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Rensburg Sheppards (RBG)

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Wednesday 18 November, 2009

Rensburg Sheppards

Half Yearly Report

RNS Number : 6652C
Rensburg Sheppards plc
18 November 2009
 



   

   18 November 2009

Rensburg Sheppards plc

('Rensburg Sheppards' or 'the Company')

Half-Yearly Financial Report


Rensburg Sheppards, the investment management group, today announces its half-yearly results for the six months ended 30 September 2009


Key Points:


  • Profit before tax of £12.5 million (2008: £16.4 million*).

  • Adjusted** profit before tax of £14.1 million (2008: £19.6 million*).

  • Basic earnings per share of 20.4p (200826.2p*).

  • Adjusted*basic earnings per share of 23.1p (200831.8p*).

  • Interim dividend maintained at 8.5p per ordinary share.

  • Group funds under management at 30 September 2009 of £12.13 billion (31 March 2009: £10.01 billion).

  • Appointment of three executive directors, effective 1 December 2009.

  • Post period end, a team of eight investment managers has joined the Edinburgh office.

As restated following change in accounting policy resulting from the implementation of the amendment to IFRS 2. 


** Before amortisation of client relationship intangible assets, share-based charges relating to the Employee Benefit Trust ('EBT') and the profit on disposal of intangible assets. These items amount to a net charge before tax of £1.6 million (2008: £3.2 million) and a net charge after tax of £1.2 million (2008: £2.5 million).


Steve Elliott, Chief Executive of Rensburg Sheppards, commented:


''I believe these results reflect Rensburg Sheppards' ability to withstand difficult market conditions and to take advantage of opportunities to take the business forward. We remain focussed on maintaining our strong client relationships and on maximising net organic growth in funds under management.''


An analysts' meeting will be held today at 9.30 am at the offices of Hudson Sandler, 29 Cloth Fair, LondonEC1A 7NN


For further information, please contact:



Steve Elliott, Chief Executive

Jonathan Wragg, Finance Director

Rensburg Sheppards plc

   Tel: 020 7597 1234



Nick Lyon / James MaceWhite

Hudson Sandler

   

   Tel: 020 7796 4133


Interim Management Report 


The six months to 30 September 2009 saw a transformation in market sentiment, from fears of a deepening and prolonged recession in the spring, via a mood of relief that financial markets and economies were stabilising, to a consensus by September that a modest economic recovery was showing signs of emerging. This was enough to effect strong rises in equity and credit markets, recovering much of the ground lost in the aftermath of the Lehman Brothers failure. Although this recovery may be viewed as being out of proportion to the improvement in the cyclical outlook, the earlier falls also appeared to have been exaggerated, allowing a calmer environment to unwind part of the fear-driven collapse in asset prices last winter. 


Whilst welcoming the recovery described above, these results, which span the six month period ended 30 September 2009, inevitably reflect the markedly lower average market and interest rate levels experienced between this and the corresponding period of the prior year. Having said this, we consider these results continue to demonstrate the underlying resilience of the Rensburg Sheppards business. It is also encouraging to note that since the period end the financial markets have maintained their recovery.

 

Financial results and dividend


From revenue (net of fees and commissions payable to introducers) of £51.6 million (2008: £57.5 million), the group's profit before tax was £12.5 million (2008 restated: £16.4 million). After excluding a net charge totalling £1.6 million (2008: £3.2 million) in respect of the amortisation of client relationship intangible assets, share-based charges relating to the Employee Benefit Trust ('EBT') and the profit on disposal of intangible assetsthe resulting adjusted profit before tax was £14.1 million (2008 restated: £19.6 million). 


Basic earnings per share were 20.4p (2008 restated: 26.2p). After adjusting for the items detailed in the paragraph above, together with the associated tax consequences of these adjustments, the adjusted basic earnings per share were 23.1p (2008 restated: 31.8p). It continues to be the directors' opinion that the adjusted measures of profit before tax and of earnings represent better measures of the group's underlying financial performance.


The directors have declared a maintained interim dividend of 8.5p per ordinary share payable on 5 February 2010 to all shareholders on the register at the close of business on 8 January 2010. 


Rensburg Sheppards Investment Management ('RSIM')


Excluding interest from client deposits, fee and other recurring income fell by just 1.6% to £30.7 million (2008: £31.2 million). This marginal reduction compares very favourably against the 12.4% reduction in the average of the FTSE APCIMS Private Investors Balanced Index ('APCIMS Index') at the key quarterly billing points between the first halves of 2008 and 2009 respectively. Interest from client deposits halved to £3.8 million (2008: £7.6 million) as the UK base rate remained at its historically low level of 0.5% throughout the period, coupled with the recent historically high spreads between the UK base rate and the three month LIBOR melting away sharply as the period progressed. 


Non-recurring income, which principally comprises commissions, decreased by 1.5% to £12.9 million (2008: £13.1 million). This performance reflects increasing levels of activity as the period progressed and equity markets recovered further.


At 30 September 2009, discretionary funds under management were £7.93 billion (31 March 2009: £6.46 billion), an increase of 22.8%, whilst non-discretionary funds under management were £2.92 billion (31 March 2009: £2.47 billion), an increase of 18.2%. This gave total funds under management at 30 September 2009 of £10.85 billion (31 March 2009: £8.93 billion), an increase over the six month period of 21.5%, compared with the increase of 19.2% during this period in the APCIMS Index. Of these total funds, 73.1% are managed on a discretionary basis, compared with 72.3% at 31 March 2009.


