Final Results

Rensburg Sheppards plc 13 June 2007 13 June 2007 Rensburg Sheppards plc ('Rensburg Sheppards' or 'the Company') Preliminary Results Rensburg Sheppards, the investment management group, today announces its preliminary results for the year ended 31 March 2007, its first full year results under International Financial Reporting Standards Key Points: • Profit before tax of £25.7 million (16 months ended 31 March 2006: £13.0 million) • Adjusted* profit before tax of £35.9 million (16 months ended 31 March 2006: £29.1 million) • Basic earnings per share of 37.5p (16 months ended 31 March 2006: 20.9p) • Adjusted* basic earnings per share of 57.1p (16 months ended 31 March 2006: 55.1p) • Proposed final dividend of 15p per ordinary share, giving a total dividend for the year of 22.5p • In respect of the acquisition of Carr Sheppards Crosthwaite, the achievement by 31 March 2007 of future annualised pre-tax cost synergies of approximately £5.5 million per annum • Group funds under management at 31 March 2007 of £14.40 billion (31 March 2006: £ 13.13 billion), an increase of 9.7% * Before amortisation of the client relationships intangible asset, share-based payments relating to the Employee Benefit Trust ('EBT'), reorganisation costs and profit on disposal of available-for-sale investments. These items amount to a net charge before tax of £10.2 million (16 months ended 31 March 2006: £16.1 million) and a net charge after tax of £8.6 million (16 months ended 31 March 2006: £12.5 million). Steve Elliott, Chief Executive of Rensburg Sheppards, commented: "These strong figures are the culmination of an important year for Rensburg Sheppards. Whilst we have benefited from favourable market conditions, it is important to recognise the contribution from the successfully completed integration of Carr Sheppards Crosthwaite, the capital investments we have made in strengthening our infrastructure and the hard work from all of our employees. The combination of the current macro-economic backdrop, the strength of the enlarged Rensburg Sheppards group and the potential sustainable growth opportunities which we have identified leads me to look to the future with confidence." An analysts meeting will be held today at 10.00am at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN. For further information, please contact: Steve Elliott, Chief Executive Tel: 020 7597 1234 Rensburg Sheppards plc Nick Lyon / James White Tel: 020 7796 4133 Hudson Sandler Chairman's statement I am delighted that we are reporting on an excellent set of results at the end of our first full year of trading following the acquisition of Carr Sheppards Crosthwaite ('CSC'). We knew that an acquisition of such significance would be a considerable challenge, but there was great confidence throughout the Company that a successful integration would be achieved. It has been, and the result is that the group has achieved record levels of profits and earnings. We have of course had the benefit of a following wind in that world stock markets have moved higher, but pleasingly our funds under management have grown faster than the comparable indices. It is therefore entirely appropriate that I draw attention early in this report to the sheer hard work and continued commitment shown by every employee. They have generated the profits now being reported upon, and I believe all shareholders will share my appreciation of their efforts. Results and dividend For the year ended 31 March 2007, reported profit before tax was £25.7 million and basic earnings per share were 37.5p. Adjusting for amortisation of the client relationships intangible asset and share-based payments relating to the Employee Benefit Trust ('EBT'), together with their associated tax consequences, gives underlying profit before tax of £35.9 million and underlying basic earnings per share of 57.1p. Unfortunately, for this year, it is difficult to make meaningful comparisons with the figures for the prior reporting period. In part this is because we previously had an extended period of 16 months following the change in the Company's financial year end and furthermore those results only included those derived from CSC subsequent to its acquisition by Rensburg Sheppards part-way through that period. I can however make the general observation that we have made considerable progress and all parts of the business have shown satisfactory growth. The directors are now recommending a final dividend of 15p per ordinary share payable on 10 August 2007 to all shareholders on the register at the close of business on 20 July 2007. When added to the interim dividend of 7.5p per ordinary share, this brings the total dividends in respect of the year to 22.5p per ordinary share. Board Right at the end of the year under review we saw significant change to the board. Two executive directors, Mike Burns and Nick Bagshawe, retired on 31 March 2007 and I should like to pay tribute to them both for their great efforts on the group's behalf. Mike Burns was chief executive for the past ten years and it would be very difficult to exaggerate the contribution he made during this time. Under Mike's leadership what is now Rensburg Sheppards has been created from what was initially a stockbroking and investment management business of quite modest size. Whilst this period of exciting growth has always been a team effort, it is clear who was the chief architect and I thank him warmly for all that he has done. Nick Bagshawe also contributed greatly as an executive director following the merger with CSC. We will miss his wise counsel around the boardroom table and I know his clients recognise the same wisdom he has used to good effect on their behalf during a long and successful City career. We wish him and Mike well in their retirements. We are very fortunate that in Steve Elliott, the managing director of the group since the CSC acquisition and previously chief executive of CSC, we have an ideal replacement for Mike Burns and he therefore took up the position of chief executive on 1 April 2007. I wish Steve every success in his new role. Outlook With the major task of integrating CSC completed, the group is now well placed to concentrate on growing its revenue and earnings, aided, I hope, by a continuation of the favourable operating environment that we have enjoyed during the past few years. C.G. Clarke Chairman 12 June 2007 Chief executive's report I would like to open this, my first report since taking over as chief executive on 1 April 2007, by acknowledging the tremendous contribution made by my predecessor Mike Burns, who led the transformation of the business over the last ten years into one of the UK's leading private client investment management businesses. The year to 31 March 2007 was, apart from the small dip in the first quarter, one in which the UK financial markets in which we operate continued to strengthen. This backdrop has undoubtedly assisted us in delivering the strong financial results reported, however it is essential to acknowledge that such results would simply not have been achievable, were it not for the absolute professionalism and commitment of all of the group's employees. The market for private client investment and fund management and financial planning services that the group provides to its clients is generally recognised to be a market which will see greater demand, given in particular, the increasing recognition by individuals of the need for specialist advice to invest for their own futures and the increased availability of personal wealth for possible investment. The current pressures from both a regulatory and operational efficiency perspective will, I believe, drive further consolidation within