TIDMCAY
RNS Number : 7420S
Charles Stanley Group PLC
18 November 2021
18 November 2021
CAY.L
Charles Stanley Group PLC
("Charles Stanley" or "the Company" or "the Group")
Interim results for the six months ended 30 September 2021
Key Points
Financial:
-- Record level of Funds under Management and Administration
("FuMA"), up 7.0% at the half year end to GBP27.4bn (FY
2021: GBP25.6bn)
-- Revenue up by 12.2% to GBP91.9m (H1 2021: GBP81.9m), with
growth across all three divisions
-- Underlying(1) profit before tax up by 40.9% to GBP9.3m
(H1 2021: GBP6.6m)/ Reported profit before tax of GBP4.7m
(H1 2021: GBP4.8m), including one-off exception items
relating to the Raymond James Offer
-- Underlying(1) pre-tax profit margin increased to 10.1%
(H1 2021: 8.1%)
-- Underlying(1) EPS up by 46.1% to 14.52 pence per share
(H1 2021: 9.94 pence per share)/ Reported EPS of 6.99
pence per share (H1 2021: 7.06 pence per share)
-- Strong balance sheet strengthened:
- net assets up by 2.8% to GBP126.7m (31 March 2021:
GBP123.3m)
- cash balances of GBP93.4m at 30 September 2021 (31
March 2021: GBP105.4m)
- regulatory capital solvency ratio of 199% (H1 2021:
174%) with increased capital resources of GBP103.7m
(H1 2021: GBP92.8m)
-- Interim dividend increased to 4.0p per share(2) (H1 2021:
3.0p per share)
1 Underlying profit before tax and earnings per share excludes
exceptional items.
2 As set out in the Scheme Document, payment of such interim
dividend to Charles Stanley shareholders is subject to
the acquisition of the Company by Raymond James not having
been sanctioned by the Court by 10 December 2021.
Offer by Raymond James
-- The proposed acquisition by Raymond James UK Wealth Management
Holdings Limited, a wholly owned subsidiary of Raymond
James Financial, Inc. ("Raymond James"), to be effected
by way of scheme of arrangement , remains subject to FCA
approval and sanction by the Court, and is currently expected
to complete in December 2021.
Outlook:
-- Trading conditions are favourable and the Group is well-positioned,
supported by a strong balance sheet, no debt and good
cash flows
Paul Abberley, Chief Executive Officer of Charles Stanley group
plc, commented:
"The Group has performed well, aided by the improvement in
investor confidence following the onset of the coronavirus
vaccination programme and global economic recovery. We are
continuing with initiatives to enhance our customer proposition,
including a streamlined digital offering. The recommended Offer by
Raymond James is expected to conclude in December 2021, subject to
FCA and Court approvals. We remain confident that our acquisition
by Raymond James will bring benefits for clients and staff and
create new opportunities for the business to flourish. We look
forward to the future with optimism."
Charles Stanley Group PLC LEI: 213800LBSEGKE5MCYC90
For further information, please contact:
Charles Stanley
Joanne Higginson
Via KTZ Communication
Canaccord Genuity
Andrew Potts
020 7523 8306
Peel Hunt
Andrew Buchanan
020 3597 8680
N.M. Rothschild
& Sons Limited
Jonathan Eddis
020 7280 5000
KTZ Communications
Katie Tzouliadis
020 3178 6378
Notes to editors:
Charles Stanley provides holistic wealth management services to
private clients, charities, trusts and institutions. Its origins
trace back to 1792 and it is one of the oldest firms on the London
Stock Exchange. The Company has a national presence, with 26
locations and over 800 professionals. Its wealth management
services are provided direct to clients and to intermediaries.
Cautionary Statement
The Interim management report for the six months ended 30
September 2021 has been prepared to provide information to
shareholders to assess the current position and future potential of
Charles Stanley Group PLC. It contains certain forward-looking
statements with respect to the Group's financial condition,
operations and business opportunities. These forward-looking
statements involve risks and uncertainties that could cause the
actual results of operations, financial condition, liquidity,
dividend policy and the development of the industry in which the
Group operates to differ materially from the impression created by
the forward-looking statements. Any forward-looking statement is
made in good faith based on information available to the Directors
at the time of their approval of this report. Past performance
cannot be relied on as a guide to future performance.
Publication on website
A copy of this announcement and the documents required to be
published pursuant to Rule 26.1 and Rule 26.2 of the City Code on
Takeovers and Mergers (the "Code") will be made available (subject
to certain restrictions relating to persons resident in Restricted
Jurisdictions (as defined in the Scheme Document)), free of charge,
at charles-stanley.co.uk/recommended-offer-for-charles-stanley by
no later than 12 noon on the Business Day following the date of
this announcement.
Neither the contents of the website nor the content of any other
website accessible from hyperlinks on such website is incorporated
into, or forms part of, this announcement.
Interim management report
First half review
The new financial year started strongly, with investor
confidence greatly improved following the commencement of the
rollout of the COVID-19 vaccination programme and the onset of
global economic recovery.
The Group performed very well against this backdrop. Total
revenues rose by 12.2% to GBP91.9 million (H1 2021: GBP81.9
million) and underlying profit before tax increased by 40.9% to
GBP9.3 million (H1 2021: GBP6.6 million). The reported profit
before tax declined marginally to GBP4.7 million (H1 2021: GBP4.8
million) but included exceptional items relating to the Offer by
Raymond James.
Revenues and FuMA
Revenues grew significantly, continuing the progress made in the
second half of the prior year as markets recovered from the
immediate shock of the COVID-19 outbreak. All three divisions
delivered growth, and higher fee and administration income more
than offset reduced commission and interest income, which
respectively reflected less volatile markets and the Bank of
England's cut in interest rates.
FuMA at GBP27.4 billion at the end of the first half of the
financial year was 7.0% higher than at 31 March 2021 when it stood
at GBP25.6 billion. Average FuMA for the first half was GBP27.0
billion, 22.2% higher than during the same period last year (H1
2021: GBP22.1 billion).
Expenditure
We have continued to keep a firm control of underlying
expenditure. Overall it increased by GBP7.2 million to GBP82.4
million (H1 2021: GBP75.2 million), of which GBP5.9 million was
attributable to increased variable remuneration.
Underlying costs excluding staff costs rose by GBP1.5 million.
This rise principally reflected a full six months of outsourced IT
costs, which amounted to GBP0.9 million. This followed the
outsourcing of IT infrastructure maintenance was outsourced part
way through the first half of FY 2021 whereas we have had a full
six months of such costs in the current period. We are also in the
process of enhancing the digital proposition for clients which has
resulted in additional expenditure in the period.
Approximately GBP4.6 million of exceptional costs have been
incurred during the period (H1 2021: GBP1.8 million). GBP4.0
million of these exceptional items are attributable to costs
incurred and accrued in relation to the Offer by Raymond James.
This includes a non-cash charge of GBP3.0 million accounted for
under IFRS 2 Share-based payments, being the assessed cost for the
period of options expected to vest as a result of the acquisition.
In the event the transaction does not complete this charge will be
reversed. The Group also incurred GBP0.7 million of exceptional
costs arising from the completion of the business transformation
projects that we have reported on previously. These projects were
largely completed by the reporting date and future benefits will be
reported within the Group's underlying results. The balance of
GBP0.1 million is accounted for by the amortisation of client
relationships (GBP0.6 million) offset by a GBP0.7 million gain on
the sale of a freehold property.
