RNS Number:7252S
Aberdeen Asset Management PLC
02 December 2003
ABERDEEN ASSET MANAGEMENT PLC
DRAFT FINAL RESULTS FOR YEAR TO 30 SEPTEMBER 2003
FINANCIAL HIGHLIGHTS
2003 2002
Turnover #142.3m #192.1m
Pre-tax profit (before goodwill amortisation and #5.0m #41.7m
exceptional items)
Pre-tax (loss) profit (after goodwill amortisation and (#6.4m) #18.3m
exceptional items)
Earnings per share (before goodwill amortisation and 3.1p 16.5p
exceptional items)
Earnings (loss) per share (after goodwill amortisation and (8.8p) 3.3p
exceptional items)
Total dividend per share 4.0p 6.0p
Assets under management at the year-end #20.6bn #23.7bn
Operational Highlights
* Group substantially restructured and strengthened over the period
* Acquisition of Edinburgh Fund Managers Group plc
* Sales of selected retail rights to New Star Asset Management
* Balance sheet strengthened
* Annualised cost base reduced by 40%
* New business trend upwards since March
* Streamlined investment process rolled out worldwide; typically strong fund
performances now in evidence across the group
Commenting on the results, Martin Gilbert, Group Chief Executive, said:
"Following our successful restructuring we are now well positioned to benefit
from any improvement in world fnancial markets. Our cost base is down by 40% on
an annualised basis and our balance sheet has been strengthened. After the
Edinburgh Fund Managers deal we are now one of the UK's largest managers of
closed end funds. We continue to focus on costs and margins to ensure that in a
low growth environment we will make positive progress. We have carried costs
associated with restructuring which have lagged the fall in revenues. We will
not see the full impact of the cost reduction programme until 2005. The
effects of our restructuring and revised business focus began to show during the
second half of the year with a marked pick up in fund raising activities and
improved investment performance. The trend is encouraging. We continue to work
with the Regulator on their review of the Split Capital Investment Trust sector
and await their findings. We will further develop our core area of expertise
and we view the future from a sound financial position with cautious optimism."
Enquiries:
Aberdeen Asset Management Tel 020 7463 6000
Martin Gilbert, Chief Executive
Gavin Anderson & Company Tel 020 7554 1400
Neil Bennett
Mark Lunn
Chairman's statement
The year to 30 September 2003 was another challenging period, both for the Group
and for the investment management sector generally. The first half of the year
saw global stock markets continuing to decline before beginning something of a
rally, albeit from a low base, during the second six months.
Against this background, the Board has concentrated on implementing its
strategy, as set out in the 2002 Annual Report, of focussing on the Group's core
competencies in the management of equity and fixed interest securities whilst
also seeking to reduce operating costs and disposing of non-core activities.
The financial results for the year reflect the considerable restructuring which
has been undertaken. Profit before taxation, goodwill amortisation and
exceptionals was #5.0 million compared to #41.7 million in 2002, representing
earnings per share of 3.1p against 16.5p last year. After accounting for
exceptional costs of #29.2 million, an exceptional gain of #53.5 million and
goodwill charges of #35.7 million, we report a pre-tax loss of #6.4 million,
compared to a profit of #18.3 million in 2002.
During the year we reduced our involvement in the UK retail unit trust market
following the sale of certain management contracts to New Star Asset Management
plc. The attention of our investment management division is now more balanced
across onshore and offshore open-end funds, closed-end funds and institutional
mandates. The acquisition of Edinburgh Fund Managers Group plc, which was
announced in September and completed in late October, will provide further scale
to the latter two of these activities and enable further cost efficiencies
to be achieved across the enlarged range of funds.
There remains much for us to achieve. We recognise the need to maintain our
service standards to clients and to remain responsive and attentive to changes
in the external environment, whilst also seeking to control operating costs. We
are seeing some encouraging flows of new business and we anticipate sustainable
growth after the retrenchment of the last 18 months.
Dividend
The Board is recommending a final dividend of 2p per share making a
total for the year of 4p per share, compared with 6p in 2002. This reflects the
reduced level of core profits earned in 2003 but recognises that those core
profits have only benefitted from a part year effect of cost cuts implemented
during the course of the year.
