Half Yearly Report

RNS Number : 0301D

Liontrust Asset Management PLC

25 November 2009

 



Embargoed until 0700 hours, Wednesday 25 November 2009 

Stock Exchange Announcement

LIONTRUST ASSET MANAGEMENT PLC

Interim results for the six months to 30 September 2009

Highlights

Liontrust Asset Management PLC ("Liontrust" or "the Group"), the independent specialist fund management group, today announces its interim results for the six months ended 30 September 2009 (the "Interim Period").

Results and dividend

• Profit before tax £0.5 million (2008: £6.1 million). 

• Performance fees of £2.2 million were earned during the Interim Period (2008: £3.9 million).

• Basic earnings per share 0.7 pence (2008: 14.8 pence).

• Interim dividend maintained at 2.5 pence (2008: 2.5 pence).

Funds under management

• Funds under management as at 30 September 2009 £1.3 billion (2008: £3.9 billion).

• Funds now at £1.2 billion (as at 24 November 2009).

Directorate changes

• Bernard Asher steps down as non-executive Chairman on 1 January 2010 while remaining a non-executive director

• Adrian Collins becomes non-executive Chairman 

Commenting on these results, Nigel Legge, Chief Executive, said:

"The six months to 30 September 2009 marked the first stage in the rebuilding of Liontrust. The addition of a fixed income team and the recruitment of a global equities team have expanded our already strong fund management capability. This can be seen in the very good long-term performance that has been delivered by all our fund management teams.

"We are well capitalised to rebuild Liontrust. We have no debt and hold net cash and financial assets of over £20 million. This gives us the resources to continue expanding and diversifying our fund management teams into new asset classes while maintaining our focus on having strong investment processes. 

"We have the resources to market our products more proactively to institutional, hedge fund, discretionary and retail buyers in the years to come. 

"We also plan to launch a number of funds over the next few months, including for the Fixed Income and Global Equities teams. We are well positioned to grow our assets under management.

"I would like to thank Bernard Asher for the invaluable and integral role he has played in Liontrust's development over the past five years. I have worked with Bernard at HSBC as well as at Liontrust and he has been a great help to me personally."

For further information please contact:

Liontrust Asset Management PLC          020 7412 1700 

Nigel Legge                                           www.liontrust.co.uk

Vinay Abrol 
Simon Hildrey

Altium                                                    020 7484 4040 

Sam Fuller

Paul Chamberlain

Chairman's Statement

Introduction

During 2009, Liontrust has put in place the foundations to enable the Group to rebuild and expand over the next few years. This is aided by the fact that assets under management have stabilised over the past five months and were standing at £1.3 billion on 30 September 2009. Liontrust is now well positioned to grow for a number of reasons.

Liontrust is in a solid financial position. The Group has no debt and held net cash (cash plus receivables less payables) and financial assets of £20.3 million on 30 September 2009. The fall in net cash and financial assets by £1.4 million from £21.7 million on 31 March 2009 reflects the payment of the dividend during the Interim Period.

This solid financial position will enable the Group to further expand and diversify its fund management capability, including into new asset classes. Liontrust continues to hold discussions with potential new fund management teams who fit the Group's strong process oriented approach. We will look to strengthen our fund management teams so they can, if appropriate, implement existing successful investment processes in other markets. 

We also have plans for a number of fund launches over the next few months. These are likely to include a UCITS III version of the Liontrust Fund, a fixed income fund for the retail market, a European value fund and global equity funds. We will implement a more proactive marketing campaign in 2010 to raise our profile among a widening investor audience to grow our assets under management.

At the same time, we are continually looking at areas where we can reduce our operating costs.

The Group continues to enjoy very good long-term fund performance across our existing asset classes of UK and European equities and European fixed income. Liontrust's two hedge funds, in particular, have strong performance, which is reflected in the £2.2 million of performance fees earned by the group over the Interim Period. In June, Liontrust launched a UCITS III version of the Liontrust European Long/Short Fund and currently has raised more than £20 million in assets. 

This is my last statement as Chairman of Liontrust, having really enjoyed the past five years in the role. Liontrust is a great business and with its focus on documented investment processes and behavioural finance has carved out a distinctive place in the asset management industry. 

While 2009 has undoubtedly been challenging for Liontrust, I believe the company is in a strong position to grow over the next few years. That is why I am so pleased to remain as a non-executive Director after stepping down as Chairman.

Results

Profit before tax in the Interim Period was £0.476 million (2008: £6.149 million). Performance fees of £2.236 million were earned during the Interim Period (2008: £3.894 million). Basic earnings per share were 0.7 pence (2008: 14.8 pence).