Balance sheet and regulatory capital
The Group's balance sheet remains strong, with total net assets
at 30 September 2021 increased by 2.8% to GBP126.7 million (31
March 2021: GBP123.3 million), which includes GBP93.4 million of
cash (31 March 2021: GBP105.4 million).
Following an injection of GBP4.1 million into the Group's
Defined Benefits Pension Scheme in July 2021, the Scheme is now in
surplus and its portfolio assets have been rebalanced to match the
expected liabilities development.
At 30 September 2021, the Group had regulatory capital resources
of GBP103.7 million (H1 2021: GBP92.8 million and FY 2021: GBP100.6
million). Our capital solvency ratio has increased to 199% (H1
2021: 174% and FY 2021: 185%).
Dividend
The Board is pleased to declare an interim dividend of 4.0 pence
per share (H1 2021: 3.0 pence per share). This will be paid in the
event that the acquisition of the Company by Raymond James has not
been sanctioned by the Court by 10 December 2021 and will be paid
on 14 January 2022 to shareholders on the register on 10 December
2021.
Raymond James
On 29 July 2021 the Directors of Charles Stanley and Raymond
James announced that they had reached an agreement on the terms of
a recommended acquisition by Raymond James of Charles Stanley to be
effected by way of scheme of arrangement (the "Scheme"). The Scheme
was approved by shareholders on 16 September 2021. At the time of
writing, completion of the Scheme remains subject to both FCA
approval and sanction by the Court. It is our current expectation
that these conditions will be met and the transaction will complete
in December 2021.
Any updates to the expected timetable, including the time and
date of the Court hearing to sanction the Scheme once confirmed,
will be announced through a Regulatory Information Service.
Outlook
The outlook for global economic growth in the near-term remains
very positive as major economies worldwide continue their recovery
from the coronavirus pandemic. However, there are also
uncertainties ahead, particularly around the outlook for inflation
and consumer confidence. Although global equity market sentiment
remains bullish, investors are nervous of the potential
uncertainties.
The Group is well-positioned for ongoing growth. We are
continuing with initiatives to enhance our customer proposition and
to support growth plans. We are also confident that the proposed
acquisition by Raymond James will bring benefits for staff and
clients and create new opportunities for the business to
flourish.
We look forward to the future with optimism.
Paul Abberley, Chief Executive Officer
Ben Money-Coutts, Chief Financial Officer
Group results and performance
The following tables show the Group's financial performance for
the six months ended 30 September 2021 and for the prior period.
These reconcile the underlying results, which the Board considers
the best reflection of the Group's performance, to the statutory
reported results. The difference comprises adjusting items, which
are stripped out of the underlying results so as not to distort the
underlying performance.
Underlying Adjusting Reported
Performance items performance
GBPm GBPm GBPm
Six months ended 30 September
2021
Revenue 91.9 - 91.9
Expenditure (82.4) (5.3) (87.7)
Net finance and other non-operating
(costs)/ income (0.2) 0.7 0.5
------------------------------------- ------------ ---------- ------------
Profit/(loss) before tax 9.3 (4.6) 4.7
Tax (expense)/credit (1.7) 0.6 (1.1)
------------------------------------- ------------ ---------- ------------
Profit/(loss) after tax 7.6 (4.0) 3.6
------------------------------------- ------------ ---------- ------------
Profit before tax margin (%) 10.1 - 5.1
------------------------------------- ------------ ---------- ------------
Basic earnings per share (p) 14.52 - 6.99
------------------------------------- ------------ ---------- ------------
Six months ended 30 September
2020
Revenue 81.9 - 81.9
Expenditure (75.2) (1.9) (77.1)
Net finance and other non-operating
(costs)/ income (0.1) 0.1 -
------------------------------------- ------------ ---------- ------------
Profit/(loss) before tax 6.6 (1.8) 4.8
Tax (expense)/credit (1.5) 0.4 (1.1)
------------------------------------- ------------ ---------- ------------
Profit/(loss) after tax 5.1 (1.4) 3.7
------------------------------------- ------------ ---------- ------------
Profit before tax margin (%) 8.1 - 5.9
------------------------------------- ------------ ---------- ------------
Basic earnings per share (p) 9.94 - 7.06
------------------------------------- ------------ ---------- ------------
Funds under Management and Administration
The Group's revenue is substantially driven by the level of its
FuMA. These stood at GBP27.4 billion at 30 September 2021,
representing a 7.0% increase from GBP25.6 billion at 31 March
2021.
30 September 31 March Change
2021 2021
GBPbn GBPbn %
Discretionary funds 16.3 15.2 7.2
Advisory Managed funds 1.3 1.3 -
Total managed funds 17.6 16.5 6.7
------------------------------------ ------------- --------- -------
Advisory Dealing funds 1.2 1.2 -
Execution-only funds 8.6 7.9 8.9
Total administered funds 9.8 9.1 7.7
------------------------------------ ------------- --------- -------
Total Funds under Management and
Administration 27.4 25.6 7.0
------------------------------------ ------------- --------- -------
MSCI WMA Private Investor Balanced
Index 1,781 1,704 4.5
------------------------------------ ------------- --------- -------
Growth in FuMA since 31 March 2021 has been attributable to
investment performance which outstripped the benchmark MSCI WMA
Private Investor Balanced Index by 2.5%.
The mix of FuMA has remained broadly in line with 31 March 2021,
with Discretionary funds representing the largest proportion at
59.5% (31 March 2021: 59.4%). Administered funds, which typically
have a higher equity component than managed accounts, saw the
highest growth with an increase during the period of 7.7%.
Revenue
Fee income increased by GBP11.3 million reflecting the higher
average FuMA compared to H1 2021. The asset mix remained closely
aligned to the prior year. Administration fees have increased by
GBP1.6 million, primarily due to improved Financial Planning
Services revenues of GBP1.4 million. Commission income decreased by
GBP0.1 million reflecting lower market volatility. Interest income
decreased by GBP1.2 million on the prior period. The main reason
for the decrease was that average rates were reduced following Bank
of England cuts in March 2020 to 0.1%. These charges were not
passed on by the banks in full until July 2020, whereas we saw a
full period of low rates in H1 2022.
Underlying expenditure
Underlying expenditure increased by GBP7.2 million (9.6%) on the
prior year to GBP82.4 million.
Overall employment costs are up GBP5.6 million, largely due to
higher variable compensation reflecting higher revenues and
underlying profits. Fixed compensation has fallen fractionally,
reflecting the impact of personnel changes during the period.
IT, communications and market data costs have increased by
GBP1.1 million. This mainly reflected a full period of outsource
costs in H1 2022 following the outsourcing of IT infrastructure in
H1 2021. We have also incurred development costs for the enhanced
client digital offering. FSCS levy charges remained at a similar
level to H1 2021 and, as with last year, we have incurred a full
year's charge in the first half of the financial year. Other
non-staff costs rose slightly compared to the prior year.
Underlying pre-tax profit
The underlying pre-tax profit rose from GBP6.6 million to GBP9.3
million, an increase of 40.9%, and the underlying pre-tax profit
margin increased to 10.1% (H1 2021: 8.1%). Investment Management
Services increased both profit levels and margins. Financial
Planning Services reported a 31.1% increase in revenue, a positive
contribution for the first time and a 41.7% reduction in the level
of its overall losses after central cost allocations, a trend we
expect to continue as the benefit of historic investment in
additional financial planners flows through. Central Financial
Services saw a reduction both in profits and margins despite a rise
in fee revenues due to the investment being made to develop the
division.