the industry for which we as a group will ensure that we are prepared. Rensburg Sheppards Investment Management ('RSIM') As a business, RSIM seeks to grow the proportion of total funds under management operated on a discretionary basis and consequently the proportion of its revenue which is recurring in nature. Our current target is to achieve 75% of total funds under management managed on a discretionary basis. We consider that, on balance, retaining a meaningful proportion of the business run on a non-discretionary basis results in a higher level of interaction with such clients, satisfying the requirements of certain clients and also being desirable for the business. Discretionary funds under management at 31 March 2007 were £8.53 billion (31 March 2006: £7.88 billion) a pleasing increase of 8.2% over the year; non-discretionary funds increased by 0.7% to £4.11 billion over the same period. This gave total funds under management at 31 March 2007 of £12.64 billion compared with £11.96 billion at 31 March 2006 of which the proportion managed on a discretionary basis had increased to 67.5% from 65.9%. The increase in RSIM's total funds under management of 5.7% compared favourably with the increase in the FTSE/APCIMS Private Investors Balanced index of 3.1% over this period; this index being the one which we believe most closely reflects the composition of RSIM client portfolios. At the four principal quarterly fee billing points during the year, the FTSE/ APCIMS Private Investors Balanced index was as follows: 31 May 2006 2,758.7 31 August 2006 2,813.8 30 November 2006 2,892.9 28 February 2007 2,935.4 Average of above 2,850.2 31 March 2007 2,977.6 Of RSIM's total net revenue for the year, 70.8% was recurring in nature. During the year a significant capital investment has been made to improve the company's infrastructure. These investments include the relocation of the Liverpool based employees to a new office that offers a significantly more efficient working environment and much improved facilities for receiving clients. In November 2006, the existing ex-Rensburg London team was smoothly relocated to the London Gresham Street office and we are now in the process of planning a refurbishment of our Leeds office. Capital investment into our IT and telephony systems commenced during the latter half of the financial year and this will continue through 2007 and beyond, ensuring we retain the necessary tools to serve our clients. The provision of improved formal reporting to our clients commenced during the second half of 2006 and is now continuing with the delivery of much clearer, more user friendly year-end packs. We will seek to develop these and other mediums of communication with our clients, as their needs and requirements change. The harmonisation of employee remuneration across the historic businesses of Rensburg Investment Management ('RIM') and Carr Sheppards Crosthwaite ('CSC') was agreed during the year, with these new arrangements becoming effective from 1 April 2007. While we believe our client-facing personnel are incentivised appropriately, on both annual and longer-term bases, we keep our remuneration arrangements for all of our employees under regular review. Looking forward, RSIM management has recently embarked on a comprehensive exercise to review and refresh the company's strategy. This is a logical step following the successful completion of the major task of integrating the historic RIM and CSC businesses. One area where we have already identified opportunities for improvement is with regard to RSIM's brand awareness. We will look to significantly increase the levels of marketing and business development activity undertaken in this area and the first steps to address this are currently underway. Rensburg Fund Management ('RFM') RFM has once again delivered an excellent performance both in terms of growth of funds under management and in terms of investment performance. Unit trust sales in the year of £434 million and a net inflow into trusts of £205 million (16 months ended 31 March 2006: sales of £429 million and a net inflow of £225 million) have, together with the rising financial markets, continued solid investment performance and the launch of a new Managers' Focus fund increased the value of RFM's retail unit trust funds under management by 36.9% to £1.29 billion as at 31 March 2007 (31 March 2006: £942 million). By 31 March 2007, the Managers' Focus fund had grown to £88 million since its launch seven months earlier. The total funds under the two segregated mandates managed by RFM have more than doubled over the year to £472 million at 31 March 2007 (31 March 2006: £223 million) with the bulk of this growth being derived from new inflows for investment. This brings the total assets managed by RFM to £1.76 billion (31 March 2006: £1.17 billion) an increase of 50.4%, compared with a rise in the FTSE All-Share index (which we consider most closely reflects the investments managed by RFM) of 7.7%. Of RFM's total net revenue for the year, 85% was recurring in nature. This represented a marginal increase over that achieved for the 16 months ended 31 March 2006. Group funds under management Combining RSIM and RFM brings the group's total funds under management as at 31 March 2007 to £14.40 billion (31 March 2006: £13.13 billion) an increase of 9.7%. Regulation During the year more resources than ever have been directed towards ensuring we meet our regulatory and legal obligations, both as a UK listed company and as a group whose trading businesses are authorised and regulated by the Financial Services Authority. Issues either addressed or being addressed include the introduction of International Financial Reporting Standards as adopted by the European Union ('IFRS'), the Markets in Financial Instruments Directive (' MiFID'), the Capital Requirements Directive ('CRD'), the Transparency Directive and the new Companies Act. The simultaneous introduction of such items inevitably places a burden on internal resources and incurs both direct and indirect costs. I hope, as we reach the end of 2007, that the future level and pace of such change will start to slow for the benefit of all. Outlook Ten weeks into the new financial year I am pleased to report that trading has started satisfactorily, assisted by the further marked rise in the level of the UK financial markets since 31 March 2007. The combination of the current macro-economic backdrop, the strength of the fully-integrated enlarged Rensburg Sheppards group and the potential sustainable growth opportunities which we have identified leads me to look to the future with confidence. S.M. Elliott Chief Executive 12 June 2007 Financial review Financial results From revenue (net of fees and commissions payable to introducers) of £112.9 million (16 months ended 31 March 2006: £109.4 million), the group's reported profit before tax for the year ended 31 March 2007 was £25.7 million (16 months ended 31 March 2006: £13.0 million). After removing a net charge totalling £10.2 million (16 months ended 31 March 2006: £16.1 million) in respect of the amortisation of the client relationships intangible asset, the share-based payments relating to the Employee Benefit Trust ('EBT'), the reorganisation costs associated with the integration of Carr Sheppards Crosthwaite ('CSC') and profit on disposal of available-for-sale investments, the resulting adjusted profit before tax increased to £35.9 million (16 months ended 31 March 2006: £29.1 million). It is the directors' opinion that this adjusted measure of profit before tax and that of earnings given below represent better measures of the group's underlying financial performance. Reported basic earnings per share were 