RNS Number:1172M
Charles Stanley Group PLC
10 June 2003
10 June 2003
CHARLES STANLEY GROUP PLC
ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED
31 MARCH 2003
* Resilient performance in subdued markets
* Several strategic acquisitions
* Turnover #51.06 million (2001-02: #54.61 million)
* Profit before tax, goodwill amortisation and loss on sale of
investments #1.99 million (2001-02: #7.59 million)
* Earnings per share excluding goodwill amortisation 3.35p (2001-02: 13.58p)
* Total dividends for the year unchanged at 4.5p net
I am pleased to announce that, despite the worst stock market conditions in
recent memory, Charles Stanley has succeeded in maintaining its turnover at
close to last year's figure, and has continued to trade profitably.
Turnover for the year ended 31 March 2003 was #51.06 million, some 6.5% lower
than the figure of #54.61 million recorded for the previous year. Having
maintained our turnover at the half-way stage (at #26.98 million, compared with
#26.96 million in the first half of 2001/ 02) the further general decline in
stock market trading volumes in the second half of our year denied us the chance
of repeating this achievement for the full year.
The profit for the year, before tax, amortisation and investment losses, was
#1.99 million, compared with #7.59 million for the year ended 31 March 2002. A
higher charge in the latest year for amortising goodwill, arising from recent
acquisitions, left us with a figure of profit before tax for the year of
#978,000 compared with #7.71 million in the previous year.
Traditionally we have pursued a cautious dividend policy. In past years we have
held the dividend well below our earnings per share, knowing the
unpredictability of stock market trading volumes to which the company's fortunes
are linked. So when conditions are less favourable, as they have been in the
latest year, we can demonstrate our confidence in the future by maintaining the
dividend. Our recommendation is to pay a final dividend at last year's record
level of 3.5p net per share, making a total dividend, once again, of 4.5p net
per share. This is covered by our operating cashflow.
Analysis of the results
Our turnover is derived essentially from two sources, commission on Stock
Exchange transactions, and fees for our services. Commission, in particular,
reflects the fluctuating level of stock market volumes. In the latest year our
commission income fell by 11.8%. We track our performance against the total
number of UK retail Stock Exchange transactions, as measured by the leading
survey company ComPeer Ltd. In the same period this total number of transactions
fell by 22.5%. Against such a background we think that this is a satisfactory
result.
It is pleasing to be able to report that fee income, the other major component
of our turnover, rose yet again in the latest year. At #17.20 million fee income
now represents 33.7% of overall turnover, compared with 29.7% (#16.20 million)
in the previous year.
An important element of this is the fees from various added-value services which
we provide to our large private client base. One example is our cash management
service, which holds on deposit more than #400 million of clients' uninvested
funds. Another is our ISA and PEP service. This continues to attract significant
levels of subscription, and even at this depressed level of stock market
indices, we currently administer more than #750 million of clients' ISA and PEP
funds.
Further added-value services were introduced during the year, for example even
more comprehensive reporting for clients. We have a programme of consistent
improvements in the quality and range of services that we provide, and we
anticipate that this will lead to a continuing steady increase in fee income to
reflect these improvements.
Our on-line service for discretionary and advisory managed clients has proved
particularly popular. This allows clients to view their current portfolio
valuations and their dealing history at the click of a button.
An excellent year, too, was enjoyed by our internet share-trading services - by
FasTrade (our own service) and by our provision of "white-labelling" services
for major financial houses - and also by our Gold Dealing execution-only
telephone service.
The dearth of corporate finance activity in recent months has been well
publicised. But this area of our business has performed creditably, contributing
#2.39 million to revenue compared to #2.25 million in the year to 31 March 2002.
In difficult markets our Sales Trading team experienced a particularly
successful year.
Our Financial Planning and Employee Benefit Division performed strongly, too. It
now contributes nearly #1 million to revenue. This is an area in which we are
actively seeking further relevant acquisition opportunities.