Investment Financial Central Underlying
Management Planning Financial performance
Services Services Services
GBPm GBPm GBPm GBPm
Six months ended 30
September 2021
Revenue 73.5 5.9 12.5 91.9
Direct fixed staff costs (8.5) (3.6) (1.9) (14.0)
Direct variable staff
costs (23.9) (0.7) (0.7) (25.3)
Other direct operating
expenses (6.2) (1.1) (2.6) (9.9)
-------------------------- ------------ ---------- ----------- -------------
Contribution 34.9 0.5 7.3 42.7
Allocated costs (25.6) (1.9) (5.7) (33.2)
-------------------------- ------------ ---------- ----------- -------------
Operating profit/(loss) 9.3 (1.4) 1.6 9.5
Net finance and other
non-operating costs (0.2) - - (0.2)
Underlying profit/(loss)
before tax 9.1 (1.4) 1.6 9.3
-------------------------- ------------ ---------- ----------- -------------
Six months ended 30
September 2020
Revenue 66.9 4.5 10.5 81.9
Direct fixed staff costs (9.0) (3.6) (1.5) (14.1)
Direct variable staff
costs (20.2) (0.6) (0.3) (21.1)
Other direct operating
expenses (6.4) (0.9) (2.2) (9.5)
-------------------------- ------------ ---------- ----------- -------------
Contribution 31.3 (0.6) 6.5 37.2
Allocated costs (24.4) (1.8) (4.3) (30.5)
-------------------------- ------------ ---------- ----------- -------------
Operating profit/(loss) 6.9 (2.4) 2.2 6.7
Net finance and other
non-operating costs (0.1) - - (0.1)
Underlying profit/(loss)
before tax 6.8 (2.4) 2.2 6.6
-------------------------- ------------ ---------- ----------- -------------
Adjusting items
To calculate the underlying performance the Board has excluded
certain adjusting items. A reconciliation between underlying profit
before tax and reported profit before tax is provided below:
H1 2022 H1 2021
GBPm GBPm
Underlying profit before tax 9.3 6.6
Restructuring costs (0.7) (0.6)
Amortisation of client relationships (0.6) (0.6)
Gain on sale of freehold property 0.7 -
Share-based payments in relation to acquisition (3.0) -
by Raymond James
Professional fees in relation to acquisition (1.0) -
by Raymond James
Net other one-off charges in prior year - (0.6)
Net charge from adjusting items (4.6) (1.8)
------------------------------------------------- -------- --------
Reported profit before tax 4.7 4.8
------------------------------------------------- -------- --------
Restructuring costs (H1 2022: GBP0.7 million charge)
As part of the Group's stated objectives, the Group continues to
undertake a number of initiatives to improve productivity and
operational efficiency. A number of key programmes are being
implemented, which have given rise to exceptional charges. One-off
costs incurred to date on these projects have been removed from
underlying results and are being reported separately on the
consolidated income statement. Total restructuring costs for H1
2022 amounted to GBP0.7 million.
Amortisation of client relationships (H1 2022: GBP0.6 million
charge)
Payments made for the introduction of client relationships that
are deemed to be intangible assets are capitalised and amortised
over their useful life, which has been assessed to be 10 years.
This amortisation charge has been excluded from the underlying
profit since it is a significant non-cash item that investors and
analysts typically add back when considering underlying
profitability and cash generation.
Gain on sale of freehold property (H1 2022: GBP0.7 million
credit)
In July 2021 we completed the sale of our Chelmsford freehold
property. This resulted in a GBP0.7 million gain compared to the
book cost of GBP2.3 million.
Share-based payments in relation to acquisition by Raymond James
(H1 2022: GBP3.0 million charge)
Various share options are expected to crystallise as a result of
the acquisition by Raymond James. These have been accounted for
under IFRS 2 Share-based payments because the share schemes will
mostly be allowed to vest in full, with an accelerated vesting
timetable being agreed if the transaction completes. The charges
relate to the Performance Share Plan (GBP2.6 million), the
Restricted Share Unit Plan (GBP0.1 million) and the Deferred Share
Awards Plan (GBP0.3 million). In the event that the acquisition
does not proceed, the Directors expect that this charge will be
reversed.
Professional fees in relation to acquisition by Raymond James
(H1 2022: GBP1.0 million charge)
We have incurred charges to date from external advisers,
primarily in relation to legal fees.
Net other one-off charges in prior year (H1 2021: GBP0.6 million
charge)
The net charge of GBP0.6 million recognised as an adjusting item
in the prior financial year consisted of an impairment of Goodwill
(GBP0.7 million charge) and a fair value adjustment for contingent
consideration in relation to the acquisition of Myddleton Croft
(GBP0.1 million credit).
Taxation
The corporation tax charge for the period was GBP1.1 million (H1
2021: GBP1.1 million) representing an effective tax rate of 23.4%
(H1 2021: 22.9%).
Earnings per share
The Group's reported basic earnings per share for the period
were 6.99 pence (H1 2021: 7.06 pence). The underlying basic
earnings per share increased 46.1% to 14.52 pence (H1 2021: 9.94
pence).
Dividends
The Board has declared an interim dividend of 4.0 pence per
share (H1 2021: 3.0 pence per share). This will be paid in the
event that the Scheme relating to the acquisition of the Company by
Raymond James has not been sanctioned by the Court by 10 December
2021, and will be paid on 14 January 2022 to shareholders on the
register on 10 December 2021.
Financial position
The Group has maintained its strong financial position with
total net assets at 30 September 2021 of GBP126.7 million (31 March
2021: GBP123.3 million). Cash balances at that date were GBP93.4
million (31 March 2021: GBP105.4 million).
Regulatory capital
Charles Stanley & Co. Limited, the Group's main operating
subsidiary, is an IFPRU 125k Limited Licence Firm regulated by the
FCA. In view of this, the Group is classified as a regulated group
and is subject to the same regime.
The Group monitors a range of capital and liquidity statistics
on a daily, weekly and monthly basis.
At 30 September 2021, the Group had regulatory capital resources
of GBP103.7 million (H1 2021: GBP92.8 million and FY 2021: GBP100.6
million). Our capital solvency ratio has increased to 199% (H1
2021: 174% and FY 2021: 185%), primarily due to the elimination of
the defined benefit pension scheme liability. It remains well in
excess of the requirement and the Board's internal risk
appetite.
As required under FCA rules, the Group maintains an Internal
Capital Adequacy Assessment Process (ICAAP), which includes
performing a range of stress tests to determine the appropriate
level of regulatory capital and liquidity that the Group needs to
hold. The last review of the ICAAP conducted and signed off by the
Board was in September 2021. This review resulted in updates to the
operational risks, stress testing and reverse stress testing.
Regulatory capital forecasts are performed monthly and take into
account expected dividends, intangible asset movements, as well as
budgeted and forecast trading results. The Group's Pillar III
disclosures are published annually on the Group's website
(charles-stanley.co.uk) and provide further details about the
Group's regulatory capital resources and requirements.
Condensed consolidated income statement
Six months ended 30 September 2021
Notes Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Revenue 4 91,891 81,936 171,150
Administrative expenses 4 (86,876) (75,853) (154,948)
Restructuring costs 5 (693) (613) (1,336)
Impairment of intangible assets 10 (125) (700) (700)
Other income 4 19 16 29
Operating profit 4,216 4,786 14,195
------------------------------------- ------ ---------- ---------- ----------
Profit/(loss) on disposal of
property, plant and equipment 750 (31) (31)
Impairment of freehold property - - (645)
Fair value adjustment of contingent
consideration 1 79 121
Finance income 127 383 520
Finance costs (346) (420) (799)
Net finance and other non-operating
income/ (costs) 532 11 (834)
------------------------------------- ------ ---------- ---------- ----------
Profit before tax 4,748 4,797 13,361
Tax expense 9 (1,104) (1,143) (2,888)
Profit for the period attributable
to owners of the Parent Company 3,644 3,654 10,473
------------------------------------- ------ ---------- ---------- ----------
Earnings per share
Basic 6 6.99p 7.06p 20.16p
Diluted 6 6.94p 7.00p 19.97p
------------------------------------- ------ ---------- ---------- ----------
The results for each period relate to continuing operations.