37.5p (16 months ended 31 March 2006: 20.9p) and on the basis of adjusting for the items detailed in the above paragraph, together with the associated tax consequences of these adjustments, the adjusted basic earnings per share were 57.1p (16 months ended 31 March 2006: 55.1p). The financial results reported for the year ended 31 March 2007, including the restated comparative figures for the 16 months ended 31 March 2006, are the first set of full year results that the group has prepared under International Financial Reporting Standards as adopted by the European Union ('IFRS'). The effect of the transition to IFRS on the group's previously reported figures for the 16 months ended 31 March 2006 was announced on 13 October 2006 and a summary of the effects is set out in note 18. Synergies and associated reorganisation costs With the integration of CSC having been completed some nine months ago, it is pleasing to be able to report that by 31 March 2007 we had achieved a position where the future annualised pre-tax cost synergies from the acquisition of CSC had reached the target originally stated of approximately £5.5 million per annum, with the final total of the pre-tax reorganisation costs necessarily incurred to achieve these synergies being £9.9 million, compared with the originally stated estimate of £10 million. During the year to 31 March 2007, the group benefited from approximately £3.2 million of such synergies, which was weighted approximately one third / two thirds between the first and second half years. Tax The effective tax rate for the year is 36.2% (16 months ended 31 March 2006: 41.5%) calculated as the total tax charge of £9.3 million (16 months ended 31 March 2006: £5.4 million) divided by the profit before tax of £25.7 million (16 months ended 31 March 2006: £13.0 million). A full reconciliation of the tax charge which explains why the effective rate of tax is higher than the UK standard rate of 30%, is set out in note 4. Dividend An interim dividend of 7.5p per share was paid to shareholders on 2 February 2007 and the board is recommending a final dividend of 15p, resulting in a total payment of 22.5p. In determining the dividend, the directors specifically considered the requirement for the group to ensure it retains adequate levels of working capital and regulatory capital for the foreseeable future, the group's commitment to repay the £60 million subordinated loan and the need to retain adequate reserves for re-investment towards the future growth of the business. In accordance with current accounting standards the final dividend of 15p has not been recognised in these financial results, but has been disclosed as a post balance sheet event in note 17. Cash flow During the year the business enjoyed a net cash inflow from its operating activities, after corporation tax payments, of £16.0 million. The group's investing and financing cash flows for the year, which principally included dividend payments of £9.1 million, loan interest of £4.3 million and capital expenditure of £1.6 million, amounted to a net cash payment of £16.2 million, resulting in a slight overall decrease in the group's cash balances during the year of £0.2 million. Key performance indicators ('KPIs') The principal KPIs used by management for the group as a whole, and also for each of the two individual business segments that make up the group, are stated below. The comparison between the two reporting periods is, for certain KPIs, not particularly meaningful. This is a consequence of the differing lengths of the reporting periods and the fundamental changes taking place within both reporting periods arising from the acquisition of CSC on 6 May 2005. Where figures are described in the tables below as 'underlying', then this is after adjusting, where appropriate, for the items referred to in the opening paragraph of this financial review for the reason stated. The group: Year ended 16 months ended 31 March 31 March 2007 2006 % change Total funds under management* £14.40 billion £13.13 billion +9.7% FTSE/APCIMS Balanced Index* 2,977.6 2,887.4 +3.1% Underlying operating profit £37.7 million £29.9 million +26.1% Underlying operating profit as a % of net revenue 33.4% 27.3% +22.3% Underlying basic earnings per share 57.1 pence 55.1 pence +3.6% * As at the period end Investment management: Year ended 16 months ended 31 March 31 March 2007 2006 % change Total funds under management* £12.64 billion £11.96 billion +5.7% FTSE/APCIMS Balanced Index* 2,977.6 2,887.4 +3.1% % of total funds managed on a discretionary basis* 67.5% 65.9% +2.4% Underlying operating profit £33.2 million £27.0 million +23.0% Underlying operating profit as a % of net revenue 32.7% 27.2% +20.2% * As at the period end Fund management: Year ended 16 months ended 31 March 31 March 2007 2006 % change Total funds under management* £1.76 billion £1.17 billion +50.4% FTSE All-Share Index* 3,283.2 3,048.0 +7.7% Underlying operating profit £4.5 million £2.9 million +55.2% Underlying operating profit as a % of net revenue 39.1% 28.5% +37.2% * As at the period end Capital structure and treasury management At 31 March 2007 the group had net assets of £169.7 million, which included £187.6 million of intangible assets principally comprising goodwill of £136.4 million and client relationships of £50.5 million. Throughout the year, the group was financed by equity shareholders funds which at 31 March 2007 were £169.7 million, together with debt which comprised a subordinated loan of £60 million. The loan is repayable in equal annual instalments of £7.5 million commencing May 2008 and ending May 2015. The group maintained the bulk of its cash balances, which at 31 March 2007 totalled £49.8 million, within its regulated trading subsidiaries in order to provide them with comfortable levels of regulatory capital. Cash was placed on deposit with highly rated banks and was available on instant or near instant access, thus minimising credit and liquidity risk. The nature of the group's business has been such that currency risk was insignificant. Repayments of capital in relation to the subordinated loan that was entered into as a part of the consideration for the acquisition of CSC, were due to commence on 6 May 2008. However given the subsequent stronger financial performance of the group than was anticipated at the point of acquiring CSC in May 2005, the board announced that on 8 May 2007 an early repayment of £10 million of this debt had been made. Full details of this are provided in note 17 to this preliminary statement. Regulatory capital The group's two principal trading subsidiaries are both FSA regulated and hence are required at all times to hold certain minimum levels of regulatory capital. These businesses are both well capitalised and have throughout the year held regulatory capital comfortably above the minimum levels required. The Capital Requirements Directive ('CRD'), which is a European Directive, came into effect on 1 January 2007 although due to a staged implementation, the full impact of this will not be felt until 1 January 2008 and beyond. The introduction of CRD has led to a modest increase in the minimum amount of regulatory capital required since 1 January 2007 and we fully expect this may increase further on 1 January 2008. This further increase is not anticipated at this point in time to be major and we are confident that we will continue to have sufficient capital to meet the future requirements. Risks and uncertainties The significant risks faced by the group and the controls operating over such risks are kept under regular review by the group's risk committee and, acting on behalf of the board, by the audit committee. These risks have been faced by the group throughout the reporting period and are expected to continue to be faced going forward. Hence, the appropriate management of these risks is key to the successful future development, performance and position of the group. The principal risks and uncertainties, together with the associated controls are: 1. Reputational risk which may arise from poor investment advice or service to clients, or from a public censure by the regulator. This risk is mitigated by the group's strong service ethic demonstrated by its professionally qualified and experienced staff who operate in an environment where compliance is given a high priority and are supported by a strong internal research function and appropriate investment committees. 