Asset disposals
We significantly strengthened the Group's balance sheet following the disposal
of the management rights of six UK retail funds to New Star Asset Management in
February 2003, realising cash proceeds, after expenses of #82.1 million which
were used to reduce net debt. This disposal allowed Aberdeen to make a tactical
withdrawal from parts of the UK retail market and focus instead on opportunities
the professional fund buyer and institutional markets.
We announced in 2002 our intention to dispose of our property management
division, Aberdeen Property Investors. There was significant interest in this
business from a wide range of interested parties, but the terms on offer did not
reach an acceptable level. Having already completed the sale of retail funds to
New Star and recognising the weakness in the market for corporate transactions
at the time, we concluded that it would be in the best interests of shareholders
for this division to be retained. We therefore withdrew from negotiations in
August 2003.
We also made some minor disposals, including the sale of Asset Value Investors
to its management, after the end of the financial year.
Acquisition
In September 2003, we announced agreed terms for the acquisition of Edinburgh
Fund Managers plc ("EFM") for an all-share consideration of #36 million, and the
simultaneous disposal of EFM's retail business to New Star Asset Management for
a consideration of #33 million, mainly cash. This transaction was completed
in late October and the integration process is underway. We are delighted to
welcome all clients, staff and shareholders of EFM to the Aberdeen Group.
EFM's business, excluding the retail funds sold to New Star, comprises eight
investment trusts with total assets under management of #1.4 billion and #0.9
billion of other mandates. The addition of these contracts reinforces our
ongoing commitment to the management of global closed-end funds at a time when
other fund managers and bancassurance groups have given less significance to
this type of business. We recognise the specialist service and dedicated
resource required in the management of this type of assets and we are confident
that our client support team, supplemented by EFM's own highly regarded
administration function, are well placed to support further growth of this
business. A new Code of Conduct was published by the Association of Investment
Trust Companies in July and we are now working closely with our clients to help
them deepen and improve investor communications and the achievement of best
practice at all levels.
Balance Sheet
As a result of these transactions, pro-forma total assets under management were
#22.5 billion. At 30th September 2003, bank borrowings had reduced to #52
million from #123 million at 30th September 2002. Bank debt has now been
consolidated with HBOS plc, with whom we have a long-standing relationship.
Cost reduction programme
We have made more than #40 million of annualised cost reductions over the last
year and we continue to focus on margin improvement. Some of this
cost reduction benefit will not be recognised until the next reporting period.
This was an arduous and difficult process for management and staff, needing
considerable thought as to what areas truly align with the group's future
strategy. Invariably, with over 60 per cent of costs in staff in a fund
management group, this programme led to regrettable but necessary redundancies.
Investment Process
Our investment process is focused primarily on the active management of equities
and fixed interest securities and is designed to offer clear added value to
portfolios. In equities, we have adopted on a Group-wide basis the long
established and successful process implemented by the Group's Asia Pacific team.
This process emphasises fundamental research through direct company visits and
provides a platform for clear decision-making, backed by a full audit trail. The
major benefit lies in a coherent, articulate approach to stock selection,
rewarding the Group with stronger performance, better ratings and consequently
greater institutional asset gathering and client retention capability. There are
encouraging signs that this focused investment process is delivering stronger
performance.
Split Capital Investment Trusts
The Financial Services Authority ("FSA") is continuing its review of the Split
Capital Investment Trust sector and Aberdeen is amongst the numerous companies
that have been interviewed by the FSA and requested to provide further
information. The Group has at all times co-operated with the FSA in its review
and will continue to do so and we believe we have at all times acted with
complete integrity and in accordance with allo relevant regulations and laws.
Business development
We have continued to develop our business, successfully securing new
clients for our Far East equity products where we increased assets under
management by over #500 million during the year, and a new #120 million
institutional mandate commenced just after the year end. Such moves are
distinguished through the Group's decision to focus on institutional
and discretionary channels internationally, with asset expertise where we have
discernible competitive strength. We have also returned to growing underlying
net fund flows on a monthly basis generally from our open-ended business
(excepting known or planned outflows such as from planned closures of uneconomic
funds), from the UK, Europe and Singapore ranges.
