Half Yearly Report

RNS Number : 6652C

Rensburg Sheppards plc

18 November 2009

 



   18 November 2009

Rensburg Sheppards plc

('Rensburg Sheppards' or 'the Company')

Half-Yearly Financial Report

Rensburg Sheppards, the investment management group, today announces its half-yearly results for the six months ended 30 September 2009

Key Points:

• Profit before tax of £12.5 million (2008: £16.4 million*).

• Adjusted** profit before tax of £14.1 million (2008: £19.6 million*).

• Basic earnings per share of 20.4p (2008: 26.2p*).

• Adjusted** basic earnings per share of 23.1p (2008: 31.8p*).

• Interim dividend maintained at 8.5p per ordinary share.

• Group funds under management at 30 September 2009 of £12.13 billion (31 March 2009: £10.01 billion).

• Appointment of three executive directors, effective 1 December 2009.

• Post period end, a team of eight investment managers has joined the Edinburgh office.

* As restated following change in accounting policy resulting from the implementation of the amendment to IFRS 2. 

** Before amortisation of client relationship intangible assets, share-based charges relating to the Employee Benefit Trust ('EBT') and the profit on disposal of intangible assets. These items amount to a net charge before tax of £1.6 million (2008: £3.2 million) and a net charge after tax of £1.2 million (2008: £2.5 million).

Steve Elliott, Chief Executive of Rensburg Sheppards, commented:

''I believe these results reflect Rensburg Sheppards' ability to withstand difficult market conditions and to take advantage of opportunities to take the business forward. We remain focussed on maintaining our strong client relationships and on maximising net organic growth in funds under management.''

An analysts' meeting will be held today at 9.30 am at the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN. 

For further information, please contact:
Steve Elliott, Chief Executive Jonathan Wragg, Finance Director Rensburg Sheppards plc	Tel: [phone]
Nick Lyon / James Macey White Hudson Sandler	Tel: [phone]

Interim Management Report 

The six months to 30 September 2009 saw a transformation in market sentiment, from fears of a deepening and prolonged recession in the spring, via a mood of relief that financial markets and economies were stabilising, to a consensus by September that a modest economic recovery was showing signs of emerging. This was enough to effect strong rises in equity and credit markets, recovering much of the ground lost in the aftermath of the Lehman Brothers failure. Although this recovery may be viewed as being out of proportion to the improvement in the cyclical outlook, the earlier falls also appeared to have been exaggerated, allowing a calmer environment to unwind part of the fear-driven collapse in asset prices last winter. 

Whilst welcoming the recovery described above, these results, which span the six month period ended 30 September 2009, inevitably reflect the markedly lower average market and interest rate levels experienced between this and the corresponding period of the prior year. Having said this, we consider these results continue to demonstrate the underlying resilience of the Rensburg Sheppards business. It is also encouraging to note that since the period end the financial markets have maintained their recovery.

Financial results and dividend

From revenue (net of fees and commissions payable to introducers) of £51.6 million (2008: £57.5 million), the group's profit before tax was £12.5 million (2008 restated: £16.4 million). After excluding a net charge totalling £1.6 million (2008: £3.2 million) in respect of the amortisation of client relationship intangible assets, share-based charges relating to the Employee Benefit Trust ('EBT') and the profit on disposal of intangible assets, the resulting adjusted profit before tax was £14.1 million (2008 restated: £19.6 million). 

Basic earnings per share were 20.4p (2008 restated: 26.2p). After adjusting for the items detailed in the paragraph above, together with the associated tax consequences of these adjustments, the adjusted basic earnings per share were 23.1p (2008 restated: 31.8p). It continues to be the directors' opinion that the adjusted measures of profit before tax and of earnings represent better measures of the group's underlying financial performance.

The directors have declared a maintained interim dividend of 8.5p per ordinary share payable on 5 February 2010 to all shareholders on the register at the close of business on 8 January 2010. 

Rensburg Sheppards Investment Management ('RSIM')

Excluding interest from client deposits, fee and other recurring income fell by just 1.6% to £30.7 million (2008: £31.2 million). This marginal reduction compares very favourably against the 12.4% reduction in the average of the FTSE APCIMS Private Investors Balanced Index ('APCIMS Index') at the key quarterly billing points between the first halves of 2008 and 2009 respectively. Interest from client deposits halved to £3.8 million (2008: £7.6 million) as the UK base rate remained at its historically low level of 0.5% throughout the period, coupled with the recent historically high spreads between the UK base rate and the three month LIBOR melting away sharply as the period progressed. 

Non-recurring income, which principally comprises commissions, decreased by 1.5% to £12.9 million (2008: £13.1 million). This performance reflects increasing levels of activity as the period progressed and equity markets recovered further.

At 30 September 2009, discretionary funds under management were £7.93 billion (31 March 2009: £6.46 billion), an increase of 22.8%, whilst non-discretionary funds under management were £2.92 billion (31 March 2009: £2.47 billion), an increase of 18.2%. This gave total funds under management at 30 September 2009 of £10.85 billion (31 March 2009: £8.93 billion), an increase over the six month period of 21.5%, compared with the increase of 19.2% during this period in the APCIMS Index. Of these total funds, 73.1% are managed on a discretionary basis, compared with 72.3% at 31 March 2009.

Shortly following the end of the period RSIM lost two discretionary mandates of an institutional nature which, when combined, represented £284.5 million of funds under management, but in income terms were very low yielding. These funds, which are not typical of the profile of the funds managed by RSIM, have been deducted from the funds under management figures at 30 September 2009 disclosed above. Excluding the effect of these departing funds, together with the benefit of £49.8 million of funds acquired from Investec Asset Management during the period, the net organic growth achieved over the six months ended 30 September 2009 was 2.6% (2008: 0.8%). Increasing the level of organic growth in funds under management remains a key strategic objective, and to this end we are seeking ways to support our staff in delivering this on a sustainable basis.  