Shortly following the end of the period RSIM lost two discretionary mandates of an institutional nature which, when combined, represented £284.5 million of funds under management, but in income terms were very low yielding. These funds, which are not typical of the profile of the funds managed by RSIM, have been deducted from the funds under management figures at 30 September 2009 disclosed above. Excluding the effect of these departing funds, together with the benefit of £49.8 million of funds acquired from Investec Asset Management during the period, the net organic growth achieved over the six months ended 30 September 2009 was 2.6% (2008: 0.8%). Increasing the level of organic growth in funds under management remains a key strategic objective, and to this end we are seeking ways to support our staff in delivering this on a sustainable basis.  

  

One structural change that seems likely in the wider economy and will benefit RSIM is an increase in personal savings, both as part of a desire to reduce indebtedness and as changes in final salary pension schemes force individuals to rely more on investment returns from their own savings, rather than relying on a defined income from an institutional source. We believe that RSIM's business model is well suited to giving clients the informed and impartial advice they need in order to preserve and grow their wealth during what could prove to be a less predictable growth environment than most economies have enjoyed during the past 25 years.


Shortly following the period end, it was announced that RSIM has appointed a team of eight experienced investment mangers to join the Edinburgh office, which was established in April 2008. We are pleased to confirm that yesterday this team commenced their employment with RSIM and we now look forward to developing our service capability in this important financial centre.  


Rensburg Fund Management ('RFM') 


Recurring income in RFM, which comprises the manager's ad valorem service charge, was £3.5 million (2008: £5.0 million), a 30.0% reduction over the comparable period of the prior year. This was brought about principally by the distinctly lower average market levels when comparing the two half-years. On the same basis, non-recurring income, which mainly comprises profits from sales of units, was £0.65 million (2008: £0.64 million).  


Over the six months to 30 September 2009, the value of RFM's retail unit trust based funds under management increased by 15.8% to £886.7 million (31 March 2009: £765.5 million). Excluding the Corporate Bond trust, which at 31 March 2009 stood at £98.7 million and was subsequently disposed of in July 2009, the increase in funds under management during the six month period was 33.0%. This compares with the corresponding increase of 32.8% in the FTSE All-Share index. The net inflow into RFM's seven current trusts totalled £14.0 million during the period. 


The disposal of the Corporate Bond trust during the period resulted in a profit on disposal of £0.92 million. This represents the directors' estimate of RFM's share of the net income from this trust which will be received over the three years subsequent to the disposal, in accordance with the terms of the sale agreement. 


The value of the segregated mandate managed by RFM increased by 24.7% to £388.8 million (31 March 2009: £311.7 million); this included the effect of a net capital outflow of £5.0 million during the six months to 30 September 2009. Combining the unit trust and segregated mandate funds gives RFM's total funds under management at 30 September 2009 of £1.28 billion (31 March 2009: £1.08 billion).  


Group funds under management


The group's total funds under management at 30 September 2009 were £12.13 billion (31 March 2009: £10.01 billion), an increase of £2.12 billion, or 21.2%, since 31 March 2009. This compared with the increases of 19.2% in the FTSE APCIMS Private Investors Balanced and 32.8% in the FTSE All-Share indices over this period.


People


The board is pleased to announce, with effect from 1 December 2009, the appointments of Judy PriceSimon Kaye and Tom Street as executive directors of the company.  Judy Price is currently the chief operations officer for RSIM, taking responsibility for settlements, IT, projects and administration. Judy joined Sheppards in 1986. Simon Kaye and Tom Street are both currently divisional investment directors of RSIM, heading the Leeds and Sheffield offices respectively, positions in which they are well established. Simon joined the Rensburg Sheppards group in Huddersfield in 1986 when it traded as Battye Wimpenny & Dawson ('BWD'). Tom joined Rensburg in its Liverpool office in 1987. Each of these individuals brings to the board considerable experience of operating successfully within the investment management arena and will play a key role in our drive to secure the future growth of the business.


Although the exceptionally difficult conditions experienced last autumn and in the early months of 2009 have eased during the period under review, it has remained a challenging operating environment. For their success in continuing to take the business forward during this time we would like to record formally the board's thanks to all of the group's staff.  


Outlook


Since 30 September 2009, the UK financial markets have maintained their recovery, and this is being reflected in increased levels of activity. The authorities now have a delicate balancing act to perform in sustaining the emerging recovery while ensuring that investors have confidence that the risks of inflation and growing national indebtedness will be addressed effectively. Whilst this will give financial markets mixed influences to react to in the near-term, this is an altogether much better prospect than last winter's threat of a downward spiral in activity followed by a deep and prolonged recession.


We remain confident that Rensburg Sheppards continues to be well positioned to withstand any further downturns that may be experienced along the path to a sustained economic recovery and to continue to benefit as confidence returns.  


C.G. Clarke

S.M. Elliott

Chairman  

Chief Executive



17 November 2009




Consolidated income statement

for the six months ended 30 September 2009







Restated


Restated




2009


2008


2009




Six months


Six months


Year




ended


ended


ended




30 September


30 September


31 March




(unaudited)


(unaudited)


(audited)


Note


£'000


£'000


£'000









Revenue



55,932 


62,480 


118,874 

Fees and commissions payable



(4,313)


(4,940)


(8,539)

Net revenue

2


51,619 


57,540 


110,335 

Share-based payments - EBT

3



(440)


(440)

Amortisation of intangible assets - client relationships



(2,533)


(2,802)


(5,603)

Other operating expenses



(37,032)


(38,173)


(73,888)

Operating expenses



(39,565)


(41,415)


(79,931)

Operating profit



12,054 


16,125 


30,404 

Profit on disposal of intangible assets



920 



Loss on disposal of available-for-sale investments





(68)

Finance income



752 


1,733 


2,845 

Finance expenses

4


(1,263)


(1,498)


(2,940)

Profit before tax



12,463 


16,360 


30,241 

Taxation

5


(3,549)


(4,941)


(9,085)