Finally, I am pleased to report that, despite a fall in values because of market
conditions, the inflow of new money together with acquisitions has lifted the
total of clients' funds under management from #6.16 billion to #6.21 billion.
Our strategy
The performance of the group flows directly from the strategy which the
directors have consistently adopted over many years. An appreciation of this
strategy is therefore important in understanding the latest results.
Charles Stanley is a "full-service" stockbroking company, serving primarily a UK
private client base, but with substantial involvement, too, in other
stockbroking activity such as corporate finance, institutional trading and
personal financial planning. Our policy has been to expand the group evenly on
all fronts - organically, by acquisition, and by developing new products and
services. We seek to achieve this against the background of unpredictable stock
market conditions, and we therefore have to measure our success over the longer
term.
In earlier times "boom and bust" seemed to operate in economic cycles of perhaps
four or five years, and one could measure the growth of the business from one
cycle to the next. This pattern is less predictable now. The long bull market
which ran for eight years from September 1992 was succeeded by three years of
sharp stock market contraction.
The cycles are longer and the peaks and troughs are more pronounced - the
exuberance of the late 1990s having given way to greater uncertainty.
The group has steered its way carefully through this, building its balance sheet
in times of high business volumes so as to expand its trading activity when
conditions are less favourable. It is not our policy to make severe cuts in the
business operation when times are hard, but rather to devote the accumulated
resources to building it further. So our strategy, and our resulting
performance, have to be viewed against a longer-term perspective.
The latest results of the group reflect this. Income has held up well, thanks
partly to recent acquisitions. Expenditure is higher, because these acquisitions
bring more personnel, premises and systems costs. Our policy is to integrate
acquisitions immediately, closing legacy systems and repositioning the staff.
All of this carries additional short-term cost (which we estimate at a
non-recurring #750,000 in the latest year) but higher long-term savings.
Yet, despite paying cash for our acquisitions during the latest year, our cash
balances (at #26.95 million) - another measure to which we pay great attention -
are higher at the year-end than they were at the beginning.
Acquisitions
In June 2002, at the end of the first quarter of the latest year, we completed
the acquisition of Robson Cotterell Ltd, the principal competitor to our large
and well-established office in Bournemouth. Robson Cotterell, with offices in
Bournemouth, Dorchester, Eastbourne and Wimborne, enjoyed a high reputation, and
we were delighted to welcome such a powerful addition to our presence on the
south coast.
In October 2002 we were joined by a well-regarded group of corporate finance,
corporate broking and smaller company research teams, adding considerable
strength to our existing presence in these areas. The quality of the new
business introduced has been particularly pleasing, and the Division is
performing to budget, with over six transactions and #20 million raised already
since the beginning of the current year, 1 April 2003.
Finally, in November 2002 we opened our new office in Brighton and Hove. This
has got off to a flying start and with a well-respected team it has enjoyed
rapid expansion.
Split Capital Trusts
In view of the media interest in the problems caused by the collapse of a number
of split capital investment trusts, and the concern which shareholders may
therefore have, I deal in some detail with the impact of this issue on the
group.
Split capital investment trust shares performed satisfactorily for many years,
as a reliable investment with a reasonably predictable outcome. They played a
valuable role, in the spectrum of investment opportunities, for investors with
particular financial requirements. At some point a limited number of these
trusts embarked on higher risk strategies, leading to their collapse when the
value of their share portfolios fell away.
Like other advisers, we recommended split capital investment trust shares to a
number of clients, to meet their specific investment requirements. We did not
act as corporate broker to, or float, any of these trusts, we were not involved
in any marketing arrangements for them, nor did we promote them aggressively.
Our role in every case was to act as an independent adviser accountable only to
the client, seeking the best investment in the client's particular
circumstances. Though our advice in a proportion of cases subsequently proved
unsuccessful, and regretfully so, it was, we believe, appropriate in the light
of information known at the time.
