Interim Results
Investec PLC
25 November 2004
25 November 2004
Investec plc (incorporating the results of Investec Limited)
Unaudited consolidated financial results in UK GAAP Pounds Sterling for the six
months ended 30 September 2004.
Investec announces strong interim results
Investec, the international specialist banking group, announces today its
interim results for the six months ended 30 September 2004.
Financial highlights
• Operating profit of £88.7 million (2003: £57.9 million)*
- Operating profit: Southern Africa of £55.0 million, 62.0% of overall
(2003: £30.6 million, 52.8%)*
- Operating profit: UK & Europe, Australia, Israel and the US of £33.7
million, 38% of overall (2003: £27.3 million, 47.2%)*
• Profit before tax of £95.9 million (2003: £62.7 million)*
• Profit after tax of £72.6 million (2003: £50.1 million)*
• Earnings per share of 61.7p (2003: 47.0p)*
• Total dividends per share of 30.0p (2003: 28.0p)
Business highlights
• Strong operating profit growth from:
- Private Client Activities: £40.9 million, 63.1% increase (2003: £25.1
million)*
- Treasury and Specialised Finance: £21.5 million, 39.5% increase (2003:
£15.4 million)*
- Asset Management: £14.9 million, 37.0% increase (2003: £10.9 million)*
- Investment Banking performed well despite a decline in operating
profit to £18.0 million (2003:£20.0 million) due to more moderate
performances from Direct Investments and Private Equity.
*before exceptional items and amortisation of goodwill, totalling £34.1 million
(2003: £22.2 million)
Stephen Koseff, Chief Executive of Investec, said:
'Investec has focused heavily on changing the shape of the group to improve the
quality and stability of earnings by strengthening and growing the group profit
contribution of the less volatile and less market sensitive businesses. The
result is that Investec now has a robust and well balanced business model with a
more stable earnings stream, highlighted by the fact that Private Client
Activities contributed 46.1% of group operating profit.'
Bernard Kantor, Managing Director of Investec, said:
'Investec achieved solid operating profit growth across the group during the
first half of the year which was supported by an exceptional performance from
our Private Client Activities business. We are optimistic about the outlook for
the remainder of the year and believe we can continue to build a sustainable
business model that will deliver value to shareholders.'
For further information please contact:
Investec +44 (0) 207 597 4000 Citigate Dewe Rogerson +44(0)20 7638 9571
Stephen Koseff, Chief Executive Jonathan Clare
Bernard Kantor, Managing Director Simon Rigby
Sara Batchelor
Investec +27 82 552 8808
Ursula Munitich, Investor Relations
A telephone conference will be available at 9am (UK time), for further viewing
options please refer to www.investec.com
Overall performance
Investec is pleased to announce that for the half-year ended 30 September 2004,
earnings per share (EPS) before exceptional items and amortisation of goodwill
increased 31.3% to 61.7 pence from 47.0 pence (as restated). These six months
were characterised by favourable economic conditions in all principal markets in
which the group operates. The group continued to make significant progress
towards achieving the financial objectives it set at the time of the release of
the 2004 year-end results.
Salient features of the six month period were:
• Operating profit before exceptional items and amortisation of goodwill
increased 53.2% from £57.9 million to £88.7 million.
• Earnings attributable to ordinary shareholders before exceptional items
and amortisation of goodwill increased 40.9% from £47.0 million to £66.2
million.
• Annuity/recurring income as a percentage of total operating income
increased from 67.3% to 69.2%.
• The ratio of total operating expenses to total operating income
decreased from 75.0% to 68.6%.
• Annualised return on adjusted equity shareholders' funds (inclusive of
compulsorily convertible instruments) increased from 14.0% to 18.7%.
• Dividends of 30 pence per share are proposed, equating to a dividend
cover of 2.06 based on the group's EPS before exceptional items and
goodwill amortisation.
Commentary
The financial information contained in the Commentary section is prepared in
accordance with UK GAAP. Rand values included in the Commentary section are
translated into Pounds Sterling - in the case of the profit and loss accounts at
the weighted average rate for the relevant period, and in the case of the
balance sheets at the relevant closing rate. Reuters quotes the average Rand/
Pounds Sterling exchange rate at 11.74 and 12.25 for the six months ended 30
September 2004 and 30 September 2003, respectively. This represents an
appreciation of approximately 4% of the Rand during the period under review.
Unless the context indicates otherwise, all comparatives included below relate
to the six months ended 30 September 2003.
Business unit review
Private Client Activities
The group's Private Client Activities, comprising the Private Banking and
Private Client Portfolio Management and Stockbroking divisions, reported
substantial growth in operating profit before exceptional items and amortisation
of goodwill of 63.1% to £40.9 million from £25.1 million.
