Interim Results

RNS Number : 7211Z
Rathbone Brothers PLC
24 July 2008
 



Rathbone Brothers Plc

Interim results for the 6 months to 30 June 2008


Profits up and strong organic growth at Rathbones despite volatile markets


Rathbone Brothers Plc, a leading provider of high quality, personalised discretionary investment management and wealth management services for private investors and trustees, announces its interim results for the half year ended 30 June 2008.


Financial highlights:

  • Excluding results of the potential disposal of the Jersey and Singapore Trust businesses, profit before tax from continuing operations for the first half of the year was £24.0 million (30 June 2007: £23.4 million).

  • Operating income from continuing operations increased by 3.4% to £70.2 million (30 June 2007: £67.9 million). 

  • Basic earnings per share from continuing operations rose by 2.3% to 41.0p (30 June 2007: 40.0p). 

  • Interim dividend per share remains at 16.0p (2007: 16.0p) and is payable on 8 October 2008.


Operating highlights:

  • Recruitment of Paul Stockton as Finance Director, who starts in August.

  • Planned disposal to management of trust businesses in Jersey and Singapore (as announced on 17 July 2008). 

  • Total funds under management decreased by 8.6% over the six months period to 30 June 2008 to £12.0 billion (from £13.1 billion as at 31 Dec 2007) compared with a decrease in the FTSE/APCIMS Balanced Index of 9.8% and a fall in the FTSE 100 of 12.9% over the same period.

  • Net organic growth in funds under management within Rathbone Investment Management, which accounts for 87.5% of Group funds under management was 8.2%.


Mark Powell, chairman of Rathbone Brothers Plc, commented:

'Our results for the half year to 30 June 2008 show further progress for Rathbones, and at 8.2%, the highest underlying rate of net organic growth in funds under management in our core business that we have reported. In spite of the volatile and difficult conditions in financial markets, we have also increased profits in our continuing operations to £24 million. 


Our intention to dispose of our trust businesses in Jersey and Singapore reflects the changing climate for the use of offshore structures and services, and a belief that these businesses are best owned offshore by their management. We are confident that our trust and tax services in the UK will continue to form an important part of our offering to clients, through all of our offices in the UK. It will not affect our offshore investment management business in Jersey (Rathbone Investment Management International).


The uncertainties and volatilities created by the crisis in credit markets may provide attractive investment opportunities for the longer-term and call for precisely the investment management skills that we seek to provide to all of our clients. We face the medium and long-term future with guarded optimism.'


ENDS


For further information contact:


Rathbone Brothers Plc 020 7399 0000

Mark Powell, Chairman

Andy Pomfret, Chief Executive

Emily Morris, Marketing Director


Smithfield

Reg Hoare/Miranda Good 020 7360 4900


Notes for editors:

Rathbone Brothers Plc

Rathbone Brothers Plc specialises in providing, through its subsidiaries, high quality, personalised investment management and wealth management services for private investors and trustees, including discretionary fund management, unit trusts, tax planning, trust and company management, pension and banking services. It manages £11.99 billion of funds, including £1.5 billion managed by Rathbone Unit Trust Management Limited (as at 30 June 2008).

  Chairman's statement


Our results for the half year to 30 June 2008 show further progress for Rathbones, and at 8.2%, the highest underlying rate of net organic growth in funds under management in our core business that we have reported, in what has developed into volatile and difficult conditions in financial markets.

Profits before tax from continuing operations were £24.0 million, compared with £23.4 million in the same period in 2007, an increase of 2.6%. Full year profits from continuing operations for 2007 were £47.5 million, including profits arising from a part disposal of our investment in London Stock Exchange Group Plc of £1.3 million.

Reported basic earnings per share from continuing operations for the period are 40.97p, compared with 40.04p in the first half of 2007. The interim dividend is maintained at 16p per share and will be payable on 8 October 2008.

At the start of the year markets were pre-occupied with the difficulties associated with losses being incurred by banks, arising from sub-prime mortgages in the USA and the subsequent lack of liquidity in money markets. The subsequent increase in short term money market rates in the UK and elsewhere and a sharp deterioration in property values has led to fears of further losses for banks; several of which have sought to raise substantial amounts of additional equity capital in order to restore their financial ratios.

Rises in commodity prices have contributed to a rise in the reported rate of inflation and to expectations of still higher inflation, at a time of weakening economic activity.

The strength of the euro against sterling and political uncertainties in the UK have contributed to a growing sense of unease in financial markets.

These market conditions have provided challenging conditions for all investors and investment managers. However, at the half year the total funds under management in Rathbone Investment Management were £10.5 billion, a decrease of 6.3% compared with a decrease of 9.8% in the FTSE/APCIMS Balanced Index and 12.9% in the FTSE 100 Index.  

During this period net new funds under management, measured as the value of new funds less the value of withdrawn funds, of £525 million were attracted and our growing charities investment management team has been especially successful in attracting new client accounts.

