Interim Results

Rathbone Brothers PLC 27 July 2006 27 July 2006 Rathbone Brothers Plc Interim results for the six months to 30 June 2006 Rathbones announces record interim results Rathbone Brothers Plc, a leading provider of discretionary fund management and wealth management services for private clients and trustees, today announces its interim results for the six months to 30 June 2006. Highlights â€¢ Profits before tax for the first half of 2006 are Â£22.3 million compared to Â£14.7 million for the same period in 2005. o 2006 first half results include profits of Â£1.9 million from a part disposal of the Company's holding in London Stock Exchange plc; 2005 first half results include costs of Â£1.4 million in relation to an aborted acquisition. o Full year reported profits for 2005 were Â£35.3 million. â€¢ Operating income increased by 21.9% to Â£65.7 million (30 June 2005: Â£53.9 million; full year 2005: Â£113.2 million). â€¢ Total funds under management increased by 12.6% over the six months to 30 June 2006 to Â£10.7 billion compared with an increase in the FTSE 100 Index of 3.8% and an increase in the FTSE/APCIMS Balanced Index of 0.9% over the same period. â€¢ Funds managed by Rathbone Unit Trust Management increased by 16.7% over the period to Â£1.4 billion as at 30 June 2006. â€¢ Basic earnings per share have risen to 38.59p (30 June 2005: 25.46p). â€¢ Interim dividend payable is increased by 17.4% to 13.5p (30 June 2005: 11.5p). Mark Powell, Chairman of Rathbone Brothers Plc, commented: 'The setback to world markets and the increased volatility that has been experienced since early May this year will have some impact upon our business. At the same time these trends underline the value to wealthy private investors of the professional investment management of their portfolios, supported by a thorough and soundly-based investment process and delivered in a way that is appropriate to each individual client. 'Our current view of world markets is that they are likely to stabilise towards the end of the year and that sentiment will recover thereafter. This view underlines our continuing confidence in the growth of Rathbones as a provider of high quality investment management and tax and trust services to a wide range of clients.' An analysts' meeting will be held at 10.45 for 11.00am at the offices of Dresdner Kleinwort, 30 Gresham Street, EC2 2XY. For further information contact: Rathbone Brothers Plc 020 7399 0000 (Switchboard) Mark Powell, Chairman Andy Pomfret, Chief Executive Sue Desborough, Finance Director Emily Morris, Marketing Director Smithfield Reg Hoare/Katie Hunt 020 7360 4900 Notes for editors: Rathbone Brothers Plc Rathbone Brothers Plc specialises in providing, through its subsidiaries, personalised investment management and wealth management services for private clients and trustees, including discretionary asset management, tax planning, trust and company management, and banking services. It manages nearly Â£11 billion of funds, including Â£1.4 billion managed by Rathbone Unit Trust Management Limited (as at 30 June 2006). Chairman's statement I am pleased to be announcing record interim results for the six months ended 30 June 2006. Profits before tax for the first half of 2006 are Â£22.3 million compared to Â£14.7 million for the same period in 2005 (included in the first half of 2006 are profits of Â£1.9 million from a part disposal of the Company's holding in London Stock Exchange plc and the first half of 2005 includes costs of Â£1.4 million in relation to an aborted acquisition). Full year reported profits for 2005 were Â£35.3 million. Reported basic earnings per share rose to 38.59p, compared with 25.46p in the first half of 2005. The interim dividend is increased by 17.4% to 13.5p per share and will be payable on 13 October 2006. During the course of the first six months of this year we successfully completed the acquisition of Dexia's UK investment management and private banking business which has added approximately Â£600 million to our funds under management and enabled us to welcome new experienced colleagues to Rathbones. The integration of the Dexia business into Rathbones is on track and we continue to expect the acquisition to be earnings enhancing during 2007. We have seen an increase in the rate of organic growth of funds under management in Rathbone Investment Management and at 30 June 2006 funds under management were Â£9.3 billion, 12.0% higher than at 31 December 2005. During the same period the FTSE/APCIMS Balanced Index rose by 0.9% and the FTSE 100 Index rose by 3.8%. Funds under management in Rathbone Unit Trust Management at 30 June 2006 were Â£1.4 billion, compared with Â£1.2 billion at 31 