We have received a total of 95 complaints from clients, which we have carefully
investigated. They do not in our view demonstrate any pattern of mis-selling. 40
of these complaints have been referred to the Financial Ombudsman, from whom we
have received no rulings.
In the circumstances we do not believe it appropriate to make any provision in
relation to our advice on split capital investment trusts, nor for any
additional resources required to consider them. These are handled within the
normal activity of our internal Compliance team. And if, despite our considered
view, this judgement is proved wrong we carry extensive insurance coverage to
meet this kind of eventuality.
A world of change
The pace of change in our industry, to which I refer every year, has continued
to accelerate. Much of the time of management is absorbed in trying to predict
future developments on the widest front - in legislation, in IT and settlement
systems, in regulation, and in Directives from Brussels. We try to plan for it
all, we play an active role in industry-wide initiatives, and against a
constantly-shifting future we seek to gain the best possible benefits for our
clients.
We coped well, we think, with the dramatic change-over to the new regulatory
system at "N2", on 30 November 2001. The directors and managers of the group
play an ever greater role on regulatory, professional and industry boards and
committees. The financial services sector in the UK, as in Europe, continues to
evolve at break-neck speed, and Charles Stanley is an active participant.
This, I believe, is one of our strengths, the careful and structured way in
which we plan for, and assimilate, this rapid rate of change. Always there is
something new, more work to be done, more to plan for. I am biased, of course,
but I think our team, throughout the group, is second to none.
Outlook
Any company engaged in financial services expects the occasional poor quarter,
and sometimes two. But to experience deteriorating market conditions for three
years in a row taxes the memories of all of us.
So it is pleasing to report that we have finally seen a glimmer of improvement.
The FTSE-100 Index has recovered a little ground, back above 4000 again (having
been well above 6000 not long ago). The economic fundamentals look better, and
there is more activity on the corporate front.
Stock market trading volumes, too, have shown signs of recovery. It is early in
our financial year, but if this trend continues, and in the absence of any
significant further developments, I feel rather more optimistic about the
outlook than I did at this time last year.
Sir David Howard
Chairman
FOR FURTHER INFORMATION PLEASE CONTACT
CHARLES STANLEY GROUP PLC
25 Luke Street
London
EC2A 4AR
Phone 020 7739 8200
SIR DAVID HOWARD PETER HURST MARTINA MURPHY
Chairman and Finance Director Financial Controller
Managing Director
HSBC BANK plc
Phone 020 7992 2174
ANDREW MEIGH
Associate Director
CHARLES STANLEY GROUP PLC
Consolidated Profit and Loss Account
Year ended 31 March 2003
2003 2002
Note #'000 #'000 #'000 #'000
TURNOVER 2
Continuing operations 47,553 53,518
Acquisitions 3,511 1,095
51,064 54,613
Operating expenses (47,877) (46,123)
Depreciation and amortisation (3,181) (2,796)
(51,058) (48,919)
OPERATING PROFIT/(LOSS)
Continuing operations 350 5,616
Acquisitions (344) 78
6 5,694
(Loss)/profit on sale of investments -
continuing operations (50) 581
(44) 6,275
Interest receivable 1,142 1,560
Interest payable 4 (120) (123)
Profit on ordinary activities before
goodwill amortisation and (loss)/profit on
sale of investments 1,997 7,586
Goodwill amortisation (969) (455)
Operating profit and interest before tax 1,028 7,131
(Loss)/profit on sale of investments (50) 581
PROFIT BEFORE TAX 978 7,712
Taxation 5 (534) (2,445)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 444 5,267
Dividends 6 (1,897) (1,897)
TRANSFER (FROM)/TO RESERVES (1,453) 3,370
EARNINGS PER SHARE