The volatile market conditions have resulted in an increase in the proportion of clients' assets held as cash; with client deposits increasing by 16.5% to £1.1 billion. This in turn has led to an increase in the funds that we have invested in the money markets, as a provider of liquidity. Market conditions have created higher interest margins. These two factors together have increased interest income by 57.6% to £34.2 million, leading to a rise in net interest income of 65.9% to £13.9 million.

Our policy of investing only in high quality and readily realisable assets, issued by institutions rated 'A' or higher, has ensured that the strength of our balance sheet has not been adversely affected by market conditions. We continue to hold a level of capital that provides appropriate headroom over the regulatory minimum.

We have selectively sought to expand our network of offices by the acquisition of Citywall Financial Management to create a new Rathbones presence in Exeter and recruitment of investment managers to enable us to open a new office in Birmingham. Later in the year we expect to open in Aberdeen. We have extended our specialist ethical investment service by launching Rathbone Greenbank Investments from our office in Liverpool to work alongside the existing team in Bristol

Our unit trust management company has, in common with other unit trust managers, experienced net redemptions of £110 million reflecting market conditions and a downturn in performance in some of our funds. 

Potential disposal

On 17 July 2008 we announced our intention to dispose of our trust businesses in Jersey and Singapore. This disposal reflects the changing climate for the use of offshore structures and services, and a belief that these businesses are best owned offshore by their management. 

Discussions are also taking place on the most appropriate ownership structure of Rathbones' Swiss and BVI trust businesses.

These disposal plans do not in any way affect our trust and tax services in the UK which we are confident will continue to form an important part of our offering to clients, through all of our offices in the UK. Nor does it affect our offshore investment management business in Jersey (Rathbones Investment Management International).


Composition of the Board

In May we announced the recruitment of Paul Stockton as finance director with effect from August this year. He will join us with extensive and relevant experience in our sector and as a finance director.

Outlook

The uncertainties and volatilities created by the crisis in credit markets and the consequent effect on property values and the reported rises in inflation seem likely to create challenging markets for the rest of this calendar year. These conditions will also provide attractive investment opportunities for the longer-term and call for precisely the investment management skills that we seek to provide to all of our clients. We face the medium and long-term future with guarded optimism.


Mark Powell

Chairman

23 July 2008

  Interim management report


Group activities

Rathbone Brothers Plc is the parent company of a group of companies which offers a range of investment management services and related professional advice to private individuals, trustees, charities, pension funds and the professional advisers of these clients. The Group also provides financial planning, private banking, offshore fund management and trust administration services.

The Group's principal activity is discretionary investment management for private clients carried out by Rathbone Investment Management Limited from ten offices in the UK and by Rathbone Investment Management (C.I.) Limited (which trades as Rathbone Investment Management International) in Jersey.

Rathbone Investment Management Limited is authorised and regulated by the Financial Services Authority and also provides private banking services. The company also offers an ethical investment service (Rathbone Greenbank Investments) and is the investment adviser to five venture capital trusts. In addition, the Rathbone Group continues to provide some advisory stockbroking services.

Rathbones manages nine authorised unit trusts through Rathbone Unit Trust Management Limited and is the Authorised Corporate Director of four Open Ended Investment Companies (OEICs).

Rathbone Trust Company Limited provides a wide range of trust, company management and taxation services. Activities of other overseas subsidiary companies, which trade as Rathbone Trust International, currently comprise trust and company formation and administration services undertaken from offices in JerseyGenevaSingapore and the British Virgin Islands. On 17 July 2008 the Group announced the planned sale (by way of management buy out) of the Jersey and Singapore trust businesses.

Rathbone Pension & Advisory Services Limited offers pension advice, SIPP administration and other financial planning services.

Key events

A summary of the operational highlights and their impact on the performance and financial position of the Group is given in the Chairman's statement.

Related parties

Related party disclosures are given in note 16.

Principal risks

The principal risks that face the Group are described in the Chairman's statement and in section 6 of the Business review in the Group's Report and accounts prepared as at 31 December 2007. There have been no changes to the principal risks during the six months ended 30 June 2008.

Capital resources

Under the Capital Requirements Directive, the Group is required to make Pillar 3 disclosure of additional information on its risk management framework, capital resources and individual risks. These disclosures will be published on the Group's website (www.rathbones.com) in October 2008.

Forward looking statements

This interim statement contains certain forward-looking statements which are made by the directors in good faith based on the information available to them at the time of their approval of this interim statement. Forward looking statements contained within the interim statement should be treated with some caution due to the inherent uncertainties, including economic, regulatory and business risk factors, underlying any such forward looking statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

The interim statement has been prepared by Rathbone Brothers Plc to provide information to its shareholders and should not be relied upon by any other party or for any other purpose.




Statement of 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;

  • the interim management report, incorporating the Chairman's statement and other information where referenced, includes a fair view of the information required by the Disclosure and Transparency Rules of the UK Financial Services Authority (DTR) 4.2.7 (indication of important events during the first six months and description of principal risks for the remaining six months of the year); and

  • the interim management report, incorporating the Chairman's statement and other information where referenced, includes a fair view of the information required by DTR 4.2.8 (disclosures of related parties' transactions and changes therein).