Profit for the period attributable to the equity holders of the company



8,914 


11,419 


21,156 









Earnings per share

7















Basic



20.4p 


26.2p 


48.5p 

Diluted



20.2p 


26.1p 


48.4p 










Consolidated statement of comprehensive income

for the six months ended 30 September 2009







Restated


Restated




2009


2008


2009




Six months


Six months


Year




ended


ended


ended




30 September


30 September


31 March




(unaudited)


(unaudited)


(audited)




£'000


£'000


£'000









Profit for the period



8,914 


11,419 


21,156 

Other comprehensive income:








Gain/(loss) arising from changes in fair value of available-for-sale investments



365 


(647)


(940)

Loss on disposal of available-for-sale investments transferred to the income statement





34 

Gain arising from change in fair value of property




278 


278 

Tax relating to components of other comprehensive income



(83)


449 


502 

Other comprehensive income for the period, net of tax



282 


80 


(126)

Total comprehensive income for the period net of tax, attributable to the equity holders of the company



9,196 


11,499 


21,030 


Consolidated balance sheet

at 30 September 2009








2009


2008


2009







30 September


30 September


31 March







(unaudited)


(unaudited)


(audited)





Note


£'000


£'000


£'000












Assets











Non-current assets











Intangible assets




8


174,768 


178,861 


176,542 

Property, plant and equipment




9


5,231 


5,562 


5,532 

Available-for-sale investments






1,845 


2,180 


1,464 

Trade and other receivables




10


614 



Deferred tax assets






2,055 


1,435 


1,594 







184,513 


188,038 


185,132 












Current assets











Trade and other receivables






110,111 


156,458 


133,814 

Cash and cash equivalents




11


68,721 


53,927 


71,217 







178,832 


210,385 


205,031 












Total assets






363,345 


398,423 


390,163 












Liabilities











Current liabilities











Trade and other payables






(110,508)


(147,340)


(133,093)

Subordinated loan




12


(5,625)


(5,625)


(5,625)

Provisions




13


(371)


(82)


(122)

Current tax liabilities






(4,682)


(5,910)


(5,487)







(121,186)


(158,957)


(144,327)












Non-current liabilities











Accruals and deferred income





(2,190)


(1,593)


(2,247)

Subordinated loan



12


(28,125)


(33,750)


(33,750)

Provisions 



13


(852)


(568)


(592)

Deferred tax liabilities





(10,949)


(12,419)


(11,564)







(42,116)


(48,330)


(48,153)












Total liabilities






(163,302)


(207,287)


(192,480)












Net assets






200,043 


191,136 


197,683 























Equity attributable to the equity holders of the company



















Share capital




14


4,822 


4,822 


4,822 

Share premium






10,617 


10,617 


10,617 

Capital redemption reserve






100 


100 


100 

Available-for-sale reserve






1,070 


994 


807 

Revaluation reserve






1,493 


1,512 


1,483 

Other reserves






130,601 


130,601 


130,601 

Retained earnings






51,340 


42,490 


49,253 

Total equity






200,043 


191,136 


197,683 


Consolidated cash flow statement

for the six months ended 30 September 2009







Restated


Restated




2009


2008


2009




Six months


Six months


Year




ended


ended


ended




30 September


30 September


31 March




(unaudited)


(unaudited)


(audited)




£'000


£'000


£'000

Cash flows from operating activities








Profit before taxation



12,463 


16,360 


30,241 

Adjustments for:








- Amortisation of intangible assets



2,749 


3,046 


6,049 

- Finance expenses



1,263 


1,498 


2,940 

- Finance income



(752)


(1,733)


(2,845)

- Depreciation



505 


500 


1,008 

Share-based payments



530 


949 


1,685 

Profit on disposal of intangible assets



(920)



Loss on disposal of available-for-sale investments





68 

Decrease/(increase) in trade and other receivables



24,333 


(32,355)


(9,887)

(Decrease)/increase in trade payables and provisions



(22,302)


21,031 


7,161 

Cash generated from operations



17,869 


9,296 


36,420 

Interest received



373 


1,515 


2,771 

Dividends received



55 


68 


100 

Interest paid



(33)


(7)


(25)

Taxation paid



(5,320)


(6,741)


(12,278)

Net cash inflow from operating activities



12,944 


4,131 


26,988 









Cash flows from investing activities








Purchase of property, plant and equipment



(204)


(587)


(1,065)

Purchase of intangible assets - computer software



(428)


(135)


(699)

Purchase of available-for-sale investments



(16)



Proceeds from disposal of available-for-sale investments





389 

Net cash outflow from investing activities



(648)


(722)


(1,375)









Cash flows from financing activities








Dividends paid to shareholders



(7,427)


(7,421)


(11,132)

Repayment of subordinated loan



(5,625)


(10,625)


(10,625)

Interest paid on subordinated loan



(1,397)


(1,796)


(3,216)

Net cash outflow from financing activities



(14,449)


(19,842)


(24,973)









Net (decrease)/increase in cash and cash equivalents



(2,153)


(16,433)


 640 

Cash and cash equivalents at start of period



70,872 


70,232 


70,232 

Cash and cash equivalents at end of period

11


68,719 


53,799 


 70,872 










Consolidated statement of changes in equity

for the six months ended 30 September 2009 (unaudited)





Capital

Available

Reval-





Share

Share

redemption

-for-sale

uation

Other

Retained

Total


capital

premium

reserve

reserve

reserve

reserves

earnings

Equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 April 2008

4,822 

10,617 

100 

1,460 

973 

130,601 

37,542 

186,115 

Dividends

(7,421)

(7,421)

Share-based payments (restated)

949 

949 

Deferred tax on share-based payments

(6)

(6)

Total comprehensive income for the period (restated)

(466)

546

11,419 

11,499 

Depreciation on revalued property

(7)

At 30 September 2008

4,822 

10,617 

100 

994 

1,512 

130,601 

42,490 

191,136 

Dividends

(3,711)