One structural change that seems likely in the wider economy and will benefit RSIM is an increase in personal savings, both as part of a desire to reduce indebtedness and as changes in final salary pension schemes force individuals to rely more on investment returns from their own savings, rather than relying on a defined income from an institutional source. We believe that RSIM's business model is well suited to giving clients the informed and impartial advice they need in order to preserve and grow their wealth during what could prove to be a less predictable growth environment than most economies have enjoyed during the past 25 years.

Shortly following the period end, it was announced that RSIM has appointed a team of eight experienced investment mangers to join the Edinburgh office, which was established in April 2008. We are pleased to confirm that yesterday this team commenced their employment with RSIM and we now look forward to developing our service capability in this important financial centre.  

Rensburg Fund Management ('RFM') 

Recurring income in RFM, which comprises the manager's ad valorem service charge, was £3.5 million (2008: £5.0 million), a 30.0% reduction over the comparable period of the prior year. This was brought about principally by the distinctly lower average market levels when comparing the two half-years. On the same basis, non-recurring income, which mainly comprises profits from sales of units, was £0.65 million (2008: £0.64 million).  

Over the six months to 30 September 2009, the value of RFM's retail unit trust based funds under management increased by 15.8% to £886.7 million (31 March 2009: £765.5 million). Excluding the Corporate Bond trust, which at 31 March 2009 stood at £98.7 million and was subsequently disposed of in July 2009, the increase in funds under management during the six month period was 33.0%. This compares with the corresponding increase of 32.8% in the FTSE All-Share index. The net inflow into RFM's seven current trusts totalled £14.0 million during the period. 

The disposal of the Corporate Bond trust during the period resulted in a profit on disposal of £0.92 million. This represents the directors' estimate of RFM's share of the net income from this trust which will be received over the three years subsequent to the disposal, in accordance with the terms of the sale agreement. 

The value of the segregated mandate managed by RFM increased by 24.7% to £388.8 million (31 March 2009: £311.7 million); this included the effect of a net capital outflow of £5.0 million during the six months to 30 September 2009. Combining the unit trust and segregated mandate funds gives RFM's total funds under management at 30 September 2009 of £1.28 billion (31 March 2009: £1.08 billion).  

Group funds under management

The group's total funds under management at 30 September 2009 were £12.13 billion (31 March 2009: £10.01 billion), an increase of £2.12 billion, or 21.2%, since 31 March 2009. This compared with the increases of 19.2% in the FTSE APCIMS Private Investors Balanced and 32.8% in the FTSE All-Share indices over this period.

People

The board is pleased to announce, with effect from 1 December 2009, the appointments of Judy Price, Simon Kaye and Tom Street as executive directors of the company.  Judy Price is currently the chief operations officer for RSIM, taking responsibility for settlements, IT, projects and administration. Judy joined Sheppards in 1986. Simon Kaye and Tom Street are both currently divisional investment directors of RSIM, heading the Leeds and Sheffield offices respectively, positions in which they are well established. Simon joined the Rensburg Sheppards group in Huddersfield in 1986 when it traded as Battye Wimpenny & Dawson ('BWD'). Tom joined Rensburg in its Liverpool office in 1987. Each of these individuals brings to the board considerable experience of operating successfully within the investment management arena and will play a key role in our drive to secure the future growth of the business.

Although the exceptionally difficult conditions experienced last autumn and in the early months of 2009 have eased during the period under review, it has remained a challenging operating environment. For their success in continuing to take the business forward during this time we would like to record formally the board's thanks to all of the group's staff.  

Outlook

Since 30 September 2009, the UK financial markets have maintained their recovery, and this is being reflected in increased levels of activity. The authorities now have a delicate balancing act to perform in sustaining the emerging recovery while ensuring that investors have confidence that the risks of inflation and growing national indebtedness will be addressed effectively. Whilst this will give financial markets mixed influences to react to in the near-term, this is an altogether much better prospect than last winter's threat of a downward spiral in activity followed by a deep and prolonged recession.

We remain confident that Rensburg Sheppards continues to be well positioned to withstand any further downturns that may be experienced along the path to a sustained economic recovery and to continue to benefit as confidence returns.  

C.G. Clarke	S.M. Elliott
Chairman	Chief Executive
17 November 2009

Consolidated income statement

for the six months ended 30 September 2009

					Restated		Restated
			2009		2008		2009
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
			(unaudited)		(unaudited)		(audited)
	Note		£'000		£'000		£'000
Revenue			55,932		62,480		118,874
Fees and commissions payable			(4,313)		(4,940)		(8,539)
Net revenue	2		51,619		57,540		110,335
Share-based payments - EBT	3		-		(440)		(440)
Amortisation of intangible assets - client relationships			(2,533)		(2,802)		(5,603)
Other operating expenses			(37,032)		(38,173)		(73,888)
Operating expenses			(39,565)		(41,415)		(79,931)
Operating profit			12,054		16,125		30,404
Profit on disposal of intangible assets			920		-		-
Loss on disposal of available-for-sale investments			-		-		(68)
Finance income			752		1,733		2,845
Finance expenses	4		(1,263)		(1,498)		(2,940)
Profit before tax			12,463		16,360		30,241
Taxation	5		(3,549)		(4,941)		(9,085)
Profit for the period attributable to the equity holders of the company			8,914		11,419		21,156
Earnings per share	7
Basic			20.4p		26.2p		48.5p
Diluted			20.2p		26.1p		48.4p