Dividend

The Board has declared a first interim dividend of 2.5 pence per share, payable on 30 December 2009 to shareholders who are on the register as at 4 December 2009, the shares going ex-dividend on 2 December 2009.

Performance fees

There are further potential performance fees owing which, if out-performance is maintained, will fall due for payment before the end of the financial year ending 31 March 2010. As at 24 November 2009, these performance fees have an aggregate value in excess of £1.3 million. The realisation of any such performance fees is subject to continuing outperformance.

Funds under management

On 30 September 2009, our funds under management stood at £1.280 billion (2008: £3.913 billion) and were broken down by type and process as follows:-

Process	Fund Manager	Total	Institutional	Retail & Offshore
		£m	£m	£m
Cashflow Solution	West/Inglis-Jones	941	368	573
Economic Advantage	Cross / Fosh	247	0	247
Fixed Income	Thorp/Sclater	39	0	39
Indexed		53	0	53
Total		1,280	368	912

Funds under management now stand at £1.219 billion (as at 24 November 2009).

Funds flow

Net redemptions of offshore and retail funds were £108 million in the Interim Period. Net institutional assets amounting to £825 million were redeemed in the Interim Period and most of these were withdrawn before our preliminary results for 2009 were announced on 10 June 2009. 

A reconciliation of fund flows and funds under management over the Interim Period is as follows:-

	Total	Institutional	Retail & Offshore
	£m	£m	£m
Opening FuM - 1 April 2009	1,888	1,069	819
Inflows	90	21	69
Outflows	(1,023)	(846)	(177)
Net flows	(933)	(825)	(108)
Market movement	325	124	201
Closing FuM - 30 September 2009	1,280	368	912

Fund Performance

Liontrust continues to enjoy strong short and long-term performance across our products. The Liontrust European Long/Short Fund, which applies the Cashflow Solution investment process, has continued its strong performance. Over the ten months to 31 October 2009, the sterling share class of the Fund returned 1.78% and 52.48% from launch in December 2006 to the end of October 2009. 

The Continental European Fund was 7.49% ahead of the FTSE All World Developed Europe excluding UK benchmark from launch on 15 November 2006 to 20 November 2009. This places the fund 9th out of 96 funds in its peer group over that period. Over the calendar year to 20 November 2009, the fund is 2.75% ahead of its benchmark.

Since 25 March 2009, the Cashflow Solution process has been applied to the Liontrust First Income Fund. From that date to 20 November 2009, the fund outperformed the FTSE All Share benchmark by 1.97%. This places the fund 15th out of 86 funds in its peer group over the period.

The Liontrust Intellectual Capital Trust, which is based on the Economic Advantage process, outperformed the FTSE Small Cap (ex IT) benchmark by 142.17% from launch on 8 January 1998 to 20 November 2009. This places the fund 8th out of 37 funds in its peer group over the period. Over the calendar year to 20 November 2009, the fund underperformed its benchmark by 25.34%.

The Liontrust First Opportunities, which also applies the Economic Advantage process, was 20.98% ahead of the FTSE All Share benchmark from launch on 11 November 2005 to 20 November 2009 placing it 12th out of 283 funds in its peer group. Over the calendar year to 20 November 2009, the fund outperformed its benchmark by 11.22%. 

Since 25 March 2009, the Economic Advantage investment process has been applied to the Liontrust First Growth Fund. From that date to 20 November 2009, the fund underperformed the FTSE All Share index by 10.33% but the restructuring of the portfolio was only completed in September. 

The Liontrust Credit Fund, which is managed by the fixed income team recruited from Ilex in March, again has a strong short and long-term performance record. From the start of 2009 to the end of October 2009, the euro share class of the Fund was up 39%, while from launch in June 2000 to the end of October 2009 the Fund returned 98.42%. 

We are confident that, over the coming year, investors will appreciate the strong overall performance across our range of funds. Specific performance statistics are widely available from many sources, including our website, www.liontrust.co.uk.

Executive remuneration

The announcement of our preliminary results for the financial year ended 31 March 2009 refers to the implementation of a deferred bonus scheme for the executive directors and stated that details would be published in the Interim Results announcement. Up to 50% of any bonus for the executive directors will be satisfied by the issue of Company shares to be held for a period of up to three years. 

The Remuneration Committee also intends to ensure the interests of employees are closely aligned with those of the Group's shareholders and is reviewing the Group's equity incentivisation schemes.