December 2005. The profits from this division rose by 78.6% from Â£1.4 million in the first half of 2005 to Â£2.5 million. Funds under management in Rathbones as a whole rose by 12.6% to Â£10.7 billion over the six months to 30 June 2006. The surprise announcement from the Treasury of significant changes to the tax treatment of trusts is creating some challenges for our Trust Division. On a more positive note, in the second half of the year, we will be moving our three Jersey offices to a single location in the heart of St. Helier. During the first half of the year we have carried out a routine review of the provision of audit services to Rathbone Brothers Plc. As a result of this process, we are pleased to have invited PricewaterhouseCoopers to act as our auditors. Our results for the six months to 30 June 2006 cover a period of considerable change in world stock markets. During the first quarter, world markets moved ahead and natural resource sectors were particularly strong. From early May however, fears of inflation and a slowing in the US economy, in particular, have led to some sharp falls and markedly increased volatility. These trends have been exacerbated by the renewed conflict in the Middle East. Whereas the FTSE 100 Index at the first of our quarterly charging dates (5 April) stood at 6,044, by 30 June 2006 the Index had fallen to 5,833. The setback to world markets and the increased volatility that has been experienced since early May this year will have some impact upon our business but at the same time these trends underline the value to wealthy private investors of the professional investment management of their portfolios, supported by a thorough and soundly-based investment process and delivered in a way that is appropriate to each individual client. Our current view of world markets is that they are likely to stabilise towards the end of the year and that sentiment will recover thereafter. This view underlines our continuing confidence in the growth of Rathbones as a provider of high quality investment management and tax and trust services to a wide range of clients. Mark Powell Chairman 26 July 2006 Consolidated interim income statement for the six months ended 30 June 2006 Note Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 ------------------------------------ ---- -------- -------- -------- Interest and similar income 15,881 13,180 27,472 Interest expense and similar charges (8,783) (7,141) (15,029) ------------------------------------ ---- -------- -------- -------- Net interest income 7,098 6,039 12,443 ------------------------------------ ---- -------- -------- -------- Fee and commission income 58,846 49,911 102,869 Fee and commission expense (3,775) (3,149) (6,850) ------------------------------------ ---- -------- -------- -------- Net fee and commission income 55,071 46,762 96,019 ------------------------------------ ---- -------- -------- -------- Dividend income 93 15 78 Net trading income 917 685 1,409 Net income from sale of available for sale securities 1,897 - 2,261 Other operating income 628 360 975 ------------------------------------ ---- -------- -------- -------- Operating income 65,704 53,861 113,185 ------------------------------------ ---- -------- -------- -------- Operating expenses (43,377) (39,178) (77,887) Aborted acquisition costs - (1,375) (1,381) Other operating expenses (43,377) (37,803) (76,506) Profit before tax 22,327 14,683 35,298 Profit before aborted acquisition costs and tax 22,327 16,058 36,679 Aborted acquisition costs - (1,375) (1,381) Income tax expense 4 (6,237) (4,257) (10,617) ------------------------------------ ---- -------- -------- -------- Profit for the period attributable to equity holders of the Company 16,090 10,426 24,681 ------------------------------------ ---- -------- -------- -------- Earnings per share for the period attributable to equity holders of the Company: 6 - Basic 38.59p 25.46p 60.13p - Diluted 37.54p 25.16p 58.84p Dividends proposed for the period per ordinary share 5 13.50p 11.50p 30.00p Dividends (Â£'000) 5,686 4,719 12,351 ------------------------------------ ---- -------- -------- -------- Consolidated interim balance sheet as at 30 June 2006 Note Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 ------------------------------------ ---- -------- -------- -------- Assets Cash and balances at central banks 986 306 511 Settlement balances 30,756 32,939 14,017 Loans and advances to banks 172,887 141,634 144,975 Loans and advances to customers 75,012 38,465 37,520 Investment securities - available for sale 6,662 6,203 5,157 - held to maturity 552,003 403,297 396,000 Intangible assets 76,796 60,120 60,101 Property, plant and equipment 7 4,956 4,185 