Consolidated statement of comprehensive income

for the six months ended 30 September 2009

					Restated		Restated
			2009		2008		2009
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
			(unaudited)		(unaudited)		(audited)
			£'000		£'000		£'000
Profit for the period			8,914		11,419		21,156
Other comprehensive income:
Gain/(loss) arising from changes in fair value of available-for-sale investments			365		(647)		(940)
Loss on disposal of available-for-sale investments transferred to the income statement			-		-		34
Gain arising from change in fair value of property			-		278		278
Tax relating to components of other comprehensive income			(83)		449		502
Other comprehensive income for the period, net of tax			282		80		(126)
Total comprehensive income for the period net of tax, attributable to the equity holders of the company			9,196		11,499		21,030

Consolidated balance sheet

at 30 September 2009

						2009		2008		2009
						30 September		30 September		31 March
						(unaudited)		(unaudited)		(audited)
				Note		£'000		£'000		£'000
Assets
Non-current assets
Intangible assets				8		174,768		178,861		176,542
Property, plant and equipment				9		5,231		5,562		5,532
Available-for-sale investments						1,845		2,180		1,464
Trade and other receivables				10		614		-		-
Deferred tax assets						2,055		1,435		1,594
						184,513		188,038		185,132
Current assets
Trade and other receivables						110,111		156,458		133,814
Cash and cash equivalents				11		68,721		53,927		71,217
						178,832		210,385		205,031
Total assets						363,345		398,423		390,163
Liabilities
Current liabilities
Trade and other payables						(110,508)		(147,340)		(133,093)
Subordinated loan				12		(5,625)		(5,625)		(5,625)
Provisions				13		(371)		(82)		(122)
Current tax liabilities						(4,682)		(5,910)		(5,487)
						(121,186)		(158,957)		(144,327)
Non-current liabilities
Accruals and deferred income						(2,190)		(1,593)		(2,247)
Subordinated loan				12		(28,125)		(33,750)		(33,750)
Provisions				13		(852)		(568)		(592)
Deferred tax liabilities						(10,949)		(12,419)		(11,564)
						(42,116)		(48,330)		(48,153)
Total liabilities						(163,302)		(207,287)		(192,480)
Net assets						200,043		191,136		197,683
Equity attributable to the equity holders of the company
Share capital				14		4,822		4,822		4,822
Share premium						10,617		10,617		10,617
Capital redemption reserve						100		100		100
Available-for-sale reserve						1,070		994		807
Revaluation reserve						1,493		1,512		1,483
Other reserves						130,601		130,601		130,601
Retained earnings						51,340		42,490		49,253
Total equity						200,043		191,136		197,683

Consolidated cash flow statement

for the six months ended 30 September 2009

					Restated		Restated
			2009		2008		2009
			Six months		Six months		Year
			ended		ended		ended
			30 September		30 September		31 March
			(unaudited)		(unaudited)		(audited)
			£'000		£'000		£'000
Cash flows from operating activities
Profit before taxation			12,463		16,360		30,241
Adjustments for:
- Amortisation of intangible assets			2,749		3,046		6,049
- Finance expenses			1,263		1,498		2,940
- Finance income			(752)		(1,733)		(2,845)
- Depreciation			505		500		1,008
Share-based payments			530		949		1,685
Profit on disposal of intangible assets			(920)		-		-
Loss on disposal of available-for-sale investments			-		-		68
Decrease/(increase) in trade and other receivables			24,333		(32,355)		(9,887)
(Decrease)/increase in trade payables and provisions			(22,302)		21,031		7,161
Cash generated from operations			17,869		9,296		36,420
Interest received			373		1,515		2,771
Dividends received			55		68		100
Interest paid			(33)		(7)		(25)
Taxation paid			(5,320)		(6,741)		(12,278)
Net cash inflow from operating activities			12,944		4,131		26,988
Cash flows from investing activities
Purchase of property, plant and equipment			(204)		(587)		(1,065)
Purchase of intangible assets - computer software			(428)		(135)		(699)
Purchase of available-for-sale investments			(16)		-		-
Proceeds from disposal of available-for-sale investments			-		-		389
Net cash outflow from investing activities			(648)		(722)		(1,375)
Cash flows from financing activities
Dividends paid to shareholders			(7,427)		(7,421)		(11,132)
Repayment of subordinated loan			(5,625)		(10,625)		(10,625)
Interest paid on subordinated loan			(1,397)		(1,796)		(3,216)
Net cash outflow from financing activities			(14,449)		(19,842)		(24,973)
Net (decrease)/increase in cash and cash equivalents			(2,153)		(16,433)		640
Cash and cash equivalents at start of period			70,872		70,232		70,232
Cash and cash equivalents at end of period	11		68,719		53,799		70,872

Consolidated statement of changes in equity

for the six months ended 30 September 2009 (unaudited)

