Interim Results - Part 3

St. James's Place Capital PLC 26 July 2000 Part 3 Notes to the Accounts 1. Accounting policies The accounting policies used by the group in the preparation of this interim report are consistent with those applied in preparing statutory accounts for the year ended 31 December 1999 with the exception of the adoption of the accounting standard FRS 16 'Current Tax'. In accordance with FRS 16, franked investment income is now included net of the associated tax credits previously included in taxation. The comparative figures of the Technical Account have accordingly been restated. 2. Segmental analysis of profits 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== £' Million £' Million Group JRAH's life business 27.7 27.4 JRAH's unit trust business 2.8 2.3 Other 2.4 0.1 Exceptional (8.9) 1.6 =========== =========== 24.0 31.4 =========== =========== Participating interests LAHC 11.9 4.7 GAM - 2.6 =========== =========== 11.9 7.3 =========== =========== Profit on ordinary activities before taxation 35.9 38.7 Taxation JRAH's life business (8.3) (8.3) JRAH's unit trust business (0.8) (0.7) Other (0.9) (0.2) LAHC (3.6) (1.4) GAM - (0.4) =========== =========== (13.6) (11.0) =========== =========== Profit on ordinary activities after taxation 22.3 27.7 =========== =========== Included within 'other' is a foreign exchange gain of £1.1 million arising from the blocked GAM disposal proceeds. 3. Profit from life business As shown in note 2, the pre-tax profit for JRAH's life and pension business is £27.7 million (post tax £19.4 million). This result includes a number of one-off items, which need to be added back to arrive at the basic operating profit, as detailed below. 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== Post tax profit £' Million £' Million Basic profit from life and 24.4 20.2 pension business Reconstruction costs of international business (3.2) (1.1) Pensions transitional commission (1.8) - =========== =========== 19.4 19.1 =========== =========== Pre-tax profit Basic profit from life and 34.8 29.0 pension business Reconstruction costs of international business (4.5) (1.6) Pensions transitional commission (2.6) - =========== =========== 27.7 27.4 =========== =========== Reconstruction costs of international business The costs of closing the international operations outside Europe and of preparing to relaunch the Italian operation amounted to £3.2 million after tax (£4.5 million pre-tax). Pensions transitional commission During the year the company has assisted its Distribution by bearing a share of the cost of moving from front end loaded to level loaded commission. This amounted to £1.8 million after tax (£2.6 million pre- tax). After taking into account all of the above items, the basic profit of JRAH's life and pension business was £24.4 million (£34.8 million pre-tax) compared with £20.2 million (£29.0 million pre-tax) for the comparative six month period. A more detailed analysis of the life business, together with JRAH's unit trust business is provided in the supplementary information. 4. Premiums written 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== £'Million £' Million Life business Single premiums 354.6 214.2 Regular premiums 43.9 37.1 Reinsurances - Risk (5.3) (4.4) - Financial (1.5) (0.6) =========== =========== 391.7 246.3 =========== =========== Pension business Single premiums 45.5 45.3 Regular premiums 60.9 53.4 Reinsurances - Risk (0.9) (0.8) =========== =========== 105.5 97.9 =========== =========== Permanent health insurance Regular premiums 3.8 3.1 Reinsurances - Risk (2.8) (2.2) =========== =========== 1.0 0.9 =========== =========== Total net premiums 498.2 345.1 =========== =========== Gross premiums comprise: Individual business 479.5 331.2 Group contracts 29.2 21.9 =========== =========== Total gross premiums 508.7 353.1 =========== =========== 5. JRA Group's gross new business 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== £'Million £'Million Regular premiums (annualised) Life & PHI 11.1 12.4 Pension 17.3 16.1 =========== =========== 28.4 28.5 =========== =========== Single premiums Life 354.6 214.2 Pension 45.5 45.3 Unit trusts 200.8 85.7 =========== =========== 600.9 345.2 =========== =========== Total new business Life & PHI 46.6 33.8 Pension 21.8 20.6 Unit trusts 20.1 8.6 =========== =========== 88.5 63.0 =========== =========== Total new business is calculated on the standard industry measure of regular premiums plus 1/10 of single premiums. 