The directors of Rathbone Brothers Plc are listed in the Group's report and accounts prepared as at 31 December 2007. There have been no changes to the directors in the six months ended 30 June 2008.


By order of the Board




Andy Pomfret

Chief Executive

23 July 2008

  Consolidated interim income statement

for the six months ended 30 June 2008




Note

Unaudited

Six months to

30 June 2008

£'000


Unaudited

Six months to

30 June 2007

£'000

(restated - note1)

Audited

Year to

31 December 2007

£'000

(restated - note 1)

Interest and similar income


34,196

21,703

51,583

Interest expense and similar charges


(20,317)

(13,339)

(32,282)

   Net interest income


13,879

8,364

19,301

   Fee and commission income


59,677

63,701

126,284

Fee and commission expense


(4,593)

(5,687)

(11,499)

Net fee and commission income


55,084

58,014

114,785

Dividend income


48

19

67

Net trading income


272

812

1,676

Net income from sale of available for sale securities


-

-

1,297

Other operating income


940

723

1,555

Operating income


70,223

67,932

138,681

Operating expenses


(46,222)

(44,546)

(91,152)

Profit before tax from continuing operations


24,001

23,386

47,529

Taxation

4

(6,504)

(6,398)

(14,218)

Profit after tax from continuing operations


17,497

16,988

33,311






Discontinued operations





Profit before tax from discontinued operations


1,815

2,473

4,695

Tax credit/(charge) on profit before tax from discontinued
operations


106

(624)

(626)

Loss recognised on re-measurement of assets of the
disposal group


(5,690)

-

-

Net (loss)/profit from discontinued operations

5

 (3,769)

1,849

4,069

Profit for the period attributable to equity holders of the Company


13,728

18,837

37,380






Dividends proposed for the period per ordinary share 

6

16.00p

16.00p

41.00p

Dividends (£'000)


6,839

6,817

17,479






Earnings per share for the period attributable to equity holders of the Company:

7




- Basic


32.15p

44.40p

87.88p

- Diluted


31.92p

43.64p

86.46p






Earnings per share from profit from continuing operations for the period attributable to equity holders of the Company:

7




- Basic


40.97p

40.04p

78.31p

- Diluted


40.68p

39.36p

77.05p


  Consolidated interim balance sheet

as at 30 June 2008



Note

Unaudited

30 June 2008

£'000

Unaudited

30 June 2007

£'000

Audited

31 December 2007

£'000

Assets





Cash and balances at central banks 


279

280

275

Settlement balances


33,001

41,169

21,573

Loans and advances to banks


248,103

213,334

250,103

Loans and advances to customers


33,833

38,593

39,380

Investment securities





- available for sale


53,541

6,374

6,948

- held to maturity


875,783

568,401

765,274

Non-current assets held for sale

5

32,432

-

-

Intangible assets


62,982

84,260

85,734

Property, plant and equipment

8

6,316

7,834

8,131

Deferred tax asset


4,265

2,810

3,528

Prepayments, accrued income and other assets


48,786

45,624

45,677

Total assets


1,399,321

1,008,679

1,226,623

Liabilities





Deposits by banks

9

12,211

13,803

12,460

Settlement balances


40,489

46,657

19,926

Due to customers


1,102,432

724,968

946,608

Accruals, deferred income and other liabilities


39,479

31,615

41,478

Current tax liabilities


4,515

6,327

6,790

Provisions for liabilities and charges

10

3,716

9,484

8,159

Non-current liabilities held for sale

5

3,673

-

-

Retirement benefit obligations

11

12,540

2,100

6,452

Total liabilities


1,219,055

834,954

1,041,873

Equity





Share capital

12

2,137

2,130

2,134

Share premium

12

28,169

27,115

27,758

Other reserves

13

51,723

53,566

54,181

Retained earnings

13

98,237

90,914

100,677

Total equity


180,266

173,725

184,750

Total equity and liabilities


1,399,321

1,008,679

1,226,623



Approved by the Board of Directors on 23 July 2008


  Consolidated interim cash flow statement

for the six months ended 30 June 2008



Note

Unaudited

Six months to

30 June 2008

£'000


Unaudited

Six months to

30 June 2007

£'000

(restated - note 1)

Audited

Year to

31 December 2007

£'000

(restated - note 1)

Cash flows from operating activities





Profit before tax


24,001

23,386

47,529

Net interest income


(13,879)

(8,364)

(19,301)

Net income from sale of available for sale securities


-

-

(1,297)

Impairment losses on loans and advances


139

139

102

Profit on disposal of plant and equipment


(51)

(13)

(2)

Depreciation and amortisation


2,135

1,931

4,230

Defined benefit pension scheme charges 


1,375

1,250

2,554

Share based payment charges


759

1,458

2,692

Interest paid


(21,910)

(14,246)

(31,525)

Interest received


51,468

34,280

46,994



44,037

39,821

51,976

Changes in operating assets and liabilities:





- net decrease in loans and advances to banks and customers


12,092

17,541

14,867

- net (increase) in settlement balance debtors


(11,428)