We have enjoyed strong overall relative performance from the closed end funds we
manage in the United States as well as in the UK.
Our "best practice" programme, for our investment trust clients, sets out
optimal standards of reporting in an ever-changing regulatory, consumer and
legal environment. Elsewhere, we are conscious of increasing European regulatory
demands expected from Basel II and the planned Capital Adequacy Directive, and
like other fund managers, we hope that additional European prudential-based
regulation will not unwittingly render the United Kingdom a less attractive
place to do business. As an industry we need to make our voice better understood
in this regard.
Corporate Governance
This year has seen considerable change to corporate governance codes, with the
publication of the Higgs Report coupled with amendments to the Combined Code.
Such reviews emphasise the importance of disclosure and transparency as well as
recommend a clear separation of executive and non-executive functions. We have a
clear governance map, as well as extensive risk controls and strategies, in
order to mitigate operational risk.
Despite our concerns that the level of UK regulatory activity and
consultation papers seem to be increasing on all levels, the Board welcomes any
initiatives that help and support the Board in its duties to its shareholders.
Outlook
Our focus continues to be on improving returns for shareholders. Our cost
reduction programme is leading to margin improvement and the business is
positioned to grow in a low absolute return environment.
Our industry operates in an ever-changing regulatory environment and we continue
to strive for best practice throughout the Group and actively work to ensure the
best for all our stakeholders.
We have substantially improved our financial position following the disposals
made in the last year. After a difficult year for markets, we look forward to
2004 and the challenges it will bring with a greater degree of confidence.
2003 was not an easy year for our staff. The unstinting support of all has
enabled us to emerge a stronger company. It has been a true team effort and
I thank them all for their commitment and hard work.
Charles Irby
Chairman
2 December 2003
ENDS
Consolidated Profit and Loss Account
For the year ended 30 September 2003
Notes 2003 2002
#'000 #'000
------ ---------- ---------
Turnover - fixed margin property management 15,151 11,899
Turnover - other 127,117 180,179
---------- ---------
Total turnover 1 142,268 192,078
Operating expenses
---------- ---------
- Fixed margin property management 1 (13,781) (11,030)
- Other (109,469) (123,771)
- Exceptional costs 2 (23,851) (5,621)
Amortisation of goodwill (18,430) (19,640)
Provision for impairment of goodwill & 2 (17,311) -
intangible assets ---------- ---------
Total administrative expenses (182,842) (160,062)
Other operating income - exceptional 2 - 4,446
Exceptional amounts written off investments 2 (5,376) (2,651)
Operating profit before goodwill ---------- ---------
amortisation,
impairment provisions & exceptional items 19,018 57,277
Amortisation of goodwill, impairment (64,968) (23,466)
provisions & exceptional items ---------- ---------
Operating (loss) profit (45,950) 33,811
Profit on disposal of management contracts 2 53,536 -
Net interest payable and similar charges (13,985) (15,533)
---------- ---------
(Loss) profit on ordinary activities before (6,399) 18,278
taxation
Tax on (loss) profit on ordinary activities (8,232) (11,184)
---------- ---------
(Loss) profit on ordinary activities after (14,631) 7,094
taxation
Minority interests - equity (231) (216)
---------- ---------
(Loss) profit for the financial year (14,862) 6,878
Dividends
---------- ---------
Equity dividends on ordinary shares 3 (7,074) (10,500)
Non-equity dividends on preference shares 3 (589) (1,132)
---------- ---------
(7,663) (11,632)
========== =========
Retained loss for the financial year (22,525) (4,754)
========== =========
Earnings (loss) per share - basic
Before goodwill amortisation & exceptional 5 3.10p 16.51p
items
After goodwill amortisation & exceptional 5 (8.76)p 3.29p
items
========== =========
Earnings (loss) per share - diluted
Before goodwill amortisation & exceptional 5 3.10p 16.47p
items
After goodwill amortisation & exceptional 5 (8.76)p 3.28p
items
========== =========
Turnover, operating (loss) profit and the profit on disposal of management
contracts arises wholly from continuing activities.