4,295 Deferred tax asset 4,911 5,042 8,599 Prepayments, accrued income and other assets 34,002 28,044 25,093 ------------------------------------ ---- -------- -------- -------- Total assets 958,971 720,235 696,268 ------------------------------------ ---- -------- -------- -------- Liabilities Deposits by banks 8 12,105 3,718 1,853 Settlement balances 40,790 26,630 16,133 Due to customers 706,864 525,302 493,612 Debt securities in issue 141 170 141 Accruals, deferred income and other liabilities 26,610 22,358 24,722 Current tax liabilities 4,644 4,867 7,869 Provisions for liabilities and charges 9 8,458 1,002 2,811 Retirement benefit obligations 10 11,003 15,603 18,710 ------------------------------------ ---- -------- -------- -------- Total liabilities 810,615 599,650 565,851 ------------------------------------ ---- -------- -------- -------- Equity Share capital 11 2,106 2,054 2,063 Share premium 12 23,270 16,220 17,487 Other reserves 12 54,058 53,746 53,013 Retained earnings 12 68,922 48,565 57,854 ------------------------------------ ---- -------- -------- -------- Total equity 148,356 120,585 130,417 ------------------------------------ ---- -------- -------- -------- Total equity and liabilities 958,971 720,235 696,268 ------------------------------------ ---- -------- -------- -------- Approved by the Board on 26 July 2006 Consolidated interim cash flow statement for the six months ended 30 June 2006 Note Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 ------------------------------------ ---- -------- -------- -------- Cash flows from operating activities Profit before tax 22,327 14,683 35,298 Net income from sale of available for sale securities (1,897) - (2,261) Movement in fair value of derivative financial instruments (40) - (12) Impairment losses on loans and advances 90 401 386 Profit on disposal of plant and equipment (6) (41) (160) Depreciation and amortisation 1,516 1,295 2,497 Defined benefit pension scheme charges 1,809 1,400 2,920 Share based payment charges 897 1,007 1,971 ------------------------------------ ---- -------- -------- -------- 24,696 18,745 40,639 Changes in operating assets and liabilities - net decrease/(increase) in loans and advances to banks and customers 23,295 (17,445) (18,490) - net (increase) in settlement balance debtors (16,739) (21,740) (2,818) - net (increase) in prepayments, accrued income and other assets (8,856) (5,930) (2,963) - net increase in amounts due to customers and deposits by banks 171,017 101,281 67,509 - net increase in settlement balance creditors 24,658 11,393 894 - net increase in accruals, deferred income, provisions and other liabilities 2,058 415 4,587 ------------------------------------ ---- -------- -------- -------- Cash generated from operations 220,129 86,719 89,358 Defined benefit pension contributions paid (4,520) (1,662) (3,359) Tax paid (6,771) (5,534) (10,246) ------------------------------------ ---- -------- -------- -------- Net cash inflow from operating activities 208,838 79,523 75,753 ------------------------------------ ---- -------- -------- -------- Cash flows from investing activities Acquisition of businesses, net of cash acquired (1,770) - - Purchase of property, equipment and intangible assets (2,566) (1,273) (2,602) Proceeds from sale of property and equipment 44 29 205 Purchase of investment securities (658,338) (528,050) (1,229,307) Proceeds from sale and redemption of investment securities 536,232 566,801 1,240,609 ------------------------------------ ---- -------- -------- -------- Net cash (used in)/generated from investing activities (126,398) 37,507 8,905 ------------------------------------ ---- -------- -------- -------- Cash flows from financing activities Repayments of debt securities - (116) (146) Purchase of shares for share based schemes (2,291) (980) (293) Issue of ordinary shares 14 5,611 1,023 1,586 Dividends paid (7,750) (6,942) (11,660) ------------------------------------ ---- -------- -------- -------- Net cash (used in) financing activities (4,430) (7,015) (10,513) ------------------------------------ ---- -------- -------- -------- Net increase in cash and cash equivalents 78,010 110,015 74,145 Cash and cash equivalents at beginning of the period 234,883 160,517 160,517 Effect of exchange rate changes on cash and cash equivalents (151) 134 221 ------------------------------------ ---- -------- -------- -------- Cash and cash equivalents at end of the period 14 312,742 270,666 234,883 ------------------------------------ ---- -------- -------- -------- Consolidated interim statement of recognised income and expense for the six months ended 30 June 2006 Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 ------------------------------------ -------- -------- -------- Profit after taxation 16,090 10,426 24,681 ------------------------------------ -------- -------- -------- Exchange translation differences (112) 36 120 Actuarial gains/(losses) on retirement benefit obligation 4,996 (880) (4,166) Revaluation of available for sale investment securities: ------------------------------------ -------- -------- -------- - net gain/(loss) from changes in fair value 3,390 (1,016) 199 - net profit on disposal transferred to income during the period (1,897) - (2,261) ------------------------------------ -------- -------- -------- 1,493 (1,016) (2,062) Deferred tax on equity items: ------------------------------------ -------- -------- -------- - available for sale investment securities (448) 305 619 - actuarial gains and losses (1,499) 290 1,250 ------------------------------------ -------- -------- -------- (1,947) 595 1,869 ------------------------------------ -------- -------- -------- Net income/(expense) recognised directly in equity 4,430 (1,265) (4,239) ------------------------------------ -------- -------- -------- Recognised income and expense for the period attributable to equity holders of the Company 20,520 9,161 20,442 ------------------------------------ -------- -------- -------- Notes to the consolidated accounts for the six months ended 30 June 2006 1. Principal accounting policies 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 and methods of computation set out in the Group's consolidated accounts for the year ended 31 December 2005, except for the changes set out below. The interim accounts should be read in conjunction with the Group's audited accounts for the year ended 31 December 2005. The Group's accounts for the year ended 31 December 2005 have been reported on by the previous 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. Changes in accounting policies The Group has adopted the amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts that relate to financial guarantees. In accordance with IAS 39, financial guarantees issued by the Group are initially recognised in the balance sheet at fair value. Guarantees are subsequently measured at the higher of the best estimate of any amount to be paid to settle the guarantee and the amount initially recognised less cumulative amortisation, which is recognised over the life of the contract. Adoption of the amendments did not have a material impact on the reported results or position of the Group for the period ended 30 June 2006 or the year ended 31 December 2005. Comparative figures have therefore not been restated. 2. Segmental information (a) Business segments For management purposes, the Group is currently organised into three operating divisions: Investment Management and Banking, Unit Trusts and Trust Services. These divisions are the basis on which the Group reports its primary segment information. Investment management and Unit Trust banking trusts services Eliminations Total 30 June 2006 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 (unaudited) ---------------------- ------- ------- ------- ------- ------- External revenues 54,513 10,793 11,011 - 76,317 Revenues from other segments 707 - - (707) - ---------------------- ------- ------- ------- ------- ------- 55,220 10,793 11,011 (707) 76,317 Unallocated external revenues 1,945 ---------------------- ------- ------- ------- ------- ------- Total revenues 78,262 ---------------------- ------- ------- ------- ------- ------- Segment result 16,578 2,549 1,255 20,382 Unallocated items 1,945 ---------------------- ------- ------- ------- ------- ------- Profit before tax 22,327 Income tax expense (6,237) ---------------------- ------- ------- ------- ------- ------- Profit for the period 16,090 ---------------------- ------- ------- ------- ------- ------- Segment assets 856,204 16,977 55,373 928,554 Unallocated assets 30,417 ---------------------- ------- ------- ------- ------- ------- Total assets 958,971 ---------------------- ------- ------- ------- ------- ------- Segment liabilities 750,656 12,010 18,608 781,274 Unallocated liabilities 29,341 ---------------------- ------- ------- ------- ------- ------- Total liabilities 810,615 ---------------------- ------- ------- ------- ------- ------- Other segment items: Capital expenditure 6,091 87 439 6,617 Depreciation and amortisation 1,194 59 263 1,516 Other non-cash expenses 815 125 378 1,318 Provisions charged in the period 594 - 72 666 Provisions utilised in the period 176 - 372 548 ---------------------- ------- ------- ------- ------- ------- 30 June 2005 Investment (unaudited) management and Unit Trust banking trusts services