6. Exceptional Items 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== £'Million £'Million Transaction and re-branding costs arising from Halifax deal (8.9) - Release of provision held against litigation - 1.6 =========== =========== (8.9) 1.6 =========== =========== The acquisition of 60% of the share capital of St. James's Place Capital plc ('SJPC') by Halifax Group plc was completed on 2 June 2000 and resulted in the occurrence of a number of one-off transaction and re- branding costs. 7. Taxation 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== £'Million £' Million Attributable to life business 8.3 8.3 Attributable to participating interests LAHC 3.6 1.4 GAM - 0.4 Attributable to non life business 1.7 0.9 =========== =========== 13.6 11.0 =========== =========== The tax charge has been calculated on a prudent basis of not taking account of tax relief on any of the exceptional costs outlined in note 6. 8. Interim dividend The Directors have resolved to pay an interim dividend of 1.00p per share (1999:0.75p). This will absorb £4.2 million (1999: £3.2 million) and will be paid on 11 September 2000 to shareholders on the register on 11 August 2000. 9. Earnings per share Restated 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 =========== =========== Pence Pence Profit on ordinary activities after taxation 5.3 6.6 Adjustments Costs of Halifax deal 2.1 - JRAH life business one-off items 1.2 0.3 LAHC one-off item (0.9) - Release of provision held against litigation - (0.3) =========== =========== Adjusted earnings 7.7 6.6 =========== =========== =========== =========== Diluted earnings 5.1 6.3 =========== =========== =========== =========== Diluted adjusted earnings 7.5 6.3 =========== =========== The above table sets out earnings per share, adjusted earnings per share and their diluted counterparts. Adjusted earnings per share figures have been presented to eliminate the effect of the items discussed in notes 3 and 6, together with the LAHC one-off item arising from the release of various provisions. The earnings per share has been calculated using the profit on ordinary activities after tax of £22.3 million (1999: £27.7 million). The adjusted earnings per share has been calculated using an adjusted profit after tax of £32.6 million (1999: £27.7 million). The weighted average number of shares in issue, including shares to be issued, for the six months ended 30 June 2000 was 422.1 million and for the six months ended 30 June 1999 was 417.5 million. The fully diluted earnings per share takes account of options over 13.9 million shares including the share options outstanding at the time of the JRAH acquisition (1999: 18.9 million). The 1999 earnings per share figures have been amended to allow for reconstruction costs of international business in arriving at the adjusted earnings per share figures. The effect of the amendment on the adjusted earnings per share has been to increase it from the previously reported 6.3p per share to 6.6p per share. The diluted adjusted earnings per share figure previously reported in 1999 has also been amended from 5.7p per share to 6.3p per share. 10.Provision for other risks and charges Deferred Costs of Total Tax Halifax deal =========== =========== =========== £'Million £'Million £'Million At 31 December 1999 9.2 - 9.2 Movement in the period (0.4) 4.5 4.1 =========== =========== =========== At 30 June 2000 8.8 4.5 13.3 =========== =========== =========== As a consequence of the shareholders' acceptance of the Halifax partial offer to acquire up to 60% of the share capital of SJPC, a new St. James's Place brand will be introduced from October 2000 to replace the existing J. Rothschild brand. It is anticipated that this will be completed by 2003. A provision has been made for the cost of the requirement to cease to use the J. Rothschild brand, and other obligations arising as a result of the Halifax acquisition. 