Final Results

RNS Number : 4459I

Liontrust Asset Management PLC

15 June 2011

 



Embargoed until 0700 hours, Wednesday 15 June 2011

LIONTRUST ASSET MANAGEMENT PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED

31 MARCH 2011

Liontrust Asset Management PLC ("Liontrust" or "the Group"), the independent specialist fund management group, today announces its results for the year ended 31 March 2011.

Results:

·    Loss after tax of £4.5 million (2010: Profit after tax of £1.1 million)

·    Adjusted loss before tax of £1.7 million (2010: Adjusted profit before tax of £0.8 million) (see note 5)

·    Performance fees of £1.3 million (2010: £3.4 million)

Assets under management:

·    On 31 March 2011, assets under management were £1.3 billion (2010: £1.1 billion)

·    On 14 June 2011, assets under management were £1.3 billion

Commenting on the results, John Ions, Chief Executive, said:

"Liontrust has undergone an extensive restructuring programme over the past 14 months, including a rebrand, implementing a more proactive sales strategy, enhancing client communications, revisions to our retail funds range and a focus on our strong performing fund management teams. As a result, the Company is significantly better placed for future expansion than it was a year ago. Liontrust is now more focused and streamlined, better organised and has a clearer strategy for growth.

"This has been reflected in the three successive quarters of net positive flows to 31 March 2011. The positive net sales of £81 million for the financial year ended 31 March 2011 represented the first time since the financial year ended 31 March 2004 that the Group has been in a net positive sales position over a financial year.

"The restructuring has come at a one-off financial cost, however, with a consequential impact on Liontrust's profitability. Nevertheless, the Group believes the changes have been crucial in turning around the fortunes of the business and will have a significant long-term benefit for the Company and its shareholders.

"This confidence is reinforced by the continued excellent performance of our UK and European equity teams and the dedication and hard work of the partners and employees at Liontrust. The strength of our fund management team is shown by the fact that 67% of Liontrust's unit trust funds (excluding Liontrust Top 100 Fund) outperformed their IMA sectors in the 12 months to 31 March 2011 (weighted by number of funds).

"This is all leading to a broadening of our client base, our funds being added to advisers' buy lists and our funds receiving further independent ratings. This will in turn lead to a further growth in our assets under management and a return to profitability.

"It has been a challenging start with your company but I believe we are now well positioned to take the Company forward. I relish the challenge."

For further information please contact:

Liontrust Asset Management                                               020 7412 1700

John Ions                                                                                 www.liontrust.co.uk

Vinay Abrol

Simon Hildrey (Head of Marketing & Communications)

Altium                                                                                     020 7484 4040

Sam Fuller

Paul Chamberlain

Chairman's Statement

Introduction

I am pleased to report that our funds under management have risen to £1.3 billion on 14 June 2011 and our investors have enjoyed continued excellent investment performance. These are the building blocks of the business.

While the profit and loss account has necessarily been negatively affected by our restructuring programme, month on month the Group is going in the right direction and I am confident John Ions and his team will re-establish Liontrust as one of the UK's premier fund management companies. The Group has increased its expenditure on marketing, for example, which has succeeded in raising the profile of Liontrust's range of funds in the intermediary market and therefore helped boost inflows.

The Group has suffered significant, one-off costs in the financial year ended 31 March 2011, reducing employment and other administration costs, closing the Global equities team and restructuring the Group's UK operating subsidiaries and funds.

Liontrust has also been subjected to a vast increase in the Financial Services Compensation Scheme Interim Levy of £415,000 compared to £20,000 for the previous financial year. This relates to an increase in the volume and value of investment claims relating to Keydata Investment Services Limited, Wills & Co and other failed investment intermediary firms. The increase in this charge has affected the financial year ended 31 March 2011 but, subject to similar events not being repeated, we would expect the levy to return to more normal, lower levels in future.