There were no discontinued operations in either the current or any
of the periods presented.
Condensed consolidated statement of comprehensive income
Six months ended 30 September 2021
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Profit for the period 3,644 3,654 10,473
Other comprehensive income
Items that will never be reclassified
to profit or loss
Remeasurement of the defined benefit scheme
obligation 646 (1,256) 1,449
Related tax 92 239 (275)
Fair value through other comprehensive
income financial assets - unrealised gains
and losses 8 (1,043) 1
Fair value through other comprehensive
income financial assets - realised losses - - (925)
Related tax - deferred (7) 198 815
Related tax - current - - (625)
----------------------------------------------- ---------- ---------- ---------
Other comprehensive income for the period,
net of tax 739 (1,862) 440
----------------------------------------------- ---------- ---------- ---------
Total comprehensive income for the period
attributable to owners of the Parent Company 4,383 1,792 10,913
----------------------------------------------- ---------- ---------- ---------
Condensed consolidated statement of financial position
As at 30 September 2021
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Assets Notes
Intangible assets 10 18,572 18,989 18,475
Property, plant and equipment 10,651 16,986 14,526
Net deferred tax asset 2,491 1,231 1,314
Employee benefits 1,702 - -
Financial assets at fair value
through other comprehensive income 110 3,439 102
Non-current assets 33,526 40,645 34,417
-------------------------------------- ------ ---------- ---------- --------------
Trade and other receivables 211,995 197,267 230,662
Financial assets at fair value
through profit or loss 2,054 1,763 1,904
Cash and cash equivalents 93,449 92,143 105,387
Current tax assets 332 29 126
Current assets 307,830 291,202 338,079
-------------------------------------- ------ ---------- ---------- --------------
Total assets 341,356 331,847 372,496
-------------------------------------- ------ ---------- ---------- --------------
Equity
Share capital 13,034 13,028 13,029
Share premium 5,264 5,196 5,207
Own shares (606) (724) (724)
Revaluation reserve 40 2,658 39
Merger relief reserve 15,167 15,167 15,167
Retained earnings 93,824 80,049 90,591
-------------------------------------- ------ ---------- ---------- --------------
Equity attributable to owners
of the Parent Company 126,723 115,374 123,309
Non-controlling interests 24 24 24
Total equity 126,747 115,398 123,333
-------------------------------------- ------ ---------- ---------- --------------
Liabilities
Employee benefits - 6,122 3,198
Non-current trade and other payables - 331 -
Non-current lease liabilities 6,613 7,839 6,599
Non-current provisions 2,070 1,995 2,011
Non-current liabilities 8,683 16,287 11,808
-------------------------------------- ------ ---------- ---------- --------------
Trade and other payables 203,769 196,061 233,652
Current lease liabilities 1,645 3,318 3,087
Current provisions 512 783 616
Current liabilities 205,926 200,162 237,355
Total liabilities 214,609 216,449 249,163
-------------------------------------- ------ ---------- ---------- --------------
Total equity and liabilities 341,356 331,847 372,496
-------------------------------------- ------ ---------- ---------- --------------
The financial statements were approved and authorised per issue
by the board of Charles Stanley Group PLC (company number 48796) on
17 November 2021.
Condensed consolidated statement of changes in equity
Six months ended 30 September 2021
Merger
Share Share Own Re-valuation relief Retained Non-controlling Total
capital premium shares reserve reserve earnings Total interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2021 13,029 5,207 (724) 39 15,167 90,591 123,309 24 123,333
------------------------------------ -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Profit for the period - - - - - 3,644 3,644 - 3,644
------------------------------------ -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Other comprehensive income:
Financial assets at fair value
through other comprehensive income:
- unrealised gains and losses - - - 8 - - 8 - 8
- related deferred tax - - - (7) - - (7) - (7)
Remeasurement of defined benefit
scheme liability:
* actuarial gain in the period - - - - - 646 646 - 646
- related deferred tax - - - - - 92 92 - 92
Total other comprehensive income
for the period - - - 1 - 738 739 - 739
------------------------------------ -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Total comprehensive income for
the period - - - 1 - 4,382 4,383 - 4,383
------------------------------------ -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Dividends paid - - - - - (4,690) (4,690) - (4,690)
Own shares acquired - - - - - - - - -
Shares transfer to employees - - 118 - - (118) - - -
Share-based payments:
- value of employee services - - - - - 2,987 2,987 - 2,987
- issue of shares 5 57 - - - - 62 - 62
- related tax - - - - - 672 672 - 672
30 September 2021 (unaudited) 13,034 5,264 (606) 40 15,167 93,824 126,723 24 126,747
------------------------------------ -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Condensed consolidated statement of changes in equity
Merger
Share Share Own Re-valuation relief Retained Non-controlling Total
capital premium shares reserve reserve earnings Total interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
31 March 2020 12,784 5,170 (334) 3,503 15,167 80,194 116,484 24 116,508
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Profit for the
period - - - - - 3,654 3,654 - 3,654
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Other
comprehensive
income:
Financial
assets at fair
value
through other
comprehensive
income:
- unrealised
gains and
losses - - - (1,043) - - (1,043) - (1,043)
- related tax - - - 198 - - 198 - 198
Remeasurement
of defined
benefit
scheme
liability:
- actuarial
loss in the
period - - - - - (1,256) (1,256) - (1,256)
- deferred tax
movement on
scheme
liability - - - - - 239 239 - 239
Total other
comprehensive
income
for the
period - - - (845) - (1,017) (1,862) - (1,862)
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Total
comprehensive
income for
the period - - - (845) - 2,637 1,792 - 1,792
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Dividends paid - - - - - (3,125) (3,125) - (3,125)
Own shares
acquired - - (447) - - - (447) - (447)
Shares
transfer to
employees - - 57 - - (57) - - -
Share-based
payments:
- value of
employee
services - - - - - 420 420 - 420
- issue of
shares 244 26 - - - - 270 - 270
- related
deferred tax - - - - - (20) (20) - (20)
30 September
2020
(unaudited) 13,028 5,196 (724) 2,658 15,167 80,049 115,374 24 115,398
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Condensed consolidated statement of changes in equity
Merger
Share Share Own Re-valuation relief Retained Non-controlling Total
capital premium shares reserve reserve earnings Total interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
01 October
2020 13,028 5,196 (724) 2,658 15,167 80,049 115,374 24 115,398
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Profit for the
period - - - - - 6,819 6,819 - 6,819
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Other
comprehensive
income:
Financial
assets at fair
value
through other
comprehensive
income:
- unrealised
gains and
losses - - - 111 - - 111 - 111
- related - - - - - - - - -
deferred tax
Remeasurement
of defined
benefit
scheme
liability:
- actuarial
gain in the
period - - - - - 2,705 2,705 - 2,705
- deferred tax
movement on
scheme
liability - - - - - (514) (514) - (514)
Total other
comprehensive
income
for the
period - - - 111 - 2,191 2,302 - 2,302
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Total
comprehensive
income for
the period - - - 111 - 9,010 9,121 - 9,121
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Dividends paid - - - - - (1,563) (1,563) - (1,563)
Transfer
between
reserves - - - (2,730) - 2,730 - - -
Unclaimed
dividends - - - - - 13 13 - 13
Own shares - - - - - - - - -
acquired
Shares - - - - - - - - -
transfer to
employees
Share-based
payments:
- value of
employee
services - - - - - 340 340 - 340
- issue of
shares 1 11 - - - - 12 - 12
- related
deferred tax - - - - - 12 12 - 12
31 March 2021
(audited) 13,029 5,207 (724) 39 15,167 90,591 123,309 24 123,333
--------------- -------- -------- ------- ------------- -------- --------- -------- ---------------- --------
Condensed consolidated statement of cash flows
Six months ended 30 September 2021
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Notes
Cash flows from operating activities
Cash generated from operating activities 12 (5,439) 5,268 21,597
Interest received 15 149 139
Interest paid - (10) -
Tax paid (1,730) (734) (3,260)
Net cash (used in)/generated from
operating activities (7,154) 4,673 18,476
------------------------------------------- ------ ---------- ---------- ---------
Cash flows from investing activities
Acquisition of intangible assets (880) (402) (617)
Purchase of property, plant and equipment (467) (967) (1,582)
Purchase of financial assets (134) (216) (976)
Proceeds from sale of freehold property 3,012 34 381
Proceeds from sale of financial assets 96 5,680 9,903
Dividends received 19 16 29
Net cash generated from investing
activities 1,646 4,145 7,138
------------------------------------------- ------ ---------- ---------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary share
capital 62 270 282
Purchase of own shares - (447) (447)
Interest paid (346) - (799)
Payment of lease liabilities (1,456) (1,850) (3,052)
Dividends paid (4,690) (3,125) (4,688)
Net cash used in financing activities (6,430) (5,152) (8,704)
------------------------------------------- ------ ---------- ---------- ---------
Net (decrease)/increase in cash and
cash equivalents (11,938) 3,666 16,910
------------------------------------------- ------ ---------- ---------- ---------
Cash and cash equivalents at start
of period 105,387 88,477 88,477
------------------------------------------- ------ ---------- ---------- ---------
Cash and cash equivalents at end of
period 93,449 92,143 105,387
------------------------------------------- ------ ---------- ---------- ---------
The cash flows for each period relate to continuing operations.