2003 2002
Basic Diluted Basic Diluted
Basic 7 1.05p 1.02p 12.50p 12.26p
Excluding goodwill amortisation 7 3.35p 3.25p 13.58p 13.32p
Based on historical cost profit for the
year 7 0.99p 0.96p 14.42p 14.14p
Statement of Total Recognised Gains and Losses
2003 2002
#'000 #'000
Profit for the year 444 5,267
Unrealised (losses)/gains on investments (1,241) 1,075
TOTAL RECOGNISED GAINS AND LOSSES RELATING
TO THE YEAR (797) 6,342
Note of Historical Cost Profits and Losses
2003 2002
#'000 #'000
Reported profit on ordinary activities before 978 7,712
taxation
Realisation of investment revaluation (losses)/gains (27) 807
of previous years
Historical profit on ordinary activities before 951 8,519
taxation
Historical cost (loss)/profit for the year retained (1,480) 4,177
after taxation and dividends
CHARLES STANLEY GROUP PLC
Consolidated Balance Sheet
31 March 2003
2003 2002
Notes #'000 #'000
FIXED ASSETS
Intangible 8,191 7,516
Tangible 5,227 6,212
Investments 2,732 3,987
16,150 17,715
CURRENT ASSETS
Debtors 8 178,896 144,120
Listed Investments 322 152
Cash at bank and in hand 26,948 26,148
206,166 170,420
CREDITORS: due within one year 9 (182,931) (146,934)
NET CURRENT ASSETS 23,235 23,486
TOTAL ASSETS LESS CURRENT LIABILITIES 39,385 41,201
CREDITORS: due after one year 10 (1,155) (277)
Minority Interests (44) (44)
NET ASSETS 38,186 40,880
CAPITAL AND RESERVES
Called up share capital 11 10,537 10,537
Revaluation reserve 2,096 3,337
Profit and loss account 25,553 27,006
EQUITY SHAREHOLDERS' FUNDS 12 38,186 40,880
Net Asset Value per Share 90.60p 96.99p
CHARLES STANLEY GROUP PLC
Consolidated Cash Flow Statement
Year ended 31 March 2003
2003 2002
Notes #'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 13 6,972 4,650
Returns on investments and servicing of finance 1,027 1,380
Taxation (1,486) (3,626)
Capital expenditure and financial investment (1,278) (373)
Acquisitions 106 (4,008)
Equity dividends paid (1,897) (1,791)
Cash inflow/(outflow) before financing 3,444 (3,768)
FINANCING
Decrease in debt (2,644) (1,573)
Increase/(decrease) in cash in the year 800 (5,341)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Increase/(decrease) in cash in the year 800 (5,341)
Cash outflow from change in debt and lease financing 2,644 1,573
3,444 (3,768)
Convertible debt issued - (1,500)
New finance leases (43) (46)
Movement in net funds in the year 3,401 (5,314)
Net funds at 1 April 23,222 28,536
Net funds at 31 March 26,623 23,222
CHARLES STANLEY GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2003
1 BASIS OF PREPARATION
The results are an abridged extract from the financial statements for the year
ended 31 March 2003 which have not yet been delivered to the Registrar of
Companies. The auditors' report on the full financial statements has yet to be
signed.
The results have been prepared on a basis consistent with the accounting
policies set out on pages 19 and 20 of Charles Stanley Group PLC's annual report
and financial statements for the year ended 31 March 2002. These preliminary
financial statements should therefore be read in conjunction with the 2002
annual report and financial statements.
The financial information as set out in this report is unaudited and does not
comprise statutory accounts for the purposes of Section 240 of the Companies Act
1985.
The comparative figures for the year ended 31 March 2002 have been taken from,
but do not constitute, the Company's statutory financial statements for that
financial year. Those financial statements have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The report was
unqualified.
2 TURNOVER
Turnover is derived from stockbroking operations in the United Kingdom analysed
as follows:
2003 2002
#'000 #'000
Commission 33,862 38,408
Investment management fees 14,817 13,958
Corporate finance fees 2,385 2,247
51,064 54,613
3 PARTICULARS OF STAFF
The average number of persons employed (including Directors) during the year was
458 (2002: 430).