• Private Banking
Operating profit before exceptional items and amortisation of goodwill of the
Private Banking division increased by 60.2% to £34.9 million driven by a solid
growth in total advances and non-interest income.
Strong performances were recorded across the majority of Private Banking
activities with notable performances from Specialised Lending and Property
Finance. Since 31 March 2004, the global private client lending book has grown
by 19.5% to £3.8 billion and the division increased its retail deposit book by
17.5% to £3.0 billion.
• Private Client Portfolio Management and Stockbroking
Private Client Portfolio Management and Stockbroking recorded a strong result,
earning operating profit before exceptional items and amortisation of goodwill
of £6.0 million, an increase of 82.2%.
Improved equity market conditions and strict cost control benefited both Carr
Sheppards Crosthwaite in the UK and Investec Securities in SA. Since 31 March
2004, total private client funds under management have increased by 1.8% to £8.6
billion.
Treasury and Specialised Finance
The group's Treasury and Specialised Finance division posted operating profit
before exceptional items and amortisation of goodwill of £21.5 million, an
increase of 39.5%.
The SA operation benefited from a relatively stable interest rate environment
and a significant increase in dealing profits following a disappointing
performance reported in the prior period. The advisory and lending activities in
the UK and SA performed well with a notable performance from the Project Finance
division in the UK. These results were somewhat offset by an unsatisfactory
result recorded by the Commodities trading operation in the UK.
Investment Banking
The group's Investment Banking division recorded a decline in operating profit
before exceptional items and amortisation of goodwill of 10.4% from £20.0
million to £18.0 million.
The Corporate Finance divisions performed well with a strong performance from
the UK and sound contributions from Australia and SA. The Institutional
Stockbroking operations posted sound results against a backdrop of favourable
equity markets. Off a high base in the prior period the Direct Investments and
Private Equity divisions posted a lower operating profit.
Asset Management
The Asset Management division delivered operating profit before exceptional
items and amortisation of goodwill of £14.9 million, which represented growth of
37.0%. Since 31 March 2004, with £302 million net inflows, assets under
management increased by 7.2% in Pounds Sterling to £22.1 billion and by 7.4% in
Rands to R257.7 billion.
The UK and other international operations recorded a significant improvement in
profit due to strong net inflows across its product range, with investment
performance remaining solid. The South African business continues to deliver
good results on the back of a well-established market position and strong
investment performance across its core products.
Assurance Activities
The group's SA assurance activities, conducted by Investec Employee Benefits
(IEB) reported an increase in operating profit of 60.3% to £3.5 million. The
business has benefited from continued market penetration and improved
efficiencies.
Group Services and Other Activities
Group Services and Other Activities posted an operating loss of £10.0 million
compared to the prior period loss of £15.7 million. The UK Property division
performed particularly well whilst the SA Central Funding division benefited
from an improved capital structure and a lower interest rate environment. These
results were partially offset by a net increase in interest costs in the UK
Central Funding division following the issue of Tier II debt of £200 million in
March 2004.
Financial statements analysis
Operating income
Operating income increased by 24.0% to £311.6 million. The movements in total
operating income are analysed further below.
Net interest income increased by 30.7% to £61.6 million. The group reported
strong growth in its Private Banking and UK Treasury and Specialised Finance
lending portfolios. A more stable interest rate environment in SA has lead to an
improvement in the performance of the Treasury and Specialised Finance and
Central Funding divisions.
Net fees and commissions increased by 34.4% to £195.7 million. This was largely
attributable to increased lending turnover and transactional activity in the
Private Banking division and a sound performance by the Project Finance,
Investment Banking and Property divisions in the UK. The Asset Management and
Private Client Portfolio and Stockbroking divisions benefited from improved
equity market conditions and net inflows across a number of the product ranges.
Dealing profits decreased by 14.1% to £33.8 million mainly as a result of a more
moderate performance of the trading investments held in the Investment Banking
and Private Equity portfolios and certain other investments held in the group's
corporate portfolio.
The performance of the group's long-term assurance activities is discussed under
'Business unit review'.
The growth in the return on shareholders' funds in the long-term assurance
business conducted through IEB is as a result of the substantial increase in
long-term assurance assets attributable to the shareholder from £188.7 million
to £299.2 million, supported by favourable capital market conditions.
Other operating income declined as the prior period included a significant
one-off gain.
Overall, annuity/recurring income as a percentage of total operating income
increased from 67.3% to 69.2%.
Administrative expenses
Total administrative expenses increased by 15.0% from £181.9 million to £209.2
million largely as a result of an increase in variable remuneration due to
increased profitability, an increase in compliance and regulatory costs, and an
increase in rental costs given that the group no longer owned certain of the
buildings from which it operates.
The group made material progress towards achieving its operating expenses to
total operating income target of 65% as the ratio decreased from 75.0% to 68.6%,
principally as a result of the strong growth in operating income of 24.0%.