			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 April 2008	4,822	10,617	100	1,460	973	130,601	37,542	186,115
Dividends	-	-	-	-	-	-	(7,421)	(7,421)
Share-based payments (restated)	-	-	-	-	-	-	949	949
Deferred tax on share-based payments	-	-	-	-	-	-	(6)	(6)
Total comprehensive income for the period (restated)	-	-	-	(466)	546	-	11,419	11,499
Depreciation on revalued property	-	-	-	-	(7)	-	7	-
At 30 September 2008	4,822	10,617	100	994	1,512	130,601	42,490	191,136
Dividends	-	-	-	-	-	-	(3,711)	(3,711)
Share-based payments (restated)	-	-	-	-	-	-	736	736
Deferred tax on share-based payments	-	-	-	-	-	-	(9)	(9)
Total comprehensive income for the period (restated)	-	-	-	(187)	(19)	-	9,737	9,531
Depreciation on revalued property	-	-	-	-	(10)	-	10	-
At 31 March 2009	4,822	10,617	100	807	1,483	130,601	49,253	197,683
Dividends	-	-	-	-	-	-	(7,427)	(7,427)
Share-based payments	-	-	-	-	-	-	398	398
Deferred tax on share-based payments	-	-	-	-	-	-	193	193
Total comprehensive income for the period	-	-	-	263	19	-	8,914	9,196
Depreciation on revalued property	-	-	-	-	(9)	-	9	-
At 30 September 2009	4,822	10,617	100	1,070	1,493	130,601	51,340	200,043

Notes to the condensed financial statements

1. Basis of preparation and statement of compliance

Rensburg Sheppards plc ('the company') is a public company incorporated in the United Kingdom. The shares of the company are listed on the London Stock Exchange. The consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity, and the related notes represent condensed consolidated interim financial statements of the company and comprise those of the company and its subsidiaries (together referred to as 'the group'). The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 March 2009.  

The financial information contained in these condensed consolidated interim financial statements is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The comparative figures for the year ended 31 March 2009 are not the company's statutory accounts for that year.  Those accounts have been reported on by the auditor of the company and delivered to the Registrar of Companies.   The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

The directors have undertaken a review to consider the use of the going concern basis for the preparation of these condensed consolidated interim financial statements. No new activities, events or circumstances have arisen since 31 March 2009 which might affect the group's ability to continue as a going concern. These condensed consolidated interim financial statements have therefore been prepared on the going concern basis.

Change in accounting policies and disclosures

The accounting policies applied are the same as those applied by the group in its consolidated financial statements for the year ended 31 March 2009, other than with regard to changes in accounting policies and disclosures that have been applied during the period as a result of changes to International Financial Reporting Standards, as set out below.

(i) Operating segments

IFRS 8 Operating segments became effective for the group on 1 April 2009. The group has applied the requirements of the standard in determining its operating segments and the information disclosed regarding those segments.  The segmental disclosure set out in note 2 is based on the financial information that is presented to the board of Rensburg Sheppards plc, which represents the chief operating decision maker of the group.  Following the implementation of IFRS 8, the group continues to have two operating segments, being the investment management segment and the fund management segment.  

Comparative information has been restated in accordance with the transitional requirements of IFRS 8. The change of accounting policy that has arisen as a result of this standard relates only to presentation and disclosure, and there is no effect on profit after tax or earnings per share. 

(ii) Presentation of financial statements

IAS 1 (revised 2007) Presentation of financial statements became effective for the group on 1 April 2009. As a result, the group has presented a consolidated statement of changes in equity and a consolidated statement of comprehensive income. The consolidated statement of changes in equity reconciles the carrying value of each component of equity at the beginning and end of the period.  The statement of comprehensive income comprises items of income and expenditure other than those recognised in the income statement. 

Comparative information has been re-presented on a basis consistent with that for the six months ended 30 September 2009. The change of accounting policy that has arisen as a result of the revised standard relates only to presentation of information, and there is no effect on profit after tax or earnings per share. 

(iii) Share-based payments

An amendment to IFRS 2 Share-based payment - vesting conditions and cancellations became effective for the group on 1 April 2009. The amendment changes the definition of vesting conditions in respect of employee share option schemes. Following the adoption of the amendment, the requirement to save is now considered to be a vesting condition that should be taken into account when calculating the fair value at the date of grant. In addition, where an employee decides to withdraw from a share option scheme, their withdrawal is treated as a cancellation of the award. As a result, any remaining share-based charge that would have been recognised over the remaining vesting period is recognised in full at the time of cancellation.

The amendment has been applied retrospectively, in accordance with its transitional provisions.  Comparative information in respect of the six months ended 30 September 2008 and the year ended 31 March 2009 has been restated accordingly. The financial effect is to increase operating expenses and reduce profit after tax by £65,000 for the six months ended 30 September 2008, and by £253,000 for the year ended 31 March 2009.  Basic earnings per share have reduced by 0.1 pence per share in respect of the six months ended 30 September 2008 and by 0.5 pence per share in respect of the year ended 31 March 2009.  There is no material financial effect on earlier periods, and hence no additional balance sheet prior to that at 30 September 2008 has been presented.  Profit after tax and basic earnings per share for the six months ended 30 September 2009 are £253,000 and 0.6 pence per share greater respectively as a result of the implementation of the amendment during the period.

2. Revenue and segmental information

For management and internal reporting purposes, the group is organised into two business segments, being Investment Management and Fund Management.  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.