2. Market risk from the group's exposure to downturns in the UK and world financial markets in which it operates. We continue to reduce this risk by seeking to further increase the proportion of the group's income which is recurring in nature and also by keeping a significant proportion of the total remuneration of client facing staff in the form of incentives dependent upon the level of income they produce. 3. Competition risk which manifests itself in a reduction in clients due to inappropriate and/or poorly priced service/product offerings or insufficient professional staff to properly serve clients. To mitigate this risk we keep developments in the market in which we operate under careful review and we invest heavily in our staff, not only in terms of their remuneration packages, but also in the office environments from which they operate and in ensuring we meet their ongoing training and development needs. 4. Operational risk which principally arises from inadequate business continuity /disaster recovery planning or a significant business process failure in one of our key support functions. Business continuity/disaster recovery is an area we continue to recognise the increasing importance of and we are currently investing significant management time and financial resources to mitigate this risk further. With regard to our support functions, operational risk in this area was sharply heightened during 2005 and 2006 as we undertook the major integration of Rensburg and CSC. This risk has now subsided following the completion of the integration last autumn and we now consider that through proper resourcing we are appropriately mitigating the risk in this area. 5. Fraud risk that follows from holding significant cash and securities both on our own behalf and on behalf of our clients. This risk is mitigated by: • regular reconciliations of both firm and client assets; • the detailed personal knowledge of clients that their investment management team possesses which, in particular, assists greatly in protecting against the growing risk of identity theft; • the significant level of fidelity insurance carried by the group. J.P. Wragg Finance Director 12 June 2007 Consolidated income statement for the year ended 31 March 2007 2007 2006 Year 16 months ended ended 31 March 31 March Note £'000 £'000 Revenue 122,297 117,389 Fees and commissions payable (9,360) (8,004) Net revenue 2 112,937 109,385 Reorganisation costs - (9,907) Share-based payments - EBT (4,653) (4,226) Amortisation of intangible assets - client relationships (5,603) (5,066) Other operating expenses (75,225) (79,468) Operating expenses (85,481) (98,667) Operating profit 27,456 10,718 Profit on disposal of available-for-sale investments - 3,129 Finance income 3 2,694 3,365 Finance expenses 3 (4,483) (4,205) Profit before tax 25,667 13,007 Taxation 4 (9,289) (5,374) Profit for the period attributable to the equity holders of 16,378 7,633 the company Earnings per share 6 Basic 37.5p 20.9p Diluted 37.4p 20.6p Consolidated balance sheet at 31 March 2007 2007 2006 Note £'000 £'000 Assets Non-current assets Intangible assets 7 187,601 193,611 Property, plant and equipment 8 5,422 4,775 Available-for-sale investments 9 2,562 2,188 Deferred tax assets 10 1,280 2,984 196,865 203,558 Current assets Trade and other receivables 130,452 167,257 Cash and cash equivalents 11 49,775 49,958 180,227 217,215 Total assets 377,092 420,773 Liabilities Current liabilities Trade and other payables (124,359) (174,276) Loan notes (72) (840) Provisions 13 (641) (6,284) Current tax liabilities (4,672) (2,794) (129,744) (184,194) Non-current liabilities Accruals and deferred income (798) - Subordinated loan 12 (60,000) (60,000) Provisions 13 (517) (875) Deferred tax liabilities 10 (16,341) (17,920) (77,656) (78,795) Total liabilities (207,400) (262,989) Net assets 169,692 157,784 Equity attributable to the equity holders of the company Share capital 14,16 4,822 4,760 Share premium 16 10,603 9,276 Capital redemption reserve 16 100 100 Available-for-sale reserve 16 1,234 972 Revaluation reserve 16 959 972 Other reserves 16 130,601 130,601 Retained earnings 16 21,373 11,103 Total equity 169,692 157,784 Consolidated cash flow statement for the year ended 31 March 2007 2007 2006 Year 16 months ended ended Note 31 March 31 March £'000 £'000 Cash flows from operating activities Profit before taxation 25,667 13,007 Adjustments for: - Amortisation of intangible assets 6,219 5,617 - Finance expenses 4,483 4,205 - Finance income (2,694) (3,365) - Depreciation 672 747 Share-based payments 4,815 4,472 Profit on disposal of available-for-sale investments - (3,129) Loss on disposal of tangible and intangible assets 102 58 Non-cash reorganisation costs - 669 Decrease/(increase) in trade and other receivables 36,901 (52,992) (Decrease)/increase in trade payables and provisions (55,116) 55,095 Cash generated from operations 21,049 24,384 Interest received 2,318 3,762 Dividends received 280 61 Interest paid (221) (317) Taxation paid (7,446) (5,595) Net cash inflow from operating activities 15,980 22,295 Cash flows from investing activities Purchase of property, plant and equipment (1,407) (810) Purchase of intangible software (223) (1,024) Proceeds from disposal of available-for-sale investments - 3,129 Acquisition of subsidiaries, net of cash acquired - 16,830 Deferred consideration paid - (52) Net cash (outflow)/inflow from in investing activities (1,630) 18,073 Cash flows from financing activities Dividends paid to shareholders (9,073) (26,939) Proceeds from issue of ordinary share capital 1,390 25 Costs associated with issue of shares (1) (180) Purchase of own shares (1,815) - Redemption of loan notes (768) (1,755) Interest paid on subordinated loan (4,266) (2,179) Net cash outflow from financing activities (14,533) (31,028) Net (decrease)/increase in cash and cash equivalents (183) 9,340 Cash and cash equivalents at start of period 49,958 40,618 Cash and cash equivalents at end of period 11 49,775 49,958 Consolidated statement of recognised income and expense for the year ended 31 March 2007 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Revaluation of available-for-sale investments -gain arising from changes in fair value 374 738 -gain on disposal transferred to the income statement - (2,709) Deferred tax on revaluation of available-for-sale investments -on gain arising from changes in fair value (112) (221) -on gain on disposal transferred to the income statement - 813 Net income/(expense) recognised directly in equity 262 (1,379) Profit for the period 16,378 7,633 Total recognised income and expense for the period 16,640 6,254 Notes to the financial statements 1. Basis of preparation The group financial statements consolidate those of the company and its subsidiaries (together referred to as 'the group'). The financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS'). The group has presented its financial statements in accordance with IFRS for the first time for the