(3,711)

Share-based payments (restated)

736 

736 

Deferred tax on share-based payments

(9)

(9)

Total comprehensive income for the period (restated)

(187)

(19)

9,737 

9,531 

Depreciation on revalued property

(10)

10 

At 31 March 2009

4,822 

10,617 

100 

807 

1,483 

130,601 

49,253 

197,683 

Dividends

(7,427)

(7,427)

Share-based payments

398 

398 

Deferred tax on share-based payments

193 

193 

Total comprehensive income for the period

263 

19 

8,914 

9,196 

Depreciation on revalued property

(9)

At 30 September 2009

4,822 

10,617 

100 

1,070 

1,493 

130,601 

51,340 

200,043 


Notes to the condensed financial statements


1. Basis of preparation and statement of compliance


Rensburg Sheppards plc ('the company') is a public company incorporated in the United Kingdom. The shares of the company are listed on the London Stock Exchange. The consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity, and the related notes represent condensed consolidated interim financial statements of the company and comprise those of the company and its subsidiaries (together referred to as 'the group'). The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group for the year ended 31 March 2009.  


The financial information contained in these condensed consolidated interim financial statements is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 The comparative figures for the year ended 31 March 2009 are not the company's statutory accounts for that year.  Those accounts have been reported on by the auditor of the company and delivered to the Registrar of Companies.   The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.


The directors have undertaken a review to consider the use of the going concern basis for the preparation of these condensed consolidated interim financial statements. No new activities, events or circumstances have arisen since 31 March 2009 which might affect the group's ability to continue as a going concern. These condensed consolidated interim financial statements have therefore been prepared on the going concern basis.


Change in accounting policies and disclosures


The accounting policies applied are the same as those applied by the group in its consolidated financial statements for the year ended 31 March 2009, other than with regard to changes in accounting policies and disclosures that have been applied during the period as a result of changes to International Financial Reporting Standards, as set out below.


(i) Operating segments

IFRS 8 Operating segments became effective for the group on 1 April 2009. The group has applied the requirements of the standard in determining its operating segments and the information disclosed regarding those segments.  The segmental disclosure set out in note 2 is based on the financial information that is presented to the board of Rensburg Sheppards plc, which represents the chief operating decision maker of the group.  Following the implementation of IFRS 8, the group continues to have two operating segments, being the investment management segment and the fund management segment.  


Comparative information has been restated in accordance with the transitional requirements of IFRS 8. The change of accounting policy that has arisen as a result of this standard relates only to presentation and disclosure, and there is no effect on profit after tax or earnings per share. 


(ii) Presentation of financial statements

IAS 1 (revised 2007) Presentation of financial statements became effective for the group on 1 April 2009. As a result, the group has presented a consolidated statement of changes in equity and a consolidated statement of comprehensive income. The consolidated statement of changes in equity reconciles the carrying value of each component of equity at the beginning and end of the period.  The statement of comprehensive income comprises items of income and expenditure other than those recognised in the income statement. 


Comparative information has been re-presented on a basis consistent with that for the six months ended 30 September 2009. The change of accounting policy that has arisen as a result of the revised standard relates only to presentation of information, and there is no effect on profit after tax or earnings per share. 


(iii) Share-based payments

An amendment to IFRS 2 Share-based payment - vesting conditions and cancellations became effective for the group on 1 April 2009. The amendment changes the definition of vesting conditions in respect of employee share option schemes. Following the adoption of the amendment, the requirement to save is now considered to be a vesting condition that should be taken into account when calculating the fair value at the date of grant. In addition, where an employee decides to withdraw from a share option scheme, their withdrawal is treated as a cancellation of the award. As a result, any remaining share-based charge that would have been recognised over the remaining vesting period is recognised in full at the time of cancellation.


The amendment has been applied retrospectively, in accordance with its transitional provisions.  Comparative information in respect of the six months ended 30 September 2008 and the year ended 31 March 2009 has been restated accordingly. The financial effect is to increase operating expenses and reduce profit after tax by £65,000 for the six months ended 30 September 2008, and by £253,000 for the year ended 31 March 2009.  Basic earnings per share have reduced by 0.1 pence per share in respect of the six months ended 30 September 2008 and by 0.5 pence per share in respect of the year ended 31 March 2009.  There is no material financial effect on earlier periods, and hence no additional balance sheet prior to that at 30 September 2008 has been presented.  Profit after tax and basic earnings per share for the six months ended 30 September 2009 are £253,000 and 0.6 pence per share greater respectively as a result of the implementation of the amendment during the period.


2. Revenue and segmental information


For management and internal reporting purposes, the group is organised into two business segments, being Investment Management and Fund Management.  The principal activity of the investment management segment is the provision of investment management services to private clients, pension funds and charities. The fund management segment manages unit trusts and segregated mandates. Transactions between the two business segments are undertaken on an arm's length basis on normal commercial terms. All of the group's activities are undertaken in the United Kingdom and hence relate to a single geographical segment.