Six months ended 30 September 2009

		Investment		Fund
		Management		Management		Eliminations		Group
		£'000		£'000		£'000		£'000
Revenue
External		48,845		7,087		-		55,932
Inter-segment		348		-		(348)		-
		49,193		7,087		(348)		55,932
Fees and commissions payable		(1,749)		(2,912)		348		(4,313)
Segmental net revenue		47,444		4,175		-		51,619
Costs excluding amortisation of client relationship intangible assets and non-operating items:
Staff costs - fixed		(18,044)		(905)		-		(18,949)
Other costs - fixed		(8,193)		(1,190)		-		(9,383)
Total fixed costs		(26,237)		(2,095)		-		(28,332)
Staff costs - variable		(8,091)		(609)		-		(8,700)
Total costs		(34,328)		(2,704)		-		(37,032)
Operating profit before amortisation of client relationship intangible assets and non-operating items		13,116		1,471		-		14,587
Interest receivable and other finance income		729		23		-		752
Interest payable		(1,263)		-		-		(1,263)
Profit before tax, amortisation of client relationship intangible assets and non-operating items		12,582		1,494		-		14,076
Amortisation of client relationship intangible assets		(2,533)		-		-		(2,533)
Profit on disposal of intangible assets		-		920		-		920
Profit before taxation		10,049		2,414		-		12,463
Taxation		(2,863)		(686)		-		(3,549)
Profit after taxation		7,186		1,728		-		8,914
Segmental net revenue comprises:
Fees		26,706		3,527		-		30,233
Commission		11,559		-		-		11,559
Interest from client deposits		3,802		-		-		3,802
Trail commission		2,247		-		-		2,247
Profit on sale of units of unit trusts		-		632		-		632
Other income		3,130		16		-		3,146
Total segmental net revenue		47,444		4,175		-		51,619
Segmental profit is stated after charging:
Depreciation		504		1		-		505
Amortisation		2,749		-		-		2,749

Six months ended 30 September 2008

		Investment		Fund
		Management		Management		Eliminations		Group
		£'000		£'000		£'000		£'000
Revenue
External		53,610		8,870		-		62,480
Inter-segment		318		-		(318)		-
		53,928		8,870		(318)		62,480
Fees and commissions payable		(2,009)		(3,249)		318		(4,940)
Segmental net revenue		51,919		5,621		-		57,540
Costs excluding amortisation of client relationship intangible assets and non-operating items:
Staff costs - fixed		(18,098)		(943)		-		(19,041)
Other costs - fixed		(8,924)		(1,163)		-		(10,087)
Total fixed costs		(27,022)		(2,106)		-		(29,128)
Staff costs - variable		(7,939)		(1,106)		-		(9,045)
Total costs		(34,961)		(3,212)		-		(38,173)
Operating profit before amortisation of client relationship intangible assets and non-operating items		16,958		2,409		-		19,367
Interest receivable and other finance income		1,467		266		-		1,733
Interest payable		(1,498)		-		-		(1,498)
Profit before tax, amortisation of client relationship intangible assets and non-operating items		16,927		2,675		-		19,602
Amortisation of client relationship intangible assets		(2,802)		-		-		(2,802)
Share-based payments - EBT		(440)		-		-		(440)
Profit before taxation		13,685		2,675		-		16,360
Taxation		(4,136)		(805)		-		(4,941)
Profit after taxation		9,549		1,870		-		11,419
Segmental net revenue comprises:
Fees		26,596		4,981		-		31,577
Commission		11,048		-		-		11,048
Interest from client deposits		7,589		-		-		7,589
Trail commission		2,844		-		-		2,844
Profit on sale of units of unit trusts		-		624		-		624
Other income		3,842		16		-		3,858
Total segmental net revenue		51,919		5,621		-		57,540
Segmental profit is stated after charging:
Depreciation		499		1		-		500
Amortisation		3,046		-		-		3,046

Year ended 31 March 2009

		Investment		Fund
		Management		Management		Eliminations		Group
		£'000		£'000		£'000		£'000
Revenue
External		102,915		15,959		-		118,874
Inter-segment		619		-		(619)		-
		103,534		15,959		(619)		118,874
Fees and commissions payable		(3,492)		(5,666)		619		(8,539)
Segmental net revenue		100,042		10,293		-		110,335
Costs excluding amortisation of client relationship intangible assets and non-operating items:
Staff costs - fixed		(36,299)		(1,894)		-		(38,193)
Other costs - fixed		(18,115)		(2,245)		-		(20,360)
Total fixed costs		(54,414)		(4,139)		-		(58,553)
Staff costs - variable		(13,435)		(1,900)		-		(15,335)
Total costs		(67,849)		(6,039)		-		(73,888)
Operating profit before amortisation of client relationship intangible assets and non-operating items		32,193		4,254		-		36,447
Interest receivable and other finance income		2,462		383		-		2,845
Interest payable		(2,940)		-		-		(2,940)
Profit before tax, amortisation of client relationship intangible assets and non-operating items		31,715		4,637		-		36,352
Loss on disposal of available-for-sale investments		(68)		-		-		(68)
Amortisation of client relationship intangible assets		(5,603)		-		-		(5,603)
Share-based payments - EBT		(440)		-		-		(440)
Profit before taxation		25,604		4,637		-		30,241
Taxation		(7,759)		(1,326)		-		(9,085)
Profit after taxation		17,845		3,311		-		21,156
Segmental net revenue comprises:
Fees		49,641		9,042		-		58,683
Commission		22,438		-		-		22,438
Interest from client deposits		16,011		-		-		16,011
Trail commission		5,184		-		-		5,184
Profit on sale of units of unit trusts		-		1,180		-		1,180
Other income		6,768		71		-		6,839
Total segmental net revenue		100,042		10,293		-		110,335
Segmental profit is stated after charging:
Depreciation		1,006		2		-		1,008
Amortisation		6,049		-		-		6,049

Of the segmental net revenue shown above, fees, interest from client deposits, trail commission and certain amounts within other income are deemed to be recurring in nature. Recurring income amounted to £34,504,000 in respect of the Investment Management segment (September 2008: £38,802,000; March 2009: £74,046,000) and £3,527,000 in respect of the Fund Management segment (September 2008: £4,981,000; March 2009: £9,042,000).