In April 2011, the Group entered into a conditional business purchase agreement for the sale of its credit business, including its credit team, to Avoca Capital Holdings ("Avoca"). We expect the sale of the credit business to Avoca to complete on or around 30 June 2011.

All these developments have been part of the process of creating a more streamlined, focused business on which we can build over the coming months and years. The restructuring is now complete and Liontrust is in a vastly better shape to achieve this growth than a year ago, and has the infrastructure to attract new fund management teams of the required quality.   

As part of the rebuilding of Liontrust, the Board has been strengthened through the appointment of two new non-executive directors Alastair Barbour and Mike Bishop, who have extensive experience in the financial services industry and will be invaluable in the future development of Liontrust.

The task ahead for Liontrust is self-evident. The Group needs to grow its assets under management and broaden the range of funds and asset classes offered to clients while ensuring Liontrust keeps a close eye on costs and maintains its superior investment performance. It is important that the Group maintains the infrastructure that can support future growth in both assets and fund management teams. As previously stated, the Group intends to build the business organically and through acquiring new fund management teams. The Group now has a sound platform to evaluate other opportunities to accelerate growth. To that effect, the Group is seeing an increasing number of acquisition opportunities and continues to assess all options to grow assets under management.

We also need to be mindful of the ever changing regulatory environment and the challenges that the Retail Distribution Review ("RDR") will bring both to the Group as a product provider and to the professional advisers who use our funds. Liontrust has actively participated in the lengthy consultation process and generally welcomes the introduction of RDR in 18 months. The banning of commission payment is probably the most significant change in the retail financial market for a generation.

As an active, performance driven, investment business, Liontrust is well positioned to make the RDR transition. Last summer, the Group undertook a full review of the fund range and structure which resulted in the introduction of non-commission paying unit classes specifically for the increasing number of intermediary clients who have already adopted a fee-based business model.

Liontrust is now well placed to meet the challenges of continuing to rebuild the business as well as those presented by regulatory and industry developments such as RDR. The Group has implemented the findings of the review of the Company that was initiated over a year ago, has restructured the business and has a clear and focused strategy for growth. 

Results

Adjusted loss before tax was £1.663 million after adding back expenses for cost reduction and restructuring, depreciation and intangible asset amortisation, severance compensation, expenses related to share incentivisation and the Financial Services Compensation Scheme Interim Levy (2010: Adjusted profit before tax of £796,000).

Assets under management and sales

On 31 March 2011, our assets under management ("AuM") stood at £1.343 billion and were broken down by type and process as follows:-

Process	Total	Institutional	UK Retail	Offshore Funds
	£m	£m	£m	£m
The Liontrust Cashflow Solution	863	395	450	18
The Liontrust Economic Advantage	335	-	335	-
The Liontrust Credit Process	87	-	-	87
Indexed	58	-	58	-
Total	1,343	395	843	105

A reconciliation of fund flows and assets under management over the year is as follows:-

	Total	Institutional	UK Retail	Offshore Funds
	£m	£m	£m	£m
Opening AuM - 1 April 2010	1,149	311	772	66
Inflows	367	103	200	64
Outflows	(286)	(50)	(201)	(35)
Net flows	81	53	(1)	29
Market movement	113	31	72	10
Closing AuM - 31 Mar 2011	1,343	395	843	105

Assets under management as at 14 June 2010 were £1.347 billion.

Outlook

The restructuring of Liontrust has now been completed and ensures that the Group is well placed to maintain its recent expansion. The ongoing excellent investment performance allied to a more proactive sales and marketing strategy will enable Liontrust to continue to grow assets under management while costs are kept under control. The Group will also look to expand into new asset classes and is in a position to evaluate other opportunities to accelerate growth as they present themselves.