Six months ended 30 September 2009



Investment


Fund







Management


Management


Eliminations


Group



£'000


£'000


£'000


£'000

Revenue









External


48,845 


7,087 



55,932 

Inter-segment


348 



(348)




49,193 


7,087  


(348)


55,932 

Fees and commissions payable


(1,749)


(2,912)


348 


(4,313)

Segmental net revenue


47,444 


4,175 



51,619 










Costs excluding amortisation of client relationship intangible assets and non-operating items:









Staff costs - fixed


(18,044)


(905)



(18,949)

Other costs - fixed


(8,193)


(1,190)



(9,383)

Total fixed costs


(26,237)


(2,095)



(28,332)

Staff costs - variable


(8,091)


(609)



(8,700)

Total costs


(34,328)


(2,704)



(37,032)










Operating profit before amortisation of client relationship intangible assets and non-operating items


13,116 


1,471 



14,587 

Interest receivable and other finance income


729 


23 



752 

Interest payable


(1,263)




(1,263)

Profit before tax, amortisation of client relationship intangible assets and non-operating items


12,582 


1,494 



14,076 

Amortisation of client relationship intangible assets


(2,533)




(2,533)

Profit on disposal of intangible assets



920 



920 

Profit before taxation


10,049 


2,414 



12,463 

Taxation


(2,863)


(686)



(3,549)

Profit after taxation


7,186 


1,728 



8,914 










Segmental net revenue comprises:









Fees


26,706 


3,527 



30,233 

Commission


11,559 




11,559 

Interest from client deposits


3,802 




3,802 

Trail commission


2,247 




2,247 

Profit on sale of units of unit trusts



632 



632 

Other income


3,130 


16 



3,146 

Total segmental net revenue


47,444 


4,175 



51,619 










Segmental profit is stated after charging:









Depreciation


504 




505 

Amortisation


2,749 




2,749 


Six months ended 30 September 2008



Investment


Fund







Management


Management


Eliminations


Group



£'000


£'000


£'000


£'000

Revenue









External


53,610 


8,870 



62,480 

Inter-segment


318 



(318)




53,928 


8,870 


(318)


62,480 

Fees and commissions payable


(2,009)


(3,249)


318 


(4,940)

Segmental net revenue


51,919 


5,621 



57,540 










Costs excluding amortisation of client relationship intangible assets and non-operating items:









Staff costs - fixed


(18,098)


(943)



(19,041)

Other costs - fixed


(8,924)


(1,163)



(10,087)

Total fixed costs


(27,022)


(2,106)



(29,128)

Staff costs - variable


(7,939)


(1,106)



(9,045)

Total costs


(34,961)


(3,212)



(38,173)










Operating profit before amortisation of client relationship intangible assets and non-operating items


16,958 


2,409 



19,367 

Interest receivable and other finance income


1,467 


266 



1,733 

Interest payable


(1,498)




(1,498)

Profit before tax, amortisation of client relationship intangible assets and non-operating items


16,927 


2,675 



19,602 

Amortisation of client relationship intangible assets


(2,802)




(2,802)

Share-based payments - EBT


(440)




(440)

Profit before taxation


13,685 


2,675 



16,360 

Taxation


(4,136)


(805)



(4,941)

Profit after taxation


9,549 


1,870 



11,419 










Segmental net revenue comprises:









Fees


26,596 


4,981 



31,577 

Commission


11,048 




11,048 

Interest from client deposits


7,589 




7,589 

Trail commission


2,844 




2,844 

Profit on sale of units of unit trusts



624 



624 

Other income


3,842 


16 



3,858 

Total segmental net revenue


51,919 


5,621 



57,540 










Segmental profit is stated after charging:









Depreciation


499 




500 

Amortisation


3,046 




3,046 


Year ended 31 March 2009



Investment


Fund







Management


Management


Eliminations


Group



£'000


£'000


£'000


£'000

Revenue









External


102,915 


15,959 



118,874 

Inter-segment


619 



(619)




103,534 


15,959 


(619)


118,874 

Fees and commissions payable


(3,492)


(5,666)


619 


(8,539)

Segmental net revenue


100,042 


10,293 



110,335 










Costs excluding amortisation of client relationship intangible assets and non-operating items:









Staff costs - fixed


(36,299)


(1,894)



(38,193)

Other costs - fixed


(18,115)


(2,245)



(20,360)

Total fixed costs


(54,414)


(4,139)



(58,553)

Staff costs - variable


(13,435)


(1,900)



(15,335)

Total costs


(67,849)


(6,039)



(73,888)










Operating profit before amortisation of client relationship intangible assets and non-operating items


32,193 


4,254 



36,447 

Interest receivable and other finance income


2,462 


383 



2,845 

Interest payable


(2,940)




(2,940)

Profit before tax, amortisation of client relationship intangible assets and non-operating items


31,715 


4,637 



36,352 

Loss on disposal of available-for-sale investments


(68)




(68)

Amortisation of client relationship intangible assets


(5,603)




(5,603)

Share-based payments - EBT


(440)




(440)

Profit before taxation


25,604 


4,637 



30,241 

Taxation


(7,759)


(1,326)



(9,085)

Profit after taxation


17,845 


3,311 



21,156 










Segmental net revenue comprises:









Fees


49,641 


9,042 



58,683 

Commission


22,438 




22,438 

Interest from client deposits


16,011 




16,011 

Trail commission


5,184 




5,184 

Profit on sale of units of unit trusts



1,180 



1,180 

Other income


6,768 


71 



6,839 

Total segmental net revenue


100,042 


10,293 



110,335 










Segmental profit is stated after charging:









Depreciation


1,006 




1,008 

Amortisation


6,049 




6,049 


Of the segmental net revenue shown above, fees, interest from client deposits, trail commission and certain amounts within other income are deemed to be recurring in nature. Recurring income amounted to £34,504,000 in respect of the Investment Management segment (September 2008: £38,802,000March 2009: £74,046,000and £3,527,000 in respect of the Fund Management segment (September 2008: £4,981,000March 2009: £9,042,000).


3. Share-based payments


The total charge for the period in respect of employee share and share option schemes was £530,000 (September 2008 restated£949,000; March 2009 restated: £1,685,000), all of which represents equity-settled share-based payment transactions.  Awards made under the Employee Benefit Trust vested during the year ended 31 March 2009, and hence no charge has been incurred during the six months ended 30 September 2009 in respect of the EBT (September 2008: £440,000; March 2009: £440,000).


The movements during the period in the number of shares in respect of which awards were outstanding are set out below:






Employee


SAYE

SAYE

2007 Employee

Share


2006

2008

Share Plan

Ownership Plan


No.