year ended 31 March 2007 and has applied the requirements of IFRS 1 First-time adoption of IFRS. The effect of the transition to IFRS on the group's previously reported figures for the 16 months ended 31 March 2006 was announced on 13 October 2006 and a summary is set out in note 18 below. In applying the requirements of IFRS 1, the group has taken advantage of the following exemptions: • IFRS 3 Business combinations has not been applied retrospectively to business combinations that took place prior to the date of transition to IFRS, being 1 December 2004. • IFRS 2 Share-based payment has not been applied to equity instruments that were granted before 7 November 2002 or to those that were granted after 7 November 2002 that vested before 1 January 2005. A summary of the group's significant accounting policies will be included in the 2007 Report & Financial Statements. The financial information contained in this announcement does not constitute the company's statutory accounts for the year ended 31 March 2007 or the 16 month period ended 31 March 2006 but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies, and those for 2007 will be delivered following the company's annual general meeting. The independent auditor has reported on those accounts; its reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Revenue and segmental information For management purposes, the group is organised into two business segments, being Investment Management and Fund Management. This organisation reflects the differing nature of each segment's services, client base and risk profile. The principal activity of the investment management segment is the provision of investment management services to private clients, pension funds and charities. The fund management segment manages unit trusts and segregated mandates. Transactions between the two business segments are undertaken on an arm's length basis on normal commercial terms. All of the group's activities are undertaken in the United Kingdom and hence relate to a single geographical segment. Year ended 31 March 2007 Investment Fund Management Management Eliminations Group £'000 £'000 £'000 £'000 Revenue External 104,602 17,695 - 122,297 Inter-segment 598 - (598) - 105,200 17,695 (598) 122,297 Fees and commissions payable (3,783) (6,175) 598 (9,360) Segmental net revenue 101,417 11,520 - 112,937 Share-based payments - EBT (4,653) - - (4,653) Amortisation of intangible assets - client (5,603) - - (5,603) relationships Other operating expenses (68,206) (7,019) - (75,225) Segmental expenses (78,462) (7,019) - (85,481) Segmental operating profit 22,955 4,501 - 27,456 Finance income 2,284 410 - 2,694 Finance expenses (4,483) - - (4,483) Profit before tax 20,756 4,911 - 25,667 Segmental net revenue is derived from: Investment Management services 101,417 - - 101,417 Fund Management services - 9,822 - 9,822 Profit on sale of units of unit trusts - 1,698 - 1,698 101,417 11,520 - 112,937 Other segmental items: Total assets 355,962 21,130 - 377,092 Total liabilities (191,213) (16,187) - (207,400) Capital expenditure 1,404 3 - 1,407 Acquisition of intangible assets 223 - - 223 Depreciation and amortisation 6,888 3 - 6,891 16 months ended 31 March 2006 Investment Fund Management Management Eliminations Group £'000 £'000 £'000 £'000 Revenue External 101,885 15,504 - 117,389 Inter-segment 788 - (788) - 102,673 15,504 (788) 117,389 Fees and commissions payable (3,492) (5,300) 788 (8,004) Segmental net revenue 99,181 10,204 - 109,385 Reorganisation costs (9,907) - - (9,907) Share-based payments - EBT (4,226) - - (4,226) Amortisation of intangible assets - client (5,066) - - (5,066) relationships Other operating expenses (72,176) (7,292) - (79,468) Segmental expenses (91,375) (7,292) - (98,667) Segmental operating profit 7,806 2,912 - 10,718 Profit on disposal of available-for-sale 3,129 - - 3,129 investments Finance income 2,992 373 - 3,365 Finance expenses (4,205) - - (4,205) Profit before tax 9,722 3,285 - 13,007 Segmental net revenue is derived from: Investment Management services 99,181 - - 99,181 Fund Management services - 8,658 - 8,658 Profit on sale of units of unit trusts - 1,546 - 1,546 99,181 10,204 - 109,385 Other segmental items: Total assets 403,815 16,958 - 420,773 Total liabilities (250,542) (12,447) - (262,989) Capital expenditure 808 2 - 810 Acquisition of intangible assets 185,771 - - 185,771 Depreciation and amortisation 6,360 4 - 6,364 3. Finance income and expenses 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Interest receivable on bank deposits 2,414 3,304 Dividends receivable 280 61 Finance income 2,694 3,365 Interest payable on bank overdrafts and loan notes 178 347 Interest payable on subordinated loan 4,305 3,858 Finance expenses 4,483 4,205 4. Taxation 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Current tax expense: United Kingdom corporation tax at 30% (2006: 30%) 9,950 6,327 Adjustments in respect of prior periods 88 (3) 10,038 6,324 Deferred tax expense: Origination and reversal of timing differences (560) (962) Adjustments in respect of prior periods (189) 12 Total tax expense in the income statement 9,289 5,374 The tax charge for the year and the amount calculated by applying the standard United Kingdom corporation tax rate of 30% (16 months ended 31 March 2006: 30%) to the profit before tax per the income statement can be reconciled as follows: 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Profit before tax 25,667 13,007 Tax expense using the United Kingdom corporation tax rate of 30% 7,700 3,902 Effects of: Share-based payments not tax deductible 1,396 1,268 Other expenses not tax deductible 378 197 Income not chargeable to tax (84) (2) Adjustments to current tax in respect of prior periods 88 (3) Adjustments to deferred tax in respect of prior periods (189) 12 9,289 5,374 The following amounts of deferred tax have been recognised directly in equity: 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Available-for-sale investments (112) 592 Share-based payments (762) 598 (874) 1,190 5. Dividends The final dividend proposed for the year ended 31 March 2007 of 15.0 pence per share is payable on 10 August 2007 to shareholders on the register as at the close of business on 20 July 2007. In accordance with the group's accounting policies and the requirements of IAS 10 Events after the balance sheet date this dividend has not been recognised as a liability at 31 March 2007. Dividends have been recognised in the periods set out below: 2007 2006 Year 16 months ended ended 31 March 31 March £'000 £'000 Amounts recognised as distributions to equity holders during the period: Final dividend for the year ended 30 November 2004 of 12.0p per share - 2,629 First interim dividend for the six months ended 31 May 2005 of 6.6p per share - 1,319 Second interim dividend for the four months ended 30 September 2005 of 6.6p per share - 2,854 Special dividend of 45.0p per share - 9,871 Final dividend for the sixteen months ended 31 March 2006 of 13.2p per share 5,783 - Interim dividend for the six months ended 30 September 2006 of 7.5p per share 3,290 - 9,073 16,673 The amount recognised as distributions to equity holders shown above for the 16 months ended 31 March 2006 excludes the dividend of £10,266,000 paid by Carr Sheppards Crosthwaite Limited ('CSC') to Investec following the group's acquisition of CSC on 6 May 2005, as the liability for this dividend formed part of the net assets of CSC at the date of acquisition. However, this payment does represent a cash outflow from the group during the 16 months ended 31 March 2006 and is included in the cash flow statement in that period. 