Eliminations Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ---------------------- ------- ------- ------- ------- ------- External revenues 45,453 7,641 11,057 - 64,151 Revenues from other segments 695 - 1 (696) - ---------------------- ------- ------- ------- ------- ------- Total revenues 46,148 7,641 11,058 (696) 64,151 ---------------------- ------- ------- ------- ------- ------- Segment result 13,190 1,414 1,454 16,058 Unallocated items (1,375) ---------------------- ------- ------- ------- ------- ------- Profit before tax 14,683 Income tax expense (4,257) ---------------------- ------- ------- ------- ------- ------- Profit for the period 10,426 ---------------------- ------- ------- ------- ------- ------- Segment assets 631,232 13,443 59,162 703,837 Unallocated assets 16,398 ---------------------- ------- ------- ------- ------- ------- Total assets 720,235 ---------------------- ------- ------- ------- ------- ------- Segment liabilities 557,351 10,866 22,656 590,873 Unallocated liabilities 8,777 ---------------------- ------- ------- ------- ------- ------- Total liabilities 599,650 ---------------------- ------- ------- ------- ------- ------- Other segment items: Capital expenditure 1,043 34 234 1,311 Depreciation and amortisation 980 51 264 1,295 Other non-cash expenses 696 74 638 1,408 Provisions charged in the period 250 - 2 252 Provisions utilised in the period - - 4 4 ---------------------- ------- ------- ------- ------- ------- Investment management and Unit Trust 31 December 2005 banking trusts services Eliminations Total (audited) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ---------------------- ------- ------- ------- ------- ------- External revenues 93,927 16,600 22,221 - 132,748 Revenues from other segments 1,199 - - (1,199) - ---------------------- ------- ------- ------- ------- ------- 95,126 16,600 22,221 (1,199) 132,748 Unallocated external revenues 2,316 ---------------------- ------- ------- ------- ------- ------- Total revenues 135,064 Segment result 27,383 3,784 3,194 34,361 Unallocated items 937 ---------------------- ------- ------- ------- ------- ------- Profit before tax 35,298 Income tax expense (10,617) ---------------------- ------- ------- ------- ------- ------- Profit for the year 24,681 ---------------------- ------- ------- ------- ------- ------- Segment assets 601,607 11,374 53,617 666,598 Unallocated assets 29,670 ---------------------- ------- ------- ------- ------- ------- Total assets 696,268 ---------------------- ------- ------- ------- ------- ------- Segment liabilities 511,966 7,985 17,589 537,540 Unallocated liabilities 28,311 ---------------------- ------- ------- ------- ------- ------- Total liabilities 565,851 ---------------------- ------- ------- ------- ------- ------- Other segment items: Capital expenditure 1,816 93 693 2,602 Depreciation and amortisation 1,891 138 467 2,496 Other non-cash expenses 1,498 208 785 2,491 Provisions charged in the period 1,819 - 704 2,523 Provisions utilised in the period 230 - 339 569 ---------------------- ------- ------- ------- ------- ------- (b) Geographical segments The Group's operations are located in the United Kingdom, Jersey, Switzerland and the British Virgin Islands. The following table provides an analysis of the Group's revenues by geographical market, by origin of the services: Total revenues by geographical market Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- United Kingdom 67,016 53,464 113,146 Jersey 9,029 8,581 17,579 Rest of the world 2,217 2,106 4,339 -------------------------------- ------- ------- ------- 78,262 64,151 135,064 -------------------------------- ------- ------- ------- 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: Carrying amount of segment assets Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- United Kingdom 882,506 658,374 622,115 Jersey 26,056 25,959 24,132 Rest of the world 19,992 19,504 20,351 -------------------------------- ------- ------- ------- 928,554 703,837 666,598 -------------------------------- ------- ------- ------- Additions to property, plant and equipment and intangible assets Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- United Kingdom 6,342 1,135 2,022 Jersey 252 151 444 Rest of the world 23 25 136 -------------------------------- ------- ------- ------- 6,617 1,311 2,602 -------------------------------- ------- ------- ------- (c) Total revenues and operating income Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Interest and similar income 15,881 13,180 27,472 Fee and commission income 58,846 49,911 102,869 Dividend income 93 15 78 Net trading income 917 685 1,409 Net income from sale of available 1,897 - 2,261 for sale securities Other operating income 628 360 975 -------------------------------- ------- ------- ------- Total revenues 78,262 64,151 135,064 Interest payable (8,783) (7,141) (15,029) Fees and commission expense (3,775) (3,149) (6,850) -------------------------------- ------- ------- ------- Operating income 65,704 53,861 113,185 -------------------------------- ------- ------- ------- 3. Business combinations On 6 April 2006, the Group acquired the investment management and private banking business of Dexia Banque Internationale a Luxembourg S.A., London Branch. The business was transferred to Rathbone Investment Management Limited, a principal subsidiary of the Company, by way of a Court order sanctioning a banking business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000. Included within the consolidated income statement for the six months ended 30 June 2006 is a loss before tax of Â£10,000 relating to the acquired business. If the acquisition had occurred on 1 January 2006, the estimated total revenue for the Group for the six months ended 30 June 2006 would have been Â£79,556,000 and profit before tax for that period would have been Â£22,363,000. The acquired business' net assets at the acquisition date were as follows: Recognised Fair value Carrying values adjustments amounts Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Cash and cash equivalents 9,101 - 9,101 Loans and advances to customers 43,342 - 43,342 Property, plant and equipment 91 - 91 Client relationships 3,962 3,962 - Other receivables 14 - 14 Due to customers (52,443) - (52,443) -------------------------------- ------- ------- ------- Net identifiable assets acquired 4,067 3,962 105 -------------------------------- ------- ------- ------- Goodwill on acquisition 12,293 -------------------------------- ------- Total net assets acquired 16,360 -------------------------------- ------- Total consideration for the acquisition, including directly attributable costs, constitutes the following: Amount Amount paid deferred Total Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Cash consideration 10,478 5,489 15,967 Professional fees 393 - 393 -------------------------------- ------- ------- ------- 10,871 5,489 16,360 -------------------------------- ------- ------- ------- The goodwill arising on the acquisition is attributable to the employees and the anticipated profitability of incorporating the business into the Group's operating model and utilising existing capacity within its operations. 4. Income tax expense The current tax expense for the six months ended 30 June 2006 was calculated based on the estimated average annual effective tax rate. The overall effective tax rate for this period was 27.9% (30 June 2005: 29.0%; 31 December 2005: 30.1%). The income tax charge for the period comprises: Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- United Kingdom taxation 3,007 3,640 10,794 Overseas taxation 539 642 1,242 Deferred taxation 2,691 (25) (1,419) -------------------------------- ------- ------- ------- 6,237 4,257 10,617 -------------------------------- ------- ------- ------- 5. Dividend The interim dividend of 13.5p per share is payable on 13 October 2006 to shareholders on the register at the close of business on 22 September 2006 (30 June 2005: 11.5p). The interim dividend has not been included as a liability in this interim report. 6. Earnings per share Basic earnings per share has been calculated by dividing the profits attributable to shareholders of Â£16,090,000 (30 June 2005: Â£10,426,000; 31 December 2005: Â£24,681,000) by the weighted average number of shares in issue throughout the period of 41,697,326 (30 June 2005: 40,944,800; 31 December 2005: 41,046,753). 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 Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ---------- ---------- ---------- Weighted average number of ordinary shares in issue during the period - basic 41,697,326 40,944,800 41,046,753 Effect of ordinary share options 667,803 177,882 385,312 Effect of dilutive shares issuable under the Share Incentive Plan 197,480 96,914 163,556 Effect of contingently issuable ordinary shares under the Long Term Incentive Plan 303,870 222,129 354,242 -------------------------------- ---------- ---------- ---------- Diluted ordinary shares 42,866,479 41,441,725 41,949,863 -------------------------------- ---------- ---------- ---------- 7. Property, plant and equipment During the six months ended 30 June 2006, the Group acquired assets with a cost of Â£1,591,000 (30 June 2005: Â£1,208,000; 31 December 2005: Â£1,469,000), including assets acquired through business combinations (see note 3) of Â£91,000 (30 June 2005 and 31 December 2005: Â£nil). Assets with a net book value of Â£38,000 were disposed of in the six months ended 30 June 2006 (30 June 2005: Â£42,000; 31 December 2005: Â£46,000), resulting in a gain on disposal of Â£6,000 (30 June 2005: Â£41,000; 31 December 2005: Â£160,000). 