No.

No.

No.






Outstanding at 1 April 2009

6,005 

1,146,734 

202,350 

8,000 

Forfeited

(286)

(22,615)

Exercised

(5,353)

(8,000)

Outstanding at 30 September 2009

5,719 

1,124,119 

196,997 

- 


On 1 April 2009, an amendment to IFRS 2 Share-based payment - vesting conditions and cancellations became effective for the group. The financial effect of this amendment for the six months ended 30 September 2009 and prior periods is set out in note 1. 


4. Finance expenses


Finance expenses include interest payable of £1,249,000 relating to the subordinated loan (September 2008£1,491,000; March 2009: £2,896,000). 


5Taxation


The tax expense for the six months ended 30 September 2009 has been calculated using the estimateannual effective rate of tax for the year ending 31 March 2010.  The tax charge recognised in the income statement comprises:



2009


2008


2009


Six months


Six months


Year


ended


ended


ended


30 September


30 September


31 March


£'000


£'000


£'000







United Kingdom corporation tax

4,515 


5,831 


10,945 

Deferred tax

(966)


(890)


(1,860)


3,549 


4,941 


9,085 


6. Dividend


The interim dividend declared for the six months ended 30 September 2009 of 8.5 pence per ordinary share is payable on February 2010 to shareholders on the register as at the close of business on 8 January 2010. In accordance with the group's accounting policies and the requirements of IAS 10 Events after the balance sheet date this dividend has not been recognised as a liability at 30 September 2009.


7. Earnings per share    


Basic earnings per share is calculated with reference to earnings for shareholders of £8,914,000 (September 2008 restated: £11,419,000; March 2009 restated£21,156,000and the weighted average number of shares in issue during the period of 43,679,687 (September 2008: 43,654,177; March 200943,659,112). Adjusted earnings per share is calculated with reference to earnings for shareholders of £10,076,000 (September 2008 restated£13,876,000; March 2009 restated£25,679,000).  Details of the adjusted items are set out in the table below.


Diluted earnings per share is the basic earnings per share, adjusted for the effect of the conversion into fully paid shares of the weighted average number of all employee share options outstanding during the period. The number of additional shares used for the diluted calculation is 427,168 shares (September 200835,811; March 200992,921).  


The directors believe that the provision of additional earnings per share figures, which exclude the amortisation of client relationship intangible assets, profit on disposal of intangible assets, share-based payments relating to the EBT and the loss on disposal of available-for-sale investments, better represent underlying business performance. The effect of these adjustments on earnings and earnings per share is set out below. Comparative figures in respect of the six months ended 30 September 2008 and the year ended 31 March 2009 have been restated following the adoption of the amendment to IFRS 2 Share-based payment - vesting conditions and cancellations, details of which are set out in note 1:





Basic


Diluted


Earnings


EPS


EPS

Six months ended 30 September 2009

£'000


Pence


Pence







Unadjusted earnings and EPS

8,914 


20.4 


20.2 

Amortisation of intangible assets - client relationships

2,533 


5.8 


5.7 

Profit on disposal of intangible assets

(920)


(2.1)


(2.1)

Tax arising on adjusted items at 28%

(451)


(1.0)


(1.0)

Adjusted earnings and EPS

10,076 


23.1 


22.8 



Restated


Restated


Restated




Basic


Diluted


Earnings


EPS


EPS

Six months ended 30 September 2008

£'000


Pence


Pence







Unadjusted earnings and EPS

11,419 


26.2 


26.1 

Share-based payments - EBT

440 


1.0 


1.0 

Amortisation of intangible assets - client relationships

2,802 


6.4 


6.4 

Tax arising on adjusted items at 28%

(785)


(1.8)


(1.7)

Adjusted earnings and EPS

13,876 


31.8 


31.8 



Restated


Restated


Restated




Basic


Diluted


Earnings


EPS


EPS

Year ended 31 March 2009

£'000


Pence


Pence







Unadjusted earnings and EPS

21,156 


48.5 


48.4 

Share-based payments - EBT

440 


1.0 


1.0 

Amortisation of intangible assets - client relationships

5,603 


12.8 


12.8 

Loss on disposal of available-for-sale investments

68 


0.1 


0.1 

Tax arising on adjusted items at 28%

(1,588)


(3.6)


(3.6)

Adjusted earnings and EPS

25,679 


58.8 


58.7 


8Intangible assets















Client


Computer





Goodwill


relationships


software


Total



£'000


£'000


£'000


£'000

Cost









At 1 April 2008


136,385 


61,138 


2,229 


199,752 

Additions




135 


135 

At 30 September 2008


136,385 


61,138 


2,364 


199,887 

Additions



120 


564 


684 

At 31 March 2009


136,385 


61,258 


2,928 


200,571 

Additions



547 


428 


975 

At 30 September 2009


136,385 


61,805 


3,356 


201,546 










Amortisation









At 1 April 2008



16,272 


1,708 


17,980 

Charged during the period



2,802 


244 


3,046 

At 30 September 2008



19,074 


1,952 


21,026 

Charged during the period



2,801 


202 


3,003 

At 31 March 2009



21,875 


2,154 


24,029 

Charged during the period



2,533 


216 


2,749 

At 30 September 2009



24,408 


2,370 


26,778 










Net book value









At 30 September 2009


136,385 


37,397 


986 


174,768 

At 30 September 2008


136,385 


42,064 


412 


178,861 

At 31 March 2009


136,385 


39,383 


774 


176,542 











Additions to client relationships during the period of £547,000 relate to client relationship agreements acquired from Investec Asset Management Limited under the terms of an agreement that was entered into on 18 November 2008.   The deferred contingent consideration payable in respect of the client relationships acquired is recognised within provisions in note 13.