Goodwill amortisation
The charge for goodwill amortisation and impairment decreased from £29.8 million
to £18.4 million. Included in the current period is £5 million relating to
negative goodwill arising from a structured finance transaction. The prior
period included an amount of £6.3 million relating to an impairment of the
Traded Endowments business.
Provision for bad and doubtful debts
The bad and doubtful debts charge in the income statement increased by 86.4% to
£9.1 million largely due to an increase in general provisions reflecting solid
book growth.
The percentage of gross non-performing loans (NPLs) to core loans and advances
increased marginally from 1.1% to 1.2%. Total provision coverage remains high
both as a percentage of gross NPLs and net NPLs (gross NPLs net of security), at
139.1% and 361.1% respectively. The group's general provision coverage as a
percentage of net loans and advances has remained at approximately 1.2%.
Taxation
The operational effective tax rate of the group (excluding the tax effect on
exceptional items) increased from 21.7% to 26.3% due to reduced availability of
assessed losses.
Share of income of associated companies
The group's main associate is Capital Alliance Holdings Limited (CAL). An amount
£7 million before goodwill amortisation was accrued, representing Investec's
share of the directors estimate of CAL's operating earnings for the six months
ended 30 September 2004.
Exceptional items
Exceptional items include:
• Provisions for losses arising on the pending sale of the banking
subsidiary in Israel of £6.5 million largely relating to a write down in
the value of the buildings it occupies.
• Losses of £3 million and an impairment of goodwill of £2.7 million
arising on the closure of the Traded Endowments operation in the UK.
Capital resources
Total capital resources and shareholders' funds of £1.3 billion and £765.4
million, respectively, have remained relatively unchanged since 31 March 2004.
The annualised return on average total equity shareholders' funds, inclusive of
goodwill, increased from 15.1% to 20.7%. The annualised return on adjusted
shareholders' funds (inclusive of compulsorily convertible instruments)
increased from 14.0% to 18.7%, representing material progress towards the target
of 20%.
Investec plc and Investec Limited are well capitalised and capital adequacy
ratios comfortably exceed the minimum regulatory requirements. The capital
adequacy of Investec plc (applying UK Financial Services Authority rules to its
capital base) is 17.0% (March 2004: 17.3%). The capital adequacy of Investec
Limited (applying South African Reserve Bank rules to its capital base) is 15.0%
(March 2004: 15.1%).
Total assets under administration
Total assets under administration (including on and off balance sheet assets)
increased by 9.5% from £47.8 billion at 31 March 2004 to £52.3 billion. This was
mainly attributable to growth in assets under management of £3.3 billion across
all ranges of third party funds, due to improved equity values, and a solid
growth in core advances.
Prospects
Conditions are currently favourable and the board remains optimistic on the
outlook for the remainder of the financial year. The group strives to build
distinctive businesses in its core areas of operation focusing on activities in
regions where it believes it can compete effectively. The group has made
significant progress towards delivering on its financial objectives and remains
committed to ensuring that these objectives are met over the long-term. By
concentrating on the fundamentals of growing revenues, improving efficiency and
maintaining credit quality, Investec is confident that it can continue to build
a sustainable business model that will deliver value to shareholders.
On behalf of the boards of Investec plc and Investec Limited
Hugh Herman Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
Presentation of financial information
Investec operates under a Dual Listed Companies (DLC) structure with primary
listings of Investec plc on the London Stock Exchange and Investec Limited on
the JSE Securities Exchange South Africa.
In terms of the contracts constituting the DLC structure, Investec plc and
Investec Limited effectively form a single economic enterprise in which the
economic and voting rights of shareholders of the companies are maintained in
equilibrium relative to each other. The directors of the two companies consider
that for financial reporting purposes, the fairest presentation is achieved by
consolidating the results and financial position of both companies using merger
accounting principles.
Accordingly, the half-year results for Investec plc present the results and
financial position of the combined DLC group under UK GAAP, denominated in
Pounds Sterling. However, because SA GAAP differs in certain respects from UK
GAAP, the group publishes a high-level reconciliation and summary of the
principal differences. In the commentary below, all references to Investec or
the group relate to the combined DLC group comprising Investec plc and Investec
Limited.
As announced on 30 July 2004 Investec plc sold its 80.28% stake in Investec Bank
(Israel) Limited to The First International Bank of Israel. The details with
respect to the transaction as well as regulatory approval were obtained
subsequent to 30 September 2004 and hence the results of Investec Bank (Israel)
Limited have been consolidated into the group results for the six months ended
30 September 2004.
Accounting policies and disclosures
The comparative information provided in the financial information is for the six
months ended 30 September 2003 and the 12 months ended 31 March 2004. Changes in
accounting policies adopted at 31 March 2004 were not yet effective at 30
September 2003. For this reason, the note below discusses changes to accounting
policies since the release of 31 March 2004 annual results followed by changes
to the previously released September 2003 interim results. Other than changes
noted below, accounting policies adopted by the group are consistent with the
prior period.