There were no discontinued operations in any of the periods
presented.
1. General information
Charles Stanley Group PLC (the Company) is the Parent Company of
the Charles Stanley group of companies (the Group).
The Company is a public limited company which is listed on the
London Stock Exchange and is domiciled in the United Kingdom. The
Company is registered in England and Wales. The address of its
registered office is 55 Bishopsgate, London EC2N 3AS, UK.
2 Significant accounting policies and application of new and
revised IFRSs
The accounting policies and presentation of figures adopted in
the preparation of the condensed consolidated financial statements
are consistent with those followed in the preparation of the
Group's Annual Report and Accounts for the year ended 31 March
2021, except for the mandatory standards and amendments that had an
effective date on the start of the six-month period.
There were no new mandatory standards or amendments to existing
standards effective in the six-month reporting period to 30
September 2021.
Following the UK's exit from the EU on 1 January 2021, the Group
is required to report under UK-adopted IFRS as adopted and endorsed
by The UK Endorsement Board (UKEB). The Group will report under
UK-adopted IFRS from 1 April 2021. We do not anticipate any
material changes.
A number of new standards and amendments to standards and
interpretations are effective for periods beginning on or after 1
April 2021. These new standards are not applicable to these
financial statements and they are not expected to have a material
impact when they become effective. The Group plans to apply these
standards and amendments in the reporting period in which they
become effective.
3. Use of judgements and estimates
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions to determine the carrying amounts of certain assets and
liabilities. The estimates and associated assumptions are based on
the Group's historical experience and other relevant factors.
Actual results may differ from the estimates applied.
Estimates and judgements are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the
revision affects both current and future periods.
3.1 Major sources of estimation and uncertainty in applying the
Group's accounting policies
The following key estimates have been made by the Directors in
applying the Group's accounting policies:
3.1.1 Goodwill and intangible assets
For the purposes of impairment testing, the Parent Company and
the Group assess Goodwill and client relationships based on the
recoverable amount of the Cash Generating Unit's (CGU) making up
the relevant intangible asset. The recoverable amount is calculated
based on assumptions which are set out in more detail in note 10.
Sensitivity analysis is also set out in note 10. No impairment to
the carrying value of Goodwill was required in the period. An
impairment charge of GBP0.1 million was recognised in respect of a
client relationship CGU in the period.
3.1.2 Retirement benefit obligations
In consultation with an independent actuary, the Group makes
estimates about a number of long-term trends and market conditions
to determine the value of the surplus or deficit of its defined
benefit pension scheme. These long-term forecasts and estimates are
highly judgmental and subject to the risk that actual events may be
significantly different from those forecast.
The valuation performed as at 30 September 2021 resulted in a
change from an actuarial deficit as at 31 March 2021 to an
actuarial surplus of GBP1.7 million which has been reflected in
these financial statements.
3.1.3 Share-based payments
The Group participates in a number of equity-settled share-based
payment arrangements with its employees. When such awards are made,
the fair value at grant date serves as the basis for calculating
the staff costs. The vesting conditions attached to the awards are
subject to specific non-market performance conditions and it is
expected that, as has been agreed by the Board and Raymond James, a
number will vest as a result of the acquisition of the Company by
Raymond James.
The expense in respect of each arrangement is recognised over
the expected vesting period and the number anticipated to vest.
These estimates are revised at each reporting date and the
cumulative charge is updated. The recommended Offer by Raymond
James for Charles Stanley, which is currently expected to complete
in December 2021, has given rise to a substantial increase in the
estimation of both the number of share options and the acceleration
of the time period over which they will vest. Details of the
estimates applied can be found in note 7.
3.2 Key accounting judgements in applying the Group's accounting
policies
The Directors do not consider there are any key accounting
judgements impacting the financial statements.
4. Operating segments
The Group has three operating divisions which are its reportable
segments and represent the underlying performance. These segments
are the basis on which the Group reports its performance to the
Chief Executive Officer, who is the Group's chief operating
decision-maker.
Immediately following the financial year end, the Group carried
out a reorganisation of its front office divisions to reflect a new
operating structure as shown below. For reporting periods on or
before 31 March 2021, the divisions were Investment Management
Services, Financial Planning Services and Charles Stanley Direct
which represented the main operating divisions and the reportable
operating segments of the Group.
Investment Financial Central Support Total
Management Planning Financial Functions(3)
Services Services Services
Six months ended 30 September GBP000 GBP000 GBP000 GBP000 GBP000
2021
Investment management fees 49,910 1,279 3,461 - 54,650
Administration fees 7,287 4,631 6,592 - 18,510
------------------------------- ------------ ---------- ----------- -------------- ---------
Total fees 57,197 5,910 10,053 - 73,160
Commission 16,286 - 2,445 - 18,731
Total revenue 73,483 5,910 12,498 - 91,891
------------------------------- ------------ ---------- ----------- -------------- ---------
Administrative expenses(1,4) (38,473) (5,574) (5,415) (38,232) (87,694)
Other income - 19 - 19
------------------------------- ------------ ---------- ----------- -------------- ---------
Operating contribution 35,010 336 7,102 (38,232) 4,216
Allocated costs (30,592) (1,907) (5,733) 38,232 -
------------------------------- ------------ ---------- ----------- -------------- ---------
Operating profit/(loss)(2) 4,418 (1,571) 1,369 - 4,216
Segment assets 335,100 209 5,753 294 341,356
------------------------------- ------------ ---------- ----------- -------------- ---------
Segment liabilities 213,671 718 220 - 214,609
------------------------------- ------------ ---------- ----------- -------------- ---------
Notes
1. Administrative expenses include GBP0.7 million of
restructuring costs, GBP0.8 million of amortisation of intangible
assets and GBP0.1 million of impairment to client
relationships.