8. Deposits by banks Included within deposits by banks is the amount of Â£12,000,000 drawn down under a Â£24,000,000 term loan facility which is repayable in ten, six-monthly instalments ending on 4 April 2011. Interest is payable on the loan at 0.7% above the London Inter-Bank Offer Rate. 9. Provisions for liabilities and charges Deferred Litigation contingent Client related & consideration compensation other Total Â£'000 Â£'000 Â£'000 Â£'000 ---------------------- ------- ------- ------- ------- At 1 January 2006 157 2,072 582 2,811 ---------------------- ------- ------- ------- ------- Charged to the income statement - 594 72 666 Unused amount credited to the income statement - (410) - (410) ---------------------- ------- ------- ------- ------- Net charge/(credit) to the income statement (i) - 184 72 256 Capitalised during the period (ii) 5,939 - - 5,939 Utilised during the period - (507) (41) (548) ---------------------- ------- ------- ------- ------- 6,096 1,749 613 8,458 ---------------------- ------- ------- ------- ------- (i) In addition to the net charge of Â£256,000 to the income statement in the above table, a net credit of Â£109,000 has been recognised in the income statement during the period in relation to expected insurance recoveries - an overall charge of Â£147,000. (ii) Amounts capitalised during the period include Â£5,489,000 deferred consideration in relation to the acquisition of the investment management and private banking business of Dexia Banque Internationale a Luxembourg S.A., London Branch (see note 3) and Â£450,000 in relation to the acquisition of other client relationships. 10. 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 financial assumptions have been used. Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 % p.a. % p.a. % p.a. -------------------------------- ------- ------- ------- Rate of increase in salaries 4.15 3.55 4.05 Rate of increase of pensions in payment *2.90 *2.60 *2.80 Rate of increase in deferred pensions 2.90 2.80 2.80 Discount rate 5.30 5.20 4.90 Future retail price inflation 2.90 2.80 2.80 -------------------------------- ------- ------- ------- *5% for service prior to April 2001 The amount included in the balance sheet arising from the Group's obligations in respect of the schemes is as follows: Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Present value of defined benefit (59,846) (52,422) (62,198) obligations Fair value of scheme assets 48,843 36,819 43,488 -------------------------------- ------- ------- ------- (11,003) (15,603) (18,710) -------------------------------- ------- ------- ------- With effect from 1 April 2006, each active member of the Rathbone 1987 scheme was required to elect either to maintain their existing rate of contributions but receive a lower accrual rate or to pay a higher rate of contributions whilst maintaining their current benefit accrual rate. The impact of the decisions made by the scheme members has been to reduce the Group's current service cost in relation to the scheme by Â£80,000 for the period ended 30 June 2006. On 12 May and 30 June, the Group made additional contributions of Â£2,000,000 and Â£1,000,000 respectively into the Rathbone 1987 scheme as part of its commitment to reduce significantly the scheme's funding deficit. 11. Share capital The following movements in share capital occurred during the period: Number of Exercise Share Share Total shares price capital premium consideration issued Pence Â£'000 Â£'000 Â£'000 ----------------------- ------- ------- ------ ------- ------- Issue of shares in relation to: - share incentive plan 62,399 847.0 3 525 528 322.5- - exercise of options 790,351 985.0 40 5,258 5,298 ----------------------- ------- ------- ------ ------- ------- 852,750 43 5,783 5,826 ----------------------- ------- ------- ------ ------- ------- 12. Reserves and retained earnings Available Share Merger for sale Translation Retained premium reserve reserve reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ----------------------------- ------- ------- ------- ------- ------- At 1 January 2005 14,766 49,428 5,029 (109) 46,283 Retained profit for the period 10,426 Foreign currency translation 36 Dividends paid (6,942) Shares issued 1,454 Actuarial gains and losses (880) Revaluation of investment securities (1,016) Share based payments - value of employee services 883 - cost of shares issued/ purchased (1,422) Tax on equity items 305 290 ----------------------------- ------- ------- ------- ------- ------- At 30 June 