Change in accounting policies since the release of the 31 March 2004 annual
results
UITF 38: Accounting for ESOP trusts
The group has adopted UITF 38 in respect of accounting for employee share
incentive trusts (ESOP trusts). In summary the impact on the adoption of the new
standard from prior accounting policies is as follows:
• Own shares held by the ESOP trusts (which have not vested to employees)
are deducted from shareholders' funds (previously included on balance sheet
as an asset under 'own shares').
• No gain or loss is recognised in the profit and loss account or
statement of total recognised gains and losses on the purchase, sale or
cancellation of the group's own shares held by the ESOP trusts.
• The net finance costs of the ESOP trusts are charged to the profit and
loss account as they accrue.
Other than UITF 38, the changes in policies noted below were already included in
the 31 March 2004 annual results.
The impact of the change in accounting policies arising from the adoption of
UITF 38 is detailed below:
12 months to 31 March 2004 Total
£'000
Interest receivable 1 184
Interest payable -
Net interest income 1 184
Other operating income (1 063)
Profit on ordinary activities before 121
taxation
Taxation -
Profit on ordinary activities after 121
taxation
The impact of the change in accounting policies arising from the adoption of
UITF 38 on reserves is detailed below:
£'000
Reserves at 31 March 2004 as previously reported 808 969
UITF 38 (42 596)
Relating to 2004 opening reserves (51 502)
Relating to 2004 movement in reserves 8 906
Retained profit for the year 121
Net reduction in treasury shares 5 764
Net movement in share premium on reduction of treasury 3 021
shares
Restated total reserves at 31 March 2004 766 373
--------
Impact of changes in accounting policies on the 30 September 2003 interim
results
UITF 37: Purchase and sale of own shares (excluding ESOP trusts)
The group has adopted UITF 37 in respect of own shares held. In summary the
impact for the group is as follows:
• Consideration paid for the group's own shares (referred to as 'treasury
shares') are deducted from shareholders' funds.
• No gain or loss is recognised in the profit and loss account or
statement of total recognised gains and losses on the purchase, sale or
cancellation of the group's own shares.
UITF 38: Accounting for ESOP trusts
The impact on adoption of this standard is as noted above.
FRS 17 - Retirement Benefits
The group has fully adopted the requirements of FRS 17 in respect of retirement
benefits. In line with the objective of the standard, the group reflects the
fair value of assets and liabilities and any related funding arising from
defined benefit schemes within the group.
The impact of the above changes in accounting policies on reserves is detailed
below:
6 months to 30 September 2003 UITF 38 UITF 37 FRS 17 Total
£'000
Interest receivable 1 184 - - 1 184
Interest payable - 214 (451) (237)
Net interest income 1 184 214 (451) 947
Other operating income (410) (762) - (1 172)
Profit/(loss) on ordinary
activities 774 (548) (451) (225)
before taxation
Taxation - - 135 135
Profit/(loss) on ordinary -----------------------------------------
activities 774 (548) (316) (90)
after taxation -----------------------------------------
The cumulative impact on September 2003 closing reserves is detailed below:
£'000
Reserves at 30 September 2003 as previously reported 842 710
Cumulative prior year adjustments to 30 September 2003 (114 204)
Reduction in share premium (12 492)
Increase in treasury shares (98 273)
Increase in foreign currency reserves 6 011
Decrease in cumulative profit and loss account (9 450)
---------
Restated total reserves at 30 September 2003 728 506
---------
Restatements to 30 September 2003 consolidated profit and loss accounts and the
weighted average number of shares ('wanos')
Reclassifications were made to the 30 September 2003 consolidated profit and
loss account that are consistent with those noted in the 2004 annual report
(full details are to be found on page 159 of the report). As noted in the annual
report, the reclassifications were made so as to reflect the nature of the
underlying transactions in a more meaningful manner. These reclassifications
have no impact on the profit and loss account.
Investec has established a number of share incentive plans that are designed to
link the interests of employees with shareholders and long-term organisational
interest through performance and risk-based equity grants. These schemes are
required to be consolidated into the accounts of the group. However, to the
extent that the underlying risks and rewards inherent in these schemes have
already vested with the participants, Investec is entitled to recognise its
respective pro-rata share of any income on related balances. This accounting
treatment has been consistently applied in the current and prior periods.
Historically shares that were not entitled to dividends were not included in the
wanos. In order to match the wanos to the group's share of income associated
with such schemes, the wanos has been increased by the weighted number of shares
vested, notwithstanding no dividend being payable on these shares.