(21,541)

(1,945)

- net (increase) in prepayments, accrued income and other assets


(21,694)

(16,999)

(2,109)

- net increase in amounts due to customers and deposits by banks


154,164

61,858

280,791

- net increase in settlement balance creditors


20,563

28,579

1,848

- net (decrease)/increase in accruals, deferred income, provisions and other liabilities


(4,180)

1,201

9,001

Cash generated from operations


193,554

110,460

354,429

Defined benefit pension contributions paid


(1,379)

(4,897)

(6,595)

Tax paid


(5,361)

(6,302)

(12,736)

Discontinued operations


1,639

1,511

3,101

Net cash inflow from operating activities


188,453

100,772

338,199

Cash flows from investing activities





Acquisition of businesses, net of cash acquired 


(734)

(298)

(422)

Purchase of property, equipment and intangible assets


(2,551)

(5,682)

(9,815)

Proceeds from sale of property and equipment


121

13

29

Purchase of investment securities


(1,292,026)

(495,489)

(1,276,420)

Proceeds from sale and redemption of investment securities


1,181,519

485,455

1,070,811

Discontinued operations


(74)

(181)

(369)

Net cash (used in) investing activities


(113,745)

(16,182)

(216,186)

Cash flows from financing activities





Purchase of shares for share based schemes


(1,453)

(3,033)

(3,210)

Issue of ordinary shares

15

414

2,316

2,963

Dividends paid


(10,662)

(9,107)

(15,914)






Net cash (used in) financing activities


(11,701)

(9,824)

(16,161)

Net increase/(decrease) in cash and cash equivalents


63,007

74,766

105,852

Cash and cash equivalents at the beginning of the period


214,220

108,343

108,343

Effect of exchange rate changes on cash and cash equivalents


58

(63)

25

Cash and cash equivalents at the end of the period

15

277,285

183,046

214,220


  Consolidated interim statement of recognised income and expense

for the six months ended 30 June 2008




Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

Profit for the period 


13,728

18,837

37,380

Exchange translation differences


92

(77)

14

Actuarial (loss)/gain on retirement benefit obligation


(6,092)

5,016

270

Revaluation of available for sale investment securities:





- net (loss)/gain from changes in fair value


(3,542)

221

2,069

- net profit on disposal transferred to income during the period


-

-

(1,297)



(3,542)

221

772

Deferred tax on equity items:





- available for sale investment securities


992

(66)

(93)

- actuarial gains and losses


1,706

(1,505)

34

- share based payments


(426)

517

694



2,272

(1,054)

635

Net (loss)/income recognised directly in equity


(7,270)

4,106

1,691

Recognised income and expense for the period attributable to equity holders of the Company


6,458

22,943

39,071


  Notes to the consolidated interim accounts

for the six months ended 30 June 2008

1.          Basis of preparation

The Group's consolidated accounts are prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS). These interim accounts are presented in accordance with IAS 34 'Interim Financial Reporting'. The interim accounts have been prepared on the basis of the accounting policies, methods of computation and presentation set out in the Group's consolidated accounts for the year ended 31 December 2007. The interim accounts should be read in conjunction with the Group's audited accounts for the year ended 31 December 2007.

Comparative balances have been restated in the Income statement, the Cash flow statement and the related notes where applicable to reflect the presentation of certain subsidiary entities as disposal groups in accordance with IFRS 5. Further details are set out in note 5.

The information in this announcement does not comprise Statutory Accounts within the meaning of section 240 of the Companies Act 1985 (section 434 of the Companies Act 2006). The Group's accounts for the year ended 31 December 2007 have been reported on by the auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not draw attention to any matters by way of emphasis. They also did not contain a statement under section 237(2) or (3) of the Companies Act 1985 (section 498 of the Companies Act 2006).

2.         Segmental information

(a)
    Business segments

For management purposes, the Group is currently organised into three operating divisions: Investment Management, Unit Trusts and Trust and Tax Services. These divisions are the basis on which the Group reports its primary segment information. A reconciliation of total gross revenues to the Income statement is included in note 2(c).

30 June 2008 (unaudited)

Investment management 
£'000

Unit trusts
£'000

Trust and tax services
£'000

Central costs allocated to discontinued operations

£'000

Eliminations
£'000

Total
£'000

External revenues (continuing)

77,952

11,753

5,428


-

95,133

External revenues (discontinued)

-

-

7,650


-

7,650

Revenues from other segments

671

-

-


(671)

-


78,623

11,753

13,078


(671)

102,783

Unallocated external revenues 






-

Total gross revenues (note 2c)






102,783

Segment result (continuing)

21,960

2,152

200

(311)


24,001

Segment result (discontinued)

-

-

(3,875)

-


(3,875)


21,960

2,152

(3,675)

(311)


20,126

Unallocated items






-

Profit before tax






20,126

Taxation (continuing)






(6,504)

Taxation (discontinued)






106

Profit for the period






13,728

Segment assets

1,303,457

18,818

57,146



1,379,421

Unallocated assets






19,900

Total assets






1,399,321

Segment liabilities

1,157,190

12,742

19,441



1,189,373

Unallocated liabilities






29,682

Total liabilities






1,219,055

Other segment items:







Capital expenditure

2,061

97

196



2,354

Depreciation and amortisation

1,886

72

177



2,135

Other non-cash expenses

575

38

198



811

Provisions charged in the period

42

-

-



42

Provisions utilised in the period

3,777

-

232



4,009


30 June 2007 (unaudited)

(restated - note 1)

Investment management 
£'000

Unit trusts
£'000

Trust and tax services
£'000

Central costs allocated to discontinued operations

£'000

Eliminations
£'000

Total
£'000

External revenues (continuing)

67,278

15,015

4,665


-

86,958

External revenues (discontinued)

-

-

7,788


-

7,788

Revenues from other segments

822

-

-


(822)

-


68,100

15,015

12,453


(822)

94,746

Unallocated external revenues 






-

Total gross revenues (note 2c)






94,746

Segment result (continuing)

20,275

3,719

(140)

(468)


23,386

Segment result (discontinued)

-

-

2,473

-


2,473


20,275

3,719

2,333

(468)


25,859

Unallocated items






-

Profit before tax






25,859

Taxation (continuing)






(6,398)

Taxation (discontinued)






(624)

Profit for the period






18,837

Segment assets

907,034

23,882

56,971



987,887

Unallocated assets






20,792

Total assets






1,008,679

Segment liabilities

776,336

16,624

17,972



810,932

Unallocated liabilities






24,022

Total liabilities






834,954

Other segment items:







Capital expenditure

5,287

152

293



5,732

Depreciation and amortisation

1,705

71

155



1,931

Other non-cash expenses

1,012

129

200



1,341

Provisions charged in the period

210

-

628



838

Provisions utilised in the period

2,383

-

-



2,383


31 December 2007 (audited)

(restated - note 1)

Investment
management 

£'000

Unit trusts
£'000

Trust and tax services
£'000

Central costs allocated to discontinued operations

£'000

Eliminations
£'000

Total
£'000

External revenues (continuing)

141,078

30,303

9,784


-

181,165

External revenues (discontinued)

-

-

16,130


-

16,130

Revenues from other segments

1,606

-

-


(1,606)

-


142,684

30,303

25,914


(1,606)

197,295

Unallocated external revenues 






1,297

Total gross revenues (note 2c)






198,592

Segment result (continuing)

40,091

6,880

58

(797)


46,232

Segment result (discontinued)

-

-

4,695

-


4,695


40,091

6,880

4,753

(797)


50,927

Unallocated items (continuing)






1,297

Profit before tax






52,224

Taxation (continuing)






(14,218)

Taxation (discontinued)






(626)

Profit for the year






37,380

Segment assets

1,115,899

27,837

59,722



1,203,458

Unallocated assets






23,165

Total assets






1,226,623

Segment liabilities

974,760

21,390

18,462



1,014,612

Unallocated liabilities






27,261

Total liabilities






1,041,873

Other segment items:







Capital expenditure

8,718

262

616



9,596

Depreciation and amortisation

3,724

148

358



4,230

Other non-cash expenses

1,852

256

349



2,457

Provisions charged in the period

1,080

-

813



1,893

Provisions utilised in the period

5,512

-

801



6,313



(b)     Geographical segments

The Group’s operations are located in the United Kingdom, Jersey, Switzerland, the British Virgin Islands and Singapore. The following table provides an analysis of the Group’s revenues by geographical market, by origin of the services:

 

Total gross revenues by geographical market



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

United Kingdom


89,185

82,051

171,556

Jersey


10,475

10,410

21,686

Rest of the world


3,123

2,285

5,350

Total gross revenues (note 2c)


102,783

94,746

198,592


The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:

Assets allocated to business segments



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

United Kingdom


1,325,121

937,467

1,145,684

Jersey


33,298

31,733

37,123

Rest of the world


21,002

18,687

20,651



1,379,421

987,887

1,203,458


Additions to property, plant and equipment and intangible assets



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

United Kingdom


2,340

5,724

9,790

Jersey


58

168

296

Rest of the world


17

8

23



2,415

5,900

10,109

 

(c)           Total gross revenues



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

Interest and similar income


34,196

21,703

51,583

Fee and commission income


59,677

63,701

126,284

Dividend income


48

19

67

Net trading income


272

812

1,676

Net income from sale of available for sale securities


-

-

1,297

Other operating income


940

723

1,555

Revenue from discontinued operations


7,650

7,788

16,130

Total gross revenues


102,783

94,746

198,592

 

3.    Business combinations


On 1 April 2008, the Group acquired the entire share capital of Citywall Financial Management Limited for cash consideration of £1,214,000. Contingent, deferred consideration is also payable dependent on the value of discretionary funds under management introduced by the business at 5 April 2009 and 30 September 2009. The acquired business’ net assets at the acquisition date were as follows:

 



Recognised values

£'000

Fair value adjustments

£'000

Carrying amounts

£'000

Cash and cash equivalents


480

-

480

Other current assets


115

-

115

Property, plant and equipment


10

-

10

Client relationships


565

565

-

Current liabilities


(225)

-

(225)

Net identifiable assets acquired


945

565

380

Goodwill on acquisition


1,000



Total net assets acquired


1,945




Included within the consolidated income statement for the six months ended 30 June 2008 is a profit before tax of £103,000 relating to the acquired business. If the business had been acquired on 1 January 2008, consolidated operating income from continuing operations would have been £70,223,000 and consolidated profit before tax from continuing operations would have been £24,023,000.
The goodwill arising on the acquisition is attributable to the anticipated profitability of incorporating the business into the Group’s operating model.