During the period, the group transferred the management of its Corporate Bond unit trust to Gartmore Fund Managers Limited. The right to manage the trust represented an intangible asset.  The asset had a carrying value of nil at the date of its disposal, by virtue of ihaving been generated internally. The profit arising on the disposal was £920,000.


The carrying values of intangible assets are subject to an annual impairment review. The directors have considered whether there are any indications that the intangible assets may have become impaired in the period following the latest annual impairment review, and have concluded that there are no indications of impairment either at 30 September 2009 or the date of this report.


9. Property, plant and equipment


During the six months ended 30 September 2009, the group acquired assets with a cost of £204,000 (September 2008: £587,000; March 2009£1,065,000).  No assets were disposed of during the six months ended 30 September 2009 (September 2008: nil; March 2009assets with a cost of £226,000 and a carrying value of nil were disposed of, with no profit or loss arising on disposal).


10. Trade and other receivables


Trade and other receivables presented within non-current assets comprise the group's estimate of amounts receivable after more than one year from Gartmore Asset Management Limited, in respect of the transfer of the management of the Corporate Bond Trust during the period. Details of the transfer are set out in note 8.


11. Cash, cash equivalents and bank overdrafts


For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks and financial institutions with a maturity of up to three months, and bank overdrafts repayable on demand.



2009


2008


2009


30 September


30 September


31 March


£'000


£'000


£'000







Cash and cash equivalents

68,721 


53,927 


71,217 

Bank overdrafts

(2)


(128)


(345)


68,719 


53,799 


70,872 


12. Subordinated loan


The carrying value of the subordinated loan of £33.750 million at 30 September 2009 is subject to a fixed rate of interest of 7.155% per annum.  On 6 May 2009, £5.625 million of the loan was repaid in accordance with the normal repayment schedule.


13. Provisions




Deferred 









contingent


Onerous


Property





consideration


leases


dilapidations


Total



£'000


£'000


£'000


£'000

At 1 April 2009









Current liabilities


57 


65 



122 

Non-current liabilities


63 


232 


297 


592 



120 


297 


297 


714 

Charged to the income statement





Capitalised during the period


547 




547 

Utilised during the period



(46)



(46)

At 30 September 2009


667 


259 


297 


1,223


The balances at 30 September 2009 are categorised as follows:



Deferred 








contingent


Onerous


Property




consideration


leases


dilapidations


Total


£'000


£'000


£'000


£'000









Current liabilities

300 


71 



371 

Non-current liabilities

367 


188 


297 


852 


667 


 259 


297 


1,223 


14. Share capital


There have been no changes to the company's issued share capital during the period.  


15. Contingent assets and liabilities


The group's principal trading subsidiary, Rensburg Sheppards Investment Management Limited ('RSIM'), is continuing to seek to agree a basis with HM Revenue & Customs ('HMRC') on which to determine the amount of input VAT it can recover on the goods and services it purchases. Once agreed, this basis of recovery of input VAT, known as a partial exemption special method ('special method') will be applied retrospectively from May 2005, being the point at which the group acquired Carr Sheppards Crosthwaite Limited ('CSC'). The special methods that existed and were applied by the group and CSC prior to May 2005, and had been agreed with HMRC, ceased as a result of the acquisition, and it became necessary to agree a special method with HMRC for the enlarged business.


The special method that RSIM has proposed to HMRC was formally rejected by HMRC during the year ended 31 March 2009, and this decision was upheld following an internal reconsideration of the decision within HMRC. RSIM has appealed to the VAT tribunal against the decision to reject the proposed special method. The date for the tribunal hearing has been deferred pending the outcome of an industry-wide consultation which HMRC icurrently undertaking regarding the VAT liability of dealing charges in respect of portfolios that are managed on a discretionary basis, as the outcome of this consultation may impact the proposed special method


Pending the outcome of the tribunal hearing and the eventual agreement of a special method, RSIM has applied a rate of input VAT recovery which reflects the rates that applied under the special methods of CSC and the group that were in place at the time of the acquisition of CSC (the 'historic methods') to determine the amount of input VAT that is recoverable on the goods and services it has purchased since May 2005. VAT that is not recoverable following the application of the historic methods of recovery has been charged to the income statement.


As noted above, once a special method has been agreed between RSIM and HMRC, it will be applied retrospectively from May 2005. Any difference between the input VAT recoverable under the agreed special method and that which has been treated as recoverable under the historic methods during the period since May 2005 will be payable to, or receivable from, HMRC, and will be charged or credited accordingly to the income statement.


The maximum amount that may become recoverable from HMRC at 30 September 2009 is estimated to be £1.4 million, representing the difference between the input VAT recoverable under the proposed special method and that recoverable under the historic methods since May 2005.


The maximum amount that may become payable to HMRC at 30 September 2009 would arise if RSIM is not ultimately able to obtain HMRC's agreement to a special method and is required to apply the standard method of input VAT recovery. The standard method is the default method of input VAT recovery, and would result in RSIM recovering input VAT based simply on the value of its income that is subject to VAT, relative to its income that is exempt from VAT. If the standard method were to be applied retrospectively from May 2005, the additional input VAT and associated interest that would become payable to HMRC at 30 September 2009 is estimated at £3.5 million, representing the difference between the input VAT recoverable under the historic methods and that recoverable under the standard method.


The standard method is not considered by the group to represent a fair and reasonable basis of input VAT recovery, as it does not reflect accurately the way in which the group's activities consume costs. In addition, the standard method is not consistent with the rates of VAT recovery applicable previously to either CSC or the group, nor is it believed to be representative of the rates of recovery common amongst businesses that are comparable in nature to RSIM. For these reasons, RSIM will continue to pursue the agreement of its proposed special method.