3. Share-based payments

The total charge for the period in respect of employee share and share option schemes was £530,000 (September 2008 restated: £949,000; March 2009 restated: £1,685,000), all of which represents equity-settled share-based payment transactions.  Awards made under the Employee Benefit Trust vested during the year ended 31 March 2009, and hence no charge has been incurred during the six months ended 30 September 2009 in respect of the EBT (September 2008: £440,000; March 2009: £440,000).

The movements during the period in the number of shares in respect of which awards were outstanding are set out below:

				Employee
	SAYE	SAYE	2007 Employee	Share
	2006	2008	Share Plan	Ownership Plan
	No.	No.	No.	No.
Outstanding at 1 April 2009	6,005	1,146,734	202,350	8,000
Forfeited	(286)	(22,615)	-	-
Exercised	-	-	(5,353)	(8,000)
Outstanding at 30 September 2009	5,719	1,124,119	196,997	-

On 1 April 2009, an amendment to IFRS 2 Share-based payment - vesting conditions and cancellations became effective for the group. The financial effect of this amendment for the six months ended 30 September 2009 and prior periods is set out in note 1. 

4. Finance expenses

Finance expenses include interest payable of £1,249,000 relating to the subordinated loan (September 2008: £1,491,000; March 2009: £2,896,000). 

5. Taxation

The tax expense for the six months ended 30 September 2009 has been calculated using the estimated annual effective rate of tax for the year ending 31 March 2010.  The tax charge recognised in the income statement comprises:

	2009		2008		2009
	Six months		Six months		Year
	ended		ended		ended
	30 September		30 September		31 March
	£'000		£'000		£'000
United Kingdom corporation tax	4,515		5,831		10,945
Deferred tax	(966)		(890)		(1,860)
	3,549		4,941		9,085

6. Dividend

The interim dividend declared for the six months ended 30 September 2009 of 8.5 pence per ordinary share is payable on 5 February 2010 to shareholders on the register as at the close of business on 8 January 2010. 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 30 September 2009.

7. Earnings per share    

Basic earnings per share is calculated with reference to earnings for shareholders of £8,914,000 (September 2008 restated: £11,419,000; March 2009 restated: £21,156,000) and the weighted average number of shares in issue during the period of 43,679,687 (September 2008: 43,654,177; March 2009: 43,659,112). Adjusted earnings per share is calculated with reference to earnings for shareholders of £10,076,000 (September 2008 restated: £13,876,000; March 2009 restated: £25,679,000).  Details of the adjusted items are set out in the table below.

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 427,168 shares (September 2008: 35,811; March 2009: 92,921).  

The directors believe that the provision of additional earnings per share figures, which exclude the amortisation of client relationship intangible assets, profit on disposal of intangible assets, share-based payments relating to the EBT and the loss on disposal of available-for-sale investments, better represent underlying business performance. The effect of these adjustments on earnings and earnings per share is set out below. Comparative figures in respect of the six months ended 30 September 2008 and the year ended 31 March 2009 have been restated following the adoption of the amendment to IFRS 2 Share-based payment - vesting conditions and cancellations, details of which are set out in note 1:

			Basic		Diluted
	Earnings		EPS		EPS
Six months ended 30 September 2009	£'000		Pence		Pence
Unadjusted earnings and EPS	8,914		20.4		20.2
Amortisation of intangible assets - client relationships	2,533		5.8		5.7
Profit on disposal of intangible assets	(920)		(2.1)		(2.1)
Tax arising on adjusted items at 28%	(451)		(1.0)		(1.0)
Adjusted earnings and EPS	10,076		23.1		22.8

	Restated		Restated		Restated
			Basic		Diluted
	Earnings		EPS		EPS
Six months ended 30 September 2008	£'000		Pence		Pence
Unadjusted earnings and EPS	11,419		26.2		26.1
Share-based payments - EBT	440		1.0		1.0
Amortisation of intangible assets - client relationships	2,802		6.4		6.4
Tax arising on adjusted items at 28%	(785)		(1.8)		(1.7)
Adjusted earnings and EPS	13,876		31.8		31.8

	Restated		Restated		Restated
			Basic		Diluted
	Earnings		EPS		EPS
Year ended 31 March 2009	£'000		Pence		Pence
Unadjusted earnings and EPS	21,156		48.5		48.4
Share-based payments - EBT	440		1.0		1.0
Amortisation of intangible assets - client relationships	5,603		12.8		12.8
Loss on disposal of available-for-sale investments	68		0.1		0.1
Tax arising on adjusted items at 28%	(1,588)		(3.6)		(3.6)
Adjusted earnings and EPS	25,679		58.8		58.7

8. Intangible assets

				Client		Computer
		Goodwill		relationships		software		Total
		£'000		£'000		£'000		£'000
Cost
At 1 April 2008		136,385		61,138		2,229		199,752
Additions		-		-		135		135
At 30 September 2008		136,385		61,138		2,364		199,887
Additions		-		120		564		684
At 31 March 2009		136,385		61,258		2,928		200,571
Additions		-		547		428		975
At 30 September 2009		136,385		61,805		3,356		201,546
Amortisation
At 1 April 2008		-		16,272		1,708		17,980
Charged during the period		-		2,802		244		3,046
At 30 September 2008		-		19,074		1,952		21,026
Charged during the period		-		2,801		202		3,003
At 31 March 2009		-		21,875		2,154		24,029
Charged during the period		-		2,533		216		2,749
At 30 September 2009		-		24,408		2,370		26,778
Net book value
At 30 September 2009		136,385		37,397		986		174,768
At 30 September 2008		136,385		42,064		412		178,861
At 31 March 2009		136,385		39,383		774		176,542

Additions to client relationships during the period of £547,000 relate to client relationship agreements acquired from Investec Asset Management Limited under the terms of an agreement that was entered into on 18 November 2008.   The deferred contingent consideration payable in respect of the client relationships acquired is recognised within provisions in note 13.