The impact of this change in methodology has resulted in the wanos increasing
from 95 791 802 to 100 066 802 for the 6 months ended 30 September 2003,
resulting in the comparative earnings per share - before goodwill and
exceptional items decreasing from 49.2 pence (including the effects of UITF 37,
UITF 38 and FRS 17 per above) to 47.0 pence.
Dividend announcement
Investec plc
In terms of the DLC structure, Investec plc shareholders who are non-South
African resident shareholders may receive all or part of their dividend
entitlements through dividends declared and paid by Investec plc on their
ordinary shares and / or through dividends declared and paid on the SA DAN share
issued by Investec Limited.
Investec plc shareholders who are South African residents, may receive all or
part of their dividend entitlements through dividends declared and paid by
Investec plc on their ordinary shares and / or through dividends declared and
paid on the SA DAS share issued by Investec Limited.
Notice is hereby given that an interim dividend (No. 5) has been declared and
will be paid on 24 December 2004 in respect of the six months ended 30 September
2004. Shareholders in Investec plc will receive a total distribution of 30 pence
(2003: 28 pence) per ordinary share, which will be paid as follows:-
- for non-South African resident Investec plc shareholders, through a
dividend paid by Investec plc of 14 pence per ordinary share.
- for South African resident shareholders of Investec plc, through a
dividend paid by Investec plc of 16 pence per ordinary share and a
dividend paid on the SA DAS share equivalent to 30 pence per ordinary
share.
The relevant dates for the payment of the dividends are:-
Last day to trade cum-dividend:
- On the London Stock Exchange Tuesday, 14 December 2004
- On the JSE Securities Exchange South Thursday, 9 December 2004
Africa
Shares commence trading ex-dividend:
- On the London Stock Exchange Wednesday, 15 December 2004
- On the JSE Securities Exchange South Friday, 10 December 2004
Africa
Record date:
- On the London Stock Exchange Friday, 17 December 2004
- On the JSE Securities Exchange South Friday, 17 December 2004
Africa
Payment date:
- United Kingdom register Friday, 24 December 2004
- South African register Friday, 24 December 2004
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Friday, 10 December 2004 and Friday, 17
December 2004, both dates inclusive, nor may transfers between the UK and SA
registers take place between Friday, 10 December 2004 and Friday, 17 December
2004, both dates inclusive.
Shareholders registered on the South African register are advised that the total
distribution of 30 pence, equivalent to 335 cents per share, has been arrived at
using the Rand/Pounds Sterling conversion rate, at 11h00 (SA time) on
24 November 2004.
By order of the board
R Vardy
Company Secretary 25 November 2004
Dividend announcement
Investec Limited
Notice is hereby given that an interim dividend (No. 98) of 335 cents (2003:
309 cents) per ordinary share has been declared in respect of the six months
ended 30 September 2004.
The dividend is payable to shareholders recorded in the members' register of the
company at the close of business on Friday, 17 December 2004.
The relevant dates for the payment of the dividend are:
Last day to trade cum-dividend Thursday, 9 December 2004
Shares commence trading ex-dividend Friday, 10 December 2004
Record date Friday, 17 December 2004
Payment date Friday, 24 December 2004
The interim dividend of 335 cents per ordinary share has been determined by
converting the Investec plc distribution of 30 pence per ordinary share into
Rand using the Rand/Pounds Sterling average spot rate at 11h00 (SA time) on 24
November 2004.
Share certificates may not be dematerialised or rematerialised between
Friday, 10 December 2004 and Friday, 17 December 2004, both dates inclusive.
By order of the board
S Noik
Company Secretary 25 November 2004
Further information
Information provided on the Company's website at www.investec.com includes:
• Copies of this statement.
• The results presentation.
• Additional report produced for the investment community including more
detail on the results.
• Excel worksheets containing the salient financial information in UK GAAP
Pounds Sterling.
Alternatively for further information please contact the Investor Relations
division on e-mail investorrelations@investec.co.za or telephone +27 11 286
7070.
Investec plc (incorporating the results of Investec Limited)
Unaudited consolidated financial results in UK GAAP Pounds Sterling for the six
months ended 30 September 2004
Salient features
30 September % 30 September
UK GAAP 2004 Change 2003* 31 March 2004*
Unaudited Unaudited Audited
Operating profit before goodwill
amortisation, exceptional items and
taxation (£'000) 88 706 53.2 57 895 132 260
Earnings before goodwill amortisation and
exceptional items (£'000) 66 208 40.9 47 003 106 203
Profit attributable to shareholders
(£'000) 37 776 41.8 26 642 68 906
Earnings per share (before goodwill
amortisation and exceptional items)
(pence) 61.7 31.1 47.0 103.8
Earnings per share (pence) 29.9 20.6 24.8 60.0
Dividend per share (pence) 30.0 7.1 28.0 58.0
* Restated for changes to accounting policies and disclosures.