6. Earnings per share Basic earnings per share is calculated with reference to earnings for shareholders of £16,378,000 (16 months ended 31 March 2006: £7,633,000) and the weighted average number of shares in issue during the period of 43,723,007 (16 months ended 31 March 2006: 36,595,582). Adjusted earnings per share before amortisation of the client relationships intangible asset, share-based payments relating to the EBT, reorganisation costs and profit on disposal of available-for-sale investments is calculated with reference to earnings for shareholders of £24,953,000 (16 months ended 31 March 2006: £20,150,000). 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 period. The number of additional shares used for the diluted calculation is 112,337 shares (16 months ended 31 March 2006: 491,190). Details of contingently issuable shares, that are not included in the calculation of basic or diluted earnings per share, are given in note 12. The directors believe that the provision of additional earnings per share figures, in particular before amortisation of the client relationships intangible asset, share-based payments relating to the EBT, reorganisation costs and profit on disposal of available-for-sale investments, better represent underlying business performance. The effect of these adjustments on earnings and basic earnings per share is as follows: Year ended 16 months ended 31 March 2007 31 March 2006 Earnings Earnings Earnings Earnings per per share share £'000 Pence £'000 Pence Unadjusted earnings and EPS 16,378 37.5 7,633 20.9 Share-based payments - EBT 4,653 10.6 4,226 11.5 Amortisation of intangible assets - client 5,603 12.8 5,066 13.9 relationships Reorganisation costs - - 9,907 27.1 Profit on disposal of available-for-sale investments - - (3,129) (8.6) Tax arising on adjusted items (1,681) (3.8) (3,553) (9.7) Adjusted earnings and EPS 24,953 57.1 20,150 55.1 7. Intangible assets The carrying values of intangible assets at 31 March are as follows: 2007 2006 £'000 £'000 Goodwill 136,385 136,385 Client relationships 50,469 56,072 Software 747 1,154 187,601 193,611 The client relationships intangible asset comprises amounts at cost of £58,087,000 relating to private client business and £3,051,000 relating to charities business. These amounts are being amortised on a straight line basis over the estimate of their useful economic lives of 12 and four years respectively. Amortisation of software is recognised in the income statement within other operating expenses. Goodwill is allocated to the cash generating unit ('CGU') to which it relates and the goodwill shown above has been allocated to the group's London, Cheltenham, Farnham and Reigate offices (collectively referred to as the 'London and Southern offices') and the group's Sheffield office. The London and Southern offices and the Sheffield office each represent separate CGUs. The allocation of all intangible assets to CGUs is summarised below: Client Goodwill relationships Software Total £'000 £'000 £'000 £'000 Cash generating unit London and Southern offices 129,637 50,469 273 180,379 Sheffield office 6,748 - 86 6,834 Other - - 388 388 136,385 50,469 747 187,601 The recoverable amounts of the group's CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding discount rates, future income growth rates, changes in the cost base of the business and future market conditions. The basis of the value-in-use calculations is the budget for the forthcoming financial year ending 31 March 2008, which has been approved by the board. This budget has been established based on management's experience and future expectations of the business and the market in which it operates. Projections beyond 31 March 2008 are extrapolated using a growth rate of 2.25%, which represents the historic long-term UK economic growth rate. The future cash flows are discounted using the group's weighted average cost of capital, which has been calculated at 12% per annum. To establish whether any impairment exists, the value-in-use of each CGU to which goodwill and intangible assets have been allocated has been compared with the present carrying value of the CGUs' assets. In each case, the value-in-use exceeds the carrying value of the assets and it has therefore been concluded that no impairment exists. 8. Property, plant and equipment Included within property, plant and equipment is the group's freehold property. The carrying value of the property at 31 March 2007 amounted to £3,160,000 (2006: £3,208,000). The property was revalued at 1 December 2004 by independent qualified valuers. The valuation was undertaken in accordance with the Appraisal and Valuation standards issued by the Royal Institution of Chartered Surveyors. The valuation was on a market value basis. The valuation has been incorporated into the financial statements and the resulting revaluation adjustment has been taken to the revaluation reserve. The revaluation surplus at 31 March 2007 amounted to £959,000 (31 March 2006: £972,000). This revaluation surplus is not distributable. At 31 March 2007, had the freehold property been carried at historic cost less accumulated depreciation, the carrying amount would have been £1,789,000 (31 March 2006: £1,819,000). 9. Available-for-sale investments Available-for-sale financial assets at 31 March comprise: 2007 2006 £'000 £'000 Equity securities: Listed 1,588 1,588 Unlisted 974 600 2,562 2,188 Unlisted available-for-sale investments represent ordinary equity shares of Euroclear plc. The fair value attributed to these shares represents the directors' estimate of the value that could be obtained in an arm's length disposal of the shares, taking into account recently published market transaction information. 10. Deferred tax assets and liabilities Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30% (2006: 30%). Deferred tax assets have been recognised in respect of all tax losses and other temporary timing differences giving rise to deferred tax assets, as it is considered to be probable that these assets are recoverable in full. Deferred tax assets and liabilities are attributed to the following: Assets Liabilities Net 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 Intangible assets - - (15,141) (16,822) (15,141) (16,822) Property, plant and equipment 566 589 (484) (432) 82 157 Available-for-sale investments - - (609) (497) (609) (497) Trade and other receivables - - (107) (169) (107) (169) Share-based payments 91 1,069 - - 91 1,069 Provisions, accruals and other payables 623 1,326 - - 623 1,326 Net deferred tax assets/(liabilities) 1,280 2,984 (16,341) (17,920) (15,061) (14,936) 11. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks and financial institutions with a maturity of up to three months and bank overdrafts repayable on demand. 