Adrian Collins

Chairman

14 June 2011

Extract from the Chief Executive's Business Review

Fund Performance

UK Retail Funds

% returns (Quartile Ranking) to 31 March 2011

	1 year	3 years	Since Manager tenure	Manager change/launch date
The Liontrust Economic Advantage
UK Growth Fund (IMA UK All Companies)	20.7% (1)	16.2% (2)	76.1% (1)	25.03.09
Special Situations Fund (IMA UK All Companies)	32.2% (1)	57.7% (1)	97.1% (1)	11.11.05
UK Smaller Companies Fund (IMA UK Smaller Companies)	27.1% (3)	56.8% (1)	293.9% (1)	08.01.98
The Liontrust Cashflow Solution
Income Fund (IMA UK Equity Income)	9.5% (3)	2.6% (4)	65.0% (2)	25.03.09
European Growth Fund (IMA Europe ex UK)	20.4% (1)	26.5% (1)	45.6% (1)	15.11.06
European Absolute Return Fund (IMA Absolute Return)	5.2% (1)	n/a	-2.2% (4)	09.07.09
Index Fund
Top 100 Fund (IMA UK All Companies)	7.9% (4)	15.6% (2)	167.8% (3)	14.07.95

Offshore Funds

% Returns to 31 March 2011

	1 year	3 years	Since  launch	Launch date
The Liontrust Cashflow Solution
European Long/Short Fund (Guernsey domiciled hedge fund (Euro NAV)	2.4%	14.9%	49.3%	06.12.06

It is important to remember that the price of units, and the income from them, can fall as well as rise and are not guaranteed and that past performance is not a guide to the future.

Because of the risks involved, investment in hedge funds and absolute return funds is suitable only for investors who are able to bear the loss of a substantial portion or even all of the money they invest in the funds, who understand the high risks involved, believe that investment in the funds is suitable for them based on their investment objectives and financial needs. Investors are urged to seek independent professional advice on the implications of investing in the funds.

UK RETAIL FUNDSPerformance data source: Financial Express, Sterling terms, bid to bid basis, total return.  The issue of units may be subject to an initial charge, which will have an impact on the realisable value of the investment, especially in the short term. The Funds' Prospectus or Simplified Prospectus are available direct from Liontrust or from our website, www.liontrust.co.uk. 

OFFSHORE FUNDSPerformance data sources: Liontrust International (Guernsey) Limited (Liontrust European Long/Short Fund); Euro terms.  Subscriptions must be made only on the basis of a prospectus, which is issued to authorised financial advisers and qualifying persons only.

Review of sales and marketing

Liontrust distributes funds and segregated accounts to both the retail and institutional markets. Of Liontrust's existing funds under management, 71% come from the retail market while the rest is from institutional investors.

Central to increasing sales is good fund performance and we have strong short and long-term performance across our fund management teams. This is being communicated to clients and the rest of the market through dialogue, presentation, literature, sales events and press coverage.

We have invested in enhancing sales and marketing, the clear objective being to raise the profile of Liontrust and our products, increase our engagement with existing and potential clients, broaden our client base and, ultimately, to grow significantly our assets under management.

Liontrust has undergone a rebrand: our suite of literature has been upgraded, including the introduction of monthly factsheets, we have implemented an advertising campaign for the first time in the Group's history, built a new website and now send out regular client emails.

Liontrust has implemented a more proactive sales strategy that is designed to engage more fully with a broader range of clients and raise awareness of our proprietary investment processes and excellent fund performance. To this end, Liontrust held its first investment conference in January 2011 at The Savoy hotel. This enabled our fund management teams to present to over 100 institutional and intermediary clients and potential clients.

The initial success of the sales and marketing strategy has been reflected in the net positive inflows the Group generated in the three quarters to 31 March 2011, the high quality of attendees at the investment conference and the progress the Group has been making in getting funds back on to the buy and recommended lists of wealth managers and leading intermediary firms.

Cost reduction and restructuring of the business

The Group previously announced that it had decided to implement a cost reduction and restructuring programme (the "programme"). Our North American sales and marketing office has been closed down, the reduction in employment and other administration costs have been implemented and the restructuring of the Group's UK operating subsidiaries is complete. With the appointment of John Ions in May 2010, the programme was expanded to include further cost reductions and restructuring as discussed below.