Consolidated profit and loss accounts
6 Months ended 30 September 2004 6 Months ended 30 September 2003* Year ended 31 March 2004*
Before Goodwill Total Before Goodwill Total Before Goodwill Total
goodwill and goodwill and goodwill and
and exceptional and exceptional and exceptional
exceptional items exceptional items exceptional items
£'000 Items items items
Interest
receivable
- interest
income
arising
from debt
securities 39 528 - 39 528 54 170 - 54 170 91 845 - 91 845
Interest
receivable
- other
interest
income 310 283 - 310 283 285 950 - 285 950 588 188 - 588 188
Interest
payable (288 183) - (288 183) (292 950) - (292 950) (574 249) - (574 249)
----------------------------------------------------------------------------------------------------------------------
Net interest
income 61 628 - 61 628 47 170 - 47 170 105 784 - 105 784
----------------------------------------------------------------------------------------------------------------------
Dividend
income 879 - 879 3 511 - 3 511 3 450 - 3 450
Fees and
commissions
receivable 205 781 - 205 781 153 857 - 153 857 339 942 - 339 942
- annuity 156 966 - 156 966 126 884 - 126 884 273 977 - 273 977
- deal 48 815 - 48 815 26 973 - 26 973 65 965 - 65 965
Fees and
commission
payable (10 117) - (10 117) (8 318) - (8 318) (21 569) - (21 569)
Dealing
profits 33 771 - 33 771 39 312 - 39 312 91 015 - 91 015
Income from
long-term
assurance
business 3 538 - 3 538 2 699 - 2 699 5 082 - 5 082
Return on
shareholders'
fund in the
long-
term assurance
business 14 515 - 14 515 6 769 - 6 769 24 122 - 24 122
Other
operating
income 1 650 - 1 650 6 385 - 6 385 13 028 - 13 028
----------------------------------------------------------------------------------------------------------------------
Other income 250 017 - 250 017 204 215 - 204 215 455 070 - 455 070
----------------------------------------------------------------------------------------------------------------------
Total
operating
income 311 645 - 311 645 251 385 - 251 385 560 854 - 560 854
Administrative
expenses (209 193) - (209 193) (181 922) - (181 922) (395 188) - (395 188)
Depreciation
and
amortisation (4 631) (18 419) (23 050) (6 679) (29 780) (36 459) (12 448) (50 644) (63 092)
- tangible
fixed
assets (4 631) - (4 631) (6 679) - (6 679) (12 448) - (12 448)
- amortisation
and
impairment
of goodwill - (18 419) (18 419) - (29 780) (29 780) - (50 644) (50 644)
Provision for
bad
and doubtful
debts (9 115) - (9 115) (4 889) - (4 889) (20 958) - (20 958)
----------------------------------------------------------------------------------------------------------------------
Operating
profit
before
exceptional
items 88 706 (18 419) 70 287 57 895 (29 780) 28 115 132 260 (50 644) 81 616
Share of
income of
associated
companies 7 181 (1 033) 6 148 4 791 (1 008) 3 783 11 205 (2 132) 9 073
Exceptional - (14 655) (14 655) - 8 571 8 571 - 8 529 8 529
items
Provision for
losses
on termination
and
disposal of
group
operations -
discontinued - - - - (5 103) (5 103) - (5 103) (5 103)
Losses on
termination
and disposal
of
group
operations -
discontinued - (2 602) (2 602) - (24 328) (24 328) - (24 328) (24 328)
Less provision
raised in
prior
periods - 2 602 2 602 - 19 225 19 225 - 19 225 19 225
Impairment of
goodwill on
termination
and
disposal of
group
operations-
continuing - (2 712) (2 712) - - - - - -
(Loss)/profit
on
termination
and disposal
of
group
operations -
continuing - (11 943) (11 943) - 13 674 13 674 - 13 632 13 632
----------------------------------------------------------------------------------------------------------------------
Profit on
ordinary
activities
before
taxation 95 887 (34 107) 61 780 62 686 (22 217) 40 469 143 465 (44 247) 99 218
Tax on profit
on
ordinary
activities (23 292) - (23 292) (12 592) - (12 592) (27 821) (678) (28 499)
Tax on profit
on
ordinary
continuing
activities (23 292) - (23 292) (12 592) - (12 592) (27 821) - (27 821)
Tax on
provision
for losses on
termination
and
disposal of
group
operations -
discontinued - - - - - - - (678) (678)
----------------------------------------------------------------------------------------------------------------------
Profit on
ordinary
activities
after taxation 72 595 (34 107) 38 488 50 094 (22 217) 27 877 115 644 (44 925) 70 719
Minority
interests-
equity (712) - (712) (1 235) - (1 235) (1 888) 75 (1 813)
----------------------------------------------------------------------------------------------------------------------
Profit
attributable
to
shareholders 71 883 (34 107) 37 776 (48 859) (22 217) 26 642 113 756 (44 850) 68 906
Dividends-
including
non-equity (36 118) - (36 118) (29 819) - (29 819) (63 709) - (63 709)
----------------------------------------------------------------------------------------------------------------------
Retained
profit /
(loss) for the
period 35 765 (34 107) 1 658 19 040 (22 217) (3 177) 50 047 (44 850) 5 197
----------------------------------------------------------------------------------------------------------------------
* Restated for changes to accounting policies and disclosures.