There is no material difference between the (loss) profit on ordinary activities
before taxation above and the historic cost equivalent.
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 30 September 2003
2003 2002
#'000 #'000
---------- ----------
(Loss) profit for the financial year (14,862) 6,878
Revaluation of fixed asset investments 3,171 2,521
Translation of foreign currency net investments 1,102 (735)
---------- ----------
Total recognised gains and losses for the financial (10,589) 8,664
year
========== ==========
Consolidated Balance Sheet
As at 30 September 2003
Notes 2003 2002
#'000 #'000
---------- ----------
ASSETS
Fixed assets
Intangible assets 42,408 76,820
Goodwill 302,459 331,792
Tangible assets 14,981 17,452
Investments 33,861 36,280
---------- ----------
393,709 462,344
---------- ----------
Current assets
Stock 192 720
Debtors 39,981 55,807
Investments 2,812 2,932
Cash at bank and in hand 23,003 32,490
---------- ----------
65,988 91,949
---------- ----------
Assets attributable to equity shareholders 459,697 554,293
Assets of long - term life assurance 247,328 255,824
business
---------- ----------
Total assets 707,025 810,117
========== ==========
LIABILITIES
Capital and reserves
Called up share capital 28,034 38,411
Share premium account 19,205 19,203
Revaluation reserve 15,529 12,358
Other reserves 154,766 144,389
Profit & loss account (38,938) (7,173)
---------- ----------
Shareholders' funds
Equity 168,253 186,503
Non-equity 10,343 20,685
---------- ----------
178,596 207,188
Minority interests - equity 749 456
Provisions for liabilities and charges 4,179 6,912
Creditors: due within one year
---------- ----------
Creditors 123,810 111,000
Convertible debt 19,562 23,888
---------- ----------
143,372 134,888
Creditors: due after more than one year,
including convertible debt
Creditors 35,272 108,061
Convertible debt 97,529 96,788
---------- ----------
132,801 204,849
---------- ----------
459,697 554,293
Liabilities of long - term life assurance 247,328 255,824
business
---------- ----------
Total liabilities 707,025 810,117
========== ==========
Summary Consolidated Cash Flow Statement
For the year ended 30 September 2003
Notes 2003 2002
#'000 #'000
---------- ----------
Net cash inflow from operating activities
Core cashflow from operating activities 17,082 47,227
Effects of short-term timing differences on (9,669) (8,208)
unit trust settlements
---------- ----------
4 7,413 39,019
Returns on investments and servicing of (14,749) (18,037)
finance
Taxation paid (3,243) (7,154)
Capital expenditure and financial 79,198 (12,522)
investment
Acquisitions and disposals (2,208) (22,897)
Equity dividends paid (7,311) (18,245)
---------- ----------
Net cash inflow (outflow) before financing 59,100 (39,836)
Financing
Issue of share capital - 42
Redemption of preference share capital (10,342) (10,343)
Redemption of performance share capital - (152)
Issue of convertible bonds - 96,294
Instalments repaid on long-term loans (71,762) (71,861)
Repayment of convertible loan notes (3,163) -
New bank term loans 754 -
---------- ----------
Decrease in cash (25,413) (25,856)
========== ==========
Reconciliation of net cash flow to movement
in net debt
Notes 2003 2002
#'000 #'000
---------- ----------
Decrease in cash in the year (25,413) (25,856)
Issue of convertible bonds - (96,294)
New bank term loans (754) -
Instalments repaid on long-term loans 71,762 71,861
Repayment of convertible loan notes 3,163 -
---------- ----------
Change in net debt resulting from cash 48,758 (50,289)
flows
Amortisation of issue costs of convertible (744) (494)
bonds
Conversion of bonds to ordinary shares 3 -
Translation difference 1,102 (735)
---------- ----------
Movement in net debt in the year 49,119 (51,518)
Net debt at 1 October 6 (234,451) (182,933)
---------- ----------
Net debt at 30 September 6 (185,332) (234,451)
========== ==========
Notes
1. Segmental information
The Group is involved in providing investment management and property asset
management services. These services are provided to clients in the following
geographic areas:
United Rest of Rest of Total
Kingdom Europe World
#'000 #'000 #'000 #'000
Year to September 2003
Turnover 89,445 41,682 11,141 142,268
-------- -------- -------- --------
Operating loss (54,873) 5,181 3,742 (45,950)
-------- -------- -------- --------
Net assets outwith the UK 10,910 5,455 16,365
-------- -------- --------
Year to September 2002
Turnover 132,710 39,443 19,925 192,078
-------- -------- -------- --------
Operating profit 18,417 5,991 9,403 33,811
-------- -------- -------- --------
Net assets outwith the UK 9,627 5,859 15,486
-------- -------- --------
Turnover and operating (loss) profit by origin is not materially different to
the information given above.