16. Related party transactions


The directors of the company represent the key management of both the group and the company and the amounts paid in respect of their services for the latest full financial year were set out in the Report & Financial Statements of the group for the year ended 31 March 2009 The directors of the company include B. Kantor and S. Koseff, both of whom are also directors of Investec plc.  The transactions set out below have taken place with Investec plc or its subsidiary companies ('the Investec group') during the period.


The group entered into an agreement on 18 November 2008 with Investec Asset Management Limited, a member of the Investec group, to acquire certain client relationship agreements.  Accordingly, client relationship agreements with a value of £547,000 have been acquired by the group during the six months ended 30 September 2009. The deferred consideration payable to Investec Asset Management Limited, which is estimated at £547,000 at 30 September 2009, is contingent upon the revenues generated by the client relationship agreements during each year ending 31 March following their transfer to the group, until 31 March 2012. No consideration was paid to Investec Asset Management during the period (September 2008: nil; March 2009: nil).


The group has a subordinated loan facility with the Investec group which was entered into on 6 May 2005.  The loan, which had an original value of £60 million, formed part of the consideration for the acquisition of Carr Sheppards Crosthwaite Limited on 6 May 2005. Following capital repayments, including £5.625 million repaid during the period, the outstanding value of the loan amounted to £33.750 million at 30 September 2009 (September 2008: £39.375 million; March 2009: £39.375 million).  The interest charged on the loan during the period amounted to £1,249,000 (September 2008: £1,491,000; March 2009: £2,896,000) and interest of £979,000 was payable at 30 September 2009 (September 2008: £1,154,000; March 2009: £1,139,000).


The group leases premises at 2 Gresham Street London from the Investec group.  The amount payable during the period under the terms of the lease in respect of rent and service charges amounted to £768,000 (September 2008: £558,000; March 2009£1,464,000). £122,000 was outstanding at 30 September 2009 (September 2008£nilMarch 2009£122,000).


The Investec group provides the group with certain infrastructure services.  The amount payable during the period under the terms of the related agreement amounted to £282,000 (September 2008: £303,000; March 2009£611,000) and £205,000 was outstanding at 30 September 2009 (September 2008£329,000; March 2009£396,000).


The Investec group has provided internal audit services to the group during the period The amount payable by the group during the period in respect of these services amounted to £84,000 (September 2008: £93,000March 2009£163,000) and £81,000 was outstanding at 30 September 2009 (September 2008£nilMarch 2009£88,000).


The group contributes to defined contribution pension schemes on behalf of its employees and operates a number of share-based payment arrangements for the purposes of employee remuneration. Details of these schemes were set out in the latest full financial statements for the year ended 31 March 2009.


Directors, and all employees of the group, are eligible to receive investment management services from the group at discounted staff rates.


17. Risks and uncertainties


The principal risks and uncertainties which the group faces, together with the key associated controls, were set out in the Financial Review section of the group's annual Report & Financial Statements for the year ended 31 March 2009, and can be summarised as follows:

  

1 Reputational risk, which may arise from poor investment advice or service to clients, or from a public censure by the regulator. 


2 Market risk from the group's exposure to sudden movements and/or downturns in the UK and world financial markets in which it operates.


Regulatory risk, which arises from the group operating in the highly regulated financial services sector, where failure to comply with regulatory requirements could lead to substantial fines or other disciplinary action.


4 Competition risk, which may manifest itself in a reduction in clients due to inappropriate and/or poorly priced service or product offerings, or insufficient professional staff to properly serve clients.


5 Operational risk, which principally arises from inadequate business continuity and/or disaster recovery planning or a significant business process failure in the settlements area or one of the group's support functions.


6 Fraud risk, that follows from holding significant cash and securities, both on our own behalf and on behalf of our clients.


7 Credit risk, being the risk of financial loss arising from a client or other counterparty failing to meet their obligations to repay outstanding amounts as they fall due. 


8 Liquidity risk, relating to both the sufficiency of the group's own cash resources to meet the group's financial obligations as they become due for payment, and the management of clients' cash assets, which must retain sufficient liquidity in order that cash is available for investment in non-cash assets within clients' portfolios at the relevant time or repaid to clients upon demand.


9 Interest rate riskbeing the potential adverse effect of the future cash flows of the group a result of changes in

interest rates.


10 Price risk. The group's fee income is determined by reference to the value of the funds managed by the group, and changes in market prices affect the level of these funds and hence the group's fee income generated from them. The group's exposure to price risk also relates to the income derived from, and the value of, the group's holdings of financial instruments.


There have been no significant changes to the principal risks and uncertainties faced by the group during the six months ended 30 September 2009.  


18. Forward-looking statements


Certain sections of these condensed consolidated interim financial statements contain forward-looking statements. Statements containing the words 'believes', 'expects', 'anticipates' and other words of similar meaning are forward-looking. Forward-looking statements reflect knowledge and information available at the time the statement is made. Future events and circumstances, some of which are beyond the control of the group, can cause results to differ materially from those anticipated. The group undertakes no obligation to update these forward-looking statements.



Responsibility statement of the directors in respect of the half-yearly financial report


We confirm that to the best of our knowledge:


  • the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; 


  • the interim management report includes a fair review of the information required by: 


(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and


(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

By order of the board


P.M. Watts

Company Secretary

17 November 2009



Independent review report to Rensburg Sheppards Plc


Introduction


We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009, which comprises the consolidated income statement, consolidated balance sheet, consolidated statement of comprehensive income, consolidated cash flow statement, consolidated statement of changes in equity and the related explanatory 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.


This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ('the DTR') of the UK's Financial Services Authority ('the UK FSA'). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.


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 DTR of the UK FSA.


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


Our responsibility


Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 


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 UK. 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 in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.



Richard Gabbertas

for and on behalf of KPMG Audit Plc
Chartered Accountants 

1 The Embankment

Neville Street

Leeds

17 November 2009


This information is provided by RNS
The company news service from the London Stock Exchange
 
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