 

4.    Taxation

The current tax expense for the six months ended 30 June 2008 was calculated based on the estimated average annual effective tax rate. The overall effective tax rate for this period was 31.8% (30 June 2007: 27.2%; 31 December 2007: 28.4%). The taxation charge for the period comprises:

 



Unaudited

Six months to

30 June 2008

£'000


Unaudited

Six months to

30 June 2007

£'000

(restated - note 1)

Audited

Year to

31 December 2007

£'000

(restated - note 1)

United Kingdom taxation


4,454

4,954

11,669

Overseas taxation


(67)

146

246

Deferred taxation


2,117

1,298

2,303



6,504

6,398

14,218

 

5.    Disposal groups

On 16 July 2008 Rathbone Brothers Plc signed a heads of terms to sell Rathbone Trust Company Jersey Limited, Rathbone Jersey Limited and Rathbone Trust (Singapore) Pte. Limited. The sale has conditions precedent that remain unfulfilled.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:

 



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

Operating income


7,650

7,711

15,844

Operating expenses


(5,835)

(5,238)

(11,149)

Profit before tax from discontinued operations


1,815

2,473

4,695

Attributable tax credit/(expense)


106

(624)

(626)

Profit after tax from discontinued operations


1,921

1,849

4,069

Loss recognised on re-measurement of assets of the disposal group


(5,690)



Attributable tax expense


-



Loss from discontinued operations


(3,769)



The operations of these businesses are included within Trust and Tax Services in the segmental analysis in note 2.
The assets and liabilities of the disposal group were re-measured according to IFRS principles at the date of held for sale classification and the carrying amount of goodwill was reduced by £5,690,000.
The major classes of assets and liabilities comprising the operations classified as held for sale as at 30 June 2008 are as follows:



Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

Cash and balances at central banks


1

-

1

Loans and advances to banks


3,172

1,737

2,249

Loans and advances to customers


4,432

3,988

6,250

Intangible assets


18,574

24,184

24,219

Property, plant and equipment


2,112

2,351

2,287

Deferred tax asset


(284)

(795)

(807)

Prepayments, accrued income and other assets


4,425

3,890

1,564

Total assets of the disposal group


32,432

35,355

35,763

Accruals, deferred income and other liabilities


2,901

2,652

1,623

Current tax liabilities


595

1,042

1,078

Provisions for liabilities and charges


177

432

322

Total liabilities of the disposal group


3,673

4,126

3,023

Net assets of the disposal group


28,759

31,229

32,740

Comparative balances have not been restated to show assets and liabilities held for sale, in accordance with IFRS 5.

6.    Dividend

The interim dividend of 16.0p per share is payable on 8 October 2008 to shareholders on the register at the close of business on 19 September 2008 (30 June 2007: 16.0p). The interim dividend has not been included as a liability in this interim report. The 2007 final dividend of 25.0p per share was paid on 14 May 2008.

 

7.    Earnings per share

Basic earnings per share has been calculated by dividing the profits attributable to shareholders of £13,728,000 (30 June 2007: £18,837,000; 31 December 2007: £37,380,000) by the weighted average number of shares in issue throughout the period of 42,703,432 (30 June 2007: 42,422,960; 31 December 2007: 42,536,821).
Diluted earnings per share is the basic earnings per share, adjusted for the effect of contingently issuable shares under the Long Term Incentive Plan, employee share options remaining capable of exercise and any dilutive shares to be issued under the Share Incentive Plan, weighted for the relevant period (see table below).

 



Unaudited

Six months to

30 June 2008

Unaudited

Six months to

30 June 2007

Audited

Year to

31 December 2007

Weighted average number of ordinary shares in issue during the period - basic


42,703,432

42,422,960

42,536,821

Effect of ordinary share options


235,019

502,377

461,167

Effect of dilutive shares issuable under the Share Incentive Plan


14,528

70,109

85,535

Effect of contingently issuable ordinary shares under the Long Term Incentive Plan


59,231

167,385

148,431

Diluted ordinary shares


43,012,210

43,162,831

43,231,954

8.    Property, plant and equipment

During the six months ended 30 June 2008, the Group acquired assets with a cost of £1,577,000 (six months ended 30 June 2007: £2,673,000; year ended 31 December 2007: £4,405,000), including assets acquired through business combinations of £10,000 (six months ended 30 June 2007 and year ended 31 December 2007: £9,000).
Assets with a net book value of £70,000 were disposed of in the six months ended 30 June 2008 (30 June 2007: £nil; 31 December 2007: £26,000), resulting in a gain on disposal of £51,000 (30 June 2007: £13,000; 31 December 2007: £2,000).