Given the fall in funds under managements and the profits of the Group, the Remuneration Committee has determined that there will be a salary freeze for executive directors next year and that they will receive no annual bonus for this year. This shows a commitment to minimise any increases in fixed costs, reflects the turnaround strategy of the Group and the current economic environment.

Outlook

We are confident about the outlook for Liontrust and excited about its re-building. We believe our continued commitment to integrity, transparency and process stands us in very good stead in the aftermath of 2008. Assets under management have stabilised over the past five months, we have a strong balance sheet with over £20 million in net cash and financial assets, very strong long-term fund performance based on tried and tested processes and a new global equities team. We have the resources to further diversify our fund management teams and to raise the profile of the Group and our fund managers among a widening investor audience. 

Bernard Asher

Chairman

  Consolidated Statement of Comprehensive Income (unaudited)

Six months to 30 September 2009

			Six	Six	Year
			months to	months to	ended
			30-Sep-09	30-Sep-08	31-Mar-09
			(unaudited)	(unaudited)	(audited)
		Notes	£'000	£'000	£'000
Continuing operations
Revenue			7,245	15,844	36,004
Cost of sales			(56)	(106)	(133)
Gross profit			7,189	15,738	35,871
Realised gain on sale of financial assets			437	143	143
Administrative expenses		3	(7,153)	(10,176)	(24,240)
Operating profit			473	5,705	11,774
Interest receivable			3	464	599
Interest payable			-	(20)	(23)
Profit before tax			476	6,149	12,350
Taxation			(273)	(1,731)	(3,873)
Profit for the period			203	4,418	8,477
Other comprehensive income:
Gain on financial assets net of tax			209	158	670
Realised gain taken to the statement of comprehensive income			(437)	-	(143)
Exchange differences on translating foreign operations			(30)	-	26
Other comprehensive income for the period, net of tax			(258)	158	553
Total comprehensive income			(55)	4,576	9,030
Memo - Dividends		6	(1,497)	(7,634)	(8,382)
			Pence	Pence	Pence
Basic earnings per share		5	0.68	14.76	28.32
Diluted earnings per share		5	0.68	14.76	28.32

Consolidated Balance Sheet

As at 30 September 2009

				30-Sep-09	30-Sep-08	31-Mar-09
				(unaudited)	(unaudited)	(audited)
				£'000	£'000	£'000
Assets
Non-current assets
Intangible assets				900	-	1,000
Property, plant and equipment				139	162	156
Deferred tax assets				226	595	546
				1,265	757	1,702
Current assets
Receivables				12,829	19,971	42,893
Financial assets				4,862	6,213	6,839
Cash and cash equivalents				10,844	11,961	26,637
				28,535	38,145	76,369
Liabilities
Current liabilities
Deferred tax liabilities				(201)	-	(289)
Payables				(8,254)	(19,138)	(54,712)
Accruals				(160)	(355)	(333)
				(8,615)	(19,493)	(55,334)
Net current assets				19,920	18,652	21,035
Net assets				21,185	19,409	22,737
Shareholders' equity
Ordinary shares				337	337	337
Share premium				8,962	8,962	8,962
Capital redemption reserve				15	15	15
Revaluation reserve				417	276	645
Retained earnings				23,626	21,991	24,950
Own shares held				(12,172)	(12,172)	(12,172)
Total equity				21,185	19,409	22,737

Consolidated Cash Flow Statement

Six months to 30 September 2009

				Six	Six	Year
				months to	months to	ended
				30-Sep-09	30-Sep-08	31-Mar-09
				(unaudited)	(unaudited)	(audited)
				£'000	£'000	£'000
Cash flows from operating activities
Cash inflow from operations				7,853	20,943	41,652
Cash outflow from operations				(14,108)	(15,748)	(26,439)
Cash (outflow)/inflow from changes in unit trust receivables and payables				(6,673)	(2,585)	4,803
Net cash (used in)/from operations				(12,928)	2,610	20,016
Interest received				3	464	599
Interest paid				-	(20)	(23)
Tax paid				(1,863)	(3,776)	(5,855)
Net cash (used in)/from operating activities				(14,788)	(722)	14,737
Cash flows from investing activities
Purchase of property and equipment				(16)	(22)	(83)
Purchase of intangible assets				(1,000)	-	-
Sale of seeding investments				2,045	2,414	2,398
Net cash from investing activities				1,029	2,392	2,315
Cash flows from financing activities
Borrowings:(Repaid)				-	(2,884)	(2,884)
Purchase of minority interest shares				(508)	-	-
Dividends paid to shareholders				(1,497)	(7,634)	(8,382)
Net cash used in financing activities				(2,005)	(10,518)	(11,266)
Net (decrease)/increase in cash and cash equivalents				(15,764)	(8,848)	5,786
Effect of exchange rate changes				(29)	-	42
Opening cash and cash equivalents*				26,637	20,809	20,809
Closing cash and cash equivalents				10,844	11,961	26,637

* Cash and cash equivalents consist only of cash balances.