In July 2010, the Group announced the closure of its Global equities team and in August 2010 the Group announced the purchase of the minority interest in Liontrust European Investment Services Limited ("LEIS"), a subsidiary of the Group, from Gary West and James Inglis-Jones.

Following a strategic review of our retail funds range, we made a number of revisions. These changes were intended to align us more closely with the rest of the fund management industry. We renamed five of our retail funds so their titles more accurately reflect their objectives. The new fund names are: Income Fund, UK Growth Fund, Special Situations Fund, UK Smaller Companies Fund and European Growth Fund. We also merged the Large Cap Fund into the UK Growth Fund. As part of this review and the decision by the Group to sell its credit business, the Liontrust Pan-European Fund, a sub-fund of the Liontrust International Funds (Luxembourg) SICAV, was closed.

We have added institutional share classes to the retail funds to accommodate a "clean fees" structure requested by many wealth and discretionary managers and as part of our preparations for the post-Retail Distribution Review world. We are confident the addition of these share classes will lead to increased inflows from this part of the market.

We also added the full UCITS III powers to the five renamed funds. It is not intended that these powers will change the risk profile or volatility of any of the funds.

In April 2011, the Group entered into a conditional business purchase agreement for the sale of its credit business including its credit team to Avoca Capital Holdings (the "Disposal"). The two funds that the credit team manages, the Liontrust Credit Absolute Return Fund and the Liontrust Credit Fund, will, subject to completion, be transferred to Avoca. The total consideration for the Disposal will be 3.75% of the assets under management transferred, with 2% payable on completion and 1.75% payable one month later in cash. Completion is subject to applicable regulatory approvals and other customary closing conditions. In the financial year ended 31 March 2011, the credit business made an operating loss of approximately £0.4 million before performance fees.

Summary

The last year has seen significant change within the business. The restructuring was vital to the future success of Liontrust and leaves the business well positioned to capitalise on these strong foundations. Excellent fund performance, a broader client base, a much improved profile combined with a committed and focused strategy will help to ensure that Liontrust returns to be a successful and profitable business.

The business will continue to follow a strategy of organic and acquisitive growth to meet its objectives and is well positioned to achieve this.

John Ions

Chief Executive

14 June 2011

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2011

					Year	Year
					ended	ended
					31-Mar-11	31-Mar-10
				Notes	£'000	£'000
Continuing operations
Revenue					9,918	13,171
Cost of sales					(80)	(102)
Gross profit					9,838	13,069
Realised gain on sale of financial assets					701	1,261
Administration expenses				2	(15,639)	(15,346)
Operating loss					(5,100)	(1,016)
Interest receivable					10	11
Loss before tax					(5,090)	(1,005)
Taxation					538	2,094
(Loss)/Profit for the year					(4,552)	1,089
Other comprehensive income:
Gains on available-for-sale financial assets net of tax					445	1,023
Amounts recycled through the Consolidated Statement of Comprehensive Income					(701)	(1,261)
Exchange differences on translating foreign operations					7	(72)
Other Comprehensive income for the year, net of tax					(249)	(310)
Total comprehensive income					(4,801)	779
Memo - Dividends					-	(2,245)
					Pence	Pence
Basic earnings per share				3	(14.69)	3.64
Diluted earnings per share				3	(13.65)	3.18