 

9.     Deposits by banks
Included within deposits by banks is a term loan of £10,734,000 which is repayable in seven, six-monthly instalments ending on 4 April 2011 (30 June 2007: £13,800,000; 31 December 2007: £12,267,000). Interest is payable on the loan at 0.7% above the London Inter-Bank Offer Rate.

 

10.    Provisions for liabilities and charges


Deferred contingent consideration

£'000


Client compensation

£'000

(restated-note1)

Litigation related & other

£'000

(restated-note1)

Total

£'000

(restated-note1)

At 1 January 2008

5,843

1,842

153

7,838

Exchange adjustments

-

6

-

6

Charged to the income statement


42

-

42

Unused amount credited to profit or loss


(499)

-

(499)

Net credit to the income statement (i)


(457)

-

(457)

Capitalised during the period (ii)

730



730

Amounts released (iii)

(392)



(392)

Utilised/paid during the period

(3,800)

(104)

(105)

(4,009)


2,381

1,287

48

3,716






Current

1,929

990

48

2,967

Non-current

452

297

-

749


2,381

1,287

48

3,716

(i) In addition to the net credit of £457,000 in the above table, a net charge of £102,000 has been recognised in the income statement during the period in relation to expected insurance recoveries – an overall credit of £355,000.
(ii) Amounts capitalised as intangible assets during the period represent deferred consideration in relation to the acquisition of Citywall Financial Management Limited (see note 3).
(iii) Amounts released represent a reduction in the estimated cost of previously capitalised deferred payments to Investment Managers under earn-out schemes.

 

11.    Retirement benefit obligations

The Group operates two pension schemes providing benefits based on final pensionable pay for executive directors and staff employed by the Company. For the purposes of calculating the pension benefit obligation, the following assumptions have been used:

 



Unaudited

30 June 2008

% p.a.

Unaudited

30 June 2007

% p.a.

Audited

31 December 2007

% p.a.

Rate of increase in salaries


5.20

4.45

4.55

Rate of increase of pensions in payment:





- Laurence Keen Scheme


*3.95

*3.60

*3.60

- Rathbones 1987 Scheme


*3.80

*3.10

*3.20

Rate of increase of deferred pensions


3.95

3.20

3.30

Discount rate


6.30

5.80

5.70

Inflation assumption


3.95

3.20

3.30

*5% for service prior to April 2001

 

Normal retirement age is 65 for members of the Laurence Keen Scheme and 60 for members of the Rathbone 1987 Scheme. The assumed life expectations on retirement were:

 
 
 
Unaudited 30 June 2008
Males
Unaudited 30 June 2008 Females
Unaudited 30 June 2007
Males
Unaudited 30 June 2007 Females
Audited
31 December 2007
Males
Audited
31 December 2007
Females
Retiring today          - aged 60
 
25.0
27.9
24.7
27.6
24.7
27.7
                                - aged 65
 
20.3
23.1
20.0
22.9
20.0
22.9
Retiring in 20 years - aged 60
 
26.0
28.8
25.9
28.7
25.9
28.7
                                - aged 65
 
21.3
24.0
21.1
23.9
21.1
23.9

 

 

The amount included in the balance sheet arising from the Group’s obligations in respect of the schemes is as follows:



Unaudited

30 June 2008

£'000

Unaudited

30 June 2007

£'000

Audited

31 December 2007

£'000

Present value of defined benefit obligations


(72,809)

(63,455)

(70,575)

Fair value of scheme assets


60,269

61,355

64,123



(12,540)

(2,100)

(6,452)

The Group made a special contribution of £35,000 during the period (30 June 2007: £3,500,000 and 31 December 2007: £3,890,000) into its pension schemes.

 

12.    Share capital

The following movements in share capital occurred during the period:


Number of shares

Exercise price

Pence

Share capital

£'000

Share premium

£'000

Total

£'000

At 1 January 2007

42,276,852


2,114

24,518

26,632

Shares issued:






- for share incentive plan

55,693

1,174.0

3

651

654

- on exercise of options

275,237

372.0-1,172.0

13

1,946

1,959

At 30 June 2007

42,607,782


2,130

27,115

29,245

Shares issued on exercise of options

82,160

415.0-985.0

4

643

647

At 31 December 2007

42,689,942


2,134

27,758

29,892

Shares issued on exercise of options

54,973

643.3-852.0

3

411

414

At 30 June 2008

42,744,915


2,137

28,169

30,306

13.    Reserves and retained earnings


Merger reserve

£'000

Available for sale reserve

£'000

Translation reserve

£'000

Total other reserves

£'000

Retained earnings

£'000

At 1 January 2007

49,428

4,289

(229)

53,488

79,029

Profit for the period





18,837

Foreign currency translation



(77)

(77)


Dividends paid





(9,107)

Actuarial gains and losses





5,016

Revaluation of investment securities


221


221


Share based payments






- value of employee services





1,458

- cost of shares issued/purchased





(3,331)