2. The operating profit/(loss) as per the above table is
different to that presented in the divisional analysis included
within the Interim management report as the table above includes
adjusting items which are excluded from the underlying
analysis.
3. Support Functions' costs are allocated to the respective
divisions based on proportions agreed by the Directors, which
reflect utilisation.
4. Impairments to intangible assets of GBP0.1 million (2021:
GBP0.7 million) are allocated to the Investment Management Services
segment.
4. Operating segments (continued)
Investment Financial Central Support Total
Management Planning Financial Functions(3)
Services Services Services
Six months ended 30 September GBP000 GBP000 GBP000 GBP000 GBP000
2020
(restated)
Investment management fees 42,547 1,040 2,531 - 46,118
Administration fees 7,691 3,461 5,792 - 16,944
------------------------------- ------------ ---------- ----------- -------------- ---------
Total fees 50,238 4,501 8,323 - 63,062
Commission 16,643 7 2,224 - 18,874
Total revenue 66,881 4,508 10,547 - 81,936
------------------------------- ------------ ---------- ----------- -------------- ---------
Administrative expenses(1,4) (35,762) (5,246) (4,206) (31,952) (77,166)
Other income - - 16 - 16
------------------------------- ------------ ---------- ----------- -------------- ---------
Operating contribution 31,119 (738) 6,357 (31,952) 4,786
Allocated costs (25,897) (1,801) (4,254) 31,952 -
------------------------------- ------------ ---------- ----------- -------------- ---------
Operating profit/(loss)(2) 5,222 (2,539) 2,103 - 4,786
Segment assets 325,706 181 5,666 294 331,847
------------------------------- ------------ ---------- ----------- -------------- ---------
Segment liabilities 215,631 709 109 - 216,449
------------------------------- ------------ ---------- ----------- -------------- ---------
Notes
1. Administrative expenses include GBP0.6 million of
restructuring costs, GBP0.6 million of amortisation of intangible
assets and a GBP0.7 million credit for non-cash share options.
2. The operating profit/(loss) as per the above table is
different to that presented in the divisional analysis included
within the Interim management report as the table above includes
adjusting items which are excluded from the underlying
analysis.
3. Support Functions' costs are allocated to the respective
divisions based on proportions agreed by the Directors, which
reflect utilisation.
4. Impairments to intangible assets of GBP0.7 million (2020:
GBP0.3 million) are allocated to the Investment Management Services
segment.
4. Operating segments (continued)
Investment Management Financial Central Support Total
Services Planning Financial Functions(3)
Services Services
Year ended 31 March 2021 GBP000 GBP000 GBP000 GBP000 GBP000
(restated)
Investment management fees 88,272 2,146 5,398 - 95,816
Administration fees 15,057 7,876 12,020 - 34,953
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Total fees 103,329 10,022 17,418 - 130,769
Commission 35,201 10 5,170 - 40,381
Total revenue 138,530 10,032 22,588 - 171,150
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Administrative expenses(1,4) (74,193) (10,735) (9,085) (62,971) (156,984)
Other income - - 29 - 29
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Operating contribution 64,337 (703) 13,532 (62,971) 14,195
Allocated costs (50,722) (3,725) (8,524) 62,971 -
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Operating profit/(loss)(2) 13,615 (4,428) 5,008 - 14,195
Segment assets 366,288 204 5,710 294 372,496
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Segment liabilities 247,543 1,430 190 - 249,163
------------------------------ ---------------------- ---------- ----------- -------------- ----------
Notes
1. Administrative expenses include GBP1.3 million of
restructuring costs, GBP1.3 million of amortisation of intangible
assets and GBP0.7 million of impairments to intangible assets.
2. The operating profit/(loss) as per the above table is
different to that presented in the divisional analysis included
within the Annual report and accounts, as the table above includes
adjusting items which are excluded from the underlying
analysis.
3. Support Functions' costs are allocated to the respective
divisions based on proportions agreed by the Directors, which
reflect utilisation.
4. Impairments to intangible assets of GBP0.7 million (2020:
GBP0.3 million) are allocated to the Investment Management Services
segment.
5. Restructuring costs
The Group is undertaking a transformation programme to improve
sales and productivity. As part of this programme the following
one-off exceptional costs are included in the condensed
consolidated income statement:
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Redundancy costs - - 56
External consultants - contract
staff 505 487 840
IT and communications 84 80 339
Legal and professional fees 104 46 101
--------------------------------- ---------- ---------- ---------
693 613 1,336
--------------------------------- ---------- ---------- ---------
6. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to equity holders of the Parent Company by the
weighted average number of ordinary shares in issue during the
period.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares to assume exercise of
all potentially dilutive share options.
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
pence per pence per pence per
share share share
Earnings per share
Basic earnings per share 6.99 7.06 20.16
---------------------------- ----------- ----------- -----------
Diluted earnings per share 6.94 7.00 19.97
---------------------------- ----------- ----------- -----------
The Directors believe that a truer reflection of the performance
of the Group's underlying business is given by the measure of
underlying earnings per share which is presented in the Interim
management report. This measure is also followed by the analyst
community as a benchmark of the Group's underlying performance.
The earnings and weighted average number of shares used in the
calculation of basic and diluted earnings per share is shown
below:
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Earnings
Earnings used in the calculation of
basic earnings per share and diluted
earnings per share 3,644 3,654 10,473
--------------------------------------- ---------- ---------- ---------
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
000 000 000
Number of shares
Weighted average number of ordinary
shares used in the calculation of
basic earnings per share 52,123 51,777 51,943
Effect of potentially dilutive share
options 362 456 495
Weighted average number of ordinary
shares used in the calculation of
diluted earnings per share 52,485 52,233 52,438
-------------------------------------- ---------- ---------- ---------
All amounts related to continuing operations. There were no
discontinued operations in any of the periods presented.
7. Share-based payment arrangements
The Group has a number of share-based payment arrangements, the
costs of which are accounted for under IFRS 2. The accounting
standard requires share-based payments to be recognised in the
financial statements at fair value, where the estimate of that fair
value is based on the most likely outcome of any performance
conditions and vesting period.
Due to the announcement of the recommended acquisition of
Charles Stanley Group by Raymond James, the majority of the share
schemes will be allowed to vest in full and all such awards (except
for the Save As You Earn scheme) structured as options will be
accelerated so as to be automatically exercised upon the scheme
being sanctioned by the Court, and as the Board considers there is
a high degree of probability that the scheme will be sanctioned by
the Court, we have accounted for additional and accelerated vesting
period charges. In the unlikely event that the acquisition does not
complete, that part of the charge that is conditional on completion
will be reversed in a future period. Details of each share-based
payment arrangement are as follows:
7.1 Deferred Equity Plan (equity-settled)
The Deferred Equity Plan is only open to Executive Directors and
certain senior managers. Nil-cost options are granted under the
plan for any annual bonus amounts deferred into shares, in
accordance with the Group's remuneration policy. Options ordinarily
vest over periods of between one and three years and have a
contractual life of five years. There are no performance conditions
attached to options granted under the plan.
A total of 260,956 options were granted under the Deferred
Equity Plan from June 2017 to July 2021, of which 232,530 remain to
vest or be exercised. As these awards are nil-cost options, the
grant date fair value was deemed to be between GBP2.56 and GBP3.85
over the years.