During the period, the group transferred the management of its Corporate Bond unit trust to Gartmore Fund Managers Limited. The right to manage the trust represented an intangible asset.  The asset had a carrying value of nil at the date of its disposal, by virtue of it having been generated internally. The profit arising on the disposal was £920,000.

The carrying values of intangible assets are subject to an annual impairment review. The directors have considered whether there are any indications that the intangible assets may have become impaired in the period following the latest annual impairment review, and have concluded that there are no indications of impairment either at 30 September 2009 or the date of this report.

9. Property, plant and equipment

During the six months ended 30 September 2009, the group acquired assets with a cost of £204,000 (September 2008: £587,000; March 2009: £1,065,000).  No assets were disposed of during the six months ended 30 September 2009 (September 2008: nil; March 2009: assets with a cost of £226,000 and a carrying value of nil were disposed of, with no profit or loss arising on disposal).

10. Trade and other receivables

Trade and other receivables presented within non-current assets comprise the group's estimate of amounts receivable after more than one year from Gartmore Asset Management Limited, in respect of the transfer of the management of the Corporate Bond Trust during the period. Details of the transfer are set out in note 8.

11. Cash, cash equivalents and bank overdrafts

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.

	2009		2008		2009
	30 September		30 September		31 March
	£'000		£'000		£'000
Cash and cash equivalents	68,721		53,927		71,217
Bank overdrafts	(2)		(128)		(345)
	68,719		53,799		70,872

12. Subordinated loan

The carrying value of the subordinated loan of £33.750 million at 30 September 2009 is subject to a fixed rate of interest of 7.155% per annum.  On 6 May 2009, £5.625 million of the loan was repaid in accordance with the normal repayment schedule.

13. Provisions

		Deferred
		contingent		Onerous		Property
		consideration		leases		dilapidations		Total
		£'000		£'000		£'000		£'000
At 1 April 2009
Current liabilities		57		65		-		122
Non-current liabilities		63		232		297		592
		120		297		297		714
Charged to the income statement		-		8		-		8
Capitalised during the period		547		-		-		547
Utilised during the period		-		(46)		-		(46)
At 30 September 2009		667		259		297		1,223

The balances at 30 September 2009 are categorised as follows:

	Deferred
	contingent		Onerous		Property
	consideration		leases		dilapidations		Total
	£'000		£'000		£'000		£'000
Current liabilities	300		71		-		371
Non-current liabilities	367		188		297		852
	667		259		297		1,223

14. Share capital

There have been no changes to the company's issued share capital during the period.  

15. Contingent assets and liabilities

The group's principal trading subsidiary, Rensburg Sheppards Investment Management Limited ('RSIM'), is continuing to seek to agree a basis with HM Revenue & Customs ('HMRC') on which to determine the amount of input VAT it can recover on the goods and services it purchases. Once agreed, this basis of recovery of input VAT, known as a partial exemption special method ('special method') will be applied retrospectively from May 2005, being the point at which the group acquired Carr Sheppards Crosthwaite Limited ('CSC'). The special methods that existed and were applied by the group and CSC prior to May 2005, and had been agreed with HMRC, ceased as a result of the acquisition, and it became necessary to agree a special method with HMRC for the enlarged business.

The special method that RSIM has proposed to HMRC was formally rejected by HMRC during the year ended 31 March 2009, and this decision was upheld following an internal reconsideration of the decision within HMRC. RSIM has appealed to the VAT tribunal against the decision to reject the proposed special method. The date for the tribunal hearing has been deferred pending the outcome of an industry-wide consultation which HMRC is currently undertaking regarding the VAT liability of dealing charges in respect of portfolios that are managed on a discretionary basis, as the outcome of this consultation may impact the proposed special method. 

Pending the outcome of the tribunal hearing and the eventual agreement of a special method, RSIM has applied a rate of input VAT recovery which reflects the rates that applied under the special methods of CSC and the group that were in place at the time of the acquisition of CSC (the 'historic methods') to determine the amount of input VAT that is recoverable on the goods and services it has purchased since May 2005. VAT that is not recoverable following the application of the historic methods of recovery has been charged to the income statement.

As noted above, once a special method has been agreed between RSIM and HMRC, it will be applied retrospectively from May 2005. Any difference between the input VAT recoverable under the agreed special method and that which has been treated as recoverable under the historic methods during the period since May 2005 will be payable to, or receivable from, HMRC, and will be charged or credited accordingly to the income statement.

The maximum amount that may become recoverable from HMRC at 30 September 2009 is estimated to be £1.4 million, representing the difference between the input VAT recoverable under the proposed special method and that recoverable under the historic methods since May 2005.

The maximum amount that may become payable to HMRC at 30 September 2009 would arise if RSIM is not ultimately able to obtain HMRC's agreement to a special method and is required to apply the standard method of input VAT recovery. The standard method is the default method of input VAT recovery, and would result in RSIM recovering input VAT based simply on the value of its income that is subject to VAT, relative to its income that is exempt from VAT. If the standard method were to be applied retrospectively from May 2005, the additional input VAT and associated interest that would become payable to HMRC at 30 September 2009 is estimated at £3.5 million, representing the difference between the input VAT recoverable under the historic methods and that recoverable under the standard method.

The standard method is not considered by the group to represent a fair and reasonable basis of input VAT recovery, as it does not reflect accurately the way in which the group's activities consume costs. In addition, the standard method is not consistent with the rates of VAT recovery applicable previously to either CSC or the group, nor is it believed to be representative of the rates of recovery common amongst businesses that are comparable in nature to RSIM. For these reasons, RSIM will continue to pursue the agreement of its proposed special method.