Tax on equity items


(66)


(66)

(988)

At 30 June 2007

49,428

4,444

(306)

53,566

90,914

Profit for the period





18,543

Foreign currency translation



91

91


Dividends paid





(6,807)

Actuarial gains and losses





(4,746)

Revaluation of investment securities


1,848


1,848


Net gains transferred to net profit on disposal of available for sale investment securities


(1,297)


(1,297)


Share based payments






- value of employee services





1,234

- cost of shares issued/purchased





(177)

Tax on equity items


(27)


(27)

1,716

At 31 December 2007

49,428

4,968

(215)

54,181

100,677

Profit for the period





13,728

Foreign currency translation



92

92


Dividends paid





(10,662)

Actuarial gains and losses





(6,092)

Revaluation of investment securities


(3,542)


(3,542)


Share based payments






- value of employee services





759

- cost of shares issued/purchased





(1,453)

Tax on equity items


992


992

1,280

At 30 June 2008

49,428

2,418

(123)

51,723

98,237

The Merger reserve represents share premium that was not recognised on the issue of shares as consideration for acquisitions prior to the adoption of IFRS on 1 January 2004.

 

14.    Contingent liabilities and commitments

(a)       Indemnities are provided to a number of directors and employees in our Trust and Tax Services Division in connection with
           them acting as directors on client structures in the normal course of business.
(b)      Capital expenditure authorised and contracted for at 30 June 2008 but not provided in the accounts amounted to £1,027,000 (30
           June 2007: £594,000; 31 December 2007: £1,189,000).
(c)      The contractual amounts of the Group’s commitments to extend credit to its clients are as follows:

 



Unaudited

30 June 2008

£'000

Unaudited

30 June 2007

£'000

Audited

31 December 2007

£'000

Guarantees


758

711

724

Undrawn commitments to lend of 1 year or less


3,065

4,172

4,492



3,823

4,883

5,216

 

The fair value of the guarantees is £nil (30 June 2007 and 31 December 2007: £nil)

 


15.    Consolidated cash flow statement

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months until maturity from the date of acquisition:



Unaudited

30 June 2008

£'000

Unaudited

30 June 2007

£'000

Audited

31 December 2007

£'000

Cash and balances at central banks 


8

11

4

Available for sale investment securities


50,000

-

-

Loans and advances to banks


227,277

183,035

214,216



277,285

183,046

214,220

Available for sale investment securities include £50,000,000 invested in money market funds which are realisable on demand.

Cash flows arising from issue of ordinary shares comprise:


Unaudited

Six months to

30 June 2008

£'000

Unaudited

Six months to

30 June 2007

£'000

Audited

Year to

31 December 2007

£'000

Cash inflow - share capital

3

16

20

Cash inflow - share premium

411

2,597

3,240

Cash outflow - financing of shares in relation to share-based schemes

-

(297)

(297)


414

2,316

2,963

16.    Related party transactions

Certain directors of Rathbone Trust Company Jersey Limited are also partners of Nigel Harris & Partners. During the period, £537,315 (30 June 2007: £255,138; 31 December 2007: £684,595) was paid to Nigel Harris & Partners for services supplied to Rathbone Trust Company Jersey Limited. At 30 June 2008, £597,458 (30 June 2007: £272,477; 31 December 2007: £365,192) was due from Nigel Harris & Partners.
Certain directors of Rathbone Trust Company Jersey Limited are also partners of Galsworthy & Stones. During the period, £185,070 (30 June 2007: £273,941; 31 December 2007: £335,841) was received from Galsworthy & Stones for services supplied by Rathbone Trust Company Jersey Limited. At 30 June 2008, £852,886 (30 June 2007: £407,550; 31 December 2007: £541,109) was due from Galsworthy & Stones.
At 30 June 2008, key management and their close family members had outstanding deposits of £593,000 (30 June 2007: £339,000; 31 December 2007: £381,000) and outstanding loans of £186,000 (30 June 2007: £175,000; 31 December 2007: £181,000), which were made on normal business terms. A number of the Company's directors and their close family members make use of the services provided by companies within the Group. Charges for such services are made at various staff rates.
Rathbone Trust Company Jersey Limited is the tenant of a property in St Helier, Jersey, the freehold of which is owned by a number of the directors of the company. Annual rental of £150,000 (30 June 2007 and 31 December 2007: £150,000) is payable under the lease, which expires on 31 December 2008.
One of the Group's non-executive directors is an executive director of Novae Group Plc, a related entity of which underwrites part of the Group's professional indemnity insurance policy.
All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.


  Independent review report to Rathbone Brothers Plc


Introduction

We have been engaged by the company to review the condensed set of financial statements included in the half-yearly financial report for the six months ended 30 June 2008, which comprises the consolidated interim income statement, the consolidated interim balance sheet, the consolidated interim cash flow statement, the consolidated interim statement of recognised income and expense and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

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

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements included in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements included in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.



PricewaterhouseCoopers LLP

Chartered Accountants

London

23 July 2008





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