Consolidated Balance Sheet

as at 31 March 2011

					31-Mar-11	31-Mar-10
					£'000	£'000
Assets
Non current assets
Intangible assets					600	800
Property, plant and equipment					123	111
Deferred tax assets					2,160	711
					2,883	1,622
Current assets
Trade and other  receivables					10,205	14,302
Financial assets					8,530	8,052
Cash and cash equivalents					4,157	11,722
					22,892	34,076
Non current financial assets held for sale					-	830
Total current assets					22,892	34,906
Liabilities
Current liabilities
Deferred tax liabilities					(57)	(160)
Trade and other payables					(10,277)	(14,644)
Accruals					(119)	(113)
					(10,453)	(14,917)
Liabilities directly linked with non current financial assets held for sale					-	(181)
Total current liabilities					(10,453)	(15,098)
Net current assets					12,439	19,808
Net assets					15,322	21,430
Shareholders' equity attributable to owners of the parent
Ordinary shares					353	337
Share premium					10,272	8,962
Capital redemption reserve					15	15
Revaluation reserve					151	407
Retained earnings					16,703	23,881
Own shares held					(12,172)	(12,172)
Total equity					15,322	21,430

Consolidated Cash Flow Statement

for the year ended 31 March 2011

						Year	Year
						Ended	ended
						31-Mar-11	31-Mar-10
						£'000	£'000
Cash flows from operating activities
Cash inflow from operations						11,447	18,852
Cash outflow from operations						(18,002)	(20,706)
Cash outflow from changes in unit trust receivables and payables						(601)	(6,222)
Net cash used in operations						(7,156)	(8,076)
Interest received						10	11
Tax received/(paid)						263	(2,053)
Net cash used in operating activities						(6,883)	(10,118)
Cash flows from investing activities
Purchase of property and equipment						(50)	(23)
Sale/(purchase) of Seeding investments						703	(999)
Purchase of intangible asset						-	(1,000)
Net cash generated from/(used in) investing activities						653	(2,022)
Cash flows from financing activities
Purchase of minority interest shares						(2,654)	(508)
Issue of new shares						1,326	-
Dividends paid to shareholders						-	(2,245)
Net cash used in financing activities						(1,328)	(2,753)
Net decrease in cash and cash equivalents						(7,558)	(14,893)
Effect of exchange rate changes						(7)	(22)
Opening cash and cash equivalents*						11,722	26,637
Closing cash and cash equivalents						4,157	11,722
* Cash and cash equivalents consist only of cash balances.

Consolidated Statement of Changes in Equity

for the year ended 31 March 2011

		Share	Share		Capital		Revaluation		Retained		Own shares	Total
		capital	premium		redemption				Earnings		Held	Equity
		£ '000	£ '000		£ '000		£ '000		£ '000		£ '000	£ '000
Balance at 1 April 2010 brought forward		337	8,962		15		407		23,881		(12,172)	21,430
Loss for the year		-	-		-		-		(4,552)		-	(4,552)
Net gains on available-for-sale financial assets net of tax		-	-		-		445		-		-	445
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-		-		(701)		-		-	(701)
Gain on foreign exchange		-	-		-		-		7		-	7
Total comprehensive income for the year		-	-		-		(256)		(4,545)		-	(4,801)
Acquisition of minority interest shares		-	-		-		-		(2,654)		-	(2,654)
Shares issued		16	1,310		-		-		-		-	1,326
Equity share options issued		-	-		-		-		21		-	21
Balance at 31 March 2011		353	10,272		15		151		16,703		(12,172)	15,322
Consolidated Statement of Changes in Equity
for the year ended 31 March 2010
		Share	Share		Capital		Revaluation		Retained		Own shares	Total
		capital	premium		redemption				earnings		held	Equity
		£ '000	£ '000		£ '000		£ '000		£ '000		£ '000	£ '000
Balance at 1 April 2009 brought forward		337	8,962		15		645		24,950		(12,172)	22,737
Profit for the year		-	-		-		-		1,089		-	1,089
Net gains on available-for-sale financial assets net of tax		-	-		-		1,023		-		-	1,023
Amounts recycled through the Consolidated Statement of Comprehensive Income		-	-		-		(1,261)		-		-	(1,261)
Loss on foreign exchange		-	-		-		-		(72)		-	(72)
Total comprehensive income for the year		-	-		-		(238)		1,017		-	779
Dividends paid		-	-		-		-		(2,245)		-	(2,245)
Equity share options issued		-	-		-		-		159		-	159
Balance at 31 March 2010		337	8,962		15		407		23,881		(12,172)	21,430

Notes to the Financial Statements

1.             Accounting policies

The Groups accounting policies are consistent with those set out in the Report and Accounts for the year ended 31 March 2010.