The results of the Group can be further analysed between investment management
and property asset management as shown below.
2003 2002
Investment Investment
Management Property Total Management Property Total
#'000 #'000 #'000 #'000 #'000 #'000
Turnover- fixed margin - 15,151 15,151 - 11,899 11,899
property management
Turnover - other 90,073 37,044 127,117 141,477 38,702 180,179
-------- -------- -------- -------- -------- --------
Total turnover 90,073 52,195 142,268 141,477 50,601 192,078
-------- -------- -------- -------- -------- --------
Operating expenses - - (13,781) (13,781) - (11,030) (11,030)
fixed margin property
management
Operating expenses - (79,859) (29,610) (109,469) (94,325) (29,446) (123,771)
other
-------- -------- -------- -------- -------- --------
Total operating (79,859) (43,391) (123,250) (94,325) (40,476) (134,801)
expenses excluding
amortisation of
goodwill, impairment
provisions & exceptional
operating items
-------- -------- -------- -------- -------- --------
Operating profit 10,214 8,804 19,018 47,152 10,125 57,277
before goodwill
amortisation,
impairment provisions
& exceptional
operating items
-------- -------- -------- -------- -------- --------
Operating (loss) (51,698) 5,748 (45,950) 26,502 7,309 33,811
profit
-------- -------- -------- -------- -------- --------
2. Exceptional Items
Exceptional costs
Recognised within operating (loss) profit 2003 2002
#'000 #'000
Expenses in relation to cost reduction programme 8,662 5,155
Costs incurred in relation to regulatory matters and 11,655 -
curtailment of activities in the UK retail market
Costs of aborted sale, subsequent rationalisation 3,534 466
and other costs
--------- ---------
23,851 5,621
Amounts written off investments 5,376 2,651
--------- ---------
29,227 8,272
========= =========
Expenses in relation to cost reduction programme cover expenses incurred as a
part of the group's continued cost reduction exercise and include costs in
respect of redundancy, staff retention, office closure and outsourcing.
Costs incurred in relation to regulatory matters and curtailment of activities
in the UK retail market include legal and professional fees in relation to
regulatory investigations and provision for marketing expenditure which had been
aimed at retail markets from which the Group has curtailed its activities.
Cost of aborted sale, subsequent rationalisation and other costs relate
principally to the proposed sale of the Group's property division.
The amounts written off investments represent provisions made against the value
of both fixed asset and current asset investments.
Provision for impairment of goodwill and intangible 2003 2002
assets
#'000 #'000
Recognised within operating (loss) profit
Provision for impairment of goodwill 13,511 -
Provision for impairment of intangible assets 3,800 -
--------- ---------
17,311 -
========= =========
Impairment provisions on goodwill and intangible assets represent amounts which
have been charged to the profit and loss account following an impairment review
of these assets. The provision in respect of goodwill arose due to the proposed
sale of assets and the loss of management contracts. The provision in respect of
intangibles arose as result of a fall in the embedded value underlying the
assets.
Other operating income - exceptional
2003 2002
#'000 #'000
Recognised within operating (loss) profit
Compensation received on the termination of the - 4,446
Scottish Provident investment management contract
========= =========
Profit on disposal of management contracts
2003 2002
#'000 #'000
Proceeds of disposal 86,762 -
Less : intangible assets written off (28,526) -
Less : related costs of disposal (4,700) -
--------- ---------
Profit on disposal of management contracts 53,536 -
========= =========
The profit on disposal of management contracts relates to the sale of the
management rights of six UK retail assets to New Star Asset Management. The
transaction was completed on 21 February 2003 achieving proceeds of #86.8
million from the #1.73 billion of assets which transferred to New Star. The tax
attributable to this transaction has been estimated at #13 million, which the
directors believe is a prudent estimate because it does not take account of
certain reliefs until such time as their availability is confirmed.