2005 16,220 49,428 4,318 (73) 48,638 Retained profit for the period 14,255 Foreign currency translation 84 Dividends paid (4,718) Shares issued 1,267 Actuarial gains and losses (3,286) Revaluation of investment securities 1,215 Net gains transferred to net profit on disposal of available for sale investment securities (2,261) Share based payments - value of employee services 1,088 - cost of shares issued/ purchased (26) Tax on equity items 313 1,892 ----------------------------- ------- ------- ------- ------- ------- At 1 January 2006 17,487 49,428 3,585 11 57,843 Retained profit for the period 16,090 Foreign currency translation (112) Dividends paid (7,750) Shares issued 5,783 Actuarial gains and losses 4,996 Revaluation of investment securities 3,390 Net gains transferred to net profit on disposal of available for sale investment securities (1,897) Share based payments - value of employee services 897 - cost of shares issued/ purchased (2,506) Tax on equity items (448) (547) ----------------------------- ------- ------- ------- ------- ------- At 30 June 2006 23,270 49,428 4,630 (101) 69,023 ----------------------------- ------- ------- ------- ------- ------- 13. Contingent liabilities Since the year end, the Group has continued the review of its Rathbone Self Invested Personal Pension business. At 30 June 2006, there remain 13 cases (31 December 2005: 30 cases) requiring further investigation for which, at this stage, it is not practicable to determine what, if any, financial effect there will be for the Group. 14. 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 maturity from the date of acquisition: Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Cash and balances at central banks 694 25 197 Loans and advances to banks 164,048 117,634 118,686 Debt instruments 148,000 153,007 116,000 -------------------------------- ------- ------- ------- 312,742 270,666 234,883 -------------------------------- ------- ------- ------- Cash flows arising from issue of ordinary shares comprise: Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 31 December 2006 2005 2005 Â£'000 Â£'000 Â£'000 -------------------------------- ------- ------- ------- Cash inflow - share capital 43 11 20 Cash inflow - share premium 5,783 1,454 2,721 Cash outflow - financing of shares in relation to share based schemes (215) (442) (1,155) -------------------------------- ------- ------- ------- 5,611 1,023 1,586 -------------------------------- ------- ------- ------- 15. Related party transactions Certain directors of Rathbone Trust Company Jersey Limited are also partners of Nigel Harris & Partners. During the period, Â£296,000 (30 June 2005: Â£416,000; 31 December 2005: Â£851,000) was paid to Nigel Harris & Partners for services supplied to Rathbone Trust Company Jersey Limited. At 30 June 2006, Â£251,000 (30 June 2005: Â£158,000; 31 December 2005: Â£100,000) was due from Nigel Harris & Partners. Certain directors of Rathbone Trust Company Jersey Limited are also partners of Galsworthy & Stones. During the period, Â£178,000 (30 June 2005: Â£141,000; 31 December 2005: Â£202,000) was received from Galsworthy & Stones for services supplied by Rathbone Trust Company Jersey Limited. At 30 June 2006, Â£275,000 (30 June 2005: Â£434,000; 31 December 2005: Â£344,000) was due from Galsworthy & Stones. Mrs Carole Pomfret, the wife of the Group's chief executive, has been employed as a consultant since 1 November 2002 at an annual fee of Â£7,500 (2005: Â£7,500). The terms of her employment entitle her to participate in one of the Group's new business incentive schemes. At 30 June 2006, key management and their close family members had outstanding deposits of Â£607,000 (30 June 2005: Â£447,000; 31 December 2005: Â£337,000) and outstanding loans of Â£77,000 (30 June 2005: Â£71,000; 31 December 2005: Â£53,000), which were made on normal business terms. 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 instructed by the Company to review the financial information for the six months ended 30 June 2006 which comprises the consolidated income statement, balance sheet, cash flow statement, statement of total recognised income and expense and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. This interim report has been prepared in accordance with International Accounting Standard 34, 'Interim financial reporting'. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Listing 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. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2006. PricewaterhouseCoopers LLP London 26 July 2006 This information is provided by RNS The company news service from the London Stock Exchange

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