7.2 Performance Share Plan (equity-settled)
The Performance Share Plan is only open to Executive Directors
and certain senior managers. Nil-cost options are awarded annually
under the plan and ordinarily vest over a period of three years
based on specific performance targets. The contractual life of the
options is five years.
A total of 1,083,578 options were granted under the Performance
Share Plan between June 2017 and July 2020, of which 1,070,078
remain to vest. As these awards are nil-cost options with an
entitlement to dividends during the vesting period, the grant date
fair value was deemed to be between GBP2.56 and GBP3.63 over the
years.
7.3 Investment Managers Share Plan (equity-settled)
The Investment Managers Share Plan is a one-off share scheme
which granted 2,415,725 options to investment managers on 15 June
2017. During the period 935,365 options were exercised, which
vested upon publication of the Annual report and accounts for the
year ended 31 March 2020.
The remaining options will only vest if the pre-tax profit
margin of the employed investment management teams collectively is
15% or more in the year ending 31 March 2022. The current
expectation is that this condition will not be met and therefore no
accumulated expense has been recognised. It has been further
determined by the Remuneration Committee that these options will
lapse in full on completion of the acquisition by Raymond
James.
7.4 Save As You Earn (equity-settled)
The SAYE scheme is open to all employees. Options are granted
under the scheme at a 20% discount to the mid-market closing price
for the three days preceding the grant date and ordinarily have a
three-year vesting period. The options are exercisable for a period
of six months after vesting and are not subject to any performance
conditions.
7.5 Share Incentive Plan
The Share Incentive Plan is open to all employees, enabling them
to purchase shares in the Parent Company out of their pre-tax
salary.
7. Share-based payment arrangements (continued)
7.6 Restricted Share Unit Plan (equity-settled)
The Restricted Share Unit Plan is only open to Executive
Directors and certain senior managers. Nil-cost options are awarded
annually under the plan and ordinarily vest over a period of three
years based on specific performance targets. The contractual life
of the options is five years.
A total of 335,732 options were granted under the scheme in July
2021, of which 55,955 options are expected to vest if the Offer
expects to complete by the expected date. As these awards are over
nil-cost options with an entitlement to dividends during the
vesting period, the grant date fair value was deemed to be GBP5.13,
being the share price at that date.
8. Employee benefits
Amounts included in the condensed consolidated statement of
financial position
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Fair value of scheme assets 26,015 24,833 21,357
Present value of defined benefit obligation (24,313) (30,955) (23,693)
Impact of asset ceiling - - (862)
Surplus/(deficit) in scheme and liability
in the
condensed consolidated statement of
financial position 1,702 (6,122) (3,198)
--------------------------------------------- ---------- ---------- ---------
Significant actuarial assumptions
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
% % %
Inflation - Consumer Price Index (CPI) 3.00 2.50 2.80
Discount rate 2.00 1.70 2.10
Allowance for pension payment increases
of CPI
(or 5% p.a. if less than CPI, minimum
3% p.a.) 3.60 3.40 3.50
Allowance for revaluation of deferred
pensions of CPI
(or 2.5% p.a. if less than CPI) 2.50 2.50 2.50
Allowance for commutation of pension
for cash at retirement 50.00 - 50.00
----------------------------------------- ---------- ---------- ---------
The mortality assumptions adopted at 30 September 2021 are 95%
(30 September 2020: 100% and 31 March 2021: 95%) of the standard
tables S3PMA, Year of Birth, no age rating for males and females,
projected using CMI_2020 converging to 1.25% p.a. These imply the
following life expectancies at age 65:
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
% % %
Male retiring in current year 22.5 21.6 22.5
Female retiring in current year 24.2 23.5 24.2
Male retiring in twenty years 23.8 22.6 23.8
Female retiring in twenty years 25.7 24.7 25.7
--------------------------------- ---------- ---------- ---------
9. Income taxes
Tax recognised in the condensed consolidated income
statement
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Current taxation
Expense for the period 1,514 621 2,291
Adjustment in respect of prior periods 10 197 197
1,524 818 2,488
---------------------------------------- ---------- ---------- ---------
Deferred taxation
(Credit)/expense for the period (447) 339 423
Adjustment in respect of prior periods 27 (14) (23)
(420) 325 400
---------------------------------------- ---------- ---------- ---------
Total tax expense 1,104 1,143 2,888
---------------------------------------- ---------- ---------- ---------
Deferred tax is calculated using the rate expected to apply when
the relevant timing differences are forecast to unwind.
The Finance Act 2021 introduced a 25% tax rate on UK profits
arising after 1 April 2023. As a result, UK deferred tax assets and
liabilities previously recognised at 19% have been revalued to the
appropriate tax rate which is expected to be in force when the
deferred tax asset or liability is forecast to unwind.
During the period, the group's IFRS 2 accounting charges in
respect of share-based compensation were accelerated as a result of
the vesting and exercise dates of the awards being brought forward.
In addition to this, the share price of the group increased
significantly during the period. As a result, the deferred tax
asset in relation to these awards has also increased significantly,
reflecting the estimated part 12 deduction available on exercise of
the awards.
In line with IAS 12, the group is permitted to recognise a
deferred tax asset within the income statement in respect of
share-based compensation awards up to the cumulative IFRS 2 charge
of each award, with any excess deferred tax asset recognised within
equity.
10. Intangible assets
Internally
Client generated
Goodwill relationships software Total
Cost GBP000 GBP000 GBP000 GBP000
At 1 October 2020 20,213 28,718 4,230 53,161
Additions - 174 - 174
Disposals - - (3,947) (3,947)
At 31 March 2021 20,213 28,892 283 49,388
Additions - 99 781 880
At 30 September 2021 20,213 28,991 1,064 50,268
---------------------------------- --------- -------------- ----------- ---------
Amortisation and impairment
At 1 October 2020 6,510 23,478 4,184 34,172
Impairment charge during
the period - 666 22 688
Amortisation charge for
the period - - (3,947) (3,947)
At 31 March 2021 6,510 24,144 259 30,913
Impairment charge during
the period - 125 - 125
Amortisation charge for
the period - 571 87 658
At 30 September 2021 6,510 24,840 346 31,696
---------------------------------- --------- -------------- ----------- ---------
Net book value
At 30 September 2021 (unaudited) 13,703 4,151 718 18,572
---------------------------------- --------- -------------- ----------- ---------
At 31 March 2021 (audited) 13,703 4,748 24 18,475
---------------------------------- --------- -------------- ----------- ---------
At 30 September 2020 (unaudited) 13,703 5,240 46 18,989
---------------------------------- --------- -------------- ----------- ---------
None of the intangible assets have been pledged as security.
Goodwill is allocated to the Group's divisions as follows:
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Goodwill
Investment Management Services 8,456 8,456 8,456
Charles Stanley Direct 5,247 5,247 5,247
-------------------------------- ---------- ---------- ---------
13,703 13,703 13,703
-------------------------------- ---------- ---------- ---------
10. Intangible assets (continued)
10.1 Goodwill
The recoverable amount of Goodwill allocated to a CGU is
determined initially by calculating the CGU's fair value less costs
to sell. If this is lower than the carrying amount or is not
determinable, a value in use calculation is also prepared.
Fair value less costs to sell is calculated based on a
percentage of FuMA, which is determined by the consideration paid
as a percentage of FuMA in recent transactions in the market. At 30
September 2021 this was determined to be 2.47%. The inputs into
fair value less costs to sell calculations are considered to be
level 3 in the fair value hierarchy. The valuation techniques for
calculating the recoverable amount are consistent with those used
in prior years.