Consolidated Statement of Changes in Equity (unaudited)

Six months to 30 September 2009

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	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 period		-	-	-	-	203	-	203
Gain on financial assets net of tax		-	-	-	209	-	-	209
Realised gains taken to statement of comprehensive income		-	-	-	(437)	-	-	(437)
Loss on exchange differences on translating foreign operations		-	-	-	-	(30)	-	(30)
Total comprehensive income for the period		-	-	-	(228)	173	-	(55)
Dividends paid		-	-	-	-	(1,497)	-	(1,497)
Equity share options issued		-	-	-	-	-	-	-
Balance at 30 September 2009		337	8,962	15	417	23,626	(12,172)	21,185

Consolidated Statement of Changes in Equity (unaudited)

Six months to 30 September 2008

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2008 brought forward		337	8,962	15	118	25,207	(12,172)	22,467
Profit for the period		-	-	-	-	4,418	-	4,418
Gain on financial assets		-	-	-	158	-	-	158
Realised gains taken to statement of comprehensive income		-	-	-	-	-	-	-
Gain on exchange differences on translating foreign operations		-	-	-	-	-	-	-
Total comprehensive income for the period		-	-	-	158	4,418	-	4,576
Dividends paid		-	-	-	-	(7,634)	-	(7,634)
Equity share options issued		-	-	-	-	-	-	-
Balance at 30 September 2008		337	8,962	15	276	21,991	(12,172)	19,409

Consolidated Statement of Changes in Equity (audited)

Year to 31 March 2009

		Share	Share	Capital	Re-	Retained	Own shares	Total
		capital	premium	redemption	valuation	earnings	held	Equity
		£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 April 2008 brought forward		337	8,962	15	118	25,207	(12,172)	22,467
Profit for the period		-	-	-	-	8,477	-	8,477
Gain on financial assets net of tax		-	-	-	670	-	-	670
Realised gains taken to statement of comprehensive income		-	-	-	(143)	-	-	(143)
Gain on exchange differences on translating foreign operations		-	-	-	-	26	-	26
Total comprehensive income for the year		-	-	-	527	8,503	-	9,030
Acquisition of minority interest shares		-	-	-	-	(508)	-	(508)
Dividends paid		-	-	-	-	(8,382)	-	(8,382)
Equity share options issued		-	-	-	-	130	-	130
Balance at 31 March 2009		337	8,962	15	645	24,950	(12,172)	22,737

Notes to the Financial Statements

1    Principal Accounting policies    

a)     Basis of preparation

This interim report is unaudited and does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The financial information for the half years ended 30 September 2009 and 2008 has not been audited or reviewed by the auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The statutory accounts for 2009, which were prepared in accordance with International Financial Reporting Standards ('IFRS'), comprising standards and interpretations approved by either the International Accounting Standards Board or the International Financial Reporting Interpretations Committee or their predecessors, as adopted by the European Union, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS, have been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and did not contain a statement made under s237 of the Companies Act 1985.    

The financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority ("DTR") and with IAS 34 'Interim Financial Reporting'.    

The accounting policies applied in these interim accounts are consistent with those applied in the Group's most recent annual accounts.    

At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but either not endorsed not yet effective:    

IFRS 3 (amended)    Business combinations

IFRS 7 (amended)    Financial instruments: Disclosures

IAS 27 (amended)    Consolidation and separate financial statements

IFRS9            Financial instruments: Classification

In these financial statements, the Group has presented a Consolidated Statement of Comprehensive Income in line with the revised requirements of IAS1 and has adopted IFRS8 under which management have determined that the Group has one operating segment. The directors anticipate the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.    

2    Segmental reporting    

The Group's operations consist only of investment management in the UK. As such, no segmental analysis is presented.     