Earnings and dividends per share
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
£'000 2004 2003* 2004*
Unaudited Unaudited Audited
Profit attributable to shareholders 37 776 26 642 68 906
Amortisation and impairment of goodwill 18 419 29 780 50 644
Loss/(profit) on termination and disposal of group operations
(net of taxation and minority interest) 11 943 (13 674) (13 029)
Provision for losses on termination and disposal of group
operations - 5 103 5 103
Impairment of goodwill on termination and disposal of group
operations - continuing 2 712 - -
Amortisation of goodwill of associates 1 033 1 008 2 132
Preference dividends (5 675) (1 856) (7 553)
--------------------------------------------------------------------------------------------------------
Earnings before goodwill amortisation and exceptional 66 208 47 003 106 203
items
--------------------------------------------------------------------------------------------------------
Earnings per share (pence)
- Basic 29.9 24.8 60.0
- Diluted 29.7 23.9 59.6
Excluding goodwill amortisation and exceptional items
- Basic 61.7 47.0 103.8
- Diluted 59.3 45.0 100.8
Dividends per share (pence) 30.0 28.0 58.0
Weighted number of ordinary shares in issue 107.4 100.1 102.3
* Restated for changes to accounting policies and disclosures.
Consolidated statements of recognised gains and losses
6 months 6 months
ended ended Year ended
30 September 30 September 31 March
2004 2003* 2004*
£'000 Unaudited Unaudited Audited
Profit for the period attributable to shareholders 37 776 26 642 68 906
Currency translation differences on foreign currency
net investments (4 803) 19 556 (4 104)
Unrealised surplus on revaluation of investment
properties 2 735 2 033 13 982
Actuarial losses recognised on pension fund schemes - - (1 294)
-----------------------------------------------------------------------------------------------------
Total recognised gains and losses for the period 35 708 48 231 77 490
-----------------------------------------------------------------------------------------------------
Prior year adjustments in respect of changes in
accounting policies (43)
------
Total gains and losses since last annual report 35 665
------
* Restated for changes to accounting policies and disclosures.
Consolidated balance sheets at
30 September 30 September 31 March 2004*
2004 2003* Audited
£'000 Unaudited Unaudited
Assets
Cash and balances at central banks 217 460 348 391 363 862
Treasury bills and other eligible bills 277 583 311 422 332 208
Loans and advances to banks 2 676 378 1 523 294 1 704 715
Loans and advances to customers 6 532 100 5 844 318 6 347 032
Debt securities 1 761 409 1 902 519 1 466 437
Equity shares 240 744 263 895 418 254
Interests in associated undertakings 71 684 66 099 70 006
Other participating interests 9 137 8 890 9 135
Intangible fixed assets 225 358 280 286 251 508
Tangible fixed assets 143 567 174 297 146 326
Other assets 1 259 779 1 765 475 1 081 131
Prepayments and deferred income 110 221 120 297 81 511
Long-term assurance business attributable to the 299 209 188 700 265 315
shareholder
13 824 629 12 797 883 12 537 440
Long-term assurance assets attributable to policyholders 2 689 767 2 857 111 2 781 335
---------------------------------------------
16 514 396 15 654 994 15 318 775
---------------------------------------------
Liabilities
Deposits by banks 886 583 1 402 002 1 233 609
Customer accounts 7 233 545 6 907 589 7 211 292
Debt securities in issue 1 165 994 960 697 621 857
Other liabilities 3 031 690 2 212 605 1 969 855
Accruals and deferred income 191 299 231 644 185 600
Pension fund liability 11 967 10 041 11 967
12 521 078 11 724 578 11 234 180
Long-term assurance liabilities attributable to 2 689 767 2 857 111 2 781 335
policyholders
---------------------------------------------
15 210 845 14 581 689 14 015 515
---------------------------------------------
Capital Resources
Subordinated liabilities (including convertible debt) 500 326 302 812 497 858
Minority interests - equity 37 781 41 987 39 029
Called up share capital 165 158 165
Share premium account 1 027 539 981 606 1 027 539
Treasury shares (101 541) (98 273) (101 304)
Shares to be issued 2 384 2 996 2 666
Perpetual preference shares 126 698 126 778 126 698
Revaluation reserves 45 877 31 193 43 142
Other reserves (173 205) (147 356) (168 402)
Profit and loss account (162 473) (168 596) (164 131)
Shareholders' funds 765 444 728 506 766 373
- equity 638 746 601 728 639 675
- non equity 126 698 126 778 126 698
1 303 551 1 073 305 1 303 260
---------------------------------------------
16 514 396 15 654 994 15 318 775
---------------------------------------------
Memorandum items
Contingent liabilities 424 856 313 180 267 441
Commitments 327 062 250 046 522 879
------------------------------------------
751 918 563 226 790 320
------------------------------------------
* Restated for changes to accounting policies and disclosures.