11.Share capital Number £'Million As at 31 December 1999 421,727,467 63.3 Exercise of options 1,564,631 0.2 =========== =========== As at 30 June 2000 423,292,098 63.5 =========== =========== 12.Other reserves £'Million As at 31 December 1999 346.8 Profit for the period 22.3 Dividends (4.2) =========== As at 30 June 2000 364.9 =========== 13.Reconciliation of operating profit to net cash inflow from operating activities 6 Months 6 Months Ended Ended 30 June 30 June 2000 1999 ========== ========== £' Million £' Million Operating profit before tax 35.9 38.7 Continuing activities Interest paid 0.2 0.9 Interest received (3.4) (1.7) Profits relating to long-term business (27.7) (27.4) Depreciation 1.2 1.0 Profit on sale of fixed assets (0.1) - Share of profit of associated undertakings (11.9) (4.7) Increase in debtors and prepayments (3.3) (5.0) Decrease in debtors to long-term business fund - 1.6 Increase/(decrease) in creditors 13.1 (1.2) Increase in creditor to long term business fund 0.1 - Discontinued activities Share of profit of associated undertakings - (2.6) ========= ========= Net cash inflow/(outflow) from operating activities 4.1 (0.4) ========= ========= 14.Movement in opening and closing portfolio investments, net of financing 6 Months 6 Months Ended Ended 30 June 30 June 2000 2000 =========== =========== £' Million £' Million Increase in cash holdings 7.8 Decrease in deposits with credit institutions (17.8) =========== =========== Movement arising from cashflows (10.0) =========== Total movement in portfolio investments, net of financing (10.0) Portfolio investments, net of financing at 1 January 2000 86.0 ========== Portfolio investments, net of financing at 30 June 2000 76.0 ========== 15.Pension transfer provision In common with many life companies in the United Kingdom, the Group has liabilities in respect of pension transfer and opt-out business. The provision in respect of rectification and review costs at 30 June 2000 was £9.8 million (31 December 1999:£12.5 million), being the Directors' best estimate of the costs of settlement. Taking into account payments during the period, this represents a reduction in the provision of £0.6 million pre-tax. Included in the provision is an allowance for compensation of FSAVC policyholders. The provision is included in the long-term business provision in the Group's financial statements at 30 June 2000. 16. Statutory accounts The financial information shown in this publication is unaudited and does not constitute statutory accounts. The statutory accounts for the year ended 31 December 1999 have been delivered to the UK Registrar of Companies and the report of the auditors on these accounts was unqualified. Supplementary Information On Group Life And Unit Trust Embedded Values The following information is provided for the combined 'embedded value' of JRAH's life and unit trust business. 6 Months Ended 6 Months Ended 30 June 2000 30 June 1999 ======================= ====================== Post tax profits £'Million £'Million £'Million £'Million Profit from new business Life 12.8 9.9 Unit trust 6.9 3.3 ========= 19.7 ========= 13.2 Unwind of discount rate Life 10.7 8.6 Unit trust 2.6 2.0 ========= 13.3 ========= 10.6 Other Life 0.9 1.7 Unit trust 6.7 0.8 ========= 7.6 ========= 2.5 Basic operating profit after taxation Life 24.4 20.2 Unit trust 16.2 6.1 ========= 40.6 ========= 26.3 Exceptionals Life (5.0) (1.1) Unit trust - - ========= (5.0) ========= (1.1) Profit after taxation Life 19.4 19.1 Unit trust 16.2 6.1 ========= ========= ========== ========== 35.6 25.2 ========== ========== Notes 1. The figures show the earnings for JRAH's life and unit trust businesses accounted for on an embedded value basis. 2. The figures for unit trusts include the earnings on a conventional accounting basis of £2.0 million after taxation (1999: £1.6 million). 3. Inclusion of the unit trust value of in force would increase Group net assets by £58.7 million (1999: £42.9 million). 4. Further details of the life one-off items are given in note 3. Secretary and Advisers Secretary and Registered Office H J Gladman J. Rothschild House Dollar Street Cirencester GL7 2AQ Tel: 01285 640302 Fax: 01285 653993 Auditors PricewaterhouseCoopers 32 London Bridge Street London SE1 9SY Solicitors Herbert Smith Exchange House Primrose Street London EC2A 2HS Registrars and Transfer Office Computershare Services plc P.O. Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Dedicated telephone number for shareholder enquiries: 0870 702 0197 Bankers National Westminster Bank plc National Westminster House 73a Commercial Road Swindon SN1 5LT Brokers Cazenove & Co 12 Tokenhouse Yard London EC2R 7AN

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