 3 (3,943) (3,933)
_______ _______
Retained profit for the financial year 1,776 10,929
_______ _______
Earnings per share before goodwill amortisation and 4
exceptional items
-Basic 27.9p 22.6p
-Diluted 27.3p 22.1p
Earnings per share
-Basic 26.1p 68.2p
-Diluted 25.6p 66.8p
Consolidated statement of total recognised gains and losses
Note 2004 2003
£'000 £'000
Profit for the financial year 5,719 14,862
_______
Prior year adjustment 5 (1,318)
_______
Total gains recognised since last annual 4,401
Report _______
Consolidated balance sheet
at 30 November 2004
2004 2003
£'000 £'000
Fixed assets
Intangible assets 13,000 14,555
Tangible assets 4,132 3,267
Investments 500 500
_______ _______
17,632 18,322
_______ _______
Current assets
Debtors 26,226 23,662
Cash at bank and in hand 40,618 35,420
_______ _______
66,844 59,082
Creditors
Amounts falling due within one year (40,389) (32,108)
_______ _______
Net current assets 26,455 26,974
_______ _______
Total assets less current liabilities 44,087 45,296
Creditors
Amounts falling due after more than one year (232) (3,340)
Provisions for liabilities and charges (206) (92)
_______ _______
Net assets 43,649 41,864
_______ _______
Capital and reserves
Called up share capital 2,209 2,208
Share premium account 9,252 9,244
Capital redemption reserve 100 100
Other reserves 6,086 6,086
Profit and loss account 26,002 24,226
_______ _______
Equity shareholders' funds 43,649 41,864
_______ _______
Consolidated cash flow statement
for the year ended 30 November 2004
2004 2003
Note £'000 £'000
Net cash inflow from operating activities a 11,850 6,813
Returns on investment and servicing of finance
Interest received 1,565 1,240
Interest paid (69) (313)
Income from fixed asset investments - exceptional 1 490 -
Taxation paid (2,513) (2,022)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,354) (817)
Proceeds from sale of tangible fixed assets - 1,432
Proceeds from sale of fixed asset investments - 390
Acquisitions and disposals
Proceeds from sale of subsidiary undertakings - 18,469
Costs associated with disposal - (704)
Cash disposed of with subsidiary undertakings - (1,704)
Equity dividends paid (3,936) (3,920)
_______ _______
Cash inflow before financing 6,033 18,864
Financing
Issue of ordinary share capital 9 10
Decrease in debt - (4,000)
Redemption of loan notes (844) (1,072)
_______ _______
Increase in cash in the year b 5,198 13,802
_______ _______
Notes to the consolidated cash flow statement
a. Reconciliation of operating profit to operating cash flows
2004 2003
£'000 £'000
Operating profit 6,202 4,778
Amortisation of goodwill 868 917
Depreciation 489 462
Profit on disposal of tangible fixed assets - (47)
(Increase)/decrease in debtors (2,356) 2,157
Increase/(decrease) in creditors and provisions 6,647 (1,454)
_______ _______
Net cash inflow from operating activities 11,850 6,813
_______ _______
Net cash inflow from operating activities comprises:
Continuing operations 11,850 6,956
Discontinued operations - (143)
_______ _______
11,850 6,813
_______ _______
b. Analysis and reconciliation of net funds
At 1 Dec Cash Other At 30 Nov
2003 Flow Changes 2004
£'000 £'000 £'000 £'000
Cash and deposits 35,420 5,198 - 40,618
Debt due after one year (982) - 750 (232)
Debt due within one year (844) 844 (750) (750)
_______ _______ _______ _______
Net Funds 33,594 6,042 - 39,636
_______ _______ _______ _______
2004 2003
£'000 £'000
Increase in cash 5,198 13,802
Repayment of debt 844 5,072
Issue of loan notes - (2,482)
_______ _______
Movement in net funds in the year 6,042 16,392
Net funds brought forward 33,594 17,202
_______ _______
Net funds at 30 November 39,636 33,594
_______ _______
NOTES
1. Income from fixed asset investments - exceptional
Exceptional income from fixed asset investments represents a special dividend of
55 pence per share paid by London Stock Exchange plc on 16 August 2004 in
respect of the 890,000 shares in London Stock Exchange plc held by the Company
at that date. The dividend was accompanied by a share consolidation of six new
shares in London Stock Exchange plc for every seven existing shares held. The
Company's holding therefore stood at 762,857 shares immediately following this
consolidation. As explained in note 6 below, 662,857 of these shares were sold
after 30 November 2004.