16. Related party transactions

The directors of the company represent the key management of both the group and the company and the amounts paid in respect of their services for the latest full financial year were set out in the Report & Financial Statements of the group for the year ended 31 March 2009.  The directors of the company include B. Kantor and S. Koseff, both of whom are also directors of Investec plc.  The transactions set out below have taken place with Investec plc or its subsidiary companies ('the Investec group') during the period.

The group entered into an agreement on 18 November 2008 with Investec Asset Management Limited, a member of the Investec group, to acquire certain client relationship agreements.  Accordingly, client relationship agreements with a value of £547,000 have been acquired by the group during the six months ended 30 September 2009. The deferred consideration payable to Investec Asset Management Limited, which is estimated at £547,000 at 30 September 2009, is contingent upon the revenues generated by the client relationship agreements during each year ending 31 March following their transfer to the group, until 31 March 2012. No consideration was paid to Investec Asset Management during the period (September 2008: nil; March 2009: nil).

The group has a subordinated loan facility with the Investec group which was entered into on 6 May 2005.  The loan, which had an original value of £60 million, formed part of the consideration for the acquisition of Carr Sheppards Crosthwaite Limited on 6 May 2005. Following capital repayments, including £5.625 million repaid during the period, the outstanding value of the loan amounted to £33.750 million at 30 September 2009 (September 2008: £39.375 million; March 2009: £39.375 million).  The interest charged on the loan during the period amounted to £1,249,000 (September 2008: £1,491,000; March 2009: £2,896,000) and interest of £979,000 was payable at 30 September 2009 (September 2008: £1,154,000; March 2009: £1,139,000).

The group leases premises at 2 Gresham Street London from the Investec group.  The amount payable during the period under the terms of the lease in respect of rent and service charges amounted to £768,000 (September 2008: £558,000; March 2009: £1,464,000). £122,000 was outstanding at 30 September 2009 (September 2008: £nil; March 2009: £122,000).

The Investec group provides the group with certain infrastructure services.  The amount payable during the period under the terms of the related agreement amounted to £282,000 (September 2008: £303,000; March 2009: £611,000) and £205,000 was outstanding at 30 September 2009 (September 2008: £329,000; March 2009: £396,000).

The Investec group has provided internal audit services to the group during the period.  The amount payable by the group during the period in respect of these services amounted to £84,000 (September 2008: £93,000; March 2009: £163,000) and £81,000 was outstanding at 30 September 2009 (September 2008: £nil; March 2009: £88,000).

The group contributes to defined contribution pension schemes on behalf of its employees and operates a number of share-based payment arrangements for the purposes of employee remuneration. Details of these schemes were set out in the latest full financial statements for the year ended 31 March 2009.

Directors, and all employees of the group, are eligible to receive investment management services from the group at discounted staff rates.

17. Risks and uncertainties

The principal risks and uncertainties which the group faces, together with the key associated controls, were set out in the Financial Review section of the group's annual Report & Financial Statements for the year ended 31 March 2009, and can be summarised as follows:

1 Reputational risk, which may arise from poor investment advice or service to clients, or from a public censure by the regulator. 

2 Market risk from the group's exposure to sudden movements and/or downturns in the UK and world financial markets in which it operates.

3 Regulatory risk, which arises from the group operating in the highly regulated financial services sector, where failure to comply with regulatory requirements could lead to substantial fines or other disciplinary action.

4 Competition risk, which may manifest itself in a reduction in clients due to inappropriate and/or poorly priced service or product offerings, or insufficient professional staff to properly serve clients.

5 Operational risk, which principally arises from inadequate business continuity and/or disaster recovery planning or a significant business process failure in the settlements area or one of the group's support functions.

6 Fraud risk, that follows from holding significant cash and securities, both on our own behalf and on behalf of our clients.

7 Credit risk, being the risk of financial loss arising from a client or other counterparty failing to meet their obligations to repay outstanding amounts as they fall due. 

8 Liquidity risk, relating to both the sufficiency of the group's own cash resources to meet the group's financial obligations as they become due for payment, and the management of clients' cash assets, which must retain sufficient liquidity in order that cash is available for investment in non-cash assets within clients' portfolios at the relevant time or repaid to clients upon demand.

9 Interest rate risk, being the potential adverse effect of the future cash flows of the group a result of changes in

interest rates.

10 Price risk. The group's fee income is determined by reference to the value of the funds managed by the group, and changes in market prices affect the level of these funds and hence the group's fee income generated from them. The group's exposure to price risk also relates to the income derived from, and the value of, the group's holdings of financial instruments.

There have been no significant changes to the principal risks and uncertainties faced by the group during the six months ended 30 September 2009.  

18. Forward-looking statements

Certain sections of these condensed consolidated interim financial statements contain forward-looking statements. Statements containing the words 'believes', 'expects', 'anticipates' and other words of similar meaning are forward-looking. Forward-looking statements reflect knowledge and information available at the time the statement is made. Future events and circumstances, some of which are beyond the control of the group, can cause results to differ materially from those anticipated. The group undertakes no obligation to update these forward-looking statements.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; 

• the interim management report includes a fair review of the information required by: 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the board

P.M. Watts

Company Secretary

17 November 2009

Independent review report to Rensburg Sheppards Plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Richard Gabbertas

for and on behalf of KPMG Audit Plc
Chartered Accountants 

1 The Embankment

Neville Street

Leeds

17 November 2009

 

END

 

 

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