No value in use calculations have been prepared for other CGUs
on the basis that the fair value less costs to sell was greater
than the carrying amount. No other assets or liabilities related to
the Group are allocated to CGUs in the assessment of the fair value
of each CGU.
10.1.1 Investment Management Services
The Goodwill attributed to this division is represented by four
CGUs, comprising acquired investment management teams in different
locations across the UK. The largest CGUs are Edinburgh and Robson
Cotterell, representing 51% and 27% respectively of the carrying
value of the Goodwill held by the division.
The recoverable amount was assessed using fair value less costs
to sell for the period ended 30 September 2021, based on a
percentage of FuMA, being the lower end of management's
estimations. The Eastbourne CGU had the lowest headroom of GBP1.9
million, between the carrying value and the recoverable amount.
FuMA associated with this CGU would need to fall by over 30% under
the current method before an impairment would be recognised.
10.1.2 Charles Stanley Direct
The Goodwill attributed to this division is represented by two
CGUs comprising acquired Execution-only services. The largest CGU
(Charles Stanley Investment Choices) represents 93% of the carrying
value.
The recoverable amount of Goodwill relating to Charles Stanley
Direct was assessed using fair value less costs to sell for the
period ended 30 September 2021. Fair value less costs to sell was
determined based on a price paid per billion of FuMA in recent
market transactions. The range observed was GBP2.5 million to
GBP10.3 million paid per GBP1.0 billion of assets. The recoverable
amount was determined to be higher than the carrying amount of the
CGU and therefore the Goodwill carrying value is adequately
supported.
10.2 Client relationships
Client relationships relate to payments made to investment
managers and third parties for the introduction of client
relationships. Client relationships also arise on business
combinations. The fair value was determined based on a percentage
of FuMA of investment managers who have received payments. The fair
value of those acquired in business combinations is based on the
discounted cash flow model.
As an amortising asset, an impairment assessment is required
only when an impairment trigger has been identified. The assessment
is carried out by comparing the carrying value of each relationship
and the remaining consideration that the Group expects to receive
for services which are derived from the client relationships. The
recoverable amount is calculated based on fair value less costs to
sell using FuMA multiples derived from recent market transactions.
Where necessary a value in use calculation is carried out to
support the assessment.
An impairment charge of GBP0.1 million has been recognised in
the period to 30 September 2021 relating to a client list CGU,
reducing the carrying value of this to nil. The reason for the
impairment is due to the loss of the investment manager, resulting
in the carrying value exceeding the recoverable amount. Except for
the above, the recoverable amount of all other CGUs was determined
to be higher than the carrying amounts and therefore the carrying
value is adequately supported.
10.3 Sensitivity
To assess the impact of potentially volatile markets on our
assessment, the additional sensitivity was applied to gain comfort
over the impact of volatile markets on the fair value less costs to
sell of each CGU.
In respect of Goodwill associated with Investment Management
Services, when assessing the carrying value as a percentage of FuMA
at 2.47%, the value of FuMA for the CGUs would have to fall by more
than 30% before the carrying value would exceed the recoverable
amount. For client relationship intangibles, there are a
significant number of relationships associated with the overall
balance with a wide range of carrying values. The additional
sensitivity analysis concluded that sufficient headroom existed
between carrying values and the threshold for impairment to the
relevant CGUs for client relationships.
In respect of Goodwill associated with Charles Stanley Direct,
we applied sensitivity analysis to the asset values from recent
market transactions which were used to determine the fair value of
the CGU. A range of scenarios were modelled, with the impact of a
40% reduction in the price paid per GBP1 billion of assets applied
against the average price paid of GBP7.3 million in recent market
transactions. The carrying value of the CGU was adequately
supported.
10.4 Internally generated software
Internally generated software is software designed, developed
and commercialised by the Group.
11. Dividends
The following dividends were declared and paid by the Parent
Company in the year:
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Final dividend paid for 2020 of 6.0p
per share 16 July 2020 - 3,125 3,125
Interim dividend paid for 2021 of
3.0p per share paid 15 January - - 1,563
Final dividend paid for 2021 of 9.0p 4,690 - -
per share paid 19 July 2021
--------------------------------------
4,690 3,125 4,688
-------------------------------------- ---------- ---------- ---------
An interim dividend of 4.0 pence per share was declared by the
Board on 17 November 2021. In the event that the Scheme to effect
the proposed acquisition of the Company by Raymond James has not
been sanctioned by the Court by 10 December 2021, the interim
dividend will be payable on 14 January 2022 to shareholders on the
register as at 10 December 2021.
Dividends are payable from the Parent Company's distributable
reserves which comprise retained earnings adjusted for charges in
respect of outstanding share-based payment arrangements and the
merger relief reserve.
12. Reconciliation of net profit to cash generated from
operations
Unaudited Unaudited Audited
H1 2022 H1 2021 FY 2021
GBP000 GBP000 GBP000
Profit before tax 4,748 4,797 13,361
Adjustments for:
Depreciation 2,080 2,153 4,273
Amortisation and impairment of intangible
assets 783 1,353 2,041
Impairment of freehold property 608
Share-based payments - value of employee
services 2,987 420 760
Retirement benefit scheme - (credit)/charge (4,254) 59 116
Dividend income (19) (16) (29)
Interest income (15) (149) (139)
Interest expense 346 420 799
Profit/(loss) on disposal of financial
assets (8) 7 (90)
Gain on sale of freehold property (750) (31) (31)
Changes in working capital:
Unrealised gains on financial assets
at fair value through profit or loss (104) (238) (288)
Decrease/(increase) in receivables 18,667 6,571 (26,824)
(Decrease)/increase in payables (29,900) (10,078) 27,040
Net cash (outflow)/inflow from operations (5,439) 5,268 21,597
--------------------------------------------- ---------- ---------- ---------
13. Contingent liabilities
The Group is exposed to the risk of legal matters which could
give rise to the need to recognise provisions, or in the case they
do not qualify for the recognition of a provision, to disclose
contingent liabilities. Currently, the Group are in an Offer period
in relation to the acquisition of Charles Stanley by Raymond James
UK Wealth Management Holdings Ltd, therefore, the Group is exposed
to GBP3.5 million (exc. VAT) of professional fees in relation to
the completion of the deal.
14. Subsequent events
During the period, a cash Offer was made by Raymond James UK
Wealth Management Holdings Ltd to acquire Charles Stanley, to be
effected by means of a scheme of arrangement. The scheme was
approved by shareholders on 16 September 2021. Completion of the
transaction remains subject to change in control consent from the
FCA and to sanction by the Court. On 5 October 2021 the capital of
the Company was reduced by GBP0.02 million following the
cancellation of 84,988 shares represented by share warrants to
bearer, as confirmed by an order of the High Court of England and
Wales.
Cautionary statement
The Interim management report for the six months ended 30
September 2021 has been prepared to provide information to
shareholders to assess the current position and future potential of
Charles Stanley Group PLC. It contains certain forward-looking
statements with respect to the Group's financial condition,
operations and business opportunities. These forward-looking
statements involve risks and uncertainties that could cause the
actual results of operations, financial condition, liquidity,
dividend policy and the development of the industry in which the
Group operates to differ materially from the impression created by
the forward-looking statements. Any forward-looking statement is
made in good faith based on information available to the Directors
at the time of their approval of this report. Past performance
cannot be relied on as a guide to future performance.
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END
IR FLFVDLDLDLIL
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November 18, 2021 02:00 ET (07:00 GMT)
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