3. Dividends
2003 2002
#'000 #'000
Equity dividends on ordinary shares:
Interim paid 2.0p (2002 - 3.85p) 3,536 6,725
Final proposed 2.0p (2002 - 2.15p) 3,538 3,775
--------- ---------
7,074 10,500
========= =========
Non-equity dividends on redeemable preference
shares:
Accrued at 1 October (182) (274)
31 October paid 273 411
31 January paid 136 274
30 April paid 136 265
31 July paid 135 274
Accrued to 30 September 91 182
--------- ---------
589 1,132
========= =========
It is proposed to pay the final dividend of 2.0p on 25 February 2004 to
qualifying shareholders on the register at 12 December 2003.
4. Reconciliation of operating (loss) profit to operating cash flow
2003 2002
#'000 #'000
Operating (loss) profit (45,950) 33,811
Depreciation charges 4,911 5,939
Amortisation of goodwill 18,430 19,640
Provision for impairment of goodwill 13,511 -
Amortisation of intangible assets 2,086 1,565
Provision for impairment of intangible assets 3,800 -
(Profit) loss on disposal of tangible fixed (38) 32
assets
Loss on disposal of fixed and current asset 77 -
investments
Exceptional amounts written off fixed and current 5,376 2,651
asset investments
Unrealised loss on current asset investments 282 -
Share of results of associated undertakings (129) (67)
Decrease in provisions for liabilities and (1,320) (521)
charges
Decrease (increase) in stock 528 (350)
Decrease in debtors 16,728 26,664
Decrease in creditors (10,879) (50,345)
---------- ---------
Net cash inflow from operating activities 7,413 39,019
========== =========
The operating cash flow in the year includes #15.5 million relating to
exceptional costs.
Analysis of the balances of cash as 2003 Change 2002 Change 2001
shown in the balance sheet in in
#'000 Period #'000 Period #'000
#'000 #'000
Cash at bank and in hand 23,003 (9,487) 32,490 (14,673) 47,163
Bank overdraft (29,517) (15,987) (13,530) (13,530) -
-------- -------- -------- -------- --------
(6,514) (25,474) 18,960 (28,203) 47,163
======== ======== ======== ======== ========
Analysis of the changes in cash 2003 2002
#'000 #'000
Net cash outflow before adjustment for the effects of (25,413) (25,856)
foreign exchange rates
Effects of foreign exchange rates (61) (2,347)
-------- --------
(25,474) (28,203)
======== ========
5. Earnings (loss) per share
The calculation of earnings (loss) per share is based on the following (losses)
profits and numbers of shares:
Basic Diluted
2003 2002 2003 2002
#'000 #'000 #'000 #'000
(Loss) profit for the financial year (14,862) 6,878 (14,862) 6,878
Non- equity dividends (589) (1,132) (589) (1,132)
-------- -------- -------- --------
(Loss) profit for financial year - FRS 14 (15,451) 5,746 (15,451) 5,746
basis
Amortisation and impairment of goodwill 35,741 19,640 35,741 19,640
and intangible assets
Exceptional items, net of attributable 25,724 3,474 25,724 3,474
taxation
Profit on disposal of management contracts, (40,536) - (40,536) -
net of attributable taxation -------- -------- -------- --------
Profit for the financial year before 5,478 28,860 5,478 28,860
goodwill amortisation, impairment
provisions & exceptional items
======== ======== ======== ========
2003 2002
Number Number
of of
shares shares
000's 000's
Weighted average number of shares
For basic earnings per share 176,458 174,806
Dilutive effect of exercisable share options - 395
and performance shares
-------- --------
For diluted earnings per share 176,458 175,201
======== ========
The directors believe that the Group's results are more fairly represented by a
measure of earnings per share which excludes exceptional items, impairment
provisions and amortisation of goodwill and therefore also present earnings per
share figures stated before these items are charged to the profit and loss
account. The two measures of earnings per share can be reconciled as follows:
Basic Diluted
2003 2002 2003 2002
After goodwill amortisation, impairment (8.76p) 3.29p (8.76p) 3.28p
provisions & exceptional items - FRS 14 basis
Add: amortisation and impairment of goodwill 20.25p 11.23p 20.25p 12.10p
and intangible assets
Add: exceptional items, net of attributable 14.58p 1.99p 14.58p 0.47p
taxation
Less: profit on disposal of management (22.97p) - (22.97p) -
contracts, net of attributable taxation
-------- ------- ------- --------