2.             Administrative expenses

	Year ended	Year ended
	31-Mar-11	31-Mar-10
	£'000	£'000
Employee related expenses
Director and employee costs	5,119	9,591
Share incentivisation expense	433	105
Severance compensation (1) (2)	1,458	126
Cost reduction and restructuring program related severance compensation	-	1,021
	7,010	10,843
Non employee related expenses
Members drawings charged as an expense	2,175	-
Global equities team closure costs	284	-
Cost reduction and restructuring program (3)	892	281
Depreciation and Intangible asset amortisation	238	268
Financial Services Compensation Scheme Levy	414	-
Other administration expenses	4,626	3,954
	15,639	15,346

(1)           Includes £665,000 of employment related expenses relating to the departure of Nigel Legge, who stepped down as Chief Executive on 6 May 2010.

(2)           Includes £513,000 of employment related expenses relating to the departure of the Global equities team.

(3)           Includes £492,000 of expenses related to fund reorganisations and restructuring.

3.             Earnings per share

The calculation of basic earnings per share is based on profit after taxation for the year and the weighted average number of Ordinary Shares in issue for each period. The weighted average number of Ordinary Shares was 30,987,024 for the year (2010: 29,937,673). Shares held by the Liontrust Asset Management Employee Trust are not eligible for dividends and are treated as cancelled for the purposes of calculating earnings per share.                                                                               

Diluted earnings per share are calculated on the same bases as set out above, after adjusting the weighted average number of Ordinary Shares for the effect of options to subscribe for new Ordinary Shares or Ordinary Shares held in the Liontrust Asset Management Employee Trust that were in existence during the year ended 31 March 2011. The adjusted weighted average number of Ordinary Shares so calculated for the year was 33,337,489 (2010: 33,796,420).                                              

5.             Reconciliation to adjusted profit before tax

Adjusted profit (or loss) before tax is disclosed in order to give shareholders an indication of the profitability of the Group excluding non-cash (depreciation, intangible asset amortisation and IFRS2 related) expenses, non-recurring (cost reduction, restructuring, Global equities team closure, share incentivisation, severance compensation related and Financial Services Compensation Scheme Interim Levy) expenses and is reconciled in the table below.                 

		Year ended	Year ended
		31-Mar-11	31-Mar-10
		£'000	£'000
Gross profit		9,838	13,069
Realised gain on sale of financial assets		701	1,261
Director and employee costs		(5,119)	(9,591)
Members' drawings charged as an expense		(2,175)	-
Members' advance drawings		(292)	-
Other administration expenses		(4,626)	(3,954)
Adjusted operating (loss)/profit		(1,673)	785
Interest receivable		10	11
Adjusted (loss)/profit before tax		(1,663)	796

Other information

This preliminary announcement constitutes non-statutory accounts under section 435 of the Companies Act 2006. The financial information for the year ended 31 March 2010 has been abridged from the financial statements which received an unqualified audit report and which has been filed with the Registrar of Companies and did not contain a statement under section 498(2) or (3) of the Companies Act, 2006.

The Annual Report is expected to be posted to shareholders on or around 29 June 2011.

The release, publication, transmission or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published, transmitted or distributed should inform themselves about and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction.

This preliminary announcement contains certain forward-looking statements with respect to the financial condition, results of operations and businesses and plans of the Group. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that have not yet occurred. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. As a result, the Group's actual future financial condition, results of operations and business and plans may differ materially from the plans, goals and expectations expressed or implied by these forward-looking statements.  Liontrust undertakes no obligation publicly to update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules of the Financial Services Authority).  Nothing in this announcement should be construed as a profit forecast or be relied upon as a guide to future performance.

END

 

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