Consolidated statements of reconciliations of shareholders' funds and
movements on reserves
6 months ended 6 months ended
30 September 30 September Year ended
£'000 2004 2003* 31 March 2004*
Unaudited Unaudited Audited
Balance at the beginning of the period 766 373 588 466 588 466
As previously reported 808 969 696 968 639 968
Changes in accounting policies
Adoption of UITF 38:
Accounting for ESOP trusts (42 596) (51 502) (51 502)
Adoption of UITF 37:Purchase
and sale of own shares - (47 827) -
Adoption of full requirements of
FRS 17:Retirement benefits - (9 173) -
Foreign currency adjustments (4 803) 19 556 (4 104)
Retained profit/(loss) for the period 1 658 (3 177) 5 197
Reduction in shareholding of associate - (1 055) (1 056)
Issue of shares - 568 46 325
Issue of perpetual preference shares - 127 465 127 484
Share issue expenses - (697) (2 031)
Re-issue of treasury shares - 410 18 975
Purchase of treasury shares (519) (5 063) (25 571)
Transfer to pension fund deficit - - (1 294)
Revaluation of investment properties 2 735 2 033 13 982
----------------------------------------------------------------------------------------------
Balance at end of the period 765 444 728 506 766 373
----------------------------------------------------------------------------------------------
* Restated for changes to accounting policies and disclosures.
Consolidated cash flow statements
6 months ended 6 months ended Year ended
£'000 30 September 30 September 31 March
2004 2003* 2004*
Unaudited Unaudited
Audited
Net cash inflow/(outflow) from operating activities 487 999 (58 383) (485 602)
Net cash outflow from return on investments and
servicing of finance (35 444) (17 022) (54 318)
Taxation (16 691) (4 973) (31 917)
Net cash (outflow)/inflow from capital expenditure
and financial investment (525 744) 25 006 334 187
Net cash (outflow)/inflow from acquisitions and
disposals (2 423) (1 055) 40 227
Ordinary share dividends paid (28 833) (26 298) (52 810)
Net cash (outflow)/inflow from financing (6 886) 122 585 389 225
(Decrease)/increase in cash (128 022) 39 860 138 992
Cash and demand bank balances at beginning of
period 1 172 894 1 033 902 1 033 902
-----------------------------------------
Cash and demand bank balances at end of period 1 044 872 1 073 762 1 172 894
-----------------------------------------
* Restated for changes to accounting policies and disclosures.
Segmental analysis - geographical and business analysis of operating profit
before taxation, goodwill amortisation and exceptional items
For the 6 months ended 30 September 2004
United
£'000 Kingdom United
Southern and States of Total group
Africa Europe Australia Israel America
Private Client Activities 16 207 21 763 1 180 1 753 - 40 903
Treasury and Specialised Finance 15 006 6 178 611 (343) - 21 452
Investment Banking 11 488 3 155 1 540 1 842 (41) 17 984
Asset Management 12 748 1 981 - 152 - 14 881
Assurance Activities 3 525 - - - - 3 525
Group Services and Other
Activities (3 966) (7 110) 1 135 (112) 14 (10 039)
------------------------------------------------------------------------
55 008 25 967 4 466 3 292 (27) 88 706
------------------------------------------------------------------------
For the 6 months ended 30 September 2003*
United
£'000 Kingdom United
Southern and States of Total
Africa Europe Australia Israel America group
Private Client Activities 9 149 14 328 1 229 370 - 25 076
Treasury and Specialised Finance 5 239 8 909 65 1 165 - 15 378
Investment Banking 15 884 1 516 1 591 1 086 - 20 077
Asset Management 10 537 215 - 111 - 10 863
Assurance Activities 2 198 - - - - 2 198
Group Services and Other
Activities (12 420) (4 314) 885 (691) 843 (15 697)
---------------------------------------------------------------------
30 587 20 654 3 770 2 041 843 57 895
---------------------------------------------------------------------
* Restated for changes to accounting policies and disclosures.
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