Before goodwill amortisation, impairment 3.10p 16.51p 3.10p 16.47p
provisions & exceptional items
======== ======= ======= ========
6. Analysis of changes in net debt
2002 Cash Flow Other non-cash Exchange 2003
changes Movement
#'000 #'000 #'000 #'000 #'000
-------- -------- -------- -------- --------
Cash at bank and in hand 32,490 (9,426) - (61) 23,003
Bank overdraft (13,530) (15,987) - - (29,517)
-------- -------- -------- -------- --------
18,960 (25,413) - (61) (6,514)
-------- -------- -------- -------- --------
Debt due within one year (26,664) 26,182 (25,973) - (26,455)
Convertible debt due within one (23,888) 3,163 - 1,163 (19,562)
year
Debt due after more than one year (106,071) 44,826 25,973 - (35,272)
Convertible debt due after more than (96,788) - (741) - (97,529)
one year -------- -------- -------- -------- --------
(253,411) 74,171 (741) 1,163 (178,818)
-------- -------- -------- -------- --------
Total (234,451) 48,758 (741) 1,102 (185,332)
======== ======== ======== ======== ========
7. Contingent liabilities
The Group has acted as manager of a total of 20 split capital closed-end funds
("Splits") in recent years. The value of gross assets managed for Splits peaked
at #3.4 billion (including #1.2 billion financed by borrowings) in January 2001.
This represented 11.4% of the Group's total assets under management at that time
and approximately 25% of the assets of the Splits sector as a whole.
At 30 September 2003 the Group managed assets of #514 million (including #160
million of borrowings) for 12 Splits, representing 2.5% of the Group's total
assets under management.
The Company made detailed disclosures in the financial statements for the year
ended 30 September 2002 and the Listing Particulars of 3 October 2003 in respect
of contingent liabilities which might arise due to the involvement of various
companies in the Group (the "Group" or "Aberdeen") in the management and
marketing of Splits, as manager of the Aberdeen Progressive Growth Unit Trust
which invests primarily in zero dividend preference shares of a range of Splits
("Progressive") and in relation to termination of the management contract for
Real Estate Opportunities Limited ("REO"). The current position in regard to
these matters is detailed below: -
Aberdeen is one of numerous companies being investigated by the FSA in relation
to Splits and certain representatives of Aberdeen have been interviewed. A
similar investigation is being carried out in Jersey by investigators appointed
by the Jersey Financial Services Commission. The Board remains of the belief
that the Group has at all times acted with complete integrity and in accordance
with all-relevant regulations and laws.
The speculation that legal proceedings may be brought against a range of parties
who have been involved in the Splits sector continues. No notice of any legal
proceedings related to the Group's involvement in the Splits sector has been
served against any member of the Group and any such proceedings would be
defended robustly. Having taken legal advice and reviewed the present progress
of regulatory proceedings, the Board does not consider that any provision is
appropriate in respect of these investigations and potential actions.
In December 2002 Aberdeen received a letter from a Financial Ombudsman Service
("FOS") adjudicator regarding the sustainability of a number of "lead case"
complaints in respect of Progressive. The letter sought observations from the
Group, prior to the FOS making a provisional assessment, in relation to specific
areas of concern expressed by the FOS regarding Progressive, which if sustained
would be adverse to Aberdeen's interests. The FOS has the power to require
compensation (limited to #100,000 in relation to each individual complaint) to
be paid where it upholds the relevant complaint. Aberdeen replied to that letter
in February 2003 and is now awaiting a response from the FOS. In this regard,
given the advice of Aberdeen's solicitors and the lack of information as to both
the number and quantity of claims, the Board considers it impossible to make any
reasonable estimate of any potential liability of the Group. Accordingly, and as
required by FRS 12, no provision for such claims has been made in these
accounts.