3    Administration expenses                    

	Six	Six	Year
	months to	months to	ended
	30-Sep-09	30-Sep-08	31-Mar-09
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Staff costs
- Director and employee costs	4,862	7,332	16,907
- Severance compensation	51	-	1,622
- Share option expense	-	65	130
- Share incentive plan expense	46	73	106
- Share option NI liability	-	8	17
	4,959	7,478	18,782
Other administration expenses	2,194	2,698	5,458
Total administration expenses	7,153	10,176	24,240

4    Taxation                    

The interim tax charge has been calculated at the estimated full year effective UK corporation tax rate of 28% (2008: 28%). As Liontrust European Investment Services Limited is 70% owned by the Group it falls below the 75% threshold required by HM Revenue & Customs in order to qualify for group tax relief. Losses relating to Liontrust International (North America) inc. are not allowable for UK group tax relief. The interim tax charge has been adjusted accordingly.                

5    Earnings per share                    

The calculation of basic earnings per share is based on profit after taxation and the weighted average number of Ordinary Shares in issue for each period. The weighted average number of Ordinary Shares for the six months ended 30 September 2009 was 29,937,673 (30 September 2008: 29,937,673, 31 March 2009: 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 that were in existence during the six months ended 30 September 2009. The adjusted weighted average number of Ordinary Shares so calculated for the period was 29,937,673 (30 September 2008: 29,937,673, 31 March 2009: 29,937,673). 

6    Dividends                    

The directors declare a first interim dividend in respect of the current period of 2.5 pence per share (2008: 2.5 pence), which will be paid on 30 December 2009 to all shareholders on the register as at 4 December 2009. The shares will go ex-dividend on 2 December 2009.

7    Financial Assets

Assets held at fair value through profit and loss:                    

The Group's assets held at fair value through profit and loss represent units in the UK Authorised unit trusts and shares in sub-funds of the Liontrust Guernsey Fund Limited (a Guernsey domiciled Open ended investment company) held in the manager's box and are valued at bid price.                                                                

Assets held as available for sale:                            

The Group's assets held as available for sale represent shares in the Liontrust European Long/Short Fund and Liontrust MMVIII Fund (both sub-funds of Liontrust Alternative Funds PCC Limited), and Liontrust Pan-European Fund (a sub-fund of Liontrust International (Luxembourg) SICAV) and are valued at mid price.    

8    Related Party Transactions                            

During the six months to 30 September 2009 the Group received fees from unit trusts under management of £5,060,000 (2008: £10,942,000). Transactions with these unit trusts comprised creations of £27,895,000 (2008: £146,449,000) and liquidations of £193,112,000 (2008: £258,998,000). Directors can invest in unit trusts managed by the Group on commercial terms that are no more favourable than those available to staff in general. As at 30 September 2009 the Group owed the unit trusts £107,000 (2008: £6,135,000) in respect of unit trust creations and was owed £3,185,000 (2008: £9,534,000) in respect of unit trust cancellations and fees.                

9    Subsequent Events

On 28 August 2009 the Company committed to redeem its holding of class B shares in the Liontrust European Long/Short Fund. The holding was redeemed on the 1 October 2009 dealing day for a total consideration of £3,248,000 including a realised gain before tax of £489,000. As at 30 September this gain has been treated as unrealised and has been recorded within the Consolidated Statement of Changes in Equity. On 29 September 2009 the Company committed to subscribe for £5,000,000 of GBP class shares in the Liontrust Credit Fund. The shares were issued on the 1 October 2009 dealing day, as at 30 September the amount is included on the balance sheet within Receivables.       

10     Key Risks

The directors have identified the risk and uncertainties that affect the Group's business and believe that they will be substantially the same for the second half of the year as the current risks as identified in the 2009 Annual Report. These can be broken down into risks that are within the management's influence and risks that are outside it.

Risks that are within management's influence include areas such as the expansion of the business, prolonged periods of under-performance, loss of key personnel, human error, poor communication and service leading to reputation damage and fraud.

Risks outside the management's influence include falling markets, terrorism, a deteriorating UK economy, investment industry price competition and hostile takeovers.

Management monitor all risks to the business, they record how each risk is mitigated and have warning flags to identify increased risk levels. Management recognise the importance of risk management and view risk management as an integral part of the management process which is tied into the business model and is described further in the Risk management and internal control section on page 35 of the 2009 Annual Report and Note 2 "Financial risk management" on page 58 of the 2009 Annual Report.

11    Directors' Responsibilities

The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.                                

By Order of the Board      

Nigel R. Legge                                                 Vinay K. Abrol            

Chief Executive                                                          Chief Operating Officer                                                                                             and Chief Financial Officer                     

Nigel R. Legge                                           Vinay K. Abrol        

Chief Executive                                       Chief Operating Officer

                                                                  and Chief Financial Officer

25 November 2009

Forward Looking Statements                        

This 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

Other information

The release, publication, transmission or distribution of this announcement in, into or from 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.

ENDS

 

END

 

 

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