2007 2006 £'000 £'000 Cash at bank and in hand 49,775 44,958 Fixed term deposits - 5,000 49,775 49,958 12. Subordinated loan The company entered into a £60 million subordinated loan agreement with Investec 1 Limited on 6 May 2005. The loan formed part of the consideration for the acquisition of Carr Sheppards Crosthwaite Limited. A fixed rate of interest of 7.155% per annum is payable on £45 million of the loan and a floating rate, being 2.25% above LIBOR, is payable on £15 million of the loan. Interest on the subordinated loan is payable every six months in May and November. The total amount of the loan is repayable in equal instalments over eight years, with the first instalment becoming payable in May 2008. The company has the option to redeem part or all of the floating rate debt at any point during the term of the loan. Early redemption of part or all of the fixed rate debt is not permitted for five years from the date of commencement of the loan, until May 2010. Early redemption after this period is at the option of the company. As set out in note 17, the company redeemed £10 million of the floating rate debt on 8 May 2007. The loan is subordinated to all other creditors of the company. For the purposes of the regulatory capital requirements of the Financial Services Authority (' FSA'), the loan is required to be treated as part of the consolidated capital requirement of the Investec group. If for any reason the Investec group is unable to provide the consolidated regulatory capital required in respect of the loan, the relevant amount of the loan will, at the request of the company, be converted into ordinary shares of the company. The rate of conversion would be based on the company's average mid-market share price during the three months prior to a conversion. However, where a conversion is required as a consequence of a disposal of shares by Investec 1 Limited, or a conversion would otherwise require a member of the Investec group to make a general offer for the company, an alternative instrument, that would enable the company to satisfy the FSA's regulatory capital requirements, would be issued in place of ordinary shares. 13. Provisions Reorganisation Onerous Restructuring Property costs leases costs dilapidations Total £'000 £'000 £'000 £'000 £'000 At 1 April 2006 Current liabilities 6,212 18 54 - 6,284 Non-current liabilities 584 130 11 150 875 6,796 148 65 150 7,159 Charged to the income statement - 219 - 75 294 Utilised during the year (6,212) (18) (54) - (6,284) Released to the income statement - - (11) - (11) At 31 March 2007 584 349 - 225 1,158 The balances at 31 March 2007 are categorised as follows: Reorganisation Onerous Restructuring Property costs leases costs dilapidations Total £'000 £'000 £'000 £'000 £'000 Current liabilities 584 57 - - 641 Non-current liabilities - 292 - 225 517 584 349 - 225 1,158 Reorganisation costs relate to the integration of the business of CSC into the group. The onerous leases provision represents future rentals and running costs of unoccupied leasehold premises to the end of the lease term. All such leases are due to expire during or before 2017. The provision for restructuring costs represents the residue of amounts previously provided within Carr Sheppards Crosthwaite Limited prior to its acquisition by the company, in respect of the cost of restructuring certain business activities. The provision for property dilapidation costs reflects the obligations that the group has to reinstate leasehold properties to their original condition prior to the expiry of the relevant lease. The leases held on these properties expire in the period up to 2017. 14. Share capital Nominal Number value of shares £'000 Authorised ordinary shares of 10 90/91 pence each At 31 March 2006 and 31 March 2007 54,600,000 6,000 Allotted, called up and fully paid ordinary shares At 1 December 2004: ordinary shares of 10 pence each 22,087,078 2,209 Exercise of share options 3,220 - Issued on acquisition of CSC 25,500,000 2,550 47,590,298 4,759 Effect of share consolidation (4,283,127) - Exercise of share options 6,897 1 At 31 March 2006: ordinary shares of 10 90/91 pence each 43,314,068 4,760 Exercise of share options 567,314 62 At 31 March 2007: ordinary shares of 10 90/91 pence each 43,881,382 4,822 The authorised share capital at 1 December 2004 comprised 30,000,000 ordinary shares of 10 pence each. The authorised share capital was increased to £6,000,000, comprising 60,000,000 ordinary shares of 10 pence each, on 20 April 2005. On 20 May 2005, the company's share capital was consolidated by the issue of 91 new ordinary shares of 10 90/91 pence each for every 100 existing ordinary shares of 10 pence each. Following the share consolidation, the authorised share capital became 54,600,000 ordinary shares of 10 90/91 pence each. During the year, 567,314 ordinary shares of 10 90/91 pence each were issued to certain employees of the group at £2.45 per share following the exercise of share options on 1 June 2006 under the terms of the group's Savings-Related Share Option ('SAYE') Scheme. The aggregate nominal value of these shares was £62,342 and the total consideration received was £1,389,919. The market price of the shares on 1 June 2006 was £6.93 per share. On 2 March 2007, the Employee Share Ownership Trust ('the Trust') purchased 180,700 ordinary shares of 10 90/91 pence each of Rensburg Sheppards plc at a price of 900 pence per share; a further 21,650 shares of the same class were purchased by the Trust on 8 March 2007 at 870 pence per share. The shares were purchased to satisfy awards granted by Rensburg Sheppards plc under the 2007 Employee Share Plan. At 31 March 2007, 233,600 ordinary shares of 10 90/91 pence each (2006: 76,660 shares) were held by the Trust. The trustee of the trust is R S Trustees Limited, a wholly owned subsidiary of Rensburg Sheppards plc. These shares are held in order to satisfy outstanding awards under the group's Employee Share Ownership Plan and the 2007 Employee Share Plan, details of which are set out in note 15 below. At 31 March 2007, Investec 1 Limited ('Investec'), an associated company of the group, held 20,657,000 ordinary shares of 10 90/91 pence each (2006: 20,657,000 shares). These shares were issued to Investec under the terms of the acquisition of Carr Sheppards Crosthwaite Limited ('CSC'), which occurred on 6 May 2005. A total of 25,500,000 shares were issued to Investec under the terms of the acquisition, prior to the effect of the share consolidation noted above. Of the 25,500,000 shares issued, 2,800,000 of these shares were immediately transferred by Investec to an Employee Benefit Trust ('EBT'). The 2,800,000 shares were subject to the share consolidation which took place on 20 May 2005 and hence at 31 March 2007 the EBT held 2,548,000 ordinary shares of 10 90/91 pence each (2006: 2,548,000 shares). At 31 March 2007, 457,629 new ordinary shares of 10 90/91 pence each are issuable in respect of outstanding options under the group's current SAYE scheme. 15. Share-based payments The total charge for the year relating to employee share-based payment schemes was £4,815,000 (16 months ended 31 March 2006: £4,472,000), all of which related to equity-settled share-based payment transactions. The equity-settled share and share option schemes relevant to the group are as follows: Save As You Earn The group operates a Savings-Related Share Option ('SAYE') scheme in which all employees of the group are eligible to participate. Options have been granted under the SAYE scheme in April 2003 and December 2006. Options are granted with a fixed exercise price determined in accordance with the scheme rules. The options can be exercised at any time during the six month period following the vesting date. Exercise of the options is subject to continued employment with the group; however, options may be exercised prior to the vesting date where employment ceases as a result of redundancy, ill health or on reaching normal retirement age. The vesting of options is not subject to any performance conditions. 