The Group is working towards providing an uplift package to investors in
Progressive, intended to take effect in August 2005, but no decision or
commitment has been made in this respect.
To put this in context, the peak value of Progressive was approximately #80
million in September 2001. The portfolio is currently valued at some #33
million (2002; #22 million), based on the market prices of individual holdings
of zero dividend preference shares. However, the portfolio stands at a discount
to the estimated underlying net asset values attributable to these holdings and,
in the absence of any market movements or other change, this discount would be
expected to narrow over time as maturity dates of individual holdings are
reached.
On 3 April 2003, the board of Real Estate Opportunities Limited ("REO")
announced it had terminated Aberdeen's management contract with immediate effect
and indicated that it held Aberdeen liable for damages in respect of losses
incurred on its income portfolio. No proceedings have been issued by REO.
Aberdeen does not accept the validity of REO's termination without notice.
Aberdeen has rejected the claim and, if proceedings are brought, they will be
vigorously defended. Aberdeen has a claim for its accrued fees and for fees
relating to the 12 months notice period provided for in the management contract.
Having taken legal advice the Board considers that there is no need for any
provision in respect of any action threatened by REO.
In the event that the contingent issues referred to above were to give rise to
liabilities significantly in excess of the Group's insurance cover, certain
asset sales would need to be considered. The Board is confident that, if this
were to become necessary, such disposals could be achieved at above book value,
including attributable goodwill. Whilst the position is necessarily uncertain,
the Board considers, having regard to the above courses of action open to them,
that it is appropriate to prepare the accounts on a going concern basis.
8. Post balance sheet events
On 24 October 2003 the Company announced that its offer for the whole of the
issued and to be issued ordinary share capital of Edinburgh Fund Managers Group
plc ("Edinburgh") was unconditional. The acquisition was satisfied by the issue
of up to 58,879,491 New Ordinary Shares of Aberdeen Asset Management Group plc,
representing 2.05 shares for each Edinburgh share in issue and valued Edinburgh
at approximately #36 million based on the closing price of Aberdeen shares on 4
September 2003. On acquisition funds under management were approximately #3.3
billion.
Subsequent to the acquisition of Edinburgh, Aberdeen had agreed to sell the
rights to manage the retail funds managed by the Edinburgh group (comprising
unit trusts and OIECs with approximately #965 million of assets under
management) to New Star Asset Management Group Limited for #33 million, of which
#27 million was paid in cash and #6 million in New Star Shares. This sale was
completed on 31 October 2003.
On 7 October 2003 the Company completed the disposal of the entire share capital
of Asset Value Investors Limited ("AVI"). The consideration for the sale was 30
per cent of the total gross revenues of AVI for the years ended 30 September
2004, 2005 and 2006.
9. The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2003 or 2002. The financial
information for 2002 is derived from the statutory accounts for 2002 which have
been delivered to the Registrar of Companies. The auditors have reported on the
2002 accounts; their report was unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985. The statutory accounts
for 2003 will be finalised on the basis of the financial information presented
by the directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's annual general meeting.
Assets Under Management
2003 2002
#m #m
---------- ------------
By Product
Institutional funds 12,212 12,902
Unit trusts & OEICs 2,327 4,379
Investment trusts and closed end funds 3,990 4,480
Offshore funds 1,227 965
Discretionary accounts 389 432
Private equity 455 493
---------- ------------
20,600 23,651
========== ============
By asset class
Equities: UK 4,814 5,417
Asia Pacific 1,950 1,371
European 1,235 1,420
North America 870 1,074
Japan 400 397
Emerging markets (ex Asia) 194 221
---------- ------------
9,463 9,900
Fixed interest & cash 5,468 7,107
Property 5,669 6,644
---------- ------------
20,600 23,651
========== ============
This information is provided by RNS
The company news service from the London Stock Exchange
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