2003 2002
#'000 #'000
Staff costs:
Wages and salaries 15,628 13,829
Social security costs 1,563 1,394
Other pension costs 1,465 1,336
18,656 16,559
4 INTEREST PAYABLE
On bank loans and overdrafts 35 59
Finance lease interest 38 64
On convertible loans 47 -
120 123
5 TAX ON PROFIT ON ORDINARY ACTIVITIES
2003 2002
#'000 #'000
Current taxation:
UK corporation tax at 30% (2002: 30%) 585 2,213
Adjustment in respect of prior periods (51) 232
534 2,445
6 DIVIDENDS
Interim paid of 1.00p per share (2002: 1.00p) 421 421
Proposed final of 3.50p per share (2002: 3.50p) 1,476 1,476
1,897 1,897
The directors have recommended a final dividend of 3.50p per share. This will
be paid on 30 July 2003 to shareholders registered on 11 July 2003. The ordinary
shares are expected to be quoted ex dividend on 9 July 2003.
7 EARNINGS PER SHARE
2003 2002
No. No.
Basic
Weighted average number of shares in issue in the year 42,149,378 42,129,763
Diluted
Weighted average number of options outstanding for the year 1,371,565 828,413
Diluted weighted average number of shares in issue in the year 43,520,943 42,958,176
#'000 #'000
Profit for the year before goodwill 1,413 5,722
Goodwill amortisation (969) (455)
Profit for the year 444 5,267
Realisation of investment revaluation gains of previous years (27) 807
Historical cost profit for the year 417 6,074
8 DEBTORS
2003 2002
#'000 #'000
Trade debtors 177,380 142,617
Other debtors 387 756
Prepayments 1,129 747
178,896 144,120
9 CREDITORS: amounts due within one year
2003 2002
#'000 #'000
Trade creditors 177,626 137,994
Subordinated bank loan - 750
Obligations under finance leases 120 399
Corporation tax 173 1,125
Other taxes and social security 1,298 1,448
Other creditors 1,404 884
Accruals and deferred income 834 1,358
Proposed dividend 1,476 1,476
182,931 145,434
Convertible debt:
3% Fixed rate convertible redeemable loan notes 2007 - 1,500
182,931 146,934
10 CREDITORS: amounts due after one year
2003 2002
#'000 #'000
Obligations under finance leases 205 277
Other creditors 950 -
1,155 277
11 CALLED UP SHARE CAPITAL
2003 2002
#'000 #'000
Authorised:
80,000,000 ordinary shares of 25p each 20,000 20,000
Allotted and fully paid:
42,149,378 ordinary shares of 25p each 10,537 10,537
On 31 March 2003 the following options have been granted and remain outstanding
in respect of ordinary shares of 25p in the Company under the Company's Save As
You Earn Scheme.
No. of shares Option price
Grant dated 11 July 2001 59,768 #2.87
Options are exercisable during the six months commencing 1 September 2006.
Grant dated 2 January 2003 2,005,358 #0.96
Options are exercisable during the six months commencing 1 February 2008.
12 RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
2003 2002
#'000 #'000
Profit for the year 444 5,267
Other recognised (losses)/gains (1,241) 1,075
Dividends (1,897) (1,897)
Net (decrease)/increase in shareholders' funds (2,694) 4,445
Opening shareholders' funds 40,880 36,435
Closing shareholders' funds 38,186 40,880
13 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2003 2002
#'000 #'000
Operating profit 6 5,694
Provision made against fixed asset investments 59 9
Depreciation charges 2,212 2,341
Goodwill written off 969 455
Loss on sale of fixed assets - 6
(Increase)/decrease in debtors (34,946) 30,266
Increase/(Decrease) in creditors 38,672 (34,121)
Net cash inflow from operating activities 6,972 4,650
14 REPORT AND ACCOUNTS
Copies of the Annual Report and Accounts will be despatched shortly to
shareholders. The Annual General Meeting will be held on Wednesday, 23 July
2003.
This information is provided by RNS
The company news service from the London Stock Exchange
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