2. Corporation tax
Corporation tax at 30% (2003: 30%)
3. Dividends
2004 2003
£'000 £'000
Interim paid of 6.0p per share (2003: 6.0p) 1,314 1,311
Final proposed of 12.0p per share (2003: 12.0p) 2,629 2,622
_______ _______
---
3,943 3,933
_______ _______
The Directors are recommending a final dividend of 12.0p per share (2003:
12.0p), which together with the interim dividend of 6.0p per share (2003: 6.0p)
makes a total dividend for the year of 18.0p per share (2003: 18.0p). The
proposed dividend, to be paid on 8 April 2005 to shareholders who are on the
register at the close of business on 18 March 2005, is calculated on 21,908,901
ordinary shares. This excludes 180,250 ordinary shares held by the Employee
Share Ownership Trust for which all dividends have been waived.
4. Earnings per share
Basic earnings per share before goodwill amortisation and exceptional items is
calculated with reference to earnings for shareholders of £6,097,000 (2003:
£4,917,000) and the weighted average number of shares in issue during the year
of 21,876,641 (2003: 21,796,791). Basic earnings per share is calculated with
reference to earnings for shareholders of £5,719,000 (2003: £14,862,000).
Diluted earnings per share is the basic earnings per share, adjusted for the
effect of the conversion into fully paid shares of the weighted average number
of all employee share options outstanding during the year. The number of
additional shares used for the diluted calculation is 495,756 shares (2003:
438,568).
5. Prior year adjustment
The prior year adjustment relates to the implementation of UITF Abstracts 17
(Revised 2003) and 38, which are effective for the first time this year. UITF
Abstract 17 (Revised 2003) changes the measurement and timing of the charge to
the profit and loss account in respect of share options previously awarded under
the Company's Employee Share Ownership Plan ('the Plan'). UITF Abstract 38
changes the recognition of the Company's holding of shares in Rensburg plc that
were previously acquired by the Employee Share Ownership Trust ('the Trust') to
satisfy the award of options under the Plan.
UITF Abstract 17 (Revised 2003) requires that an amount be charged to the profit
and loss account in respect of options awarded that is based on the Company's
share price at the date the options are granted. The amount that has previously
be charged to the profit and loss account, which was based on the UITF Abstract
that was applicable at the time, was based on the share price at the time the
shares were acquired by the Trust. The difference between the share price at
the date of grant and the date of acquisition by the Trust amounts to
£1,318,000. This amount has been recognised during the year in the Statement of
Total Recognised Gains and Losses and relates to the years ending 30 November
1998, 1999 and 2001. The prior year adjustment also includes a credit to the
profit and loss reserve during the same years of an equal amount, such that
there is no net overall effect on the profit and loss reserve at 30 November
2003 or 30 November 2004 as a result of the adoption of the requirements of this
UITF Abstract.
UITF Abstract 38 requires that the shares in Rensburg plc held by the Trust are
recognised as a deduction from shareholders' funds. Previously, these shares
had been recognised within fixed asset investments, in accordance with the UITF
Abstract that was applicable at the time. At 30 November 2004, the Trust held
180,250 shares in Rensburg plc. The consideration of £330,000 that was paid at
the time the 180,250 shares were acquired by the Trust has been deducted in
arriving at shareholders' funds. An equal and opposite adjustment has also been
made to shareholders' funds to reinstate the amount that has previously been
written off to the profit and loss account in respect of these shares. The net
effect of these adjustments is nil and hence there is no overall effect on the
value of shareholders' funds at 30 November 2003 or 30 November 2004.
6. Post balance sheet events
On 10 December 2004, the Company announced that agreement had been reached for
the Company to acquire the entire share capital of Carr Sheppards Crosthwaite
Limited ('CSCL'), a wholly owned subsidiary of Investec plc. CSCL is a private
client stockbroking and investment management company with offices in London,
Farnham, Reigate and Cheltenham. The proposed transaction is subject, inter
alia, to approval by the shareholders of the Company and to certain regulatory
approvals. On 14 January 2005, shareholders were informed of a pre-conditional
possible offer proposal made to the Board by Rathbone Brothers Plc. Discussions
with both of these parties are continuing.
As set out in note 1 above, the Company held 762,857 shares in London Stock
Exchange plc at 30 November 2004. On 1 December 2004 the Company sold 400,000
of these shares and sold a further 262,857 shares on 30 December 2004. These
disposals gave rise to a taxable gain of £3,129,000. The amount of tax payable
is expected to be £939,000.
Basis of preparation
The financial information in this press release does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985, but is
derived from the accounts. Statutory accounts for 2003 have been delivered to
the Register of Companies, and those for 2004 will be delivered following the
Company's Annual General Meeting. The independent auditor has reported on the
accounts for both 2003 and 2004; its reports were unqualified and did not
contain statements under section 237 (2) or (3) of the Companies Act 1985.
Full Accounts
The full accounts will be posted to shareholders on 23 February 2005 and will be
available at the Company's registered office from this date, and on the Group's
website at www.rensburg.co.uk.
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