2007 Employee Share Plan Awards were made under the 2007 Employee Share Plan over a fixed number of shares to certain of the group's employees during March 2007. The future award is conditional on the participant remaining in the employment of the group, and not having been given or received notice, by 31 March 2010. The future provision of these shares is not subject to any performance criteria or consideration and no amounts were payable at the time the potential entitlements were conferred. Employee Benefit Trust The Employee Benefit Trust ('EBT') was established by Investec under the terms of the acquisition of Carr Sheppards Crosthwaite Limited ('CSC') by Rensburg Sheppards plc on 6 May 2005. Under the terms of the EBT, the number of shares conferred on each participating employee, or other equivalent benefit, will be transferred to the participants on 6 May 2008 providing that they remain employees of the group at that date. The future provision of these shares is not subject to any performance criteria or consideration and no amounts were payable at the time the potential entitlements were conferred. Employee Share Ownership Plan At 31 March 2007, options in respect of 31,250 shares (2006: 76,660) which were granted to certain of the group's employees under the Employee Share Ownership Plan remain outstanding. All of these options were granted before 7 November 2002 and as such, do not fall within the scope of IFRS 2 Share-based payment. The group has therefore not attributed a fair value to these options. The remaining options are exercisable at any time and are not subject to any performance criteria or consideration. The fair value of all share-based payments arising from share awards granted post 7 November 2002 have been estimated using the Black-Scholes option pricing model. The assumptions used in the calculations are as follows: SAYE SAYE 2007 Employee Employee 2003 2006 Share Plan Benefit Trust Nature of scheme Share options Share options Potential future Potential future entitlement to entitlement to shares shares Grant date 16 Apr 2003 18 Dec 2006 9 Mar 2007 6 May 2005 Share price at grant date £3.19 £8.45 £8.92 £4.99* Exercise price £2.45 £6.60 Nil Nil Shares under option or potential 665,501 461,635 202,350 2,548,000** future entitlement at date of grant Expected volatility 29.3% 24.0% N/A N/A Expected life (years) 3.12 3.12 3.30 3.00 Risk free rate 3.9% 4.8% N/A N/A Expected dividends expressed as a 2.6% 2.9% 2.8% N/A dividend yield Expected forfeiture rate 6% 6% 0% N/A Fair value at date of grant £0.99 £2.42 £8.15 £4.99 * After deduction of the special dividend of 45p paid on 1 June 2005 and the first interim dividend in respect of the six month period ended 31 May 2005 of 6.6p, for which the shares issued to Investec under the terms of the acquisition did not rank. ** After taking account of the share consolidation which took place on 20 May 2005. The expected volatility is based on historic volatility over an appropriate period, consistent with the expected life of the option during the period immediately preceding the date of grant. The risk free rate of return represents the yield on UK Gilt Strip at the date of grant of a term consistent with the life of the option. A reconciliation of the number of shares in respect of which awards have been made is set out below. SAYE SAYE 2007 Employee Employee 2003 2006 Share Plan Benefit Trust Outstanding at 1 December 2004 595,235 - - - Granted - - - 2,800,000 Effect of share consolidation - - - (252,000) Forfeited (17,804) - - - Exercised (10,117) - - - Outstanding at 31 March 2006 567,314 - - 2,548,000 Granted - 461,635 202,250 - Forfeited - (4,006) - - Exercised (567,314) - - - Outstanding at 31 March 2007 - 457,629 202,350 2,548,000 16. Reconciliation of changes in shareholders' equity Capital Available Reval- Share Share redemption -for-sale uation Other Retained Total capital premium reserve reserve reserve reserves earnings equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 December 2004 2,209 9,252 100 2,351 989 6,086 29,028 50,015 Profit after taxation - - - - - - 7,633 7,633 Dividends - - - - - - (16,673) (16,673) Issue of shares: - ordinary shares issued 2,551 24 - - - 124,695 - 127,270 - EBT shares issued for nil - - - - - - (13,972) (13,972) consideration - share issue costs - - - - - (180) - (180) Share-based payments - - - - - - 4,472 4,472 Deferred tax on share-based - - - - - - 598 598 payments Gain on available-for-sale investments: - changes in fair value - - - 738 - - - 738 - transferred to income - - - (2,709) - - - (2,709) statement on disposal Deferred tax on available-for-sale investments: - on changes in fair value - - - (221) - - - (221) - transferred to income - - - 813 - - - 813 statement on disposal Depreciation on revalued - - - - (17) - 17 - property At 31 March 2006 4,760 9,276 100 972 972 130,601 11,103 157,784 Profit after taxation - - - - - - 16,378 16,378 Dividends - - - - - - (9,073) (9,073) Issue of shares 62 1,328 - - - - - 1,390 Share issue costs - (1) - - - - - (1) Purchase of own shares by - - - - - - (1,815) (1,815) Employee Share Ownership Trust Share-based payments - - - - - - 4,815 4,815 Tax relief on share-based - - - - - - 714 714 payments Deferred tax on share-based - - - - - - (762) (762) payments Gain arising on - - - 374 - - - 374 available-for-sale investments Deferred tax on - - - (112) - - - (112) available-for-sale investments Depreciation on revalued - - - - (13) - 13 - property At 31 March 2007 4,822 10,603 100 1,234 959 130,601 21,373 169,692 17. Events after the balance sheet date On 8 May 2007, £10 million of the £60 million subordinated loan, the details of which are set out in note 12, was repaid ahead of schedule. This repayment is in respect of the £15 million floating rate element of the loan and was originally scheduled for repayment in equal annual instalments commencing on 6 May 2008. No penalty arose from the making of this prepayment. Under the terms of the loan agreement, this prepayment is to be applied in chronological order against the future scheduled repayment obligations of the floating rate portion of the loan. Interest payable on the loan is calculated on a daily basis, based on the balance of the loan outstanding; therefore, no further interest expense will be incurred in respect of the £10 million that has been repaid after the repayment date of 8 May 2007. On 12 June 2007, the directors proposed a final dividend in respect of the year ended 31 March 2007 of 15.0 pence per share. Subject to the approval of shareholders at the forthcoming annual general meeting, which is to be held on 31 July 2007, the dividend will be payable on 10 August 2007 to shareholders on the register at the close of business on 20 July 2007. 18. Transition to IFRS On 13 October 2006 the group announced the effect of the transition to International Financial Reporting Standards as adopted by the European Union (' IFRS') on its results previously reported under UK GAAP. This transitional statement is available on the group's website at www.rensburgsheppards.co.uk. The effect of the transition to IFRS on the group's total equity at 31 March 2006 and its profit after tax for the 16 months ended 31 March 2006, which is explained fully in the transitional statement, is summarised below. Summary reconciliation of changes in equity At 31 March 2006 £'000 Total equity as previously reported under UK GAAP 153,675 Revaluation of available-for-sale investments 1,388 Deferred tax on revaluation of available-for-sale investments (416) Deferred tax on share-based payments 1,069 Dividends 5,783 Revaluation of property, plant and equipment 1,389 Deferred tax on revaluation of property, plant and equipment (417) Business combinations 5,059 EBT prepayment taken to equity (9,746) Total value of IFRS adjustments 4,109 Total equity as restated under IFRS 157,784 Summary reconciliation of changes in profit after tax 2006 16 months ended 31 March £'000 Profit after tax as previously reported under UK GAAP 2,763 Business combinations 3,539 Revaluation of property, plant and equipment (24) Share-based payments (246) Tax effect of above adjustments 1,601 Total value of IFRS adjustments 4,870 Profit after tax as restated under IFRS 7,633 This information is provided by RNS The company news service from the London Stock Exchange

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